Arch Capital Group reported third-quarter net income of US$1.0 billion, down from US$1.3 billion a year earlier, as catastrophe losses rose and its reinsurance segment contracted. After-tax operating income fell to US$910 million, or US$2.67 per share, from US$1.0 billion, or US$2.77 - still ahead of the US$2.30 analyst consensus.
The Bermuda-based group writes insurance, reinsurance and mortgage insurance globally across more than 50 countries.
The results tell two different stories by segment. In insurance, gross premiums written rose 7.8% to US$2.77 billion. Stripping out the non-renewal of certain programs inherited from Arch’s acquisition of Allianz’s US MidCorp and Entertainment businesses, net premiums written would have grown 5.8%, with international business the primary driver. The insurance combined ratio was 94.4%, up from 93.4%, with catastrophe activity - including losses from the Iran conflict - adding 5.7 points to the loss ratio against 2.2 points a year earlier.
Reinsurance moved in the opposite direction. Gross premiums written fell 8.0% to US$2.31 billion, and net premiums written dropped 9.3%, with Arch citing non-renewals and deliberate share reductions. The reinsurance combined ratio was 78.3%, up from 76.1%. Company-wide, the combined ratio was 82.5% against 79.8% a year earlier.
Pre-tax current-year catastrophe losses totalled US$234 million. Favourable prior-year reserve development of US$179 million partially offset that.
“We are operating in a transitioning market where conditions are increasingly uneven, but we are prepared and welcome the challenge,” said chief executive Nicolas Papadopoulo.
For brokers placing business with Arch, the Q3 figures give a clear read on where capacity is expanding and where it is being managed back. Arch is growing primary insurance, particularly internationally, while selectively reducing reinsurance shares. Brokers working in London, Bermuda and international markets should expect continued appetite on the insurance side, with more selectivity on reinsurance lines and programs where Arch has been reviewing its participation.
The Iran conflict casualty losses added a specific geopolitical dimension to the cat figure. Brokers placing political violence, war risk or international casualty with Arch should note the carrier is actively absorbing losses in that exposure category.
Net investment income rose to US$451 million from US$408 million. Total investment return was negative 0.42%, reflecting the impact of rising interest rates on fixed income securities - a mechanical drag that does not affect underwriting discipline. Arch repurchased US$1.4 billion of shares in the quarter. Book value per common share was US$67.90 at September 30, down 0.2% from June 30.
