Mercury Insurance 2012 Annual Report Download - page 46

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25
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. For future expansion, the Company owns 4.2 acre and 5.9 acre parcels
of land in Brea and Rancho Cucamonga, California, respectively. 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, 2012
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 the nature of the loss contingency and an estimate
of the possible loss, range of loss, or a statement that such an estimate cannot be made. While actual losses may differ from the
amounts recorded and the ultimate outcome of the Company’s pending actions is generally not yet determinable, the Company
does not believe that the ultimate resolution of currently pending legal or regulatory proceedings, either individually or in the
aggregate, will have a material adverse effect on its financial condition, results of operations, or cash flows.
In all cases, the Company vigorously defends itself unless a reasonable settlement appears appropriate. For a discussion of
legal matters, see “Overview—B. Regulatory and Legal Matters” in “Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and Note 16 of Notes to Consolidated Financial Statements, which is incorporated herein
by reference.
There are no environmental proceedings arising under federal, state, or local laws or regulations to be discussed.
Item 4. Mine Safety Disclosure
Not applicable.