AM Best, the global insurance credit ratings agency and provider of insurance market intelligence, says US property and casualty mutual insurers recorded a significant improvement in financial performance during 2025, despite continued competitive pressures and exposure to severe weather events.
In its latest Best’s Market Segment Report, Mutual Insurers Resilient Despite Competitive Pressures, AM Best reported that net income across its rated US mutual insurance composite reached $42.6 billion in 2025, twice the level recorded a year earlier.
AM Best said the increase was supported by a marked improvement in underwriting performance. The composite moved from a $7.2 billion underwriting loss in 2024 to a $14.8 billion underwriting gain in 2025. Investment income also remained an important contributor, exceeding $20 billion in both years.
The improvement followed several years in which mutual insurers had adjusted pricing and underwriting practices in response to inflation and changing claims conditions. AM Best said insurers had introduced rate increases, revised discounts and increased deductibles before 2025, with those measures contributing to stronger premium revenue.
“Mutuals began filing for significant rate increases, restructuring discounts and raising deductibles in years preceding 2025, and the effects of these underwriting actions have bolstered revenue,” commented Justin Aimone, Financial Analyst, AM Best. “Rate adequacy and mutual carriers’ ability to properly price risks also have benefited significantly from the rise of data analytics, enhanced technology and risk modelling.”
AM Best reported that underwriting expenses increased by 5.8% in 2025 compared with the previous year. However, the increase was partly balanced by a modest reduction in loss and loss adjustment expenses.
Weather-related losses remained an important consideration. While the mutual insurers included in AM Best’s composite avoided major losses from hurricanes, the relatively quiet Atlantic hurricane season did not remove the impact of other catastrophe risks. Wildfires, localised flooding and severe convective storms continued to generate claims and put pressure on results.
AM Best also highlighted higher policyholder dividends during the period. Mutual insurers increased distributions as improved underwriting performance and investment returns strengthened their financial position. During the first quarter of 2026, policyholder dividends reached $5.5 billion, compared with $0.5 billion in the corresponding period of 2025.
Net income for the first quarter of 2026 also rose to more than three times the level recorded during the same period a year earlier, according to AM Best. The company noted, however, that the comparison was affected by the significant impact of the California wildfires on results in the first quarter of 2025.
The performance of the wider mutual insurance segment continues to be influenced by the size and geographical spread of individual insurers. AM Best said larger mutual insurers, which hold substantial policyholders’ surplus, have a significant effect on the composite’s overall results. Smaller insurers, meanwhile, have tended to report lower loss ratios.
“Many small insurers tend to write in niche or local markets, cultivating strong relationships with independent agents, and typically exhibit higher retentions within the customer base. However, these smaller companies can be more susceptible to weather-related events and volatility, as larger mutuals may have a greater geographical spread of risk,” noted Anthony Molinaro, Associate Director, AM Best.
AM Best also reported that growth in net premiums slowed to 5% in 2025. The company said this brought premium growth closer to historical pre-pandemic levels, as pricing from earlier periods was considered adequate for prevailing conditions.
The financial position of the mutual insurance segment continued to strengthen, with AM Best-rated mutual insurers recording an increase in surplus for the third consecutive year. Surplus rose by $64 billion during 2025 to reach $468 billion, marking the largest year-on-year increase recorded during the period covered by the report.
Despite the improvement in overall results, AM Best identified social inflation as an ongoing issue for mutual insurers, particularly those operating in casualty and liability lines. The company said market conditions in these areas had continued to harden, creating additional pressure for insurers as they assessed pricing, claims costs and liability exposures.
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