8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 2, 2009

MERCURY GENERAL CORPORATION

(Exact Name of Registrant as Specified in Charter)

California	001-12257	95-221-1612
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

4484 Wilshire Boulevard

Los Angeles, California 90010

(Address of Principal Executive Offices)

(323) 937-1060

(Registrant’s telephone number, including area code)

Not applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 425 under the Exchange Act (17 CFR 240.14.a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition

The following information is furnished pursuant to Item 2.02, “Results of Operations and Financial Condition,” and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section.

On November 2, 2009, Mercury General Corporation issued a press release announcing its financial results for the third quarter ended September 30, 2009.  A copy of the press release is attached hereto as Exhibit 99.1.

The information contained in this Current Report, including the exhibit, shall not be incorporated by reference into any filing of Mercury General Corporation, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

Item 9.01. Financial Statements and Exhibits

(d) Exhibits.

99.1 Press Release, dated November 2, 2009, issued by Mercury General Corporation, furnished pursuant to Item 2.02 of Form 8-K.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date:  November 2, 2009	MERCURY GENERAL CORPORATION
	By:	/s/ Theodore Stalick
	Name:  Theodore Stalick
	Its:  Chief Financial Officer

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Exhibit Index

Exhibit 99.1. Press Release, dated November 2, 2009, issued by Mercury General Corporation.

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EX-99.1

4484 Wilshire Boulevard Los Angeles, California 90010 (323) 937-1060 Fax (323) 857-7125

Press Release

FOR MORE INFORMATION, CONTACT:

Theodore Stalick, VP/CFO

(323) 937-1060

www.mercuryinsurance.com

For Release: November 2, 2009

Mercury General Corporation Announces Third Quarter Results and Increases

Quarterly Dividend

Los Angeles, California…Mercury General Corporation (NYSE: MCY) reported today for the third quarter of 2009:

Consolidated Highlights

	Three Months Ended												Nine Months Ended
	September 30,						Change						September 30,						Change
	2009			2008			$			%			2009			2008			$			%
(000's except per-share amounts and ratios)
Net premiums written (1)	$	662,756		$	695,142		$	(32,386	)		(4.7	)	$	1,971,053		$	2,108,585		$	(137,532	)		(6.5	)
Net income (loss)	$	157,737		$	(140,539	)	$	298,276			-		$	368,837		$	(73,774	)	$	442,611			-
Net income (loss) per diluted share	$	2.85		$	(2.57	)	$	5.42			-		$	6.70		$	(1.35	)	$	8.05			-
Operating income (1)	$	46,345		$	39,493		$	6,852			17.3		$	139,680		$	142,425		$	(2,745	)		(1.9	)
Operating income per diluted share (1)	$	0.84		$	0.72		$	0.12			16.7		$	2.54		$	2.60		$	(0.06	)		(2.3	)
Severance related expenses (2)	$	-		$	-		$	-			-		$	8,000		$	-		$	8,000			-
Net expense related to amortization of December 31, 2008
AIS deferred policy acquisition costs (2) (3)	$	-		$	-		$	-			-		$	15,000		$	-		$	15,000			-
Catastrophe losses (2) (4)	$	-		$	6,000		$	(6,000	)		-		$	-			6,000		$	(6,000	)		-
Favorable tax ruling (5)	$	-		$	17,500		$	(17,500	)		-		$	-			17,500		$	(17,500	)		-
Combined ratio		96.4	%		102.0	%	(5.6		)pts		-			96.5	%		98.1	%	(1.6		)pts		-

(1) These measures are not based on U.S. generally accepted accounting principles (“GAAP”) and are defined and reconciled to the most directly comparable GAAP measures in “Information Regarding Non-GAAP Measures.”

(2) The amounts are estimated and rounded to the nearest million.

(3) Represents the net expense related to Auto Insurance Specialists, LLC (“AIS”) deferred commissions at December 31, 2008 amortized in 2009, partially offset by deferred costs related to policy sales made by AIS in 2009.

(4) Catastrophe losses in 2008 were primarily a result of Hurricane Ike.

(5) The Company recognized a net tax benefit of $17.5 million in the third quarter 2008 as a result of a favorable California Superior Court ruling.  This amount is included in both the operating income and net loss for 2008.

Net income in the third quarter 2009 was $157.7 million ($2.85 per share-diluted) compared with net loss of $140.5 million ($2.57 per share-diluted) for the same period in 2008.  For the first nine months of 2009, net income was $368.8 million ($6.70 per share-diluted) compared with net loss of $73.8 million ($1.35 per share-diluted) for the same period in 2008.  Included in net income (loss) are net realized investment gains, net of tax, of $111.4 million ($2.01 per share-diluted) in the third quarter of 2009 compared with net realized investment losses, net of tax, of $180.0 million ($3.29 per share-diluted) for the same period in 2008, and net realized investment gains, net of tax, of $229.2 million ($4.16 per share-diluted) for the first nine months of 2009 compared with net realized investment losses, net of tax, of $216.2 million ($3.95 per share) for the same period in 2008.  Operating income was $46.3 million ($0.84 per share-diluted) for the third quarter of 2009, a 17.3% increase over the same period in 2008, and $139.7 million ($2.54 per share-diluted) for the first nine months of 2009, a 1.9% decrease over the same period in 2008.

As a result of adopting the fair value accounting option, changes in unrealized gains and losses on all investments were recorded as net realized gains and losses in the statement of operations.  Net realized investment gains, net of tax, of $111.4 million for the third quarter of 2009 and $229.2 million for the first nine months of 2009 include gains, net of tax, from the adoption of the fair value accounting option, of $124.3 million and $263.6 million, respectively.  Partially offsetting these gains were $12.3 million and $36.9 million in losses, net of tax, from the sale of securities during the third quarter and the first nine months of 2009, respectively.

Net premiums written were $662.8 million in the third quarter of 2009, a 4.7% decrease over the third quarter 2008 net premiums written of $695.1 million, and were approximately $2.0 billion for the first nine months of 2009, a 6.5% decrease over the same period in 2008.  The rate of premium decline has slowed over the last few quarters.  The premium decrease was 8.0% and 6.8% in the first and second quarter 2009, respectively, over comparable quarters in 2008.

The Company’s combined ratio (GAAP basis) was 96.4% in the third quarter and 96.5% for the first nine months of 2009 compared with 102.0% and 98.1% for the same periods in 2008.  Loss development on prior accident years’ loss reserves was approximately $40 million positive for the nine months ended September 30, 2009, compared with approximately $46 million adverse for the same period in 2008.  The positive development in 2009 is largely the result of re-estimates of accident year 2008 California bodily injury losses which have experienced both lower average severities and fewer late reported claims (claim count development) than was originally estimated at December 31, 2008.

Net investment income of $35.2 million (after tax, $32.0 million) in the third quarter of 2009 decreased by 7.6% over the same period in 2008.  The investment income after-tax yield was 4.0% on average investments (fixed maturities at amortized cost, equities and short-term investments at cost) of $3.2 billion for the third quarter 2009.  This compares with an investment income after-tax yield of 3.9% on average investments of $3.4 billion for the same period in 2008.  Net investment income for the first nine months of 2009 was $109.3 million (after tax, $98.0 million), a decrease of 6.1% over the same period in 2008.  The investment income after-tax yield was 4.1% on average assets of $3.2 billion for the first nine months of 2009.  This compares with an investment income after-tax yield of 3.9% on average investments of $3.5 billion for the same period in 2008.

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The Board of Directors declared a quarterly dividend of $0.59 per share, representing a 1.7% increase over the quarterly dividend amount paid in 2008.  The dividend is to be paid on December 30, 2009 to shareholders of record on December 16, 2009.

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 November 9, 2009. The replay telephone numbers are (800) 642-1687 (USA) or (706) 645-9291 (International).  The conference ID# is 35610503. 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, inflation and in 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 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 managing its business in states outside of California; the Company’s ability to successfully complete its initiative to standardize its policies and procedures nationwide in all of its functional areas; 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.

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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 U.S. generally accepted accounting principles. 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 net effect of 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 excludes the effect of items that tend to be highly variable from period to period and highlights the results from ongoing operations and the underlying profitability of the Company’s core insurance business. Therefore, the Company believes that it is useful for investors to evaluate net income and operating income separately when reviewing and evaluating its performance.  Operating income is meant as supplemental information and it should not be considered as a substitute for net income and 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										Nine Months Ended
	September 30,										September 30,
	Total					Per diluted share (1)					Total					Per diluted share (1)
	2009		2008			2009		2008			2009		2008			2009		2008
(000's except per-share amounts)
Operating income	$	46,345	$	39,493		$	0.84	$	0.72		$	139,680	$	142,425		$	2.54	$	2.60
Net realized investment gains (losses), net of tax		111,392		(180,032	)		2.01		(3.29	)		229,157		(216,199	)		4.16		(3.95	)
Net income (loss)	$	157,737	$	(140,539	)	$	2.85	$	(2.57	)	$	368,837	$	(73,774	)	$	6.70	$	(1.35	)

(1) The dilutive impact of incremental shares is excluded from loss positions in 2008 in accordance with GAAP.

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. The Company has reconciled net premiums written with the most directly comparable GAAP measure in the supplemental schedule entitled, “Summary of Operating Results.”

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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. 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 business 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.

	Nine Months Ended
	September 30,
	2009			2008
Combined ratio-accident period basis		98.5	%		95.9	%
Effect of estimated prior periods' loss development		-2.0	%		2.2	%
Combined ratio		96.5	%		98.1	%

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Mercury General Corporation and Subsidiaries

Summary of Operating Results

(000's except per-share amounts and ratios)

(unaudited)

	Quarter Ended September 30,						Nine Months Ended September 30,
	2009			2008			2009			2008
Net premiums written	$	662,756		$	695,142		$	1,971,053		$	2,108,585
Revenues:
Net premium earned	$	653,758		$	696,605			1,979,032			2,128,725
Net investment income		35,208			38,086			109,334			116,380
Net realized investment gains (losses)		171,373			(276,973	)		352,549			(332,614	)
Other		895			1,313			3,256			3,809
Total revenues	$	861,234		$	459,031		$	2,444,171		$	1,916,300
Expenses:
Incurred losses		446,436			511,806			1,336,191			1,484,824
Policy acquisition costs		130,172			154,530			414,062			472,112
Other operating expenses		53,766			44,350			158,616			131,834
Interest		1,634			1,663			5,059			3,659
Total expenses	$	632,008		$	712,349		$	1,913,928		$	2,092,429
Income before income taxes	$	229,226		$	(253,318	)	$	530,243		$	(176,129	)
Income tax expense		71,489			(112,779	)		161,406			(102,355	)
Net income (loss)	$	157,737		$	(140,539	)	$	368,837		$	(73,774	)
Basic average shares outstanding		54,770			54,748			54,769			54,737
Diluted average shares outstanding		55,313			55,062			55,081			54,926
Basic Per Share Data
Net income (loss)	$	2.88		$	(2.57	)	$	6.73		$	(1.35	)
Net realized investment gains (losses), net of tax	$	2.03		$	(3.29	)	$	4.18		$	(3.95	)
Diluted Per Share Data
Net income (loss)	$	2.85		$	(2.57	)	$	6.70		$	(1.35	)
Net realized investment gains (losses), net of tax (a)	$	2.01		$	(3.29	)	$	4.16		$	(3.95	)
Operating Ratios-GAAP Basis
Loss ratio		68.3	%		73.5	%		67.5	%		69.7	%
Expense ratio		28.1	%		28.5	%		29.0	%		28.4	%
Combined ratio		96.4	%		102.0	%		96.5	%		98.1	%
Reconciliations of Operating Measures to Comparable GAAP Measures
Net premiums written	$	662,756		$	695,142		$	1,971,053		$	2,108,585
(Increase) decrease in unearned premiums		(8,998	)		1,463			7,979			20,140
Net premiums earned	$	653,758		$	696,605		$	1,979,032		$	2,128,725
Paid losses and loss adjustment expenses	$	460,609		$	483,141		$	1,413,408		$	1,539,395
(Decrease) increase in net loss and loss adjustment expense reserves		(14,173	)		28,665			(77,217	)		(54,571	)
Incurred losses and loss adjustment expenses	$	446,436		$	511,806		$	1,336,191		$	1,484,824

(a) The dilutive impact of incremental shares in 2008 is excluded from loss positions in accordance with GAAP

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Mercury General Corporation and Subsidiaries

Condensed Balance Sheets and Other Information

(000's except per-share amounts and ratios)

	September 30, 2009			December 31, 2008
	(unaudited)
ASSETS
Investments:
Fixed maturities trading, at fair value (amortized cost $2,692,117; $2,728,471)	$	2,728,815		$	2,481,673
Equity securities trading, at fair value (cost $321,911; $403,773)		287,720			247,391
Short-term investments, at fair value (amortized cost $126,328; $208,278)		126,172			204,756
Total investments		3,142,707			2,933,820
Cash		204,194			35,396
Receivables:
Premiums receivable		267,684			268,227
Premium notes		23,357			25,699
Accrued investment income		38,168			36,540
Other		9,835			9,526
Total receivables		339,044			339,992
Deferred policy acquisition costs		182,237			200,005
Fixed assets, net		200,930			191,777
Current income taxes		0			43,378
Deferred income taxes		63,604			171,025
Goodwill		42,850			5,206
Other intangible assets		68,526			0
Other assets		29,755			29,596
Total assets	$	4,273,847		$	3,950,195
LIABILITIES AND SHAREHOLDERS' EQUITY
Losses and loss adjustment expenses	$	1,055,887		$	1,133,508
Unearned premiums		871,698			879,651
Notes payable		272,690			158,625
Accounts payable and accrued expenses		133,954			93,864
Current income taxes		7,113			0
Other liabilities		163,892			190,496
Shareholders' equity		1,768,613			1,494,051
Total liabilities and shareholders' equity	$	4,273,847		$	3,950,195
OTHER INFORMATION
Common stock-shares outstanding		54,770			54,764
Book value per share	$	32.29		$	27.28
Estimated statutory surplus	$	1.5 billion		$	1.4 billion
Estimated premiums written to surplus ratio		1.8			2.0
Debt to total capital ratio		13.4	%		9.6	%
Portfolio duration	5.0 years			6.5 years
Policies-in-Force (Company-wide "PIF")
Personal Auto PIF		1,288			1,321
Homeowners PIF		321			303

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