Private U.S. property-casualty insurers saw a partial rebound in their net income after taxes for the first nine months of last year when compared to 2008, but still lagged when compared with 2007.

The property-casualty insurance companies reported $16.2 billion in net income for the first nine months of 2009, after showing just $4.4 billion for the first nine months of 2008, according to ISO and the Property Casualty Insurers Association of America. The 2008 net income showed a 91.2% decline from the prior year’s $49.6 billion in net income.

A brighter note appeared in insurance companies’ overall profitability. Measured by annualized rate of return on average policyholders’ surplus or statutory net worth, the profitability rose to 4.5% from January through September of 2009. In 2008, it had fallen to 1.2% for the time period, a decrease from the 13.1% reported in 2007.

Driving the increases in insurers’ net income and rate of return, net losses on underwriting fell by $16.6 billion, to $3.2 billion through first nine-months of 2009, as claim costs (loss and loss adjustment expenses) dropped $26.5 billion, according to the report.

The combined ratio – a key measure of losses and other underwriting expenses per dollar of premium – improved to 100.7% in the first nine months of 2009, an increase from 105.5% in the first nine months of 2008.

If not for the decline in claim costs, the combined ratio would have increased 3.5 percentage points, instead of declining by 4.8 percentage points.

Partially offsetting the improvement in underwriting results, insurers’ net investment gains – the sum of net investment income and realized capital gains (or losses) on investments – fell 8.2%, to $26.2 billion in 2009, the report said.

Reflecting the industry’s net income and unrealized capital gains on investments (not included in net income), policyholders’ surplus — insurers’ net worth measured according to Statutory Accounting Principles — rose 7.3%, to $490.8 billion in 2009, according to the report.

The figures are consolidated estimates for all private property-casualty insurers based on reports accounting for at least 96% of all business written by private U.S. property-casualty insurers.