ROE for US P&C Insurers Reached Decade High Level in 2025: AM Best

Key Takeaways

• P&C insurers' ROE hit 14.97% in 2025, decade high
• Rate hikes in homeowners and auto lines drove underwriting gains
• Median return on capital employed rose to 12.41% for P&C
• Health insurers still beat cost of capital despite claim pressures

Pulse Analysis

The AM Best 2025 rating report shows U.S. property‑and‑casualty insurers achieving a return‑on‑equity of 14.97%, the strongest in ten years. The surge reflects a combination of higher premium rates—particularly in homeowners and personal auto lines—and a relatively mild hurricane season that limited loss severity after the early‑year California wildfires. Underwriting profitability has shifted from loss‑making to gain‑making for two consecutive years, allowing carriers to translate pricing power into solid equity returns. This performance places P&C firms well above their 8.18% cost of equity, widening the profit margin.

The upward trend is not isolated to P&C. Health insurers have consistently outperformed their weighted‑average cost of capital for the past 15 years, even as medical claim costs rise and specialty drugs pressure margins. In contrast, life and annuity carriers saw returns erode as the 2024 interest‑rate rally faded; their median return on capital employed fell to 8.36%, just shy of the 8.43% cost of capital. The data underscores how sensitive life‑insurance profitability remains to Treasury yield movements, while P&C and health segments benefit more from pricing discipline than from interest‑rate environments.

For investors, the decade‑high ROE signals a compelling risk‑adjusted return profile for P&C stocks, especially as insurers retain disciplined underwriting and continue to leverage rate increases. However, the sustainability of these gains hinges on the trajectory of natural‑catastrophe exposure and regulatory constraints on premium hikes. Health insurers must balance claim cost inflation with pricing power to maintain their capital advantage. Meanwhile, life insurers may need to diversify asset allocations or explore new product mixes to offset the narrowing spread between returns and capital costs as rates normalize.