Arch Capital reported solid QQ1 2025 results driven by strong underwriting discipline and diversified earnings streams, despite $547 million of catastrophe losses primarily from California wildfires. After-tax operating income totaled $587 million, or $1.54 per share, with an annualized operating ROE of 11.5%, underscoring the profitability of Arch's cycle-management approach across its three reportable segments. Net income was $574 million and GAAP EPS stood at $1.51 (diluted $1.48), with a reported gross margin of approximately 27.0% and an overall ex-cat accident-year combined ratio of 81% across the portfolio. The company also highlighted meaningful contributions from the newly acquired MidCorp and Entertainment Insurance businesses, which added about $373 million of net premiums written in the quarter and lowered the current accident-year ex-cat combined ratio by 1.1 percentage points.
Key operational dynamics continued to reflect Arch's multi-front strategy: Reinsurance remained resilient with 91.8% combined ratio including catastrophe losses, while the Insurance segment benefited from integration of middle-market operations and steady premium generation (net premiums written up 25% YoY for the acquired businesses, contributing 24.2 points to premium growth). The Mortgage segment delivered underwriting income of $252 million, supported by very low delinquency in U.S. MI (1.96%). Investment activity supported earnings with $431 million pre-tax from net investment income and funds accounting (roughly $1.13 per share pre-tax). Cash flow remained robust: operating cash flow of about $1.46 billion and free cash flow near $1.45 billion; common shares repurchased totaled $196 million in Q1 and an additional $100 million in April. Balance sheet metrics remained strong, with common shareholders’ equity of $20.7 billion and a debt-and-preferred-to-capital ratio of 14.7%. Management emphasized capital discipline and cycle management as pillars of the opportunity set going forward, including potential further capital deployment and selective growth opportunities in casualty and U.S. middle-market lines. Look-through: while near-term revenue growth faces headwinds from market competition and structured-reinsurance non-renewals, Arch remains positioned to capitalize on rate adequacy in core lines and to navigate the cycle with disciplined underwriting and strong capitalflexibility.