10-KPeriod: FY2019

ARCH CAPITAL GROUP LTD. Annual Report, Year Ended Dec 31, 2019

Filed February 28, 2020For Securities:ACGLACGLNACGLO

Summary

Arch Capital Group Ltd. (ACGL) reported strong performance in its 2019 10-K filing, demonstrating robust growth across its insurance, reinsurance, and mortgage segments. The company achieved net premiums written of $6.04 billion and net income available to common shareholders of $1.59 billion, with book value per share increasing to $26.42. Key drivers of this performance included disciplined underwriting, favorable market conditions in many lines of business, and strong investment returns. The company's diversified business model, with a focus on specialty lines, positions it well to navigate the cyclical insurance and reinsurance markets. Strategic acquisitions, such as Barbican Group Holdings Limited, further expanded its underwriting capabilities and geographic reach. The mortgage segment also showed strong underwriting income, benefiting from favorable macroeconomic conditions. Looking ahead, Arch Capital continues to focus on capitalizing on profitable underwriting opportunities, maintaining a disciplined approach, and managing risk effectively. The company's solid capital base and experienced management team provide a strong foundation for continued growth and value creation for shareholders.

Financial Highlights

32 data points
Beta

Revenue

$6.93B

Net Income

$1.64B

23.6% Net Margin

EPS (Diluted)

$3.87

Total Assets

$37.89B

Cash & Equivalents

$726.23M

Free Cash Flow

$2.05B

Financial Statements
Beta
Revenue$6.93B
Interest Expense$120.87M
Net Income$1.64B
EPS (Basic)$3.97
EPS (Diluted)$3.87
Shares Outstanding (Basic)401.80M
Shares Outstanding (Diluted)411.61M

Key Highlights

  • 1Achieved net premiums written of $6.04 billion and net income available to Arch common shareholders of $1.59 billion for 2019.
  • 2Book value per share increased by 22.8% to $26.42 at December 31, 2019, up from $21.52 at December 31, 2018.
  • 3The insurance segment's combined ratio was 101.5% in 2019, a slight increase from 101.3% in 2018, but driven by acquisitions.
  • 4The reinsurance segment delivered a combined ratio of 94.9% in 2019, an improvement from 94.5% in 2018, with strong underwriting income.
  • 5The mortgage segment reported a combined ratio of 24.9% in 2019, a significant improvement from 28.9% in 2018, reflecting favorable market conditions.
  • 6Total investable assets grew to $24.99 billion at December 31, 2019, up from $22.32 billion in the prior year, with a pre-tax total return of 7.30% for 2019.
  • 7The company continued its share repurchase program, with $1.0 billion remaining authorization through December 31, 2021.

Frequently Asked Questions

Arch Capital demonstrated strong financial performance in 2019. The company reported net premiums written of $6.04 billion and net income available to Arch common shareholders of $1.59 billion. Its book value per share increased significantly to $26.42 from $21.52 in the previous year, reflecting successful underwriting and investment activities.

Arch Capital operates in three main segments: insurance, reinsurance, and mortgage. The insurance segment had a combined ratio of 101.5%, slightly up due to acquisitions. The reinsurance segment showed improvement with a combined ratio of 94.9% and strong underwriting income. The mortgage segment performed very well, achieving a combined ratio of 24.9%, significantly down from the prior year, driven by favorable market conditions.

Arch Capital focuses on disciplined underwriting in specialty lines, risk selection, and active capital allocation. The company utilizes reinsurance to manage exposures, particularly for catastrophe-exposed business. Its investment strategy emphasizes capital preservation, market liquidity, and diversification, aiming for a stable return. The company also has an active share repurchase program and maintains a strong capital base to support its operations and rating agency requirements.

The filing highlights several risks, including intense competition in the insurance and reinsurance industries, the cyclical nature of the business, potential losses from catastrophic events (natural and man-made), cybersecurity risks, and the impact of regulatory changes. The company also notes risks associated with its mortgage insurance portfolio, investment market volatility, and foreign currency exchange rate fluctuations.