Arch Capital Group Ltd posted net income of $126.1 million in the fourth quarter of last year, despite significant catastrophe losses.

The Bermudian-based insurer and reinsurer estimated $118.2 million in pre-tax catastrophic losses, primarily related to Hurricane Michael and the California wildfires.

The quarter’s net income broke down to 31 cents per share and represented a 5.9 per cent annualised average return on equity. It was down on the $203.5 million, or 49 cents per share, of net income recorded in the corresponding quarter in 2017.

After-tax operating income available to Arch common shareholders, a non-GAAP measure, of $189.2 million, or 46 cents per share. This beat the 37 cents per share consensus estimate of analysts tracked by Zacks and represented an 8.8 per cent annualised return on average common equity.

The results were helped by favourable development on prior-year loss reserves, net of related adjustments, of $74.4 million, the company said.

The combined ratio — the proportion of premium dollars spent on claims and expenses — was 87.8 per cent, compared to 86.3 per cent in the fourth quarter of 2017.

Gross premiums written in the quarter increased 16.7 per cent year over year to $1.69 billion.

Book value per share was $21.52 at December 31, 2018, a 1.7 per cent increase in the 2018 fourth quarter and a 6 per cent increase for the year.