Mercury General Corporation Announces Third Quarter Results

Mercury General Corporation (NYSE: MCY), a major California automobile insurer with operations in a number of other states, reported today that net operating earnings in the third quarter of 2000 were $27.0 million, or $.50 per share (diluted), compared with $32.1 million, or $.59 per share (diluted) in 1999. For the full nine months, net operating earnings were $81.6 million, or $1.50 per share (diluted), compared with $106.0 million, or $1.93 per share (diluted) in 1999. Per share net income (diluted), including net realized investment gains and losses, was $.51 for the third quarter and $1.54 for the full nine months, compared with $.51 and $1.84, respectively, in 1999.

Company-wide premiums written in the third quarter were $320.5 million, a 4.4% increase over 1999. California premiums written in the quarter were $283.6 million, a 1.6% increase over 1999.

The loss ratio (GAAP basis) was 71.9% in the third quarter and 71.3% for the full nine months, compared to 68.5% and 66.2%, respectively, in 1999. The higher loss ratio in the quarter, as compared to the third quarter of 1999, was largely due to an increase in recorded severity on California automobile claims partially offset by an improvement in the Company's operations outside of California.

The expense ratio (GAAP basis) was 26.2% in the third quarter and 26.8% for the full nine months, compared to 26.4% and 26.9%, respectively, in 1999.

The Company had an underwriting loss of $3.2 million in the quarter from its operations outside of California compared to an underwriting loss of $5.0 million in the third quarter of 1999. The third quarter underwriting loss was principally attributable to a $2.6 million loss in the Company's new operations in Texas. The Company had better loss experience and lower underwriting expenses at American Mercury Insurance Group and at the Company's Florida operations.

Investment income in the quarter increased 8.2% to $26.9 million. After taxes at an effective rate of 10.4% versus 10.2% in 1999, per share (diluted) investment income was $.44 in the third quarter, compared with $.41 in 1999. The after-tax yield on average investments of $1.7 billion (fixed maturities and equities at cost) was approximately 5.56% for the quarter, compared with 5.62% for all of 1999.

Realized investment gains totaled $0.6 million in the third quarter compared to a realized investment loss of $6.8 million in the third quarter of 1999. The large realized loss in 1999 was primarily due to a $6.0 million write down of a permanently impaired preferred stock holding.

On October 27, 2000, the Board of Directors declared a second quarter dividend of $.24 per share to be paid on December 28, 2000 to holders of record on December 14, 2000. The Company's book value per share at September 30, 2000 was $18.22 per share.

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 no 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.

                    SUMMARY OF OPERATING RESULTS (000)

                                              Quarter Ended September 30,

                                                      2000           1999
  Net Premiums Written                            $320,516       $307,062
  Net Premiums Earned                              315,108        300,070
  Paid Losses and Loss Adjustment Expenses         209,173        188,775
  Incurred Losses                                  226,706        205,412
  Net Investment Income                             26,865         24,834
  Net Operating Income (a)                          27,015         32,113
  Capital Gains (Losses), net of tax                   406         (4,417)
  Net Income                                       $27,421        $27,696

  Basic Average Shares Outstanding              54,074,298     54,633,375
  Diluted Average Shares Outstanding            54,223,764     54,818,300

  Basic Per Share Data
  Earnings Per Share                                 $0.51          $0.51

  Diluted Per Share Data (b)
  Net Operating Income                               $0.50          $0.59
  Capital Gains (Losses), net of tax                 $0.01         ($0.08)
  Earnings Per Share                                 $0.51          $0.51

  Operating Ratios--GAAP Basis (c)
  Loss Ratio                                         71.9%          68.5%
  Expense Ratio                                      26.2%          26.4%
  Combined Ratio                                     98.1%          94.9%


                                            Nine Months Ended September 30,

                                                      2000           1999
  Net Premiums Written                            $956,111       $907,802
  Net Premiums Earned                              931,950        886,522
  Paid Losses and Loss Adjustment Expenses         634,132        561,857
  Incurred Losses                                  664,609        586,523
  Net Investment Income                             78,536         73,942
  Net Operating Income (a)                          81,551        106,024
  Capital Gains (Losses), net of tax                 1,810         (5,323)
  Net Income                                       $83,361       $100,701

  Basic Average Shares Outstanding              54,098,916     54,615,320
  Diluted Average Shares Outstanding            54,230,720     54,833,838

  Basic Per Share Data
  Earnings Per Share                                 $1.54          $1.84

  Diluted Per Share Data (b)
  Net Operating Income                               $1.50          $1.93
  Capital Gains (Losses), net of tax                 $0.03         ($0.10)
  Earnings Per Share                                 $1.54          $1.84

  Operating Ratios--GAAP Basis (c)
  Loss Ratio                                         71.3%          66.2%
  Expense Ratio                                      26.8%          26.9%
  Combined Ratio                                     98.1%          93.1%

  (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, fax, 323-857-7116

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

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800-758-5804, ext. 554587