Investing.com -- Progressive Corp. reported better-than-expected second-quarter earnings on Wednesday, driven by continued premium growth and investment gains, though shares fell about 4% in premarket trading as investors reacted to a modest deterioration in underwriting margins.

The insurer posted second-quarter earnings of $5.67 per share, exceeding analysts' consensus estimate of $4.73 by $0.94. Revenue rose to $21.57 billion, slightly ahead of expectations of $21.53 billion.

A stronger-than-expected profit performance underscored the insurer's ability to keep growing premiums and policy counts in a competitive auto insurance market, while benefiting from investment gains. However, investors appeared focused on the quarter's higher combined ratio and signs of moderating underwriting profitability, sending the shares lower despite the earnings and revenue beat.

Net income increased 4% year over year to $3.31 billion, while net premiums written climbed 5% to $21.08 billion and net premiums earned rose 6% to $21.57 billion. Pretax realized gains on securities jumped 56% to $604 million from $387 million a year earlier.

However, underwriting profitability softened during the quarter. Progressive's combined ratio worsened to 87.3 from 86.2 a year earlier, indicating higher claims and expense costs relative to premiums earned, although the ratio remained well below 100%, reflecting continued underwriting profitability.

The company also continued to add customers, with total policies in force rising 7% year over year to 40.1 million as of June 30, led by growth in both its direct and agency auto insurance businesses.