Contract premiums totaled $50.6 million during 1996 compared to $31.3 million for 1995, an increase of 62%. The increase in Contract premiums was primarily the result of increased new Contract sales resulting in a higher number of active Contracts in force. New Contract sales during 1996 were 194,483 compared to 109,922 during 1995. At December 31, 1996, there were 294,151 active Contracts in force compared to 203,535 at December 31, 1995. Additionally, the average annual premium per Contract has increased from $239 for those Contracts written in 1995 to $244 for Contracts written during 1996, a 2.0% increase, as a result of a higher portion of Contracts written during 1996 including the additional pre-trial hours benefit at an additional cost to the member.
The Company's expense ratio remained at 45% for both 1996 and 1995. These factors resulted in a combined loss and expense ratio of 81% and 80% for 1996 and 1995, respectively.
Provision for income taxes increased significantly during 1995 to $3.9 million, or 35% of net income before taxes, from a 1994 benefit of $319,000. This $4.2 million change is attributable to the 1994 expense which reflected the benefit of net operating loss carryforwards, general business and rehabilitation tax credit carryforwards and alternative minimum tax credit carryforward. The Company has established a valuation allowance for the portion of its deferred tax asset that the Company does not believe it is more likely than not that the tax benefits from its NOLs and other carryforwards will be realized. The Company believes it is unlikely that it will generate sufficient taxable income to realize these benefits before they expire, primarily as a result of tax deductions attributable to expected levels of commissions to be paid on new Contract sales.
Earnings per common and common equivalent share................................... $ .56 $ .35 $ .26 ======== ======= ======== Earnings per common share - assuming full dilution................................ $ .56 $ .34 $ .24 ======== ======= ========
Year Ended December 31, -------------------------- 1996 1995 1994 -------- -------- -------- Preferred Stock - $1 par value, 400 shares - --------------- authorized; issued and outstanding in two series designated as follows: $2.40 Cumulative Convertible Preferred Stock, --------------------------------------------- authorized 391 shares; shares issued and outstanding at beginning of year (299 in 1995)..... $ - $ 299 $ - Shares issued during year (346 in 1994)............. - - 346 Shares exchanged for Common Stock (299 in 1995 and 47 in 1994)........................................ - (299) (47) ------ ------ ------ Shares issued and outstanding at end of year (299 in 1994), liquidation value of $7,188 at December 31, 1994........................................... - - 299 ------ ------ ------ $3.00 Cumulative Convertible Preferred Stock, --------------------------------------------- authorized 5 shares; 5 shares issued and outstanding at beginning and end of year, liquidation value of $84.......................... 5 5 5 ------ ------ ------
Fair Value of Financial Instruments The Company's financial instruments consist primarily of cash, certificates of deposit, other short-term investments, receivables and trade payables. Fair value estimates have been determined by the Company, using available market information and appropriate valuation methodologies. The carrying value of cash, certificates of deposit, other short-term investments, net receivables and trade payables are considered to be representative of their respective fair value, due to the short term nature of these instruments.
Income Taxes The Company accounts for income taxes in accordance with SFAS 109, which is an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that are recognized in different periods in the Company's financial statements and tax returns. In estimating future tax consequences, SFAS 109 generally considers all future events other than enactment's of changes in the tax law or rates
Held-to-maturity investments- current portion.............. $ 500 $ 500 Held-to-maturity investments..... 989 112 Investments pledged.............. 950 943 ------ ------ Total............................ $2,439 $1,555 ====== ======