Additionally, the increase in net premiums written in 1997 includes approximately $26,000,000 of growth generated by a national account program started by EBI in the first quarter of 1997. The increases in net premiums written are mitigated in part by the effects of legislative reforms in certain states that have led to an increasingly competitive workers compensation marketplace with lower premium rates as well as a reduction in losses. As a result of the increasingly competitive workers compensation marketplace, the 1997 premium rates have averaged 8% lower than the 1996 levels.
The year-to-year changes in net investment income also reflect increases from limited partnership investment equity earnings of $1,120,000, or 7.0%, from 1996 to 1997 and $6,889,000, or 76.0%, from 1995 to 1996. Limited partnership earnings increased in 1996 due to higher earnings from the largest limited partnership investment and the inclusion of Guaranty National's partnership earnings. The increase in limited partnership earnings for 1997 is primarily attributable to favorable performance for a majority of the limited partnership investments partly offset by lower 1997 earnings as compared to 1996 from the largest investment. Earnings from limited partnership investments can vary considerably from year-to-year. The Company's long-term experience with limited partnership investments has been quite favorable; however, they represent only 3.6% and 3.8% of total investments at December 31, 1997 and 1996, respectively. Net investment income has also increased in both years by income generated from the deployment of operating cash flow. The carrying value of the Company's investment portfolio amounted to $2,543,733,000 at December 31, 1997 and $2,309,767,000 at December 31, 1996.
Orion's insurance subsidiaries maintain liquidity in their investment portfolios substantially in excess of that required to pay claims and expenses. The insurance subsidiaries held cash and short-term investments of $160,444,000 and $293,477,000 at December 31, 1997 and 1996, respectively. These balances consider consolidated cash and short-term investment balances, which includes balances held by Orion. The consolidated policyholders' surplus of Orion's insurance subsidiaries is $789,036,000 and $670,572,000 at
Investments - Fixed maturity investments include bonds, preferred stocks with mandatory redemption features, and certificates of deposit that mature more than one year after the balance sheet date. Fixed maturity investments that the Company has both the positive intent and the ability to hold to maturity are recorded at amortized cost. Fixed maturity investments which may be sold in response to, among other things, changes in interest rates, prepayment risk, income tax strategies or liquidity needs, are classified as available-for-sale and are carried at market value. Common stocks and non- redeemable preferred stocks are also carried at market value. Fluctuations in
Reclassifications - The 1996 and 1995 consolidated financial statements have been reclassified to conform to the classifications used in 1997.
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No. 131,"Disclosures About Segments of an Enterprise and Related Information", which changes the way public companies report information about segments. This statement is effective for financial statements for periods beginning after December 15, 1997. Financial statement disclosures for prior periods are required to be restated. The Company is in the process of evaluating the disclosure requirements. The adoption of this standard will have no impact on the Company's consolidated results of operations, financial position or cash flows.