UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
October 25, 2011
Date of Report (Date of earliest event reported)
Arch Capital Group Ltd.
(Exact name of registrant as specified in its charter)
Bermuda |
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0-26456 |
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N/A |
(State or other |
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(Commission File Number) |
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(I.R.S. Employer |
Wessex House, 45 Reid Street, Hamilton HM 12, Bermuda
(Address of principal executive offices) (Zip Code)
Registrants telephone number, including area code:
(441) 278-9250
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
ITEM 2.02 Results of Operations and Financial Condition.
On October 25, 2011, Arch Capital Group Ltd. (ACGL) issued a press release reporting its earnings and the availability of its third quarter financial supplement for the nine month period ended September 30, 2011. The press release and financial supplement are attached to this Current Report on Form 8-K as Exhibit 99.1 and Exhibit 99.2, respectively, and are incorporated herein by reference.
ITEM 9.01 Exhibits.
EXHIBIT NO. |
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DESCRIPTION |
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99.1 |
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Press Release dated October 25, 2011 announcing the earnings of Arch Capital Group Ltd. for the nine month period ended September 30, 2011 |
99.2 |
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Third Quarter 2011 Financial Supplement |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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ARCH CAPITAL GROUP LTD. | |
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Date: October 25, 2011 |
By: |
/s/ W. Preston Hutchings |
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Name: W. Preston Hutchings |
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Title: Senior Vice President and Chief Investment Officer |
Exhibit 99.1
ARCH CAPITAL GROUP LTD.
Earnings Release Supplement
As of September 30, 2011
INDEX TO SUPPLEMENT
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PAGE |
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Earnings Release |
1 |
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Supplemental Financial Information |
8 |
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Consolidated Statements of Income |
14 |
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Consolidated Balance Sheets |
15 |
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Wessex House, 5th Floor | |
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45 Reid Street | |
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Hamilton HM 12 Bermuda | |
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441-278-9250 | |
PRESS RELEASE |
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441-278-9255 fax |
NASDAQ Symbol ACGL |
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For Immediate Release |
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CONTACT: |
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John C.R. Hele |
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Executive Vice President and |
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Chief Financial Officer |
ARCH CAPITAL GROUP LTD. REPORTS 2011 THIRD QUARTER RESULTS
HAMILTON, BERMUDA, October 25, 2011 Arch Capital Group Ltd. (NASDAQ: ACGL) reports that net income available to common shareholders for the 2011 third quarter was $162.5 million, or $1.19 per share, compared to $141.6 million, or $0.92 per share, for the 2010 third quarter. The Company also reported after-tax operating income available to common shareholders of $107.4 million, or $0.78 per share, for the 2011 third quarter, compared to $130.7 million, or $0.85 per share, for the 2010 third quarter. All earnings per share amounts discussed in this release are on a diluted basis. All information in this release has been adjusted to reflect the three-for-one share split effected in May 2011.
The Companys book value per common share was $31.20 at September 30, 2011, a 0.6% increase from $31.00 per share at June 30, 2011 and a 4.0% increase from $29.99 per share at December 31, 2010. The Companys after-tax operating income available to common shareholders represented a 10.4% annualized return on average common equity for the 2011 third quarter, compared to 12.3% for the 2010 third quarter. After-tax operating income available to common shareholders, a non-GAAP measure, is defined as net income available to common shareholders, excluding net realized gains or losses, net impairment losses recognized in earnings, equity in net income or loss of investment funds accounted for using the equity method and net foreign exchange gains or losses, net of income taxes. See page 7 for a further discussion of after-tax operating income available to common shareholders and Regulation G.
The Companys 2011 third quarter results included losses for current year catastrophic events of $59.6 million, net of reinsurance and reinstatement premiums, compared to $24.2 million in the 2010 third quarter. The 2011 third quarter amounts included $45.5 million for catastrophic events that occurred in the quarter, primarily related to Hurricane Irene and the Denmark floods, and $14.1 million related to net increases in loss estimates on catastrophic events that occurred in the first six months of 2011. The Companys preliminary estimates for these events are based on currently available information derived from modeling techniques, industry assessments of exposure, preliminary claims information obtained from the Companys clients and brokers to date and a review of in-force contracts. The Companys actual losses from these events may vary materially from the estimates due to the inherent uncertainties in making such determinations resulting from several factors, including the preliminary nature of available information, the potential inaccuracies and inadequacies in the data provided by clients and brokers, the modeling techniques and the application of such techniques, the contingent nature of business interruption exposures, the effects of any resultant demand surge on claims activity and attendant coverage issues. In addition, actual losses may increase if the Companys reinsurers or retrocessionaires fail to meet their obligations to the Company or the reinsurance protections purchased by the Company are exhausted or are otherwise unavailable.
The following table summarizes the Companys underwriting results:
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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(U.S. dollars in thousands) |
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2011 |
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2010 |
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2011 |
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2010 |
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Gross premiums written |
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$ |
860,289 |
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$ |
831,788 |
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$ |
2,736,794 |
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$ |
2,602,575 |
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Net premiums written |
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691,381 |
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636,117 |
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2,162,202 |
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2,028,129 |
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Net premiums earned |
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682,049 |
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627,409 |
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1,958,623 |
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1,920,337 |
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Underwriting income (loss) |
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38,890 |
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60,486 |
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(22,392 |
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146,648 |
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Combined ratio |
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94.3 |
% |
90.4 |
% |
101.1 |
% |
92.4 |
% | ||||
The following table summarizes, on an after-tax basis, the Companys consolidated financial data, including a reconciliation of after-tax operating income available to common shareholders to net income available to common shareholders and related diluted per share results:
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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(U.S. dollars in thousands, except share data) |
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2011 |
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2010 |
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2011 |
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2010 |
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After-tax operating income available to common shareholders |
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$ |
107,409 |
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$ |
130,672 |
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$ |
176,746 |
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$ |
361,585 |
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Net realized gains, net of tax |
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28,458 |
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68,611 |
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94,842 |
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175,233 |
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Net impairment losses recognized in earnings, net of tax |
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(2,739 |
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(2,075 |
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(7,103 |
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(8,091 |
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Equity in net income (loss) of investment funds accounted for using the equity method, net of tax |
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(30,549 |
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9,708 |
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5,097 |
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38,410 |
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Net foreign exchange gains (losses), net of tax |
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59,948 |
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(65,346 |
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4,121 |
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21,956 |
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Net income available to common shareholders |
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$ |
162,527 |
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$ |
141,570 |
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$ |
273,703 |
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$ |
589,093 |
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Diluted per common share results: |
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After-tax operating income available to common shareholders |
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$ |
0.78 |
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$ |
0.85 |
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$ |
1.28 |
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$ |
2.26 |
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Net realized gains, net of tax |
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0.21 |
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0.45 |
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0.68 |
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1.09 |
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Net impairment losses recognized in earnings, net of tax |
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(0.02 |
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(0.01 |
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(0.05 |
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(0.05 |
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Equity in net income (loss) of investment funds accounted for using the equity method, net of tax |
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(0.22 |
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0.06 |
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0.04 |
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0.24 |
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Net foreign exchange gains (losses), net of tax |
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0.44 |
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(0.43 |
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0.03 |
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0.14 |
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Net income available to common shareholders |
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$ |
1.19 |
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$ |
0.92 |
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$ |
1.98 |
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$ |
3.68 |
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Weighted average common shares and common share equivalents outstanding diluted |
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137,140,929 |
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153,546,027 |
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138,542,558 |
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159,951,594 |
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The combined ratio represents a measure of underwriting profitability, excluding investment income, and is the sum of the loss ratio and expense ratio. A combined ratio under 100% represents an underwriting profit and a combined ratio over 100% represents an underwriting loss. For the 2011 third quarter, the combined ratio of the Companys insurance and reinsurance subsidiaries consisted of a loss ratio of 62.2% and an underwriting expense ratio of 32.1%, compared to a loss ratio of 57.3% and an underwriting expense ratio of 33.1% for the 2010 third quarter.
In establishing the reserves for losses and loss adjustment expenses, the Company has made various assumptions relating to the pricing of its reinsurance contracts and insurance policies and also has considered available historical industry experience and current industry conditions. Any estimates and assumptions made as part of the reserving process could prove to be inaccurate due to several factors, including the fact that relatively limited historical information has been reported to the
Company through September 30, 2011. As actual loss information is reported to the Company and it develops its own loss experience, the Company will give more emphasis to other actuarial techniques. For a discussion of underwriting activities and a review of the Companys results by operating segment, see Segment Information in the Supplemental Financial Information section of this release.
The Companys investment portfolio continues to be comprised primarily of high quality fixed income securities with an average credit quality of AA+. The average effective duration of the investment portfolio was 3.17 years at September 30, 2011, compared to 2.87 years at June 30, 2011 and 2.83 years at December 31, 2010. Including the effects of foreign exchange, total return on the Companys investment portfolio was approximately (0.23)% for the 2011 third quarter, compared to 3.61% for the 2010 third quarter. Excluding the effects of foreign exchange, total return was 0.38% for the 2011 third quarter, compared to 2.94% for the 2010 third quarter. Total return for the 2011 third quarter reflected significantly wider credit spreads, strengthening of the U.S. Dollar and weak equity and commodity market returns during the period which more than offset the positive returns in the U.S. Treasury market.
Net investment income for the 2011 third quarter was $82.8 million, or $0.60 per share, compared to $90.8 million, or $0.59 per share, for the 2010 third quarter. The comparability of net investment income between the periods was influenced by the Companys share repurchase program described below. The pre-tax investment income yield was 2.83% for the 2011 third quarter, compared to 3.27% for the 2010 third quarter. The lower yields in the 2011 third quarter primarily reflect the effects of lower prevailing interest rates available in the market.
The Company uses the equity method on certain investments (which primarily invest in fixed maturity securities) due to the ownership structure of these investment funds (e.g., limited partnership), where it does not have a controlling interest and is not the primary beneficiary. In applying the equity method, these investments are initially recorded at cost and are subsequently adjusted based on the Companys proportionate share of the net income or loss of the funds (which include changes in the market value of the underlying securities in the funds). Such investments are generally recorded on a one month lag with some investments recorded on a three month lag based on the availability of reports from the investment funds. Certain of these funds employ leverage to achieve a higher rate of return on their assets under management. While leverage presents opportunities for increasing the total return of such investments, it may increase losses as well.
The Company recorded $30.5 million of equity in net losses related to investment funds accounted for using the equity method in the 2011 third quarter, compared to $9.7 million of equity in net income for the 2010 third quarter. Losses in the 2011 third quarter were primarily related to investments in two funds that employ leverage in their investment strategy, one of which that invests in a portfolio of loans and another public-private investment fund (PPIF) that invests in high quality U.S. residential and commercial mortgages. Negative returns for both investment funds in the 2011 third quarter reflect the weak economic data in August 2011 and were magnified by the use of leverage.
Consolidated cash flow provided by operating activities for the 2011 third quarter was $309.9 million, compared to $267.4 million for the 2010 third quarter. The higher level of operating cash flows in the 2011 third quarter resulted, in part, from increased premium receipts which more than offset a higher level of paid losses.
For the nine months ended September 30, 2011, the Companys effective tax rates on income before income taxes and pre-tax operating income were a benefit of 1.5% and 3.3%, respectively, compared to an expense of 1.8% and 2.0%, respectively, for the nine months ended September 30, 2010. The reduction in the annual effective tax rate for the nine months ended September 30, 2011 did not have a material impact on the Companys 2011 third quarter per share results. The Companys effective tax rates may fluctuate from period to period based on the relative mix of income reported by jurisdiction primarily due to the varying tax rates in each jurisdiction. The Companys quarterly tax provision is adjusted to reflect changes in its expected annual effective tax rate, if any. In addition, the Companys Bermuda-based reinsurer incurs federal excise taxes for
premiums assumed on U.S. risks. The Company incurred $7.3 million of federal excise taxes for the nine months ended September 30, 2011, compared to $8.7 million for the 2010 period. Such amounts are reflected as acquisition expenses in the Companys consolidated statements of income.
Net unrealized foreign exchange gains or losses result from the effects of revaluing the Companys net insurance liabilities required to be settled in foreign currencies at each balance sheet date. Historically, the Company has held investments in foreign currencies which are intended to mitigate its exposure to foreign currency fluctuations in its net insurance liabilities. However, changes in the value of such investments due to foreign currency rate movements are reflected as a direct increase or decrease to shareholders equity and are not included in the consolidated statements of income. As a result of the current financial and economic environment as well as the potential for additional investment returns, the Company may not match a portion of its projected liabilities in foreign currencies with investments in the same currencies, which could increase the Companys exposure to foreign currency fluctuations and increase the volatility of the Companys shareholders equity.
Net foreign exchange gains for the 2011 third quarter were $60.0 million (net unrealized gains of $62.8 million and net realized losses of $2.8 million), compared to net foreign exchange losses for the 2010 third quarter of $65.2 million (net unrealized losses of $66.1 million and net realized gains of $0.9 million). Net foreign exchange gains for the nine months ended September 30, 2011 were $4.8 million (net unrealized gains of $7.1 million and net realized losses of $2.3 million), compared to net foreign exchange gains for the nine months ended September 30, 2010 of $22.1 million (net unrealized gains of $21.0 million and net realized gains of $1.1 million). The 2011 third quarter net foreign exchange gains primarily resulted from the strengthening of the U.S. Dollar against the Euro, British Pound Sterling and other major foreign currencies during the period.
During the 2011 third quarter, the Company repurchased 0.7 million common shares for an aggregate purchase price of $20.8 million under its share repurchase program. Since the inception of the share repurchase program through September 30, 2011, ACGL has repurchased 104.8 million common shares for an aggregate purchase price of $2.56 billion. At September 30, 2011, $942.0 million of repurchases were available under the share repurchase program.
At September 30, 2011, the Companys capital of $4.87 billion consisted of $300.0 million of senior notes, representing 6.2% of the total, $100.0 million of revolving credit agreement borrowings due in August 2014, representing 2.1% of the total, $325.0 million of preferred shares, representing 6.7% of the total, and common shareholders equity of $4.15 billion, representing the balance. At December 31, 2010, the Companys capital of $4.91 billion consisted of $300.0 million of senior notes, representing 6.1% of the total, $100.0 million of revolving credit agreement borrowings, representing 2.0% of the total, $325.0 million of preferred shares, representing 6.6% of the total, and common shareholders equity of $4.19 billion, representing the balance.
The Company will hold a conference call for investors and analysts at 11:00 a.m. Eastern Time on Wednesday, October 26, 2011. A live webcast of this call will be available via the Investor Relations Events & Presentations section of the Companys website at http://www.archcapgroup.bm. A telephone replay of the conference call also will be available beginning on October 26 at 2:00 p.m. Eastern Time until November 2, 2011 at midnight Eastern Time. To access the replay, domestic callers should dial 888-286-8010 (passcode 36761386), and international callers should dial 617-801-6888 (passcode 36761386).
Please refer to the Companys Financial Supplement dated September 30, 2011, which is posted on the Companys website at http://www.archcapgroup.bm/EarningsReleases.aspx. The Financial Supplement provides additional detail regarding the financial performance of the Company. From time to time, the Company posts additional financial information and presentations to its website, including information with respect to its subsidiaries. Investors and other recipients of this information are encouraged to check the Companys website regularly, including the Investor Relations Events & Presentations section of the Companys website at http://www.archcapgroup.bm/presentations.aspx for additional information regarding the Company.
Arch Capital Group Ltd., a Bermuda-based company with approximately $4.87 billion in capital at September 30, 2011, provides insurance and reinsurance on a worldwide basis through its wholly owned subsidiaries.
Cautionary Note Regarding Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 (PLSRA) provides a safe harbor for forward-looking statements. This release or any other written or oral statements made by or on behalf of the Company may include forward-looking statements, which reflect the Companys 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 release are forward-looking statements. Forward-looking statements, for purposes of the PLSRA 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 the Companys 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 release and in the Companys periodic reports filed with the Securities and Exchange Commission (the SEC), and include:
· the Companys ability to successfully implement its business strategy during soft as well as hard markets;
· acceptance of the Companys business strategy, security and financial condition by rating agencies and regulators, as well as by brokers and its insureds and reinsureds;
· the Companys ability to maintain or improve its ratings, which may be affected by its 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 economic and market conditions (including inflation, interest rates, foreign currency exchange rates, prevailing credit terms and the depth and duration of a recession) and conditions specific to the reinsurance and insurance markets (including the length and magnitude of the current soft market) in which the Company operates;
· competition, including increased competition, on the basis of pricing, capacity, coverage terms or other factors;
· developments in the worlds financial and capital markets and the Companys access to such markets;
· the Companys ability to successfully integrate, establish and maintain operating procedures (including the implementation of improved computerized systems and programs to replace and support manual systems) to effectively support its underwriting initiatives and to develop accurate actuarial data;
· the loss of key personnel;
· the integration of businesses the Company has acquired or may acquire into its existing operations;
· accuracy of those estimates and judgments utilized in the preparation of the Companys financial statements, including those related to revenue recognition, insurance and other reserves, reinsurance recoverables, investment valuations, intangible assets, bad debts, income taxes, contingencies and litigation, and any determination to use the deposit method of accounting, which for a relatively new insurance and reinsurance company, like the Company, are even more difficult to make than those made in a mature company since relatively limited historical information has been reported to the Company through September 30, 2011;
· greater than expected loss ratios on business written by the Company and adverse development on claim and/or claim expense liabilities related to business written by its insurance and reinsurance subsidiaries;
· severity and/or frequency of losses;
· claims for natural or man-made catastrophic events in the Companys insurance or reinsurance business could cause large losses and substantial volatility in its results of operations;
· acts of terrorism, political unrest and other hostilities or other unforecasted and unpredictable events;
· losses relating to aviation business and business produced by a certain managing underwriting agency for which the Company may be liable to the purchaser of its prior reinsurance business or to others in connection with the May 5, 2000 asset sale described in the Companys periodic reports filed with the SEC;
· availability to the Company of reinsurance to manage its gross and net exposures and the cost of such reinsurance;
· the failure of reinsurers, managing general agents, third party administrators or others to meet their obligations to the Company;
· the timing of loss payments being faster or the receipt of reinsurance recoverables being slower than anticipated by the Company;
· the Companys investment performance, including legislative or regulatory developments that may adversely affect the fair value of the Companys investments;
· the impact of the continued weakness of the U.S. and other key economies, projected budget deficits for the U.S. and other governments and the consequences associated with possible additional downgrades of securities of the U.S. and other governments by credit rating agencies, and the resulting effect on the value of securities in the Companys investment portfolio as well as the uncertainty in the market generally;
· changes in accounting principles or policies or in the Companys application of such accounting principles or policies;
· changes in the political environment of certain countries in which the Company operates, underwrites business or invests;
· statutory or regulatory developments, including as to tax policy matters and insurance and other regulatory matters such as the adoption of proposed legislation that would affect Bermuda-headquartered companies and/or Bermuda-based insurers or reinsurers and/or changes in regulations or tax laws applicable to the Company, its subsidiaries, brokers or customers; and
· the other matters set forth under Item 1A Risk Factors, Item 7 Managements Discussion and Analysis of Financial Condition and Results of Operations and other sections of the Companys Annual Report on Form 10-K, as well as the other factors set forth in the Companys other documents on file with the SEC, and managements response to any of the aforementioned factors.
All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with other cautionary statements that are included herein or elsewhere. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
Comment on Regulation G
Throughout this release, the Company presents its operations in the way it believes will be the most meaningful and useful to investors, analysts, rating agencies and others who use the Companys financial information in evaluating the performance of the Company. This presentation includes the use of after-tax operating income available to common shareholders, which is defined as net income available to common shareholders, excluding net realized gains or losses, net impairment losses recognized in earnings, equity in net income or loss of investment funds accounted for using the equity method and net foreign exchange gains or losses, net of income taxes. The presentation of after-tax operating income available to common shareholders is a non-GAAP financial measure as defined in Regulation G. The reconciliation of such measure to net income available to common shareholders (the most directly comparable GAAP financial measure) in accordance with Regulation G is included on page 2 of this release.
The Company believes that net realized gains or losses, net impairment losses recognized in earnings, equity in net income or loss of investment funds accounted for using the equity method and net foreign exchange gains or losses in any particular period are not indicative of the performance of, or trends in, the Companys business performance. Although net realized gains or losses, net impairment losses recognized in earnings, equity in net income or loss of investment funds accounted for using the equity method and net foreign exchange gains or losses are an integral part of the Companys operations, the decision to realize investment gains or losses, the recognition of net impairment losses, the recognition of equity in net income or loss of investment funds accounted for using the equity method and the recognition of foreign exchange gains or losses are independent of the insurance underwriting process and result, in large part, from general economic and financial market conditions. Furthermore, certain users of the Companys financial information believe that, for many companies, the timing of the realization of investment gains or losses is largely opportunistic. In addition, net impairment losses recognized in earnings on the Companys investments represent other-than-temporary declines in expected recovery values on securities without actual realization. The use of the equity method on certain of the Companys investments in certain funds that invest in fixed maturity securities is driven by the ownership structure of such funds (either limited partnerships or limited liability companies). In applying the equity method, these investments are initially recorded at cost and are subsequently adjusted based on the Companys proportionate share of the net income or loss of the funds (which include changes in the fair value of the underlying securities in the funds). This method of accounting is different from the way the Company accounts for its other fixed maturity securities and the timing of the recognition of equity in net income or loss of investment funds accounted for using the equity method may differ from gains or losses in the future upon sale or maturity of such investments. Due to these reasons, the Company excludes net realized gains or losses, net impairment losses recognized in earnings, equity in net income or loss of investment funds accounted for using the equity method and net foreign exchange gains or losses from the calculation of after-tax operating income available to common shareholders.
The Company believes that showing net income available to common shareholders exclusive of the items referred to above reflects the underlying fundamentals of the Companys business since the Company evaluates the performance of and manages its business to produce an underwriting profit. In addition to presenting net income available to common shareholders, the Company believes that this presentation enables investors and other users of the Companys financial information to analyze the Companys performance in a manner similar to how the Companys management analyzes performance. The Company also believes that this measure follows industry practice and, therefore, allows the users of the Companys financial information to compare the Companys performance with its industry peer group. The Company believes that the equity analysts and certain rating agencies which follow the Company and the insurance industry as a whole generally exclude these items from their analyses for the same reasons.
ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL INFORMATION
Book Value Per Common Share
|
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September 30, |
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December 31, |
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(U.S. dollars in thousands, except share data) |
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2011 |
|
2010 |
| ||
|
|
|
|
|
| ||
Calculation of book value per common share: |
|
|
|
|
| ||
Total shareholders equity |
|
$ |
4,474,371 |
|
$ |
4,513,003 |
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Less preferred shareholders equity |
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(325,000 |
) |
(325,000 |
) | ||
Common shareholders equity |
|
$ |
4,149,371 |
|
$ |
4,188,003 |
|
Common shares outstanding, net of treasury shares (1) |
|
133,005,465 |
|
139,632,225 |
| ||
Book value per common share |
|
$ |
31.20 |
|
$ |
29.99 |
|
(1) Excludes the effects of 10,348,686 and 12,251,568 stock options and 274,823 and 519,534 restricted stock units outstanding at September 30, 2011 and December 31, 2010, respectively.
Share Repurchase Activity
|
|
Three Months Ended |
|
Nine Months Ended |
|
Cumulative |
| |||||||||
(U.S. dollars in thousands, |
|
September 30, |
|
September 30, |
|
September 30, |
| |||||||||
except share data) |
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
2011 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Effect of share repurchases: |
|
|
|
|
|
|
|
|
|
|
| |||||
Aggregate cost of shares repurchased |
|
$ |
20,833 |
|
$ |
53,398 |
|
$ |
287,558 |
|
$ |
503,724 |
|
$ |
2,558,030 |
|
Shares repurchased |
|
655,772 |
|
2,043,195 |
|
9,600,116 |
|
20,565,615 |
|
104,758,118 |
| |||||
Average price per share repurchased |
|
$ |
31.77 |
|
$ |
26.13 |
|
$ |
29.95 |
|
$ |
24.49 |
|
$ |
24.42 |
|
Estimated net accretive impact on diluted earnings per share (1) |
|
$ |
0.25 |
|
$ |
0.23 |
|
$ |
0.31 |
|
$ |
0.55 |
|
|
| |
Estimated net accretive impact on ending book value per common share (2) |
|
|
|
|
|
|
|
|
|
$ |
2.99 |
|
(1) The estimated impact on diluted earnings per share was calculated comparing reported results versus (i) after-tax operating income per share plus an estimate of lost net investment income on the cumulative share repurchases divided by (ii) weighted average diluted shares outstanding excluding the weighted average impact of cumulative share repurchases. The impact of cumulative share repurchases was accretive to diluted earnings per share in the periods presented.
(2) As the cumulative average price per share of shares repurchased through September 30, 2011 was lower than the ending book value per common share, the repurchase of shares increased ending book value per common share.
Investment Information
|
|
Three Months Ended |
|
Nine Months Ended |
| ||||||||
|
|
September 30, |
|
September 30, |
| ||||||||
(U.S. dollars in thousands, except share data) |
|
2011 |
|
2010 |
|
2011 |
|
2010 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Components of net investment income: |
|
|
|
|
|
|
|
|
| ||||
Fixed maturities |
|
$ |
82,686 |
|
$ |
94,209 |
|
$ |
252,250 |
|
$ |
286,051 |
|
Equity securities |
|
1,796 |
|
120 |
|
5,187 |
|
410 |
| ||||
Short-term investments |
|
430 |
|
473 |
|
1,613 |
|
958 |
| ||||
Other (1) |
|
4,264 |
|
1,174 |
|
17,625 |
|
2,296 |
| ||||
Gross investment income |
|
89,176 |
|
95,976 |
|
276,675 |
|
289,715 |
| ||||
Investment expense |
|
(6,423 |
) |
(5,208 |
) |
(18,944 |
) |
(15,438 |
) | ||||
Net investment income |
|
$ |
82,753 |
|
$ |
90,768 |
|
$ |
257,731 |
|
$ |
274,277 |
|
|
|
|
|
|
|
|
|
|
| ||||
Per share |
|
$ |
0.60 |
|
$ |
0.59 |
|
$ |
1.86 |
|
$ |
1.71 |
|
|
|
|
|
|
|
|
|
|
| ||||
Investment income yield, at amortized cost (2): |
|
|
|
|
|
|
|
|
| ||||
Pre-tax |
|
2.83 |
% |
3.27 |
% |
2.98 |
% |
3.37 |
% | ||||
After-tax |
|
2.66 |
% |
3.16 |
% |
2.83 |
% |
3.26 |
% | ||||
|
|
|
|
|
|
|
|
|
| ||||
Total return (3): |
|
|
|
|
|
|
|
|
| ||||
Including effects of foreign exchange |
|
(0.23 |
)% |
3.61 |
% |
2.97 |
% |
7.08 |
% | ||||
Excluding effects of foreign exchange |
|
0.38 |
% |
2.94 |
% |
3.11 |
% |
7.31 |
% | ||||
|
|
|
|
|
|
|
|
|
| ||||
Cash flow from operations |
|
$ |
309,924 |
|
$ |
267,424 |
|
$ |
756,471 |
|
$ |
657,561 |
|
(1) Includes interest on term loan investments (included in investments accounted for using the fair value option), dividends on investment funds and other items.
(2) Investment income yield calculations exclude the impact of investments for which returns are not included within investment income, such as investments accounted for using the equity method and certain equities.
(3) Includes net investment income, equity in net income or loss of investment funds accounted for using the equity method, net realized gains and losses and the change in unrealized gains or losses generated by the Companys investment portfolio. Total return is calculated on a pre-tax basis and before investment expenses.
Investment Information (continued)
|
|
September 30, |
|
December 31, |
| ||
(U.S. dollars in thousands) |
|
2011 |
|
2010 |
| ||
|
|
|
|
|
| ||
Investable assets: |
|
|
|
|
| ||
Fixed maturities available for sale, at fair value |
|
$ |
9,529,834 |
|
$ |
8,957,859 |
|
Fixed maturities, at fair value (1) |
|
122,866 |
|
124,969 |
| ||
Fixed maturities pledged under securities lending agreements, at fair value (2) |
|
72,399 |
|
75,575 |
| ||
Total fixed maturities |
|
9,725,099 |
|
9,158,403 |
| ||
Short-term investments available for sale, at fair value |
|
799,662 |
|
915,841 |
| ||
Cash |
|
369,895 |
|
362,740 |
| ||
Equity securities available for sale, at fair value |
|
273,213 |
|
310,194 |
| ||
Equity securities, at fair value (1) |
|
100,719 |
|
94,204 |
| ||
Other investments available for sale, at fair value |
|
229,974 |
|
275,538 |
| ||
Other investments, at fair value (1) |
|
95,796 |
|
|
| ||
TALF investments, at fair value (3) |
|
392,455 |
|
402,449 |
| ||
Investments accounted for using the equity method (4) |
|
383,543 |
|
508,334 |
| ||
Securities sold but not yet purchased (5) |
|
(46,526 |
) |
(41,143 |
) | ||
Securities transactions entered into but not settled at the balance sheet date |
|
(94,403 |
) |
(144,047 |
) | ||
Total investable assets |
|
$ |
12,229,427 |
|
$ |
11,842,513 |
|
|
|
|
|
|
| ||
Investment portfolio statistics (2): |
|
|
|
|
| ||
Average effective duration (in years) |
|
3.17 |
|
2.83 |
| ||
Average credit quality |
|
AA+ |
|
AA+ |
| ||
Imbedded book yield (before investment expenses) |
|
3.09 |
% |
3.52 |
% |
(1) Represents securities which are carried at fair value under the fair value option and reflected as investments accounted for using the fair value option on the Companys balance sheet. Changes in the carrying value of such securities are recorded in net realized gains or losses.
(2) This table excludes the collateral received and reinvested and includes the fixed maturities and short-term investments pledged under securities lending agreements, at fair value.
(3) The Federal Reserves Term Asset-Backed Securities Loan Facility (TALF) provides secured financing for certain asset-backed securities and legacy commercial mortgage-backed securities. TALF financing is non-recourse to the Company, is collateralized by the purchased securities and provides financing for the purchase price of the securities, less a haircut that varies based on the type of collateral. The Company can deliver the collateralized securities to the Federal Reserve in full defeasance of the loan.
(4) Changes in the carrying value of investment funds accounted for using the equity method are recorded as equity in net income (loss) of investments funds accounted for using the equity method rather than as an unrealized gain or loss component of accumulated other comprehensive income.
(5) Represents the Companys obligation to deliver securities that it did not own at the time of sale. Such amounts are included in other liabilities on the Companys balance sheet.
Selected Information on Losses and Loss Adjustment Expenses
|
|
Three Months Ended |
|
Nine Months Ended |
| ||||||||
|
|
September 30, |
|
September 30, |
| ||||||||
(U.S. dollars in thousands) |
|
2011 |
|
2010 |
|
2011 |
|
2010 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Components of losses and loss adjustment expenses incurred |
|
|
|
|
|
|
|
|
| ||||
Paid losses and loss adjustment expenses |
|
$ |
373,682 |
|
$ |
310,172 |
|
$ |
1,013,752 |
|
$ |
938,231 |
|
Change in unpaid losses and loss adjustment expenses |
|
50,302 |
|
49,021 |
|
335,734 |
|
212,158 |
| ||||
Total losses and loss adjustment expenses |
|
$ |
423,984 |
|
$ |
359,193 |
|
$ |
1,349,486 |
|
$ |
1,150,389 |
|
|
|
|
|
|
|
|
|
|
| ||||
Estimated net (favorable) adverse development in prior year loss reserves, net of related adjustments |
|
|
|
|
|
|
|
|
| ||||
Net impact on underwriting results: |
|
|
|
|
|
|
|
|
| ||||
Insurance |
|
$ |
(490 |
) |
$ |
(8,193 |
) |
$ |
(23,056 |
) |
$ |
(5,375 |
) |
Reinsurance |
|
(57,739 |
) |
(29,059 |
) |
(151,137 |
) |
(94,242 |
) | ||||
Total |
|
$ |
(58,229 |
) |
$ |
(37,252 |
) |
$ |
(174,193 |
) |
$ |
(99,617 |
) |
|
|
|
|
|
|
|
|
|
| ||||
Impact on losses and loss adjustment expenses: |
|
|
|
|
|
|
|
|
| ||||
Insurance |
|
$ |
(5,265 |
) |
$ |
(9,251 |
) |
$ |
(28,102 |
) |
$ |
(13,307 |
) |
Reinsurance |
|
(58,317 |
) |
(29,327 |
) |
(152,515 |
) |
(94,884 |
) | ||||
Total |
|
$ |
(63,582 |
) |
$ |
(38,578 |
) |
$ |
(180,617 |
) |
$ |
(108,191 |
) |
|
|
|
|
|
|
|
|
|
| ||||
Impact on acquisition expenses: |
|
|
|
|
|
|
|
|
| ||||
Insurance |
|
$ |
4,775 |
|
$ |
1,058 |
|
$ |
5,046 |
|
$ |
7,932 |
|
Reinsurance |
|
578 |
|
268 |
|
1,378 |
|
642 |
| ||||
Total |
|
$ |
5,353 |
|
$ |
1,326 |
|
$ |
6,424 |
|
$ |
8,574 |
|
|
|
|
|
|
|
|
|
|
| ||||
Impact on combined ratio: |
|
|
|
|
|
|
|
|
| ||||
Insurance |
|
(0.1 |
)% |
(2.0 |
)% |
(1.8 |
)% |
(0.4 |
)% | ||||
Reinsurance |
|
(23.7 |
)% |
(13.5 |
)% |
(21.5 |
)% |
(14.0 |
)% | ||||
Total |
|
(8.5 |
)% |
(5.9 |
)% |
(8.9 |
)% |
(5.2 |
)% | ||||
|
|
|
|
|
|
|
|
|
| ||||
Impact on loss ratio: |
|
|
|
|
|
|
|
|
| ||||
Insurance |
|
(1.2 |
)% |
(2.2 |
)% |
(2.2 |
)% |
(1.1 |
)% | ||||
Reinsurance |
|
(23.9 |
)% |
(13.6 |
)% |
(21.7 |
)% |
(14.1 |
)% | ||||
Total |
|
(9.3 |
)% |
(6.1 |
)% |
(9.2 |
)% |
(5.6 |
)% | ||||
|
|
|
|
|
|
|
|
|
| ||||
Impact on acquisition expense ratio: |
|
|
|
|
|
|
|
|
| ||||
Insurance |
|
1.1 |
% |
0.2 |
% |
0.4 |
% |
0.7 |
% | ||||
Reinsurance |
|
0.2 |
% |
0.1 |
% |
0.2 |
% |
0.1 |
% | ||||
Total |
|
0.8 |
% |
0.2 |
% |
0.3 |
% |
0.4 |
% | ||||
|
|
|
|
|
|
|
|
|
| ||||
Estimated net losses incurred from current accident year catastrophic events (1) |
|
|
|
|
|
|
|
|
| ||||
Insurance |
|
$ |
6,997 |
|
$ |
2,513 |
|
$ |
80,910 |
|
$ |
29,812 |
|
Reinsurance |
|
52,609 |
|
21,644 |
|
252,406 |
|
59,441 |
| ||||
Total |
|
$ |
59,606 |
|
$ |
24,157 |
|
$ |
333,316 |
|
$ |
89,253 |
|
|
|
|
|
|
|
|
|
|
| ||||
Impact on loss ratio: |
|
|
|
|
|
|
|
|
| ||||
Insurance |
|
1.6 |
% |
0.6 |
% |
6.4 |
% |
2.4 |
% | ||||
Reinsurance |
|
21.6 |
% |
10.0 |
% |
35.9 |
% |
8.8 |
% | ||||
Total |
|
8.7 |
% |
3.9 |
% |
17.0 |
% |
4.6 |
% |
(1) Equals estimated losses from catastrophic events occurring in the current accident year, net of reinsurance and reinstatement premiums. Amounts shown for the insurance segment are for named catastrophic events only. Amounts shown for the reinsurance segment include (i) named events with over $5 million of losses incurred by its Bermuda and Europe operations and (ii) all catastrophe losses incurred by its U.S. operations.
Segment Information
The following section provides analysis on the Companys 2011 third quarter performance by operating segment. For additional details regarding the Companys operating segments, please refer to the Companys Financial Supplement dated September 30, 2011 on the Companys website at http://www.archcapgroup.bm/EarningsReleases.aspx.
Insurance Segment
|
|
Three Months Ended September 30, |
| ||||||
(U.S. dollars in thousands) |
|
2011 |
|
2010 |
|
% Change |
| ||
|
|
|
|
|
|
|
| ||
Gross premiums written |
|
$ |
634,280 |
|
$ |
624,490 |
|
1.6 |
|
Net premiums written |
|
472,986 |
|
431,361 |
|
9.6 |
| ||
Net premiums earned |
|
437,970 |
|
411,881 |
|
6.3 |
| ||
Underwriting income (loss) |
|
(5,818 |
) |
2,947 |
|
n/m |
| ||
|
|
|
|
|
|
% Point |
|
|
|
|
|
|
|
Change |
|
Underwriting Ratios |
|
|
|
|
|
|
|
Loss ratio |
|
66.4 |
% |
64.4 |
% |
2.0 |
|
Acquisition expense ratio |
|
17.4 |
% |
16.1 |
% |
1.3 |
|
Other operating expense ratio |
|
17.6 |
% |
18.7 |
% |
(1.1 |
) |
Combined ratio |
|
101.4 |
% |
99.2 |
% |
2.2 |
|
|
|
|
|
|
|
|
|
Catastrophic activity and prior year development: |
|
|
|
|
|
|
|
Current accident year catastrophic events |
|
1.6 |
% |
0.6 |
% |
1.0 |
|
Net (favorable) adverse development in prior year loss reserves, net of related adjustments |
|
(0.1 |
)% |
(2.0 |
)% |
1.9 |
|
Combined ratio excluding such items |
|
99.9 |
% |
100.6 |
% |
(0.7 |
) |
Gross premiums written by the insurance segment in the 2011 third quarter were 1.6% higher than in the 2010 third quarter, while net premiums written were 9.6% higher than in the 2010 third quarter, reflecting increases in property, energy, marine and aviation business as well as in program and executive assurance business. The increase in property, energy, marine and aviation business reflected growth in U.S. property business resulting from new accounts and a higher retention rate on existing accounts along with growth in global property and energy lines written by the insurance segments European operations. Such amounts were partially offset by a reduction in commercial aviation business which followed a strategic decision to exit the business in early 2010. The increase in program business resulted from growth on existing programs while the higher level of executive assurance business resulted, in part, from growth in middle market business written by the insurance segment. Such amounts were partially offset by a decrease in professional liability business which was due to market conditions. Net premiums earned by the insurance segment in the 2011 third quarter were 6.3% higher than in the 2010 third quarter, and reflect changes in net premiums written over the previous five quarters.
The 2011 third quarter loss ratio reflected 1.6 points of current year catastrophic event activity, with 3.8 points of losses related to Hurricane Irene combined with reductions in catastrophic events from the first six months of 2011, compared to 0.6 points in the 2010 third quarter. Estimated net favorable development in prior year loss reserves, before related adjustments, reduced the loss ratio by 1.2 points in the 2011 third quarter, compared to 2.2 points in the 2010 third quarter. The estimated net favorable development in the 2011 third quarter primarily resulted from better than expected claims emergence in property and other short-tail lines.
The underwriting expense ratio was 35.0% in the 2011 third quarter, compared to 34.8% in the 2010 third quarter. The acquisition expense ratio was 17.4% in the 2011 third quarter, compared to 16.1% in the 2010 third quarter. The 2011 third quarter acquisition expense ratio included an increase of 1.1 points of commission expense related to the estimated net favorable development in prior year loss reserves, compared to a 0.2 point increase in the 2010 third quarter. The operating expense ratio was 17.6% in the 2011 third quarter, compared to 18.7% in the 2010 third quarter. The lower 2011 third quarter operating expense ratio primarily resulted from the higher level of net premiums earned in the period.
Reinsurance Segment
|
|
Three Months Ended September 30, |
| ||||||
(U.S. dollars in thousands) |
|
2011 |
|
2010 |
|
% Change |
| ||
|
|
|
|
|
|
|
| ||
Gross premiums written |
|
$ |
227,837 |
|
$ |
208,770 |
|
9.1 |
|
Net premiums written |
|
218,395 |
|
204,756 |
|
6.7 |
| ||
Net premiums earned |
|
244,079 |
|
215,528 |
|
13.2 |
| ||
Underwriting income |
|
44,708 |
|
57,539 |
|
(22.3 |
) | ||
|
|
|
|
|
|
% Point |
|
|
|
|
|
|
|
Change |
|
Underwriting Ratios |
|
|
|
|
|
|
|
Loss ratio |
|
54.6 |
% |
43.5 |
% |
11.1 |
|
Acquisition expense ratio |
|
17.8 |
% |
20.4 |
% |
(2.6 |
) |
Other operating expense ratio |
|
9.3 |
% |
9.4 |
% |
(0.1 |
) |
Combined ratio |
|
81.7 |
% |
73.3 |
% |
8.4 |
|
|
|
|
|
|
|
|
|
Catastrophic activity and prior year development: |
|
|
|
|
|
|
|
Current accident year catastrophic events |
|
21.6 |
% |
10.0 |
% |
11.6 |
|
Net (favorable) adverse development in prior year loss reserves, net of related adjustments |
|
(23.7 |
)% |
(13.5 |
)% |
(10.2 |
) |
Combined ratio excluding such items |
|
83.8 |
% |
76.8 |
% |
7.0 |
|
Gross premiums written by the reinsurance segment in the 2011 third quarter were 9.1% higher than in the 2010 third quarter, while net premiums written were 6.7% higher than in the 2010 third quarter, reflecting increases in property catastrophe and other specialty lines. The growth in premiums written in the property catastrophe line in the 2011 third quarter reflected share increases, new business and higher premiums on in force contracts due to market conditions along with $5.7 million of adjustment premiums on an expiring treaty. The higher level of other specialty business primarily resulted from new business written beginning in 2011. Premiums written in marine and aviation, casualty and property other than property catastrophe lines were lower than in the 2010 third quarter, reflecting non-renewals and share reductions based on market conditions. Net premiums earned in the 2011 third quarter were 13.2% higher than in the 2010 third quarter, and reflect changes in net premiums written over the previous five quarters, including the mix and type of business written.
The 2011 third quarter loss ratio reflected 21.6 points of current year catastrophic activity, with roughly half of the losses due to 2011 third quarter events, including Hurricane Irene and the Denmark floods, and half related to catastrophic events from the first six months of 2011. The 2010 third quarter ratio included 10.0 points of catastrophic activity, primarily related to the Darfield New Zealand earthquake event. In addition, the 2011 third quarter loss ratio reflected two facultative losses in the period which contributed 4.9 points to the loss ratio. Estimated net favorable development in prior year loss reserves, before related adjustments, reduced the loss ratio by 23.9 points in the 2011 third quarter, compared to 13.6 points in the 2010 third quarter. The estimated net favorable development in the 2011 third quarter primarily resulted from better than expected claims emergence in property and other short-tail reserves and in casualty reserves from earlier underwriting years.
The underwriting expense ratio was 27.1% in the 2011 third quarter, compared to 29.8% in the 2010 third quarter. The acquisition expense ratio for the 2011 third quarter was 17.8%, compared to 20.4% for the 2010 third quarter. The 2011 third quarter acquisition expense ratio benefited from 1.8 points of contingent commission income related to a contract written in 2004. In addition, the comparison of the 2011 third quarter and 2010 third quarter acquisition expense ratios is influenced by, among other things, the mix and type of business written and earned and the level of ceding commission income. The operating expense ratio was 9.3% in the 2011 third quarter, compared to 9.4% in the 2010 third quarter.
ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(U.S. dollars in thousands, except share data)
|
|
(Unaudited) |
|
(Unaudited) |
| ||||||||
|
|
Three Months Ended |
|
Nine Months Ended |
| ||||||||
|
|
September 30, |
|
September 30, |
| ||||||||
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
| ||||
Revenues |
|
|
|
|
|
|
|
|
| ||||
Net premiums written |
|
$ |
691,381 |
|
$ |
636,117 |
|
$ |
2,162,202 |
|
$ |
2,028,129 |
|
Change in unearned premiums |
|
(9,332 |
) |
(8,708 |
) |
(203,579 |
) |
(107,792 |
) | ||||
Net premiums earned |
|
682,049 |
|
627,409 |
|
1,958,623 |
|
1,920,337 |
| ||||
Net investment income |
|
82,753 |
|
90,768 |
|
257,731 |
|
274,277 |
| ||||
Net realized gains |
|
30,199 |
|
68,828 |
|
96,104 |
|
178,724 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Other-than-temporary impairment losses |
|
(5,180 |
) |
(2,679 |
) |
(10,406 |
) |
(9,732 |
) | ||||
Less investment impairments recognized in other comprehensive income, before taxes |
|
2,441 |
|
604 |
|
3,303 |
|
1,641 |
| ||||
Net impairment losses recognized in earnings |
|
(2,739 |
) |
(2,075 |
) |
(7,103 |
) |
(8,091 |
) | ||||
|
|
|
|
|
|
|
|
|
| ||||
Fee income |
|
848 |
|
874 |
|
2,447 |
|
2,551 |
| ||||
Equity in net income (loss) of investment funds accounted for using the equity method |
|
(30,549 |
) |
9,708 |
|
5,097 |
|
38,410 |
| ||||
Other income |
|
2,432 |
|
1,840 |
|
2,734 |
|
12,346 |
| ||||
Total revenues |
|
764,993 |
|
797,352 |
|
2,315,633 |
|
2,418,554 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Expenses |
|
|
|
|
|
|
|
|
| ||||
Losses and loss adjustment expenses |
|
423,984 |
|
359,193 |
|
1,349,486 |
|
1,150,389 |
| ||||
Acquisition expenses |
|
120,205 |
|
111,279 |
|
339,598 |
|
336,378 |
| ||||
Other operating expenses |
|
105,998 |
|
103,121 |
|
318,981 |
|
311,460 |
| ||||
Interest expense |
|
8,125 |
|
7,371 |
|
23,604 |
|
22,547 |
| ||||
Net foreign exchange losses (gains) |
|
(60,040 |
) |
65,157 |
|
(4,753 |
) |
(22,069 |
) | ||||
Total expenses |
|
598,272 |
|
646,121 |
|
2,026,916 |
|
1,798,705 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Income before income taxes |
|
166,721 |
|
151,231 |
|
288,717 |
|
619,849 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Income tax (benefit) expense |
|
(2,267 |
) |
3,200 |
|
(4,369 |
) |
11,373 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net income |
|
168,988 |
|
148,031 |
|
293,086 |
|
608,476 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Preferred dividends |
|
6,461 |
|
6,461 |
|
19,383 |
|
19,383 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net income available to common shareholders |
|
$ |
162,527 |
|
$ |
141,570 |
|
$ |
273,703 |
|
$ |
589,093 |
|
|
|
|
|
|
|
|
|
|
| ||||
Net income per common share |
|
|
|
|
|
|
|
|
| ||||
Basic |
|
$ |
1.24 |
|
$ |
0.96 |
|
$ |
2.07 |
|
$ |
3.85 |
|
Diluted |
|
$ |
1.19 |
|
$ |
0.92 |
|
$ |
1.98 |
|
$ |
3.68 |
|
|
|
|
|
|
|
|
|
|
| ||||
Weighted average common shares and common share equivalents outstanding |
|
|
|
|
|
|
|
|
| ||||
Basic |
|
131,560,851 |
|
146,993,373 |
|
132,090,354 |
|
152,979,948 |
| ||||
Diluted |
|
137,140,929 |
|
153,546,027 |
|
138,542,558 |
|
159,951,594 |
|
ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands, except share data)
|
|
(Unaudited) |
|
|
| ||
|
|
September 30, |
|
December 31, |
| ||
|
|
2011 |
|
2010 |
| ||
Assets |
|
|
|
|
| ||
Investments: |
|
|
|
|
| ||
Fixed maturities available for sale, at fair value (amortized cost: $9,304,357 and $8,771,988) |
|
$ |
9,529,834 |
|
$ |
8,957,859 |
|
Short-term investments available for sale, at fair value (amortized cost: $807,872 and $913,488) |
|
799,662 |
|
915,841 |
| ||
Investment of funds received under securities lending, at fair value (amortized cost: $44,695 and $69,682) |
|
44,553 |
|
69,660 |
| ||
Equity securities available for sale, at fair value (cost: $300,335 and $292,958) |
|
273,213 |
|
310,194 |
| ||
Other investments available for sale, at fair value (cost: $226,089 and $252,590) |
|
229,974 |
|
275,538 |
| ||
Investments accounted for using the fair value option |
|
319,381 |
|
219,173 |
| ||
TALF investments, at fair value (amortized cost: $376,889 and $389,200) |
|
392,455 |
|
402,449 |
| ||
Investments accounted for using the equity method |
|
383,543 |
|
508,334 |
| ||
Total investments |
|
11,972,615 |
|
11,659,048 |
| ||
|
|
|
|
|
| ||
Cash |
|
369,895 |
|
362,740 |
| ||
Accrued investment income |
|
71,264 |
|
74,837 |
| ||
Investment in joint venture (cost: $100,000) |
|
107,642 |
|
105,698 |
| ||
Fixed maturities and short-term investments pledged under securities lending, at fair value |
|
72,399 |
|
75,575 |
| ||
Securities purchased under agreements to resell using funds received under securities lending |
|
20,032 |
|
|
| ||
Premiums receivable |
|
606,963 |
|
503,434 |
| ||
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses |
|
1,840,191 |
|
1,763,985 |
| ||
Prepaid reinsurance premiums |
|
267,846 |
|
263,448 |
| ||
Deferred acquisition costs, net |
|
306,810 |
|
277,861 |
| ||
Receivable for securities sold |
|
1,067,188 |
|
56,145 |
| ||
Other assets |
|
727,183 |
|
669,164 |
| ||
Total Assets |
|
$ |
17,430,028 |
|
$ |
15,811,935 |
|
|
|
|
|
|
| ||
Liabilities |
|
|
|
|
| ||
Reserve for losses and loss adjustment expenses |
|
$ |
8,523,522 |
|
$ |
8,098,454 |
|
Unearned premiums |
|
1,578,419 |
|
1,370,075 |
| ||
Reinsurance balances payable |
|
123,815 |
|
132,452 |
| ||
Senior notes |
|
300,000 |
|
300,000 |
| ||
Revolving credit agreement borrowings |
|
100,000 |
|
100,000 |
| ||
TALF borrowings, at fair value (par: $314,371 and $326,219) |
|
314,137 |
|
325,770 |
| ||
Securities lending payable |
|
74,696 |
|
78,021 |
| ||
Payable for securities purchased |
|
1,161,591 |
|
200,192 |
| ||
Other liabilities |
|
779,477 |
|
693,968 |
| ||
Total Liabilities |
|
$ |
12,955,657 |
|
$ |
11,298,932 |
|
|
|
|
|
|
| ||
Commitments and Contingencies |
|
|
|
|
| ||
|
|
|
|
|
| ||
Shareholders Equity |
|
|
|
|
| ||
Non-cumulative preferred shares - Series A and B |
|
325,000 |
|
325,000 |
| ||
Common shares ($0.0033 par, shares issued: 163,267,317 and 160,073,616) |
|
544 |
|
534 |
| ||
Additional paid-in capital |
|
150,882 |
|
110,325 |
| ||
Retained earnings |
|
4,696,256 |
|
4,422,553 |
| ||
Accumulated other comprehensive income, net of deferred income tax |
|
146,576 |
|
204,503 |
| ||
Common shares held in treasury, at cost (shares: 30,261,852 and 20,441,391) |
|
(844,887 |
) |
(549,912 |
) | ||
Total Shareholders Equity |
|
4,474,371 |
|
4,513,003 |
| ||
Total Liabilities and Shareholders Equity |
|
$ |
17,430,028 |
|
$ |
15,811,935 |
|
Exhibit 99.2
Wessex House, 5th Floor 45 Reid Street Hamilton HM 12 Bermuda
441-278-9250 441-278-9255 fax
Contact: John C.R. Hele Executive Vice President and Chief Financial Officer |
Financial Supplement
Financial Information
as of September 30, 2011
The following financial supplement is provided to assist in your understanding of Arch Capital Group Ltd.
This report is for informational purposes only. It should be read in conjunction with documents filed by Arch Capital Group Ltd. with the U.S. Securities and Exchange Commission, including the most recent Annual Report on Form 10-K and the Quarterly Reports on Form 10-Q. Please refer to the Companys website at www.archcapgroup.bm for further information describing Arch Capital Group Ltd. All information in this financial supplement has been adjusted to reflect the three-for-one share split effected in May 2011. In addition, the Company has reclassified the presentation of certain prior period information to conform to the current period presentation.
Arch Capital Group Ltd. and Subsidiaries
Table of Contents
|
Page(s) | ||
|
|
| |
I. |
Financial Highlights |
1 | |
|
|
| |
II. |
Consolidated Financial Statements |
| |
|
a. |
Consolidated Statements of Income |
2 |
|
b. |
Consolidated Balance Sheets |
3 |
|
c. |
Consolidated Statements of Comprehensive Income |
4 |
|
d. |
Consolidated Statements of Changes in Shareholders Equity |
5 |
|
e. |
Consolidated Statements of Cash Flows |
6 |
|
|
| |
III. |
Segment Information |
| |
|
a. |
Overview |
7 |
|
b. |
Consolidated Segment Underwriting Results |
8-9 |
|
c. |
Insurance Segment Underwriting Results |
10-11 |
|
d. |
Reinsurance Segment Underwriting Results |
12-13 |
|
|
| |
IV. |
Investment Information |
| |
|
a. |
Investable Asset Summary, Investment Portfolio Metrics and Credit Quality Distribution |
14 |
|
b. |
Composition of Fixed Maturities and Analysis of Corporate Exposures |
15 |
|
c. |
Mortgage Backed, Commercial Mortgage Backed and Asset Backed Securities |
16 |
|
d. |
Bank Loan Investments |
17 |
|
|
| |
V. |
Other |
| |
|
a. |
Comments on Regulation G |
18 |
|
b. |
Operating Income Reconciliation |
19 |
|
c. |
Share Repurchase Activity |
20 |
|
d. |
Annualized Operating Return on Average Common Equity |
21 |
|
e. |
Capital Structure |
22 |
Arch Capital Group Ltd. and Subsidiaries
Cautionary Note Regarding Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. This release or any other written or oral statements made by or on behalf of Arch Capital Group Ltd. and its subsidiaries 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 release are forward-looking statements.
Forward-looking statements can generally be identified by the use of forward-looking terminology such as may, will, expect, intend, estimate, anticipate, believe or continue 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. A non-exclusive list of the important factors that could cause actual results to differ materially from those in such forward-looking statements includes the following: adverse general economic and market conditions; increased competition; pricing and policy term trends; fluctuations in the actions of rating agencies and our ability to maintain and improve our ratings; investment performance; the loss of key personnel; the adequacy of our loss reserves, severity and/or frequency of losses, greater than expected loss ratios and adverse development on claim and/or claim expense liabilities; greater frequency or severity of unpredictable natural and man-made catastrophic events; the impact of acts of terrorism and acts of war; changes in regulations and/or tax laws in the United States or elsewhere; our ability to successfully integrate, establish and maintain operating procedures as well as integrate the businesses we have acquired or may acquire into the existing operations; changes in accounting principles or policies; material differences between actual and expected assessments for guaranty funds and mandatory pooling arrangements; availability and cost to us of reinsurance to manage our gross and net exposures; the failure of others to meet their obligations to us; and other factors identified in our filings with the U.S. Securities and Exchange Commission.
The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with other cautionary statements that are included herein or elsewhere. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
Arch Capital Group Ltd. and Subsidiaries
Financial Highlights
(U.S. dollars in thousands, except share data)
|
|
Three Months Ended |
|
Nine Months Ended |
| ||||||||||||
|
|
September 30, |
|
September 30, |
| ||||||||||||
|
|
2011 |
|
2010 |
|
Change |
|
2011 |
|
2010 |
|
Change |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Gross premiums written |
|
$ |
860,289 |
|
$ |
831,788 |
|
3.4 |
% |
$ |
2,736,794 |
|
$ |
2,602,575 |
|
5.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net premiums written |
|
$ |
691,381 |
|
$ |
636,117 |
|
8.7 |
% |
$ |
2,162,202 |
|
$ |
2,028,129 |
|
6.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net premiums earned |
|
$ |
682,049 |
|
$ |
627,409 |
|
8.7 |
% |
$ |
1,958,623 |
|
$ |
1,920,337 |
|
2.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Underwriting income (loss) |
|
$ |
38,890 |
|
$ |
60,486 |
|
(35.7 |
)% |
$ |
(22,392 |
) |
$ |
146,648 |
|
(115.3 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net investment income |
|
$ |
82,753 |
|
$ |
90,768 |
|
(8.8 |
)% |
$ |
257,731 |
|
$ |
274,277 |
|
(6.0 |
)% |
Per diluted share |
|
$ |
0.60 |
|
$ |
0.59 |
|
1.7 |
% |
$ |
1.86 |
|
$ |
1.71 |
|
8.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net income available to common shareholders |
|
$ |
162,527 |
|
$ |
141,570 |
|
14.8 |
% |
$ |
273,703 |
|
$ |
589,093 |
|
(53.5 |
)% |
Per diluted share |
|
$ |
1.19 |
|
$ |
0.92 |
|
29.3 |
% |
$ |
1.98 |
|
$ |
3.68 |
|
(46.2 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
After-tax operating income available to common shareholders (1) |
|
$ |
107,409 |
|
$ |
130,672 |
|
(17.8 |
)% |
$ |
176,746 |
|
$ |
361,585 |
|
(51.1 |
)% |
Per diluted share |
|
$ |
0.78 |
|
$ |
0.85 |
|
(8.2 |
)% |
$ |
1.28 |
|
$ |
2.26 |
|
(43.4 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Comprehensive income |
|
$ |
51,980 |
|
$ |
363,170 |
|
(85.7 |
)% |
$ |
235,159 |
|
$ |
858,320 |
|
(72.6 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash flow from operations |
|
$ |
309,924 |
|
$ |
267,424 |
|
15.9 |
% |
$ |
756,471 |
|
$ |
657,561 |
|
15.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Diluted weighted average common shares and common share equivalents outstanding |
|
137,140,929 |
|
153,546,027 |
|
(10.7 |
)% |
138,542,558 |
|
159,951,594 |
|
(13.4 |
)% | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
% Point |
|
|
|
|
|
% Point |
| ||||
|
|
|
|
|
|
Change |
|
|
|
|
|
Change |
| ||||
Underwriting ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Loss ratio |
|
62.2 |
% |
57.3 |
% |
4.9 |
|
68.9 |
% |
59.9 |
% |
9.0 |
| ||||
Acquisition expense ratio |
|
17.5 |
% |
17.6 |
% |
(0.1 |
) |
17.2 |
% |
17.4 |
% |
(0.2 |
) | ||||
Other operating expense ratio |
|
14.6 |
% |
15.5 |
% |
(0.9 |
) |
15.0 |
% |
15.1 |
% |
(0.1 |
) | ||||
Combined ratio |
|
94.3 |
% |
90.4 |
% |
3.9 |
|
101.1 |
% |
92.4 |
% |
8.7 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Financial measures: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Growth in book value per common share |
|
0.6 |
% |
8.7 |
% |
(8.1 |
) |
4.0 |
% |
22.2 |
% |
(18.2 |
) | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Annualized operating return on average common equity |
|
10.4 |
% |
12.3 |
% |
(1.9 |
) |
5.7 |
% |
11.5 |
% |
(5.8 |
) | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total return on investments (2) |
|
(0.23 |
)% |
3.61 |
% |
-384 bps |
|
2.97 |
% |
7.08 |
% |
-411 bps |
|
(1) See page 18, Comments on Regulation G.
(2) Total return on investments includes net investment income, equity in net income (loss) of investment funds accounted for using the equity method, net realized gains and losses and the change in unrealized gains and losses generated by the Companys investment portfolio. Total return is calculated on a pre-tax basis and before investment expenses and includes the effect of financial market conditions along with foreign currency fluctuations.
Arch Capital Group Ltd. and Subsidiaries
Consolidated Statements of Income
(U.S. dollars in thousands, except share data)
|
|
Three Months Ended |
|
Nine Months Ended |
| |||||||||||||||||||||||||||||
|
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
September 30, |
|
September 30, |
| |||||||||||
|
|
2011 |
|
2011 |
|
2011 |
|
2010 |
|
2010 |
|
2010 |
|
2010 |
|
2009 |
|
2009 |
|
2011 |
|
2010 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Gross premiums written |
|
$ |
860,289 |
|
$ |
911,939 |
|
$ |
964,566 |
|
$ |
664,212 |
|
$ |
831,788 |
|
$ |
817,100 |
|
$ |
953,687 |
|
$ |
718,712 |
|
$ |
937,328 |
|
$ |
2,736,794 |
|
$ |
2,602,575 |
|
Net premiums written |
|
691,381 |
|
706,543 |
|
764,278 |
|
482,911 |
|
636,117 |
|
624,258 |
|
767,754 |
|
519,087 |
|
727,308 |
|
2,162,202 |
|
2,028,129 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net premiums earned |
|
$ |
682,049 |
|
$ |
642,879 |
|
$ |
633,695 |
|
$ |
632,146 |
|
$ |
627,409 |
|
$ |
623,011 |
|
$ |
669,917 |
|
$ |
708,538 |
|
$ |
734,385 |
|
$ |
1,958,623 |
|
$ |
1,920,337 |
|
Fee income |
|
848 |
|
784 |
|
815 |
|
2,814 |
|
874 |
|
883 |
|
794 |
|
894 |
|
826 |
|
2,447 |
|
2,551 |
| |||||||||||
Losses and loss adjustment expenses |
|
(423,984 |
) |
(431,622 |
) |
(493,880 |
) |
(367,326 |
) |
(359,193 |
) |
(363,145 |
) |
(428,051 |
) |
(410,360 |
) |
(444,914 |
) |
(1,349,486 |
) |
(1,150,389 |
) | |||||||||||
Acquisition expenses, net |
|
(120,205 |
) |
(110,639 |
) |
(108,754 |
) |
(104,824 |
) |
(111,279 |
) |
(107,475 |
) |
(117,624 |
) |
(120,549 |
) |
(122,739 |
) |
(339,598 |
) |
(336,378 |
) | |||||||||||
Other operating expenses |
|
(99,818 |
) |
(99,166 |
) |
(95,394 |
) |
(114,454 |
) |
(97,325 |
) |
(91,030 |
) |
(101,118 |
) |
(99,305 |
) |
(93,723 |
) |
(294,378 |
) |
(289,473 |
) | |||||||||||
Underwriting income (loss) |
|
38,890 |
|
2,236 |
|
(63,518 |
) |
48,356 |
|
60,486 |
|
62,244 |
|
23,918 |
|
79,218 |
|
73,835 |
|
(22,392 |
) |
146,648 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income |
|
82,753 |
|
86,671 |
|
88,307 |
|
90,601 |
|
90,768 |
|
90,537 |
|
92,972 |
|
93,551 |
|
100,213 |
|
257,731 |
|
274,277 |
| |||||||||||
Net realized gains |
|
30,199 |
|
45,210 |
|
20,695 |
|
74,027 |
|
68,828 |
|
62,114 |
|
47,782 |
|
89,901 |
|
70,638 |
|
96,104 |
|
178,724 |
| |||||||||||
Net impairment losses recognized in earnings |
|
(2,739 |
) |
(1,684 |
) |
(2,680 |
) |
(3,230 |
) |
(2,075 |
) |
(4,410 |
) |
(1,606 |
) |
(4,493 |
) |
(4,643 |
) |
(7,103 |
) |
(8,091 |
) | |||||||||||
Equity in net income (loss) of investment funds accounted for using the equity method |
|
(30,549 |
) |
5,973 |
|
29,673 |
|
22,990 |
|
9,708 |
|
(348 |
) |
29,050 |
|
32,391 |
|
69,119 |
|
5,097 |
|
38,410 |
| |||||||||||
Other income (loss) |
|
2,432 |
|
(4,265 |
) |
4,567 |
|
6,165 |
|
1,840 |
|
4,528 |
|
5,978 |
|
5,428 |
|
5,687 |
|
2,734 |
|
12,346 |
| |||||||||||
Other expenses |
|
(6,180 |
) |
(11,397 |
) |
(7,026 |
) |
(6,881 |
) |
(5,796 |
) |
(10,503 |
) |
(5,688 |
) |
(6,680 |
) |
(6,020 |
) |
(24,603 |
) |
(21,987 |
) | |||||||||||
Interest expense |
|
(8,125 |
) |
(7,758 |
) |
(7,721 |
) |
(7,460 |
) |
(7,371 |
) |
(7,916 |
) |
(7,260 |
) |
(7,015 |
) |
(6,001 |
) |
(23,604 |
) |
(22,547 |
) | |||||||||||
Net foreign exchange gains (losses) |
|
60,040 |
|
(18,375 |
) |
(36,912 |
) |
6,039 |
|
(65,157 |
) |
48,625 |
|
38,601 |
|
9,051 |
|
(19,755 |
) |
4,753 |
|
22,069 |
| |||||||||||
Income before income taxes |
|
166,721 |
|
96,611 |
|
25,385 |
|
230,607 |
|
151,231 |
|
244,871 |
|
223,747 |
|
291,352 |
|
283,073 |
|
288,717 |
|
619,849 |
| |||||||||||
Income tax benefit (expense) |
|
2,267 |
|
1,731 |
|
371 |
|
3,505 |
|
(3,200 |
) |
(1,420 |
) |
(6,753 |
) |
(195 |
) |
(2,205 |
) |
4,369 |
|
(11,373 |
) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net income |
|
168,988 |
|
98,342 |
|
25,756 |
|
234,112 |
|
148,031 |
|
243,451 |
|
216,994 |
|
291,157 |
|
280,868 |
|
293,086 |
|
608,476 |
| |||||||||||
Preferred dividends |
|
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(19,383 |
) |
(19,383 |
) | |||||||||||
Net income available to common shareholders |
|
$ |
162,527 |
|
$ |
91,881 |
|
$ |
19,295 |
|
$ |
227,651 |
|
$ |
141,570 |
|
$ |
236,990 |
|
$ |
210,533 |
|
$ |
284,696 |
|
$ |
274,407 |
|
$ |
273,703 |
|
$ |
589,093 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Underwriting Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Loss ratio |
|
62.2 |
% |
67.1 |
% |
77.9 |
% |
58.1 |
% |
57.3 |
% |
58.3 |
% |
63.9 |
% |
57.9 |
% |
60.6 |
% |
68.9 |
% |
59.9 |
% | |||||||||||
Acquisition expense ratio |
|
17.5 |
% |
17.1 |
% |
17.0 |
% |
16.5 |
% |
17.6 |
% |
17.1 |
% |
17.4 |
% |
16.9 |
% |
16.6 |
% |
17.2 |
% |
17.4 |
% | |||||||||||
Other operating expense ratio |
|
14.6 |
% |
15.4 |
% |
15.1 |
% |
18.1 |
% |
15.5 |
% |
14.6 |
% |
15.1 |
% |
14.0 |
% |
12.8 |
% |
15.0 |
% |
15.1 |
% | |||||||||||
Combined ratio |
|
94.3 |
% |
99.6 |
% |
110.0 |
% |
92.7 |
% |
90.4 |
% |
90.0 |
% |
96.4 |
% |
88.8 |
% |
90.0 |
% |
101.1 |
% |
92.4 |
% | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net premiums written to gross premiums written |
|
80.4 |
% |
77.5 |
% |
79.2 |
% |
72.7 |
% |
76.5 |
% |
76.4 |
% |
80.5 |
% |
72.2 |
% |
77.6 |
% |
79.0 |
% |
77.9 |
% | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net income per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Basic |
|
$ |
1.24 |
|
$ |
0.70 |
|
$ |
0.14 |
|
$ |
1.59 |
|
$ |
0.96 |
|
$ |
1.55 |
|
$ |
1.32 |
|
$ |
1.65 |
|
$ |
1.52 |
|
$ |
2.07 |
|
$ |
3.85 |
|
Diluted |
|
$ |
1.19 |
|
$ |
0.67 |
|
$ |
0.14 |
|
$ |
1.51 |
|
$ |
0.92 |
|
$ |
1.48 |
|
$ |
1.26 |
|
$ |
1.58 |
|
$ |
1.46 |
|
$ |
1.98 |
|
$ |
3.68 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Weighted average common shares and common share equivalents outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Basic |
|
131,560,851 |
|
131,232,269 |
|
133,499,241 |
|
143,320,146 |
|
146,993,373 |
|
152,962,620 |
|
159,117,078 |
|
172,139,922 |
|
180,468,657 |
|
132,090,354 |
|
152,979,948 |
| |||||||||||
Diluted |
|
137,140,929 |
|
137,975,599 |
|
140,460,516 |
|
150,306,429 |
|
153,546,027 |
|
159,795,909 |
|
166,541,481 |
|
179,732,001 |
|
187,601,448 |
|
138,542,558 |
|
159,951,594 |
|
Arch Capital Group Ltd. and Subsidiaries
Consolidated Balance Sheets
(U.S. dollars in thousands, except share data)
|
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
| |||||||||
|
|
2011 |
|
2011 |
|
2011 |
|
2010 |
|
2010 |
|
2010 |
|
2010 |
|
2009 |
|
2009 |
| |||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Fixed maturities available for sale, at fair value |
|
$ |
9,529,834 |
|
$ |
9,247,002 |
|
$ |
8,916,017 |
|
$ |
8,957,859 |
|
$ |
9,692,852 |
|
$ |
9,326,574 |
|
$ |
9,202,122 |
|
$ |
9,306,482 |
|
$ |
9,185,443 |
|
Short-term investments available for sale, at fair value |
|
799,662 |
|
704,495 |
|
1,130,142 |
|
915,841 |
|
780,671 |
|
554,304 |
|
669,798 |
|
571,489 |
|
706,157 |
| |||||||||
Investment of funds received under securities lending, at fair value (1) |
|
44,553 |
|
145,224 |
|
9,951 |
|
69,660 |
|
200,020 |
|
209,635 |
|
177,954 |
|
91,160 |
|
252,500 |
| |||||||||
Equity securities available for sale, at fair value |
|
273,213 |
|
320,434 |
|
361,639 |
|
310,194 |
|
79,805 |
|
38,879 |
|
41,537 |
|
249 |
|
74 |
| |||||||||
Other investments available for sale, at fair value |
|
229,974 |
|
299,845 |
|
293,073 |
|
275,538 |
|
229,488 |
|
211,241 |
|
125,262 |
|
58,751 |
|
51,031 |
| |||||||||
Investments accounted for using the fair value option |
|
319,381 |
|
321,790 |
|
256,614 |
|
219,173 |
|
175,841 |
|
140,541 |
|
147,471 |
|
139,787 |
|
130,082 |
| |||||||||
TALF investments, at fair value |
|
392,455 |
|
399,341 |
|
400,970 |
|
402,449 |
|
410,881 |
|
407,469 |
|
406,997 |
|
250,265 |
|
250,517 |
| |||||||||
Investments accounted for using the equity method |
|
383,543 |
|
399,968 |
|
449,206 |
|
508,334 |
|
500,737 |
|
474,971 |
|
467,597 |
|
468,667 |
|
447,918 |
| |||||||||
Total investments |
|
11,972,615 |
|
11,838,099 |
|
11,817,612 |
|
11,659,048 |
|
12,070,295 |
|
11,363,614 |
|
11,238,738 |
|
10,886,850 |
|
11,023,722 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Cash |
|
369,895 |
|
411,001 |
|
406,877 |
|
362,740 |
|
365,997 |
|
341,469 |
|
338,708 |
|
334,571 |
|
385,149 |
| |||||||||
Accrued investment income |
|
71,264 |
|
71,083 |
|
69,057 |
|
74,837 |
|
79,180 |
|
72,102 |
|
74,214 |
|
70,673 |
|
77,762 |
| |||||||||
Investment in joint venture |
|
107,642 |
|
105,982 |
|
105,495 |
|
105,698 |
|
104,347 |
|
103,540 |
|
102,946 |
|
102,855 |
|
101,473 |
| |||||||||
Fixed maturities and short-term investments pledged under securities lending, at fair value |
|
72,399 |
|
150,501 |
|
198,418 |
|
75,575 |
|
203,221 |
|
214,564 |
|
184,221 |
|
212,820 |
|
609,334 |
| |||||||||
Securities purchased under agreements to resell using funds received under securities lending (1) |
|
20,032 |
|
|
|
185,176 |
|
|
|
|
|
|
|
|
|
115,839 |
|
358,996 |
| |||||||||
Premiums receivable |
|
606,963 |
|
712,397 |
|
633,144 |
|
503,434 |
|
662,634 |
|
706,503 |
|
699,385 |
|
595,030 |
|
697,806 |
| |||||||||
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses |
|
1,840,191 |
|
1,855,342 |
|
1,772,130 |
|
1,763,985 |
|
1,715,122 |
|
1,721,059 |
|
1,711,307 |
|
1,720,270 |
|
1,768,344 |
| |||||||||
Prepaid reinsurance premiums |
|
267,846 |
|
278,587 |
|
259,624 |
|
263,448 |
|
267,240 |
|
256,952 |
|
250,841 |
|
277,985 |
|
283,290 |
| |||||||||
Deferred acquisition costs, net |
|
306,810 |
|
310,616 |
|
302,271 |
|
277,861 |
|
297,250 |
|
293,982 |
|
298,371 |
|
280,372 |
|
303,826 |
| |||||||||
Receivable for securities sold |
|
1,067,188 |
|
733,931 |
|
749,708 |
|
56,145 |
|
1,329,508 |
|
1,084,122 |
|
1,427,085 |
|
187,171 |
|
998,431 |
| |||||||||
Other assets |
|
727,183 |
|
746,267 |
|
734,317 |
|
669,164 |
|
624,395 |
|
634,242 |
|
628,407 |
|
609,323 |
|
592,701 |
| |||||||||
Total Assets |
|
$ |
17,430,028 |
|
$ |
17,213,806 |
|
$ |
17,233,829 |
|
$ |
15,811,935 |
|
$ |
17,719,189 |
|
$ |
16,792,149 |
|
$ |
16,954,223 |
|
$ |
15,393,759 |
|
$ |
17,200,834 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Reserve for losses and loss adjustment expenses |
|
8,523,522 |
|
8,564,908 |
|
8,319,324 |
|
8,098,454 |
|
8,054,677 |
|
7,940,104 |
|
$ |
7,898,162 |
|
$ |
7,873,412 |
|
$ |
7,879,586 |
| ||||||
Unearned premiums |
|
1,578,419 |
|
1,589,497 |
|
1,504,162 |
|
1,370,075 |
|
1,524,100 |
|
1,492,550 |
|
1,495,265 |
|
1,433,331 |
|
1,627,519 |
| |||||||||
Reinsurance balances payable |
|
123,815 |
|
154,860 |
|
131,512 |
|
132,452 |
|
130,274 |
|
128,723 |
|
114,254 |
|
156,500 |
|
159,898 |
| |||||||||
Senior notes |
|
300,000 |
|
300,000 |
|
300,000 |
|
300,000 |
|
300,000 |
|
300,000 |
|
300,000 |
|
300,000 |
|
300,000 |
| |||||||||
Revolving credit agreement borrowings |
|
100,000 |
|
100,000 |
|
100,000 |
|
100,000 |
|
125,000 |
|
125,000 |
|
100,000 |
|
100,000 |
|
100,000 |
| |||||||||
TALF borrowings, at fair value |
|
314,137 |
|
318,441 |
|
322,222 |
|
325,770 |
|
331,797 |
|
336,213 |
|
346,746 |
|
217,565 |
|
219,843 |
| |||||||||
Securities lending payable |
|
74,696 |
|
155,072 |
|
203,925 |
|
78,021 |
|
209,411 |
|
219,796 |
|
189,024 |
|
219,116 |
|
625,706 |
| |||||||||
Payable for securities purchased |
|
1,161,591 |
|
838,787 |
|
1,266,390 |
|
200,192 |
|
1,649,462 |
|
1,192,181 |
|
1,429,529 |
|
136,381 |
|
1,197,411 |
| |||||||||
Other liabilities |
|
779,477 |
|
750,972 |
|
760,759 |
|
693,968 |
|
676,558 |
|
659,579 |
|
702,486 |
|
634,105 |
|
630,049 |
| |||||||||
Total Liabilities |
|
12,955,657 |
|
12,772,537 |
|
12,908,294 |
|
11,298,932 |
|
13,001,279 |
|
12,394,146 |
|
12,575,466 |
|
11,070,410 |
|
12,740,012 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Commitments and Contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Shareholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Non-cumulative preferred shares - Series A and B |
|
325,000 |
|
325,000 |
|
325,000 |
|
325,000 |
|
325,000 |
|
325,000 |
|
325,000 |
|
325,000 |
|
325,000 |
| |||||||||
Common shares |
|
544 |
|
541 |
|
535 |
|
534 |
|
531 |
|
529 |
|
527 |
|
548 |
|
595 |
| |||||||||
Additional paid-in capital |
|
150,882 |
|
142,001 |
|
120,109 |
|
110,325 |
|
100,640 |
|
83,828 |
|
95,926 |
|
253,466 |
|
592,334 |
| |||||||||
Retained earnings |
|
4,696,256 |
|
4,533,729 |
|
4,441,848 |
|
4,422,553 |
|
4,194,902 |
|
4,053,332 |
|
3,816,342 |
|
3,605,809 |
|
3,321,113 |
| |||||||||
Accumulated other comprehensive income, net of deferred income tax |
|
146,576 |
|
263,584 |
|
225,405 |
|
204,503 |
|
388,370 |
|
173,231 |
|
140,962 |
|
138,526 |
|
221,780 |
| |||||||||
Common shares held in treasury, at cost |
|
(844,887 |
) |
(823,586 |
) |
(787,362 |
) |
(549,912 |
) |
(291,533 |
) |
(237,917 |
) |
|
|
|
|
|
| |||||||||
Total Shareholders Equity |
|
4,474,371 |
|
4,441,269 |
|
4,325,535 |
|
4,513,003 |
|
4,717,910 |
|
4,398,003 |
|
4,378,757 |
|
4,323,349 |
|
4,460,822 |
| |||||||||
Total Liabilities and Shareholders Equity |
|
$ |
17,430,028 |
|
$ |
17,213,806 |
|
$ |
17,233,829 |
|
$ |
15,811,935 |
|
$ |
17,719,189 |
|
$ |
16,792,149 |
|
$ |
16,954,223 |
|
$ |
15,393,759 |
|
$ |
17,200,834 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Common shares outstanding, net of treasury shares (2) |
|
133,005,465 |
|
132,771,524 |
|
131,850,639 |
|
139,632,225 |
|
147,676,113 |
|
148,891,710 |
|
158,129,802 |
|
164,285,034 |
|
178,572,927 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Book value per common share |
|
$ |
31.20 |
|
$ |
31.00 |
|
$ |
30.34 |
|
$ |
29.99 |
|
$ |
29.75 |
|
$ |
27.36 |
|
$ |
25.64 |
|
$ |
24.34 |
|
$ |
23.16 |
|
(1) The Companys collateral received under securities lending agreements is reinvested in (i) fixed maturities and short-term investments (shown as Investment of funds received under securities lending , at fair value) and (ii) collateralized borrowings (shown as Securities purchased under agreements to resell using funds received under securities lending agreements).
(2) Excludes the effects of stock options and restricted stock units outstanding.
Arch Capital Group Ltd. and Subsidiaries
Consolidated Statements of Comprehensive Income
(U.S. dollars in thousands)
|
|
Three Months Ended |
|
Nine Months Ended |
| |||||||||||||||||||||||||||||
|
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
September 30, |
|
September 30, |
| |||||||||||
|
|
2011 |
|
2011 |
|
2011 |
|
2010 |
|
2010 |
|
2010 |
|
2010 |
|
2009 |
|
2009 |
|
2011 |
|
2010 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Comprehensive Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net income |
|
$ |
168,988 |
|
$ |
98,342 |
|
$ |
25,756 |
|
$ |
234,112 |
|
$ |
148,031 |
|
$ |
243,451 |
|
$ |
216,994 |
|
$ |
291,157 |
|
$ |
280,868 |
|
$ |
293,086 |
|
$ |
608,476 |
|
Other comprehensive income (loss), net of deferred income tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Unrealized holding gains (losses) arising during period |
|
(71,861 |
) |
84,862 |
|
40,370 |
|
(141,807 |
) |
264,609 |
|
71,087 |
|
42,847 |
|
(8,954 |
) |
300,733 |
|
53,371 |
|
378,543 |
| |||||||||||
Portion of other-than-temporary impairment losses recognized in other comprehensive income, net of deferred income tax |
|
(2,440 |
) |
(285 |
) |
(578 |
) |
(111 |
) |
(603 |
) |
(308 |
) |
(730 |
) |
(353 |
) |
(3,217 |
) |
(3,303 |
) |
(1,641 |
) | |||||||||||
Reclassification of net realized gains, net of income taxes, included in net income |
|
(30,707 |
) |
(47,682 |
) |
(20,176 |
) |
(43,414 |
) |
(56,299 |
) |
(32,611 |
) |
(37,607 |
) |
(74,886 |
) |
(52,152 |
) |
(98,565 |
) |
(126,517 |
) | |||||||||||
Foreign currency translation adjustments |
|
(12,000 |
) |
1,284 |
|
1,286 |
|
1,465 |
|
7,432 |
|
(5,899 |
) |
(2,074 |
) |
939 |
|
209 |
|
(9,430 |
) |
(541 |
) | |||||||||||
Other comprehensive income (loss) |
|
(117,008 |
) |
38,179 |
|
20,902 |
|
(183,867 |
) |
215,139 |
|
32,269 |
|
2,436 |
|
(83,254 |
) |
245,573 |
|
(57,927 |
) |
249,844 |
| |||||||||||
Comprehensive Income |
|
$ |
51,980 |
|
$ |
136,521 |
|
$ |
46,658 |
|
$ |
50,245 |
|
$ |
363,170 |
|
$ |
275,720 |
|
$ |
219,430 |
|
$ |
207,903 |
|
$ |
526,441 |
|
$ |
235,159 |
|
$ |
858,320 |
|
Arch Capital Group Ltd. and Subsidiaries
Consolidated Statements of Changes in Shareholders Equity
(U.S. dollars in thousands)
|
|
Three Months Ended |
|
Nine Months Ended |
| |||||||||||||||||||||||||||||
|
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
September 30, |
|
September 30, |
| |||||||||||
|
|
2011 |
|
2011 |
|
2011 |
|
2010 |
|
2010 |
|
2010 |
|
2010 |
|
2009 |
|
2009 |
|
2011 |
|
2010 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Non-Cumulative Preferred Shares - Series A and B |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance at beginning and end of period |
|
$ |
325,000 |
|
$ |
325,000 |
|
$ |
325,000 |
|
$ |
325,000 |
|
$ |
325,000 |
|
$ |
325,000 |
|
$ |
325,000 |
|
$ |
325,000 |
|
$ |
325,000 |
|
$ |
325,000 |
|
$ |
325,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Common Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance at beginning of period |
|
541 |
|
535 |
|
534 |
|
531 |
|
529 |
|
527 |
|
548 |
|
595 |
|
610 |
|
534 |
|
548 |
| |||||||||||
Common shares issued, net |
|
3 |
|
6 |
|
1 |
|
3 |
|
2 |
|
7 |
|
4 |
|
4 |
|
1 |
|
10 |
|
13 |
| |||||||||||
Purchases of common shares under share repurchase program |
|
|
|
|
|
|
|
|
|
|
|
(5 |
) |
(25 |
) |
(51 |
) |
(16 |
) |
|
|
(30 |
) | |||||||||||
Balance at end of period |
|
544 |
|
541 |
|
535 |
|
534 |
|
531 |
|
529 |
|
527 |
|
548 |
|
595 |
|
544 |
|
531 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Additional Paid-in Capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance at beginning of period |
|
142,001 |
|
120,109 |
|
110,325 |
|
100,640 |
|
83,828 |
|
95,926 |
|
253,466 |
|
592,334 |
|
681,445 |
|
110,325 |
|
253,466 |
| |||||||||||
Common shares issued, net |
|
(2 |
) |
3,904 |
|
8 |
|
1,334 |
|
283 |
|
3,275 |
|
14 |
|
1,173 |
|
0 |
|
3,910 |
|
3,572 |
| |||||||||||
Exercise of stock options |
|
3,007 |
|
2,245 |
|
4,127 |
|
2,716 |
|
10,486 |
|
7,964 |
|
16,700 |
|
12,380 |
|
2,905 |
|
9,379 |
|
35,150 |
| |||||||||||
Common shares retired |
|
|
|
|
|
|
|
|
|
|
|
(36,212 |
) |
(181,350 |
) |
(358,611 |
) |
(98,632 |
) |
|
|
(217,562 |
) | |||||||||||
Amortization of share-based compensation |
|
5,781 |
|
13,877 |
|
5,628 |
|
5,615 |
|
6,074 |
|
12,280 |
|
7,096 |
|
6,199 |
|
6,576 |
|
25,286 |
|
25,450 |
| |||||||||||
Other |
|
95 |
|
1,866 |
|
21 |
|
20 |
|
(31 |
) |
595 |
|
|
|
(9 |
) |
40 |
|
1,982 |
|
564 |
| |||||||||||
Balance at end of period |
|
150,882 |
|
142,001 |
|
120,109 |
|
110,325 |
|
100,640 |
|
83,828 |
|
95,926 |
|
253,466 |
|
592,334 |
|
150,882 |
|
100,640 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Retained Earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance at beginning of period |
|
4,533,729 |
|
4,441,848 |
|
4,422,553 |
|
4,194,902 |
|
4,053,332 |
|
3,816,342 |
|
3,605,809 |
|
3,321,113 |
|
3,046,706 |
|
4,422,553 |
|
3,605,809 |
| |||||||||||
Dividends declared on preferred shares |
|
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(19,383 |
) |
(19,383 |
) | |||||||||||
Net income |
|
168,988 |
|
98,342 |
|
25,756 |
|
234,112 |
|
148,031 |
|
243,451 |
|
216,994 |
|
291,157 |
|
280,868 |
|
293,086 |
|
608,476 |
| |||||||||||
Balance at end of period |
|
4,696,256 |
|
4,533,729 |
|
4,441,848 |
|
4,422,553 |
|
4,194,902 |
|
4,053,332 |
|
3,816,342 |
|
3,605,809 |
|
3,321,113 |
|
4,696,256 |
|
4,194,902 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Accumulated Other Comprehensive Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance at beginning of period |
|
263,584 |
|
225,405 |
|
204,503 |
|
388,370 |
|
173,231 |
|
140,962 |
|
138,526 |
|
221,780 |
|
(23,793 |
) |
204,503 |
|
138,526 |
| |||||||||||
Change in unrealized appreciation (decline) in value of investments, net of deferred income tax |
|
(102,568 |
) |
37,180 |
|
20,194 |
|
(185,221 |
) |
208,310 |
|
38,476 |
|
5,240 |
|
(83,840 |
) |
248,581 |
|
(45,194 |
) |
252,026 |
| |||||||||||
Portion of other-than-temporary impairment losses recognized in other comprehensive income, net of deferred income tax |
|
(2,440 |
) |
(285 |
) |
(578 |
) |
(111 |
) |
(603 |
) |
(308 |
) |
(730 |
) |
(353 |
) |
(3,217 |
) |
(3,303 |
) |
(1,641 |
) | |||||||||||
Foreign currency translation adjustments, net of deferred income tax |
|
(12,000 |
) |
1,284 |
|
1,286 |
|
1,465 |
|
7,432 |
|
(5,899 |
) |
(2,074 |
) |
939 |
|
209 |
|
(9,430 |
) |
(541 |
) | |||||||||||
Balance at end of period |
|
146,576 |
|
263,584 |
|
225,405 |
|
204,503 |
|
388,370 |
|
173,231 |
|
140,962 |
|
138,526 |
|
221,780 |
|
146,576 |
|
388,370 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Common Shares Held in Treasury, at Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance at beginning of period |
|
(823,586 |
) |
(787,362 |
) |
(549,912 |
) |
(291,533 |
) |
(237,917 |
) |
|
|
|
|
|
|
|
|
(549,912 |
) |
|
| |||||||||||
Shares repurchased for treasury |
|
(21,301 |
) |
(36,224 |
) |
(237,450 |
) |
(258,379 |
) |
(53,616 |
) |
(237,917 |
) |
|
|
|
|
|
|
(294,975 |
) |
(291,533 |
) | |||||||||||
Balance at end of period |
|
(844,887 |
) |
(823,586 |
) |
(787,362 |
) |
(549,912 |
) |
(291,533 |
) |
(237,917 |
) |
|
|
|
|
|
|
(844,887 |
) |
(291,533 |
) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Shareholders Equity |
|
$ |
4,474,371 |
|
$ |
4,441,269 |
|
$ |
4,325,535 |
|
$ |
4,513,003 |
|
$ |
4,717,910 |
|
$ |
4,398,003 |
|
$ |
4,378,757 |
|
$ |
4,323,349 |
|
$ |
4,460,822 |
|
$ |
4,474,371 |
|
$ |
4,717,910 |
|
Arch Capital Group Ltd. and Subsidiaries
Consolidated Statements of Cash Flows
(U.S. dollars in thousands)
|
|
Three Months Ended |
|
Nine Months Ended |
| |||||||||||||||||||||||||||||
|
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
September 30, |
|
September 30, |
| |||||||||||
|
|
2011 |
|
2011 |
|
2011 |
|
2010 |
|
2010 |
|
2010 |
|
2010 |
|
2009 |
|
2009 |
|
2011 |
|
2010 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net income |
|
$ |
168,988 |
|
$ |
98,342 |
|
$ |
25,756 |
|
$ |
234,112 |
|
$ |
148,031 |
|
$ |
243,451 |
|
$ |
216,994 |
|
$ |
291,157 |
|
$ |
280,868 |
|
$ |
293,086 |
|
$ |
608,476 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net realized gains |
|
(29,615 |
) |
(48,886 |
) |
(22,481 |
) |
(78,261 |
) |
(72,534 |
) |
(62,406 |
) |
(49,483 |
) |
(70,680 |
) |
(70,612 |
) |
(100,982 |
) |
(184,423 |
) | |||||||||||
Net impairment losses included in earnings |
|
2,739 |
|
1,684 |
|
2,680 |
|
3,230 |
|
2,075 |
|
4,410 |
|
1,606 |
|
4,493 |
|
4,643 |
|
7,103 |
|
8,091 |
| |||||||||||
Equity in net income or loss of investment funds accounted for using the equity method and other income |
|
31,734 |
|
18,945 |
|
(355 |
) |
(26,110 |
) |
(11,545 |
) |
(3,368 |
) |
(15,012 |
) |
(37,819 |
) |
(74,985 |
) |
50,324 |
|
(29,925 |
) | |||||||||||
Share-based compensation |
|
5,781 |
|
13,877 |
|
5,628 |
|
5,615 |
|
6,074 |
|
12,280 |
|
7,096 |
|
6,199 |
|
6,576 |
|
25,286 |
|
25,450 |
| |||||||||||
Changes in: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Reserve for losses and loss adjustment expenses, net of unpaid losses and loss adjustment expenses recoverable |
|
48,397 |
|
130,746 |
|
155,477 |
|
3,546 |
|
49,420 |
|
71,357 |
|
91,247 |
|
50,992 |
|
79,701 |
|
334,620 |
|
212,024 |
| |||||||||||
Unearned premiums, net of prepaid reinsurance premiums |
|
9,919 |
|
63,987 |
|
130,136 |
|
(149,242 |
) |
9,024 |
|
236 |
|
96,645 |
|
(188,951 |
) |
(6,983 |
) |
204,042 |
|
105,905 |
| |||||||||||
Premiums receivable |
|
82,200 |
|
(77,556 |
) |
(118,688 |
) |
157,034 |
|
63,197 |
|
(20,280 |
) |
(116,571 |
) |
99,023 |
|
41,108 |
|
(114,044 |
) |
(73,654 |
) | |||||||||||
Deferred acquisition costs, net |
|
1,115 |
|
(7,743 |
) |
(22,518 |
) |
18,910 |
|
47 |
|
2,038 |
|
(19,655 |
) |
23,636 |
|
4,356 |
|
(29,146 |
) |
(17,570 |
) | |||||||||||
Reinsurance balances payable |
|
(19,368 |
) |
23,109 |
|
(7,122 |
) |
3,277 |
|
(4,853 |
) |
19,267 |
|
(36,669 |
) |
(1,467 |
) |
(85 |
) |
(3,381 |
) |
(22,255 |
) | |||||||||||
Other liabilities |
|
5,925 |
|
(26,613 |
) |
33,366 |
|
(47,339 |
) |
23,914 |
|
(57,219 |
) |
41,448 |
|
(26,439 |
) |
(5,849 |
) |
12,678 |
|
8,143 |
| |||||||||||
Other items, net |
|
2,109 |
|
32,075 |
|
42,701 |
|
19,741 |
|
54,574 |
|
(4,252 |
) |
(33,023 |
) |
33,839 |
|
31,381 |
|
76,885 |
|
17,299 |
| |||||||||||
Net Cash Provided By Operating Activities |
|
309,924 |
|
221,967 |
|
224,580 |
|
144,513 |
|
267,424 |
|
205,514 |
|
184,623 |
|
183,983 |
|
290,119 |
|
756,471 |
|
657,561 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Purchases of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Fixed maturity investments |
|
(2,729,874 |
) |
(4,235,140 |
) |
(3,151,767 |
) |
(2,434,319 |
) |
(5,018,619 |
) |
(4,885,606 |
) |
(4,597,713 |
) |
(5,221,819 |
) |
(6,675,195 |
) |
(10,116,781 |
) |
(14,501,938 |
) | |||||||||||
Equity securities |
|
(94,115 |
) |
(159,157 |
) |
(89,790 |
) |
(226,677 |
) |
(65,155 |
) |
(21,727 |
) |
(52,283 |
) |
(35,470 |
) |
(34,532 |
) |
(343,062 |
) |
(139,165 |
) | |||||||||||
Other investments |
|
(166,449 |
) |
(114,588 |
) |
(92,777 |
) |
(147,127 |
) |
(92,955 |
) |
(150,631 |
) |
(132,819 |
) |
(184,598 |
) |
(8,528 |
) |
(373,814 |
) |
(376,405 |
) | |||||||||||
Proceeds from the sales of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Fixed maturity investments |
|
2,299,627 |
|
3,323,456 |
|
3,232,541 |
|
2,670,332 |
|
4,872,668 |
|
4,668,666 |
|
4,443,108 |
|
5,054,102 |
|
6,066,081 |
|
8,855,624 |
|
13,984,442 |
| |||||||||||
Equity securities |
|
111,467 |
|
147,334 |
|
52,316 |
|
14,522 |
|
19,151 |
|
25,043 |
|
11,725 |
|
35,097 |
|
3,239 |
|
311,117 |
|
55,919 |
| |||||||||||
Other investments |
|
191,767 |
|
119,780 |
|
84,967 |
|
133,211 |
|
68,843 |
|
87,536 |
|
89,510 |
|
200,912 |
|
79,378 |
|
396,514 |
|
245,889 |
| |||||||||||
Proceeds from redemptions and maturities of fixed maturities |
|
200,671 |
|
283,512 |
|
253,898 |
|
266,044 |
|
226,889 |
|
244,312 |
|
212,625 |
|
146,480 |
|
261,604 |
|
738,081 |
|
683,826 |
| |||||||||||
Net (purchases) sales of short-term investments |
|
(123,211 |
) |
459,091 |
|
(223,415 |
) |
(129,794 |
) |
(205,411 |
) |
96,239 |
|
(102,921 |
) |
129,070 |
|
(48,395 |
) |
112,465 |
|
(212,093 |
) | |||||||||||
Change in investment of securities lending collateral |
|
80,376 |
|
48,853 |
|
(125,904 |
) |
131,389 |
|
10,385 |
|
(30,772 |
) |
30,092 |
|
406,590 |
|
(51,692 |
) |
3,325 |
|
9,705 |
| |||||||||||
Purchases of furniture, equipment and other |
|
(3,178 |
) |
(4,266 |
) |
(8,082 |
) |
(1,553 |
) |
(2,251 |
) |
(6,057 |
) |
(1,803 |
) |
(3,897 |
) |
(4,067 |
) |
(15,526 |
) |
(10,111 |
) | |||||||||||
Net Cash Provided By (Used For) Investing Activities |
|
(232,919 |
) |
(131,125 |
) |
(68,013 |
) |
276,028 |
|
(186,455 |
) |
27,003 |
|
(100,479 |
) |
526,467 |
|
(412,107 |
) |
(432,057 |
) |
(259,931 |
) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Purchases of common shares under share repurchase program |
|
(20,833 |
) |
(29,552 |
) |
(237,173 |
) |
(258,150 |
) |
(53,398 |
) |
(269,054 |
) |
(181,272 |
) |
(358,656 |
) |
(98,194 |
) |
(287,558 |
) |
(503,724 |
) | |||||||||||
Proceeds from common shares issued, net |
|
1,609 |
|
(1,397 |
) |
2,875 |
|
4,693 |
|
8,586 |
|
3,779 |
|
10,591 |
|
9,194 |
|
2,152 |
|
3,087 |
|
22,956 |
| |||||||||||
Proceeds from borrowings |
|
|
|
|
|
|
|
|
|
|
|
50,000 |
|
214,526 |
|
|
|
269,843 |
|
|
|
264,526 |
| |||||||||||
Repayments of borrowings |
|
(4,225 |
) |
(3,919 |
) |
(3,695 |
) |
(31,072 |
) |
(5,646 |
) |
(34,022 |
) |
(86,317 |
) |
(1,103 |
) |
(50,000 |
) |
(11,839 |
) |
(125,985 |
) | |||||||||||
Change in securities lending collateral |
|
(80,376 |
) |
(48,853 |
) |
125,904 |
|
(131,389 |
) |
(10,385 |
) |
30,772 |
|
(30,092 |
) |
(406,590 |
) |
51,692 |
|
(3,325 |
) |
(9,705 |
) | |||||||||||
Other |
|
818 |
|
2,467 |
|
714 |
|
(893 |
) |
1,593 |
|
2,296 |
|
5,061 |
|
4,816 |
|
88 |
|
3,999 |
|
8,950 |
| |||||||||||
Preferred dividends paid |
|
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(19,383 |
) |
(19,383 |
) | |||||||||||
Net Cash Provided By (Used For) Financing Activities |
|
(109,468 |
) |
(87,715 |
) |
(117,836 |
) |
(423,272 |
) |
(65,711 |
) |
(222,690 |
) |
(73,964 |
) |
(758,800 |
) |
169,120 |
|
(315,019 |
) |
(362,365 |
) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Effects of exchange rate changes on foreign currency cash |
|
(8,643 |
) |
997 |
|
5,406 |
|
(526 |
) |
9,270 |
|
(7,066 |
) |
(6,043 |
) |
(2,228 |
) |
1,324 |
|
(2,240 |
) |
(3,839 |
) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Increase (decrease) in cash |
|
(41,106 |
) |
4,124 |
|
44,137 |
|
(3,257 |
) |
24,528 |
|
2,761 |
|
4,137 |
|
(50,578 |
) |
48,456 |
|
7,155 |
|
31,426 |
| |||||||||||
Cash beginning of period |
|
411,001 |
|
406,877 |
|
362,740 |
|
365,997 |
|
341,469 |
|
338,708 |
|
334,571 |
|
385,149 |
|
336,693 |
|
362,740 |
|
334,571 |
| |||||||||||
Cash end of period |
|
$ |
369,895 |
|
$ |
411,001 |
|
$ |
406,877 |
|
$ |
362,740 |
|
$ |
365,997 |
|
341,469 |
|
$ |
338,708 |
|
$ |
334,571 |
|
$ |
385,149 |
|
$ |
369,895 |
|
$ |
365,997 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Income taxes paid, net |
|
$ |
3,662 |
|
$ |
2,296 |
|
$ |
3,670 |
|
$ |
3,140 |
|
$ |
1,928 |
|
$ |
1,430 |
|
$ |
704 |
|
$ |
5,021 |
|
$ |
4,234 |
|
$ |
9,628 |
|
$ |
4,062 |
|
Interest paid |
|
$ |
2,177 |
|
$ |
13,084 |
|
$ |
2,191 |
|
$ |
12,831 |
|
$ |
1,832 |
|
$ |
13,437 |
|
$ |
1,785 |
|
$ |
12,556 |
|
$ |
529 |
|
$ |
17,452 |
|
$ |
17,054 |
|
Arch Capital Group Ltd. and Subsidiaries
Segment Information Overview
The Company classifies its businesses into two underwriting segments insurance and reinsurance and corporate and other (non-underwriting). The Companys insurance and reinsurance operating segments each have segment managers who are responsible for the overall profitability of their respective segments and who are directly accountable to the Companys chief operating decision makers, the Chairman, President and Chief Executive Officer of ACGL and the Chief Financial Officer of ACGL. The chief operating decision makers do not assess performance, measure return on equity or make resource allocation decisions on a line of business basis. The Company determined its reportable operating segments using the management approach described in accounting guidance regarding disclosures about segments of an enterprise and related information.
Management measures segment performance based on underwriting income or loss. The Company does not manage its assets by segment and, accordingly, investment income is not allocated to each underwriting segment. In addition, other revenue and expense items are not evaluated by segment. The accounting policies of the segments are the same as those used for the preparation of the Companys consolidated financial statements. Intersegment business is allocated to the segment accountable for the underwriting results.
The insurance segment consists of the Companys insurance underwriting subsidiaries which primarily write on both an admitted and non-admitted basis. Specialty product lines include: casualty; construction; executive assurance; healthcare; national accounts casualty; professional liability; programs; property, energy, marine and aviation; surety; travel and accident; and other (consisting of excess workers compensation, employers liability and collateral protection business).
The reinsurance segment consists of the Companys reinsurance underwriting subsidiaries. The reinsurance segment generally seeks to write significant lines on specialty property and casualty reinsurance contracts. Classes of business include: casualty; marine and aviation; other specialty; property catastrophe; property excluding property catastrophe (losses on a single risk, both excess of loss and pro rata); and other (consisting of non-traditional, casualty clash and other business).
Corporate and other (non-underwriting) includes net investment income, other income (loss), other expenses incurred by the Company, interest expense, net realized gains or losses, net impairment losses included in earnings, equity in net income (loss) of investment funds accounted for using the equity method, net foreign exchange gains or losses, income taxes and dividends on the Companys non-cumulative preferred shares.
Arch Capital Group Ltd. and Subsidiaries
Segment Information Three Months Ended September 30, 2011 and 2010
(U.S. dollars in thousands)
|
|
Three Months Ended |
|
Three Months Ended |
| ||||||||||||||
|
|
September 30, 2011 |
|
September 30, 2010 |
| ||||||||||||||
|
|
Insurance |
|
Reinsurance |
|
Total |
|
Insurance |
|
Reinsurance |
|
Total |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Gross premiums written (1) |
|
$ |
634,280 |
|
$ |
227,837 |
|
$ |
860,289 |
|
$ |
624,490 |
|
$ |
208,770 |
|
$ |
831,788 |
|
Net premiums written |
|
472,986 |
|
218,395 |
|
691,381 |
|
431,361 |
|
204,756 |
|
636,117 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net premiums earned |
|
$ |
437,970 |
|
$ |
244,079 |
|
$ |
682,049 |
|
$ |
411,881 |
|
$ |
215,528 |
|
$ |
627,409 |
|
Fee income |
|
661 |
|
187 |
|
848 |
|
864 |
|
10 |
|
874 |
| ||||||
Losses and loss adjustment expenses |
|
(290,608 |
) |
(133,376 |
) |
(423,984 |
) |
(265,411 |
) |
(93,782 |
) |
(359,193 |
) | ||||||
Acquisition expenses, net |
|
(76,763 |
) |
(43,442 |
) |
(120,205 |
) |
(67,309 |
) |
(43,970 |
) |
(111,279 |
) | ||||||
Other operating expenses |
|
(77,078 |
) |
(22,740 |
) |
(99,818 |
) |
(77,078 |
) |
(20,247 |
) |
(97,325 |
) | ||||||
Underwriting income (loss) |
|
$ |
(5,818 |
) |
$ |
44,708 |
|
38,890 |
|
$ |
2,947 |
|
$ |
57,539 |
|
60,486 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net investment income |
|
|
|
|
|
82,753 |
|
|
|
|
|
90,768 |
| ||||||
Net realized gains |
|
|
|
|
|
30,199 |
|
|
|
|
|
68,828 |
| ||||||
Net impairment losses recognized in earnings |
|
|
|
|
|
(2,739 |
) |
|
|
|
|
(2,075 |
) | ||||||
Equity in net income (loss) of investment funds accounted for using the equity method |
|
|
|
|
|
(30,549 |
) |
|
|
|
|
9,708 |
| ||||||
Other income |
|
|
|
|
|
2,432 |
|
|
|
|
|
1,840 |
| ||||||
Other expenses |
|
|
|
|
|
(6,180 |
) |
|
|
|
|
(5,796 |
) | ||||||
Interest expense |
|
|
|
|
|
(8,125 |
) |
|
|
|
|
(7,371 |
) | ||||||
Net foreign exchange gains (losses) |
|
|
|
|
|
60,040 |
|
|
|
|
|
(65,157 |
) | ||||||
Income before income taxes |
|
|
|
|
|
166,721 |
|
|
|
|
|
151,231 |
| ||||||
Income tax benefit (expense) |
|
|
|
|
|
2,267 |
|
|
|
|
|
(3,200 |
) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net income |
|
|
|
|
|
168,988 |
|
|
|
|
|
148,031 |
| ||||||
Preferred dividends |
|
|
|
|
|
(6,461 |
) |
|
|
|
|
(6,461 |
) | ||||||
Net income available to common shareholders |
|
|
|
|
|
$ |
162,527 |
|
|
|
|
|
$ |
141,570 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Underwriting Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Loss ratio |
|
66.4 |
% |
54.6 |
% |
62.2 |
% |
64.4 |
% |
43.5 |
% |
57.3 |
% | ||||||
Acquisition expense ratio (2) |
|
17.4 |
% |
17.8 |
% |
17.5 |
% |
16.1 |
% |
20.4 |
% |
17.6 |
% | ||||||
Other operating expense ratio |
|
17.6 |
% |
9.3 |
% |
14.6 |
% |
18.7 |
% |
9.4 |
% |
15.5 |
% | ||||||
Combined ratio |
|
101.4 |
% |
81.7 |
% |
94.3 |
% |
99.2 |
% |
73.3 |
% |
90.4 |
% | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net premiums written to gross premiums written |
|
74.6 |
% |
95.9 |
% |
80.4 |
% |
69.1 |
% |
98.1 |
% |
76.5 |
% |
(1) Certain amounts included in the gross premiums written of each segment are related to intersegment transactions and are included in the gross premiums written of each segment. Accordingly, the sum of gross premiums written for each segment does not agree to the total gross premiums written as shown in the table above due to the elimination of intersegment transactions in the total.
(2) The acquisition expense ratio is adjusted to include certain fee income.
Arch Capital Group Ltd. and Subsidiaries
Segment Information Nine Months Ended September 30, 2011 and 2010
(U.S. dollars in thousands)
|
|
Nine Months Ended |
|
Nine Months Ended |
| ||||||||||||||
|
|
September 30, 2011 |
|
September 30, 2010 |
| ||||||||||||||
|
|
Insurance |
|
Reinsurance |
|
Total |
|
Insurance |
|
Reinsurance |
|
Total |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Gross premiums written (1) |
|
$ |
1,903,868 |
|
$ |
836,616 |
|
$ |
2,736,794 |
|
$ |
1,874,419 |
|
$ |
735,942 |
|
$ |
2,602,575 |
|
Net premiums written |
|
1,360,540 |
|
801,662 |
|
2,162,202 |
|
1,307,122 |
|
721,007 |
|
2,028,129 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net premiums earned |
|
$ |
1,256,380 |
|
$ |
702,243 |
|
$ |
1,958,623 |
|
$ |
1,246,831 |
|
$ |
673,506 |
|
$ |
1,920,337 |
|
Fee income |
|
2,141 |
|
306 |
|
2,447 |
|
2,491 |
|
60 |
|
2,551 |
| ||||||
Losses and loss adjustment expenses |
|
(889,973 |
) |
(459,513 |
) |
(1,349,486 |
) |
(852,716 |
) |
(297,673 |
) |
(1,150,389 |
) | ||||||
Acquisition expenses, net |
|
(204,721 |
) |
(134,877 |
) |
(339,598 |
) |
(200,099 |
) |
(136,279 |
) |
(336,378 |
) | ||||||
Other operating expenses |
|
(228,580 |
) |
(65,798 |
) |
(294,378 |
) |
(229,525 |
) |
(59,948 |
) |
(289,473 |
) | ||||||
Underwriting income (loss) |
|
$ |
(64,753 |
) |
$ |
42,361 |
|
(22,392 |
) |
$ |
(33,018 |
) |
$ |
179,666 |
|
146,648 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net investment income |
|
|
|
|
|
257,731 |
|
|
|
|
|
274,277 |
| ||||||
Net realized gains |
|
|
|
|
|
96,104 |
|
|
|
|
|
178,724 |
| ||||||
Net impairment losses recognized in earnings |
|
|
|
|
|
(7,103 |
) |
|
|
|
|
(8,091 |
) | ||||||
Equity in net income of investment funds accounted for using the equity method |
|
|
|
|
|
5,097 |
|
|
|
|
|
38,410 |
| ||||||
Other income |
|
|
|
|
|
2,734 |
|
|
|
|
|
12,346 |
| ||||||
Other expenses |
|
|
|
|
|
(24,603 |
) |
|
|
|
|
(21,987 |
) | ||||||
Interest expense |
|
|
|
|
|
(23,604 |
) |
|
|
|
|
(22,547 |
) | ||||||
Net foreign exchange gains |
|
|
|
|
|
4,753 |
|
|
|
|
|
22,069 |
| ||||||
Income before income taxes |
|
|
|
|
|
288,717 |
|
|
|
|
|
619,849 |
| ||||||
Income tax expense |
|
|
|
|
|
4,369 |
|
|
|
|
|
(11,373 |
) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net income |
|
|
|
|
|
293,086 |
|
|
|
|
|
608,476 |
| ||||||
Preferred dividends |
|
|
|
|
|
(19,383 |
) |
|
|
|
|
(19,383 |
) | ||||||
Net income available to common shareholders |
|
|
|
|
|
$ |
273,703 |
|
|
|
|
|
$ |
589,093 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Underwriting Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Loss ratio |
|
70.8 |
% |
65.4 |
% |
68.9 |
% |
68.4 |
% |
44.2 |
% |
59.9 |
% | ||||||
Acquisition expense ratio (2) |
|
16.1 |
% |
19.2 |
% |
17.2 |
% |
15.8 |
% |
20.2 |
% |
17.4 |
% | ||||||
Other operating expense ratio |
|
18.2 |
% |
9.4 |
% |
15.0 |
% |
18.4 |
% |
8.9 |
% |
15.1 |
% | ||||||
Combined ratio |
|
105.1 |
% |
94.0 |
% |
101.1 |
% |
102.6 |
% |
73.3 |
% |
92.4 |
% | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net premiums written to gross premiums written |
|
71.5 |
% |
95.8 |
% |
79.0 |
% |
69.7 |
% |
98.0 |
% |
77.9 |
% |
(1) Certain amounts included in the gross premiums written of each segment are related to intersegment transactions and are included in the gross premiums written of each segment. Accordingly, the sum of gross premiums written for each segment does not agree to the total gross premiums written as shown in the table above due to the elimination of intersegment transactions in the total.
(2) The acquisition expense ratio is adjusted to include certain fee income.
Arch Capital Group Ltd. and Subsidiaries
Segment Information Insurance Segment
(U.S. dollars in thousands)
|
|
Three Months Ended |
|
Nine Months Ended |
| ||||||||||||||||
|
|
September 30, |
|
September 30, |
| ||||||||||||||||
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
| ||||||||||||
|
|
Amount |
|
% of Total |
|
Amount |
|
% of Total |
|
Amount |
|
% of Total |
|
Amount |
|
% of Total |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net premiums written |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Property, energy, marine and aviation |
|
$ |
114,631 |
|
24.2 |
|
$ |
88,412 |
|
20.5 |
|
$ |
294,345 |
|
21.6 |
|
$ |
277,271 |
|
21.2 |
|
Programs |
|
79,086 |
|
16.7 |
|
68,264 |
|
15.8 |
|
235,111 |
|
17.3 |
|
212,107 |
|
16.2 |
| ||||
Professional liability |
|
66,484 |
|
14.1 |
|
78,873 |
|
18.3 |
|
183,775 |
|
13.5 |
|
216,617 |
|
16.6 |
| ||||
Executive assurance |
|
62,328 |
|
13.2 |
|
51,503 |
|
11.9 |
|
172,370 |
|
12.7 |
|
165,010 |
|
12.6 |
| ||||
National accounts casualty |
|
17,275 |
|
3.7 |
|
19,215 |
|
4.5 |
|
61,863 |
|
4.5 |
|
53,901 |
|
4.1 |
| ||||
Construction |
|
23,576 |
|
5.0 |
|
20,245 |
|
4.7 |
|
97,493 |
|
7.2 |
|
92,813 |
|
7.1 |
| ||||
Casualty |
|
30,563 |
|
6.5 |
|
28,493 |
|
6.6 |
|
85,636 |
|
6.3 |
|
80,573 |
|
6.2 |
| ||||
Travel and accident |
|
17,404 |
|
3.7 |
|
19,673 |
|
4.6 |
|
58,189 |
|
4.3 |
|
56,751 |
|
4.3 |
| ||||
Lenders products |
|
22,551 |
|
4.8 |
|
23,452 |
|
5.4 |
|
65,151 |
|
4.8 |
|
61,979 |
|
4.7 |
| ||||
Healthcare |
|
8,810 |
|
1.9 |
|
8,705 |
|
2.0 |
|
26,349 |
|
1.9 |
|
27,218 |
|
2.1 |
| ||||
Surety |
|
10,389 |
|
2.2 |
|
11,128 |
|
2.6 |
|
29,741 |
|
2.2 |
|
26,231 |
|
2.0 |
| ||||
Other (1) |
|
19,889 |
|
4.0 |
|
13,398 |
|
3.1 |
|
50,517 |
|
3.7 |
|
36,651 |
|
2.9 |
| ||||
Total |
|
$ |
472,986 |
|
100.0 |
|
$ |
431,361 |
|
100.0 |
|
$ |
1,360,540 |
|
100.0 |
|
$ |
1,307,122 |
|
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net premiums earned |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Property, energy, marine and aviation |
|
$ |
92,288 |
|
21.1 |
|
$ |
82,301 |
|
20.0 |
|
$ |
242,531 |
|
19.3 |
|
$ |
258,156 |
|
20.7 |
|
Programs |
|
73,561 |
|
16.8 |
|
68,404 |
|
16.6 |
|
212,513 |
|
16.9 |
|
202,944 |
|
16.3 |
| ||||
Professional liability |
|
64,403 |
|
14.7 |
|
69,900 |
|
17.0 |
|
189,570 |
|
15.1 |
|
201,451 |
|
16.2 |
| ||||
Executive assurance |
|
56,783 |
|
13.0 |
|
51,675 |
|
12.5 |
|
171,841 |
|
13.7 |
|
162,865 |
|
13.1 |
| ||||
National accounts casualty |
|
19,642 |
|
4.5 |
|
18,595 |
|
4.5 |
|
58,970 |
|
4.7 |
|
57,178 |
|
4.6 |
| ||||
Construction |
|
28,590 |
|
6.5 |
|
25,664 |
|
6.2 |
|
84,195 |
|
6.7 |
|
82,557 |
|
6.6 |
| ||||
Casualty |
|
30,305 |
|
6.9 |
|
27,503 |
|
6.7 |
|
83,561 |
|
6.7 |
|
83,720 |
|
6.7 |
| ||||
Travel and accident |
|
19,051 |
|
4.3 |
|
17,418 |
|
4.2 |
|
54,105 |
|
4.3 |
|
51,086 |
|
4.1 |
| ||||
Lenders products |
|
18,293 |
|
4.2 |
|
17,593 |
|
4.3 |
|
56,495 |
|
4.5 |
|
51,553 |
|
4.1 |
| ||||
Healthcare |
|
9,340 |
|
2.1 |
|
9,738 |
|
2.4 |
|
27,081 |
|
2.2 |
|
30,021 |
|
2.4 |
| ||||
Surety |
|
10,091 |
|
2.3 |
|
9,876 |
|
2.4 |
|
29,272 |
|
2.3 |
|
28,157 |
|
2.3 |
| ||||
Other (1) |
|
15,623 |
|
3.6 |
|
13,214 |
|
3.2 |
|
46,246 |
|
3.6 |
|
37,143 |
|
2.9 |
| ||||
Total |
|
$ |
437,970 |
|
100.0 |
|
$ |
411,881 |
|
100.0 |
|
$ |
1,256,380 |
|
100.0 |
|
$ |
1,246,831 |
|
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net premiums written by client location |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
United States |
|
$ |
313,028 |
|
66.2 |
|
$ |
298,188 |
|
69.1 |
|
$ |
942,421 |
|
69.3 |
|
$ |
923,012 |
|
70.6 |
|
Europe |
|
64,870 |
|
13.7 |
|
64,320 |
|
14.9 |
|
224,758 |
|
16.5 |
|
227,783 |
|
17.4 |
| ||||
Other |
|
95,088 |
|
20.1 |
|
68,853 |
|
16.0 |
|
193,361 |
|
14.2 |
|
156,327 |
|
12.0 |
| ||||
Total |
|
$ |
472,986 |
|
100.0 |
|
$ |
431,361 |
|
100.0 |
|
$ |
1,360,540 |
|
100.0 |
|
$ |
1,307,122 |
|
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net premiums written by underwriting location |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
United States |
|
$ |
302,547 |
|
64.0 |
|
$ |
285,126 |
|
66.1 |
|
$ |
899,372 |
|
66.1 |
|
$ |
884,974 |
|
67.7 |
|
Europe |
|
145,112 |
|
30.7 |
|
133,349 |
|
30.9 |
|
385,532 |
|
28.3 |
|
357,751 |
|
27.4 |
| ||||
Other |
|
25,327 |
|
5.3 |
|
12,886 |
|
3.0 |
|
75,636 |
|
5.6 |
|
64,397 |
|
4.9 |
| ||||
Total |
|
$ |
472,986 |
|
100.0 |
|
$ |
431,361 |
|
100.0 |
|
$ |
1,360,540 |
|
100.0 |
|
$ |
1,307,122 |
|
100.0 |
|
(1) Includes excess workers compensation and employers liability business.
Arch Capital Group Ltd. and Subsidiaries
Segment Information Insurance Segment
(U.S. dollars in thousands)
|
|
Three Months Ended |
|
Nine Months Ended |
| |||||||||||||||||||||||||||||
|
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
September 30, |
|
September 30, |
| |||||||||||
|
|
2011 |
|
2011 |
|
2011 |
|
2010 |
|
2010 |
|
2010 |
|
2010 |
|
2009 |
|
2009 |
|
2011 |
|
2010 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Gross premiums written |
|
$ |
634,280 |
|
$ |
635,005 |
|
$ |
634,583 |
|
$ |
527,783 |
|
$ |
624,490 |
|
$ |
616,353 |
|
$ |
633,576 |
|
$ |
563,087 |
|
$ |
673,986 |
|
$ |
1,903,868 |
|
$ |
1,874,419 |
|
Net premiums written |
|
472,986 |
|
438,263 |
|
449,291 |
|
351,841 |
|
431,361 |
|
422,837 |
|
452,924 |
|
369,704 |
|
473,676 |
|
1,360,540 |
|
1,307,122 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net premiums earned |
|
$ |
437,970 |
|
$ |
410,819 |
|
$ |
407,591 |
|
$ |
404,275 |
|
$ |
411,881 |
|
$ |
405,473 |
|
$ |
429,477 |
|
$ |
426,649 |
|
$ |
443,319 |
|
$ |
1,256,380 |
|
$ |
1,246,831 |
|
Fee income |
|
661 |
|
702 |
|
778 |
|
761 |
|
864 |
|
874 |
|
753 |
|
883 |
|
814 |
|
2,141 |
|
2,491 |
| |||||||||||
Losses and loss adjustment expenses |
|
(290,608 |
) |
(301,642 |
) |
(297,723 |
) |
(264,848 |
) |
(265,411 |
) |
(275,294 |
) |
(312,011 |
) |
(278,746 |
) |
(303,304 |
) |
(889,973 |
) |
(852,716 |
) | |||||||||||
Acquisition expenses, net |
|
(76,763 |
) |
(66,543 |
) |
(61,415 |
) |
(63,102 |
) |
(67,309 |
) |
(65,359 |
) |
(67,431 |
) |
(60,926 |
) |
(60,964 |
) |
(204,721 |
) |
(200,099 |
) | |||||||||||
Other operating expenses |
|
(77,078 |
) |
(76,765 |
) |
(74,737 |
) |
(82,879 |
) |
(77,078 |
) |
(71,727 |
) |
(80,720 |
) |
(75,144 |
) |
(72,452 |
) |
(228,580 |
) |
(229,525 |
) | |||||||||||
Underwriting income (loss) |
|
$ |
(5,818 |
) |
$ |
(33,429 |
) |
$ |
(25,506 |
) |
$ |
(5,793 |
) |
$ |
2,947 |
|
$ |
(6,033 |
) |
$ |
(29,932 |
) |
$ |
12,716 |
|
$ |
7,413 |
|
$ |
(64,753 |
) |
$ |
(33,018 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Underwriting Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Loss ratio |
|
66.4 |
% |
73.4 |
% |
73.0 |
% |
65.5 |
% |
64.4 |
% |
67.9 |
% |
72.6 |
% |
65.3 |
% |
68.4 |
% |
70.8 |
% |
68.4 |
% | |||||||||||
Acquisition expense ratio (1) |
|
17.4 |
% |
16.0 |
% |
14.9 |
% |
15.4 |
% |
16.1 |
% |
15.9 |
% |
15.5 |
% |
14.1 |
% |
13.6 |
% |
16.1 |
% |
15.8 |
% | |||||||||||
Other operating expense ratio |
|
17.6 |
% |
18.7 |
% |
18.3 |
% |
20.5 |
% |
18.7 |
% |
17.7 |
% |
18.8 |
% |
17.6 |
% |
16.3 |
% |
18.2 |
% |
18.4 |
% | |||||||||||
Combined ratio |
|
101.4 |
% |
108.1 |
% |
106.2 |
% |
101.4 |
% |
99.2 |
% |
101.5 |
% |
106.9 |
% |
97.0 |
% |
98.3 |
% |
105.1 |
% |
102.6 |
% | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net premiums written |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Property, energy, marine and aviation |
|
$ |
114,631 |
|
$ |
103,296 |
|
$ |
76,418 |
|
$ |
44,258 |
|
$ |
88,412 |
|
$ |
88,194 |
|
$ |
100,665 |
|
$ |
42,811 |
|
$ |
118,536 |
|
$ |
294,345 |
|
$ |
277,271 |
|
Programs |
|
79,086 |
|
81,629 |
|
74,396 |
|
60,969 |
|
68,264 |
|
73,345 |
|
70,498 |
|
60,685 |
|
66,964 |
|
235,111 |
|
212,107 |
| |||||||||||
Professional liability |
|
66,484 |
|
57,906 |
|
59,385 |
|
51,559 |
|
78,873 |
|
70,626 |
|
67,118 |
|
64,385 |
|
72,566 |
|
183,775 |
|
216,617 |
| |||||||||||
Executive assurance |
|
62,328 |
|
53,974 |
|
56,068 |
|
54,448 |
|
51,503 |
|
52,514 |
|
60,993 |
|
58,561 |
|
58,529 |
|
172,370 |
|
165,010 |
| |||||||||||
National accounts casualty |
|
17,275 |
|
4,397 |
|
40,191 |
|
14,024 |
|
19,215 |
|
3,877 |
|
30,809 |
|
16,553 |
|
30,726 |
|
61,863 |
|
53,901 |
| |||||||||||
Construction |
|
23,576 |
|
42,408 |
|
31,509 |
|
20,014 |
|
20,245 |
|
44,276 |
|
28,292 |
|
20,227 |
|
30,259 |
|
97,493 |
|
92,813 |
| |||||||||||
Casualty |
|
30,563 |
|
24,939 |
|
30,134 |
|
27,389 |
|
28,493 |
|
26,617 |
|
25,463 |
|
23,037 |
|
26,753 |
|
85,636 |
|
80,573 |
| |||||||||||
Travel and accident |
|
17,404 |
|
19,284 |
|
21,501 |
|
14,486 |
|
19,673 |
|
15,272 |
|
21,806 |
|
15,528 |
|
15,998 |
|
58,189 |
|
56,751 |
| |||||||||||
Lenders products |
|
22,551 |
|
21,526 |
|
21,074 |
|
30,942 |
|
23,452 |
|
22,208 |
|
16,319 |
|
34,150 |
|
14,774 |
|
65,151 |
|
61,979 |
| |||||||||||
Healthcare |
|
8,810 |
|
8,422 |
|
9,117 |
|
10,290 |
|
8,705 |
|
9,989 |
|
8,524 |
|
10,610 |
|
10,854 |
|
26,349 |
|
27,218 |
| |||||||||||
Surety |
|
10,389 |
|
9,618 |
|
9,734 |
|
7,918 |
|
11,128 |
|
7,012 |
|
8,091 |
|
10,716 |
|
12,025 |
|
29,741 |
|
26,231 |
| |||||||||||
Other (2) |
|
19,889 |
|
10,864 |
|
19,764 |
|
15,544 |
|
13,398 |
|
8,907 |
|
14,346 |
|
12,441 |
|
15,692 |
|
50,517 |
|
36,651 |
| |||||||||||
Total |
|
$ |
472,986 |
|
$ |
438,263 |
|
$ |
449,291 |
|
$ |
351,841 |
|
$ |
431,361 |
|
$ |
422,837 |
|
$ |
452,924 |
|
$ |
369,704 |
|
$ |
473,676 |
|
$ |
1,360,540 |
|
$ |
1,307,122 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net premiums earned |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Property, energy, marine and aviation |
|
$ |
92,288 |
|
$ |
76,644 |
|
$ |
73,599 |
|
$ |
77,811 |
|
$ |
82,301 |
|
$ |
80,818 |
|
$ |
95,037 |
|
$ |
91,549 |
|
$ |
94,471 |
|
$ |
242,531 |
|
$ |
258,156 |
|
Programs |
|
73,561 |
|
71,934 |
|
67,018 |
|
69,462 |
|
68,404 |
|
68,381 |
|
66,159 |
|
67,672 |
|
69,436 |
|
212,513 |
|
202,944 |
| |||||||||||
Professional liability |
|
64,403 |
|
57,767 |
|
67,400 |
|
63,152 |
|
69,900 |
|
63,642 |
|
67,909 |
|
64,987 |
|
63,368 |
|
189,570 |
|
201,451 |
| |||||||||||
Executive assurance |
|
56,783 |
|
60,488 |
|
54,570 |
|
55,270 |
|
51,675 |
|
54,958 |
|
56,232 |
|
56,764 |
|
56,094 |
|
171,841 |
|
162,865 |
| |||||||||||
National accounts casualty |
|
19,642 |
|
18,166 |
|
21,162 |
|
17,360 |
|
18,595 |
|
16,810 |
|
21,773 |
|
19,606 |
|
19,969 |
|
58,970 |
|
57,178 |
| |||||||||||
Construction |
|
28,590 |
|
27,214 |
|
28,391 |
|
26,837 |
|
25,664 |
|
27,982 |
|
28,911 |
|
31,491 |
|
36,667 |
|
84,195 |
|
82,557 |
| |||||||||||
Casualty |
|
30,305 |
|
24,829 |
|
28,427 |
|
25,893 |
|
27,503 |
|
28,148 |
|
28,069 |
|
27,198 |
|
30,004 |
|
83,561 |
|
83,720 |
| |||||||||||
Travel and accident |
|
19,051 |
|
19,455 |
|
15,599 |
|
15,705 |
|
17,418 |
|
17,590 |
|
16,078 |
|
16,580 |
|
18,193 |
|
54,105 |
|
51,086 |
| |||||||||||
Lenders products |
|
18,293 |
|
19,966 |
|
18,236 |
|
19,617 |
|
17,593 |
|
17,153 |
|
16,807 |
|
17,201 |
|
15,353 |
|
56,495 |
|
51,553 |
| |||||||||||
Healthcare |
|
9,340 |
|
9,089 |
|
8,652 |
|
9,701 |
|
9,738 |
|
10,340 |
|
9,943 |
|
9,886 |
|
12,303 |
|
27,081 |
|
30,021 |
| |||||||||||
Surety |
|
10,091 |
|
9,402 |
|
9,779 |
|
9,810 |
|
9,876 |
|
8,023 |
|
10,258 |
|
11,448 |
|
12,239 |
|
29,272 |
|
28,157 |
| |||||||||||
Other (2) |
|
15,623 |
|
15,865 |
|
14,758 |
|
13,657 |
|
13,214 |
|
11,628 |
|
12,301 |
|
12,268 |
|
15,222 |
|
46,246 |
|
37,143 |
| |||||||||||
Total |
|
$ |
437,970 |
|
$ |
410,819 |
|
$ |
407,591 |
|
$ |
404,275 |
|
$ |
411,881 |
|
$ |
405,473 |
|
$ |
429,477 |
|
$ |
426,649 |
|
$ |
443,319 |
|
$ |
1,256,380 |
|
$ |
1,246,831 |
|
(1) The acquisition expense ratio is adjusted to include certain fee income.
(2) Includes excess workers compensation and employers liability business.
Arch Capital Group Ltd. and Subsidiaries
Segment Information Reinsurance Segment
(U.S. dollars in thousands)
|
|
Three Months Ended |
|
Nine Months Ended |
| ||||||||||||||||
|
|
September 30, |
|
September 30, |
| ||||||||||||||||
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
| ||||||||||||
|
|
Amount |
|
% of Total |
|
Amount |
|
% of Total |
|
Amount |
|
% of Total |
|
Amount |
|
% of Total |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net premiums written |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Casualty (1) |
|
$ |
34,873 |
|
16.0 |
|
$ |
38,276 |
|
18.7 |
|
$ |
146,989 |
|
18.3 |
|
$ |
154,500 |
|
21.4 |
|
Property excluding property catastrophe (2) |
|
64,495 |
|
29.5 |
|
70,149 |
|
34.3 |
|
189,583 |
|
23.6 |
|
202,956 |
|
28.1 |
| ||||
Other specialty |
|
40,882 |
|
18.7 |
|
30,468 |
|
14.9 |
|
162,464 |
|
20.3 |
|
104,150 |
|
14.4 |
| ||||
Property catastrophe |
|
59,961 |
|
27.5 |
|
40,255 |
|
19.7 |
|
235,157 |
|
29.3 |
|
199,460 |
|
27.7 |
| ||||
Marine and aviation |
|
17,037 |
|
7.8 |
|
24,913 |
|
12.2 |
|
61,179 |
|
7.6 |
|
55,760 |
|
7.7 |
| ||||
Other |
|
1,147 |
|
0.5 |
|
695 |
|
0.2 |
|
6,290 |
|
0.9 |
|
4,181 |
|
0.7 |
| ||||
Total |
|
$ |
218,395 |
|
100.0 |
|
$ |
204,756 |
|
100.0 |
|
$ |
801,662 |
|
100.0 |
|
$ |
721,007 |
|
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net premiums earned |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Casualty (1) |
|
$ |
49,066 |
|
20.1 |
|
$ |
52,792 |
|
24.5 |
|
$ |
149,053 |
|
21.2 |
|
$ |
182,729 |
|
27.1 |
|
Property excluding property catastrophe (2) |
|
62,565 |
|
25.6 |
|
66,438 |
|
30.8 |
|
183,095 |
|
26.1 |
|
211,419 |
|
31.4 |
| ||||
Other specialty |
|
48,722 |
|
20.0 |
|
25,254 |
|
11.7 |
|
128,202 |
|
18.3 |
|
65,315 |
|
9.7 |
| ||||
Property catastrophe |
|
64,910 |
|
26.6 |
|
54,206 |
|
25.2 |
|
176,340 |
|
25.1 |
|
160,380 |
|
23.8 |
| ||||
Marine and aviation |
|
17,739 |
|
7.3 |
|
16,106 |
|
7.5 |
|
60,458 |
|
8.6 |
|
50,441 |
|
7.5 |
| ||||
Other |
|
1,077 |
|
0.4 |
|
732 |
|
0.3 |
|
5,095 |
|
0.7 |
|
3,222 |
|
0.5 |
| ||||
Total |
|
$ |
244,079 |
|
100.0 |
|
$ |
215,528 |
|
100.0 |
|
$ |
702,243 |
|
100.0 |
|
$ |
673,506 |
|
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net premiums written |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Pro rata |
|
$ |
99,884 |
|
45.7 |
|
$ |
105,844 |
|
51.7 |
|
$ |
310,412 |
|
38.7 |
|
$ |
308,838 |
|
42.8 |
|
Excess of loss |
|
118,511 |
|
54.3 |
|
98,912 |
|
48.3 |
|
491,250 |
|
61.3 |
|
412,169 |
|
57.2 |
| ||||
Total |
|
$ |
218,395 |
|
100.0 |
|
$ |
204,756 |
|
100.0 |
|
$ |
801,662 |
|
100.0 |
|
$ |
721,007 |
|
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net premiums earned |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Pro rata |
|
$ |
110,091 |
|
45.1 |
|
$ |
103,698 |
|
48.1 |
|
$ |
320,711 |
|
45.7 |
|
$ |
336,943 |
|
50.0 |
|
Excess of loss |
|
133,988 |
|
54.9 |
|
111,830 |
|
51.9 |
|
381,532 |
|
54.3 |
|
336,563 |
|
50.0 |
| ||||
Total |
|
$ |
244,079 |
|
100.0 |
|
$ |
215,528 |
|
100.0 |
|
$ |
702,243 |
|
100.0 |
|
$ |
673,506 |
|
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net premiums written by client location |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
United States |
|
$ |
115,128 |
|
52.7 |
|
$ |
126,882 |
|
62.0 |
|
$ |
451,459 |
|
56.3 |
|
$ |
433,257 |
|
60.1 |
|
Europe |
|
39,892 |
|
18.3 |
|
25,050 |
|
12.2 |
|
215,974 |
|
26.9 |
|
165,570 |
|
23.0 |
| ||||
Bermuda |
|
17,027 |
|
7.8 |
|
16,330 |
|
8.0 |
|
44,192 |
|
5.5 |
|
62,027 |
|
8.6 |
| ||||
Other |
|
46,348 |
|
21.2 |
|
36,494 |
|
17.8 |
|
90,037 |
|
11.3 |
|
60,153 |
|
8.3 |
| ||||
Total |
|
$ |
218,395 |
|
100.0 |
|
$ |
204,756 |
|
100.0 |
|
$ |
801,662 |
|
100.0 |
|
$ |
721,007 |
|
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net premiums written by underwriting location |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Bermuda |
|
$ |
127,553 |
|
58.4 |
|
$ |
116,433 |
|
56.9 |
|
$ |
449,167 |
|
56.0 |
|
$ |
397,935 |
|
55.2 |
|
United States |
|
77,972 |
|
35.7 |
|
76,183 |
|
37.2 |
|
268,337 |
|
33.5 |
|
250,204 |
|
34.7 |
| ||||
Other |
|
12,870 |
|
5.9 |
|
12,140 |
|
5.9 |
|
84,158 |
|
10.5 |
|
72,868 |
|
10.1 |
| ||||
Total |
|
$ |
218,395 |
|
100.0 |
|
$ |
204,756 |
|
100.0 |
|
$ |
801,662 |
|
100.0 |
|
$ |
721,007 |
|
100.0 |
|
(1) Includes professional liability, executive assurance and healthcare business.
(2) Includes facultative business.
Arch Capital Group Ltd. and Subsidiaries
Segment Information Reinsurance Segment
(U.S. dollars in thousands)
|
|
Three Months Ended |
|
Nine Months Ended |
| |||||||||||||||||||||||||||||
|
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
September 30, |
|
September 30, |
| |||||||||||
|
|
2011 |
|
2011 |
|
2011 |
|
2010 |
|
2010 |
|
2010 |
|
2010 |
|
2009 |
|
2009 |
|
2011 |
|
2010 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Gross premiums written |
|
$ |
227,837 |
|
$ |
277,766 |
|
$ |
331,013 |
|
$ |
139,015 |
|
$ |
208,770 |
|
$ |
203,695 |
|
$ |
323,477 |
|
$ |
159,229 |
|
$ |
266,193 |
|
$ |
836,616 |
|
$ |
735,942 |
|
Net premiums written |
|
218,395 |
|
268,280 |
|
314,987 |
|
131,070 |
|
204,756 |
|
201,421 |
|
314,830 |
|
149,383 |
|
253,632 |
|
801,662 |
|
721,007 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net premiums earned |
|
$ |
244,079 |
|
$ |
232,060 |
|
$ |
226,104 |
|
$ |
227,871 |
|
$ |
215,528 |
|
$ |
217,538 |
|
$ |
240,440 |
|
$ |
281,889 |
|
$ |
291,066 |
|
$ |
702,243 |
|
$ |
673,506 |
|
Fee income |
|
187 |
|
82 |
|
37 |
|
2,053 |
|
10 |
|
9 |
|
41 |
|
11 |
|
12 |
|
306 |
|
60 |
| |||||||||||
Losses and loss adjustment expenses |
|
(133,376 |
) |
(129,980 |
) |
(196,157 |
) |
(102,478 |
) |
(93,782 |
) |
(87,851 |
) |
(116,040 |
) |
(131,614 |
) |
(141,610 |
) |
(459,513 |
) |
(297,673 |
) | |||||||||||
Acquisition expenses, net |
|
(43,442 |
) |
(44,096 |
) |
(47,339 |
) |
(41,722 |
) |
(43,970 |
) |
(42,116 |
) |
(50,193 |
) |
(59,623 |
) |
(61,775 |
) |
(134,877 |
) |
(136,279 |
) | |||||||||||
Other operating expenses |
|
(22,740 |
) |
(22,401 |
) |
(20,657 |
) |
(31,575 |
) |
(20,247 |
) |
(19,303 |
) |
(20,398 |
) |
(24,161 |
) |
(21,271 |
) |
(65,798 |
) |
(59,948 |
) | |||||||||||
Underwriting income (loss) |
|
$ |
44,708 |
|
$ |
35,665 |
|
$ |
(38,012 |
) |
$ |
54,149 |
|
$ |
57,539 |
|
$ |
68,277 |
|
$ |
53,850 |
|
$ |
66,502 |
|
$ |
66,422 |
|
$ |
42,361 |
|
$ |
179,666 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Underwriting Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Loss ratio |
|
54.6 |
% |
56.0 |
% |
86.8 |
% |
45.0 |
% |
43.5 |
% |
40.4 |
% |
48.3 |
% |
46.7 |
% |
48.7 |
% |
65.4 |
% |
44.2 |
% | |||||||||||
Acquisition expense ratio |
|
17.8 |
% |
19.0 |
% |
20.9 |
% |
18.3 |
% |
20.4 |
% |
19.4 |
% |
20.9 |
% |
21.2 |
% |
21.2 |
% |
19.2 |
% |
20.2 |
% | |||||||||||
Other operating expense ratio |
|
9.3 |
% |
9.7 |
% |
9.1 |
% |
13.9 |
% |
9.4 |
% |
8.9 |
% |
8.5 |
% |
8.6 |
% |
7.3 |
% |
9.4 |
% |
8.9 |
% | |||||||||||
Combined ratio |
|
81.7 |
% |
84.7 |
% |
116.8 |
% |
77.2 |
% |
73.3 |
% |
68.7 |
% |
77.7 |
% |
76.5 |
% |
77.2 |
% |
94.0 |
% |
73.3 |
% | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net premiums written |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Casualty (1) |
|
$ |
34,873 |
|
$ |
40,755 |
|
$ |
71,361 |
|
$ |
32,274 |
|
$ |
38,276 |
|
$ |
43,642 |
|
$ |
72,582 |
|
$ |
68,693 |
|
$ |
85,084 |
|
$ |
146,989 |
|
$ |
154,500 |
|
Property excluding property catastrophe (2) |
|
64,495 |
|
53,938 |
|
71,150 |
|
46,835 |
|
70,149 |
|
57,880 |
|
74,927 |
|
49,413 |
|
90,845 |
|
189,583 |
|
202,956 |
| |||||||||||
Other specialty |
|
40,882 |
|
43,937 |
|
77,645 |
|
27,008 |
|
30,468 |
|
18,920 |
|
54,762 |
|
10,578 |
|
10,595 |
|
162,464 |
|
104,150 |
| |||||||||||
Property catastrophe |
|
59,961 |
|
108,235 |
|
66,961 |
|
3,529 |
|
40,255 |
|
70,403 |
|
88,802 |
|
3,022 |
|
50,539 |
|
235,157 |
|
199,460 |
| |||||||||||
Marine and aviation |
|
17,037 |
|
19,978 |
|
24,164 |
|
21,303 |
|
24,913 |
|
9,609 |
|
21,238 |
|
17,576 |
|
16,187 |
|
61,179 |
|
55,760 |
| |||||||||||
Other |
|
1,147 |
|
1,437 |
|
3,706 |
|
121 |
|
695 |
|
967 |
|
2,519 |
|
101 |
|
382 |
|
6,290 |
|
4,181 |
| |||||||||||
Total |
|
$ |
218,395 |
|
$ |
268,280 |
|
$ |
314,987 |
|
$ |
131,070 |
|
$ |
204,756 |
|
$ |
201,421 |
|
$ |
314,830 |
|
$ |
149,383 |
|
$ |
253,632 |
|
$ |
801,662 |
|
$ |
721,007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net premiums earned |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Casualty (1) |
|
$ |
49,066 |
|
$ |
51,493 |
|
$ |
48,494 |
|
$ |
48,609 |
|
$ |
52,792 |
|
$ |
59,501 |
|
$ |
70,436 |
|
$ |
86,193 |
|
$ |
88,721 |
|
$ |
149,053 |
|
$ |
182,729 |
|
Property excluding property catastrophe (2) |
|
62,565 |
|
57,524 |
|
63,006 |
|
70,744 |
|
66,438 |
|
65,742 |
|
79,239 |
|
94,716 |
|
94,837 |
|
183,095 |
|
211,419 |
| |||||||||||
Other specialty |
|
48,722 |
|
40,511 |
|
38,969 |
|
30,296 |
|
25,254 |
|
22,292 |
|
17,769 |
|
24,085 |
|
23,251 |
|
128,202 |
|
65,315 |
| |||||||||||
Property catastrophe |
|
64,910 |
|
59,788 |
|
51,642 |
|
54,768 |
|
54,206 |
|
52,301 |
|
53,873 |
|
56,937 |
|
61,772 |
|
176,340 |
|
160,380 |
| |||||||||||
Marine and aviation |
|
17,739 |
|
21,093 |
|
21,626 |
|
22,445 |
|
16,106 |
|
16,263 |
|
18,072 |
|
18,882 |
|
21,666 |
|
60,458 |
|
50,441 |
| |||||||||||
Other |
|
1,077 |
|
1,651 |
|
2,367 |
|
1,009 |
|
732 |
|
1,439 |
|
1,051 |
|
1,076 |
|
819 |
|
5,095 |
|
3,222 |
| |||||||||||
Total |
|
$ |
244,079 |
|
$ |
232,060 |
|
$ |
226,104 |
|
$ |
227,871 |
|
$ |
215,528 |
|
$ |
217,538 |
|
$ |
240,440 |
|
$ |
281,889 |
|
$ |
291,066 |
|
$ |
702,243 |
|
$ |
673,506 |
|
(1) Includes professional liability, executive assurance and healthcare business.
(2) Includes facultative business.
Arch Capital Group Ltd. and Subsidiaries
Investment Information Investable Asset Summary, Investment Portfolio Metrics and Credit Quality Distribution
(U.S. dollars in thousands)
|
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
| |||||||||||||||
|
|
2011 |
|
2011 |
|
2011 |
|
2010 |
|
2010 |
| |||||||||||||||
Investable assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Fixed maturities available for sale, at fair value |
|
$ |
9,529,834 |
|
78 |
% |
$ |
9,247,002 |
|
77 |
% |
$ |
8,916,017 |
|
76 |
% |
$ |
8,957,859 |
|
76 |
% |
$ |
9,692,852 |
|
80 |
% |
Fixed maturities, at fair value (1) |
|
122,866 |
|
1 |
% |
102,897 |
|
1 |
% |
117,391 |
|
1 |
% |
124,969 |
|
1 |
% |
117,250 |
|
1 |
% | |||||
Fixed maturities pledged under securities lending agreements, at fair value (2) |
|
72,399 |
|
1 |
% |
150,501 |
|
1 |
% |
161,888 |
|
1 |
% |
75,575 |
|
1 |
% |
184,226 |
|
2 |
% | |||||
Total fixed maturities |
|
9,725,099 |
|
80 |
% |
9,500,400 |
|
79 |
% |
9,195,296 |
|
78 |
% |
9,158,403 |
|
78 |
% |
9,994,328 |
|
83 |
% | |||||
Short-term investments available for sale, at fair value |
|
799,662 |
|
6 |
% |
704,495 |
|
6 |
% |
1,130,142 |
|
10 |
% |
915,841 |
|
8 |
% |
780,671 |
|
6 |
% | |||||
Short-term investments pledged under securities lending agreements, at fair value (2) |
|
|
|
0 |
% |
|
|
0 |
% |
36,530 |
|
0 |
% |
|
|
0 |
% |
18,995 |
|
0 |
% | |||||
Cash |
|
369,895 |
|
3 |
% |
411,001 |
|
3 |
% |
406,877 |
|
3 |
% |
362,740 |
|
3 |
% |
365,997 |
|
3 |
% | |||||
Equity securities available for sale, at fair value |
|
273,213 |
|
2 |
% |
320,434 |
|
3 |
% |
361,639 |
|
3 |
% |
310,194 |
|
3 |
% |
79,805 |
|
1 |
% | |||||
Equity securities, at fair value (1) |
|
100,719 |
|
1 |
% |
152,844 |
|
1 |
% |
100,117 |
|
1 |
% |
94,204 |
|
1 |
% |
58,591 |
|
0 |
% | |||||
Other investments available for sale, at fair value |
|
229,974 |
|
2 |
% |
299,845 |
|
2 |
% |
293,073 |
|
2 |
% |
275,538 |
|
2 |
% |
229,488 |
|
3 |
% | |||||
Other investments, at fair value (1) |
|
95,796 |
|
1 |
% |
66,049 |
|
1 |
% |
39,106 |
|
0 |
% |
|
|
|
|
|
|
|
| |||||
TALF investments, at fair value (3) |
|
392,455 |
|
3 |
% |
399,341 |
|
3 |
% |
400,970 |
|
3 |
% |
402,449 |
|
3 |
% |
410,881 |
|
3 |
% | |||||
Investments accounted for using the equity method |
|
383,543 |
|
3 |
% |
399,968 |
|
3 |
% |
449,206 |
|
4 |
% |
508,334 |
|
4 |
% |
500,737 |
|
4 |
% | |||||
Securities sold but not yet purchased |
|
(46,526 |
) |
0 |
% |
(51,626 |
) |
0 |
% |
(41,863 |
) |
0 |
% |
(41,143 |
) |
(1 |
)% |
(17,792 |
) |
0 |
% | |||||
Securities transactions entered into but not settled at the balance sheet date |
|
(94,403 |
) |
(1 |
)% |
(104,856 |
) |
(1 |
)% |
(516,682 |
) |
(4 |
)% |
(144,047 |
) |
(1 |
)% |
(319,954 |
) |
(3 |
)% | |||||
Total investable assets (2) |
|
$ |
12,229,427 |
|
100 |
% |
$ |
12,097,895 |
|
100 |
% |
$ |
11,854,411 |
|
100 |
% |
$ |
11,842,513 |
|
100 |
% |
$ |
12,101,747 |
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Investment portfolio metrics (1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Average effective duration (in years) |
|
3.17 |
|
|
|
2.87 |
|
|
|
2.73 |
|
|
|
2.83 |
|
|
|
3.11 |
|
|
| |||||
Average credit quality |
|
AA+ |
|
|
|
AA+ |
|
|
|
AA+ |
|
|
|
AA+ |
|
|
|
AA+ |
|
|
| |||||
Imbedded book yield (before investment expenses) |
|
3.09 |
% |
|
|
3.23 |
% |
|
|
3.36 |
% |
|
|
3.52 |
% |
|
|
3.53 |
% |
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Credit quality distribution of total fixed maturities (2) (4): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
AAA |
|
$ |
6,421,366 |
|
66 |
% |
$ |
6,503,536 |
|
68 |
% |
$ |
6,435,249 |
|
70 |
% |
$ |
6,531,757 |
|
71 |
% |
$ |
7,503,390 |
|
75 |
% |
AA |
|
1,531,869 |
|
16 |
% |
1,194,430 |
|
13 |
% |
1,043,463 |
|
11 |
% |
1,053,666 |
|
12 |
% |
993,018 |
|
10 |
% | |||||
A |
|
754,421 |
|
8 |
% |
765,831 |
|
7 |
% |
697,002 |
|
7 |
% |
605,483 |
|
7 |
% |
573,298 |
|
6 |
% | |||||
BBB |
|
555,023 |
|
6 |
% |
472,491 |
|
5 |
% |
425,913 |
|
5 |
% |
388,564 |
|
4 |
% |
347,810 |
|
4 |
% | |||||
BB |
|
151,665 |
|
1 |
% |
158,517 |
|
2 |
% |
154,537 |
|
2 |
% |
133,673 |
|
1 |
% |
132,618 |
|
1 |
% | |||||
B |
|
140,571 |
|
1 |
% |
241,538 |
|
3 |
% |
250,318 |
|
3 |
% |
242,479 |
|
3 |
% |
223,582 |
|
2 |
% | |||||
Lower than B |
|
106,775 |
|
1 |
% |
97,748 |
|
1 |
% |
100,409 |
|
1 |
% |
109,596 |
|
1 |
% |
115,686 |
|
1 |
% | |||||
Not rated |
|
63,409 |
|
1 |
% |
66,309 |
|
1 |
% |
88,405 |
|
1 |
% |
93,185 |
|
1 |
% |
104,926 |
|
1 |
% | |||||
Total fixed maturities, at fair value |
|
$ |
9,725,099 |
|
100 |
% |
$ |
9,500,400 |
|
100 |
% |
$ |
9,195,296 |
|
100 |
% |
$ |
9,158,403 |
|
100 |
% |
$ |
9,994,328 |
|
100 |
% |
(1) Represents securities which are carried at fair value under the fair value option and reflected as investments accounted for using the fair value option on the balance sheet.
(2) In securities lending transactions, the Company receives collateral in excess of the fair value of the fixed maturities and short-term investments pledged under securities lending. This table excludes the collateral received and reinvested and includes the fixed maturities and short-term investments pledged under securities lending agreements, at fair value.
(3) The Company participates in the Federal Reserves Term Asset-Backed Securities Loan Facility (TALF), which provides secured financing for asset-backed securities backed by certain types of consumer and small-business loans and legacy commercial mortgage-backed securities. TALF financing is non-recourse to the Company, is collateralized by the purchased securities and provides financing for the purchase price of the securities, less a haircut that varies based on the type of collateral. The Company can deliver the collateralized securities to the Federal Reserve in full payment of the loan and is carrying the investments and borrowings at fair value.
(4) Ratings as assigned by the major rating agencies.
Arch Capital Group Ltd. and Subsidiaries
Investment Information Composition of Fixed Maturities and Analysis of Corporate Exposures
(U.S. dollars in thousands)
Composition of Fixed Maturities
The following table summarizes the Companys fixed maturities and fixed maturities pledged under securities lending agreements, excluding TALF investments, at September 30, 2011:
|
|
|
|
Gross |
|
Gross |
|
Net |
|
|
|
|
| |||||
|
|
Fair |
|
Unrealized |
|
Unrealized |
|
Unrealized |
|
Amortized |
|
Fair Value / |
| |||||
|
|
Value |
|
Gains |
|
Losses |
|
Gains (Losses) |
|
Cost |
|
Amortized Cost |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Corporates |
|
$ |
2,533,643 |
|
$ |
81,629 |
|
$ |
(40,895 |
) |
$ |
40,734 |
|
$ |
2,492,909 |
|
101.6 |
% |
Non-U.S. government-backed corporates |
|
256,865 |
|
10,470 |
|
(1,335 |
) |
9,135 |
|
247,730 |
|
103.7 |
% | |||||
FDIC guaranteed corporates |
|
83,358 |
|
1,319 |
|
|
|
1,319 |
|
82,039 |
|
101.6 |
% | |||||
U.S. government and government agencies |
|
1,263,665 |
|
39,866 |
|
(536 |
) |
39,330 |
|
1,224,335 |
|
103.2 |
% | |||||
Agency mortgage-backed securities |
|
1,319,052 |
|
28,973 |
|
(1,730 |
) |
27,243 |
|
1,291,809 |
|
102.1 |
% | |||||
Non-agency mortgage-backed securities |
|
226,269 |
|
3,530 |
|
(19,380 |
) |
(15,850 |
) |
242,119 |
|
93.5 |
% | |||||
Agency commercial mortgage-backed securities |
|
385,533 |
|
13,919 |
|
(637 |
) |
13,282 |
|
372,251 |
|
103.6 |
% | |||||
Non-agency commercial mortgage-backed securities |
|
733,372 |
|
13,062 |
|
(3,593 |
) |
9,469 |
|
723,903 |
|
101.3 |
% | |||||
Municipal bonds |
|
1,422,943 |
|
66,880 |
|
(2,322 |
) |
64,558 |
|
1,358,385 |
|
104.8 |
% | |||||
Non-U.S. government securities |
|
852,694 |
|
42,570 |
|
(15,610 |
) |
26,960 |
|
825,734 |
|
103.3 |
% | |||||
Asset-backed securities |
|
647,705 |
|
19,529 |
|
(8,572 |
) |
10,957 |
|
636,748 |
|
101.7 |
% | |||||
Total |
|
$ |
9,725,099 |
|
$ |
321,747 |
|
$ |
(94,610 |
) |
$ |
227,137 |
|
$ |
9,497,962 |
|
102.4 |
% |
Corporates (Excluding Guaranteed Amounts)
The following table summarizes the Companys corporate bonds by sector and by credit quality at September 30, 2011, excluding guaranteed amounts:
|
|
Estimated Fair Value |
| |||||
|
|
|
|
% of Asset |
|
% of Investable |
| |
|
|
Total |
|
Class |
|
Assets |
| |
Sector: |
|
|
|
|
|
|
| |
Financials |
|
$ |
1,206,565 |
|
47.6 |
% |
9.9 |
% |
Industrials |
|
842,348 |
|
33.2 |
% |
6.9 |
% | |
Utilities |
|
93,766 |
|
3.7 |
% |
0.8 |
% | |
Foreign agencies |
|
74,197 |
|
2.9 |
% |
0.6 |
% | |
All other (1) |
|
316,767 |
|
12.6 |
% |
2.6 |
% | |
Total |
|
$ |
2,533,643 |
|
100.0 |
% |
20.7 |
% |
|
|
|
|
|
|
|
| |
Credit quality distribution (2): |
|
|
|
|
|
|
| |
AAA |
|
$ |
610,330 |
|
24.1 |
% |
5.0 |
% |
AA |
|
497,114 |
|
19.6 |
% |
4.1 |
% | |
A |
|
588,463 |
|
23.2 |
% |
4.8 |
% | |
BBB |
|
493,148 |
|
19.5 |
% |
4.0 |
% | |
BB |
|
147,840 |
|
5.8 |
% |
1.2 |
% | |
B |
|
112,066 |
|
4.4 |
% |
0.9 |
% | |
Lower than B |
|
11,069 |
|
0.4 |
% |
0.1 |
% | |
Not rated |
|
73,613 |
|
3.0 |
% |
0.6 |
% | |
Total |
|
$ |
2,533,643 |
|
100.0 |
% |
20.7 |
% |
(1) Includes sovereign securities, supernational securities and other.
(2) Ratings as assigned by the major rating agencies.
The following table summarizes the Companys top ten exposures to fixed income corporate issuers by fair value at September 30, 2011, excluding guaranteed amounts and covered bonds:
|
|
Estimated |
|
% of Asset |
|
% of Investable |
|
Credit |
| |
Issuer |
|
Fair Value |
|
Class |
|
Assets |
|
Rating (2) |
| |
|
|
|
|
|
|
|
|
|
| |
JPMorgan Chase & Co |
|
$ |
57,539 |
|
2.3 |
% |
0.5 |
% |
Aa3 |
|
General Electric Co |
|
56,358 |
|
2.2 |
% |
0.5 |
% |
Aa2 |
| |
Royal Bank of Canada |
|
31,940 |
|
1.3 |
% |
0.3 |
% |
Aa1 |
| |
Abbey National Treasury Svcs |
|
30,397 |
|
1.2 |
% |
0.2 |
% |
Aa3 |
| |
National Australia Bank Limited |
|
29,229 |
|
1.2 |
% |
0.2 |
% |
Aa2 |
| |
Total SA |
|
29,038 |
|
1.1 |
% |
0.2 |
% |
Aa1 |
| |
Royal Dutch Shell PLC |
|
27,832 |
|
1.1 |
% |
0.2 |
% |
Aa1 |
| |
Bank of America Corp |
|
26,766 |
|
1.1 |
% |
0.2 |
% |
Baa1 |
| |
Australia & New Zealand Banking Group Ltd |
|
25,271 |
|
1.0 |
% |
0.2 |
% |
Aa3 |
| |
Crown Castle Intl Corp |
|
25,159 |
|
1.0 |
% |
0.2 |
% |
A2 |
| |
Total |
|
$ |
339,529 |
|
13.4 |
% |
2.8 |
% |
|
|
Arch Capital Group Ltd. and Subsidiaries
Investment Information Mortgage-Backed, Commercial Mortgage-Backed and Asset-Backed Securities
(U.S. dollars in thousands)
The following table provides information on the Companys mortgage-backed securities (MBS) and commercial mortgage-backed securities (CMBS) at September 30, 2011, excluding amounts guaranteed by the U.S. government:
|
|
|
|
|
|
Average |
|
Fair Value |
| ||||||
|
|
Issuance |
|
Amortized |
|
Credit |
|
|
|
% of Amortized |
|
% of Investable |
| ||
|
|
Year |
|
Cost |
|
Quality |
|
Total |
|
Cost |
|
Assets |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Non-agency MBS: |
|
2003 |
|
$ |
2,547 |
|
AAA |
|
$ |
2,482 |
|
97.4 |
% |
0.0 |
% |
|
|
2004 |
|
15,950 |
|
BBB+ |
|
14,428 |
|
90.5 |
% |
0.1 |
% | ||
|
|
2005 |
|
52,187 |
|
B+ |
|
46,412 |
|
88.9 |
% |
0.4 |
% | ||
|
|
2006 |
|
32,009 |
|
CCC+ |
|
27,122 |
|
84.7 |
% |
0.2 |
% | ||
|
|
2007 |
|
44,785 |
|
CCC |
|
41,144 |
|
91.9 |
% |
0.3 |
% | ||
|
|
2008 |
|
7,902 |
|
CCC |
|
7,091 |
|
89.7 |
% |
0.1 |
% | ||
|
|
2009 (6) |
|
46,621 |
|
AAA |
|
48,740 |
|
104.5 |
% |
0.4 |
% | ||
|
|
2010 (6) |
|
40,118 |
|
AAA |
|
38,850 |
|
96.8 |
% |
0.3 |
% | ||
Total non-agency MBS |
|
|
|
$ |
242,119 |
|
BBB- |
|
$ |
226,269 |
|
93.5 |
% |
1.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Non-agency CMBS: |
|
1998 |
|
$ |
3,536 |
|
AAA |
|
$ |
3,606 |
|
102.0 |
% |
0.0 |
% |
|
|
2002 |
|
35,360 |
|
AAA |
|
35,509 |
|
100.4 |
% |
0.3 |
% | ||
|
|
2003 |
|
44,363 |
|
AAA |
|
45,870 |
|
103.4 |
% |
0.4 |
% | ||
|
|
2004 |
|
36,615 |
|
AAA |
|
36,471 |
|
99.6 |
% |
0.3 |
% | ||
|
|
2005 |
|
50,112 |
|
AAA |
|
49,673 |
|
99.1 |
% |
0.4 |
% | ||
|
|
2006 |
|
6,688 |
|
A |
|
6,383 |
|
95.4 |
% |
0.1 |
% | ||
|
|
2007 |
|
92,546 |
|
AA- |
|
96,829 |
|
104.6 |
% |
0.8 |
% | ||
|
|
2008 |
|
192 |
|
AA+ |
|
193 |
|
100.5 |
% |
0.0 |
% | ||
|
|
2010 |
|
246,180 |
|
AAA |
|
248,777 |
|
101.1 |
% |
2.0 |
% | ||
|
|
2011 |
|
208,311 |
|
AAA |
|
210,061 |
|
100.8 |
% |
1.7 |
% | ||
Total non-agency CMBS |
|
|
|
$ |
723,903 |
|
AAA |
|
$ |
733,372 |
|
101.3 |
% |
6.0 |
% |
|
|
Non-Agency MBS |
|
Non-Agency |
| ||
Additional Statistics |
|
Re-REMICs |
|
All Other |
|
CMBS (1) |
|
|
|
|
|
|
|
|
|
Wtd. average loan age (months) |
|
64 |
|
68 |
|
45 |
|
Wtd. average life (months) (2) |
|
23 |
|
65 |
|
41 |
|
Wtd. average loan-to-value % (3) |
|
70.3 |
% |
68.4 |
% |
68.6 |
% |
Total delinquencies (4) |
|
18.3 |
% |
23.3 |
% |
4.7 |
% |
Current credit support % (5) |
|
37.9 |
% |
10.7 |
% |
27.7 |
% |
(1) Loans defeased with government/agency obligations represented approximately 4% of the collateral underlying the Companys CMBS holdings.
(2) The weighted average life for MBS is based on the interest rates in effect at September 30, 2011. The weighted average life for CMBS reflects the average life of the collateral underlying the Companys CMBS holdings.
(3) The range of loan-to-values on MBS is 32% to 87%, while the range of loan-to-values on CMBS is 31% to 96%.
(4) Total delinquencies includes 60 days and over.
(5) Current credit support % represents the % for a collateralized mortgage obligation (CMO) or CMBS class/tranche from other subordinate classes in the same CMO or CMBS deal.
(6) Primarily represents Re-REMICs issued in 2009 and 2010 with an average credit quality of AAA from Fitch ratings.
The following table provides information on the Companys asset-backed securities (ABS) September 30, 2011:
|
|
|
|
Average |
|
Fair Value |
| ||||||
|
|
Amortized |
|
Credit |
|
|
|
% of Amortized |
|
% of Investable |
| ||
|
|
Cost |
|
Quality |
|
Total |
|
Cost |
|
Assets |
| ||
|
|
|
|
|
|
|
|
|
|
|
| ||
Sector: |
|
|
|
|
|
|
|
|
|
|
| ||
Credit cards (1) |
|
$ |
244,849 |
|
AAA |
|
$ |
251,417 |
|
102.7 |
% |
2.1 |
% |
Autos (2) |
|
142,453 |
|
AAA |
|
143,377 |
|
100.6 |
% |
1.2 |
% | ||
U.K. securitized (3) |
|
40,111 |
|
AAA |
|
39,865 |
|
99.4 |
% |
0.3 |
% | ||
Student loans (4) |
|
29,007 |
|
AAA |
|
29,569 |
|
101.9 |
% |
0.2 |
% | ||
Rate reduction bonds (5) |
|
80,106 |
|
AAA |
|
84,468 |
|
105.4 |
% |
0.7 |
% | ||
Other |
|
85,797 |
|
AA+ |
|
85,749 |
|
99.9 |
% |
0.7 |
% | ||
|
|
622,323 |
|
AAA |
|
634,445 |
|
101.9 |
% |
5.2 |
% | ||
|
|
|
|
|
|
|
|
|
|
|
| ||
Home equity (6) |
|
$ |
3,124 |
|
AAA |
|
$ |
2,677 |
|
85.7 |
% |
0.0 |
% |
|
|
72 |
|
A |
|
71 |
|
98.6 |
% |
0.0 |
% | ||
|
|
7,662 |
|
BBB to B |
|
5,573 |
|
72.7 |
% |
0.0 |
% | ||
|
|
3,385 |
|
CCC to C |
|
4,875 |
|
144.0 |
% |
0.0 |
% | ||
|
|
182 |
|
D |
|
64 |
|
35.2 |
% |
0.0 |
% | ||
|
|
14,425 |
|
BB- |
|
13,260 |
|
91.9 |
% |
0.1 |
% | ||
Total ABS |
|
$ |
636,748 |
|
AAA |
|
$ |
647,705 |
|
101.7 |
% |
5.3 |
% |
The effective duration of the total ABS was 1.2 years at September 30, 2011.
(1) The weighted average credit support % on credit cards is 18.9%.
(2) The weighted average credit support % on autos is 43.7%.
(3) The weighted average credit support % on U.K. securitized is 17.7%.
(4) The weighted average credit support % on student loans is 10.0%.
(5) The weighted average credit support % on rate reduction bonds is 10.4%.
(6) The weighted average credit support % on home equity is 22.6%.
The Companys investment portfolio included $42.3 million par in sub-prime securities at September 30, 2011, with an estimated market value of $16.7 million and an average credit quality of Ba2/BBB-. Such amounts were primarily in the home equity sector with the balance in other ABS, MBS and CMBS sectors. In addition, the portfolio of collateral backing the Companys securities lending program contains approximately $8.5 million estimated market value of sub-prime securities with an average credit quality of CCC from Standard & Poors and Caa3 from Moodys.
Arch Capital Group Ltd. and Subsidiaries
Investment Information Bank Loan Investments
(U.S. dollars in thousands)
The Companys investments in bank loans are included in the following categories at September 30, 2011:
|
|
Carrying |
|
% of Asset |
|
% of Investable |
| |
|
|
Value |
|
Class |
|
Assets |
| |
|
|
|
|
|
|
|
| |
Investment funds accounted for using the equity method |
|
$ |
131,703 |
|
43.9 |
% |
1.1 |
% |
Corporate bonds |
|
90,092 |
|
30.0 |
% |
0.7 |
% | |
Other investments |
|
78,510 |
|
26.1 |
% |
0.6 |
% | |
Total |
|
$ |
300,305 |
|
100.0 |
% |
2.5 |
% |
The following table summarizes the Companys bank loans by currency (translated into U.S. Dollars) at September 30, 2011:
|
|
Carrying |
|
% of Asset |
|
% of Investable |
| |
|
|
Value |
|
Class |
|
Assets |
| |
|
|
|
|
|
|
|
| |
U.S.-denominated |
|
$ |
208,981 |
|
69.6 |
% |
1.7 |
% |
Euro-denominated |
|
91,324 |
|
30.4 |
% |
0.7 |
% | |
Total |
|
$ |
300,305 |
|
100.0 |
% |
2.5 |
% |
The following table summarizes the Companys bank loans by major sector at September 30, 2011:
|
|
Carrying |
|
% of Asset |
|
% of Investable |
| |
|
|
Value |
|
Class |
|
Assets |
| |
Sector: |
|
|
|
|
|
|
| |
Consumer cyclical |
|
$ |
67,741 |
|
22.6 |
% |
0.6 |
% |
Media |
|
41,762 |
|
13.9 |
% |
0.3 |
% | |
Industrials |
|
39,786 |
|
13.2 |
% |
0.3 |
% | |
Basic materials |
|
27,034 |
|
9.0 |
% |
0.2 |
% | |
Consumer non-cyclical |
|
21,051 |
|
7.0 |
% |
0.2 |
% | |
Utilities |
|
18,476 |
|
6.2 |
% |
0.2 |
% | |
All other |
|
84,455 |
|
28.1 |
% |
0.7 |
% | |
Total |
|
$ |
300,305 |
|
100.0 |
% |
2.5 |
% |
|
|
|
|
|
|
|
| |
Weighted average rating factor (Moodys) |
|
B2 |
|
|
|
|
|
Arch Capital Group Ltd. and Subsidiaries
Comments on Regulation G
Throughout this financial supplement, the Company presents its operations in the way it believes will be the most meaningful and useful to investors, analysts, rating agencies and others who use the Companys financial information in evaluating the performance of the Company. This presentation includes the use of after-tax operating income available to common shareholders, which is defined as net income available to common shareholders, excluding net realized gains or losses, net impairment losses recognized in earnings, equity in net income or loss of investment funds accounted for using the equity method and net foreign exchange gains or losses, net of income taxes. The presentation of after-tax operating income available to common shareholders is a non-GAAP financial measure as defined in Regulation G. The reconciliation of such measure to net income available to common shareholders (the most directly comparable GAAP financial measure) in accordance with Regulation G is included on the following page.
The Company believes that net realized gains or losses, net impairment losses recognized in earnings, equity in net income or loss of investment funds accounted for using the equity method and net foreign exchange gains or losses in any particular period are not indicative of the performance of, or trends in, the Companys business performance. Although net realized gains or losses, net impairment losses recognized in earnings, equity in net income or loss of investment funds accounted for using the equity method and net foreign exchange gains or losses are an integral part of the Companys operations, the decision to realize investment gains or losses, the recognition of net impairment losses recognized in earnings, the recognition of equity in net income or loss of investment funds accounted for using the equity method and the recognition of foreign exchange gains or losses are independent of the insurance underwriting process and result, in large part, from general economic and financial market conditions. Furthermore, certain users of the Companys financial information believe that, for many companies, the timing of the realization of investment gains or losses is largely opportunistic. In addition, net impairment losses recognized in earnings represent other-than-temporary declines in expected recovery values on securities without actual realization. The use of the equity method on certain of the Companys investments in certain funds that invest in fixed maturity securities is driven by the ownership structure of such funds (either limited partnerships or limited liability companies). In applying the equity method, these investments are initially recorded at cost and are subsequently adjusted based on the Companys proportionate share of the net income or loss of the funds (which include changes in the market value of the underlying securities in the funds). This method of accounting is different from the way the Company accounts for its other fixed maturity securities and the timing of the recognition of equity in net income or loss of investment funds accounted for using the equity method may differ from gains or losses in the future upon sale or maturity of such investments. Due to these reasons, the Company excludes net realized gains or losses, net impairment losses recognized in earnings, equity in net income or loss of investment funds accounted for using the equity method and net foreign exchange gains or losses from the calculation of after-tax operating income available to common shareholders.
The Company believes that showing net income available to common shareholders exclusive of the items referred to above reflects the underlying fundamentals of the Companys business since the Company evaluates the performance of and manages its business to produce an underwriting profit. In addition to presenting net income available to common shareholders, the Company believes that this presentation enables investors and other users of the Companys financial information to analyze the Companys performance in a manner similar to how the Companys management analyzes performance. The Company also believes that this measure follows industry practice and, therefore, allows the users of the Companys financial information to compare the Companys performance with its industry peer group. The Company believes that the equity analysts and certain rating agencies which follow the Company and the insurance industry as a whole generally exclude these items from their analyses for the same reasons.
Arch Capital Group Ltd. and Subsidiaries
Operating Income Reconciliation
(U.S. dollars in thousands, except share data)
The following table provides a reconciliation of after-tax operating income available to common shareholders to net income available to common shareholders along with related per common share results:
|
|
Three Months Ended |
|
Nine Months Ended |
| |||||||||||||||||||||||||||||
|
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
September 30, |
|
September 30, |
| |||||||||||
|
|
2011 |
|
2011 |
|
2011 |
|
2010 |
|
2010 |
|
2010 |
|
2010 |
|
2009 |
|
2009 |
|
2011 |
|
2010 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
After-tax operating income available to common shareholders |
|
$ |
107,409 |
|
$ |
61,478 |
|
$ |
7,859 |
|
$ |
129,489 |
|
$ |
130,672 |
|
$ |
132,182 |
|
$ |
98,731 |
|
$ |
159,431 |
|
$ |
160,332 |
|
$ |
176,746 |
|
$ |
361,585 |
|
Net realized gains (losses), net of tax |
|
28,458 |
|
44,799 |
|
21,585 |
|
71,821 |
|
68,611 |
|
61,119 |
|
45,503 |
|
88,592 |
|
69,190 |
|
94,842 |
|
175,233 |
| |||||||||||
Net impairment losses recognized in earnings, net of tax |
|
(2,739 |
) |
(1,684 |
) |
(2,680 |
) |
(3,230 |
) |
(2,075 |
) |
(4,410 |
) |
(1,606 |
) |
(4,493 |
) |
(4,643 |
) |
(7,103 |
) |
(8,091 |
) | |||||||||||
Equity in net income (loss) of investment funds accounted for using the equity method, net of tax |
|
(30,549 |
) |
5,973 |
|
29,673 |
|
22,990 |
|
9,708 |
|
(348 |
) |
29,050 |
|
32,391 |
|
69,119 |
|
5,097 |
|
38,410 |
| |||||||||||
Net foreign exchange (losses) gains, net of tax |
|
59,948 |
|
(18,685 |
) |
(37,142 |
) |
6,581 |
|
(65,346 |
) |
48,447 |
|
38,855 |
|
8,775 |
|
(19,591 |
) |
4,121 |
|
21,956 |
| |||||||||||
Net income available to common shareholders |
|
$ |
162,527 |
|
$ |
91,881 |
|
$ |
19,295 |
|
$ |
227,651 |
|
$ |
141,570 |
|
$ |
236,990 |
|
$ |
210,533 |
|
$ |
284,696 |
|
$ |
274,407 |
|
$ |
273,703 |
|
$ |
589,093 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Diluted per common share results: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
After-tax operating income available to common shareholders |
|
$ |
0.78 |
|
$ |
0.45 |
|
$ |
0.06 |
|
$ |
0.86 |
|
$ |
0.85 |
|
$ |
0.83 |
|
$ |
0.59 |
|
$ |
0.89 |
|
$ |
0.85 |
|
$ |
1.28 |
|
$ |
2.26 |
|
Net realized gains (losses), net of tax |
|
0.21 |
|
0.32 |
|
0.15 |
|
0.48 |
|
0.45 |
|
0.38 |
|
0.27 |
|
0.49 |
|
0.37 |
|
0.68 |
|
1.09 |
| |||||||||||
Net impairment losses recognized in earnings, net of tax |
|
(0.02 |
) |
(0.01 |
) |
(0.02 |
) |
(0.02 |
) |
(0.01 |
) |
(0.03 |
) |
(0.01 |
) |
(0.03 |
) |
(0.03 |
) |
(0.05 |
) |
(0.05 |
) | |||||||||||
Equity in net income (loss) of investment funds accounted for using the equity method, net of tax |
|
(0.22 |
) |
0.04 |
|
0.21 |
|
0.15 |
|
0.06 |
|
0.00 |
|
0.18 |
|
0.18 |
|
0.37 |
|
0.04 |
|
0.24 |
| |||||||||||
Net foreign exchange (losses) gains, net of tax |
|
0.44 |
|
(0.13 |
) |
(0.26 |
) |
0.04 |
|
(0.43 |
) |
0.30 |
|
0.23 |
|
0.05 |
|
(0.10 |
) |
0.03 |
|
0.14 |
| |||||||||||
Net income available to common shareholders |
|
$ |
1.19 |
|
$ |
0.67 |
|
$ |
0.14 |
|
$ |
1.51 |
|
$ |
0.92 |
|
$ |
1.48 |
|
$ |
1.26 |
|
$ |
1.58 |
|
$ |
1.46 |
|
$ |
1.98 |
|
$ |
3.68 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Weighted average common shares and common share equivalents outstanding diluted |
|
137,140,929 |
|
137,975,599 |
|
140,460,516 |
|
150,306,429 |
|
153,546,027 |
|
159,795,909 |
|
166,541,481 |
|
179,732,001 |
|
187,601,448 |
|
138,542,558 |
|
159,951,594 |
|
Arch Capital Group Ltd. and Subsidiaries
Share Repurchase Activity
(U.S. dollars in thousands, except share data)
The following table provides an analysis of the Companys share repurchase program:
|
|
Three Months Ended |
|
Cumulative |
| ||||||||||||||||||||||||||
|
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
September 30, |
| ||||||||||
|
|
2011 |
|
2011 |
|
2011 |
|
2010 |
|
2010 |
|
2010 |
|
2010 |
|
2009 |
|
2009 |
|
2011 |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Effect of share repurchases: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Aggregate cost of shares repurchased |
|
$ |
20,833 |
|
$ |
29,552 |
|
$ |
237,173 |
|
$ |
258,151 |
|
$ |
53,398 |
|
$ |
269,054 |
|
$ |
181,272 |
|
$ |
358,655 |
|
$ |
98,194 |
|
$ |
2,558,030 |
|
Shares repurchased |
|
655,772 |
|
881,961 |
|
8,062,383 |
|
8,679,051 |
|
2,043,195 |
|
10,932,681 |
|
7,589,739 |
|
15,444,813 |
|
4,599,741 |
|
104,758,118 |
| ||||||||||
Average price per share repurchased |
|
$ |
31.77 |
|
$ |
33.51 |
|
$ |
29.42 |
|
$ |
29.74 |
|
$ |
26.13 |
|
$ |
24.61 |
|
$ |
23.88 |
|
$ |
23.22 |
|
$ |
21.35 |
|
$ |
24.42 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Average book value per common share (1) |
|
$ |
31.10 |
|
$ |
30.67 |
|
$ |
30.17 |
|
$ |
29.87 |
|
$ |
28.55 |
|
$ |
26.50 |
|
$ |
24.99 |
|
$ |
23.75 |
|
$ |
21.71 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Average repurchase price-to-book multiple |
|
1.02x |
|
1.09x |
|
0.98x |
|
1.00x |
|
0.92x |
|
0.93x |
|
0.96x |
|
0.98x |
|
0.98x |
|
|
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Remaining share repurchase authorization (2) |
|
$ |
941,970 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Equals average of beginning and ending book value per common share for each period presented. |
(2) |
Repurchases under the share repurchase authorization may be effected from time to time in open market or privately negotiated transactions through December 31, 2012. |
Arch Capital Group Ltd. and Subsidiaries
Annualized Operating Return on Average Common Equity
(U.S. dollars in thousands)
The following table provides the calculation of annualized operating return on average common equity:
|
|
Three Months Ended |
|
Nine Months Ended |
| |||||||||||||||||||||||||||||
|
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
September 30, |
|
September 30, |
| |||||||||||
|
|
2011 |
|
2011 |
|
2011 |
|
2010 |
|
2010 |
|
2010 |
|
2010 |
|
2009 |
|
2009 |
|
2011 |
|
2010 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
After-tax operating income available to common shareholders |
|
$ |
107,409 |
|
$ |
61,478 |
|
$ |
7,859 |
|
$ |
129,489 |
|
$ |
130,672 |
|
$ |
132,182 |
|
$ |
98,731 |
|
$ |
159,431 |
|
$ |
160,332 |
|
$ |
176,746 |
|
$ |
361,585 |
|
Annualized after-tax operating income available to common shareholders (a) |
|
$ |
429,636 |
|
$ |
245,912 |
|
$ |
31,436 |
|
$ |
517,956 |
|
$ |
522,688 |
|
$ |
528,728 |
|
$ |
394,924 |
|
$ |
637,724 |
|
$ |
641,328 |
|
$ |
235,661 |
|
$ |
482,113 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Beginning common shareholders equity |
|
$ |
4,116,269 |
|
$ |
4,000,535 |
|
$ |
4,188,003 |
|
$ |
4,392,910 |
|
$ |
4,073,003 |
|
$ |
4,053,757 |
|
$ |
3,998,349 |
|
$ |
4,135,822 |
|
$ |
3,704,968 |
|
$ |
4,188,003 |
|
$ |
3,998,349 |
|
Ending common shareholders equity |
|
4,149,371 |
|
4,116,269 |
|
4,000,535 |
|
4,188,003 |
|
4,392,910 |
|
4,073,003 |
|
4,053,757 |
|
3,998,349 |
|
4,135,822 |
|
4,149,371 |
|
4,392,910 |
| |||||||||||
Average common shareholders equity (b) |
|
$ |
4,132,820 |
|
$ |
4,058,402 |
|
$ |
4,094,269 |
|
$ |
4,290,457 |
|
$ |
4,232,957 |
|
$ |
4,063,380 |
|
$ |
4,026,053 |
|
$ |
4,067,086 |
|
$ |
3,920,395 |
|
$ |
4,168,687 |
|
$ |
4,195,630 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Annualized operating return on average common equity (a)/(b) |
|
10.4 |
% |
6.1 |
% |
0.8 |
% |
12.1 |
% |
12.3 |
% |
13.0 |
% |
9.8 |
% |
15.7 |
% |
16.4 |
% |
5.7 |
% |
11.5 |
% |
Arch Capital Group Ltd. and Subsidiaries
Capital Structure
(U.S. dollars in thousands, except share data)
The following table provides an analysis of the Companys capital structure:
|
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
| |||||||||
|
|
2011 |
|
2011 |
|
2011 |
|
2010 |
|
2010 |
|
2010 |
|
2010 |
|
2009 |
|
2009 |
| |||||||||
Debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Senior notes, due May 1, 2034 (7.35%) |
|
$ |
300,000 |
|
$ |
300,000 |
|
$ |
300,000 |
|
$ |
300,000 |
|
$ |
300,000 |
|
$ |
300,000 |
|
$ |
300,000 |
|
$ |
300,000 |
|
$ |
300,000 |
|
Revolving credit agreement borrowings, due August 18, 2014 (variable) |
|
100,000 |
|
100,000 |
|
100,000 |
|
100,000 |
|
125,000 |
|
125,000 |
|
100,000 |
|
100,000 |
|
100,000 |
| |||||||||
Total debt |
|
$ |
400,000 |
|
$ |
400,000 |
|
$ |
400,000 |
|
$ |
400,000 |
|
$ |
425,000 |
|
$ |
425,000 |
|
$ |
400,000 |
|
$ |
400,000 |
|
$ |
400,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Shareholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Series A non-cumulative preferred shares (8.0%) (1) |
|
$ |
200,000 |
|
$ |
200,000 |
|
$ |
200,000 |
|
$ |
200,000 |
|
$ |
200,000 |
|
$ |
200,000 |
|
$ |
200,000 |
|
$ |
200,000 |
|
$ |
200,000 |
|
Series B non-cumulative preferred shares (7.875%) (2) |
|
125,000 |
|
125,000 |
|
125,000 |
|
125,000 |
|
125,000 |
|
125,000 |
|
125,000 |
|
125,000 |
|
125,000 |
| |||||||||
Preferred shareholders equity |
|
325,000 |
|
325,000 |
|
325,000 |
|
325,000 |
|
325,000 |
|
325,000 |
|
325,000 |
|
325,000 |
|
325,000 |
| |||||||||
Common shareholders equity (a) |
|
4,149,371 |
|
4,116,269 |
|
4,000,535 |
|
4,188,003 |
|
4,392,910 |
|
4,073,003 |
|
4,053,757 |
|
3,998,349 |
|
4,135,822 |
| |||||||||
Total shareholders equity |
|
$ |
4,474,371 |
|
$ |
4,441,269 |
|
$ |
4,325,535 |
|
$ |
4,513,003 |
|
$ |
4,717,910 |
|
$ |
4,398,003 |
|
$ |
4,378,757 |
|
$ |
4,323,349 |
|
$ |
4,460,822 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Total capital |
|
$ |
4,874,371 |
|
$ |
4,841,269 |
|
$ |
4,725,535 |
|
$ |
4,913,003 |
|
$ |
5,142,910 |
|
$ |
4,823,003 |
|
$ |
4,778,757 |
|
$ |
4,723,349 |
|
$ |
4,860,822 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
TALF non-recourse borrowings, at market value, due between 2012 to 2015 (various) (3) |
|
314,137 |
|
318,441 |
|
322,222 |
|
325,770 |
|
331,797 |
|
336,213 |
|
346,746 |
|
217,565 |
|
219,843 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Total capital and TALF non-recourse borrowings |
|
$ |
5,188,508 |
|
$ |
5,159,710 |
|
$ |
5,047,757 |
|
$ |
5,238,773 |
|
$ |
5,474,707 |
|
$ |
5,159,216 |
|
$ |
5,125,503 |
|
$ |
4,940,914 |
|
$ |
5,080,665 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Common shares outstanding, net of treasury shares (b) |
|
133,005,465 |
|
132,771,524 |
|
131,850,639 |
|
139,632,225 |
|
147,676,113 |
|
148,891,710 |
|
158,129,802 |
|
164,285,034 |
|
178,572,927 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Book value per common share (4) (a)/(b) |
|
$ |
31.20 |
|
$ |
31.00 |
|
$ |
30.34 |
|
$ |
29.99 |
|
$ |
29.75 |
|
$ |
27.36 |
|
$ |
25.64 |
|
$ |
24.34 |
|
$ |
23.16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Leverage ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Senior notes/total capital |
|
6.2 |
% |
6.2 |
% |
6.3 |
% |
6.1 |
% |
5.8 |
% |
6.2 |
% |
6.3 |
% |
6.4 |
% |
6.2 |
% | |||||||||
Revolving credit agreement borrowings/total capital |
|
2.1 |
% |
2.1 |
% |
2.1 |
% |
2.0 |
% |
2.4 |
% |
2.6 |
% |
2.1 |
% |
2.1 |
% |
2.1 |
% | |||||||||
Debt/total capital |
|
8.2 |
% |
8.3 |
% |
8.5 |
% |
8.1 |
% |
8.3 |
% |
8.8 |
% |
8.4 |
% |
8.5 |
% |
8.2 |
% | |||||||||
Preferred/total capital |
|
6.7 |
% |
6.7 |
% |
6.9 |
% |
6.6 |
% |
6.3 |
% |
6.7 |
% |
6.8 |
% |
6.9 |
% |
6.7 |
% | |||||||||
Debt and preferred/total capital |
|
14.9 |
% |
15.0 |
% |
15.3 |
% |
14.8 |
% |
14.6 |
% |
15.6 |
% |
15.2 |
% |
15.3 |
% |
14.9 |
% |
(1) |
8,000,000 shares. ACGL has the right to redeem all or a portion of the shares at a redemption price of $25 per share. |
(2) |
5,000,000 shares. ACGL has the right to redeem all or a portion of the shares at a redemption price of $25 per share. |
(3) |
The Company participates in the Federal Reserves Term Asset-Backed Securities Loan Facility (TALF), which provides secured financing for asset-backed securities backed by certain types of consumer and small-business loans and legacy commercial mortgage-backed securities. TALF financing is non-recourse to the Company, is collateralized by the purchased securities and provides financing for the purchase price of the securities, less a haircut that varies based on the type of collateral. The Company can deliver the collateralized securities to the Federal Reserve in full defeasance of the loan. The Company excludes the TALF non-recourse borrowings from the calculations of leverage ratios and total capital due to the nature of the borrowings. If the TALF non-recourse borrowings were included in the leverage ratios and total capital, the ratio of debt to total capital would have been 13.8% and the ratio of debt and preferred to total capital would have been 20.0% at September 30, 2011. |
(4) |
Excludes the effects of stock options and restricted stock units outstanding. |
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