Mercury Insurance 2010 Annual Report Download - page 57

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Investments
The following table presents the investment results of the Company:
2010 2009
(Amounts in thousands)
Average invested assets at cost (1) .......................................... $3,121,366 $3,196,944
Net investment income:
Before income taxes ................................................ $ 143,814 $ 144,949
After income taxes ................................................. $ 128,888 $ 130,070
Average annual yield on investments:
Before income taxes ................................................ 4.6% 4.5%
After income taxes ................................................. 4.1% 4.1%
Net realized investment gains ............................................. $ 57,089 $ 346,444
(1) Fixed maturities and short-term bonds at amortized cost and equities and other short-term investments at
cost.
Included in net income are net realized investment gains of $57.1 million and $346.4 million in 2010 and
2009, respectively. Net realized investment gains include gains of $46.6 million and $395.5 million in 2010 and
2009, respectively, due to changes in the fair value of total investments pursuant to application of the fair value
accounting option. The net gains during 2010 arise from $1.0 million and $45.7 million increases in the market
value of the Company’s fixed maturity and equity securities, respectively. The primary cause of the gains on the
Company’s equity securities was the overall improvement in the equity markets.
Net Income
Net income was $152.2 million or $2.78 per diluted share and $403.1 million or $7.32 per diluted share in
2010 and 2009, respectively. Diluted per share results were based on a weighted average of 54.8 million shares
and 55.1 million shares in 2010 and 2009, respectively. Basic per share results were $2.78 and $7.36 in 2010 and
2009, respectively. Included in net income per share were net realized investment gains, net of income taxes, of
$0.68 and $4.11 per basic share, and $0.68 and $4.09 per diluted share in 2010 and 2009, respectively.
Year Ended December 31, 2009 Compared to Year Ended December 31, 2008
Revenues
Net premiums earned and net premiums written in 2009 decreased 6.5% and 5.8%, respectively, from
2008. Net premiums written by the Company’s California operations were approximately $2 billion in 2009, a
6.9% decrease from 2008. Net premiums written by the Company’s non-California operations were
approximately $578 million in 2009, a 1.9% decrease from 2008. The decrease in net premiums written is
primarily due to a decrease in the number of policies written and slightly lower average premiums per policy
reflecting the continuing soft market conditions.
The following is a reconciliation of total net premiums written to net premiums earned:
2009 2008
(Amounts in thousands)
Net premiums written ......................................... $2,589,972 $2,750,226
Change in unearned premium ................................... 35,161 58,613
Net premiums earned ..................................... $2,625,133 $2,808,839
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