Standard & Poor's Ratings Services (S&P) expectscommercial lines property-casualty rates to continue to drop,changing their initial prediction that they would be stable.

This decision was a result of the continuing decline in pricingfor commercial lines and decreases in investment income. Based onindustry pricing surveys and information from companies insecond-quarter earnings releases, S&P says pricing in thesecond quarter for renewal business declined at a mid-single-digitrate in most lines and at a low-double-digit rate for newbusiness.

Other factors that contributed to the change in expectationsinclude deterioration in net investment income in the beginning of2008 and an increase in net unrealized investment losses.

S&P also says that over the next 12-to-18 months, thisdecline will harm underwriting results. They predict thatunderwriting results for commercial lines writers will remainstrong in 2008, although they warn that underwriting performancecould worsen at the end of 2008 and in 2009.

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