Arch Capital reports 2016 premium growth but only slight profit rise

Bermuda-based Arch Capital has announced that its full year 2016 results saw a slight rise in profits of just two percent from its 2015 results, despite significant premium growth.

The re/insurer said that after-tax operating income for the year came to $577.4 million, a slight rise on the $565.2 million it made in 2015. In the fourth quarter of 2016, net operating income came to $141.5 million, down on the $143.6 million it made in the same quarter of 2015.

Arch Capital did report a rise of 8.4 percent in its gross premiums written for the year, which went from $4.8 billion in 2015 to $5.2 billion in 2016.

Commenting on a 3.6 percentage point rise of the loss ratio to 57.2 percent in the fourth quarter, the company said in a statement.

“The 2016 fourth quarter loss ratio included 4.5 points of current year catastrophic activity (before the impact of reinstatement premiums), primarily related to Hurricane Matthew, compared to 5.8 points of catastrophic activity in the 2015 fourth quarter. Estimated net favourable development in prior year loss reserves, before related adjustments, reduced the loss ratio by 16.7 points in the 2016 fourth quarter, compared to 22.5 points in the 2015 fourth quarter. The estimated net favourable development in the 2016 fourth quarter primarily resulted from better than expected claims emergence in short-tail business from most underwriting years and in longer-tail business from 2013 and prior underwriting years.”

In addition the company pointed out that the fourth quarter 2016 results included the completion of the purchase of UGC from American International Group, which was agreed on August 15, 2016, and that although the company’s balance sheet reflects the acquisition of UGC, its income statement for 2016 does not include UGC activity other than the impact of capital raising activity and UGC transaction costs of $25.2 million.

Arch Capital saw a slight rise in its combined ratio, which went from 89.5 percent in 2015 to 89.9 percent in 2016.

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