period over which deferred tax assets will be recoverable. In the event that actual results differ from these estimates or these estimates are adjusted in future periods, the Company may need to adjust its valuation allowance, which would impact the financial position and results of operations. A valuation allowance has been established for approximately the full value of the net deferred tax assets at December 31, 2002.
The Company will earn substantially less premiums in 2003 because it has ceased writing new insurance policies other than endorsements and tail coverage as of September 1, 2002.
UNDERWRITING EXPENSES. Underwriting expenses increased $8.5 million, or 22.2%, to $47.1 million in 2001 from $38.6 million in 2000. This increase was primarily composed of $3.4 million in severance and recruitment fees, $1.5 million largely related to underwriting, servicing, and marketing initiatives, $1.0 million associated with information systems costs, $1.4 million for consulting fees and $1.2 million of other costs which included broker commission expense and guarantee fund charges. The ratio of underwriting expenses to net premiums earned increased to 32.1% in 2001 from 21.0% in 2000. The increase resulted primarily from increased expenses and lower net earned premiums due to additional ceded premiums associated with additional losses ceded under the Company's aggregate reinsurance contracts. The ratio of underwriting expenses to net premiums earned excluding the impact of the severance charges was 29.8%.
The MIIX Group is a holding company whose assets primarily consist of all of the capital stock of its subsidiaries. Its principal sources of funds are dividends and other permissible payments from its subsidiaries and revenues from its non-insurance operations. The insurance company subsidiaries are restricted by state regulation in the amount of dividends they can pay in relation to surplus and net income without the consent of the applicable state regulatory authority, principally the New Jersey Department of Banking and Insurance. New Jersey regulations permit the payment of any dividend or distribution only out of statutory earned (unassigned) surplus. The Department may limit or disallow the payment of any dividend or distribution if an insurer's statutory surplus following the payment of any dividend or other distribution is not deemed adequate in relation to its outstanding liabilities and adequate to meet its financial needs, or the insurer is determined to be in a hazardous financial condition. In that regard, because of losses recorded as of December 31, 2002, MIIX's RBC is currently at the Mandatory Control Level. At that level, the Insurance Commissioner of the New Jersey Department of Banking and Insurance is authorized to place MIIX in supervision, rehabilitation or liquidation.
During August 1999, the Company approved a stock repurchase program authorizing the purchase of up to 1,000,000 shares of its Common Stock in the open market. During November 1999, the program was amended, authorizing the purchase of up to an additional 2,000,000 shares. Through December 31, 2000, 3,000,000 shares had been repurchased at a total cost of $39.3 million and 25,933 shares have been issued from treasury at a value of $0.4 million. No stock was repurchased under the stock repurchase program during 2001 or during 2002. The Company does not expect to repurchase any additional common stock under this program.