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Condensed Financial Information of Registrant | 12 Months Ended
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Dec. 31, 2016
Condensed Financial Information of Parent Company Only Disclosure [Abstract] |
Condensed Financial Information of Registrant |
MERCURY GENERAL CORPORATION CONDENSED FINANCIAL INFORMATION OF REGISTRANT BALANCE SHEETS
| December 31,
| 2016 |  | 2015
| (Amounts in thousands)
ASSETS |  |  |
Investments, at fair value: |  |  |
Fixed maturity securities (amortized cost $1,609; $557) | $ | 1,605 |  |  | $ | 571 |
Equity securities (cost $113,943; $131,217) | 122,717 |  |  | 127,572 |
Short-term investments (cost $629; $1,144) | 629 |  |  | 1,144 |
Investment in subsidiaries | 1,810,663 |  |  | 1,819,426 |
Total investments | 1,935,614 |  |  | 1,948,713 |
Cash | 11,786 |  |  | 20,139 |
Accrued investment income | 189 |  |  | 208 |
Amounts receivable from affiliates | 226 |  |  | 220 |
Current income taxes | — |  |  | 8,894 |
Deferred income taxes | 2,702 |  |  | 10,524 |
Income tax receivable from affiliates | 35,237 |  |  | 5,917 |
Other assets | 414 |  |  | 2,981 |
Total assets | $ | 1,986,168 |  |  | $ | 1,997,596 |
LIABILITIES AND SHAREHOLDERS’ EQUITY |  |  |
Notes payable | $ | 180,000 |  |  | $ | 150,000 |
Accounts payable and accrued expenses | 348 |  |  | — |
Amounts payable to affiliates | 36 |  |  | 25 |
Income tax payable to affiliates | 39,539 |  |  | 26,439 |
Current income taxes | 10,200 |  |  | — |
Other liabilities | 3,643 |  |  | 247 |
Total liabilities | 233,766 |  |  | 176,711 |
Commitments and contingencies |  |  |
Shareholders’ equity: |  |  |
Common stock | 95,529 |  |  | 90,985 |
Additional paid-in capital | — |  |  | 8,870 |
Retained earnings | 1,656,873 |  |  | 1,721,030 |
Total shareholders’ equity | 1,752,402 |  |  | 1,820,885 |
Total liabilities and shareholders’ equity | $ | 1,986,168 |  |  | $ | 1,997,596 |
SCHEDULE II, Continued
MERCURY GENERAL CORPORATION CONDENSED FINANCIAL INFORMATION OF REGISTRANT STATEMENTS OF OPERATIONS
| Year Ended December 31,
| 2016 |  | 2015 |  | 2014
| (Amounts in thousands)
Revenues: |  |  |  |  |
Net investment income | $ | 4,032 |  |  | $ | 4,314 |  |  | $ | 4,478 |
Net realized investment gains (losses) | 6,062 |  |  | (7,026 | ) |  | (9,428 | )
Other | 17 |  |  | — |  |  | — |
Total revenues | 10,111 |  |  | (2,712 | ) |  | (4,950 | )
Expenses: |  |  |  |  |
Other operating expenses | 2,673 |  |  | 7,526 |  |  | 5,971 |
Interest | 2,690 |  |  | 2,127 |  |  | 1,746 |
Total expenses | 5,363 |  |  | 9,653 |  |  | 7,717 |
Income (loss) before income taxes and equity in net income of subsidiaries | 4,748 |  |  | (12,365 | ) |  | (12,667 | )
Income tax expense (benefit) | 8,514 |  |  | (4,708 | ) |  | (100 | )
Loss before equity in net income of subsidiaries | (3,766 | ) |  | (7,657 | ) |  | (12,567 | )
Equity in net income of subsidiaries | 73,864 |  |  | 82,136 |  |  | 190,516 |
Net income | $ | 70,098 |  |  | $ | 74,479 |  |  | $ | 177,949 |
SCHEDULE II, Continued
MERCURY GENERAL CORPORATION CONDENSED FINANCIAL INFORMATION OF REGISTRANT STATEMENTS OF CASH FLOWS
| Year Ended December 31,
| 2016 |  | 2015 |  | 2014
| (Amounts in thousands)
Cash flows from operating activities: |  |  |  |  |
Net cash provided by (used in) operating activities | $ | 526 |  |  | $ | 548 |  |  | $ | (3,434 | )
Cash flows from investing activities: |  |  |  |  |
Capital contribution to subsidiaries | (30,125 | ) |  | (90,125 | ) |  | (30,125 | )
Distributions received from special purpose entities | 4,898 |  |  | 8,883 |  |  | 6,756 |
Dividends received from subsidiaries | 110,800 |  |  | 133,000 |  |  | 225,000 |
Purchases of fixed maturity securities available for sale in nature | (1,060 | ) |  | (571 | ) |  | — |
Equity securities available for sale in nature |  |  |  |  |
Purchases | (64,807 | ) |  | (146,236 | ) |  | (254,572 | )
Sales | 73,942 |  |  | 192,005 |  |  | 90,422 |
(Decrease) in payable for securities, net | — |  |  | — |  |  | (2,489 | )
Net decrease in short-term investments | 515 |  |  | 8,612 |  |  | 1,346 |
Business acquisition | — |  |  | (6,000 | ) |  |
Other, net | 1,614 |  |  | 1,945 |  |  | 2,191 |
Net cash provided by investing activities | 95,777 |  |  | 101,513 |  |  | 38,529 |
Cash flows from financing activities: |  |  |  |  |
Dividends paid to shareholders | (137,201 | ) |  | (136,386 | ) |  | (135,496 | )
Excess tax benefit from exercise of stock options | 913 |  |  | 27 |  |  | 148 |
Proceeds from stock options exercised | 1,632 |  |  | 2,111 |  |  | 6,247 |
Proceeds from bank loan | 30,000 |  |  | — |  |  | 100,000 |
Net cash used in financing activities | (104,656 | ) |  | (134,248 | ) |  | (29,101 | )
Net (decrease) increase in cash | (8,353 | ) |  | (32,187 | ) |  | 5,994 |
Cash: |  |  |  |  |
Beginning of year | 20,139 |  |  | 52,326 |  |  | 46,332 |
End of year | $ | 11,786 |  |  | $ | 20,139 |  |  | $ | 52,326 |
SUPPLEMENTAL CASH FLOW DISCLOSURE |  |  |  |  |
Interest paid | $ | 2,397 |  |  | $ | 2,153 |  |  | $ | 1,757 |
Income taxes (refunded) paid | $ | (339 | ) |  | $ | 1,807 |  |  | $ | 2,112 |
The accompanying condensed financial information should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements included in this report. Distributions received from Special Purpose Entities On February 13, 2014, Fannette Funding LLC ("FFL"), a special purpose investment vehicle, formed by and consolidated into the Company, entered into a total return swap agreement with Citibank. Under the total return swap agreement, FFL receives the income equivalent on underlying obligations due to Citibank and pays to Citibank interest on the outstanding notional amount of the underlying obligations. The total return swap is secured by approximately $30 million of U.S. Treasuries as collateral, which are included in short-term investments on the consolidated balance sheets. The Company paid interest equal to LIBOR plus 145 basis points on approximately $108 million and $95 million of underlying obligations as of December 31, 2016 and 2015, respectively. The agreement had an initial term of one year, subject to annual renewal. In January 2017, the agreement was renewed for an additional year expiring February 17, 2018, and the interest rate was changed to LIBOR plus 128 basis points. On August 9, 2013, Animas Funding LLC ("AFL"), a special purpose investment vehicle, formed and consolidated by the Company, entered into a three-year total return swap agreement with Citibank, which has been renewed for an additional one-year term through February 17, 2018. Under the total return swap agreement, AFL receives the income equivalent on underlying obligations due to Citibank and pays to Citibank interest on the outstanding notional amount of the underlying obligations. The total return swap is secured by approximately $40 million of U.S. Treasuries as collateral, which are included in short-term investments on the consolidated balance sheets. The Company paid interest equal to LIBOR plus 135 basis points on approximately $152 million and $124 million of underlying obligations as of December 31, 2016 and 2015, respectively. The agreement was amended in January 2017 and the interest rate was changed to LIBOR plus 128 basis points. Distributions of $4.9 million and $8.9 million were received in 2016 and 2015, respectively, from these special purpose entities. Dividends received from Subsidiaries Dividends of $110,800,000, $133,000,000 and $225,000,000 were received by Mercury General from its 100% owned insurance subsidiaries in 2016, 2015 and 2014, respectively, and are recorded as a reduction to investment in subsidiaries. Capitalization of Insurance Subsidiaries Mercury General made capital contributions to its insurance subsidiaries of $30,125,000, $90,125,000 and $30,125,000 in 2016, 2015 and 2014, respectively. Business Acquisition Pursuant to an October 22, 2014 Stock Purchase Agreement, Mercury General purchased all the issued and outstanding shares of Workmen’s Auto Insurance Company ("WAIC"), a California domiciled property and casualty insurance company, on January 2, 2015. WAIC is a Los Angeles-based non-standard, private passenger automobile insurance company that operates predominantly in California. Mercury General intends to use the WAIC non-standard automobile product to complement its preferred and standard product offerings. The Company paid $8 million in cash for the shares of WAIC, of which $2 million has been held in escrow for up to three years as security for any loss development on claims incurred on or prior to June 30, 2014. Based on the evaluation performed at the acquisition date and at December 31, 2015, of the claims reserves for WAIC for losses and loss adjustment expenses incurred on or prior to June 30, 2014, the Company estimated that it would recover the $2 million held in escrow and, therefore, the Company deducted it from cash consideration to arrive at the fair value of total consideration transferred. The Company recovered the $2 million held in escrow in 2016. In accordance with regulatory approval requirements, the Company made a $15 million cash capital contribution to WAIC on January 12, 2015. Notes Payable On July 2, 2013, Mercury General entered into an unsecured $200 million five-year revolving credit facility. Effective December 3, 2014, the Company expanded the borrowing capacity from $200 million to $250 million. Total borrowings were $180 million under the credit facility as of December 31, 2016. The interest rate was approximately 1.73% at December 31, 2016. Commitments and Contingencies The borrowings by MCC, a subsidiary, under the $120 million credit facility and $20 million bank loan are secured by approximately $175 million of municipal bonds owned by MCC, at fair value, held as collateral. The total borrowings of $140 million are guaranteed by Mercury General. Federal Income Taxes The Company files a consolidated federal income tax return for the following entities:
Mercury Casualty Company |  | Mercury County Mutual Insurance Company
Mercury Insurance Company |  | Mercury Insurance Company of Florida
California Automobile Insurance Company |  | Mercury Indemnity Company of America
California General Underwriters Insurance Company, Inc. |  | Mercury Select Management Company, Inc.
Mercury Insurance Company of Illinois |  | Mercury Insurance Services LLC
Mercury Insurance Company of Georgia |  | AIS Management LLC
Mercury Indemnity Company of Georgia |  | Auto Insurance Specialists LLC
Mercury National Insurance Company |  | PoliSeek AIS Insurance Solutions, Inc.
American Mercury Insurance Company |  | Animas Funding LLC
American Mercury Lloyds Insurance Company |  | Fannette Funding LLC
Workmen's Auto Insurance Company |  |
The method of allocation between the companies is subject to an agreement approved by the Board of Directors. Allocation is based upon separate return calculations with current credit for net losses incurred by the insurance subsidiaries to the extent it can be used in the current consolidated return.

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- Definition The entire disclosure for condensed financial information, including the financial position, cash flows, and the results of operations of the registrant (parent company) as of the same dates or for the same periods for which audited consolidated financial statements are being presented. Alternatively, the details of this disclosure can be reported by the specific parent company taxonomy elements, indicating the appropriate date and period contexts in an instance document. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 10 -Section S99 -Paragraph 3 -Subparagraph (SX 210.7-05(c)(Schedule II)) -URI http://asc.fasb.org/extlink&oid=6879921&loc=d3e569147-122900 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -SubTopic 10 -Section 45 -Paragraph 11 -URI http://asc.fasb.org/extlink&oid=68079674&loc=d3e5283-111683 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 235 -Section S99 -Paragraph 2 -Subparagraph (SX 210.9-06) -URI http://asc.fasb.org/extlink&oid=6882215&loc=d3e537971-122884 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 10 -Section S99 -Paragraph 6 -Subparagraph (SX 210.5-04(c)(Schedule I)) -URI http://asc.fasb.org/extlink&oid=27047687&loc=d3e5864-122674 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 3 -Subparagraph (SX 210.12-04) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e24072-122690 + Details
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