The following selected consolidated GAAP financial data of the Company as of and for the years ended December 31, 2017, 2016, 2015, 2014 and 2013, were derived from the audited consolidated financial statements of the Company. The following financial data should be read in conjunction with the Consolidated Financial Statements and accompanying notes.
Based on weighted average basic common shares outstanding of 40.6 million, 41.3 million, 43.4 million, 45.4 million and 48.6 million for 2017, 2016, 2015, 2014 and 2013, respectively.
Based on 40.8 million, 40.9 million, 42.7 million, 44.7 million and 47.5 million common shares outstanding for December 31, 2017, 2016, 2015, 2014 and 2013, respectively.
Commencing in 2015, we initiated a strategic build out of our insurance platform through the investment in key leadership hires which in turn has brought significant underwriting talent and stronger direction in achieving our insurance program strategic goals of increased premium volume and improved underwriting results. Recent growth is coming from highly diversified areas including newly launched lines of business, as well as, product and geographic expansion in existing lines of business. We are building a world-class insurance platform capable of offering products across lines and geographies, complementing our leading global reinsurance franchise. As part of this initiative, we launched a new syndicate through Lloyd's of London and formed Ireland Insurance, providing us access to additional international business and new product opportunities to further diversify and broaden our insurance portfolio.
Overall, we believe that given our size, strong ratings, distribution system, reputation, expertise and capital market vehicle activity the current marketplace conditions provide profit opportunities. We continue to employ our strategy of targeting business that offers the greatest profit potential, while maintaining balance and diversification in our overall portfolio.
Net Investment Income. Net investment income increased by 14.8% to $542.9 million in 2017 compared with investment income of $473.1 million in 2016. Net pre-tax investment income, as a percentage of average invested assets, was 3.1% in 2017 compared to 2.8% in 2016. The increases in income and yield were primarily the result of higher income from our limited partnerships and higher income from the growing fixed income portfolio, partially offset by lower dividend income from our equity portfolio.
Net Realized Capital Gains (Losses). Net realized capital gains were $153.2 million in 2017 and net realized capital losses were $7.2 million and $184.1 million in 2016 and 2015, respectively. The net realized capital gains of $153.2 million in 2017 were comprised of $139.0 million of net gains from fair value re-measurements on our equity portfolio and $21.3 million of net realized capital gains from sales on our fixed maturity and equity securities, partially offset by $7.1 million of other-than-temporary impairments. The net realized capital losses of $7.2 million in 2016 were comprised of $31.6 million of other-than-temporary impairments, realized capital loss of $28.0 million from the sale of our Heartland subsidiary and $6.7 million of net realized capital losses from sales on our fixed maturity and equity securities, partially offset by $59.1 million of net gains from fair value re-measurements. The net realized capital losses of $184.1 million in 2015 were comprised of $102.2 million of other-than-temporary impairments, $45.6 million of net losses from fair value re-measurements and $36.3 million of net realized capital losses from sales on our fixed maturity and equity securities.
Net Derivative Gain (Loss). In 2005 and prior, we sold seven equity index put option contracts, six of which remain outstanding. These contracts meet the definition of a derivative in accordance with FASB guidance and as such, are fair valued each quarter with the change recorded as net derivative gain or loss in the consolidated statements of operations and comprehensive income (loss). As a result of these adjustments in value, we recognized net derivative gains of $9.6 million, 18.6 million and $6.3 million in 2017, 2016 and
2015, respectively. The change in the fair value of these equity index put option contracts is generally indicative of the change in the equity markets and interest rates over the same periods.
($23.2 million), the 2016 New Zealand earthquake ($18.9 million), the 2016 Taiwan earthquake ($15.1 million), the Tennessee wildfire ($14.7 million) and Hurricane Hermine ($13.5 million).
Incurred losses and LAE increased by 2.4% to $3,139.6 million in 2016, compared to $3,064.7 million in 2015, primarily due to an increase of $300.7 million in current year catastrophe losses, partially offset by higher favorable prior years attritional development of $177.1 million and prior years catastrophe development of $53.2 million in 2016 compared to 2015. The $208.7 million of favorable prior years attritional loss development in 2016 was comprised of $382.4 million of favorable development on reinsurance business mainly related in the reinsurance segments, partially offset by $173.6 million in the insurance segment. The favorable development in the reinsurance segments is primarily due to property and short-tail business in the U.S., as well as, property business in Canada, Latin America, the Middle East and Africa, partially offset by $53.9 million of adverse development on A&E. Part of the favorable development in the reinsurance segments related to the 2015 loss from the explosion at the Chinese port of Tianjin. In 2015, this loss was originally estimated to be $60.0 million. At December 31, 2016, this loss was projected to be $16.7 million resulting in $43.3 million of favorable development. The adverse development in the insurance segment is primarily attributable to run-off construction liability and umbrella program business. The $86.6 million of prior years' catastrophe development mainly related to the 2015 Chile earthquake, the 2011 Japan earthquake and the 2015 U.S. storms. The $387.9 million of current year catastrophe losses in 2016 are outlined above. The $87.2 million of current year catastrophe losses in 2015 related to the 2015 Chilean earthquake ($34.8 million), the Northern Chile storms ($19.5 million), the New South Wales storms ($16.7 million) and the 2015 U.S. storms ($16.2 million).
Commission, brokerage, taxes and fees increased by 0.4% to $1,188.7 million for the year ended December 31, 2016 compared to $1,183.6 million for the year ended December 31, 2015. The change was primarily due to the impact of the increase in premiums earned.
Corporate Expenses. Corporate expenses, which are general operating expenses that are not allocated to segments, were $25.9 million, $27.2 million and $23.3 million for the years ended December 31, 2017, 2016 and 2015. The changes between years were mainly due to fluctuations in variable compensation costs.
Interest, Fees and Bond Issue Cost Amortization Expense. Interest, fees and other bond amortization expense was $31.6 million, $36.2 million and $36.2 million in 2017, 2016 and 2015, respectively. The decreases in expense for 2017 was primarily due to the conversion of the long term subordinated notes from a fixed rate of 6.6% to a floating rate, which is reset quarterly per the note agreement. The floating rate was 3.8% as of December 31, 2017.
The TCJA, which was enacted on December 22, 2017, caused the Company to record income tax expense of $8.2 million in 2017. This income tax expense reflects the lower 21% tax benefit to be realized by the Company under the TCJA upon the reversal of the temporary differences in its deferred tax inventory account versus the 35% tax benefit that had been expected before the TCJA. In 2018, the Company expects to record adjustments to the amount of tax expense it recorded in 2017 with respect to the TCJA as estimated amounts are finalized. The adjustments are not expected to be significant to the Company's results.
Our combined ratio increased by 1.9 points to 87.0% in 2016, compared to 85.1% in 2015. The loss ratio component increased 1.1 points in 2016 over the same periods last year. The change was mainly due to the increase in current year catastrophes in 2016 compared to 2015, partially offset by more favorable development on prior years attritional losses year over year. The commission and brokerage ratio components were comparable at 22.3% in 2016 and 22.4% in 2015. The other underwriting expense ratio components increased by 0.9 points in 2016 over the same periods last year due primarily to the increased focus on the expansion of the insurance business.
Shareholders' equity increased by $293.8 million to $8,369.2 million at December 31, 2017 from $8,075.4 million at December 31, 2016, principally as a result of $469.0 million of net income, $121.9 million of net foreign currency translation adjustments, $25.0 million of share-based compensation transactions and $6.5 million of net benefit plan obligation adjustments, partially offset by $207.2 million of shareholder dividends, $71.3 million of unrealized depreciation on investments, net of tax and repurchases of 0.2 million common shares for $50.0 million.
Net investment income increased by 14.8% to $542.9 million in 2017, compared with investment income of $473.1 million in 2016. The increase was primarily due to an increase in limited partnership income and higher income from the growing fixed income portfolio, partially offset by lower dividend income from our equity portfolio.
The pre-tax equivalent total return for the bond portfolio was approximately 4.3%, 5.0% and 1.4%, respectively, in 2017, 2016 and 2015. The pre-tax equivalent return adjusts the yield on tax-exempt bonds to the fully taxable equivalent.
Our fixed income and equity portfolios have different compositions than the benchmark indexes. Our fixed income portfolios have a shorter duration because we align our investment portfolio with our liabilities. We also hold foreign securities to match our foreign liabilities while the index is comprised of only U.S. securities. Our equity portfolios reflect an emphasis on dividend yield and growth equities, while the index is comprised of the largest 500 equities by market capitalization.
Net realized capital gains were $153.2 million in 2017 and net realized capital losses were $7.2 million and $184.1 million in 2016 and 2015, respectively. In 2017, we recorded $139.0 million of net gains from fair value re-measurements and $21.3 million of net realized capital gains from sales on our fixed maturity and equity securities, partially offset by $7.1 million of other-than-temporary impairments. In 2016, we recorded $31.6 million of other-than-temporary impairments, $28.0 million of realized capital loss from the sale of our Heartland subsidiary and $6.7 million of net realized capital losses from sales on our fixed maturity and equity securities, partially offset by $59.1 million of net gains from fair value re-measurements. In 2015, we recorded $102.2 million of other-than-temporary impairments, $45.6 million of net losses from fair value re-measurements and $36.3 million of net realized capital losses from sales on our fixed maturity and equity securities. The fixed maturity and equity sales related primarily to adjusting the portfolios for overall market changes and individual credit shifts.
The U.S. Reinsurance operation writes property and casualty reinsurance and specialty lines of business, including Marine, Aviation, Surety and Accident and Health ("A&H") business, on both a treaty and facultative basis, through reinsurance brokers, as well as directly with ceding companies primarily within the U.S. The International operation writes non-U.S. property and casualty reinsurance through Everest Re's branches in Canada and Singapore and through offices in Brazil, Miami and New Jersey. The Bermuda operation provides reinsurance and insurance to worldwide property and casualty markets through brokers and directly
Premiums. Gross written premiums increased by 22.0% to $2,593.0 million in 2017 from $2,125.8 million in 2016, primarily due to an increase in the new crop reinsurance business, an increase in treaty property business and the influx of reinstatement premiums due to the catastrophe losses and an increase in mortgage business. Net written premiums increased by 13.9% to $2,245.4 million in 2017 compared to $1,970.6 million in 2016. The difference between the change in gross written premiums compared to the change in net written premiums is primarily due to varying utilization of reinsurance. Premiums earned increased by 5.3% to $2,181.2 million in 2017, compared to $2,072.2 million in 2016. The change in premiums earned relative to net written premiums is primarily the result of changes in the mix of business and timing; premiums are earned ratably over the coverage period whereas written premiums are recorded at the initiation of the coverage period.
Incurred losses increased by 29.5% to $1,068.5 million in 2016 compared to $825.1 million in 2015, primarily due to an increase of $155.4 million in current year attritional losses, resulting mainly from the impact of the increase in premiums earned and the impact of the new crop reinsurance contract effective upon the sale of Heartland, and $117.4 million in current year catastrophe losses. The $126.4 million of favorable prior years attritional loss development in 2016 is primarily due to U.S property and marine business, partially offset by $47.1 million of adverse development on A&E reserves. There was also an increase in favorable development of $26.1 million on prior years' catastrophe losses in 2016 compared to 2015. The $35.3 million of favorable development on prior years catastrophes in 2016 mainly related to the 2011 Japan earthquake ($15.5 million), the 2015 U.S. storms ($11.6 million) and the 2013 U.S. storms ($9.6 million). The $134.1 million of current year catastrophe losses in 2016 are outlined above. The $16.7 million of current year catastrophe losses in 2015 were mainly due to the US storms ($16.2 million).
Premiums. Gross written premiums increased by 7.0% to $1,316.7 million in 2017 compared to $1,230.7 million in 2016, primarily due to the increases in Middle East and Asian business and a positive impact of $22.0 million from the movement of foreign exchange rates, partially offset by a decline in Latin American business. Net written premiums increased by 13.6% to $1,229.6 million in 2017 compared to $1,082.7 million in 2016. The difference between the change in gross written premiums compared to the change in net written premiums is primarily due to varying utilization of reinsurance related to the quota share contracts. Premiums earned increased 7.4% to $1,202.0 million in 2017 compared to $1,119.1 million in 2016. The change in premiums earned relative to net written premiums is primarily the result of timing; premiums are earned ratably over the coverage period whereas written premiums are recorded at the initiation of the coverage period.
Incurred losses and LAE decreased by 35.1% to $486.6 million in 2016 compared to $749.9 million in 2015, primarily due to more favorable development on prior year attritional losses of $193.4 million, a decrease in current year attritional losses of $145.1 million, mainly due to lower Canadian, Latin American, Middle Eastern and African losses in 2016 and the impact of the decrease in premiums earned, as well as more favorable development of prior year catastrophe losses of $33.2 million, partially offset by an increase of $108.3 million in current year catastrophe losses. The $224.8 million of favorable development on prior years attritional losses was mainly related to property business. The $178.8 million of current year catastrophe losses in 2016 are outlined above. The $70.5 million of current year catastrophe losses in 2015 were due to the Chilean earthquake ($34.8 million), Northern Chile storms ($19.5 million) and the
New South Wales storms ($16.2 million). The 2016 favorable development on prior years catastrophe losses related primarily to the 2015 Chilean earthquake.
Commission and brokerage decreased by 4.9% to $283.4 million in 2016 compared to $298.2 million in 2015. The year over year decrease was mainly due to the impact of the decrease in premiums earned. Segment other underwriting expenses increased slightly to $35.5 million in 2016 compared to $34.3 million in 2015.
Gross written premiums increased by 1.5% to $890.4 million in 2016 compared to $877.3 million in 2015, primarily due to an increased casualty writings through the Bermuda office, partially offset by lower casualty writings through the Ireland office and the negative impact of $31.1 million from the movement of foreign exchange rates. Net written premiums increased by 5.1% to $831.9 million in 2016 compared to $791.6 million in 2015. The difference between the change in gross written premiums compared to the change in net written premiums was due to varying utilization of reinsurance. Premiums earned increased 1.9% to $838.0 million in 2016 compared to $822.4 million in 2015. The change in premiums earned relative to net written premiums is the result of timing; premiums are earned ratably over the coverage period whereas written premiums are recorded at the initiation of the coverage period.
Segment Expenses. Commission and brokerage increased by 29.8% to $303.7 million in 2017 compared to $234.0 million in 2016. The increase was mainly due to the impact of the increase in premiums earned and higher contingent commissions. Segment other underwriting expenses increased slightly to $38.0 million in 2017 compared to $36.3 million in 2016.
Gross written premiums increased by 16.6% to $1,787.0 million in 2016 compared to $1,532.3 million in 2015. This increase was primarily driven by expansion of various insurance lines of business, increases in accident and health business and premium from the start-up of the Lloyd's Syndicate. Net written premiums increased by 4.5% to $1,385.7 million in 2016 compared to $1,325.9 million in 2015. The difference between the change in gross written premiums compared to the change in net written premiums is primarily due to the transfer of the crop business to the U.S. Reinsurance segment as a result of the Heartland sale. Premiums earned increased 1.9% to $1,291.2 million in 2016 compared to $1,266.7 million in 2015. The change in premiums earned relative to net written premiums is the result of timing; premiums are earned ratably over the coverage period whereas written premiums are recorded at the initiation of the coverage period.
Segment Expenses. Commission and brokerage increased by 21.8% to $250.1 million in 2017 compared to $205.3 million in 2016. The increase was mainly due to the impact of the increase in premiums earned and changes in the mix of business. Segment other underwriting expenses increased to $186.1 million in 2017 compared to $176.8 million in 2016. The increase was mainly due to the impact of the increase in premiums earned and increased expenses related to the continued build out of the insurance business.
Commission and brokerage increased by 16.5% to $205.3 million in 2016 compared to $176.2 million in 2015. The increase was mainly due to the impact of the increase in premiums earned and changes in the mix of business. Segment other underwriting expenses increased to $176.8 million in 2016 compared to $136.7 million in 2015. The increase was primarily due to increased expenses due to the build out of our insurance platform.
It is more difficult to accurately estimate loss reserves for reinsurance liabilities than for insurance liabilities. At December 31, 2017, we had reinsurance reserves of $8,763.4 million and insurance loss reserves of $3,121.0 million, of which $331.2 million and $117.8 million, respectively, were loss reserves for A&E liabilities. A detailed discussion of additional considerations related to A&E exposures follows later in this section.
Reinsurance Receivables. We have purchased reinsurance to reduce our exposure to adverse claim experience, large claims and catastrophic loss occurrences. Our ceded reinsurance provides for recovery from reinsurers of a portion of losses and loss expenses under certain circumstances. Such reinsurance does not relieve us of our obligation to our policyholders. In the event our reinsurers are unable to meet their obligations under these agreements or are able to successfully challenge losses ceded by us under the contracts, we will not be able to realize the full value of the reinsurance receivable balance. To minimize exposure from uncollectible reinsurance receivables, we have a reinsurance security committee that evaluates the financial strength of each reinsurer prior to our entering into a reinsurance arrangement. In some cases, we may hold full or partial collateral for the receivable, including letters of credit, trust assets and cash. Additionally, creditworthy foreign reinsurers of business written in the U.S., as well as capital markets' reinsurance mechanisms, are generally required to secure their obligations. We have established reserves for uncollectible balances based on our assessment of the collectability of the outstanding balances. As of December 31, 2017 and 2016, the reserve for uncollectible balances was $15.0 million. Actual uncollectible amounts may vary, perhaps substantially, from such reserves, impacting income (loss) in the period in which the change in reserves is made. See also ITEM 8, "Financial Statements and Supplementary Data" - Note 11 of Notes to the Consolidated Financial Statements and "Financial Condition - Reinsurance Receivables" below.
Over the past several years, we have expanded the allocation of our investments funded by shareholders' equity to include: 1) a greater percentage of publicly traded equity securities, 2) emerging market fixed maturities through mutual fund structures, as well as individual holdings, 3) high yield fixed maturities, 4) bank and private loan securities and 5) private equity limited partnership investments. The objective of this portfolio diversification is to enhance the risk-adjusted total return of the investment portfolio by allocating a prudent portion of the portfolio to higher return asset classes, which are also less subject to changes in value with movements in interest rates. We limit our allocation to these asset classes because of 1) the potential for volatility in their values and 2) the impact of these investments on regulatory and rating agency capital adequacy models. We use investment managers experienced in these markets and adjust our allocation to these investments based upon market conditions. At December 31, 2017, the market value of investments in these investment market sectors, carried at both market and fair value, approximated 48.5% of shareholders' equity.
Depending on the specific segment, the range derived for the loss reserves, excluding reserves for A&E exposures, ranges from minus 10.1% to minus 16.7% for the low range and from plus 10.1% to plus 16.7% for the high range. Both the higher and lower ranges are associated with the U.S. Reinsurance segment. The size of the range is dependent upon the level of confidence associated with the outcome. Within each range, management's best estimate of loss reserves is based upon the point estimate derived by our actuaries in detailed reserve studies. Such ranges are necessarily subjective due to the lack of generally accepted actuarial standards with respect to their development. For the above presentation, we have assumed what we believe is a reasonable confidence level but note that there can be no assurance that our claim obligations will not vary outside of these ranges.
With respect to asbestos only, at December 31, 2017, we had net asbestos loss reserves of $306.1 million, or 96.2%, of total net A&E reserves, all of which was for assumed business.
Industry analysts use the "survival ratio" to compare the A&E reserves among companies with such liabilities. The survival ratio is typically calculated by dividing a company's current net reserves by the three year average of annual paid losses. Hence, the survival ratio equals the number of years that it would take to exhaust the current reserves if future loss payments were to continue at historical levels. Using this measurement, our net three year asbestos survival ratio was 6.2 years at December 31, 2017. These metrics can be skewed by individual large settlements occurring in the prior three years and therefore, may not be indicative of the timing of future payments.
Shareholders' Equity. Our shareholders' equity increased to $8,369.2 million as of December 31, 2017 from $8,075.4 million as of December 31, 2016. This increase was the result of $469.0 million of net income, $121.9 million of net foreign currency translation adjustments, $25.0 million of share-based compensation transactions and $6.5 million of net benefit plan obligation adjustments, partially offset by $207.2 million of shareholder dividends, $71.3 million of unrealized appreciation on investments, net of tax and repurchases of 0.2 million common shares for $50.0 million.
Our shareholders' equity increased to $8,075.4 million as of December 31, 2016 from $7,608.6 million as of December 31, 2015. This increase was the result of $996.3 million of net income, $72.7 million of unrealized appreciation on investments, net of tax and $37.1 million of share-based compensation transactions, partially offset by repurchases of 2.1 million common shares for $386.3 million, $195.4 million of shareholder dividends, $55.3 million of net foreign currency translation adjustments and $2.4 million of net benefit plan obligation adjustments.
Commencing in 2017, the regulatory targeted capital required by the State of Delaware, Department of Insurance was expanded to include a provision for catastrophe exposure. This additional requirement added $759.8 million of regulatory targeted capital for Everest Re as of December 31, 2017.
(3) The 2017 BSCR calculation is not yet due to be completed; however, the Company anticipates that Bermuda Re's December 31, 2017 actual capital will exceed the targeted capital level.
As the timing of payments for claims and benefits cannot be predicted with certainty, we maintain portfolios of long term invested assets with varying maturities, along with short-term investments that provide additional liquidity for payment of claims. At December 31, 2017 and December 31, 2016, we held cash and short-term investments of $1,144.7 million and $913.4 million, respectively. Our short-term investments are generally readily marketable and can be converted to cash. Starting in the first quarter of 2016, we implemented a new liquidity sweep facility with investments in short maturity, investment grade, U.S. dollar denominated fixed income securities. The facility is structured as a limited liability corporation so it is classified on our balance sheet as part of other invested assets. This facility had $447.9 million of available liquidity at December 31, 2017. In addition to these cash and short-term investments, at December 31, 2017, we had $1,050.1 million of available for sale fixed maturity securities maturing within one year or less, $7,554.2 million maturing within one to five years and $3,175.7 million maturing after five years. Our $1,093.1 million of equity securities are comprised primarily of publicly traded securities that can be easily liquidated. We believe that these fixed maturity and equity securities, in conjunction with the short-term investments and positive cash flow from operations, provide ample sources of liquidity for the expected payment of losses in the near future. We do not anticipate selling a significant amount of securities or using available credit facilities to pay losses and LAE but have the ability to do so. Sales of securities might result in realized capital gains or losses. At December 31, 2017 we had $66.5 million of net pre-tax unrealized appreciation related to fixed maturity and equity securities, comprised of $249.0 million of pre-tax unrealized appreciation and $182.6 million of pre-tax unrealized depreciation.
Effective May 26, 2016, Group, Bermuda Re and Everest International entered into a five year, $800.0 million senior credit facility with a syndicate of lenders, which amended and restated in its entirety the June 22, 2012, four year, $800.0 million senior credit facility. Both the May 26, 2016 and June 22, 2012 senior credit facilities, which have similar terms, are referred to as the "Group Credit Facility". Wells Fargo Corporation ("Wells Fargo Bank") is the administrative agent for the Group Credit Facility, which consists of two tranches. Tranche one provides up to $200.0 million of unsecured revolving credit for liquidity and general corporate purposes, and for the issuance of unsecured standby letters of credit. The interest on the revolving loans shall, at the Company's option, be either (1) the Base Rate (as defined below) or (2) an adjusted London Interbank Offered Rate ("LIBOR") plus a margin. The Base Rate is the higher of (a) the prime commercial lending rate established by Wells Fargo Bank, (b) the Federal Funds Rate plus 0.5% per annum or (c) the one month LIBOR Rate plus 1.0% per annum. The amount of margin and the fees payable for the Group Credit Facility depends on Group's senior unsecured debt rating. Tranche two exclusively provides up to $600.0 million for the issuance of standby letters of credit on a collateralized basis.
At December 31, 2017 and 2016, the Company had no outstanding short-term borrowings from the Group Credit Facility revolving credit line. At December 31, 2017, the Group Credit Facility had no outstanding letters of credit under tranche one and $538.2 million outstanding letters of credit under tranche two. At December 31, 2016, the Group Credit Facility had no outstanding letters of credit under tranche one and $478.2 million outstanding letters of credit under tranche two.
Management estimates that the projected net economic loss from its largest 100-year event in a given zone represents approximately 11% of its December 31, 2017 shareholders' equity. Economic loss is the PML exposure, net of third party reinsurance, reduced by estimated reinstatement premiums to renew coverage and estimated income taxes. The impact of income taxes on the PML depends on the distribution of the losses by corporate entity, which is also affected by inter-affiliate reinsurance. Management also monitors and controls its largest PMLs at multiple points along the loss distribution curve, such as loss amounts at the 20, 50, 100, 250, 500 and 1,000 year return periods. This process enables management to identify and control exposure accumulations and to integrate such exposures into enterprise risk, underwriting and capital management decisions.
We believe that our greatest worldwide 1 in 100 year exposure to a single catastrophic event is to a hurricane affecting the U.S. southeast coast, where we estimate we have a PML exposure, net of third party reinsurance, of $1,313.0 million. See also table under ITEM 1, "Business - Risk Management of Underwriting and Retrocession Arrangements".
If such a single catastrophe loss were to occur, management estimates that the economic loss to us would be approximately $943.0 million. The estimate involves multiple variables, including which Everest entity would experience the loss, and as a result there can be no assurance that this amount would not be exceeded.
Information Technology. Our information technology is a key component of our business operations and is supported by a team of knowledgeable professionals. The majority of our information technology platform is located at our service processing center in New Jersey but processing is performed at the office locations of our operating subsidiaries and branches. In addition, our main-frame processing is performed by a third party vendor at a separate location. We have implemented procedures that ensure that our key business systems are protected (or secured) and data is backed up and stored at off-site locations so that they can be restored promptly if necessary. We have documented business continuity plans and disaster recovery plans to provide uninterrupted technology services for major systems outages with alternative secure data centers available in case of broader outages.
Despite these safeguards, a significant cyber incident, including system failure, security breach and disruption by malware or other damage could interrupt or delay our operations. This type of incident may result in a violation of applicable privacy and other laws. Management is not aware of a cybersecurity incident that has had a material impact on our operations.
Interest expense on 6.6% long term notes is calculated at the variable floating rate of 3.80% as of December 31, 2017.
During 2017, 2016 and 2015, we declared and paid common shareholder dividends of $207.2 million, $195.4 million and $175.1 million, respectively. As an insurance holding company, we are partially dependent on dividends and other permitted payments from our subsidiaries to pay cash dividends to our shareholders. The payment of dividends to Group by Holdings Ireland and Everest Dublin Holdings is subject to Irish corporate and regulatory restrictions; the payment of dividends to Holdings Ireland by Holdings and to Holdings by Everest Re is subject to Delaware regulatory restrictions; and the payment of dividends to Group by Bermuda Re, Everest International or Mt. Logan Re is subject to Bermuda insurance regulatory restrictions. Management expects that, absent extraordinary catastrophe losses, such restrictions should not affect Everest Re's ability to declare and pay dividends sufficient to support Holdings' general corporate needs and that Holdings Ireland, Everest Dublin Holdings, Bermuda Re and Everest International will have the ability to declare and pay dividends sufficient to support Group's general corporate needs. For the years ended December 31, 2017, 2016 and 2015, Everest Re paid no dividends to Holdings. For the years ended December 31, 2017, 2016 and 2015, Bermuda Re paid dividends to Group of $400.0 million, $650.0 million and $575.0 million, respectively; Everest International paid dividends to Group of $0.0 million, $40.0 million and $15.0 million, respectively; and Mt. Logan Re paid dividends to Group of $25.0 million, $0.0 million and $0.0 million, respectively. See ITEM 1, "Business - Regulatory Matters - Dividends" and ITEM 8, "Financial Statements and Supplementary Data" - Note 14 of Notes to Consolidated Financial Statements.
Accounting for Impact on Income Taxes due to Tax Reform. In December 2017, the SEC issued Staff Accounting Bulletin ("SAB") 118 which provides guidance on the application of FASB Accounting Standards Codification ("ASC") Topic 740, Income Taxes, due to the enactment of TCJA. SAB 118 became effective upon release. The Company has adopted the provisions of SAB 118 with respect to measuring the tax effects for the modifications to the determination of tax basis loss reserves. Because of uncertainty in how the Internal Revenue Service ("IRS") intends to implement the modifications and the necessary transition calculation, the Company has determined that a reasonable estimate cannot be determined and has followed the provisions of the tax laws that were in effect prior to the modifications. In 2018, the Company expects to record adjustments to the amount of tax expense it recorded in 2017 with respect to the TCJA as estimated amounts are finalized. Further adjustments are not expected to have a material impact on the Company's financial statements.
Disclosure of Restricted Cash. In November 2016, FASB issued ASU 2016-18 which outlines guidance on the presentation in the statements of cash flows of changes in restricted cash. The new guidance requires that the statements of cash flows should reflect all changes in cash, cash equivalents and restricted cash in total and not segregated individually. The guidance is effective for annual and interim reporting periods beginning after December 15, 2017. The Company does not expect the adoption of ASU 2016-18 to have a material impact on its financial statements.
Valuation of Financial Instruments. In June 2016, FASB issued ASU 2016-13 which outlines guidance on the valuation of and accounting for assets measured at amortized cost and available for sale debt securities. The carrying value of assets measured at amortized cost will now be presented as the amount expected to be collected on the financial asset (amortized cost less an allowance for credit losses valuation account). Available for sale debt securities will now record credit losses through an allowance for credit losses, which will be limited to the amount by which fair value is below amortized cost. The guidance is effective for annual and interim reporting periods beginning after December 15, 2019. The Company is currently evaluating the impact of the adoption of ASU 2016-13 on its financial statements.
Accounting for Share-Based Compensation. In March 2016, the FASB issued ASU 2016-09, authoritative guidance regarding the accounting for share-based compensation. This guidance requires that the income tax effects resulting from the change in the value of share-based compensation awards between grant and settlement will be recorded as part of the Consolidated Statements of Operations and Comprehensive Income/(Loss). Previously, excess tax benefits have been recorded as part of the additional paid in capital within the Consolidated Balance Sheets. The guidance is effective for annual reporting periods beginning after December 15, 2016 and interim periods within that annual reporting period. The Company has implemented this guidance prospectively as of January 1, 2017. The guidance also requires that the cost of employee taxes paid via shares withheld upon settlement of share-based compensation awards must be shown as a financing activity within the Statements of Cash Flows. The Company has implemented this guidance retrospectively as of January 1, 2017.
Leases. In February 2016, FASB issued ASU 2016-02 which outlines new guidance on the accounting for leases. The new guidance requires the recognition of lease assets and lease liabilities on the balance sheets for most leases that were previously deemed operating leases and required only lease expense presentation in the statements of operations. The guidance is effective for annual and interim reporting periods beginning after December 15, 2018. The Company is currently evaluating the impact of the adoption of ASU 2016-02 on its financial statements.
The following tables present certain financial statement line items as previously reported in 2015, the effect on those line items due to not consolidating the segregated accounts of Mt. Logan Re, in accordance with the newly adopted accounting policy and the line items as currently reported within the financial statements.
Interest rate risk is the potential change in value of the fixed maturity securities portfolio, including short-term investments, from a change in market interest rates. In a declining interest rate environment, it includes prepayment risk on the $2,445.4 million of mortgage-backed securities in the $14,756.8 million fixed maturity portfolio. Prepayment risk results from potential accelerated principal payments that shorten the average life and thus the expected yield of the security.
The tables below display the potential impact of market value fluctuations and after-tax unrealized appreciation on our fixed maturity portfolio (including $509.7 million of short-term investments) for the period indicated based on upward and downward parallel and immediate 100 and 200 basis point shifts in interest rates. For legal entities with a U.S. dollar functional currency, this modeling was performed on each security individually. To generate appropriate price estimates on mortgage-backed securities, changes in prepayment expectations under different interest rate environments were taken into account. For legal entities with a non-U.S. dollar functional currency, the effective duration of the involved portfolio of securities was used as a proxy for the market value change under the various interest rate change scenarios.
We had $11,884.3 million and $10,312.3 million of gross reserves for losses and LAE as of December 31, 2017 and 2016, respectively. These amounts are recorded at their nominal value, as opposed to present value, which would reflect a discount adjustment to reflect the time value of money. Since losses are paid out over a period of time, the present value of the reserves is less than the nominal value. As interest rates rise, the present value of the reserves decreases and, conversely, as interest rates decline, the present value increases. These movements are the opposite of the interest rate impacts on the fair value of investments. While the difference between present value and nominal value is not reflected in our financial statements, our financial results will include investment income over time from the investment portfolio until the claims are paid. Our loss and loss reserve obligations have an expected duration of approximately 3.7 years, which is reasonably consistent with our fixed income portfolio. If we were to discount our loss and LAE reserves, net of ceded reserves, the discount would be approximately $1.3 billion resulting in a discounted reserve balance of approximately $9.4 billion, representing approximately 61.6% of the value of the fixed maturity investment portfolio funds.
Foreign Currency Risk. Foreign currency risk is the potential change in value, income and cash flow arising from adverse changes in foreign currency exchange rates. Each of our non-U.S./Bermuda ("foreign") operations maintains capital in the currency of the country of its geographic location consistent with local regulatory guidelines. Each foreign operation may conduct business in its local currency, as well as the currency of other countries in which it operates. The primary foreign currency exposures for these foreign operations are the Canadian Dollar, the Singapore Dollar, the British Pound Sterling and the Euro. We mitigate foreign exchange exposure by generally matching the currency and duration of our assets to our corresponding operating liabilities. In accordance with FASB guidance, the impact on the market value of available for sale fixed maturities due to changes in foreign currency exchange rates, in relation to functional currency, is reflected as part of other comprehensive income. Conversely, the impact of changes in foreign currency exchange rates, in relation to functional currency, on other assets and liabilities is reflected through net income as a component of other income (expense). In addition, we translate the assets, liabilities and
In June 2016, the United Kingdom approved a referendum to exit the European Union (commonly referred to as "Brexit") which resulted in volatility in global stock markets and currency exchange rates, and has increased political, economic and global market uncertainty. The formal negotiation process for the United Kingdom to exit the European Union will determine the timing and terms of such an exit. The Company has a Lloyd's of London Syndicate and Bermuda Re has a branch operation in the United Kingdom. The nature and extent of the impact of Brexit on regulation, interest rates, currency exchange rates and financial markets is still uncertain and may adversely affect our operations.
This report contains forward-looking statements within the meaning of the U.S. federal securities laws. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in the federal securities laws. In some cases, these statements can be identified by the use of forward-looking words such as "may", "will", "should", "could", "anticipate", "estimate", "expect", "plan", "believe", "predict", "potential" and "intend". Forward-looking statements contained in this report include information regarding our reserves for losses and LAE, the impact of the Tax Cut and Jobs Act, the adequacy of capital in relation to regulatory required capital, the adequacy of our provision for uncollectible balances, estimates of our catastrophe exposure, the effects of catastrophic events on our financial statements, the ability of Everest Re, Holdings, Holdings Ireland, Dublin Holdings, Bermuda Re and Everest International to pay dividends and the settlement costs of our specialized equity index put option contracts. Forward-looking statements only reflect our expectations and are not guarantees of performance. These statements involve risks, uncertainties and assumptions. Actual events or results may differ materially from our expectations. Important factors that could cause our actual events or results to be materially different from our expectations include those discussed under the caption ITEM 1A, "Risk Factors". We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.