Mercury General Corporation Announces Second Quarter Results And Management Changes

Mercury General Corporation (NYSE: MCY), a major California automobile insurer, with operations in a number of other states, reported today that net operating earnings for the second quarter of 2000 were $25.6 million, or $.47 per share (diluted), compared with $33.9 million, or $.62 per share (diluted) in 1999. For the full six months, net operating earnings were $54.5 million, or $1.01 per share (diluted), compared with $73.9 million, or $1.35 per share (diluted) in 1999. Per share net income (diluted), including net realized investment gains and losses, was $.48 for the second quarter and $1.03 for the full six months, compared with $.60 and $1.33, respectively, in 1999.

Company wide premiums written in the quarter were $313.3 million, a 4.9% increase over 1999. California premiums written in the quarter were $278.5 million, a 2.7% increase over 1999.

The loss ratio (GAAP basis) was 71.8% in the quarter compared to 67.0% in 1999. During the second quarter, the Company recorded approximately $3 million, or 1.0 point, of adverse loss reserve development on prior accident years primarily relating to the Company's California automobile bodily injury line. In addition, as compared to the first quarter of 2000, the Company recorded an increase in its California bodily injury severity estimates for the 2000 accident year. The loss ratio for California business was 69.8% in the quarter compared to 65.3% in 1999.

The expense ratio (GAAP basis) was 27.2% in the quarter compared to 27.1% in 1999.

The Company's underwriting results were adversely affected during the quarter from its operations outside of California. The Company had an underwriting loss of $10.1 million in the quarter from its operations outside of California compared to an underwriting loss of $5.5 million in the second quarter of 1999. The increased underwriting loss was primarily related to poor loss experience in Florida, Illinois and in the Company's new Texas operations. In addition, operating expenses from the Company's new Texas operations and increased advertising expenses in Florida, Georgia and Illinois contributed to the increased underwriting loss.

Investment income in the quarter increased 4.2% to $26.2 million. After taxes, per share (diluted) investment income was $.43 per share compared with $.41 in 1999. The after tax yield on average investments of $1.7 billion (fixed maturities and equities at cost) was 5.59% for the quarter compared with 5.62% obtained for the year ended 1999.

The Company also announced that Michael Curtius, President and Chief Operating Officer, has decided to reduce his role with the Company, effective October 1, 2000. Mr. Curtius will become an executive consultant to the Company in an exclusive capacity, and will take a more active role in strategic planning matters relating to systems and market growth. He will remain a member of the Board of Directors. George Joseph, Chief Executive Officer, will assume the position of President and Chief Operating Officer. Gabriel Tirador, Vice President and Chief Financial Officer, will assume a greater managerial role in operational matters.

On July 28, 2000, the Board of Directors declared a second quarter dividend of $.24 per share to be paid on September 28, 2000 to holders of record on September 14, 2000. The Company's book value per share at June 30, 2000 was $17.57 per share.

The Company has signed a definitive agreement with Employers Reinsurance Corporation to purchase the authority and right to manage and control Elm County Mutual Insurance Company (Elm). Elm is a county mutual insurance company in the state of Texas. The transaction is subject to regulatory approval and is expected to close within the next 60 days.

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, and in general economic conditions; the possibility actual loss experience may vary adversely from the actuarial estimates made to determine the Company's loss reserves; legislation adverse to the automobile insurance industry or business generally may be enacted in California or other states; the presence of competitors with greater financial resources and the impact of competitive pricing 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
                      SUMMARY OF OPERATING RESULTS (000)

                                                   Quarter Ended June 30,
                                                    2000           1999
  Net Premiums Written                            $313,301       $298,790
  Net Premiums Earned                              312,187        295,934
  Paid Losses and Loss Adjustment Exp.             210,596        189,294
  Incurred Losses                                  224,259        198,266
  Net Investment Income                             26,187         25,120
  Net Operating Income (a)                          25,562         33,905
  Capital Gains (Losses), net of tax                   440           (944)
  Net Income                                       $26,002        $32,961

  Basic Average Shares Outstanding              54,062,288     54,616,785
  Diluted Average Shares Outstanding            54,205,423     54,834,457

  Basic Per Share Data
  Earnings Per Share                                 $0.48          $0.60

  Diluted Per Share Data (b)
  Net Operating Income                               $0.47          $0.62
  Capital Gains (Losses), net of tax                 $0.01         ($0.02)
  Earnings Per Share                                 $0.48          $0.60

  Operating Ratios -- GAAP Basis (c)
  Loss Ratio                                         71.8%          67.0%
  Expense Ratio                                      27.2%          27.1%
  Combined Ratio                                     99.0%          94.1%


                                                 Six Months Ended June 30,
                                                    2000           1999
  Net Premiums Written                            $635,595       $600,740
  Net Premiums Earned                              616,842        586,452
  Paid Losses and Loss Adjustment Exp.             424,959        373,082
  Incurred Losses                                  437,903        381,111
  Net Investment Income                             51,671         49,108
  Net Operating Income (a)                          54,537         73,911
  Capital Gains (Losses), net of tax                 1,403           (906)
  Net Income                                       $55,940        $73,005

  Basic Average Shares Outstanding              54,111,360     54,606,143
  Diluted Average Shares Outstanding            54,234,333     54,836,366

  Basic Per Share Data
  Earnings Per Share                                 $1.03          $1.34

  Diluted Per Share Data (b)
  Net Operating Income                               $1.01          $1.35
  Capital Gains (Losses), net of tax                 $0.03         ($0.02)
  Earnings Per Share                                 $1.03          $1.33

  Operating Ratios -- GAAP Basis (c)
  Loss Ratio                                         71.0%          65.0%
  Expense Ratio                                      27.1%          27.2%
  Combined Ratio                                     98.1%          92.2%

  (a)  Net Income, excluding capital gains, net of tax.
  (b)  Numbers may not sum due to rounding differences
  (c)  Generally Accepted Accounting Principles

SOURCE: Mercury General Corporation

Contact: Gabriel Tirador, CFO of Mercury General Corporation,
323-937-1060

Website: http://www.mercuryinsurance.com/

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