Arch Capital Q3 Earnings Beat, Revenues Miss Estimates

Core Insights - Arch Capital Group Ltd. (ACGL) reported third-quarter 2025 operating income of $2.77 per share, exceeding the Zacks Consensus Estimate by 26.5% and reflecting a year-over-year increase of 39.2% [1][8] - The quarterly results were positively influenced by higher premiums in the Insurance segment, improved net investment income, and a less active catastrophe environment [1][8] Financial Performance - Gross premiums written decreased by 0.6% year over year to $5.4 billion, while net premiums written fell by 2.1% to $4 billion [2] - Operating revenues rose by 7.8% year over year to $4.7 billion, driven by higher net premiums earned and net investment income, although it missed the Zacks Consensus Estimate by 0.6% [3] - Pre-tax net investment income increased by 2.3% year over year to $408 million, driven by growth in average invested assets [2] Underwriting Results - Underwriting income surged by 61.9% year over year to $871 million, with the combined ratio improving by 680 basis points to 79.8 [4][8] - In the Insurance segment, gross premiums written increased by 9.7% to $2.6 billion, and net premiums written rose by 7.3% to $2 billion, primarily due to the MCE Acquisition [5] - The Reinsurance segment saw gross premiums written decline by 9% to $2.5 billion, with net premiums written down by 10.7% to $1.7 billion [6] Segment Analysis - Underwriting income in the Reinsurance segment increased significantly by 223.5% year over year to $482 million, with the combined ratio improving by 1620 basis points to 76.1 [7] - The Mortgage segment experienced a slight decline, with gross premiums written dipping by 2.7% to $330 million and net premiums written decreasing by 2.8% to $274 million [7] Financial Position - As of September 30, 2025, Arch Capital had cash of $1.1 billion, an increase of 8.6% from the end of 2024, and debt remained unchanged at $2.7 billion [10] - The book value per share rose by 17.3% to $62.32, and annualized operating return on average common equity expanded by 70 basis points to 18.5% [10] - Cash from operations increased by 8.3% year over year to $2.2 billion [10] Share Repurchase - The company repurchased $732 million worth of shares during the third quarter of 2025 [11]