Mercury Insurance 2010 Annual Report Download - page 85

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MERCURY GENERAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
2. Investments
The Company applies the fair value option to all fixed maturity securities and equity securities and short-
term investments as of the time the eligible item is first recognized. Gains and losses due to changes in fair value
for items measured at fair value pursuant to application of the fair value option are included in net realized
investment gains (losses) in the Company’s consolidated statements of operations. Interest and dividend income
on the investment holdings are recognized on an accrual basis on each measurement date and are included in net
investment income in the Company’s consolidated statements of operations.
The following table presents gains and losses due to changes in fair value for items measured at fair value
pursuant to application of the fair value option:
Year Ended December 31,
2010 2009 2008
(Amounts in thousands)
Fixed maturity securities ........................................... $ 967 $261,866 $(274,103)
Equity securities ................................................. 45,659 133,580 (251,644)
Short-term investments ............................................ (46) 36 3
Total ...................................................... $46,580 $395,482 $(525,744)
A summary of net realized investment gains (losses) is as follows:
Year Ended December 31,
2010 2009 2008
(Amounts in thousands)
Net realized gains (losses) from investments and other liabilities:
Fixed maturities ............................................. $ 5,909 $255,195 $(280,522)
Equity securities ............................................. 46,547 83,452 (281,316)
Short-term investments ........................................ 18 76 (4,177)
Other liabilities(1) ............................................ 4,615 7,721 15,495
Total .................................................. $57,089 $346,444 $(550,520)
(1) Other liabilities include call option and short sale transactions
Net realized gains (losses) from investments included gains of $52.5 million and $338.7 million, and losses
of $566.0 million related to trading securities which were still held at December 31, 2010, 2009, and 2008,
respectively.
Gross gains and losses realized on the sales of investments (excluding calls) are shown below:
Year Ended December 31,
2010 2009 2008
(Amounts in thousands)
Gross
Realized
Gains
Gross
Realized
Losses Net
Gross
Realized
Gains
Gross
Realized
Losses Net
Gross
Realized
Gains
Gross
Realized
Losses Net
Fixed maturities .......... $ 8,754 $ (3,812)$4,942 $ 1,918 $ (8,589)$ (6,671)$ 5,436 $(11,855)$ (6,419)
Equity securities ......... 16,793 (15,905) 888 20,558 (70,686) (50,128) 26,795 (54,489) (27,694)
Short-term investments .... 64 0 64 356 (3,902) (3,546) 152 (956) (804)
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