There are numerous factors, some of that are outside our control, that could have a material impact on our business. We have described these factors in detail under the heading “Risk Factors.” Certain of these factors, which include market conditions, legal and regulatory changes, operational risk and interest rate risk, have a particular impact on our business:
As of December 31, 2011, 1.6% of our invested assets (approximately $61.2 million) consisted of short-term commercial paper with maturities of less than 45 days. This compares to 2.9% of the our invested assets (approximately $108.0 million) as of December 31, 2010. This commercial paper consisted of direct obligations of various corporations rated a minimum of A1 by Standard and Poor’s and P1 by Moody’s. This cash balance was reduced during 2010 and 2011, as we determined that our cash balances were more than sufficient to cover projected cash needs from annuity surrenders and required payments. As part of its asset-liability management strategy, the Insurance Company had kept elevated levels of cash investments since 2005, but management currently believes that its excess cash should be invested in additional fixed income investments to augment investment income.
The following two tables present the gross unrealized losses for fixed maturities where the estimated fair value had declined and remained below amortized cost and the number of issuers with total gross unrealized losses in excess of 12 months for fixed maturities and common stock at December 31, 2010:
As of December 31, 2010, we had 220 securities in a net unrealized loss position. Of this total, 198 are bonds and 22 are preferred stocks.
Interest credited and benefits paid to policyholders amounted to $178.5 million, $229.6 million and $214.6 million in 2011, 2010 and 2009, respectively. These represent a decrease of 22.3% comparing 2011 to 2010 and a 7.0% increase in comparing fiscal 2010 to fiscal 2009. These reductions are primarily due to a decrease in the change in liability for future policy benefits of $48.9 million in 2011 relative to 2010 and 11.6 million in 2010 relative to 2009. The decrease in the liability is primarily due to decreased sales on our immediate annuities during 2011 and 2010 relative to the previous year.
Accumulated other comprehensive income increased from approximately $118.6 million at December 31, 2010 to $192.8 million at December 31, 2011. The increase was due to an increase in net unrealized investment gains, net of taxes, during the year of approximately $74.2 million. The effect of declining interest rates on the fixed maturities was the primary reason for the increase.
Should we decide to raise capital subject to current financial and economic environments, it will be challenging and expensive. Several options are available including, but not limited to, the following:
Under GAAP, net cash provided by (used in) our operating activities was approximately ($21.0) million, $24.8 million and $17.9 million in 2011, 2010 and 2009, respectively. Net cash provided by our investing activities (principally reflecting investments purchased, called, redeemed or sold) was approximately $147.0 million, $25.0 million and $49.1 million in 2011, 2010 and 2009, respectively.
When available, the estimated fair value of securities is based on quoted prices in active markets that are readily and regularly obtainable. Generally, these are the most liquid of our securities holdings and valuation of these securities does not involve management judgment.
See the accompanying Consolidated Financial Statements and Schedules beginning on Page.