Professional Services & ITO revenues for 1999 decreased $6.6 million compared to 1998, with the following increases (decreases) by business segment: property and casualty down 11% ($20.8 million) primarily due to the winding down of Year 2000 preparations and a decrease in initial license activity in 1998; life and financial solutions up 20% ($18.9 million) primarily due to the acquisition of TLG in the third quarter of 1998 ($14.3million) and higher 1998 initial license activity; and international down 3% ($4.7 million) on weak 1998 initial licensing activity.
Professional Services & ITO revenues for 1998 increased $88.8 million compared to 1997, with the following increases by business segment: property and casualty up 30% ($42.2 million); life and financial solutions up 51% ($32.3 million); and international up 11% ($14.3 million). The increases are principally due to increases in implementation services and in the processing volumes of services provided to new and existing customers.
Depreciation and amortization of property, equipment and capitalized software costs for 1999 increased 144% compared to 1998 principally due to the write-off or write-down of certain software described below under "Special Charges and Accounting Changes." Excluding these charges, depreciation and amortization decreased 1% due primarily to the benefit of the special charges largely offset by increased software amortization related to product releases during the last twelve months and increased depreciation of property and equipment primarily related to new headquarters facilities in Blythewood and the United Kingdom. These increases were partially offset by lower software amortization as a result of software write-offs and write-downs. As a percentage of revenue, depreciation and amortization expense, excluding special charges, remained the same at 10% of revenues in both 1999 and 1998.
There were no discontinued operations for 1999. Loss from discontinued operations increased in 1998 compared to 1997, principally due to (i) an additional loss of $1.0 million, net of tax, recognized during 1998 related to the write down of capitalized software and receivables of the property and casualty information services segment; (ii) partial year operating results in 1998 compared to full year operating results in 1997 for the life information services segment; and (iii) no operating results in 1998 compared to eight months operating results in 1997 for the property and casualty information services segment.
Realized gains and losses are included in net income and the cost of securities sold is based on the specific identification method. Marketable securities were sold for cash proceeds of $2.1 and $3.3 million during 1999 and 1998, respectively. There were no sales of marketable securities during 1997.
In accordance with Statement of Financial Accounting Standards No. 86, "Accounting for the Costs of Computer Software to Be Sold, Leased or Otherwise Marketed," ("SFAS 86") certain costs incurred in the internal development of computer software and costs of purchased computer software, consisting primarily of software acquired through business acquisitions, are capitalized. Such capitalized costs are amortized over the "estimated useful life," generally 3 to 5 years, at the greater of the amount computed using (i) the ratio that current gross revenues for a product bear to the total of current and anticipated future gross revenues of that product or (ii) the straight-line method. Costs which are capitalized as part of internally developed software primarily include direct and indirect costs associated with payroll, computer time and allocable depreciation and other direct allocable costs, among others. Product enhancements are improvements to existing products that are intended to extend the life or significantly improve the marketability of the original product. Costs incurred for product enhancements are charged to expense as research and development until technological feasibility of the enhancement has been established. If the original product is no longer to be marketed, the net book value of the original product is allocated to the cost of the enhancement. The cost of the enhanced product, including the cost allocated from the original product or enhancement if not allocated up, is amortized over the life of the enhancement. If the original product will remain on the market along with the enhancement, an allocation is made of the unamortized cost of the original product between the original product and the enhancement. All internal costs incurred prior to the establishment of technological feasibility have been expensed as research and development costs during the periods in which they were incurred and amounted to $0.5, $0.7 and $0.6 million for the years ended December 31, 1999, 1998 and 1997, respectively. The amount by which unamortized software costs exceeds the net realizable value, if any, is recognized as accelerated amortization in the period it is determined (see Note 6).
On June 30, 1999, the Company purchased DORN Technology Group, Inc. ("DORN"), a risk and claims management company, for $33.2 million in cash plus additional consideration of up to $3.0 million contingent upon the future performance of DORN, to be recorded as compensation expense as incurred until 2001. DORN owns the Riskmaster claims management software and the Quest healthcare facility software, and provides risk and claims management software and services mainly to the US self-insured market. The Company intends to grow DORN's business and further develop the Riskmaster and Quest systems to complement its existing claims products.
The results of operations in 1998 third and forth quarters include $3.7 million and $9.6 million of charges related to the acquisition of TLG and accelerated amortization, respectively. For a further discussion of these charges see Management's Discussion and Analysis of Financial Condition and Results of Operations.