Expense discipline wars: which insurance business managed cost inflation best?

In the insurance industry, revenue is a story. Expense discipline is the truth.

Over the four years from 2021 through 2025, the American insurance sector rode a wave of premium expansion — driven by hard market conditions in property and casualty, surging demand for health coverage, and the post-pandemic repricing of nearly every line of business. UnitedHealth Group alone grew its top line from $288 billion to nearly $448 billion. Progressive's premiums ballooned. Brokers such as Marsh & McLennan and Arthur J. Gallagher compounded revenues at a healthy clip.

But revenue growth, by itself, tells only half the story. The more revealing question — the one that separates the operationally excellent from the merely lucky — is whether expenses grew faster or slower than that revenue. An insurance business that grows revenue 12% a year while growing expenses 13% a year is quietly destroying operating leverage, even if its headlines look impressive.

A review of financial data for the largest U.S.-listed insurance businesses across the five fiscal years ending in 2025 reveals a strikingly wide divergence in expense discipline — and a clear fault line between industry segments.

The scorecard: who won and who didn't

The central metric in this analysis is straightforward: the ratio of total operating expenses to total revenue, measured at the start and end of the period. A falling expense ratio signals that costs grew more slowly than premiums and fees — the definition of operating leverage. A rising expense ratio is the opposite: revenue expanded, but the business let expenses run even faster, eroding the benefits of scale.

Ranked by improvement in expense ratio (expenses / revenue). Lower is better. CAGR = compound annual growth rate.

^{Source: Company filings, fiscal years 2021-2025. Expense ratio = total operating expenses / total revenue.}

The P&C standouts: discipline under pressure

The most striking results come from the property and casualty segment, where several household names managed to lower their expense ratios meaningfully even as loss costs surged from elevated catastrophe activity and persistent social inflation.

Progressive's expense ratio fell from 91.2% in 2021 to 83.8% in 2025 — a 7.4 percentage-point improvement over a period when the company was simultaneously absorbing historic weather losses and rapid volume growth. Revenues compounded at 16.4% annually while expenses grew at only 14.0%, a 2.4-point annual spread in the carrier's favor. That kind of sustained operating leverage, over four years of hard conditions, is the hallmark of a genuinely well-run cost structure.

Allstate's turnaround is similarly notable. The carrier spent much of 2022 and 2023 under fire for underwriting losses, particularly in personal auto. But by 2025, its expense ratio had fallen from 87.2% to 80.4% — a nearly seven-point swing. Expense growth ran 2.2 percentage points below revenue growth annually, as the company's remediation efforts bore fruit not just in combined ratios but in underlying cost efficiency.

The Travelers Companies and The Hartford showed more modest but still positive progress, each trimming two to three percentage points off their expense ratios. W.R. Berkley, the specialty commercial carrier, also improved slightly despite years of significant premium growth.

The exception in the P&C bucket is Markel Group, where the expense ratio rose from 75.8% to 83.3% — an 8-point deterioration. Markel's business is partly a reinsurer and partly an investment conglomerate, complicating a pure operating cost comparison, but the numbers show that expense growth materially outpaced revenue growth over the period.

Total expenses as a share of total revenue. Green shading = improved; red = deteriorated.

^{Source: Company filings, fiscal years 2021-2025.}

Health: growing fast, but at what cost?

Health insurance presents a more troubling picture. The segment's five largest players — UnitedHealth, Elevance Health, Cigna, Humana, and Centene — all grew revenues impressively over the period. But without exception, their expense ratios rose, reflecting the unrelenting pressure of medical cost inflation, wage increases for clinical staff, and the reversal of pandemic-era utilization deferrals.

KEY METRIC: THE MEDICAL COST ANCHOR
UnitedHealth's expense ratio rose from 91.7% to 95.8% between 2021 and 2025, reflecting the sector's wider struggle with medical cost trends that outpaced premium increases. Humana crossed 98.8%, approaching the limit of operational viability for a managed care organization.

UnitedHealth, the sector's bellwether, saw its expense ratio rise 4.1 percentage points to 95.8%. The company's revenue growth — an 11.7% annual compound rate — was impressive, but costs grew faster at 12.9% annually. At a firm of its scale, that 1.2-point annual spread, compounding over four years, represents tens of billions of dollars in foregone operating income.

Centene's trajectory is the most alarming. Its expense ratio breached 100% by 2025 — meaning the company spent more than it earned in revenue, before accounting for investment income or other adjustments. Medicaid redeterminations and rising pharmacy costs were significant culprits. Humana, battered by Medicare Advantage repricing and higher utilization, sat at 98.8%.

Every major managed care organization saw expense ratios rise. The question is by how much.

^{Source: Company filings, fiscal years 2021-2025.}

Life and retirement: the clearest fault line

If the P&C sector showcases disciplined expense management, the life and retirement segment represents its antithesis — at least for some players.

MetLife and Prudential Financial both saw their expense ratios climb meaningfully, rising 7.2 and 7.6 percentage points respectively. For Prudential, this occurred despite falling revenues — its top line shrank at a 3.8% annual rate as the company restructured its business mix, yet expenses declined more slowly, pushing the ratio higher. Lincoln National's expense ratio surged from 73.6% to 92.7%, a 19-point deterioration over four years.

The most extreme cases belong to Corebridge Financial and Jackson Financial, both heavily exposed to variable annuity blocks that generate volatile accounting results. These numbers reflect the accounting conventions of the life industry — fair value adjustments on derivatives and policyholder liabilities — as much as true operational cost discipline.

The brokers: a bright spot

The insurance brokerage segment — Marsh & McLennan, Arthur J. Gallagher, and Brown & Brown — offers the most constructive story in the dataset.

Marsh & McLennan, the world's largest insurance broker, held its expense ratio essentially flat at around 77%, with expenses growing fractionally more slowly than revenues. Arthur J. Gallagher improved its ratio by two percentage points, compounding revenue at 14.2% annually — largely through acquisitions — while holding expense growth at 13.5%. The firm's ability to absorb acquired businesses without letting expense ratios drift is a mark of its integration capability.

Brown & Brown, the most acquisitive mid-market broker, saw its expense ratio edge up modestly, from 72.0% to 73.9%. Given that the firm more than doubled its revenue over the period through a relentless acquisition strategy, a less-than-two-point increase in the expense ratio suggests strong cost integration.

What the spread reveals

The most useful single number from this analysis is the spread between expense CAGR and revenue CAGR — a positive number means costs outpaced growth, a negative number means the company improved its operating leverage. Across the full dataset, this spread ranges from negative 2.4 percentage points (Progressive, the best result) to positive 50.4 points for Jackson Financial's volatile accounting-driven figure.

For investors and analysts, the spread matters more than the absolute level of the expense ratio, because it speaks to management's ability to scale efficiently. A company with a 90% expense ratio that is improving is often a better investment than a company with an 80% ratio that is deteriorating.

The structural lesson of the 2021-2025 period is this: hard markets create revenue tailwinds that can mask a multitude of cost management sins. Premiums rise, top lines expand, and earnings look reasonable. But the companies that used the tailwind to invest in operational efficiency will enter the next soft market cycle with meaningfully better unit economics. Those that simply let costs follow revenues will face a reckoning when pricing power eventually fades.

In insurance, unlike almost any other financial sector, the combined ratio is a public confession. The expense component of that ratio, tracked over multiple years, reveals whether a carrier is genuinely building a durable franchise — or merely surfing a wave.

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^{Data sourced from company annual filings (10-K) for fiscal years 2021 through 2025. All figures in USD. Expense ratio calculated as total operating expenses divided by total revenue. Corebridge Financial and Jackson Financial expense ratios are materially influenced by GAAP fair value adjustments on derivatives and policyholder liabilities and should be interpreted with appropriate caution.}