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

Mercury General Corporation (NYSE: MCY) reported today net income of $60.5 million ($1.10 per share-diluted) in the first quarter 2007 compared with $58.6 million ($1.07 per share-diluted) for the same period in 2006. Included in net income are net realized investment losses, net of tax, of $0.7 million ($0.01 per share-diluted) in the first quarter of 2007 compared with net realized investment gains, net of tax, of $4.2 million ($0.08 per share-diluted) for the same period in 2006.

Company-wide net premiums written were $785.9 million in the first quarter 2007, a 1.5% increase over first quarter 2006 net premiums written of $774.0 million. California net premiums written were $601.0 million in the first quarter of 2007, an increase of 6.2% over the same period in 2006. Non-California net premiums written were $184.9 million in the first quarter of 2007, an 11.2% decrease over the same period in 2006.

The Company's combined ratio (GAAP basis) was 94.5% in the first quarter of 2007 compared with 91.8% for the same period in 2006. Loss development on prior accident years' loss reserves, which came primarily from the Company's California operations, was approximately $13 million adverse and $10 million positive for the quarters ended March 31, 2007 and 2006, respectively.

Net investment income of $42.1 million (after tax $35.7 million) in the first quarter of 2007 increased by 7.0% over the same period in 2006. The after-tax yield on investment income was 4.2% on average assets of $3.4 billion (fixed maturities and equities at cost) for the quarter. This compares with an after-tax yield on investment income of 4.1% on average investments of $3.2 billion (fixed maturities and equities at cost) for the same period in 2006.

As previously reported, included in net income in the first quarter 2006 is an income tax charge, net of federal tax benefit, of approximately $15 million, or $0.27 per share (diluted), relating to Notices of Proposed Assessments upheld by the California State Board of Equalization ("SBE") for tax years 1993 through 1996 in which the California Franchise Tax Board disallowed a portion of the Company's expenses related to management services provided to its insurance company subsidiaries. The Company is challenging the SBE decision in Superior Court.

The Board of Directors declared a second quarter dividend of $0.52 per share, representing an 8.3% increase over the quarterly dividend amount paid in 2006. The dividend is to be paid on June 28, 2007 to shareholders of record on June 15, 2007. The Company's book value per share at March 31, 2007 was $32.30.

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 14, 2007. The replay telephone numbers are (800) 642-1687 (USA) or (706) 645-9291 (International). The conference ID# is 6300927. 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 served 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 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 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 March 31,
                                                    2007           2006
  Net premiums written                            $785,883       $774,020
  Net premiums earned                              755,752        736,680
  Paid losses and loss adjustment expenses         519,946        479,340
  Incurred losses and loss adjustment expenses     509,759        475,180
  Net investment income                             42,145         39,403
  Net realized investment (losses) gains,
   net of tax                                         (677)         4,195
  Net income                                       $60,453        $58,646

  Basic average shares outstanding                  54,674         54,623

  Diluted average shares outstanding                54,821         54,745

  Basic Per Share Data
  Net income                                         $1.11          $1.07

  Net realized investment (losses) gains,
   net of tax                                       $(0.01)         $0.08

  Diluted Per Share Data
  Net income                                         $1.10          $1.07

  Net realized investment (losses) gains,
   net of tax                                       $(0.01)         $0.08

  Operating Ratios -- GAAP (a) Basis
  Loss ratio                                          67.5%          64.5%
  Expense ratio                                       27.0%          27.3%
  Combined ratio                                      94.5%          91.8%

  Reconciliations of Operating Measures to
   Comparable GAAP (a) Measures

  Net premiums written                            $785,883       $774,020
  Increase in unearned premiums                    (30,131)       (37,340)
  Net premiums earned                             $755,752       $736,680

  Paid losses and loss adjustment expenses        $519,946       $479,340
  Decrease in net loss and loss adjustment
   expense reserves                                (10,187)        (4,160)
  Incurred losses and loss adjustment
   expenses                                       $509,759       $475,180


  (a) Generally Accepted Accounting Principles



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

                                                  Quarter Ended March 31,
                                                    2007           2006
  California Operations (1)
  Net Premiums Written                            $600,982       $565,908
  Net Premiums Earned                              573,517        539,257

  Loss Ratio                                          65.2%          63.7%
  Expense Ratio                                       26.0%          26.5%
  Combined Ratio                                      91.2%          90.2%


  Non-California Operations (2)
  Net Premiums Written                            $184,901       $208,112
  Net Premiums Earned                              182,235        197,423

  Loss Ratio                                          74.4%          66.7%
  Expense Ratio                                       30.4%          29.4%
  Combined Ratio                                     104.9%          96.1%


                                                          At March 31,
  Policies-in-force (000's)                           2007           2006

  California Personal Auto                           1,152          1,124
  California Commercial Auto                            20             21
  Non-California Personal Auto                         326            372
  California Homeowners                                264            247
  Florida Homeowners                                    13             15


  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 Sheets and Other Information
                     (000's except per-share amounts)
                               (unaudited)

                                         March 31, 2007    December 31, 2006

  Investments - available for sale
    Fixed maturities at market
     (amortized cost $2,888,100
     in 2007 and $2,851,715 in 2006)
     (includes hybrid financial
     instruments: 2007 -- $12,745)          $2,929,364         $2,898,987
    Equity securities at market
     (cost $282,448 in 2007 and
     $258,310 in 2006)                         362,229            318,449
    Short-term investments, at cost,
     which approximates market                 244,438            282,302
        Total investments                    3,536,031          3,499,738
    Net receivables                            393,863            372,777
    Deferred policy acquisition costs          216,191            209,783
    Other assets                               226,657            218,764
      Total assets                          $4,372,742         $4,301,062

    Losses and loss adjustment expenses     $1,078,304         $1,088,822
    Unearned premiums                          980,428            950,344
    Other liabilities                          407,092            396,212
    Notes payable                              140,808            141,554
    Shareholders' equity                     1,766,110          1,724,130
      Total liabilities and shareholders'
       equity                               $4,372,742         $4,301,062


    Common stock - shares outstanding           54,681             54,670
    Book value per share                        $32.30             $31.54
    Statutory surplus                     $1.6 billion       $1.6 billion
    Portfolio duration                       4.5 years          4.0 years

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/


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