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

Mercury General Corporation (NYSE: MCY) reported today net income of $73.6 million ($1.35 per share-diluted) in the second quarter 2005 compared with $78.1 million ($1.43 per share-diluted) for the same period in 2004. For the first six months of 2005, net income was $134.0 million ($2.45 per share-diluted) compared to net income of $147.0 million ($2.69 per share-diluted) for the same period in 2004. Included in net income are net realized investment gains, net of tax, of $2.3 million ($0.04 per share-diluted) in the second quarter of 2005 compared with net realized investment gains, net of tax, of $7.9 million ($0.14 per share-diluted) for the same period in 2004, and net realized investment gains, net of tax, of $5.0 million ($0.09 per share-diluted) for the first six months of 2005 compared to net realized investment gains, net of tax, of $11.6 million ($0.21 per share-diluted) for the same period in 2004.

Company-wide net premiums written were $729.9 million in the second quarter 2005, a 12.6% increase over second quarter 2004 net premiums written of $648.5 million, and were approximately $1.5 billion for the first six months of 2005, a 14.2% increase over the same period in 2004. California net premiums written were $525.9 million in the second quarter of 2005, an increase of 5.5% over the same period in 2004, and were approximately $1.1 billion for the first six months of 2005, a 5.3% increase over the same period in 2004. Non-California net premiums written were $204.0 million in the second quarter of 2005, a 36.2% increase over the same period in 2004, and were $407.7 million for the first six months of 2005, an increase of 45.6% increase over the same period in 2004. Non-California net premiums written represented 27.9% of the Company's total second quarter net premiums written, up from 23.1% in the second quarter of 2004.

The Company's combined ratio (GAAP basis) was 90.1% in the second quarter and 91.3% for the first six months of 2005 compared with 88.3% and 88.7% for the same periods in 2004. Positive development on prior accident years' loss reserves was approximately $40 million and $25 million, respectively, for the six months ending June 30, 2005 and June 30, 2004.

Net investment income of $30.7 million (after tax $26.6 million) in the second quarter of 2005 increased by 17.1% over the same period in 2004. The after-tax yield on investment income was 3.6% on average assets of $3.0 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 $2.6 billion (fixed maturities and equities at cost) for the same period in 2004.

The Board of Directors declared a second 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 September 29, 2005 to shareholders of record on September 15, 2005. The Company's book value per share at June 30, 2005 was $28.44.

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 August 8, 2005. The replay telephone numbers are (800) 642-1687 (USA) or (706) 645-9291 (International). The conference ID# is 7791945. 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, and in general economic conditions; the accuracy and adequacy of the Company's pricing methodologies; adverse weather conditions 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; 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 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 June 30,  Six Months Ended June 30,
                               2005        2004         2005         2004
   Net premiums written     $729,875    $648,449    $1,459,705   $1,278,732
   Net premiums earned       707,261     620,432     1,391,975    1,212,369
   Paid losses and loss
    adjustment expenses      422,055     348,993       846,727      711,899
   Incurred losses and loss
    adjustment expenses      442,764     380,526       891,010      752,522
   Net investment income      30,701      26,212        59,486       51,940
   Net realized investment
    gains, net of tax          2,304       7,876         5,045       11,564
   Net income                $73,602     $78,134      $134,026     $146,950

   Basic average shares
    outstanding               54,548      54,459        54,542       54,445

   Diluted average shares
    outstanding               54,699      54,628        54,708       54,616

   Basic Per Share Data
   Net income                  $1.35       $1.43         $2.46        $2.70

   Net realized investment
    gains, net of tax          $0.04       $0.14         $0.09        $0.21

   Net income                  $1.35       $1.43         $2.45        $2.69

   Net realized investment
    gains, net of tax          $0.04       $0.14         $0.09        $0.21

   Operating Ratios -- GAAP
    (a) Basis
   Loss ratio                  62.6%       61.3%         64.0%        62.1%
   Expense ratio               27.5%       27.0%         27.3%        26.6%
   Combined ratio              90.1%       88.3%         91.3%        88.7%

   Reconciliations of
    Operating Measures to
    Comparable GAAP
    (a) Measures

   Net premiums written     $729,875    $648,449    $1,459,705   $1,278,732
   Increase in unearned
    premiums                 (22,614)    (28,017)      (67,730)     (66,363)
   Net premiums earned      $707,261    $620,432    $1,391,975   $1,212,369

   Paid losses and loss
    adjustment expenses     $422,055    $348,993      $846,727     $711,899
   Increase in net losses
    and loss adjustment
    expense reserves          20,709      31,533        44,283       40,623
   Incurred losses and
    loss adjustment
    expenses                $442,764    $380,526      $891,010     $752,522

    (a)  Generally Accepted Accounting Principles



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

                                Quarter ending,        Six Months Ending,
                                    June 30,                 June 30,
                                2005      2004         2005        2004
   Total California
    Operations (1)
   Net Premiums Written       $525,910    $498,697   $1,051,990   $998,795
   Net Premiums Earned         517,345     495,137    1,022,661    979,919

   Loss Ratio                    61.5%       60.7%       63.6%       62.0%
   Expense Ratio                 25.6%       26.0%       25.7%       25.9%
   Combined Ratio                87.1%       86.7%       89.3%       87.9%

   California Automobile
    lines
   Net Premiums Written       $470,069    $450,959    $950,713    $912,952
   Net Premiums Earned         469,909     454,548     930,478     902,344

   Loss Ratio                    62.9%       62.7%       64.0%       63.7%
   Expense Ratio                 25.6%       26.1%       25.6%       25.9%
   Combined Ratio                88.5%       88.8%       89.6%       89.6%

   California Homeowners
    line
   Net Premiums Written        $46,180     $39,725     $83,403     $71,751
   Net Premiums Earned          38,997      33,375      76,333      64,843

   Loss Ratio                    47.9%       35.7%       60.4%       41.4%
   Expense Ratio                 23.9%       24.5%       24.3%       25.1%
   Combined Ratio                71.8%       60.2%       84.7%       66.5%

   Non-California
    Operations (2)
   Net Premiums Written       $203,965    $149,752    $407,715    $279,937
   Net Premiums Earned         189,916     125,295     369,314     232,450

   Loss Ratio                    65.7%       64.0%       65.1%       62.1%
   Expense Ratio                 32.7%       30.6%       32.0%       29.8%
   Combined Ratio                98.4%       94.6%       97.1%       91.9%


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

   California Personal Auto           1,093       1,048
   California Commercial Auto            21          21
   Non-California Personal Auto         368         252
   California Homeowners                228         202
   Florida Homeowners                    15          13

   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

                                        June 30, 2005    December 31, 2004
                                          (unaudited)

   Investments -- available for sale
    Fixed maturities at market
     (amortized cost $2,335,149
     in 2005 and $2,164,955 in 2004)     $2,411,489           $2,245,311
    Equity securities at market
     (cost $206,698 in 2005 and
     $210,553 in 2004)                      259,637              254,362
    Short-term cash investments,
     at cost, which approximates market     443,784              421,369
       Total investments                  3,114,910            2,921,042
   Net receivables                          365,096              367,662
   Deferred policy acquisition costs        189,998              174,840
   Other assets                             183,915              146,199
   Total assets                          $3,853,919           $3,609,743

   Loss and loss adjustment expenses       $940,491             $900,744
   Unearned premiums                        867,450              799,679
   Other liabilities                        358,521              325,029
   Notes payable                            136,008              124,743
   Shareholders' equity                   1,551,449            1,459,548
   Total liabilities and
    shareholders' equity                 $3,853,919           $3,609,743


   Common stock -- shares outstanding        54,561               54,515
   Book value per share                      $28.44               $26.77
   Statutory surplus                  $1.43 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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