The outlook for the property-casualty insurance sector remains “negative,” according to Fitch Ratings, because insurers will face many pressures on earnings in the coming months.

Pressure to maintain underwriting profitability as premium revenue is hindered by the recession and competitive pricing conditions in most markets, as well as rising accident-year loss ratios and shrinking reserve cushions are among the challenges the industry will have to address this year, according to Fitch Ratings.

Investment earnings will continue to be less favorable, resulting from a combination of low asset yields, further anticipated investment writedowns and an anticipated sluggish economic recovery, according to the ratings service.

Fitch reported that the GAAP equity for 51 property-casualty insurers rose an aggregate 10% in the first half of the year, boosted by significant unrealized investment gains and mostly solid profits.

Fitch compiled mid-year GAAP 2009 financial results for its universe of publicly traded insurers and reinsurers, analyzing results for the group on the whole and various industry subsectors. It also said it compared relative performance and considering the primary drivers of profitability and capital formation for 2009.

Despite its rebound during the first half of 2009, the group’s consolidated GAAP equity remains significantly below levels reported in 2008. While Fitch said it expects these companies to achieve further growth in GAAP equity during the second half of this year, the industry will face considerable earnings challenges along the way, it said.