An In-Depth Analysis of Profitability in the Global Insurance Industry

Section 1: The Dual-Engine Model of Insurance Profitability

The insurance industry, a cornerstone of the global financial system, operates on a business model that is fundamentally different from that of most other corporations.

While a typical company generates profit by selling a product or service for more than it costs to produce, an insurer’s profitability is derived from a sophisticated, dual-engine mechanism.

The first engine is underwriting income, generated from the core business of assuming and pricing risk.

The second, and often more powerful, engine is investment income, earned by strategically investing the vast pools of capital collected from policyholders.¹

Understanding how these two engines interact is essential to comprehending how, and how much, insurance companies truly make.

1.1 Underwriting Income: The Art and Science of Pricing Risk

The primary and most visible function of an insurance company is to provide financial protection against unforeseen future events.

Insurers enter into legal agreements, or policies, with individuals and businesses (policyholders), agreeing to bear the financial burden of a specified loss event in exchange for a regular payment, known as a premium.³

The primary way an insurer seeks to profit from this activity is by ensuring that the total premiums collected exceed the total amount paid out in claims plus all operating expenses.

This net result is known as the underwriting profit.³

This process is anchored by the discipline of underwriting, which involves the meticulous evaluation of potential risks to determine the correct premium rates and whether to accept or decline new applications.¹

Insurance companies employ teams of underwriters and actuaries who use vast amounts of historical data and complex statistical models to predict the timing, likelihood, and potential value of future claims.³

This risk-adjusted pricing is the foundation of the insurer’s revenue model, designed to ensure financial stability by covering expected claims, operational costs, and a margin for profit.¹

The critical metric for measuring the performance of this core business engine is the combined ratio.

This ratio provides a comprehensive view of an insurer’s underwriting profitability before accounting for investment income.

It is calculated with the following formula ²:

Combined Ratio=Premiums Earned(Claims Paid+Expenses)​

A combined ratio below 100% indicates that the insurer has made an underwriting profit, as its premium income was more than sufficient to cover all claims and operating costs.

Conversely, a combined ratio above 100% signifies an underwriting loss, meaning the insurer paid out more in claims and expenses than it collected in premiums.²

The relationship between underwriting and investment income is not merely additive; it is symbiotic and strategic.

An insurer’s overall profitability is a function of its total return, which combines underwriting results with investment returns.⁴

This means an insurer might be willing to operate at an underwriting loss—accepting a combined ratio over 100%—if it believes the investment income generated from the premiums will more than compensate for that loss.

This strategy was particularly common in eras of high interest rates, when investment income could reliably offset underwriting shortfalls.⁵

However, in low-interest-rate environments, the pressure shifts back to the core business, forcing insurers to exercise greater “underwriting discipline” to achieve a profit directly from their insurance operations.⁵

This dynamic balance between the two profit engines explains much of the cyclical pricing behavior in the industry, often referred to as “hard” markets (high premiums, strict underwriting) and “soft” markets (lower premiums, more lenient underwriting).⁶

1.2 Investment Income: The Power of the “Float”

The second engine of insurance profitability, and arguably its most profound structural advantage, is the income generated from investing premiums.

This is made possible by a concept known as the “float.” In an insurance operation, float arises because premiums are received upfront, while claims are paid out later—an interval that can sometimes extend for many years.⁵

During this period, the insurer holds a massive sum of money that it does not yet own but can invest for its own account.¹

This float is strategically invested in a diverse portfolio of financial instruments, including government and corporate bonds, equities, real estate, and other income-generating assets.¹

The returns from these investments constitute a critical revenue stream that supports the insurer’s long-term financial obligations, covers claims payments, and ultimately drives shareholder returns.¹

The core of a typical insurer’s investment strategy is centered on stable, interest-bearing instruments.

U.S. Treasury securities and high-grade corporate bonds are favored for their ability to offer a predictable return while preserving the capital needed to pay future claims.¹

Consequently, the prevailing interest rate environment has a direct and significant impact on an insurer’s investment income; as interest rates rise, so do the returns on these key fixed-income assets.²

The ability to invest the float before paying claims provides insurers with a unique and powerful structural advantage over other financial institutions.

As famously articulated by investor Warren Buffett, whose conglomerate Berkshire Hathaway is built around a core of insurance operations, when an insurer achieves an underwriting profit, the float essentially becomes “free money.” In this scenario, the insurer is effectively being paid to hold the capital it will later invest for its own gain.⁵

This stands in stark contrast to other investment vehicles, such as private equity firms, which must typically borrow capital at a significant positive interest rate to fund their investments.⁵

This access to a low-cost, or even negative-cost, source of capital is not merely a secondary revenue stream; it is the fundamental competitive moat of the insurance industry and explains why investment-focused entities are often built upon an insurance foundation.

To illustrate the interplay of these two engines, consider the following scenarios for a hypothetical insurance policy.

Table 1: The Dual Revenue Streams of Insurance (Illustrative Example)

Line Item	Scenario A: Underwriting Profit	Scenario B: Underwriting Loss
Premium Income	$1,000	$1,000
Claims Paid	$700	$900
Underwriting Expenses	$200	$200
Underwriting Profit/(Loss)	$100	($100)
Investment Income on Float	$50	$150
Total Profit	$150	$50

Source: Adapted from model in.³

In Scenario A, the insurer achieves a modest underwriting profit, which is then supplemented by investment income to produce a healthy total profit.

In Scenario B, the insurer suffers an underwriting loss, but a stronger investment performance more than compensates for it, still resulting in a positive total profit.

This simple model demonstrates the crucial balancing act that defines insurance profitability.

1.3 Ancillary Revenue Streams and The Role of Reinsurance

Beyond the two primary engines of underwriting and investment, insurers generate additional income from a variety of ancillary sources.

These non-core revenue streams include administrative and service fees charged for policy issuance, renewal processing, and management changes, as well as penalties for late payments or cancellations.¹

Insurers also earn revenue from selling add-on products alongside core policies, such as legal expense coverage or home emergency assistance, and from premium financing arrangements where they lend funds to customers to pay their premiums in installments.⁷

A crucial strategic element of the insurance business model is reinsurance, often described as “insurance for insurance companies”.²

A primary insurer cedes, or passes on, a portion of its premium and risk portfolio to a reinsurer.

This practice serves several critical functions that directly impact profitability and stability.

First, reinsurance provides vital risk mitigation, allowing primary insurers to transfer a portion of their potential losses, particularly from large, high-severity events like hurricanes or earthquakes.

This protects their balance sheets from the volatility of catastrophic claims.²

Second, it is a key tool for capital management and growth.

Insurance regulators often mandate that insurers obtain reinsurance for policies that exceed a certain percentage of their capital value.²

By offloading risk, reinsurance allows insurers to underwrite more policies and compete for greater market share than their own capital base would otherwise permit.²

Finally, reinsurance helps to smooth out the natural fluctuations in profits and losses, leading to more predictable financial results over time.²

In some cases, insurers can even profit from this arrangement through arbitrage, charging consumers a certain rate for a policy and then obtaining cheaper rates by reinsuring these policies on a bulk scale.²

Section 2: Sector-Specific Profitability Analysis: A Tale of Divergent Fortunes

While the dual-engine model of underwriting and investment is universal, its application and results vary dramatically across the industry’s major sectors: Property & Casualty (P&C), Health, and Life.

The financial performance of these segments in the recent 2023-2024 period tells a tale of divergent fortunes, as each sector responded differently to the prevailing macroeconomic environment of high inflation and rising interest rates.

The P&C sector staged a dramatic comeback to profitability, while the Health sector saw its profits collapse under the weight of rising costs.

2.1 Property & Casualty (P&C) Sector Deep Dive

The U.S. P&C insurance industry executed a remarkable financial turnaround in 2024.

After enduring a substantial net underwriting loss of $21.2 billion in 2023, the sector swung forcefully back into the black, posting a net underwriting gain of $22.9 billion in 2024.⁹

This recovery was reflected across all key performance indicators.

The industry’s combined ratio, the core measure of underwriting profitability, improved dramatically from a loss-making 101.6% in 2023 to a solidly profitable 96.6% in 2024.⁹

This marked the industry’s best underwriting result since 2013.¹²

This improvement was fueled by robust premium growth, with net premiums written increasing by 10.5% in the first half of 2024 alone and reaching an estimated $918.6 billion for the full year, a 7.1% increase over 2023.¹¹

The bottom-line result was a surge in net income.

Depending on the source and the inclusion of large, one-time realized capital gains at certain companies, industry net income soared from approximately $39 billion in 2023 to between $88 billion and $169 billion in 2024.⁹

The primary driver of this turnaround was the personal lines segment, particularly auto and homeowners insurance.

After several years of absorbing the impacts of high inflation on the costs of auto parts, construction materials, and labor, the aggressive rate increases implemented by insurers finally outpaced rising claims costs.¹²

The personal auto insurance segment alone experienced a stunning $31 billion improvement, swinging from a $17 billion underwriting loss in 2023 to a $14 billion underwriting profit in 2024.¹²

This powerful recovery in personal lines more than offset continued pressures from catastrophe losses, lifting the entire P&C sector to a position of strong profitability.

Table 2: U.S. P&C Insurance Industry – Key Financial Metrics (2023 vs. 2024)

Metric	2023	2024	Year-over-Year Change (%)
Net Premiums Written	$857.9 B	$918.6 B	+7.1%
Net Underwriting Gain/(Loss)	($21.2 B)	$22.9 B	N/A
Net Investment Income	$70.1 B	$85.2 B	+21.5%
Net Income	$87.6 B	$169.3 B (est.)	+93.3%
Combined Ratio	101.6%	96.6%	-4.9 pts

Note: Figures are compiled from multiple reports and represent full-year or estimated full-year data.

Net income figures can vary based on inclusion of realized capital gains.

Sources:.⁹

2.2 Life & Health (L&H) Sector Deep Dive

In stark contrast to the P&C sector’s recovery, the U.S. Health and Life insurance sectors faced a more challenging environment in 2024, albeit for very different reasons.

Health Insurance: A Story of Declining Profits

The profitability of the health insurance industry experienced a precipitous decline in 2024.

Net earnings plummeted from $25 billion in 2023 to just $9 billion in 2024, marking the lowest point in a decade.16 This collapse was reflected in the industry’s profit margin, which fell from 2.2% to a mere 0.8%.16

The core driver of this downturn was a surge in costs that far outpaced premium growth.

Total hospital and medical expenses rose by 8.9% ($85 billion), driven by record-high healthcare utilization and persistent medical cost inflation.

This was significantly higher than the 5.9% ($64 billion) increase in net earned premiums.¹⁶

As a result, the industry’s combined ratio deteriorated from a profitable 98.2% in 2023 to an unprofitable 100.1% in 2024, indicating an underwriting loss.¹⁶

The health insurance sector only managed to remain profitable on a net basis due to a strong performance from its investment engine; $13.9 billion in investment income was sufficient to offset the $1.3 billion net underwriting loss.¹⁶

Table 3: U.S. Health Insurance Industry – Key Financial Metrics (2023 vs. 2024)

Metric	2023	2024	Year-over-Year Change (%)
Net Earned Premium	$1,085 B	$1,149 B	+5.9%
Net Underwriting Gain/(Loss)	$19.8 B	($1.3 B)	-106.6%
Net Investment Income	$12.8 B	$13.9 B	+8.6%
Net Earnings	$25.0 B	$9.0 B	-64.0%
Combined Ratio	98.2%	100.1%	+1.9 pts

Source: Data compiled from NAIC 2024 Annual Health Industry Commentary.¹⁶

Life Insurance: Strong Growth, Lower Net Income

The life insurance sector presented a more mixed financial picture in 2024.

While overall net income for the industry decreased by a significant 25.3% to $23.5 billion compared to 2023, this figure belies a story of powerful top-line growth.17

Direct written premiums and deposits for the life industry surged by an impressive 16.6% to reach $1.4 trillion in 2024.¹⁷

This growth was overwhelmingly driven by the industry’s sensitivity to the higher interest rate environment.

Sales of annuities—savings and retirement products that become more attractive to consumers when interest rates are high—skyrocketed by 19.2%, or $84.3 billion, to a total of $524.5 billion.¹⁷

This demonstrates how the Life sector, more than any other, can directly capitalize on the monetary policy response to inflation.

The decline in net income, despite this strong premium growth, was influenced by other factors, including changes in unrealized capital gains and losses on their vast investment portfolios.¹⁷

Table 4: U.S. Life Insurance Industry – Key Financial Metrics (2023 vs. 2024)

Metric	2023	2024	Year-over-Year Change (%)
Direct Written Premiums & Deposits	$1,224.6 B	$1,427.4 B	+16.6%
Net Investment Income	$220.7 B	$242.9 B	+10.0%
Net Income	$31.4 B	$23.5 B	-25.2%
Return on Equity (ROE)	6.2%	4.6%	-1.6 pts

Source: Data compiled from NAIC 2024 Annual Life/A&H Industry Commentary.¹⁷

The starkly different 2024 results for P&C, Health, and Life insurance are not isolated events.

They represent three distinct reactions to the same macroeconomic forces.

The P&C sector, having been hit hard by input cost inflation in prior years, successfully passed those costs on through aggressive rate hikes that finally bore fruit in 2024.¹²

The Health sector, in contrast, is currently lagging behind the inflationary curve, with medical service costs rising faster than their premium adjustments can keep pace.¹⁶

Finally, the Life sector is capitalizing directly on the

response to inflation—higher interest rates—which makes their savings products highly appealing to consumers, driving massive premium growth even as other balance sheet factors depress net income.¹⁷

This reveals the different temporal lags and sensitivities within the insurance industry, providing a holistic picture of how macroeconomic shifts ripple through the financial system at different speeds.

2.3 Comparative Risk Profiles: P&C vs. L&H

The divergent financial results of the P&C and L&H sectors are rooted in their fundamentally different risk profiles, time horizons, and business structures.

P&C insurance is characterized by short-term policies, typically lasting one year, which cover damages to property or businesses.⁸

This short duration means policies must be constantly re-priced to reflect rapidly changing risks and market conditions.¹⁸

The dominant risks in P&C are

underwriting risk—the danger that premiums collected will be insufficient to cover claims—and catastrophe risk from large-scale events like hurricanes, wildfires, and earthquakes.⁸

Life & Health insurance, conversely, operates on a much longer time horizon.

Life insurance policies can span decades, providing a payout upon the death of the policyholder.⁸

The primary risks in this sector are therefore tied to long-term demographic trends.

Longevity risk is the risk that people live longer than actuaries expect, which increases the payout obligations for retirement products like annuities.

Mortality risk is the opposite: the risk that people die sooner than expected, accelerating claims on life insurance policies.⁸

Life insurers manage these opposing risks by offering a diversified product portfolio; for example, retirement products that pay out if people live long provide a natural hedge against life insurance policies that pay out when people die.⁸

These different risk profiles also lead to different profitability and commission structures.

Because life insurance policies are highly persistent—customers tend to keep them for many years—they are extremely profitable to the carrier over the long term.

To incentivize sales, carriers front-load commissions, often paying agents over 100% of the first year’s premium.¹⁸

P&C commissions are much smaller on a per-policy basis but provide agents with a steadier, residual income stream as policies renew each year.¹⁹

Section 3: The Macro-Environment: External Forces Shaping the Bottom Line

The profitability of the insurance industry is not determined in a vacuum.

It is profoundly shaped by a trio of powerful external forces: the macroeconomic environment, particularly interest rates; the increasing frequency and severity of natural catastrophes; and a dense, multi-layered regulatory framework.

These factors are not mere influences; they are primary determinants of the industry’s operational landscape and financial results.

3.1 The Interest Rate Lever: Impact on Investments and Products

Interest rates act as a crucial, double-edged sword for the insurance industry, with rising rates creating both significant opportunities and considerable risks.²⁰

On the positive side, a higher interest rate environment is a powerful tailwind for insurer profitability.

It directly increases the investment income that insurers can earn on their vast float and on new capital they invest.²

This is especially beneficial for the Life & Annuity sector, as higher yields make their guaranteed-rate savings and retirement products more attractive to consumers and more profitable to underwrite.²⁰

For P&C carriers, stronger investment returns can help offset underwriting losses and provide a cushion against unexpected claims volatility.²⁰

However, the transition to a higher-rate environment carries significant risks.

The most immediate negative impact is on insurers’ existing balance sheets.

The vast majority of an insurer’s investment portfolio is held in fixed-rate bonds.

When market interest rates rise, the market value of these existing, lower-yielding bonds falls.

This can create substantial unrealized losses, depressing an insurer’s statutory capital and surplus levels.⁶

For life insurers, a sharp and rapid rise in rates also introduces “disintermediation risk”—the danger that policyholders will surrender their existing low-yield policies en masse to reinvest their cash in newer, more attractive products, forcing the insurer to sell its devalued bonds at a loss to meet redemptions.²⁰

These dynamics also influence broader business strategy.

In a sustained high-rate environment, the relentless “search for yield” that characterized the previous decade becomes less challenging.

Insurers may be able to rebalance their portfolios back toward more traditional, safer fixed-income assets and reduce their reliance on more volatile alternative investments.²⁰

Furthermore, the need for certain types of reinsurance transactions may decline, as insurers find it easier to manage interest rate risk internally without transferring it to other parties.²⁰

3.2 The Rising Tide of Catastrophes: Climate, Cost, and Consequence

For the P&C sector in particular, the escalating frequency and severity of natural catastrophes, largely attributed to climate change and population growth in high-risk areas, represents a formidable and growing challenge to profitability.⁶

The financial impact of these events is immense.

In 2024, global insured losses from natural disasters reached a staggering $140 billion, a significant increase from prior years and the third most expensive year on record.²²

These losses flow directly to the underwriting side of the P&C industry’s ledger.

In 2024, catastrophe losses accounted for 8.7 points of the industry’s combined ratio, meaning nearly 9% of all premiums earned were paid out for disaster claims.⁹

While major hurricanes garner headlines, a notable trend is the rising cost of so-called “secondary perils.” In 2024, severe convective storms—a category that includes thunderstorms, tornadoes, and hail—were responsible for $41 billion in insured losses in the U.S. alone, a figure that confirms these events now cause cumulative damage equivalent to a major hurricane year after year.²²

The consequences of these rising losses are systemic and far-reaching.

They are a primary driver of the “hard market,” forcing insurers to implement significant premium increases, tighten underwriting standards, and in some cases, reduce the amount of coverage available.⁶

These losses also strain the capacity of the global reinsurance market.

A catastrophe on the other side of the world can reduce the global pool of reinsurance capital, leading to higher reinsurance costs for primary insurers in the U.S., which are ultimately passed on to consumers.⁶

In the most extreme cases, the risk of loss becomes so correlated, severe, and unpredictable that the private market for property insurance begins to fail.

This is increasingly evident in disaster-prone states like California and Florida, where multiple major insurers have stopped writing new policies or have withdrawn from the market entirely, citing the inability to charge rates that adequately reflect the risk of wildfire and hurricane damage.²¹

This creates a crisis of insurance availability and affordability, placing immense strain on state-run “insurers of last resort” and prompting calls for greater government intervention.²¹

This dynamic reveals a dangerous feedback loop where climate change, insurer solvency, and regulation are intertwined.

Climate change drives more frequent and severe catastrophic events, leading to massive, correlated losses for P&C insurers.²¹

To remain profitable and solvent, these insurers must seek substantial rate increases in high-risk areas.²⁴

However, state regulators, tasked with protecting consumers from sudden and dramatic price shocks, may resist or slow down the approval of these actuarially necessary rate hikes.⁶

Faced with the prospect of writing policies at a guaranteed loss, insurers are then forced to reduce their exposure by ceasing to write new business or withdrawing from the state altogether, which leads to the market failure and availability crisis.²¹

This demonstrates that P&C profitability is no longer just a matter of financial management; it is now inextricably linked to climate science and public policy.

The fundamental tension between the actuarial necessity of pricing for risk and the political reality of keeping insurance affordable is a central, and perhaps existential, challenge for the modern P&C industry.

3.3 The Regulatory Gauntlet: Navigating a Complex Web of Oversight

The U.S. insurance industry operates within one of the most comprehensive regulatory frameworks of any sector, a system that directly constrains and shapes profitability.

Unlike banking, which has significant federal oversight, insurance is primarily regulated at the state level, a structure established by the McCarran-Ferguson Act of 1944.²⁶

This creates a uniquely complex and costly compliance environment, as national insurers must navigate and adhere to 50 different sets of rules and regulations governing their products, pricing, and market conduct.²⁷

The two primary pillars of this regulation are rate approval and solvency monitoring.

Rate Regulation: In most states, insurance rates must be filed with and approved by the state insurance department.

Regulators are guided by the statutory standard that rates shall not be “excessive, inadequate, or unfairly discriminatory”.²⁸

This gives regulators direct power over the “price” side of an insurer’s profit equation.

The legal standard for this oversight is rooted in constitutional law and public utility precedent, most notably the

Hope doctrine.

This principle establishes that regulation must provide a regulated firm with the opportunity to earn a fair and reasonable return on its capital, but it does not guarantee a profit.²⁸

Inefficient companies or those operating in declining markets are not shielded from losses by regulation.²⁸

Solvency Regulation: The other core function of state regulators is to ensure that insurance companies remain financially sound and have sufficient capital to meet their future obligations to policyholders.

This is achieved through minimum capital and surplus requirements, risk-based capital (RBC) calculations, and restrictions on investment activities.²⁹

While essential for consumer protection, these solvency requirements represent a direct “cost” to the insurer.

By requiring a certain amount of capital to be held in reserve, regulations limit the funds that can be invested more aggressively to generate higher returns, thereby placing a ceiling on potential profitability.²⁹

Looking ahead, the regulatory burden is set to increase as regulators intensify their focus on a new set of emerging challenges.

Key areas of growing scrutiny that will impact future costs and operations include insurers’ management of climate-related risks, their use of artificial intelligence (AI) and big data in underwriting and pricing, cybersecurity standards to protect consumer data, and enhanced financial oversight and transparency, particularly around offshore reinsurance transactions.²⁵

Section 4: The Titans of Insurance: A Company-Level Performance Review

The broad industry trends in profitability are ultimately the aggregate result of the performance of individual companies.

An analysis of the industry’s largest players reveals how these macro-level forces manifest in the specific financial results of the titans that shape the global insurance landscape.

4.1 Mapping the Market Leaders

The global insurance industry is dominated by a cohort of massive, often multinational, corporations.

Measured by market capitalization, the leaders include diversified health insurers like UnitedHealth Group, P&C giants like Progressive and Chubb, European powerhouses such as Allianz and AXA, and the unique conglomerate Berkshire Hathaway, whose value is anchored by its vast insurance and reinsurance operations.³¹

Within the key U.S. market, leadership is concentrated among a few key players.

In the crucial personal auto insurance segment, State Farm is the dominant force, commanding an 18.3% market share based on premiums written.

It is followed by a competitive tier that includes Progressive (15.3%), Geico (a subsidiary of Berkshire Hathaway, 12.3%), and Allstate (10.4%).³³

Across the entire P&C landscape, State Farm remains the largest group by countrywide premium, followed by Berkshire Hathaway and Progressive.³⁴

4.2 Performance Analysis of Key Players (2024)

The 2024 financial results of these leading companies provide a clear illustration of the divergent sector trends and the impact of company-specific events.

• UnitedHealth Group (UNH): As the world’s largest insurance company by revenue, UnitedHealth’s 2024 performance epitomized the pressures facing the health insurance sector. While revenues grew to a record $400.3 billion, net income plummeted to $14.4 billion from over $22 billion in 2023.³⁵ This result was a direct reflection of rising medical costs and utilization trends that squeezed margins. However, UnitedHealth’s year was also defined by a massive company-specific event: the cyberattack on its Change Healthcare subsidiary, which incurred $3.1 billion in direct costs and disrupted operations across the U.S. healthcare system, highlighting the immense and growing financial risk of cybersecurity threats.³⁵
• Berkshire Hathaway (BRK.A/B): The performance of this conglomerate underscores the incredible power of the investment float. With annual revenue of $371.4 billion, Berkshire Hathaway reported a staggering net income of $89.0 billion in 2024.³⁸ This immense profitability is fueled by the steady stream of low-cost capital generated by its insurance subsidiaries, including GEICO and Berkshire Hathaway Reinsurance Group, which is then invested across a wide array of public and private companies.
• Progressive (PGR): Progressive’s results are a textbook case of the P&C sector’s dramatic 2024 turnaround. The company’s revenue grew over 21% to $75.3 billion, and its net income more than doubled, surging to $8.5 billion from $3.9 billion in 2023.⁴¹ This was driven by a sharp improvement in underwriting profitability, with the company’s combined ratio falling to a highly profitable 88.8%.⁴²
• Chubb (CB): Demonstrating best-in-class underwriting discipline and the benefits of global diversification, Chubb reported a record net income of $9.27 billion in 2024 on $51.5 billion of net premiums written.⁴⁴ Its P&C combined ratio of 86.6% is considered a gold standard in the industry and highlights its ability to generate strong profits from its core insurance operations even in a challenging environment.⁴⁴
• Allianz (ALIZY): As a major European-based global insurer, Allianz’s results showed broad-based strength. The company reported total business volume of €179.8 billion and a strong net income of €10.5 billion in 2024.⁴⁷ Its solid performance across both its P&C and Life/Health segments demonstrates the resilience afforded by a diversified business model and global footprint.

Table 5: 2024 Financial Snapshot of Leading Global Insurers

Company	2024 Total Revenue	2024 Net Income	Key Profitability Metric / Note
UnitedHealth Group	$400.3 Billion	$14.4 Billion	Net income impacted by rising medical costs and a $3.1B cyberattack.
Berkshire Hathaway	$371.4 Billion	$89.0 Billion	Profitability driven by investment of massive insurance float.
Progressive	$75.3 Billion	$8.5 Billion	P&C Combined Ratio of 88.8%, reflecting strong underwriting turnaround.
Chubb	$62.0 Billion (Gross)	$9.3 Billion	P&C Combined Ratio of 86.6%, demonstrating elite underwriting.
Allianz	€179.8 Billion	€10.5 Billion	Strong, diversified results across P&C and Life/Health segments.

Sources:.³⁵

Section 5: Benchmarking and Strategic Outlook

To fully grasp the financial performance of the insurance industry, it is necessary to place it in the context of the broader economy and to look forward at the strategic trends that will shape its future profitability.

This final analysis benchmarks insurance against other key sectors and provides a cohesive outlook for 2025 and beyond.

5.1 Industry Profitability in Context: A Cross-Sector Comparison

When comparing average net profit margins, the insurance industry occupies a unique position.

Its profitability metrics are generally more modest than those of the banking and technology sectors but can be stronger than those of the low-margin retail sector.

• Insurance: Net profit margins vary significantly by line of business. P&C and diversified insurers typically see margins in the range of 5% to 12%, while Life insurance can be lower, and Health insurance has recently fallen below 1%.¹⁶
• Banking: The banking sector consistently demonstrates significantly higher net profit margins, with regional and money center banks averaging between 24% and 30%.⁴⁹
• Technology (Software): Established application software companies often boast high net profit margins, frequently in the 20% to 30% range, due to low marginal costs of production. However, high-growth internet companies may operate at a net loss.⁴⁹
• Retail: This is generally a low-margin business, with net profit margins for general and grocery retailers often falling in the 1% to 5% range.⁴⁹

However, a simple comparison of net profit margins is insufficient to understand the true financial power of the insurance industry.

A bank’s high margin is derived from its net interest spread, while a software company’s margin comes from its scalable intellectual property.

The insurance model is different.

Its profitability is a function of its underwriting margin plus the total return generated from investing its immense, low-cost float.

Therefore, while a 10% net margin for an insurer may seem lower than a 25% margin for a bank, the insurer’s profit is generated on a much larger base of invested assets funded by other people’s money.

Table 6: Comparative Net Profit Margins by Industry Sector

Industry Sector	Average Net Profit Margin (%)
Banking – Regional	24.4%
Software – Application	19.1%
Insurance – Diversified	12.1%
Insurance – Property & Casualty	10.4%
Retail – General	3.1%

Source: Data aggregated from industry analyses.⁴⁹

5.2 Strategic Outlook for 2025 and Beyond: Navigating Headwinds and Tailwinds

Looking ahead, the insurance industry faces a complex landscape of persistent challenges and significant opportunities that will shape its profitability.

Financial Performance Outlook: The strong profitability of the P&C sector seen in 2024 is expected to continue but moderate, as the pace of premium rate increases slows and competitive pressures return.⁵³

The Life insurance sector is poised for continued robust growth, driven by structural tailwinds such as strong consumer demand for retirement products in a higher-rate environment and an increase in large-scale pension de-risking transactions.⁵³

The Health insurance sector, however, will continue to face significant profitability pressure from rising medical cost trends and utilization.¹⁶

Key Strategic Trends:

• Technology and AI Integration: The adoption of advanced technology, particularly artificial intelligence, is no longer a peripheral activity but a core strategic imperative. Insurers are accelerating investments in AI across the entire value chain—from more sophisticated underwriting and pricing models to automated claims processing and AI-powered customer service chatbots. This is seen as a primary lever for improving operational efficiency, reducing costs, and managing risk in the future.²⁴
• Mergers, Acquisitions, and Consolidation: The market for insurance deals is expected to remain active. The insurance brokerage space, in particular, continues to see significant consolidation. There is also a substantial backlog of insurance companies that have delayed initial public offerings (IPOs) while waiting for more stable market conditions, suggesting a potential wave of public market activity. Strategic and financial buyers, including asset managers and foreign investors, remain highly interested in acquiring U.S. insurance portfolios, particularly in the life and annuity sector.⁵⁶
• Persistent and Emerging Risks: The industry will continue to grapple with significant headwinds. Geopolitical instability and global trade tensions can disrupt supply chains and depress demand for certain types of commercial insurance.⁵⁴ The threat of severe and frequent natural catastrophes remains the primary challenge for the P&C sector.⁵³ Furthermore, a risk known as “social inflation”—the trend of rising litigation costs, larger jury awards, and a more litigious environment—is a growing concern that is driving up claims costs for liability insurance lines.²⁰

5.3 Conclusive Insights

The question of “how much do insurance companies make?” cannot be answered with a single number.

It is a complex equation with multiple variables that shift according to sector, geography, and the prevailing economic climate.

The core of the industry’s financial power lies in its dual-engine business model.

Billions of dollars in profit are generated through a combination of disciplined underwriting of risk and the astute investment of the resulting premium float.

The relative importance of these two engines shifts with the economic cycle, particularly with changes in interest rates, creating a dynamic and constantly evolving path to profitability.

In the current environment, the industry’s major sectors are on divergent paths.

The P&C sector has successfully navigated the inflationary wave to return to strong profitability.

The Health sector is currently bearing the brunt of that same inflation through higher medical costs, leading to a sharp decline in earnings.

The Life sector, meanwhile, is capitalizing on the high-interest-rate response to inflation, driving powerful growth in its savings and retirement businesses.

Ultimately, an insurer’s profitability is dictated by its ability to manage a formidable set of external forces.

The industry’s fortunes are inextricably linked to interest rate cycles, the increasing severity of catastrophic events, and a heavy-handed and complex regulatory environment.

While a surface-level comparison shows that the insurance industry’s net profit margins are often more modest than those of banking or technology, this view is incomplete.

The true measure of the industry’s financial strength is the combination of these margins with the immense, low-cost capital provided by the investment float—a unique and enduring competitive advantage.

The future profitability of any given insurer will depend on its ability to navigate this volatile macro-environment, maintain rigorous underwriting discipline, and effectively leverage technology to manage emerging risks and create new efficiencies.

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