Mercury Insurance 2015 Annual Report Download - page 55

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43
Year Ended December 31, 2013
Gains (Losses) Recognized in Income
Sales
Changes in fair
value Total
(Amounts in thousands)
Net realized investment gains (losses):
Fixed maturity securities (1)(2) $ 5,478 $ (100,703)$ (95,225)
Equity securities (1)(4) 24,088 56,822 80,910
Short-term investments (1) (903)(156)(1,059)
Total return swap 527 1,649 2,176
Options sold 1,835 (59) 1,776
Total $ 31,025 $ (42,447)$ (11,422)
__________
(1) The changes in fair value of the investment portfolio result from the application of the fair value option.
(2) The Company’s municipal bond holdings represent the majority of the fixed maturity portfolio. The fair value increases in
2014 were primarily caused by the overall improvement in the municipal bond market, and the fair value decreases in 2013
were primarily caused by the overall decline in the municipal bond market.
(3) Prior to the fourth quarter of 2014, the Company realized gains by selling equity securities. During the fourth quarter of
2014, decreases in the fair value of equity securities were primarily due to a decline in the value of the Company's holdings
in energy stocks.
(4) For 2013, the increases in fair value were primarily caused by the overall improvement in the equity markets.
Net Income
Year Ended December 31,
2014 2013
(Amounts in thousands, except per share data)
Net income $ 177,949 $ 112,143
Basic average shares outstanding 55,008 54,947
Diluted average shares outstanding 55,020 54,964
Basic Per Share Data:
Net Income $ 3.23 $ 2.04
Net realized investment gains (losses), net of tax $ 0.95 $ (0.14)
Diluted Per Share Data:
Net Income $ 3.23 $ 2.04
Net realized investment gains (losses), net of tax $ 0.95 $ (0.14)
LIQUIDITY AND CAPITAL RESOURCES
A. General
The Company is largely dependent upon dividends received from its insurance subsidiaries to pay debt service costs and
to make distributions to its shareholders. Under current insurance law, the Insurance Companies are entitled to pay ordinary
dividends of approximately $164 million in 2016 to Mercury General. The Insurance Companies paid Mercury General ordinary
dividends of $133 million during 2015. As of December 31, 2015, Mercury General had approximately $149 million in investments
and cash that could be utilized to satisfy its direct holding company obligations.
The principal sources of funds for the Insurance Companies are premiums, sales and maturity of invested assets, and dividend
and interest income from invested assets. The principal uses of funds for the Insurance Companies are the payment of claims and
related expenses, operating expenses, dividends to Mercury General, payment of debt, and the purchase of investments.