Intangible assets with definite lives consist of agency relationships acquired through various business combinations or asset acquisitions. Significant declines in 2011 in premiums written in the markets corresponding to the recorded agency relationship compared with prior periods and forecast, as well as customer attrition rates indicated that the carrying amounts of definite-lived intangible assets were not recoverable, resulting in a non-cash impairment charge of $1.7 million in 2011.
Depreciation and Amortization. Depreciation and amortization expenses for 2012 increased $0.4 million, or 4.0%, compared with 2011. Depreciation and amortization expenses for 2011 were comparable to 2010.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Affirmative Insurance Holdings, Inc. and subsidiaries as of December 31, 2012 and 2011, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2012, in conformity with U.S. generally accepted accounting principles.
Affirmative Insurance Holdings, Inc. (the Company), formerly known as Instant Insurance Holdings, Inc., was incorporated in Delaware in June 1998. The Company is a distributor and producer of non-standard personal automobile insurance policies and related products and services for individual consumers in targeted geographic areas. The Company currently offers insurance directly to individual consumers through retail stores in 9 states (Louisiana, Texas, Illinois, Alabama, Missouri, Indiana, South Carolina, Kansas and Wisconsin) as well as through 5,400 independent agents or brokers in 8 states (Louisiana, Texas, Illinois, Alabama, California, Missouri, Indiana and South Carolina).
Fiduciary and Restricted Cash • Fiduciary and restricted cash consists of non-operating FDIC-insured certificates of deposit required by state regulations and/or under various agreements with third parties.
The Company’s available-for-sale investment securities are carried at fair value with unrealized gains and losses reported in accumulated other comprehensive income (loss), a separate component of stockholders’ equity
The amortized cost, gross unrealized gains (losses), and estimated fair value of the Company’s available-for-sale securities at December 31, 2012 and 2011, were as follows (in thousands):
Management believes the decrease in the 2012 accident year resulted from the confluence of a number of initiatives. During 2012, we realized the full benefit of our new multi-variate pricing model in our four largest states, implemented pricing and underwriting changes and our continuing improvements in our claims process. Management believes the combination of these improvements has allowed us to start growing in the fourth quarter while keeping our losses at levels lower than 2011.
The following table summarizes the Company’s minimum future IT outsourcing and operating lease commitments at December 31, 2012 (in thousands):
Stock options outstanding and exercisable at December 31, 2012 were as follows (shares in thousands):
Restricted Stock Awards • A summary of activity for the Company’s restricted stock grants for each of the years ended December 31 was as follows (shares in thousands):
The amount of statutory capital and surplus necessary for AIC to satisfy regulatory requirements as of December 31, 2012 was $42.8 million. The statutory capital and surplus of each of the Company’s insurance subsidiaries exceeded the highest level of minimum regulatory required capital as of December 31, 2012, 2011 and 2010.