<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549


                                   FORM 10Q

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

  For the Quarter September 30, 2001                  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:
                                      (323) 937-1060

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_____
                                 -----

At October 26, 2001, the Registrant had issued and outstanding an aggregate  of
54,226,048 shares of its Common Stock.
<PAGE>

                        PART 1 - FINANCIAL INFORMATION

Item 1. - Financial Statements

                          MERCURY GENERAL CORPORATION
                               AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

             Amounts expressed in thousands, except share amounts

                                  A S S E T S

<TABLE>
<CAPTION>
                                                            September 30,   December 31,
                                                                 2001           2000
                                                                 ----           ----
                                                             (Unaudited)
<S>                                                         <C>            <C>
Investments:
   Fixed maturities available for sale (amortized cost
    $1,523,215 in 2001 and $1,463,897 in 2000)..........    $1,584,118     $1,509,474
   Equity securities available for sale (cost $278,399
    in 2001 and $250,593 in 2000).......................       273,421        252,510
   Short-term cash investments, at cost, which
    approximates market.................................        99,024         32,977
                                                            ----------     ----------
              Total investments.........................     1,956,563      1,794,961
Cash....................................................         5,102          5,935
Receivables:
   Premiums receivable..................................       141,459        123,070
   Premium notes........................................        17,084         14,205
   Accrued investment income............................        25,850         25,707
   Other................................................        33,036         36,410
                                                            ----------     ----------
                                                               217,429        199,392
Deferred policy acquisition costs.......................        81,665         71,126
Fixed assets, net.......................................        39,470         35,208
Other assets............................................        28,816         35,641
                                                            ----------     ----------
              Total assets                                  $2,329,045     $2,142,263
                                                            ==========     ==========

                            LIABILITIES AND SHAREHOLDERS' EQUITY

Losses and loss adjustment expenses.......................  $  512,091     $  492,220
Unearned premiums.........................................     413,041        365,579
Notes payable.............................................     130,423        107,889
Loss drafts payable.......................................      53,235         49,954
Accounts payable and accrued expenses.....................      51,221         39,715
Current income taxes......................................      10,564          3,471
Deferred income taxes.....................................      11,274          8,336
Other liabilities.........................................      67,513         42,194
                                                            ----------     ----------
              Total liabilities...........................   1,249,362      1,109,358
                                                            ----------     ----------
Shareholders' equity:
   Common stock without par value or stated value.
    Authorized 70,000,000 shares; issued and outstanding
     54,219,348 shares in 2001 and 54,193,423 shares in
     2000.................................................      52,540         52,162
   Accumulated other comprehensive income.................      36,352         30,871
   Unearned ESOP compensation.............................      (1,250)        (2,000)
   Retained earnings......................................     992,041        951,872
                                                            ----------     ----------
             Total shareholders' equity...................   1,079,683      1,032,905
                                                            ----------     ----------
   Commitments and contingencies..........................  $2,329,045     $2,142,263
                                                            ==========     ==========
</TABLE>


                                       2
<PAGE>

                          MERCURY GENERAL CORPORATION
                               AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF INCOME

                                  (Unaudited)

                       Three Months Ended September 30,

        Amounts expressed in thousands, except share and per share data

                                                            2001     2000
                                                            ----     ----

Revenues:
        Earned premiums................................  $351,896  $315,108
        Net investment income..........................    29,043    26,865
        Net realized investment gains..................     2,784       625
        Other..........................................     1,355       538
                                                         --------  --------

               Total revenues..........................   385,078   343,136
                                                         --------  --------

Expenses:
        Losses and loss adjustment expenses............   250,939   226,706
        Policy acquisition costs.......................    76,805    68,002
        Other operating expenses.......................    15,393    14,546
        Interest.......................................     1,974     1,837
                                                         --------  --------

               Total expenses..........................   345,111   311,091
                                                         --------  --------

        Income before income taxes.....................    39,967    32,045

Income taxes...........................................     7,912     4,624
                                                         --------  --------

      Net income.......................................  $ 32,055  $ 27,421
                                                         ========  ========

BASIC EARNINGS PER SHARE (average shares outstanding
 54,182,065 in 2001 and 54,074,298 in 2000)............  $   0.59  $   0.51
                                                         ========  ========

DILUTED EARNINGS PER SHARE (adjusted weighted average
 shares 54,385,345 in 2001 and 54,223,764 in 2000).....  $   0.59  $   0.51
                                                         ========  ========

Dividends declared per share...........................  $  0.265  $  0.240
                                                         ========  ========


                                       3
<PAGE>

                          MERCURY GENERAL CORPORATION
                               AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF INCOME

                                  (Unaudited)

                        Nine Months Ended September 30,

        Amounts expressed in thousands, except share and per share data

                                                             2001        2000
                                                             ----        ----

Revenues:
     Earned premiums...................................  $1,013,839  $  931,950
     Net investment income.............................      85,003      78,536
     Net realized investment gains.....................       7,077       2,784
     Other.............................................       3,067       4,383
                                                         ----------  ----------

          Total revenues...............................   1,108,986   1,017,653
                                                         ----------  ----------

Expenses:
     Loss and loss adjustment expenses.................     734,577     664,609
     Policy acquisition costs..........................     222,562     204,768
     Other operating expenses..........................      46,162      44,742
     Interest..........................................       5,323       5,219
                                                         ----------  ----------

          Total expenses...............................   1,008,624     919,338
                                                         ----------  ----------

     Income before income taxes........................     100,362      98,315

Income taxes...........................................      17,134      14,954
                                                         ----------  ----------

     Net income........................................  $   83,228  $   83,361
                                                         ==========  ==========

BASIC EARNINGS PER SHARE (average shares outstanding
 54,167,910 in 2001 and 54,098,916 in 2000)............  $     1.54  $     1.54
                                                         ==========  ==========

DILUTED EARNINGS PER SHARE (adjusted weighted average
 shares 54,363,277 in 2001 and 54,230,720 in 2000).....  $     1.53  $     1.54
                                                         ==========  ==========

Dividends declared per share...........................  $    0.795  $    0.720
                                                         ==========  ==========


                                       4
<PAGE>

                          MERCURY GENERAL CORPORATION
                               AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

                                  (Unaudited)

                       Three Months Ended September 30,

                        Amounts expressed in thousands

                                                     2001       2000

Net income                                         $32,055    $27,421

Other comprehensive income, before tax:
  Unrealized gains on securities:
   Unrealized holding gains arising
    during period                                    6,895     32,408
    Less: reclassification adjustment for net
     gains included in net income                   (1,682)       (42)
                                                   -------    -------
Other comprehensive income, before tax               5,213     32,366

Income tax expense related to unrealized
 holding gains arising during the period             2,413     11,342
Income tax benefit related to reclassification
 adjustment for gains included in  net income         (588)       (14)
                                                   -------    -------

Comprehensive income, net of tax                   $35,443    $48,459
                                                   =======    =======


                                       5
<PAGE>

                          MERCURY GENERAL CORPORATION
                                AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

                                  (Unaudited)

                        Nine Months Ended September 30,

                         Amounts expressed in thousands

                                                    2001        2000
                                                    ----        ----

Net income                                        $ 83,228   $  83,361

Other comprehensive income, before tax:
  Unrealized gains on securities:
   Unrealized holding gains arising
    during period                                   13,450      59,130
    Less: reclassification adjustment for net
     gains included in net income                   (5,018)     (1,238)
                                                  --------   ---------
Other comprehensive income, before tax               8,432      57,892

Income tax expense related to unrealized
 holding gains arising during period                 4,707      20,695
Income tax benefit related to reclassification
 adjustment for gains included in net income        (1,756)       (433)
                                                  --------   ---------

Comprehensive income, net of tax                  $ 88,709   $ 120,991
                                                  ========   =========


                                       6
<PAGE>

                          MERCURY GENERAL CORPORATION
                               AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                                  (Unaudited)

                        Nine Months Ended September 30,

                        Amounts expressed in thousands

<TABLE>
<CAPTION>
                                                                 2001        2000
                                                                 ----        ----
<S>                                                           <C>         <C>
Cash flows from operating activities:
   Net income                                                 $  83,228   $  83,361
   Adjustments to reconcile net income to net cash
    provided from operating activities:
      Increase in unpaid losses and loss adjustment
       expenses                                                  19,871      27,134
      Increase in unearned premiums                              47,462      21,886
      Increase in premium notes receivable                       (2,879)     (1,276)
      Increase in premiums receivable                           (18,389)     (6,717)
      Increase in deferred policy acquisition costs             (10,539)     (4,354)
      Increase in loss drafts payable                             3,281       6,166
      Increase in accrued income taxes, excluding deferred
       tax on change in unrealized gain                           7,080       5,802
      Increase in accounts payable and accrued expenses          11,506       1,871
      Depreciation                                                4,925       5,039
      Net realized investment gains                              (7,077)     (2,784)
      Bond accretion, net                                        (6,556)     (5,201)
      Other, net                                                 23,484       8,455
                                                              ---------   ---------
           Net cash provided from operating activities          155,397     139,382

Cash flows from investing activities:
      Fixed maturities available for sale:
        Purchases                                              (243,917)   (231,627)
        Sales                                                   157,373      94,945
        Calls or maturities                                      38,431      44,142
      Equity securities available for sale:
        Purchases                                               (72,805)    (62,334)
        Sales                                                    47,427      57,879
      Cash acquired in Elm County Mutual Insurance
       Company transaction                                           -0-      1,862
      Increase in payable for securities                         14,814       6,440
      Increase in short-term cash investments, net              (66,048)     (9,754)
      Purchase of fixed assets                                  (10,664)     (5,044)
      Sale of fixed assets                                        1,622         827
                                                              ---------   ---------
           Net cash used in investing activities              $(133,767)  $(102,664)
</TABLE>

                                  (Continued)

                                       7
<PAGE>

                          MERCURY GENERAL CORPORATION
                               AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                                  (Continued)


                                                            2001       2000
                                                            ----       ----
Cash flows from financing activities:
   Net proceeds from issuance of senior notes             $ 123,309   $     -0-
   Net (payments) borrowings under credit arrangements     (102,000)     8,000
   Decrease in notes payable                                   (122)        -0-
   Dividends paid to shareholders                           (43,059)   (38,920)
   Proceeds from stock options exercised                        409        345
   Purchase and retirement of common stock                       -0-    (6,979)
   Net decrease in ESOP loan                                 (1,000)    (1,000)
                                                          ---------   --------
      Net cash used in financing activities                 (22,463)   (38,554)
                                                          ---------   --------

Net decrease in cash                                           (833)    (1,836)
Cash:
   Beginning of the year                                      5,935      8,052
                                                          ---------   --------
   End of the year                                        $   5,102   $  6,216
                                                          =========   ========

Supplemental disclosures of cash flow information:
   Interest paid during the period                        $   4,561   $  5,642
   Income taxes paid during the period                    $  10,070   $  9,323
   Debt issuance costs                                    $   1,345   $     -0-

Non-cash investing and financing transactions:
   Notes payable issued in exchange for right to
    manage and control Elm County Mutual Insurance
    Company                                               $      -0-  $ 12,889


                                       8
<PAGE>

                   MERCURY GENERAL CORPORATION & SUBSIDIARIES

                NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1.   Basis of Presentation
     ---------------------

     The financial data included herein have been prepared by the Company,
without audit.  In the opinion of management, all adjustments of a normal
recurring nature necessary to present fairly the Company's financial position at
September 30, 2001 and the results of operations, comprehensive income and cash
flows for the periods presented have been made.  Operating results for the three
and nine  months ended September 30, 2001, are not necessarily indicative of the
results that may be expected for the year ending December 31, 2001.

2.   Recently Issued Accounting Standards
     ------------------------------------

     In July 2001, the Financial Accounting Standard Board issued SFAS No. 141,
Business Combinations (SFAS No. 141), and SFAS No. 142, Goodwill and Other
Intangible Assets (SFAS No. 142).  SFAS No. 141 requires companies to apply the
purchase method of accounting for all business combinations initiated after June
30, 2001 and prohibits the use of the pooling-of-interest method.  SFAS No. 142
changes the method by which companies may recognize intangible assets in
purchase business combinations and generally requires identifiable intangible
assets to be recognized separately from goodwill.  In addition, it eliminates
the amortization of all existing and newly acquired goodwill on a prospective
basis and requires companies to assess goodwill for impairment, at least
annually, based on the fair value of the reporting unit.  The Company will be
required to adopt SFAS Nos. 141 and 142 on January 1, 2002.  Management is
currently evaluating the impact, if any, that these statements will have on the
Company's financial statements.

3.   Public Debt Offering
     --------------------

     On August 7, 2001, the Company completed a public debt offering issuing
$125 million of senior notes payable under a $300 million shelf registration
filed with the SEC in July 2001. The notes are unsecured, senior obligations of
the Company that mature on August 15, 2011 and bear interest at 7.25% per annum,
payable semi-annually on August 15 and February 15 each year, commencing
February 15, 2002.  The company incurred debt issuance costs of approximately
$1.3 million, inclusive of underwriter's fees.  These costs are deferred and
then amortized as a component of interest expense over the term of the notes.
The notes were issued at a slight discount at 99.723%, making the effective
annualized interest rate including debt issuance costs, approximately 7.44%.  On
August 7, 2001 the Company retired $102 million of bank debt with the proceeds
from the senior note issuance.

     This interim information should be read in conjunction with the financial
statements and notes thereto included in the Company's latest annual report on
Form 10-K.

                                       9
<PAGE>

Item 2.   Management's Discussion and Analysis of Financial Condition and
          ---------------------------------------------------------------
          Results of Operations
          ---------------------

General
-------

     The Company is engaged primarily in writing all risk classifications of
automobile insurance in California, which in 2000 accounted for approximately
86% of the Company's direct premiums written.  Since 1990, the Company has also
written small amounts of automobile insurance in Georgia and Illinois.  In
December 1996 the Company acquired the American Mercury Insurance Group
(formerly named American Fidelity Insurance Group) which was licensed in 36
states but writes automobile and mechanical breakdown insurance predominantly in
Oklahoma and Texas.  During 1998, the Company began writing private passenger
automobile coverage in Florida.  In January 2000, the Company began assuming
automobile risks in the state of Texas on business produced by Concord Insurance
Services, Inc., a controlled entity.  In January 2001, the Company began writing
private passenger automobile coverage in Virginia and in September 2001 began
writing private passenger automobile coverage in New York.

     Certain statements in this report on Form 10-Q that are not historical fact
and constitute "forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended.  These forward-looking statements may address,
among other things, our strategy for growth, business development, regulatory
approvals, market position, expenditures, financial results and reserves.
Forward-looking statements are not guarantees of performance and are subject to
important factors and events that could cause our actual business, prospects and
results of operations to differ materially from the historical information
contained in this Form 10-Q and from those that may be expressed or implied by
the forward-looking statements.  Factors that could cause or contribute to such
differences include, among others: the intense competition currently existing in
the California automobile insurance markets, our success in expanding our
business in states outside of California, the impact of potential third party
"bad-faith" legislation, changes in laws or regulations, third party relations
and approvals, and decisions of courts, regulators and governmental bodies,
particularly in California, our ability to obtain the approval of the California
Insurance Commissioner for premium rate changes for private passenger automobile
policies issued in California and similar rate approvals in other states where
we do business, our success in integrating and profitably operating the
businesses we have acquired, the level of investment yields we are able to
obtain with our investments in comparison to recent yields, the cyclical and
general competitive nature of the property and casualty insurance industry and
general uncertainties regarding loss reserve estimates, and other uncertainties,
all of which are difficult to predict and many of which are beyond our control.
We assume no obligation to update any forward-looking statements as a result of
new information or future events or developments.  Investors are cautioned not
to place undue reliance on any forward-looking statements, which speak only as
of the date of this Form 10-Q  or, in the case of any document we incorporate by
reference, the date of that document.  Investors also should understand that it
is not possible to predict or identify all factors and should not consider the
risks set forth above to be a complete statement of all potential risks and
uncertainties.  If the expectations or assumptions underlying our forward-
looking statements prove inaccurate or if risks or uncertainties arise, actual
results could differ materially from those predicted in any forward-looking
statements.

                                       10
<PAGE>

Results of Operations
---------------------

Three Months Ended September 30, 2001 compared to Three Months Ended September
30, 2000

     Premiums earned in the third quarter of 2001 increased 11.7% from the
corresponding period in 2000.  Net premiums written in the third quarter of 2001
increased 16.6% from the corresponding period in 2000.  Contributing to the
overall third quarter 2001 premiums written growth were increased policy sales
in the California automobile insurance lines as well as increased production in
California homeowners insurance, Florida automobile insurance and Texas
automobile insurance lines. Many competitors have instituted rate increases over
the past year which has helped Mercury attract new customers.

     California premiums written, representing 87% of the Company's total
premiums, grew approximately 14.9% in the third quarter of 2001 compared to an
increase of 1.6% for the comparative period of 2000.

     The loss ratio  in the third quarter (loss and loss adjustment expenses
related to premiums earned) was 71.3%, compared with 71.9% in 2000.

     The expense ratio (policy acquisition costs and other expenses related to
premiums earned) was 26.2% in both 2001 and 2000.

     The combined ratio of losses and expenses (GAAP basis) was 97.5% in 2001
compared with 98.1% in 2000, resulting in an underwriting gain for the period of
$8.8 million, compared with $5.9 million in 2000.

     Investment income for the third quarter was $29.0 million, compared with
$26.9 million in the third quarter of 2000.  The after-tax yield on average
investments of $1,849.1 million (fixed maturities and equities valued at cost)
was 5.38% compared with 5.56% on average investments of $1,731.1 million in the
third quarter of 2000.

     Realized investment gains before income taxes were $2.8 million compared to
$0.6 million in the third quarter of 2000.

     The income tax provision in the third quarter of 2001 of $7.9 million
represented an effective tax rate of 19.8%, compared with an effective rate of
14.4% in 2000.  The higher effective rate is principally attributable to the
larger proportion of pre-tax income derived from fully taxable underwriting gain
and taxable investment income compared to tax exempt investment income.

     Net income for the third quarter of $32.1 million, or $.59 per share
(diluted), compares with $27.4 million or $.51 per share (diluted) in 2000.
Basic net income per share was $.59 in 2001 and $.51 in 2000.

     Other comprehensive income represents the change in the unrealized gains
and losses on the Company's investments occurring during the period.  Other
comprehensive income, before tax for the third quarter was $5.2 million in 2001
and $32.4 million in 2000 which represents the change in the unrealized gains
and losses on the Company's investments occurring during the period.

                                       11
<PAGE>

Nine Months ended September 30, 2001 compared to Nine Months ended September 30,
2000

     Premiums earned in the first nine months of 2001 increased 8.8% from the
corresponding period in 2000.  Net premiums written in the first nine months of
2001 increased 11.7% from the corresponding period in 2000.  Contributing to the
overall first nine months of 2001 premiums written growth were increased policy
sales in the California automobile insurance lines as well as increased
production in California homeowners insurance, Florida automobile insurance and
Texas automobile insurance lines.

     California premiums written, representing 88% of the Company's total
premiums, grew approximately 10.6% in the first nine months of 2001 compared to
an increase of 2.8% for the comparative period of 2000.

     The loss ratio in the first nine months of 2001 (loss and loss adjustment
expenses related to premiums earned) was 72.5%, compared with 71.3% in 2000.

     The expense ratio (policy acquisition costs and other expenses related to
premiums earned) in 2001 was 26.5% compared to 26.8% in 2000.

     The combined ratio of losses and expenses (GAAP basis) was 99.0% in 2001
compared with 98.1% in 2000, resulting in an underwriting gain for the period of
$10.5 million, compared with $17.8 million in 2000.

     Investment income for the first nine months of 2001 was $85.0 million,
compared with $78.5 million in the first nine months of 2000.  The after-tax
yield on average investments of $1,805.2 million (fixed maturities and equities
valued at cost), was 5.43% compared with 5.55% on average investments of
$1,696.7 million in 2000.

     Realized investment gains before income taxes were $7.1 million compared
with $2.8 million in the first nine months of 2000.

     The income tax provision in the first nine months of 2001 of $17.1 million
represented an effective tax rate of 17.1%, compared with an effective rate of
15.2% in 2000.  The higher rate in 2001 reflects a shift in a portion of the
Company's investments from tax-exempt issues to taxable issues.

     Net income for the first nine months of $83.2 million, or $1.53 per share
(diluted), compares with $83.4 million or $1.54 per share (diluted) in 2000.
Basic net income per share was $1.54 in both 2001 and 2000.

     Other comprehensive income represents the change in the unrealized gains
and losses on the Company's investments occurring during the period.  Other
comprehensive income, before tax for the first nine months of 2001 of $8.4
million compares with $57.9 million in 2000.  The gains were primarily the
result of decreased market interest rates which increased the value of the
Company's investment portfolio.

Liquidity and Capital Resources
-------------------------------

     Net cash provided from operating activities during the nine months of 2001
was $155.4 million, while funds derived from the sale, call or maturity of
investments was $243.2 million,

                                       12
<PAGE>

of which approximately 19% was represented by the sale of equities. Fixed-
maturity investments, at amortized cost, increased by $59.3 million during the
period. Equity investments, including perpetual preferred stocks, increased by
$27.8 million at cost, and short-term cash investments increased by $66.0
million. The amortized cost of fixed-maturities available for sale which were
sold or called during the period was $186.9 million.

     The market value of all investments (fixed-maturities and equities) held at
market as "Available for Sale" exceeded amortized cost of $1,801.6 million at
September 30, 2001 by $55.9 million.  That unrealized gain, reflected as
accumulated other comprehensive income in shareholders' equity net of applicable
tax effects, was $36.4 million at September 30, 2001 compared with an unrealized
gain of $30.9 million at December 31, 2000.

     The Company's cash and short term investments totaled $104.1 million at
September  30, 2001, of which $3 million is restricted. Together with funds
generated internally, such liquid assets are adequate to pay claims without the
forced sale of investments.

     Approximately 1.4% of total assets at September 30, 2001 were bonds rated
below investment grade.  The average rating of the $1,507.0 million bond
portfolio (at amortized cost) was AA. Bond holdings are broadly diversified
geographically, within the tax exempt sector.  Holdings in the taxable sector
consist principally of investment grade issues.  Fixed-maturity investments of
$1,523.2 million (at cost) include $16.2 million of sinking fund preferreds,
principally utility issues.

     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 $273.4 million at market (cost $278.4 million),
including perpetual preferred issues, are largely confined to the public
utility, financial and banking sectors and represent 25.8% (at cost) of total
shareholders' equity.

     As of September 30, 2001, the Company had no material commitments for
capital expenditures.

     On August 7, 2001, the Company completed a public debt offering issuing
$125 million of senior notes payable under a $300 million shelf registration
filed with the SEC in July 2001. The notes are unsecured, senior obligations of
the Company that mature on August 15, 2011 and bear interest at 7.25% per annum,
payable semi-annually on August 15 and February 15 each year, commencing
February 15, 2002. The Company incurred debt issuance costs of approximately
$1.3 million, inclusive of underwriter's fees.  These costs are deferred and
then amortized as a component of interest expense over the term of the notes.
The notes were issued at a slight discount at 99.723%, making the effective
annualized interest rate including debt issuance costs, approximately 7.44%.

     The Company had outstanding debt at September 30, 2001 of $130.4 million.
Prior to the $125 million senior note issuance, the Company had  $75 million
payable under a revolving credit facility due November 21, 2001 and $27 million
payable under a $30 million revolving credit facility due October 26, 2001.  The
interest on these two loans was variable and through August 7, 2001 was priced
off of the Eurodollar London Interbank Rate (LIBOR) making the effective
interest rate 5.77% and 5.78%, respectively.  On August 7, 2001, the Company
repaid the entire balance of both the $75 million and $27 million borrowings
with proceeds received from the $125

                                       13
<PAGE>

million senior note issuance. The Company also terminated the $75 million
revolving credit facility. The $30 million facility that expired on October
26,2001 was not renewed.

     Prior to the issuance of the senior notes, the Company used short-term
floating rate debt as part of its capital structure.  From time to time the
Company may evaluate  the possibility of entering into an agreement to swap its
fixed interest rate on the senior notes to a variable interest rate.  See Item
3. Quantitative and Qualitative Disclosures About Market Risk.
   ----------------------------------------------------------

     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 to 1.  Based on the combined surplus of all of the
Company's licensed insurance subsidiaries of $1,020.0 million at September 30,
2001 and net written premiums for the twelve months ended on that date of
$1,384.0 million, the ratio of writings to surplus was approximately 1.4 to 1.

Item 3.   Quantitative and Qualitative Disclosures About Market Risk
          ----------------------------------------------------------

     As of September 30, 2001, there have been no material changes in the
Company's investment strategies, types of financial instruments held or the
risks associated with such instruments which would materially alter the market
risk disclosures made in the Company's Annual Statement or Form 10-K for the
year ended December 31, 2000.

     As discussed in the Liquidity and Capital Resources section, on August 7,
2001 the Company repaid total short-term floating rate bank debt of $102 million
with the proceeds from the issuance of the $125 million fixed-rate senior notes
maturing on August 15, 2011.  To the extent market interest rates fluctuate, the
fair value of the fixed rate debt will fluctuate in the opposite direction.

     A common measure of the market rate interest sensitivity of fixed maturity
debt is modified duration, a calculation that takes maturity, coupon rate, yield
and call terms to calculate an average age of expected cash flows.  The modified
duration of the senior notes is calculated to be approximately 6.7 years.  This
compares to the modified duration of the Company's $1.5 billion investment in
bonds (at market) of approximately 5.7 years, at September 30, 2001.  Given a
hypothetical decrease of 100 basis points in market interest rates, the fair
value of the $1.5 billion investment in bonds would increase by approximately
$89 million.  A similar 100 basis points decrease in market interest rates would
result in an increase in the fair value of the senior notes of approximately $8
million.  The converse would hold true for a hypothetical 100 basis point
increase in market interest rates.

     From time to time, the Company may evaluate  the possibility of entering
into an agreement to swap its fixed interest rate on the senior notes to a
variable interest rate.  A swap would have the effect of lowering the current
borrowing costs compared to the interest rate on the senior notes but could
expose the Company to higher borrowing costs in the future, if short-term market
interest rates increase.

     A decrease in market interest rates during the first nine months of the
year positively impacted the value of the Company's investments.  The impact is
described in the Liquidity and Capital Resources section above.

                                       14
<PAGE>

                          PART II - OTHER INFORMATION

Item 6.   Exhibits and Reports on Form 8-K
          --------------------------------

          1.   Current Report on Form 8-K, dated July 30, 2001, related to the
               Company's results of operations for the three month period ending
               June 30, 2001.

          2.   Current Report on Form 8-K, dated August 6, 2001, related to the
               issuance of the Company's senior notes due August 15, 2011.

                                       15
<PAGE>

                                  SIGNATURES


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


                               MERCURY GENERAL CORPORATION



Date: November 8, 2001         By: /s/ GABRIEL TIRADOR
                                   -----------------------------------------
                                       Gabriel Tirador
                                       President and Chief Operating Officer



Date: November 8, 2001         By: /s/ THEODORE STALICK
                                   -----------------------------------------
                                       Theodore Stalick
                                       Vice President and Chief Financial
                                       Officer

                                       16