The following discussion should be read in conjunction with our condensed consolidated financial statements and notes thereto included in this Form 10-K. In connection with, and because we desire to take advantage of, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain forward looking statements in the following discussion and elsewhere in this report and in any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Forward looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward looking statements made by, or on our behalf. We disclaim any obligation to update forward looking statements.
Revenues. Insurance revenues are primarily generated from premium revenues and investment income. Insurance revenues for the years ended December 31, 2016 and 2015 are summarized in the table below.
Direct, assumed and ceded premiums for the years ended December 31, 2016 and 2015 are summarized in the following table.
Expenses. Expenses for the year ended December 31, 2016 and 2015 are summarized in the table below.
Death claims: Death benefits were $651,844 in the year ended December 31, 2016 compared to $363,870 in 2015, an increase of $287,974. This increase is attributable to the growth of our in-force block of life insurance policies. The majority of death claims paid from inception have been on pre-need policies. We expect these claims to grow as we continue to increase the size of our in-force pre-need business.
Policyholder benefits: Policyholder benefits were $3,207,074 in the year ended December 31, 2016 compared to $2,166,113 in 2015, an increase of $1,040,961. The primary driver of this increase is the growth of our assumed business and is more than offset by the increased premiums associated with this block of assumed policies.
Increase in policyholder reserves: Policyholder reserves increased $1,440,737 in the year ended December 31, 2016, compared to $1,214,695 in 2015, an increase of $226,042. The increase in policyholder reserves reflects the growth in new business for 2016 as well as the maturation of in-force policies.
Net Loss: Our net loss was $1,285,773 in the year ended December 31, 2016 compared to net loss of $1,337,377 in the same period of 2016, a decrease of $51,604. This decrease is attributable to growth in our invested assets and growth of our in-force insurance business offset by our increased regulatory compliance costs. Our net loss per share decreased to $0.24 from $0.30 in 2015, basic and diluted.
Assets. Assets have increased to $19,191,989 as of December 31, 2016, an increase of $4,389,791 from December 31, 2015. This is primarily the result of the growth of our available for sale assets and cash and cash equivalents.
Available for sale fixed maturity securities: As of December 31, 2016, we had available for sale fixed maturity assets of $10,320,074, an increase of $2,188,955 from the December 31, 2015 balance of $8,131,119. This growth is driven by our premium income and our warrant exercise offering.
Available for sale equity securities: As of December 31, 2016, we had available for sale equity assets of $5,143,504, an increase of $1,539,236 from the December 31, 2015 balance of $3,604,268. This growth is driven by our premium income and our warrant exercise offering.
Property, equipment and software, net: As of December 31, 2016 our property, equipment and software assets were $244,849 compared to $283,582 as of December 31, 2015. This decrease is a result of normal amortization during the period. We did not purchase any new property, equipment and software during 2016.
Policy liabilities: Our total policy liabilities as of December 31, 2016 were $7,740,329 compared to $4,220,525 as of December 31, 2015. The growth in deposit-type contracts is the result of our annuity sales and the growth of our annuity block of business. The growth in policyholder benefit reserves is the result of our life insurance sales and the growth of our life insurance block of business. The growth of advance premiums is also attributable to the growth of our life insurance block of business.
Shareholders’ Equity. Our shareholders’ equity was $11,380,983 as of December 31, 2016, an increase of $890,190 from our December 31, 2015 shareholders’ equity of $10,490,793. The growth in shareholders’ equity was driven by the exercise of warrants during the first six months of 2016. This resulted in the increased common stock par value and additional paid in capital. The increased accumulated deficit is the direct result of our net loss during 2016. The increase in accumulated other comprehensive income reflects the change in unrealized gains and losses in our available for sale securities.
Our overall investment philosophy is reflected in the allocation of our investments. We emphasize investment grade debt securities with smaller holdings in equity securities and other investments. The following table shows the carrying value of our investments by investment category and cash and cash equivalents, and the percentage of each to total invested assets as of December 31, 2016 and December 30, 2015.
We attempt to mitigate our exposure to adverse interest rate movements through laddering the maturities of the fixed maturity investments and through maintaining cash and other short term investments to assure sufficient liquidity to meet our obligations and to address reinvestment risk considerations. Due to the composition of our book of insurance business, management believes it is unlikely that we would encounter large surrender activity due to an interest rate increase that would force the disposal of fixed maturities at a loss.
Since inception, our operations have been financed primarily through the sale of voting common stock. Our operations have not been profitable and have generated significant operating losses since we were incorporated in 2009.
Net cash provided by operating activities was $409,353 for the year ended December 31, 2016. The primary sources of cash from operating activities were premiums and deposits received from policyholders. The primary uses of cash for operating activities were for payments of commissions to agents and settlement of policy liabilities. Net cash used in investing activities was $3,309,889. The primary source of cash was from sales of available for sale securities and the sale of the short-term investments. Offsetting this source of cash was our purchases of investments in available-for-sale securities. Cash provided by financing activities was $3,579,755. The primary sources of cash were receipts on deposit-type contracts and issuance of common stock from warrants exercised.
At December 31, 2016, we had cash and cash equivalents totaling $3,145,745. We believe that our existing cash and cash equivalents will be sufficient to fund the anticipated operating expenses and capital expenditures through at least 2017. We have based this estimate upon assumptions that may prove to be wrong and we could use our capital resources sooner than we currently expect. The growth of USALSC, our insurance subsidiary, is uncertain and will require additional capital if it continues to grow.