The Company also derives revenues from its role as managing general agent for an unaffiliated insurance company. While the Company performs all services and pays all costs (including the independent agents' commissions) related to administering and processing policies and processing claims, the policies are written on behalf of an unaffiliated insurance company. The Company's financial statements reflect commission income as a percentage of premiums written but do not reflect these premiums written or associated claims incurred.
Other operating costs and expenses for the years ended December 31, 1995 and 1994 were $42.8 million and $55.2 million, respectively. This decrease of $12.5 million, or 23%, is a result of the Company's ongoing efforts to maintain costs at a level appropriate to the associated revenue levels. The largest component of the decrease is due to workforce reductions management of the Company initiated in early 1995. At December 31, 1995, the Company employed 268 full-time employees, compared to 407 at December 31, 1994. The related salaries and fringes for the Company was $10.7 million for the year ended December 31, 1995, compared to $14.5 million for the year ended December 31, 1994, a decrease of $3.8 million, or 26%. Additional savings were realized in the Company's data processing costs. The Company converted its two largest volumes of business from PMSC to another data processing system in December, 1994 and June, 1995 reducing data processing expense from $3.4 million for the year ended December 31, 1994 to $1.8 million for the year ended December 31, 1995.
Provision (benefit) from income taxes was $(2,000) and $29,000 for the years ended December 31, 1995, and 1994, respectively. During 1995, the Company utilized net operating loss carryforwards to offset current income taxes in the amount of $0.3 million. Net operating loss carryforwards were not used to offset current income taxes during 1994. The 1995 and 1994 provision for income taxes on operations of insignificant amounts resulted from certain life insurance taxable income and state income taxes that cannot be offset by tax operating losses.
Unpaid losses Re-estimated as Cumulative 				 and LAE of one year later Deficiency 				 ------------- ----------------- ----------
Because only 71 claims remain open as of December 31,1996, the exposure to significant additional development is less than when the claims were less mature. In addition, the likelihood of new claims being asserted for construction liability is lessened by the expiration of statutes of limitations since the last policy expired over ten years ago.
Proceeds from sales of debt securities and related realized gains and losses were as follows (in thousands):
Non-redeemable preferred stock 17 1 - 18 Common stocks 17 - - 17
Deferred tax liabilities Deferred acquisition costs $ 29 $ 146 Property and equipment 92 95 Net unrealized investment gains - 136 Other 97 -
The Company has determined, based on its recent earnings history, that a valuation allowance of $15.0 million should be maintained against the deferred tax asset at December 31, 1996. The Company's valuation allowance decreased by $4.9 million during 1996 due to utilization of net operating loss and due to unrealized investment losses.
Estimated losses and LAE incurred $ 174,870 $ 173,336 $ 205,599 Estimated reinsurance loss recoveries on incurred losses (163,890) (155,718) (165,359) NCCI commutation (1) - - (6,138) American Star commutation (2) - - 2,852
With respect to credit concentrations, most of the Company's business activity is with agents and policyholders located within the five operating states. The primary reinsurance recoverables are from the state and federal servicing carrier activities. There are otherwise no material credit concentrations related to premiums receivable, agents' balances, and premium notes receivable.