Bermuda-based Arch Capital Group has reported significantly improved results for the first quarter of 2023, helped by its reinsurance segment, which saw underwriting income almost double as gross premiums written grew by 43.1%.
Overall, Arch’s net income for Q1 was $705 million, compared with just $186 million for the same period last year, while operating income similarly increased from $422 million to $654 million.
This performance was aided by the company’s reinsurance business, which reported underwriting income of $213 million for the quarter, representing an increase of 95.4% over the $109 million recorded last year.
The segment also recorded gross premiums written of $2,460 million, versus $1,719 million previously, with Arch saying that increases across most lines of business reflected rate increases, new business opportunities and growth in existing accounts.
In addition, the reinsurance segment retained more business in the 2023 first quarter due to a lower level of retrocession activity than last year and was impacted by changes in the mix of business.
The reinsurance combined ratio also improved by 2.3 points to 84.3%, as catastrophe activity contributed only 5.4 points to the loss ratio, while favourable developments on prior year reserves further reduced the ratio by 4.0 points. The underwriting expense ratio was 26.7%, compared to 30.1% previously.
Arch’s overall combined ratio did deteriorate by 1.9 points but this is mainly attributable to a 16.9 point increase in its mortgage segment ratio, which experienced a lower level of favourable development on prior year losses.
Turning to Arch’s primary insurance business, the segment reported underwriting income of $114 million for Q1 2023, up 81.0% from the $63 million reported for the same period last year.
Gross premiums written likewise increased by 15.1% to $1,979 million and more business was again retained due to ongoing changes to the company’s reinsurance programs and changes in the mix of business.
The insurance segment improved its combined ratio by 2.9 points to 90.9% during the quarter, reflecting 1.4 points of catastrophic activity, with favourable development reducing the loss ratio by 0.9 points. The underwriting expense ratio was fairly stable at 35.0%.
On mortgage business, Arch reported underwriting income of $243 million, which was 15.05% lower than last year, as well as a 6.0% decrease in gross premiums to $343 million.
Finally, on investment income, Arch improved its result from $80 million in Q1 2022 to $199 million in Q1 2023 due to the effects of higher interest rates available in the market along with growth in invested assets which benefited from strong operating cash flows.
Net realized gains were $17 million for the 2023 first quarter, compared to losses of $292 million in the 2022 first quarter, and reflected sales of investments along with the impact of financial market movements on the company’s investment portfolio.
