Mercury General Reports Net Income of $214.8 Million in 2006

February 12, 2007

Los Angeles-based Mercury General Corp. has announced its fourth quarter and 2006 earnings, posting net income of $50.1 million ($0.91 per share-diluted) in the fourth quarter 2006 compared with $46.2 million ($0.84 per share-diluted) for the same period in 2005. For the year, net income was $214.8 million ($3.92 per share-diluted) compared with net income of $253.3 million ($4.63 per share-diluted) for the same period in 2005.

Included in net income are net realized investment gains, net of tax, of $1.3 million ($0.02 per share-diluted) in the fourth quarter of 2006 compared with net realized investment gains, net of tax, of $0.5 million ($0.01 per share-diluted) for the same period in 2005, and net realized investment gains, net of tax, of $10.0 million ($0.18 per share-diluted) for the entire 2006 year compared with net realized investment gains, net of tax, of $10.5 million ($0.19 per share-diluted) for 2005.

Company-wide net premiums written were $740.7 million in the fourth
quarter 2006, a 1.7 percent increase over fourth quarter 2005 net premiums written of $728 million, and were approximately $3 billion for the year, a 3.2 percent increase over the same period in 2005.

California net premiums written were $558.5 million in the fourth quarter of 2006, an increase of 5.5 percent over the same period in 2005, and were approximately $2.2 billion for the year, a 5.8 percent increase over the same period in 2005. Non-California net premiums written were $182.2 million in the fourth quarter of 2006, an 8.2 percent decrease over the same period in 2005, and were $795 million for the year, a decrease of 3.5 percent over the same period in 2005.

The company’s combined ratio (GAAP basis) was 96.5 percent in the fourth quarter and 95 percent for the year compared with 96 percent and 92.4 percent for the same periods in 2005. Catastrophe losses did not impact the financial results during the fourth quarter of 2006 as compared to the fourth quarter 2005, when losses caused by Hurricane Wilma increased the loss ratio by 3.3 points.

Loss development on prior accident years’ loss reserves was
approximately $20 million adverse and $45 million positive for the years ended Dec. 31, 2006 and 2005, respectively. For business produced in California, positive development on prior accident years’ loss reserves was approximately $15 million and $40 million for the years ended Dec. 31, 2006 and 2005. For business produced outside of California, development on prior accident years’ loss reserves was approximately $35 million adverse and $5 million positive for the years ended Dec. 31, 2006 and 2005.

Net investment income of $38.6 million (after tax $33.9 million) in the
fourth quarter of 2006 increased by 19.7 percent over the same period in 2005. The after-tax yield on investment income was 4 percent 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 percent on average investments of $3.3 billion (fixed maturities and equities at cost) for the same period in 2005.

For more information, visit http://www.mercuryinsurance.com. The company will be hosting a conference call and
webcast today at 10 a.m. Pacific time, in which management will discuss results and address questions. The teleconference and webcast can be accessed by calling 877-807-1888 or (international)706- 679-3827. A replay of the call will be available beginning at 1:30 p.m. Pacific time and running through Feb.19, 2007. The replay telephone numbers are 800-642-1687 or (international) 706-645-9291. The conference ID# is 6946173. The replay will also be available on the company’s Web site following the call.

Source: Mercury General