10-KPeriod: FY2017

ARCH CAPITAL GROUP LTD. Annual Report, Year Ended Dec 31, 2017

Filed February 28, 2018For Securities:ACGLACGLNACGLO

Summary

Arch Capital Group Ltd. (ACGL) reported strong financial performance for the year ended December 31, 2017. The company, a global provider of insurance, reinsurance, and mortgage insurance, demonstrated robust growth in net premiums written across its segments. The acquisition of United Guaranty Corporation (UGC) significantly bolstered the mortgage segment, leading to a substantial increase in net premiums written and a positive contribution to the company's overall results. Despite a challenging insurance market with increased catastrophic loss activity, Arch Capital's disciplined underwriting and diversified business lines contributed to a solid net income available to common shareholders of $566.5 million. Book value per share increased to $60.91 at year-end 2017, reflecting the company's commitment to long-term value creation.

Financial Highlights

33 data points
Beta

Revenue

$5.63B

Net Income

$619.28M

11.0% Net Margin

EPS (Diluted)

$1.36

Total Assets

$32.05B

Cash & Equivalents

$606.20M

Free Cash Flow

$1.09B

Financial Statements
Beta
Revenue$5.63B
Interest Expense$117.43M
Net Income$619.28M
EPS (Basic)$1.40
EPS (Diluted)$1.36
Shares Outstanding (Basic)404.14M
Shares Outstanding (Diluted)417.79M

Key Highlights

  • 1Arch Capital Group Ltd. reported a net income available to common shareholders of $566.5 million for the year ended December 31, 2017.
  • 2Book value per share increased to $60.91 at December 31, 2017, up from $55.19 at December 31, 2016.
  • 3Net premiums written for the year totaled $4.96 billion, with significant growth in the mortgage segment driven by the acquisition of UGC.
  • 4The insurance segment experienced a challenging year with a combined ratio of 109.1%, primarily due to catastrophic event activity.
  • 5The reinsurance segment showed strong growth in net premiums written, though its combined ratio was 99.9% due to catastrophic event activity and a retroactive reinsurance contract.
  • 6The mortgage segment delivered strong underwriting income, with a combined ratio of 36.0%, benefiting significantly from the UGC acquisition.
  • 7Total investable assets held by Arch (excluding the 'other' segment) increased to $19.72 billion at December 31, 2017, with a focus on capital preservation and market liquidity.

Frequently Asked Questions

Arch Capital reported a net income available to common shareholders of $566.5 million for the year ended December 31, 2017. Book value per share grew to $60.91, and net premiums written reached $4.96 billion. The company's mortgage segment, strengthened by the UGC acquisition, performed particularly well, while the insurance segment faced headwinds from catastrophic events.

The acquisition of United Guaranty Corporation (UGC) significantly expanded Arch Capital's mortgage insurance operations. This led to a substantial increase in net premiums written for the mortgage segment and contributed positively to the company's overall financial results. The integration of UGC was a key driver of growth in this segment.

Profitability was driven by strong performance in the mortgage segment and disciplined underwriting across the reinsurance segment. Challenges included higher catastrophic loss activity in the insurance and reinsurance segments, which negatively impacted their combined ratios. The company's investment portfolio also contributed positively to total return.

Arch Capital maintained a focus on capital preservation, market liquidity, and diversification. Total investable assets grew to $19.72 billion. The fixed income portfolio maintained a high credit quality (AA-/Aa2), and the company's total return on investments outperformed its benchmark, driven by strong performance in fixed income, equities, and alternative investments.