Arch Capital profit soars 279%

Arch Capital Group Ltd. Wednesday reported first-quarter net income of $705 million, up 279% from the year-earlier period, as net premiums written grew 30%, investment income more than doubled, and its insurance and reinsurance segments saw high-double-digit percentage increases in underwriting income.

CEO Marc Grandisson said on a Thursday conference call with analysts that Arch had benefitted from continuing “premium growth momentum” from the past few hard market years.

“Our property and casualty underwriting teams continue to lean into attractive market conditions,” he said.

Arch’s combined ratio worsened to 80.6% from 78.7% in last year's first quarter as its loss ratio increased to 51% from 47.2%.  

Net investment income soared 148.8% to $199 million from $80 million.

François Morin, chief financial officer and treasurer, said on the call that investment income benefitted from a higher interest rate environment.

In Arch’s insurance segment, net premiums written increased 19.1% to $1.437 billion, and the combined ratio improved to 90.9% from 93.8%. Underwriting income jumped 81% to $114 million.

Mr. Grandisson said current market conditions have Arch targeting growth in property lines.

“Since 2019, we have seen the market psychology pivot to underwriting discipline, and our underwriting teams were prepared to become more willing providers of capacity,” Mr. Grandisson said.

In the reinsurance segment, net premiums written rose 51.5% over last year's first quarter to $1.726 billion, and the combined ratio improved to 84.3% from 86.6%. Underwriting income soared 95.4% to $213 million as the reinsurance segment retained more business in this year’s first quarter due to a lower level of retrocession activity compared with the year-earlier period.

“The property casualty environment continues to offer plenty of opportunities. The reinsurance market in particular is very attractive right now,” Mr. Grandisson said on the call.

Looking forward, Mr. Grandisson said that while the property market has seen “significant rate escalation” over the past few quarters, “We believe it will take further rate improvement before it finds equilibrium.”