UPDATE 1-Progressive Q1 net income falls 3 percent

* Net income $232.5 million, or 35 cents a share

* Investment income down 17 percent to $131.5 million

NEW YORK, April 15 (Reuters) - Progressive Corp (PGR.N), the third-largest U.S. auto insurer, said first-quarter net income fell 3 percent as investment income dropped.

Net income declined to $232.5 million, or 35 cents a share, from $239.4 million, or 35 cents a share, in the same quarter last year, The Mayfield Village, Ohio-based company said on Wednesday.

Investment income fell 17 percent to $131.5 million. Higher income tax expense also cut into earnings. (Reporting by Dan Wilchins; editing by John Wallace)