Arch Capital Earnings Cheat Sheet: Mixed Report Yields Choppy Stock Action

Arch Capital Group Ltd. (NASDAQ:ACGL) posted lower net income in the first quarter compared with a year-earlier period. Arch Capital Group Ltd. provides insurance and reinsurance on a worldwide basis through its wholly owned subsidiaries.

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Arch Capital Group Earnings Cheat Sheet for the First Quarter

Results: Net income for Arch Capital Group Ltd. fell to $19.3 million (41 cents/share) vs. $217 million ($3.79/share) a year earlier. A decline of 91.1% from the year earlier quarter.

Revenue: Fell 8.3% to $775.1 million YoY.

Actual vs. Wall St. Expectations: ACGL beat the mean analyst estimate of a loss of 59 cents/share. Estimates ranged from a loss of $1.58 per share to a profit of $1.65 per share.

Quoting Management: The company addressed higher losses from catastrophic events in their earnings release, stating, “the Company’s 2011 first quarter results included losses for current year catastrophic events of $178.7 million, net of reinsurance and reinstatement premiums, compared to $58.1 million in the 2010 first quarter. The Company’s estimates for these catastrophic events are based on currently available information derived from modeling techniques, industry assessments of exposure, preliminary claims information obtained from the Company’s clients and brokers to date and a review of in-force contracts. The Company’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 available information, the unprecedented nature and scale of the Japanese earthquake and tsunami event, 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 risks affecting Japan are relatively untested by actual experience and may be subject to even greater variability. In addition, actual losses may increase if the Company’s reinsurers fail to meet their obligations to the Company or the reinsurance protections purchased by the Company are exhausted or are otherwise unavailable.”

Key Stats: The company has now seen net income fall in each of the last four quarters. In the fourth quarter of the last fiscal year, net income fell 19.6% while the figure fell 47.3% in the third quarter of the last fiscal year and 53.5% three quarters ago.

Competitors to Watch: Endurance Specialty Hldgs. Ltd. (NYSE:ENH), Alterra Capital Hldgs. Ltd. (NASDAQ:ALTE), Fairfax Financial Hldgs. Ltd. (FRFHF), PartnerRe Ltd. (NYSE:PRE), Allied World Assurance Co Hldgs., AG. (NYSE:AWH), W.R. Berkley Corporation (NYSE:WRB), Everest Re Group, Ltd. (NYSE:RE), ACE Limited (NYSE:ACE), Argo Group Intl. Hldgs., Ltd. (NASDAQ:AGII), American International Group (NYSE:AIG), AllState (NYSE:ALL), Progressive (NYSE:PGR), Traveler’s (NYSE:TRV) and Axis Capital Holdings Ltd. (NYSE:AXS).

Today’s Performance: Shares of ACGL are trading at $101.30 as of April 26, 2011 at 2:59 PM ET, down 1% from the previous close.

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