Fitch Ratings says the US property and casualty sector turned in a strong first half of 2025, with underwriting results showing resilience despite heavy catastrophe losses.
The industry’s statutory combined ratio landed at 96.4%, an improvement of 1.2 points from the same period in 2024.
Catastrophe costs were severe, ranging from $75bn to $92bn in the first six months, largely tied to the Palisades and Eaton fires and a wave of damaging storms early in the year.
Losses eased in the second quarter, while favorable reserve development equivalent to 2.8% of earned premiums—up from 1.8% the year before—helped absorb the impact.
Segment performance varied. Personal auto posted its best result in five years with a direct loss ratio of 66.9%, down 6.3 points thanks to physical damage improvements and past rate hikes.
Homeowners’ insurance moved the opposite way, as catastrophe activity drove the direct loss ratio to 79.8%, nearly 11 points higher than last year.
Commercial auto improved by 4.6 points, while commercial multi-peril notched smaller gains. Workers’ compensation and liability softened modestly.
Premium growth followed similar lines. Personal lines expanded 6.7% in the first half, supported by homeowners rate increases, while auto growth slowed. Commercial lines rose 4.3%, down from 5.3% a year earlier, with workers’ comp continuing to contract.
Operating income climbed 18% year over year, with operating return on surplus at 7.9%. Investment income improved 3.1%.
Adjusted for Berkshire Hathaway’s Apple stock sale in 2024, net income grew 25.7%. Policyholder surplus was up 4.9% from year-end, buoyed by earnings and unrealized gains.
Fitch expects the sector to remain profitable for the full year, even with combined ratios edging slightly higher than 2024’s 97%.
Pricing momentum is moderating, competitive pressure in auto remains, and tariffs pose risks, but overall profitability is expected to hold. The agency maintains a neutral outlook on the US non-life market through 2025.
