Income from operations increased $627.6 million, or 111.7%, in the year ended December 31, 2010, as compared to the year ended December 31, 2009. The Company’s income from operations increased substantially primarily due to the decline in impairments from $618.5 million in 2009 to $2.9 million in 2010. The decline in impairments was driven by the significant impairment taken during the three months ended March 31, 2009. Commission expense increased slightly in the CCG and ICG, with commission expense of $37.1 million and $89.4 million, respectively, for the year ended December 31, 2010. This compared with CCG and ICG commission expense of $34.4 million and $84.3 million, respectively, for the year ended December 31, 2009. The increase in commission payouts at the ASG was commensurate with the increase in revenue. In addition, compensation expense-employees decreased in each of the three segments and non-compensation expense decreased within the CCG and ICG, primarily due to a $9.0 million loss and related expenses recognized on the sublet of one of the floors of the Company’s New York corporate headquarters in the fourth quarter of 2009. This expense was allocated among the segments.
Individual Client Group. Commissions paid by insurance companies are based on a percentage of the premium that the insurance company charges to the policyholder. In the marketing organization and wholesale life brokerage business line, the ICG generally receives commissions paid by the insurance carrier for facilitating the placement of the product. Wholesale life brokerage revenue also includes amounts received by NFP’s life brokerage entities, including its life settlements brokerage entities which assist advisors with the placement and sale of life insurance. In the retail life business line, commissions are generally calculated as a percentage of premiums, generally paid in the first year. The ICG receives renewal commissions for a period following the first year. The ICG’s wealth management business line earns fees for offering financial advisory and related services. These fees are generally based on a percentage of assets under management and are paid quarterly. In addition, the ICG may earn commissions related to the sale of securities and certain investment-related insurance products.
As of December 31, 2011, no businesses have elected to continue to participate in NFP’s ongoing incentive plan. See “Note 4-Commitments and Contingencies-Ongoing incentive plan” to the Company’s Consolidated Financial Statements contained in this report.
Gain on sale of businesses. During the year ended December 31, 2010, the CCG recognized a gain on sale of businesses totaling $8.1 million. During the year ended December 31, 2010, the CCG disposed of three businesses and contributed certain assets of a wholly-owned subsidiary to a newly formed entity in exchange for preferred units. The contribution of assets resulted in a deconsolidation and remeasurement of the Company’s retained investment for an overall gain of $9.2 million. During the year ended December 31, 2009, the CCG recognized a net loss from the disposition of three businesses and the sale of certain assets of another two businesses totaling less than $0.1 million.
Liquidity refers to the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash. NFP derives liquidity primarily from cash generated by the Company’s businesses and from financing activities.
During the year ended December 31, 2011, cash provided by operating activities was approximately $116.2 million compared with $119.4 million for the year ended December 31, 2010. The decrease in operating cash flow for the year ended December 31, 2011 as compared with the prior period was primarily due to a decrease in accounts payable related to commission payments on a particularly large transaction that was accrued for at December 31, 2010, offset by a decrease in notes receivable as cash collections on balances owed by principals have increased, and an increase in accrued liabilities, primarily relating to the alignment of the end of the second PIP to the 2011 calendar year. During 2011 no PIP payments were made, whereas in the prior year, the Company paid PIP payments in the fourth quarter of 2010 as the initial PIP 12-month performance period ended September 30, 2010.
During the year ended December 31, 2011, cash used in investing activities was $53.9 million, which was primarily due to $48.7 million paid as payments for acquisitions, net of cash, and $8.9 million paid for purchases of property and equipment.