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
April 25, 2012
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 April 25, 2012, Arch Capital Group Ltd. issued a press release reporting its earnings and the availability of its first quarter financial supplement for the three month period March 31, 2012. 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.
The information in this Current Report on Form 8-K, including the information set forth in Exhibit 99.1 and Exhibit 99.2, shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing
ITEM 9.01 Exhibits.
EXHIBIT NO. |
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DESCRIPTION |
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99.1 |
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Press Release dated April 25, 2012 announcing the earnings of Arch Capital Group Ltd. for the three month period ended March 31, 2012 |
99.2 |
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First Quarter 2012 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: April 25, 2012 |
By: |
/s/ John C.R. Hele |
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Name: John C.R. Hele |
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Title: Executive Vice President and Chief Financial Officer |
Exhibit 99.1
ARCH CAPITAL GROUP LTD.
Earnings Release Supplement
As of March 31, 2012
INDEX TO SUPPLEMENT
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PAGE |
|
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Earnings Release |
1 |
Supplemental Financial Information |
8 |
Consolidated Statements of Income |
13 |
Consolidated Balance Sheets |
14 |
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Wessex House, 5th Floor 45 Reid Street Hamilton HM 12 Bermuda
441-278-9250 441-278-9255 fax |
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PRESS RELEASE |
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CONTACT: |
NASDAQ Symbol ACGL |
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John C.R. Hele |
For Immediate Release |
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Executive Vice President and Chief Financial Officer |
ARCH CAPITAL GROUP LTD. REPORTS 2012 FIRST QUARTER RESULTS
HAMILTON, BERMUDA, April 25, 2012 Arch Capital Group Ltd. (NASDAQ: ACGL) reports that net income available to common shareholders for the 2012 first quarter was $157.8 million, or $1.14 per share, compared to $19.0 million, or $0.14 per share, for the 2011 first quarter. The Company also reported after-tax operating income available to common shareholders of $113.7 million, or $0.82 per share, for the 2012 first quarter, compared to $7.6 million, or $0.06 per share, for the 2011 first quarter. All earnings per share amounts discussed in this release are on a diluted basis.
The Companys book value per common share was $33.33 at March 31, 2012, a 4.9% increase from $31.76 per share at December 31, 2011. The Companys after-tax operating income available to common shareholders represented a 10.4% annualized return on average common equity for the 2012 first quarter, compared to 0.7% for the 2011 first 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 2012 first quarter results included losses for current year catastrophic events of $23.0 million, net of reinsurance and reinstatement premiums, primarily related to U.S. storm activity. Such amounts compared to $178.7 million recorded in the 2011 first quarter which resulted from the Japanese earthquake and tsunami, New Zealand earthquake and other events. In addition, the Company recorded $19.6 million of losses, net of reinsurance and reinstatement premiums, for the January 2012 Costa Concordia marine event. The Companys estimates for the 2012 events are based on currently available information derived from modeling techniques, industry assessments of exposure, preliminary claims information obtained from the Companys clients and brokers to date and a review of in-force contracts. The Companys actual losses from these events may vary materially from the estimates due to the inherent uncertainties in making such determinations resulting from several factors, including the preliminary nature of available information, the potential inaccuracies and inadequacies in the data provided by clients and brokers, the modeling techniques and the application of such techniques, the contingent nature of business interruption exposures, the effects of any resultant demand surge on claims activity and attendant coverage issues. In addition, actual losses may increase if the Companys reinsurers fail to meet their obligations to the Company or the reinsurance protections purchased by the Company are exhausted or are otherwise unavailable.
The following table summarizes the Companys underwriting results:
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Three Months Ended |
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March 31, |
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(U.S. dollars in thousands) |
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2012 |
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2011 |
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Gross premiums written |
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$ |
1,066,656 |
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$ |
964,566 |
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Net premiums written |
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863,611 |
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764,278 |
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Net premiums earned |
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680,312 |
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633,695 |
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Underwriting income (loss) |
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67,193 |
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(63,980 |
) | ||
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Combined ratio (1) |
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90.1 |
% |
110.0 |
% | ||
(1) 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.
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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March 31, |
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(U.S. dollars in thousands, except share data) |
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2012 |
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2011 |
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After-tax operating income available to common shareholders |
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$ |
113,660 |
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$ |
7,576 |
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Net realized gains, net of tax |
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40,873 |
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21,585 |
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Net impairment losses recognized in earnings, net of tax |
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(1,023 |
) |
(2,680 |
) | ||
Equity in net income of investment funds accounted for using the equity method, net of tax |
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24,826 |
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29,673 |
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Net foreign exchange losses, net of tax |
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(20,541 |
) |
(37,142 |
) | ||
Net income available to common shareholders |
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$ |
157,795 |
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$ |
19,012 |
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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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$ |
0.82 |
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$ |
0.06 |
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Net realized gains, net of tax |
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0.30 |
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0.15 |
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Net impairment losses recognized in earnings, net of tax |
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(0.01 |
) |
(0.02 |
) | ||
Equity in net income of investment funds accounted for using the equity method, net of tax |
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0.18 |
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0.21 |
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Net foreign exchange losses, net of tax |
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(0.15 |
) |
(0.26 |
) | ||
Net income available to common shareholders |
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$ |
1.14 |
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$ |
0.14 |
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Weighted average common shares and common share equivalents outstanding diluted |
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137,814,906 |
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140,460,516 |
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Effective January 1, 2012, the Company adopted new accounting guidance concerning the accounting for costs associated with acquiring or renewing insurance contracts. This guidance was adopted retrospectively and has been applied to all prior period financial information in this release and accompanying financial supplement. The adoption of the new accounting guidance reduced the Companys shareholders equity at December 31, 2011 by $36.4 million, or $0.27 per share.
For the 2012 first quarter, the combined ratio of the Companys insurance and reinsurance subsidiaries consisted of a loss ratio of 58.1% and an underwriting expense ratio of 32.0%, compared to a loss ratio of 77.9% and an underwriting expense ratio of 32.1% for the 2011 first quarter. 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/Aa2. The average effective duration of the investment portfolio was 2.75 years at March 31, 2012, compared to 2.99 years at December 31, 2011. Including the effects of foreign exchange, total return on the Companys investment portfolio, calculated on a pre-tax basis and before investment expenses, was approximately 1.87% for the 2012 first quarter, compared to 1.50% for the 2011 first quarter. Excluding the effects of foreign exchange, total return was 1.60% for the 2012 first quarter, compared to 1.14% for the 2011 first quarter.
Net investment income for the 2012 first quarter was $74.3 million, or $0.54 per share, compared to $88.3 million, or $0.63 per share, for the 2011 first quarter. The pre-tax investment income yield was 2.52% for the 2012 first quarter, compared to 2.72% for the 2011 fourth quarter and 3.06% for the 2011 first quarter. The decline in the 2012 first quarter yield reflects the effects of lower prevailing interest rates available in the market and our investment focus which puts a priority on total return.
The Company recorded $24.8 million of equity in net income related to investment funds accounted for using the equity method in the 2012 first quarter, compared to $29.7 million for the 2011 first quarter. The Companys income in the 2012 first quarter resulted, in part, from positive returns on two funds, one credit fund 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. 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 recorded on a lag of up to three months based on the availability of reports from the investment funds.
Consolidated cash flow provided by operating activities for the 2012 first quarter was $144.8 million, compared to $224.6 million for the 2011 first quarter. The decrease in operating cash flows in the 2012 first quarter was due, in part, to a higher level of paid losses and a lower level of distributions related to interest and dividend income received during the period.
The Company recorded a loss of $8.6 million related to its investment in Aeolus LP in the 2012 first quarter. As of March 31, 2012, the carrying value of this investment (after taking into account the $83.1 million in cumulative cash distributions received) was $10.7 million with no unfunded capital commitments. Aeolus LP operates as an unrated reinsurance platform that provides collateralized property catastrophe protection to insurers and reinsurers on both an ultimate net loss and industry loss warranty basis. This investment is accounted for using the equity method on a three month lag basis based on the availability of their financial statements with changes in the carrying value recorded in other income (loss).
For the 2012 first quarter, the Companys effective tax rate on income before income taxes was an expense of 1.1%, compared to a benefit of 2.2% for the 2011 first quarter. For the 2012 first quarter, the Companys effective tax rate on pre-tax operating income was a benefit of 1.0%, compared to an expense of 0.8% for the 2011 first quarter. 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. In addition, the Companys Bermuda-based reinsurer incurs federal excise taxes for premiums assumed on U.S. risks. The Company incurred $2.0 million of federal excise taxes for the 2012 first quarter, compared to $2.5 million for the 2011 first quarter. Such amounts are reflected as acquisition expenses in the Companys consolidated statements of income.
Net foreign exchange losses for the 2012 first quarter were $20.7 million (net unrealized losses of $20.2 million and net realized losses of $0.5 million), compared to net foreign exchange losses for the 2011 first quarter of $36.9 million (net unrealized losses of $37.0 million and net realized gains of $0.1 million). The 2012 first quarter net foreign exchange losses primarily resulted from the weakening of the U.S. Dollar against the Euro, British Pound Sterling and other major foreign currencies during the period. 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.
On April 2, 2012, the Company announced the closing of its underwritten public offering of $325 million of its 6.75% Series C preferred shares. The net proceeds from the offering of approximately $316 million and other available funds will be used to redeem all of the Companys $200 million of 8.0% Series A preferred shares and $125 million of 7.875% Series B preferred shares on May 2, 2012. The lower dividend costs each year will save the Company approximately $3.9 million annually.
On April 10, 2012, the Company announced that it completed its acquisition of the credit and surety reinsurance operations of Ariel Reinsurance Company Ltd. (Ariel Re) based in Zurich, Switzerland. The former Ariel Re credit and surety team joined the Zurich branch office of Arch Reinsurance Europe Underwriting Limited. The Company will include the results of the acquired business in its results of operations beginning in the 2012 second quarter.
At March 31, 2012, the Companys capital of $5.24 billion consisted of $300.0 million of senior notes, representing 5.7% of the total, $100.0 million of revolving credit agreement borrowings due in August 2014, representing 1.9% of the total, $325.0 million of preferred shares, representing 6.2% of the total, and common shareholders equity of $4.51 billion, representing the balance. At December 31, 2011, the Companys capital of $4.99 billion consisted of $300.0 million of senior notes, representing 6.0% of the total, $100.0 million of revolving credit agreement borrowings due in August 2014, representing 2.0% of the total, $325.0 million of preferred shares, representing 6.5% of the total, and common shareholders equity of $4.3 billion, representing the balance.
The Company will hold a conference call for investors and analysts at 11:00 a.m. Eastern Time on Thursday, April 26, 2012. 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 April 26 at 1:00 p.m. Eastern Time until May 3, 2012 at midnight Eastern Time. To access the replay, domestic callers should dial 888-286-8010 (passcode 11661368), and international callers should dial 617-801-6888 (passcode 11661368).
Please refer to the Companys Financial Supplement dated March 31, 2012, 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 $5.24 billion in capital at March 31, 2012, 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 (PSLRA) 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 PSLRA or otherwise, can generally be identified by the use of forward-looking terminology such as may, will, expect, intend, estimate, anticipate, believe or continue and similar statements of a future or forward-looking nature or their negative or variations or similar terminology.
Forward-looking statements involve 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 enhance, integrate and maintain operating procedures (including information technology) to effectively support its current and new business;
· 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 March 31, 2012;
· 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;
· 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 market value of the Companys investments;
· the impact of the continued weakness of the U.S., European countries and other key economies, projected budget deficits for the U.S., European countries and other governments and the consequences associated with possible additional downgrades of securities of the U.S., European countries 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;
· 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 our periodic reports filed with the SEC;
· 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 or underwrites business;
· 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 included 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 included 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 included 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 included 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 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 included 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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March 31, |
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December 31, |
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(U.S. dollars in thousands, except share data) |
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2012 |
|
2011 |
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|
|
|
|
|
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Calculation of book value per common share: |
|
|
|
|
| ||
Total shareholders equity |
|
$ |
4,839,456 |
|
$ |
4,592,074 |
|
Less preferred shareholders equity |
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(325,000 |
) |
(325,000 |
) | ||
Common shareholders equity |
|
$ |
4,514,456 |
|
$ |
4,267,074 |
|
Common shares outstanding, net of treasury shares (1) |
|
135,441,687 |
|
134,358,345 |
| ||
Book value per common share |
|
$ |
33.33 |
|
$ |
31.76 |
|
(1) Excludes the effects of 7,502,048 and 8,706,441 stock options and 298,125 and 298,425 restricted stock units outstanding at March 31, 2012 and December 31, 2011, respectively.
Investment Information
|
|
Three Months Ended |
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|
|
March 31, |
| ||||
(U.S. dollars in thousands, except share data) |
|
2012 |
|
2011 |
| ||
|
|
|
|
|
| ||
Components of net investment income: |
|
|
|
|
| ||
Fixed maturities |
|
$ |
73,450 |
|
$ |
85,144 |
|
Term loan investments (1) |
|
2,299 |
|
151 |
| ||
Equity securities |
|
1,664 |
|
1,547 |
| ||
Short-term investments |
|
372 |
|
678 |
| ||
Other (2) |
|
3,193 |
|
6,903 |
| ||
Gross investment income |
|
80,978 |
|
94,423 |
| ||
Investment expenses |
|
(6,681 |
) |
(6,116 |
) | ||
Net investment income |
|
$ |
74,297 |
|
$ |
88,307 |
|
Per share |
|
$ |
0.54 |
|
$ |
0.63 |
|
|
|
|
|
|
| ||
Investment income yield, at amortized cost (3): |
|
|
|
|
| ||
Pre-tax |
|
2.52 |
% |
3.06 |
% | ||
After-tax |
|
2.40 |
% |
2.94 |
% | ||
|
|
|
|
|
| ||
Total return (4): |
|
|
|
|
| ||
Including effects of foreign exchange |
|
1.87 |
% |
1.50 |
% | ||
Excluding effects of foreign exchange |
|
1.60 |
% |
1.14 |
% | ||
|
|
|
|
|
| ||
Cash flow from operations |
|
$ |
144,821 |
|
$ |
224,580 |
|
(1) Included in investments accounted for using the fair value option on the Companys consolidated balance sheets.
(2) The 2011 first quarter amount includes an initial dividend of $5.5 million received on an investment fund.
(3) Investment income yield is presented on an annualized basis and excludes 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.
(4) 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)
|
|
March 31, |
|
December 31, |
| ||
(U.S. dollars in thousands) |
|
2012 |
|
2011 |
| ||
|
|
|
|
|
| ||
Investable assets: |
|
|
|
|
| ||
Fixed maturities available for sale, at fair value |
|
$ |
9,221,145 |
|
$ |
9,375,604 |
|
Fixed maturities, at fair value (1) |
|
250,805 |
|
147,779 |
| ||
Fixed maturities pledged under securities lending agreements, at fair value (2) |
|
50,813 |
|
56,393 |
| ||
Total fixed maturities |
|
9,522,763 |
|
9,579,776 |
| ||
Short-term investments available for sale, at fair value |
|
1,112,249 |
|
904,219 |
| ||
Cash |
|
422,806 |
|
351,699 |
| ||
Equity securities available for sale, at fair value |
|
318,181 |
|
299,584 |
| ||
Equity securities, at fair value (1) |
|
52,766 |
|
87,403 |
| ||
Other investments available for sale, at fair value |
|
357,992 |
|
238,111 |
| ||
Other investments, at fair value (1) |
|
196,712 |
|
131,721 |
| ||
TALF investments, at fair value (3) |
|
313,187 |
|
387,702 |
| ||
Investments accounted for using the equity method (4) |
|
347,273 |
|
380,507 |
| ||
Securities sold but not yet purchased (5) |
|
(18,831 |
) |
(27,178 |
) | ||
Securities transactions entered into but not settled at the balance sheet date |
|
(121,435 |
) |
(17,339 |
) | ||
Total investable assets |
|
$ |
12,503,663 |
|
$ |
12,316,205 |
|
|
|
|
|
|
| ||
Investment portfolio statistics (2): |
|
|
|
|
| ||
Average effective duration (in years) |
|
2.75 |
|
2.99 |
| ||
Average credit quality (Standard & Poors/Moodys Investors Service) |
|
AA/Aa2 |
|
AA/Aa1 |
| ||
Imbedded book yield (before investment expenses) |
|
2.76 |
% |
2.98 |
% |
(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 |
| ||||
|
|
March 31, |
| ||||
(U.S. dollars in thousands) |
|
2012 |
|
2011 |
| ||
|
|
|
|
|
| ||
Components of losses and loss adjustment expenses incurred |
|
|
|
|
| ||
Paid losses and loss adjustment expenses |
|
$ |
352,145 |
|
$ |
338,250 |
|
Increase in unpaid losses and loss adjustment expenses |
|
43,062 |
|
155,630 |
| ||
Total losses and loss adjustment expenses |
|
$ |
395,207 |
|
$ |
493,880 |
|
|
|
|
|
|
| ||
Estimated net (favorable) adverse development in prior year loss reserves, net of related adjustments |
|
|
|
|
| ||
Net impact on underwriting results: |
|
|
|
|
| ||
Insurance |
|
$ |
4,067 |
|
$ |
(15,552 |
) |
Reinsurance |
|
(52,108 |
) |
(42,889 |
) | ||
Total |
|
$ |
(48,041 |
) |
$ |
(58,441 |
) |
|
|
|
|
|
| ||
Impact on losses and loss adjustment expenses: |
|
|
|
|
| ||
Insurance |
|
$ |
(465 |
) |
$ |
(15,369 |
) |
Reinsurance |
|
(52,805 |
) |
(43,357 |
) | ||
Total |
|
$ |
(53,270 |
) |
$ |
(58,726 |
) |
|
|
|
|
|
| ||
Impact on acquisition expenses: |
|
|
|
|
| ||
Insurance |
|
$ |
4,532 |
|
$ |
(183 |
) |
Reinsurance |
|
697 |
|
468 |
| ||
Total |
|
$ |
5,229 |
|
$ |
285 |
|
|
|
|
|
|
| ||
Impact on combined ratio: |
|
|
|
|
| ||
Insurance |
|
0.9 |
% |
(3.8 |
)% | ||
Reinsurance |
|
(21.8 |
)% |
(19.0 |
)% | ||
Total |
|
(7.1 |
)% |
(9.2 |
)% | ||
|
|
|
|
|
| ||
Impact on loss ratio: |
|
|
|
|
| ||
Insurance |
|
(0.1 |
)% |
(3.8 |
)% | ||
Reinsurance |
|
(22.1 |
)% |
(19.2 |
)% | ||
Total |
|
(7.8 |
)% |
(9.3 |
)% | ||
|
|
|
|
|
| ||
Impact on acquisition expense ratio: |
|
|
|
|
| ||
Insurance |
|
1.0 |
% |
0.0 |
% | ||
Reinsurance |
|
0.3 |
% |
0.2 |
% | ||
Total |
|
0.7 |
% |
0.1 |
% | ||
|
|
|
|
|
| ||
Estimated net losses incurred from current accident year catastrophic events (1) |
|
|
|
|
| ||
Insurance |
|
$ |
5,364 |
|
$ |
41,206 |
|
Reinsurance |
|
17,631 |
|
137,537 |
| ||
Total |
|
$ |
22,995 |
|
$ |
178,743 |
|
|
|
|
|
|
| ||
Impact on combined ratio: |
|
|
|
|
| ||
Insurance |
|
1.2 |
% |
10.1 |
% | ||
Reinsurance |
|
7.4 |
% |
60.8 |
% | ||
Total |
|
3.4 |
% |
28.2 |
% |
(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 2012 first quarter performance by operating segment. For additional details regarding the Companys operating segments, please refer to the Companys Financial Supplement dated March 31, 2012 on the Companys website at http://www.archcapgroup.bm/EarningsReleases.aspx.
Insurance Segment
|
|
Three Months Ended March 31, |
| ||||||
(U.S. dollars in thousands) |
|
2012 |
|
2011 |
|
% Change |
| ||
|
|
|
|
|
|
|
| ||
Gross premiums written |
|
$ |
688,113 |
|
$ |
634,583 |
|
8.4 |
|
Net premiums written |
|
490,680 |
|
449,291 |
|
9.2 |
| ||
Net premiums earned |
|
441,740 |
|
407,591 |
|
8.4 |
| ||
Underwriting loss |
|
(8,134 |
) |
(25,398 |
) |
n/m |
| ||
|
|
|
|
|
|
% Point |
|
|
|
|
|
|
|
Change |
|
Underwriting Ratios |
|
|
|
|
|
|
|
Loss ratio |
|
68.6 |
% |
73.0 |
% |
(4.4 |
) |
Acquisition expense ratio |
|
16.6 |
% |
14.9 |
% |
1.7 |
|
Other operating expense ratio |
|
16.6 |
% |
18.3 |
% |
(1.7 |
) |
Combined ratio |
|
101.8 |
% |
106.2 |
% |
(4.4 |
) |
|
|
|
|
|
|
|
|
Catastrophic activity and prior year development: |
|
|
|
|
|
|
|
Current accident year catastrophic events |
|
1.2 |
% |
10.1 |
% |
(8.9 |
) |
Net (favorable) adverse development in prior year loss reserves, net of related adjustments |
|
0.9 |
% |
(3.8 |
)% |
4.7 |
|
Combined ratio excluding such items |
|
99.7 |
% |
99.9 |
% |
(0.2 |
) |
Gross premiums written by the insurance segment in the 2012 first quarter were 8.4% higher than in the 2011 first quarter with increases in professional liability, property, executive assurance and program business. The growth in professional liability premiums primarily reflected new business written in small and medium sized accounts in the U.K. while the increase in executive assurance business primarily resulted from small and medium sized accounts in the U.K. and the U.S. The increase in program business primarily reflected growth in existing accounts while the higher level of property business was primarily due to new business and rate increases on renewals. Net premiums written were 9.2% higher than in the 2011 first quarter, reflecting the increase in gross premiums written and changes in the mix of business, reinstatement premiums and reinsurance structure. Net premiums earned by the insurance segment in the 2012 first quarter were 8.4% higher than in the 2011 first quarter, and reflect changes in net premiums written over the previous five quarters.
The 2012 first quarter loss ratio reflected 1.2 points for current year catastrophic event activity, primarily related to U.S. storm activity, compared to 10.1 points in the 2011 first quarter, which was related to the Japanese earthquake and tsunami, New Zealand earthquake and other events. Estimated net favorable development, before related adjustments, reduced the loss ratio by 0.1 points in the 2012 first quarter, compared to 3.8 points in the 2011 first quarter. The level of large non-catastrophic loss activity was similar in both periods. The 2012 first quarter estimated net favorable development was primarily due to better than expected claims emergence in property and other short-tail lines. Such amounts were substantially offset by increases in specialty casualty and executive assurance reserves. Adverse development in specialty casualty reserves resulted from an increase in loss picks in earlier accident years in reaction to recent claims development while adverse development in executive assurance reserves was primarily due to a small number of international D&O claims.
The underwriting expense ratio was 33.2% in the 2012 first quarter, compared to 33.2% in the 2011 first quarter. The acquisition expense ratio was 16.6% in the 2012 first quarter, compared to 14.9% in the 2011 first quarter. The 2012 first quarter acquisition expense ratio included an increase of 1.0 points related to development in certain prior year loss reserves. The operating expense ratio benefited from the higher level of net premiums earned than in the 2011 first quarter.
Reinsurance Segment
|
|
Three Months Ended March 31, |
| ||||||
(U.S. dollars in thousands) |
|
2012 |
|
2011 |
|
% Change |
| ||
|
|
|
|
|
|
|
| ||
Gross premiums written |
|
$ |
379,976 |
|
$ |
331,013 |
|
14.8 |
|
Net premiums written |
|
372,931 |
|
314,987 |
|
18.4 |
| ||
Net premiums earned |
|
238,572 |
|
226,104 |
|
5.5 |
| ||
Underwriting income (loss) |
|
75,327 |
|
(38,582 |
) |
n/m |
| ||
|
|
|
|
|
|
% Point |
|
|
|
|
|
|
|
Change |
|
Underwriting Ratios |
|
|
|
|
|
|
|
Loss ratio |
|
38.6 |
% |
86.8 |
% |
(48.2 |
) |
Acquisition expense ratio |
|
18.9 |
% |
20.9 |
% |
(2.0 |
) |
Other operating expense ratio |
|
10.9 |
% |
9.4 |
% |
1.5 |
|
Combined ratio |
|
68.4 |
% |
117.1 |
% |
(48.7 |
) |
|
|
|
|
|
|
|
|
Catastrophic activity and prior year development: |
|
|
|
|
|
|
|
Current accident year catastrophic events |
|
7.4 |
% |
60.8 |
% |
(53.4 |
) |
Net (favorable) adverse development in prior year loss reserves, net of related adjustments |
|
(21.8 |
)% |
(19.0 |
)% |
(2.8 |
) |
Combined ratio excluding such items |
|
82.8 |
% |
75.3 |
% |
7.5 |
|
Gross premiums written by the reinsurance segment in the 2012 first quarter were 14.8% higher than in the 2011 first quarter, primarily due to growth in other specialty, professional liability and property catastrophe lines. The higher level of other specialty business primarily resulted from U.K. motor writings while growth in professional liability reflected a small number of new accounts. Growth in property catastrophe business was primarily due to new business and reflects improving market conditions. Net premiums written by the reinsurance segment in the 2012 first quarter were 18.4% higher than in the 2011 first quarter. The higher growth in net premiums written compared to gross premiums written primarily reflects the non-renewal of certain retrocessional coverage on international property business. Net premiums earned in the 2012 first quarter were 5.5% higher than in the 2011 first quarter, reflecting changes in net premiums written over the previous five quarters, including the mix and type of business written.
The 2012 first quarter loss ratio reflected 7.4 points for current year catastrophic event activity, primarily related to U.S. storm activity, while the 2011 first quarter included 60.8 points of catastrophic activity, which was related to the Japanese earthquake and tsunami, New Zealand earthquake and other events. The 2012 first quarter loss ratio included 5.1 points related to the Costa Concordia and Elgin oil platform events while the 2011 first quarter loss ratio did not include substantial large non-catastrophic loss activity. Estimated net favorable development, before related adjustments, reduced the loss ratio by 22.1 points in the 2012 first quarter, compared to 19.2 points in the 2011 first quarter. The estimated net favorable development in the 2012 first quarter included better than expected claims emergence from property and other short tail lines and from casualty business across many underwriting years.
The underwriting expense ratio was 29.8% in the 2012 first quarter, compared to 30.3% in the 2011 first quarter. The acquisition expense ratio for the 2012 first quarter was 18.9%, compared to 20.9% for the 2011 first quarter. The comparison of the 2012 first quarter and 2011 first 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 other operating expense ratio in the 2012 first quarter reflected a higher level of incentive compensation costs related to better than expected experience on business written in prior underwriting years along with expenses related to new business opportunities.
ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(U.S. dollars in thousands, except share data)
|
|
(Unaudited) |
| ||||
|
|
Three Months Ended |
| ||||
|
|
March 31, |
| ||||
|
|
2012 |
|
2011 |
| ||
Revenues |
|
|
|
|
| ||
Net premiums written |
|
$ |
863,611 |
|
$ |
764,278 |
|
Change in unearned premiums |
|
(183,299 |
) |
(130,583 |
) | ||
Net premiums earned |
|
680,312 |
|
633,695 |
| ||
Net investment income |
|
74,297 |
|
88,307 |
| ||
Net realized gains |
|
44,121 |
|
20,695 |
| ||
|
|
|
|
|
| ||
Other-than-temporary impairment losses |
|
(1,031 |
) |
(3,258 |
) | ||
Less investment impairments recognized in other comprehensive income, before taxes |
|
8 |
|
578 |
| ||
Net impairment losses recognized in earnings |
|
(1,023 |
) |
(2,680 |
) | ||
|
|
|
|
|
| ||
Fee income |
|
543 |
|
815 |
| ||
Equity in net income of investment funds accounted for using the equity method |
|
24,826 |
|
29,673 |
| ||
Other income (loss) |
|
(8,068 |
) |
4,567 |
| ||
Total revenues |
|
815,008 |
|
775,072 |
| ||
|
|
|
|
|
| ||
Expenses |
|
|
|
|
| ||
Losses and loss adjustment expenses |
|
395,207 |
|
493,880 |
| ||
Acquisition expenses |
|
118,962 |
|
108,754 |
| ||
Other operating expenses |
|
106,472 |
|
102,882 |
| ||
Interest expense |
|
7,521 |
|
7,721 |
| ||
Net foreign exchange losses |
|
20,688 |
|
36,912 |
| ||
Total expenses |
|
648,850 |
|
750,149 |
| ||
|
|
|
|
|
| ||
Income before income taxes |
|
166,158 |
|
24,923 |
| ||
|
|
|
|
|
| ||
Income tax expense (benefit) |
|
1,902 |
|
(550 |
) | ||
|
|
|
|
|
| ||
Net income |
|
164,256 |
|
25,473 |
| ||
|
|
|
|
|
| ||
Preferred dividends |
|
6,461 |
|
6,461 |
| ||
|
|
|
|
|
| ||
Net income available to common shareholders |
|
$ |
157,795 |
|
$ |
19,012 |
|
|
|
|
|
|
| ||
Net income per common share |
|
|
|
|
| ||
Basic |
|
$ |
1.18 |
|
$ |
0.14 |
|
Diluted |
|
$ |
1.14 |
|
$ |
0.14 |
|
|
|
|
|
|
| ||
Weighted average common shares and common share equivalents outstanding |
|
|
|
|
| ||
Basic |
|
133,954,623 |
|
133,499,241 |
| ||
Diluted |
|
137,814,906 |
|
140,460,516 |
|
ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands, except share data)
|
|
(Unaudited) |
|
|
| ||
|
|
March 31, |
|
December 31, |
| ||
|
|
2012 |
|
2011 |
| ||
Assets |
|
|
|
|
| ||
Investments: |
|
|
|
|
| ||
Fixed maturities available for sale, at fair value (amortized cost: $8,989,350 and $9,165,438) |
|
$ |
9,221,145 |
|
$ |
9,375,604 |
|
Short-term investments available for sale, at fair value (amortized cost: $1,110,944 and $909,121) |
|
1,112,249 |
|
904,219 |
| ||
Investment of funds received under securities lending, at fair value (amortized cost: $42,174 and $48,577) |
|
41,867 |
|
48,419 |
| ||
Equity securities available for sale, at fair value (cost: $295,242 and $299,058) |
|
318,181 |
|
299,584 |
| ||
Other investments available for sale, at fair value (cost: $342,234 and $235,381) |
|
357,992 |
|
238,111 |
| ||
Investments accounted for using the fair value option |
|
500,283 |
|
366,903 |
| ||
TALF investments, at fair value (amortized cost: $297,301 and $373,040) |
|
313,187 |
|
387,702 |
| ||
Investments accounted for using the equity method |
|
347,273 |
|
380,507 |
| ||
Total investments |
|
12,212,177 |
|
12,001,049 |
| ||
|
|
|
|
|
| ||
Cash |
|
422,806 |
|
351,699 |
| ||
Accrued investment income |
|
65,643 |
|
70,739 |
| ||
Investment in joint venture (cost: $100,000) |
|
107,866 |
|
107,576 |
| ||
Fixed maturities and short-term investments pledged under securities lending, at fair value |
|
50,813 |
|
56,393 |
| ||
Premiums receivable |
|
700,137 |
|
501,563 |
| ||
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses |
|
1,849,603 |
|
1,851,584 |
| ||
Contractholder receivables |
|
762,031 |
|
748,231 |
| ||
Prepaid reinsurance premiums |
|
261,619 |
|
265,696 |
| ||
Deferred acquisition costs, net |
|
261,467 |
|
227,884 |
| ||
Receivable for securities sold |
|
621,560 |
|
462,891 |
| ||
Other assets |
|
497,061 |
|
460,052 |
| ||
Total Assets |
|
$ |
17,812,783 |
|
$ |
17,105,357 |
|
|
|
|
|
|
| ||
Liabilities |
|
|
|
|
| ||
Reserve for losses and loss adjustment expenses |
|
$ |
8,511,323 |
|
$ |
8,456,210 |
|
Unearned premiums |
|
1,595,712 |
|
1,411,872 |
| ||
Reinsurance balances payable |
|
137,791 |
|
133,866 |
| ||
Contractholder payables |
|
762,031 |
|
748,231 |
| ||
Senior notes |
|
300,000 |
|
300,000 |
| ||
Revolving credit agreement borrowings |
|
100,000 |
|
100,000 |
| ||
TALF borrowings, at fair value (par: $241,005 and $310,868) |
|
239,551 |
|
310,486 |
| ||
Securities lending payable |
|
52,224 |
|
58,546 |
| ||
Payable for securities purchased |
|
742,995 |
|
480,230 |
| ||
Other liabilities |
|
531,700 |
|
513,842 |
| ||
Total Liabilities |
|
12,973,327 |
|
12,513,283 |
| ||
|
|
|
|
|
| ||
Commitments and Contingencies |
|
|
|
|
| ||
|
|
|
|
|
| ||
Shareholders Equity |
|
|
|
|
| ||
Non-cumulative preferred shares |
|
325,000 |
|
325,000 |
| ||
Common shares ($0.0033 par, shares issued: 165,725,990 and 164,636,338) |
|
552 |
|
549 |
| ||
Additional paid-in capital |
|
170,694 |
|
161,419 |
| ||
Retained earnings |
|
4,954,450 |
|
4,796,655 |
| ||
Accumulated other comprehensive income, net of deferred income tax |
|
234,468 |
|
153,923 |
| ||
Common shares held in treasury, at cost (shares: 30,284,303 and 30,277,993) |
|
(845,708 |
) |
(845,472 |
) | ||
Total Shareholders Equity |
|
4,839,456 |
|
4,592,074 |
| ||
Total Liabilities and Shareholders Equity |
|
$ |
17,812,783 |
|
$ |
17,105,357 |
|
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 March 31, 2012
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. The adoption of new accounting guidance concerning the accounting for costs associated with acquiring or renewing insurance contracts was adopted retrospectively and has been applied to all prior period financial information in this financial supplement.
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 |
|
c. |
Insurance Segment Underwriting Results |
9-10 |
|
d. |
Reinsurance Segment Underwriting Results |
11-12 |
|
|
|
|
IV. |
Investment Information |
| |
|
a. |
Investable Asset Summary, Investment Portfolio Metrics and Credit Quality Distribution |
13 |
|
b. |
Composition of Fixed Maturities and Analysis of Corporate Exposures |
14 |
|
c. |
Mortgage Backed, Commercial Mortgage Backed and Asset Backed Securities |
15 |
|
d. |
Bank Loan Investments |
16 |
|
e. |
Eurozone 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 |
| ||||||
|
|
March 31, |
| ||||||
|
|
2012 |
|
2011 |
|
Change |
| ||
|
|
|
|
|
|
|
| ||
Gross premiums written |
|
$ |
1,066,656 |
|
$ |
964,566 |
|
10.6 |
% |
|
|
|
|
|
|
|
| ||
Net premiums written |
|
$ |
863,611 |
|
$ |
764,278 |
|
13.0 |
% |
|
|
|
|
|
|
|
| ||
Net premiums earned |
|
$ |
680,312 |
|
$ |
633,695 |
|
7.4 |
% |
|
|
|
|
|
|
|
| ||
Underwriting income (loss) |
|
$ |
67,193 |
|
$ |
(63,980 |
) |
N/M |
|
|
|
|
|
|
|
|
| ||
Net investment income |
|
$ |
74,297 |
|
$ |
88,307 |
|
(15.9 |
)% |
Per diluted share |
|
$ |
0.54 |
|
$ |
0.63 |
|
(14.3 |
)% |
|
|
|
|
|
|
|
| ||
Net income available to common shareholders |
|
$ |
157,795 |
|
$ |
19,012 |
|
730.0 |
% |
Per diluted share |
|
$ |
1.14 |
|
$ |
0.14 |
|
714.3 |
% |
|
|
|
|
|
|
|
| ||
After-tax operating income available to common shareholders (1) |
|
$ |
113,660 |
|
$ |
7,576 |
|
1,400.3 |
% |
Per diluted share |
|
$ |
0.82 |
|
$ |
0.06 |
|
1,266.7 |
% |
|
|
|
|
|
|
|
| ||
Comprehensive income |
|
$ |
244,801 |
|
$ |
46,375 |
|
427.9 |
% |
|
|
|
|
|
|
|
| ||
Cash flow from operations |
|
$ |
144,821 |
|
$ |
224,580 |
|
(35.5 |
)% |
|
|
|
|
|
|
|
| ||
Diluted weighted average common shares and common share equivalents outstanding |
|
137,814,906 |
|
140,460,516 |
|
(1.9 |
)% |
|
|
|
|
|
|
% Point |
|
|
|
|
|
|
|
Change |
|
Underwriting ratios: |
|
|
|
|
|
|
|
Loss ratio |
|
58.1 |
% |
77.9 |
% |
(19.8 |
) |
Acquisition expense ratio |
|
17.4 |
% |
17.0 |
% |
0.4 |
|
Other operating expense ratio |
|
14.6 |
% |
15.1 |
% |
(0.5 |
) |
Combined ratio |
|
90.1 |
% |
110.0 |
% |
(19.9 |
) |
|
|
|
|
|
|
|
|
Financial measures: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Growth in book value per common share |
|
4.9 |
% |
1.1 |
% |
3.8 |
|
|
|
|
|
|
|
|
|
Annualized operating return on average common equity |
|
10.4 |
% |
0.7 |
% |
9.7 |
|
|
|
|
|
|
|
|
|
Total return on investments (2) |
|
|
|
|
|
|
|
Including effects of foreign exchange |
|
1.87 |
% |
1.50 |
% |
37 bps |
|
Excluding effects of foreign exchange |
|
1.60 |
% |
1.14 |
% |
46 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.
Arch Capital Group Ltd. and Subsidiaries
Consolidated Statements of Income
(U.S. dollars in thousands, except share data)
|
|
Three Months Ended |
| |||||||||||||||||||||||||
|
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
| |||||||||
|
|
2012 |
|
2011 |
|
2011 |
|
2011 |
|
2011 |
|
2010 |
|
2010 |
|
2010 |
|
2010 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Gross premiums written |
|
$ |
1,066,656 |
|
$ |
699,662 |
|
$ |
860,289 |
|
$ |
911,939 |
|
$ |
964,566 |
|
$ |
664,212 |
|
$ |
831,788 |
|
$ |
817,100 |
|
$ |
953,687 |
|
Net premiums written |
|
863,611 |
|
511,124 |
|
691,381 |
|
706,543 |
|
764,278 |
|
482,911 |
|
636,117 |
|
624,258 |
|
767,754 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Net premiums earned |
|
680,312 |
|
$ |
673,192 |
|
$ |
682,049 |
|
$ |
642,879 |
|
$ |
633,695 |
|
$ |
632,146 |
|
$ |
627,409 |
|
$ |
623,011 |
|
$ |
669,917 |
| |
Fee income |
|
543 |
|
982 |
|
848 |
|
784 |
|
815 |
|
2,814 |
|
874 |
|
883 |
|
794 |
| |||||||||
Losses and loss adjustment expenses |
|
(395,207 |
) |
(378,067 |
) |
(423,984 |
) |
(431,622 |
) |
(493,880 |
) |
(367,326 |
) |
(359,193 |
) |
(363,145 |
) |
(428,051 |
) | |||||||||
Acquisition expenses, net |
|
(118,962 |
) |
(123,339 |
) |
(120,205 |
) |
(110,639 |
) |
(108,754 |
) |
(104,824 |
) |
(111,279 |
) |
(107,475 |
) |
(117,624 |
) | |||||||||
Other operating expenses |
|
(99,493 |
) |
(103,300 |
) |
(100,141 |
) |
(101,445 |
) |
(95,856 |
) |
(112,228 |
) |
(97,247 |
) |
(92,748 |
) |
(101,759 |
) | |||||||||
Underwriting income (loss) |
|
67,193 |
|
69,468 |
|
38,567 |
|
(43 |
) |
(63,980 |
) |
50,582 |
|
60,564 |
|
60,526 |
|
23,277 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Net investment income |
|
74,297 |
|
80,467 |
|
82,753 |
|
86,671 |
|
88,307 |
|
90,601 |
|
90,768 |
|
90,537 |
|
92,972 |
| |||||||||
Net realized gains |
|
44,121 |
|
14,542 |
|
30,199 |
|
45,210 |
|
20,695 |
|
74,027 |
|
68,828 |
|
62,114 |
|
47,782 |
| |||||||||
Net impairment losses recognized in earnings |
|
(1,023 |
) |
(1,959 |
) |
(2,739 |
) |
(1,684 |
) |
(2,680 |
) |
(3,230 |
) |
(2,075 |
) |
(4,410 |
) |
(1,606 |
) | |||||||||
Equity in net income (loss) of investment funds accounted for using the equity method |
|
24,826 |
|
(14,702 |
) |
(30,549 |
) |
5,973 |
|
29,673 |
|
22,990 |
|
9,708 |
|
(348 |
) |
29,050 |
| |||||||||
Other income (loss) |
|
(8,068 |
) |
(4,848 |
) |
2,432 |
|
(4,265 |
) |
4,567 |
|
6,165 |
|
1,840 |
|
4,528 |
|
5,978 |
| |||||||||
Other expenses |
|
(6,979 |
) |
(6,777 |
) |
(6,180 |
) |
(11,397 |
) |
(7,026 |
) |
(6,881 |
) |
(5,796 |
) |
(10,503 |
) |
(5,688 |
) | |||||||||
Interest expense |
|
(7,521 |
) |
(8,087 |
) |
(8,125 |
) |
(7,758 |
) |
(7,721 |
) |
(7,460 |
) |
(7,371 |
) |
(7,916 |
) |
(7,260 |
) | |||||||||
Net foreign exchange gains (losses) |
|
(20,688 |
) |
12,613 |
|
60,040 |
|
(18,375 |
) |
(36,912 |
) |
6,039 |
|
(65,157 |
) |
48,625 |
|
38,601 |
| |||||||||
Income before income taxes |
|
166,158 |
|
140,717 |
|
166,398 |
|
94,332 |
|
24,923 |
|
232,833 |
|
151,309 |
|
243,153 |
|
223,106 |
| |||||||||
Income tax (expense) benefit |
|
(1,902 |
) |
4,615 |
|
2,357 |
|
2,271 |
|
550 |
|
3,067 |
|
(3,291 |
) |
(1,011 |
) |
(6,494 |
) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Net income |
|
164,256 |
|
145,332 |
|
168,755 |
|
96,603 |
|
25,473 |
|
235,900 |
|
148,018 |
|
242,142 |
|
216,612 |
| |||||||||
Preferred dividends |
|
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) | |||||||||
Net income available to common shareholders |
|
$ |
157,795 |
|
$ |
138,871 |
|
$ |
162,294 |
|
$ |
90,142 |
|
$ |
19,012 |
|
$ |
229,439 |
|
$ |
141,557 |
|
$ |
235,681 |
|
$ |
210,151 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Underwriting Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Loss ratio |
|
58.1 |
% |
56.2 |
% |
62.2 |
% |
67.1 |
% |
77.9 |
% |
58.1 |
% |
57.3 |
% |
58.3 |
% |
63.9 |
% | |||||||||
Acquisition expense ratio |
|
17.4 |
% |
18.2 |
% |
17.5 |
% |
17.1 |
% |
17.0 |
% |
16.5 |
% |
17.6 |
% |
17.1 |
% |
17.4 |
% | |||||||||
Other operating expense ratio |
|
14.6 |
% |
15.3 |
% |
14.7 |
% |
15.8 |
% |
15.1 |
% |
17.8 |
% |
15.5 |
% |
14.9 |
% |
15.2 |
% | |||||||||
Combined ratio |
|
90.1 |
% |
89.7 |
% |
94.4 |
% |
100.0 |
% |
110.0 |
% |
92.4 |
% |
90.4 |
% |
90.3 |
% |
96.5 |
% | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Net premiums written to gross premiums written |
|
81.0 |
% |
73.1 |
% |
80.4 |
% |
77.5 |
% |
79.2 |
% |
72.7 |
% |
76.5 |
% |
76.4 |
% |
80.5 |
% | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Net income per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Basic |
|
$ |
1.18 |
|
$ |
1.05 |
|
$ |
1.23 |
|
$ |
0.69 |
|
$ |
0.14 |
|
$ |
1.60 |
|
$ |
0.96 |
|
$ |
1.54 |
|
$ |
1.32 |
|
Diluted |
|
$ |
1.14 |
|
$ |
1.01 |
|
$ |
1.18 |
|
$ |
0.65 |
|
$ |
0.14 |
|
$ |
1.53 |
|
$ |
0.92 |
|
$ |
1.47 |
|
$ |
1.26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Weighted average common shares and common share equivalents outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Basic |
|
133,954,623 |
|
132,612,528 |
|
131,560,851 |
|
131,232,269 |
|
133,499,241 |
|
143,320,146 |
|
146,993,373 |
|
152,962,620 |
|
159,117,078 |
| |||||||||
Diluted |
|
137,814,906 |
|
137,473,670 |
|
137,140,929 |
|
137,975,599 |
|
140,460,516 |
|
150,306,429 |
|
153,546,027 |
|
159,795,909 |
|
166,541,481 |
|
Arch Capital Group Ltd. and Subsidiaries
Consolidated Balance Sheets
(U.S. dollars in thousands, except share data)
|
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
| |||||||||
|
|
2012 |
|
2011 |
|
2011 |
|
2011 |
|
2011 |
|
2010 |
|
2010 |
|
2010 |
|
2010 |
| |||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Fixed maturities available for sale, at fair value |
|
$ |
9,221,145 |
|
$ |
9,375,604 |
|
$ |
9,529,834 |
|
$ |
9,247,002 |
|
$ |
8,916,017 |
|
$ |
8,957,859 |
|
$ |
9,692,852 |
|
$ |
9,326,574 |
|
$ |
9,202,122 |
|
Short-term investments available for sale, at fair value |
|
1,112,249 |
|
904,219 |
|
799,662 |
|
704,495 |
|
1,130,142 |
|
915,841 |
|
780,671 |
|
554,304 |
|
669,798 |
| |||||||||
Investment of funds received under securities lending, at fair value |
|
41,867 |
|
48,419 |
|
44,553 |
|
145,224 |
|
9,951 |
|
69,660 |
|
200,020 |
|
209,635 |
|
177,954 |
| |||||||||
Equity securities available for sale, at fair value |
|
318,181 |
|
299,584 |
|
273,213 |
|
320,434 |
|
361,639 |
|
310,194 |
|
79,805 |
|
38,879 |
|
41,537 |
| |||||||||
Other investments available for sale, at fair value |
|
357,992 |
|
238,111 |
|
229,974 |
|
299,845 |
|
293,073 |
|
275,538 |
|
229,488 |
|
211,241 |
|
125,262 |
| |||||||||
Investments accounted for using the fair value option |
|
500,283 |
|
366,903 |
|
319,381 |
|
321,790 |
|
256,614 |
|
219,173 |
|
175,841 |
|
140,541 |
|
147,471 |
| |||||||||
TALF investments, at fair value |
|
313,187 |
|
387,702 |
|
392,455 |
|
399,341 |
|
400,970 |
|
402,449 |
|
410,881 |
|
407,469 |
|
406,997 |
| |||||||||
Investments accounted for using the equity method |
|
347,273 |
|
380,507 |
|
383,543 |
|
399,968 |
|
449,206 |
|
508,334 |
|
500,737 |
|
474,971 |
|
467,597 |
| |||||||||
Total investments |
|
12,212,177 |
|
12,001,049 |
|
11,972,615 |
|
11,838,099 |
|
11,817,612 |
|
11,659,048 |
|
12,070,295 |
|
11,363,614 |
|
11,238,738 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Cash |
|
422,806 |
|
351,699 |
|
369,895 |
|
411,001 |
|
406,877 |
|
362,740 |
|
365,997 |
|
341,469 |
|
338,708 |
| |||||||||
Accrued investment income |
|
65,643 |
|
70,739 |
|
71,264 |
|
71,083 |
|
69,057 |
|
74,837 |
|
79,180 |
|
72,102 |
|
74,214 |
| |||||||||
Investment in joint venture |
|
107,866 |
|
107,576 |
|
107,642 |
|
105,982 |
|
105,495 |
|
105,698 |
|
104,347 |
|
103,540 |
|
102,946 |
| |||||||||
Fixed maturities and short-term investments pledged under securities lending, at fair value |
|
50,813 |
|
56,393 |
|
72,399 |
|
150,501 |
|
198,418 |
|
75,575 |
|
203,221 |
|
214,564 |
|
184,221 |
| |||||||||
Securities purchased under agreements to resell using funds received under securities lending |
|
|
|
|
|
20,032 |
|
|
|
185,176 |
|
|
|
|
|
|
|
|
| |||||||||
Premiums receivable |
|
700,137 |
|
501,563 |
|
606,963 |
|
712,397 |
|
633,144 |
|
503,434 |
|
662,634 |
|
706,503 |
|
699,385 |
| |||||||||
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses |
|
1,849,603 |
|
1,851,584 |
|
1,840,191 |
|
1,855,342 |
|
1,772,130 |
|
1,763,985 |
|
1,715,122 |
|
1,721,059 |
|
1,711,307 |
| |||||||||
Contractholder receivables |
|
762,031 |
|
748,231 |
|
732,270 |
|
702,423 |
|
672,296 |
|
660,546 |
|
635,682 |
|
609,476 |
|
579,238 |
| |||||||||
Prepaid reinsurance premiums |
|
261,619 |
|
265,696 |
|
267,846 |
|
278,587 |
|
259,624 |
|
263,448 |
|
267,240 |
|
256,952 |
|
250,841 |
| |||||||||
Deferred acquisition costs, net (1) |
|
261,467 |
|
227,884 |
|
253,163 |
|
257,292 |
|
251,226 |
|
227,278 |
|
244,441 |
|
241,095 |
|
247,202 |
| |||||||||
Receivable for securities sold |
|
621,560 |
|
462,891 |
|
1,067,188 |
|
733,931 |
|
749,708 |
|
56,145 |
|
1,329,508 |
|
1,084,122 |
|
1,427,085 |
| |||||||||
Other assets (1) |
|
497,061 |
|
460,052 |
|
490,728 |
|
520,901 |
|
521,292 |
|
490,277 |
|
461,473 |
|
480,448 |
|
492,662 |
| |||||||||
Total Assets |
|
$ |
17,812,783 |
|
$ |
17,105,357 |
|
$ |
17,872,196 |
|
$ |
17,637,539 |
|
$ |
17,642,055 |
|
$ |
16,243,011 |
|
$ |
18,139,140 |
|
$ |
17,194,944 |
|
$ |
17,346,547 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Reserve for losses and loss adjustment expenses |
|
$ |
8,511,323 |
|
$ |
8,456,210 |
|
$ |
8,523,522 |
|
$ |
8,564,908 |
|
$ |
8,319,324 |
|
$ |
8,098,454 |
|
$ |
8,054,677 |
|
$ |
7,940,104 |
|
$ |
7,898,162 |
|
Unearned premiums |
|
1,595,712 |
|
1,411,872 |
|
1,578,419 |
|
1,589,497 |
|
1,504,162 |
|
1,370,075 |
|
1,524,100 |
|
1,492,550 |
|
1,495,265 |
| |||||||||
Reinsurance balances payable |
|
137,791 |
|
133,866 |
|
123,815 |
|
154,860 |
|
131,512 |
|
132,452 |
|
130,274 |
|
128,723 |
|
114,254 |
| |||||||||
Contractholder payables |
|
762,031 |
|
748,231 |
|
732,270 |
|
702,423 |
|
672,296 |
|
660,546 |
|
635,682 |
|
609,476 |
|
579,238 |
| |||||||||
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 |
|
100,000 |
|
100,000 |
|
125,000 |
|
125,000 |
|
100,000 |
| |||||||||
TALF borrowings, at fair value |
|
239,551 |
|
310,486 |
|
314,137 |
|
318,441 |
|
322,222 |
|
325,770 |
|
331,797 |
|
336,213 |
|
346,746 |
| |||||||||
Securities lending payable |
|
52,224 |
|
58,546 |
|
74,696 |
|
155,072 |
|
203,925 |
|
78,021 |
|
209,411 |
|
219,796 |
|
189,024 |
| |||||||||
Payable for securities purchased |
|
742,995 |
|
480,230 |
|
1,161,591 |
|
838,787 |
|
1,266,390 |
|
200,192 |
|
1,649,462 |
|
1,192,181 |
|
1,429,529 |
| |||||||||
Other liabilities |
|
531,700 |
|
513,842 |
|
527,847 |
|
510,521 |
|
533,189 |
|
500,715 |
|
498,832 |
|
490,890 |
|
552,255 |
| |||||||||
Total Liabilities |
|
12,973,327 |
|
12,513,283 |
|
13,436,297 |
|
13,234,509 |
|
13,353,020 |
|
11,766,225 |
|
13,459,235 |
|
12,834,933 |
|
13,004,473 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Commitments and Contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Shareholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Non-cumulative preferred shares |
|
325,000 |
|
325,000 |
|
325,000 |
|
325,000 |
|
325,000 |
|
325,000 |
|
325,000 |
|
325,000 |
|
325,000 |
| |||||||||
Common shares |
|
552 |
|
549 |
|
544 |
|
541 |
|
535 |
|
534 |
|
531 |
|
529 |
|
527 |
| |||||||||
Additional paid-in capital |
|
170,694 |
|
161,419 |
|
150,882 |
|
142,001 |
|
120,109 |
|
110,325 |
|
100,640 |
|
83,828 |
|
95,926 |
| |||||||||
Retained earnings (1) |
|
4,954,450 |
|
4,796,655 |
|
4,657,784 |
|
4,495,490 |
|
4,405,348 |
|
4,386,336 |
|
4,156,897 |
|
4,015,340 |
|
3,779,659 |
| |||||||||
Accumulated other comprehensive income, net of deferred income tax |
|
234,468 |
|
153,923 |
|
146,576 |
|
263,584 |
|
225,405 |
|
204,503 |
|
388,370 |
|
173,231 |
|
140,962 |
| |||||||||
Common shares held in treasury, at cost |
|
(845,708 |
) |
(845,472 |
) |
(844,887 |
) |
(823,586 |
) |
(787,362 |
) |
(549,912 |
) |
(291,533 |
) |
(237,917 |
) |
|
| |||||||||
Total Shareholders Equity |
|
4,839,456 |
|
4,592,074 |
|
4,435,899 |
|
4,403,030 |
|
4,289,035 |
|
4,476,786 |
|
4,679,905 |
|
4,360,011 |
|
4,342,074 |
| |||||||||
Total Liabilities and Shareholders Equity |
|
$ |
17,812,783 |
|
$ |
17,105,357 |
|
$ |
17,872,196 |
|
$ |
17,637,539 |
|
$ |
17,642,055 |
|
$ |
16,243,011 |
|
$ |
18,139,140 |
|
$ |
17,194,944 |
|
$ |
17,346,547 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Common shares outstanding, net of treasury shares |
|
135,441,687 |
|
134,358,345 |
|
133,005,465 |
|
132,771,524 |
|
131,850,639 |
|
139,632,225 |
|
147,676,113 |
|
148,891,710 |
|
158,129,802 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Book value per common share (1) (2) |
|
$ |
33.33 |
|
$ |
31.76 |
|
$ |
30.91 |
|
$ |
30.71 |
|
$ |
30.06 |
|
$ |
29.73 |
|
$ |
29.49 |
|
$ |
27.10 |
|
$ |
25.40 |
|
(1) Reflects the adoption of new accounting guidance concerning the accounting for costs associated with acquiring or renewing insurance contracts retrospectively applied to all periods.
(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 |
| |||||||||||||||||||||||||
|
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
| |||||||||
|
|
2012 |
|
2011 |
|
2011 |
|
2011 |
|
2011 |
|
2010 |
|
2010 |
|
2010 |
|
2010 |
| |||||||||
Comprehensive Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Net income |
|
$ |
164,256 |
|
$ |
145,332 |
|
$ |
168,755 |
|
$ |
96,603 |
|
$ |
25,473 |
|
$ |
235,900 |
|
$ |
148,018 |
|
$ |
242,142 |
|
$ |
216,612 |
|
Other comprehensive income (loss), net of deferred income tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Unrealized holding gains (losses) arising during period |
|
94,863 |
|
40,476 |
|
(71,861 |
) |
84,862 |
|
40,370 |
|
(141,807 |
) |
264,609 |
|
71,087 |
|
42,847 |
| |||||||||
Portion of other-than-temporary impairment losses recognized in other comprehensive income, net of deferred income tax |
|
(8 |
) |
(1,485 |
) |
(2,440 |
) |
(285 |
) |
(578 |
) |
(111 |
) |
(603 |
) |
(308 |
) |
(730 |
) | |||||||||
Reclassification of net realized gains, net of income taxes, included in net income |
|
(27,511 |
) |
(29,785 |
) |
(30,707 |
) |
(47,682 |
) |
(20,176 |
) |
(43,414 |
) |
(56,299 |
) |
(32,611 |
) |
(37,607 |
) | |||||||||
Foreign currency translation adjustments |
|
13,201 |
|
(1,859 |
) |
(12,000 |
) |
1,284 |
|
1,286 |
|
1,465 |
|
7,432 |
|
(5,899 |
) |
(2,074 |
) | |||||||||
Other comprehensive income (loss) |
|
80,545 |
|
7,347 |
|
(117,008 |
) |
38,179 |
|
20,902 |
|
(183,867 |
) |
215,139 |
|
32,269 |
|
2,436 |
| |||||||||
Comprehensive Income |
|
$ |
244,801 |
|
$ |
152,679 |
|
$ |
51,747 |
|
$ |
134,782 |
|
$ |
46,375 |
|
$ |
52,033 |
|
$ |
363,157 |
|
$ |
274,411 |
|
$ |
219,048 |
|
Arch Capital Group Ltd. and Subsidiaries
Consolidated Statements of Changes in Shareholders Equity
(U.S. dollars in thousands)
|
|
Three Months Ended |
| |||||||||||||||||||||||||
|
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
| |||||||||
|
|
2012 |
|
2011 |
|
2011 |
|
2011 |
|
2011 |
|
2010 |
|
2010 |
|
2010 |
|
2010 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Non-Cumulative Preferred Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Common Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Balance at beginning of period |
|
549 |
|
544 |
|
541 |
|
535 |
|
534 |
|
531 |
|
529 |
|
527 |
|
548 |
| |||||||||
Common shares issued, net |
|
3 |
|
5 |
|
3 |
|
6 |
|
1 |
|
3 |
|
2 |
|
7 |
|
4 |
| |||||||||
Purchases of common shares under share repurchase program |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5 |
) |
(25 |
) | |||||||||
Balance at end of period |
|
552 |
|
549 |
|
544 |
|
541 |
|
535 |
|
534 |
|
531 |
|
529 |
|
527 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Additional Paid-in Capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Balance at beginning of period |
|
161,419 |
|
150,882 |
|
142,001 |
|
120,109 |
|
110,325 |
|
100,640 |
|
83,828 |
|
95,926 |
|
253,466 |
| |||||||||
Common shares issued, net |
|
(3 |
) |
1,857 |
|
(2 |
) |
3,904 |
|
8 |
|
1,334 |
|
283 |
|
3,275 |
|
14 |
| |||||||||
Exercise of stock options |
|
1,851 |
|
2,926 |
|
3,007 |
|
2,245 |
|
4,127 |
|
2,716 |
|
10,486 |
|
7,964 |
|
16,700 |
| |||||||||
Common shares retired |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(36,212 |
) |
(181,350 |
) | |||||||||
Amortization of share-based compensation |
|
7,411 |
|
5,700 |
|
5,781 |
|
13,877 |
|
5,628 |
|
5,615 |
|
6,074 |
|
12,280 |
|
7,096 |
| |||||||||
Other |
|
16 |
|
54 |
|
95 |
|
1,866 |
|
21 |
|
20 |
|
(31 |
) |
595 |
|
|
| |||||||||
Balance at end of period |
|
170,694 |
|
161,419 |
|
150,882 |
|
142,001 |
|
120,109 |
|
110,325 |
|
100,640 |
|
83,828 |
|
95,926 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Retained Earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Balance at beginning of period |
|
4,796,655 |
|
4,657,784 |
|
4,495,490 |
|
4,405,348 |
|
4,386,336 |
|
4,156,897 |
|
4,015,340 |
|
3,779,659 |
|
3,605,809 |
| |||||||||
Cumulative effect of adjustment resulting from adoption of new accounting guidance (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(36,301 |
) | |||||||||
Balance at beginning of period, as adjusted |
|
4,796,655 |
|
4,657,784 |
|
4,495,490 |
|
4,405,348 |
|
4,386,336 |
|
4,156,897 |
|
4,015,340 |
|
3,779,659 |
|
3,569,508 |
| |||||||||
Dividends declared on preferred shares |
|
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) | |||||||||
Net income |
|
164,256 |
|
145,332 |
|
168,755 |
|
96,603 |
|
25,473 |
|
235,900 |
|
148,018 |
|
242,142 |
|
216,612 |
| |||||||||
Balance at end of period |
|
4,954,450 |
|
4,796,655 |
|
4,657,784 |
|
4,495,490 |
|
4,405,348 |
|
4,386,336 |
|
4,156,897 |
|
4,015,340 |
|
3,779,659 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Accumulated Other Comprehensive Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Balance at beginning of period |
|
153,923 |
|
146,576 |
|
263,584 |
|
225,405 |
|
204,503 |
|
388,370 |
|
173,231 |
|
140,962 |
|
138,526 |
| |||||||||
Change in unrealized appreciation (decline) in value of investments, net of deferred income tax |
|
67,352 |
|
10,691 |
|
(102,568 |
) |
37,180 |
|
20,194 |
|
(185,221 |
) |
208,310 |
|
38,476 |
|
5,240 |
| |||||||||
Portion of other-than-temporary impairment losses recognized in other comprehensive income, net of deferred income tax |
|
(8 |
) |
(1,485 |
) |
(2,440 |
) |
(285 |
) |
(578 |
) |
(111 |
) |
(603 |
) |
(308 |
) |
(730 |
) | |||||||||
Foreign currency translation adjustments, net of deferred income tax |
|
13,201 |
|
(1,859 |
) |
(12,000 |
) |
1,284 |
|
1,286 |
|
1,465 |
|
7,432 |
|
(5,899 |
) |
(2,074 |
) | |||||||||
Balance at end of period |
|
234,468 |
|
153,923 |
|
146,576 |
|
263,584 |
|
225,405 |
|
204,503 |
|
388,370 |
|
173,231 |
|
140,962 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Common Shares Held in Treasury, at Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Balance at beginning of period |
|
(845,472 |
) |
(844,887 |
) |
(823,586 |
) |
(787,362 |
) |
(549,912 |
) |
(291,533 |
) |
(237,917 |
) |
|
|
|
| |||||||||
Shares repurchased for treasury |
|
(236 |
) |
(585 |
) |
(21,301 |
) |
(36,224 |
) |
(237,450 |
) |
(258,379 |
) |
(53,616 |
) |
(237,917 |
) |
|
| |||||||||
Balance at end of period |
|
(845,708 |
) |
(845,472 |
) |
(844,887 |
) |
(823,586 |
) |
(787,362 |
) |
(549,912 |
) |
(291,533 |
) |
(237,917 |
) |
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Total Shareholders Equity |
|
$ |
4,839,456 |
|
$ |
4,592,074 |
|
$ |
4,435,899 |
|
$ |
4,403,030 |
|
$ |
4,289,035 |
|
$ |
4,476,786 |
|
$ |
4,679,905 |
|
$ |
4,360,011 |
|
$ |
4,342,074 |
|
(1) Reflects the adoption of new accounting guidance concerning the accounting for costs associated with acquiring or renewing insurance contracts retrospectively applied to all periods.
Arch Capital Group Ltd. and Subsidiaries
Consolidated Statements of Cash Flows
(U.S. dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
| |||||||||||||||||||||||||
|
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
| |||||||||
|
|
2012 |
|
2011 |
|
2011 |
|
2011 |
|
2011 |
|
2010 |
|
2010 |
|
2010 |
|
2010 |
| |||||||||
Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Net income |
|
$ |
164,256 |
|
$ |
145,332 |
|
$ |
168,755 |
|
$ |
96,603 |
|
$ |
25,473 |
|
$ |
235,900 |
|
$ |
148,018 |
|
$ |
242,142 |
|
$ |
216,612 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Net realized gains |
|
(44,072 |
) |
(12,940 |
) |
(29,615 |
) |
(48,886 |
) |
(22,481 |
) |
(78,261 |
) |
(72,534 |
) |
(62,406 |
) |
(49,483 |
) | |||||||||
Net impairment losses included in earnings |
|
1,023 |
|
1,959 |
|
2,739 |
|
1,684 |
|
2,680 |
|
3,230 |
|
2,075 |
|
4,410 |
|
1,606 |
| |||||||||
Equity in net income or loss of investment funds accounted for using the equity method and other income |
|
(12,030 |
) |
20,776 |
|
31,734 |
|
18,945 |
|
(355 |
) |
(26,110 |
) |
(11,545 |
) |
(3,368 |
) |
(15,012 |
) | |||||||||
Share-based compensation |
|
7,411 |
|
5,700 |
|
5,781 |
|
13,877 |
|
5,628 |
|
5,615 |
|
6,074 |
|
12,280 |
|
7,096 |
| |||||||||
Changes in: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Reserve for losses and loss adjustment expenses, net of unpaid losses and loss adjustment expenses recoverable |
|
39,343 |
|
(59,998 |
) |
48,397 |
|
130,746 |
|
155,477 |
|
3,546 |
|
49,420 |
|
71,357 |
|
91,247 |
| |||||||||
Unearned premiums, net of prepaid reinsurance premiums |
|
181,735 |
|
(162,490 |
) |
9,919 |
|
63,987 |
|
130,136 |
|
(149,242 |
) |
9,024 |
|
236 |
|
96,645 |
| |||||||||
Premiums receivable |
|
(190,102 |
) |
106,818 |
|
82,200 |
|
(77,556 |
) |
(118,688 |
) |
157,034 |
|
63,197 |
|
(20,280 |
) |
(116,571 |
) | |||||||||
Deferred acquisition costs, net |
|
(32,269 |
) |
24,823 |
|
1,438 |
|
(5,464 |
) |
(22,056 |
) |
16,684 |
|
(31 |
) |
3,756 |
|
(19,014 |
) | |||||||||
Reinsurance balances payable |
|
(3,181 |
) |
8,896 |
|
(19,368 |
) |
23,109 |
|
(7,122 |
) |
3,277 |
|
(4,853 |
) |
19,267 |
|
(36,669 |
) | |||||||||
Other liabilities |
|
10,134 |
|
30,620 |
|
5,925 |
|
(26,613 |
) |
33,366 |
|
(47,339 |
) |
23,914 |
|
(57,219 |
) |
41,448 |
| |||||||||
Other items, net |
|
22,573 |
|
145 |
|
2,019 |
|
31,535 |
|
42,522 |
|
20,179 |
|
54,665 |
|
(4,661 |
) |
(33,282 |
) | |||||||||
Net Cash Provided By Operating Activities |
|
144,821 |
|
109,641 |
|
309,924 |
|
221,967 |
|
224,580 |
|
144,513 |
|
267,424 |
|
205,514 |
|
184,623 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Purchases of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Fixed maturity investments |
|
(3,593,630 |
) |
(3,758,854 |
) |
(2,729,874 |
) |
(4,235,140 |
) |
(3,151,767 |
) |
(2,434,319 |
) |
(5,018,619 |
) |
(4,885,606 |
) |
(4,597,713 |
) | |||||||||
Equity securities |
|
(33,803 |
) |
(69,962 |
) |
(94,115 |
) |
(159,157 |
) |
(89,790 |
) |
(226,677 |
) |
(65,155 |
) |
(21,727 |
) |
(52,283 |
) | |||||||||
Other investments |
|
(239,167 |
) |
(220,048 |
) |
(166,449 |
) |
(114,588 |
) |
(92,777 |
) |
(147,127 |
) |
(92,955 |
) |
(150,631 |
) |
(132,819 |
) | |||||||||
Proceeds from the sales of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Fixed maturity investments |
|
3,628,932 |
|
3,542,629 |
|
2,299,627 |
|
3,323,456 |
|
3,232,541 |
|
2,670,332 |
|
4,872,668 |
|
4,668,666 |
|
4,443,108 |
| |||||||||
Equity securities |
|
75,860 |
|
58,386 |
|
111,467 |
|
147,334 |
|
52,316 |
|
14,522 |
|
19,151 |
|
25,043 |
|
11,725 |
| |||||||||
Other investments |
|
111,149 |
|
147,243 |
|
191,767 |
|
119,780 |
|
84,967 |
|
133,211 |
|
68,843 |
|
87,536 |
|
89,510 |
| |||||||||
Proceeds from redemptions and maturities of fixed maturities |
|
261,660 |
|
296,408 |
|
200,671 |
|
283,512 |
|
253,898 |
|
266,044 |
|
226,889 |
|
244,312 |
|
212,625 |
| |||||||||
Net (purchases) sales of short-term investments |
|
(207,444 |
) |
(114,854 |
) |
(123,211 |
) |
459,091 |
|
(223,415 |
) |
(129,794 |
) |
(205,411 |
) |
96,239 |
|
(102,921 |
) | |||||||||
Change in investment of securities lending collateral |
|
6,322 |
|
16,150 |
|
80,376 |
|
48,853 |
|
(125,904 |
) |
131,389 |
|
10,385 |
|
(30,772 |
) |
30,092 |
| |||||||||
Purchases of furniture, equipment and other |
|
(6,498 |
) |
(3,461 |
) |
(3,178 |
) |
(4,266 |
) |
(8,082 |
) |
(1,553 |
) |
(2,251 |
) |
(6,057 |
) |
(1,803 |
) | |||||||||
Net Cash Provided By (Used For) Investing Activities |
|
3,381 |
|
(106,363 |
) |
(232,919 |
) |
(131,125 |
) |
(68,013 |
) |
276,028 |
|
(186,455 |
) |
27,003 |
|
(100,479 |
) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Purchases of common shares under share repurchase program |
|
|
|
(3 |
) |
(20,833 |
) |
(29,552 |
) |
(237,173 |
) |
(258,150 |
) |
(53,398 |
) |
(269,054 |
) |
(181,272 |
) | |||||||||
Proceeds from common shares issued, net |
|
780 |
|
3,245 |
|
1,609 |
|
(1,397 |
) |
2,875 |
|
4,693 |
|
8,586 |
|
3,779 |
|
10,591 |
| |||||||||
Proceeds from borrowings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000 |
|
214,526 |
| |||||||||
Repayments of borrowings |
|
(69,863 |
) |
(3,513 |
) |
(4,225 |
) |
(3,919 |
) |
(3,695 |
) |
(31,072 |
) |
(5,646 |
) |
(34,022 |
) |
(86,317 |
) | |||||||||
Change in securities lending collateral |
|
(6,322 |
) |
(16,150 |
) |
(80,376 |
) |
(48,853 |
) |
125,904 |
|
(131,389 |
) |
(10,385 |
) |
30,772 |
|
(30,092 |
) | |||||||||
Other |
|
588 |
|
766 |
|
818 |
|
2,467 |
|
714 |
|
(893 |
) |
1,593 |
|
2,296 |
|
5,061 |
| |||||||||
Preferred dividends paid |
|
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) | |||||||||
Net Cash Used For Financing Activities |
|
(81,278 |
) |
(22,116 |
) |
(109,468 |
) |
(87,715 |
) |
(117,836 |
) |
(423,272 |
) |
(65,711 |
) |
(222,690 |
) |
(73,964 |
) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Effects of exchange rate changes on foreign currency cash |
|
4,183 |
|
642 |
|
(8,643 |
) |
997 |
|
5,406 |
|
(526 |
) |
9,270 |
|
(7,066 |
) |
(6,043 |
) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Increase (decrease) in cash |
|
71,107 |
|
(18,196 |
) |
(41,106 |
) |
4,124 |
|
44,137 |
|
(3,257 |
) |
24,528 |
|
2,761 |
|
4,137 |
| |||||||||
Cash beginning of period |
|
351,699 |
|
369,895 |
|
411,001 |
|
406,877 |
|
362,740 |
|
365,997 |
|
341,469 |
|
338,708 |
|
334,571 |
| |||||||||
Cash end of period |
|
$ |
422,806 |
|
$ |
351,699 |
|
$ |
369,895 |
|
$ |
411,001 |
|
$ |
406,877 |
|
$ |
362,740 |
|
$ |
365,997 |
|
341,469 |
|
$ |
338,708 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Income taxes paid (received), net |
|
$ |
2,788 |
|
$ |
(7,724 |
) |
$ |
3,662 |
|
$ |
2,296 |
|
$ |
3,670 |
|
$ |
3,140 |
|
$ |
1,928 |
|
$ |
1,430 |
|
$ |
704 |
|
Interest paid |
|
$ |
2,206 |
|
$ |
13,047 |
|
$ |
2,177 |
|
$ |
13,084 |
|
$ |
2,191 |
|
$ |
12,831 |
|
$ |
1,832 |
|
$ |
13,437 |
|
$ |
1,785 |
|
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 March 31, 2012 and 2011
(U.S. dollars in thousands)
|
|
Three Months Ended |
|
Three Months Ended |
| ||||||||||||||
|
|
March 31, 2012 |
|
March 31, 2011 |
| ||||||||||||||
|
|
Insurance |
|
Reinsurance |
|
Total |
|
Insurance |
|
Reinsurance |
|
Total |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Gross premiums written (1) |
|
$ |
688,113 |
|
$ |
379,976 |
|
$ |
1,066,656 |
|
$ |
634,583 |
|
$ |
331,013 |
|
$ |
964,566 |
|
Net premiums written |
|
490,680 |
|
372,931 |
|
863,611 |
|
449,291 |
|
314,987 |
|
764,278 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net premiums earned |
|
$ |
441,740 |
|
$ |
238,572 |
|
$ |
680,312 |
|
$ |
407,591 |
|
$ |
226,104 |
|
$ |
633,695 |
|
Fee income |
|
530 |
|
13 |
|
543 |
|
778 |
|
37 |
|
815 |
| ||||||
Losses and loss adjustment expenses |
|
(303,164 |
) |
(92,043 |
) |
(395,207 |
) |
(297,723 |
) |
(196,157 |
) |
(493,880 |
) | ||||||
Acquisition expenses, net |
|
(73,870 |
) |
(45,092 |
) |
(118,962 |
) |
(61,415 |
) |
(47,339 |
) |
(108,754 |
) | ||||||
Other operating expenses |
|
(73,370 |
) |
(26,123 |
) |
(99,493 |
) |
(74,629 |
) |
(21,227 |
) |
(95,856 |
) | ||||||
Underwriting income (loss) |
|
$ |
(8,134 |
) |
$ |
75,327 |
|
67,193 |
|
$ |
(25,398 |
) |
$ |
(38,582 |
) |
(63,980 |
) | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net investment income |
|
|
|
|
|
74,297 |
|
|
|
|
|
88,307 |
| ||||||
Net realized gains |
|
|
|
|
|
44,121 |
|
|
|
|
|
20,695 |
| ||||||
Net impairment losses recognized in earnings |
|
|
|
|
|
(1,023 |
) |
|
|
|
|
(2,680 |
) | ||||||
Equity in net income (loss) of investment funds accounted for using the equity method |
|
|
|
|
|
24,826 |
|
|
|
|
|
29,673 |
| ||||||
Other income (loss) |
|
|
|
|
|
(8,068 |
) |
|
|
|
|
4,567 |
| ||||||
Other expenses |
|
|
|
|
|
(6,979 |
) |
|
|
|
|
(7,026 |
) | ||||||
Interest expense |
|
|
|
|
|
(7,521 |
) |
|
|
|
|
(7,721 |
) | ||||||
Net foreign exchange losses |
|
|
|
|
|
(20,688 |
) |
|
|
|
|
(36,912 |
) | ||||||
Income before income taxes |
|
|
|
|
|
166,158 |
|
|
|
|
|
24,923 |
| ||||||
Income tax (expense) benefit |
|
|
|
|
|
(1,902 |
) |
|
|
|
|
550 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net income |
|
|
|
|
|
164,256 |
|
|
|
|
|
25,473 |
| ||||||
Preferred dividends |
|
|
|
|
|
(6,461 |
) |
|
|
|
|
(6,461 |
) | ||||||
Net income available to common shareholders |
|
|
|
|
|
$ |
157,795 |
|
|
|
|
|
$ |
19,012 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Underwriting Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Loss ratio |
|
68.6 |
% |
38.6 |
% |
58.1 |
% |
73.0 |
% |
86.8 |
% |
77.9 |
% | ||||||
Acquisition expense ratio (2) |
|
16.6 |
% |
18.9 |
% |
17.4 |
% |
14.9 |
% |
20.9 |
% |
17.0 |
% | ||||||
Other operating expense ratio |
|
16.6 |
% |
10.9 |
% |
14.6 |
% |
18.3 |
% |
9.4 |
% |
15.1 |
% | ||||||
Combined ratio |
|
101.8 |
% |
68.4 |
% |
90.1 |
% |
106.2 |
% |
117.1 |
% |
110.0 |
% | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net premiums written to gross premiums written |
|
71.3 |
% |
98.1 |
% |
81.0 |
% |
70.8 |
% |
95.2 |
% |
79.2 |
% |
(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 |
| ||||||||
|
|
2012 |
|
2011 |
| ||||||
|
|
Amount |
|
% of Total |
|
Amount |
|
% of Total |
| ||
|
|
|
|
|
|
|
|
|
| ||
Net premiums written |
|
|
|
|
|
|
|
|
| ||
Property, energy, marine and aviation |
|
$ |
79,819 |
|
16.3 |
|
$ |
76,418 |
|
17.0 |
|
Programs |
|
81,616 |
|
16.6 |
|
74,396 |
|
16.6 |
| ||
Professional liability |
|
70,561 |
|
14.4 |
|
59,385 |
|
13.2 |
| ||
Executive assurance |
|
68,378 |
|
13.9 |
|
56,068 |
|
12.5 |
| ||
National accounts |
|
35,438 |
|
7.2 |
|
40,191 |
|
8.9 |
| ||
Construction |
|
33,653 |
|
6.9 |
|
31,509 |
|
7.0 |
| ||
Casualty |
|
26,973 |
|
5.5 |
|
30,134 |
|
6.7 |
| ||
Travel and accident |
|
22,836 |
|
4.7 |
|
21,501 |
|
4.8 |
| ||
Lenders products |
|
22,415 |
|
4.6 |
|
21,074 |
|
4.7 |
| ||
Healthcare |
|
10,635 |
|
2.2 |
|
9,117 |
|
2.0 |
| ||
Surety |
|
12,134 |
|
2.5 |
|
9,734 |
|
2.2 |
| ||
Other (1) |
|
26,222 |
|
5.2 |
|
19,764 |
|
4.4 |
| ||
Total |
|
$ |
490,680 |
|
100.0 |
|
$ |
449,291 |
|
100.0 |
|
|
|
|
|
|
|
|
|
|
| ||
Net premiums earned |
|
|
|
|
|
|
|
|
| ||
Property, energy, marine and aviation |
|
$ |
78,494 |
|
17.8 |
|
$ |
73,599 |
|
18.1 |
|
Programs |
|
73,998 |
|
16.8 |
|
67,018 |
|
16.4 |
| ||
Professional liability |
|
63,256 |
|
14.3 |
|
67,400 |
|
16.5 |
| ||
Executive assurance |
|
58,766 |
|
13.3 |
|
54,570 |
|
13.4 |
| ||
National accounts |
|
19,136 |
|
4.3 |
|
21,162 |
|
5.2 |
| ||
Construction |
|
31,808 |
|
7.2 |
|
28,391 |
|
7.0 |
| ||
Casualty |
|
29,065 |
|
6.6 |
|
28,427 |
|
7.0 |
| ||
Travel and accident |
|
16,713 |
|
3.8 |
|
15,599 |
|
3.8 |
| ||
Lenders products |
|
32,153 |
|
7.3 |
|
18,236 |
|
4.5 |
| ||
Healthcare |
|
8,898 |
|
2.0 |
|
8,652 |
|
2.1 |
| ||
Surety |
|
10,560 |
|
2.4 |
|
9,779 |
|
2.4 |
| ||
Other (1) |
|
18,893 |
|
4.2 |
|
14,758 |
|
3.6 |
| ||
Total |
|
$ |
441,740 |
|
100.0 |
|
$ |
407,591 |
|
100.0 |
|
|
|
|
|
|
|
|
|
|
| ||
Net premiums written by client location |
|
|
|
|
|
|
|
|
| ||
United States |
|
$ |
334,553 |
|
68.2 |
|
$ |
305,216 |
|
67.9 |
|
Europe |
|
107,631 |
|
21.9 |
|
100,091 |
|
22.3 |
| ||
Other |
|
48,496 |
|
9.9 |
|
43,984 |
|
9.8 |
| ||
Total |
|
$ |
490,680 |
|
100.0 |
|
$ |
449,291 |
|
100.0 |
|
|
|
|
|
|
|
|
|
|
| ||
Net premiums written by underwriting location |
|
|
|
|
|
|
|
|
| ||
United States |
|
$ |
321,559 |
|
65.5 |
|
$ |
295,043 |
|
65.7 |
|
Europe |
|
152,615 |
|
31.1 |
|
135,536 |
|
30.2 |
| ||
Other |
|
16,506 |
|
3.4 |
|
18,712 |
|
4.1 |
| ||
Total |
|
$ |
490,680 |
|
100.0 |
|
$ |
449,291 |
|
100.0 |
|
(1) Includes excess workers compensation, employers liability, alternative markets and accident and health business.
Arch Capital Group Ltd. and Subsidiaries
Segment Information Insurance Segment
(U.S. dollars in thousands)
|
|
Three Months Ended |
| |||||||||||||||||||||||||
|
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
| |||||||||
|
|
2012 |
|
2011 |
|
2011 |
|
2011 |
|
2011 |
|
2010 |
|
2010 |
|
2010 |
|
2010 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Gross premiums written |
|
$ |
688,113 |
|
$ |
540,617 |
|
$ |
634,280 |
|
$ |
635,005 |
|
$ |
634,583 |
|
$ |
527,783 |
|
$ |
624,490 |
|
$ |
616,353 |
|
$ |
633,576 |
|
Net premiums written |
|
490,680 |
|
360,739 |
|
472,986 |
|
438,263 |
|
449,291 |
|
351,841 |
|
431,361 |
|
422,837 |
|
452,924 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Net premiums earned |
|
$ |
441,740 |
|
$ |
422,667 |
|
$ |
437,970 |
|
$ |
410,819 |
|
$ |
407,591 |
|
$ |
404,275 |
|
$ |
411,881 |
|
$ |
405,473 |
|
$ |
429,477 |
|
Fee income |
|
530 |
|
729 |
|
661 |
|
702 |
|
778 |
|
761 |
|
864 |
|
874 |
|
753 |
| |||||||||
Losses and loss adjustment expenses |
|
(303,164 |
) |
(282,769 |
) |
(290,608 |
) |
(301,642 |
) |
(297,723 |
) |
(264,848 |
) |
(265,411 |
) |
(275,294 |
) |
(312,011 |
) | |||||||||
Acquisition expenses, net |
|
(73,870 |
) |
(73,975 |
) |
(76,763 |
) |
(66,543 |
) |
(61,415 |
) |
(63,102 |
) |
(67,309 |
) |
(65,359 |
) |
(67,431 |
) | |||||||||
Other operating expenses |
|
(73,370 |
) |
(77,593 |
) |
(77,801 |
) |
(77,774 |
) |
(74,629 |
) |
(82,535 |
) |
(76,892 |
) |
(72,533 |
) |
(80,772 |
) | |||||||||
Underwriting income (loss) |
|
$ |
(8,134 |
) |
$ |
(10,941 |
) |
$ |
(6,541 |
) |
$ |
(34,438 |
) |
$ |
(25,398 |
) |
$ |
(5,449 |
) |
$ |
3,133 |
|
$ |
(6,839 |
) |
$ |
(29,984 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Underwriting Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Loss ratio |
|
68.6 |
% |
66.9 |
% |
66.4 |
% |
73.4 |
% |
73.0 |
% |
65.5 |
% |
64.4 |
% |
67.9 |
% |
72.6 |
% | |||||||||
Acquisition expense ratio (1) |
|
16.6 |
% |
17.3 |
% |
17.4 |
% |
16.0 |
% |
14.9 |
% |
15.4 |
% |
16.1 |
% |
15.9 |
% |
15.5 |
% | |||||||||
Other operating expense ratio |
|
16.6 |
% |
18.4 |
% |
17.8 |
% |
18.9 |
% |
18.3 |
% |
20.4 |
% |
18.7 |
% |
17.9 |
% |
18.8 |
% | |||||||||
Combined ratio |
|
101.8 |
% |
102.6 |
% |
101.6 |
% |
108.3 |
% |
106.2 |
% |
101.3 |
% |
99.2 |
% |
101.7 |
% |
106.9 |
% | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Net premiums written |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Property, energy, marine and aviation |
|
$ |
79,819 |
|
$ |
41,244 |
|
$ |
114,631 |
|
$ |
103,296 |
|
$ |
76,418 |
|
$ |
44,258 |
|
$ |
88,412 |
|
$ |
88,194 |
|
$ |
100,665 |
|
Programs |
|
81,616 |
|
62,874 |
|
79,086 |
|
81,629 |
|
74,396 |
|
60,969 |
|
68,264 |
|
73,345 |
|
70,498 |
| |||||||||
Professional liability |
|
70,561 |
|
54,085 |
|
66,484 |
|
57,906 |
|
59,385 |
|
51,559 |
|
78,873 |
|
70,626 |
|
67,118 |
| |||||||||
Executive assurance |
|
68,378 |
|
59,035 |
|
62,328 |
|
53,974 |
|
56,068 |
|
54,448 |
|
51,503 |
|
52,514 |
|
60,993 |
| |||||||||
National accounts |
|
35,438 |
|
19,110 |
|
17,275 |
|
4,397 |
|
40,191 |
|
14,024 |
|
19,215 |
|
3,877 |
|
30,809 |
| |||||||||
Construction |
|
33,653 |
|
22,912 |
|
23,576 |
|
42,408 |
|
31,509 |
|
20,014 |
|
20,245 |
|
44,276 |
|
28,292 |
| |||||||||
Casualty |
|
26,973 |
|
28,599 |
|
30,563 |
|
24,939 |
|
30,134 |
|
27,389 |
|
28,493 |
|
26,617 |
|
25,463 |
| |||||||||
Travel and accident |
|
22,836 |
|
13,751 |
|
17,404 |
|
19,284 |
|
21,501 |
|
14,486 |
|
19,673 |
|
15,272 |
|
21,806 |
| |||||||||
Lenders products |
|
22,415 |
|
21,543 |
|
22,551 |
|
21,526 |
|
21,074 |
|
30,942 |
|
23,452 |
|
22,208 |
|
16,319 |
| |||||||||
Healthcare |
|
10,635 |
|
9,303 |
|
8,810 |
|
8,422 |
|
9,117 |
|
10,290 |
|
8,705 |
|
9,989 |
|
8,524 |
| |||||||||
Surety |
|
12,134 |
|
12,734 |
|
10,389 |
|
9,618 |
|
9,734 |
|
7,918 |
|
11,128 |
|
7,012 |
|
8,091 |
| |||||||||
Other (2) |
|
26,222 |
|
15,549 |
|
19,889 |
|
10,864 |
|
19,764 |
|
15,544 |
|
13,398 |
|
8,907 |
|
14,346 |
| |||||||||
Total |
|
$ |
490,680 |
|
$ |
360,739 |
|
$ |
472,986 |
|
$ |
438,263 |
|
$ |
449,291 |
|
$ |
351,841 |
|
$ |
431,361 |
|
$ |
422,837 |
|
$ |
452,924 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Net premiums earned |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Property, energy, marine and aviation |
|
$ |
78,494 |
|
$ |
79,979 |
|
$ |
92,288 |
|
$ |
76,644 |
|
$ |
73,599 |
|
$ |
77,811 |
|
$ |
82,301 |
|
$ |
80,818 |
|
$ |
95,037 |
|
Programs |
|
73,998 |
|
75,085 |
|
73,561 |
|
71,934 |
|
67,018 |
|
69,462 |
|
68,404 |
|
68,381 |
|
66,159 |
| |||||||||
Professional liability |
|
63,256 |
|
62,467 |
|
64,403 |
|
57,767 |
|
67,400 |
|
63,152 |
|
69,900 |
|
63,642 |
|
67,909 |
| |||||||||
Executive assurance |
|
58,766 |
|
56,782 |
|
56,783 |
|
60,488 |
|
54,570 |
|
55,270 |
|
51,675 |
|
54,958 |
|
56,232 |
| |||||||||
National accounts |
|
19,136 |
|
20,572 |
|
19,642 |
|
18,166 |
|
21,162 |
|
17,360 |
|
18,595 |
|
16,810 |
|
21,773 |
| |||||||||
Construction |
|
31,808 |
|
28,569 |
|
28,590 |
|
27,214 |
|
28,391 |
|
26,837 |
|
25,664 |
|
27,982 |
|
28,911 |
| |||||||||
Casualty |
|
29,065 |
|
28,093 |
|
30,305 |
|
24,829 |
|
28,427 |
|
25,893 |
|
27,503 |
|
28,148 |
|
28,069 |
| |||||||||
Travel and accident |
|
16,713 |
|
15,840 |
|
19,051 |
|
19,455 |
|
15,599 |
|
15,705 |
|
17,418 |
|
17,590 |
|
16,078 |
| |||||||||
Lenders products |
|
32,153 |
|
18,796 |
|
18,293 |
|
19,966 |
|
18,236 |
|
19,617 |
|
17,593 |
|
17,153 |
|
16,807 |
| |||||||||
Healthcare |
|
8,898 |
|
8,825 |
|
9,340 |
|
9,089 |
|
8,652 |
|
9,701 |
|
9,738 |
|
10,340 |
|
9,943 |
| |||||||||
Surety |
|
10,560 |
|
11,847 |
|
10,091 |
|
9,402 |
|
9,779 |
|
9,810 |
|
9,876 |
|
8,023 |
|
10,258 |
| |||||||||
Other (2) |
|
18,893 |
|
15,812 |
|
15,623 |
|
15,865 |
|
14,758 |
|
13,657 |
|
13,214 |
|
11,628 |
|
12,301 |
| |||||||||
Total |
|
$ |
441,740 |
|
$ |
422,667 |
|
$ |
437,970 |
|
$ |
410,819 |
|
$ |
407,591 |
|
$ |
404,275 |
|
$ |
411,881 |
|
$ |
405,473 |
|
$ |
429,477 |
|
(1) The acquisition expense ratio is adjusted to include certain fee income.
(2) Includes excess workers compensation, employers liability, alternative markets and accident and health business.
Arch Capital Group Ltd. and Subsidiaries
Segment Information Reinsurance Segment
(U.S. dollars in thousands)
|
|
Three Months Ended |
| ||||||||
|
|
2012 |
|
2011 |
| ||||||
|
|
Amount |
|
% of Total |
|
Amount |
|
% of Total |
| ||
|
|
|
|
|
|
|
|
|
| ||
Net premiums written |
|
|
|
|
|
|
|
|
| ||
Casualty (1) |
|
$ |
83,960 |
|
22.5 |
|
$ |
71,361 |
|
22.7 |
|
Property excluding property catastrophe (2) |
|
75,493 |
|
20.2 |
|
71,150 |
|
22.6 |
| ||
Other specialty |
|
95,462 |
|
25.6 |
|
77,645 |
|
24.7 |
| ||
Property catastrophe |
|
86,574 |
|
23.2 |
|
66,961 |
|
21.3 |
| ||
Marine and aviation |
|
25,617 |
|
6.9 |
|
24,164 |
|
7.7 |
| ||
Other |
|
5,825 |
|
1.6 |
|
3,706 |
|
1.0 |
| ||
Total |
|
$ |
372,931 |
|
100.0 |
|
$ |
314,987 |
|
100.0 |
|
|
|
|
|
|
|
|
|
|
| ||
Net premiums earned |
|
|
|
|
|
|
|
|
| ||
Casualty (1) |
|
$ |
45,943 |
|
19.3 |
|
$ |
48,494 |
|
21.4 |
|
Property excluding property catastrophe (2) |
|
61,632 |
|
25.8 |
|
63,006 |
|
27.9 |
| ||
Other specialty |
|
46,148 |
|
19.3 |
|
38,969 |
|
17.2 |
| ||
Property catastrophe |
|
61,863 |
|
25.9 |
|
51,642 |
|
22.8 |
| ||
Marine and aviation |
|
21,449 |
|
9.0 |
|
21,626 |
|
9.6 |
| ||
Other |
|
1,537 |
|
0.7 |
|
2,367 |
|
1.1 |
| ||
Total |
|
$ |
238,572 |
|
100.0 |
|
$ |
226,104 |
|
100.0 |
|
|
|
|
|
|
|
|
|
|
| ||
Net premiums written |
|
|
|
|
|
|
|
|
| ||
Pro rata |
|
$ |
124,746 |
|
33.5 |
|
$ |
105,492 |
|
33.5 |
|
Excess of loss |
|
248,185 |
|
66.5 |
|
209,495 |
|
66.5 |
| ||
Total |
|
$ |
372,931 |
|
100.0 |
|
$ |
314,987 |
|
100.0 |
|
|
|
|
|
|
|
|
|
|
| ||
Net premiums earned |
|
|
|
|
|
|
|
|
| ||
Pro rata |
|
$ |
99,925 |
|
41.9 |
|
$ |
106,653 |
|
47.2 |
|
Excess of loss |
|
138,647 |
|
58.1 |
|
119,451 |
|
52.8 |
| ||
Total |
|
$ |
238,572 |
|
100.0 |
|
$ |
226,104 |
|
100.0 |
|
|
|
|
|
|
|
|
|
|
| ||
Net premiums written by client location |
|
|
|
|
|
|
|
|
| ||
United States |
|
$ |
174,000 |
|
46.7 |
|
$ |
167,215 |
|
53.1 |
|
Europe |
|
140,358 |
|
37.6 |
|
125,700 |
|
39.9 |
| ||
Bermuda |
|
29,600 |
|
7.9 |
|
4,379 |
|
1.4 |
| ||
Other |
|
28,973 |
|
7.8 |
|
17,693 |
|
5.6 |
| ||
Total |
|
$ |
372,931 |
|
100.0 |
|
$ |
314,987 |
|
100.0 |
|
|
|
|
|
|
|
|
|
|
| ||
Net premiums written by underwriting location |
|
|
|
|
|
|
|
|
| ||
Bermuda |
|
$ |
155,956 |
|
41.8 |
|
$ |
146,596 |
|
46.5 |
|
United States |
|
129,459 |
|
34.7 |
|
113,756 |
|
36.1 |
| ||
Other |
|
87,516 |
|
23.5 |
|
54,635 |
|
17.4 |
| ||
Total |
|
$ |
372,931 |
|
100.0 |
|
$ |
314,987 |
|
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 |
| |||||||||||||||||||||||||
|
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
| |||||||||
|
|
2012 |
|
2011 |
|
2011 |
|
2011 |
|
2011 |
|
2010 |
|
2010 |
|
2010 |
|
2010 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Gross premiums written |
|
$ |
379,976 |
|
$ |
161,904 |
|
$ |
227,837 |
|
$ |
277,766 |
|
$ |
331,013 |
|
$ |
139,015 |
|
$ |
208,770 |
|
$ |
203,695 |
|
$ |
323,477 |
|
Net premiums written |
|
372,931 |
|
150,385 |
|
218,395 |
|
268,280 |
|
314,987 |
|
131,070 |
|
204,756 |
|
201,421 |
|
314,830 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Net premiums earned |
|
$ |
238,572 |
|
$ |
250,525 |
|
$ |
244,079 |
|
$ |
232,060 |
|
$ |
226,104 |
|
$ |
227,871 |
|
$ |
215,528 |
|
$ |
217,538 |
|
$ |
240,440 |
|
Fee income |
|
13 |
|
253 |
|
187 |
|
82 |
|
37 |
|
2,053 |
|
10 |
|
9 |
|
41 |
| |||||||||
Losses and loss adjustment expenses |
|
(92,043 |
) |
(95,298 |
) |
(133,376 |
) |
(129,980 |
) |
(196,157 |
) |
(102,478 |
) |
(93,782 |
) |
(87,851 |
) |
(116,040 |
) | |||||||||
Acquisition expenses, net |
|
(45,092 |
) |
(49,364 |
) |
(43,442 |
) |
(44,096 |
) |
(47,339 |
) |
(41,722 |
) |
(43,970 |
) |
(42,116 |
) |
(50,193 |
) | |||||||||
Other operating expenses |
|
(26,123 |
) |
(25,707 |
) |
(22,340 |
) |
(23,671 |
) |
(21,227 |
) |
(29,693 |
) |
(20,355 |
) |
(20,215 |
) |
(20,987 |
) | |||||||||
Underwriting income (loss) |
|
$ |
75,327 |
|
$ |
80,409 |
|
$ |
45,108 |
|
$ |
34,395 |
|
$ |
(38,582 |
) |
$ |
56,031 |
|
$ |
57,431 |
|
$ |
67,365 |
|
$ |
53,261 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Underwriting Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Loss ratio |
|
38.6 |
% |
38.0 |
% |
54.6 |
% |
56.0 |
% |
86.8 |
% |
45.0 |
% |
43.5 |
% |
40.4 |
% |
48.3 |
% | |||||||||
Acquisition expense ratio |
|
18.9 |
% |
19.7 |
% |
17.8 |
% |
19.0 |
% |
20.9 |
% |
18.3 |
% |
20.4 |
% |
19.4 |
% |
20.9 |
% | |||||||||
Other operating expense ratio |
|
10.9 |
% |
10.3 |
% |
9.2 |
% |
10.2 |
% |
9.4 |
% |
13.0 |
% |
9.4 |
% |
9.3 |
% |
8.7 |
% | |||||||||
Combined ratio |
|
68.4 |
% |
68.0 |
% |
81.6 |
% |
85.2 |
% |
117.1 |
% |
76.3 |
% |
73.3 |
% |
69.1 |
% |
77.9 |
% | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Net premiums written |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Casualty (1) |
|
$ |
83,960 |
|
$ |
34,968 |
|
$ |
34,873 |
|
$ |
40,755 |
|
$ |
71,361 |
|
$ |
32,274 |
|
$ |
38,276 |
|
$ |
43,642 |
|
$ |
72,582 |
|
Property excluding property catastrophe (2) |
|
75,493 |
|
36,430 |
|
64,495 |
|
53,938 |
|
71,150 |
|
46,835 |
|
70,149 |
|
57,880 |
|
74,927 |
| |||||||||
Other specialty |
|
95,462 |
|
48,555 |
|
40,882 |
|
43,937 |
|
77,645 |
|
27,008 |
|
30,468 |
|
18,920 |
|
54,762 |
| |||||||||
Property catastrophe |
|
86,574 |
|
11,636 |
|
59,961 |
|
108,235 |
|
66,961 |
|
3,529 |
|
40,255 |
|
70,403 |
|
88,802 |
| |||||||||
Marine and aviation |
|
25,617 |
|
16,130 |
|
17,037 |
|
19,978 |
|
24,164 |
|
21,303 |
|
24,913 |
|
9,609 |
|
21,238 |
| |||||||||
Other |
|
5,825 |
|
2,666 |
|
1,147 |
|
1,437 |
|
3,706 |
|
121 |
|
695 |
|
967 |
|
2,519 |
| |||||||||
Total |
|
$ |
372,931 |
|
$ |
150,385 |
|
$ |
218,395 |
|
$ |
268,280 |
|
$ |
314,987 |
|
$ |
131,070 |
|
$ |
204,756 |
|
$ |
201,421 |
|
$ |
314,830 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Net premiums earned |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Casualty (1) |
|
$ |
45,943 |
|
$ |
47,317 |
|
$ |
49,066 |
|
$ |
51,493 |
|
$ |
48,494 |
|
$ |
48,609 |
|
$ |
52,792 |
|
$ |
59,501 |
|
$ |
70,436 |
|
Property excluding property catastrophe (2) |
|
61,632 |
|
60,607 |
|
62,565 |
|
57,524 |
|
63,006 |
|
70,744 |
|
66,438 |
|
65,742 |
|
79,239 |
| |||||||||
Other specialty |
|
46,148 |
|
60,891 |
|
48,722 |
|
40,511 |
|
38,969 |
|
30,296 |
|
25,254 |
|
22,292 |
|
17,769 |
| |||||||||
Property catastrophe |
|
61,863 |
|
62,408 |
|
64,910 |
|
59,788 |
|
51,642 |
|
54,768 |
|
54,206 |
|
52,301 |
|
53,873 |
| |||||||||
Marine and aviation |
|
21,449 |
|
17,361 |
|
17,739 |
|
21,093 |
|
21,626 |
|
22,445 |
|
16,106 |
|
16,263 |
|
18,072 |
| |||||||||
Other |
|
1,537 |
|
1,941 |
|
1,077 |
|
1,651 |
|
2,367 |
|
1,009 |
|
732 |
|
1,439 |
|
1,051 |
| |||||||||
Total |
|
$ |
238,572 |
|
$ |
250,525 |
|
$ |
244,079 |
|
$ |
232,060 |
|
$ |
226,104 |
|
$ |
227,871 |
|
$ |
215,528 |
|
$ |
217,538 |
|
$ |
240,440 |
|
(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)
|
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
| |||||||||||||||
|
|
2012 |
|
2011 |
|
2011 |
|
2011 |
|
2011 |
| |||||||||||||||
Investable assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Fixed maturities available for sale, at fair value |
|
9,221,145 |
|
74 |
% |
$ |
9,375,604 |
|
76 |
% |
$ |
9,529,834 |
|
78 |
% |
$ |
9,247,002 |
|
77 |
% |
$ |
8,916,017 |
|
76 |
% | |
Fixed maturities, at fair value (1) |
|
250,805 |
|
2 |
% |
147,779 |
|
1 |
% |
122,866 |
|
1 |
% |
102,897 |
|
1 |
% |
117,391 |
|
1 |
% | |||||
Fixed maturities pledged under securities lending agreements, at fair value (2) |
|
50,813 |
|
0 |
% |
56,393 |
|
1 |
% |
72,399 |
|
1 |
% |
150,501 |
|
1 |
% |
161,888 |
|
1 |
% | |||||
Total fixed maturities |
|
9,522,763 |
|
76 |
% |
9,579,776 |
|
78 |
% |
9,725,099 |
|
80 |
% |
9,500,400 |
|
79 |
% |
9,195,296 |
|
78 |
% | |||||
Short-term investments available for sale, at fair value |
|
1,112,249 |
|
9 |
% |
904,219 |
|
7 |
% |
799,662 |
|
6 |
% |
704,495 |
|
6 |
% |
1,130,142 |
|
10 |
% | |||||
Short-term investments pledged under securities lending agreements, at fair value (2) |
|
|
|
0 |
% |
|
|
0 |
% |
|
|
0 |
% |
|
|
0 |
% |
36,530 |
|
0 |
% | |||||
Cash |
|
422,806 |
|
3 |
% |
351,699 |
|
3 |
% |
369,895 |
|
3 |
% |
411,001 |
|
3 |
% |
406,877 |
|
3 |
% | |||||
Equity securities available for sale, at fair value |
|
318,181 |
|
3 |
% |
299,584 |
|
2 |
% |
273,213 |
|
2 |
% |
320,434 |
|
3 |
% |
361,639 |
|
3 |
% | |||||
Equity securities, at fair value (1) |
|
52,766 |
|
0 |
% |
87,403 |
|
1 |
% |
100,719 |
|
1 |
% |
152,844 |
|
1 |
% |
100,117 |
|
1 |
% | |||||
Other investments available for sale, at fair value |
|
357,992 |
|
3 |
% |
238,111 |
|
2 |
% |
229,974 |
|
2 |
% |
299,845 |
|
2 |
% |
293,073 |
|
2 |
% | |||||
Other investments, at fair value (1) |
|
196,712 |
|
2 |
% |
131,721 |
|
1 |
% |
95,796 |
|
1 |
% |
66,049 |
|
1 |
% |
39,106 |
|
0 |
% | |||||
TALF investments, at fair value (3) |
|
313,187 |
|
2 |
% |
387,702 |
|
3 |
% |
392,455 |
|
3 |
% |
399,341 |
|
3 |
% |
400,970 |
|
3 |
% | |||||
Investments accounted for using the equity method |
|
347,273 |
|
3 |
% |
380,507 |
|
3 |
% |
383,543 |
|
3 |
% |
399,968 |
|
3 |
% |
449,206 |
|
4 |
% | |||||
Securities sold but not yet purchased |
|
(18,831 |
) |
0 |
% |
(27,178 |
) |
0 |
% |
(46,526 |
) |
0 |
% |
(51,626 |
) |
0 |
% |
(41,863 |
) |
0 |
% | |||||
Securities transactions entered into but not settled at the balance sheet date |
|
(121,435 |
) |
(1 |
)% |
(17,339 |
) |
0 |
% |
(94,403 |
) |
(1 |
)% |
(104,856 |
) |
(1 |
)% |
(516,682 |
) |
(4 |
)% | |||||
Total investable assets |
|
$ |
12,503,663 |
|
100 |
% |
$ |
12,316,205 |
|
100 |
% |
$ |
12,229,427 |
|
100 |
% |
$ |
12,097,895 |
|
100 |
% |
$ |
11,854,411 |
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Investment portfolio metrics (1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Average effective duration (in years) |
|
2.75 |
|
|
|
2.99 |
|
|
|
3.17 |
|
|
|
2.87 |
|
|
|
2.73 |
|
|
| |||||
Average S&P/Moodys credit ratings (4) |
|
AA/Aa2 |
|
|
|
AA/Aa1 |
|
|
|
AA+/Aa1 |
|
|
|
AA+/Aa1 |
|
|
|
AA+/Aa1 |
|
|
| |||||
Imbedded book yield (before investment expenses) |
|
2.76 |
% |
|
|
2.98 |
% |
|
|
3.09 |
% |
|
|
3.23 |
% |
|
|
3.36 |
% |
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Credit quality distribution of total fixed maturities (5): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
U.S. government and government agencies (6) |
|
$ |
2,850,031 |
|
30 |
% |
$ |
3,154,480 |
|
33 |
% |
$ |
2,968,250 |
|
30 |
% |
$ |
2,880,650 |
|
30 |
% |
$ |
2,628,362 |
|
29 |
% |
AAA |
|
3,420,490 |
|
36 |
% |
3,229,161 |
|
34 |
% |
3,453,116 |
|
36 |
% |
3,622,886 |
|
38 |
% |
3,806,887 |
|
41 |
% | |||||
AA |
|
1,383,663 |
|
14 |
% |
1,425,249 |
|
15 |
% |
1,531,869 |
|
16 |
% |
1,194,430 |
|
13 |
% |
1,043,463 |
|
11 |
% | |||||
A |
|
917,925 |
|
10 |
% |
884,957 |
|
9 |
% |
754,421 |
|
8 |
% |
765,831 |
|
8 |
% |
697,002 |
|
7 |
% | |||||
BBB |
|
398,645 |
|
4 |
% |
412,566 |
|
4 |
% |
555,023 |
|
6 |
% |
472,491 |
|
5 |
% |
425,913 |
|
5 |
% | |||||
BB |
|
157,427 |
|
2 |
% |
140,029 |
|
1 |
% |
151,665 |
|
1 |
% |
158,517 |
|
2 |
% |
154,537 |
|
2 |
% | |||||
B |
|
172,360 |
|
2 |
% |
165,003 |
|
2 |
% |
140,571 |
|
1 |
% |
241,538 |
|
2 |
% |
250,318 |
|
3 |
% | |||||
Lower than B |
|
125,134 |
|
1 |
% |
114,672 |
|
1 |
% |
106,775 |
|
1 |
% |
97,748 |
|
1 |
% |
100,409 |
|
1 |
% | |||||
Not rated |
|
97,088 |
|
1 |
% |
53,659 |
|
1 |
% |
63,409 |
|
1 |
% |
66,309 |
|
1 |
% |
88,405 |
|
1 |
% | |||||
Total fixed maturities, at fair value |
|
$ |
9,522,763 |
|
100 |
% |
$ |
9,579,776 |
|
100 |
% |
$ |
9,725,099 |
|
100 |
% |
$ |
9,500,400 |
|
100 |
% |
$ |
9,195,296 |
|
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) |
Average credit ratings on the Companys investment portfolio on securities with ratings assigned by Standard & Poors (S&P) and Moodys Investors Service (Moodys). |
(5) |
For individual fixed maturities, S&P ratings are used. In the absence of an S&P rating, ratings from Moodys are used, followed by ratings from Fitch Ratings. |
(6) |
Includes U.S. government-sponsored agency mortgage backed securities and agency commercial mortgage backed securities. |
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 March 31, 2012:
|
|
|
|
Gross |
|
Gross |
|
Net |
|
|
|
|
| |||||
|
|
Fair |
|
Unrealized |
|
Unrealized |
|
Unrealized |
|
Amortized |
|
Fair Value / |
| |||||
|
|
Value |
|
Gains |
|
Losses |
|
Gains (Losses) |
|
Cost |
|
Amortized Cost |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Corporates |
|
$ |
2,529,559 |
|
$ |
81,713 |
|
$ |
(10,875 |
) |
$ |
70,838 |
|
$ |
2,458,721 |
|
102.9 |
% |
Non-U.S. government-backed corporates |
|
205,172 |
|
8,465 |
|
(388 |
) |
8,077 |
|
197,095 |
|
104.1 |
% | |||||
FDIC guaranteed corporates |
|
76,815 |
|
615 |
|
|
|
615 |
|
76,200 |
|
100.8 |
% | |||||
U.S. government and government agencies |
|
1,254,434 |
|
19,500 |
|
(4,295 |
) |
15,205 |
|
1,239,229 |
|
101.2 |
% | |||||
Agency mortgage-backed securities |
|
1,213,144 |
|
22,232 |
|
(779 |
) |
21,453 |
|
1,191,691 |
|
101.8 |
% | |||||
Non-agency mortgage-backed securities |
|
281,824 |
|
4,515 |
|
(13,998 |
) |
(9,483 |
) |
291,307 |
|
96.7 |
% | |||||
Agency commercial mortgage-backed securities |
|
382,453 |
|
8,984 |
|
(1,150 |
) |
7,834 |
|
374,619 |
|
102.1 |
% | |||||
Non-agency commercial mortgage-backed securities |
|
742,214 |
|
26,737 |
|
(1,501 |
) |
25,236 |
|
716,978 |
|
103.5 |
% | |||||
Municipal bonds |
|
1,301,255 |
|
64,044 |
|
(1,381 |
) |
62,663 |
|
1,238,592 |
|
105.1 |
% | |||||
Non-U.S. government securities |
|
912,020 |
|
30,517 |
|
(9,552 |
) |
20,965 |
|
891,055 |
|
102.4 |
% | |||||
Asset-backed securities |
|
623,873 |
|
16,033 |
|
(6,132 |
) |
9,901 |
|
613,972 |
|
101.6 |
% | |||||
Total |
|
$ |
9,522,763 |
|
$ |
283,355 |
|
$ |
(50,051 |
) |
$ |
233,304 |
|
$ |
9,289,459 |
|
102.5 |
% |
Corporates (Excluding Guaranteed Amounts)
The following table summarizes the Companys corporate bonds by sector and by credit quality at March 31, 2012, excluding guaranteed amounts:
|
|
Estimated Fair Value |
| |||||
|
|
|
|
% of Asset |
|
% of Investable |
| |
|
|
Total |
|
Class |
|
Assets |
| |
Sector: |
|
|
|
|
|
|
| |
Financials |
|
$ |
951,924 |
|
37.6 |
% |
7.6 |
% |
Industrials |
|
1,171,754 |
|
46.3 |
% |
9.4 |
% | |
Utilities |
|
96,544 |
|
3.8 |
% |
0.8 |
% | |
Foreign agencies |
|
51,263 |
|
2.0 |
% |
0.4 |
% | |
All other (1) |
|
258,074 |
|
10.3 |
% |
2.1 |
% | |
Total |
|
$ |
2,529,559 |
|
100.0 |
% |
20.2 |
% |
|
|
|
|
|
|
|
| |
Credit quality distribution (3): |
|
|
|
|
|
|
| |
AAA |
|
$ |
697,660 |
|
27.6 |
% |
5.6 |
% |
AA |
|
357,925 |
|
14.1 |
% |
2.9 |
% | |
A |
|
729,460 |
|
28.8 |
% |
5.8 |
% | |
BBB |
|
351,605 |
|
13.9 |
% |
2.8 |
% | |
BB |
|
128,103 |
|
5.1 |
% |
1.0 |
% | |
B |
|
146,256 |
|
5.8 |
% |
1.2 |
% | |
Lower than B |
|
21,470 |
|
0.8 |
% |
0.2 |
% | |
Not rated |
|
97,080 |
|
3.9 |
% |
0.8 |
% | |
Total |
|
$ |
2,529,559 |
|
100.0 |
% |
20.2 |
% |
The following table summarizes the Companys top ten exposures to fixed income corporate issuers by fair value at March 31, 2012, excluding guaranteed amounts and covered bonds:
|
|
Estimated |
|
% of Asset |
|
% of Investable |
|
Credit |
| |
Issuer |
|
Fair Value |
|
Class |
|
Assets |
|
Rating (2) |
| |
|
|
|
|
|
|
|
|
|
| |
General Electric Co |
|
$ |
45,315 |
|
1.8 |
% |
0.4 |
% |
AA+/Aa2 |
|
Abbey National Treasury Svcs |
|
31,335 |
|
1.2 |
% |
0.3 |
% |
A+/A1 |
| |
Caterpillar Inc |
|
31,290 |
|
1.2 |
% |
0.3 |
% |
A/A2 |
| |
Total SA |
|
29,032 |
|
1.1 |
% |
0.2 |
% |
Aa-/Aa1 |
| |
Royal Dutch Shell PLC |
|
28,213 |
|
1.1 |
% |
0.2 |
% |
AA/Aa1 |
| |
National Australia Bank Ltd |
|
27,879 |
|
1.1 |
% |
0.2 |
% |
Aa-/Aa2 |
| |
Coca-Cola Company |
|
26,579 |
|
1.1 |
% |
0.2 |
% |
A+/Aa3 |
| |
Verizon Communications Inc |
|
26,078 |
|
1.0 |
% |
0.2 |
% |
A-/A3 |
| |
HSBC Holdings PLC |
|
25,925 |
|
1.0 |
% |
0.2 |
% |
A/A3 |
| |
Berkshire Hathaway Inc |
|
25,281 |
|
1.0 |
% |
0.2 |
% |
A/A2 |
| |
Total |
|
$ |
296,927 |
|
11.7 |
% |
2.4 |
% |
|
|
(1) |
Includes sovereign securities, supernational securities and other. |
(2) |
Ratings as assigned by S&P and Moodys, respectively. |
(3) |
For individual fixed maturities, S&P ratings are used. In the absence of an S&P rating, ratings from Moodys are used, followed by ratings from Fitch Ratings. |
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 March 31, 2012, excluding amounts guaranteed by the U.S. government:
|
|
|
|
|
|
Average |
|
Estimated Fair Value |
| ||||||
|
|
Issuance |
|
Amortized |
|
Credit |
|
|
|
% of Amortized |
|
% of Investable |
| ||
|
|
Year |
|
Cost |
|
Quality |
|
Total |
|
Cost |
|
Assets |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Non-agency MBS: |
|
2003 |
|
$ |
2,378 |
|
AAA |
|
$ |
2,402 |
|
101.0 |
% |
0.0 |
% |
|
|
2004 |
|
14,472 |
|
BBB |
|
13,455 |
|
93.0 |
% |
0.1 |
% | ||
|
|
2005 |
|
46,202 |
|
B |
|
42,140 |
|
91.2 |
% |
0.3 |
% | ||
|
|
2006 |
|
57,247 |
|
BBB |
|
52,964 |
|
92.5 |
% |
0.4 |
% | ||
|
|
2007 |
|
47,338 |
|
CCC- |
|
45,215 |
|
95.5 |
% |
0.4 |
% | ||
|
|
2008 |
|
6,911 |
|
CCC- |
|
6,781 |
|
98.1 |
% |
0.1 |
% | ||
|
|
2009 (6) |
|
32,481 |
|
AAA |
|
35,086 |
|
108.0 |
% |
0.3 |
% | ||
|
|
2010 (6) |
|
30,612 |
|
AAA |
|
29,732 |
|
97.1 |
% |
0.2 |
% | ||
|
|
2012 (6) |
|
53,666 |
|
AAA |
|
54,049 |
|
100.7 |
% |
0.4 |
% | ||
Total non-agency MBS |
|
|
|
$ |
291,307 |
|
BBB+ |
|
$ |
281,824 |
|
96.7 |
% |
2.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Non-agency CMBS: |
|
1998 |
|
$ |
3,479 |
|
AAA |
|
$ |
3,536 |
|
101.6 |
% |
0.0 |
% |
|
|
2002 |
|
9,245 |
|
AAA |
|
9,228 |
|
99.8 |
% |
0.1 |
% | ||
|
|
2003 |
|
38,287 |
|
AAA |
|
39,293 |
|
102.6 |
% |
0.3 |
% | ||
|
|
2004 |
|
27,757 |
|
AAA |
|
27,775 |
|
100.1 |
% |
0.2 |
% | ||
|
|
2005 |
|
49,205 |
|
AAA |
|
49,507 |
|
100.6 |
% |
0.4 |
% | ||
|
|
2006 |
|
4,255 |
|
BBB+ |
|
4,131 |
|
97.1 |
% |
0.0 |
% | ||
|
|
2007 |
|
74,617 |
|
AA |
|
80,269 |
|
107.6 |
% |
0.6 |
% | ||
|
|
2008 |
|
24,925 |
|
AA+ |
|
24,692 |
|
99.1 |
% |
0.2 |
% | ||
|
|
2010 |
|
255,803 |
|
AAA |
|
263,230 |
|
102.9 |
% |
2.1 |
% | ||
|
|
2011 |
|
197,548 |
|
AAA |
|
208,547 |
|
105.6 |
% |
1.7 |
% | ||
|
|
2012 |
|
31,857 |
|
AAA |
|
32,006 |
|
100.5 |
% |
0.3 |
% | ||
Total non-agency CMBS |
|
|
|
$ |
716,978 |
|
AAA |
|
$ |
742,214 |
|
103.5 |
% |
5.9 |
% |
|
|
Non-Agency MBS |
|
Non-Agency |
| ||
Additional Statistics |
|
Re-REMICs |
|
All Other |
|
CMBS (1) |
|
|
|
|
|
|
|
|
|
Wtd. average loan age (months) |
|
69 |
|
68 |
|
46 |
|
Wtd. average life (months) (2) |
|
30 |
|
61 |
|
36 |
|
Wtd. average loan-to-value % (3) |
|
70.1 |
% |
67.9 |
% |
64.4 |
% |
Total delinquencies (4) |
|
20.5 |
% |
19.4 |
% |
4.0 |
% |
Current credit support % (5) |
|
42.6 |
% |
11.4 |
% |
28.7 |
% |
(1) |
Loans defeased with government/agency obligations represented approximately 2.7% of the collateral underlying the Companys CMBS holdings. |
(2) |
The weighted average life for MBS is based on the interest rates in effect at March 31, 2012. 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 31% to 87%, while the range |
|
of loan-to-values on CMBS is 31% to 95%. |
(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 with an average credit quality of AAA from Fitch Ratings. |
The following table provides information on the Companys asset-backed securities (ABS) March 31, 2012:
|
|
|
|
Average |
|
Estimated Fair Value |
| ||||||
|
|
Amortized |
|
Credit |
|
|
|
% of Amortized |
|
% of Investable |
| ||
|
|
Cost |
|
Quality |
|
Total |
|
Cost |
|
Assets |
| ||
|
|
|
|
|
|
|
|
|
|
|
| ||
Sector: |
|
|
|
|
|
|
|
|
|
|
| ||
Credit cards (1) |
|
$ |
238,068 |
|
AAA |
|
$ |
244,377 |
|
102.7 |
% |
2.0 |
% |
Autos (2) |
|
174,409 |
|
AAA |
|
174,100 |
|
99.8 |
% |
1.4 |
% | ||
Rate reduction bonds (3) |
|
65,731 |
|
AAA |
|
68,478 |
|
104.2 |
% |
0.5 |
% | ||
U.K. securitized (4) |
|
29,320 |
|
AAA |
|
29,335 |
|
100.1 |
% |
0.2 |
% | ||
Student loans (5) |
|
1,934 |
|
AA+ |
|
1,948 |
|
100.7 |
% |
0.0 |
% | ||
Other |
|
86,972 |
|
AA- |
|
88,036 |
|
101.2 |
% |
0.7 |
% | ||
|
|
596,434 |
|
AA+ |
|
606,274 |
|
101.6 |
% |
4.8 |
% | ||
|
|
|
|
|
|
|
|
|
|
|
| ||
Home equity (6) |
|
$ |
2,895 |
|
AAA |
|
$ |
2,552 |
|
88.2 |
% |
0.0 |
% |
|
|
1,279 |
|
BBB |
|
1,169 |
|
91.4 |
% |
0.0 |
% | ||
|
|
8,828 |
|
BB to B |
|
8,499 |
|
96.3 |
% |
0.1 |
% | ||
|
|
4,362 |
|
CCC to C |
|
5,296 |
|
121.4 |
% |
0.0 |
% | ||
|
|
174 |
|
D |
|
83 |
|
47.7 |
% |
0.0 |
% | ||
|
|
17,538 |
|
B+ |
|
17,599 |
|
100.3 |
% |
0.1 |
% | ||
|
|
|
|
|
|
|
|
|
|
|
| ||
Total ABS |
|
$ |
613,972 |
|
AA+ |
|
$ |
623,873 |
|
101.6 |
% |
5.0 |
% |
|
|
The effective duration of the total ABS was 1.71 years at March 31, 2012. |
(1) |
|
The weighted average credit support % on credit cards is 18.6%. |
(2) |
|
The weighted average credit support % on autos is 26.6%. |
(3) |
|
The weighted average credit support % on rate reduction bonds is 7.7%. |
(4) |
|
The weighted average credit support % on U.K. securitized is 18.6%. |
(5) |
|
The weighted average credit support % on student loans is 11.3%. |
(6) |
|
The weighted average credit support % on home equity is 24.7%. |
|
|
|
|
|
The Companys investment portfolio included $44 million par in sub-prime securities at March 31, 2012, with an estimated fair value of $20.7 million and an average credit quality of BB/Ba3. 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 $6.2 million estimated fair value of sub-prime securities with an average credit quality of CCC/Caa2. |
Arch Capital Group Ltd. and Subsidiaries
Investment Information Bank Loan Investments
(U.S. dollars in thousands)
Bank Loan Investments
The Companys investments in bank loans are included in the following categories at March 31, 2012:
|
|
Fair |
|
% of Asset |
|
% of Investable |
| |
|
|
Value |
|
Class |
|
Assets |
| |
Composition: |
|
|
|
|
|
|
| |
Investment funds accounted for using the equity method |
|
$ |
121,284 |
|
35.9 |
% |
1.0 |
% |
Corporate bonds |
|
93,550 |
|
27.7 |
% |
0.7 |
% | |
Other investments |
|
122,695 |
|
36.4 |
% |
1.0 |
% | |
Total |
|
$ |
337,529 |
|
100.0 |
% |
2.7 |
% |
|
|
|
|
|
|
|
| |
Currency: |
|
|
|
|
|
|
| |
U.S.-denominated |
|
$ |
243,036 |
|
72.0 |
% |
1.9 |
% |
Euro-denominated |
|
94,493 |
|
28.0 |
% |
0.8 |
% | |
Total |
|
$ |
337,529 |
|
100.0 |
% |
2.7 |
% |
|
|
|
|
|
|
|
| |
Sector: |
|
|
|
|
|
|
| |
Consumer cyclical |
|
$ |
60,257 |
|
17.9 |
% |
0.5 |
% |
Media |
|
42,439 |
|
12.6 |
% |
0.3 |
% | |
Consumer non-cyclical |
|
39,409 |
|
11.7 |
% |
0.3 |
% | |
Basic materials |
|
31,826 |
|
9.4 |
% |
0.3 |
% | |
Industrials |
|
26,502 |
|
7.9 |
% |
0.2 |
% | |
Utilities |
|
12,180 |
|
3.6 |
% |
0.1 |
% | |
All other |
|
124,916 |
|
36.9 |
% |
1.0 |
% | |
Total |
|
$ |
337,529 |
|
100.0 |
% |
2.7 |
% |
|
|
|
|
|
|
|
| |
Weighted average rating factor (Moodys) |
|
B2 |
|
|
|
|
|
Arch Capital Group Ltd. and Subsidiaries
Investment Information Eurozone Investments
(U.S. dollars in thousands)
Composition of Eurozone Fixed Maturities
The fair value of the Companys Eurozone fixed maturities are as follows at March 31, 2012:
|
|
|
|
Financial |
|
Other |
|
Covered |
|
Bank |
|
Equities |
|
|
| |||||||
|
|
Sovereign (2) |
|
Corporates |
|
Corporates |
|
Bonds (3) |
|
Loans (4) |
|
and Other (5) |
|
Total |
| |||||||
Country (1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Germany |
|
$ |
194,372 |
|
$ |
19,982 |
|
$ |
2,353 |
|
$ |
0 |
|
$ |
25,076 |
|
$ |
1,056 |
|
$ |
242,839 |
|
Netherlands |
|
3,114 |
|
38,878 |
|
45,254 |
|
30,469 |
|
7,596 |
|
18,969 |
|
144,280 |
| |||||||
France |
|
|
|
|
|
30,070 |
|
40,407 |
|
4,853 |
|
10,388 |
|
85,718 |
| |||||||
Finland |
|
98,497 |
|
250 |
|
|
|
|
|
|
|
|
|
98,747 |
| |||||||
Supranational (6) |
|
83,286 |
|
|
|
|
|
|
|
|
|
|
|
83,286 |
| |||||||
Spain |
|
|
|
|
|
784 |
|
13,436 |
|
5,750 |
|
224 |
|
20,194 |
| |||||||
Luxembourg |
|
|
|
|
|
22,741 |
|
|
|
2,535 |
|
27 |
|
25,303 |
| |||||||
Italy |
|
947 |
|
|
|
3,773 |
|
|
|
1,245 |
|
(188 |
) |
5,777 |
| |||||||
Belgium |
|
|
|
1,972 |
|
|
|
|
|
|
|
|
|
1,972 |
| |||||||
Ireland |
|
|
|
|
|
1,424 |
|
|
|
|
|
|
|
1,424 |
| |||||||
Portugal |
|
|
|
|
|
653 |
|
|
|
|
|
|
|
653 |
| |||||||
Total |
|
$ |
380,216 |
|
$ |
61,082 |
|
$ |
107,052 |
|
$ |
84,312 |
|
$ |
47,055 |
|
$ |
30,476 |
|
$ |
710,193 |
|
(1) The country allocations set forth in the table are based on various assumptions made by the Company in assessing the country in which the underlying credit risk resides, including a review of the jurisdiction of organization, business operations and other factors. Based on such analysis, the Company does not believe that it has any Eurozone fixed maturities from Austria, Cyprus, Estonia, Greece, Malta, Slovakia or Slovenia at March 31, 2012.
(2) Sovereign includes securities issued and/or guaranteed by Eurozone governments.
(3) Securities issued by Eurozone banks where the security is backed by a separate group of loans.
(4) Included in corporate bonds in the Bank Loan Investments table on page 16.
(5) Includes long or (short) net equity positions and other.
(6) Includes World Bank, European Investment Bank, International Finance Corp. and European Bank for Reconstruction and Development.
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 |
| |||||||||||||||||||||||||
|
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
| |||||||||
|
|
2012 |
|
2011 |
|
2011 |
|
2011 |
|
2011 |
|
2010 |
|
2010 |
|
2010 |
|
2010 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
After-tax operating income available to common shareholders |
|
$ |
113,660 |
|
$ |
128,891 |
|
$ |
107,176 |
|
$ |
59,739 |
|
$ |
7,576 |
|
$ |
131,277 |
|
$ |
130,659 |
|
$ |
130,873 |
|
$ |
98,349 |
|
Net realized gains, net of tax |
|
40,873 |
|
13,464 |
|
28,458 |
|
44,799 |
|
21,585 |
|
71,821 |
|
68,611 |
|
61,119 |
|
45,503 |
| |||||||||
Net impairment losses recognized in earnings, net of tax |
|
(1,023 |
) |
(1,959 |
) |
(2,739 |
) |
(1,684 |
) |
(2,680 |
) |
(3,230 |
) |
(2,075 |
) |
(4,410 |
) |
(1,606 |
) | |||||||||
Equity in net income (loss) of investment funds accounted for using the equity method, net of tax |
|
24,826 |
|
(14,702 |
) |
(30,549 |
) |
5,973 |
|
29,673 |
|
22,990 |
|
9,708 |
|
(348 |
) |
29,050 |
| |||||||||
Net foreign exchange gains (losses), net of tax |
|
(20,541 |
) |
13,177 |
|
59,948 |
|
(18,685 |
) |
(37,142 |
) |
6,581 |
|
(65,346 |
) |
48,447 |
|
38,855 |
| |||||||||
Net income available to common shareholders |
|
$ |
157,795 |
|
$ |
138,871 |
|
$ |
162,294 |
|
$ |
90,142 |
|
$ |
19,012 |
|
$ |
229,439 |
|
$ |
141,557 |
|
$ |
235,681 |
|
$ |
210,151 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Diluted per common share results: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
After-tax operating income available to common shareholders |
|
$ |
0.82 |
|
$ |
0.94 |
|
$ |
0.78 |
|
$ |
0.43 |
|
$ |
0.06 |
|
$ |
0.87 |
|
$ |
0.85 |
|
$ |
0.82 |
|
$ |
0.59 |
|
Net realized gains, net of tax |
|
0.30 |
|
0.10 |
|
0.21 |
|
0.32 |
|
0.15 |
|
0.48 |
|
0.45 |
|
0.38 |
|
0.27 |
| |||||||||
Net impairment losses recognized in earnings, net of tax |
|
(0.01 |
) |
(0.01 |
) |
(0.02 |
) |
(0.01 |
) |
(0.02 |
) |
(0.02 |
) |
(0.01 |
) |
(0.03 |
) |
(0.01 |
) | |||||||||
Equity in net income (loss) of investment funds accounted for using the equity method, net of tax |
|
0.18 |
|
(0.11 |
) |
(0.22 |
) |
0.04 |
|
0.21 |
|
0.15 |
|
0.06 |
|
0.00 |
|
0.18 |
| |||||||||
Net foreign exchange gains (losses), net of tax |
|
(0.15 |
) |
0.09 |
|
0.43 |
|
(0.13 |
) |
(0.26 |
) |
0.05 |
|
(0.43 |
) |
0.30 |
|
0.23 |
| |||||||||
Net income available to common shareholders |
|
$ |
1.14 |
|
$ |
1.01 |
|
$ |
1.18 |
|
$ |
0.65 |
|
$ |
0.14 |
|
$ |
1.53 |
|
$ |
0.92 |
|
$ |
1.47 |
|
$ |
1.26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Weighted average common shares and common share equivalents outstanding diluted |
|
137,814,906 |
|
137,473,670 |
|
137,140,929 |
|
137,975,599 |
|
140,460,516 |
|
150,306,429 |
|
153,546,027 |
|
159,795,909 |
|
166,541,481 |
|
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 |
| ||||||||||||||||||||||||||
|
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
March 31, |
| ||||||||||
|
|
2012 |
|
2011 |
|
2011 |
|
2011 |
|
2011 |
|
2010 |
|
2010 |
|
2010 |
|
2010 |
|
2012 |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Effect of share repurchases: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Aggregate cost of shares repurchased |
|
$ |
0 |
|
$ |
3 |
|
$ |
20,833 |
|
$ |
29,552 |
|
$ |
237,173 |
|
$ |
258,151 |
|
$ |
53,398 |
|
$ |
269,054 |
|
$ |
181,272 |
|
$ |
2,558,033 |
|
Shares repurchased |
|
|
|
100 |
|
655,772 |
|
881,961 |
|
8,062,383 |
|
8,679,051 |
|
2,043,195 |
|
10,932,681 |
|
7,589,739 |
|
104,758,218 |
| ||||||||||
Average price per share repurchased |
|
|
|
$ |
31.51 |
|
$ |
31.77 |
|
$ |
33.51 |
|
$ |
29.42 |
|
$ |
29.74 |
|
$ |
26.13 |
|
$ |
24.61 |
|
$ |
23.88 |
|
$ |
24.42 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Average book value per common share (1) |
|
$ |
32.55 |
|
$ |
31.34 |
|
$ |
30.81 |
|
$ |
30.39 |
|
$ |
29.90 |
|
$ |
29.61 |
|
$ |
28.30 |
|
$ |
26.25 |
|
$ |
24.76 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Average repurchase price-to-book multiple |
|
|
|
1.01x |
|
1.03x |
|
1.10x |
|
0.98x |
|
1.00x |
|
0.92x |
|
0.94x |
|
0.96x |
|
|
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Remaining share repurchase authorization (2) |
|
$ |
941,967 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 |
| |||||||||||||||||||||||||
|
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
| |||||||||
|
|
2012 |
|
2011 |
|
2011 |
|
2011 |
|
2011 |
|
2010 |
|
2010 |
|
2010 |
|
2010 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
After-tax operating income available to common shareholders |
|
$ |
113,660 |
|
$ |
128,891 |
|
$ |
107,176 |
|
$ |
59,739 |
|
$ |
7,576 |
|
$ |
131,277 |
|
$ |
130,659 |
|
$ |
130,873 |
|
$ |
98,349 |
|
Annualized after-tax operating income available to common shareholders (a) |
|
$ |
454,640 |
|
$ |
515,564 |
|
$ |
428,704 |
|
$ |
238,956 |
|
$ |
30,304 |
|
$ |
525,108 |
|
$ |
522,636 |
|
$ |
523,492 |
|
$ |
393,396 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Beginning common shareholders equity |
|
$ |
4,267,074 |
|
$ |
4,110,899 |
|
$ |
4,078,030 |
|
$ |
3,964,035 |
|
$ |
4,151,786 |
|
$ |
4,354,905 |
|
$ |
4,035,011 |
|
$ |
4,017,074 |
|
$ |
3,962,048 |
|
Ending common shareholders equity |
|
4,514,456 |
|
4,267,074 |
|
4,110,899 |
|
4,078,030 |
|
3,964,035 |
|
4,151,786 |
|
4,354,905 |
|
4,035,011 |
|
4,017,074 |
| |||||||||
Average common shareholders equity (b) |
|
$ |
4,390,765 |
|
$ |
4,188,987 |
|
$ |
4,094,465 |
|
$ |
4,021,033 |
|
$ |
4,057,911 |
|
$ |
4,253,346 |
|
$ |
4,194,958 |
|
$ |
4,026,043 |
|
$ |
3,989,561 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Annualized operating return on average common equity (a)/(b) |
|
10.4 |
% |
12.3 |
% |
10.5 |
% |
5.9 |
% |
0.7 |
% |
12.3 |
% |
12.5 |
% |
13.0 |
% |
9.9 |
% |
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:
|
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
| |||||||||
|
|
2012 |
|
2011 |
|
2011 |
|
2011 |
|
2011 |
|
2010 |
|
2010 |
|
2010 |
|
2010 |
| |||||||||
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 |
|
100,000 |
|
100,000 |
|
125,000 |
|
125,000 |
|
100,000 |
| |||||||||
Total debt |
|
$ |
400,000 |
|
$ |
400,000 |
|
$ |
400,000 |
|
$ |
400,000 |
|
$ |
400,000 |
|
$ |
400,000 |
|
$ |
425,000 |
|
$ |
425,000 |
|
$ |
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%) (1) |
|
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) |
|
4,514,456 |
|
4,267,074 |
|
4,110,899 |
|
4,078,030 |
|
3,964,035 |
|
4,151,786 |
|
4,354,905 |
|
4,035,011 |
|
4,017,074 |
| |||||||||
Total shareholders equity |
|
$ |
4,839,456 |
|
$ |
4,592,074 |
|
$ |
4,435,899 |
|
$ |
4,403,030 |
|
$ |
4,289,035 |
|
$ |
4,476,786 |
|
$ |
4,679,905 |
|
$ |
4,360,011 |
|
$ |
4,342,074 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Total capital |
|
$ |
5,239,456 |
|
$ |
4,992,074 |
|
$ |
4,835,899 |
|
$ |
4,803,030 |
|
$ |
4,689,035 |
|
$ |
4,876,786 |
|
$ |
5,104,905 |
|
$ |
4,785,011 |
|
$ |
4,742,074 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
TALF non-recourse borrowings, at market value, due between 2012 to 2015 (various) (2) |
|
239,551 |
|
310,486 |
|
314,137 |
|
318,441 |
|
322,222 |
|
325,770 |
|
331,797 |
|
336,213 |
|
346,746 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Total capital and TALF non-recourse borrowings |
|
$ |
5,479,007 |
|
$ |
5,302,560 |
|
$ |
5,150,036 |
|
$ |
5,121,471 |
|
$ |
5,011,257 |
|
$ |
5,202,556 |
|
$ |
5,436,702 |
|
$ |
5,121,224 |
|
$ |
5,088,820 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Common shares outstanding, net of treasury shares (b) |
|
135,441,687 |
|
134,358,345 |
|
133,005,465 |
|
132,771,524 |
|
131,850,639 |
|
139,632,225 |
|
147,676,113 |
|
148,891,710 |
|
158,129,802 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Book value per common share (3) (a)/(b) |
|
$ |
33.33 |
|
$ |
31.76 |
|
$ |
30.91 |
|
$ |
30.71 |
|
$ |
30.06 |
|
$ |
29.73 |
|
$ |
29.49 |
|
$ |
27.10 |
|
$ |
25.40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Leverage ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Senior notes/total capital |
|
5.7 |
% |
6.0 |
% |
6.2 |
% |
6.2 |
% |
6.4 |
% |
6.2 |
% |
5.9 |
% |
6.3 |
% |
6.3 |
% | |||||||||
Revolving credit agreement borrowings/total capital |
|
1.9 |
% |
2.0 |
% |
2.1 |
% |
2.1 |
% |
2.1 |
% |
2.1 |
% |
2.4 |
% |
2.6 |
% |
2.1 |
% | |||||||||
Debt/total capital |
|
7.6 |
% |
8.0 |
% |
8.3 |
% |
8.3 |
% |
8.5 |
% |
8.2 |
% |
8.3 |
% |
8.9 |
% |
8.4 |
% | |||||||||
Preferred/total capital |
|
6.2 |
% |
6.5 |
% |
6.7 |
% |
6.8 |
% |
6.9 |
% |
6.7 |
% |
6.4 |
% |
6.8 |
% |
6.9 |
% | |||||||||
Debt and preferred/total capital |
|
13.8 |
% |
14.5 |
% |
15.0 |
% |
15.1 |
% |
15.5 |
% |
14.9 |
% |
14.7 |
% |
15.7 |
% |
15.3 |
% |
(1) |
|
On April 2, 2012, ACGL closed an underwritten public offering of $325 million of its Series C non-cumulative preferred shares (6.75%), with a liquidation preference of $25 per share. All of ACGLs Series A and Series B shares will be redeemed on May 2, 2012 at a redemption price of $25 per share. |
(2) |
|
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 11.7% and the ratio of debt and preferred to total capital would have been 17.6% at March 31, 2012. |
(3) |
|
Excludes the effects of stock options and restricted stock units outstanding. Amounts reflect the adoption of new accounting guidance concerning the accounting for costs associated with acquiring or renewing insurance contracts. |