Good morning my name is Marley and I will be your conference operator today. At this time I’d like to welcome everyone to the Mercury General Corporation Third Quarter Results Conference Call. All lines have been placed on mute to prevent any background noise. (Operator Instructions) This conference call may contain comments and forward-looking statements based on current plans, expectations, events and financial and industry trend which may affect Mercury General’s future operating results and financial position. Such statements involve risks and uncertainties which cannot be predicted or quantified and which may cause future activities and results of operations to differ materially from those discussed here today. I’d now like to turn the call over to Mr. Gabriel Tirador, sir please go ahead.

Thank you very much. I’d like to welcome everyone to Mercury’s third quarter conference call. I’m Gabe Tirador, President and CEO. In the room with me is Mr. George Joseph, Chairman; Ted Stalick, Vice President and CFO; Chris Graves, Vice President and Chief Investment Officer; and John Sutton, Senior Vice President and Customer Service. On the phone we have Robert Houlihan, Vice President and Chief Product Officer. Before we take questions we will make a few comments regarding the quarter. For the seventh consecutive quarter our premiums written increased over the prior year. In the third quarter premiums written grew by 3.4% to highest it has been since we started growing in 2011. The growth is attributable to several factors including our California revenue neutral rating plan we implemented in December of 2011 that made us more competitive for new business as well as an increase in a number of agents selling our products. California new business private passenger automobile sales increased year-over-year in the quarter by 20%. Our combined ratio was 99.1% in the third quarter of 2012 compared to 98.3% in the third quarter of 2011. We recorded $4 million of unfavorable reserve development on private action aired in the quarter and 33 million for the first nine months of 2012. Most of the $4 million development in the quarter came from our existing (inaudible) Florida home owner’s line of business and from a few large claims and commercial property they developed worse than we anticipated. The third quarter results were aided by decline in the expense ratio. The 26.6% expense ratio in the quarter was lower than the 27% expense ratio recorded in the third quarter of 2011 primarily due to a reduction in profitability related accruals. Going forward our current expectation is for the expense ratio…

(Operator Instructions) And your first question comes from the line of Meyer Shields with Stifel Nicolaus.

Two quick questions if I can, one, are the policies that are going to reflect the rate increase in California, are those going to be 12 months or six month policies?

They are a combination of both, but I would say the majority are six month policies that I’d say probably 90% of the policies are six months right now.

Is it simply being the insurance decision about (inaudible) six months or 12?

Well in Mercury Insurance Company we started writing annual policies earlier this year. So Mercury Insurance which is by far our biggest company in California, there was not option. It was historically only six month that we rolled, but typically the agents talked to the insured about the various alternatives and it's up to them to decide whether it's a six month or 12 month policy. But in our largest company again, we get started writing annual policies recently.

And I guess the pre-tax investment yield pick up fairly significant from the second quarter. Just wondering whether you could talk to that a little bit?

On the pre-tax or the after-tax or both?

I look it on a pre-tax basis, but something on the after-tax then please let me know?

Well there has been a larger allocation to dividend paying stock in the portfolio and Chris you want to talk about that.

Well, yes, in terms of the pretax we are trying to pick up more yield mainly off of dividend stocks, municipal bond income levels, the reinvestment yields are so low right now in going out on the curve doesn’t make a lot of sense to me. So we guys allocated quite a bit more into common equities. That's most likely what's driving that change.

And then on the after-tax that's also driving the effective tax rate up a little bit on investment income as the dividends are not as tax sheltered as the municipal bond interest.

Your next question comes from Alison Jacobowitz with Bank of America. Alison Jacobowitz - Bank of America/Merrill Lynch: I guess two questions. One is did the shift to annual policies impact premium growth materially this quarter? And then the second is did you make any changes to current year reserves in the quarter?

Well the shift to annual policies really started in late December last year and we are seeing that under 7% of the total California personal auto policies written are now annual policies. But it's hard to tell because it's somewhat distorted when you look at it on a year-over-year basis and there was somewhat of an offset from the temporary declines in retention from the dislocation that was caused by our rate plan we implemented last December. We do note that California personal auto policies in force counts are up a little over 2% when you compare them from September of 2012 to September of 2011. So, to the extent that you can measure it based on policies in force. They are growing at a comparable rate to the rate of premium growth. On your question on the loss development within the year, we really, Alison, analyze it on a year-to-date basis now and so it's hard for us to make any comment on what was happening within the current accident year.

Your next question comes from Ray Iardella with Macquarie.

Just a few question from me. Would you mind repeating the policyholder number you gave in terms of the northeast?

Its 25,000 homeowner policies in northeast region for us, homeowners.

How did that compare to I guess last year around this time? I mean has that materially increased, has it been pretty consistent or has it been declining?

The growth in our homeowners business, it's up. I don't have that specific number for you, but it's definitely up year-over-year. Our homeowner's volume has grown. To give you some context, last year, we had Hurricane Irene and it's hard to estimate what the impact of Sandy is going to be compared to Irene, but Irene costs us 4 million last year. You tried to put into context, but it's just way too early for us to estimate, what we think the impact is going to be.

No, I can appreciate that. Just trying to get directionally, how we should be thinking about that relevant to Irene. I guess the other question, I know in the past, you guys talked a lot about BI severity in California, just curious what are the current loss trend in California given I guess the roughly 4% rate increase you guys are putting into place in late October?

We’re seeing severity in the lower middle single-digits if that make sense, the 3 or 4% range and frequency in the low single-digits, 1 to 2% in California.

And then just last one from me, in terms of Proposition 33, can you guys comment on your thoughts on that initiatives and kind of how that would position Mercury going forward if it were to pass and if weren't to pass?

Well if it were to pass, we think it's going to make it easier to tracking the business. So, since companies today are not allowed to offer continuous insurance discount to new customers but only to existing clients. So I think it's going to improve our competitiveness on new business probably allowing us to offer this discount to customers that are getting it from their existing carrier. So, it will improve our competitive position, and if it doesn't pass, well we still feel that we have a competitive product. We're growing in California as we mentioned earlier. Our app count in the quarter year-over-year was up a little bit over 20%, so we still feel good about Mercury’s position here in California despite what happens with the initiatives, but obviously if the initiative were to pass, we sort of long-term that would be a nice plus for Mercury because it will allow us to attract new business and we also feel it's good for consumer as well because consumers are going to be able to shop for better rates. So, it's a net-net win for both we believe for us and consumers. But again I just want to reiterate that we are growing, we grew 20% this quarter. So if it doesn’t pass we still feel pretty good about our position here in California.

One last one if I could sneak it in and just update the Florida homeowners business assuming that you guys are completely out of that. I think the previous guidance was the end of September?

Yes, we are completely out of the homeowners business in Florida. We do have some one-off claims that we are going to have for some time but basically have no policies in force as of the end of September in Florida homeowners.

(Operator Instructions) Your next question comes from Ron Bobman with Capital Returns.

A question about Florida, but Florida auto I was curious, in the wake of the PIP I guess legislative changes what's your rate plan and your thoughts about recognizing or not yet recognizing the impact from the legislative change there?

Robert you want to take that question.

Sure. In Florida we have, I'm just checking our filing for aligned product.

Well we made the required filing, I guess it was due on 10/1, Robert and the filing indicated that our PIP indication was higher than 10% for PIP. Also basically we filed for no change in rates because even though the new statute required you to reduce rates by 10%. Our indication was that for PIP that it would higher than 10%. So, we did not take that, we didn't take the rate increase that was indicated because of that. So, what's what I believe we did, Robert?

Yes, that's correct. We are assuming that the improvement in PIP from the regulatory changes will offset our indicated rate, but we didn't actually decrease our PIP rates.

Right.

And then some people I think have assumed adverse losses in BI or sort of other liability lines in the auto product. If I’m close to right, are you making any assumptions about that?

Robert, did we make any assumptions in BI. I think we just used in our latest filing, we just used our historical trends, which BI was going up in Florida, but I don't believe that in our latest filing, we made any kind of estimated forecast as to what we thought BI would be after the PIP legislation at least not in this latest filings.

That's correct. Yes, we used our historical trends. We didn't project for any changes in BI relative to the PIP reform.

Right.

And there are no further questions at this time.

Okay. Well, thank you everyone for joining us and those of you in the East Coast, please stay safe. Thank you very much and we will talk to you next quarter.