Arch Capital Group Ltd. · NASDAQ:ACGL

Arch Capital — Investor Day (November 2024)

32 slides from Arch Capital's investor day presentation, Nov 14, 2024

  1. Slide 1: Creating Value Through the Cycle

    ©2024 Arch Capital Group Ltd. All rights reserved. Creating Value Through the Cycle Arch Investor Day Presentation November 14, 2024

  2. Slide 2: Informational Statements

    Informational Statements 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 may include forward-looking state

  3. Slide 3: Agenda

    Agenda Welcome  Introductory Comments A Discussion With:  Executive Panel – Nicolas Papadopoulo, François Morin and Don Watson  Arch Investment Management Panel – François Morin, Christine Todd, Nasri Toutoungi and William Bell  Insurance Panel – Nicolas Papadopoulo, Hugh Sturgess, Brian First a

  4. Slide 4: A Discussion with the Executive Team

    A Discussion with the Executive Team Nicolas Papadopoulo François Morin Don Watson Chief Executive Officer Chief Financial Officer & Treasurer Executive Vice President, Arch Capital Group Ltd. Arch Capital Group Ltd. Financial Services Arch Capital Services LLC ©2024 Arch Capital Group Ltd. All righ

  5. Slide 5: Our Operating Principles

    Our Operating Principles 1. We are best in-class cycle managers with a focus on underwriting. We are a diversified, specialty-focused company targeting areas that require 2. specialized underwriting expertise, distribution or customer capabilities. 3. We are trusted stewards of capital who apply pru

  6. Slide 6: Sustained Outperformance

    Sustained Outperformance Total Value Creation vs. Coefficient of Variation – 20 year 12/31/2003 – 6/30/2024 Lower Volatility, Higher Returns Higher Volatility, Higher Returns 18% Composite 16% Average = 108% ACGL 14% WRB TVC CAGR (YE:03-6M:24) 12% PGR MKL RLI AFG EG CB 10% TRV RNR FFH Composite SAFT

  7. Slide 7: Capital and Financial Flexibility

    Capital and Financial Flexibility Capital Structure ($M) Capital Ratios As Reported September 30, 2024 Pro-forma for Special Dividend As Reported Pro-forma for $25,001 September 30, 2024 Special Dividend $2,727 $23,101 $830 $2,727 Debt/Total Capital 10.9% 11.8% $830 Preferred/Total 3.3% 3.6% Capital

  8. Slide 8: Commercial Lines Pricing Remains Strong

    Commercial Lines Pricing Remains Strong Cumulative Quarterly Rate Increases by Line of Business Cumulative Quarterly Rate Increases by Account Size 240 170 160 220 150 200 Cumulative Rate Increase Cumulative Rate Increase 140 180 130 160 120 140 110 120 100 100 90 2Q24 4Q99 4Q00 4Q01 4Q02 4Q03 4Q04

  9. Slide 9: U.S. Industry – Other Liability Lines

    U.S. Industry – Other Liability Lines* Accident Year Loss Ratios – Developed 180% 162% Adverse 160% Favorable Loss Ratio 140% 120% 116% 107% 104% 104% Loss Ratio 100% 96% 85% 82% 80% 72% 61% 64% 66% 65% 66% 62% 64% 67% 74% 72% 52% 57% 65% 64% 68% 70% 71% 63% 50% 57% 63% 67% 65% 50% 51% 62% 63% 66% 6

  10. Slide 10: A Discussion with the Arch Investment Management Team

    A Discussion with the Arch Investment Management Team François Morin Christine Todd Nasri Toutoungi William Bell Chief Financial Officer and Treasurer of Chief Investment Officer of Chief Investment Officer, Fixed Income and Chief Investment Officer of Alternatives of Arch Capital Group Ltd. Arch Ca

  11. Slide 11: Strong Investment Income

    Strong Investment Income Annualized Total Return*,1 on Arch’s Investment Portfolio vs. Benchmark Investment Income ($M) As of September 30, 2024 $1,942 3.5% Benchmark 3.3% Arch Investment Portfolio $539 Net Investment Income 2.8% Equity Method Income or Loss 2.6% $1,301 2.4% $278 1.5% $713 $615 $611

  12. Slide 12: Conservative Investment Portfolio Focused on Total Return

    Conservative Investment Portfolio Focused on Total Return Invested Assets Fixed Maturity by Rating September 30, 2024 September 30, 2024 Lower than B, Not Rated, U.S. Equity method funds & other, U.S. B, 1.8% 0.1% government 2.4% 16.7% government, and 13.7% BB, 3.7% government Equity agencies3, secu

  13. Slide 13: Diverse and Growing Alternatives Portfolio

    Diverse and Growing Alternatives Portfolio Alternatives Portfolio Net Asset Value (NAV) by Year ($B) Alternatives Portfolio NAV by Strategy September 30, 2024 15.2% 14.3% 14.5% Real Estate 13.0% 6% $6.0 Infrastructure 8% 10.8% 10.6% $4.8 10.3% $4.1 PE Primary 7.8% $3.5 16% Private Credit 7.1% 7.0% $

  14. Slide 14: A Discussion with the Insurance Team

    A Discussion with the Insurance Team Nicolas Papadopoulo Hugh Sturgess Brian First Jay Rajendra Chief Executive Officer of Chief Executive Officer of President of Chief Strategy and Innovation Officer at Arch Capital Group Ltd. Arch Insurance International Arch Insurance North America Arch Capital G

  15. Slide 15: Scaling Up a Diversified Platform

    Scaling Up a Diversified Platform Calendar Year Net Written Premiums by Line ($M) Underwriting Income ($M) and Combined Ratio $7,000 $500 106.0% $6,000 NWP up ~2.5x $400 104.0% 104.5% in 5 years 102.0% $5,000 $300 101.5% 100.0% $4,000 $200 98.0% $3,000 $100 96.7% 96.0% $2,000 $- 95.0% 94.0% $1,000 $

  16. Slide 16: Arch MidCorp & Entertainment – Business Overview

    Arch MidCorp & Entertainment – Business Overview Business Segments Size of U.S. Middle Market  Provides standard commercial insurance products *$120 Billion GWP for mid-sized businesses. ($50k-$1.5M GWP size, 50-999 employees, $10M-$1B in annual revenues) Middle Market  Key lines include Commercia

  17. Slide 17: Strategy Powered by Analytics

    Strategy Powered by Analytics Strategic Analytics Dynamic Strategy During Hard Market 2018 2019 2020 2021 ~3x pricing ©2024 Arch Capital Group Ltd. All rights reserved. 17

  18. Slide 18: Arch Insurance International – Growth Story

    Arch Insurance International – Growth Story Arch Insurance International underwrites across multiple platforms in the London Market, Lloyd’s, UK Regional Market, Australia, Bermuda and Europe. Gross Written Premium (Underwriting Year) US$ M $2,500 GWP up ~4x in 5 years 2022 Plan $2,000 Gross Written

  19. Slide 19: Optimizing London Market and International

    Optimizing London Market and International London Market Short Tail Lines:  London Market ~80% of Arch Core lead lines: Accident & Health, Cargo, Contingency, Fine Art, Terrorism and Warranty & Affinity. International's Gross Written Premium. Accident, Health Cargo & Credit &  Growth in the UK (es

  20. Slide 20: Break

    Break ©2024 Arch Capital Group Ltd. All rights reserved.

  21. Slide 21: A Discussion with the Reinsurance Team

    A Discussion with the Reinsurance Team Maamoun Rajeh Jerome Halgan Jonathan Schriber President, Arch Capital Group Ltd. Chief Executive Officer, President, Arch Reinsurance Company Arch Reinsurance Ltd. ©2024 Arch Capital Group Ltd. All rights reserved. 21

  22. Slide 22: Reinsurance – A Diversified Growth Story

    Reinsurance – A Diversified Growth Story Calendar Year Net Written Premiums by Line ($M) Underwriting Income ($M) and Combined Ratio $8,000 $1,400 105.0% $7,000 Other $1,200 100.0% $6,000 Marine and 99.5% $1,000 NWP up ~5x in aviation $5,000 5 years Property 95.0% catastrophe $800 94.9% $4,000 94.2%

  23. Slide 23: Disciplined Risk Management and Capital Allocation

    Disciplined Risk Management and Capital Allocation ACGL Peak Zone 1:250 PML 301 1:250 as a % of Tangible shareholders' equity available to Arch 2,000 285 30% 1:250 as a % of Tangible shareholders' equity available to Arch* Guy Carpenter Global Rate On Line Index 25% 1,650 247 246 $1,691 $1,627 19.4%

  24. Slide 24: Arch Re Outperforms with Less Volatility

    Arch Re Outperforms with Less Volatility Historical Combined Ratios Hurricanes 126% 21 Yr. Avg. Volatility Maximum Katrina, Wilma Arch 85% 9.6% 100% and Rita Japan Earthquake, 120% Peers 92% 14.0% 126% Thailand Floods and Hurricane Irene Hurricanes Florence, Hurricanes Harvey, Michael and California

  25. Slide 25: A Discussion with the Mortgage Team

    A Discussion with the Mortgage Team David Gansberg Michael Schmeiser Seamus Fearon President, Arch Capital Group Ltd. Chief Executive Officer of Chief Executive Officer of Arch Mortgage Insurance Company International Mortgage Group ©2024 Arch Capital Group Ltd. All rights reserved. 25

  26. Slide 26: Arch’s History in Mortgage Guaranty

    Arch’s History in Mortgage Guaranty 2012 2014 2016 2019  ARL provides quota  GSEs approve Arch MI  Arch completes  Arch LMI obtains share reinsurance to (U.S.). acquisition of United license from APRA to 2011 U.S. primary  Arch MI (U.S.) closes Guaranty, making insure mortgages in 2024 mortgage

  27. Slide 27: Consistent Source of Strong Earnings

    Consistent Source of Strong Earnings Mortgage Segment Underwriting Income and Combined Ratio $1,400 120% $1,200 $1,257 100% Underwriting Income ($M) $1,133 $1,000 $1,041 $1,064 80% Combined Ratio $953 $800 59% 60% $600 40% $594 25% 27% $400 20% 9% 9% $200 0% -8% $0 -20% 2019 2020 2021 2022 2023 2024

  28. Slide 28: Favorable Conditions for U.S. Mortgage Insurance Industry

    Favorable Conditions for U.S. Mortgage Insurance Industry Months of Housing Inventory Unemployment Rates 12 16 15 11 14 10 13 9 12 11 8 10 7 9 6 8 5 7 6 4 5 3 4 2 3 2 1 1 0 0 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16

  29. Slide 29: U.S. Mortgage Insurance Market Attractive Fundamentals

    U.S. Mortgage Insurance Market Attractive Fundamentals Portfolio less vulnerable to refinancings in short-term, and demographics are favorable in long-term. Portion of Borrowers “In the Money” to Refinance (%) U.S. Population Age 29-38 (millions) 50 100% Actual 49 90% Projected 80% 48 70% 47 60% 46

  30. Slide 30: International – A Story of Innovation

    International – A Story of Innovation The Components of International Mortgage Credit Risk Transfer (CRT) and Services Australian LMI Europe  Uses Arch Re Ltd. (Bermuda flagship) to  Arch LMI is one of Australia’s three major  Transformed business from flow MI to provide XOL reinsurance to GSEs.

  31. Slide 31: Q&A

    Q&A ©2024 Arch Capital Group Ltd. All rights reserved.

  32. Slide 32: Contact

    Contact Investor Inquiries: Donald Watson Vinay Misquith Executive Vice President, Senior Vice President, Financial Services Finance 914 872 3616 914 872 3666 dwatson@archgroup.com vmisquith@archgroup.com Jordan Arnold Maureen Kitson Director, Executive Assistant, Financial Services Investor Relatio

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