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57
MERCURY GENERAL CORPORATION AND SUBSIDIARIES
NOTES STATEMENTS TO CONSOLIDATED FINANCIAL
1. Summary of Significant Accounting Policies
General
Mercury General Corporation (“Mercury General”) and its subsidiaries (referred to herein collectively as the “Company”)
are primarily engaged in writing personal automobile insurance through 13 Insurance Companies in 13 states, principally California.
The Company also writes homeowners, commercial automobile, commercial property, mechanical breakdown, fire, and umbrella
insurance. The private passenger automobile lines of insurance exceeded 79% of the Company’s direct premiums written in 2013,
2012, and 2011, of which approximately 81%, 78%, and 77% of the private passenger automobile premiums were written in
California during 2013, 2012, and 2011, respectively. Premiums written represents the premiums charged on policies issued during
a fiscal period, which is a statutory measure designed to determine production levels.
Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of Mercury General Corporation and its subsidiaries:
Insurance Companies
Mercury Casualty Company (“MCC”) Mercury National Insurance Company
Mercury Insurance Company (“MIC”) American Mercury Insurance Company
California Automobile Insurance Company (“CAIC”) American Mercury Lloyds Insurance Company(1)
California General Underwriters Insurance Company, Inc. Mercury County Mutual Insurance Company(2)
Mercury Insurance Company of Illinois Mercury Insurance Company of Florida
Mercury Insurance Company of Georgia Mercury Indemnity Company of America
Mercury Indemnity Company of Georgia
Non-Insurance Companies
Mercury Select Management Company, Inc. AIS Management LLC
Mercury Insurance Services LLC Auto Insurance Specialists LLC
Animas Funding LLC (“AFL”)(3) PoliSeek AIS Insurance Solutions, Inc.
Concord Insurance Services, Inc.(4) Mercury Group, Inc.(5)
American Mercury MGA, Inc.(5)
__________
(1) American Mercury Lloyds Insurance Company is not owned but is controlled by the Company through its attorney-in-fact,
Mercury Select Management Company, Inc.
(2) Mercury County Mutual Insurance Company is not owned but is controlled by the Company through a management contract.
(3) Special purpose investment vehicle formed in 2013.
(4) Inactive company dissolved in 2013.
(5) Inactive companies dissolved in 2012.
The consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles
(“GAAP”), which differ in some respects from those filed in reports to insurance regulatory authorities. All intercompany
transactions and balances have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenue and expenses during the reporting period. These estimates require the Company
to apply complex assumptions and judgments, and often the Company must make estimates about effects of matters that are
inherently uncertain and will likely change in subsequent periods. The most significant assumptions in the preparation of these
consolidated financial statements relate to reserves for losses and loss adjustment expenses. Actual results could differ from those
estimates.