A recent report from AM Best shows that the U.S. property and casualty industry will post its largest underwriting profit and lowest combined ratio in a decade in 2025, driven by improvements in underwriting performance and pricing.
The ratings agency noted that the industry generated $84 billion in underwriting gains over the past two full calendar years, compared with $51 billion in underwriting losses between 2021 and 2023.
The improvement in net underwriting performance began in 2024, with a $45 billion increase, and continued into 2025, despite considerable losses at the beginning of the year due to January’s Los Angeles wildfires.
According to the report, by 2025, underwriting profits in the U.S. personal lines business will almost quadruple to $45.7 billion, accounting for 51% of the industry’s total direct written premiums, while profits in the commercial line business will more than double to $19.2 billion.
Private passenger car insurers have experienced a significant turnaround over the past two years, with combined ratios well below 100 in both 2024 and 2025 after exceeding the threshold in the previous three years, reflecting unprofitable underwriting performance.
David Blades, associate director at AM Best, said: “Insurers writing personal auto and homeowners insurance have reaped the benefits of technology and data analytics to supplement underwriting, claims processing and rate setting.
“For both lines, there will be significant rate momentum in net premiums going into 2024 and 2025, helping profitability.”
AM Best noted that U.S. commercial insurers generally continued to generate underwriting profits during the five-year period covered by the report. This analysis is based on the companies’ NAIC insurance expense schedule financial statements received, processed and summarized by AM Best as of June 2, 2026.
Commercial Lines results reflected strong underwriting and operating performance, continued pricing adequacy, improved investment returns and overall adequate reserves.
“Casualty insurance, particularly commercial auto liability and other liability (accident) insurance, remains under pressure from adverse developments and rising claims severity,” said Christopher Graham, senior industry analyst at AM Best. “Calendar year underwriting performance varied widely across the major commercial lines of business, but overall results remained favorable.”
AM Best added that workers’ compensation continued to contribute positively to overall commercial line results; however, underwriting profits in this line continued to shrink as the recent trend of lower interest rates continued.
The report also highlights that claims trends continue to be a major concern for commercial liability insurance, driven by social inflation, aggressive litigation strategies, third-party litigation funding, increased settlement costs, and increasing jury awards.
Additionally, unfavorable developments in reserves continue to plague commercial auto liability, with a reserve shortfall of $2 billion in 2025, the bulk of which is due to recent accidents in 2023 and 2024.
