Arch Capital Group Ltd. · NASDAQ:ACGL
Arch Capital — Q2 2022 Earnings Presentation
20 slides from Arch Capital's earnings presentation, Jul 28, 2022
Slide 1: Investor Presentation 2022 Second Quarter
Investor Presentation 2022 Second Quarter © 2022 Arch Capital Group Ltd. All rights reserved.
Slide 2: Informational Statements
Informational Click Statements to edit Master title style The Private Securities Litigation Reform Act of 1995 (“PSLRA”) 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
Slide 3: Book Value per Common Share and Growth
Click to editand Growth Master Booktitle style Value Book value per common share1 $40.00 $35.00 $30.00 $25.00 $20.00 $33.56 $15.00 $30.31 $31.37 $26.42 $10.00 $20.30 $21.52 $18.40 $15.09 $15.88 $11.98 $13.18 $5.00 $8.04 $9.91 $10.51 $6.12 $5.71 $4.89 $2.36 $2.84 $3.45 $3.76 $2.03 $0.00 Dec-01 Dec-02
Slide 4: Specialty (Re)insurance Strategy
Specialty Click (Re)insurance to edit Master title styleStrategy Arch operates leading Specialty P&C and Mortgage Insurance businesses across a wide range of geographies and products providing meaningful diversification and earnings stability. Total Net Premiums Written $9.4B1,5 Line of Business1 Ot
Slide 5: Property Casualty Segments
Property Casualty Segments Diversified book of business across products and geographies Insurance Net Premiums Written $4.6B* Reinsurance Net Premiums Written $3.6B* Lenders products, 3% Other, 9% Professional Other, 3% Marine, aviation and lines, 30% space, 4% Construction Specialty, and national 3
Slide 6: Specialty Insurance: Building on Market Opportunities
Specialty Click to editInsurance Master title– style Building on Market Opportunities Calendar Year Net Premiums Written by Line ($M) Soft Markets Hardening Markets $5,000 Other $4,500 $4,000 Lenders products $3,500 Travel, accident and health $3,000 Excess and surplus casualty $2,500 Construction a
Slide 7: Reinsurance – Flexing into a Hard Market
Reinsurance Click – Flexing to edit Master into a Hard Market title style Calendar Year Net Premiums Written by Line ($M) Soft Markets Hardening Markets $4,000 Other $3,500 Marine, aviation $3,000 and space $2,500 Specialty $2,000 Property catastrophe $1,500 Property excl. $1,000 property catastroph
Slide 8: Catastrophe Risk – Peak Zone 1:250
Click to edit Master Catastrophe Risktitle style Year Peak Zone – 1:250 ACGL Peak Zone 1:250 PML 1,200 25% 1:250 as a % of Tangible Shareholders' Equity* 19.1% 1,000 20% 16.9% $881 14.3% $888 1:250 PML $M $867 $860 800 15% $801 $748 9.0% 600 8.0% 10% $612 7.7% 6.6% 5.8% 6.9% $544 5.7% 5.9% $489 $492
Slide 9: Mortgage Segment: Differentiated Business Model
Mortgage Segment: Differentiated Business Model Arch MI manages the industry’s cycles by shaping our net exposure to maximize our risk adjusted return given our assessment of the landscape. © 2022 Arch Capital Group Ltd. All rights reserved. 9
Slide 10: Mortgage Segment: Diversified Book
Mortgage Segment: Diversified Book Insurance In Force (IIF) $B © 2022 Arch Capital Group Ltd. All rights reserved. 10
Slide 11: Mortgage Segment: Earnings Power
Mortgage Segment: Earnings Power Underwriting Income and Net Premiums Earned ($M)* $1,800 $1,600 $1,366 $1,398 $1,400 $1,283 $1,186 $1,198 $1,200 $1,057 $1,000 $1,086 $1,041 $953 $800 $858 $600 $691 $594 $400 $287 $200 $156 $- 2016 2017 2018 2019 2020 2021 2Q22 Underwriting Income Net Premiums Earne
Slide 12: Pandemic Led Rise In U.S. Delinquency Rate Is Declining
Pandemic Led Rise In U.S. Delinquency Rate Is Declining Arch MI U.S. Delinquency Rate 5.5% 5.14% 5.0% 4.69% 4.5% 4.19% 3.86% 4.0% 3.5% 3.11% 3.0% 2.67% 2.57% 2.36% 2.5% 2.25% 2.23% 2.02% 1.98% 2.09% 1.98% 2.0% 1.70% 1.77% 1.60% 1.60% 1.54% 1.45% 1.48% 1.54% 1.42% 1.5% 1.0% 0.5% 0.0% 12/31/16 3/31/17
Slide 13: Private Mortgage Insurance vs FHA/VA Origination
Private Mortgage Insurance vs FHA/VA Origination PMIs’ share of insured originations has been stable in recent years. Market Shares of Insured Originations 100% 7% 13% 90% 17% 16% 30% 80% 70% 31% 60% 26% 50% 67% 40% 77% 30% 56% 20% 44% 10% 16% 0% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 200
Slide 14: Arch MI US – Bellemeade Reinsurance Coverage by Vintage
Arch MI US – Bellemeade Reinsurance Coverage by Vintage As of June 30, 2022 ($ in millions) Est. Bellemeade Est. RIF Ceded to Coverage as % of Bellemeade Vintage Gross RIF QS RIF net of QS (1) RIF net of QS Reference Pool 2012 and prior $2,621 $- $2,621 68.6% $1,798 2013 927 - 927 3.3% 30 2014 1,135
Slide 15: Our Investment Strategy
Our Investment Strategy Arch manages the portfolio conservatively to protect our reserves on an economic basis and ensure our ongoing ability to pay claims. Arch’s investment approach is to improve the Company’s Return on Equity while avoiding undue risk. We do this by focusing on total return w
Slide 16: Investment Highlights
Investment Highlights 1 2 Net Investment Income ($M) Equity Method Investment Income ($M) $120.0 $140.0 $1.00 $106.4 $126.7 $122.2 $0.90 $99.9 $100.0 $120.0 $88.0 $89.4 $88.2 $90.5 $105.4 $0.80 1.76% $78.7 $80.4 1.76% $100.0 $89.3 $0.70 $80.0 $0.60 $80.0 $71.7 $67.1 $60.0 $0.50 1.45% 1.47% 1.46% $58
Slide 17: Our ESG Strategy – Transparency and Disclosures
OurtoESG Click edit Strategy – Transparency Master title style and Disclosures We take a measured approach to identifying existing and emerging ESG topics material to Arch and our wider industry and to working with internal groups to ensure appropriate integration of ESG risks and opportunities. Ann
Slide 18: Creating Shareholder Value Throughout The Cycle
Click to editShareholder Creating Master title style Value Throughout The Cycle Generate Superior Focus on Conservative Risk Adjusted Underwriting Balance Sheet Returns Thorough risk Talent intensive, assessment of Minimize not people underlying investment risk intensive exposures Align executive co
Slide 19: Superior Risk-Adjusted Returns
Superior Click to editRisk-Adjusted Master title styleReturns Strong track record of generating higher, more consistent risk-adjusted returns Total Value Creation vs. Coefficient of Variation – Total Composite 12/31/2002 – 12/31/2021 Coefficient of Variance (Standard Deviation of Annual TVC / Mean)
Slide 20: Contact
Click to edit Master title style Contact Investor Inquiries: Donald Watson Vinay Misquith Executive Vice President, Senior Vice President, Financial Services Financial Services (914) 872 3616 (914) 872 3666 DWatson@archgroup.com VMisquith@archgroup.com © 2017 Arch Capital Group Ltd. All rights reser