* Investment gains and losses are integral to our financial results over the long term, but our substantial discretion in the timing of investment sales may cause this value to fluctuate substantially. Also, applicable accounting standards require us to recognize gains and losses from changes in fair values of equity securities and changes in embedded derivatives without actual realization of those gains and losses. We discuss investment gains and losses for the past three years in Item 7, Investments Results.
We are targeting an annual value creation ratio averaging 10% to 13% over the next five-year period. At 14.7% for 2020, our performance exceeded the high end of that range. We also exceeded the high end of it for both the three-year and five-year periods that ended in December 2020.
Our investment portfolio is our largest asset. We monitor the fixed-maturity portfolio and all other assets for signs of credit-related or other impairment. We monitor decreases in the fair value of invested assets and the need for an allowance for credit losses for our fixed-maturity portfolio; allowances for expected credit losses on receivable and recoverable assets considering past events, current conditions and reasonable and supportable forecasts; an accumulation of company costs in excess of the amount originally expected to acquire or construct an asset; or other factors such as bankruptcy, deterioration of creditworthiness, failure to pay interest; and changes in legal factors or in the business climate.
Expansion of Cincinnati Re produced $302 million of 2020 net written premiums and contributed $74 million of the growth in other written premiums, compared with 2019. Cincinnati Re assumes risks through reinsurance treaties and in some cases cedes part of the risk and related premiums to one or more unaffiliated reinsurance companies through transactions known as retrocessions. In 2020, earned premiums for Cincinnati Re totaled $259 million.
Effective June 1, 2020, we restructured and renewed our combined property catastrophe occurrence excess of loss treaty for a period of one year. The treaty provides coverage for various combinations of occurrences, has an aggregate limit of $50 million in excess of $150 million per loss and applies to business written on a direct basis and by Cincinnati Re. Cincinnati Global catastrophe losses are not applicable to the treaty. Cincinnati Re purchases additional reinsurance coverages with various triggers and unique features. As of June 1, 2020, Cincinnati Re had separate property catastrophe excess of loss coverage with a total available aggregate limit of $30 million.
While earned premiums increased 5% in 2020, the COVID-19 pandemic and related economic effects slowed the pace of net written premium growth for our commercial lines insurance segment. Net written premiums grew 4%, compared with 2019. The rate of growth for several major lines of business was less in 2020, compared with the respective 2019 growth rate, including commercial property down 3 percentage points, commercial auto down 4 points and workers' compensation down by 5 points, while commercial casualty was up 2 percentage points. New business and renewal premium growth could continue to slow if the basis for policy premiums, such as sales and payrolls of businesses we insure, decrease as a result of a weakened economy.
Premiums resulting from audits of actual sales or payrolls that confirmed or adjusted initial premium estimates are part of net written premiums and earned premiums. The contribution to our commercial lines earned premiums was $41 million, $65 million and $70 million in 2020, 2019 and 2018, respectively. The contribution on a net written premiums basis was $53 million, $65 million and $70 million in 2020, 2019 and 2018, respectively. These net written premium amounts are included with agency renewal written premiums in the Commercial Lines Insurance Premiums table above.
The 4% increase in agency renewal written premiums in 2020 reflected various rate changes. We estimate that premium rates for our personal auto line of business increased at average percentages in the mid-single-digit range during 2020, with some individual policies experiencing lower or higher rate changes based on enhanced pricing precision enabled by predictive models that consider characteristics of specific risks. For our homeowner line of business, we estimate that rate increases during 2020 averaged near the high end of the mid-single-digit range, higher than in 2019. Similar to our personal auto line of business, that average varied widely by state, and some individual policies experienced lower or higher rate changes based on pricing precision and current rate level indications that helped determine appropriate premium rates.
•Interest income increased by $9 million, or 2%, in 2020, compared with 2019. The average fixed-maturity pretax yield declined by approximately 4 basis points but was offset by a larger average fixed-maturity portfolio that rose 2% on an amortized cost basis. Interest income in 2019 increased by $1 million, compared with 2018, when that yield declined by approximately 15 basis points while the portfolio rose 4% on an amortized cost basis.
We carried $85 million of net loss and loss expense reserves for asbestos and environmental claims and $43 million of reserves for mold claims at year-end 2020, compared with $85 million and $43 million, respectively, for such claims at year-end 2019. The asbestos and environmental claims amounts for each respective year constituted 1.3% and 1.5% of total net loss and loss expense reserves at these year-end dates.
The low point of each year’s range corresponds to approximately one standard error below each year’s mean reserve estimate, while the high point corresponds to approximately one standard error above each year’s mean reserve estimate. We discussed management’s reasons for basing reasonably likely reserve ranges on standard errors in Critical Accounting Estimates, Reserve Estimate Variability.
These estimated cash outflows are undiscounted with respect to interest. As a result, the sum of the cash outflows for all years of $5.814 billion (total of life insurance obligations) exceeds the liabilities recorded in life policy and investment contract reserves and separate accounts for future policy benefits and claims of $3.853 billion (total of life insurance policy reserves and separate account policy reserves). A significant portion of the difference can be attributed to the time value of money and changes in mortality, morbidity and lapse assumptions between the date the liabilities were originally established and the current date.
The modeled losses according to RMS in the table are based on its RiskLink version 18.1 catastrophe model and use a long-term storm catalog methodology. The modeled losses according to AIR in the table are based on its AIR Touchstone® version 7.3 catastrophe model and use a long-term methodology. The AIR and RMS storm catalogs include decades of documented weather events used in simulations for probable maximum loss projections.
•Events or conditions that could weaken or harm the company’s relationships with its independent agencies and hamper opportunities to add new agencies, resulting in limitations on the company’s opportunities for growth, such as:
Included within our other invested assets were $162 million and $164 million held on deposit at Lloyd's, $128 million and $71 million of private equity investments, $33 million and $32 million of life policy loans and $25 million and $29 million of real estate through direct property ownership and development projects in the United States at December 31, 2020 and 2019, respectively. Lloyd's deposits primarily consist of highly liquid short-term investment instruments. The private equity investments provide their financial statements to us and generally report investments on their balance sheets at fair value. We use the equity method of accounting for private equity and real estate development investments. Life policy loans are carried at the receivable value.
The consolidated property casualty companies actively write property casualty insurance through independent agencies in 45 states. Our 10 largest states generated 53.3% and 54.8% of total earned premiums in 2020 and 2019, respectively. Ohio, our largest state, accounted for 14.8% and 15.1% of total earned premiums in 2020 and 2019, respectively. Illinois, Georgia, North Carolina, Pennsylvania and Indiana each accounted for between 4% and 6% of total earned premiums in 2020. Our largest single agency relationship accounted for approximately 1.3% of our total property casualty earned premiums in 2020. No aggregate agency relationship locations under a single
We carry the assets of separate account BOLIs at fair value. The liabilities on separate account BOLIs primarily are the contract holders’ claims to the related assets and are carried at an amount equal to the contract holders’ account value. At December 31, 2020 and 2019, the current fair value of the BOLI invested assets and cash exceeded the current fair value of the contract holders’ account value by approximately $99 million and $52 million, respectively. If the BOLI projected fair value were to fall below the value we guaranteed, a liability would be established with a corresponding charge to the company’s earnings.
We record land at cost, and record building and equipment at cost less accumulated depreciation. Equipment held under finance leases also is classified as property and equipment with the related lease obligations recorded as liabilities. We capitalize and amortize costs for internally developed computer software during the application development stage. These costs generally consist of external consulting, internal payroll and payroll-related costs. Our depreciation is based on estimated useful lives (ranging from three to 39.5 years) using straight-line and accelerated methods. Depreciation expense was $33 million for 2020, $25 million for 2019 and $31 million for 2018. We review our accumulated depreciation for our building, equipment and software assets and write off fully depreciated assets for obsolescence and nonuse. We monitor land, building and equipment and software assets for potential impairments. Indicators of potential impairments may include a significant decrease in the fair values of the assets, considerable cost overruns on projects, a change in legal factors or business climate or other factors that indicate that the carrying amount may not be recoverable or useful. There were no recorded land, building and equipment impairments for 2020, 2019 or 2018.
During 2018, we other-than-temporarily impaired one security. At December 31, 2018, 400 fixed-maturity investments with a total unrealized loss of $58 million had been in an unrealized loss position for 12 months or more. Of that total, no fixed-maturity investments had fair values below 70% of amortized cost.
◦Quotes from brokers or other external sources where the inputs are not deemed observable.
Included in our lines of business are asbestos and environmental claims. We carried $85 million of net loss and loss expense reserves for asbestos and environmental claims at December 31, 2020 and 2019. The asbestos and environmental claims amounts for each respective year constituted less than 2.0% of total net loss and loss expense reserves at these year-end dates. We believe our exposure to asbestos and environmental claims is limited, largely because our reinsurance retention was $500,000 or below prior to 1987. We also were predominantly a personal lines company in the 1960s and 1970s. During the 1980s and early 1990s, commercial lines grew as a percentage of our overall business and our exposure to asbestos and environmental claims grew accordingly. Over that period, we included an asbestos and environmental exclusion in almost all policies or endorsed the exclusion to the policies. We have no exposure to asbestos and environmental claims related to our acquisition of Cincinnati Global. We continue to monitor our claims for evidence of material exposure to other mass tort classes but have found no such credible evidence to date.
Our life insurance company purchases reinsurance for protection of a portion of risks that are written. Primary components of our life reinsurance program include individual mortality coverage, aggregate catastrophe and accidental death coverage in excess of certain deductibles.
As of December 31, 2020, 2019 and 2018, we had a gross unrecognized tax benefit of $34 million. The following is a tabular reconciliation of the total amounts of unrecognized tax benefits.
for our benefit obligation generally track with high-quality rated corporate bond yields chosen in our theoretical settlement portfolio, and yearly adjustments reflect any changes to those bond yields. We believe the expected return on plan assets is representative of the expected long-term rate of return on these assets, which is consistent with 2020 expectations of interest rates and based partially on the fact that the plan’s common stock holdings pay dividends. We review historical actual return on plan assets when determining our expected long-term rate of return. Total portfolio return for 2020 was 11.4% and for 2019 was 24.5%. Our compensation increase assumptions in 2020 reflect anticipated rates of inflation, real return on wage growth and merit and promotional increases.
$6 million, and $5 million for the years ended December 31, 2020, 2019 and 2018, respectively. Options exercised during the years ended December 31, 2020, 2019 and 2018, had intrinsic value of $15 million, $26 million and $15 million, respectively. Intrinsic value is the market price less the exercise price. Options vested during the years ended December 31, 2020, 2019 and 2018, had total intrinsic value of $7 million, $23 million and $6 million, respectively.
•Correlation coefficients are based upon the stock price data used to calculate the historical volatilities. The correlation coefficients are used to model the way the price of each entity's stock tends to move in relation to each other.