Revenues:	 	Premiums	 	$85.3	 	$90.0 		$96.7	 	$101.5		$116.9 	Net investment income 12.8	 	12.9	 	13.8	 	13.2 		14.3 	Net realized investment gains (losses)	 	1.0 		1.0	 	(0.2)	 	1.3 		0.9 	Other income(1) 0.2	 	0.5	 	0.7	 	0.7	 	0.9 			Total revenues 		99.3 		104.4 		111.0	 	116.7		 133.0
Income before federal income taxes 		1.0	 	8.0	 	10.7	 	4.9	 	14.6 	Federal income tax expense 		0.4	 	1.8 		3.1 		1.4 		5.0 	Net income 		$0.6		 $6.2	 	$7.6	 	$3.5	 	$9.6
Total investments(2)		 $150.2 		$160.8 		$177.7 		$170.6		$207.9 	Total assets 		204.4	 	221.5 		244.1 		243.1 		278.3 	Long-term debt 		2.8	 	2.8	 	2.8	 	2.7	 	2.7 	Total liabilities 		163.8	 	175.0 		183.6 		190.1	 	204.1 	Total equity(2)	 	40.6 		46.5 		60.5 		53.0	 	74.2
The following analysis of the consolidated results of operations and financial condition of the Company should be read in conjunction with "Selected Consolidated Financial Data," the Consolidated Financial Statements and the accompanying notes to the Consolidated Financial Statements included elsewhere herein.
All of the Company's insurance policies are currently written on a participating basis although for several years the Company has paid dividends only on certain of its workers compensation policies. Subsequent to the Effective Date, only these workers compensation policies will continue to be written on a participating basis.
For the years ended December 31, 1993, 1994, and 1995, 38.8%, 38.5% and 39.1%, respectively, of the Company's direct written premiums were derived from policies written in New York and 19.0%, 19.6%, and 20.8%, respectively, were derived from policies written in New Jersey. For these periods, no other state accounted for more than 10.0% of the company's direct written premiums. As a result of the concentration of the Company's business in the states of New York and New Jersey and more generally in the Northeastern United States, the Company's results of operations may be significantly affected by weather conditions, catastrophic events and regulatory developments in these two states and in the Northeastern United States.
Premiums. Premium revenue increased $15.5 million, or 15.2%, during the year ended December 31, 1995 to $116.9 million from $101.5 million in 1994. The increase in premium revenue in 1995 resulted from an increase of $14.3 million in earned premiums on additional business directly written by the Company (principally in New York and New Jersey) and an increase of $2.3 million in earned premiums retained by the Company and not ceded to reinsurers, which were partially offset by a decrease of $1.1 million in earned premiums assumed. The $14.3 million increase in earned premiums on additional business directly written by the Company was primarily attributable to an increase of $10.8 million, or 11.1%, in earned premiums from the Company's primary products (personal and commercial automobile products other than assigned risk business, the Special Farm Package, businessowners products, homeowners products, and the Special Home Package) and to an increase of $1.8 million in earned premiums on assigned risk business. The number of policies in force related to the Company's primary products increased by 8.4% to approximately 105,000 in 1995 from approximately 97,000 in 1994 and the average premium earned for each such policy increased by 2.5% in 1995. The $2.3 million increase in earned premiums retained by the Company was primarily the result of a change in the terms of certain of the Company's reinsurance agreements pursuant to which both the amount of earned premiums ceded by the Company and the ceding commissions received by the Company were reduced. The $1.1 million decrease in earned premiums assumed was attributable to a reduction in premiums assumed from mandatory pools as a result of the depopulation of such pools.
Net Investment Income. Net investment income increased $1.1 million, or 8.6%, to $14.3 million for the year ended December 31, 1995 from $13.2 million in 1994. The increase in net investment income was primarily the result of an increase in cash and invested assets (at amortized cost) of approximately $17.2 million, or 9.6%. The return realized on the Company's cash and invested assets was 7.6% in 1995 and 1994.
Net Realized Investment Gains. Net realized investment gains were $0.9 million for the year ended December 31, 1995 compared to $1.3 million in 1994.
Underwriting Expenses. Underwriting expenses increased $6.1 million, or 21%, to $34.9 million for the year ended December 31, 1995 from $28.8 million in 1994. For the year ended December 31, 1995, underwriting expenses were 29.8% of premium revenue compared to 28.4% in 1994. A reduction in 1994 of $2.2 million in amounts accrued for the Company's share of the deficit of the New Jersey Market Transition Facility had a favorable impact on the Company's underwriting expense ratio in that year. Without taking into account the effect of this reduction, underwriting expenses in 1994 would have been 30.5% of premium revenue.
Net Income. Net income increased $6.1 million to $9.6 million in 1995 from $3.5 million in 1994 primarily as a result of the foregoing factors.
Net Realized Investment Gains. Net realized investment gains (losses) were $1.3 million for the year ended December 31, 1994 compared to ($0.2 million) in 1993. The net realized investment losses in 1993 were primarily the result of an approximately $1.9 million realized loss recognized by the Company in 1993 on a non-investment grade fixed maturity security which was deemed to be permanently impaired, offset in part by realized investment gains on the sale of other investments.
Federal Income Tax Expense. Federal income tax expense decreased $1.7 million to $1.4 million in 1994 from $3.1 million in 1993 due primarily to the decline in income before federal income tax expense. Federal income tax expense as a percentage of income before federal income tax expense was relatively unchanged in 1994 from 1993 at approximately 29%.
The Company has in place an unsecured bank line of credit with Key Bank of New York under which it may borrow up to $2.0 million. At December 31, 1995, no amounts were outstanding on this line of credit, which has an annual interest rate equal to the bank's prime rate. In addition, at December 31, 1995, the Company had $2.7 million principal amount of Surplus Notes outstanding. The Surplus Notes bear interest at the rate of eight percent per annum and have no maturity date. The principal and interest on the Surplus Notes (and any other funds borrowed by the Company) are repayable only with the approval of the Insurance Department of the State of New York. Pursuant to the Plan, the holders of the Surplus Notes will generally have the option to exchange the Surplus Notes for cash or shares of Common Stock in Farm Family Holdings, Inc., or they may elect to continue to hold such Surplus Notes.
Net cash provided by operating activities was $16.4 million, $8.6 million, and $5.6 million during the years ended December 31, 1995, 1994, and 1993, respectively. The increase in net cash provided by operating activities in 1995 was primarily attributable to the increase in net income and a decrease in payments for losses and loss settlement expenses during 1995 compared to 1994. The increase in net cash provided by operating activities in 1994 was primarily attributable to a reduction in reinsurance receivables during 1994 compared to 1993.
The response to Item 8 is submitted as a separate section of this report.