Arch Capital Group Ltd. · NASDAQ:ACGL
Arch Capital — Q3 2021 Earnings Presentation
22 slides from Arch Capital's earnings presentation, Oct 28, 2021
Slide 1: Investor Presentation 2021 Third Quarter
Investor Presentation 2021 Third Quarter © 2021 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 Growth
Click to editand Growth Master Booktitle style Value Book value per common share1 $35.00 $30.00 $25.00 $20.00 $32.43 $15.00 $30.31 $26.42 $10.00 $20.30 $21.52 $18.40 $13.18 $15.09 $15.88 $9.91 $10.51 $11.98 $5.00 $8.04 $6.12 $5.71 $4.89 $2.84 $3.45 $3.76 $2.03 $2.36 $0.00 Dec-01 Dec-02 Dec-03 Dec-04
Slide 4: Creating Shareholder Value Throughout The Cycle
Click to editShareholder Creating Master title style Value Throughout The Cycle Generate Superior Focus on Conservative Risk Adjusted Underwriting Balance Sheet Returns Thorough risk Talent intensive, assessment of Minimize not people underlying investment risk intensive exposures Align executive co
Slide 5: Specialty (Re)insurance Strategy
Specialty Click to edit (Re)insurance Master title styleStrategy Arch operates leading Specialty P&C and Mortgage Insurance businesses across a wide range of geographies and products providing meaningful diversification and earnings stability. Trailing Twelve Months Ended September 30, 2021 Gross pr
Slide 6: Property Casualty Segments
Property Casualty Segments Improving underwriting conditions leading to growth Calendar Year Net Premiums Written Growth (y/y change) Insurance NPW Growth Reinsurance NPW Growth 35% 31% 60% 53% 30% 50% 25% 20% 40% 19% 32% 20% 30% 15% 17% 17% 10% 20% 11% 4% 5% 1% 2% 10% 1% 0% 0% 2016 2017 2018 2019 2
Slide 7: Specialty Insurance: Building on Market Opportunities
Specialty Click to editInsurance Master title–style Building on Market Opportunities Calendar Year Net Premiums Written by Line ($M) $4,500 Other $4,000 Lenders products $3,500 Travel, accident and health $3,000 $2,500 Excess and surplus casualty $2,000 Construction and national accounts $1,500 Prog
Slide 8: Reinsurance – Flexing into a Hard Market
Reinsurance Click – Flexing to edit Master into a Hard Market title style Calendar Year Net Premiums Written by Line ($M) $3,500 Other $3,000 Marine, $2,500 aviation and space Specialty $2,000 $1,500 Property catastrophe $1,000 Property excl. property catastrophe $500 Casualty $0 2006 2007 2008 2009
Slide 9: Catastrophe Risk – Peak Zone 1:250
Click to edit Master Catastrophe Risktitle style Year Peak Zone – 1:250 ACGL Peak Zone 1:250 PML ACGL Peak Zone 1:250 PML 1,200 25% 1:250 as a % of Tangible Shareholders' Equity* 19.1% 1,000 20% 16.9% 14.3% 1:250 PML $M $881 $867 800 $860 15% $801 $778 9.0% $676 $671 600 8.0% 10% $612 6.9% 6.6% 5.8%
Slide 10: Mortgage Segment: Differentiated Business Model
Mortgage Segment Differentiated Business Model Arch aggregates risk from diversified sources and then utilizes a variety of tools for Arch MI RateStar® Bellemeade (ILNs) risk-based pricing and traditional managing mortgage and credit approach constructs reinsurance reduce risk portfolios risk expo
Slide 11: Mortgage Segment: Insurance In Force and Underwriting Income
Mortgage Segment Insurance In Force (IIF) and Underwriting Income *Underwriting income for 3Q21 is for the trailing 12 months ended September 30, 2021. © 2021 Arch Capital Group Ltd. All rights reserved. 11
Slide 12: Pandemic Led Rise In US Delinquency Rate Is Declining
Pandemic Led Rise In US Delinquency Rate Is Declining Arch MI US Delinquency Rate 5.5% 5.14% 5.0% 4.69% 4.5% 4.19% 3.86% 4.0% 3.5% 3.11% 3.0% 2.67% 2.57% 2.5% 2.25% 2.23% 2.02%1.98% 1.98% 2.0% 1.70%1.60%1.60% 1.54%1.45%1.48%1.54% 1.42% 1.5% 1.0% 0.5% 0.0% 12/31/16 3/31/17 6/30/17 9/30/17 12/31/17 3/
Slide 13: Private Mortgage Insurance vs FHA/VA Origination
Private Mortgage Insurance vs FHA/VA Origination After a strong rebound off of its low in 2009, PMIs’ share of insured originations has declined slightly since the onset of pandemic due to heavy refi activity. Market Shares of Insured Originations Source: Inside Mortgage Finance © 2021 Arch Capital
Slide 14: Equity Position of Delinquent Borrowers
Equity Click Position to edit Masteroftitle Delinquent style Borrowers Distribution of Arch Insured Loans by Estimated Mark-to-Market LTV* 60% 50% 40% % of Loans 30% 20% 10% 0% < 70% 70% - 79% 80% - 89% => 90% Mark-to-Market LTV Delinquent Policies in Force All Policies in Force An Estimated 98% of
Slide 15: Arch MI US – Bellemeade Reinsurance Coverage by Deal
Arch MI US – Bellemeade Reinsurance Coverage by Deal September 30, 2021 ($ in millions) Bellemeade Re Insurance-Linked Notes Key Metrics (1)* 2017-1 2018-1 2018-3 2019-1 2019-2 2019-3 2019-4 2020-2 (8) 2020-3 (8) 2020-4 (8) 2021-1 (8) 2021-2 (8) 2021-3 (8) Coverage dates for policies issued between
Slide 16: Arch MI US – Bellemeade Reinsurance Coverage by Deal (notes)
Arch MI US – Bellemeade Reinsurance Coverage by Deal (1) Through September 30, 2021, including the initial coverage of $364M provided directly by a panel of reinsurers through traditional excess of loss agreements, Arch Mortgage Insurance Company ("AMIC") and United Guaranty Residential Insurance Co
Slide 17: Arch MI US – Bellemeade Reinsurance Coverage by Vintage
Arch MI US – Bellemeade Reinsurance Coverage by Vintage As of September 30, 2021 ($ 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 2011 and prior $2,672 $- $2,672 78.5% $2,098 2012 505 - 505 23.4% 118 201
Slide 18: 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 19: Our Environmental, Social & Governance Strategy
OurtoEnvironmental, Click edit Master titleSocial style & Governance Strategy Our ESG Impact Areas and Material ESG Topics We focus our ESG efforts around integrating sustainability-driven thinking and decision-making into five core impact areas of our company. By organizing our strategy around thes
Slide 20: Our ESG Reporting
OurtoEnvironmental, Click edit Master titleSocial style & Governance Strategy Our ESG Reporting A major element of our ESG strategy is our annual reporting. We believe in the value of transparency around our sustainability initiatives, and we are committed to sharing our progress to relevant stakeho
Slide 21: Superior Risk-Adjusted Returns
Click to edit Superior Master title Risk-adjusted style Returns Strong track record of generating higher, more consistent risk-adjusted returns Total Value Creation vs. Coefficient of Variation – Total Composite 12/31/2002 – 06/30/2021 Lower Volatility, Higher Returns Higher Volatility, Higher Retur
Slide 22: Contact
Click to edit Master title style Contact Investor Inquiries: Donald Watson Vinay Misquith Executive Vice President, 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 reserved. ©