Arch Capital Bought Back 109% Of Its Net Income, And Its CFO Says 'Even More' Is Coming
CFO Francois Morin said growth is hard to find, so Arch will likely return more capital, with buybacks preferred over another special dividend.
Arch Capital, the Bermuda-based insurer, spent $1.4 billion buying back 14.8 million of its own shares in the third quarter, and CFO Francois Morin said on the company's earnings call Wednesday that "even more" capital will most likely follow. Through nine months of 2026, Arch has repurchased about 109% of its net income, Morin said.
Growth is the constraint
Asked by a Wells Fargo analyst how long the payouts can run, Morin said the stock looked "particularly attractive" last quarter and that "the challenge for us right now is growing." With earnings strong and growth harder, he said Arch will be in a position to "probably most likely return back even more capital as we move forward."
He said buybacks are the preferred route over another special dividend at this stock price. There is no set target, he added: the pace reacts to the share price and the market, and could go up or down.
Fourth-quarter repurchases stood at just about another $100 million through the night before the call, Morin said. Arch was in a blackout period using a pre-set trading plan with limits, he explained, and the trading window reopens the day after the call. He urged analysts not to read too much into daily activity.
Arch's insurance, reinsurance and mortgage operations are the engine. CEO Nicolas Papadopoulo said on the call that after-tax operating income was $910 million, or $2.67 per share, a 16% annualized operating return on average common equity. He said Arch is led by returns, so premium growth is not the goal. Reinsurance gross premiums fell about 8%, which he tied to abundant capacity in property and short-tail lines.
The excess-capital cushion
A Bank of America analyst noted Arch has returned 100% of earnings over the past year and asked how big the excess cushion is. Morin replied: "I know you're hoping I'm going to give you the number, and I'm not."
He did say Arch has "accumulated a lot of excess capital over the years and there's still some on the balance sheet." He said Arch barely bought back stock in 2024, began modestly last year, then stepped up in the second half and this year.
On a possible loss of a Bermuda deferred tax asset, Morin said there is no new development and more may come over the coming months. Arch runs its capital analysis both with and without it, since losing it is a possibility, not a certainty.
A Wolfe Research analyst noted that about $1.1 billion of a $2 billion debt raise was incremental. Morin confirmed the June raise brought about $1.1 billion of new capital earmarked for general corporate purposes and said it "certainly helped," calling it all the same pot of money. He said rating agencies are very supportive of Arch's approach.
Catastrophe exposure and mortgage
Current-year catastrophe losses were $234 million in the quarter, including losses tied to the Iran conflict. Arch's one-in-250-year peak-zone natural catastrophe loss estimate, net, was up slightly to $1.9 billion as of October 1, or 8.6% of tangible shareholders' equity, Morin said.
On mortgage insurance, Papadopoulo said the segment earned $201 million of underwriting income and that a new regulatory pilot on cancelling coverage should have no near-term impact because it applies to new mortgages.
Arch's market value was $34.2 billion in Wednesday morning trading, and Papadopoulo said the company will ring the Nasdaq bell for its 25th anniversary in a few weeks.
Sources
- acgl-20261027 — sec.gov
- Arch Capital (ACGL) Reports Q3 Earnings: What Key Metrics Have to Say — Yahoo Finance
- Arch Capital Non-GAAP EPS of $2.67 beats by $0.37 (NASDAQ:ACGL) | Seeking Alpha — seekingalpha.com
- Arch Capital Group (ACGL) Q3 Earnings and Revenues Beat Estimates — Yahoo Finance
- Are Finance Stocks Lagging Arch Capital Group (ACGL) This Year? — Yahoo Finance
