Mercury Insurance 2013 Annual Report Download - page 89

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74
11. Dividends
The following table presents shareholder dividends paid in total and per share:
Year Ended December 31,
2013 2012 2011
(Amounts in thousands, except per share data)
Total paid $ 134,776 $ 134,105 $ 132,142
Per share $ 2.4525 $ 2.4425 $ 2.41
The Insurance Companies are subject to the financial capacity guidelines established by their domiciliary states. The payment
of dividends from statutory unassigned surplus of the Insurance Companies is restricted, subject to certain statutory limitations. For
2014, the insurance subsidiaries of the Company are permitted to pay approximately $260 million in dividends to Mercury General
without the prior approval of the DOI of domiciliary states. The above statutory regulations may have the effect of indirectly
limiting the ability of the Company to pay shareholder dividends. During 2013, 2012, and 2011, the Insurance Companies paid
the Company ordinary dividends of $120 million, $145 million, and $0, respectively, and extraordinary dividends of $0, $0, and
$270 million, respectively.
On February 7, 2014, the Board of Directors declared a $0.6150 quarterly dividend payable on March 31, 2014 to
shareholders of record on March 17, 2014.
12. Statutory Balances and Accounting Practices
The Insurance Companies prepare their statutory-basis financial statements in conformity with accounting practices
prescribed or permitted by the insurance departments of their domiciliary states. Prescribed statutory accounting practices primarily
include those published as statements of statutory accounting principles by the National Association of Insurance Commissioners
(the “NAIC”), as well as state laws, regulations, and general administrative rules. Permitted statutory accounting practices
encompass all accounting practices not so prescribed. As of December 31, 2013, there were no material permitted statutory
accounting practices utilized by the Insurance Companies.
The following table presents the statutory net income and capital and surplus of the Insurance Companies, as reported to
regulatory authorities:
Year Ended December 31,
2013 2012 2011
(Amounts in thousands)
Statutory net income(1) $ 235,251 $ 63,365 $ 223,447
Statutory capital and surplus 1,528,682 1,440,973 1,497,609
__________
(1) Statutory net income excludes changes in the fair value of the investment portfolio as a result of the application of fair value
option.
The Insurance Companies must comply with minimum capital requirements under applicable state laws and regulations.
The RBC formula is used by insurance regulators to monitor capital and surplus levels. It was designed to capture the widely
varying elements of risks undertaken by writers of different lines of insurance having differing risk characteristics, as well as
writers of similar lines where differences in risk may be related to corporate structure, investment policies, reinsurance
arrangements, and a number of other factors. The Company periodically monitors the RBC level of each of the Insurance Companies.
As of December 31, 2013, 2012, and 2011 each of the Insurance Companies exceeded the minimum required RBC levels, as
determined by the NAIC and adopted by the state insurance regulators. None of the Insurance Companies’ RBC ratio was less
than 500% of the authorized control level RBC as of December 31, 2013, 2012, and 2011, respectively. Generally, an RBC ratio
of 200% or less would require some form of regulatory or company action.
13. Profit Sharing Plan
The Company’s employees are eligible to become members of the Profit Sharing Plan (the “Plan”). The Company, at the
option of the Board of Directors, may make annual contributions to the Plan, and the contributions are not to exceed the greater
of the Company’s net income for the plan year or its retained earnings at that date. In addition, the annual contributions may not
exceed an amount equal to 15% of the compensation paid or accrued during the year to all participants under the Plan. No
contributions were made in the past three years.