Arch reports higher quarterly profit amid a hardening market

Arch Capital Group Ltd. on Tuesday reported net income of $533.1 million for the fourth quarter of 2020, up 68.7% compared with the same period a year earlier.

Net premium written increased to $1.76 billion in the quarter, up 20.8% compared with the fourth quarter of 2019.

“Broadly hardening market conditions” drove growth across all segments, said Marc Grandisson, CEO of the Bermuda-based insurer and reinsurer during an earnings call with analysts Wednesday. 

“Arch leans strongly into improving markets,” to accelerate growth, he said.

Net investment income fell 25.8% compared with the prior year period to $114.5 million.

Pre-tax fourth-quarter catastrophe losses for the insurance and reinsurance segments, net of reinsurance and reinstatement premiums, totaled $156.4 million, including $400,000 of COVID-19-related losses.

Arch’s combined ratio worsened slightly to 88.3% from 83.8% in the fourth quarter of 2019.

Net premiums written in the insurance segment increased 21.6% to $837.7 million in the fourth quarter, driven by rate increases and new business, Arch said in its earnings statement.

Insurance segment renewal rate changes increased approximately 12%, with directors and officers liability, property, energy and marine exhibiting “strong advances,” in the fourth quarter, Mr. Grandisson said. 

Net premiums written in the reinsurance segment increased 44.9% to $490.9 million in the fourth quarter, again on rate increases and new business. January 2021 reinsurance renewals showed “continued rate increases in most areas” as reinsurance benefitted from the underlying hardening primary market conditions. 

Net income for the year declined 14.5% to $1.35 billion and net written premiums written increased 25.3% to $6.9 billion.