Canadian Underwriter

Combined ratio up 0.5 points for Arch Capital

April 28, 2016   by Canadian Underwriter

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Arch Capital Group Ltd. reported Wednesday a 0.5-point increase in its combined ratio, a 4.2% increase in first-quarter gross written premiums in insurance and a 0.8% drop in Q1 gross written premiums in reinsurance.

Pembroke, Bermuda-based Arch released Wednesday its financial results for the three months ending March 31.

screen shot arch q1 16 financialsThe combined ratio in the latest quarter was 88.9%, up 0.5 points from 88.4% in Q1 2015.

Gross written premiums were $1.438 billion in Q1 2016, up 7% from $1.342 billion in the same period in 2015. All figures are in United States dollars.

Arch writes reinsurance and insurance worldwide. In addition to Bermuda, the firm and has operations in Canada, the U.S., Europe, Australia and the United Arab Emirates, Arch said in February in its annual report for 2015. In Canada, Arch started treaty operations in 2011 and beginning in 2015, reinsurance in Canada is written through the Canadian branch of Arch Re U.S., whose principal U.S. offices are in Morristown, N.J.  Reinsurance lines include property catastrophe, casualty, marine, aviation, proportional motor, workers compensation catastrophe and life, among others.

Gross premiums written in reinsurance were $481.4 million in the latest quarter, down 0.8% from $485.1 million in Q1 2015. Net premiums written for Q1, in reinsurance, dropped 8% year-over year.

“The lower level of net premiums written reflected decreases in property excluding property catastrophe and property catastrophe business, partially offset by growth in casualty business,” Arch said. “The decrease in property lines reflected share decreases and timing of renewals in response to current market conditions and a higher level of retrocessional usage. Growth in casualty business reflected exposure growth and new business.”

Arch’s combined ratio in reinsurance deteriorated 3.7 points, from 74% in Q1 2015 to 77.7% in the latest quarter.

Arch Capital’s insurance operations in Canada are conducted through Toronto-based Arch Insurance Canada Worldwide, Arch Capital’s gross premiums written in insurance were $798.55 million in the latest quarter, up 4.2% from $766.15 million in Q1 2015.

The combined ratio in insurance was 94.3% in the most recent quarter, a 0.4-point improvement from 94.7% in Q1 2015.

In the latest quarter, 19.9% of net premiums written, in insurance ($109.48 million) was from professional lines, including directors’ and officers’ liability, errors and omissions and employment practices, among others. Arch reported $104.47 million in net premiums written (19% of its total from insurance) in construction and national accounts, which includes casualty insurance for middle and large accounts in the construction industry plus products for middle and large national accounts, “specializing in loss sensitive primary casualty insurance programs (including large deductible, self-insured retention and retrospectively rated programs).”

Arch’s other primary insurance coverages include marine, energy, aviation and commercial auto.

In the latest quarter, Arch reported gross premiums written of  $111.29 million in mortgage and $148.6 million in “other.”

Company-wide, Arch Capital reported net income of $175.6 million on revenue of $1.087 billion in the most recent quarter, compared to net income of $309 million on revenue of $1.082 billion in the first three months of 2015.

Underwriting income dropped from $116.47 million in Q1 2015 to $110.9 million in the latest quarter.

As of Feb. 23, 2016, Arch Capital’s insurance group had about 1,310 employees and its reinsurance group had about 280 employees, the firm said in its annual report for 2015.

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