The industry logged $61.9 billion in net income after taxes last year, the second-highest after 2006's record $65.8 billion, according to data compiled by Insurance Services Office Inc. and trade group Property Casualty Insurers Association of America. The total still was well above the $44.2 billion the industry earned in 2005.
But the year-end totals indicate how falling prices for many types of insurance policies are beginning to affect the bottom line.
"The industry has moved into a cyclical downturn in terms of profitability," says Robert Hartwig, president of the Insurance Information Institute, another trade group. He adds that there is "general concern" about how fast profits and underwriting results could deteriorate.
For some commercial insurance policies, recent drops in premiums have been significant. A survey of insurance buyers released recently found the cost of commercial-property insurance dropped 6% in the first quarter, and workers' compensation insurance premiums dropped 11%.
Such price declines have been going on for some time and can be a boon to insurance clients. But they can pose a threat to insurance companies and their investors.