Because the Preferred Shares have a mandatory redemption provision requiring redemption on February 24, 2020, the Company was required to classify the Preferred Shares as a liability on its balance sheet as opposed to recording the value of the shares in equity. The resulting liability was recorded at a discount to the $4,200 ultimate redemption amount which includes all dividends to be paid on the Preferred Shares based upon an analysis of the timing and amounts of the cash payments expected to occur under the terms of the Preferred Shares discounted for the Company’s estimated cost of equity (13.9%). As a result, amortization in amount of $1,889 will be charged to operations through February 24, 2020 using the effective interest method.
At December 31, 2015, approximately 56.5% of the Company’s fixed income securities had contractual maturities of five years or less. The Company holds cash and high-grade short-term assets which, along with fixed income securities, management believes are sufficient in amount for the payment of loss and loss adjustment expense reserves and other operating subsidiary obligations on a timely basis. The Company may not be able to liquidate its investments in the event that additional cash is required to meet obligations to its policyholders, however, the Company believes that the high-quality, liquid investments in the portfolios provide it with sufficient liquidity.
Ceded reinsurance premiums payable increased $724 to $3,283 as of December 31, 2015 compared to $2,559 as of December 31, 2014 primarily as a result of the timing of payments due under our reinsurance programs. The bulk of the balance payable as of December 31, 2015 represents the quarterly payment due under our catastrophe reinsurance program, which was paid in January 2016.
Net cash used by investing activities as reported on our consolidated statements of cash flows was $12,534, resulting from the net purchases of fixed income securities of $10,213.
As a result of the foregoing, our net increase in cash and cash equivalents during 2014 was $38,632.
Maison began providing homeowners insurance, manufactured home insurance and dwelling fire insurance to individuals in Louisiana in December 2012. Maison writes both full peril property policies as well as wind/hail only exposures in Louisiana and distributes its policies through independent insurance agents. On May 13, 2015 the Company was notified by the Texas Department of Insurance that a Certificate of Authority had been granted to Maison, allowing us to begin writing insurance in the State of Texas. Maison began assuming wind/hail only insurance for commercial properties in Texas beginning in June 2015. In September 2015, Maison began writing manufactured home policies in the State of Texas on a direct basis.
As of December 31, 2015 the Company had net operating loss carryforwards (“NOLs”) for federal income tax purposes of approximately $835 which will be available to offset future taxable income. As a result of certain changes in ownership and pursuant to Section 382 of the Internal Revenue Code of 1986, as amended, these NOLs are subject to a yearly limitation. The amount and expiration date of the NOL carryforwards are as follows:
On March 31, 2014, the Company completed its IPO of 2,170,625 shares of its common stock at a price to the public of $8.00 per share, for total gross proceeds of $17,365. Net proceeds to the Company were $15,087 after deducting underwriting discounts and commissions and other offering expenses payable by the Company. In conjunction with the IPO, the Company issued warrants to its underwriters to purchase 94,375 shares of its common stock. Each warrant entitles the holder to purchase one common share of PIH at a price of $10.00 per share at any time after March 31, 2015 and prior to expiry on March 31, 2019.
On January 23, 2014, Fund Management Group LLC, an entity of which the Company’s Chairman of the Board, Gordon G. Pratt, is a Managing Member and controlling equity holder, invested $2,000 in the Company in exchange for 80,000 Series A Convertible Preferred Shares (“Series A Shares”) of the Company. The Series A Shares were non-voting and ranked senior to all classes of capital stock of the Company. The Series A Shares did not pay any dividends. At the time of the issuance, the value of the common stock into which the Series A Shares is convertible had a fair value greater than the $2,000 proceeds received upon issuance. Accordingly, the Company recorded a beneficial conversion feature on the Series A Shares of $500 during the first quarter of 2014, which was equal to the amount by which the estimated fair value of the common stock issuable upon the conversion of the issued Series A Shares exceeded the proceeds from the issuance.