Mercury General Reports Net Income of $68.2 Million for Q3, Tirador is CEO

Mercury General Corp. reported net income of $68.2 million ($1.25 per share- diluted) in the third quarter 2006 compared with $73 million ($1.33 per share-diluted) for the same period in 2005. For the first nine months of 2006, net income was $164.7 million ($3.01 per share-diluted) compared with net income of $207 million ($3.78 per share-diluted) for the same period in 2005. Included in net income are net realized investment gains, net of tax, of $1.7 million ($0.03 per share-diluted) in the third quarter of 2006 compared with net realized investment gains, net of tax, of $5 million ($0.09 per share-diluted) for the same period in 2005, and net realized investment gains, net of tax, of $8.7 million ($0.16 per share-diluted) for the first nine months of 2006 compared with net realized investment gains, net of tax, of $10.0 million ($0.18 per share-diluted) for the same period in 2005.

Company-wide net premiums written were $776.2 million in the third quarter 2006, a 1.7 percent increase over third quarter 2005 net premiums written of $762.9 million, and were approximately $2.3 billion for the first nine months of 2006, a 3.7 percent increase over the same period in 2005. California net premiums written were $573.1 million in the third quarter of 2006, an increase of 5.1% over the same period in 2005, and were approximately $1.7 billion for the first nine months of 2006, a 5.9 percent increase over the same period in 2005. Non-California net premiums written were $203.1 million in the third quarter of 2006, a 6.7 percent decrease over the same period in 2005, and were $612.8 million for the first nine months of 2006, a decrease of 2 percent over the same period in 2005.

The company’s combined ratio (GAAP basis) was 93 percent in the third quarter and 94.5 percent for the first nine months of 2006 compared with 90.8 percent and 91.2 percent for the same periods in 2005. For the states outside of California, the company experienced adverse development for the nine months ended September 30, 2006 of approximately $37 million on prior accident years’ loss reserves. The loss development primarily relates to additional reserves established for large individual losses in Florida and additional reserves established for personal injury protection and bodily injury losses in New Jersey. As a result of these developments, the Company also increased the implied severity for the 2006 accident year for Florida and New Jersey business. The company experienced positive development on prior accident years’ loss reserves of approximately $19 million for the nine months ended September 30, 2006 on its California business.

Net investment income of $36.9 million (after tax $30.7 million) in the third quarter of 2006 increased by 19.4% over the same period in 2005. The after-tax yield on investment income was 3.7% 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 3.4% on average investments of $3.2 billion (fixed maturities and equities at cost) for the same period in 2005.

The company also announced that George Joseph, CEO and chairman, will resign as CEO effective Jan. 1, 2007. The Board of Directors has appointed Gabriel Tirador to serve as president and CEO, effective Jan. 1, 2007. Tirador has served as president and COO since Oct. 2001. Joseph will remain as Chairman.

The Board of Directors declared a third quarter dividend of $0.48 per share, representing an 11.6 percent increase over the same period in 2005. The dividend is to be paid on Dec. 28, 2006 to shareholders of record on Dec. 15, 2006. The company’s book value per share at Sept. 30, 2006 was $30.98.

For more information, visit www.mercuryinsurance.com. The company will be hosting a conference call and webcast today at 10 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 Nov. 13, 2006. The replay telephone numbers are 800-642-1687 (USA) or 706 645-9291 (International). The conference ID# is 8732770. The replay will also be available on the company’s website shortly following the call.