**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

**FORM 10-K**

 

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**Commission file number 0-5486**

 

**Presidential Life Corporation**

(Exact name of registrant as specifiedin its charter)

 

 

Securities registered pursuant to Section 12(b) ofthe Act:

 

Securities registered pursuant to Section 12(g) ofthe Act:  **None.**

 

Indicateby check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes   ̈    No  þ

 

Indicateby check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of theAct.    Yes   ̈    No  þ

 

Indicateby check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required tofile such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  þ    No   ̈

 

Indicate by check mark whether the registrant has submittedelectronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuantto Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for suchshorter period that the registrant was required to submit and post such files). Yes  þ    No   ̈

 

Indicateby check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405) is not containedherein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  þ 

 

Indicate by check mark whether the registrant is a large acceleratedfiler, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large acceleratedfiler,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Indicateby check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes   ̈    No  þ

 

The aggregate market value of the votingstock (Common Stock) held by non-affiliates of the Registrant as of the close of business on June 30, 2011 was approximately $249,359,692based on the closing sale price of the common stock on the NASDAQ Global Select on that date. The company does not have any non-votingcommon equity.

 

 

 

 

**PART 1**

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*Noteon Forward-Looking Statements*

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*This Annual Reporton Form 10-K (“Form 10-K”) contains forward-looking statements that involve risks and uncertainties. Many of the forward-lookingstatements are located in the “Business” and “Management’s Discussion and Analysis of Financial Conditionand Results of Operations” Sections of this Form 10-K. Forward-looking statements reflect management's current expectationsof future events, trends or results based on certain assumptions and include any statement that does not directly relate to anyhistorical or current fact. Forward-looking statements can be identified by words such as “anticipates,” “believes,”“estimates,” “expects,” “intends,” “plans,” “predicts” and similarterms. Forward-looking statements are not guarantees of future performance and the Company’s actual results may differ significantlyfrom the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limitedto, those discussed in “Risk Factors” under Part I, Item 1A of this Form 10-K. The Company assumes no obligation torevise or update any forward-looking statements for any reason, except as required by law.*

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Introduction

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PresidentialLife Corporation is an insurance holding company that, through its wholly owned subsidiary, Presidential Life Insurance Company(the “Insurance Company”), markets and sells a variety of fixed annuity, life insurance and accident and health insuranceproducts. We manage our business and report as a single business segment. We are a Delaware corporation founded in 1965. Throughthe Insurance Company, we are licensed to market our products in all 50 states and the District of Columbia. Approximately 47.9%of our 2011 sales of annuity, life insurance and accident and health products were made to individuals residing in the State ofNew York. Headquartered in Nyack, New York, we had 99 full-time employees as of December 31, 2011. Unless the context otherwiserequires, the “Company,” “we,” “us,” “our” and similar references shall mean PresidentialLife Corporation and the Insurance Company, collectively.

 

**Business Strategy:**

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Our core businessstrategy is to expand our individual annuity business and to increase our risk-adjusted returns on invested capital by prudentlymanaging investment spreads and investment risk.

 

Key elements to ourmultiyear strategy include the following:

 

 

 

 

 

 

 

Products

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We offer a range offixed annuity, life insurance and accident and health insurance products. During 2011, our product mix was approximately 67% annuities,23% life insurance and 10% accident and health insurance. Due to the competitive nature of the traditional term, whole life anduniversal life insurance business and the negative impact of that competition on our profitability, in 2004, management decidedto stop offering those traditional life insurance products. We continue to service the in-force policies and continue to issuemore profitable Graded Benefit Life and Simplified Issue Whole Life products. For financial statement purposes, revenues fromthe sale of ordinary life insurance, annuity contracts with life contingencies and accident and health insurance are treated asrevenues whereas the sale of annuity contracts without life contingencies, deferred annuities and universal life insurance productsare not reported as revenues but as additions to policyholders’ account balances on our balance sheet.

 

***Annuities***

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We sell a varietyof fixed annuity products, including single and flexible premium deferred annuities, single premium immediate annuities and aselection of special annuities. Each of these products is designed to meet the needs of increasingly sophisticated consumers forsupplemental retirement income and estate planning. Annuities currently enjoy an advantage over certain other savings mechanismsbecause the annuitant receives a tax-deferred accrual of interest on his or her investment. Due to the prevailing low interestrate environment, industry-wide demand for fixed annuity products was weak in 2011 and the first quarter of 2012.

 

*Single PremiumDeferred Annuities.* Single Premium Deferred Annuities, or SPDAs, provide for a single, lump sum premium at time of issue,an accumulation period and an annuity payout period beginning at some future date. During the accumulation period, the accountvalue of the annuitant is credited with earnings at a current interest rate that is guaranteed for periods ranging from one tosix years, at the annuitant’s option, and thereafter is subject to change based on market and other conditions. Each contractalso has a minimum guaranteed rate. The accrual of interest during the accumulation period is on a tax-deferred basis to the annuitant.After the number of years specified in the annuity contract, the annuitant may elect to take the proceeds of the annuity as asingle payment, a specified income for life, or a specified income for a fixed number of years. The annuitant is permitted atany time during the accumulation period to withdraw all or part of the single premium paid plus the amount credited to his orher account. Any such withdrawal, however, typically is subject to a surrender charge during the early years of the annuity contract.

 

*Flexible PremiumDeferred Annuities.* Flexible premium deferred annuities provide similar benefits to those provided by single premium products,but instead permit periodic premium payments in such amounts as the holder deems appropriate. Flexible premium deferred annuitiesare not available in every state.

 

All of our deferredannuity products provide minimum interest rate guarantees. These minimum guaranteed rates range from 1.1% to 5.5% annually, andthe contracts (except for immediate contracts discussed below) are designed to permit us to change the crediting rates annuallyafter the initial guarantee period subject to the minimum guaranteed rate. In determining the frequency and extent of changesto the interest-crediting rate, we take into account the profitability of our annuity business and its relative competitive positionin the marketplace.

 

Ourdeferred annuity products are designed to encourage persistency by incorporating surrender charges that exceed the cost of issuingthe policy. An annuitant may not terminate or withdraw substantial funds for periods generally ranging from one to seven yearsafter purchase of the annuity without incurring significant penalties in the form of surrender charges. As of December 31, 2011and 2010, approximately 38.4% and 42.5%, respectively, of our deferred annuity contracts in force (measured by reserves) are subjectto surrender charges.

 

*Single PremiumImmediate Annuities.* Our single premium immediate products guarantee a stream of payments, which begin within the first contractyear (as opposed to being deferred) and continue for the life of the annuitant and/or for a specified period of time. In a periodcertain only immediate annuity, the payment may be guaranteed for a period of time (typically five to twenty years). If the annuitantdies during the guarantee period, payments will continue to be made to the annuitant’s beneficiary for the balance of theguarantee period. Immediate annuities differ from deferred annuities in that they generally provide for fixed payments that arenot subject to surrender or loan. The implicit interest rate on immediate annuities is based on market conditions that exist atthe time the annuity is issued and is guaranteed for the term of the annuity.

 

 

The following tablesummarizes annuity products in force measured by reserves, as well as certain statistical data for each of the years in the five-yearperiod ended December 31, 2011, in each case, as determined in accordance with accounting principles generally accepted in theUnited States of America, or GAAP.

 

**ANNUITIES IN-FORCE AS OF DECEMBER 31,**

 

**Because there are no surrenders on immediate annuities,related reserves are excluded from in-force annuity balances when calculating this ratio. Immediate annuity balances were $665million, $695 million, $675 million, $668 million and $672 million as of December 31, 2011, 2010, 2009, 2008 and 2007, respectively.See Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations, Certain Factorsthat May Affect our Business, Interest Rate Risk.”*

 

The reductionin annuity surrenders since 2007 is attributable to both an extended low interest rate environment as well as a reduction in policiescoming off surrender charge periods when compared to prior years when large blocks of policies came off their surrender chargeperiod.

 

AnnuityConsiderations – The following table sets forth certain information with respect toour annuity considerations for each of the five years ended December 31, 2011, as determined in accordance with statutory accountingprinciples, which include as revenue the consideration from policyholders in such years other than consideration from immediateannuities without life contingencies. The information below differs from the premiums shown on our consolidated financial statementsin accordance with GAAP in that, under GAAP, consideration from single premium annuity contracts without life contingencies, universallife insurance products and deferred annuities are not reported as premium revenues, but are reported as additions to policyholderaccount balances, which are liabilities on our consolidated balance sheet. 

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*LifeInsurance*

 

We offer thefollowing life insurance products:

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*Graded BenefitWhole Life*. Graded benefit life policies are designed for the upper age (*i.e.,* ages 40-80 in most states), substandardapplicant. Depending upon age, these policies provide for a limited death benefit of the return of premium plus 5% interest foreither two or three years. Thereafter, the death benefit is limited to the face amount of the policy. This product typically isoffered with a maximum face value of $50,000.

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*SimplifiedIssue Whole Life.* In 2009, we introduced a simplified issue whole life policy for customers who would not qualifyfor standard risk rates, but who want immediate coverage as opposed to graded benefit life, which has a modifiedface amount for two to three years. The rates are substandard based on the impairments that are deemed acceptable by us forthat risk classification. The maximum face amount available is $20,000 and underwriting is required to approvefor issue.  Field underwriting by the agent is required at the time of the application. The applicant is requiredto disclose medical information, which is then verified by us to ascertain if the risk is acceptable or greaterthan the impairments that qualify for the product.  If the applicant is not eligible by underwriting standards, wecan offer a graded benefit life policy. Underwriting rules for reinstatement of a simplified issue whole lifepolicy must meet the same risk classification it was at issue, or the policyholder is declined reinstatement.  

 

*Group Life.*Group term life insurance provided through the workplace provides financial coverage in the event of premature death. Accidentaldeath and dismemberment, or AD&D insurance, as well as coverage for spouses, children or domestic partners, are also available.Insurance consists primarily of renewable term life insurance with the amount of coverage provided being either a flat amount,a multiple of the employee’s earnings, or a combination of the two.

 

*Other.*Otherlife insurance****products in force, but no longer being issued, include universal life, whole life and term life. Universallife policies, both flexible premium and single premium, are interest-sensitive products, which typically provide the insuredwith “non-participating” (*i.e.*, non-dividend paying) life insurance with a cash value. Current interest iscredited to the policy’s cash value based primarily upon prevailing interest rates but not less than the guaranteed ratespecified in the policy. Whole life policies are products that provide the insured with life insurance with a guaranteed cashvalue. Typically, a fixed premium, which costs more than comparable term coverage when the policyholder is younger, but less thancomparable term coverage as the policyholder grows older, is paid over a period of years. Whole life insurance products combineinsurance protection with a savings plan that gradually increases over a period of time, which the policyholder may borrow against.Term life policies are products that provide insurance protection if the insured dies during the time period specified in thepolicy. No cash value is built up. Term life products provide the maximum benefit for the lowest initial premium outlay.

 

We continueto maintain our life insurance in-force business and this may require additional underwriting (*i.e.*, reinstatements, re-entriesand conversions). In that regard, we have adopted and follow detailed, uniform underwriting procedures designed to assess andquantify insurance risks. To the extent that a policyholder eligible for reinstatement, reentry or conversion does not meet ourunderwriting standards at the standard risk classifications, we may offer to issue a classified, substandard or impaired riskpolicy for a risk adjusted premium amount rather than declining the application. The amount of the Insurance Company’s impairedrisk insurance in-force in proportion to the total amount of its individual life insurance in-force was approximately 4.8% atDecember 31, 2011.

 

 

**Insurance Policies In-force** – The followingtable sets forth universal, whole and term life insurance policies in-force, as well as certain statistical data for each of thefive years ended December 31, 2011.

 

 

*1**Includesgraded benefit life insurance products*

 

*2**UniversalLife includes the full death benefit of in-force policies. The net amount at risk, defined as the difference between the deathbenefit and account value at a point in time, is $193.8 million and $212.8 million at December 31, 2011 and 2010, respectively.*

 

*Accidentand Health Insurance*

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New York StatutoryDisability Benefits, or DBL, are short-term disability contracts issued to employers of one or more employees in New York State.The benefit must be equal or better, in every respect, to the minimum benefits defined in the New York Disability Benefits Law.The minimum benefit allowed is 50% of the weekly earnings to a maximum of $170 commencing on the 8th day of non-occupationdisabilities for a maximum of 26 weeks in any 52 week period for any one disability. With few exceptions, employers are requiredto provide this coverage to their New York employees.

 

 

*AncillaryProducts*

 

We offer ancillaryaccident and health lines designed to further protect against risks to which our core customer is typically exposed. These productscombined contributed 6.3% to our total premiums in 2011. The majority of these products, excluding group dental insurance, arereinsured and the administration of these products is handled by a third-party administrator. Our ancillary product offeringsinclude the following:

 

 

 

 

 

 

Marketingand Distribution

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The InsuranceCompany is licensed to market insurance products in all 50 states and the District of Columbia. The Insurance Company distributesour annuity and life insurance products through 1,318 independent general agents (364 of which are located in New York State).These general agents, in turn, distribute the Insurance Company’s products through their 12,019 licensed insurance agentsor brokers, most of whom also distribute similar products marketed by other insurance companies. We believe that we offer innovativeproducts and quality service and that our product commission rates are competitive. The New York State Department of FinancialServices, or NYDFS, regulates general agent commission rates. In October 2011, the functions of the New York State Insurance Department,or NYSID, and the New York State Banking Department were transferred to the NYDFS.

 

The independentgeneral agent system is our primary product distribution system. Management believes that the general agent distribution systemprovides cost advantages to us because we incur minimal fixed costs associated with recruiting, training and maintaining agents.Therefore, a substantial portion of our costs normally associated with product distribution is variable. Distribution costs riseand fall with the level of business.

 

We utilize many generalagents to distribute our products and therefore we are not dependent on any one general agent for a substantial amount of ourbusiness. On the other hand, independent general agents and their licensed agents and brokers are not captive to us. Managementbelieves that interest crediting rates, general agent product commission levels, annuity and life product features, company supportservices and perceived company financial stability help determine our competitive position at any given point in time and influencegeneral agents and their licensed agents and brokers to distribute our products. Generally, we issue annuity contracts along withthe general agent’s commission within two business days after application receipt. We also provide general agent supportby providing direct access to the Insurance Company’s senior executives. Annuity contract and life insurance policyholdersmay access information regarding their individual holdings via our website or toll-free telephone number.

 

 

Our top tengeneral agents, as measured by combined 2011 annuity and life premiums, accounted for approximately 36% of our sales in 2011.No single general agent accounted for more than 7%. Management does not believe that the loss of any single distribution sourcewould have a material adverse impact on our business. However, the simultaneous loss of several distribution sources would diminishour product distribution and reduce sales unless these sources were timely replaced. To guard against this contingency, we continuouslyrecruit new independent general agents.

 

Policy Claims

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Individual life claimsare received and reviewed by claims examiners at our home office. The initial review of claims includes verification that coverageis in force and that the claim is not subject to exclusion under the policy. Birth and death certificates are basic requirements.Medical records and investigative reports are ordered for contestable claims.

 

Reinsurance

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We follow theusual industry practice of reinsuring (“ceding”) portions of our life insurance and medical stop loss risks with othercompanies, a practice that permits us to write policies in amounts larger than the risk we are willing to retain and to obtaincommissions on the insurance ceded and thereby reduce our net commission expense. The maximum amount of individual life insurancewe normally retain on any one life is $50,000 per policy and $100,000 per life. We cede primarily on an “automatic”basis, under which risks are ceded to a reinsurer on specific blocks of business where the underlying risks meet certain predeterminedcriteria, and on a “facultative” basis, under which the reinsurer’s prior approval is required on each riskreinsured. The maximum retention of the group medical stop loss business varies, but typically we cede 85% to 90% on a quota sharebasis.

 

Use of reinsurancedoes not discharge an insurer from liability on the insurance ceded. An insurer is required to pay the full amount of its insuranceobligations regardless of whether it is entitled or able to receive payments from the reinsurer. At December 31, 2011, of theapproximately $1.0 billion of our individual life insurance in force, we had ceded to reinsurer’s approximately $547 million.The principal reinsurance companies of individual life policies with whom we did business at December 31, 2011 were TransamericaInternational Re, Ltd. (not rated by A.M. Best) and Swiss Re Life and Health America, Inc. (A.M. Best rating of “A+ (Superior)”).

 

Competition

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We operate in a highlycompetitive environment. There are numerous insurance companies, banks, securities brokerage firms and other financial intermediariesmarketing insurance products, annuities and other investments that compete with us, and many of these companies are more highlyrated and have substantially greater resources than we do. Management believes that the principal competitive factors in the saleof annuity and life insurance products are product features, commission structure, perceived stability of the insurer, claimspaying rating and service. Many other insurance and financial services companies are capable of competing for sales in our targetmarkets.

 

Managementbelieves that our ability to compete is dependent upon, among other things, our ability to retain and attract independent generalagents to market our products and our ability to successfully develop competitive, profitable products. Management believes thatwe have good relationships with our agents, that we have an adequate variety of products approved for issuance and that we generallyare competitive within the industry in all applicable areas.

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**Investments and Investment Policy**

 

***Investment Portfolio Summary***

 

Thefollowing table summarizes our investment portfolio at December 31, 2011. This table consists primarily of fixed maturity investmentsavailable for sale, which are carried at fair value.

  

 

*1All fixed maturity and equity securities areclassified as available for sale; accordingly total carrying value equals estimated fair value. Quoted market prices for mostpublicly traded securities are available. Where quoted prices are unavailable, prices are obtained from securities dealers andvaluation methodologies.*

*2 Consists of investments in limited partnerships,which are accounted for under the fair value and equity methods. See Note 1D to the Notes to the Consolidated Financial Statementsfor an explanation of the methodology used to value limited partnerships.*

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***InvestmentGrade Securities***

 

Asof December 31, 2011, approximately 89% or $3.4 billion of our investment portfolio consisted of investment grade securities (accordingto the designations of the National Association of Insurance Commissioners, or NAIC) and investment grade short-term commercialpaper. Of that amount, approximately $ 2.3 billion consisted of investment grade corporate bonds and preferred stock and $ 108.3million consisted of cash and commercial paper rated A1/P1 or higher. The remaining $989 million, consisting of U.S. Governmentbonds and government agency securities, bonds of states and municipalities, public utility bonds and commercial mortgage-backedsecurities, is discussed below. Included in the investment grade portfolio, as of December 31, 2011, we had $431.7 million ofsecurities designated as Rule 144A investments that have not been registered under the Securities Act of 1933. These securitiesare freely tradable amongst institutions that are qualified institutional buyers under Rule 144A. 

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***BelowInvestment Grade Securities***

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Asof December 31, 2011, we held approximately $231.2 million, excluding limited partnerships, in below investment gradesecurities, according to NAIC designations, representing approximately 6.1% of our investment portfolio. This compares to$195.3 million, or 5.2% of our investment portfolio at December 31, 2010. Of the 2011 amount, $ 163.2 million consisted ofcorporate bonds, $32.0 million of preferred stock, $10.2 million of public utility bonds, $20.2 million of commercialmortgage-backed obligations and $5.5 million of local governmental authority bonds. Of these, approximately $148.4 million(64.2%) were rated at the highest below investment-grade level. 

 

***GovernmentBonds and Agency Securities***

 

Asof December 31, 2011, we held approximately $ 45.3 million in U.S. Treasury or other government agency bonds consisting primarilyof U.S. Treasury and GNMA, FNMA, FHLMC and FHLB obligations.

 

***States,Municipalities and Political Subdivisions***

 

Asof December 31, 2011, the Company held $ 371.6 million in municipal bonds of states, political subdivisions, and special revenueand tax assessment bonds. 99% of these bonds are considered investment grade.As a result ofthe Economic Recovery Act of 2009, the federal government provided a 35% subsidy of municipal interest to 2009 and 2010 municipalissuers that funded infrastructure projects, including elementary and secondary schools, college housing and related projects,highways and various road projects, water and wastewater improvements, and a variety of building projects. In return, the municipalissuers agreed to issue municipal bonds where the interest is subject to federal income tax. Known as “Build-America Bonds”,this program created a new money investment opportunity for us in 2009 and 2010.  Most of the bonds purchased carried ratingshigher than AA3 by Moody’s, AA- by Standard and Poor’s or AA- by Fitch Investor Services and provided yields on 12-20year maturity bonds that exceed yields on 10-year BBB-rated corporate bonds. All of these bonds are rated NAIC “1”. The Build-America program ended in December 2010 but municipal credits continued to issue taxable municipal bonds in 2011. During2011, we purchased $36.5 million of taxable municipals. We also purchased an additional $ 10.5 million of federally tax-exemptindustrial revenue bonds. These are bonds of A and BBB-rated industrial corporations that have absolute yields comparable to long-termtaxable corporate bonds yet provide limited tax benefits to us. We intend to continue investing in both taxable municipals andtax-exempt industrial revenue bonds as opportunities arise.

 

***PublicUtility Bonds***

 

As of December31, 2011, we held $ 485.8 million in public utility bonds, representing 12.72% of the investment portfolio. Of that amount, 98%or $475.6 million consisted of investment grade securities. Approximately 85% of the holdings represented bonds issued by theoperating companies of electric and gas utilities, with the balance consisting of an assortment of electric utility holding companybonds, capital trust securities and U.S. dollar holdings in foreign electric and water utilities. The portfolio is diversified,with 127 individual holdings of primarily investment-grade companies. Given their large and continuing need for additional capital,public utilities are sensitive to a general rise in overall interest rates. However, regulatory agencies generally provide regulatorysupport in increasing interest rate environments because of the nature of utility service. A number of these public utilitiesown and operate nuclear facilities and are exposed to the risks related thereto.

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***Mortgage-BackedSecurities***

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Asof December 31, 2011, approximately $ 122.5 million (3.21%) of our investment portfolio was invested in commercial mortgage-backedobligations, or CMBS, and residential mortgage-backed obligations, or RMBS, mostly purchased as mezzanine level debt, between1995 and 2001.  This compares to $158.5 million, or 4.3% of our portfolio at December 31, 2010. A significant portion ofthis CMBS portfolio is scheduled to mature over the next three years, although expected maturities could be extended based uponthe slowdown of prepayments. Of the CMBS portfolio, approximately 62% have an A rating or better and 32% are rated Baa. The remaining6% are considered non-investment grade. We made approximately $19 million of investments in RMBS in 2011.  Our total RMBSexposure is approximately $20.5 million or 0.05% of invested assets.  Of the RMBS portfolio, approximately 32% or $6.6 millionis investment grade rated.

 

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***LimitedPartnerships***

 

Asof December 31, 2011, approximately $ 166.9 million (4.37%) of our investment portfolio consisted of interests in approximately57 limited partnerships, which are engaged in a variety of investment strategies, including debt restructurings, real estate,international opportunities, merchant banking, oil and gas, infrastructure and multi-strategy hedge funds. In general, risks associatedwith such limited partnerships include those related to their underlying investments (i.e., equity securities, debt securitiesand real estate), plus a level of illiquidity, which, except for hedge fund investments, may be mitigated by our ability to receivequarterly distributions of partnership earnings. 

 

Thecarrying values of our investments in limited partnerships as of December 31, 2011, 2010 and 2009 were approximately $166.9 million,$195.5 million and $212.7 million respectively. Net realized investment gains (losses), including other than temporary impairments,or OTTI losses, derived from our interests in limited partnership investments under the fair value method, aggregated approximately$ 41.1 million $ 26.2 million and ($7.9) million in fiscal, 2011, 2010 and 2009 respectively. Equity in earnings (loss) derivedfrom the limited partnerships under the equity method totaled approximately $ 2.2 million, ($5.5) million and ($.1) million infiscal 2011, 2010 and 2009 respectively.

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Pursuantto the terms of certain limited partnership agreements to which we are a party, we are committed to contribute, if called upon,an aggregate of approximately $41.7 million of additional capital to such limited partnerships. Commitments of $40.6 million and$1.1 million are expected to be called or expire in 2012 and 2013, respectively. Based on historical experience, we believe thatit is likely that no more than 75% of the maximum commitment will be called.

 

Dividends,or distributions, including earnings plus return of capital, paid by the limited partnerships totaled approximately $5.5 millionand $7.2 million in fiscal years 2011 and 2010, respectively. 

 

AtDecember 31, 2011, the investments in limited partnerships, totaling $159.1 million, are not redeemable during the lives of thefunds and have expected remaining lives that extend in some cases 10 years. At December 31, 2011, 39% of the total above had expectedremaining lives of less than three years, 56% between 3 and 7 years and 5% between 7 and 10 years. Expected lives are based uponlegal maturity, which can be extended typically in one-year increments.

 

During2011, we liquidated two hedge fund investments at market value except for approximately $4.2 million of private special investmentsheld by one of the liquidated funds. As of December 31, 2011, we are invested in five hedge funds with a remaining book valueof $7.8 million. Our remaining investments in these hedge funds are either private special investments that are subject to liquidationat a date to be determined by the fund or investments located at the prime brokerage unit of Lehman Brothers International (Europe),located in the United Kingdom. Since September 2008, when Lehman Brothers filed for bankruptcy, the assets were frozen and theclaims to such assets are subject to the resolution of the bankruptcy proceedings.

 

Approximately24% of our investment portfolio in limited partnerships is involved in distressed asset investments. These limited partnershipstake positions in debt and equity securities, loans originated by banks and other liabilities of financially troubled companies.Investments in companies undergoing debt restructurings, which by their nature have a high degree of financial uncertainty, maybe senior, unsecured or subordinated indebtedness. This makes such underlying investments particularly sensitive to interest rateincreases, which could affect the ability of the borrower to generate sufficient cash flow to meet its fixed charges.

 

Approximately18% of our limited partnership portfolio generally invests in real estate assets, real estate joint ventures and real estate operatingcompanies. These partnerships seek to achieve significant rates of return by targeting investments that provide a strategic orcompetitive advantage and are priced at levels that the general partner believes to be attractive.

 

The limitedpartnerships that are involved in merchant banking activities generally seek to achieve significant rates of return (includingcapital gains) through a wide variety of investment strategies, including leveraged acquisitions, bridge financing, and otherprivate equity investments in existing businesses.

 

 

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***Other Investments***

 

Asof December 31, 2011, our investment portfolio included approximately $82.3 million (2.2%) invested in preferred stock, and approximately$1.3 million (0.03%) invested in common stock. Our only direct real estate investments are two buildings in Nyack, New York, whichare used as our home office, and two acres of undeveloped land in Nyack, New York.

 

***Scheduled Maturities, NAICDesignations and Credit Ratings***

 

The following table sets forth the scheduledmaturities for our investments in bonds and notes as of December 31, 2011.

 

**Maturity1**