Arch tops estimates on strong underwriting, investment income

(Reuters) — Arch Capital Group’s fourth-quarter operating income surpassed market expectations, as the insurer reported  Wednesday that it benefited from stronger underwriting and better returns on its investments.

Buoyed by employer-guaranteed and government-mandated policies, the demand for insurance remains resilient irrespective of the broader economic conditions.

Arch Capital said its gross written premium increased 12% to $4.25 billion in the quarter. It posted a combined ratio of 78.9%, compared with 73.5% a year earlier. A ratio below 100% means the insurer earned more in premiums than it paid out in claims.

Investment returns at major insurers have rebounded as global capital markets rallied on hopes that the U.S. Federal Reserve is nearing the end of its rate-hike cycle.

Arch’s net investment income improved to $313 million, compared with $181 million in the year-earlier period.

The company’s after-tax operating income came in at $2.49 per share, compared with analysts’ estimate of $2.03 per share, according to LSEG data.