Diluted earnings per share $ 1.03 $ 0.85 $ 1.71 $ 1.35 $ 1.53
During 1997, Meridian Mutual became licensed in the state of Washington and launched a new direct response marketing effort for private passenger automobile products. This direct response program represents Meridian's initial efforts to supplement its distribution channels. Historically, Meridian has sold insurance only through its strong independent agency force. During the start-up phase, the direct response business will be conducted only in Meridian Mutual and will be excluded from the reinsurance pooling agreement with its affiliates. Affinity marketing relationships with banking or other financial institutions are expected to evolve, creating additional distribution vehicles.
Losses and loss adjustment expenses incurred of $149.2 million for 1997 were 14.7 percent higher than the previous year's $130.1 million. Approximately $33.8 million of the 1997 incurred amount relates to the
Premiums earned $194,586,632 $167,304,414 $143,865,821 Net investment income 16,371,711 14,908,285 14,563,820 Net realized investment gains 4,477,580 3,793,778 1,538,281 Other income (expense) 1,042,350 562,198 (146,345)
December 31, 1997 1996 1995 Cash flows from operating activities: Net income $ 6,921,123 $ 5,799,952 $ 11,617,039 Reconciliation of net income to net cash provided by operating activities: Realized investment gains (4,477,580) (3,793,778) (1,538,281) Amortization 42,893,857 36,442,635 30,820,058 Deferred policy acquisition costs (43,475,066) (39,321,446) (32,068,780) Increase (decrease) in unearned premiums (1,226,418) 2,034,199 4,895,409 Increase (decrease) in loss and loss adjustment expenses 8,492,087 11,054,147 (177,410) Decrease (increase) in amount due from Meridian Mutual 1,250,395 385,131 (2,548,320) Decrease (increase) in reinsurance receivables (2,999,236) (7,352,448) 234,172 Decrease (increase) in prepaid reinsurance premiums 1,159,098 (349,547) 2,654 Decrease in other assets 5,549,960 2,064,651 66,763 Increase in other post-employment benefits 515,367 119,436 197,223 Increase in reinsurance payables 413,718 1,800,732 972,951 Increase (decrease) in other liabilities (1,839,705) (1,866,664) 116,619 Other, net 769,010 (61,732) 1,193,850 Net cash provided by operating activities 13,946,610 6,955,268 13,783,947
1998 $ 1,250,000 1999 1,625,000 2000 2,000,000 2001 2,125,000 Thereafter 4,375,000 Total payments outstanding $11,375,000
Meridian Security, Citizens Fund, ICO, Meridian Mutual and Citizens Security Mutual are parties to a reinsurance pooling agreement ("pooling agreement") under which essentially all premiums, losses and loss adjustment expenses as well as other underwriting expenses are shared by the companies on the basis of their percentage participation defined in the pooling agreement. Other expenses are allocated on the basis of specific identification or estimated costs. Amounts either due to or due from Meridian Mutual and Citizens Security Mutual result from these transactions, and are normally reimbursed on a monthly basis. Management believes that such expenses would not be materially different if incurred directly by each company.
Approximately 92 percent of the Company's ceded reserves for losses and loss adjustment expenses were with Employers Reinsurance Corporation, Michigan Catastrophic Claims Association and Swiss Reinsurance America Corporation. The effect of reinsurance on premiums written, premiums earned and losses and loss adjustment expenses for the years ended December 31, 1997, 1996 and 1995 were as follows:
December 31, 1996 Basic earnings per share Income available to common stockholders $ 5,799,952 6,779,284 $ 0.86 Effect of dilutive securities Stock options --- 28,165 Diluted earnings per share Income available to common stockholders $ 5,799,952 6,807,449 $ 0.85
December 31, 1995 Basic earnings per share Income available to common stockholders $11,617,039 6,770,081 $ 1.72 Effect of dilutive securities Stock options --- 18,813 Diluted earnings per share Income available to common stockholders $11,617,039 6,788,894 $ 1.71