Net premiums earned. The Company's net premiums earned for 2001 decreased 66.4% to $33.0 million from $98.2 million in 2000. The decrease in net premiums earned is due the factors discussed above related to gross premiums written as well as an increase in quota share reinsurance participation. In 2001, PICO ceded 36% of its earned premium under quota share agreements compared to 4% in 2000.
Historically, the sources of funds of the agency operations are cash flows from operating activities and the major use of funds is operating expenses. In the most recent years, operating cash flows at Pan Am have met the agency subsidiaries' liquidity requirements as well as a portion of the parent company's cash flow requirements, including debt service requirements. In 2001, the agency operations generated earnings before interest, taxes, depreciation and amortization of $2.4 million.
PICO's investments consist primarily of taxable and tax-exempt United States government and other investment grade securities and investment grade fixed maturity commercial paper and, to a lesser extent, equity securities. PICO does not generally invest in below investment grade fixed maturity securities, mortgage loans or real estate. PICO's investments in fixed maturity securities are carried at market value as such securities may be sold in response to changes in interest rates, tax planning considerations or other aspects of asset/liability management. As of December 31, 2001, the carrying value of PICO's fixed maturity securities portfolio was $28.8 million and the entire portfolio was rated "A" or better by S&P, Moody's or Fitch.
In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent
In addition, certain other state insurance regulatory authorities have acted to withdraw or restrict PICO's authority to issue policies in their states. PICO anticipates that states which have not yet acted will take action in the near term to withdraw or restrict PICO's authority to do business in their respective states.
The Company maintains a 401(k) plan covering substantially all employees. Employees may contribute up to 17% of their compensation. The Company makes a matching contribution of 50% of the employee contribution, limited to 6% of compensation. Total employer costs under the plan were $257, $288 and $293 for the years ended December 31, 2001, 2000 and 1999, respectively.
The insurance subsidiaries are required to file statutory financial statements with state insurance regulatory authorities. Accounting practices used to prepare these statutory financial statements differ from generally accepted accounting principles ("GAAP"). Such differences include the following: (1) reserves for losses and loss adjustment expenses must meet certain minimum requirements, (2) reserves for policyholder dividends are recorded as a restriction on surplus until declared, (3) Federal income taxes are recorded when payable, (4) fixed maturities are carried at admitted values, (5) certain assets are non-admitted and (6) acquisition expenses are expensed when incurred. Amounts reported to regulatory authorities as compared to amounts included in the accompanying consolidated financial statements on a GAAP basis for the years ended December 31, 2000 and 1999 follow: