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Arch Capital Group Ltd. Reports 2012 Second Quarter Results

Arch Capital Group Ltd. (NASDAQ: ACGL) reports that net income available to common shareholders for the 2012 second quarter was $212.6 million, or $1.54 per share, compared to $90.1 million, or $0.65 per share, for the 2011 second quarter. The Company also reported after-tax operating income available to common shareholders of $141.4 million, or $1.02 per share, for the 2012 second quarter, compared to $59.7 million, or $0.43 per share, for the 2011 second quarter. All earnings per share amounts discussed in this release are on a diluted basis.

The Company’s book value per common share was $34.45 at June 30, 2012, a 3.4% increase from $33.33 per share at March 31, 2012 and an 8.5% increase from $31.76 per share at December 31, 2011. The Company’s after-tax operating income available to common shareholders represented a 12.3% annualized return on average common equity for the 2012 second quarter, compared to 5.9% for the 2011 second quarter. After-tax operating income available to common shareholders, a non-GAAP measure, is defined as net income available to common shareholders, excluding net realized gains or losses, net impairment losses recognized in earnings, equity in net income or loss of investment funds accounted for using the equity method and net foreign exchange gains or losses, net of income taxes. See page 6 for a further discussion of after-tax operating income available to common shareholders and Regulation G.

The following table summarizes the Company’s underwriting results:

  Three Months Ended   Six Months Ended
June 30, June 30,
(U.S. dollars in thousands) 2012   2011 2012   2011
 
Gross premiums written $ 1,051,813 $ 911,939 $ 2,118,469 $ 1,876,505
Net premiums written 820,233 706,543 1,683,844 1,470,821
Net premiums earned 726,656 642,879 1,406,968 1,276,574
Underwriting income (loss) 93,723 (43 ) 160,916 (64,023 )
 
Combined ratio (1) 87.2 % 100.0 % 88.6 % 105.1 %
 
(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 second quarter, the combined ratio of the Company’s insurance and reinsurance subsidiaries consisted of a loss ratio of 55.0% and an underwriting expense ratio of 32.2%, compared to a loss ratio of 67.1% and an underwriting expense ratio of 32.9% for the 2011 second quarter. For a discussion of underwriting activities and a review of the Company’s results by operating segment, see “Segment Information” in the Supplemental Financial Information section of this release.

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