Net income of $252.4 million in 1996, or $1.77 per fully diluted share, included: (i) net investment losses (net of related costs, amortization and taxes) of $6.2 million, or 5 cents per fully diluted share; (ii) restructuring income totaling $17.4 million, or 12 cents per share, primarily arising from the sale of Conseco's investment in Noble Broadcast Group, Inc.; and (iii) an extraordinary charge of $26.5 million, or 19 cents per share, related to early retirement of debt. Net income of $220.4 million in 1995, or $2.11 per fully diluted share, included: (i) net investment gains (net of related costs, amortization and taxes) of $4.1 million, or 4 cents per share; (ii) restructuring income of $87.1 million, or 83 cents per share, primarily arising from the release of deferred income taxes previously accrued on income related to CCP and BLH (such deferred tax was no longer required when Conseco reached 80 percent ownership of these companies) and the sale of Conseco's investment in Eagle Credit (a finance subsidiary of Harley-Davidson); and (iii) an extraordinary charge of $2.1 million, or 2 cents per share, related to early retirement of debt. Net income of $150.4 million in 1994, or $1.22 per fully diluted share, included: (i) net investment losses (net of related costs, amortization and taxes) of $20.5 million, or 17 cents per share; (ii) restructuring income of $23.2 million, or 19 cents per share, resulting from the sale of WNC, net of expenses incurred in conjunction with a terminated merger; and (iii) an extraordinary charge of $4.0 million, or 3 cents per share, related to early retirement of debt.
effective July 1, 1996. The profitability of this segment largely depends on the investment spread earned (i.e., the excess of investment earnings over interest credited on annuity deposits), persistency of inforce business, and expense control.
These functions include underwriting and policy administration, accounting and financial reporting, marketing, regulatory compliance, actuarial services and asset management.
(b) Amounts under this heading are included to assist the reader in analyzing the Company's financial position and results of operations. Such amounts are not intended to, and do not, represent insurance policy income, net income, net income per share, shareholders' equity or book value per share prepared in accordance with GAAP.
Equity securities include investments in common stocks and non-redeemable preferred stock. We treat them like actively managed fixed maturities (as described above).
Securities segregated for the future redemption of redeemable preferred stock of a subsidiary. Estimated fair values of the U.S. Treasury securities held in escrow for the future redemption of redeemable preferred stock of a subsidiary of ALH are based on quoted market prices.
(1) The estimated fair value of the liabilities for investment contracts was approximately equal to its carrying value at December 31, 1996 and 1995. This was because interest rates credited on the vast majority of account balances approximate current rates paid on similar investments and because these rates are not generally guaranteed beyond one year. We are not required to disclose fair values for insurance liabilities, other than those for investment contracts. However, we take into consideration the estimated fair values of all insurance liabilities in our overall management of interest rate risk. We attempt to minimize exposure to changing interest rates by matching investment maturities with amounts due under insurance contracts.
On December 23, 1994, Conseco sold its remaining 40 percent interest in WNC to American General Corporation for $274.4 million in cash, or $11.00 for each of the 24,947,500 WNC shares owned by Conseco. Conseco recognized restructuring income from the sale of approximately $4.1 million, net of taxes of $11.4 million. Net cash proceeds from the sale were used for general corporate purposes, including the repurchase of common stock of Conseco.
We used purchase accounting to account for all our acquisitions during 1996, 1995 and 1994. We allocated the total purchase cost of acquisitions completed in 1996 to the assets and liabilities acquired, based on a preliminary determination of their fair values. We may adjust this allocation when we make a final determination of such values. We don't expect any adjustment to be material, however.
(1) We have excluded $74.9 million from pro forma income before extraordinary charge and $.39 from income before extraordinary charge per fully diluted common share. These amounts related to the release of deferred income taxes that are no longer required to be accrued as a result of the CCP Merger and the purchase of additional BLH common shares in 1995.
The following table summarizes selected 1994 account balances of CCP and WNC.
Cost of reinsurance ceded where the reinsured policy contains mortality risks totaled $313.8 million, $72.6 million and $33.4 million in 1996, 1995 and 1994, respectively. This cost was deducted from insurance premium revenue. Conseco is contingently liable for claims reinsured if the assuming company is unable to pay. Reinsurance recoveries netted against insurance policy benefits totaled $281.4 million, $59.8 million and $23.7 million in 1996, 1995 and 1994, respectively.
The agreements described above also include provisions under which the employee may elect to receive, in the event of a termination of the agreement following a change in control of the Company (as defined), a severance allowance equal to 60 months' salary, bonus and other benefits. The employee also may elect to have the Company purchase all Conseco stock and all options to purchase Conseco stock, without deduction of the applicable exercise prices, held by such person at a price per share equal to the highest market price in the preceding six months.
In 1996, 1995 and 1994, the Company repurchased approximately 1.7 million, 8.1 million and 28.0 million shares of its common stock for $26.0 million, $92.4 million and $360.2 million, respectively, in connection with its stock repurchase program. The cost of the common stock repurchased by Conseco was allocated to the shareholders' equity accounts in 1996, 1995 and 1994 as follows: (i) $3.1 million, $15.0 million, and $25.5 million, respectively, to common stock and additional paid-in capital (such allocation was based on the average common stock and paid-in capital balance per share) and (ii) $22.9 million, $77.4 million and $337.0 million, respectively, to retained earnings (representing the purchase price in excess of such average).