Bermuda's Arch Capital's business is booming in 2002 with a $278 million rise in the amount of net premiums written.

Net premiums written for the 2002 first quarter were $280.7 million, compared to $2.8 million for the first quarter of 2001.

But net income fell to $3.966 million for the quarter from $7.993 million for the same period a year earlier. After tax operating income grew to $8.368 million in the first four months of the year from $1.608 million a year earlier.

Net income for the 2002 first quarter included, on an after-tax basis, net realised investment losses of $1.2 million, or $0.02 per diluted share, equity in net income of investees of $540,000, or $0.01 per diluted share, non-cash compensation charges of $3.7 million, or $0.07 per diluted share and a foreign exchange loss of $108,000.

These amounts correspond to net income for the 2001 first quarter which includes, on an after-tax basis, net realised investment gains of $6.2 million, or $0.48 per diluted share, equity in net income of investees of $540,000, or $0.04 per diluted share, and non-cash compensation charges of $307,000, or $0.02 per diluted share.

In connection with the Company's new insurance operations, the company incurred start-up costs of approximately $1.1 million after-tax, or $0.02 per diluted share in the 2002 first quarter.

The company's new reinsurance subsidiaries alone brought in $264.9 million in new business during the first quarter of the year and overall Arch Capital group will write about $600 million in reinsurance premiums over the year, the company reported yesterday.

“We are very pleased with the results of our new underwriting initiative during the first four months of 2002,” said Peter Appel, President and Chief Executive Officer of Arch Capital. “Our reinsurance operations are off to a very strong start and our insurance group is now positioned to participate more actively in an attractive insurance marketplace.”

And the company attributed the increase primarily due to net written premiums of $264.9 million generated by the company's newly-formed reinsurance operations.

Following events in the United States on September 11, Arch Capital changed the use of Arch Re to take advantage of the shortage in insurance capacity created by the terrorist attacks.

And this move has paid off handsomely for Arch Capital, and yesterday the company said that during the period from January 1 to April 30, 2002, its reinsurance subsidiaries have entered into more than 1,000 reinsurance treaties and other reinsurance arrangements with over 350 clients. The deals are expected to provide about $600 million of annualised net reinsurance premiums written.

During the first four months of 2002, the company also reported it had made significant progress in expanding its insurance operations, which it said had received a significant increase in the amount of business submitted.

The company added in its release: “ These net written premiums represent the current period's portion of the annualised net premiums written during the January 1 renewal season.

“The quarterly net premiums written differ from the annualised net premiums written due to the timing of recording premiums for contracts written on a pro rata and excess of loss basis.”

It said that for business written on a pro rata basis, premiums are recorded as the underlying policies are written, generally over a twelve-month period.

For excess of loss treaties, the minimum annual premium is recorded as written as of the date of the treaty. Approximately 65 percent of the $506 million of annualised premiums written through March 31, 2002 were generated from pro rata contracts and 35 percent were derived from excess of loss treaties.

The company said that as a result, approximately 70 percent of the net written premiums for the first quarter of 2002 were produced by excess of loss business, with the balance attributable to pro rata contracts.