The parent holding company has met its liquidity and capital needs through dividends paid by its subsidiaries and the issuance of debt. The insurance subsidiaries' ability to pay cash dividends to the parent company is generally restricted by law or subject to approval of the insurance regulatory authorities of the states in which they are domiciled. Additionally, the terms of guarantees by the Company of bank loans to the trustee of the Company's Employees Savings and Stock Ownership Plan restrict the amount of debt the Company may incur; this covenant is being met.
Net investment income was down by 3.6% and grew by 0.9% and 3.9% in 1999, 1998 and 1997, respectively. For each of the past three years, this revenue source was affected by positive consolidated operating cash flows and by a concentration of investable assets in interest-bearing, fixed maturity securities. The Company, as previously mentioned, used internal funds in the three latest calendar years for most open market purchases of its common stock, thus reducing the size and earning power of its invested asset base. The average annual yield on investments was 5.5%, 5.7% and 5.9% for the years ended December 31, 1999, 1998 and 1997, respectively. This yield pattern reflects at once the relatively short maturity of Old Republic's fixed maturity securities portfolio, a generally flat to declining interest rate climate during most of the past three years, and the greater commitment of investable funds to tax-exempt fixed maturity securities that typically bear lower pre-tax yields.
Consolidated income before taxes decreased by 32.1% in 1999 and increased by 9.4% in 1998 and 24.6% in 1997. General insurance results declined significantly in 1999 compared to 1998 and 1997 due to poorer underwriting experience and lower investment income. The mortgage guaranty segment reflected rising earnings in each of the last three years due to increased revenues generating higher income from underwriting operations and from a greater invested assets base. Title insurance earnings during the past three years were higher in 1998 compared to 1999 and 1997 which resulted from the previously noted claim and expense trends. Life and disability operations, excluding the aforementioned non-recurring tax recovery item in 1997, registered relatively flat earnings in 1998 and 1997. Earnings in 1999 benefited from the revision of certain actuarial factors used in calculating various life and health reserves and deferred acquisition costs. The net benefit, the majority of which applied to 1999 premium revenues, amounted to approximately $4.8; this was partially offset by underwriting losses in Old Republic's Canadian travel accident coverages.
Included in the plans' assets are Common Shares of the Company valued at $6.7 and $11.2 as of December 31, 1999 and 1998, respectively.
Reinsurance protection on property and liability operations generally limits the net loss on any one risk to a maximum of (in thousands): workers' compensation-$1,000; auto liability-$600; general liability-$600; and property coverages-$300. Substantially all the mortgage guaranty insurance business is retained, with the exposure on any one risk currently averaging approximately $28. Title insurance risk assumptions, based on the title insurance subsidiaries' financial resources, are limited to a maximum of $25,000 as to any one policy. The maximum amount of ordinary life insurance retained on any one life by the Life Insurance Group is $300.
The General Insurance Group provides property and liability insurance primarily to commercial clients. Old Republic does not have a meaningful participation in personal lines of insurance. Commercial automobile (principally trucking) insurance is the largest type of coverage underwritten by the General Insurance Group accounting for 47.6% of the Group's direct premiums written in 1999. The remaining premiums written by the General Insurance Group are derived largely from a wide variety of coverages, including workers' compensation and general liability insurance, loan credit guaranty insurance, and surety bonds. The General Insurance Group's operations have been expanded, over the years, to insure certain specialty lines such as directors' and officers' liability and errors and omissions liability insurance, to cover owners and operators of private aircraft for hull and liability exposures, and to insure grain elevators and liquid petroleum gas operations.