Reinsurance drives Arch to $1bn quarterly profit
A surge in reinsurance underwriting revenue along with favourable reserve developments drove Arch Capital to a 24.6% increase in net income in the first quarter of the year, the re/insurer said last night.
Bermuda-based Arch recorded net income of $1.1 billion or $2.92 per share compared to net income available to Arch common shareholders of $705 million, or $1.87 per share in the same period in 2023.
Gross written premiums jumped 24.1% to $5.9 billion while net premiums earned rose 18.7% to $3.4 billion and underwriting income soared 29% to $736 million. The company’s combined ratio improved from 80.6% to 78.8%.
Arch reported favourable development in prior year loss reserves of $126 million.
The company’s loss ratio declined from 51% to 50.5% although the Baltimore Bridge collapse contributed 2.1 points of activity on the insurance segment and 3 points of activity related to the reinsurance segment.
Pre-tax current accident year catastrophic losses for the Company’s insurance and reinsurance segments, net of reinsurance and reinstatement premiums, were $58 million.
Marc Grandisson, chief executive officer said: “We are extremely pleased with the outstanding financial results across our operations in the first quarter. I am especially proud of the ongoing commitment of our Arch colleagues to delivering value-added solutions to our clients and partners in this ever-changing risk environment.
“This level of hard and smart work bodes well for our future success to the benefit of our shareholders.”
Arch’s performance was driven by its reinsurance segment, where gross premiums written jumped 40.9% and net premiums rose 31.3%, which Arch attributed to increases in all lines of business, due in part to rate increases, new business opportunities and growth in existing accounts.
Gross premiums written by the insurance segment in the 2024 first quarter were 7.4% higher than in the 2023 first quarter, while net premiums written were 7.3% higher than in the 2023 first quarter.
Gross premiums written by the mortgage segment in the 2024 first quarter were 0.6% lower than in the 2023 first quarter, while net premiums written were 6.1% higher.
Investment income rose from $199 million in the first quarter of 2023 to $327 million in 2024 as the company benefited from higher interest rates and an increase in invested assets.
Net realized gains were $67 million for the 2024 first quarter, compared to net realized gains of $17 million in the 2023 first quarter, and reflected sales of investments as well as the impact of financial market movements on the Company’s derivatives, equity securities and investments accounted for under the fair value option method.
Income from operating affiliates for the 2024 first quarter was $55 million, or $0.14 per share, compared to $39 million, or $0.10 per share, for the 2023 first quarter, and primarily reflected amounts related to the Company’s investment in Somers Group Holdings and Coface.
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