By Chris Munro

Feb 10 - (The Insurer) - Arch Capital Group’s combined ratio climbed 6.1 points year on year to 85.0 percent in Q4 2024 in part driven by higher catastrophes, while the (re)insurer has estimated it will take a $450mn to $550mn hit from the California wildfires.

The Bermuda-based firm’s fourth quarter 2024 loss ratio stood at 57.5 percent, up from the prior-year period’s 49.0 percent.

Arch’s insurance and reinsurance operations faced pre-tax current accident year catastrophe losses of $393mn in Q4 2024, net of reinsurance and reinstatement premiums, due in part to hurricanes Milton and Helene.

It benefitted from favourable development in prior year loss reserves, net of related adjustments, of $146mn.

On an ex-cat and net of prior year loss development basis, Arch’s combined ratio increased 10 basis points year on year to 79.0 percent.

Arch’s after-tax operating income totalled $866mn for the final three months of 2024, down from the prior-year period’s $945mn.

Its after-tax operating income per share for 2024’s fourth quarter stood at $2.26, a decrease when compared with Q4 2023’s $2.49, but ahead of the $1.80 that was the consensus estimate of 14 analysts as compiled by S&P Capital IQ.

Underwriting income in Q4 2024 fell by 12.6 percent from 2023’s fourth quarter to $625mn.

Arch booked gross premiums written (GPW) of $4.76bn in Q4 2024, compared with $4.25bn in the prior-year period.

Its net premiums written $(NPW.SI)$ increased 17.1 percent year on year to $3.82bn.

“We closed the year with a very strong fourth quarter including contributions from all our earnings sources,” said Arch CEO Nicolas Papadopoulo.

“These are excellent results when you consider the elevated catastrophe environment and the increased risk levels across many lines of business,” he added.

Insurance Q4 CR climbs 5.4 points

Arch’s insurance business’ fourth quarter 2024 combined ratio deteriorated by 5.4 points year on year to 98.5 percent, while the segment’s underwriting income declined by $69mn from Q4 2023 to $30mn.

Current accident year catastrophes, net of reinsurance and reinstatement premiums, contributed 8.3 points to Arch’s insurance Q4 2024 combined ratio, primarily related to hurricanes Helene and Milton, compared with 3.8 points in the prior-year period.

Net favourable development in prior year loss reserves, net of related adjustments, shaved 10 basis points from the insurance unit’s fourth quarter 2024 combined ratio, compared with 50 points of favourable development in Q4 2023.

The insurance ex-cat and prior year development combined ratio increased 50 basis points year on year to 90.3 percent in 2024’s fourth quarter.

Fourth quarter 2024 insurance GPW increased 28.4 percent year on year to $2.48bn, while NPW grew 34.9 percent from Q4 2023 to $1.95bn.

Arch said the insurance NPW growth reflected the impact of the company’s acquisition of Allianz’s US midcorp and entertainment businesses, along with an increase in property and short-tail specialty and other liability—occurrence due partly to new business opportunities and rate changes.

Reinsurance Q4 CR up 3.0 points

The company’s reinsurance business recorded a combined ratio of 83.0 percent, a deterioration of 3.0 points from the prior-year period. Underwriting income dipped by $2mn year on year to $328mn.

Current accident year catastrophes, net of reinsurance and reinstatement premiums, added 12.2 points to Arch’s reinsurance Q4 2024 combined ratio, largely from Hurricane Milton, compared with the prior-year period’s 5.1 points.

Net favourable development in prior year loss reserves, net of related adjustments, cut 4.0 points from the reinsurance division’s Q4 2024 combined ratio, compared with 1.3 points of favourable development in Q4 2023.

The reinsurance ex-cat and prior year development combined ratio improved 1.4 points year on year to 74.8 percent.

Reinsurance GPW decreased 1.5 percent year on year to $1.94bn in the final three months of last year, while NPW increased 2.0 percent from Q4 2023 to $1.59bn.

The reinsurance NPW growth reflected increases in casualty, property excluding property catastrophe and property catastrophe lines, driven partly by rate increases, new business opportunities and growth in existing accounts.

Arch’s mortgage business posted a combined ratio of 13.4 percent and underwriting income of $267mn for the final quarter of 2024. In the prior-year period, the mortgage business reported a combined ratio of -3.3 percent and underwriting income of $286mn.

Mortgage GPW and NPW for Q4 2024 totalled $331mn and $277mn, respectively. In the prior-year period, mortgage GPW was $350mn and NPW was $255mn.

Arch estimates CA wildfire impact

In its earnings release, Arch also outlined the expected impact of the California wildfires on its operations.

While Papadopoulo said it remains too early to fully assess the magnitude of the wildfires, Arch’s current view of the insured market loss is $35bn to $45bn.

“[The makes] Arch's expected share of the event somewhere between $450mn and $550mn,” the executive added.