Underwriting profitability improved modestly in the third quarter for U.S. property-casualty insurers, based on preliminary review of statutory financial data.

Charlottesville, Va.-based SNL Financial said the insurers also saw additional stabilization through realized and unrealized capital gains.

With data available for nearly 88% of expected property-casualty filers, the industry (excluding financial and mortgage guarantor companies) is on pace to report a $536 million underwriting gain in the third quarter.

During the same period last year, the industry reported $7.7 billion in losses.

Losses and expenses totaled $93.7 million in the third quarter of this year, a reduction from $107.2 million in third-quarter 2008, according to the report.

The loss ratio, defined as losses and LAE (loss adjustment expense) to net premiums written, fell by nearly 9 percentage points to 71.7%.

Good weather helped the numbers.

“Fortunately for P-C insurers, there was no Hurricane Gustav or Ike this season,” said Jon Wright, director of the insurance group at SNL. “With the economy still weak and premiums written dropping off further, it was very fortunate that catastrophic losses were minimal. The soft market has to continue at this point with an industry seemingly flush with surplus capital.”

The combined ratio for third-quarter 2009 was 99.1% and realized capital gains topped $458.8 million, an improvement when compared to 107.4% and losses of $6.7 billion, respectively, for the year-ago period. However, overall profitability was tempered by a decline in net premiums earned, down 5.2% year-over-year, the report found.