If property and casualty results maintain their momentum throughthe 2013 fourth quarter, the industry could see its first yearlyunderwriting profit since 2009, A.M. Best says.

As it is, A.M. Best notes that the industry has been profitablethrough the first three quarters of 2013—the firsttime it has done so for this time period since 2007.

The ratings agency credits the industry’s results to lowercatastrophe and non-catastrophic weather losses and higher premiumvolumes. Net premiums written were up 4.5% compared to the firstnine months of 2012, up slightly from the 4.4% growth rate thoughthe first half of the year.

A.M. Best’s nine-month analysis comes shortly after ISO and theProperty Casualty Insurers Association of America released theirjoint analysis, which prompted Insurance Information InstitutePresident Robert Hartwig to remark that the industry appears to beon a “firm trajectory” for what will “assuredly be its best year inthe post-crisis era.”

According to the A.M. Best analysis, the industry posted anunderwriting profit through the first nine months of $7.5 billion,a turnaround from the $4.7 billion underwriting loss for the sameperiod in 2012. That underwriting profit more than offset a 2.8%decline in net investment income, and helped fuel a 35.3% increasein pre-tax operating income for the period—to $43.5 billion.

The P&C industry’s 54.9% increase in net income for thefirst nine months of 2013—to $47.7 billion—was also aided by higherrealized capital gains of $12.8 billion, compared to $5.1 billionfor the first nine months of 2012.

The industry’s combined ratio for the period was 96.5, down from100.2 in the first nine months of 2012.

While the news was largely positive for the industry, there weresome signs of caution in the report. Commercial lines underwritingresults in the third quarter—while still positive at $2.6 billionand improved compared to the 2012 third quarter—deterioratedsomewhat compared to earlier in the year. The segment’sthird-quarter combined ratio of 99.9 was also up some compared tothe prior two quarters.

A.M. Best also reiterated concerns with the industry’sloss-reserve position. While the industry reported $13.1 billion infavorable development through the first nine months of 2013,including $3 billion in favorable reserve release for thecommercial segment (an increase from $1.9 billion for the sameperiod in 2012), A.M. Best says it “remains concerned with theindustry’s loss-reserve position given the extended soft-marketcycle, which eroded pricing adequacy during those years whilereducing the available loss-reserve cushion, particularly thereserves of the commercial-lines segment.”

The ratings agency notes that several insurance groups announcedin the fourth quarter they would be taking reserve charges tostrengthen prior accident years’ loss reserves.

“In light of the level of favorable development recognized onrecent accident years and the concern with adequacy of those ratesdue to challenging market conditions that predominated in thoseyears, the cushion of available reserve redundancies has declinedand may not provide the same support to future calendar-yearresults,” says A.M. Best.