Mercury Insurance 2012 Annual Report Download - page 85

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64
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 Company adopted the new standard which became effective for the interim period ended March 31, 2012. The
adoption of the new standard did not have a material impact on the Company’s consolidated financial statements.
2. Investments
The following table presents gains (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,
2012 2011 2010
(Amounts in thousands)
Fixed maturity securities $ 36,317 $ 62,149 $ 967
Equity securities 9,158 (30,879)45,659
Short-term investments 34 19 (46)
Total $ 45,509 $ 31,289 $ 46,580
A summary of net realized investment gains is as follows:
Year Ended December 31,
2012 2011 2010
(Amounts in thousands)
Net realized gains (losses) from investments and other liabilities:
Fixed maturity securities $ 47,707 $ 54,112 $ 5,909
Equity securities 16,679 (4,854) 46,547
Short-term investments (686) 139 18
Options 2,680 9,000 4,615
Total $ 66,380 $ 58,397 $ 57,089
Gross gains and losses realized on the sales of investments, excluding options, are shown below:
Year Ended December 31,
2012 2011 2010
(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 maturity securities $ 11,473 $ (83) $ 11,390 $ 2,675 $ (10,712) $ (8,037) $ 8,754 $ (3,812) $ 4,942
Equity securities 19,538 (12,017) 7,521 41,872 (15,847) 26,025 16,793 (15,905) 888
Short-term investments 2 (722) (720) 120 0 120 64 0 64
Contractual Maturity
At December 31, 2012, fixed maturity holdings rated below investment grade and non-rated comprised 2.8% of total
investments at fair value. Additionally, the Company owns securities that are credit enhanced by financial guarantors that are
subject to uncertainty related to market perception of the guarantors’ ability to perform. Determining the estimated fair value of
municipal bonds could become more difficult should markets for these securities become illiquid. The estimated fair values at
December 31, 2012 by contractual maturity are shown below. Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.