U.S. property & casualty insurers posted an underwriting loss of $2.6 billion for 2024, a significant improvement from the $24.6 billion underwriting loss recorded in 2023, according to AM Best. Additionally, the estimated combined ratio for 2024 was 98.9, an improvement from 101.9 for 2023.

While the industry continued to face weather-related challenges and adverse litigation trends such as social inflation and third-party litigation funding in 2024, the report highlights positive trends in underwriting and operating results, with expectations for further improvement in 2025.

An improvement in underwriting results is likely to bring a healthier underwriting environment with increased capacity and more stable market conditions. However, with rate increases and carriers withdrawing from certain markets having played a key role in restoring profitability, affordability pressures for policyholders are likely to continue.

The industry's underwriting results benefited from improved rate momentum in most commercial lines and a notable recovery in personal lines. Additionally, the industry's net investment income grew by an estimated 18% to $85.4 billion, boosting the industry's net income by an estimated 61% to $143.5 billion in 2024.

The personal lines segment will be a driver of the expected improvement, the report said. In 2024, personal lines posted a net underwriting loss of $11.9 billion compared to a loss of $36.7 billion in 2023. As rate increases were pushed through in auto and home insurance, the combined ratio for private passenger auto improved to 98.7, down from 104.9 in 2023. The combined ratio for homeowners improved to 105.7, down from 110.9 in 2023.

A further reduction in the combined ratio for personal auto to 97.5 is expected in 2025, the report said.

Personal lines premium increased 12.9% in 2024 and is projected to increase 9% in 2025, according to the report, with carriers prepared to withdraw from a state entirely if needed increases are not approved, the report said.

With personal auto accounting for a third of all the p&c industry's annual direct premium and more than a half of total personal lines premium, the market will have a material impact on the p&c industry's overall results going forward.

Despite the commercial lines segment posting a combined ratio of 97, four points better than the personal lines segment, the segment was adversely impacted by a commercial auto combined ratio of 108.5. While growth is expected to weaken to about 4% in 2025, the combined ratio should remain steady at 97, the report said.

Overall, the p&c sector experienced robust premium growth in 2024, with net premiums written increasing by 10%, the report said. This is expected to moderate in 2025, with projections looking closer to a 7.3% increase.

Olivia Overman is IA content editor.