We currently maintain our principal place of business at 100 Crowne Point Place, Sharonville, Ohio 45241, which we own. We believe that our existing facility is adequate to support our business.
In our markets, there has been limited growth in recent years in the number of individuals enrolled in dental benefit plans. However, there has been a shift of membership out of the more expensive dental indemnity products into the dental PPO products that offer both less expensive in-network benefits and out-of-network benefits. At the same time, members have migrated away from dental HMO products with very limited provider networks. While these dental HMO products are the least expensive, employers and members have focused their attention on the dental PPO products that offer broad provider access with the cost control associated within a contracted provider network for the in-network portion of the dental services rendered. Prior to the advent of the ACA, there was limited growth in the number of individuals enrolled in dental benefit plans. Beginning in 2014, there has been a significant increase in publicly funded dental membership that was the result of the expansion of Medicaid in certain states and the dental membership associated with state-based insurance exchanges across the country.
Our ratio of healthcare services expense to premium revenue (“loss ratio”) decreased by approximately 1.8% from 78.0% in 2015 to 76.2% in 2016. The improved loss ratio impacted 2016 by approximately $132,000 in gross margin. The fully-insured dental HMO/IND and fully-insured dental PPO segments together represent approximately 71.7% of our total dental business.
In March 2016, we paid a dividend of $40.47 per share to shareholders of record for all Redeemable Common Shares. We paid a dividend in March 2015 of $39.86 per share to shareholders of record for all Redeemable Common Shares.
Net income was approximately $1,989,000 and $958,000 for 2016 and 2015, respectively. This increase in net income is primarily the result of an increase in premium revenue of approximately $7,333,000 offset by an increase in healthcare services expense of approximately $3,816,000 in 2016. The increase in gross margin of approximately $3,517,000 was offset by an increase in insurance expenses of $2,067,000 in 2016. Our ratio of insurance expense to total premium revenue (“insurance expense ratio”) increased to 21.0% in 2016 from 20.4% in 2015.
Our fully-insured dental HMO/IND membership increased by approximately 8,800 in 2016. This membership increase is primarily attributable to an increase in fully-insured dental HMO membership resulting from new sales of approximately 11,500 members in the Cincinnati and Northern Kentucky markets during 2016. An increase of approximately 2,400 is due to an increase of new sales of our individual dental HMO product. These increases were offset by the loss of approximately 5,100 members due to employer groups that did not renew with the Company or reduced employee counts of retained employer groups. Some of our fully-insured dental HMO membership losses were the result of employer groups moving to medical carriers to take advantage of medical/dental package savings.
Other income and realized (losses) gains on investments increased approximately $125,000 to $128,000 in 2016 from $3,000 in 2015. The increase is primarily the result of realized gains due to the sale of investments in 2016 that did not occur in 2015, offset by a slight decrease in other income.
Fully-insured dental PPO healthcare services expense increased 7.0%. This increase was primarily the result of an increase of approximately $2,694,000 related to the increase in fully-insured group and individual dental PPO membership. This increase in fully-insured dental PPO healthcare member volume change was offset by an overall decrease of approximately $1,687,000 due to a decrease in claims expense on a PMPM basis. Lower dental service utilization resulted in a decrease of approximately $2,029,000 offset by an increase in healthcare service expense of approximately $342,000 due to fee schedule increases effective January 1, 2016.
Self-Insured Claim Revenue - Self-insured claim revenue increased 7.6%. Self-insured claim revenue increased by approximately $1,358,000 due to new self-insured sales. Also, self-insured claim revenue increased by approximately $598,000 primarily due to an increase in the self-insured claim revenue on a per member per month basis as a result of a 1.5% dental fee schedule increase effective January 1, 2015.
Self-Insured ASO Fees - Self-insured ASO fees increased 4.5%. Approximately $72,000 of this increase is attributable to self-insured product sales and an increase in membership for existing employer groups, offset by approximately $11,000 due to a decrease in average self-insured ASO fee rates for 2015 compared to 2014.
Fully-insured dental HMO/IND healthcare services expense increased or 3.7%. This increase is attributable to an increase in fully-insured dental HMO/IND healthcare services expense on a per member per month basis of approximately $592,000, or 1.6%, in 2015 for both existing and new fully-insured dental HMO/IND membership. Fully-insured dental HMO/IND healthcare services expense increased by approximately $551,000 due to the fee schedule increases effective January 1, 2015 and by approximately $41,000 due to an increase in dental service utilization level by our fully-insured dental HMO/IND members in 2015 compared to 2014. This increase in fully-insured dental HMO/IND healthcare services expense is also the result of an increase of approximately $759,000, or 2.1%, due to an increase in fully-insured dental HMO/IND member months of 2.0% in 2015 compared to 2014.
Fully-insured dental PPO healthcare services expense increased 13.6%. This increase was primarily the result of an increase of approximately $1,810,000 related to the increase in fully-insured group and individual dental PPO membership. This increase in fully-insured dental PPO healthcare member volume change was offset to an overall decrease of approximately $87,000 due to a decrease in claims expense on a PMPM basis. Lower dental service utilization resulted in a decrease of approximately $303,000 offset by an increase in healthcare service expense of approximately $216,000 due to the fee schedule increases effective January 1, 2015.
Self-insured healthcare services expense increased 8.3%, in 2015. An increase of 5.3% in self-insured member month volume in 2015 compared to 2014 resulted in an increase in self-insured healthcare services expense of approximately $1,225,000. Self-insured dental healthcare services expense increased by approximately $364,000 due to the fee schedule increases effective January 1, 2015. The remaining increase in self-insured claims expense of approximately $325,000 is due to an increase in dental service utilization level by our self-insured members in 2015 compared to 2014.
Consolidated insurance expenses increased approximately $1,751,000 in 2015. Total insurance expenses as a percentage of total premium revenue, or the insurance expense ratio, was 20.4% for 2015, increasing 0.5% from the 2014 ratio of 19.9%. Salaries and wages increased by approximately $517,000 in 2015. Commissions expense increased approximately $297,000, due to the increase in total premium revenue in 2015 compared to 2014. Other insurance expense increased by approximately $937,000 due to an increase in expenses related to the launch of the individual dental PPO and dental HMO products in Ohio as well as the development of the on exchange dental PPO products for Georgia, Tennessee and Pennsylvania for 2016.
Our effective tax rate for 2015 was 45.5% compared to the 39.8% effective tax rate in 2014. The increase in the effective tax rate for 2015 compared to 2014 is the result of the increase in the 2015 federal premium tax assessment that is not deductible for federal tax purposes. Also, our 2015 and 2014 effective tax rates were higher than the federal statutory rate primarily due to the impact of permanent tax differences related to meal and entertainment expenses and legal fees. See Note 10 to the consolidated financial statements included in Item 8 - Financial Statements and Supplementary Data for a complete reconciliation of the federal statutory rate to the effective tax rate.
Cash increased $2,467,000, or 26.8%, for the year ended December 31, 2015 to approximately $11,657,000 million at December 31, 2015 from approximately $9,190,000 million at December 31, 2014. This cash increase is primarily the result of cash flow from operations of approximately $2,994,000 and cash provided by financing activities of approximately $817,000 that was offset by cash used in investing activities of approximately $1,344,000. The change in cash for the years ended December 31, 2016, 2015 and 2014 is summarized as follows (in thousands):
In 2016, approximately $3,682,000 was provided by operating activities. We had net income of approximately $1,989,000. Our non-cash deferred compensation activity was approximately $995,000 primarily due to current year vesting activity and an increase in current book value in 2016. Deferred policy acquisition costs increased by approximately $1,096,000 primarily as a result of the increase in the fully-insured business renewed in January 2016. Other payables and accrued expenses increased and resulted in a net increase in cash flow from operating activities of approximately $1,848,000. An increase in accounts receivable offset by an increase in unearned premium revenue resulted in a decrease of cash of approximately $641,000 in the 2016 period. We paid $1,069,000 of federal income taxes in the 2016 period that related to our 2015 extension payment and 2016 estimated tax payments. The remaining effects of changes in operating assets and liabilities that represent fluctuations are not significant and are consistent with 2015.
A summary of our future commitments as of December 31, 2016 is as follows:
Redeemable Common Shares - Pursuant to the Company’s Code of Regulations, holders of Class A, Class B and Class C shares have the right to require the Company to repurchase such holder’s common shares on the terms contained in the Code of Regulations. At December 31, 2016, approximately $25,000 in redeemed common shares are to be paid in 2017.
Federal and State Premium Taxes - We expect federal and state premium payments to generally correspond to earned premium volume.
Our consolidated cash and short term investments were approximately $11.7 million at December 31, 2016. Our consolidated cash and short term investments decreased by approximately $0.4 million from approximately $12.1 million as of December 31, 2015.
This decrease in cash and short term investments from December 31, 2015 to December 31, 2016 is primarily due an increase of cash used by financing activities as a result of the redemption of the redeemable preferred shares of approximately $3.2 million offset by the issuance of Redeemable Common Shares of approximately $2.2 million. During 2016, we invested an additional $1.7 million in securities. The net increase in cash used for investing and financing activities was offset by an increase in cash received from operating activities of approximately $3.7 million.
We have an annually renewable agreement with a commercial bank for a $1,000,000 working capital line of credit. Interest is payable at a variable rate of LIBOR plus 2.50%. The Company did not have any interest expense for the line of credit in 2016, 2015 or 2014. As of December 31, 2016 and 2015, there was no amount outstanding on this line of credit.
We believe our cash, short term investments and working capital lines of credit together are sufficient to meet our short term and long term liquidity needs. We are obligated to make payments related to our contractual obligations such as our building mortgage and our operating leases and other commitments (see contractual obligations and other commitments). We will also be obligated in certain circumstances to repurchase the redeemable shares of our Class A, Class B and Class C shareholders who die and our Class A and Class B shareholders who become permanently disabled, or retire. Our Board considers limitations on the amount of share redemptions each year. While we are not able to estimate future redeemable share redemptions, we repurchased approximately $276,000, $223,000, and $362,000, of Redeemable Common Shares in the years ended December 31, 2016, 2015, and 2014, respectively. We believe our cash balances, available-for-sale investment securities, operating cash flows, and borrowing capacity, taken together, provide adequate resources to fund ongoing operating and regulatory requirements and fund future expansion opportunities and capital expenditures in the foreseeable future.
Our largest subsidiary, Dental Care Plus, operates in states that regulate its payment of dividends and debt service on inter-company loans, as well as other inter-company cash transfers and require minimum levels of equity as well as limit investments to approved securities. The amount of dividends that may be paid by Dental Care Plus, without prior approval by state regulatory authorities, is limited based on statutory income and statutory capital and surplus. Dividends cannot exceed in any one year the lesser of: (i) 10% of net worth (as of the preceding December 31), or (ii) net income for the prior year, and only if net worth exceeds $250,000 and only out of positive retained earnings. There were no dividends declared or paid by Dental Care Plus during 2016, 2015 or 2014. Even if prior approval is not required, prior notification must be provided to state insurance departments before paying a dividend.
We maintained aggregate statutory capital and surplus of approximately $12.2 million as of December 31, 2016 and were in compliance with applicable statutory requirements. Although the minimum required levels of equity are largely based on premium volume, product mix, and the quality of assets held, minimum requirements can vary significantly from state to state. Given our anticipated premium growth in 2017 resulting from the expansion of our networks and membership, capital requirements will increase. We expect to fund these increased requirements through the retention of earnings and future capital raising activities, if any.
The differences between our net income and comprehensive income include the changes in the unrealized gains or losses on marketable securities and changes in the fair value of our interest rate swap agreement. For the years ended December 31, 2016, 2015, and 2014, respectively, such changes increased or (decreased), net of related income tax effects, by the following amounts:
Between December 31, 2015 and December 31, 2016, our claims payable liability estimate increased by approximately $490,200 or 15.1%, primarily due to higher fully-insured dental HMO/IND and fully-insured dental PPO membership at December 31, 2016 compared to December 31, 2015, along with a significant increase in fully-insured dental HMO/IND utilization in December 2016 compared to December 2015.
(a) Reflects estimated potential changes in incurred claims payable liability caused by changes in completion factors for all months prior to December 31, 2016.
Fully-Insured-Membership contracts are written on an annual basis and are subject to cancellation by the employer group upon thirty days written notice. The Company’s unearned premium revenue was approximately $46,955,000 and $32,631,000 at December 31, 2016 and 2015, respectively, and primarily relates to the estimated premium revenue associated with the remaining contract periods. Related amounts recorded in accounts receivable were approximately $45,687,000 and $30,955,000 at December 31, 2016 and 2015, respectively. Premiums are due monthly in advance and are recognized evenly as revenue during the period in which the Company is obligated to provide services to members. Any amounts not received by the end of a reporting period are recorded as accounts receivable by the Company. Any premiums received prior to the beginning of a reporting period are recognized as premiums received in advance and are included in unearned premium revenue in the accompanying consolidated balance sheets. Premiums received in advance were approximately $1,268,000 and $1,676,000 at December 31, 2016 and 2015, respectively. Management has determined that as of December 31, 2016 and 2015, respectively, no premium deficiency reserve is required. The Company’s premium deficiency reserve analysis includes an allocation of investment income.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of DCP Holding Company and its subsidiaries as of December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.
AS OF DECEMBER 31, 2016 AND 2015 AND FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
In 2013, the Company entered into a Preferred Shares Purchase Agreement (the “2013 Stock Purchase Agreement”) with an investor. Pursuant to the 2013 Stock Purchase Agreement, the investor agreed to purchase 1,000 shares of Redeemable Institutional Preferred Shares at a purchase price of $1,000 per share, for an aggregate purchase price of $1,000,000. The annual dividend payable on each share is 5% of the book value at the beginning of the dividend period.
Third-party administration fee revenue (“ASO fees”) is recognized monthly when earned and is normally based on annual contracts with the self-insured groups. ASO fees are charged to self-insured employer groups monthly on a per subscriber per month basis. ASO fees also include the administrative fees the Company earns relative to the dental PPO, dental indemnity and vision products that are underwritten by third-party insurance carriers.
Investment Income- Investment income is comprised of interest income primarily earned from the Company’s certificates of deposit, investment grade corporate bonds, non-investment grade corporate bonds, and money market investments.
Other Income and Realized Gains (Losses) On Investments, Net - Other income is comprised primarily of rental income from the rental of space in the building owned and partially occupied by the Company (See Note 15). Realized gains (losses) on investments is primarily made up of realized investment gains, losses and other than temporary impairments of investment grade and non-investment grade corporate bonds as well as .
Healthcare Services Expense- Healthcare services expense is recognized on a monthly basis. In the case of the fully-insured dental HMO and indemnity (“dental HMO/IND”) and dental PPO segments, healthcare services expense is calculated by taking the paid claims associated with the fully-insured membership and adjusting this amount for the change in the claims payable liability determined using actuarial estimates. For the self-insured dental segment, the healthcare services expense is based solely on the paid claims for the self-insured membership. The Company incurred claim costs related to dental care providers amounting to approximately $80,500,000, $76,684,000, and $71,696,000, for the years ended December 31, 2016, 2015, and 2014, respectively.
The Company had one customer that had a balance of approximately 24% and 28% of the uncollected premium receivable balance at December 31, 2016 and 2015, respectively.
New Accounting Guidance- In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, Revenue from Contracts with Customers. ASU 2014-09 amends the accounting for revenue recognition. Insurance contracts are not included in the scope of this new guidance. The effective date of ASU 2014-09 is for annual reporting periods beginning after December 15, 2017. While we expect revenue related to our self-insured dental business to remain primarily unchanged, we are still evaluating the impact of the new guidance on the customer arrangements for this business. Accordingly, management continues to evaluate the impact of the new standard on the Company’s results of operations, financial condition and cash flows.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 introduces a new lease model that requires the recognition of lease assets and lease liabilities on the balance sheet and the disclosure of key information about leasing arrangements. While this new standard retains most of the principles of the existing lessor model under U.S. GAAP, it aligns many of those principles with ASC 606: Revenue from Contracts with Customers. The effective date of ASU 2016-02 is for interim and annual reporting periods beginning after December 15, 2018. The ASU has not yet been adopted by the Company. Management is currently evaluating the impact on the Company’s consolidated financial position, cash flows and results of operations, but it is not expected to have a significant impact.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 amends previous guidance on the impairment of financial instruments by adding an impairment model that allows an entity to recognize expected credit losses as an allowance rather than impairing as they are incurred. The new guidance is intended to reduce complexity of credit impairment models and result in a more timely recognition of expected credit losses. The effective date of ASU 2016-13 is for interim and annual reporting periods beginning after December 15, 2019. The ASU has not yet been adopted by the Company. Management is currently evaluating the impact on the Company’s consolidated financial position, cash flows and results of operations, but it is not expected to have a significant impact.
The Company owned corporate bonds at December 31, 2016, which consist primarily of investment grade securities. At December 31, 2016, total bond fair value was approximately $8,020,000, which consists of approximately $7,363,000 with a credit rating of BBB- or better. The remaining securities, totaling approximately $657,000, had a credit rating of between BB+ and CCC. The weighted average yield-to-cost of the Company’s corporate bonds was approximately 3.08% at December 31, 2016. The weighted average maturity of the Company’s corporate bonds was 5.10 years at December 31, 2016.
At December 31, 2016 and, 2015, maturity dates for fixed maturities and short-term investments (excluding the money market funds) were:
Investments classified at December 31, 2016 and 2015, as fixed maturities and short-term investments were as follows:
Unrealized losses at December 31, 2016 and 2015 on investments were generally due to higher current market yields relative to the yields of the investments at their amortized cost. Unrealized losses due to credit risk associated with the underlying collateral of the investments, if any, are not material. All investments with unrealized losses are reviewed quarterly to determine if any impairment is other than temporary, requiring a charge to earnings. The Company considers the severity of the loss on a security, duration of loss, duration of the investment, credit rating of the security, as well as payment performance and the Company’s intent or requirement to sell the investment before recovery when determining whether any impairment is other than temporary. The Company had no other-than-temporary impairment charges for the year ended December 31, 2016. The Company had six other-than-temporarily impaired securities which were recorded as a realized loss of approximately $111,000 for the year ended December 31, 2015. The Company had no other-than-temporary impairment charges for the year ended December 31, 2014. The Company had no investments in a material unrealized loss position for greater than one year as of December 31, 2016 and 2015.
The following table provides realized investments gains and losses for the years ended December 31, 2016, 2015 and 2014:
The Company had depreciation expense of approximately $484,000, $449,000, and $318,000 for the years ended December 31, 2016, 2015 and 2014, respectively.
Goodwill and intangible assets were recorded as a result of the acquisition of Adenta, Inc. in 2005 related to goodwill, an acquired contract, memberships and a provider network. Goodwill amounted to approximately $136,000 at December 31, 2016 and 2015. There has not been any impairment on goodwill. Identifiable and amortizable intangible assets amounted to approximately $50,000 net of approximately $190,000 of accumulated amortization at December 31, 2016 and to approximately $66,000 net of approximately $174,000 of accumulated amortization at December 31, 2015. Amortization expense was approximately $15,000 for each of the three years ended December 31, 2016, 2015 and 2014. The provider network intangible asset of approximately $46,000 at December 31, 2016 is being amortized over a period of 20 years, a period during which the Company expects that all of these providers will have retired from the network. Membership intangible assets (net of individual memberships written-off in the year of acquisition) of approximately $4,000 at December 31, 2016 are being amortized over an 11 year useful life in accordance with the Company’s expectation for the membership retention. The remaining weighted-average amortization period for these intangible assets is approximately 8 years. Goodwill and intangible assets are included in other assets in the accompanying consolidated balance sheets at December 31, 2016 and 2015.
The Company has a long-term incentive compensation program for named executive officers pursuant to which an officer may receive an award of up to 45% of such officer’s base salary in the form of cash awards which will vest if established Company performance criteria are achieved over a three year period. The named executive officer has the option to defer all or a portion of the cash award. During 2016, approximately $288,000 in cash awards vested of which approximately $235,000 has been deferred and included in the deferred compensation liability. There were no non-vested awards outstanding at December 31, 2016.
The Plans also provide for the directors and key employees to receive share awards based on the book value of the Redeemable Common Shares. Subsequent to 2010, a director will receive Class B Redeemable Common Shares upon vesting. A key employee may elect to defer receiving such amounts until termination of employment and vesting requirements are met. If a key employee does not elect to defer receiving his or her share awards, the individual will receive Class B Redeemable Common Shares upon vesting. If the share awards are deferred, these deferred amounts will be paid in cash at redemption. An individual director’s award vests 100% at the end of each year if the director meets certain attendance requirements. The key employee awards vest 10%, 20%, 30% and 40% at the end of each respective year in a four-year period following the grant date. There are no performance criteria associated with the vesting of the awards for key employees and the only requirement for vesting is that the individual is an employee of the Company at the end of the vesting year in question. There were approximately 170 and 157 of these non-vested awards outstanding at December 31, 2016 and 2015, respectively. The number of awards expected to vest approximates the total non-vested awards outstanding.
In February 2016 and 2015, the Board declared a per share cash dividend for all Redeemable Common Shares in the amounts of $40.47 and $39.86 per share, respectively. With the dividend, the holders of restricted share units and phantom shares received an equivalent share based dividend that resulted in an increase in the deferred compensation liability of approximately $102,000 and $65,000 in February 2016 and February 2015, respectively. At December 31, 2016 and 2015, the deferred compensation liability was approximately $4,051,000 and $3,287,000, respectively.
In 2014, the Company entered into a sale-leaseback transaction with a leasing company for the sale of certain fixed assets for approximately $516,000. There was no gain or loss on the sale. The Company did not retain the benefits and risk to the property sold and the risk of ownership was transferred to the leasing company. The Company also entered into a capital lease agreement with the leasing company that obligates the Company to pay lease payments totaling approximately $552,000 related to these assets over a four year period. Under this capital lease agreement, the Company is required to have a minimum tangible net worth equal to or greater than $2,500,000 at the end of each fiscal year.
The Company entered into an interest rate swap agreement (cash flow hedge) used to manage the Company’s interest rate risk. The swap agreement effectively changed the interest rate related to the Company’s mortgage note with a commercial bank from a variable rate based on the 30-day LIBOR rate plus 1.95% to a fixed rate of 3.90% for the 10-year period through December 22, 2022. The Company’s risk management policy is to not enter into derivatives for speculative purposes. The notional amount decreases in direct correlation to the principal reduction of the mortgage and was approximately $1,148,000 and $1,198,000 at December 31, 2016 and 2015, respectively. The Company believes that the risk of nonperformance by the counter party to this agreement is not material to the financial statements. At December 31, 2016 and 2015, the fair value of this agreement was a liability of approximately $7,000 and $18,000, respectively. This amount is included in other payables and accruals in the accompanying consolidated balance sheets. The agreement will terminate upon maturity of the mortgage loan payable (Note 7).
The Company has an annually renewable agreement with a commercial bank for a $500,000 working capital line of credit. Interest is payable at a variable rate of LIBOR plus 2.50%. The Company did not have any interest expense or significant fees for the line of credit for each of the three years ended December 31, 2016. As of December 31, 2016 and 2015, there was no amount outstanding on this line of credit. The $500,000 working capital line of credit expires in July 2017. The Company expects to renew this line of credit at its maturity.
The Company has an additional annually renewable working capital line of credit for $1,000,000. Interest is payable at a variable rate of LIBOR plus 2.50%. The Company did not have any interest expense or significant fees for the line of credit for each of the three years ended December 31, 2016. At December 31, 2016 and 2015, there was no amount outstanding on this line of credit. The $1,000,000 working capital line of credit expires in July 2017. The Company expects to renew this line of credit at its maturity.
The components of the provision for income taxes are summarized as follows for the years ended December 31, 2016, 2015 and 2014, respectively:
For the years ended December 31, 2016, 2015, and 2014, the Company did not have any significant uncertain tax positions. The Company is primarily subject to U.S. federal and various U.S. state and local tax authorities. Tax years subsequent to 2012 remain open to examination by the Internal Revenue Service (“IRS”), and tax years subsequent to 2011 remain open to other state and local tax authorities.
Employees of the Company are covered by a defined contribution 401(k) plan sponsored by the Company. Discretionary contributions of a certain percentage of each employee’s contribution, which may not exceed a limit set annually by the Internal Revenue Service, are contributed by the Company each year and vest ratably over a five-year period. Company contributions, including administration fees paid by the Company, amounted to approximately $89,000, $83,000 and $60,000 for the years ended December 31, 2016, 2015 and 2014, respectively.
Leases-The Company leases certain equipment and office space under non-cancelable operating leases. Rent expense under all operating leases was approximately $206,000, $168,000, and $154,000 for the years ended December 31, 2016, 2015 and 2014, respectively.
At December 31, 2016, future approximate minimum annual lease payments under non-cancelable operating leases are as follows:
The results of the fully-insured dental HMO and indemnity, fully-insured dental PPO and self-insured dental segments are measured by gross profit. The Company does not allocate insurance expense, investment and other income, assets or liabilities to these segments because the Company does not use these measures to analyze the segments. These items are assigned to the remainder of the Company’s business, which it identifies as corporate, all other. The Company’s gross profit was approximately $25,094,000, $21,577,000, and $20,240,000 for the years ended December 31, 2016, 2015 and 2014, respectively.
Seven of our Board members are also participating providers and as a group received approximately $201,000, $191,000, and $191,000 in directors’ fees for the years ended December 31, 2016, 2015, and 2014, respectively.
The following table presents for each of the fair value levels, the Company’s assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2016 and 2015 (amounts in thousands):
Participating providers along with Company directors and employees have the option to purchase one or more voting Class B Redeemable Common Shares of the Company, when offered. Non-provider individuals are eligible to purchase Class C voting Redeemable Common Shares, when offered. The maximum percentage of Class C Common Shares outstanding at any time as a proportion of all voting Common Shares is 40%. The book value of a common share was approximately $1,110 and $1,012 at December 31, 2016 and 2015, respectively. In 2016, 2015, and 2014, the Board declared a per share cash dividend for all Class A, Class B and Class C Redeemable Common Shares in the amounts of $40.47, $39.86, and $35.77, respectively.
Redeemable Provider Preferred Shares-2009 Series are entitled to a cumulative cash dividend equal to 5% of the year end book value of the Redeemable Provider Preferred Shares. As of December 31, 2016 and 2015, none of these Provider Preferred Shares were issued or are outstanding.
A summary of our unaudited quarterly results of operations for the years ended December 31, 2016 and 2015 is as follows (amounts in thousands):