Mercury Insurance 2014 Annual Report Download - page 44

Download and view the complete annual report

Please find page 44 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


LQ HVWDEOLVKLQJ LWV UHVHUYH E\ ORRNLQJ DW KLVWRULFDO SDWWHUQV DQG WUHQGV DQG SURMHFWLQJ WKHVH RXW WR FXUUHQW UHVHUYHV 7KH XQGHUO\LQJ
IDFWRUV DQG DVVXPSWLRQV WKDW VHUYH DV WKH EDVLV IRU SUHSDULQJ WKH UHVHUYH HVWLPDWH LQFOXGH SDLG DQG LQFXUUHG ORVV GHYHORSPHQW
IDFWRUV H[SHFWHG DYHUDJH FRVWV SHU FODLP LQIODWLRQ WUHQGV H[SHFWHG ORVV UDWLRV LQGXVWU\ GDWD DQG RWKHU UHOHYDQW LQIRUPDWLRQ
7KH &RPSDQ\ DOVR HQJDJHV LQGHSHQGHQW DFWXDULDO FRQVXOWDQWV WR UHYLHZ WKH &RPSDQ\µV UHVHUYHV DQG WR SURYLGH WKH DQQXDO
DFWXDULDO RSLQLRQV UHTXLUHG XQGHU VWDWH VWDWXWRU\ DFFRXQWLQJ UHTXLUHPHQWV 7KH &RPSDQ\ GRHV QRW UHO\ RQ WKH DFWXDULDO FRQVXOWDQWV
IRU *$$3 UHSRUWLQJ RU SHULRGLF GLVFORVXUH SXUSRVHV 7KH &RPSDQ\ DQDO\]HV ORVV UHVHUYHV TXDUWHUO\ SULPDULO\ XVLQJ WKH LQFXUUHG
ORVV FODLP FRXQW GHYHORSPHQW DQG DYHUDJH VHYHULW\ PHWKRGV GHVFULEHG EHORZ 7KH &RPSDQ\ DOVR XVHV WKH SDLG ORVV GHYHORSPHQW
PHWKRG DV SDUW RI LWV UHVHUYH DQDO\VLV :KHQ GHFLGLQJ DPRQJ PHWKRGV WR XVH WKH &RPSDQ\ HYDOXDWHV WKH FUHGLELOLW\ RI HDFK PHWKRG
EDVHG RQ WKH PDWXULW\ RI WKH GDWD DYDLODEOH DQG WKH FODLPV VHWWOHPHQW SUDFWLFHV IRU HDFK SDUWLFXODU OLQH RI EXVLQHVV RU FRYHUDJH
ZLWKLQ D OLQH RI EXVLQHVV :KHQ HVWDEOLVKLQJ WKH UHVHUYH WKH &RPSDQ\ ZLOO JHQHUDOO\ DQDO\]H WKH UHVXOWV IURP DOO RI WKH PHWKRGV
XVHG UDWKHU WKDQ UHO\LQJ RQ D VLQJOH PHWKRG :KLOH WKHVH PHWKRGV DUH GHVLJQHG WR GHWHUPLQH WKH XOWLPDWH ORVVHV RQ FODLPV XQGHU
WKH &RPSDQ\µV SROLFLHV WKHUH LV LQKHUHQW XQFHUWDLQW\ LQ DOO DFWXDULDO PRGHOV VLQFH WKH\ XVH KLVWRULFDO GDWD WR SURMHFW RXWFRPHV 7KH
&RPSDQ\ EHOLHYHV WKDW WKH WHFKQLTXHV LW XVHV SURYLGH D UHDVRQDEOH EDVLV LQ HVWLPDWLQJ ORVV UHVHUYHV
7KH LQFXUUHG ORVV GHYHORSPHQW PHWKRG DQDO\]HV KLVWRULFDO LQFXUUHG FDVH ORVV FDVH UHVHUYHV SOXV SDLG ORVVHV
GHYHORSPHQW WR HVWLPDWH XOWLPDWH ORVVHV 7KH &RPSDQ\ DSSOLHV GHYHORSPHQW IDFWRUV DJDLQVW FXUUHQW FDVH LQFXUUHG ORVVHV
E\ DFFLGHQW SHULRG WR FDOFXODWH XOWLPDWH H[SHFWHG ORVVHV 7KH &RPSDQ\ EHOLHYHV WKDW WKH LQFXUUHG ORVV GHYHORSPHQW
PHWKRG SURYLGHV D UHDVRQDEOH EDVLV IRU HYDOXDWLQJ XOWLPDWH ORVVHV SDUWLFXODUO\ LQ WKH &RPSDQ\µV ODUJHU PRUH HVWDEOLVKHG
OLQHV RI EXVLQHVV ZKLFK KDYH D ORQJ RSHUDWLQJ KLVWRU\
7KH DYHUDJH VHYHULW\ PHWKRG DQDO\]HV KLVWRULFDO ORVV SD\PHQWV DQGRU LQFXUUHG ORVVHV GLYLGHG E\ FORVHG FODLPV DQG
RU WRWDO FODLPV WR FDOFXODWH DQ HVWLPDWHG DYHUDJH FRVW SHU FODLP )URP WKLV WKH H[SHFWHG XOWLPDWH DYHUDJH FRVW SHU FODLP
FDQ EH HVWLPDWHG 7KH DYHUDJH VHYHULW\ PHWKRG FRXSOHG ZLWK WKH FODLP FRXQW GHYHORSPHQW PHWKRG SURYLGHV PHDQLQJIXO
LQIRUPDWLRQ UHJDUGLQJ LQIODWLRQ DQG IUHTXHQF\ WUHQGV WKDW WKH &RPSDQ\ EHOLHYHV LV XVHIXO LQ HVWDEOLVKLQJ UHVHUYHV 7KH
FODLP FRXQW GHYHORSPHQW PHWKRG DQDO\]HV KLVWRULFDO FODLP FRXQW GHYHORSPHQW WR HVWLPDWH IXWXUH LQFXUUHG FODLP FRXQW
GHYHORSPHQW IRU FXUUHQW FODLPV 7KH &RPSDQ\ DSSOLHV WKHVH GHYHORSPHQW IDFWRUV DJDLQVW FXUUHQW FODLP FRXQWV E\
DFFLGHQW SHULRG WR FDOFXODWH XOWLPDWH H[SHFWHG FODLP FRXQWV
7KH SDLG ORVV GHYHORSPHQW PHWKRG DQDO\]HV KLVWRULFDO SD\PHQW SDWWHUQV WR HVWLPDWH WKH DPRXQW RI ORVVHV \HW WR EH SDLG
7KH &RPSDQ\ XVHV WKLV PHWKRG IRU ORVVHV DQG ORVV DGMXVWPHQW H[SHQVHV
7KH &RPSDQ\ DQDO\]HV FDWDVWURSKH ORVVHV VHSDUDWHO\ IURP QRQFDWDVWURSKH ORVVHV )RU FDWDVWURSKH ORVVHV WKH &RPSDQ\
GHWHUPLQHV FODLP FRXQWV EDVHG RQ FODLPV UHSRUWHG DQG GHYHORSPHQW H[SHFWDWLRQV IURP SUHYLRXV FDWDVWURSKHV DQG DSSOLHV DQ DYHUDJH
H[SHFWHG ORVV SHU FODLP EDVHG RQ UHVHUYHV HVWDEOLVKHG E\ DGMXVWHUV DQG DYHUDJH ORVVHV RQ SUHYLRXV VLPLODU FDWDVWURSKHV
7KHUH DUH PDQ\ IDFWRUV WKDW FDQ FDXVH YDULDELOLW\ EHWZHHQ WKH XOWLPDWH H[SHFWHG ORVV DQG WKH DFWXDO GHYHORSHG ORVV :KLOH
WKHUH DUH FHUWDLQO\ RWKHU IDFWRUV WKH &RPSDQ\ EHOLHYHV WKDW WKH IROORZLQJ WKUHH LWHPV WHQG WR FUHDWH WKH PRVW YDULDELOLW\ EHWZHHQ
H[SHFWHG ORVVHV DQG DFWXDO ORVVHV
,QIODWLRQ
)RU WKH &RPSDQ\µV &DOLIRUQLD DXWRPRELOH OLQHV RI EXVLQHVV WRWDO UHVHUYHV DUH FRPSULVHG RI WKH IROORZLQJ
%, UHVHUYHV±DSSUR[LPDWHO\  RI WRWDO UHVHUYHV
0DWHULDO GDPDJH 0' UHVHUYHV LQFOXGLQJ FROOLVLRQ DQG FRPSUHKHQVLYH SURSHUW\ GDPDJH±DSSUR[LPDWHO\ 
RI WRWDO UHVHUYHV
/RVV DGMXVWPHQW H[SHQVHV UHVHUYHV±DSSUR[LPDWHO\  RI WRWDO UHVHUYHV
/RVV GHYHORSPHQW RQ 0' UHVHUYHV LV JHQHUDOO\ LQVLJQLILFDQW EHFDXVH 0' FODLPV DUH JHQHUDOO\ VHWWOHG LQ D VKRUWHU SHULRG
WKDQ %, FODLPV 7KH PDMRULW\ RI WKH ORVV DGMXVWPHQW H[SHQVH UHVHUYHV DUH HVWLPDWHG FRVWV WR GHIHQG %, FODLPV ZKLFK WHQG WR UHTXLUH
ORQJHU SHULRGV RI WLPH WR VHWWOH DV FRPSDUHG WR 0' FODLPV
%, ORVV UHVHUYHV DUH JHQHUDOO\ WKH PRVW GLIILFXOW WR HVWLPDWH EHFDXVH WKH\ WDNH ORQJHU WR FORVH WKDQ RWKHU FRYHUDJHV %,
FRYHUDJH LQ WKH &RPSDQ\µV SROLFLHV LQFOXGHV LQMXULHV VXVWDLQHG E\ DQ\ SHUVRQ RWKHU WKDQ WKH LQVXUHG H[FHSW LQ WKH FDVH RI XQLQVXUHG
RU XQGHULQVXUHG PRWRULVW %, FRYHUDJH ZKLFK FRYHUV GDPDJHV WR WKH LQVXUHG IRU %, FDXVHG E\ XQLQVXUHG RU XQGHULQVXUHG PRWRULVWV
%, SD\PHQWV DUH SULPDULO\ IRU PHGLFDO FRVWV DQG JHQHUDO GDPDJHV
7KH IROORZLQJ WDEOH SUHVHQWV WKH W\SLFDO FORVXUH SDWWHUQV RI %, FODLPV LQ WKH &DOLIRUQLD DXWRPRELOH LQVXUDQFH FRYHUDJH