The report says that driving the increase was a $4.3 billion drop in net losses on underwriting, from $4.5 billion in 2011's first quarter to $200 million in the first quarter of 2012.

“Insurers breathed a collective sigh of relief in the first quarter of 2012 as catastrophe losses fell by nearly one-half, driving a sharp improvement in underwriting performance, which resulted in a substantial, very welcome and much needed improvement in profitability,” says Robert Hartwig, president of the I.I.I.

Net losses and loss adjustment expense from catastrophes fell to $3.4 billion in the first quarter from $6.6 billion for the same period last year.

The combined ratio improved 4.3 points, dropping from 103.3 to 99.

Policyholder surplus saw a gain of $20.4 billion over the first quart of last year to a record high of $570.7 billion in the quarter, the report says.

Robert Gordon, PCI's senior vice president for policy and development and research, commenting on the policyholder surplus, says it “is a testament to the resilience of property [and] casualty insurers throughout the financial crisis and the strength and safety of our commitment to policyholders.”

Noting the lower combined ratio, Michael R. Murray, assistant vice president for financial analysis for ISO, says, “The improvement in underwriting results is especially welcome given the toll that long-term declines in interest rates and investment leverage have taken on insurers' ability to use investment earnings to balance underwriting losses.”

However, the report did see some negatives for the industry.

P&C industry reported a 7.2 percent annualized rate of return for the quarter, affected by mortgage and financial guaranty insurers and single-digit rates of return for other carriers.

ISO says it estimates the mortgage and financial guaranty insurers' annualized rate of return on average surplus deteriorated to negative 38.1 percent in the first quarter a further decline from negative 17.7 percent in 2011.

With those carriers excluded from the results, the annualized rate of return climbs to 8.2 percent for the industry. That is an improvement from 6.1 percent in the first quarter of 2011.

In a separate report from Conning Research & Consulting titled “2011 Property-Casualty Loss Reserves: Another Year of Releases, No Clear Trends 2012,” notes that 2012 industry reserves are “modestly redundant” at about 2.1 percent of carried reserves despite releases in 2011. The reserve position “is a consequence of muted claims activity associated with the recent recession,” says Conning.

Conning adds that the industry released more than $11 billion in reserves in 2011.

“Overall, the industry continues to appear to have sufficient reserves, with a modest degree of safety, under assumptions that claim settlement patterns will continue apace,” says Conning.