Mercury Insurance 2011 Annual Report Download - page 96

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MERCURY GENERAL CORPORATION AND SUBSIDIARIES
NOTES STATEMENTS TO CONSOLIDATED FINANCIAL—(Continued)
has elected to early adopt the standard and performed its assessment for the fiscal year ended December 31,
2011. The adoption of the new standard did not have a material impact on the Company’s consolidated financial
statements.
In May 2011, the FASB issued a new standard which develops a single and converged guidance on how to
measure fair value and on required disclosures about fair value measurements. While the new standard is largely
consistent with existing fair value measurement principles, it expands existing disclosure requirements for fair
value measurements and makes other amendments. The new standard will be effective for fiscal years and
interim periods within those years that begin after December 15, 2011. The adoption of the new standard will not
have a material impact on the Company’s consolidated financial statements.
In October 2010, the FASB issued a new standard to address diversity in practice regarding the
interpretation of which costs relating to the acquisition of new or renewal insurance contracts qualify for deferral.
The new standard defines acquisition costs as those related directly to the successful acquisition of new or
renewal insurance contracts, and will be effective for fiscal years and interim periods beginning after
December 15, 2011 and may be applied either prospectively or retrospectively. The Company completed its
assessment using the prospective method and believes the adoption of the new standard will not have a material
impact on the Company’s consolidated financial statements.
2. Investments
The Company applies the fair value option to all fixed maturity and equity securities and short-term
investments at the time an 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 in the Company’s consolidated statements of operations, while interest and dividend income on 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 of investments that are measured
at fair value pursuant to application of the fair value option:
Year Ended December 31,
2011 2010 2009
(Amounts in thousands)
Fixed maturity securities ............................................ $62,149 $ 967 $261,866
Equity securities .................................................. (30,879) 45,659 133,580
Short-term investments ............................................. 19 (46) 36
Total ....................................................... $31,289 $46,580 $395,482
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