Bermuda-based re/insurance firm Arch Capital Group has reported a 61.9% drop in underwriting income for its reinsurance segment during the first quarter of 2019, partly driven by $16 million of loss creep from Typhoon Jebi.
Underwriting income for Arch’s reinsurance operations totalled $20.9 million in Q1 2019, down from $54.8 million in Q1 2018, despite gross premiums written increasing 18.2% to $682.9 million and net premiums earned increasing 24.1% to $346.4 million.
Arch attributed the increase in premiums written to growth from selected new business opportunities in casualty and property excluding property catastrophe.
The combined ratio for the segment also deteriorated 14.5 points to 95.2%, compared with 80.7% for the same period last year.
This was driven by an 18.5 point increase in the loss ratio, which moved from 50.7% in Q1 2018 to to 69.2% this year.
For its insurance segment, Arch also reported a 92.9% decrease in underwriting income, from $7.9 million to $562,000, despite growing gross written premiums by 14.4% to $942.0 million and net premiums earned by 2.7% to $553.5 million.
Nevertheless, Arch performed well overall in the first quarter of 2019, growing its underwriting income by 9.8% to $260.1 million and reporting a stable combined ratio of 81.7%, compared to 81.3% last year.
The re/insurer also reported little change in its combined ratio, which moved from 81.3% to 81.7%, as both its loss ratio and underwriting expense ratio remained stable.
This was primarily due to the performance of its mortgage segment, which saw a 39.6% increase in underwriting income, from $174.9 million to $244.1 million, as well as a 13.2% improvement in combined ratio, from 38.8% to 25.6%.
Arch’s net income also grew from $166.4 million in Q1 2018 to $495.5 million in Q1 2019, primarily due to $156.9 million of investment income and $141.6 million of net realised gains, compared with $111.0 million of net realised losses in 2018.
The company explained that the growth in 2019 first quarter net investment income reflected the reinvestment of fixed income securities at higher available yields and the shift from municipal bonds to corporates.
