10-KPeriod: FY2008

ARCH CAPITAL GROUP LTD. Annual Report, Year Ended Dec 31, 2008

Filed March 2, 2009For Securities:ACGLACGLNACGLO

Summary

ARCH CAPITAL GROUP LTD. (ACGL) reported strong financial performance for the fiscal year ended December 31, 2008, despite challenging market conditions. The company generated $2.8 billion in net premiums and achieved a net income of $265.1 million, resulting in a return on equity of 7.8%. Diluted book value per share stood at $51.36 at year-end. The company operates in specialty lines of insurance and reinsurance, with a global presence across Bermuda, the United States, Europe, and Canada. ACGL's strategy emphasizes disciplined underwriting, leveraging its experienced management team and strong capital base, which is unencumbered by significant pre-2002 risks. The company's investment portfolio, totaling approximately $10 billion, is managed with a focus on capital preservation, market liquidity, and risk diversification, although it experienced some market-related pressures in 2008.

Financial Highlights

20 data points
Beta

Revenue

$2.97B

Net Income

$290.97M

9.8% Net Margin

EPS (Diluted)

$0.45

Cash & Equivalents

$251.74M

Free Cash Flow

$1.14B

Financial Statements
Beta
Revenue$2.97B
Interest Expense$23.84M
Net Income$290.97M
EPS (Basic)$0.47
EPS (Diluted)$0.45
Shares Outstanding (Basic)558.91M
Shares Outstanding (Diluted)583.10M

Key Highlights

  • 1Achieved net income of $265.1 million on net premiums written of $2.8 billion for the year ended December 31, 2008.
  • 2Maintained a strong capital base with over $3.8 billion in capital at December 31, 2008.
  • 3Diluted book value per share was $51.36 at December 31, 2008.
  • 4Operates a diversified business model across insurance and reinsurance segments, with a global footprint.
  • 5Investment portfolio totaled approximately $10 billion at December 31, 2008, primarily consisting of investment-grade fixed maturities.
  • 6Experienced favorable development of prior year loss reserves in both the insurance and reinsurance segments.
  • 7Strategically expanded underwriting platform with new branches and regulatory approvals in Europe and the UK.

Frequently Asked Questions

For the year ended December 31, 2008, ARCH CAPITAL GROUP LTD. reported a net income of $265.1 million on net premiums written of $2.8 billion. The company's return on average equity was 7.8%, and its diluted book value per share was $51.36.

ARCH CAPITAL GROUP operates in both insurance and reinsurance segments, writing specialty lines of business on a worldwide basis. Its operations are geographically diversified across Bermuda, the United States, Europe, and Canada.

At December 31, 2008, the company's investment portfolio totaled approximately $10 billion, primarily comprising fixed maturities (87.6% of the total). Approximately 97% of these fixed maturities were rated investment grade. The portfolio experienced a pre-tax total return of -2.84% for 2008, reflecting challenging market conditions, with net realized losses of $185.1 million, partly due to other-than-temporary impairments.

The insurance segment reported an underwriting loss of $29.4 million with a combined ratio of 101.7%, impacted by an underwriting loss ratio of 71.3% due to catastrophes like Hurricanes Gustav and Ike. The reinsurance segment reported underwriting income of $173.0 million with a combined ratio of 85.3%, also affected by catastrophe losses but benefiting from favorable prior year loss reserve development.