The return-on-equity for US P&C insurers reached a decade high level of 14.97% in 2025, while the cost of equity held relatively steady at 8.18%, according to AM Best.
“Significant rate increases, especially in the homeowners and personal auto lines, have boosted the performance of P&C insurers, reversing a trend of underwriting losses into significant underwriting gains for the past two years,” said Helen Andersen, industry analyst, AM Best.
For the life/annuity (L/A) segment, high interest rates throughout 2024 drove exceptional returns. As interest rates began to decline in 2025, new money yields slowed, bringing down returns. The relationship between interest rates and L/A insurers’ returns is evident when viewed alongside the yield of US Treasury bonds. L/A insurers’ median return on capital employed level of 8.36% narrowly missed the weighted average cost of capital target of 8.43%.
Similarly, the median return on equity for life insurers fell to 11.71% in 2025, down from a record high of 15.96% in 2024. Like the P&C and health segments, L/A insurers exceeded the cost of equity despite its increase.
