UPDATE: Progressive's 3Q Profit Tops Views; Shares Climb

Progressive Corp. (PGR) returned to the black in the third quarter after being hurt last year by $1.37 billion of investment losses.

The auto insurer said claims costs were also lower, as earnings handily topped analysts' expectations.

Progressive's earnings were $269.9 million, or 40 cents a share, compared with a year-earlier loss of $684.2 million, or $1.03 a share. The mean estimates of analysts surveyed by Thomson Reuters were earnings of 33 cents a share.

The results come as insurers have been battling for market share amid an ever-competitive environment in which consumers are more interested in price comparisons. Progressive made gains in policies and in net premiums written, both of which indicate that it is winning business.

Total personal-lines policies written were up 4% to 10.94 million, with most of the gain coming from its direct auto business. Its agency-driven business continued to decline in policies, a trend that has continued for several quarters. Its total commercial auto policies dropped 5% to 524,900, a likely consequence of the recession reducing commercial spending.

Net premiums written rose 1.2% to $3.55 billion, just under the analyst expectation of $3.56 billion.

Morningstar Inc. analyst Drew Woodbury called it "heartening" that Progressive reported growth in policies and premiums "after a couple years of declining premiums," in a Wednesday note. "We have speculated that Progressive's low-cost focus would allow it to steal customers from competitors during economic downturns, and this thesis seems to be playing out, at least in the firm's direct channel."

The combined ratio, a measure of the percentage of premiums received that went to expenses and claims paid, fell to 92.7% from 95.1%.

Shares rose 1.6% in recent trading to $16.71.

-By Lavonne Kuykendall and Kevin Kingsbury, Dow Jones Newswires; [phone]; [e-mail]