Realized Gains (Losses) on Investments. In 2013, we sold two equity bond funds which resulted in a realized loss of $0.4 million which is reduced by gains on bond calls during the year. The Company sold equity mutual funds in 2012 and 2011, which were previously impaired, and realized gains of $0.6 million and $1.3 million, respectively.
Federal Income Tax. Federal income tax expense was $2.1 million, $1.5 million and $2.8 million in 2013, 2012 and 2011, respectively, resulting in effective tax rates of 30.8%, 25.0% and 25.1%, respectively. The Company began purchasing tax-exempt state and local bonds in the second half of 2011 and continued to do so in 2012 and 2013 in the non-insurance companies where the full tax benefit can be realized. In addition, the fair value change related to outstanding warrants of $0.5 million, and $1.1 million were reported as an increase in revenues in 2012 and 2011 respectively, which was not taxable and also impacted our corporate tax rate. Differences between our effective tax rate and the statutory tax rate result from income and expense items that are treated differently for financial reporting and tax purposes.
Capitalization and Amortization of Deferred Policy Acquisition Costs. Capitalized costs increased, as commission related costs have increased in the current year compared to 2012. Amortization of DAC increased in the current year by 4.1% from 2012 as the asset balance has increased and our persistency was lower in the current year.
Realized Investment Gains (Losses), Net. We sold two bond mutual fund issues in 2013 which resulted in a realized loss of $57,000 which was offset by bond gains on calls of $36,000. Net losses on investment of $0.3 million in 2012 is related to an OTTI adjustment on one coal energy provider debt issuer. The operations of this energy provider have been negatively impacted by challenging environment in the coal-fired generation sector and overall decline in the price of power it can charge to customers. This fixed maturity security is scheduled to mature in 2017. Net realized losses of $0.6 million in 2011 are due primarily from an OTTI on one American Airlines debt security that totaled $70,000 due to the issuer filing bankruptcy, and a write-down of approximately $0.5 million related to investment real estate for an office building in Arkansas. We obtained an appraisal in 2011 that reflected a loss in fair value.
Yields on investment assets vary between segment operations due to different portfolio mixes and durations in the segments. The life segment previously invested more in U.S. Government securities however over the past few years it has invested in municipal and corporate issuers and is now more similar to the home service segment which has had concentrations primarily in the corporate and municipal sectors.
Inherent in the capitalization and amortization of deferred policy acquisition costs are certain management judgments about what acquisition costs are deferred, the ending asset balance and the annual amortization. Approximately 91.0% of our capitalized deferred acquisition costs are attributed to first year excess commissions. The remaining 9.0% are attributed to costs that vary with and are directly related to the successful acquisition of new insurance business. Those costs generally include costs related to the production, underwriting and issuance of new business.