Mercury Insurance 2013 Annual Report Download - page 44

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Statements
Certain statements in this Annual Report on Form 10-K or in other materials the Company has filed or will file with the
SEC (as well as information included in oral statements or other written statements made or to be made by the Company) contain
or may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements may address, among other
things, the Company’s strategy for growth, business development, regulatory approvals, market position, expenditures, financial
results, and reserves. Forward-looking statements are not guarantees of performance and are subject to important factors and events
that could cause the Company’s actual business, prospects, and results of operations to differ materially from the historical
information contained in this Annual Report on Form 10-K and from those that may be expressed or implied by the forward-
looking statements contained in this Annual Report on Form 10-K and in other reports or public statements made by the Company.
Factors that could cause or contribute to such differences include, among others: the competition currently existing in the
automobile insurance markets in California and the other states in which the Company operates; the cyclical and generally
competitive nature of the property and casualty insurance industry and general uncertainties regarding loss reserves or other
estimates; the accuracy and adequacy of the Company’s pricing methodologies; the Company’s success in managing its non-
California business; the impact of potential third party “bad-faith” legislation, changes in laws, regulations or new interpretations
of existing laws and regulations, tax position challenges by the California Franchise Tax Board (“FTB”), and decisions of courts,
regulators and governmental bodies, particularly in California; the Company’s ability to obtain and the timing of required regulatory
approvals of premium rate changes for insurance policies issued in states where the Company operates; the Company’s reliance
on independent agents to market and distribute its policies; the investment yields the Company is able to obtain on its investments
and the market risks associated with the Company’s investment portfolio; the effect government policies may have on market
interest rates; uncertainties related to assumptions and projections generally, inflation and changes in economic conditions; changes
in driving patterns and loss trends; acts of war and terrorist activities; court decisions, trends in litigation, and health care and auto
repair costs; adverse weather conditions or natural disasters, including those which may be related to climate change, in the markets
served by the Company; the stability of the Company’s information technology systems and the ability of the Company to execute
on its information technology initiatives; the Company’s ability to realize deferred tax assets or to hold certain securities with
current loss positions to recovery or maturity; and other risks and uncertainties, including but not limited to those discussed in
“Risk Factors” in Item 1A of this Annual Report on Form 10-K or that are otherwise described or updated from time to time in
the Company's SEC filings, all of which are difficult to predict and many of which are beyond the Company’s control. GAAP
prescribes when a Company may reserve for particular risks including litigation exposures. Accordingly, results for a given reporting
period could be significantly affected if and when a reserve is established for a major contingency. Reported results may therefore
appear to be volatile in certain periods.
From time to time, forward-looking statements are also included in the Company’s quarterly reports on Form 10-Q and
current reports on Form 8-K, in press releases, in presentations, on its web site, and in other materials released to the public. The
Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information or
future events or otherwise. Investors are cautioned not to place undue reliance on any forward-looking statements, which speak
only as of the date of this Annual Report on Form 10-K or, in the case of any document the Company incorporates by reference,
any other report filed with the SEC or any other public statement made by the Company, the date of the document, report or
statement. Investors should also understand that it is not possible to predict or identify all factors and should not consider the risks
set forth above to be a complete statement of all potential risks and uncertainties. If the expectations or assumptions underlying
the Company’s forward-looking statements prove inaccurate or if risks or uncertainties arise, actual results could differ materially
from those predicted in any forward-looking statements. The factors identified above are believed to be some, but not all, of the
important factors that could cause actual events and results to be significantly different from those that may be expressed or implied
in any forward-looking statements.
OVERVIEW
A. General
The operating results of property and casualty insurance companies are subject to significant quarter-to-quarter and year-
to-year fluctuations due to the effect of competition on pricing, the frequency and severity of losses, the effect of weather and
natural disasters on losses, general economic conditions, the general regulatory environment in states in which an insurer operates,
state regulation of insurance including premium rates, changes in fair value of investments, and other factors such as changes in
tax laws. The property and casualty industry has been highly cyclical, with periods of high premium rates and shortages of