Through our subsidiaries, we engage in a number of diverse business activities. We manage our operating businesses on an unusually decentralized basis. There are few centralized or integrated business functions. Our senior corporate management team participates in and is ultimately responsible for significant capital allocation decisions, investment activities and the selection of the Chief Executive to head each of the operating businesses. The business segment data (Note 27 to the accompanying Consolidated Financial Statements) should be read in conjunction with this discussion.
Underwriting results in 2020 of certain of our commercial insurance and reinsurance businesses were negatively affected by estimated losses and costs associated with the COVID-19 pandemic, including estimated provisions for claims and uncollectible premiums and incremental operating costs to maintain customer service levels. The effects of the pandemic in the future may be further affected by judicial rulings and regulatory and legislative actions pertaining to insurance coverage and claims and by its effects on general economic activity, which we cannot reasonably estimate at this time.
Losses and loss adjustment expenses decreased $2.9 billion (10.1%) in 2020 compared to 2019. GEICO’s ratio of losses and loss adjustment expenses to premiums earned (the “loss ratio”) was 74.1%, a decrease of 7.2 percentage points compared to 2019. The decrease in the loss ratio reflected declines in claims frequencies, partly offset by increases in claims severities and the impact of lower premiums earned attributable to the GEICO Giveback program.
We offer excess-of-loss and quota-share reinsurance coverages on property and casualty risks and life and health reinsurance to insurers and reinsurers worldwide through several subsidiaries, led by National Indemnity Company (“NICO”), Berkshire Hathaway Life Insurance Company of Nebraska (“BHLN”) and General Reinsurance Corporation, General Reinsurance AG and General Re Life Corporation (collectively, “General Re”). We also periodically assume property and casualty risks under retroactive reinsurance contracts written through NICO. In addition, we write periodic payment annuity contracts predominantly through BHLN.
MEC electric utility margin decreased $10 million to $1.8 billion in 2020 compared to 2019. The electric utility margin decrease was attributable to lower operating revenue from unfavorable wholesale prices and price impacts from changes in retail sales mix. These effects were mostly offset by lower generation and purchased power costs and higher operating revenue from a 1.2% increase in retail customer volumes. The increase in electric retail customer volumes was primarily due to increased usage by certain industrial customers, partially offset by the impacts of the pandemic. Natural gas utility margin decreased $9 million in 2020 compared to 2019, due to the unfavorable impacts of weather.
PCC’s pre-tax earnings increased 5.1% in 2019 compared to 2018, reflecting increased sales of aerospace products and higher earnings from various non-recurring items in 2019, which were partially offset by lower earnings from the power markets due to the decrease in sales. Temporary unplanned shutdowns of certain metals facilities and metal press outages also negatively impacted earnings in 2018. PCC incurred incremental costs in 2019 to meet required deliveries to customers associated with the increased aerospace demand, which negatively affected margins and earnings. The production headwinds experienced were primarily attributable to shortages of qualified skilled labor and the rapid increase in requirements for newer, complex aerospace products.
The comparative increase in revenues reflected revenue increases from Forest River and Duracell, partially offset by lower apparel and footwear revenues. Forest River revenues increased 11.7% in 2020 compared to 2019, primarily attributable to a significant increase in recreational vehicle unit sales over the last half of the year and changes in sales mix. Unit sales in the second half of 2020 increased 31% over the second half of 2019. Revenues from Duracell increased 10.0% in 2020 compared to 2019, reflecting the effects of changes in sales mix and increased volume. Apparel and footwear revenues declined 6.1% in 2020 compared to 2019.
Home furnishings group pre-tax earnings increased $79 million (36%) in 2020 versus 2019, reflecting generally higher average gross margin rates, sales mix changes and fewer sales promotions, and from lower advertising and other operating expenses. Certain of our other operations, including Pampered Chef and Louis experienced significant earnings increases in 2020, while others, including See’s Candy and Oriental Trading Company, experienced significant declines driven by the negative effects of the pandemic.
The following table summarizes our equity securities and derivative contract liabilities with significant equity price risk as of December 31, 2020 and 2019 and the estimated effects of a hypothetical 30% increase and a 30% decrease in market prices as of those dates. The selected 30% hypothetical increase and decrease does not reflect the best or worst case scenario. Indeed, results from declines could be far worse due both to the nature of equity markets and the aforementioned concentrations existing in our equity investment portfolio. Dollar amounts are in millions.
We developed independent claim liability estimates for certain retroactive reinsurance contracts and compared our estimates to management’s estimates. For other retroactive reinsurance contracts and related assets, we evaluated the process used by management to develop the estimated claim liabilities and related assets.
The amortized cost and estimated fair value of fixed maturity securities at December 31, 2020 are summarized below by contractual maturity dates. Amounts are in millions. Actual maturities may differ from contractual maturities due to early call or prepayment rights held by issuers.
Investment gains/losses for each of the three years ending December 31, 2020 are summarized below (in millions).
GEICO’s incurred and paid losses and ALAE, net of reinsurance, are summarized by accident year below for physical damage and auto liability claims. IBNR and case development liabilities are as of December 31, 2020. Claim counts are established when accidents that may result in a liability are reported and are based on policy coverage. Each claim event may generate claims under multiple coverages, and thus may result in multiple counts. The “Cumulative Number of Reported Claims” includes the combined number of reported claims for all policy coverages and excludes projected IBNR claims. Dollars are in millions.
Debt principal repayments expected during each of the next five years are as follows (in millions). Amounts in 2021 include short-term borrowings.
Reconciliations of assets and liabilities measured and carried at fair value on a recurring basis with the use of significant unobservable inputs (Level 3) for each of the three years ending December 31, 2020 follow (in millions).
Providers of numerous services including shared aircraft ownership programs, aviation pilot training, electronic components distribution, various retailing businesses, including automobile dealerships and trailer and furniture leasing