According to credit rating agency AM Best, the US property and casualty (P/C) insurance industry recorded a $1.1 billion net underwriting loss in the first quarter of 2025—a significant decline from the $9.4 billion gain reported during the same period in 2024.
The drop was primarily driven by elevated losses from the January wildfires in California. These initial figures are presented in AM Best’s Special Report: “First Look: Three-Month 2025 US Property/Casualty Financial Results.”
The data reflects insurer filings received as of May 29, 2025, covering about 96% of total industry net premiums written.
Catastrophe-related losses had a major impact on profitability, adding an estimated 14.7 percentage points to the industry’s combined ratio—up from 5.4 points in the first quarter of the previous year. This contributed to a deterioration in the combined ratio, which rose to 99.4 from 94.4 year over year.
While net investment income increased modestly by 2.4%, pre-tax operating income fell by 34.4% to $19.6 billion. A substantial 74.6% drop in net realised capital gains—primarily due to a $10.5 billion decrease at National Indemnity Company—led to a 50.4% decline in industry net income, which dropped to $19.8 billion compared to the prior year.
Despite the decline in profits, the industry’s capital base remained resilient. Policyholders’ surplus inched up to $1.1 trillion, supported by net income and capital contributions. This was partially offset by a $9.5 billion reduction in unrealized capital gains and $4.9 billion in shareholder dividends.
Return on equity (ROE) fell to 1.8%, down from 3.8% in the prior year, underscoring continued pressure on profitability.
According to AM Best, the accident-year combined ratio—excluding prior-year reserve development—was 103.6, suggesting that core underwriting performance weakened further than the headline combined ratio indicates. Favorable reserve development totaled $9.6 billion.
The California wildfires in January illustrate growing exposure to high-severity weather events, particularly in areas with significant insured property values. Combined with increasing claims severity, this is prompting greater focus on underwriting discipline and catastrophe risk management across the industry.
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