Total revenue was $165.4 million in 2013 as compared to $139.8 million in 2012. Premium revenue increased to $145.6 million in 2013 from $126.7 million in 2012. The increase in premium revenue was primarily attributable to increases in Medicare supplement business in the life and health operations as well as an increase in the commercial automobile line of business in the property and casualty operations due to a significant new state contract. Also, included in total revenue were net realized investment gains of $8.7 million in 2013 compared to net realized investment gains of $1.4 million in 2012. The magnitude of realized investment gains and losses in any year is a function of the timing of trades of investments relative to the markets themselves as well as the recognition of any other than temporary impairments on investments.
Total expenses were $154.2 million in 2013 as compared to $134.7 million in 2012. As a percentage of premiums, insurance benefits and losses incurred and commissions and underwriting expenses were 96.8% and 96.5% in 2013 and 2012, respectively. The increase in the ratio was primarily due to increases in advertising expenses as well as development of worksite products discussed previously, partially offset by the increase in premium revenue and more favorable loss experience in the property and casualty operations.
Underwriting expenses increased $3.9 million, or 31.5%, during 2013 as compared to 2012. As a percentage of premiums, underwriting expenses were 35.1% in 2013 compared to 32.7% in 2012. The increase in the expense ratio was primarily due to American Southern’s variable commission structure, which compensates the company’s agents in relation to the loss ratios of the business they write. During periods in which the loss ratio decreases, commissions and underwriting expenses will generally increase, and conversely, during periods in which the loss ratio increases, commissions and underwriting expenses will generally decrease. In 2013, these commission accruals at American Southern increased $3.6 million as compared to 2012 due to the more favorable loss experience. Partially offsetting the increase in the expense ratio was the significant increase in earned premium from the new state contract referenced previously coupled with a relatively consistent level of fixed general and administrative expenses.
Premium revenue at Bankers Fidelity increased $10.5 million, or 11.8%, during 2013 as compared to 2012. Premiums from the Medicare supplement line of business increased $11.1 million, or 15.2%, in 2013 as compared to 2012, due primarily to an increase in business generated from the company’s existing agents and newly appointed agents as well as continued active management and implementation of rate increases on renewal business, as appropriate. Other health product premiums increased $0.2 million, or 3.8%, during 2013 as compared to 2012, primarily as a result of new sales of the company’s short-term care products. Premiums from the life insurance line of business decreased $0.7 million, or 6.1%, in 2013 from 2012 due to the redemption and settlement of existing policy obligations exceeding the level of new sales activity. In 2013, the company’s five principal states in terms of premium revenue were Georgia, Missouri, Indiana, Ohio, and Pennsylvania, which accounted for approximately 46% of total premiums for 2013.
Bonds having an amortized cost of $10,101 and $7,170 and included in the tables above were on deposit with insurance regulatory authorities at December 31, 2013 and 2012, respectively, in accordance with statutory requirements.
(3) The Parent has guaranteed, on a subordinated basis, all of the obligations under the Trust Preferred Securities, including payment of the redemption price and any accumulated and unpaid distributions to the extent of available funds and upon dissolution, winding up or liquidation.
The Company initiated a nonqualified stock purchase plan (the “Agent Stock Purchase Plan”) in May 2012. The purpose of the Agent Stock Purchase Plan is to promote and advance the interests of the Company and its stockholders by providing independent agents who qualify as participants with an opportunity to purchase the common stock of the Company. Under the Agent Stock Purchase Plan, payment for shares of common stock of the Company is made by either deduction from an agent’s commission payment or a direct cash payment. Stock purchases are made at the end of each calendar quarter at the then current market value.