Arch Capital reports US$173 million loss in net income for 2008 Q3

Arch Capital Group Ltd has reported net income available to common shareholders was US$26.4 million for 2008 Q3, as compared to US$199.7 million for the same period in 2007.
For the nine months ended Sept. 30, 2008, net income available to common shareholders was US$408.1 million as compared to US$597.7 million for the first nine months of 2007.
Arch reported a combined ratio of 105.3% for 2008 Q3 as compared to 84.8% for the same period in 2007. The combined ratio was 92.9% for the first nine months of 2008, as compared to 84.1% for the first nine months of 2007.
The company reported an underwriting loss of $38.5 million for 2008 Q3 as compared to an underwriting income of US$112.3 million for the same quarter in 2007. Underwriting income for the first nine months of 2008 is US$151.3 million, as compared to US$357.2 million for the same nine months in 2007.
In 2008 Q3, Arch recorded estimated after-tax net losses of US$133 million related to Hurricanes Gustav and Ike, after reinsurance recoveries and net of reinstatement premiums, the company noted in a release.
“Such estimates were based on currently available information derived from modeling techniques, industry assessments of exposure, preliminary claims information obtained from the [Arch’s} clients and brokers and a review of the Company’s in-force contracts,” Arch noted in a release. Arch’s “actual losses from these events may vary materially from the estimates due to the inherent uncertainties in making such determinations resulting from several factors, including the preliminary nature of the available information, the potential inaccuracies and inadequacies in the data provided by clients and brokers, the modeling techniques and the application of such techniques, the contingent nature of business interruption exposures, the effects of any resultant demand surge on claims activity and attendant coverage issues.”
In particular, the models used for offshore energy risks are relatively new and may be subject to even greater variability, the company went on to note, adding that actual losses may increase if Arch’s reinsurers fail to meet their obligations to Arch if the reinsurance protections purchased by Arch are exhausted or otherwise unavailable.