A.M. Best Special Report: U.S. P/C Industry Set toPost Another Underwriting Profit.

OLDWICK, N.J. -- Underwriting profits and investment returns drove a 4.4% increase in net income for the U.S. property/casualty industry through the first nine months of 2007, as the sector's results withstood increasing competition. The U.S. industry is on course to report only its third underwriting

* Net income was $49.8 billion, up from $47.7 billion.

* The industry recorded underwriting income of $18.6 billion, compared with $23.8 billion for the same period a year ago.

* Net investment income increased 2.6% to $40.5 billion.

* The industry's after-tax return on equity was 14.5% for the 12-month period ended Sept. 30, 2007, up from 14.3% for the preceding 12 months but down from 15.0% at year-end 2006.

* Deteriorating underwriting results cut into profitability as premium erosion squeezed margins across most lines of business.

* Light catastrophe losses and favorable prior-year reserve development offset growing competition, and the nine month combined ratio deteriorated to a still-profitable 93.8 from 91.7.

* Credit market conditions have challenged many financial services companies, but the U.S. property/casualty industry has been relatively unscathed by the subprime mortgage crisis.

* The U.S. property/casualty industry's policyholder surplus grew $25.4 billion, or 5.0%, to $528.1 billion through the first nine months of 2007 from $502.7 billion at year-end 2006.

* Underwriting results in personal lines deteriorated amid increases in the loss and loss-adjustment expense and underwriting expense ratios.

* Commercial lines maintained strong underwriting results, aided by apparently prudent underwriting, favorable loss-cost trends, mild catastrophe losses and healthier balance sheets.

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Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.