Arch Capital Reports $83.7 Million Q4 Net; $280.6 Million Full Year

Bermuda-based Arch Capital Group Ltd. reported that its net income for the 2003 fourth quarter was $83.7 million, or $1.22 per share, compared to $43.5 million, or $0.65 per share, for the 2002 fourth quarter. Net income for the year ended December 31, 2003 was $280.6 million, or $4.14 per share, compared to $59.0 million, or $0.99 per share, for the year ended December 31, 2002.

The Company said its “diluted book value per share increased by 20.4 percent to $25.52 at December 31, 2003 from $21.20 at December 31, 2002. Net premiums written for the 2003 fourth quarter increased to $627.4 million from $439.2 million for the 2002 fourth quarter, and net premiums written for the year ended December 31, 2003 increased to $2.74 billion from $1.26 billion for the year ended December 31, 2002.

“The growth in net premiums written was due to substantial increases in business written by both the Company’s reinsurance and insurance segments,” the announcement continued. “It also reported after-tax operating income for the 2003 fourth quarter of $87.9 million, or $1.29 per share, compared to $48.6 million, or $0.72 per share for the 2002 fourth quarter. After-tax operating income for the year ended December 31, 2003 was $266.5 million, or $3.93 per share, compared to $95.0 million, or $1.59 per share, for the year ended December 31, 2002.”

Arch said its after-tax operating income “represented a 21.5 percent return on beginning equity for the 2003 fourth quarter, on an annualized basis, and a 18.9 percent return on beginning equity for the year ended December 31, 2003. Operating income, a non-GAAP measure, is defined as net income or loss before extraordinary items, excluding net realized investment gains or losses, net foreign exchange gains or losses, other income, reversal of deferred tax asset valuation allowances and non-cash compensation, net of tax.”

Figures for Arch’s insurance and reinsurance subsidiaries showed an increase to $75.8 million for the 2003 fourth quarter from $36.0 million for the 2002 fourth quarter. For the year ended December 31, 2003, underwriting income was $228.7 million, compared to $59.2 million for the year ended December 31, 2002. “The increase in underwriting income in the 2003 periods was primarily due to a significantly higher level of net premiums earned. In addition, underwriting results in the 2003 periods also benefited from increased profits recorded in property and other short-tail lines of business due, in part, to a low level of catastrophic activity,” said the bulletin.

It also noted that the “combined ratio of the Company’s insurance and reinsurance subsidiaries was 89.3 percent for the 2003 fourth quarter, compared to 87.6 percent for the 2002 fourth quarter, and 90.0 percent for the year ended December 31, 2003, compared to 90.9 percent for the year ended December 31, 2002. The loss ratio of the Company’s insurance and reinsurance subsidiaries was 61.9 percent for the 2003 fourth quarter, compared to 59.9 percent for the 2002 fourth quarter. The loss ratio was 63.9 percent for the year ended December 31, 2003, compared to 64.8 percent for the year ended December 31, 2002. The loss ratio of 63.9 percent for the year ended December 31, 2003 was comprised of 12.0 points of paid losses, 7.4 points related to reserves for reported losses and 44.5 points related to incurred but not reported reserves.”