Mercury Insurance 2015 Annual Report Download - page 91

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than 375% of the authorized control level RBC as of December 31, 2015, 2014 and 2013 . Generally, an RBC ratio of 200% or
less would require some form of regulatory or company action.
14. Profit Sharing Plan and Annual Cash Bonuses
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.
The Plan includes an option for employees to make salary deferrals under Section 401(k) of the Internal Revenue Code. The
matching contributions, at a rate set by the Board of Directors, totaled $8.5 million, $8.0 million, and $8.1 million for 2015, 2014,
and 2013, respectively.
The Plan also includes an employee stock ownership plan that covers substantially all employees. The Board of Directors
authorizes the Plan to purchase the Company’s common stock in the open market for allocation to the Plan participants. No
purchases were made during the past three years.
The Company also provides annual cash bonuses to eligible employees based on performance criteria for each recipient
and for the Company as a whole. The Company performance goals were based on the Company's premium growth and combined
ratio. The Company paid annual cash bonuses of $20.7 million, $19.1 million, and $0.0 million in 2015, 2014, and 2013,
respectively.
15. Share-Based Compensation
In February 2015, the Company adopted the 2015 Incentive Award Plan (the "2015 Plan"), replacing the 2005 Equity
Incentive Plan (the "2005 Plan") which expired in January 2015. The 2015 Plan was approved at the Company's Annual Meeting
of Shareholders in May 2015. A maximum of 4,900,000 shares of common stock under the 2015 Plan are authorized for issuance
upon exercise of stock options, stock appreciation rights and other awards, or upon vesting of restricted or deferred stock awards. As
of December 31, 2015, onlystock options and restricted stock unit awards have been grantedunder these plans. Beginning January 1,
2008, stock options granted, for which the Company has recognized share-based compensation expense, become exercisable at a
rate of 25% per year beginning one year from the date granted, are granted at the closing price of the Company's stock on the date
of grant, and expire after 10 years. Prior to January 1, 2008, stock options granted became exercisable at a rate of 20% per year.
Year Ended December 31,
2015 2014 2013
(Amounts in thousands)
Cash received from stock option exercises $ 2,111 $ 6,247 $ 1,446
Compensation cost 5,208 4,112 974
Excess tax benefit 27 148 202
Stock Option Awards
No stock options were awarded in 2015 and 2014 under the 2015 Plan and 2005 Plan, respectively. The fair values of stock
options awarded in 2013 under the 2005 Plan were estimated on the dates of grant using a closed-form option valuation model
(Black-Scholes). The following table provides the assumptions used in the calculation of grant-date fair values of stock options
awarded during 2013 based on the Black-Scholes option pricing model.
2013
Weighted-average grant-date fair value $7.11
Expected volatility 33.16% - 33.18%
Weighted-average expected volatility 33.17%
Risk-free interest rate 0.88% - 1.60%
Expected dividend yield 5.40% - 5.76%
Expected term in months 72