Arch Capital Group Ltd. (NASDAQ: ACGL; “Arch,” “our” or “the
Company”) announces its 2024 third quarter results. The results
included:
- Net income available to Arch common shareholders of $978
million, or $2.56 per share, representing a 19.0% annualized net
income return on average common equity, compared to net income
available to Arch common shareholders of $713 million, or $1.88 per
share, for the 2023 third quarter.
- After-tax operating income available to Arch common
shareholders(1) of $762 million, or $1.99 per share, representing a
14.8% annualized operating return on average common equity(1),
compared to $876 million, or $2.31 per share, for the 2023 third
quarter.
- Pre-tax current accident year catastrophic losses for the
Company’s insurance and reinsurance segments, net of reinsurance
and reinstatement premiums, of $450 million, due in part to
Hurricane Helene and a series of other global events.
- Favorable development in prior year loss reserves, net of
related adjustments, of $119 million.
- Combined ratio excluding catastrophic activity and prior year
development(1) of 78.3%, compared to 77.0% for the 2023 third
quarter.
- Book value per common share of $57.00 at September 30, 2024, an
8.1% increase from June 30, 2024.
Nicolas Papadopoulo, Chief Executive Officer of ACGL commented:
“Our third quarter results demonstrate the value of our diversified
platform with excellent bottom-line contributions from all our
units. Arch’s culture of adapting to evolving market conditions
while maintaining underwriting discipline remains a key element of
our long-term success.”
All earnings per share amounts discussed in this release are on
a diluted basis. The following table summarizes the Company’s
underwriting results:
(U.S. Dollars in millions)
Three Months Ended September
30,
2024
2023
% Change
Gross premiums written
$
5,440
$
4,527
20.2
Net premiums written
4,047
3,355
20.6
Net premiums earned
3,970
3,248
22.2
Underwriting income
538
721
(25.4)
Underwriting Ratios
% Point Change
Loss ratio
60.5%
50.7%
9.8
Underwriting expense ratio
26.1%
27.2%
(1.1)
Combined ratio
86.6%
77.9%
8.7
Combined ratio excluding catastrophic
activity and prior year development (1)
78.3%
77.0%
1.3
(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):
(U.S. Dollars in millions, except per
share data)
Three Months Ended
September 30,
2024
2023
Net income available to Arch common
shareholders
$
978
$
713
Net realized (gains) losses (1)
(169)
248
Equity in net (income) loss of investment
funds accounted for using the equity method
(171)
(59)
Net foreign exchange (gains) losses
63
(22)
Transaction costs and other
30
1
Income tax expense (benefit) (2)
31
(5)
After-tax operating income available to
Arch common shareholders
$
762
$
876
Diluted per common
share results:
Net income available to Arch common
shareholders
$
2.56
$
1.88
Net realized (gains) losses (1)
(0.44)
0.65
Equity in net (income) loss of investment
funds accounted for using the equity method
(0.45)
(0.16)
Net foreign exchange (gains) losses
0.16
(0.05)
Transaction costs and other
0.08
0.00
Income tax expense (benefit) (2)
0.08
(0.01)
After-tax operating income available to
Arch common shareholders
$
1.99
$
2.31
Weighted average common shares and common
share equivalents outstanding — diluted
382.3
379.4
Beginning common shareholders’ equity
$
19,835
$
13,811
Ending common shareholders’ equity
21,444
14,409
Average common shareholders’ equity
$
20,640
$
14,110
Annualized net income return on average
common equity
19.0%
20.2%
Annualized operating return on average
common equity
14.8%
24.8%
(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.
Segment Information
The following section provides analysis on the Company’s 2024
third quarter performance by reportable segments. For additional
details regarding the Company’s reportable segments, please refer
to the Company’s Financial Supplement dated September 30, 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 September
30,
(U.S. Dollars in millions)
2024
2023
% Change
Gross premiums written
$
2,341
$
2,043
14.6
Net premiums written
1,820
1,522
19.6
Net premiums earned
1,765
1,412
25.0
Underwriting income
$
120
$
129
(7.0)
Underwriting Ratios
% Point Change
Loss ratio
61.6%
57.5%
4.1
Underwriting expense ratio
31.5%
33.4%
(1.9)
Combined ratio
93.1%
90.9%
2.2
Catastrophic activity and prior year
development:
Current accident year catastrophic events,
net of reinsurance and reinstatement premiums
4.9%
2.6%
2.3
Net (favorable) adverse development in
prior year loss reserves, net of related adjustments
(0.7)%
(0.8)%
0.1
Combined ratio excluding catastrophic
activity and prior year development
88.9%
89.1%
(0.2)
On August 1, 2024, the insurance segment completed the
acquisition of the U.S. MidCorp and Entertainment insurance
businesses from Allianz (“MCE Acquisition”). As such, the insurance
segment’s 2024 third quarter results include two months of activity
related to the acquired business.
Gross premiums written by the insurance segment in the 2024
third quarter were 14.6% higher than in the 2023 third quarter
(4.4% excluding the MCE Acquisition), while net premiums written
were 19.6% higher than in the 2023 third quarter (5.8% excluding
the MCE Acquisition). Growth in net premiums written included the
impact of the MCE Acquisition and also reflected an increase in
other liability—occurrence due, in part, to new business
opportunities and rate changes. Net premiums earned in the 2024
third quarter were 25.0% higher than in the 2023 third quarter
(8.8% excluding the MCE Acquisition), and reflect changes in net
premiums written over the previous five quarters.
The 2024 third quarter loss ratio reflected 4.9 points of
current year catastrophic activity, primarily related to Hurricane
Helene, compared to 2.6 points of catastrophic activity in the 2023
third quarter. Estimated net favorable development of prior year
loss reserves, before related adjustments, reduced the loss ratio
by 0.9 points in the 2024 third quarter, compared to 0.7 points in
the 2023 third quarter.
The underwriting expense ratio was 31.5% in the 2024 third
quarter, compared to 33.4% in the 2023 third quarter. The impact of
the MCE Acquisition lowered the underwriting expense ratio by
approximately 2.5 points, primarily due to the effects of the fair
value estimation of the assets acquired at closing, including the
non-recognition of deferred acquisition costs. The value of
policies in force at closing are considered within the value of
business acquired which is amortized through amortization of
intangibles. The underwriting expense ratio also benefited from an
initial lower level of operating expenses in the acquired
business.
Reinsurance Segment
Three Months Ended September
30,
(U.S. Dollars in millions)
2024
2023
% Change
Gross premiums written
$
2,763
$
2,138
29.2
Net premiums written
1,945
1,562
24.5
Net premiums earned
1,892
1,543
22.6
Other underwriting income
2
2
—
Underwriting income
$
149
$
310
(51.9)
Underwriting Ratios
% Point Change
Loss ratio
69.6%
56.4%
13.2
Underwriting expense ratio
22.7%
23.6%
(0.9)
Combined ratio
92.3%
80.0%
12.3
Catastrophic activity and prior year
development:
Current accident year catastrophic events,
net of reinsurance and reinstatement premiums
19.3%
9.3%
10.0
Net (favorable) adverse development in
prior year loss reserves, net of related adjustments
(1.9)%
(2.8)%
0.9
Combined ratio excluding catastrophic
activity and prior year development
74.9%
73.5%
1.4
Gross premiums written by the reinsurance segment in the 2024
third quarter were 29.2% higher than in the 2023 third quarter,
while net premiums written were 24.5% higher than in the 2023 third
quarter. The growth in net premiums written reflected increases in
most lines of business, due in part to rate increases, new business
opportunities and growth in existing accounts. Net premiums earned
in the 2024 third quarter were 22.6% higher than in the 2023 third
quarter, and reflect changes in net premiums written over the
previous five quarters.
The 2024 third quarter loss ratio reflected 21.3 points of
current year catastrophic activity, related to Hurricane Helene and
a series of other global events, compared to 9.7 points of
catastrophic activity in the 2023 third quarter. Estimated net
favorable development of prior year loss reserves, before related
adjustments, reduced the loss ratio by 2.2 points in the 2024 third
quarter, compared to 2.8 points in the 2023 third quarter. The
balance of the change in the loss ratio resulted, in part, from the
impact of rate increases, higher level of attritional losses and
changes in the mix of business.
The underwriting expense ratio was 22.7% in the 2024 third
quarter, compared to 23.6% in the 2023 third quarter. The decrease
primarily reflected growth in net premiums earned.
Mortgage Segment
Three Months Ended September
30,
(U.S. Dollars in millions)
2024
2023
% Change
Gross premiums written
$
339
$
347
(2.3)
Net premiums written
282
271
4.1
Net premiums earned
313
293
6.8
Other underwriting income
3
3
—
Underwriting income
$
269
$
282
(4.6)
Underwriting Ratios
% Point Change
Loss ratio
(0.4)%
(12.1)%
11.7
Underwriting expense ratio
15.2%
16.8%
(1.6)
Combined ratio
14.8%
4.7%
10.1
Prior year development:
Net (favorable) adverse development in
prior year loss reserves, net of related adjustments
(22.8)%
(33.5)%
10.7
Combined ratio excluding prior year
development
37.6%
38.2%
(0.6)
Gross premiums written by the mortgage segment in the 2024 third
quarter were 2.3% lower than in the 2023 third quarter, while net
premiums written were 4.1% higher. The increase in net premiums
written and earned in the 2024 third quarter primarily reflected a
lower level of Bellemeade premiums ceded, due in part to the
termination of certain Bellemeade agreements in the 2023 fourth
quarter.
Estimated net favorable development of prior year loss reserves,
before related adjustments, decreased the loss ratio by 20.5
points, compared to 31.4 points in the 2023 third quarter. Such
amounts were primarily related to better than expected cure rates.
The 2024 third quarter loss ratio, excluding net favorable
development, was slightly higher than in the 2023 third quarter,
primarily due to higher new delinquencies in the period.
The underwriting expense ratio was 15.2% in the 2024 third
quarter, compared to 16.8% in the 2023 third quarter. The decrease
was primarily due to higher level of ceding and profit commissions
on U.S. primary business, along with a higher level of net premiums
earned.
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:
(U.S. Dollars in millions, except per
share data)
Three Months Ended
September 30,
June 30,
September 30,
2024
2024
2023
Pre-tax net investment income
$
399
$
364
$
269
Per share
$
1.04
$
0.95
$
0.71
Equity in net income (loss) of investment
funds accounted for using the equity method
$
171
$
167
$
59
Per share
$
0.45
$
0.44
$
0.16
Pre-tax investment income yield, at
amortized cost (1)
4.40%
4.39%
3.68%
Total return on investments (2)
3.97%
1.33%
(0.40)%
(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 third quarter
primarily reflected the effects of sustained higher interest rates
available in the market, along with growth in invested assets due
in part to strong operating cash flows and inflows related to the
MCE Acquisition. Net realized gains were $169 million for the 2024
third quarter, compared to net realized losses of $248 million in
the 2023 third quarter, and reflected sales of investments as well
as the impact of financial market movements on the Company’s
derivatives, equity securities and investments accounted for under
the fair value option method.
Amortization of intangible assets for the 2024 third quarter was
$88 million, compared to $24 million for the 2023 third quarter.
The higher level of expense for the 2024 third quarter reflects the
amortization of intangible assets included in the MCE Acquisition,
including intangible assets related to value of business acquired
and distribution relationships.
Transaction costs and other were $30 million for the 2024 third
quarter. Transaction costs and other primarily included
integration, advisory, financing, legal and other transaction costs
related to the MCE Acquisition.
On a pre-tax basis, net foreign exchange losses for the 2024
third quarter were $63 million, compared to net foreign exchange
gains of $22 million for the 2023 third quarter. For both periods,
such amounts were primarily unrealized and resulted from the
effects of revaluing the Company’s net insurance liabilities
required to be settled in foreign currencies at each balance sheet
date. Changes in the value of available-for-sale investments held
in foreign currencies due to foreign currency rate movements are
reflected as a direct increase or decrease to shareholders’ equity
and are not included in the consolidated statements of income.
The Company’s effective tax rate on income before income taxes
(based on the Company’s estimated annual effective tax rate) was
9.0% for the 2024 third quarter, compared to 9.1% for the 2023
third quarter. The Company’s effective tax rate on pre-tax
operating income available to Arch common shareholders was 8.0% for
the 2024 third quarter, consistent with 8.0% for the 2023 third
quarter. The effective tax rate may fluctuate from period to period
based upon the relative mix of income or loss reported by
jurisdiction, the level of catastrophic loss activity incurred, and
the varying tax rates in each jurisdiction.
Income from operating affiliates for the 2024 third quarter was
$36 million, or $0.09 per share, compared to $54 million, or $0.14
per share, for the 2023 third quarter, and primarily reflects
amounts related to the Company’s investment in Somers Group
Holdings Ltd. and Coface SA.
Conference Call
The Company will hold a conference call for investors and
analysts at 11:00 a.m. Eastern Time on October 31, 2024. 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
September 30, 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 Bermuda exempted
company with approximately $25.0 billion in capital at September
30, 2024. Arch, which is part of the S&P 500 index, provides
insurance, reinsurance and mortgage insurance on a worldwide basis
through its wholly owned subsidiaries.
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 $1.18 billion consistent with the
transition provisions specified in the Bermuda Corporate Income Tax
Act of 2023. Due to the non-recurring nature of this one-time item,
the Company believes that excluding this item from after-tax
operating income or loss available to common shareholders provides
the user with a better evaluation of the Company’s ongoing business
performance.
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 third quarter and 2023 third 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:
(U.S. Dollars in millions)
Three Months Ended
September 30, 2024
Insurance
Reinsurance
Mortgage
Total
Gross premiums written (1)
$
2,341
$
2,763
$
339
$
5,440
Premiums ceded (1)
(521)
(818)
(57)
(1,393)
Net premiums written
1,820
1,945
282
4,047
Change in unearned premiums
(55)
(53)
31
(77)
Net premiums earned
1,765
1,892
313
3,970
Other underwriting income (loss)
—
2
3
5
Losses and loss adjustment expenses
(1,087)
(1,317)
1
(2,403)
Acquisition expenses
(308)
(374)
1
(681)
Other operating expenses
(250)
(54)
(49)
(353)
Underwriting income (loss)
$
120
$
149
$
269
538
Net investment income
399
Net realized gains (losses)
169
Equity in net income (loss) of investment
funds accounted for using the equity method
171
Other income (loss)
8
Corporate expenses (2)
(19)
Transaction costs and other (2)
(30)
Amortization of intangible assets
(88)
Interest expense
(35)
Net foreign exchange gains (losses)
(63)
Income (loss) before income taxes and
income (loss) from operating affiliates
1,050
Income tax benefit (expense)
(98)
Income (loss) from operating
affiliates
36
Net income (loss) available to
Arch
988
Preferred dividends
(10)
Net income (loss) available to Arch
common shareholders
$
978
Underwriting Ratios
Loss ratio
61.6%
69.6%
(0.4)%
60.5%
Acquisition expense ratio
17.4%
19.8%
(0.4)%
17.2%
Other operating expense ratio
14.1%
2.9%
15.6%
8.9%
Combined ratio
93.1%
92.3%
14.8%
86.6%
Net premiums written to gross premiums
written
77.7%
70.4%
83.2%
74.4%
(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.
(U.S. Dollars in millions)
Three Months Ended
September 30, 2023
Insurance
Reinsurance
Mortgage
Total
Gross premiums written (1)
$
2,043
$
2,138
$
347
$
4,527
Premiums ceded (1)
(521)
(576)
(76)
(1,172)
Net premiums written
1,522
1,562
271
3,355
Change in unearned premiums
(110)
(19)
22
(107)
Net premiums earned
1,412
1,543
293
3,248
Other underwriting income (loss)
—
2
3
5
Losses and loss adjustment expenses
(812)
(870)
35
(1,647)
Acquisition expenses
(269)
(304)
(2)
(575)
Other operating expenses
(202)
(61)
(47)
(310)
Underwriting income (loss)
$
129
$
310
$
282
721
Net investment income
269
Net realized gains (losses)
(248)
Equity in net income (loss) of investment
funds accounted for using the equity method
59
Other income (loss)
(4)
Corporate expenses (2)
(20)
Transaction costs and other (2)
—
Amortization of intangible assets
(24)
Interest expense
(34)
Net foreign exchange gains (losses)
22
Income (loss) before income taxes and
income (loss) from operating affiliates
741
Income tax benefit (expense)
(72)
Income (loss) from operating
affiliates
54
Net income (loss) available to
Arch
723
Preferred dividends
(10)
Net income (loss) available to Arch
common shareholders
$
713
Underwriting Ratios
Loss ratio
57.5%
56.4%
(12.1)%
50.7%
Acquisition expense ratio
19.1%
19.7%
0.6%
17.7%
Other operating expense ratio
14.3%
3.9%
16.2%
9.5%
Combined ratio
90.9%
80.0%
4.7%
77.9%
Net premiums written to gross premiums
written
74.5%
73.1%
78.1%
74.1%
(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/or Bermuda-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 the Bermuda
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/20241030073497/en/
Arch Capital Group Ltd. François Morin: (441)
278-9250
Investor Relations Donald Watson: (914) 872-3616;
dwatson@archgroup.com
Arch Capital (NASDAQ:ACGL)
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