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. Shares rose 2.2% in early trading to $16.81.

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.

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. Net premiums written rose 1.2% to $3.55 billion. The mean estimates of analysts surveyed by Thomson Reuters were earnings of 33 cents a share and net premiums written of $3.56 billion.

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%.

-By Lavonne Kuykendall, Dow Jones Newswires; (312) 750-4141; lavonne.kuykendall@dowjones.com

-By Kevin Kingsbury, Dow Jones Newswires; 212-416-2354; kevin.kingsbury@dowjones.com