Arch Capital earnings double on reinsurance rebound
The Bermuda-based insurer posted first-quarter net income of $1.0 billion, up 84% from a year earlier.
Arch Capital Group (ACGL) reported first-quarter net income available to common shareholders of $1.0 billion, an 84% increase from $564 million a year earlier, as underwriting income surged and catastrophic losses eased. Earnings per share rose to $2.88 from $1.48, while after-tax operating income climbed 54% to $901 million, or $2.50 a share.
The quarter marked a sharp acceleration in profitability, driven by a 74.6% jump in underwriting income to $728 million and a 9.4-percentage-point improvement in the loss ratio to 52.4%. The reinsurance segment led the turnaround, with underwriting income more than doubling to $441 million and its loss ratio falling 15.2 points to 51.7%. Despite the gains, gross premiums written dipped 0.6% to $6.425 billion, extending a deceleration from 1.1% growth in the prior quarter.
Revenue trends diverged across segments. Insurance gross premiums grew 2.0% to $2.697 billion, though the pace slowed from 2.3% in the fourth quarter, while reinsurance premiums fell 2.3% to $3.414 billion. The mortgage segment saw premiums decline 3.1% to $316 million, and its underwriting income dropped 12.3% to $221 million as the loss ratio rose 4.2 points to 5.3%.
The combined ratio improved to 81.7% from 90.1% a year earlier, though the underlying ratio excluding catastrophes and prior-year development ticked up to 82.3% from 79.5% in the prior quarter. Favorable reserve development declined to $200 million from $237 million in the third quarter, while pre-tax catastrophic losses fell to $174 million from $210 million in the fourth quarter.
Book value per share rose 1.7% sequentially to $66.19, though the pace slowed from a 4.5% increase in the prior quarter. Investment income continued to soften, with pre-tax net income declining to $408 million and the yield on amortized cost slipping to 3.99% from 4.22%. Total return on investments fell to 0.10% from 1.36% in the prior quarter.
Share repurchases totaled $783 million, down from $798 million in the fourth quarter and $1.3 billion in the third. The company did not update its full-year guidance, leaving its outlook unchanged from prior disclosures.
Source: company public filings.