Despite a rebound from low levels in early March, RBC said p-c stock valuations still remain well below historical averages and the bank is positive on group fundamentals. DJINP Insurance Index has risen more than 30 percent from March, it was noted.

According to a summary of Mr. Dwelle's report:

o Underwriting margins remain under pressure, and while redundant reserve positions for most in the p-c group studied are anticipated, a lower pace of reserve releases along with a more conservative stance on loss trends may weigh on margins.

o Soft premiums are expected although the percentage declines for most primary insurers have narrowed in recent quarters. RBC forecasts premium declines for most in the group, finding companies are still highly cautious on new business generation.

o The recession effects are being felt by the industry. Although insurance is considered a somewhat defensive industry, RBC finds the duration and severity of the current recession is creating more challenges for p-c insurers than during previous recessions. Near term, the bank's report finds the recession poses headwind to the insurers' top lines as customers increase deductibles and buy less coverage, exposures on commercial accounts fall consistent with declining employee counts, and economically sensitive areas (construction, hospitality, retail) feel the hit from lower activity.

o A trend of gradual insurance rate increases is still intact, RBC said, with the expectation that the common theme will remain that industry pricing is on a slow recovery trajectory with prices turning positive on several insurance classes in recent months. Reinsurance said RBC continues to show good pricing visibility with growth in the mid-to-high single digits.

o Investment portfolios will finally show some signs of stabilization in the first quarter, although negative marks across many of the company's investment portfolios (mortgage-backed securities, corporate bonds) are expected. The erosion in values, it is noted, was comparatively smaller relative to last quarter and was somewhat offset by rising market values for treasury and government securities.

Mr. Dwelle is continuing to recommend investors stick with well-established names that are leveraged to improving pricing prospects and the flight-to-quality trend, including Chubb, PartnerRe, RenaissanceRe and W.R. Berkley.