10-QPeriod: Q1 FY2019

ARCH CAPITAL GROUP LTD. Quarterly Report for Q1 Ended Mar 31, 2019

Filed May 7, 2019For Securities:ACGLACGLNACGLO

Summary

Arch Capital Group Ltd. (ACGL) reported a strong first quarter for 2019, demonstrating significant growth and profitability across its segments. The company's net income available to common shareholders surged to $438.1 million, a substantial increase from $137.3 million in the prior year's first quarter. This growth was driven by robust performance in its mortgage segment, which saw a 39.6% increase in underwriting income, and solid investment income, which grew to $156.9 million. The insurance and reinsurance segments also contributed positively, although underwriting income in the reinsurance segment saw a decline due to increased loss ratios and prior period reserve development impacts, particularly related to Typhoon Jebi. Total investable assets managed by Arch Capital stood at approximately $20.1 billion, reflecting a healthy investment portfolio. The company's book value per share increased to $23.12 from $21.52 at the end of 2018, indicating value creation for shareholders. The report also highlights a disciplined underwriting strategy focused on specific lines of business and effective risk management. With a strong capital position and continued focus on profitable growth, Arch Capital appears well-positioned for the remainder of 2019.

Financial Highlights

28 data points
Beta

Revenue

$1.72B

Net Income

$448.53M

26.0% Net Margin

EPS (Diluted)

$1.07

Total Assets

$33.98B

Cash & Equivalents

$633.10M

Free Cash Flow

$235.40M

Financial Statements
Beta
Revenue$1.72B
Interest Expense$29.07M
Net Income$448.53M
EPS (Basic)$1.09
EPS (Diluted)$1.07
Shares Outstanding (Basic)400.18M
Shares Outstanding (Diluted)408.97M

Key Highlights

  • 1Net income available to Arch common shareholders increased significantly to $438.1 million from $137.3 million in the prior year's first quarter.
  • 2The mortgage segment demonstrated strong growth with underwriting income up 39.6% to $244.1 million.
  • 3Net investment income rose to $156.9 million from $126.7 million in Q1 2018.
  • 4Book value per share increased to $23.12 as of March 31, 2019, up from $21.52 at December 31, 2018.
  • 5Total investable assets held by Arch Capital reached $20.06 billion.
  • 6The company reported a combined ratio of 81.7% for Q1 2019, an improvement from 81.3% in Q1 2018.
  • 7Favorable prior period reserve development was reported in the insurance ($4.4 million) and mortgage ($36.6 million) segments.

Frequently Asked Questions

For the first quarter of 2019, Arch Capital Group Ltd.'s net income available to common shareholders was $438.1 million, a significant increase compared to $137.3 million reported in the same period of 2018.

The mortgage segment was a standout performer, with underwriting income increasing by 39.6% to $244.1 million. The insurance segment's underwriting income was $562,000, down from $7.9 million in the prior year, while the reinsurance segment's underwriting income was $20.9 million, down from $54.8 million, largely due to adverse prior year reserve development related to Typhoon Jebi.

The company's investment portfolio generated $156.9 million in net investment income. Total investable assets managed by Arch were approximately $20.1 billion. The book value per share grew to $23.12 as of March 31, 2019, from $21.52 at the end of 2018, reflecting overall value growth for shareholders.

The company faces risks common to the insurance and reinsurance industry, including the potential for large losses from catastrophic events and severe economic events. The filing also notes that the reinsurance segment's results were impacted by adverse development on reserves, specifically mentioning an increase related to Typhoon Jebi. Management also highlighted changes in the timing of incentive compensation practices affecting corporate expenses.