increase of $14.0 million, driven by net realized and unrealized gains in 2019 versus losses in the prior year period. See “-Tiptree Insurance Investment Portfolio” for a further discussion of the investment results.
Underwriting margin for the year ended December 31, 2019 was $145.7 million, up $17.9 million, or 14.0%. Credit protection underwriting margin was $87.7 million, an increase of $10.7 million, or 13.9%. Credit protection products continue to provide opportunities for steady growth through a combination of expanded product offerings and new clients. Underwriting margin for warranty products was $37.9 million, up $9.3 million, or 32.5%, driven primarily by growth in auto, furniture and appliances warranty service contracts. Specialty underwriting margin for the year ended December 31, 2019 was $9.7 million, down $3.4 million, or 26.0%, due to the run-off of certain discontinued non-standard auto programs. Services and other contributed $10.4 million in year ended December 31, 2019, which was up $1.3 million, or 14.3%.
(1) Total Return % represents the ratio of annualized net investment income, realized and unrealized gains (losses) (including realized and unrealized gains (losses) on available for sale securities included in AOCI), less investment portfolio interest expense to the average of the prior five quarters total investments less investment portfolio debt plus cash.
Discontinued operations includes the results from Care, previously reported in the Senior Living segment. In the year ended December 31, 2018, pre-tax income was $57.5 million, which included a $56.9 million gain on sale of Care.
Balance Sheet Information - as of December 31, 2019 compared to the year ended December 31, 2018
Our mortgage business relies on short term uncommitted sources of financing as a part of their normal course of operations. To date, we have been able to obtain and renew uncommitted warehouse credit facilities. If we were not able to obtain financing, then we may need to draw on other sources of liquidity to fund our mortgage business. See Note (10) Debt, net in the notes to consolidated financial statements, for additional information regarding our mortgage warehouse borrowings.
The Company defers certain costs of acquiring new and renewal insurance policies and other products within the Company’s insurance segment.
Vessel valuations, residual value of vessels and the useful lives of vessels;
assets and liabilities carried at Level 2 are valued based on one or more of the following:
The Company evaluates tax positions taken or expected to be taken in the course of preparing its tax returns to determine whether the tax positions are “more likely than not” of being sustained by the applicable tax authority. The Company’s tax benefit or tax expense is adjusted accordingly for tax positions not deemed to meet the more likely than not threshold. The Company’s policy is to account for interest as a component of interest expense and penalties as a component of other expenses.
The Company records all investment transactions on a trade-date basis. Realized gains (losses) are determined using the specific-identification method. The Company classifies its investments in debt securities as available for sale or held-to-maturity based
Through the insurance business, the Company has various reinsurance agreements in place whereby the amount of risk in excess of its retention goals is reinsured by unrelated domestic and foreign insurance companies. The Company is required to pay losses even if a reinsurer fails to meet its obligations under the applicable reinsurance agreement. Reinsurance receivables include amounts related to paid benefits, unpaid benefits and prepaid reinsurance premiums. Reinsurance receivables are based upon estimates and are reported on the consolidated balance sheets separately as assets, as reinsurance does not relieve the Company of its legal liability to policyholders. Management continually monitors the financial condition and agency ratings of the Company’s reinsurers and believes that the reinsurance receivables accrued are collectible. Balances recoverable from reinsurers
liabilities, net, commissions payable and accrued interest payable. See Note (14) Other Assets and Other Liabilities and Accrued Expenses.
In March 2017, the FASB issued ASU 2017-08, Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The new guidance is effective for fiscal years beginning after December 15, 2018 and interim periods within those years. Early adoption is permitted for interim or annual reporting periods beginning after December 15, 2017. The guidance is to be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The guidance shortens the amortization period for certain callable debt securities held at a premium, requiring the premium to be amortized to the earliest call date. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements on fair value measurements in Topic 820. The modifications include the removal of certain requirements, modifications to existing requirements and additional requirements. The amendments in ASU 2018-13 are effective for fiscal years, and interim periods within those fiscal years, beginning after
December 15, 2019, with early adoption permitted. The Company is currently evaluating the effect on its consolidated financial statements.
When the Company entered into a purchase agreement on November 16, 2017 to sell Care, the Company concluded that the sale met the requirements to be classified as a discontinued operation. As a result, the Company reclassified the income and expenses attributable to Care to net income (loss) from discontinued operations through the completion of the sale.
Except as noted below, Care, Luxury and our commercial lending business adhered to the Significant Accounting Policies as described in Note (2) Summary of Significant Accounting Policies.
Asset based debt is generally recourse only to specific assets and related cash flows.
The following table presents the future maturities of the unpaid principal balance on the Company’s debt for the following period:
A subsidiary in our insurance business has $35,000 of preferred trust securities due June 15, 2037. Interest is payable quarterly at an interest rate of LIBOR plus 4.10%. The Company may redeem the preferred trust securities, in whole or in part, at a price equal to the full outstanding principal amount of such preferred trust securities outstanding plus accrued and unpaid interest.
U.S Treasury Securities, Obligations of U.S. Government Authorities and Agencies, Obligations of State and Political Subdivisions, Corporate Securities, Asset Backed Securities, and Obligations of Foreign Governments: Fair values were obtained from an independent pricing service and a third party investment manager. The prices provided by the independent pricing service and third party investment manager are based on quoted market prices, when available, non-binding broker quotes, or matrix pricing and fall under Level 2 or Level 3 in the fair value hierarchy.
Administrative fee revenue includes the administration of premium associated with our producers and their producer owned reinsurance companies (PORCs). In addition, we also earn fee revenue from debt cancellation programs, motor club programs, and warranty programs. Related administrative fee revenue is recognized consistent with the earnings recognition pattern of the underlying insurance policies, debt cancellation contracts and motor club memberships being administered, using Rule of 78's, modified Rule of 78's, pro rata, or other methods as appropriate for the contract. Management selects the appropriate method based on available information, and periodically reviews the selections as additional information becomes available.