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Dec 31, 2023
Arch Capital Q4 2023 Earnings Report
Arch Capital reported strong Q4 2023 results, marked by a significant net income and operating income growth compared to the previous year.
Key Takeaways
Arch Capital Group Ltd. reported a net income of $2.3 billion, or $6.12 per share, a substantial increase from $849 million, or $2.26 per share, in Q4 2022. After-tax operating income was $945 million, or $2.49 per share, compared to $806 million, or $2.14 per share, for the same period last year. The results were impacted by a $1.18 billion net deferred tax asset related to Bermuda's new corporate income tax.
Net income available to Arch common shareholders was $2.3 billion, or $6.12 per share.
After-tax operating income available to Arch common shareholders was $945 million, or $2.49 per share.
Pre-tax current accident year catastrophic losses for the Company’s insurance and reinsurance segments, net of reinsurance and reinstatement premiums, totaled $137 million.
Favorable development in prior year loss reserves, net of related adjustments, amounted to $135 million.
Arch Capital
Arch Capital
Arch Capital Revenue by Segment
Revenue by Segment
Insurance Revenue
CapyFin.comReinsurance Revenue
CapyFin.comMortgage Revenue
CapyFin.com Forward Guidance
Arch Capital is optimistic about its prospects for 2024, anticipating continued favorable conditions in most of its operating markets.
Positive Outlook
- The company finished 2023 with a 21.6% operating return on equity.
- Book value per share grew by 43.9% in 2023.
- Underwriters are leaning into excellent market conditions.
- The company expects to utilize a $1.18 billion net deferred tax asset over a 10-year period.
- Growth in net investment income primarily reflected the effects of higher interest rates available in the market, along with growth in invested assets due in part to strong operating cash flows.
Challenges Ahead
- The company expects to incur and pay increased taxes in Bermuda beginning in 2025.
- The 2023 fourth quarter loss ratio reflected 3.8 points of current year catastrophic activity, spread across a series of global events, compared to 2.8 points of catastrophic activity in the 2022 fourth quarter for the insurance segment.
- The 2023 fourth quarter loss ratio reflected 5.4 points of current year catastrophic activity, spread across a series of global events, compared to minimal catastrophic activity in the 2022 fourth quarter for the reinsurance segment.
- Reduction in net premiums written in the 2023 fourth quarter for the mortgage segment primarily reflected a higher level of premiums ceded, with $17 million of one-time payments related to the termination of eight Bellemeade agreements.
- On a pre-tax basis, net foreign exchange losses for the 2023 fourth quarter were $59 million, compared to net foreign exchange losses of $81 million for the 2022 fourth quarter.
Revenue & Expenses
Visualization of income flow from segment revenue to net income