We lease office space in Birmingham, Michigan, where our principal executive office is located. We also lease offices in Southfield, Michigan; Jacksonville, Longwood and Miami, Florida; Somerset, Pennsylvania; Brentwood, Tennessee; and Waco, Texas. We believe that our facilities are adequate for our current needs and that suitable additional or substitute space will be available as needed.
Our revenues are primarily derived from premiums earned from our insurance operations. We also generate other revenues through investment income and other income which mainly consists of: installment fees and policy issuance fees generally related to the policies we write and commission income from SIA's 50% owned agency (the "Affiliate"). The Affiliate places small commercial risks mainly for alarm and security guard markets.
assumptions used in preparing the consolidated financial statements. We evaluate our estimates regularly using information that we believe to be relevant. See the Consolidated Financial Statements Note 1 - Summary of Significant Accounting Policies, for further details.
We carry fixed maturity and equity securities classified as available-for-sale at fair value, and unrealized gains and losses on such securities, net of any deferred taxes, are reported as a separate component of accumulated other comprehensive income. We do not have any securities classified as trading or held-to-maturity.
We consider a number of factors in assessing whether an impairment is other-than-temporary, including (1) the amount and percentage that current fair value is below cost or amortized cost, (2) the length of time that the fair value has been below cost or amortized cost and (3) recent corporate developments or other factors that may impact an issuer’s near term prospects. In addition, for fixed maturity securities, we also consider the credit quality ratings for the securities, with a special emphasis on securities downgraded to below investment grade. We also consider our intent to sell available-for-sale fixed maturity securities in an unrealized loss position, and if it is more likely than not that we will be required to sell these securities before a recovery in fair value to their cost or amortized cost basis. For equity securities, we evaluate the near-term prospect of these investments in relation to the severity and duration of the impairment, and we consider our ability and intent to hold these investments until they recover their fair value.
The values for publicly-traded equity securities are generally based on Level 1 inputs which use the market approach valuation technique. The values for fixed maturity securities generally incorporate significant Level 2 inputs. The carrying value of cash and short-term investments approximate their fair values due to their short-term maturity.
As of December 31, 2016, we have federal and state income tax net operating loss (“NOL”) carryforwards of $22.8 million and $8.7 million, respectively, which will expire at various dates from 2019 through 2036. Of the federal NOL amount, $15.1 million are subject to limitations under Section 382 of the Internal Revenue Code. These net NOL carryforwards are limited in the amount that can be utilized in any one year and may expire before they are realized. At this time we do not expect that any of the remaining NOL carryforwards will expire before utilized.
The carrying value of our gross deferred tax asset for the NOL carryforwards is equal to the total NOL carryforward amount times the applicable federal and state tax rates, and was $8.0 million and $6.1 million as of December 31, 2016 and 2015, respectively. Total gross deferred tax assets were $13.0 million and $9.8 million as of December 31, 2016 and 2015. A valuation allowance of $8.4 million and $5.2 million has been recorded against the gross deferred tax assets as of December 31, 2016 and 2015, respectively, as the Company has recognized a three year cumulative loss as of December 31, 2016 which is significant negative evidence to support the lack of recoverability of those deferred tax assets in accordance with ASC 740, Income Taxes. The net deferred tax liability was $179 thousand and $325 thousand as of December 31, 2016 and 2015, respectively.
Adjusted operating income and adjusted operating income per share are non-GAAP measures that represent net income allocable to common shareholders excluding net realized investment and other gains (losses), net of tax, and the tax effect of changes in unrealized gains to the extent included in net income. The most directly comparable financial GAAP measures to adjusted operating income and adjusted operating income per share are net income and net income per share, respectively. Adjusted operating income and adjusted operating income per share are intended as supplemental information and are not meant to replace net income or net income per share. Adjusted operating income and adjusted operating income per share should be read in conjunction with the GAAP financial results. Our definition of adjusted operating income may be different from that used by other companies. The following is a reconciliation of net income to adjusted operating income (dollars in thousands), as well as net income per share to adjusted operating income per share:
We use adjusted operating income and adjusted operating income per share, in conjunction with other financial measures, to assess our performance and to evaluate the results of our business. We believe these measures provide investors with valuable information relating to our ongoing performance that may be obscured by the effect of investment gains and losses as a result of our market risk sensitive instruments, which primarily relate to fixed income securities that are available for sale and not held for trading purposes. Realized investment gains and losses may vary significantly between periods and are generally driven by external economic developments, such as capital market conditions. Accordingly, adjusted operating income excludes the effect of items that tend to be highly variable from period to period and highlights the results from our ongoing business operations and the underlying loss or profitability of our business. We believe that it is useful for investors to evaluate adjusted operating income and adjusted operating income per share, along with net income and net income per share, when reviewing and evaluating our performance.
The Company reported a net loss of $8.4 million for the year ended December 31, 2016, compared to a net loss of $17,000 for the year ended December 31, 2015. Net loss allocable to common shareholders was $8.4 million or $1.11 per share for the year ended December 31, 2016, compared to a net loss of $476,000 or $0.09 per share for the same period in 2015.
Our results for the year ended December 31, 2016 also reflect the continued expansion of our commercial lines and repositioning of our personal lines. Our commercial lines gross written premiums grew by 29.4% for the year ended December 31, 2016, as compared to the same period in 2015. Gross written premiums in our personal lines grew by 4.4% for the year ended December 31, 2016, compared to the same period in 2015.
Gross written premiums increased $21.2 million, or 22.6%, to $114.9 million for the year ended December 31, 2016, as compared to $93.8 million for the same period in 2015. The increase was driven by continued growth in our commercial lines. These results reflect our continued execution of our growth initiatives in the niche commercial insurance markets and our strategic change in the mix of business of our personal lines.
Policy acquisition costs are costs we incur to issue policies, which include commissions, premium taxes, underwriting reports and underwriter compensation costs. The Company offsets direct commissions with ceded commissions from reinsurers. The percentage of policy acquisition costs to net earned premiums and other income increased to 27.8% for the year ended December 31, 2016, compared to 23.7% in 2015, primarily due to the termination of a quota share reinsurance agreement in August 2015, which had previously reduced commission expense from ceding commission received from the reinsurer. The Company's direct commission expense rate was consistent between 2015 and 2016.
Our expense ratio is calculated by dividing the sum of policy acquisition costs and operating expenses by the sum of net earned premiums and other income. We use the expense ratio to evaluate the operating efficiency of our consolidated operations and each segment. Costs that are not readily identifiable as a direct cost of a segment or product line remain in Corporate and Other for segment reporting purposes.
Our expense ratio remained flat for the year ended December 31, 2015, as compared to the same period in 2014. The expense ratio remained consistent with the prior year as we saw an increase in our expenses, and our earned premium base has not yet grown sufficiently to show a reduction in the expense ratio.
For the year ended December 31, 2015, the Company had $0 of federal income tax expense due to a valuation allowance that offset any use of prior period net operating loss carryforwards and $48,000 of state income tax expense. The income tax benefit of $281,000 for the year ended December 31, 2014 relates to the impact of changes to net unrealized gains during the year. This tax effect was included in the change in other comprehensive income and the corresponding change to the valuation allowance was reflected in the consolidated statement of operations as a deferred tax benefit.
At December 31, 2016, we had $23.3 million in cash and short-term investments. Our principal sources of funds, excluding capital raises, are insurance premiums, investment income, proceeds from maturity and sale of invested assets and installment fees. These funds are primarily used to pay claims, commissions, employee compensation, taxes and other operating expenses, and service debt.
We believe that our existing cash, short-term investments and investment securities balances and the $7.0 million available under our revolving credit line, will be adequate to meet our capital and liquidity needs and the needs of our subsidiaries on a short-term and long-term basis.
We contributed $2.1 million to our Insurance Company Subsidiaries in 2016 to increase their statutory surplus levels. We believe that the current statutory surplus levels and the funds available at the holding company level will provide the necessary statutory capital to support our premium volume growth over the next two years.
We are party to a $30.0 million senior credit facility (the "Credit Facility") with Comerica Bank which currently consists of the 2014 Term Note of $7.5 million, the Term Note of $5.0 million and the Revolver with an available $17.5 million. The Revolver was renewed on November 30, 2016 and the maturity date extended to August 1, 2018. Our total outstanding senior debt at December 31, 2016, was $17.8 million. Our minimum principal and interest payments on our senior debt for future years is $3.3 million for 2017, and $15.7 million for 2018-2019.
Refer to Note 1 ~ Summary of Significant Accounting Policies - Recently Issued Accounting Guidance of the Notes to the Consolidated Financial Statements for detailed information.