Bermudian carrier Arch has posted a consensus-beating set of Q1 results as the company’s underwriting income soared nearly 12 percent to $236.9mn on improved profits in its recently-acquired mortgage business and low catastrophe losses.
The firm reported earnings per share of $1.69, comfortably ahead of the $1.55 average estimate of 14 analysts surveyed by financial news site Marketwatch.
Overall the carrier’s combined ratio for the period totalled 81.3 percent, broadly flat year-on-year, with a result for the insurance and reinsurance segments of 98.7 percent and 93.4 percent respectively.
Catastrophe losses added just 40 bps to the result for Q1, compared to a 4 percent hit taken in the same period last year, while the loss ratio also benefited from 13.1 points of favourable reserve releases.
“The estimated net favorable development in the 2018 first quarter primarily resulted from better than expected claims emergence in short-tail business from more recent underwriting years and in longer-tail business across earlier underwriting years,” Arch said.
“The balance of the change in the 2018 first quarter loss ratio resulted, in part, from a higher level of large loss activity than in the 2017 first quarter.”
However, the result was also boosted by marked improvements in the company’s expense ratio, which dropped 4.1 points to 30 percent.
The strong underwriting performance came on the back of a 10.9 percent hike in gross written premiums (GWP) to $1.8bn, despite a 7.9 percent reduction in the mortgage top line, which fell to $321.3mn.
The growth was primarily due to a 21.4 percent leap in reinsurance GWP, which climbed to $577.5mn, with favourable FX rates giving a boost to the result, while insurance premiums increased 5.3 percent to $823.4mn.
Return on equity for the quarter came in at 11.3 percent, a 1 point improvement on the result posted for the same period in 2017.