ANALYSIS OF FINANCIAL CONDITION - DECEMBER 31, 2012 COMPARED TO DECEMBER 31, 2011
Premiums collections increased due to the increased writings we have experienced in 2012 compared to 2011. Reimbursement for paid losses decreased because we commuted our 2005 FHCF contract in 2011 and the number of open catastrophe claims continues to decrease as we close those claims. In 2011 we assumed policies from Citizens Property Insurance Corporation whereas we did not assume any policies in 2012. Reinsurance payments increased because we purchased more reinsurance coverage for our current contract than we purchased under our previous contract. Claim payments increased primarily due to the increase in exposures and payments on claims from prior accident years. Operating expenses, agents' commission payments and premium taxes increased due to the overall growth in the business in 2012. Income tax deposits increased due to the growth in taxable income.
We classify our property and equipment, which we record at cost less accumulated depreciation and amortization, within other assets on our Consolidated Balance Sheets because the total net amount ($548,000 at December 31, 2012) is not material to our consolidated financial statements. We use the straight-line method of calculating depreciation over the estimated useful lives of the assets, which are three to five years. We also use the straight-line method to calculate amortization of leasehold improvements over the estimated useful lives of the assets or the term of the lease, whichever is shorter. We periodically review estimated useful lives and, where appropriate, we make changes prospectively. We charge maintenance and repair costs to expense as incurred.
On September 25, 2012, we acquired an investment in a limited partnership, recorded in other assets, that is currently being accounted for at cost. Our total investment in the partnership is $750,000 and is currently bifurcated between a capital contribution of $187,500 and a note receivable of $562,500 that will be utilized to fund our future capital contributions. We are not required to fund any additional amounts in excess of our initial $750,000 investment. As the limited partnership is still in the acquisition phase, the cost basis of our investment approximated its fair value at December 31, 2012.
We write flood insurance under an agreement with the National Flood Insurance Program. We cede 100% of the premiums written and the related risk of loss to the federal government. We earn commissions for the issuance of flood policies based upon a fixed percentage of net written premiums and the processing of flood claims based upon a fixed percentage of incurred losses, and we can earn additional commissions by meeting certain growth targets for the number of in-force policies. We recognized commission revenue from our flood program of $267,000, $377,000, and $516,000, for the years ended December 31, 2012, 2011, and 2010, respectively.
On January 3, 2011, Synovus Bank voluntarily dismissed its case without prejudice against United Insurance Holdings, L.C. and UPC Insurance. We did not establish any reserves regarding this action because we were not able to predict the probable outcome of the action.
On January 8, 2013, our insurance affiliate assumed 15,133 policies from Citizens, representing in-force premium totaling approximately $27,348,000. We recorded approximately $16,136,000 of written premium assumed; however, the amount of written premium assumed can be affected by policyholder "opt-outs", policy endorsements and cancellations; however, under current regulations, policyholders have more limited conditions under which they can opt-out when compared to previous assumption programs. As was the case with the assumptions we conducted under the 2011 assumption agreement with Citizens, this current assumption agreement does not allow for any bonuses related to policies assumed.