Arch Capital Group Ltd. boosted its profits by more than $80 million during the second quarter of 2010 despite a drop in gross premiums written and underwriting income.

The company's net income was $237 million, or $4.45 per share, for the second quarter compared to $152.1 million, or $2.43 per share, for the 2009 second quarter.

After-tax operating income was $132.2 million, or $2.48 per share, versus $163 million, or $2.60 per share, over the respective period.

Arch's book value per share increased 6.7 percent to $82.07 per share at June 30, 2010 from $76.91 per share at March 31, 2010, and by 12.4 percent from $73.01 per share at December 31, 2009.

The company's after-tax operating income represented a 13 percent annualised return on average common equity for the 2010 second quarter, compared to 18.6 percent for the 2009 second quarter.

But gross premiums written were down by almost $100 million at $817.1 million in the second quarter of 2010 from $911.9 million for the same period last year, while underwriting income fell to $62.2 million from $89.6 million and the combined ratio was up at 90 percent from 87.2 percent over the same time frame.

For the 2010 second quarter, the combined ratio of Arch's re/insurance subsidiaries consisted of a loss ratio of 58.3 percent and an underwriting expense ratio of 31.7 percent, versus a loss ratio of 57 percent and an underwriting expense ratio of 30.2 percent for the 2009 second quarter.

The loss ratio of 58.3 percent for the second quarter consisted of 46.8 points of paid losses, 5.4 points related to reserves for reported losses and 6.1 points related to incurred but not reported reserves, reflecting a lower than anticipated level of losses (1.1 points) from catastrophic events occurring in the current accident year.

Including the effects of foreign exchange, total return on Arch's investment portfolio was approximately 1.74 percent for the 2010 second quarter, compared to 3.89 percent for the 2009 second quarter, and 3.35 percent for the six months ended June 30, 2010, versus 5.03 percent for the six months ended June 30, 2009.

Net investment income for the 2010 second quarter was $90.5 million or $1.70 per share.

In November 2009, Arch's board of directors authorised the company to invest up to an additional $1 billion in its shares through the share repurchase programme. The company bought back 3.6 million shares for an aggregate purchase price of $269.1 million during the second quarter.

Since the inception of the share repurchase programme through June 30, 2010, Arch has repurchased 28.1 million common shares for an aggregate purchase price of $1.96 billion.