The US property and casualty industry has recorded its worst first-half loss for five years, suffering $US5.1 billion ($6.44 billion) in net underwriting losses, AM Best says.

This compares with a $US2 billion ($2.52 billion) loss in the corresponding period last year.

The ratings agency blames continuing pressure on operating results.

The industry recorded underwriting income of $US3.1 billion ($3.9 billion) in the first half two years ago.

The first-half combined operating ratio deteriorated by 0.9 points to 100.9, and there was a 6.1% increase in incurred losses and loss adjustment expenses.

A 1.8% rise in underwriting expenses offset 3.7% growth in net premium earned.

The industry’s accident-year combined operating ratio was 103.7, excluding $US7.2 billion ($9.09 billion) of favourable reserve development.

Net income fell 29% to $US15.4 billion ($19.44 billion), partly due to a retroactive reinsurance contract entered into last February by AIG and National Indemnity, whereby the latter agreed to provide $US20 billion ($25.25 billion) of aggregate cover on much of AIG’s commercial book, covering losses unpaid as of January 1 last year.

Despite the decline in net income, the industry surplus was a record $US703.4 billion ($887.97 billion) at the end of June, driven by a $US14 billion ($17.67 billion) increase in unrealised gains, an increase in other surplus gains and lower stockholder dividends.