The U.S. property-casualty insurance industry’s net income after taxes dipped 5.5 percent in the first quarter compared to the same period last year, according to Insurance Services Office and the Property Casualty Insurers Association of America (PCI).

The industry reported $15.8 billion income in the quarter compared with $16.7 last year and $17.7 billion in the same 2005 period.

Robert Hartwig, president of the Insurance Information Institute, said the 12.9 percent rate of return in the quarter showed the industry is past the profitability peak of 15.5 percent reached in the same 2006 period.

“The only question that remains is how long the decline in profitability will last and how many years it will take to get to the bottom,” he said.

The industry’s net gain on underwriting receded to $8.3 billion in the first three months of this year from $8.4 billion in the first three months of 2006.

Meanwhile, net written premium growth slowed to 0.8 percent in the first quarter from 1.8 percent in first-quarter 2006.

Also contributing to the decline in net income, the industry’s federal income taxes rose to $5.4 billion in first-quarter 2007 from $5.3 billion in first-quarter 2006.

But much of the decline in first-quarter net income, according to PCI and ISO, reflects a special transaction in which one U.S. insurer they did not identify assumed $9.3 billion in liabilities from a foreign entity in exchange for considerations valued at $7.1 billion.

Michael R. Murray, ISO’s assistant vice president for financial analysis, said despite the fact the industry’s combined ratio of 91.7 is the second best for any quarter in the past 21 years, the insurance industry’s rate of return failed to reach other industries’ similar figure.

“During the 24 years from 1983 to 2006, the comparable rate of return for the Fortune 500 averaged 13.9 percent, and escalating competition in insurance markets suggests insurers’ rate of return will fall further below that earned by firms in other industries rather than rise to meet it,” he said.

Genio Staranczak, PCI’s chief economist, said that insurers’ profitability in the first quarter usually exceeds their profitability later in the year, in part because of the timing of weather-related catastrophe losses.