Catastrophe losses, net of reinsurance, were $818.1 million in 2017, compared with $226.0 million in 2016 and $62.0 million in 2015.
2016 vs 2015. The increase in net loss and LAE in 2016 from 2015 primarily reflects an increase at our reinsurance segment due primarily to higher net premiums earned, as discussed above, higher catastrophe losses, as well as higher non-catastrophe losses in the 2016 accident year related to the Quota Share Treaty, partially offset by an increase in favorable prior accident year loss reserve development.
Income taxes. The following table presents our consolidated income tax expense.
The favorable prior accident year loss reserve development in 2017, 2016 and 2015 reflects favorable loss emergence compared with loss emergence patterns assumed in earlier periods. The favorable prior accident year loss reserve development in 2017 did not impact assumptions used in estimating TransRe’s loss and LAE liabilities for business earned in 2017.
The increase in net loss and LAE in 2016 from 2015 primarily reflects the impact of higher net premiums earned and higher losses in the 2016 accident year related to the Quota Share Treaty, partially offset by the impact of increases in favorable prior accident year loss reserve development. The modest catastrophe losses in 2016 relate primarily to earthquake losses in Ecuador. The catastrophe losses for 2015 relate to the chemical explosion in Tianjin, China in August 2015.
The increases in net premiums earned in 2017 from 2016 and in 2016 from 2015 primarily reflect increases in gross premiums written.
Insurance Segment: Commissions, brokerage and other underwriting expenses. The following table presents commissions, brokerage and other underwriting expenses for the insurance segment.
CapSpecialty. The slight decrease in underwriting profit in 2017 from 2016 primarily reflects the impact of higher 2017 accident year losses and less favorable prior accident year loss reserve development in 2017, partially offset by the impact of growing net premiums earned, all as discussed above. The underwriting profit in 2016 compared with the underwriting loss in 2015 primarily reflects favorable prior accident year loss reserve development in 2016, compared with unfavorable prior accident year loss reserve development in 2015, and the impact of higher net premiums earned, all as discussed above.
The following table presents the investment results for our reinsurance and insurance segments.
Alleghany Capital consists of: (i) manufacturing and service operations conducted through Bourn & Koch, Kentucky Trailer, IPS, Jazwares, W&W|AFCO Steel, beginning April 28, 2017, and a 45 percent equity interest in Wilbert, beginning August 1, 2017; (ii) oil and gas operations conducted through SORC and Alleghany Capital’s investment in ORX until it was sold on December 23, 2016; and (iii) corporate operations and investments at the Alleghany Capital level.
On August 1, 2017, Alleghany Capital acquired a 45 percent equity interest in Wilbert. Wilbert is accounted for under the equity method of accounting and is included in other invested assets.
Interest expense. The increase in interest expense in 2017 from 2016 reflects new or increased borrowings at Jazwares, IPS and Bourn & Koch and borrowings at W&W|AFCO Steel. Interest expense in 2016 approximated interest expense in 2015.
Corporate administration. The increase in corporate administration expense in 2017 from 2016 primarily reflects higher long-term incentive compensation expense accruals at Alleghany, driven by the impact of unrealized appreciation on our equity and, to a lesser extent, bond portfolios, partially offset by losses arising from Hurricanes Harvey, Irma and Maria. The decrease in corporate administration expense in 2016 from 2015 primarily reflects lower long-term incentive compensation expense accruals due mainly to the impact of less favorable financial results, partially offset by the impact of an increase in the price per share of our common stock during 2016.
(12) Generally reflects favorable prior accident year loss reserve development in a variety of casualty & other lines of business primarily from the 2005 through 2014 accident years, including ($30.7) million of favorable prior accident year development related to French medical malpractice loss reserves commuted in the fourth quarter of 2015 with a European cedant, partially offset by unfavorable prior accident year development from the 2004 and prior accident years.
(3) Primarily represents goodwill and other intangible assets related to the acquisition of: (i) W&W|AFCO Steel on April 28, 2017; (ii) Jazwares on April 15, 2016; (iii) IPS on October 31, 2015; (iv) Bourn & Koch on April 26, 2012; and (v) a controlling equity interest in Kentucky Trailer on August 30, 2013. Also reflects minor acquisitions made by Jazwares and Bourn & Koch in 2016 and Kentucky Trailer in 2015 and 2014.
(2) See Note 8 for additional information on the Senior Notes and other debt.
In 2016, there were transfers of $10.6 million of securities into Level 3 that were principally due to a decrease in observable inputs related to the valuation of such assets and, specifically, a decrease in broker quotes. Of the $10.6 million of transfers, $7.3 million related to U.S. corporate bonds, $1.9 million related to foreign corporate bonds and $1.4 million related to common stock. There were no other material transfers between Levels 1, 2 or 3 in 2016.
Amounts recoverable from reinsurers are recognized in a manner consistent with the claims liabilities associated with the reinsurance placement and presented on the balance sheet as reinsurance recoverables. Such balances as of December 31, 2017 and 2016 are presented in the table below:
Alleghany and its subsidiaries lease certain facilities, furniture and equipment under long-term lease agreements. In addition, certain land, office space and equipment are leased under non-cancelable operating leases that expire at various dates through 2038. Rent expense was $37.0 million, $37.5 million and $34.0 million in 2017, 2016 and 2015, respectively. The following table presents the aggregate minimum payments under operating leases with initial or remaining terms of more than one year as of December 31, 2017:
The following types of awards were outstanding as of December 31, 2017:
W&W|AFCO Steel has a funded noncontributory defined benefit plan for certain of its employees. Benefits under W&W|AFCO Steel’s defined benefit plans were frozen as of April 1, 2003. As of December 31, 2017, the projected benefit obligation was $23.2 million and the related fair value of plan assets was $14.0 million.