Net income for P&C insurers slipped slightly in the firstquarter of 2014, dipping to $13.8 billion from $14.3 billion in Q12013, due to deteriorating underwriting results, according to ajoint report released Thursday by the Property CasualtyInsurers Association of America (PCI) and ISO. Overallprofitability industry-wide, as measured by return on averagesurplus, fell to 8.4% in the quarter, compared to 9.6% in the firstquarter of 2013 and 10.3% for all of 2014.

Still, despite these headline numbers, Dr. Robert Hartwig,president of the Insurance Information Institute (III), is notconcerned for the industry.

“Despite an unusually costly winter, rising non-cat losses, andpersistently low interest rates, the industry posted anotherprofitable quarter aided by capital gains and reserve releases,”Hartwig wrote in a statement following the report. ”Premiumgrowth, while still modest, is now experiencing its longestsustained period of gains in a decade. Fundamentally, the P/Cinsurance industry remains quite strong financially, with capitaladequacy ratios remaining high relative to long-term historicalaverages.”

Overall, the industry generated $121.4 billion worth of netwritten premiums in Q1 2014, up 3.6% from the same period a yearago, while net earned premiums rose 4.3% to $117.9billion.

Net income after taxes did drop slightly in the quarter, aresult the report pinned almost entirely on underwriting results,as net gains on underwriting fell $2.3 billion in Q1 to $2.2billion. That's compared to $4.5 billion in the first quarter of2013. The combined ratio, which ISO describes as “a keymeasure of losses and other underwriting expenses per dollar ofpremium,” fell to 97.3% in Q1 2014 from 94.9% in Q1 2013.

“Policyholders' surplus – the funds available to cover newclaims – rose $8.7 billion in first-quarter 2014 to a record-high$662.0 billion, leaving no doubt that insurers are strong, wellcapitalized, and well prepared to pay future claims,” said RobertGordon, PCI's senior vice president for policy development andresearch. “Policyholders can rely on insurers to fulfill theirobligations and help finance economic recovery even if we're struckthis hurricane season by a storm more devastating than SuperstormSandy or Hurricane Katrina.”

On the upside of the balance sheet, ISO and PCI reported thatinsurer's net investment gains rose $1.3 billion to $14.1 billionin the quarter, partially offsetting the decline in net gains onunderwriting.

“Though insurers' net gains on underwriting in first-quarter2014 were down from the levels experienced a year earlier,underwriting results remained unusually strong,” said Michael R.Murray, ISO's assistant vice president for financial analysis.“Insurers posted net gains on underwriting for only 21 of the 113quarters since the start of ISO's quarterly data, and insurers'97.3% combined ratio for first-quarter 2014 was 7.7% points betterthan the average since first-quarter 1986 … But with premium growthslowing and loss and loss adjustment expenses surging upward infirst-quarter 2014, there is some risk that net gains onunderwriting will slip further as the year progresses.”