Except as described below, we believe that in 2009 there were no significant changes in those critical accounting policies and estimates. Senior management has reviewed the development and selection of our critical accounting policies and estimates and their disclosure in this Form 10-K with the Audit Committee of our Board of Directors.
We are required to review the contractual terms of all our reinsurance purchases to ensure compliance with FASB issued guidance. The guidance establishes the conditions required for a contract with a reinsurer to be accounted for as reinsurance and prescribes accounting and reporting standards for those contracts. Contracts that do not result in the reasonable possibility that the reinsurer may realize a significant loss from the insurance risk assumed generally do not meet the conditions for reinsurance accounting and must be accounted for as deposits. The guidance also requires us to disclose the nature, purpose and effect of reinsurance transactions, including the premium amounts associated with reinsurance assumed and ceded. It also requires disclosure of concentrations of credit risk associated with reinsurance receivables and prepaid reinsurance premiums.
The Company’s sale of homeowners’ policies decreased $38.8 million, or 39.0%, to $60.7 million in 2008, compared with $99.5 million in 2007. The significant erosion was primarily due to the soft market conditions prevailing in the state of Florida. The soft market conditions are lead by Citizens, the state run insurance company. We believe that these marketplace conditions have forced some carriers to pursue market share based on “best case” pricing models that may ultimately prove unprofitable from an underwriting perspective. We did not compete with others solely based on pricing. We continued to market our property insurance product in territories in Florida where our rates are competitive.
Affecting our net investment income was a decrease in funds available for investment and a decrease in the overall yield to 4.11% in 2008 compared with a yield of 5.28% in 2007.
Net realized investment losses were $10.6 million in 2008, compared with $0.1 million in 2007. The table below depicts the net realized investment losses by investment category in 2008 as compared with the same period during 2007.
For the years ended December 31, 2009 and 2008, there were no off balance sheet transactions.
21st Century is an insurance holding company, which, through our subsidiaries and our contractual relationships with our independent agents and general agents, controls substantially all aspects of the insurance underwriting, distribution and claims processes. We are authorized to underwrite homeowners’ multi-peril, commercial general liability, personal and commercial automobile, fire, allied lines, surety, commercial multi-peril and inland marine in various states on behalf of our wholly owned subsidiaries, Federated National and American Vehicle and other insurance carriers. We market and distribute our own and third-party insurers’ products and our other services through contractual relationships with a network of approximately 4,200 independent agents, of which approximately 300 actively sell and service our products. We also utilize a select number of general agents for the same purpose.
We are focusing our marketing efforts on continuing to expand our distribution network and market our products and services throughout Florida and in other states by establishing relationships with additional independent agents and general agents. As this occurs, we will seek to replicate our distribution network in those states. There can be no assurance, however, that we will be able to obtain the required regulatory approvals to offer additional insurance products or expand into other states.
As of December 31, 2009, all of our securities are in good standing and not impaired as defined by FASB issued guidance, except for our holdings in Blackrock Pfd, Inc., which continues to be impaired by $0.4 million as of December 31, 2009, compared to the total $2.1 million as of December 31, 2008.
On September 4, 2009, a stipulation of settlement ("Stipulation of Settlement") was submitted to the Court by lead plaintiffs, the derivative plaintiff and the Defendants, setting forth the terms of a settlement of the Class Litigation and Derivative Litigation ("Settlement Agreement") which proposes that a payment of $2.4 million be made to the lead plaintiffs and the derivative plaintiff. The Stipulation of Settlement was preliminarily approved by the Court on October 19, 2009. This settlement amount was funded by its directors and officers insurance.
Basic and diluted earnings per share for 2008 would have been ($0.27) if the Company had not adopted FASB issued guidance, compared with reported basic and diluted earnings per share of ($0.31).
On September 30, 2004, we completed a private placement of 6% Senior Subordinated Notes due September 30, 2007 (the “September 2004 Notes”). These notes were offered and sold to accredited investors as units consisting of one September 2004 Note with a principal amount of $1,000 and warrants to purchase shares of our Common Stock (the “2004 Warrants”). We sold an aggregate of $12.5 million of units in this placement, which resulted in proceeds (net of placement agent fees of $700,000 and offering expenses of $32,500) to us of $11,767,500.
The September 2004 Notes paid interest at the annual rate of 6%, were subordinated to senior debt of the Company and matured on September 30, 2007. Quarterly payments of principal and interest due on the September 2004 Notes were made in cash or, at our option, in shares of our Common Stock. When paid in shares of Common Stock, the number of shares issued was determined by dividing the payment due by 95% of the weighted-average volume price for the Common Stock on NASDAQ as reported by Bloomberg for the 20 consecutive trading days preceding the payment date.