UPDATE 3-Mercury General posts Q4 loss, looks at cost cuts

* Q4 loss/shr $3.07 vs. $0.81 profit last year

* Q4 oper loss $26.7 mln vs. profit of $38.2 mln year ago

* Realized investment losses $141.6 mln

* Shares fall 14 pct

(Adds analysts' comments, details from conference call, updates share movement)

By Adheesha Sarkar and Sweta Singh

BANGALORE, Feb 9 (Reuters) - Auto and home insurer Mercury General Corp (MCY.N) posted a net loss for the fourth quarter, hit by realized investment losses of about $141.6 million, and said it was looking at cost reduction measures, sending its shares down 17 percent to their five-year low.

The company has frozen salaries for all employees and has stopped hiring except for certain positions, Chief Executive Gabriel Tirador said in acall with analysts.

"We are also evaluating other cost reduction measures," said the CEO, who believes that growth will be challenging over the next few quarters.

"I think the issue there is that they had significant exposure to California basic municipal bonds. I think some of those did quite poorly in the quarter," Stifel Nicolaus analyst Meyer Shields said by phone.

The company is not likely to shift its focus from California until it can solve pricing issues in New Jersey, its other biggest market, analyst Shields added.

California, which is the company's biggest segment, is doing poorly, and there is limited flexibility on granting rate increases there, the analyst said. "I think they are in a very difficult spot."

Q4 RESULTS

The insurer posted a quarterly net loss of $168.3 million, compared with a profit of $44.6 million last year.

The company, which writes automobile insurance mainly in California, also posted an operating loss of 48 cents a share, compared with an operating profit of 69 cents a year earlier.

Analysts expected earnings of 78 cents a share, excluding special items, according to Reuters Estimates.