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

Mercury General Corporation (NYSE: MCY) reported today net income of $46.2 million ($0.84 per share-diluted) in the fourth quarter of 2005 compared with $74.1 million ($1.36 per share-diluted) for the same period in 2004. For the year, net income was $253.3 million ($4.63 per share-diluted) compared to net income of $286.2 million ($5.24 per share-diluted) for the same period in 2004.

Net income includes net realized investment gains, net of tax, of $0.5 million ($0.01 per share-diluted) in the fourth quarter of 2005 compared with net realized investment gains, net of tax, of $4.2 million ($0.08 per share-diluted) for the same period in 2004, and net realized investment gains, net of tax, of $10.5 million ($0.19 per share-diluted) for the entire 2005 year compared with net realized investment gains, net of tax, of $16.3 million ($0.30 per share-diluted) for 2004. Also included in net income are hurricane losses, net of tax benefit, of $16 million ($0.29 per share-diluted) in the fourth quarter of 2005 compared with no hurricane losses for the same period in 2004, and hurricane losses, net of tax benefit, of $18 million ($0.32 per share-diluted) for the entire 2005 year compared with $14 million ($0.26 per share-diluted) for the same period in 2004.

Company-wide net premiums written were $728.0 million in the fourth quarter 2005, an 8.0% increase over fourth quarter 2004 net premiums written of $674.2 million, and were approximately $3.0 billion for the year, an 11.5% increase over the same period in 2004. California net premiums written were $529.5 million in the fourth quarter of 2005, an increase of 7.0% over the same period in 2004, and were approximately $2.1 billion for the year, a 6.0% increase over the same period in 2004.

The Company's combined ratio (GAAP basis) was 96.0% in the fourth quarter and 92.4% for the year compared with 88.6% and 89.2%, respectively, for the same periods in 2004. During the fourth quarter of 2005, the loss ratio increased by 3.3 points for losses caused by Hurricane Wilma. Positive development on prior accident years' loss reserves was approximately $45 million and $58 million for the years ended December 31, 2005 and 2004, respectively.

Net investment income of $32.2 million (after tax $27.7 million) in the fourth quarter of 2005 increased by 9.9% over the same period in 2004. The after-tax yield on investment income was 3.4% on average assets of $3.3 billion (at cost) for the quarter. This compares with an after tax yield on investment income of 3.6% on average investments of $2.8 billion (at cost) for the same period in 2004.

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 February 20, 2006. The replay telephone numbers are (800) 642-1687 (USA) or (706) 645-9291 (International). The conference ID# is 4437368. 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 in general economic conditions; the accuracy and adequacy of the Company's pricing methodologies; adverse weather conditions or natural disasters in the markets serviced by the Company; 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 expanding its business in states outside of California; 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
  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 Generally Accepted Accounting Principles ("GAAP"). These measures are not intended to replace, and should be read in conjunction with, the GAAP financial results. The Company has reconciled these measures with the most directly comparable GAAP measure in the supplemental schedule entitled, "Summary of Operating Results."

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 is recognized as income in the financial statements for the periods presented and 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. It should be read in conjunction with the GAAP financial 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 meant 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.

               Mercury General Corporation and Subsidiaries
                       Summary of Operating Results
               (000's) except per-share amounts and ratios
                               (unaudited)

                                Quarter Ended       Twelve Months Ended
                                 December 31,           December 31,
                               2005       2004        2005         2004
  Net premiums written       $727,956   $674,239   $2,950,523   $2,646,704
  Net premiums earned         732,859    668,102    2,847,733    2,528,636
  Paid losses and loss
   adjustment expenses        460,510    394,919    1,743,909    1,481,803
  Incurred losses and loss
   adjustment expenses        507,217    413,573    1,862,936    1,582,254
  Net investment income        32,239     29,331      122,582      109,681
  Net realized investment
   gains, net of tax              457      4,168       10,504       16,292
  Net income                  $46,219    $74,129     $253,259     $286,208

  Basic average shares
   outstanding                 54,603     54,506       54,566       54,471

  Diluted average shares
   outstanding                 54,756     54,683       54,717       54,633

  Basic Per Share Data
  Net income                    $0.85      $1.36        $4.64        $5.25

  Net realized investment
   gains, net of tax            $0.01      $0.08        $0.19        $0.30

  Incurred losses from
   Florida Hurricanes,
   net of tax benefit          $(0.29)       $--       $(0.33)      $(0.26)

  Diluted Per Share Data
  Net income                    $0.84      $1.36        $4.63        $5.24

  Net realized investment
   gains, net of  tax           $0.01      $0.08        $0.19        $0.30

  Incurred losses from
   Florida Hurricanes,
   net of tax benefit          $(0.29)       $--       $(0.32)      $(0.26)

  Operating Ratios--GAAP(a)
   Basis
  Loss ratio                     69.2%      61.9%        65.4%        62.6%
  Expense ratio                  26.8%      26.7%        27.0%        26.6%
  Combined ratio                 96.0%      88.6%        92.4%        89.2%

  Impact of Florida
   Hurricanes on loss ratio      -3.3%       0.0%        -1.0%        -0.9%

  Reconciliations of Operating
   Measures to Comparable
   GAAP(a) Measures

  Net premiums written       $727,956   $674,239   $2,950,523   $2,646,704
  Decrease (increase) in
   unearned premiums            4,903     (6,137)    (102,790)    (118,068)
  Net premiums earned        $732,859   $668,102   $2,847,733   $2,528,636

  Paid losses and loss
   adjustment expenses       $460,510   $394,919   $1,743,909   $1,481,803
  Increase in net losses
   and loss adjustment
   expense reserves            46,707     18,654      119,027      100,451
  Incurred losses and loss
   adjustment expenses       $507,217   $413,573   $1,862,936   $1,582,254

  (a) Generally Accepted Accounting Principles



               Mercury General Corporation and Subsidiaries
                      Other Supplemental Information
                          (000's) except ratios
                               (unaudited)

                                  Quarter Ended      Twelve Months Ended
                                   December 31,          December 31,
                                  2005      2004       2005        2004
  California Operations(1)
  Net Premiums Written          $529,542  $494,975  $2,126,825  $2,006,351
  Net Premiums Earned            532,493   501,745   2,080,041   1,981,463

  Loss Ratio                       64.1%     61.7%       63.5%       61.0%
  Expense Ratio                    25.8%     24.9%       25.5%       25.6%
  Combined Ratio                   89.9%     86.6%       89.0%       86.6%

  Non-California Operations(2)
  Net Premiums Written          $198,414  $179,264    $823,698    $640,353
  Net Premiums Earned            200,366   166,357     767,692     547,173

  Loss Ratio                       82.7%     62.5%       70.7%       68.4%
  Expense Ratio                    29.8%     32.3%       31.0%       30.4%
  Combined Ratio                  112.5%     94.8%      101.7%       98.8%



                                    At December 31,
  Policies-in-force (000's)         2005      2004

  California Personal Auto         1,099     1,060
  California Commercial Auto          21        21
  Non-California Personal Auto       371       322
  California Homeowners              242       215
  Florida Homeowners                  15        16

  Notes:
  All ratios are calculated on GAAP basis.
  (1) Includes homeowners, auto, commercial property and other immaterial
      California business lines
  (2) Includes all states except California



               Mercury General Corporation and Subsidiaries
              Condensed Balance Sheet and Other Information
                     (000's) except per-share amounts

                                             December 31,    December 31,
                                                2005            2004
                                             (Unaudited)
  Investments - available for sale
    Fixed maturities at market
     (amortized cost $2,593,745 in
     2005 and $2,164,955 in 2004)             $2,645,555      $2,245,311
    Equity securities at market
     (cost $225,310 in 2005 and
     $210,553 in 2004)                           276,108         254,362
    Short-term cash investments, at
     cost, which approximates market             321,049         421,369
          Total investments                    3,242,712       2,921,042
  Net receivables                                390,234         367,662
  Deferred policy acquisition costs              197,943         174,840
  Other assets                                   210,662         158,480
    Total assets                              $4,041,551      $3,622,024

  Loss and loss adjustment expenses           $1,022,603        $900,744
  Unearned premiums                              902,567         799,679
  Other liabilities                              365,004         325,029
  Notes payable                                  143,540         137,024
  Shareholders' equity                         1,607,837       1,459,548
    Total liabilities and shareholders'
     equity                                   $4,041,551      $3,622,024


  Common stock - shares outstanding               54,605          54,515
  Book value per share                            $29.44          $26.77
  Statutory surplus                         $1.49 billion  $1.36 billion
  Portfolio duration                            2.9 years      3.2 years

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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