We lease under a non-cancelable lease expiring in 2016 approximately 258,000 square feet in an office building in Houston, Texas, which is used for our corporate offices and for offices of several of our subsidiaries. In addition, we lease offices at approximately 420 additional locations that are used for branch offices and technology centers. These additional locations include significant leased facilities in Dallas, Denver, Los Angeles, New York, San Diego and Toronto.
We reported a net loss attributable to Stewart of $12.6 million for the year ended December 31, 2010 compared to a net loss attributable to Stewart of $51.0 million for 2009. On a basic and diluted per share basis, our net loss attributable to Stewart was $0.69 for the year ended December 31, 2010 compared to a net loss attributable to Stewart of $2.80 for 2009.
Revenues from direct operations declined 6.0% for the year 2010 compared to 2009. As long term rates began to rise and refinance transactions declined, closed title orders declined 18.1% for 2010 compared to 2009. Agency revenues decreased 3.3% in 2010 compared to 2009. Revenue per closed order for the year increased 14.9% from the previous year as our business mix shifted to include more commercial and sale transactions and fewer refinance transactions. Agency revenues represented 59.0% of total title revenues for the year. Declines in our revenues from direct operations were somewhat offset by growth in our international and commercial businesses, which were up 20.2% and 25.3%, respectively, for the year 2010 compared to 2009.
Our most critical accounting estimate is providing for title loss reserves. Our liability for estimated title losses as of December 31, 2010 comprises both known claims ($144.2 million) and our estimate of claims that may be reported in the future ($351.6 million). The amount of the reserve represents the aggregate future payments (net of recoveries) that we expect to incur on policy and escrow losses and in costs to settle claims.
Internal controls relating to independent agencies include, but are not limited to, pre-signing and periodic audits, site visits and reconciliations of policy inventories and premiums. The audits and site visits cover examination of the escrow account bank reconciliations and an examination of a sample of closed transactions. In some instances, we are limited in our scope by attorney agencies who cite client confidentiality. Certain states have mandated a requirement for annual reviews of all agencies by their underwriter. We also determine whether our independent agencies have appropriate internal controls as defined by the American Land Title Association and us. However, even with adequate internal controls in place, their effectiveness can be circumvented by collusion or improper management override at the independent agencies. To aid in the selection of independent agencies to review, we have developed an agency risk model that aggregates data from different areas to identify possible problems. This is not a guarantee that all independent agencies with deficiencies will be identified. In addition, we are typically not the only underwriter for which an independent agency issues policies, and independent agencies may not always provide complete financial records for our review.
Our accruals for revenues on unreported policies from agencies were not material to our consolidated assets or stockholders’ equity as of December 31, 2010 and 2009. The differences between the amounts our agencies have subsequently reported to us compared to our estimated accruals are substantially offset by any differences arising from prior years’ accruals and have been immaterial to consolidated assets and stockholders’ equity during each of the three prior years. We believe our process provides the most reliable estimate of the unreported revenues on policies and appropriately reflects the trends in agency policy activity.
Based on this evaluation, we estimate and expense to current operations any loss in value of these assets. As part of our process, we obtain input from third-party appraisers regarding the fair value of our reporting units. While we are responsible for assessing whether an impairment of goodwill exists, we utilize the input from third-party appraisers to assess the overall reasonableness of our conclusions. There were no impairment charges for goodwill or material impairment charges for other long-lived assets during 2010 or 2009. In June 2008, the Company’s REI segment incurred an impairment charge of $6.0 million, which is included in depreciation and amortization in our consolidated statement of operations, related to internally developed software that we subsequently determined will not be deployed into production.
Direct operating revenues, excluding large commercial policies, decreased 9.7% in 2010 compared to 2009, primarily due to fewer direct orders closed, although the average revenue per closing, excluding large commercial policies, increased 10.2% in 2010 compared to 2009. Direct orders closed, including large commercial policies, decreased 18.1% in 2010 compared to 2009, although the average revenue per closing, including large commercial policies, increased 14.9% during the same period. Our decrease in direct orders closed and increase in average revenue per closing are driven by a different mix of closings, with 2010 experiencing more large commercial closings and fewer residential refinancing closings than in 2009. On average, refinance premium rates are 60% of the title premium revenue of a similarly priced sale transaction.
Since the beginning of the current downturn in real estate markets across the country, the median selling price of homes has fallen 29.2% from August 2007 to January 2011, which has resulted in lower premium revenue per resale closing. As a consequence, in 2009 we began a review of our premium rates in all states. Where possible, we are seeking to raise rates or to modify agency splits (the percent of premium remitted to the underwriter compared to the amount retained by the agency) to levels necessary to improve profitability from our agency operations. To date, we have increased title premium rates in 22 states and have increased remittance rates with our independent agencies in 38 states. As these efforts were ongoing during most of 2010, we have not yet realized a full year of increased remittances.
REI revenues. Real estate information services operating revenues increased $24.3 million, or 42.7%, and $12.4 million, or 27.9%, in 2010 and 2009, respectively. The increase in 2010 was primarily due to a significant rise in demand for our loan modification services. The increase in 2009 was also due to a significant rise in our loan modification services, partially offset by a reduction of revenues due to a decrease in demand for post-closing lender services activity, a reduction in the number of Section 1031 tax-deferred property exchanges caused by the continued decline in the real estate market and the sale of subsidiaries in 2008.
In 2010, investment and other gains (losses) - net included realized gains of $11.8 million from the sale of debt and investments available-for-sale, $6.3 million primarily from a transfer of the rights to internally developed software, $1.2 million from the sale of interests in subsidiaries, $3.0 million from the sale of real estate, $0.8 million as a result of a reduction in accruals for office closure costs and $0.5 million from the change in fair value of the cash settlement option related to the convertible senior notes. The realized gains were partially offset by realized losses of $0.6 million for the impairment of cost-basis investments and $0.5 million from the sale of debt investments available-for-sale.
In 2008, investment and other gains (losses) - net included realized losses of $13.8 million from the sale of debt and equity investments available-for-sale, $12.4 million for the impairment of equity method and cost-basis investments, $8.7 million for office closure costs, $4.7 million for the impairment of equity securities available-for-sale and $3.4 million due to sale or impairment of other fixed assets, title plants and real estate. The realized losses were partially offset by realized gains of $13.6 million from the sale of debt and equity investments available-for-sale, $1.0 million for the sale of subsidiaries and $0.8 million for sales of title plants and real estate.
Employee costs. Our employee costs and certain other operating expenses are sensitive to inflation. Employee costs for the combined business segments decreased $14.0 million, or 2.9%, in 2010 and $72.3 million, or 13.1%, in 2009. The number of persons we employed at December 31, 2010, 2009 and 2008 was approximately 5,700, 6,100 and 6,300, respectively.
In 2010, we reduced our employee headcount company-wide by 130, or 2.2%, excluding the effects of divestitures. In 2010, employee costs were reduced primarily due to the sale and deconsolidation of several subsidiaries, partially offset by increases in state unemployment tax rates in certain states.
In 2009, other operating expenses for the combined business segments decreased $75.1 million, or 20.6%. Costs fixed in nature decreased $25.5 million, or 16.1%, in 2009, primarily due to decreases in rent and other occupancy expenses, insurance and technology costs. Costs that follow, to varying degrees, changes in transaction volumes and revenues decreased $12.7 million, or 9.9%, in 2009, excluding a $3.0 million credit due to a reversal of an accrual for a legal matter related to premium taxes resolved in our favor in 2009. This decrease was primarily related to the decline in transaction volume in our direct operations. Costs that fluctuate independently of revenues decreased $31.0 million, or 39.7%, in 2009, excluding reductions in estimates for a legal matter of $2.9 million in 2009. This decrease was primarily due to decreases in promotional costs, litigation defense and settlement costs and travel.
Title losses. Provisions for title losses, as a percentage of title operating revenues, were 9.6%, 11.3% and 11.2% in 2010, 2009 and 2008, respectively. The year ended December 31, 2010 included a reserve strengthening adjustment of $4.8 million (0.03% of title revenues) relating to policy years 2007 and 2008 due to higher than expected loss payments and incurred loss experience for these policy years. This brings the total strengthening charges for these policy years to $77.0 million, substantially all of which was recorded in 2008 and 2009. We do not currently anticipate future reserve strengthening for these policy years. Reserve strengthening adjustments are to provide for future losses that may be incurred on prior policy years, and are based on current loss experience for those policy years. Current losses that are higher than anticipated are an indication that total losses for a given policy year may be higher than originally calculated. Changes in the total estimated future loss for prior policy years are recorded in the period in which the estimate changes, and thus negatively impact the provision for title loss ratios. The increase in loss payment experience for recent policy years resulted in an increase in the loss ratio related to revenues recognized on policies issued in 2010, and, accordingly, a $2.6 million catch-up adjustment was recorded to title losses in the fourth quarter 2010.
Losses incurred on known claims for the year 2010 decreased 15.7% compared to the year 2009. The loss ratio on known claims from the independent agencies cancelled in recent years was 9.2% in 2010 while the loss ratio on the current independent agency network was 2.9%. More than 70% of independent agency claim payments were for agencies cancelled in recent years.
Income taxes. Our effective tax rates, based on earnings before taxes and after deducting noncontrolling interests (a loss of $4.5 million, $70.7 million and $242.7 million in 2010, 2009 and 2008, respectively), were (179.2%), 27.9% and (1.9%) for 2010, 2009 and 2008, respectively. Our effective income tax rate in 2010 was driven by foreign and state taxes and income taxes associated with subsidiaries not included in our consolidated federal tax return, net of tax benefits from certain tax credits, and by a $1.1 million decrease in the valuation allowance against our deferred tax assets. As of December 31, 2010, our valuation allowance against deferred tax assets was $91.9 million, which will be evaluated for reversal as we return to profitability.
Our effective tax rate in 2009 was significantly impacted by a benefit of $29.8 million due to the change in tax law in the fourth quarter 2009, which allowed us to carry back net operating losses to prior years.
Material contractual obligations consist primarily of notes payable, convertible senior notes, operating leases and estimated title losses. The timing above for payments of notes payable is based upon contractually stated payment terms of each debt agreement. The convertible senior notes will mature in 2014 unless converted earlier.
Our principal sources of cash from operations are premiums on title policies, title service-related transactions and loan modification services. Our independent agencies remit cash to us net of their contractual retention. Our principal cash expenditures for operations are employee costs, operating costs and title claims payments.
Our business continues to be labor intensive, although we have made significant progress in automating our services. We have centralized order processing into Regional Production Centers, which allows us to more easily adjust staffing levels as order volumes fluctuate. We reduced our number of employees by approximately 130 and 200 during 2010 and 2009, respectively, excluding the effects of divestitures.
Cash from investing activities was generated principally by proceeds from investments matured and sold in the amounts of $328.5 million, $477.1 million and $668.5 million in 2010, 2009 and 2008, respectively. We used cash for the purchases of investments in the amounts of $303.5 million, $369.4 million and $570.3 million in 2010, 2009 and 2008, respectively. The cash from sales and maturities not reinvested was used principally to fund operations.
Capital expenditures were $16.3 million, $11.0 million, and $18.0 million in 2010, 2009, and 2008, respectively. We have limited capital expenditures for new offices and other capital projects for the last three years due to the poor economic conditions. We expect that capital expenditures will continue to be near the 2010 level as we continue to aggressively manage cash flow. We have no material commitments for capital expenditures.
Throughout 2009 and 2010, we have worked to increase title premium rates charged and premium remittance rates to our underwriters. As of December 31, 2010, we have increased title premium rates in 22 states and have increased remittance rates with our independent agencies in 38 states. In addition, we have reduced our employee count and other operating costs in each of the last three years. We anticipate improved operating results, and thus cash flow, in 2011 from the impact of these actions and will continue to seek rate increases or modify agency splits where appropriate, as well as aggressively seek opportunities to lower operating costs.
Other comprehensive earnings (loss). Unrealized gains and losses on investments and changes in foreign currency exchange rates are reported net of deferred taxes in accumulated other comprehensive earnings, a component of stockholders’ equity, until realized. In 2010, net unrealized investment gains of $0.3 million, which increased our comprehensive income, were primarily related to temporary increases in market values of government bond investments, partially offset by decreases in municipal bond investments. Foreign currency exchange rates, primarily related to our Canadian operations, increased comprehensive income by $3.5 million, net of taxes, in 2010. Other comprehensive earnings included a $1.1 million provision for Canadian income taxes related to unrealized gains in 2010.