Mercury Insurance 2015 Annual Report Download - page 26

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14
Ms. Sullivan, Vice President—Human Capital, joined the Company in 2012. Prior to joining the Company, she served as
Senior Vice President, Human Capital for Arcadian Health Plan from 2008 to 2012. Prior to 2008, she held various leadership
positions at Kaiser Permanente, Progressive Insurance, and Score Educational Centers.
Mr. Toney, Vice President and Chief Actuary, joined the Company in 1984 as a programmer/analyst. In 1994, he earned his
Fellowship in the Casualty Actuarial Society and was appointed to his current position. In 2011, he became a board member of
the Personal Insurance Federation of California. Mr. Toney is Mr. Joseph’s nephew.
Ms. Walters, Vice President—Corporate Affairs and Secretary, has been employed by the Company since 1967, and has
served as its Secretary since 1982. Ms. Walters was named Vice President—Corporate Affairs in 1998.
Item 1A. Risk Factors
The Company’s business involves various risks and uncertainties in addition to the normal risks of business, some of which
are discussed in this section. It should be noted that the Company’s business and that of other insurers may be adversely affected
by a downturn in general economic conditions and other forces beyond the Company’s control. In addition, other risks and
uncertainties not presently known or that the Company currently believes to be immaterial may also adversely affect the Company’s
business. Any such risks or uncertainties, or any of the following risks or uncertainties, that develop into actual events could result
in a material and adverse effect on the Company’s business, financial condition, results of operations, or liquidity.
The information discussed below should be considered carefully with the other information contained in this Annual Report
on Form 10-K and the other documents and materials filed by the Company with the SEC, as well as news releases and other
information publicly disseminated by the Company from time to time. The following risk factors are in no particular order.
Risks Related to the Company’s Business
The Company remains highly dependent upon California to produce revenues and operating profits.
For the year ended December 31, 2015, the Company generated 81.0% of its direct automobile insurance premiums written
in California. The Company’s financial results are subject to prevailing regulatory, legal, economic, demographic, competitive,
and other conditions in the states in which the Company operates and changes in any of these conditions could negatively impact
the Company’s results of operations.
Mercury General is a holding company that relies on regulated subsidiaries for cash operating profits to satisfy its
obligations.
As a holding company, Mercury General maintains no operations that generate revenue sufficient to pay operating expenses,
shareholders’ dividends, or principal or interest on its indebtedness. Consequently, Mercury General relies on the ability of the
Insurance Companies, particularly the California Companies, to pay dividends for Mercury General to meet its obligations. The
ability of the Insurance Companies to pay dividends is regulated by state insurance laws, which limit the amount of, and in certain
circumstances may prohibit the payment of, cash dividends. Generally, these insurance regulations permit the payment of dividends
only out of earned surplus in any year which, together with other dividends or distributions made within the preceding 12 months,
do not exceed the greater of 10% of statutory surplus as of the end of the preceding year or the net income for the preceding year,
with larger dividends payable only after receipt of prior regulatory approval. The inability of the Insurance Companies to pay
dividends in an amount sufficient to enable the Company to meet its cash requirements at the holding company level could have
a material adverse effect on the Company’s results of operations, financial condition, and its ability to pay dividends to its
shareholders.
The Insurance Companies are subject to minimum capital and surplus requirements, and any failure to meet these
requirements could subject the Insurance Companies to regulatory action.
The Insurance Companies are subject to risk-based capital standards and other minimum capital and surplus requirements
imposed under applicable laws of their state of domicile. The risk-based capital standards, based upon the Risk-Based Capital
Model Act adopted by the NAIC, require the Insurance Companies to report their results of RBC calculations to state departments
of insurance and the NAIC. If any of the Insurance Companies fails to meet these standards and requirements, the DOI regulating
such subsidiary may require specified actions by the subsidiary.
The Company’s success depends on its ability to accurately underwrite risks and to charge adequate premiums to
policyholders.