Mercury Insurance 2009 Annual Report Download - page 46

Risks Related to the Company’s Stock
The Company is controlled by small number of shareholders who will be able to exert significant
influence over matters requiring shareholder approval, including change of control transactions.
George Joseph and Gloria Joseph collectively own more than 50% of the Company’s common stock.
Accordingly, George Joseph and Gloria Joseph have the ability to exert significant influence on the actions the
Company may take in the future, including change of control transactions. This concentration of ownership may
conflict with the interests of the Company’s other shareholders and the holders of its debt securities.
Future sales of common stock may affect the market price of the Company’s common stock and the
future exercise of options and warrants will result in dilution to the Company’s shareholders.
The Company may raise capital in the future through the issuance and sale of shares of its common stock.
The Company cannot predict what effect, if any, such future sales will have on the market price of its common
stock. Sales of substantial amounts of its common stock in the public market could adversely affect the market
price of the Company’s outstanding common stock, and may make it more difficult for shareholders to sell
common stock at a time and price that the shareholder deems appropriate. In addition, the Company has issued
options to purchase shares of its common stock. In the event that any options to purchase common stock are
exercised, shareholders will suffer dilution in their investment.
Applicable insurance laws may make it difficult to effect a change of control of the Company or the sale
of any of its insurance subsidiaries.
Before a person can acquire control of a U.S. insurance company or any holding company of a U.S.
insurance company, prior written approval must be obtained from the DOI of the state where the insurer is
domiciled. Prior to granting approval of an application to acquire control of the insurer or holding company, the
state DOI will consider a number of factors relating to the acquirer and the transaction. These laws and
regulations may discourage potential acquisition proposals and may delay, deter or prevent a change of control of
the Company or the sale by the Company of any of its insurance subsidiaries, including transactions that some or
all of the Company’s shareholders might consider to be desirable.
Although the Company has consistently paid cash dividends in the past, it may not be able to pay cash
dividends in the future.
The Company has paid cash dividends on a consistent basis since the public offering of its common stock in
November 1985. However, future cash dividends will depend upon a variety of factors, including the Company’s
profitability, financial condition, capital needs, future prospects and other factors deemed relevant by the Board
of Directors. The Company’s ability to pay dividends may also be limited by the ability of the Insurance
Companies to make distributions to the Company, which may be restricted by financial, regulatory or
tax constraints, and by the terms of the Company’s debt instruments. In addition, there can be no assurance that
the Company will continue to pay dividends even if the necessary financial and regulatory conditions are met and
if sufficient cash is available for distribution.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
The Company owns the following buildings which are mostly occupied by the Company’s employees. The
space not occupied by the Company is leased to independent third party tenants. In addition, the Company owns
a 4.2 acre parcel of land in Brea, California for future expansion. The Company leases all of its other office
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