This conference call may contain comments and forward-looking statements based on current plans, expectations, events and financial and industry trends which may affect our three generals future operating results and financial positions, such statements involve risks and uncertainties which cannot be predicted and quantified and which may cause future activities and results of operations to differ materially from those discussed here today. Good afternoon, my name is Brittany and I will be your conference Operator today. At this time I would like to welcome everyone to the Mercury General second quarter conference call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question and answer session. If you would like to ask a question during this time simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question press the pound key. Thank you I would now like to turn the conference over to your host Mr. Gabriel Tirador, sir, you may begin.

Thank you very much. I would like to welcome everyone to Mercury's second quarter conference call. In the room with me is Mr. George Joseph, Chairman, Ted Stalick, Vice President and CFO, Chris Graves Vice President and Chief Investment Officer, John Sutton, Senior Vice President Customer Service and Robert Houlihan, Vice President and Chief Product Officer. Before we take questions we will make a few comments regarding the quarter, I am pleased to report that for the second consecutive quarter premiums written increased over the prior year. Although premiums increased by a modest .08 of 1% in the quarter it marked the second consecutive quarter of positive premium growth since the first quarter of 2007. In addition California private passenger auto new business sales during the quarter grew modestly on a year over year basis for the first time since 2006. Our operating results also improved on a sequential basis. The 98% second quarter combined ratio was slightly better than a 98.2% combined ratio posted in the first quarter of 2011. The combined ratio was aided during the quarter by our continued focus in reducing expenses. In 2010, the expense ratio was negatively impacted by our Supportive Proposition 17. Excluding the costs associated with our support of Proposition 17 in 2010 our expense ratio declined from 28.7% in the second quarter of 2010 to 27.7% in the second quarter of 2011. We were fortunate not to be significantly impacted by severe weather in many states during the quarter that not only cause a significant amount of property loss but took the lives of some of our fellow citizens. Our catastrophe losses in the quarter were approximately $3 million. Most of which was from the state of Georgia. Year to date we recorded $10 million of unfavorable reserve development compared to…

(Operator Instructions), and your first question does come from Allison Jacobowitz with Bank of America.

Thanks, I'm just wondering if you could talk a little bit about you know maybe more broadly for the team severity trends and maybe margins inside California now and then also for the growth -- if you could give a little bit more color maybe. Where that's coming from? What you're seeing there and your outlook for that in the quarters to come?

Go ahead and talk about that Chris?

On the loss side, Allison, this is Ted. In California we saw a little bit of favorable trend in the second quarter which might possibly be attributable to the high gas prices in the quarter. We're not positive but so I'm not sure that's a trend or just some benefit that we received in the second quarter. As we said before outside of California, it varies a lot by state, in general costs are going up, but again it varies a lot by state. Some are going down, several are going up.

Yeah, on the growth side in California we're relatively flat, maybe down slightly in California, offset by some growth outside California. Although yeah, there's some mix. There's some states outside of California, that are growing more rapidly and other -- there are some states outside of California that are declining so it is somewhat of a mix. You know looking forward to this quarter you know it's hard to anticipate what's going to happen to all three months but we are continuing to see at least in July in California the continued trend of new business sales being above where they were a year ago. So that trend has continued through July whether that continues for the remaining months in the remaining quarters is yet to be seen, so that's kind of where we're at on the growth aspects.

Thanks.

Your next question comes from Meyer Shields of Stifel Nicolaus.

Thanks let me start on the (inaudible) side on the review line picked up fairly dramatically again year over year. Can you talk a little bit more about what's driving that?

Yeah, Meyer, this is Ted again. So the other income includes a lot of items such as gains on fixed assets sales, premium finance fees, changes in the market value of slots not designated as hedges and commissioned income earned by AIF on policies written for other peers. So there's a lot of different components in there. The increase this quarter was largely due to -- that this gains on this position of some older fixed assets that we liquidated during the quarter.

Okay, so, pardon me, if (inaudible) issues. If it all comes down to where (inaudible) in the previous quarter?

Could you repeat the question please?

I guess what I am asking is the last -- the prior two quarters was in the $3 million run rate is that a decent number for future quarters?

Yeah, that's more typical.

Okay, and can you just give I guess some discussion on your California meeting holdings?

Well, we maintained a very low exposure to Cal Geo Debt. We got on -- throughout the state the -- I'm not sure I have our Cal Exposure right here in front of me but bear with me a minute here. Yeah, 11% of the Municipal Bond Portfolio with an average rating. I'm not sure what else you would like to know about the --

No, just the 11% was what I was looking for. That's all, thank you very much.

Sure.

And once again ladies and gentlemen if you would like to ask a question please press star 1 and your next question comes from the Dean Evans of KBW.

I was wondering if we could get maybe a little more detail on the reserve editions in the quarter. Maybe -- it looks from the text it looks like it was largely from the 2010 action here. I'm not sure if that's correct. Just any other color you have on that would be helpful.

Hi Dean, actually it's from the '09 accident year and a little bit of the '10 accident year in California. We did have some off-set. We had some loss adjustment and expense redundancy in some areas that partially offset that.

And is there anything I guess you know kind of major happening with the reserves? It seems like you had maybe two years there where you were seeing favorable development every quarter. Now for the last three or four quarters we've seen some minor editions. Anything changed in the overall reserving philosophy. Anything you should be thinking about you know from that perspective or is it just sort of kind of what you mentioned at the claims trends? A little bit worse than expected?

We evaluate our reserves every quarter and do our best to make the most accurate estimate of what we think the losses will be and as you know it isn’t an exact science and sometimes we're a little over, sometimes we're a little under.

Okay but nothing is really majorly changed in the way you look at? No change in philosophy at all?

No.

Okay and I guess the last thing; I guess can you give us an update on how the Florida home owner's withdrawal is progressing?

It's continuing to progress well. We started thinning out the notices in March and policies are starting to non-renew in I believe by September 2012 we should be out of the Florida Homeowners Market.

Okay so the non-renewals don’t start until September?

Yeah because we're required in Florida to provide a six month notice and we started that six months' notice I believe in early March.

Okay, all right. That's all I have thank you.

Great, thanks.

And once again that is star 1 for any questions at this time and your next question comes from Brian Peree of Samsung Partners.

Good morning and thanks for taking my question. It was in the papers last week that Geico was forced to cut rates almost 11% in California and I was wondering if you could discuss the risks to your business in two regards. One is just a greater competitive threat from Geico's lower prices and, two, just the risk of greater advocacy from the regulators and consumer advocacy groups. Thank you.

Good question, with respect to Geico we run competitive analysis internally here among all of our major competitors and we still feel that with respect to Geico that we still have very competitive rates today. So we still believe that our rates are very competitive. We also feel that with the new rate level we anticipate putting into effect sometime later this year that I discussed in my prepared remarks that that is going to actually provide us with actually we have more competitive rate on the business as well. So from that stand point we show fairly comfortable with our competitive position it the market place right now. You second part of the question regarding regulatory you know actions or from either the interveners or from the DOI itself. Something that we have had to deal with really for the past I don’t know how many years. Many years and it's something that not only us but the whole industry has to deal with and I believe Geico had originally filed for a small increase and ended up refilling it for a small decrease in the neighborhood of lower single digits but ended up with a negative 11. That's my recollection; at least that’s my recollection but we deal with it. We feel that when we make a rate filing for an increase which we actually anticipate making the rate filing for an increase here in California shortly I would say probably by the end of September we will make a rate filing for a small increase here in California. We feel that we can substantiate our rates.

Okay, so it's pretty remarkable for one company to file for a slight increase and end up with a massive decrease. But, it sounds like you're saying that's a Geico-specific problem that may be something specific to the way they were calculating the rate increase that was appropriate.

I can say that in our latest find that we filed back in December we had filed for a small increase and ended up with an increase and ended up with a decreased spread between -- the spread that we had was not as broad as the spread Geico had. I mean they had to come up with a plus something and had a negative 11. Our spread was not nearly that wide. In our last filing that we had back in December where we had filed for I think a one and half and ended up with a negative four.

Right.

Those are ballpark figures.

Great, thanks for taking my questions.

Bye.

And your next question comes from Allison Jacobowitz with Bank of America.

Thanks, I know you mentioned the expense ratio in your opening remarks but I just want to make sure I'm not missing anything. So, was there anything unusual that helped it? How do you see the run rate there going forward?

Hi, Allison, probably the year to date run rate is close to where we see it going. We are at little under 28 for the quarter. There's not a lot of unusual items in there but we've done a really good job this year of reigning in expenses. We've reduced our technology expense. Our ad spend is a little lower than it's been in previous years and additional washing the expense closely.

Okay, thanks.

And we have no further questions at this time.

Okay, I would like to thank everyone for joining us this quarter and we look forward to speaking with all of you next quarter. Thank you.

And this does conclude today's conference call you may now disconnect.