Premiums assumed include all premiums received by a reinsurance company during a specified accounting period, even if the policy provides coverage beyond the end of the period. Premiums are earned over the term of the related policies. At the end of each accounting period, the portion of the premiums that are not yet earned are included in the unearned premiums reserve and are realized as revenue in subsequent periods over the remaining term of the policy. Our policies typically have a term of twelve months. Thus, for example, for a policy that is written on July 1, 2015, one-half of the premiums will be earned in 2015 and the other half will be earned during 2016.
Comparison of the Year Ended December 31, 2015 to Year Ended December 31, 2014
Although net income increased for the year ended December 31, 2015 when compared to the year ended December 31, 2014, the basic and diluted share value fell slightly from $0.82 to $0.76. This was solely due to the higher level of weighted-average outstanding shares during the year ended December 31, 2015, when compared to the year ended to December 31, 2014.
Losses Incurred. There were no losses incurred for the years ended December 31, 2015 and 2014.
Premiums Assumed. We use gross premiums assumed to measure our sales of reinsurance products. Gross premiums assumed also correlates to our ability to generate net premiums earned. See also the analysis above relating to the growth in premiums assumed.
FINANCIAL CONDITION - DECEMBER 31, 2015 COMPARED TO DECEMBER 31, 2014
Investments. As of December 31, 2015, our available for sale securities decreased by $2.5 million, or 21%, to $9.3 million, from $11.8 million as of December 31, 2014. The decrease is primarily a result of net sales of fixed-maturity and equity securities, coupled with increased unrealized losses on investments on our fixed-maturity and equity securities during the year ended December 31, 2015.
As of December 31, 2015, we believe we had sufficient cash flows from operations to meet our liquidity requirements. We expect that our operational needs for liquidity will be met by cash, investment income and funds generated from underwriting activities. We have no plans to issue debt and expect to fund our operations for the foreseeable future from operating cash flows, as well as from potential future equity offerings. However, we cannot provide assurances that in the future we will not incur indebtedness to implement our business strategy, pay claims or make acquisitions.
Although Oxbridge Re Holdings Limited is not subject to any significant legal prohibitions on the payment of dividends, Oxbridge Reinsurance Limited is subject to Cayman Islands regulatory constraints that affect its ability to pay dividends to us and include a minimum net worth requirement. Currently, the minimum net worth requirement for Oxbridge Reinsurance Limited is $500. As of December 31, 2015, Oxbridge Reinsurance Limited exceeded the minimum required. By law, Oxbridge Reinsurance Limited is restricted from paying a dividend if such a dividend would cause its net worth to drop to less than the required minimum.
Net cash provided by operating activities for the year ended December 31, 2014 totaled $8,769, which consisted primarily of cash received from net written premiums less cash disbursed for operating expenses. Net cash used in investing activities of $29,299 was primarily due to the net purchases of available for sale securities and increased collateral deposited in trust accounts. Net cash provided by financing activities totaled $25,242, which consisted primarily of net proceeds from the initial public offering of $26,950 offset by cash dividend payments of $1,708.
We account for reinsurance contracts in accordance with ASC 944, ‘‘Financial Services - Insurance. ” Assessing whether or not a reinsurance contract meets the conditions for risk transfer requires judgment. The determination of risk transfer is critical to reporting premiums written. If we determine that a reinsurance contract does not transfer sufficient risk, we must account for the contract as a deposit liability.
Reserves for Losses and Loss Adjustment Expenses. We determine our reserves for losses and loss adjustment expenses on the basis of the claims reported by our ceding insurers, and for losses incurred but not reported, if any, we will use the assistance of an independent actuary. The reserves for losses and loss adjustment expenses represent management’s best estimate of the ultimate settlement costs of all losses and loss adjustment expenses. We believe that the amounts that are determined by us will be adequate; however, the inherent impossibility of predicting future events with precision, results in uncertainty as to the amount which will ultimately be required for the settlement of losses and loss expenses, and the differences could be material.
The financial statements and supplementary data have been filed as a part of this Annual Report on Form 10-K as indicated in the Index to Consolidated Financial Statements and Financial Statement Schedules appearing on page 65 of this Annual Report on Form 10-K.