Mercury Insurance 2013 Annual Report Download - page 83

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68
4. Fixed Assets
Fixed assets consist of the following:
December 31,
2013 2012
(Amounts in thousands)
Land $ 26,770 $ 26,770
Buildings and improvements 127,940 126,726
Furniture and equipment 108,819 106,788
Capitalized software 147,140 133,477
Leasehold improvements 8,610 7,593
419,279 401,354
Less accumulated depreciation and amortization (262,563)(239,414)
Fixed assets, net $ 156,716 $ 161,940
Depreciation expense including amortization of leasehold improvements was $24.6 million, $30.8 million, and $34.3 million
during 2013, 2012, and 2011, respectively.
5. Deferred Policy Acquisition Costs
Deferred policy acquisition costs are as follows:
December 31,
2013 2012 2011
(Amounts in thousands)
Balance, beginning of year $ 185,910 $ 171,430 $ 170,579
Policy acquisition costs deferred 514,073 492,268 482,572
Amortization (505,517)(477,788)(481,721)
Balance, end of year $ 194,466 $ 185,910 $ 171,430
6. Notes Payable
Notes payable consists of the following:
December 31,
Lender Interest Rate Expiration 2013 2012
(Amounts in thousands)
Secured credit facility Bank of America LIBOR plus 40 basis points July 31, 2016 $ 120,000 $ 120,000
Secured loan Union Bank LIBOR plus 40 basis points January 2, 2015 20,000 20,000
Unsecured credit facility Bank of America and Union Bank (1) June 30, 2018 50,000 0
Total $ 190,000 $ 140,000
__________
(1) On July 2, 2013, the Company entered into an unsecured $200 million five-year revolving credit facility. The interest rate
on borrowings under the credit facility is based on the Company's debt to total capital ratio and ranges from LIBOR plus
112.5 basis points when the ratio is under 15% to LIBOR plus 162.5 basis points when the ratio is above 25%. Commitment
fees for undrawn portions of the credit facility range from 12.5 basis points when the ratio is under 15% to 22.5 basis points
when the ratio is above 25%. In 2013, the interest rate was LIBOR plus 112.5 basis points on the $50 million of borrowings
and 12.5 basis points on the undrawn portions of the credit facility.
The $120 million credit facility and $20 million bank loan are secured by municipal bonds held as collateral. These secured
notes call for the collateral requirement to be greater than the loan amount. The collateral requirement is calculated as the fair
market value of the municipal bonds held as collateral multiplied by the advance rates, which vary based on the credit quality and
duration of the assets held and range between 75% and 100% of the fair value of each bond.