Mercury Insurance 2008 Annual Report Download - page 73

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63
In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS
No. 162”). SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles to be used
in the preparation of financial statements of nongovernmental entities that are presented in conformity with GAAP (“GAAP
hierarchy”). The current GAAP hierarchy, as set forth in the American Institute of Certified Public Accountants Statement on
Auditing Standards No. 69, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles,” has
been criticized because (1) it is directed to the auditor rather than the entity, (2) it is complex, and (3) it ranks FASB Statements of
Financial Accounting Concepts, which are subject to the same level of due process as FASB Statements of Financial Accounting
Standards, below industry practices that are widely recognized as generally accepted but that are not subject to due process. SFAS
No. 162 became effective in 2008 and did not have a material impact on the Company’ s consolidated financial statements.
In April 2008, the FASB issued FASB Staff Position FAS 142-3, “Determination of the Useful Life of Intangible Assets”
(“FSP FAS 142-3”). FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension
assumptions used to determine the useful life of a recognized intangible asset under SFAS No.142, “Goodwill and Other
Intangible Assets.” FSP FAS 142-3 is effective for fiscal years beginning after December 15, 2008. The Company adopted FSP
FAS 142-3 on January 1, 2009. The adoption of FSP FAS 142-3 did not have a material impact on the Company’ s consolidated
financial statements.
Reclassifications
Certain reclassifications have been made to the prior year balances to conform to the current year presentation.
(2) Investments and Investment Income
Investment Income
A summary of net investment income is shown in the following table:
2008 2007 2006
Interest and dividends on fixed maturities 138,287$ 141,021$ 130,339$
Dividends on equity securities 9,431 9,476 8,152
Interest on short-term investments 5,582 13,452 15,557
Total investment income 153,300 163,949 154,048
Investment expense 2,020 5,038 2,949
Net investment income 151,280$ 158,911$ 151,099$
Year ended December 31,
(Amounts in thousands)
Realized Investment Gains and Losses
Effective January 1, 2008, the losses due to changes in fair value for items measured at fair value pursuant to the
Company’ s election of the fair value option are included in net realized investment gains and losses in the Company’ s
consolidated statements of operations.
The following table presents losses due to changes in fair value for items measured at fair value pursuant to election of
the fair value option under SFAS No. 159:
Year ended December 31,
2008
(Amounts in thousands)
Fixed maturity securities (274,103)$
Equity securities (251,644)
Short-term investments 3
Total (525,744)$