In order to verify the accuracy and completeness of the information provided to the Company by its ceding company counterparties, the Company’s underwriters, actuaries, accounting and claims personnel perform underwriting and claims reviews of the Company’s ceding companies. Any material findings are communicated to the ceding companies and utilized in the establishment or revision of the Company’s case reserves and related IBNR reserve. On occasion, these reviews reveal that the ceding company’s reported loss and loss adjustment expenses do not comport with the terms of the contract with the Company. In such events, the Company strives to resolve the outstanding differences in an amicable fashion. The large majority of such differences are resolved in this manner. In the infrequent instance where an amicable solution is not feasible, the Company’s policy is to vigorously defend its position in litigation or arbitration. As of December 31, 2012, the Company was not involved in any material claims litigation or arbitration proceedings.
Commission and other acquisition expenses increased by $53.3 million, or 12.1%, for the year ended December 31, 2012 compared to 2011 due to the ongoing premium growth of the Company. However, the commission and other acquisition expense ratio decreased to 27.1% for the year ended December 31, 2012 compared to 28.0% in 2011, respectively. The reduced ratio largely reflects: (1) the impact of loss sensitive features on ceding commission in the Diversified Reinsurance segment, in particular business written by Maiden US, due to higher loss ratios in that segment; (2) continued growth and ongoing changes in the mix of business in the AmTrust Quota Share Reinsurance segment, including the impact of a full year of modifications to ceding commission made under the Reinsurance Agreement along with lower ceding commission and profit share under the European Hospital Liability Quota Share, effective April 1, 2011 and discussed in further detail in that segment's results of operations; (3) modifications made to ceding commission made to the ACAC Quota Share effective October 1, 2012.
Net premiums earned increased by $169.6 million, or 30.4% for the year ended December 31, 2012, compared to the same period in 2011. The increase reflects the ongoing growth of business written under the Reinsurance Agreement and the European Hospital Liability Quota Share. The table below details net premiums earned by line of business for the years ended December 31, 2012 and 2011:
Net Loss and Loss Adjustment Expenses - Net loss and loss expenses increased by $99.4 million, or 35.4%, for the year ended December 31, 2011 compared to 2010. Net loss and loss adjustment expense ratios were 68.1% and 63.1% for the years ended December 31, 2011 and 2010, respectively. The increase in the net loss and loss adjustment expense ratios reflects the ongoing shift in the mix of business to Specialty Risk and Extended Warranty under the Reinsurance Agreement and the European Hospital Liability Quota Share, which historically produce higher loss ratios than the other lines of business.
We generated $13.2 million in net cash from investing activities during the year ended December 31, 2011 compared to using $125.2 million for the year ended December 31, 2010. This change was the result of an increase in restricted cash balances and prepayments from the Company's mortgage-backed securities portfolio.
Cash flows provided by financing activities were $208.8 million for the year ended December 31, 2012 compared to $99.5 million and $37.2 million used in the years ended December 31, 2011 and 2010, respectively. The following summarizes the net cash inflow (outflow) from financing activities for the years ended December 31, 2012, 2011 and 2010.