Property/casualty insurers posted relatively strong results in the second-quarter of 2017, despite difficult market conditions that are likely to continue for the foreseeable future, analysts say.

While weather-related losses hit some property insurers and reserve releases slowed for some casualty books, combined ratios largely remained below 100%.

But with investment income still under pressure from low interest rates and prices continuing to soften in some lines of coverage, insurers face more challenges ahead, they say.

Overall, insurers’ results were better than expected, said Jim Auden, managing director at Fitch Ratings Inc. in Chicago.

“We thought results would deteriorate in 2017 given cyclical pressures,” he said. “We’ll have to see how the year ends up.”

“Overall, it was a pretty good quarter for most companies,” said Paul Newsome, managing director at Sandler O’Neil & Partners L.P. in Chicago.

However, severe hail storms and weather-related losses in the United States in the second-quarter took their toll.

“We had anticipated bad weather in the U.S., but it was a little worse than we thought just in terms of translation into insured loss,” said Meyer Shields, managing director at Keefe, Bruyette & Woods Inc. in Baltimore.

In May alone, severe weather across the central and eastern United States caused insured losses approaching $3 billion, according to Aon Benfield’s Impact Forecasting.

“There was a little bit of an elevated weather and catastrophe effect, particularly with those companies that are U.S focused,” said Paul Newsome, managing director at Sandler O’Neil & Partners L.P. in Chicago.

On the casualty side, some reserve releases slowed, said Mr. Shields.

“There were a couple of new notes of caution with regards to loss trends where some companies, I think appropriately, were a little more hesitant to release reserves for casualty lines for recent years because there’s an expectation that maybe things won’t develop to favorably,” he said.

While rates increased in some lines, such as commercial auto, continued soft or flat pricing in many lines also put pressure on insurer profits.

“There was margin compression in most lines of commercial insurance due to price declines,” Mr. Newsome said.

“Most companies still achieved underwriting profits,” with combined ratios below 100%, Mr. Auden said, despite “limited” revenue growth.

Growth in investment income was also limited, despite small increases in interest rates and investment yields.

“It really takes some time for any change in interest rates to lead to a change in the portfolio yield,” Mr. Auden said.

“For the group, (return on equity) is pretty flat at about 7%, even with the past year, but most companies are not satisfied with that,” he said.

Looking forward, insurers are unlikely to see much in the way of price increases, particularly those that write reinsurance, the analysts said.

“One key development over the quarter was that property/casualty reinsurance renewal pricing at June 1 and July 1 was worse than expectations,” Mr. Shields said.

Insurance pricing, too, is unlikely to improve for insurers.

“Pricing deterioration is likely to continue in the near term,” Mr. Auden said. “Market underwriting capacity in commercial lines remains strong and there is no evident catalyst for a move towards higher premium rates.”

“There were some very small signs that commercial insurance pricing has flattened out,” Mr. Newsome said, adding that it’s “far, far too early,” to call a bottom to the market.