Bermuda-based Arch Capital Group Ltd., the company that has just set up Arch Re Ltd. to take advantage of the higher reinsurance prices in the wake of September 11, has seen its profits more than half for the third quarter of 2001.

The company reported 2001 third quarter after-tax operating income (which excludes net realised investment gains and losses and equity in net income of investees) of $465,000, or $0.04 per share, down from operating income of $1.2 million, or $0.10 per share, in the same period in 2000.

On October 24, 2001, Arch Capital announced the launch of Arch Re to meet the demand in the global insurance marketplace following the September 11 attacks.

And as part of this initiative, Arch Re., the company's Bermuda-based reinsurance subsidiary, appointed a new beefed-up management team, consisting of Paul Ingrey, formerly chairman of F&G Re; Dwight Evans, formerly executive vice president, North American Property for St. Paul Re and F&G Re; and Marc Grandisson, formerly vice president and actuary of the reinsurance division of Berkshire Hathaway.

Arch Reinsurance, is said to be backed by two private equity firms, Warburg Pincus and Hellman & Friedman, which would invest a total of $750 million in shares and warrants in Arch Capital.

The new reinsurer is set to open as soon as possible to sign up business in the January 1 renewals, which are being negotiated now.

The new venture currently has about $500 million in capital, which is relatively small by reinsurance industry standards.

Arch Reinsurance was the third firm set up to meet surging demand for reinsurance after the September 11 hijacked jetliner attacks, as traditional firms, facing $70 billion in expected claims, lick their wounds. There are currently six new firms in Bermuda with nearly $6 billion in targeted capital.

Arch Captial reported net income for the 2001 third quarter was $892,000, or $0.07 per share, which included after-tax net realised investment losses of $247,000, or $0.02 per share, and after-tax equity in net income of investees of $674,000, or $0.05 per share.

These amounts compare with net income for the 2000 third quarter of $2.3 million, or $0.18 per share, which included after-tax net realised investment gains of $473,000, or $0.04 per share, and after-tax equity in net income of investees of $572,000, or $0.04 per share.