A downward revision of the latest economic growth indicators prompted analysts to predict that property and casualty insurers will not see a reversal in pricing or significant boost in earnings anytime soon.

The U.S. government revised its second-quarter gross domestic product figure to 1.6 percent, down from an earlier forecast of 2.4 percent.

The U.S. Bureau of Economic Analysis said the revision was primarily due to “a sharp acceleration in imports and a sharp deceleration in private inventory investment.”

These figures could impact the strategies of insurance executives as they consider how to grow their businesses, according to Howard Mills, chief advisor for Deloitte Services' insurance practice.

“This downward revision is certainly going to cause the industry to question its growth assumptions, and it is an issue that is really going to impact them, no doubt,” observed Mr. Mills.

Insurance executives realize they need a “robust economy” in order to achieve organic growth, he noted. Without that, the latest figures might prompt them to alter strategies and “speed up” acquisition plans, he added.

As far as impacting the current soft market, Mr. Mills–a former New York insurance superintendent–said there is no indication of a change in downward pricing trends coming anytime soon. Indeed, he noted, the p&c industry appears to be in agreement that no uptick will come on premiums without a significant event impacting the current pricing direction.

Robert Riegel, managing director for the U.S. Insurance Team at Moody's Rating Service, said the property and casualty business continues to be hindered by the slow economy as their commercial clients purchase less insurance.

Meanwhile, he noted, a continuing downturn in housing means less need for construction insurance products. Less work means fewer employees, in turn affecting employee benefits and workers' compensation insurance. The impact extends to the transportation sector, since fewer vehicles are being used.

The key issue for p&c companies is the pricing cycle, he said.

“With lower GDP, you are going to get lower premium [volume], but the more important factor is just the pricing cycle, and that has been driving premiums down in addition to the weak economy over the last couple of years,” observed Mr. Riegel.

In a report on insurer profitability, Fitch Ratings said that while company net earnings have improved substantially over last year for the first half of 2010 to $16.2 billion, operating profits have declined.

In a review of 50 publicly traded p&c insurers, Fitch said the increase in earnings was primarily due to improvement in investment results, especially for larger insurers.

The results show insurers have experienced “unusually high catastrophe losses, and the deteriorating commercial insurance pricing environment combined to more than offset the continuing benefit of favorable loss reserve development, resulting in lower underwriting margins and a corresponding decrease in operating profitability for most companies.”

Fitch said favorable loss reserve development represented 3.7 percent of earned premium, compared with 2.6 percent during the first half of 2009 for the insurers reviewed.

“Profitability will continue to be pressured by limited premium growth and weaker accident-year loss ratios in a stubbornly competitive insurance market with a weak economic recovery and low-investment yields,” Fitch concluded.

However, the use of reserve releases to improve earnings has “approached exhaustion for many insurers,” according to Fitch, which noted that could mean a turnaround in the soft market trend.

In an analyst report from Stifel Nicolaus, Meyer Shields said despite the use of reserves, there is no clear indicator of a change in the pricing trend. However, it is Mr. Shields' belief that reserve releases will slow this year and into next.

He said that as insurers approach the historical trigger point for rate increases–which he pinpointed at a calendar-year combined ratio of 110–a hard market could begin by 2012.