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Arch Capital Group Ltd. Reports 2020 Fourth Quarter Results

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Arch Capital Group Ltd. (NASDAQ: ACGL) announces its 2020 fourth quarter results. The results included:

  • Net income available to Arch common shareholders of $533.1 million, or $1.30 per share, a 17.8% annualized return on average common equity, compared to $316.0 million, or $0.76 per share, for the 2019 fourth quarter;
  • After-tax operating income available to Arch common shareholders(1) of $230.4 million, or $0.56 per share, a 7.7% annualized return on average common equity, compared to $308.4 million, or $0.74 per share, for the 2019 fourth quarter;
  • Pre-tax current accident year catastrophic losses for the Company’s insurance and reinsurance segments, net of reinsurance and reinstatement premiums(1) of $156.4 million, including $0.4 million of COVID-19 related losses;
  • Favorable development in prior year loss reserves, net of related adjustments(1) of $49.8 million;
  • Combined ratio excluding catastrophic activity and prior year development(1) of 80.2%, compared to 81.4% for the 2019 fourth quarter;
  • The percentage of loans in default on U.S. primary mortgage business was 4.19% at December 31, 2020, compared to 4.69% at September 30, 2020;
  • Total return on investments(1) of 2.46%;
  • Book value per common share of $30.31 at December 31, 2020, a 5.4% increase from September 30, 2020 and a 14.7% increase from December 31, 2019.

All earnings per share amounts discussed in this release are on a diluted basis. The following table summarizes the Company’s underwriting results, both (i) on a consolidated basis and (ii) on a consolidated basis excluding the ‘other’ segment (i.e., results of Watford):

(U.S. dollars in thousands)

Consolidated

 

Consolidated Excluding ‘Other’ Segment (1)

 

Three Months Ended December 31,

 

Three Months Ended December 31,

 

2020

 

2019

 

% Change

 

2020

 

2019

 

% Change

Gross premiums written

$

2,256,514

 

 

$

1,942,151

 

 

16.2

 

 

$

2,170,831

 

 

$

1,842,071

 

 

17.8

 

Net premiums written

1,758,015

 

 

1,455,453

 

 

20.8

 

 

1,660,298

 

 

1,343,100

 

 

23.6

 

Net premiums earned

1,811,045

 

 

1,515,882

 

 

19.5

 

 

1,668,299

 

 

1,382,437

 

 

20.7

 

Underwriting income

220,987

 

 

251,421

 

 

(12.1

)

 

229,542

 

 

288,672

 

 

(20.5

)

Underwriting Ratios

 

 

 

 

% Point
Change

 

 

 

 

 

% Point
Change

Loss ratio

62.3

%

 

55.7

%

 

6.6

 

 

61.0

%

 

51.4

%

 

9.6

 

Underwriting expense ratio

26.0

%

 

28.1

%

 

(2.1

)

 

25.6

%

 

28.2

%

 

(2.6

)

Combined ratio

88.3

%

 

83.8

%

 

4.5

 

 

86.6

%

 

79.6

%

 

7.0

 

 

 

 

 

 

 

 

 

 

 

 

 

Combined ratio excluding catastrophic activity and prior year development (1)

 

 

 

 

 

 

80.2

%

 

81.4

%

 

(1.2

)

(1)

 

Presentation represents a “non-GAAP” financial measure as defined in Regulation G. Such presentation excludes the results of Watford Holdings Ltd. (“Watford”). Pursuant to GAAP, the Company consolidates the results of Watford in its financial statements, although it only owns approximately 13% of Watford’s outstanding common equity as of December 31, 2020. See ‘Comments on Regulation G’ for further details.

The following table summarizes the Company’s consolidated financial data, including a reconciliation of net income or loss available to Arch common shareholders to after-tax operating income or loss available to Arch common shareholders and related diluted per share results:

(U.S. dollars in thousands, except share data)

Three Months Ended

 

Year Ended

 

December 31,

 

December 31,

 

2020

 

2019

 

2020

 

2019

Net income available to Arch common shareholders

$

533,141

 

 

$

315,981

 

 

$

1,363,909

 

 

$

1,594,707

 

Net realized (gains) losses

(297,801

)

 

(32,966

)

 

(814,808

)

 

(349,848

)

Equity in net (income) loss of investment funds accounted for using the equity method

(89,286

)

 

(27,139

)

 

(146,693

)

 

(123,672

)

Net foreign exchange (gains) losses

63,588

 

 

39,832

 

 

80,591

 

 

10,732

 

Arch Capital Group Ltd

NASDAQ:ACGL

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Finance, Property/Casualty Insurance, Multi-Line Insurance, Finance and Insurance, Direct Property and Casualty Insurance Carriers
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About ACGL

arch capital group ltd., together with its subsidiaries, provides insurance, reinsurance, and mortgage insurance products worldwide. the company's insurance segment offers primary and excess casualty coverages; loss sensitive primary casualty insurance programs; collateral protection, debt cancellation, and service contract reimbursement products; directors' and officers' liability, errors and omissions liability, employment practices and fiduciary liability, crime, professional indemnity, and other financial related coverages; medical professional and general liability insurance coverages; and workers' compensation and umbrella liability, as well as commercial automobile and inland marine products. it also provides property, energy, marine, and aviation insurance; travel insurance; accident, disability, and medical plan insurance coverages; captive insurance programs; and contract and commercial surety coverages. this segment markets its products through a group of licensed independen

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