Arch Capital Group Ltd. Files Q2 2024 10-Q

TL;DR

ACGL 10-Q filed: Q2 2024 financials out, showing investment and liability details. Check fixed maturities & short-term investments.

AI Summary

Arch Capital Group Ltd. filed its 10-Q for the period ending June 30, 2024. The filing details the company's financial position, including its investments and liabilities. Specific financial data points such as fixed maturities and short-term investments as of June 30, 2024, and December 31, 2023, are provided.

Why It Matters

This filing provides investors with a detailed look at Arch Capital Group's financial health and investment portfolio for the second quarter of 2024, crucial for assessing its stability and performance.

Risk Assessment

Risk Level: low — This is a routine quarterly financial filing (10-Q) and does not contain any immediately apparent high-risk disclosures.

Key Numbers

• 2024-06-30 — As of Date (Key date for financial reporting in the 10-Q)
• 2023-12-31 — Previous Year End Date (For comparative financial analysis)

Key Players & Entities

• ARCH CAPITAL GROUP LTD. (company) — Filer
• 20240630 (date) — Period of Report
• 20240806 (date) — Filing Date
• PEMBROKE (location) — Business Address City

FAQ

Key Financial Figures

• $0.0011 — nge on which registered Common shares, $0.0011 par value per share ACGL NASDAQ Stock M

Filing Documents

• acgl-20240630.htm (10-Q) — 3726KB
• ex31163024.htm (EX-31.1) — 10KB
• ex31263024.htm (EX-31.2) — 10KB
• ex32163024.htm (EX-32.1) — 6KB
• ex32263024.htm (EX-32.2) — 6KB
• acgl-20240630_g1.jpg (GRAPHIC) — 68KB
• 0000947484-24-000105.txt ( ) — 15443KB
• acgl-20240630.xsd (EX-101.SCH) — 58KB
• acgl-20240630_cal.xml (EX-101.CAL) — 107KB
• acgl-20240630_def.xml (EX-101.DEF) — 338KB
• acgl-20240630_lab.xml (EX-101.LAB) — 800KB
• acgl-20240630_pre.xml (EX-101.PRE) — 579KB
• acgl-20240630_htm.xml (XML) — 3510KB

Consolidated Financial Statements

Item 1. Consolidated Financial Statements 4

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 38

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 62

Controls and Procedures

Item 4. Controls and Procedures 62 PART II Other Information 63

Legal Proceedings

Item 1. Legal Proceedings 63

Risk Factors

Item 1A. Risk Factors 63

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 64

Defaults Upon Senior Securities

Item 3. Defaults Upon Senior Securities 64

Mine Safety Disclosures

Item 4. Mine Safety Disclosures 64

Other Information

Item 5. Other Information 64

Exhibits

Item 6. Exhibits 65

Signatures

Signatures 66 ARCH CAPITAL 1 2024 SECOND QUARTER FORM 10-Q Table of Contents

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION Cautionary Note Regarding Forward-Looking Statements The Private Securities Litigation Reform Act of 1995 ("PSLRA") provides a "safe harbor" for forward-looking statements. This report or any other written or oral statements made by or on behalf of us may include forward-looking statements, which reflect our current views with respect to future events and financial performance. All statements other than statements of historical fact included in or incorporated by reference in this report are forward-looking statements. Forward-looking statements, for purposes of the PSLRA or otherwise, can generally be identified by the use of forward-looking terminology such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe" or "continue" and similar statements of a future or forward-looking nature or their negative or variations or similar terminology. Forward-looking statements involve our current assessment of risks and uncertainties. Actual events and results may differ materially from those expressed or implied in these statements. Important factors that could cause actual events or results to differ materially from those indicated in such statements are discussed below and elsewhere in this report and in our periodic reports filed with the Securities and Exchange Commission ("SEC"), and include: our ability to successfully implement our business strategy during "soft" as well as "hard" markets; acceptance of our business strategy, security and financial condition by rating agencies and regulators, as well as by brokers and our insureds and reinsureds; our ability to consummate acquisitions and integrate the business we have acquired or may acquire into our existing operations; our ability to maintain or improve our ratings, which may be affected by our ability to raise additional equity or debt financings, by ratings agencies' existing or new policies and practices, as well as other factors described herein; general

CONSOLIDATED FINANCIAL STATEMENTS

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS Page No. Consolidated Balance Sheets June 30, 2024 and December 31, 2023 (unaudited) 5 Consolidated Statements of Income For the three and six month periods ended June 30, 2024 and 2023 (unaudited) 6 Consolidated Statements of Comprehensive Income For the three and six month periods ended June 30, 2024 and 2023 (unaudited) 7 Consolidated Statements of Changes in Shareholders' Equity For the three and six month periods ended June 30, 2024 and 2023 (unaudited) 8 Consolidated Statements of Cash Flows For the six month periods ended June 30, 2024 and 2023 (unaudited) 9

Notes to Consolidated Financial Statements (unaudited)

Notes to Consolidated Financial Statements (unaudited) Note 1 - Basis of Presentation and Recent Accounting Pronouncements 10 Note 2 - Share Transactions 10 Note 3 - Earnings Per Common Share 11 Note 4 - Segment Information 12 Note 5 - Reserve for Losses and Loss Adjustment Expenses 17 Note 6 - Allowance for Expected Credit Losses 19 Note 7 - Investment Information 21 Note 8 - Fair Value 28 Note 9 - Derivative Instruments 34 Note 10 - Commitments and Contingencies 35 Note 11 - Variable Interest Entities 35 Note 12 - Other Comprehensive Income (Loss) 36 Note 13 - Income Taxes 37 Note 14 - Legal Proceedings 37 Note 15 - Transactions with Related Parties 37 Note 16 - Subsequent Events 37 ARCH CAPITAL 4 2024 SECOND QUARTER FORM 10-Q Table of Contents ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (U.S. dollars and shares in millions ) (Unaudited) June 30, 2024 December 31, 2023 Assets Investments: Fixed maturities available for sale, at fair value (amortized cost: $ 25,882 and $ 24,131 ; net of allowance for credit losses: $ 27 and $ 28 ) $ 25,202 $ 23,553 Short-term investments available for sale, at fair value (amortized cost: $ 2,296 and $ 2,064 ; net of allowance for credit losses: $ 0 and $ 0 ) 2,297 2,063 Equity securities, at fair value 1,397 1,186 Other investments, at fair value 3,206 2,488 Investments accounted for using the equity method 4,983 4,566 Total investments 37,085 33,856 Cash 1,020 917 Accrued investment income 287 236 Investment in operating affiliates 1,143 1,119 Premiums receivable (net of allowance for credit losses: $ 36 and $ 34 ) 6,268 4,644 Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses (net of allowance for credit losses: $ 20 and $ 21 ) 7,473 7,064 Contractholder receivables (net of allowance for credit losses: $ 4 and $ 3 ) 2,016 1,814 Ceded unearned premiums 2,981 2,170 Deferred acquisition costs 1,635

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Basis of Presentation and Recent Accounting Pronouncements General Arch Capital Group Ltd. ("Arch Capital") is a publicly listed Bermuda exempted company which provides insurance, reinsurance and mortgage insurance on a worldwide basis through its wholly-owned subsidiaries. As used herein, the "Company" means Arch Capital and its subsidiaries. Basis of Presentation The interim consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"). All significant intercompany transactions and balances have been eliminated in consolidation. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates and assumptions. In the opinion of management, the accompanying unaudited interim consolidated financial statements reflect all adjustments (consisting of normally recurring accruals) necessary for a fair statement of results on an interim basis. The results of any interim period are not necessarily indicative of the results for a full year or any future periods. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted; however, management believes that the disclosures are adequate to make the information presented not misleading. This report should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2023 ("2023 Form 10-K"), including the Company's audited consolidated financial statements and related notes. The Company has reclassified the p

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 3. Earnings Per Common Share The following table sets forth the computation of basic and diluted earnings per common share: Three Months Ended Six Months Ended June 30, June 30, 2024 2023 2024 2023 Numerator: Net income (loss) $ 1,269 $ 669 $ 2,389 $ 1,386 Net (income) loss attributable to noncontrolling interests — 2 — — Net income (loss) available to Arch 1,269 671 2,389 1,386 Preferred dividends ( 10 ) ( 10 ) ( 20 ) ( 20 ) Net income (loss) available to Arch common shareholders $ 1,259 $ 661 $ 2,369 $ 1,366 Denominator: Weighted average common shares and common share equivalents outstanding — basic 372.7 368.7 371.8 368.0 Effect of dilutive common share equivalents: Nonvested restricted shares 1.8 2.3 1.9 2.4 Stock options (1) 7.1 7.4 7.2 7.4 Weighted average common shares and common share equivalents outstanding — diluted 381.6 378.4 380.9 377.8 Earnings per common share: Basic $ 3.38 $ 1.79 $ 6.37 $ 3.71 Diluted $ 3.30 $ 1.75 $ 6.22 $ 3.62 (1) Certain stock options were not included in the computation of diluted earnings per share where the exercise price of the stock options exceeded the average market price and would have been anti-dilutive or where, when applying the treasury stock method to in-the-money options, the sum of the proceeds, including unrecognized compensation, exceeded the average market price and would have been anti-dilutive. For the 2024 second quarter and 2023 second quarter, the number of stock options excluded were 0.2 million and 0.3 million, respectively. For the six months ended June 30, 2024 and 2023, the number of stock options excluded were 0.4 million and 0.5 million, respectively. ARCH CAPITAL 11 2024 SECOND QUARTER FORM 10-Q Table of Contents ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 4. Segment Information The Company's insurance, reinsurance and mortgage segments each have managers who are responsible for the overall profitability of their respective segments and who are directly accountable to the Company's chief operating decision makers. The Chief Executive Officer, the Chief Financial Officer and Treasurer and the President and Chief Underwriting Officer are the Company's chief operating decision makers. They do not assess performance, measure return on equity or make resource allocation decisions on a line of business basis. Management measures segment performance for its three underwriting segments based on underwriting income or loss. The Company does not manage its assets by underwriting segment, with the exception of goodwill and intangible assets, and accordingly, investment income is not allocated to each underwriting segment. The Company determined its reportable segments using the management approach described in accounting guidance regarding disclosures about segments of an enterprise and related information. The accounting policies of the segments are the same as those used for the preparation of the Company's consolidated financial statements. Intersegment business is allocated to the segment accountable for the underwriting results. The insurance segment consists of the Company's insurance underwriting units which offer specialty product lines on a worldwide basis. Product lines include: construction and national accounts; excess and surplus casualty; professional lines; programs; property, energy, marine and aviation; travel, accident and health; warranty and lenders solutions; and other (consisting of alternative markets, excess workers' compensation and surety business). The reinsurance segment consists of the Company's reinsurance underwriting units which offer specialty product lines on a worldwide basis. Product lines include: casualty; marine and aviation; ot

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