In November 2009, First Professionals acquired all of the issued and outstanding stock of Advocate, MD. For additional information see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. and Note 3, Acquisition of Advocate, MD to the consolidated financial statements included elsewhere herein.
We have a process in place to identify fixed income and equity securities that could potentially have a credit impairment that is other-than-temporary. This process involves monitoring market events that could impact an issuer’s credit rating, business climate, management changes, litigation and government actions and other similar factors. This process also involves monitoring pricing levels, downgrades by rating agencies, key financial ratios and cash flow projections as indicators of credit issues.
The fair value of our investment holdings is affected by general economic conditions and changes in the financial and credit markets, and we rely on the investment income produced by our investment portfolio to contribute to our profitability. Changes in interest rates and credit quality may result in fluctuations in the income derived from, the valuation of, and in the case of declines in credit quality, payment defaults on our fixed income securities. In addition, deteriorating economic conditions could impact the value of our equity securities resulting in other-than-temporary impairments to such securities. These changes could have a material adverse effect on our financial condition, results of operations or cash flows. Our investment portfolio is also subject to credit and cash flow risk, including risks associated with our investments in asset-backed and mortgage-backed securities. Because our investment portfolio is the largest component of consolidated assets and a multiple of shareholders’ equity, adverse changes in economic conditions could result in other-than-temporary impairments that are material to our financial condition, operating results or cash flows. Such economic changes could arise from overall changes in the financial markets or specific changes to industries, companies or municipalities in which we maintain investment holdings. Our fixed income portfolio had an overall average credit quality of AA-, based on the lower of the available credit ratings from Moody’s and S&P.
Consolidated net income was $34.0 million for 2009, or $4.63 per diluted common share, an increase of 6 percent and 25 percent, respectively, compared to $32.1 million, or $3.69 per diluted common share, for 2008. Included in net income for 2009 was a gain from discontinued operations of $0.4 million. Other changes in net income are due to the factors discussed in the paragraph above with regard to income from continuing operations.
Consolidated net income was $32.1 million for 2008, or $3.69 per diluted common share, a decrease of 37 percent and 29 percent, respectively, compared to $50.9 million, or $5.18 per diluted common share, for 2007. Included in net income for 2007 was a loss from discontinued operations of $0.2 million. Other changes in net income are due to the factors discussed in the paragraph above with regard to income from continuing operations.
The following table summarizes our significant contractual obligations and commitments as of December 31, 2009, and the future periods in which such obligations are expected to be settled in cash. In addition, the table reflects the timing of principal payments on outstanding borrowings. Additional information regarding these obligations is provided in Note 3, Acquisition of Advocate, MD, Note 8, Liability for Losses and LAE, Note 10, Long-term Debt, Note 13, Income Taxes, , Note 16, Employee Benefit Plans and Note 19, Commitments and Contingencies to the consolidated financial statements included elsewhere herein.