Arch Capital delivered a standout QQ4 2024 performance amid elevated catastrophe activity, underscoring the strength of its diversified business mix. The quarter showed solid top-line appetite with a reported revenue of $4.51 billion and quarterly net income of $935 million, translating to $2.48 per share, while 2024 metrics highlighted a robust capital framework and resilient returns despite elevated natural catastrophe losses. The group’s underwriting engine remained the portfolio’s core strength: the Reinsurance segment posted a record $1.2 billion of annual underwriting income, while the Insurance segment benefited from the Midcorp and Entertainment acquisitions, contributing to a 2024 combined ratio of 78.6%. Mortgage insurance (US MI) produced the first $1+ billion of annual underwriting income, reinforcing Arch’s diversified cash-flow durability.
Management stressed active capital management as a core discipline, citing a 2024 year-end book value per share of $53.11 (up 13% for the year, ~24% after adjusting for a $5 per share special dividend) and $24 million of fourth-quarter share buybacks. The firm signaled continued focus on high-return opportunities across its diversified portfolio, with a cautious stance on lines where returns do not meet minimum profitability thresholds. Looking ahead to 2025, Arch projects a catastrophe load of roughly 7-8% of full-year group net earned premium and intends to maintain attractive margins in a competitive market, aided by its data-driven culture and cycle-management discipline. Nevertheless, management warned that California wildfire losses and broader rate/loss dynamics will temper near-term improvements in some lines.
Key macro considerations include: (i) the California wildfire event driving an industry-wide loss estimate of $35-45 billion, (ii) the potential for DTA realizations to be affected by OECD guidance, and (iii) Bermuda tax reform introducing a 15% corporate tax with an expected 16-18% effective tax rate in 2025. Taken together, Arch remains well-capitalized and capable of funding strategic growth while returning excess capital to shareholders when appropriate.