The financial data included in the table for the five years ended December 31, 1996 have been derived from financial statements audited by the Company's independent accountants, Deloitte & Touche LLP. This data was restated for prior years to reflect the discontinuation of the Company's General Dental Practices (see Note 2 of the Consolidated Financial Statements). Additionally, effective January 1, 1996, the Company adopted a preferable method of recognizing orthodontic revenues which better matches revenues and expenses over the life of an orthodontic contract (see Note 1 of the Consolidated Financial Statements). This data should be read in conjunction with such financial statements and notes thereto, and
Interest income declined to $984 from $1,286 due to lower balances of cash and investments. The Company entered into a credit agreement during 1996 to facilitate the acquisition of First American, resulting in interest expense of $485.
The operating results, net of taxes, of the discontinued General Dental Practices for the twelve months ended December 31, 1996, reflect a net loss of $2,863, net of an after tax deferred loss of $621. This compares to a net after tax loss of $818 for the same period in 1995. This loss was offset by an after tax gain of $1,678 on the sale of four General Dental Practices during 1996, for a net after tax loss of $1,185 for 1996.
Health care revenues increased as a result of sales to new small and mid-size clients and increased revenue from the Company's indemnity insurance subsidiary. Membership enrollment increased to 761,000 primarily from sales to new small and mid-size group clients and an increase in the number of persons covered under various dental indemnity insurance products offered by the Company's insurance subsidiary.
Health care expense increased primarily due to increased capitation and increased indemnity benefits paid to insureds directly related to increased premium revenue. Health care expense also increased due to increased claims and claims reserve costs associated with the implementation of a number of new indemnity benefit programs offered by the Company's indemnity insurance subsidiary, geographic expansion, and to a lesser extent, the expansion of the Company's Preferred Provider Organization operations. General and administrative expenses increased at a lower rate due to increased operating efficiencies. Selling expenses increased primarily due to higher costs in the distribution of the Company's products through insurance related sources.
Other income increased due to the favorable disposition by the Company of certain equity investments and dividend income. Net income increased due to the above factors.
Health care expenses increased primarily due to increases in capitation payments to participating providers in direct correlation with the increase in premium revenues. Health care expenses, as a percentage of revenues, increased primarily due to the increase in payments made to providers of care under the Company's indemnity insurance program, along with an increase in the reserve established for incurred but not reported claims.
Pro forma operating losses for the discontinued General Dental Practices for the twelve months ended December 31, 1994, increased due to increased costs associated with the opening of new company-owned general dental offices.
At December 31, 1996 and December 31, 1995, the current ratio was 2.0 to 1.0 and 4.0 to 1.0, respectively. The Company's net worth was $35.2 million compared to $31.9 million the previous year. The Company had $9.8 million and $14.7 million of cash and short-term investments as of December 31, 1996 and December 31, 1995, respectively. As a result of its regulated nature, the Company is required to maintain various regulatory bank accounts in an aggregate amount of approximately $6.3 million to satisfy depository requirements imposed by state regulatory agencies. Due to the significant cash and short-term investments maintained by the Company, these requirements do not pose a significant liquidity burden on the Company. The Company believes that cash flow from continuing operations, together with the existing cash and short-term investments on hand, and other available sources of financing, should be adequate to meet operating capital and regulatory needs for the foreseeable future.