Progressive announced net income was off 41 percent for the fourth quarter and down 51 percent in the month of December.

In a brief report yesterday, the company issued its monthly financial update, indicating it continues to be in a down cycle with increased losses over the previous year.

Net income for the month of December dropped $71 million to $68 million with net premium written falling 1 percent, or $9 million, to $910 million. Net income per share was down 8 cent to 10 cents a share.

The Mayfield Village, Ohio-based auto insurer reported its combined ratio for the month rose 9.2 points to 95.8.

In the fourth quarter, net income compared to the same period in 2006 was down by $165 million to $236 million. Net income per share saw a steep decline of 19 cents a share to 34 cents a share.

The results were fueled by a 3 percent drop in net premiums written, down $110 million to $3.08 billion, and an increase in the combined ratio of 7.3 points to 95.

Investment analyst David Small for Bear Stearns said the results show many of the trends seen through 2007.

“Growth is lackluster, although it appears to be stabilizing,” he wrote in an analyst's note.

He said profitability is being cut because of rate cuts working their way through the company's system and because the company may have underestimated its lost cost trends. He added that the company is at a point where it cannot suffer this continued loss trend and must begin raising prices.

The company faces a difficult choice in 2008, he continued–either raise prices to keep its loss ratio below 96 and hurt growth, or continue to grow and watch its combined ratio rise above 96.

Progressive reported that the number of policies in force for its personal auto, special lines and commercial auto combined rose 4 percent, or 411,000 policies, to 10.65 million policies.

The company said it will hold a conference call on its annual report on Feb. 29 after filing its 10-K.