- ---------- (1) These leases terminate in 2004. (2) This lease terminates in 2007. (3) These leases terminate in 2005. (4) These leases terminate in 2001. (5) This lease terminates in 2009. (6) This lease terminates in 2003.
A comparison of the results of operations of the Company for 2000 with 1999 and 1999 with 1998 follows.
GENERAL. The Company's two segments of operations are title and real estate information ("REI"). In general, the principal factors that contribute to increases in the Company's operating revenues for both segments include declining mortgage interest rates (which usually increase home sales and refinancing transactions), rising home prices, higher premium rates, increased market share, additional revenues from new offices and increased revenues from commercial transactions. Although relatively few in number, large commercial transactions typically yield higher premiums.
Operating in these mortgage interest rate environments and in strong general economies, real estate activity in 1998 was very strong. In 1999, existing home sales remained strong, increasing about 4.6%. However, refinancing transactions dropped significantly during the second half of 1999. In 2000, existing home sales declined about 3.7% from 1999. Refinancing transactions also continued to decline in 2000. The annual average for refinancing to total loan applications was 51.3% in 1998, 31.3% in 1999 and 19.6% in 2000. At the end of 2000, however, refinancings had increased to about 40%.
Other revenues in 2000 included $1.6 million in losses in an equity investee startup operation. In 1999 other revenues included a $1.3 million pretax gain resulting from a settlement of a lawsuit and a related sale of an equity ownership in a title agency.
REI REVENUES. Real estate information revenues were $52.5 million in 2000, $59.0 million in 1999 and $50.4 million in 1998. The decrease in 2000 resulted primarily from decreased real estate transactions and fewer ongoing mapping and title plant projects. The increase in 1999 was primarily due to a significant number of new businesses started and additional income earned from existing operations. The increases in 1999 were partially offset by a decrease in business volume due to increases in mortgage interest rates.
INVESTMENTS. Investment income increased 7.5% in 2000 and 9.6% in 1999 primarily because of increases in yields. Investment gains in 2000, 1999 and 1998 were realized as part of the ongoing management of the investment portfolio for the purpose of improving performance.
In the REI segment, employee costs (and cost ratios) increased in 2000 primarily due to a shift in focus to provide more post-closing services to lenders. These services are considerably more labor intensive. Certain REI startup operations also increased expenses.
OTHER OPERATING EXPENSES. Other operating expenses for the combined business segments increased 2.4% in 2000 and 18.3% in 1999. The overall increase in other operating expenses for the combined business segments in 2000 was in new offices, rent, search fees and provisions for regulatory actions brought against the Company. These were offset partially by reductions in premium taxes and certain REI expenses in response to volume decreases. In 1999 the increase was caused primarily by a higher volume of services and products purchased for resale, rent, the expense of new offices, business promotion and other REI expenses. The year 1999 also included a $1.3 million charge resulting from a lawsuit settlement in an REI operation.
Other operating expenses also include title plant expenses, travel, delivery costs, telephone, supplies and policy forms. Most of these expenses follow, to varying degrees, the changes in transaction volume and revenues.
TITLE LOSSES. Provisions for title losses, as a percentage of title premiums, fees and other revenues, were 4.5%, 4.5% and 4.4% in 2000, 1999 and 1998, respectively. The continued improvement in industry trends in claims and increases in refinancing transactions, which result in lower loss exposure, have led to lower loss ratios in recent years.
INCOME TAXES. The provision for federal and state income taxes represented effective tax rates of 47.1%, 39.0% and 38.4% in 2000, 1999 and 1998, respectively. The 2000 effective rate was higher primarily due to state income taxes which were proportionately higher in relation to taxable income.
The liquidity of the Company itself, excluding Guaranty and its subsidiaries, is comprised of cash and investments aggregating $4.8 million and short-term liabilities of $0.9 million at December 31, 2000. The Company knows of no commitments or uncertainties which are likely to materially affect the ability of the Company and its subsidiaries to fund cash needs.