MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL - ------ CONDITION AND RESULTS OF OPERATIONS --------------------------------------------------------
Arista's gross premiums earned for the year 1995 were approximately $26.1 million as compared with approximately $26.2 million for 1994. This decrease reflects a continuation of the net loss of covered lives and policyholders.
Other income, including income from TPA operations, was approximately $333,000 as compared to approximately $279,000 for 1994. The principal reason for this increase was the continuing income derived from Arista's agreement to act as a TPA for another insurer's statutory disability benefits book of business.
The Consolidated general and administrative expenses increased from approximately $4.8 million for the year 1994 to $5.0 million for the year 1995. This change was mainly attributable to the amortization of the balance of the intangible assets of American at the time of sale that had been incurred in connection with the acquisition of American and to increases in salaries and employee benefits, rent and reinsurance costs, offset by a reduction in professional fees.
Arista's gross premiums earned for the year 1994 were approximately $26.2 million. This included a fourth quarter reduction due to adjustments in the calculation of the estimated quarterly premiums receivable. Because premiums on New York State statutory disability benefits insurance are principally collected quarterly in arrears, there is lag time between the fiscal period and the actual receipt of premiums. Therefore, Arista must estimate and then accrue the amount of premiums earned during any fiscal period. During the first quarter of 1995, it became increasingly apparent that Arista's estimate of premiums receivable, especially associated with the acquisitions completed in 1994 including the reinsurance assumed transaction entered into during the fourth quarter of 1994, were initially overstated. Thus, an adjustment was required to properly reflect actual premiums receivable.
Arista's gross claims incurred for 1994 were $17.8 million or 67.8% of gross premiums earned. For the year 1993, gross claims incurred were $15.9 million or 65.6% of gross premiums earned. The primary reason for the increase in the loss ratio was the non-recurring adjustment in estimated premiums receivable previously mentioned.
Other income, including income from TPA operations was approximately $279,000 for 1994 as compared with approximately $130,000 for 1993. The principal reason for the increase was attributable to an $88,000 additional federal income tax net refund for the years 1987, 1990, 1991 and 1992, which was in excess of the amount originally reserved, as well as approximately a $58,000 1993 federal income tax overpayment .
Arista's gross commissions incurred for each of 1994 and 1993 were 16.0% of gross premiums earned. Arista's gross commissions for 1994 and 1993 were approximately $4.2 million and $3.9 million, respectively.
Consolidated general and administrative expenses increased from approximately $3.7 million in 1993 to approximately $4.8 million in 1994. The reasons for this change were a substantial increase in legal fees above 1993 which were associated with proposed transactions involving the sale of the Registrant as well as other increases in expenses for salaries, employee benefits, allocated loss adjustment expenses, and other general and administrative expenses, including additional acquisition costs.