Income before taxes and change in accounting method 7,128 5,950 15,722 11,536 11,650 Income taxes 207 150 4,105 2,415 2,765 Income before change in accounting method 6,921 5,800 11,617 9,121 8,885 Changes in accounting method: Accounting for income taxes --- --- --- --- 526 Net income $ 6,921 $ 5,800 $ 11,617 $ 9,121 $ 9,411
In 1996, the Company reported net income of $5.8 million, or $0.86 basic earnings per common share ($0.85 diluted earnings per share). This compares to 1995 net income of $11.6 million, or $1.72 basic earnings per share ($1.71 diluted earnings per share). The 1996 results were negatively impacted by a series of severe storms that produced an unusually large volume of property damage claims throughout the Company's operating territory. The after-tax impact of weather-related catastrophe claims was estimated to be approximately $1.03 per share in 1996, compared to approximately $0.42 per share in 1995. The 1996 catastrophe losses represent the largest catastrophe loss total in the Company's history. The Company's statutory combined ratio for 1996 was 108.0 percent versus 100.2 percent for the comparable 1995 period. The Company's total revenues in 1996 were a record high of $186.6 million, a 16.7 percent increase over 1995's $159.8 million. The 1996 total includes five months of premiums and investment income from the Citizens Security Group companies which were acquired on July 31, 1996. The effect of the Citizens Security Group acquisition on total revenues was approximately $15.8 million, including approximately $14.7 million of net earned premiums and $1.1 million of net investment income. Incremental net income from the Citizens Security Group operation for the five month period ended December 31, 1996 was approximately $0.25 million, or $0.04 per share, net of goodwill amortization and interest expense.
Heavily impacted by catastrophe losses in 1996, the Company's incurred losses and loss adjustment expenses of $130.1 million were 31.3 percent higher than the $99.1 million reported for the comparable 1995 period. Approximately $12.2 million of the current year losses resulted from catastrophe and other weather-related non-catastrophic claims. This compares to approximately $4.4 million for the 1995 period. The acquisition of the Citizens Security Group business contributed approximately $9.1 million to the current year loss and loss adjustment expense total, accounting for over 9 percent of the increase. Also contributing to the high volume of losses was an increase in claim severity for Meridian's private passenger automobile and commercial multiple-peril lines of business. Partially offsetting these losses were improved results in the Company's workers' compensation and personal and commercial automobile liability lines of business. The Company's statutory loss ratio for 1996 deteriorated to 68.9 percent from 1995's 60.2 percent. The statutory loss adjustment expense ratio of 9.1 percent remained virtually unchanged from 1995 ratio.
The Company's net investment income for the periods ended December 31, 1997, 1996 and 1995 are summarized as follows:
Also as a result of the employee transfer, the Company assumed the operations of the previously established benefit plans of Meridian Mutual. Included in these benefit plans was a non-contributory pension plan that covers substantially all employees, a non-tax qualified supplemental retirement plan for certain key employees, and a multi-employer plan for other post-retirement benefits. (See Note 9-Pension and Other Post-Retirement Benefit Plans) The Company also assumed a 401(k) plan whereby employees can contribute up to 16 percent of their compensation, with the Company contributing 50 percent of the employee contribution on the first 6 percent. Costs related to these benefit plans are allocated to each company in accordance with their percentage participation under the pooling agreement.
The reconciliation for 1997 shows an approximately $16.4 million reduction in previously established loss reserves. Favorable loss developments resulting from decreases in the frequency and severity of claims in 1996 and prior accident years for the Company's commercial automobile liability, workers' compensation lines and commercial multiple-peril lines of business were the primary factors in the most recent period reduction. The Company also experienced favorable underwriting trends from its involvement in the involuntary National Workers' Compensation Pool.
The Company maintains a defined benefit pension plan for the benefit of eligible employees. Under the plan, all employees of the Company completing more than 1,000 hours of employment in a 12- month period become eligible to participate. The plan provides for a pension annuity beginning at age 65 based on the employee's average monthly base pay during the five highest consecutive salary years out of the last ten. Provisions for delayed retirement benefits, early retirements benefits after age 55, disability and death benefits, optional methods for benefit payment, payments to an employee who leaves after a certain number of years of service, and payments to an employee's surviving spouse are also covered under the plan.
Service costs $ 705,872 $ 21,400 Interest costs 1,098,786 34,016 Actual return on assets (3,176,536) --- Net amortization and deferral 1,080,844 17,077 Net periodic pension cost/(income) $ (291,034) $ 72,493
The following table presents the components of the plan's accumulated post-retirement benefit obligation as of December 31, 1997 reconciled with the plan's funded status and the amount recognized in the Company's consolidated balance sheet at December 31, 1997: Accumulated post-retirement benefit obligation: Retired employees $ 310,545 Active employees: Not yet eligible 1,308,235 Fully eligible 333,694 Obligation at December 31, 1997 1,952,474 Plan assets at fair value --- Funded status 1,952,474 Unrecognized net loss (72,418) Accrued liability at December 31, 1997 $ 1,880,056