Arch Capital Group Ltd. Reports 2024 Fourth Quarter Results
Arch Capital Group (NASDAQ: ACGL) reported its Q4 2024 results with net income of $925 million ($2.42 per share), representing a 17.9% annualized return on equity. After-tax operating income was $866 million ($2.26 per share), with a 16.7% annualized operating return.
The quarter saw pre-tax catastrophic losses of $393 million, primarily from Hurricanes Milton and Helene, and $146 million in favorable development from prior year reserves. The combined ratio excluding catastrophic activity was 79.0%. The company executed share repurchases of $24 million and paid a special dividend of $1.9 billion ($5.00 per share).
Key financial metrics include: gross premiums written up 11.9% to $4.76 billion, net premiums written increased 17.1% to $3.82 billion, and net premiums earned rose 23.9% to $4.14 billion. Book value per share decreased 6.8% to $53.11 (1.9% increase excluding special dividend impact).
Arch Capital Group (NASDAQ: ACGL) ha riportato i risultati del quarto trimestre 2024 con un reddito netto di 925 milioni di dollari (2,42 dollari per azione), che rappresenta un ritorno annualizzato sul capitale azionario del 17,9%. Il reddito operativo dopo le tasse è stato di 866 milioni di dollari (2,26 dollari per azione), con un ritorno operativo annualizzato del 16,7%.
Nel trimestre si sono registrate perdite catastrofiche ante imposte di 393 milioni di dollari, principalmente a causa degli uragani Milton e Helene, e 146 milioni di dollari di sviluppo favorevole dalle riserve dell'anno precedente. Il rapporto combinato escludendo l'attività catastrofica è stato del 79,0%. L'azienda ha effettuato riacquisti di azioni per 24 milioni di dollari e ha pagato un dividendo speciale di 1,9 miliardi di dollari (5,00 dollari per azione).
I principali indicatori finanziari includono: premi lordi scritti aumentati dell'11,9% a 4,76 miliardi di dollari, premi netti scritti aumentati del 17,1% a 3,82 miliardi di dollari e premi netti guadagnati aumentati del 23,9% a 4,14 miliardi di dollari. Il valore contabile per azione è diminuito del 6,8% a 53,11 dollari (aumento dell'1,9% escludendo l'impatto del dividendo speciale).
Arch Capital Group (NASDAQ: ACGL) informó sus resultados del cuarto trimestre de 2024 con un ingreso neto de 925 millones de dólares (2.42 dólares por acción), lo que representa un retorno anualizado del 17.9% sobre el capital. El ingreso operativo después de impuestos fue de 866 millones de dólares (2.26 dólares por acción), con un retorno operativo anualizado del 16.7%.
En el trimestre se reportaron pérdidas catastróficas antes de impuestos de 393 millones de dólares, principalmente debido a los huracanes Milton y Helene, y 146 millones de dólares en desarrollo favorable de reservas del año anterior. La relación combinada, excluyendo la actividad catastrófica, fue del 79.0%. La compañía realizó recompras de acciones por 24 millones de dólares y pagó un dividendo especial de 1.9 mil millones de dólares (5.00 dólares por acción).
Los principales indicadores financieros incluyen: primas brutas escritas aumentaron un 11.9% a 4.76 mil millones de dólares, primas netas escritas aumentaron un 17.1% a 3.82 mil millones de dólares y primas netas ganadas aumentaron un 23.9% a 4.14 mil millones de dólares. El valor contable por acción disminuyó un 6.8% a 53.11 dólares (aumento del 1.9% excluyendo el impacto del dividendo especial).
Arch Capital Group (NASDAQ: ACGL)는 2024년 4분기 결과를 보고했으며, 순이익은 9억 2천5백만 달러(주당 2.42달러)로, 연환산 자기자본 수익률은 17.9%에 해당합니다. 세후 운영 소득은 8억 6천6백만 달러(주당 2.26달러)로, 연환산 운영 수익률은 16.7%였습니다.
이번 분기에는 밀턴 및 헬렌 허리케인으로 인한 세전 재해 손실이 3억 9천3백만 달러였으며, 이전 연도의 준비금에서 1억 4천6백만 달러의 유리한 개발이 있었던 것으로 나타났습니다. 재해를 제외한 결합비율은 79.0%였습니다. 회사는 2천4백만 달러의 자사주 매입을 실시하였고, 특별 배당금으로 19억 달러(주당 5.00달러)를 지급했습니다.
주요 재무 지표는 다음과 같습니다: 총 보험료가 11.9% 증가하여 47억 6천만 달러에 이르렀고, 순 보장보험료는 17.1% 증가하여 38억 2천만 달러에 도달했으며, 순 보험료 수익은 23.9% 증가하여 41억 4천만 달러에 이르렀습니다. 주당 장부 가치는 6.8% 감소하여 53.11달러에 이르렀으며(특별 배당금 영향 제외 시 1.9% 증가).
Arch Capital Group (NASDAQ: ACGL) a annoncé ses résultats du quatrième trimestre 2024 avec un revenu net de 925 millions de dollars (2,42 dollars par action), représentant un rendement annualisé des capitaux propres de 17,9%. Le revenu d'exploitation après impôt était de 866 millions de dollars (2,26 dollars par action), avec un rendement opérationnel annualisé de 16,7%.
Le trimestre a vu des pertes catastrohiques avant impôts de 393 millions de dollars, principalement en raison des ouragans Milton et Helene, et 146 millions de dollars de développement favorable provenant des réserves de l'année précédente. Le ratio combiné, hors activité catastrophique, était de 79,0%. L'entreprise a effectué des rachats d'actions pour 24 millions de dollars et a versé un dividende spécial de 1,9 milliard de dollars (5,00 dollars par action).
Les principaux indicateurs financiers incluent : les primes brutes écrites augmentées de 11,9% à 4,76 milliards de dollars, les primes nettes écrites en hausse de 17,1% à 3,82 milliards de dollars, et les primes nettes gagnées augmentées de 23,9% à 4,14 milliards de dollars. La valeur comptable par action a diminué de 6,8% à 53,11 dollars (augmentation de 1,9% sans tenir compte de l'impact du dividende spécial).
Arch Capital Group (NASDAQ: ACGL) hat die Ergebnisse des vierten Quartals 2024 veröffentlicht, mit einem Nettogewinn von 925 Millionen Dollar (2,42 Dollar pro Aktie), was einer annualisierten Eigenkapitalrendite von 17,9% entspricht. Der Betriebsertrag nach Steuern betrug 866 Millionen Dollar (2,26 Dollar pro Aktie), mit einer annualisierten Betriebsrendite von 16,7%.
Im Quartal gab es vorsteuerliche Katastrophenschäden in Höhe von 393 Millionen Dollar, hauptsächlich von den Hurrikanen Milton und Helene, sowie 146 Millionen Dollar an positiven Entwicklungen aus Rückstellungen des Vorjahres. Die kombinierte Quote ohne katastrophale Aktivitäten betrug 79,0%. Das Unternehmen hat Aktienrückkäufe in Höhe von 24 Millionen Dollar durchgeführt und eine Sonderdividende von 1,9 Milliarden Dollar (5,00 Dollar pro Aktie) ausgezahlt.
Wichtige Finanzkennzahlen sind: brutto geschriebene Prämien stiegen um 11,9% auf 4,76 Milliarden Dollar, netto geschriebene Prämien erhöhten sich um 17,1% auf 3,82 Milliarden Dollar, und netto verdiente Prämien stiegen um 23,9% auf 4,14 Milliarden Dollar. Der Buchwert pro Aktie fiel um 6,8% auf 53,11 Dollar (1,9% Anstieg ohne Berücksichtigung der Sonderdividendenwirkung).
- Net income of $925 million ($2.42 per share) with 17.9% return on equity
- Gross premiums written increased 11.9% to $4.76 billion
- Net premiums written grew 17.1% to $3.82 billion
- Net premiums earned rose 23.9% to $4.14 billion
- Favorable development in prior year loss reserves of $146 million
- Strong combined ratio of 79.0% excluding catastrophic activity
- Pre-tax catastrophic losses of $393 million from hurricanes
- Book value per share decreased 6.8% to $53.11
- Underwriting income declined 12.6% to $625 million
- Combined ratio increased 6.1 points to 85.0%
Insights
Arch Capital's Q4 2024 results demonstrate robust operational execution despite significant catastrophic events. The 17.9% annualized ROE and 85.0% combined ratio reflect strong underwriting discipline in a challenging market.
The company's capital management strategy is particularly noteworthy, with a
Key performance indicators reveal underlying strength:
- Investment income grew substantially, with a
4.32% pre-tax yield reflecting successful navigation of higher interest rates - The mortgage segment's exceptional
13.4% combined ratio demonstrates continued profitability despite market challenges - Reinsurance segment maintained discipline with
83.0% combined ratio despite elevated catastrophe losses
The projected California wildfire exposure (
PEMBROKE,
-
Net income available to Arch common shareholders of
$925 million $2.42 17.9% annualized net income return on average common equity, compared to net income available to Arch common shareholders of$2.3 billion $6.12 -
After-tax operating income available to Arch common shareholders(1) of
$866 million $2.26 16.7% annualized operating return on average common equity(1), compared to$945 million $2.49 -
Pre-tax current accident year catastrophic losses for the Company’s insurance and reinsurance segments, net of reinsurance and reinstatement premiums, of
$393 million -
Favorable development in prior year loss reserves, net of related adjustments, of
$146 million -
Combined ratio excluding catastrophic activity and prior year development(1) of
79.0% , compared to78.9% for the 2023 fourth quarter. -
Share repurchases of approximately
$24 million $1.9 billion $5.00 -
Book value per common share of
$53.11 6.8% decrease from September 30, 2024 (or a1.9% increase excluding the impact of the special cash dividend noted above).
Nicolas Papadopoulo, Arch CEO, commented: “We closed the year with a very strong fourth quarter including contributions from all our earnings sources. These are excellent results when you consider the elevated catastrophe environment and the increased risk levels across many lines of business.” Papadopoulo added, “Additionally, on behalf of everyone at Arch, I would like to offer our thoughts and sympathies to everyone affected by the
All earnings per share amounts discussed in this release are on a diluted basis. The following table summarizes the Company’s underwriting results:
( |
|
Three Months Ended December 31, |
||||||
|
|
2024 |
|
2023 |
|
% Change |
||
Gross premiums written |
|
$ |
4,756 |
|
$ |
4,251 |
|
11.9 |
Net premiums written |
|
|
3,819 |
|
|
3,261 |
|
17.1 |
Net premiums earned |
|
|
4,143 |
|
|
3,344 |
|
23.9 |
Underwriting income |
|
|
625 |
|
|
715 |
|
(12.6) |
Underwriting Ratios |
|
|
|
|
|
% Point Change |
||
Loss ratio |
|
|
|
|
|
|
|
8.5 |
Underwriting expense ratio |
|
|
|
|
|
|
|
(2.4) |
Combined ratio |
|
|
|
|
|
|
|
6.1 |
|
|
|
|
|
|
|
||
Combined ratio excluding catastrophic activity and prior year development (1) |
|
|
|
|
|
|
|
0.1 |
(1) See ‘Comments on Non-GAAP Financial Measures’ for further details. |
||||||||
The following table summarizes the Company’s consolidated financial data, including a reconciliation of net income or loss available to Arch common shareholders to after-tax operating income or loss available to Arch common shareholders and related diluted per share results (see ‘Comments on Non-GAAP Financial Measures’ for further details):
( |
Three Months Ended |
||||
|
December 31, |
||||
|
2024 |
|
2023 |
||
Net income available to Arch common shareholders |
$ |
925 |
|
$ |
2,324 |
Net realized (gains) losses (1) |
|
161 |
|
|
(189) |
Equity in net (income) loss of investment funds accounted for using the equity method |
|
(143) |
|
|
(102) |
Net foreign exchange (gains) losses |
|
(106) |
|
|
60 |
Transaction costs and other |
|
26 |
|
|
4 |
Income tax expense (benefit) (2) |
|
3 |
|
|
(1,152) |
After-tax operating income available to Arch common shareholders |
$ |
866 |
|
$ |
945 |
|
|
|
|
||
Diluted per common share results: |
|
|
|
||
Net income available to Arch common shareholders |
$ |
2.42 |
|
$ |
6.12 |
Net realized (gains) losses (1) |
|
0.41 |
|
|
(0.50) |
Equity in net (income) loss of investment funds accounted for using the equity method |
|
(0.37) |
|
|
(0.27) |
Net foreign exchange (gains) losses |
|
(0.28) |
|
|
0.16 |
Transaction costs and other |
|
0.07 |
|
|
0.01 |
Income tax expense (benefit) (2) |
|
0.01 |
|
|
(3.03) |
After-tax operating income available to Arch common shareholders |
$ |
2.26 |
|
$ |
2.49 |
|
|
|
|
||
Weighted average common shares and common share equivalents outstanding — diluted |
|
382.8 |
|
|
379.8 |
|
|
|
|
||
Beginning common shareholders’ equity |
$ |
21,444 |
|
$ |
14,409 |
Ending common shareholders’ equity |
|
19,990 |
|
|
17,523 |
Average common shareholders’ equity |
$ |
20,717 |
|
$ |
15,966 |
|
|
|
|
||
Annualized net income return on average common equity |
|
|
|
|
|
Annualized operating return on average common equity |
|
|
|
|
|
(1) |
Net realized gains or losses include realized and unrealized changes in the fair value of equity securities and assets accounted for using the fair value option, realized and unrealized gains and losses on derivative instruments, changes in the allowance for credit losses on financial assets and gains and losses realized from the acquisition or disposition of subsidiaries. |
|
(2) |
Income tax expense (benefit) on net realized gains or losses, equity in net income (loss) of investment funds accounted for using the equity method, net foreign exchange gains or losses and transaction costs and other reflects the relative mix reported by jurisdiction and the varying tax rates in each jurisdiction. The 2023 fourth quarter results were impacted by the establishment of a net deferred tax asset of |
Segment Information
The following section provides analysis on the Company’s 2024 fourth quarter performance by reportable segments. For additional details regarding the Company’s reportable segments, please refer to the Company’s Financial Supplement dated December 31, 2024. The Company’s segment information includes the use of underwriting income (loss) and a combined ratio excluding catastrophic activity and prior year development (see ‘Comments on Non-GAAP Financial Measures’ for further details).
Insurance Segment
|
Three Months Ended December 31, |
||||||
( |
2024 |
|
2023 |
|
% Change |
||
|
|
|
|
|
|
||
Gross premiums written |
$ |
2,484 |
|
$ |
1,934 |
|
28.4 |
Net premiums written |
|
1,954 |
|
|
1,449 |
|
34.9 |
Net premiums earned |
|
1,933 |
|
|
1,449 |
|
33.4 |
|
|
|
|
|
|
||
Underwriting income |
$ |
30 |
|
$ |
99 |
|
(69.7) |
|
|
|
|
|
|
||
Underwriting Ratios |
|
|
|
|
% Point Change |
||
Loss ratio |
|
|
|
|
|
|
7.9 |
Underwriting expense ratio |
|
|
|
|
|
|
(2.5) |
Combined ratio |
|
|
|
|
|
|
5.4 |
|
|
|
|
|
|
||
Catastrophic activity and prior year development: |
|
|
|
|
|
||
Current accident year catastrophic events, net of reinsurance and reinstatement premiums |
|
|
|
|
|
|
4.5 |
Net (favorable) adverse development in prior year loss reserves, net of related adjustments |
|
(0.1)% |
|
|
(0.5)% |
|
0.4 |
Combined ratio excluding catastrophic activity and prior year development |
|
|
|
|
|
|
0.5 |
On August 1, 2024, the insurance segment completed the acquisition of the
Gross premiums written by the insurance segment in the 2024 fourth quarter were
The 2024 fourth quarter loss ratio reflected 8.3 points of current year catastrophic activity, primarily related to Hurricanes Helene and Milton, compared to 3.8 points of catastrophic activity in the 2023 fourth quarter. Estimated net favorable development of prior year loss reserves, before related adjustments, reduced the loss ratio by 0.3 points in the 2024 fourth quarter, compared to 0.6 points in the 2023 fourth quarter. The balance of the change in the loss ratio resulted, in part, from the impact of the MCE Acquisition business, certain adjustments to current accident year loss picks for select lines of business and changes in the mix of business.
The underwriting expense ratio was
Reinsurance Segment
|
Three Months Ended December 31, |
||||||
( |
2024 |
|
2023 |
|
% Change |
||
|
|
|
|
|
|
||
Gross premiums written |
$ |
1,941 |
|
$ |
1,971 |
|
(1.5) |
Net premiums written |
|
1,588 |
|
|
1,557 |
|
2.0 |
Net premiums earned |
|
1,904 |
|
|
1,620 |
|
17.5 |
Other underwriting income |
|
4 |
|
|
8 |
|
(50.0) |
|
|
|
|
|
|
||
Underwriting income |
$ |
328 |
|
$ |
330 |
|
(0.6) |
|
|
|
|
|
|
||
Underwriting Ratios |
|
|
|
|
% Point Change |
||
Loss ratio |
|
|
|
|
|
|
6.6 |
Underwriting expense ratio |
|
|
|
|
|
|
(3.6) |
Combined ratio |
|
|
|
|
|
|
3.0 |
|
|
|
|
|
|
||
Catastrophic activity and prior year development: |
|
|
|
|
|
||
Current accident year catastrophic events, net of reinsurance and reinstatement premiums |
|
|
|
|
|
|
7.1 |
Net (favorable) adverse development in prior year loss reserves, net of related adjustments |
|
(4.0)% |
|
|
(1.3)% |
|
(2.7) |
Combined ratio excluding catastrophic activity and prior year development |
|
|
|
|
|
|
(1.4) |
Gross premiums written by the reinsurance segment in the 2024 fourth quarter were
The 2024 fourth quarter loss ratio reflected 12.9 points of current year catastrophic activity, primarily related to Hurricane Milton, compared to 5.4 points of catastrophic activity in the 2023 fourth quarter. Estimated net favorable development of prior year loss reserves, before related adjustments, reduced the loss ratio by 3.8 points in the 2024 fourth quarter, compared to 1.6 points in the 2023 fourth quarter. The balance of the change in the loss ratio resulted, in part, from changes in the mix of business.
The underwriting expense ratio was
Mortgage Segment
|
Three Months Ended December 31, |
||||||
( |
2024 |
|
2023 |
|
% Change |
||
|
|
|
|
|
|
||
Gross premiums written |
$ |
331 |
|
$ |
350 |
|
(5.4) |
Net premiums written |
|
277 |
|
|
255 |
|
8.6 |
Net premiums earned |
|
306 |
|
|
275 |
|
11.3 |
Other underwriting income |
|
2 |
|
|
2 |
|
— |
|
|
|
|
|
|
||
Underwriting income |
$ |
267 |
|
$ |
286 |
|
(6.6) |
|
|
|
|
|
|
||
Underwriting Ratios |
|
|
|
|
% Point Change |
||
Loss ratio |
|
(5.9)% |
|
|
(20.6)% |
|
14.7 |
Underwriting expense ratio |
|
|
|
|
|
|
2.0 |
Combined ratio |
|
|
|
|
(3.3)% |
|
16.7 |
|
|
|
|
|
|
||
Prior year development: |
|
|
|
|
|
||
Net (favorable) adverse development in prior year loss reserves, net of related adjustments |
|
(22.3)% |
|
|
(39.0)% |
|
16.7 |
Combined ratio excluding prior year development |
|
|
|
|
|
|
— |
Gross premiums written by the mortgage segment in the 2024 fourth quarter were
Estimated net favorable development of prior year loss reserves, before related adjustments, decreased the loss ratio by 20.2 points, compared to 36.6 points in the 2023 fourth quarter. Such amounts were primarily related to better than expected cure rates. The 2024 fourth quarter loss ratio, excluding net favorable development, was slightly lower than in the 2023 fourth quarter.
The underwriting expense ratio was
Corporate
The Company’s results include net investment income, net realized gains or losses (which includes realized and unrealized changes in the fair value of equity securities and assets accounted for using the fair value option, realized and unrealized gains and losses on derivative instruments, changes in the allowance for credit losses on financial assets and gains and losses realized from the acquisition or disposition of subsidiaries), equity in net income or loss of investment funds accounted for using the equity method, other income (loss), corporate expenses, transaction costs and other, amortization of intangible assets, interest expense, net foreign exchange gains or losses, income tax items, income or loss from operating affiliates and items related to the Company’s non-cumulative preferred shares.
Investment returns were as follows:
( |
|
Three Months Ended |
|||||||
|
|
December 31, |
|
September 30, |
|
December 31, |
|||
|
|
2024 |
|
2024 |
|
2023 |
|||
Pre-tax net investment income |
|
$ |
405 |
|
$ |
399 |
|
$ |
313 |
Per share |
|
$ |
1.06 |
|
$ |
1.04 |
|
$ |
0.82 |
|
|
|
|
|
|
|
|||
Equity in net income (loss) of investment funds accounted for using the equity method |
|
$ |
143 |
|
$ |
171 |
|
$ |
102 |
Per share |
|
$ |
0.37 |
|
$ |
0.45 |
|
$ |
0.27 |
|
|
|
|
|
|
|
|||
Pre-tax investment income yield, at amortized cost (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Total return on investments (2) |
|
|
(1.05)% |
|
|
|
|
|
|
(1) |
Presented on an annualized basis and excluding the impact of investments for which returns are not included within investment income, such as investments accounted for using the equity method and certain equities. |
|
(2) |
See ‘Comments on Non-GAAP Financial Measures’ for further details. |
The growth in net investment income in the 2024 fourth quarter primarily reflected the effects of sustained higher interest rates available in the market. Net realized losses were
Amortization of intangible assets was
Transaction costs and other were
On a pre-tax basis, net foreign exchange gains were
The Company’s effective tax rate on income before income taxes was an expense of
Income from operating affiliates for the 2024 fourth quarter was
Conference Call
The Company will hold a conference call for investors and analysts at 11:00 a.m. Eastern Time on February 11, 2025. A live webcast of this call will be available via the Investors section of the Company’s website at http://www.archgroup.com/investors. A recording of the webcast will be available in the Investors section of the Company’s website approximately two hours after the event concludes and will be archived on the site for one year.
Please refer to the Company’s Financial Supplement dated December 31, 2024, which is available via the Investors section of the Company’s website at http://www.archgroup.com/investors. The Financial Supplement provides additional detail regarding the financial performance of the Company. From time to time, the Company posts additional financial information and presentations to its website, including information with respect to its subsidiaries. Investors and other recipients of this information are encouraged to check the Company’s website regularly for additional information regarding the Company.
Arch Capital Group Ltd., is a publicly listed
Comments on Non-GAAP Financial Measures
Throughout this release, the Company presents its operations in the way it believes will be the most meaningful and useful to investors, analysts, rating agencies and others who use the Company’s financial information in evaluating the performance of the Company and that investors and such other persons benefit from having a consistent basis for comparison between quarters and for comparison with other companies within the industry. These measures may not, however, be comparable to similarly titled measures used by companies outside of the insurance industry. Investors are cautioned not to place undue reliance on these non-GAAP financial measures in assessing the Company’s overall financial performance.
This presentation includes the use of “after-tax operating income or loss available to Arch common shareholders,” which is defined as net income available to Arch common shareholders, excluding net realized gains or losses (which includes realized and unrealized changes in the fair value of equity securities and assets accounted for using the fair value option, realized and unrealized gains and losses on derivative instruments, changes in the allowance for credit losses on financial assets and gains and losses realized from the acquisition or disposition of subsidiaries), equity in net income or loss of investment funds accounted for using the equity method, net foreign exchange gains or losses, transaction costs and other, net of income taxes and the use of annualized operating return on average common equity. The presentation of after-tax operating income available to Arch common shareholders and annualized operating return on average common equity are non-GAAP financial measures as defined in Regulation G. The reconciliation of such measures to net income available to Arch common shareholders and annualized net income return on average common equity (the most directly comparable GAAP financial measures) in accordance with Regulation G is included on page 2 of this release.
The Company believes that net realized gains or losses, equity in net income or loss of investment funds accounted for using the equity method, net foreign exchange gains or losses and transaction costs and other, in any particular period are not indicative of the performance of, or trends in, the Company’s business performance. Although net realized gains or losses, equity in net income or loss of investment funds accounted for using the equity method and net foreign exchange gains or losses are an integral part of the Company’s operations, the decision to realize these items are independent of the insurance underwriting process and result, in large part, from general economic and financial market conditions. Furthermore, certain users of the Company’s financial information believe that, for many companies, the timing of the realization of investment gains or losses is largely opportunistic. In addition, changes in the allowance for credit losses and net impairment losses recognized in earnings on the Company’s investments represent other-than-temporary declines in expected recovery values on securities without actual realization.
The use of the equity method on certain of the Company’s investments in certain funds that invest in fixed maturity securities is driven by the ownership structure of such funds (either limited partnerships or limited liability companies). In applying the equity method, these investments are initially recorded at cost and are subsequently adjusted based on the Company’s proportionate share of the net income or loss of the funds (which include changes in the fair value of the underlying securities in the funds). This method of accounting is different from the way the Company accounts for its other fixed maturity securities and the timing of the recognition of equity in net income or loss of investment funds accounted for using the equity method may differ from gains or losses in the future upon sale or maturity of such investments.
Transaction costs and other include integration, advisory, financing, legal, severance, incentive compensation and all other costs directly related to acquisitions. The Company believes that transaction costs and other, due to their non-recurring nature, are not indicative of the performance of, or trends in, the Company’s business performance.
In the 2023 fourth quarter, the Company established a net deferred tax benefit of
The Company believes that showing net income available to Arch common shareholders exclusive of the items referred to above reflects the underlying fundamentals of the Company’s business since the Company evaluates the performance of and manages its business to produce an underwriting profit. In addition to presenting net income available to Arch common shareholders, the Company believes that this presentation enables investors and other users of the Company’s financial information to analyze the Company’s performance in a manner similar to how the Company’s management analyzes performance. The Company also believes that this measure follows industry practice and, therefore, allows the users of the Company’s financial information to compare the Company’s performance with its industry peer group. The Company believes that the equity analysts and certain rating agencies that follow the Company and the insurance industry as a whole generally exclude these items from their analyses for the same reasons.
The Company’s segment information includes the presentation of consolidated underwriting income or loss and a subtotal of underwriting income or loss. Such measures represent the pre-tax profitability of its underwriting operations and include net premiums earned plus other underwriting income, less losses and loss adjustment expenses, acquisition expenses and other operating expenses. Other operating expenses include those operating expenses that are incremental and/or directly attributable to the Company’s individual underwriting operations. Underwriting income or loss does not include certain income and expense items which are included in corporate. While these measures are presented in the Segment Information footnote to the Company’s Consolidated Financial Statements, they are considered non-GAAP financial measures when presented elsewhere on a consolidated basis. The reconciliations of underwriting income or loss to income before income taxes (the most directly comparable GAAP financial measure) on a consolidated basis, in accordance with Regulation G, is shown on the following pages.
Management measures segment performance for its three underwriting segments based on underwriting income or loss. The Company does not manage its assets by underwriting segment and, accordingly, investment income, income from operating affiliates and other items are not allocated to each underwriting segment.
In addition, the Company’s segment information includes the use of a combined ratio excluding catastrophic activity and prior year development, for the insurance and reinsurance segments, and a combined ratio excluding prior year development, for the mortgage segment. These ratios are non-GAAP financial measures as defined in Regulation G. The reconciliation of such measures to the combined ratio (the most directly comparable GAAP financial measure) in accordance with Regulation G are shown on the individual segment pages. The Company’s management utilizes the adjusted combined ratios excluding current accident year catastrophic events and favorable or adverse development in prior year loss reserves in its analysis of the underwriting performance of each of its underwriting segments.
Total return on investments includes investment income, equity in net income or loss of investment funds accounted for using the equity method, net realized gains and losses (excluding changes in the allowance for credit losses on non-investment related financial assets) and the change in unrealized gains and losses generated by Arch’s investment portfolio. Total return is calculated on a pre-tax basis and before investment expenses and reflects the effect of financial market conditions along with foreign currency fluctuations. Management uses total return on investments as a key measure of the return generated to Arch common shareholders, and compares the return generated by the Company’s investment portfolio against benchmark returns during the periods presented.
The following tables summarize the Company’s results by segment for the 2024 fourth quarter and 2023 fourth quarter and a reconciliation of underwriting income or loss to income or loss before income taxes and net income or loss available to Arch common shareholders:
( |
|
Three Months Ended |
||||||||||
|
|
December 31, 2024 |
||||||||||
|
|
Insurance |
|
Reinsurance |
|
Mortgage |
|
Total |
||||
Gross premiums written (1) |
|
$ |
2,484 |
|
$ |
1,941 |
|
$ |
331 |
|
$ |
4,756 |
Premiums ceded (1) |
|
|
(530) |
|
|
(353) |
|
|
(54) |
|
|
(937) |
Net premiums written |
|
|
1,954 |
|
|
1,588 |
|
|
277 |
|
|
3,819 |
Change in unearned premiums |
|
|
(21) |
|
|
316 |
|
|
29 |
|
|
324 |
Net premiums earned |
|
|
1,933 |
|
|
1,904 |
|
|
306 |
|
|
4,143 |
Other underwriting income (loss) |
|
|
— |
|
|
4 |
|
|
2 |
|
|
6 |
Losses and loss adjustment expenses |
|
|
(1,281) |
|
|
(1,121) |
|
|
18 |
|
|
(2,384) |
Acquisition expenses |
|
|
(345) |
|
|
(382) |
|
|
(3) |
|
|
(730) |
Other operating expenses |
|
|
(277) |
|
|
(77) |
|
|
(56) |
|
|
(410) |
Underwriting income (loss) |
|
$ |
30 |
|
$ |
328 |
|
$ |
267 |
|
|
625 |
|
|
|
|
|
|
|
|
|
||||
Net investment income |
|
|
|
|
|
|
|
|
405 |
|||
Net realized gains (losses) |
|
|
|
|
|
|
|
|
(161) |
|||
Equity in net income (loss) of investment funds accounted for using the equity method |
|
|
|
|
|
|
|
|
143 |
|||
Other income (loss) |
|
|
|
|
|
|
|
|
12 |
|||
Corporate expenses (2) |
|
|
|
|
|
|
|
|
(31) |
|||
Transaction costs and other (2) |
|
|
|
|
|
|
|
|
(26) |
|||
Amortization of intangible assets |
|
|
|
|
|
|
|
|
(99) |
|||
Interest expense |
|
|
|
|
|
|
|
|
(37) |
|||
Net foreign exchange gains (losses) |
|
|
|
|
|
|
|
|
106 |
|||
Income (loss) before income taxes and income (loss) from operating affiliates |
|
|
|
|
|
|
|
|
937 |
|||
Income tax benefit (expense) |
|
|
|
|
|
|
|
|
(66) |
|||
Income (loss) from operating affiliates |
|
|
|
|
|
|
|
|
64 |
|||
Net income (loss) available to Arch |
|
|
|
|
|
|
|
|
935 |
|||
Preferred dividends |
|
|
|
|
|
|
|
|
(10) |
|||
Net income (loss) available to Arch common shareholders |
|
|
|
|
|
|
|
$ |
925 |
|||
|
|
|
|
|
|
|
|
|
||||
Underwriting Ratios |
|
|
|
|
|
|
|
|
||||
Loss ratio |
|
|
|
|
|
|
|
|
(5.9)% |
|
|
|
Acquisition expense ratio |
|
|
|
|
|
|
|
|
|
|
|
|
Other operating expense ratio |
|
|
|
|
|
|
|
|
|
|
|
|
Combined ratio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net premiums written to gross premiums written |
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Certain assumed and ceded amounts related to intersegment transactions are included in individual segment results. Accordingly, the sum of such transactions for each segment does not agree to the total due to eliminations. |
|
(2) |
Certain expenses have been excluded from ‘corporate expenses’ and reflected in ‘Transaction costs and other.’ See ‘Comments on Non-GAAP Financial Measures’ for a further discussion of such items. |
( |
|
Three Months Ended |
||||||||||
|
|
December 31, 2023 |
||||||||||
|
|
Insurance |
|
Reinsurance |
|
Mortgage |
|
Total |
||||
Gross premiums written (1) |
|
$ |
1,934 |
|
$ |
1,971 |
|
$ |
350 |
|
$ |
4,251 |
Premiums ceded (1) |
|
|
(485) |
|
|
(414) |
|
|
(95) |
|
|
(990) |
Net premiums written |
|
|
1,449 |
|
|
1,557 |
|
|
255 |
|
|
3,261 |
Change in unearned premiums |
|
|
— |
|
|
63 |
|
|
20 |
|
|
83 |
Net premiums earned |
|
|
1,449 |
|
|
1,620 |
|
|
275 |
|
|
3,344 |
Other underwriting income (loss) |
|
|
— |
|
|
8 |
|
|
2 |
|
|
10 |
Losses and loss adjustment expenses |
|
|
(846) |
|
|
(848) |
|
|
57 |
|
|
(1,637) |
Acquisition expenses |
|
|
(277) |
|
|
(365) |
|
|
(1) |
|
|
(643) |
Other operating expenses |
|
|
(227) |
|
|
(85) |
|
|
(47) |
|
|
(359) |
Underwriting income (loss) |
|
$ |
99 |
|
$ |
330 |
|
$ |
286 |
|
|
715 |
|
|
|
|
|
|
|
|
|
||||
Net investment income |
|
|
|
|
|
|
|
|
313 |
|||
Net realized gains (losses) |
|
|
|
|
|
|
|
|
189 |
|||
Equity in net income (loss) of investment funds accounted for using the equity method |
|
|
|
|
|
|
|
|
102 |
|||
Other income (loss) |
|
|
|
|
|
|
|
|
17 |
|||
Corporate expenses (2) |
|
|
|
|
|
|
|
|
(27) |
|||
Transaction costs and other (2) |
|
|
|
|
|
|
|
|
(4) |
|||
Amortization of intangible assets |
|
|
|
|
|
|
|
|
(24) |
|||
Interest expense |
|
|
|
|
|
|
|
|
(34) |
|||
Net foreign exchange gains (losses) |
|
|
|
|
|
|
|
|
(59) |
|||
Income (loss) before income taxes and income (loss) from operating affiliates |
|
|
|
|
|
|
|
|
1,188 |
|||
Income tax benefit (expense) |
|
|
|
|
|
|
|
|
1,076 |
|||
Income (loss) from operating affiliates |
|
|
|
|
|
|
|
|
69 |
|||
Net income (loss) |
|
|
|
|
|
|
|
|
2,333 |
|||
Net (income) loss attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
1 |
|||
Net income (loss) available to Arch |
|
|
|
|
|
|
|
|
2,334 |
|||
Preferred dividends |
|
|
|
|
|
|
|
|
(10) |
|||
Net income (loss) available to Arch common shareholders |
|
|
|
|
|
|
|
$ |
2,324 |
|||
|
|
|
|
|
|
|
|
|
||||
Underwriting Ratios |
|
|
|
|
|
|
|
|
||||
Loss ratio |
|
|
|
|
|
|
|
|
(20.6)% |
|
|
|
Acquisition expense ratio |
|
|
|
|
|
|
|
|
|
|
|
|
Other operating expense ratio |
|
|
|
|
|
|
|
|
|
|
|
|
Combined ratio |
|
|
|
|
|
|
|
|
(3.3)% |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net premiums written to gross premiums written |
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Certain assumed and ceded amounts related to intersegment transactions are included in individual segment results. Accordingly, the sum of such transactions for each segment does not agree to the total due to eliminations. |
|
(2) |
Certain expenses have been excluded from ‘corporate expenses’ and reflected in ‘Transaction costs and other.’ See ‘Comments on Non-GAAP Financial Measures’ for a further discussion of such items. |
Cautionary Note Regarding Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 (“PSLRA”) provides a “safe harbor” for forward-looking statements. This release or any other written or oral statements made by or on behalf of the Company may include forward-looking statements, which reflect the Company’s current views with respect to future events and financial performance. All statements other than statements of historical fact included in or incorporated by reference in this release are forward-looking statements. Forward-looking statements, for purposes of the PSLRA or otherwise, can generally be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe” or “continue” and similar statements of a future or forward-looking nature or their negative or variations or similar terminology.
Forward-looking statements involve the Company’s current assessment of risks and uncertainties. Actual events and results may differ materially from those expressed or implied in these statements. Important factors that could cause actual events or results to differ materially from those indicated in such statements are discussed below and elsewhere in this release and in the Company’s periodic reports filed with the Securities and Exchange Commission (the “SEC”), and include:
- the Company’s ability to successfully implement its business strategy during “soft” as well as “hard” markets;
- acceptance of the Company’s business strategy, security and financial condition by rating agencies and regulators, as well as by brokers and its insureds and reinsureds;
- the Company’s ability to consummate acquisitions and integrate any businesses it has acquired or may acquire into its existing operations;
- the Company’s ability to maintain or improve its ratings, which may be affected by its ability to raise additional equity or debt financings, by ratings agencies’ existing or new policies and practices, as well as other factors described herein;
- general economic and market conditions (including inflation, interest rates, unemployment, housing prices, foreign currency exchange rates, prevailing credit terms and the depth and duration of a recession, including those resulting from COVID-19) and conditions specific to the reinsurance and insurance markets in which the Company operates;
- competition, including increased competition, on the basis of pricing, capacity (including alternative sources of capital), coverage terms or other factors;
- developments in the world’s financial and capital markets and the Company’s access to such markets;
- the Company’s ability to successfully enhance, integrate and maintain operating procedures (including information technology) to effectively support its current and new business;
- the loss and addition of key personnel;
- material differences between actual and expected assessments for guaranty funds and mandatory pooling arrangements;
- accuracy of those estimates and judgments utilized in the preparation of the Company’s financial statements, including those related to revenue recognition, insurance and other reserves, reinsurance recoverables, investment valuations, intangible assets, bad debts, income taxes, deferred tax assets, contingencies and litigation, and any determination to use the deposit method of accounting;
- greater than expected loss ratios on business written by the Company and adverse development on claim and/or claim expense liabilities related to business written by its insurance and reinsurance subsidiaries;
- the adequacy of the Company’s loss reserves;
- severity and/or frequency of losses;
- greater frequency or severity of unpredictable natural and man-made catastrophic events;
- claims resulting from natural or man-made catastrophic events or severe economic events in the Company’s insurance, reinsurance and mortgage businesses could cause large losses and substantial volatility in the Company’s results of operations;
- the effect of climate change on the Company’s business;
- the effect of contagious diseases (including COVID-19) on the Company’s business;
- acts of terrorism, geopolitical political unrest and other regional and global hostilities or other unforecasted and unpredictable events;
- availability to the Company of reinsurance to manage its gross and net exposures and the cost of such reinsurance;
- the failure of reinsurers, managing general agents, third party administrators or others to meet their obligations to the Company;
- the timing of loss payments being faster or the receipt of reinsurance recoverables being slower than anticipated by the Company;
- the Company’s investment performance, including legislative or regulatory developments that may adversely affect the fair value of the Company’s investments;
-
changes in general economic conditions, including new or continued sovereign debt concerns or downgrades of
U.S. securities by credit rating agencies, which could affect the Company’s business, financial condition and results of operations; - the volatility of the Company’s shareholders’ equity from foreign currency fluctuations, which could increase due to us not matching portions of the Company’s projected liabilities in foreign currencies with investments in the same currencies;
- changes in accounting principles or policies or in the Company’s application of such accounting principles or policies;
- changes in the political environment of certain countries in which the Company operates, underwrites business or invests;
- an incident, disruption in operations or other cyber event caused by cyber attacks, the use of artificial intelligence technologies or other technology on the Company’s systems or those of the Company’s business partners and service providers, which could negatively impact the Company’s business and/or expose the Company to litigation;
-
statutory or regulatory developments, including as to tax matters and insurance and other regulatory matters such as the adoption of legislation that affects
Bermuda -headquartered companies and/orBermuda -based insurers or reinsurers and/or changes in regulations or tax laws applicable to the Company, its subsidiaries, brokers or customers, including the implementation of the Organization for Economic Cooperation and Development (“OECD”) Pillar I and Pillar II initiative and the enactment of theBermuda corporate income tax; and - the other matters set forth under Item 1A “Risk Factors”, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other sections of the Company’s Annual Report on Form 10-K, as well as the other factors set forth in the Company’s other documents on file with the SEC, and management’s response to any of the aforementioned factors.
All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with other cautionary statements that are included herein or elsewhere. The Company's forward-looking statements speak only as of the date of this press release or as of the date they are made, and the Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
arch-corporate
View source version on businesswire.com: https://www.businesswire.com/news/home/20250210130810/en/
Arch Capital Group Ltd.
François Morin: (441) 278-9250
Investor Relations
Donald Watson: (914) 872-3616; dwatson@archgroup.com
Source: Arch Capital Group Ltd.
FAQ
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