Adjusted net operating income of $517.7 million for 2017 (2016: $396.3 million) and adjusted net operating income per diluted share of $1.36 (2016: $0.99) each increased from the prior year primarily due to lower losses incurred, net.
Since December 31, 2015 we have operated under the requirements of the PMIERs of the GSEs in order to insure loans purchased by them. The PMIERs include financial requirements that require an approved mortgage insurer to have Available Assets that meet or exceed its Minimum Required Assets. MGIC's Available Assets under PMIERs totaled $4.8 billion, an excess of $0.8 billion over its Minimum Required Assets at December 31, 2017.
insurers, although no date has been established by which the NAIC must propose revisions to the capital requirements and certain items have not yet been completely addressed by the framework, including the treatment of ceded risk, minimum capital floors, and action level triggers. Currently we believe that the PMIERs contain the more restrictive capital requirements in most circumstances.
The FHA offers fixed premium rates across all FICO scores and often has lower monthly premium rates across lower FICO business, which are effectively cross-subsidized by higher-FICO score premium rates. As a result, we have seen, and expect to continue to see some lenders utilize FHA insurance for the lower-FICO score business for which we compete. However, not all lower-FICO score business is migrating to the FHA because PMI may be cancelable when FHA insurance is not, lenders value our customer service, PMI continues to be an efficient and cost-effective alternative to the FHA for many borrowers, and some lenders perceive greater legal risks under FHA versus GSE programs. Any reduction in premium rates by the FHA that create a larger payment differential than at present could result in more business utilizing FHA mortgage insurance.
Even though the PMI industry's pricing changes raised premiums on lower-FICO score loans in 2016, the PMI industry captured a greater share of the total low down payment (PMI and government programs) insured volume in 2017 and 2016, when compared to the respective prior year (see table t.03). In addition to a higher mix of purchase originations, the increases in PMI share were due in part to new 97% LTV loan offerings from lenders that sell loans to the GSEs, which provided an alternative to similar FHA loan programs for qualified borrowers, and some lenders are shifting business away from the FHA due to perceived legal risks.
Our book of IIF grew in 2017 due to NIW growth and a 10% decline in cancellations, each when compared to the prior year. Cancellation activity is primarily due to refinancing activity, but is also impacted by rescissions, cancellations due to claim payment, and policies cancelled when borrowers achieve the required amount of home equity. Refinancing activity has historically been affected by the level of mortgage interest rates and the level of home price appreciation. Cancellations generally move inversely to the change in the direction of interest rates, although they generally lag a change in direction.
2017 compared to 2016. NPW increased 2% from the prior year, due to a decline in premium refunds and lower ceded premiums due to a higher profit commission. Premium refunds declined and our profit commission increased due to lower losses incurred. NPE increased slightly from the prior year due to a decline in premium refunds and lower ceded premiums, which offset lower premiums from our IIF during the year as our premium yield (discussed below) decreased.
2016 compared to 2015. Underwriting and other expenses for 2016 decreased when compared to 2015, primarily due to an increase in ceding commissions from reinsurers, offset by increases in compensation costs and professional services.
2017 compared to 2016. Income tax expense for 2017 increased compared to 2016. The increase was due to a remeasurement of net deferred tax assets at the lower corporate income tax rate under the Tax Act, the increase in income before tax, and an additional tax provision recorded for the expected settlement of our IRS litigation. See Note 12 - "Income taxes" to our consolidated financial statements for further discussion on the Tax Act and expected IRS settlement. The difference between our statutory tax rate of 35% and our effective tax provision rate of 54.7% in 2017 was primarily due to the remeasurement of deferred tax assets at the lower corporate tax rate and the additional tax provision recorded for the expected settlement of our IRS litigation. The difference between our statutory tax rate of 35% and our effective tax provision rate of 33.5% in 2016 was primarily due to the benefits of tax preferenced securities.
The increase in “A” rated securities reflects marketplace ratings of corporate bonds and our increased concentration in that sector.
Our deferred income taxes primarily relate to net operating loss carryforwards from operating losses experienced in prior years that we expect will offset taxable income in future periods. During 2017, net deferred tax assets were remeasured to reflect the lower corporate income tax rate under the Tax Act. The remeasurement of our net deferred tax assets was a discrete period item that increased our tax provision by $133 million for the year ended December 31, 2017 and decreased our deferred tax asset by a like amount. See Note 12- "Income Taxes" to our consolidated financial statements for further discussion on the Tax Act. As of December 31, 2017, our deferred tax asset is recorded at $234.4 million.
Chart c.10 shows the outstanding principal amount of the debt obligations of our holding company as of December 31, 2017 and 2016. The 5.75% Notes and 9% Debentures are obligations of our holding company, MGIC Investment Corporation, and not of its subsidiaries. MGIC's ownership of $132.7 million of our holding
See Note 8 - “Loss Reserves” to our consolidated financial statements and “Critical Accounting Policies” below for additional information on our loss reserves. In accordance with GAAP for the mortgage insurance industry, we establish loss reserves only for delinquent loans. Because our reserving method does not take account of the impact of future losses that could occur from loans that are not delinquent, our obligation for ultimate losses that we expect to occur under our policies in force at any period end is not reflected in our consolidated financial statements or in the table above.
Table 3.2 shows the relevant new amendments to accounting standards, which are not yet effective or adopted.
Assets measured at fair value included those listed, by hierarchy level, in the following tables as of December 31, 2017 and 2016:
We are required under the Credit Agreement to pay commitment fees on the average daily amount of the unused revolving commitments of the lenders, and an annual administrative fee to the administrative agent. The Credit Agreement contains affirmative, negative and financial covenants which are customary for financings of this type, including, among other things, limits on the creation of liens, limits on the incurrence of indebtedness, restrictions on dispositions, maximum debt-to-capital ratio, minimum consolidated stockholders' equity, minimum policyholder's position of MGIC, and compliance with the financial requirements of the PMIERs. The Credit Agreement includes customary events of default for facilities of this type (with customary grace periods, as applicable) and provides that, upon the occurrence of an event of default, payments of all outstanding loans may be accelerated and/or the lenders' commitments may be terminated. Upon the occurrence of certain insolvency or bankruptcy related events of default, all amounts payable under the Credit Agreement shall automatically become immediately due and payable, and the lenders' commitments will automatically terminate. In addition, upon the occurrence of certain insolvency or bankruptcy related events of default, or the failure to pay interest, principal or fees, the interest rates on all outstanding obligations will be increased.
In 2016, we repurchased $188.5 million in aggregate principal of our 5% Notes at a purchase price of $195.5 million, plus accrued interest using funds held at our holding company. The excess of the purchase price over carrying value was reflected as a loss on debt extinguishment of $7.9 million on our consolidated statement of operations. Our 2016 5% Notes repurchases reduced our potentially dilutive shares by approximately 14.0 million shares.
The increase in our pension and supplemental executive retirement plans obligation in 2017 compared to 2016 was primarily due to a decrease in the discount rate used to calculate the obligation and a lower amount of benefits paid from the fund. The increase in our other postretirement plan obligation was primarily due a decrease in the discount rate used to calculate the obligation. Table 11.8 below includes the actuarial assumptions used to calculate the benefit obligations of our plans for 2017 and 2016.
In the third quarter of 2015, we concluded that it was more likely than not that our deferred tax assets would be fully realizable and that the valuation allowance was no longer necessary and we reversed the valuation allowance. For the year ended December 31, 2015, we reversed $161.1 million of our valuation allowance based on income from 2015. The portion of the valuation allowance reversed related to deferred tax assets that are expected to be realized in future years, totaling $747.5 million, is treated as a discrete period item and is recognized as a component of the tax provision in continuing operations in the period of reversal. Furthermore, in determining the discrete period impact from the reversal, we removed the prior period disproportionate tax effects that had arisen in other comprehensive income because of the valuation allowance. This reduced the amount of tax benefit included in net income and resulted in an allocation of tax benefit of $60.8 million to components of other comprehensive income.
The statutory net income (loss), policyholders' surplus and contingency reserve liability of the insurance subsidiaries of our holding company are show in table 14.1 below. The statutory net loss in 2015 was driven by the dissolution of an MGIC non-insurance subsidiary. The surplus amounts included in the following table are the combined policyholders' surplus of our insurance operations as utilized in our risk-to-capital calculations.