OREANDA-NEWS. The U.S. property/casualty insurance industry posted an underwriting loss of approximately $2.3 billion and a 3.5% decline year-over-year in net investment income through the first six months of 2016, as the impact of catastrophes, lower favorable loss reserve development and challenging market conditions continue to pressure insurers, according to a new A.M. Best special report.

The Best’s Special Report, titled, “Property/Casualty Industry Performance Declines in Second Quarter of 2016 as Pressure Continues on Underwriting and Investment Results,” states that realized capital gains declined 43.3% from their level for the first two quarters of 2015, to $4.6 billion from $8.1 billion. Taxes were down by 14.6%, which provided a modest benefit to net income. Overall, however, the industry’s net income fell 29.0%, to $21.5 billion through June 30, 2016, from $30.2 billion last year. Additionally, the industry’s combined ratio through first-half 2016 deteriorated to 100.0 from 97.8 for the same period in 2015.

Pre-tax operating income fell 22.2% for the six-month period to $20.7 billion. Pre-tax return on revenue (ROR) of 8.2% marks a sharp drop from 10.9% through the first half of 2015, and represents the lowest level of ROR at this point in a year since 9.3% in 2012.

Despite the decline in net income, policyholders’ surplus grew modestly, up 1.3% year-to-date in 2016 and up 1.5% from its level at June 30, 2015. While the industry’s accumulated unrealized gain position declined again, the drop was 81.1% less than in the prior year, at -$1.6 billion.

Net premiums written growth remained positive for the industry, up 3.3% year-to-date, down from 4.0% through the first two quarters of 2015. Premium growth remained stronger than expected through this period,

driven by continuing solid growth in personal lines. While commercial lines continue to show signs of pricing pressure, with premiums down in key property lines, other liability and commercial auto liability premiums are growing faster than the industry average rate.

The industry’s direct premiums written (DPW) grew 3.8% from its prior-year level through June 30, 2016. Among the major lines of insurance, auto physical damage and private passenger auto liability saw the largest increases in DPW year-over-year, of 7.6% and 6.4%, respectively.