On June 11, 2008, our corporate headquarters was forced to close temporarily due to historic flooding in Cedar Rapids, Iowa, that caused extensive damage to the first and lower levels of our buildings. Our disaster recovery plan was effective in allowing us to access and restore all of our major automated processing systems within 24 hours of the flood. We were also able to have a temporary office for more than 200 employees up and running within one week. Other employees were able to remotely access our systems and work from home. Despite a few minor technical issues, we were able to maintain our book of business and actively process new business during the 11 weeks that employees were displaced from our corporate headquarters. Reconstruction of those areas of our corporate headquarters affected by the flood continues on schedule and we expect these efforts to be completed during the first quarter of 2009.
In 2008, the property and casualty insurance industry experienced the fourth year of soft market conditions, characterized by increased competition and pricing pressure, particularly on mid-size and large commercial accounts. During 2007 and 2008, despite the soft market conditions, our retention rates have remained high. We attribute this success to our relationships with our agents, a superior level of customer service, automation and our products. We feel the property and casualty insurance market is at or near the bottom of the current market cycle and we anticipate that prices will begin to firm sometime in 2009. With the approval of recent low single-digit percentage rate level increases in the fourth quarter of 2008, we believe we are well positioned to take advantage of and benefit from hardening in the market, when it occurs. However, if soft market conditions continue through 2009, we may see a decline in policy retention and further reductions in net premiums written.
For surety business, the economic downturn and weakened credit environment has, and will, impact profitability. New private and government construction has declined, driven by the turmoil in the investment and credit markets resulting in lower demand for contract surety business. In addition, inflationary pressures may lead to an increase in our loss costs in 2009.
Net cash flows from financing activities have been impacted by a combination of factors. Cash outflows associated with our life insurance segment’s annuity portfolio have increased from historical levels in connection with the increased level of surrenders and withdrawals experienced in recent years. Net cash used in these activities totaled $48.8 million, $61.7 million and $76.5 million for 2008, 2007 and 2006, respectively. The increase in withdrawals is described in the earlier “Life Insurance Segment” section. During 2008 and 2007, pursuant to authorization by our Board of Directors, we repurchased 580,792 and 497,500 shares of common stock respectively, which used cash totaling $14.8 million in 2008 and $16.1 million in 2007. Dividend payments to our common shareholders totaled $16.2 million in 2008, compared with $15.3 million in 2007 and $13.2 million in 2006. In May 2006, we received $107.0 million in net proceeds from the issuance of 4,025,000 shares of common stock.
As of December 31, 2008, we have no off-balance sheet obligations or commitments.
The amounts of the case-based reserves that we establish for claims in long-tail lines depends upon various factors, including individual claim facts (including type of coverage, severity of loss and underlying policy limits), company historical loss experience, changes in underwriting practice, legislative enactments, judicial decisions, legal developments in the awarding of damages, changes in political attitudes and trends in general economic conditions, including inflation. As with the short-tail lines of business, we review and make changes to long-tail case-based reserves based on our review of continually evolving facts as they become available to us during the claims settlement process. Our adjustments to case-based reserves are reflected in the financial statements in the period that new information arises about the claim. Examples of facts that become known that could cause us to change our case-based reserves include, but are not limited to: evidence that loss severity is different than previously assessed, new claimants who have presented claims and the assessment that no coverage exists.
The historical patterns of claim frequency and claim severity utilized within our IBNR reserve calculation, without considering unusual events, are consistent and will continue to be consistent; and
Based on the results of the four different projection methods, a reasonable range of net reserves from $467.5 million to $589.0 million has been calculated. Our net reserves for losses and loss settlement expenses as of December 31, 2008 were $533.6 million.
Investments in held-to-maturity fixed maturities are recorded at amortized cost. We have the ability and positive intent to hold these investments until maturity. Available-for-sale fixed maturities, trading securities and equity securities are recorded at fair value. Other long-term investments are recorded on the equity method of accounting. Mortgage loans are recorded at cost. Policy loans are recorded at the outstanding loan amount due from policyholders. Included in investments at December 31, 2008 and 2007, are securities on deposit with, or available to, various regulatory authorities as required by law, with fair values of $1,270,181,000 and $1,356,649,000, respectively.
Property and equipment is carried at cost less accumulated depreciation. Depreciation is computed primarily by the straight-line method over the estimated useful lives of the underlying assets. Depreciation expense totaled $3,556,000, $3,513,000 and $3,418,000 for 2008, 2007 and 2006, respectively.
Our intangibles are composed entirely of agency relationships, which are being amortized by the straight-line method over periods of up to 10 years. We regularly review the carrying value of our intangibles for impairment in the recoverability of the underlying asset, with any impairment being charged to operations in the period that the impairment was recognized. We did not recognize an impairment write-down to the carrying value of our intangibles in 2008, 2007 or 2006.
Level 1: Valuations are based on unadjusted quoted prices in active markets for identical financial instruments.
Intrinsic value is the difference between our share price on the last day of trading, December 31, 2008 and the price of the options when granted and represents the value that would have been received by option holders had they exercised their options on December 31, 2008. These values change based on the fair market value of our shares. The intrinsic value of options exercised totaled $125,000, $774,000 and $448,000 in 2008, 2007 and 2006, respectively.
Life insurance in force, before ceded reinsurance, totaled $4,589,010,000 and $4,467,206,000 as of December 31, 2008 and 2007, respectively. Traditional life insurance products represented 61 percent and 59 percent of our insurance in force at December 31, 2008 and 2007, respectively. Universal life insurance represented 36 percent and 38 percent of insurance in force at December 31, 2008 and 2007, respectively.