Mercury General Corporation (NYSE: MCY) reported today that net income was $49.2 million ($0.90 per share - diluted) in the fourth quarter of 2003 compared to $17.3 million ($0.32 per share - diluted) in the same period in 2002. Included in net income are net realized investment gains, net of tax, of $3.8 million ($0.07 per share) in the fourth quarter of 2003 compared to net realized investment losses, net of tax benefit, of $14.2 million ($0.26 per share) for the same period in 2002. Net income in the fourth quarter of 2003 also includes approximately $16 million ($10.2 million after tax benefit or $0.19 per share) in losses resulting from the October 2003 Southern California fire storms.

    For the year, net income was $184.3 million ($3.38 per share - diluted) in 2003 compared to net income of $66.1 million ($1.21 per share - diluted) in 2002. Net realized investment gains, net of tax, was $7.3 million ($0.13 per share) in 2003 compared to net realized investment losses, net of tax benefit, of $45.8 million ($0.84 per share) in 2002.

    Company-wide premiums written were $591.4 million in the fourth quarter of 2003, a 17.2% increase over 2002, and $2.3 billion for the year, a 21.6% increase over 2002. California premiums written were $481.7 million in the fourth quarter of 2003, a 12.6% increase over 2002, and $1.9 billion for the year, an 18.8% increase over 2002. Non-California premiums written were $109.7 million in the fourth quarter of 2003, a 43.2% increase over 2002 and $382.6 million for the year, a 37.7% increase over 2002. Non-California premiums made up 18.5% of fourth quarter premiums, up from 15.2% for the same period in 2002.

    The Company's combined ratio (GAAP basis) was 94.1% in the fourth quarter of 2003 and 94.0% for the entire year compared to 97.6% and 98.8% for the respective periods of 2002. The Southern California fire storms negatively impacted the combined ratio by 2.7% for the fourth quarter of 2003 and 0.7% for the entire year of 2003.

    Net investment income of $26.3 million for the fourth quarter decreased by $0.4 million over the corresponding period in 2002. The after-tax yield was 3.9% on average investments of $2.42 billion (fixed maturities and equities at cost) for the quarter. This compares with 4.4% in the fourth quarter of 2002. Net investment income for 2003 was $104.5 million compared to $113.1 million for 2002.

    Mercury General Corporation and its subsidiaries are a multiple line insurance organization offering predominantly personal automobile and homeowners insurance through a network of independent agents and brokers in many states. For more information, visit our website at http://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 can be accessed by calling 1 (877) 807-1888 or by visiting http://investor.mercuryinsurance.com/calendarofevents.asp. A replay of the call will be available beginning at 1:30 p.m. pacific time and running through February 16, 2004. The replay telephone numbers are 1 (800) 642-1687 (USA) or 1 (706) 645-9291 (International). The conference ID# is 4885467. The replay will also be available on our 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; 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

Information Regarding Non-GAAP Measures

    The Company has presented information within this document containing operating measures which in management's opinion provide investors useful industry specific information to 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.