Net investment income for 2002 was $16.1 million, a 9.0% increase over $14.8 million in 2001. This increase is the result of growth in the average balance of invested assets by $48.9 million to $301.4 million for the year ended December 31, 2002, from $252.5 million for 2001. The growth in invested assets is attributable to normal operating cash flow. The pre-tax yield on average invested assets decreased to 5.3% for 2002 compared to 5.8% for 2001, reflecting the current low interest rate environment for new money investments and the disposal of a number of higher yielding corporate bonds with lower credit quality during the past twelve months to enhance the overall quality of the portfolio. The portfolio's tax-equivalent yield-to-maturity was 7.9% at December 31, 2002, versus 8.0% at December 31, 2001. Based on fair value, approximately 81% and 72% of the Company's fixed maturity portfolio at December 31, 2002 and 2001, respectively, was composed of state and municipal tax-preferred securities. At December 31, 2002, based on fair value, approximately 95% of the Company's fixed maturity portfolio was either a U.S. government or U.S. agency obligation or was rated investment grade by at least one nationally recognized securities rating organization compared to approximately 93% of the Company's fixed maturity portfolio at December 31, 2001.
Net income for 2001 increased 17.9% to $41.3 million from $35.0 million in 2000. This improvement was led by a 17.4% increase in earned premiums and a 16.8% increase in net investment income. Net income for 2001 also included the receipt of a nonrecurring payment of approximately $1.9 million related to the voluntary cancellation of an excess of loss reinsurance contract. The payment was reported as "other income" in the first quarter of 2001.
Refinance activity was 35.8% of insurance written in 2001 compared to 13.2% in 2000. Persistency, or the amount of insurance in force remaining from one year prior, was 67.6% at December 31, 2001, compared to 82.6% at December 31, 2000. The increase in refinance activity and the decrease in persistency were reflective of the low interest rate environment during 2001.
The parent company's cash flow is dependent on interest income and payments from Triad including management fees and interest payments under surplus notes. The Illinois Insurance Department permits expenses of the parent company to be reimbursed by Triad in the form of management fees. Payment of dividends is also permitted, although none have been paid to date.
Triad's total statutory policyholders' surplus increased to $112.9 million at December 31, 2002, from $105.3 million at December 31, 2001. Triad's statutory earned surplus increased to $29.2 million at December 31, 2002, from $21.6 million at December 31, 2001. The increase in Triad's statutory policyholders' surplus and statutory earned surplus resulted, primarily, from statutory net income of $61.8 million which exceeded the net increase in the statutory contingency reserve of $51.2 million and the increase in the statutory deferred tax liability of $3.0 million. The balance in the statutory contingency reserve was $245.0 million at December 31, 2002, compared to $193.7 million at December 31, 2001.
Fannie Mae is in the process of revising its approval requirements for mortgage insurers. The new requirements, which have not yet been finalized, would require prior approval by Fannie Mae for many of Triad's activities and new products, allow for other approved types of mortgage insurers rated less than "AA," and give Fannie Mae increased rights to revise the eligibility standards of mortgage insurers. The final form the eligibility guidelines will take is unknown at this time, but new guidelines, if issued, could have an adverse effect on the Company.
that the new rules will have a significant adverse impact on the Company in the future. However, if the new capital guidelines result in future changes to the preferences of Fannie Mae and Freddie Mac regarding their use of the various types of credit enhancements or their choice of mortgage insurers based on their credit rating, the Company's financial condition could be significantly harmed.