The following tables set forth our selected consolidated financial data and other financial information at the end of and for each of the years in the five-year period ended December 31, 2018.
Diluted book value per common share is calculated by dividing common shareholders' equity, adjusted for assumed proceeds from the exercise of dilutive options, by the number of outstanding common shares plus dilutive options and restricted share units (assuming exercise of all dilutive share based awards).
Underwriting (loss) income: Underwriting (loss) income is a non-GAAP measure and is calculated as net premiums earned plus other insurance revenue less net loss and LAE, commission and other acquisition expenses and general and administrative expenses directly related to underwriting activities. Management believes that this measure is important in evaluating the underwriting performance of the Company and its segments. This measure is also a useful tool to measure the profitability of the Company separately from the investment results and is also a widely used performance indicator in the insurance industry. A reconciliation of the Company's underwriting results can be found in the Company's Consolidated Financial Statements. Please refer to "Notes to Consolidated Financial Statements - Note 3. Segment Reporting" included under Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K for further details.
The Company's revenues also include fee income as well as income generated from our investment portfolio. The Company's investment portfolio is comprised of fixed maturity investments, currently held as AFS and HTM, and other investments. In accordance with U.S. GAAP, these investments, except for HTM fixed maturities, are carried at fair market value and unrealized gains and losses are excluded from earnings. The unrealized gains and losses on our AFS fixed maturity investments are included on the Company's Consolidated Balance Sheet in AOCI as a separate component of shareholders' equity. If unrealized losses are considered to be other-than-temporarily impaired due to a credit event, such losses are included in earnings as a realized loss.
General and administrative expenses include personnel expenses (including share-based compensation expense), rent expenses, legal and professional fees, information technology costs and other general operating expenses.
the Company’s need to rely on its ceding companies for loss information, which also exposes the Company to changes in the reserving philosophy of the ceding company and the adequacy of its underlying case reserves.
interest and amortization expenses decreased by $3.9 million or 16.9% compared to the same period in 2017 due to the redemption of the 2012 Senior Notes on June 27, 2017. The prior period also included a charge of $2.8 million resulting from the acceleration of the amortization of the 2012 Senior Notes issuance cost due to its redemption during 2017; and
Please refer to "Notes to Consolidated Financial Statements - Note 14. Shareholders' Equity" included under Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K for further details on our preference shares.
Premiums - Gross premiums written increased by $46.9 million, or 55.4% for the year ended December 31, 2018 compared to the same period in 2017 primarily generated by new account growth and expansion of client relationships in our European Capital Solutions business within Maiden Bermuda and growth in German auto programs within the IIS business during 2018. Contributing to the increase in gross premiums written were new business development and account growth within the Life and General international lines.
lower adverse prior year loss development which was $2.3 million or 1.9 points during 2018, compared to $5.4 million or 5.8 points for the same period in 2017. The 2018 development was due to facultative reinsurance run-off lines partially offset by favorable development in International auto programs. The 2017 development was primarily from adverse development in facultative reinsurance run-off lines as well as claims activity in International auto programs; and
Net premiums earned increased by $1.0 million, or 1.3%, during the year ended December 31, 2017 compared to the same period in 2016. The table below shows net premiums earned by line of business:
The impact of adverse prior year development on each period's respective loss ratio was $5.4 million or 5.8 points in 2017 compared to $11.1 million or 11.9 points in 2016. Also, higher initial loss ratios on current year premiums earned during the year within our IIS business as well as elevated loss experience on current year activity on certain International auto programs contributed to the increase in net loss and LAE in 2017 compared to 2016.
The combined ratio increased to 110.8% for the year ended December 31, 2017 compared to 98.4% during the same period in 2016 largely due to the following:
Our sources of funds historically have consisted of premium receipts net of commissions and brokerage, investment income, net proceeds from capital raising activities, which may include the issuance of debt and common and preference shares, and proceeds from sales, maturities, pay downs and redemption of investments. Cash is used primarily to pay loss and LAE, ceded reinsurance premium, general and administrative expenses, interest expense and dividends, with the remainder in excess of our operating requirements, made available to our investment managers for investment in accordance with our investment policy.
We expect to use funds from cash and investment portfolios, collected premiums on reinsurance contracts in force or being run-off, investment income and proceeds from sales and redemptions of investments to meet expected claims payments and operational expenses. Claim payments will be principally from the run-off of existing reserves for losses and loss adjustment expenses. A significant portion of those liabilities are collateralized and claim payments will be funded by using the collateral and this should provide sufficient funding to fulfill those obligations.
Total shareholders' equity at December 31, 2018 decreased by $677.9 million, or 55.0%, compared to December 31, 2017 primarily due to the following factors: