Fee income increased 39% to $29.0 million for the quarter and 31% to $105.9 million for the year compared to $20.8 million and $80.7 million in 1996. Pre-tax profit margins were 41% for both the quarter and year ended 1997 as compared to 37% and 40% respectively in 1996.
Investment income for 1997 amounted to $26.3 million, an increase of 17% over 1996 primarily as a result of an increase in invested assets and somewhat higher rates of return on those assets.
Operating expenses amounted to $62.9 million, an increase of 29% over 1996. This increase is partly attributable to the inclusion of Small Business Underwriter ("SBU") for the first time in 1997, the expansion of Professional Underwriters Corporation into New York State, and the recent acquisition by Hemisphere of Hugo Trust Ltd., which combined, added $5.5 million or 11% of the total increase in Operating expenses in 1997. The remaining additional expenses were primarily due to growth in personnel and other expenses resulting from the increase in business.
The Company's policy-issuing subsidiaries added 29 new accounts in the fourth quarter of 1997 bringing the total new accounts added during 1997 to 123 as compared to 27 in the 1996 fourth quarter and 108 for 1996. The renewal rate on this business was 80% for the year as compared to 75% in 1996. In California the Company added 25 new accounts compared to 8 in 1996 and the renewal rate increased to 85% as compared to 77% in 1996. There were 343 active accounts at December 31, 1997, including 48 in California, as compared to 284 at December 31, 1996, of which 27 were in California.
The Program Business segment, the fastest growing business segment, involves the Company replacing traditional insurers and acting as a conduit between producers of specialty books of business and reinsurers wishing to write that business. Accounting for 45% of total Fee income for the year, almost twice its 1996 contribution of 24%, the Program Business segment is now the Company's largest fee contributor. Fees from Program Business increased 118% in the fourth quarter to $13.5 million, compared to $6.2 million in the fourth quarter of 1996, and 143% to $47.5 million for the 1997 year as compared to $19.6 million in 1996. This resulted from the continued expansion of this business segment in the extremely soft commercial insurance market and the acquisition of SBU on February 1, 1997. Pre-tax profit margins were 41% for the quarter and the year, compared to 38% for both periods of 1996.
Gross premiums written increased 61% to $655.4 million during 1997 versus $405.9 million in 1996. This increase was primarily a result of the growth in the Program Business segment which generally involves greater premium volume per unit than business derived from the Corporate Risk Management segment. Premiums earned increased 49% to $84.2 million in 1997, versus $56.4 million in 1996, this increase was also attributable to the expansion in the Program Business segment.
Corporate Risk Management, the Company's original business segment, involves providing services to businesses and associations seeking to insure a portion of their risk in a loss sensitive Alternative Market structure. This segment accounted for 40% of total Fee income for 1997 down from 61% in 1996. Corporate Risk Management fees decreased by 10% in the fourth quarter to $10.7 million compared to $11.9 million in the fourth quarter of 1996 and by 14% in 1997 to $42.6 million. These declines are a direct result of the continuation of the extremely soft commercial insurance market and continued declines in workers' compensation rates. Profit margins increased to 46% in the quarter as compared to 39% in 1996 and to 44% for the year as compared to 43% in 1996.
The Company's Specialty Brokerage segment provides access to Alterative Risk Transfer insurers and reinsurers in Bermuda and Europe. The segment produced $1.9 million in Fees in the fourth quarter and $7.0 million for the year representing 7% of total Fee income. Despite declines in premium on new and renewal policies, Specialty Brokerage fees grew by 25% in 1997 from $5.6 million in 1996. Renewal rates remained high at 85% for 1997 as compared to 86% in 1996. Profit margins increased to 33% in the fourth quarter from 27% in the fourth quarter of 1996 but declined slightly to 35% for the year down from 37% in 1996.
Financial Services, the Company's newest business segment, is being built on the 1996 acquisition of Hemisphere which provides administrative services to offshore mutual funds and other companies. The segment accounted for 8% of total Fee income in both 1997 and 1996. Fees from Financial Services increased in the quarter by 81%, to $2.9 million, and by 44%, to $8.7 million for the year primarily as a result of an increase in the number of mutual funds under administration from 85 at December 31, 1996 to 129. Renewal rates were up significantly in this business segment from 80% in 1996 to 93% in 1997, while profit margins improved to 26% for the year, up from 20% in 1996.
Financial Services, the Company's newest business segment, is being built on the 1996 acquisition of Hemisphere which provides administrative services to offshore mutual funds and other companies. The segment accounted for 8% of total Fee income in both 1997 and 1996. Fees from Financial Services increased in the quarter by 81%, to $2.9 million, and by 44%, to $8.7 million for the year primarily as a result of an increase in the number of mutual funds under administration from 85 at December 31, 1996 to 129. Renewal rates were up significantly in this business segment from 80% in 1996 to 93% in 1997, while profit margins improved to 26% for the year, up from 20% in 1996.
Mutual Risk Management Ltd. provides risk management services to clients in the United States, Canada and Europe seeking alternatives to traditional commercial insurance for certain of their risk exposures as well as financial services to offshore mutual funds and other companies. Mutual Risk Management Ltd. (MM) Common Shares are listed on the New York and Bermuda stock exchanges.