Net premiums written $ 928,742 $ 1,001,308 $ 992,262 $ 997,955 $ 975,091
Realized investment (losses) gains, net including net impairment losses 13,752 5,306 (1,353) 231 8,921
Adjusted net operating income for 2020 was $456.8 million (2019: $669.7 million) and adjusted net operating income per diluted share was $1.32 (2019: $1.84). Adjusted net operating income for 2020 included an adjustment for a loss on debt extinguishment and for both 2020 and 2019, included an adjustment for net realized investment gains.
NPE decreased slightly due to lower premium rates on our IIF and a decrease in profit commission from our QSR transactions that was a result of higher ceded losses incurred, partially offset by higher average IIF and an increase in accelerated premiums from single premium policy cancellations.
The impacts of the COVID-19 pandemic, including unemployment resulting from initiatives intended to reduce the
The widespread use of risk based pricing systems by the PMI industry makes it more difficult to compare our rates to those offered by our competitors. We may not be aware of industry rate changes until we observe that our volume of NIW has changed. In addition, business under customized rate plans is awarded by certain customers for only limited periods of time. As a result, our NIW may fluctuate more than it had in the past.
If a servicer of a loan is unable to contact the borrower prior to the expiration of the first 180-day forbearance plan term, or if the forbearance plan reaches its twelve-month anniversary and is not further extended, the forbearance plan will generally expire. In such case, if the loan remains delinquent, the 70% reduction in Minimum Required Assets for that loan will no longer be applicable, our Minimum Required Assets will increase and our excess of Available Assets over Minimum Required Assets will decrease.
instead requires a MPP. The "policyholder position" of a mortgage insurer is its net worth or surplus, contingency reserve, and a portion of the reserve for unearned premiums.
(4)Infrequent or unusual non-operating items. Items that are non-recurring in nature and are not part of our primary operating activities. Past adjustments in this category include our 2018 income tax expense related to our IRS dispute.
Net realized investment (gains) losses (13,245) (2,781) (10,464) (5,108) (1,073) (4,035)
(in billions) Nine Months Ended September 30, 2020 Twelve Months Ended December 31, 2019
We terminated a portion of our 2015 QSR Transaction effective June 30, 2019, paid a termination fee of $6.8 million, and entered into an amended quota share reinsurance agreement that effectively reduces the quota share cede rate from 30% to 15% on the remaining eligible insurance. The lower cede rate reduced our ceded RIF but does not impact our determination of the amount of IIF subject to quota share reinsurance agreements.
4 - 11 payments 36 % 79 % 62 % 28 %
The primary default inventory for the top 15 jurisdictions (based on 2020 losses paid) at December 31, 2020, and 2019 appears in table the below.
Underwriting and other expenses for 2020 decreased when compared to 2019 primarily due to a decreases in employee compensation costs, including equity-based compensation, and travel. This was partially offset by increases in professional services and equipment and software expense.
Our long-term debt increased to $1,243.2 million as of December 31, 2020 from $832.8 million as of December 31, 2019. In August, 2020, we issued $650.0 million aggregate principal amount of 5.25% Notes due in 2028 with a three year call feature. We used a portion of the proceeds to repurchase $182.7 million in aggregate principal of our 5.75% Notes due in 2023 and $48.1 million in aggregate principal of our 9% Debentures due 2063. The balance of the proceeds remains at the holding company.
Net cash provided by operating activities in 2020 increased compared to 2019 primarily due to a lower level of losses paid, net, and a decrease in taxes paid, partially offset by a decrease in net premium written.
of liquidity to meet its payment obligations for the foreseeable future.
See Note 7 - “Debt” to our consolidated financial statements for additional information about the conversion terms of our 9% Debentures and the terms of our indebtedness, including our option to defer interest. The description in Note 7 - “Debt" to our consolidated financial statements is qualified in its entirety by the terms of the notes and debentures. The terms of our 9% Debentures are contained in the Indenture dated as of March 28, 2008, between us and U.S. Bank National Association filed as an exhibit to our Form 10-Q filed with the SEC on May 12, 2008. The terms of our 5.75% Notes are contained in a Supplemental Indenture, dated as of August 5, 2016, between us and U.S. Bank National Association, as trustee, which is included as an exhibit to our 8-K filed with the SEC on August 5, 2016, and in the Indenture dated as of October 15, 2000 between us and the trustee. The terms of our 5.25% Notes are contained in a Supplemental Indenture, dated as of August 12, 2020, between us and U.S. Bank National Association, as trustee, which is included as an exhibit to our 8-K filed with the SEC on August 12, 2020, and in the Indenture dated as of October 15, 2000 between us and the trustee.
The table below presents the PMIERS capital credit for our reinsurance transactions.
Consolidated statements of operations for each of the three years in the period ended December 31, 2020
Change in unrealized investment gains and losses 5 133,616 173,910 (64,646)
Cash and cash equivalents and restricted cash and cash equivalents at end of year $ 296,680 $ 169,056 $ 155,038
We have a non-contributory defined benefit pension plan covering substantially all domestic employees, as well as a supplemental executive retirement plan. Retirement benefits are based on compensation and years of service. Effective January 1, 2019, all participants, regardless of hire or rehire date, earn benefits using a cash balance formula. Participants hired or rehired prior to January 1, 2014, earned benefits under a traditional formula through December 31, 2018. which calculated a pension credit for each year of eligible service. Under the cash balance formula, participants’ accounts are credited each year with an employer contribution and interest. The employer contribution is a percentage of eligible earnings based on the participant’s age on January 1, 2019. We recognize these retirement benefit costs
over the period during which employees render the service that qualifies them for benefits. Our policy is to fund pension cost as required under the Employee Retirement Income Security Act of 1974.
Loss reserves are reported before taking credit for amounts ceded under reinsurance agreements. Ceded loss reserves are reflected as "Reinsurance recoverable on loss reserves." Amounts due from reinsurers on paid claims are reflected as “Reinsurance recoverable on paid losses.” Ceded premiums payable are included in “Other liabilities.” Profit commissions are included with “Premiums written - Ceded” and ceding commissions are included with “Other underwriting and operating expenses, net.” We remain liable for all insurance ceded. (See Note 9 - “Reinsurance.”)
We recorded $0.3 million of realized losses for the year ended December 31, 2020 related to our intent to sell certain securities. We also recorded a credit allowance of $49 thousand for the year ended December 31, 2020.
The source of net investment income is shown in table 5.5 below.
•Fixed income securities: Consist of primarily U.S. Treasury securities with valuations derived from quoted prices for identical instruments in active markets that we can access.
Commercial Mortgage-Backed Securities ("CMBS") are valued using techniques that reflect market participants’ assumptions and maximize the use of relevant observable inputs including quoted prices for similar assets, benchmark yield curves and market corroborated inputs. Evaluation uses regular reviews of the inputs for securities covered, including executed trades, broker quotes, credit information, collateral attributes and/or cash flow waterfall as applicable.
The 5.75% Notes have covenants customary for securities of this nature, including customary events of default, and further provide that the trustee or holders of at least 25% in aggregate principal amount of the outstanding 5.75% Notes may declare them immediately due and payable upon the occurrence of certain events of default after the expiration of the applicable grace period. In addition, in the case of an event of default arising from certain events of bankruptcy, insolvency or reorganization relating to the Company or any of its significant subsidiaries, the 5.75% Notes will become due and payable immediately. This description is not intended to be complete in all respects and is qualified in its entirety by the terms of the 5.75% Notes, including their covenants and events of default. We were in compliance with all covenants as of December 31, 2020.
As described in Note 3 - “Summary of Significant Accounting Policies - Loss Reserves,” We establish case reserves and loss adjustment expenses ("LAE") reserves on delinquent loans that were reported to us as two or more payments past due and have not become current or resulted in a claim payment. Case reserves are established by estimating the number of loans in our inventory of delinquent loans that will result in a claim payment, which is referred to as the claim rate, and further estimating the amount of the claim payment, which is referred to as claim severity.
We have agreed to terms with a group of unaffiliated reinsurers for a reinsurance transaction with an effective date of January 1, 2021 with a similar structure to our existing QSR transactions that will cover most of our NIW in 2021 (with an additional 12.5% quota share) and 2022 (with a 15% quota share). Generally, we will receive an annual profit commission provided the annual loss ratio on the loans covered under the transaction remain below 57.5%.
Ceded premiums written and earned, net of profit commission $ 167,930 $ 111,550 $ 108,337
b. Net Prior Service Cost/(Credit) (247) (281) (351) 51 (34) (4,104)
1. Projected Benefit Obligation $ (423,713) $ (413,350) $ (28,714) $ (27,496)
1. Net Actuarial (Gain)/Loss $ 98,899 $ 99,826 $ (30,565) $ (18,005)
b. Recognized during year - Net Actuarial (Losses)/Gains (16,948) (8,412) 782 -
Total Assets at fair value $ 31,249 $ 379,996 $ 411,245
Table 12.3 summarizes the components of the provision for (benefit from) income taxes:
Repurchases may be made from time to time on the open market (including through 10b5-1 plans) or through privately negotiated transactions. The repurchase program may be suspended for periods or discontinued at any time, and in light of the uncertainty caused by the COVID-19 pandemic, we have temporarily suspended stock repurchases, but may resume them in the future.