The Company, National Western and Ozark National, accepts funds from policyholders or contract holders and establishes a liability representing future obligations to pay the policy or contract holders and their beneficiaries. To ensure the Company will be able to pay these future commitments, the funds received as premium payments and deposits are invested in high quality investments, primarily fixed income securities.
Deferred Sales Inducements ("DSI"). Costs related to sales inducements offered on sales to new customers, principally on investment type contracts and primarily in the form of additional credits to the customer’s account value or enhancements to interest credited for a specified period, which are beyond amounts currently being credited to existing contracts, are deferred and recorded as other assets. All other sales inducements are expensed as incurred and included in interest credited to contract holders’ funds. Deferred sales inducements are amortized to income using the same methodology and assumptions as DPAC, and are included in interest credited to contract holders’ funds. Deferred sales inducements are also periodically reviewed for recoverability. For more information about accounting for deferred sales inducements see Note (1), Summary of Significant Accounting Policies, in the accompanying Notes to Consolidated Financial Statements in this report.
Pension Plans and Other Postretirement Benefits. The Company sponsors a qualified defined benefit pension plan, which was frozen effective December 31, 2007, covering substantially all employees at that time, and three non-qualified defined benefit plans covering certain senior officers. In addition, the Company has postretirement health care benefits for certain senior officers. The freeze of the qualified benefit pension plan ceased future benefit accruals to all participants and closed the Plan to any new participants. In addition, all participants became immediately 100% vested in their accrued benefits as of that date. In accordance with prescribed accounting standards, the Company annually reviews plan assumptions.
The Company's investable funds are derived from incremental cash flow from new business and investment income from its portfolio above its operational requirements to pay policy benefits, commissions, and expenses. The debt securities portfolio increased from $10.2 billion at December 31, 2018 to $10.5 billion at December 31, 2019, reflecting the addition of Ozark National's $722.9 million debt security portfolio. The debt securities portfolio increased back to $10.8 billion at December 31, 2020, however the increase in balance was the result of recording certain holdings at fair value instead of amortized cost as had been done previously. Investment yields on new bond purchases in 2020 were less than the portfolio's weighted average yield after exceeding the portfolio yield in 2018 and 2019. The portfolio weighted average yield was approximately 3.68% at December 31, 2020, while the yield on debt security purchases to fund insurance operations was 3.33%, 4.06%, and 4.20% in 2020, 2019, and 2018, respectively. Ozark National's weighted average portfolio yield at December 31, 2020 was 3.66%. Although the yield on new purchases in 2018 and 2019 exceeded the portfolio weighted average yield, bond portfolio yields have continued to be impacted by higher yielding debt securities maturing or being called by borrowers with the proceeds being reinvested into lower yielding securities.
Another contract interest expense component is the amortization of deferred sales inducements. Similar to deferred policy acquisition costs, the Company defers sales inducements in the form of first year credited interest bonuses on annuity products that are directly related to the production of new business. These bonus interest charges are deferred and amortized using the same methodology and assumptions used to amortize other capitalized acquisition costs and the amortization is included in contract interest. In addition, deferred sales inducement balances ("DSI") are also reviewed periodically to ascertain whether actual experience has deviated significantly from that assumed (unlock) and are adjusted to reflect current policy lapse or termination rates, expense levels and credited rates on policies compared to anticipated experience (true-up). These adjustments, plus or minus, are included in contract interest expense. As part of the DPAC balance unlockings for the Annuity segment previously discussed for 2020, 2019, and 2018, the Company also unlocked its DSI balance. The effect of these prospective unlockings was to increase/(decrease) the DSI balance by $(4.4) million, $(0.6) million, and $1.3 million, respectively. These amounts are included in the previous table in the Unlocking adjustments line.
Nursing home expenses reflect the operations of the Company's two facilities which were sold during 2019. The Reno, Nevada nursing home was sold effective February 1, 2019, while the San Marcos, Texas nursing home sale closed effective May 1, 2019. Expenses shown for 2019 reflect operations up to the date of sale for each facility. The Company must maintain the legal entities for a specified time period subsequent to each sale and incur various record safekeeping and other administrative expenses in the interim.
National Western’s domestic life insurance in force, in terms of policy counts, has been declining for some time. The pace of new policies issued has lagged the number of policies terminated from death or surrender causing a declining level of policies in force from which contract revenue is received. Consequently, the number of domestic life insurance policies in force has declined from 49,000 at December 31, 2018 to 47,900 at December 31, 2019 and to 46,900 at December 31, 2020. Policy lapse rates in 2020 decreased to 6.0% from 6.2% in 2019. While policy counts have declined, the face amount of life insurance in force has increased from $3.2 billion at December 31, 2018 to $3.4 billion at December 31, 2019 and to $3.5 billion at December 31, 2020.
Although not an unlocking, in 2018 the Company successfully converted its reserve modeling for excess death benefit reserves on UL riders to its existing actuarial software platform. The implementation refined the estimate increasing reserves and included an adjustment decreasing the Domestic Life DPAC balance (increasing amortization expense). The amount of the amortization expense increase was $0.8 million.
In 2020, the Company unlocked DPAC balances for lapse rates, mortality, and investment spread. While this unlocking had a relatively small impact on the International Life segment DPAC balance, a substantially larger effect was recorded in benefit reserves the change of which is reflected in contract interest expense as discussed below. During 2019, DPAC balances were unlocked for mortality rates, lapse rates, maintenance expenses, and investment spread which increased DPAC balances and reduced amortization expense. Favorable mortality experience on the block of business was the primary cause behind the DPAC balance increase and the amortization expense decrease.
As noted in the Domestic Life segment discussion, operating expenses are allocated to lines of business based upon a functional cost analysis of the activity by business area giving rise to incurred expenses. A greater proportion of the Company's overall operating expenses have been allocated toward the Domestic Life and Annuity segments and away from the International Life segment due to the decreased activity relative to the former two segments.
A comparative analysis of results of operations for the Company's annuity segment is detailed below.
As noted in the discussion in the Consolidated Operations section, collection of asset management fees on positive returns of expiring options are subtracted from contract interest credited to policyholders. This offset serves to lessen the increase in contract interest expense relative to the option gains reported in the Company's net investment income. Asset management fees collected during 2020, 2019, and 2018 were $30.7 million, $15.9 million, and $24.3 million, respectively.