The setting up of a Bermuda holding company will allow Arch Capital Group to benefit from a good financing, regulatory and tax environment, reports Mairi Mallon .

Arch Capital Group Ltd has officially become the latest reinsurance company to relocate to Bermuda.

The revelation was made in the company's third quarter results which showed the company's third quarter net loss last year of $3.7 million has been converted into net profit of $2.3 million for the same period in 2000.

The company, which is listed on the Nasdaq, said the decision to move to Bermuda was made on November 8, 2000.

In a statement the company said: "On November 8, 2000 the company consummated the previously announced reorganisation transaction that resulted in the company becoming a wholly owned subsidiary of a newly-formed Bermuda holding company "Arch Capital Group-Bermuda''.

"Arch Capital Group-Bermuda retains the name of "Arch Capital Group Ltd.'' and the company has been renamed "Arch Capital Group (U.S.) Inc.'' '' Earlier this year in September, the company announced its intention to move its headquarters and said it had filed with the US regulatory body, the Securities and Exchange Commission.

The filing revealed that Arch chairman Robert Clements, one of the key people behind the formation of Bermuda insurance giants ACE and XL, said the move would allow the company to become exempt from a whole host of taxes.

The board of directors had already voted on the move in September, and recommended its shareholders vote in favour of the motion.

In a letter to shareholders Mr. Clements said: " The establishment of a Bermuda holding company for Arch Capital Group Delaware should allow us to benefit from a more favourable business, tax, regulatory and financing environment.'' Arch, which was originally called Risk Capital Reinsurance Co., has 29 employees which are based in Delaware. It is not known whether the company will have a physical presence on the Island.

Arch, which provides risk services to multinational clients in the form of reinsurance and investment capital for insurance concerns, set up two companies in July 2000 to effect the move.

The report added: "Arch Capital Group-Bermuda performs the holding company functions previously conducted by the Company, and the stockholders of the company have become the stockholders of Arch Capital Group-Bermuda. The common shares of Arch Capital Group-Bermuda continue to trade on the Nasdaq National Market under the symbol ACGL.'' Arch's primary subsidiary Arch Reinsurance Company, which targets US and European-based insurance and reinsurance companies as well as certain Lloyds' syndicates, was sold for over $20 million on May 5, 2000 when the company changed its name from Risk Capital Holdings.

Among the speciality business that Arch covers are aviation and space, marine and accident and health business.

Arch Capital on the move In the quarterly statement the company reported comprehensive income of $13.1 million, which was composed of net income of $2.3 million and other comprehensive income of $10.8 million, consisting of the change in after-tax unrealised appreciation of investments.

The 2000 third quarter net income included after-tax realised investment gains of $473,000 and equity in net income of investors of $544,000.

These amounts compare with comprehensive loss for the 1999 third quarter of $10.5 million, which was composed of net loss of $3.7 million and other comprehensive loss of $6.8 million, consisting of the change in after-tax unrealised appreciation of investments, the company said.

The 1999 third quarter net loss included after-tax realised investment gains of $3.4 million and equity in net income of investors of $400,000.

At September 30, 2000, consolidated stockholders' equity totalled $268.4 million, compared with $346.5 million at December 31, 1999.

On a diluted basis, book value per share was $21.63 based on 12,411,644 shares outstanding at September 30, 2000, which included dilutive options outstanding, compared with $20.28 based on 17,087,970 shares outstanding at December 31, 1999.

The company recently bought back the quarter share owned by XL Capital. The release said: "Book value and per share amounts at September 30, 2000 reflect the repurchase on March 2, 2000 from XL Capital Ltd of all of the 4,755,000 shares of the company's common stock XL Capital previously held for a repurchase price of $59.2 million, or $12.45 per share.''