A giant rebound in investment income helped property/casualty insurers post a dramatic improvement in overall financial performance, new data from the Property Casualty Insurers Association of America (PCI) indicates.

Investment gains grew $13.3 billion to $25.8 billion in first-half 2010, up from $12.5 billion in first-half 2009. As a result, net income after taxes for the sector rose to $16.5 billion in first-half 2010 from $6 billion in first-half 2009. Moreover, insurers’ overall profitability as measured by their annualized rate of return on average policyholders’ surplus increased to 6.3% from 2.6%.

“Property/casualty insurers’ positive results for first-half 2010 are yet another testament to the conservative investment strategies and superior risk management that enabled insurers to emerge from the financial crisis and great recession essentially unscathed,” said David Sampson, PCI’s president and CEO.

The increased investment income also helped offset net losses on underwriting, which grew to $5.1 billion for six-months 2010 from $2.1 billion for six-months 2009. PCI says much of the $2.9 billion increase in net losses on underwriting reflects a decline in net earned premiums. The combined ratio also deteriorated to 101.7% for six-months 2010 from 100.8 % for six-months 2009,

“The absence of premium growth in first-half 2010 reflects the ongoing consequences of a once-in-a-generation economic storm,” said Sampson. “The weakness in the economy reduced demand for insurance and thereby contributed to continued softening in commercial insurance markets.”

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