Total revenues and net income amounts have been restated to conform with the new accounting standard for realized gains and losses as discussed in Note 12.
Service fees earned in 1995 increased 100% from 1994 due to the strong volume of policies administered for the State of Florida; FRPCJUA AND FAJUA as well as growth in the Registrant's premium financing subsidiary. Investment income increased 34% as a result of the continued conversion of funds available for investment from tax advantaged vehicles to taxable securities with their inherent higher yields.
Loss and loss adjustment expense as a percentage of earned premium was 77.6% in 1993, 77.0% in 1994 and 81.6% in 1995. The Company believes that its current reserves are adequate and proper. The Company has continued corrective action, specifically in the form of substantial rate increases in the fourth quarter of 1995, to reduce the ratio of loss and loss adjustment expense to earned premium. However, additional reserve strengthening may be required in the future. The Company continues to have comprehensive independent actuarial reviews of its reserves. At year end 1995 the Company's loss reserves are within a range which the Company's independent actuary deems appropriate but is approximately 7.1% below the midpoint of that range.
Salaries and wages and general and administrative expenses increased 41% as a result of the increased costs associated with the growth in the fee for service segment.
Insurance premiums earned decreased by 17% as a result of more selective underwriting prerequisites in effect throughout 1994 and periodic review and cancellation of unprofitable producers. Increased reinsurance cessions effective in 1994 also contributed to the decrease in insurance premiums while providing relief in losses incurred and policy acquisition costs. Material rate modifications introduced in late 1993 and 1994 to the company's core automobile product have resulted in lower premiums written and an indication of prospective improvement in profitability as measured by actuarial models of the expected loss costs. Continued increasing catastrophe reinsurance costs and regulatory assessments on the personal property lines have also contributed to reductions in both premiums earned and profitability in this particular segment.
Investment income decreased by 11% as a direct result of lower interest rates on funds available for investment during the year. Recent market changes with prevailing interest rate increases will provide a more stabilized yield for 1995 as the Company is now converting much of its positive cash flow to taxable securities which yield a higher after-tax return.
Since its introduction in 1993, the fee for service subsidiary has shown a momentum of growing profitability and revenues have increased from $182,297 to $1,329,269 primarily for services provided to the FRPCJUA. With the addition of the FAJUA business as well as recent approval to participate in the National Flood Insurance Program, it is expected that this segment will continue to contribute considerably to both revenues and profitability during 1995.
Loss and loss adjustment expenses decreased by 18% as a result of increased reinsurance recoveries resulting from revised cessions in effect during 1994. Loss ratios as measured against insurance premiums earned have stabilized as a result of the underwriting changes and rate increases effected during the year which have offset any reserve strengthening indicated by actuarial loss development trends and patterns. Policy acquisition costs decreased as a result of additional ceding commissions received from the revised reinsurance cessions.
Loss and loss adjustment expense as a percentage of earned premium was 69.3% in 1992, 77.6% in 1993 and 77.0% in 1994. The Company believes that its current reserves are adequate and proper, and that several steps have been taken in the last fifteen months which should reduce the ratio of loss and loss adjustment expense to earned premium. However, additional reserve strengthening may be required in the future. The Company continues to have comprehensive independent actuarial review of its reserves. At year end 1994 the Company's loss reserves are in a range which the independent actuary deems appropriate but approximately 7.5% below the midpoint of that range.