Our underwriting income was $31.2 million for the year ended December 31, 2018, compared to $28.2 million for the year ended December 31, 2017, an increase of $3.0 million, or 10.6%. The corresponding combined ratio was 85.3% for the year ended December 31, 2018 compared to 84.0% for the year ended December 31, 2017. The increase in our underwriting income was attributable to a combination of growth in the business and lower catastrophe losses, net of reinsurance, offset in part by lower net favorable development of loss reserves for prior accident years.
On May 17, 2017, the Company completed a second follow-on offering of 4,557,774 shares of common stock at a price of $33.00 per share, which included 594,492 shares sold to the underwriters pursuant to their over-allotment
(2) Return on equity represents net income expressed as a percentage of average beginning and ending stockholders’ equity during the period.
During the year ended December 31, 2018, our net incurred losses for accident years 2017 and prior developed favorably by $7.0 million. This favorable development included $6.8 million for the 2017 accident year and $3.8 million for the 2016 accident year. This favorable development was primarily due to reported losses emerging at a lower level than expected, across most lines of business. The favorable development was offset in part by adverse development of $3.6 million for accident years 2015 and prior. The unfavorable development was primarily attributable to claims on the other liability occurrence statutory line of business.
Reinsurance premiums, commissions, and ceded unearned premiums on reinsured business are accounted for on a basis consistent with that used in accounting for the original policies issued and the terms of the reinsurance contracts. The Company receives ceding commissions in accordance with certain reinsurance treaties. The ceding commissions are capitalized and amortized as a reduction of underwriting, acquisition and insurance expenses.
Intangible assets are recorded at fair value at the date of acquisition. The Company's intangible assets are comprised solely of indefinite-lived intangible assets, which arose from regulatory approvals granted by the various state insurance
departments to write insurance business in the respective states on a non-admitted basis. In accordance with U.S. GAAP, amortization of indefinite-lived intangible assets is not permitted. Indefinite-lived intangible assets are tested for impairment during the fourth quarter on an annual basis, or earlier if there is reason to suspect that their values may have been diminished or impaired. There were no impairments recognized in 2018, 2017, or 2016. In addition, as of December 31, 2018, no triggering events occurred that suggested an updated review was necessary.
beginning of the first reporting period presented. The Company does not expect the adoption of ASU 2017-08 to have a material impact on its financial statements.
Other operating expenses within underwriting, acquisition and insurance expenses included salaries, employee benefits and bonus expense of $19.7 million, $17.7 million and $18.7 million, for the years ended December 31, 2018, 2017 and 2016, respectively.
The reserves for unpaid losses and loss adjustment expenses represent the Company's estimated ultimate cost of all unreported and reported but unpaid insured claims and the cost to adjust these losses that have occurred as of or before the balance sheet date. Reserves are estimated using individual case-basis valuations of reported claims and statistical analyses. Case reserves are established for individual claims that have been reported to the Company, typically by the Company's insureds or their brokers. Based on the information provided, case reserves are established by estimating the ultimate losses from the claim, including defense costs associated with the ultimate settlement of the claim. Incurred-but-not-reported ("IBNR") reserves are determined using actuarial methods to estimate losses that have occurred but have not yet been reported to the Company. The incurred Bornhuetter-Ferguson actuarial method ("BF method") is used to arrive at the Company's loss reserve estimates for each line of business. This method estimates the reserves based on the initial expected loss ratio and expected reporting patterns for losses. Because the Company has a limited number of years of loss experience compared to the period over which losses are expected to be reported, the Company uses industry and peer-group data, in addition to its own data, as a basis for selecting its expected reporting patterns.
There were no credit agreements outstanding at December 31, 2018 or December 31, 2017.