SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 1995 Commission File No. 0-3681

MERCURY GENERAL CORPORATION
(Exact name of registrant as specified in its charter)

         California                                    95-221-1612
(State or other jurisdiction                       (I.R.S. Employer
of incorporation or organization)                  Identification No.)

4484 Wilshire Boulevard, Los Angeles California          90010
(Address of principal executive offices)               (Zip Code)

Registrant's telephone number, including area code: (213) 937-1060

Securities registered pursuant to Section 12(b) of the Act

NONE

Securities registered pursuant to Section 12(g) of the Act

Common Stock
(Title of Class)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

The aggregate market value of the Registrant's voting stock held by non- affiliates of the Registrant at March 22, 1996, was approximately $567,702,856 (based upon the closing sales price of such date, as reported by the Wall Street Journal).

At March 22, 1996, the Registrant had issued and outstanding an aggregate of 27,463,475 shares of its Common Stock.

Documents Incorporated by Reference

Proxy statement for the Annual Meeting of Stockholders of Registrant to be held on May 29, 1996 (only portions of which are incorporated by reference).


PART I

Item 1. Business

General

The Company is engaged primarily in writing all risk classifications of automobile insurance in California, which in 1995 accounted for approximately 98% of the Company's direct premiums written. In 1990, the Company commenced writing small amounts of automobile insurance in Georgia and Illinois. During 1995, private passenger automobile insurance and commercial automobile insurance accounted for 93.1% and 4.5%, respectively, of the Company's direct premiums written. The Company also writes homeowners insurance, commercial and dwelling fire insurance and commercial property insurance. In 1995, the non-automobile lines of insurance accounted for 2.4% of direct premiums written, of which approximately 55% was in commercial lines.

The Company offers automobile policyholders the following types of coverage: bodily injury liability coverage, including underinsured and uninsured motorist coverage, property damage liability coverage and physical damage coverage, including fire, theft, collision and other hazards specified in the policy. The Company's published maximum limits of liability for bodily injury are $250,000 per person injured, $500,000 per accident and, for property damage, $250,000 per accident. Subject to special underwriting approval, the combined policy limits may be as high as $1,000,000 for vehicles written under the Company's commercial automobile plan. Under the majority of the Company's automobile policies, however, the limits of liability are less than $100,000 per person injured, $300,000 per accident and $50,000 for property damage.

In 1995, A.M. Best & Co. rated Mercury Casualty Company and Mercury Insurance Company, the Company's chief operating subsidiaries, A+ (Superior). This is the second highest of the fifteen rating categories in the A.M. Best rating system, which range from A++ (Superior) to F (In Liquidation).

The principal executive offices of Mercury General Corporation are located in Los Angeles, California. The home office of its California insurance subsidiaries and the Company's computer and operations center is located in Brea, California. The Company maintains branch offices in a number of locations in California, in Vernon Hills, Illinois and in Atlanta, Georgia. The Company has approximately 1400 employees.

Organization

Mercury General Corporation ("Mercury General"), an insurance holding company, is the parent of Mercury Casualty Company, a California automobile insurer founded in 1961 by George Joseph, its Chief Executive Officer. Its insurance operations in California are conducted through three California insurance company subsidiaries, Mercury Casualty Company ("Mercury Casualty"), Mercury Insurance Company ("Mercury Insurance"), and California Automobile Insurance Company. Two subsidiaries, Mercury Insurance Company of Georgia and Mercury Insurance Company of Illinois, received authority in late 1989 to write

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automobile insurance in those two states. In 1992, Mercury Indemnity Company of Georgia and Mercury Indemnity Company of Illinois were formed to write preferred risk automobile insurance in those two states.

Mercury General furnishes management services to its insurance company subsidiaries. Mercury General and its insurance company subsidiaries are referred to as the "Company" unless the context indicates otherwise, and Mercury General Corporation individually is referred to as "Mercury General."

Underwriting

The Company sets its own automobile insurance premium rates, subject to rating factor regulations issued by the California Department of Insurance (DOI). Automobile insurance rates on voluntary business in California have been subject to approval by the DOI since November 1989 pursuant to regulations required by an initiative known as Proposition 103, which was passed by California voters in November, 1988. Judicial proceedings and administrative hearings delayed implementation of prior approval proceedings until after July 1990, when the Insurance Commissioner then in office issued initial prior approval regulations and rating factor regulations. The Company submitted a new classification and rating plan in accordance with the new regulations, which the DOI approved for implementation in February of 1991. The Company uses its own extensive data base to establish its classification and rating factor plans. In January 1991, a new, elected Insurance Commissioner rescinded the prior approval regulations of his predecessor. No prior approval regulations are currently in effect, but the DOI continues to process rate applications. The regulations pertaining to the rating factor criteria were left intact and remain in effect as of this date. The present Insurance Commissioner took office in January 1995. After conducting hearings in April 1995 and December 1995, the Commissioner issued proposed rating factor regulations in March 1996. See "Regulation - Automobile Insurance Rating Factor Regulations."

On February 25, 1994, the DOI approved a revised rating plan and rates for the Company which became effective on May 1, 1994. These rates were designed to improve the Company's competitive position for new insureds and included a modest overall rate reduction. Further rate modifications were approved and made effective on October 15, 1995. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Overview."

Approximately 80% of the Company's new applications for automobile insurance during 1995 were placed in the lowest risk classifications, known as "good drivers" (as defined by the California Insurance Code), while approximately 20% of new applications were accepted in higher risk classifications at increased rate levels. Policies are reclassified at the time of renewal and may be changed to a higher or lower risk classification.

At December 31, 1995, "good drivers" accounted for approximately 78% of all voluntary private passenger automobile policies in force, while the higher risk categories accounted for 22%. The Company's renewal rate (the rate of acceptance of offers to renew) averages approximately 93%.

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Production and Servicing of Business

The Company sells its policies through 910 independent agents located in California, Georgia and Illinois, of which 780 are located in California. Approximately half of the agents have represented the Company for more than ten years. These agents, most of whom also represent one or more competing insurance companies, are independent contractors selected and appointed by the Company.

One agency produced direct premiums written of approximately 15%, 13% and 12% during 1995, 1994 and 1993, respectively, of the Company's total direct premiums. No other agent accounted for more than 2% of direct premiums written.

The Company believes that its agents' compensation is higher than the industry average. During 1995 total commissions and bonuses incurred averaged 15.8% of direct premiums written. The Company is not responsible for any of its agents' expenses.

Traditionally, any advertising done has been handled by the individual agents. During the fourth quarter of 1995, the Company began its first advertising program in major newspapers in Southern California. While the Company plans, coordinates and executes the program, the agents are responsible for the cost of the advertisements. The program has been satisfactory and was expanded to Northern California in early 1996.

Claims

Claims operations are supervised by the Company's Vice President and Chief Claims Officer. The claims staff administers all claims and directs all legal and adjustment aspects of the claims process. The Company adjusts most claims without the assistance of outside adjusters.

Loss and Loss Adjustment Expense Reserves

The Company maintains reserves for the payment of losses and loss adjustment expenses for both reported and unreported claims. Loss reserves are estimated based upon a case-by-case evaluation of the type of claim involved and the expected development of such claim. The amount of loss reserves and loss adjustment expense reserves for unreported claims are determined on the basis of historical information by line of insurance. Inflation is reflected in the reserving process through analysis of cost trends and reviews of historical reserving results.

Ultimate liability may be greater or lower than stated loss reserves. Reserves are closely monitored and are analyzed quarterly by the Company's actuarial consultant using new information on reported claims and a variety of statistical techniques. The Company does not discount to a present value that portion of its loss reserves expected to be paid in future periods. The Tax Reform Act of 1986 does, however, require the Company to discount loss reserves for Federal income tax purposes.

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The following table sets forth a reconciliation of beginning and ending reserves for losses and loss adjustment expenses, net of reinsurance deductions, as shown on the Company's consolidated financial statements for the periods indicated.

                                                                   Year ended December 31,
                                                                 ----------------------------
                                                                   1995      1994      1993
                                                                 --------  --------  --------
                                                                    (Amounts in thousands)
Net reserves for losses and loss adjustment
 expenses,  beginning of year..............................      $223,392  $214,525  $239,203
Incurred losses and loss adjustment expenses:
         Provision for insured events of the
           current year....................................       423,264   370,631   323,932
         Decrease in provision for insured events
           of prior years..................................        (6,708)  (10,074)  (34,724)
                                                                 --------  --------  --------
           Total incurred losses and loss adjustment
             expenses......................................       416,556   360,557   289,208
                                                                 --------  --------  --------

Payments:
         Losses and loss adjustment expenses attribu-
           table to insured events of the current
           year............................................       243,294   208,418   178,698
         Losses and loss adjustment expenses attribu-
           table to insured events of prior years..........       145,664   143,272   135,188
                                                                 --------  --------  --------
           Total payments..................................       388,958   351,690   313,886
                                                                 --------  --------  --------

Net reserves for losses and loss adjustment
 expenses at the end of the period.........................       250,990   223,392   214,525
Reinsurance recoverable....................................         2,556     4,107       776
                                                                 --------  --------  --------
Gross liability at end of year.............................      $253,546  $227,499  $215,301
                                                                 ========  ========  ========

The difference between the reserves reported in the Company's consolidated financial statements prepared in accordance with generally accepted accounting principles (GAAP) and those reported in the statements filed with the DOI in accordance with statutory accounting principles (SAP) is as follows:

                                                                     December 31,
                                                             ---------------------------
                                                             1995      1994        1993
                                                             ----      ----        ----
                                                              (Amounts in thousands)
Reserves reported on a SAP basis.......................      $250,990  $223,392  $214,525
Reinsurance recoverable................................         2,556  $  4,107       776
                                                             --------  --------  --------
Reserves reported on a GAAP basis......................      $253,546  $227,499  $215,301
                                                             ========  ========  ========

The following table represents the development of loss reserves for the period 1986 through 1995. The top line of the table shows the reserves at the balance sheet date net of reinsurance recoverable for each of the indicated years. This represents the estimated amount of losses and loss adjustment expenses for claims arising in all prior years that are unpaid at the balance sheet date, including losses that had been incurred but not yet reported to the Company. The upper portion of the table shows the cumulative amounts paid as of successive years with respect to that reserve liability. The lower portion of the table shows the re-estimated amount of the previously recorded reserves based on experience as of the end of each succeeding year, including cumulative payments made since the end of the respective year. The estimate changes as more

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information becomes known about the frequency and severity of claims for individual years. A redundancy (deficiency) exists when the original reserve estimate is greater (less) than the re-estimated reserves at December 31, 1995.

In evaluating the information in the table, it should be noted that each amount includes the effects of all changes in amounts for prior periods. This table does not present accident or policy year development data. Conditions and trends that have affected development of the liability in the past may not necessarily occur in the future. Accordingly, it may not be appropriate to extrapolate future redundancies or deficiencies based on this table.

                                                                     As of December 31,
                             -------------------------------------------------------------------------------------------------
                             1986      1987      1988      1989      1990      1991      1992      1993      1994      1995
                                                                 (Amounts in thousands)
Net reserves for
 losses and loss
 adjustment
 expenses.................   $114,158  $178,605  $241,037  $291,408  $301,354  $280,157  $239,203  $214,525  $223,392  $250,990
Paid (cumulative)
 as of:
  One year later..........     78,469   112,099   139,874   167,850   181,781   151,866   135,188   143,272   145,664
  Two years later.........    106,461   147,641   195,453   227,503   238,030   197,640   184,119   187,641
  Three years later.......    117,118   166,477   218,335   249,371   254,884   213,824   197,371
  Four years later........    123,105   175,232   226,384   256,659   261,058   218,067
  Five years later........    125,040   177,328   229,168   259,147   263,011
  Six years later.........    125,661   177,938   229,773   259,781
  Seven years later.......    125,757   178,178   229,815
  Eight years later.......    125,939   178,215
  Nine years later........    126,018

Net reserves re-estimated
 as of:
  One year later..........    124,818   173,325   230,249   269,934   285,212   230,991   204,479   204,451   216,684
  Two years later.........    125,549   175,876   233,607   269,652   265,618   218,404   204,999   207,089
  Three years later.......    126,938   179,157   234,757   259,635   259,624   220,620   203,452
  Four years later........    126,276   180,084   228,909   256,694   264,259   221,118
  Five years later........    126,137   177,591   228,326   260,365   264,127
  Six years later.........    125,479   177,335   230,102   260,402
  Seven years later.......    125,340   178,364   229,998
  Eight years later.......    125,994   178,303
  Nine years later........    126,035
Net Cumulative Redundancy
 (deficiency).............    (11,877)      302    11,039    31,006    37,227    59,039    35,751     7,436     6,708

Gross liability - end of year                                                             240,183    215,30   227,499   253,546
Reinsurance recoverable                                                                      (980)     (776)   (4,107)   (2,556)
                                                                                         --------  --------  --------  --------
Net liability - end of year                                                               239,203   214,525   223,392   250,990
                                                                                         ========  ========  ========  ========
Gross re-estimated liability - latest                                                     206,821   209,427   222,953

Re-estimated recoverable - latest                                                          (3,369)   (2,338)   (6,269)
                                                                                         --------  --------  --------
Net re-estimated liability - latest                                                       203,452   207,089   216,684
                                                                                         ========  ========  ========
Gross cumulative redundancy                                                                38,140     8,998     8,870
                                                                                         ========  ========  ========

The deficiency in calendar year loss reserves for the year 1986 was experienced during a period of rapidly escalating premium growth for the Company. The Company attributes this change to greater than anticipated inflation in California private passenger automobile claims costs and expenses experienced generally by California insurers during the mid-1980's and, to a lesser extent, to the addition and training of claims adjusters and supervisorial claims personnel to deal with the expanded claims volume resulting from the Company's significant premium growth. These factors stabilized in 1987. For the calendar years 1988 through 1994, the Company's previously estimated loss reserves produced redundancies. The Company attributes this favorable loss development to several factors. First, the Company had completed its development of a full

5

complement of claims personnel. Second, during 1988, the California Supreme Court reversed what was known as the "Royal Globe" doctrine, which, since 1978, had permitted third party plaintiffs to sue insurers for alleged "bad faith" in resolving claims, even when the plaintiff had voluntarily agreed to a settlement. This doctrine had placed undue pressures on claims representatives to settle legitimate disputes at unfairly high settlement amounts. After the reversal of Royal Globe, the Company believes that it has been able to achieve fairer settlements, because both parties are in a more equal bargaining position. Third, during the years 1988 through 1990, the volume of business written in the Assigned Risk Program expanded substantially as rates were suppressed at grossly inadequate levels. Following the Insurance Commissioner's approval of an 85% temporary rate increase in September 1990, the volume of assigned risk business has declined by nearly 80%. Many of the claims associated with the high volume of assigned risk business in the 1988-1990 period were later found to be fraudulent or grossly exaggerated and were settled in subsequent periods for substantially less than had been initially reserved. Fourth, a number of factors have combined to produce favorable frequency and severity trends in recent years, and actuarial assumptions based on historical trends have proved to be conservative.

Operating Ratios

Loss and Expense Ratios

Loss and underwriting expense ratios are used to interpret the underwriting experience of property and casualty insurance companies. Losses and loss adjustment expenses, on a statutory basis, are stated as a percentage of premiums earned because losses occur over the life of a policy. Underwriting expenses on a statutory basis are stated as a percentage of premiums written rather than premiums earned because most underwriting expenses are incurred when policies are written and are not spread over the policy period. The statutory underwriting profit margin is the extent to which the combined loss and underwriting expense ratios are less than 100%. The Company's loss ratio, expense ratio and combined ratio, and the private passenger automobile industry combined ratio, on a statutory basis, are shown in the following table. The 1992 ratios exclude the effect of the Proposition 103 settlement. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." The Company's ratios include lines of insurance other than private passenger automobile. Since these other lines represent only a small percentage of premiums written, the Company believes its ratios can be compared to the industry ratios included in the table.

                                                 Year ended December 31,
                                      ---------------------------------------------
                                        1995      1994     1993     1992     1991
                                      --------  --------  -------  -------  -------
Loss Ratio..........................     67.8%     68.4%    61.3%    60.8%    69.8%
Expense Ratio.......................     24.0      24.6     24.8     24.2     24.2
                                         ----      ----     ----     ----     ----
Combined Ratio......................     91.8%     93.0%    86.1%    85.0%    94.0%
                                         ====      ====     ====     ====     ====
 Industry combined ratio (all
  writers) (1)......................      102.3%(2) 101.3%  101.7%  102.0%  104.7%
Industry combined ratio (excluding
  direct writers) (1)...............       N.A.     102.5%  103.1%  104.9%  107.2%


6

(1) Source: A.M. Best, Aggregates & Averages (1995), for all property and casualty insurance companies (private passenger automobile line only, after policyholder dividends).

(2) Source: A.M. Best, "Best's Review, January 1996," "Review and Preview."

(N.A.) Not available.

Premiums to Surplus Ratio

The following table shows, for the periods indicated, the insurance companies' statutory ratios of net premiums written to policyholders' surplus. While there is no statutory requirement applicable to the Company which establishes a permissible net premium writings to surplus ratio, widely recognized guidelines established by the National Association of Insurance Commissioners (NAIC) indicate that this ratio should be no greater than 3 to 1.

                                                    Year ended December 31,
                                       -----------------------------------------------
                                         1994      1993      1992      1991      1995
                                         ----      ----      ----      ----      ----
                                             (Amounts in thousands, except ratios)
Net premiums written (1)...........    $636,590  $550,838  $484,097  $455,685  $467,523
Policyholders' surplus.............    $479,114  $411,898  $314,136  $294,374  $236,140
Ratio..............................    1.3 to 1  1.3 to 1  1.5 to 1  1.6 to 1  2.0 to 1

(1) The 1992 amounts exclude the effect of the Proposition 103 settlement.

Risk-Based Capital Requirements

In December 1993, the NAIC adopted a risk-based capital formula for casualty insurance companies which establishes recommended minimum capital requirements for casualty companies. The formula has been designed to capture the widely varying elements of risks undertaken by writers of different lines of insurance having differing risk characteristics, as well as writers of similar lines where differences in risk may be related to corporate structure, investment policies, reinsurance arrangements and a number of other factors. Based on the formula adopted by the NAIC, the Company has estimated the Risk- Based Capital Requirements of each of its insurance subsidiaries as of December 31, 1995. Each of the companies exceeded the highest level of recommended capital requirements.

Investments and Investment Results

The investments of the Company are made by the Company's Chief Financial Officer under the supervision of the Company's Board of Directors. The Company follows an investment policy which is regularly reviewed and revised. The Company's policy emphasizes investment grade, fixed income securities and maximization of after-tax yields. The Company does not invest with a view to achieving realized gains, and does not maintain a trading account. However, sales of securities are undertaken, with resulting gains or losses, in order to enhance after-tax yield and keep its portfolio in line with current market

7

conditions. Tax considerations are important in portfolio management, and have been made more so since 1986 when the alternative minimum tax was imposed on casualty companies. Changes in loss experience, growth rates and profitability produce significant changes in the Company's exposure to alternative minimum tax liability, requiring appropriate shifts in the investment asset mix between taxable bonds, tax-exempt bonds and equities in order to maximize after-tax yield. The optimum asset mix is subject to continuous review. At year-end, approximately 72% of the Company's portfolio, at market values, was invested in medium to long term, investment grade tax-exempt revenue and municipal bonds. The average Standard & Poor's rating of the Company's bond holdings was A at December 31, 1995.

The nominal average maturity of the bond portfolio was 14.0 years at December 31, 1995, but the call-adjusted average maturity of the portfolio is shorter, approximately 7.2 years, because holdings are heavily weighted with high coupon issues which are expected to be called prior to maturity. The modified duration of the bond portfolio reflecting anticipated early calls was 5.8 years at December 31, 1995. Duration is a measure of how long it takes, on average, to receive all the cash flows produced by a bond, including reinvestment of interest. Because of its sensitivity to interest rates, it is a proxy for a bond's price volatility. The longer the duration, the greater the price volatility in relation to changes in interest rates.

Holdings of lower than investment grade bonds constitute less than 2% of total investments. All but $2.7 million of such holdings were downgraded to their current ratings subsequent to purchase. Equity holdings consist primarily of perpetual preferred stocks and relatively high yielding electric utility common stocks on which dividend income is partially tax-sheltered by the 70% corporate dividend exclusion.

The following table summarizes the investment results of the Company for the five years ended December 31, 1995.

                                                      Year ended December 31,
                                             1995      1994      1993      1992      1991
                                             ----      ----      ----      ----      ----
                                                      (Amounts in thousands)
Averaged invested assets (includes
 short-term cash investments)(1).......    $827,861  $727,866  $683,874  $649,001  $628,441
Net investment income:
         Before income taxes...........      62,964    54,586    54,121    52,994    53,670
         After income taxes............      57,035    49,787    48,223    46,376    46,005
Average annual return on investments:
         Before income taxes...........         7.6%      7.5%      7.9%      8.2%      8.5%
         After income taxes............         6.9%      6.8%      7.1%      7.2%      7.3%
Net realized investment gains
 (losses) after income taxes...........    $    681  $ (6,485) $  1,954  $  3,415  $    730
Net increase (decrease) in un-
 realized gains on all invest-
 ments after income taxes.........         $ 37,960  $(36,503) $    556  $ (2,501) $ 20,747

(1) Fixed maturities at cost, equities at market.

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The following table sets forth the composition of the investment portfolio of the Company at the dates indicated.

                                                                    December 31,
                                         -----------------------------------------------------------------
                                               1995                     1994                    1993
                                         ----------------         ----------------        ----------------
                                         Amortized Market         Amortized Market        Amortized Market
                                         Cost       Value         Cost       Value        Cost       Value
                                         ----       -----         ----       -----        ----       -----
                                                                    (Amounts in thousands)
Taxable Bonds...................       $ 21,518    $ 22,539    $ 18,332    $ 18,128    $ 22,590    $ 24,387
Tax-Exempt State and
 Municipal Bonds................        630,811     663,163     529,592     520,748     455,516     483,022
Sinking Fund Preferred
 Stocks.........................         90,080      94,081     108,858     105,421     110,647     117,732
                                       --------    --------    --------    --------    --------    --------
  Total Fixed Maturity
   Investments..................        742,409     779,783     656,782     644,297     588,753     625,141
Equity Investments incl.
 Perpetual Preferred
 Stocks.........................        113,478     114,915      91,726      84,622      85,417      85,598
Short-term Cash Invest-
 ments..........................         28,496      28,496      22,695      22,695      29,741      29,741
                                       --------    --------    --------    --------    --------    --------
Total Investments...............       $884,383    $923,194    $771,203    $751,614    $703,911    $740,480
                                       ========    ========    ========    ========    ========    ========

At December 31, 1995, the Company had a net unrealized gain on all investments of $38,811,000 before income taxes.

Competitive Conditions

The property and casualty insurance industry is highly competitive. The insurance industry consists of a large number of companies, many of which operate in more than one state, offering automobile, homeowners and commercial property insurance, as well as insurance coverage in other lines. Many of the Company's competitors have larger volumes of business and greater financial resources than the Company. Based on regularly published statistical compilations concerning insurance company operations, the Company in 1995 was the seventh largest writer of private passenger automobile insurance in California. All of the insurance companies having greater shares of the California market sell insurance either directly or through exclusive agents to policyholders, rather than through independent agents.

The property and casualty insurance industry is highly cyclical, character- ized by periods of high premium rates and shortages of underwriting capacity followed by periods of severe price competition and excess capacity. In the Company's view, competitive pressures have become more pronounced in the last several years. The current level of profits makes the market attractive for new companies, although some of the small companies who entered the California private passenger automobile market in recent years have already experienced unsatisfactory results.

Price and reputation for service are the principal means by which the Company competes with other automobile insurers. The Company believes that it has a good reputation for service, and it has, historically, been among the

9

lowest-priced insurers doing business in California according to surveys conducted by the California Department of Insurance. In the most recent survey conducted in 1995, the Company's rates for most classes of insureds were among the lowest available in most territories throughout the state. In addition to good service and competitive pricing, for those insurers dealing through independent agents, as the Company does, the marketing efforts of agents is a means of competition.

The current and future competitive climate for private passenger automobile insurance in California remains uncertain. All rates charged by private passenger automobile insurers are subject to the prior approval of the California Insurance Commissioner. Newly proposed revised rating factor regulations have recently been issued but have not yet been approved, and a bill has been introduced in the California legislature which would codify the rating factors currently in effect. See "Underwriting" and "Regulation - Automobile Insurance Rating Factor Regulations."

Reinsurance

The Company no longer maintains reinsurance for its liability coverages. Effective January 1, 1994, the Company terminated its liability reinsurance coverage with Employers Reinsurance Corporation (ERC) because of rising premiums and underutilization of such coverage. The Company regularly evaluates the need for liability reinsurance.

The Company maintains property reinsurance under a treaty which was effective April 1, 1995 with National Reinsurance Corporation, which is rated A+ by A.M. Best & Co. The treaty provides $900,000 coverage in excess of $100,000 for each risk subject to a maximum of $2,700,000 for any one occurrence. A second layer of coverage provides an additional $1,000,000 in excess of the first $1,000,000 per risk subject to a maximum of $2,000,000 for any one occurrence.

Prior to February 1, 1995, ERC provided catastrophe reinsurance for property and auto physical damage business. Under the treaty, ERC agreed to pay 95% of $9,000,000 in excess of $1,000,000 for any single occurrence and 95% of $18,000,000 for all occurrences in one calendar year. Effective February 1, 1995, the treaty with ERC was amended to provide coverage for 95% of $7,500,000 in excess of $5,000,000 each occurrence subject to an aggregate limit of 95% of $15,000,000 for all occurrences. Effective April 1, 1995 this treaty was replaced with a new catastrophe treaty covering all physical damage and property lines with several reinsurers arranged through E.W. Blanch Company, a reinsurance intermediary. The main reinsurers are rated A or better by A.M. Best. Under the new treaty, the first layer of protection is 95% of $7,500,000 in excess of $10,000,000, for a single occurrence, with a second layer providing 95% of $12,500,000 in excess of $17,500,000.

If the reinsurers were unable to perform their obligations under the reinsurance treaty, the Company would be required, as primary insurer, to discharge all obligations to its insureds in their entirety.

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Regulation

The Company's business in California is subject to regulation and supervision by the DOI, which has broad regulatory, supervisory and administrative powers.

The powers of the DOI primarily include the prior approval of insurance rates and rating factors; the standards of solvency which must be met and maintained; the licensing of insurers and their agents; the nature of and limitation of insurers' investments; the issuance of securities by insurers; periodic examinations of the affairs of insurers; the annual and other reports required to be filed on the financial condition of such insurers or for other purposes; and the establishment of reserves required to be maintained for unearned premiums, losses, and other purposes. The regulation and supervision by the DOI are designed principally for the benefit of policyholders and not for insurance company shareholders. The DOI conducts periodic examinations of the Company's insurance subsidiaries. The DOI recently conducted an examination of the California insurance subsidiaries as of December 31, 1994. The reports on the results of that examination have not yet been issued, but the drafts recently submitted to the Company recommend no adjustments to the statutory financial statements as filed by the Company.

The Georgia and Illinois insurance subsidiaries are subject to the regulatory powers of the insurance departments of those two states. Those powers are similar to the regulatory powers in California enumerated above. Generally, the regulations relate primarily to standards of solvency and are designed for the benefit of policyholders and not for insurance company shareholders. The Georgia DOI recently conducted an examination of Mercury Insurance Company of Georgia and Mercury Indemnity Company of Georgia as of December 31, 1994. The reports on that audit have not been issued but the auditors have indicated there will be no changes recommended to the statutory financial statements as filed. The DOI of Illinois has just begun an examination of Mercury Insurance Company of Illinois and Mercury Indemnity Company of Illinois as of December 31, 1995.

In California, insurance rates have required prior approval since November 1989. Georgia is also a prior approval state, while Illinois only requires that rates be filed with the Department of Insurance prior to their use. In each state, the insurance code provides that rates must not be "excessive, inadequate or unfairly discriminatory."

The operations of the Company are dependent on the laws of the States of California, Georgia and Illinois, and changes in those laws can materially affect the revenue and expenses of the Company. The Company retains its own legislative advocates in California. The Company also makes financial contributions to officeholders and candidates. In 1995 and 1994, those contributions amounted to $209,000 and $434,000, respectively. The Company believes in supporting the political process and intends to continue to make such contributions in amounts which it determines are appropriate.

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Insurance Guarantee Association

In 1969, the California Insurance Guarantee Association (the "Association") was created pursuant to California law to provide for payment of claims for which insolvent insurers of most casualty lines are liable but which cannot be paid out of such insurers' assets. The Company is subject to assessment by the Association for its pro-rata share of such claims based on premiums written in the particular line in the year preceding the assessment by insurers writing that line of insurance in California. Such assessments are based upon estimates of losses to be incurred in liquidating an insolvent insurer. In a particular year, the Company cannot be assessed an amount greater than 1% of its premiums written in the preceding year. The only assessment imposed during the past five years was an immaterial amount in 1994. Assessments are recouped through a mandated surcharge to policyholders the year after the assessment. Insurance subsidiaries in Illinois and Georgia are subject to the provisions of similar insurance guaranty associations.

Holding Company Act

The Company's California subsidiaries are subject to regulation by the DOI pursuant to the provisions of the California Insurance Holding Company System Regulatory Act (the "Holding Company Act"). Pursuant to the Holding Company Act, the DOI may examine the affairs of each company at any time. The Holding Company Act requires disclosure of any material transactions by or among the companies. Certain transactions defined to be of an "extraordinary" type may not be effected without the prior approval of the DOI. Such transactions include, but are not limited to, sales, purchases, exchanges, loans and extensions of credit, and investments made within the immediately preceding 12 months involving, in the net aggregate, more than the lesser of 5% of the company's admitted assets or 25% of surplus as to policyholders, as of the preceding December 31. An extraordinary transaction also includes a dividend which, together with other dividends or distributions made within the preceding 12 months, exceeds the greater of 10% of the insurance company's policyholders' surplus as of the preceding December 31 or the insurance company's net income for the preceding calendar year. An insurance company is also required to notify the DOI of any dividend after declaration, but prior to payment.

The Holding Company Act also provides that the acquisition or change of "control" of a California domiciled insurance company or of any person who controls such an insurance company cannot be consummated without the prior approval of the Insurance Commissioner. In general, a presumption of "control" arises from the ownership of voting securities and securities that are convertible into voting securities, which in the aggregate constitute 10% or more of the voting securities of a California insurance company or of a person that controls a California insurance company, such as Mercury General. A person seeking to acquire "control," directly or indirectly, of the Company must generally file with the Commissioner an application for change of control containing certain information required by statute and published regulations and provide a copy of the application to the Company. The Holding Company Act also effectively restricts the Company from consummating certain reorganizations or mergers without prior regulatory approval. The insurance subsidiaries in Georgia and Illinois are subject to holding company acts in those states, the provisions of which are substantially similar to those of California.

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Assigned Risks

Automobile liability insurers in California are required to sell bodily injury liability, property damage liability, medical expense and uninsured motorist coverage to a proportionate number (based on the insurer's share of the California automobile casualty insurance market) of those drivers applying to the DOI for placement as "assigned risks." Drivers seek placement as assigned risks because their driving records or other relevant characteristics make them difficult to insure in the voluntary market. During the last five years, approximately 1.2% of the direct automobile insurance premium written was for assigned risk business. In 1995, assigned risks represented 0.8% of total automobile direct premiums written and earned. Premium rates for assigned risk business are set by the DOI. In October, 1990 more stringent rules for gaining entry into the plan were approved, resulting in a substantial reduction in the number of assigned risks insured by the Company since 1991. Effective January 1, 1994, the Insurance Code requires that rates established for the Plan be adequate to support the Plan's losses and expenses. The last rate increase approved by the Commissioner approximated 4.8% and became effective June 1, 1995.

No-Fault Automobile Insurance Initiative/Legislation

A proposed No-Fault automobile insurance measure, Proposition 200, has been qualified and is on the ballot to be voted on in California's primary elections on March 26, 1996. Entitled the "Pure No-Fault Insurance Act," the measure would radically change the reparations system for bodily injury, removing most bodily injury claims from the judiciary/tort system. Instead of requiring insurance coverage for injuries caused to others as a result of the insured's negligence or fault, automobile insurers would be required to offer, and all motor vehicle owners would be required to obtain, a Personal Injury Protection Policy (PIP) which would cover the bodily injury losses of all occupants of a vehicle involved in an accident, irrespective of who is at fault for the accident. The present tort system for dealing with property damage liability would not be changed.

All automobile insurers would be required to offer PIP coverage ranging from a minimum of $50,000 to $1,000,000 for each occupant of the insured vehicle. Insurers, such as the Company, who write over $100 million of automobile insurance premiums in the state of California would be required to offer up to $5.0 million of coverage for each occupant of the insured vehicle. Required benefits would cover all medical and rehabilitation costs, death benefits up to a maximum of $200,000 and lost wage benefits up to a maximum of $2500 per month.

All vehicle owners would be required to offer proof of insurance annually to the Department of Motor Vehicles in order to register or reregister a vehicle.

The right to sue to recover damages for bodily injury or death would no longer be allowed, except for accidents caused by drunk drivers or drivers committing a felony. Unlike damages sought and paid under the tort system, where the injured person recovers his losses from the insurer of the at-fault driver and, in addition, is typically compensated for pain and suffering as well, under the "Pure No-Fault" law, the injured person would recover only his actual economic losses, including lost wages, from his own insurer under the PIP

13

coverage and would receive no compensation for pain and suffering. Insurers would, however, be required to offer up to $250,000 of coverage for pain and suffering resulting from a permanent and serious injury.

While fault would no longer be a factor in determining responsibility for injuries and losses, a determination of fault would still be required to settle property damage claims and to classify drivers for the establishment of appropriate premiums.

The initiative has received little, if any, support from the insurance industry, and the Company has not supported it. Contrary to the stated expectation of the Proposition's backers that enactment of the measure would reduce losses and, therefore, premium rates, the Company is uncertain that such a reduction in loss costs and rates would materialize. The proposition makes no provision for a reduction in automobile insurance premium rates.

The opponents have mounted a well-financed media campaign opposing the no- fault proposition. An earlier no-fault proposition was on the California ballot in November 1988 and was defeated. No-fault legislation has been frequently introduced in the California legislature, but all such proposals have met serious opposition and have been defeated.

If the no-fault initiative passes, and is not nullified by an initiative planned by the trial lawyers to be on the November 1996 general election ballot, it would become effective on July 1, 1997. Passage would require substantial changes in the Company's loss settlement procedures, and the Company cannot predict the effect such changes would have on future loss experience, rates and profitability.

Automobile Insurance Rating Factor Regulations

Commencing November 8, 1989, Proposition 103 required that property and casualty insurance rates must be approved by the Commissioner prior to their use, and that no rate shall be approved which is excessive, inadequate, unfairly discriminatory or otherwise in violation of the provisions of the initiative. The proposition specified three statutory factors required to be applied in "decreasing order of importance" in determining rates for private passenger automobile insurance: (1) the insured's driving safety record, (2) the number of miles the insured drives annually, and (3) the number of years of driving experience of the insured. The new law also gave the Commissioner discretion to adopt other factors by regulation that have a substantial relationship to risk of loss. The new statute further provided that insurers are required to give a 20% discount to "good drivers," as defined, from rates that would otherwise be charged to such drivers and that no insurer may refuse to insure a "good driver."

The Company, and most other insurers, historically charged different rates for residents of different geographical areas within California. The rates for urban areas, particularly in Los Angeles, have been generally substantially higher than for suburban and rural areas. The Company's geographical rate differentials have been derived by actuarial analysis of the claims costs in a given area.

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On July 26, 1990, the DOI promulgated interim cost-based rating factor regulations which are still in effect. These regulations include both the three mandatory rating factors and a number of optional rating factors that are applied on a sequentially weighted basis. Pursuant to those regulations, all writers of private passenger automobile insurance, including the Company, were required to submit new rating classification plans in October 1990. In October 1990 the Company filed its new rating plan, which was approved on December 21, 1990.

The present Commissioner, who took office in January 1995, conducted hearings in April 1995 to consider the appropriate methodology and weighting of the mandated and optional rating factors. In September 1995, he issued for comment newly proposed rating factor regulations which had the effect of tempering certain factors, particularly loss experience by territory, thus narrowing geographical rating differentials. Further hearings were conducted in December 1995. The Company and other insurers submitted comments and testimony at those hearings which, in general, argued that the tempering of the weight given to differences in geographical loss experience would result in rates which would lead to dislocations in the automobile insurance market-place and would be unlawfully discriminatory. On March 7, 1996, the Commissioner issued revised rating factor regulations which are substantially unchanged from those proposed in September 1995. Following a fifteen day comment period, the regulations will be submitted to the Office of Administrative law, and, if approved and formally promulgated, would require the filing by automobile insurers of new rating plans unless legal action is undertaken to restrain their enforcement. The impact of the new regulations, if approved, is not determinable at this time.

In the meantime, a bill has been introduced in the California legislature which would codify the present cost-based rating factor regulations which have been applied with minimal disruption and dislocation since they were first promulgated in July 1990.

Under the Company's prior rating plan as well as the new plans approved in 1994 and 1995, the weights applied to the various rating factors conform to present regulations and are cost-based as determined by the mandated sequential regression analysis, and are not artificially "tempered." Since this methodology captures the widely varying loss experience of different areas, urban, suburban and rural, the historically wide geographical rate differentials remain substantially unchanged.

Item 2. Properties

The home office of the California insurance subsidiaries and the Company's computer facilities are located in Brea, California in an 80,000 sq.ft. office building owned by the Company.

Since December 1986, Mercury General's executive offices are located in a 40,000 sq. ft. office building owned by Mercury Casualty Company. The Company occupies approximately 95% of the building and leases the remaining office space to others.

In October 1992, the Company purchased a 158,000 square foot office building in Brea, California. The Company occupies approximately 37% of the

15

facility and leases the remaining office space to others.

The Company leases most of its other California offices under short-term leases. Office location is not material to the Company's operations, and the Company anticipates no difficulty in extending these leases or obtaining comparable office space.

Item 3. Legal Proceedings

The Company is from time to time named as a defendant in various lawsuits incidental to its insurance business. In most of these actions, plaintiffs assert claims for punitive damages which are not insurable under California judicial decisions. The Company vigorously defends these actions, unless a reasonable settlement appears appropriate. The Company believes that adverse results, if any, in the actions currently pending should not have a material effect on the Company's operations or financial position.

Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of security holders by the Company during the fourth quarter of the fiscal year covered by this report.

EXECUTIVE OFFICERS OF THE COMPANY

The following table sets certain information concerning the executive officers of the Company as of March 25, 1996:

Name                    Age               Position
- - ----                    ---               --------

George Joseph            74  Chairman of the Board and Chief
                               Executive Officer
Michael D. Curtius       46  President and Chief Operating Officer
Cooper Blanton, Jr.      69  Executive Vice President
Keith L. Parker          68  Vice President and Chief Financial Officer
Bruce E. Norman          47  Vice President in charge of Marketing
Joanna Y. Moore          40  Vice President and Chief Claims Officer
Kenneth G. Kitzmiller    49  Vice President in charge of Underwriting
Donna J. Moore           40  Vice President and Controller
Judy A. Walters          49  Secretary

Mr. Joseph, Chief Executive Officer of the Company and Chairman of its Board of Directors, has served in those capacities since 1961. Mr. Joseph has more than 40 years experience in all phases of the property and casualty insurance business.

Mr. Curtius, President and Chief Operating Officer, has been employed by the Company since 1977. In October 1987, Mr. Curtius was named Vice President and Chief Claims Officer, and in August 1991 he was appointed Executive Vice President. He was elected President and Chief Operating Officer of Mercury General and its four California insurance company subsidiaries in May 1995. Mr. Curtius has over 20 years of experience in the insurance industry.

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Mr. Blanton, Executive Vice President, joined the Company in 1966 and supervised its underwriting activities from 1967 until September 1995. He was appointed Executive Vice President of Mercury Casualty and Mercury Insurance in 1983 and was named Executive Vice President of Mercury General in 1985. In May of 1995 he was named President of the Georgia and Illinois insurance company subsidiaries. Mr. Blanton has over 30 years of experience in underwriting and other aspects of the property and casualty insurance business.

Mr. Parker, Vice President and Chief Financial Officer, has been employed by the Company or its subsidiaries since 1970 and has held his present position since October 1985. Mr. Parker has over 40 years of investment management experience and has been primarily responsible for management of the Company's investment portfolio since 1972.

Mr. Norman, Vice President in charge of Marketing, has been employed by the Company since 1971. Mr. Norman was named to this position in October 1985, and has been a Vice President of Mercury Casualty since 1983. Mr. Norman has supervised the selection and training of agents and managed relations between agents and the Company since 1977.

Ms. Joanna Moore, Vice President & Chief Claims Officer, joined the Company in the claims department in March 1981. She was named Vice President of Claims of Mercury General in August 1991 and has held her present position since July 1995.

Mr. Kitzmiller, Vice President in charge of Underwriting, has been employed by the Company in the underwriting department since 1972. In August 1991 he was appointed Vice President of Underwriting of Mercury General and has supervised the underwriting activities of the Company since early 1996.

Ms. Donna Moore, Vice President and Controller, joined the Company in June 1983 as its Controller. She was appointed Vice President in October 1985. Ms. Moore has over 15 years of experience in the insurance industry and is a Certified Public Accountant in the state of California.

Ms. Walters has been employed by the Company since 1967, and has served as its Secretary since 1982.

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PART II

Item 5. Market for the Registrant's Common Equity and Related Security Holder

Matters

Price Range of Common Stock

The following table shows the price range per share in each quarter as reported on the Nasdaq National Market. These quotations do not include adjustments for retail mark-ups, mark-downs or commissions.

1994                                        High      Low
                                           -------  -------
     1st Quarter.........................  $31.500  $26.750
     2nd Quarter.........................  $30.750  $25.500
     3rd Quarter.........................  $30.000  $26.750
     4th Quarter.........................  $30.500  $27.000

1995                                        High      Low
                                           -------  -------
     1st Quarter.........................  $34.250  $28.250
     2nd Quarter.........................  $35.000  $28.750
     3rd Quarter.........................  $39.000  $31.750
     4th Quarter.........................  $49.750  $37.750

1996
     1st Quarter (January 1 - March 22)..  $52.000  $41.625

Dividends

Following the public offering of its Common Stock in November 1985, the Company has paid regular quarterly dividends on its common stock. On February 2, 1996, the Directors declared a $0.24 quarterly dividend ($.96 annually) payable on March 28, 1996 to stockholders of record on March 15, 1996. The dividend rate has been increased twelve times since dividends were initiated in January, 1986, at an annual rate of $0.10, adjusted for the two-for-one stock split in September 1992. For financial statement purposes, the Company records dividends on the declaration date. The Company expects to continue the payment of quarterly dividends. The continued payment and amount of cash dividends will depend upon, among other factors, the Company's operating results, overall financial condition, capital requirements and general business conditions.

As a holding company, Mercury General is largely dependent upon dividends from its subsidiaries to pay dividends to its shareholders. These subsidiaries are subject to state laws that restrict their ability to distribute dividends. California law permits a casualty insurance company to pay dividends and advances within any 12-month period, without any prior regulatory approval, in an amount up to the greater of ten percent of statutory surplus at the preceding December 31 or net income for the calendar year preceding the date the dividend is paid. Under this test, Mercury Casualty and California Automobile Insurance Company,

18

the direct California insurance subsidiaries of the Company, are entitled to pay dividends to Mercury General during 1996 of up to approximately $50.9 million. See Note 8 of Notes to Consolidated Financial Statements and "Business -- Regulation -- Holding Company Act."

Shareholders of Record

The approximate number of holders of record of the Company's Common Stock as of March 1, 1996 was 218. The approximate number of beneficial holders as of March 21, 1996 was 4,618 according to U.S. Stock Transfer Corporation, the Company's transfer agent.

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Item 6. Selected Consolidated Financial Data

                                                        Year ended December 31,
                                           --------------------------------------------------
                                             1995      1994       1993      1992      1991
                                           --------  ---------  --------  --------  ---------
                                             (Amounts in thousands, except per share data)

Income Data:
Premiums earned..........................  $616,326  $529,390   $474,093  $455,508  $473,532
Net investment income....................    62,964    54,586     54,121    52,994    53,670
Premium finance fees.....................     1,840     1,947      1,828     1,438     1,138
Realized investment gains(losses)........     1,048    (9,853)     3,006     5,174     1,106
Other....................................     1,501     1,176        716       168        49
                                           --------  --------   --------  --------  --------

       Total Revenues....................   683,679   577,246    533,764   515,282   529,495
                                           --------  --------   --------  --------  --------

Losses and loss adjustment
  expenses...............................   416,556   360,557    289,208   276,088   328,615
Policy acquisition costs.................   128,743   112,682     99,738    94,672    98,943
Other operating expenses.................    22,017    20,566     18,564    16,688    16,046
Impact of rate refund....................        --        --         --    18,621     2,102
Interest.................................     2,040     1,025        793     1,192     1,577
                                           --------  --------   --------  --------  --------

       Total Expenses....................   569,356   494,830    408,303   407,261   447,283
                                           --------  --------   --------  --------  --------

Income before income taxes...............   114,323    82,416    125,461   108,021    82,212
Income taxes.............................    24,022    16,121     29,252    24,695    16,719
                                           --------  --------   --------  --------  --------
       Net Income........................  $ 90,301  $ 66,295   $ 96,209  $ 83,326  $ 65,493
                                           ========  ========   ========  ========  ========

Per Share Data:
Net income per share.....................  $   3.31  $   2.43   $   3.52  $  3.06   $   2.42
                                           ========  ========   ========  ========  ========
Dividends paid                             $    .80  $    .70   $    .60  $    .50  $    .40
                                           ========  ========   ========  ========  ========

                                                                 December 31,
                                           ------------------------------------------------------
                                              1995        1994       1993       1992       1991
                                           ----------   --------   --------   --------   --------

Balance Sheet Data:
Total investments........................  $  923,194   $751,614   $740,480   $661,672   $640,981
Premiums receivable......................      58,902     48,741     38,227     35,454     37,649
Total assets.............................   1,081,656    911,693    863,962    775,402    765,867
Unpaid losses and loss adjust-
 ment expenses...........................     253,546    227,499    215,301    240,183    280,933
Unearned premiums........................     168,404    148,654    128,828    117,524    117,417
Notes payable............................      25,000     25,000     15,000     15,000     16,500
Deferred income tax liability
  (asset)................................      10,158    (10,190)     8,758        466    (13,969)
Shareholders' equity.....................     565,188    457,161    450,275    353,704    277,209
Book value per share.....................       20.67      16.75      16.44      12.95      10.20


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Item 7. Management's Discussion and Analysis of Financial Condition and

Results of Operations

Overview

The operating results of property and casualty insurance companies are subject to significant fluctuations from quarter-to-quarter and from year-to- year due to the effect of competition on pricing, the frequency and severity of losses, including the effect of natural disasters on losses, general economic conditions, the general regulatory environment in those states in which an insurer operates, state regulation of premium rates and other factors such as changes in tax laws. The property and casualty industry has been highly cyclical, with periods of high premium rates and shortages of underwriting capacity followed by periods of severe price competition and excess capacity.

The Company did business only in the state of California until 1990, when it began operations in Georgia and Illinois. During 1995, approximately 98% of its direct premiums written were in California. Since November 1988, the Company's California insurance operations have been subject to the provisions of Proposition 103, a state-wide initiative passed by the California voters. The provision of Proposition 103 that has the most significant current impact on the Company is a requirement that no rate may be used by a property and casualty insurer in California after November 8, 1989 that has not been approved by the California Insurance Commissioner (the "Commissioner").

In February 1994, the Commissioner approved new rates which were designed to improve the Company's competitive position for new insureds. These rate changes, which became effective on May 1, 1994, provided for decreases in premium rates for insureds new to the Company or its agents. Further rate modifications were approved and made effective on October 15, 1995. The 1994 and 1995 rate changes have resulted in a substantial increase in new business being submitted to the Company. Automobile policies in force in California have increased by approximately 87,000 to 391,898 since the new rates were first established, an annual rate of increase of over 18%, compared with an annualized growth rate of 9.1% over the prior eighteen month period. Net premiums written since July 1, 1994 have increased at a compounded rate of 15.6%, compared with average annual premium growth of 3.7% over the preceding five and one-half years following passage of Proposition 103 in 1988.

Results of Operations

Year Ended December 31, 1995 Compared to Year Ended December 31, 1994

Premiums earned in 1995 increased 16.4%, primarily reflecting unit growth. Average premium per policy for the year was substantially unchanged. Net premiums written in 1995 increased 15.6% over a year earlier, continuing a growth trend which began in the second quarter of 1993.

The loss ratio in 1995 (loss and loss adjustment expenses related to premiums earned) was 67.6%, compared with 68.1% in 1994. In contrast to the previous several years, the 1995 and 1994 loss ratios reflect smaller contributions from favorable loss reserve development from prior periods.

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The expense ratio (policy acquisition costs and other operating expenses related to premiums earned) was 24.4%, compared with 25.2% in 1994. The improvement reflects both economies related to greater premium volume and smaller provisions for agent and employee incentive bonuses in 1995.

Total losses and expenses, excluding interest expense of $2.0 million, were $567.4 million, resulting in an underwriting gain for the period of $49.0 million, compared with an underwriting gain of $35.6 million in 1994.

Investment income in 1995 was $63.0 million, compared with $54.6 million in 1994. The after-tax yield on average investments of $827.9 million (fixed maturities at cost, equities at market) was 6.89%, compared with 6.84% on average investments of $727.9 million in 1994. The effective tax rate on investment income was 9.4% in 1995, compared with 8.8% in 1994. The slightly higher tax rate reflects an increase in the proportion of investment income derived from dividend income on equities, principally perpetual preferred stocks, compared to tax-exempt income. The maintenance of above-average yields during a period of declining interest rates is, in part, the result of the bond restructuring program undertaken in 1994 when bonds acquired in lower interest rate environments were sold with proceeds reinvested at significantly higher rates. The redemption of bonds acquired during higher interest periods has been a negative influence on realized yields which will continue in 1996 and 1997. Bonds matured and called in 1995 totaled $71.0 million, compared with $53.4 million in 1994, and approximately $83.1 million of calls and maturities are expected in 1996. Average yields being obtained during the first quarter of 1996 on new investments are some 50-75 basis points lower than the average 1995 portfolio yield.

Realized investment gains in 1995 were $1.0 million, compared with realized losses of $9.9 million in 1994. The 1994 losses reflect principally yield- enhancing swaps of both fixed maturities and equity securities, including perpetual preferred stocks, undertaken to recapture capital gains taxes paid in prior years. The 1995 gains arose in part from the early redemption of fixed- maturity investments.

The income tax provision of $24.0 million in 1995 represented an effective tax rate of 21.0%, compared with an effective rate of 19.6%, in 1994. The increase in the rate is attributable principally to the realization of capital gains in 1995, in contrast to the realization of losses in 1994.

Net income in 1995 was $90.3 million, or $3.31 per share, compared with $66.3 million, or $2.43 per share, in 1994. Per share results are based on 27.3 million average shares in both years.

Year Ended December 31, 1994 Compared to Year Ended December 31, 1993

Premiums earned in 1994 increased 11.7%, reflecting unit growth. Average premium per policy was substantially unchanged by the May 1, 1994 rate revisions. Direct premiums written in the first half of 1994 increased 10.7% over a year earlier, continuing the growth trend which began in the second quarter of 1993. During the last half of 1994, this increase accelerated to 14.1% over the prior year as a result of the May 1, 1994 rate revisions.

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The loss ratio in 1994 was 68.1%, compared with 61.0% in 1993. The higher loss ratio in 1994 reflects a much smaller contribution from favorable loss reserve development from prior periods and a reduction in the estimate of salvage and subrogation recoverable for prior accident years. The major earthquake which struck Southern California on January 17, 1994 resulted in net loss claims, after reinsurance recoveries, of approximately $1.2 million, which added less than 0.25% to the 1994 loss ratio. Earthquake losses were immaterial as the Company writes only a small amount of homeowners' insurance.
Approximately one half of the net earthquake losses incurred were related to the Company's principal line, automobile insurance, while the other half was related to the homeowners' line.

The expense ratio (policy acquisition costs and other expenses related to premiums earned) was 25.2%, compared with 25.0% in 1993.

Total losses and expenses, excluding interest expense of $1,025,000, were $493.8 million, resulting in an underwriting gain for the period of $35.6 million, compared with an underwriting gain of $66.6 million in 1993.

Investment income in 1994 was $54.6 million, compared with $54.1 million in 1993. The after-tax yield on average investments of $727.9 million (fixed maturities at cost, equities at market) was 6.84%, compared with 7.05% on average investments of $683.9 million in 1993. The effective tax rate on investment income was 8.8% in 1994, compared with 10.9% in 1993, reflecting an increase in the proportion of tax-exempt interest income. The decline in realized investment yields reflects principally the redemption and maturity of bonds and preferred stocks acquired in higher interest rate environments.

Realized investment losses in 1994 were $9.9 million, compared with realized gains of $3.0 million in 1993. The losses reflect principally yield- enhancing swaps of both fixed maturities and equity securities, including perpetual preferred stocks. The 1993 gains arose in significant part from the redemption of fixed-maturity investments. The realized capital losses were undertaken to recapture capital gains taxes paid in prior years.

The income tax provision of $16.1 million in 1994 represented an effective tax rate of 19.6%, compared with an effective rate of 23.3%, in 1993. The decrease in the rate is attributable principally to the decrease in fully taxable underwriting income, and the resulting higher proportion of tax exempt investment income.

Net income in 1994 was $66.3 million, or $2.43 per share, compared with $96.2 million, or $3.52 per share, in 1993. Per share results are based on 27.3 million average shares in 1994 and 27.4 million average shares in 1993.

Year Ended December 31, 1993 Compared to Year Ended December 31, 1992

Premiums earned in 1993 increased 4.1%. The year-to-year increase in the final quarter was 8.4%, following sequential quarterly increases (decreases) of (0.4%), 2.7% and 5.7%. Premiums written in 1993 increased 6.2%, with the quarterly pattern increasing sequentially throughout the year. This improvement largely reflects new business submitted by newly appointed agents who had previously represented other insurers which had withdrawn from the California

23

market. Premium rates were unchanged from a year earlier.

The loss ratio in 1993 was 61.0%, compared with 60.6% in 1992. The 1992 ratio was computed without adjustment for the impact of the Proposition 103 rate refund provision. The historically low loss ratios in both years reflect, principally, the seasoned characteristics of the Company's existing book of business and the continued favorable loss severity trends in the automobile bodily injury line in California. Reduced exposure to unprofitable assigned risk business contributed to the improvement, as did continued favorable loss reserve development. The more competitive rates which will apply to new business effective on May 1, 1994 are expected to produce an increase in the proportion of new, unseasoned risks insured by the Company. Loss experience on new business is characteristically less favorable than that of seasoned business.

The expense ratio (policy acquisition costs and other expenses related to premiums earned) was 25.0% in 1993, compared with 24.5% in 1992. The expense ratio has remained at or below 25% in each of the last five years.

Total losses and expenses, excluding interest expense of $793,000, were $407.5 million, resulting in an underwriting gain for the year of $66.6 million, or 14.0% of premiums earned, compared with an underwriting gain of $68.1 million in 1992, or 14.9% of premiums earned in 1992. The latter result excludes a provision of $18.6 million for rate refunds relating to the Proposition 103 rate rollback mandate. The rollback issue was resolved in May 1992 by a negotiated settlement reached with the California Department of Insurance (DOI). Refunds were completed in August 1992, fully extinguishing the Company's Proposition 103 rollback liability.

Net investment income in 1993 was $54.1 million, compared with $53.0 million in 1992. Average invested assets in 1993 (fixed maturities at cost/equities at market) were $683.9 million, a year-to-year increase of 5.4%. Reflecting the declining trends in interest rates in 1993, the average pre-tax yield for the period was 7.9% in 1993 and 8.2% in 1992. The effective tax rate on investment income was 10.9% in 1993 and 12.5% in 1992. The year-to-year decrease of approximately 25 basis points in the overall portfolio yield was significantly related to the maturity and call of approximately $134.4 million of relatively high coupon fixed maturity investments acquired in prior higher interest rate environments.

Realized investment gains were $3.0 million in 1993 and $5.2 million in 1992. The 1993 gains arose in significant part from calls of fixed-maturity investments. Sales of equity securities in 1993, particularly in the fourth quarter, produced losses of $1.7 million, partially offsetting the taxable gains generated by the early call of fixed maturity investments.

Income before taxes was $125.5 million, compared with $108.0 million in 1992. The provision for final settlement of the Proposition 103 refund obligation in 1992 reduced income before income taxes by $18.6 million.

The income tax provision in 1993 was $29.3 million, an effective tax rate of 23.3%, compared with a tax provision of $24.7 million, an effective rate of 22.9%, in the corresponding 1992 period. Excluding the impact of the rate refund

24

in 1992, the effective tax rate in 1992 was 24.5%. The effective tax rate is lower than the statutory corporate rate, 35% in 1993 and 34% in 1992, because a substantial part of net investment income is derived from tax-exempt bonds and dividends entitled to the corporate dividend exclusion. Except for the increase in the corporate statutory tax rate to 35% from 34%, effective as of January 1, 1993, the impact of the Omnibus Tax Reconciliation Act of 1993 was insignificant.

Net income in 1993 was $96.2 million, or $3.52 per share, compared with $83.3 million, or $3.06 per share, in 1992. Per share results are based on 27.4 million average shares in 1993 and 27.2 million shares in 1992. The provision for final settlement of rate refunds in the 1992 period reduced net income by $12.3 million, or $.45 per share.

Liquidity and Capital Resources

Net cash provided from operating activities in 1995 was $136.6 million, while funds derived from the sale, redemption or maturity of investments was $484.5 million, of which approximately 75% was represented by the sale of equity securities. The amortized cost of fixed-maturity investments increased by $85.6 million during the year. Equity investments, including perpetual preferred stocks, increased by $21.8 million at cost, and short-term cash investments increased by $5.8 million. The amortized cost of fixed-maturities available for sale that were sold, called or matured during the year was $118.8 million.

The market value of all investments (fixed-maturities and equity securities) held at market as "Available for Sale" exceeded the amortized cost of $855.9 million at December 31, 1995 by $38.8 million. That unrealized gain, reflected in shareholders' equity net of applicable tax effects, was $25.2 million at December 31, 1995 compared with an unrealized loss of $12.7 million at December 31, 1994. The increase in market values since December 31, 1994 reflects principally the substantial decline in intermediate and long term interest rates which occurred during the period.

The Company's cash and short term investments totaled $31.4 million at December 31, 1995. Together with funds generated internally, such liquid assets are more than adequate to pay claims without the sale of investments.

Traditionally, it has been the Company's policy not to invest in high yield or "junk" bonds. In 1995, the Company adopted a policy to place a small proportion of its investments in the taxable sector in bonds rated lower than investment grade, but not lower than Ba by Moody's or BB by Standard & Poor's. At December 31, 1995 bond holdings rated below investment grade totaled $16.4 million at market (cost $16.0 million), or 1.8% of total investments. All but $2.7 million of such holdings were downgraded to their current ratings subsequent to purchase. The average rating of the $652 million bond portfolio (at amortized cost) was A, while the average effective maturity, giving effect to anticipated early call, approximates 7.2 years. The modified duration of the bond portfolio at year-end was 5.8 years, reflecting the heavy weighting of high coupon issues, including housing issues subject to sinking funds and other issues which are pre-refunded or are expected to be called prior to their maturities. Duration measures the length of time it takes to receive all the cash flows produced by a bond, including reinvestment of interest. Because it measures four factors

25

(maturity, coupon rate, yield and call terms) which determine sensitivity to changes in interest rates, modified duration is a much better indicator of price volatility than simple maturity alone. Bond holdings are broadly diversified geographically, and, within the tax-exempt sector, consist largely of high coupon revenue issues, many of which have been pre-refunded and escrowed with U.S. Treasuries. General obligation bonds of the large eastern cities have generally been avoided.

The Company holds no direct obligations of Orange County, California, which has filed for protection under the bankruptcy laws. The Company does, however, hold $8.8 million principal amount of bonds issued by entities within Orange County, some of which may be affected by losses arising from participation in the Orange County investment pool. Exclusive of those bonds that have been either insured or pre-refunded with U.S. Treasuries, the Company's total holdings of issues affected by investments in the Orange County pool approximates $7.7 million based on market value at December 31, 1995. The Company has reviewed those holdings and believes that it will incur no losses as a result of the Orange County bankruptcy filing.

Holdings in the taxable sector consist principally of senior public utility issues. Fixed-maturity investments of $742.4 million (at amortized cost) include $90.1 million of sinking fund preferreds, principally utility issues. Included in the sinking fund preferred holdings are two investment grade utility issues which are held in trust and structured as "inverse floaters," dividends on which vary inversely to short term interest rates. The aggregate market value and cost of those holdings was $4.4 million and $4.2 million, respectively, at December 31, 1995. The year-end yield at market on those holdings approximated 8.8%. The only other securities which may be considered derivatives are a small amount of adjustable rate preferred stocks.

Except for Company-occupied buildings, the Company has no direct investments in real estate and no holdings of mortgages secured by commercial real estate.

Equity holdings of $114.9 million at market (cost $113.5 million), including perpetual preferred issues, are largely confined to the public utility and banking sectors and represent about 20.3% of total shareholders' equity.

The only significant debt of the Company at December 31, 1995, was a three year revolving credit agreement covering two bank loans totalling $25,000,000 dated December 20, 1994. The proceeds of the loans were used to repay a prior $15,000,000 loan, and to contribute $10,000,000 to the Company's insurance subsidiaries. The agreement renews annually, at which time it may be extended for an additional year to maintain the three year maturity date. The interest cost of the loans is variable and related to LIBOR (London Interbank Rate). Based on the rate effective March 19 through September 16, 1996, the net interest cost of the loans approximates 6.09%. The Company expects that the revolving loans will be renewed and extended to 1998 with no difficulty. The loans may be repaid in whole or in part with no penalty. The source of any repayments are expected to be derived from dividends from the Company's insurance subsidiaries or other external financing.

26

In March 1994, the Company's Employee Stock Ownership Plan (the Plan) purchased 161,000 shares of Mercury's common stock in the open market at a price of $29.75 per share. The purchases were funded by a $5.0 million bank loan to the Plan which is guaranteed by the Company. The shares are being allocated to employees over a five year period, with the initial allocation made in December 1994, and the debt is being retired by Company contributions to the Plan over the same time period. Since dividends on unallocated shares held by the Plan are tax deductible if they are used for debt service, as are Company contributions to the Plan, the net, after-tax interest cost to the Company for the borrowed funds used for the Plan stock purchase is less than the nominal 6.98% fixed rate of interest on the loan.

In December 1993, the NAIC adopted a risk-based capital formula for casualty insurance companies which establishes recommended minimum capital requirements for casualty companies. The formula has been designed to capture the widely varying elements of risks undertaken by writers of different lines of insurance having differing risk characteristics, as well as writers of similar lines where differences in risk may be related to corporate structure, investment policies, reinsurance arrangements and a number of other factors. The Company has estimated the Risk-Based Capital Requirements of each of its insurance subsidiaries as of December 31, 1995. Each of the companies' policyholders' surplus exceeded the highest level of recommended capital requirements.

As of December 31, 1995, the Company had no commitments for capital expenditures.

Industry and regulatory guidelines suggest that the ratio of a property and casualty insurer's annual net premiums written to statutory policyholders' surplus should not exceed 3.0 to 1. Based on the combined surplus of all of the licensed insurance subsidiaries of $479.1 million at December 31, 1995, and net written premiums for the twelve months ended on that date of $636.6 million, the ratio of writings to surplus was approximately 1.3 to 1.

Supplementary Data

Summarized quarterly financial data for 1995 and 1994 is as follows (in thousands except per share data):

                                                             Quarter Ended
                                                 --------------------------------------
                                                 March 31  June 30   Sept. 30  Dec. 31
                                                 --------  --------  --------  --------
1995
- - ----
Earned premiums................................  $144,676  $151,732  $157,179  $162,739
Income before income taxes ....................  $ 22,449  $ 28,679  $ 32,305  $ 30,890
Net income.....................................  $ 18,500  $ 22,407  $ 25,157  $ 24,237
Earnings per share.............................  $    .68  $    .82  $    .92  $    .89
Dividends declared per share...................  $    .20  $    .20  $    .20  $    .20

1994
- - ----
Earned premiums................................  $126,918  $127,635  $134,022  $140,815
Income before income taxes.....................  $ 22,043  $ 21,420  $ 20,432  $ 18,521
Net income.....................................  $ 17,766  $ 17,366  $ 16,272  $ 14,891
Earnings per share.............................  $    .65  $    .64  $    .60  $    .55
Dividends declared per share...................  $   .175  $   .175  $   .175  $   .175

27

Item 8. Financial Statements

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                           Page

Independent Auditors' Report...........................................    29
Consolidated Financial Statements:
     Consolidated Balance Sheets as of December 31, 1995 and 1994......    30
     Consolidated Statements of Income for Each of the Years in the
      Three-Year Period Ended December 31, 1995........................    31
     Consolidated Statements of Shareholders' Equity for Each of the
      Years in the Three-Year Period Ended December 31, 1995...........    32
     Consolidated Statements of Cash Flows for Each of the Years in
      the Three-Year Period Ended December 31, 1995....................    33
     Notes to Consolidated Financial Statements........................    35

28

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Mercury General Corporation:

We have audited the accompanying consolidated balance sheets of Mercury General Corporation and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of income, shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 1995. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Mercury General Corporation and subsidiaries as of December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1995, in conformity with generally accepted accounting principles.

KPMG PEAT MARWICK LLP

Los Angeles, California
March 22, 1996

29

MERCURY GENERAL CORPORATION

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 1995 AND 1994

AMOUNTS EXPRESSED IN THOUSANDS, except share amounts

A S S E T S

                                                                       1995       1994
                                                                    ----------  --------
Investments:
 Fixed maturities available for sale (amortized cost
  $742,409 in 1995 and $656,782 in 1994)..........................  $  779,783  $644,297
 Equity securities available for sale (cost $113,478 in
  1995 and $91,726 in 1994).......................................     114,915    84,622
 Short-term cash investments, at cost, which approxi-
  mates market....................................................      28,496    22,695
                                                                    ----------  --------
    Total investments.............................................     923,194   751,614
Cash..............................................................       2,872     3,344
Receivables:
 Premiums receivable..............................................      58,902    48,741
 Premium notes....................................................      11,728    11,562
 Accrued investment income........................................      15,870    14,642
 Other............................................................       6,108     7,795
                                                                    ----------  --------
                                                                        92,608    82,740
Deferred policy acquisition costs.................................      33,809    30,068
Fixed assets, net.................................................      27,464    27,579
Current income taxes..............................................          --     4,699
Deferred income taxes.............................................          --    10,190
Other assets......................................................       1,709     1,459
                                                                    ----------  --------
                                                                    $1,081,656  $911,693
                                                                    ==========  ========

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Losses and loss adjustment expenses...............................  $  253,546  $227,499
Unearned premiums.................................................     168,404   148,654
Notes payable.....................................................      25,000    25,000
Loss drafts payable...............................................      20,071    17,779
Accounts payable and accrued expenses.............................      25,412    21,925
Current income taxes..............................................         388        --
Deferred income taxes.............................................      10,158        --
Other liabilities.................................................      13,489    13,675
                                                                    ----------  --------
    Total liabilities.............................................     516,468   454,532
                                                                    ----------  --------
Shareholders' equity:
 Common stock without par value or stated value.
  Authorized 30,000,000 shares; issued and outstanding
   27,442,675 shares in 1995 and 27,415,275 in 1994...............      40,895    40,250
 Net unrealized investment gains (losses).........................      25,227   (12,733)
 Unearned ESOP compensation.......................................      (3,084)   (4,042)
 Retained earnings................................................     502,150   433,686
                                                                    ----------  --------
    Total shareholders' equity....................................     565,188   457,161
                                                                    ----------  --------
 Commitments and contingencies....................................  $1,081,656  $911,693
                                                                    ==========  ========

See accompanying notes to consolidated financial statements.

30

MERCURY GENERAL CORPORATION
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

Three years ended December 31, 1995

Amounts expressed in thousands, except per share data

                                                              1995      1994     1993
                                                            --------  --------  --------
Revenues:
 Earned premiums..........................................  $616,326  $529,390  $474,093
 Net investment income ...................................    62,964    54,586    54,121
 Premium finance fees.....................................     1,840     1,947     1,828
 Net realized investment gains (losses)(note 2)                1,048    (9,853)    3,006
 Other....................................................     1,501     1,176       716
                                                            --------  --------  --------

  Total revenues..........................................   683,679   577,246   533,764
                                                            --------  --------  --------

Expenses:
 Losses and loss adjustment expenses......................   416,556   360,557   289,208
 Policy acquisition costs ................................   128,743   112,682    99,738
 Other operating expenses.................................    22,017    20,566    18,564
 Interest.................................................     2,040     1,025       793
                                                            --------  --------  --------

  Total expenses..........................................   569,356   494,830   408,303
                                                            --------  --------  --------

 Income before income taxes...............................   114,323    82,416   125,461

Income taxes .............................................    24,022    16,121    29,252
                                                            --------  --------  --------

 Net income...............................................  $ 90,301  $ 66,295  $ 96,209
                                                            ========  ========  ========

Earnings per share .......................................  $   3.31  $   2.43  $   3.52
                                                            ========  ========  ========

See accompanying notes to consolidated financial statements.

31

MERCURY GENERAL CORPORATION
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

Three years ended December 31, 1995

Amounts expressed in thousands

                                                                                   1995       1994       1993
                                                                                 --------   --------   --------

Common stock, beginning of year................................................  $ 40,250   $ 40,014   $ 39,389
Proceeds of stock options exercised............................................       384        206        436
Tax benefit on sales of incentive stock
 options.......................................................................        74         69        189
Release of common stock by the ESOP............................................       187        (39)        --
                                                                                 --------   --------   --------
Common stock, end of year......................................................    40,895     40,250     40,014
                                                                                 --------   --------   --------

Net unrealized investment gains (losses) on
 securities, beginning of year.................................................   (12,733)    23,770      7,610
Net increase (decrease) in unrealized invest-
 ment gains (losses) on securities.............................................    37,960    (36,503)    16,160
                                                                                 --------   --------   --------
Net unrealized investment gains (losses) on
 securities, end of year.......................................................    25,227    (12,733)    23,770
                                                                                 --------   --------   --------

Unearned ESOP compensation relating to common
 stock purchases by ESOP.......................................................    (4,042)    (5,000)        --
Amortization of unearned ESOP compensation.....................................       958        958         --
                                                                                 --------   --------   --------
Unearned ESOP compensation, end of year........................................    (3,084)    (4,042)        --
                                                                                 --------   --------   --------

Retained earnings, beginning of year...........................................   433,686    386,491    306,705
Net income.....................................................................    90,301     66,295     96,209
Dividends paid to shareholders.................................................   (21,837)   (19,100)   (16,423)
                                                                                 --------   --------   --------
Retained earnings, end of year.................................................   502,150    433,686    386,491
                                                                                 --------   --------   --------

  Total shareholders' equity...................................................  $565,188   $457,161   $450,275
                                                                                 ========   ========   ========

See accompanying notes to consolidated financial statements.

32

MERCURY GENERAL CORPORATION
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE YEARS ENDED DECEMBER 31, 1995
Amounts expressed in thousands

                                                                1995        1994        1993
                                                             ---------   ---------   ---------
Cash flows from operating activities:
 Net income                                                  $  90,301   $  66,295   $  96,209
 Adjustments to reconcile net income to net cash
  provided from operating activities:
   Increase (decrease) in unpaid losses and loss
    adjustment expenses                                         26,047      12,198     (24,882)
   Increase in unearned premiums                                19,750      19,826      11,304
   Increase in premium notes receivable                           (166)     (1,618)       (778)
   Increase in premiums receivable                             (10,161)    (10,514)     (2,773)
   Increase in deferred policy acquisition costs                (3,741)     (4,345)     (2,763)
   Increase (decrease) in loss drafts payable                    2,292       3,018      (3,661)
   Increase (decrease) in accrued income taxes,
    excluding deferred tax on change in unrealized
    gain                                                         4,995      (3,260)     (5,664)
   Increase (decrease) in accounts payable and accrued
    expenses                                                     3,487      (2,698)      5,001
   Depreciation                                                  3,736       3,486       2,661
   Net realized investment (gains) losses                       (1,048)      9,853      (3,006)
   Bond amortization (accretion), net                             (103)      1,466       3,052
   Other, net                                                    1,169      (1,523)     (1,940)
                                                             ---------   ---------   ---------
          Net cash provided from operating activities          136,558      92,184      72,760

Cash flows from investing activities:
   Fixed maturities, at amortized cost:
     Purchases                                                      --          --     (19,201)
     Transfer from fixed maturities available for sale              --          --      (2,238)
     Sales                                                          --          --         740
     Calls or maturities                                            --          --     101,355
     Transfer to fixed maturities, available for sale               --          --     281,937
   Fixed maturities available for sale:
     Purchases                                                (204,360)   (239,193)   (146,233)
     Transfer from fixed maturities, at amortized cost              --          --    (281,937)
     Sales                                                      47,824     111,773      23,664
     Calls or maturities                                        70,954      53,351      37,393
     Transfer to fixed maturities, at amortized cost                --          --       2,238
   Equity securities available for sale:
     Purchases                                                (386,343)   (120,537)   (308,127)
     Sales                                                     365,696     108,949     269,457
   Decrease (increase) in short-term cash investments,
    net                                                         (5,801)      7,046     (12,863)
   Purchase of fixed assets                                     (4,115)     (3,711)     (7,139)
   Sale of fixed assets                                            494         268         434
                                                             ---------   ---------   ---------
          Net cash used in investing activities              $(115,651)  $ (82,054)  $ (60,520)

(Continued)

33

MERCURY GENERAL CORPORATION
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Continued)

                                                                1995        1994        1993
                                                             ---------   ---------   ---------
Cash flows from financing activities:
   Additions to notes payable                                $      --   $  25,000   $      --
   Principal payments on notes payable                              --     (15,000)         --
   Dividends paid to shareholders                              (21,837)    (19,100)    (16,423)
   Proceeds from stock options exercised                           458         275         625
                                                             ---------   ---------   ---------
          Net cash used in financing activities                (21,379)     (8,825)    (15,798)
                                                             ---------   ---------   ---------

Net increase (decrease) in cash                                   (472)      1,305      (3,558)
Cash:
   Beginning of the year                                         3,344       2,039       5,597
                                                             ---------   ---------   ---------
   End of the year                                           $   2,872   $   3,344   $   2,039
                                                             =========   =========   =========

See accompanying notes to consolidated financial statements.

34

MERCURY GENERAL CORPORATION

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1995 and 1994

(1) Significant Accounting Policies

Principles of Consolidation and Presentation

The Company is primarily engaged in the underwriting of private passenger automobile insurance in the state of California.

The consolidated financial statements include the accounts of Mercury General Corporation (the Company) and its wholly-owned subsidiaries, Mercury Casualty Company, Mercury Insurance Company, California Automobile Insurance Company, California General Underwriters Insurance Company, Inc., Mercury Insurance Company of Georgia, Mercury Insurance Company of Illinois, Mercury Indemnity Company of Georgia and Mercury Indemnity Company of Illinois. Collectively, the subsidiaries are referred to as the Insurance Companies. The consolidated financial statements have been prepared in conformity with generally accepted accounting principles (GAAP) which differ in some respects from those filed in reports to insurance regulatory authorities. All significant intercompany balances and transactions have been eliminated.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Investments

The Company adopted Statement of Financial Accounting Standards No.
115 ("SFAS No. 115"), "Accounting for Certain Investments in Debt and Equity Securities" on December 31, 1993. The Company transferred all $281,937,000 of Fixed Maturities, at amortized cost on that date to Fixed Maturities Available for Sale. Fixed maturities available for sale include those securities that management intends to hold for indefinite periods, but which may be sold in response to changes in interest rates, tax planning considerations or other aspects of asset/liability management. Short-term investments are carried at cost, which approximates market. Investments in equity securities, which include common stocks and non-redeemable preferred stocks, are carried at market.

35

MERCURY GENERAL CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 1995 and 1994

(1) Significant Accounting Policies (Continued)

In most cases, the market valuations were drawn from standard trade data sources. In no case were any valuations made by the Company's management. Equity holdings, including non sinking fund preferred stocks, are, with minor exceptions, actively traded on national exchanges, and were valued at the last transaction price.

Temporary unrealized investment gains and losses on securities available for sale are credited or charged directly to shareholders' equity, net of applicable tax effects. When a decline in value of fixed maturities or equity securities is considered other than temporary, a loss is recognized in the consolidated statement of income. Realized gains and losses are included in the consolidated statements of income based upon the specific identification method.

Fair Value of Financial Instruments

Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments", and Statement of Financial Accounting Standards No. 119, "Disclosure about Derivative Financial Instruments and Fair Value of Financial Instruments", require disclosure of estimated fair value information about financial instruments, for which it is practicable to estimate that value. Under SFAS No. 115, the Company categorizes all of its investments in debt and equity securities as available for sale. Accordingly, all investments, including cash and short term cash investments, are carried on the balance sheet at their fair value. The carrying amounts and fair values for investment securities are disclosed in Note 2 and were drawn from standard trade data sources such as market and broker quotes. The estimated fair value of notes payable equals their carrying value, which was based on borrowing rates currently available to the Company for bank loans with similar terms and maturities. The terms of the notes are discussed in Note 5.

Premium Income Recognition

Insurance premiums are recognized as income ratably over the term of the policies. Unearned premiums are computed on the monthly pro rata basis. The liability is stated gross of reinsurance deductions, with the reinsurance deduction recorded in other assets.

Net premiums written during 1995, 1994 and 1993 were $636,590,000, $550,838,000 and $484,097,000, respectively.

One agent produced direct premiums written of approximately 15%, 13% and 12% of the Company's total direct premiums written during 1995, 1994 and 1993, respectively.

36

MERCURY GENERAL CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 1995 and 1994

(1) Significant Accounting Policies (Continued)

Premium Notes and Premium Finance Fees

Premium notes receivable represent the balance due to the Company from policyholders who elect to finance their premiums over the policy term. The Company requires both a downpayment and monthly payments as part of its financing program. Premium finance fees are charged to policyholders who elect to finance premiums. The fees are charged at rates that vary with the amount of premium financed. Premium finance fees are recognized over the term of the premium note based upon the effective yield.

Deferred Policy Acquisition Costs

Acquisition costs related to unearned premiums, which consist of commissions, premium taxes and certain other underwriting costs, which vary directly with and are directly related to, the production of business, are deferred and amortized to income ratably over the terms of the policies. Deferred acquisition costs are limited to the amount which will remain after deducting from unearned premiums and anticipated investment income, the estimated losses and loss adjustment expenses and the servicing costs that will be incurred as the premiums are earned.

Losses and Loss Adjustment Expenses

The liability for losses and loss adjustment expenses is based upon the accumulation of individual case estimates for losses reported prior to the close of the accounting period, plus estimates, based upon past experience, of ultimate developed costs which may differ from case estimates and of unreported claims. The liability is stated net of anticipated salvage and subrogation recoveries. The amount of reinsurance recoverable is included in other receivables. Management believes that the liability for losses and loss adjustment expenses is adequate to cover the ultimate net cost of losses and loss adjustment expenses incurred to date. Since the provisions are necessarily based upon estimates, the ultimate liability may be more or less than such provisions.

Depreciation

Buildings and furniture and equipment are depreciated over 30-year and 5-year to 10-year periods, respectively, on a combination of straight-line and accelerated methods. Automobiles are depreciated over 5 years, using an accelerated method.

37

MERCURY GENERAL CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 1995 and 1994

(1) Significant Accounting Policies (Continued)

Earnings per Share

Earnings per share are computed by dividing earnings by the weighted average number of common shares outstanding of 27,311,707 for 1995, 27,273,192 for 1994 and 27,361,831 for 1993.

Income Taxes

Effective January 1, 1993, the Company provides for income taxes in accordance with Statement of Financial Accounting Standards No. 109 ("SFAS No. 109") "Accounting for Income Taxes." Deferred income taxes result from temporary differences in the recognition of income and expense for tax and financial reporting purposes. The adoption of SFAS No. 109 on January 1, 1993 did not have a material effect on the Company's financial condition or its results of operations. The recoverability of the deferred tax asset is demonstrated by the recoverability of taxes paid in previous years and the availability of tax planning strategies.

Reinsurance

In December 1992 the Financial Accounting Standards Board issued SFAS No. 113, "Accounting and Reporting for Reinsurance of Short-Duration and Long- Duration Contracts." Among other provisions, SFAS No. 113 requires a balance sheet gross up of reinsurance accounts and increases the degree of analysis required to assess risk transfer. SFAS No. 113 was adopted by the Company on January 1, 1993. The impact of the adoption of SFAS No. 113 was not material to the consolidated financial statements.

In accordance with SFAS No. 113, the liabilities for unearned premiums and unpaid losses are stated in the accompanying consolidated financial statements before deductions for ceded reinsurance. The ceded amounts are immaterial and are carried in other assets and other receivables. Earned premiums are stated net of deductions for ceded reinsurance.

The Insurance Companies, as primary insurers, would be required to pay losses in their entirety in the event that the reinsurers were unable to discharge their obligations under the reinsurance agreements.

38

MERCURY GENERAL CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 1995 and 1994

(1) Significant Accounting Policies (Continued)

Statements of Cash Flows

Interest paid during 1995, 1994, and 1993 was $1,970,000, $1,001,000, and $791,000 respectively. Income taxes paid were $18,954,000 in 1995, $19,315,000 in 1994, and $34,679,000 in 1993.

Stock-Based Compensation

During October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"), which is effective for fiscal years beginning after December 15, 1995. Presently, management expects to continue use of the accounting methods prescribed by Accounting Principles Board Opinion No. 25 and expand its disclosure of stock-based compensation as permitted by SFAS No. 123. Accordingly, adoption of this pronouncement is not expected to have a material effect on the financial statements of the Company.

(2) Investments and Investment Income

A summary of net investment income is shown in the following table:

                                                            Year ended December 31,
                                                            (Amounts in thousands)
                                                         ---------------------------
                                                           1995      1994      1993
                                                         -------   -------   -------
Interest and dividends on fixed maturities.............  $50,099   $46,636   $45,645
Dividends on equity securities.........................   11,855     7,483     8,154
Interest on short-term cash investments................    1,456       894       742
                                                         -------   -------   -------
  Total investment income..............................   63,410    55,013    54,541
Investment expense.....................................      446       427       420
                                                         -------   -------   -------
  Net investment income................................  $62,964   $54,586   $54,121
                                                         =======   =======   =======

A summary of net realized investment gains (losses) is as follows:

                                                            Year ended December 31,
                                                            (Amounts in thousands)
                                                         ---------------------------
                                                           1995      1994      1993
                                                         -------   -------   -------
Net realized investment gains (losses):
  Fixed maturities.....................................  $   (57)  $(4,574)  $ 4,332
  Equity securities....................................    1,105    (5,279)   (1,326)
                                                         -------   -------   -------
                                                         $ 1,048   $(9,853)  $ 3,006
                                                         =======   =======   =======

39

MERCURY GENERAL CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 1995 and 1994

(2) Investments and Investment Income (Continued)

Gross gains and losses realized on the sales of investments (excluding calls) are shown below:

                                            Year ended December 31,
                                            (Amounts in thousands)
                                         ----------------------------
                                           1995       1994     1993
                                         -------    -------   -------
Fixed maturities, at amortized cost:
    Gross realized gains...............  $    --    $    --   $    37
    Gross realized losses..............       --         --        --
                                         -------    -------   -------
      Net..............................  $    --    $    --   $    37
                                         =======    =======   =======

Fixed maturities available for sale:
    Gross realized gains...............  $   346    $   718   $   152
    Gross realized losses..............     (822)    (5,633)     (106)
                                         -------    -------   -------
      Net..............................  $  (476)   $(4,915)  $    46
                                         =======    =======   =======

Equity securities available for sale:
    Gross realized gains...............  $ 5,154    $   472   $ 3,382
    Gross realized losses..............   (4,049)    (5,751)   (4,708)
                                         -------    -------   -------
      Net..............................  $ 1,105    $(5,279)  $(1,326)
                                         =======    =======   =======

A summary of the net increase (decrease) in unrealized investment gains (losses) less applicable income tax expense (benefit), is as follows:

                                                 Year ended December 31,
                                                 (Amounts in thousands)
                                              -----------------------------
                                                1995      1994       1993
                                              -------   --------   --------
Net increase (decrease) in net unrealized
 investment gains (losses):
    Fixed maturities, at amortized cost.....  $    --   $    --    $(23,642)
    Income tax (benefit)....................       --        --      (8,038)
                                              -------   --------   --------
                                              $    --   $    --    $(15,604)
                                              =======   ========   ========

    Fixed maturities available for sale.....  $49,859   $(48,873)  $ 26,627
    Income tax expense (benefit)............   17,451    (17,106)     9,417
                                              -------   --------   --------
                                              $32,408   $(31,767)  $ 17,210
                                              =======   ========   ========

    Equity securities.......................  $ 8,541   $ (7,285)  $ (1,588)
    Income tax expense (benefit)............    2,989     (2,549)      (538)
                                              -------   --------   --------
                                              $ 5,552   $ (4,736)  $ (1,050)
                                              =======   ========   ========

40

MERCURY GENERAL CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 1995 and 1994

(2) Investments and Investment Income (Continued)

Accumulated unrealized gains and losses on securities available for sale follows:

                                                            December 31,
                                                      (Amounts in thousands)
                                                      ----------------------
                                                        1995          1994
                                                      --------      --------

Fixed maturities available for sale:
   Unrealized gains.................................  $ 41,326      $ 10,757
   Unrealized losses................................    (3,952)      (23,242)
   Tax effect.......................................   (13,081)        4,370
                                                      --------      --------
                                                        24,293        (8,115)
                                                      --------      --------
Equity securities available for sale:
   Unrealized gains.................................  $  3,135           948
   Unrealized losses................................    (1,698)       (8,052)
   Tax effect.......................................      (503)        2,486
                                                      --------      --------
                                                           934        (4,618)
                                                      --------      --------

 Net unrealized investment gains (losses)...........  $ 25,227      $(12,733)
                                                      ========      ========

The amortized cost and estimated market values of investments in fixed maturities available for sale as of December 31, 1995 are as follows:

                                                               Gross        Gross      Estimated
                                                 Amortized   Unrealized   Unrealized    Market
                                                   Cost        Gains       Losses        Value
                                                 ---------   ----------   ----------   ---------
                                                             (Amounts in thousands)
U.S. Treasury securities and
 obligations of U.S. government
 corporations and agencies....................    $  3,659     $    82      $    3     $  3,738
Obligations of states and political
 subdivisions.................................     630,811      34,197       1,845      663,163
Public utilities..............................      10,177         783           2       10,958
Corporate securities..........................       7,682         242          81        7,843
Redeemable preferred stock....................      90,080       6,022       2,021       94,081
                                                  --------     -------      ------     --------
    Totals....................................    $742,409     $41,326      $3,952     $779,783
                                                  ========     =======      ======     ========

41

MERCURY GENERAL CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 1995 and 1994

(2) Investments and Investment Income (Continued)

The amortized cost and estimated market values of investments in fixed maturities available for sale as of December 31, 1994 are as follows:

                                                               Gross        Gross      Estimated
                                                 Amortized   Unrealized   Unrealized    Market
                                                   Cost        Gains       Losses        Value
                                                 ---------   ----------   ----------   ---------
                                                             (Amounts in thousands)
U.S. Treasury securities and
 obligations of U.S. government
 corporations and agencies....................    $  3,515     $     5      $   348    $  3,172
Obligations of states and political
 subdivisions.................................     529,592       8,657       17,501     520,748
Public utilities..............................       8,521         164           10       8,675
Corporate securities..........................       6,296          31           46       6,281
Redeemable preferred stock....................     108,858       1,900        5,337     105,421
                                                  --------     -------      -------    --------
    Totals....................................    $656,782     $10,757      $23,242    $644,297
                                                  ========     =======      =======    ========

Traditionally, it has been the Company's policy not to invest in high yield or non-investment grade bonds. In 1995, the Company adopted a policy allowing a small percentage of its investments to be placed in bonds rated lower than investment grade, but not lower than Ba by Moody's or BB by Standard & Poor's. At December 31, 1995 bond holdings rated below investment grade totaled approximately 1.7% of total investments. All but $2.7 million of such holdings were downgraded subsequent to purchase. The average Standard and Poor's rating of the bond portfolio is A.

The amortized cost and estimated market value of fixed maturities available for sale at December 31, 1995, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

                                                          Estimated
                                             Amortized     Market
                                               Cost         Value
                                             ---------    ---------
                                             (Amounts in thousands)
                                             ----------------------
Fixed maturities available for sale:
  Due in one year or less.................    $ 80,872     $ 83,137
  Due after one year through five years...     154,953      163,235
  Due after five years through ten years..     311,125      323,117
  Due after ten years.....................     195,459      210,294
                                              --------     --------
                                              $742,409     $779,783
                                              ========     ========

42

MERCURY GENERAL CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 1995 and 1994

(3) Fixed Assets

A summary of fixed assets follows:

                                       December 31,
                                  (Amounts in thousands)
                                  ----------------------
                                    1995          1994
                                  --------      --------
Land............................  $  6,084      $  6,084
Buildings.......................    20,432        20,271
Furniture and equipment.........    18,410        15,943
Leasehold improvements..........     1,128         1,085
                                  --------      --------
                                    46,054        43,383
Less accumulated depreciation....  (18,590)      (15,804)
                                  --------      --------
  Net fixed assets............... $ 27,464      $ 27,579
                                  ========      ========

(4) Deferred Policy Acquisition Costs

Policy acquisition costs incurred and amortized to income are as follows:

                                                   Years ended December 31,
                                                    (Amounts in thousands)
                                               --------------------------------
                                                 1995         1994       1993
                                               ---------   ---------   --------
Balance, beginning of year...................  $  30,068   $  25,723   $ 22,960
Costs deferred during the year...............    132,484     117,027    102,501
Amortization charged to expense..............   (128,743)   (112,682)   (99,738)
                                               ---------   ---------   --------
Balance, end of year.........................  $  33,809   $  30,068   $ 25,723
                                               =========   =========   ========

(5) Notes Payable

Notes payable at December 31, 1995 consists of two unsecured notes payable dated December 20, 1994. The combined principal amount on the notes of $25,000,000 is payable on December 20, 1997. The interest cost of the loans is variable and related to the London Interbank Rate (LIBOR). Based on the rate effective through March 19, 1996, the net interest cost on the loans at December 31, 1995 is 6.4%.

The terms of the debt agreement include certain affirmative covenants, all of which are met by the Company at December 31, 1995.

43

MERCURY GENERAL CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 1995 and 1994

(6) Income Taxes

The Company and its subsidiaries file a consolidated Federal income tax return.

The provision for income tax expense (benefit) consists of the following components:

                                       Year ended December 31,
                                       (Amounts in thousands)
                                     ---------------------------
                                       1995      1994      1993
                                     -------   -------   -------
Federal
     Current.......................  $24,016   $15,318   $29,669
     Deferred......................      (92)      707      (523)
                                     -------   -------   -------
                                     $23,924   $16,025   $29,146
                                     =======   =======   =======
State
     Current.......................  $    98   $    96   $   153
     Deferred......................       --        --       (47)
                                     -------   -------   -------
                                     $    98   $    96   $   106
                                     =======   =======   =======
Total
     Current.......................  $24,114   $15,414   $29,822
     Deferred......................      (92)      707      (570)
                                     -------   -------   -------
Total..............................  $24,022   $16,121   $29,252
                                     =======   =======   =======

The income tax provision reflected in the consolidated statements of income is less than the expected federal income tax on income before income taxes as shown in the table below:

                                                               Year ended December 31,
                                                               (Amounts in thousands)
                                                           ------------------------------
                                                             1995       1994       1993
                                                           --------   --------   --------
Computed tax expense at 35% .............................  $ 40,013   $ 28,846   $ 43,911
Tax-exempt interest income...............................   (13,718)   (12,216)   (10,436)
Dividends received deduction.............................    (4,936)    (4,253)    (4,751)
Reduction of losses incurred deduction for 15% of
 income on securities purchased after August 7, 1986          2,546      2,220      1,877
Other, net...............................................       117      1,524     (1,349)
                                                           --------   --------   --------
    Income tax expense ..................................  $ 24,022   $ 16,121   $ 29,252
                                                           ========   ========   ========

44

MERCURY GENERAL CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 1995 and 1994

(6) Income Taxes (Continued)

The Omnibus Budget Reconciliation Act of 1993 increased the corporate tax rate from 34% to 35% effective January 1, 1993. Under SFAS No. 109, the effects of the higher corporate tax rate are recognized in determining tax on deferred items in the period that includes the date of enactment. The effect of the tax rate change on the deferred liability was not material to the consolidated financial position of the Company.

The "temporary differences" that give rise to a significant portion of the deferred tax asset (liability) relate to the following:

                                                               December 31,
                                                          (Amounts in thousands)
                                                     ------------------------------
                                                       1995       1994       1993
                                                     --------   --------   --------
Deferred tax assets
     Discounting of loss reserves and salvage
      and subrogation recoverable for tax
      purposes...................................    $  5,030   $  5,030   $  5,631
     Tax benefit on net unrealized loss on
      securities carried at market value.........          --      6,856         --
     Other deferred tax assets...................         638        534        534
                                                     --------   --------   --------
        Total gross deferred tax assets..........       5,668     12,420      6,165
          Less valuation allowance...............          --         --         --
                                                     --------   --------   --------
          Net deferred tax assets................       5,668     12,420      6,165
                                                     --------   --------   --------

Deferred tax liabilities
     Tax liability on net unrealized gain on
      securities carried at market value.........     (13,584)        --    (12,799)
     Tax depreciation in excess of book
      depreciation...............................      (1,184)    (1,192)    (1,149)
     Accretion on bonds..........................        (742)      (574)      (549)
     Other deferred tax liabilities..............        (316)      (464)      (426)
                                                     --------   --------   --------
          Total gross deferred tax liabilities...     (15,826)    (2,230)   (14,923)
                                                     --------   --------   --------
          Net deferred tax assets (liabilities)..    $(10,158)  $ 10,190   $ (8,758)
                                                     ========   ========   ========

45

MERCURY GENERAL CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 1995 and 1994

(7) Reserves for Losses and Loss Adjustment Expenses

Activity in the reserves for losses and loss adjustment expenses is summarized as follows:

                                                    Year ended December 31,
                                                     (Amounts in thousands)
                                                ------------------------------
                                                  1995       1994       1993
                                                --------   --------   --------
Gross reserves for losses and loss
 adjustment expenses at beginning of year.....  $227,499   $215,301   $240,183
   Less reinsurance recoverable...............    (4,107)      (776)      (980)
                                                --------   --------   --------
Net reserves, beginning of year...............   223,392    214,525    239,203

Incurred losses and loss adjustment expenses
 related to:
   Current year...............................   423,264    370,631    323,932
   Prior years................................    (6,708)   (10,074)   (34,724)
                                                --------   --------   --------
 Total incurred losses and loss adjustment
  expenses....................................   416,556    360,557    289,208
                                                --------   --------   --------

Loss and loss adjustment expense payments
 related to:
   Current year...............................   243,294    208,418    178,698
   Prior years................................   145,664    143,272    135,188
                                                --------   --------   --------
Total payments................................   388,958    351,690    313,886
                                                --------   --------   --------

Net reserves for losses and loss adjustment
 expenses at end of year......................   250,990    223,392    214,525
Reinsurance recoverable.......................     2,556      4,107        776
                                                --------   --------   --------
Gross reserves, end of year...................  $253,546   $227,499   $215,301
                                                ========   ========   ========

Decreases in incurred losses relating to prior years reflects the favorable loss experience during these years attributable to a number of combined factors which have produced favorable frequency and severity trends in recent years. In addition, actuarial assumptions based on historical trends have proved to be conservative.

46

MERCURY GENERAL CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 1995 and 1994

(8) Dividend Restrictions

The Insurance Companies are subject to the financial capacity guidelines established by the Office of the Commissioner of Insurance of their domicile states. The payment of dividends from statutory unassigned surplus of the Insurance Companies is restricted, subject to certain statutory limitations. For the year 1996, Mercury Casualty Company and California Automobile Insurance Company are permitted to pay approximately $50,869,000 in dividends to the Company without the prior approval of the California Commissioner of Insurance.

The above statutory regulations may have the effect of indirectly limiting the ability of the Company to pay dividends.

(9) Statutory Balances and Accounting Practices

The Insurance Companies prepare their statutory financial statements in accordance with accounting practices prescribed or permitted by the various state insurance departments. Prescribed statutory accounting practices include a variety of publications of the National Association of Insurance Commissioners (NAIC), as well as state laws, regulations, and general administrative rules. Permitted statutory accounting practices encompass all accounting practices not so prescribed. As of December 31, 1995, there were no material permitted statutory accounting practices utilized by the Insurance Companies. The NAIC is working on a project to codify statutory accounting practices, the result of which is expected to constitute the only source of "prescribed" statutory accounting practices. When complete, that project will most likely change the definition of prescribed versus permitted statutory accounting practices and may result in changes to the accounting policies that insurance enterprises use to prepare their statutory financial statements.

The Insurance Companies' statutory net income, as reported to regulatory authorities, was $86,210,000, $62,861,000 and $93,877,000 for the years ended December 31, 1995, 1994 and 1993, respectively. The statutory policyholders' surplus of the Insurance Companies, as reported to regulatory authorities, as of December 31, 1995 and 1994 was $479,114,000 and $411,898,000, respectively.

The Company has estimated the Risk-Based Capital Requirements of each of its insurance subsidiaries as of December 31, 1995 according to the formula issued by the NAIC. Each of the companies' policyholders' surplus exceeded the highest level of recommended capital requirements.

47

MERCURY GENERAL CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 1995 and 1994

(10) Commitments and Contingencies

The Company is obligated under several noncancellable lease agreements providing for office space that expire at various dates through the year 2000. Total rent expense under these lease agreements, all of which are operating leases, was $1,461,000, $1,492,000 and $1,653,000 for the years ended December 31, 1995, 1994 and 1993, respectively. Mercury Casualty Company will receive minimum future rentals on various noncancellable operating leases on a building purchased in Brea in October 1992. The annual rental commitments, expressed in thousands, are as follows:

                     Rent       Rent
Year                Expense    Income
----                -------   --------
1996..............  $1,401    $(1,016)
1997..............  $  828    $  (830)
1998..............  $  735    $  (488)
1999..............  $  538    $   (35)
2000..............  $  129    $    --
Thereafter........  $   --    $    --

The Company and its subsidiaries are defendants in various lawsuits generally incidental to their business. In most of these actions, plaintiffs assert claims for exemplary and punitive damages which are not insurable under California judicial decisions. The Company vigorously defends these actions, unless a reasonable settlement appears appropriate. Management does not expect the ultimate disposition of these lawsuits to have a material effect on the Company's consolidated operations or financial position.

(11) Profit Sharing Plan

The Company, at the option of the Board of Directors, may make annual contributions to an employee profit sharing plan. The contributions are not to exceed the greater of the Company's net income for the plan year or its retained earnings at that date. In addition, the annual contributions may not exceed an amount equal to 15% of the compensation paid or accrued during the year to all participants under the plan. The annual contribution was $1,000,000, $1,000,000 and $2,000,000 for the plan years ended December 31, 1995, 1994 and 1993.

The Profit Sharing Plan also includes an option for employees to make salary deferrals under Section 401(k) of the Internal Revenue Code. Company matching contributions, at a rate set by the Board of Directors, totaled $773,000, $762,000 and $593,000 for the plan years ended December 31, 1995, 1994 and 1993.

48

MERCURY GENERAL CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 1995 and 1994

(11) Profit Sharing Plan (Continued)

Effective March 11, 1994 the Profit Sharing Plan also includes a leveraged employee stock ownership plan (ESOP) that covers substantially all employees. The Company makes annual contributions to the ESOP equal to the ESOP's debt service less dividends received by the ESOP. Dividends received by the ESOP on unallocated shares are used to pay debt service and the ESOP shares serve as collateral for its debt. As the debt is repaid, shares are released from collateral and allocated to employees, based on the proportion of debt service paid in the year. The Company accounts for its ESOP in accordance with Statement of Position 93-6. Accordingly, the debt of the ESOP, which was $4,000,000 and $5,000,000 at December 31, 1995 and 1994, respectively, is recorded in the balance sheet as other liabilities. The shares pledged as collateral are reported as unearned ESOP compensation in the shareholders' equity section of the balance sheet. As shares are committed to be released from collateral, the Company reports compensation expense equal to the current market price of the shares, and reduces unearned ESOP compensation by the original cost of the shares. The difference between the market price and cost of the shares is charged to common stock. As shares are committed to be released from collateral, the shares become outstanding for earnings-per-share computations. Dividends on allocated ESOP shares are recorded as a reduction of retained earnings; dividends on unallocated ESOP shares are recorded as a reduction of accrued interest. ESOP compensation expense was $1,145,000 and $919,000 in 1995 and 1994, respectively. The ESOP shares as of December 31 were as follows:

                                         1995        1994
                                      ----------  ----------
Allocated shares                          32,200          --
Shares committed-to-be released           32,200      32,200
Unreleased shares                         96,600     128,800
                                      ----------  ----------
Total ESOP shares                        161,000     161,000
                                      ==========  ==========
Market value of unreleased shares at
 December 31,                         $4,613,000  $3,703,000
                                      ==========  ==========

(12) Common Stock

The Company adopted a stock option plan in October 1985 (the "1985 Plan") under which 2,700,000 shares were reserved for issuance. Options granted during 1985 were exercisable immediately. Subsequent options granted become exercisable 20% per year beginning one year from the date granted. All options were granted at the market price on the date of the grant.

49

MERCURY GENERAL CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 1995 and 1994

(12) Common Stock (Continued)

In May 1995 the Company adopted The 1995 Equity Participation Plan (the "1995 Plan") which succeeds the Company's 1985 Plan. Under the 1995 Plan, 2,700,000 shares of Common Stock are authorized for issuance upon exercise of options, stock appreciation rights and other awards, or upon vesting of restricted or deferred stock awards. During 1995, the Company granted incentive stock options under the 1994 and 1995 Plans. The options granted during 1995 become exercisable 20% per year beginning one year from the date granted and were granted at the market price on the date of the grant.

Activity pursuant to the plans, was as follows:

                                             Total      Exercisable
                                             Shares       Shares     Option Price
                                           ----------  ------------  -------------
Outstanding December 31, 1992............    220,200       188,200    $5.00 - 8.00
                                                           =======
  Granted in 1993........................    115,000                        30.125
  Exercised in 1993......................    (70,460)                  5.00 - 8.00
                                             -------                  ------------
Outstanding December 31, 1993............    264,740       135,940    $5.00-30.125
                                                           =======
  Granted in 1994........................      4,000                         27.00
  Exercised in 1994......................    (27,815)                  5.00 - 8.00
  Cancelled or expired in 1994...........     (3,000)                       30.125
                                             -------                  ------------
Outstanding December 31, 1994............    237,925       142,725    $5.00-30.125
                                                           =======
  Granted in 1995........................    155,000                  30.00-31.875
  Exercised in 1995......................    (27,600)                  5.00-30.125
                                             -------                  ------------
Outstanding December 31, 1995............    365,325       141,725    $6.75-31.875
                                             =======       =======    ============

50

Item 9. Changes in and Disagreements with Accountants on Accounting and

Financial Disclosure

None.

PART III

Item 10. Directors and Executive Officers of the Registrant

Section 16(a) of the Securities Exchange Act of 1934 requires the directors, officers and certain other employees of the registrant, and persons who own more than ten percent of a registered class of the registrant's equity securities, ("Reporting Persons") to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of Common Stock of the registrant. Due dates for these reports have been established and the registrant is required to disclose any failure to file by these dates during 1995. To the registrant's knowledge, all of these requirements were satisfied.

Item 11. Executive Compensation

Item 12. Security ownership of Certain Beneficial Owners and Management

Item 13. Certain Relationships and Related Transactions

Information regarding executive officers of the Company is included in Part
I. For this and other information called for by Items 10, 11, 12 and 13, reference is made to the Company's definitive proxy statement for its Annual Meeting of Shareholders, to be held on May 29, 1996, which will be filed with the Securities and Exchange Commission within 120 days after December 31, 1995, and which is incorporated herein by reference.

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a) The following documents are filed as a part of this report:

1. Financial Statements: The Consolidated Financial Statements for the year ended December 31, 1995 are contained herein as listed in the Index to Consolidated Financial Statements on page 28.

2. Financial Statement Schedules:

Title

Auditors' Report on Financial Statement Schedules Schedule I -- Summary of Investments -- Other than Investments in Related Parties
Schedule II -- Condensed Financial Information of Registrant

51

Schedule IV -- Reinsurance

All other schedules are omitted as the required information is inapplicable or the information is presented in the Consolidated Financial Statements or Notes thereto.

3. Exhibits:

3.1**     Articles of Incorporation of the Company, as amended to
          date.
3.2       By-laws of the Company, as amended to date.
4.1*      Shareholders' Agreement dated as of October 7, 1985 among
          the Company, George Joseph and Gloria Joseph.
10.1*     Form of Agency Contract.
10.2#     Management Agreement, as amended, effective July 1, 1992,
          among the Company, Mercury Casualty Company, Mercury
          Insurance Company and California Automobile Insurance
          Company.
10.3##    Profit Sharing Plan, as Amended and Restated as of March 11,
          1994.
10.4##    ESOP Feature Trust Agreement between the Company and Wells
          Fargo Bank, N.A., as Trustee, effective March 1, 1994.
10.5##    ESOP Loan Agreement between Union Bank and Wells Fargo Bank,
          N.A., as Trustee, of the Mercury General Corporation ESOP
          Feature Trust dated as of March 11, 1994.
10.6##    Continuing Guaranty, dated as of March 11, 1994, executed by
          Mercury General Corporation in favor of Union Bank.
10.7**    Amendment 1994-I to the Mercury General Corporation Profit
          Sharing Plan.
10.8**    Amendment 1994-II to the Mercury General Corporation Profit
          Sharing Plan.
10.9**    Revolving Credit Agreement by and among Mercury General
          Corporation, the Lenders Party Hereto and The Bank of New
          York, as Agent.
10.10**   Property Per Risk Excess of Loss Reinsurance Agreement
          between National Reinsurance Corporation and Mercury
          Casualty Company, effective April 1, 1995.
10.11**   Endorsement No. 1 to the Property Per Risk Excess of Loss
          Agreement effective April 1, 1995.
10.12     Endorsement No. 2 to the Property Per Risk Excess of Loss
          Agreement effective April 1, 1995.
10.13     Endorsement No. 3 to the Property Per Risk Excess of Loss
          Agreement effective April 1, 1995.
10.14     Management Agreement effective January 1, 1995 between the
          Company and Mercury Insurance Company of Illinois.
10.15     Management Agreement effective January 1, 1995 between the
          Company and Mercury Indemnity Company of Illinois.
10.16     Management Agreement effective January 1, 1995 between the
          Company and Mercury Insurance Company of Georgia.

                             52

10.17     Management Agreement effective January 1, 1995 between the
          Company and Mercury Indemnity Company of Georgia.
10.18     Draft, Second and Third Excess Property Catastrophe
          Reinsurance Contract Effective April 1, 1995 issued to
          Mercury Casualty Company, Mercury Insurance Company,
          California Automobile Insurance Company and California
          General Underwriters Insurance Company, Inc.
10.19@    The 1995 Equity Participation Plan.
21.1##    Subsidiaries of the Company.
23.1      Accountants' Consent.
27.1      Financial Data Schedule
28.1      Consolidated Schedule P of the Annual Statement provided to
----
          state insurance regulatory authorities for the year ended
          December 31, 1995.

* This document was filed as an exhibit to Registrant's Registration Statement on Form S-1, File No. 33-899, and is incorporated herein by this reference.

# This document was filed as an exhibit to Registrant's Form 10-K for the fiscal year ended December 31, 1992, and is incorporated herein by this reference.

## This document was filed as an exhibit to Registrant's Form 10-K for the fiscal year ended December 31, 1993, and is incorporated herein by this reference.

** This document was filed as an exhibit to Registrant's Form 10-K for the fiscal year ended December 31, 1994, and is incorporated herein by this reference.

@ This document was filed as an exhibit to Registrant's Form S-8 filed on March 8, 1996 and is incorporated herein by this reference.

(b) Reports on Form 8-K:
None

53

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

MERCURY GENERAL CORPORATION

By           GEORGE JOSEPH
  -------------------------------------
             George Joseph
      Chief Executive Officer and
         Chairman of the Board

March 22, 1996

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

       Signature                         Title                      Date
       ---------                         -----                      ----

                                Chief Executive Officer
                                          and
                                 Chairman of the Board
      GEORGE JOSEPH          (Principal Executive Officer)      March 22, 1996
- - --------------------------
      George Joseph


                                Chief Financial Officer
      KEITH L. PARKER        (Principal Financial Officer)      March 22, 1996
- - --------------------------
      Keith L. Parker


                             Vice President and Controller
      DONNA J. MOORE         (Principal Accounting Officer)     March 22, 1996
- - --------------------------
      Donna J. Moore


      NATHAN BESSIN                     Director                March 22, 1996
- - --------------------------
      Nathan Bessin


      BRUCE A. BUNNER                   Director                March 22, 1996
- - --------------------------
      Bruce A. Bunner


      RICHARD E. GRAYSON                Director                March 22, 1996
- - --------------------------
      Richard E. Grayson

                                       54

       Signature                         Title                      Date
       ---------                         -----                      ----

      GLORIA JOSEPH                     Director                March 22, 1996
- - --------------------------
      Gloria Joseph


      CHARLES MCCLUNG                   Director                March 22, 1996
- - ---------------------------
      Charles McClung


      DONALD P. NEWELL                  Director                March 22, 1996
- - ---------------------------
      Donald P. Newell


      DONALD R. SPUEHLER                Director                March 22, 1996
- - ---------------------------
      Donald R. Spuehler

55

AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULES

The Board of Directors
Mercury General Corporation:

Under date of March 22, 1996, we reported on the consolidated balance sheets of Mercury General Corporation and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of income, shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 1995, as contained in the annual report on Form 10-K for the year 1995. In connection with our audits of the aforementioned consolidated financial statements, we also have audited the related financial statement schedules as listed under Item 14(a)2. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statement schedules based on our audits.

In our opinion, the related financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

KPMG PEAT MARWICK LLP

Los Angeles, California
March 22, 1996

S-1

SCHEDULE I

MERCURY GENERAL CORPORATION

SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN RELATED PARTIES

December 31, 1995

Amounts in Thousands

                                                                                  Amount at
                                                                                 which shown
                                                                                   in the
Type of Investment                                            Cost     Value    balance sheet
- - ------------------                                          --------  --------  -------------
Fixed maturities available for sale
         Bonds:
           U.S. Government................................  $  3,659  $  3,738     $  3,738
           States, Municipalities.........................   630,811   663,163      663,163
           Public utilities...............................    10,177    10,958       10,958
           All other corporate bonds......................     7,682     7,843        7,843
         Redeemable preferred stock.......................    90,080    94,081       94,081
                                                            --------  --------     --------
           Total fixed maturities available for
            sale..........................................   742,409   779,783      779,783
                                                            --------  --------     --------

Equity securities:
         Common stocks:
           Public utilities...............................    18,787    19,714       19,714
           Banks, trust and insurance companies...........       535       469          469
           Industrial, Miscellaneous and
            all other.....................................     1,133     1,524        1,524
         Nonredeemable preferred stocks...................    93,023    93,208       93,208
                                                            --------  --------     --------

           Total equity securities available for
            sale..........................................   113,478   114,915      114,915
                                                            --------  --------     --------
Short-term investments....................................    28,496                 28,496
                                                            --------               --------

           Total investments..............................  $884,383               $923,194
                                                            ========               ========

S-2

SCHEDULE I, Continued

MERCURY GENERAL CORPORATION

SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN RELATED PARTIES

December 31, 1994

Amounts in Thousands

                                                                                  Amount at
                                                                                 which shown
                                                                                   in the
Type of Investment                                            Cost     Value    balance sheet
- - ------------------                                          --------  --------  -------------
Fixed maturities available for sale
         Bonds:
           U.S. Government................................  $  3,515  $  3,172     $  3,172
           States, Municipalities.........................   529,592   520,748      520,748
           Public utilities...............................     8,521     8,675        8,675
           All other corporate bonds......................     6,296     6,281        6,281
         Redeemable preferred stock.......................   108,858   105,421      105,421
                                                            --------  --------     --------

           Total fixed maturities available for
            sale..........................................   656,782   644,297      644,297
                                                            --------  --------     --------

Equity securities:
         Common stocks:
           Public utilities...............................    16,890    15,577       15,577
           Banks, trust and insurance companies...........       535       431          431
           Industrial, Miscellaneous and
            all other.....................................     1,038     1,197        1,197
         Nonredeemable preferred stocks...................    73,263    67,417       67,417
                                                            --------  --------     --------

           Total equity securities available for
            sale..........................................    91,726    84,622       84,622
                                                            --------  --------     --------

Short-term investments....................................    22,695                 22,695
                                                            --------               --------

           Total investments..............................  $771,203               $751,614
                                                            ========               ========

S-3

SCHEDULE II

MERCURY GENERAL CORPORATION

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

BALANCE SHEETS

December 31, 1995 and 1994

Amounts in thousands

ASSETS

                                                                              1995      1994
                                                                            --------  --------
Investments:
      Fixed maturities available for sale (amortized
       cost $3,771 in 1995 and $3,456 in 1994)............................  $  3,770  $  3,377
      Equity securities, available for sale (cost
       $12,943 in 1995 and $12,126 in 1994)...............................    12,841    11,297
      Short-term cash investments.........................................     4,746     2,038
      Investment in subsidiaries..........................................   574,224   470,746
                                                                            --------  --------
           Total investments..............................................   595,581   487,458

Amounts due from affiliates...............................................     3,834     4,795
Income taxes..............................................................     2,615     1,637
Other assets..............................................................     2,110     1,905
                                                                            --------  --------
                                                                            $604,140  $495,795
                                                                            ========  ========

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Notes payable.............................................................  $ 25,000  $ 25,000
Accounts payable and accrued expenses.....................................     8,611     7,433
Other liabilities.........................................................     5,341     6,201
                                                                            --------  --------
     Total liabilities....................................................    38,952    38,634
                                                                            --------  --------

Shareholders' equity:
     Common stock.........................................................    40,895    40,250
     Net unrealized investment gains (losses).............................    25,227   (12,733)
     Unearned ESOP compensation...........................................    (3,084)   (4,042)
     Retained earnings....................................................   502,150   433,686
                                                                            --------  --------
           Total shareholders' equity.....................................   565,188   457,161
                                                                            --------  --------
                                                                            $604,140  $495,795
                                                                            ========  ========

See notes to condensed financial information

S-4

SCHEDULE II, Continued

MERCURY GENERAL CORPORATION

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

STATEMENTS OF INCOME

Three years ended December 31, 1995

Amounts in thousands

                                                                           1995      1994     1993
                                                                         --------  --------  -------
Revenues:
  Net investment income...............................................   $  1,824  $  1,389  $ 1,300
  Management fee income from subsidiaries.............................    101,823   101,858   87,376
  Other...............................................................         27      (704)     107
                                                                         --------  --------  -------

     Total revenues...................................................    103,674   102,543   88,783
                                                                         --------  --------  -------

Expenses:
  Loss adjustment expenses............................................     68,048    68,771   59,851
  Policy acquisition costs............................................     17,087    17,953   15,174
  Other operating expenses............................................     16,627    15,544   12,832
  Interest............................................................      2,040     1,025      793
                                                                         --------  --------  -------

     Total expenses...................................................    103,802   103,293   88,650
                                                                         --------  --------  -------

  Income (loss) before income taxes and equity
   in net income of subsidiaries......................................       (128)     (750)     133

Income tax benefit....................................................       (386)     (506)    (350)
                                                                         --------  --------  -------

  Income (loss) before equity in net income
   of subsidiaries....................................................        258      (244)     483

Equity in net income of subsidiaries..................................     90,043    66,539   95,726
                                                                         --------  --------  -------
     Net income.......................................................   $ 90,301  $ 66,295  $96,209
                                                                         ========  ========  =======

See notes to condensed financial information.

S-5

SCHEDULE II, Continued

MERCURY GENERAL CORPORATION

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

STATEMENTS OF CASH FLOWS

Three Years ended December 31, 1995

Amounts in thousands

                                                                           1995      1994      1993
                                                                         --------  --------  --------
Cash flows from operating activities:
  Net cash provided from operating activities.........................   $ 25,526  $ 20,367  $ 24,039

Cash flows from investing activities:
  Capital contribution to subsidiaries................................       (500)  (10,000)   (6,000)
  Fixed maturities, at amortized cost:
    Calls or maturities...............................................         --        --        44
    Transfer to fixed maturities, at market...........................         --        --     3,113
  Fixed maturities, at market:
    Transfer from fixed maturities, at amortized
     cost.............................................................         --        --    (3,113)
    Purchases.........................................................     (1,051)     (547)
    Sales.............................................................        335        --        --
    Calls or maturities...............................................        349     2,632     2,243
  Equity securities:
    Purchases.........................................................    (49,390)  (20,105)  (25,219)
    Sales.............................................................     48,675    16,461    21,376
  Increase in short term cash investments, net........................     (2,708)     (365)   (1,490)
  Other, net..........................................................         --        31       259
                                                                         --------  --------  --------
         Net cash used in investing activities........................     (4,290)  (11,893)   (8,787)

Cash flows from financing activities:
  Additions to notes payable..........................................         --    25,000        --
  Principal payments on notes payable.................................         --   (15,000)       --
  Dividends paid to shareholders......................................    (21,837)  (19,100)  (16,423)
  Stock options exercised.............................................        458       275       625
                                                                         --------  --------  --------
         Net cash used in financing activities........................    (21,379)   (8,825)  (15,798)

Net decrease in cash..................................................       (143)     (351)     (546)
Cash:
  Beginning of the year...............................................     (1,197)     (846)     (300)
                                                                         --------  --------  --------
  End of the year.....................................................   $ (1,340) $ (1,197) $   (846)
                                                                         ========  ========  ========

See notes to condensed financial information.

S-6

SCHEDULE II, Continued

MERCURY GENERAL CORPORATION

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

NOTES TO CONDENSED FINANCIAL INFORMATION

December 31, 1995 and 1994

The accompanying condensed financial information should be read in conjunction with the consolidated financial statements and notes included in this statement.

Management Fee Income

Under a management agreement, the Company performs management services for its subsidiaries which include all underwriting and claims servicing functions. The Company is compensated by monthly reimbursement of expenses paid.

Dividends Received From Subsidiaries

Dividends of $24,500,000, $20,000,000, and $26,700,000 were received by the Company from its wholly-owned subsidiaries in 1995, 1994 and 1993, respectively and are recorded as a reduction to Investment in Subsidiaries.

Cash Overdraft

At December 31, 1995 and 1994, the Company had cash overdrafts of $1,340,000 and $1,197,000, respectively which are classified in "other liabilities" in the accompanying condensed balance sheet.

S-7

SCHEDULE IV

MERCURY GENERAL CORPORATION

REINSURANCE

Three years ended December 31, 1995

Amounts in thousands

                                              Ceded to
                                     Gross      other               Net
                                     amount   companies  Assumed   amount
                                    --------  ---------  -------  --------
Property and Liability insurance
     1995.........................  $619,404   $3,444     $366    $616,326
     1994.........................  $530,224   $1,321     $487    $529,390
     1993.........................  $477,737   $4,229     $585    $474,093

S-8

EXHIBIT INDEX

3.1**     Articles of Incorporation of the Company, as amended to date.
3.2       By-laws of the Company, as amended to date.
4.1*      Shareholders' Agreement dated as of October 7, 1985 among the Company,
          George Joseph and Gloria Joseph.
10.1*     Form of Agency Contract.
10.2#     Management Agreement, as amended, effective July 1, 1992, among the
          Company, Mercury Casualty Company, Mercury Insurance Company and
          California Automobile Insurance Company.
10.3##    Profit Sharing Plan, as Amended and Restated as of March 11, 1994.
10.4##    ESOP Feature Trust Agreement between the Company and Wells Fargo Bank,
          N.A., as Trustee, effective March 1, 1994.
10.5##    ESOP Loan Agreement between Union Bank and Wells Fargo Bank, N.A., as
          Trustee, of the Mercury General Corporation ESOP Feature Trust dated
          as of March 11, 1994.
10.6##    Continuing Guaranty, dated as of March 11, 1994, executed by Mercury
          General Corporation in favor of Union Bank.
10.7**    Amendment 1994-I to the Mercury General Corporation Profit Sharing
          Plan.
10.8**    Amendment 1994-II to the Mercury General Corporation Profit Sharing
          Plan.
10.9**    Revolving Credit Agreement by and among Mercury General Corporation,
          the Lenders Party Hereto and The Bank of New York, as Agent.
10.10**   Property Per Risk Excess of Loss Reinsurance Agreement between
          National Reinsurance Corporation and Mercury Casualty Company,
          effective April 1, 1995.
10.11**   Endorsement No. 1 to the Property Per Risk Excess of Loss Agreement
          effective April 1, 1995.
10.12     Endorsement No. 2 to the Property Per Risk Excess of Loss Agreement
          effective April 1, 1995.
10.13     Endorsement No. 3 to the Property Per Risk Excess of Loss Agreement
          effective April 1, 1995.
10.14     Management Agreement effective January 1, 1995 between the Company and
          Mercury Insurance Company of Illinois.
10.15     Management Agreement effective January 1, 1995 between the Company and
          Mercury Indemnity Company of Illinois.
10.16     Management Agreement effective January 1, 1995 between the Company and
          Mercury Insurance Company of Georgia.
10.17     Management Agreement effective January 1, 1995 between the Company and
          Mercury Indemnity Company of Georgia.
10.18     Draft, Second and Third Excess Property Catastrophe Reinsurance
          Contract Effective April 1, 1995 issued to Mercury Casualty Company,
          Mercury Insurance Company, California Automobile Insurance Company and
          California General Underwriters, Inc.
10.19@    The 1995 Equity Participation Plan.
21.1##    Subsidiaries of the Company.
23.1      Accountants' Consent.
27.1      Financial Data Schedule.
28.1      Consolidated Schedule P of the Annual Statement provided to state
- - ----
          insurance regulatory authorities for the year ended December 31, 1995.


* This document was filed as an exhibit to Registrant's Registration Statement on Form S-1, File No. 33-899, and is incorporated herein by this reference.

# This document was filed as an exhibit to Registrant's Form 10-K for the fiscal year ended December 31, 1992, and is incorporated herein by this reference.

## This document was filed as an exhibit to Registrant's Form 10-K for the fiscal year ended December 31, 1993, and is incorporated herein by this reference.

** This document was filed as an exhibit to Registrant's Form 10-K for the fiscal year ended December 31, 1994, and is incorporated herein by this reference.

@ This document was filed as an exhibit to Registrant's Form S-8 filed on March 8, 1996 and is incorporated herein by this reference.

(b) Reports on Form 8-K:

None


Exhibit 3.2

BYLAWS

OF

MERCURY GENERAL CORPORATION


TABLE OF CONTENTS

                                                                                           Page
                                                                                           ----
ARTICLE I - OFFICES.......................................................................    1

     Section 1.   PRINCIPAL OFFICES.......................................................    1
     Section 2.   OTHER OFFICES...........................................................    1

ARTICLE II - MEETINGS OF SHAREHOLDERS.....................................................    1

     Section 1.   PLACE OF MEETINGS.......................................................    1
     Section 2.   ANNUAL MEETINGS OF SHAREHOLDERS.........................................    1
     Section 3.   SPECIAL MEETINGS........................................................    1
     Section 4.   NOTICE OF SHAREHOLDERS' MEETINGS........................................    2
     Section 5.   MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE............................    2
     Section 6.   QUORUM..................................................................    3
     Section 7.   ADJOURNED MEETING AND NOTICE THEREOF....................................    3
     Section 8.   VOTING..................................................................    3
     Section 9.   WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDERS......................    4
     Section 10.  SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.................    4
     Section 11.  RECORD DATE FOR SHAREHOLDER NOTICE, VOTING, AND GIVING CONSENTS.........    5
     Section 12.  PROXIES.................................................................    5
     Section 13.  INSPECTORS OF ELECTION..................................................    6

ARTICLE III - DIRECTORS...................................................................    7

     Section 1.   POWERS..................................................................    7
     Section 2.   NUMBER AND QUALIFICATION OF DIRECTORS...................................    7
     Section 3.   ELECTION AND TERM OF OFFICE OF DIRECTORS................................    7
     Section 4.   VACANCIES...............................................................    7
     Section 5.   PLACE OF MEETINGS AND TELEPHONIC MEETINGS...............................    8
     Section 6.   ANNUAL MEETINGS.........................................................    8
     Section 7.   OTHER REGULAR MEETINGS..................................................    8
     Section 8.   SPECIAL MEETINGS........................................................    8
     Section 9.   DISPENSING WITH NOTICE..................................................    9
     Section 10.  QUORUM..................................................................    9
     Section 11.  ADJOURNMENT.............................................................    9
     Section 12.  NOTICE OF ADJOURNMENT...................................................    9
     Section 13.  ACTION WITHOUT MEETING..................................................    9
     Section 14.  FEES AND COMPENSATION OF DIRECTORS......................................    9

i

ARTICLE IV - COMMITTEES...................................................................   10

     Section 1.   COMMITTEES OF DIRECTORS.................................................   10
     Section 2.   MEETINGS AND ACTION OF COMMITTEES.......................................   10

ARTICLE V - OFFICERS......................................................................   11

     Section 1.   OFFICERS................................................................   11
     Section 2.   ELECTION OF OFFICERS....................................................   11
     Section 3.   SUBORDINATE OFFICERS, ETC...............................................   11
     Section 4.   REMOVAL AND RESIGNATION OF OFFICERS.....................................   11
     Section 5.   VACANCIES IN OFFICES....................................................   11
     Section 6.   CHAIRMAN OF THE BOARD...................................................   11
     Section 7.   PRESIDENT...............................................................   12
     Section 8.   VICE PRESIDENTS.........................................................   12
     Section 9.   SECRETARY...............................................................   12
     Section 10.  CHIEF FINANCIAL OFFICER.................................................   12

ARTICLE VI - INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER AGENTS............  13

     Section 1.   SCOPE OF INDEMNIFICATION................................................   13
     Section 2.   NON-EXCLUSITIVITY OF RIGHTS.............................................   14
     Section 3.   TERM AND HEIRS..........................................................   14
     Section 4.   SEVERABILITY............................................................   14
     Section 5.   AMENDMENTS..............................................................   14

ARTICLE VII - RECORDS AND REPORTS.........................................................   14

     Section 1.   MAINTENANCE AND INSPECTION OF SHARE REGISTER............................   14
     Section 2.   MAINTENANCE AND INSPECTION OF BYLAWS....................................   15
     Section 3.   MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS...................   15
     Section 4.   INSPECTION BY DIRECTORS.................................................   15
     Section 5.   ANNUAL REPORT TO SHAREHOLDERS...........................................   15
     Section 6.   FINANCIAL STATEMENTS....................................................   16

ARTICLE VIII - GENERAL CORPORATE MATTERS..................................................   16

     Section 1.   RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING...................   16
     Section 2.   CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS...............................   17
     Section 3.   CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED.......................   17
     Section 4.   CERTIFICATES FOR SHARES.................................................   17
     Section 5.   LOST CERTIFICATES.......................................................   17
     Section 6.   REPRESENTATION OF SHARES OF OTHER CORPORATIONS..........................   17

ii

                                                                                           Page
                                                                                           ----
ARTICLE IX - AMENDMENTS...................................................................   18

     Section 1.   AMENDMENT BY SHAREHOLDERS...............................................   18
     Section 2.   AMENDMENT BY DIRECTORS..................................................   18

ARTICLE X - GENERAL.......................................................................   18

     Section 1.   GOVERNING LAW...........................................................   18
     Section 2.   CONSTRUCTION AND DEFINITIONS............................................   18

iii

BYLAWS

OF

MERCURY GENERAL CORPORATION

ARTICLE I

OFFICES

Section 1. PRINCIPAL OFFICES. The Board of Directors shall fix the location of the principal executive office of the corporation at any place within or outside the State of California. If the principal executive office is located outside this state, and the corporation has one or more business offices in this state, the Board of Directors shall likewise fix and designate a principal business office in the State of California.

Section 2. OTHER OFFICES. The Board of Directors may at any time establish branch or subordinate offices at any place or places where the corporation is qualified to do business.

ARTICLE II

MEETINGS OF SHAREHOLDERS

Section 1. PLACE OF MEETINGS. Meetings of shareholders shall be held at any place within or outside the State of California designated by the Board of Directors. In the absence of any such designation, shareholders' meetings shall be held at the principal executive office of the corporation.

Section 2. ANNUAL MEETINGS OF SHAREHOLDERS. The annual meeting of shareholders shall be held each year on a date and at a time designated by the Board of Directors. At each annual meeting directors shall be elected and any other proper business may be transacted.

Section 3. SPECIAL MEETINGS. A special meeting of the shareholders may be called at any time by the Board of Directors, or by the Chairman of the Board, or by the President, or by one or more shareholders holding shares in the aggregate entitled to cast not less than 10% of the votes at any such meeting.

If a special meeting is called by any person or persons other than the Board of Directors, the request shall be in writing, specifying the time of such meeting and the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by telegraphic or other facsimile transmission to the Chairman of the Board, the President, any Vice President or the Secretary of the corporation. The officer receiving such request forthwith shall cause notice to be given to the shareholders entitled to vote, in accordance with the provisions of Sections 4 and 5 of this Article II, that a meeting will be held at the time requested by the person or persons calling the meeting, not less than thirty-five (35) nor more than sixty (60) days after the


receipt of the request. If the notice is not given within twenty (20) days after receipt of the request, the person or persons requesting the meeting may give the notice. Nothing contained in this paragraph of this Section 3 shall be construed as limiting, fixing or affecting the time when a meeting of shareholders called by action of the Board of Directors may be held.

Section 4. NOTICE OF SHAREHOLDERS' MEETINGS. All notices of meetings of shareholders shall be sent or otherwise given in accordance with Section 5 of this Article II not less than ten (10) nor more than sixty (60) days before the date of the meeting being noticed. The notice shall specify the place, date and hour of the meeting and (i) in the case of a special meeting, the general nature of the business to be transacted, or (ii) in the case of the annual meeting those matters which the Board of Directors, at the time of giving the notice, intends to present for action by the shareholders. The notice of any meeting at which directors are to be elected shall include the name of any nominee or nominees which, at the time of the notice, management intends to present for election.

If action is proposed to be taken at any meeting for approval of (i) a contract or transaction in which a director has a direct or indirect financial interest, pursuant to Section 310 of the Corporations Code of California, (ii) an amendment of the articles of incorporation, pursuant to Section 902 of such Code, (iii) a reorganization of the corporation, pursuant to Section 1201 of such Code, (iv) a voluntary dissolution of the corporation, pursuant to Section 1900 of such Code, or (v) a distribution in dissolution other than in accordance with the rights of outstanding preferred shares pursuant to Section 2007 of such Code, the notice shall also state the general nature of such proposal.

Section 5. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. Notice of any meeting of shareholders shall be given either personally or by first-class mail or telegraphic or other written communication, charges prepaid, addressed to the shareholder at the address of such shareholder appearing on the books of the corporation or given by the shareholder to the corporation for the purpose of notice. If no such address appears on the corporation's books or has been so given, notice shall be deemed to have been given if sent by first-class mail or telegraphic or other written communication to the corporation's principal executive office, or if published at least once in a newspaper of general circulation in the county where such office is located. Notice shall be deemed to have been given at the time when delivered personally or deposited in the mail or sent by telegram or other means of written communication.

If any notice addressed to a shareholder at the address of such shareholder appearing on the books of the corporation is returned to the corporation by the United States Postal Service marked to indicate that the United States Postal Service is unable to deliver the notice to the shareholder at such address, all future notices or reports shall be deemed to have been duly given without further mailing if the same shall be available to the shareholder upon written demand of the shareholder at the principal executive office of the corporation for a period of one year from the date of the giving of such notice.

An affidavit of the mailing or other means of giving any notice of any shareholders' meeting shall be executed by the Secretary, Assistant Secretary or any transfer agent of the corporation giving such notice, and shall be filed and maintained in the minute book of the corporation.

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Section 6. QUORUM. The presence in person or by proxy of the holders of a majority of the shares entitled to vote at any meeting of shareholders shall constitute a quorum for the transaction of business. The shareholders present at a duly called or held meeting at which a quorum is present may continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum, if any action taken (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum.

Section 7. ADJOURNED MEETING AND NOTICE THEREOF. Any shareholders' meeting, annual or special, whether or not a quorum is present, may be adjourned from time to time by the vote of the majority of the shares represented at such meeting, either in person or by proxy, but in the absence of a quorum, no other business may be transacted at such meeting, except as provided in Section 6 of this Article II.

When any meeting of shareholders, either annual or special, is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken, unless a new record date for the adjourned meeting is fixed, or unless the adjournment is for more than forty-five (45) days from the date set for the original meeting, in which case the Board of Directors shall set a new record date. Notice of any such adjourned meeting, if required, shall be given to each shareholder of record entitled to vote at the adjourned meeting in accordance with the provisions of Sections 4 and 5 of this Article II. At any adjourned meeting the corporation may transact any business which might have been transacted at the original meeting.

Section 8. VOTING. The shareholders entitled to vote at any meeting of shareholders shall be determined in accordance with the provisions of Section 11 of this Article II, subject to the provisions of Sections 702 to 704, inclusive, of the Corporations Code of California (relating to voting shares held by a fiduciary, in the name of a corporation or in joint ownership). Such vote may be by voice vote or by ballot; provided, however, that all elections for directors must be by ballot upon demand by a shareholder at any election and before the voting begins. Any shareholder entitled to vote on any matter (other than the election of directors) may vote part of the shares in favor of the proposal and refrain from voting the remaining shares or vote them against the proposal, but, if the shareholder fails to specify the number of shares such shareholder is voting affirmatively, it will be conclusively presumed that the shareholder's approving vote is with respect to all shares such shareholder is entitled to vote. If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting and voting on any matter (other than the election of directors), provided that the shares voting affirmatively must also constitute at least a majority of the required quorum, shall be the act of the shareholders, unless the vote of a greater number or voting by classes is required by the California General Corporation Law or the articles of incorporation.

At a shareholders' meeting involving the election of directors, no shareholder shall be entitled to cumulate votes (i.e., cast for any candidate a number of votes greater than the number of the shareholder's shares) unless such candidate or candidates' names have been placed in nomination prior to commencement of the voting and a shareholder has given notice prior to commencement of the voting of the shareholder's intention to cumulate votes. If any shareholder has given such notice, then every shareholder entitled to vote may cumulate such shareholder's votes for candidates in nomination and give one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which such shareholder's shares are

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entitled, or distribute the shareholder's votes on the same principle among any or all of the candidates, as the shareholder thinks fit. The candidates receiving the highest number of votes, up to the number of directors to be elected, shall be elected.

Section 9. WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDERS. The transactions of any meeting of shareholders, either annual or special, however called and noticed, and wherever held, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum be present either in person or by proxy, and if, either before or after the meeting, each person entitled to vote, not present in person or by proxy, signs a written waiver of notice or a consent to the holding of the meeting, or an approval of the minutes thereof. The waiver of notice or consent need not specify either the business to be transacted or the purpose of any annual or special meeting of shareholders, except that if action is taken or proposed to be taken for approval of any of those matters specified in the second paragraph of Section 4 of this Article II, the waiver of notice or consent shall state the general nature of such proposal. All such waivers, consents or approvals shall be filed with the corporate records or made a part of the minutes of the meeting.

Attendance of a person at a meeting shall also constitute a waiver of notice of such meeting, except when the person objects, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened, and except that attendance at a meeting is not a waiver of any right to object to the consideration of matters not included in the notice of the meeting if such objection is expressly made at the meeting.

Section 10. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Any action which may be taken at any annual or special meeting of shareholders may be taken without a meeting and without prior notice, if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. In the case of election of directors, such consent shall be effective only if signed by the holders of all outstanding shares entitled to vote for the election of directors; provided, however, that a director may be elected at any time to fill a vacancy not created by removal and not filled by the directors by the written consent of the holders of a majority of the outstanding shares entitled to vote for the election of directors. All such consents shall be filed with the Secretary of the corporation and shall be maintained in the corporate records. Any shareholder giving a written consent, or the shareholder's proxy holders, or a transferee of the shares or a personal representative of the shareholder or their respective proxy holder, may revoke the consent by a writing received by the Secretary of the corporation prior to the time that written consents of the number of shares required to authorize the proposed action have been filed with the Secretary.

Unless the consents of all shareholders entitled to vote have been solicited in writing, the Secretary shall give prompt notice of any corporate action approved by the shareholders without a meeting by less than unanimous consent, to those shareholders entitled to vote who have not consented in writing. Such notice shall be given in the manner specified in Section 5 of this Article II. In the case of approval of (i) contracts or transactions in which a director has a direct or indirect financial interest, pursuant to
Section 310 of the Corporations Code of California, (ii) indemnification of agents of the corporation, pursuant to Section 317 of such Code, (iii) a reorganization of the corporation, pursuant to Section 1201 of such Code, or
(iv) a distribution in dissolution other than

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in accordance with the rights of outstanding preferred shares pursuant to
Section 2007 of such Code, such notice shall be given at least ten (10) days before the consummation of any such action authorized by any such approval.

Section 11. RECORD DATE FOR SHAREHOLDER NOTICE, VOTING, AND GIVING CONSENTS. For purposes of determining the shareholders entitled to notice of any meeting or to vote or entitled to give consent to corporate action without a meeting, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) days nor less than ten (10) days prior to the date of any such meeting nor more than sixty (60) days prior to such action without a meeting, and in such case only shareholders of record at the close of business on the date so fixed are entitled to notice and to vote or to give consents, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date fixed as aforesaid, except as otherwise provided in the California General Corporation Law.

If the Board of Directors does not so fix a record date:

(a) The record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the business day next preceding the day on which notice if given or, if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held.

(b) The record date for determining shareholders entitled to give consent to corporate action in writing without a meeting, (i) when no prior action by the Board has been taken, shall be the day on which the first written consent is given, or (ii) when prior action of the Board has been taken, shall be at the close of business on the day on which the Board adopts the resolution relating thereto, or the sixtieth (60th) day prior to the date of such other action, whichever is later.

Section 12. PROXIES. Every person entitled to vote for directors or on any other matter shall have the right to do so either in person or by one or more agents authorized by a written proxy signed by the person and filed with the Secretary of the corporation. A proxy shall be deemed signed if the shareholder's name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission or otherwise) by the shareholder or the shareholder's attorney in fact. A validly executed proxy which does not state that it is irrevocable shall continue in full force and effect unless (i) revoked by the person executing it, prior to the vote pursuant thereto, by a writing delivered to the corporation stating that the proxy is revoked or by a subsequent proxy presented to the meeting and executed by, or attendance at the meeting and voting in person by, the person executing the proxy; or (ii) written notice of the death or incapacity of the maker of such proxy is received by the corporation before the vote pursuant thereto is counted; provided, however, that no such proxy shall be valid after the expiration of eleven (11) months from the date of such proxy, unless otherwise provided in the proxy. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 705(e) and (f) of the Corporations Code of California.

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Section 13. INSPECTORS OF ELECTION. Before any meeting of shareholders, the Board of Directors may appoint any persons other than nominees for office to act as inspectors of election at the meeting or its adjournment. If no inspectors of election are so appointed, the chairman of the meeting may, and on the request of any shareholder or a shareholder's proxy shall, appoint inspectors of election at the meeting. The number of inspectors shall be either one (l) or three (3). If inspectors are appointed at a meeting on the request of one or more shareholders or proxies, the holders of a majority of shares or their proxies present at the meeting shall determine whether one (l) or three
(3) inspectors are to be appointed. If any person appointed as inspector fails to appear or fails or refuses to act, the chairman of the meeting may, and upon the request of any shareholder or a shareholder's proxy shall, appoint a person to fill such vacancy.

The duties of these inspectors shall be as follows:

(a) Determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, and the authenticity, validity and effect of proxies;

(b) Receive votes, ballots or consents;

(c) Hear and determine all challenges and questions in any way arising in connection with the right to vote;

(d) Count and tabulate all votes or consents;

(e) Determine when the polls shall close;

(f) Determine the result; and

(g) Do any other acts that may be proper to conduct the election or vote with fairness to all shareholders.

ARTICLE III

DIRECTORS

Section 1. POWERS. Subject to the provisions of the California General Corporation Law and any limitations in the articles of incorporation and these bylaws relating to action required to be approved by the shareholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the Board of Directors.

Without prejudice to such general powers, but subject to the same limitations, it is hereby expressly declared that the directors shall have the power and authority to:

(a) Select and remove all officers, agents, and employees of the corporation, prescribe such powers and duties for them as may not be inconsistent with law, the articles of incorporation or these bylaws, fix their compensation, and require from them security for faithful service.

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(b) Change the principal executive office or the principal business office in the State of California from one location to another; cause the corporation to be qualified to do business in any other state, territory, dependency, or foreign country and conduct business within or outside the State of California; designate any place within or without the State for the holding of any shareholders' meeting or meetings, including annual meetings; adopt, make and use a corporate seal, and prescribe the forms of certificates of stock, and alter the form of such seal and of such certificates from time to time as in their judgment they may deem best, provided that such forms shall at all times comply with the provisions of law.

(c) Authorize the issuance of shares of stock of the corporation from time to time, upon such terms as may be lawful, in consideration of money paid, labor done or services actually rendered, debts or securities cancelled or tangible or intangible property actually received.

(d) Borrow money and incur indebtedness for the purposes of the corporation, and cause to be executed and delivered therefor, in the corporate name, promissory notes, bonds, debentures, deeds of trust, mortgages, pledges, hypothecations, or other evidences of debt and securities therefor.

Section 2. NUMBER AND QUALIFICATION OF DIRECTORS. The number of directors of the corporation shall be not less than five (5) nor more than nine
(9). The exact number of directors shall be nine (9) until changed, within the limits specified above, by a bylaw amending this Section 2, duly adopted by the Board of Directors or by the shareholders. Such indefinite number of directors may be changed, or a definite number fixed without provision for an indefinite number, by a duly adopted amendment to the Articles of Incorporation or by an amendment to this bylaw duly adopted by the vote or written consent of holders of a majority of the outstanding shares entitled to vote; provided, however, that an amendment reducing the number or the minimum number of directors to a number less than five cannot be adopted if the votes cast against its adoption at a meeting of the shareholders, or the shares not consenting in the case of action by written consent, are equal to more than 16-2/3% of the outstanding shares entitled to vote. No amendment may change the stated maximum number of authorized directors to a number greater than two times the stated minimum number of directors minus one.

Section 3. ELECTION AND TERM OF OFFICE OF DIRECTORS. Directors shall be elected at each annual meeting of the shareholders to hold office until the next annual meeting. Each director, including a director elected to fill a vacancy, shall hold office until the expiration of the term for which elected and until a successor has been elected and qualified.

Section 4. VACANCIES. Vacancies in the Board of Directors may be filled by a majority of the remaining directors, though less than a quorum, or by a sole remaining director, except that a vacancy created by the removal of a director by the vote or written consent of the shareholders or by court order may be filled only by the vote of a majority of the shares represented and voting at a duly held meeting at which a quorum is present, or by the written consent of holders of all outstanding shares entitled to vote. Each director so elected shall hold office until the next annual meeting of the shareholders and until a successor has been elected and qualified.

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A vacancy or vacancies in the Board of Directors shall be deemed to exist in the case of the death, resignation or removal of any director, or if the Board of Directors by resolution declares vacant the office of a director who has been declared of unsound mind by an order of court or convicted of a felony, or if the authorized number of directors be increased, or if the shareholders fail, at any meeting of shareholders at which any director or directors are elected, to elect the full authorized number of directors to be voted for at that meeting.

The shareholders may elect a director or directors at any time to fill any vacancy or vacancies not filled by the directors, but any such election by written consent, other than to fill a vacancy created by removal, shall require the consent of a majority of the outstanding shares entitled to vote.

Any director may resign upon giving written notice to the Chairman of the Board, the President, the Secretary or the Board of Directors. A resignation shall be effective upon the giving of the notice, unless the notice specifies a later time for its effectiveness. If the resignation of a director is effective at a future time, the Board of Directors may elect a successor to take office when the resignation becomes effective.

No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of his term of office.

Section 5. PLACE OF MEETINGS AND TELEPHONIC MEETINGS. Regular meetings of the Board of Directors may be held at any place within or without the State that has been designated from time to time by resolution of the board. In the absence of such designation, regular meetings shall be held at the principal executive office of the corporation. Special meetings of the board shall be held at any place within or without the State that has been designated in the notice of the meeting or, if not stated in the notice or there is no notice, at the principal executive office of the corporation. Any meeting, regular or special, may be held by conference telephone or similar communication equipment, so long as all directors participating in such meeting can hear one another, and all such directors shall be deemed to be present in person at such meeting.

Section 6. ANNUAL MEETINGS. Immediately following each annual meeting of shareholders, the Board of Directors shall hold a regular meeting for the purpose of organization, any desired election of officers and the transaction of other business. Notice of this meeting shall not be required.

Section 7. OTHER REGULAR MEETINGS. Other regular meetings of the Board of Directors shall be held without call at such time as shall from time to time be fixed by the Board of Directors. Such regular meetings may be held without notice.

Section 8. SPECIAL MEETINGS. Special meetings of the Board of Directors for any purpose or purposes may be called at any time by the Chairman of the Board or the President or any Vice President or the Secretary or any two directors.

Notice of the time and place of special meetings shall be delivered personally or by telephone to each director or sent by first-class mail or telegram, charges prepaid, addressed to each director at his or her address as it is shown upon the records of the corporation. In case such notice is mailed, it shall be deposited in the United States mail at least four (4) days prior to the time of the

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holding of the meeting. In case such notice is delivered personally, or by telephone or telegram, it shall be delivered personally or by telephone or to the telegraph company at least forty-eight (48) hours prior to the time of the holding of the meeting. Any oral notice given personally or by telephone may be communicated to either the director or to a person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director. The notice need not specify the purpose of the meeting nor the place if the meeting is to be held at the principal executive office of the corporation.

Section 9. DISPENSING WITH NOTICE. The transactions of any meeting of the Board of Directors, however called and noticed or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice if a quorum be present and if, either before or after the meeting, each of the directors not present signs a written waiver of notice, a consent to holding the meeting or an approval of the minutes thereof. The waiver of notice or consent need not specify the purpose of the meeting. All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Notice of a meeting need not be given to any director who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to such director.

Section 10. QUORUM. A majority of the authorized number of directors shall constitute a quorum for the transaction of business, except to adjourn as hereinafter provided. Every act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present shall be regarded as the act of the Board of Directors, subject to the provisions of
Section 310 of the Corporations Code of California (approval of contracts or transactions in which a director has a direct or indirect material financial interest), Section 311 (appointment of committees), and Section 317 (e) (indemnification of directors). A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for such meeting.

Section 11. ADJOURNMENT. A majority of the directors present, whether or not constituting a quorum, may adjourn any meeting to another time and place.

Section 12. NOTICE OF ADJOURNMENT. Notice of the time and place of holding an adjourned meeting need not be given, unless the meeting is adjourned for more than twenty-four (24) hours, in which case notice of such time and place shall be given prior to the time of the adjourned meeting, in the manner specified in Section 8 of this Article III, to the directors who were not present at the time of the adjournment.

Section 13. ACTION WITHOUT MEETING. Any action required or permitted to be taken by the Board of Directors may be taken without a meeting, if all members of the board shall individually or collectively consent in writing to such action. Such action by written consent shall have the same force and effect as a unanimous vote of the Board of Directors. Such written consent or consents shall be filed with the minutes of the proceedings of the board.

Section 14. FEES AND COMPENSATION OF DIRECTORS. Directors and members of committees may receive such compensation, if any, for their services, and such reimbursement of expenses, as may be fixed or determined by resolution of the Board of Directors. Nothing herein contained shall be construed to preclude any director from serving the corporation

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in any other capacity as an officer, agent, employee, or otherwise, and receiving compensation for such services.

ARTICLE IV

COMMITTEES

Section 1. COMMITTEES OF DIRECTORS. The Board of Directors may, by resolution adopted by a majority of the authorized number of directors, designate one or more committees, each consisting of two or more directors, to serve at the pleasure of the board. The board may designate one or more directors as alternate members of any committee, who may replace any absent member at any meeting of the committee. Any such committee, to the extent provided in the resolution of the board, shall have all the authority of the board, except with respect to:

(a) the approval of any action which, under the General Corporation Law of California, also requires shareholders' approval or approval of the outstanding shares;

(b) the filling of vacancies on the Board of Directors or in any committee;

(c) the fixing of compensation of the directors for serving on the board or on any committee;

(d) the amendment or repeal of bylaws or the adoption of new bylaws;

(e) the amendment or repeal of any resolution of the Board of Directors which by its express terms is not so amendable or repealable;

(f) a distribution to the shareholders of the corporation, except at a rate or in a periodic amount or within a price range determined by the Board of Directors; or

(g) the appointment of any other committees of the Board of Directors or the members thereof.

Section 2. MEETINGS AND ACTION OF COMMITTEES. Meetings and action of committees shall be governed by, and held and taken in accordance with, the provisions of Article III of these bylaws, Sections 5 (place of meetings), 7 (regular meetings), 8 (special meetings and notice), 9 (dispensing with notice),
10 (quorum), 11 (adjournment), 12 (notice of adjournment) and 13 (action without meeting), with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the Board of Directors and its members, except that the time of regular meetings of committees may be determined by resolution of the Board of Directors as well as the committee, special meetings of committees may also be called by resolution of the Board of Directors and notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The Board of

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Directors may adopt rules for the government of any committee not inconsistent with the provisions of these bylaws.

ARTICLE V

OFFICERS

Section 1. OFFICERS. The officers of the corporation shall be a Chief Executive Officer, a President, a Secretary and a Chief Financial Officer. The corporation may also have, at the discretion of the Board of Directors, a Chairman of the Board, one or more Vice Presidents, one or more Assistant Secretaries, one or more Assistant Treasurers, and such other officers as may be appointed in accordance with the provisions of Section 3 of this Article V. Any number of offices may be held by the same person.

Section 2. ELECTION OF OFFICERS. The officers of the corporation, except such officers as may be appointed in accordance with the provisions of
Section 3 of this Article V, shall be chosen by the Board of Directors, and each shall serve at the pleasure of the Board, subject to the rights, if any, of an officer under any contract of employment.

Section 3. SUBORDINATE OFFICERS, ETC. The Board of Directors may empower the Chief Executive Officer to appoint all officers, other than the President, as the business of the corporation may require, each of whom shall hold office for such period, have such authority and perform such duties as are provided in the Bylaws or as the Board of Directors or the Chief Executive Officer, as the case may be, may from time to time determine.

Section 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the rights, of any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by the Board of Directors, at any regular or special meeting thereof, or, except in case of an officer chosen by the Board of Directors, by any officer upon whom such power of removal may be conferred by the Board of Directors.

Any officer may resign at any time by giving written notice to the corporation. Any such resignation shall take effect at the date of the receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Any such resignation is without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party.

Section 5. VACANCIES IN OFFICE. A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in these Bylaws for regular appointments to such office.

Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if such officer be elected, shall, if present, preside at all meetings of the Board of Directors and exercise and perform such other powers and duties as may be from time to time assigned to him by the Board of Directors or prescribed by the Bylaws. If there is no Chief Executive Officer, the Chairman of the Board shall in addition be the Chief Executive Officer of the corporation and shall have the powers and duties prescribed in Section 7 of this Article V.

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Section 7. CHIEF EXECUTIVE OFFICER. The Board of Directors shall appoint a Chief Executive Officer. In the absence of such appointment, the Chairman of the Board shall be the Chief Executive Officer of the Corporation. The Chief Executive Officer shall have the general responsibility for implementation of the policies of the Corporation, as determined by the Board of Directors, and for the management of the business and affairs of the Corporation. He shall preside at all meetings of the shareholders and, in the absence of the Chairman of the Board, or if there be none, at all meetings of the Board of Directors.

Section 8. PRESIDENT. Subject to such supervisory powers, if any, as may be given by the Board of Directors to the Chairman of the Board or the Chief Executive Officer, the President shall be the chief operating officer of the corporation and shall, subject to the control of the Board of Directors, have general supervision, direction and control of the operations and the officers of the corporation. He shall have the general powers and duties of management usually vested in the office of President of a corporation, and shall have such other powers and duties as may be prescribed by the Board of Directors or the Bylaws.

Section 9. VICE PRESIDENTS. In the absence or disability of the President, the Vice Presidents, if any, in order of their rank as fixed by the Board of Directors or, if not ranked, a Vice President designated by the Board of Directors, shall perform all the duties of the President, and when so acting shall have all the powers of, and be subject to all the restrictions upon, the President. The Vice President shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the Board of Directors or the Bylaws, the President or the Chairman of the Board if there is no President.

Section 10. SECRETARY. The Secretary shall keep or cause to be kept, at the principal executive officer or such other place as the Board of Directors may order, a book of minutes of all meetings and actions of directors, committees of directors and shareholders, with the time and place of holding, whether regular or special, and, if special, how authorized, the notice thereof given, the names of those present at directors' and committee meetings, the number of shares present or represented at shareholders' meetings, and the proceedings thereof.

The Secretary shall keep, or cause to be kept, at the principal executive office or at the office of the corporation's transfer agent or registrar, as determined by resolution of the Board of Directors, a share register, or a duplicate share register, showing the names of all shareholders and their addresses, the number and classes of shares held by each, the number and date of certificates issued for the same, and the number and date of cancellation of every certificate surrendered for cancellation.

The Secretary shall give, or cause to be given, notice of all meetings of the shareholders and of the Board of Directors required by the Bylaws or by law to be given, and he shall keep the seal of the corporation, if one be adopted, in safe custody, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or by the Bylaws.

Section 10. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the corporation, including accounts of its

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assets, liabilities, receipts, disbursements, gains, losses, capital, retained earnings and shares. The books of account shall be open at all reasonable times to inspection by any director.

The Chief Financial Officer shall deposit all moneys and other values in the name and to the credit of the corporation with such depositaries as may be designated by the Board of Directors. He shall disburse the funds of the corporation as may be ordered by the Board of Directors, shall render to the President and directors, whenever they request it, an account of all of his transactions as Chief Financial Officer and of the financial condition of the corporation, and shall have other powers and perform such other duties as may be prescribed by the Board of Directors or the Bylaws.

ARTICLE VI

INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES

AND OTHER AGENTS

Section 1. SCOPE OF INDEMNIFICATION.

a. The corporation shall, to the broadest and maximum extent permitted by law, indemnify each person who was or is a party or is threatened to be made a party to any proceeding by reason of the fact that such person is or was a director of the corporation, or is or was serving at the request of the corporation as a director of another corporation or other enterprise, against expenses (including attorneys' fees), judgments, fines, settlements and other amounts actually and reasonably incurred in connection with such proceeding. In addition, the corporation shall, to the broadest and maximum extent permitted by law, promptly upon demand pay to such person any and all expenses (including attorneys' fees) incurred in defending or settling any such proceeding in advance of the final disposition of such proceeding upon receipt of an undertaking by or on behalf of the director to repay such amount if it shall ultimately be determined by a final judgment or other final adjudication that such person is not entitled to be indemnified by the corporation as authorized as this Section 1.

b. If a claim under paragraph a. of this Section 1 is not paid in full by the corporation within 45 days after a written claim has been received by the corporation, the claimant may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall also be entitled to be paid the expenses of prosecuting such claim, including attorneys' fees. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking has been tendered to the corporation) that the claimant has not met the standards of conduct which make it permissible under the California Corporations Code for the corporation to indemnify the claimant for the amount claimed, but the burden or proving such defense by clear and convincing evidence shall be on the corporation.

c. The Board of Directors may in its discretion provide by resolution for such indemnification of, or advance of expenses to, officers, employees or agents of the corporation, and

13

likewise may refuse to provide for such indemnification or advance of expenses except to the extent such indemnification is mandatory under the California General Corporation Law.

Section 2. NON-EXCLUSIVITY OF RIGHTS. The rights to indemnification and to the advancement of expenses conferred in this Article VI shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, the corporation's articles of incorporation or any bylaw, agreement, vote of shareholders or disinterested directors or otherwise.

Section 3. TERM AND HEIRS. The rights to indemnification and advancement of expenses conferred in this Article VI shall continue as to any person who has ceased to be a director with respect to any acts or omissions that occurred during the time such person was a director and shall inure to the benefit of the heirs, executors and administrators of each such person.

Section 4. SEVERABILITY. If any provision of this Article VI shall be found, in any proceeding or appeal therefrom or in any other circumstances or as to any person entitled to indemnification hereunder to be unenforceable, ineffective or invalid for any reason, the enforceability, effect and validity of the remaining parts or of such parts in other circumstances shall not be affected, except as otherwise required by applicable law.

Section 5. AMENDMENTS. The provisions of this Article VI shall be deemed to constitute an agreement between the corporation and each of the persons entitled to indemnification hereunder, for as long as such provisions remain in effect. Any amendment to the provisions of this Article VI which limits or otherwise adversely affects the scope of indemnification or rights of any such persons hereunder shall, as to such persons, apply only to claims or causes of action based on actions or events occurring after such amendment and delivery of notice of such amendment is given to the person or persons so affected. Until notice of such amendment is given to the person or persons whose rights hereunder are affected, such amendment shall have no effect on such rights of such persons hereunder. Any person entitled to indemnification under the provisions of this Article VI shall as to any act or omission occurring prior to the date of receipt of such notice, be entitled to indemnification to the same extent as had such provisions continued as Bylaws of the corporation without such amendment."

ARTICLE VII

RECORDS AND REPORTS

Section 1. MAINTENANCE AND INSPECTION OF SHARE REGISTER. The corporation shall keep at its principal executive office, or at the office of its transfer agent or registrar, if either be appointed and as determined by resolution of the Board of Directors, a record of its shareholders, giving the names and addresses of all shareholders and the number and class of shares held by each shareholder.

A shareholder or shareholders of the corporation holding at least five percent (5%) in the aggregate of the outstanding voting shares of the corporation may (i) inspect and copy the records of shareholders' names and addresses and shareholdings during usual business hours upon five (5) business days prior written demand upon the corporation, and/or (ii) obtain from the transfer agent of the corporation, upon written demand and upon the tender of such transfer agent's usual charges for such list, a list of the shareholders' names and addresses, who are entitled to vote for

14

the election of directors, and their shareholdings, as of the most recent record date for which such list has been compiled or as of a date specified by the shareholder subsequent to the date of demand. Such list shall be made available to such shareholder or shareholders by the transfer agent on or before the later of five (5) business days after the demand is received or the date specified therein as the date as of which the list is to be compiled. The record of shareholders shall also be open to inspection upon the written demand of any shareholder or holder of a voting trust certificate, at any time during usual business hours, for a purpose reasonably related to such holder's interests as a shareholder or as the holder of a voting trust certificate. Any inspection and copying under this Section l may be made in person or by an agent or attorney of the shareholder or holder of a voting trust certificate making such demand.

Section 2. MAINTENANCE AND INSPECTION OF BYLAWS. The corporation shall keep at its principal executive office, or if its principal executive office is not in the State of California at its principal business office in this state, the original or a copy of the bylaws as amended to date, which shall be open to inspection by the shareholders at all reasonable times during office hours. If the principal executive office of the corporation is outside this state and the corporation has no principal business office in this state, the Secretary shall, upon the written request of any shareholder, furnish to such shareholder a copy of the bylaws as amended to date.

Section 3. MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS. The accounting books and records and minutes of proceedings of the shareholders and the Board of Directors and any committee or committees of the Board of Directors shall be kept at such place or places designated by the Board of Directors, or, in the absence of such designation, at the principal executive office of the corporation. The minutes shall be kept in written form and the accounting books and records shall be kept either in written form or in any other form capable of being converted into written form. Such minutes and accounting books and records shall be open to inspection upon the written demand of any shareholder or holder of a voting trust certificate, at any reasonable time during usual business hours, for a purpose reasonably related to such holder's interests as a shareholder or as the holder of a voting trust certificate. Such inspection may be made in person or by an agent or attorney, and shall include the right to copy and make extracts. The foregoing rights of inspection shall extend to the records of each subsidiary corporation of the corporation.

Section 4. INSPECTION BY DIRECTORS. Every director shall have the absolute right at any reasonable time to inspect all books, records and documents of every kind and the physical properties of the corporation and each of its subsidiary corporations. Such inspection by a director may be made in person or by agent or attorney and the right of inspection includes the right to copy and make extracts.

Section 5. ANNUAL REPORT TO SHAREHOLDERS. The Board of Directors shall cause an annual report to be sent to the shareholders not later than one hundred twenty days (120) after the close of the fiscal year adopted by the corporation. The annual report shall contain a balance sheet as of the end of such fiscal year and an income statement and statement of changes in financial position for such fiscal year, accompanied by any report thereon of independent accountants or, if there is no such report, the certificate of an authorized officer of the corporation that such statements were prepared without audit from the books and records of the corporation. Such report shall be sent at least fifteen (15) days prior to the annual meeting of shareholders to be

15

held during the next fiscal year and in the manner specified in Section 5 of Article II of these bylaws for giving notice to shareholders of the corporation.

Section 6. FINANCIAL STATEMENTS. A copy of any annual financial statement and any income statement of the corporation for each quarterly period of each fiscal year, and any accompanying balance sheet of the corporation as of the end of each such period, that has been prepared by the corporation shall be kept on file in the principal executive office of the corporation for twelve
(12) months and each such statement shall be exhibited at all reasonable times to any shareholder demanding an examination of any such statement or a copy shall be mailed to any such shareholder.

If the corporation has not sent to the shareholders an annual report for the last fiscal year, a balance sheet as of the end of such fiscal year and an income statement and statement of changes in financial position for such fiscal year shall, upon the written request of any shareholder made more than one hundred twenty (120) days after the close of such fiscal year, be delivered or mailed to such shareholder within thirty (30) days after such request.

If a shareholder or shareholders holding at least five percent (5%) of the outstanding shares of any class of stock of the corporation make a written request to the corporation for an income statement of the corporation for the three-month, six-month or nine-month period of the current fiscal year ended more than thirty (30) days prior to the date of the request, and a balance sheet of the corporation as of the end of such period, the Chief Financial Officer shall cause such statement to be prepared, if not already prepared, and shall deliver personally or mail such statement or statements to the person making the request within thirty (30) days after the receipt of such request.

The corporation also shall, upon the written request of any shareholder, mail to the shareholder a copy of the last annual, semi-annual or quarterly income statement which it has prepared and a balance sheet as of the end of such period.

The quarterly income statements and balance sheets referred to in this section shall be accompanied by the report thereon, if any, of any independent accountants engaged by the corporation or the certificate of an authorized officer of the corporation that such financial statements were prepared without audit from the books and records of the corporation.

ARTICLE VIII

GENERAL CORPORATE MATTERS

Section 1. RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING. For purposes of determining the shareholders entitled to receive payment of any dividend or other distribution or allotment of any rights or entitled to exercise any rights in respect of any other lawful action, (other than action by shareholders by written consent without a meeting) the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) days prior to any such action, and in such case only shareholders of record on the date so fixed are entitled to receive the dividend, distribution or allotment of rights or to exercise the rights, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the

16

record date fixed as aforesaid, except as otherwise provided in the California General Corporation Law.

If the Board of Directors does not so fix a record date, the record date for determining shareholders for any such purpose shall be at the close of business on the day on which the board adopts the resolution relating thereto, or the sixtieth (60th) day prior to the date of such action, whichever is later.

Section 2. CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS. All checks, drafts or other orders for payment of money, notes or other evidences of indebtedness, issued in the name of or payable to the corporation, shall be signed or endorsed by such person or persons and in such manner as, from time to time, shall be determined by resolution of the Board of Directors.

Section 3. CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED. The Board of Directors, except as otherwise provided in these bylaws, may authorize any officer or officers, agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances; and, unless so authorized or ratified by the Board of Directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or to any amount.

Section 4. CERTIFICATES FOR SHARES. A certificate or certificates for shares of the capital stock of the corporation shall be issued to each shareholder when any such shares are fully paid, and the Board of Directors may authorize the issuance of certificates or shares as partly paid provided that such certificates shall state the amount of the consideration to be paid therefor and the amount paid thereon. All certificates shall be signed in the name of the corporation by the Chairman of the Board or Vice Chairman of the Board or the President or Vice President and by the Chief Financial Officer or an Assistant Treasurer or the Secretary or any Assistant Secretary, certifying the number of shares and the class or series of shares owned by the shareholder. Any or all of the signatures on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if such person were an officer, transfer agent or registrar at the date of issue.

Section 5. LOST CERTIFICATES. Except as hereinafter in this Section 5 provided, no new certificates for shares shall be issued in lieu of an old certificate unless the latter is surrendered to the corporation and cancelled at the same time. The Board of Directors may in case any share certificate or certificate for any other security is lost, stolen or destroyed, authorize the issuance of a new certificate in lieu thereof, upon such terms and conditions as the board may require, including provision for indemnification of the corporation secured by a bond or other adequate security sufficient to protect the corporation against any claim that may be made against it, including any expense or liability, on account of the alleged loss, theft or destruction of such certificate or the issuance of such new certificate.

Section 6. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The Chairman of the Board, the President, or any Vice President, or any other person authorized

17

by resolution of the Board of Directors by any of the foregoing designated officers, is authorized to vote on behalf of the corporation any and all shares of any other corporation or corporations, foreign or domestic, standing in the name of the corporation. The authority herein granted to said officers to vote or represent on behalf of the corporation any and all shares held by the corporation in any other corporation or corporations may be exercised by any such officer in person or by any person authorized to do so by proxy duly executed by said officer.

ARTICLE IX

AMENDMENTS

Section 1. AMENDMENT BY SHAREHOLDERS. New bylaws may be adopted or these bylaws may be amended or repealed by the vote or written consent of holders of two-thirds of the outstanding shares entitled to vote.

Section 2. AMENDMENT BY DIRECTORS. Subject to the rights of the shareholders as provided in Section 1 of this Article IX, to adopt, amend or repeal bylaws, bylaws may be adopted, amended or repealed by the Board of Directors; provided, however, that the Board of Directors may adopt a bylaw or amendment thereof changing the authorized number of directors only for the purpose of fixing the exact number of directors within the limits specified in the Articles of Incorporation or Section 2 of Article III of these bylaws.

ARTICLE X

GENERAL

Section 1. GOVERNING LAW. This corporation is organized under the provisions of the California General Corporation Law (Corporations Code Sections 100-2319) as in effect on the date of filing of its original articles of incorporation, namely January 20, 1961. Upon such filing the California Secretary of State assigned the following corporation number to this corporation: 408367. The corporate affairs of this corporation shall be governed by and conducted in accordance with the provisions of the California General Corporation Law, as the same presently exist and are from time to time hereafter amended or superseded, except in those instances where the articles of incorporation or bylaws of this corporation, now or through amendment hereafter, may adopt alternative rules which are permissible under the California General Corporation Law. Any provision (or portion thereof) in these bylaws which is not permissible under the California General Corporation Law or is inconsistent with the articles of incorporation of this corporation (as they may from time to time be amended and supplemented) is void, but the balance of these bylaws shall nevertheless be valid and effective.

Section 2. CONSTRUCTION AND DEFINITIONS. Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the California General Corporation Law shall govern the construction of these bylaws. Without limiting the generality of the foregoing, the singular number includes the plural, the plural number includes the singular, and the term "person" includes both a corporation and a natural person.

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CERTIFICATE OF SECRETARY

I, the undersigned, do hereby certify:

(1) That I am duly elected and acting Secretary of Mercury General

Corporation, a California corporation; and

(2) That the foregoing bylaws constitute the bylaws of said

corporation as duly adopted and restated by the board of directors of said

corporation as of November 3, 1995.

IN WITNESS WHEREOF, I have hereunto subscribed my name this day of

February, 1996.


Judy Walters, Secretary

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Exhibit 10.12

ENDORSEMENT NO. 2

Attached to and made a part of the

PROPERTY PER RISK EXCESS OF LOSS
REINSURANCE AGREEMENT NO. 5320-01A/01B

between

NATIONAL REINSURANCE CORPORATION
Stamford, Connecticut
(hereinafter referred to as the "REINSURER")

and

MERCURY CASUALTY COMPANY
Los Angeles, California
(hereinafter referred to as the "COMPANY")


IT IS MUTUALLY AGREED that effective from the inception of this Agreement (i.e., 12: 01 a.m., April 1, 1995), all references in the Agreement and in Endorsement No. 1 to "MERCURY CASUALTY INSURANCE COMPANY" are corrected to read "MERCURY CASUALTY COMPANY."

All other terms and conditions remain unchanged.

IN WITNESS WHEREOF, the parties hereto have caused this Endorsement No. 2 to be executed in Los Angeles, California, in duplicate this day of , 1995.

MERCURY CASUALTY COMPANY


ATTEST:______________________

And in Stamford, Connecticut, this day of , 1995.

NATIONAL REINSURANCE CORPORATION


Second Vice President

ATTEST:______________________


Exhibit 10.13

ENDORSEMENT NO. 3

Attached to and made a part of the

PROPERTY PER RISK EXCESS OF LOSS
REINSURANCE AGREEMENT NO. 5320-01A/01B

between

NATIONAL REINSURANCE CORPORATION
Stamford, Connecticut
(hereinafter referred to as the "REINSURER")

and

MERCURY CASUALTY COMPANY
Los Angeles, California
(hereinafter referred to as the "COMPANY")


2

IT IS MUTUALLY AGREED that effective at 12:01 a.m., April 1, 1995, Exclusion 10.b., appearing, in ADDENDUM A - EXCLUSIONS, is deleted and replaced by the following:

b. The peril of earthquake, when written as such;

All other terms and conditions remain unchanged.

IN WITNESS WHEREOF, the parties hereto have caused this Endorsement No. 3 to be executed in Los Angeles, California, in duplicate this day of , 1995.

MERCURY CASUALTY COMPANY


ATTEST:

And in Stamford, Connecticut, this day of , 1995.

NATIONAL REINSURANCE CORPORATION


Second Vice President

ATTEST:



Exhibit 10.14

MANAGEMENT AGREEMENT

This Agreement is entered into by and between Mercury Insurance Company of Illinois, hereinafter referred to as Insurer, and Mercury General Corporation, hereinafter referred to as Manager.

In consideration of the promises, conditions and covenants herein contained, the parties agree as follows:

SECTION I

FILING WITH THE ILLINOIS DEPARTMENT OF INSURANCE

This Agreement shall be submitted to the Illinois Department of Insurance prior to the effective date hereof pursuant to the requirements of the Illinois Insurance Code.

SECTION II

EFFECTIVE DATE

This Agreement shall become effective January 1, 1995 and will continue through December 31, 1999.

SECTION III

CONDITIONS OF EFFECTIVENESS

The Agreement or any amendment thereto shall become effective only if the following shall have first occurred:

A. The Illinois Department of Insurance, if required, shall have approved of and/or acknowledged in writing this Agreement or any amendment thereto; and

B. The boards of directors of the Manager and the Insurer shall have approved this Agreement by a majority vote.

SECTION IV

SERVICES AND FACILITIES

A. Commencing on the Effective Date and until the termination of this Agreement, Manager shall provide the services and facilities as are described hereunder to the Insurer. Such services and facilities as are provided hereunder shall be subject to the control and approval of the board of directors of the Insurer, and shall be performed in the manner and for the consideration set forth herein by Manager, and such services shall be performed in accordance with applicable laws and regulations in all of the jurisdictions in which the Insurer conducts business. It is recognized that the Insurer may be governed by laws and regulations which are particularly applicable to its business and this Manager, by virtue of this Agreement, recognizes its responsibility to perform in accordance with any such laws or regulations including, but not limited to, compliance with any order or orders issued by any governmental agency affecting the Insurer; and Manager hereby acknowledges that in such case it will immediately conform to same in the performance of its services as hereinafter set forth. The board of directors of the Insurer shall retain responsibility for the performance of services provided pursuant to this Agreement by Manager and, in connection therewith, shall require Manager to perform in accordance with the standards of performance set forth herein.

B. The Manager promises to manage the Insurer, and to conduct on its behalf any and all duties of

1

management as shall be necessary for the complete operation of the Insurer.

C. The Insurer hereby delegates to the Manager all of the duties of management which it is allowed to so delegate by the laws of the State of Illinois, including but not limited to the following duties: to issue and underwrite insurance policies, which the Insurer may be so authorized to do by law, in accordance with the rules and regulations as delineated in the underwriting manuals of the Insurer, settle and adjust any and all losses and claims, defend lawsuits, establish premium rates, establish and choose sales agents and brokers, determine agents' and brokers' commissions, prepare the records necessary for the conduct of the insurance business, furnish all forms, supplies and agents' manuals necessary for the conduct of the insurance business.

D. The Manager promises to perform all of the operating functions on behalf of Insurer, including but not be limited to the following:

1. To acquire, license and appoint sales agents and brokers for the production of the insurance business of and for the Insurer, provided that the Insurer shall retain the right to refuse the appointment of any agent or broker and the right to terminate any agent or broker.

2. To issue and underwrite policies on behalf of the Insurer and to choose and obtain the necessary applications and policy forms.

3. To furnish for the Insurer all of the operating forms, printing supplies, agents' manuals and any other related items which may become necessary for the operation of the insurance business.

4. To provide all personnel reasonably required by the Insurer and to fill all such positions in the Insurer with the advice and consent of the board of directors of the Insurer, all of which personnel shall be compensated exclusively by the Manager.

5. To provide all facilities necessary for the conduct of the Insurer's business, including but not limited to real estate, office space and personal property, including furniture, fixtures and equipment. The office space, furniture, fixtures and equipment utilized by the Insurer in the conduct of its business may be owned or leased by the Manager or the Insurer.

6. To pay on behalf of the Insurer all of its operating expenses, including but not limited to rent, supplies, salaries of all personnel, telephone, advertising costs, costs of settling and adjusting all insurance claims, legal defense costs, court costs, costs of loss analysis, accounting costs (other than auditing), and premium collection costs; provided, however, that the Insurer shall pay, and be responsible for, the costs of management fees, premium taxes, losses, reserves for unpaid losses, reserves for unpaid loss adjustment expense, audit fees, assigned risk or similar assessments, bureau fees, Fair Plan or similar assessments, directors' fees, agents' commissions, reinsurance premiums, outside investment counsel fees, assessments by the Illinois Insurance Guaranty Fund or similar state guaranty funds, membership fees in trade associations, any assessments by such associations, political contributions (to the extent not prohibited by applicable law), premiums paid for insurance policies in which the Insurer is the beneficiary and owner, such as fidelity bonds, taxes of all types and costs which may be levied on insurance companies by the governmental authorities having jurisdiction over the same, and agents' bonuses (contingency commissions).

E. Without limiting the generality of the foregoing provisions regarding the duties of the Manager, the Manager hereby expressly agrees to take all steps necessary to preserve the Insurer's exemption from the privilege tax imposed by Section 409 of the Illinois Insurance Code, including but not limited to:

1. Maintaining the Insurer's principal place of business within the State of Illinois;

2

2. Maintaining within the State of Illinois officers and personnel knowledgeable of and responsible for the Insurer's operation, books, records, administration, and annual statement;

3. Conducting within the State of Illinois substantially all underwriting, policy issuing, and servicing operations relating to the Insurer's Illinois policyholders; and

4. Complying with the provisions of Section 133(2) of the Illinois Insurance Code.

F. This Agreement is not intended to supersede or replace the policy making decisions of or the supervisory responsibilities of the board of directors of the Insurer. Nor is it intended that substantial control of the Insurer or of any of the powers vested in the board of directors thereof are to be transferred to the Manager as a result of this Agreement. Said board of directors, a committee thereof or agents appointed by said board of directors, shall have the right, at all times, to cause the books and records of the Manager to be inspected and/or audited as they relate to the business of the Insurer.

SECTION V

INVESTMENT ADVISORY SERVICES

The Manager agrees to act as investment advisor to the Insurer with respect to the investment of the Insurer's assets, and, in general, to supervise the investment and reinvestment of cash, securities or other property comprising the assets of the Insurer, subject at all times to the direction and control of the board of directors (or responsible committee thereof) of the Insurer, all as more fully set forth herein.

In connection with the Manager's performance of investment advisory services for the Insurer, the following provisions shall apply:

A. The Insurer shall at all times maintain a custodian (referred to hereinafter as the "Custodian") for its securities and appropriate bank or custodial accounts for the purpose of handling cash involved in the Insurer's investment transactions.

B. The Manager shall obtain and evaluate pertinent information about significant economic developments and gather statistical and financial data affecting the investments of the Insurer and such investments which the Manager considers may be suitable for inclusion in the Insurer's investment portfolio.

C. At mutually agreeable intervals, the Manager shall furnish reports to the Investment Committee of the Insurer setting forth (i) a list of the Insurer's securities, showing the cost, market value, maturity date and other pertinent information regarding each such security, (ii) a summary of the investment transactions effected on behalf of the Insurer since the closing date of the preceding report, and (iii) the Manager's recommendations as to what securities should be acquired or sold in light of prevailing economic and securities market conditions.

D. After reviewing the Manager's periodic investment reports, the Investment Committee of the Insurer will advise the Manager which of the Manager's investment recommendations it has accepted or rejected. If the Manager is notified in writing of the Insurer's acceptance of the Manager's recommendations, such notification shall constitute authorization to the Manager to effect the recommended investment transactions.

E. All investment transactions authorized by the Insurer's Investment Committee shall be carried out by the Manager through the Custodian, but the Manager may designate a broker or brokers to carry out said transactions. All instructions or directions of the Manager to the Custodian shall, unless otherwise agreed to by the Manager and the Custodian, be made in writing, or orally and confirmed in writing as soon as

3

practicable thereafter, and the Manager shall instruct all brokers, dealers or other persons executing investment orders to forward to the Custodian copies of all brokerage or dealer confirmations promptly after execution of all transactions.

F. The Manager is authorized to enter into an agreement with the Custodian to use the Depository Trust Company's Institutional Delivery System for trade confirmation and settlements.

G. The Insurer shall notify its Custodian of the appointment of the Manager as investment advisor by delivering a copy of this Agreement to its Custodian.

H. It is understood and agreed that the Manager's services in recommending investments shall be advisory only, and shall not in any way be deemed a delegation by the Insurer or its board of directors of their fiduciary powers, discretion or judgment in the selection, retention or disposition of any investments.

I. The investment advisory services provided by the Manager under this Section, and all actions taken hereunder by it, shall at all times conform to the requirements imposed by the insurance laws and regulations of the State of Illinois.

SECTION VI

COMPENSATION

In consideration of the services to be provided by the Manager under this Agreement, the Insurer agrees to pay the Manager compensation in the amount and manner set forth below:

A. Manager shall be reimbursed monthly for all expenses incurred on behalf of the Insurer in providing personnel, facilities and services contemplated by this Agreement.

B. In addition to the reimbursement of its expenses as provided in Paragraph A above, the Manager shall also receive for its services hereunder a management fee from the Insurer in an amount equal to one percent (1%) of the gross premiums written by the Insurer. Such fee shall be payable quarterly within 45 days of the end after each calendar quarter.

SECTION VII

OWNERSHIP OF RECORDS

The ownership and legal title to the insurance policies, insurance policy records, data processing tapes, disks, programs and documentation, and account records of the Insurer, compiled on behalf of the Insurer by the Manager, shall remain in and with the Insurer. However, the Manager shall have joint custody with the Insurer of said records.

SECTION VIII

TERM OF AGREEMENT

A. This Agreement shall be continuous from the Effective Date hereof to and including December 31, 1999; provided, however, that this Agreement may be terminated earlier by either party upon 120 days prior written notice.

4

B. The Insurer may terminate its participation under this Agreement immediately in the event that:

(1) The Manager shall have defaulted in the performance of any obligation under this Agreement and shall have failed to remedy such default within 30 days of receipt of written notice thereof from the Insurer asserting such default as grounds for termination of this Agreement; or

C. The Manager may terminate its obligations to the Insurer under this Agreement immediately in the event that:

(1) The Insurer shall have defaulted in the performance of any obligation under this Agreement and shall have failed to remedy such default within 30 days of receipt of written notice thereof from the Manager asserting such default as grounds for termination of this Agreement; or

(2) The Insurer is dissolved or determined insolvent.

IN WITNESS WHEREOF, we have set our hands and seals this 3rd day of January, 1995.

MERCURY INSURANCE COMPANY               MERCURY GENERAL CORPORATION
OF ILLINOIS


________________________________        __________________________________
By: George Joseph, President            By: George Joseph, President


By: Judy Walters, Secretary By: Judy Walters, Secretary

5

Exhibit 10.15

MANAGEMENT AGREEMENT

This Agreement is entered into by and between Mercury Indemnity Company of Illinois, hereinafter referred to as Insurer, and Mercury General Corporation, hereinafter referred to as Manager.

In consideration of the promises, conditions and covenants herein contained, the parties agree as follows:

SECTION I

EFFECTIVE DATE

This Agreement shall become effective on January 1, 1995 subject to the conditions set forth in Section II.

SECTION II

CONDITIONS OF EFFECTIVENESS

The Agreement or any amendment thereto shall become effective only if:

A. The Illinois Department of Insurance, if required, shall have approved of and/or acknowledged in writing this Agreement or any amendment thereto; and

B. The boards of directors of the Manager and the Insurer shall have approved this Agreement by a majority vote.

SECTION III

SERVICES AND FACILITIES

A. Commencing on the Effective Date and until the termination of this Agreement, Manager shall provide the services and facilities as are described hereunder to the Insurer. Such services and facilities as are provided hereunder shall be subject to the control and approval of the board of directors of the Insurer, and shall be performed in the manner and for the consideration set forth herein by manager, and such services shall be performed in accordance with applicable laws and regulations in all of the jurisdictions in which the Insurer conducts business. It is recognized that the Insurer may be governed by laws and regulations which are particularly applicable to its business and thus Manager, by virtue of this Agreement, recognizes its responsibility to perform in accordance with any such laws or regulations including, but not limited to, compliance with any order or orders issued by any governmental agency affecting the Insurer; and Manager hereby acknowledges that in such case it will immediately conform to same in the performance of its services as hereinafter set forth. The board of directors of the Insurer shall retain responsibility for the performance of services provided pursuant to this Agreement by Manager and, in connection therewith, shall require Manager to perform in accordance with the standards of performance set forth herein.

B. The Manager promises to manage the Insurer, and to conduct on its behalf any and all duties of management as shall be necessary for the complete operation of the Insurer.

C. The Insurer hereby delegates to the Manager all of the duties of management which it is allowed to so delegate by the laws of the State of Illinois, including but not limited to the following duties: to issue

1

and underwrite insurance policies, which the Insurer may be so authorized to do by law, in accordance with the rules and regulations as delineated in the underwriting manuals of the Insurer, settle and adjust any and all losses and claims, defend lawsuits, establish premium rates, establish and choose sales agents and brokers, determine agents' and brokers' commissions, prepare the records necessary for the conduct of the insurance business, furnish all forms, supplies and agents' manuals necessary for the conduct of the insurance business.

D. The Manager promises to perform all of the operating functions on behalf of Insurer, including but not be limited to the following:

1. To acquire, license and appoint sales agents and brokers for the production of the insurance business of and for the Insurer, provided that the Insurer shall retain the right to refuse the appointment of any agent or broker and the right to terminate any agent or broker.

2. To issue and underwrite policies on behalf of the Insurer and to choose and obtain the necessary applications and policy forms.

3. To furnish for the Insurer all of the operating forms, printing supplies, agents' manuals and any other related items which may become necessary for the operation of the insurance business.

4. To provide all personnel reasonably required by the Insurer and to fill all such positions in the Insurer with the advice and consent of the board of directors of the Insurer, all of which personnel shall be compensated exclusively by the Manager.

5. To provide all facilities necessary for the conduct of the Insurer's business, including but not limited to real estate, office space and personal property, including furniture, fixtures and equipment. The office space, furniture, fixtures and equipment utilized by the Insurer in the conduct of its business may be owned or leased by the Manager or the Insurer.

6. To pay on behalf of the Insurer all of its operating expenses, including but not limited to rent, supplies, salaries of all personnel, telephone, advertising costs, costs of settling and adjusting all insurance claims, legal defense costs, court costs, costs of loss analysis, accounting costs (other than auditing), and premium collection costs; provided, however, that the Insurer shall pay, and be responsible for, the costs of management fees, premium taxes, losses, reserves for unpaid losses, reserves for unpaid loss adjustment expense, audit fees, assigned risk or similar assessments, bureau fees, Fair Plan or similar assessments, directors' fees, agents' commissions, reinsurance premiums, outside investment counsel fees, assessments by the Illinois Insurance Guaranty Fund or similar state guaranty funds, membership fees in trade associations, any assessments by such associations, political contributions (to the extent not prohibited by applicable law), premiums paid for insurance policies in which the Insurer is the beneficiary and owner, such as fidelity bonds, taxes of all types and costs which may be levied on insurance companies by the governmental authorities having jurisdiction over the same, and agents' bonuses (contingency commissions).

E. This Agreement is not intended to supersede or replace the policy making decisions of or the supervisory responsibilities of the board of directors of the Insurer. Nor is it intended that substantial control of the Insurer or of any of the powers vested in the board of directors thereof are to be transferred to the Manager as a result of this Agreement. Said board of directors, a committee thereof or agents appointed by said board of directors, shall have the right, at all times, to cause the books and records of the Manager to be inspected and/or audited as they relate to the business of the Insurer.

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SECTION IV

INVESTMENT ADVISORY SERVICES

The Manager agrees to act as investment advisor to the Insurer with respect to the investment of the Insurer's assets, and, in general, to supervise the investment and reinvestment of cash, securities or other property comprising the assets of the Insurer, subject at all times to the direction and control of the board of directors (or responsible committee thereof) of the Insurer, all as more fully set forth herein.

In connection with the Manager's performance of investment advisory services for the Insurer, the following provisions shall apply:

A. The Insurer shall at all times maintain a custodian (referred to hereinafter as the "Custodian") for its securities and appropriate bank or custodial accounts for the purpose of handling cash involved in the insurer's investment transactions.

B. The Manager shall obtain and evaluate pertinent information about significant economic developments and gather statistical and financial data affecting the investments of the Insurer and such investments which the Manager considers may be suitable for inclusion in the Insurer's investment portfolio.

C. At mutually agreeable intervals, the Manager shall furnish reports to the Investment Committee of the Insurer setting forth (i) a list of the Insurer's securities, showing the cost, market value, maturity date and other pertinent information regarding each such security, (ii) a summary of the investment transactions effected on behalf of the Insurer since the closing date of the preceding report, and (iii) the Manager's recommendations as to what securities should be acquired or sold in light of prevailing economic and securities market conditions.

D. After reviewing the Manager's periodic investment reports, the Investment Committee of the Insurer will advise the Manager which of the Manager's investment recommendations it has accepted or rejected. If the Manager is notified in writing of the Insurer's acceptance of the Manager's recommendations, such notification shall constitute authorization to the Manager to effect the recommended investment transactions.

E. All investment transactions authorized by the Insurer's Investment Committee shall be carried out by the Manager through the Custodian, but the Manager may designate a broker or brokers to carry out said transactions. All instructions or directions of the Manager to the Custodian shall, unless otherwise agreed to by the Manager and the Custodian, be made in writing, or orally and confirmed in writing as soon as practicable thereafter, and the Manager shall instruct all brokers, dealers or other persons executing investment orders to forward to the Custodian copies of all brokerage or dealer confirmations promptly after execution of all transactions.

F. The Manager is authorized to enter into an agreement with the Custodian to use the Depository Trust Company's Institutional Delivery System for trade confirmation and settlements.

G. The Insurer shall notify its Custodian of the appointment of the Manager as investment advisor by delivering a copy of this Agreement to its Custodian.

H. It is understood and agreed that the Manager's services in recommending investments shall be advisory only, and shall not in any way be deemed a delegation by the Insurer or its board of directors of their fiduciary powers, discretion or judgment in the selection, retention or disposition of any investments.

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I. The investment advisory services provided by the Manager under this Section, and all actions taken hereunder by it, shall at all times conform to the requirements imposed by the insurance laws and regulations of the State of Illinois.

SECTION V

COMPENSATION

In consideration of the services to be provided by the Manager under this Agreement, the Insurer agrees to pay the Manager compensation in the amount and manner set forth below:

A. Manager shall be reimbursed monthly for all expenses incurred on behalf of the Insurer in providing personnel, facilities and services contemplated by this Agreement.

B. In addition to the reimbursement of its expenses as provided in Paragraph A above, the Manager shall also receive for its services hereunder a management fee from the Insurer in an amount equal to one percent (1%) of the gross premiums written by the Insurer. Such fee shall be payable quarterly within 45 days of the end after each calendar quarter.

SECTION VI

OWNERSHIP OF RECORDS

The ownership and legal title to the insurance policies, insurance policy records, data processing tapes, disks, programs and documentation, and account records of the Insurer, compiled on behalf of the Insurer by the Manager, shall remain in and with the Insurer. However, the Manager shall have joint custody with the Insurer of said records.

SECTION VII

TERM OF AGREEMENT

A. This Agreement shall be continuous from the Effective Date hereof to and including December 31, 1999; provided, however, that this Agreement may be terminated earlier by either party upon 120 days prior written notice.

B. The Insurer may terminate its participation under this Agreement immediately in the event that:

(1) The Manager shall have defaulted in the performance of any obligation under this Agreement and shall have failed to remedy such default within 30 days of receipt of written notice thereof from the Insurer asserting such default as grounds for termination of this Agreement; or

(2) The Manager is dissolved or determined insolvent.

C. The Manager may terminate its obligations to the Insurer under this Agreement immediately in the event that:

(1) The Insurer shall have defaulted in the performance of any obligation under this Agreement and shall have failed to remedy such default within 30 days of receipt of written notice thereof from the Manager asserting such default as grounds for termination of this Agreement; or

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(2) The Insurer is dissolved or determined insolvent.

IN WITNESS WHEREOF, we have set our hands and seals this third day of January, 1995.

MERCURY INDEMNITY COMPANY MERCURY GENERAL CORPORATION
OF ILLINOIS

- - ---------------------------------        ----------------------------------
By: George Joseph, President             By: George Joseph, President



- - ---------------------------------        ----------------------------------
By: Judy Walters, Secretary              By: Judy Walters, Secretary

5

Exhibit 10.16

MANAGEMENT AGREEMENT

This Agreement is effective as of the 1st day of January 1996, by Mercury Insurance Company of Georgia (formerly known as Georgia Automobile Insurance Company) (hereinafter referred to as Insurer) and Mercury General Corporation, hereinafter referred to as Manager.

In consideration of the promises, conditions and covenants herein contained, the parties agreed as follows:

1. The Manager promises to manage the Insurer, and to conduct on its' behalf any and all duties of management as shall be necessary for the complete operation of the Insurer.

2. That Insurer promises and hereby delegates to the Manager all of the duties of management which they are allowed to so delegate by the laws of the State of Georgia, including but not limited to the following duties: to issue and underwrite insurance policies, which the Insurer may be so authorized to do by law, in accordance with the rules and regulations as delineated in the underwriting manuals of the Insurer, settle and adjust any and all losses and claims, defend lawsuits, establish premium rates, establish and choose sales agents and brokers, determine agents' and brokers' commissions, prepare the records necessary for the conduct of the insurance business, furnish all forms, supplies and agents' manuals necessary for the conduct of the insurance business.

3. That Manager promises to perform all of the operating functions on behalf of the Insurer including but not be limited to the following:

A. To acquire, license and appoint sales agents and brokers for the production of the insurance business of and for the Insurer, provided that the Insurer shall retain the right to refuse the appointment of any agent or broker and the right to terminate any agent or broker.

B. To issue and underwrite policies on behalf of the Insurer and to choose and obtain the necessary application and policy forms.

C. To furnish for Insurer all of the operating forms, printing supplies, agents' manuals and any other related items which may become necessary for the operation of the insurance business.

D. To pay on behalf of the Insurer all of their operating expenses, including but not limited to rent, supplies, salaries of all personnel, telephone, advertising costs, costs of settling and adjusting all insurance claims, legal defense costs, court costs, costs of loss analysis, accounting costs (other than auditing), premium collection costs; provided, however, Insurer shall pay, and be responsible for, the costs of management fees, premium taxes, losses, reserves for unpaid losses, reserves for unpaid loss adjustment expense, audit fees, assigned risk or similar assessments, bureau fees, Fair Plan or similar assessments, directors' fees, agents' commissions, reinsurance premiums, investment counsel fees, assessments by the applicable Insurance Guarantee Association, membership fees in insurance trade association of insurance companies, premiums paid for insurance policies in which the Insurer is the beneficiary and owner, such as fidelity bonds, taxes of all types and costs which may be levied on insurance companies by the governmental authorities having jurisdiction over the same and agents' bonuses (contingency commissions).

4. Manager shall be reimbursed monthly for all expenses incurred on behalf of the Insurers.

5. Manager shall receive as the sole compensation for its services hereunder a management fee from the Insurer in an amount equal to one percent (1%) of the gross premiums written by the Insurer. Such fee shall be payable quarterly within 45 days of the end of each calendar quarter.

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6. The ownership and legal title to the insurance policies, insurance policy records, data processing tapes, disks, programs and documentation, and account records of the Insurer, compiled on behalf of the Insurer by manager, shall remain in and with Insurer, however, Manager shall have joint custody with Insurer of said records.

7. The manager shall, within 90 days after expiration of each calendar year, furnish the insurer's board of directors a written statement of amounts received under or on account of the contract and amounts expended under or on account of the contract during the calendar year, including the emoluments received therefrom by the respective directors, officers, and other principal management personnel of the manager or producer, with such classification of items and further detail as the insurer's board of directors may reasonably require.

8. The term of this agreement shall commence January 1, 1996 and shall terminate December 31, 1999.

IN WITNESS WHEREOF, we have set our hands and seals this 1st day of January, 1996.

MERCURY INSURANCE COMPANY MERCURY GENERAL CORPORATION
OF GEORGIA

______________________________   _____________________________________
By: Cooper Blanton, President           By: Michael Curtius, President




______________________________   _____________________________________
By: Judy Walters, Secretary             By: Judy Walters, Secretary

2

Exhibit 10.17

MANAGEMENT AGREEMENT

This Agreement is effective as of the 1st day of January 1996, by Mercury Indemnity Company of Georgia (hereinafter referred to as Insurer) and Mercury General Corporation, hereinafter referred to as Manager.

In consideration of the promises, conditions and covenants herein contained, the parties agreed as follows:

1. The Manager promises to manage the Insurer, and to conduct on its' behalf any and all duties of management as shall be necessary for the complete operation of the Insurer.

2. That Insurer promises and hereby delegates to the Manager all of the duties of management which they are allowed to so delegate by the laws of the State of Georgia, including but not limited to the following duties: to issue and underwrite insurance policies, which the Insurer may be so authorized to do by law, in accordance with the rules and regulations as delineated in the underwriting manuals of the Insurer, settle and adjust any and all losses and claims, defend lawsuits, establish premium rates, establish and choose sales agents and brokers, determine agents' and brokers' commissions, prepare the records necessary for the conduct of the insurance business, furnish all forms, supplies and agents' manuals necessary for the conduct of the insurance business.

3. That Manager promises to perform all of the operating functions on behalf of the Insurer including but not be limited to the following:

A. To acquire, license and appoint sales agents and brokers for the production of the insurance business of and for the Insurer, provided that the Insurer shall retain the right to refuse the appointment of any agent or broker and the right to terminate any agent or broker.

B. To issue and underwrite policies on behalf of the Insurer and to choose and obtain the necessary application and policy forms.

C. To furnish for Insurer all of the operating forms, printing supplies, agents' manuals and any other related items which may become necessary for the operation of the insurance business.

D. To pay on behalf of the Insurer all of their operating expenses, including but not limited to rent, supplies, salaries of all personnel, telephone, advertising costs, costs of settling and adjusting all insurance claims, legal defense costs, court costs, costs of loss analysis, accounting costs (other than auditing), premium collection costs; provided, however, Insurer shall pay, and be responsible for, the costs of management fees, premium taxes, losses, reserves for unpaid losses, reserves for unpaid loss adjustment expense, audit fees, assigned risk or similar assessments, bureau fees, Fair Plan or similar assessments, directors' fees, agents' commissions, reinsurance premiums, investment counsel fees, assessments by the applicable Insurance Guarantee Association, membership fees in insurance trade association of insurance companies, premiums paid for insurance policies in which the Insurer is the beneficiary and owner, such as fidelity bonds, taxes of all types and costs which may be levied on insurance companies by the governmental authorities having jurisdiction over the same and agents' bonuses (contingency commissions).

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4. Manager shall be reimbursed monthly for all expenses incurred on behalf of the Insurers.

5. Manager shall receive as the sole compensation for its services hereunder a management fee from the Insurer in an amount equal to one percent (1%) of the gross premiums written by the Insurer. Such fee shall be payable quarterly within 45 days of the end of each calendar quarter.

6. The ownership and legal title to the insurance policies, insurance policy records, data processing tapes, disks, programs and documentation, and account records of the Insurer, compiled on behalf of the Insurer by manager, shall remain in and with Insurer, however, Manager shall have joint custody with Insurer of said records.

7. The manager shall, within 90 days after expiration of each calendar year, furnish the insurer's board of directors a written statement of amounts received under or on account of the contract and amounts expended under or on account of the contract during the calendar year, including the emoluments received therefrom by the respective directors, officers, and other principal management personnel of the manager or producer, with such classification of items and further detail as the insurer's board of directors may reasonably require.

8. The term of this agreement shall commence January 1, 1996 and shall terminate December 31, 1999.

IN WITNESS WHEREOF, we have set our hands and seals this 1st day of January 1996.

MERCURY INDEMNITY COMPANY            MERCURY GENERAL CORPORATION
    OF GEORGIA


_____________________________        _______________________________________
By: Cooper Blanton, President                By: Michael Curtius, President


By: Judy Walters, Secretary By: Judy Walters, Secretary

2

Exhibit 10.18


Second and Third Property Excess Catastrophe Reinsurance Contract Effective: April 1, 1995

issued to

Mercury Casualty Company Mercury Insurance Company California Automobile Insurance Company and California General Underwriters Insurance Company, Inc. All of Los Angeles, California


(hereinafter collectively referred to as the "Company")

Article I - Classes of Business Reinsured

By this Contract the Reinsurer agrees to reinsure the excess liability which may accrue to the Company under its policies, contracts and binders of insurance or reinsurance (hereinafter called "policies") in force at the effective date hereof or issued or renewed on or after that date, and classified by the Company as Homeowners (Section I), Fire, Allied Lines, Commercial Multiple Peril (Section I), Automobile Physical Damage, Earthquake and Inland Marine, subject to the terms, conditions and limitations set forth herein and in Schedule A attached to and forming part of this Contract.

Article II - Term

A. This Contract shall become effective on April 1, 1995, with respect to losses arising out of loss occurrences commencing on or after that date, and shall remain in force until March 31, 1996, both days inclusive. However, if the Reinsurer sustains no loss hereunder from loss occurrences commencing on or prior to December 31, 1995, this Contract shall, upon notice from the Company prior to December 31, 1995, expire on December 31, 1995.

B. If this Contract expires while a loss occurrence covered hereunder is in progress, the Reinsurer's liability hereunder shall, subject to the other terms and conditions of this Contract, be determined as if the entire loss occurrence had occurred prior to the expiration of this Contract, provided that no part of such loss occurrence is claimed against any renewal or replacement of this Contract.

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Article III - Territory

This Contract shall apply to the territorial limits set forth in the Company's policies reinsured hereunder.

Article IV - Exclusions

This Contract does not apply to and specifically excludes the following:

1. All lines of business not included in Article I.

2. All excess of loss reinsurance assumed by the Company.

3. Reinsurance assumed by the Company under obligatory reinsurance agreements, except agency reinsurance where the policies involved are to be reunderwritten in accordance with the underwriting standards of the Company and reissued as Company policies at the next anniversary or expiration date.

4. Financial guarantee and insolvency.

5. All Accident and Health, Fidelity and Surety, Boiler and Machinery, Ocean Marine, Workers' Compensation and Credit business when written as such.

6. Flood and/or earthquake when written as such.

7. Mortgage Impairment insurances and similar kinds of insurances, however styled.

8. Nuclear risks as defined in the "Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance" attached to and forming part of this Contract.

9. Risks excluded under the provisions of the "Total Insured Value Exclusion Clause" attached to and forming part of this Contract.

10. Loss or damage caused by or resulting from war, invasion, hostilities, acts of foreign enemies, civil war, rebellion, insurrection, military or usurped power, or martial law or confiscation by order of any government or public authority, but this exclusion shall not apply to loss or damage covered under a standard policy with a standard War Exclusion Clause.

11. All liability of the Company arising by contract, operation of law, or otherwise, from its participation or membership, whether voluntary or involuntary, in any insolvency fund. "Insolvency fund" includes any guaranty fund, insolvency fund, plan, pool,

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association, fund or other arrangement, however denominated, established or governed, which provides for any assessment of or payment or assumption by the Company of part or all of any claim, debt, charge, fee or other obligation of an insurer, or its successors or assigns, which has been declared by any competent authority to be insolvent, or which is otherwise deemed unable to meet any claim, debt, charge, fee or other obligation in whole or in part.

12. Liability as a member, subscriber or reinsurer of any Pool, Syndicate or Association; and any combination of insurers or reinsurers formed for the purpose of covering specific perils, specific classes of business or for the purpose of insuring risks located in specific geographic areas; but this exclusion shall not apply to FAIR Plans or to Coastal Pools, Beach Plans or similar plans, however styled. It is understood and agreed, however, that this reinsurance does not include any increase in liability to the Company resulting from (a) the inability of any other participant in a FAIR Plan, Coastal Pool, Beach Plan or similar plan to meet its liability, or (b) any claim against such a FAIR Plan, Coastal Pool, Beach Plan or similar plan, or any participant therein, including the Company, whether by way of subrogation or otherwise, brought by or on behalf of any insolvency fund.

Article V - Retention and Limit

A. As respects each excess layer of reinsurance coverage provided by this Contract, the Company shall retain and be liable for the first amount of ultimate net loss, shown as "Company's retention" for that excess layer in Schedule A attached hereto, arising out of each loss occurrence. The Reinsurer shall then be liable, as respects each excess layer, for the amount by which such ultimate net loss exceeds the Company's applicable retention, but the liability of the Reinsurer under each excess layer shall not exceed the amount, shown as "Reinsurer's Per Occurrence Limit" for that excess layer in Schedule A attached hereto, as respects any one loss occurrence.

B. The Company shall retain, in addition to its initial retention on each loss occurrence, 5.0% of the excess ultimate net loss to which the excess layer applies.

C. The Company shall be permitted to carry excess per risk reinsurance, recoveries under which shall inure to the benefit of this Contract.

Article VI - Reinstatement

A. In the event all or any portion of the reinsurance coverage provided by this Contract is exhausted by loss, the amount so exhausted shall be reinstated immediately from the time the loss occurrence commences hereon. For each amount so reinstated the Company agrees to pay additional premium equal to the product of the following:

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1. The percentage of the occurrence limit for the excess layer reinstated (based on the loss paid by the Reinsurer under that excess layer); times

2. The earned reinsurance premium for the excess layer reinstated for the term of this Contract (exclusive of reinstatement premium).

B. Whenever the Company requests payment by the Reinsurer of any loss under any excess layer hereunder, the Company shall submit a statement to the Reinsurer of reinstatement premium due the Reinsurer for that excess layer. If the earned reinsurance premium for any excess layer for the term of this Contract has not been finally determined as of the date of any such statement, the calculation of reinstatement premium due for that excess layer shall be based on the annual deposit premium for that excess layer and shall be readjusted when the earned reinsurance premium for that excess layer for the term of this Contract has been finally determined. Any reinstatement premium shown to be due the Reinsurer for any excess layer as reflected by any such statement (less prior payments, if any, for that excess layer) shall be payable by the Company concurrently with payment by the Reinsurer of the requested loss for that excess layer. Any return reinstatement premium shown to be due the Company shall be remitted by the Reinsurer within 60 days after receipt and verification of the Company's statement.

C. Notwithstanding anything stated herein, the liability of the Reinsurer provided by this Contract shall not exceed either of the following:

1. The amount, shown as "Reinsurer's Annual Limit" for that excess layer in Schedule A attached hereto, as respects loss or losses arising out of any one loss occurrence; or

2. The amount, shown as "Reinsurer's Annual Limit" for that excess layer in Schedule A attached hereto, in all during the term of this Contract.

Article VII - Loss Occurrence (BRMA 27A)

A. The term "loss occurrence" shall mean the sum of all individual losses directly occasioned by any one disaster, accident or loss or series of disasters, accidents or losses arising out of one event which occurs within the area of one state of the United States or province of Canada and states or provinces contiguous thereto and to one another. However, the duration and extent of any one "loss occurrence" shall be limited to all individual losses sustained by the Company occurring during any period of 168 consecutive hours arising out of and directly occasioned by the same event, except that the term "loss occurrence" shall be further defined as follows:

1. As regards windstorm, hail, tornado, hurricane, cyclone, including ensuing collapse and water damage, all individual losses sustained by the Company occurring during any period of 72 consecutive hours arising out of and directly occasioned by the same

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event. However, the event need not be limited to one state or province or states or provinces contiguous thereto.

2. As regards riot, riot attending a strike, civil commotion, vandalism and malicious mischief, all individual losses sustained by the Company occurring during any period of 72 consecutive hours within the area of one municipality or county and the municipalities or counties contiguous thereto arising out of and directly occasioned by the same event. The maximum duration of 72 consecutive hours may be extended in respect of individual losses which occur beyond such 72 consecutive hours during the continued occupation of an assured's premises by strikers, provided such occupation commenced during the aforesaid period.

3. As regards earthquake (the epicentre of which need not necessarily be within the territorial confines referred to in paragraph A of this Article) and fire following directly occasioned by the earthquake, only those individual fire losses which commence during the period of 168 consecutive hours may be included in the Company's "loss occurrence."

4. As regards "freeze," only individual losses directly occasioned by collapse, breakage of glass and water damage (caused by bursting frozen pipes and tanks) may be included in the Company's "loss occurrence."

B. Except for those "loss occurrences" referred to in subparagraphs 1 and 2 of paragraph A above, the Company may choose the date and time when any such period of consecutive hours commences, provided that it is not earlier than the date and time of the occurrence of the first recorded individual loss sustained by the Company arising out of that disaster, accident or loss, and provided that only one such period of 168 consecutive hours shall apply with respect to one event.

C. However, as respects those "loss occurrences" referred to in subparagraphs 1 and 2 of paragraph A above, if the disaster, accident or loss occasioned by the event is of greater duration than 72 consecutive hours, then the Company may divide that disaster, accident or loss into two or more "loss occurrences," provided that no two periods overlap and no individual loss is included in more than one such period, and provided that no period commences earlier than the date and time of the occurrence of the first recorded individual loss sustained by the Company arising out of that disaster, accident or loss.

D. No individual losses occasioned by an event that would be covered by 72 hours clauses may be included in any "loss occurrence" claimed under the 168 hours provision.

Article VIII - Definitions

A. "Ultimate net loss" as used herein is defined as the sum or sums (including interest on judgments, extra contractual obligations, loss resulting from the reformation or liberalization

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of policies, litigation expenses and all other loss adjustment expense, except office expenses and salaries of the Company's regular employees) paid or payable by the Company in settlement of claims and in satisfaction of judgments rendered on account of such claims, after deduction of all salvage, all recoveries and all claims on inuring insurance or reinsurance, whether collectible or not. Nothing herein shall be construed to mean that losses under this Contract are not recoverable until the Company's ultimate net loss has been ascertained.

B. "Extra contractual obligations" as used herein shall mean 90.0% of any punitive, exemplary, compensatory or consequential damages paid or payable by the Company as a result of an action against it by its insured or its insured's assignee, which action alleges negligence or bad faith on the part of the Company in handling a claim under a policy subject to this Contract. An extra contractual obligation shall be deemed to have occurred on the same date as the loss covered or alleged to be covered under the policy. Notwithstanding anything stated herein, this Contract shall not apply to any extra contractual obligation incurred by the Company as a result of any fraudulent and/or criminal act by any officer or director of the Company acting individually or collectively or in collusion with any individual or corporation or any other organization or party involved in the presentation, defense or settlement of any claim covered hereunder.

C. As respects amounts paid by the Company subject to this Contract for debris removal, including cleanup of pollutants, as respects business classified as commercial property, "loss" shall mean an amount not to exceed 30.0% of the direct physical loss or damage paid by the Company, for any one loss, any one location, any one insured. "Loss" is further restricted to include only such claims for debris removal, including cleanup of pollutants, reported to the Company not more than 180 days immediately following the direct physical loss or damage.

D. "Pollutant" as used herein shall mean any solid liquid, gaseous, or thermal irritant or contaminant, including, but not limited to smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.

Article IX - Loss Notices and Settlements

A. Whenever a loss sustained by the Company appears likely to result in a claim hereunder, the Company shall notify the Reinsurer, and the Reinsurer shall have the right to participate in the adjustment of the loss at its own expense.

B. All loss settlements made by the Company, provided they are within the terms of this Contract, and either under the strict conditions of the Company's policies or by way of compromise, shall be unconditionally binding upon the Reinsurer, and the Reinsurer agrees to pay all amounts for which it may be liable upon receipt of reasonable evidence of the amount paid (or scheduled to be paid) by the Company.

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C. All salvage and recoveries received subsequent to a loss settlement under this Contract shall be applied as if received prior to said loss settlement, and all necessary adjustment shall be made between the Company and the Reinsurer immediately following receipt by the Company of such salvage or recoveries.

Article X - Salvage and Subrogation

The Reinsurer shall be credited with salvage (i.e., reimbursement obtained or recovery made by the Company, less the actual cost, excluding salaries of officials and employees of the Company and sums paid to attorneys as retainer, of obtaining such reimbursement or making such recovery) on account of claims and settlements involving reinsurance hereunder. Salvage thereon shall always be used to reimburse the excess carriers in the reverse order of their priority according to their participation before being used in any way to reimburse the Company for its primary loss. The Company hereby agrees to enforce its rights to salvage or subrogation relating to any loss, a part of which loss was sustained by the Reinsurer, and to prosecute all claims arising out of such rights.

Article XI - Reinsurance Premium

A. As premium for each excess layer of reinsurance coverage provided by this Contract, the Company shall pay the Reinsurer the greater of the following:

1. The amount, shown as "Annual Minimum Premium" for that excess layer in Schedule A attached hereto; or, in the event the early termination provision outlined in paragraph A of Article II is exercised by the Company, the amount shown as "Early Expiration Minimum Premium" for that excess layer in Schedule A attached hereto.

2. The percentage, shown as "Premium Rate" for that excess layer in Schedule A attached hereto, of the Company's net earned premium for the term of this Contract.

B. The Company shall pay the Reinsurer an annual deposit premium for each excess layer of an amount, shown as "Annual Deposit Premium" for that excess layer in Schedule A attached hereto, in four equal installments of an amount, shown as "Quarterly Deposit Premium" for that excess layer in Schedule A attached hereto, on April 1, July 1 and October 1 of 1995, and January 1, 1996. However, in the event that the Company elects to terminate this contract in accordance with the early expiration provision outlined in paragraph A of Article II, the Company shall not be required to pay the deposit due January 1, 1996.

C. Within 60 days after the expiration of this Contract, the Company shall provide a report to the Reinsurer setting forth the premium due hereunder for each excess layer, computed in accordance with paragraph A, and any additional premium due the Reinsurer or return premium due the Company for each such excess layer shall be remitted promptly.

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D. "Net earned premium" as used herein is defined as gross earned premium of the Company for the classes of business reinsured hereunder, less the earned portion of premiums ceded by the Company for reinsurance which inures to the benefit of this Contract. For purposes of calculating net earned premium, for multiple peril policies with indivisible premiums, if any, 80.0% of the total Homeowners basic policy premium and 70.0% of the total basic Commercial Multiple Peril policy premium shall be considered subject premium.

Article XII - Offset

The Company or the Reinsurer may offset any balance, whether on account of premiums, commissions, loss or claim expenses due from one party to the other under this Contract or under any other reinsurance contract heretofore or hereafter entered into between the Company and the Reinsurer, whether acting as assuming reinsurer or ceding company.

Article XIII - Inspection of Records

The Reinsurer may inspect the records of the Company pertaining to the risks reinsured hereunder.

Article XIV - Net Retained Lines (BRMA 32B)

A. This Contract applies only to that portion of any policy which the Company retains net for its own account, and in calculating the amount of any loss hereunder and also in computing the amount or amounts in excess of which this Contract attaches, only loss or losses in respect of that portion of any policy which the Company retains net for its own account shall be included.

B. The amount of the Reinsurer's liability hereunder in respect of any loss or losses shall not be increased by reason of the inability of the Company to collect from any other reinsurer(s), whether specific or general, any amounts which may have become due from such reinsurer(s), whether such inability arises from the insolvency of such other reinsurer(s) or otherwise.

Article XV - Errors and Omissions (BRMA 14F)

Inadvertent delays, errors or omissions made in connection with this Contract or any transaction hereunder shall not relieve either party from any liability which would have attached had such delay, error or omission not occurred, provided always that such error or omission is rectified as soon as possible after discovery.

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Article XVI - Currency (BRMA 12A)

A. Whenever the word "Dollars" or the "$" sign appears in this Contract, they shall be construed to mean United States Dollars and all transactions under this Contract shall be in United States Dollars.

B. Amounts paid or received by the Company in any other currency shall be converted to United States Dollars at the rate of exchange at the date such transaction is entered on the books of the Company.

Article XVII - Taxes (BRMA 50B)

In consideration of the terms under which this Contract is issued, the Company will not claim a deduction in respect of the premium hereon when making tax returns, other than income or profits tax returns, to any state or territory of the United States of America or the District of Columbia.

Article XVIII - Federal Excise Tax (BRMA 17A)

(Applicable to those reinsurers, excepting Underwriters at Lloyd's London and other reinsurers exempt from Federal Excise Tax, who are domiciled outside the United States of America.)

A. The Reinsurer has agreed to allow for the purpose of paying the Federal Excise Tax the applicable percentage of the premium payable hereon as imposed under Section 4371 of the Internal Revenue Code to the extent such premium is subject to the Federal Excise Tax.

B. In the event of any return premium becoming due hereunder the Reinsurer will deduct the applicable percentage from the return premium payable hereon and the Company or its agent should take steps to recover the tax from the United States Government.

Article XIX - Unauthorized Reinsurers

A. If the Reinsurer is unauthorized in any state of the United States of America or the District of Columbia, the Reinsurer agrees to fund its share of the Company's ceded outstanding loss and loss adjustment expense reserves (including incurred but not reported loss reserves) by:

1. Clean, irrevocable and unconditional letters of credit issued and confirmed, if confirmation is required by the insurance regulatory authorities involved, by a bank or banks meeting the NAIC Securities Valuation Office credit standards for issuers of letters of credit and acceptable to said insurance regulatory authorities; and/or

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2. Escrow accounts for the benefit of the Company; and/or

3. Cash advances;

if, without such funding, a penalty would accrue to the Company on any financial statement it is required to file with the insurance regulatory authorities involved. The Reinsurer, at its sole option, may fund in other than cash if its method and form of funding are acceptable to the insurance regulatory authorities involved.

B. With regard to funding in whole or in part by letters of credit, it is agreed that each letter of credit will be in a form acceptable to insurance regulatory authorities involved, will be issued for a term of at least one year and will include an "evergreen clause," which automatically extends the term for at least one additional year at each expiration date unless written notice of non-renewal is given to the Company not less than 30 days prior to said expiration date. The Company and the Reinsurer further agree, notwithstanding anything to the contrary in this Contract, that said letters of credit may be drawn upon by the Company or its successors in interest at any time, without diminution because of the insolvency of the Company or the Reinsurer, but only for one or more of the following purposes:

1. To reimburse itself for the Reinsurer's share of losses and/or loss adjustment expense paid under the terms of policies reinsured hereunder, unless paid in cash by the Reinsurer;

2. To reimburse itself for the Reinsurer's share of any other amounts claimed to be due hereunder, unless paid in cash by the Reinsurer;

3. To fund a cash account in an amount equal to the Reinsurer's share of any ceded outstanding loss and loss adjustment expense reserves (including incurred but not reported loss reserves) funded by means of a letter of credit which is under non-renewal notice, if said letter of credit has not been renewed or replaced by the Reinsurer 10 days prior to its expiration date;

4. To refund to the Reinsurer any sum in excess of the actual amount required to fund the Reinsurer's share of the Company's ceded outstanding loss and loss adjustment expense reserves (including incurred but not reported loss reserves), if so requested by the Reinsurer.

In the event the amount drawn by the Company on any letter of credit is in excess of the actual amount required for B(1) or B(3), or in the case of B(2), the actual amount determined to be due, the Company shall promptly return to the Reinsurer the excess amount so drawn.

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Article XX - Insolvency

A. In the event of the insolvency of one or more of the reinsured companies, this reinsurance shall be payable directly to the company or to its liquidator, receiver, conservator or statutory successor immediately upon demand, with reasonable provision for verification, on the basis of the liability of the company without diminution because of the insolvency of the company or because the liquidator, receiver, conservator or statutory successor of the company has failed to pay all or a portion of any claim. It is agreed, however, that the liquidator, receiver, conservator or statutory successor of the company shall give written notice to the Reinsurer of the pendency of a claim against the company indicating the policy or bond reinsured which claim would involve a possible liability on the part of the Reinsurer within a reasonable time after such claim is filed in the conservation or liquidation proceeding or in the receivership, and that during the pendency of such claim, the Reinsurer may investigate such claim and interpose, at its own expense, in the proceeding where such claim is to be adjudicated, any defense or defenses that it may deem available to the company or its liquidator, receiver, conservator or statutory successor. The expense thus incurred by the Reinsurer shall be chargeable, subject to the approval of the Court, against the company as part of the expense of conservation or liquidation to the extent of a pro rata share of the benefit which may accrue to the company solely as a result of the defense undertaken by the Reinsurer.

B. Where two or more reinsurers are involved in the same claim and a majority in interest elect to interpose defense to such claim, the expense shall be apportioned in accordance with the terms of this Contract as though such expense had been incurred by the company.

C. It is further understood and agreed that, in the event of the insolvency of one or more of the reinsured companies, the reinsurance under this Contract shall be payable directly by the Reinsurer to the company or to its liquidator, receiver or statutory successor, except as provided by Section 4118(a) of the New York Insurance Law or except (1) where this Contract specifically provides another payee of such reinsurance in the event of the insolvency of the company or (2) where the Reinsurer with the consent of the direct insured or insureds has assumed such policy obligations of the company as direct obligations of the Reinsurer to the payees under such policies and in substitution for the obligations of the company to such payees.

Article XXI - Arbitration (BRMA 6J)

A. As a condition precedent to any right of action hereunder, in the event of any dispute or difference of opinion hereafter arising with respect to this Contract, it is hereby mutually agreed that such dispute or difference of opinion shall be submitted to arbitration. One Arbiter shall be chosen by the Company, the other by the Reinsurer, and an Umpire shall be chosen by the two Arbiters before they enter upon arbitration, all of whom shall be active or retired disinterested executive officers of insurance or reinsurance companies or Lloyd's London Underwriters. In the event that either party should fail to choose an Arbiter within

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30 days following a written request by the other party to do so, the requesting party may choose two Arbiters who shall in turn choose an Umpire before entering upon arbitration. If the two Arbiters fail to agree upon the selection of an Umpire within 30 days following their appointment, each Arbiter shall nominate three candidates within 10 days thereafter, two of whom the other shall decline, and the decision shall be made by drawing lots.

B. Each party shall present its case to the Arbiters within 30 days following the date of appointment of the Umpire. The Arbiters shall consider this Contract as an honorable engagement rather than merely as a legal obligation and they are relieved of all judicial formalities and may abstain from following the strict rules of law. The decision of the Arbiters shall be final and binding on both parties; but failing to agree, they shall call in the Umpire and the decision of the majority shall be final and binding upon both parties. Judgment upon the final decision of the Arbiters may be entered in any court of competent jurisdiction.

C. If more than one reinsurer is involved in the same dispute, all such reinsurers shall constitute and act as one party for purposes of this Article and communications shall be made by the Company to each of the reinsurers constituting one party, provided, however, that nothing herein shall impair the rights of such reinsurers to assert several, rather than joint, defenses or claims, nor be construed as changing the liability of the reinsurers participating under the terms of this Contract from several to joint.

D. Each party shall bear the expense of its own Arbiter, and shall jointly and equally bear with the other the expense of the Umpire and of the arbitration. In the event that the two Arbiters are chosen by one party, as above provided, the expense of the Arbiters, the Umpire and the arbitration shall be equally divided between the two parties.

E. Any arbitration proceedings shall take place at a location mutually agreed upon by the parties to this Contract, but notwithstanding the location of the arbitration, all proceedings pursuant hereto shall be governed by the law of the state in which the Company has its principal office.

Article XXII - Service of Suit (BRMA 49C)

(Applicable if the Reinsurer is not domiciled in the United States of America, and/or is not authorized in any State, Territory or District of the United States where authorization is required by insurance regulatory authorities)

A. It is agreed that in the event the Reinsurer fails to pay any amount claimed to be due hereunder, the Reinsurer, at the request of the Company, will submit to the jurisdiction of any court of competent jurisdiction within the United States. Nothing in this Article constitutes or should be understood to constitute a waiver of the Reinsurer's rights to commence an action in any court of competent jurisdiction in the United States, to remove

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an action to a United States District Court, or to seek a transfer of a case to another court as permitted by the laws of the United States or of any state in the United States.

B. Further, pursuant to any statute of any state, territory or district of the United States which makes provision therefor, the Reinsurer hereby designates the party named in its Interests and Liabilities Agreement, or if no party is named therein, the Superintendent, Commissioner or Director of Insurance or other officer specified for that purpose in the statute, or his successor or successors in office, as its true and lawful attorney upon whom may be served any lawful process in any action, suit or proceeding instituted by or on behalf of the Company or any beneficiary hereunder arising out of this Contract.

Article XXIII - Assignments and Changes of Interest

No assignment or change of the Company's interest hereunder, whether voluntary or involuntary and whether by merger or reinsurance of its entire business with another company or otherwise, shall be binding upon the Reinsurer.

Article XXIV - Agency Agreement

If more than one reinsured company is named as a party to this Contract, the first named company shall be deemed the agent of the other reinsured companies for purposes of sending or receiving notices required by the terms and conditions of this Contract, and for purposes of remitting or receiving any monies due any party.

Article XXV - Intermediary (BRMA 23A)

E. W. Blanch Co. is hereby recognized as the Intermediary negotiating this Contract for all business hereunder. All communications (including but not limited to notices, statements, premium, return premium, commissions, taxes, losses, loss adjustment expense, salvages and loss settlements) relating thereto shall be transmitted to the Company or the Reinsurer through E. W. Blanch Co., Reinsurance Services, 3500 West 80th Street, Minneapolis, Minnesota 55431. Payments by the Company to the Intermediary shall be deemed to constitute payment to the Reinsurer. Payments by the Reinsurer to the Intermediary shall be deemed to constitute payment to the Company only to the extent that such payments are actually received by the Company.

In Witness Whereof, the Company by its duly authorized representative has executed this Contract as of the date undermentioned at:

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Los Angeles, California, this day of 199 .


Mercury Casualty Company Mercury Insurance Company California Automobile Insurance Company California General Underwriters Insurance Company, Inc.

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Schedule A

Second and Third
Property Excess Catastrophe
Reinsurance Contract
Effective: April 1, 1995

issued to

Mercury Casualty Company
Mercury Insurance Company
California Automobile Insurance Company
and

California General Underwriters Insurance Company, Inc. all of Los Angeles, California

                                                          Second        Third
                                                          Excess        Excess

Company's Retention                                    $10,000,000   $17,500,000

Reinsurer's Per Occurrence Limit                       $ 7,500,000   $12,500,000

Reinsurer's Annual Limit                               $15,000,000   $25,000,000

Annual Minimum Premium                                 $   477,200   $   557,133

Early Expiration Minimum Premium                       $   357,900   $   417,850

Premium Rate
  Class of Business other than Auto Physical Damage          3.369%        3.733%
  Auto Physical Damage                                       0.250%        0.350%

Annual Deposit Premium                                 $   596,500   $   696,416

Quarterly Deposit Premium                              $   149,125   $   174,104

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Table of Contents

Article Page

I Classes of Business Reinsured 1

II Term 1

III Territory 2

IV Exclusions 2

V Retention and Limit 3

VI Reinstatement 3

VII Loss Occurrence (BRMA 27A) 4

VIII Definitions 5

IX Loss Notices and Settlements 6

X Salvage and Subrogation 7

XI Reinsurance Premium 7

XII Offset 8

XIII Inspection of Records 8

XIV Net Retained Lines (BRMA 32B) 8

XV Errors and Omissions (BRMA 14F) 8

XVI Currency (BRMA 12A) 9

XVII Taxes (BRMA 50C) 9

XIII Federal Excise Tax (BRMA 17A) 9

XIX Unauthorized Reinsurers 9

XX Insolvency 11

XXI Arbitration (BRMA 6J) 11

XXII Service of Suit (BRMA 49C) 12

XXIII Assignments and Changes of Interest 13

XXIV Agency Agreement 13

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XXV Intermediary (BRMA 23A) 13

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Interests and Liabilities Agreement

of

Certain Underwriting Members of Lloyd's

shown in the Signing Schedule attached hereto


(hereinafter referred to as the "Subscribing Reinsurer")

with respect to the

Second and Third
Property Excess Catastrophe
Reinsurance Contract
Effective: April 1, 1995

issued to and duly executed by

Mercury Casualty Company
Mercury Insurance Company
California Automobile Insurance Company
and

California General Underwriters Insurance Company, Inc. All of Los Angeles, California

The Subscribing Reinsurer hereby accepts the following percentage shares in the interests and liabilities of the "Reinsurer" as set forth in the attached Contract captioned above:

0% of the Second Excess Catastrophe Reinsurance 6.70% of the Third Excess Catastrophe Reinsurance

This Agreement shall become effective on April 1, 1995, and shall continue in force until March 31, 1996, both days inclusive. However, if the "Reinsurer" under the attached Contract sustains no loss from loss occurrences commencing on or prior to December 31, 1995, the Agreement shall, upon notice from the Company prior to December 31, 1995, expire on December 31, 1995.

The Subscribing Reinsurer's share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it being understood that the Subscribing Reinsurer shall in no event participate in the interests and liabilities of the other reinsurers.

In any action, suit or proceeding to enforce the Subscribing Reinsurer's obligations under the attached Contract, service of process may be made upon Mendes & Mount, 750 Seventh Avenue, New York, New York 10019.

E. W. BLANCH CO.

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Signed for and on behalf of the Subscribing Reinsurer in the Signing Schedule attached hereto.

E. W. BLANCH CO.

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Interests and Liabilities Agreement

of

Certain Insurance Companies

shown in the Signing Schedule(s) attached hereto


(hereinafter referred to as the "Subscribing Reinsurer")

with respect to the

Second and Third
Property Excess Catastrophe
Reinsurance Contract
Effective: April 1, 1995

issued to and duly executed by

Mercury Casualty Company
Mercury Insurance Company
California Automobile Insurance Company
and

California General Underwriters Insurance Company, Inc. All of Los Angeles, California

The Subscribing Reinsurer hereby accepts the following percentage shares in the interests and liabilities of the "Reinsurer" as set forth in the attached Contract captioned above:

0% of the Second Excess Catastrophe Reinsurance 8.30% of the Third Excess Catastrophe Reinsurance

This Agreement shall become effective on April 1, 1995, and shall continue in force until March 31, 1996, both days inclusive. However, if the "Reinsurer" under the attached Contract sustains no loss from loss occurrences commencing on or prior to December 31, 1995, this Agreement shall, upon notice from the Company prior to December 31, 1995, expire on December 31, 1995.

The Subscribing Reinsurer's share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it being understood that the Subscribing Reinsurer shall in no event participate in the interests and liabilities of the other reinsurers.

In any action, suit or proceeding to enforce the Subscribing Reinsurer's obligations under the attached Contract, service of process may be made upon Mendes & Mount, 750 Seventh Avenue, New York, New York 10019.

E. W. BLANCH CO.

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Signed for and on behalf of the Subscribing Reinsurer in the Signing Schedule(s) attached hereto.

E. W. BLANCH CO.

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Interests and Liabilities Agreement

of

Abeille Reassurances, U.S. Branch
New York, New York
(hereinafter referred to as the "Subscribing Reinsurer")

with respect to the

Second and Third
Property Excess Catastrophe
Reinsurance Contract
Effective: April 1, 1995

issued to and duly executed by

Mercury Casualty Company
Mercury Insurance Company
California Automobile Insurance Company
and

California General Underwriters Insurance Company, Inc. All of Los Angeles, California

The Subscribing Reinsurer hereby accepts the following percentage shares in the interests and liabilities of the "Reinsurer" as set forth in the attached Contract captioned above:

4.00% of the Second Excess Catastrophe Reinsurance 0% of the Third Excess Catastrophe Reinsurance

This Agreement shall become effective on April 1, 1995, and shall continue in force until March 31, 1996, both days inclusive. However, if the "Reinsurer" under the attached Contract sustains no loss from loss occurrences commencing on or prior to December 31, 1995, this Agreement shall, upon notice from the Company prior to December 31, 1995, expire on December 31, 1995.

The Subscribing Reinsurer's share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it

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being understood that the Subscribing Reinsurer shall in no event participate in the interests and liabilities of the other reinsurers.

In Witness Whereof, the Subscribing Reinsurer by its duly authorized representative has executed this Agreement as of the date undermentioned at:

New York, New York, this day of 199 .


Abeille Reassurances, U.S. Branch

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Interests and Liabilities Agreement

of

Allmerica Re
A Division of
The Hanover Insurance Company
Bedford, New Hampshire
(hereinafter referred to as the "Subscribing Reinsurer")

with respect to the

Second and Third
Property Excess Catastrophe
Reinsurance Contract
Effective: April 1, 1995

issued to and duly executed by

Mercury Casualty Company
Mercury Insurance Company
California Automobile Insurance Company
and

California General Underwriters Insurance Company, Inc. All of Los Angeles, California

The Subscribing Reinsurer hereby accepts the following percentage shares in the interests and liabilities of the "Reinsurer" as set forth in the attached Contract captioned above:

1.25% of the Second Excess Catastrophe Reinsurance 1.50% of the Third Excess Catastrophe Reinsurance

This Agreement shall become effective on April 1, 1995, and shall continue in force until March 31, 1996, both days inclusive. However, if the "Reinsurer" under the attached Contract sustains no loss from loss occurrences commencing on or prior to December 31, 1995, this Agreement shall, upon notice from the Company prior to December 31, 1995, expire on December 31, 1995.

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The Subscribing Reinsurer's share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it

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being understood that the Subscribing Reinsurer shall in no event participate in the interests and liabilities of the other reinsurers.

In Witness Whereof, the Subscribing Reinsurer by its duly authorized representative has executed this Agreement as of the date undermentioned at:

Florham Park, New Jersey, this day of 199 .


Allmerica Re, A Division of The Hanover Insurance Company

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Interests and Liabilities Agreement

of

AXA Reinsurance Company
Wilmington, Delaware
(hereinafter referred to as the "Subscribing Reinsurer")

with respect to the

Second and Third
Property Excess Catastrophe
Reinsurance Contract
Effective: April 1, 1995

issued to and duly executed by

Mercury Casualty Company
Mercury Insurance Company
California Automobile Insurance Company
and

California General Underwriters Insurance Company, Inc. All of Los Angeles, California

The Subscribing Reinsurer hereby accepts the following percentage shares in the interests and liabilities of the "Reinsurer" as set forth in the attached Contract captioned above:

10.00% of the Second Excess Catastrophe Reinsurance 10.00% of the Third Excess Catastrophe Reinsurance

This Agreement shall become effective on April 1, 1995, and shall continue in force until March 31, 1996, both days inclusive. However, if the "Reinsurer" under the attached Contract sustains no loss from loss occurrences commencing on or prior to December 31, 1995, this Agreement shall, upon notice from the Company prior to December 31, 1995, expire on December 31, 1995.

The Subscribing Reinsurer's share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it

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being understood that the Subscribing Reinsurer shall in no event participate in the interests and liabilities of the other reinsurers.

In Witness Whereof, the Subscribing Reinsurer by its duly authorized representative has executed this Agreement as of the date undermentioned at:

New York, New York, this day of 199 .


AXA Reinsurance Company

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Interests and Liabilities Agreement

of

First Excess and Reinsurance Corporation Overland Park, Kansas


(hereinafter referred to as the "Subscribing Reinsurer")

with respect to the

Second and Third
Property Excess Catastrophe
Reinsurance Contract
Effective: April 1, 1995

issued to and duly executed by

Mercury Casualty Company
Mercury Insurance Company
California Automobile Insurance Company
and

California General Underwriters Insurance Company, Inc. All of Los Angeles, California

The Subscribing Reinsurer hereby accepts the following percentage shares in the interests and liabilities of the "Reinsurer" as set forth in the attached Contract captioned above:

9.00% of the Second Excess Catastrophe Reinsurance 10.00% of the Third Excess Catastrophe Reinsurance

This Agreement shall become effective on April 1, 1995, and shall continue in force until March 31, 1996, both days inclusive. However, if the "Reinsurer" under the attached Contract sustains no loss from loss occurrences commencing on or prior to December 31, 1995, this Agreement shall, upon notice from the Company prior to December 31, 1995, expire on December 31, 1995.

The Subscribing Reinsurer's share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it

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being understood that the Subscribing Reinsurer shall in no event participate in the interests and liabilities of the other reinsurers.

In Witness Whereof, the Subscribing Reinsurer by its duly authorized representative has executed this Agreement as of the date undermentioned at:

Overland Park, Kansas, this day of 199 .


First Excess and Reinsurance Corporation

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Interests and Liabilities Agreement

of

Kemper Reinsurance Company
Long Grove, Illinois
(hereinafter referred to as the "Subscribing Reinsurer")

with respect to the

Second and Third
Property Excess Catastrophe
Reinsurance Contract
Effective: April 1, 1995

issued to and duly executed by

Mercury Casualty Company
Mercury Insurance Company
California Automobile Insurance Company
and

California General Underwriters Insurance Company, Inc. All of Los Angeles, California

The Subscribing Reinsurer hereby accepts the following percentage shares in the interests and liabilities of the "Reinsurer" as set forth in the attached Contract captioned above:

0% of the Second Excess Catastrophe Reinsurance 6.00% of the Third Excess Catastrophe Reinsurance

This Agreement shall become effective on April 1, 1995, and shall continue in force until March 31, 1996, both days inclusive. However, if the "Reinsurer" under the attached Contract sustains no loss from loss occurrences commencing on or prior to December 31, 1995, this Agreement shall, upon notice from the Company prior to December 31, 1995, expire on December 31, 1995.

The Subscribing Reinsurer's share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it

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being understood that the Subscribing Reinsurer shall in no event participate in the interests and liabilities of the other reinsurers.

In Witness Whereof, the Subscribing Reinsurer by its duly authorized representative has executed this Agreement as of the date undermentioned at:

Long Grove, Illinois, this day of 199 .


Kemper Reinsurance Company

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Interests and Liabilities Agreement

of

Nationwide Mutual Insurance Company
Columbus, Ohio
(hereinafter referred to as the "Subscribing Reinsurer")

with respect to the

Second and Third
Property Excess Catastrophe
Reinsurance Contract
Effective: April 1, 1995

issued to and duly executed by

Mercury Casualty Company
Mercury Insurance Company
California Automobile Insurance Company
and

California General Underwriters Insurance Company, Inc. All of Los Angeles, California

The Subscribing Reinsurer hereby accepts the following percentage shares in the interests and liabilities of the "Reinsurer" as set forth in the attached Contract captioned above:

3.00% of the Second Excess Catastrophe Reinsurance 3.00% of the Third Excess Catastrophe Reinsurance

This Agreement shall become effective on April 1, 1995, and shall continue in force until March 31, 1996, both days inclusive. However, if the "Reinsurer" under the attached Contract sustains no loss from loss occurrences commencing on or prior to December 31, 1995, this Agreement shall, upon notice from the Company prior to December 31, 1995, expire on December 31, 1995.

The Subscribing Reinsurer's share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it

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being understood that the Subscribing Reinsurer shall in no event participate in the interests and liabilities of the other reinsurers.

In Witness Whereof, the Subscribing Reinsurer by its duly authorized representative has executed this Agreement as of the date undermentioned at:

Columbus, Ohio, this day of 199 .


Nationwide Mutual Insurance Company

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Interests and Liabilities Agreement

of

Prudential Reinsurance Company
Dover, Delaware
(hereinafter referred to as the "Subscribing Reinsurer")

with respect to the

Second and Third
Property Excess Catastrophe
Reinsurance Contract
Effective: April 1, 1995

issued to and duly executed by

Mercury Casualty Company
Mercury Insurance Company
California Automobile Insurance Company
and

California General Underwriters Insurance Company, Inc. All of Los Angeles, California

The Subscribing Reinsurer hereby accepts the following percentage shares in the interests and liabilities of the "Reinsurer" as set forth in the attached Contract captioned above:

13.00% of the Second Excess Catastrophe Reinsurance 0% of the Third Excess Catastrophe Reinsurance

This Agreement shall become effective on April 1, 1995, and shall continue in force until March 31, 1996, both days inclusive. However, if the "Reinsurer" under the attached Contract sustains no loss from loss occurrences commencing on or prior to December 31, 1995, this Agreement shall, upon notice from the Company prior to December 31, 1995, expire on December 31, 1995.

The Subscribing Reinsurer's share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it

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being understood that the Subscribing Reinsurer shall in no event participate in the interests and liabilities of the other reinsurers.

In Witness Whereof, the Subscribing Reinsurer by its duly authorized representative has executed this Agreement as of the date undermentioned at:

Newark, New Jersey, this day of 199 .


Prudential Reinsurance Company

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Interests and Liabilities Agreement

of

San Francisco Reinsurance Company
Novato, California
(hereinafter referred to as the "Subscribing Reinsurer")

with respect to the

Second and Third
Property Excess Catastrophe
Reinsurance Contract
Effective: April 1, 1995

issued to and duly executed by

Mercury Casualty Company
Mercury Insurance Company
California Automobile Insurance Company
and

California General Underwriters Insurance Company, Inc. All of Los Angeles, California

The Subscribing Reinsurer hereby accepts the following percentage shares in the interests and liabilities of the "Reinsurer" as set forth in the attached Contract captioned above:

0% of the Second Excess Catastrophe Reinsurance 6.00% of the Third Excess Catastrophe Reinsurance

This Agreement shall become effective on April 1, 1995, and shall continue in force until March 31, 1996, both days inclusive. However, if the "Reinsurer" under the attached Contract sustains no loss from loss occurrences commencing on or prior to December 31, 1995, this Agreement shall, upon notice from the Company prior to December 31, 1995, expire on December 31, 1995.

The Subscribing Reinsurer's share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it

E. W. BLANCH CO.

Reinsurance Services
Page 1 of 2


being understood that the Subscribing Reinsurer shall in no event participate in the interests and liabilities of the other reinsurers.

In Witness Whereof, the Subscribing Reinsurer by its duly authorized representative has executed this Agreement as of the date undermentioned at:

Novato, California, this day of 199 .


San Francisco Reinsurance Company

E. W. BLANCH CO.

Reinsurance Services
Page 2 of 2


Interests and Liabilities Agreement

of

Security Reinsurance Company
Farmington, Connecticut
(hereinafter referred to as the "Subscribing Reinsurer")

with respect to the

Second and Third
Property Excess Catastrophe
Reinsurance Contract
Effective: April 1, 1995

issued to and duly executed by

Mercury Casualty Company
Mercury Insurance Company
California Automobile Insurance Company
and

California General Underwriters Insurance Company, Inc. All of Los Angeles, California

The Subscribing Reinsurer hereby accepts the following percentage shares in the interests and liabilities of the "Reinsurer" as set forth in the attached Contract captioned above:

0.50% of the Second Excess Catastrophe Reinsurance 0.50% of the Third Excess Catastrophe Reinsurance

This Agreement shall become effective on April 1, 1995, and shall continue in force until March 31, 1996, both days inclusive. However, if the "Reinsurer" under the attached Contract sustains no loss from loss occurrences commencing on or prior to December 31, 1995, this Agreement shall, upon notice from the Company prior to December 31, 1995, expire on December 31, 1995.

The Subscribing Reinsurer's share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it

E. W. BLANCH CO.

Reinsurance Services
Page 1 of 2


being understood that the Subscribing Reinsurer shall in no event participate in the interests and liabilities of the other reinsurers.

In Witness Whereof, the Subscribing Reinsurer by its duly authorized representative has executed this Agreement as of the date undermentioned at:

Farmington, Connecticut, this day of 199 .


Security Reinsurance Company

E. W. BLANCH CO.

Reinsurance Services
Page 2 of 2


Interests and Liabilities Agreement

of

Signet Star Reinsurance Company
Wilmington, Delaware
(hereinafter referred to as the "Subscribing Reinsurer")

with respect to the

Second and Third
Property Excess Catastrophe
Reinsurance Contract
Effective: April 1, 1995

issued to and duly executed by

Mercury Casualty Company
Mercury Insurance Company
California Automobile Insurance Company
and

California General Underwriters Insurance Company, Inc. All of Los Angeles, California

The Subscribing Reinsurer hereby accepts the following percentage shares in the interests and liabilities of the "Reinsurer" as set forth in the attached Contract captioned above:

2.00% of the Second Excess Catastrophe Reinsurance 3.00% of the Third Excess Catastrophe Reinsurance

This Agreement shall become effective on April 1, 1995, and shall continue in force until March 31, 1996, both days inclusive. However, if the "Reinsurer" under the attached Contract sustains no loss from loss occurrences commencing on or prior to December 31, 1995, this Agreement shall, upon notice from the Company prior to December 31, 1995, expire on December 31, 1995.

The Subscribing Reinsurer's share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it

E. W. BLANCH CO.

Reinsurance Services
Page 1 of 2


being understood that the Subscribing Reinsurer shall in no event participate in the interests and liabilities of the other reinsurers.

In Witness Whereof, the Subscribing Reinsurer by its duly authorized representative has executed this Agreement as of the date undermentioned at:

Florham Park, New Jersey, this day of 199 .


Signet Star Reinsurance Company

E. W. BLANCH CO.

Reinsurance Services
Page 2 of 2


Interests and Liabilities Agreement

of

Sydney Reinsurance Corporation
Philadelphia, Pennsylvania
(hereinafter referred to as the "Subscribing Reinsurer")

with respect to the

Second and Third
Property Excess Catastrophe
Reinsurance Contract
Effective: April 1, 1995

issued to and duly executed by

Mercury Casualty Company
Mercury Insurance Company
California Automobile Insurance Company
and

California General Underwriters Insurance Company, Inc. All of Los Angeles, California

The Subscribing Reinsurer hereby accepts the following percentage shares in the interests and liabilities of the "Reinsurer" as set forth in the attached Contract captioned above:

4.25% of the Second Excess Catastrophe Reinsurance 3.00% of the Third Excess Catastrophe Reinsurance

This Agreement shall become effective on April 1, 1995, and shall continue in force until March 31, 1996, both days inclusive. However, if the "Reinsurer" under the attached Contract sustains no loss from loss occurrences commencing on or prior to December 31, 1995, this Agreement shall, upon notice from the Company prior to December 31, 1995, expire on December 31, 1995.

The Subscribing Reinsurer's share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it

E. W. BLANCH CO.

Reinsurance Services
Page 1 of 2


being understood that the Subscribing Reinsurer shall in no event participate in the interests and liabilities of the other reinsurers.

In Witness Whereof, the Subscribing Reinsurer by its duly authorized representative has executed this Agreement as of the date undermentioned at:

New York, New York, this day of 199 .


Sydney Reinsurance Corporation

E. W. BLANCH CO.

Reinsurance Services
Page 2 of 2


Interests and Liabilities Agreement

of

United Fire & Casualty Company
Cedar Rapids, Iowa
(hereinafter referred to as the "Subscribing Reinsurer")

with respect to the

Second and Third
Property Excess Catastrophe
Reinsurance Contract
Effective: April 1, 1995

issued to and duly executed by

Mercury Casualty Company
Mercury Insurance Company
California Automobile Insurance Company
and

California General Underwriters Insurance Company, Inc. All of Los Angeles, California

The Subscribing Reinsurer hereby accepts the following percentage shares in the interests and liabilities of the "Reinsurer" as set forth in the attached Contract captioned above:

1.00% of the Second Excess Catastrophe Reinsurance 1.00% of the Third Excess Catastrophe Reinsurance

This Agreement shall become effective on April 1, 1995, and shall continue in force until March 31, 1996, both days inclusive. However, if the "Reinsurer" under the attached Contract sustains no loss from loss occurrences commencing on or prior to December 31, 1995, this Agreement shall, upon notice from the Company prior to December 31, 1995, expire on December 31, 1995.

The Subscribing Reinsurer's share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it

E. W. BLANCH CO.

Reinsurance Services
Page 1 of 2


being understood that the Subscribing Reinsurer shall in no event participate in the interests and liabilities of the other reinsurers.

In Witness Whereof, the Subscribing Reinsurer by its duly authorized representative has executed this Agreement as of the date undermentioned at:

Cedar Rapids, Iowa, this day of 199 .


United Fire & Casualty Company

E. W. BLANCH CO.

Reinsurance Services
Page 2 of 2


Interests and Liabilities Agreement

of

USF RE Insurance Company
Boston, Massachusetts
(hereinafter referred to as the "Subscribing Reinsurer")

with respect to the

Second and Third
Property Excess Catastrophe
Reinsurance Contract
Effective: April 1, 1995

issued to and duly executed by

Mercury Casualty Company
Mercury Insurance Company
California Automobile Insurance Company
and

California General Underwriters Insurance Company, Inc. All of Los Angeles, California

The Subscribing Reinsurer hereby accepts the following percentage shares in the interests and liabilities of the "Reinsurer" as set forth in the attached Contract captioned above:

2.00% of the Second Excess Catastrophe Reinsurance 0% of the Third Excess Catastrophe Reinsurance

This Agreement shall become effective on April 1, 1995, and shall continue in force until March 31, 1996, both days inclusive. However, if the "Reinsurer" under the attached Contract sustains no loss from loss occurrences commencing on or prior to December 31, 1995, this Agreement shall, upon notice from the Company prior to December 31, 1995, expire on December 31, 1995.

The Subscribing Reinsurer's share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it

E. W. BLANCH CO.

Reinsurance Services
Page 1 of 2


being understood that the Subscribing Reinsurer shall in no event participate in the interests and liabilities of the other reinsurers.

In Witness Whereof, the Subscribing Reinsurer by its duly authorized representative has executed this Agreement as of the date undermentioned at:

Costa Mesa, California, this day of 199 .


USF RE Insurance Company

E. W. BLANCH CO.

Reinsurance Services
Page 2 of 2


Interests and Liabilities Agreement

of

Vesta Fire Insurance Corporation
Birmingham, Alabama
(hereinafter referred to as the "Subscribing Reinsurer")

with respect to the

Second and Third
Property Excess Catastrophe
Reinsurance Contract
Effective: April 1, 1995

issued to and duly executed by

Mercury Casualty Company
Mercury Insurance Company
California Automobile Insurance Company
and

California General Underwriters Insurance Company, Inc. All of Los Angeles, California

The Subscribing Reinsurer hereby accepts the following percentage shares in the interests and liabilities of the "Reinsurer" as set forth in the attached Contract captioned above:

40.00% of the Second Excess Catastrophe Reinsurance 25.00% of the Third Excess Catastrophe Reinsurance

This Agreement shall become effective on April 1, 1995, and shall continue in force until March 31, 1996, both days inclusive. However, if the "Reinsurer" under the attached Contract sustains no loss from loss occurrences commencing on or prior to December 31, 1995, this Agreement shall, upon notice from the Company prior to December 31, 1995, expire on December 31, 1995.

The Subscribing Reinsurer's share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it

E. W. BLANCH CO.

Reinsurance Services
Page 1 of 2


being understood that the Subscribing Reinsurer shall in no event participate in the interests and liabilities of the other reinsurers.

In Witness Whereof, the Subscribing Reinsurer by its duly authorized representative has executed this Agreement as of the date undermentioned at:

Birmingham, Alabama, this day of 199 .


Vesta Fire Insurance Corporation

E. W. BLANCH CO.

Reinsurance Services
Page 2 of 2


Interests and Liabilities Agreement

of

Winterthur Reinsurance Corporation of America New York, New York


(hereinafter referred to as the "Subscribing Reinsurer")

with respect to the

Second and Third
Property Excess Catastrophe
Reinsurance Contract
Effective: April 1, 1995

issued to and duly executed by

Mercury Casualty Company
Mercury Insurance Company
California Automobile Insurance Company
and

California General Underwriters Insurance Company, Inc. All of Los Angeles, California

The Subscribing Reinsurer hereby accepts the following percentage shares in the interests and liabilities of the "Reinsurer" as set forth in the attached Contract captioned above:

5.00% of the Second Excess Catastrophe Reinsurance 1.00% of the Third Excess Catastrophe Reinsurance

This Agreement shall become effective on April 1, 1995, and shall continue in force until March 31, 1996, both days inclusive. However, if the "Reinsurer" under the attached Contract sustains no loss from loss occurrences commencing on or prior to December 31, 1995, this Agreement shall, upon notice from the Company prior to December 31, 1995, expire on December 31, 1995.

The Subscribing Reinsurer's share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it

E. W. BLANCH CO.

Reinsurance Services
Page 1 of 2


being understood that the Subscribing Reinsurer shall in no event participate in the interests and liabilities of the other reinsurers.

In Witness Whereof, the Subscribing Reinsurer by its duly authorized representative has executed this Agreement as of the date undermentioned at:

New York, New York, this day of 199 .


Winterthur Reinsurance Corporation of America

E. W. BLANCH CO.

Reinsurance Services
Page 2 of 2


Interests and Liabilities Agreement

of

Various Lloyd's Underwriters
through
Patriot Re Corporation
Princeton, New Jersey
(hereinafter referred to as the "Subscribing Reinsurer")

with respect to the

Second and Third
Property Excess Catastrophe
Reinsurance Contract
Effective: April 1, 1995

issued to and duly executed by

Mercury Casualty Company
Mercury Insurance Company
California Automobile Insurance Company
and

California General Underwriters Insurance Company, Inc. All of Los Angeles, California

The Subscribing Reinsurer hereby accepts the following percentage shares in the interests and liabilities of the "Reinsurer" as set forth in the attached Contract captioned above:

0% of the Second Excess Catastrophe Reinsurance 1.50% of the Third Excess Catastrophe Reinsurance

This Agreement shall become effective on April 1, 1995, and shall continue in force until March 31, 1996, both days inclusive. However, if the "Reinsurer" under the attached Contract sustains no loss from loss occurrences commencing on or prior to December 31, 1995, this Agreement shall, upon notice from the Company prior to December 31, 1995, expire on December 31, 1995.

E. W. BLANCH CO.

Reinsurance Services
Page 1 of 2


The Subscribing Reinsurer's share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it

E. W. BLANCH CO.

Reinsurance Services
Page 2 of 2


being understood that the Subscribing Reinsurer shall in no event participate in the interests and liabilities of the other reinsurers.

In Witness Whereof, the Subscribing Reinsurer by its duly authorized representative has executed this Agreement as of the date undermentioned at:

Princeton, New Jersey, this day of 199 .


Patriot Re Corporation
(for and on behalf of Underwriters at Lloyd's as evidenced by the attached Contract)

E. W. BLANCH CO.

Reinsurance Services
Page 3 of 2


Interests and Liabilities Agreement

of

Renaissance Reinsurance Ltd.
Hamilton, Bermuda
(hereinafter referred to as the "Subscribing Reinsurer")

with respect to the

Second and Third
Property Excess Catastrophe
Reinsurance Contract
Effective: April 1, 1995

issued to and duly executed by

Mercury Casualty Company
Mercury Insurance Company
California Automobile Insurance Company
and

California General Underwriters Insurance Company, Inc. All of Los Angeles, California

The Subscribing Reinsurer hereby accepts the following percentage shares in the interests and liabilities of the "Reinsurer" as set forth in the attached Contract captioned above:

0% of the Second Excess Catastrophe Reinsurance 6.50% of the Third Excess Catastrophe Reinsurance

This Agreement shall become effective on April 1, 1995, and shall continue in force until March 31, 1996, both days inclusive. However, if the "Reinsurer" under the attached Contract sustains no loss from loss occurrences commencing on or prior to December 31, 1995, this Agreement shall, upon notice from the Company prior to December 31, 1995, expire on December 31, 1995.

The Subscribing Reinsurer's share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it

E. W. BLANCH CO.

Reinsurance Services
Page 1 of 2


being understood that the Subscribing Reinsurer shall in no event participate in the interests and liabilities of the other reinsurers.

In Witness Whereof, the Subscribing Reinsurer by its duly authorized representative has executed this Agreement as of the date undermentioned at:

Hamilton, Bermuda, this day of 199 .


Renaissance Reinsurance Ltd.

E. W. BLANCH CO.

Reinsurance Services
Page 2 of 2


Interests and Liabilities Agreement

of

Europa Re
Cologne, Germany
(hereinafter referred to as the "Subscribing Reinsurer")

with respect to the

Second and Third
Property Excess Catastrophe
Reinsurance Contract
Effective: April 1, 1995

issued to and duly executed by

Mercury Casualty Company
Mercury Insurance Company
California Automobile Insurance Company
and

California General Underwriters Insurance Company, Inc. All of Los Angeles, California

The Subscribing Reinsurer hereby accepts the following percentage shares in the interests and liabilities of the "Reinsurer" as set forth in the attached Contract captioned above:

0% of the Second Excess Catastrophe Reinsurance 2.00% of the Third Excess Catastrophe Reinsurance

This Agreement shall become effective on April 1, 1995, and shall continue in force until March 31, 1996, both days inclusive. However, if the "Reinsurer" under the attached Contract sustains no loss from loss occurrences commencing on or prior to December 31, 1995, this Agreement shall, upon notice from the Company prior to December 31, 1995, expire on December 31, 1995.

The Subscribing Reinsurer's share in the attached Contract shall be separate and apart from the shares of the other reinsurers, and shall not be joint with the shares of the other reinsurers, it

E. W. BLANCH CO.

Reinsurance Services
Page 1 of 2


being understood that the Subscribing Reinsurer shall in no event participate in the interests and liabilities of the other reinsurers.

In Witness Whereof, the Subscribing Reinsurer by its duly authorized representative has executed this Agreement as of the date undermentioned at:

Cologne, Germany, this day of 199 .


Europa Re

E. W. BLANCH CO.

Reinsurance Services
Page 2 of 2


Second and Third Property Excess Catastrophe Reinsurance Contract Effective: April 1, 1995

issued to

Mercury Casualty Company Mercury Insurance Company California Automobile Insurance Company and California General Underwriters Insurance Company, Inc. All of Los Angeles, California

E. W. Blanch Co.

Reinsurance Services

3500 West 80th Street




Minneapolis, Minnesota 55431




Second and Third Property Excess Catastrophe Reinsurance Contract Effective: April 1, 1995

issued to

Mercury Casualty Company Mercury Insurance Company California Automobile Insurance Company and California General Underwriters Insurance Company, Inc. All of Los Angeles, California

Second Excess Catastrophe Reinsurance

                   Reinsurers                                Participations

Abeille-Paix Management, Incorporated
  (for Abeille Reassurances, U.S. Branch)                     4.00%
Allmerica Re, A Division of The Hanover Insurance Company     1.25
AXA Reinsurance Company                                      10.00
First Excess and Reinsurance Corporation                      9.00
Nationwide Mutual Insurance Company                           3.00
Prudential Reinsurance Company                               13.00
Security Reinsurance Company                                  0.50
Signet Star Reinsurance Company                               2.00
Sydney Reinsurance Corporation                                4.25
United Fire & Casualty Company                                1.00
USF RE Insurance Company                                      2.00
Vesta Fire Insurance Corporation                             40.00
Winterthur Reinsurance Corporation of America                 5.00

Total                                                        95.00% part of
                                                             100% share in
                                                             the interests and
                                                             liabilities of the
                                                             "Reinsurer"


Page 1 of 2



Page 2 of 2


Third Excess Catastrophe Reinsurance

                   Reinsurers                                Participations

Allmerica Re, A Division of The Hanover Insurance Company     1.50%
AXA Reinsurance Company                                      10.00
First Excess and Reinsurance Corporation                     10.00
Kemper Reinsurance Company                                    6.00
Nationwide Mutual Insurance Company                           3.00
Patriot Re Corporation (for Various Lloyd's Underwriters)     1.50
Renaissance Reinsurance Ltd.                                  6.50
San Francisco Reinsurance Company                             6.00
Security Reinsurance Company                                  0.50
Signet Star Reinsurance Company                               3.00
Sydney Reinsurance Corporation                                3.00
United Fire & Casualty Company                                1.00
Vesta Fire Insurance Corporation                             25.00
Winterthur Reinsurance Corporation of America                 1.00

Through Swire Blanch Europe
Europa Re                                                     2.00

Through Nelson Hurst Reinsurance Brokers Limited
Lloyd's Underwriters and Companies
  Per Signing Schedule(s)                                    15.00

Total                                                        95.00% part of
                                                             100% share in
                                                             the interests and
                                                             liabilities of the
                                                             "Reinsurer"

E. W. Blanch Co.

Reinsurance Services

3500 West 80th Street


Page 3 of 2


Minneapolis, Minnesota 55431


Page 4 of 2

Exhibit 23.1

The Board of Directors
Mercury General Corporation

We consent to incorporation by reference in the registration statement No. 33-4461 on Form S-8 of Mercury General Corporation of our reports dated March 22, 1996, relating to the consolidated balance sheets of Mercury General Corporation and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of income, shareholders' equity, and cash flows and related schedules for each of the years in the three-year period ended December 31, 1995, which reports appear in the December 31, 1995 annual report on Form 10-K of Mercury General Corporation.

KPMG PEAT MARWICK LLP

Los Angeles, California

March 22, 1996


ARTICLE 7
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MERCURY GENERAL CORPORATION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
MULTIPLIER: 1,000


PERIOD TYPE YEAR
FISCAL YEAR END DEC 31 1995
PERIOD START JAN 01 1995
PERIOD END DEC 31 1995
DEBT HELD FOR SALE 779,783
DEBT CARRYING VALUE 0
DEBT MARKET VALUE 0
EQUITIES 114,915
MORTGAGE 0
REAL ESTATE 0
TOTAL INVEST 923,194
CASH 2,872
RECOVER REINSURE 0
DEFERRED ACQUISITION 33,809
TOTAL ASSETS 1,081,656
POLICY LOSSES 253,546
UNEARNED PREMIUMS 168,404
POLICY OTHER 0
POLICY HOLDER FUNDS 0
NOTES PAYABLE 25,000
PREFERRED MANDATORY 0
PREFERRED 0
COMMON 40,895
OTHER SE 524,293
TOTAL LIABILITY AND EQUITY 1,081,656
PREMIUMS 616,326
INVESTMENT INCOME 62,964
INVESTMENT GAINS 1,048
OTHER INCOME 1,501
BENEFITS 416,556
UNDERWRITING AMORTIZATION 128,743
UNDERWRITING OTHER 22,017
INCOME PRETAX 114,323
INCOME TAX 24,022
INCOME CONTINUING 90,301
DISCONTINUED 0
EXTRAORDINARY 0
CHANGES 0
NET INCOME 90,301
EPS PRIMARY 3.31
EPS DILUTED 0
RESERVE OPEN 223,392
PROVISION CURRENT 423,264
PROVISION PRIOR (6,708)
PAYMENTS CURRENT 243,294
PAYMENTS PRIOR 145,664
RESERVE CLOSE 250,990
CUMULATIVE DEFICIENCY 6,708

Exhibit 28.1

Form 2
ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY AND ITS

AFFILIATED COMPANIES

SCHEDULE P - ANALYSIS OF LOSSES AND LOSS EXPENSES
Notes to Schedule P

(1) The Parts of Schedule P:                                       (3) Reinsurance A, B, C, and D (lines N to Q) are:
   Part 1 - detailed information on losses and loss expenses.       Reinsurance A = nonproportional property (1988 and subsequent)
   Part 2 - history of incurred losses and allocated expenses.      Reinsurance B = nonproportional liability (1988 and subsequent)
   Part 3 - history of loss and allocated expense payments.         Reinsurance C = financial lines (1988 and subsequent)
   Part 4 - history of bulk and incurred-but-not reported
            reserves.                                               Reinsurance D = old Schedule O line 30 (1987 and prior)
   Part 5 - history of claims.
   Part 6 - history of premiums earned.
   Part 7 - history of loss sensitive contracts.
   Schedule P Interrogatories

(2) Lines of business A through M, R, and S are groupings of the lines of business used on the state page.

SCHEDULE P - PART 1 - SUMMARY
($000 omitted)

--------------------------------------------------------------------------------------------------------------------
                           Premiums Earned                                          Loss and Loss Expense Payments
      1       ------------------------------------------------------------------------------------------------------
    Years           2             3             4                Loss Payments                 Allocated Loss
   in Which                                                                                   Expense Payments
Premiums Were                                           ------------------------------------------------------------
  Earned and     Direct                        Net            5              6              7              8
 Losses Were       and          Ceded        (2 - 3)        Direct                        Direct
   Incurred      Assumed                                 and Assumed       Ceded       and Assumed       Ceded
--------------------------------------------------------------------------------------------------------------------
 1. Prior...... ..X X X... .....X X X... .....X X X... ............61 .............. ............49 ..............
 2. 1986....... ...240,107 ........4,306 ......235,801 .......160,408 .........7,476 ........11,951 ............46
 3. 1987....... ...339,461 ........3,035 ......336,426 .......218,463 ...........658 ........17,376 ...........234
 4. 1988....... ...417,990 ........5,867 ......412,123 .......267,715 .........1,948 ........21,842 ...........297
 5. 1989....... ...477,732 ........5,300 ......472,432 .......283,691 ...........669 ........22,399 ............59
 6. 1990....... ...482,940 ........5,623 ......477,317 .......284,441 ...........285 ........22,547 ...........193
 7. 1991....... ...477,041 ........3,509 ......473,532 .......255,178 ...........289 ........23,523 ...........371
 8. 1992....... ...424,116 ........2,595 ......421,521 .......242,005 ...........761 ........23,732 ............23
 9. 1993....... ...478,323 ........4,227 ......474,096 .......249,345 ...........768 ........21,801 ............65
10. 1994....... ...530,709 ........1,318 ......529,391 .......267,482 .........8,084 ........11,400 ............23
11. 1995....... ...619,770 ........3,444 ......616,326 .......211,586 .........3,371 .........2,968 ............86
--------------------------------------------------------------------------------------------------------------------
12. Totals..... ..X X X... .....X X X... .....X X X... .....2,440,376 ........24,309 .......179,588 .........1,397
--------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------

      1       --------------------------------------------       12
    Years           9              10             11
   in Which                                                  Number of
Premiums Were    Salvage      Unallocated       Total          Claims
  Earned and       and            Loss         Net Paid      Reported -
 Losses Were   Subrogation      Expense       (5 - 6 + 7     Direct and
   Incurred      Received       Payments      - 8 + 10)       Assumed
-------------------------------------------------------------------------
 1. Prior.... ...........15 ............(9)...........101 .....X X X.....
 2. 1986..... .......13,763 ........11,817 .......176,654 .....X X X.....
 3. 1987..... .......20,166 ........19,479 .......254,426 .....X X X.....
 4. 1988..... .......25,714 ........26,684 .......313,996 .....X X X.....
 5. 1989..... .......27,091 ........31,652 .......337,014 .....X X X.....
 6. 1990..... .......28,084 ........35,981 .......342,491 .....X X X.....
 7. 1991..... .......27,148 ........27,824 .......305,865 .....X X X.....
 8. 1992..... .......28,000 ........32,196 .......297,149 .....X X X.....
 9. 1993..... .......29,984 ........34,905 .......305,218 .....X X X.....
10. 1994..... .......33,999 ........40,806 .......311,581 .....X X X.....
11. 1995..... .......22,242 ........33,698 .......244,795 .....X X X.....
-------------------------------------------------------------------------
12. Totals... ......256,206 .......295,033 .....2,889,291 .....X X X.....
-------------------------------------------------------------------------

- - ----------------------------------------------------------------------------------------------------------------------------------
                                      Losses Unpaid                                     Allocated Loss Expenses Unpaid
                ------------------------------------------------------------------------------------------------------------------
                          Case Basis                  Bulk + IBNR                  Case Basis                    Bulk + IBNR
                ------------------------------------------------------------------------------------------------------------------
                     13            14            15             16             17             18             19             20
                   Direct                      Direct                        Direct                        Direct
                 and Assumed      Ceded      and Assumed      Ceded       and Assumed       Ceded       and Assumed       Ceded
- - ----------------------------------------------------------------------------------------------------------------------------------
   1. Prior.... ...........10 ............. ............. .............. .............. .............. .............. .............
   2. 1986..... ............6 ............. ............. .............. .............. .............. .............. .............
   3. 1987..... ...........40 ............. ............7 .............. ............22 .............. .............. .............
   4. 1988..... ...........53 ............. ............4 .............. ............34 .............. .............. .............
   5. 1989..... ..........303 ............. ...........12 .............. ...........105 .............. .............. .............
   6. 1990..... ..........372 ...........91 ...........15 .............. ...........180 .............. .............. .............
   7. 1991..... ........1,285 ...........25 ...........77 .............. ...........508 .............. ............10 .............
   8. 1992..... ........1,769 ..........142 ..........111 .............. .........1,086 .............. ............41 .............
   9. 1993..... ........8,007 ...........45 ..........188 .............. .........4,536 .............. ............59 .............
  10. 1994..... .......34,479 ........1,474 ..........987 .............. ........14,969 .............. ...........131 .............
  11. 1995..... ......111,015 ..........778 .......32,527 .............. ........19,331 .............. .........4,634 .............
- - ----------------------------------------------------------------------------------------------------------------------------------
  12. Totals... ......157,339 ........2,555 .......33,928 .............. ........40,771 .............. .........4,875 .............
- - ----------------------------------------------------------------------------------------------------------------------------------
  -------------------------------------------------------------------------

                       21             22             23            24
                                                                Number of
                    Salvage      Unallocated       Total         Claims
                      and            Loss        Net Losses   Outstanding -
                  Subrogation      Expenses     and Expenses     Direct
                  Anticipated       Unpaid         Unpaid      and Assumed
  -------------------------------------------------------------------------
   1. Prior.... ............... .............1 ............11 ....X X X....
   2. 1986..... ............... .............. ............ 6 ....X X X....
   3. 1987..... ............... .............2 ............71 ....X X X....
   4. 1988..... ............... .............4 ............95 ....X X X....
   5. 1989..... ............... ............18 ...........438 ....X X X....
   6. 1990..... ............... ............19 ...........495 ....X X X....
   7. 1991..... ............... ............80 .........1,935 ....X X X....
   8. 1992..... ............643 ...........165 .........3,030 ....X X X....
   9. 1993..... ..........1,291 ...........622 ........13,367 ....X X X....
  10. 1994..... ..........3,409 .........2,480 ........51,572 ....X X X....
  11. 1995..... .........23,384 ........13,237 .......179,966 ....X X X....
  -------------------------------------------------------------------------
  12. Totals... .........28,727 ........16,628 .......250,986 ....X X X....
  -------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------------------
                          Total Losses and                    Loss and Loss Expense Percentage             Discount for Time
                       Loss Expenses Incurred                    (Incurred/Premiums Earned)                 Value of Money
              -------------------------------------------------------------------------------------------------------------------
                   25            26            27             28             29             30             31             32
                 Direct                                     Direct                                                       Loss
               and Assumed      Ceded          Net       and Assumed       Ceded           Net            Loss         Expense
---------------------------------------------------------------------------------------------------------------------------------
 1. Prior.... ....X X X.... ....X X X.... ....X X X.... ....X X X..... ....X X X..... ....X X X..... .............. .............
 2. 1986..... ......184,182 ........7,522 ......176,660 ..........76.7 .........174.7 ..........74.9 .............. .............
 3. 1987..... ......255,389 ..........892 ......254,497 ..........75.2 ..........29.4 ..........75.6 .............. .............
 4. 1988..... ......316,336 ........2,245 ......314,091 ..........75.7 ..........38.3 ..........76.2 .............. .............
 5. 1989..... ......338,180 ..........728 ......337,452 ..........70.8 ..........13.7 ..........71.4 .............. .............
 6. 1990..... ......343,555 ..........569 ......342,986 ..........71.1 ..........10.1 ..........71.9 .............. .............
 7. 1991..... ......308,485 ..........685 ......307,800 ..........64.7 ..........19.5 ..........65.0 .............. .............
 8. 1992..... ......301,105 ..........926 ......300,179 ..........71.0 ..........35.7 ..........71.2 .............. .............
 9. 1993..... ......319,463 ..........878 ......318,585 ..........66.8 ..........20.8 ..........67.2 .............. .............
10. 1994..... ......372,734 ........9,581 ......363,153 ..........70.2 .........726.8 ..........68.6 .............. .............
11. 1995..... ......428,996 ........4,235 ......424,761 ..........69.2 .........123.0 ..........68.9 .............. .............

---------------------------------------------------------------------------------------------------------------------------------
12. Totals... ....X X X.... ....X X X.... ....X X X.... ....X X X..... ....X X X..... ....X X X..... .............. .............

---------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------
                                Net Balance Sheet Reserves
                     33               After Discount
               Inter-Company  -----------------------------
                  Pooling           34             35
               Participation      Losses     Loss Expenses
                 Percentage       Unpaid         Unpaid
-----------------------------------------------------------
 1. Prior.... ......X X X.... ............10 .............1
 2. 1986..... ............... .............6 ..............
 3. 1987..... ............... ............47 ............24
 4. 1988..... ............... ............57 ............38
 5. 1989..... ............... ...........315 ...........123
 6. 1990..... ............... ...........296 ...........199
 7. 1991..... ............... .........1,337 ...........598
 8. 1992..... ............... .........1,738 ........ 1,292
 9. 1993..... ............... .........8,150 ........ 5,217
10. 1994..... ............... ........33,992 ........17,580
11. 1995..... ............... .......142,764 ........37,202
-----------------------------------------------------------
12. Totals... .....X X X..... .......188,712 ........62,274
-----------------------------------------------------------

74

Form 2

ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY AND ITS
AFFILIATED COMPANIES

SCHEDULE P - PART 2 - SUMMARY

- - --------------------------------------------------------------------------------------------------------------------------------
        1                                       Incurred Losses and Allocated Expenses Reported At Year End ($000 omitted)
  Years in Which  --------------------------------------------------------------------------------------------------------------
   Losses Were        2             3             4             5             6             7             8             9
    Incurred        1986          1987          1988          1989          1990          1991          1992          1993
- - --------------------------------------------------------------------------------------------------------------------------------
 1.  Prior ...   .....26,451   .....30,841   .....31,800   .....32,890   .....32,373   .....31,760   .....31,010   ..... 31,021
 2.  1986 ....   ....166,524   ....167,942   ....166,459   ....166,514   ....165,173   ....165,175   ....164,598   ....164,466
 3.  1987 ....   ...X X X...   ....249,267   ....234,490   ....234,213   ....236,678   ....236,909   ....234,832   ....234,724
 4.  1988 ....   ...X X X...   ...X X X...   ....316,583   ....293,200   ....290,989   ....291,523   ....286,996   ....286,686
 5.  1989 ....   ...X X X...   ...X X X...   ...X X X...   ....349,929   ....313,602   ....311,801   ....306,010   ....303,732
 6.  1990 ....   ...X X X...   ...X X X...   ...X X X...   ...X X X...   ....346,720   ....320,972   ....308,956   ....306,110
 7.  1991 ....   ...X X X...   ...X X X...   ...X X X...   ...X X X...   ...X X X...   ....328,070   ....287,398   ....281,475
 8.  1992 ....   ...X X X...   ...X X X...   ...X X X...   ...X X X...   ...X X X...   ...X X X...   ....291,957   ....270,877
 9.  1993 ....   ...X X X...   ...X X X...   ...X X X...   ...X X X...   ...X X X...   ...X X X...   ...X X X...   ....288,766
10.  1994 ....   ...X X X...   ...X X X...   ...X X X...   ...X X X...   ...X X X...   ...X X X...   ...X X X...   ...X X X...
11.  1995 ....   ...X X X...   ...X X X...   ...X X X...   ...X X X...   ...X X X...   ...X X X...   ...X X X...   ...X X X...
- - --------------------------------------------------------------------------------------------------------------------------------
12.  Totals ...................................................................................................................
- - --------------------------------------------------------------------------------------------------------------------------------

- - ----------------------------------------------------------------------
        1                                         Development
  Years in Which  ----------------------------------------------------
   Losses Were           10            11           12           13
    Incurred            1994          1995       One Year     Two Year
- - ----------------------------------------------------------------------
 1.  Prior ...    .....31,282   .....31,358   .........76   ........337
 2.  1986 ....    ....164,868   ....164,843   ........(25)  ........377
 3.  1987 ....    ....235,115   ....235,016   ........(99)  ........292
 4.  1988 ....    ....287,441   ....287,403   ........(38)  ........717
 5.  1989 ....    ....305,644   ....305,782   ........138   ......2,050
 6.  1990 ....    ....307,134   ....306,986   .......(148)  ........876
 7.  1991 ....    ....279,221   ....279,896   ........675   .....(1,579)
 8.  1992 ....    ....269,732   ....267,818   .....(1,913)  .....(3,059)
 9.  1993 ....    ....278,565   ....283,058   ......4,493   .....(5,708)
10.  1994 ....    ....327,465   ....319,867   .....(7,597)  ...X X X...
11.  1995 ....    ...X X X...   ....377,825   ...X X X...   ...X X X...
- - ------------------------------------------------------------------------
12.  Totals .......................................(4,438)       (5,696)
- - ------------------------------------------------------------------------

SCHEDULE P - PART 3 - SUMMARY

  -------------------------------------------------------------------------------------------------------------------------

         1                                         Cumulative Paid Losses and Allocated Expenses At Year End ($000 omitted)
   Years in Which    ------------------------------------------------------------------------------------------------------
    Losses Were           2            3             4             5             6             7             8             9
     Incurred           1986         1987          1988          1989          1990          1991          1992          1993

  ---------------------------------------------------------------------------------------------------------------------------------
  1.  Prior ...     ....000....   .....16,413   .....25,137   .....29,024   .....31,064   .....31,163   .....31,216   .....31,237
  2.  1986 ....     .....75,554   ....133,737   ....152,045   ....158,747   ....162,375   ....164,101   ....164,590   ....164,670
  3.  1987 ....     ...X X X...   ....110,820   ....190,234   ....214,262   ....226,587   ....233,005   ....234,431   ....234,929
  4.  1988 ....     ...X X X...   ...X X X...   ....132,377   ....230,702   ....265,865   ....279,240   ....284,859   ....286,959
  5.  1989 ....     ...X X X...   ...X X X...   ...X X X...   ....145,298   ....250,389   ....284,974   ....298,622   ....302,988
  6.  1990 ....     ...X X X...   ...X X X...   ...X X X...   ...X X X...   ....146,974   ....259,117   ....292,452   ....301,682
  7.  1991 ....     ...X X X...   ...X X X...   ...X X X...   ...X X X...   ...X X X...   ....148,021   ....238,353   ....266,220
  8.  1992 ....     ...X X X...   ...X X X...   ...X X X...   ...X X X...   ...X X X...   ...X X X...   ....141,704   ....225,014
  9.  1993 ....     ...X X X...   ...X X X...   ...X X X...   ...X X X...   ...X X X...   ...X X X...   ...X X X...   ....153,951
 10.  1994 ....     ...X X X...   ...X X X...   ...X X X...   ...X X X...   ...X X X...   ...X X X...   ...X X X...   ...X X X...
 11.  1995 ....     ...X X X...   ...X X X...   ...X X X...   ...X X X...   ...X X X...   ...X X X...   ...X X X...   ...X X X...
-----------------------------------------------------------------------------------------------------------------------------------

  ------------------------------------------------------------------------
                                                    12            13
         1                                       Number of     Number of
   Years in Which  ---------------------------    Claims        Claims
    Losses Were        10             11        Closed With      Closed
     Incurred         1994           1995           Loss      Without Loss
                                                  Payment       Payment
  ------------------------------------------------------------------------
  1.  Prior ...    .....31,238    .....31,348   ...X X X...   ...X X X...
  2.  1986 ....    ....164,859    ....164,837   ...X X X...   ...X X X...
  3.  1987 ....    ....234,989    ....234,947   ...X X X...   ...X X X...
  4.  1988 ....    ....287,306    ....287,312   ...X X X...   ...X X X...
  5.  1989 ....    ....304,797    ....305,362   ...X X X...   ...X X X...
  6.  1990 ....    ....305,240    ....306,510   ...X X X...   ...X X X...
  7.  1991 ....    ....275,823    ....278,041   ...X X X...   ...X X X...
  8.  1992 ....    ....256,290    ....264,953   ...X X X...   ...X X X...
  9.  1993 ....    ....240,495    ....270,313   ...X X X...   ...X X X...
 10.  1994 ....    ....177,134    ....270,775   ...X X X...   ...X X X...
 11.  1995 ....    ...X X X...    ....211,097   ...X X X...   ...X X X...
--------------------------------------------------------------------------

SCHEDULE P - PART 4 - SUMMARY

 --------------------------------------------------------------------------------------------------------------------------------
        1                 Bulk and Incurred But Not Reported Reserves on Losses and Allocated Expenses at Year End ($000 omitted)
  Years in Which  ---------------------------------------------------------------------------------------------------------------
     Losses          2           3           4          5           6         7           8          9         10         11
  Were Incurred    1986        1987        1988       1989         1990      1991        1992       1993      1994       1995
 --------------------------------------------------------------------------------------------------------------------------------
 1.   Prior ..  ....4,393   ....3,260   ....1,410   ......956   ........2   .......1   .......1   ........   ........   .......
 2.   1986 ...  ...36,485   ....9,881   ....3,394   ....2,384   .......77   .......3   .......2   ........   ........   .......
 3.   1987 ...  ..X X X..   ...55,237   ...10,006   ....3,907   ....2,463   ...1,186   .......9   .......4   ......11   ......7
 4.   1988 ...  ..X X X..   ..X X X..   ...74,966   ...14,710   ....6,752   ...3,414   ......23   ......18   .......2   ......4
 5.   1989 ...  ..X X X..   ..X X X..   ..X X X..   ...79,435   ...15,048   ...4,908   .....457   ......32   ......17   .....12
 6.   1990 ...  ..X X X..   ..X X X..   ..X X X..   ..X X X..   ...63,399   ..11,203   ...2,240   .....276   .....116   .....15
 7.   1991 ...  ..X X X..   ..X X X..   ..X X X..   ..X X X..   ..X X X..   ..54,608   ...7,903   .....681   .....207   .....87
 8.   1992 ...  ..X X X..   ..X X X..   ..X X X..   ..X X X..   ..X X X..   ..X X X.   ..38,545   ...4,004   .....415   ....152
 9.   1993 ...  ..X X X..   ..X X X..   ..X X X..   ..X X X..   ..X X X..   ..X X X.   ..X X X.   ..26,419   ...1,193   ....247
10.   1994 ...  ..X X X..   ..X X X..   ..X X X..   ..X X X..   ..X X X..   ..X X X.   ..X X X.   ..X X X.   ..31,953   ..1,118
11.   1995 ...  ..X X X..   ..X X X..   ..X X X..   ..X X X..   ..X X X..   ..X X X.   ..X X X.   ..X X X.   ..X X X.   .37,161
---------------------------------------------------------------------------------------------------------------------------------

75

Form 2

ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY AND ITS
AFFILIATED COMPANIES

SCHEDULE P - PART 1A - HOMEOWNERS/FARMOWNERS

                                                     ($000 omitted)
- - ----------------------------------------------------------------------------------------------------------------------
       1                    Premiums Earned                                             Loss and Loss Expense Payments
               -------------------------------------------------------------------------------------------------------
     Years           2             3             4              Loss Payments                   Allocated Loss
    in Which                                                                                   Expense Payments
 Premiums Were                                           -----------------------------------------------------------
   Earned and     Direct                        Net            5              6             7              8
  Losses Were       and          Ceded        (2 - 3)        Direct                       Direct
    Incurred      Assumed                                 and Assumed       Ceded       and Assumed       Ceded
 ---------------------------------------------------------------------------------------------------------------------
  1. Prior         X X X         X X X         X X X                30                             4
  2. 1986             1,769           192         1,577          1,538            331            206
  3. 1987             1,828           180         1,648          1,050             93            102
  4. 1988             1,552           144         1,408          1,219            237            140
  5. 1989             1,228           107         1,121            380             35             49
  6. 1990               970           120           850            354              2             35
  7. 1991               889           107           782            388              8             95
  8. 1992               761           171           590            344             20             39
  9. 1993             2,256           605         1,651          1,280             86            126              1
 10. 1994             5,434         1,136         4,298          1,796             29            135              1
 11. 1995             5,135           686         4,449          1,576            217            217             45
 ---------------------------------------------------------------------------------------------------------------------
 12. Totals        X X X         X X X         X X X             9,955          1,058          1,148             47
 ---------------------------------------------------------------------------------------------------------------------

- - --------------------------------------------------------------------------
       1
               --------------------------------------------
     Years           9              10             11             12
    in Which                                                  Number of
 Premiums Were    Salvage      Unallocated       Total          Claims
   Earned and       and            Loss         Net Paid      Reported -
  Losses Were   Subrogation      Expense       (5 - 6 + 7     Direct and
    Incurred      Received       Payments      - 8 + 10)       Assumed
  -------------------------------------------------------------------------
  1. Prior                                2             36      X X X
  2. 1986                 25             34          1,447            523
  3. 1987                 48            107          1,166            479
  4. 1988                 15            103          1,225            450
  5. 1989                                87            481            181
  6. 1990                                85            472            163
  7. 1991                  2             40            515            200
  8. 1992                                93            456            161
  9. 1993                 16            267          1,586            468
 10. 1994                 23            337          2,238            986
 11. 1995                 11            216          1,747          1,351
 -------------------------------------------------------------------------
 12. Totals              140          1,371         11,369      X X X
 -------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------------------
                                    Losses Unpaid                                     Allocated Loss Expenses Unpaid
              -------------------------------------------------------------------------------------------------------------------
                        Case Basis                  Bulk + IBNR                  Case Basis                    Bulk + IBNR
              -------------------------------------------------------------------------------------------------------------------
                   13            14            15             16             17             18             19             20

                 Direct                      Direct                        Direct                        Direct
               and Assumed      Ceded      and Assumed      Ceded       and Assumed       Ceded       and Assumed       Ceded
---------------------------------------------------------------------------------------------------------------------------------
 1. Prior
 2. 1986
 3. 1987
 4. 1988                (3)
 5. 1989
 6. 1990
 7. 1991               100            25            48                             1                             5
 8. 1992
 9. 1993                (1)           26                                           2
10. 1994               149                         115                            16                             9
11. 1995               677             3           333                            58                            33
---------------------------------------------------------------------------------------------------------------------------------
12. Totals             922            54           496                            77                            47
---------------------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------

                     21             22             23            24
                                                              Number of
                  Salvage      Unallocated       Total         Claims
                    and            Loss        Net Losses   Outstanding -
                Subrogation      Expenses     and Expenses   Direct and
                Anticipated       Unpaid         Unpaid        Assumed
--------------------------------------------------------------------------
 1. Prior
 2. 1986
 3. 1987
 4. 1988                                                (3)            1
 5. 1989
 6. 1990
 7. 1991                                               129             1
 8. 1992                                                               1
 9. 1993                                               (25)            1
10. 1994                                               289            18
11. 1995                                             1,098           272
-------------------------------------------------------------------------
12. Totals                                           1,488           294
-------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------
                           Total Losses and                    Loss and Loss Expense Percentage            Discount for Time
                         Loss Expenses Incurred                   (Incurred/Premiums Earned)                Value of Money
              --------------------------------------------------------------------------------------------------------------------
                   25            26            27             28             29             30             31             32

                 Direct                                     Direct                                                       Loss
               and Assumed      Ceded          Net       and Assumed       Ceded           Net            Loss         Expense
----------------------------------------------------------------------------------------------------------------------------------
 1. Prior         X X X         X X X         X X X         X X X          X X X          X X X
 2. 1986             1,778           331         1,447          100.5          172.4           91.8
 3. 1987             1,259            93         1,166           68.9           51.7           70.8
 4. 1988             1,459           237         1,222           94.0          164.6           86.8
 5. 1989               516            35           481           42.0           32.7           42.9
 6. 1990               474             2           472           48.9            1.7           55.5
 7. 1991               677            33           644           76.2           30.8           82.4
 8. 1992               476            20           456           62.5           11.7           77.3
 9. 1993             1,674           113         1,561           74.2           18.7           94.5
10. 1994             2,557            30         2,527           47.1            2.6           58.8
11. 1995             3,110           265         2,845           60.6           38.6           63.9
----------------------------------------------------------------------------------------------------------------------------------
12. Totals        X X X         X X X         X X X         X X X          X X X          X X X
----------------------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------
                                Net Balance Sheet Reserves
                     33               After Discount
                              -----------------------------
               Inter-Company        34             35
                  Pooling                         Loss
               Participation      Losses        Expenses
                 Percentage       Unpaid         Unpaid
-----------------------------------------------------------
 1. Prior          X X X
 2. 1986
 3. 1987
 4. 1988                                 (3)
 5. 1989
 6. 1990
 7. 1991                                123              6
 8. 1992
 9. 1993                                (27)             2
10. 1994                                264             25
11. 1995                              1,007             91
-----------------------------------------------------------
12. Totals         X X X              1,364            124
-----------------------------------------------------------

76

Form 2

ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY AND ITS
AFFILIATED COMPANIES

SCHEDULE P - PART 1B - PRIVATE PASSENGER AUTO LIABILITY/MEDICAL

                                                                      ($000 omitted)
- - -----------------------------------------------------------------------------------------------------------------------------------
      1                    Premiums Earned                                        Loss and Loss Expense Payments
              ---------------------------------------------------------------------------------------------------------------------
    Years           2            3            4             Loss Payments           Allocated Loss            9            10
   in Which                                                                        Expense Payments
Premiums Were                                        ---------------------------------------------------   Salvage    Unallocated
  Earned and     Direct                      Net          5             6           7             8          and          Loss
 Losses Were       and         Ceded       (2 - 3)      Direct                    Direct                 Subrogation    Expense
   Incurred      Assumed                             and Assumed      Ceded    and Assumed      Ceded      Received     Payments
- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior ... ....X X X...  ...X X X...  ...X X X...   .......(11) ...........  .........31  ............  ........15  ........(12)
 2. 1986 .... .....131,964  ......2,713  ....129,251   ....99,891  ......4,781  ......9,434  ..........46  .....2,455  ......7,114
 3. 1987 .... .....192,629  ......1,561  ....191,068   ..137,4161  ........151  .....13,523  .........158  .....3,840  .....11,329
 4. 1988 .... .....256,356  ......4,210  ....252,146   ...171,788  .........60  .....18,087  ..........67  .....4,961  .....16,932
 5. 1989 .... .....306,827  ......3,878  ....302,949  ....185.772  .........51  .....18,791  ..........26  .....4,617  .....19,880
 6. 1990 .... .....315,974  ......4,098  ....311,876  ....193,732  ........190  .....20,404  .........150  .....4,887  .....24,955
 7. 1991 .... .....323,054  ......1,821  ....321,233  ....168,655  ........214  .....21,271  .........358  .....4,294  .....17,935
 8. 1992 .... .....295,654  ......1,116  ....294,538  ....154,641  ........163  .....21,420  ...........9  .....4,096  .....17,325
 9. 1993 .... .....327,184  ......1,281  ....325,903  ....149,664  ........210  .....18,636  ..........33  .....3,913  .....20,061
10. 1994 .... .....353,422  .....(2.852) ....356,274  ....143,187  ........528  ......9,599  ...........1  .....3,262  .....22,295
11. 1995 .... .....402,702  ........308  ....402,394  .....73,681  .........24  ......1,713  ...........1  .......981  .....15,679
- - -----------------------------------------------------------------------------------------------------------------------------------
12. Totals .. ....X X X...  ...X X X...  ...X X X... ...1,478,461  ......6,372  ....152,909  .........849  ....37,321  ....173,493
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ---------------------------------------
      1
              -------------------------
    Years           11           12
   in Which                  Number of
Premiums Were     Total       Claims
  Earned and    Net Paid    Reported -
 Losses Were   (5 - 6 + 7   Direct and
   Incurred     - 8 + 10)    Assumed
- - -----------------------------------------
 1. Prior .... ...........8  .....X X X..
 2. 1986 ..... .....111,612  ......28,387
 3. 1987 ..... .....162,004  ......39,854
 4. 1988 ..... .....206,680  ......44,888
 5. 1989 ..... .....224,366  ......47,096
 6. 1990 ..... .....238,751  ......46,596
 7. 1991 ..... .....207,289  ......41,036
 8. 1992 ..... .....193,214  ......40,168
 9. 1993 ..... .....188,118  ......42,803
10. 1994 ..... .....174,552  ......49,454
11. 1995 ..... ......91,048  ......53,724
- - -----------------------------------------
12. Totals ... ...1,797,642  ....X X X...
- - -----------------------------------------

- - -----------------------------------------------------------------------------------------------------------------------------------
                                 Losses Unpaid                              Allocated Loss Expenses Unpaid
              -------------------------------------------------------------------------------------------------------
                                                                                                                           21
                     Case Basis                Bulk + IBNR               Case Basis               Bulk + IBNR
              -------------------------------------------------------------------------------------------------------    Salvage
                   13           14           15           16           17           18           19           20           and
                 Direct                    Direct                    Direct                    Direct                  Subrogation
              and Assumed      Ceded    and Assumed      Ceded    and Assumed      Ceded    and Assumed      Ceded     Anticipated

- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior ... ..........10  ............  ...........  ...........  ...........  ...........  ............  ...........  ..........
 2. 1986 .... ...........5  ............  ...........  ...........  ...........  ...........  ............  ...........  ..........
 3. 1987 .... ..........34  ............  ...........  ...........  .........22  ...........  ............  ...........  ..........
 4. 1988 .... ..........49  ............  ...........  ...........  .........34  ...........  ............  ...........  ..........
 5. 1989 .... .........280  ............  ...........  ...........  ........105  ...........  ............  ...........  ..........
 6. 1990 .... .........290  ..........81  ...........  ...........  ........153  ...........  ............  ...........  ..........
 7. 1991 .... .......1,116  ............  .........12  ...........  ........491  ...........  ...........5  ...........  ..........
 8. 1992 .... .......1,670  ..........65  .........85  ...........  ......1,017  ...........  ..........40  ...........  .......412
 9. 1993 .... .......7,574  ...........1  ........110  ...........  ......4,180  ...........  ..........54  ...........  .......681
10. 1994 .... ......32,103  ..........84  ........198  ...........  .....14,227  ...........  ..........(5) ...........  .....1,811
11. 1995 .... .....104,113  .........353  .....25,456  ...........  .....18,350  ...........  .......4,118  ...........  .....4,856
- - -----------------------------------------------------------------------------------------------------------------------------------
12. Totals .. .....147,244  .........584  .....25,861  ...........  .....38,579  ...........  .......4,212  ........... ......7,760
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ------------------------------------------------------
                    22          23           24
                                          Number of
              Unallocated     Total        Claims
                  Loss      Net Losses  Outstanding -
                Expenses   and Expenses   Direct and
                 Unpaid       Unpaid       Assumed
- - ------------------------------------------------------
 1. Prior ....  ........1   .........11   ..........3
 2. 1986 .....  .........   ..........5   ..........2
 3. 1987 .....  ........2   .........58   ..........3
 4. 1988 .....  ........4   .........87   ..........6
 5. 1989 .....  .......18   ........403   .........10
 6. 1990 .....  .......15   ........377   .........25
 7. 1991 .....  .......77   ......1,701   .........75
 8. 1992 .....  ......155   ......2,902   ........167
 9. 1993 .....  ......572   .....12,489   ........640
10. 1994 .....  ....2,297   .....48,736   ......3,279
11. 1995 .....  ...10,784   ....162,468   .....19,060
- - ------------------------------------------------------
12. Totals ...  ....13,925  ....229,237   .....23,270
- - ------------------------------------------------------

- - -----------------------------------------------------------------------------------------------------------------------------------
                         Total Losses and              Loss and Loss Expense Percentage         Discount for Time
                      Loss Expenses Incurred              (Incurred/Premiums Earned)              Value of Money            33
              -------------------------------------------------------------------------------------------------------
                   25           26           27           28           29           30           31           32       Inter-Company
                                                                                                                          Pooling
                 Direct                                 Direct                                              Loss       Participation
              and Assumed      Ceded         Net     and Assumed      Ceded         Net         Loss       Expense       Percentage
- - ------------------------------------------------------------------------------------------------------------------------------------
 1. Prior ...  ...X X X...  ...X X X...  ...X X X...  ...X X X...  ...X X X...  ...X X X...  ...........  ...........  ...X X X...
 2. 1986 ....  ....116,444  ......4,827  ....111,617  .......88.2  ......177.9  .......86.4  ...........  ...........  ...........
 3. 1987 ....  ....162,371  ........309  ....162,062  .......84.3  .......19.8  .......84.8  ...........  ...........  ...........
 4. 1988 ....  ....206,894  ........127  ....206,767  .......80.7  ........3.0  .......82.0  ...........  ...........  ...........
 5. 1989 ....  ....224,846  .........77  ....224,769  .......73.3  ........2.0  .......74.2  ...........  ...........  ...........
 6. 1990 ....  ....239,549  ........421  ....239,128  .......75.8  .......10.3  .......76.7  ...........  ...........  ...........
 7. 1991 ....  ....209,562  ........572  ....208,990  .......64.9  .......31.4  .......65.1  ...........  ...........  ...........
 8. 1992 ....  ....196,353  ........237  ....196,116  .......66.4  .......21.2  .......66.6  ...........  ...........  ...........
 9. 1993 ....  ....200,851  ........244  ....200,607  .......61.4  .......19.0  .......61.6  ...........  ...........  ...........
10. 1994 ....  ....223,901  ........613  ....223,288  .......63.4  ......(21.5) .......62.7  ...........  ...........  ...........
11. 1995 ....  ....253,894  ........378  ....253,516  .......63.0  ......122.7  .......63.0  ...........  ...........  ...........
- - -----------------------------------------------------------------------------------------------------------------------------------
12. Totals ..  ...X X X...  ...X X X...  ...X X X...  ...X X X...  ...X X X...  ...X X X...  ...........  ...........  ...X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------

- - -----------------------------------------
              Net Balance Sheet Reserves
                    After Discount
              ---------------------------
                   34           35
                               Loss
                 Losses      Expenses
                 Unpaid       Unpaid
- - -----------------------------------------
 1. Prior ....  .........10  ..........1
 2. 1986 .....  ..........5  ...........
 3. 1987 .....  .........34  .........24
 4. 1988 .....  .........49  .........38
 5. 1989 .....  ........280  ........123
 6. 1990 .....  ........209  ........168
 7. 1991 .....  ......1,128  ........573
 8. 1992 .....  ......1,690  ......1,212
 9. 1993 .....  ......7,683  ......4,806
10. 1994 .....  .....32,217  .....16,519
11. 1995 .....  ....129,216  .....33,252
- - -----------------------------------------
12. Totals ...  ....172,521  .....56,716
- - -----------------------------------------

77

Form 2

ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY AND ITS
AFFILIATED COMPANIES

SCHEDULE P - PART 1C - COMMERCIAL AUTO/TRUCK LIABILITY/MEDICAL

                                                    ($000 omitted)
-------------------------------------------------------------------------------------------------------------------
      1                    Premiums Earned                                           Loss and Loss Expense Payments
              -----------------------------------------------------------------------------------------------------
    Years           2             3             4                Loss Payments                 Allocated Loss
   in Which                                                                                   Expense Payments
Premiums Were                                           -----------------------------------------------------------
  Earned and     Direct                        Net            5              6              7               8
 Losses Were       and          Ceded        (2 - 3)        Direct                        Direct
   Incurred      Assumed                                 and Assumed       Ceded       and Assumed        Ceded
-------------------------------------------------------------------------------------------------------------------
 1. Prior....  ...X X X...   ...X X X...   ...X X X...   ............   ............   ............    ...........
 2. 1986.....  .....14,312   ........262   .....14,050   ......10,164   .......1,575   .......1,030    ...........
 3. 1987.....  .....21,100   ........205   .....20,895   ......14,116   .........176   .......2,168    .........56
 4. 1988.....  .....23,777   ........354   .....23,423   ......18,062   .......1,360   .......2,573    ........225
 5. 1989.....  .....24,569   .........96   .....24,473   ......15,475   .........320   .......2,602    .........28
 6. 1990.....  .....21,747   ........102   .....21,645   ......11,094   ............   .......1,503    .........28
 7. 1991.....  .....20,339   .........91   .....20,248   .......9,318   ............   .......1,567    .........10
 8. 1992.....  .....16,507   .........40   .....16,467   .......8,124   ............   .......1,441    ..........3
 9. 1993.....  .....18,237   .........40   .....18,197   .......8,463   ............   .......1,491    ..........3
10. 1994.....  .....20,437   ..........1   .....20,436   .......6,385   ............   .........571    ...........
11. 1995.....  .....22,120   ...........   .....22,120   .......2,488   ............   ..........82    ...........
-------------------------------------------------------------------------------------------------------------------
12. Totals     ...X X X...   ...X X X...   ...X X X...   .....103,689   .......3,431   ......15,028    ........353
-------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------
      1
              --------------------------------------------
    Years           9              10             11             12
   in Which                                                  Number of
Premiums Were    Salvage      Unallocated       Total          Claims
  Earned and       and            Loss         Net Paid      Reported -
 Losses Were   Subrogation      Expense       (5 - 6 + 7     Direct and
   Incurred      Received       Payments      - 8 + 10)       Assumed
-------------------------------------------------------------------------
 1. Prior.....  ...........   ...........1   ...........1   ...X X X....
 2. 1986......  ........198   .........555   ......10,174   .......2,127
 3. 1987......  ........156   .........772   ......16,824   .......2,946
 4. 1988......  ........214   .......1,024   ......20,074   .......3,165
 5. 1989......  ........156   .........810   ......18,539   .......2,838
 6. 1990......  ........133   .......1,135   ......13,704   .......2,404
 7. 1991......  ........120   .........667   ......11,542   .......1,903
 8. 1992......  ........155   .........703   ......10,265   .......1,797
 9. 1993......  ........164   .......1,109   ......11,060   .......1,761
10. 1994......  ........118   .......1,181   .......8,137   .......2,010
11. 1995......  .........30   .........806   .......3,376   .......1,934
-------------------------------------------------------------------------
12. Totals....  ......1,444   .......8,763   .....123,696   ...X X X....
-------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------------------
                                    Losses Unpaid                                     Allocated Loss Expenses Unpaid
              -------------------------------------------------------------------------------------------------------------------
                        Case Basis                  Bulk + IBNR                  Case Basis                    Bulk + IBNR
              -------------------------------------------------------------------------------------------------------------------
                   13            14            15             16             17             18             19             20
                 Direct                      Direct                        Direct                        Direct
               and Assumed      Ceded      and Assumed      Ceded       and Assumed       Ceded       and Assumed       Ceded
---------------------------------------------------------------------------------------------------------------------------------
 1. Prior....  ...........   ...........   ...........   ...........   .............    ...........   ...........    ...........
 2. 1986.....  ...........   ...........   ...........   ...........   .............    ...........   ...........    ...........
 3. 1987.....  ..........6   ...........   ..........7   ...........   .............    ...........   ...........    ...........
 4. 1988.....  ..........7   ...........   ..........4   ...........   .............    ...........   ...........    ...........
 5. 1989.....  .........21   ...........   .........12   ...........   .............    ...........   ...........    ...........
 6. 1990.....  .........82   .........10   .........15   ...........   ...........27    ...........   ...........    ...........
 7. 1991.....  .........69   ...........   .........17   ...........   ...........16    ...........   ...........    ...........
 8. 1992.....  ........184   ...........   .........26   ...........   ...........64    ...........   ..........1    ...........
 9. 1993.....  ........825   ...........   .........16   ...........   ..........335    ...........   ...........    ...........
10. 1994.....  ......1,963   ...........   ........250   ...........   ..........680    ...........   .........71    ...........
11. 1995.....  ......4,800   ...........   ......3,147   ...........   ..........654    ...........   ........406    ...........
---------------------------------------------------------------------------------------------------------------------------------
12. Totals...  ......7,957   .........10   ......3,494   ...........   ........1,776    ...........   ........478    ...........
---------------------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------

                      21             22            23             24
                                                               Number of
                   Salvage       Unallocated      Total         Claims
                     and            Loss        Net Losses    Outstanding -
                  Subrogation     Expenses     and Expenses    Direct and
                  Anticipated      Unpaid         Unpaid        Assumed
---------------------------------------------------------------------------
 1. Prior.....   ............    ...........   ............   ...........
 2. 1986......   ............    ...........   ............   ...........
 3. 1987......   ............    ...........   ..........13   ...........
 4. 1988......   ............    ...........   ..........11   ..........1
 5. 1989......   ............    ...........   ..........33   ...........
 6. 1990......   ............    ..........4   .........118   ..........2
 7. 1991......   ............    ..........3   .........105   ..........3
 8. 1992......   ............    .........10   .........285   .........21
 9. 1993......   ............    .........50   .......1,226   .........42
10. 1994......   ..........16    ........157   .......3,121   ........182
11. 1995......   .........100    ........744   .......9,751   ........745
---------------------------------------------------------------------------
12. Totals....   .........116    ........968   ......14,663   ........996
---------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------------------

                           Total Losses and                    Loss and Loss Expense Percentage            Discount for Time
                         Loss Expenses Incurred                   (Incurred/Premiums Earned)                Value of Money
              -------------------------------------------------------------------------------------------------------------------
                   25            26            27             28             29             30             31             32

                 Direct                                     Direct                                                       Loss
               and Assumed      Ceded          Net       and Assumed       Ceded           Net            Loss         Expense
---------------------------------------------------------------------------------------------------------------------------------
 1. Prior       ..X X X...   ...X X X...   ...X X X...   ...X X X....   ...X X X....   ...X X X....   ...........   ...........
 2. 1986......  ....11,749   ......1,575   .....10,174   ........82.1   .......601.1   ........72.4   ...........   ...........
 3. 1987......  ....17,069   ........232   .....16,837   ........80.9   .......113.2   ........80.6   ...........   ...........
 4. 1988......  ....21,670   ......1,585   .....20,085   ........91.1   .......447.7   ........85.7   ...........   ...........
 5. 1989......  ....18,920   ........348   .....18,572   ........77.0   .......362.5   ........75.9   ...........   ...........
 6. 1990......  ....13,860   .........38   .....13,822   ........63.7   ....... 37.3   ........63.9   ...........   ...........
 7. 1991......  ....11,657   .........10   .....11,647   ........57.3   ....... 11.0   ........57.5   ...........   ...........
 8. 1992......  ....10,553   ..........3   .....10,550   ........63.9   .........7.5   ........64.1   ...........   ...........
 9. 1993......  ....12,289   ..........3   .....12,286   ........67.4   .........7.5   ........67.5   ...........   ...........
10. 1994......  ....11,258   ...........   .....11,258   ........55.1   ............   ........55.1   ...........   ...........
11. 1995......  ....13,127   ...........   .....13,127   ........59.3   ............   ........59.3   ...........   ...........
---------------------------------------------------------------------------------------------------------------------------------
12. Totals        X X X         X X X         X X X         X X X          X X X          X X X
---------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------
                                 Net Balance Sheet Reserves
                      33               After Discount
                               -----------------------------
                Inter-Company        34            35
                   Pooling                        Loss
                Participation      Losses       Expenses
                 Percentage        Unpaid        Unpaid
------------------------------------------------------------
 1. Prior....    ...X X X...   ............   ...........
 2. 1986.....    ...........   ............   ...........
 3. 1987.....    ...........   ..........13   ...........
 4. 1988.....    ...........   ..........11   ...........
 5. 1989.....    ...........   ..........33   ...........
 6. 1990.....    ...........   ..........87   .........31
 7. 1991.....    ...........   ..........86   .........19
 8. 1992.....    ...........   .........210   .........75
 9. 1993.....    ...........   .........841   ........385
10. 1994.....    ...........   .......2,213   ........908
11. 1995.....    ...........   .......7,947   ......1,804
------------------------------------------------------------
12. Totals...    ...X X X...   ......11,441   ......3,222
------------------------------------------------------------

78

Form 2

ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY AND ITS
AFFILIATED COMPANIES

SCHEDULE P - PART 1D - WORKERS' COMPENSATION

                                                        ($000 omitted)
---------------------------------------------------------------------------------------------------------------------
      1                    Premiums Earned                                           Loss and Loss Expense Payments
              -------------------------------------------------------------------------------------------------------
    Years           2             3             4                Loss Payments                 Allocated Loss
   in Which                                                                                   Expense Payments
Premiums Were                                           -------------------------------------------------------------
  Earned and     Direct                        Net            5              6              7              8
 Losses Were       and          Ceded        (2 - 3)        Direct                        Direct
   Incurred      Assumed                                 and Assumed       Ceded       and Assumed       Ceded
---------------------------------------------------------------------------------------------------------------------

 1. Prior.... ....X X X ... ....X X X.... ....X X X.... ................ ............ .............. ...............
 2. 1986..... ............. ............. ............. ................ ............ .............. ...............
 3. 1987..... ............. ............. ............. ................ ............ .............. ...............
 4. 1988..... ............. ............  ............. ................ ............ .............. ...............
 5. 1989..... ............. ............. ............. ................ ............ .............. ...............
 6. 1990..... ............. ............  ............. ................ ............ .............. ...............
 7. 1991..... ............. ............. ............. ................ N         O    N         E  ...............
 8. 1992..... ............. ............. ............. ................ ............ .............. ...............
 9. 1993..... ............. ............. ............. ................ ............ .............. ...............
10. 1994..... ............. ............. ............. ................ ............ .............. ...............
11. 1995..... ............. ............. ............. ................ ............ .............. ...............
---------------------------------------------------------------------------------------------------------------------
12. Totals... ....X X X.... ....X X X.... ....X X X.... ................ ............ .............. ...............
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------
      1
               --------------------------------------------
    Years            9              10             11             12
   in Which                                                   Number of
Premiums Were     Salvage      Unallocated       Total          Claims
  Earned and        and            Loss         Net Paid      Reported -
 Losses Were    Subrogation      Expense       (5 - 6 + 7     Direct and
   Incurred       Received       Payments      - 8 + 10)       Assumed
--------------------------------------------------------------------------
 1. Prior.... ............. .............. ............... ....X X X.....
 2. 1986..... ............. .............. ............... ..............
 3. 1987..... ............. .............. ............... ..............
 4. 1988..... ............. .............. ............... ..............
 5. 1989..... ............. .............. ............... ..............
 6. 1990..... ............. .............. ............... ..............
 7. 1991..... ............. .............. ............... ..............
 8. 1992..... ............. .............. ............... ..............
 9. 1993..... ............. .............. ............... ..............
10. 1994..... ............. .............. ............... ..............
11. 1995..... ............. .............. ............... ..............
--------------------------------------------------------------------------
12. Totals... ............. .............. ............... ....X X X.....
--------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------

                                    Losses Unpaid                                     Allocated Loss Expenses Unpaid
              --------------------------------------------------------------------------------------------------------------------

                        Case Basis                  Bulk + IBNR                  Case Basis                    Bulk + IBNR
              --------------------------------------------------------------------------------------------------------------------

                   13            14            15             16             17             18             19             20
                 Direct                      Direct                        Direct                        Direct
               and Assumed      Ceded      and Assumed      Ceded       and Assumed       Ceded       and Assumed       Ceded
----------------------------------------------------------------------------------------------------------------------------------
 1. Prior.... ............ ............ .............. ............. ............... ............... ............... .............
 2. 1986..... ............ ............ .............. ............. ............... ............... ............... .............
 3. 1987..... ............ ............ .............. ............. ............... ............... ............... .............
 4. 1988..... ............ ............ .............. ............. ............... ............... ............... .............
 5. 1989..... ............ ............ .............. ............. ............... ............... ............... .............
 6. 1990..... ............ ............ .............. .............    N      O      N       E      ............... .............
 7. 1991..... ............ ............ .............. ............. ............... ............... ............... .............
 8. 1992..... ............ ............ .............. ............. ............... ............... ............... .............
 9. 1993..... ............ ............ .............. ............. ............... ............... ............... .............
10. 1994..... ............ ............ .............. ............. ............... ............... ............... .............
11. 1995..... ............ ............ .............. ............. ............... ............... ............... .............
----------------------------------------------------------------------------------------------------------------------------------
12. Totals... ............ ............ .............. .............. .............. ............... ............... .............
----------------------------------------------------------------------------------------------------------------------------------


---------------------------------------------------------------------------

                      21             22             23            24
                                                               Number of
                   Salvage      Unallocated       Total         Claims
                     and            Loss        Net Losses   Outstanding -
                 Subrogation      Expenses     and Expenses   Direct and
                 Anticipated       Unpaid         Unpaid        Assumed
---------------------------------------------------------------------------
 1. Prior.... ............. ............... .............. ..............
 2. 1986..... ............. ............... .............. ..............
 3. 1987..... ............. ............... .............. ..............
 4. 1988..... ............. ............... .............. ..............
 5. 1989..... ............. ............... .............. ..............
 6. 1990..... ............. ............... .............. ..............
 7. 1991..... ............. ............... .............. ..............
 8. 1992..... ............. ............... .............. ..............
 9. 1993..... ............. ............... .............. ..............
10. 1994..... ............. ............... .............. ..............
11. 1995..... ............. ............... .............. ..............
---------------------------------------------------------------------------
12. Totals... ............. ............... .............. ..............
---------------------------------------------------------------------------

 ----------------------------------------------------------------------------------------------------------------------------------

                            Total Losses and                    Loss and Loss Expense Percentage            Discount for Time
                          Loss Expenses Incurred                   (Incurred/Premiums Earned)                Value of Money
               --------------------------------------------------------------------------------------------------------------------

                    25            26            27             28             29             30             31             32

                  Direct                                     Direct                                                       Loss
                and Assumed      Ceded          Net       and Assumed       Ceded           Net            Loss         Expense
 ----------------------------------------------------------------------------------------------------------------------------------
  1. Prior.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... .....X X X..... ....X X X...... ............. ..............
  2. 1986..... ............. ............. ............. ............. ............... ............... ............. ..............
  3. 1987..... ............. ............. ............. ............. ............... ............... ............. ..............
  4. 1988..... ............. ............. ............. ............. ............... ............... ............. ..............
.  5. 1989..... ............. ............. ............. ............. ............... ............... ............. ..............
  6. 1990..... ............. ............. .............   N      O     N       E      ............... ............. ..............
  7. 1991..... ............. ............. ............. ............. ............... ............... ............. ..............
  8. 1992..... ............. ............. ............. ............. ............... ............... ............. ..............
  9. 1993..... ............. ............. ............. ............. ............... ............... ............. ..............
 10. 1994..... ............. ............. ............. ............. ............... ............... ............. ..............
 11. 1995..... ............. ............. ............. ............. ............... ............... ............. ..............
 ----------------------------------------------------------------------------------------------------------------------------------
 12. Totals... ....X X X.... ....X X X.... ....X X X.... ....X X X.... .....X X X..... ....X X X...... ............. ..............
 ----------------------------------------------------------------------------------------------------------------------------------
 ------------------------------------------------------------
                                  Net Balance Sheet Reserves
                     33               After Discount
                                -----------------------------
                 Inter-Company        34             35
                    Pooling                         Loss
                 Participation      Losses        Expenses
                   Percentage       Unpaid         Unpaid
 ------------------------------------------------------------
  1. Prior.... ......X X X.... .............. ..............
  2. 1986..... ............... .............. ..............
  3. 1987..... ............... .............. ..............
  4. 1988..... ............... .............. ..............
  5. 1989..... ............... .............. ..............
  6. 1990..... ............... .............. ..............
  7. 1991..... ............... .............. ..............
  8. 1992..... ............... .............. ..............
  9. 1993..... ............... .............. ..............
 10. 1994..... ............... .............. ..............
 11. 1995..... ............... .............. ..............
 ------------------------------------------------------------
 12. Totals... ......X X X.... .............. ..............
 ------------------------------------------------------------

79

Form 2

ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY AND ITS
AFFILIATED COMPANIES

SCHEDULE P - PART 1E - COMMERCIAL MULTIPLE PERIL

                                                                               ($000 omitted)
--------------------------------------------------------------------------------------------------------------------------
      1                    Premiums Earned                                                  Loss and Loss Expense Payments
              ------------------------------------------------------------------------------------------------------------
    Years           2             3             4                Loss Payments                 Allocated Loss
   in Which                                                                                   Expense Payments
Premiums Were                                           -----------------------------------------------------------
  Earned and     Direct                        Net            5              6              7              8
 Losses Were       and          Ceded        (2 - 3)        Direct                        Direct
   Incurred      Assumed                                 and Assumed       Ceded       and Assumed       Ceded
-------------------------------------------------------------------------------------------------------------------
 1. Prior.....  ..X X X...    ..X X X...    ..X X X...     ..........      .........      ........1     ..........
 2. 1986......  .....2,285    .......747    .....1,538     .....1,330      ......771      ......183     ..........
 3. 1987......  .....2,547    .......703    .....1,844     .......716      ......229      ......185     .........1
 4. 1988......  .....2,774    .......732    .....2,042     .......562      ......201      ......126     .........9
 5. 1989......  .....2,919    .......791    .....2,128     .......701      ......168      .......99     .........4
 6. 1990......  .....2,984    .......883    .....2,101     .......417      .......93      .......89     ........15
 7. 1991......  .....3,353    .....1,056    .....2,297     .......284      .......36      ......143     .........2
 8. 1992......  .....3,443    .......849    .....2,594     .......859      ......263      ......143     ........10
 9. 1993......  .....5,427    .....1,813    .....3,614     .....1,042      ......448      ......206     ........24
10. 1994......  .....6,976    .....2,253    .....4,723     .....1,495      ......643      ......131     ........19
11. 1995......  .....8,169    .....1,679    .....6,490     .....1,762      ......898      .......79     ........41
------------------------------------------------------------------------------------------------------------------
12. Totals....  ..X X X...    ..X X X...    ..X X X...     .....9,168      ....3,750      ....1,385     .......125
-------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------
      1
             --------------------------------------------
    Years          9              10             11             12
   in Which                                                 Number of
Premiums Were   Salvage      Unallocated       Total          Claims
  Earned and      and            Loss         Net Paid      Reported -
 Losses Were  Subrogation      Expense       (5 - 6 + 7     Direct and
   Incurred     Received       Payments      - 8 + 10)       Assumed
------------------------------------------------------------------------
 1. Prior.....  ..........   ...........1   ...........2    ..X X X....
 2. 1986......  ..........   ..........99   .........841    ........158
 3. 1987......  .........5   .........312   .........983    ........107
 4. 1988......  .........3   .........207   .........685    ........ 89
 5. 1989......  ........12   .........220   .........848    ........ 95
 6. 1990......  .........3   .........232   .........630    ........100
 7. 1991......  .........6   .........352   .........741    ........101
 8. 1992......  ..........   .........624   .......1,353    ........146
 9. 1993......  ........89   .........814   .......1,590    ........200
10. 1994......  ........10   .........732   .......1,696    ........227
11. 1995......  .........4   .........807   .......1,709    ........253
------------------------------------------------------------------------
12. Totals....  .......132   .......4,400   ......11,078    ..X X X....
------------------------------------------------------------------------

  ---------------------------------------------------------------------------------------------------------------------------------
                                      Losses Unpaid                                     Allocated Loss Expenses Unpaid
                -------------------------------------------------------------------------------------------------------------------
                          Case Basis                  Bulk + IBNR                  Case Basis                    Bulk + IBNR
                -------------------------------------------------------------------------------------------------------------------
                     13            14            15           16              17             18           19             20
                   Direct                      Direct                       Direct                       Direct
                 and Assumed      Ceded      and Assumed     Ceded        and Assumed       Ceded      and Assumed      Ceded
  ---------------------------------------------------------------------------------------------------------------------------------
   1. Prior.....  ..........   ...........    ..........   ...........    ...........     ..........   ...........    ...........
   2. 1986......  ..........   ...........    ..........   ...........    ...........     ..........   ...........    ...........
   3. 1987......  ..........   ...........    ..........   ...........    ...........     ..........   ...........    ...........
   4. 1988......  ..........   ...........    ..........   ...........    ...........     ..........   ...........    ...........
   5. 1989......  ..........   ...........    ..........   ...........    ...........     ..........   ...........    ...........
   6. 1990......  ..........   ...........    ..........   ...........    ...........     ..........   ...........    ...........
   7. 1991......  ..........   ...........    ..........   ...........    ...........     ..........   ...........    ...........
   8. 1992......  .......125   .........75    ..........   ...........    ..........5     ..........   ...........    ...........
   9. 1993......  .......208   .........25    ........55   ...........    .........18     ..........   ..........5    ...........
  10. 1994......  .......170   .........45    .......109   ...........    .........15     ..........   ..........9    ...........
  11. 1995......  .......781   ........416    .......383   ...........    .........37     ..........   .........38    ...........
  ---------------------------------------------------------------------------------------------------------------------------------
  12. Totals....  .....1,286   ........561    .......547   ...........    ..........75    ..........   .........52    ...........
  ---------------------------------------------------------------------------------------------------------------------------------

- - --------------------------------------------------------------------------

                      21            22             23              24
                                                                Number of
                    Salvage     Unallocated       Total          Claims
                      and          Loss        Net Losses     Outstanding -
                  Subrogation    Expenses     and Expenses     Direct and
                  Anticipated     Unpaid         Unpaid          Assumed
  -------------------------------------------------------------------------
   1. Prior.....  ..........    ...........    ...........     ..........
   2. 1986......  ..........    ...........    ...........     ..........
   3. 1987......  ..........    ...........    ...........     ..........
   4. 1988......  ..........    ...........    ...........     ..........
   5. 1989......  ..........    ...........    ...........     .........1
   6. 1990......  ..........    ...........    ...........     ..........
   7. 1991......  ..........    ...........    ...........     ..........
   8. 1992......  ..........    ...........    .........55     .........6
   9. 1993......  ..........    ...........    ........261     .........9
  10. 1994......  ..........    ...........    ........258     ........14
  11. 1995......  ..........    ...........    ........823     ........69
  -------------------------------------------------------------------------
  12. Totals....  ..........    ...........    ........1,399   ........99
  -------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------------------
                           Total Losses and                    Loss and Loss Expense Percentage            Discount for Time
                         Loss Expenses Incurred                   (Incurred/Premiums Earned)                Value of Money
              ------------------------------------------------------------------------------------------------------------------

                   25            26            27             28             29             30             31             32

                 Direct                                     Direct                                                       Loss
               and Assumed      Ceded          Net       and Assumed       Ceded           Net            Loss         Expense
--------------------------------------------------------------------------------------------------------------------------------
 1. Prior..... ..X X X...    ...X X X...   ...X X X...   ...X X X....   ...X X X....   ...X X X....   ...........    ...........
 2. 1986...... .....1,612    ........771   ........841   ........70.5   .......103.2   ........54.7   ...........    ...........
 3. 1987...... .....1,213    ........230   ........983   ........47.6   ........32.7   ........53.3   ...........    ...........
 4. 1988...... .......895    ........210   ........685   ........32.3   ........28.7   ........33.5   ...........    ...........
 5. 1989...... .....1,022    ........172   ........850   ........35.0   ........21.7   ........39.9   ...........    ...........
 6. 1990...... .......738    ........108   ........630   ........24.7   ........12.2   ........30.0   ...........    ...........
 7. 1991...... .......779    .........38   ........741   ........23.2   .........3.6   ........32.3   ...........    ...........
 8. 1992...... .....1,756    ........348   ......1,408   ........51.0   ........41.0   ........54.3   ...........    ...........
 9. 1993...... .....2,348    ........497   ......1,851   ........43.3   ........27.4   ........51.2   ...........    ...........
10. 1994...... .....2,661    ........707   ......1,954   ........38.1   ........31.4   ........41.4   ...........    ...........
11. 1995...... .....3,887    ......1,355   ......2,532   ........47.6   ........80.7   ........39.0   ...........    ...........
--------------------------------------------------------------------------------------------------------------------------------
12. Totals.... ..X X X...    ...X X X...   ...X X X...   ...X X X....   ...X X X...    ...X X X....   ...........    ...........
--------------------------------------------------------------------------------------------------------------------------------

-------------------------------------------------------------
                                 Net Balance Sheet Reserves
                      33               After Discount
                                -----------------------------
                Inter-Company        34             35
                   Pooling                         Loss
                Participation      Losses        Expenses
                  Percentage       Unpaid         Unpaid
-------------------------------------------------------------
 1. Prior.....   ..X X X....     ...........    ...........
 2. 1986......   ...........     ...........    ...........
 3. 1987......   ...........     ...........    ...........
 4. 1988......   ...........     ...........    ...........
 5. 1989......   ...........     ...........    ...........
 6. 1990......   ...........     ...........    ...........
 7. 1991......   ...........     ...........    ...........
 8. 1992......   ...........     .........50    ..........5
 9. 1993......   ...........     ........238    .........23
10. 1994......   ...........     ........234    .........24
11. 1995......   ...........     ........748    .........75
-------------------------------------------------------------
12. Totals....   ..X X X....      .....1,272    ........127
-------------------------------------------------------------

80

Form 2

ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY AND ITS
AFFILIATED COMPANIES

SCHEDULE P - PART 1F - SECTION 1 - MEDICAL MALPRACTICE - OCCURRENCE

                                                                                 ($000 omitted)
- - --------------------------------------------------------------------------------------------------------------------------
      1                   Premiums Earned                                                 Loss and Loss Expense Payments
             -------------------------------------------------------------------------------------------------------------
    Years          2            3            4               Loss Payments                Allocated Loss          9
   in Which                                                                              Expense Payments
Premiums Were                                       --------------------------------------------------------   Salvage
  Earned and    Direct                      Net           5             6             7             8            and
 Losses Were      and         Ceded       (2 - 3)       Direct                      Direct                   Subrogation
   Incurred     Assumed                              and Assumed      Ceded      and Assumed      Ceded        Received
- - --------------------------------------------------------------------------------------------------------------------------
 1. Prior..    ..X X X..    ..X X X..    ..X X X..    .........      .........    .........       .........    .........
 2. 1986 ..    .........    .........    .........    .........      .........    .........       .........    .........
 3. 1987 ..    .........    .........    .........    .........                                   .........    .........
 4. 1988 ..    .........    .........    .........    .........                                   .........    .........
 5. 1989 ..    .........    .........    .........    .........      N       O       N     E      .........    .........
 6. 1990 ..    .........    .........    .........    .........                                   .........    .........
 7. 1991 ..    .........    .........    .........    .........                                   .........    .........
 8. 1992 ..    .........    .........    .........    .........                                   .........    .........
 9. 1993 ..    .........    .........    .........    .........      .........    .........       .........    .........
10. 1994 ..    .........    .........    .........    .........      .........    .........       .........    .........
11. 1995 ..    .........    .........    .........    .........      .........    .........       .........    .........
- - --------------------------------------------------------------------------------------------------------------------------
12. Totals..   ..X X X..    ..X X X..    ..X X X..    .........      .........    .........       .........    .........
- - --------------------------------------------------------------------------------------------------------------------------
- - --------------------------------------------------------
      1
             ----------------------------
    Years           10            11            12
   in Which                                 Number of
Premiums Were  Unallocated      Total         Claims
  Earned and       Loss        Net Paid     Reported -
 Losses Were     Expense      (5 - 6 + 7    Direct and
   Incurred      Payments     - 8 + 10)      Assumed
- - --------------------------------------------------------
 1. Prior..    .........       .........    ..X X X..
 2. 1986 ..    .........       .........    .........
 3. 1987 ..    .........       .........    .........
 4. 1988 ..    .........       .........    .........
 5. 1989 ..    .........       .........    .........
 6. 1990 ..    .........       .........    .........
 7. 1991 ..    .........       .........    .........
 8. 1992 ..    .........       .........    .........
 9. 1993 ..    .........       .........    .........
10. 1994 ..    .........       .........    .........
11. 1995 ..    .........       .........    .........
- - --------------------------------------------------------
12. Totals..   .........       .........    ..X X X..
- - --------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------------
                                   Losses Unpaid                                    Allocated Loss Expenses Unpaid
             -------------------------------------------------------------------------------------------------------------
                       Case Basis                 Bulk + IBNR                 Case Basis                   Bulk + IBNR
             -------------------------------------------------------------------------------------------------------------
                  13           14           15            16            17            18            19            20
                Direct                    Direct                      Direct                      Direct
              and Assumed     Ceded     and Assumed     Ceded      and Assumed      Ceded      and Assumed      Ceded
--------------------------------------------------------------------------------------------------------------------------
 1. Prior..    .........     .........   .........      .........   .........      .........    .........       .........
 2. 1986 ..    .........     .........   .........      .........   .........      .........    .........       .........
 3. 1987 ..    .........     .........   .........      .........   .........      .........    .........       .........
 4. 1988 ..    .........     .........   .........      .........   .........      .........    .........       .........
 5. 1989 ..    .........     .........   .........      .........   .........      .........    .........       .........
 6. 1990 ..    .........     .........   .........      .........   .........      .........    .........       .........
 7. 1991 ..    .........     .........   .........      .........   .........      .........    .........       .........
 8. 1992 ..    .........     .........   .........      .........   .........      .........    .........       .........
 9. 1993 ..    .........     .........   .........      .........   .........      .........    .........       .........
10. 1994 ..    .........     .........   .........      .........   .........      .........    .........       .........
11. 1995 ..    .........     .........   .........      .........   .........      .........    .........       .........
--------------------------------------------------------------------------------------------------------------------------
12. Totals..   .........     .........   .........      .........   .........      .........    .........       .........
--------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------

                  21            22            23           24
                                                         Number of
                Salvage     Unallocated      Total        Claims
                  and           Loss       Net Losses  Outstanding -
              Subrogation     Expenses    and Expenses  Direct and
              Anticipated      Unpaid        Unpaid       Assumed
--------------------------------------------------------------------
 1. Prior..    .........     .........     .........     .........
 2. 1986 ..    .........     .........     .........     .........
 3. 1987 ..    .........     .........     .........     .........
 4. 1988 ..    .........     .........     .........     .........
 5. 1989 ..    .........     .........     .........     .........
 6. 1990 ..    .........     .........     .........     .........
 7. 1991 ..    .........     .........     .........     .........
 8. 1992 ..    .........     .........     .........     .........
 9. 1993 ..    .........     .........     .........     .........
10. 1994 ..    .........     .........     .........     .........
11. 1995 ..    .........     .........     .........     .........
--------------------------------------------------------------------
12. Totals..   .........     .........     .........     .........
--------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------------
                          Total Losses and                   Loss and Loss Expense Percentage           Discount for Time
                        Loss Expenses Incurred                  (Incurred/Premiums Earned)               Value of Money
             -------------------------------------------------------------------------------------------------------------
                  25           26           27            28            29            30            31            32

                Direct                                  Direct                                                   Loss
              and Assumed     Ceded         Net      and Assumed      Ceded          Net           Loss        Expense
--------------------------------------------------------------------------------------------------------------------------
 1. Prior..    ..X X X..    ..X X X..    ..X X X..    ..X X X..     ..X X X..     ..X X X..       .........     .........
 2. 1986 ..    .........    .........    .........    .........     .........     .........       .........     .........
 3. 1987 ..    .........    .........    .........                                .........       .........     .........
 4. 1988 ..    .........    .........    .........                                .........       .........     .........
 5. 1989 ..    .........    .........    .........    N      O       N      E     .........       .........     .........
 6. 1990 ..    .........    .........    .........                                .........       .........     .........
 7. 1991 ..    .........    .........    .........                                .........       .........     .........
 8. 1992 ..    .........    .........    .........                                .........       .........     .........
 9. 1993 ..    .........    .........    .........    .........     .........     .........       .........     .........
10. 1994 ..    .........    .........    .........    .........     .........     .........       .........     .........
11. 1995 ..    .........    .........    .........    .........     .........     .........       .........     .........
--------------------------------------------------------------------------------------------------------------------------
12. Totals..   ..X X X..    ..X X X..    ..X X X..    ..X X X..     ..X X X..     ..X X X..
--------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------
                             Net Balance Sheet Reserves
                   33             After Discount
                           ---------------------------------
             Inter-Company       34            35
                Pooling                       Loss
             Participation     Losses       Expenses
               Percentage      Unpaid        Unpaid
------------------------------------------------------------
 1. Prior..    ..X X X..      .........     .........
 2. 1986 ..    .........      .........     .........
 3. 1987 ..    .........      .........     .........
 4. 1988 ..    .........      .........     .........
 5. 1989 ..    .........      .........     .........
 6. 1990 ..    .........      .........     .........
 7. 1991 ..    .........      .........     .........
 8. 1992 ..    .........      .........     .........
 9. 1993 ..    .........      .........     .........
10. 1994 ..    .........      .........     .........
11. 1995 ..    .........      .........     .........
------------------------------------------------------------
12. Totals..   ..X X X..      .........     .........
------------------------------------------------------------

81

Form 2

ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY AND ITS
AFFILIATED COMPANIES

SCHEDULE P - PART 1F - SECTION 2 - MEDICAL MALPRACTICE - CLAIMS-MADE

                                                                        ($000 omitted)
-------------------------------------------------------------------------------------------------------------------
      1                    Premiums Earned                                          Loss and Loss Expense Payments
              -----------------------------------------------------------------------------------------------------
    Years           2             3             4                Loss Payments             Allocated Loss
   in Which                                                                               Expense Payments
Premiums Were                                           -----------------------------------------------------------
  Earned and     Direct                       Net            5              6              7              8
 Losses Were       and         Ceded        (2 - 3)        Direct                        Direct
   Incurred      Assumed                                and Assumed      Ceded       and Assumed        Ceded
-------------------------------------------------------------------------------------------------------------------
 1. Prior ...  ...X X X...  ...X X X...   ...X X X...   ...........   ............   ............   ............
 2. 1986 ....  ...........  ...........   ...........   ...........   ............   ............   ............
 3. 1987 ....  ...........  ...........   ...........   ...........   ............   ............   ............
 4. 1988 ....  ...........  ...........   ...........   ...........                                 ............
 5. 1989 ....  ...........  ...........   ...........   ...........                                 ............
 6. 1990 ....  ...........  ...........   ...........   ...........       N     O     N     E       ............
 7. 1991 ....  ...........  ...........   ...........   ...........                                 ............
 8. 1992 ....  ...........  ...........   ...........   ...........   ............   ............   ............
 9. 1993 ....  ...........  ...........   ...........   ...........   ............   ............   ............
10. 1994 ....  ...........  ...........   ...........   ...........   ............   ............   ............
11. 1995 ....  ...........  ...........   ...........   ...........   ............   ............   ............
-------------------------------------------------------------------------------------------------------------------
12. Totals ..     X X X        X X X         X X X      ...........   ............   ............   ............
-------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------
      1
              --------------------------------------------
    Years           9              10             11             12
   in Which                                                  Number of
Premiums Were    Salvage      Unallocated       Total          Claims
  Earned and       and            Loss         Net Paid      Reported -
 Losses Were   Subrogation      Expense       (5 - 6 + 7     Direct and
   Incurred      Received       Payments      - 8 + 10)       Assumed
-------------------------------------------------------------------------
 1. Prior ...  .........      .........       .........      ..X X X..
 2. 1986 ....  .........      .........       .........      .........
 3. 1987 ....  .........      .........       .........      .........
 4. 1988 ....  .........      .........       .........      .........
 5. 1989 ....  .........      .........       .........      .........
 6. 1990 ....  .........      .........       .........      .........
 7. 1991 ....  .........      .........       .........      .........
 8. 1992 ....  .........      .........       .........      .........
 9. 1993 ....  .........      .........       .........      .........
10. 1994 ....  .........      .........       .........      .........
11. 1995 ....  .........      .........       .........      .........
-------------------------------------------------------------------------
12. Totals ..  .........      .........       .........        X X X
-------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------------------
                                    Losses Unpaid                                     Allocated Loss Expenses Unpaid
              ------------------------------------------------------------------------------------------------------------------
                      Case Basis                  Bulk + IBNR                  Case Basis                    Bulk + IBNR
              ------------------------------------------------------------------------------------------------------------------
                   13            14            15             16             17             18             19             20
                 Direct                      Direct                        Direct                        Direct
               and Assumed      Ceded      and Assumed      Ceded       and Assumed       Ceded       and Assumed       Ceded
--------------------------------------------------------------------------------------------------------------------------------
 1. Prior ...    .........     .........     .........     .........      .........      .........      .........     .........
 2. 1986 ....    .........     .........     .........     .........      .........      .........      .........     .........
 3. 1987 ....    .........     .........     .........     .........      .........      .........      .........     .........
 4. 1988 ....    .........     .........     .........     .........      .........      .........      .........     .........
 5. 1989 ....    .........     .........     .........                                   .........      .........     .........
 6. 1990 ....    .........     .........     .........        N     O     N     E        .........      .........     .........
 7. 1991 ....    .........     .........     .........                                   .........      .........     .........
 8. 1992 ....    .........     .........     .........     .........       .........     .........      .........     .........
 9. 1993 ....    .........     .........     .........     .........       .........     .........      .........     .........
10. 1994 ....    .........     .........     .........     .........       .........     .........      .........     .........
11. 1995 ....    .........     .........     .........     .........       .........     .........      .........     .........
--------------------------------------------------------------------------------------------------------------------------------
12. Totals ..    .........     .........     .........     .........       .........     .........      .........     .........
--------------------------------------------------------------------------------------------------------------------------------


-------------------------------------------------------------------------

                   21             22             23           24
                                                            Number of
                Salvage      Unallocated       Total        Claims
                  and           Loss        Net Losses    Outstanding -
              Subrogation     Expenses     and Expenses    Direct and
              Anticipated      Unpaid         Unpaid        Assumed
-------------------------------------------------------------------------
 1. Prior ...  ...........   ...........    ...........    ...........
 2. 1986 ....  ...........   ...........    ...........    ...........
 3. 1996 ....  ...........   ...........    ...........    ...........
 4. 1988 ....  ...........   ...........    ...........    ...........
 5. 1989 ....  ...........   ...........    ...........    ...........
 6. 1990 ....  ...........   ...........    ...........    ...........
 7. 1991 ....  ...........   ...........    ...........    ...........
 8. 1992 ....  ...........   ...........    ...........    ...........
 9. 1993 ....  ...........   ...........    ...........    ...........
10. 1994 ....  ...........   ...........    ...........    ...........
11. 1995 ....  ...........   ...........    ...........    ...........
-------------------------------------------------------------------------
12. Totals ..  ...........   ...........    ...........    ...........
-------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------------------
                           Total Losses and                    Loss and Loss Expense Percentage            Discount for Time
                         Loss Expenses Incurred                   (Incurred/Premiums Earned)                Value of Money
              -------------------------------------------------------------------------------------------------------------------
                   25           26            27            28           29           30              31             32

                 Direct                                   Direct                                                    Loss
              and Assumed     Ceded          Net       and Assumed      Ceded         Net            Loss         Expense
---------------------------------------------------------------------------------------------------------------------------------
 1. Prior ... ...X X X...  ...X X X...   ...X X X...   ...X X X...   ...X X X...   ...X X X....   ............   ............
 2. 1986 .... ...........  ...........   ...........   ...........   ...........   ............   ............   ............
 3. 1987 .... ...........  ...........   ...........   ...........   ...........   ............   ............   ............
 4. 1988 .... ...........  ...........   ...........   ...........   ...........   ............   ............   ............
 5. 1989 .... ...........  ...........   ...........   ...........                                ............   ............
 6. 1990 .... ...........  ...........   ...........   ...........            N O N E             ............   ............
 7. 1991 .... ...........  ...........   ...........   ...........   ...........   ............   ............   ............
 8. 1992 .... ...........  ...........   ...........   ...........   ...........   ............   ............   ............
 9. 1993 .... ...........  ...........   ...........   ...........   ...........   ............   ............   ............
10. 1994 .... ...........  ...........   ...........   ...........   ...........   ............   ............   ............
11. 1995 .... ...........  ...........   ...........   ...........   ...........   ............   ............   ............
--------------------------------------------------------------------------------------------------------------------------------
12. Totals ..    X X X        X X X         X X X      ...........   ...........   ............   ............   ............
--------------------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------
                                Net Balance Sheet Reserves
                   33                 After Discount
                              -----------------------------
             Inter-Company        34              35
                Pooling                          Loss
             Participation      Losses         Expenses
               Percentage       Unpaid          Unpaid
-----------------------------------------------------------
 1. Prior ...  ..X X X..     ............     ...........
 2. 1986 ....  ..........    ............     ...........
 3. 1987 ....  ..........    ............     ...........
 4. 1988 ....  ..........    ............     ...........
 5. 1989 ....  ..........    ............     ...........
 6. 1990 ....  ..........    ............     ...........
 7. 1991 ....  ..........    ............     ...........
 8. 1992 ....  ..........    ............     ...........
 9. 1993 ....  ..........    ............     ...........
10. 1994 ....  ..........    ............     ...........
11. 1995 ....  ..........    ............     ...........
-----------------------------------------------------------
12. Totals ..    X X X       ............     ...........
-----------------------------------------------------------

82

Form 2

ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY AND ITS
AFFILIATED COMPANIES

SCHEDULE P - PART 1G - SPECIAL LIABILITY (OCEAN MARINE,

AIRCRAFT (ALL PERILS), BOILER AND MACHINERY)
($000 omitted)

- - -----------------------------------------------------------------------------------------------------------------------------------
      1                    Premiums Earned                                        Loss and Loss Expense Payments
              ---------------------------------------------------------------------------------------------------------------------
    Years           2            3            4             Loss Payments           Allocated Loss            9            10
   in Which                                                                        Expense Payments
Premiums Were                                        ---------------------------------------------------   Salvage    Unallocated
  Earned and     Direct                      Net          5             6           7             8          and          Loss
 Losses Were       and         Ceded       (2 - 3)      Direct                    Direct                 Subrogation    Expense
   Incurred      Assumed                             and Assumed      Ceded    and Assumed      Ceded      Received     Payments
- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior ... ....X X X... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............
 2. 1986 .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 3. 1987 .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 4. 1988 .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 5. 1989 .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 6. 1990 .... ............ ............ ............ ............ N       O       N      E  ............ ............ ............
 7. 1991 .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 8. 1992 .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 9. 1993 .... ............ ............ ............ ............ ............ ............ ............ ............ ............
10. 1994 .... ............ ............ ............ ............ ............ ............ ............ ............ ............
11. 1995 .... ............ ............ ............ ............ ............ ............ ............ ............ ............
- - -----------------------------------------------------------------------------------------------------------------------------------
12. Totals .. ....X X X... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ---------------------------------------
      1
               -----------
    Years           11           12
   in Which                  Number of
Premiums Were     Total       Claims
  Earned and    Net Paid    Reported -
 Losses Were   (5 - 6 + 7   Direct and
   Incurred     - 8 + 10)    Assumed
- - -----------------------------------------
 1. Prior .... ............ ....X X X...
 2. 1986 ..... ............ ....X X X...
 3. 1987 ..... ............ ....X X X...
 4. 1988 ..... ............ ....X X X...
 5. 1989 ..... ............ ....X X X...
 6. 1990 ..... ............ ....X X X...
 7. 1991 ..... ............ ....X X X...
 8. 1992 ..... ............ ....X X X...
 9. 1993 ..... ............ ....X X X...
10. 1994 ..... ............ ....X X X...
11. 1995 ..... ............ ....X X X...
- - -----------------------------------------
12. Totals ... ............ ....X X X...
- - -----------------------------------------

- - -----------------------------------------------------------------------------------------------------------------------------------
                                 Losses Unpaid                              Allocated Loss Expenses Unpaid
              ------------------------------------------------------------------------------------------------------
                                                                                                                           21
                     Case Basis                Bulk + IBNR               Case Basis               Bulk + IBNR
              ------------------------------------------------------------------------------------------------------     Salvage
                   13           14           15           16           17           18           19           20           and
                 Direct                    Direct                    Direct                    Direct                  Subrogation
              and Assumed      Ceded    and Assumed      Ceded    and Assumed      Ceded    and Assumed      Ceded     Anticipated

- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior ... ............ ............ ............ ............ ............ ............ ............ ............ ............
 2. 1986 .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 3. 1987 .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 4. 1988 .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 5. 1989 .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 6. 1990 .... ............ ............ ............ ............ N      O       N       E  ............ ............ ............
 7. 1991 .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 8. 1992 .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 9. 1993 .... ............ ............ ............ ............ ............ ............ ............ ............ ............
10. 1994 .... ............ ............ ............ ............ ............ ............ ............ ............ ............
11. 1995 .... ............ ............ ............ ............ ............ ............ ............ ............ ............
- - -----------------------------------------------------------------------------------------------------------------------------------
12. Totals .. ............ ............ ............ ............ ............ ............ ............ ............ ............
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ------------------------------------------------------
                    22          23           24
                                          Number of
              Unallocated     Total        Claims
                  Loss      Net Losses  Outstanding -
                Expenses   and Expenses   Direct and
                 Unpaid       Unpaid       Assumed
- - ------------------------------------------------------
 1. Prior .... ............ ............ ............
 2. 1986 ..... ............ ............ ............
 3. 1987 ..... ............ ............ ............
 4. 1988 ..... ............ ............ ............
 5. 1989 ..... ............ ............ ............
 6. 1990 ..... ............ ............ ............
 7. 1991 ..... ............ ............ ............
 8. 1992 ..... ............ ............ ............
 9. 1993 ..... ............ ............ ............
10. 1994 ..... ............ ............ ............
11. 1995 ..... ............ ............ ............
- - ------------------------------------------------------
12. Totals ... ............ ............ ............
- - ------------------------------------------------------

- - -----------------------------------------------------------------------------------------------------------------------------------
                         Total Losses and              Loss and Loss Expense Percentage         Discount for Time
                      Loss Expenses Incurred              (Incurred/Premiums Earned)              Value of Money            33
              -------------------------------------------------------------------------------------------------------
                   25           26           27           28           29           30           31           32       Inter-Company
                                                                                                                          Pooling
                 Direct                                 Direct                                              Loss       Participation
              and Assumed      Ceded         Net     and Assumed      Ceded         Net         Loss       Expense       Percentage
- - ------------------------------------------------------------------------------------------------------------------------------------

 1. Prior ... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............ ....X X X...
 2. 1986 .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 3. 1987 .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 4. 1988 .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 5. 1989 .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 6. 1990 .... ............ ............ ............ ............ ........N O N E.......... ............ ............ ............
 7. 1991 .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 8. 1992 .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 9. 1993 .... ............ ............ ............ ............ ............ ............ ............ ............ ............
10. 1994 .... ............ ............ ............ ............ ............ ............ ............ ............ ............
11. 1995 .... ............ ............ ............ ............ ............ ............ ............ ............ ............
- - -----------------------------------------------------------------------------------------------------------------------------------
12. Totals .. ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............ ....X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------

- - -----------------------------------------
              Net Balance Sheet Reserves
                    After Discount
              ---------------------------
                   34           35
                               Loss
                 Losses      Expenses
                 Unpaid       Unpaid
- - -----------------------------------------
 1. Prior .... ............ ............
 2. 1986 ..... ............ ............
 3. 1987 ..... ............ ............
 4. 1988 ..... ............ ............
 5. 1989 ..... ............ ............
 6. 1990 ..... ............ ............
 7. 1991 ..... ............ ............
 8. 1992 ..... ............ ............
 9. 1993 ..... ............ ............
10. 1994 ..... ............ ............
11. 1995 ..... ............ ............
- - -----------------------------------------
12. Totals ... ............ ............
- - -----------------------------------------

83

Form 2

ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY AND ITS
AFFILIATED COMPANIES

SCHEDULE P - PART 1H - SECTION 1 - OTHER LIABILITY - OCCURRENCE

($000 omitted)

- - -----------------------------------------------------------------------------------------------------------------------------------
      1                    Premiums Earned                                        Loss and Loss Expense Payments
              ---------------------------------------------------------------------------------------------------------------------
    Years           2            3            4             Loss Payments           Allocated Loss            9            10
   in Which                                                                        Expense Payments
Premiums Were                                        ---------------------------------------------------   Salvage    Unallocated
  Earned and     Direct                      Net          5             6           7             8          and          Loss
 Losses Were       and         Ceded       (2 - 3)      Direct                    Direct                 Subrogation    Expense
   Incurred      Assumed                             and Assumed      Ceded    and Assumed      Ceded      Received     Payments
- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior ... ....X X X... ....X X X... ....X X X... ........50.. ............ ........12.. ............ ............ ............
 2. 1986 .... .......403.. .......116.. .......287.. ........67.. ............ ........67.. ............ ............ ........21..
 3. 1987 .... .......301.. ........44.. .......257.. ........76.. ............ ........64.. ........20.. ............ ........43..
 4. 1988 .... .......102.. ........36.. ........66.. ............ ............ ........49.. ........(4). ............ .........8..
 5. 1989 .... ........77.. ........25.. ........52.. ............ ............ ........14.. .........1.. ............ ........10..
 6. 1990 .... ........82.. ........34.. ........48.. ............ ............ .........9.. ............ ............ .........6..
 7. 1991 .... .......153.. ........96.. ........57.. ........15.. ............ ............ ............ ............ ........33..
 8. 1992 .... .......220.. .......152.. ........68.. ........20.. ............ .........2.. ............ ............ .........8..
 9. 1993 .... .......293.. .......184.. .......109.. .........1.. ............ .........1.. ............ ............ .........1..
10. 1994 .... .......287.. ........14.. .......273.. ............ ............ ............ ............ ............ ............
11. 1995 .... .......109.. ............ .......109.. ............ ............ .........1.. ............ ............ ............
- - -----------------------------------------------------------------------------------------------------------------------------------
12. Totals .. ....X X X... ....X X X... ....X X X... .......229.. ............ .......219.. ........17.. ............ .......130..

- - -----------------------------------------------------------------------------------------------------------------------------------

- - ---------------------------------------
      1
              -------------------------
    Years           11           12
   in Which                  Number of
Premiums Were     Total       Claims
  Earned and    Net Paid    Reported -
 Losses Were   (5 - 6 + 7   Direct and
   Incurred     - 8 + 10)    Assumed
- - -----------------------------------------
 1. Prior .... ........62.. ....X X X...
 2. 1986 ..... .......155.. ........33..
 3. 1987 ..... .......163.. ........23..
 4. 1988 ..... ........61.. .........1..
 5. 1989 ..... ........23.. .........1..
 6. 1990 ..... ........15.. .........1..
 7. 1991 ..... ........48.. .........2..
 8. 1992 ..... ........30.. .........9..
 9. 1993 ..... .........3.. .........2..
10. 1994 ..... ............ .........1..
11. 1995 ..... .........1.. .........1..
- - -----------------------------------------
12. Totals ... .......561.. ....X X X...
- - -----------------------------------------

- - -----------------------------------------------------------------------------------------------------------------------------------
                                 Losses Unpaid                              Allocated Loss Expenses Unpaid
              -------------------------------------------------------------------------------------------------------
                                                                                                                           21
                     Case Basis                Bulk + IBNR               Case Basis               Bulk + IBNR
              -------------------------------------------------------------------------------------------------------    Salvage
                   13           14           15           16           17           18           19           20           and
                 Direct                    Direct                    Direct                    Direct                  Subrogation
              and Assumed      Ceded    and Assumed      Ceded    and Assumed      Ceded    and Assumed      Ceded     Anticipated
- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior ... ............ ............ ............ ............ ............ ............ ............ ............ ............
 2. 1986 .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 3. 1987 .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 4. 1988 .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 5. 1989 .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 6. 1990 .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 7. 1991 .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 8. 1992 .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 9. 1993 .... ............ ............ ............ ............ ............ ............ ............ ............ ............
10. 1994 .... ............ ............ ........10.. ............ ............ ............ ........32.. ............ ............
11. 1995 .... ............ ............ .........1.. ............ ............ ............ ............ ............ ............
- - -----------------------------------------------------------------------------------------------------------------------------------
12. Totals .. ............ ............ ........11.. ............ ............ ............ ........32.. ............ ............

- - -----------------------------------------------------------------------------------------------------------------------------------

- - ------------------------------------------------------
                    22          23           24
                                          Number of
              Unallocated     Total        Claims
                  Loss      Net Losses  Outstanding -
                Expenses   and Expenses   Direct and
                 Unpaid       Unpaid       Assumed
- - ------------------------------------------------------
 1. Prior .... ............ ............ ............
 2. 1986 ..... ............ ............ ............
 3. 1987 ..... ............ ............ ............
 4. 1988 ..... ............ ............ ............
 5. 1989 ..... ............ ............ ............
 6. 1990 ..... ............ ............ ............
 7. 1991 ..... ............ ............ ............
 8. 1992 ..... ............ ............ ............
 9. 1993 ..... ............ ............ ............
10. 1994 ..... ............ ........42.. ............
11. 1995 ..... ............ .........1.. ............
- - ------------------------------------------------------
12. Totals ... ............ ........43.. ............
- - ------------------------------------------------------

- - -----------------------------------------------------------------------------------------------------------------------------------
                         Total Losses and              Loss and Loss Expense Percentage         Discount for Time
                      Loss Expenses Incurred              (Incurred/Premiums Earned)              Value of Money            33
              -------------------------------------------------------------------------------------------------------
                   25           26           27           28           29           30           31           32       Inter-Company
                                                                                                                          Pooling
                 Direct                                 Direct                                              Loss       Participation
              and Assumed      Ceded         Net     and Assumed      Ceded         Net         Loss       Expense       Percentage
- - ------------------------------------------------------------------------------------------------------------------------------------

 1. Prior ... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............ ....X X X...
 2. 1986 .... .......155.. ............ .......155.. ......38.5.. ............ ......54.0.. ............ ............ ............
 3. 1987 .... .......183.. ........20.. .......163.. ......60.8.. ......45.5.. ......63.4.. ............ ............ ............
 4. 1988 .... ........57.. ........(4). ........61.. ......55.9.. .....(11.1). ......92.4.. ............ ............ ............
 5. 1989 .... ........24.. .........1.. ........23.. ......31.2.. .......4.0.. ......44.2.. ............ ............ ............
 6. 1990 .... ........15.. ............ ........15.. ......18.3.. ............ ......31.3.. ............ ............ ............
 7. 1991 .... ........48.. ............ ........48.. ......31.4.. ............ ......84.2.. ............ ............ ............
 8. 1992 .... ........30.. ............ ........30.. ......13.6.. ............ ......44.1.. ............ ............ ............
 9. 1993 .... .........3.. ............ .........3.. .......1.0.. ............ .......2.8.. ............ ............ ............
10. 1994 .... ........42.. ............ ........42.. ......14.6.. ............ ......15.4.. ............ ............ ............
11. 1995 .... .........2.. ............ .........2.. .......1.8.. ............ .......1.8.. ............ ............ ............
- - -----------------------------------------------------------------------------------------------------------------------------------
12. Totals .. ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............ ....X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------

- - -----------------------------------------
              Net Balance Sheet Reserves
                    After Discount
              ---------------------------
                   34           35
                               Loss
                 Losses      Expenses
                 Unpaid       Unpaid
- - -----------------------------------------
 1. Prior .... ............ ............
 2. 1986 ..... ............ ............
 3. 1987 ..... ............ ............
 4. 1988 ..... ............ ............
 5. 1989 ..... ............ ............
 6. 1990 ..... ............ ............
 7. 1991 ..... ............ ............
 8. 1992 ..... ............ ............
 9. 1993 ..... ............ ............
10. 1994 ..... ........10.. ........32..
11. 1995 ..... .........1.. ............
- - -----------------------------------------
12. Totals ... ........11.. ........32..
- - -----------------------------------------

84

Form 2

ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY AND ITS
AFFILIATED COMPANIES

SCHEDULE P - PART 1H - SECTION 2 - OTHER LIABILITY - CLAIMS-MADE

                                                          ($000 omitted)
- - ------------------------------------------------------------------------------------------------------------
      1                   Premiums Earned                                 Loss and Loss Expense Payments
             -----------------------------------------------------------------------------------------------
    Years          2            3            4               Loss Payments                Allocated Loss
   in Which                                                                              Expense Payments
Premiums Were                                       --------------------------------------------------------
  Earned and    Direct                      Net           5             6             7             8
 Losses Were      and         Ceded       (2 - 3)       Direct                      Direct
   Incurred     Assumed                              and Assumed      Ceded      and Assumed      Ceded
- - ------------------------------------------------------------------------------------------------------------
 1. Prior...   ..X X X..    ..X X X..    ..X X X..    .........      .........     .........     .........
 2. 1986 ...   .........    .........    .........    .........      .........     .........     .........
 3. 1987 ...   .........    .........    .........    .........                                  .........
 4. 1988 ...   .........    .........    .........    .........                                  .........
 5. 1989 ...   .........    .........    .........    .........      N       O       N     E     .........
 6. 1990 ...   .........    .........    .........    .........                                  .........
 7. 1991 ...   .........    .........    .........    .........                                  .........
 8. 1992 ...   .........    .........    .........    .........                                  .........
 9. 1993 ...   .........    .........    .........    .........      .........     .........     .........
10. 1994 ...   .........    .........    .........    .........      .........     .........     .........
11. 1995 ...   .........    .........    .........    .........      .........     .........     .........
- - ------------------------------------------------------------------------------------------------------------
12. Totals..   ..X X X..    ..X X X..    ..X X X..    .........      .........     .........     .........
- - ------------------------------------------------------------------------------------------------------------

- - -------------------------------------------------------------------------
      1
              --------------------------------------------
    Years           9              10             11             12
   in Which                                                  Number of
Premiums Were    Salvage      Unallocated       Total          Claims
  Earned and       and            Loss         Net Paid      Reported -
 Losses Were   Subrogation      Expense       (5 - 6 + 7     Direct and
   Incurred      Received       Payments      - 8 + 10)       Assumed
- - -------------------------------------------------------------------------
 1. Prior..    .........        .........     .........      ..X X X..
 2. 1986 ..    .........        .........     .........      .........
 3. 1987 ..    .........        .........     .........      .........
 4. 1988 ..    .........        .........     .........      .........
 5. 1989 ..    .........        .........     .........      .........
 6. 1990 ..    .........        .........     .........      .........
 7. 1991 ..    .........        .........     .........      .........
 8. 1992 ..    .........        .........     .........      .........
 9. 1993 ..    .........        .........     .........      .........
10. 1994 ..    .........        .........     .........      .........
11. 1995 ..    .........        .........     .........      .........
- - -------------------------------------------------------------------------
12. Totals..   .........        .........     .........      ..X X X..
- - -------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------------------------------------
                                   Losses Unpaid                                     Allocated Loss Expenses Unpaid
             -----------------------------------------------------------------------------------------------------------------
                    Case Basis                 Bulk + IBNR                 Case Basis                  Bulk + IBNR
             ------------------------------------------------------------------------------------------------------------
                  13           14           15            16            17            18            19            20
                Direct                    Direct                      Direct                      Direct
              and Assumed     Ceded     and Assumed     Ceded      and Assumed      Ceded      and Assumed      Ceded
-------------------------------------------------------------------------------------------------------------------------
 1. Prior..   ........       ........   ........        ........   ........         ........   ........          ........
 2. 1986 ..   ........       ........   ........        ........   ........         ........   ........          ........
 3. 1987 ..   ........       ........   ........        ........                               ........          ........
 4. 1988 ..   ........       ........   ........        ........                               ........          ........
 5. 1989 ..   ........       ........   ........        ........    N       O       N     E    ........          ........
 6. 1990 ..   ........       ........   ........        ........                               ........          ........
 7. 1991 ..   ........       ........   ........        ........                               ........          ........
 8. 1992 ..   ........       ........   ........        ........                               ........          ........
 9. 1993 ..   ........       ........   ........        ........   ........         ........   ........          ........
10. 1994 ..   ........       ........   ........        ........   ........         ........   ........          ........
11. 1995 ..   ........       ........   ........        ........   ........         ........   ........          ........
-------------------------------------------------------------------------------------------------------------------------
12. Totals..  ........       ........   ........        ........   ........         ........   ........          ........
-------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------

                    21             22             23            24
                                                             Number of
                 Salvage      Unallocated       Total         Claims
                   and            Loss        Net Losses   Outstanding -
               Subrogation      Expenses     and Expenses   Direct and
               Anticipated       Unpaid         Unpaid        Assumed
------------------------------------------------------------------------
 1. Prior..    .........      .........      .........      .........
 2. 1986 ..    .........      .........      .........      .........
 3. 1987 ..    .........      .........      .........      .........
 4. 1988 ..    .........      .........      .........      .........
 5. 1989 ..    .........      .........      .........      .........
 6. 1990 ..    .........      .........      .........      .........
 7. 1991 ..    .........      .........      .........      .........
 8. 1992 ..    .........      .........      .........      .........
 9. 1993 ..    .........      .........      .........      .........
10. 1994 ..    .........      .........      .........      .........
11. 1995 ..    .........      .........      .........      .........
------------------------------------------------------------------------
12. Totals..   .........      .........      .........      .........
------------------------------------------------------------------------

 --------------------------------------------------------------------------------------------------------------------------------
                            Total Losses and                    Loss and Loss Expense Percentage           Discount for Time
                          Loss Expenses Incurred                   (Incurred/Premiums Earned)               Value of Money
               ---------------------------------------------------------------------------------------------------------------
                    25            26            27             28            29            30            31            32

                  Direct                                     Direct                                                   Loss
                and Assumed      Ceded          Net       and Assumed      Ceded          Net           Loss        Expense
 -----------------------------------------------------------------------------------------------------------------------------
 1. Prior..     ..X X X..     ..X X X..     ..X X X..     ..X X X..     ..X X X..     ..X X X..         .........    .........
 2. 1986 ..     .........     .........     .........     .........     .........     .........         .........    .........
 3. 1987 ..     .........     .........     .........     .........                                     .........    .........
 4. 1988 ..     .........     .........     .........     .........                                     .........    .........
 5. 1989 ..     .........     .........     .........     .........     N    0       N     E            .........    .........
 6. 1990 ..     .........     .........     .........     .........                                     .........    .........
 7. 1991 ..     .........     .........     .........     .........                                     .........    .........
 8. 1992 ..     .........     .........     .........     .........                                     .........    .........
 9. 1993 ..     .........     .........     .........     .........     .........     .........         .........    .........
10. 1994 ..     .........     .........     .........     .........     .........     .........         .........    .........
11. 1995 ..     .........     .........     .........     .........     .........     .........         .........    .........
- - ------------------------------------------------------------------------------------------------------------------------------
12. Totals..    ..X X X..     ..X X X..     ..X X X..     ..X X X..     ..X X X..     ..X X X..         .........    .........
 -----------------------------------------------------------------------------------------------------------------------------
                ----------------------------------------------
                                   Net Balance Sheet Reserves
                        33               After Discount
                                 -----------------------------
                 Inter-Company        34             35
                   Pooling                         Loss
                Participation      Losses        Expenses
                  Percentage       Unpaid         Unpaid
               ----------------------------------------------
 1. Prior..     ..X X X..         .........     .........
 2. 1986 ..     .........         .........     .........
 3. 1987 ..     .........         .........     .........
 4. 1988 ..     .........         .........     .........
 5. 1989 ..     .........         .........     .........
 6. 1990 ..     .........         .........     .........
 7. 1991 ..     .........         .........     .........
 8. 1992 ..     .........         .........     .........
 9. 1993 ..     .........         .........     .........
10. 1994 ..     .........         .........     .........
11. 1995 ..     .........         .........     .........
- - -----------------------------------------------------------
12. Totals..    ..X X X..         .........     .........
- - -----------------------------------------------------------

85

Form 2

ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY AND ITS
AFFILIATED COMPANIES

SCHEDULE P - PART 1I - SPECIAL PROPERTY (FIRE, ALLIED LINES, INLAND MARINE,

EARTHQUAKE, GLASS, BURGLARY AND THEFT)
($000 omitted)

 ------------------------------------------------------------------------------------------------------------
       1                   Premiums Earned                                   Loss and Loss Expense Payments
              -----------------------------------------------------------------------------------------------
     Years          2            3            4               Loss Payments                Allocated Loss
    in Which                                                                              Expense Payments
 Premiums Were                                       --------------------------------------------------------
   Earned and    Direct                      Net           5             6             7             8
  Losses Were      and         Ceded       (2 - 3)       Direct                      Direct
    Incurred     Assumed                              and Assumed      Ceded      and Assumed      Ceded
 ------------------------------------------------------------------------------------------------------------
1. Prior..    ..X X X....  ..X X X....  ..X X X....  .........34   .........10    .........2    .........3
2. 1994 ..    .....1,451.  .......437.  .....1,014.  ......5,509   ......4,639    .......182    .........2
3. 1995 ..    .....1,584.  .......354.  .....1,230.  ........109   .........49    ........21    .........0
------------------------------------------------------------------------------------------------------------
4. Totals.    ..X X X....  ..X X X....  ..X X X....  ......5,652   ......4,698    .......205    .........5
 ------------------------------------------------------------------------------------------------------------
 -----------------------------------------------------------------------
       1
                    -------------------------------------------
     Years                 9              10             11             12
    in Which                                         Number of
 Premiums Were          Salvage      Unallocated       Total          Claims
   Earned and             and            Loss         Net Paid      Reported -
  Losses Were         Subrogation      Expense       (5 - 6 + 7     Direct and
    Incurred            Received       Payments      - 8 + 10)       Assumed
 -------------------------------------------------------------------------------
  1. Prior..          ...........    ..........4    .........27    ..X X X....
  2. 1994 ..          ..........4    ........106    ......1,156    ..X X X....
  3. 1995 ..          ...........    .........19    ........100    ..X X X....
 -------------------------------------------------------------------------------
  4. Totals.          ..........4    ........129    ......1,283    ..X X X....
 -------------------------------------------------------------------------------

- - -------------------------------------------------------------------------------------------------------------------------
                                    Losses Unpaid                                    Allocated Loss Expenses Unpaid
              -----------------------------------------------------------------------------------------------------------
                     Case Basis                Bulk + IBNR                  Case Basis                  Bulk + IBNR
              -----------------------------------------------------------------------------------------------------------
                   13           14           15            16            17            18            19            20
                 Direct                    Direct                      Direct                      Direct
               and Assumed     Ceded     and Assumed     Ceded      and Assumed      Ceded      and Assumed      Ceded
- - -------------------------------------------------------------------------------------------------------------------------
1. Prior..    ........19   ..........   .........7     .........    .........1      .........    .........    .........
2. 1994 ..    .....1,596   .....1,338   .......135     .........    ........25      .........    ........1    .........
3. 1995 ..    ........83   .........5   ........31     .........    .........9      .........    ........2    .........
- - -----------------------------------------------------------------------------------------------------------------------
4. Totals.    .....1,698   .....1,343   .......173     .........    ........35      .........    ........3    .........
- - -----------------------------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------
                   21            22            23           24
                                                         Number of
                Salvage     Unallocated      Total        Claims
                  and           Loss       Net Losses  Outstanding -
              Subrogation     Expenses    and Expenses  Direct and
              Anticipated      Unpaid        Unpaid       Assumed
- - ---------------------------------------------------------------------
1. Prior..    ...........     ...........   ........27   ..........
2. 1994 ..    ...........     ...........   .......419   ........39
3. 1995 ..    ...........     ...........   .......120   .........9
- - ----------------------------------------------------------------------
4. Totals.    ...........     ...........   .......566   ........48
 ---------------------------------------------------------------------

- - -----------------------------------------------------------------------------------------------------------------------------
                           Total Losses and                   Loss and Loss Expense Percentage           Discount for Time
                         Loss Expenses Incurred                  (Incurred/Premiums Earned)               Value of Money
              ------------------------------------------------------------------------------------------------------------
                   25           26           27            28            29            30            31            32

                 Direct                                  Direct                                                   Loss
               and Assumed     Ceded         Net      and Assumed      Ceded          Net           Loss        Expense
- - --------------------------------------------------------------------------------------------------------------------------
1. Prior..    ..X X X....  ..X X X....  ..X X X....  ..X X X.....  ..X X X.....  ..X X X.....   ..........     ..........
2. 1994 ..    .....7,554.  .....5,979.  .....1,575.  ......520.6.  ....1,368.2.  ......155.3.   ..........     ..........
3. 1995 ..    .......274.  ........54.  .......220.  .......17.3.  .......15.3.  .......17.9.   ..........     ..........
- - --------------------------------------------------------------------------------------------------------------------------
4. Totals.    ..X X X....  ..X X X....  ..X X X....  ..X X X.....  ..X X X.....  ..X X X.....   ..........     ..........
- - --------------------------------------------------------------------------------------------------------------------------
- - --------------------------------------------------------
                             Net Balance Sheet Reserves
                   33              After Discount
                           ----------------------------
             Inter-Company       34            35
                Pooling                       Loss
             Participation     Losses       Expenses
               Percentage      Unpaid        Unpaid
- - -------------------------------------------------------
1. Prior..    ..X X X....    ....... 26    .........1
2. 1994 ..    ...........    ...... 393    ........26
3. 1995 ..    ...........    .......109    ........11
- - -------------------------------------------------------
4. Totals.    ..X X X....    .......528    ........38
- - -------------------------------------------------------

86

Form 2

ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY AND ITS
AFFILIATED COMPANIES

SCHEDULE P - PART 1J - AUTO PHYSICAL DAMAGE

($000 omitted)

- - -----------------------------------------------------------------------------------------------------------------
       1                   Premiums Earned                                        Loss and Loss Expense Payments
              -------------------------------------------------------------------------------------------------
     Years          2            3            4               Loss Payments                Allocated Loss
    in Which                                                                              Expense Payments
 Premiums Were                                       --------------------------------------------------------
   Earned and    Direct                      Net           5             6             7             8
  Losses Were      and         Ceded       (2 - 3)       Direct                      Direct
    Incurred     Assumed                              and Assumed      Ceded      and Assumed      Ceded
- - ------------------------------------------------------------------------------------------------------------
1. Prior..    ..X X X....  ..X X X....  ..X X X....   ....(1,470)   ..........   ........18     .........1
2. 1994 ..    ...142,700.  .......329.  ...142,371.   ...109,110.   .....2,245   ........782    ..........
3. 1995 ..    ...179,952.  .......415.  ...179,537.   ...131,970.   .....2,183   ........856    ..........
- - -----------------------------------------------------------------------------------------------------------
4. Totals.    ..X X X....  ..X X X....  ..X X X....   ...239,610.   .....4,428   ......1,656    .........1
- - ------------------------------------------------------------------------------------------------------------
- - ----------------------------------------------------------------------------
       1
                 -------------------------------------------
     Years             9               10            11            12
    in Which                                                   Number of
 Premiums Were       Salvage      Unallocated      Total         Claims
   Earned and          and            Loss        Net Paid     Reported -
  Losses Were      Subrogation      Expense      (5 - 6 + 7    Direct and
    Incurred         Received       Payments     - 8 + 10)      Assumed
- - ---------------------------------------------------------------------------
1. Prior..       .......1,668      .......(177)   ....(1,630)  ..X X X.....
2. 1994 ..       ......30,582      .....16,155    ...123,802   .....73,750.
3. 1995 ..       ......21,216      .....16,171    ...146,814   .....85,440.
- - ---------------------------------------------------------------------------
4. Totals.       ......53,466      .....32,149    ...268,986   ..X X X.....
- - ---------------------------------------------------------------------------

- - ------------------------------------------------------------------------------------------------------------------------------
                                     Losses Unpaid                                    Allocated Loss Expenses Unpaid
               ---------------------------------------------------------------------------------------------------------------
                         Case Basis                  Bulk + IBNR                 Case Basis                   Bulk + IBNR
               ---------------------------------------------------------------------------------------------------------------
                    13            14            15             16            17            18            19            20
                  Direct                      Direct                       Direct                      Direct
                and Assumed      Ceded      and Assumed      Ceded      and Assumed      Ceded      and Assumed      Ceded
- - -------------------------------------------------------------------------------------------------------------------------------
1. Prior..     ......(822)   ...........   ...........    ...........   ...........    ...........   ...........   ...........
2. 1994 ..     ....(1,506)   .........3.   .......170.    ...........   .........6.    ...........   ........14.   ...........
3. 1995 ..     .......560    ...........   .....3,176.    ...........   .......223.    ...........   ........37.   ...........
- - ------------------------------------------------------------------------------------------------------------------------------
4. Totals.     ....(1,768)   .........3.   .....3,346.    ...........   .......229.    ...........   ........51.   ...........
- - ------------------------------------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------

                    21            22            23           24
                                                          Number of
                 Salvage     Unallocated      Total        Claims
                   and           Loss       Net Losses  Outstanding -
               Subrogation     Expenses    and Expenses  Direct and
               Anticipated      Unpaid        Unpaid       Assumed
- - ---------------------------------------------------------------------
1. Prior..     ........840   ............   ......(822)   .......32.
2. 1994 ..     ......1,582   .........26.   ....(1,293)   ......109.
3. 1995 ..     .....18,428   ......1,709.   .... 5,705.   ...10,694.
- - ---------------------------------------------------------------------
4. Totals.     .....20,850   ......1,735.   .....3,590.   ...10,835.
- - ---------------------------------------------------------------------

 -----------------------------------------------------------------------------------------------------------------------------
                           Total Losses and                   Loss and Loss Expense Percentage           Discount for Time
                         Loss Expenses Incurred                  (Incurred/Premiums Earned)               Value of Money
              ----------------------------------------------------------------------------------------------------------------
                   25           26           27            28            29            30            31            32

                 Direct                                  Direct                                                   Loss
               and Assumed     Ceded         Net      and Assumed      Ceded          Net           Loss        Expense
 -----------------------------------------------------------------------------------------------------------------------------
1. Prior..    ..X X X....  ..X X X....  ..X X X....  ..X X X.....  ..X X X.....  ..X X X.....     ............   ............
2. 1994 ..    ...124,757.  .....2,248.  ...122,509.  .......87.4.  ......683.3.  .......86.0.     ............   ............
3. 1995 ..    ...154,702.  .....2,183.  ...152,519.  .......86.0.  ......526.0.  .......85.0.     ............   ............
- - ------------------------------------------------------------------------------------------------------------------------------
4. Totals.    ..X X X....  ..X X X....  ..X X X....  ..X X X.....  ..X X X.....  ..X X X.....     ............   ............
 -----------------------------------------------------------------------------------------------------------------------------
 -----------------------------------------------------------
                                Net Balance Sheet Reserves
                      33              After Discount
                              ------------------------------
                Inter-Company       34            35
                   Pooling                       Loss
                Participation     Losses       Expenses
                  Percentage      Unpaid        Unpaid
 -----------------------------------------------------------
  1. Prior..      ..X X X.....  .......(822)   ...........
  2. 1994 ..      ............  .....(1,339)   ....... 46.
  3. 1995 ..      ............  ......3,736.   .....1,969.
 -----------------------------------------------------------
  4. Totals.      ..X X X.....  ......1,575.   .....2,015.
 -----------------------------------------------------------

87

Form 2

ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY AND ITS
AFFILIATED COMPANIES

SCHEDULE P - PART 1K - FIDELITY/SURETY

($000 omitted)

 ----------------------------------------------------------------------------------------------------------------
       1                   Premiums Earned                                      Loss and Loss Expense Payments
              ---------------------------------------------------------------------------------------------------
     Years          2             3            4               Loss Payments                Allocated Loss
    in Which                                                                               Expense Payments
 Premiums Were                                        -----------------------------------------------------------
   Earned and    Direct                       Net           5             6             7             8
  Losses Were      and          Ceded       (2 - 3)       Direct                      Direct
    Incurred     Assumed                               and Assumed      Ceded      and Assumed      Ceded
 ----------------------------------------------------------------------------------------------------------------
1. Prior..    ...X X X....  ...X X X.... ...X X X....   ............  ............  ............  ..............
2. 1994 ..    ............  ............ ............   ............  ............  ............  ..............
3. 1995 ..    ............  ............ ............   ............  N       O      N        E   ..............
- - -----------------------------------------------------------------------------------------------------------------
4. Totals..   ...X X X....  ...X X X.... ...X X X....   ............  ............  ............  ..............
 ----------------------------------------------------------------------------------------------------------------
 ----------------------------------------------------------------------
       1
              ------------------------------------------
     Years          9             10            11            12
    in Which                                              Number of
 Premiums Were   Salvage     Unallocated      Total         Claims
   Earned and      and           Loss        Net Paid     Reported -
  Losses Were  Subrogation     Expense      (5 - 6 + 7    Direct and
    Incurred     Received      Payments     - 8 + 10)      Assumed
 ----------------------------------------------------------------------
1. Prior..    ............    ............  ............  ...X X X....
2. 1994 ..    ............    ............  ............  ...X X X...
3. 1995 ..    ............    ............  ............  ...X X X...
- - -----------------------------------------------------------------------
4. Totals..   ............    ............  ............  ...X X X....
 ----------------------------------------------------------------------

 -----------------------------------------------------------------------------------------------------------------------------------

                                    Losses Unpaid                                    Allocated Loss Expenses Unpaid
              ----------------------------------------------------------------------------------------------------------------------

                        Case Basis                 Bulk + IBNR                 Case Basis                   Bulk + IBNR
              ----------------------------------------------------------------------------------------------------------------------

                   13           14           15            16                 17            18            19            20
                 Direct                    Direct                           Direct                      Direct
               and Assumed     Ceded     and Assumed     Ceded           and Assumed      Ceded      and Assumed      Ceded
 -----------------------------------------------------------------------------------------------------------------------------------
1. Prior..    ............  ............  ............    ............   ............  ............  ............    ............
2. 1994 ..    ............  ............  ............    ............   ............  ............  ............    ............
3. 1995 ..    ............  ............  ............    ............   N      O       N       E    ............    ............
- - ------------------------------------------------------------------------------------------------------------------------------------
4. Totals..   ............  ............  ............    ............   ............  ............  ............    ............
 -----------------------------------------------------------------------------------------------------------------------------------
 -----------------------------------------------------------------------

                   21            22            23           24
                                                         Number of
                Salvage     Unallocated      Total        Claims
                  and           Loss       Net Losses  Outstanding -
              Subrogation     Expenses    and Expenses  Direct and
              Anticipated      Unpaid        Unpaid       Assumed
 -----------------------------------------------------------------------
1. Prior..   ............  ............  ............    ............
2. 1994 ..   ............  ............  ............    ............
3. 1995 ..   ............  ............  ............    ............
- - ------------------------------------------------------------------------
4. Totals..  ............  ............  ............    ............
 -----------------------------------------------------------------------

 -----------------------------------------------------------------------------------------------------------------------------
                           Total Losses and                   Loss and Loss Expense Percentage           Discount for Time
                         Loss Expenses Incurred                  (Incurred/Premiums Earned)               Value of Money
              ----------------------------------------------------------------------------------------------------------------
                   25           26           27            28           29            30             31            32

                 Direct                                  Direct                                                   Loss
               and Assumed     Ceded         Net      and Assumed      Ceded          Net           Loss        Expense
 -----------------------------------------------------------------------------------------------------------------------------
1. Prior..   ...X X X.... ...X X X.... ...X X X...  ...X X X....  ...X X X....  ...X X X....    ............  ............
2. 1994 ..   ............ ............ ............ ............  ............  ............    ............  ............
3. 1995 ..   ............ ............ ............ ............  N     O       N       E       ............  ............
- - ------------------------------------------------------------------------------------------------------------------------------
4. Totals..  ...X X X.... ...X X X.... ...X X X.... ...X X X....  ............  ............    ............  ............
 -----------------------------------------------------------------------------------------------------------------------------
- - -----------------------------------------------------------
                             Net Balance Sheet Reserves
                   33              After Discount
                           --------------------------------
             Inter-Company       34            35
                Pooling                       Loss
             Participation     Losses       Expenses
               Percentage      Unpaid        Unpaid
- - -----------------------------------------------------------
1. Prior..   ...X X X....     ............   ............
2. 1994 ..   ............     ............   ............
3. 1995 ..   ............     ............   ............
- - -----------------------------------------------------------
4. Totals..  ...X X X....     ............   ............
- - -----------------------------------------------------------

88

Form 2

ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY AND ITS
AFFILIATED COMPANIES

SCHEDULE P - PART 1L - OTHER (INCLUDING CREDIT, ACCIDENT AND HEALTH)

($000 omitted)

 ----------------------------------------------------------------------------------------------------------------
       1                   Premiums Earned                                      Loss and Loss Expense Payments
              ---------------------------------------------------------------------------------------------------
     Years          2             3            4               Loss Payments                Allocated Loss
    in Which                                                                               Expense Payments
 Premiums Were                                        -----------------------------------------------------------
   Earned and    Direct                       Net           5             6             7             8
  Losses Were      and          Ceded       (2 - 3)       Direct                      Direct
    Incurred     Assumed                               and Assumed      Ceded      and Assumed      Ceded
 ----------------------------------------------------------------------------------------------------------------
1. Prior..    ...X X X....  ...X X X.... ...X X X....   ............  ............  ............    ............
2. 1994 ..    ............  ............ ............   ............                                ............
3. 1995 ..    ............  ............ ............   ............  N       O      N        E     ............
- - ----------------------------------------------------------------------                          -----------------
4. Totals..   ...X X X....  ...X X X.... ...X X X....   ............                                ............
 ----------------------------------------------------------------------------------------------------------------

 ----------------------------------------------------------------------
       1
              ------------------------------------------
     Years          9             10            11            12
    in Which                                              Number of
 Premiums Were   Salvage     Unallocated      Total         Claims
   Earned and      and           Loss        Net Paid     Reported -
  Losses Were  Subrogation     Expense      (5 - 6 + 7    Direct and
    Incurred     Received      Payments     - 8 + 10)      Assumed
 ----------------------------------------------------------------------
1. Prior..    ............    ............  ............  ...X X X....
2. 1994 ..    ............    ............  ............  ...X X X....
3. 1995 ..    ............    ............  ............  ...X X X....
- - -----------------------------------------------------------------------
4. Totals..   ............    ............  ............  ...X X X....
 ----------------------------------------------------------------------

 -----------------------------------------------------------------------------------------------------------------------------------

                                    Losses Unpaid                                    Allocated Loss Expenses Unpaid
              ----------------------------------------------------------------------------------------------------------------------

                        Case Basis                 Bulk + IBNR                 Case Basis                   Bulk + IBNR
              ----------------------------------------------------------------------------------------------------------------------

                   13           14           15            16                 17            18            19            20
                 Direct                    Direct                           Direct                      Direct
               and Assumed     Ceded     and Assumed     Ceded           and Assumed      Ceded      and Assumed      Ceded
 -----------------------------------------------------------------------------------------------------------------------------------

1. Prior..    ............  ............  ............    ............   ............  ............  ............    ............
2. 1994 ..    ............  ............  ............    ............                               ............    ............
3. 1995 ..    ............  ............  ............    ............   N      O       N       E    ............    ............
- - -------------------------------------------------------------------------                          ---------------------------------

4. Totals..   ............  ............  ............    ............                               ............    ............
 -----------------------------------------------------------------------------------------------------------------------------------


 -----------------------------------------------------------------------

                   21            22            23           24
                                                         Number of
                Salvage     Unallocated      Total        Claims
                  and           Loss       Net Losses  Outstanding -
              Subrogation     Expenses    and Expenses  Direct and
              Anticipated      Unpaid        Unpaid       Assumed
 -----------------------------------------------------------------------
1. Prior..   ............  ............  ............    ............
2. 1994 ..   ............  ............  ............    ............
3. 1995 ..   ............  ............  ............    ............
- - ------------------------------------------------------------------------
4. Totals..  ............  ............  ............    ............
 -----------------------------------------------------------------------

 -----------------------------------------------------------------------------------------------------------------------------
                           Total Losses and                   Loss and Loss Expense Percentage           Discount for Time
                         Loss Expenses Incurred                  (Incurred/Premiums Earned)               Value of Money
              --------------------------------------------------------------------------------------------------------------
                   25           26           27            28            29            30            31            32

                 Direct                                  Direct                                                   Loss
               and Assumed     Ceded         Net      and Assumed      Ceded          Net           Loss        Expense
 ---------------------------------------------------------------------------------------------------------------------------
1. Prior..   ...X X X.... ...X X X.... ...X X X...  ...X X X....  ...X X X....  ...X X X....    ............  ............
2. 1994 ..   ............ ............ ............ ............                                ............  ............
3. 1995 ..   ............ ............ ............ ............  N     O       N       E       ............  ............
- - ------------------------------------------------------------------                          --------------------------------
4. Totals..  ...X X X.... ...X X X.... ...X X X.... ...X X X....                                ............  ............
 ---------------------------------------------------------------------------------------------------------------------------

- - -----------------------------------------------------------
                             Net Balance Sheet Reserves
                   33              After Discount
                           --------------------------------
             Inter-Company       34            35
                Pooling                       Loss
             Participation     Losses       Expenses
               Percentage      Unpaid        Unpaid
- - -----------------------------------------------------------
1. Prior..   ...X X X....     ............   ............
2. 1994 ..   ............     ............   ............
3. 1995 ..   ............     ............   ............
- - -----------------------------------------------------------
4. Totals..  ...X X X....     ............   ............
- - -----------------------------------------------------------

89

Form 2

ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY AND ITS
AFFILIATED COMPANIES

SCHEDULE P - PART 1M - INTERNATIONAL

                                                            ($000 omitted)
----------------------------------------------------------------------------------------------------------------------------------
      1                    Premiums Earned                                                  Loss and Loss Expense Payments
              --------------------------------------------------------------------------------------------------------------------
    Years           2             3             4                Loss Payments                 Allocated Loss             9
   in Which                                                                                   Expense Payments
Premiums Were                                           -----------------------------------------------------------    Salvage
  Earned and     Direct                        Net            5              6              7              8             and
 Losses Were       and          Ceded        (2 - 3)        Direct                        Direct                     Subrogation
   Incurred      Assumed                                 and Assumed       Ceded       and Assumed       Ceded         Received
----------------------------------------------------------------------------------------------------------------------------------
 1. Prior ... ....X X X.... ....X X X.... ....X X X.... .............. ............. .............. ............... ..............
 2. 1986 .... ............. ............. ............. .............. ............. .............. ............... ..............
 3. 1987 .... ............. ............. ............. .............. ............. .............. ............... ..............
 4. 1988 .... ............. ............. ............. .............. ............. .............. ............... ..............
 5. 1989 .... ............. ............. ............. .............. ............. .............. ............... ..............
 6. 1990 .... ............. ............. ............. ...N     O     N     E...... .............. ............... ..............
 7. 1991 .... ............. ............. ............. .............. ............. .............. ............... ..............
 8. 1992 .... ............. ............. ............. .............. ............. .............. ............... ..............
 9. 1993 .... ............. ............. ............. .............. ............. .............. ............... ..............
10. 1994 .... ............. ............. ............. .............. ............. .............. ............... ..............
11. 1995 .... ............. ............. ............. .............. ............. .............. ............... ..............
----------------------------------------------------------------------------------------------------------------------------------
12. Totals .. ....X X X.... ....X X X.... ....X X X.... .............. ............. .............. ............... ..............
----------------------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------
      1
              -----------------------------
    Years           10             11             12
   in Which                                   Number of
Premiums Were  Unallocated       Total          Claims
  Earned and       Loss         Net Paid      Reported -
 Losses Were     Expense       (5 - 6 + 7     Direct and
   Incurred      Payments      - 8 + 10)       Assumed
-----------------------------------------------------------
 1. Prior ... .............. .............. ....X X X.....
 2. 1986 .... .............. .............. ....X X X.....
 3. 1987 .... .............. .............. ....X X X.....
 4. 1988 .... .............. .............. ....X X X.....
 5. 1989 .... .............. .............. ....X X X.....
 6. 1990 .... .............. .............. ....X X X.....
 7. 1991 .... .............. .............. ....X X X.....
 8. 1992 .... .............. .............. ....X X X.....
 9. 1993 .... .............. .............. ....X X X.....
10. 1994 .... .............. .............. ....X X X.....
11. 1995 .... .............. .............. ....X X X.....
-----------------------------------------------------------
12. Totals .. .............. .............. ....X X X.....
-----------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------
                                    Losses Unpaid                                     Allocated Loss Expenses Unpaid
              --------------------------------------------------------------------------------------------------------------------
                        Case Basis                  Bulk + IBNR                  Case Basis                    Bulk + IBNR
              --------------------------------------------------------------------------------------------------------------------
                   13            14            15             16             17             18             19             20
                 Direct                      Direct                        Direct                        Direct
               and Assumed      Ceded      and Assumed      Ceded       and Assumed       Ceded       and Assumed       Ceded
----------------------------------------------------------------------------------------------------------------------------------
 1. Prior ... ............. ............. ............. .............. .............. .............. .............. ..............
 2. 1986 .... ............. ............. ............. .............. .............. .............. .............. ..............
 3. 1987 .... ............. ............. ............. .............. .............. .............. .............. ..............
 4. 1988 .... ............. ............. ............. .............. .............. .............. .............. ..............
 5. 1989 .... ............. ............. ............. .............. .............. .............. .............. ..............
 6. 1990 .... ............. ............. ............. ...N     O     N     E....... .............. .............. ..............
 7. 1991 .... ............. ............. ............. .............. .............. .............. .............. ..............
 8. 1992 .... ............. ............. ............. .............. .............. .............. .............. ..............
 9. 1993 .... ............. ............. ............. .............. .............. .............. .............. ..............
10. 1994 .... ............. ............. ............. .............. .............. .............. .............. ..............
11. 1995 .... ............. ............. ............. .............. .............. .............. .............. ..............
----------------------------------------------------------------------------------------------------------------------------------
12. Totals .. ............. ............. ............. .............. .............. .............. .............. ..............
----------------------------------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------

                    21             22             23            24
                                                             Number of
                 Salvage      Unallocated       Total         Claims
                   and            Loss        Net Losses   Outstanding -
               Subrogation      Expenses     and Expenses   Direct and
               Anticipated       Unpaid         Unpaid        Assumed
-------------------------------------------------------------------------
 1. Prior ... .............. .............. .............. .............
 2. 1986 .... .............. .............. .............. .............
 3. 1987 .... .............. .............. .............. .............
 4. 1988 .... .............. .............. .............. .............
 5. 1989 .... .............. .............. .............. .............
 6. 1990 .... .............. .............. .............. .............
 7. 1991 .... .............. .............. .............. .............
 8. 1992 .... .............. .............. .............. .............
 9. 1993 .... .............. .............. .............. .............
10. 1994 .... .............. .............. .............. .............
11. 1995 .... .............. .............. .............. .............
-------------------------------------------------------------------------
12. Totals .. .............. .............. .............. .............
-------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------
                           Total Losses and                    Loss and Loss Expense Percentage            Discount for Time
                         Loss Expenses Incurred                   (Incurred/Premiums Earned)                Value of Money
              --------------------------------------------------------------------------------------------------------------------
                   25            26            27             28             29             30             31             32

                 Direct                                     Direct                                                       Loss
               and Assumed      Ceded          Net       and Assumed       Ceded           Net            Loss         Expense
----------------------------------------------------------------------------------------------------------------------------------
 1. Prior ... ....X X X.... ....X X X.... ....X X X.... ....X X X..... ....X X X..... ....X X X..... .............. ..............
 2. 1986 .... ............. ............. ............. .............. .............. .............. .............. ..............
 3. 1987 .... ............. ............. ............. .............. .............. .............. .............. ..............
 4. 1988 .... ............. ............. ............. .............. .............. .............. .............. ..............
 5. 1989 .... ............. ............. ............. .............. .............. .............. .............. ..............
 6. 1990 .... ............. ............. ............. ...N     O     N     E....... .............. .............. ..............
 7. 1991 .... ............. ............. ............. .............. .............. .............. .............. ..............
 8. 1992 .... ............. ............. ............. .............. .............. .............. .............. ..............
 9. 1993 .... ............. ............. ............. .............. .............. .............. .............. ..............
10. 1994 .... ............. ............. ............. .............. .............. .............. .............. ..............
11. 1995 .... ............. ............. ............. .............. .............. .............. .............. ..............
----------------------------------------------------------------------------------------------------------------------------------
12. Totals .. ....X X X.... ....X X X.... ....X X X.... ....X X X..... ....X X X..... ....X X X..... .............. ..............
----------------------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------
                               Net Balance Sheet Reserves
                    33               After Discount
                             ------------------------------
              Inter-Company        34             35
                 Pooling                         Loss
              Participation      Losses        Expenses
                Percentage       Unpaid         Unpaid
-----------------------------------------------------------
 1. Prior ... ....X X X..... .............. ..............
 2. 1986 .... .............. .............. ..............
 3. 1987 .... .............. .............. ..............
 4. 1988 .... .............. .............. ..............
 5. 1989 .... .............. .............. ..............
 6. 1990 .... .............. .............. ..............
 7. 1991 .... .............. .............. ..............
 8. 1992 .... .............. .............. ..............
 9. 1993 .... .............. .............. ..............
10. 1994 .... .............. .............. ..............
11. 1995 .... .............. .............. ..............
------------- -------------- -------------- --------------
12. Totals .. ....X X X..... .............. ..............
------------- -------------- -------------- --------------

90

Form 2

ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY AND ITS
AFFILIATED COMPANIES

SCHEDULE P - PART 1N - REINSURANCE A

                                                          ($000 omitted)
---------------------------------------------------------------------------------------------------------------------------------
      1                    Premiums Earned                                                  Loss and Loss Expense Payments
              -------------------------------------------------------------------------------------------------------------------
    Years           2             3             4                Loss Payments                 Allocated Loss             9
   in Which                                                                                   Expense Payments
Premiums Were                                           -----------------------------------------------------------    Salvage
  Earned and     Direct                        Net            5              6              7              8             and
 Losses Were       and          Ceded        (2 - 3)        Direct                        Direct                     Subrogation
   Incurred      Assumed                                 and Assumed       Ceded       and Assumed       Ceded         Received
---------------------------------------------------------------------------------------------------------------------------------
 1. 1988 .... ............. ............. ............. .............. .............. .............. .............. ..............
 2. 1989 .... ............. ............. ............. .............. .............. .............. .............. ..............
 3. 1990 .... ............. ............. ............. .............. .............. .............. .............. ..............
 4. 1991 .... ............. ............. ............. .............. .............. .............. .............. ..............
 5. 1992 .... ............. ............. ............. .............. N        O        N         E .............. ..............
 6. 1993 .... ............. ............. ............. .............. .............. .............. .............. ..............
 7. 1994 .... ............. ............. ............. .............. .............. .............. .............. ..............
 8. 1995 .... ............. ............. ............. .............. .............. .............. .............. ..............
----------------------------------------------------------------------------------------------------------------------------------
 9. Totals .. ....X X X.... ....X X X.... ....X X X.... .............. .............. .............. .............. ..............
---------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------
      1
              ------------------------------
    Years           10             11             12
   in Which                                   Number of
Premiums Were  Unallocated       Total          Claims
  Earned and       Loss         Net Paid      Reported -
 Losses Were     Expense       (5 - 6 + 7     Direct and
   Incurred      Payments      - 8 + 10)       Assumed
-----------------------------------------------------------
 1. 1988 .... .............. .............. ....X X X.....
 2. 1989 .... .............. .............. ....X X X.....
 3. 1990 .... .............. .............. ....X X X.....
 4. 1991 .... .............. .............. ....X X X.....
 5. 1992 .... .............. .............. ....X X X.....
 6. 1993 .... .............. .............. ....X X X.....
 7. 1994 .... .............. .............. ....X X X.....
 8. 1995 .... .............. .............. ....X X X.....
-----------------------------------------------------------
 9. Totals .. .............. .............. ....X X X.....
-----------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------
                                    Losses Unpaid                                     Allocated Loss Expenses Unpaid
              --------------------------------------------------------------------------------------------------------------------
                        Case Basis                  Bulk + IBNR                  Case Basis                    Bulk + IBNR
              --------------------------------------------------------------------------------------------------------------------
                   13            14            15             16             17             18             19             20
                 Direct                      Direct                        Direct                        Direct
               and Assumed      Ceded      and Assumed      Ceded       and Assumed       Ceded       and Assumed       Ceded
----------------------------------------------------------------------------------------------------------------------------------
 1. 1988 .... ............. ............. ............. .............. .............. .............. .............. .............
 2. 1989 .... ............. ............. ............. .............. .............. .............. .............. .............
 3. 1990 .... ............. ............. ............. .............. .............. .............. .............. .............
 4. 1991 .... ............. ............. ............. .............. .............. .............. .............. .............
 5. 1992 .... ............. ............. ............. .............. N        O        N         E .............. .............
 6. 1993 .... ............. ............. ............. .............. .............. .............. .............. .............
 7. 1994 .... ............. ............. ............. .............. .............. .............. .............. .............
 8. 1995 .... ............. ............. ............. .............. .............. .............. .............. .............
----------------------------------------------------------------------------------------------------------------------------------
 9. Totals .. ............. ............. ............. .............. .............. .............. .............. .............
----------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------
                    21             22             23            24
                                                             Number of
                 Salvage      Unallocated       Total         Claims
                   and            Loss        Net Losses   Outstanding -
               Subrogation      Expenses     and Expenses   Direct and
               Anticipated       Unpaid         Unpaid        Assumed
-------------------------------------------------------------------------
 1. 1988 .... .............. .............. .............. ....X X X....
 2. 1989 .... .............. .............. .............. ....X X X....
 3. 1990 .... .............. .............. .............. ....X X X....
 4. 1991 .... .............. .............. .............. ....X X X....
 5. 1992 .... .............. .............. .............. ....X X X....
 6. 1993 .... .............. .............. .............. ....X X X....
 7. 1994 .... .............. .............. .............. ....X X X....
 8. 1995 .... .............. .............. .............. ....X X X....
-------------------------------------------------------------------------
 9. Totals .. .............. .............. .............. ....X X X....
-------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------
                           Total Losses and                    Loss and Loss Expense Percentage            Discount for Time
                         Loss Expenses Incurred                   (Incurred/Premiums Earned)                Value of Money
              --------------------------------------------------------------------------------------------------------------------
                   25            26            27             28             29             30             31             32
                 Direct                                     Direct                                                       Loss
               and Assumed      Ceded          Net       and Assumed       Ceded           Net            Loss         Expense
----------------------------------------------------------------------------------------------------------------------------------
 1. 1988 .... ............. ............. ............. .............. .............. .............. .............. .............
 2. 1989 .... ............. ............. ............. .............. .............. .............. .............. .............
 3. 1990 .... ............. ............. ............. .............. .............. .............. .............. .............
 4. 1991 .... ............. ............. ............. .............. .............. .............. .............. .............
 5. 1992 .... ............. ............. ............. .............. N        O        N        E  .............. .............
 6. 1993 .... ............. ............. ............. .............. .............. .............. .............. .............
 7. 1994 .... ............. ............. ............. .............. .............. .............. .............. .............
 8. 1995 .... ............. ............. ............. .............. .............. .............. .............. .............
----------------------------------------------------------------------------------------------------------------------------------
 9. Totals .. ....X X X.... ....X X X.... ....X X X.... ....X X X..... ....X X X..... ....X X X..... .............. .............
----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------
                               Net Balance Sheet Reserves
                    33               After Discount
                             ------------------------------
              Inter-Company        34             35
                 Pooling                         Loss
              Participation      Losses        Expenses
                Percentage       Unpaid         Unpaid
-----------------------------------------------------------
 1. 1988 .... .............. .............. ..............
 2. 1989 .... .............. .............. ..............
 3. 1990 .... .............. .............. ..............
 4. 1991 .... .............. .............. ..............
 5. 1992 .... .............. .............. ..............
 6. 1993 .... .............. .............. ..............
 7. 1994 .... .............. .............. ..............
 8. 1995 .... .............. .............. ..............
-----------------------------------------------------------
 9. Totals .. ....X X X..... .............. ..............
-----------------------------------------------------------

91

Form 2

ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY AND ITS
AFFILIATED COMPANIES

SCHEDULE P - PART 1O - REINSURANCE B

                                                          ($000 omitted)
---------------------------------------------------------------------------------------------------------------------------------
      1                    Premiums Earned                                                  Loss and Loss Expense Payments
              -------------------------------------------------------------------------------------------------------------------
    Years           2             3             4                Loss Payments                 Allocated Loss             9
   in Which                                                                                   Expense Payments
Premiums Were                                           -----------------------------------------------------------    Salvage
  Earned and     Direct                        Net            5              6              7              8             and
 Losses Were       and          Ceded        (2 - 3)        Direct                        Direct                     Subrogation
   Incurred      Assumed                                 and Assumed       Ceded       and Assumed       Ceded         Received
---------------------------------------------------------------------------------------------------------------------------------
 1. 1988 .... ............. ............. ............. .............. .............. .............. .............. ..............
 2. 1989 .... ............. ............. ............. .............. .............. .............. .............. ..............
 3. 1990 .... ............. ............. ............. .............. .............. .............. .............. ..............
 4. 1991 .... ............. ............. ............. .............. .............. .............. .............. ..............
 5. 1992 .... ............. ............. ............. N        O        N         E .............. .............. ..............
 6. 1993 .... ............. ............. ............. .............. .............. .............. .............. ..............
 7. 1994 .... ............. ............. ............. .............. .............. .............. .............. ..............
 8. 1995 .... ............. ............. ............. .............. .............. .............. .............. ..............
----------------------------------------------------------------------------------------------------------------------------------
 9. Totals .. ....X X X.... ....X X X.... ....X X X.... .............. .............. .............. .............. ..............
---------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------
      1
             -------------------------------
    Years           10             11             12
   in Which                                   Number of
Premiums Were  Unallocated       Total          Claims
  Earned and       Loss         Net Paid      Reported -
 Losses Were     Expense       (5 - 6 + 7     Direct and
   Incurred      Payments      - 8 + 10)       Assumed
-----------------------------------------------------------
 1. 1988 .... .............. .............. ....X X X.....
 2. 1989 .... .............. .............. ....X X X.....
 3. 1990 .... .............. .............. ....X X X.....
 4. 1991 .... .............. .............. ....X X X.....
 5. 1992 .... .............  .............. ....X X X.....
 6. 1993 .... .............. .............. ....X X X.....
 7. 1994 .... .............. .............. ....X X X.....
 8. 1995 .... .............. .............. ....X X X.....
-----------------------------------------------------------
 9. Totals .. .............. .............. ....X X X.....
-----------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------
                                    Losses Unpaid                                     Allocated Loss Expenses Unpaid
              --------------------------------------------------------------------------------------------------------------------
                        Case Basis                  Bulk + IBNR                  Case Basis                    Bulk + IBNR
              --------------------------------------------------------------------------------------------------------------------
                   13            14            15             16             17             18             19             20
                 Direct                      Direct                        Direct                        Direct
               and Assumed      Ceded      and Assumed      Ceded       and Assumed       Ceded       and Assumed       Ceded
----------------------------------------------------------------------------------------------------------------------------------
 1. 1988 .... ............. ............. ............. .............. .............. .............. .............. .............
 2. 1989 .... ............. ............. ............. .............. .............. .............. .............. .............
 3. 1990 .... ............. ............. ............. .............. .............. .............. .............. .............
 4. 1991 .... ............. ............. ............. .............. .............. .............. .............. .............
 5. 1992 .... ............. ............. ............. N        O        N         E .............. .............. .............
 6. 1993 .... ............. ............. ............. .............. .............. .............. .............. .............
 7. 1994 .... ............. ............. ............. .............. .............. .............. .............. .............
 8. 1995 .... ............. ............. ............. .............. .............. .............. .............. .............
----------------------------------------------------------------------------------------------------------------------------------
 9. Totals .. ............. ............. ............. .............. .............. .............. .............. .............
----------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------
                    21             22             23            24
                                                             Number of
                 Salvage      Unallocated       Total         Claims
                   and            Loss        Net Losses   Outstanding -
               Subrogation      Expenses     and Expenses   Direct and
               Anticipated       Unpaid         Unpaid        Assumed
-------------------------------------------------------------------------
 1. 1988 .... .............. .............. .............. ....X X X....
 2. 1989 .... .............. .............. .............. ....X X X....
 3. 1990 .... .............. .............. .............. ....X X X....
 4. 1991 .... .............. .............. .............. ....X X X....
 5. 1992 .... .............. .............. .............. ....X X X....
 6. 1993 .... .............. .............. .............. ....X X X....
 7. 1994 .... .............. .............. .............. ....X X X....
 8. 1995 .... .............. .............. .............. ....X X X....
-------------------------------------------------------------------------
 9. Totals .. .............. .............. .............. ....X X X....
-------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------
                           Total Losses and                    Loss and Loss Expense Percentage            Discount for Time
                         Loss Expenses Incurred                   (Incurred/Premiums Earned)                Value of Money
              --------------------------------------------------------------------------------------------------------------------
                   25            26            27             28             29             30             31             32
                 Direct                                     Direct                                                       Loss
               and Assumed      Ceded          Net       and Assumed       Ceded           Net            Loss         Expense
----------------------------------------------------------------------------------------------------------------------------------
 1. 1988 .... ............. ............. ............. .............. .............. .............. .............. .............
 2. 1989 .... ............. ............. ............. .............. .............. .............. .............. .............
 3. 1990 .... ............. ............. ............. .............. .............. .............. .............. .............
 4. 1991 .... ............. ............. ............. .............. .............. .............. .............. .............
 5. 1992 .... ............. ............. ............. .............. N        O        N        E  .............. .............
 6. 1993 .... ............. ............. ............. .............. .............. .............. .............. .............
 7. 1994 .... ............. ............. ............. .............. .............. .............. .............. .............
 8. 1995 .... ............. ............. ............. .............. .............. .............. .............. .............
----------------------------------------------------------------------------------------------------------------------------------
 9. Totals .. ....X X X.... ....X X X.... ....X X X.... ....X X X..... ....X X X..... ....X X X..... .............. .............
----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------
                               Net Balance Sheet Reserves
                    33               After Discount
                             ------------------------------
              Inter-Company        34             35
                 Pooling                         Loss
              Participation      Losses        Expenses
                Percentage       Unpaid         Unpaid
-----------------------------------------------------------
 1. 1988 .... .............. .............. ..............
 2. 1989 .... .............. .............. ..............
 3. 1990 .... .............. .............. ..............
 4. 1991 .... .............. .............. ..............
 5. 1992 .... .............. .............. ..............
 6. 1993 .... .............. .............. ..............
 7. 1994 .... .............. .............. ..............
 8. 1995 .... .............. .............. ..............
-----------------------------------------------------------
 9. Totals .. ....X X X..... .............. ..............
-----------------------------------------------------------

92

Form 2

ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY AND ITS
AFFILIATED COMPANIES

SCHEDULE P - PART 1P - REINSURANCE A

                                                          ($000 omitted)
---------------------------------------------------------------------------------------------------------------------------------
      1                    Premiums Earned                                                  Loss and Loss Expense Payments
              -------------------------------------------------------------------------------------------------------------------
    Years           2             3             4                Loss Payments                 Allocated Loss             9
   in Which                                                                                   Expense Payments
Premiums Were                                           -----------------------------------------------------------    Salvage
  Earned and     Direct                        Net            5              6              7              8             and
 Losses Were       and          Ceded        (2 - 3)        Direct                        Direct                     Subrogation
   Incurred      Assumed                                 and Assumed       Ceded       and Assumed       Ceded         Received
---------------------------------------------------------------------------------------------------------------------------------
 1. 1988 .... ............. ............. ............. .............. .............. .............. .............. ..............
 2. 1989 .... ............. ............. ............. .............. .............. .............. .............. ..............
 3. 1990 .... ............. ............. ............. .............. .............. .............. .............. ..............
 4. 1991 .... ............. ............. ............. .............. .............. .............. .............. ..............
 5. 1992 .... ............. ............. ............. .............. N        O        N        E  .............. ..............
 6. 1993 .... ............. ............. ............. .............. .............. .............. .............. ..............
 7. 1994 .... ............. ............. ............. .............. .............. .............. .............. ..............
 8. 1995 .... ............. ............. ............. .............. .............. .............. .............. ..............
----------------------------------------------------------------------------------------------------------------------------------
 9. Totals .. ....X X X.... ....X X X.... ....X X X.... .............. .............. .............. .............. ..............
---------------------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------
      1
             -------------------------------
    Years           10             11             12
   in Which                                   Number of
Premiums Were  Unallocated       Total          Claims
  Earned and       Loss         Net Paid      Reported -
 Losses Were     Expense       (5 - 6 + 7     Direct and
   Incurred      Payments      - 8 + 10)       Assumed
-----------------------------------------------------------
 1. 1988 .... .............. .............. ....X X X.....
 2. 1989 .... .............. .............. ....X X X.....
 3. 1990 .... .............. .............. ....X X X.....
 4. 1991 .... .............. .............. ....X X X.....
 5. 1992 .... .............. .............. ....X X X.....
 6. 1993 .... .............. .............. ....X X X.....
 7. 1994 .... .............. .............. ....X X X.....
 8. 1995 .... .............. .............. ....X X X.....
-----------------------------------------------------------
 9. Totals .. .............. .............. ....X X X.....
-----------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------
                                    Losses Unpaid                                     Allocated Loss Expenses Unpaid
              --------------------------------------------------------------------------------------------------------------------
                        Case Basis                  Bulk + IBNR                  Case Basis                    Bulk + IBNR
              --------------------------------------------------------------------------------------------------------------------
                   13            14            15             16             17             18             19             20
                 Direct                      Direct                        Direct                        Direct
               and Assumed      Ceded      and Assumed      Ceded       and Assumed       Ceded       and Assumed       Ceded
----------------------------------------------------------------------------------------------------------------------------------
 1. 1988 .... ............. ............. ............. .............. .............. .............. .............. .............
 2. 1989 .... ............. ............. ............. .............. .............. .............. .............. .............
 3. 1990 .... ............. ............. ............. .............. .............. .............. .............. .............
 4. 1991 .... ............. ............. ............. .............. .............. .............. .............. .............
 5. 1992 .... ............. ............. ............. .............. N        O        N        E ............... .............
 6. 1993 .... ............. ............. ............. .............. .............. .............. .............. .............
 7. 1994 .... ............. ............. ............. .............. .............. .............. .............. .............
 8. 1995 .... ............. ............. ............. .............. .............. .............. .............. .............
----------------------------------------------------------------------------------------------------------------------------------
 9. Totals .. ............. ............. ............. .............. .............. .............. .............. .............
----------------------------------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------
                    21             22             23            24
                                                             Number of
                 Salvage      Unallocated       Total         Claims
                   and            Loss        Net Losses   Outstanding -
               Subrogation      Expenses     and Expenses   Direct and
               Anticipated       Unpaid         Unpaid        Assumed
-------------------------------------------------------------------------
 1. 1988 .... .............. .............. .............. ....X X X....
 2. 1989 .... .............. .............. .............. ....X X X....
 3. 1990 .... .............. .............. .............. ....X X X....
 4. 1991 .... .............. .............. .............. ....X X X....
 5. 1992 .... .............. .............. .............. ....X X X....
 6. 1993 .... .............. .............. .............. ....X X X....
 7. 1994 .... .............. .............. .............. ....X X X....
 8. 1995 .... .............. .............. .............. ....X X X....
-------------------------------------------------------------------------
 9. Totals .. .............. .............. .............. ....X X X....
-------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------
                           Total Losses and                    Loss and Loss Expense Percentage            Discount for Time
                         Loss Expenses Incurred                   (Incurred/Premiums Earned)                Value of Money
              --------------------------------------------------------------------------------------------------------------------
                   25            26            27             28             29             30             31             32
                 Direct                                     Direct                                                       Loss
               and Assumed      Ceded          Net       and Assumed       Ceded           Net            Loss         Expense
----------------------------------------------------------------------------------------------------------------------------------
 1. 1988 .... ............. ............. ............. .............. .............. .............. .............. .............
 2. 1989 .... ............. ............. ............. .............. .............. .............. .............. .............
 3. 1990 .... ............. ............. ............. .............. .............. .............. .............. .............
 4. 1991 .... ............. ............. ............. .............. .............. .............. .............. .............
 5. 1992 .... ............. ............. ............. .............. N        O        N        E  .............. .............
 6. 1993 .... ............. ............. ............. .............. .............. .............. .............. .............
 7. 1994 .... ............. ............. ............. .............. .............. .............. .............. .............
 8. 1995 .... ............. ............. ............. .............. .............. .............. .............. .............
----------------------------------------------------------------------------------------------------------------------------------
 9. Totals .. ....X X X.... ....X X X.... ....X X X.... ....X X X..... ....X X X..... ....X X X..... .............. .............
----------------------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------
                               Net Balance Sheet Reserves
                    33               After Discount
                             ------------------------------
              Inter-Company        34             35
                 Pooling                         Loss
              Participation      Losses        Expenses
                Percentage       Unpaid         Unpaid
-----------------------------------------------------------
 1. 1988 .... .............. .............. ..............
 2. 1989 .... .............. .............. ..............
 3. 1990 .... .............. .............. ..............
 4. 1991 .... .............. .............. ..............
 5. 1992 .... .............. .............. ..............
 6. 1993 .... .............. .............. ..............
 7. 1994 .... .............. .............. ..............
 8. 1995 .... .............. .............. ..............
-----------------------------------------------------------
 9. Totals .. ....X X X..... .............. ..............
-----------------------------------------------------------

93

Form 2

ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY AND ITS
AFFILIATED COMPANIES

SCHEDULE P - PART 1Q - REINSURANCE D

                                                     ($000 omitted)
  -------------------------------------------------------------------------------------------------------------------
        1                    Premiums Earned                                           Loss and Loss Expense Payments
                -----------------------------------------------------------------------------------------------------
      Years           2             3             4                Loss Payments                 Allocated Loss
     in Which                                                                                   Expense Payments
  Premiums Were                                           -----------------------------------------------------------
    Earned and     Direct                        Net            5              6              7              8
   Losses Were       and          Ceded        (2 - 3)        Direct                        Direct
     Incurred      Assumed                                 and Assumed       Ceded       and Assumed       Ceded
  -------------------------------------------------------------------------------------------------------------------
   1. Prior ... ....X X X.... ....X X X.... ....X X X.... .............  .............  .............  .............
   2. 1986 .... ............. ............. ............. .............  .............  .............  .............
   3. 1987 .... ............. ............. ............. .............  .............  .............  .............
  -------------------------------------------------------------------------------------------------------------------
   4. Totals .. ....X X X.... ....X X X.... ....X X X.... .............      N     O     N      E      .............
  -------------------------------------------------------------------------------------------------------------------
  ----------------------------------------------------------------------
        1
               --------------------------------------------
      Years          9              10             11             12
     in Which                                                 Number of
  Premiums Were   Salvage      Unallocated       Total          Claims
    Earned and      and            Loss         Net Paid      Reported -
   Losses Were  Subrogation      Expense       (5 - 6 + 7     Direct and
     Incurred     Received       Payments      - 8 + 10)       Assumed
- - --------------------------------------------------------------------------

   1. Prior ... .............. .............. .............. ....X X X....
   2. 1986 .... .............. .............. .............. ....X X X....
   3. 1987 .... .............. .............. .............. ....X X X....
- - --------------------------------------------------------------------------
   4. Totals .. .............. .............. .............. ....X X X....
- - --------------------------------------------------------------------------

- - ---------------------------------------------------------------------------------------------------------------------------------
                                      Losses Unpaid                                     Allocated Loss Expenses Unpaid
                ------------------------------------------------------------------------------------------------------------------
                          Case Basis                  Bulk + IBNR                  Case Basis                    Bulk + IBNR
                ------------------------------------------------------------------------------------------------------------------
                     13            14            15             16             17             18             19             20
                   Direct                      Direct                        Direct                        Direct
                 and Assumed      Ceded      and Assumed      Ceded       and Assumed       Ceded       and Assumed       Ceded
  --------------------------------------------------------------------------------------------------------------------------------
   1. Prior ... ............. ............. ............. .............  .............  .............  .............  ............
   2. 1986 .... ............. ............. ............. .............  .............  .............  .............  ............
   3. 1987 .... ............. ............. ............. .............  .............  .............  .............  ............
  --------------------------------------------------------------------------------------------------------------------------------
   4. Totals .. ............. ............. ............. .............      N     O     N      E      .............  .............
  --------------------------------------------------------------------------------------------------------------------------------

  -------------------------------------------------------------------------

                       21             22             23            24
                                                                Number of
                    Salvage      Unallocated       Total         Claims
                      and            Loss        Net Losses   Outstanding -
                  Subrogation      Expenses     and Expenses   Direct and
                  Anticipated       Unpaid         Unpaid        Assumed
  -------------------------------------------------------------------------
   1. Prior ...  .............. .............. .............. ....X X X....
   2. 1986 ....  .............. .............. .............. ....X X X....
   3. 1987 ....  .............. .............. .............. ....X X X....
  -------------------------------------------------------------------------
   4. Totals ..  .............. .............. .............. ....X X X....
  -------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------------------
                           Total Losses and                    Loss and Loss Expense Percentage            Discount for Time
                         Loss Expenses Incurred                   (Incurred/Premiums Earned)                Value of Money
              ------------------------------------------------------------------------------------------------------------------
                   25            26            27             28             29             30             31           32

                 Direct                                     Direct                                                     Loss
               and Assumed     Ceded          Net         and Assumed      Ceded           Net            Loss        Expense
--------------------------------------------------------------------------------------------------------------------------------
 1. Prior ... ....X X X.... ....X X X.... ....X X X.... ....X X X....  ....X X X....  ....X X X....  ............. .............
 2. 1986 .... ............. ............. ............. .............  .............  .............  ............. .............
 3. 1987 .... ............. ............. ............. .............  .............  .............  .............  ............
--------------------------------------------------------------------------------------------------------------------------------
 4. Totals .. ....X X X.... ....X X X.... ....X X X.... ....X X X.....     N     O     N      E      .............. ............
--------------------------------------------------------------------------------------------------------------------------------
              -----------------------------------------------
                              Net Balance Sheet Reserves
                  33               After Discount
                              ------------------------------
              Inter-Company        34             35
                 Pooling                         Loss
              Participation      Losses        Expenses
                Percentage       Unpaid         Unpaid
-----------------------------------------------------------
 1. Prior ... ....X X X....   .............  .............
 2. 1986 .... .............   .............  .............
 3. 1987 .... .............   .............  .............
------------- --------------  -------------  -------------
 4. Totals .. ....X X X.....  .............  .............
------------- --------------  -------------  -------------

94

Form 2

ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY AND ITS
AFFILIATED COMPANIES

SCHEDULE P - PART 1R - SECTION 2 - PRODUCTS LIABILITY - CLAIMS-MADE

                                                        ($000 omitted)
---------------------------------------------------------------------------------------------------------------------------------
      1                    Premiums Earned                                                  Loss and Loss Expense Payments
              -------------------------------------------------------------------------------------------------------------------
    Years           2             3             4                Loss Payments                 Allocated Loss             9
   in Which                                                                                   Expense Payments
Premiums Were                                           -----------------------------------------------------------    Salvage
  Earned and     Direct                        Net            5              6              7              8             and
 Losses Were       and          Ceded        (2 - 3)        Direct                        Direct                     Subrogation
   Incurred     Assumed                                  and Assumed       Ceded       and Assumed       Ceded         Received
---------------------------------------------------------------------------------------------------------------------------------
 1. Prior.... ....X X X.... ....X X X.... ....X X X.... .............. .............. .............. .............. .............
 2. 1986..... ............. ............. ............. .............. .............. .............. .............. .............
 3. 1987..... ............. ............. ............. .............. N        O        N        E  .............. .............
 4. 1988..... ............. ............. ............. .............. .............. .............. .............. .............
 5. 1989..... ............. ............. ............. .............. .............. .............. .............. .............
 6. 1990..... ............. ............. ............  .............. .............. .............. .............. .............
 7. 1991..... ............. ............. ............. .............. .............. .............. .............. .............
 8. 1992..... ............. ............. ............. .............. .............. .............. .............. .............
 9. 1993..... ............. ............. ............. .............. .............. .............. .............. .............
10. 1994..... ............. ............. ............. .............. .............. .............. .............. .............
11. 1995..... ............. ............. ............. .............. .............. .............. .............. .............
------------- ------------- ------------- ---------------------------- -------------- -------------- -------------- -------------
12. Totals... ....X X X.... ....X X X.... ....X X X.... .............. .............. .............. .............. .............
------------- ------------- ------------- ---------------------------- -------------- -------------- -------------- -------------

----------------------------------------------------------
      1

    Years          10             11             12
   in Which                                   Number of
Premiums Were  Unallocated       Total         Claims
  Earned and       Loss         Net Paid      Reported -
 Losses Were     Expense       (5 - 6 + 7     Direct and
   Incurred      Payments      - 8 + 10)       Assumed
----------------------------------------------------------
 1. Prior.... .............. .............. ....X X X.....
 2. 1986..... .............. .............. ..............
 3. 1987..... .............. .............. ..............
 4. 1988..... .............. .............. ..............
 5. 1989..... .............. .............. ..............
 6. 1990..... .............. .............. ..............
 7. 1991..... .............. .............. ..............
 8. 1992..... .............. .............. ..............
 9. 1993..... .............. .............. ..............
10. 1994..... .............. .............. ..............
11. 1995..... .............. .............. ..............
----------------------------------------------------------
12. Totals... .............. .............. ....X X X.....
----------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------------------
                                    Losses Unpaid                                     Allocated Loss Expenses Unpaid
              -------------------------------------------------------------------------------------------------------------------
                        Case Basis                  Bulk + IBNR                  Case Basis                    Bulk + IBNR
              -------------------------------------------------------------------------------------------------------------------
                   13            14            15             16             17             18             19             20
                 Direct                      Direct                        Direct                        Direct
               and Assumed      Ceded      and Assumed      Ceded       and Assumed       Ceded       and Assumed       Ceded
---------------------------------------------------------------------------------------------------------------------------------
 1. Prior.... ............. ............. ............. .............. .............. .............. .............. .............
 2. 1986..... ............. ............. ............. .............. .............. .............. .............. .............
 3. 1987..... ............. ............. ............. .............. .............. .............. .............. .............
 4. 1988..... ............. ............. ............. .............. .............. .............. .............. .............
 5. 1989..... ............. ............. ............. .............. .............. .............. .............. .............
 6. 1990..... ............. ............. ............. .............. .............. .............. .............. .............
 7. 1991..... ............. ............. ............. .............. N        O        N        E  .............. .............
 8. 1992..... ............. ............. ............. .............. .............. .............. .............. .............
 9. 1993..... ............. ............. ............. .............. .............. .............. .............. .............
10. 1994..... ............. ............. ............. .............. .............. .............. .............. .............
11. 1995..... ............. ............. ............. .............. .............. .............. .............. .............
---------------------------------------------------------------------------------------------------------------------------------
12. Totals... ............. ............. ............. .............. .............. .............. .............. .............
---------------------------------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------

                    21             22             23            24
                                                             Number of
                 Salvage      Unallocated       Total         Claims
                   and            Loss        Net Losses   Outstanding -
               Subrogation      Expenses     and Expenses   Direct and
               Anticipated       Unpaid         Unpaid        Assumed
-------------------------------------------------------------------------
 1. Prior.... .............. .............. .............. .............
 2. 1986..... .............. .............. .............. .............
 3. 1987..... .............. .............. .............. .............
 4. 1988..... .............. .............. .............. .............
 5. 1989..... .............. .............. .............. .............
 6. 1990..... .............. .............. .............. .............
 7. 1991..... .............. .............. .............. .............
 8. 1992..... .............. .............. .............. .............
 9. 1993..... .............. .............. .............. .............
10. 1994..... .............. .............. .............. .............
11. 1995..... .............. .............. .............. .............
------------------------------------------------------------------------
12. Totals... .............. .............. .............. .............
------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------

                           Total Losses and                    Loss and Loss Expense Percentage            Discount for Time
                         Loss Expenses Incurred                   (Incurred/Premiums Earned)                Value of Money
              --------------------------------------------------------------------------------------------------------------------

                   25            26            27             28             29             30             31             32

                 Direct                                     Direct                                                       Loss
               and Assumed      Ceded          Net       and Assumed       Ceded           Net            Loss         Expense
----------------------------------------------------------------------------------------------------------------------------------

 1. Prior.... ....X X X.... ....X X X.... ....X X X.... ....X X X..... ....X X X..... ....X X X..... .............. .............
 2. 1986..... ............. ............. ............. .............. .............. .............. .............. .............
 3. 1987..... ............. ............. ............. .............. .............. .............. .............. .............
 4. 1988..... ............. ............. ............. .............. .............. .............. .............. .............
 5. 1989..... ............. ............. ............. .............. .............. .............. .............. .............
 6. 1990..... ............. ............. ............. .............. N        O        N        E  .............. .............
 7. 1991..... ............. ............. ............. .............. .............. .............. .............. .............
 8. 1992..... ............. ............. ............. .............. .............. .............. .............. .............
 9. 1993..... ............. ............. ............. .............. .............. .............. .............. .............
10. 1994..... ............. ............. ............. .............. .............. .............. .............. .............
11. 1995..... ............. ............. ............. .............. .............. .............. .............. .............
----------------------------------------------------------------------------------------------------------------------------------

12. Totals... ....X X X.... ....X X X.... ....X X X.... ....X X X..... ....X X X..... ....X X X..... .............. .............
----------------------------------------------------------------------------------------------------------------------------------


-----------------------------------------------------------
                               Net Balance Sheet Reserves
                    33               After Discount
                             ------------------------------
              Inter-Company        34             35
                 Pooling                         Loss
              Participation      Losses        Expenses
                Percentage       Unpaid         Unpaid
-----------------------------------------------------------
 1. Prior     ....X X X..... .............. ..............
 2. 1986      .............. .............. ..............
 3. 1987      .............. .............. ..............
 4. 1988      .............. .............. ..............
 5. 1989      .............. .............. ..............
 6. 1990      .............. .............. ..............
 7. 1991      .............. .............. ..............
 8. 1992      .............. .............. ..............
 9. 1993      .............. .............. ..............
10. 1994      .............. .............. ..............
11. 1995      .............. .............. ..............
-----------------------------------------------------------
12. Totals    ....X X X..... .............. ..............
-----------------------------------------------------------

95

Form 2

ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY
AND ITS AFFILIATED COMPANIES

SCHEDULE P - PART 1R - SECTION 2 - PRODUCTS LIABILITY - CLAIMS-MADE

($000 omitted)

- - ------------------------------------------------------------------------------------------------------------
      1                   Premiums Earned                                    Loss and Loss Expense Payments
              ----------------------------------------------------------------------------------------------
    Years          2            3            4             Loss Payments               Allocated Loss
   in Which                                                                           Expense Payments
Premiums Were                                       --------------------------------------------------------
  Earned and    Direct                      Net           5             6             7             8
 Losses Were      and         Ceded       (2 - 3)       Direct                      Direct
   Incurred     Assumed                              and Assumed      Ceded      and Assumed      Ceded
- - ------------------------------------------------------------------------------------------------------------
 1. Prior..    ..X X X..    ..X X X..    ..X X X..    .........      ..........    ..........    .........
 2. 1986 ..    .........    .........    .........    .........      ..........    ..........    .........
 3. 1987 ..    .........    .........    .........    .........      ..........    ..........    .........
 4. 1988 ..    .........    .........    .........    .........      ..........    ..........    .........
 5. 1989 ..    .........    .........    .........    .........      N       O       N     E     .........
 6. 1990 ..    .........    .........    .........    .........      ..........    ..........    .........
 7. 1991 ..    .........    .........    .........    .........      ..........    ..........    .........
 8. 1992 ..    .........    .........    .........    .........      ..........    ..........    .........
 9. 1993 ..    .........    .........    .........    .........      ..........    ..........    .........
10. 1994 ..    .........    .........    .........    .........      ..........    ..........    .........
11. 1995 ..    .........    .........    .........    .........      .........     ..........    .........
- - ------------------------------------------------------------------------------------------------------------
12. Totals.    ..X X X..    ..X X X..    ..X X X..    .........      .........     .........     .........
- - ------------------------------------------------------------------------------------------------------------

- - -------------------------------------------------------------------------
      1
              --------------------------------------------
    Years           9              10             11             12
   in Which                                                  Number of
Premiums Were    Salvage      Unallocated       Total          Claims
  Earned and       and            Loss         Net Paid      Reported -
 Losses Were   Subrogation      Expense       (5 - 6 + 7     Direct and
   Incurred      Received       Payments      - 8 + 10)       Assumed
- - -------------------------------------------------------------------------
 1. Prior..    .........        .........     .........      ..X X X..
 2. 1986 ..    .........        .........     .........      .........
 3. 1987 ..    .........        .........     .........      .........
 4. 1988 ..    .........        .........     .........      .........
 5. 1989 ..    .........        .........     .........      .........
 6. 1990 ..    .........        .........     .........      .........
 7. 1991 ..    .........        .........     .........      .........
 8. 1992 ..    .........        .........     .........      .........
 9. 1993 ..    .........        .........     .........      .........
10. 1994 ..    .........        .........     .........      .........
11. 1995 ..    .........        .........     .........      .........
- - -------------------------------------------------------------------------
12. Totals.    .........        .........     .........      ..X X X..
- - -------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------------------------------------
                                   Losses Unpaid                                     Allocated Loss Expenses Unpaid
             ------------------------------------------------------------------------------------------------------------
                       Case Basis                 Bulk + IBNR               Case Basis                 Bulk + IBNR
             ------------------------------------------------------------------------------------------------------------
                  13           14           15            16            17            18            19            20
                Direct                    Direct                      Direct                      Direct
              and Assumed     Ceded     and Assumed     Ceded      and Assumed      Ceded      and Assumed      Ceded
-------------------------------------------------------------------------------------------------------------------------
 1. Prior..   ........     ..........   ..........    ..........   ...........    ..........   ..........   .............
 2. 1986 ..   ........     ..........   ..........    ..........   ...........    ..........   ..........   .............
 3. 1987 ..   ........     ..........   ..........    ..........   ...........    ..........   ..........   .............
 4. 1988 ..   ........     ..........   ..........    ..........   ...........    ..........   ..........   .............
 5. 1989 ..   ........     ..........   ..........    ..........   ...........    ..........   ..........   .............
 6. 1990 ..   ........     ..........   ..........    ..........   ..N     O      N      E..   ..........   .............
 7. 1991 ..   ........     ..........   ..........    ..........   ...........    ..........   ..........   .............
 8. 1992 ..   ........     ..........   ..........    ..........   ...........    ..........   ..........   .............
 9. 1993 ..   ........     ..........   ..........    ..........   ...........    ..........   ..........   .............
10. 1994 ..   ........     ..........   ..........    ..........   ...........    ..........   ..........   .............
11. 1995 ..   ........     ..........   ..........    ..........   ..........     ..........   ..........   .............
-------------------------------------------------------------------------------------------------------------------------
12. Totals.   ........     ..........   ..........    ..........   ..........     ..........   ...........  .............
-------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------

                    21             22             23            24
                                                             Number of
                 Salvage      Unallocated       Total         Claims
                   and            Loss        Net Losses   Outstanding -
               Subrogation      Expenses     and Expenses   Direct and
               Anticipated       Unpaid         Unpaid        Assumed
------------------------------------------------------------------------
 1. Prior..    .........      .........      .........      .........
 2. 1986 ..    .........      .........      .........      .........
 3. 1987 ..    .........      .........      .........      .........
 4. 1988 ..    .........      .........      .........      .........
 5. 1989 ..    .........      .........      .........      .........
 6. 1990 ..    .........      .........      .........      .........
 7. 1991 ..    .........      .........      .........      .........
 8. 1992 ..    .........      .........      .........      .........
 9. 1993 ..    .........      .........      .........      .........
10. 1994 ..    .........      .........      .........      .........
11. 1995 ..    .........      .........      .........      .........
------------------------------------------------------------------------
12. Totals..   .........      .........      .........      .........
------------------------------------------------------------------------

 -----------------------------------------------------------------------------------------------------------------------------
                            Total Losses and                    Loss and Loss Expense Percentage           Discount for Time
                          Loss Expenses Incurred                   (Incurred/Premiums Earned)               Value of Money
               ---------------------------------------------------------------------------------------------------------------
                    25            26            27             28            29            30            31            32

                  Direct                                     Direct                                                   Loss
                and Assumed      Ceded          Net       and Assumed      Ceded          Net           Loss        Expense
 -----------------------------------------------------------------------------------------------------------------------------
 1. Prior..     ..X X X..     ..X X X..     ..X X X..     ..X X X..     ..X X X..     ..X X X...     ............    .........
 2. 1986 ..     .........     .........     .........     .........     .........     ..........     ............    .........
 3. 1987 ..     .........     .........     .........     .........     .........     ..........     ............    .........
 4. 1988 ..     .........     .........     .........     .........     .........     ..........     ............    .........
 5. 1989 ..     .........     .........     .........     .........     .........     ..........     ............    .........
 6. 1990 ..     .........     .........     .........     .........     .........     ..........     ............    .........
 7. 1991 ..     .........     .........     .........     .........      N     O      N     E        ............    .........
 8. 1992 ..     .........     .........     .........     .........     .........     ..........     ............    .........
 9. 1993 ..     .........     .........     .........     .........     .........     ..........     ............    .........
10. 1994 ..     .........     .........     .........     .........     .........     ..........     ............    .........
11. 1995 ..     .........     .........     .........     .........     .........     ..........     ............    .........
- - ------------------------------------------------------------------------------------------------------------------------------
12. Totals.     ..X X X..     ..X X X..     ..X X X..     ..X X X..     ..X X X..     ..X X X...     ............    .........
 -----------------------------------------------------------------------------------------------------------------------------

               -----------------------------------------------
                                   Net Balance Sheet Reserves
                        33               After Discount
                                 -----------------------------
                 Inter-Company        34             35
                   Pooling                         Loss
                Participation      Losses        Expenses
                  Percentage       Unpaid         Unpaid
               -----------------------------------------------
 1. Prior..     ..X X X..         .........     .........
 2. 1986 ..     .........         .........     .........
 3. 1987 ..     .........         .........     .........
 4. 1988 ..     .........         .........     .........
 5. 1989 ..     .........         .........     .........
 6. 1990 ..     .........         .........     .........
 7. 1991 ..     .........         .........     .........
 8. 1992 ..     .........         .........     .........
 9. 1993 ..     .........         .........     .........
10. 1994 ..     .........         .........     .........
11. 1995 ..     .........         .........     .........
- - --------------------------------------------------------------
12. Totals.     ..X X X..         .........     .........
- - --------------------------------------------------------------

96

Form 2

ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY AND ITS
AFFILIATED COMPANIES

SCHEDULE P - PART 1S - FINANCIAL GUARANTY/MORTGAGE GUARANTY

($000 omitted)

- - -----------------------------------------------------------------------------------------------------------------------------------
      1                    Premiums Earned                                        Loss and Loss Expense Payments
              ---------------------------------------------------------------------------------------------------------------------
    Years           2            3            4             Loss Payments           Allocated Loss            9            10
   in Which                                                                        Expense Payments
Premiums Were                                        ---------------------------------------------------   Salvage    Unallocated
  Earned and     Direct                      Net          5             6           7             8          and          Loss
 Losses Were       and         Ceded       (2 - 3)      Direct                    Direct                 Subrogation    Expense
   Incurred      Assumed                             and Assumed      Ceded    and Assumed      Ceded      Received     Payments
- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior ... ....X X X... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............
 2. 1994 .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 3. 1995 .... ............ ............ ............ ............ ........N O N E.......... ............ ............ ............
- - -----------------------------------------------------------------------------------------------------------------------------------
 4. Totals .. ....X X X... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ---------------------------------------
      1
              -------------
    Years           11           12
   in Which                  Number of
Premiums Were     Total       Claims
  Earned and    Net Paid    Reported -
 Losses Were   (5 - 6 + 7   Direct and
   Incurred     - 8 + 10)    Assumed
- - -----------------------------------------
 1. Prior .... ............ ....X X X...
 2. 1994 ..... ............ ....X X X...
 3. 1995 ..... ............ ....X X X...
- - -----------------------------------------
 4. Totals ... ............ ....X X X...
- - -----------------------------------------

- - -----------------------------------------------------------------------------------------------------------------------------------
                                 Losses Unpaid                              Allocated Loss Expenses Unpaid
              -------------------------------------------------------------------------------------------------------
                                                                                                                           21
                     Case Basis                Bulk + IBNR               Case Basis               Bulk + IBNR
              -------------------------------------------------------------------------------------------------------    Salvage
                   13           14           15           16           17           18           19           20           and
                 Direct                    Direct                    Direct                    Direct                  Subrogation
              and Assumed      Ceded    and Assumed      Ceded    and Assumed      Ceded    and Assumed      Ceded     Anticipated

- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior ... ............ ............ ............ ............ ............ ............ ............ ............ ............
 2. 1994 .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 3. 1995 .... ............ ............ ............ ............ ........N O N E.......... ............ ............ ............
- - -----------------------------------------------------------------------------------------------------------------------------------
 4. Totals .. ............ ............ ............ ............ ............ ............ ............ ............ ............
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ------------------------------------------------------
                    22          23           24
                                          Number of
              Unallocated     Total        Claims
                  Loss      Net Losses  Outstanding -
                Expenses   and Expenses   Direct and
                 Unpaid       Unpaid       Assumed
- - ------------------------------------------------------
 1. Prior .... ............ ............ ............
 2. 1994 ..... ............ ............ ............
 3. 1995 ..... ............ ............ ............
- - ------------------------------------------------------
 4. Totals ... ............ ............ ............
- - ------------------------------------------------------

- - -----------------------------------------------------------------------------------------------------------------------------------
                         Total Losses and              Loss and Loss Expense Percentage         Discount for Time
                      Loss Expenses Incurred              (Incurred/Premiums Earned)              Value of Money            33
              -------------------------------------------------------------------------------------------------------
                   25           26           27           28           29           30           31           32       Inter-Company
                                                                                                                          Pooling
                 Direct                                 Direct                                              Loss       Participation
              and Assumed      Ceded         Net     and Assumed      Ceded         Net         Loss       Expense       Percentage
- - ------------------------------------------------------------------------------------------------------------------------------------
 1. Prior ... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............ ....X X X...
 2. 1994 .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 3. 1995 .... ............ ............ ............ ............ ........N O N E.......... ............ ............ ............
- - -----------------------------------------------------------------------------------------------------------------------------------
 4. Totals .. ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............ ....X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------

- - -----------------------------------------
              Net Balance Sheet Reserves
                    After Discount
              ---------------------------
                   34           35
                               Loss
                 Losses      Expenses
                 Unpaid       Unpaid
- - -----------------------------------------
 1. Prior .... ............ ............
 2. 1994 ..... ............ ............
 3. 1995 ..... ............ ............
- - -----------------------------------------
 4. Totals ... ............ ............
- - -----------------------------------------

97

Form 2

ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY AND ITS
AFFILIATED COMPANIES

SCHEDULE P - PART 2A - HOMEOWNERS/FARMOWNERS

- - -----------------------------------------------------------------------------------------------------------------------------------
      1                               INCURRED LOSSES AND ALLOCATED EXPENSES REPORTED AT YEAR END ($000 OMITTED)
               ---------------------------------------------------------------------------------------------------------------------

Years in Which       2             3           4            5            6            7            8            9           10
  Losses Were      1986          1987        1988         1989         1990         1991         1992         1993         1994
   Incurred
- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior .... ........80.. ........48.. .......234.. .......238.. .......258.. .......262.. .......262.. .......274.. .......265..
 2. 1986 ..... .....1,199.. .....1,245.. .....1,365.. .....1,394.. .....1,407.. .....1,413.. .....1,413.. .....1,413.. .....1,413..
 3. 1987 ..... ....X X X... .......793.. .....1,079.. .....1,036.. .....1,052.. .....1,059.. .....1,059.. .....1,059.. .....1,059..
 4. 1988 ..... ....X X X... ....X X X... .....1,247.. .....1,136.. .....1,157.. .....1,119.. .....1,118.. .....1,118.. .....1,119..
 5. 1989 ..... ....X X X... ....X X X... ....X X X... .......487.. .......409.. .......407.. .......402.. .......394.. .......394..
 6. 1990 ..... ....X X X... ....X X X... ....X X X... ....X X X... .......325.. .......404.. .......394.. .......387.. .......387..
 7. 1991 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .......579.. .......571.. .......587.. .......532..
 8. 1992 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .......419.. .......399.. .......410..
 9. 1993 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .....1,028.. .....1,241..
10. 1994 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .....2,408..
11. 1995 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------
      1                            Development
               ---------------------------------------
Years in Which     11           12          13
  Losses Were     1995        One Year    Two Year
   Incurred
- - ------------------------------------------------------
 1. Prior .... .......299.. ........34.. ........25..
 2. 1986 ..... .....1,413.. ............ ............
 3. 1987 ..... .....1,059.. ............ ............
 4. 1988 ..... .....1,119.. ............ .........1..
 5. 1989 ..... .......394.. ............ ............
 6. 1990 ..... .......387.. ............ ............
 7. 1991 ..... .......604.. ........72.. ........17..
 8. 1992 ..... .......363.. .......(47). .......(36).
 9. 1993 ..... .....1,294.. ........53.. .......266..
10. 1994 ..... .....2,190.. ......(218). ....X X X...
11. 1995 ..... .....2,629.. ....X X X... ....X X X...
- - ------------------------------------------------------
               12. Totals   ......(106). .......273..
                           ---------------------------

SCHEDULE P - PART 2B - PRIVATE PASSENGER AUTO LIABILITY/MEDICAL

- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior .... ....22,513.. ....26,281.. ....26,355.. ....26,821.. ....26,227.. ....25,723.. ....25,272.. ....25,264.. ....25,396..
 2. 1986 ..... ...100,491.. ...107,127.. ...105,761.. ...106,059.. ...104,577.. ...104,734.. ...104,343.. ...104,225.. ...104,511..
 3. 1987 ..... ....X X X... ...157,264.. ...150,517.. ...150,383.. ...152,007.. ...152,215.. ...150,705.. ...150,657.. ...150,803..
 4. 1988 ..... ....X X X... ....X X X... ...208,064.. ...194,616.. ...192,384.. ...193,782.. ...189,838.. ...189,443.. ...189,860..
 5. 1989 ..... ....X X X... ....X X X... ....X X X... ...235,857.. ...210,048.. ...208,467.. ...204,740.. ...204,245.. ...204,686..
 6. 1990 ..... ....X X X... ....X X X... ....X X X... ....X X X... ...239,682.. ...225,667.. ...215,750.. ...213,599.. ...214,168..
 7. 1991 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ...225,218.. ...196,986.. ...192,195.. ...190,560..
 8. 1992 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ...200,292.. ...180,248.. ...179,945..
 9. 1993 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ...185,646.. ...175,431..
10. 1994 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ...204,316..
11. 1995 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ------------------------------------------------------
 1. Prior .... ....25,409.. ........13.. .......145..
 2. 1986 ..... ...104,503.. ........(8). .......278..
 3. 1987 ..... ...150,731.. .......(72). ........74..
 4. 1988 ..... ...189,831.. .......(29). .......388..
 5. 1989 ..... ...204,871.. .......185.. .......626..
 6. 1990 ..... ...214,158.. .......(10). .......579..
 7. 1991 ..... ...190,978.. .......418.. ....(1,217).
 8. 1992 ..... ...178,636.. ....(1,309). ....(1,612).
 9. 1993 ..... ...179,974.. .....4,543.. ....(5,672).
10. 1994 ..... ...198,696.. ....(5,620). ....X X X...
11. 1995 ..... ...227,052.. ....X X X... ....X X X...
- - ------------------------------------------------------
               12. Totals   ....(1,889). ....(6,411).
                           ---------------------------

SCHEDULE P - PART 2C - COMMERCIAL AUTO/TRUCK LIABILITY/MEDICAL

- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior .... .....2,411.. .....3,314.. .....3,833.. .....3,901.. .....3,801.. .....3,845.. .....3,653.. .....3,656.. .....3,658..
 2. 1986 ..... .....8,190.. .....8,959.. .....9,650.. .....9,598.. .....9,702.. .....9,634.. .....9,643.. .....9,633.. .....9,624..
 3. 1987 ..... ....X X X... ....13,437.. ....13,888.. ....14,847.. ....16,085.. ....16,279.. ....16,113.. ....16,058.. ....16,075..
 4. 1988 ..... ....X X X... ....X X X... ....18,139.. ....18,445.. ....19,485.. ....19,064.. ....19,021.. ....19,105.. ....19,045..
 5. 1989 ..... ....X X X... ....X X X... ....X X X... ....18,556.. ....19,029.. ....19,750.. ....18,296.. ....17,966.. ....17,792..
 6. 1990 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....16,257.. ....14,285.. ....13,362.. ....13,034.. ....12,768..
 7. 1991 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....13,737.. ....12,254.. ....11,512.. ....11,013..
 8. 1992 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....11,192.. ....10,811.. ....10,079..
 9. 1993 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....10,894.. ....11,280..
10. 1994 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....11,703..
11. 1995 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ------------------------------------------------------
 1. Prior .... .....3,654.. ........(4). ........(2).
 2. 1986 ..... .....9,619.. ........(5). .......(14).
 3. 1987 ..... ....16,065.. .......(10). .........7..
 4. 1988 ..... ....19,061.. ........16.. .......(44).
 5. 1989 ..... ....17,762.. .......(30). ......(204).
 6. 1990 ..... ....12,683.. .......(85). ......(351).
 7. 1991 ..... ....10,977.. .......(36). ......(535).
 8. 1992 ..... .....9,837.. ......(242). ......(974).
 9. 1993 ..... ....11,127.. ......(153). .......233..
10. 1994 ..... .....9,920.. ....(1,783). ....X X X...
11. 1995 ..... ....11,577.. ....X X X... ....X X X...
- - ------------------------------------------------------
               12. Totals   ....(2,332). ....(1,884).
                           ---------------------------

SCHEDULE P - PART 2D - WORKERS' COMPENSATION

- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 2. 1986 ..... ............ ............ ............ ............ ............ ............ ............ ............ ............
 3. 1987 ..... ....X X X... ............ ............ ............ ............ ............ ............ ............ ............
 4. 1988 ..... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............ ............
 5. 1989 ..... ....X X X... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............
 6. 1990 ..... ....X X X... ....X X X... ....X X X... ....X X X... ........N O N E.......... ............ ............ ............
 7. 1991 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............ ............ ............
 8. 1992 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............ ............
 9. 1993 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............
10. 1994 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............
11. 1995 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ------------------------------------------------------
 1. Prior .... ............ ............ ............
 2. 1986 ..... ............ ............ ............
 3. 1987 ..... ............ ............ ............
 4. 1988 ..... ............ ............ ............
 5. 1989 ..... ............ ............ ............
 6. 1990 ..... ............ ............ ............
 7. 1991 ..... ............ ............ ............
 8. 1992 ..... ............ ............ ............
 9. 1993 ..... ............ ............ ............
10. 1994 ..... ............ ............ ....X X X...
11. 1995 ..... ............ ....X X X... ....X X X...
- - ------------------------------------------------------
               12. Totals   ............ ............
                           ---------------------------

SCHEDULE P - PART 2-E - COMMERCIAL MULTIPLE PERIL

- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior .... .......512.. .......509.. .......6361. .......912.. .....1,029.. .......927.. .......923.. .......911.. .......910..
 2. 1986 ..... .......625.. .......616.. .......716.. .......754.. .......799.. .......768.. .......743.. .......742.. .......742..
 3. 1987 ..... ....X X X... .......441.. .......680.. .......673.. .......683.. .......678.. .......671.. .......671.. .......671..
 4. 1988 ..... ....X X X... ....X X X... .......420.. .......320.. .......487.. .......463.. .......475.. .......476.. .......478..
 5. 1989 ..... ....X X X... ....X X X... ....X X X... .......670.. .......648.. .......649.. .......614.. .......626.. .......628..
 6. 1990 ..... ....X X X... ....X X X... ....X X X... ....X X X... .......458.. .......432.. .......420.. .......410.. .......398..
 7. 1991 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .......448.. .......461.. .......422.. .......389..
 8. 1992 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .....1,003.. .......745.. .......731..
 9. 1993 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .......776.. .......917..
10. 1994 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .....1,199..
11. 1995 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ------------------------------------------------------
 1. Prior .... .......911.. .........1.. ............
 2. 1986 ..... .......742.. ............ ............
 3. 1987 ..... .......671.. ............ ............
 4. 1988 ..... .......478.. ............ .........2..
 5. 1989 ..... .......630.. .........2.. .........4..
 6. 1990 ..... .......398.. ............ .......(12).
 7. 1991 ..... .......389.. ............ .......(33).
 8. 1992 ..... .......784.. ........53.. ........39..
 9. 1993 ..... .....1,037.. .......120.. .......261..
10. 1994 ..... .....1,222.. ........23.. ....X X X...
11. 1995 ..... .....1,725.. ....X X X... ....X X X...
- - ------------------------------------------------------
               12. Totals   .......199.. .......261..
                           ---------------------------

98

Form 2

ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY AND ITS
AFFILIATED COMPANIES

SCHEDULE P - PART 2F - SECTION 1 - MEDICAL MALPRACTICE - OCCURRENCE

- - -----------------------------------------------------------------------------------------------------------------------------------
      1                               INCURRED LOSSES AND ALLOCATED EXPENSES REPORTED AT YEAR END ($000 OMITTED)
               ---------------------------------------------------------------------------------------------------------------------

Years in Which       2             3           4            5            6            7            8            9           10
  Losses Were      1986          1987        1988         1989         1990         1991         1992         1993         1994
   Incurred
- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 2. 1986 ..... ............ ............ ............ ............ ............ ............ ............ ............ ............
 3. 1987 ..... ....X X X... ............ ............ ............ ............ ............ ............ ............ ............
 4. 1988 ..... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............ ............
 5. 1989 ..... ....X X X... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............
 6. 1990 ..... ....X X X... ....X X X... ....X X X... ....X X X... .......N O N E........... ............ ............ ............
 7. 1991 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............ ............ ............
 8. 1992 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............ ............
 9. 1993 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............
10. 1994 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............
11. 1995 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ------------------------------------------------------
      1                            Development
               ---------------------------------------
Years in Which     11            12          13
  Losses Were     1995        One Year    Two Year
   Incurred
- - ------------------------------------------------------
                                         C>
 1. Prior .... ............ ............ ............
 2. 1986 ..... ............ ............ ............
 3. 1987 ..... ............ ............ ............
 4. 1988 ..... ............ ............ ............
 5. 1989 ..... ............ ............ ............
 6. 1990 ..... ............ ............ ............
 7. 1991 ..... ............ ............ ............
 8. 1992 ..... ............ ............ ............
 9. 1993 ..... ............ ............ ............
10. 1994 ..... ............ ............ ....X X X...
11. 1995 ..... ............ ....X X X... ....X X X...
- - ------------------------------------------------------
               12. Totals   ............ ............
                           ---------------------------

SCHEDULE P - PART 2F - SECTION 2 - MEDICAL MALPRACTICE - CLAIMS-MADE

- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 2. 1986 ..... ............ ............ ............ ............ ............ ............ ............ ............ ............
 3. 1987 ..... ....X X X... ............ ............ ............ ............ ............ ............ ............ ............
 4. 1988 ..... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............ ............
 5. 1989 ..... ....X X X... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............
 6. 1990 ..... ....X X X... ....X X X... ....X X X... ....X X X... .......N O N E........... ............ ............ ............
 7. 1991 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............ ............ ............
 8. 1992 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............ ............
 9. 1993 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............
10. 1994 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............
11. 1995 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ------------------------------------------------------
                                         C>
 1. Prior .... ............ ............ ............
 2. 1986 ..... ............ ............ ............
 3. 1987 ..... ............ ............ ............
 4. 1988 ..... ............ ............ ............
 5. 1989 ..... ............ ............ ............
 6. 1990 ..... ............ ............ ............
 7. 1991 ..... ............ ............ ............
 8. 1992 ..... ............ ............ ............
 9. 1993 ..... ............ ............ ............
10. 1994 ..... ............ ............ ....X X X...
11. 1995 ..... ............ ....X X X... ....X X X...
- - ------------------------------------------------------
               12. Totals   ............ ............
                           ---------------------------

SCHEDULE P - PART 2G - SPECIAL LIABILITY (OCEAN MARINE, AIRCRAFT
(ALL PERILS), BOILER AND MACHINERY)

- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 2. 1986 ..... ............ ............ ............ ............ ............ ............ ............ ............ ............
 3. 1987 ..... ....X X X... ............ ............ ............ ............ ............ ............ ............ ............
 4. 1988 ..... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............ ............
 5. 1989 ..... ....X X X... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............
 6. 1990 ..... ....X X X... ....X X X... ....X X X... ....X X X... .......N O N E........... ............ ............ ............
 7. 1991 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............ ............ ............
 8. 1992 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............ ............
 9. 1993 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............
10. 1994 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............
11. 1995 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ------------------------------------------------------
                                         C>
 1. Prior .... ............ ............ ............
 2. 1986 ..... ............ ............ ............
 3. 1987 ..... ............ ............ ............
 4. 1988 ..... ............ ............ ............
 5. 1989 ..... ............ ............ ............
 6. 1990 ..... ............ ............ ............
 7. 1991 ..... ............ ............ ............
 8. 1992 ..... ............ ............ ............
 9. 1993 ..... ............ ............ ............
10. 1994 ..... ............ ............ ....X X X...
11. 1995 ..... ............ ....X X X... ....X X X...
- - ------------------------------------------------------
               12. Totals   ............ ............
                           ---------------------------

SCHEDULE P - PART 2H - SECTION 1 - OTHER LIABILITY - OCCURRENCE

- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior .... .......245.. .......354.. .......619.. .......750.. .......786.. .......831.. .......906.. .......925.. .......948..
 2. 1986 ..... ........97.. ........85.. .......130.. .......116.. .......121.. .......118.. .......132.. .......132.. .......132..
 3. 1987 ..... ....X X X... .......113.. .......140.. .......146.. .......150.. .......116.. .......117.. .......120.. .......120..
 4. 1988 ..... ....X X X... ....X X X... ........25.. ........12.. ........53.. ........53.. ........63.. ........53.. ........53..
 5. 1989 ..... ....X X X... ....X X X... ....X X X... ........13.. ........13.. ........13.. ........13.. ........13.. ........13..
 6. 1990 ..... ....X X X... ....X X X... ....X X X... ....X X X... .........9.. .........8.. .........8.. .........8.. .........9..
 7. 1991 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ........39.. ........15.. ........16.. ........15..
 8. 1992 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ........41.. .........5.. ........23..
 9. 1993 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .......357.. .........3..
10. 1994 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ........33..
11. 1995 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ------------------------------------------------------
                                         C>
 1. Prior .... .......987.. ........39.. ........62..
 2. 1986 ..... .......134.. .........2.. .........2..
 3. 1987 ..... .......120.. ............ ............
 4. 1988 ..... ........53.. ............ ............
 5. 1989 ..... ........13.. ............ ............
 6. 1990 ..... .........9.. ............ .........1..
 7. 1991 ..... ........15.. ............ ........(1).
 8. 1992 ..... ........22.. ........(1). ........17..
 9. 1993 ..... .........2.. ........(1). ......(355).
10. 1994 ..... ........42.. .........9.. ....X X X...
11. 1995 ..... .........2.. ....X X X... ....X X X...
- - ------------------------------------------------------
               12. Totals   ........48.. ......(274).
                           ---------------------------

SCHEDULE P - PART 2H - SECTION 2 - OTHER LIABILITY - CLAIMS-MADE

- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 2. 1986 ..... ............ ............ ............ ............ ............ ............ ............ ............ ............
 3. 1987 ..... ....X X X... ............ ............ ............ ............ ............ ............ ............ ............
 4. 1988 ..... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............ ............
 5. 1989 ..... ....X X X... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............
 6. 1990 ..... ....X X X... ....X X X... ....X X X... ....X X X... .......N O N E........... ............ ............ ............
 7. 1991 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............ ............ ............
 8. 1992 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............ ............
 9. 1993 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............
10. 1994 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............
11. 1995 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ------------------------------------------------------
                                         C>
 1. Prior .... ............ ............ ............
 2. 1986 ..... ............ ............ ............
 3. 1987 ..... ............ ............ ............
 4. 1988 ..... ............ ............ ............
 5. 1989 ..... ............ ............ ............
 6. 1990 ..... ............ ............ ............
 7. 1991 ..... ............ ............ ............
 8. 1992 ..... ............ ............ ............
 9. 1993 ..... ............ ............ ............
10. 1994 ..... ............ ............ ....X X X...
11. 1995 ..... ............ ....X X X... ....X X X...
- - ------------------------------------------------------
               12. Totals   ............ ............
                           ---------------------------

99

Form 2

ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY AND ITS
AFFILIATED COMPANIES

SCHEDULE P - PART 2I - SPECIAL PROPERTY (FIRE, ALLIED LINES, INLAND MARINE,

EARTHQUAKE, GLASS, BURGLARY AND THEFT)

- - -----------------------------------------------------------------------------------------------------------------------------------
      1                               INCURRED LOSSES AND ALLOCATED EXPENSES REPORTED AT YEAR END ($000 OMITTED)
               ---------------------------------------------------------------------------------------------------------------------

Years in Which       2             3           4            5            6            7            8            9           10
  Losses Were      1986          1987        1988         1989         1990         1991         1992         1993         1994
   Incurred
- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior .... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .......138.. .......205..
 2. 1994 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .......986..
 3. 1995 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------
      1                            Development
               ---------------------------------------
Years in Which     11           12          13
  Losses Were     1995        One Year    Two Year
   Incurred
- - ------------------------------------------------------
 1. Prior .... .......209.. .........4.. ........71..
 2. 1994 ..... .....1,469.. .......483.. ....X X X...
 3. 1995 ..... .......201.. ....X X X... ....X X X...
- - ------------------------------------------------------
                4. Totals   .......487.. ........71..
                           ---------------------------

SCHEDULE P - PART 2J - AUTO PHYSICAL DAMAGE

- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior .... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....(3,873). ....(1,250).
 2. 1994 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ...106,815..
 3. 1995 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ------------------------------------------------------
 1. Prior .... ....(1,603). ......(353). .....2,270..
 2. 1994 ..... ...106,328.. ......(487). ....X X X...
 3. 1995 ..... ...134,639.. ....X X X... ....X X X...
- - ------------------------------------------------------
                4. Totals   ......(840). .....2,270..
                           ---------------------------

SCHEDULE P - PART 2K - FIDELITY/SURETY

- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior .... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............
 2. 1994 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............
 3. 1995 ..... ....X X X... ....X X X... ....X X X... ....X X X... .......N O N E...X X X... ....X X X... ....X X X... ....X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ------------------------------------------------------
 1. Prior .... ............ ............ ............
 2. 1994 ..... ............ ............ ....X X X...
 3. 1995 ..... ............ ....X X X... ....X X X...
- - ------------------------------------------------------
                4. Totals   ............ ............
                           ---------------------------

SCHEDULE P - PART 2L - OTHER (INCLUDING CREDIT, ACCIDENT AND HEALTH)

- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior .... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............
 2. 1994 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............
 3. 1995 ..... ....X X X... ....X X X... ....X X X... ....X X X... .......N O N E...X X X... ....X X X... ....X X X... ....X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ------------------------------------------------------
                                         C>
 1. Prior .... ............ ............ ............
 2. 1994 ..... ............ ............ ....X X X...
 3. 1995 ..... ............ ....X X X... ....X X X...
- - ------------------------------------------------------
                4. Totals   ............ ............
                           ---------------------------

SCHEDULE P - PART 2M - INTERNATIONAL

- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 2. 1986 ..... ............ ............ ............ ............ ............ ............ ............ ............ ............
 3. 1987 ..... ....X X X... ............ ............ ............ ............ ............ ............ ............ ............
 4. 1988 ..... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............ ............
 5. 1989 ..... ....X X X... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............
 6. 1990 ..... ....X X X... ....X X X... ....X X X... ....X X X... .......N O N E........... ............ ............ ............
 7. 1991 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............ ............ ............
 8. 1992 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............ ............
 9. 1993 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............
10. 1994 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............
11. 1995 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ------------------------------------------------------
 1. Prior .... ............ ............ ............
 2. 1986 ..... ............ ............ ............
 3. 1987 ..... ............ ............ ............
 4. 1988 ..... ............ ............ ............
 5. 1989 ..... ............ ............ ............
 6. 1990 ..... ............ ............ ............
 7. 1991 ..... ............ ............ ............
 8. 1992 ..... ............ ............ ............
 9. 1993 ..... ............ ............ ............
10. 1994 ..... ............ ............ ....X X X...
11. 1995 ..... ............ ....X X X... ....X X X...
- - ------------------------------------------------------
               12. Totals   ............ ............
                           ---------------------------

100

Form 2
ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY AND ITS

AFFILIATED COMPANIES

SCHEDULE P - PART 2N - REINSURANCE A

- - -----------------------------------------------------------------------------------------------------------------------------------
      1                               INCURRED LOSSES AND ALLOCATED EXPENSES REPORTED AT YEAR END ($000 OMITTED)
               ---------------------------------------------------------------------------------------------------------------------

Years in Which       2             3           4            5            6            7            8            9           10
  Losses Were      1986          1987        1988         1989         1990         1991         1992         1993         1994
   Incurred
- - -----------------------------------------------------------------------------------------------------------------------------------
 1. 1988 ..... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............ ............
 2. 1989 ..... ....X X X... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............
 3. 1990 ..... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............ ............ ............ ............
 4. 1991 ..... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............ ............ ............ ............
 5. 1992 ..... ....X X X... ....X X X... ....X X X... ....X X X...        N   O    N    E      .......... ............ ............
 6. 1993 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............ ............ ............
 7. 1994 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............
 8. 1995 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ------------------------------------------------------
      1                            Development
               ---------------------------------------
Years in Which     11           12          13
  Losses Were     1995        One Year    Two Year
   Incurred
- - ------------------------------------------------------
                                         C>
 1. 1986 ..... ............ ............ ............
 2. 1987 ..... ............ ............ ............
 3. 1988 ..... ............ ............ ............
 4. 1989 ..... ............ ............ ............
 5. 1990 ..... ............ ............ ............
 6. 1991 ..... ............ ............ ............
 7. 1992 ..... ............ ............ ....X X X...
 8. 1993 ..... ............ ....X X X... ....X X X...
- - ------------------------------------------------------
                9. Totals   ............ ............
                           ---------------------------

SCHEDULE P - PART 2O - REINSURANCE B

- - -----------------------------------------------------------------------------------------------------------------------------------
 1. 1988 ..... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............ ............
 2. 1989 ..... ....X X X... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............
 3. 1990 ..... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............ ............ ............ ............
 4. 1991 ..... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............ ............ ............ ............
 5. 1992 ..... ....X X X... ....X X X... ....X X X... ....X X X...   N    O      N    E      ............ ............ ............
 6. 1993 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............ ............ ............
 7. 1994 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............
 8. 1995 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ------------------------------------------------------
                                         C>
 1. 1988 ..... ............ ............ ............
 2. 1989 ..... ............ ............ ............
 3. 1990 ..... ............ ............ ............
 4. 1991 ..... ............ ............ ............
 5. 1992 ..... ............ ............ ............
 6. 1993 ..... ............ ............ ............
 7. 1994 ..... ............ ............ ....X X X...
 8. 1995 ..... ............ .....X X X.. ....X X X...
- - ------------------------------------------------------
                9. Totals   ............ ............
                           ---------------------------

SCHEDULE P - PART 2P - REINSURANCE C

- - -----------------------------------------------------------------------------------------------------------------------------------
 1. 1988 ..... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............ ............
 2. 1989 ..... ....X X X... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............
 3. 1990 ..... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............ ............ ............ ............
 4. 1991 ..... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............ ............ ............ ............
 5. 1992 ..... ....X X X... ....X X X... ....X X X... ....X X X... .......N O N E........... ............ ............ ............
 6. 1993 ..... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............ ............ ............ ............
 7. 1994 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............
 8. 1995 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ------------------------------------------------------
                                         C>
 1. 1988 ..... ............ ............ ............
 2. 1989 ..... ............ ............ ............
 3. 1990 ..... ............ ............ ............
 4. 1991 ..... ............ ............ ............
 5. 1992 ..... ............ ............ ............
 6. 1993 ..... ............ ............ ............
 7. 1994 ..... ............ ............ ....X X X...
 8. 1995 ..... ............ ....X X X... ....X X X...
- - ------------------------------------------------------
                9. Totals   ............ ............
                           ---------------------------

SCHEDULE P - PART 2Q - REINSURANCE D

- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 2. 1986 ..... ............ ............ ............ ............ N       O       N       E ............ ............ ............
 3. 1987 ..... ....X X X... ............ ............ ............ ............ ............ ............ ............ ............
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ------------------------------------------------------
                                         C>
 1. Prior .... ............ ............ ............
 2. 1986 ..... ............ ............ ............
 3. 1987 ..... ............ ............ ............
- - ------------------------------------------------------
                4. Totals   ............ ............
                           ---------------------------

101

Form 2

ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY AND ITS
AFFILIATED COMPANIES

SCHEDULE P - PART 2R - SECTION 1 - PRODUCTS LIABILITY - OCCURRENCE

  --------------------------------------------------------------------------------------------------------------------------
         1                                       INCURRED LOSSES AND ALLOCATED EXPENSES REPORTED AT YEAR END ($000 OMITTED)
                   ---------------------------------------------------------------------------------------------------------
  Years in Which         2            3            4            5            6            7            8            9
   Losses Were         1986         1987         1988         1989         1990         1991         1992         1993
     Incurred
  --------------------------------------------------------------------------------------------------------------------------
  1.   Prior... ............... ............ ............. ........... ............. ............ .............. ...........
  2.   1986.... ............... ............ ............. ........... ............. ............ .............. ...........
  3.   1987.... .......X X X... ............ ............. ...........       N        O         N      E         ...........
  4.   1988.... .......X X X... ....X X X... ............. ........... ............. ............ .............. ...........
  5.   1989.... .......X X X... ....X X X... ....X X X.... ........... ............. ............ .............. ...........
  6.   1990.... .......X X X... ....X X X... ....X X X.... ...X X X... ............. ............ .............. ...........
  7.   1991.... .......X X X... ....X X X... ....X X X.... ...X X X... ....X X X.... ............ .............. ...........
  8.   1992.... .......X X X... ....X X X... ....X X X.... ...X X X... ....X X X.... ...X X X.... .............. ...........
  9.   1993.... .......X X X... ....X X X... ....X X X.... ...X X X... ....X X X.... ...X X X.... ...X X X...... ...........
 10.   1994.... .......X X X... ....X X X... ....X X X.... ...X X X... ....X X X.... ...X X X.... ...X X X...... ...X X X...
 11.   1995.... .......X X X... ....X X X... ....X X X.... ...X X X... ....X X X.... ...X X X.... ...X X X...... ...X X X...
 ---------------------------------------------------------------------------------------------------------------------------
 ------------------------------------------------------------------------
                            1                       Development
                  ------------------------------------------------------
 Years in Which         10           11            12           13
  Losses Were          1994         1995        One Year     Two Year
    Incurred
 -----------------------------------------------------------------------
 1.   Prior.... ............... ............. ............ ............
 2.   1986..... ............... ............. ............ ............
 3.   1987..... ............... ............. ............ ............
 4.   1988..... ............... ............. ............ ............
 5.   1989..... ............... ............. ............ ............
 6.   1990..... ............... ............. ............ ............
 7.   1991..... ............... ............. ............ ............
 8.   1992..... ............... ............. ............ ............
 9.   1993..... ............... ............. ............ ............
10.   1994..... ............... ............. ............ ...X X X....
11.   1995..... .......X X X... ............. ...X X X.... ...X X X....
- - ------------------------------------------------------------------------
                                  12. Totals  ............ ............
                                              --------------------------

SCHEDULE P - PART 2R - SECTION 2 - PRODUCTS LIABILITY - CLAIMS-MADE

 --------------------------------------------------------------------------------------------------------------
 1.   Prior... ........... ........... ........... ........... ........... ........... ........... ............
 2.   1986.... ........... ........... ........... ........... ........... ........... ........... ............
 3.   1987.... ..X X X.... ........... ........... ........... ........... ........... ........... ............
 4.   1988.... ..X X X.... ..X X X.... ........... ........... ........... ........... ........... ............
 5.   1989.... ..X X X.... ..X X X.... ..X X X.... ........... ........... ........... ........... ............
 6.   1990.... ..X X X.... ..X X X.... ..X X X.... ..X X X.... ........... ........... ........... ............
 7.   1991.... ..X X X.... ..X X X.... ..X X X.... ..X X X....   N      O     N      E ........... ............
 8.   1992.... ..X X X.... ..X X X.... ..X X X.... ..X X X....                         ........... ............
 9.   1993.... ..X X X.... ..X X X.... ..X X X.... ..X X X.... ..X X X.... ..X X X.... ..X X X.... ............
10.   1994.... ..X X X.... ..X X X.... ..X X X.... ..X X X.... ..X X X.... ..X X X.... ..X X X.... ..X X X.....
11.   1995.... ..X X X.... ..X X X.... ..X X X.... ..X X X.... ..X X X.... ..X X X.... ..X X X ... ..X X X.....
- - ---------------------------------------------------------------------------------------------------------------

- - ------------------------------------------------------------------
 1.   Prior... ........... .......... ........... .............
 2.   1986.... ........... .......... ........... .............
 3.   1987.... ........... .......... ........... .............
 4.   1988.... ........... .......... ........... .............
 5.   1989.... ........... .......... ........... .............
 6.   1990.... ........... .......... ........... .............
 7.   1991.... ........... .......... ........... .............
 8.   1992.... ........... .......... ........... .............
 9.   1993.... ........... .......... ........... .............
10.   1994.... ........... .......... ........... ...X X X.....
11.   1995.... ..X X X.... .......... ...X X X... ...X X X.....
- - ------------------------------------------------------------------
                          12. Totals  ........... .............
                                       ---------------------------

SCHEDULE P - PART 2S - FINANCIAL GUARANTY/MORTGAGE GUARANTY

- - -------------------------------------------------------------------------------------------------------------
1.   Prior.... ......X X ....  ............ ............ ............  ..N        O        N        E....
2.   1994..... ......X X X.... ...X X X.... ...X X X.... ...X X X....   ......                       ....
3.   1995..... ......X X X.... ...X X X.... ...X X X.... ...X X X....   .....                        ....
- - -------------------------------------------------------------------------------------------------------------

- - ------------------------------------------------------------------------------------
1.   Prior..... .............. ........... ............. ............. ...........
2.   1994...... .....X X X.... ........... ............. ............. ...X X X...
3.   1995...... .....X X X.... ...X X X... ............. ...X X X..... ...X X X...
- - ------------------------------------------------------------------------------------
                                          4. Totals      ............. ............
                                                    --------------------------------

102

Form 2

ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY AND ITS
AFFILIATED COMPANIES

SCHEDULE P - PART 3A - HOMEOWNERS/FARMOWNERS

- - -----------------------------------------------------------------------------------------------------------------------------------
        1                               CUMULATIVE PAID LOSSES AND ALLOCATED EXPENSES AT YEAR END ($000 OMITTED)
               ---------------------------------------------------------------------------------------------------------------------

Years in Which
  Losses Were        2             3           4            5            6            7            8            9           10
   Incurred        1986          1987        1988         1989         1990         1991         1992         1993         1994

- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior .... .....000.... .......(19). .......109.. .......219.. .......250.. .......262.. .......262.. .......272.. .......265..
 2. 1986 ..... .......765.. .....1,247.. .....1,327.. .....1,389.. .....1,402.. .....1,413.. .....1,413.. .....1,413.. .....1,413..
 3. 1987 ..... ....X X X... .......795.. .....1,046.. .....1,036.. .....1,047.. .....1,059.. .....1,059.. .....1,059.. .....1,059..
 4. 1988 ..... ....X X X... ....X X X... .......894.. .....1,080.. .....1,092.. .....1,118.. .....1,118.. .....1,121.. .....1,122..
 5. 1989 ..... ....X X X... ....X X X... ....X X X... .......303.. .......375.. .......387.. .......391.. .......394.. .......394..
 6. 1990 ..... ....X X X... ....X X X... ....X X X... ....X X X... .......225.. .......386.. .......386.. .......387.. .......387..
 7. 1991 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .......369.. .......422.. .......433.. .......443..
 8. 1992 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .......287.. .......358.. .......359..
 9. 1993 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .......507.. .....1,078..
10. 1994 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .....1,409..
11. 1995 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------
      1                          12           13
                              Number of    Number of
Years in Which                  Claims      Claims
  Losses Were      11           Closed      Closed
   Incurred       1995        With Loss     Without
                               Payment    Loss Payment
- - ------------------------------------------------------
 1. Prior .... .......299.. .....9,014.. .....1,511..
 2. 1986 ..... .....1,413.. .......493.. ........30..
 3. 1987 ..... .....1,059.. .......458.. ........21..
 4. 1988 ..... .....1,122.. .......433.. ........16..
 5. 1989 ..... .......394.. .......175.. .........6..
 6. 1990 ..... .......387.. .......153.. ........10..
 7. 1991 ..... .......475.. .......183.. ........16..
 8. 1992 ..... .......363.. .......139.. ........21..
 9. 1993 ..... .....1,319.. .......367.. .......100..
10. 1994 ..... .....1,901.. .......733.. .......235..
11. 1995 ..... .....1,531.. .......815.. .......264..
- - ------------------------------------------------------

SCHEDULE P - PART 3B - PRIVATE PASSENGER AUTO LIABILITY/MEDICAL

- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior .... .....000.... ....14,403.. ....21,069.. ....23,712.. ....25,325.. ....25,395.. ....25,400.. ....25,388.. ....23,379..
 2. 1986 ..... ....27,897.. ....76,802.. ....93,204.. ....99,368.. ...102,322.. ...103,847.. ...104,202.. ...104,310.. ...104,506..
 3. 1987 ..... ....X X X... ....42,920.. ...111,696.. ...133,395.. ...143,558.. ...148,867.. ...150,122.. ...150,635.. ...150,700..
 4. 1988 ..... ....X X X... ....X X X... ....53,801.. ...140,501.. ...171,590.. ...183,114.. ...187,798.. ...189,378.. ...189,733..
 5. 1989 ..... ....X X X... ....X X X... ....X X X... ....60,812.. ...155,385.. ...186,845.. ...198,596.. ...202,488.. ...204,006..
 6. 1990 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....65,344.. ...169,803.. ...200,631.. ...209,185.. ...212,503..
 7. 1991 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....67,539.. ...151,993.. ...178,215.. ...187,319..
 8. 1992 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....60,722.. ...138,083.. ...167,720..
 9. 1993 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....61,417.. ...140,034..
10. 1994 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....67,635..
11. 1995 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ------------------------------------------------------
 1. Prior .... ....25,399.. ....82,682.. ....27,308..
 2. 1986 ..... ...104,498.. ....21,010.. .....7,375..
 3. 1987 ..... ...150,675.. ....26,478.. ....13,373..
 4. 1988 ..... ...189,748.. ....31,636.. ....13,246..
 5. 1989 ..... ...204,486.. ....33,435.. ....13,651..
 6. 1990 ..... ...213,795.. ....33,132.. ....13,439..
 7. 1991 ..... ...189,354.. ....29,662.. ....11,299..
 8. 1992 ..... ...175,889.. ....29,165.. ....10,836..
 9. 1993 ..... ...168,057.. ....30,512.. ....11,649..
10. 1994 ..... ...152,257.. ....32,679.. ....13,492..
11. 1995 ..... ....73,369.. ....22,823.. ....11,837..
- - ------------------------------------------------------

SCHEDULE P - PART 3C - COMMERCIAL AUTO/TRUCK LIABILITY/MEDICAL

- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior .... .....000.... .....1,650.. .....2,693.. .....3,542.. .....3,579.. .....3,616.. .....3,641.. .....3,651.. .....3,654..
 2. 1986 ..... .....2,118.. .....5,765.. .....7,973.. .....8,604.. .....9,293.. .....9,491.. .....9,610.. .....9,611.. .....9,619..
 3. 1987 ..... ....X X X... .....3,237.. .....8,935.. ....12,063.. ....14,523.. ....15,738.. ....15,985.. ....16,029.. ....16,052..
 4. 1988 ..... ....X X X... ....X X X... .....3,671.. ....10,292.. ....15,340.. ....17,477.. ....18,474.. ....19,025.. ....19,034..
 5. 1989 ..... ....X X X... ....X X X... ....X X X... .....3,923.. ....10,830.. ....14,787.. ....16,829.. ....17,316.. ....17,627..
 6. 1990 ..... ....X X X... ....X X X... ....X X X... ....X X X... .....2,789.. .....8,524.. ....11,381.. ....12,213.. ....12,542..
 7. 1991 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .....3,143.. .....7,583.. .....9,904.. ....10,606..
 8. 1992 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .....2,672.. .....6,508.. .....8,872..
 9. 1993 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .....2,588.. .....7,506..
10. 1994 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .....3,120..
11. 1995 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ------------------------------------------------------
                                         C>
 1. Prior .... .....3,654.. .....6,597.. .....1,669..
 2. 1986 ..... .....9,619.. .....1,670.. .......457..
 3. 1987 ..... ....16,052.. .....2,271.. .......675..
 4. 1988 ..... ....19,050.. .....2,337.. .......827..
 5. 1989 ..... ....17,729.. .....2,077.. .......761..
 6. 1990 ..... ....12,569.. .....1,735.. .......667..
 7. 1991 ..... ....10,875.. .....1,405.. .......495..
 8. 1992 ..... .....9,562.. .....1,342.. .......434..
 9. 1993 ..... .....9,951.. .....1,326.. .......393..
10. 1994 ..... .....9,956.. .....1,344.. .......484..
11. 1995 ..... .....2,570.. .......778.. .......411..
- - ------------------------------------------------------

SCHEDULE P - PART 3D - WORKERS' COMPENSATION

- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior .... .....000.... ............ ............ ............ ............ ............ ............ ............ ............
 2. 1986 ..... ............ ............ ............ ............ ............ ............ ............ ............ ............
 3. 1987 ..... ....X X X... ............ ............ ............ ............ ............ ............ ............ ............
 4. 1988 ..... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............ ............
 5. 1989 ..... ....X X X... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............
 6. 1990 ..... ....X X X... ....X X X... ....X X X... ....X X X... .......N O N E........... ............ ............ ............
 7. 1991 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............ ............ ............
 8. 1992 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............ ............
 9. 1993 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............
10. 1994 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............
11. 1995 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ------------------------------------------------------
                                         C>
 1. Prior .... ............ ............ ............
 2. 1986 ..... ............ ............ ............
 3. 1987 ..... ............ ............ ............
 4. 1988 ..... ............ ............ ............
 5. 1989 ..... ............ ............ ............
 6. 1990 ..... ............ ............ ............
 7. 1991 ..... ............ ............ ............
 8. 1992 ..... ............ ............ ............
 9. 1993 ..... ............ ............ ............
10. 1994 ..... ............ ............ ............
11. 1995 ..... ............ ............ ............
- - ------------------------------------------------------

SCHEDULE P - PART 3E - COMMERCIAL MULTIPLE PERIL

- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior .... .....000.... .......165.. .......469.. .......753.. .......977.. .......902.. .......903.. .......906.. .......910..
 2. 1986 ..... .......325.. .......466.. .......607.. .......663.. .......704.. .......726.. .......741.. .......742.. .......742..
 3. 1987 ..... ....X X X... .......209.. .......563.. .......652.. .......674.. .......676.. .......671.. .......671.. .......671..
 4. 1988 ..... ....X X X... ....X X X... .......363.. .......421.. .......456.. .......458.. .......464.. .......476.. .......478..
 5. 1989 ..... ....X X X... ....X X X... ....X X X... .......419.. .......409.. .......555.. .......614.. .......626.. .......628..
 6. 1990 ..... ....X X X... ....X X X... ....X X X... ....X X X... .......267.. .......378.. .......397.. .......410.. .......398..
 7. 1991 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .......208.. .......313.. .......374.. .......369..
 8. 1992 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .......367.. .......575.. .......652..
 9. 1993 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .......368.. .......766..
10. 1994 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .......509..
11. 1995 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ------------------------------------------------------
                                         C>
 1. Prior .... .......911.. .....2,921.. .......626..
 2. 1986 ..... .......742.. .......130.. ........28..
 3. 1987 ..... .......671.. ........90.. ........17..
 4. 1988 ..... .......478.. ........77.. ........12..
 5. 1989 ..... .......628.. ........86.. .........8..
 6. 1990 ..... .......398.. ........84.. ........16..
 7. 1991 ..... .......389.. ........71.. ........30..
 8. 1992 ..... .......729.. .......106.. ........34..
 9. 1993 ..... .......776.. .......127.. ........64..
10. 1994 ..... .......964.. .......144.. ........69..
11. 1995 ..... .......902.. .......122.. ........62..
- - ------------------------------------------------------

103

Form 2

ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY AND ITS
AFFILIATED COMPANIES

SCHEDULE P - PART 3F - SECTION 1 - MEDICAL MALPRACTICE - OCCURRENCE

-----------------------------------------------------------------------------------------------------------------------
          1                       CUMULATIVE PAID LOSSES AND ALLOCATED EXPENSES AT YEAR END ($000 OMITTED)
                     --------------------------------------------------------------------------------------------------
    Years in Which
     Losses Were           2             3             4             5             6             7             8
      Incurred           1986          1987          1988          1989          1990          1991          1992

-----------------------------------------------------------------------------------------------------------------------

  1.   Prior ....... .....000..... ............. ............. ............. ............. ............. .............
  2.   1986 ........ ............. ............. ............. ............. ............. ............. .............
  3.   1987 ........ ....X X X.... ............. ............. ............. ............. ............. .............
  4.   1988 ........ ....X X X.... ....X X X.... ............. ............. ............. ............. .............
  5.   1989 ........ ....X X X.... ....X X X.... ....X X X.... N     O     N     E........ ............. .............
  6.   1990 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ............. ............. .............
  7.   1991 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ............. .............
  8.   1992 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... .............
  9.   1993 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X....
 10.   1994 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X....
 11.   1995 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X....
-----------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
          1                                                        12            13
                    -----------------------------------------   Number of     Number of
    Years in Which                                               Claims        Claims
     Losses Were          9            10            11          Closed        Closed
      Incurred          1993          1994          1995        With Loss   Without Loss
                                                                 Payment       Payment
------------------------------------------------------------------------------------------
  1.   Prior ....... ............ ............. ............. ............. .............
  2.   1986 ........ ............ ............. ............. ............. .............
  3.   1987 ........ ............ ............. ............. ............. .............
  4.   1988 ........ ............ ............. ............. ............. .............
  5.   1989 ........ ............ ............. ............. ............. .............
  6.   1990 ........ ............ ............. ............. ............. .............
  7.   1991 ........ ............ ............. ............. ............. .............
  8.   1992 ........ ............ ............. ............. ............. .............
  9.   1993 ........ ............ ............. ............. ............. .............
 10.   1994 ........ ...X X X.... ............. ............. ............. .............
 11.   1995 ........ ...X X X.... ....X X X.... ............. ............. .............
------------------------------------------------------------------------------------------

SCHEDULE P - PART 3F - SECTION 2 - MEDICAL MALPRACTICE - CLAIMS-MADE

-----------------------------------------------------------------------------------------------------------------------
  1.   Prior ....... .....000..... ............. ............. ............. ............. ............. .............
  2.   1986 ........ ............. ............. ............. ............. ............. ............. .............
  3.   1987 ........ ....X X X.... ............. ............. ............. ............. ............. .............
  4.   1988 ........ ....X X X.... ....X X X.... ............. ............. ............. ............. .............
  5.   1989 ........ ....X X X.... ....X X X.... ....X X X.... .N     O     N     E....... ............. .............
  6.   1990 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ............. ............. .............
  7.   1991 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ............. .............
  8.   1992 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... .............
  9.   1993 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X....
 10.   1994 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X....
 11.   1995 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X....
-----------------------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------
  1.   Prior ....... ............. ............. ............. ............. .............
  2.   1986 ........ ............. ............. ............. ............. .............
  3.   1987 ........ ............. ............. ............. ............. .............
  4.   1988 ........ ............. ............. ............. ............. .............
  5.   1989 ........ ............. ............. ............. ............. .............
  6.   1990 ........ ............. ............. ............. ............. .............
  7.   1991 ........ ............. ............. ............. ............. .............
  8.   1992 ........ ............. ............. ............. ............. .............
  9.   1993 ........ ............. ............. ............. ............. .............
 10.   1994 ........ ....X X X.... ............. ............. ............. .............
 11.   1995 ........ ....X X X.... ....X X X.... ............. ............. .............
-------------------------------------------------------------------------------------------

SCHEDULE P - PART 3G - SPECIAL LIABILITY (OCEAN MARINE, AIRCRAFT
(ALL PERILS), BOILER AND MACHINERY)

-----------------------------------------------------------------------------------------------------------------------
  1.   Prior ....... .....000..... ............. ............. ............. ............. ............. .............
  2.   1986 ........ ............. ............. ............. ............. ............. ............. .............
  3.   1987 ........ ....X X X.... ............. ............. ............. ............. ............. .............
  4.   1988 ........ ....X X X.... ....X X X.... ............. ............. ............. ............. .............
  5.   1989 ........ ....X X X.... ....X X X.... ....X X X.... N     O     N     E........ ............. .............
  6.   1990 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ............. ............. .............
  7.   1991 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ............. .............
  8.   1992 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... .............
  9.   1993 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X....
 10.   1994 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X....
 11.   1995 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X....
-----------------------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------
  1.   Prior ....... ............. ............. ............. ....X X X.... ....X X X....
  2.   1986 ........ ............. ............. ............. ....X X X.... ....X X X....
  3.   1987 ........ ............. ............. ............. ....X X X.... ....X X X....
  4.   1988 ........ ............. ............. ............. ....X X X.... ....X X X....
  5.   1989 ........ ............. ............. ............. ....X X X.... ....X X X....
  6.   1990 ........ ............. ............. ............. ....X X X.... ....X X X....
  7.   1991 ........ ............. ............. ............. ....X X X.... ....X X X....
  8.   1992 ........ ............. ............. ............. ....X X X.... ....X X X....
  9.   1993 ........ ............. ............. ............. ....X X X.... ....X X X....
 10.   1994 ........ ....X X X.... ............. ............. ....X X X.... ....X X X....
 11.   1995 ........ ....X X X.... ....X X X.... ............. ....X X X.... ....X X X....
-------------------------------------------------------------------------------------------

SCHEDULE P - PART 3H - SECTION 1 - OTHER LIABILITY - OCCURRENCE

----------------------------------------------------------------------------------------------------------------------
 1.   Prior ....... .....000..... .........396. .........987. .........636. .........727. .........842. .........884.
 2.   1986 ........ ...........7. ..........44. ..........79. ..........95. .........103. .........473. .........132.
 3.   1987 ........ ....X X X.... ..........36. ......... 86. ..........83. .........120. .........117. .........116.
 4.   1988 ........ ....X X X.... ....X X X.... ..........11. ..........12. ..........53. .........116. ..........53.
 5.   1989 ........ ....X X X.... ....X X X.... ....X X X.... ...........4. ..........13. ..........53. ..........13.
 6.   1990 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ...........8. ..........13. ...........8.
 7.   1991 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ...........8. ..........15.
 8.   1992 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ...........2.
 9.   1993 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X....
10.   1994 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X....
11.   1995 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X....
----------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------
 1.   Prior ....... .........915. .........925. .........987. .........346. .........210.
 2.   1986 ........ .........132. .........132. .........134. ..........18. ..........15.
 3.   1987 ........ .........120. .........120. .........120. ..........14. ...........9.
 4.   1988 ........ ..........53. ..........53. ..........53. ............. ...........1.
 5.   1989 ........ ..........13. ..........13. ..........13. ............. ...........1.
 6.   1990 ........ .......... 8. ...........9. ...........9. ............. ...........1.
 7.   1991 ........ ..........15. ..........15. ..........15. ...........1. ...........1.
 8.   1992 ........ ...........2. ..........22. ..........22. ...........2. ...........7.
 9.   1993 ........ ...........2. ...........2. ...........2. ...........1. ...........1.
10.   1994 ........ ....X X X.... ............. ............. ...........1. .............
11.   1995 ........ ....X X X.... ....X X X.... ...........1. ............. ...........1.
------------------------------------------------------------------------------------------

SCHEDULE P - PART 3H - SECTION 2 - OTHER LIABILITY - CLAIMS-MADE

-----------------------------------------------------------------------------------------------------------------------
  1.   Prior ....... .....000..... ............. ............. ............. ............. ............. .............
  2.   1986 ........ ............. ............. ............. ............. ............. ............. .............
  3.   1987 ........ ....X X X.... ............. ............. ............. ............. ............. .............
  4.   1988 ........ ....X X X.... ....X X X.... ............. ............. ............. ............. .............
  5.   1989 ........ ....X X X.... ....X X X.... ....X X X.... ..N     O     N     E...... ............. .............
  6.   1990 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ............. ............. .............
  7.   1991 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ............. .............
  8.   1992 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... .............
  9.   1993 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X....
 10.   1994 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X....
 11.   1995 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X....
-----------------------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------
  1.   Prior ....... ............. ............. ............. ............. .............
  2.   1986 ........ ............. ............. ............. ............. .............
  3.   1987 ........ ............. ............. ............. ............. .............
  4.   1988 ........ ............. ............. ............. ............. .............
  5.   1989 ........ ............. ............. ............. ............. .............
  6.   1990 ........ ............. ............. ............. ............. .............
  7.   1991 ........ ............. ............. ............. ............. .............
  8.   1992 ........ ............. ............. ............. ............. .............
  9.   1993 ........ ............. ............. ............. ............. .............
 10.   1994 ........ ....X X X.... ............. ............. ............. .............
 11.   1995 ........ ....X X X.... ....X X X.... ............. ............. .............
-------------------------------------------------------------------------------------------

104

Form 2

ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY AND ITS
AFFILIATED COMPANIES

SCHEDULE P - PART 3I - SPECIAL PROPERTY (FIRE, ALLIED LINES, INLAND MARINE,

EARTHQUAKE, GLASS, BURGLARY AND THEFT)

- - ---------------------------------------------------------------------------------------------------------------------------
             1                             CUMULATIVE PAID LOSSES AND ALLOCATED EXPENSES AT YEAR END ($000
                            -----------------------------------------------------------------------------------------------
       Years in Which              2               3               4               5               6               7
         Losses Were
          Incurred               1986            1987            1988            1989            1990            1991

- - ---------------------------------------------------------------------------------------------------------------------------
  1.    Prior ............. .....X X X..... .... X X X..... .....X X X..... .....X X X..... .....X X X..... .....X X X.....
  2.    1994 .............. .....X X X..... .... X X X..... .....X X X..... .....X X X..... .....X X X..... .....X X X.....
  3.    1995 .............. .....X X X..... .... X X X..... .....X X X..... .....X X X..... .....X X X..... .....X X X.....
- - ---------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------
             1              OMITTED)                                                        12            13
                            ----------------------------------------------------------   Number of     Number of
       Years in Which           8               9              10             11          Claims        Claims
         Losses Were                                                                      Closed        Closed
          Incurred            1992            1993            1994           1995        With Loss   Without Loss
                                                                                          Payment       Payment
- - ------------------------------------------------------------------------------------------------------------------
  1.    Prior ............. ....X X X... ......000.....  ...........159. .........182 .....X X X.... ....X X X....
  2.    1994 .............. ....X X X... .....X X X....  ...........768. .......1,050 .....X X X.... ....X X X....
  3.    1995 .............. ....X X X... .....X X X....  .....X X X..... ..........81 .....X X X.... ....X X X....
- - ------------------------------------------------------------------------------------------------------------------

SCHEDULE P - PART 3J - AUTO PHYSICAL DAMAGE

-----------------------------------------------------------------------------------------------------------------------------
  1.     Prior .............. .....X X X..... .....X X X..... .....X X X..... .....X X X..... .....X X X..... .....X X X.....
  2.     1994 ............... .....X X X..... .....X X X..... .....X X X..... .....X X X..... .....X X X..... .....X X X.....
  3.     1995 ............... .....X X X..... .....X X X..... .....X X X..... .....X X X..... .....X X X..... .....X X X.....
-----------------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------------------
  1.     Prior .............. .....X X X..... ......000...... ...........672. ..........(781) .......443,346. .......156,360.
  2.     1994 ............... .....X X X..... .....X X X..... .......103,694. .......107,647. ........54,050. ........22,817.
  3.     1995 ............... .....X X X..... .....X X X..... ......X X X.... .......130,643. ........53,750. ........22,985.
-----------------------------------------------------------------------------------------------------------------------------

SCHEDULE P - PART 3K - FIDELITY/SURETY

-----------------------------------------------------------------------------------------------------------------------------
  1.     Prior .............. .....X X X..... .....X X X..... .....X X X..... .....X X X.....
  2.     1994 ............... .....X X X..... .....X X X..... .....X X X..... .....X X X.....             N O N E
  3.     1995 ............... .....X X X..... .....X X X..... .....X X X..... .....X X X.....
-----------------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------------------
  1.     Prior .............. .....X X X..... ......000...... ............... ............... .....X X X..... .....X X X.....
  2.     1994 ............... .....X X X..... .....X X X..... ............... ............... .....X X X..... .....X X X.....
  3.     1995 ............... .....X X X..... .....X X X..... .....X X X..... ............... .....X X X..... .....X X X.....
-----------------------------------------------------------------------------------------------------------------------------

SCHEDULE P - PART 3L - OTHER (INCLUDING CREDIT, ACCIDENT ADND HEALTH)

-----------------------------------------------------------------------------------------------------------------------------
  1.     Prior .............. .....X X X..... .....X X X..... .....X X X..... .....X X X.....
  2.     1994 ............... .....X X X..... .....X X X..... .....X X X..... .....X X X.....             N O N E
  3.     1995 ............... .....X X X..... .....X X X..... .....X X X..... .....X X X.....
-----------------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------------------
  1.     Prior .............. .....X X X..... ......000...... ............... ............... .....X X X..... .....X X X.....
  2.     1994 ............... .....X X X..... .....X X X..... ............... ............... .....X X X..... .....X X X.....
  3.     1995 ............... .....X X X..... .....X X X..... .....X X X..... ............... .....X X X..... .....X X X.....
-----------------------------------------------------------------------------------------------------------------------------

SCHEDULE P - PART 3M - INTERNATIONAL

-----------------------------------------------------------------------------------------------------------------------------
  1.     Prior............... ......000...... ............... ............... ............... ............... ...............
  2.     1986................ ............... ............... ............... ............... ............... ...............
  3.     1987................ .....X X X..... ............... ............... ............... ............... ...............
  4.     1988................ .....X X X..... .....X X X..... ............... ............... ............... ...............
  5.     1989................ .....X X X..... .....X X X..... .....X X X..... ...............
  6.     1990................ .....X X X..... .....X X X..... .....X X X..... .....X X X.....
  7.     1991................ .....X X X..... .....X X X..... .....X X X..... .....X X X.....             N O N E
  8.     1992................ .....X X X..... .....X X X..... .....X X X..... .....X X X.....
  9.     1993................ .....X X X..... .....X X X..... .....X X X..... .....X X X..... .....X X X..... .....X X X.....
 10.     1994................ .....X X X..... .....X X X..... .....X X X..... .....X X X..... .....X X X..... .....X X X.....
 11.     1995................ .....X X X..... .....X X X..... .....X X X..... .....X X X..... .....X X X..... .....X X X.....
-----------------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------------------
  1.     Prior............... ............... ............... ............... ............... .....X X X..... .....X X X.....
  2.     1986................ ............... ............... ............... ............... .....X X X..... .....X X X.....
  3.     1987................ ............... ............... ............... ............... .....X X X..... .....X X X.....
  4.     1988................ ............... ............... ............... ............... .....X X X..... .....X X X.....
  5.     1989................ ............... ............... ............... ............... .....X X X..... .....X X X.....
  6.     1990................ ............... ............... ............... ............... .....X X X..... .....X X X.....
  7.     1991................ ............... ............... ............... ............... .....X X X..... .....X X X.....
  8.     1992................ ............... ............... ............... ............... .....X X X..... .....X X X.....
  9.     1993................ .....X X X..... ............... ............... ............... .....X X X..... .....X X X.....
 10.     1994................ .....X X X..... .....X X X..... ............... ............... .....X X X..... .....X X X.....
 11.     1995................ .....X X X..... .....X X X..... .....X X X..... ............... .....X X X..... .....X X X.....
-----------------------------------------------------------------------------------------------------------------------------

105

Form 2

ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY AND ITS
AFFILIATED COMPANIES

SCHEDULE P - PART 3N - REINSURANCE A

----------------------------------------------------------------------------------------------------------------------------------

         1                                            CUMULATIVE PAID LOSSES AND ALLOCATED EXPENSES AT YEAR END ($000 OMITTED)
                     -------------------------------------------------------------------------------------------------------------

   Years in Which          2             3             4             5             6             7             8             9
    Losses Were          1986          1987          1988          1989          1990          1991          1992          1993
     Incurred

----------------------------------------------------------------------------------------------------------------------------------
  1.   1988......... ....X X X.... ....X X X.... ............. ............. ............. ............. ............. ...........
  2.   1989......... ....X X X.... ....X X X.... ....X X X.... ............. ............. ............. ............. ...........
  3.   1990......... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ............. ............. ........ .... ...........
  4.   1991......... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....N      O      N      E. ............. ...........
  5.   1992......... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ............. ............. ............. ...........
  6.   1993......... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ............. ............. ........ .... ...........
  7.   1994......... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ...X X X...
  8.   1995......... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ...X X X...
----------------------------------------------------------------------------------------------------------------------------------

         1
                     -------------------------------------------------------
                                                      12            13
                                                   Number of     Number of
   Years in Which         10            11          Claims        Claims
    Losses Were          1994          1995         Closed        Closed
     Incurred                                      With Loss   Without Loss
                                                    Payment       Payment
----------------------------------------------------------------------------
  1.   1988......... ............. ............. ....X X X.... ....X X X....
  2.   1989......... ............. ............. ....X X X.... ....X X X....
  3.   1990......... ............. ............. ....X X X.... ....X X X....
  4.   1991......... ............. ............. ....X X X.... ....X X X....
  5.   1992......... ............. ............. ....X X X.... ....X X X....
  6.   1993......... ............. ............. ....X X X.... ....X X X....
  7.   1994......... ............. ............. ....X X X.... ....X X X....
  8.   1995......... ....X X X.... ............. ....X X X.... ....X X X....
----------------------------------------------------------------------------

SCHEDULE P - PART 3O - REINSURANCE B

----------------------------------------------------------------------------------------------------------------------------------
  1.   1988 ........ ....X X X.... ....X X X.... ............. ............. ............. ............. ............. ...........
  2.   1989 ........ ....X X X.... ....X X X.... ....X X X.... ............. ............. ............. ............. ...........
  3.   1990 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ............. ............. ............. ...........
  4.   1991 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....N      O      N      E. ............. ...........
  5.   1992 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ............. ............. ............. ...........
  6.   1993 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ............. ............  ............. ...........
  7.   1994 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ...X X X...
  8.   1995 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ...X X X...
----------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------
  1.   1988 ........ ............. ............. ....X X X.... ....X X X....
  2.   1989 ........ ............. ............. ....X X X.... ....X X X....
  3.   1990 ........ ............. ............. ....X X X.... ....X X X....
  4.   1991 ........ ............. ............. ....X X X.... ....X X X....
  5.   1992 ........ ............. ............. ....X X X.... ....X X X....
  6.   1993 ........ ............. ............. ....X X X.... ....X X X....
  7.   1994 ........ ............. ............. ....X X X.... ....X X X....
  8.   1995 ........ ....X X X.... ............. ....X X X.... ....X X X....
----------------------------------------------------------------------------

SCHEDULE P - PART 3P - REINSURANCE C

 ----------------------------------------------------------------------------------------------------------------------------------
   1.   1988 ........ ....X X X.... ....X X X.... ............. ............. ............. ............. ............. ...........
   2.   1989 ........ ....X X X.... ....X X X.... ....X X X.... ............. ............. ............. ............. ...........
   3.   1990 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ............. ............. ............. ...........
   4.   1991 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....N      O     N       E. ............. ...........
   5.   1992 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ............ .............. ............. ...........
   6.   1993 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ............ .............. ............. ...........
   7.   1994 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ...X X X...
   8.   1995 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ...X X X...
-----------------------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------
   1.   1988 ........ ............ ............. ....X X X.... ....X X X....
   2.   1989 ........ ............ ............. ....X X X.... ....X X X....
   3.   1990 ........ ............ ............. ....X X X.... ....X X X....
   4.   1991 ........ ............ ............. ....X X X.... ....X X X....
   5.   1992 ........ ............ ............. ....X X X.... ....X X X....
   6.   1993 ........ ............ ............. ....X X X.... ....X X X....
   7.   1994 ........ ............ ............. ....X X X.... ....X X X....
   8.   1995 ........    X X X     ............. ....X X X.... ....X X X....
-----------------------------------------------------------------------------

SCHEDULE P - PART 3Q - REINSURANCE D

 -----------------------------------------------------------------------------------------------------------------------------------
    1.   Prior ....... ............. ............. ............. ............. ........... ............ ........... ..............
    2.   1986  ....... ............. ............. ............. ............. ....N    O     N     E.. ............ ..............
    3.   1987  ....... ....X X X.... ............. ............. ............. ............ ........... ........... ...............
 -----------------------------------------------------------------------------------------------------------------------------------

 -------------------------------------------------------------------------------
    1.   Prior ......... ............. ............. ....X X X.... ....X X X....
    2.   1986  ......... ............. ............. ....X X X.... ....X X X....
    3.   1987  ......... ............. ............. ....X X X.... ....X X X....
- - ---------------------------------------------------------------------------------

106

Form 2

ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY AND ITS
AFFILIATED COMPANIES

SCHEDULE P - PART 3R - SECTION 1 - PRODUCTS LIABILITY - OCCURRENCE

----------------------------------------------------------------------------------------------------------------------------------

         1                             CUMULATIVE PAID LOSSES AND ALLOCATED EXPENSES AT YEAR END ($000 OMITTED)
                     -------------------------------------------------------------------------------------------------------------

   Years in Which          2             3             4             5             6             7             8             9
    Losses Were          1986          1987          1988          1989          1990          1991          1992          1993
     Incurred
----------------------------------------------------------------------------------------------------------------------------------
  1.   Prior........ .....000..... ............. ............. ............. ............. ............. ............. ...........
  2.   1986 ........ ............. ............. ............. ............. ............. ............. ............. ...........
  3.   1987 ........ ....X X X.... ............. ............. ............. ............. ............. ............. ...........
  4.   1988 ........ ....X X X.... ....X X X.... ............. ............. ....N      O      N      E. ............. ...........
  5.   1999 ........ ....X X X.... ....X X X.... ....X X X.... ............. ............. ............. ............. ...........
  6.   1990 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ............. ............. ............. ...........
  7.   1991 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ............. ............. ...........
  8.   1992 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ............. ...........
  9.   1993 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X...  ....X X X.... ...........
 10.   1994 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ...X X X...
 11.   1995 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ...X X X...
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                      12            13
                                                   Number of     Number of
   Years in Which         10            11          Claims        Claims
    Losses Were          1994          1995         Closed        Closed
     Incurred                                      With Loss   Without Loss
                                                    Payment       Payment
----------------------------------------------------------------------------
  1.   1988......... ............. ............. ............. .............
  2.   1989......... ............. ............. ............. .............
  3.   1990......... ............. ............. ............. .............
  4.   1991......... ............. ............. ............. .............
  5.   1992......... ............. ............. ............. .............
  6.   1993......... ............. ............. ............. .............
  7.   1994......... ............. ............. ............. .............
  8.   1995......... ....X X X.... ............. ............. .............
----------------------------------------------------------------------------

SCHEDULE P - PART 3R - SECTION 2 - PRODUCTS LIABILITY - CLAIMS-MADE

----------------------------------------------------------------------------------------------------------------------------------
  1.   Prior........ .....000..... ............. ............. ............. ............. ............. ............. ...........
  2.   1986 ........ ............. ............. ............. ............. ............. ............. ............. ...........
  3.   1987 ........ ....X X X.... ............. ............. ............. ............. ............. ............. ...........
  4.   1988 ........ ....X X X.... ....X X X.... ............. ............. ............. ............. ............. ...........
  5.   1999 ........ ....X X X.... ....X X X.... ....X X X.... ............. ............. ............. ............. ...........
  6.   1990 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ............. ............. ............. ...........
  7.   1991 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....N      O      N      E. ............. ...........
  8.   1992 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ............. ............. ...........
  9.   1993 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X...  ............. ...........
 10.   1994 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ...X X X...
 11.   1995 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ...X X X...
----------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------
  1.   Prior........ ............. ............. ............. .............
  2.   1986 ........ ............. ............. ............. .............
  3.   1987 ........ ............. ............. ............. .............
  4.   1988 ........ ............. ............. ............. .............
  5.   1989 ........ ............. ............. ............. .............
  6.   1990 ........ ............. ............. ............. .............
  7.   1991 ........ ............. ............. ............. .............
  8.   1992 ........ ............. ............. ............. .............
  9.   1993 ........ ............. ............. ............. .............
 10.   1994 ........ ............. ............. ............. .............
 11.   1995 ........ ....X X X.... ............. ............. .............
----------------------------------------------------------------------------

SCHEDULE P - PART 3S - FINANCIAL GUAR|ANTY/MORTGAGE GUARANTY

- - ---------------------------------------------------------------------------------------------------------------------------------
   1.   Prior......... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....N     O     N     E. ... 000...... ..........
   2.   1994.......... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ............ ........... ....X X X.... ..........
   3.   1995.......... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ............ ........... ....X X X.... ...X X X..
- - --------------------------------------------------------------------------------------------------------------------------------

- - ---------------------------------------------------------------
1.   Prior............ ............. ...X X X.... ....X X X....
2.   1994............. ............. ...X X X.... ....X X X....
3.   1995............. ............. ...X X X.... ....X X X....
- - ---------------------------------------------------------------

107

Form 2

ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY AND ITS
AFFILIATED COMPANIES

SCHEDULE P - PART 4A - HOMEOWNERS/FARMOWNERS

- - -------------------------------------------------------------------------------------------------------------------------
            1        BULK AND INCURRED BUT NOT REPORTED RESERVES ON LOSSES AND ALLOCATED EXPENSES AT YEAR END ($000 OMITTED)
                       --------------------------------------------------------------------------------------------------
      Years in Which
       Losses Were           2             3             4             5             6             7             8
        Incurred           1986          1987          1988          1989          1990          1991          1992

- - -------------------------------------------------------------------------------------------------------------------------
    1.   Prior ....... ..........54. ..........19. ............. ............. ............. ............. .............
    2.   1986 ........ .........127. ..........37. ..........17. ............. ............. ............. .............
    3.   1987 ........ ....X X X.... .........132. ..........33. ............. ............. ............. .............
    4.   1988 ........ ....X X X.... ....X X X.... .........114. ............. ..........10. ............. .............
    5.   1989 ........ ....X X X.... ....X X X.... ....X X X.... .........129. ..........19. ...........9. .............
    6.   1990 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ..........68. ..........18. ...........8.
    7.   1991 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ..........62. ..........15.
    8.   1992 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ..........54.
    9.   1993 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X....
   10.   1994 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X....
   11.   1995 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X....
- - -------------------------------------------------------------------------------------------------------------------------
- - ----------------------------------------------------------------
            1
                      -----------------------------------------
      Years in Which
       Losses Were          9            10            11
        Incurred          1993          1994          1995

- - ----------------------------------------------------------------
    1.   Prior ....... ............ ............. .............
    2.   1986 ........ ............ ............. .............
    3.   1987 ........ ............ ............. .............
    4.   1988 ........ ............ ............. .............
    5.   1989 ........ ............ ............. .............
    6.   1990 ........ ............ ............. .............
    7.   1991 ........ .........19. ............. ..........53.
    8.   1992 ........ .........38. ..........51. .............
    9.   1993 ........ ........155. .........103. .............
   10.   1994 ........ ...X X X.... .........380. .........124.
   11.   1995 ........ ...X X X.... ....X X X.... .........366.
- - ----------------------------------------------------------------

SCHEDULE P - PART 4B - PRIVATE PASSENGER AUTO LIABILITY/MEDICAL

- - -------------------------------------------------------------------------------------------------------------------------
    1.   Prior ....... .......3,877. .......2,935. .......1,277. .........835. ............. ............. .............
    2.   1986 ........ ......29,873. .......8,813. .......2,941. .......2,071. .........(12) ............. .............
    3.   1987 ........ ....X X X.... ......47,187. .......8,834. .......3,222. .......2,071. .......1,037. .............
    4.   1988 ........ ....X X X.... ....X X X.... ......64,968. ......12,915. .......5,084. .......2,892. .............
    5.   1989 ........ ....X X X.... ....X X X.... ....X X X.... ......67,175. ......12,210. .......3,712. .........267.
    6.   1990 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ......53,293. .......9,331. .......1,655.
    7.   1991 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ......47,436. .......6,854.
    8.   1992 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ......34,167.
    9.   1993 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X....
   10.   1994 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X....
   11.   1995 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X....
- - -------------------------------------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------
    1.   Prior ....... ............. ............. .............
    2.   1986 ........ ............. ............. .............
    3.   1987 ........ ............. ............. .............
    4.   1988 ........ ............. ............. .............
    5.   1989 ........ ..........(5) ............. .............
    6.   1990 ........ .........163. ..........52. .............
    7.   1991 ........ .........340. .........156. ..........17.
    8.   1992 ........ .......2,735. .........275. .........125.
    9.   1993 ........ ......22,016. .........780. .........164.
   10.   1994 ........ ....X X X.... ......25,130. .........193.
   11.   1995 ........ ....X X X.... ....X X X.... ......29,574.
- - -----------------------------------------------------------------

SCHEDULE P - PART 4C - COMMERCIAL AUTO/TRUCK LIABILITY/MEDICAL

- - -------------------------------------------------------------------------------------------------------------------------
    1.   Prior ....... .........385. .........281. .........133. .........120. ...........1. ............. .............
    2.   1986 ........ .......3,005. .........986. .........418. .........313. ..........89. ...........3. ...........2.
    3.   1987 ........ ....X X X.... .......4,419. .......1,102. .........685. .........385. .........149. ...........9.
    4.   1988 ........ ....X X X.... ....X X X.... .......6,925. .......1,794. .......1,638. .........522. ..........23.
    5.   1989 ........ ....X X X.... ....X X X.... ....X X X.... .......8,404. .......2,779. .......1,166. .........190.
    6.   1990 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... .......7,030. .......1,811. .........554.
    7.   1991 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... .......4,719. .........987.
    8.   1992 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... .......2,985.
    9.   1993 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X....
   10.   1994 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X....
   11.   1995 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X....
- - -------------------------------------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------
    1.   Prior ....... ............. ............. .............
    2.   1986 ........ ............. ............. .............
    3.   1987 ........ ...........4. ..........11. ...........7.
    4.   1988 ........ ..........18. ...........2. ...........4.
    5.   1989 ........ ..........37. ..........17. ..........12.
    6.   1990 ........ .........113. ..........64. ..........15.
    7.   1991 ........ .........285. ..........51. ..........17.
    8.   1992 ........ .......1,154. ..........41. ..........27.
    9.   1993 ........ .......2,043. .........211. ..........16.
   10.   1994 ........ ....X X X.... .......3,664. .........321.
   11.   1995 ........ ....X X X.... ....X X X.... .......3,664.
- - -----------------------------------------------------------------

SCHEDULE P - PART 4D - WORKERS' COMPENSATION

- - -------------------------------------------------------------------------------------------------------------------------
    1.   Prior ....... ............. ............. ............. ............. ............. ............. .............
    2.   1986 ........ ............. ............. ............. ............. ............. ............. .............
    3.   1987 ........ ....X X X.... ............. ............. ............. ............. ............. .............
    4.   1988 ........ ....X X X.... ....X X X.... ............. ............. ............. ............. .............
    5.   1989 ........ ....X X X.... ....X X X.... ............. ............. ............. ............. .............
    6.   1990 ........ ....X X X.... ....X X X.... ............. ............. ............. ............. .............
    7.   1991 ........ ....X X X.... ....X X X.... ............  ............. ....X X X.... ............. .............
    8.   1992 ........ ....X X X.... ....X X X.... ....  N   O   N   E ....... ....X X X.... ....X X X.... .............
    9.   1993 ........ ....X X X.... ....X X X.... ....X X X...  ....X X X.... ....X X X.... ....X X X.... ....X X X....
   10.   1994 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X....
   11.   1995 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X....
- - -------------------------------------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------
    1.   Prior ....... ............. ............. .............
    2.   1986 ........ ............. ............. .............
    3.   1987 ........ ............. ............. .............
    4.   1988 ........ ............. ............. .............
    5.   1989 ........ ............. ............. .............
    6.   1990 ........ ............. ............. .............
    7.   1991 ........ ............. ............. .............
    8.   1992 ........ ............. ............. .............
    9.   1993 ........ ............. ............. .............
   10.   1994 ........ ....X X X.... ............. .............
   11.   1995 ........ ....X X X.... ....X X X.... .............
- - -----------------------------------------------------------------

SCHEDULE P - PART 4E - COMMERCIAL MULTIPLE PERIL

- - -------------------------------------------------------------------------------------------------------------------------
    1.   Prior ....... ..........43. ..........18. ............. ............. ............. ............. .............
    2.   1986 ........ ..........99. ..........34. ..........18. ............. ............. ............. .............
    3.   1987 ........ ....X X X.... .........119. ..........36. ............. ............. ............. .............
    4.   1988 ........ ....X X X.... ....X X X.... .........125. ............. ..........20. ............. .............
    5.   1989 ........ ....X X X.... ....X X X.... ....X X X.... .........196. ..........39. ..........21. .............
    6.   1990 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... .........136. ..........43. ..........23.
    7.   1991 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... .........148. ..........47.
    8.   1992 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... .........166.
    9.   1993 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X....
   10.   1994 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X....
   11.   1995 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X....
- - -------------------------------------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------
    1.   Prior ....... ............. ............. .............
    2.   1986 ........ ............. ............. .............
    3.   1987 ........ ............. ............. .............
    4.   1988 ........ ............. ............. .............
    5.   1989 ........ ............. ............. .............
    6.   1990 ........ ............. ............. .............
    7.   1991 ........ ..........33. ............. .............
    8.   1992 ........ ..........67. ..........42. .............
    9.   1993 ........ .........234. ..........84. ..........60.
   10.   1994 ........ ....X X X.... .........295. .........118.
   11.   1995 ........ ....X X X.... ....X X X.... .........421.
- - -----------------------------------------------------------------

108

Form 2

ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY AND ITS
AFFILIATED COMPANIES

SCHEDULE P - PART 4F - SECTION 1 - MEDICAL MALPRACTICE - OCCURRENCE

- - ----------------------------------------------------------------------------------------------------------------------------
            1        BULK AND INCURRED BUT NOT REPORTED RESERVES ON LOSSES AND ALLOCATED EXPENSES AT YEAR END ($000 OMITTED)
                       -----------------------------------------------------------------------------------------------------
      Years in Which
       Losses Were           2             3             4             5             6             7             8
        Incurred           1986          1987          1988          1989          1990          1991          1992

- - -------------------------------------------------------------------------------------------------------------------------
    1.   Prior ....... ............. ............. ............. ............. ............. ............. .............
    2.   1986 ........ ............. ............. ............. ............. ............. ............. .............
    3.   1987 ........ ....X X X.... ............. ............. ............. ............. ............. .............
    4.   1988 ........ ....X X X.... ....X X X.... ............. ............. ............. ............. .............
    5.   1989 ........ ....X X X.... ....X X X.... ....X X X.... N     O     N     E........ ............. .............
    6.   1990 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ............. ............. .............
    7.   1991 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ............. .............
    8.   1992 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... .............
    9.   1993 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X....
   10.   1994 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X....
   11.   1995 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X....
- - -------------------------------------------------------------------------------------------------------------------------
- - ----------------------------------------------------------------
            1
                      -----------------------------------------
      Years in Which
       Losses Were          9            10            11
        Incurred          1993          1994          1995

- - ----------------------------------------------------------------
    1.   Prior ....... ............ ............. .............
    2.   1986 ........ ............ ............. .............
    3.   1987 ........ ............ ............. .............
    4.   1988 ........ ............ ............. .............
    5.   1989 ........ ............ ............. .............
    6.   1990 ........ ............ ............. .............
    7.   1991 ........ ............ ............. .............
    8.   1992 ........ ............ ............. .............
    9.   1993 ........ ............ ............. .............
   10.   1994 ........ ...X X X.... ............. .............
   11.   1995 ........ ...X X X.... ....X X X.... .............
- - ----------------------------------------------------------------

SCHEDULE P - PART 4F - SECTION 2 - MEDICAL MALPRACTICE - CLAIMS-MADE

- - -------------------------------------------------------------------------------------------------------------------------
    1.   Prior ....... ............. ............. ............. ............. ............. ............. .............
    2.   1986 ........ ............. ............. ............. ............. ............. ............. .............
    3.   1987 ........ ....X X X.... ............. ............. ............. ............. ............. .............
    4.   1988 ........ ....X X X.... ....X X X.... ............. ............. ............. ............. .............
    5.   1989 ........ ....X X X.... ....X X X.... ....X X X.... .N     O     N     E....... ............. .............
    6.   1990 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ............. ............. .............
    7.   1991 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ............. .............
    8.   1992 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... .............
    9.   1993 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X....
   10.   1994 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X....
   11.   1995 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X....
- - -------------------------------------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------
    1.   Prior ....... ............. ............. .............
    2.   1986 ........ ............. ............. .............
    3.   1987 ........ ............. ............. .............
    4.   1988 ........ ............. ............. .............
    5.   1989 ........ ............. ............. .............
    6.   1990 ........ ............. ............. .............
    7.   1991 ........ ............. ............. .............
    8.   1992 ........ ............. ............. .............
    9.   1993 ........ ............. ............. .............
   10.   1994 ........ ....X X X.... ............. .............
   11.   1995 ........ ....X X X.... ....X X X.... .............
- - -----------------------------------------------------------------

SCHEDULE P - PART 4G - SPECIAL LIABILITY (OCEAN MARINE, AIRCRAFT
(ALL PERILS), BOILER AND MACHINERY)

- - -------------------------------------------------------------------------------------------------------------------------
    1.   Prior ....... ............. ............. ............. ............. ............. ............. .............
    2.   1986 ........ ............. ............. ............. ............. ............. ............. .............
    3.   1987 ........ ....X X X.... ............. ............. ............. ............. ............. .............
    4.   1988 ........ ....X X X.... ....X X X.... ............. ............. ............. ............. .............
    5.   1989 ........ ....X X X.... ....X X X.... ....X X X.... N     O     N     E........ ............. .............
    6.   1990 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ............. ............. .............
    7.   1991 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ............. .............
    8.   1992 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... .............
    9.   1993 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X....
   10.   1994 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X....
   11.   1995 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X....
- - -------------------------------------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------
    1.   Prior ....... ............. ............. .............
    2.   1986 ........ ............. ............. .............
    3.   1987 ........ ............. ............. .............
    4.   1988 ........ ............. ............. .............
    5.   1989 ........ ............. ............. .............
    6.   1990 ........ ............. ............. .............
    7.   1991 ........ ............. ............. .............
    8.   1992 ........ ............. ............. .............
    9.   1993 ........ ............. ............. .............
   10.   1994 ........ ....X X X.... ............. .............
   11.   1995 ........ ....X X X.... ....X X X.... .............
- - -----------------------------------------------------------------

SCHEDULE P - PART 4H - SECTION 1 - OTHER LIABILITY - OCCURRENCE

- - -------------------------------------------------------------------------------------------------------------------------
    1.   Prior ....... ..........21. ...........6. ............. ............. ............. ............. .............
    2.   1986 ........ ..........48. ..........10. ............. ............. ............. ............. .............
    3.   1987 ........ ....X X X.... ..........39. ............. ............. ...........7. ............. .............
    4.   1988 ........ ....X X X.... ....X X X.... ..........14. ............. ............. ............. .............
    5.   1989 ........ ....X X X.... ....X X X.... ....X X X.... ...........9. ............. ............. .............
    6.   1990 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ...........1. ............. .............
    7.   1991 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ..........30. .............
    8.   1992 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ..........33.
    9.   1993 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X....
   10.   1994 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X....
   11.   1995 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X....
- - -------------------------------------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------
    1.   Prior ....... ............. ............. .............
    2.   1986 ........ ............. ............. .............
    3.   1987 ........ ............. ............. .............
    4.   1988 ........ ............. ............. .............
    5.   1989 ........ ............. ............. .............
    6.   1990 ........ ............. ............. .............
    7.   1991 ........ ...........1. ............. .............
    8.   1992 ........ ...........3. ...........1. .............
    9.   1993 ........ .........353. ...........3. .............
   10.   1994 ........ ....X X X.... ..........33. ..........42.
   11.   1995 ........ ....X X X.... ....X X X.... ...........1.
- - -----------------------------------------------------------------

SCHEDULE P - PART 4H - SECTION 2 - OTHER LIABILITY - CLAIMS-MADE

- - -------------------------------------------------------------------------------------------------------------------------
    1.   Prior ....... .....000..... ............. ............. ............. ............. ............. .............
    2.   1986 ........ ............. ............. ............. ............. ............. ............. .............
    3.   1987 ........ ....X X X.... ............. ............. ............. ............. ............. .............
    4.   1988 ........ ....X X X.... ....X X X.... ............. ............. ............. ............. .............
    5.   1989 ........ ....X X X.... ....X X X.... ....X X X.... ..N     O     N     E...... ............. .............
    6.   1990 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ............. ............. .............
    7.   1991 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ............. .............
    8.   1992 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... .............
    9.   1993 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X....
   10.   1994 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X....
   11.   1995 ........ ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X.... ....X X X....
- - -------------------------------------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------
    1.   Prior ....... ............. ............. .............
    2.   1986 ........ ............. ............. .............
    3.   1987 ........ ............. ............. .............
    4.   1988 ........ ............. ............. .............
    5.   1989 ........ ............. ............. .............
    6.   1990 ........ ............. ............. .............
    7.   1991 ........ ............. ............. .............
    8.   1992 ........ ............. ............. .............
    9.   1993 ........ ............. ............. .............
   10.   1994 ........ ....X X X.... ............. .............
   11.   1995 ........ ....X X X.... ....X X X.... .............
- - -----------------------------------------------------------------

109

Form 2

ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY AND ITS
AFFILIATED COMPANIES

SCHEDULE P - PART 4I - SPECIAL PROPERTY (FIRE, ALLIED LINES, INLAND MARINE,

EARTHQUAKE, GLASS, BURGLARY AND THEFT)

- - ---------------------------------------------------------------------------------------------------------------------------
             1              BULK AND INCURRED BUT NOT REPORTED RESERVES ON LOSSES AND ALLOCATED EXPENSES AT YEAR END ($000
                            -----------------------------------------------------------------------------------------------
       Years in Which              2               3               4               5               6               7
         Losses Were
          Incurred               1986            1987            1988            1989            1990            1991

- - ---------------------------------------------------------------------------------------------------------------------------
  1.    Prior ............. .....X X X..... .... X X X..... .....X X X..... .....X X X..... .....X X X..... .....X X X.....
  2.    1994 .............. .....X X X..... .... X X X..... .....X X X..... .....X X X..... .....X X X..... .....X X X.....
  3.    1995 .............. .....X X X..... .... X X X..... .....X X X..... .....X X X..... .....X X X..... .....X X X.....
- - ---------------------------------------------------------------------------------------------------------------------------
- - ----------------------------------------------------------------------------------------
             1              OMITTED)
                            ------------------------------------------------------------
       Years in Which           8               9              10              11
         Losses Were
          Incurred            1992            1993            1994            1995
- - ----------------------------------------------------------------------------------------
  1.    Prior ............. ..X X X..... ............34  ............19  .............7.
  2.    1994 .............. ..X X X..... .....X X X....  ............35  ...........136.
  3.    1995 .............. ..X X X..... .....X X X....  .....X X X....  ............33.
- - ----------------------------------------------------------------------------------------

SCHEDULE P - PART 4J - AUTO PHYSICAL DAMAGE

-----------------------------------------------------------------------------------------------------------------------------
  1.     Prior .............. .....X X X..... .....X X X..... .....X X X..... .....X X X..... .....X X X..... .....X X X.....
  2.     1994 ............... .....X X X..... .....X X X..... .....X X X..... .....X X X..... .....X X X..... .....X X X.....
  3.     1995 ............... .....X X X..... .....X X X..... .....X X X..... .....X X X..... .....X X X..... .....X X X.....
-----------------------------------------------------------------------------------------------------------------------------
 --------------------------------------------------------------------------------------------
  1.     Prior .............. .....X X X..... .........1,594. ............... ...............
  2.     1994 ............... .....X X X..... .....X X X..... .........2,416. ...........184.
  3.     1995 ............... .....X X X..... .....X X X..... .....X X X..... .........3,213.
---------------------------------------------------------------------------------------------

SCHEDULE P - PART 4K - FIDELITY/SURETY

-----------------------------------------------------------------------------------------------------------------------------
  1.     Prior .............. .....X X X..... .....X X X..... .....X X X.....            N O N E              .....X X X.....
  2.     1994 ............... .....X X X..... .....X X X..... .....X X X..... .............. ..............   .....X X X.....
  3.     1995 ............... .....X X X..... .....X X X..... .....X X X..... .....X X X..... .....X X X..... .....X X X.....
-----------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
  1.     Prior .............. .....X X X..... ............... ............... ...............
  2.     1994 ............... .....X X X..... .....X X X..... ............... ...............
  3.     1995 ............... .....X X X..... .....X X X..... .....X X X..... ...............
---------------------------------------------------------------------------------------------

SCHEDULE P - PART 4L - OTHER (INCLUDING CREDIT, ACCIDENT ADND HEALTH)

-----------------------------------------------------------------------------------------------------------------------------
  1.     Prior .............. .....X X X..... .....X X X..... .....X X X..... .....X X X..... .....X X X..... .....X X X.....
  2.     1994 ............... .....X X X..... .....X X X..... ............... ............... .....X X X..... .....X X X.....
  3.     1995 ............... .....X X X..... .....X X X..... ...........N O N E............. .....X X X..... .....X X X.....
-----------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
  1.     Prior .............. .....X X X..... ............... ............... ...............
  2.     1994 ............... .....X X X..... .....X X X..... ............... ...............
  3.     1995 ............... .....X X X..... .....X X X..... .....X X X..... ...............
---------------------------------------------------------------------------------------------

SCHEDULE P - PART 4M - INTERNATIONAL

-----------------------------------------------------------------------------------------------------------------------------
  1.     Prior............... ............... ............... ............... ............... ............... ...............
  2.     1986................ ............... ............... ............... ............... ............... ...............
  3.     1987................ .....X X X..... ............... ............... ............... ............... ...............
  4.     1988................ .....X X X..... .....X X X..... ............... ............... ............... ...............
  5.     1989................ .....X X X..... .....X X X..... .....X X X..... ............... ............... ...............
  6.     1990................ .....X X X..... .....X X X..... .....X X X..... .....X X X..... ............... ...............
  7.     1991................ .....X X X..... .....X X X..... .....X X X..... .....X X X..... .....X X X..... ...............
  8.     1992................ .....X X X..... .....X X X..... .....X X X..... .....X X X..... .....X X X..... .....X X X.....
  9.     1993................ .....X X X..... .....X X X..... .....X X X..... .....X X X..... .....X X X..... .....X X X.....
 10.     1994................ .....X X X..... .....X X X..... .....X X X..... .....X X X..... .....X X X..... .....X X X.....
 11.     1995................ .....X X X..... .....X X X..... .....X X X..... .....X X X..... .....X X X..... .....X X X.....
-----------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
  1.     Prior............... ............... ............... ............... ...............
  2.     1986................ ............... ............... ............... ...............
  3.     1987................ ............... ............... ............... ...............
  4.     1988................ ............... ............... ............... ...............
  5.     1989................ ............... ............... ............... ...............
  6.     1990................ ............... ............... ............... ...............
  7.     1991................ ............... ............... ............... ...............
  8.     1992................ ............... ............... ............... ...............
  9.     1993................ .....X X X..... ............... ............... ...............
 10.     1994................ .....X X X..... .....X X X..... ............... ...............
 11.     1995................ .....X X X..... .....X X X..... .....X X X..... ...............
---------------------------------------------------------------------------------------------

110

Form 2

ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY AND ITS
AFFILIATED COMPANIES

SCHEDULE P - PART 4N - REINSURANCE A

- - -----------------------------------------------------------------------------------------------------------------------------------

             1             BULK AND INCURRED BUT NOT REPORTED RESERVES ON LOSSES AND ALLOCATED EXPENSES AT YEAR END ($000 OMITTED)
                      ------------------------------------------------------------------------------------------------------------

      Years in Which       2            3            4             5             6             7              8              9
        Losses Were      1986         1987         1988          1989          1990          1991           1992           1993
         Incurred

- - ----------------------------------------------------------------------------------------------------------------------------------
1.     1988 .......   ...X X X...  ...X X X...   ...........   ...........  ...........    ...........    ...........   ...........
2.     1989 .......   ...X X X...  ...X X X...   ...X X X...   ...........  ...........    ...........    ...........   ...........
3.     1990 .......   ...X X X...  ...X X X...   ...X X X...   ...X X X...  ...........    ...........    ...........   ...........
4.     1991 .......   ...X X X...  ...X X X...   ...X X X...   ...X X   N    O    N    E   ...........    ...........   ...........
5.     1992 .......   ...X X X...  ...X X X...   ...X X X...   ...X X X...  ...X X X...    ...X X X...    ...........   ...........
6.     1993 .......   ...X X X...  ...X X X...   ...X X X...   ...X X X...  ...X X X...    ...X X X...    ...X X X...   ...........
7.     1994 .......   ...X X X...  ...X X X...   ...X X X...   ...X X X...  ...X X X...    ...X X X...    ...X X X...   ...X X X...
8.     1995 .......   ...X X X...  ...X X X...   ...X X X...   ...X X X...  ...X X X...    ...X X X...    ...X X X...   ...X X X...
- - ----------------------------------------------------------------------------------------------------------------------------------

- - ------------------------------------------------------
             1
                     ---------------------------------

      Years in Which          10             11
        Losses Were          1994           1995
         Incurred

- - ------------------------------------------------------
1.     1988.......... .............. .................
2.     1989.......... .............. .................
3.     1990.......... .............. .................
4.     1991.......... .............. .................
5.     1992.......... .............. .................
6.     1993.......... .............. .................
7.     1994.......... .............. .................
8.     1995.......... .....X X X.... .................
- - ------------------------------------------------------

SCHEDULE P - PART 4O - REINSURANCE B

- - -------------------------------------------------------------------------------------------------------------
1.    1988....... ...X X X.... ...X X X.... ............ ............ ............ ............ .............
2.    1989....... ...X X X.... ...X X X.... ...X X X.... ............ ............ ............ .............
3.    1990....... ...X X X.... ...X X X.... ...X X X.... ............ ............ ............ .............
4.    1991....... ...X X X.... ...X X X.... ...X X X....   N    O      N    E      ............ .............
5.    1992....... ...X X X.... ...X X X.... ...X X X.... ............ ............ ....X X X... .............
6.    1993....... ...X X X.... ...X X X.... ...X X X.... ....X X X... ....X X X... ....X X X... ....X X X....
7.    1994....... ...X X X.... ...X X X.... ...X X X.... ....X X X... ....X X X... ....X X X... ....X X X....
8.    1995....... ...X X X.... ...X X X.... ...X X X.... ....X X X... ....X X X... ....X X X... ....X X X....
- - -------------------------------------------------------------------------------------------------------------
- - ----------------------------------------------------------
1.    1988....... ............. ............. ............
2.    1989....... ............. ............. ............
3.    1990....... ............. ............. ............
4.    1991....... ............. ............. ............
5.    1992....... ............. ............. ............
6.    1993....... ............. ............. ............
7.    1994....... ....X X X.... ............. ............
8.    1995....... ....X X X.... ....X X X.... ............
- - -----------------------------------------------------------

SCHEDULE P - PART 4P - REINSURANCE C

- - -------------------------------------------------------------------------------------------------------------
1.    1988....... ...X X X.... ...X X X.... ............ ............ ............ ............ .............
2.    1989....... ...X X X.... ...X X X.... ...X X X.... ............ ............ ............ .............
3.    1990....... ...X X X.... ...X X X.... ...X X X.... ............ ............ ............ .............
4.    1991....... ...X X X.... ...X X X.... ...X X X....   N    O      N    E      ............ .............
5.    1992....... ...X X X.... ...X X X.... ...X X X.... ............ ............ ....X X X... .............
6.    1993....... ...X X X.... ...X X X.... ...X X X.... ....X X X... ....X X X... ....X X X... ....X X X....
7.    1994....... ...X X X.... ...X X X.... ...X X X.... ....X X X... ....X X X... ....X X X... ....X X X....
8.    1995....... ...X X X.... ...X X X.... ...X X X.... ....X X X... ....X X X... ....X X X... ....X X X....
- - -------------------------------------------------------------------------------------------------------------
- - ----------------------------------------------------------
1.    1988....... ............. ............. ............
2.    1989....... ............. ............. ............
3.    1990....... ............. ............. ............
4.    1991....... ............. ............. ............
5.    1992....... ............. ............. ............
6.    1993....... ............. ............. ............
7.    1994....... ....X X X.... ............. ............
8.    1995....... ....X X X.... ....X X X.... ............
- - -----------------------------------------------------------

SCHEDULE P - PART 4Q - REINSURANCE D

- - -------------------------------------------------------------------------------------------------------------
1.    Prior...... ............ ............ ............ ............ ............. ........... .............
2.    1989....... ............ ............ ............ ............ ............. ........... .............
3.    1990....... ...X X X.... ............ ............ ........ N    O    N    E  ........... .............
- - -------------------------------------------------------------------------------------------------------------
- - ----------------------------------------------------------
1.    Prior...... ............. ............. ............
2.    1989....... ............. ............. ............
3.    1990....... ............. ............. ............
- - -----------------------------------------------------------

111

Form 2

ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY AND ITS
AFFILIATED COMPANIES

SCHEDULE P - PART 4R - SECTION 1 - PRODUCTS LIABILITY - OCCURRENCE

- - -----------------------------------------------------------------------------------------------------------------------------------
      1                               INCURRED LOSSES AND ALLOCATED EXPENSES REPORTED AT YEAR END ($000 OMITTED)
               --------------------------------------------------------------------------------------------------------------------

Years in Which       2             3           4            5            6            7            8            9           10
  Losses Were      1986          1987        1988         1989         1990         1991         1992         1993         1994
   Incurred
- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 2. 1986 ..... ............ ............ ............ ............ ............ ............ ............ ............ ............
 3. 1987 ..... ....X X X... ............ ............ ............ ............ ............ ............ ............ ............
 4. 1988 ..... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............ ............
 5. 1989 ..... ....X X X... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............
 6. 1990 ..... ....X X X... ....X X X... ....X X X... ....X X X... .......N O N E........... ............ ............ ............
 7. 1991 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............ ............ ............
 8. 1992 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............ ............
 9. 1993 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............
10. 1994 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............
11. 1995 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ---------------------------
      1
               ------------

Years in Which     11
  Losses Were     1995
   Incurred
- - ---------------------------
 1. Prior .... ............
 2. 1986 ..... ............
 3. 1987 ..... ............
 4. 1988 ..... ............
 5. 1989 ..... ............
 6. 1990 ..... ............
 7. 1991 ..... ............
 8. 1992 ..... ............
 9. 1993 ..... ............
10. 1994 ..... ............
11. 1995 ..... ............
- - ---------------------------

SCHEDULE P - PART 4R - SECTION 2 - PRODUCTS LIABILITY - CLAIMS-MADE

- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 2. 1986 ..... ............ ............ ............ ............ ............ ............ ............ ............ ............
 3. 1987 ..... ....X X X... ............ ............ ............ ............ ............ ............ ............ ............
 4. 1988 ..... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............ ............
 5. 1989 ..... ....X X X... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............
 6. 1990 ..... ....X X X... ....X X X... ....X X X... ....X X X... .......N O N E........... ............ ............ ............
 7. 1991 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............ ............ ............
 8. 1992 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............ ............
 9. 1993 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............
10. 1994 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............
11. 1995 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ---------------------------
 1. Prior .... ............
 2. 1986 ..... ............
 3. 1987 ..... ............
 4. 1988 ..... ............
 5. 1989 ..... ............
 6. 1990 ..... ............
 7. 1991 ..... ............
 8. 1992 ..... ............
 9. 1993 ..... ............
10. 1994 ..... ............
11. 1995 ..... ............
- - ---------------------------

SCHEDULE P - PART 4S - FINANCIAL GUARANTY/MORTGAGE GUARANTY

- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior .... ....X X X... ....X X X... ....X X X... ............ ............ ....X X X... ....X X X... ............ ............
 2. 1994 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............
 3. 1995 ..... ....X X X... ....X X X... ....X X X... ...N O N E.. ....X X X... ....X X X... ....X X X... ....X X X... ............
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ---------------------------
 1. Prior .... ............
 2. 1994 ..... ............
 3. 1995 ..... ............
- - ---------------------------

112

Form 2

ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY AND ITS
AFFILIATED COMPANIES

SCHEDULE P - PART 5A - HOMWOWNERS/FARMOWNERS

SECTION 1

- - -----------------------------------------------------------------------------------------------------------------------------------
      1                          CUMULATIVE NUMBER OF CLAIMS CLOSED WITH LOSS PAYMENT DIRECT AND ASSUMED AT YEAR END
               --------------------------------------------------------------------------------------------------------------------

     Years           2             3           4            5            6            7            8            9           10
   in Which
 Premiums Were
  Earned and
  Losses Were
   Incurred        1986          1987        1988         1989         1990         1991         1992         1993         1994
- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 2. 1986 ..... ............ ............ ............ ............ ............ ............ ............ ............ ............
 3. 1987 ..... ....X X X... ............ ............ ............ ............ ............ ............ ............ ............
 4. 1988 ..... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............ ............
 5. 1989 ..... ....X X X... ....X X X... ....X X X... .........133 .........171 .........175 .........175 .........175 .........175
 6. 1990 ..... ....X X X... ....X X X... ....X X X... ....X X X... .........111 .........151 .........151 .........152 .........153
 7. 1991 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .........149 .........181 .........182 .........182
 8. 1992 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .........109 .........138 .........139
 9. 1993 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .........163 .........360
10. 1994 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .........616
11. 1995 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ---------------------------
      1
               ------------
     Years          11
   in Which
 Premiums Were
  Earned and
  Losses Were
   Incurred        1995
- - ---------------------------
 1. Prior .... ............
 2. 1986 ..... ............
 3. 1987 ..... ............
 4. 1988 ..... ............
 5. 1989 ..... .........175
 6. 1990 ..... .........153
 7. 1991 ..... .........183
 8. 1992 ..... .........139
 9. 1993 ..... .........367
10. 1994 ..... .........733
11. 1995 ..... .........815
- - ---------------------------

SECTION 2

- - -----------------------------------------------------------------------------------------------------------------------------------
      1                                     NUMBER OF CLAIMS OUTSTANDING DIRECT AND ASSUMED AT YEAR END
               --------------------------------------------------------------------------------------------------------------------

     Years           2             3           4            5            6            7            8            9           10
   in Which
 Premiums Were
  Earned and
  Losses Were
   Incurred        1986          1987        1988         1989         1990         1991         1992         1993         1994
- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior .... ............ ............ ............ ............ ...........3 ...........3 ............ ...........1 ............
 2. 1986 ..... ............ ............ ............ ............ ...........1 ............ ............ ............ ............
 3. 1987 ..... ....X X X... ............ ............ ............ ...........2 ............ ............ ............ ............
 4. 1988 ..... ....X X X... ....X X X... ............ ............ ...........6 ...........1 ............ ...........2 ...........1
 5. 1989 ..... ....X X X... ....X X X... ....X X X... ............ ...........4 ...........1 ............ ............ ............
 6. 1990 ..... ....X X X... ....X X X... ....X X X... ....X X X... ...........5 ...........2 ...........1 ............ ............
 7. 1991 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ..........21 ...........2 ...........2 ...........2
 8. 1992 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ..........20 ...........2 ............
 9. 1993 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ..........81 ...........9
10. 1994 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .........174
11. 1995 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ---------------------------
      1
               ------------
     Years          11
   in Which
 Premiums Were
  Earned and
  Losses Were
   Incurred        1995
- - ---------------------------
 1. Prior .... ............
 2. 1986 ..... ............
 3. 1987 ..... ............
 4. 1988 ..... ...........1
 5. 1989 ..... ............
 6. 1990 ..... ............
 7. 1991 ..... ...........1
 8. 1992 ..... ...........1
 9. 1993 ..... ...........1
10. 1994 ..... ..........18
11. 1995 ..... .........272
- - ---------------------------

SECTION 3

- - -----------------------------------------------------------------------------------------------------------------------------------
      1                              CUMULATIVE NUMBER OF CLAIMS REPORTED DIRECT AND ASSORTED AT YEAR END
               --------------------------------------------------------------------------------------------------------------------

     Years           2             3           4            5            6            7            8            9           10
   in Which
 Premiums Were
  Earned and
  Losses Were
   Incurred        1986          1987        1988         1989         1990         1991         1992         1993         1994
- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior .... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X...
 2. 1986 ..... ............ ............ ............ ............ ............ ............ ............ ............ ............
 3. 1987 ..... ....X X X... ............ ............ ............ ............ ............ ............ ............ ............
 4. 1988 ..... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............ ............
 5. 1989 ..... ....X X X... ....X X X... ....X X X... .........139 .........177 .........180 .........180 .........180 .........181
 6. 1990 ..... ....X X X... ....X X X... ....X X X... ....X X X... .........120 .........163 .........163 .........163 .........163
 7. 1991 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .........183 .........198 .........200 .........200
 8. 1992 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .........145 .........159 .........160
 9. 1993 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .........289 .........464
10. 1994 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .........911
11. 1995 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ---------------------------
      1
               ------------
     Years          11
   in Which
 Premiums Were
  Earned and
  Losses Were
   Incurred        1995
- - ---------------------------
 1. Prior .... ....X X X...
 2. 1986 ..... ............
 3. 1987 ..... ............
 4. 1988 ..... ............
 5. 1989 ..... .........181
 6. 1990 ..... .........163
 7. 1991 ..... .........200
 8. 1992 ..... .........161
 9. 1993 ..... .........168
10. 1994 ..... .........986
11. 1995 ..... .......1,351
- - ---------------------------

113

Form 2

ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY AND ITS
AFFILIATED COMPANIES

SCHEDULE P - PART 5B - PRIVATE PASSENGER AUTO LIABILITY/MEDICAL

SECTION 1

- - -----------------------------------------------------------------------------------------------------------------------------------
      1                          CUMULATIVE NUMBER OF CLAIMS CLOSED WITH LOSS PAYMENT DIRECT AND ASSUMED AT YEAR END
               ---------------------------------------------------------------------------------------------------------------------

     Years           2             3           4            5            6            7            8            9           10
   in Which
 Premiums Were
  Earned and
  Losses Were
   Incurred        1986          1987        1988         1989         1990         1991         1992         1993         1994
- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 2. 1986 ..... ............ ............ ............ ............ ............ ............ ............ ............ ............
 3. 1987 ..... ....X X X... ............ ............ ............ ............ ............ ............ ............ ............
 4. 1988 ..... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............ ............
 5. 1989 ..... ....X X X... ....X X X... ....X X X... ....21,325.. ....30,076.. ....32,375.. ....33,102.. ....33,332.. ....33,415..
 6. 1990 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....17,575.. ....30,254.. ....32,342.. ....32,889.. ....33,092..
 7. 1991 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....16,649.. ....27,231.. ....29,026.. ....29,539..
 8. 1992 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....16,233.. ....26,749.. ....28,702..
 9. 1993 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....17,558.. ....28,705..
10. 1994 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....19,983..
11. 1995 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ---------------------------
      1
               ------------
     Years          11
   in Which
 Premiums Were
  Earned and
  Losses Were
   Incurred        1995
- - ---------------------------
 1. Prior .... ............
 2. 1986 ..... ............
 3. 1987 ..... ............
 4. 1988 ..... ............
 5. 1989 ..... ....33,435..
 6. 1990 ..... ....33,132..
 7. 1991 ..... ....29,662..
 8. 1992 ..... ....29,165..
 9. 1993 ..... ....30,512..
10. 1994 ..... ....32,680..
11. 1995 ..... ....22,825..
- - ---------------------------

SECTION 2

- - -----------------------------------------------------------------------------------------------------------------------------------
      1                                       NUMBER OF CLAIMS OUTSTANDING DIRECT AND ASSUMED AT YEAR END
               ---------------------------------------------------------------------------------------------------------------------

     Years           2             3           4            5            6            7            8            9           10
   in Which
 Premiums Were
  Earned and
  Losses Were
   Incurred        1986          1987        1988         1989         1990         1991         1992         1993         1994
- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior .... .......588.. .......394.. .......175.. ........21.. .......101.. ........39.. ........13.. .........8.. .........3..
 2. 1986 ..... .....1,806.. .......561.. .......227.. .......105.. .......230.. ........72.. ........25.. .........5.. .........1..
 3. 1987 ..... ....X X X... .....2,487.. .......574.. .......238.. .......472.. .......166.. ........52.. ........14.. .........5..
 4. 1988 ..... ....X X X... ....X X X... .....3,660.. .......852.. .....1,311.. .......521.. .......171.. ........49.. ........12..
 5. 1989 ..... ....X X X... ....X X X... ....X X X... .....3,917.. .....3,501.. .....1,158.. .......402.. .......139.. ........30..
 6. 1990 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....15,794.. .....3,062.. .......924.. .......311.. ........81..
 7. 1991 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....13,369.. .....2,710.. .......792.. .......221..
 8. 1992 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....13,741.. .....2,798.. .......685..
 9. 1993 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....14,405.. .....2,592..
10. 1994 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....16,865..
11. 1995 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ---------------------------
      1
               ------------
     Years          11
   in Which
 Premiums Were
  Earned and
  Losses Were
   Incurred        1995
- - ---------------------------
 1. Prior .... .........3..
 2. 1986 ..... .........2..
 3. 1987 ..... .........3..
 4. 1988 ..... .........6..
 5. 1989 ..... ........10..
 6. 1990 ..... ........25..
 7. 1991 ..... ........75..
 8. 1992 ..... ........67..
 9. 1993 ..... .......642..
10. 1994 ..... .....3,280..
11. 1995 ..... ....19,068..
- - ---------------------------

SECTION 3

- - -----------------------------------------------------------------------------------------------------------------------------------
      1                                CUMULATIVE NUMBER OF CLAIMS REPORTED DIRECTED AND ASSUMED AT YEAR END
               ---------------------------------------------------------------------------------------------------------------------

     Years           2             3           4            5            6            7            8            9           10
   in Which
 Premiums Were
  Earned and
  Losses Were
   Incurred        1986          1987        1988         1989         1990         1991         1992         1993         1994
- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior .... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X...
 2. 1986 ..... ............ ............ ............ ............ ............ ............ ............ ............ ............
 3. 1987 ..... ....X X X... ............ ............ ............ ............ ............ ............ ............ ............
 4. 1988 ..... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............ ............
 5. 1989 ..... ....X X X... ....X X X... ....X X X... ....45,960.. ....46,894.. ....47,045.. ....47,080.. ....47,091.. ....47,094..
 6. 1990 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....43,053.. ....46,426.. ....46,568.. ....46,589.. ....46,595..
 7. 1991 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....38,490.. ....40,918.. ....41,016.. ....41,031..
 8. 1992 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....37,953.. ....40,090.. ....40,159..
 9. 1993 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....40,569.. ....42,753..
10. 1994 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....47,107..
11. 1995 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ---------------------------
      1
               ------------
     Years          11
   in Which
 Premiums Were
  Earned and
  Losses Were
   Incurred        1995
- - ---------------------------
 1. Prior .... ....X X X...
 2. 1986 ..... ............
 3. 1987 ..... ............
 4. 1988 ..... ............
 5. 1989 ..... ....47,096..
 6. 1990 ..... ....46,596..
 7. 1991 ..... ....41,036..
 8. 1992 ..... ....40,168..
 9. 1993 ..... ....42,803..
10. 1994 ..... ....49,454..
11. 1995 ..... ....53,731..
- - ---------------------------

114

Form 2

ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY AND ITS
AFFILIATED COMPANIES

SCHEDULE P - PART 5C - COMMERCIAL AUTO/TRUCK LIABILITY/MEDICAL

SECTION 1

- - -----------------------------------------------------------------------------------------------------------------------------------
      1                          CUMULATIVE NUMBER OF CLAIMS CLOSED WITH LOSS PAYMENT DIRECT AND ASSUMED AT YEAR END
               ---------------------------------------------------------------------------------------------------------------------

     Years           2             3           4            5            6            7            8            9           10
   in Which
 Premiums Were
  Earned and
  Losses Were
   Incurred        1986          1987        1988         1989         1990         1991         1992         1993         1994
- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 2. 1986 ..... ............ ............ ............ ............ ............ ............ ............ ............ ............
 3. 1987 ..... ....X X X... ............ ............ ............ ............ ............ ............ ............ ............
 4. 1988 ..... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............ ............
 5. 1989 ..... ....X X X... ....X X X... ....X X X... .....1,347.. .....1,627.. .....1,948.. .....2,022.. .....2,041.. .....2,057..
 6. 1990 ..... ....X X X... ....X X X... ....X X X... ....X X X... .......779.. .....1,531.. .....1,672.. .....1,715.. .....1,735..
 7. 1991 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .......760.. .....1,251.. .....1,354.. .....1,405..
 8. 1992 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .......756.. .....1,215.. .....1,340..
 9. 1993 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .......739.. .....1,320..
10. 1994 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .......947..
11. 1995 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ---------------------------
      1
               ------------
     Years          11
   in Which
 Premiums Were
  Earned and
  Losses Were
   Incurred        1995
- - ---------------------------
 1. Prior .... ............
 2. 1986 ..... ............
 3. 1987 ..... ............
 4. 1988 ..... ............
 5. 1989 ..... .....2,077..
 6. 1990 ..... .....1,735..
 7. 1991 ..... .....1,405..
 8. 1992 ..... .....1,342..
 9. 1993 ..... .....1,326..
10. 1994 ..... .....1,344..
11. 1995 ..... .......778..
- - ---------------------------

SECTION 2

- - -----------------------------------------------------------------------------------------------------------------------------------
      1                                   NUMMBER OF CLAIMS OUTSTANDING DIRECT AND ASSUMED AT YEAR END
               ---------------------------------------------------------------------------------------------------------------------

     Years           2             3           4            5            6            7            8            9           10
   in Which
 Premiums Were
  Earned and
  Losses Were
   Incurred        1986          1987        1988         1989         1990         1991         1992         1993         1994
- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior .... ............ ............ ............ ............ ........18.. .........8.. .........2.. .........2.. ............
 2. 1986 ..... ............ ............ ............ ............ ........32.. .........9.. .........3.. .........3.. ............
 3. 1987 ..... ....X X X... ............ ............ ............ ........64.. ........28.. ........11.. .........2.. ............
 4. 1988 ..... ....X X X... ....X X X... ............ ............ .......163.. ........76.. ........36.. ........12.. .........1..
 5. 1989 ..... ....X X X... ....X X X... ....X X X... ............ .......295.. .......137.. ........43.. ........19.. ............
 6. 1990 ..... ....X X X... ....X X X... ....X X X... ....X X X... .......800.. .......243.. ........77.. ........26.. .........2..
 7. 1991 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .......681.. .......182.. ........67.. .........4..
 8. 1992 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .......612.. .......168.. ........26..
 9. 1993 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .......579.. ........44..
10. 1994 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .......543..
11. 1995 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ---------------------------
      1
               ------------
     Years          11
   in Which
 Premiums Were
  Earned and
  Losses Were
   Incurred        1995
- - ---------------------------
 1. Prior .... ............
 2. 1986 ..... ............
 3. 1987 ..... ............
 4. 1988 ..... .........1..
 5. 1989 ..... ............
 6. 1990 ..... .........2..
 7. 1991 ..... .........3..
 8. 1992 ..... ........21..
 9. 1993 ..... ........42..
10. 1994 ..... .......182..
11. 1995 ..... .......745..
- - ---------------------------

SECTION 3

- - -----------------------------------------------------------------------------------------------------------------------------------
      1                                CUMULATIVE NUMBER OF CLAIMS REPORTED DIRECT AND ASSUMED AT YEAR END
               ---------------------------------------------------------------------------------------------------------------------

     Years           2             3           4            5            6            7            8            9           10
   in Which
 Premiums Were
  Earned and
  Losses Were
   Incurred        1986          1987        1988         1989         1990         1991         1992         1993         1994
- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior .... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X...
 2. 1986 ..... ............ ............ ............ ............ ............ ............ ............ ............ ............
 3. 1987 ..... ....X X X... ............ ............ ............ ............ ............ ............ ............ ............
 4. 1988 ..... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............ ............
 5. 1989 ..... ....X X X... ....X X X... ....X X X... .....2,553.. .....2,553.. .....2,799.. .....2,802.. .....2,805.. .....2,807..
 6. 1990 ..... ....X X X... ....X X X... ....X X X... ....X X X... .....1,978.. .....2,386.. .....2,399.. .....2,404.. .....2,404..
 7. 1991 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .....1,757.. .....1,888.. .....1,897.. .....1,903..
 8. 1992 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .....1,641.. .....1,788.. .....1,796..
 9. 1993 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .....1,585.. .....1,753..
10. 1994 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .....1,861..
11. 1995 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ---------------------------
      1
               ------------
     Years          11
   in Which
 Premiums Were
  Earned and
  Losses Were
   Incurred        1995
- - ---------------------------
 1. Prior .... ....X X X...
 2. 1986 ..... ............
 3. 1987 ..... ............
 4. 1988 ..... ............
 5. 1989 ..... .....2,838..
 6. 1990 ..... .....2,404..
 7. 1991 ..... .....1,903..
 8. 1992 ..... .....1,797..
 9. 1993 ..... .....1,761..
10. 1994 ..... .....2,010..
11. 1995 ..... .....1,934..
- - ---------------------------

115

Form 2

ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY AND ITS
AFFILIATED COMPANIES

SCHEDULE P - PART 5D - WORKERS' COMPENSATION

                                                             SECTION 1
- - -----------------------------------------------------------------------------------------------------------------------------------
      1                          CUMULATIVE NUMBER OF CLAIMS CLOSED WITH LOSS PAYMENT DIRECT AND ASSUMED AT YEAR END
               --------------------------------------------------------------------------------------------------------------------
     Years
   in Which          2             3           4            5            6            7            8            9           10
 Premiums Were
  Earned and
  Losses Were
   Incurred        1986          1987        1988         1989         1990         1991         1992         1993         1994
- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 2. 1986 ..... ............ ............ ............ ............ ............ ............ ............ ............ ............
 3. 1987 ..... ....X X X... ............ ............ ............ ............ ............ ............ ............ ............
 4. 1988 ..... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............ ............
 5. 1989 ..... ....X X X... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............
 6. 1990 ..... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............ ............ ............ ............
 7. 1991 ..... ....X X X... ....X X X... ....X X X... ....X X X... N       O       N       E ............ ............ ............
 8. 1992 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............ ............
 9. 1993 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............
10. 1994 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............
11. 1995 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ---------------------------
      1
               ------------
     Years
   in Which         11
 Premiums Were
  Earned and
  Losses Were
   Incurred        1995
- - ---------------------------
 1. Prior .... ............
 2. 1986 ..... ............
 3. 1987 ..... ............
 4. 1988 ..... ............
 5. 1989 ..... ............
 6. 1990 ..... ............
 7. 1991 ..... ............
 8. 1992 ..... ............
 9. 1993 ..... ............
10. 1994 ..... ............
11. 1995 ..... ............
- - ---------------------------

SECTION 2

- - -----------------------------------------------------------------------------------------------------------------------------------
      1                          NUMBER OF CLAIMS OUTSTANDING DIRECT DIRECT AND ASSUMED AT YEAR END
               --------------------------------------------------------------------------------------------------------------------
     Years
   in Which          2             3           4            5            6            7            8            9           10
 Premiums Were
  Earned and
  Losses Were
   Incurred        1986          1987        1988         1989         1990         1991         1992         1993         1994
- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 2. 1986 ..... ............ ............ ............ ............ ............ ............ ............ ............ ............
 3. 1987 ..... ....X X X... ............ ............ ............ ............ ............ ............ ............ ............
 4. 1988 ..... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............ ............
 5. 1989 ..... ....X X X... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............
 6. 1990 ..... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............ ............ ............ ............
 7. 1991 ..... ....X X X... ....X X X... ....X X X... ....X X X... N       O       N       E ............ ............ ............
 8. 1992 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............ ............
 9. 1993 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............
10. 1994 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............
11. 1995 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ---------------------------
      1
               ------------
     Years
   in Which         11
 Premiums Were
  Earned and
  Losses Were
   Incurred        1995
- - ---------------------------
 1. Prior .... ............
 2. 1986 ..... ............
 3. 1987 ..... ............
 4. 1988 ..... ............
 5. 1989 ..... ............
 6. 1990 ..... ............
 7. 1991 ..... ............
 8. 1992 ..... ............
 9. 1993 ..... ............
10. 1994 ..... ............
11. 1995 ..... ............
- - ---------------------------

SECTION 3

- - -----------------------------------------------------------------------------------------------------------------------------------
      1                                CUMULATIVE NUMBER OF CLAIMS REPORTED DIRECT AND ASSUMED AT YEAR END
               --------------------------------------------------------------------------------------------------------------------
     Years
   in Which          2             3           4            5            6            7            8            9           10
 Premiums Were
  Earned and
  Losses Were
   Incurred        1986          1987        1988         1989         1990         1991         1992         1993         1994
- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior .... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X...
 2. 1986 ..... ............ ............ ............ ............ ............ ............ ............ ............ ............
 3. 1987 ..... ....X X X... ............ ............ ............ ............ ............ ............ ............ ............
 4. 1988 ..... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............ ............
 5. 1989 ..... ....X X X... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............
 6. 1990 ..... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............ ............ ............ ............
 7. 1991 ..... ....X X X... ....X X X... ....X X X... ....X X X... N       O       N       E ............ ............ ............
 8. 1992 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............ ............
 9. 1993 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............
10. 1994 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............
11. 1995 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ---------------------------
      1
               ------------
     Years
   in Which         11
 Premiums Were
  Earned and
  Losses Were
   Incurred        1995
- - ---------------------------
 1. Prior .... ....X X X...
 2. 1986 ..... ............
 3. 1987 ..... ............
 4. 1988 ..... ............
 5. 1989 ..... ............
 6. 1990 ..... ............
 7. 1991 ..... ............
 8. 1992 ..... ............
 9. 1993 ..... ............
10. 1994 ..... ............
11. 1995 ..... ............
- - ---------------------------

116

Form 2

ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY AND ITS
AFFILIATED COMPANIES

SCHEDULE P - PART 5E - COMMERCIAL MULTIPLE PERIL

SECTION 1

- - -----------------------------------------------------------------------------------------------------------------------------------
      1                          CUMULATIVE NUMBER OF CLAIMS CLOSED WITH LOSS PAYMENT DIRECT AND ASSUMED AT YEAR END
               ---------------------------------------------------------------------------------------------------------------------

     Years           2             3           4            5            6            7            8            9           10
   in Which
 Premiums Were
  Earned and
  Losses Were
   Incurred        1986          1987        1988         1989         1990         1991         1992         1993         1994
- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 2. 1986 ..... ............ ............ ............ ............ ............ ............ ............ ............ ............
 3. 1987 ..... ....X X X... ............ ............ ............ ............ ............ ............ ............ ............
 4. 1988 ..... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............ ............
 5. 1989 ..... ....X X X... ....X X X... ....X X X... ........43.. ........81.. ........84.. ........87.. ........87.. ........87..
 6. 1990 ..... ....X X X... ....X X X... ....X X X... ....X X X... ........65.. ........83.. ........84.. ........84.. ........84..
 7. 1991 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ........47.. ........64.. ........67.. ........71..
 8. 1992 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ........66.. ........98.. .......104..
 9. 1993 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ........82.. .......120..
10. 1994 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ........92..
11. 1995 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ---------------------------
      1
               ------------
     Years          11
   in Which
 Premiums Were
  Earned and
  Losses Were
   Incurred        1995
- - ---------------------------
 1. Prior .... ............
 2. 1986 ..... ............
 3. 1987 ..... ............
 4. 1988 ..... ............
 5. 1989 ..... ........86..
 6. 1990 ..... ........84..
 7. 1991 ..... ........71..
 8. 1992 ..... .......106..
 9. 1993 ..... .......127..
10. 1994 ..... .......144..
11. 1995 ..... .......122..
- - ---------------------------

SECTION 2

- - -----------------------------------------------------------------------------------------------------------------------------------
      1                                   NUMMBER OF CLAIMS OUTSTANDING DIRECT AND ASSUMED AT YEAR END
               ---------------------------------------------------------------------------------------------------------------------

     Years           2             3           4            5            6            7            8            9           10
   in Which
 Premiums Were
  Earned and
  Losses Were
   Incurred        1986          1987        1988         1989         1990         1991         1992         1993         1994
- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior .... ............ ............ ............ ............ ........12.. .........2.. .........2.. .........1.. ............
 2. 1986 ..... ............ ............ ............ ............ .........8.. .........3.. .........1.. ............ ............
 3. 1987 ..... ....X X X... ............ ............ ............ .........5.. .........2.. ............ ............ ............
 4. 1988 ..... ....X X X... ....X X X... ............ ............ .........2.. .........1.. .........1.. .........1.. ............
 5. 1989 ..... ....X X X... ....X X X... ....X X X... ............ .........5.. .........3.. ............ ............ ............
 6. 1990 ..... ....X X X... ....X X X... ....X X X... ....X X X... .........9.. .........1.. .........1.. .........1.. ............
 7. 1991 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ........21.. .........8.. .........3.. ............
 8. 1992 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ........34.. ........11.. .........5..
 9. 1993 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ........50.. ........17..
10. 1994 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ........71..
11. 1995 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ---------------------------
      1
               ------------
     Years          11
   in Which
 Premiums Were
  Earned and
  Losses Were
   Incurred        1995
- - ---------------------------
 1. Prior .... ............
 2. 1986 ..... ............
 3. 1987 ..... ............
 4. 1988 ..... ............
 5. 1989 ..... .........1..
 6. 1990 ..... ............
 7. 1991 ..... ............
 8. 1992 ..... .........6..
 9. 1993 ..... .........9..
10. 1994 ..... ........14..
11. 1995 ..... ........69..
- - ---------------------------

SECTION 3

- - -----------------------------------------------------------------------------------------------------------------------------------
      1                                CUMULATIVE NUMBER OF CLAIMS REPORTED DIRECT AND ASSUMED AT YEAR END
               ---------------------------------------------------------------------------------------------------------------------

     Years           2             3           4            5            6            7            8            9           10
   in Which
 Premiums Were
  Earned and
  Losses Were
   Incurred        1986          1987        1988         1989         1990         1991         1992         1993         1994
- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior .... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X...
 2. 1986 ..... ............ ............ ............ ............ ............ ............ ............ ............ ............
 3. 1987 ..... ....X X X... ............ ............ ............ ............ ............ ............ ............ ............
 4. 1988 ..... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............ ............
 5. 1989 ..... ....X X X... ....X X X... ....X X X... ........53.. ........93.. ........94.. ........94.. ........95.. ........95..
 6. 1990 ..... ....X X X... ....X X X... ....X X X... ....X X X... ........76.. ........97.. ........98.. .......100.. .......100..
 7. 1991 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ........84.. .......100.. .......101.. .......101..
 8. 1992 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .......119.. .......141.. .......144..
 9. 1993 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .......167.. .......196..
10. 1994 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... .......212..
11. 1995 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ---------------------------
      1
               ------------
     Years          11
   in Which
 Premiums Were
  Earned and
  Losses Were
   Incurred        1995
- - ---------------------------
 1. Prior .... ....X X X...
 2. 1986 ..... ............
 3. 1987 ..... ............
 4. 1988 ..... ............
 5. 1989 ..... ........95..
 6. 1990 ..... .......100..
 7. 1991 ..... .......101..
 8. 1992 ..... .......146..
 9. 1993 ..... .......200..
10. 1994 ..... .......227..
11. 1995 ..... .......253..
- - ---------------------------

117

Form 2

ANNUAL STATEMENT FOR THE YEAR 1995 OF THE MERCURY CASUALTY COMPANY AND ITS
AFFILIATED COMPANIES

SCHEDULE P - PART 5F - MEDICAL MALPRACTICE - OCCURRENCE

SECTION 1A

- - -----------------------------------------------------------------------------------------------------------------------------------
      1                          CUMULATIVE NUMBER OF CLAIMS CLOSED WITH LOSS PAYMENT DIRECT AND ASSUMED AT YEAR END
               ---------------------------------------------------------------------------------------------------------------------

     Years           2             3           4            5            6            7            8            9           10
   in Which
 Premiums Were
  Earned and
  Losses Were
   Incurred        1986          1987        1988         1989         1990         1991         1992         1993         1994
- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 2. 1986 ..... ............ ............ ............ ............ ............ ............ ............ ............ ............
 3. 1987 ..... ....X X X... ............ ............ ............ ............ ............ ............ ............ ............
 4. 1988 ..... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............ ............
 5. 1989 ..... ....X X X... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............
 6. 1990 ..... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............ ............ ............ ............
 7. 1991 ..... ....X X X... ....X X X... ....X X X... ....X X X... .......N O N E........... ............ ............ ............
 8. 1992 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............ ............
 9. 1993 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............
10. 1994 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............
11. 1995 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ---------------------------
      1
               ------------
     Years          11
   in Which
 Premiums Were
  Earned and
  Losses Were
   Incurred        1995
- - ---------------------------
 1. Prior .... ............
 2. 1986 ..... ............
 3. 1987 ..... ............
 4. 1988 ..... ............
 5. 1989 ..... ............
 6. 1990 ..... ............
 7. 1991 ..... ............
 8. 1992 ..... ............
 9. 1993 ..... ............
10. 1994 ..... ............
11. 1995 ..... ............
- - ---------------------------

SECTION 2A

- - -----------------------------------------------------------------------------------------------------------------------------------
      1                                  NUMBER OF CLAIMS OUTSTANDING DIRECT AND ASSUMED AT YEAR END
               ---------------------------------------------------------------------------------------------------------------------

     Years           2             3           4            5            6            7            8            9           10
   in Which
 Premiums Were
  Earned and
  Losses Were
   Incurred        1986          1987        1988         1989         1990         1991         1992         1993         1994
- - -----------------------------------------------------------------------------------------------------------------------------------
 1. Prior .... ............ ............ ............ ............ ............ ............ ............ ............ ............
 2. 1986 ..... ............ ............ ............ ............ ............ ............ ............ ............ ............
 3. 1987 ..... ....X X X... ............ ............ ............ ............ ............ ............ ............ ............
 4. 1988 ..... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............ ............
 5. 1989 ..... ....X X X... ....X X X... ....X X X... ............ ............ ............ ............ ............ ............
 6. 1990 ..... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............ ............ ............ ............
 7. 1991 ..... ....X X X... ....X X X... ....X X X... ....X X X... .......N O N E........... ............ ............ ............
 8. 1992 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............ ............
 9. 1993 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............ ............
10. 1994 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ............
11. 1995 ..... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X... ....X X X...
- - -----------------------------------------------------------------------------------------------------------------------------------

- - ---------------------------
      1
               ------------
     Years          11
   in Which
 Premiums Were
  Earned and
  Losses Were
   Incurred        1995
- - ---------------------------
 1. Prior .... ............
 2. 1986 ..... ............
 3. 1987 ..... ............
 4. 1988 ..... ............
 5. 1989 ..... ............
 6. 1990 ..... ............
 7. 1991 ..... ............
 8. 1992 ..... ............
 9. 1993 ..... ............
1