NSIC ended 2009 with net realized investment gains totaling $234,000 compared to realized losses of $1,423,000 in 2008. The primary reason for the improved results in the current year was the reduced amount recognized for other-than-temporary impairment losses. During 2009 NSIC recognized $293,000 in other-than-temporary impairment losses compared to $1,358,000 for the same period last year.
In a typical year, cash flow from operating activities and cash flow from investing activities tend to have an inverse relationship. Cash flows from 2008 and 2009 are examples of this inverse relationship. In 2009, improved underwriting results in the property and casualty subsidiaries increased cash from operations. This increased cash from operations was then used to increase investments leading to a net increase in cash used in investing activities. Results for 2008 show a similar relationship between cash from operations and investments but in the opposite direction. Increased uses of cash in operating activities in 2008, primarily the payment of hurricane claims, led us to liquidate certain investments in order to provide more cash to pay claims. Therefore, cash provided from investments of $8,705,000 was primarily used to support negative cash flow from operations of $5,892,000.
Interest on fixed income securities is credited to income as it accrues on the principal amounts outstanding adjusted for amortization of premiums and accretion of discounts computed utilizing the effective interest rate method. Premiums and discounts on mortgage backed securities are amortized or accreted using anticipated prepayments with changes in anticipated prepayments accounted for prospectively. The model used to determine anticipated prepayment assumptions for mortgage backed securities uses separate home sale, refinancing, curtailment and pay-off assumptions derived from a variety of industry sources. Mortgage-backed security valuations are subject to prospective adjustments in yield due to changes in prepayment assumptions. The utilization of the prospective method will result in a recalculated effective yield that will equate the carrying amount of the investment to the present value of the projected future cash flows. The recalculated yield is used to accrue income on investments for subsequent periods.
Liabilities for loss contingencies arising from, but not limited to, litigation, claims, assessments, fines and penalties are recorded when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated.
This new accounting standard requires that companies record, as of the beginning of the interim period of adoption, a cumulative-effect adjustment to reclassify the noncredit component of a previously recognized OTTI loss from retained earnings to other comprehensive income if the Company does not intend to sell the security and it is more-likely-than-not that the Company will not be required to sell the security before recovery of its amortized cost basis. The adoption had no impact on our financial position or results of operations. The Company had no cumulative-effect adjustment upon adoption at the beginning of the second quarter.
Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.
In 1989, the Company and its subsidiaries established a retirement savings plan (401K Plan) and transferred the assets from the defined contribution profit sharing plan into the new plan. All full-time employees who have completed six months of service at the beginning of any calendar quarter are eligible to participate and all employee contributions are fully vested for employees who have completed 1,000 hours of service in the year of contribution. Company matching contributions for 2009 and 2008 amounted to $219,000 and $255,000, respectively. The Company contributes dollar-for-dollar matching contributions up to 5% of compensation subject to government limitations.