Arch Capital’s Q1 profit cut nearly in half on California wildfire losses

(Reuters) — Arch Capital’s first-quarter profit fell 49.2% as catastrophe losses from the California wildfires weighed on its underwriting performance and investment returns, the insurer said Tuesday.

The Los Angeles wildfires earlier this year resulted in several fatalities and caused economic damage estimated as high as $250 billion.

The insurer reported a pretax catastrophe loss of $547 million, primarily due to the California wildfires. This loss is net of reinsurance and reinstatement premiums.

Pembroke, Bermuda-based Arch had said earlier this year it expected an insured market loss between $35 billion and $45 billion due to the California wildfires, with its share of the losses estimated between $450 million and $550 million.

Gross premiums written rose 8.9% to $6.46 billion in the first quarter. The insurer’s net investment income surged 15.6% to $378 million.

The company reported losses and loss adjustment expenses of $2.59 billion, compared with $1.73 billion in the year-earlier period.

Profit available to common shareholders was $564 million, or $1.48 per share, compared with $1.11 billion, or $2.92 per share.

Arch reported a combined ratio of 90.1%, compared with 78.8% last year. A ratio below 100% indicates the insurer earned more in premiums than it paid out in claims.