However, the percentage of the industry's assets invested in long-term bonds did shrink nearly five percentage points, falling from 80.7 percent in 1996 to 75.8 percent in 2000.

At the same time, allocations to common stocks (excluding affiliate company investments) rose 1.6 percentage points?from 7.9 percent in 1996 to 9.5 percent in 2000, the study said.

With the bulls retreating in 2001 and underwriting profits on the horizon, have the investment strategies of p-c insurance changed significantly?and will they continue to change?

"That's going to be one of the interesting things to see going forward," Clint Harris, vice president of research and publications, noting that there is a relationship between anticipated underwriting returns and anticipated investment income. He said that Conning plans to publish an annual investment study for the same p-c companies.

"We did see movement into equities" during a five-year period that was marked by underwriting losses, he said. The report notes, in fact, that investment returns were the sole positive contributor to net income for the industry during the five years studied.

Referring to a portion of the report that tries to uncover the secrets of success of 30 companies that had better than average returns over the study period, Mr. Harris noted that the common theme was that they "in some way, shape or form, invested in equities."

The thing that's noteworthy about that is not the type of investment, but instead that these companies were "very aware of the environment" of a rising equity market "and that they took advantage of changes in that environment" to improve investment returns.

Mr. Harris believes that the most important finding of the study report "was a non-finding."

"We expected to see a greater dissimilarity between peer groups" in terms of investment strategies, he said.

Because Conning analysts expected that the competitive pressures of underwriting different lines would create different investment return pressures, the analysts divided insurers into nine industry peer groups to examine differences in investment approaches.

The nine peer groups, distinguished mainly by predominant line of business written, were auto insurers, large and medium-sized commercial insurers, large and mid-sized multilines, reinsurers, guarantors, liability, and malpractice insurers

Conning found that the peer groups moved in similar directions, with nearly all showing a slight shift toward greater equity investments toward the end of the study period.

Within the peer groups, however, "insurers were like snowflakes," he said, referring to the fact that no two seemed to have similar investment strategies.

While eight of the nine peer groups had more assets in equities in 2000 than in 1996, reinsurers were the sole exception to this trend, with their equity investments (excluding investments in affiliates) declining from 10.3 percent in 1996 to 2.7 percent in 2000.

Mr. Harris couldn't explain why reinsurers showed a divergent trend, but offered the possibility that because a small number of reinsurers were studied, one or two companies might have skewed the results. (Seven out of the 176 companies studied were reinsurers, according to the report.)

Large multiline companies showed the biggest shift to non-traditional investments such as derivatives and hedge funds over the period?with 3.4 percent in 1996 and 9 percent in 2000.

Such investments are referred to as Schedule BA investments in the report, because that is the schedule where they are reported in insurer statutory financial reports.

Conning reports, however, that the majority of p-c insurers have very low Schedule BA allocations and that two insurers account for over half the industry assets in that category.

Looking at investment returns from 1996 to 2000, Conning found that while average returns were roughly 9 percent over the five-year period, a handful of top performers earned close to 13 percent returns.

Investment returns are defined as investment income from interest on bonds and stock dividends plus realized gains on sales of investments.

Balance was a key to success, Conning analysts concluded in the report, noting that the best performers had average returns from both bonds and equities and relatively high asset allocations to common stocks.

Comparing the returns by industry segment, the study shows that auto insurance group, with its much higher allocation to equities, earned the highest return of any group, coming in at 9.4 percent.

"That certainly makes sense relative to the insurance coverage their offering," Mr. Harris said. Partly because auto insurance involves covering large groups of small exposures, there's a greater degree of loss predictability, he said. And with more predictability on the underwriting side, auto insurers can be more aggressive with investment strategies, he said.

Guarantors, with 95.9 percent of their investments in fixed-rate bonds, earned only 6.6 percent?the lowest five-year average return among nine industry groups that Conning studied.

For all the groups together, the average return was 8.8 percent, the study reported. The study also said that a number of larger firms, with significantly larger returns, pulled up that average.

Overall, only 44 of the 176 firms studied had returns above 8.8 percent, the study said.

Size, however, was not a guarantee of success in the investment area, Conning said, noting that 12 of the nation's top 25 insurers posted investment returns well below the industry average.

The report also presents industry returns by asset class (with common stocks yielding the highest returns, at 26.5 percent in 2000).

In addition, the report contains a detailed analysis of how the industry's $450 million in fixed-income assets are distributed by sector (government, industrial, and public utility bonds), maturity, and quality.

The Conning study is based on the analysis of statutory financial data for 176 large p-c groups representing more than 85 percent of the industry, based on total premium and invested asset measures.

Appendices to the 134-page report list the 176 companies individually, giving the asset allocations by company for 2000, and percentages of each companies bond portfolios in risky (below-investment-grade) bonds for each of the five years studied.