US property and casualty insurers earned net income after tax of $US26 billion ($29.7 billion) in the half-year to June 30, up from $US24.4 billion ($27.9 billion) in the corresponding period last year, new figures show.

The improvement was partly driven by higher realised capital gains on investments and lower federal and foreign income taxes, the Property Casualty Insurers Association of America and analyst ISO say.

Pre-tax operating income fell to $US23.9 billion ($27.3 billion) from $US25.8 billion ($29.5 billion), dragged down by lower net gains on underwriting and net investment income.

Net gains on underwriting fell to $US284 million ($324.4 million) from $US2.2 billion ($2.5 billion) as premium growth failed to match the rising cost of providing insurance.

The industry’s net investment income dropped to $US23 billion ($26.3 billion) from $US23.3 billion ($26.6 billion).

The combined operating ratio deteriorated to 98.9% from 98%.

ISO Assistant VP for Financial Analysis Michael Murray says lower underwriting results and investment income have raised concerns about the sustainability of insurers’ earnings.

“With investment yields, financial leverage and tax rates such as those in first half… ISO estimates the combined ratio would have to improve to 97% for insurers to earn their long-term average rate of return,” he said.

Policyholders’ surplus – funds available to cover new claims – grew to $US671.6 billion ($767.4 billion) from $US613.5 billion ($701 billion) in the half.

Net written premium grew 4% to $US246.4 billion ($281.6 billion).

The first-half figures feature consolidated estimates for all private property and casualty insurers, based on reports for at least 96% of all business written.