Paid losses and loss adjustment expenses were $42.5 million in 1997, as compared to $37.2 million in 1996 and $47.2 million in 1995. Paid losses and loss adjustment expenses for 1997 were $5.3 million more than in 1996 due mainly to the Company's reinsurance agreement with MEEMIC. See "Liquidity and Capital Resources." Paid losses and loss adjustment expenses for 1996 were $10.0 million less than in 1995 primarily due to the effect of tort reform legislation enacted in Michigan during 1994. A pre-suit notification procedure enacted as part of such tort reform legislation has enabled the Company to investigate and resolve many claims in a less expensive manner. Since the adoption of such legislation, the Company has been able to utilize its internal claims management staff to a greater extent. In the years prior to the adoption of such legislation, the Company had utilized, to a greater degree, more expensive outside legal counsel to investigate and resolve claims. In addition, paid losses and loss adjustment expenses were significantly higher in 1995 due to the high number of claims filed in 1994 just prior to the effective date of such tort reform legislation.
ceding commission attributable to the MEEMIC reinsurance agreement. Additional 1997 expenses included start-up expenses associated with the Company's expansion of business into Indiana and Ohio during 1997 and its planned expansion into Florida and Pennsylvania during 1998. Interest expense of $1.1 million during 1997 resulted from the Company's bank borrowings of $22.5 million in April 1997. See "Liquidity and Capital Resources."
assets of Michigan Educators Insurance Agency, Inc. ("MEIA"), the exclusive distributor of MEEMIC insurance products.
The FASB has issued SFAS No. 131 "Disclosures About Segments of an Enterprise and Related Information," which is effective for fiscal years beginning after December 15, 1997. This standard requires that an enterprise report financial and descriptive information about its reportable operating segments. Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Generally, financial information is required to be reported on the basis that it is used internally for evaluating segment performance and deciding how to allocate resources to segments. The Company has not determined what effects the adoption of SFAS No. 131 will have on its consolidated results of operations or financial condition.
On August 15, 1997, Professionals Group announced a definitive agreement to merge PICOM with Physicians Protective Trust Fund, a medical malpractice self-insurance trust fund located in Coral Gables, Florida ("PPTF"). PPTF is a provider of medical malpractice insurance for physicians and physician corporations in the State of Florida. This agreement was amended and restated on October 3, 1997, and pursuant to the amended and restated agreement, Professionals Group will issue 4,089,160 shares of Professionals Group common stock to the eligible members of PPTF and 153,000 shares to directors and management of PPTF upon consummation of the merger. The transaction is expected to be accounted for as a pooling of interests, whereby Professionals Group will carry forward to its accounts the assets and liabilities of PPTF at their respective amounts as reported by PPTF. The closing of the merger is expected to occur in the second quarter of 1998, subject to regulatory and shareholder/policyholder approval.