The US property and casualty industry's first half net income dropped as underwriting losses grew by nearly a third and investment results deteriorated, according the to Insurance Services Office and the National Association of Insurers.

A three percent decline in pre-tax net investment gains also helped push the net income after taxed down to $15.1 billion, 3.5 percent below the $15.7 billion in the first half of 1998.

The industry's net underwriting loss amounted to $8 billion for the first half of 1999, 32.1 percent more than the $6 billion net loss on underwriting for the same time in the previous year.

The industry's pre-tax net investment gain --the sum of net investment income and realised capital gains-- fell to $27.2 billion, down from $28 billion the same time in 1998. A decline in the industry's federal income taxes partially offset the deterioration in underwriting and investment results.

Weak premium growth and increased loss and loss-adjustment expenses contributed to the deterioration in underwriting results. Industry net written premiums for first-half 1999 were $143.4 billion, up just 1 percent from $141.9 billion a year ago. The 1 percent written premium growth rate in the first half of the year is down from 2.3 percent in the same time last year and 3.8 percent in the first half of 1997.

It is the lowest first half premium growth rated in at least a dozen years, and if growth continues at the same pace to the end of the year, the year growth will be short of last year's record low of 1.8 percent.

Robert Hartwig, vice president and chief economist at the Insurance Information Institute said: "The annualised premium grown of 1.0 percent for the first half is disappointing. Nevertheless, it comes amid a notable firming of prices in some commercial lines and a get-tough attitude in underwriting.

Various agent surveys indicate that price cutting has been reined-in.

He added that some of the weaknesses in premium grown reflected the fact that major companies were now walking away from hundreds of millions of dollars in unprofitable business, with commercial auto and workers compensation the lines most affected.

Industry loss and loss-adjustment expenses rose to $106.1 billion in the first half of this year, up 2.5 percent from $103.4 billion in the first half of 1998. The 2.5 percent increase in loss and loss-adjustment expenses for the first half of 1999 compares with a 5.2 percent increase at the same time in 1998, and 4.8 percent decline in the first half of 1997.

According to Mr. Hartwig, there is mixed news on the loss side. He said: "Loss ratios are deteriorating in some lines, most notably personal auto which is suffering the effects of intense competition. Rising medical inflation is also beginning to rear its ugly head, a factor that affects many lines. Abnormally high catastrophe losses continue to plague insurers, led by $1.5 billion in losses from May's tornado outbreak that swept through Oklahoma, Kansas and 16 other states.

"Catastrophe losses through the first half of 1999 stand at $5.2 billion and are on a path that could match last year's total of $10.1 billion. We are approaching the peak of what is expected to be a very active hurricane season and early estimates from insurance companies place losses at a relatively modest $100 million.'' The figures used in the report, published yesterday(thurs), are consolidated estimates for the entire industry based on the reports of insurers that account for 96 percent of the US property and casualty business.