The SAP non-catastrophe loss and ALAE ratio for 2016 was 60.9% compared to 57.7% and 62.6% for 2015 and 2014, respectively. The 2016 loss ratio increased compared to 2015 due primarily to higher severity in lines of business with auto exposures. The 2014 loss ratios were impacted by strengthening RED reserves within the specialty insurance segment by $96.7 million, which included the net cost of the ADC reinsurance agreement, as well as the impact of the HO QS Arrangement, which increased our SAP non-catastrophe loss and ALAE ratio 3.4 points in 2014.
The following table sets forth the components of net investment income for the years ended December 31, 2016, 2015 and 2014:
The following table sets forth the realized losses related to OTTI on our investment portfolio recognized for the years ended December 31, 2016, 2015 and 2014:
For the year ended December 31, 2016, the federal income tax benefit was $1.8 million compared to an income tax expense of $16.1 million for 2015 and an income tax benefit of $80.6 million for 2014. Income taxes for the year ended 2016 reflect the impact of a correction of prior period deferred tax expense related to expired stock options. As a result of the correction, deferred federal income tax expense and additional paid-in-capital were reduced by $1.6 million, respectively. The change from 2014 to 2015 was primarily due to the $82.6 million of deferred tax benefit resulting from the reversal of the valuation allowance against net deferred tax assets at December 31, 2014, as well as greater taxable income in 2015.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), State Auto Financial Corporation and subsidiaries’ internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 1, 2017 expressed an unqualified opinion thereon.
Material estimates that are particularly susceptible to significant change in the near term relate to the determination of losses and loss expenses payable and the realization of deferred tax assets. In connection with the determination of losses and loss expenses payable, management uses historical data, current business conditions and assumptions about future conditions to formulate estimates of the ultimate cost to settle claims. Deferred tax assets are evaluated periodically by management to determine if they are realizable, requiring management to make certain judgments and assumptions. In evaluating the ability to recover deferred tax assets, management considers all available evidence, including loss carryback potential, past operating results, existence of cumulative losses in the most recent years, projected performance of the business, future taxable income, including the ability to generate capital gains, and prudent and feasible tax planning strategies. If, based on available information, it is more likely than not that the deferred income tax assets will not be realized, then a valuation allowance must be established with a corresponding charge to net income and/or other comprehensive loss. These estimates by their nature are subject to uncertainties for various reasons.
The Company also has a broad-based employee stock purchase plan under which employees of the Company may choose, at two different specified time intervals each year, to have up to 6% of their annual base earnings withheld to purchase the Company’s common shares. The purchase price of the common shares is 85% of the lower of its beginning-of-interval or end-of-interval market price. The Company has reserved 3.7 million common shares under this plan. As of December 31, 2016, a total of 3.4 million common shares have been purchased under this plan. This plan remains in effect until terminated by the Board of Directors.
The following tables set forth quarterly financial data for 2016 and 2015: