NEW YORK—The U.S. property/casualty insurance industry saw a sharp decline in performance in the first nine months of 2008, and full-year results are likely to follow the same trend, Fitch Ratings Ltd. analysts say.

Investment losses, compounded by catastrophe claims, hammered most insurers in the segment, Fitch said. The group's aggregate net income—excluding results from American International Group Inc.—dropped 77% during the nine-month period. In a report released Wednesday, New York-based Fitch said its negative outlook for most global insurance sectors "reflects a view that rating downgrades are likely to outnumber upgrades in the next 12-18 months."

Earnings are not expected to rebound much during the rest of this year, Fitch said, adding that further investment losses are likely. Analysts said that despite the drop in net income for the first nine months, most insurers should still post an underwriting profit in 2008.

U.S. insured catastrophe losses for the first nine months of 2008 topped $22 billion, according to the Insurance Services Office's Property Claim Services Unit, which was the fourth highest-amount for comparable periods in the past 10 years.

Looking ahead to 2009, Fitch analysts predict that premium growth will be slow due to a competitive market and the possibility of an economic recession.

However, Fitch does not expect a hard insurance market outside of recently harder-hit segments, including professional liability for financial institutions, coastal property coverage and property/casualty reinsurance.