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Condensed Financial Information of Registrant | 12 Months Ended
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Dec. 31, 2019
Condensed Financial Information Disclosure [Abstract] |
Condensed Financial Information of Registrant |
MERCURY GENERAL CORPORATION CONDENSED FINANCIAL INFORMATION OF REGISTRANT BALANCE SHEETS
| December 31,
| 2019 |  | 2018
| (Amounts in thousands)
ASSETS |  |  |
Investments, at fair value: |  |  |
Equity securities (cost $81,802; $110,279) | $ | 114,668 |  |  | $ | 119,037 |
Short-term investments (cost $29,356; $3,166) | 29,356 |  |  | 3,166 |
Investment in subsidiaries | 2,008,163 |  |  | 1,850,582 |
Total investments | 2,152,187 |  |  | 1,972,785 |
Cash | 39,766 |  |  | 24,140 |
Accrued investment income | 90 |  |  | 161 |
Amounts receivable from affiliates | 244 |  |  | 1,172 |
Current income taxes | — |  |  | — |
Income tax receivable from affiliates | 9,192 |  |  | 19,225 |
Other assets | 312 |  |  | 446 |
Total assets | $ | 2,201,791 |  |  | $ | 2,017,929 |
LIABILITIES AND SHAREHOLDERS’ EQUITY |  |  |
Notes payable | $ | 372,133 |  |  | $ | 371,734 |
Accounts payable and accrued expenses | 17 |  |  | 25 |
Amounts payable to affiliates | 22 |  |  | 3,082 |
Income tax payable to affiliates | 4,106 |  |  | 580 |
Current income taxes | 14,052 |  |  | 17,773 |
Deferred income taxes | 7,059 |  |  | 1,691 |
Other liabilities | 4,900 |  |  | 5,360 |
Total liabilities | 402,289 |  |  | 400,245 |
Commitments and contingencies |  |  |
Shareholders’ equity: |  |  |
Common stock | 98,828 |  |  | 98,026 |
Retained earnings | 1,700,674 |  |  | 1,519,658 |
Total shareholders’ equity | 1,799,502 |  |  | 1,617,684 |
Total liabilities and shareholders’ equity | $ | 2,201,791 |  |  | $ | 2,017,929 |
SCHEDULE II, Continued
MERCURY GENERAL CORPORATION CONDENSED FINANCIAL INFORMATION OF REGISTRANT STATEMENTS OF OPERATIONS
| Year Ended December 31,
| 2019 |  | 2018 |  | 2017
| (Amounts in thousands)
Revenues: |  |  |  |  |
Net investment income | $ | 3,735 |  |  | $ | 4,661 |  |  | $ | 4,090 |
Net realized investment gains (losses) | 31,682 |  |  | (10,797 | ) |  | 19,279 |
Other | 5 |  |  | 2 |  |  | — |
Total revenues | 35,422 |  |  | (6,134 | ) |  | 23,369 |
Expenses: |  |  |  |  |
Other operating expenses | 2,592 |  |  | 2,343 |  |  | 1,918 |
Interest | 17,036 |  |  | 17,036 |  |  | 14,856 |
Total expenses | 19,628 |  |  | 19,379 |  |  | 16,774 |
Income (loss) before income taxes and equity in net income of subsidiaries | 15,794 |  |  | (25,513 | ) |  | 6,595 |
Income tax expense (benefit) | 2,816 |  |  | (5,144 | ) |  | 1,572 |
Income (loss) before equity in net income of subsidiaries | 12,978 |  |  | (20,369 | ) |  | 5,023 |
Equity in net income of subsidiaries | 307,109 |  |  | 14,641 |  |  | 139,854 |
Net income (loss) | $ | 320,087 |  |  | $ | (5,728 | ) |  | $ | 144,877 |
SCHEDULE II, Continued
MERCURY GENERAL CORPORATION CONDENSED FINANCIAL INFORMATION OF REGISTRANT STATEMENTS OF CASH FLOWS
| Year Ended December 31,
| 2019 |  | 2018 |  | 2017
| (Amounts in thousands)
Cash flows from operating activities: |  |  |  |  |
Net cash used in operating activities | $ | (5,392 | ) |  | $ | (16,108 | ) |  | $ | (14,503 | )
Cash flows from investing activities: |  |  |  |  |
Capital contribution to subsidiaries | (125 | ) |  | (541 | ) |  | (140,125 | )
Capital distribution from subsidiaries | 30,069 |  |  | — |  |  | — |
Distributions received from special purpose entities | 5,153 |  |  | 5,998 |  |  | 5,243 |
Dividends received from subsidiaries | 114,431 |  |  | 135,000 |  |  | 109,000 |
Fixed maturity securities available for sale in nature: |  |  |  |  |
Sales | — |  |  | — |  |  | 1,614 |
Equity securities available for sale in nature |  |  |  |  |
Purchases | (39,966 | ) |  | (22,286 | ) |  | (22,406 | )
Sales | 74,663 |  |  | 33,052 |  |  | 18,876 |
Calls | — |  |  | — |  |  | 4,000 |
(Increase) decrease in short-term investments | (25,213 | ) |  | 18,065 |  |  | (20,607 | )
Other, net | 376 |  |  | 605 |  |  | 310 |
Net cash provided by (used in) investing activities | 159,388 |  |  | 169,893 |  |  | (44,095 | )
Cash flows from financing activities: |  |  |  |  |
Dividends paid to shareholders | (139,071 | ) |  | (138,478 | ) |  | (137,886 | )
Proceeds from stock options exercised | 701 |  |  | 358 |  |  | 2,162 |
Net proceeds from issuance of senior notes | — |  |  | — |  |  | 371,011 |
Payoff of principal on loan and credit facilities | — |  |  | — |  |  | (180,000 | )
Net cash (used in) provided by financing activities | (138,370 | ) |  | (138,120 | ) |  | 55,287 |
Net increase (decrease) in cash | 15,626 |  |  | 15,665 |  |  | (3,311 | )
Cash: |  |  |  |  |
Beginning of year | 24,140 |  |  | 8,475 |  |  | 11,786 |
End of year | $ | 39,766 |  |  | $ | 24,140 |  |  | $ | 8,475 |
SUPPLEMENTAL CASH FLOW DISCLOSURE |  |  |  |  |
Interest paid | $ | 16,586 |  |  | $ | 16,586 |  |  | $ | 9,435 |
Income taxes (refunded) paid, net | $ | (12,391 | ) |  | $ | 4,296 |  |  | $ | 346 |
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. The agreement had an initial term of one year, subject to periodic renewal. In July 2018, the agreement was renewed through January 24, 2020. During the fourth quarter of 2019, the underlying obligations were liquidated and the total return swap agreement between FFL and Citibank was terminated. Under the agreement, FFL received the income equivalent on underlying obligations due to Citibank and paid to Citibank interest on the outstanding notional amount of the underlying obligations. The total return swap was secured by approximately $31 million of U.S. Treasuries as collateral, which were included in short-term investments on the consolidated balance sheets. The Company paid interest equal to LIBOR plus 128 basis points prior to the renewal of the agreement in January 2018, LIBOR plus 120 basis points subsequent to the January 2018 renewal through July 2018, and LIBOR plus105 basis points subsequent to the July 2018 renewal until December 2019, on approximately $100 million of underlying obligations as of December 31, 2018. 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 was renewed for an additional one-year term through February 17, 2018. During June and July 2017, the underlying obligations were liquidated and the total return swap agreement between AFL and Citibank was terminated on. Under the agreement, AFL received the income equivalent on underlying obligations due to Citibank and paid to Citibank interest on the outstanding notional amount of the underlying obligations. The total return swap was secured by approximately $40 million of U.S. Treasuries as collateral, which were included in short-term investments on the consolidated balance sheets. The Company paid interest equal to LIBOR plus 135 basis points prior to the amendment of the agreement in January 2017 and LIBOR plus 128 basis points subsequent to the amendment until July 2017, on approximately $152 million of underlying obligations as of December 31, 2016. Distributions of $5.2 million and $6.0 million were received in 2019 and 2018, respectively, from these special purpose entities. Dividends received from Subsidiaries Dividends of $114,431,433, $135,000,000 and $109,000,000 were received by Mercury General from its 100% owned insurance subsidiaries in 2019, 2018 and 2017, 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 $125,000, $540,619 and $140,125,000 in 2019, 2018 and 2017, respectively. In addition, Mercury General received a capital distribution from one of its insurance subsidiaries of $30,068,567 in 2019. Notes Payable On March 8, 2017, Mercury General completed a public debt offering issuing $375 million of senior notes. The notes are unsecured senior obligations of Mercury General, with a 4.4% annual coupon payable on March 15 and September 15 of each year commencing September 15, 2017. These notes mature on March 15, 2027. The Company used the proceeds from the notes to pay off the total outstanding balance of $320 million under the existing loan and credit facility agreements and terminated the agreements on March 8, 2017. The remainder of the proceeds from the notes was used for general corporate purposes. Mercury General incurred debt issuance costs of approximately $3.4 million, inclusive of underwriters' fees. The notes were issued at a slight discount of 99.847% of par, resulting in the effective annualized interest rate, including debt issuance costs, of approximately 4.45%. Commitments and Contingencies On March 29, 2017, Mercury General entered into an unsecured credit agreement that provides for revolving loans of up to $50 million and matures on March 29, 2022. The interest rates on borrowings under the credit facility are based on the Company's debt to total capital ratio and range from LIBOR plus 112.5 basis points when the ratio is under 15% to LIBOR plus 162.5 basis points when the ratio is greater than or equal to 25%. Commitment fees for the undrawn portions of the credit facility range from 12.5 basis points when the ratio is under 15% to 22.5 basis points when the ratio is greater than or equal to 25%. The debt to total capital ratio is expressed as a percentage of (a) consolidated debt to (b) consolidated shareholders' equity plus consolidated debt. The Company's debt to total capital ratio was 17.2% at December 31, 2019, resulting in a 15 basis point commitment fee on the $50 million undrawn portion of the credit facility. As of February 6, 2020, there have been no borrowings under this facility. 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 |  | Mercury Plus Insurance Services LLC
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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -SubTopic 10 -Section 45 -Paragraph 11 -URI http://asc.fasb.org/extlink&oid=108774443&loc=d3e5283-111683 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -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 + Details
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