Mercury Insurance 2014 Annual Report Download - page 32

Download and view the complete annual report

Please find page 32 of the 2014 Mercury Insurance annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 114

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114


&KDOOHQJLQJ HFRQRPLF FRQGLWLRQV FRXOG DGYHUVHO\ DIIHFW WKH &RPSDQ\ LQ WKH IRUP RI FRQVXPHU EHKDYLRU DQG SUHVVXUH RQ
LWV LQYHVWPHQW SRUWIROLR &RQVXPHU EHKDYLRU FRXOG LQFOXGH SROLF\ FDQFHOODWLRQV PRGLILFDWLRQV RU QRQUHQHZDOV ZKLFK PD\ UHGXFH
FDVK IORZV IURP RSHUDWLRQV DQG LQYHVWPHQWV PD\ KDUP WKH &RPSDQ\µV ILQDQFLDO SRVLWLRQ DQG PD\ UHGXFH WKH ,QVXUDQFH &RPSDQLHVµ
VWDWXWRU\ VXUSOXV&KDOOHQJLQJ HFRQRPLF FRQGLWLRQV DOVR PD\ LPSDLU WKH DELOLW\ RI WKH &RPSDQ\µV FXVWRPHUV WR SD\ SUHPLXPV DV
WKH\ EHFRPH GXH DQG DV D UHVXOW WKH &RPSDQ\µV EDG GHEW UHVHUYHV DQG ZULWHRIIV FRXOG LQFUHDVH ,W LV DOVR SRVVLEOH WKDW FODLPV
IUDXG PD\ LQFUHDVH 7KH &RPSDQ\µV LQYHVWPHQW SRUWIROLRV FRXOG EH DGYHUVHO\ DIIHFWHG DV D UHVXOW RI ILQDQFLDO DQG EXVLQHVV FRQGLWLRQV
DIIHFWLQJ WKH LVVXHUV RI WKH VHFXULWLHV LQ WKH &RPSDQ\µV LQYHVWPHQW SRUWIROLR ,Q DGGLWLRQ GHFOLQHV LQ WKH &RPSDQ\µV SURILWDELOLW\
FRXOG UHVXOW LQ D FKDUJH WR HDUQLQJV IRU WKH LPSDLUPHQW RI JRRGZLOO ZKLFK ZRXOG QRW DIIHFW WKH &RPSDQ\µV FDVK IORZ EXW FRXOG
GHFUHDVH LWV HDUQLQJV DQG LWV VWRFN SULFH FRXOG EH DGYHUVHO\ DIIHFWHG
7KH &RPSDQ\ PD\ EH DGYHUVHO\ DIIHFWHG LI HFRQRPLF FRQGLWLRQV UHVXOW LQ HLWKHU LQIODWLRQ RU GHIODWLRQ ,Q DQ LQIODWLRQDU\
HQYLURQPHQW HVWDEOLVKHG UHVHUYHV PD\ EHFRPH LQDGHTXDWH DQG LQFUHDVH WKH &RPSDQ\µV ORVV UDWLR DQG PDUNHW LQWHUHVW UDWHV PD\
ULVH DQG UHGXFH WKH YDOXH RI WKH &RPSDQ\µV IL[HG PDWXULW\ SRUWIROLR ZKLOH LQFUHDVLQJ LQWHUHVW H[SHQVH RQ LWV /,%25 EDVHG GHEW
7KH '2,V PD\ QRW DSSURYH SUHPLXP UDWH LQFUHDVHV LQ WLPH IRU WKH &RPSDQ\ WR DGHTXDWHO\ PLWLJDWH LQIODWHG ORVV FRVWV ,Q D
GHIODWLRQDU\ HQYLURQPHQW VRPH IL[HG PDWXULW\ LVVXHUV PD\ KDYH GLIILFXOW\ PHHWLQJ WKHLU GHEW VHUYLFH REOLJDWLRQV DQG WKHUHE\
UHGXFH WKH YDOXH RI WKH &RPSDQ\µV IL[HG PDWXULW\ SRUWIROLR HTXLW\ LQYHVWPHQWV PD\ GHFUHDVH LQ YDOXH DQG SROLF\KROGHUV PD\
H[SHULHQFH GLIILFXOWLHV SD\LQJ WKHLU SUHPLXPV WR WKH &RPSDQ\ ZKLFK FRXOG DGYHUVHO\ DIIHFW SUHPLXP UHYHQXH
5LVNV5HODWHGWRWKH&RPSDQ\µV ,QGXVWU\
7KH SULYDWH SDVVHQJHU DXWRPRELOH LQVXUDQFH LQGXVWU\ LV KLJKO\ FRPSHWLWLYH DQG WKH &RPSDQ\ PD\ QRW EH DEOH WR FRPSHWH
HIIHFWLYHO\ DJDLQVW ODUJHU RU EHWWHUFDSLWDOL]HG FRPSDQLHV
7KH &RPSDQ\ FRPSHWHV ZLWK PDQ\ SURSHUW\ DQG FDVXDOW\ LQVXUDQFH FRPSDQLHV VHOOLQJ SULYDWH SDVVHQJHU DXWRPRELOH
LQVXUDQFH LQ WKH VWDWHV LQ ZKLFK WKH &RPSDQ\ RSHUDWHV 0DQ\ RI WKHVH FRPSHWLWRUV DUH EHWWHU FDSLWDOL]HG WKDQ WKH &RPSDQ\ KDYH
KLJKHU $0 %HVW UDWLQJV DQG KDYH D ODUJHU PDUNHW VKDUH LQ WKH VWDWHV LQ ZKLFK WKH &RPSDQ\ RSHUDWHV 7KH VXSHULRU FDSLWDOL]DWLRQ
RI WKH FRPSHWLWRUV PD\ HQDEOH WKHP WR RIIHU ORZHU UDWHV WR ZLWKVWDQG ODUJHU ORVVHV DQG WR PRUH HIIHFWLYHO\ WDNH DGYDQWDJH RI QHZ
PDUNHWLQJ RSSRUWXQLWLHV 7KH &RPSDQ\µV FRPSHWLWLRQ PD\ DOVR EHFRPH LQFUHDVLQJO\ EHWWHU FDSLWDOL]HG LQ WKH IXWXUH DV WKH WUDGLWLRQDO
EDUULHUV EHWZHHQ LQVXUDQFH FRPSDQLHV DQG EDQNV DQG RWKHU ILQDQFLDO LQVWLWXWLRQV HURGH DQG DV WKH SURSHUW\ DQG FDVXDOW\ LQGXVWU\
FRQWLQXHV WR FRQVROLGDWH 7KH &RPSDQ\µV DELOLW\ WR FRPSHWH DJDLQVW WKHVH ODUJHU EHWWHUFDSLWDOL]HG FRPSHWLWRUV GHSHQGV RQ LWV
DELOLW\ WR GHOLYHU VXSHULRU VHUYLFH DQG LWV VWURQJ UHODWLRQVKLSV ZLWK LQGHSHQGHQW DJHQWV
7KH &RPSDQ\ PD\ XQGHUWDNH VWUDWHJLF PDUNHWLQJ DQG RSHUDWLQJ LQLWLDWLYHV WR LPSURYH LWV FRPSHWLWLYH SRVLWLRQ DQG GULYH
JURZWK ,I WKH &RPSDQ\ LV XQDEOH WR VXFFHVVIXOO\ LPSOHPHQW QHZ VWUDWHJLF LQLWLDWLYHV RU LI WKH &RPSDQ\µV PDUNHWLQJ FDPSDLJQV
GR QRW DWWUDFW QHZ FXVWRPHUV WKH &RPSDQ\µV FRPSHWLWLYH SRVLWLRQ PD\ EH KDUPHG ZKLFK FRXOG DGYHUVHO\ DIIHFW WKH &RPSDQ\µV
EXVLQHVV DQG UHVXOWV RI RSHUDWLRQV $GGLWLRQDOO\ LQ WKH HYHQW RI D IDLOXUH RI DQ\ FRPSHWLWRU WKH &RPSDQ\ DQG RWKHU LQVXUDQFH
FRPSDQLHV ZRXOG OLNHO\ EH UHTXLUHG E\ VWDWH ODZ WR DEVRUE WKH ORVVHV RI WKH IDLOHG LQVXUHU DQG ZRXOG EH IDFHG ZLWK DQ XQH[SHFWHG
VXUJH LQ QHZ EXVLQHVV IURP WKH IDLOHG LQVXUHUµV IRUPHU SROLF\KROGHUV
7KH &RPSDQ\ PD\ EH DGYHUVHO\ DIIHFWHG E\ FKDQJHV LQ WKH SULYDWH SDVVHQJHU DXWRPRELOH LQVXUDQFH LQGXVWU\
 RI WKH &RPSDQ\µV GLUHFW ZULWWHQ SUHPLXPV IRU WKH \HDU HQGHG 'HFHPEHU   ZHUH JHQHUDWHG IURP SULYDWH
SDVVHQJHU DXWRPRELOH LQVXUDQFH SROLFLHV $GYHUVH GHYHORSPHQWV LQ WKH PDUNHW IRU SHUVRQDO DXWRPRELOH LQVXUDQFH RU WKH SHUVRQDO
DXWRPRELOH LQVXUDQFH LQGXVWU\ LQ JHQHUDO ZKHWKHU UHODWHG WR FKDQJHV LQ FRPSHWLWLRQ SULFLQJ RU UHJXODWLRQV FRXOG FDXVH WKH
&RPSDQ\µV UHVXOWV RI RSHUDWLRQV WR VXIIHU 7KH SURSHUW\FDVXDOW\ LQVXUDQFH LQGXVWU\ LV DOVR H[SRVHG WR WKH ULVNV RI VHYHUH ZHDWKHU
FRQGLWLRQV VXFK DV UDLQVWRUPV VQRZVWRUPV KDLO DQG LFH VWRUPV KXUULFDQHV WRUQDGRHV ZLOG ILUHV VLQNKROHV HDUWKTXDNHV DQG WR
D OHVVHU GHJUHH H[SORVLRQV WHUURULVW DWWDFNV DQG ULRWV 7KH DXWRPRELOH LQVXUDQFH EXVLQHVV LV DOVR DIIHFWHG E\ FRVW WUHQGV WKDW LPSDFW
SURILWDELOLW\ )DFWRUV ZKLFK QHJDWLYHO\ DIIHFW FRVW WUHQGV LQFOXGH LQIODWLRQ LQ DXWRPRELOH UHSDLU FRVWV DXWRPRELOH SDUWV FRVWV QHZ
DQG XVHG FDU YDOXDWLRQV PHGLFDO FRVWV DQG FKDQJHV LQ QRQHFRQRPLF FRVWV GXH WR FKDQJHV LQ WKH OHJDO DQG UHJXODWRU\ HQYLURQPHQWV
,Q DGGLWLRQ WKH DGYHQW RI GULYHUOHVV FDUV DQG XVDJHEDVHG LQVXUDQFH FRXOG PDWHULDOO\ DOWHU WKH ZD\ WKDW DXWRPRELOH LQVXUDQFH LV
PDUNHWHG SULFHG DQG XQGHUZULWWHQ
7KH &RPSDQ\ FDQQRW SUHGLFW WKH LPSDFW WKDW FKDQJLQJ FOLPDWH FRQGLWLRQV LQFOXGLQJ OHJDO UHJXODWRU\ DQG VRFLDO
UHVSRQVHV WKHUHWR PD\ KDYH RQ LWV EXVLQHVV
9DULRXV VFLHQWLVWV HQYLURQPHQWDOLVWV LQWHUQDWLRQDO RUJDQL]DWLRQV UHJXODWRUV DQG RWKHU FRPPHQWDWRUV EHOLHYH WKDW JOREDO
FOLPDWH FKDQJH KDV DGGHG DQG ZLOO FRQWLQXH WR DGG WR WKH XQSUHGLFWDELOLW\ IUHTXHQF\ DQG VHYHULW\ RI QDWXUDO GLVDVWHUV LQFOXGLQJ
EXW QRW OLPLWHG WR KXUULFDQHV WRUQDGRHV IUHH]HV GURXJKWV RWKHU VWRUPV DQG ILUHV LQ FHUWDLQ SDUWV RI WKH ZRUOG ,Q UHVSRQVH D
QXPEHU RI OHJDO DQG UHJXODWRU\ PHDVXUHV DQG VRFLDO LQLWLDWLYHV KDYH EHHQ LQWURGXFHG LQ DQ HIIRUW WR UHGXFH JUHHQKRXVH JDV DQG
RWKHU FDUERQ HPLVVLRQV WKDW PD\ EH FKLHI FRQWULEXWRUV WR JOREDO FOLPDWH FKDQJH 7KH &RPSDQ\ FDQQRW SUHGLFW WKH LPSDFW WKDW