Our leases expire from 2020 through 2030 and we believe we will not have any difficulty obtaining renewals of leases as they expire or, alternatively, leasing comparable properties. The aggregate annual rent expense under all office leases was approximately $42.5 million in 2019.
The following table sets forth selected consolidated financial data, which were derived from our consolidated financial statements and should be read in conjunction with our audited consolidated financial statements, including the Notes thereto, beginning on page of this report. See also
$5.9 million of office closure costs primarily related to lease terminations included in other operating expenses ($4.7 million in the title segment and $1.2 million in the ancillary services and corporate segment),
$2.1 million of other non-operating charges ($1.3 million in the ancillary services and corporate segment and $0.8 million in the title segment).
$4.3 million of net realized and unrealized losses which were primarily related to fair value changes of equity securities investments,
$1.0 million of executive severance expenses included in employee costs ($0.6 million in the title segment and $0.4 million in the ancillary services and corporate segment), and
$0.8 million of office closure costs included in other operating expenses within the title segment.
Summary results of the title segment are as follows ($ in millions, except pretax margin):
Title operating revenues in the fourth quarter 2019 increased 11%, compared to the prior year quarter, as direct title revenues and gross independent agency revenues improved by 12% and 10%, respectively. The segment’s overall operating expenses in the fourth quarter 2019 increased $58.9 million, or 14%, compared to the last year’s quarter, primarily due to higher agency retention expense and other operating costs driven by increased title revenues, increased title loss expense primarily resulting from less favorable loss experience in portions of our non-Canadian international operations and the escrow loss in our commercial business, and the charges discussed above. Excluding the segment’s net realized and unrealized losses and other non-operating charges, pretax income in the fourth quarter 2019 would have been $33.0 million (6.5% margin) compared to pretax income of $35.1 million (7.7% margin) in the fourth quarter 2018.
Non-commercial domestic revenues increased in the fourth quarter 2019, compared to fourth quarter 2018, as a result of improved closed orders primarily driven by the current lower interest rate environment. Domestic commercial revenues were lower compared to the prior year quarter primarily as a result of a lower average fee per file during the fourth quarter 2019. Fourth quarter 2019 domestic commercial fee per file was approximately $12,300, a 5% decrease from last year’s quarter, while domestic residential fee per file decreased 11% to approximately $2,100, primarily due to the higher ratio of refinancing to purchase orders in the fourth quarter 2019 versus fourth quarter 2018. Total international title revenues increased $4.0 million, or 15%, primarily driven by increased volumes in our Canada operations.
Gross revenues from independent agency operations increased 10% in the fourth quarter 2019, compared to the fourth quarter 2018, with the independent agency remittance rate of 17.7% remaining comparable to that of the prior year quarter.
The segment’s operating revenues decreased $5.2 million in the fourth quarter 2019 compared to the prior year quarter, primarily as a result of reductions in orders from several customers. The segment’s results for the fourth quarter 2019 and 2018 included approximately $10.9 million and $8.8 million, respectively, of net expenses attributable to parent company and corporate operations. Excluding the segment’s net realized and unrealized losses of $4.6 million in the fourth quarter 2019 and the non-operating charges discussed above, the fourth quarter 2019 pretax loss improved to $2.8 million compared to $5.2 million in the prior year quarter.
Actual results can differ from our accounting estimates. While we do not anticipate significant changes in our estimates, there is a risk that such changes could have a material impact on our consolidated financial condition or results of operations for future periods. The discussion of critical accounting estimates below should be read in conjunction with the related accounting policies disclosed within Note 1 to our audited consolidated financial statements in Part IV.
Provisions for title losses, as a percentage of title operating revenues, were 4.6%, 3.9% and 5.1% for the years ended December 31, 2019, 2018 and 2017, respectively. Actual loss payment experience, including the impact of large losses, is the primary reason for increases or decreases in our loss provision. A 100 basis point change in the loss provisioning percentage, a reasonably likely scenario based on our historical loss experience, would have increased or decreased our provision for title losses and pretax operating results by approximately $18.4 million for the year ended December 31, 2019.
In 2019, total known claims provisions increased by $12.1 million, or 15%, to $91.9 million primarily due to the higher reported claims relating to prior year policies compared to 2018. Total 2019 provisions - IBNR increased by $12.7 million, or 24%, to $66.0 million compared to the prior year, primarily as a result of unfavorable loss experience in 2019 and a $4.0 million prior policy year reserve reduction during 2018. In 2018, total known claims provisions increased to $79.8 million from $77.5 million in 2017, as a result of slightly higher reported claims relating to prior year policies. Total 2018 provisions - IBNR decreased by $25.0 million, or 32%, to $53.3 million compared to the prior year, primarily due to a favorable loss experience in 2018, which resulted in a lower current year policy provisioning rate and a $4.0 million prior policy year reserve reduction. As a percentage of title operating revenues, current year provisions - IBNR were 3.3%, 2.8% and 3.8% in 2019, 2018 and 2017, respectively. Provisions - IBNR relating to prior policy years for 2019 and 2017 were primarily related to adverse developments on large claims.
Large title losses due to independent agency defalcations typically occur when the independent agency misappropriates funds from escrow accounts under its control. Such losses are usually discovered when the independent agency fails to pay off an outstanding mortgage loan at closing (or immediately thereafter) from the proceeds of the new loan. These incurred losses are typically more severe in terms of dollar value compared with traditional title policy claims since the independent agency is often able, over time, to conceal misappropriation of escrow funds relating to more than one transaction through the constant volume of funds moving through its escrow accounts. In declining real estate markets, lower transaction volumes result in a lower incoming volume of funds, making it more difficult to cover up the misappropriation with incoming funds. Thus, when the defalcation is discovered, it often relates to several transactions. In addition, the overall decline in an independent agency’s revenues, profits and cash flows increases the agency’s incentive to improperly utilize the escrow funds from real estate transactions. For each of the three years ended December 31, 2019, our net title losses due to independent agency defalcations were not material.
The quantitative analysis involves the comparison of the fair value of each reporting unit to its carrying amount. The goodwill impairment is calculated as the excess of the reporting unit's carrying amount over the estimated fair value and is charged to current operations. While we are responsible for assessing whether an impairment of goodwill exists, we utilize inputs from third-party appraisers in performing the quantitative analysis. We estimate the fair value using a combination of the income approach (discounted cash flow (DCF) technique) and the market approach (guideline company and precedent transaction analyses). The DCF model utilizes historical and projected operating results and cash flows, initially driven by estimates of changes in future revenue levels, and risk-adjusted discount rates. Our projected operating results are primarily driven by anticipated mortgage originations, which we obtain from projections by industry experts, for our title reporting units and expected contractual revenues for our ancillary services reporting unit. Fluctuations in revenues, followed by our ability to appropriately adjust our employee count and other operating expenses, or large and unanticipated adjustments to title loss reserves, are the primary reasons for increases or decreases in our projected operating results. Our market-based valuation methodologies utilize (i) market multiples of earnings and/or other operating metrics of comparable companies and (ii) our market capitalization and a control premium based on market data.
During 2019 and 2018, we concluded that the goodwill related to each of our reporting units was not impaired after performing our quantitative impairment analysis. Refer to Notes 1-L and 8 to our audited consolidated financial statements for details on goodwill.
Operations. Our primary business is title insurance and settlement-related services. We close transactions and issue title policies on homes, commercial and other real properties located in all 50 states, the District of Columbia and international markets through policy-issuing offices, independent agencies and centralized title services centers. Our ancillary services and corporate segment includes our parent holding company expenses and certain enterprise-wide overhead costs, along with our ancillary services operations, which are principally search and valuation services.
ability to attract and retain highly productive sales executives and associates;
Total mortgage originations improved 24% in 2019 compared to 2018 as refinancing and purchase lending increased 73% and 3%, respectively, primarily as a result of lower interest rates and continued economic expansion in 2019. Fannie Mae forecasts total mortgage originations to slow down slightly by 6% in 2020 as it expects home price increases and inventory constraints will continue. Compared to the prior year, 2019 new home sales improved 11%, primarily influenced by the low interest rate environment and a modest 1% dip in average home prices, while 2019 existing home sales remained flat and average home prices grew 5% from 2018. For the three years ended December 31, 2019, average monthly mortgage interest rates (30-year, fixed-rate) have fallen from a high of 4.87% in November 2018 to a low of 3.61% in September 2019. For the year 2020, Fannie Mae projects the 30-year average mortgage interest rate to be 3.7%, while new and existing home sales are expected to improve by 6% and 2%, respectively.
Revenues from direct title operations in 2019 increased $36.3 million, or 4%, compared to 2018, primarily due to the $45.1 million (9%) and $3.3 million (3%) improvement in non-commercial domestic and total international revenues, respectively, which were partially offset by a $12.1 million, or 6%, decline in domestic commercial revenues. The improvement in non-commercial domestic revenues, which include revenues from purchase and refinancing transactions, was primarily due to a 13% improvement in closed orders influenced by lower interest rates in 2019 compared to the prior year. Domestic commercial revenues declined primarily as a result of lower number of commercial transactions in 2019 versus the prior year. Total international revenues increased primarily due to improved transaction volumes in our Canada and United Kingdom operations, partially offset by the effect of the weaker average exchange rates of the Canadian dollar and United Kingdom pound against the U.S. dollar during 2019 compared to 2018.
Revenues from direct title operations in 2018 decreased $29.2 million, or 3%, compared to 2017, primarily as a result of lower non-commercial domestic and international revenues, which were partially offset by higher commercial revenues. Revenues from purchase transactions and centralized title operations decreased 2% and 48%, respectively, primarily due to the lower purchase and refinancing orders. Total domestic commercial revenues increased $11.3 million, or 5%, primarily as a result of a higher average fee per file in 2018 versus the prior year. Total international revenues declined $12.2 million, or 10%, primarily due to lower transaction volumes from our Canada operations, partially offset by growth from our United Kingdom operations.
*Prior year 2018 and 2017 commercial orders were updated to take into account changes to our domestic order tracking process and the exclusion of international orders.
Gross revenues from independent agency operations in 2019 and 2018 declined $33.4 million (or 3%) and $12.4 million (or 1%), respectively; while, net agency revenues also decreased $5.6 million (or 3%) and $2.3 million (or 1%), respectively, compared to the corresponding prior year. The average agency remittance rate remained approximately the same during the years 2017 through 2019. Refer further to the "Retention by independent agencies" discussion under Expenses below.
Ancillary services revenues. Ancillary services revenues decreased $13.3 million, or 26%, in 2019 versus 2018 and also decreased $5.1 million, or 9%, in 2018 compared to 2017, as a result of decreased orders from several search and valuation services' customers.
Investment income. Investment income in 2019 was comparable to 2018, while investment income in 2018 slightly increased to $19.7 million from $18.9 million in 2017, primarily due to increased income on higher short-term investments and cash equivalents balances. Refer to Note 6 to our audited consolidated financial statements for additional details.
Our total employee counts at December 31, 2019, 2018 and 2017 were approximately 5,300, 5,400 and 6,000, respectively. Average cost per employee increased 7% in 2019 versus 2018, primarily due to increased incentive compensation and the executive severance charges mentioned above. The average cost per employee in 2018 also increased 7% compared to 2017, primarily due to increased incentive compensation on higher commercial revenues and the lower average employee count largely due to employee terminations in direct title operations.
Employee costs in the title segment increased $7.2 million, or 1%, in 2019 versus 2018 and also increased $5.2 million, or 1%, in 2018 versus 2017, primarily due to increased incentive compensation and severance charges, partially reduced by the lower salaries expense resulting from lower average employee counts, as mentioned above. Employee costs in the ancillary services and corporate segment decreased $2.5 million, or 8%, in 2019 versus 2018, and also decreased $8.9 million, or 24%, in 2018 versus 2017, primarily due to employee count reductions relating to volume declines during 2019 and 2018.
Consolidated other operating expenses in 2019 were comparable to 2018, while other operating expenses in 2018 decreased $6.2 million, or 2%, compared to 2017. As a percentage of total operating revenues, other operating expenses were 18.4%, 18.3% and 18.2% in 2019, 2018 and 2017, respectively. In 2019, other operating expenses included charges of primarily $6.8 million of third-party advisory expenses related to the terminated FNF merger transaction, $6.6 million of office closures costs primarily related to lease terminations and fixed asset disposals and $2.2 million of executive insurance policy settlement expenses. In 2018, other operating expenses included charges of primarily $12.7 million of third-party advisory expenses related to the FNF merger transaction and $1.2 million of litigation expense related to a prior years' lender services acquisition. In 2017, other operating expenses included charges of primarily $3.2 million of office closure costs, $2.9 million of third-party consulting fees related to the corporate strategic alternatives review and $2.4 million of acquisition integration expenses. Excluding the impact of the non-operating charges, other operating expenses, as a percentage of total operating revenues, would have been 17.5%, 17.5% and 17.7% in 2019, 2018 and 2017, respectively.
Title losses paid were $91.0 million, $82.7 million and $84.2 million in 2019, 2018 and 2017, respectively. The higher claims payments in 2019 compared to the prior year were primarily due to higher payments on non-large claims, partially offset by lower payments on large claims. The decrease in claims payments in 2018, compared to 2017, was primarily due to lower payments on non-large claims. Claims payments made on large title claims, net of insurance recoveries, during 2019, 2018 and 2017 were $6.1 million, $7.3 million and $7.3 million, respectively.
Our liability for estimated title losses as of December 31, 2019 and 2018 comprises both known claims and our IBNR. Known claims reserves are reserves related to actual losses reported to us. Our reserve for known claims comprises both claims related to title insurance policies as well as losses arising from escrow closing and funding operations due to fraud or error (which are recognized as expense when discovered). The amount of the reserve represents the aggregate, non-discounted future payments (net of recoveries) that we expect to incur on policy and escrow losses and in costs to settle claims.
Income taxes. Our effective tax rates for 2019, 2018 and 2017 were 25.3%, 22.1% and 23.5%, respectively, based on income before taxes (after deducting noncontrolling interests) of $105.3 million, $61.0 million and $63.6 million, respectively.
Our 2018 effective tax rate included $2.7 million of income tax net benefits primarily related to adjustments in connection with the final determination of the tax effects of the 2017 Tax Cuts and Jobs Act (the 2017 Act), previously unrecognized research and development tax credits and other 2017 return-to-provision and true-up adjustments. Our 2017 effective tax rate included $8.8 million of income tax net benefits primarily related to the effects of the 2017 Act and previously unrecognized research and development tax credits. Excluding these income tax effects, our effective tax rates for 2018 and 2017 were 26.6% and 37.3%, respectively. The lower effective tax rates in 2019 and 2018, as compared to 2017, were primarily the result of the reduced corporate tax rate enacted as part of the 2017 Act. Refer to Note 7 to our audited consolidated financial statements for details on income taxes.
Material contractual obligations consist primarily of amounts drawn on our line of credit facility, other notes payable, 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. Other notes payable include short-term loan agreements in connection with our Section 1031 business (Section 1031 notes) and finance lease obligations. Operating leases are primarily for office space and expire over the next eleven years, but also include short-term leases and equipment leases. The timing shown above for the payments of estimated title losses is not set by contract. Rather, it is projected based on historical payment patterns. The actual timing of estimated title loss payments may vary materially from the above projection since claims, by their nature, are complex and paid over long periods of time. Refer to Notes 10, 11 and 15 to our audited consolidated financial statements for details.
A substantial majority of our consolidated cash and investments as of December 31, 2019 was held by Guaranty and its subsidiaries. The use and investment of these funds, dividends to the parent company, and cash transfers between Guaranty and its subsidiaries and the parent company are subject to certain legal and regulatory restrictions. In general, Guaranty may use its cash and investments in excess of its legally-mandated statutory premium reserve (established in accordance with requirements under Texas law) to fund its insurance operations, including claims payments. Guaranty may also, subject to certain limitations, provide funds to its subsidiaries (whose operations consist principally of field title offices and ancillary services operations) for their operating and debt service needs.
The ability of Guaranty to pay dividends to its parent is governed by Texas insurance law. The TDI must be notified of any dividend declared, and any dividend in excess of the statutory maximum of 20% of surplus (which was approximately $115.0 million as of December 31, 2019) would be, by regulation, considered extraordinary and subject to pre-approval by the TDI. Also, the Texas Insurance Commissioner may raise an objection to a planned distribution during the notification period. Guaranty’s actual ability or intent to pay dividends to its parent may be constrained by business and regulatory considerations, such as the impact of dividends on surplus and the liquidity ratio, which could affect its ratings and competitive position, the amount of insurance it can write and its ability to pay future dividends. As of December 31, 2019, our liquidity ratio for our principal underwriter was 116% based on its statutory balance sheet. The liquidity ratio is calculated using Guaranty's total cash and investments divided over its total liabilities. Our internal objective is to maintain a ratio of at least 100%, as we believe that ratio is crucial to our competitiveness in the market. Further, depending on business and regulatory conditions, we may in the future need to retain cash in Guaranty or even raise cash in the capital markets to contribute to it in order to maintain its ratings or statutory capital position. Such a requirement could be the result of investment losses, reserve charges, adverse economic environment operating conditions or changes in interpretation of statutory accounting requirements by regulators. Guaranty paid dividends of $25.0 million to its parent during 2018 and none during 2019.
During 2018 and 2017, we used $19.0 million and $17.4 million, respectively, of cash for acquisitions of title offices, while cash used for purchases of property and equipment during 2019, 2018 and 2017 amounted to $17.1 million, $10.7 million and $16.4 million, respectively. We maintain investment in capital expenditures at a level that enables us to implement technologies for increasing our operational and back-office efficiencies and to pursue growth in key markets.
Financing activities and capital resources. Total debt and stockholders’ equity were $110.6 million and $753.8 million, respectively, as of December 31, 2019. Of the total notes payable activity during 2019, 2018 and 2017, proceeds of $30.5 million, $14.5 million and $40.4 million, respectively, and payments of $25.0 million, $16.3 million and $42.7 million, respectively, were related to Section 1031 notes. During 2017, we drew $16.0 million from our unsecured line of credit facility and repaid $10.0 million on that line of credit facility, while we increased the line of credit facility to $150.0 million during 2018. Refer to Note 10 to our audited consolidated financial statements for details.
There were no stock repurchases during the three years ended December 31, 2019, except for repurchases of approximately 12,500 shares (aggregate purchase price of approximately $0.5 million) in 2019, 28,600 shares (aggregate purchase price of approximately $1.2 million) in 2018, and 17,300 shares (aggregate purchase price of approximately $0.7 million) in 2017 in relation to the statutory income tax withholding on the vesting of restricted share grants to executives and senior management.
Effect of changes in foreign currency rates. The effect of changes in foreign currency rates on the consolidated statements of cash flows was a net increase (decrease) in cash and cash equivalents of $2.9 million, $(3.8) million and $2.9 million in 2019, 2018 and 2017, respectively. Our principal foreign operating unit is in Canada, and, on average, the value of the Canadian dollar, relative to the U.S. dollar, appreciated during 2019 and 2017, while it declined during 2018.
In 2017, net unrealized investment losses of $0.3 million, net of taxes, which decreased our other comprehensive income, were primarily related to temporary decreases in fair values of foreign bond and equity securities investments, partially offset by the increase in fair values of municipal and corporate securities investments. Changes in foreign currency exchange rates, primarily related to our Canadian operations, increased other comprehensive income by $8.4 million, net of taxes, in 2017.
Forward-looking statements. Certain statements in this report are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements relate to future, not past, events and often address our expected future business and financial performance. These statements often contain words such as "expect," "anticipate," "intend," "plan," "believe," "seek," "will," "foresee" or other similar words. Forward-looking statements by their nature are subject to various risks and uncertainties that could cause our actual results to be materially different than those expressed in the forward-looking statements. These risks and uncertainties include, among other things, the volatility of economic conditions; adverse changes in the level of real estate activity; changes in mortgage interest rates, existing and new home sales, and availability of mortgage financing; our ability to respond to and implement technology changes, including the completion of the implementation of our enterprise systems; the impact of unanticipated title losses or the need to strengthen our policy loss reserves; any effect of title losses on our cash flows and financial condition; the ability to attract and retain highly productive sales associates; the impact of vetting our agency operations for quality and profitability; independent agency remittance rates; changes to the participants in the secondary mortgage market and the rate of refinancing that affects the demand for title insurance products; regulatory non-compliance, fraud or defalcations by our title insurance agencies or employees; our ability to timely and cost-effectively respond to significant industry changes and introduce new products and services; the outcome of pending litigation; the impact of changes in governmental and insurance regulations, including any future reductions in the pricing of title insurance products and services; our dependence on our operating subsidiaries as a source of cash flow; our ability to access the equity and debt financing markets when and if needed; our ability to grow our international operations; seasonality and weather; and our ability to respond to the actions of our competitors. We expressly disclaim any obligation to update, amend or clarify any forward-looking statements contained in this report to reflect events or circumstances that may arise after the date hereof, except as may be required by applicable law.