Arch Capital Group (ACGL) Q1 2016 Earnings Call

posted in: Earnings Call, Notes | 0

Acrch Capital Group (ACGL) CEO Dinos Iordanou reported stong results which were helped by lower catastrophe cost

“We are staring the year on a good note, our first quarter, it was terrific from virtually all perspectives. Our reported combined ratio was excellent at 87.1, which was aided by low level of catastrophe losses and continued favorable loss reserve development in each of our segments.”

Sees the reinsurance market possibly bottoming out

“There are no significant changes in the property, casualty operating environment from last quarter, although there are some signs that reinsurance terms, especially ceding commissions maybe bottoming out. We are in a market where the importance of cycle management, not only in preserving capital, but also maintaining balance sheet integrity is paramount. Navigating through this phase of the cycle requires that our underwriters remain disciplined, opportunistic and laser-focused in execution.”

Shifting their insurance portfolio to where they see opportunity by shrinking unprofitable areas where they don’t feel they are being adequately compensated for the risk

“As far a longer term view of our mix changes, I would point out that four years ago, in the first quarter of 2012, within the reinsurance segment, the property cat line represented 26% at net earned premiums, whereas this quarter it is down to only 6.9% of earned premiums and this was accomplished through 71% reduction in net earned premiums over the four-year period. Yes, 71%. The insurance segment similarly reduced its property of marine net earned premiums by 38% over that same time period. Both actions reflect our view of sever margin compression in the property cat space.”

Focused on profits not revenue

“So we’re putting a lot of focus in trying to find this profitable segment for us. But let me reemphasize, we always look for bottom line results first and we look at premium growth second. At the end of the day, you can’t focus just on premium growth.”

Seeing pockets of opportunity as a result of some of their competitors going through mergers and footprint rationalizations

“On the insurance side I believe that we’ve seen an increase in submissions over the last quarter or so because some of our competitors have decided to exit the lines of business, there have been some mergers and acquisition. So we are seeing some movement, it is not widespread but it is certainly starting to occur and we are seizing the opportunity whenever we can and whenever we think it’s appropriate.”