Click here to listen to the 3rd Quarter Call.

    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). This 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.