our goal is to maintain our focus on disciplined underwriting and to continue to pursue profitable growth opportunities across market cycles ; however , we continue to be affected by the impacts of the most recent economic recession . the pace of recovery remains persistently slow and , although it appears to us that total employment and payroll have begun to improve , we do not believe the situation will significantly improve in the near-term . 29 the comparative components of net income are set forth in the following table . replace_table_token_18_th ( 1 ) we define net income before impact of the deferred gain as net income less : ( a ) amortization of deferred gain and ( b ) adjustments to lpt agreement ceded reserves . deferred gain reflects the unamortized gain from our lpt agreement . under gaap , this gain is deferred and is being amortized using the recovery method , whereby the amortization is determined by the proportion of actual reinsurance recoveries to total estimated recoveries , and the amortization is reflected in losses and lae . we periodically reevaluate the remaining direct reserves subject to the lpt agreement . our reevaluation results in corresponding adjustments , if needed , to reserves , ceded reserves , reinsurance recoverables and the deferred gain , with the net effect being an increase or decrease , as the case may be , to net income . net income before impact of the deferred gain is not a measurement of financial performance under gaap , but rather reflects the difference in accounting treatment between statutory and gaap , and should not be considered in isolation or as an alternative to net income before income taxes or net income or any other measure of performance derived in accordance with gaap . we present net income before impact of the deferred gain because we believe that it is an important supplemental measure of operating performance to be used by analysts , investors and other interested parties in evaluating us . the lpt agreement was a non-recurring transaction , under which the deferred gain does not result in ongoing cash benefits , and , consequently , we believe this presentation is useful in providing a meaningful understanding of our operating performance . in addition , we believe this non-gaap measure , as we have defined it , is helpful to our management in identifying trends in our performance because the excluded item has limited significance in our current and ongoing operations . in october 2010 , the financial accounting standards board ( fasb ) issued guidance that changes the definition of acquisition costs which may be capitalized beginning in 2012. we currently estimate that our underwriting and other operating expenses will be increased by approximately $ 7 million in 2012 as a result of the adoption of this new accounting guidance . additional information regarding this change is set forth under “ –new accounting standards . ” net premiums earned net premiums earned increased $ 41.6 million for the year ended december 31 , 2011 , compared to the prior year . this increase is primarily due to increasing policy count as we continue to execute our growth strategy . the change in the accrual for final audit premiums increased our net premiums earned by $ 14.9 million in 2011 , compared to 2010. changes in the accrual for final audit premium are driven by various factors , including general economic conditions such as unemployment and payroll trends . the decrease in net premiums earned for the year ended december 31 , 2010 , compared to the same period of 2009 , was due to the impacts of the recession , including high unemployment and fewer hours worked , declines in our policyholders ' payroll , lower net rates , and our application of disciplined pricing objectives and underwriting guidelines in a highly competitive market . 30 the following table shows the percentage change in our in-force premium , policy count , average policy size , and payroll exposure , upon which our premiums are based , and net rate . replace_table_token_19_th ( 1 ) net rate , defined as total premium in-force divided by total insured payroll exposure , is a function of a variety of factors , including rate changes , underwriting risk profiles and pricing , and changes in business mix related to economic and competitive pressures . over one-half of our business is generated in california , where our policy count increased 26.1 % during the year ended december 31 , 2011 . we set our own premium rates in california based upon actuarial analyses of current and anticipated loss trends with a goal of maintaining underwriting profitability . due to increasing loss costs , primarily medical cost inflation , we have increased our filed premium rates by a cumulative 33.3 % since february 1 , 2009. we expect that premiums in 2012 will continue to reflect : overall rate increases ; increasing policy count as we continue to execute our growth strategy ; increasing average policy size ; and lessened competitive pressures . as we have executed our growth strategy , we have increased our network of independent insurance agencies by approximately 43 % in 2011 and continued to deploy technology to make it easier for agents to do business with us . net investment income and realized gains ( losses ) on investments we invest our holding company assets , statutory surplus , and the funds supporting our insurance liabilities , including unearned premiums and unpaid losses and lae . we invest in fixed maturity securities , equity securities , short-term investments , and cash equivalents . net investment income includes interest and dividends earned on our invested assets and amortization of premiums and discounts on our fixed maturity securities , less bank service charges and custodial and portfolio management fees . we have established a high quality/short duration bias in our investment portfolio . story_separator_special_tag policyholder dividends fluctuate from time to time due to changes in premium levels on dividend policies and the eligibility of policyholders to receive dividend payments . interest expense we incur interest expenses on notes payable . we also had an interest rate swap agreement on our credit facility with wells fargo bank , national association ( wells fargo ) , which expired on september 30 , 2010. interest expense was $ 3.6 million , $ 5.7 million , and $ 7.4 million for the years ended december 31 , 2011 , 2010 , and 2009 , respectively . the decrease in interest expense from 2010 to 2011 was primarily due to the expiration of the interest rate swap that was in place in 2010. the decrease in interest expense from 2009 to 2010 was primarily due to a $ 50.0 million reduction in the principal balance on our credit facility with wells fargo in the fourth quarter of 2009 and the expiration of the interest rate swap in the third quarter of 2010. income tax expense income tax expense ( benefit ) was $ ( 2.1 ) million , $ 3.5 million , and $ 9.3 million for the years ended december 31 , 2011 , 2010 , and 2009 , respectively . the effective tax rates for the years ended december 31 , 2011 , 2010 , and 2009 were ( 4.6 ) % , 5.3 % , and 10.1 % , respectively . the decreased tax expense from 2009 through 2011 is primarily due to increases in tax exempt income as a percentage of pre-tax net income , which was 68.2 % , 50.6 % , and 36.8 % for the years ended december 31 , 2011 , 2010 , and 2009 , respectively . the increases in tax exempt income as a percentage of pre-tax net income for the year ended december 31 , 2011 , compared to the same period of 2010 , and for the year ended december 31 , 2010 , compared to the same period of 2009 , were primarily due to decreases in pre-tax income of $ 21.0 million and $ 26.0 million , respectively . 34 story_separator_special_tag including the deferred gain , as of december 31 , 2011 . operating subsidiaries operating cash and cash equivalents and short–term investments . the primary sources of cash for our insurance operating subsidiaries are funds generated from underwriting operations , investment income , and maturities and sales of investments . the primary uses of cash are payments of claims and operating expenses , purchases of investments , and payments of dividends to the parent holding company , which are subject to state insurance laws and regulations . our insurance subsidiaries had total cash and cash equivalents and fixed maturity securities of $ 305.1 million maturing within the next 24 months at december 31 , 2011 . we believe that our subsidiaries ' liquidity needs over the next 24 months will be met with cash from operations , investment income , and maturing investments . we purchase reinsurance to protect us against the costs of severe claims and catastrophic events . on july 1 , 2011 , we entered into a new reinsurance program that is effective through june 30 , 2012. the reinsurance program consists of one treaty covering excess of loss and catastrophic loss events in five layers of coverage . our reinsurance coverage is $ 195.0 million in excess of our $ 5.0 million retention on a per occurrence basis , subject to a $ 2.0 million annual aggregate deductible and certain exclusions . we believe 35 that our reinsurance program meets our needs and that we are sufficiently capitalized . our insurance subsidiaries are required by law to maintain a certain minimum level of surplus on a statutory basis . surplus is calculated by subtracting total liabilities from total admitted assets . the amount of capital in our insurance subsidiaries is maintained relative to standardized capital adequacy measures such as risk-based capital ( rbc ) , as established by the national association of insurance commissioners . the rbc standard was designed to provide a measure by which regulators can assess the adequacy of an insurance company 's capital and surplus relative to its operations . an insurance company must maintain capital and surplus of at least 200 % of rbc . each of our insurance subsidiaries had total adjusted capital in excess of the minimum rbc requirements that correspond to any level of regulatory action at december 31 , 2011 . various state regulations require us to keep securities or letters of credit on deposit with the states in which we do business . securities having a fair market value of $ 522.6 million and $ 558.6 million were on deposit at december 31 , 2011 and 2010 , respectively . these laws and regulations govern both the amount and type of fixed maturity security that is eligible for deposit . additionally , certain reinsurance contracts require us to hold funds in trust for the benefit of the ceding reinsurer to secure the outstanding liabilities we assumed . the fair value of securities held in trust for reinsurance was $ 40.3 million and $ 52.9 million at december 31 , 2011 and 2010 , respectively . cash flows we monitor cash flows at both the consolidated and subsidiary levels . we use trend and variance analyses to project future cash needs , making adjustments to our forecasts as appropriate . the table below shows our net cash flows . replace_table_token_22_th operating activities . major components of net cash provided by operating activities in 2011 included : net premiums received of $ 358.4 million ; investment income received of $ 90.8 million ; and amounts recovered from reinsurers of $ 46.1 million . these were partially offset by : claims payments of $ 316.4 million ; underwriting and other operating expenses paid of $ 86.1 million ; commissions paid of $ 36.3

liquidity and capital resources parent company operating cash and cash equivalents and short-term investments . we are a holding company and our ability to fund our operations is contingent upon our insurance subsidiaries and their ability to pay dividends up to the holding company . payment of dividends by our insurance subsidiaries is restricted by state insurance laws , including laws establishing minimum solvency and liquidity thresholds . we require cash to pay stockholder dividends , repurchase common stock , make interest and principal payments on our outstanding debt obligations , fund our operating expenses , and support our growth strategy . during 2011 , eicn and epic paid dividends of $ 51.9 million and $ 15.5 million , respectively , to employers group , inc. ( egi ) , their immediate holding company , which were subsequently paid from egi to ehi . based on reported capital , surplus , and dividends paid within the last 12 months , the maximum dividends that may be paid by eicn and epic in 2012 without prior approval by the respective state insurance regulator are $ 26.3 million and $ 13.6 million , respectively . as of december 31 , 2011 , the holding company had $ 188.4 million of cash and cash equivalents and fixed maturity securities maturing within the next 24 months . ten million dollars of our line of credit is payable on each of december 31 , 2012 and december 31 , 2013. we believe that the liquidity needs of the holding company over the next 24 months will be met with cash , maturing investments , and dividends from our insurance subsidiaries . share repurchases .


 Write a concise suspicious activity report of the following text delimited by triple backquotes. Return your response as a formal report which covers the key points highlighting the location,dates,entity names and account holder information in chronological order of the text.
     ```liquidity and capital resources parent company operating cash and cash equivalents and short-term investments . we are a holding company and our ability to fund our operations is contingent upon our insurance subsidiaries and their ability to pay dividends up to the holding company . payment of dividends by our insurance subsidiaries is restricted by state insurance laws , including laws establishing minimum solvency and liquidity thresholds . we require cash to pay stockholder dividends , repurchase common stock , make interest and principal payments on our outstanding debt obligations , fund our operating expenses , and support our growth strategy . during 2011 , eicn and epic paid dividends of $ 51.9 million and $ 15.5 million , respectively , to employers group , inc. ( egi ) , their immediate holding company , which were subsequently paid from egi to ehi . based on reported capital , surplus , and dividends paid within the last 12 months , the maximum dividends that may be paid by eicn and epic in 2012 without prior approval by the respective state insurance regulator are $ 26.3 million and $ 13.6 million , respectively . as of december 31 , 2011 , the holding company had $ 188.4 million of cash and cash equivalents and fixed maturity securities maturing within the next 24 months . ten million dollars of our line of credit is payable on each of december 31 , 2012 and december 31 , 2013. we believe that the liquidity needs of the holding company over the next 24 months will be met with cash , maturing investments , and dividends from our insurance subsidiaries . share repurchases .
```    
 Suspicious Activity Report : our goal is to maintain our focus on disciplined underwriting and to continue to pursue profitable growth opportunities across market cycles ; however , we continue to be affected by the impacts of the most recent economic recession . the pace of recovery remains persistently slow and , although it appears to us that total employment and payroll have begun to improve , we do not believe the situation will significantly improve in the near-term . 29 the comparative components of net income are set forth in the following table . replace_table_token_18_th ( 1 ) we define net income before impact of the deferred gain as net income less : ( a ) amortization of deferred gain and ( b ) adjustments to lpt agreement ceded reserves . deferred gain reflects the unamortized gain from our lpt agreement . under gaap , this gain is deferred and is being amortized using the recovery method , whereby the amortization is determined by the proportion of actual reinsurance recoveries to total estimated recoveries , and the amortization is reflected in losses and lae . we periodically reevaluate the remaining direct reserves subject to the lpt agreement . our reevaluation results in corresponding adjustments , if needed , to reserves , ceded reserves , reinsurance recoverables and the deferred gain , with the net effect being an increase or decrease , as the case may be , to net income . net income before impact of the deferred gain is not a measurement of financial performance under gaap , but rather reflects the difference in accounting treatment between statutory and gaap , and should not be considered in isolation or as an alternative to net income before income taxes or net income or any other measure of performance derived in accordance with gaap . we present net income before impact of the deferred gain because we believe that it is an important supplemental measure of operating performance to be used by analysts , investors and other interested parties in evaluating us . the lpt agreement was a non-recurring transaction , under which the deferred gain does not result in ongoing cash benefits , and , consequently , we believe this presentation is useful in providing a meaningful understanding of our operating performance . in addition , we believe this non-gaap measure , as we have defined it , is helpful to our management in identifying trends in our performance because the excluded item has limited significance in our current and ongoing operations . in october 2010 , the financial accounting standards board ( fasb ) issued guidance that changes the definition of acquisition costs which may be capitalized beginning in 2012. we currently estimate that our underwriting and other operating expenses will be increased by approximately $ 7 million in 2012 as a result of the adoption of this new accounting guidance . additional information regarding this change is set forth under “ –new accounting standards . ” net premiums earned net premiums earned increased $ 41.6 million for the year ended december 31 , 2011 , compared to the prior year . this increase is primarily due to increasing policy count as we continue to execute our growth strategy . the change in the accrual for final audit premiums increased our net premiums earned by $ 14.9 million in 2011 , compared to 2010. changes in the accrual for final audit premium are driven by various factors , including general economic conditions such as unemployment and payroll trends . the decrease in net premiums earned for the year ended december 31 , 2010 , compared to the same period of 2009 , was due to the impacts of the recession , including high unemployment and fewer hours worked , declines in our policyholders ' payroll , lower net rates , and our application of disciplined pricing objectives and underwriting guidelines in a highly competitive market . 30 the following table shows the percentage change in our in-force premium , policy count , average policy size , and payroll exposure , upon which our premiums are based , and net rate . replace_table_token_19_th ( 1 ) net rate , defined as total premium in-force divided by total insured payroll exposure , is a function of a variety of factors , including rate changes , underwriting risk profiles and pricing , and changes in business mix related to economic and competitive pressures . over one-half of our business is generated in california , where our policy count increased 26.1 % during the year ended december 31 , 2011 . we set our own premium rates in california based upon actuarial analyses of current and anticipated loss trends with a goal of maintaining underwriting profitability . due to increasing loss costs , primarily medical cost inflation , we have increased our filed premium rates by a cumulative 33.3 % since february 1 , 2009. we expect that premiums in 2012 will continue to reflect : overall rate increases ; increasing policy count as we continue to execute our growth strategy ; increasing average policy size ; and lessened competitive pressures . as we have executed our growth strategy , we have increased our network of independent insurance agencies by approximately 43 % in 2011 and continued to deploy technology to make it easier for agents to do business with us . net investment income and realized gains ( losses ) on investments we invest our holding company assets , statutory surplus , and the funds supporting our insurance liabilities , including unearned premiums and unpaid losses and lae . we invest in fixed maturity securities , equity securities , short-term investments , and cash equivalents . net investment income includes interest and dividends earned on our invested assets and amortization of premiums and discounts on our fixed maturity securities , less bank service charges and custodial and portfolio management fees . we have established a high quality/short duration bias in our investment portfolio . story_separator_special_tag policyholder dividends fluctuate from time to time due to changes in premium levels on dividend policies and the eligibility of policyholders to receive dividend payments . interest expense we incur interest expenses on notes payable . we also had an interest rate swap agreement on our credit facility with wells fargo bank , national association ( wells fargo ) , which expired on september 30 , 2010. interest expense was $ 3.6 million , $ 5.7 million , and $ 7.4 million for the years ended december 31 , 2011 , 2010 , and 2009 , respectively . the decrease in interest expense from 2010 to 2011 was primarily due to the expiration of the interest rate swap that was in place in 2010. the decrease in interest expense from 2009 to 2010 was primarily due to a $ 50.0 million reduction in the principal balance on our credit facility with wells fargo in the fourth quarter of 2009 and the expiration of the interest rate swap in the third quarter of 2010. income tax expense income tax expense ( benefit ) was $ ( 2.1 ) million , $ 3.5 million , and $ 9.3 million for the years ended december 31 , 2011 , 2010 , and 2009 , respectively . the effective tax rates for the years ended december 31 , 2011 , 2010 , and 2009 were ( 4.6 ) % , 5.3 % , and 10.1 % , respectively . the decreased tax expense from 2009 through 2011 is primarily due to increases in tax exempt income as a percentage of pre-tax net income , which was 68.2 % , 50.6 % , and 36.8 % for the years ended december 31 , 2011 , 2010 , and 2009 , respectively . the increases in tax exempt income as a percentage of pre-tax net income for the year ended december 31 , 2011 , compared to the same period of 2010 , and for the year ended december 31 , 2010 , compared to the same period of 2009 , were primarily due to decreases in pre-tax income of $ 21.0 million and $ 26.0 million , respectively . 34 story_separator_special_tag including the deferred gain , as of december 31 , 2011 . operating subsidiaries operating cash and cash equivalents and short–term investments . the primary sources of cash for our insurance operating subsidiaries are funds generated from underwriting operations , investment income , and maturities and sales of investments . the primary uses of cash are payments of claims and operating expenses , purchases of investments , and payments of dividends to the parent holding company , which are subject to state insurance laws and regulations . our insurance subsidiaries had total cash and cash equivalents and fixed maturity securities of $ 305.1 million maturing within the next 24 months at december 31 , 2011 . we believe that our subsidiaries ' liquidity needs over the next 24 months will be met with cash from operations , investment income , and maturing investments . we purchase reinsurance to protect us against the costs of severe claims and catastrophic events . on july 1 , 2011 , we entered into a new reinsurance program that is effective through june 30 , 2012. the reinsurance program consists of one treaty covering excess of loss and catastrophic loss events in five layers of coverage . our reinsurance coverage is $ 195.0 million in excess of our $ 5.0 million retention on a per occurrence basis , subject to a $ 2.0 million annual aggregate deductible and certain exclusions . we believe 35 that our reinsurance program meets our needs and that we are sufficiently capitalized . our insurance subsidiaries are required by law to maintain a certain minimum level of surplus on a statutory basis . surplus is calculated by subtracting total liabilities from total admitted assets . the amount of capital in our insurance subsidiaries is maintained relative to standardized capital adequacy measures such as risk-based capital ( rbc ) , as established by the national association of insurance commissioners . the rbc standard was designed to provide a measure by which regulators can assess the adequacy of an insurance company 's capital and surplus relative to its operations . an insurance company must maintain capital and surplus of at least 200 % of rbc . each of our insurance subsidiaries had total adjusted capital in excess of the minimum rbc requirements that correspond to any level of regulatory action at december 31 , 2011 . various state regulations require us to keep securities or letters of credit on deposit with the states in which we do business . securities having a fair market value of $ 522.6 million and $ 558.6 million were on deposit at december 31 , 2011 and 2010 , respectively . these laws and regulations govern both the amount and type of fixed maturity security that is eligible for deposit . additionally , certain reinsurance contracts require us to hold funds in trust for the benefit of the ceding reinsurer to secure the outstanding liabilities we assumed . the fair value of securities held in trust for reinsurance was $ 40.3 million and $ 52.9 million at december 31 , 2011 and 2010 , respectively . cash flows we monitor cash flows at both the consolidated and subsidiary levels . we use trend and variance analyses to project future cash needs , making adjustments to our forecasts as appropriate . the table below shows our net cash flows . replace_table_token_22_th operating activities . major components of net cash provided by operating activities in 2011 included : net premiums received of $ 358.4 million ; investment income received of $ 90.8 million ; and amounts recovered from reinsurers of $ 46.1 million . these were partially offset by : claims payments of $ 316.4 million ; underwriting and other operating expenses paid of $ 86.1 million ; commissions paid of $ 36.3

