10-Q/APeriod: Q1 FY2001

ARCH CAPITAL GROUP LTD. Quarterly Report (Amendment) for Q1 Ended Mar 31, 2001

Filed August 10, 2001For Securities:ACGLACGLNACGLO

Summary

Arch Capital Group Ltd. (ACGL) filed a Form 10-Q/A to restate its financial statements for the first quarter of 2001 and 2000. The restatement was primarily due to the adoption of the equity method of accounting for an initial investment in Arch Risk Transfer Services Ltd. (ART Services) following the acquisition of the remaining ownership interests on June 22, 2001. This change retroactively applied the equity method to the initial 27.9% stake, impacting historical results. For the first quarter of 2001, the restatement resulted in a decrease in net income by $148,000 ($0.01 per share) and a reduction in book value by $3.1 million ($0.24 per share). Conversely, the restatement increased net income for the first quarter of 2000 by $1.9 million ($0.13 per share). Overall, the company reported net income of $7.993 million ($0.63 per share) for the first quarter of 2001, an increase from $7.697 million ($0.50 per share) in the prior year's first quarter. Total revenues decreased significantly from $95.7 million in Q1 2000 to $16.9 million in Q1 2001, primarily due to a sharp decline in net premiums written. Expenses also decreased substantially, driven by lower claims and claims expenses. The company's consolidated shareholders' equity stood at $269.4 million at March 31, 2001.

Key Highlights

  • 1Arch Capital Group Ltd. restated its Q1 2001 and Q1 2000 financial statements due to the retroactive adoption of the equity method of accounting for an investment in ART Services following its full acquisition.
  • 2The restatement reduced Q1 2001 net income by $148,000 ($0.01/share) and book value by $3.1 million ($0.24/share), while increasing Q1 2000 net income by $1.9 million ($0.13/share).
  • 3Reported net income for Q1 2001 was $7.993 million ($0.63 per share), up from $7.697 million ($0.50 per share) in Q1 2000.
  • 4Total revenues for Q1 2001 declined sharply to $16.9 million from $95.7 million in Q1 2000, mainly due to reduced net premiums written.
  • 5Consolidated shareholders' equity was $269.4 million as of March 31, 2001.
  • 6The company's investment portfolio at March 31, 2001, comprised fixed maturities, publicly traded equity securities, privately held securities, and short-term investments, totaling $261.4 million.
  • 7Liquidity appears stable with $45.2 million in cash and short-term investments, though certain investment assets were restricted or held in escrow.

Frequently Asked Questions

The company restated its Q1 2001 and 2000 financial statements to retroactively apply the equity method of accounting to its initial 27.9% ownership interest in Arch Risk Transfer Services Ltd. (ART Services). This change was required under 'step acquisition' accounting rules after the company acquired the remaining ownership interests in ART Services on June 22, 2001.

The restatement resulted in a decrease in net income of $148,000 ($0.01 per share) and a reduction in book value of $3.1 million ($0.24 per share) for the first quarter of 2001. For the first quarter of 2000, the restatement led to an increase in net income of $1.9 million ($0.13 per share).

Net income for the first quarter of 2001 was $7.993 million ($0.63 per share), an increase from $7.697 million ($0.50 per share) in the first quarter of 2000. However, total revenues saw a significant decrease to $16.9 million in Q1 2001 from $95.7 million in Q1 2000, largely driven by a substantial drop in net premiums written.

As of March 31, 2001, Arch Capital Group Ltd. reported consolidated shareholders' equity of $269.4 million. The total investment portfolio amounted to $261.4 million, consisting of fixed maturities, publicly traded equity securities, privately held securities, and short-term investments. The company also had $45.2 million in cash and short-term investments available for liquidity, though some assets were restricted or held in escrow.