NEW YORK (Reuters) - Progressive Corp (PGR.N: Quote, Profile, Research), the third-largest auto insurer in the United States, said on Wednesday net income fell 41 percent in the fourth quarter, as net premiums written edged lower.

Progressive said net earnings were $236.1 million, or 34 cents a share, down from $400.9 million, or 53 cents a share, in the year earlier quarter.

Analysts on average had expected the insurer to earn 33 cents a share, according to Reuters Estimates.

Progressive's net premiums written fell 3 percent year over year to $3.1 billion.

Auto insurers are cutting rates as they fight to keep market share against direct marketers such as Geico, a unit of insurer Berkshire Hathaway (BRKa.N: Quote, Profile, Research).

Progressive, based in Mayfield Village, Ohio, said that as of the end of December, its policies in force had risen 2 percent in personal auto and 8 percent in its special lines.

Progressive's combined ratio, which reflects how much it made on premiums earned before losses and expenses, was 95, up from 87.7 a year ago. A lower combined ratio is better for an insurer.

Progressive shares were up 11 cents, or 0.6 percent, at 18.78, in early trading on the New York Stock Exchange, outperforming the KBW Insurance index, which was 0.1 percent higher.

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