Total revenues for 2014 were $1,870.8 million, a decrease of $57.2 million, or 3.0%, from $1,928.0 million for the 2013 year, due principally to fewer transactions closed resulting from a decline in overall housing industry activity, partially offset by the impact of acquisitions.
Our title segment revenues for the fourth quarter 2014 were $449.3 million, an increase of 6.3% from the fourth quarter 2013 and an increase sequentially of 2.0% from the third quarter 2014. In the fourth quarter 2014, the title segment generated pretax earnings of $45.6 million (10.2% margin), as compared with fourth quarter 2013’s pretax earnings of $48.8 million (11.5% margin) and third quarter 2014 pretax earnings of $74.9 million (17.0% margin). Title segment results for the third quarter 2014 include the aforementioned title loss recovery. Our direct operations include local offices, commercial and international operations. We generate commercial revenues both domestically and internationally. U.S. and Canadian commercial revenues increased 12.9% from the fourth quarter 2013 to $47.8 million, and 15.9% sequentially from the third quarter 2014. For the year ended December 31, 2014, commercial revenues increased 13.4%. During 2014, we refined our systems for tracking international revenue and beginning fourth quarter 2014, we reported on commercial revenues generated outside of the United States and Canada, which include Europe, Australia, the Caribbean, and Latin America. Commercial revenues from those areas were $2.8 million for the fourth quarter 2014, and $14.8 million for the full year. For the fourth quarter, total international revenues were $28.3 million, up 1.3% from $27.9 million in the fourth quarter 2013. For the year, total international revenues were $116.6 million, up 3.4% from $112.8 million in 2013.
Revenues from our mortgage services segment increased to $70.1 million for the fourth quarter 2014, from $22.8 million in the fourth quarter 2013, largely due to acquisitions of Wetzel Trott, Inc., the title and collateral valuation business of DataQuick Lending Solutions; and LandSafe Title, all of which closed in the second and third quarters 2014. Revenues also increased as the result of new contracts which began contributing meaningful revenue during the second quarter and a net realized gain of $7.4 million. As a result, the segment reported pretax earnings of $7.4 million in the fourth quarter 2014 compared to a pretax loss of $3.7 million and pretax earnings of $3.3 million for the fourth quarter 2013 and third quarter 2014, respectively.
Provisions for title losses, as a percentage of title operating revenues, were 4.7%, 5.9% and 8.1% for the years ended December 31, 2014, 2013 and 2012, respectively. We recorded an increase related to large claims of $6.9 million in the fourth quarter of 2014 due to new large claims and adjustments to existing large claims and we recorded a policy loss reserve reduction in the third quarter of 2014 relating to a partial recovery on a large claim recorded in prior years. Actual loss payment experience, including the impact of large losses, is the primary reason for increases or decreases in our loss provision. A change of 100 basis points in this 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 approximately $17.1 million for the year ended December 31, 2014.
Known claims provisions decreased for the year ended December 31, 2014 to $66.7 million from $107.2 million in 2013, primarily as a result of adjustments to existing claims on policies issued in previous years and a reclassification of $10.7 million of bulk reserves to an IBNR provision for prior policy years. Current year provisions - IBNR are recorded on policies issued in the current year as a percentage of premiums realized (provisioning rate). For the year ended December 31, 2014, current year provisions - IBNR decreased $21.8 million to $46.2 million compared to 2013. As a percentage of title operating revenues, provisions - IBNR for the current policy year decreased from 3.8% in 2013 to 2.7% in 2014 due to a decrease in the incurred losses resulting from the lowering of the provisioning rate effective for policies issued in the first quarter 2014. This trend is indicative of lower incurred losses as the claims environment has continued to improve. Provisions - IBNR relating to prior policy years slightly increased due to the reclassification of bulk reserves from the known claims provision as well as the adverse development relating to certain older policy years with higher than normal claims.
In addition to title policy claims, we incur losses in our direct operations from escrow, closing and disbursement functions. These escrow losses typically relate to errors or other miscalculations of amounts to be paid at closing, including timing or amount of a mortgage payoff, payment of property or other taxes and payment of homeowners’ association fees. Escrow losses also arise in cases of mortgage fraud, and in those cases the title insurer incurs the loss under its obligation to ensure that an unencumbered title is conveyed. Escrow losses are recognized as expense when discovered and are typically paid less than 12 months after the loss is discovered. For the years ended December 31, 2014 and 2013, we accrued approximately $4.5 million and $7.6 million, respectively, for policy loss reserves relating to legacy escrow losses arising principally from mortgage fraud.
We consider our actual claims payments and incurred loss experience, including consideration of the frequency and severity of claims compared to our actuarial estimates of claims payments and incurred losses, in determining whether our overall loss experience has improved or worsened compared to prior periods. We also consider the impact of economic or market factors on particular policy years to determine whether the results of those policy years are indicative of future expectations. In addition, we evaluate the frequency and severity of large losses in determining whether our experience has improved or worsened. Our method for recording the reserves for title losses on both an interim and annual basis begins with the calculation of our current loss provision rate which is applied to our current premium revenues, resulting in a title loss expense for the period. This loss provision rate is set to provide for losses on current year policies and is determined using moving average ratios of recent actual policy loss payment experience (net of recoveries) to premium revenues.
Due to the inherent uncertainty in predicting future title policy losses, significant judgment is required by both our management and our third party actuaries in estimating reserves. As a consequence, our ultimate liability may be materially greater or less than current reserves and/or our third party actuary’s calculated estimate.
Our evaluation of goodwill is normally completed annually in the third quarter using June 30 balances, but an evaluation may also be made whenever events indicate a potential impairment. This evaluation is based on a combination of a discounted cash flow analysis (DCF) and market approaches that incorporate market multiples of comparable companies and our own market capitalization. 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. 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 and factors specific to our ownership and corporate governance structure (such as our Class B Common Stock). To the extent that our future operating results are below our projections, or in the event of adverse market conditions, an interim review for impairment may be required, which may result in an impairment of goodwill.
Operations. Our business has three operating segments: title insurance and related services, mortgage services and corporate.
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, agencies and centralized title services centers. We also provide loan origination and servicing support; loan review services; real estate valuation services; loss mitigation; REO asset management; home and personal insurance services; loan due diligence; compliance solutions; service performance management; and technology to streamline the real estate process.
Industry data. Published mortgage interest rates and other selected residential data for the years ended December 31, 2014, 2013 and 2012 follow (amounts shown for 2014 are preliminary and subject to revision). The amounts below may not relate directly to or provide accurate data for forecasting our operating revenues or order counts.
Trends and order counts. For the three years ended December 31, 2014, mortgage interest rates (30-year, fixed-rate) have fluctuated from a monthly low of 3.4% in November 2012 to a monthly high of 4.49% in September 2013. In 2014, total mortgage originations and refinancing mortgage originations decreased 37.5% and 54.9%, respectively, from 2013. During 2014, sales of new homes and existing homes increased 1.4% and decreased 3.1%, respectively, from 2013. In 2013, sales of new homes and existing homes increased 16.3% and 8.6%, respectively, from 2012.
For 2014, we are reporting open and closed order information, based on more detailed reporting information that became available beginning in the fourth quarter 2014, but due to system constraints, we are unable to provide comparable data for 2013 and 2012. The new reporting is more comprehensive than in prior quarters, as it now includes orders through our centralized title operations.
During 2014, we completed acquisitions of three companies that provide collateral valuation, settlement services, title and closing services and loan quality control and due diligence services. These acquisitions expand our offerings to mortgage lenders and progress continues on integrating these acquisitions. The original synergy estimate of approximately $5.0 million of future annualized savings has been achieved. We will continue to optimize these businesses with those of the legacy Stewart Lender Services businesses, as well as the broader Stewart organization, and we expect improving margins in 2015 in this segment.
In 2013, investment and other (losses) gains - net included a $5.4 million non-cash charge relating to the early retirement of $37.8 million of 6% Convertible Senior (Notes), a $1.5 million loss on the sale of an equity investment and $1.0 million for the impairment of cost-basis investments offset by realized gains of $2.7 million from the sale of debt and equity investments available-for-sale, $2.3 million from non-title-related insurance policy proceeds and $1.9 million from the sale of real estate.
Retention by agencies. Amounts retained by title agencies are based on agreements between the agencies and our title underwriters. On average, amounts retained by independent agencies, as a percentage of revenues generated by them, were 81.5%, 81.1% and 82.3% in the years 2014, 2013 and 2012, respectively. The average retention percentage may vary from year-to-year due to the geographical mix of agency operations, the volume of title revenues and, in some states, laws or regulations. Due to the variety of such laws or regulations, as well as competitive factors, the average retention rate can differ significantly from state to state. In addition, a high proportion of our independent agencies are in states with retention rates greater than 80%, and so we expect our average retention percentage to remain in the 81%-82% range over the near to medium term.
Employee costs. Including the impact of acquisitions, employee costs for the combined business segments increased $53.3 million, or 9.3%, in 2014 and $28.6 million, or 5.3%, in 2013. Excluding the impacts of acquisitions and integration-related severance costs, employee costs for the combined business segments decreased 1.3% from 2013. Our total employee count at December 31, 2014, 2013 and 2012 were approximately 7,400, 6,600 and 6,300, respectively.
In 2014, total employee count increased by approximately 770 employees, or 11.7%, including acquisitions. We experienced an increase of approximately 890 employees due to the recent acquisitions and 370 employees related to a new service offering and contract, partially offset by subsequent reductions of approximately 120 employees at these acquired operations and reductions of approximately 370 employees at existing operations. In 2014, total mortgage services employee count increased by approximately 800 employees, with an increase of approximately 780 employees due to the recent acquisitions and 370 employees related to a new service offering and contract, partially offset by subsequent reductions of approximately 80 employees at these acquired operations and reductions of approximately 270 employees at existing mortgage service operations. In 2014, total title segment employee count decreased by approximately 35 employees, resulting from a decrease of approximately 105 employees from existing, sold or closed title operations, reductions of 40 employees of acquired title operations, partially offset by increased employee count of 110 resulting from acquired operations.
occupancy expenses, repairs and maintenance, technology costs, telephone and title plant expenses. Costs that follow, to varying degrees, changes in transaction volumes and revenues include fee attorney splits, bad debt expenses, certain mortgage services expenses, copy supplies, delivery fees, outside search fees, postage, premium taxes and title plant maintenance expenses. Costs that fluctuate independently of revenues include general supplies, litigation defense, business promotion and marketing and travel.
In 2013, other operating expenses for the combined business segments decreased $6.2 million, or 2.2%. Costs fixed in nature increased $2.0 million, or 1.7%, in 2013, primarily due to increases in professional fees, insurance and technology costs partially offset by a decrease in audit costs. Costs that follow, to varying degrees, changes in transaction volumes and revenues decreased $4.0 million, or 3.7%, in 2013 primarily due to decreases in certain mortgage services expenses, outside search fees and bad debt expenses, partially offset by increases in premium taxes. Costs that fluctuate independently of revenues decreased $4.2 million, or 7.3%, in 2013 primarily due to decreases in litigation-related expenses, partially offset by increases in technology costs, promotion costs and travel.
For the year ended December 31, 2014, title losses decreased 23.5% when compared to the same period in 2013. Excluding the impact of the reserve reductions and recovery described above, and increases to large claims (recorded in the third and fourth quarters of 2014 and fourth quarter 2013), title losses were 5.6% and 5.9% for the years ended December 31, 2014 and 2013, respectively. The title loss ratio in any given quarter can be significantly influenced by new large claims incurred as well as adjustments to reserves for existing large claims, and we continue to manage and resolve large claims prudently and in keeping with our commitments to our policyholders. For the years ended December 31, 2014 and 2013, we recorded approximately $4.4 million and $7.6 million, respectively, for policy loss expense relating to legacy escrow losses arising primarily from mortgage fraud.
Our liability for estimated title losses as of December 31, 2014 comprises both known claims and our estimate of claims that may be reported in the future (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.
Title claims are generally incurred three to five years after policy issuance and the timing of payments on these claims can significantly impact the balance of known claims, since in many cases claims may be open for several years before resolution and payment occur and thus the estimate of ultimate amount to be paid may be modified over that time period.
Our title policy loss development continued to improve during 2013, reflecting an ongoing decline in prior policy year loss experience on non-large title policies as well as our continued attention to prudent risk management and emphasis on the quality and profitability of our independent agency network. We recorded policy loss reserve reductions relating to non-large losses on prior policy years aggregating approximately $22.1 million for the year ended December 31, 2013. However, these reductions were largely offset by increases in reserves relating to new and existing large losses aggregating approximately $19.3 million for the year ended December 31, 2013. The overall effect of these adjustments was a reallocation of policy loss reserves from non-large claims to large claims. As a result of the policy loss development improvement, we lowered our overall provisioning rate on non-large claims effective with policies issued in the second quarter and again in the fourth quarter of 2013.
The year ended December 31, 2012 included charges of $17.8 million resulting from large title claims relating to policies issued in prior years. As anticipated, our overall loss experience on non-large claims continued to improve relative to prior year periods and was in line with our actuarial expectations, which allowed us to lower the overall loss provision rate effective with policies issued in the third quarter 2012. Losses incurred on known claims for the year 2012 increased 1.3% compared to the year 2011.
Depreciation and amortization. Depreciation and amortization expense increased $6.3 million to $24.2 million in 2014 from $17.9 million in 2013. The increase is primarily due to $3.3 million of amortization expense on acquired intangible assets, $1.6 million of amortization expense relating to an underwriter production system placed into service July 1, 2014 and $0.7 million of additional depreciation expense on the fixed assets of the acquisitions.
In the fourth quarter 2013, we released $6.6 million of our valuation allowance relating to a portion of our foreign tax credit carryforwards.
A substantial majority of our consolidated cash and investments as of December 31, 2014 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 entities comprising the mortgage services segment) for their operating and debt service needs.
We maintain investments in accordance with certain statutory requirements in the states of domicile of our underwriters for the funding of statutory premium reserves. Statutory premium reserves, which approximated $438.5 million and $450.6 million at December 31, 2014 and 2013, respectively, are required to be fully funded and invested in high-quality securities and short-term investments. In addition, cash and cash equivalents-statutory reserve funds were approximately $57.4 million and $15.1 million at December 31, 2014 and 2013, respectively. Cash and cash equivalents-statutory reserve funds are not restricted or segregated in depository accounts. If the Company fails to maintain minimum investments or cash and cash equivalents to meet statutory requirements, the Company may be subject to fines or other penalties, including potential revocation of its business license. As of December 31, 2014, our statutory estimate of claims that may be reported in the future totaled $383.7 million. In addition to this, we had cash and investments (excluding equity method investments) of $185.1 million which are available for underwriter operations, including claims payments.
Our principal sources of cash from operations are premiums on title policies and revenue from title service-related transactions and mortgage servicing support 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.
Cash provided by operations in 2014 was $64.0 million, a decrease of $23.2 million from $87.2 million provided by operations in 2013, which was primarily a result of the decline in net earnings in 2014 compared with 2013.
Cash payments on title claims in 2014, 2013 and 2012 were $86.7 million, $115.7 million and $124.0 million, respectively. Claim payments made, net of insurance recoveries, during 2014, 2013 and 2012 include $5.4 million, $23.2 million and $28.8 million, respectively, on large title claims.
Cash from investing activities was generated principally by proceeds from investments matured and sold in the amounts of $197.2 million, $104.5 million and $181.9 million in 2014, 2013 and 2012, respectively. We used cash for the purchases of investments in the amounts of $224.7 million, $160.5 million and $207.7 million in 2014, 2013 and 2012, respectively.
Capital expenditures were $19.5 million, $17.3 million, and $16.8 million in 2014, 2013 and 2012, respectively. We maintain investment in capital expenditures at a level that enables us to implement technologies for increasing our operational and back-office efficiencies. We paid cash for acquisitions of $40.0 million, $14.9 million and $1.2 million in 2014, 2013, and 2012, respectively.
Total debt and stockholders’ equity were $65.6 million and $700.5 million, respectively, as of December 31, 2014. In 2014 and 2013, we repaid $60.8 million and $12.2 million, respectively, of debt in accordance with the underlying terms of the debt instruments. On October 14, 2014, we exchanged the remaining $27.2 million of Notes, at maturity, for an aggregate of 2,111,017 shares of Common Stock. In 2013, we exchanged an aggregate of $37.8 million of Notes for an aggregate of 3,094,440 shares of Common Stock plus cash for accrued and unpaid interest. On October 21, 2014, we replaced our $75.0 million unsecured line of credit with a new $125.0 million unsecured line of credit, which expires October 2019. Amounts outstanding under the new line of credit at December 31, 2014 were $60.0 million and were used principally to fund acquisitions. In order to preserve Guaranty’s liquidity ratio, we also drew on the line of credit to provide working capital at the parent company and to fund the $10.5 million litigation settlement payment by Stewart Title Company in June 2014.
The effect of changes in foreign currency rates on the consolidated statements of cash flows was a net decrease in cash and cash equivalents of $5.2 million in 2014, a net decrease of $4.9 million in 2013 and a net increase of $1.8 million in 2012. Our principal foreign operating unit is in Canada, and, on average, the value of the Canadian dollar relative to the U.S. dollar decreased during 2014.
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 2014, net unrealized investment gains of $9.2 million, which increased our other comprehensive earnings, were primarily related to increases in fair values of corporate, municipal and government bond investments, partially offset by temporary decreases in fair values of equity
securities and deferred taxes. Changes in foreign currency exchange rates, primarily related to our Canadian operations, decreased other comprehensive earnings by $7.6 million, net of taxes, in 2014.
In 2012, net unrealized investment gains of $7.0 million, which increased our other comprehensive earnings, were primarily related to increases in market values of corporate bond investments. Changes in foreign currency exchange rates, primarily related to our Canadian operations, increased other comprehensive earnings by $2.9 million, net of taxes, in 2012.