Income per common share from continuing operations before cumulative effect of accounting changes.........$ .41 $ .15 $ .25 $ .17 $ .22
Corporate --------- Net operating expenses remained constant for the year ended December 31, 1995 as compared to 1994 levels. Investment income increased $.1 million and realized gains increased $.3 million. Equity income decreased $.1 million and other income declined $.2 million reflecting a sale of real estate in 1994. Interest expense increased $.1 million due to higher interest rates on the debt of a corporate subsidiary, and general and administrative expenses remained constant.
Insurance Group --------------- The Insurance Group had operating income of $4.7 million for the year ended December 31, 1994 versus $8.8 million for the year ended December 31, 1993. Operating income includes realized and unrealized losses of $2.0 million in 1994 compared to realized and unrealized gains of $.9 million in 1993. Operating income excluding net securities gains or losses was $6.7 million in 1994 versus $7.9 million in 1993. Premium revenues increased $3.1 million. Madison Life had a decrease of $1.1 million primarily from the credit lines of business due to the run-off status of the purchased credit blocks of business from 1991. Premium revenues at Standard Life increased $4.2 million due to an increase in stop loss premiums of $1.9 million and an increase in DBL premiums of $2.1 million reflecting Standard Life's continued growth in these lines of business. Standard Life also had a $.9 million increase in premiums due to the assumption of a group accident and health block of business, partially offset by a $.7 million decrease due to the continued runoff of the Company's closed blocks of life, annuity and individual and group accident and health lines of business. Net investment income decreased $.3 million resulting in a 6.9% return on investments in 1994 as compared to a 7.3% return on investments in 1993. Equity income decreased $.8 million due to lower returns on certain partnership investments in 1994. Madison Life reported other income of $2.3 million in 1993 related to the anticipated recovery from a reinsurer on a stop loss treaty for credit business. During 1994, the estimated recovery was reduced to $1.0 million. Other income at Standard Life increased $.3 million as a result of an increase in stop loss fees of $.5 million, partially offset by a reduction in reinsurance recoveries of $.2 million due to the partial disposal of lotto annuity business at the end of 1993 and a reduction in reinsurance recoveries on its closed block of ordinary life business. Insurance benefits, claims and reserves decreased by $1.2 million for the year ended December 31, 1994 compared to 1993. Madison Life's and Standard Life's expenses decreased by $.2 million and $1.0 million, respectively. Standard Life's decrease was related to a $1.3 million reduction in claims and reserves connected with the ordinary life, group life and individual accident and health lines of business which is in runoff status and a $3.0 million decrease in payments and reserves on the lotto annuity contracts due to the partial disposal of this business in 1993. These decreases were partially offset by an increase in stop
alternative transactions which would result in the divestiture or significant reduction of the Company's investment in Zimmerman, although there can be no assurance that any such transactions would be consummated. Standard Life intends to continue to focus on its core stop loss and DBL businesses, while expanding its reinsurance, risk- sharing and other alliances with HMO's and provider health care organizations, its POS products, its specialty products such as its behavioral health carve-out product, and its South and Central American reinsurance coverage. Standard Life will also seek actively opportunities to purchase blocks of business, such as the block of DBL business purchased in early 1996 having premiums of $1.0 million. Madison Life anticipates focusing on expansion of its core group and long-term and short-term disability and group life businesses, together with credit life and credit disability products. Madison Life stands ready to purchase, on an assumption reinsurance basis, blocks of business, such as the block of pre- need individual ordinary life business that Madison Life has contracted to purchase in 1996, and will seek appropriate investments in joint ventures involved in managed health care activities. The health care industry is one of the largest industries in the United States. IHC believes that the Insurance Group is well- positioned to take advantage of the changing health care environment; the size of the Insurance Subsidiaries affords them greater flexibility than their larger competitors to develop or participate in new business opportunities, and their network of established independent managing general underwriters and agents affords them broad access to the marketplace. The Insurance Group will pursue opportunities in managed health care in addition to the provider reinsurance, POS and specialty carve-out products mentioned above. The Insurance Group is participating with physician-hospital organizations, third party administrators and other provider organizations to develop provider sponsored community health plans and/or HMO's in target markets in the United States. A provider sponsored health plan ("PSHP") is a managed care health plan which is co-sponsored by an insurance company and a select group of providers to serve the community in the providers' service area. The PSHP integrates the financing and delivery of health care and is designed to compete with HMO's and other managed care plans. The Insurance Group believes that PSHP's which align the risk of the providers and the insurance company have a greater chance of success, and is working to establish PSHP's in which the providers and the insurance company share the financial results of the plan's operations. The Insurance Group currently has two such plans under development, one in the Southwest and one in the Northeast. The PSHP's will initially provide services to the commercial market; however, the goal is for these entities to access the Medicare and Medicaid markets either by becoming provider sponsored organizations as contemplated by proposed legislation before Congress or by becoming full-fledged HMO's.
The Insurance Group is focusing its development efforts relating to PSHP's on smaller, secondary markets. While opportunities in the urban markets still exist, the competition is more intense. Market features which the Insurance Group believes provide the most opportunity include those with the following characteristics: populations in the range of 100,000 to 1,000,000 (to ensure a sufficient diversity of providers, lessen the cost of advertising and marketing, and ensure a sufficient number of enrollees), a favorable regulatory environment, a low managed care penetration, an overcapacity of acute inpatient bed days, an oversupply of specialist physicians, and favorable Medicare and Medicaid populations.