US property and casualty (P&C) insurers’ net income after taxes reached $US33.5 billion ($32.5 billion) last year, up 72% on 2011 despite Superstorm Sandy and smaller investment gains.

The rate of return on average policyholders’ surplus increased to 5.9% from 3.5%, according to figures from risk analyst ISO and the Property Casualty Insurers Association of America (PCIA).

This is still short of the 8.9% average since records began in 1959.

Improved underwriting results drove the increases. Net losses on underwriting fell to $US16.7 billion ($16.2 billion) from $US36.2 billion ($35.2 billion) in 2011.

Net written premiums rose 4.3% to $US457 billion ($443.9 billion).

However, underwriting expenses and dividends to policyholders both rose last year, ISO and the PCIA say.

The combined ratio improved to 103.2% from 108.1% in 2011.

Better underwriting results were partially offset by lower net investment gains, a decline in miscellaneous other income and higher taxes.

Policyholders’ surplus – insurers’ net worth measured using statutory accounting principles – grew $US33.1 billion ($32.2 billion) to a record $US586.9 billion ($570.2 billion).

The figures are consolidated estimates for all private P&C insurers based on reports covering at least 96% of all business written.

Although the results improved, “they pale in comparison with long-term norms”, according to ISO Assistant VP for Financial Analysis Michael Murray.

“The combined ratio would have to improve by an additional 4.6 percentage points to 98.6% for insurers to earn their long-term average rate of return.

“Insurers’ ability to attract the capital necessary to meet the coverage needs of an expanding economy is a function of their profitability. Our economic future depends on insurers being able to earn rates of return commensurate with the risks they assume.”