(Bloomberg) -- U.S. property-casualty insurers’ quarterly investment income dropped to the lowest since 2004 as falling bond yields pressured the industry.

The figure fell to $10.9 billion in the three months ended March 31 from $11.7 billion a year earlier, according to a report Thursday from the Property Casualty Insurers Association of America and ISO, a unit of Verisk Analytics Inc.

The annualized yield on the industry’s portfolio fell to 2.9% from 3.1%. That compares with an average of 3.8% over the past decade and peaks of more than 8% in 1984 and 1985.

Pressures for companies

Sinking interest rates add to pressures for companies such as Travelers Cos. and Allstate Corp., which are also confronting higher-than-average natural disaster costs and the increased frequency of car accidents as low fuel prices encourage motorists to drive more.

First-quarter net income for the industry fell to $13.3 billion from $18.1 billion a year earlier, a decline of 27%.

“Insurers will be very challenged to reach long-term historical returns in the current hyper-competitive market,” Robert Gordon, a senior vice president at the insurers’ association, said in a statement.

Still, P&C insurers have it easier than life insurers, which can hold premiums for decades before paying claims, making them even more vulnerable to low interest rates. The S&P 500 Life & Health Insurance Index has declined 2.9% this year as of 12:13 p.m. in New York.

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Sinking yields drag investment income to 12-year low at P&C insurers

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