The U.S. property/casualty insurance industry’s net income after taxes rose 7.1 percent to $49.4 billion through nine months of 2007, from $46.1 billion through nine months of 2006. Fueled by the industry’s net income, policyholders’ surplus — insurers’ net worth measured according to Statutory Accounting Principles — increased $35.6 billion to $521.8 billion by September 30, 2007, from $486.2 billion at year-end 2006. But the insurance industry’s overall profitability as measured by its annualized rate of return on average policyholders’ surplus slipped to 13.1 percent in the first nine months of 2007 from 13.8 percent in the first nine months of 2006 as underwriting results deteriorated. 

Net gains on underwriting fell 25.3 percent to $18.1 billion through nine months 2007 from $24.3 billion through nine months 2006.  The combined ratio — a key measure of losses and other underwriting expenses per dollar of premium — worsened to 93.8 percent in the first three quarters of 2007 from 91.5 percent in the first three quarters of 2006, according to ISO and the Property Casualty Insurers Association of America.

January 8, 2008