Arch Capital Group has disclosed its financial results for the fourth quarter of 2023, reporting a surge in its insurance and reinsurance profits.
The group’s reinsurance segment experienced growth, with gross premiums written rising by 9.7% and net premiums earned by 32.2%.
Arch Capital’s insurance sector, meanwhile, reported a notable 17.6% rise in gross premiums written and a 19.1% increase in net premiums written, indicating expansion across various lines of business. However, the mortgage segment faced a slight downturn in both gross and net premiums.
The group experienced a significant leap in net income available to common shareholders, reaching $2.3 billion, or $6.12 per share. This figure marked a 58.2% annualized net income return on average common equity, showcasing a substantial increase from the $849 million, or $2.26 per share, recorded in the final quarter of 2022.
The period also saw growth in the company’s after-tax operating income available to common shareholders, which escalated to $945 million, or $2.49 per share, up from $806 million, or $2.14 per share, in the corresponding quarter of the previous year.
A significant boost to this performance came from the creation of a net deferred tax asset valued at $1.18 billion, or $3.10 per share, a move triggered by the introduction of a new corporate income tax in Bermuda.
Despite a slight dip in underwriting income to $715 million from $734 million year-on-year, Arch Capital’s underwriting discipline reflected an improved combined ratio, adjusting for catastrophic activity and prior year development, to 78.9% from 82.0%. Additionally, the company’s book value per common share saw a 21.5% increase, closing at $46.94 as of December 31, 2023.
Marc Grandisson, CEO of Arch Capital, shared a positive outlook for the company, highlighting the strong operating return on equity achieved over the year and favorable market conditions.
From an investment standpoint, Arch Capital benefited from higher interest rates and robust operating cash flows, reporting net realized gains of $189 million for the quarter. The corporate segment, encompassing net investment income and realized gains or losses, also contributed positively to the company’s overall financial health.
The quarter’s effective tax rate on income before income taxes was notably a benefit of 85.6%, primarily due to the one-time deferred tax benefit related to Bermuda’s corporate income tax reform.
Arch Capital anticipates encountering and settling increased tax obligations in Bermuda starting in 2025, reflecting the company’s adjustment to the new tax landscape.
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