Click Here to listen to the 3rd Quarter conference call

    LOS ANGELES, Nov. 1 -- Mercury General Corporation (NYSE: MCY) reported today net income of $65.1 million, or $1.19 per share (diluted), in the third quarter 2004 compared with $49.6 million, or $0.91 per share (diluted), in the same period for 2003. For the first nine months of 2004, net income was $212.1 million ($3.88 per share-diluted) compared to net income of $135.1 million ($2.48 per share-diluted) in the same period for 2003. Included in net income are net realized gains, net of tax, of $0.6 million ($0.01 per share-diluted) in the third quarter 2004 compared to net realized gains, net of tax, of $4.1 million ($0.07 per share-diluted) for the third quarter 2003, and net realized gains, net of tax, of $12.1 million ($0.22 per share-diluted) for the first nine months of 2004 compared to net realized gains, net of tax, of $3.5 million ($0.06 per share-diluted) for the same period in 2003. Net income in the third quarter of 2004 includes approximately $24 million ($16 million after tax benefit or $0.29 per share-diluted) in losses resulting from the four recent Florida hurricanes.

    Company-wide net premiums written were $693.7 million in the third quarter 2004, a 17.5% increase over third quarter 2003 net premiums written of $590.2 million, and were $1,972.5 million for the first nine months of 2004, a 17.6% increase over the same period in 2003. California net premiums written were $512.6 million in the quarter, an increase of 4.2% over 2003, and were $1,511.4 million for the first nine months of 2004, a 7.6% increase over the same period in 2003. Non-California net premiums written were $181.2 million in the quarter, an 84.4% increase over 2003, and were $461.1 million for the first nine months of 2004, a 69.0% increase over the same period in 2003. Non-California net premiums written represented 26.1% of the Company's total third quarter net premiums written, up from 16.6% in the third quarter of 2003.

    The Company's combined ratio (GAAP basis) was 90.8% in the third quarter and 89.4% for the first nine months of 2004 compared with 93.4% for the third quarter and 94.0% for the nine month period in 2003. Favorable loss frequency trends and positive development of approximately $40 million for the nine month period ended September 30, 2004 on the 2003 and prior accident year loss reserves contributed to the improvement in the combined ratio. The Florida hurricanes negatively impacted the combined ratio by 3.7% for the third quarter of 2004 and 1.3% for the first nine months of 2004.

    Net investment income was $28.4 million (after tax $24.5 million) in the third quarter of 2004. The after-tax yield on investment income was 3.6% on average assets of $2.7 billion (fixed maturities and equities at cost) for the quarter. This compares with an after tax yield on investment income of 3.8% on average investments of $2.3 billion (fixed maturities and equities at cost) for the same period in 2003.

    During October 2004, the Company began writing private passenger automobile insurance in Michigan, marking the twelfth state in which the Company writes automobile insurance.

    On October 29, 2004, the Board of Directors declared a quarterly dividend of $0.37 per share for the third quarter, representing a 12% increase over the quarterly dividend amount paid in 2003. The dividend is to be paid on December 29, 2004 to shareholders of record on December 15, 2004.

    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 (1:00 P.M. Eastern Time) where management will discuss results and address questions. The teleconference and webcast can be accessed by calling 1 (877) 807-1888 or by clicking here. A replay of the call will be available beginning at 1:30 P.M. Pacific Time and running through November 8, 2004. The replay telephone numbers are (800) 642-1687 (USA) or (706) 645-9291 (International). The conference ID# is 1398662. 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; 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 in general and in particular with respect to the recent Florida hurricanes; 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 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.