Mercury Insurance 2012 Annual Report Download - page 91

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70
Fair value amounts, and gains and losses on derivative instruments
The following tables present the location and amounts of derivative fair values in the consolidated balance sheets and
derivative gains and losses in the consolidated statements of operations:
Asset Derivatives Liability Derivatives
December 31, 2012 December 31, 2011 December 31, 2012 December 31, 2011
(Amounts in thousands)
Non-hedging derivatives
Interest rate contracts—Other liabilities $ 0 $ 0 $ (103) $ (670)
Equity contracts—Short-term investments
(Other liabilities) 0 0 (175)(655)
Total derivatives $ 0 $ 0 $ (278) $ (1,325)
Gain (Loss) Recognized in
Comprehensive Income
Year Ended December 31,
Derivatives Contracts for Cash Flow Hedges 2012 2011 2010
(Amounts in thousands)
Interest rate contracts—Other comprehensive income (loss) $ 0 $ 1,139 $ (220)
Gain (Loss)
Recognized in Income
Year Ended December 31,
Derivatives Not Designated as Hedging Instruments 2012 2011 2010
(Amounts in thousands)
Interest rate contract—Other revenue (expense) $ 567 $ 1,232 $ (457)
Equity contracts—Net realized investment gains 2,680 9,000 4,615
Total $ 3,247 $ 10,232 $ 4,158
Most equity contracts consist of covered calls. The Company writes covered calls on underlying equity positions held as
an enhanced income strategy that is permitted for the Company’s insurance subsidiaries under statutory regulations. The Company
manages the risk associated with covered calls through strict capital limitations and asset diversification throughout various
industries.
8. Goodwill and Other Intangible Assets
Goodwill
There was a slight change in the carrying amount of goodwill due to the dissolution of AMMGA for the year ended
December 31, 2012. Goodwill is reviewed for impairment on an annual basis and more frequently if potential impairment indicators
exist. No impairment indications were identified during any of the periods presented.