Our headquarters are located in Cedar Rapids, Iowa, where we own approximately 182,000 square feet of office and building space that is ready to occupy. We are in the process of constructing improvements to our Cedar Rapids facilities. In addition, we own and lease office and building space, including underwriting and claims offices, throughout the U.S. We believe our existing facilities, both owned and leased, are in good condition and suitable for the conduct of our business.
offset by a decrease in post-retirement benefit expenses. These increases were partially offset by a 6.6 percent increase in net premiums earned.
In 2017, our losses and loss settlement expenses were 11.2 percent percent higher than 2016 and our net loss ratio increased 3.1 points due to an increase in catastrophe losses, which accounted for 0.9 percentage points of the increase, and an increase in large losses over $500 thousand in our commercial automobile lines of business in the first three quarters of 2017 and an increase in losses in our personal lines of business, primarily in personal auto and
Incurred losses from construction defect claims were $15.7 million in 2017 compared to $10.4 million and $3.6 million in 2016 and 2015, respectively. At December 31, 2017, we had $34.4 million in construction defect loss and loss settlement expense reserves (excluding IBNR reserves which are calculated at the overall other liability commercial line), which consisted of 1,857 claims. In comparison, at December 31, 2016, we had reserves of $22.3 million, excluding IBNR reserves, consisting of 1,382 claims. The increase in the incurred losses is due to an improved economic environment which increased construction activity in 2017. Our West Coast and Rocky Mountain regions continue to be the origin of the majority of the construction defect claim activity. The increase in reserves at December 31, 2017 is due to a increase in open claim counts.
As a result of our acquisition of Mercer Insurance Group in 2011, we added construction defect exposure in the states of California, Nevada and Arizona. Mercer Insurance Group has been writing in these states for more than 20 years. In order to minimize our exposure to construction defect claims in this region, we continually review the
discussion of our investments, including our philosophy and portfolio, see the "Investment Portfolio" section contained in this Item.
Securities categorized as Level 3 include holdings in certain private placement fixed maturity and equity securities for which an active market does not currently exist. The fair value of our Level 3 private placement securities is determined by management relying on pricing received from our independent pricing services and brokers consistent with the process to estimate fair value for Level 2 securities. However, securities are categorized as Level 3 if these quotes cannot be corroborated by other market observable data due to the unobservable nature of the brokers’ valuation processes. If pricing cannot be obtained from these sources, which occurs on a limited basis, management will perform a discounted cash flow analysis, using an appropriate risk-adjusted discount rate, on the underlying security to estimate fair value. During the twelve month period ended December 31, 2017, there were no securities transferred in or out of Level 3.
If we incur catastrophe losses and loss settlement expenses that exceed the coverage limits of our reinsurance program, our property catastrophe program provides one guaranteed reinstatement. In such an instance, we are required to pay the reinsurers a reinstatement premium equal to the full amount of the original premium, which will reinstate the full amount of reinsurance available under the property catastrophe program.
We also offer a health and dental benefit plan to all of our eligible employees and retirees that consists of two programs: (1) the self-funded employee health and dental benefit plan and (2) the self-funded (pre-65) and fully-funded (post-65) retiree health and dental benefit plan (the "post-retirement benefit plan"). Effective January 1, 2017, there was a plan amendment, which included the following changes: eliminated the pre-65 retirement plan with a $500 hundred dollar deductible; for retirements after January 1, 2017, the retiree will pay 50 percent of the lower cost supplemental plan if they are 65 or older and 100 percent of the premium if less than 65; and removed spousal coverage after the death of the participant. The financial impact of the changes were reflected in accumulated other comprehensive income at December 31, 2016.
recent trading activity of the underlying security in the financial markets. These securities represent various taxable bonds held by the pension plan. These securities categorized as Level 2 are valued in the same manner as described in Part II, Item 8, Note 3 and have the same controls in place.
On September 18, 2017, we signed a definitive agreement to sell our subsidiary, United Life Insurance Company, to Kuvare for $280,000 in cash, subject to specified adjustments as set forth in the definitive agreement. As a result, our life insurance business (previously reported as a separate segment) has been considered held for sale and reported as discontinued operations and its financial position, results of operations and cash flows are separately reported for all periods presented, unless otherwise noted. The sale is expected to close in the first half of 2018, subject to customary conditions, including regulatory approval.