Our 2013 results of operations were also impacted by: (1) unfavorable prior accident year loss development of $6.9 million, including $5.0 million related to California loss reserves for the 2009 through 2011 accident years and $1.9 million related to our assigned risk business, which increased our losses and LAE by the same amount during 2013; (2) favorable development in the estimated reserves ceded under the LPT Agreement during 2013, which resulted in a $19.0 million cumulative adjustment to the Deferred Gain (LPT Reserve Adjustment); (3) an increase in the contingent commission receivable under the LPT Agreement that resulted in a $4.3 million cumulative adjustment, which reduced our losses and LAE by the same amount (LPT Contingent Commission Adjustment); and (4) a reallocation of reserves from non-taxable periods prior to January 1, 2000, which reduced our effective tax rate by 13.9 percentage points, or $7.4 million, in 2013. Collectively, these items increased net income by $23.8 million for the year ended December 31, 2013.
Our commission expense ratio was 12.2%, 13.1%, and 13.0%, while our commission expense was $78.3 million, $65.6 million, and $47.3 million for the years ended December 31, 2013, 2012, and 2011, respectively. While our commission expense is up over the past three years, primarily due to higher net premiums earned, our commission expense ratio decreased in 2013, primarily due to lower base commissions and agency incentives as a percentage of premiums earned, compared to 2012 and 2011.
Income tax benefit was $10.7 million, $9.3 million, and $2.1 million for the years ended December 31, 2013, 2012, and 2011, respectively. The effective tax rate was (20.0)%, (9.6)%, and (4.5)% for the years ended December 31, 2013, 2012, and 2011, respectively. The increased tax benefit for the year ended December 31, 2013, compared to 2012, was primarily due to the reallocation of $27.2 million in reserves from non-taxable periods prior to January 1, 2000, during 2013, which reduced our effective tax rate by 13.9 percentage points for the year ended December 31, 2013.
Operating Activities. Major components of net cash provided by operating activities in 2013 included net premiums received of $624.0 million, investment income received of $78.8 million, and amounts recovered from reinsurers of $33.1 million. These were partially offset by claims payments of $365.9 million, underwriting and other operating expenses paid of $131.2 million (including premium taxes paid of $22.7 million), and commissions paid of $75.1 million.
In 2013, the Company reallocated $27.2 million in reserves from non-taxable periods prior to January 1, 2000 to taxable years, which reduced our effective tax rate by 13.9 percentage points for the year ended December 31, 2013. This change in estimate was the result of the determination in the third quarter of 2013 that a reallocation of reserves among accident years was appropriate to address a continuation of observed loss trends. The income tax impact of this change in estimate increased net income by $7.4 million, or $0.24 and $0.23 per basic and diluted share, respectively.
In California, where the Company's operations began on July 1, 2002, the actuaries' and management's initial expectations of ultimate losses and patterns of loss emergence and payment were based on benchmarks derived from analyses of historical insurance industry data in California. No historical data from the Company's California insurance subsidiary existed prior to July 1, 2002; however, some historical data was available for the prior years for some of the market segments the Company entered in California, but was limited as to the number of loss reserve evaluation points available. The industry-based benchmarks were judgmentally adjusted for the anticipated impact of significant environmental changes, specifically the enactment of major changes to the statutory workers' compensation benefit structure and the manner in which claims are administered and adjudicated in California. The actual emergence and payment of claims by the Company's California insurance subsidiary has been more favorable than those initial expectations through 2008, due at least in part to the enactment of the major changes in the California workers' compensation environment; however, our recent loss experience, beginning in 2010, indicates an upward trend in medical costs that is reflected in our loss reserves. Additionally, the Company's indemnity claims frequency (the number of claims expressed as a percentage of payroll) increased year-over-year in 2013. The Company's estimates assume that increasing medical cost trends will continue and will impact our long-term claims costs and loss reserves.
On December 28, 2010, the Company entered into the Third Amended and Restated Credit Agreement (Amended Credit Facility) with Wells Fargo Bank, National Association (Wells Fargo), under which the Company is provided with: (a) $100.0 million line of credit through December 31, 2011; (b) $90.0 million line of credit from January 1, 2012 through December 31, 2012; (c) $80.0 million line of credit from January 1, 2013 through December 31, 2013; (d) $70.0 million line of credit from January 1, 2014
The PSUs have a performance period of three years and are subject to certain performance goals, based on the Company's statutory combined ratio, with payouts that range from 0% to 200% of the target awards.