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Arch Capital Group Ltd. ACGL reported first-quarter 2025 operating income of $1.54 per share, which beat the Zacks Consensus Estimate by 12.4%. The bottom line, however, declined 37.1% year over year.
The results benefited from higher premiums across its Insurance and Reinsurance segments and improved net investment income. It was offset by poor underwriting income and wider catastrophic losses (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)
Behind the Headline
Gross premiums written improved 8.9% year over year to $6.4 billion. Net premiums written climbed 10.5% year over year to $4.5 billion on higher premiums written across its Insurance and Reinsurance segments.
Net investment income grew 15.6% year over year to $378 million and beat our estimate of $436.2 million. It reflected the impact of a reduction of investable assets related to the special cash dividend to common shareholders of $1.9 billion paid in December 2024, along with higher investment expenses primarily related to incentive compensation in the period. The Zacks Consensus Estimate was pegged at $415 million.
Operating revenues of $4.5 billion rose 21.2% year over year, driven by higher net premiums earned and net investment income. It missed the Zacks Consensus Estimate by 0.9%.
Arch Capital Group Ltd. Price, Consensus and EPS Surprise
Arch Capital Group Ltd. price-consensus-eps-surprise-chart | Arch Capital Group Ltd. Quote
Pre-tax current accident year catastrophic losses for the company’s insurance and reinsurance segments, net of reinsurance and reinstatement premiums, were $547 million, wider than the year-ago period’s loss of $58 million. Arch Capital’s underwriting income declined 43.3% year over year to $417 million.
The combined ratio — the percentage of premiums paid out as claims and expenses — deteriorated 1,130 basis points (bps) to 90.1. Our estimate was 94.5. The Zacks Consensus Estimate was pegged at 93.
Segmental Results
Insurance: Gross premiums written increased 24.4% year over year to $2.6 billion. Our estimate was $2.4 billion. Net premiums written climbed 25.4% year over year to $1.9 billion. Growth in net premiums written, excluding the impact of the MCE Acquisition , reflected an increase in commercial automobile and other liability–occurrence due, in part, to new business opportunities and rate changes. These increases were mostly offset by reductions in other liability–claims made where markets remained competitive. Our estimate was $1.7 billion.
The company reported an underwriting loss of $2 million against the year-ago quarter’s income of $86 million. The combined ratio deteriorated 600 bps to 100.1. The Zacks Consensus Estimate was pegged at 102.
Reinsurance: Gross premiums written improved 0.8% year over year to $3.5 billion. Our estimate was $4.3 billion.
Net premiums written rose 2.2% year over year to $2.3 billion. The growth primarily reflected increases in casualty, property catastrophe and property, excluding property catastrophe lines, due in part to rate increases, new business opportunities and growth in existing accounts. The upside was offset by reductions in specialty lines due to non-renewals of structured deals and share reductions. Our estimate was $2.8 billion.
Underwriting income was $167 million, which declined 55.9% year over year. The combined ratio deteriorated 1440 bps year over year to 91.8. The Zacks Consensus Estimate was pegged at 94.
Mortgage: Gross premiums written dropped 4.4% year over year to $326 million. Our estimate was $350.3 million.
Net premiums written decreased 4% year over year to $266 million. The decrease primarily reflected a lower level of mortgage originations, mostly in international businesses. Our estimate was $275.9 million.
Underwriting income decreased 7% year over year to $252 million. Our estimate was $237.5 million. The combined ratio deteriorated 160 bps to 16.1%. The Zacks Consensus Estimate was pegged at 25.9.