Although profits in the U.S. property and casualty insurance market were high in 2006, and profits in 2007 are anticipated to be above historical norms, Fitch Ratings questions the sustainability of the U.S. P&C insurance markets financial performance. Looking ahead, the results of 2006 are unfortunately not sustainable over the long term, the ratings agency said in its recent report, Sustainability Questioned Following Three Straight Years of Record Profits. Fitch noted premium rates in the U.S. P&C market are declining, promoting more modest growth in net written premium. As insurers look to more fully deploy their capital, pricing deterioration will accelerate and underwriting profit opportunities diminish, the report says. On the whole, Fitch reported, underwriting terms and conditions appear to be holding up reasonably well. Nevertheless, there have been signals of future market deterioration, the ratings agency noted. Underwriters are pricing newly gained accounts more aggressively than retained business, Fitch notes. Also, insurers looking for new avenues for growth are more frequently venturing into new product or geographic segments. Besides new product lines, diversification can also take the form of middle-market insurers pursuing small commercial accounts or admitted carriers entering into the excess and surplus lines market. Venturing into new segments creates uncertainty whether an insurer has the appropriate underwriting and claims expertise to succeed outside of core markets. As a result of these signs Fitch predicts, for 2007, barring above-average catastrophe-related losses, the property/casualty industry is expected to earn a significant underwriting profit, though net earnings will decline somewhat from 2006 levels. Returns on capital are more likely to decline below required levels in 2008, Fitch added.