The industry was also helped by a combination of "strong cash flow generation," a moderate amount of debt, good capitalization and conservative investing.

On the negative side, personal lines insurance is a commodity-type product. As a mature industry, under intense competition, the only room for growth is through price.

The industry is concentrated among a handful of "large, established and well-entrenched players," the report noted. Five of the top companies represent 50 percent of the market collectively, while the top-10 companies make up two-thirds of the market based on 2009 direct written premiums.

"We would expect to see consolidation among the smaller personal lines players as investments in technology, advertising and brand make it more difficult to compete, though we do not expect major shifts in market share," Moody's said. The merger and acquisition activity is primarily expected to take place among smaller, regional players, Moody's suggested, but such activity is not expected to cause "material shifts in market share over the medium term."

Ratings are expected to remain unchanged for this segment over the next 12-18 months, the rating service said, as "modest organic premium growth, rising prices and a manageable combined ratio contribute to a stable financial profile."

The report noted that direct writers have an economic advantage because their lower overhead costs can be passed onto consumers, undercutting agency business. However, independent agents have an advantage emphasizing service and customer loyalty.

The report said that carriers have developed multiple channel platforms--direct, agent and Internet--"to take advantage of changing consumer buying habits."