Arch Capital Group Ltd. (NASDAQ:ACGL) Q1 2024 Earnings Call Transcript

Bob Jian Huang: Got it. No, that’s very helpful. And then in that case, when we think about M&A or future M&A, is it the first preference to use the excess capital or excess cash you’re generating from this business to do the M&A deals? Or is it more preferable to use some of the stocks given where the valuation is and things of that nature?

François Morin: I mean there’s no one answer to that. I think there’s always — I mean, and we talk about M&A, but M&A doesn’t happen that often. So there’s a size that matters, how much could we need — would we need to raise in terms of using our own stock? Certainly, in terms of dilution, it’s always, we think better to kind of use our cash. But there’s many considerations we look at, trying to optimize as best we can all the options. We’ve got plenty of capacity in raising debt too, if need be. So it’s very much a function of each specific circumstance, each specific opportunity. We look at it on its own and go from there.

Bob Jian Huang: Sorry, if I can just have a little bit of clarification on it. Is it fair to say that in that case, cash and debt is more preferable and then equity may be a little bit less or I’m [indiscernible]? So sorry, just maybe a little bit clarification on that.

François Morin: I mean that’s been the preference historically. But I mean, again, it’s hard to speculate on what could be the next thing. So yes, historically, but things change over time, too.

Operator: Our next question comes from the line of Michael Zaremski from BMO.

Michael Zaremski: Just a quick follow-up. You mentioned fee income earlier. Arch has a lot of diversified sources of income. Is there a way you can update us on kind of what percentage of your earnings maybe last year was derived from these kind of fee income type arrangements at a high level?

François Morin: I mean it’s grown over the years, for sure. I think that the difficulty or the reality we face is some of these fees are somewhat — with the expense — the revenue we get that has some expenses that go with it, and those are kind of co-mingled with our own internal expenses. So isolating, call it, the margin on those contracts is a little bit kind of cloudy. But yes, it’s grown. It’s part of what we do. It’s part of the leveraging our platform, leveraging our underwriting capabilities, in all our segments, right? All three segments have some fee income that comes into the errors. Obviously, Somers is part of that as well. But yes, it’s become a bit more sizable for us.

Operator: Thank you. I would now like to turn the conference over to Mr. Marc Grandisson for closing remarks.

Marc Grandisson: Thank you very much for hearing our earnings. Great start of the year. We look forward to seeing you all in July.

Operator: Ladies and gentlemen, thank you for participating in today’s conference. This concludes the program. You may all disconnect.