3 Includes the net change in deferred acquisition costs as well as compensation expense and other expenses.
See Note 13 of the " Notes to Consolidated Financial Statements” contained herein in Item 8 for further details.
Our effective income tax rate for 2019 was 20.4 percent, compared to 16.6 percent in 2018 and 29.2 percent in 2017. Our 2019 and 2018 effective tax rates differed from the U.S. statutory rate of 21 percent due to favorable tax credits, with additional favorable adjustments in 2018 related to our prior year tax return. The TCJA was enacted in December 2017 and stipulated a reduction of the U.S. statutory rate from 35 percent to 21 percent effective in 2018. Our effective tax rate for 2017 was favorably impacted by the enactment of the TCJA, which reduced the net deferred tax liability and was partially offset by the Deemed Repatriation Tax.
In describing our results, we may at times note certain items and exclude the impact on financial ratios and metrics to enhance the understanding and comparability of our operational performance and the underlying fundamentals, but this exclusion is not an indication that similar items may not recur. We also measure and analyze our segment performance on the basis of "adjusted operating revenue" and "adjusted operating income" or "adjusted operating loss", which differ from total revenue and income before income tax as presented in our consolidated statements of income due to the exclusion of net realized investment gains and losses and certain other items. These performance measures are in accordance with GAAP guidance for segment reporting, but they should not be viewed as a substitute for total revenue, income before income tax, or net income. See "Reconciliation of Non-GAAP Financial Measures" contained herein in this Item 7.
Commissions and the deferral of acquisition costs were higher relative to 2018 due to higher sales. The amortization of acquisition costs was lower in 2019 compared to 2018 due to a decline in the level of the deferred asset. The other expense ratio was lower relative to 2018 due to higher premiums and our continued focus on expense management.
During the second quarter of 2019, we recognized a realized loss of $15.6 million on the sale of securities of a U.S. based oil and natural gas producer. The company has been impacted by the significant decline in energy prices, a high level of debt, and an inability to complete certain asset sales. At the time of disposition, these securities had been in an unrealized loss position for a period of greater than three years.
Tax credit partnerships in which we have invested were formed for the purpose of investing in the construction and rehabilitation of low-income housing. Because the partnerships are structured such that there is no return of principal, the primary sources of investment return from our tax credit partnerships are tax credits and tax benefits derived from passive losses on the investments, both of which may exhibit variability over the life of the investment. These partnerships are accounted for using either the proportional or the effective yield method, depending primarily on whether the tax credits are guaranteed through a letter of credit, a tax indemnity agreement, or another similar arrangement. Tax credits received from these partnerships are reported in our consolidated statements of income as either a reduction of premium tax or a reduction of income tax. The amortization of the principal amount invested in these partnerships is reported as a component of either premium tax or income tax.
•Level 1 - the highest category of the fair value hierarchy classification wherein inputs are unadjusted and represent quoted prices in active markets for identical assets or liabilities at the measurement date.
•77.0 percent of our fixed maturity securities were valued based on prices from pricing services that generally use observable inputs such as prices for securities or comparable securities in active markets in their valuation techniques. These assets were classified as Level 2.
The following tables present information about financial instruments measured at fair value on a recurring basis by fair value level, based on the observability of the inputs used:
•The time period during which there has been a significant decline in value
Our average investment in impaired mortgage loans was $0.6 million and $2.3 million for the years ended December 31, 2019 and 2018, respectively. We did not hold any impaired mortgage loans for the year ended December 31, 2017. We did not recognize any interest income during 2019, 2018 or 2017 on mortgage loans subsequent to impairment.
Under the TCJA, a modified territorial tax system was adopted that required a one-time Deemed Repatriation Tax on accumulated foreign E&P. Future repatriation of foreign E&P subject to the one-time Deemed Repatriation Tax will not be subject to further U.S. taxation other than tax on foreign currency translation gain or loss. As of December 31, 2019, our plans for the future repatriations of cash from our foreign subsidiaries include only the amount of capital above that which is required by Solvency II. The remainder of our investment in our foreign subsidiaries is indefinitely reinvested and we have not recorded any deferred taxes on the approximately $0.7 billion of the excess of the U.S. GAAP carrying values over the tax basis of investments in our foreign subsidiaries.
Northwind Holdings is required to repay a portion of the outstanding principal under the Northwind notes at par on the quarterly scheduled payment dates under the Northwind notes in an amount equal to the lesser of (i) a targeted amortization amount as defined in the Northwind indenture and (ii) the amount of the remaining available funds in the DSCA minus an amount equal to the minimum balance that is required to be maintained in the DSCA under the Northwind indenture, provided that Northwind Holdings has sufficient funds available to pay its other expenses, including interest payments on the Northwind notes, and to maintain the minimum balance in the DSCA as required under the Northwind indenture. Northwind Holdings made principal payments on the Northwind notes of $60.0 million in each of 2019, 2018, and 2017.
As of December 31, 2019 and 2018, we had $250.0 million notional amount of an interest rate swap which effectively converts certain of our unsecured senior notes into floating rate debt. Under this agreement, we receive a fixed rate of interest and pay a variable rate of interest, based off of three-month LIBOR. See Note 4 for further information on the interest rate swap.
for the periods subsequent to the respective dates of acquisition, did not have a material impact on revenue or results of operations for 2018.
Statutory net income for U.S. life insurance companies is reported in conformity with statutory accounting principles prescribed by the National Association of Insurance Commissioners (NAIC) and adopted by applicable domiciliary state laws. The commissioners of the states of domicile have the right to permit other specific practices that may deviate from prescribed practices. Our traditional U.S. life insurance subsidiaries have no prescribed or permitted statutory accounting practices that differ materially from statutory accounting principles prescribed by the NAIC.