NOTES TO CONSOLIDATED FINANCIAL STATEMENTS responded to the complaint by filing a motion to dismiss. Because this case is at a very early stage, it is not possible to evaluate the likelihood of an unfavorable outcome or to estimate the amount or range of potential loss. A similar action focusing on pool insurance was filed in February 2001 in the United States District Court for the Eastern District of Texas. In addition to the above, the Company is involved in certain litigation arising in the normal course of its business. The Company is contesting the allegations in each such other action and believes, based on current knowledge and consultation with counsel, that the outcome of such litigation will not have  a material adverse effect on the Company’s consolidated financial position or results of operations. In conjunction with the acquisition of Financial Guaranty, the Company has guaranteed payments of up to $25.0 million of a revolving credit facility issued to Sherman Financial Group LLC (“Sherman”), a 45.5%-owned affiliate of Financial Guaranty. As of December 31, 2001, there were no outstanding amounts under this facility. Mortgage Insurance utilizes its underwriting skills to provide an outsource contract underwriting service to its customers. Mortgage Insurance often gives recourse to its customers on loans it underwrites for compliance. If the loan does not meet agreed-upon guidelines and is not salable in the secondary market for that reason, Mortgage Insurance agrees to remedy the situation either by placing mortgage insurance coverage  on the loan, by purchasing the loan, or indemnifying the loan against future loss. Purchasing the loan would subject the Company to interest rate risk. During 2001, less than 1% of all loans were subject to these remedies and the costs associated with these remedies were immaterial. The Company is a party to reinsurance agreements with all the four largest primary financial guaranty insurance companies. The Company’s facultative and treaty agreements The commitment for noncancelable operating leases in future years has not been reduced by future minimum sublease rental payments aggregating approximately $52,798,000. The Company leases office space for use in its operations. Net rental expense in connection with these leases total $6,155,000, $2,970,000 and $3,145,000 in 2001, 2000 and 1999, respectively. The commitment for noncancelable operating leases in future years is as follows (in thousands): are generally subject to termination (i) upon written notice (ranging from 90 to 120 days) prior to the specified deadline for renewal, (ii) at the option of the primary insurer if the Company fails to maintain certain financial, regulatory and rating agency criteria which are equivalent to or more stringent than those the Company is otherwise required to maintain for its own compliance with the New York Insurance Law and to maintain  a specified claims-paying ability or financial strength rating for the particular insurance subsidiary or (iii) upon certain changes of control of the Company. Upon termination under the conditions set forth in (ii) and (iii) above, the Company may be required (under some of its reinsurance agreements) to return to the primary insurer all unearned premiums, less ceding commissions, attributable to reinsurance ceded pursuant to such agreements. Upon the occurrence of the conditions set forth in (ii) above, whether or not an agreement is terminated, the Company may be required to obtain a letter of credit or alternative form of security to collateralize its obligation to perform under such agreement. 12. QUARTERLYFINANCIAL DATA (UNAUDITED) See footnotes page 37. 2002 $10,092 2003  8,993 2004  7,669 2005 7,157 2006 6,198  Thereafter 55,622 $95,732 (in thousands, except per-share information) 2001 Quarter First Second Third Fourth Year Net premiums written $160,249 $199,203 $183,938 $240,254 $783,644 Net premiums earned 155,763 179,241 180,490 200,386 715,880  Net investment income 28,020 39,455 39,956 40,056 147,487  Equity in net income of affiliates 12,044 12,760 7,389 9,116 41,309  Provision for losses 49,272 52,310 50,968 55,586 208,136  Policy acquisition  and other operating  expenses 40,998 54,938 54,476 66,366 216,778  Net gains (losses) 1,823 748 (1,299) (225) 1,047  Net income 80,157 92,677 91,532 96,053 360,419  Net income per share (1)(2)(3) $ 0.96 $ 0.97 $ 0.96 $ 1.00 $ 3.88  Average  shares out- standing (1)(3) 83,038 94,854 94,784 95,157 91,958 2000 Quarter First Second Third Fourth Year Net premiums written $135,606 $128,936 $136,147 $143,583 $544,272 Net premiums earned 127,297 129,539 130,236 133,799 520,871  Net gains 851 246 2,313 769 4,179  Net income 58,600 61,858 64,069 64,411 248,938  Net income per share (1)(2)(3) $ 0 .77 $ 0.80 $ 0.83 $ 0.83 $ 3.22  Average  shares out- standing (1)(3) 75,278 76,276 76,383 76,760 76,298