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MERCURY GENERAL CORP. REPORTS 1991 RESULTS; DIVIDEND INCREASED 25 PERCENT

 MERCURY GENERAL CORP. REPORTS 1991 RESULTS;
 DIVIDEND INCREASED 25 PERCENT
 LOS ANGELES, Feb. 18 /PRNewswire/ -- Mercury General Corp. (NASDAQ: MRCY), a major California automobile insurer, reported today that net income in 1991 was $65.5 million, or $4.83 per share, compared with $51.6 million, or $3.82 per share, in 1990. Excluding "fresh start" tax benefits, earnings per share in 1991 were $4.79, compared with $3.32 in 1990. Realized capital gains contributed $.05 per share to 1991 results, compared with realized losses of $.02 per share in 1990.
 Net income in the fourth quarter of 1991 was $16.7 million, or $1.22 per share, compared with $18.9 million, or $1.40 per share. Excluding "fresh start" tax benefits, fourth quarter earnings per share were $1.19, a 30 percent increase over 1990 results of $.92 per share. Per share results are based on 13.6 million shares in 1991 and 13.5 million shares in 1990.
 Premium volume in 1991 was $467.5 million, a year-to-year decrease of 1.7 percent. The company's new rating factor plan, designed to comply with the California Department of Insurance (DOI) regulations, became effective late in the first quarter, with the result that the new rates for certain classes of drivers in some rating territories were not as competitive as they had been, and the company experienced some fall-off in new business. Renewal experience continues to be excellent, remaining above 90 percent.
 The company expects to file a revised rating classification plan within the next 30 days. The rate changes have been designed to be revenue-neutral and will improve the company's relative competitiveness for many risk classifications, particularly single drivers.
 Reflecting higher rates made effective in the first quarter and favorable loss experience, underwriting results in both the final quarter and throughout the year were excellent. The combined ratio in the fourth quarter (GAAP basis), computed without respect to provisions for potential Proposition 103 refund liability, was 93.8 percent, compared with 97.0 percent in 1990. For the entire year, the combined ratio was 93.7 percent, compared with 97.4 percent a year ago. Much of the year-to-year improvement reflects reduced losses from California's Assigned Risk Plan. Assignments under the Plan declined by nearly 90 pere?nt following an 85 percent temporary rate increase made effective Oct. 1, 1990.
 Investment income in 1991 was $53.7 million, an increase of 5.4 percent. After taxes at an effective rate of 14.3 percent vs. 16.0 percent in 1990, investment income per share was $3.39, compared with $3.17 in 1990. In the final quarter, per share after-tax investment income was $.87, compared with $.83 a year ago.
 On Oct. 16, 1991, the California Insurance Commissioner issued Proposition 103 rollback refund orders to 14 California insurers, including Mercury, totaling $1.57 billion. The Mercury order amounts to $65.2 million, including interest calculated to Oct. 15, 1991. The order applies only to rates in the rollback period, the 1989 calendar year, and would have no effect on operations subsequent to 1989. In January, the regulations on which the rollback orders were based were determined to be unlawful by the Director of the California Office of Administrative Law (OAL), principally because they restrict an insurer from obtaining relief from a rollback order which is confiscatory as applied to that particular insurer, and thus violate the principles articulated by the California Supreme Court when it upheld Proposition 103 in Calfarm. The Insurance Commissioner filed an appeal with the Governor who, on Jan. 14, 1992, overruled the OAL, thus permitting the rollback hearings to proceed.
 The company believes the rollback order is unconstitutional. It deprives the company of the "fair rate of return" which the California Supreme Court in Calfarm ruled was an essential requirement for allowing implementation of any part of the Proposition's mandated 20 percent rate rollback. The company will challenge the refund order in an administrative hearing tentatively scheduled for March 30, 1992, and will pursue all available legal remedies in the courts.
 The company has reexamined its previously established reserve for potential Proposition 103 liabilities. That reserve, $25.0 million at Dec. 31, 1991, is believed by management to be adequate to reflect any probable adverse court determination of the many issues related to the question of what constitutes a fair return to Mercury as an individual company in 1989. Charges to the reserve reduced results in 1991 by $.10 per share (principally interest), and, in 1990, $.39 per share. If the Commissioner's regulations survive numerous court challenges, both state and federal, and Mercury's ordered refund of $65.2 million, including interest to Oct. 15, 1991, is ultimately upheld by the courts, the additional charge to earnings and shareholders' equity at Dec. 31, 1991, assuming a full tax offset at 34 percent, would amount to $26.5 million, or $1.96 per share. Interest on any refund liability will continue to accrue at 10 percent annually.
 Total assets at Dec. 31, 1991, were $763.9 million, and shareholders' equity was $277.2 million, or $20.39 per share. Unrealized gains in fixed maturity investments carried at cost amounted to $23.4 million after taxes, or $1.72 per share.
 On Feb. 7, 1991, the board of directors declared a quarterly dividend of $.25 per share payable on March 31, 1992, to holders of record on March 16, 1992. The new rate of $1.00 per share annually is a 25 percent increase over the previous $.80 rate established in February 1991 and is the eighth increase in the quarterly rate since the company's initial public offering in November 1985.
 MERCURY GENERAL CORP.
 SUMMARY OF OPERATING RESULTS (000)
 Twelve Months Quarter
 Ended Dec. 31, Ended Dec. 31,
 1991 1990 1991 1990
 Net Premiums Written $467,523 $475,572 $113,055 $113,132
 Net Premiums Earned 473,532 477,322 116,580 119,037
 Net Investment Income 53,670 50,937 13,651 13,362
 Provision for
 Potential Refund, 2,102 7,898 500 533
 Net Operating Income (a) 64,763 51,871 16,744 19,553
 Capital Gains
 (Losses), Net of 730 (313) (92) (632)
 Net Income $65,493 $51,558 $16,652 $18,921
 Average Shares
 Outstanding 13,568,088 13,505,625 13,597,900 13,506,943
 Per Share Data
 Net Operating Income (a) $4.78 $3.84 $1.23 $1.45
 Capital Gains,
 Net of Tax $0.05 ($0.02) ($0.01) ($0.05)
 Earnings Per Share $4.83 $3.82 $1.22 $1.40
 Operating Ratios--GAAP Basis (b)
 Loss Ratio 69.4 pct 72.9 pct 69.6 pct 69.2 pct
 Expense Ratio 24.3 pct 24.5 pct 24.2 pct 27.8 pct
 Combined Ratio (c) 93.7 pct 97.4 pct 93.8 pct 97.0 pct
 (a) Net Income excluding realized gains (losses), net of tax
 (b) Generally Accepted Accounting Principles
 (c) Excludes provision for potential rate refund in all periods.
 -0- 2/18/92
 /CONTACT: Keith L. Parker, CFO of Mercury General, 213-937-1060/
 (MRCY) CO: Mercury General ST: California IN: AUT INS SU: ERN


CH-JL -- LA004 -- 9790 02/18/92 09:32 EST
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