Underwriting profitability in the US property/casualty market has suffered in the first three quarters as a result of catastrophe losses, according to a just published report.

Rating agency A.M. Best Co. said net income fell 15 percent over the nine-month period from a year ago, as higher underwriting losses and declining investment income outpaced a large increase in realised gains. The special report is contained in the latest property/casualty edition of BestWeek.

It said the industry's reported combined ratio -- the measure of underwriting profitability -- was 104.2 percent for the nine-month period, 3.2 points worse than the same period last year and only slightly higher than Best's expectations.

Catastrophe losses contributed five points to the third quarter's combined ratio, compared with less than one point in third quarter of 1997.

The total estimated third-quarter catastrophe loss was $3.7 billion, of which Hurricane Georges contributed $2.5 billion from its devastation to Puerto Rico and the US Virgin Islands.

Hurricane Bonnie's damage to the Southeast contributed $360 million. Through the first nine months, the industry has incurred about $8.3 billion in catastrophe losses.

In addition to the third-worst losses in history recorded in the third quarter, the industry posted record-high losses in the second quarter.

These losses are keeping pace with the $8.9 billion yearly average for the past decade, but the ten-year average is inflated by huge Northridge earthquake and Hurricane Andrew losses.

Best believes the industry's reported combined ratio for the full year 1998 will be slightly higher than its originally projected 104.8, which compares with the 101.6 recorded in 1997.