On February 10, 2025, Arch Capital Group Ltd (ACGL, Financial) released its 8-K filing detailing the financial results for the fourth quarter of 2024. Arch Capital Group Ltd, a Bermuda-based company, operates in the insurance and reinsurance sectors across various regions including the United States, Canada, Europe, Australia, and the United Kingdom. The company is structured into three underwriting segments: insurance, reinsurance, and mortgage, along with two operating segments: corporate and other.

Quarterly Financial Performance

Arch Capital Group Ltd reported a net income of $925 million, or $2.42 per share, for the fourth quarter of 2024. This result surpassed the analyst estimate of $1.99 per share. However, it marked a significant decrease from the $2.3 billion, or $6.12 per share, reported in the same quarter of the previous year. The after-tax operating income was $866 million, or $2.26 per share, slightly below the $945 million, or $2.49 per share, from the fourth quarter of 2023.

Challenges and Catastrophic Losses

The company faced pre-tax current accident year catastrophic losses of $393 million, primarily due to Hurricanes Milton and Helene. Despite these challenges, Arch Capital Group Ltd managed to achieve a favorable development in prior year loss reserves amounting to $146 million. The combined ratio, excluding catastrophic activity and prior year development, was 79.0%, a slight increase from 78.9% in the previous year.

Insurance Segment Performance

The insurance segment saw a 28.4% increase in gross premiums written, reaching $2,484 million, largely due to the acquisition of the U.S. MidCorp and Entertainment insurance businesses from Allianz. However, the underwriting income for this segment decreased by 69.7% to $30 million, with a combined ratio of 98.5% compared to 93.1% in the previous year.

Reinsurance Segment Insights

Gross premiums written in the reinsurance segment slightly decreased by 1.5% to $1,941 million, while net premiums written increased by 2.0%. The segment's underwriting income remained relatively stable at $328 million, with a combined ratio of 83.0%, up from 80.0% in the previous year. The segment was significantly impacted by catastrophic events, contributing 12.2% to the loss ratio.

Mortgage Segment Developments

The mortgage segment experienced a 5.4% decline in gross premiums written, but net premiums written increased by 8.6%. The underwriting expense ratio rose to 19.3% from 17.3% in the previous year, influenced by higher operating expenses and one-time costs.

Financial Metrics and Achievements

Arch Capital Group Ltd's book value per common share was $53.11 as of December 31, 2024, reflecting a 6.8% decrease from the previous quarter, primarily due to a special cash dividend. The company also repurchased approximately $24 million in shares during the quarter.

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.”

Conclusion and Analysis

Arch Capital Group Ltd's performance in the fourth quarter of 2024 demonstrates resilience in the face of significant catastrophic events. The company's ability to exceed earnings estimates despite these challenges highlights its robust risk management and strategic acquisitions. However, the increased combined ratios and catastrophic losses indicate areas for potential improvement in operational efficiency and risk mitigation strategies. As the company continues to navigate a complex insurance landscape, its focus on strategic growth and financial stability will be crucial for sustaining long-term success.

Explore the complete 8-K earnings release (here) from Arch Capital Group Ltd for further details.