Background
Arch
Capital Group is a Bermuda public limited company, with insurance and
reinsurance subsidiaries in Bermuda, the United States and Europe. Its
subsidiaries provide a full range of property and casualty insurance
and reinsurance products on a global basis, with a focus on specialty
lines of business.
In October 2001, conditions in the
insurance and reinsurance marketplace presented a significant market
opportunity for newly-established, well-capitalised insurance and reinsurance
companies not burdened by uncertainties resulting from participating
in the pre-2002 underwriting environment.
In response to these market conditions, Arch Capital, under the leadership
of Robert Clements (a co-founder of ACE, XL Capital and other well-known
Bermuda companies), and Peter Appel launched an underwriting initiative
to position Arch Capital as an important provider of insurance and reinsurance
capacity. As part of this initiative, Arch Capital recruited new insurance
and reinsurance management teams.
Arch Capital’s underwriting
initiative also included the raising of additional capital. In November
2001, a group of investors led by Warburg Pincus and Hellman & Friedman
invested an aggregate of $750 million in the company. Certain members
of management also invested an aggregate of $13.2 million. In April 2002,
Arch Capital raised an additional $180 million in an offering of shares
of its common stock, and in September 2002, it received an additional
$74 million from the exercise of warrants to purchase its shares by certain
of its investors, including Warburg Pincus and Hellman & Friedman.
In the years
since it was formed, Arch Capital has proved among the most sturdy of the post-9/11
companies, with whom it is linked. By attracting a number of insurance executives
with extraordinary depth of experience in other companies, Arch Capital has
placed itself at the forefront of the Bermuda re/insurance sector.
Spotlight – Pre- and post-9/11
Arch Capital
was an unusual member of the brigade of companies formed in Bermuda after
the events of September 11, 2001, in that the company was already in
existence before 9/11. The market disruptions following that day convinced
Arch Capital’s
management that the time to act was nigh. As a result, Arch Capital was
one of the first of the “Class
of 2001” to get into high gear.
The company
was founded as Risk Capital Holdings in 1995, and raised $335 million through
an IPO. XL Capital invested $75 million for 22.3 percent of RCH.
In 1997,
RCH had a hand in starting Bermuda’s Sovereign Risk Insurance, a provider
of political risk insurance coverage, and Latin American Reinsurance. RCH subsequently
sold its interest in Sovereign Risk Insurance to the other owners, XL Capital
and ACE.
Early in
2000, in preparation for its new life, RCH sold substantially all of the reinsurance
operations of Risk Capital Re. In a complicated later transaction, RCH also
sold its interest in Latin American Re to XL. RCH changed its name to Arch
Capital Group in May 2000 and late that year, the company moved to Bermuda.
Analysis
Arch
Capital writes both insurance and reinsurance. The
company’s business strategy emphasises:
Disciplined underwriting: prudent
risk selection and proper pricing is of paramount importance across all
lines of business.
Leveraging management and underwriting
experience: Arch Capital’s
business has been built by senior management teams with an average
of over 20 years of industry experience and extensive industry relationships.
Capitalising on its balance sheet
strength: the size of Arch’s
balance sheet (total assets at June 30, 2005: $9 billion), unencumbered
by significant pre-2002 risks, is of great importance to the company’s
intermediaries and customers. As of June 30, 2005, Arch Capital has
capital in excess of $2.8 billion.
Prudent capital management: the company
regularly assesses the deployment of its capital and the size of its
capital base in order to provide investors with optimal returns and policyholders
with appropriate financial security.
Maintaining a broad-based underwriting
platform: Arch Capital intends to maintain and build its existing platform
in order to access the wide array of underwriting opportunities that
are available in the current marketplace.
The company’s insurance group operates
in Bermuda through Arch Insurance (Bermuda), a division of Arch Reinsurance,
and in the US through the insurance companies of Arch Insurance Group
(US), which include Arch Insurance (a Missouri corporation), Arch Specialty
Insurance (a Wisconsin corporation) and Arch Excess and Surplus Insurance
(a Nebraska corporation).
Its reinsurance group includes Arch Reinsurance
in Bermuda and Arch Reinsurance (US) in the States. The group draws on
highly-rated capacity, experienced management and operational flexibility
to provide a wide range of property and casualty reinsurance products.
Senior Management
Chairman: Paul Ingrey
President and CEO: Constantine Iordanou
CFO: John D. Vollaro
Financial data
(half-year to June 30, 2005)
Gross premiums written: $1.921 billion, up 5 percent
Net premiums earned: $1.437 billion, unchanged
Net income: $241.9 million, up 26 percent
Shareholders’ equity: $2.504 billion, up 23 percent
Website
www.archcapgroup.com
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