Mercury General Corp. on Monday said that its third quarter profit fell 39 percent as it collected fewer premiums and spent more on claims. But shares rose on the announcement of a higher quarterly dividend.

The Los Angeles auto and homeowners’ insurance company reported net income of $96.8 million ($1.77 per share), compared with more than $157 million ($2.85) a year earlier. Revenue fell 11 percent to less than $767 million.

Operating income was down 12 percent to $40.7 million (74 cents), a penny below the average forecast of analysts surveyed by Thomson Reuters. In addition, Mercury’s combined ratio – a reflection of an insurer’s losses and expenses – rose from 96.4 percent to 98 percent as the company spent more to pay out claims. A ratio above 100 means that for every premium dollar taken in, more than a dollar went to cover claims and other expenses.

But the company also raised its quarterly dividend nearly 2 percent to 60 cents, which it will pay Dec. 30 to shareholders of record on Dec. 16.

Shares closed up nearly 3 percent to $42.48 on the New York Stock Exchange.