Aggregate net income for the U.S. property/casualty insurance sector rose to $26.7 billion for the first nine months of 2010, according to numbers jointly released by the Des Plaines, Ill.-based Property Casualty Insurers Association of America (PCI) and Jersey City, N.J.-based ISO Inc.

The numbers represents a significant jump in after-tax income for the industry compared to the $16.4 billion tallied through the first nine months of 2009. Much of the credit goes to a rebound in investment income notes PCI’s president and CEO, David Sampson.

“Insurers’ overall capital gains for nine-months 2010 reflect developments in financial markets,” Sampson said in a statement. “The S&P 500 rose 2.3% from year-end 2009 to September 30, 2010, the Dow Jones Industrial Average increased 3.5%, and the NASDAQ composite climbed 4.4%. Insurers’ investment results also benefited from a decline in realized capital losses on impaired investments, which dropped to $3.1 billion through nine-months 2010 from $13.6 billion through nine-months 2009.”

Yet, this positive development on the investment side was tempered by a $3.1 billion increase in net losses on underwriting to $6.2 billion for the first nine months of 2010. Sampson notes much of this is due to the ongoing struggles of mortgage and financial guaranty insurers in the wake of the collapse of the housing bubble.

“Reflecting the residual weakness in the economy and foreclosure rates, mortgage and financial guaranty insurers continued to suffer disproportionate losses on underwriting,” Sampson said. “Mortgage and financial guaranty insurers’ net written premiums declined 14.5% to $4.2 billion for nine-months 2010, and their net earned premiums dropped 11.1% to $5.1 billion. Reflecting these declines in premiums and a sharp increase in underwriting expenses, mortgage and financial guaranty insurers’ combined ratio deteriorated to 192.2% for nine-months 2010 from 175% for nine-months 2009, even though their loss and loss adjustment expenses dropped 9.4% to $8.4 billion. Excluding mortgage and financial guaranty insurers, industry net written premiums rose 1%, earned premiums dropped 0.7%, loss and loss adjustment expenses fell 0.5%, and the combined ratio rose to 99.7 % for nine-months 2010 from 99.3% a year earlier.

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