10-KPeriod: FY2002

ARCH CAPITAL GROUP LTD. Annual Report, Year Ended Dec 31, 2002

Filed March 31, 2003For Securities:ACGLACGLNACGLO

Summary

Arch Capital Group Ltd. (ACGL) filed its 2002 10-K on March 31, 2003, reporting significant growth driven by its strategic underwriting initiative launched in October 2001. The company has established a strong capital base, bolstered by a substantial capital infusion led by Warburg Pincus and Hellman & Friedman. ACGL's operations are divided into two segments: reinsurance and insurance, with reinsurance contributing 70% of the $1.26 billion in net premiums written for 2002. The company emphasizes disciplined underwriting, focusing on specialty lines across property and casualty. Despite a competitive market, ACGL's diversified portfolio and experienced management team position it to capitalize on market opportunities. The company's investment portfolio is conservatively managed, focusing on capital preservation and liquidity, with a high average credit quality.

Key Highlights

  • 1Arch Capital Group Ltd. (ACGL) reported net premiums written of $1.26 billion for the year ended December 31, 2002.
  • 2The company's operations are divided into reinsurance (70% of net premiums written) and insurance (30% of net premiums written).
  • 3A significant capital infusion of $763.2 million in November 2001 has strengthened ACGL's capital base.
  • 4ACGL's investment portfolio totaled approximately $2.0 billion at December 31, 2002, with a focus on capital preservation and diversification, maintaining an average credit quality of 'AA-'.
  • 5The company's reinsurance and principal insurance subsidiaries maintain an 'A-' (Excellent) financial strength rating from A.M. Best.
  • 6ACGL is strategically positioned to take advantage of favorable market conditions in the insurance and reinsurance industry following the events of September 11, 2001.
  • 7The company emphasizes a disciplined underwriting philosophy, prioritizing profitability and risk selection over premium growth.

Frequently Asked Questions

Arch Capital Group Ltd. focuses on writing specialty lines of insurance and reinsurance on a worldwide basis through its operations in Bermuda and the United States. Its business is divided into two underwriting segments: reinsurance and insurance.

ACGL significantly strengthened its financial position through an underwriting initiative launched in October 2001, which included a substantial equity capital infusion of $763.2 million led by Warburg Pincus LLC funds and Hellman & Friedman LLC funds. Further capital was raised through common share offerings and warrant exercises in 2002.

ACGL employs a disciplined underwriting philosophy, prioritizing active risk selection and management to meet profitability criteria. The company emphasizes disciplined underwriting over premium growth, maintains flexibility to respond to changing market conditions, and focuses on a low-cost structure. Risk management involves carefully monitoring exposures to natural and man-made catastrophic events.

For the year ended December 31, 2002, ACGL reported net premiums written of $1.26 billion, with the reinsurance segment contributing $882.7 million and the insurance segment contributing $378.9 million. The company reported net income of $58.98 million and had approximately $2.0 billion in invested assets. Its combined ratio on a GAAP basis was 90.9%.

ACGL's reinsurance subsidiaries (Arch Re U.S. and Arch Re Bermuda) and its principal insurance subsidiaries (Arch Insurance Company, Arch Specialty, and Arch E&S) each hold a financial strength rating of 'A-' (Excellent) from A.M. Best. Some smaller subsidiaries have different ratings.