business of approximately 85%. We believe use of a provision for volatility considers inherent risks associated with our rate development process and the historic volatility of professional liability losses (the industry has experienced accident year loss ratios as high as 163% and as low as 53% over the past 30 years) and produces a reasonable best estimate of the reserve required to cover actual ultimate unpaid losses. A similar practice is followed for our legal professional liability business (4% of consolidated gross premiums earned for the year ended December 31, 2014).
For our workers’ compensation segment we utilize the various actuarial methodologies discussed above, with particular reliance on incurred development, paid loss development and Bornhuetter-Ferguson, to develop our reserve for each accident year. The actuarial review includes the stratification of claims data (lost item claims, medical only claims) using different variations that allow us to identify trends that may not be readily identifiable if the data was evaluated only in the aggregate. Incurred and paid loss development factors are key assumptions in the reserve estimation process and are based on our historical incurred and paid loss development patterns. As accident years mature, the various actuarial methodologies produce more consistent loss estimates.
Our professional liability line of business includes both our HCPL and legal professional lines, with our HCPL line representing the largest component of our reserve. In support of our concern that the decline in frequency will result in a higher severity trend for our HCPL claims, we saw our closed-with-indemnity-payment ratio (i.e., the number of claims closed with an indemnity or loss payment as compared to the total number of closed claims) for our claims increase from 10% in 2005 to 15% in 2014. While this trend has been in keeping with our expectations, the anticipated increase in severity incorporated into our loss assumptions has not occurred. Rather, we have experienced lower than expected severity which has been the primary driver of the favorable development recognized in recent years.
We use insurance and reinsurance (collectively, “reinsurance”) to provide capacity to write larger limits of liability, to provide protection against losses in excess of policy limits, to stabilize underwriting results in years in which higher losses occur, and to provide a mechanism for sharing risk with insureds or their affiliates. The purchase of reinsurance does not relieve us from the ultimate risk on our policies, but it does provide reimbursement for certain losses we pay.
(2) Includes net favorable development of $1.3 million attributable to the reserves acquired in a business combination completed in 2014.
Within our Specialty P&C Segment, we use insurance and reinsurance (collectively, “reinsurance”) to provide capacity to write larger limits of liability, to provide reimbursement for losses incurred under the higher limit coverages we offer, to provide protection against losses in excess of policy limits, and, in the case of risk sharing arrangements, to provide custom insurance solutions for large customer groups. Within our Workers' Compensation segment, we use reinsurance to reduce our net liability on individual risks, to mitigate the effect of significant loss occurrences (including catastrophic events), to stabilize underwriting results, and to increase underwriting capacity by decreasing leverage. The purchase of reinsurance does not relieve us from the ultimate risk on our policies, but it does provide reimbursement for certain losses we pay.
The carrying value of our qualified affordable housing tax credit partnerships reflects both funded and unfunded commitments to the partnerships, less amortization, since our initial investment. The carrying value of these investments was approximately $133.1 million at December 31, 2014 and $142.2 million at December 31, 2013. We fund these investments based on funding schedules maintained by the partnerships. During the years ended December 31, 2014, 2013 and 2012 we funded approximately $8.6 million, $63.5 million and $35.7 million, respectively. As of December 31, 2014, approximately $15.5 million of our total commitments to these partnerships had not yet been funded.
We recognized favorable loss development related to our previously established reserve, on a gross basis, of $213.7 million for the year ended December 31, 2014. On a net basis, we recognized favorable development of $180.8 million for the year ended December 31, 2014. The net basis reflects the favorable development recognized with respect to our ceded coverage layers. We re-evaluate our previously established reserve each quarter based on our most recently available claims data and currently available industry trend information. Development recognized during 2014 principally related to accident years 2007 through 2011.
Net investment income is primarily derived from the income earned by our fixed maturity securities and also includes dividend income from equity securities, income from our short-term and cash equivalent investments earnings from other investments and increases in the cash surrender value of business owned life insurance (BOLI) contracts. Investment fees and expenses are deducted from investment income.
We hold interests in certain LPs/LLCs that generate earnings from trading portfolios, secured debt, debt securities, multi-strategy funds and private equity investments. Our 2013 earnings included $8.4 million that related to periods prior to 2013 but was recognized in 2013 as the result of converting one LP investment from the cost to the equity method. The equity method was considered preferable as our ownership percentage in the LP had increased. Exclusive of the effect of this conversion, LP earnings were higher in 2014 as compared to 2013.
Interest expense for 2014 and 2013 is provided in the following table:
The increase in legal professionals premium for 2013 is principally attributable to our acquisition of Medmarc. Our legal professionals policies are offered throughout the United States, principally through agent and brokerage arrangements.
Operating expenses were $15.7 million and $10.4 million for the years ended December 31, 2013 and 2012, respectively. Corporate expenses in 2013 reflected cost increases as compared to 2012 of approximately $4.7 million that were attributable to discrete events of one period or the other, including costs associated with business combinations or expansions, and in 2012, recoveries associated with the settlement of litigation. Otherwise, corporate expenses increased by approximately $0.6 million during 2013.