Arch Capital Group Ltd. Reports 2012 Third Quarter Results

Arch Capital Group Ltd. (NASDAQ: ACGL) reports that net income available to common shareholders for the 2012 third quarter was $184.2 million, or $1.33 per share, compared to $162.3 million, or $1.18 per share, for the 2011 third quarter. The Company also reported after-tax operating income available to common shareholders of $120.2 million, or $0.87 per share, for the 2012 third quarter, compared to $107.2 million, or $0.78 per share, for the 2011 third quarter. All earnings per share amounts discussed in this release are on a diluted basis.

The Company’s book value per common share was $36.79 at September 30, 2012, a 6.8% increase from $34.45 per share at June 30, 2012 and a 19.0% increase from $30.91 per share at September 30, 2011. The Company’s after-tax operating income available to common shareholders represented a 9.9% annualized return on average common equity for the 2012 third quarter, compared to 10.5% for the 2011 third 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.

On October 29, 2012, Hurricane Sandy made landfall on the eastern coast of the United States. It is too early to reasonably estimate losses for this recent event given the significant unknowns, the early stage of the damage assessment process and the unusual nature of the event.

The following table summarizes the Company’s underwriting results:
       
Three Months Ended Nine Months Ended
September 30, September 30,
(U.S. dollars in thousands) 2012     2011   2012     2011  
 
Gross premiums written $ 936,764 $ 860,289 $ 3,055,233 $ 2,736,794
Net premiums written 755,249 691,381 2,439,093 2,162,202
Net premiums earned 748,691 682,049 2,155,659 1,958,623
Underwriting income (loss) 73,452 38,567 234,368 (25,456 )
 
Combined ratio (1) 90.2 % 94.4 % 89.2 % 101.3 %
 
(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 third quarter, the combined ratio of the Company’s insurance and reinsurance subsidiaries consisted of a loss ratio of 59.3% and an underwriting expense ratio of 30.9%, compared to a loss ratio of 62.2% and an underwriting expense ratio of 32.2% for the 2011 third 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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