Sentiment Analysis of the earnings transcript to help figure out if there are any bullish or bearish sentiments that could be gathered from it. We're doing ML and AI based analysis on the earnings call to get some more insights.
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| Statement |
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| This puts your underwriters in a strong position to fully capitalize on the market opportunity |
| The high persistency of our insurance in-force portfolio, which carries its own unique version of owning the renewals, enables a segment to consistently serve as an earnings engine for our shareholders |
| primary MI portfolio remains excellent and the overall MI market continues to be disciplined and returned focus |
| We delivered strong net premium written growth across our insurance and reinsurance segments, a 22% increase over the fourth quarter of 2022 after adjusting for large non-recurring reinsurance transactions we discussed last year, and an excellent combined ratio of 78.9% for the Group |
| Growth was strong all year as we allocated capital to our property and casualty teams, we short over $17 billion of gross premium and over $12.4 billion of net premium |
| Our excellent performance resulted from an outstanding quarter across our three business segments highlighted by $715 million in underwriting income |
| So throughout the year, we saw very strong or very well performing housing market |
| As we have mentioned on previous calls, those earnings have helped fund growth opportunities in the segments with the best risk adjusted returns, demonstrating that the disciplined underwriting approach and active capital allocation are essential throughout the cycle |
| We have successfully deployed capital into our diversified operating segments to fuel growth, while also making substantial operational enhancements to our platform, including entering new lines, expanding into new geographies and making investments into new underwriting teams, technology and data analytics |
| It's a good market |
| Our full year financial performance was excellent with an annual operating return on average common equity of 21.6% and an exceptional 43.9% increase in book value per share, which remains an impressive 34.2% if we exclude the one-time benefit from the deferred tax asset we booked in the fourth quarter |
| Our fourth quarter results conclude another record year as we continued to lean into broadly favorable underwriting conditions in the property and casualty sectors |
| We have capacity, capital to be able to deploy and I think we would be very, very pleased to do more |
| The significant increases to our asset base provide a tailwind for our creative investment group to further increase its contributions to Arch's earnings |
| Onto investments, net investment income grew to over $1 billion for the year due to rising interest rates that enhanced earnings from the float generated by our increasing cash flows from underwriting |
| Underwriting income of nearly $1.1 billion is a record for this segment and a significant improvement from the cat heavy 2022 |
| Reinsurance underwriting results remain excellent as we ended the year with an 81.4% combined ratio overall in a 77.4% combined ratio ex-cat and prior year development both significant improvements over 2022 |
| Overall, our balance sheet remains extremely strong and we retain significant financial flexibility to pursue any opportunities that arise |
| With an investable asset base approaching $35 billion, supported by a record $5.7 billion of cash flow from operating activities in 2023 and new money rates near 5%, we should see continued positive momentum in our investment returns |
| The $450 million of underwriting income generated by the insurance segment in 2023 doubled our 2022 output as we continue to earn in premium from our deliberate growth during the early years of this hard market |
| Underwriting results remained solid on the year as the insurance segment delivered a combined ratio of 91.7% and a healthy 89.6% excluding cat and prior year development |
| These conditions should help to ensure that our mortgage segment remains a valuable source of earnings diversification for Arch |
| So obviously profitability embedded in the business should be strong |
| François Morin And as you know it's been a very good market, very rationale market |
| And yet you had very strong other income in the quarter |
| We observed favorable development across many units, but primarily in short day lines in our property and casualty segments and in mortgage due to strong cure activity |
| But certainly we like the profitability in the book and it should be -- it should remain strong |
| Where we are today at the start of 2024 is certainly a bit more, I wouldn't call it optimistic in the sense that we see good home prices and a solid housing market for 2024 |
| And 2008, 2009, and 2010 were really, really good years in property because the market, as we all know, goes up really, really quickly but does not go down in one fell swoop |
| Our ability to deploy capital early in the hard market cycle is paying dividends as we own the renewals, a phrase I learned from Paul Ingrey, a personal mentor and foundational leader of Arch |
| Statement |
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| And then my second question Marc, I think in your prepared comments you'd said that casualty may be collectively worse than expected for the industry |
| Similar question to Bob, we've seen, obviously, a number of companies report some reserve problems in the fourth quarter |
| It's not as litigious internationally as you would expect, but we're still seeing some hardening in international casualty as well |
| Overall, the catastrophe losses we recognize were below our expected catastrophe load |
| But I guess the question would be, even if they weren't as soft and you were getting a lot of piece, the industry was getting a lot of rate at that point, if the expectation was for a inflationary trend of five and it ended up being seven, you could still see some deterioration of very profitable years nonetheless |
| Bob Jian Huang My second question regarding MGA and capacity in general, there has been some concern that MGAs have been increasingly aggressive |
| So I think that our focus right now is really on the primary, as you can see on our reinsurance, what we did in reinsurance for the last year, we think the reinsurance market is a little bit delayed in reacting to what happened, as in some of the development that we see and some of the increase in inflation |
| So it's the lowest quarter of new insurance written in the mortgage insurance business since acquiring UGC |
| But I think that now we're realizing that maybe it's a little bit worse collectively as an industry than we thought |
| While there were no major catastrophe industry events this quarter, a series of smaller events that occurred across the globe throughout the year resulted in current accident year catastrophe losses of $137 million for the Group in the quarter |
| I say reserve releases this year in general were somewhat driven by our -- the views we had on the housing market at the start of the year, right? So if you rolled back the tape a year, we were more concerned about home prices dropping fairly rapidly, recession, no soft landing, et cetera |
| And there's a lot more uncertainty, a lot more inflation, certainly, as we all know, is a big factor |
| Unemployment remains relatively low |
| And the market got much harder, in fact, in 2004 or 2005 than it was in 2002 |
| Did we have a couple of sublines or kind of sales in casualty where we had a little bit of adverse? Absolutely, but it's not -- I wouldn't call it an offset |
| The performance of our reinsurance segment last year was nothing short of stellar |
| They're playing in match but cautiously, not wanting to make an error that will put their entire team at a disadvantage |
| Josh Shanker Hey, everyone, I think there might be a problem with the phones |
| So I think that those years are not as soft, clearly not as soft as 2016 to 2019 were |
| Similar question, I guess, obviously what we've seen here is a lot of domestic concerns over liability lines on the international casualty side, is that concern worsening as well, or should we think of that as just a domestic concern? Marc Grandisson It's a similar issue |
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