The Bermuda-based Arch Capital Group Ltd. has reported net income available to common shareholders for the 2006 fourth quarter of $239.3 million, or $3.12 per share, compared to $100.9 million, or $1.34 per share, for the 2005 fourth quarter.
For the full year Arch posted net income of $692.6 million, or $9.08 per share, compared to $256.5 million, or $3.43 per share, for the 2005 period.
After-tax operating income, which excludes capital gains and losses, available to common shareholders was $220.3 million, or $2.88 per share, for the 2006 fourth quarter, compared to $141.7 million, or $1.88 per share, for the 2005 fourth quarter.
Operating income for the full year was $734.5 million, or $9.63 per share, compared to $284.2 million, or $3.80 per share, for 2005.
Arch said that its “after-tax operating income available to common shareholders represented a 28.9 percent annualized return on average common equity for the 2006 fourth quarter, compared to 23.5 percent for the 2005 fourth quarter, and 25.6 percent for the year ended December 31, 2006, compared to 12.0 percent for the 2005 period.”
Gross and net premiums written for the 2006 fourth quarter were $873.2 million and $601.9 million, respectively, compared to $1.05 billion and $827.9 million, respectively, for the 2005 fourth quarter, and $4.28 billion and $3.02 billion, respectively, for the year ended December 31, 2006, compared to $4.01 billion and $3.14 billion, respectively, for the 2005 period.
The Company’s combined ratio was 83.0 percent for the 2006 fourth quarter, compared to 87.3 percent for the 2005 fourth quarter, and 85.4 percent for the year ended December 31, 2006, compared to 95.8 percent for the 2005 period. All per share amounts discussed in this release are on a diluted basis.
The bulletin also noted that Arch’s U.S. insurance operation has “entered into an agreement under which it will write excess workers’ compensation and employers’ liability insurance business produced by a managing general agent. As part of the transaction, the Company’s U.S. insurance operations also entered into an asset purchase agreement to acquire the operations of the managing general agent, including the renewal rights of the subject business, as of January 1, 2008, subject to the satisfaction of customary closing conditions. In 2006, the managing general agent produced approximately $74 million for the predecessor carrier on the program, although no assurances can be made as to the level of business that will be written by the Company’s U.S. insurance operations during 2007 under the arrangements with the managing general agent.”
The bulletin indicated that Arch had not suffered a major loss from European windstorm Kyrill, with damage claims estimated at between $5 million and $15 million. Arch cautioned, however that the “estimates relating to these events are based on currently available information derived from modeling techniques, industry assessments of exposure and claims information obtained from the Company’s clients and brokers. To date, the Company has received relatively few claims advices from clients and brokers. The Company’s actual losses from these events may vary materially from the estimates due to the inherent uncertainties in making such determinations resulting from several factors, including the preliminary nature of the available information, the potential inaccuracies and inadequacies in the data provided by clients and brokers, the modeling techniques and the application of such techniques, the contingent nature of business interruption exposures, the effects of any resultant demand surge on claims activity and attendant coverage issues. In addition, actual losses may increase if the Company’s reinsurers fail to meet their obligations to the Company or the reinsurance protections purchased by the Company are exhausted or are otherwise unavailable.”
The full report and additional information is available on the Group’s web site at: http://www.archcapgroup.com.
A live webcast of the conference call for investors and analysts is available via the “Media-Earnings Webcasts” section of the Company’s web site through March 13, 2007. A telephone replay of the conference call is also available until February 20 at midnight Eastern Time. To access the replay, domestic callers should dial 888-286-8010 (passcode 81752453), and international callers should dial 617-801-6888 (passcode 81752453).
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