Arch Capital hit by wildfire expenses
The California wildfires could cost Bermudian based Arch Capital Group “somewhere between $450 million and $550 million" the company said in releasing fourth quarter results tonight.
The estimate is based on what Arch believes will be an insured market loss of between $35 billion and $45 billion.
The company wrote $21.5 billion in gross premium for the year, 16.9 per cent higher than for the 2023 year.
Net income available to common shareholders for the full year was $4.27 billion, three per cent less than in 2023.
Fourth quarter net income was about $925 million for the three months to December 31, compared to $2.32 billion for the same period in 2023.
The company’s underwriting profitability as measured by the combined ratio for the year was 82.5 per cent and net investment income was about $1.495 billion, some 46 per cent higher than the year before.
After-tax operating income available to Arch common shareholders for the fourth quarter was $866 million, compared to $945 million in the corresponding period the year before.
Net income available to Arch common shareholders of $925 million, or $2.42 per share, representing a 17.9 per cent annualised net income return on average common equity, compared to net income available to Arch common shareholders of $2.3 billion, or $6.12 per share, for the 2023 fourth quarter.
After-tax operating income available to Arch common shareholders of $866 million, or $2.26 per share, representing a 16.7 per cent annualised operating return on average common equity, compared to $945 million, or $2.49 per share, for the 2023 fourth quarter.
Pre-tax current accident year catastrophic losses for the Company’s insurance and reinsurance segments, net of reinsurance and reinstatement premiums, of $393 million, due in part to Hurricanes Milton and Helene.
Favourable development in prior year loss reserves, net of related adjustments, of $146 million.
Combined ratio excluding catastrophic activity and prior year development of 79.0 per cent, compared to 78.9 per cent for the 2023 fourth quarter.
Share repurchases of approximately $24 million, in addition to the already communicated special cash dividend to common shareholders of $1.9 billion, or $5.00 per share, paid on December 4, 2024.
Book value per common share of $53.11 at December 31, 2024, a 6.8 per cent decrease from September 30, 2024 (or a 1.9 per cent increase excluding the impact of the special cash dividend noted above).
Nicolas Papadopoulo, Arch chief executive officer, commented: “We closed the year with a very strong fourth quarter including contributions from all our earnings sources.”
“These are excellent results when you consider the elevated catastrophe environment and the increased risk levels across many lines of business.” Papadopoulo added.
“Additionally, on behalf of everyone at Arch, I would like to offer our thoughts and sympathies to everyone affected by the California wildfires.
“This devastating event will require the coordinated efforts of many, particularly the insurance industry, to help rebuild.”
Arch Capital Group Ltd, is a publicly listed Bermuda exempted company with approximately $23.5 billion in capital at December 31, 2024.
Arch, which is part of the S&P 500 index, provides insurance, reinsurance and mortgage insurance on a worldwide basis through its wholly owned subsidiaries.
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