Pre-tax investment income of $14.5 million during 2016 was 16% higher than 2015, reflecting an increased allocation to higher-yielding bonds and increases in average invested assets. After tax investment income increased by 15% during 2016 compared to the prior year reflecting the mix between taxable and tax-exempt investment income.
In determining if and when an equity security's decline in market value below cost is other-than-temporary, we first make an objective analysis of each individual equity security where current market value is less than cost. For any equity security where the unrealized loss exceeds 20% of original or adjusted cost, and where that decline has existed for a period of at least six months, the decline is treated as an other-than-temporary impairment, without any subjective evaluation as to possible future recovery. For individual issues where the decline in value is less than 20% but the amount of the decline is considered significant, we will also evaluate the market conditions, trends of earnings, price multiples and other key measures for the securities to determine if it appears that the decline is other-than-temporary. In those instances, the Company also considers its intent and ability to hold equity investments until recovery can be reasonably expected. Additionally, for any equity security where the decline has existed for a period of at least one year, the decline is treated as an other-than-temporary impairment. For any decline which is considered to be other-than-temporary, we recognize an impairment loss in the current period earnings as an investment loss. Declines which are considered to be temporary are recorded as a reduction in shareholders' equity, net of related federal income tax credits.
Expected loss ratios for the current book of business, particularly the Company's fleet transportation products, where the number of accounts insured, selected self-insured retentions, policy limits and reinsurance structures may vary widely from period to period
The table below sets forth the amounts of the Company's contractual obligations at December 31, 2016.
The Company's loss and loss expense reserves do not have contractual maturity dates and the exact timing of the payment of claims cannot be predicted with certainty. However, based upon historical payment patterns, the above table presents an estimate of when we might expect our direct loss and loss expense reserves (without the benefit of reinsurance recoveries) to be paid. Timing of the collection of the related reinsurance recoverable, estimated to be $255.0 million at December 31, 2016, or 43% of the amounts presented in the above table, would approximate that of the above projected direct reserve payout but could lag such payments by several months in some instances.
In May 2015, the FASB issued ASU 2015-07 - Fair Value Measurement - (Topic 820) Disclosures for Investments in Certain Entities that Calculate Net Asset Value per Share (or its equivalent) (a consensus of the Emerging Issues Task Force), which became effective for fiscal years beginning after December 15, 2015. The new pronouncement was issued to ensure that all investments categorized in the fair value hierarchy are classified using a consistent approach. The Company adopted the guidance and the adoption of this guidance did not have a material impact on presentation of data in our consolidated financial statements.
The Company's fixed maturities are over 85% invested in investment grade fixed maturity investments. The Company has a total of $719, representing one investment, of fixed maturity investments which were originally issued with guarantees by a third party insurance company. The S&P credit rating of such investment, with consideration of the guarantee, is AA. The S&P underlying credit rating of such investment, without consideration of the guarantee, would remain AA. The Company does not have any direct exposure to any guarantor.
The Company is required to establish a valuation allowance for any portion of the gross deferred tax asset that management believes will not be realized. Management has determined that no such valuation allowance is necessary at December 31, 2016 or 2015. As of December 31, 2016, calendar years 2015 and 2014 remain subject to examination by the IRS.
Non-financial instruments such as real estate, property and equipment, other assets, deferred income taxes and intangible assets, and certain financial instruments such as policy reserve liabilities are excluded from the fair value disclosures. Therefore, the fair value amounts cannot be aggregated to determine the underlying economic value of the Company.The following methods, assumptions and inputs were used to estimate the fair value of each class of financial instrument: