The rough past year experienced by U.S. property/casualty insurers has been quantified by a joint study by the Property Casualty Insurers Association of America, Insurance Information Institute, and ISO Inc.

The industry finished well in the black with $2.4 billion in net income after taxes, but this was down $60.1 billion, or 96%, from $62.5 billion cleared in 2007. Behind this number was $21.2 billion in net losses on underwriting in 2008, a $40.5 billion reversal from $19.3 billion in net gains insurers tallied in 2007. In accordance, the industry’s combined ratio rose to 105.1% last year, much worse than the 95.5% recorded in 2007.

“Along with natural catastrophes, the recession and the crisis sweeping through the financial system took a toll on underwriting results for 2008, with foreclosures and other credit problems contributing to disproportionate deterioration in results for mortgage and financial guaranty insurers,” Michael Murray, ISO‘s AVP for financial analysis, said in a statement. “Yet, aside from some problems in the mortgage and financial guaranty sector, the property/casualty insurance industry emerged. But make no mistake — insurers absorbed a pounding last year.”

According to Murray and David Sampson, PCI president and CEO, the capital losses suffered by insurers last year result from both developments in financial markets and the need to write-down investments that became impaired as a result of the financial crisis.

“Conceptually, insurers’ investment income is a result of two things — the yield on cash and invested assets, and the amount of cash and invested assets held by insurers,” said Sampson. “The 7% decline in investment income in 2008 reflects declines in both investment yields and insurers’ holdings of cash and invested assets. That property/casualty insurers remained profitable in 2008 and finished the year with more than a trillion dollars available to pay claims is a remarkable testament to their risk management and conservative approach.”

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