All material subject to strictly enforced copyright laws. © 2021 Insurance Insider is part of Euromoney Institutional Investor PLC.
Accessibility | Terms & Conditions | Privacy Policy | Modern Slavery Act | Cookies | Subscription Terms & Conditions

Arch underwriting gain climbs to $174mn off 80% jump in mortgage profits

Arch logo map finance bermuda.jpg

Underwriting earnings at Arch Capital Group grew by 66%, powered higher by booming mortgage profits that offset underwriting losses in its (re)insurance business.

For the third quarter, Arch’s underwriting gain swelled to $174mn, helped by a $234mn underwriting profit in its mortgage insurance business. The reinsurance segment fell to a $39mn underwriting loss, while underwriting in insurance was negative by $21mn.

The mortgage division improved its underwriting result by 80% from $130mn a year ago.

Results in the (re)insurance business were weighed down by $336mn in catastrophe losses, with $$221mn in claims falling on the reinsurance business versus $114mn for insurance. The cat loss total was an increase from the $205mn in cat claims the company recorded a year ago.

Gross written premium growth slowed to 25%, down from the 41% increase in the second quarter. CEO Marc Grandisson has been vocal about the finite window companies have to grow amid the current market cycle to compound long-term book growth.

Arch lowered its combined ratio by 2.5 points to 91.4%, improving its loss ratio on both a reported and underlying basis. The reported loss ratio fell by 4.2 points, while the underlying margin expanded by 5.9 points.

The company lowered its reported loss ratio, even though catastrophes added 17.4 points to the combined, a 4.9-point increase from last year.

Favorable reserve development accelerated, as Arch released $118mn in reserves, compared with $46mn last year. About $65mn of the releases came from reinsurance, versus $48mn for mortgage, while prior years were favorable by only $4mn for insurance.

Arch’s expense ratio crept up by 1.7 points, despite a 9% increase in net earned premiums to $1.93bn.

Operating income at the company more than doubled to $0.74 a share from $0.29 last year, well ahead of the $0.32 that analysts had predicted. The operating profit totaled $294mn, compared with $120mn last year.

ARCH CAPITAL PURPLE 3Q 21.JPG

Growth: Arch grew net written premiums (NWP) in its insurance business by 40%, to $1.2bn. The company’s professional lines book jumped 56% to $310mn, while property, marine, and energy premiums grew 41% to $215mn. Programs business increased by 59% to $196mn, compared with a 25% growth in E&S casualty to $98mn.

Reinsurance NWP increased by only 2.8%, to $621mn. Casualty reinsurance NWP totaled $187mn, 31% higher than last year, while property cat business fell to a negative $7mn, versus $42mn last year. Marine and aviation reinsurance premiums declined 31% to $19mn.

Gross written premiums for reinsurance were up 25%, with the divergence from the net figure the result of a one-time $161mn cession to Watford Re.

Underwriting: The insurance segment improved its combined ratio to 102.2%, from 104.2%. The reinsurance combined ratio increased to 106.2% from 99%. Mortgage improved its all-in reported combined ratio to 26.2%, from 64.2%.

Investments: Net investment income fell by 12%, to $88mn from last year.

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree