Bermuda-headquartered insurer and reinsurer Arch Capital Group Ltd. has reported strong group-wide underwriting income growth of 25.7% for Q2 2024 to $762 million, compared with $606 million in Q2 2023, driven by an improved underwriting performance in its reinsurance division.
Group-wide, gross premiums written (GPW) were $5.4 billion for the quarter, an 11.1% increase over last year’s $4.9 billion. Net premiums written (NPW) grew by 10.3% to $3.8 billion in Q2 2024, compared to Q2 2023’s $3.4 billion, as net premiums earned rose from $3 billion to $3.6 billion.
For Q2 2024, pre-tax current accident year catastrophic losses in the insurance and reinsurance segments, net of reinsurance and reinstatement premiums, were $196 million, driving a 0.9 percentage point increase in the quarterly loss ratio to 51.2%.
The second quarter 2024 underwriting result also includes favourable development in prior year loss reserves, net of related adjustments, of $124 million.
All in all, Arch has reported an overall combined ratio of 78.7% for Q2 2024, compared to 79.8% last year.
In the reinsurance segment, GPW grew by 15.6% year over year to $2.9 billion, compared to Q2 2023’s $2.5 billion. NPW were 13.9% higher than Q2 2023 at $1.95 billion, driven by increases in all lines of business, rate increases, new business opportunities, and growth in existing accounts.
Net premiums earned in Q2 2024 for the reinsurance segment were 32.5% higher than in Q2 2023 reflecting changes in net premiums written over the previous five quarters.
Arch’s reinsurance operation produced underwriting income of $366 million in the quarter, up by almost 50% on last year’s $245 million, as the combined ratio strengthened from 81.9% to 79.5%, as the lower expense ratio more than offset a higher loss ratio.
In the insurance segment, GPW grew by 7.5% to $2.1 billion from $1.9 billion, while NPW were 7.2% higher at $1.6 billion, and net premiums earned in Q2 2024 rose 11.3% to $1.47 billion.
Insurance underwriting income increased from $108 million to $109 million, but a slight rise in the expense ratio coupled with a flat loss ratio saw the segment’s combined ratio weaken slightly to 92.6%.
In the re/insurer’s mortgage arm, the firm reported a 2% decrease in GWP at $340 million. However, NPW were 4.2% higher for Q2 2024 at $276 million, driven by a lower level of Bellemeade premiums ceded, due in part to the termination of certain Bellemeade agreements in Q4 2023. Net premiums earned increased from $294 million to $307 million in Q2 2024.
The mortgage segment’s Q2 2024 loss ratio, excluding net favourable development, was down by 4.1% year over year reflecting lower estimated claim rates, partially offset by slightly higher new delinquencies. Underwriting income increased by 13.4% to $287 million from $253 million.
Group-wide, net income recorded for this quarter was $1.3 billion, representing a 26.3% annualised net income return on average common equity, compared to $661 million in the comparative quarter.
The after-tax operating income reported was $981 million, with a 20.5% annualised operating return on average common equity, compared to $726 million last year.
Marc Grandisson, Chief Executive Officer, commented: “Our excellent results this quarter highlight the value of our ongoing commitment to bottom-line returns combined with disciplined execution throughout the underwriting cycle.”
“We are pleased with the contributions made by our underwriting and investment teams, which are key to us being able to consistently generate returns above our target.”
