Premium writings ceded to reinsurers decreased $4.7 million (28.7%) during 1996 to $11.8 million. The percentage of premiums ceded to direct premiums written decreased to 18.6% for 1996 from 24.5% for 1995 due primarily to the termination of the quota share treaty on the Company's "work accident" program at the beginning of 1996. Ceding rates on the Company's primary treaties for 1996 were consistent with the prior year.
After giving effect to changes in unearned premiums, the factors mentioned above decreased net premiums earned by $2.4 million (3.9%) to $58.8 million for 1995. Net premiums earned from all trucking liability insurance products, including small fleet trucking, decreased by $3.6 million (8.2%). Premiums earned from reinsurance assumed decreased by $1.4 million primarily as the result of a $1.7 million decrease in premium earned from mandatory state pools and underwriting associations. Premiums earned from worker's compensation products for truckers increased $1.0 million due primarily to the increase in premiums from the runoff of older retrospectively rated policies. In addition, premiums earned from Sagamore's new non-standard automobile program totaled $1.7 million during 1995.
Other operating expenses for 1995, before credits for allowances from reinsurers, increased $2.2 million (13.1%) to $19.2 million. Salary related expenses increased $1.9 million (21.6%) due primarily to incentive bonus and equity appreciation rights accruals which are tied to the Company's operating results and book value. Commission expense increased $.5 million (24.6%) as the result of increases in premiums from Sagamore's personal automobile and small fleet trucking products. The ratio of net operating expenses of the insurance subsidiaries to net premiums earned was 28.0% during 1995 compared to 27.6% for 1994. Including the agency operations, the ratio of other operating expenses to total revenue, adjusted for net realized gains, was 21.9% for 1995 compared with 19.8% for 1994.
(i) the Company's plans, strategies, objectives, expectations and intentions are subject to change at any time at the discretion of the Company; (ii) the Company's business is highly competitive and the entrance of new competitors into or the expansion of the operations by existing competitors in the Company's markets and other changes in the market for insurance products could adversely affect the Company's plans and results of operations; and (iii) other risks and uncertainties indicated from time to time in the Company's filings with the Securities and Exchange Commission.
Net income of the insurance subsidiaries, as determined in accordance with statutory accounting practices, was $20,249, $22,849 and $18,377 for 1996, 1995 and 1994, respectively. Consolidated statutory shareholder's equity for these subsidiaries was $222,720 and $188,592 at December 31, 1996 and 1995, respectively.
The brokerage/agency segment received approximately 98% of its commission income from the insurance underwriting segment in each of the years 1996, 1995 and 1994. Intersegment commission rates are generally comparable to the average commission rates paid by unaffiliated insurance companies. The insurance underwriting segment received approximately 74% of its direct premium income by providing insurance coverage to customers of the brokerage/agency segment (86% and 98%, respectively, in 1995 and 1994). Premiums charged by the insurance underwriting segment to customers of the brokerage/agency segment are comparable to premiums charged to other insureds for similar insurance coverages. Intersegment reimbursements for certain expenses (office space, equipment costs, salaries, etc.) are based upon actual usage and other predetermined allocation methods. Underwriting expenses of the insurance underwriting segment include approximately $8,303 in 1996, $7,418 in 1995 and $6,857 in 1994 representing allocations of general operating expenses from the brokerage/agency segment, which records these reimbursements as reductions in its operating expenses.