For its assumed reinsurance business, the Company has historically made estimates for its reinsurance reports received subsequent to a period end on a combined underwriting and accident year basis for both statutory and GAAP purposes. During a routine examination by the Alabama Department of Insurance, the Company agreed to revise the accounting for its reinsurance business for statutory purposes. Effective with its year end 1997 statutory filings, Vesta Fire has revised its statutory accounting for its assumed reinsurance business to reflect only accident/calendar year information. The adjustments essentially reversed, in the form of a one-time charge, the cumulative effect of the accounting practice consistently applied over prior years. This statutory revision did not have a material effect on the Company's GAAP financial position or result of operations for 1997.
Gross premiums written for reinsurance decreased by $83.0 million, or 13.5%, to $532.4 million for the year ended December 31, 1997, from $615.4 million for the year ended December 31, 1996. In 1997, the Company's pro rata reinsurance writings of private passenger automobile decreased significantly over 1996. The acquisition of Vesta County Mutual resulted in the shift of $47 million of private passenger automobile writings which had been recorded on the reinsurance line to primary insurance. Additionally, the reinsurance market experienced increased market capacity accompanied by increased price- competition in the private passenger automobile line of business. As a result of these factors, the Company elected to terminate certain accounts. Net premiums written for reinsurance decreased $97.3 million, or 21.8%, to $348.8 million for the year ended December 31, 1997, from $446.1 million for the year ended December 31, 1996. Net premiums earned for reinsurance decreased $82.7 million, or 19.9% to $332.3 million for the year ended December 31, 1997, from $415.0 million for the year ended December 31, 1996. The decreases in net premiums written and net premiums earned are attributable to the decrease in gross premiums written for the year ended December 31, 1997, as well as, the pro-rata reinsurance facility being in place for 12 months in 1997 versus six months in 1996.
- -------- (1) Vesta acquired The Hawaiian Insurance & Guaranty Company, Limited on June 19, 1995 and the operating subsidiaries of Anthem Casualty Insurance Group, Inc. on June 30, 1997.
A summary of fixed maturities and equity securities by amortized cost and estimated fair value at December 31, 1995 and 1996 is as follows:
promissory notes. In 1994, an additional 60,000 shares of Common Stock at $18.92 per share were issued to an officer of the Company under a restricted stock agreement in exchange for a promissory note. The common stock is being held by the Company as security for repayment of the notes. A portion of the shares will be released to the officers annually as they repay the promissory notes. The Company intends to pay cash bonuses each year in amounts sufficient to reduce the notes by the amount of the purchase price for the shares which are earned in that year. During 1995 the company acquired 31,192 shares of its common stock with respect to previously granted awards of restricted stock in exchange for release of indebtedness of $320 thousand. The balance of the notes at December 31, 1995 was $3,162 thousand. During 1996 the Company acquired 19,564 shares of its common stock with respect to previously granted awards of restricted stock in exchange for release of indebtedness of $169 thousand. The balance of the notes at December 31, 1996 was $3,207 thousand. During 1997 the Company did not acquire any shares of its common stock with respect to previously granted awards of restricted stock. The balance of the notes at December 31, 1997 was $3,891 thousand. The promissory notes and the unearned compensation are shown as deductions from stockholders equity.
The following is a summary of quarterly financial data, in thousands except per share data: