The Company leases office space from Endurance in Pembroke, Bermuda, through the Administrative Services Agreement.
The majority of our property catastrophe business is originated during the key January and June annual renewal periods. We experienced continued competition during the January 1 and June 1, 2016 renewal periods, due to relatively light industry catastrophe losses experienced over the past several years. As a result, we experienced an overall rate decrease of approximately 7% and 3% on the risks we wrote at January 1, and June 1, 2016, respectively, versus those written a year ago. Despite the competitive market conditions we faced, through the efforts of the Manager in 2016, we believe that we have achieved preferred signings with our business partners including a shift in the profile of renewal premiums where we increased our participation in the retrocessional quota share agreement with Endurance and reduced the amount of other indemnity reinsurance and retro ILW business in our portfolio.
During 2016, we generated $14.3 million of net income, declared and paid quarterly dividends of $0.30 per Common Share and RSU during each of the first three quarters and, on February 1, 2017, we announced a special dividend with respect to 2016 of $0.59 per Common Share and RSU, which is payable on March 15, 2017 to all shareholders of record on February 28, 2017. The aggregate dollar value of all dividends declared with respect to 2016, which totaled $13.1 million, represented 90.6% of our Distributable Income for the year.
Looking ahead to 2017, we expect to experience continued competition on renewals and rates to remain depressed due to the industry catastrophe losses experienced over the past several quarters not being at a level significant enough to improve market conditions.
The table that follows details our projected net impact from single event losses as of January 1, 2017 for selected zones at specified return periods. It is important to note that each catastrophe model we use contains its own assumptions as to the frequency and severity of loss events, and results may vary significantly from model to model.
Since the Manager utilizes a combination of third-party models, its own proprietary models and underwriting judgment to project the net impact from single event losses, our internal projections and actual results may be higher or lower than those presented in the table below:
Subsidiaries of Endurance manage our reinsurance underwriting decisions and provide us with the services of our CEO and our CFO. Through this relationship, we leverage Endurance’s reinsurance underwriting expertise and infrastructure to conduct our business.
During 2016, 2015 and 2014 we wrote $43.2 million, $38.6 million and $45.0 million of reinsurance premiums, respectively, all of which represented indemnity reinsurance contracts relating to property catastrophe risks. The increase in reinsurance premiums written in 2016, compared to 2015 resulted from an increase in our participation in the retrocessional quota share agreement with Endurance (the "Endurance Quota Share Agreement") under which premiums are recorded as written uniformly over the period of the agreement. This increase was partially offset by a reduction in the amount of other indemnity reinsurance and retro ILW business renewed in January 2016.
Our reinsurance premiums written and earned during 2016, 2015 and 2014 included $1.5 million, $0.3 million and $1.0 million, respectively of reinstatement premiums.
The following table summarizes the components of our consolidated loss and LAE incurred and our loss and LAE ratios for the years ended December 31, 2016, 2015 and 2014:
During 2015 we established $2.6 million of losses and LAE, of loss and LAE reserves for estimated losses incurred during the year, reflected as a combination of case and incurred but not reported ("IBNR") reserves. There were no individually significant known loss events that impacted us during the 2015 period. In addition, during the year ended December 31, 2015, we recognized $0.6 million of net favorable loss and LAE reserve development for estimated losses incurred during 2014. The prior year loss and LAE development we recognized during 2015 was primarily the result of new or revised loss information received from our cedants.
During 2014, we incurred $17.1 million of losses and LAE, driven by the catastrophe events summarized in the following table together with reported attritional losses and incurred but not reported ("IBNR") reserves.
Our reinsurance acquisition costs, which we normally recognize over the underlying risk period of the related contracts, include commissions, brokerage costs, premium taxes and excise taxes, in each case, when applicable, and are normally a set percentage of gross premiums written. Our reinsurance acquisition costs may also include profit commissions, which are paid by reinsurers to ceding companies in the event of favorable loss experience.
The expenses we have incurred pursuant to the Investment Management Agreement and the Administrative Services Agreement have remained consistent in 2016, 2015 and 2014. During 2016 we incurred $0.5 million of performance fees pursuant to the Underwriting and Insurance Management Agreement compared to $1.3 million during 2015. The decrease is due to financial results not meeting the level of return necessary to trigger a performance fee during the quarters ended June 30, 2016 and September 30, 2016. In 2014 there were no performance fees accrued reflecting a combination of the financial results achieved in the year combined with a brought forward deficit in the rolling high water mark used in the computation.
The Company has no operations of its own and relies on dividends and distributions from its operating subsidiaries to pay its expenses and dividends to its shareholders and to repay its outstanding borrowings under the 2016 Credit Facility. There are restrictions imposed by the BMA on the payment of dividends to the Company from its operating subsidiaries as described in Note 10 of the Notes to Consolidated Financial Statements.
As of December 31, 2015, the Company had $13.0 million of outstanding borrowings under the 2014 Credit Agreement. With respect to the Company's outstanding borrowings at December 31, 2015, $4.0 million was repaid on February 2, 2016 and was subject to an annual interest rate of 1.33%, $5.0 million was repaid on February 22, 2016 and was subject to an annual interest rate of 1.48% and $4.0 million was repaid on March 11, 2016 and was subject to an annual interest rate of 1.51%.
The Company generally repays any outstanding borrowings under the Credit Agreements with funds it expects to receive from Blue Capital Re, which are made available to Blue Capital Re in the normal course through scheduled releases of funds held as collateral.
During 2016, 2015 and 2014 we declared and paid quarterly cash dividends of $0.30 per Common Share and RSU during each of the first three quarters of the year. In addition, in the first quarter of 2016 and 2015 we declared a special dividend of $1.24 and $0.66, respectively, per Common Share and RSU with respect to the 2015 and 2014 fiscal year. The total amount of dividends paid to holders of Common Shares and RSUs during 2016, 2015 and 2014 was $18.8 million, $13.7 million and $7.9 million, respectively.
On February 1, 2017, the Company declared a special dividend of $0.59 per Common Share and RSU, which is payable on March 15, 2017 to holders of record on February 28, 2017. The total amount of the special dividend to be paid in March 2017 is $5.2 million. The Company intends to pay the special dividend with funds it expects to receive from Blue Capital Re, which are made available to Blue Capital Re in the normal course through scheduled releases of funds held as collateral.
Our total shareholders’ equity (or total capital) was $183.3 million and $187.6 million at December 31, 2016 and 2015, respectively. The decrease in our total capital during the year ended December 31, 2016 was primarily the result of recording net income of $14.3 million and declaring $18.8 million in dividends to holders of Common Shares and RSUs.
We may need to raise additional capital in the future, by issuing new debt, equity or hybrid securities, in order to enable us to, among other things: write new business; enter into other reinsurance opportunities; cover or pay losses; manage working capital requirements; repurchase Common Shares; respond to, or comply with, any changes in the capital requirements, if any,
that the BMA or other regulatory bodies may require; acquire new businesses; or invest in existing businesses. We intend to rely on future offerings of Common Shares to raise additional equity capital; however, we cannot assure you that we will be able to successfully raise additional capital. In the event that we incur indebtedness for any of these purposes or other purposes, we intend to limit our borrowing to an amount no greater than 50% of our shareholders’ equity at the time of the borrowing. However, subject to the approval of the Board, we may borrow an amount in excess of 50% of our shareholders’ equity at the time of the borrowing.
Investment Management Agreement. Pursuant to the Investment Management Agreement, we are obligated to pay the Manager a management fee (the "Management Fee") equal to 1.5% of our average total shareholders’ equity (as defined in the Investment Management Agreement) per annum, calculated and payable in arrears in cash each quarter (or part thereof) that the Investment Management Agreement is in effect.
Neither the Company nor its operating subsidiaries had any commitments for operating leases or capital expenditures at December 31, 2016 and neither the Company nor its operating subsidiaries expect any material expenditures of this type during the next 12 months or for the foreseeable future.
During the year ended December 31, 2016, our premium collections, net releases of cash and cash equivalents from trusts established by Blue Water Re and cash inflows from other operating activities exceeded our payments of general and administrative expenses by $30.4 million. We also paid $18.8 million in dividends to holders of Common Shares and RSUs and repaid $13.0 million under the Credit Agreement during the period.
The two primary bases we use for estimating the ultimate loss associated with a large event are: (i) actual and precautionary claims advice received from the cedant; and (ii) the nature and extent of the impact the event is estimated to have on the industry as a whole and the affected underlying contracts. Immediately after a loss event, the estimated industry market loss is the primary driver of our ultimate loss from such event. In order to estimate the nature and extent of the event, we rely on output provided by commercially available catastrophe models, as well as proprietary models developed by Endurance and utilized by the Manager. The exposure of each cedant potentially affected by the event is analyzed on the basis of this output. As the amount of information received from cedants increases during the period following an event, so does our reliance on this information.
We have determined that our best estimates for our gross and net loss and LAE reserves at December 31, 2016 and 2015 were $11.1 million and $4.0 million respectively. The following table summarizes the composition of these reserves at December 31, 2016 and 2015:
Some of our reinsurance contracts may include contract terms that require an automatic reinstatement of coverage in the event of a loss. Reinstatement premiums are fully earned or expensed as applicable when a triggering loss event occurs and losses are recorded. We record reinstatement premiums on a basis consistent with our estimates of losses and LAE. During 2016, 2015 and 2014 we recorded net written and earned reinstatement premiums totaling $1.5 million, $0.3 million and $1.0 million, respectively.
We routinely review the creditworthiness of our cedants on the basis of our market knowledge, the cedant’s current financial strength ratings, the timeliness of cedants’ past payments and the status of current balances owing. Based on our reviews, we have determined that we did not require an allowance for uncollectible reinsurance premiums receivable as of 2016 and 2015.
We have also determined that, as an emerging growth company, we will not: (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b); (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act; (iii) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board
The financial statements and supplementary data have been filed as a part of this Report on Form 10-K as indicated in the Index to Consolidated Financial Statements and Financial Statement Schedules appearing on page 73 of this report.