Arch grows reinsurance GPW 29% as group net income hits $978m in Q3’24

Arch Capital Group Ltd., the Bermuda-based insurer and reinsurer, has reported premium growth across its insurance and reinsurance segments in the third quarter of 2024, although the underwriting result dipped year-on-year amid elevated losses from natural catastrophes.

Group-wide, gross premiums written (GPW) rose more than 20% year-on-year to $5.4 billion in Q3 2024, as net premiums written (NPW) rose 21% to over $4 billion, and net premiums earned (NPE) increased 22% to just under $4 billion.

In its reinsurance segment, GPW increased by more than 29% to $2.8 billion and NPW by 25% to almost $2 billion. Arch attributes the growth in GPW to increases in most lines of business, driven in part by rate increases, new business opportunities, and growth in existing accounts.

In the insurance arm, GPW rose 15% to $2.3 billion and NPW increased by 20% to $1.8 billion. The firm explains that growth in NPW included the impact of the MCE acquisition and also reflected an increase in other liability.

While premiums increased in many parts of the business, the group underwriting result fell 25% from $721 million in Q3 2023 to $538 million in Q3 2024, reflected in an 8.7 percentage point increase in the combined ratio to 86.6%, which remains very solid. The underwriting expense ratio actually improved by 1.1 percentage point to 26.1%, but the loss ratio rose 9.8 points to 60.5%.

Pre-tax current accident year catastrophic losses for Arch’s insurance and reinsurance segments, net of reinsurance and reinstatement premiums, reached $450 million, due in part to hurricane Helene and a series of other global events. This was somewhat offset by favorable development in prior year loss reserves, net of related adjustments, of $119 million.

It appears as though the reinsurance business assumed the majority of Arch’s Q3 2024 catastrophe losses, as the loss ratio increased by 13.2 percentage points to 69.6%, which reflects 21.3 points of current year catastrophic activity, related to Helene and a series of other global events, compared to 9.7 points of catastrophic activity in the 2023 third quarter. This was somewhat offset by net favorable development of prior year loss reserves, which reduced the loss ratio by 2.2 points.

All in all, the reinsurance segment’s underwriting income fell by almost 52% to $149 million in Q3 2024, as the combined ratio deteriorated from 80% to 92.3%.

Within the insurance operation, underwriting income came down by just $7 million year-on-year to $120 million, as the combined ratio rose from 90.9% to 93.1%, driven by a 4.1 point increase in the loss ratio to 61.6%, partially offset by a 1.9 point improvement in the expense ratio.

Arch explains that the insurance segment loss ratio reflected 4.9 points of current year catastrophic activity, primarily related to hurricane Helene, compared to 2.6 points of catastrophic activity in the third quarter of last year.

The re/insurer’s mortgage segment had a solid quarter, producing GPW of $339 million compared with $347 million last year, NPW of $282 million compared with $271 million, and NPE of $313 million, up from $293 million last year.

The division’s underwriting income fell slightly to $269 million with a combined ratio of 14.8%, compared with $282 million and a combined ratio of 4.7% in Q3 2023.

On the asset side of the balance sheet, pre-tax net investment income reached $399 million, up from $269 million a year earlier.

In total, Arch has reported net income of $978 million for the third quarter of 2024, a solid jump from $713 million seen in Q3 2023.

“Our third quarter results demonstrate the value of our diversified platform with excellent bottom-line contributions from all our units. Arch’s culture of adapting to evolving market conditions while maintaining underwriting discipline remains a key element of our long-term success,” said Nicolas Papadopoulo, Chief Executive Officer.

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