Net premiums earned drop 2.3% at insurance carrier Arch Capital Group

Arch Capital Group Ltd. released Tuesday its financial results for the three months ending March 31, reporting a 21.5% drop in reinsurance net premiums written, a 0.7% drop in insurance net premiums written and a 2.9-point increase in its combined ratio.

Hamilton, Bermuda-based Arch’s subsidiaries include Toronto-based Arch Insurance Canada.

Arch Capital reported a 1.3% year-over-year increase in first-quarter gross premiums written, from $1.295 billion in 2014 to $1.312 billion this year. All figures are in United States dollars. Net premiums earned dropped 2.3%, from $857.6 million in Q1 2014 to $838 million in Q1 2015 while net premiums written dropped 8.8%, from $1.033 billion in Q1 2014 to $942.4 million in the latest quarter.

Underwriting income dropped 14.1%, from $133.6 million in Q1 2014 to $114.7 million in the most recent quarter. The combined ratio deteriorated by 2.9 points, from 84.6% in Q1 2014 to 87.5% in Q1 2015. The loss ratio increased 2.3 points, from 50.7% in Q1 2014 to 53% in the latest quarter.

Arch’s insurance operations are conducted in Bermuda, the United States, Europe, Canada, Australia and South Africa, the company reported earlier in its annual report for 2014. Its insurance offerings include commercial property, auto, primary and excess casualty, construction, director’s and officers’ liability and surety, among others.

In insurance, Arch reported a 0.7% drop in net premiums written (from $545.6 million in Q1 2014 to $542 million in Q1 2015) and a 6.4% in increase in net premiums earned, from $477.5 million in Q1 2014 to $507.9 million in the latest quarter.

“The change in net premiums written primarily resulted from reductions in professional lines, energy and marine and program business, partially offset by growth in alternative markets and excess and surplus casualty business,” Arch stated in a release. “The decrease in professional lines and energy and marine business was primarily due to a strategic reduction in exposure to international business while the lower level of program business reflected the termination of one account. The increase in alternative markets primarily reflected new accounts resulting from a renewal rights agreement entered into in the 2014 second quarter while growth in excess and surplus casualty primarily resulted from contract binding business.”

Underwriting income in insurance, in the latest quarter, was $27.25 million, down 17.8% from $33.16 million in Q1 2014.

Arch’s reinsurance group writes both treaty and facultative business, in property, professional liability, workers’ compensation, marine and aviation, among others. In reinsurance, Arch reported net premiums earned of $279.7 million in Q1 2015, down 18.1% from $341.35 million in Q1 2014. Net premiums written, in reinsurance, dropped 21.5%, from $433.93 million in Q1 2014 to $348.6 million in the most recent quarter.

“The lower level of net premiums written reflected decreases in other specialty, property catastrophe and casualty lines,” Arch stated. “The decrease in other specialty reflected non-renewals and share decreases in response to current market conditions. The lower level of property catastrophe business reflected non-renewals and share decreases in response to current market conditions and a higher usage of retrocessional coverage.”

Arch’s property facultative reinsurance operations have offices in the U.S., Canada and Europe. Treaty operations in Canada are conducted through Arch Insurance Canada.

Arch Capital reported its loss ratio in reinsurance dropped 0.7 points, from 40.9% in Q1 2014 to 40.2% in the most recent quarter. However the combined ratio deteriorated by a point, from 73% in Q1 2014 to 74% in Q1 2015.

In the mortgage segment, net premiums earned increased 29.9%, from $38.8 million in Q1 2014 to $50.37 million in the most recent quarter.

The combined ratio in mortgage increased 7.2 points, from 81.3% in Q1 2014 to 88.5% in the same three months of this year.