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Mercury General Corporation Announces Fourth Quarter Results
PRNewswire-FirstCall
LOS ANGELES

Mercury General Corporation (NYSE: MCY), a major California automobile insurer with operations in a number of other states, reported today that premiums written were $504.6 million in the fourth quarter, a 34.5% increase over 2001 and $1,865.0 million for the entire year, a 29.3% increase over 2001. "We had targeted to be at an annual premium run-rate of $2 billion at the end of the first quarter 2003. We are pleased to have achieved our target one quarter ahead of schedule," said George Joseph, Mercury General Corporation's chairman and chief executive officer.

Net operating earnings in the fourth quarter of 2002 were $31.5 million, or $0.58 per share, compared with $22.5 million, or $0.41 per share in 2001. The Company defines net operating earnings, a non GAAP financial measure, as net income determined on a GAAP basis less net realized investment gains and losses. Net income was $17.3 million, or $0.32 per share (diluted) in the fourth quarter 2002 compared with $22.1 million, or $0.41 per share (diluted) in the same period for 2001. For the entire year 2002, net income and net operating earnings were $66.1 million ($1.21 diluted per share), and $111.9 million ($2.05 diluted per share), respectively, which compares to net income and net operating earnings in the same period for 2001 of $105.3 million ($1.94 diluted per share) and $101.1 million ($1.86 diluted per share), respectively.

During the fourth quarter, the Company recorded net realized losses on investments of $14.2 million, net of tax or $0.26 per share (diluted). Included in the net realized losses are $14.0 million, net of taxes, for charges related to assets classified as available for sale that were considered to be other-than-temporarily impaired. The vast majority of these securities were equity positions within the energy sector.

The combined ratio (GAAP basis) was 97.6% in the fourth quarter and 98.8% for the entire year compared to 101.2% and 99.6% for the respective periods in 2001.

In California, the Company's personal auto lines posted a combined ratio (statutory basis) of 98.1% for the fourth quarter compared to 100.7% for the respective period in 2001 and 97.8% for the year compared to 98.0% for the respective period in 2001. The Company has implemented and is continuing to seek rate increases to offset the effects of loss cost inflation and improve the combined ratio.

The Company implemented California personal automobile rate increases on March 1, 2002 of 6.9% for Mercury Casualty Company ("MCC") and California Automobile Insurance Company ("Cal Auto") and 4.1% for Mercury Insurance Company ("MIC") and on November 1, 2002 of 6.9% for MCC and Cal Auto and 3.2% for MIC. The Company has filed for additional rate increases of 6.9% in MCC and Cal Auto and 4.6% in MIC which are currently pending California Department of Insurance approval.

The California homeowners' line posted a combined ratio (statutory basis) of 92.1% for the fourth quarter compared to 106.6% for the respective period in 2001 and 101.3% for the year compared to 105.6% for the respective period in 2001. The Company has benefited from favorable frequency this year. Additionally, the Company implemented 6.9% rate increases in 2002 on both May 15, 2002 and December 15, 2002. The Company expects first quarter 2003 frequency to be up due to windstorms occurring during the first part of January 2003.

The Company is beginning to see significant improvement in many of the non-California operations. The Company's operations located in Florida, Texas (Concord operation), New York and the American Mercury operations located in Oklahoma and Texas all showed significant premium growth and posted GAAP basis combined ratios of less than 100% for the fourth quarter. Additionally, these operations showed significant year-over-year improvement. "We have taken steps to improve the profitability of our non-California operations. These steps included appropriate rate actions, implementation of our Quicksilver system and the integration of the American Mercury Texas auto business onto the Mercury underwriting and claims systems. We are encouraged that these steps are beginning to show up in positive underwriting results," said George Joseph.

The Company's loss ratio (GAAP basis) was 71.6% in the fourth quarter and 72.8% for the entire year compared to 75.2% and 73.2% for the respective periods in 2001. California personal auto line of business is the largest driver of the loss ratio. For this line of business, loss frequencies continue to be modestly favorable. Loss severities are increasing in the low to mid-single digit range in the material damage coverages and in the high single digits in the bodily injury coverages.

The Company's expense ratio (GAAP basis) was 26.0% in the fourth quarter and 26.0% for the entire year compared to 26.0% and 26.4% in the respective periods in 2001.

Investment income decreased by 9.4% to $26.7 million for the quarter and decreased by 1.2% to $113.1 million for the year. After taxes, per share (diluted) investment income was $0.43 in the quarter and $1.82 for the year, compared with $0.47 and $1.82 for the respective periods in 2001. The after- tax yield was 4.42% on average investments of $2.1 billion (fixed maturities and equities at cost) for the quarter compared to 5.32% in the fourth quarter of 2001.

The Board of Directors declared a first quarter dividend of $0.33 per share, representing a 10.0% increase over the quarterly dividend amount paid in 2002. The dividend is to be paid on March 27, 2003 to shareholders of record on March 17, 2003. The Company's book value per share at December 31, 2002 was $20.21.

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 accuracy and adequacy of the Company's pricing methodologies; market risks associated with the Company's investment portfolio; uncertainties related to estimates, assumptions and projections generally; the possibility actual loss experience may vary adversely from the actuarial estimates made to determine the Company's loss reserves; inflation and changes in economic conditions; 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 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

                      SUMMARY OF OPERATING RESULTS (000)

                                                Quarter Ended December 31,

                                                      2002         2001
  Net Premiums Written                             $504,597      $375,211
  Net Premiums Earned                               481,277       366,722
  Paid Losses and Loss Adjustment Expenses          300,001       251,648
  Incurred Losses                                   344,528       275,862
  Net Investment Income                              26,732        29,508
  Net Realized Investment Gains or (Losses) (d)     (14,163)         (367)
  Net Income                                        $17,330       $22,111

  Net Operating Earnings (a)                        $31,493       $22,478

  Basic Average Shares Outstanding               54,349,724    54,223,894

  Diluted Average Shares Outstanding             54,487,016    54,438,139

  Basic Per Share Data
  Earnings Per Share                                  $0.32         $0.41

  Diluted Per Share Data (c)
  Net Operating Earnings                              $0.58         $0.41
  Net Realized Investment Gains or (Losses) (d)      ($0.26)       ($0.01)
  Earnings Per Share                                  $0.32         $0.41

  Operating Ratios -- GAAP Basis (b)
  Loss Ratio                                          71.6%         75.2%
  Expense Ratio                                       26.0%         26.0%
  Combined Ratio                                      97.6%        101.2%


                                          Twelve Months Ended December 31,

                                                      2002         2001
  Net Premiums Written                           $1,865,046    $1,442,886
  Net Premiums Earned                             1,741,527     1,380,561
  Paid Losses and Loss Adjustment Expenses        1,119,946       957,650
  Incurred Losses                                 1,268,243     1,010,439
  Net Investment Income                             113,083       114,511
  Net Realized Investment Gains or (Losses) (d)     (45,768)        4,233
  Net Income                                        $66,105      $105,339

  Net Operating Earnings (a)                       $111,873      $101,106

  Basic Average Shares Outstanding               54,314,447    54,182,021

  Diluted Average Shares Outstanding             54,502,451    54,382,108

  Basic Per Share Data
  Earnings Per Share                                  $1.22        $1.94

  Diluted Per Share Data
  Net Operating Earnings                              $2.05        $1.86
  Net Realized Investment Gains or (Losses) (d)      ($0.84)       $0.08
  Earnings Per Share                                  $1.21        $1.94

  Operating Ratios -- GAAP Basis (b)
  Loss Ratio                                          72.8%        73.2%
  Expense Ratio                                       26.0%        26.4%
  Combined Ratio                                      98.8%        99.6%

   (a) Net Income, determined on a GAAP basis, less realized investment
       gains or (losses), net of tax.
   (b) Generally Accepted Accounting Principles
   (c) Some numbers may not sum due to rounding
   (d) Net Realized Investment Gains or (Losses) is net of taxes.


  MERCURY GENERAL CORPORATION
  Other Supplemental Information

                                   Three months ending December 31, 2002

                               Net Premium     Loss     Expense   Combined
                                 Written       Ratio     Ratio      Ratio
                                 (000's)

  California                    $428,018       72.6%      25.2%     97.8%
  Georgia                         $4,090       59.9%      29.0%     88.9%
  Illinois                        $4,150       56.6%      28.4%     85.0%
  Florida                        $32,145       69.5%      27.0%     96.5%
  Texas (Concord operations)     $12,762       63.1%      33.4%     96.5%
  New York                        $2,281       73.2%      14.1%     87.3%
  Virginia                        $1,578       99.3%      41.3%    140.6%
  American Mercury operations    $19,572       62.9%      35.3%     98.2%


                                   Three months ending December 31, 2001

                               Net Premium     Loss     Expense   Combined
                                 Written       Ratio     Ratio      Ratio
                                 (000's)

  California                    $325,109       75.4%      24.7%    100.1%
  Georgia                         $3,229       50.4%      31.9%     82.3%
  Illinois                        $3,209       58.8%      25.6%     84.4%
  Florida                        $16,997       65.3%      34.8%    100.1%
  Texas (Concord operations)      $7,899       64.1%      48.1%    112.2%
  New York                          $797       83.5%     107.6%    191.1%
  Virginia                          $241      157.6%      60.6%    218.2%
  American Mercury operations    $17,729       93.7%      29.3%    123.0%


                                  Twelve months ending December 31, 2002

                               Net Premium     Loss     Expense   Combined
                                 Written       Ratio     Ratio      Ratio
                                 (000's)

  California                  $1,587,165       73.1%      25.1%     98.2%
  Georgia                        $15,127       63.3%      31.7%     95.0%
  Illinois                       $15,150       62.0%      28.6%     90.6%
  Florida                       $112,271       73.4%      26.1%     99.5%
  Texas (Concord operations)     $42,934       70.4%      34.5%    104.9%
  New York                        $5,943       69.0%      33.2%    102.2%
  Virginia                        $4,186       98.0%      46.9%    144.9%
  American Mercury operations    $82,271       70.5%      35.7%    106.2%


                                  Twelve months ending December 31, 2001

                               Net Premium     Loss     Expense   Combined
                                 Written       Ratio     Ratio      Ratio
                                 (000's)

  California                  $1,262,585       72.8%      25.2%     98.0%
  Georgia                        $12,826       57.0%      33.2%     90.2%
  Illinois                       $12,474       66.4%      26.0%     92.4%
  Florida                        $56,798       71.2%      31.5%    102.7%
  Texas (Concord operations)     $30,309       81.3%      52.2%    133.5%
  New York                          $818       82.9%     198.4%    281.3%
  Virginia                          $894      142.3%     121.6%    263.9%
  American Mercury operations    $66,181       83.2%      31.6%    114.8%


  Policies-in-force at December 31, 2002
                                                        amounts in
                                                         (000's)
  California Personal Auto (excluding Cal Auto)             870
  Personal Auto written through Cal Auto                     82
  California Commercial Auto                                 18
  California Homeowners                                     154
  Florida Auto                                               69
  Virginia Personal Auto                                      3
  New York Personal Auto                                      4
  Georgia Personal Auto                                      11
  Illinois Personal Auto                                     11
  Texas (Concord Operations)                                 22
  Florida Homeowners                                          6

  Total shareholders' equity at year-end           $1.1 Billion

  Statutory Surplus at year-end                    $1.0 Billion

  Portfolio Duration at year-end                            4.4

SOURCE: Mercury General Corporation

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

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


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