U.S. property/casualty insurersÃ¢â‚¬â„¢ full year 2009 results show a strong but incomplete recovery from the recession and financial crisis, according to figures just released by ISO and the Property Casualty Insurers Association of America. The industry reported an annualized statutory rate of return on average surplus of 5.8 percent in 2009, up sharply from 0.6 percent in 2008. However, net income after taxes in 2009 totaled $28.3 billion, nearly ten times the $3.0 billion earned in 2008, but less than half the $62.5 billion earned in 2007. Similarly, insurersÃ¢â‚¬â„¢ 5.8 percent overall rate of return for last year was less than half the 12.4 percent rate of return for 2007. In his commentary on the results, I.I.I. president Dr. Robert Hartwig observes that the magnitude and speed of the turnaround is truly remarkable given the length and depth of the crisis, though the industryÃ¢â‚¬â„¢s profit recovery is incomplete. According to Dr. Hartwig, key factors driving 2009Ã¢â‚¬â„¢s recovery include vastly improved investment market conditions in the final three quarters of the year, a 61 percent decline in catastrophe losses and significant releases of prior year reserves. Ã¢â‚¬Å“It is notable that the recovery occurred despite the fact that 2009 was the sixth consecutive year of declining premiums, which fell 3.7 percent last year, and amid recessionary economic conditions that continued to destroy insurance exposure,Ã¢â‚¬ he says. Perhaps the most extraordinary sign of recovery was the industryÃ¢â‚¬â„¢s rebound in claims paying capacity (as measured by policyholdersÃ¢â‚¬â„¢ surplus). PolicyholdersÃ¢â‚¬â„¢ surplus increased by $54.2 billion to $511.5 billion or 11.8 percent during the year, up from $457.3 billion at the end of 2008. The reversal is notable and important, according to Hartwig. Ã¢â‚¬Å“The bottom line is that P/C insurance industry capacity came within 2 percent of its all time record high just nine months after reaching its crisis low. Given continued favorable market conditions in the first quarter of 2010, it is quite likely that industry capacity reached a new record high, despite lingering difficulties in the overall economy,Ã¢â‚¬ he adds.