Arch Capital Group announced its third-quarter 2024 financial results, reporting significant growth in net income, premiums, and favorable development in loss reserves.
The company reported net income available to common shareholders of $978 million, or $2.56 per share, translating to a 19% annualized return on average common equity. This is an increase from $713 million, or $1.88 per share, in the third quarter of 2023. After-tax operating income was $762 million, or $1.99 per share, reflecting a 14.8% annualized return, compared to $876 million, or $2.31 per share, in the same quarter last year.
The quarter included $450 million in pre-tax catastrophic losses across Arch’s insurance and reinsurance segments, largely due to Hurricane Helene and additional global events. The company recorded $119 million in favorable development from prior year loss reserves.
Excluding catastrophic activity and prior year development, Arch’s combined ratio stood at 78.3%, slightly higher than 77% for the same period last year. Book value per common share was $57.00 at the end of September 2024, marking an 8.1% rise from June 2024.
Recently named CEO Nicolas Papadopoulo (pictured above) highlighted the strength of Arch's diversified platform, with each unit contributing to the results.
“Arch’s culture of adapting to evolving market conditions while maintaining underwriting discipline remains a key element of our long-term success,” he said.
The company’s insurance segment saw an increase in gross premiums written, up 14.6% from the third quarter of 2023, with net premiums written rising by 19.6%. Excluding contributions from Arch’s recent acquisition of US MidCorp and Entertainment insurance businesses from Allianz (the MCE acquisition), gross premiums rose by 4.4% and net premiums by 5.8%.
Net premiums earned by the insurance segment increased by 25%, partially attributed to growth in other liability lines, due to new business opportunities and rate changes.
The insurance segment’s third-quarter loss ratio included 4.9 points from current year catastrophe activity, primarily related to Hurricane Helene, compared to 2.6 points in the previous year. Favorable development in prior year reserves reduced the loss ratio by 0.9 points, compared to 0.7 points in the third quarter of 2023.
The underwriting expense ratio fell to 31.5% from 33.4% a year earlier, largely due to the impact of the MCE acquisition and lower operating expenses in the acquired business.
In the reinsurance segment, gross premiums written increased by 29.2%, and net premiums written rose by 24.5%, driven by rate increases, new business opportunities, and growth in existing accounts. Net premiums earned in the reinsurance segment were up by 22.6% from the third quarter of 2023.
The segment’s loss ratio included 21.3 points from current year catastrophe activity, mainly from Hurricane Helene and other global events, compared to 9.7 points in the prior year. Favorable development in prior year reserves reduced the loss ratio by 2.2 points, compared to a 2.8-point reduction in the same period last year.
The underwriting expense ratio improved to 22.7%, down from 23.6% in the prior-year quarter, as net premiums earned continued to grow.
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