At December 31, 2015, we leased and operated 440 retail locations (or “stores”) and a call center staffed by employee-agents who primarily sell non-standard personal automobile insurance products underwritten by us as well as certain commissionable ancillary products. In most states, our employee-agents also sell a complementary insurance product providing personal property and liability coverage for renters underwritten by us. In addition, retail locations in some markets offer non-standard personal automobile insurance serviced and underwritten by other third-party insurance carriers for which we receive a commission. See “Titan Acquisition”. At December 31, 2015, our insurance operations generate revenue from selling non-standard personal automobile insurance products and related products in 17 states. We conduct our servicing and underwriting operations in 13 states and are licensed as an insurer in 12 additional states.
The loss ratio was 82.0% for the year ended December 31, 2015, compared with 73.9% for the year ended December 31, 2014. We experienced unfavorable development related to prior fiscal years of $0.8 million for the year ended December 31, 2015, compared with favorable development of $4.9 million for the year ended December 31, 2014. The unfavorable loss development for the year ended December 31, 2015 was largely the result of an increase in bodily injury loss adjustment expenses (primarily outside legal costs) driven by the overall increase in claim frequency. The favorable loss development for the year ending December 31, 2014 was primarily related to bodily injury loss costs occurring in accident years 2010 through 2013.
The benefit for income taxes was $18.3 million for the year ended December 31, 2014, compared with a provision for income taxes of $0.7 million at the year ended December 31, 2013. The benefit for income taxes for the year ended December 31, 2014 included a decrease in the valuation allowance for the deferred tax asset of $22.4 million resulting from a change in management’s judgment regarding the realizability of the deferred tax asset. A valuation allowance is established to reduce the deferred tax asset to the amount that is more likely than not to be realized. In assessing our ability to support the realizability of our deferred tax asset, we consider both positive and negative evidence and we place greater weight on historical results rather than on our outlook for future profitability. In recent years, the Company incurred losses resulting in a source of negative evidence. With the conclusion of 2014, the Company’s historical results now reflect a twelve quarter cumulative taxable income which management considered to be a trend of positive evidence in accessing the realizability of its deferred tax asset. Based on this fact and our outlook for future profitability, the deferred tax asset valuation allowance was adjusted during that period and resulted in the aforementioned income tax benefit. A valuation allowance of $1.8 million remained at December 31, 2014 for certain amounts that are not more likely than not expected to be realized. The provision for income taxes for the year ended December 31, 2013 related to current state income taxes for certain subsidiaries with taxable income.
Our primary sources of funds are premiums, fees and investment income from our insurance company subsidiaries and commissions and fee income from our non-insurance company subsidiaries. Our primary uses of funds are the payment of claims and operating expenses. Net cash provided by operating activities for the year ended December 31, 2015 was $29.3 million, compared with net cash provided by operating activities of $27.0 million for the year ended December 31, 2014. This increase was primarily a result of the increase in policy liabilities for losses and unearned premiums as a result of the increase in premiums written, which was partially offset by the resultant increase in premiums, fees, and commissions receivable. Net cash used in investing activities for the year ended December 31, 2015 was $46.2 million, compared with net cash provided by investing activities of $3.3 million for the year ended December 31, 2014. The increase for the year ended December 31, 2015 included the Titan business acquisition of $33.8 million and capital expenditures, $2.1 million of which were related to integrating and rebranding the acquired locations. Investing activities also included investment purchases in excess of maturities and redemptions in response to a favorable change in interest rates. Net cash provided by financing activities for the year ended December 31, 2015 included $30.0 million from a term loan from our principal stockholder to partially fund the Titan acquisition.
On June 15, 2007, First Acceptance Statutory Trust I (“FAST I”), our wholly-owned unconsolidated subsidiary trust entity, completed a private placement whereby FAST I issued 40,000 shares of preferred securities at $1,000 per share to outside investors and 1,240 shares of common securities to us, also at $1,000 per share. FAST I used the proceeds from the sale of the preferred securities to purchase $41.2 million of junior subordinated debentures from us. The debentures will mature on July 30, 2037 and are currently redeemable by the Company in whole or in part and the preferred securities are callable. The debentures paid a fixed rate of 9.277% until July 30, 2012, after which the rate became variable (Three-Month LIBOR plus 375 basis points, resetting quarterly). During 2015, the interest rate related to the debentures ranged from 3.983% to 4.072%. The obligations of the Company under the junior subordinated debentures represent full and unconditional guarantees by the Company of FAST I’s obligations for the preferred securities. Dividends on the preferred securities are cumulative, payable quarterly in arrears and are deferrable at the Company’s option for up to five years. The dividends on these securities, which have not been deferred, are the same as the interest on the debentures. The Company cannot pay dividends on its common stock during any such deferments. FAST I does not meet the requirements for consolidation of FASB ASC 810, Consolidation.
Foreclosed real estate held for sale is recorded at the lower of cost or fair value less estimated costs to sell. The Company periodically reviews its portfolio of foreclosed real estate held for sale using current information including (i) independent appraisals, (ii) general economic factors affecting the area where the property is located, (iii) recent sales activity and asking prices for comparable properties and (iv) costs to sell and/or develop that would serve to lower the expected proceeds from the disposal of the real estate. Gains (losses) realized on liquidation are recorded directly to operations and included in revenues. Foreclosed real estate held for sale assets of $0.8 million at December 31, 2015 and 2014 are included within other assets in the accompanying consolidated balance sheets.
During the years ended December 31, 2015, 2014 and 2013, the Company paid $0.7 million, $0.7 million and $0.5 million, respectively, in income taxes and $1.7 million, $1.7 million and $1.7 million, respectively, in interest.
The components of net realized gains (losses) on investments, available-for-sale follow (in thousands).
The Company’s Board of Directors adopted the First Acceptance Corporation Employee Stock Purchase Plan (“ESPP”) whereby eligible employees may purchase shares of the Company’s common stock at a price equal to the lower of the closing market price on the first or last trading day of a six-month period. ESPP participants can authorize payroll deductions, administered through an independent plan custodian, of up to 15% of their salary to purchase semi-annually (June 30 and December 31) up to $25,000 of the Company’s common stock during each calendar year. The Company has reserved 400,000 shares of common stock for issuance under the ESPP. Employees purchased approximately 37,000, 31,000, and 35,000 shares during the years ended December 31, 2015, 2014 and 2013, respectively. Compensation expense attributable to subscriptions to purchase shares under the ESPP was $12 thousand, $11 thousand and $7 thousand for the years ended December 31, 2015, 2014 and 2013, respectively. At December 31, 2015, 50,565 shares remain available for issuance under the ESPP.
The identifiable intangible asset represents policy renewal rights and customer relationships. The fair value was determined using an “excess earnings” method that relied on projected future net cash flows including key assumptions for the customer retention and renewal rates. Accordingly, amortization will be recorded over 7.5 years on an accelerated basis and will decline in subsequent years in proportion to projected policy expirations. For the year ended December 31, 2015, $0.5 million relating to the identifiable intangible asset was amortized against income. Goodwill and the identifiable intangible asset from this acquisition will be deductible for tax purposes.
The results of the acquired retail locations have been included in the Company’s consolidated statement of operations and comprehensive income (loss) from the July 1, 2015 acquisition date. During the year ended December 31, 2015, the Company’s insurance operating expenses included acquisition costs of $0.1 million and integration costs of $1.5 million. Revenues and income before tax benefit of the acquired retail locations included in the Company’s results for the year ended December 31, 2015 were $12.6 million and $0.2 million (excluding acquisition and integration-related costs), respectively.