10-QPeriod: Q1 FY2016

ARCH CAPITAL GROUP LTD. Quarterly Report for Q1 Ended Mar 31, 2016

Filed May 6, 2016For Securities:ACGLACGLNACGLO

Summary

Arch Capital Group Ltd. (ACGL) reported solid financial results for the first quarter of 2016, demonstrating growth across its key segments. The company experienced an increase in net premiums written in its insurance and mortgage segments, with the mortgage segment showing particularly strong growth. Investment income also saw an uptick, contributing positively to overall revenue. While the reinsurance segment saw a slight decrease in net premiums written, it maintained healthy underwriting income. The company's book value per common share increased to $49.87, reflecting consistent value generation for shareholders. Overall, ACGL navigated a competitive market environment effectively, with disciplined underwriting and strategic investment management contributing to a stable financial performance.

Financial Highlights

29 data points
Beta

Revenue

$1.09B

Net Income

$154.80M

14.2% Net Margin

EPS (Diluted)

$0.40

Total Assets

$24.54B

Cash & Equivalents

$557.96M

Free Cash Flow

$322.54M

Financial Statements
Beta
Revenue$1.09B
Interest Expense$16.11M
Net Income$154.80M
EPS (Basic)$0.41
EPS (Diluted)$0.40
Shares Outstanding (Basic)361.28M
Shares Outstanding (Diluted)373.49M

Key Highlights

  • 1Net premiums earned increased by 1.0% to $513.1 million in the insurance segment and by 22.6% to $61.8 million in the mortgage segment, year-over-year.
  • 2The reinsurance segment experienced a 6.6% decrease in net premiums earned to $261.2 million, but maintained a strong underwriting income of $58.7 million with a combined ratio of 77.7%.
  • 3Net income available to Arch common shareholders was $149.3 million, a decrease from $277.9 million in the prior year quarter, primarily due to lower net realized gains and higher foreign exchange losses in the current period.
  • 4Book value per common share increased to $49.87 at March 31, 2016, from $47.95 at December 31, 2015, and $47.80 at March 31, 2015.
  • 5The company repurchased $75.3 million of its common shares in the first quarter of 2016, compared to $162.9 million in the same period of 2015.
  • 6Total investable assets managed by Arch increased to $14.95 billion at March 31, 2016, from $14.64 billion at December 31, 2015.

Frequently Asked Questions

Arch Capital Group reported a net income of $175.6 million for the first quarter of 2016. Net income available to Arch common shareholders was $149.3 million.

The company's investment portfolio generated a pre-tax total return of 1.82% in the first quarter of 2016, compared to 1.11% in the first quarter of 2015. This performance was driven by strong returns on fixed income securities, although this was partially offset by negative returns on equities and private credit/private equity funds.

The mortgage segment is experiencing favorable market conditions with increasing competitive forces. Arch Mortgage Insurance Company (Arch MI U.S.) continues to expand, with its RateStar program gaining wide acceptance. International business and credit risk-sharing transactions also present growth opportunities.

The reinsurance segment's underwriting income decreased by 20.6% year-over-year, primarily due to a 6.6% decline in net premiums earned, influenced by increased retrocessions and shifts in the business mix. The loss ratio also increased slightly, partly due to higher current year catastrophic activity.