The Company realized net investment gains of approximately $290,000 during 2000 compared to $1.2 million in 1999. For the fourth quarter of 2000, the Company realized net investment losses of approximately $1.4 million, which were primarily attributable to a repositioning of the fixed maturity portfolio.
Net losses and loss adjustment expenses (net of reinsurance recoveries) increased by 6.7% in 2000 to $7.6 million compared to $7.1 million in 1999. This increase reflects the growing amount of the Company's insurance in force and the resulting recognition of a greater amount of insurance in force reaching its highest claim frequency years.
Amortization of deferred policy acquisition costs increased by 18.1% to $8.2 million in 2000 compared to $7.0 million for 1999. The increase in amortization reflects a growing balance of deferred policy acquisition costs to amortize as the Company builds its total insurance in force.
Other operating expenses increased 6.3% to $16.0 million for 2000 compared to $15.1 million for the same period in 1999. This increase in expenses is primarily attributable to advertising, personnel, and facilities and equipment costs required to support the Company's product development, technology enhancements, geographic expansion, and production. Amortization of the company's policy administration system began in December of 2000 and accounted for approximately $129,000 of other operating expenses. Amortization of this system is expected to contribute approximately $1.5 million to other operating expenses in 2001.
The expense ratio (ratio of underwriting expenses to net premiums written) for 2000 was 33.7% compared to 34.5% for 1999. Contributing to this improvement is the higher level of written premiums in 2000 partially offset by the increase in expenses.
Net new insurance written was $4.4 billion for 1999 as compared to $4.8 billion for 1998, a decrease of 7.8%. For the fourth quarter, net new insurance written decreased 41.5% in 1999 to $892 million as compared to $1.5 billion in
Refinance activity was 25.0% (11.5% in the fourth quarter) of new insurance written in 1999 compared to 31.7% (34.3% in the fourth quarter) in 1998, reflecting the rise in interest rates during the year. Persistency, or the amount of insurance in force remaining from one-year prior, was 77.1% at December 31, 1999, compared to 70.0% at December 31, 1998.
Net losses and loss adjustment expenses (net of reinsurance recoveries) increased by 1.5% in 1999 to $7.1 million compared to $7.0 million in 1998. This
The Company's loss ratio (the ratio of net incurred losses to earned premiums) was 11.1% for 1999 compared to 13.3% for 1998. The loss ratio was 7.8% for the fourth quarter of 1999 compared to 18.6% for the fourth quarter of 1998. The Company's favorable loss ratio reflected the low level of delinquencies compared to the number of insured loans and the fact that approximately 79% (78% at year-end 1998) of the Company's insurance in force was originated in the last 36 months.
The Company generated positive cash flow from operating activities for 2000 of $32.7 million compared to $30.8 million for 1999. The increase in operating cash flow reflects the growth in insurance written, insurance in force, and Triad's investment portfolio, partially offset by the increase in paid claims and other operating expenses.
The Company's loss reserves increased to $15.0 million at December 31, 2000, compared to $14.8 million at December 31, 1999. This growth is the result of the increases in new insurance written and the maturing of the Company's risk in force. Consistent with industry practices, the Company does not establish loss reserves for future claims on insured loans that are not currently in default. The Company's reserves per delinquent loan were $20,300 at December 31, 2000, compared to $21,400 at December 31, 1999. The Company's delinquency ratio, the ratio of delinquent insured loans to total insured loans, was 0.60% at December 31, 2000, compared to 0.64% at December 31, 1999.
Total stockholders' equity increased to $199.8 million at December 31, 2000, from $157.1 million at December 31, 1999. This increase resulted primarily from net income of $35.0 million and net unrealized gains on invested assets classified as available-for-sale of $7.1 million (net of income tax).
Triad's total statutory policyholders' surplus increased to $101.0 million at December 31, 2000, from $94.6 million at December 31, 1999. This increase resulted primarily from statutory net income of $47.8 million, offset by increases in the statutory contingency reserve of $36.9 million and in non-admitted assets of $3.9 million. Triad's statutory earned surplus was $17.3 million at December 31, 2000, compared to $10.9 million at December 31, 1999, reflecting, primarily, growth in statutory net income greater than the increase in the statutory contingency reserve. Approximately $540,000 and $1.0 million of the statutory earned surplus for December 31, 2000, and December 31, 1999, respectively, was attributable to unrealized gains. The balance in the statutory contingency reserve was $150.8 million at December 31, 2000, compared to $113.8 million at December 31, 1999.
Triad's ability to write insurance depends on the maintenance of its claims-paying ability ratings and the adequacy of its capital in relation to risk in force. A significant reduction of capital or a significant increase in risk may impair Triad's ability to write additional insurance. A number of states also generally limit Triad's risk-to-capital ratio to 25-to-1. As of December 31, 2000, Triad's risk-to-capital ratio was 14.8-to-1 as compared to 15.4-to-1 at December 31, 1999, and 13.5-to-1 for the industry as a whole at December 31, 1999, the latest industry data available.
Management's Discussion and Analysis and this Report contain forward looking statements relating to future plans, expectations, and performance which involve various risks and uncertainties, including but not limited to the following: interest rates may increase from their current levels; housing transactions and mortgage issuance may decrease for many reasons including changes in interest rates or economic conditions; the Company's market share may change as a result of changes in underwriting criteria, or competitive products or rates; the amount of new insurance written could be affected by changes in federal housing legislation, including changes in the Federal Housing Administration loan limits and coverage requirements of Freddie Mac and Fannie Mae; the Company's financial condition and competitive position could be affected by legislation impacting the mortgage guaranty industry specifically and the financial services industry in general; rating agencies may revise methodologies for determining the Company's claims-paying ability ratings and may revise or withdraw the assigned ratings at any time; decreases in persistency, which are affected by loan refinancings in periods of low interest rates, may have an adverse effect on earnings; the amount of new insurance written and the growth of insurance in force or risk in force as well as the performance of the Company may be adversely impacted by the competitive environment in the private mortgage industry, including the type, structure, and pricing of products and services offered by the Company and its competitors; the Company's performance may be impacted by changes in the performance of the financial markets and general economic conditions. Economic downturns in regions where Triad's risk is more concentrated could have a particularly adverse effect on Triad's financial condition and loss development. Accordingly, actual results may differ from those set forth in the forward- looking statements. Attention is also directed to other risk factors set forth in documents filed by the Company with the Securities and Exchange Commission.