Fitch Ratings, a provider of credit ratings, commentary, and research, reported that the US property and casualty (P&C) insurance sector delivered notably strong underwriting results in the first half of 2025 and is expected to remain profitable through the remainder of the year.
According to Fitch, the industry posted a statutory combined ratio of 96.4% for the first six months, a 1.2-point improvement from the same period in 2024.
The firm noted that while overall pricing momentum is positive, it continues to moderate, with competitive pressures in the auto segment and the potential impact of tariffs representing risks to sustained improvement.
Fitch anticipates the industry’s combined ratio for the full year will rise slightly compared with 2024’s 97% but remain under 100%, maintaining profitability despite potential headwinds from hurricane activity, wildfires, and inflationary effects tied to trade measures.
Fitch highlighted that catastrophe losses reached between $75 billion and $92 billion in the first half of the year, driven primarily by January’s Palisades and Eaton fires and a series of severe storms.
However, the second quarter saw relatively muted catastrophe events, while favourable prior-period reserve development equivalent to 2.8% of earned premiums, compared with 1.8% last year, helped offset earlier losses.
In terms of line-specific performance, Fitch reported that the overall direct loss ratio was largely stable, with personal lines improving slightly and commercial lines showing modest deterioration.
Commercial auto experienced a 4.6-point improvement in its combined ratio, while commercial multi-peril posted a small gain. Workers’ compensation and other liability, however, recorded some softening.
Homeowners’ insurance came under pressure, with the direct loss ratio climbing to 79.8%, nearly 11 points higher than a year earlier due to first-quarter catastrophe events. Fitch added that rate increases are continuing in most states to address natural catastrophe volatility.
Personal auto insurance was one of the strongest segments, as Fitch recorded a 6.3-point decline in the direct loss ratio to 66.9%, the best outcome in five years. This was mainly driven by improvements in physical damage coverage and the benefits of prior rate hikes and underwriting actions.
Fitch cautioned, however, that further material improvement is unlikely, given slowing rate activity and the possibility that tariffs could contribute to cost severity.
On the premium side, Fitch reported that personal lines direct written premiums grew 6.7% in the first half, supported by continued significant rate increases in homeowners, while auto premium growth slowed. Commercial lines premium growth decelerated to 4.3% from 5.3% a year earlier, with commercial auto and liability lines leading expansion. Commercial multi-peril growth slowed, and workers’ compensation premiums declined once again.
Fitch also noted that operating income rose 18% year over year, with the annualised operating return on surplus improving to 7.9% from 7.2%. Investment income increased 3.1%. Adjusted for Berkshire Hathaway’s sale of Apple stock in 2024, net income grew by 25.7%. Policyholder surplus rose 4.9% compared with year-end 2024, supported by stronger statutory earnings and unrealized investment gains.
In its outlook, Fitch reiterated a neutral stance on the US non-life insurance sector, citing expectations for continued underwriting profitability in 2025. The agency stated that while the combined ratio will likely edge higher than in the prior year, it will remain favourable.
Pricing momentum is slowing overall, though performance varies across different lines, meaning that profitability will be positive but somewhat lower than 2024.
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