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Arch profit slumps on realized investment losses

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Arch Capital Group Ltd. on Wednesday reported a 66.6% decrease in third quarter profit from the same period last year, reflecting realized investment losses due to a decline in equity markets.

“Net income movement on a quarterly basis can be more volatile as these earnings are influenced by changes in foreign exchange rates and realized gains and losses in our investment portfolio,” explained Arch chairman and CEO Constantine Iordanou in a call with investment analysts Thursday.

The Hamilton, Bermuda-based insurer recorded net income of $74.5 million in the three months ended Sept. 30, compared with $223.2 million in the year-ago period.

Arch reported $847.0 million in net premiums written, down 1.5% from the year before period.

The combined ratio for the quarter was 89.7%, compared with 88.5% in 2014.

Arch said in a statement Wednesday that net premiums written in its insurance segment increased 0.7% to $543.0 million, reflecting growth in construction, alternative markets and travel, and its accident and health business, but partially offset by a reduction in its program business.

The reduction in program business was the result of “underwriting decisions,” according to the statement.

Changes in the foreign currency rates resulted in a decrease in Arch’s reinsurance segment’s net premiums written of 9.6% to $237.1 millionthe prior year period.

The decrease in net premiums also reflects declines in specialty and property lines of business, due to decreased renewals and market conditions, the statement said.

Losses from catastrophic events totaled $18.8 million in the quarter, up 32.9% from $14.2 million in the same period last year.

When asked why the port explosion in Tianjin, China, in August did not affect Arch as profoundly as it did competitors, Mr. Iordanou said in the conference call that a combination of luck and “good underwriting” spared them.