Management matters in every enterprise. There's no product or service so idiot-proof that it's immune from poor management decisions. That said, I'd argue that quality management is even more important in certain industries like insurance, where bad decisions can really wreck profits. With that in mind, I think Bermuda-based reinsurer Arch Capital (NASDAQ:ACGL) showed the virtues of its management this quarter.

This was a miserable quarter for the reinsurance business, as hurricanes in the Western hemisphere and flooding in Europe kept racking up the losses. Companies like Arch, ACE (NYSE:ACE), Renaissance Re (NYSE:RNR), Montpelier Re (NYSE:MRH), and Berkshire Hathaway (NYSE:BRKa) (NYSE:BRKb) all felt the sting from what turned out to be a devastating hurricane season.

In the case of Arch Capital, the company estimates that after-tax losses in the quarter from the flooding and from hurricanes Dennis, Emily, Katrina, and Rita totaled nearly $251 million. Although that's a big number, it was a lot better than many other reinsurers managed. Even better, while the company did a good job, management nevertheless groused about losing money.

Because of the storms, the company posted a loss in excess of $86 million for the quarter, reversing a year-ago profit. At the same time, gross premiums rose 13% and net premiums rose almost 6% for the quarter. As the net loss would suggest, the company's combined ratio was pretty high. This quarter's ratio totaled 117.7 versus 103.4 last year, when there were some hurricanes as well. Although I'm not that concerned about the loss ratio, I would have liked to see a better expense ratio, though that's a quibble.

Even with the nasty loss this quarter, the company still managed to grow per-share book value about 4% year to date. What's more, I expect that this company will take advantage of its competitors' mistakes and build on this quarter for the future. Not only might some insurers shy away from catastrophe-related business in the future, but overall pricing might improve if there's an industrywide trend to focus more on profitability than growth.

I realize that some investors consider this management team to be quite aggressive, and I've heard from readers in the past who think they take on too much risk. Nevertheless, I like what I've seen from this company so far, and I think it might be one of the better reinsurance investment ideas around.

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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares). Montpelier Re is a Motley Fool Hidden Gemsrecommendation. The Fool has a disclosure policy.