Consulting and fee income increased 37.5% to $61.2 million in 1999 from $44.5 million in 1998 due to inclusion of revenues from Applied Risk Management Inc. ("ARM") from the date of acquisition in February 1999. Consulting and fee income as a percentage of net premiums earned and consulting and fee income was 14.0% in 1999 compared to 11.4% in 1998.
Financing activities provided $37.1 million in cash in 1999, used $3.7 million in 1998 and provided $19.8 million in 1997. In December 1999, the Company drew on its line of credit and borrowed $45.0 million to contribute to the capital and surplus of ACIC. In July 1997, the Company increased its borrowings by $10.0 million to finance an investment in additional Lloyd's underwriting capacity. In December 1997, the Company completed a private placement of Capital Securities and received net proceeds of $118.7 million. Concurrent with the receipt of the proceeds, the Company repaid the full outstanding amounts under its credit agreements totaling $103.0 million. The Company had no outstanding bank debt at December 31, 1998 and 1997.
On July 23, 1997, MMI acquired a 39% interest in JMA Holdings Limited (JMAHL), the parent company of Jago Managing General Agency Limited, a Lloyd's managing agency, for consideration of $9.1 million. The consideration was comprised of $5.9 million in cash and $3.2 million of short-term notes payable.
Effective January 1, 1997, the Company purchased substantially all of the net assets of Equifax Medical Credentials Verification Services (EMCVS), a unit of Atlanta-based Equifax, Inc., and acquired by merger all of the outstanding stock of PRM. The total purchase price for these acquisitions was $8.3 million in cash and $2.0 million in MMI Common Stock. These acquisitions were accounted for as purchases and the operations of EMCVS and PRM are included in the Company's consolidated financial statements since their dates of acquisition.
The Company also holds invested assets in foreign currencies, which result primarily from business generated in foreign currencies and thus expose the Company to foreign exchange currency risk. The predominant exposure is in British pound sterling. Revenues from our business in foreign countries are the primary source of funds for our purchase of these investments. The Company purchases these investments as a natural hedge against insurance reserves and other liabilities denominated in the same currency, effectively reducing foreign currency exchange rate exposure. At December 31, 1999, the Company does have a net unhedged foreign currency exposure in its invested assets of approximately 4.0 million British pound sterling. A hypothetical weakening of 10% in the British pound sterling versus the U.S. dollar would result in a loss of value of approximately $.6 million. Management reviews its foreign currency exposure risk on a monthly basis and is of the opinion that other foreign currency exchange risk is not material.
This sensitivity analysis provides only a limited, point-in-time view of the market risk sensitivity of certain of the Company's financial instruments. The actual impact of interest rate and price changes may differ significantly from those shown in the analysis. The sensitivity is further limited as it does not take into consideration any actions the Company could take in response to or in anticipation of movements in interest rates or prices.
MMI has identified tax planning strategies which, when implemented and combined with future book income, will result in adequate future taxable income to realize the deferred tax asset. Accordingly, no valuation reserve is considered necessary.
In December 1999, MMI announced the signing of a definitive agreement to merge with The St. Paul Companies, Inc. ("The St. Paul"). Under the terms of the merger, MMI will merge with a subsidiary of The St. Paul. On March 9, 2000, MMI stockholders approved the merger with The St. Paul. In connection with obtaining regulatory approvals for the merger, early termination of The Hart-Scott-Rodino waiting period and approval from the Missouri Department of Insurance have been granted. Regulatory approvals are pending in the U.K. (with the Financial Services Authority, with the Office of Fair Trading and Lloyds and in Ireland).