Net realized (losses) gains on investments of $(10.7) million, $16.3 million, and $9.5 million in 2015, 2014, and 2013, respectively; and
Gain reflects the balance that would have existed had the revised contingent profit commission been recognized at the inception of the LPT Agreement. (See Note 2 in the Notes to our Consolidated Financial Statements.)
The following table provides the calculation of our calendar year combined ratios.
Income tax expense (benefit) was $5.0 million, $5.9 million, and $(10.7) million for the years ended December 31, 2015, 2014, and 2013, respectively. The effective tax rate was 5.0%, 5.5%, and (20.2)% for the years ended December 31, 2015, 2014, and 2013, respectively. The decrease in income tax expense in 2015, compared to 2014, was primarily due to the reallocation of $56.3 million in reserves from non-taxable periods prior to January 1, 2000, which reduced our effective tax rate by 15.4 percentage points for the year. The increase in income tax expense in 2014, compared to 2013, was primarily due to increased underwriting income. Underwriting income was $40.4 million, $20.6 million, and $(24.9) million in 2015, 2014, and 2013, respectively.
The table below shows our net cash flows. For additional information regarding our cash flows, see Item 8, Consolidated Statement of Cash Flows.
As of December 31, 2015, California and Nevada represented approximately 78% of our reserves for unpaid losses and LAE on our consolidated balance sheet.
We have driven a significant increase in claims settlement activity beginning in 2014 and continuing through 2015, which has primarily affected accident years 2009 and forward, that is the result of an internal initiative that emphasizes the settlement of open claims. This settlement activity has been recognized in the actuarial analysis using a methodology developed to adjust the data and loss development patterns to account for the settlements arising from this initiative.
Realized capital gains and losses on investments are determined on a specific-identification basis.
The LPT Reserve Adjustments for the years ended December 31, 2015, 2014, and 2013 increased GAAP net income by $6.4 million, $31.1 million, and $19.0 million, respectively, but did not increase taxable income. The LPT Contingent Commission Adjustments increased net income by $2.6 million, $10.8 million, and $4.3 million during 2015, 2014, and 2013, respectively, but did not increase taxable income.
The Company continues to develop its own loss experience in California and will rely more on its experience and less on historical industry data in projecting its reserve requirements as such data becomes available. As the actual experience of the Company emerges, it will continue to evaluate prior estimates, which may result in additional adjustments in reserves.
The fair value of the stock options granted during the years ended December 31, 2015, 2014, and 2013 was calculated using the following weighted average assumptions:
The combined capital stock, surplus, and net income of the Company's insurance subsidiaries (EICN, ECIC, EPIC, and EAC), prepared in accordance with the statutory accounting practices (SAP) of the National Association of Insurance Commissioners (NAIC) as well as SAP permitted by the states of California, Florida, and Nevada, were as follows:
Quarterly results for the years ended December 31, 2015 and 2014 were as follows: