Arch Capital Group Ltd. · NASDAQ:ACGL
Arch Capital — Q2 2021 Earnings Presentation
21 slides from Arch Capital's earnings presentation, Jul 29, 2021
Slide 1: Investor Presentation 2021 Second Quarter
Investor Presentation 2021 Second 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: Growth in Book Value
Growth Click to editand Book Master Value title style Book value per common share1 $35.00 $30.00 $25.00 $20.00 $32.02 $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 $6.12 $5.71 $8.04 $4.89 $2.84 $3.45 $3.76 $2.03 $2.36 $0.00 Dec-01 Dec-02 Dec-03 Dec-0
Slide 4: Creating Shareholder Value Throughout The Cycle
Creating Click to editShareholder Value Throughout The Cycle Master title style Generate Superior Focus on Conservative Risk Adjusted Underwriting Balance Sheet Returns Thorough risk Talent intensive, assessment of Minimize not people underlying investment risk intensive exposures Align executive co
Slide 5: Specialty (Re)insurance Strategy
Specialty Click to edit (Re)insurance Master title styleStrategy Arch operates leading Specialty P&C and Mortgage Insurance businesses across a wide range of geographies and products providing meaningful diversification and earnings stability. Trailing Twelve Months Ended June 30, 2021 Gross premium
Slide 6: Property Casualty Segments
Property Casualty Segments Improving underwriting conditions leading to growth Calendar Year Net Premiums Written Growth (y/y change) Insurance NPW Growth Reinsurance NPW Growth 35% 30% 60% 53% 30% 50% 41% 25% 19% 20% 40% 20% 30% 15% 17% 17% 10% 20% 11% 2% 4% 5% 1% 10% 1% 0% 0% 2016 2017 2018 2019 2
Slide 7: Specialty Insurance
Specialty Click to editInsurance Master title style Calendar Year Net Premiums Written by Line ($M) $4,000 Other $3,500 Lenders products $3,000 Travel, accident and health $2,500 Excess and surplus casualty $2,000 Construction and national $1,500 accounts Programs $1,000 Professional Lines $500 Prop
Slide 8: Flexing into a Hardening Market (Reinsurance)
Flexing Click into to edit a Hardening Master title styleMarket (Reinsurance) Calendar Year Net Premiums Written by Line ($M) $3,500 Other $3,000 Marine, aviation $2,500 and space Specialty $2,000 $1,500 Property catastrophe $1,000 Property excl. property catastrophe $500 Casualty $0 2006 2007 2008
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% $881 $867 14.3% $860 1:250 PML $M 800 15% $801 $778 9.0% $676 600 8.0% 10% $612 6.6% 5.8% 6.9% $54
Slide 10: Mortgage Segment
Mortgage Segment Differentiated Business Model Arch aggregates risk from diversified sources and then Arch MI RateStar® Bellemeade (ILNs) utilizes a variety of tools for risk-based pricing and traditional managing mortgage and credit approach constructs reinsurance reduce risk portfolios risk expo
Slide 11: Mortgage Segment: Insurance In Force and Underwriting Income
Mortgage Segment Insurance In Force (IIF) and Underwriting Income *Underwriting income for 2Q21 is for the trailing 12 months ended June 30, 2021 © 2021 Arch Capital Group Ltd. All rights reserved. 11
Slide 12: Pandemic Led Rise In US Delinquency Rate
Pandemic Led Rise In US Delinquency Rate Arch MI US Delinquency Rate 5.5% 5.14% 5.0% 4.69% 4.5% 4.19% 3.86% 4.0% 3.5% 3.11% 3.0% 2.57% 2.5% 2.25% 2.23% 2.02% 1.98% 1.98% 2.0% 1.70% 1.60% 1.60% 1.54% 1.45% 1.48% 1.54% 1.42% 1.5% 1.0% 0.5% 0.0% 12/31/16 3/31/17 6/30/17 9/30/17 12/31/17 3/31/18 6/30/18
Slide 13: Equity Position of Delinquent Borrowers
Equity Click Position to edit Masteroftitle Delinquent style Borrowers Distribution of Arch Insured Loans by Estimated Mark-to-Market LTV* 45% 40% 35% 30% % of Loans 25% 20% 15% 10% 5% 0% < 70% 70% - 79% 80% - 89% => 90% Mark-to-Market LTV Delinquent Policies in Force All Policies in Force An Estima
Slide 14: Bellemeade Reinsurance Coverage
Bellemeade Reinsurance Coverage June 30, 2021 ($ in millions) Bellemeade Re Insurance-Linked Notes Key Metrics (1)* 2017-1 2018-1 2018-3 2019-1 2019-2 2019-3 2019-4 2020-1 (8) 2020-2 (8) 2020-3 (8) 2020-4 (8) 2021-1 (8) 2021-2 (8) Coverage dates for policies issued between (2) 1/17-6/17 7/17-12/17 1
Slide 15: Bellemeade Reinsurance Coverage (Notes)
Bellemeade Reinsurance Coverage (1) Through June 30, 2021, including the initial coverage of $312M provided directly by a panel of reinsurers through traditional excess of loss agreements, Arch Mortgage Insurance Company ("AMIC") and United Guaranty Residential Insurance Company ("UGRIC") (together,
Slide 16: Arch MI US – Reinsurance Coverage by Vintage
Arch MI US – Reinsurance Coverage by Vintage As of June 30, 2021 ($ 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 (2) 2011 and prior $2,838 $- $2,838 79.1% $2,247 2012 587 - 587 25.0% 147 2013 1,563 - 1,
Slide 17: 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 18: 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 19: 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 20: Consistent, Higher Historical Returns
Click to edit Higher, Master More title style Historical Returns Consistent, Total Value Creation vs. Coefficient of Variation – Total Composite 12/31/2002 – 12/31/2020 Lower Volatility, Higher Returns Higher Volatility, Higher Returns 16% Composite ACGL Average = 92% PGR 14% CB TRV AFG 12% WRB TVC
Slide 21: Investor Inquiries
Growth Click to editand Book Master Value title style 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