The Company cedes a significant portion of its private passenger automobile premiums to the MCCA. Ceded premiums earned to MCCA in 1996, 1995 and 1994 were $50.5 million, $66.8 million and $80.0 million, respectively. Losses and LAE ceded to MCCA in 1996, 1995 and 1994 were ($52.9) million, $62.9 million and $24.2 million, respectively. In 1996, the MCCA's favorable development on prior year reserves exceeded the losses and LAE incurred during the current year. The aggregate losses and LAE ceded to the MCCA have no impact on the Company's consolidated statements of income.
Net cash used for financing activities was $18.2 million, $113.1 million and $11.2 million in 1996, 1995, and 1994, respectively. Net cash used in 1996 reflects the purchase of $11.1 million of treasury stock and dividends paid to shareholders of $7.1 million. The relatively higher level of net cash used in 1995 reflects the redemption of 1.0 million shares of Series A Preferred Stock from The Hanover Insurance Company for $100.0 million.
In our opinion, the consolidated financial statements and financial statement schedules listed in the accompanying index present fairly, in all material respects, the financial position of Citizens Corporation and its subsidiaries at December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above.
/s/ John F. O'Brien /s/ Edward J. Parry, III _____________________________________ _____________________________________ JOHN F. O'BRIEN EDWARD J. PARRY, III PRESIDENT AND CHIEF VICE PRESIDENT, CHIEF FINANCIAL EXECUTIVE OFFICER OFFICER, TREASURER AND PRINCIPAL ACCOUNTING OFFICER
The Company accounts for its investments, all of which are classified as available-for-sale, in accordance with the provisions of SFAS No. 115. The amortized cost and fair value of available-for-sale investments are as follows:
The Company provides retirement benefits to substantially all of its employees, under a defined benefit pension plan (the "Plan"). Through December 31, 1994, retirement benefits were based primarily on employees' years of service and compensation during the highest five consecutive plan years of employment. Benefits under this defined benefit formula were frozen for most employees effective December 31, 1994. In its place, the Company adopted a defined benefit cash balance formula, under which the Company annually provides an allocation to each eligible employee as a percentage of that employee's salary, similar to a defined contribution plan arrangement. The 1996 and 1995 allocations were based on 7.0% of each employee's salary. The Company's policy for the Plan is to fund at least the minimum amount required by the Employee Retirement Income Security Act of 1974.
Effective January 1, 1994, the Company adopted the provisions of Statement of Financial Accounting Standards No. 112 (SFAS No. 112), "Employers' Accounting for Postemployment Benefits," which requires employers to recognize the costs and obligations of severance, disability, and related life insurance and health care benefits to be paid to inactive or former employees after employment but before retirement. Prior to adoption, the Company had recognized the cost of these benefits on an accrual or paid basis, depending on the plan. Implementation of SFAS No. 112 resulted in a transition obligation of $0.6 million, net of deferred federal income taxes, reported as a cumulative effect of a change in accounting in the consolidated statement of income. The 1996, 1995 and 1994 expenses, after recognition of the cumulative effect, are not significant.
Note: Due to the use of weighted average shares outstanding when calculating earnings per common share, the sum of the quarterly per common share data may not equal the per common share data for the year.