"The increase in rates, and improvements in terms and conditions are not going to guarantee that the profitability over the medium-term is going to be sustainable," according to Laline Carvalho, an associate director at Standard & Poor's in New York.

"Our outlook on the industry is negative and remains negative, even though companies have been reporting very substantial rate increases and improvements in policy terms and conditions," she said. "We're still dealing with an industry that has significant reserving issues. The direct writers have done a lot of housecleaning and a lot of reserve strengthening, but we feel there is more reserve strengthening to come."

Grace Osborne, a director at S&P, predicted that it would take until the end of 2004 for firm profits to start returning to the industry. "It's a personal view," she said, noting that she perhaps is more pessimistic than other observers.

However, selected individual RAA companies did turn in good combined ratios, demonstrating that some are starting to benefit from the hard market.

Concerning the accompanying table of combined ratio results, listed alphabetically, it should be noted that:

? Results at American Re-Insurance Company, which had a combined ratio of 353.4 for the first six months of 2002, compared with 107.2 for the same period in 2001, reflect a $2 billion strengthening of net loss and loss adjustment expense reserves.

? Converium (Reinsurance) North America, Inc., which came in at 102.0 for this year's first-half, compared with 102.2 last year, was formerly called Zurich Re (North America).

? Gerling Global Reinsurance, which reported a first-half ratio of 153.3, compared with 116.5 last year, is being put into runoff by its Cologne-based parent, Gerling Group.

RAA First-Half Combined Ratios