Although we are authorized to underwrite the various lines described above, our business is primarily underwriting homeowners’ policies. During 2012, 85.3%, 7.8%, 4.4% and 2.5% of the premiums we underwrote were for homeowners’, commercial general liability, federal flood, and personal automobile insurance, respectively. During 2011, 81.8%, 10.3%, 4.6% and 3.3% of the premiums we underwrote were for homeowners’, commercial general liability, federal flood, and personal automobile insurance, respectively.
We select an estimate of ultimate loss & DCCE for each accident quarter after considering the results of each projection method for the quarter and the relative maturity of the quarter (the time elapsed between the start of the quarter and December 31, 2012). Reserves for unpaid losses & DCCE for each quarter are the differences between these ultimate estimates and the amount already paid. The reserves for each quarter and each coverage are summed, and the result is the overall estimate of unpaid losses & DCCE liability for the company.
Gross premiums ceded increased to $51.1 million for 2012, compared with $46.3 million for 2011. Gross premiums ceded relating to our homeowners’, commercial general liability, write-your-own flood and automobile programs totaled $43.3 million, $0.5 million, $5.3 million and $2.0 million for 2012. Gross premiums ceded relating to our homeowners’, write-your-own flood and automobile programs totaled $40.3 million, $4.5 million and $1.5 million for 2011. The increase to gross premiums ceded relating to our homeowners’ program is due to higher gross premium written, net of a reduced marginal cost of reinsurance purchased from the Florida Hurricane Catastrophe Fund (“FHCF”). We are required to report write-your-own flood premiums on a direct and 100% ceded basis.
Managing general agent fees increased $0.4 million, or 26.8%, to $2.0 million for 2012, compared with $1.6 million for 2011. The change is attributed to the increase in gross premiums written during this same period.
The Company’s sale of commercial general liability policies decreased by $1.8 million to $10.1 million for 2011, compared with $11.9 million for 2010. The primary factor for this decrease has been improvements to our underwriting standards and our decision to restrict underwriting authority within specific commercial general liability classes and geographic areas.
In 2012, operations used $19.2 million of gross cash flow primarily due to a $10.1 million decrease in unpaid losses and LAE, a $2.4 million increase in premiums receivable, a $1.9 million decrease in bank overdraft, a $1.4 million increase in reinsurance recoverable, net, $1.1 million of net realized investment gains and a $0.8 million increase in policy acquisition costs, net of amortization. Additional uses of cash included a $0.6 million increase in other assets, a $0.5 million decrease in accounts payable and accrued expenses, a $0.3 million decrease in premium deposits and customer credit balances and a $0.1 million decrease in income taxes payable.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Federated National Holding Company as of December 31, 2012 and 2011, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2012 in conformity with accounting principles generally accepted in the United States of America.
American Vehicle, prior to the January 2011 merger, was licensed as an admitted carrier in Florida, and underwrote commercial general liability, and personal and commercial automobile insurance. American Vehicle was also licensed as an admitted carrier in Alabama, Louisiana, Georgia and Texas, and underwrote commercial general liability insurance in those states. American Vehicle operated as a non-admitted carrier in Arkansas, California, Kentucky, Maryland, Missouri, Nevada, Oklahoma, South Carolina, Tennessee and Virginia, and could underwrite commercial general liability insurance in all of these states. Subsequent to the merger, these operations may continue under the newly formed FNIC.
Our insurance companies are subject to minimum capital and surplus requirements, and our failure to meet these requirements could subject us to regulatory action.
Total investments increased $0.6 million, or 0.5%, to $130.1 million as of December 31, 2012, compared with $129.5 million as of December 31, 2011.
As of December 31, 2012 and December 31, 2011, respectively, all of our securities are in good standing and not impaired, except as noted above, as defined by FASB issued guidance.
Proceeds from sales, pay downs and maturities of debt securities and proceeds from sales of equity securities in 2012, 2011 and 2010 were approximately $90.4 million, $108.3 million and $149.0 million, respectively.
GAAP differs in some respects from reporting practices prescribed or permitted by the Florida OIR. FNIC’s statutory capital and surplus was $52.1 million and $39.3 million as of December 31, 2012 and 2011, respectively. FNIC’s statutory net income was $6.6 million and $0.8 million for 2012 and 2011, respectively. FNIC’s statutory net loss was $12.0 million for 2010. FNIC’s statutory non-admitted assets were nearly nothing and approximately $5.7 million as of December 31, 2012 and 2011, respectively.