Fee income grew by 26% in the fourth quarter to $39.3 million and 30% to $149.0 million for the year ended 1998, as compared to $ 31.2 million and $114.7 million respectively in 1997. Pre-tax profit margins were 36% and 37% for the fourth quarter and full year as compared to 37% and 38% respectively, in the corresponding 1997 periods.
Net investment income increased by 14% to $7.8 million in the fourth quarter and by 11% to $29.5 million for the year. Investment yields were 7.0% in the fourth quarter and 6.9% for the year ended 1998 as compared to 6.7% in both of the corresponding 1997 periods.
Operating expenses increased 29% to $25.2 million for the quarter, compared to $19.5 million in the fourth quarter of last year, and 33% to $94.3 million for 1998, compared to $71.0 million in 1997. The increase in Operating expenses is attributable to recent acquisitions, growth in personnel and other expenses resulting from the increased business, as well as the costs associated with the previously announced revised executive incentive plan in the Financial Services segment.
Program Business involves replacing traditional insurers and acting as a conduit between producers of specialty books of business and reinsurers wishing to write that business. The segment accounted for 56% of total Fee Income in the quarter
and 55% for the year ended 1998 compared to 45% and 43% in the corresponding 1997 periods. Fees from Program Business increased by 57% in the fourth quarter to $21.9 million and by 67% to $82.4 million for the year as compared to $13.9 million and $49.4 million respectively in 1997. This resulted from the continued expansion of this business segment both through the growth of existing programs and the addition of new programs. Profit margins were 37% for the quarter and 40% for the year, as compared to 37% and 39% in the corresponding periods.
Gross premiums written increased 30% to $850.4 million as compared to $655.4 million in 1997, primarily as a result of the growth within the Program Business segment. Program Business generally involves greater premium volume per unit than Corporate Risk Management business. Premiums earned increased 29% to $27.9 million in the fourth quarter and 21% to $101.9 million in the year, as compared to $21.7 million and $84.2 in the corresponding 1997 periods. These increases in Premiums earned were also primarily due to the growth within the Program Business segment.
Corporate Risk Management, the Company's original business segment, involves providing services to businesses and associates seeking to insure a portion of their risk in a loss sensitive Alternative Market structure. This segment accounted for 27% of total Fee income in the fourth quarter and 29% for the year, down from 39% and 42% in the corresponding 1997 periods. Corporate Risk Management fees decreased by 11% in the fourth quarter to $10.8 million, and by 10% in the year to $43.3 million as a result of a continuation of the extremely soft commercial insurance market. Profit margins improved to 46% in the fourth quarter as compared to 42% in 1997 and 45% for the 1998 full year from 41% in 1997. The company added 4 new Corporate Risk Management accounts in the fourth quarter compared to 6 in 1997 and 22 in the year compared to 28 in 1997. Renewal rates decreased to 63% for the fourth quarter compared to 71% in 1997 and decreased to 66% for the year compared to 70% in 1997.
The Company's Specialty Brokerage business segment provides access to Alternative Risk Transfer insurers and reinsurers in Bermuda and Europe. The segment produced $2.3 million of total Fee income in the fourth quarter and $9.0 million in the year representing 6% of total Fee income for both the fourth quarter and year. Specialty Brokerage fees grew by 1% in the fourth quarter and 8% in the year. Renewal rates remained high in this segment at 88% for the year as compared to 85% in 1997. Profit margins were 23% in the fourth quarter and 25% for the year, as compared to 27% and 31% in the corresponding 1997 periods.
Financial Services, the Company's newest business segment, is being built on the acquisition of The Hemisphere Group which provides administrative services to offshore mutual funds and other companies. The segment accounted for 11% of total Fee income for the fourth quarter and 10% for the year ended 1998. Fees from Financial Services increased in the quarter by 49% to 44.3 million over the 1997 corresponding period, and by 6.4% to $14.3 million for the year, primarily as a result of an increase in the number of mutual funds under administration to 195 from 129. Renewal rates decreased in this business segment to 80% for 1998 as compared to 93% in 1997 due to the loss of a number of fund clients in the fourth quarter of 1998 as a result of the prevailing financial market conditions. Profit margins in the Financial Services segment were adversely affected in 1998 by the revised executive incentive plan and staff expansion costs to service new business and declined to 12% in the fourth quarter and 4% for the year. Excluding the effect of the revised executive incentive plan, the profit margins in this segment would have been 24% for the quarter and 18% for the year as compared to 26% in both 1997 periods.
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.