Bermudian carrier Arch Capital Group has reported a much-improved performance across its insurance and reinsurance operations during the fourth quarter of 2021, helping the firm generate a combined ratio of 77.6% for the period.
Across the group, gross premiums written (GPW) increased by almost 27%, year-on-year, to $2.9 billion, as net premiums written (NPW) and net premiums earned (NPE) spiked by 16% and 15% to $2.03 billion and $2.1 billion, respectively.
Underwriting income improved significantly for Arch in the quarter, from roughly $221 million in Q4 2020 to $472 million in Q4 2021. The underwriting result included current accident year catastrophe losses, net of reinsurance and reinstatement premiums, of $72.3 million.
In fact, the firm’s loss ratio fell by 14.5 percentage points in Q4 to 47.8%. This, coupled with a slight rise in the expense ratio to 29.8%, has seen Arch report a 10.7 percentage point improvement in its combined ratio, year-on-year, to 77.6%.
Overall, Arch has announced net income of $613.1 million for the fourth quarter of 2021, against $533 million for the prior year period.
A look at the company’s performance by business segment, and it’s clear to see that Arch’s insurance and reinsurance operations performed will in the period.
In Reinsurance, GPW increased by more than 88% to over $1 billion, while NPW rose by 44.5% and NPE by 33.5%. Impressively, the reinsurance segment’s underwriting result strengthened by an impressive 148.5%, year-on-year, to $132.5 million.
“The growth in net premiums written was observed in most lines of business, primarily related to new business opportunities and growth in existing accounts in casualty, property excluding property catastrophe and other specialty lines and the benefit of rate increase,” explains the company.
Within Reinsurance, the loss ratio came down to 55.2% as the expense ratio increased to 27.9%, leading to an 8.2 percentage point improvement in the segment’s combined ratio to 83.1%, compared with 91.3% a year earlier.
In Arch’s primary insurance business, GPW increased to $1.5 billion, NPW to $1 billion, and NPE to just over $1 billion. Here, the underwriting result also improved dramatically, year-on-year, to $70.5 million, compared with a loss of more than $12.6 million in Q4 2020.
“The higher level of net premiums written reflected increases in most lines of business, due in part to rate increases, new business opportunities and growth in existing accounts along with a lower level of premiums ceded,” says Arch.
In its Mortgage business, Arch has announced a decline in GPW for the quarter of more than 6% to $364 million, while NPW came down by almost 13% and NPE by more than 10%. However, the unit’s underwriting result improved by more than 42%, year-on-year, to $268.6 million. The mortgage segment’s combined ratio strengthened from 45.1% in Q4 2020 to 11.7% in Q4 2021.
On the asset side, Arch has announced pre-tax net investment income of $90.5 million for the fourth quarter of 2021, versus $88 million a year earlier.
For the full-year 2021, Arch’s net income has increased to almost $2.1 billion, compared with $1.4 billion for the same period in 2020.