Arch Capital sees pre-tax losses of $110M-$130M from Q4 catastrophic events
During the fourth quarter of 2018, there were a number of catastrophes around the globe, including Hurricane Michael, wildfires in California and a series of smaller events. Arch Capital Group Ltd. has established a range of pre-tax losses of $110M to $130M for these events, net of reinsurance recoveries and reinstatement premiums. For clarity, this estimated range incorporates and updates the $40M to $60M range previously disclosed by the company in its Quarterly Report on Form 10-Q for the 2018 third quarter. The previous range reflected only Hurricane Michael, whereas this current range also reflects the California wildfires and other catastrophic events from around the globe. At this time, there are significant uncertainties surrounding the number of claims and scope of damage for these events. The company's estimate for these events is based on currently available information derived from modeling techniques, industry assessment of exposure, preliminary claims information obtained from the company's clients and brokers to date and a review of in-force contracts. Actual losses from these events may vary materially from the estimates due to the inherent uncertainties in making such determinations. Additionally, the company estimates that the effective tax rate on pre-tax operating income for the fourth quarter of 2018 will be in a range of 12%-15%. This estimate is based on both statutory income tax rates applied to underwriting income, expenses and investment returns by jurisdiction, as well as an amalgam of discrete items. The effective tax rate for the 2018 fourth quarter reflects a higher proportion of U.S.-based operating income. The losses related to the 2018 fourth quarter catastrophic occurrences emanated mostly from our non-U.S. underwriting operations. This tax rate range is subject to change as analyses of group-wide loss reserves and investment returns, among other areas, are finalized.