Mercury Insurance 2007 Annual Report Download - page 81

2007 MERCURYNOW 79
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The decrease in the provision for insured events of prior years in 2005 relates largely to a decrease in the estimated inflation rates on earlier
accident years on bodily injury coverage for California automobile insurance. During 2005, the state of Florida was struck by several hurricanes.
The pre-tax loss resulting from these hurricanes was approximately $27 million.
Note 8. Shareholder Dividends and Dividend Restrictions
The following table summarizes shareholder dividends paid in total and per-share:
2007 2006 2005
Total paid $ 113,802,000 $ 104,960,000 $ 93,867,000
Per-share $ 2.08 $ 1.92 $ 1.72
The Insurance Companies are subject to the financial capacity guidelines established by their domiciliary states. The payment of dividends
from statutory unassigned surplus of the Insurance Companies is restricted, subject to certain statutory limitations. For 2008, the direct insurance
subsidiaries of the Company are permitted to pay approximately $246 million in dividends to the Company without the prior approval of the
Department of Insurance (“DOI”) of the states of domicile. The above statutory regulations may have the effect of indirectly limiting the ability
of the Company to pay shareholder dividends. During 2007 and 2006, the Insurance Companies paid dividends to Mercury General Corporation
of $127.0 million and $168.0 million, respectively.
Note 9. Statutory Balances and Accounting Practices
The Insurance Companies prepare their statutory financial statements in accordance with accounting practices prescribed or permitted by the various
state insurance departments. Prescribed statutory accounting practices include primarily those published as statements of Statutory Accounting
Principles by the National Association of Insurance Commissioners (“NAIC”), as well as state laws, regulations, and general administrative rules.
Permitted statutory accounting practices encompass all accounting practices not so prescribed. As of December 31, 2007, there were no material
permitted statutory accounting practices utilized by the Insurance Companies.
The Insurance Companies’ statutory net income, as reported to regulatory authorities, was $237.3 million, $238.1 million and $253.8 million
for 2007, 2006 and 2005, respectively. The statutory policyholders’ surplus of the Insurance Companies, as reported to regulatory authorities was
$1,721.8 million and $1,579.2 million as of December 31, 2007 and 2006, respectively.
Note 10. Commitments and Contingencies
LEASES
The Company is obligated under various noncancellable lease agreements providing for office space and equipment rental that expire at various
dates through the year 2013. For leases that contain predetermined escalations of the minimum rentals, the Company recognizes the related rent
expense on a straight-line basis and records the difference between the recognized rental expense and amounts payable under the leases as deferred
rent in other liabilities. This liability amounted to approximately $1,200,000 and $1,000,000 at December 31, 2007 and 2006, respectively. Total
rent expense under these lease agreements was $9,469,000, $8,292,000 and $7,175,000 for 2007, 2006 and 2005, respectively.
The annual rental commitments, expressed in thousands, are shown as follows:
Yea r Rent Expense
2008 $ 9,889
2009 7,849
2010 6,387
2011 4,534
2012 3,098
Thereafter 1,411