Monthly license charges for 1997 increased $5.9 million compared to 1996 with the following increases by business segment: domestic life insurance and financial solutions up 42.4% ($3.8 million); and international up
Professional and outsourcing services revenues for 1997 increased $71.4 million compared to 1996, with the following increases by business segment: domestic property and casualty up 19.6% ($30.6 million); domestic life insurance and financial solutions up 61.4% ($26.6 million); and international up 12.9% ($14.2 million). The increases are principally due to increases in implementation services and in the processing volumes of services provided to new and existing customers. The increases were partially offset by the elimination of approximately $11.4 million in revenue that generated no profit related to the Florida Business Process Outsourcing ("BPO") unit.
Employee compensation and benefits for 1997 increased 28.6% compared to 1996 principally as a result of the increased salaries and related costs associated with the growth in staffing in all business units. For this period, compensation and benefits increased 31.2% ($14.9 million) internationally, while domestic increased 27.6% ($36.8 million).
new and existing customers. For this period, compensation and benefits increased 68.5% ($19.2 million) internationally, while domestic increased 19.0% ($21.3 million).
Although depreciation and amortization of property, equipment and capitalized software costs for 1996 decreased slightly compared to 1995, amortization of internally developed software costs increased $3.7 million (18.8%), principally due to amortization associated with the release of the latest version of CyberLife client/server life insurance software in November 1996 and the release of the Company's property and casualty insurance S3+ client/server software systems in October 1996. Depreciation expense decreased by $4.7 million as a result of the 1995 restructuring of the Company's US data center and subsequent lease of computer equipment.
During the first half of 1993, the Company experienced a significant decrease in revenues from its health services business unit. The Company evaluated various options and during the second quarter of 1995 committed to sell the health services business and cease to market any health insurance related software systems. In June 1995, the Company completed the sale of its health services unit for a total consideration of $9.3 million in cash. After selling expenses and other accrued costs, the Company recorded a pre-tax gain of $8.1 million (see Note 10 of Notes to Consolidated Financial Statements).
We have audited the accompanying consolidated balance sheets of Policy Management Systems Corporation as of December 31, 1997 and 1996 and the related statements of operations, changes in stockholders' equity and cash flows for each of the three years in the period ended December 31, 1997. 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.
Realized gains and losses are included in net income and the cost of securities sold is based on the specific identification method. There were no sales of marketable securities during the years ended December 31, 1997 and 1996.
Property and equipment, including support software acquired for internal use, is stated at cost less accumulated depreciation and amortization. Property and equipment is depreciated on a straight-line basis over its estimated useful life.
On April 7, 1995, the Company finalized certain terms of a ten-year agreement with an insurance holding company and its subsidiaries, initially entered into in November 1994. The Company is to provide certain data processing and other professional services as required. The minimum contractual processing revenues are expected to be in excess of $60 million over the term of the agreement. The Company incurred costs of $10 million related to this agreement in the second quarter of 1995 ($5 million in the fourth quarter of 1994), which have been deferred as contract acquisition costs and are being expensed on a straight-line basis over the term of the agreement. At December 31, 1997, the net unamortized amounts related to this continuing agreement, included in other intangible assets, were $10.8 million.
In March 1994, Security Life of Denver Insurance Company ("SLD") brought suit against the Company in the United States District Court for the District of Colorado alleging breach of a life insurance joint development contract, unfair trade practices, and fraud. SLD sought direct, indirect, consequential, and punitive damages in excess of $80 million. In February 1997, following a jury trial, the Court and jury entered judgment in favor of the Company against SLD on the claims of fraud and unfair trade practices. A verdict and judgment was returned against the Company for breach of contract and damages of $3.5 million, together with pre-judgment interest. In addition, the jury found that SLD was using the Company's trade secrets without permission. As a result of post trial motions, the judgment was amended to delete the award of pre-judgment interest and SLD was ordered to return the Company's systems. Both the Company and SLD have appealed to the United States Court of Appeals. Changes in the status of this proceeding could result in a change in the Company's estimate of anticipated liability for the costs associated with these matters.
During 1995, the Company continued to examine its options to improve the overall performance of the risk information services business. The risk information services business continued to reflect declining sales and earnings, reporting revenues of $22.7 million for the year ended December 31, 1995 and an operating loss of $4.2 million. As a result of its continued detailed business assessment, the Company determined that there were no further services or investment alternatives that could bring these operations to profitability and that the cash losses related to the risk information services business would continue into the future. As a result, the Company decided to restructure its property and casualty information services business and cease providing certain data collection services, including property inspections, commercial audits and pre-employment checks. The Company sold the pre-employment business and completely ceased and abandoned operations in property inspections and commercial audits. As a result, the Company recorded, at December 31, 1995, restructuring charges of $3.7 million for disposal and severance charges related to exiting these operations. This amount is included in discontinued property and casualty information services segment results.