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Mercury General Corporation Announces First Quarter Results and Declares Quarterly Dividend
PRNewswire-FirstCall
LOS ANGELES

Mercury General Corporation (NYSE: MCY) reported today for the first quarter of 2010:

                               Consolidated Highlights


                             Three Months Ended
                                  March 31,                 Change
                                                            ------
                                2010        2009         $          %
                                ----        ----       ---         ---
  (000's except per-
   share amounts and
   ratios)
  Net premiums written
   (1)                      $652,462    $670,892  $(18,430)        (2.7)
  Net income                 $61,179     $96,653  $(35,474)           -
  Net income per diluted
   share                       $1.12       $1.75    $(0.63)           -
  Operating income (1)       $46,850     $45,999      $851          1.9
  Operating income per
   diluted share (1)           $0.85       $0.83     $0.02          2.4
  Severance related
   expenses (2)                   $-      $8,000   $(8,000)           -
  Net expense related to
   amortization of
   December 31, 2008
     AIS deferred policy
      acquisition costs (2)
      (3)                         $-     $12,000  $(12,000)           -
                                                                   (0.6)
  Combined ratio                96.3%       96.9%        -          pts

  (1) These measures are not based on U.S. generally accepted
  accounting principles ("GAAP") and are defined and reconciled to the
  most directly comparable GAAP measures in "Information Regarding
  Non-GAAP Measures."
  (2) The amounts are rounded to the nearest million.
  (3) Represents the net expense related to Auto Insurance Specialists
  LLC ("AIS") deferred commissions at December 31, 2008 amortized in
  2009, partially offset by deferred costs related to policy sales
  made by AIS in 2009.


Net income in the first quarter 2010 was $61.2 million ($1.12 per diluted share) compared with net income of $96.7 million ($1.75 per diluted share) for the same period in 2009. Included in net income are net realized investment gains, net of tax, of $14.3 million ($0.26 per diluted share) in the first quarter of 2010 compared with net realized investment gains, net of tax, of $50.7 million ($0.92 per diluted share) for the same period in 2009. Operating income was $46.9 million ($0.85 per diluted share) for the first quarter of 2010 compared with operating income of $46.0 million ($0.83 per diluted share) for the same period in 2009.

Net premiums written were $652.5 million in the first quarter of 2010, a 2.7% decrease over first quarter 2009 net premiums written of $670.9 million. Net realized investment gains, net of tax, of $14.3 million for the first quarter of 2010 include gains, net of tax, of $12.3 million from the election of the fair value option. Gains, net of tax, from the sale of securities were $2.0 million during the first quarter.

The Company's combined ratio (GAAP basis) was 96.3% in the first quarter of 2010 compared with 96.9% for the same period in 2009. The loss ratio was affected by favorable development of approximately $20 million and $21 million on prior accident years' losses and loss adjustment expenses reserves for the three months ended March 31, 2010 and 2009, respectively. The favorable development in 2010 is largely the result of re-estimates of accident year 2009 California bodily injury losses which have experienced both lower average severities and fewer late reported claims (claim count development) than was originally estimated at December 31, 2009.

Net investment income of $35.9 million (after tax, $32.2 million) in the first quarter of 2010 decreased by 5.3% over the same period in 2009. The investment income after-tax yield was 4.1% on average investments (fixed maturities at amortized cost, equities and short-term investments at cost) of $3.1 billion for the first quarter 2010. This compares with an investment income after-tax yield of 4.1% on average investments of $3.3 billion for the same period in 2009.

The Board of Directors declared a quarterly dividend of $0.59 per share. The dividend is to be paid on June 30, 2010 to shareholders of record on June 15, 2010.

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 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 www.mercuryinsurance.com. A replay of the call will be available beginning at 1:30 P.M. Pacific time and running through May 10, 2010. The replay telephone numbers are (800) 642-1687 (USA) or (706) 645-9291 (International). The conference ID# is 69119466. 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 general economic conditions, including the impact of current economic conditions on the Company's market and investment portfolio; the accuracy and adequacy of the Company's pricing methodologies; adverse weather conditions or natural disasters in the markets served by the Company; general 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 managing 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 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.

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 U.S. generally accepted accounting principles. These measures are not intended to replace, and should be read in conjunction with, the GAAP financial results.

Operating income is net income excluding realized investment gains and losses, net of tax. Net income is the GAAP measure that is most directly comparable to operating income. Operating income is used by management along with the other components of net income to assess the Company's performance. Management uses operating income as an important measure to evaluate the results of the Company's insurance business. Management believes that operating income provides investors with a valuable measure of the Company's ongoing performance as it reveals trends in the Company's insurance business that may be obscured by the net effect of realized capital gains and losses. Realized capital gains and losses may vary significantly between periods and are generally driven by external economic developments such as capital market conditions. Accordingly, operating income highlights the results from ongoing operations and the underlying profitability of the Company's core insurance business. Operating income, which is provided as supplemental information and should not be considered as a substitute for net income, does not reflect the overall profitability of our business. It should be read in conjunction with the GAAP financial results. The Company has reconciled operating income with the most directly comparable GAAP measure in the table below.

                                    Three Months Ended
                                         March 31,
                            Total                  Per diluted share
                            -----                  -----------------
                        2010        2009         2010             2009
                        ----        ----         ----             ----
  (000's except per-
   share amounts)
  Operating income   $46,850     $45,999        $0.85            $0.83
  Net realized
   investment gains,
   net of tax         14,329      50,654         0.26             0.92
                      ------      ------
  Net income         $61,179     $96,653        $1.12  (1)       $1.75
                     =======     =======        =====  ===       =====

  (1) Net income per diluted share does not sum due to rounding.



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 have been recognized as income in the financial statements for the periods presented as 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. Such information should be read in conjunction with the GAAP financial results. The Company has reconciled net premiums written with the most directly comparable GAAP measure in the supplemental schedule entitled, "Summary of Operating 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 provided 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. The Company has reconciled paid losses and loss adjustment expenses with the most directly comparable GAAP measure in the supplemental schedule entitled, "Summary of Operating Results."

Combined ratio-accident period basis is computed as the difference between two GAAP operating ratios: the combined ratio and the effect of prior accident periods' loss development. The most directly comparable GAAP measure is the combined ratio. The Company believes that this ratio is useful to investors and it is used by management to reveal the trends in the Company's results of operations that may be obscured by development on prior accident periods' loss reserves. Combined ratio-accident period basis is meant as supplemental information and is not intended to replace combined ratio. It should be read in conjunction with the GAAP financial results. The Company has reconciled combined ratio-accident period basis with the most directly comparable GAAP measure in the table below.

                                                      Three Months Ended
                                                          March 31,
                                                          ---------
                                                        2010         2009
                                                        ----         ----

  Combined ratio-accident period basis                  99.4%       100.1%
  Effect of estimated prior periods' loss development  (3.1)%       (3.2)%
                                                       -----        -----
  Combined ratio                                        96.3%        96.9%
                                                        ====         ====





                           MERCURY GENERAL CORPORATION AND SUBSIDIARIES
                                   SUMMARY OF OPERATING RESULTS
                           (000's except per-share amounts and ratios)
                                           (unaudited)

                                             Quarter Ended March 31,
                                                2010                   2009
                                                ----                   ----
  Net premiums written                      $652,462               $670,892

  Revenues:
       Net premium earned                   $640,614               $666,063
       Net investment income                  35,886                 37,914
       Net realized investment gains          22,044                 81,314
       Other                                   1,293                  1,667
            Total revenues                  $699,837               $786,958
                                            --------               --------
  Expenses:
       Losses and loss adjustment expenses   430,622                444,292
       Policy acquisition costs              128,982                147,531
       Other operating expenses               57,324                 53,486
       Interest                                1,619                  1,546
            Total expenses                  $618,547               $646,855
                                            --------               --------

  Income before income taxes                 $81,290               $140,103
       Income tax expense                     20,111                 43,450
                      Net income             $61,179                $96,653
                                             =======                =======

  Basic average shares outstanding            54,783                 54,767
  Diluted average shares outstanding          54,805                 55,091


  Basic Per Share Data
  --------------------
  Net income                                   $1.12                  $1.76
                                               =====                  =====

  Net realized investment gains, net of tax    $0.26                  $0.92
                                               =====                  =====


  Diluted Per Share Data
  ----------------------
  Net income                                   $1.12                  $1.75
                                               =====                  =====

  Net realized investment gains, net of tax    $0.26                  $0.92
                                               =====                  =====


  Operating Ratios-GAAP Basis
  ---------------------------
  Loss ratio                                    67.2%                  66.7%
  Expense ratio                                 29.1%                  30.2%
                                                ----                   ----
  Combined ratio                                96.3%                  96.9%
                                                ====                   ====


  Reconciliations of Operating Measures to
   Comparable GAAP Measures
  ----------------------------------------

  Net premiums written                      $652,462               $670,892
  Change in unearned premiums                (11,848)                (4,829)
                                             -------                 ------
  Net premiums earned                       $640,614               $666,063
                                            ========               ========

  Paid losses and loss adjustment expenses  $461,136               $485,466
  Decrease in net loss and loss adjustment
   expense reserves                          (30,514)               (41,174)
  Incurred losses and loss adjustment
   expenses                                 $430,622               $444,292
                                            ========               ========






                         MERCURY GENERAL CORPORATION AND SUBSIDIARIES
                       CONDENSED BALANCE SHEETS AND OTHER INFORMATION
                         (000's except per-share amounts and ratios)
                                         (unaudited)



                               March 31, 2010   December 31, 2009
                               --------------   -----------------

                  ASSETS
                  ------

  Investments, at fair value:
    Fixed maturities trading
     (amortized cost
     $2,655,519; $2,673,079)       $2,700,268         $2,704,561
    Equity securities trading
     (cost $298,703; $308,941)        281,618            286,131
    Short-term investments
     (cost $134,269; $156,126)        134,255            156,165
                                      -------            -------
      Total investments             3,116,141          3,146,857

  Cash                                242,511            185,505
  Receivables:
    Premiums receivable               281,822            262,278
    Premium notes                       9,761             14,510
    Accrued investment income          37,985             37,405
    Other                              11,010             13,689
                                       ------             ------
      Total receivables               340,578            327,882

  Deferred policy acquisition
   costs                              174,791            175,866
  Fixed assets, net                   201,091            201,862
  Current income taxes                  2,195             27,268
  Deferred income taxes                32,424             36,139
  Goodwill                             42,850             42,850
  Other intangible assets,
   net                                 65,120             66,823
  Other assets                         19,807             21,581
                                       ------             ------
      Total assets                 $4,237,508         $4,232,633
                                   ==========         ==========

            LIABILITIES AND
          SHAREHOLDERS' EQUITY
          --------------------

  Losses and loss adjustment
   expenses                        $1,022,721         $1,053,334
  Unearned premiums                   856,449            844,540
  Notes payable                       270,915            271,397
  Accounts payable and
   accrued expenses                   118,250            114,469
  Other liabilities                   169,048            177,947
  Shareholders' equity              1,800,125          1,770,946
                                    ---------          ---------
        Total liabilities and
         shareholders' equity      $4,237,508         $4,232,633
                                   ==========         ==========

           OTHER INFORMATION
           -----------------

  Common stock-shares
   outstanding                         54,785             54,777
  Book value per share                 $32.86             $32.33
  Estimated statutory surplus    $1.6 billion       $1.5 billion
  Estimated premiums written
   to surplus ratio                       1.6                1.7
  Debt to total capital ratio            13.1%              13.3%
  Portfolio duration                4.7 years          5.1 years
  Policies-in-Force
   (Company-wide "PIF")
      Personal Auto PIF                 1,284              1,279
      Homeowners PIF                      335                328

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/

Company News On-Call: http://www.prnewswire.com/comp/554587.html


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