Mercury Insurance 2013 Annual Report Download - page 78

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63
In February 2013, the FASB issued a new standard that requires entities to disclose additional information about items
reclassified out of accumulated other comprehensive income in their financial statements. Entities are required to include
information about changes in accumulated other comprehensive income balances by component and additional information about
significant items reclassified out of accumulated other comprehensive income in their interim reporting periods. The Company
adopted the new standard which became effective for the interim period ended March 31, 2013. The adoption of the new standard
did not have any impact on the Company’s consolidated financial statements.
2. Investments
The following table presents (losses) gains 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,
2013 2012 2011
(Amounts in thousands)
Fixed maturity securities $(100,703) $ 36,317 $ 62,149
Equity securities 56,822 9,158 (30,879)
Short-term investments (156) 34 19
Total $ (44,037) $ 45,509 $ 31,289
A summary of net realized investment (losses) gains is as follows:
Year Ended December 31,
2013 2012 2011
(Amounts in thousands)
Net realized (losses) gains from investments and other liabilities:
Fixed maturity securities $ (95,225) $ 47,707 $ 54,112
Equity securities 80,910 16,679 (4,854)
Short-term investments (1,059)(686) 139
Total return swap 2,176 0 0
Options 1,776 2,680 9,000
Total $ (11,422) $ 66,380 $ 58,397
Gross gains and losses realized on the sales of investments, excluding options, are shown below:
Year Ended December 31,
2013 2012 2011
(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 $ 9,320 $ (3,842) $ 5,478 $ 11,473 $ (83) $ 11,390 $ 2,675 $ (10,712) $ (8,037)
Equity securities 82,385 (58,297) 24,088 19,538 (12,017) 7,521 41,872 (15,847) 26,025
Short-term investments 0 (903) (903) 2 (722) (720) 120 0 120
Contractual Maturity
At December 31, 2013, fixed maturity holdings rated below investment grade and non-rated comprised 1.5% 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, 2013 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.