Our gross written premiums, excluding our captive business, grew by 16% in the fourth quarter and 10% for the full year.
Importantly, the overall P&C rate increase remained at 8% in the fourth quarter, consistent with the third quarter, leading to a full-year rate increase of 9%, which was well above long-run loss cost trends.
The all-in combined ratio was 92.9% for the quarter and 96.2% for the year, each representing the best ratios in five years.
Underlying combined ratio was 91.2% for the quarter and a record low of 91.4% for the full year.
All of this led to record core income of just over $1.1 billion for the year, up 50% in core earnings per share of $4.06 per share.
Drilling down on the details starting with the fourth quarter, our P&C operations produced core income of $353 million, or $1.29 per share.
Our Life & Group segment produced core income of $6 million, and our Corporate & Other segment produced a quarter loss of $94 million, mainly impacted by a non-economic charge related to asbestos and environmental.
In the fourth quarter, the all-in combined ratio was 92.9% percent, a half a point lower than the fourth quarter of 2020, and the lowest all-in quarterly combined ratio since 2016.
Pretax catastrophe losses in the quarter were $40 million or 2 points of the combined ratio, compared to $14 million in the prior year period.
P&C's underlying combined ratio of 91.2%, the 1.4 points improvement over last year's fourth quarter result.
The underlying loss ratio in the fourth quarter of 2021 was 60.1%, which is down 0.3 points compared to the fourth quarter of 2020.
Excluding the impacts of COVID in the prior year quarter, the underlying loss ratio improved by 0.8 points as we continue to recognize some of the margin built in the current accident year from the earned rate increases, as we did last quarter.
For P&C overall, prior period development was favorable by 0.3 points on the combined ratio.
Turning to production, gross written premium, excluding our captive business, grew by 16% in the fourth quarter, which was twice as high as the first half of the year.
Net written premium grew by 11% for the quarter, an increase of 6 points from the third quarter.
New business grew by 28% in the quarter, and the overall written rate increase was 8%, while earned rate in the quarter was 10%.
In addition, retention of 83% was higher than it's been all year.
In terms of the business units, the all-in combined ratio for specialty was 89.9% and the underlying combined ratio was 90.1%, a half-point improvement compared to last year.
The underlying loss ratio improved by 0.9 points to 59.1%.
The expense ratio increased by 0.5 points to 30.9 from a one-time to up, and Larry will provide more detail in the discussion on expenses.
Gross written premium ex captives grew 15% in the fourth quarter, with 58% growth in new business.
We also achieved an overall rate increase of 11%, up 1 point from the third quarter.
In addition, retention improved to 3 points to 83%.
Turning to commercial, the all-in combined ratio was 94.9% in the quarter, including 2.9 points of cat.
The underlying combined ratio was 92.2% this quarter, which was the lowest on record, and was 1.4 points lower than the fourth quarter of 2020, and 2.4 points lower, excluding the COVID frequency impacts that lowered the loss ratio in 2020.
The underlying loss ratio of 61.4% improved by 0.3 points compared to the fourth quarter 2020, excluding the COVID frequency impacts.
Expense ratio improved 2.3 points to 30.4% this quarter.
Commercial achieved that 19% growth in gross written premiums ex captives, with 16% growth in new business.
Rate at 5% was only slightly below the third quarter, and excluding work comp, the rate change was +7% in the quarter, which was consistent with the third quarter.
Retention was up 2 points to 84%, which was the highest of any quarter this year.
Retention were strong in all of our commercial business units, and middle-market retention improved to 85%, which is the highest level since prior to the pandemic.
Exposure change was +2% in commercial this quarter as a result of increases in payrolls, and sales volumes as the economy continues to improve.
For International, the all-in combined ratio was 94.8% in the quarter.
The underlying combined ratio improved by 4.2 points to another record low of 90.9% this quarter.
The expense ratio improved at 2.6 points to 32.4%, and the underlying loss ratio improved 1.6 points to 58.5%.
International achieved a 9% growth in gross written premium and new business growth of 15%.
Rates were up 13% this quarter, achieving double-digit rate for the seventh consecutive quarter and 9 of the last 10 quarters.
In addition, retention at 82% was the strongest quarterly retention in over three years.
As I mentioned before, core income was a record for the year increasing 50%, so a little over $1.1 billion or $4.06 per share, and net income for the year was just over $1.2 billion or $4.41 per share.
This compares to $735 million and $690 million in 2020 respectively.
The all-in combined ratio was 96.2%, with 5.1 points of catastrophe loss and 0.3 points of favorable prior period development.
That losses were $397 million pre-tax in 2021, compared to $550 million last year.
But catastrophe losses in 2021 were actually higher than the $355 million catastrophe result in 2020 when you account for the COVID cat charge we incurred in 2020.
Our P&C underlying underwriting profit for the full year increased 31% to $667 million, and the underlying combined ratio improved to 1.7 points to 91.4%.
The underlying loss ratio in 2021 was 60%, down 0.2 points compared to 2020.
Excluding the impacts of COVID in the prior year, the underlying loss ratio improved 5.6 points.
The expense ratio improved 1.5 points for the full year.
For specialty, the underlying combined ratio of 89.7% was the best on record and 1.6 points lower in 2020.
Commercial produced an underlying combined ratio of 92.6% in 2021, which is also a record and 1.3 points lower than 2020.
Multiple years of reunderwriting initiatives in our international portfolio of paid off, an underlying combined ratio of 92.1% in 2021, three and a half points lower in 2020.
Turning to production for the full year, gross written premium growth ex captives was 10% this year.
We achieved strong new business growth of 19%, and a full year rate increase of 9%.
Retention was 82% for the full year.
Net written premium grew by 5% for the year, in terms of the wider spread between gross and net written premium for the year compared to 2020.
Starting with core income for the fourth quarter, our P&C operations produced a core income of $353 million, as Dino indicated.
A key contributor to the strong result was our pre-tax underlying underwriting income of $167 million, a 22% increase from the fourth quarter of 2020.
In addition, our catastrophe losses were relatively modest at $40 million pre-tax, despite the fact that estimated cat losses for the industry were significantly above the 10 year median for fourth quarter events.
For full-year 2021, the record core income of $1.106 billion produced an ROE of 9.1% up substantially from 2020 6.1%.
The expense ratio was 30.8%, which was 1.2 points lower than the fourth quarter of 2020.
In commercial, the expense ratio improved by 2.3 points this quarter, largely from growth in net earned premium.
International also showed significant year-over-year improvement of 2.6 points, driven by net earned premium growth and lower acquisition cost.
On an annual basis, the expense ratio was 31.1% in 2021, one and a half points lower than full year 2020.
We believe 31% is a reasonable run rate going forward as we continue to make investments in talent, technology, and analytics.
The expense ratio improved for each segment for specialty, improving 0.8 points from 31.3% to 30.5%.
Commercial improving almost 20.4 points from 33% in 2020 to 31.1% in 2021.
In international improving 20.4 points from 35.5% for 2020 to 33.1% for 2021.
Moving to a prior period development, for the fourth quarter, the overall Property & Casualty net prior period development impact on the combined ratios was 0.3 points favorable compared, to no impact in the prior year quarter.
For the full year 2021 over, our development was favorable by three-tenths of a point, compared to 0.7 points favorable in 2020.
The pay to incurred ratio of 0.89 was elevated in Q4 relative to the first three quarters of 2021, due largely to pay out of catastrophes that occurred in prior quarters.
However, the 0.89 ratio remains at the lower end of our pre-pandemic range.
On a full-year basis to pay to improve ratio was 0.70.
Moving to on our Property & Casualty segments, a corporate segment produced a core loss of $94 million in the fourth quarter, which compares to a $49 million core loss in the fourth quarter of 2020.
The results of the review included a non-economic after-tax charge of $48 million, driven by the strengthening of reserves associated with higher defense and indemnity cost on existing accounts.
In compares to last year's non-economic after-tax charge of $39 million.
From a core income perspective, the impact of the fourth quarter 2021 charge was a reduction of approximately $0.18 per share versus an approximate reduction of $0.14 per share impact in the fourth quarter of 2020.
Following this year's review, we have incurred cumulative losses of $3.4 billion, which is well within the $4 billion limit of our last portfolio transfer cover that we purchased in 2010.
Importantly, pay losses are at $2.2 billion.
As of year in 2021, we have $429 million of deferred gain that will be recaptured over time.
In addition to the impact from our annual investment, asbestos and environmental reserve review, net investment income in the fourth quarter attributed to our core corporate segment is down $13 million after-tax on a year over year basis due to loss portfolio transfer agreement we entered into the end of last year related to legacy excess worker's comp reserves.
We also strengthen our legacy mass tort IBNR reserves this quarter by $16 million on an after-tax basis.
The Life & Group we had core income of $6 million for the fourth quarter of 2021, which is $20 million lower than last year's fourth quarter, as those results benefited from favorable commodity experience driven by the pandemic.
Total pre-tax that investment income was $551 million in the fourth quarter, essentially the same as last year's fourth quarter.
The results included income of $108 million from our limited partnership, or LP and common stock portfolios as compared to $140 million on these investments for the prior year quarter.
Pretax that investment income for the full year 2021 was $2.2 billion, compared to $1.9 billion for 2020.
The increase was largely driven by our LP and common stock investments, which had pre-tax returns of $402 million for 2021, compared to $144 million for 2020.
Our average book value has increased $1.4 billion from the year in 2020.
On a pre-tax effective income, yield decreased 20 basis points.
To give a sense of magnitude of the increase in our operating cash flow in the fourth quarter, operating cash flow was strong once again at $643 million, and then our full year basis increased approximately $860 million from full-year 2020 after adjusting for the payment to purchase our excess workers' comp LPT agreement.
From a balance sheet perspective, the unrealized gain possession of a fixed income portfolio was $4.4 billion at year-end, down from $4.8 billion at the end of the third quarter, reflecting the slightly higher interest rate environment.
Fixed income invested assets that support our P&C liabilities, and Life & Group liabilities had effective durations of 4.9 years and 9.2 two years, respectively, at year-end.
At year-end, shareholder's equity was $12.8 billion for $47.20 per share.
Shareholder's equity, excluding accumulated other comprehensive income, was $12.5 billion, or $46.02 per share, an increase of 10% from year in 2020 adjusting for dividends.
We have a conservative capital structure, with a level leverage ratio of 18%, and continue to maintain capital above target levels in support of our ratings.
Finally, we are pleased to announce we are increasing our regular quarterly dividend 5% to $0.40 per share, which will be payable on March 10th to shareholders of record on February 22nd.
In addition to the increase in our regular quarterly dividend, we are declaring a special dividend of $2 per share, also payable on March 10 to shareholders of record on February 22nd.
As I mentioned earlier, our pricing remains stable for the third quarter at 8 points, while retention increased 2 points.

Pretax catastrophe losses in the quarter were $40 million or 2 points of the combined ratio, compared to $14 million in the prior year period.
As I mentioned before, core income was a record for the year increasing 50%, so a little over $1.1 billion or $4.06 per share, and net income for the year was just over $1.2 billion or $4.41 per share.
At year-end, shareholder's equity was $12.8 billion for $47.20 per share.


Net income for the second quarter of 2021 included the after-tax cost related to the early retirement of debt of $53.2 million or $0.26 per diluted common share.
The after-tax amortization of the cost of reinsurance of $15.5 million or $0.08 per diluted common share, an after-tax impairment loss on the right-of-use asset related to one of our operating leases for office space we are no longer using to support our general operations of $11 million or $0.05 per diluted common share, a net after-tax realized investment gain on the company's investment portfolio of $600,000 or $0.01 per diluted common share and a net tax expense related to a U.K. tax rate increase of $24.2 million or $0.12 per diluted common share.
Net income in the second quarter of 2020 included an after-tax impairment loss on the right-of-use asset of $10 million or $0.05 per diluted common share and a net after-tax realized investment gain of $25.4 million or $0.12 per diluted common share.
So excluding these items, after-tax adjusted operating income in the second quarter of 2021 was $286.2 million or $1.39 per diluted common share compared to $250.1 million or $1.23 per diluted common share in the year ago quarter.
We showed a 13% increase year-over-year in after-tax adjusted operating income to $1.39 per share.
Given our strong second quarter results, we are raising our outlook for full year 2021 growth in after-tax adjusted operating income per share to a decline of approximately 1% to 3% compared to our previous outlook of a decline of 5% to 6%.
And Colonial Life showed very strong results this quarter with over a 50% increase from the year ago quarter, a good indicator of consumer interest in the basic financial protection products we offer.
It remained very healthy as well, with holding company cash of $1.7 billion and weighted average risk-based capital for our traditional U.S. insurance companies at 375%.
Leverage remains approximately 28% -- 26% and provides further capital flexibility for us.
We also expect to be consistent in returning capital to shareholders through dividends, which will increase by 5.3% with the dividend to be paid this month.
These and many other efforts help place Unum among the Points of Light, Civic 50, and in Forbes Best Employers for Diversity, Best Employers for Women and Best Employers for New Graduates.
We are proud of how it has helped us endure through the challenges of the past 1.5 years and how the engagement of our team will propel us going forward.
I'll start with the Unum US segment, which reported adjusted operating income for the second quarter of $179.3 million compared to $115.7 million in the first quarter.
Within the Unum US segment, the group disability line reported operating income of $59.9 million in the second quarter compared to $64.1 million in the first quarter.
Premium income was generally consistent between the two quarters and on a year-over-year basis increased 1.1%.
The group disability benefit ratio for the second quarter was 74.7%, which is consistent with the first quarter benefit ratio of 74.8%.
Adjusted operating income for Unum US group life and AD&D showed a sharp improvement in the second quarter to income of $5.2 million compared to a loss of $58.3 million in the first quarter.
This improvement is consistent with our expectations and largely explained by the significant reduction in COVID-related mortality in the U.S., which declined from approximately 200,000 nationwide observed deaths in the first quarter to approximately 52,000 in the second quarter.
We estimate that we incurred approximately 800 excess claims from COVID in the second quarter compared to an estimate of 2,050 COVID claims in the first quarter.
Our average size of claim increased in the second quarter by approximately 10% as we experienced a mix shift to a more younger, working-age policyholders who typically have higher benefit amounts.
Now looking ahead to the third quarter, our current expectation for nationwide COVID related mortality of approximately 40,000 compared to approximately 52,000 experienced in the second quarter.
Assuming the shift in the mix continues to more younger, working-age individuals with a continued higher average benefit amount, we would estimate third quarter group life operating income to show a modest improvement over second quarter results to approximately $15 million.
We saw an improved quarter with adjusted operating income of $114.2 million in the second quarter compared to $109.9 million in the first quarter.
Though the benefit ratio did increase to 48.4% in the second quarter from 42.4% in the first quarter, it continues to perform quite well compared to our pre-pandemic experience as new claim incidence trends and recovery levels remain favorable.
And then finally, utilization in the dental and vision line was higher this quarter, as was the average cost per procedure, pushing the benefit ratio to 77.1% in the second quarter compared to 73.2% in the first quarter.
Sales for Unum US in total declined 3.1% in the second quarter on a year-over-year basis compared to a decline of 10.3% in the first quarter.
For the employee benefit lines, which include LTD, STD, group life, AD&D and stop loss, total sales declined by 3.1% this quarter.
For this quarter, total sales declined 3.1% year-over-year compared to the 22.3% decline in the first quarter.
Our recently issued individual disability sales increased 4.9%, and dental and vision sales increased 2.4% year-over-year.
Voluntary benefit sales were down 7% in the quarter, which is consistent with our view that these sales will take longer to recover.
Adjusted operating income for the second quarter was $24.8 million compared to $26.4 million in the first quarter and $15.1 million in the second quarter of 2020.
The primary driver of these results is in our Unum UK business, which generated adjusted operating income of GBP16.8 million in the second quarter compared to GBP18.6 million in the first quarter and GBP10.1 million in the second quarter of 2020.
The reported benefit ratio in Unum UK, which showed an increase to 82.5% in the second quarter from 75.3% in the first quarter was impacted by the increase in inflation in the U.K. in the second quarter compared to the first quarter.
Looking at the growth on a year-over-year basis and in local currency to neutralize the benefit we saw from the higher exchange rate, Unum UK generated growth of 3% with strong persistency and the ongoing successful placement of significant rate increases on our in-force block.
And Unum Poland generated growth of 12.4%, a continuation of the low double-digit growth this business has been producing.
With this growth, our Unum International in-force premium is now at its highest level.
Next, we are very pleased with the results generated by Colonial Life, with adjusted operating income of $95.8 million in the second quarter compared to $73.3 million in the first quarter.
The benefit ratio improved to 51.7% in the second quarter from 55.4% in the first quarter as experience in the life insurance block improved with the overall decline in COVID-related mortality.
Looking out to the third quarter, we anticipate adjusted operating income to settle back to the low to mid-$80 million range as some of this favorable experience moderates.
We're very excited with the rebound in sales activity we experienced in Colonial Life this quarter, increasing 53.7% on a year-over-year basis.
As expected, premium income declined 4.3% on a year-over-year basis and will likely continue with negative comparisons for the next couple of quarters until sales volumes have sufficiently recovered.
Persistency for Colonial Life continues to show an encouraging trend at 78.3% for the first half of 2021, almost one point higher than a year ago.
Then in the Closed Block segment, adjusted operating income was $111.2 million in the second quarter compared to $97 million in the first quarter, both very strong quarters relative to our historical levels of income for this segment.
Looking within the Closed Block, the LTC block produced a slightly lower interest adjusted loss ratio of 74.6% in the second quarter compared to 77.7% in the first quarter, both results quite favorable to our long-term expected range of 85% to 90%.
Over the past four quarters, the benefit ratio for LTC was 70% excluding the impact of the fourth quarter 2020 reserve assumption update.
We continue to see higher mortality experience in the claim a block in the second quarter and estimate that counts were approximately 5% higher than expected.
For the Closed Disability Block, the interest adjusted loss ratio was 69.6% in the second quarter and 68.9% in the first quarter.
We estimate the quarterly operating income for this segment will over time run within the range of $45 million to $55 million, assuming more normal trends for investment income and claim results.
The adjusted operating loss in the Corporate segment was $48.5 million in the second quarter compared to $38.9 million in the first quarter.
We anticipate the quarterly losses in the Corporate segment will moderate in the second half of the year to the low to mid-$40 million range.
We had approximately $10 million higher investment income from bond calls this quarter relative to our historical quarterly averages.
Second, as I mentioned previously, we continue to see strong performance in the valuation mark on our alternative investment assets, which totaled $51.9 million in the second quarter following a positive mark of $35.9 million reported in the first quarter.
Both quarters are well above the expected quarterly positive marks on the portfolio of $12 million to $14 million.
The risk-based capital ratio for our traditional U.S. insurance companies improved to approximately 375%, and holding company cash was $1.7 billion as of the end of the second quarter, which are both well above our targeted levels.
During the second quarter, we successfully completed a debt offering issuing $600 million of a 30-year senior note with a coupon of 5 1/8.
The proceeds from the issue were used to redeem the $500 million of 4.5% issue that would have matured in 2025.
With the issuance and the redemption completed in the second quarter, our leverage ratio currently is 26.2%, providing additional financial flexibility.
At our outlook meeting this past December, we indicated that our capital plan for 2021 -- in our capital plan for 2021, we assumed a negative impact of approximately $225 million from the adoption of the factor changes.
We now estimate the impact to our capital position to be less than $70 million rather than the $225 million we had previously projected, a very good outcome for us, which provides upside to our capital expectations for year-end 2021.
Previously, we expected a modest decline of 5% to 6% for full year 2021 after-tax adjusted operating income per share relative to the 2020 level of $4.93 per diluted common share.
Given the strong second quarter results and our updated view on COVID trends, we are revising our outlook upward and now look for 2021 after-tax adjusted operating earnings per share to decline by a range of approximately 1% to 3% relative to 2020.

So excluding these items, after-tax adjusted operating income in the second quarter of 2021 was $286.2 million or $1.39 per diluted common share compared to $250.1 million or $1.23 per diluted common share in the year ago quarter.
We showed a 13% increase year-over-year in after-tax adjusted operating income to $1.39 per share.
Given our strong second quarter results, we are raising our outlook for full year 2021 growth in after-tax adjusted operating income per share to a decline of approximately 1% to 3% compared to our previous outlook of a decline of 5% to 6%.
With this growth, our Unum International in-force premium is now at its highest level.
Given the strong second quarter results and our updated view on COVID trends, we are revising our outlook upward and now look for 2021 after-tax adjusted operating earnings per share to decline by a range of approximately 1% to 3% relative to 2020.


For the recent CBRE flash report, U.S. industrial net absorption totaled 100 million square feet in the first quarter.
This marks the first time ever that demand has exceeded 100 million square feet in consecutive quarters.
Net absorption also significantly exceeded first quarter completions of 57 million square feet.
David has been a valued member of the FR team since 1998 when he joined the company as our Regional Director in Nashville.
He has served our company and our shareholders as Head of our Central region since 2009 helping to shape and grow our portfolio.
Occupancy at quarter-end was 95.7% and cash same-store NOI growth was 2.2%.
For the quarter, we grew cash rental rates 10.4%.
And as of today, we have renewed approximately 72% of our 2021 expirations, with a cash flow rate increase of 12.7%.
Moving on to sales; during the quarter, we sold three properties and two condo units for $67 million at an in-place cap rate of approximately 8.4%.
Thus far in the second quarter, we sold the land parcel for $11 million, bringing our year-to-date total to $78 million, well on our way to our sales guidance of $100 million to $150 million.
Based on the strong fundamentals, combined with the growth of our company, our balance sheet strength, portfolio performance and our significant future growth opportunities, we believe it is prudent to increase our speculative leasing cap by $150 million to $625 million.
When we first initiated this leasing cap nine years ago, it represented approximately 9% of our total market cap.
The first project is at our First Park 121 in Dallas comprised of two buildings totaling 375,000 square feet with an estimated investment of $30 million and a targeted cash yield of 7%.
This is the third and final phase of our park in Lewisville, adding to the three previously completed buildings that totaled 779,000 square feet.
We pre-leased the 125,000 square foot building, so we're 33% leased on the new phase prior to groundbreaking.
It's a 588,000 square footer adjacent to the 556,000 square foot building we completed in the third quarter of 2019 which was 100% leased within a couple months of completion.
Estimated investment is $53 million with a targeted cash yield of 6%.
This new building position us well to serve a significant demand for larger spaces we are seeing in that market and we look forward to future growth at that park on our remaining land on which we can develop three additional buildings totaling approximately 700,000 square feet.
Including these two new developments starts, our developments in process today total 3.3 million square feet with a total estimated investment of $318 million.
At a cash yield of 6.2%, our expected overall development margin on these projects is a healthy 45% to 55%.
Moving on to acquisitions, during the quarter, we bought one building and three land sites for a total purchase price of $24 million.
The existing asset is a 62,000 square foot distribution facility in the Oakland submarket.
The total purchase price was $12 million and the expected stabilized cash yield is 4.8%.
The three new land sites total 16.6 acres and are located in the Lehigh Valley in Pennsylvania, the Inland Empire East and the Oakland market of Northern California.
Total purchase price was $12 million and these sites can accommodate up to 275,000 square feet of future development.
In total, our balance sheet land today can support more than 10 million square feet of new investments and our two joint ventures can support 11 million square feet with our share of around 5 million.
Net refunds from operations were $0.46 per fully diluted share compared to $0.45 per share in 1Q 2020.
And our cash same-store NOYI growth for the quarter, excluding termination fees and a gain from an insurance settlement, was 2.2% primarily due to an increase in rental rates on new and renewal leasing, and rental rate bumps embedded in our leases partially offset by lower average occupancy.
Summarizing our outstanding leasing activity during the quarter, we commenced approximately 3.3 million square feet of leases.
Of these, 600,000 were new; 2.3 million were renewals and 500,000 were for developments in acquisitions with lease-up.
Tenant retention by square footage was 76.5%.
Cash rental rates for the quarter were up 10.4% overall, with renewals up 8.3%, and new leasing, 17.8%.
And on a straight-line basis, overall rental rates were up 21.4% with renewals increasing 17.6% and new leasing up 35.5%.
Now on to a few balance sheet metrics; in March 31, our net debt plus preferred stock to adjusted EBITDA is 4.8 times and the weighted average maturity of our unsecured notes, term loans, and secured financings was 6.1 years, with a weighted average interest rate of 3.6%.
Key assumptions for guidance are as follows: quarter-end average in-service occupancy of 95.75% to 96.75%, an increase of 25 basis points at the midpoint, helped by property sales in the first quarter; same-store NOI growth on a cash basis before termination fees of 3.5% to 4.5%, an increase of 50 basis points at the midpoint to the first quarter performance and property sales in the first quarter.
Please note that our same-store guidance excludes the impact of approximately $1 million from the gain from an insurance settlement.
Our G&A expense guidance remains unchanged at $33 million to $34 million.
In total, for the full year 2021, we expect to capitalize about $0.05 per share of interest.
And lastly, guidance also reflects the expected payoff of $58 million of secured debt in the third quarter, with an interest rate of 4.85%.


We generated $14.3 million net income or $1.28 of diluted earnings per share as a result of continued quality growth in our loan portfolio, a strong credit profile, disciplined expense management and low funding costs.
We originated $359 million of loans in the fourth quarter, which was comparable to the prior year and up nearly $51 million or 16% from the third quarter.
This drove sequential growth in our total portfolio of $77 million or 7%.
Our core small and large loan portfolio grew by $80 million or 8% quarter over quarter.
And on a year-over-year basis, our core loan portfolio grew by $19 million or 2%, and an impressive result considering the circumstances presented in 2020.
Our net credit loss rate during the quarter was 6.9%, a 210-basis-point improvement from last year, and we ended the quarter with a 30-plus day delinquency rate of 5.3%, down from 7% last year.
Our $150 million allowance for credit losses as of December 31 continues to compare quite favorably to our 30-plus day contractual delinquency of $60.5 million and includes a $30.4 million reserve for additional credit losses associated with COVID-19.
This reserve assumes an unemployment rate of 9% at the end of 2021.
In addition, with $452 million of unused capacity on our credit facilities and $203 million of available liquidity as of February 5, we have access to more than enough capital to invest in our business and fund our ambitious growth plans.
Earlier today, we also amended our ABL facility to provide an additional $20 million of flexibility to return capital to our shareholders in the future, whether through dividends or share repurchases.
Approximately $250 million securitization garnered wide interest from investors, and priced at a record low average-weighted coupon of 2.08%, nearly 80 basis points better than our previous securitization.
The proceeds from the securitization will be used to retire our RMIT 2018-2 securitization, thereby significantly reducing our cost of capital and further strengthening our balance sheet.
In December, we closed 20% of our branch originations through the remote loan closing process.
Over the next 18 months, we will acquire new customers through innovation and geographic expansion.
In parallel with our digital investments, we will expand our operations into four to five new states over the next 18 months.
To that end, we plan to open between 15 and 20 net new branches in 2021.
While Illinois has recently passed legislation to cap the all-in APR at 36%, we feel that it remains a terrific opportunity to enter a new market with our digitally enabled business model and take advantage of the competitive disruptions from the recent legislation.
As of year-end 2020, 80% of our loan portfolio had an APR at or below 36%.
As of year-end, 61% of our total portfolio had been underwritten using the enhanced credit standards that we deployed during the pandemic.
As we've said previously, any additional stimulus such as the recent $600 stimulus checks, will push COVID-related losses into the second half of 2021.
We generated net income of $14.3 million and diluted earnings per share of $1.28, resulting from quality growth in our portfolio, a strong credit profile, disciplined expense management and low funding costs.
Page 4 shows our strong portfolio growth in the second half of 2020, driven by increased loan demand and our new growth initiatives.
We grew $114 million from June to December of 2020, with $77 million of this growth in fourth quarter.
We also increased our core finance receivables by $120 million from June to December of 2020 with $80 million of this growth in fourth quarter.
Page 5 displays our portfolio growth and mix trends through year-end 2020.
We closed the quarter with net finance receivables of $1.1 billion, up $77 million or 7% sequentially and $3 million year over year.
Our new growth initiatives drove $36 million of the $77 million of sequential growth.
Our core loan portfolio grew $80 million or 8% sequentially and $19 million year over year.
We continued our mix shift toward large loans, which represent 63% of our portfolio as of fourth-quarter 2020.
Moving to Page 6, as Rob mentioned earlier, originations continued to rebound in the fourth quarter.
Branch originations grew from $233 million in the third quarter of 2020 to $272 million in the fourth quarter, a 17% improvement.
Meanwhile, direct mail and digital originations increased from $75 million in the third quarter to $87 million in the fourth quarter, a 16% improvement.
Total originations in December increased 7% year over year.
On Page 7, we show our digitally sourced originations, which were 29% of our new borrower volume in fourth quarter, the highest we've seen.
During the fourth quarter, large loans were 60% of our digitally sourced originations.
Turning to Page 8.
Total revenue declined 1% due to the continued product mix shift toward large loans and the portfolio composition shift toward higher-credit quality customers.
In the first quarter, due to our seasonal pattern, we expect total revenue yield to be 180 basis points lower than fourth quarter and interest and fee yield to be 140 basis points lower.
Moving to Page 10.
Our net credit loss rate was 6.9% for the fourth quarter of 2020, a 210-basis-point improvement year over year and a 90-basis-point improvement from the third quarter of 2020.
The credit quality of our portfolio remains stable, as can be seen on Page 11.
Our 30-plus day delinquency rate of 5.3% in December, continued to track near historic lows, even with the usage of borrower assistance programs remaining at pre-pandemic levels of 2.2%.
Our delinquency level of 5.3% is 60 basis points higher than the third quarter, primarily due to normal seasonality, but it represents a 170-basis-point improvement year over year.
Turning to Page 12, we ended the third quarter with an allowance for credit losses of $144 million or 13.6% of net finance receivables.
During the fourth quarter of 2020, the allowance increased by $6 million to $150 million or 13.2% of net finance receivables.
The base reserve increased by $7.5 million due to portfolio growth and was partially offset by $1.5 million of COVID-specific reserves, resulting in $30.4 million of COVID-specific reserves as of quarter end.
The severity and the duration of our macroeconomic assumptions remained relatively consistent with our third-quarter model, including an assumption that unemployment is 9% at the end of 2021.
Our $150 million allowance for credit losses as of December 31 and compares favorably to our 30-plus day contractual delinquency of $60.5 million.
Flipping to Page 13.
G&A expenses in the fourth quarter of 2020 were $44.8 million, up $3.9 million year over year but better than our sequential guidance for the quarter by $0.7 million.
The increase in G&A expense was primarily driven by $3 million in higher marketing expenses and digital investments to support our growth initiatives.
Overall, we expect G&A expenses for the first quarter to be higher than the fourth quarter by approximately $1 million, encompassing investments in increased marketing, our digital capabilities and our state expansion plans.
Turning to Page 14.
Interest expense of $9.3 million in the fourth quarter of 2020 was $1 million lower than in the prior-year period due to the lower interest rate environment.
Our fourth-quarter annualized interest expense as a percentage of average net receivables was 3.3%, a 40-basis-point improvement year over year.
We purchased $50 million of interest rate caps in the fourth quarter to take advantage of the favorable rate environment.
In the first quarter, we expect interest expense to be approximately $9 million.
As Rob mentioned, earlier this week, we priced an approximately $250 million securitization at a record low average-weighted coupon of 2.08%.
Proceeds from the securitization will be used to retire our RMIT 2018-2 securitization, which had a weighted average coupon of 4.87%.
In the fourth quarter, we accelerated $0.8 million for the amortization of debt issuance costs related to the RMIT 2018-2 transaction in advance of the expected repayment this quarter.
Our effective tax rate during the fourth quarter of 2020 was 23.3%, compared to 24.5% in the prior-year period, better-than-expected due to tax benefits on share-based compensation.
For 2021, we are expecting an effective tax rate of approximately 25.5%.
Page 15 is a reminder of our strong funding profile.
Our fourth-quarter funded debt-to-equity ratio remained at a very conservative 2.8:1.
Low leverage, coupled with $150 million in loan loss reserves provides a strong balance sheet.
As of February 5, we had $452 million of unused capacity on our credit facilities and $203 million of available liquidity, consisting of a combination of unrestricted cash on hand and immediate availability to draw down cash from our revolving credit facilities.
During the fourth quarter, we repurchased 435,116 shares at a weighted average share price of $27.58.
As of the beginning of the year, we still had $18 million of availability remaining under our $30 million share repurchase program announced in third quarter of 2020.
In addition, our board of directors recently declared a dividend of $0.20 per common share for the first quarter of 2021.

We generated $14.3 million net income or $1.28 of diluted earnings per share as a result of continued quality growth in our loan portfolio, a strong credit profile, disciplined expense management and low funding costs.
We generated net income of $14.3 million and diluted earnings per share of $1.28, resulting from quality growth in our portfolio, a strong credit profile, disciplined expense management and low funding costs.
We closed the quarter with net finance receivables of $1.1 billion, up $77 million or 7% sequentially and $3 million year over year.


Consolidated revenues improved 1% sequentially to $142 million with a 28% increase in international Fluids Systems and a 15% improvement in Industrial Solutions rental and service revenues, offsetting the previously anticipated pullback in Industrial Solution product sales that we discussed on our prior quarter call.
Second quarter EBITDA generation was $7 million.
As anticipated, coming off the exceptionally strong first quarter product sales, segment revenues declined 15% sequentially to $45 million in the second quarter as site access product sales pulled back to $10 million for the quarter.
Partially offsetting the product sales reduction, rental and service revenues improved 15% sequentially, contributing $33 million of revenue in the second quarter, including a record $25 million contribution from the power transmission and other industrial end markets, reflecting strong performance both in the United States and in the United Kingdom.
Industrial Blending revenues also pulled back to $2 million in the second quarter, reflecting the anticipated impact of product transition with our primary customer.
With the lower revenue, our Industrial Solutions operating margins declined modestly to 22% in the second quarter, generating $15 million of EBITDA.
Reflecting on our first half 2021 performance, it's worth highlighting that the power transmission and other industrial end markets contributed $75 million of our Site and Access Solutions revenues.
This annualized run rate of $150 million represents a 30% improvement over the previous high of $115 million achieved in 2018, illustrating the continued momentum in our market penetration.
Meanwhile, our historical upstream oil and gas end market contributed less than 20% of the first half 2021 segment revenues, reflecting the lower industry activity and our focus on the more stable industrial end markets.
In the Fluids Systems segment, revenues improved 11% sequentially, benefiting from project start-ups and the early phases of recovery within certain international markets following the COVID-related disruptions that significantly impacted the previous four quarters.
Our international revenues improved 28% sequentially to $35 million in the second quarter, benefiting primarily from improvements in Europe and North Africa.
In North America, revenues improved modestly to $62 million with a 19% improvement in the U.S., largely offset by the seasonal pullback in Canada.
This contract is expected to provide approximately $25 million of revenue over the three year term with work scheduled to begin in the third quarter.
In addition, as part of the latest Shale Oil tender in the Gulf of Mexico, we were awarded a contract to continue providing drilling fluids, reservoir drilling fluids and related services for two deepwater drillships, which we expect will generate approximately $30 million of revenue annually.
Total revenues for the Industrial Solutions segment declined 15% sequentially to $45 million in the second quarter, which includes a $43 million contribution from the Site and Access Solutions business and $2 million from Industrial Blending.
The sequential decline primarily reflects the anticipated $10 million reduction in product sales following the exceptionally strong Q1 performance along with a $3 million decline in Industrial Blending product sales.
Rental and service revenues improved 15% on a sequential basis, coming in at $33 million for the second quarter, which reflects our strongest quarter in nearly two years.
As a result of the $8 million decline in revenues, the Industrial Solutions segment operating income declined by $3 million sequentially to $10 million, contributing $15 million of EBITDA in the second quarter.
Comparing to the second quarter of last year, revenues from the Site and Access Solutions business increased $16 million or 59%.
This increase includes an $11 million or 50% improvement in rental and service revenues along with a $5 million improvement in product sales.
More specifically, the power transmission end market contributes more than half of our Industrial Solutions segment revenues, while our historical E&P market activity accounts for less than 20%.
Total segment revenues improved by 11% sequentially to $97 million in the second quarter.
Revenues from U.S. land increased $10 million or 24% sequentially, reflecting the benefit of the 16% improvement in market rig count along with an increase in market share, which stands at roughly 20%.
Revenues from the Gulf of Mexico declined modestly, contributing $8 million in the second quarter.
In Canada, revenues followed the typical seasonal pattern through spring breakup, declining 61% sequentially to $5 million in the second quarter.
International revenues improved $8 million sequentially to $35 million in the second quarter as delayed projects moved forward, although it's worth noting that COVID-related restrictions continue to suppress customer activity, particularly in the Middle East.
On a year-over-year basis, our Fluids Systems revenues increased $22 million or 30%.
U.S. land revenues increased by $21 million or 74%, which significantly outpaced the 16% increase in market rig count over this period.
Gulf of Mexico revenues declined $6 million or 44% year-over-year, driven primarily by the changes in customer drilling and completion plans, including a strong contribution from completion fluids in the prior year quarter.
International revenues improved $6 million or 22% year-over-year, benefiting from new project start-ups and the recovery of customer activity in several European markets and Algeria, while the Middle East remains roughly $2 million below prior year levels, reflecting the ongoing COVID challenges.
SG&A costs were $23 million in the second quarter, which includes $6.9 million of corporate office expenses, reflecting a $2 million increase from both the prior quarter as well as the second quarter of last year.
Interest expense decreased modestly to $2.2 million in the second quarter, nearly half of which reflects non-cash amortization of facility fees and discounts.
Our weighted average cash borrowing rate on our outstanding debt is approximately 3.5%.
The second quarter includes a $400,000 income tax expense despite reporting a pre-tax loss.
Our net loss in the second quarter was $0.07 per share, which compares to a net loss of $0.06 per share in the first quarter and a net loss of $0.29 per share in the second quarter of last year, which included $0.09 of charges.
Net working capital changes used $7 million of cash in the second quarter as we saw DSOs return as anticipated to a more typical level from the unusually strong performance achieved in the prior quarter.
With the higher working capital, cash used in operating activities was a modest $2 million for the quarter.
Investing activities again used less than $1 million of cash in the second quarter with $2 million of capital investments largely offset by proceeds from sales of used mats from our rental fleet and other underutilized assets.
We ended the second quarter with a total debt balance of $78 million and a cash balance of $35 million, resulting in a modest 14% debt to capital ratio and 8% net debt to capital ratio.
In total, we expect Q3 revenues for the Industrial Solutions segment will pull back modestly to roughly $40 million.
With the lingering effects of COVID, particularly in the Middle East, we expect international revenues will increase by roughly 10% in Q3 with a more pronounced improvement in Q4.
Corporate office expense is expected to increase by roughly $1 million from the Q2 level, largely reflecting the timing of long-term performance-based incentive expense along with the full lifting of salary austerity measures put in place during 2020.
Benefiting from our strong utility sector growth, our Industrial Solutions segment contributed 35% of our first half revenues, while consistently generating strong profitability and returns.
And despite the challenges of the past 18 months, we've continued to build upon our global relationships, expanding in key markets where we expect to play a meaningful role going forward.


This exceeded the upper end of our most recent guidance, which was $4.07 a share.
Across our generating fleet, we're targeting a 60% reduction in carbon emissions by 2025 and an 80% reduction by the end of 2030, all from a 2005 baseline.
In fact, by the end of 2030, we expect our use of coal for power generation will be immaterial and our plan calls for a complete exit from coal by the year 2035.
Of course, for the longer term, we remain focused on achieving net-zero carbon emissions from power generation by 2050.
Now we all recognize that advances in technology will be needed to decarbonize the economy by 2050.
Switching gears now, we're driving forward on our $17.7 billion ESG progress plan, the largest five-year plan in the company's history.
One of the highlights is the planned investment in nearly 2,400 megawatts of renewable capacity over the next five years.
Overall, we expect the ESG progress plan to support average growth in our asset base of 7% a year driving earnings growth, dividend growth and dramatically improved environmental performance.
The latest available data show Wisconsin's unemployment rate down at 2.8%; folks, that's a record low and more than a full percentage point below the national average.
I am pleased to report that our Badger Hollow 1 Solar project is now providing energy to our customers.
You'll recall that we own 100 megawatts of this project in Southwest Wisconsin.
We have also made progress on the construction of Badger Hollow 2.
We expect this project to save our customers approximately $200 million over time and help ensure reliability during Wisconsin's coldest winters.
This one contract alone represents 25% of our 2030 goal for methane reduction.
We expect our Wisconsin Public Service utility to invest approximately $150 million in this project and for it to qualify for production tax credits.
When complete, it will provide WPS with 82 megawatts of renewable capacity.
If approved, Wisconsin Public Service would acquire 100 megawatts for approximately $91 million.
We invested approximately $300 million in this project.
Overall, we have brought six projects online in our infrastructure segment, representing more than 1,000 megawatts of capacity.
Including these two projects, we plan to invest a total of $1.9 billion in this segment over the next five years, and we remain ahead of plan.
We're confident that we can deliver our earnings guidance for 2022.
We're guiding, as you know, in a range of $4.29 a share to $4.33 a share.
The midpoint $4.31 represents growth of 7.5% from the midpoint of our original guidance last year.
And you may have seen the announcement that our board of directors, at its January meeting, raised our quarterly cash dividend by 7.4%.
We continue to target a payout ratio of 65% to 70% of earnings.
Our 2021 results of $4.11 per share increased $0.32 or 8.4% compared to 2020.
Our earnings package includes a comparison of 2021 results on Page 17.
Starting with our utility operations, we grew our earnings by $0.10 compared to 2020.
First, weather added $0.04, mostly driven by colder winter weather conditions compared to 2020.
Second, continued economic recovery drove a $0.09 increase in earnings.
Overall, retail delivery of electricity, excluding the iron ore mine, were up 2.6% compared to 2020.
Small commercial and industrial electric sales were up 4.4% from 2020, and large commercial and industrial sales, excluding the iron ore mine, were up 5.1%.
Lastly, rate relief and additional capital investment contributed $0.14 to earnings and lower day-to-day O&M drove a $0.03 improvement.
These favorable factors were partially offset by $0.17 of higher depreciation and amortization expense and a net $0.03 reduction from fuel costs and other items.
Overall, we added $0.10 year over year from utility operations.
Earnings from our investment in American Transmission Company decreased $0.02 per share year over year.
Earnings at our energy infrastructure segment improved $0.06 in 2021.
Finally, we saw an $0.18 improvement in the corporate and other segment.
Lower interest expense contributed $0.07 year over year.
Also, we recognized a $0.04 gain from our investment in the fund devoted to clean energy infrastructure and technology development.
In summary, we improved on our 2020 earnings by $0.32 per share.
Looking now at the cash flow statement on Page 6.
Net cash provided by operating activities decreased $163 million.
Total capital expenditures and asset acquisitions were $2.4 billion in 2021.
This represents a $471 million decrease compared to 2020, due primarily to the timing of the in-service date of Thunderhead Wind Farm.
We opportunistically refinanced over $450 million of holding company debt during the fourth quarter.
This reduced the average interest rate of these notes from 4.5% to 2.2%.
Adjusting for the impact of voluntary pension contribution and the year-over-year increase in working capital, our FFO to debt was 15.7% in 2021.
For weather-normalized sales in Wisconsin, we're expecting 0.5% growth this year in both our electric and natural gas businesses, continued growth after a very strong year.
In terms of 2022 earnings guidance, last year, we earned $1.61 per share in the first quarter.
We project first quarter 2022 earnings to be in the range of $1.68 per share to $1.70 per share.
And as Gale stated, for the full year 2022, we are reaffirming our annual guidance of $4.29 to $4.33 per share.

We're confident that we can deliver our earnings guidance for 2022.
We're guiding, as you know, in a range of $4.29 a share to $4.33 a share.
This reduced the average interest rate of these notes from 4.5% to 2.2%.
And as Gale stated, for the full year 2022, we are reaffirming our annual guidance of $4.29 to $4.33 per share.


Bookings were once again exceptional in Q3, building on strong growth in both Q1 and Q2 and bringing our year-to-date organic bookings growth to over 25% for the enterprise.
In fact, Q3 ending backlog for the enterprise is up more than 70% or approximately $2 billion from year-end 2020 with all three of our business segments at record levels.
Americas and EMEA have backlog that are up over 90% and 65%, respectively, from year-end 2020.
Temporary supply chain delays on key materials impacted portions of our product portfolio, shifting the timing of approximately $150 million or 4% of our revenue out of the third quarter and into future periods.
Working closely with our key suppliers and with our customers, we anticipate that between $50 million and $75 million or roughly 2% of the Q3 impact will shift into the fourth quarter, leaving our 2021 revenue guidance unchanged.
We expect the remaining balance to shift into 2022.
We also highlighted on our second quarter earnings call that persistent inflation would require us to execute an incremental $150 million in pricing actions in the second half of the year in order to neutralize the impact.
In the third quarter, we realized approximately $150 million or 4.3% incremental price, offsetting approximately $150 million of inflation.
We continue to execute the business transformation projects we discussed in detail at our Investor Day in December and are on track to deliver approximately $90 million of incremental savings in 2021.
They also enable us to stay on track to deliver incremental margins of approximately 30% organic for fiscal 2021 despite persistent inflation, tight logistics systems and supply chain challenges.
We're also on track to deliver powerful free cash flow of equal to or greater than 100% of net earnings.
Exiting Q3, backlog in our Americas and EMEA segments are both at unprecedented levels, up over 90% and up over 65% versus December of 2020, respectively.
Asia also has record backlog, up nearly 20%.
If we very conservatively plot out bookings through the balance of 2021, we anticipate entering 2022 with at least 70% more backlog in the Americas and EMEA than we entered 2020.
We delivered another quarter of robust organic bookings growth, up 20% with growth across all segments and business units.
Customer demand has been high all year, with organic bookings up over 25% year-to-date, driving record backlog in each segment.
Organic revenues were also up 4%, driven by continued strong price execution.
Our Americas commercial HVAC business delivered robust bookings growth in the quarter with orders up over 30%.
Strength was broad-based with applied and unitary bookings both up more than 50% and service bookings up high teens.
The residential HVAC markets continue to be strong, and our residential team delivered low single-digit bookings growth, building on nearly 40% growth in the third quarter of 2020.
And we entered the fourth quarter with record backlog, up more than 150% year-over-year and up from prior record backlog at the end of the second quarter.
With year-to-date organic bookings up over 80% and year-to-date organic revenue up over 30%, our Americas transport refrigeration business is significantly outperforming the North America transport markets.
During the third quarter, with most of 2021 orders already in the backlog, we opened up our 2022 order book solely for the first quarter of 2022, which drove bookings growth of more than 20%.
Our EMEA teams delivered 25% organic bookings growth in the quarter with strong growth in both commercial HVAC and transport refrigeration.
Revenues were also strong, up 8%, led by high-teens organic revenue growth in transport refrigeration.
Our Asia Pacific team delivered bookings growth of 11%.
Revenue grew 1% in the quarter.
Organic revenue growth in the quarter was driven by continued strong price execution, yielding 4.3% incremental price in the quarter.
Net adjusted EBITDA and operating margins declined by 70 and 60 basis points, respectively.
Adjusted earnings per share grew 5%, driven primarily by higher adjusted operating income.
These defining characteristics compounded by the strength in the underlying market conditions power the business forward today, yielding bookings growth of over 30% in the quarter, an exceptional backlog entering Q4.
And end market indicators are generally strong, with ABI over 50 since February and a healthy GDP.
We're benefiting from increased demand across our K-12 customers with federal stimulus funds supporting both current and more importantly, future growth.
As I mentioned previously, we delivered low single-digit bookings growth in the quarter, compounding on nearly 40% growth in the prior year.
Importantly, we continue to see our 2021 adjusted earnings per share growth guidance of more than 30% as top quartile among peers in the broader industrials.
We also continue to expect free cash flow to remain strong and equal to or greater than 100% of adjusted net income.
Please go to slide number 11.
As we outlined during our investor event in December, we're on track to deliver $300 million of run rate savings by 2023, including $90 million in 2021.
Please go to slide number 12.
Third, we expect to consistently deploy 100% of excess cash over time, using a balanced approach that includes strategic M&A that further improves long-term shareholder returns and share repurchases as the stock trades below our calculated intrinsic value.
Year-to-date, we have deployed $1.8 billion in cash, with approximately $1 billion to M&A and share repurchases, including $250 million for the Farrar Scientific life sciences acquisition we closed in October.
We have paid $422 million in dividends and $425 million to pay down debt.
We are on track to deploy at least $2.5 billion in excess cash in 2021.
Please go to slide number 15.
ACT started out the year projecting an almost immediate snapback in the North America trailer production in 2021, up 39%, off the lows of the pandemic in 2020.
As trailer OEMs have had a challenging year producing enough trailers to meet the forecast, ACT has gradually pulled the forecast down and is now projecting a strong but more gradual improvement in 2021, up 18%, and continued improvement in production rates in both 2022 and 2023, up another 18% and 14%, respectively.
If you look at the all-in weighted average market forecast for North America transport refrigeration, 2021 is now expected to be up about 14% versus 24% projected in July.
Year-to-date, our Thermo King Americas transport refrigeration business is up more than 30%, clearly outperforming the markets, and we expect to outperform the markets for the full year as well.
Looking at IHS and other key indicators for EMEA markets, the outlook has improved about three points with the weighted average market growth now expected to be about 12% for 2021.
Year-to-date, our Thermo King EMEA business is up more than 20%, clearly outperforming the markets, and we expect outperformance for the full year 2021 as well.
Please go to slide number 16.
The 9-year average is in the mid-40,000 unit range with the pandemic in 2020 being the only significant outlier.
Trailer is an important part of the global mix at about 25% of the total.
Please go to slide number 17.

We expect the remaining balance to shift into 2022.
Asia also has record backlog, up nearly 20%.
We delivered another quarter of robust organic bookings growth, up 20% with growth across all segments and business units.
During the third quarter, with most of 2021 orders already in the backlog, we opened up our 2022 order book solely for the first quarter of 2022, which drove bookings growth of more than 20%.
Organic revenue growth in the quarter was driven by continued strong price execution, yielding 4.3% incremental price in the quarter.
We are on track to deploy at least $2.5 billion in excess cash in 2021.
Year-to-date, our Thermo King EMEA business is up more than 20%, clearly outperforming the markets, and we expect outperformance for the full year 2021 as well.


For KAR overall we generated $585 million in revenue an increase of 40% from Q2 of last year.
We generated total gross profit of $252 million which represents 51.7% of revenue excluding purchased vehicles.
We generated $116.5 million of adjusted EBITDA which was a 46% increase compared to Q2 of last year.
Cash flow from operations for the quarter was $131 million.
Within the ADESA segment we facilitated the sale of 711000 vehicles representing for $11 billion in gross auction proceeds.
53% of our Q2 sales were from off-premise locations.
We sold 119000 vehicles on the TradeRev and BacklotCars platforms on a combined basis.
It represents a growth of 65% compared to Q2 of last year and sequential growth of 19% versus Q1.
We generated $277 in gross profit per vehicle sold in the ADESA segment.
That represented an increase from the $264 in Q1.
SG&A for KAR overall was $140 million for the quarter.
SG&A for the ADESA segment was $131 million which was down $9 million from Q1 resulting in SG&A of $185 per vehicle sold.
So in Q2 of 2019 KAR facilitated a sale of 994000 vehicles.
Over 70% of those approximately 700000 vehicles were sold by commercial sellers.
The remainder which was approximately 275000 vehicles were sold by dealer sellers.
So from that statistic alone we can see that historically commercial sellers have represented the majority of KAR's used vehicle supply over 70%.
This is more so than our industry overall which is more like 50-50.
During Q2 of this year the volume sold on behalf of commercial sellers was approximately 420000 vehicles a decline of over 40% versus Q2 of 2019.
In Q2 of 2021 the volume of vehicles sold by commercial sellers at all U.S. auctions was down by 48% versus Q2 of 2019 in our industry according to Auctionet.
In the face of this supply shortage of new vehicles market values for used off-lease vehicles have increased by as much as 40% versus one year ago.
Based on our internal analysis the average equity in an off-lease vehicle increased to an all-time high of close to $8000 per vehicle in Q2 and that was up from an average of less than zero two years ago.
The positive equity situation for lessees resulted in a reduction of over 50% in off-lease vehicles being returned versus what we would normally expect.
For those vehicles that were returned we saw upstream conversion reach an all-time high of approximately 80% in Q2.
So while we enjoy nearly 80% market share in the upstream off-lease segment in North America a record number of vehicles were kept up by consumers where we received no fees or by the grounding dealers where we generate lower revenue.
In Q2 based on our data repossession volume across our industry continued to be about 35% below what we would consider to be normal levels.
We sold 292000 dealer vehicles in Q2 of this year.
That was an increase of 6% versus the 276000 dealer-owned vehicles that we sold in Q2 of 2019.
If we look at the digital dealer category only Q2 represented our strongest performance yet with 119000 vehicles sold representing year-over-year growth of 65%.
I've been pleased with AFC's performance in the present quarter but also over the past 18 months since the onset of the pandemic.
AFC continues to have healthy margins with gross profit for the quarter right at 80% and with SG&A of under 13% of revenue.
In terms of its key metrics AFC had 356000 loan transactions in the quarter.
Revenue per loan transaction was strong at $193 for the quarter.
Adjusted EBITDA of $116.5 million represents approximately 20% of operating revenue.
Gross profit for the quarter was 51.7% of revenue net of purchased vehicles.
The primary drivers of this strong performance gross profit per unit at ADESA $277 up from $224 in the prior year and $264 in the first quarter.
AFC revenue per loan transaction was $193 up from $115 in the prior year and $177 in the first quarter and this more than offset a decline in the number of loan transactions compared to the prior year and the first quarter.
Operating adjusted net income per share of $0.15 was negatively impacted by a reduction in net unrealized gains on publicly traded securities and an increase in our effective tax rate to 44% primarily driven by nondeductible expenses related to the increased contingent consideration recorded for the CarsOnTheWeb acquisition.
We have generated $296 million of cash from operating activities in the first six months of 2021 of which $131 million was generated in the second quarter.
First our total volumes sold at ADESA was up 10% over the prior year.
Given the industry headwinds particularly around the commercial vehicles as Peter mentioned we are pleased with 10% year-over-year growth.
If I include the BacklotCars volume for the second quarter of 2020 in our denominator our growth in volume is 4%.
I think most impressive in our performance is the 65% growth rate in digital dealer-to-dealer for the U.S. and Canada.
Auction fees per vehicle sold of $333 was up 21.5% from the prior year.
Average selling price for all vehicles in the second quarter was $16400 compared to $14800 one year ago.
Average auction fees on off-premise transactions increased from $119 in 2020 to $153 for 2021.
This increase was accomplished even though average selling prices for total off-premise transactions declined slightly as we grew the digital dealer-to-dealer channel 65% while the off-premise commercial volumes declined 15% in the second quarter.
The average auction fees for the digital dealer-to-dealer marketplace our fastest-growing marketplace was $268 per vehicle sold an increase of only $1 from the prior year.
However another key contributor was interest and fee income per loan transaction that increased to $191 per loan transaction from $155 per loan transaction last year.
This demonstrates the impact of having over 50% of the revenue for AFC from fees creating less dependence on interest rates to drive revenue.
As the stock price of CarLotz has declined since March 31 we have reduced the unrealized gain on investments by $11.9 million.
This required adjustment to the carrying value resulted in a reduction of net operating adjusted net income per share of $0.04 net of income taxes.
We also recorded $4.5 million of accrued contingent consideration related to the CarsOnTheWeb transaction as the performance of ADESA Europe formerly CarsOnTheWeb has exceeded the amounts recorded using a Monte Carlo simulation of possible outcomes at the time of purchase.
The earn-out is capped and we are recognizing the increase to the maximum earn-out payment amount ratably over the year so the quarterly expense should not increase from $4.5 million.
We deployed $100 million to purchase KAR stock in the open market at an average purchase price of $17.77 in the second quarter.
Year-to-date we have repurchased $180.8 million of KAR stock in the open market at an average purchase price of $16.66.
We have just under $110 million left on our share repurchase authorization.
Through the first half of 2021 our capital expenditures totaling $50.7 million have been focused primarily on our digital marketplaces.
Although the root cause and duration of the current environment in our industry is much different than 2009 and the period that followed I also see many similarities in the impact on volumes trends in used car pricing and the prospects for recovery following a period where we are at the bottom of the down cycle in our industry.


Our lease-up occupancy exceeded 90%, a level many believe to be a best-case scenario in the early days of this pandemic.
Our rent collection rate improved to 97% in September, the first full month of the new academic year in most of our markets, from approximately 94% in Q2.
As we are not currently holding any discussions for on-campus rental refunds beyond one university partner, which we expect to total only $1 million -- approximately $1 million in the fourth quarter versus the $15 million we contributed in the second quarter of the prior academic year.
The survey received responses from over 12,000 of our residents.
Not surprising, according to the survey, 85% of respondents are more stressed as a result of the global pandemic.
During the quarter, we provided $2.1 million in rent refunds to on-campus residents at one ACE Partnership University, which we expect to decrease to $1.2 million in the fourth quarter.
This is in comparison to the $15 million provided to residents that are primarily on-campus residence halls in the second quarter.
With regard to students and parents being impacted by COVID-19, we instituted our Resident Hardship Program during the second quarter where we provided over $8 million of financial assistance.
During the current quarter, the amount totaled $4.7 million, with the majority of this amount relating to our prior academic year leases.
In September, based on significantly lower levels of requests within the program, we gave approximately $175,000 in direct rent relief during the month.
In regards to collections, we had a 97% collection rate on our rent charge for September, a significant improvement from the 93.7% seen during the second quarter.
As expected, our third quarter other income was impacted by $8.4 million due to the loss of summer camp conference business, the continued waiver of online transaction fees and late payment fees, and higher levels of bad debt.
With regard to same-store opex, we were able to partially offset lost revenue with savings and operating expenses of 5.2%, led by savings in all of our controllable categories.
In the current academic year, residents have reported a total of approximately 1,500 positive COVID-19 cases or 1.7% of our occupied beds.
At this time, we are tracking only 110 active cases or 0.1% of our occupied beds.
As of September 30, our 2020-2021 same-store portfolio was 90.3% leased, with in-place rents growing 1.1% over prior year.
However, as you will see in the chart, we gained approximately 300 additional leases at our properties that primarily serve sophomores and above, which offsets the decreasing at our properties, primarily serving first year students as our university partners finalize their move-in in assignment processes.
We still anticipate the projects will stabilize at development yields of 6.25 upon a return to normalcy on each campus.
With the continued temporary suspension of the Disney College Program, both delivered phases, which totaled 406 units and 1,624 beds remain unoccupied at the current time.
We expect to earn a total of $3 million in development fees, and we'll manage the project upon completion.
Of the 68 owned markets where ACC currently operates, 85% of universities have reported statistics for the fall.
Overall, we've seen only a 0.3% decline in enrollment across those 58 markets.
50% of our universities experienced increased enrollment in fall 2020, with an average increase in students of 2.5%.
Of the half of our universities that had decreases in enrollment, they only averaged a 3.1% decline for fall 2020.
First year student enrollment is only down 1.1% for fall.
As Jennifer discussed, our properties that primarily serve first year students are currently 77% occupied.
As international students typically constitute less than 10% of enrollment in our portfolio, while demand from domestic students remains deep to replace any loss from international students.
With 51% of our universities having released fall 2020 international data, there has been a 14% decline in international students.
Yet those same universities have grown the much larger segment of domestic enrollment by 1.2%.
Within ACC's 68 markets, we are now tracking 21,150 beds currently under construction for 2021, of a potential additional 400 beds planned, but not yet under construction, reflecting a decline of 2% to 4% in new supply off the current year's decline in new supply of 20%.
As we reported last night, total FFOM for the third quarter of 2020 was $45.2 million or $0.32 per fully diluted share.
While the company's near-term earnings will, of course, be affected by the governmental and university actions taken in response to the pandemic, we believe that we are on a path to return to a relative level of normalcy both operationally and financially after achieving over 90% for this fall despite the amount of ongoing online instruction as well as seeing significant reductions in delinquencies, refunds, and resident hardships as we have started the new academic year.
Like last quarter, we cannot completely isolate every item related to the pandemic, but we believe FFOM was negatively impacted by approximately $19 million versus our original expectations for the quarter.
And year-to-date, FFOM has been negatively impacted by approximately $42 million to $43 million.
Total property revenue was approximately $27 million impacted for the quarter, with $15 million due to COVID-related rent relief, lost summer camp revenue, increased bad debt, and wave fees.
And $12 million due to lower opening occupancy for the fall semester relative to our original expectations.
Partially offsetting the loss revenue, property operating expenses were $7.5 million than -- lower than originally budgeted, as Jennifer discussed.
Also as a result of the lower originally budgeted property NOI, joint venture partners' noncontrolling interest and earnings was approximately $700,000 lower, and ground lease expense was approximately $1.4 million less due to a reduction in outperformance rent being paid to our university ground lessor partners as well as Disney's agreement to waive ground rent on the Disney College Program housing until occupancy resumes.
Additionally, third-party management fee income was approximately $1.2 million lower than expected.
And FFOM contributed from our on-campus participating properties was almost $500,000 lower, due to University's refunding a portion of rents and lower fall occupancies at properties in both of these business segments.
Lastly, we benefited from approximately $700,000 in G&A and third-party overhead expense savings relative to our original plan due to both reduced travel and payroll costs.
If the current environment remains stable, though, we are hopeful that the reduction in revenue through the remainder of the year should be limited to the impact of the 90.3% occupancy we achieved for the opening of the fall semester, and the $1.2 million in rent refunds that we have agreed to for the fourth quarter at one of our ACE partnership universities.
Also, while delinquencies and resident hardships have improved significantly in September, we still expect to run at an elevated level of bad debt relative to the 1% level we typically operated at prior to the pandemic.
However, with the new academic year physical occupancy levels above 90% and approximately $2.5 million to $3 million in expected additional annual costs for COVID-related cleaning supplies and procedures, we do not expect to be able to create expense savings at the same levels we did in the second and third quarters.
These projects were expected to contribute a combined $4 million in development fee income in the fourth quarter of 2020.
As of September 30, we had $44 million in cash on hand and over $720 million of availability on our corporate revolver, with no remaining debt maturities in 2020, and a manageable $167 million in secured mortgage debt maturing in 2021.
Also, as detailed on Page S16 of our earnings supplemental, the remaining phases of the Walt Disney World project represent our only ongoing development with phases spanning through 2023 and only $201 million in remaining development capital needs.
As of September 30, the company's debt to total asset value was 41.3%, and net debt-to-EBITDA was 8.1 times.
It's worth noting that excluding the impacts of COVID on operating results this year, net debt-to-EBITDA would be in the range of seven to 7.1 times.
Although our leverage levels are temporarily elevated relative to the targets we have historically communicated, we feel confident that with the three-year capital plan we layout on Page S16 as well as the expected normalization of the EBITDA, the company's debt to total assets will return to the mid-30% range and net debt-to-EBITDA to the high five to low six times range.


A recent International Air Transport Association report indicates domestic passenger market show improvement, but with demand still down 22% versus June 2019 levels.
Ryanair took delivery of its first 737 MAX 8200 and had positive feedback.
With 85% of Spirit's backlog associated with narrow-body aircraft, we believe we are well positioned to benefit from this domestic air traffic demand and narrow-body recovery.
In the first half of this year, we delivered 64 737 shipsets compared to 37 in the first half of last year, a 73% increase.
We are also on track to deliver about 160 shipsets this year, a 125% increase over the 71 we delivered in 2020.
As we have discussed before, we are trailing Boeing in terms of 737 production rate to burn off the inventory of storage shipsets in Wichita and Tulsa.
This quarter, for example, we delivered 35 units but shipped 42 to Boeing.
We currently have about 125 units in storage, all of which Boeing owns.
We expect store units will decrease to about 100 shipsets by the end of the year.
Our plan is that we will reach 20 stored units by the end of next year, which will remain as a permanent buffer to cushion the production system.
Turning to the 787 program.
Primarily driven by this issue, we have recognized a $46 million forward loss on the 787 program.
Despite this forward loss, we are maintaining our free cash flow target of negative $200 million to $300 million, as indicated on our last earnings call.
This amount is net of the $300 million cash tax benefit, which we expect to receive in the second half of this year.
For example, by the end of this year, we intend to be 100% wind powered at our Wichita facility.
We recently acquired the assets of Applied Aerodynamics, and we've already completed approximately 60% of the 323 identified integration tasks.
We have completed about 90% of the tasks required to integrate the Belfast, Morocco and Dallas site.
We also secured the award of the engine nacelle on the new Falcon 10 times.
These business aircraft inventories are down around 40% year-over-year, highlighting a strong demand.
Additionally, U.S. business jet flight activity is about 6% higher than prepandemic levels, another good indicator of a rebound in this market segment.
We believe our capabilities and business ship programs position us well to generate $500 million of revenue at accretive margins by 2023.
We are also accelerating our revenue diversification efforts in defense, which we expect will grow by roughly 20% in 2021.
Revenue for the quarter was $1 billion, up 55% from the same quarter of last year and approximately 11% above the first quarter of 2021.
The revenue increase was primarily due to production on the 737 and A320 programs as well as increased revenue from the recently acquired A220 wing and Bombardier business jet programs.
Overall deliveries increased to 243 shipsets compared to 159 shipsets in the same quarter of 2020.
The second quarter 737 deliveries have increased to 35 compared to 19 shipsets delivered in the second quarter of last year.
We still expect to deliver around 160 shipsets during the year.
Additionally, second quarter A320 deliveries increased to 96 compared to 69 shipsets delivered in the same period of last year.
We reported earnings per share of negative $1.30 compared to negative $2.46 per share in the same period of 2020.
Adjusted earnings per share was negative $0.31 compared to earnings per share of $2.28 in the second quarter of 2020.
Looking at the operating margin, we saw improvement in the second quarter to negative 10% and compared to negative 57% in the second quarter of 2020.
In the second quarter, we recognized forward loss charges of $52 million, primarily driven by engineering analysis and rework on the 787 program compared to forward loss charges of $194 million in the same period of 2020.
This resulted in an income tax benefit of approximately $55 million.
Earlier this week, Spirit received the latest 787 program demand from Boeing.
Based on our preliminary assessment, we expect to incur an incremental forward loss of approximately $40 million to $60 million in the third quarter of 2021 due to the impact of reduced production volumes and the corresponding amount of fixed overhead absorption applied to lower deliveries.
Free cash flow for the quarter was negative $53 million compared to negative -- $249 million negative in the same period of 2020.
The second quarter cash from operations also reflect an improvement of $142 million as compared to the first quarter of '21.
Excluding the cash interest payments of approximately $80 million made during the second quarter, cash from operations was positive $51 million.
Despite the additional challenge of the 787 program, we continue to expect free cash flow for the year to be between negative $200 million and $300 million.
We ended the second quarter with $1.3 billion of cash and $3.6 billion of debt.
In February, we paid $300 million floating rate notes early, and we remain on track to repay $1 billion in debt during the next three years.
In the second quarter, fuselage segment revenues were $492 million, up 51% compared to the same period of 2020, primarily due to higher production volumes on the 737 and Bombardier business jet program, partially offset by lower production volumes on the 787 program.
Operating margin for the quarter was negative 7% compared to negative 77% in the same period of the prior year, primarily due to increased 737 production volumes and the resulting decrease in excess capacity costs as well as less net forward losses in the absence of a loss on disposal charges.
The fuselage segment recorded $4 million of favorable cumulative catch-up adjustments and $36 million of net forward losses during the quarter, primarily due to the 787 program.
Propulsion revenue in the quarter improved to $242 million, up 43% compared to the same period of 2020, primarily due to higher revenue on the 737 program and aftermarket sales, partially offset by decreased volume on the 777 program.
Despite the challenging environment, operating margin for the quarter was positive 12%.
This is compared to negative 10% in the same quarter of 2020.
Increased 737 production and the resulting decrease in excess capacity costs as well as less forward loss charges were the main drivers to the improvement in the segment profitability.
The segment recorded $6 million of favorable cumulative catch-up adjustments and $9 million of forward losses.
High production volumes on the 737, A220 and A320 programs were the main contributors to the increase in wing revenue to $259 million.
Operating margin for the quarter was negative 6% compared to negative 35% in the second quarter of 2020.
The segment recorded $8 million of net forward losses.
We are also monitoring the remaining regulatory approvals needed for the 737 MAX return to service.
For the year, we expect to deliver 160 737 shipsets, up from just 71 in 2020.
This quarter, we also continued work with Boeing to address fit and finish issues on the 787 program, and we'll continue to coordinate with them to complete all necessary rework.
We are maintaining our 2021 free cash flow guidance of negative $200 million to $300 million.

Turning to the 787 program.
Primarily driven by this issue, we have recognized a $46 million forward loss on the 787 program.
We reported earnings per share of negative $1.30 compared to negative $2.46 per share in the same period of 2020.
Adjusted earnings per share was negative $0.31 compared to earnings per share of $2.28 in the second quarter of 2020.
In the second quarter, we recognized forward loss charges of $52 million, primarily driven by engineering analysis and rework on the 787 program compared to forward loss charges of $194 million in the same period of 2020.
Earlier this week, Spirit received the latest 787 program demand from Boeing.
Based on our preliminary assessment, we expect to incur an incremental forward loss of approximately $40 million to $60 million in the third quarter of 2021 due to the impact of reduced production volumes and the corresponding amount of fixed overhead absorption applied to lower deliveries.
Despite the additional challenge of the 787 program, we continue to expect free cash flow for the year to be between negative $200 million and $300 million.
In the second quarter, fuselage segment revenues were $492 million, up 51% compared to the same period of 2020, primarily due to higher production volumes on the 737 and Bombardier business jet program, partially offset by lower production volumes on the 787 program.
The fuselage segment recorded $4 million of favorable cumulative catch-up adjustments and $36 million of net forward losses during the quarter, primarily due to the 787 program.
This quarter, we also continued work with Boeing to address fit and finish issues on the 787 program, and we'll continue to coordinate with them to complete all necessary rework.


For the second quarter of 2021, net sales were $200.1 million and diluted earnings were $2.50 per share.
For the comparable prior year period, net sales were $130.3 million and diluted earnings were $1.05 per share.
For the first six months of 2021, net sales were $384.4 million and diluted earnings were $4.66 per share.
For the corresponding period in 2020, net sales were $253.9 million and diluted earnings were $1.91 per share.
During the first half of 2021, we generated $76.2 million of cash from operations.
We reinvested $11.5 million of that back into the company in the form of capital expenditures.
We estimate that 2021 capital expenditures will be approximately $20 million predominantly related to new product development.
Our cash and short-term investments, which are invested in UST bills, totaled $173.6 million.
Our current ratio was 3.7:1, and we had no debt.
Our stockholders' equity was $319.1 million, which equates to a book value of $18.14 per share, of which $9.86 per share was cash and short-term investments.
In the first month -- in the first six months of 2021, we returned $27.6 million to our shareholders through the payment of dividends.
Our Board of Directors declared a $1 per share quarterly dividend for shareholders of record as of August 16, 2021, payable on August 27, 2021.
Upon receiving the $1 quarterly dividend, shareholders will have received over $2.50 of dividends per share thus far in 2021.
As a reminder, our quarterly dividend is approximately 40% of net income and, therefore, varies quarter-to-quarter.
The estimated unit sell-through of the company's products from the independent distributors to retailers increased 13% in the first half of '21 compared to the prior year period.
For the same period, the National Instant Criminal Background Check System background checks, as adjusted by the National Shooting Sports Foundation, commonly referred to as NICS checks, decreased 5%.
On the heels of the successful MAX-9 pistol launch earlier this year, we introduced the Ruger LCP MAX, a 380 Auto pistol in June.
These include the extremely popular Ruger-57 Pistol, which is awarded the 2020 Caliber Award for best overall new product by the Professional Outdoor Media Association in conjunction with the NASGW.
22 Long rifle, which is based on the venerable LCP platforms and utilizes our Lite Rack system for easier slide manipulation and reduced recoil.
The Wrangler revolver, our latest take on the classic single-action revolver, which shows no signs of slowing down and the MAX-9 pistol, a versatile 9-millimeter pistol that has been met with tremendous excitement.
In the first half of 2021, new product sales represented $78 million or 22% of firearm sales compared to $48 million or 21% of firearm sales in the first half of 2020.
Since March of 2020, our workforce has been strengthened by approximately 400 folks, an increase of 25%, and our quarterly unit production has increased by over 200,000 units or 58%.
And despite the growth in our output at the end of the second quarter of 2021, our finished goods inventory and distributor inventories of Ruger products were 160,000 units lower than they were at the end of the first quarter of 2020.
We estimate that COVID-related costs will total approximately $1.5 million in 2021.
Included in this estimate is a $200 bonus for every employee who becomes fully vaccinated.

For the second quarter of 2021, net sales were $200.1 million and diluted earnings were $2.50 per share.
Upon receiving the $1 quarterly dividend, shareholders will have received over $2.50 of dividends per share thus far in 2021.


Clean is about decarbonizing our generation mix with our new goal to deliver 100% clean carbon-free energy by 2050.
First, we recently announced our goal to deliver 100% clean carbon-free electricity to customers by 2050.
This goal includes a near-term target of 65% clean energy with 45% coming from renewables by 2030 and a commitment to exit coal by 2031.
Supporting an internal culture focused on reducing costs and maintaining a financially strong company to access low cost capital are also key in delivering a 100% clean energy future affordably.
We finished 2019 with our best-ever reliability performance, if you exclude outages from voluntary proactive fire mitigation efforts, and Palo Verde once again achieved a capacity factor above 90%.
Our goal to reach 100% clean carbon-free energy by 2050 is new, but our efforts to move toward a cleaner energy mix are not.
Notably, APS was one of 10 American companies and the only U.S. utility to make CDP's A List for both climate change and water security in 2019.
And we accomplished all this while reducing the average residential bill by 7.8% or $11.68 on average since January of 2018 due primarily to savings from federal tax reform and operating cost savings that have been passed on to customers.
The 242 megawatt Clear Creek wind farm in Missouri and the 250 megawatt Nobles 2 wind farm in Minnesota.
First, to the team at Palo Verde for their work on a short notice outage at Unit 3 in getting the necessary work done safely and the unit back online ahead of schedule.
And third, to the Arizona State Sun Devils for their win last night over 14 Oregon.
For the fourth quarter of 2019, we earned $0.57 per share compared to $0.23 per share in the fourth quarter of 2018.
For the full-year 2019, we earned $4.77 per share compared to $4.54 per share in 2018.
2019 earnings reflect our growing infrastructure to support the strong Phoenix economy and 2% customer growth.
Other key items for 2019 was negative weather, which decreased gross margin by $37 million or $0.25 per share.
Year-over-year lower adjusted O&M expense increased earnings $0.52 per share, primarily driven by lower planned outage expenses and lower public outreach costs at the parent level.
As a result of our cost management efforts, we made great strides in reducing O&M in 2019, allowing us to reach the low end of our original guidance range, despite the mildest Metro Phoenix cooling season on 10 years.
We expect to continue our cost savings efforts by reducing O&M approximately $20 million in 2020.
As Jeff mentioned in his comments, we are on a path to deliver 100% clean carbon-free electricity.
Our 2022 capex forecast reflects nearly $800 million of investment related to new clean generation resources and reflects our conservative mix of owned resources.
While the exact amount has not yet been determined, we would expect the amount to be in the $300 million to $400 million range.
In 2020, we expect to issue up to $1 billion of term debt at APS and $450 million that Pinnacle West.
In the fourth quarter, APS issued $300 million of new 30-year unsecured debt at 3.5%.
We used the proceeds to repay commercial paper and to fund a $100 million of our $250 million par value 2.2% notes which matured in mid-January.
At the end of the fourth quarter, Pinnacle West had a $115 million of short-term debt outstanding and APS had no short-term debt outstanding.
Due to the tax benefits associated with both the TEAM Phase II and Phase III and optimized use of income tax incentives, our effective tax rate for 2019 was a negative 2.9%.
We anticipate an effective tax rate in 2020 of 14%.
The funded status of our pension remains healthy at 97% as of year-end 2019.
Arizona's population grew by approximately 120,000 people between July 2018 and July 2019.
Reflecting the steady improvement in economic conditions, APS' retail customer base grew 2.2% in the fourth quarter of 2019.
In 2019, employment in Metro Phoenix increased 2.9% compared to 1.6% for the entire U.S. Construction employment in Metro Phoenix increased by 9.6% and manufacturing employment increased by 5.2%.
In 2020, we expect a total of 31,100 housing permits, driven by both single-family and multifamily permits.
We continue to expect Pinnacle West's consolidated earnings for 2020 to be in the range of $4.75 to $4.95 per share.
A complete list of key factors and assumptions underlying our 2020 guidance can be found on Slide 6 and 7.
In closing, our long-term rate base growth outlook remains intact at 6% to 7% and we expect to achieve a weather-normalized annual consolidated earned return on average common equity of more than 9.5% in 2020.

For the fourth quarter of 2019, we earned $0.57 per share compared to $0.23 per share in the fourth quarter of 2018.
We continue to expect Pinnacle West's consolidated earnings for 2020 to be in the range of $4.75 to $4.95 per share.