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Arch reports spike in Q4 net income to $533mn

10th February 2021 - Author: Luke Gallin

Bermuda domiciled Arch Capital Group, Ltd. has reported an increase in net income to $533.1 million for the fourth-quarter of 2020, as the performance of its reinsurance and mortgage segments more than offset an underwriting loss in the firm’s insurance unit.

ArchNet income increased by 69% from the same period in 2019, while Arch has announced operating income of $230.4 million for the quarter, which is down on the $308.4 million posted last year.

All in all, the company has reported pre-tax current accident year catastrophe losses for both its insurance and reinsurance businesses, net of reinsurance and reinstatement premiums, of $156.4 million, which includes $0.4 million of losses related to the COVID-19 pandemic.

Gross premiums written (GPW) for the quarter increased by more than 16% to $2.3 billion, while net premiums written (NPW) jumped by 20.8% to $1.8 billion, and net premiums earned (NPE) increased by 19.5% to $1.8 billion.

Across the firm, underwriting income fell by more than 12% to $220.1 million in Q4 2020. During the period, Arch’s loss ratio increased to 62.3% as the underwriting expense ratio improved to 26%, resulting in a combined ratio of 88.3% for the quarter.

In Q4 2019, Arch posted a combined ratio of 83.8% on the back of a 55.7% loss ratio and an underwriting expense ratio of 28.1%.

Arch’s insurance segment fell to a $12.6 million underwriting loss in the quarter, which is actually an improvement on the loss reported a year earlier.

Insurance GPW jumped by almost 20% to $1.24 billion, while NPW increased to $838 million and NPE spiked by 15.9% to $748 million.

With a loss ratio of 72.4% and an underwriting expense ratio of 29.3%, Arch’s insurance arm ended the quarter with a combined ratio of 101.7%, against 102.1% a year earlier.

More than offsetting the performance of its insurance segment, Arch’s reinsurance segment recorded a 104.8% rise in underwriting income in the quarter to $53.3 million.

The unit recorded elevated GPW of $537.9 million, NPW growth of 44.9% to $491 million, and NPE growth of 31%, year-on-year, to $2.7 million.

In Q4 2020, the reinsurance segment’s combined ratio improved by 2.5 percentage points from the prior year, reaching 91.3%. This is comprised of a loss ratio of 67.2% and an underwriting expense ratio of 24.1%.

In its mortgage area, Arch saw underwriting income fall by almost 32% but remain robust at $188.9 million. GPW here increased by more than 5% to $389.7 million, as NPW improved to $331.7 million and NPE declined to $335.6 million.

Arch’s mortgage operation produced a combined ratio of 45.1% for the fourth-quarter of 2020, comprised of a 24.9% loss ratio and an underwriting expense ratio of 20.2%.

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