Arch Capital grows GWP 24% in Q1 on heavy lean into reinsurance
Re/insurance group Arch Capital increased gross written premium by 24% in the first quarter, including a head-turning 41% gain in its reinsurance segment which it leveraged for its Q1 profit gain.
Reinsurance increased its Q1 underwriting profit by $166 million or 78%, part and parcel with a 6.9 point decline in the segment’s combined ratio to 77.4%.
Management claimed growth in all lines of business, “due in part to rate increases, new business opportunities and growth in existing accounts.”
The Q1 reinsurance loss ratio, down 4.6 points to 53%, included 3.0 points related to the Baltimore bridge collapse, suggesting a $50 million hit, and 1.9 points of current year catastrophic activity attributed to “a series of global events,” down from 5.4 points of cat loss in the year prior period. Favourable PYD slowed mildly.
The insurance segment proved less profitable as growth was toned down. Underwriting income was down 24.6% to render a 3.2 point increase to the segment combined ratio.
Primary insurance also suffered its losses on the Baltimore bridge at 2.1 ratio points, suggesting $30.5 million. Other cat losses hit 1.9 ratio points, up from 1.4 points in the prior year period. The impact of favourable PYD largely matched the prior year period.
Growth in primary insurance slowed: mark gross written premium up 7.4%, below the growth rate in net earned premium at 15%, which management noted was still reaping interim gains.
In the mortgage segment, Arch increased underwriting income by 11.5% with GWP flat but net revenue measures showing a mild gain on the Q4 2023 termination of select reinsurance deals.
Combined on the group P&L, underwriting income was up 29% to $736 million for a 1.8 point cut to the group's combined ratio to 78.8%. Excluding cat losses and PYD, the adjusted combined ratio came down 1.4 points to 80.8%.
Combined with an notable increase in Q1 investment income, the group ended with a 57% year on year increase in attributable net profits and an ROE of 24.6%.
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