While it's not necessarily reason for insurers to throw up their hands and crack open the champagne, a preliminary review by SNL Financial of Q3 statutory financial data for U.S. property/casualty insurers found modest improvement in underwriting profitability and additional stabilization through realized and unrealized capital gains. 

With data available for nearly 88% of expected P&C filers, the industry (excluding financial and mortgage guarantor companies) is on pace to report a $536.0 million underwriting gain in Q3 2009, an encouraging sign when compared to the $7.7 billion loss the industry experienced during the same period in 2008, SNL says. Losses and expenses totaled $93.7 million, down from $107.2 million at this time last year. The loss ratio, defined as losses and LAE (loss adjustment expense) to net premiums written, fell by nearly 9 percentage points to 71.7%.

“Fortunately for P&C insurers, there was no Hurricane Gustav or Ike this season,” said Jon Wright, director of the insurance group at SNL. “With the economy still weak and premiums written dropping off further, it was very fortunate that catastrophic losses were minimal. The soft market has to continue at this point with an industry seemingly flush with surplus capital.”

The combined ratio for Q3 2009 was 99.1%, and realized capital gains topped $458.8 million, an improvement compared to 107.4% and losses of $6.7 billion, respectively, for Q3 2008. However, overall profitability was tempered by a decline in net premiums earned, down 5.2% year-over-year.

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