Depreciation and amortization expense for the year ended December 31, 2012 increased $0.9 million or 27.8% to $3.9 million from $3.1 million for the year ended December 31, 2011, with the increase attributable to higher levels of depreciable and amortizable assets in service during 2012 compared to 2011.
Net revenues for the three months ended March 31, 2011 increased $4.3 million, or 43.1%, to $14.2 million from 9.9 million for the three months ended March 31, 2010. The 2011 results include a full quarter of revenues from the acquisitions of Auto Knight, Continental Car Club and United Motor Club, which added $2.2 million of revenue. Ceding commission revenue increased by $1.5 million due to favorable underwriting results and a realized gain on the sale of assets contributed $0.1 million.
At our election, borrowings under the Revolving Facility will bear interest either at the base rate plus an applicable interest margin or the adjusted LIBO rate plus an applicable interest margin; provided, however, that all swingline loans will be base rate loans. The base rate is a fluctuating interest rate equal to the highest of: (i) Wells Fargo's publicly announced prime lending rate; (ii) the federal funds rate plus 0.50%; and (iii) the adjusted LIBO rate, determined on a daily basis for an interest period of one month, plus 1.0%. The adjusted LIBO rate is the rate per annum obtained by dividing (i) the London interbank offered rate ("LIBOR") for such interest period by (ii) a percentage equal to 1.00 minus the Eurodollar Reserve Percentage (as defined in the Credit Agreement). The interest margin over the adjusted LIBO rate, initially set at 2.75%, may increase (to a maximum amount of 3.0%) or decrease (to a minimum amount of 2.0%) based on changes in our leverage ratio. The interest margin over the base rate, initially set at 1.75%, may increase (to a maximum amount of 2.0%) or decrease (to a minimum amount of 1.0%) based on changes in our leverage ratio.
Net cash provided by financing activities was $30.1 million for the year ended December 31, 2010 and primarily reflected proceeds of our IPO totaling $43.6 million less IPO related costs of $3.3 million and borrowings under our lines of credit of $25.2 million, partially offset by the redemption of $20.0 million in subordinated debentures and payment of the liquidation preference of $14.1 million paid to Class A stockholders.
We are obligated to evaluate any such funding request received from the PC Board in good faith to determine whether in our reasonable business judgment the requested capital should be contributed. Fortegra is not required to honor the funding request from the PC Board if we in good faith deem the request to be imprudent or unjustified.
Credit disability unpaid claims reserves also include continuing claim reserves for open disability claims. For all other product lines, unpaid claims reserves are bulk reserves and are entirely IBNR. The Company uses a number of algorithms in establishing its unpaid claims reserves. These algorithms are used to calculate unpaid claims as a function of paid losses, earned premium, target loss ratios, in-force amounts, unearned premium reserves, industry recognized morbidity tables or a combination of these factors.
The unpaid claims reserves do not represent an exact calculation of exposure, but instead represent the Company's best estimates, generally involving actuarial projections at a given time. The process used in determining the unpaid claims reserves cannot be exact since actual claim costs are dependent upon a number of complex factors such as changes in doctrines of legal liabilities and damage awards. These factors are not directly quantifiable, particularly on a prospective basis. The Company periodically reviews and updates its methods of making such unpaid claims reserve estimates and establishing the related liabilities based on our actual experience. The Company has not made any changes to its methodologies for determining unpaid claims reserves in the periods presented.
The Company defers certain costs of acquiring new business and retaining existing business in accordance with the guidance in ASU 2010-26. These costs are limited to direct costs that resulted from successful contract transactions and would not have been incurred by the Company's insurance entities had the transactions not occurred. These capitalized costs are amortized as the related premium is earned. The following table shows the amortization of deferred acquisition costs for the Company's insurance subsidiaries:
For the nine months ended September 30, 2012, this immaterial correction reduced retained earnings by $0.2 million. The effects of these restatements to the first three quarters of 2012 are included in the Consolidated Statement of Income, Consolidated Balance Sheet, and Consolidated Statement of Cash Flows as of and for the year ended December 31, 2012.
As a result, in this Form 10-K, the Consolidated Balance Sheet data as of December 31, 2011 has been revised to reflect the correction of the error associated with the Auto Knight acquisition, as previously disclosed in the Form 10-Q for the period ended September 30, 2012. This correction, included in final purchase accounting amounts disclosed in Note "Business Combinations" increased goodwill by $0.6 million and increased deferred income tax liabilities by $0.6 million. See the Note, "Goodwill" for more information on this correction. The effect of this correction had no impact on net income, basic or diluted earnings per share amounts, or stockholders' equity.
(1) - Includes the business acquisition valuation measurement period adjustments presented in the Notes, "Business Combinations," "Goodwill," and "Other Intangible Assets."
The finite-lived and indefinite-lived other intangible assets acquired in 2012 relate to the acquisition of ProtectCELL and 4Warranty and for the purchase of a book of business. In 2012, the Company determined the final valuations for the 2011 acquisitions of eReinsure and PBG and made retrospective adjustments to other intangible assets. The following table includes the retrospective adjustments made to the balance of other intangible assets at December 31, 2011 to reflect the effect of these measurement period adjustments made in accordance with the accounting requirements under ASC 805 and the current period activity.
The Company, at its option, may prepay any borrowing, in whole or in part, at any time and from time to time without premium or penalty. However, after the end of our fiscal year (commencing with the fiscal year ending December 31, 2015), the Company is required to make mandatory principal prepayments of loans under the Facilities in an amount determined under the Credit Agreement based upon a percentage of the Company's Excess Cash Flow (as defined in the Credit Agreement) minus certain off set amounts relating to permitted acquisitions.
The Credit Agreement also contains the financial covenants which the Company must maintain. See the section below, "Financial Covenants" for a presentation of the Company's more significant covenants associated with the Credit Agreement.
RBC Ratio - the ratio (expressed as a percentage) of NAIC RBC (as defined in the NAIC standards) for any Regulated Insurance Company on an individual basis, calculated at the end of any Fiscal Year, to the "authorized control level" (as defined in the NAIC standards).
The following table shows the shares repurchased during the following periods:
Adjustments in the 2010 periods to service and administrative fees, member benefit claims, and commissions represent the effects of restatements for the errors in Motor Clubs revenue presentation, as discussed in Note "Restatement".