CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 ("PLSRA") provides a "safe harbor" for forward-looking statements. This report or
any other written or oral statements made by or on behalf of us may include forward-looking statements, which reflect our current views with respect to future events and financial performance. All
statements other than statements of historical fact included in or incorporated by reference in this report are forward-looking statements. Forward-looking statements, for purposes of the PLSRA or
otherwise, can generally be identified by the use of forward-looking terminology such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe" or "continue" and similar statements of
a future or forward-looking nature or their negative or variations or similar terminology.
Forward-looking
statements involve our current assessment of risks and uncertainties. Actual events and results may differ materially from those expressed or implied in these statements.
Important factors that could cause actual events or results to differ materially from those indicated in such statements are discussed below, elsewhere in this report and in our periodic reports filed
with the Securities and Exchange Commission ("SEC"), and include:
- •
- our ability to successfully implement our business strategy during "soft" as well as "hard" markets;
- •
- acceptance of our business strategy, security and financial condition by rating agencies and regulators, as well as by
brokers and our insureds and reinsureds;
- •
- our ability to maintain or improve our ratings, which may be affected by our ability to raise additional equity or debt
financings, by ratings agencies' existing or new policies and practices, as well as other factors described herein;
- •
- general economic and market conditions (including inflation, interest rates, foreign currency exchange rates, prevailing
credit terms and the depth and duration of a recession) and conditions specific to the reinsurance and insurance markets (including the length and magnitude of the current "soft" market) in which we
operate;
- •
- competition, including increased competition, on the basis of pricing, capacity, coverage terms or other factors;
- •
- developments in the world's financial and capital markets and our access to such markets;
- •
- our ability to successfully integrate, establish and maintain operating procedures (including the implementation of
improved computerized systems and programs to replace and support manual systems) to effectively support our underwriting initiatives and to develop accurate actuarial data;
- •
- the loss of key personnel;
- •
- the integration of businesses we have acquired or may acquire into our existing operations;
- •
- accuracy of those estimates and judgments utilized in the preparation of our financial statements, including those related
to revenue recognition, insurance and other reserves, reinsurance recoverables, investment valuations, intangible assets, bad debts, income taxes, contingencies and litigation, and any determination
to use the deposit method of accounting, which for a relatively new insurance and reinsurance company, like our company, are even more difficult to make than those made in a mature company since
relatively limited historical information has been reported to us through December 31, 2010;
- •
- greater than expected loss ratios on business written by us and adverse development on claim and/or claim expense
liabilities related to business written by our insurance and reinsurance subsidiaries;
- •
- severity and/or frequency of losses;
- •
- claims for natural or man-made catastrophic events in our insurance or reinsurance business could cause large
losses and substantial volatility in our results of operations;
- •
- acts of terrorism, political unrest and other hostilities or other unforecasted and unpredictable events;
- •
- losses relating to aviation business and business produced by a certain managing underwriting agency for which we may be
liable to the purchaser of our prior reinsurance business or to others in connection with the May 5, 2000 asset sale described in our periodic reports filed with the SEC;
- •
- availability to us of reinsurance to manage our gross and net exposures and the cost of such reinsurance;
- •
- the failure of reinsurers, managing general agents, third party administrators or others to meet their obligations to us;
- •
- the timing of loss payments being faster or the receipt of reinsurance recoverables being slower than anticipated by us;
- •
- our investment performance, including legislative or regulatory developments that may adversely affect the market value of
our investments;
- •
- material differences between actual and expected assessments for guaranty funds and mandatory pooling arrangements;
- •
- changes in accounting principles or policies or in our application of such accounting principles or policies;
- •
- changes in the political environment of certain countries in which we operate or underwrite business;
- •
- statutory or regulatory developments, including as to tax policy and matters and insurance and other regulatory matters
such as the adoption of proposed legislation that would affect Bermuda-headquartered companies and/or Bermuda-based insurers or reinsurers and/or changes in regulations or tax laws applicable to us,
our subsidiaries, brokers or customers; and
- •
- the other matters set forth under Item 1A "Risk Factors", Item 7 "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and other sections of this Annual Report on Form 10-K, as well as the other factors set forth in Arch Capital Group Ltd.'s
other documents on file with the SEC, and management's response to any of the aforementioned factors.
All
subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements.
The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with other cautionary statements that are included herein or elsewhere. We undertake
no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
PART I
ITEM 1. BUSINESS
As used in this report, references to "we," "us," "our" or the "Company" refer to the consolidated operations of Arch Capital
Group Ltd. ("ACGL") and its subsidiaries. Tabular amounts are in U.S. Dollars in thousands, except share amounts, unless otherwise noted. We refer you to Item 1A
"Risk Factors" for a discussion of risk factors relating to our business.
OUR COMPANY
General
Arch Capital Group Ltd. is a Bermuda public limited liability company with approximately $4.91 billion in capital at
December 31, 2010 and, through operations in Bermuda, the United States, Europe and Canada, writes insurance and reinsurance on a worldwide basis. While we are positioned to provide a full
range of property and casualty insurance and reinsurance lines, we focus on writing specialty lines of insurance and reinsurance. For 2010, we wrote $2.51 billion of net premiums and reported
net income available to common shareholders of $816.7 million. Diluted book value per share was $89.98 at December 31, 2010, compared to $73.01 per share at December 31, 2009.