Property and casualty insurers and reinsurers reported improvedprofitability in 2013's first half compared to the same perioda year ago, according to a recent Fitch Ratings report.

Click here for a summary of the entire industry'sperformance

But each of the five subsectors Fitch analyzed tells its ownstory regarding performance so far this year versuslast. Click “Next” to see a breakdown of thesubsectors—commercial diversified, regionals, specialty commercial,personal writers and reinsurance—as well as insight into areas ofimprovement and concern.

Commercial Diversified Insurers

Underwriting results for this group improved broadly compared to2012's first half, says Fitch, with only 2 of 13 organizationsanalyzed (AIG and CNA Financial) failing to report anunderwriting profit in the period. Alleghany Corp. was the onlycompany in the group that saw no improvement over last year's firsthalf underwriting results.

But Fitch notes that operating profitability for the group“continues to be driven lower for many companies by thelow-interest-rate environment” that is suppressing investmentincome across the P&C sector. Still, just one company (TheHartford Financial Services Group) reported a consolidatedoperating loss in 2013's first half, and Fitch notes the loss wasgenerated by businesses outside Hartford's P&C operations.

Favorable loss-reserve development shaved 1.9 points off of thegroup's combined ratio, which is slightly greater than the 1.8points in 2012's first half.

Net earned premiums for the group grew by 4.5 percent in thefirst six months of 2013 compared to the same period a year ago.Three companies reported modest declines in earned premiums—AIG(-3.4 percent), White Mountains (-1.5 percent) and Hartford (-0.9percent)—while Alleghany (+40 percent) and Berkshire (+9.9 percent)reported the greatest gains. Fitch notes that Alleghany's outsizedearned-premium growth is skewed by the company's March 2012acquisition of Transatlantic Reinsurance Holdings. Adjusting forthe acquisition, Alleghany's earned-premium growth totals 3.8percent.

Insurers in Group and1H13 vs. 1H12 Operating Earnings

($ Millions)

Source: SNL Financial, Companyreports, Fitch

Regional Insurers

While Fitch says regionals continue to be the weakest performersoverall in its universe from an underwriting standpoint, the groupdid report the biggest improvement in year-to-year underwritingresults. Fitch attributes the improvement to modest pricingimprovement in smaller commercial markets and a decline in tornadoand inland storm-related losses compared to recent years.

All of the six insurers in this group posted improvedcalendar-year underwriting results in 2013's first half compared tothe same period a year ago, and only State Auto Financial Corp.failed to report an underwriting profit, Fitch notes.

All of the companies managed to report an operating profit forthe period, and as a group regionals reported an 89 percentyear-over-year increase in aggregate operating earnings compared to2012's first half.

Regionals managed these results despite diminished levels offavorable reserve development. Reserve releases shaved 1.9 pointsoff of the group's combined ratio, compared to 3.1 points in 2012'sfirst half

Insurers in Group and 1H13vs. 1H12 Operating Earnings

($ Millions)

Source: SNL Financial, Companyreports, Fitch

Specialty Commercial Insurers

After several years of outperforming the other two commercialsubsectors, specialty insurers now report underwriting results andoverall profitability more in line with diversified and regionalinsurers, says Fitch.

Still, the ratings agency calls the subsector's 2013 first-halfresults “solid and largely unchanged versus the prior-year period.”Employers Holding, Inc. and Meadowbrook were the only 2 of the 12specialty insurers in Fitch's universe to report combined ratiosover 100.

Though operating results were generally positive, Fitch says 9of the 12 companies reported a decline in common equity for 2013'sfirst half due to $1.3 billion of unrealized investment losses and$381 million of share repurchases.

The group reports an overall 11.2 percent growth in net earnedpremiums in the period due mostly to the commercial lines rateenvironment. Adjusting for Markel's May 2013 acquisition ofAlterra, net earned premiums grew by 8.3 percent.

Insurers in Group and 1H13vs. 1H12 Operating Earnings

($ Millions)

Source: SNL Financial, Companyreports, Fitch

Personal Lines Writers

The six personal-lines insurers in Fitch's universe all reportedimproved underwriting results thanks to modest pricing improvementand stabilizing loss severity, and just one company, Horace MannEducators Corp., reported an underwriting loss for 2013's firsthalf.

Operating income for the group grew by 17.1 percent compared to2012's first half.

Fitch notes that this group reports “a significant decrease inthe amount of aggregate favorable reserve development during thefirst half of the year,” adding that Progressive and InfinityProperty and Casualty Corp. each report unfavorable development forthe second year in a row.

Insurers in Group and 1H13vs. 1H12 Operating Earnings

($ Millions)

Source: SNL Financial, Companyreports, Fitch

Reinsurers

Despite increased catastrophe losses for the group in 2013'sfirst half, reinsurers in Fitch's universe report an improvedcalendar-year combined ratio thanks to increased net earnedpremiums.

Catastrophes added 5.6 points to the group's combined ratio,compared to 3.6 points in 2012's first half. The larges loss wasinland flooding in Germany and central Europe, while flooding inAlberta, Canada and parts of Queensland and New South Wales,Australia also contributed to the total.

Net realized investment losses of $314 million—compared to $564million in realized gains for the first six months of 2012—drove a4.4-point decline in net return on equity for reinsurers, althoughstrong operating earnings led to a 13.2 percent operating return onequity, which is up from 12.8 percent in 2012's first half.

Reinsurers in Group and 1H13vs. 1H12 Operating Earnings

($ Millions)

Source: SNL Financial, Companyreports, Fitch