We currently lease approximately 15,000 square feet of office space at 360 Central Avenue, Suite 900, St. Petersburg, Florida 33701. We initially made rent payments of $21.50 per square foot, and that amount increases each year through the final year, in which we will pay rent of $26.16 per square foot, plus our percentage of increase in the common area maintenance charge. This lease expires in July 2014 with two five-year renewal options. We consider our current office facility suitable for our business as it is presently conducted. We do not own any real estate or other physical properties. Our facility is in good condition.
The table below displays the average rate increases we have implemented during the years ended December 31, 2011, 2010 and 2009. Applying a rate increase to all policies that were in force on the date the increase became effective takes up to one
The loss-development-based models are easy to use and comparable to industry benchmarks, but potential volatility in the calculated factors, as well as an element of subjectivity in the selected factors, slightly weakens the effectiveness of the method. The volatility arises from a number of factors such as inflation, changes in reserving practices, changes in underwriting criteria and geographic concentration.
Reliance and Selection of Methods. The various models we use have strengths and weaknesses that depend upon the circumstances of the segment and the age of the claims experience we analyze. The nature of our book of business allows us to place substantial, but not exclusive, reliance on the loss-development-based models. Ultimately, this means the main assumptions of the loss-development-based models, the selected loss development factors, represent the most critical aspect of our loss reserving process. We use the same set of loss development factors in the models during our loss reserving process that we also use to calculate the premium necessary to pay expected ultimate losses.
Our average in-force premium per policy increased from $1,663 for 2009, to $1,878 for 2010. The implementation of the rate increases in late 2009 and in early 2010 contributed to the per policy increase of $215, or 12.9%. See the PRICING section in Item 1 of this Form 10-K for a more detailed discussion of the rate increases that we implemented. The rate increases did not have a significant effect on our policy retention rate.
During the year ended December 31, 2011, our operations generated cash of $38,649, compared to using $7,943 during the same period in 2010. The increase in cash generated by our operating activities resulted primarily because:
The carrying amounts for the following financial instrument categories approximate their fair values at December 31, 2011 and 2010 because of their short-term nature: cash and cash equivalents, accrued investment income, premiums receivable, reinsurance recoverable, reinsurance payable, and accounts payable and accrued expenses. The carrying amounts of notes receivable and notes payable also approximate their fair values as the interest rate on the note payable is variable and the note receivable, which we recorded at fair value using a discounted cash flow methodology, is due in less than three years.
We record any income tax penalties and income-tax-related interest as income tax expense in the period incurred. We did not incur any material tax penalties or income-tax-related interest during the years ended December 31, 2011, 2010 or 2009.
The CD we deposited with the Florida insurance regulatory authority is a twelve-month, automatically renewing CD. The par value of the securities we deposited with the South Carolina and Massachusetts insurance regulatory authorities are $1,000 and $100, respectively.
During the years ended December 31, 2011, 2010 and 2009, we recorded other-than-temporary impairment charges of $31, $97, and $1,878, respectively. We have never recorded an OTTI charge on our debt-security investments.
At December 31, 2010 and 2009, we had 7,077,375 warrants outstanding; each warrant could have been exercised for one share of common stock. On October 4, 2011, the warrants expired. For the years ended December 31, 2010 and 2009, the warrants were anti-dilutive.
At December 31, 2009, we had 350,000 unit purchase options outstanding; each unit consisted of a share of common stock and a warrant to purchase a share of common stock. On October 4, 2010, the unit purchase options expired. For the year ended December 31, 2009, the units were anti-dilutive.
Our catastrophe reinsurance agreements provide us coverage against severe weather events. We entered into excess-of-loss agreements with several private reinsurers and with the Florida Hurricane Catastrophe Fund. The private agreements provide coverage against severe weather events such as hurricanes, tropical storms and tornadoes. The agreement with the FHCF only provides coverage against storms that the National Hurricane Center designates as a hurricane at landfall.
We agreed to certain covenants, the violation of which could cause an event of default. Among others, these covenants include: 1) maintaining statutory surplus greater than or equal to $50,000 less repayments of principal on the note, catastrophic losses paid since the note incepted and any deferred acquisition costs related to Florida policies, calculated at December 31, 2011 as $41,966, 2) refraining from the payment of dividends when principal and/or interest payments related to the note are past due, and 3) maintaining a minimum writing ratio. The note permits us to meet either of the following ratios:
On August 13, 2009, our Board declared a $0.05 per share dividend. We paid the $529 dividend on September 15, 2009 to shareholders of record on August 31, 2009.