Arch Capital has improved its first-quarter profits by $59 million year-on-year despite a near $200m drop in gross premiums written compared to the corresponding period in 2006.

The company's board of directors authorised a $1 billion share repurchase programme at the end of February that remains valid during the next two years.

Late in 2006 Arch had its financial ratings upgraded by both AM Best and Fitch as it strengthened its operation as a result of the benign hurricane season of last year.

Announcing its results for the first three months of 2007, Arch reported the net income available to common shareholders in the quarter at $198.6m, or $2.59 per share, a favourable improvement over the first quarter 2006 figures of $129.6m and $1.71 per share.

Pre-tax operating income available to shareholders is $207.4m, $2.71 per share, representing a 24.7 percent annualised return on common equity for the opening three months compared to 22.8 percent over the same period in 2006. The gross premiums written fell from $1.617 billion to $1.210bn year-on-year.

The Bermuda-based company had approximately $3.9bn in capital at the end of 2006 and writes insurance and reinsurance world-wide through its operations in Bermuda, the US, Europe and Canada.

At the time of making its ratings upgrade last December, AM Best noted: "The company's proven risk management capability has enabled recent and historical operating performance to be among the leaders in the Bermuda market as evidenced by a 2005 combined ratio of 95.8 percent, despite net catastrophe losses totalling approximately $330 million for the year."