10-KPeriod: FY2005

ARCH CAPITAL GROUP LTD. Annual Report, Year Ended Dec 31, 2005

Filed March 13, 2006For Securities:ACGLACGLNACGLO

Summary

Arch Capital Group Ltd. (ACGL) reported strong performance for the fiscal year ending December 31, 2005. The company experienced significant growth in net premiums written, reaching $3.14 billion, and achieved a net income of $256.5 million, resulting in a return on average equity of 10.9%. Diluted book value per share increased by 9.0% to $33.82. The company highlighted its successful underwriting initiative launched in October 2001, driven by an experienced management team and a robust capital base unencumbered by pre-2002 risks. ACGL's operations span insurance and reinsurance across Bermuda, the United States, Europe, and Canada, with a strategic focus on specialty lines. The company also completed several capital-raising activities throughout the year and in early 2006 to support its underwriting expansion.

Key Highlights

  • 1Net premiums written increased to $3.14 billion in 2005, up from $2.98 billion in 2004.
  • 2Net income was $256.5 million in 2005, with a return on average equity of 10.9%.
  • 3Diluted book value per share grew to $33.82 at December 31, 2005, an increase of 9.0% from the prior year.
  • 4The company operates in both insurance and reinsurance sectors across multiple geographies, focusing on specialty lines.
  • 5Capital was strengthened through multiple equity and debt offerings, including $200 million in preferred shares issued in February 2006.
  • 6The company managed significant catastrophe losses in 2005, with estimated net losses of $213.4 million in its reinsurance segment and $119.8 million in its insurance segment.
  • 7Investment portfolio grew to $7.12 billion, with a strong credit quality (96% investment grade) and an average S&P rating of 'AA+'.

Frequently Asked Questions

Arch Capital Group Ltd. (ACGL) reported net income of $256.5 million for the year ended December 31, 2005, representing a 10.9% return on average equity. Net premiums written increased to $3.14 billion, and diluted book value per share rose to $33.82.

ACGL operates in two primary segments: reinsurance and insurance. They focus on writing specialty lines of insurance and reinsurance across Bermuda, the United States, Europe, and Canada.

Catastrophe events, including Hurricanes Dennis, Emily, Katrina, Rita, and Wilma, had a significant impact. The reinsurance segment reported estimated net losses of $213.4 million, and the insurance segment reported estimated net losses of $119.8 million from these events. These losses affected the company's underwriting income and combined ratios for the year.

As of December 31, 2005, ACGL's total cash and invested assets amounted to $7.12 billion. The portfolio was heavily weighted towards fixed maturities (86.3%) and maintained a high credit quality, with approximately 96% rated investment grade by Standard & Poor's, and an average S&P quality rating of 'AA+'.