CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31 (in thousands) 2001 2000 1999 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 360,419 $ 248,938 $ 148,138  Adjustments to reconcile net income to net cash provided by operating activities: Net gains (1,047) (4,179) (1,568) Equity in net income of affiliates (41,309) — — Proceeds from sales of trading securities 14,204 — — Purchase of trading securities (24,978) — — Increase (decrease) in unearned premiums 65,685 22,316 (20,613) Net increase in deferred policy acquisition costs (24,336) (8,369) (12,697) Increase in reserve for losses 90,980 54,437 90,459  Increase in deferred federal income taxes 140,804 62,942 57,849 Increase in provisional losses recoverable (3,276) (3,675) (7,347) Depreciation and other amortization, net 2,486 3,158 2,289  Net change in prepaid federal income taxes, other assets, accounts payable and accrued expenses (98,483) (95,591) 5,163 Net cash provided by operating activities 481,149 279,977 261,673  CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sales of fixed maturity investments available for sale 1,039,762 552,439 131,170  Proceeds from sales of fixed maturity investments held to maturity — 1,922 10  Proceeds from sales of equity securities available for sale 8,425 18,988 3,076  Proceeds from redemptions of fixed maturity investments available for sale 111,674 16,467 24,769  Proceeds from redemptions of fixed maturity investments held to maturity 21,509 2,897 19,981  Purchases of fixed maturity investments available for sale (1,595,179) (813,627) (380,683) Purchases of equity securities available for sale (66,098) (29,713) (25,595) Purchases of short-term investments, net (28,101) (38,859) (32,560) Purchases of property and equipment, net (8,538) (9,419) (12,509) Acquisitions, net of cash acquired 6,788 — — Investment in affiliates (15,020) — — Distributions from affiliates 12,761 — — Other (1,084) (952) (1,468) Net cash used in investing activities (513,101) (299,857) (273,809) CASH FLOWS FROM FINANCING ACTIVITIES: Dividends paid (10,052) (7,791) (6,860) Proceeds from issuance of common stock under incentive plans 39,687 24,747 17,126  Purchase of treasury stock (5,715) (2,159) — Repayment of short-term debt (173,724) — — Issuance of long-term debt 246,885 — — Acquisition costs (7,394) — — Net cash provided by financing activities 89,687 14,797 10,266  Increase (decrease) in cash 57,735 (5,083) (1,870) Cash, beginning of year 2,424 7,507 9,377  Cash, end of year $ 60,159 $ 2,424 $ 7,507  SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Income taxes paid $ 98,960 $ 74,768 $ 61,450  Interest paid $ 19,099 $ 817 $ 181  >19 See notes to consolidated financial statements.