To fund the cash required to close the transaction and to provide us with capital to support our organic growth, investment funds operated by Lee Equity Partners, LLC, Perry Capital, LLC, Union Square Partners Management, LLC, the successor to Capital Z Management, LLC, and Welsh, Carson, Anderson & Stowe X, L.P., acquired shares of our preferred stock valued at $20 per equivalent share of our common stock. The preferred stock is convertible into shares of our common stock. The preferred stock does not bear a dividend, and we can require exchange of the preferred stock into common stock after one year. See Note 6-Stockholders' Equity to the consolidated financial statements included elsewhere in this annual report on Form 10K, for additional information regarding the preferred stock. These funds invested a total of approximately $350 million, of which they funded $100 million in the second quarter of 2007, and the remainder effective September 21, 2007. We did not register the preferred stock under the Securities Act of 1933, as amended, and it may not be subsequently offered or sold by investors in the United States absent registration or an applicable exemption from the registration requirement.
Our Senior Managed Care-Medicare Advantage segment generated segment income of $10.5 million during 2006, a decrease of $17.3 million, compared to $27.8 million for 2005, primarily due to expenses of approximately $24.9 million relating to expansion initiatives for our Medicare Advantage plans, offset in part by the continued growth in membership in our Medicare Advantage plans.
Benefits, Claims and Expenses. Medical expenses increased by $88.3 million, or 56%, compared to 2006. Growth in membership added approximately $64.5 million. The enhanced prescription drug benefit increased pharmacy costs by $12.1 million to $22.4 million. In addition, there was an increase in the medical loss ratio for the HMO's to 73.3% for 2006, from 72.3% for 2005, due to an increase in utilization of member benefits. Commissions and general expenses increased by $34.9 million compared to 2005, due primarily to the growth in business, including $10.2 million for marketing costs for new service areas and other development activities, as well as an increase in commissions as more of the Medicare Advantage product is being sold by our agents.
Revenue increased by $25.9 million, or 44%, during 2006 compared to 2005. Affiliated service fee revenue increased by $18.7 million primarily as a result of fees for the administration of our Part D prescription drug plans on behalf of our insurance subsidiaries which commenced on January 1, 2006, offset, in part, by a decline in revenues for administration of affiliated Medicare supplement and life insurance business. Unaffiliated service fee revenue increased by $7.2 million, due primarily to an increase in additional administrative services performed for unaffiliated clients for Part D and Medicare Advantage business, partially offset by a decrease in Medicare supplement business. General expenses for the segment increased by $19.5 million, or 40%, primarily attributed to the administration of the affiliated Part D business and increase in Medicare Advantage service agreements.
(3)The rate on this issue is fixed at 7.7% for the first five years. On March 23, 2012, the rate will convert to a floating rate equal to LIBOR plus 275 basis points. The Trusts have the right to call the Capital Securities at par after five years from the date of issuance (which ranged from December 2002 to March 2007). The proceeds from the sale of the Trust Preferred Securities, together with proceeds from the sale by the Trusts of their common securities to our parent holding company, were invested in thirty-year floating rate Junior Subordinated Debt of our parent holding company. The proceeds have been used, in part to fund acquisitions, to provide capital to our insurance subsidiaries to support growth and to be held for general corporate purposes.
Our parent holding company made capital contributions to American Exchange amounting to $37.2 million during 2005. In September 2005, Pennsylvania Life declared and paid a dividend in the amount of $2.5 million to American Exchange. American Exchange made capital contributions of $16.5 million to American Pioneer, $7.5 million to American Progressive, $5.0 million to Pennsylvania Life, $3.4 million to Constitution and $3.0 million to Union Bankers during the year ended December 31, 2005. Additionally, during 2005, Pennsylvania Life made a capital contribution of $13.0 million to Pyramid Life.
do not anticipate any material impact from the future adoption of the pending accounting pronouncements discussed in that note.