Log In

Reset Password
BERMUDA | RSS PODCAST

Arch profits increase eightfold on lower catastrophe losses

Arch Capital Group Ltd’s first-quarter profit was eight times larger than the net income it made in the same period of 2011.

The Bermuda-based re/insurer last night posted net income of $157.8 million, or $1.14 per share compared to $19 million, or 41 cents per share in the same period in 2011.

Operating earnings per share of 82 cents a share easily beat analysts’ expectations of 71 cents per share. This is the fourth straight quarter the company has surpassed Wall Street estimates. It beat the mark by 11 cents in the first quarter, by 27 cents in the fourth quarter of last year, 15 cents in the third quarter of last year and by 25 cents in the second quarter of last year.

Analysts also projected revenue to rise to $812.8 million, but the company exceeded that estimate as well, reporting a 5.3 percent increase in revenue to more than $815 million.

The year-over-year revenue increase puts an end to a streak of four consecutive quarters of revenue declines for the company. The worst quarter was the fourth quarter of last year in which Arch saw a 9.4 percent decrease.

The increased profits stemmed from a difference in the amount of catastrophic losses. In the first three months of 2011, the company suffered catastrophe losses of nearly $180 million, which resulted from the Japanese earthquake and tsunami, New Zealand earthquake and other events. During the same time frame of 2012 Arch posted $23 million in catastrophe losses, mostly related to storms and tornado activity in the US.

Next quarter’s results are expected to be even more favourable for the company. Over the past sixty days, the average estimate for the second quarter has reached 78 cents per share, up from 77 cents. At $2.80 per share, the average estimate for the fiscal year has fallen from $2.85 90 days ago.

The company’s book value per share was $33.33 at March 21, 2012, a 4.9 percent increase from $31.76 per share on December 31, 2011 while its after-tax operating income represented a 10.4 percent annualised return on average common equity for the first quarter of 2012 versus 0.7 percent for the 2011 first quarter.

It wrote more than a billion dollars in gross premiums for the first three months of 2012, compared to $964.6 million the prior year. The combined ratio, reflecting the proportion of premium dollars spent on claims and expenses, fell to 90.1 percent from 110 percent in the respective period, indicating a profitable underwriting period.

Net realised gains were up at $40.8 million in the first quarter from $21.6 million in 2011.

For the 2012 first quarter, the combined ratio of the company’s insurance and reinsurance subsidiaries consisted of a loss ratio of 58.1 percent and an underwriting expense ratio of 32 percent, compared to a loss ratio of 77.9 percent and an underwriting expense ratio of 32.1 percent for the 2011 first quarter.

Including the effects of foreign exchange, total return on Arch’s investment portfolio, calculated on a pre-tax basis and before investment expenses, was approximately 1.87 percent for the 2012 first quarter, compared to 1.5 percent for the 2011 first quarter. Excluding the effects of foreign exchange, total return was 1.6 percent for the 2012 first quarter, compared to 1.14 percent for the 2011 first quarter.

Net investment income for the 2012 first quarter was $74.3 million, or 54 cents per share, compared to $88.3 million, or 63 cents per share, for the 2011 first quarter.

Arch Capital CEO Constantine Iordanou

You must be Registered or to post comment or to vote.

Published April 26, 2012 at 2:00 am (Updated April 26, 2012 at 9:11 am)

Arch profits increase eightfold on lower catastrophe losses

What you
Need to
Know
1. For a smooth experience with our commenting system we recommend that you use Internet Explorer 10 or higher, Firefox or Chrome Browsers. Additionally please clear both your browser's cache and cookies - How do I clear my cache and cookies?
2. Please respect the use of this community forum and its users.
3. Any poster that insults, threatens or verbally abuses another member, uses defamatory language, or deliberately disrupts discussions will be banned.
4. Users who violate the Terms of Service or any commenting rules will be banned.
5. Please stay on topic. "Trolling" to incite emotional responses and disrupt conversations will be deleted.
6. To understand further what is and isn't allowed and the actions we may take, please read our Terms of Service
7. To report breaches of the Terms of Service use the flag icon