Arch Capital Group Ltd. saw its profits soar by 67 percent for the first quarter of 2004 to $87.5 million after a successful renewal period which saw gross premiums written top $1 billion.

The company, which was set up in the wake of the September 11, 2001 attacks and the following capital crunch in the markets, reported on Wednesday night its first quarter 2004 earnings.

And it said that in the first quarter of 2003 net income stood at $52.5 million and during the same quarter gross written premiums had been at $860 million.

The company?s combined ratio was 89.2 percent for the 2004 first quarter, compared to 90.6 percent for the 2003 first quarter. Arch also reported after-tax operating income for the 2004 first quarter of $86.8 million, compared to $49.2 million for the 2003 first quarter.

The company?s after-tax operating income represented a 20.3 percent return on beginning equity for the 2004 first quarter, compared to 13.9 percent for the 2003 first quarter. In late March, 2004, the company issued 4,688,750 common shares and received net proceeds of approximately $179 million. ?The offering proceeds will be used to support the growth of the company?s insurance and reinsurance divisions and for other corporate purposes,? said the company in its earnings release. ?In addition, the company has announced that it has commenced the marketing of a public offering of $300 million principal amount of its senior notes.?

Arch said it expects to use the net proceeds from the sale of the notes to repay all amounts outstanding under its existing revolving credit facility and to support the underwriting activities of its insurance and reinsurance divisions and for ?other corporate purposes?.

At March 31, Arch?s capital of $2.21 billion consisted of revolving credit facility borrowings of $200.0 million, representing 9.0 percent of the total, and shareholders? equity of $2.01 billion, representing 91.0 percent of the total.

The increase in the company?s capital of approximately $300 million during 2004 was primarily attributable to the effects of the recent stock offering and net income for the 2004 first quarter, said the release. Net investment income for the 2004 first quarter was $24.6 million, compared to $18.4 million for the 2003 first quarter and this growth was due to a significant increase in the company?s invested assets, primarily resulting from cash flow provided by operating activities during 2003, which more than offset the effects of lower yields available in the financial markets. The company?s investment portfolio mainly consists of high quality fixed income securities, which had an average Standard & Poor?s quality rating of ?AA plus? and an average duration of 2.3 years at March 31. For the 2004 and 2003 first quarters, the company?s effective tax rates on income before income taxes were 11.2 percent and 13.0 percent, respectively, and the effective tax rates on pre-tax operating income were 10.0 percent and 12.5 percent respectively. The reduction in the effective tax rates in the 2004 first quarter resulted from a change in the relative mix of income reported by jurisdiction, the company said. The combined ratio, which represents a measure of underwriting profitability, excluding investment income, and is the sum of the loss ratio and expense ratio, for the company?s insurance and reinsurance subsidiaries for the first quarter of 2004 consisted of a loss ration of 60.7 percent and an underwriting expense ration of 28.5 percent, compared to a loss ration of 65.1 percent and an underwriting expense ration of 25.5 percent for the same period in 2003. A combined ratio under 100 percent represents an underwriting profit and a combined ratio over 100 percent represents an underwriting loss.