We lease office space in Bermuda, where our principal executive offices are located. Argo Group US, Inc. leases office space in San Antonio, Texas, for its U.S. headquarters and certain operational and support functions. We also lease space in the following locations:
For the year ended December 31, 2017, we reported net income of $50.3 million, or $1.64 per fully diluted share. Effective February 6, 2017, we completed the acquisition of Maybrooke Holdings, S.A., and its subsidiaries, including Ariel Reinsurance, Ltd. (collectively “Ariel Re”). Included in our consolidated results of operations for the year ended December 31, 2017 is activity specifically attributable to Ariel Re from the date of acquisition. For the year ended December 31, 2016, we reported net income of $146.7 million, or $4.75 per fully diluted share. For the year ended December 31, 2015 we reported net income of $163.2 million, or $5.20 per fully diluted share.
The increase in consolidated gross written premiums for the year ended December 31, 2017 as compared to the same period in 2016 was attributable to growth across all product lines as we continue to focus on introducing new products and increasing renewal retention. Additionally, Ariel Re contributed gross written premiums of $298.1 million for the year ended December 31, 2017. During 2017, all product lines experienced increased competition and pressure on rates due to market conditions. Consolidated earned premiums increased for the year ended December 31, 2017 as compared to the same period in 2016 due to the growth in gross written premiums. The increase in consolidated earned premiums for the year ended December 31, 2017 includes Ariel Re earned premiums of $123.3 million. Partially offsetting these increases was the reduction in our participation percentage for our Lloyd’s Syndicate 1200 operations, to 46.0% in 2017 as compared to 53.5% in 2016. Additionally, during the last six months of 2017, we recorded reinsurance premium adjustments associated with the third quarter 2017 catastrophe events which reduced net earned premiums by $18.9 million. We also purchased additional reinsurance contracts in connection with risk management activities following the acquisition of Ariel Re which reduced net earned premiums by $20.8 million, all within our property lines. The increase in consolidated gross written and earned premiums for the year ended December 31, 2016 as compared to the same period in 2015 was primarily the result of growth in the U.S. Operations segment and across most of our product lines. The International Operations segment was adversely impacted to some degree by increasing competition and, in some cases, declining rates.
The increase in consolidated net investment income for the year ended December 31, 2017 as compared to the same period in 2016 was primarily attributable to a $25.6 million increase in the net investment income of our alternative investment portfolio and an $8.2 million increase in income from our fixed maturities portfolio, partially offset by increased investment related expenses. Included in net investment income was $12.1 million of net investment gains relating to net asset sales initiated by an equity investee during the year ended December 31, 2017. The increase in consolidated net investment income for the year ended December 31, 2016 as compared to the same period ended 2015 was primarily attributable to a $20.9 million increase in the return on our alternative investment portfolio, from $3.0 million for the year ended December 31, 2015 to $23.9 million for the same period ended 2016. Absent the results of the alternative investments, consolidated net investment income increased $5.6 million from $85.6 million for the year ended December 31, 2015 to $91.2 million for the same period ended 2016, primarily attributable to an increase in income on our fixed maturity portfolio, partially offset by increased investment related expenses. Total invested assets at December 31, 2017 were $4,612.1 million, net of $130.8 million of invested assets attributable to Syndicate 1200’s trade capital providers. Total invested assets at December 31, 2016 were $4,188.4 million, net of $131.9 million of invested assets attributable to Syndicate 1200’s trade capital providers. Total invested assets at December 31, 2015 were $4,013.1 million, net of $95.3 million of invested assets attributable to Syndicate 1200’s trade capital providers.
Consolidated net realized investment and other gains for the year ended December 31, 2017 consisted of $60.1 million in realized gains primarily from the sale of fixed maturity and equity securities. Partially offsetting these realized gains was $17.6 million of realized foreign currency exchange losses, including $8.6 million on our foreign currency forward contracts and $9.0 million on our fixed maturity and equity securities portfolios, as well as $0.7 million of losses from other invested assets, primarily overseas deposits. Additionally, for the year ended December 31, 2017, we recognized a $2.5 million other-than-temporary impairment loss within our equity and fixed maturity portfolios. Consolidated net realized investment and other gains for the year ended December 31, 2016 consisted of $62.0 million in realized gains primarily from the sale of equity and fixed maturity securities. Partially offsetting these realized gains was $25.7 million of realized foreign currency exchange losses, primarily from our fixed maturity portfolio. Additionally, for the year ended December 31, 2016, we recognized a $10.2 million other-than-temporary impairment loss within our equity and fixed maturity portfolios. Consolidated net realized investment and other gains for the year ended December 31, 2015 consisted of $38.9 million in realized gains from the sale of equity and fixed maturity securities. Partially offsetting these realized gains was $3.1 million of realized foreign currency exchange losses, primarily from our fixed maturity portfolio. For the year ended December 31, 2015, we recognized an $11.9 million other-than-temporary impairment loss within our equity and fixed maturity portfolios.
Consolidated losses and loss adjustment expenses were $1,050.2 million, $810.1 million and $766.1 million for the years ended December 31, 2017, 2016 and 2015, respectively. The increase in the consolidated loss ratio for the year ended December 31, 2017 as compared to the same period ended 2016 was attributable to an increase in the current accident year loss ratio including catastrophe losses and lower net favorable development on prior accident year loss reserves. The increase in the consolidated loss ratio for the year ended December 31, 2016 as compared to the same period ended 2015 was attributable to increased catastrophe losses.
Included in losses and loss adjustment expenses for 2016 were $63.9 million in catastrophe losses resulting from storm activity in the United States, including Hurricane Matthew and the Louisiana floods, the Alberta wildfires and the Taiwan and New Zealand earthquakes. Partially offsetting these current accident year losses was $33.3 million of net favorable development on prior accident year loss reserves, primarily attributable to favorable development in our commercial automobile, property reinsurance, surety and commercial multiple peril lines, partially offset by unfavorable development in our general liability line.
Consolidated underwriting, acquisition and insurance expenses were $635.4 million, $547.0 million and $536.7 million for the years ended December 31, 2017, 2016 and 2015, respectively. Ariel Re contributed $31.6 million in underwriting expenses for the year ended December 31, 2017. The expense ratio for the year ended December 31, 2017 as compared to the same period in 2016 was negatively impacted by the aforementioned reduction to earned premiums for catastrophe-related reinsurance premium adjustments and additional group reinsurance contracts purchased in connection with risk management activities following the acquisition of Ariel Re. These adjustments increased the expense ratio by 1.0 percentage point. The remaining increase in the expense ratio was primarily attributable to increased information technology costs and higher personnel expenses in our strategic growth units. Additionally, included in our non-acquisition expenses for the year ended December 31, 2017 was $2.5 million in transaction costs related to the Ariel Re acquisition. The decline in the expense ratio for 2016 as compared to 2015 was primarily attributable to increased ceding commissions received, reduced contingent commissions payable and lower equity stock compensation expenses, partially offset by increased premium taxes and assessment expenses.
Consolidated foreign currency exchange losses were $6.3 million for the year ended December 31, 2017 as compared to gains of $4.5 million and $18.3 million for the years ended December 31, 2016 and 2015, respectively. The changes in the foreign currency exchange gains/losses were due to fluctuations of the U.S. Dollar, on a weighted average basis, against the currencies in which we transact our business. For the year ended December 31, 2017, the foreign currency exchange losses were driven by the U.S. Dollar weakening against the British Pound, the Euro, the Canadian Dollar and the Australian Dollar. For the year ended December 31, 2016, the foreign currency exchange gain was primarily due to the U.S. Dollar strengthening against the British Pound and the Euro. The gains recognized for the year ended December 31, 2015 were due to the U.S. Dollar strengthening against all major currencies in which we transact our business.
Professional includes various professional lines products including Errors and Omissions, Management Liability (including Directors and Officers) and Cyber coverages.
The results of operations for prior periods have been reclassified to conform to the current presentation.
The increase in gross written premiums for the year ended December 31, 2017 as compared to the same period in 2016 was due to launching new programs in 2017, partially offset by reductions from the termination of a fronted program in 2017, as well as planned underwriting actions taken to optimize our underwriting results. Earned premiums were reduced by $9.2 million during the year ended December 31, 2017 due to reinsurance premium adjustments associated with the third quarter 2017 catastrophe events and additional group reinsurance contracts purchased in connection with risk management activities following the acquisition of Ariel Re. Underwriting actions taken in certain programs to optimize results also account for the reduction in earned premiums during the year ended December 31, 2017 as compared to the same period in 2016.
The increase in gross written premiums for the year ended December 31, 2016 as compared to the same period in 2015 was primarily due to growth in one of our fronting programs, which did not impact earned premiums, but resulted in a ceding commission received. The decrease in earned premiums for the year ended December 31, 2016 as compared to the same period in 2015 was primarily due to planned decisions to exit certain classes of business and underwriting actions in risk bearing programs.
The increase in gross written and earned premiums for the year ended December 31, 2017 as compared to the same period in 2016 was driven by the introduction of new coverage products in all U.S. professional lines and higher production associated with increasing our underwriting staff.
More than half of the increase in gross written premiums for the year ended December 31, 2016 as compared to the same period in 2015 was driven by our management liability products. Our cyber liability and lawyers’ professional liability lines also contributed significantly to the increase. The growth in earned premiums was due to changes in reinsurance structure, which resulted in more earned premiums being retained in 2016.
Included in losses and loss adjustment expense for the year ended December 31, 2017 was $16.8 million in catastrophe losses from Hurricanes Harvey and Irma, other smaller storms and the California wildfires. Offsetting the catastrophe losses was $38.7 million of net favorable loss reserve development on prior accident years which was primarily concentrated in our general liability, workers compensation, surety and commercial automobile lines. We also experienced increased non-catastrophe current accident year property losses in 2017.
Included in losses and loss adjustment expense for the year ended December 31, 2016 was $14.2 million in catastrophe losses from Hurricane Matthew, the Louisiana floods and various storm activity in the United States. Offsetting the catastrophe losses was $35.9 million of net favorable loss reserve development on prior accident years primarily attributable to favorable development in our commercial automobile, workers compensation, surety and commercial multiple peril lines, partially offset by unfavorable development in our general liability lines.
The increase in the expense ratio for the year ended December 31, 2017 as compared to the same period in 2016 was primarily attributable to higher acquisition expenses due to changes in certain reinsurance agreements and programs that resulted in declines in ceding commissions and fronting fees earned, as well as increased non-acquisition expenses. The increase in non-acquisition expenses was primarily attributable to higher information technology and occupancy costs. The expense ratios for the years ended December 31, 2016 and December 31, 2015 were consistent at 31.9% and 31.8%, respectively.
Ariel Re contributed $298.1 million of gross written premiums and $123.3 million of earned premiums for the year ended December 31, 2017.
The increase in gross written and earned premiums for the year ended December 31, 2016 as compared to the same period in 2015 was primarily attributable to growth in our Bermuda operation as a result of new and expanded business, as well as additional premium coming from our European and Brazil platforms.
The increase in gross written and earned premiums for the year ended December 31, 2017 as compared to the same period in 2016 was primarily attributable to premiums written by Ariel Re. For the year ended December 31, 2017, Ariel Re contributed specialty lines gross written and earned premiums of $135.0 million and $58.3 million, respectively. Additionally, gross written and earned premiums were favorably impacted by increases within the surety and marine liability lines. Partially offsetting these increases were planned reductions in the aerospace division, and offshore energy due to continuing soft market conditions.
The increase in the loss ratio for the year ended December 31, 2017 as compared to the same period in 2016 was primarily attributable to increased catastrophe losses concentrated in the second half of 2017, higher than anticipated non-catastrophe current accident year losses and net unfavorable development on prior accident year loss reserves in 2017. The increase in the loss ratio for the year ended December 31, 2016 as compared to the same period in 2015 was primarily attributable to increased catastrophe losses.
The increase in the expense ratio for the year ended December 31, 2017 as compared to the same period in 2016 was due in large part to the aforementioned $30.5 million reduction to earned premiums for catastrophe-related reinsurance premium adjustments and additional group reinsurance contracts purchased in connection with risk management activities following the acquisition of Ariel Re. These adjustments increased the expense ratio by 1.7 percentage points. Ariel Re contributed $31.6 million in underwriting expenses for the year ended December 31, 2017.
The decline in the expense ratio for the year ended December 31, 2016 as compared to the same period in 2015 was primarily attributable to reduced compensation related expenses partially offset by increased acquisition cost resulting from higher broker expenses due to the competitive Lloyd’s market conditions.
Fee and other income represents amounts we receive in connection with the management of third party capital for our underwriting Syndicates at Lloyd’s. Fee and other income increased for the year ended December 31, 2017 as compared to the same period ended 2016 primarily due to fee income earned by Ariel Re’s Syndicate 1910, as well as additional fee income earned by Syndicate 1200 due to the increase in ownership participation by third party capital providers in 2017.
Earned premiums for the years ended December 31, 2017, 2016 and 2015 were primarily attributable to final audits, reinstatement premiums and other adjustments on policies previously underwritten.
Losses and loss adjustment expenses for the year ended December 31, 2017 included $17.3 million of net unfavorable loss reserve development on prior accident years driven by $13.6 million for our asbestos exposure due to increasing defense costs and an increase in the time claims remain open, and $5.9 million in other run-off lines, partially offset by net favorable loss reserve development on prior accident years of $2.2 million for the run-off risk management lines.
The following table represents gross payments on asbestos and environmental claims:
uncertainties regarding ultimate claim costs, (4) coverage interpretations and (5) the judicial, statutory and regulatory environments under which these claims may ultimately be resolved. Significant uncertainty remains as to our ultimate liability due to the potentially long waiting period between exposure and emergence of any bodily injury or property damage and the resulting potential for involvement of multiple policy periods for individual claims. Due to these uncertainties, the current trends may not be indicative of future results. Although we have determined and recorded our best estimate of the reserves for losses and loss adjustment expenses for Run-off Lines, current judicial and legislative decisions continue to broaden liability, expand policy scopes and increase the severity of claims payments. As a result of these and other recent developments, the uncertainties inherent in estimating ultimate loss reserves are heightened, further complicating the already complex process of determining loss reserves. The industry as a whole is involved in extensive litigation over these coverages and liability issues continue to make it difficult to quantify these exposures.
The primary sources of our cash flows are premiums, reinsurance recoveries, proceeds from sales and redemptions of investments and investment income. The primary cash outflows are claim payments, loss adjustment expenses, reinsurance costs, underwriting, acquisition and insurance expenses, and income taxes. Management believes that cash receipts from premiums, proceeds from investment sales and redemptions and investment income are sufficient to cover cash outflows in the foreseeable future. We believe we have access to additional sources of liquidity should the need for additional cash arise.
Argo Group and its other holding company subsidiaries are dependent on dividends and other permitted payments from their insurance and reinsurance subsidiaries to pay cash dividends to their shareholders, for debt service and for their operating expenses. The ability of our insurance and reinsurance subsidiaries to pay dividends to us is subject to certain restrictions imposed by the jurisdictions of domicile that regulate our immediate insurance and reinsurance subsidiaries and each jurisdiction has calculations for the amount of dividends that an insurance and reinsurance company can pay without the approval of the insurance regulator.
Argo Group and Argo Group US did not receive dividends from their subsidiaries in 2017.
The payment of dividends by Argo Re is limited under Bermuda insurance laws which require Argo Re to maintain certain measures of solvency and liquidity. As of December 31, 2017, the unaudited statutory capital and surplus of Argo Re was $1,694.4 million, and the amount required to be maintained was $403.8 million, thereby allowing Argo Re the potential to pay dividends or capital distributions within the parameters of the solvency and liquidity margins. We believe that the dividend and capital distribution capacity of Argo Re will provide us with sufficient liquidity to meet the operating and debt service commitments, as well as other obligations.
During 2018, Argo Group US, Inc. may be permitted to receive dividends from its subsidiaries as follows: Argonaut Insurance Company - $87.3 million and Rockwood - $33.2 million. Business and regulatory considerations may impact the amount of dividends actually paid and prior approval of dividend payments may be required.
On March 3, 2017, each of Argo Group, Argo Group US, Inc., Argo International Holdings Limited, and Argo Underwriting Agency Limited (the “Borrowers”) entered into a $325.0 million credit agreement (“Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent. The Credit Agreement replaced and terminated the original $175.0 million credit agreement. The Credit Agreement provides for a $200.0 million revolving credit facility with a maturity date of March 3, 2022 unless extended in accordance with the terms of the Credit Agreement. In addition, the Credit Agreement includes a $125.0 million term loan borrowing, which Argo Group used to pay off in its entirety the $125.0 million borrowing drawn on January 31, 2017 under the prior credit agreement to help fund the acquisition of Maybrooke. At December 31, 2017, the $125.0 million drawn on this term loan remained outstanding, with a maturity date of March 3, 2019. The term loan bears interest based on a variable rate, which resets and is payable based on reset options we select pursuant to the terms of the Credit Agreement. As of December 31, 2017, the interest rate on this debt was equal to the two-month LIBOR (1.44% at December 31, 2017) plus 150 basis points, or 2.94%.
Borrowings under the Credit Agreement may be used for general corporate purposes, including working capital and permitted acquisitions, and each of the Borrowers has agreed to be jointly and severally liable for the obligations of the other Borrowers under the Credit Agreement.
The Credit Agreement contains customary events of default. If an event of default occurs and is continuing, the Borrowers could be required to repay all amounts outstanding under the Credit Agreement. Lenders holding at least a majority of the loans and commitments under the Credit Agreement could elect to accelerate the maturity of the loans and/or terminate the commitments under the Credit Agreement upon the occurrence and during the continuation of an event of default. No defaults or events of defaults have occurred as of the date of this filing.
Included in the Credit Agreement is a provision that allows up to $200.0 million of the revolving credit facility to be used for letters of credit (“LOCs”), subject to availability. As of December 31, 2017, there were no borrowings outstanding and $0.5 million in LOCs against the revolving credit facility.
Throughout 2017, 2016 and 2015, we had no preferred shares outstanding.
For the year ended December 31, 2017, our Board declared quarterly dividends in the aggregate amount of $1.08 per share. Cash dividends paid for the year ended December 31, 2017 totaled $33.2 million. On February 20, 2018, our Board declared a quarterly cash dividend in the amount of $0.27 on each share of common stock outstanding. The dividend will be paid on March 23, 2018 to our shareholders of record on March 7, 2018. In addition, our Board declared a 15% stock dividend, payable on March 21, 2018, to shareholders of record at the close of business on March 7, 2018. The cash dividend will be paid on the adjusted number of common shares outstanding. The declaration and payment of future dividends to our shareholders is at the discretion of our Board and will depend upon our financial results, cash requirements, future prospects and other factors deemed relevant by our Board.
On May 3, 2016, our Board authorized the repurchase of up to $150.0 million of our common shares (“2016 Repurchase Authorization”). The 2016 Repurchase Authorization supersedes all the previous repurchase authorizations. As of December 31, 2017, availability under the 2016 Repurchase Authorization for future repurchases of our common shares was $85.0 million.
Our insurance and reinsurance subsidiaries require liquidity and adequate capital to meet ongoing obligations to policyholders and claimants and fund operating expenses. During the year ended December 31, 2017, cash flow provided by operations was $165.0 million. Based on current premium volumes and other measures of capital deployed in our business, we determined we had excess capital and, therefore, returned capital to our shareholders through the share buy-back program and through dividend payments to our shareholders. We believe our liquidity generated from operations and, if required, from our investment portfolio, will be sufficient to meet our obligations for the foreseeable future. We believe we have access to various sources of liquidity including cash, investments and the ability to borrow under our revolving credit facility.
Other than as described in the immediately preceding paragraph, we have not entered into any off-balance sheet arrangements, as defined by Item 303(a)(4) of Regulation S-K at December 31, 2017.
Interest only on Junior Subordinated Debentures through 2037. Interest calculated based on the rate in effect at December 31, 2017. Principal due beginning May 2033.
Interest only on Term Loan through 2019. Interest calculated based on the rate in effect at December 31, 2017. Principal due March 2019.
In conducting our actuarial analyses, we generally assume that past patterns demonstrated in the data will repeat themselves and that the data provides a basis for estimating future loss reserves. In the event that we become aware of a material change that may render past experience inappropriate for the purpose of estimating current loss reserves, we will attempt to quantify the effect of the change and use informed management judgment to adjust loss reserve forecasts appropriately.
The causes of uncertainty will vary for each product line reviewed. For short-tail property lines of business, we are exposed to catastrophe losses, both natural and manmade. Due to the nature of certain catastrophic loss events, such as hurricanes, earthquakes or terrorist attacks, our normal claims resolution processes may be impaired due to factors such as difficulty in accessing impacted areas and other physical, legal and regulatory impediments. These factors can make establishment of accurate loss reserve estimates difficult and render such estimates subject to greater uncertainty. Additionally, if the catastrophe occurs near the end of a financial reporting period, there are additional uncertainties in loss reserve estimates due to the lack of sufficient time to conduct a thorough analysis. Long-tail casualty lines of business also present challenges in establishing appropriate loss reserves, for example if changes in the legal environment occur over time which broaden our liability or scope of policy coverage and increase the magnitude of claim payments.
In addition to the previously described general uncertainties encountered in estimating loss reserves, there are significant additional uncertainties in estimating the amount of our potential losses from asbestos and environmental claims. Loss reserves for asbestos and environmental claims normally cannot be estimated with traditional loss reserving techniques that rely on historical accident year development factors due to the uncertainties surrounding these types of claims. Among the uncertainties impacting the estimation of such losses are:
potentially long waiting periods between exposure and emergence of any bodily injury or property damage;
Syndicate 1200 Liability is a long-tail line, and the risk factors are the same as discussed for General Liability except that Syndicate 1200 Liability does not include asbestos and environmental claims. Syndicate 1200 Property is a short-tail line. In general, paid and incurred loss development methods are used to forecast property losses.
As a property catastrophe reinsurer, incurred losses are inherently more volatile than those of primary insurers and reinsurers of risks that have an established historical pattern of loss development. The most significant uncertainty in reserves involves estimates of catastrophe losses. In reserving for catastrophe losses, estimates are influenced by underwriting and claim information provided by clients, clients’ market shares, industry catastrophe models, industry loss estimates and internal analyses of this information. This reserving approach can cause significant development from initial loss estimates in the immediate wake of a catastrophe event due to the limited information available to us as a reinsurer regarding the actual underlying losses. This process can cause the ultimate estimates to differ significantly from initial projections.
Concurrently, underwriting teams employ a market share approach as well as perform a thorough contract by contract analysis to identify potential changes to the expected loss estimates including IBNR by contract. The results of this initial process are updated when additional information becomes available. This information comes in the form of publicly available announcements, informal contact with brokers and/or clients, submission data and formal claim notices. As catastrophic events mature and reporting loss methods become more credible, sometimes as much as six to twelve months after the event or more, estimates of ultimate loss will rely more heavily on the actual claim experience arising from the event. In evaluating the loss estimates for catastrophic events, we use internal databases to establish projected reporting and payment patterns. Industry patterns from the Reinsurance Association of America (“RAA”), an insurance industry organization, are also employed.
We estimate reserves using a variety of methods, assumptions and data elements. The reserve estimation process includes explicit assumptions about a number of factors in the internal and external environment. Across most lines of business, the most important assumptions are future loss development factors applied to paid or reported losses to date. The trend in loss costs is also a key assumption, particularly in the most recent accident years, where loss development factors are less credible.
Similar to general liability, commercial multiple peril reserves are affected by reported loss development pattern assumptions. Recorded gross reserves for commercial multiple peril business were $237.0 million as of December 31, 2017. If the development patterns underlying our net reserves for this line of business change by 10%, the estimated net reserve could change by $10.0 million, in either direction.
Recorded gross reserves for commercial auto liability were $113.2 million as of December 31, 2017. A key assumption for commercial lines auto liability is the annual loss cost trend, particularly the severity trend component of loss costs. A 3% change in assumed annual severity is within the range of our historical experience and which management considers possible. A 3% change in assumed annual severity could change the estimated net reserve by $15.0 million, in either direction.
The factors discussed above affect the variability of estimates for asbestos and environmental reserves including assumptions with respect to the frequency of claims, average severity of those claims settled with payment, dismissal rate of claims with no payment and expense to indemnity ratio. The uncertainty with respect to the underlying reserve assumptions for asbestos and environmental adds a greater degree of variability to these reserve estimates than reserve estimates for more traditional exposures. While this variability is reflected in part in the size of the range of reserves we have developed, that range may still not be indicative of the potential variance between the ultimate outcome and the recorded reserves. The process of estimating asbestos and environmental reserves, which is detailed in Note 6, “Run-off Lines,” of Notes to Consolidated Financial Statements, remains subject to a wide variety of uncertainties. Due to these uncertainties, further developments could cause us to change our estimates and ranges of our asbestos and environmental reserves, and the effect of these changes could be material to our consolidated operating results, financial condition and liquidity.
On December 22, 2017, the TCJA was enacted. Among many changes resulting from TCJA, the new law (i) reduces the corporate tax rate to 21% effective January 1, 2018, (ii) eliminates the corporate alternative minimum tax for tax years beginning after December 31, 2017, (iii) allows businesses to immediately expense, for tax purposes, the cost of new investments in certain qualified depreciable assets, (iv) modifies the computation of loss reserve discounting for tax purposes, (v) modifies the recognition of income rules by requiring the recognition of income for certain items no later than the tax year in which an item is taken into account as income on an applicable financial statement and (vi) significantly modifies the United States international tax system.