Mercury Insurance 2011 Annual Report Download - page 75

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(3) Corporate Securities
Included in fixed maturity securities are $75.1 million and $95.2 million of fixed rate corporate securities,
which had durations of 3.6 and 4.1 years, at December 31, 2011 and 2010, respectively. The weighted-average
rating was BBB+ as of December 31, 2011 and 2010.
(4) Collateralized Debt Obligations
Included in fixed maturities securities are collateralized debt obligations of $47.5 million and $55.7 million,
which represent 1.6% and 1.8% of the total investment portfolio and had durations of 1.1 years and 2.0 years, at
December 31, 2011 and 2010, respectively.
Equity Securities
Equity holdings consist of non-redeemable preferred stocks, common stocks on which dividend income is
partially tax-sheltered by the 70% corporate dividend received deduction, and a partnership interest in a private
credit fund. The net losses in 2011 due to changes in fair value of the Company’s equity portfolio were $30.9
million. The primary cause of the losses on the Company’s equity securities was the overall decline in the equity
markets.
The Company’s common stock allocation is intended to enhance the return of and provide diversification for
the total portfolio. At December 31, 2011, 12.4% of the total investment portfolio at fair value was held in equity
securities, compared to 11.4% at December 31, 2010. The following table presents the equity security portfolio
by industry sector for 2011 and 2010:
December 31,
2011 2010
Cost Fair Value Cost Fair Value
(Amounts in thousands)
Equity securities:
Basic materials .................................... $ 32,719 $ 27,139 $ 11,755 $ 12,781
Communications ................................... 7,692 7,347 8,495 8,473
Consumer—cyclical ................................ 12,985 11,986 19,287 20,183
Consumer—non-cyclical ............................. 4,310 4,197 5,629 5,657
Energy ........................................... 227,183 233,225 199,822 215,796
Financial ......................................... 26,156 23,887 25,339 26,419
Funds ............................................ 11,190 10,621 4,160 3,572
Industrial ......................................... 34,622 28,728 35,040 34,915
Technology ....................................... 8,548 6,875 4,611 4,555
Utilities .......................................... 23,012 26,383 22,619 27,255
$388,417 $380,388 $336,757 $359,606
Short-Term Investments
At December 31, 2011, short-term investments include money market accounts, options, and short-term
bonds which are highly rated short duration securities and redeemable within one year.
D. Debt
The Company retired all of its $125 million 7.25% senior notes on the August 15, 2011 maturity date by
using a portion of the proceeds from the extraordinary dividend paid by MCC to Mercury General.
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