The following tables summarize certain selected financial data that should be read in conjunction with our audited financial statements and accompanying notes thereto for the year ended December 31, 2019 included in this report and “
Net Investment Income. Net investment income in 2019 was $32.5 million, an increase of 6.7% from the $30.5 million reported in 2018. The pre-tax investment yield on our investment portfolio was 2.8% per annum for 2019 versus 2.6% per annum for 2018. The tax-equivalent yield on our investment portfolio was 3.1% per annum for 2019, compared to 3.2% per annum for 2018. The tax-equivalent yield is calculated using the effective interest rate and the appropriate marginal tax rate. Average invested assets, including cash and cash equivalents, increased 0.5%, from an average of $1,195.1 million for 2018 to an average of $1,200.6 million for 2019.
The Company recorded favorable prior accident year loss and loss adjustment expense development of $65.0 million in calendar year 2019, $45.6 million in calendar year 2018 and $34.8 million in calendar year 2017. The table below sets forth the favorable development for accident years 2014 through 2018 and, collectively, all accident years prior to 2014.
The table below sets forth the number of open claims as of December 31, 2019, 2018 and 2017, and the numbers of claims reported and closed during the years then ended.
At December 31, 2019, our incurred amounts for certain accident years, particularly 2015 and 2016, developed more favorably than management previously expected. Multiple factors can cause loss development both unfavorable and favorable. The favorable loss development we experienced across accident years was largely due to two factors: (1) lower than expected severity of injuries in these accident years compared to our original and revised estimates; and (2) favorable case reserve development from closed claims and claims where the worker had reached maximum medical improvement. We believe the favorable case reserve development resulted primarily from an intensive claims management focus with the Company actively seeking to settle claims, leading to favorable development.
We forecast claim payments based on our historical trends. We seek to manage the funding of claim payments by actively managing available cash and forecasting cash flows on a short- and long-term basis. Cash payments, net of reinsurance, for claims were $190.0 million in 2019, $200.7 million in 2018 and $186.9 million in 2017. We fund claim payments out of cash flow from operations, principally premiums, net of amounts ceded to our reinsurers, and net investment income. Our investment portfolio at December 31, 2019 was $1.2 billion.
For our fixed maturity securities classified as available-for-sale, the securities are “marked to market” as of the end of each calendar quarter. As of that date, unrealized gains and losses are recorded in Other Comprehensive Income (Loss), except when such securities are deemed to be other-than-temporarily impaired. For our fixed maturity securities classified as held-to-maturity, unrealized gains and losses are not recorded in the financial statements until realized or until a decline in fair value, below amortized cost, is deemed to be other-than-temporary. Equity securities are measured at fair value with changes in the fair value recognized in net income.
In establishing a current expected credit allowance for reinsurance recoverables under the new accounting standard, the Company will use a probability of default and loss given default methodology based on the credit ratings of our reinsurers. The amount is currently estimated to be $443 thousand. This estimate is based on the amount of reinsurance recoverables and the ratings of our reinsurers at December 31, 2019.
Short-term investments held at December 31, 2019 include $54.6 million of U.S. Treasury securities and obligations of U.S. government agencies and $1.9 million of obligations of states and political subdivisions. Short-term investments held at December 31, 2018 include $13.4 million of corporate bonds and $0.8 million of obligations of states and political subdivisions.
A summary of the amortized cost and fair value of investments in fixed maturity securities classified as held-to-maturity by contractual maturity is as follows:
In 2019, 2018 and 2017, there were no impairment losses recognized for other-than-temporary declines in the fair value of our investments.
Experience-rated commissions recoverable represents earned commission from reinsurance companies based on the financial results of the applicable risks ceded to the reinsurers. These amounts declined during 2019 as a result of the December 2019 commutation of the 2009 - 2011 reinsurance agreement with Hannover.
The Company generally secures large reinsurance recoverable balances with various forms of collateral, including funds withheld accounts, irrevocable letters of credit and secured trusts. At December 31, 2019, reinsurance recoverables from reinsurers that exceeded 1.5% of statutory surplus of the Company’s insurance subsidiaries are shown below.