10-QPeriod: Q1 FY2009

ARCH CAPITAL GROUP LTD. Quarterly Report for Q1 Ended Mar 31, 2009

Filed May 11, 2009For Securities:ACGLACGLNACGLO

Summary

Arch Capital Group Ltd. (ACGL) reported its first quarter 2009 financial results, showing a decrease in net income available to common shareholders to $139.9 million ($2.24 per diluted share) from $189.4 million ($2.78 per diluted share) in the prior year's comparable quarter. This decline was primarily driven by lower investment returns, reflecting prevailing market conditions. Despite the decrease in net income, the company maintained a strong financial position with total shareholders' equity growing to $3.63 billion, or $54.61 per common share. The company's underwriting segments, insurance and reinsurance, demonstrated combined ratios of 97.1% and 72.7%, respectively, indicating operational performance. ACGL continues to focus on specialty lines of insurance and reinsurance, aiming to manage capital and maintain strong financial strength ratings. The company is navigating a challenging economic environment characterized by financial market volatility and potential impacts on claim frequency and severity. Management is focused on underwriting discipline and managing its investment portfolio to preserve capital and liquidity.

Key Highlights

  • 1Net income available to common shareholders decreased to $139.9 million in Q1 2009 from $189.4 million in Q1 2008, primarily due to lower investment returns.
  • 2Diluted earnings per common share decreased to $2.24 in Q1 2009 from $2.78 in Q1 2008.
  • 3Total shareholders' equity increased to $3.63 billion as of March 31, 2009, up from $3.43 billion as of December 31, 2008, resulting in book value per common share of $54.61.
  • 4The company's investment portfolio stood at $10.25 billion as of March 31, 2009.
  • 5The insurance segment reported an underwriting income of $11.4 million with a combined ratio of 97.1%, an improvement from 98.4% in Q1 2008.
  • 6The reinsurance segment reported an underwriting income of $82.0 million with a combined ratio of 72.7%, compared to 68.5% in Q1 2008.
  • 7The company repurchased $1.6 million of common shares during Q1 2009, with $448.3 million remaining under its share repurchase program.

Frequently Asked Questions

Arch Capital's net income available to common shareholders for the first quarter of 2009 was $139.9 million, or $2.24 per diluted share. This represents a decrease compared to $189.4 million, or $2.78 per diluted share, in the same period of 2008, primarily due to lower investment returns.

The company's financial condition remained strong, with total shareholders' equity increasing to $3.63 billion as of March 31, 2009, up from $3.43 billion at the end of 2008. This resulted in a book value per common share of $54.61.

The primary driver for the decrease in net income was a lower level of investment returns, which included both net investment income and net realized gains/losses. This reflects the challenging financial market conditions experienced during the period.

The insurance segment reported an underwriting income of $11.4 million and a combined ratio of 97.1%, an improvement from the prior year. The reinsurance segment generated an underwriting income of $82.0 million but saw its combined ratio increase to 72.7% from 68.5% in the prior year, mainly due to changes in premiums written and loss ratios.