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Mercury General Corporation Announces First Quarter Results


Mercury General Corporation (NYSE: MCY), a major California automobile insurer with operations in a number of other states, reported today that net income was $42.1 million, or $0.77 per share (diluted), in the first quarter 2003 compared with $29.0 million, or $0.53 per share (diluted), in the same period for 2002. Net operating earnings in the first quarter of 2003 were $42.6 million, or $0.78 per share, compared with $28.8 million, or $0.53 per share in 2002. The Company defines net operating earnings, a non GAAP financial measure, as net income excluding net realized investment gains and losses, net of tax. Management believes that net operating earnings better reflects the Company's core business results since its investment policy emphasizes maximization of after-tax yields and not achieving realized gains.

Company-wide premiums written were $538.8 million in the first quarter 2003, a 27.8% increase over first quarter 2002 premiums written of $421.5 million. California premiums written were $452.9 million in the quarter, an increase of 25.8% over 2002. The increased premiums were driven by both policy count growth and recent rate increases.

The loss ratio (GAAP basis) was 68.2% in the quarter compared with 71.9% in the same period for 2002. The lower loss ratio is largely attributed to recent rate increases and improved loss frequency in the Company's automobile lines of business. Loss frequencies can be affected by many factors including seasonal travel, weather and fluctuations in gasoline prices.

The expense ratio (GAAP basis) was 26.2% in the quarter compared with 26.6% in the same period for 2002.

The Company received approval from the California Department of Insurance to increase its personal automobile rates by 6.9% in Mercury Casualty Company and California Automobile Insurance Company and 3.8% in Mercury Insurance Company. The Company plans to implement these rate increases in June 2003.

Net investment income in the first quarter of 2003 of $26.9 million decreased by 8.7% from $29.5 million in the same period for 2002. After taxes, per share (diluted) investment income was $0.44 in the quarter, compared with $0.47 in the first quarter of 2002. The after-tax yield was 4.33% on average investments of $2.21 billion (fixed maturities and equities at cost) for the quarter. This compares with 5.23% in the first quarter of 2002.

The Board of Directors declared a second quarter dividend of $0.33 per share, representing a 10% increase over the quarterly dividend amount paid in 2002. The dividend is to be paid on June 30, 2003 to shareholders of record on June 15, 2003. The Company's book value per share at March 31, 2003 was $20.84.

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 March 31,
                                                         2003        2002
   Net Premiums Written                               $538,750    $421,501
   Net Premiums Earned                                 500,666     386,637
   Paid Losses and Loss Adjustment Expenses            320,599     259,636
   Incurred Losses and Loss Adjustment Expenses        341,546     278,101
   Net Investment Income                                26,926      29,504
   Net Realized Investment (Losses) or Gains (a)          (493)        155
   Net Income                                          $42,108     $28,954

   Net Operating Earnings                              $42,601     $28,799

   Basic Average Shares Outstanding                 54,378,897  54,265,041

   Diluted Average Shares Outstanding               54,489,585  54,462,002

   Basic Per Share Data
   Earnings Per Share                                    $0.77       $0.53

   Diluted Per Share Data
   Net Operating Earnings                                $0.78       $0.53
   Net Realized Investment (Losses) or Gains (a)        ($0.01)      $0.00
   Earnings Per Share                                    $0.77       $0.53

   Operating Ratios -- GAAP Basis (b)
   Loss Ratio                                            68.2%       71.9%
   Expense Ratio                                         26.2%       26.6%
   Combined Ratio                                        94.4%       98.5%

   Reconciliations of Operating Measures to
    Comparable GAAP (b) Measures

   Net Premiums Written                               $538,750    $421,501
   Increase in Unearned Premiums                       (38,084)    (34,864)
   Net Premiums Earned                                $500,666    $386,637

   Paid Losses and Loss Adjustment Expenses           $320,599    $259,636
   Increase in net losses and loss adjustment
    expense reserves                                    20,947      18,465
   Incurred Losses and Loss Adjustment Expenses       $341,546    $278,101

   Net Operating Earnings                              $42,601     $28,799
   Net Realized Investment (Losses) or Gains (a)          (493)        155
   Net Income, GAAP basis (b)                          $42,108     $28,954

   (a)  Net Realized Investment (Losses) or Gains is net of taxes.
   (b)  Generally Accepted Accounting Principles
   (c)  Some numbers may not sum due to rounding

                         MERCURY GENERAL CORPORATION

                        Other Supplemental Information

                        Three months ending March 31, 2003

                                Net Premiums   Loss     Expense  Combined
                                  Written      Ratio     Ratio     Ratio
   California                    $452,946      70.0%     25.6%      95.6%
   Georgia                         $4,727      68.1%     31.5%      99.6%
   Illinois                        $4,597      53.8%     27.2%      81.0%
   Florida                        $33,518      58.7%     25.9%      84.6%
   Texas (Concord operations)     $15,363      58.6%     31.1%      89.7%
   New York                        $2,516      79.7%     32.4%     112.1%
   Virginia                        $1,873      76.4%     39.0%     115.4%
   American Mercury operations    $23,210      53.6%     33.4%      87.0%
    Total Company                $538,750      68.2%     26.2%      94.4%

                        Three months ending March 31, 2002

                                Net Premiums   Loss     Expense  Combined
                                  Written      Ratio     Ratio     Ratio
   California                    $359,957      71.9%     25.6%      97.5%
   Georgia                         $3,727      64.1%     31.6%      95.7%
   Illinois                        $3,256      57.4%     28.2%      85.6%
   Florida                        $21,837      76.4%     28.3%     104.7%
   Texas (Concord operations)      $9,229      69.6%     34.0%     103.6%
   New York                          $800      80.9%     48.3%     129.2%
   Virginia                          $551      77.7%     54.9%     132.6%
   American Mercury operations    $22,144      73.4%     37.3%     110.7%
    Total Company                $421,501      71.9%     26.6%      98.5%

   Policies-in-force at March 31, 2003
                                                       amounts in
   California Personal Auto (excluding Cal Auto)          897
   Personal Auto written through Cal Auto                  84
   California Commercial Auto                              19
   California Homeowners                                  163
   Florida Auto                                            71
   Virginia Personal Auto                                   4
   New York Personal Auto                                   5
   Georgia Personal Auto                                   13
   Illinois Personal Auto                                  12
   Texas (Concord Operations)                              26
   Florida Homeowners                                       7

   Total shareholders' equity at year-end         $1.1Billion

SOURCE: Mercury General Corporation

CONTACT: Theodore Stalick, VP/CFO of Mercury General Corporation,

Web site:

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