Mercury General Corporation Reports Fourth 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 for the fourth quarter ended December 31, 2000 was $25.3 million, or $.46 per share (diluted), compared with $35.4 million, or $.65 per share (diluted) in 1999. For the year 2000, net operating earnings were $106.8 million, or $1.97 per share (diluted), compared with $141.5 million or $2.58 per share (diluted) in 1999. Including realized capital gains and losses, per share net income (diluted) in 2000 was $.48 in the fourth quarter and $2.02 for the full year, compared with $.60 and $2.44, respectively, in 1999.

Company wide premiums written in the quarter were $316.3 million, a 6.0% increase over 1999. California premiums written in the quarter were $281.2 million, a 3.9% increase over 1999. For the year 2000, Company wide premiums written were $1,272.4 million, an increase of 5.5% over 1999.

The Company experienced an increase in California private passenger automobile new business submissions during the quarter, as compared to the third quarter of 2000, particularly in its California Automobile Insurance Company subsidiary, which writes non-standard private passenger automobile insurance. This trend continued during January 2001.

The loss ratio (GAAP basis) was 74.7% in the fourth quarter and 72.2% for the year ended 2000, compared to 67.1% and 66.4%, respectively, in 1999. The higher loss ratio in the fourth quarter of 2000, as compared to the fourth quarter of 1999, was largely due to increased severity recorded on California automobile claims.

The expense ratio (GAAP basis) was 24.9% in the fourth quarter and 26.3% for the year ended 2000, compared to 26.3% and 26.8%, respectively, in 1999. The decrease in the expense ratio in the fourth quarter was largely attributable to a reduction in the accrual for contingent commissions and employee bonuses and the initial set up of deferred policy acquisition costs for the Company's Florida business, partially offset by an increase in expenses from the Company's new operation in Texas.

Investment income in the quarter increased 9.8% to $27.9 million. For the year ended December 31, 2000, investment income was $106.5 million, a year to year increase of 7.1%. After taxes, per share (diluted) investment income was $1.75 for the year 2000, compared with $1.63 in 1999. The after tax yield on average investments of $1.7 billion (fixed maturities and equities at cost) was 5.58% in the fourth quarter and 5.56% for the year 2000, compared with 5.63% for the fourth quarter and 5.62% for the year 1999.

Realized gains totaled $1.2 million for the fourth quarter and $3.9 million for the year 2000. In 1999, the Company had realized losses of $3.7 million for the quarter and $11.9 million for the year.

On January 26, 2001, the Board of Directors declared a first quarter dividend of $.265 or $1.06 annually, a 10.4% increase over the rate paid in 2000. The increased dividend will be paid on March 29, 2001 to shareholders of record on March 15, 2001. Since dividends were instituted in the first quarter of 1986, Mercury General's dividend has increased at least once each year with the overall compound rate of increase over fifteen years averaging 22%. The Company's book value per share at December 31, 2000 was $19.08 per share.

According to a recent study released by the California Department of Insurance (CDI), the combined results for the Company's California subsidiaries included in the study, tied the Company for best among the largest seven automobile insurers in California when measured by consumer complaints. The Company's California subsidiaries had 1,325,783 earned cars in 1999 and only 24 justified complaints, a ratio of 1.8 for every 100,000 cars. The Company had no justified complaints on its homeowners business. Mr. George Joseph, Chairman & Chief Executive Officer of Mercury General Corporation, said, "the favorable rankings are a testament of the Company's commitment to provide superior policyholder service, which in turn translates to fewer complaints and higher retention rates."

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 December 31,
                                                      2000           1999
  Net Premiums Written                            $316,336       $298,369
  Net Premiums Earned                              317,309        301,785
  Paid Losses and Loss Adjustment Expenses         222,646        194,262
  Incurred Losses                                  237,172        202,580
  Net Investment Income                             27,930         25,432
  Net Operating Income (a)                          25,251         35,439
  Capital Gains (Losses), net of tax                   754         (2,431)
  Net Income                                       $26,005        $33,008

  Basic Average Shares Outstanding              54,102,494     54,538,177

  Diluted Average Shares Outstanding            54,423,212     54,711,007

  Basic Per Share Data
  Earnings Per Share                                 $0.48          $0.61

  Diluted Per Share Data (b)
  Net Operating Income                               $0.46          $0.65
  Capital Gains (Losses), net of tax                 $0.01         ($0.04)
  Earnings Per Share                                 $0.48          $0.60

  Operating Ratios--GAAP Basis (c)
  Loss Ratio                                         74.7%          67.1%
  Expense Ratio                                      24.9%          26.3%
  Combined Ratio                                     99.6%          93.4%


                                                   Year Ended December 31,
                                                      2000           1999
  Net Premiums Written                          $1,272,447     $1,206,171
  Net Premiums Earned                            1,249,259      1,188,307
  Paid Losses and Loss Adjustment Expenses         856,778        756,119
  Incurred Losses                                  901,781        789,103
  Net Investment Income                            106,466         99,374
  Net Operating Income (a)                         106,802        141,463
  Capital Gains (Losses), net of tax                 2,564         (7,754)
  Net Income                                      $109,366       $133,709

  Basic Average Shares Outstanding              54,099,815     54,595,876

  Diluted Average Shares Outstanding            54,257,848     54,814,842

  Basic Per Share Data
  Earnings Per Share                                 $2.02          $2.45

  Diluted Per Share Data (b)
  Net Operating Income                               $1.97          $2.58
  Capital Gains (Losses), net of tax                 $0.05         ($0.14)
  Earnings Per Share                                 $2.02          $2.44

  Operating Ratios--GAAP Basis (c)
  Loss Ratio                                         72.2%          66.4%
  Expense Ratio                                      26.3%          26.8%
  Combined Ratio                                     98.5%          93.2%

  (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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