Arch Capital Group Ltd. expects to lose between $105 million and $180 million, net of reinsurance and reinstatement premiums, in its third quarter pre-tax earnings as a result of the impact of Hurricanes Gustav and Ike

The Bermuda-based insurer's preliminary net loss estimate for Gustav is in the range of $15 million to $30 million, based on industry insured losses of $2.5 billion to $4.5 billion.

The company's portfolio exposures to publicly-traded equity securities include investments in equity index funds, which had an aggregate fair market value of $106.2 million at June 30, 2008. It has no exposure to fixed income securities issued directly by American International Group Inc. (AIG), but held fixed income securities of subsidiaries of AIG in the amount of $16.9 million at June 30, 2008 fair market values.

It also held fixed income securities issued by Lehman Brothers Holdings Inc. in the amount of $26.3 million at June 30, 2008 fair market values.

The preliminary net loss estimate for Ike is between $90 million and $150 million, based on industry insured losses of $8 billion to $12 billion.

The losses from the storms are estimated to be 30 percent from its insurance operations and 70 percent of its reinsurance segment.

A significant portion of the company's catastrophe-exposed business is written by a Bermuda-based subsidiary and as a result, generally, its effective tax rate is likely to be adversely affected in periods with significant catastrophic claims activity.

The above hurricane loss estimates are based on currently available information derived from modelling techniques, industry assessments of exposure, preliminary claims information obtained from the company's clients and brokers to date and a review of its in-force contracts. Its actual losses from this event may vary materially from the estimates due to the uncertainties in making such determinations resulting from several factors.

In addition, actual losses may increase if the Company's reinsurers fail to meet their obligations to the company or the reinsurance protections purchased by the company are exhausted or are otherwise unavailable.