US property/casualty insurers’ net income fell last year, but rose in the year’s fourth quarter, according to the full-year industry results of the Property Casualty Insurers Association of America and property/casualty insurance risk analyst ISO.

Net income fell to $US19.1 billion ($18.5 billion) in 2011 from $US35.2 billion ($34.1 billion) in 2010, while in the fourth quarter net income rose to $US11.2 billion ($10.8 billion), up from $US8.1 billion ($7.8 billion) in the fourth quarter of 2010.

The report also says insurers’ overall profitability, measured by their rate of return on average policyholders’ surplus, fell to 3.5% from 6.6%.

Net losses on underwriting contributed to the declines, at $US36.5 billion ($35.3 billion) last year, up from $US10.5 billion ($10.2 billion) in 2010.

A spike in net losses and loss adjustment expenses from catastrophes caused the poorer underwriting results. ISO estimates that insurers’ net losses and other expenses from catastrophes rose to $US38 billion ($36.8 billion) in 2011 from $US14.3 billion ($13.8 billion) in 2010.

Net investment gains grew to $US56.2 billion ($54.4 billion) last year from $US53.4 billion ($51.7 billion) in 2010, partially offsetting the underwriting results.

Even so, pre-tax operating income fell to $US14.8 billion ($14.3 billion) last year from $US38.2 billion ($37 billion) for 2010.

Policyholders’ surplus fell to $US550.3 billion ($532.8 billion) at the end of last year, from $US559.2 billion ($541.4 billion) the year before.

Insurers’ 3.5% rate of return on average surplus for 2011 was the lowest full-year rate of return since 0.6% in 2008 and the eighth-lowest full-year rate of return in the 53 years since the start of ISO’s annual records in 1959. The 2011 rate was less than half insurers’ 9% average rate of return from 1959 to 2011.

The 3.5% rate of return was the net result of negative rates of return for mortgage and financial guaranty insurers, where rate of return on average surplus fell to negative 51.4% in 2011 from negative 36.6% in 2010, and single-digit rates of return for other insurers.

Even so, PCI Senior Vice President for Policy Development and Research Robert Gordon says insurers emerged from the year in a strong position.

“At year-end 2011, insurers had $US550.3 billion ($532.8 billion) in policyholders’ surplus to cover new claims and meet other contingencies,” he said.