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

Mercury General Corporation (NYSE: MCY) reported today net income of $73.0 million ($1.33 per share-diluted) in the third quarter 2005 compared with $65.1 million ($1.19 per share-diluted) for the same period in 2004. For the first nine months of 2005, net income was $207.0 million ($3.78 per share-diluted) compared to net income of $212.1 million ($3.88 per share-diluted) for the same period in 2004. Included in net income are net realized investment gains, net of tax, of $5.0 million ($0.09 per share-diluted) in the third quarter of 2005 compared with net realized investment gains, net of tax, of $0.6 million ($0.01 per share-diluted) for the same period in 2004, and net realized investment gains, net of tax, of $10.0 million ($0.18 per share- diluted) for the first nine months of 2005 compared to net realized investment gains, net of tax, of $12.1 million ($0.22 per share-diluted) for the same period in 2004. Net income in the third quarter of 2005 included approximately $4 million ($3 million after tax benefit) of losses resulting from hurricanes compared to hurricane losses of approximately $24 million ($16 million after tax benefit) in the third quarter of 2004.

Company-wide net premiums written were $762.9 million in the third quarter 2005, a 10% increase over third quarter 2004 net premiums written of $693.7 million, and were approximately $2.2 billion for the first nine months of 2005, a 12.7% increase over the same period in 2004. California net premiums written were $545.3 million in the third quarter of 2005, an increase of 6.4% over the same period in 2004, and were approximately $1.6 billion for the first nine months of 2005, a 5.7% increase over the same period in 2004.

The Company's combined ratio (GAAP basis) was 90.8% in the third quarter and 91.2% for the first nine months of 2005 compared with 90.8% and 89.4% for the same periods in 2004. Positive development on prior accident years' loss reserves was approximately $45 million and $40 million for the nine months ending September 30, 2005 and September 30, 2004, respectively.

Net investment income of $30.9 million (after tax $26.5 million) in the third quarter of 2005 increased by 8.6% over the same period in 2004. The after-tax yield on investment income was 3.4% on average assets of $3.2 billion (fixed maturities and equities at cost) for the quarter. This compares with an after tax yield on investment income of 3.6% on average investments of $2.7 billion (fixed maturities and equities at cost) for the same period in 2004.

The Board of Directors declared a third quarter dividend of $0.43 per share, representing a 16% increase over the quarterly dividend amount paid in 2004. The dividend is to be paid on December 29, 2005 to shareholders of record on December 15, 2005. The Company's book value per share at September 30, 2005 was $29.27.

On October 24, 2005, Hurricane Wilma made landfall as a Category 3 storm on the southern gulf coast of Florida. Based upon preliminary estimates, the Company expects fourth quarter losses from this storm will be approximately $12 million ($8 million after tax benefit). The estimate is based on the total number of currently reported claims and the number of unreported claims anticipated as a result of the hurricane. Due to the recent occurrence of the hurricane, the Company's estimate may change as more information becomes available.

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 November 7, 2005. The replay telephone numbers are (800) 642-1687 (USA) or (706) 645-9291 (International). The conference ID# is 1423350. 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       Nine Months Ended
                                   September 30,         September 30,
                                   2005      2004       2005        2004
  Net premiums written           $762,862  $693,733  $2,222,567  $1,972,465
  Net premiums earned             722,899   648,165   2,114,874   1,860,534
  Paid losses and loss
   adjustment expenses            436,672   374,985   1,283,399   1,086,884
  Incurred losses and loss
   adjustment expenses            464,709   416,159   1,355,719   1,168,681
  Net investment income            30,857    28,410      90,343      80,350
  Net realized investment gains,
   net of tax                       5,002       560      10,047      12,124
  Net income                      $73,014   $65,129    $207,040    $212,079

  Basic average shares
   outstanding                     54,578    54,487      54,554      54,459

  Diluted average shares
   outstanding                     54,739    54,639      54,715      54,623

  Basic Per Share Data
  Net income                        $1.34     $1.20       $3.80       $3.89

  Net realized investment gains,
   net of tax                       $0.09     $0.01       $0.18       $0.22

  Incurred losses from Florida
   Hurricanes, net of tax
   benefit                         ($0.05)   ($0.29)     ($0.05)     ($0.29)

  Diluted Per Share Data
  Net income                        $1.33     $1.19       $3.78       $3.88

  Net realized investment gains,
   net of  tax                      $0.09     $0.01       $0.18       $0.22

  Incurred losses from Florida
   Hurricanes, net of tax
   benefit                         ($0.05)   ($0.29)     ($0.05)     ($0.29)

  Operating Ratios -- GAAP (a)
   Basis
  Loss ratio                        64.3%     64.2%       64.1%       62.8%
  Expense ratio                     26.5%     26.6%       27.1%       26.6%
  Combined ratio                    90.8%     90.8%       91.2%       89.4%

  Impact of Florida Hurricanes
   on loss ratio                     0.6%      3.7%        0.2%        1.3%

  Reconciliations of Operating
   Measures to Comparable GAAP
   (a) Measures

  Net premiums written           $762,862  $693,733  $2,222,567  $1,972,465
  Increase in unearned premiums   (39,963)  (45,568)   (107,693)   (111,931)
  Net premiums earned            $722,899  $648,165  $2,114,874  $1,860,534

  Paid losses and loss
   adjustment expenses           $436,672  $374,985  $1,283,399  $1,086,884
  Increase in net losses and
   loss adjustment expense
   reserves                        28,037    41,174      72,320      81,797
  Incurred losses and loss
   adjustment expenses           $464,709  $416,159  $1,355,719  $1,168,681

  (a) Generally Accepted Accounting Principles



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

                                  Quarter Ended        Nine Months Ended
                                   September 30,         September 30,
                                  2005      2004       2005        2004
  Total California
   Operations (1)
  Net Premiums Written          $545,293  $512,583  $1,597,283  $1,511,377
  Net Premiums Earned            524,887   499,800   1,547,548   1,479,719

  Loss Ratio                       62.5%     58.0%       63.3%       60.7%
  Expense Ratio                    25.1%     25.8%       25.4%       25.9%
  Combined Ratio                   87.6%     83.8%       88.7%       86.6%

  California Automobile lines
  Net Premiums Written          $488,303  $464,573  $1,439,016  $1,377,525
  Net Premiums Earned            474,874   457,652   1,405,352   1,359,996

  Loss Ratio                       64.4%     60.0%       64.1%       62.5%
  Expense Ratio                    25.3%     26.0%       25.5%       25.9%
  Combined Ratio                   89.7%     86.0%       89.6%       88.4%

  California Homeowners line
  Net Premiums Written           $46,529   $39,454    $129,932    $111,205
  Net Premiums Earned             40,856    34,605     117,189      99,448

  Loss Ratio                       45.1%     29.5%       55.0%       37.2%
  Expense Ratio                    23.8%     24.6%       24.2%       25.0%
  Combined Ratio                   68.9%     54.1%       79.2%       62.2%

  Non-California Operations (2)
  Net Premiums Written          $217,569  $181,150    $625,284    $461,088
  Net Premiums Earned            198,012   148,365     567,326     380,815

  Loss Ratio                       68.9%     85.0%       66.4%       71.1%
  Expense Ratio                    30.5%     29.3%       31.5%       29.6%
  Combined Ratio                   99.4%    114.3%       97.9%      100.7%



                                                       At September 30,
  Policies-in-force (000's)                         2005              2004

  California Personal Auto                         1,096             1,050
  California Commercial Auto                          21                21
  Non-California Personal Auto                       370               294
  California Homeowners                              236               209
  Florida Homeowners                                  16                15

    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

                                       September 30, 2005  December 31, 2004
                                          (unaudited)

  Investments - available for sale
    Fixed maturities at market
     (amortized cost $2,380,119 in 2005
     and $2,164,955 in 2004)                $2,438,026        $2,245,311
    Equity securities at market (cost
     $216,448 in 2005 and $210,553 in 2004)    281,561           254,362
    Short-term cash investments, at
     cost, which approximates market           533,772           421,369
          Total investments                  3,253,359         2,921,042
  Net receivables                              385,196           367,662
  Deferred policy acquisition costs            197,946           174,840
  Other assets                                 180,331           146,199
    Total assets                            $4,016,832        $3,609,743

  Loss and loss adjustment expenses           $968,874          $900,744
  Unearned premiums                            907,418           799,679
  Other liabilities                            406,642           325,029
  Notes payable                                136,016           124,743
  Shareholders' equity                       1,597,882         1,459,548
    Total liabilities and shareholders'
     equity                                 $4,016,832        $3,609,743

  Common stock - shares outstanding             54,595            54,515
  Book value per share                          $29.27            $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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