Incurred losses and LAE were $222.5 million, or 71.2% of earned premiums, in 2014, compared to $188.5 million, or 57.8% of earned premiums, in 2013. Incurred losses and LAE as a percentage of earned premiums increased due to higher incurred catastrophe losses and LAE (excluding reserve development) and a lower level of favorable loss and LAE reserve development, partially offset by lower underlying losses and LAE as a percentage of earned premiums. Underlying losses and LAE as a percentage of earned premiums were 50.1% in 2014, compared to 52.2% in 2013, which was an improvement of 2.1 percentage points due primarily to the impact of pricing and underwriting actions taken by the Company, partially offset by higher frequency of claims and higher severity of losses.
In 2016, the Company is changing its method for estimating the interest and service cost components of expense recognized for its pension and other postretirement employee benefit plans. As a result, the Company is electing to use a full yield curve approach to estimate these components of benefit cost by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows. Historically, the interest and service cost components were estimated using a single weighted-average discount rate derived from the yield curve used to measure the projected benefit obligation or accumulated postretirement benefit obligation, as relevant, at the beginning of the period. The change provides a more precise measurement of interest and service costs by improving the correlation between projected benefit cash flows to the corresponding spot yield curve rates. The Company will account for this change as a change in accounting estimate that is inseparable from a change in accounting principle and, accordingly, will recognize its effect prospectively in 2016. The Company anticipates that the change in method for estimating the interest and service cost components will decrease pension expense by $5.4 million in 2016, but will have no impact on the measurement of benefit obligations.
Trinity and United Insurance are members of the Federal Home Loan Bank (“FHLB”) of Dallas and the FHLB of Chicago, respectively. As members, Trinity and United Insurance may obtain advances from the FHLB of Dallas and Chicago, respectively. Advances from the FHLB of Dallas and Chicago are subject to collateral requirements as specified in the respective agreements with Trinity and United Insurance. From time to time, Trinity and United Insurance obtain advances from the FHLB of Dallas and Chicago, respectively, for short-term liquidity needs. In 2015, Trinity borrowed and repaid $77.5 million under its agreement with the FHLB of Dallas, and United Insurance borrowed and repaid $21.0 million under its agreement with the FHLB of Chicago. There were no advances from the FHLB of Dallas or Chicago outstanding at either December 31, 2015 or December 31, 2014.
Included in the fair value of Other Mortgage- and Asset-backed investments at December 31, 2015 are $3.8 million of collateralized debt obligations, $1.3 million of non-governmental residential mortgage-backed securities and $0.1 million of other asset-backed securities.
The following table sets forth the pre-tax amount of OTTI credit losses, recognized in Retained Earnings for Investments in Fixed Maturities held by the Company as of December 31, 2015, 2014 and 2013, for which a portion of the OTTI loss related to factors other than credit has been recognized in AOCI, and the corresponding changes in such amounts.
The total of minimum rentals to be received in the future under non-cancellable subleases was $3.9 million at December 31, 2015.
On September 3, 2013, the Company made a voluntary cash contribution of $55.0 million to the Pension Plan. The Company did not contribute to the Pension Plan in 2015 or 2014. The Company does not expect that it will be required to contribute to the Pension Plan in 2016, but could make a voluntary contribution pursuant to the maximum funding limits under ERISA.
Segment Revenues, including a reconciliation to Total Revenues, for the years ended December 31, 2015, 2014 and 2013 were:
The Company’s policy is to recognize transfers between levels as of the end of the reporting period. There were no transfers between Levels 1 and 2 or Levels 1 and 3 for the year ended December 31, 2015. All of the $4.1 million transfers into Level 3 for the year ended December 31, 2015, relate to an investment that changed from an Equity Method Limited Liability investment to Other Equity Interest at Fair Value. All other transfers out of Level 3 for the year ended December 31, 2015 were due to changes in the availability of market observable inputs.