Commercial Lines Drive Strong the First Half of 2025 Profitability for US Insurers

US property-casualty insurers reported strong underwriting performance in the first half of 2025, with commercial lines continuing to deliver steady premium growth and improved results in several segments. The industry posted a combined ratio of 96.4 percent, down 1.2 percentage points year over year, according to Fitch Ratings. The second-quarter combined ratio came in at 94.1 percent—7 points better than a year earlier and well below the 15-year average of 102.1 percent.

Commercial lines direct written premiums rose 4.3 percent in the first half, a slight deceleration from 5.3 percent in the same period of 2024. Commercial auto and other liability-occurrence lines delivered the strongest year-over-year premium growth as insurers continued to implement meaningful rate actions in these challenging areas. However, premium growth slowed for commercial multiperil, and workers compensation saw continued premium declines.

Commercial auto posted a 4.6-point improvement in its combined ratio in the first half, reflecting better underwriting discipline and rate adequacy. Commercial multiperil improved marginally by 0.4 points. Workers compensation and other liability lines experienced modest deterioration, continuing a trend of mixed performance across commercial sectors.

Catastrophe losses were significant in early 2025, estimated between $75 billion and $92 billion, primarily from January's Palisades and Eaton fires and convective storms. However, second-quarter catastrophe losses were comparatively muted. Favorable reserve development, totaling 2.8 percent of earned premiums versus 1.8 percent in the prior year, also helped offset first-quarter impacts.

Overall, direct written premium growth for the industry was supported by ongoing rate actions, particularly in commercial auto and liability lines. However, Fitch noted that pricing momentum is moderating across most commercial segments amid rising competition. Tariffs could add upward pressure to loss costs, especially in auto lines, potentially narrowing underwriting margins in the second half of the year.

Operating income increased 18 percent year over year in 1H25, while the annualized operating return on surplus rose to 7.9 percent from 7.2 percent. Investment income improved by 3.1 percent. Net income, adjusted for Berkshire Hathaway's Apple Inc. divestiture in 2024, increased 25.7 percent year over year. Policyholder surplus grew 4.9 percent from year-end 2024, driven by stronger statutory earnings and investment gains.

Fitch expects the full-year combined ratio to increase modestly from 97 percent in 2024 but remain below 100 percent. Its neutral sector outlook reflects continued underwriting profitability through 2025, despite softer pricing and persistent external risks in certain commercial lines.