Mercury Insurance 2011 Annual Report Download - page 49

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.
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 space
for operations. Office location is not crucial to the Company’s operations, and the Company anticipates no
difficulty in extending these leases or obtaining comparable office space. The Company’s properties are well
maintained, adequately meet its needs, and are being utilized for their intended purposes.
Location Purpose
Size in
square feet
Percent occupied by
the Company at
December 31, 2011
Brea, CA ..................... Home office and I.T. facilities (2 buildings) 236,000 100%
Folsom, CA ................... Administrative and Data Center 88,000 100%
Los Angeles, CA ............... Executive offices 41,000 95%
Rancho Cucamonga, CA ........ Administrative 127,000 100%
St. Petersburg, FL .............. Administrative 157,000 74%
Oklahoma, OK ................ Administrative 100,000 77%
Item 3. Legal Proceedings
The Company is, from time to time, named as a defendant in various lawsuits or regulatory actions
incidental to its insurance business. The majority of lawsuits brought against the Company relate to insurance
claims that arise in the normal course of business and are reserved for through the reserving process. For a
discussion of the Company’s reserving methods, see “Critical Accounting Estimates” in “Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations” and Note 1 of Notes to Consolidated
Financial Statements.
The Company also establishes reserves for non-insurance claims related lawsuits, regulatory actions, and
other contingencies for which the Company is able to estimate its potential exposure and when the Company
believes a loss is probable. For loss contingencies believed to be reasonably possible, the Company also discloses
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