The Predecessor financial information included in the selected financial data below includes the historical financial information of the operations previously owned by FNFI and acquired by the Company on July 1, 1997 and excludes the impact of the goodwill and minority interest associated with the Company's acquisition of 60% of the common stock of ATC from FNFI on July 1, 1997. The Company's financial information included herein includes only the historical financial information of the Company since its formation in 1996. Although incorporated in 1996, the Company had no operations until it acquired 60% of the outstanding common stock of ATC in July 1997.
Net title service revenues consist of gross title insurance premiums less fees paid to underwriters. Fees to underwriters represent the portion of gross title insurance premiums paid by the Company's underwritten title companies to FNTIC, pursuant to the terms of the Issuing Agency Agreement, and similar fees paid by the Company's other underwritten title company subsidiaries.
Net Title Service Revenue. Net title service revenue decreased $726,000 or 1.4%, to $51.4 million from $52.1 million in 1999. In 1998, net title service revenue increased by 58.8%, to $52.1 million, from $32.8 million in 1997. The decrease in 1999 net title service revenue is consistent with the current real estate environment and the decline in closed title orders during the second half of 1999. The average fee per file increased to $940 in 1999 compared to $825 in 1998 and $886 in 1997. The fee per file increase is indicative of a change in the mix of closed title orders from a refinance driven market to a resale market, which generates higher fee per file business. Gross title premiums were $58.4 million, $59.2 million and $37.4 million in 1999, 1998 and 1997, respectively.
Investment Income. Investment income is primarily a function of securities markets asset base interest rates. Prior to 1999, the Company primarily invested in interest bearing accounts and certificate of deposit. During 1999, the Company strengthened its balance sheet with the acquisition of National, proceeds from the Initial Public Offering in addition to shifting the emphasis to a fixed income portfolio. In 1999, investment income increased $561,000, or 152.0% to $930,000 compared to $369,000 in 1998. During 1998, investment income increased 122.3% to $369,000 from $166,000 in 1997.
Income tax expense (benefit) for years ended December 31, 1999, 1998 and 1997 consists of the following (dollars in thousands):
Underwritten title companies are subject to certain regulations by insurance regulatory or banking authorities, primarily relating to minimum net worth and working capital. Minimum net worth of $400,000 and minimum working capital of $10,000 is required for ATC. The net worth of ATC was $20.5 million and $15.3 million at December 31, 1999 and 1998, respectively. The working capital of ATC was $3.7 million and $5.9 million on December 31, 1999 and 1998, respectively.
A summary of the Company's stock option activity, and related information for the year ended December 31, 1999:
In a separate, non-affiliated transaction, ATC entered into a capital lease agreement during 1998 to purchase a copy of a title plant. The gross amount of the title plant recorded under the capital lease is $1.4 million at December 31, 1999 and 1998. The capital lease agreement expires in August 2007.
The following briefly describes the significant accounting policies of the Company which have been followed in preparing the accompanying financial statements.
The Company is required to maintain certain amounts on deposit with the Insurance Commissioner in order to operate in certain counties.