-
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
HAMILTON, Bermuda--(BUSINESS WIRE)--
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: adversegeneral
economic and market conditions;increased competition;pricing
and policy term trends;fluctuations in the actions of rating
agencies and ourability 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; andother
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
Source: Arch Capital Group Ltd.