Mercury Insurance 2008 Annual Report Download - page 79

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69
Based upon the Company’s analysis of the securities, which included consideration of the status of debt servicing for
fixed maturities and third party analyst estimates for the equity securities, and the Company’s intent and ability to hold the
securities until they mature or recover their costs, the Company concluded that the gross unrealized losses of $35.8 million at
December 31, 2007 were temporary in nature.
Unrealized losses that had been in a continuous unrealized loss position over 12 months were mostly accounted for by
unrealized losses of fixed maturity securities, and amounted to 0.3% of the total investment market value at December 31, 2007.
Contractual Maturity
At December 31, 2008, bond holdings rated below investment grade or non rated were 3.6% of total investments at fair
value. Additionally, the Company owns securities that are credit enhanced by financial guarantors that are subject to uncertainty
related to market perception of the guarantors’ ability to perform. Determining the estimated fair value of municipal bonds could
become more difficult should markets for these securities become illiquid. The amortized cost and estimated fair value of fixed
maturities at December 31, 2008 by contractual maturity are shown below. Expected maturities will differ from contractual
maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Amortized Cost Estimated Fair Value
Fixed maturities:
Due in one year or less 27,298$ 24,813$
Due after one year through five years 215,855 207,234
Due after five years through ten years 554,761 522,501
Due after ten years 1,714,074 1,524,799
Mortgage-backed securities 216,483 202,326
Total 2,728,471$ 2,481,673$
(Amounts in thousands)
(3) Fixed Assets
A summary of fixed assets follows:
2008 2007
Land 26,768$ 23,353$
Buildings 114,185 94,827
Furniture and equipment 124,531 116,531
Capitalized software 84,021 74,307
Leasehold improvements 5,203 4,468
354,708 313,486
Less accumulated depreciation (162,931) (141,129)
Net fixed assets 191,777$ 172,357$
December 31,
(Amounts in thousands)
Depreciation expense including amortization of leasehold improvements was $27.0 million, $26.3 million, and $24.3
million during 2008, 2007 and 2006, respectively.
(4) Deferred Policy Acquisition Costs
Policy acquisition costs incurred and amortized are as follows:
2008 2007 2006
Balance, beginning of year 209,805$ 209,783$ 197,943$
Costs deferred during the year 615,054 659,692 660,785
Amortization charged to expense (624,854) (659,670) (648,945)
Balance, end of yea
r
200,005$ 209,805$ 209,783$
Year ended December 31,
(Amounts in thousands)