Arch Capital Group Ltd., a Bermuda-based insurance and reinsurance company, reports that net income available to Arch common shareholders for the 2014 fourth quarter was $209.7 million, or $1.60 per share, compared to $156.0 million, or $1.14 per share, for the 2013 fourth quarter.
For the 2014 fourth quarter, after-tax operating income available to Arch common shareholders was $150.2 million, or $1.15 per share, compared to $152.7 million, or $1.12 per share, for the 2013 fourth quarter.
For the year ended December 31, 2014, net income available to Arch common shareholders was $812.4 million, or $6.02 per share, compared to $687.8 million, or $5.07 per share, for 2013, while after-tax operating income available to Arch common shareholders for 2014 was $617.3 million, or $4.58 per share, compared to $595.7 million, or $4.39 per share, for 2013. All earnings per share amounts discussed in this release are on a diluted basis.
The company’s book value per common share was $45.58 at December 31, 2014, a 3.5 percent increase from $44.04 per share at September 30, 2014 and a 14.5 percent increase from $39.82 per share at December 31, 2013.
The company’s after-tax operating income available to Arch common shareholders represented an annualized return on average common equity of 10.4 percent for the 2014 fourth quarter, compared to 11.7 percent for the 2013 fourth quarter, and 11.1 percent for the year ended December 31, 2014, compared to 11.7 percent for 2013.
The company’s net income available to Arch common shareholders represented an annualized return on average common equity of 14.5 percent for the 2014 fourth quarter, compared to 12.0 percent for the 2013 fourth quarter, and 14.6 percent for the year ended December 31, 2014, compared to 13.5 percent for 2013.
Net investment income for the 2014 fourth quarter was $72.6 million, or $0.56 per share, compared to $72.2 million, or $0.53 per share, for the 2014 third quarter, and $67.1 million, or $0.49 per share, for the 2013 fourth quarter. The annualized pre-tax investment income yield was 2.16 percent for the 2014 fourth quarter, compared to 2.05 percent for the 2014 third quarter and 2.08 percent for the 2013 fourth quarter. Such yields reflect the effects of low prevailing interest rates available in the market and the company’s investment strategy, which puts an emphasis on total return, Arch said in a statement.
Consolidated cash flow provided by operating activities was $226.9 million for the 2014 fourth quarter, compared to $223.8 million for the 2013 fourth quarter.
Gulf Reinsurance Limited
In 2008, the company provided $100 million of funding to Gulf Reinsurance Limited, a specialty reinsurer based in the Dubai International Financial Centre which was founded jointly by Arch and Gulf Investment Corporation (“GIC”).
Arch said it recorded a loss of $5.0 million in the 2014 fourth quarter and $14.1 million for the year ended December 31, 2014 related to its investment in Gulf Re, primarily resulting from a small number of large losses.
Arch entered into a number of strategic initiatives in the 2014 fourth quarter, including an agreement to acquire complete ownership of Gulf Re, which is currently pending approval by the Dubai Financial Services Authority.
To further support Gulf Re’s business in advance of the January 1 renewal season, Arch entered into a 90 percent whole account quota share retrocession arrangement of Gulf Re’s net liabilities and a portfolio transfer of all of Gulf Re’s existing business (both unearned premium and loss reserves), effective as of October 1, 2014.
Share Repurchase Program
During the 2014 fourth quarter, the company repurchased 3.6 million common shares for an aggregate purchase price of $202.2 million under its share repurchase program. Since the inception of the share repurchase program through December 31, 2014, Arch Capital Group Ltd. has repurchased 118.1 million common shares for an aggregate purchase price of $3.24 billion. At December 31, 2014, $887.1 million of repurchases were available under the share repurchase program.
Source: Arch Capital Group Ltd.