10-QPeriod: Q3 FY2010

ARCH CAPITAL GROUP LTD. Quarterly Report for Q3 Ended Sep 30, 2010

Filed November 8, 2010For Securities:ACGLACGLNACGLO

Summary

Arch Capital Group Ltd. (ACGL) reported its financial results for the nine months ended September 30, 2010. The company demonstrated robust growth in book value per common share, increasing by 22.2% to $89.24 since December 31, 2009. This growth was driven by solid underwriting results and positive investment returns, further enhanced by a significant share repurchase program where $503.7 million was spent on repurchasing 6.9 million shares year-to-date. Financially, ACGL maintained a strong capital position with shareholders' equity reaching $4.72 billion. Net income available to common shareholders for the nine-month period was $589.1 million, or $11.05 per diluted share. The company's investment portfolio, totaling $12.1 billion, saw a pre-tax total return of 7.08% for the nine months, slightly outperforming its benchmark. Despite a slight decrease in net premiums written compared to the prior year, reflecting market conditions and strategic adjustments, the company's core insurance and reinsurance segments remained profitable, with combined ratios of 92.4% and 73.3% respectively for the nine-month period.

Financial Highlights

27 data points
Beta

Revenue

$797.35M

Net Income

$148.03M

18.6% Net Margin

EPS (Diluted)

$0.31

Total Assets

$17.70B

Cash & Equivalents

$366.00M

Free Cash Flow

$267.42M

Financial Statements
Beta
Revenue$797.35M
Interest Expense$7.37M
Net Income$148.03M
EPS (Basic)$0.32
EPS (Diluted)$0.31
Shares Outstanding (Basic)440.98M
Shares Outstanding (Diluted)460.64M

Key Highlights

  • 1Book value per common share increased by 22.2% to $89.24 as of September 30, 2010, compared to December 31, 2009.
  • 2Net income available to common shareholders was $589.1 million for the nine months ended September 30, 2010, with diluted EPS of $11.05.
  • 3The company repurchased 6.9 million shares for $503.7 million during the first nine months of 2010, as part of its $2.5 billion share repurchase program.
  • 4Total investments grew to $12.05 billion as of September 30, 2010, with a pre-tax total return of 7.08% for the nine-month period.
  • 5Shareholders' equity stood at $4.72 billion as of September 30, 2010.
  • 6The reinsurance segment demonstrated a strong combined ratio of 73.3% for the nine-month period, while the insurance segment's combined ratio was 102.6%, impacted by prior period reserve development and current year catastrophe events.

Frequently Asked Questions

For the nine months ended September 30, 2010, Arch Capital Group reported net income available to common shareholders of $589.1 million, or $11.05 per diluted share. The company also saw a significant increase in book value per common share to $89.24, up 22.2% from the end of 2009, indicating strong value creation for shareholders.

Arch Capital Group maintained a strong capital position with shareholders' equity of $4.72 billion as of September 30, 2010. The company actively returned capital to shareholders through its share repurchase program, repurchasing 6.9 million shares for $503.7 million year-to-date. The company also saw a pre-tax total return of 7.08% on its investment portfolio.

The reinsurance segment performed strongly with a combined ratio of 73.3% for the nine months, benefiting from favorable prior period reserve development and strong underwriting on current year business. The insurance segment, however, reported a combined ratio of 102.6%, impacted by a higher loss ratio due to current year catastrophe events (like the New Zealand earthquake) and some adverse prior period reserve development, particularly in casualty and executive assurance lines.

The company's investment portfolio, valued at $12.05 billion as of September 30, 2010, generated a pre-tax total return of 7.08% for the nine months ended September 30, 2010, slightly exceeding its benchmark return index. Net investment income decreased compared to the prior year due to lower prevailing interest rates, but this was partially offset by strong net realized gains.