Bermuda-based insurer and reinsurer, Arch Capital Group Ltd. has today posted its financial results for the third-quarter of 2018, reporting net income of $217 million compared with a net loss in the same period last year, supported by solid results within its reinsurance segment.
Arch Capital’s gross written premiums (GWP) increased to $1.73 billion in Q3 2018, while net written premiums (NWP) increased slightly to $1.33 billion. As a result, the firm’s underwriting income totalled $234 million in Q3 compared with a $142 million loss a year earlier.
The firm’s combined ratio for the period reached 82.3%, which is an improvement on the 111.8% recorded a year earlier, and, which falls to 81.8% when excluding catastrophe losses and prior year reserve development.
Arch’s catastrophe losses in the third-quarter of this year totalled $58.2 million, pre-tax, net of reinsurance and reinstatement premiums, and were primarily related to hurricane Florence and typhoon Jebi.
At the same time, the firm realised a $77.6 million benefit from favourable development in prior year loss reserves, net of related adjustments, which appears to have offset current accident-year cat losses during the quarter.
The firm’s loss ratio in Q3 2018 reflected 5.8 points for current year catastrophic activity, mostly related to Florence, and this compares to 40.1 points in the third-quarter of last year. As a result, the loss ratio in the insurance segment improved from 106.3% to 73%, year-on-year.
Within the reinsurance segment, the firm’s loss ratio improved from 98.5% in Q3 2017, to 62.5% this year. Overall, Arch’s loss ratio for the quarter totalled 54.2%, compared with 82.9% a year earlier.
But while the loss ratio within the insurance segment improved, as was the case last year the segment recorded an underwriting loss, of $26.7 million. This resulted in a combined ratio within the segment of 104.8%, which, although unprofitable, is still an improvement on the 138.7% recorded a year earlier.
Within the reinsurance segment, the story was different this year for Arch. The unit posted an underwriting gain of $30.9 million in Q3 2018, compared with an underwriting loss of $86.8 million last year. Within the reinsurance segment, the firm’s combined ratio improved to 89.9%, compared with 127.4% in the third-quarter of 2017.
The re/insurer’s mortgage segment also improved during Q3, with underwriting income of $230.5 million and a combined ratio of 24.6%, compared with $186.3 million and 33.4% in Q3 2017, respectively.
So, it appears that during the third-quarter of 2018, the solid performance of Arch’s reinsurance segment and mortgage segment offset an unprofitable insurance segment, and, at the same time, favourable prior year reserve development was stronger than cat losses in the period, again helping the firm report an overall net income for the quarter, compared with a loss in Q3 2017.
