Arch Capital .-Arch Capital Q1 Earnings Surpass Estimates, Premiums Increase Y/Y

Core Viewpoint - Arch Capital Group Ltd. (ACGL) reported a first-quarter 2025 operating income of $1.54 per share, exceeding the Zacks Consensus Estimate by 12.4%, although it represented a 37.1% decline year over year. The results were supported by higher premiums in the Insurance and Reinsurance segments and improved net investment income, but were negatively impacted by poor underwriting income and increased catastrophic losses [1]. Premiums and Income - Gross premiums written increased by 8.9% year over year to$ 6.4 billion, while net premiums written rose by 10.5% year over year to $4.5 billion, driven by higher premiums in both Insurance and Reinsurance segments [2]. - Net investment income grew by 15.6% year over year to$ 378 million, although it fell short of the estimate of $436.2 million, influenced by a reduction in investable assets due to a$ 1.9 billion special cash dividend paid in December 2024 and higher investment expenses [3]. Revenue and Losses - Operating revenues reached $4.5 billion, marking a 21.2% increase year over year, but missed the Zacks Consensus Estimate by 0.9%. Pre-tax current accident year catastrophic losses amounted to$ 547 million, significantly higher than the previous year's loss of $58 million. Underwriting income declined by 43.3% year over year to$ 417 million [4]. - The combined ratio, indicating the percentage of premiums paid out as claims and expenses, worsened by 1,130 basis points to 90.1, compared to the estimate of 94.5 [5]. Segment Performance - In the Insurance segment, gross premiums written rose by 24.4% year over year to $2.6 billion, with net premiums written climbing 25.4% to$ 1.9 billion, driven by new business opportunities and rate changes, despite competitive market pressures [6]. - The Reinsurance segment saw gross premiums written increase by 0.8% year over year to $3.5 billion, while net premiums written rose by 2.2% to$ 2.3 billion, primarily due to rate increases and growth in existing accounts, although offset by reductions in specialty lines [7][8]. - The Mortgage segment experienced a decline, with gross premiums written dropping by 4.4% year over year to $326 million and net premiums written decreasing by 4% to$ 266 million, attributed to lower mortgage originations [9]. Financial Position - As of March 31, 2025, the company had cash of $1.2 billion, a 21.2% increase from the end of 2024. Debt remained flat at$ 2.7 billion. Book value per share was $55.15, up 3.8% from the end of 2024, while annualized operating return on average common equity contracted by 920 basis points year over year to 11.5% [11].