Mercury General Corporation Announces First Quarter Results and Declares Quarterly Dividend

   Mercury General Corporation Announces First Quarter Results and Declares
                              Quarterly Dividend

PR Newswire

LOS ANGELES, April 29, 2013

LOS ANGELES, April 29, 2013 /PRNewswire/ -- Mercury General Corporation (NYSE:
MCY) reported today for the first quarter of 2013:

Consolidated Highlights

                              Three Months Ended March 31, Change
                              2013           2012          $          %
 (000's except per-share
 amounts and ratios)
 Net premiums written (1)     $  690,504     $  658,287    $ 32,217   4.9
 Net income                   $  66,461      $  73,356     $ (6,895)  (9.4)
 Net income per diluted share $  1.21        $  1.34       $ (0.13)   (9.7)
 Operating income (1)         $  37,829      $  39,125     $ (1,296)  (3.3)
 Operating income per diluted $  0.69        $  0.71       $ (0.02)   (2.8)
 share (1)
 Restructuring charges (2)    $  10,000      $  0          $ 10,000   NM
 Catastrophe losses (3)       $  1,000       $  0          $ 1,000    NM
 Combined ratio (4)           97.9        %  97.6        % —          0.3 pts
 NM = not meaningful

    These measures are not based on U.S. generally accepted accounting
(1) principles ("GAAP") and are defined and reconciled to the most directly
    comparable GAAP measures in "Information Regarding Non-GAAP Measures."
    The Company consolidated its claims and underwriting operations located
    outside of California into hub locations in Florida, New Jersey, and
(2) Texas, which resulted in a net workforce reduction of approximately 135
    employees and a $10 million expense in the first quarter of 2013. The
    amounts are rounded to the nearest million.
(3) 2013 catastrophe losses were primarily the result of weather related
    events in Georgia. The amounts are rounded to the nearest million.
    The Company experienced favorable development of approximately $3 million
    and unfavorable development of approximately $6 million on prior accident
(4) years' losses and loss adjustment expenses reserves for the three months
    ended March 31, 2013 and 2012, respectively. The year-to-date favorable
    development for the three months ended March 31, 2013 is primarily from
    non-California states.

Investment Results

                                                  Three Months Ended March 31,
                                                  2013           2012
(000's except average annual yield)
Average invested assets at cost (1)               $  3,046,982   $ 2,984,903
Net investment income (2)
 Before income taxes                          $  31,175      $ 31,486
 After income taxes                           $  27,271      $ 28,037
Average annual yield on investments - after       3.6          % 3.8         %
income taxes (2)

    Fixed maturities and short-term bonds at amortized cost and equities and
(1) other short-term investments at cost. Average invested assets at cost are
    based on the monthly amortized cost of the invested assets for each
    respective period.
    Net investment income and average annual yield for the three months ended
    March 31, 2013 decreased primarily due to the maturity and replacement of
(2) higher yielding investments, purchased when market interest rates were
    higher, with lower yielding investments purchased during the current low
    interest rate environment.

Mercury CEO and President Gabe Tirador commented on the quarterly results:

"I am pleased to report our first quarter 2013 combined ratio was 97.9% and
our written premiums grew by 4.9%, our ninth consecutive quarter of written
premium growth. The Company is executing on our plan to improve profitability
and we are experiencing continued improvement in our financial results outside
of California.

The results were favorably impacted by approximately $3 million of positive
reserve development, arising primarily from Florida and New Jersey business.
Additionally, loss costs in the first quarter of 2013 compared favorably to
those of the fourth quarter of 2012 which had included losses from Hurricane
Sandy. Premium growth continues to be driven by personal automobile business
in California and homeowners business in many states.

The first quarter results were impacted by approximately $10 million of
pre-tax restructuring charges related to the consolidation of operations
outside of California into hubs located in Florida, New Jersey and Texas. The
charges added 0.5 point to our expense ratio and 1.0 point to the loss
adjustment expense portion of the loss ratio. The Company expects future
savings of approximately $12 million per year as a result of the
consolidation."

The Board of Directors declared a quarterly dividend of $0.6125 per share. The
dividend will be paid on June 27, 2013 to shareholders of record on June 13,
2013.

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 May 6, 2013. The replay telephone numbers are (855) 859-2056
(USA) or (404) 537-3406 (International). The conference ID# is 35496206. The
replay will also be available on the Company's website shortly following the
call.

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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 general economic conditions, including the impact of current
economic conditions on the Company's market and investment portfolio; the
accuracy and adequacy of the Company's pricing methodologies; adverse weather
conditions or natural disasters in the markets served by the Company; general
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 the approval of premium rate changes for
insurance policies issued in states where the Company operates; legislation
adverse to the automobile insurance industry or business generally that may be
enacted in the states where the Company operates; the Company's success in
managing its business in states outside of California; the presence of
competitors with greater financial resources and the impact of competitive
pricing and marketing efforts; 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 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.

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MERCURY GENERAL CORPORATION AND SUBSIDIARIES
SUMMARY OF OPERATING RESULTS
(000's except per-share amounts and ratios)
(unaudited)
                                                  Three Months Ended March 31,
                                                  2013             2012
Net premiums written                              $  690,504       $ 658,287
Revenues:
 Net premium earned                           $  662,595       $ 635,812
 Net investment income                        31,175           31,486
 Net realized investment gains                44,050           52,663
 Other                                        2,333            2,714
 Total revenues                         $  740,153       $ 722,675
Expenses:
 Losses and loss adjustment expenses          467,060          449,916
 Policy acquisition costs                     123,722          117,430
 Other operating expenses                     58,063           52,925
 Interest                                     314              410
 Total expenses                          $  649,159       $ 620,681
Income before income taxes                        90,994           101,994
 Income tax expense                           24,533           28,638
 Net income                    $  66,461        $ 73,356
Basic average shares outstanding                  54,922           54,877
Diluted average shares outstanding                54,935           54,908
Basic Per Share Data
Net income                                        $  1.21          $ 1.34
Net realized investment gains, net of tax         $  0.52          $ 0.62
Diluted Per Share Data
Net income                                        $  1.21          $ 1.34
Net realized investment gains, net of tax         $  0.52          $ 0.62
Operating Ratios-GAAP Basis
Loss ratio                                        70.5        %    70.8      %
Expense ratio                                     27.4        %    26.8      %
Combined ratio                                    97.9        %    97.6      %
Reconciliations of Operating Measures to Comparable GAAP
Measures
Net premiums written                              $  690,504       $ 658,287
Change in net unearned premiums                   (27,909)         (22,475)
Net premiums earned                               $  662,595       $ 635,812
Paid losses and loss adjustment expenses          $  493,480       $ 480,522
Change in net loss and loss adjustment expense    (26,420)         (30,606)
reserves
Incurred losses and loss adjustment expenses      $  467,060       $ 449,916



MERCURY GENERAL CORPORATION AND SUBSIDIARIES

CONDENSED BALANCE SHEETS AND OTHER INFORMATION

(000's except per-share amounts and ratios)
                                             March31, 2013  December31, 2012
                                             (unaudited)
ASSETS
Investments, at fair value:
 Fixed maturity securities (amortized    $  2,513,418    $   2,408,354
cost $2,386,204; $2,270,903)
 Equity securities (cost $484,102;       539,258         477,088
$475,959)
 Short-term investments (cost $152,184;  152,081         294,653
$294,607)
 Total investments                  3,204,757       3,180,095
Cash                                         185,042         158,183
Receivables:
 Premiums                                368,303         345,387
 Accrued investment income               33,778          31,109
 Other                                   16,306          17,756
 Total receivables                  418,387         394,252
Deferred policy acquisition costs            190,844         185,910
Fixed assets, net                            158,284         161,940
Current income taxes                         0               7,058
Goodwill                                     42,796          42,796
Other intangible assets, net                 46,090          47,589
Other assets                                 25,966          11,863
 Total assets                       $  4,272,166    $   4,189,686
LIABILITIES AND SHAREHOLDERS' EQUITY
Losses and loss adjustment expenses          $  1,009,418    $   1,036,123
Unearned premiums                            948,373         920,429
Notes payable                                140,000         140,000
Accounts payable and accrued expenses        113,090         96,220
Current income taxes                         4,726           0
Deferred income taxes                        12,755          445
Other liabilities                            168,458         153,972
Shareholders' equity                         1,875,346       1,842,497
 Total liabilities and              $  4,272,166    $   4,189,686
shareholders' equity
OTHER INFORMATION
Common stock shares outstanding              54,922          54,922
Book value per share                         $34.15          $33.55
Estimated statutory surplus                  $1.51 billion   $1.44 billion
Estimated premiums written to surplus ratio  1.8             1.8
Debt to total capital ratio                  6.9          %  7.1            %
Portfolio duration (including all short-term 3.3 years       2.8 years
instruments)^(a)
Policies-in-force (company-wide "PIF")^(a)
 Personal Auto PIF                       1,252           1,249
 Homeowners PIF                          450             442

(a) Unaudited. 

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 GAAP. These measures are not intended to replace,
and should be read in conjunction with, the GAAP financial results.

Operating income is net income excluding realized investment gains and losses,
net of tax. Net income is the GAAP measure that is most directly comparable to
operating income. Operating income is used by management along with the other
components of net income to assess the Company's performance. Management uses
operating income as an important measure to evaluate the results of the
Company's insurance business. Management believes that operating income
provides investors with a valuable measure of the Company's ongoing
performance as it reveals trends in the Company's insurance business that may
be obscured by the effect of net realized capital gains and losses. Realized
capital gains and losses may vary significantly between periods and are
generally driven by external economic developments such as capital market
conditions. Accordingly, operating income highlights the results from ongoing
operations and the underlying profitability of the Company's core insurance
business. Operating income, which is provided as supplemental information and
should not be considered as a substitute for net income, does not reflect the
overall profitability of our business. It should be read in conjunction with
the GAAP financial results. The Company has reconciled operating income with
the most directly comparable GAAP measure in the table below.

                                    Three Months Ended March 31,
                                    Total               Per diluted share
                                    2013      2012      2013      2012
(000's except per-share amounts)
Operating income                    $ 37,829  $ 39,125  $  0.69   $ 0.71
Net realized investment gains, net  28,632    34,231    0.52      0.62
of tax
Net income                          $ 66,461  $ 73,356  $  1.21   $ 1.34  ^(a)
(a) Net income per diluted share does not sum due to rounding.



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 have been recognized
as income in the financial statements for the periods presented as earned on a
pro-rata basis over the term of the policies. Net premiums written are meant
as supplemental information and are not intended to replace net premiums
earned. Such information should be read in conjunction with the GAAP financial
results. The Company has reconciled net premiums written with the most
directly comparable GAAP measure in the supplemental schedule entitled,
"Summary of Operating 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 provided 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. The Company has
reconciled paid losses and loss adjustment expenses with the most directly
comparable GAAP measure in the supplemental schedule entitled, "Summary of
Operating Results."

Combined ratio-accident period basis is computed as the difference between two
GAAP operating ratios: the combined ratio and the effect of prior accident
periods' loss development. The most directly comparable GAAP measure is the
combined ratio. The Company believes that this ratio is useful to investors
and it is used by management to reveal the trends in the Company's results of
operations that may be obscured by development on prior accident periods' loss
reserves. Combined ratio-accident period basis is meant as supplemental
information and is not intended to replace combined ratio. It should be read
in conjunction with the GAAP financial results. The Company has reconciled
combined ratio-accident period basis with the most directly comparable GAAP
measure in the table below.

                                                Three Months Ended March 31,
                                                2013                 2012
Combined ratio-accident period basis            98.4       %         96.7    %
Effect of estimated prior periods' loss         (0.5)%               0.9     %
development
Combined ratio                                  97.9       %         97.6    %

SOURCE Mercury General Corporation

Website: http://www.mercuryinsurance.com
Contact: Theodore Stalick, VP/CFO, +1-323-937-1060, www.mercuryinsurance.com
 
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