Certain of the statements contained herein, other than statements of historical fact, are forward-looking statements. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and include estimates and assumptions related to economic, competitive, and legislative developments. These forward-looking statements are subject to change and uncertainty, which are, in many instances, beyond our control and have been made based upon our expectations and beliefs concerning future developments and their potential effect on us. There can be no assurance that future developments will be in accordance with our expectations or that the effect of future developments on the Company will be those anticipated by us. Actual results could differ materially from those expected by us, depending on the outcome of certain factors, including the possibility of general economic and business conditions that are different than anticipated, legislative developments, changes in interest rates or the stock markets, stronger than anticipated competitive activity, and the factors described in the forward-looking statements.
We regularly monitor our investment portfolio to ensure that investments that may be other-than-temporarily impaired are identified in a timely fashion, properly valued, and any other-than-temporary impairments are charged against earnings in the proper period. Our methodology to identify potential impairments requires judgment and is further described in the Investments section of Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Our expenses essentially consist of a) amounts paid on claims submitted, b) increases in reserves for estimated future claim payments, c) costs of acquiring new business and servicing existing policies, and d) other general business expenses including income taxes.
According to industry data, our national market share of net new primary insurance written, which includes insurance written on a flow basis as well as that attributed to structured bulk transactions, was 4.9% for 2003 (5.6% for the fourth quarter) compared to 3.7% for 2002 (3.9% for the fourth quarter). Our national market share of net new primary insurance written on a flow basis was 5.0% for 2003 (4.7% for the fourth quarter) compared to 4.3% for 2002 (4.7% in the fourth quarter). Industry data indicates that we had 4.4% of the national market share attributable to structured bulk transactions in 2003 compared to 0.3% in 2002.
Total direct insurance in force reached $31.7 billion at December 31, 2003, compared to $25.4 billion at December 31, 2002. Significant refinance activity in 2003 and 2002 resulted in a high level of policy cancellations that substantially offset the impact that the high level of insurance written had on in force growth. As a result, insurance in force increased by only $6.3 billion in 2003, even though insurance written during 2003 was $20.5 billion.
Fixed maturity securities represented approximately 91% of our invested assets at December 31, 2003. While the fair value of these fixed rate securities generally bears an inverse relationship to changes in prevailing market interest rates, a change in market interest rates would not immediately impact earnings because we generally hold these securities until maturity. However, a decrease in market interest rates generally will have the effect of initiating an early call provision of those securities possessing such provisions. The proceeds relating to the early called securities in a decreasing interest rate environment generally are invested in lower yielding investments that would ultimately decrease earnings. Our long-term debt matures in 2028 with no early call or put provisions and bears interest at a fixed rate of 7.9% per annum. The fair value of this debt is sensitive to changes in prevailing interest rates; however, a change in rates would not impact earnings. We believe that a 20% increase or decrease in market interest rates is reasonable for the upcoming year. A 20% relative increase or decrease in market interest rates that affect our financial instruments would not have a material impact on earnings during the next fiscal year.
housing transactions requiring mortgage insurance may decrease for many reasons including changes in interest rates or economic conditions;
Management’s responsibilities related to establishing and maintaining effective disclosure controls and procedures include maintaining effective internal controls over financial reporting that are designed to produce reliable financial statements in accordance with accounting principles generally accepted in the United States. Management has assessed the Company’s system of internal control over financial reporting as of December 31, 2003, in relation to criteria for effective internal control over financial reporting as described in “Internal Control - Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management believes that, as of December 31, 2003, its system of internal controls over financial reporting met those criteria.
reinsurer. This payment is included as other income in the accompanying Consolidated Statement of Income for 2001.