Total annuity considerations and life insurance premiums increased to approximately $12.7 million in fiscal 1996 from approximately $8.2 million in fiscal 1995, an increase of approximately 55.2%. Of this amount, annuity considerations increased to approximately $8.5 million in fiscal 1996 from approximately $3.8 million in fiscal 1995, an increase of approximately $4.7 million.
Universal life and investment type policy fee income was approximately $1.99 million in fiscal 1997, as compared to approximately $2.09 million in fiscal 1996 and approximately $1.93 million in fiscal 1995. This represents approximately a 4.9% decrease comparing fiscal 1997 to fiscal 1996 and approximately an 8.1% increase comparing fiscal 1996 to fiscal 1995. The decrease in fiscal 1997 was primarily attributable to the lower level of surrender charges incurred by annuitants in connection with surrenders of their annuity contracts during fiscal 1997. Surrenders of annuity products represented approximately $117.4 million, $124.5 million, and $99.8 million during fiscal 1997, 1996 and 1995, respectively.
The increase in other income is the result of the settlement in the second quarter of 1997 of the litigation with Fidelity Mutual Life Insurance Company.
Total benefits and expenses for fiscal 1997 aggregated approximately $157.1 million, as compared to approximately $147.3 million for fiscal 1996 and approximately $143.5 million for fiscal 1995. This represents an increase of approximately 6.7% comparing fiscal 1997 to fiscal 1996 and an increase of approximately 2.7% comparing fiscal 1996 to fiscal 1995. The reasons for these changes will be discussed under the respective components below.
Interest credited and benefits to policyholders amounted to approximately $137.0 million in fiscal 1997 as compared to approximately $124.3 million in fiscal 1996 and approximately $123.9 million in fiscal 1995. This represents an increase of approximately 10.3% comparing fiscal 1997 to fiscal 1996 and approximately a 0.3% increase comparing fiscal 1996 to fiscal 1995. The increase in fiscal 1997 principally is attributable to a higher level of policyholder account balances as a result of the increase in annuity sales.
The interest expense on the Company's notes payable amounted to approximately $5.85 million in fiscal 1997, approximately $5.0 million in fiscal 1996 and approximately $5.0 million in fiscal 1995. The increase in interest expense in fiscal 1997 is attributable to the increase in the Company's short term note payable.
General expenses, taxes and commissions to agents totaled approximately $17.2 million in fiscal 1997 as compared to approximately $17.2 million in fiscal 1996 and approximately $15.0 million in fiscal 1995. This represents approximately no increase comparing fiscal 1997 to fiscal 1996 and approximately a 14.7% increase comparing fiscal 1996 to fiscal 1995. The increase in fiscal 1996 compared to fiscal 1995 is primarily attributable to higher professional fees related to the potential acquisition of Fidelity. In fiscal 1997 compared to fiscal 1996 commissions and related expenses increased as a result of an increase in sales of single premium deferred annuities which was offset by lower professional fees in fiscal 1997.
The change in the net DAC for fiscal 1997 resulted in a credit of approximately $2.9 million, as compared to a charge of approximately $850 thousand in fiscal 1996 and credit of approximately $460 thousand in fiscal 1995. Such changes are due to the effect of revisions to estimated gross profits on unamortized deferred acquisition costs which are reflected in the year such estimated gross profits are revised.
Income tax expense (benefit) was approximately $29.3 million for fiscal 1997, as compared to approximately $21.8 million in fiscal 1996 and approximately $7.3 million in fiscal 1995. The increase in income taxes in fiscal 1997 is primarily attributable to higher income from operations and realized capital gains during fiscal 1997. In addition, as a result of the finalization of the Company's 1994 federal income tax return, the federal income tax recoverable from operations and capital loss carryback recorded at December 31, 1994 was increased in fiscal 1995 by $3.1 million which reduced income tax expense by a similar amount.
For the reasons discussed above, the Company had net income of approximately $61.3 million in fiscal 1997, net income of approximately $54.5 million in fiscal 1996 and net income of approximately $49.1 million in fiscal 1995.
The Company is an insurance holding company and its primary uses of cash are debt service obligations, operating expenses and dividend payments. The Company's principal sources of cash are dividends from the Insurance Company, sales of and interest on the Company's investments and rent from its real estate. During the third quarter of 1997, the Company's Board of Directors increased the quarterly dividend rate to $.06 per share. During 1997 and 1996, the Company purchased and retired 372,300 and 724,000 shares of common stock, respectively. The Company is authorized to purchase an additional 232,000 shares of common stock. At the February 1998 Board of Directors meeting, the Company was authorized to purchase an additional 1,000,000 shares of common stock.
The Insurance Company is subject to various regulatory restrictions on the maximum amount of payments, including loans or cash advances, that it may make to the Company without obtaining prior regulatory approval. As a New York domiciled insurance company, the Insurance Company is subject to restrictions on the payment of dividends under New York law. New York law states that no domestic stock life insurance company shall distribute any dividend to its shareholders unless a notice of its intention to declare such dividend and the amount thereof shall have been filed with the Superintendent not less than 30 days in advance of such proposed declaration. The Superintendent may disapprove such distribution by giving written notice to such company within 30 days after such filing that he or she finds that the financial condition of the company does not warrant such distribution. The NYSDI has established informal guidelines for the Superintendent's findings which focus upon, among other things, the overall financial condition and profitability of the insurer under statutory accounting practices. During fiscal 1997, 1996, and 1995, the Insurance Company paid dividends of $24.8 million, $15 million and $5 million, respectively, to the Company.
Net cash provided by the Company's operating activities (reflecting principally: (I) premiums and contract charges collected less (ii) benefits paid on life insurance and annuity products plus (iii) income collected on invested assets less (iv) commissions and other general expenses paid) was approximately $47.3 million, $43.9 million and $30.2 million in fiscal 1997, 1996 and 1995, respectively. Net cash (used in) provided by the Company's investing activities (principally reflecting investments purchased less investments called, redeemed or sold) was approximately $(62.5) million, $(63.7) million and $(162.7) million in fiscal 1997, 1996 and 1995, respectively.
For purposes of the Company's consolidated statements of cash flows, financing activities relate primarily to "dollar roll" repurchase transactions, and to sales and surrenders of the Company's annuity and universal life insurance products. The payment of dividends by the Company to its stockholders also is considered to be a financing activity. Net cash provided by (used in) the Company's financing activities amounted to approximately $27.9 million, $22.4 million and $131.4 million in fiscal 1997, 1996 and 1995, respectively. These fluctuations primarily are attributable to the net change in "dollar roll" repurchase transactions, higher policyholder account balances, and an increase in borrowings under the Company's line of credit during fiscal 1997.
As of December 31, 1997, approximately 8.4% of the Company's total invested assets were invested in limited partnerships. Pursuant to NYSID regulations, the Company's investments in equity securities, including limited partnership interests, may not exceed 20% of the Insurance Company's invested assets. Investments in limited partnerships are included in the Company's consolidated balance sheet under the heading "Other invested assets." See "Note 2 to the Notes to Consolidated Financial Statements." The Company is committed, if called upon during a specified period, to contribute an aggregate of approximately $73.7 million of additional capital to certain of these limited partnerships. However, management does not expect this entire amount to be called because certain of these limited partnerships are nearing the end of the period during which investors are required to make contributions. The Company may make selective investments in additional limited partnerships as opportunities arise. In general, risks associated with such limited partnerships include those related to their underlying investments (i.e., equity securities, debt securities and real estate), plus a level of illiquidity, which is mitigated by the ability of the Company to take annual distributions of partnership earnings. There can be no assurance that the Company will continue to achieve the same level of returns on its investments in limited partnerships as it has historically or that the Company will achieve any returns on such investments at all. Further, there can be no assurance that the Company will receive a return of all or any portion of its current or future capital investments in limited partnerships. The failure of the Company to receive the return of a material portion of its capital investments in limited partnerships, or to achieve historic levels of return on such investments, could have a material adverse effect on the Company's financial condition and results of operations.
As previously discussed, in fiscal 1997 and 1996 the Company participated in "dollar roll" repurchase agreement transactions. Amounts outstanding to repurchase securities under such agreements were approximately $205.2 million and $200.9 million at December 31, 1997 and 1996, respectively. The Company may engage in selected "dollar roll" transactions as market opportunities arise.
Purchased hardware will be capitalized in accordance with normal policy. Personnel and all other costs related to the project are being expensed as incurred. The total cost to the Company of these Year 2000 compliance activities has not been and is not anticipated to be material to its financial position or results of operations in any given year.
Forward-looking statements are necessarily based on estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the Company's control and many of which are subject to change. These uncertainties and contingencies could cause actual results to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Company. Whether or not actual results differ materially from forward-looking statements may depend on numerous foreseeable and unforeseeable developments. Some may be national in scope, such as general economic conditions, changes in tax law and changes in interest rates. Some may be related to the insurance industry generally, such as pricing competition, regulatory developments and industry consolidation. Others may relate to the Company specifically, such as credit, volatility and other risks associated with the Company's investment portfolio. The Company disclaims any obligation to update forward-looking information.
Also in June 1997, the FASB issued Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" (SFAS 131). SFAS 131 establishes standards for reporting information about operating segments in annual financial statements and requires reporting selected information about operating segments in interim financial reports issued to shareholders. SFAS 131 is effective for fiscal years beginning after December 15, 1997. The Company's current definition of its operating segments will not change.
See the accompanying Table of Contents to Consolidated Financial Statements and Schedules on Page.