HCC owns the building which houses the Company's principal and executive offices in Houston, Texas. The building contains approximately 54,000 square feet, substantially all of which are used by the Company. LDG's principal facility is leased office space in Wakefield, Massachusetts consisting of approximately 34,000 square feet. The lease terminates on October 31, 2001. Principal activities conducted at the Wakefield office include corporate management, finance and administration, marketing and actuarial services for all areas of LDG's business, and medical stop-loss insurance underwriting management, reinsurance underwriting management, claims, and reinsurance intermediary activities. LDG's Medical Stop-Loss Division maintains sales and administration offices in Atlanta, Georgia, Overland Park, Kansas, Portland, Maine, and Minneapolis, Minnesota. LDG maintains a reinsurance underwriting and sales office in New York, New York. LDG also maintains an office in London, England. NASRA's principal facility is newly leased office space in Northbrook, Illinois, consisting of approximately 18,000 square feet. The lease terminates on November 30, 2005. Principal activities conducted at the Northbrook office include corporate management, finance and administration, marketing, underwriting, customer service and claims activities.
(6) The pro forma amounts shown include the following adjustments relating to the merger of LDG and HCCH: a) to eliminate the non-recurring compensatory stock grant and expenses related to the merger, and b) to reflect appropriate Federal income tax expense on LDG's earnings for the period LDG was an S Corporation.
Income tax expense decreased to $7.3 million in 1996, compared to $9.0 million in 1995. The decrease in income tax expense was a result of a deferred tax benefit of $9.6 million which was recorded in connection with the compensatory stock grant to certain LDG employees. Also, as an S corporation, LDG was exempt from Federal income taxes through May 21, 1996. Had LDG been subject to Federal income taxes for both years, additional income tax expense of $2.3 million and $722,000 would have been recorded during the years ended December 31, 1996 and 1995, respectively.
Total revenue during 1995 increased 49% to $127.2 million from $85.5 million in 1994. GWP increased 24% to $239.0 million from $192.9 million in 1994, while 1995 NWP increased 65% from $59.7 million to $98.8 million. Accordingly, net earned premium in 1995 increased 71% from $46.8 million to $80.0 million. These increases were due to substantial new business, rate increases on some renewals, particularly property and aviation, and increased retentions.
Interest expense during 1995 increased 14% to $2.2 million from $2.0 million during 1994 due to the increased level of indebtedness during the first six months of 1995, which was incurred during late 1994 to fund the acquisitions of IMG and MEIB.
HCCH completed an initial public offering of 1,437,500 shares (pre splits) of Common Stock during October, 1992 and secondary public offerings of 1,254,200 shares (pre splits) of Common Stock in September, 1993 and 2,012,500 shares (pre split) of Common Stock in June, 1995. The offerings dramatically improved the capital resources of the Company. The net proceeds of the offerings have been used to reduce the Company's indebtedness and to contribute capital to the insurance company subsidiaries. HCC now has more than $150 million in policyholders' surplus and IMG has more than $59 million. This additional capital enables both HCC and IMG to write significantly more premium income. The initial public offering also resulted in the termination of all redemption rights previously held by certain shareholders.
In February, 1997, the Financial Accounting Standards Board issued SFAS No.128 "Earnings Per Share". SFAS No.128 is effective for fiscal years ending after December 15, 1997. Early application is not permitted. SFAS No.128 modifies the denominator to be used in the earnings per share calculations, and requires additional disclosures of the calculations. However, the statement will have no effect on the Company's net earnings, shareholders' equity or cash flows.