Arch Capital Group Ltd. Announces Updated Catastrophe Loss Estimates and Other Information Related to Operations
January 09 2018 - 4:46PM
Business Wire
- Estimated $60 to $75 million related to
2017 fourth quarter catastrophic events, primarily related to the
California wildfires
- Estimated $15 to $20 million charge on
the Company’s net deferred tax assets related to the impact of
lower U.S. corporate tax rates beginning in 2018
- Estimated 17% to 20% effective tax rate
on pre-tax operating income for the 2017 fourth quarter excluding
the charge on the Company’s net deferred tax asset as noted
above
During the fourth quarter of 2017, a series of wildfires burned
across many areas of California and a series of smaller catastrophe
events occurred around the globe. Arch Capital Group Ltd. [NASDAQ:
ACGL] has established a range of pre-tax losses of $60 million to
$75 million, net of reinsurance recoveries and reinstatement
premiums, for these 2017 fourth quarter catastrophic events. For
clarity, this estimated range incorporates and updates the $30
million to $55 million range previously disclosed by the Company in
its Quarterly Report on Form 10-Q for the 2017 third quarter. The
previous range reflected the first series of California wildfires
only (also referred to as the Tubbs fire), whereas this current
range reflects the Tubbs Fire, the second series of California
wildfires (also referred to as the Thomas Fire) and other
catastrophic events from around the globe. At this time, there are
significant uncertainties surrounding the number of claims and
scope of damage for both the Tubbs and Thomas Fires, as well as the
other global events. The Company’s estimate for these events is
based on currently available information derived from modeling
techniques, industry assessment of exposure, preliminary claims
information obtained from the Company’s clients and brokers to date
and a review of in-force contracts. Actual losses from these events
may vary materially from the estimates due to the inherent
uncertainties in making such determinations.
The Company entered into intercompany loss portfolio transfers
(LPTs) effective on December 31, 2017 that transferred
approximately $1.35 billion of net retained reserves for losses and
allocated loss adjustment expenses between its subsidiaries. Given
that these transactions involve two related parties, and in
accordance with GAAP, they eliminate in consolidation. These
transactions support the Company’s ongoing capital management
strategies.
As a result of the reduction in the U.S. corporate tax rate from
35% to 21% effective January 1, 2018 pursuant to the Tax Cuts and
Job Act of 2017, the Company anticipates that it will write down a
portion of its deferred tax asset by approximately $15 million to
$20 million in the 2017 fourth quarter. Such charge will be
excluded from after-tax operating income available to Arch common
shareholders, a non-GAAP financial measure, as it is not reflective
of operations.
Additionally, the Company estimates that the effective tax rate
on pre-tax operating income for the fourth quarter of 2017 will be
in a range of 17% to 20%. This estimate is based on both statutory
income tax rates applied to underwriting income, expenses and
investment returns by jurisdiction, as well as an amalgam of
discrete items that includes, but is not limited to, the impact of
vested or exercised equity compensation, changes in judgment with
respect to valuation allowances and changes related to the LPTs
referenced above. The effective tax rate for the 2017 fourth
quarter reflects an increased proportion of U.S. based operating
income. The losses related to the 2017 fourth quarter catastrophic
occurrences emanated mostly from our non-U.S. underwriting
operations. Although additional information will be provided during
the Company’s earnings call scheduled for February 13, 2018, this
tax rate range is subject to change as analyses of group-wide loss
reserves and investment returns, among other areas, are
finalized.
Arch Capital Group Ltd., a Bermuda-based company with
approximately $11.04 billion in capital at September 30, 2017,
provides insurance, reinsurance and mortgage insurance on a
worldwide basis through its wholly owned subsidiaries.
Cautionary Note Regarding Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a
"safe harbor" for forward−looking statements. This release or any
other written or oral statements made by or on behalf of Arch
Capital Group Ltd. and its subsidiaries 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 release are forward−looking statements.
Forward−looking statements can generally be identified by the
use of forward−looking terminology such as "may," "will," "expect,"
"intend," "estimate," "anticipate," "believe" or "continue" 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. A
non-exclusive list of the important factors that could cause actual
results to differ materially from those in such forward-looking
statements includes the following: adverse general economic and
market conditions; increased competition; pricing and policy term
trends; fluctuations in the actions of rating agencies and our
ability to maintain and improve our ratings; investment
performance; the loss of key personnel; the adequacy of our loss
reserves, severity and/or frequency of losses, greater than
expected loss ratios and adverse development on claim and/or claim
expense liabilities; greater frequency or severity of unpredictable
natural and man-made catastrophic events; the impact of acts
of terrorism and acts of war; changes in regulations and/or tax
laws in the United States or elsewhere; our ability to successfully
integrate, establish and maintain operating procedures as well as
integrate the businesses we have acquired or may acquire into the
existing operations; changes in accounting principles or policies;
material differences between actual and expected assessments for
guaranty funds and mandatory pooling arrangements; availability and
cost to us of reinsurance to manage our gross and net exposures;
the failure of others to meet their obligations to us; and other
factors identified in our filings with the U.S. Securities and
Exchange Commission.
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.
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. We
undertake no obligation to publicly update or revise any
forward−looking statement, whether as a result of new information,
future events or otherwise.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180109006761/en/
Arch Capital Group Ltd.Mark D. Lyons, 441-278-9250
Arch Capital (NASDAQ:ACGL)
Historical Stock Chart
From Aug 2024 to Sep 2024
Arch Capital (NASDAQ:ACGL)
Historical Stock Chart
From Sep 2023 to Sep 2024