We currently lease under a non-cancelable operating lease that expires in year 2025 approximately 150,000 square feet of space in an office building in Houston, Texas, which is used for our corporate offices and for offices of several of our subsidiaries. Additionally, we lease space at approximately 420 locations for title office operations, production, administrative and technology centers. These additional locations include significant leased facilities in New York, New York; Glendale, California; Houston, Texas; Tucson, Arizona, Anchorage, Alaska; Richardson, Texas; and Denver, Colorado.
Our leases expire from 2021 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 $39.4 million in 2020.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A)
For the year ended December 31, 2020, net income attributable to Stewart was $154.9 million, or $6.22 per diluted share, compared to $78.6 million, or $3.31 per diluted share, for the year ended December 31, 2019. Pretax income before noncontrolling interests for the year ended December 31, 2020 was $218.5 million, compared to $117.0 million for the year ended December 31, 2019. Total revenues increased 18% to $2.3 billion in 2020, from $1.9 billion in 2019, primarily due to increased revenues from title operations principally resulting from increased transaction volumes, and a net revenue increase from ancillary services operations mainly due to acquisitions during 2020. In line with the improved revenues, total operating expenses increased 14% in 2020 compared to 2019. Refer to "Results of Operations" for detailed year-to-year income statement discussions, and "Liquidity and Capital Resources" for an analysis of Stewart's financial condition.
During 2020, we acquired a number of title offices across several states, two appraisal management services companies, and an online notarization and closing solutions provider, in line with our investment and growth strategy of focusing on attractive businesses and geographies where we can have sustained success and where additional scale can efficiently and effectively improve profitability and margins. These acquisitions realign Stewart to strongly compete in several strategic markets where we have traditionally been underrepresented. As expected, these acquisitions were immediately accretive to Stewart and contributed in 2020 total revenues and pretax income of $109.2 million and $17.3 million, respectively. We believe our solid operating results and liquidity position will allow us to continue investing and growing to maximize our operational potential.
For the fourth quarter 2020, we reported net income attributable to Stewart of $59.7 million ($2.22 per diluted share), compared to break-even results for the fourth quarter 2019. On an adjusted basis, Stewart’s fourth quarter 2020 net income of $56.4 million ($2.09 per diluted share) increased 174% from $20.6 million ($0.87 per diluted share) in the fourth quarter 2019. Fourth quarter 2020 pretax income before noncontrolling interests was $83.9 million compared to pretax income before noncontrolling interests of $3.8 million for the fourth quarter 2019.
•$6.5 million of severance expenses related to our corporate reorganization included in employee costs ($4.3 million in the ancillary services and corporate segment and $2.2 million in the title segment),
•$2.2 million of executive insurance policy settlement expense recorded as part of other operating expenses within the ancillary services and corporate segment,
•$1.7 million of commercial services’ escrow loss recorded as part of title loss expense in the title segment, and
Summary results of the title segment are as follows (in $ millions, except pretax margin and % change):
Title loss expense increased $17.7 million, or 61%, in the fourth quarter 2020 compared to the prior year quarter, primarily due to increased title revenues and higher loss provisioning rates due to the macroeconomic environment. As a percentage of title revenues, the title loss expense in the fourth quarter 2020 was 6.8% compared to 5.7% from the prior year quarter; on a full year basis, the title loss ratio was 5.3% in 2020 compared to 4.6% in 2019. Given the current economic environment, we anticipate that our 2021 loss ratio will be comparable to the full year 2020 loss ratio.
Direct title revenues increased as a result of overall improvements in commercial and non-commercial revenues, primarily driven by increased transactions during the fourth quarter 2020 compared to the prior year quarter. Domestic non-commercial revenues increased $90.6 million, or 61%, as a result of higher purchase and refinancing residential closed orders from both existing and newly acquired title offices. Domestic commercial revenues improved $3.4 million, or 6%, due to increased transaction size and volume. Total international revenues increased $11.9 million, or 38%, primarily due to higher volumes in our Canadian and European operations. Domestic commercial fee per file in the fourth quarter 2020 was approximately $12,900, an improvement of 6% from the fourth quarter 2019; while domestic residential fee per file was approximately $2,000, or 4% lower than the prior year quarter, primarily due to a higher mix of refinancing compared to purchase transactions.
Summary results of the ancillary services and corporate segment are as follows (in $ millions, except % change):
Currently, various levels of restrictions to address the spread of COVID-19 are still in place across the U.S. and the rest of the world, with some economies gradually opening up and efforts to distribute vaccines continue. We continue to proactively manage our business through this crisis with the help of our exceptional employees and support of our customers. While the pandemic continues, Stewart is committed to helping people safely navigate the real estate closing process. We believe our strong liquidity position and innovative solutions will allow us to facilitate our customers’ purchase and refinance of real estate should macroeconomic conditions become more challenging.
We consider our actual claims payments and incurred loss experience, including 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 relative 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, large claims, including large title losses due to independent agency defalcations, are analyzed and reserved for separately due to the potential higher dollar amount of loss, lower volume of claims reported and sporadic reporting of such claims. 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, except for large claims and escrow losses. This loss provision rate is set to provide for losses on current year policies and is primarily determined using moving average ratios of recent actual policy loss payment experience (net of recoveries) to premium revenues.
In 2020, total known claims provisions decreased by $8.8 million, or 10%, to $83.1 million primarily due to lower reported claims relating to prior year policies compared to 2019. Total 2020 provisions - IBNR increased by $34.9 million, or 53%, to $100.9 million compared to the prior year, primarily due to increased title premiums, higher loss provisioning rates driven by an overall uncertainty related to incurred losses resulting from the COVID-19 pandemic, and unfavorable loss experience in our Canadian operations. 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. As a percentage of title operating revenues, current year provisions - IBNR were 3.9%, 3.3% and 2.8% in 2020, 2019 and 2018, respectively. Provisions - IBNR relating to prior policy years for 2019 were primarily related to adverse developments on large 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 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 or when contingencies associated with them (such as litigation) are resolved and are typically paid less than 12 months after the loss is recognized.
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, 2020, our net title losses due to independent agency defalcations were not material.
We concluded that the goodwill related to each of our reporting units was not impaired after performing the qualitative assessment during 2020 and the quantitative impairment analysis during 2019. Refer to Note 1-L and Note 8 to our audited consolidated financial statements for details on goodwill.
We discuss in this section the consolidated results of operations for the years 2020 and 2019, as compared to each corresponding prior year. Factors contributing to fluctuations in our results of operations are presented in the order of their monetary significance, and significant changes are quantified, when necessary. Segment results are included in the discussions and are discussed separately, when relevant.
For 2021, the average 30-year mortgage interest fixed rate is expected to stay the same with that of 2020, while the housing activity, though expected to remain strong in 2021, is forecasted to decelerate compared to the pace set by the second half of 2020. Total lending is estimated to decline 21%, compared to 2020, mainly due to 39% lower refinancing originations, which will be partially offset by an 8% rise in purchase originations. Nevertheless, 2021 refinancing originations are expected to be 38% higher than that in 2019. New and existing homes sales in 2021 are expected to grow 10% and 7%, respectively, compared to 2020, while median new and existing home prices are estimated to increase 2% and 3%, respectively.
•number and value of commercial transactions, which typically yield higher premiums;
Direct title revenues in 2019 increased 4% compared to 2018, primarily due to the improvement in non-commercial domestic and total international revenues, respectively, which were partially offset by a decline in domestic commercial revenues. The improvement in non-commercial domestic revenues was primarily due to a 13% improvement in total purchase and refinancing 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.
Gross revenues from independent agency operations (agency revenues) increased $180.5 million, or 19%, in 2020 compared to 2019, which was consistent with the improving real estate market trends and the continued return of agents after the terminated merger transaction with FNF in late 2019. Gross agency revenues in 2019 declined $33.4 million, or 3%, compared to 2018, primarily due to the negative effect of the proposed FNF merger on our agents. In line with the change in gross agency revenues, net agency revenues (which are net of agency retention) increased $35.2 million, or 21%, in 2020 and declined $5.6 million, or 3%, in 2019 compared to 2018. Refer further to the "Retention by agencies" discussion under Expenses below.
Title revenues by geographic location. The approximate amounts and percentages of consolidated title operating revenues for the last three years ended December 31, 2020 were as follows:
Ancillary services revenues. Ancillary services revenues in 2020 increased $45.2 million, or 121%, compared to 2019, primarily due to $65.8 million of revenues generated from 2020 acquisitions, partially offset by $20.6 million, or 55%, lower revenues from our capital markets search and home equity valuation services operations as a result of reduced market activity in 2020. In 2019, ancillary services revenues declined $13.3 million, or 26%, compared to 2018, primarily due to significantly lower customer orders.
Investment income. Investment income in 2020 declined $1.2 million, or 6%, compared to 2019, primarily due to lower interest income on investments resulting from the low interest rates environment in 2020; while investment income in 2019 was comparable to 2018. Refer to Note 6 to our audited consolidated financial statements for additional details.
Net realized and unrealized gains. Refer to Note 6 to our audited consolidated financial statements for details.
Employee costs. Consolidated employee costs increased $46.0 million, or 8%, primarily due to acquisitions, higher incentive compensation on improved operating results, and increased overtime costs driven by higher transaction volumes in 2020 compared to 2019. These increases were partially offset by reduced salaries expense resulting from a 4% reduction in average employee counts (excluding acquisitions) in 2020. Consolidated employee costs in 2019 increased $4.7 million, or 1%, compared to 2018, primarily due to increased incentive compensation resulting from higher direct title revenues and the executive severance charges related to the corporate reorganization, which was partially offset by reduced salaries expense driven by a 6% reduction in average employee counts.
Other operating expenses. Other operating expenses include costs that are fixed in nature, costs that follow, to varying degrees, changes in transaction volumes and revenues (variable costs) and costs that fluctuate independently of revenues (independent costs). Costs that are fixed in nature include attorney and professional fees, third-party outsourcing provider fees, equipment rental, insurance, rent and other occupancy expenses, repairs and maintenance, technology costs, telecommunications and title plant expenses. Variable costs include appraiser expenses, outside search and valuation fees, attorney fee splits, bad debt expenses, copy supplies, delivery fees, postage, premium taxes and title plant maintenance expenses. Independent costs include general supplies, litigation defense, business promotion and marketing and travel.
Title losses. Provisions for title losses, as a percentage of title operating revenues, were 5.3%, 4.6% and 3.9% in 2020, 2019 and 2018, respectively. The title loss ratio in any given year can be significantly influenced by new large claims incurred as well as adjustments to reserves for existing large claims. We continue to manage and resolve large claims prudently and in keeping with our commitments to our policyholders.
Title claims are generally reported within the first six years after policy issuance and the timing of payments on these claims can significantly impact the balance of known claims, since claims, in many cases, may be open for several years before resolution and payment occur. As a result, the estimate of ultimate amount to be paid on any claim may be modified over that time period. As of December 31, 2020 and 2019, our reserve balance was above the actuarial midpoint of total estimated policy loss reserves.
Our liquidity and capital resources reflect our ability to generate cash flow to meet our obligations to shareholders, customers (payments to satisfy claims on title policies), vendors, employees, lenders and others. As of December 31, 2020, our total cash and investments, including amounts reserved pursuant to statutory requirements, aggregated $1.1 billion ($621.2 million, net of statutory reserves on cash and investments). Of our total cash and investments at December 31, 2020, $814.8 million ($546.0 million, net of statutory reserves) was held in the United States (U.S.) and the rest internationally, principally in Canada.
A substantial majority of our consolidated cash and investments as of December 31, 2020 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.
We maintain investments in accordance with certain statutory requirements for the funding of statutory premium reserves. Statutory premium reserves are required to be fully funded and invested in high-quality securities and short-term investments. Statutory reserve funds are not available for current claims payments, which must be funded from current operating cash flow. Included in investments in debt and equity securities are statutory reserve funds of approximately $496.6 million at December 31, 2020. In addition, included within cash and cash equivalents are statutory reserve funds of approximately $20.0 million at December 31, 2020. Although these cash statutory reserve funds are not restricted or segregated in depository accounts, they are required to be held pursuant to state statutes. If the Company fails to maintain minimum investments or cash and cash equivalents sufficient 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, 2020, our known claims reserve totaled $68.9 million and our estimate of claims that may be reported in the future, under generally accepted accounting principles, totaled $427.4 million. In addition to this, we had cash and investments (excluding equity method investments) of $428.9 million which are available for underwriter operations, including claims payments.
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 $158.9 million as of December 31, 2020) 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. Guaranty paid dividends of $30.0 million to its parent during 2020 and none during 2019.
In regard to the reserves for estimated title losses, the timing of payments is not set by contract. The actual timing of estimated title loss payments may vary since claims, by their nature, are complex and paid over long periods of time. Based on our historical payment patterns, approximately 77% of the outstanding reserves are paid out within six years. Refer to Note 11 (Estimated title losses) to our audited consolidated financial statements for details.
Net cash provided by operations in 2020 improved by $109.4 million compared to 2019, primarily due to the higher net income generated and lower claim payments in 2020. Net cash provided by operations in 2019 improved by $82.2 million compared to 2018, primarily due to the higher net income in 2019, which included the $50.0 million merger termination fee from FNF, partially offset by higher payments on claims. Although our business is labor intensive, we are focused on a cost-effective, scalable business model which includes utilization of technology, centralized back and middle office functions and business process outsourcing. We are continuing our emphasis on cost management, especially in light of the current economic environment due to the COVID-19 pandemic, specifically focusing on lowering unit costs of production and improving operating margins in all our businesses. Our plans to improve margins include additional automation of manual processes, and further consolidation of our various systems and production operations. We continue to invest in the technology necessary to accomplish these goals.
We used $200.0 million of cash in 2020 for acquisitions of several title offices and ancillary services businesses and also used $19.0 million of cash in 2018 for acquiring title offices; while we used $15.0 million, $17.1 million and $10.7 million of cash for purchases of property and equipment during 2020, 2019 and 2018, 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.
Total debt and stockholders’ equity were $101.8 million and $1.0 billion, respectively, as of December 31, 2020. During 2020, 2019 and 2018, payments on notes payable of $23.8 million, $25.0 million and $16.3 million, respectively, and notes payable additions of $16.5 million, $30.5 million and $14.5 million, respectively, were related to short-term loan agreements in connection with our Section 1031 tax-deferred property exchange (Section 1031) business. As of December 31, 2020, the outstanding balance on the line of credit facility was $98.9 million, while the remaining balance of the line of credit available for use was $98.6 million, net of an unused $2.5 million letter of credit. Our debt-to-equity ratio at December 31, 2020, excluding our Section 1031 notes, was approximately 10.0%.
In 2020, net unrealized investment gains of $14.9 million, net of taxes, which increased our other comprehensive income, were primarily related to increases in the fair values of our overall bond securities portfolio, mainly driven by the effect of lower interest rates and partially offset by higher credit spreads. The five-year U.S. treasury yield applicable on our investments decreased approximately 130 basis points in 2020 versus 2019, while the applicable credit spreads increased by approximately 70 basis points in 2020 compared to 2019. Also in 2020, we recorded foreign currency translation gains which increased our other comprehensive income by $4.8 million, net of taxes, which was primarily driven by the appreciation in value of the Canadian dollar and United Kingdom pound against the U.S. dollar in 2020.
Cautionary statements regarding forward-looking statements. Certain statements in this report are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. 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 “may,” "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, including the duration and effects of the COVID-19 pandemic; 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. All forward-looking statements included in this report are expressly qualified in their entirety by such cautionary statements. 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.