wildfire ($322.0 million), Woolsey wildfire ($154.0 million), Typhoon Jebi ($80.0 million), Hurricane Florence ($73.8 million), Cyclone Mekunu ($43.7 million), Typhoon Trami ($25.0 million), Australia Hailstorm ($25.0 million), other 2018 California wildfires ($24.6 million), Japan floods ($20.5 million) and the U.S. winter storms ($8.4 million).
Gross written premiums increased by 38.3% to $1,666.3 million in 2018 compared to $1,205.0 million in 2017, primarily due to increased casualty and motor business written through the U.K. Branch and Ireland office, an increase in Bermuda property business and a positive impact of $15.8 million from the movement of foreign exchange rates. Net written premiums increased by 40.9% to $1,605.5 million in 2018 compared to $1,139.1 million in 2017, which is consistent with the change in gross written premiums. Premiums earned increased 21.1% to $1,324.2 million in 2018 compared to $1,093.3 million in 2017. The change in premiums earned relative
Over the past several years, we have expanded the allocation of our investments funded by shareholders’ equity to include: 1) a greater percentage of publicly traded equity securities, 2) emerging market fixed maturities through mutual fund structures, as well as individual holdings, 3) high yield fixed maturities, 4) bank and private loan securities and 5) private equity limited partnership investments. The objective of this portfolio diversification is to enhance the risk-adjusted total return of the investment portfolio by allocating a prudent portion of the portfolio to higher return asset classes, which are also less subject to changes in value with movements in interest rates. We limit our allocation to these asset classes because of 1) the potential for volatility in their values and 2) the impact of these investments on regulatory and rating agency capital adequacy models. We use investment managers experienced in these markets and adjust our allocation to these investments based upon market conditions. At December 31, 2019, the market value of investments in these investment market sectors, carried at both market and fair value, approximated 53.3% of shareholders’ equity.
Our loss and LAE reserves represent management’s best estimate of our ultimate liability for unpaid claims. We continuously re-evaluate our reserves, including re-estimates of prior period reserves, taking into consideration all available information and, in particular, newly reported loss and claim experience. Changes in reserves resulting from such re-evaluations are reflected in incurred losses in the period when the re-evaluation is made. Our analytical methods and processes operate at multiple levels including individual contracts, groupings of like contracts, classes and lines of business, internal business units, segments, legal entities, and in the aggregate. In order to set appropriate reserves, we make qualitative and quantitative analyses and judgments at these various levels. Additionally, the attribution of reserves, changes in reserves and incurred losses among accident years requires qualitative and quantitative adjustments and allocations at these various levels. We utilize actuarial science, business expertise and management judgment in a manner intended to ensure the accuracy and consistency of our reserving practices. Nevertheless, our reserves are estimates, which are subject to variation, which may be significant.
Our shareholders’ equity decreased to $7,860.8 million as of December 31, 2018 from $8,340.7 million as of December 31, 2018. This decrease was the result of $228.2 million of unrealized depreciation on investments, net of tax, $216.2 million of shareholder dividends, $76.8 million of net foreign currency translation adjustments, and repurchases of 0.3 million common shares for $75.3 million, partially offset by $89.0 million of net income, $23.0 million of share-based compensation transactions and $4.5 million of net benefit plan obligation adjustments.