Private US property and casualty (P&C) insurers’ net income fell 12.5% to $US55.5 billion ($72.24 billion) last year, mainly due to lower investment income and higher catastrophe losses, according to a new report.

Pre-tax operating income dropped 13.2% to $US55.6 billion ($72.36 billion), the figures from the Property Casualty Insurers Association of America (PCIAA) and analyst ISO show.

The combined operating ratio deteriorated to 97% from 96.2%, while net investment returns fell 2.5% to $US46.2 billion ($60.12 billion) due to low interest rates and historically low yields as the economy slowly recovers from the financial crisis.

Policyholders’ surplus – or funds available to cover new claims – gained 3.2% last year to $674.7 billion.

Net written premium was up 4.1% to $US496.6 billion ($646.88 billion), but net gains on underwriting fell 19% to $US12.3 billion ($16.01 billion) on higher catastrophe losses.

Net catastrophe losses grew 20% to $US16.8 billion ($21.87 billion), mainly due to US catastrophes including wildfires, winter storms, hailstorms and tornadoes.

PCIAA Senior VP for Policy Development and Research Robert Gordon says P&C insurers had another moderately good year, with profitability, premium growth and underwriting ratios above long-term historical averages, and policyholders’ surplus reaching record levels.

Insurance Information Institute President Robert Hartwig says the industry’s performance last year marks a return to long-term trends, neither as strongly profitable as 2013 nor as catastrophe-affected as 2011 and 2012. “With the pace of real GDP growth expected to quicken this year to nearly 3%, personal and commercial lines exposures – and the premiums they generate – should continue to expand modestly.”

With premiums for auto, home and major commercial lines trending positively, industry growth may keep pace with overall economic growth this year, he says.

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