Loss and loss adjustment expenses. Loss and loss adjustment expenses (“LAE”) include claims paid, estimates of future claim payments, changes in those estimates from prior reporting periods and costs associated with investigating, defending and servicing claims. We record loss and LAE related to estimates of future claim payments based on historical experience. We seek to establish all reserves at the most likely ultimate exposure based on our historical claims experience. We revise our estimates as we receive additional information about claims and the total costs of settlement.
Adjusted net income. Adjusted net income is considered a non-GAAP financial measure because it reflects the following adjustments to net income, which is the most directly comparable measure calculated in accordance with GAAP: the pro forma provision for income taxes as if the Company had been treated as a C Corporation for each period presented, and the exclusion (net of tax benefit) of the increase in the Company’s deferred tax asset as a result of the conversion to C Corporation status, the amount of founder special compensation and the non-recurring offering-related expenses and contract modification expense related to the amendment to our alliance agreement with CUNA Mutual. Management believes this measure is helpful to investors because it provides comparability in evaluating core financial performance between periods. Management uses adjusted net income to evaluate core financial performance against historical results without the effect of these items.
Return on equity. One of the key financial measures that we use to evaluate our operating performance is return on average equity. We calculate return on average equity by dividing net income by the average GAAP equity. Our overall financial objective is to produce a return on equity of at least 15% over the long-term.
Our consolidated financial statements include amounts that, either by their nature or due to the requirements of generally accepted accounting principles in the U.S. (GAAP), are determined using estimates and assumptions. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances. While
General and administrative expense. General and administrative expense increased by $3.0 million, or 8.3%, from $36.0 million for the year ended December 31, 2013 to $39.0 million for the year ended December 31, 2014 primarily due to an increase in direct personnel cost.
There were 143 and 141 securities at December 31, 2014 and December 31, 2013 respectively, that account for the gross unrealized loss, none of which we deemed to be other-than-temporarily impaired . Management believes that the temporary impairments are primarily the result of interest rate fluctuations, current conditions in the capital markets, and the impact of those conditions on market liquidity and prices. The Company does not intend to sell the securities, and it is not more likely than not that the Company will be required to sell these securities before recovery of their amortized cost. Management has the intent and ability to hold the equity securities in an unrealized loss position until the recovery of their fair value. Therefore, management does not consider these investments to be other-than-temporarily impaired.
Net cash provided by operating activities was approximately $23.2 million for the year ended December 31, 2014, compared with $33.9 million provided by operating activities for the same period in 2013. On July 8, we made payments totaling $17.8 million dollars to CUNA Mutual pursuant to the 2014 amendment of the alliance agreement. In addition, the Company paid offering-related expenses of $8.8 million and had an increase in founder special compensation of $7.7 million as of December 31, 2014. These increases in cash outflows are partially offset by increases in cash inflows related to premium and ceding fee growth through December 31, 2014.