We have traditionally invested in fixed maturity securities with a large percent held in callable issues. Over the past three years, we have experienced significant call activity related to fixed maturity security holdings due to the historically low interest rate environment. As these call proceeds were invested into lower yielding securities, the yield on the portfolio has declined. The recent declines in yield rates appear to be leveling off as the reinvestment of calls is resulting in a lesser impact relative to yield changes. If market interest rates begin to rise, our call risk would diminish and our portfolio yield will rise over time, as new money investments would be made at higher rates.
We perform an expense study on an annual basis, which reflects an enterprise-wide time study, and we adjust cost allocations among entities as needed based upon this review. In the current year, we increased expenses allocated to the Life Insurance segment and decreased expenses attributable to the Home Service segment by approximately $1.5 million. The allocation changes are reflected in the segment operations, but do not impact total expenses.
Deferred Policy Acquisition Costs. Capitalized deferred policy acquisition costs ("DAC") were $29.4 million, $28.0 million and $27.1 million in 2011, 2010 and 2009. These costs will vary based upon newly issued and renewal business. Significantly lower amounts are capitalized related to renewal business in correlation with the lower commissions paid on renewal business compared to first year. Amortization of deferred policy acquisition costs increased in 2011 compared to 2010 amortization, as policy persistency had improved in 2010 compared to 2009, but declined in the Home Service segment in 2011, resulting in higher amortization. In addition, the prolonged low interest rate environment impacted the assumptions used in the development of the DAC asset for new policies issued in 2011. This resulted in a lower DAC balance and increased amortization in the current year by approximately $1.4 million.
Federal Income Tax. Federal income tax expense was $2.8 million, $4.1 million and $3.3 million in 2011, 2010 and 2009, respectively, resulting in effective tax rates of 25.0%, 21.0% and 15.8%, respectively. The Company established a tax valuation allowance related to other-than-temporary impairment ("OTTI") losses on its mutual funds of $6.9 million in 2008. The establishment of the valuation allowance had the effect of increasing tax expense. In 2009, $2.8 million of this allowance was released as a reduction of tax expense primarily due to the sale of approximately 42% of the mutual fund portfolio in 2009. The remaining $2.5 million valuation allowance was released in 2010, as the Company sold investments at a gain that enabled it to realize the tax basis losses, thereby making the valuation allowance no longer necessary. In addition, the fair value change related to outstanding warrants of $1.1 million and $0.2 million were reported as an increase in revenues in 2011 and 2010, respectively, and $3.2 million in 2009, which was not taxable and also impacted the corporate tax rate.
Increase in Future Policy Benefit Reserves. Policy benefit reserves in 2011 increased compared to the same periods in 2010, primarily due to increased sales of endowment products, which build up reserve balances more quickly compared to other life product sales. Endowment sales have become more popular relative to our international clientele in the past few years. Endowment sales totaled approximately $12.3 million, $9.4 million and $8.5 million, representing approximately 69.4%, 56.5% and 52.2% of total new first year premium in 2011, 2010 and 2009, respectively.
The following table sets forth our premiums by state for the periods indicated.
Additionally, a substantial portion of our international policyholders invest their policy cash dividends and benefits in our Class A common stock through our Stock Investment Plan (the “Plan”). Once a policyholder elects to participate in the Plan, their policy benefits can be used to purchase Citizens Class A common stock. In addition, our existing holders of Class A common stock, our employees and our independent consultants are eligible to participate in the Plan. In 2011, 3,150,043 shares were purchased in the open market under the Plan and 1,131,196 shares were sold in the open market under the Plan. If fewer policyholders elect to participate in the Plan, or if our international premium collections were to decrease as a result of regulatory or marketing impediments, the trading volume of our Class A common stock may decline from its present levels.
The evaluation of securities for impairments is a quantitative and qualitative process, which is subject to risks and uncertainties and is intended to determine whether declines in the fair value of investments should be recognized in current period earnings. The risks and uncertainties include changes in general economic conditions, the issuer's financial condition or future prospects, the effects of changes in interest rates or credit spreads and the expected recovery period.