Bermuda-based Arch Capital Group Ltd. yesterday reported first-quarter earnings of $189.4 million as underwriting income fell by more than 20 percent.

Broken down, the profit amounted to $2.78 per share and was down four percent from the same three-month period last year, when Arch earned $198.6 million, or $2.59 per share.

The company's book value climbed and so did its net investment income, but the insurer and reinsurer recorded a fall in gross premiums written from $1.21 billion to $1.05 billion in the first quarter of 2007.

Underwriting income declined to $98.37 million from $124.6 million in the same period last year.

The company's combined ratio, which measures the percentage of premium dollars spent on claims and expenses, was 86.2 percent for the quarter, compared to 83.4 percent last year.

The Group bought 2.7 million shares during the first quarter through its repurchase programme at a total cost of $189.8 million, as Arch's book value rose from $55.12 per share at the end of last year to $56.92, as at March 31, 2008.

Net investment income for the 2008 first quarter was $122.2 million, compared to $110.0 million for the same three months last year. The increase in net investment income in the 2008 first quarter primarily resulted from a higher level of average invested assets in the 2008 first quarter and also included $3.4 million of interest income resulting from a favourable arbitration decision.

The company also reported after-tax operating income available to common shareholders of $202.0 million, or $2.97 per share, for the 2008 first quarter, compared to $204.7 million, or $2.67 per share, for the 2007 first quarter.

Total shareholder's equity fell from $4.03 billion at the end of last year to $4.00 billion at the end of March.

Arch will hold a conference call for investors and analysts at 12 noon Bermuda time today.

ARCH 1Q

REPORT CARD

b>Net income: $189.4 million compared to $198.6 million in 2007.

Gross premiums written: $1.05 billion compared to $1.21 billion in 2007.

Combined ratio: 86.2 percent compared to 83.4 percent last year.