01—Abstract
Summary
Summary of the 10-K filed February 28, 2018. Cited figures are marked; the original filing is the authoritative source.
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 milliona. Book value per share increased to $60.91 at year-end 2017, reflecting the company's commitment to long-term value creation.
02—Key points
Key Highlights
- Arch Capital Group Ltd. reported a net income available to common shareholders of $566.5 million for the year ended December 31, 2017.
- Book value per share increased to $60.91 at December 31, 2017, up from $55.19 at December 31, 2016.
- Net premiums written for the year totaled $4.96 billion, with significant growth in the mortgage segment driven by the acquisition of UGC.
- The insurance segment experienced a challenging year with a combined ratio of 109.1%, primarily due to catastrophic event activity.
- The 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.
- The mortgage segment delivered strong underwriting income, with a combined ratio of 36.0%, benefiting significantly from the UGC acquisition.
- Total 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.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 28, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $5.63B$4.46B | +26.1% |
| Interest Expense | $117.43M$66.25M | +77.2% |
| Net Income | $619.28M$692.74M | −10.6% |
| EPS (Basic) | $1.40$1.83 | −23.5% |
| EPS (Diluted) | $1.36$1.78 | −23.6% |
| Shares Outstanding (Basic) | 404.14M362.38M | +11.5% |
| Shares Outstanding (Diluted) | 417.79M374.15M | +11.7% |
05—Questions
Frequently Asked Questions
What was Arch Capital's financial performance in 2017?
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.
How did the UGC acquisition impact Arch Capital's results?
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.
What were the main drivers of profitability and challenges in 2017?
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.
How did Arch Capital manage its investment portfolio in 2017?
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.
06—Continue