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Arch’s reinsurance result more than offsets insurance segment loss in Q4

12th February 2020 - Author: Luke Gallin

Arch Capital Group Ltd. has reported an improved combined ratio of 83.8% for the fourth-quarter of 2019, as underwriting income in its reinsurance segment more than offset a loss in the re/insurer’s insurance division.

Arch Capital logoThe company’s combined ratio improved by four percentage points when compared with the 87.8% recorded in the same period in 2018.

Overall, Arch has announced Q4 2019 underwriting income of $251.4 million, which is up by almost 51% on the $166.9 million recorded in the prior year quarter.

By segment, and Arch reveals that its insurance segment fell to an underwriting loss of almost $14 million in Q4, which is actually a slight improvement on Q4 2018. The division’s loss ratio improved slightly to 69.2%, while the underwriting expense ratio increased slightly, to 32.9%. Overall, the insurance segment reported a combined ratio of 102.1% for the fourth-quarter of 2019.

Arch notes that within its insurance unit, the Q4 loss ratio reflected a higher level of large attritional losses than in the 2018 fourth quarter, although catastrophe activity was lower.

While the insurer and reinsurer’s insurance segment struggled in the quarter, Arch’s reinsurance division produced underwriting income of more than $26 million in Q4 2019, which compares to a net underwriting loss of more than $41 million in Q4 2018.

Within reinsurance, the loss ratio improved significantly in Q4 2019 to 66.9%, while the underwriting expense ratio also improved, to 26.9%. Overall, the segment recorded a combined ratio of 93.8% in Q4 2019, against 110.9% in Q4 2018.

Both the insurance and reinsurance segments were hit by catastrophe losses in the period, however, at $30.4 million, Arch’s pre-tax current accident year cat losses, net of reinsurance and reinstatement premiums, declined year-on-year.

The firm’s mortgage segment also performed well in the quarter, posting 12.5% growth in underwriting income to $276.5 million, and a combined ratio of 21.6%, versus 22.6% a year earlier.

Overall, Arch has reported net income for the fourth-quarter of 2019 of $316 million, compared with $126 million in the fourth-quarter of 2018. For the full year 2019, Arch’s net income reached $1.6 billion, which is up significantly on the $714 million posted in 2018.

Turning to premiums, and gross written premiums increased by nearly 15% to $1.94 billion, net written premiums by almost 12% to $1.45 billion, and net premiums earned by nearly 11%, to $1.52 billion.

The insurance segment recorded gross written premiums growth of nearly 25% to $1.04 billion, net written premiums grew by almost 29% to $689 million, and net premiums earned grew by more than 15%, to $646 million.

The reinsurance unit recorded gross written premiums growth of nearly 6% to $432 million, net written premiums growth of 4.3% to $339 million, and net premiums earned expanded by more than 11%, to $389 million.

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