Mercury General Corporation Announces Fourth Quarter Results

Mercury General Corporation (NYSE: MCY) reported today net income of $44.6 million ($0.81 per share-diluted) in the fourth quarter 2007 compared with $50.1 million ($0.91 per share-diluted) for the same period in 2006. For the year, net income was $237.8 million ($4.34 per share-diluted) compared with net income of $214.8 million ($3.92 per share-diluted) for the same period in 2006. Included in net income are net realized investment gains, net of tax, of $6.4 million ($0.12 per share-diluted) in the fourth quarter of 2007 compared with net realized investment gains, net of tax, of $1.3 million ($0.02 per share-diluted) for the same period in 2006, and net realized investment gains, net of tax, of $13.5 million ($0.25 per share-diluted) for the entire 2007 year compared with net realized investment gains, net of tax, of $10.0 million ($0.18 per share-diluted) for 2006. Net income in the fourth quarter of 2007 also includes approximately $23 million ($15 million after tax benefit or $0.27 per share-diluted) in losses resulting from the October 2007 Southern California fire storms.

Company-wide net premiums written were $699.9 million in the fourth quarter 2007, a 5.5% decrease over fourth quarter 2006 net premiums written of $740.7 million, and were approximately $3.0 billion for the year, a 2.1% decrease over the same period in 2006. California net premiums written were $547.8 million in the fourth quarter of 2007, a decrease of 1.9% over the same period in 2006, and were approximately $2.3 billion for the year, a 2.4% increase over the same period in 2006. Non-California net premiums written were $152.1 million in the fourth quarter of 2007, a 16.5% decrease over the same period in 2006, and were $677.6 million for the year, a decrease of 14.8% over the same period in 2006.

The Company's combined ratio (GAAP basis) was 98.8% in the fourth quarter and 95.4% for the year compared with 96.5% and 95.0% for the same periods in 2006. The Southern California fire storms negatively impacted the combined ratio by 3.1% for the fourth quarter of 2007 and 0.8% for the entire year of 2007. Adverse development on prior accident years' loss reserves was approximately $20 million for the year ended December 31 in both 2007 and 2006. For business produced in California, loss development on prior accident years' loss reserves was approximately $26 million adverse and $15 million positive for the years ended December 31, 2007 and 2006, respectively. For business produced outside of California, development on prior accident years' loss reserves was approximately $6 million positive and $35 million adverse for the years ended December 31, 2007 and 2006, respectively.

Net investment income of $36.8 million (after tax $33.2 million) in the fourth quarter of 2007 decreased by 4.8% over the same period in 2006. The after-tax yield on investment income was 3.8% on average assets of $3.5 billion (fixed maturities and equities at cost) for the quarter. This compares with an after-tax yield on investment income of 4.0% on average investments of $3.4 billion (fixed maturities and equities at cost) for the same period in 2006. Net investment income for the entire year of 2007 was $158.9 million (after tax $137.8 million), an increase of 5.2% over the same period in 2006. The after-tax yield on investment income was 4.0% on average assets of $3.5 billion (fixed

maturities and equities at cost) for the year. This compares with an after-tax yield on investment income of 3.8% on average investments of $3.3 billion (fixed maturities and equities at cost) for the same period in 2006.

The Board of Directors declared a quarterly dividend of $0.58 per share, representing an 11.5% increase over the quarterly dividend amount paid in 2007. The dividend is to be paid on March 27, 2008 to shareholders of record on March 17, 2008. The Company's book value per share at December 31, 2007 was $34.02.

Mercury General Corporation and its subsidiaries are a multiple line insurance organization offering predominantly personal automobile and homeowners insurance through a network of independent producers in many states. For more information, visit the Company's website at http://www.mercuryinsurance.com/. The Company will be hosting a conference call and webcast today at 10:00 A.M. Pacific time where management will discuss results and address questions. The teleconference and webcast can be accessed by calling (877) 807-1888 (USA), (706) 679-3827 (International) or by visiting http://www.mercuryinsurance.com/. A replay of the call will be available beginning at 1:30 P.M. Pacific time and running through February 18, 2008. The replay telephone numbers are (800) 642-1687 (USA) or (706) 645-9291 (International). The conference ID# is 31139571. The replay will also be available on the Company's website shortly following the call.

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for certain forward-looking statements. The statements contained in this press release are forward-looking statements based on the Company's current expectations and beliefs concerning future developments and their potential effects on the Company. There can be no assurance that future developments affecting the Company will be those anticipated by the Company. Actual results may differ from those projected in the forward-looking statements. These forward-looking statements involve significant risks and uncertainties (some of which are beyond the control of the Company) and are subject to change based upon various factors, including but not limited to the following risks and uncertainties: changes in the demand for the Company's insurance products, inflation and in general economic conditions; the accuracy and adequacy of the Company's pricing methodologies; adverse weather conditions or natural disasters in the markets served by the Company; market risks associated with the Company's investment portfolio; uncertainties related to estimates, assumptions and projections generally; the possibility that actual loss experience may vary adversely from the actuarial estimates made to determine the Company's loss reserves in general; the Company's ability to obtain and the timing of regulatory approval for requested rate changes; legislation adverse to the automobile insurance industry or business generally that may be enacted in California or other states; the Company's success in expanding its business in states outside of California; the Company's ability to successfully complete its initiative to standardize its policies and procedures nationwide in all of its functional areas; the presence of competitors with greater financial resources and the impact of competitive pricing; changes in driving patterns and loss trends; acts of war and terrorist activities; court decisions and trends in litigation and health care and auto repair costs and marketing efforts; and various legal, regulatory and litigation risks. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise. For a more detailed discussion of some of the foregoing risks and uncertainties, see the Company's filings with the Securities and Exchange Commission.

  Mercury General Corporation
  Information Regarding Non-GAAP Measures

The Company has presented information within this document containing operating measures which in management's opinion provide investors with useful, industry specific information to help them evaluate, and perform meaningful comparisons of, the Company's performance, but that may not be presented in accordance with Generally Accepted Accounting Principles ("GAAP"). These measures are not intended to replace, and should be read in conjunction with, the GAAP financial results. The Company has reconciled these measures with the

most directly comparable GAAP measure in the supplemental schedule entitled, "Summary of Operating Results."

Net premiums written represents the premiums charged on policies issued during a fiscal period. Net premiums earned, the most directly comparable GAAP measure, represents the portion of premiums written that is recognized as income in the financial statements for the periods presented and earned on a pro-rata basis over the term of the policies. Net premiums written is meant as supplemental information and is not intended to replace Net premiums earned. It should be read in conjunction with the GAAP financial results.

Paid losses and loss adjustment expenses is the portion of Incurred losses and loss adjustment expenses, the most directly comparable GAAP measure, excluding the effects of changes in the loss reserve accounts. Paid losses and loss adjustment expenses is meant as supplemental information and is not intended to replace Incurred losses and loss adjustment expenses. It should be read in conjunction with the GAAP financial results.

               Mercury General Corporation and Subsidiaries
                       Summary of Operating Results
                (000's except per-share amounts and ratios)
                               (unaudited)

                                Quarter Ended         Twelve Months Ended
                                 December 31,             December 31,
                               2007        2006        2007         2006

  Net premiums written      $699,898     $740,742   $2,982,024   $3,044,774
  Net premiums earned        735,251      753,871    2,993,877    2,997,023
  Paid losses and loss
   adjustment expenses       516,316      495,573    2,019,579    1,944,887
  Incurred losses and
   loss adjustment
   expenses                  524,716      521,021    2,036,644    2,021,646
  Net investment income       36,755       38,597      158,911      151,099
  Net realized investment
   gains, net of tax           6,378        1,339       13,525       10,033
  Net income                $ 44,592     $ 50,132     $237,832     $214,817

  Basic average shares
   outstanding                54,723       54,669       54,704       54,651

  Diluted average shares
   outstanding                54,827       54,820       54,829       54,786

  Basic Per Share Data
  Net income                   $0.81        $0.92        $4.35        $3.93

  Net realized investment
   gains, net of tax           $0.12        $0.02        $0.25        $0.18

  Incurred losses from
   Southern California
   fire storms, net
   of tax benefit             $(0.27)        N/A        $(0.27)         N/A

  Operating Ratios-GAAP(a)
   Basis
  Loss ratio                   71.4%        69.1%        68.0%        67.5%
  Expense ratio                27.4%        27.4%        27.4%        27.5%
  Combined ratio               98.8%        96.5%        95.4%        95.0%

  Impact of California
   fire storms on
   loss ratio                   3.1%         N/A          0.8%          N/A


  Reconciliations of
   Operating Measures
   to Comparable GAAP
   (a) Measures

  Net premiums written      $699,898     $740,742   $2,982,024   $3,044,774
  Increase in unearned
   premiums                   35,353       13,129       11,853     (47,751)
  Net premiums earned       $735,251     $753,871   $2,993,877   $2,997,023

  Paid losses and loss
   adjustment expenses      $516,316     $495,573   $2,019,579   $1,944,887

  Increase in net loss
   and loss adjustment
   expense reserves            8,400       25,448       17,065       76,759

  Incurred losses and
   loss adjustment
   expenses                 $524,716     $521,021   $2,036,644   $2,021,646

  (a) Generally Accepted Accounting Principles

Mercury General Corporation and Subsidiaries Other Supplemental Information (000's except ratios) (unaudited)

                                   Quarter Ended      Twelve Months Ended
                                    December 31,          December 31,
                                 2007        2006      2007        2006
  California Operations (1)
  Net premiums written          $547,818   $558,548  $2,304,412  $2,249,737
  Net premiums earned            571,165    562,992   2,302,383   2,210,801

  Loss ratio                       71.9%      66.4%       66.3%       63.9%
  Expense ratio                    26.4%      25.8%       26.3%       26.4%
  Combined ratio                   98.3%      92.2%       92.6%       90.3%


  Non-California
   Operations (2)
  Net premiums written          $152,080   $182,194    $677,612    $795,037
  Net premiums earned            164,086    190,879     691,494     786,222

  Loss ratio                       69.3%      77.0%       73.7%       77.6%
  Expense ratio                    31.1%      32.1%       30.7%       30.7%
  Combined ratio                  100.4%     109.1%      104.4%      108.3%



                                    At December 31,
  Policies-in-force (000's)         2007       2006

  California personal auto         1,112      1,145
  California commercial auto          18         20
  Non-California personal auto       284        338
  California homeowners              269        261
  Florida homeowners                  12         14

  Notes:
  All ratios are calculated on GAAP basis.

  (1) Includes homeowners, auto, commercial property and other immaterial
      California business lines
  (2) Includes all states except California



               Mercury General Corporation and Subsidiaries
              Condensed Balance Sheets and Other Information
                     (000's except per-share amounts)
                               (unaudited)

                                                December 31,   December 31,
                                                    2007           2006
  Investments:
    Fixed maturities available for sale,
     at fair value (amortized cost
     $2,860,455 in 2007 and $2,851,715
     in 2006)
      (includes hybrid financial
      instruments: $31,770 in 2007)             $2,887,760     $2,898,987
    Equity securities available for
     sale, at fair value (cost $317,869 in
     2007 and $258,310 in 2006)                    413,123        318,449
    Equity securities trading,
     at fair value (cost $13,126 in 2007)           15,114              -
    Short-term investments,
     at cost, which approximates fair value        272,678        282,302
      Total investments                          3,588,675      3,499,738
  Net receivables                                  367,686        372,777
  Deferred policy acquisition costs                209,805        209,783
  Other assets                                     248,330        218,764
  Total assets                                  $4,414,496     $4,301,062

  Losses and loss adjustment expenses           $1,103,915     $1,088,822
  Unearned premiums                                938,370        950,344
  Notes payable                                    138,562        141,554
  Other liabilities                                371,651        396,212
  Shareholders' equity                           1,861,998      1,724,130
      Total liabilities
       and shareholders' equity                 $4,414,496     $4,301,062


  Common stock-shares outstanding                   54,730         54,670
  Book value per share                              $34.02         $31.54
  Statutory surplus                           $1.7 billion   $1.6 billion
  Portfolio duration                             4.4 years      4.0 years

First Call Analyst:
FCMN Contact: jwalters@mercuryinsurance.com

SOURCE: Mercury General Corporation

CONTACT: Theodore Stalick, VP-CFO of Mercury General Corporation,
+1-323-937-1060

Web site: http://www.mercuryinsurance.com/