Mercury Insurance 2008 Annual Report Download - page 13

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3
Organization
Mercury General, an insurance holding company, is the parent of Mercury Casualty Company, a California automobile
insurer founded in 1961 by George Joseph, the Company’s Chairman of the Board of Directors. Including MCC, Mercury
General has eighteen subsidiaries. The Company’s insurance operations are conducted through the following insurance
subsidiaries:
Insurance Companies
Date Formed or
Acquired
A.M. Best
Ratings Primary States
Mercury Casualty Company ("MCC") January 1961 A+ CA, AZ, FL, NV, NY, VA
Mercury Insurance Company ("MIC") November 1972 A+ CA
California Automobile Insurance Company ("CAIC") June 1975 A+ CA
California General Underwriters Insurance Company ("CGU") April 1985 Non rated CA
Mercury Insurance Company of Illinois ("MIC IL") August 1989 A+ IL
Mercury Insurance Company of Georgia ("MIC GA") March 1989 A+ GA
Mercury Indemnity Company of Georgia ("MID GA") November 1991 A+ GA
Mercury National Insurance Company ("MNIC") December 1991 A+ IL, MA
American Mercury Insurance Company ("AMI") December 1996 A- OK, FL, GA, TX
American Mercury Lloyds Insurance Company ("AML") December 1996 A- TX
Mercury County Mutual Insurance Company ("MCM") September 2000 A- TX
Mercury Insurance Company of Florida ("MIC FL") August 2001 A+ FL, PA
Mercury Indemnity Company of America ("MIDAM") August 2001 A+ NJ
Non-Insurance Companies
Date Formed or
Acquired
Mercury Select Management Company, Inc. ("MSMC") August 1997
American Mercury MGA, Inc. ("AMMGA") August 1997
Concord Insurance Services, Inc. ("Concord") October 1999
Mercury Insurance Services, LLC ("MIS LLC") November 2000
Mercury Group, Inc. ("MGI") July 2001 Inactive insurance agent since 2007
Purpose
AML's attorney-in-fact
General agent
Inactive insurance agent since 2006
Management services to subsidiaries
Mercury General and its subsidiaries are referred to collectively as the “Company” unless the context indicates
otherwise. All of the subsidiaries as a group, excluding MSMC, AMMGA, Concord, MIS LLC and MGI, are referred to as the
“Insurance Companies.” The term “California Companies” refers to MCC, MIC, CAIC and CGU.
On October 10, 2008, MCC entered into a Stock Purchase Agreement (the “Purchase Agreement”) with Aon
Corporation, a Delaware corporation, and Aon Services Group, Inc., a Delaware corporation. Pursuant to the terms of the
Purchase Agreement effective January 1, 2009, MCC acquired all of the membership interest of AIS Management LLC, a
California limited liability company, which is the parent company of Auto Insurance Specialists, LLC (“AIS”) and PoliSeek AIS
Insurance Solutions, Inc.
Production and Servicing of Business
The Company sells its policies through approximately 4,700 independent agents and brokers, of which approximately
1,000 are located in each of California and Florida. The remainder are located in Georgia, Illinois, Texas, Oklahoma, New York,
New Jersey, Virginia, Pennsylvania, Arizona, Nevada and Michigan. Over half of the agents in California have represented the
Company for more than ten years. The agents, most of whom also represent one or more competing insurance companies, are
independent contractors selected and contracted by the Company.
No agent or broker accounted for more than 2% of direct premiums written except for AIS that produced approximately
15%, 14% and 13% during 2008, 2007, and 2006, respectively, of the Company’s direct premiums written.
The Company believes that it compensates its agents and brokers above the industry average. During 2008, total
commissions incurred were approximately 17% of net premiums written.
The Company’s advertising budget is allocated among television, newspaper, internet and direct mailing media to
provide the best coverage available within targeted media markets. While the majority of these advertising costs are borne by the
Company, a portion of these costs are reimbursed by the Company’s independent agents based upon the number of account leads
generated by the advertising. The Company believes that its advertising program is important to create brand awareness and to
remain competitive in the current insurance climate. During 2008, net advertising expenditures were $26 million.