Oct. 18 (Bloomberg) -- U.S. insurers probably increased third-quarter earnings faster than any other industry as companies including Allstate Corp. passed the peak of the hurricane season unscathed a year after Katrina.

Profit for the 23 insurance companies in the Standard & Poor's 500 Index may have more than tripled from a year ago, according to analysts surveyed by Thomson Financial. Allstate, set to report results later today, likely earned $1.78 a share after a $2.52 loss. American International Group Inc.'s profit probably doubled to $1.42 a share. Figures exclude investment gains and losses.

``It'll be a very strong quarter,'' said Jim Auden, a senior director for research at Fitch Ratings in Chicago. ``But the way this industry operates, it can't last much longer.''

Insurers raised premiums on coastal properties by as much as 500 percent after Hurricane Katrina left most of New Orleans under water and devastated parts of Mississippi. Profit margins widened as claims this year plunged, leaving the industry poised for a record $55 billion to $60 billion of net income in 2006, said Bob Hartwig, chief economist of the Insurance Information Institute in New York. Future growth may not be as easy, as rates for commercial liability coverage and car insurance decline.

``I worry,'' said Eric Holmes, who helps oversee $21 billion at Cincinnati-based Fifth Third Asset Management, including insurance stocks. ``Insurance companies have tended to lower prices in order to take market share when they have the capital available. The mild season has allowed more capital to pile up.''

Neither of the two major Atlantic Ocean hurricanes this year made landfall in the U.S. This month Colorado State University researchers in Fort Collins, part of a cottage industry of government and private weather forecasters, said they didn't expect any more big storms before the season ends on Nov. 30.

St. Paul, Chubb

Katrina produced a record $40.6 billion in insured losses, the bulk of the $57.3 billion in U.S. hurricane claims last year, according to Insurance Services Office Inc. in Jersey City, New Jersey.

Northbrook, Illinois-based Allstate, the nation's largest publicly traded home and car insurer, had $3.06 billion in after- tax catastrophe costs in last year's third quarter. New York- based AIG, the No. 1 commercial insurer, had $1.57 billion.

St. Paul Travelers Cos., AIG's biggest commercial rival, had more than $1 billion in storm costs a year ago. The St. Paul, Minnesota-based company probably earned $1.32 a share in the past quarter, up from 7 cents a year ago, analysts surveyed by Thomson estimated.

Profit at Warren, New Jersey-based Chubb Corp., which covers businesses as well as homeowners, probably almost tripled to $1.24 a share. Hartford Financial Services Group Inc. of Hartford, Connecticut, may have gained 23 percent to $2.23 a share, according to Thomson.

Stock, Bond Gains

Bonds of U.S. insurers, including AIG and St. Paul Travelers, returned 3.5 percent in August and September, the most among 15 industries tracked by New York-based Merrill Lynch & Co. The S&P 500 Insurance Index climbed 6.6 percent in the past two months, outperforming the broader S&P 500's 5.1 percent gain. It reached its highest level since December 2000 this week.

``More important to the stocks will be what underwriting margins look like, excluding catastrophe losses,'' wrote Jay Cohen, a Merrill analyst in New York, in an Oct. 4 research note.

The average commercial insurance rate slid 3 percent in the second quarter, the ninth quarterly drop, according to the most recent survey by the Council of Insurance Agents and Brokers. Insurers lowered rates on every major line of coverage except commercial property, the council said.

Car insurance rates also have been falling. Policies renewed in the third quarter dropped 2 percent to 4 percent, estimated Meyer Shields, an analyst at Stifel Nicolaus & Co. in Baltimore.

Disaster-Prone Areas

``Some rates are still rising, but it's such a small percentage of the whole pie, and the bigger portions of the pie are going down,'' said Stuart Quint, who helps manage the $49 million Gartmore Global Financial Services Fund from West Conshohocken, Pennsylvania. The fund holds shares of St. Paul and AIG.

Insurance on homes and commercial properties in disaster- prone states are the least likely to succumb to competitive forces even as the season passes with no hurricane damage, Fitch's Auden said.

Prices at AIG's biggest U.S. commercial property unit rose an average of 50 percent in the second quarter. For locations vulnerable to storms, rates aren't likely to have a ``significant falloff'' even with the mild weather, AIG Chief Executive Officer Martin Sullivan told analysts in September.

Reinsurance

Rates charged by home insurers may be dictated by the higher cost of reinsuring property coverage with other companies, according to a study by Chicago-based Aon Corp., the largest reinsurance broker.

Insurers of homes in high-risk areas have sought regulatory approval for price increases of 20 percent to 100 percent since Katrina, Hartwig said. They need to raise prices by another 43 percent in some states to achieve a 14 percent return on equity, Aon said in its study.

Reinsurers were among the biggest beneficiaries of the mild hurricane season. Bermuda-based Ace Ltd., which sells insurance and reinsurance, may report profit of $1.66 after a loss of 70 cents a year ago, according to Thomson's survey. Competitor XL Capital Ltd. may post earnings of $2.13, compared with a loss of $8.01.

Third-Quarter Earnings Expectations By S&P Industry Groups

                                   Change 3Q 2006 vs. 3Q2005
                                        Increase (Decrease)
S&P Sector
Insurance                                    232%
Automobiles & Components                     76%
Materials                                    40%
Telecommunications                           22%
Energy                                       20%
Transportation                               19%
Household & Personal Products                18%
Diversified Financials                       16%
Media                                        13%
Capital Goods                                12%
Retailing                                    11%
Health Care Equipment & Services             10%
Utilities                                    9.6%
Food & Staples Retailing                     8.9%
Real Estate                                  8.7%
Consumer Services                            7.6%
Commercial Services & Supplies               6.9%
Banks                                        6.2%
Technology Hardware & Equipment              3.6%
Food Beverage & Tobacco                      3.5%
Software & Services                          2.9%
Pharmaceutical, Biotech & Life Sciences     (1.7%)
Semiconductors & Semiconductor Equipment    (8.2%)
Consumer Durables & Apparel                 (25%)

Percentages are calculated using earnings estimates from IBES, a
unit of Thomson Financial, as of Oct. 17. They are weighted using
diluted shares outstanding.

___________________________________________________________

By Erik Holm

To contact the reporter on this story: Erik Holm in New York at eholm2@bloomberg.net .

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