Earned premiums in 1997 were $15,045,844 compared to $19,899,936 in 1996. Net written premiums were $12,680,197 in 1997 compared to $18,041,488 in 1996. The decrease in earned premiums in 1997 reflects the 30% decrease in 1997 net written premiums over 1996 net written premiums primarily due to a continuing soft insurance market place and the Company's strategy to avoid current unfavorable pricing in the Company's casualty operations. Variances in net written premiums have historically occurred due to the fluctuations in size, number and timing of bonds and policies bound by the Company. The Company will maintain its existing pricing strategy and high level of service.
Consolidated Statements of Earnings Years Ended December 31, 1997, 1996 and 1995
Consolidated Statements of Stockholders' Equity December 31, 1997, 1996 and 1995
Policy acquisition costs, representing commissions and certain underwriting costs, are deferred and amortized on a straight-line basis over the policy term. During the years ended December 31, 1997, 1996 and 1995, deferrable costs capitalized were $1,975,523, $3,063,875 and $3,736,895, respectively. The amortization of deferred policy acquisition costs charged to operations for the years ended December 31, 1997, 1996 and 1995 was $2,802,993, $3,617,308 and $3,939,008, respectively.
In the normal course of business, the Company assumes and cedes reinsurance with other companies. Reinsurance ceded primarily represents excess of loss reinsurance with companies with "A" ratings from the insurance rating organization, A.M. Best Company, Inc. Such reinsurance is applicable on a per policy basis generally to those policies with per occurrence limits in excess of $2 million up to $5 million for liability and $10 million of $15.5 million of individual surety bond limit. Effective April 1, 1995, the Company secured additional liability treaty excess of loss reinsurance which provides limits on a per policy basis of $5,000,000 per occurrence or claim made and in the aggregate excess of $5,000,000 per occurrence or claim made and in the aggregate. Reinsurance ceded also includes a facultative reinsurance treaty which is applicable to excess policies written over a primary policy issued by the Company for specific projects. Reinsurance is ceded to limit losses from large exposures and to permit recovery of a portion of direct losses; however, such a transfer does not relieve the originating insurer of its liability. The Company participates in assumed quota share reinsurance arrangements covering marine and property catastrophe risks with one of its excess of loss reinsurers.
There were no reinsurance recoveries on ceded paid losses and loss adjustment expenses for the year ended December 31, 1997. Reinsurance recoveries on ceded paid losses and loss adjustment expenses totaled approximately $98,000 and $30,000 for the years ended December 31, 1996 and 1995, respectively. Ceded incurred losses and loss adjustment expenses totaled $364,015 and $421,408 for the years ended December 31, 1997 and 1996, respectively.
In June 1997, FASB issued SFAS No. 131, "Financial Reporting for Segments of a Business Enterprise". SFAS No. 131 was developed jointly by the FASB and the Accounting Standards Board of the Canadian Institute of Charted Accountants in response to request from financial statement users for additional and better segment information. This statement is effective for periods beginning after December 15, 1997. In the initial year of application, comparative information for earlier years is to be restated, unless it is impracticable to do so. The Company does not anticipate that SFAS No. 131 will significantly impact the composition of its current operating segments which are consistent with the management approach. The Company anticipates that the current insurance segment will be further disclosed as two segments as a result of SFAS No. 131.