Order. Seven of such localities were in Florida, three were in Michigan, and one each was in Washington, D.C. and St. Louis, Missouri. Pursuant to the terms of the Consent Order, the Company may not acquire, without prior notice to the FTC, any interest in a title plant in any of the named localities for a period of 10 years following the date of the Consent Order.
The information set forth in the following table should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements and Notes thereto.
The following discussion includes, in addition to actual results of operations, information on pro forma results of operations that assumes the Commonwealth and Transnation acquisition was effective for the entire years of 1998 and 1997. The Company's primary business is the insurance of titles to real property, which is greatly influenced by the real estate economy. During the three year period from 1997 to 1999, the Company benefited from the execution of
In addition to the premiums and related fees, the Company earns investment income from its investment portfolio of primarily fixed-maturity securities. Investment income includes dividends and interest as well as realized capital gains or losses on the portfolio. The Company regularly reexamines its portfolio strategies in light of changing earnings or tax situations.
Comparison of Years Ended December 31, 1999, December 31, 1998 and December 31, 1997
The Company reported pre-tax investment income of $48.0 million, $49.3 million and $16.3 million in 1999, 1998 and 1997, respectively. Excluding capital gains and losses, investment income was $49.6 million, $46.5 million and $16.6 million in 1999, 1998 and 1997, respectively. The improvement in 1999 and 1998 was principally due to the addition of earnings from the investments acquired in the Commonwealth and Transnation transaction.
Agents' Commissions. Commissions paid to title insurance agents are the largest single expense incurred by the Company. The commission rate varies by geographic area in which the commission was earned. Commissions as a percentage of agency revenue were 77.8% in 1999, 77.6% in 1998 and 75.0% in 1997.
Provision for Policy and Contract Claims. The Company's claims experience has shown improvement in recent years. The loss ratio (the provision for policy and contract claims as a percentage of operating revenues) was 4.9%, 5.2% and 5.4% in 1999, 1998 and 1997, respectively. Claims paid as a percentage of operating revenues were 3.2%, 2.8% and 4.4% in 1999, 1998 and 1997, respectively.
Cash provided by operating activities for the years ended December 31, 1999, 1998 and 1997 was $97.6 million, $165.1 million and $18.8 million, respectively. As of December 31, 1999, the Company held cash and invested cash of $163.9 million and fixed-maturity securities of $735.1 million.
In 1999, the Board of Directors approved plans to repurchase 2.0 million of the Company's issued and outstanding common shares. By December 31, 1999, the Company had repurchased 1.7 million of such shares at a cost of $43.4 million. The additional authorized repurchases were completed in the first quarter of 2000. Repurchases were funded from available corporate funds.
Upon closing the acquisition of Commonwealth and Transnation on February 27, 1998, the Company incurred debt of $207.5 million under a credit facility and issued 2.2 million shares of 7% Series B Cumulative Convertible Preferred Stock. The Company estimates that servicing the debt and preferred stock will require approximately $20.0 million per year, which management expects to be funded largely from cash flow from operations. Additionally, management believes that these cash requirements will be partially offset by approximately $15.0 million of federal income tax benefits related to the tax deductibility of interest expense, amortization of intangibles and amortization of tax reserve discount. In view of the historical ability of the Company to generate strong, positive cash flows, and the strong cash position and relatively conservative capitalization structure of the Company, management believes that the Company will have sufficient liquidity and adequate capital resources to meet both its short- and long-term capital needs. In addition, the Company has $30.0 million available under the credit facility which was unused at December 31, 1999.
The Company also has long-term debt of $207.5 million bearing interest at 6.42% at December 31, 1999. A 0.25% change in the interest rate would affect income before income taxes by approximately $0.5 million annually.
Certain information contained in this Annual Report on Form 10-K includes "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Among other things, these statements relate to the financial condition, results of operation and business of the Company. In addition, the Company and its representatives may from time to time make written or oral forward-looking statements, including statements contained in other filings with the Securities and Exchange Commission and in its reports to shareholders. These forward-looking statements are generally identified by phrases such as "the Company expects," "the Company believes" or words of similar import. These forward-looking statements involve certain risks and uncertainties and other factors that may cause the actual results, performance or achievements to be materially different from any future results,