Arch reports $1 billion profit as reinsurance premiums decline

Arch Capital Group  reported third-quarter net income available to common shareholders of $1.03 billion, down from $1.34 billion a year earlier, as underwriting income declined across its insurance, reinsurance and mortgage businesses.

After-tax operating income fell to $910 million from $1.04 billion, generating an annualized operating return on average common equity of 16%.

Gross premiums written were roughly flat at $5.39 billion, while net premiums written declined 3% to $3.85 billion. Underwriting income fell 19.4% to $702 million, and the combined ratio increased to 82.5% from 79.8%.

Arch recorded $234 million in current accident year catastrophe losses across its insurance and reinsurance segments, alongside $179 million in favorable prior-year reserve development. Excluding catastrophe activity and prior-year development, the combined ratio was 81.2%, compared with 80.5% a year earlier.

The insurance segment’s gross premiums written rose 7.8% to $2.77 billion, while net premiums written increased 2.7% to $2.01 billion. Adjusting for the nonrenewal of certain programs acquired from Allianz, net premiums written would have grown 5.8%, supported by international business. Its combined ratio increased to 94.4% from 93.4%, with catastrophe activity including losses related to the Iran conflict.

Reinsurance gross premiums written declined 8% to $2.31 billion, and net premiums written fell 9.3% to $1.58 billion, partly reflecting nonrenewals and reduced participation on accounts. The segment’s combined ratio increased to 78.3% from 76.1%.

Mortgage underwriting income declined 22.7% to $201 million, with its combined ratio increasing to 25.5% from 13.5%.

Net investment income rose to $451 million from $408 million, reflecting growth in average investable assets. Arch also recorded $99 million in net realized losses, compared with $210 million in gains a year earlier.

“We are operating in a transitioning market where conditions are increasingly uneven, but we are prepared and welcome the challenge. The market will continue to evolve, but our core principles will not, and we remain focused on producing superior risk-adjusted returns over the long term. As Arch celebrates its first 25 years, I want to thank our employees for what we have built together: a global franchise, a strong brand and a culture anchored in our Values. I also want to thank our investors for their continued confidence in Arch.” – CEO Nicolas Papadopoulo.

The company repurchased $1.4 billion of shares during the quarter. Book value per common share ended September at $67.90, down 0.2% from June.