NA P&C re/insurers post strong operating results despite catastrophes: Fitch

Fitch Ratings’ review of GAAP financial results for 41 North American (NA) re/insurers showed strong operating returns, strong underwriting results, and higher investment income in the first half of 2025, despite elevated catastrophe activity.

Fitch reported that the overall operating return on common equity declined modestly year over year to 8.9% in H1’25, with nearly all sectors still exceeding double-digit levels.

Catastrophe losses rose 64% to $22 billion, driven by the January wildfires in Southern California. Natural catastrophes had the largest impact on the reinsurer segment, increasing the group’s combined ratio by 12.5% in H1’25, up from 2.7% in H1’24.

Despite this, the group still reported an underwriting profit with a 96.9% combined ratio.

Group common shareholders’ equity rose 5%, supported by positive net earnings and a modest improvement in unrealised bond positions. The increase was tempered by a 13.1% growth in capital returned to investors. The change in capital return included $2.9 million of share repurchases in the prior year period for Berkshire Hathaway Corporation (BRK) that were not repeated. Excluding BRK, the group’s capital return rose 36% in H1’25.

Reserve releases improved the combined ratio by 1.9 points, up from 1.4 points in H1’24, reflecting continued favourable prior-year development.

Social inflation heightened loss cost trends, particularly in commercial auto, general liability, and excess casualty, leading several re/insurers to report modest reserve charges. Significant workers’ compensation reserve releases offset much of this pressure.

Core fixed-income portfolio returns remained strong in H1’25, with higher yields and larger invested asset balances driving investment income 13% higher year over year.

The group’s annualised aggregate investment yield reached 3.9%, up from 3.4% in full-year 2024. Non-life insurers’ relatively short-duration bond portfolios position them well to benefit from reinvesting at today’s higher yields.