10-QPeriod: Q3 FY2011

ARCH CAPITAL GROUP LTD. Quarterly Report for Q3 Ended Sep 30, 2011

Filed November 8, 2011For Securities:ACGLACGLNACGLO

Summary

Arch Capital Group Ltd. (ACGL) reported its financial results for the third quarter and the first nine months of 2011. The company's net income for the third quarter of 2011 was $169.0 million, or $1.19 per diluted share, a significant increase from $148.0 million, or $0.92 per diluted share, in the same period of 2010. For the nine months ended September 30, 2011, net income was $293.1 million, or $1.98 per diluted share, down from $608.5 million, or $3.68 per diluted share, in the prior year. This decrease was largely due to a substantial increase in catastrophic event losses in 2011 compared to 2010. The company's balance sheet shows total assets of $17.43 billion as of September 30, 2011, an increase from $15.81 billion at the end of 2010, primarily driven by growth in investments. Total liabilities also increased to $12.96 billion from $11.30 billion, mainly due to higher reserves for losses and unearned premiums. Shareholders' equity slightly decreased to $4.47 billion from $4.51 billion, impacted by significant share repurchases that outpaced net income generated during the period.

Financial Highlights

28 data points
Beta

Revenue

$764.99M

Net Income

$168.75M

22.1% Net Margin

EPS (Diluted)

$0.39

Total Assets

$17.43B

Cash & Equivalents

$369.89M

Free Cash Flow

$309.92M

Financial Statements
Beta
Revenue$764.99M
Interest Expense$8.13M
Net Income$168.75M
EPS (Basic)$0.41
EPS (Diluted)$0.39
Shares Outstanding (Basic)394.68M
Shares Outstanding (Diluted)411.42M

Key Highlights

  • 1Net income for Q3 2011 was $169.0 million, an increase from $148.0 million in Q3 2010.
  • 2Net income for the first nine months of 2011 was $293.1 million, a decrease from $608.5 million in the same period of 2010, primarily due to higher catastrophic event losses.
  • 3Total assets grew to $17.43 billion as of September 30, 2011, up from $15.81 billion at year-end 2010.
  • 4Book value per common share increased to $31.20 at September 30, 2011, from $29.99 at December 31, 2010.
  • 5The company repurchased approximately 0.7 million common shares for $20.8 million in Q3 2011, and 9.6 million shares for $287.6 million year-to-date.
  • 6The company's Operating Return on Average Common Equity (Operating ROAE) was 10.4% for Q3 2011 and 5.7% for the first nine months of 2011, down from 12.3% and 11.5% respectively in the prior year periods, impacted by catastrophic events and lower interest yields.
  • 7Net investment income for the nine months ended September 30, 2011 was $257.7 million, a decrease from $274.3 million in the prior year, reflecting lower reinvestment yields.

Frequently Asked Questions

Arch Capital Group Ltd. reported a net income of $169.0 million for the third quarter of 2011, which translates to $1.19 per diluted share. This represents an increase compared to the $148.0 million ($0.92 per diluted share) reported in the same quarter of 2010.

Catastrophic events significantly impacted the company's results, particularly in the nine-month period. Losses from current year catastrophic events were $333.3 million for the first nine months of 2011, compared to $89.3 million for the same period in 2010. This increase in catastrophe losses was a primary driver for the lower net income and Operating ROAE in 2011.

As of September 30, 2011, Arch Capital Group Ltd. had total assets of $17.43 billion, an increase from $15.81 billion at the end of 2010. Shareholders' equity stood at $4.47 billion, a slight decrease from $4.51 billion at year-end 2010. This decrease in equity was largely due to share repurchase activities exceeding net income generated during the period.

The company's investment portfolio is actively managed with a focus on capital preservation, liquidity, and diversification. Net investment income for the nine months ended September 30, 2011 was $257.7 million, down from $274.3 million in the prior year, reflecting lower reinvestment yields. The pre-tax investment income yield was 2.98% for the nine months of 2011. The company also experienced a total return on its portfolio of 2.97% for the first nine months of 2011, underperforming its benchmark return of 3.34%.