Arch Capital Group (ACGL) Q2 2024 earnings summary

Executive summary

• Net income for Q2 2024 was $1.3 billion ($3.30 per share), up from $661 million ($1.75 per share) year-over-year, with a 26.3% annualized net income return on average common equity, driven by strong underwriting and investment results across all segments.

• Book value per share rose to $52.75, up 6.9% for the quarter and 12.4% year-to-date.

• Gross premiums written increased 12% year-over-year to $5.4 billion, with all segments contributing to growth.

• Completed acquisitions of Allianz's U.S. MidCorp and Entertainment insurance businesses and RMIC Companies, Inc., adding $3.6 billion of insurance in force.

• Persistency in the U.S. primary mortgage insurance portfolio remained high at 83.3%, with low delinquency rates and a PMIERS sufficiency ratio of 196%.

Financial highlights

• After-tax operating income was $981 million ($2.57 per share), up 34% year-over-year.

• Combined ratio improved to 78.7%, or 76.7% on an underlying ex-cat accident year basis.

• Net investment income reached $364 million, up from $242 million in Q2 2023, with total investment portfolio at $37.8 billion.

• Net realized gains were $122 million, reversing a $123 million loss in Q2 2023.

• Favorable prior year reserve development of $124 million pre-tax, mainly in short tail P&C and mortgage lines; catastrophe losses totaled $196 million, mostly from U.S. secondary perils.

Outlook and guidance

• Management remains confident in generating solid returns due to disciplined pricing, strong market conditions, and ongoing commitment to dynamic capital allocation and ESG initiatives.

• Expect to update financial impact of Allianz acquisition in Q3, with integration expenses anticipated.

• Effective tax rate expected to be 9%-11% for full year 2024; Q2 effective tax rate was 9.5%.

• No material changes to risk factors or guidance from the prior annual report.