Mercury Insurance 2007 Annual Report Download - page 76

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74 MERCURYNOW 2007
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table illustrates the gross unrealized losses on securities available for sale and the fair value of those securities, aggregated by
investment category as of December 31, 2006. The table also illustrates the length of time that they have been in a continuous unrealized loss
position as of December 31, 2006.
Less than 12 months 12 months or more Total
Unrealized Fair Unrealized Fair Unrealized Fair
Amounts in thousands Losses Value Losses Value Losses Value
U.S. Treasury Securities and
obligations of U.S. government
corporations and agencies $ 127 $ 34,167 $ 1,165 $ 84,517 $ 1,292 $ 118,684
Obligations of states and
political subdivisions 3,140 436,060 3,555 181,190 6,695 617,250
Corporate securities 927 39,263 4,626 61,136 5,553 100,399
Mortgage-backed securities 1,043 83,784 1,823 70,457 2,866 154,241
Redeemable preferred stock 27 2,772 — — 27 2,772
Subtotal, debt securities 5,264 596,046 11,169 397,300 16,433 993,346
Equity securities 5,153 48,653 684 15,323 5,837 63,976
Total temporarily impaired securities $ 10,417 $ 644,699 $ 11,853 $ 412,623 $ 22,270 $ 1,057,322
Unrealized losses that have been in a continuous unrealized loss position over 12 months are mostly accounted for by unrealized losses of
fixed maturity securities, and amounted to 0.3% of the total investment market value at December 31, 2007 compared to 0.3% at December 31,
2006. The increase from December 31, 2006 to December 31, 2007 in the total unrealized losses is predominantly in the obligations of states and
political subdivisions (municipal bond) category and relates primarily to the credit market dislocation experienced during 2007.
At December 31, 2007, bond holdings rated below investment grade were 1.3% of total investments at fair value. The average rating of the
bond portfolio was AA, investment grade. Additionally, the Company owns securities that are credit enhanced by financial guarantors that are
subject to uncertainty related to market perception of the guarantors’ ability to perform. Determining the estimated fair value of municipal bonds
could become more difficult should markets for these securities become illiquid. The amortized cost and estimated fair value of fixed maturities
available for sale at December 31, 2007 by contractual maturity are shown below. Expected maturities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Amounts in thousands Amortized Cost Estimated Fair Value
Fixed maturities available for sale:
Due in one year or less $ 34,688 $ 34,191
Due after one year through five years 197,290 199,567
Due after five years through ten years 637,127 656,959
Due after ten years 1,745,619 1,750,971
Mortgage-backed securities 245,731 246,072
$ 2,860,455 $ 2,887,760