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
February 11, 2013
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 February 11, 2013, Arch Capital Group Ltd. issued a press release reporting its earnings and the availability of its fourth quarter financial supplement for the three month period and year ended December 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 February 11, 2013 announcing the earnings of Arch Capital Group Ltd. for the three month period and year ended December 31, 2012 |
99.2 |
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Fourth 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: February 11, 2013 |
By: |
/s/ Mark D. Lyons | |
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Name: |
Mark D. Lyons |
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Title: |
Executive Vice President, Chief Financial Officer, Chief Risk Officer & Treasurer |
Exhibit 99.1
ARCH CAPITAL GROUP LTD.
Earnings Release Supplement
As of December 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 | |
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45 Reid Street | |
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Hamilton HM 12 Bermuda | |
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441-278-9250 441-278-9255 fax | |
PRESS RELEASE |
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NASDAQ Symbol ACGL |
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CONTACT: |
For Immediate Release |
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Mark D. Lyons |
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Executive Vice President and |
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Chief Financial Officer |
ARCH CAPITAL GROUP LTD. REPORTS 2012 FOURTH QUARTER RESULTS
HAMILTON, BERMUDA, February 11, 2013 Arch Capital Group Ltd. (NASDAQ: ACGL) reports that net income available to common shareholders for the 2012 fourth quarter was $13.7 million, or $0.10 per share, compared to $138.9 million, or $1.01 per share, for the 2011 fourth quarter. For 2012, net income available to common shareholders was $568.3 million, or $4.11 per share, compared to $410.3 million, or $2.97 per share, for 2011. The Company also reported an after-tax operating loss to common shareholders of $24.7 million, or $0.18 per share, for the 2012 fourth quarter, compared to after-tax operating income available to common shareholders of $128.9 million, or $0.94 per share, for the 2011 fourth quarter. For 2012, after-tax operating income available to common shareholders was $350.6 million, or $2.54 per share, compared to $303.4 million, or $2.19 per share, for 2011. All earnings per share amounts discussed in this release are on a diluted basis.
The Companys book value per common share was $36.19 at December 31, 2012, a 1.6% decrease from $36.79 per share at September 30, 2012 and a 13.9% increase from $31.76 per share at December 31, 2011. The Companys after-tax operating income or loss available to common shareholders represented an annualized return on average common equity of (2.0%) for the 2012 fourth quarter, compared to 12.3% for 2011 fourth quarter. For 2012, the Companys return on common equity was 7.7%, compared to 7.2% for 2011. After-tax operating income or loss 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 6 for a further discussion of after-tax operating income or loss available to common shareholders and Regulation G.
The Companys 2012 fourth quarter results included losses for Superstorm Sandy of $203.5 million, net of reinsurance and the effects of reinstatement premiums. Due to the unusual nature of the event, including its broad scope, the number of insureds affected, the complexity of issues contributing to the losses and the preliminary nature of available information, there is substantial uncertainty regarding the assumptions underlying the Companys losses relating to the event. The Companys ultimate losses from the storm may vary materially from the current estimates due to these and other factors. In addition, ultimate losses may increase if the Companys reinsurers fail to meet their obligations to the Company or the reinsurance protections purchased by the Company are exhausted or are otherwise unavailable.
The following table summarizes the Companys underwriting results:
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Three Months Ended |
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Year Ended |
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December 31, |
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December 31, |
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(U.S. dollars in thousands) |
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2012 |
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2011 |
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2012 |
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2011 |
| ||||
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Gross premiums written |
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$ |
813,928 |
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$ |
699,662 |
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$ |
3,869,161 |
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$ |
3,436,456 |
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Net premiums written |
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613,142 |
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511,124 |
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3,052,235 |
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2,673,326 |
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Net premiums earned |
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779,481 |
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673,192 |
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2,935,140 |
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2,631,815 |
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Underwriting income (loss) |
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(91,334 |
) |
69,468 |
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143,034 |
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44,012 |
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Combined ratio (1) |
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112.4 |
% |
89.7 |
% |
95.4 |
% |
98.3 |
% | ||||
(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.
For the 2012 fourth quarter, the combined ratio of the Companys insurance and reinsurance subsidiaries consisted of a loss ratio of 79.9% and an underwriting expense ratio of 32.5%, compared to a loss ratio of 56.2% and an underwriting expense ratio of 33.5% for the 2011 fourth 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 following table summarizes, on an after-tax basis, the Companys consolidated financial data, including a reconciliation of after-tax operating income or loss 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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Year Ended |
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December 31, |
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December 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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2012 |
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2011 |
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After-tax operating income (loss) available to common shareholders |
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$ |
(24,667 |
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$ |
128,891 |
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$ |
350,640 |
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$ |
303,382 |
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Net realized gains, net of tax |
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51,031 |
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13,464 |
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184,083 |
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108,306 |
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Net impairment losses recognized in earnings, net of tax |
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(6,035 |
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(1,959 |
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(11,388 |
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(9,062 |
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Equity in net income (loss) of investment funds accounted for using the equity method, net of tax |
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16,567 |
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(14,702 |
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73,510 |
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(9,605 |
) | ||||
Net foreign exchange (losses) gains, net of tax |
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(23,164 |
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13,177 |
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(28,527 |
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17,298 |
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Net income available to common shareholders |
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$ |
13,732 |
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$ |
138,871 |
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$ |
568,318 |
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$ |
410,319 |
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Diluted per common share results: |
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After-tax operating income (loss) available to common shareholders |
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$ |
(0.18 |
) |
$ |
0.94 |
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$ |
2.54 |
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$ |
2.19 |
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Net realized gains, net of tax |
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0.37 |
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0.10 |
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1.33 |
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0.78 |
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Net impairment losses recognized in earnings, net of tax |
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(0.04 |
) |
(0.01 |
) |
(0.08 |
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(0.07 |
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Equity in net income (loss) of investment funds accounted for using the equity method, net of tax |
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0.12 |
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(0.11 |
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0.53 |
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(0.07 |
) | ||||
Net foreign exchange (losses) gains, net of tax |
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(0.17 |
) |
0.09 |
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(0.21 |
) |
0.14 |
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Net income available to common shareholders |
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$ |
0.10 |
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$ |
1.01 |
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$ |
4.11 |
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$ |
2.97 |
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Weighted average common shares and common share equivalents outstanding diluted |
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138,270,853 |
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137,473,670 |
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138,258,847 |
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138,289,702 |
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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 Companys investment
portfolio was 3.06 years at December 31, 2012, compared to 2.90 years at September 30, 2012 and 2.99 years at December 31, 2011. Including the effects of foreign exchange, total return on the Companys investment portfolio was 0.80% for the 2012 fourth quarter, compared to 0.82% for the 2011 fourth quarter. Excluding the effects of foreign exchange, total return was 0.67% for the 2012 fourth quarter, compared to 0.95% for the 2011 fourth quarter. Total return for the 2012 fourth quarter included strong returns on Asian and emerging market investments and high-yield corporate bonds, which augmented the return on the Companys core investment grade fixed income portfolio.
Net investment income for the 2012 fourth quarter was $73.8 million, or $0.53 per share, compared to $80.5 million, or $0.59 per share, for the 2011 fourth quarter. The annualized pre-tax investment income yield was 2.46% for the 2012 fourth quarter, compared to 2.72% for the 2011 fourth quarter. The decline in the 2012 fourth quarter yield primarily reflects the effects of lower prevailing interest rates available in the market and the Companys investment strategy which puts a priority on total return. Such effects more than offset the benefit of a higher level of investable assets compared to the 2011 fourth quarter. Consolidated cash flow provided by operating activities for the 2012 fourth quarter was $189.7 million, compared to $109.6 million for the 2011 fourth quarter. The increase in operating cash flows in the 2012 fourth quarter was primarily due to a higher level of premium receipts than in the 2011 fourth quarter.
For 2012, the Companys effective tax rates on income before income taxes and pre-tax operating income were a benefit of 0.7% and 3.8%, respectively, compared to a benefit of 2.3% and 3.8%, respectively, for 2011. The Companys effective tax rates may fluctuate from period to period based on the relative mix of income or loss reported by jurisdiction and the varying tax rates in each jurisdiction. The Companys quarterly tax provision is adjusted to reflect changes in its expected annual effective tax rate, if any. During the 2012 fourth quarter, the Company incurred underwriting losses in its U.S. operations, primarily due to Sandy, which generated a tax benefit and reduced the Companys effective tax rate during the period. In addition, the Companys Bermuda-based reinsurer incurs federal excise taxes for premiums assumed on U.S. risks. The Company incurred $8.6 million of federal excise taxes for 2012, compared to $9.3 million for 2011. Such amounts are reflected as acquisition expenses in the Companys consolidated statements of income.
On a pre-tax basis, net foreign exchange losses for the 2012 fourth quarter were $23.0 million (net unrealized losses of $22.4 million and net realized losses of $0.6 million), compared to net foreign exchange gains for the 2011 fourth quarter of $12.6 million (net unrealized gains of $16.4 million and net realized losses of $3.8 million). The 2012 fourth quarter net foreign exchange losses reflected the weakening of the U.S. Dollar against the Euro and British Pound Sterling 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. The Companys strategy has been to hold investments in foreign currencies which are intended to mitigate its exposure to foreign currency fluctuations in its net insurance liabilities. 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 has not matched a portion of its projected liabilities in foreign currencies with investments in the same currencies and may not match such amounts in future periods, which could increase the Companys exposure to foreign currency fluctuations and increase the volatility of the Companys shareholders equity.
At December 31, 2012, the Companys capital of $5.57 billion consisted of $300.0 million of senior notes, representing 5.4% of the total, $100.0 million of revolving credit agreement borrowings due in August 2014, representing 1.8% of the total, $325.0 million of preferred shares, representing 5.8% of the total, and common shareholders equity of $4.84 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, representing 2.0% of the total, $325.0 million of preferred shares, representing 6.5% of the total, and common shareholders equity of $4.27 billion, representing the balance.
As previously announced, the Companys U.S.-based subsidiaries have entered into a definitive agreement to acquire CMG Mortgage Insurance Company (CMG MI) from its current owners, PMI Mortgage Insurance Co. (PMI), which is in rehabilitation under the receivership of the Arizona Department of Insurance since 2011, and CMFG Life Insurance Company. The Company also agreed to acquire PMIs mortgage insurance operating platform and related assets from PMI. This transaction will allow ACGL to enter the rapidly improving U.S. mortgage insurance marketplace and will broaden its existing mortgage insurance and reinsurance capabilities. It is anticipated that the transaction will close within 12 months, subject to approvals of the Arizona receivership court, applicable regulators and government-sponsored enterprises, and the satisfaction of customary closing conditions. At closing, it is currently estimated that the Companys U.S.-based subsidiaries will pay aggregate consideration of approximately $300 million. Additional amounts may be paid based on the actual results of CMG MIs pre-closing portfolio over an agreed upon period.
The Company will hold a conference call for investors and analysts at 11:00 a.m. Eastern Time on Tuesday, February 12, 2013. 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 February 12, 2013 at 1:00 p.m. Eastern Time until February 19, 2013 at midnight Eastern Time. To access the replay, domestic callers should dial 888-286-8010 (passcode 32313678), and international callers should dial 617-801-6888 (passcode 32313678).
Please refer to the Companys Financial Supplement dated December 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 $5.57 billion in capital at December 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 December 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 fair 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 the Companys 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, underwrites business or invests;
· statutory or regulatory developments, including as to tax policy matters and insurance and other regulatory matters such as the adoption of proposed legislation that would affect Bermuda-headquartered companies and/or Bermuda-based insurers or reinsurers and/or changes in regulations or tax laws applicable to the Company, its subsidiaries, brokers or customers; and
· the other matters set forth under Item 1A Risk Factors, Item 7 Managements Discussion and Analysis of Financial Condition and Results of Operations and other sections of the Companys Annual Report on Form 10-K, as well as the other factors set forth in the Companys other documents on file with the SEC, and managements response to any of the aforementioned factors.
All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with other cautionary statements that are included herein or elsewhere. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
Comment on Regulation G
Throughout this release, the Company presents its operations in the way it believes will be the most meaningful and useful to investors, analysts, rating agencies and others who use the Companys financial information in evaluating the performance of the Company. This presentation includes the use of after-tax operating income or loss 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 or loss available to common shareholders is a non-GAAP financial measure as defined in Regulation G. The reconciliation of such measure to net income available to common shareholders (the most directly comparable GAAP financial measure) in accordance with Regulation G is included on page 2 of this release.
The Company believes that net realized gains or losses, net impairment losses recognized in earnings, equity in net income or loss of investment funds accounted for using the equity method and net foreign exchange gains or losses in any particular period are not indicative of the performance of, or trends in, the Companys business performance. Although net realized gains or losses, net impairment losses recognized in earnings, equity in net income or loss of investment funds accounted for using the equity method and net foreign exchange gains or losses are an integral part of the Companys operations, the decision to realize investment gains or losses, the recognition of the change in the carrying value of investments accounted for using the fair value option in net realized gains or losses, the recognition of net impairment losses, the recognition of equity in net income or loss of investment funds accounted for using the equity method and the recognition of foreign exchange gains or losses are independent of the insurance underwriting process and result, in large part, from general economic and financial market conditions. Furthermore, certain users of the Companys financial information believe that, for many companies, the timing of the realization of investment gains or losses is largely opportunistic. In addition, net impairment losses recognized in earnings on the Companys investments represent other-than-temporary declines in expected recovery values on securities without actual realization. The use of the equity method on certain of the Companys investments in certain funds that invest in fixed maturity securities is driven by the ownership structure of such funds (either limited partnerships or limited liability companies). In applying the equity method, these investments are initially recorded at cost and are subsequently adjusted based on the Companys proportionate share of the net income or loss of the funds (which include changes in the fair value of the underlying securities in the funds). This method of accounting is different from the way the Company accounts for its other fixed maturity securities and the timing of the recognition of equity in net income or loss of investment funds accounted for using the equity method may differ from gains or losses in the future upon sale or maturity of such investments. Due to these reasons, the Company excludes net realized gains
or losses, net impairment losses recognized in earnings, equity in net income or loss of investment funds accounted for using the equity method and net foreign exchange gains or losses from the calculation of after-tax operating income or loss 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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December 31, |
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December 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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|
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Calculation of book value per common share: |
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|
|
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| ||
Total shareholders equity |
|
$ |
5,168,878 |
|
$ |
4,592,074 |
|
Less preferred shareholders equity |
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(325,000 |
) |
(325,000 |
) | ||
Common shareholders equity |
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$ |
4,843,878 |
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$ |
4,267,074 |
|
Common shares outstanding, net of treasury shares (1) |
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133,842,613 |
|
134,358,345 |
| ||
Book value per common share |
|
$ |
36.19 |
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$ |
31.76 |
|
(1) Excludes the effects of 8,221,444 and 8,706,441 stock options and 480,406 and 298,425 restricted stock units outstanding at December 31, 2012 and December 31, 2011, respectively.
Investment Information
|
|
Three Months Ended |
|
Year Ended |
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|
|
December 31, |
|
December 31, |
| ||||||||
(U.S. dollars in thousands, except share data) |
|
2012 |
|
2011 |
|
2012 |
|
2011 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Components of net investment income: |
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|
|
|
|
|
|
|
| ||||
Fixed maturities |
|
$ |
69,198 |
|
$ |
79,219 |
|
$ |
281,140 |
|
$ |
331,469 |
|
Term loan investments (1) |
|
4,551 |
|
1,289 |
|
15,283 |
|
2,854 |
| ||||
Equity securities |
|
1,865 |
|
2,145 |
|
7,963 |
|
7,332 |
| ||||
Short-term investments |
|
363 |
|
561 |
|
1,980 |
|
2,174 |
| ||||
Other |
|
4,228 |
|
3,092 |
|
14,196 |
|
19,152 |
| ||||
Gross investment income |
|
80,205 |
|
86,306 |
|
320,562 |
|
362,981 |
| ||||
Investment expenses |
|
(6,436 |
) |
(5,839 |
) |
(25,667 |
) |
(24,783 |
) | ||||
Net investment income |
|
$ |
73,769 |
|
$ |
80,467 |
|
$ |
294,895 |
|
$ |
338,198 |
|
|
|
|
|
|
|
|
|
|
| ||||
Per share |
|
$ |
0.53 |
|
$ |
0.59 |
|
$ |
2.13 |
|
$ |
2.45 |
|
|
|
|
|
|
|
|
|
|
| ||||
Investment income yield, at amortized cost (2): |
|
|
|
|
|
|
|
|
| ||||
Pre-tax |
|
2.46 |
% |
2.72 |
% |
2.51 |
% |
2.89 |
% | ||||
After-tax |
|
2.32 |
% |
2.61 |
% |
2.38 |
% |
2.77 |
% | ||||
|
|
|
|
|
|
|
|
|
| ||||
Total return (3): |
|
|
|
|
|
|
|
|
| ||||
Including effects of foreign exchange |
|
0.80 |
% |
0.82 |
% |
5.88 |
% |
3.81 |
% | ||||
Excluding effects of foreign exchange |
|
0.67 |
% |
0.95 |
% |
5.59 |
% |
4.10 |
% | ||||
|
|
|
|
|
|
|
|
|
| ||||
Cash flow from operations |
|
$ |
189,652 |
|
$ |
109,641 |
|
$ |
921,603 |
|
$ |
866,112 |
|
(1) Included in investments accounted for using the fair value option on the Companys balance sheet.
(2) 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.
(3) Includes net investment income, equity in net income or loss of investment funds accounted for using the equity method, net realized gains and losses and the change in unrealized gains or losses generated by the Companys investment portfolio. Total return is calculated on a pre-tax basis and before investment expenses.
Investment Information (continued)
|
|
December 31, |
|
December 31, |
| ||
(U.S. dollars in thousands) |
|
2012 |
|
2011 |
| ||
|
|
|
|
|
| ||
Investable assets: |
|
|
|
|
| ||
Fixed maturities available for sale, at fair value |
|
$ |
9,839,988 |
|
$ |
9,375,604 |
|
Fixed maturities, at fair value (1) |
|
363,541 |
|
147,779 |
| ||
Fixed maturities pledged under securities lending agreements, at fair value (2) |
|
42,600 |
|
56,393 |
| ||
Total fixed maturities |
|
10,246,129 |
|
9,579,776 |
| ||
Short-term investments available for sale, at fair value |
|
722,121 |
|
904,219 |
| ||
Short-term investments pledged under securities lending agreements, at fair value (2) |
|
8,248 |
|
|
| ||
Cash |
|
371,041 |
|
351,699 |
| ||
Equity securities available for sale, at fair value |
|
312,749 |
|
299,584 |
| ||
Equity securities, at fair value (1) |
|
25,954 |
|
87,403 |
| ||
Other investments available for sale, at fair value |
|
549,280 |
|
238,111 |
| ||
Other investments, at fair value (1) |
|
527,971 |
|
131,721 |
| ||
TALF investments, at fair value (3) |
|
|
|
387,702 |
| ||
Investments accounted for using the equity method (4) |
|
307,105 |
|
380,507 |
| ||
Securities sold but not yet purchased (5) |
|
(6,924 |
) |
(27,178 |
) | ||
Securities transactions entered into but not settled at the balance sheet date |
|
(18,540 |
) |
(17,339 |
) | ||
Total investable assets |
|
$ |
13,045,134 |
|
$ |
12,316,205 |
|
|
|
|
|
|
| ||
Investment portfolio statistics (2): |
|
|
|
|
| ||
Average effective duration (in years) |
|
3.06 |
|
2.99 |
| ||
Average credit quality (Standard & Poors/Moodys Investors Service) |
|
AA-/Aa2 |
|
AA/Aa1 |
| ||
Imbedded book yield (before investment expenses) |
|
2.60 |
% |
2.98 |
% |
(1) Represents investments 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 investments 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) During the 2012 fourth quarter, the Company sold all investments it held under the FRBNYs TALF program and the related secured financing was extinguished accordingly.
(4) Changes in the carrying value of investment funds accounted for using the equity method are recorded as equity in net income (loss) of investment 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 |
|
Year Ended |
| ||||||||
|
|
December 31, |
|
December 31, |
| ||||||||
(U.S. dollars in thousands) |
|
2012 |
|
2011 |
|
2012 |
|
2011 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Components of losses and loss adjustment expenses incurred |
|
|
|
|
|
|
|
|
| ||||
Paid losses and loss adjustment expenses |
|
$ |
406,621 |
|
$ |
438,871 |
|
$ |
1,465,379 |
|
$ |
1,452,623 |
|
Change in unpaid losses and loss adjustment expenses |
|
215,885 |
|
(60,804 |
) |
395,898 |
|
274,930 |
| ||||
Total losses and loss adjustment expenses |
|
$ |
622,506 |
|
$ |
378,067 |
|
$ |
1,861,277 |
|
$ |
1,727,553 |
|
|
|
|
|
|
|
|
|
|
| ||||
Estimated net (favorable) adverse development in prior year loss reserves, net of related adjustments |
|
|
|
|
|
|
|
|
| ||||
Net impact on underwriting results: |
|
|
|
|
|
|
|
|
| ||||
Insurance |
|
$ |
(4,050 |
) |
$ |
(21,199 |
) |
$ |
(30,474 |
) |
$ |
(44,255 |
) |
Reinsurance |
|
(50,555 |
) |
(80,068 |
) |
(187,895 |
) |
(231,205 |
) | ||||
Total |
|
$ |
(54,605 |
) |
$ |
(101,267 |
) |
$ |
(218,369 |
) |
$ |
(275,460 |
) |
|
|
|
|
|
|
|
|
|
| ||||
Impact on losses and loss adjustment expenses: |
|
|
|
|
|
|
|
|
| ||||
Insurance |
|
$ |
(3,288 |
) |
$ |
(24,017 |
) |
$ |
(31,247 |
) |
$ |
(52,119 |
) |
Reinsurance |
|
(50,638 |
) |
(80,381 |
) |
(190,281 |
) |
(232,896 |
) | ||||
Total |
|
$ |
(53,926 |
) |
$ |
(104,398 |
) |
$ |
(221,528 |
) |
$ |
(285,015 |
) |
|
|
|
|
|
|
|
|
|
| ||||
Impact on acquisition expenses: |
|
|
|
|
|
|
|
|
| ||||
Insurance |
|
$ |
(762 |
) |
$ |
2,818 |
|
$ |
773 |
|
$ |
7,864 |
|
Reinsurance |
|
83 |
|
313 |
|
2,386 |
|
1,691 |
| ||||
Total |
|
$ |
(679 |
) |
$ |
3,131 |
|
$ |
3,159 |
|
$ |
9,555 |
|
|
|
|
|
|
|
|
|
|
| ||||
Impact on combined ratio: |
|
|
|
|
|
|
|
|
| ||||
Insurance |
|
(0.9 |
)% |
(5.0 |
)% |
(1.7 |
)% |
(2.6 |
)% | ||||
Reinsurance |
|
(15.6 |
)% |
(32.0 |
)% |
(16.6 |
)% |
(24.3 |
)% | ||||
Total |
|
(7.0 |
)% |
(15.0 |
)% |
(7.4 |
)% |
(10.5 |
)% | ||||
|
|
|
|
|
|
|
|
|
| ||||
Impact on loss ratio: |
|
|
|
|
|
|
|
|
| ||||
Insurance |
|
(0.7 |
)% |
(5.7 |
)% |
(1.7 |
)% |
(3.1 |
)% | ||||
Reinsurance |
|
(15.6 |
)% |
(32.1 |
)% |
(16.8 |
)% |
(24.4 |
)% | ||||
Total |
|
(6.9 |
)% |
(15.5 |
)% |
(7.5 |
)% |
(10.8 |
)% | ||||
|
|
|
|
|
|
|
|
|
| ||||
Impact on acquisition expense ratio: |
|
|
|
|
|
|
|
|
| ||||
Insurance |
|
(0.2 |
)% |
0.7 |
% |
0.0 |
% |
0.5 |
% | ||||
Reinsurance |
|
0.0 |
% |
0.1 |
% |
0.2 |
% |
0.1 |
% | ||||
Total |
|
(0.1 |
)% |
0.5 |
% |
0.1 |
% |
0.3 |
% | ||||
|
|
|
|
|
|
|
|
|
| ||||
Estimated net losses incurred from current accident year catastrophic events (1) |
|
|
|
|
|
|
|
|
| ||||
Insurance |
|
$ |
86,665 |
|
$ |
28,216 |
|
$ |
105,787 |
|
$ |
109,126 |
|
Reinsurance |
|
114,628 |
|
42,571 |
|
153,410 |
|
294,977 |
| ||||
Total |
|
$ |
201,293 |
|
$ |
70,787 |
|
$ |
259,197 |
|
$ |
404,103 |
|
|
|
|
|
|
|
|
|
|
| ||||
Impact on combined ratio: |
|
|
|
|
|
|
|
|
| ||||
Insurance |
|
19.0 |
% |
6.7 |
% |
5.9 |
% |
6.5 |
% | ||||
Reinsurance |
|
35.4 |
% |
17.0 |
% |
13.5 |
% |
31.0 |
% | ||||
Total |
|
25.8 |
% |
10.5 |
% |
8.8 |
% |
15.4 |
% |
(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 fourth quarter performance by operating segment. For additional details regarding the Companys operating segments, please refer to the Companys Financial Supplement dated December 31, 2012 on the Companys website at http://www.archcapgroup.bm/EarningsReleases.aspx.
Insurance Segment
|
|
Three Months Ended December 31, |
| ||||||
(U.S. dollars in thousands) |
|
2012 |
|
2011 |
|
% Change |
| ||
|
|
|
|
|
|
|
| ||
Gross premiums written |
|
$ |
571,157 |
|
$ |
540,617 |
|
5.6 |
|
Net premiums written |
|
386,714 |
|
360,739 |
|
7.2 |
| ||
Net premiums earned |
|
455,668 |
|
422,667 |
|
7.8 |
| ||
Underwriting loss |
|
(84,421 |
) |
(10,941 |
) |
n/m |
| ||
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
% Point |
| ||
|
|
|
|
|
|
Change |
| ||
Underwriting Ratios |
|
|
|
|
|
|
| ||
Loss ratio |
|
84.1 |
% |
66.9 |
% |
17.2 |
| ||
Acquisition expense ratio |
|
16.4 |
% |
17.3 |
% |
(0.9 |
) | ||
Other operating expense ratio |
|
18.0 |
% |
18.4 |
% |
(0.4 |
) | ||
Combined ratio |
|
118.5 |
% |
102.6 |
% |
15.9 |
| ||
|
|
|
|
|
|
|
| ||
Catastrophic activity and prior year development: |
|
|
|
|
|
|
| ||
Current accident year catastrophic events, net of reinsurance and reinstatement premiums |
|
19.0 |
% |
6.7 |
% |
12.3 |
| ||
Net (favorable) adverse development in prior year loss reserves, net of related adjustments |
|
(0.9 |
)% |
(5.0 |
)% |
4.1 |
| ||
Combined ratio excluding such items |
|
100.4 |
% |
100.9 |
% |
(0.5 |
) | ||
Gross premiums written by the insurance segment in the 2012 fourth quarter were 5.6% higher than in the 2011 fourth quarter, while net premiums written were 7.2% higher than in the 2011 fourth quarter. The higher level of net premiums written primarily resulted from an increase in program business, along with increases in accident and health and other lines, partially offset by a lower level of onshore energy business. The higher level of program business was primarily due to growth within existing programs and the impact of rate movements while the increase in accident and health resulted from new business. The reduction in onshore energy premiums reflected a strategic shift towards writing more on an excess basis and utilizing smaller capacity per account as well as an increased use of reinsurance. Net premiums earned by the insurance segment in the 2012 fourth quarter were 7.8% higher than in the 2011 fourth quarter, and reflect changes in net premiums written over the previous five quarters.
The 2012 fourth quarter loss ratio reflected 19.0 points of current year catastrophic event activity, primarily due to Sandy, compared to 6.0 points in the 2011 fourth quarter. Estimated net favorable development in prior year loss reserves, before related adjustments, reduced the loss ratio by 0.7 points in the 2012 fourth quarter, compared to 5.7 points in the 2011 fourth quarter. The estimated net favorable development in the 2012 fourth quarter primarily resulted from better than expected claims emergence in short-tail lines of business.
The underwriting expense ratio was 34.4% in the 2012 fourth quarter, compared to 35.7% in the 2011 fourth quarter. The acquisition expense ratio was 16.4% in the 2012 fourth quarter, compared to 17.3% in the 2011 fourth quarter. The comparison of the 2012 fourth quarter and 2011 fourth quarter acquisition expense ratios is influenced by, among other things, the mix and type of business written and earned and the level of ceding commissions. In addition, the 2012 fourth quarter acquisition expense ratio included 0.2 points of commission expense related to development in prior year loss reserves, compared to a reduction of 0.7 points in the 2011 fourth quarter. The operating expense ratio was 18.0% in the 2012 fourth quarter, compared to 18.4% in the 2011 fourth quarter. The 2012 fourth quarter operating expense ratio reflected the benefits of continued expense management and a higher level of net premiums earned, which were partially offset by an increase in incentive compensation costs related to earlier policy years which added approximately 1.0 point to the 2012 fourth quarter ratio.
Reinsurance Segment
|
|
Three Months Ended December 31, |
| ||||||
(U.S. dollars in thousands) |
|
2012 |
|
2011 |
|
% Change |
| ||
|
|
|
|
|
|
|
| ||
Gross premiums written |
|
$ |
245,292 |
|
$ |
161,904 |
|
51.5 |
|
Net premiums written |
|
226,428 |
|
150,385 |
|
50.6 |
| ||
Net premiums earned |
|
323,813 |
|
250,525 |
|
29.3 |
| ||
Underwriting income (loss) |
|
(6,913 |
) |
80,409 |
|
(108.6 |
) | ||
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
% Point |
| ||
|
|
|
|
|
|
Change |
| ||
Underwriting Ratios |
|
|
|
|
|
|
| ||
Loss ratio |
|
73.9 |
% |
38.0 |
% |
35.9 |
| ||
Acquisition expense ratio |
|
18.0 |
% |
19.7 |
% |
(1.7 |
) | ||
Other operating expense ratio |
|
11.8 |
% |
10.3 |
% |
1.5 |
| ||
Combined ratio |
|
103.7 |
% |
68.0 |
% |
35.7 |
| ||
|
|
|
|
|
|
|
| ||
Catastrophic activity and prior year development: |
|
|
|
|
|
|
| ||
Current accident year catastrophic events, net of reinsurance and reinstatement premiums |
|
35.4 |
% |
17.0 |
% |
18.4 |
| ||
Net (favorable) adverse development in prior year loss reserves, net of related adjustments |
|
(15.6 |
)% |
(32.0 |
)% |
16.4 |
| ||
Combined ratio excluding such items |
|
83.9 |
% |
83.0 |
% |
0.9 |
| ||
Gross premiums written by the reinsurance segment in the 2012 fourth quarter were 51.5% higher than in the 2011 fourth quarter, while net premiums written were 50.6% higher than in the 2011 fourth quarter. The growth in net premiums written reflected increases to all lines of business, including continued contributions from mortgage business covering newly originated residential mortgages and U.K. motor business, as noted in prior releases. Growth in property lines primarily resulted from new business written by the reinsurance segments treaty and facultative operations and also reflected $10.1 million of assumed reinstatement premiums as a result of the 2012 fourth quarter catastrophic activity.
Net premiums earned in the 2012 fourth quarter were 29.3% higher than in the 2011 fourth quarter, and primarily reflect changes in net premiums written over the previous five quarters, including the mix and type of business written. Net premiums earned also included $17 million related to the credit and surety business acquired from Ariel Reinsurance Company Ltd. in April 2012. As noted in prior releases, under applicable accounting rules for business combinations, the recording of unearned premiums was not reflected as net premiums written but will continue to result in net premiums earned (primarily over a two year period). The remaining acquired unearned premiums were approximately $34 million at December 31, 2012.
The 2012 fourth quarter loss ratio reflected 38.5 points of current year catastrophic activity, primarily due to Sandy, compared to 17.8 points of catastrophic activity in the 2011 fourth quarter. Estimated net favorable development in prior year loss reserves, before related adjustments, reduced the loss ratio by 15.6 points in the 2012 fourth quarter, compared to 32.1 points in the 2011 fourth quarter. The estimated net favorable development in the 2012 fourth quarter primarily resulted from better than expected claims emergence in short-tail lines of business.
The underwriting expense ratio was 29.8% in the 2012 fourth quarter, compared to 30.0% in the 2011 fourth quarter. The acquisition expense ratio for the 2012 fourth quarter was 18.0%, compared to 19.7% for the 2011 fourth quarter. The comparison of the 2012 fourth quarter and 2011 fourth quarter acquisition expense ratios is influenced by, among other things, the mix and type of business written and earned and the level of ceding commissions. The operating expense ratio was 11.8% in the 2012 fourth quarter, compared to 10.3% in the 2011 fourth quarter. The 2012 fourth quarter operating expense ratio reflected an increase in aggregate expenses due, in part, to selected expansion of the reinsurance segments operating platform and 1.9 points of incentive compensation costs. Such amounts more than offset the benefit of a higher level of net premiums earned on the 2012 fourth quarter ratio.
ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(U.S. dollars in thousands, except share data)
|
|
Three Months Ended |
|
Year Ended |
| ||||||||
|
|
December 31, |
|
December 31, |
| ||||||||
|
|
2012 |
|
2011 |
|
2012 |
|
2011 |
| ||||
Revenues |
|
|
|
|
|
|
|
|
| ||||
Net premiums written |
|
$ |
613,142 |
|
$ |
511,124 |
|
$ |
3,052,235 |
|
$ |
2,673,326 |
|
Change in unearned premiums |
|
166,339 |
|
162,068 |
|
(117,095 |
) |
(41,511 |
) | ||||
Net premiums earned |
|
779,481 |
|
673,192 |
|
2,935,140 |
|
2,631,815 |
| ||||
Net investment income |
|
73,769 |
|
80,467 |
|
294,895 |
|
338,198 |
| ||||
Net realized gains |
|
54,849 |
|
14,542 |
|
194,228 |
|
110,646 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Other-than-temporary impairment losses |
|
(6,046 |
) |
(3,443 |
) |
(12,175 |
) |
(13,850 |
) | ||||
Less investment impairments recognized in other comprehensive income, before taxes |
|
11 |
|
1,484 |
|
787 |
|
4,788 |
| ||||
Net impairment losses recognized in earnings |
|
(6,035 |
) |
(1,959 |
) |
(11,388 |
) |
(9,062 |
) | ||||
|
|
|
|
|
|
|
|
|
| ||||
Fee income |
|
5,664 |
|
982 |
|
8,090 |
|
3,429 |
| ||||
Equity in net income (loss) of investment funds accounted for using the equity method |
|
16,567 |
|
(14,702 |
) |
73,510 |
|
(9,605 |
) | ||||
Other income (loss) |
|
(4,189 |
) |
(4,848 |
) |
(12,094 |
) |
(2,114 |
) | ||||
Total revenues |
|
920,106 |
|
747,674 |
|
3,482,381 |
|
3,063,307 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Expenses |
|
|
|
|
|
|
|
|
| ||||
Losses and loss adjustment expenses |
|
622,506 |
|
378,067 |
|
1,861,277 |
|
1,727,553 |
| ||||
Acquisition expenses |
|
133,568 |
|
123,339 |
|
508,884 |
|
462,937 |
| ||||
Other operating expenses |
|
127,751 |
|
110,077 |
|
465,353 |
|
432,122 |
| ||||
Interest expense |
|
6,187 |
|
8,087 |
|
28,525 |
|
31,691 |
| ||||
Net foreign exchange losses (gains) |
|
22,997 |
|
(12,613 |
) |
28,955 |
|
(17,366 |
) | ||||
Total expenses |
|
913,009 |
|
606,957 |
|
2,892,994 |
|
2,636,937 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Income before income taxes |
|
7,097 |
|
140,717 |
|
589,387 |
|
426,370 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Income tax benefit |
|
(12,120 |
) |
(4,615 |
) |
(4,010 |
) |
(9,793 |
) | ||||
|
|
|
|
|
|
|
|
|
| ||||
Net income |
|
19,217 |
|
145,332 |
|
593,397 |
|
436,163 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Preferred dividends |
|
5,485 |
|
6,461 |
|
25,079 |
|
25,844 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net income available to common shareholders |
|
$ |
13,732 |
|
$ |
138,871 |
|
$ |
568,318 |
|
$ |
410,319 |
|
|
|
|
|
|
|
|
|
|
| ||||
Net income per common share |
|
|
|
|
|
|
|
|
| ||||
Basic |
|
$ |
0.10 |
|
$ |
1.05 |
|
$ |
4.23 |
|
$ |
3.10 |
|
Diluted |
|
$ |
0.10 |
|
$ |
1.01 |
|
$ |
4.11 |
|
$ |
2.97 |
|
|
|
|
|
|
|
|
|
|
| ||||
Weighted average common shares and common share equivalents outstanding |
|
|
|
|
|
|
|
|
| ||||
Basic |
|
134,229,078 |
|
132,612,528 |
|
134,446,158 |
|
132,221,970 |
| ||||
Diluted |
|
138,270,853 |
|
137,473,670 |
|
138,258,847 |
|
138,289,702 |
|
ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands, except share data)
|
|
December 31, |
|
December 31, |
| ||
|
|
2012 |
|
2011 |
| ||
Assets |
|
|
|
|
| ||
Investments: |
|
|
|
|
| ||
Fixed maturities available for sale, at fair value (amortized cost: $9,567,290 and $9,165,438) |
|
$ |
9,839,988 |
|
$ |
9,375,604 |
|
Short-term investments available for sale, at fair value (amortized cost: $719,848 and $909,121) |
|
722,121 |
|
904,219 |
| ||
Investment of funds received under securities lending, at fair value (amortized cost: $42,302 and $48,577) |
|
42,531 |
|
48,419 |
| ||
Equity securities available for sale, at fair value (cost: $298,414 and $299,058) |
|
312,749 |
|
299,584 |
| ||
Other investments available for sale, at fair value (cost: $519,955 and $235,381) |
|
549,280 |
|
238,111 |
| ||
Investments accounted for using the fair value option |
|
917,466 |
|
366,903 |
| ||
TALF investments, at fair value (2011 amortized cost: $373,040) |
|
|
|
387,702 |
| ||
Investments accounted for using the equity method |
|
307,105 |
|
380,507 |
| ||
Total investments |
|
12,691,240 |
|
12,001,049 |
| ||
|
|
|
|
|
| ||
Cash |
|
371,041 |
|
351,699 |
| ||
Accrued investment income |
|
71,748 |
|
70,739 |
| ||
Investment in joint venture (cost: $100,000) |
|
107,284 |
|
107,576 |
| ||
Fixed maturities and short-term investments pledged under securities lending, at fair value |
|
50,848 |
|
56,393 |
| ||
Premiums receivable |
|
688,873 |
|
501,563 |
| ||
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses |
|
1,870,037 |
|
1,851,584 |
| ||
Contractholder receivables |
|
865,728 |
|
748,231 |
| ||
Prepaid reinsurance premiums |
|
298,484 |
|
265,696 |
| ||
Deferred acquisition costs, net |
|
262,822 |
|
227,884 |
| ||
Receivable for securities sold |
|
19,248 |
|
462,891 |
| ||
Other assets |
|
519,409 |
|
460,052 |
| ||
Total Assets |
|
$ |
17,816,762 |
|
$ |
17,105,357 |
|
|
|
|
|
|
| ||
Liabilities |
|
|
|
|
| ||
Reserve for losses and loss adjustment expenses |
|
$ |
8,933,292 |
|
$ |
8,456,210 |
|
Unearned premiums |
|
1,647,978 |
|
1,411,872 |
| ||
Reinsurance balances payable |
|
188,546 |
|
133,866 |
| ||
Contractholder payables |
|
865,728 |
|
748,231 |
| ||
Senior notes |
|
300,000 |
|
300,000 |
| ||
Revolving credit agreement borrowings |
|
100,000 |
|
100,000 |
| ||
TALF borrowings, at fair value (2011 par: $310,868) |
|
|
|
310,486 |
| ||
Securities lending payable |
|
52,356 |
|
58,546 |
| ||
Payable for securities purchased |
|
37,788 |
|
480,230 |
| ||
Other liabilities |
|
522,196 |
|
513,842 |
| ||
Total Liabilities |
|
$ |
12,647,884 |
|
$ |
12,513,283 |
|
|
|
|
|
|
| ||
Commitments and Contingencies |
|
|
|
|
| ||
|
|
|
|
|
| ||
Shareholders Equity |
|
|
|
|
| ||
Non-cumulative preferred shares - Series A and B |
|
325,000 |
|
325,000 |
| ||
Common shares ($0.0033 par, shares issued: 168,255,572 and 164,636,338) |
|
561 |
|
549 |
| ||
Additional paid-in capital |
|
217,166 |
|
161,419 |
| ||
Retained earnings |
|
5,364,973 |
|
4,796,655 |
| ||
Accumulated other comprehensive income, net of deferred income tax |
|
287,017 |
|
153,923 |
| ||
Common shares held in treasury, at cost (shares: 34,412,959 and 30,277,993) |
|
(1,025,839 |
) |
(845,472 |
) | ||
Total Shareholders Equity |
|
5,168,878 |
|
4,592,074 |
| ||
Total Liabilities and Shareholders Equity |
|
$ |
17,816,762 |
|
$ |
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: | |
Mark D. Lyons | |
Executive Vice President and | |
|
Chief Financial Officer |
Financial Supplement
Financial Information
as of December 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 accounting guidance concerning the accounting for costs associated with acquiring or renewing insurance contracts was adopted retrospectively in the 2012 first quarter 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 |
8-9 |
|
c. |
Insurance Segment Underwriting Results |
10-11 |
|
d. |
Reinsurance Segment Underwriting Results |
12-13 |
|
|
| |
IV. |
Investment Information |
| |
|
a. |
Investable Asset Summary, Investment Portfolio Metrics and Credit Quality Distribution |
14 |
|
b. |
Composition of Fixed Maturities and Analysis of Corporate Exposures |
15 |
|
c. |
Mortgage Backed, Commercial Mortgage Backed and Asset Backed Securities |
16 |
|
d. |
Bank Loan Investments |
17 |
|
e. |
Eurozone Investments |
18 |
|
|
| |
V. |
Other |
| |
|
a. |
Comments on Regulation G |
19 |
|
b. |
Operating Income Reconciliation |
20 |
|
c. |
Share Repurchase Activity |
21 |
|
d. |
Annualized Operating Return on Average Common Equity |
22 |
|
e. |
Capital Structure |
23 |
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 |
|
Year Ended |
| ||||||||||||
|
|
December 31, |
|
December 31, |
| ||||||||||||
|
|
2012 |
|
2011 |
|
Change |
|
2012 |
|
2011 |
|
Change |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Gross premiums written |
|
$ |
813,928 |
|
$ |
699,662 |
|
16.3 |
% |
$ |
3,869,161 |
|
$ |
3,436,456 |
|
12.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net premiums written |
|
$ |
613,142 |
|
$ |
511,124 |
|
20.0 |
% |
$ |
3,052,235 |
|
$ |
2,673,326 |
|
14.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net premiums earned |
|
$ |
779,481 |
|
$ |
673,192 |
|
15.8 |
% |
$ |
2,935,140 |
|
$ |
2,631,815 |
|
11.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Underwriting income (loss) |
|
$ |
(91,334 |
) |
$ |
69,468 |
|
(231.5 |
)% |
$ |
143,034 |
|
$ |
44,012 |
|
225.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net investment income |
|
$ |
73,769 |
|
$ |
80,467 |
|
(8.3 |
)% |
$ |
294,895 |
|
$ |
338,198 |
|
(12.8 |
)% |
Per diluted share |
|
$ |
0.53 |
|
$ |
0.59 |
|
(10.2 |
)% |
$ |
2.13 |
|
$ |
2.45 |
|
(13.1 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net income available to common shareholders |
|
$ |
13,732 |
|
$ |
138,871 |
|
(90.1 |
)% |
$ |
568,318 |
|
$ |
410,319 |
|
38.5 |
% |
Per diluted share |
|
$ |
0.10 |
|
$ |
1.01 |
|
(90.1 |
)% |
$ |
4.11 |
|
$ |
2.97 |
|
38.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
After-tax operating income available to common shareholders (1) |
|
$ |
(24,667 |
) |
$ |
128,891 |
|
(119.1 |
)% |
$ |
350,640 |
|
$ |
303,382 |
|
15.6 |
% |
Per diluted share |
|
$ |
(0.18 |
) |
$ |
0.94 |
|
(119.1 |
)% |
$ |
2.54 |
|
$ |
2.19 |
|
16.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Comprehensive income (loss) |
|
$ |
(17,898 |
) |
$ |
152,679 |
|
(111.7 |
)% |
$ |
726,491 |
|
$ |
385,583 |
|
88.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash flow from operations |
|
$ |
189,652 |
|
$ |
109,641 |
|
73.0 |
% |
$ |
921,603 |
|
$ |
866,112 |
|
6.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Diluted weighted average common shares and common share equivalents outstanding |
|
138,270,853 |
|
137,473,670 |
|
0.6 |
% |
138,258,847 |
|
138,289,702 |
|
(0.0 |
)% | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
% Point |
|
|
|
|
|
% Point |
| ||||
|
|
|
|
|
|
Change |
|
|
|
|
|
Change |
| ||||
Underwriting ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Loss ratio |
|
79.9 |
% |
56.2 |
% |
23.7 |
|
63.4 |
% |
65.6 |
% |
(2.2 |
) | ||||
Acquisition expense ratio |
|
17.1 |
% |
18.2 |
% |
(1.1 |
) |
17.3 |
% |
17.5 |
% |
(0.2 |
) | ||||
Other operating expense ratio |
|
15.4 |
% |
15.3 |
% |
0.1 |
|
14.7 |
% |
15.2 |
% |
(0.5 |
) | ||||
Combined ratio |
|
112.4 |
% |
89.7 |
% |
22.7 |
|
95.4 |
% |
98.3 |
% |
(2.9 |
) | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Financial measures: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Change in book value per common share |
|
(1.6 |
)% |
2.7 |
% |
(4.3 |
) |
13.9 |
% |
6.8 |
% |
7.1 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Annualized operating return on average common equity |
|
(2.0 |
)% |
12.3 |
% |
(14.3 |
) |
7.7 |
% |
7.2 |
% |
0.5 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total return on investments (2) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Including effects of foreign exchange |
|
0.80 |
% |
0.82 |
% |
-2 bps |
|
5.88 |
% |
3.81 |
% |
207 bps |
| ||||
Excluding effects of foreign exchange |
|
0.67 |
% |
0.95 |
% |
-28 bps |
|
5.59 |
% |
4.10 |
% |
149 bps |
|
(1) |
See page 19, 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 |
|
Year Ended |
| |||||||||||||||||||||||||||||
|
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
December 31, |
|
December 31, |
| |||||||||||
|
|
2012 |
|
2012 |
|
2012 |
|
2012 |
|
2011 |
|
2011 |
|
2011 |
|
2011 |
|
2010 |
|
2012 |
|
2011 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Gross premiums written |
|
$ |
813,928 |
|
$ |
936,764 |
|
$ |
1,051,813 |
|
$ |
1,066,656 |
|
$ |
699,662 |
|
$ |
860,289 |
|
$ |
911,939 |
|
$ |
964,566 |
|
$ |
664,212 |
|
$ |
3,869,161 |
|
$ |
3,436,456 |
|
Net premiums written |
|
613,142 |
|
755,249 |
|
820,233 |
|
863,611 |
|
511,124 |
|
691,381 |
|
706,543 |
|
764,278 |
|
482,911 |
|
3,052,235 |
|
2,673,326 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net premiums earned |
|
$ |
779,481 |
|
$ |
748,691 |
|
$ |
726,656 |
|
$ |
680,312 |
|
$ |
673,192 |
|
$ |
682,049 |
|
$ |
642,879 |
|
$ |
633,695 |
|
$ |
632,146 |
|
$ |
2,935,140 |
|
$ |
2,631,815 |
|
Fee income |
|
5,664 |
|
1,077 |
|
806 |
|
543 |
|
982 |
|
848 |
|
784 |
|
815 |
|
2,814 |
|
8,090 |
|
3,429 |
| |||||||||||
Losses and loss adjustment expenses |
|
(622,506 |
) |
(443,871 |
) |
(399,693 |
) |
(395,207 |
) |
(378,067 |
) |
(423,984 |
) |
(431,622 |
) |
(493,880 |
) |
(367,326 |
) |
(1,861,277 |
) |
(1,727,553 |
) | |||||||||||
Acquisition expenses, net |
|
(133,568 |
) |
(128,065 |
) |
(128,289 |
) |
(118,962 |
) |
(123,339 |
) |
(120,205 |
) |
(110,639 |
) |
(108,754 |
) |
(104,824 |
) |
(508,884 |
) |
(462,937 |
) | |||||||||||
Other operating expenses |
|
(120,405 |
) |
(104,380 |
) |
(105,757 |
) |
(99,493 |
) |
(103,300 |
) |
(100,141 |
) |
(101,445 |
) |
(95,856 |
) |
(112,228 |
) |
(430,035 |
) |
(400,742 |
) | |||||||||||
Underwriting income (loss) |
|
(91,334 |
) |
73,452 |
|
93,723 |
|
67,193 |
|
69,468 |
|
38,567 |
|
(43 |
) |
(63,980 |
) |
50,582 |
|
143,034 |
|
44,012 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income |
|
73,769 |
|
73,221 |
|
73,608 |
|
74,297 |
|
80,467 |
|
82,753 |
|
86,671 |
|
88,307 |
|
90,601 |
|
294,895 |
|
338,198 |
| |||||||||||
Net realized gains |
|
54,849 |
|
60,391 |
|
34,867 |
|
44,121 |
|
14,542 |
|
30,199 |
|
45,210 |
|
20,695 |
|
74,027 |
|
194,228 |
|
110,646 |
| |||||||||||
Net impairment losses recognized in earnings |
|
(6,035 |
) |
(2,379 |
) |
(1,951 |
) |
(1,023 |
) |
(1,959 |
) |
(2,739 |
) |
(1,684 |
) |
(2,680 |
) |
(3,230 |
) |
(11,388 |
) |
(9,062 |
) | |||||||||||
Equity in net income (loss) of investment funds accounted for using the equity method |
|
16,567 |
|
24,330 |
|
7,787 |
|
24,826 |
|
(14,702 |
) |
(30,549 |
) |
5,973 |
|
29,673 |
|
22,990 |
|
73,510 |
|
(9,605 |
) | |||||||||||
Other income (loss) |
|
(4,189 |
) |
(532 |
) |
695 |
|
(8,068 |
) |
(4,848 |
) |
2,432 |
|
(4,265 |
) |
4,567 |
|
6,165 |
|
(12,094 |
) |
(2,114 |
) | |||||||||||
Other expenses |
|
(7,346 |
) |
(9,049 |
) |
(11,944 |
) |
(6,979 |
) |
(6,777 |
) |
(6,180 |
) |
(11,397 |
) |
(7,026 |
) |
(6,881 |
) |
(35,318 |
) |
(31,380 |
) | |||||||||||
Interest expense |
|
(6,187 |
) |
(7,378 |
) |
(7,439 |
) |
(7,521 |
) |
(8,087 |
) |
(8,125 |
) |
(7,758 |
) |
(7,721 |
) |
(7,460 |
) |
(28,525 |
) |
(31,691 |
) | |||||||||||
Net foreign exchange gains (losses) |
|
(22,997 |
) |
(16,959 |
) |
31,689 |
|
(20,688 |
) |
12,613 |
|
60,040 |
|
(18,375 |
) |
(36,912 |
) |
6,039 |
|
(28,955 |
) |
17,366 |
| |||||||||||
Income before income taxes |
|
7,097 |
|
195,097 |
|
221,035 |
|
166,158 |
|
140,717 |
|
166,398 |
|
94,332 |
|
24,923 |
|
232,833 |
|
589,387 |
|
426,370 |
| |||||||||||
Income tax benefit (expense) |
|
12,120 |
|
(5,441 |
) |
(767 |
) |
(1,902 |
) |
4,615 |
|
2,357 |
|
2,271 |
|
550 |
|
3,067 |
|
4,010 |
|
9,793 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net income |
|
19,217 |
|
189,656 |
|
220,268 |
|
164,256 |
|
145,332 |
|
168,755 |
|
96,603 |
|
25,473 |
|
235,900 |
|
593,397 |
|
436,163 |
| |||||||||||
Preferred dividends |
|
(5,485 |
) |
(5,484 |
) |
(7,649 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(25,079 |
) |
(25,844 |
) | |||||||||||
Net income available to common shareholders |
|
$ |
13,732 |
|
$ |
184,172 |
|
$ |
212,619 |
|
$ |
157,795 |
|
$ |
138,871 |
|
$ |
162,294 |
|
$ |
90,142 |
|
$ |
19,012 |
|
$ |
229,439 |
|
$ |
568,318 |
|
$ |
410,319 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Underwriting Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Loss ratio |
|
79.9 |
% |
59.3 |
% |
55.0 |
% |
58.1 |
% |
56.2 |
% |
62.2 |
% |
67.1 |
% |
77.9 |
% |
58.1 |
% |
63.4 |
% |
65.6 |
% | |||||||||||
Acquisition expense ratio |
|
17.1 |
% |
17.0 |
% |
17.6 |
% |
17.4 |
% |
18.2 |
% |
17.5 |
% |
17.1 |
% |
17.0 |
% |
16.5 |
% |
17.3 |
% |
17.5 |
% | |||||||||||
Other operating expense ratio |
|
15.4 |
% |
13.9 |
% |
14.6 |
% |
14.6 |
% |
15.3 |
% |
14.7 |
% |
15.8 |
% |
15.1 |
% |
17.8 |
% |
14.7 |
% |
15.2 |
% | |||||||||||
Combined ratio |
|
112.4 |
% |
90.2 |
% |
87.2 |
% |
90.1 |
% |
89.7 |
% |
94.4 |
% |
100.0 |
% |
110.0 |
% |
92.4 |
% |
95.4 |
% |
98.3 |
% | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net premiums written to gross premiums written |
|
75.3 |
% |
80.6 |
% |
78.0 |
% |
81.0 |
% |
73.1 |
% |
80.4 |
% |
77.5 |
% |
79.2 |
% |
72.7 |
% |
78.9 |
% |
77.8 |
% | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net income per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Basic |
|
$ |
0.10 |
|
$ |
1.36 |
|
$ |
1.58 |
|
$ |
1.18 |
|
$ |
1.05 |
|
$ |
1.23 |
|
$ |
0.69 |
|
$ |
0.14 |
|
$ |
1.60 |
|
$ |
4.23 |
|
$ |
3.10 |
|
Diluted |
|
$ |
0.10 |
|
$ |
1.33 |
|
$ |
1.54 |
|
$ |
1.14 |
|
$ |
1.01 |
|
$ |
1.18 |
|
$ |
0.65 |
|
$ |
0.14 |
|
$ |
1.53 |
|
$ |
4.11 |
|
$ |
2.97 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Weighted average common shares and common share equivalents outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Basic |
|
134,229,078 |
|
135,067,360 |
|
134,529,129 |
|
133,954,623 |
|
132,612,528 |
|
131,560,851 |
|
131,232,269 |
|
133,499,241 |
|
143,320,146 |
|
134,446,158 |
|
132,221,970 |
| |||||||||||
Diluted |
|
138,270,853 |
|
138,696,934 |
|
138,211,736 |
|
137,814,906 |
|
137,473,670 |
|
137,140,929 |
|
137,975,599 |
|
140,460,516 |
|
150,306,429 |
|
138,258,847 |
|
138,289,702 |
|
Arch Capital Group Ltd. and Subsidiaries
Consolidated Balance Sheets
(U.S. dollars in thousands, except share data)
|
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
| |||||||||
|
|
2012 |
|
2012 |
|
2012 |
|
2012 |
|
2011 |
|
2011 |
|
2011 |
|
2011 |
|
2010 |
| |||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Fixed maturities available for sale, at fair value |
|
$ |
9,839,988 |
|
$ |
9,944,186 |
|
$ |
9,556,326 |
|
$ |
9,221,145 |
|
$ |
9,375,604 |
|
$ |
9,529,834 |
|
$ |
9,247,002 |
|
$ |
8,916,017 |
|
$ |
8,957,859 |
|
Short-term investments available for sale, at fair value |
|
722,121 |
|
845,158 |
|
1,087,910 |
|
1,112,249 |
|
904,219 |
|
799,662 |
|
704,495 |
|
1,130,142 |
|
915,841 |
| |||||||||
Investment of funds received under securities lending, at fair value |
|
42,531 |
|
26,279 |
|
66,424 |
|
41,867 |
|
48,419 |
|
44,553 |
|
145,224 |
|
9,951 |
|
69,660 |
| |||||||||
Equity securities available for sale, at fair value |
|
312,749 |
|
312,371 |
|
260,864 |
|
318,181 |
|
299,584 |
|
273,213 |
|
320,434 |
|
361,639 |
|
310,194 |
| |||||||||
Other investments available for sale, at fair value |
|
549,280 |
|
477,857 |
|
381,576 |
|
357,992 |
|
238,111 |
|
229,974 |
|
299,845 |
|
293,073 |
|
275,538 |
| |||||||||
Investments accounted for using the fair value option |
|
917,466 |
|
698,068 |
|
496,843 |
|
500,283 |
|
366,903 |
|
319,381 |
|
321,790 |
|
256,614 |
|
219,173 |
| |||||||||
TALF investments, at fair value |
|
|
|
270,206 |
|
307,453 |
|
313,187 |
|
387,702 |
|
392,455 |
|
399,341 |
|
400,970 |
|
402,449 |
| |||||||||
Investments accounted for using the equity method |
|
307,105 |
|
339,587 |
|
331,601 |
|
347,273 |
|
380,507 |
|
383,543 |
|
399,968 |
|
449,206 |
|
508,334 |
| |||||||||
Total investments |
|
12,691,240 |
|
12,913,712 |
|
12,488,997 |
|
12,212,177 |
|
12,001,049 |
|
11,972,615 |
|
11,838,099 |
|
11,817,612 |
|
11,659,048 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Cash |
|
371,041 |
|
422,440 |
|
355,392 |
|
422,806 |
|
351,699 |
|
369,895 |
|
411,001 |
|
406,877 |
|
362,740 |
| |||||||||
Accrued investment income |
|
71,748 |
|
68,069 |
|
72,095 |
|
65,643 |
|
70,739 |
|
71,264 |
|
71,083 |
|
69,057 |
|
74,837 |
| |||||||||
Investment in joint venture |
|
107,284 |
|
109,363 |
|
109,240 |
|
107,866 |
|
107,576 |
|
107,642 |
|
105,982 |
|
105,495 |
|
105,698 |
| |||||||||
Fixed maturities and short-term investments pledged under securities lending, at fair value |
|
50,848 |
|
34,769 |
|
74,032 |
|
50,813 |
|
56,393 |
|
72,399 |
|
150,501 |
|
198,418 |
|
75,575 |
| |||||||||
Securities purchased under agreements to resell using funds received under securities lending |
|
|
|
|
|
|
|
|
|
|
|
20,032 |
|
|
|
185,176 |
|
|
| |||||||||
Premiums receivable |
|
688,873 |
|
773,172 |
|
834,116 |
|
700,137 |
|
501,563 |
|
606,963 |
|
712,397 |
|
633,144 |
|
503,434 |
| |||||||||
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses |
|
1,870,037 |
|
1,733,830 |
|
1,849,191 |
|
1,849,603 |
|
1,851,584 |
|
1,840,191 |
|
1,855,342 |
|
1,772,130 |
|
1,763,985 |
| |||||||||
Contractholder receivables |
|
865,728 |
|
849,352 |
|
787,389 |
|
762,031 |
|
748,231 |
|
732,270 |
|
702,423 |
|
672,296 |
|
660,546 |
| |||||||||
Prepaid reinsurance premiums |
|
298,484 |
|
302,513 |
|
313,264 |
|
261,619 |
|
265,696 |
|
267,846 |
|
278,587 |
|
259,624 |
|
263,448 |
| |||||||||
Deferred acquisition costs, net |
|
262,822 |
|
279,171 |
|
272,736 |
|
261,467 |
|
227,884 |
|
253,163 |
|
257,292 |
|
251,226 |
|
227,278 |
| |||||||||
Receivable for securities sold |
|
19,248 |
|
894,318 |
|
821,527 |
|
621,560 |
|
462,891 |
|
1,067,188 |
|
733,931 |
|
749,708 |
|
56,145 |
| |||||||||
Other assets |
|
519,409 |
|
509,048 |
|
518,744 |
|
497,061 |
|
460,052 |
|
490,728 |
|
520,901 |
|
521,292 |
|
490,277 |
| |||||||||
Total Assets |
|
$ |
17,816,762 |
|
$ |
18,889,757 |
|
$ |
18,496,723 |
|
$ |
17,812,783 |
|
$ |
17,105,357 |
|
$ |
17,872,196 |
|
$ |
17,637,539 |
|
$ |
17,642,055 |
|
$ |
16,243,011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Reserve for losses and loss adjustment expenses |
|
$ |
8,933,292 |
|
$ |
8,562,328 |
|
$ |
8,546,350 |
|
$ |
8,511,323 |
|
$ |
8,456,210 |
|
$ |
8,523,522 |
|
$ |
8,564,908 |
|
$ |
8,319,324 |
|
$ |
8,098,454 |
|
Unearned premiums |
|
1,647,978 |
|
1,815,524 |
|
1,815,135 |
|
1,595,712 |
|
1,411,872 |
|
1,578,419 |
|
1,589,497 |
|
1,504,162 |
|
1,370,075 |
| |||||||||
Reinsurance balances payable |
|
188,546 |
|
172,016 |
|
184,763 |
|
137,791 |
|
133,866 |
|
123,815 |
|
154,860 |
|
131,512 |
|
132,452 |
| |||||||||
Contractholder payables |
|
865,728 |
|
849,352 |
|
787,389 |
|
762,031 |
|
748,231 |
|
732,270 |
|
702,423 |
|
672,296 |
|
660,546 |
| |||||||||
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 |
|
100,000 |
|
100,000 |
|
100,000 |
| |||||||||
TALF borrowings, at fair value |
|
|
|
185,223 |
|
235,818 |
|
239,551 |
|
310,486 |
|
314,137 |
|
318,441 |
|
322,222 |
|
325,770 |
| |||||||||
Securities lending payable |
|
52,356 |
|
35,707 |
|
76,383 |
|
52,224 |
|
58,546 |
|
74,696 |
|
155,072 |
|
203,925 |
|
78,021 |
| |||||||||
Payable for securities purchased |
|
37,788 |
|
1,012,060 |
|
927,962 |
|
742,995 |
|
480,230 |
|
1,161,591 |
|
838,787 |
|
1,266,390 |
|
200,192 |
| |||||||||
Other liabilities |
|
522,196 |
|
508,753 |
|
502,607 |
|
531,700 |
|
513,842 |
|
527,847 |
|
510,521 |
|
533,189 |
|
500,715 |
| |||||||||
Total Liabilities |
|
12,647,884 |
|
13,540,963 |
|
13,476,407 |
|
12,973,327 |
|
12,513,283 |
|
13,436,297 |
|
13,234,509 |
|
13,353,020 |
|
11,766,225 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
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 |
|
561 |
|
556 |
|
556 |
|
552 |
|
549 |
|
544 |
|
541 |
|
535 |
|
534 |
| |||||||||
Additional paid-in capital |
|
217,166 |
|
200,607 |
|
187,013 |
|
170,694 |
|
161,419 |
|
150,882 |
|
142,001 |
|
120,109 |
|
110,325 |
| |||||||||
Retained earnings |
|
5,364,973 |
|
5,351,241 |
|
5,167,069 |
|
4,954,450 |
|
4,796,655 |
|
4,657,784 |
|
4,495,490 |
|
4,405,348 |
|
4,386,336 |
| |||||||||
Accumulated other comprehensive income, net of deferred income tax |
|
287,017 |
|
324,132 |
|
193,097 |
|
234,468 |
|
153,923 |
|
146,576 |
|
263,584 |
|
225,405 |
|
204,503 |
| |||||||||
Common shares held in treasury, at cost |
|
(1,025,839 |
) |
(852,742 |
) |
(852,419 |
) |
(845,708 |
) |
(845,472 |
) |
(844,887 |
) |
(823,586 |
) |
(787,362 |
) |
(549,912 |
) | |||||||||
Total Shareholders Equity |
|
5,168,878 |
|
5,348,794 |
|
5,020,316 |
|
4,839,456 |
|
4,592,074 |
|
4,435,899 |
|
4,403,030 |
|
4,289,035 |
|
4,476,786 |
| |||||||||
Total Liabilities and Shareholders Equity |
|
$ |
17,816,762 |
|
$ |
18,889,757 |
|
$ |
18,496,723 |
|
$ |
17,812,783 |
|
$ |
17,105,357 |
|
$ |
17,872,196 |
|
$ |
17,637,539 |
|
$ |
17,642,055 |
|
$ |
16,243,011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Common shares outstanding, net of treasury shares |
|
133,842,613 |
|
136,540,178 |
|
136,291,652 |
|
135,441,687 |
|
134,358,345 |
|
133,005,465 |
|
132,771,524 |
|
131,850,639 |
|
139,632,225 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Book value per common share (1) |
|
$ |
36.19 |
|
$ |
36.79 |
|
$ |
34.45 |
|
$ |
33.33 |
|
$ |
31.76 |
|
$ |
30.91 |
|
$ |
30.71 |
|
$ |
30.06 |
|
$ |
29.73 |
|
(1) 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 |
|
Year Ended |
| |||||||||||||||||||||||||||||
|
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
December 31, |
|
December 31, |
| |||||||||||
|
|
2012 |
|
2012 |
|
2012 |
|
2012 |
|
2011 |
|
2011 |
|
2011 |
|
2011 |
|
2010 |
|
2012 |
|
2011 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Comprehensive Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net income |
|
$ |
19,217 |
|
$ |
189,656 |
|
$ |
220,268 |
|
$ |
164,256 |
|
$ |
145,332 |
|
$ |
168,755 |
|
$ |
96,603 |
|
$ |
25,473 |
|
$ |
235,900 |
|
$ |
593,397 |
|
$ |
436,163 |
|
Other comprehensive income (loss), net of deferred income tax Unrealized holding gains (losses) arising during period |
|
(2,938 |
) |
164,733 |
|
18,060 |
|
94,863 |
|
40,476 |
|
(71,861 |
) |
84,862 |
|
40,370 |
|
(141,807 |
) |
274,718 |
|
93,847 |
| |||||||||||
Portion of other-than-temporary impairment losses recognized in other comprehensive income, net of deferred income tax |
|
(11 |
) |
(265 |
) |
(503 |
) |
(8 |
) |
(1,485 |
) |
(2,440 |
) |
(285 |
) |
(578 |
) |
(111 |
) |
(787 |
) |
(4,788 |
) | |||||||||||
Reclassification of net realized gains, net of income taxes, included in net income |
|
(39,897 |
) |
(47,411 |
) |
(43,792 |
) |
(27,511 |
) |
(29,785 |
) |
(30,707 |
) |
(47,682 |
) |
(20,176 |
) |
(43,414 |
) |
(158,611 |
) |
(128,350 |
) | |||||||||||
Foreign currency translation adjustments |
|
5,731 |
|
13,978 |
|
(15,136 |
) |
13,201 |
|
(1,859 |
) |
(12,000 |
) |
1,284 |
|
1,286 |
|
1,465 |
|
17,774 |
|
(11,289 |
) | |||||||||||
Other comprehensive income (loss) |
|
(37,115 |
) |
131,035 |
|
(41,371 |
) |
80,545 |
|
7,347 |
|
(117,008 |
) |
38,179 |
|
20,902 |
|
(183,867 |
) |
133,094 |
|
(50,580 |
) | |||||||||||
Comprehensive Income (Loss) |
|
$ |
(17,898 |
) |
$ |
320,691 |
|
$ |
178,897 |
|
$ |
244,801 |
|
$ |
152,679 |
|
$ |
51,747 |
|
$ |
134,782 |
|
$ |
46,375 |
|
$ |
52,033 |
|
$ |
726,491 |
|
$ |
385,583 |
|
Arch Capital Group Ltd. and Subsidiaries
Consolidated Statements of Changes in Shareholders Equity
(U.S. dollars in thousands)
|
|
Three Months Ended |
|
Year Ended |
| |||||||||||||||||||||||||||||
|
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
December 31, |
|
December 31, |
| |||||||||||
|
|
2012 |
|
2012 |
|
2012 |
|
2012 |
|
2011 |
|
2011 |
|
2011 |
|
2011 |
|
2010 |
|
2012 |
|
2011 |
| |||||||||||
Non-Cumulative Preferred Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance at beginning of period |
|
$ |
325,000 |
|
$ |
325,000 |
|
$ |
325,000 |
|
$ |
325,000 |
|
$ |
325,000 |
|
$ |
325,000 |
|
$ |
325,000 |
|
$ |
325,000 |
|
$ |
325,000 |
|
$ |
325,000 |
|
$ |
325,000 |
|
Shares issued - Series C |
|
|
|
|
|
325,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
325,000 |
|
|
| |||||||||||
Shares repurchased - Series A and B |
|
|
|
|
|
(325,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
(325,000 |
) |
|
| |||||||||||
Balance at end of period |
|
325,000 |
|
325,000 |
|
325,000 |
|
325,000 |
|
325,000 |
|
325,000 |
|
325,000 |
|
325,000 |
|
325,000 |
|
325,000 |
|
325,000 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Common Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance at beginning of period |
|
556 |
|
556 |
|
552 |
|
549 |
|
544 |
|
541 |
|
535 |
|
534 |
|
531 |
|
549 |
|
534 |
| |||||||||||
Common shares issued, net |
|
5 |
|
|
|
4 |
|
3 |
|
5 |
|
3 |
|
6 |
|
1 |
|
3 |
|
12 |
|
15 |
| |||||||||||
Balance at end of period |
|
561 |
|
556 |
|
556 |
|
552 |
|
549 |
|
544 |
|
541 |
|
535 |
|
534 |
|
561 |
|
549 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Additional Paid-in Capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance at beginning of period |
|
200,607 |
|
187,013 |
|
170,694 |
|
161,419 |
|
150,882 |
|
142,001 |
|
120,109 |
|
110,325 |
|
100,640 |
|
161,419 |
|
110,325 |
| |||||||||||
Common shares issued, net |
|
2,262 |
|
8 |
|
4,556 |
|
(3 |
) |
1,857 |
|
(2 |
) |
3,904 |
|
8 |
|
1,334 |
|
6,823 |
|
5,767 |
| |||||||||||
Issue costs on Series C preferred shares |
|
|
|
|
|
(9,398 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
(9,398 |
) |
|
| |||||||||||
Exercise of stock options |
|
6,599 |
|
2,797 |
|
2,971 |
|
1,851 |
|
2,926 |
|
3,007 |
|
2,245 |
|
4,127 |
|
2,716 |
|
14,218 |
|
12,305 |
| |||||||||||
Amortization of share-based compensation |
|
7,644 |
|
10,729 |
|
16,519 |
|
7,411 |
|
5,700 |
|
5,781 |
|
13,877 |
|
5,628 |
|
5,615 |
|
42,303 |
|
30,986 |
| |||||||||||
Other |
|
54 |
|
60 |
|
1,671 |
|
16 |
|
54 |
|
95 |
|
1,866 |
|
21 |
|
20 |
|
1,801 |
|
2,036 |
| |||||||||||
Balance at end of period |
|
217,166 |
|
200,607 |
|
187,013 |
|
170,694 |
|
161,419 |
|
150,882 |
|
142,001 |
|
120,109 |
|
110,325 |
|
217,166 |
|
161,419 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Retained Earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance at beginning of period |
|
5,351,241 |
|
5,167,069 |
|
4,954,450 |
|
4,796,655 |
|
4,657,784 |
|
4,495,490 |
|
4,405,348 |
|
4,386,336 |
|
4,156,897 |
|
4,796,655 |
|
4,386,336 |
| |||||||||||
Dividends declared on preferred shares |
|
(5,485 |
) |
(5,484 |
) |
(7,649 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(25,079 |
) |
(25,844 |
) | |||||||||||
Net income |
|
19,217 |
|
189,656 |
|
220,268 |
|
164,256 |
|
145,332 |
|
168,755 |
|
96,603 |
|
25,473 |
|
235,900 |
|
593,397 |
|
436,163 |
| |||||||||||
Balance at end of period |
|
5,364,973 |
|
5,351,241 |
|
5,167,069 |
|
4,954,450 |
|
4,796,655 |
|
4,657,784 |
|
4,495,490 |
|
4,405,348 |
|
4,386,336 |
|
5,364,973 |
|
4,796,655 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Accumulated Other Comprehensive Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance at beginning of period |
|
324,132 |
|
193,097 |
|
234,468 |
|
153,923 |
|
146,576 |
|
263,584 |
|
225,405 |
|
204,503 |
|
388,370 |
|
153,923 |
|
204,503 |
| |||||||||||
Change in unrealized appreciation (decline) in value of investments, net of deferred income tax |
|
(42,835 |
) |
117,322 |
|
(25,732 |
) |
67,352 |
|
10,691 |
|
(102,568 |
) |
37,180 |
|
20,194 |
|
(185,221 |
) |
116,107 |
|
(34,503 |
) | |||||||||||
Portion of other-than-temporary impairment losses recognized in other comprehensive income, net of deferred income tax |
|
(11 |
) |
(265 |
) |
(503 |
) |
(8 |
) |
(1,485 |
) |
(2,440 |
) |
(285 |
) |
(578 |
) |
(111 |
) |
(787 |
) |
(4,788 |
) | |||||||||||
Foreign currency translation adjustments, net of deferred income tax |
|
5,731 |
|
13,978 |
|
(15,136 |
) |
13,201 |
|
(1,859 |
) |
(12,000 |
) |
1,284 |
|
1,286 |
|
1,465 |
|
17,774 |
|
(11,289 |
) | |||||||||||
Balance at end of period |
|
287,017 |
|
324,132 |
|
193,097 |
|
234,468 |
|
153,923 |
|
146,576 |
|
263,584 |
|
225,405 |
|
204,503 |
|
287,017 |
|
153,923 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Common Shares Held in Treasury, at Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance at beginning of period |
|
(852,742 |
) |
(852,419 |
) |
(845,708 |
) |
(845,472 |
) |
(844,887 |
) |
(823,586 |
) |
(787,362 |
) |
(549,912 |
) |
(291,533 |
) |
(845,472 |
) |
(549,912 |
) | |||||||||||
Shares repurchased for treasury |
|
(173,097 |
) |
(323 |
) |
(6,711 |
) |
(236 |
) |
(585 |
) |
(21,301 |
) |
(36,224 |
) |
(237,450 |
) |
(258,379 |
) |
(180,367 |
) |
(295,560 |
) | |||||||||||
Balance at end of period |
|
(1,025,839 |
) |
(852,742 |
) |
(852,419 |
) |
(845,708 |
) |
(845,472 |
) |
(844,887 |
) |
(823,586 |
) |
(787,362 |
) |
(549,912 |
) |
(1,025,839 |
) |
(845,472 |
) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Shareholders Equity |
|
$ |
5,168,878 |
|
$ |
5,348,794 |
|
$ |
5,020,316 |
|
$ |
4,839,456 |
|
$ |
4,592,074 |
|
$ |
4,435,899 |
|
$ |
4,403,030 |
|
$ |
4,289,035 |
|
$ |
4,476,786 |
|
$ |
5,168,878 |
|
$ |
4,592,074 |
|
Arch Capital Group Ltd. and Subsidiaries
Consolidated Statements of Cash Flows
(U.S. dollars in thousands)
|
|
Three Months Ended |
|
Year Ended |
| |||||||||||||||||||||||||||||
|
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
December 31, |
|
December 31, |
| |||||||||||
|
|
2012 |
|
2012 |
|
2012 |
|
2012 |
|
2011 |
|
2011 |
|
2011 |
|
2011 |
|
2010 |
|
2012 |
|
2011 |
| |||||||||||
Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net income |
|
$ |
19,217 |
|
$ |
189,656 |
|
$ |
220,268 |
|
$ |
164,256 |
|
$ |
145,332 |
|
$ |
168,755 |
|
$ |
96,603 |
|
$ |
25,473 |
|
$ |
235,900 |
|
$ |
593,397 |
|
$ |
436,163 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net realized gains |
|
(56,844 |
) |
(61,950 |
) |
(36,681 |
) |
(44,072 |
) |
(12,940 |
) |
(29,615 |
) |
(48,886 |
) |
(22,481 |
) |
(78,261 |
) |
(199,547 |
) |
(113,922 |
) | |||||||||||
Net impairment losses included in earnings |
|
6,035 |
|
2,379 |
|
1,951 |
|
1,023 |
|
1,959 |
|
2,739 |
|
1,684 |
|
2,680 |
|
3,230 |
|
11,388 |
|
9,062 |
| |||||||||||
Equity in net income or loss of investment funds accounted for using the equity method and other income or loss |
|
(6,315 |
) |
(19,177 |
) |
(6,111 |
) |
(12,030 |
) |
20,776 |
|
31,734 |
|
18,945 |
|
(355 |
) |
(26,110 |
) |
(43,633 |
) |
71,100 |
| |||||||||||
Share-based compensation |
|
7,644 |
|
10,729 |
|
16,519 |
|
7,411 |
|
5,700 |
|
5,781 |
|
13,877 |
|
5,628 |
|
5,615 |
|
42,303 |
|
30,986 |
| |||||||||||
Changes in: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Reserve for losses and loss adjustment expenses, net of unpaid losses and loss adjustment expenses recoverable |
|
215,885 |
|
72,346 |
|
68,327 |
|
39,343 |
|
(59,998 |
) |
48,397 |
|
130,746 |
|
155,477 |
|
3,546 |
|
395,901 |
|
274,622 |
| |||||||||||
Unearned premiums, net of prepaid reinsurance premiums |
|
(166,338 |
) |
6,556 |
|
95,142 |
|
181,735 |
|
(162,490 |
) |
9,919 |
|
63,987 |
|
130,136 |
|
(149,242 |
) |
117,095 |
|
41,552 |
| |||||||||||
Premiums receivable |
|
84,474 |
|
68,881 |
|
(83,633 |
) |
(190,102 |
) |
106,818 |
|
82,200 |
|
(77,556 |
) |
(118,688 |
) |
157,034 |
|
(120,380 |
) |
(7,226 |
) | |||||||||||
Deferred acquisition costs, net |
|
16,851 |
|
(5,832 |
) |
(13,121 |
) |
(32,269 |
) |
24,823 |
|
1,438 |
|
(5,464 |
) |
(22,056 |
) |
16,684 |
|
(34,371 |
) |
(1,259 |
) | |||||||||||
Reinsurance balances payable |
|
23,569 |
|
(17,958 |
) |
40,310 |
|
(3,181 |
) |
8,896 |
|
(19,368 |
) |
23,109 |
|
(7,122 |
) |
3,277 |
|
42,740 |
|
5,515 |
| |||||||||||
Other liabilities |
|
19,385 |
|
24,190 |
|
(12,660 |
) |
10,134 |
|
30,620 |
|
5,925 |
|
(26,613 |
) |
33,366 |
|
(47,339 |
) |
41,049 |
|
43,298 |
| |||||||||||
Other items, net |
|
26,089 |
|
64,863 |
|
(37,864 |
) |
22,573 |
|
145 |
|
2,019 |
|
31,535 |
|
42,522 |
|
20,179 |
|
75,661 |
|
76,221 |
| |||||||||||
Net Cash Provided By Operating Activities |
|
189,652 |
|
334,683 |
|
252,447 |
|
144,821 |
|
109,641 |
|
309,924 |
|
221,967 |
|
224,580 |
|
144,513 |
|
921,603 |
|
866,112 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Purchases of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Fixed maturity investments |
|
(4,898,519 |
) |
(5,123,575 |
) |
(3,952,868 |
) |
(3,593,630 |
) |
(3,758,854 |
) |
(2,729,874 |
) |
(4,235,140 |
) |
(3,151,767 |
) |
(2,434,319 |
) |
(17,568,592 |
) |
(13,875,635 |
) | |||||||||||
Equity securities |
|
(53,078 |
) |
(105,618 |
) |
(76,500 |
) |
(33,803 |
) |
(69,962 |
) |
(94,115 |
) |
(159,157 |
) |
(89,790 |
) |
(226,677 |
) |
(268,999 |
) |
(413,024 |
) | |||||||||||
Other investments |
|
(299,741 |
) |
(314,065 |
) |
(147,076 |
) |
(239,167 |
) |
(220,048 |
) |
(166,449 |
) |
(114,588 |
) |
(92,777 |
) |
(147,127 |
) |
(1,000,049 |
) |
(593,862 |
) | |||||||||||
Proceeds from the sales of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Fixed maturity investments |
|
4,843,768 |
|
4,635,352 |
|
3,258,254 |
|
3,628,932 |
|
3,542,629 |
|
2,299,627 |
|
3,323,456 |
|
3,232,541 |
|
2,670,332 |
|
16,366,306 |
|
12,398,253 |
| |||||||||||
Equity securities |
|
49,200 |
|
65,932 |
|
122,625 |
|
75,860 |
|
58,386 |
|
111,467 |
|
147,334 |
|
52,316 |
|
14,522 |
|
313,617 |
|
369,503 |
| |||||||||||
Other investments |
|
114,537 |
|
112,129 |
|
105,815 |
|
111,149 |
|
147,243 |
|
191,767 |
|
119,780 |
|
84,967 |
|
133,211 |
|
443,630 |
|
543,757 |
| |||||||||||
Proceeds from redemptions and maturities of fixed maturities |
|
248,514 |
|
268,288 |
|
337,132 |
|
261,660 |
|
296,408 |
|
200,671 |
|
283,512 |
|
253,898 |
|
266,044 |
|
1,115,594 |
|
1,034,489 |
| |||||||||||
Net (purchases) sales of short-term investments |
|
113,780 |
|
246,746 |
|
32,837 |
|
(207,444 |
) |
(114,854 |
) |
(123,211 |
) |
459,091 |
|
(223,415 |
) |
(129,794 |
) |
185,919 |
|
(2,389 |
) | |||||||||||
Change in investment of securities lending collateral |
|
(16,650 |
) |
40,677 |
|
(24,159 |
) |
6,322 |
|
16,150 |
|
80,376 |
|
48,853 |
|
(125,904 |
) |
131,389 |
|
6,190 |
|
19,475 |
| |||||||||||
Purchase of business, net of cash acquired |
|
|
|
|
|
28,948 |
|
|
|
|
|
|
|
|
|
|
|
|
|
28,948 |
|
|
| |||||||||||
Purchases of furniture, equipment and other |
|
(4,638 |
) |
(3,686 |
) |
(3,710 |
) |
(6,498 |
) |
(3,461 |
) |
(3,178 |
) |
(4,266 |
) |
(8,082 |
) |
(1,553 |
) |
(18,532 |
) |
(18,987 |
) | |||||||||||
Net Cash Provided By (Used For) Investing Activities |
|
97,173 |
|
(177,820 |
) |
(318,702 |
) |
3,381 |
|
(106,363 |
) |
(232,919 |
) |
(131,125 |
) |
(68,013 |
) |
276,028 |
|
(395,968 |
) |
(538,420 |
) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Proceeds from issuance of Series C preferred shares, net |
|
|
|
(26 |
) |
315,789 |
|
|
|
|
|
|
|
|
|
|
|
|
|
315,763 |
|
|
| |||||||||||
Repurchase of Series A and B preferred shares |
|
|
|
|
|
(325,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
(325,000 |
) |
|
| |||||||||||
Purchases of common shares under share repurchase program . |
|
(172,056 |
) |
|
|
|
|
|
|
(3 |
) |
(20,833 |
) |
(29,552 |
) |
(237,173 |
) |
(258,150 |
) |
(172,056 |
) |
(287,561 |
) | |||||||||||
Proceeds from common shares issued, net |
|
5,429 |
|
1,256 |
|
(432 |
) |
780 |
|
3,245 |
|
1,609 |
|
(1,397 |
) |
2,875 |
|
4,693 |
|
7,033 |
|
6,332 |
| |||||||||||
Repayments of borrowings |
|
(186,291 |
) |
(50,804 |
) |
(3,910 |
) |
(69,863 |
) |
(3,513 |
) |
(4,225 |
) |
(3,919 |
) |
(3,695 |
) |
(31,072 |
) |
(310,868 |
) |
(15,352 |
) | |||||||||||
Change in securities lending collateral |
|
16,650 |
|
(40,677 |
) |
24,159 |
|
(6,322 |
) |
(16,150 |
) |
(80,376 |
) |
(48,853 |
) |
125,904 |
|
(131,389 |
) |
(6,190 |
) |
(19,475 |
) | |||||||||||
Other |
|
2,185 |
|
1,015 |
|
2,876 |
|
588 |
|
766 |
|
818 |
|
2,467 |
|
714 |
|
(893 |
) |
6,664 |
|
4,765 |
| |||||||||||
Preferred dividends paid |
|
(5,484 |
) |
(5,485 |
) |
(10,951 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(6,461 |
) |
(28,381 |
) |
(25,844 |
) | |||||||||||
Net Cash Provided By (Used For) Financing Activities |
|
(339,567 |
) |
(94,721 |
) |
2,531 |
|
(81,278 |
) |
(22,116 |
) |
(109,468 |
) |
(87,715 |
) |
(117,836 |
) |
(423,272 |
) |
(513,035 |
) |
(337,135 |
) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Effects of exchange rate changes on foreign currency cash |
|
1,343 |
|
4,906 |
|
(3,690 |
) |
4,183 |
|
642 |
|
(8,643 |
) |
997 |
|
5,406 |
|
(526 |
) |
6,742 |
|
(1,598 |
) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Increase (decrease) in cash |
|
(51,399 |
) |
67,048 |
|
(67,414 |
) |
71,107 |
|
(18,196 |
) |
(41,106 |
) |
4,124 |
|
44,137 |
|
(3,257 |
) |
19,342 |
|
(11,041 |
) | |||||||||||
Cash beginning of period |
|
422,440 |
|
355,392 |
|
422,806 |
|
351,699 |
|
369,895 |
|
411,001 |
|
406,877 |
|
362,740 |
|
365,997 |
|
351,699 |
|
362,740 |
| |||||||||||
Cash end of period |
|
$ |
371,041 |
|
$ |
422,440 |
|
$ |
355,392 |
|
$ |
422,806 |
|
$ |
351,699 |
|
$ |
369,895 |
|
$ |
411,001 |
|
$ |
406,877 |
|
$ |
362,740 |
|
$ |
371,041 |
|
$ |
351,699 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Income taxes paid (received), net |
|
$ |
(5,917 |
) |
$ |
(220 |
) |
$ |
1,548 |
|
$ |
2,788 |
|
$ |
(7,724 |
) |
$ |
3,662 |
|
$ |
2,296 |
|
$ |
3,670 |
|
$ |
3,140 |
|
$ |
(1,801 |
) |
$ |
1,904 |
|
Interest paid |
|
$ |
11,882 |
|
$ |
2,202 |
|
$ |
12,843 |
|
$ |
2,206 |
|
$ |
13,047 |
|
$ |
2,177 |
|
$ |
13,084 |
|
$ |
2,191 |
|
$ |
12,831 |
|
$ |
29,133 |
|
$ |
30,499 |
|
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; lenders products; national accounts casualty; professional liability; programs; property, energy, marine and aviation; surety; travel and accident; and other (including excess workers compensation, employers liability, alternative markets and accident and health 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 (including professional liability, executive assurance and healthcare business); marine and aviation; other specialty (including U.K. motor, trade credit, surety, workers compensation catastrophe, accident and health and other); property catastrophe; property excluding property catastrophe (losses on a single risk, both excess of loss and pro rata); and other (including mortgage, life, casualty clash and other).
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 December 31, 2012 and 2011
(U.S. dollars in thousands)
|
|
Three Months Ended |
|
Three Months Ended |
| ||||||||||||||
|
|
December 31, 2012 |
|
December 31, 2011 |
| ||||||||||||||
|
|
Insurance |
|
Reinsurance |
|
Total |
|
Insurance |
|
Reinsurance |
|
Total |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Gross premiums written (1) |
|
$ |
571,157 |
|
$ |
245,292 |
|
$ |
813,928 |
|
$ |
540,617 |
|
$ |
161,904 |
|
$ |
699,662 |
|
Net premiums written |
|
386,714 |
|
226,428 |
|
613,142 |
|
360,739 |
|
150,385 |
|
511,124 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net premiums earned |
|
$ |
455,668 |
|
$ |
323,813 |
|
$ |
779,481 |
|
$ |
422,667 |
|
$ |
250,525 |
|
$ |
673,192 |
|
Fee income |
|
532 |
|
5,132 |
|
5,664 |
|
729 |
|
253 |
|
982 |
| ||||||
Losses and loss adjustment expenses |
|
(383,106 |
) |
(239,400 |
) |
(622,506 |
) |
(282,769 |
) |
(95,298 |
) |
(378,067 |
) | ||||||
Acquisition expenses, net |
|
(75,392 |
) |
(58,176 |
) |
(133,568 |
) |
(73,975 |
) |
(49,364 |
) |
(123,339 |
) | ||||||
Other operating expenses |
|
(82,123 |
) |
(38,282 |
) |
(120,405 |
) |
(77,593 |
) |
(25,707 |
) |
(103,300 |
) | ||||||
Underwriting income (loss) |
|
$ |
(84,421 |
) |
$ |
(6,913 |
) |
(91,334 |
) |
$ |
(10,941 |
) |
$ |
80,409 |
|
69,468 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net investment income |
|
|
|
|
|
73,769 |
|
|
|
|
|
80,467 |
| ||||||
Net realized gains |
|
|
|
|
|
54,849 |
|
|
|
|
|
14,542 |
| ||||||
Net impairment losses recognized in earnings |
|
|
|
|
|
(6,035 |
) |
|
|
|
|
(1,959 |
) | ||||||
Equity in net income (loss) of investment funds accounted for using the equity method |
|
|
|
|
|
16,567 |
|
|
|
|
|
(14,702 |
) | ||||||
Other income (loss) |
|
|
|
|
|
(4,189 |
) |
|
|
|
|
(4,848 |
) | ||||||
Other expenses |
|
|
|
|
|
(7,346 |
) |
|
|
|
|
(6,777 |
) | ||||||
Interest expense |
|
|
|
|
|
(6,187 |
) |
|
|
|
|
(8,087 |
) | ||||||
Net foreign exchange (losses) gains |
|
|
|
|
|
(22,997 |
) |
|
|
|
|
12,613 |
| ||||||
Income before income taxes |
|
|
|
|
|
7,097 |
|
|
|
|
|
140,717 |
| ||||||
Income tax (expense) benefit |
|
|
|
|
|
12,120 |
|
|
|
|
|
4,615 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net income |
|
|
|
|
|
19,217 |
|
|
|
|
|
145,332 |
| ||||||
Preferred dividends |
|
|
|
|
|
(5,485 |
) |
|
|
|
|
(6,461 |
) | ||||||
Net income available to common shareholders |
|
|
|
|
|
$ |
13,732 |
|
|
|
|
|
$ |
138,871 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Underwriting Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Loss ratio |
|
84.1 |
% |
73.9 |
% |
79.9 |
% |
66.9 |
% |
38.0 |
% |
56.2 |
% | ||||||
Acquisition expense ratio (2) |
|
16.4 |
% |
18.0 |
% |
17.1 |
% |
17.3 |
% |
19.7 |
% |
18.2 |
% | ||||||
Other operating expense ratio |
|
18.0 |
% |
11.8 |
% |
15.4 |
% |
18.4 |
% |
10.3 |
% |
15.3 |
% | ||||||
Combined ratio |
|
118.5 |
% |
103.7 |
% |
112.4 |
% |
102.6 |
% |
68.0 |
% |
89.7 |
% | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net premiums written to gross premiums written |
|
67.7 |
% |
92.3 |
% |
75.3 |
% |
66.7 |
% |
92.9 |
% |
73.1 |
% |
(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 Year Ended December 31, 2012 and 2011
(U.S. dollars in thousands)
|
|
Year Ended |
|
Year Ended |
| ||||||||||||||
|
|
December 31, 2012 |
|
December 31, 2011 |
| ||||||||||||||
|
|
Insurance |
|
Reinsurance |
|
Total |
|
Insurance |
|
Reinsurance |
|
Total |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Gross premiums written (1) |
|
$ |
2,593,959 |
|
$ |
1,282,000 |
|
$ |
3,869,161 |
|
$ |
2,444,485 |
|
$ |
998,520 |
|
$ |
3,436,456 |
|
Net premiums written |
|
1,825,334 |
|
1,226,901 |
|
3,052,235 |
|
1,721,279 |
|
952,047 |
|
2,673,326 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net premiums earned |
|
$ |
1,800,343 |
|
$ |
1,134,797 |
|
$ |
2,935,140 |
|
$ |
1,679,047 |
|
$ |
952,768 |
|
$ |
2,631,815 |
|
Fee income |
|
2,335 |
|
5,755 |
|
8,090 |
|
2,870 |
|
559 |
|
3,429 |
| ||||||
Losses and loss adjustment expenses |
|
(1,283,841 |
) |
(577,436 |
) |
(1,861,277 |
) |
(1,172,742 |
) |
(554,811 |
) |
(1,727,553 |
) | ||||||
Acquisition expenses, net |
|
(298,983 |
) |
(209,901 |
) |
(508,884 |
) |
(278,696 |
) |
(184,241 |
) |
(462,937 |
) | ||||||
Other operating expenses |
|
(307,489 |
) |
(122,546 |
) |
(430,035 |
) |
(307,797 |
) |
(92,945 |
) |
(400,742 |
) | ||||||
Underwriting income (loss) |
|
$ |
(87,635 |
) |
$ |
230,669 |
|
143,034 |
|
$ |
(77,318 |
) |
$ |
121,330 |
|
44,012 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net investment income |
|
|
|
|
|
294,895 |
|
|
|
|
|
338,198 |
| ||||||
Net realized gains |
|
|
|
|
|
194,228 |
|
|
|
|
|
110,646 |
| ||||||
Net impairment losses recognized in earnings |
|
|
|
|
|
(11,388 |
) |
|
|
|
|
(9,062 |
) | ||||||
Equity in net income (loss) of investment funds accounted for using the equity method |
|
|
|
|
|
73,510 |
|
|
|
|
|
(9,605 |
) | ||||||
Other income (loss) |
|
|
|
|
|
(12,094 |
) |
|
|
|
|
(2,114 |
) | ||||||
Other expenses |
|
|
|
|
|
(35,318 |
) |
|
|
|
|
(31,380 |
) | ||||||
Interest expense |
|
|
|
|
|
(28,525 |
) |
|
|
|
|
(31,691 |
) | ||||||
Net foreign exchange (losses) gains |
|
|
|
|
|
(28,955 |
) |
|
|
|
|
17,366 |
| ||||||
Income before income taxes |
|
|
|
|
|
589,387 |
|
|
|
|
|
426,370 |
| ||||||
Income tax (expense) benefit |
|
|
|
|
|
4,010 |
|
|
|
|
|
9,793 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net income |
|
|
|
|
|
593,397 |
|
|
|
|
|
436,163 |
| ||||||
Preferred dividends |
|
|
|
|
|
(25,079 |
) |
|
|
|
|
(25,844 |
) | ||||||
Net income available to common shareholders |
|
|
|
|
|
$ |
568,318 |
|
|
|
|
|
$ |
410,319 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Underwriting Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Loss ratio |
|
71.3 |
% |
50.9 |
% |
63.4 |
% |
69.8 |
% |
58.2 |
% |
65.6 |
% | ||||||
Acquisition expense ratio (2) |
|
16.5 |
% |
18.5 |
% |
17.3 |
% |
16.4 |
% |
19.3 |
% |
17.5 |
% | ||||||
Other operating expense ratio |
|
17.1 |
% |
10.8 |
% |
14.7 |
% |
18.3 |
% |
9.8 |
% |
15.2 |
% | ||||||
Combined ratio |
|
104.9 |
% |
80.2 |
% |
95.4 |
% |
104.5 |
% |
87.3 |
% |
98.3 |
% | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net premiums written to gross premiums written |
|
70.4 |
% |
95.7 |
% |
78.9 |
% |
70.4 |
% |
95.3 |
% |
77.8 |
% |
(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 |
|
Year Ended |
| ||||||||||||||||
|
|
December 31, |
|
December 31, |
| ||||||||||||||||
|
|
2012 |
|
2011 |
|
2012 |
|
2011 |
| ||||||||||||
|
|
Amount |
|
% of Total |
|
Amount |
|
% of Total |
|
Amount |
|
% of Total |
|
Amount |
|
% of Total |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net premiums written |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Programs |
|
$ |
80,201 |
|
20.7 |
|
$ |
62,874 |
|
17.4 |
|
$ |
352,867 |
|
19.3 |
|
$ |
297,985 |
|
17.3 |
|
Property, energy, marine and aviation |
|
36,215 |
|
9.4 |
|
41,244 |
|
11.4 |
|
294,690 |
|
16.1 |
|
335,589 |
|
19.5 |
| ||||
Professional liability |
|
56,023 |
|
14.5 |
|
54,085 |
|
15.0 |
|
260,705 |
|
14.3 |
|
237,860 |
|
13.8 |
| ||||
Executive assurance |
|
59,262 |
|
15.3 |
|
59,035 |
|
16.4 |
|
250,904 |
|
13.7 |
|
231,405 |
|
13.4 |
| ||||
Construction |
|
23,283 |
|
6.0 |
|
22,912 |
|
6.4 |
|
130,201 |
|
7.1 |
|
120,405 |
|
7.0 |
| ||||
Casualty |
|
31,034 |
|
8.0 |
|
28,599 |
|
7.9 |
|
112,307 |
|
6.2 |
|
114,235 |
|
6.6 |
| ||||
Lenders products |
|
23,838 |
|
6.2 |
|
21,543 |
|
6.0 |
|
86,987 |
|
4.8 |
|
86,694 |
|
5.0 |
| ||||
National accounts |
|
18,047 |
|
4.7 |
|
19,110 |
|
5.3 |
|
80,929 |
|
4.4 |
|
80,973 |
|
4.7 |
| ||||
Travel and accident |
|
15,342 |
|
4.0 |
|
13,751 |
|
3.8 |
|
80,489 |
|
4.4 |
|
71,940 |
|
4.2 |
| ||||
Surety |
|
13,456 |
|
3.5 |
|
12,734 |
|
3.5 |
|
53,271 |
|
2.9 |
|
42,475 |
|
2.5 |
| ||||
Healthcare |
|
9,498 |
|
2.5 |
|
9,303 |
|
2.6 |
|
36,814 |
|
2.0 |
|
35,652 |
|
2.1 |
| ||||
Other (1) |
|
20,515 |
|
5.2 |
|
15,549 |
|
4.3 |
|
85,170 |
|
4.8 |
|
66,066 |
|
3.9 |
| ||||
Total |
|
$ |
386,714 |
|
100.0 |
|
$ |
360,739 |
|
100.0 |
|
$ |
1,825,334 |
|
100.0 |
|
$ |
1,721,279 |
|
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net premiums earned |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Programs |
|
$ |
87,815 |
|
19.3 |
|
$ |
75,085 |
|
17.8 |
|
$ |
326,380 |
|
18.1 |
|
$ |
287,598 |
|
17.1 |
|
Property, energy, marine and aviation |
|
79,135 |
|
17.4 |
|
79,979 |
|
18.9 |
|
313,081 |
|
17.4 |
|
322,510 |
|
19.2 |
| ||||
Professional liability |
|
60,829 |
|
13.3 |
|
62,467 |
|
14.8 |
|
258,401 |
|
14.4 |
|
252,037 |
|
15.0 |
| ||||
Executive assurance |
|
60,570 |
|
13.3 |
|
56,782 |
|
13.4 |
|
241,791 |
|
13.4 |
|
228,623 |
|
13.6 |
| ||||
Construction |
|
33,537 |
|
7.4 |
|
28,569 |
|
6.8 |
|
129,446 |
|
7.2 |
|
112,764 |
|
6.7 |
| ||||
Casualty |
|
29,255 |
|
6.4 |
|
28,093 |
|
6.6 |
|
113,597 |
|
6.3 |
|
111,654 |
|
6.6 |
| ||||
Lenders products |
|
22,003 |
|
4.8 |
|
18,796 |
|
4.4 |
|
95,838 |
|
5.3 |
|
75,291 |
|
4.5 |
| ||||
National accounts |
|
20,301 |
|
4.5 |
|
20,572 |
|
4.9 |
|
79,771 |
|
4.4 |
|
79,542 |
|
4.7 |
| ||||
Travel and accident |
|
18,850 |
|
4.1 |
|
15,840 |
|
3.7 |
|
78,050 |
|
4.3 |
|
69,945 |
|
4.2 |
| ||||
Surety |
|
13,301 |
|
2.9 |
|
11,847 |
|
2.8 |
|
47,302 |
|
2.6 |
|
41,119 |
|
2.4 |
| ||||
Healthcare |
|
9,239 |
|
2.0 |
|
8,825 |
|
2.1 |
|
36,779 |
|
2.0 |
|
35,906 |
|
2.1 |
| ||||
Other (1) |
|
20,833 |
|
4.6 |
|
15,812 |
|
3.8 |
|
79,907 |
|
4.6 |
|
62,058 |
|
3.9 |
| ||||
Total |
|
$ |
455,668 |
|
100.0 |
|
$ |
422,667 |
|
100.0 |
|
$ |
1,800,343 |
|
100.0 |
|
$ |
1,679,047 |
|
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net premiums written by client location |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
United States |
|
$ |
289,675 |
|
74.9 |
|
$ |
265,586 |
|
73.6 |
|
$ |
1,314,577 |
|
72.0 |
|
$ |
1,208,007 |
|
70.2 |
|
Europe |
|
53,993 |
|
14.0 |
|
48,820 |
|
13.5 |
|
271,278 |
|
14.9 |
|
273,578 |
|
15.9 |
| ||||
Asia and Pacific |
|
18,465 |
|
4.8 |
|
21,700 |
|
6.0 |
|
120,492 |
|
6.6 |
|
119,523 |
|
6.9 |
| ||||
Other |
|
24,581 |
|
6.3 |
|
24,633 |
|
6.9 |
|
118,987 |
|
6.5 |
|
120,171 |
|
7.0 |
| ||||
Total |
|
$ |
386,714 |
|
100.0 |
|
$ |
360,739 |
|
100.0 |
|
$ |
1,825,334 |
|
100.0 |
|
$ |
1,721,279 |
|
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net premiums written by underwriting location |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
United States |
|
$ |
277,940 |
|
71.9 |
|
$ |
254,463 |
|
70.5 |
|
$ |
1,254,623 |
|
68.7 |
|
$ |
1,153,835 |
|
67.0 |
|
Europe |
|
80,685 |
|
20.9 |
|
78,323 |
|
21.7 |
|
472,132 |
|
25.9 |
|
463,855 |
|
26.9 |
| ||||
Other |
|
28,089 |
|
7.2 |
|
27,953 |
|
7.8 |
|
98,579 |
|
5.4 |
|
103,589 |
|
6.1 |
| ||||
Total |
|
$ |
386,714 |
|
100.0 |
|
$ |
360,739 |
|
100.0 |
|
$ |
1,825,334 |
|
100.0 |
|
$ |
1,721,279 |
|
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 |
|
Year Ended |
| |||||||||||||||||||||||||||||
|
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
December 31, |
|
December 31, |
| |||||||||||
|
|
2012 |
|
2012 |
|
2012 |
|
2012 |
|
2011 |
|
2011 |
|
2011 |
|
2011 |
|
2010 |
|
2012 |
|
2011 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Gross premiums written |
|
$ |
571,157 |
|
$ |
658,599 |
|
$ |
676,090 |
|
$ |
688,113 |
|
$ |
540,617 |
|
$ |
634,280 |
|
$ |
635,005 |
|
$ |
634,583 |
|
$ |
527,783 |
|
$ |
2,593,959 |
|
$ |
2,444,485 |
|
Net premiums written |
|
386,714 |
|
483,356 |
|
464,584 |
|
490,680 |
|
360,739 |
|
472,986 |
|
438,263 |
|
449,291 |
|
351,841 |
|
1,825,334 |
|
1,721,279 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net premiums earned |
|
$ |
455,668 |
|
$ |
456,341 |
|
$ |
446,594 |
|
$ |
441,740 |
|
$ |
422,667 |
|
$ |
437,970 |
|
$ |
410,819 |
|
$ |
407,591 |
|
$ |
404,275 |
|
$ |
1,800,343 |
|
$ |
1,679,047 |
|
Fee income |
|
532 |
|
645 |
|
628 |
|
530 |
|
729 |
|
661 |
|
702 |
|
778 |
|
761 |
|
2,335 |
|
2,870 |
| |||||||||||
Losses and loss adjustment expenses |
|
(383,106 |
) |
(307,155 |
) |
(290,416 |
) |
(303,164 |
) |
(282,769 |
) |
(290,608 |
) |
(301,642 |
) |
(297,723 |
) |
(264,848 |
) |
(1,283,841 |
) |
(1,172,742 |
) | |||||||||||
Acquisition expenses, net |
|
(75,392 |
) |
(73,663 |
) |
(76,058 |
) |
(73,870 |
) |
(73,975 |
) |
(76,763 |
) |
(66,543 |
) |
(61,415 |
) |
(63,102 |
) |
(298,983 |
) |
(278,696 |
) | |||||||||||
Other operating expenses |
|
(82,123 |
) |
(75,379 |
) |
(76,617 |
) |
(73,370 |
) |
(77,593 |
) |
(77,801 |
) |
(77,774 |
) |
(74,629 |
) |
(82,535 |
) |
(307,489 |
) |
(307,797 |
) | |||||||||||
Underwriting income (loss) |
|
$ |
(84,421 |
) |
$ |
789 |
|
$ |
4,131 |
|
$ |
(8,134 |
) |
$ |
(10,941 |
) |
$ |
(6,541 |
) |
$ |
(34,438 |
) |
$ |
(25,398 |
) |
$ |
(5,449 |
) |
$ |
(87,635 |
) |
$ |
(77,318 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Underwriting Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Loss ratio |
|
84.1 |
% |
67.3 |
% |
65.0 |
% |
68.6 |
% |
66.9 |
% |
66.4 |
% |
73.4 |
% |
73.0 |
% |
65.5 |
% |
71.3 |
% |
69.8 |
% | |||||||||||
Acquisition expense ratio (1) |
|
16.4 |
% |
16.0 |
% |
16.9 |
% |
16.6 |
% |
17.3 |
% |
17.4 |
% |
16.0 |
% |
14.9 |
% |
15.4 |
% |
16.5 |
% |
16.4 |
% | |||||||||||
Other operating expense ratio |
|
18.0 |
% |
16.5 |
% |
17.2 |
% |
16.6 |
% |
18.4 |
% |
17.8 |
% |
18.9 |
% |
18.3 |
% |
20.4 |
% |
17.1 |
% |
18.3 |
% | |||||||||||
Combined ratio |
|
118.5 |
% |
99.8 |
% |
99.1 |
% |
101.8 |
% |
102.6 |
% |
101.6 |
% |
108.3 |
% |
106.2 |
% |
101.3 |
% |
104.9 |
% |
104.5 |
% | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net premiums written |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Programs |
|
$ |
80,201 |
|
$ |
98,052 |
|
$ |
92,998 |
|
$ |
81,616 |
|
$ |
62,874 |
|
$ |
79,086 |
|
$ |
81,629 |
|
$ |
74,396 |
|
$ |
60,969 |
|
$ |
352,867 |
|
$ |
297,985 |
|
Property, energy, marine and aviation |
|
36,215 |
|
92,266 |
|
86,390 |
|
79,819 |
|
41,244 |
|
114,631 |
|
103,296 |
|
76,418 |
|
44,258 |
|
294,690 |
|
335,589 |
| |||||||||||
Professional liability |
|
56,023 |
|
68,923 |
|
65,198 |
|
70,561 |
|
54,085 |
|
66,484 |
|
57,906 |
|
59,385 |
|
51,559 |
|
260,705 |
|
237,860 |
| |||||||||||
Executive assurance |
|
59,262 |
|
63,059 |
|
60,205 |
|
68,378 |
|
59,035 |
|
62,328 |
|
53,974 |
|
56,068 |
|
54,448 |
|
250,904 |
|
231,405 |
| |||||||||||
Construction |
|
23,283 |
|
23,481 |
|
49,784 |
|
33,653 |
|
22,912 |
|
23,576 |
|
42,408 |
|
31,509 |
|
20,014 |
|
130,201 |
|
120,405 |
| |||||||||||
Casualty |
|
31,034 |
|
23,662 |
|
30,638 |
|
26,973 |
|
28,599 |
|
30,563 |
|
24,939 |
|
30,134 |
|
27,389 |
|
112,307 |
|
114,235 |
| |||||||||||
Lenders products |
|
23,838 |
|
20,257 |
|
20,477 |
|
22,415 |
|
21,543 |
|
22,551 |
|
21,526 |
|
21,074 |
|
30,942 |
|
86,987 |
|
86,694 |
| |||||||||||
National accounts |
|
18,047 |
|
22,483 |
|
4,961 |
|
35,438 |
|
19,110 |
|
17,275 |
|
4,397 |
|
40,191 |
|
14,024 |
|
80,929 |
|
80,973 |
| |||||||||||
Travel and accident |
|
15,342 |
|
22,017 |
|
20,294 |
|
22,836 |
|
13,751 |
|
17,404 |
|
19,284 |
|
21,501 |
|
14,486 |
|
80,489 |
|
71,940 |
| |||||||||||
Surety |
|
13,456 |
|
14,958 |
|
12,723 |
|
12,134 |
|
12,734 |
|
10,389 |
|
9,618 |
|
9,734 |
|
7,918 |
|
53,271 |
|
42,475 |
| |||||||||||
Healthcare |
|
9,498 |
|
8,722 |
|
7,959 |
|
10,635 |
|
9,303 |
|
8,810 |
|
8,422 |
|
9,117 |
|
10,290 |
|
36,814 |
|
35,652 |
| |||||||||||
Other (2) |
|
20,515 |
|
25,476 |
|
12,957 |
|
26,222 |
|
15,549 |
|
19,889 |
|
10,864 |
|
19,764 |
|
15,544 |
|
85,170 |
|
66,066 |
| |||||||||||
Total |
|
$ |
386,714 |
|
$ |
483,356 |
|
$ |
464,584 |
|
$ |
490,680 |
|
$ |
360,739 |
|
$ |
472,986 |
|
$ |
438,263 |
|
$ |
449,291 |
|
$ |
351,841 |
|
$ |
1,825,334 |
|
$ |
1,721,279 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net premiums earned |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Programs |
|
$ |
87,815 |
|
$ |
83,978 |
|
$ |
80,589 |
|
$ |
73,998 |
|
$ |
75,085 |
|
$ |
73,561 |
|
$ |
71,934 |
|
$ |
67,018 |
|
$ |
69,462 |
|
$ |
326,380 |
|
$ |
287,598 |
|
Property, energy, marine and aviation |
|
79,135 |
|
77,862 |
|
77,590 |
|
78,494 |
|
79,979 |
|
92,288 |
|
76,644 |
|
73,599 |
|
77,811 |
|
313,081 |
|
322,510 |
| |||||||||||
Professional liability |
|
60,829 |
|
66,299 |
|
68,017 |
|
63,256 |
|
62,467 |
|
64,403 |
|
57,767 |
|
67,400 |
|
63,152 |
|
258,401 |
|
252,037 |
| |||||||||||
Executive assurance |
|
60,570 |
|
61,599 |
|
60,856 |
|
58,766 |
|
56,782 |
|
56,783 |
|
60,488 |
|
54,570 |
|
55,270 |
|
241,791 |
|
228,623 |
| |||||||||||
Construction |
|
33,537 |
|
32,409 |
|
31,692 |
|
31,808 |
|
28,569 |
|
28,590 |
|
27,214 |
|
28,391 |
|
26,837 |
|
129,446 |
|
112,764 |
| |||||||||||
Casualty |
|
29,255 |
|
27,175 |
|
28,102 |
|
29,065 |
|
28,093 |
|
30,305 |
|
24,829 |
|
28,427 |
|
25,893 |
|
113,597 |
|
111,654 |
| |||||||||||
Lenders products |
|
22,003 |
|
20,271 |
|
21,411 |
|
32,153 |
|
18,796 |
|
18,293 |
|
19,966 |
|
18,236 |
|
19,617 |
|
95,838 |
|
75,291 |
| |||||||||||
National accounts |
|
20,301 |
|
21,919 |
|
18,415 |
|
19,136 |
|
20,572 |
|
19,642 |
|
18,166 |
|
21,162 |
|
17,360 |
|
79,771 |
|
79,542 |
| |||||||||||
Travel and accident |
|
18,850 |
|
21,826 |
|
20,661 |
|
16,713 |
|
15,840 |
|
19,051 |
|
19,455 |
|
15,599 |
|
15,705 |
|
78,050 |
|
69,945 |
| |||||||||||
Surety |
|
13,301 |
|
12,643 |
|
10,798 |
|
10,560 |
|
11,847 |
|
10,091 |
|
9,402 |
|
9,779 |
|
9,810 |
|
47,302 |
|
41,119 |
| |||||||||||
Healthcare |
|
9,239 |
|
9,565 |
|
9,077 |
|
8,898 |
|
8,825 |
|
9,340 |
|
9,089 |
|
8,652 |
|
9,701 |
|
36,779 |
|
35,906 |
| |||||||||||
Other (2) |
|
20,833 |
|
20,795 |
|
19,386 |
|
18,893 |
|
15,812 |
|
15,623 |
|
15,865 |
|
14,758 |
|
13,657 |
|
79,907 |
|
62,058 |
| |||||||||||
Total |
|
$ |
455,668 |
|
$ |
456,341 |
|
$ |
446,594 |
|
$ |
441,740 |
|
$ |
422,667 |
|
$ |
437,970 |
|
$ |
410,819 |
|
$ |
407,591 |
|
$ |
404,275 |
|
$ |
1,800,343 |
|
$ |
1,679,047 |
|
(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 |
|
Year Ended |
| ||||||||||||||||
|
|
December 31, |
|
December 31, |
| ||||||||||||||||
|
|
2012 |
|
2011 |
|
2012 |
|
2011 |
| ||||||||||||
|
|
Amount |
|
% of Total |
|
Amount |
|
% of Total |
|
Amount |
|
% of Total |
|
Amount |
|
% of Total |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net premiums written |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Other specialty (1) |
|
$ |
59,827 |
|
26.4 |
|
$ |
48,555 |
|
32.3 |
|
$ |
297,962 |
|
24.3 |
|
$ |
211,019 |
|
22.2 |
|
Property catastrophe |
|
17,683 |
|
7.8 |
|
11,636 |
|
7.7 |
|
283,677 |
|
23.1 |
|
246,793 |
|
25.9 |
| ||||
Property excluding property catastrophe (2) |
|
55,929 |
|
24.7 |
|
36,430 |
|
24.2 |
|
265,783 |
|
21.7 |
|
226,013 |
|
23.7 |
| ||||
Casualty (3) |
|
50,132 |
|
22.1 |
|
34,968 |
|
23.3 |
|
216,067 |
|
17.6 |
|
181,957 |
|
19.1 |
| ||||
Marine and aviation |
|
21,038 |
|
9.3 |
|
16,130 |
|
10.7 |
|
84,649 |
|
6.9 |
|
77,309 |
|
8.1 |
| ||||
Other (4) |
|
21,819 |
|
9.7 |
|
2,666 |
|
1.8 |
|
78,763 |
|
6.4 |
|
8,956 |
|
1.0 |
| ||||
Total |
|
$ |
226,428 |
|
100.0 |
|
$ |
150,385 |
|
100.0 |
|
$ |
1,226,901 |
|
100.0 |
|
$ |
952,047 |
|
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net premiums earned |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Other specialty (1) |
|
$ |
92,120 |
|
28.4 |
|
$ |
60,891 |
|
24.3 |
|
$ |
303,805 |
|
26.8 |
|
$ |
189,093 |
|
19.8 |
|
Property catastrophe |
|
80,271 |
|
24.8 |
|
62,408 |
|
24.9 |
|
280,185 |
|
24.7 |
|
238,748 |
|
25.1 |
| ||||
Property excluding property catastrophe (2) |
|
70,414 |
|
21.7 |
|
60,607 |
|
24.2 |
|
254,338 |
|
22.4 |
|
243,702 |
|
25.6 |
| ||||
Casualty (3) |
|
51,082 |
|
15.8 |
|
47,317 |
|
18.9 |
|
194,259 |
|
17.1 |
|
196,370 |
|
20.6 |
| ||||
Marine and aviation |
|
18,643 |
|
5.8 |
|
17,361 |
|
6.9 |
|
76,145 |
|
6.7 |
|
77,819 |
|
8.2 |
| ||||
Other (4) |
|
11,283 |
|
3.5 |
|
1,941 |
|
0.8 |
|
26,065 |
|
2.3 |
|
7,036 |
|
0.7 |
| ||||
Total |
|
$ |
323,813 |
|
100.0 |
|
$ |
250,525 |
|
100.0 |
|
$ |
1,134,797 |
|
100.0 |
|
$ |
952,768 |
|
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net premiums written |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Pro rata |
|
$ |
159,439 |
|
70.4 |
|
$ |
105,909 |
|
70.4 |
|
$ |
598,874 |
|
48.8 |
|
$ |
416,321 |
|
43.7 |
|
Excess of loss |
|
66,989 |
|
29.6 |
|
44,476 |
|
29.6 |
|
628,027 |
|
51.2 |
|
535,726 |
|
56.3 |
| ||||
Total |
|
$ |
226,428 |
|
100.0 |
|
$ |
150,385 |
|
100.0 |
|
$ |
1,226,901 |
|
100.0 |
|
$ |
952,047 |
|
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net premiums earned |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Pro rata |
|
$ |
150,787 |
|
46.6 |
|
$ |
114,600 |
|
45.7 |
|
$ |
515,764 |
|
45.4 |
|
$ |
435,311 |
|
45.7 |
|
Excess of loss |
|
173,026 |
|
53.4 |
|
135,925 |
|
54.3 |
|
619,033 |
|
54.6 |
|
517,457 |
|
54.3 |
| ||||
Total |
|
$ |
323,813 |
|
100.0 |
|
$ |
250,525 |
|
100.0 |
|
$ |
1,134,797 |
|
100.0 |
|
$ |
952,768 |
|
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net premiums written by client location |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
United States |
|
$ |
106,769 |
|
47.2 |
|
$ |
60,860 |
|
40.5 |
|
$ |
629,614 |
|
51.3 |
|
$ |
512,319 |
|
53.8 |
|
Europe |
|
61,464 |
|
27.1 |
|
34,835 |
|
23.2 |
|
341,674 |
|
27.8 |
|
250,809 |
|
26.3 |
| ||||
Asia and Pacific |
|
18,814 |
|
8.3 |
|
13,413 |
|
8.9 |
|
104,398 |
|
8.5 |
|
75,590 |
|
7.9 |
| ||||
Bermuda |
|
21,505 |
|
9.5 |
|
16,054 |
|
10.7 |
|
72,864 |
|
5.9 |
|
60,246 |
|
6.3 |
| ||||
Other |
|
17,876 |
|
7.9 |
|
25,223 |
|
16.7 |
|
78,351 |
|
6.5 |
|
53,083 |
|
5.7 |
| ||||
Total |
|
$ |
226,428 |
|
100.0 |
|
$ |
150,385 |
|
100.0 |
|
$ |
1,226,901 |
|
100.0 |
|
$ |
952,047 |
|
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net premiums written by underwriting location |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Bermuda |
|
$ |
90,880 |
|
40.1 |
|
$ |
82,087 |
|
54.6 |
|
$ |
595,999 |
|
48.6 |
|
$ |
531,254 |
|
55.8 |
|
United States |
|
84,278 |
|
37.2 |
|
55,394 |
|
36.8 |
|
379,239 |
|
30.9 |
|
323,731 |
|
34.0 |
| ||||
Ireland |
|
44,596 |
|
19.7 |
|
9,149 |
|
6.1 |
|
223,861 |
|
18.2 |
|
83,892 |
|
8.8 |
| ||||
Other |
|
6,674 |
|
3.0 |
|
3,755 |
|
2.5 |
|
27,802 |
|
2.3 |
|
13,170 |
|
1.4 |
| ||||
Total |
|
$ |
226,428 |
|
100.0 |
|
$ |
150,385 |
|
100.0 |
|
$ |
1,226,901 |
|
100.0 |
|
$ |
952,047 |
|
100.0 |
|
(1) Includes U.K. motor, trade credit, surety, workers compensation catastrophe, accident and health and other.
(2) Includes facultative business.
(3) Includes professional liability, executive assurance and healthcare business.
(4) Includes mortgage, life, casualty clash and other.
Arch Capital Group Ltd. and Subsidiaries
Segment Information Reinsurance Segment
(U.S. dollars in thousands)
|
|
Three Months Ended |
|
Year Ended |
| |||||||||||||||||||||||||||||
|
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
December 31, |
|
December 31, |
| |||||||||||
|
|
2012 |
|
2012 |
|
2012 |
|
2012 |
|
2011 |
|
2011 |
|
2011 |
|
2011 |
|
2010 |
|
2012 |
|
2011 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Gross premiums written |
|
$ |
245,292 |
|
$ |
279,751 |
|
$ |
376,981 |
|
$ |
379,976 |
|
$ |
161,904 |
|
$ |
227,837 |
|
$ |
277,766 |
|
$ |
331,013 |
|
$ |
139,015 |
|
$ |
1,282,000 |
|
$ |
998,520 |
|
Net premiums written |
|
226,428 |
|
271,893 |
|
355,649 |
|
372,931 |
|
150,385 |
|
218,395 |
|
268,280 |
|
314,987 |
|
131,070 |
|
1,226,901 |
|
952,047 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net premiums earned |
|
$ |
323,813 |
|
$ |
292,350 |
|
$ |
280,062 |
|
$ |
238,572 |
|
$ |
250,525 |
|
$ |
244,079 |
|
$ |
232,060 |
|
$ |
226,104 |
|
$ |
227,871 |
|
$ |
1,134,797 |
|
$ |
952,768 |
|
Fee income |
|
5,132 |
|
432 |
|
178 |
|
13 |
|
253 |
|
187 |
|
82 |
|
37 |
|
2,053 |
|
5,755 |
|
559 |
| |||||||||||
Losses and loss adjustment expenses |
|
(239,400 |
) |
(136,716 |
) |
(109,277 |
) |
(92,043 |
) |
(95,298 |
) |
(133,376 |
) |
(129,980 |
) |
(196,157 |
) |
(102,478 |
) |
(577,436 |
) |
(554,811 |
) | |||||||||||
Acquisition expenses, net |
|
(58,176 |
) |
(54,402 |
) |
(52,231 |
) |
(45,092 |
) |
(49,364 |
) |
(43,442 |
) |
(44,096 |
) |
(47,339 |
) |
(41,722 |
) |
(209,901 |
) |
(184,241 |
) | |||||||||||
Other operating expenses |
|
(38,282 |
) |
(29,001 |
) |
(29,140 |
) |
(26,123 |
) |
(25,707 |
) |
(22,340 |
) |
(23,671 |
) |
(21,227 |
) |
(29,693 |
) |
(122,546 |
) |
(92,945 |
) | |||||||||||
Underwriting income (loss) |
|
$ |
(6,913 |
) |
$ |
72,663 |
|
$ |
89,592 |
|
$ |
75,327 |
|
$ |
80,409 |
|
$ |
45,108 |
|
$ |
34,395 |
|
$ |
(38,582 |
) |
$ |
56,031 |
|
$ |
230,669 |
|
$ |
121,330 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Underwriting Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Loss ratio |
|
73.9 |
% |
46.8 |
% |
39.0 |
% |
38.6 |
% |
38.0 |
% |
54.6 |
% |
56.0 |
% |
86.8 |
% |
45.0 |
% |
50.9 |
% |
58.2 |
% | |||||||||||
Acquisition expense ratio |
|
18.0 |
% |
18.6 |
% |
18.6 |
% |
18.9 |
% |
19.7 |
% |
17.8 |
% |
19.0 |
% |
20.9 |
% |
18.3 |
% |
18.5 |
% |
19.3 |
% | |||||||||||
Other operating expense ratio |
|
11.8 |
% |
9.9 |
% |
10.4 |
% |
10.9 |
% |
10.3 |
% |
9.2 |
% |
10.2 |
% |
9.4 |
% |
13.0 |
% |
10.8 |
% |
9.8 |
% | |||||||||||
Combined ratio |
|
103.7 |
% |
75.3 |
% |
68.0 |
% |
68.4 |
% |
68.0 |
% |
81.6 |
% |
85.2 |
% |
117.1 |
% |
76.3 |
% |
80.2 |
% |
87.3 |
% | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net premiums written |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Other specialty (1) |
|
$ |
59,827 |
|
$ |
70,412 |
|
$ |
72,261 |
|
$ |
95,462 |
|
$ |
48,555 |
|
$ |
40,882 |
|
$ |
43,937 |
|
$ |
77,645 |
|
$ |
27,008 |
|
$ |
297,962 |
|
$ |
211,019 |
|
Property catastrophe |
|
17,683 |
|
50,196 |
|
129,224 |
|
86,574 |
|
11,636 |
|
59,961 |
|
108,235 |
|
66,961 |
|
3,529 |
|
283,677 |
|
246,793 |
| |||||||||||
Property excluding property catastrophe (2) |
|
55,929 |
|
68,627 |
|
65,734 |
|
75,493 |
|
36,430 |
|
64,495 |
|
53,938 |
|
71,150 |
|
46,835 |
|
265,783 |
|
226,013 |
| |||||||||||
Casualty (3) |
|
50,132 |
|
38,273 |
|
43,702 |
|
83,960 |
|
34,968 |
|
34,873 |
|
40,755 |
|
71,361 |
|
32,274 |
|
216,067 |
|
181,957 |
| |||||||||||
Marine and aviation |
|
21,038 |
|
19,152 |
|
18,842 |
|
25,617 |
|
16,130 |
|
17,037 |
|
19,978 |
|
24,164 |
|
21,303 |
|
84,649 |
|
77,309 |
| |||||||||||
Other (4) |
|
21,819 |
|
25,233 |
|
25,886 |
|
5,825 |
|
2,666 |
|
1,147 |
|
1,437 |
|
3,706 |
|
121 |
|
78,763 |
|
8,956 |
| |||||||||||
Total |
|
$ |
226,428 |
|
$ |
271,893 |
|
$ |
355,649 |
|
$ |
372,931 |
|
$ |
150,385 |
|
$ |
218,395 |
|
$ |
268,280 |
|
$ |
314,987 |
|
$ |
131,070 |
|
$ |
1,226,901 |
|
$ |
952,047 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net premiums earned |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Other specialty (1) |
|
$ |
92,120 |
|
$ |
87,330 |
|
$ |
78,207 |
|
$ |
46,148 |
|
$ |
60,891 |
|
$ |
48,722 |
|
$ |
40,511 |
|
$ |
38,969 |
|
$ |
30,296 |
|
$ |
303,805 |
|
$ |
189,093 |
|
Property catastrophe |
|
80,271 |
|
69,059 |
|
68,992 |
|
61,863 |
|
62,408 |
|
64,910 |
|
59,788 |
|
51,642 |
|
54,768 |
|
280,185 |
|
238,748 |
| |||||||||||
Property excluding property catastrophe (2) |
|
70,414 |
|
63,572 |
|
58,720 |
|
61,632 |
|
60,607 |
|
62,565 |
|
57,524 |
|
63,006 |
|
70,744 |
|
254,338 |
|
243,702 |
| |||||||||||
Casualty (3) |
|
51,082 |
|
48,669 |
|
48,565 |
|
45,943 |
|
47,317 |
|
49,066 |
|
51,493 |
|
48,494 |
|
48,609 |
|
194,259 |
|
196,370 |
| |||||||||||
Marine and aviation |
|
18,643 |
|
16,853 |
|
19,200 |
|
21,449 |
|
17,361 |
|
17,739 |
|
21,093 |
|
21,626 |
|
22,445 |
|
76,145 |
|
77,819 |
| |||||||||||
Other (4) |
|
11,283 |
|
6,867 |
|
6,378 |
|
1,537 |
|
1,941 |
|
1,077 |
|
1,651 |
|
2,367 |
|
1,009 |
|
26,065 |
|
7,036 |
| |||||||||||
Total |
|
$ |
323,813 |
|
$ |
292,350 |
|
$ |
280,062 |
|
$ |
238,572 |
|
$ |
250,525 |
|
$ |
244,079 |
|
$ |
232,060 |
|
$ |
226,104 |
|
$ |
227,871 |
|
$ |
1,134,797 |
|
$ |
952,768 |
|
(1) Includes U.K. motor, trade credit, surety, workers compensation catastrophe, accident and health and other.
(2) Includes facultative business.
(3) Includes professional liability, executive assurance and healthcare business.
(4) Includes mortgage, life, casualty clash and other.
Arch Capital Group Ltd. and Subsidiaries
Investment Information Investable Asset Summary, Investment Portfolio Metrics and Credit Quality Distribution
(U.S. dollars in thousands)
|
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
| |||||||||||||||
|
|
2012 |
|
2012 |
|
2012 |
|
2012 |
|
2011 |
| |||||||||||||||
Investable assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Fixed maturities available for sale, at fair value |
|
$ |
9,839,988 |
|
76 |
% |
$ |
9,944,186 |
|
75 |
% |
$ |
9,556,326 |
|
75 |
% |
$ |
9,221,145 |
|
74 |
% |
$ |
9,375,604 |
|
76 |
% |
Fixed maturities, at fair value (1) |
|
363,541 |
|
3 |
% |
306,424 |
|
2 |
% |
242,735 |
|
2 |
% |
250,805 |
|
2 |
% |
147,779 |
|
1 |
% | |||||
Fixed maturities pledged under securities lending agreements, at fair value (2) |
|
42,600 |
|
0 |
% |
34,769 |
|
1 |
% |
74,032 |
|
1 |
% |
50,813 |
|
0 |
% |
56,393 |
|
1 |
% | |||||
Total fixed maturities |
|
10,246,129 |
|
79 |
% |
10,285,379 |
|
78 |
% |
9,873,093 |
|
78 |
% |
9,522,763 |
|
76 |
% |
9,579,776 |
|
78 |
% | |||||
Short-term investments available for sale, at fair value |
|
722,121 |
|
6 |
% |
845,158 |
|
6 |
% |
1,087,910 |
|
8 |
% |
1,112,249 |
|
9 |
% |
904,219 |
|
7 |
% | |||||
Short-term investments pledged under securities lending agreements, at fair value (2) |
|
8,248 |
|
0 |
% |
|
|
0 |
% |
|
|
0 |
% |
|
|
0 |
% |
|
|
0 |
% | |||||
Cash |
|
371,041 |
|
3 |
% |
422,440 |
|
3 |
% |
355,392 |
|
3 |
% |
422,806 |
|
3 |
% |
351,699 |
|
3 |
% | |||||
Equity securities available for sale, at fair value |
|
312,749 |
|
2 |
% |
312,371 |
|
2 |
% |
260,864 |
|
2 |
% |
318,181 |
|
3 |
% |
299,584 |
|
2 |
% | |||||
Equity securities, at fair value (1) |
|
25,954 |
|
0 |
% |
28,405 |
|
0 |
% |
23,118 |
|
0 |
% |
52,766 |
|
0 |
% |
87,403 |
|
1 |
% | |||||
Other investments available for sale, at fair value |
|
549,280 |
|
4 |
% |
477,857 |
|
4 |
% |
381,576 |
|
3 |
% |
357,992 |
|
3 |
% |
238,111 |
|
2 |
% | |||||
Other investments, at fair value (1) |
|
527,971 |
|
4 |
% |
363,239 |
|
3 |
% |
230,990 |
|
2 |
% |
196,712 |
|
2 |
% |
131,721 |
|
1 |
% | |||||
TALF investments, at fair value (3) |
|
|
|
0 |
% |
270,206 |
|
2 |
% |
307,453 |
|
2 |
% |
313,187 |
|
2 |
% |
387,702 |
|
3 |
% | |||||
Investments accounted for using the equity method |
|
307,105 |
|
2 |
% |
339,587 |
|
3 |
% |
331,601 |
|
3 |
% |
347,273 |
|
3 |
% |
380,507 |
|
3 |
% | |||||
Securities sold but not yet purchased |
|
(6,924 |
) |
0 |
% |
(8,017 |
) |
0 |
% |
(9,206 |
) |
0 |
% |
(18,831 |
) |
0 |
% |
(27,178 |
) |
0 |
% | |||||
Securities transactions entered into but not settled at the balance sheet date |
|
(18,540 |
) |
0 |
% |
(117,742 |
) |
(1 |
)% |
(106,435 |
) |
(1 |
)% |
(121,435 |
) |
(1 |
)% |
(17,339 |
) |
0 |
% | |||||
Total investable assets |
|
$ |
13,045,134 |
|
100 |
% |
$ |
13,218,883 |
|
100 |
% |
$ |
12,736,356 |
|
100 |
% |
$ |
12,503,663 |
|
100 |
% |
$ |
12,316,205 |
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Investment portfolio metrics (2): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Average effective duration (in years) |
|
3.06 |
|
|
|
2.90 |
|
|
|
3.01 |
|
|
|
2.75 |
|
|
|
2.99 |
|
|
| |||||
Average S&P/Moodys credit ratings (4) |
|
AA-/Aa2 |
|
|
|
AA/Aa2 |
|
|
|
AA/Aa2 |
|
|
|
AA/Aa2 |
|
|
|
AA/Aa1 |
|
|
| |||||
Imbedded book yield (5) |
|
2.60 |
% |
|
|
2.80 |
% |
|
|
2.76 |
% |
|
|
2.76 |
% |
|
|
2.98 |
% |
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Credit quality distribution of total fixed maturities (6): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
U.S. government and government agencies (7) |
|
$ |
2,523,212 |
|
25 |
% |
$ |
2,837,828 |
|
28 |
% |
$ |
3,043,908 |
|
31 |
% |
$ |
2,850,031 |
|
30 |
% |
$ |
3,154,480 |
|
33 |
% |
AAA |
|
3,413,431 |
|
33 |
% |
3,388,660 |
|
33 |
% |
3,325,996 |
|
34 |
% |
3,420,490 |
|
36 |
% |
3,229,161 |
|
34 |
% | |||||
AA |
|
1,563,846 |
|
15 |
% |
1,770,851 |
|
17 |
% |
1,505,032 |
|
15 |
% |
1,383,663 |
|
14 |
% |
1,425,249 |
|
15 |
% | |||||
A |
|
1,501,156 |
|
15 |
% |
1,158,492 |
|
11 |
% |
1,028,772 |
|
10 |
% |
917,925 |
|
10 |
% |
884,957 |
|
9 |
% | |||||
BBB |
|
538,140 |
|
5 |
% |
503,890 |
|
5 |
% |
428,200 |
|
4 |
% |
398,645 |
|
4 |
% |
412,566 |
|
4 |
% | |||||
BB |
|
174,527 |
|
2 |
% |
157,183 |
|
2 |
% |
152,982 |
|
2 |
% |
157,427 |
|
2 |
% |
140,029 |
|
1 |
% | |||||
B |
|
220,772 |
|
2 |
% |
203,416 |
|
2 |
% |
175,613 |
|
2 |
% |
172,360 |
|
2 |
% |
165,003 |
|
2 |
% | |||||
Lower than B |
|
175,866 |
|
2 |
% |
143,518 |
|
1 |
% |
116,846 |
|
1 |
% |
125,134 |
|
1 |
% |
114,672 |
|
1 |
% | |||||
Not rated |
|
135,179 |
|
1 |
% |
121,541 |
|
1 |
% |
95,744 |
|
1 |
% |
97,088 |
|
1 |
% |
53,659 |
|
1 |
% | |||||
Total fixed maturities, at fair value |
|
$ |
10,246,129 |
|
100 |
% |
$ |
10,285,379 |
|
100 |
% |
$ |
9,873,093 |
|
100 |
% |
$ |
9,522,763 |
|
100 |
% |
$ |
9,579,776 |
|
100 |
% |
(1) Represents investments 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) This table excludes the collateral received and reinvested and includes the fixed maturities and short-term investments pledged under in securities lending agreements, at fair value.
(3) During the 2012 fourth quarter, the Company sold all investments it held under the FRBNYs TALF program and the related secured financing was extinguished accordingly.
(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) The imbedded book yield is calculated excluding cash and certain fund investments and is before investment expenses.
(6) 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.
(7) 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 December 31, 2012:
|
|
|
|
Gross |
|
Gross |
|
Net |
|
|
|
|
| |||||
|
|
Fair |
|
Unrealized |
|
Unrealized |
|
Unrealized |
|
Amortized |
|
Fair Value / |
| |||||
|
|
Value |
|
Gains |
|
Losses |
|
Gains (Losses) |
|
Cost |
|
Amortized Cost |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Corporates |
|
$ |
2,884,687 |
|
$ |
98,248 |
|
$ |
(6,643 |
) |
$ |
91,605 |
|
$ |
2,793,082 |
|
103.3 |
% |
Non-U.S. government-backed corporates |
|
247,958 |
|
7,550 |
|
(67 |
) |
7,483 |
|
240,475 |
|
103.1 |
% | |||||
U.S. government and government agencies |
|
1,131,688 |
|
20,178 |
|
(1,095 |
) |
19,083 |
|
1,112,605 |
|
101.7 |
% | |||||
Agency mortgage-backed securities |
|
1,195,793 |
|
10,989 |
|
(3,719 |
) |
7,270 |
|
1,188,523 |
|
100.6 |
% | |||||
Non-agency mortgage-backed securities |
|
336,943 |
|
13,820 |
|
(3,765 |
) |
10,055 |
|
326,888 |
|
103.1 |
% | |||||
Agency commercial mortgage-backed securities |
|
195,731 |
|
4,910 |
|
(2,308 |
) |
2,602 |
|
193,129 |
|
101.3 |
% | |||||
Non-agency commercial mortgage-backed securities |
|
628,434 |
|
32,604 |
|
(2,160 |
) |
30,444 |
|
597,990 |
|
105.1 |
% | |||||
Municipal bonds |
|
1,463,586 |
|
62,322 |
|
(1,421 |
) |
60,901 |
|
1,402,685 |
|
104.3 |
% | |||||
Non-U.S. government securities |
|
1,087,310 |
|
33,701 |
|
(8,860 |
) |
24,841 |
|
1,062,469 |
|
102.3 |
% | |||||
Asset-backed securities |
|
1,073,999 |
|
25,528 |
|
(5,838 |
) |
19,690 |
|
1,054,309 |
|
101.9 |
% | |||||
Total |
|
$ |
10,246,129 |
|
$ |
309,850 |
|
$ |
(35,876 |
) |
$ |
273,974 |
|
$ |
9,972,155 |
|
102.7 |
% |
Corporates (Excluding Guaranteed Amounts)
The following table summarizes the Companys corporate bonds by sector and by credit quality at December 31, 2012, excluding guaranteed amounts:
|
|
Estimated Fair Value |
| |||||
|
|
|
|
% of Asset |
|
% of Investable |
| |
|
|
Total |
|
Class |
|
Assets |
| |
Sector: |
|
|
|
|
|
|
| |
Industrials |
|
$ |
1,543,605 |
|
53.5 |
% |
11.8 |
% |
Financials |
|
983,276 |
|
34.1 |
% |
7.5 |
% | |
Covered bonds |
|
168,404 |
|
5.8 |
% |
1.3 |
% | |
Utilities |
|
104,441 |
|
3.6 |
% |
0.8 |
% | |
All other (1) |
|
84,961 |
|
3.0 |
% |
0.7 |
% | |
Total |
|
$ |
2,884,687 |
|
100.0 |
% |
22.1 |
% |
|
|
|
|
|
|
|
| |
Credit quality distribution (3): |
|
|
|
|
|
|
| |
AAA |
|
$ |
525,917 |
|
18.2 |
% |
4.0 |
% |
AA |
|
438,880 |
|
15.2 |
% |
3.4 |
% | |
A |
|
1,005,942 |
|
34.9 |
% |
7.7 |
% | |
BBB |
|
427,386 |
|
14.8 |
% |
3.3 |
% | |
BB |
|
142,309 |
|
4.9 |
% |
1.1 |
% | |
B |
|
199,823 |
|
6.9 |
% |
1.5 |
% | |
Lower than B |
|
29,339 |
|
1.0 |
% |
0.2 |
% | |
Not rated |
|
115,091 |
|
4.1 |
% |
0.9 |
% | |
Total |
|
$ |
2,884,687 |
|
100.0 |
% |
22.1 |
% |
The following table summarizes the Companys top ten exposures to fixed income corporate issuers by fair value at December 31, 2012, excluding guaranteed amounts and covered bonds:
|
|
Estimated |
|
% of Asset |
|
% of Investable |
|
Credit |
| |
Issuer |
|
Fair Value |
|
Class |
|
Assets |
|
Rating (2) |
| |
|
|
|
|
|
|
|
|
|
| |
General Electric Co |
|
$ |
79,947 |
|
2.8 |
% |
0.6 |
% |
AA+/A1 |
|
SBA Communications Corp |
|
48,460 |
|
1.7 |
% |
0.4 |
% |
NR/A2 |
| |
Caterpillar Inc |
|
46,205 |
|
1.6 |
% |
0.4 |
% |
A/A2 |
| |
AT&T Inc |
|
44,103 |
|
1.5 |
% |
0.3 |
% |
A-/A2 |
| |
Crown Castle Intl Corp |
|
38,960 |
|
1.4 |
% |
0.3 |
% |
NR/A3 |
| |
Abbey National Treasury Svcs |
|
37,351 |
|
1.3 |
% |
0.3 |
% |
A/A2 |
| |
National Bank of Canada |
|
29,666 |
|
1.0 |
% |
0.2 |
% |
A-/Aa2 |
| |
Desjardins Group |
|
29,329 |
|
1.0 |
% |
0.2 |
% |
A+/Aa1 |
| |
Verizon Communications Inc |
|
28,781 |
|
1.0 |
% |
0.2 |
% |
A-/A2 |
| |
Royal Dutch Shell PLC |
|
28,725 |
|
1.0 |
% |
0.2 |
% |
AA/Aa1 |
| |
Total |
|
$ |
411,527 |
|
14.3 |
% |
3.2 |
% |
|
|
(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 December 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 |
|
$ |
2,134 |
|
AA- |
|
$ |
2,271 |
|
106.4 |
% |
0.0 |
% |
|
|
2004 |
|
10,006 |
|
BB+ |
|
9,920 |
|
99.1 |
% |
0.1 |
% | ||
|
|
2005 |
|
46,969 |
|
CCC+ |
|
48,716 |
|
103.7 |
% |
0.4 |
% | ||
|
|
2006 |
|
63,120 |
|
B |
|
64,249 |
|
101.8 |
% |
0.5 |
% | ||
|
|
2007 |
|
46,698 |
|
C |
|
50,799 |
|
108.8 |
% |
0.4 |
% | ||
|
|
2008 |
|
6,121 |
|
CC+ |
|
6,206 |
|
101.4 |
% |
0.0 |
% | ||
|
|
2009 (6) |
|
25,502 |
|
AA- |
|
27,795 |
|
109.0 |
% |
0.2 |
% | ||
|
|
2010 (6) |
|
24,705 |
|
AAA |
|
24,330 |
|
98.5 |
% |
0.2 |
% | ||
|
|
2012 (6) |
|
101,633 |
|
AAA |
|
102,657 |
|
101.0 |
% |
0.8 |
% | ||
Total non-agency MBS |
|
|
|
$ |
326,888 |
|
BBB- |
|
$ |
336,943 |
|
103.1 |
% |
2.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Non-agency CMBS: |
|
2004 |
|
$ |
986 |
|
AAA |
|
$ |
901 |
|
91.4 |
% |
0.0 |
% |
|
|
2005 |
|
1,522 |
|
A+ |
|
1,538 |
|
101.1 |
% |
0.0 |
% | ||
|
|
2006 |
|
3,338 |
|
A+ |
|
3,592 |
|
107.6 |
% |
0.0 |
% | ||
|
|
2007 |
|
27,041 |
|
A |
|
29,174 |
|
107.9 |
% |
0.2 |
% | ||
|
|
2008 |
|
649 |
|
AA+ |
|
631 |
|
97.2 |
% |
0.0 |
% | ||
|
|
2009 |
|
117,200 |
|
AAA |
|
126,831 |
|
108.2 |
% |
1.0 |
% | ||
|
|
2011 |
|
144,593 |
|
AAA |
|
155,586 |
|
107.6 |
% |
1.2 |
% | ||
|
|
2012 |
|
302,661 |
|
AAA |
|
310,181 |
|
102.5 |
% |
2.4 |
% | ||
Total non-agency CMBS |
|
|
|
$ |
597,990 |
|
AAA |
|
$ |
628,434 |
|
105.1 |
% |
4.8 |
% |
|
|
Non-Agency MBS |
|
Non-Agency |
| ||
Additional Statistics |
|
Re-REMICs |
|
All Other |
|
CMBS (1) |
|
|
|
|
|
|
|
|
|
Wtd. average loan age (months) |
|
80 |
|
77 |
|
22 |
|
Wtd. average life (months) (2) |
|
17 |
|
48 |
|
62 |
|
Wtd. average loan-to-value % (3) |
|
70.4 |
% |
68.9 |
% |
59.7 |
% |
Total delinquencies (4) |
|
22.0 |
% |
19.9 |
% |
1.2 |
% |
Current credit support % (5) |
|
53.3 |
% |
12.6 |
% |
28.6 |
% |
(1) |
Loans defeased with government/agency obligations represented were not material to the collateral underlying the Companys CMBS holdings. |
(2) |
The weighted average life for MBS is based on the interest rates in effect at December 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 28% to 86%, while the range of loan-to-values on CMBS is 12% to 114%. |
(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) December 31, 2012:
|
|
|
|
Average |
|
Estimated Fair Value |
| ||||||
|
|
Amortized |
|
Credit |
|
|
|
% of Amortized |
|
% of Investable |
| ||
|
|
Cost |
|
Quality |
|
Total |
|
Cost |
|
Assets |
| ||
|
|
|
|
|
|
|
|
|
|
|
| ||
Sector: |
|
|
|
|
|
|
|
|
|
|
| ||
Credit cards (1) |
|
$ |
331,009 |
|
AAA |
|
$ |
336,609 |
|
101.7 |
% |
2.6 |
% |
Equipment (2) |
|
240,867 |
|
A |
|
243,350 |
|
101.0 |
% |
1.9 |
% | ||
Loans (3) |
|
129,708 |
|
AA+ |
|
130,289 |
|
100.4 |
% |
1.0 |
% | ||
Autos (4) |
|
145,020 |
|
AAA |
|
145,148 |
|
100.1 |
% |
1.1 |
% | ||
Rate reduction bonds (5) |
|
78,115 |
|
AAA |
|
81,747 |
|
104.6 |
% |
0.6 |
% | ||
U.K. securitized (6) |
|
50,571 |
|
AAA |
|
52,676 |
|
104.2 |
% |
0.4 |
% | ||
Commodities (7) |
|
35,000 |
|
AAA |
|
35,635 |
|
101.8 |
% |
0.3 |
% | ||
Home equity (8) |
|
13,548 |
|
B |
|
17,474 |
|
129.0 |
% |
0.1 |
% | ||
Other |
|
30,471 |
|
AA- |
|
31,071 |
|
102.0 |
% |
0.2 |
% | ||
Total ABS |
|
$ |
1,054,309 |
|
AA |
|
$ |
1,073,999 |
|
101.9 |
% |
8.2 |
% |
The effective duration of the total ABS was 2.2 years at December 31, 2012.
(1) The weighted average credit support % on credit cards is 13%.
(2) The weighted average credit support % on equipment is 7%.
(3) The weighted average credit support % on loans is 36%.
(4) The weighted average credit support % on autos is 27%.
(5) The weighted average credit support % on rate reduction bonds is 6%.
(6) The weighted average credit support % on U.K. securitized is 20%.
(7) The weighted average credit support % on commodities is 6%.
(8) The weighted average credit support % on home equity is 21%.
The Companys investment portfolio included $66.9 million par in sub-prime securities at December 31, 2012, with an estimated fair value of $42.1 million and an average credit quality of B2/A-. Such amounts were primarily in the home equity and CMO sectors with the balance in SBA Loan and other ABS sectors. In addition, the portfolio of collateral backing the Companys securities lending program contains approximately $5.4 million estimated fair value of sub-prime securities with an average credit quality of CCC-/Caa3.
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 December 31, 2012:
|
|
Fair |
|
% of Asset |
|
% of Investable |
| |
|
|
Value |
|
Class |
|
Assets |
| |
Composition: |
|
|
|
|
|
|
| |
Investment funds accounted for using the equity method |
|
$ |
52,214 |
|
14.0 |
% |
0.4 |
% |
Corporate bonds |
|
95,038 |
|
25.6 |
% |
0.7 |
% | |
Term loan investments (1) |
|
224,528 |
|
60.4 |
% |
1.7 |
% | |
Total |
|
$ |
371,780 |
|
100.0 |
% |
2.8 |
% |
|
|
|
|
|
|
|
| |
Currency: |
|
|
|
|
|
|
| |
U.S.-denominated |
|
$ |
275,914 |
|
74.2 |
% |
2.1 |
% |
Euro-denominated |
|
95,866 |
|
25.8 |
% |
0.7 |
% | |
Total |
|
$ |
371,780 |
|
100.0 |
% |
2.8 |
% |
|
|
|
|
|
|
|
| |
Sector: |
|
|
|
|
|
|
| |
Consumer cyclical |
|
$ |
85,648 |
|
23.0 |
% |
0.7 |
% |
Media |
|
42,489 |
|
11.4 |
% |
0.3 |
% | |
Consumer non-cyclical |
|
40,108 |
|
10.8 |
% |
0.3 |
% | |
Industrials |
|
33,409 |
|
9.0 |
% |
0.3 |
% | |
Basic materials |
|
31,906 |
|
8.6 |
% |
0.2 |
% | |
Utilities |
|
9,444 |
|
2.5 |
% |
0.1 |
% | |
All other |
|
128,776 |
|
34.7 |
% |
1.0 |
% | |
Total |
|
$ |
371,780 |
|
100.0 |
% |
2.8 |
% |
|
|
|
|
|
|
|
| |
Weighted average rating factor (Moodys) |
|
B2 |
|
|
|
|
|
(1) Included in investments accounted for using the fair value option on the Companys balance sheet.
Arch Capital Group Ltd. and Subsidiaries
Investment Information Eurozone Investments
(U.S. dollars in thousands)
Composition of Eurozone Investments
The fair value of the Companys Eurozone investments are as follows at December 31, 2012:
|
|
|
|
Financial |
|
Other |
|
Covered |
|
Bank |
|
Equities |
|
|
| |||||||
|
|
Sovereign (2) |
|
Corporates |
|
Corporates |
|
Bonds (3) |
|
Loans (4) |
|
and Other |
|
Total |
| |||||||
Country (1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Germany |
|
$ |
199,527 |
|
$ |
843 |
|
$ |
10,094 |
|
$ |
10,044 |
|
$ |
12,712 |
|
$ |
7,055 |
|
$ |
240,275 |
|
Finland |
|
118,434 |
|
254 |
|
|
|
|
|
|
|
|
|
118,688 |
| |||||||
Netherlands |
|
|
|
15,439 |
|
46,040 |
|
|
|
6,240 |
|
15,673 |
|
83,392 |
| |||||||
France |
|
|
|
6,766 |
|
28,828 |
|
16,148 |
|
4,736 |
|
13,882 |
|
70,360 |
| |||||||
Supranational (5) |
|
29,969 |
|
|
|
|
|
|
|
|
|
|
|
29,969 |
| |||||||
Spain |
|
|
|
|
|
941 |
|
15,101 |
|
3,201 |
|
328 |
|
19,571 |
| |||||||
Luxembourg |
|
|
|
|
|
8,049 |
|
|
|
4,343 |
|
482 |
|
12,874 |
| |||||||
Belgium |
|
2,014 |
|
|
|
7,402 |
|
|
|
|
|
|
|
9,416 |
| |||||||
Italy |
|
4,092 |
|
|
|
|
|
|
|
828 |
|
927 |
|
5,847 |
| |||||||
Ireland |
|
|
|
|
|
2,156 |
|
|
|
|
|
1,506 |
|
3,662 |
| |||||||
Austria |
|
|
|
3,432 |
|
|
|
|
|
|
|
|
|
3,432 |
| |||||||
Total |
|
$ |
354,036 |
|
$ |
26,734 |
|
$ |
103,510 |
|
$ |
41,293 |
|
$ |
32,060 |
|
$ |
39,853 |
|
$ |
597,486 |
|
(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 investments from Cyprus, Estonia, Greece, Malta, Portugal, Slovakia or Slovenia at December 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 17. |
(5) |
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 the change in the carrying value of investments accounted for using the fair value option in net realized 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 (loss) available to common shareholders to net income available to common shareholders along with related per common share results:
|
|
Three Months Ended |
|
Year Ended |
| |||||||||||||||||||||||||||||
|
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
December 31, |
|
December 31, |
| |||||||||||
|
|
2012 |
|
2012 |
|
2012 |
|
2012 |
|
2011 |
|
2011 |
|
2011 |
|
2011 |
|
2010 |
|
2012 |
|
2011 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
After-tax operating income (loss) available to common shareholders |
|
$ |
(24,667 |
) |
$ |
120,247 |
|
$ |
141,400 |
|
$ |
113,660 |
|
$ |
128,891 |
|
$ |
107,176 |
|
$ |
59,739 |
|
$ |
7,576 |
|
$ |
131,277 |
|
$ |
350,640 |
|
$ |
303,382 |
|
Net realized gains, net of tax |
|
51,031 |
|
58,904 |
|
33,275 |
|
40,873 |
|
13,464 |
|
28,458 |
|
44,799 |
|
21,585 |
|
71,821 |
|
184,083 |
|
108,306 |
| |||||||||||
Net impairment losses recognized in earnings, net of tax |
|
(6,035 |
) |
(2,379 |
) |
(1,951 |
) |
(1,023 |
) |
(1,959 |
) |
(2,739 |
) |
(1,684 |
) |
(2,680 |
) |
(3,230 |
) |
(11,388 |
) |
(9,062 |
) | |||||||||||
Equity in net income (loss) of investment funds accounted for using the equity method, net of tax |
|
16,567 |
|
24,330 |
|
7,787 |
|
24,826 |
|
(14,702 |
) |
(30,549 |
) |
5,973 |
|
29,673 |
|
22,990 |
|
73,510 |
|
(9,605 |
) | |||||||||||
Net foreign exchange gains (losses), net of tax |
|
(23,164 |
) |
(16,930 |
) |
32,108 |
|
(20,541 |
) |
13,177 |
|
59,948 |
|
(18,685 |
) |
(37,142 |
) |
6,581 |
|
(28,527 |
) |
17,298 |
| |||||||||||
Net income available to common shareholders |
|
$ |
13,732 |
|
$ |
184,172 |
|
$ |
212,619 |
|
$ |
157,795 |
|
$ |
138,871 |
|
$ |
162,294 |
|
$ |
90,142 |
|
$ |
19,012 |
|
$ |
229,439 |
|
$ |
568,318 |
|
$ |
410,319 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Diluted per common share results: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
After-tax operating income (loss) available to common shareholders |
|
$ |
(0.18 |
) |
$ |
0.87 |
|
$ |
1.02 |
|
$ |
0.82 |
|
$ |
0.94 |
|
$ |
0.78 |
|
$ |
0.43 |
|
$ |
0.06 |
|
$ |
0.87 |
|
$ |
2.54 |
|
$ |
2.19 |
|
Net realized gains, net of tax |
|
0.37 |
|
0.42 |
|
0.24 |
|
0.30 |
|
0.10 |
|
0.21 |
|
0.32 |
|
0.15 |
|
0.48 |
|
1.33 |
|
0.78 |
| |||||||||||
Net impairment losses recognized in earnings, net of tax |
|
(0.04 |
) |
(0.02 |
) |
(0.01 |
) |
(0.01 |
) |
(0.01 |
) |
(0.02 |
) |
(0.01 |
) |
(0.02 |
) |
(0.02 |
) |
(0.08 |
) |
(0.07 |
) | |||||||||||
Equity in net income (loss) of investment funds accounted for using the equity method, net of tax |
|
0.12 |
|
0.18 |
|
0.06 |
|
0.18 |
|
(0.11 |
) |
(0.22 |
) |
0.04 |
|
0.21 |
|
0.15 |
|
0.53 |
|
(0.07 |
) | |||||||||||
Net foreign exchange (losses) gains, net of tax |
|
(0.17 |
) |
(0.12 |
) |
0.23 |
|
(0.15 |
) |
0.09 |
|
0.43 |
|
(0.13 |
) |
(0.26 |
) |
0.05 |
|
(0.21 |
) |
0.14 |
| |||||||||||
Net income available to common shareholders |
|
$ |
0.10 |
|
$ |
1.33 |
|
$ |
1.54 |
|
$ |
1.14 |
|
$ |
1.01 |
|
$ |
1.18 |
|
$ |
0.65 |
|
$ |
0.14 |
|
$ |
1.53 |
|
$ |
4.11 |
|
$ |
2.97 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Weighted average common shares and common share equivalents outstanding diluted |
|
138,270,853 |
|
138,696,934 |
|
138,211,736 |
|
137,814,906 |
|
137,473,670 |
|
137,140,929 |
|
137,975,599 |
|
140,460,516 |
|
150,306,429 |
|
138,258,847 |
|
138,289,702 |
|
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 |
| ||||||||||||||||||||||||||
|
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
December 31, |
| ||||||||||
|
|
2012 |
|
2012 |
|
2012 |
|
2012 |
|
2011 |
|
2011 |
|
2011 |
|
2011 |
|
2010 |
|
2012 |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Effect of share repurchases: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Aggregate cost of shares repurchased |
|
$ |
172,056 |
|
$ |
0 |
|
$ |
0 |
|
$ |
0 |
|
$ |
3 |
|
$ |
20,833 |
|
$ |
29,552 |
|
$ |
237,173 |
|
$ |
258,151 |
|
$ |
2,730,089 |
|
Shares repurchased |
|
3,924,306 |
|
|
|
|
|
|
|
100 |
|
655,772 |
|
881,961 |
|
8,062,383 |
|
8,679,051 |
|
108,682,524 |
| ||||||||||
Average price per share repurchased |
|
$ |
43.84 |
|
|
|
|
|
|
|
$ |
31.51 |
|
$ |
31.77 |
|
$ |
33.51 |
|
$ |
29.42 |
|
$ |
29.74 |
|
$ |
25.12 |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Average book value per common share (1) |
|
$ |
36.49 |
|
$ |
35.62 |
|
$ |
33.89 |
|
$ |
32.55 |
|
$ |
31.34 |
|
$ |
30.81 |
|
$ |
30.39 |
|
$ |
29.90 |
|
$ |
29.61 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Average repurchase price-to-book multiple |
|
1.20 |
x |
|
|
|
|
|
|
1.01 |
x |
1.03 |
x |
1.10 |
x |
0.98 |
x |
1.00 |
x |
|
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Remaining share repurchase authorization (2) |
|
$ |
769,911 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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. The timing and amount of the repurchase transactions under this program will depend on a variety of factors, including market conditions and corporate and regulatory considerations.
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 |
|
Year Ended |
| |||||||||||||||||||||||||||||
|
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
December 31, |
|
December 31, |
| |||||||||||
|
|
2012 |
|
2012 |
|
2012 |
|
2012 |
|
2011 |
|
2011 |
|
2011 |
|
2011 |
|
2010 |
|
2012 |
|
2011 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
After-tax operating income (loss) available to common shareholders |
|
$ |
(24,667 |
) |
$ |
120,247 |
|
$ |
141,400 |
|
$ |
113,660 |
|
$ |
128,891 |
|
$ |
107,176 |
|
$ |
59,739 |
|
$ |
7,576 |
|
$ |
131,277 |
|
$ |
350,640 |
|
$ |
303,382 |
|
Annualized after-tax operating income (loss) available to common shareholders (a) |
|
$ |
(98,668 |
) |
$ |
480,988 |
|
$ |
565,600 |
|
$ |
454,640 |
|
$ |
515,564 |
|
$ |
428,704 |
|
$ |
238,956 |
|
$ |
30,304 |
|
$ |
525,108 |
|
$ |
350,640 |
|
$ |
303,382 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Beginning common shareholders equity |
|
$ |
5,023,794 |
|
$ |
4,695,316 |
|
$ |
4,514,456 |
|
$ |
4,267,074 |
|
$ |
4,110,899 |
|
$ |
4,078,030 |
|
$ |
3,964,035 |
|
$ |
4,151,786 |
|
$ |
4,354,905 |
|
$ |
4,267,074 |
|
$ |
4,151,786 |
|
Ending common shareholders equity |
|
4,843,878 |
|
5,023,794 |
|
4,695,316 |
|
4,514,456 |
|
4,267,074 |
|
4,110,899 |
|
4,078,030 |
|
3,964,035 |
|
4,151,786 |
|
4,843,878 |
|
4,267,074 |
| |||||||||||
Average common shareholders equity (b) |
|
$ |
4,933,836 |
|
$ |
4,859,555 |
|
$ |
4,604,886 |
|
$ |
4,390,765 |
|
$ |
4,188,987 |
|
$ |
4,094,465 |
|
$ |
4,021,033 |
|
$ |
4,057,911 |
|
$ |
4,253,346 |
|
$ |
4,555,476 |
|
$ |
4,209,430 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Annualized operating return on average common equity (a)/(b) |
|
(2.0 |
)% |
9.9 |
% |
12.3 |
% |
10.4 |
% |
12.3 |
% |
10.5 |
% |
5.9 |
% |
0.7 |
% |
12.3 |
% |
7.7 |
% |
7.2 |
% |
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:
|
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
| |||||||||
|
|
2012 |
|
2012 |
|
2012 |
|
2012 |
|
2011 |
|
2011 |
|
2011 |
|
2011 |
|
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 |
|
100,000 |
|
100,000 |
|
100,000 |
| |||||||||
Total debt |
|
$ |
400,000 |
|
$ |
400,000 |
|
$ |
400,000 |
|
$ |
400,000 |
|
$ |
400,000 |
|
$ |
400,000 |
|
$ |
400,000 |
|
$ |
400,000 |
|
$ |
400,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Shareholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Series A non-cumulative preferred shares (8.0%) |
|
$ |
0 |
|
$ |
0 |
|
$ |
0 |
|
$ |
200,000 |
|
$ |
200,000 |
|
$ |
200,000 |
|
$ |
200,000 |
|
$ |
200,000 |
|
$ |
200,000 |
|
Series B non-cumulative preferred shares (7.875%) |
|
|
|
|
|
|
|
125,000 |
|
125,000 |
|
125,000 |
|
125,000 |
|
125,000 |
|
125,000 |
| |||||||||
Series C non-cumulative preferred shares (6.75%) |
|
325,000 |
|
325,000 |
|
325,000 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
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) |
|
4,843,878 |
|
5,023,794 |
|
4,695,316 |
|
4,514,456 |
|
4,267,074 |
|
4,110,899 |
|
4,078,030 |
|
3,964,035 |
|
4,151,786 |
| |||||||||
Total shareholders equity |
|
$ |
5,168,878 |
|
$ |
5,348,794 |
|
$ |
5,020,316 |
|
$ |
4,839,456 |
|
$ |
4,592,074 |
|
$ |
4,435,899 |
|
$ |
4,403,030 |
|
$ |
4,289,035 |
|
$ |
4,476,786 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Total capital |
|
$ |
5,568,878 |
|
$ |
5,748,794 |
|
$ |
5,420,316 |
|
$ |
5,239,456 |
|
$ |
4,992,074 |
|
$ |
4,835,899 |
|
$ |
4,803,030 |
|
$ |
4,689,035 |
|
$ |
4,876,786 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
TALF non-recourse borrowings, at market value (1) |
|
|
|
185,223 |
|
235,818 |
|
239,551 |
|
310,486 |
|
314,137 |
|
318,441 |
|
322,222 |
|
325,770 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Total capital and TALF non-recourse borrowings |
|
$ |
5,568,878 |
|
$ |
5,934,017 |
|
$ |
5,656,134 |
|
$ |
5,479,007 |
|
$ |
5,302,560 |
|
$ |
5,150,036 |
|
$ |
5,121,471 |
|
$ |
5,011,257 |
|
$ |
5,202,556 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Common shares outstanding, net of treasury shares (b) |
|
133,842,613 |
|
136,540,178 |
|
136,291,652 |
|
135,441,687 |
|
134,358,345 |
|
133,005,465 |
|
132,771,524 |
|
131,850,639 |
|
139,632,225 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Book value per common share (2) (a)/(b) |
|
$ |
36.19 |
|
$ |
36.79 |
|
$ |
34.45 |
|
$ |
33.33 |
|
$ |
31.76 |
|
$ |
30.91 |
|
$ |
30.71 |
|
$ |
30.06 |
|
$ |
29.73 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Leverage ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Senior notes/total capital |
|
5.4 |
% |
5.2 |
% |
5.5 |
% |
5.7 |
% |
6.0 |
% |
6.2 |
% |
6.2 |
% |
6.4 |
% |
6.2 |
% | |||||||||
Revolving credit agreement borrowings/total capital |
|
1.8 |
% |
1.7 |
% |
1.8 |
% |
1.9 |
% |
2.0 |
% |
2.1 |
% |
2.1 |
% |
2.1 |
% |
2.1 |
% | |||||||||
Debt/total capital |
|
7.2 |
% |
7.0 |
% |
7.4 |
% |
7.6 |
% |
8.0 |
% |
8.3 |
% |
8.3 |
% |
8.5 |
% |
8.2 |
% | |||||||||
Preferred/total capital |
|
5.8 |
% |
5.7 |
% |
6.0 |
% |
6.2 |
% |
6.5 |
% |
6.7 |
% |
6.8 |
% |
6.9 |
% |
6.7 |
% | |||||||||
Debt and preferred/total capital |
|
13.0 |
% |
12.6 |
% |
13.4 |
% |
13.8 |
% |
14.5 |
% |
15.0 |
% |
15.1 |
% |
15.5 |
% |
14.9 |
% |
(1) |
During the 2012 fourth quarter, the Company sold all investments it held under the FRBNYs TALF program and the related secured financing was extinguished accordingly. |
(2) |
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. |