Arch Capital .(ACGL) - 2025 Q1 - Quarterly Report

Financial Performance - Total revenues for Q1 2025 increased to $4,673 million, up 18.6% from$ 3,941 million in Q1 2024[19] - Net premiums earned rose to $4,188 million, a 22.4% increase compared to$ 3,422 million in the same period last year[19] - Net income available to Arch common shareholders decreased to $564 million, down 49.2% from$ 1,110 million in Q1 2024[19] - Comprehensive income for Q1 2025 was $886 million, compared to$ 975 million in Q1 2024, reflecting a decrease of 9.1%[22] - Basic net income per common share was $1.51, down from$ 2.99 in Q1 2024, representing a decline of 49.7%[19] - Net income for Q1 2025 was $574 million, a decrease of 48.8% compared to$ 1,120 million in Q1 2024[29] - After-tax operating income available to Arch common shareholders was $587 million for Q1 2025, down from$ 933 million in Q1 2024[192] - The annualized net income return on average common equity for Q1 2025 was 11.1%, compared to 24.6% in Q1 2024[192] Assets and Liabilities - Total assets increased to $75,176 million, up 5.8% from$ 70,906 million at the end of 2024[15] - The reserve for losses and loss adjustment expenses rose to $30,946 million, an increase of 5.4% from$ 29,369 million at the end of 2024[15] - Shareholders' equity available to Arch increased to $21,545 million, up 3.5% from$ 20,820 million at the end of 2024[15] - Cash and restricted cash at the end of Q1 2025 was $1,985 million, up from$ 1,600 million at the end of Q1 2024[29] - Total restricted assets increased to $13.769 billion as of March 31, 2025, from$ 13.048 billion at December 31, 2024[106] Investment Income - The company reported net investment income of $378 million, an increase of 15.6% from$ 327 million in Q1 2024[19] - Income from investments accounted for using the equity method for Q1 2025 was $53 million, down from$ 99 million in Q1 2024[98] - The total fair value of available-for-sale investments as of March 31, 2025, was $31,275 million, compared to$ 29,819 million at the end of 2024, indicating a 4.9% increase[81] - The company reported gross gains on investment sales of $51 million and gross losses of$ 113 million for the first quarter of 2025[91] Underwriting Performance - Underwriting income for the total company was $417 million, with the insurance segment reporting a loss of$ 2 million, the reinsurance segment generating $167 million, and the mortgage segment contributing$ 252 million[60] - The combined ratio for the insurance segment was 100.1%, while the reinsurance segment had a combined ratio of 91.8%, and the mortgage segment reported a combined ratio of 16.1%[60] - The insurance segment experienced a $2 million underwriting loss, primarily due to California wildfires, but net premiums written grew by$ 373 million from the MCE Acquisition, reflecting a 24.2% increase compared to the first quarter of 2024[174] - The mortgage segment generated $252 million of underwriting income, with a persistency rate of 81.9% and a low delinquency rate, indicating stable market conditions[175] Acquisition and Growth - The company completed the acquisition of the U.S MidCorp and Entertainment insurance business from Allianz for$ 450 million on August 1, 2024[35][36] - Total assets acquired in the Allianz transaction amounted to $3,292 million, with total liabilities acquired at$ 3,088 million, resulting in identifiable net assets of $204 million[39] - Goodwill recognized from the acquisition was$ 246 million, primarily due to expanded market presence and growth opportunities[40] Shareholder Actions - The company repurchased 2.2 million shares for $196.4 million in Q1 2025, with a total of$ 800.4 million remaining under the share repurchase program[49] - The company repurchased approximately 1.2 million common shares for an aggregate purchase price of $108 million from April 1 to May 2, 2025[166] Tax and Regulatory - The effective tax rate for the first quarter of 2025 was 17.4%, up from 8.3% in the same period of 2024, primarily due to the enactment of a 15% corporate income tax in Bermuda[160] - The company paid$ 18 million in income taxes for the first quarter of 2025, compared to a tax recovery of $6 million in the same quarter of 2024[161] Losses and Reserves - The total net incurred losses and loss adjustment expenses for Q1 2025 were$ 2,587 million, compared to $1,728 million in Q1 2024, representing a 50% increase[66] - The net reserve for losses and loss adjustment expenses at the end of Q1 2025 was$ 22,567 million, an increase from $16,636 million at the end of Q1 2024, marking a 36% rise[66] - Catastrophe losses for the current year amounted to$ 547 million, net of reinstatement premiums, impacting overall profitability[170] Market Conditions - The average credit quality of the benchmark return index was rated "A1" by Moody's as of March 31, 2025[180] - The estimated fixed income duration of the benchmark return index was 3.33 years as of March 31, 2025[180]