Arch Capital Group Ltd. on Wednesday reported first-quarter net income of $705 million, up 279% from the year-ago period, as net premium income increased 30%, investment income more than doubled and its insurance and reinsurance segment posted double-digit percentage growth in insurance income.
CEO Marc Grandisson said on a conference call with analysts Thursday that Arch had benefited from continued “premium growth momentum” from the past few tough market years.
“Our property and casualty insurance teams continue to lean into attractive market conditions,” he said.
Arch’s total expense ratio deteriorated to 80.6% from 78.7% in Q1 2022 as its loss ratio increased to 51% from 47.2%.
Net investment income rose 148.8% to $199 million from $80 million.
François Morin, chief financial officer and treasurer, said on the call that investment income benefited from a higher interest rate environment.
In Arch’s insurance segment, net premium income increased 19.1% to $1.437 billion, and the total expense ratio improved to 90.9% from 93.8%. Underwriting revenue rose 81% to $114 million.
Mr. Grandisson said current market conditions have Arch focused on growth in property lines.
“Since 2019, we’ve seen market psychology turn to underwriting discipline, and our underwriting teams were poised to become more willing providers of capacity,” said Mr. Grandisson.
In the reinsurance segment, net premium income increased 51.5% in the first quarter of 2022 to $1.726 billion, and the total expense ratio improved to 84.3% from 86.6%. Underwriting revenue increased 95.4% to $213 million as the reinsurance segment retained more business in the first quarter of the year due to a lower level of retrocession compared to the same period last year.
“The accident environment continues to offer many opportunities. The reinsurance market in particular is very attractive right now,” said Mr. Grandisson on the call.
Looking forward, said Mr. Grandisson that while the real estate market has seen “significant rate escalation” in recent quarters, “we believe it will require further rate improvements before it finds equilibrium.”