Arch Capital Group has announced its Q4 2024 results, while also anticipating massive losses from the California wildfires to kick off its 2025.
The company reported a fourth-quarter net income available to common shareholders of $925 million, or $2.42 per share, reflecting a 17.9% annualized net income return on average common equity.
This is significantly lower compared to $2.3 billion, or $6.12 per share, in the fourth quarter of 2023.
The company said that it recorded pre-tax current accident year catastrophic losses of $393 million in its insurance and reinsurance segments, net of reinsurance and reinstatement premiums. These losses were primarily driven by Hurricanes Milton and Helene.
After-tax operating income for the quarter was $866 million, or $2.26 per share, representing a 16.7% annualized operating return on average common equity, compared to $945 million, or $2.49 per share, in the prior-year period.
On the topic of the wildfires that hit California in January, CEO Nicolas Papadopoulo (pictured above) noted that it is still early to tell the extent of the financial impact.
However, Arch estimates the insured market loss from the wildfires to be between $35 billion and $45 billion, with the company’s expected share ranging from $450 million to $550 million.
January estimates from JPMorgan put losses at $20 billion for insurers, with the projections taking into account 100,000 residents who received evacuation orders and some 15,000 structures considered at risk.
On Aug. 1, 2024, Arch completed its acquisition of the US MidCorp and Entertainment insurance businesses from Allianz. With the deal in mind, Arch announced that gross premiums written in the segment increased by 28.4% compared to the fourth quarter of 2023, or 8.1% excluding the MCE Acquisition. Net premiums written rose 34.9% year-over-year, or 7.7% excluding the acquisition.
Net premium growth was driven by the acquisition as well as an increase in property, short-tail specialty, and other liability – occurrence lines, reflecting new business opportunities and rate adjustments.
Net premiums earned for the quarter were 33.4% higher than in the same period of 2023, or 7.1% when excluding the MCE Acquisition, reflecting changes in net premiums written over the previous five quarters.
Favorable development in prior year loss reserves, net of related adjustments, contributed $146 million. The combined ratio, excluding catastrophic activity and prior-year development, was 79.0%, compared to 78.9% in the fourth quarter of 2023.
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