Arch Capital: $237 Million Net Income
Bermuda-based Arch Capital Group Ltd reports that net income available to common shareholders for the 2010 second quarter was $237.0 million, or $4.45 per share, compared to $152.1 million, or $2.43 per share, for the 2009 second quarter. The Company also reported after-tax operating income available to common shareholders of $132.2 million, or $2.48 per share, for the 2010 second quarter, compared to $163.0 million, or $2.60 per share, for the 2009 second quarter. All earnings per share amounts discussed in this release are on a diluted basis.
The Company’s book value per common share was $82.07 at June 30, 2010, a 6.7% increase from $76.91 per share at March 31, 2010 and a 12.4% increase from $73.01 per share at December 31, 2009. The Company’s after-tax operating income available to common shareholders represented a 13.0% annualized return on average common equity for the 2010 second quarter, compared to 18.6% for the 2009 second quarter.
Including the effects of foreign exchange, total return on the Company’s investment portfolio was approximately 1.74% for the 2010 second quarter, compared to 3.89% for the 2009 second quarter, and 3.35% for the six months ended June 30, 2010, compared to 5.03% for the six months ended June 30, 2009. Excluding the effects of foreign exchange, total return was 2.22% for the 2010 second quarter, compared to 3.20% for the 2009 second quarter, and 4.24% for the six months ended June 30, 2010, compared to 4.46% for the six months ended June 30, 2009.
Net investment income for the 2010 second quarter was $90.5 million, or $1.70 per share, compared to $100.5 million, or $1.60 per share, for the 2009 second quarter. The comparability of net investment income between the 2010 and 2009 periods was influenced by the Company’s share repurchase program described below. In addition, during the 2010 second quarter, the Company recorded a reduction to net investment income following a review of prepayment assumptions on certain commercial mortgage backed securities. The 2010 investment income yields were calculated excluding $3.7 million of amortization expense which was recorded in the 2010 second quarter but is not expected to impact yields during the balance of 2010. The pre-tax investment income yield was 3.48% for the 2010 second quarter, compared to 3.91% for the 2009 second quarter, and 3.46% for the six months ended June 30, 2010, compared to 3.87% for the six months ended June 30, 2009. The lower yields in the 2010 periods primarily reflect lower prevailing interest rates available in the market.
Consolidated cash flow provided by operating activities for the 2010 second quarter was $205.5 million, compared to $223.7 million for the 2009 second quarter, and $390.1 million for the six months ended June 30, 2010, compared to $518.5 million for the six months ended June 30, 2009. The decline in cash flow in the 2010 periods reflect a lower level of premium collections and an increase in paid losses as the Company’s insurance and reinsurance loss reserves continue to mature.
