Arch Capital Group Ltd.'s book value soared 42 percent last year as the company's full-year profit rose more than threefold.

The Bermuda-based re/insurer last night reported fourth-quarter net income of $284.7 million, or $4.75 per share, compared to a net loss to common shareholders of $143 million, or $2.38 per share in 2008.

For the full year, Arch said earnings totalled $851.1 million, or $13.74 per share, compared to $265.1 million, or $4.09 per share, in 2008.

Arch, led by chief executive officer Constantine Iordanou, said book value per common share was $73.01 at December 31, 2009, — a 5.1 percent increase during the quarter and a 42.2 percent increase from $51.36 12 months earlier.

The company said the return on its investment portfolio for 2009 was 11.3 percent, compared to minus 2.8 percent in 2008.

Growth in book value was generated by operating income and investment returns, Arch said.

After-tax operating income rose to $159.4 million, or $2.66 per share, for the 2009 fourth quarter, compared to $85.9 million, or $1.43 per share, for the 2008 fourth quarter.

For the full year, operating income was $651.8 million, or $10.53 per share, compared to $537.4 million, or $8.29 per share, for 2008.

The after-tax operating income represented a return of equity of 18.3 percent for 2009, compared to 15.8 percent for the previous year. The amount of insurance sold by Arch declined slightly last year, as gross premiums written slipped to $3.59 billion in 2009, from $3.67 billion last year.

Combined ratio — the percentage of premium dollars spent on claims and expenses — improved to 88.1 percent for the year, compared to 95 percent in 2008. For the fourth quarter, combined ratio was 88.8 percent, compared to 101.2 percent in the same period of 2008.

Shareholders' equity soared to $4.32 billion by the end of last year from $3.43 billion at the end of 2008.

Arch said it ended the year with capital of $4.72 billion, compared to $3.83 billion a year earlier.

ARCH CAPITAL Q4 REPORT CARD

Net income: $284.7 million compared to a loss of $143 million in 2008

Gross premiums written: $718.7 million compared to $825.5 million in 200

8Combined ratio: 88.8 percent compared to 101.2 percent in 2008