(1) Includes policy acquisition expenses, and other general and administrative expenses, excluding commissions and salaries and benefits, related to insurance operations and corporate operating expenses.
Net cash provided by operating activities was $44.8 million in 2010, as compared to $27.3 million in 2009, and $64.9 million in 2008. Major components of cash provided by operating activities in 2010 were net premiums collected of $236.6 million, investment income collected of $30.6 million and amounts recovered from reinsurers of $3.8 million, offset by claim payments of $167.4 million, $49.2 million of operating expenditures, federal taxes paid of $6.5 million and dividends to policyholder paid of $3.2 million. Major components of cash provided by operating activities in 2009 were net premiums collected of $239.7 million, investment income collected of $32.1 million and amounts recovered from reinsurers of $5.4 million, offset by claim payments of $171.1 million, $59.1 million of operating expenditures, federal taxes paid of $18.8 million, and dividends to policyholders paid of $1.0 million. Major components of cash provided by operating activities in 2008 were net premiums collected of $282.3 million, investment income collected of $33.7 million and amounts recovered from reinsurers of $20.4 million, offset by claim payments of $183.4 million, $58.6 million of operating expenditures, federal taxes paid of $25.0 million, and dividends to policyholders paid of $4.5 million.
As of December 31, 2010, our investment portfolio, including cash and cash equivalents, totaled $826.5 million, an increase of 3.3% from December 31, 2009. The majority of our fixed maturity securities are classified as held-to-maturity, as defined by FASB ASC Topic 320, Investments-Debt and Equity Securities. As such, the reported value of those securities is equal to their amortized cost, and is not impacted by changing interest rates. The remainder of our fixed maturity securities and all of equity securities are classified as available-for-sale and reported at fair value.
The Company estimates EBUB premiums on a quarterly basis using historical data and applying various assumptions based on the current market and records an adjustment to premium, related losses, and expenses as warranted.
Property and casualty insurance companies are subject to certain risk-based capital (“RBC”) requirements specified by the National Association of Insurance Commissioners. Under these requirements, a target minimum amount of capital and surplus maintained by a property/casualty insurance company is determined based on the various risk factors related to it. At December 31, 2010, the capital and surplus of AIIC and its subsidiaries exceeded the minimum RBC requirement.
Prior to June 15, 2010 the Company was authorized to issue 500,000 shares of convertible preferred stock, par value $0.01 per share, of which 300,000 shares were designated Series C convertible deferred pay preferred stock and 200,000 shares were designated Series D non-voting convertible deferred pay preferred stock (collectively, the “Convertible Preferred Stock”). In November, 2006, 250,000 shares of Series C preferred stock were converted into shares of common stock by the holders in connection with a secondary public offering of the Company’s common stock. Effective as of December 31, 2009, all then-outstanding Series C and Series D shares were canceled and were not eligible for reissue. Shareholders approved an amended Certificate of Formation for the Company on June 15, 2010 under which no such class of shares was authorized to be issued.