Mercury Insurance 2009 Annual Report Download - page 67

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The following table shows estimated fair value of fixed maturity securities at December 31, 2009 by
contractual maturity in the next five years.
Fixed Maturities
(Amounts in thousands)
Due in one year or less ............................................. $ 21,692
Due after one year through two years .................................. 29,270
Due after two years through three years ................................ 42,266
Due after three years through four years ............................... 109,949
Due after four years through five years ................................ 137,767
$340,944
In addition, see “D. Debt” for cash flow related to the $120 million credit facility for the AIS acquisition.
C. Invested Assets
Portfolio Composition
An important component of the Company’s financial results is the return on its investment portfolio. The
Company’s investment strategy emphasizes safety of principal and consistent income generation, within a total
return framework. The investment strategy has historically focused on maximizing after-tax yield with a primary
emphasis on maintaining a well diversified, investment grade, fixed income portfolio to support the underlying
liabilities and achieve return on capital and profitable growth. The Company believes that investment yield is
maximized by selecting assets that perform favorably on a long-term basis and by disposing of certain assets to
enhance after-tax yield and minimize the potential effect of downgrades and defaults. The Company continues to
believe that this strategy maintains the optimal investment performance necessary to sustain investment income
over time. The Company’s portfolio management approach utilizes a recognized market risk and consistent asset
allocation strategy as the primary basis for the allocation of interest sensitive, liquid and credit assets as well as
for determining overall below investment grade exposure and diversification requirements. Within the ranges set
by the asset allocation strategy, tactical investment decisions are made in consideration of prevailing market
conditions.
The following table sets forth the composition of the total investment portfolio of the Company at
December 31, 2009:
Cost(1) Fair Value
(Amounts in thousands)
Fixed maturity securities:
U.S. government bonds and agencies ................................... $ 9,857 $ 9,980
States, municipalities and political subdivisions ........................... 2,419,859 2,441,066
Mortgage-backed securities .......................................... 107,127 114,408
Corporate securities ................................................. 92,398 91,634
Collateralized debt obligations ........................................ 43,838 47,473
2,673,079 2,704,561
Equity securities:
Common stock:
Public utilities ................................................. 23,454 28,780
Banks, trusts and insurance companies .............................. 14,096 13,291
Industrial and other ............................................. 256,652 230,406
Non-redeemable preferred stock ....................................... 14,739 13,654
308,941 286,131
Short-term investments .................................................. 156,126 156,165
Total investments .............................................. $3,138,146 $3,146,857
(1) Fixed maturities and short-term bonds at amortized cost; and equities and other short-term investments at cost.
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