Private US property and casualty insurers’ first-quarter net income fell 26.5% to $US13.3 billion ($17.4 billion), hit by higher catastrophe losses and loss adjustment expenses, according to a new report.

Weaker investment income also affected the January-March result, the Property Casualty Insurers Association of America (PCIAA) and analyst ISO say.

Incurred losses and loss adjustment costs grew to $US87.1 billion ($113.7 billion) from $US81.9 billion ($107 billion) in the corresponding period last year, while net underwriting gains fell to $US2.2 billion ($2.9 billion) from $US4.1 billion ($5.4 billion).

The combined operating ratio deteriorated to 97.5% from 95.7%.

Direct insured property losses from catastrophes hit a 22-year high of $US4.8 billion ($6.3 billion), up from $US3.6 billion ($4.7 billion).

The low interest rate environment continues to pressure returns, with net investment income down 6.6% to $US10.9 billion ($14.2 billion), the lowest since the third quarter of 2004.

“In the first quarter… insurers were affected by both one-time events and long-term trends,” ISO Solutions President Beth Fitzgerald said. “Severe hail in several southern states contributed to the highest first-quarter catastrophe losses in the US since the 1994 Northridge earthquake.

“At the same time, the combined operating ratio worsened… and interest rates remained low, leading the industry’s quarterly investment yield to its lowest level this century.”

Policyholders’ surplus – funds available to cover new claims – increased by $US2.6 billion ($3.4 billion) to a record high of $US676.3 billion ($883.1 billion).

Net written premium grew 3.2% to $US130.1 billion ($170 billion).

PCIAA members write 42% of the US motor market, 27% of homeowners’ policies, 32% of the commercial property and liability market and 34% of private workers’ compensation.