The pace of value creation for property and casualty (P&C) insurers in 2025 may slow, yet it is still expected to remain above average, according to Bloomberg Intelligence’s latest analysis. While the projected value creation rate (VCR) for the year is anticipated to be in the mid-teens, this is a decline from 2024’s strong performance. This year’s figures are still higher than the long-term average of nearly 12%. The first quarter’s Los Angeles wildfires introduce additional uncertainty, which could impact projected book value growth—an area already prone to volatility.
Investment Income to Drive Growth
A key driver of value creation in 2025 will be rising investment income, alongside strong combined ratios. Most insurers are expected to achieve VCRs in the mid-teens, surpassing the decade-long average of approximately 12%. VCR, a metric that measures growth in book value per share (excluding AOCI) plus dividends, should continue to be supported by solid underwriting margins and favorable pricing trends. While underwriting income may decline from the peak observed in 2024, the industry’s outlook remains positive, bolstered by a tailwind from pricing.
Increased investment income is expected to offset the impact of elevated catastrophe losses, such as those from the wildfires in Los Angeles. Additionally, the easing of auto insurance loss costs has benefitted personal lines businesses, although year-over-year comparisons are becoming more challenging.
Special dividends, realized gains, and equity appreciation, if announced, are not factored into the VCR calculations. These items are typically beneficial to certain insurers like W.R. Berkley, AFG, and Cincinnati.
Progressive Leads in Book Value Growth
Among all P&C subsectors, Progressive and Arch are expected to lead in terms of book value growth, with both companies maintaining relatively low levels of volatility. While we expect this trend to continue, we are more confident in Progressive’s performance. Arch’s growing exposure to property and catastrophe reinsurance premiums—nearly eight times larger than in 2019—introduces a higher level of loss risk. In contrast, personal lines insurers benefit from a lower level of legacy liability reserve risk compared to commercial and multi-line insurers.
In the past decade, some carriers’ book value growth has been distorted by their unit sales. AFG, for instance, frequently distributes special dividends, putting it among the leaders in annual VCR. RenaissanceRe and Everest have also raised equity capital, further boosting their book value.
Higher Potential for Volatility in 2025
The 2025 book value growth outlook comes with a higher-than-average potential for variability, driven in part by the unusual nature of major catastrophes that impacted the first quarter. Such events are expected to add an extra layer of uncertainty to insurers’ financial outcomes.
First Quarter Book Values Expected to See a Boost
Insurers’ reported book values for the first quarter of 2025 could receive a lift, thanks to movements in widely held fixed income categories, which affect Accumulated Other Comprehensive Income (AOCI). AOCI includes unrealized gains on available-for-sale fixed income securities, along with other items like foreign exchange. Changes in AOCI helped modestly improve 2024 book values, contributing 3% to equity, compared to 10% in 2023 and a negative 24% in 2022.
Since insurers typically hold securities to maturity, price movements in these categories are expected to reverse over time. However, significant changes in AOCI could impact underwriting capacity if they become large enough. Estimates for 2025 reported book values have declined following 4Q results, primarily due to wildfire losses.
Book Value Excluding AOCI as a Reliable Metric
Given the unpredictability of quarterly fixed income yields, book value excluding AOCI is considered a more reliable measure of an insurer’s financial health.
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