Oct. 10 (Bloomberg) -- Progressive Corp., the third-largest U.S. auto insurer, posted its first quarterly loss since 2000 after the company wrote down the value of investments, including holdings of mortgage lenders Fannie Mae and Freddie Mac.

The third-quarter loss of $684.2 million, or $1.03 a share, compares with a profit of $299.2 million, or 42 cents, in the same period a year earlier, the Mayfield Village, Ohio-based company said in a statement today. Excluding an investment loss of $1.37 billion, Progressive earned about 31 cents a share, less than the 34 cent estimate of 16 analysts surveyed by Bloomberg.

The 24-company KBW Insurance Index has plummeted 43 percent in the past month on concerns that investment losses will force insurers to sell shares to raise fresh capital. MetLife Inc., the largest U.S. life insurer, raised $2 billion in a common stock offering, and Hartford Financial Services Group Inc. agreed to sell $2.5 billion in shares and debt to Allianz SE, Europe's biggest insurer this month.

Progressive is ``not at the top of my list'' among insurers that may need to sell more shares, diluting the holdings of long- time investors, said Paul Newsome, an analyst at Sandler O'Neill & Partners in Chicago. Still, he said, the firm's ``asset values are falling like a rock.''

Progressive rose 14 cents, or 1.1 percent, to $13.05 at 4:15 p.m. in New York Stock Exchange composite trading. The company has tumbled 27 percent in the past month, compared with MetLife's 47 percent decline and a 69 percent fall at Hartford. Progressive previously reported results for July and August.

`Raises Questions'

Standard & Poor's said after the release of Progressive's August results it may lower the insurer's credit rating. The investment loss ``raises questions about Progressive's overall enterprise risk management capabilities,'' S&P said.

Chief Executive Officer Glenn Renwick said in August that the insurer may not pay a dividend in 2009 if results from the first half of this year continue through Dec. 31.

Progressive turned a profit from its insurance operations, keeping 4.9 cents for every dollar is collected in premiums. The number fell from last year's 6.3 cent profit margin on about $62 million of claims costs related to Hurricanes Gustav and Ike, which hit the U.S. Gulf Coast last month.

The number of people with Progressive auto policies rose 1.3 percent from a year earlier. The increase came from the company's so-called direct sales through the Internet, phone and mail, while the larger proportion of customers who purchased coverage through insurance agents declined. Overall policy sales climbed 0.8 percent to $3.51 billion.

Motorcycles, Mobile Homes

Policyholders who insured motorcycles, mobile homes, boats Segway Inc. scooters and other so-called specialty vehicles rose 8.3 percent.

Progressive is the third-largest U.S. auto insurer by policy sales behind State Farm Mutual Automobile Insurance Co. and Allstate Corp., according to 2007 data compiled by the National Association of Insurance Commissioners.

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