Arch Capital Group Ltd. · NASDAQ:ACGL
Arch Capital — Q1 2021 Earnings Presentation
23 slides from Arch Capital's earnings presentation, Apr 28, 2021
Slide 1: Investor Presentation 2021 First Quarter
Investor Presentation 2021 First 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: 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 4: 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 March 31, 2021 Gross premiu
Slide 5: 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 25% 60% 53% 19% 20% 20% 20% 50% 40% 15% 30% 25% 10% 17% 17% 20% 11% 4% 5% 1% 2% 10% 1% 0% 0% 2016 2017 2018 2019 2020 1Q21
Slide 6: Specialty Insurance
Specialty Click to editInsurance Master title style Calendar Year Net Premiums Written by Line ($M) $3,500 Other $3,000 Lenders products $2,500 Travel, accident and health $2,000 Excess and surplus casualty $1,500 Construction and national accounts Programs $1,000 Professional Lines $500 Property, e
Slide 7: Growth Driven by Wholesale/Large Capacity (Insurance)
Click Growthto edit Master Driven bytitle style Wholesale/Large Capacity (Insurance) Worldwide GWP (y/y change) 60% 53% 50% 40% 32% 30% 22% 20% 14% 12% 10% 9% 10% 7% 4% 4% 2% 0% -10% -10% -20% 2017FY 2018FY 2019FY 2020FY Whole sale/Large Capacity includes property, marine, offshore, casualty, high c
Slide 8: Flexing into a Hardening Market (Reinsurance)
Flexing Click into to edit a Hardening Master title styleMarket (Reinsurance) Calendar Year Net Premiums Written by Line ($M) $3,000 Other $2,500 Marine, aviation and space $2,000 Specialty $1,500 Property catastrophe $1,000 Property excl. property $500 catastrophe Casualty $0 2006 2007 2008 2009 20
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 14.3% 1:250 PML $M 800 $867 $860 15% $801 $778 9.0% 600 8.0% 10% $612 6.9% 6.6% 5.8% 6.3% $544
Slide 10: Mortgage Segment
Mortgage Segment Differentiated Business Model Arch aggregates risk from diversified sources and then Arch MI RateStar® Bellemeade (ILNs) utilizes a variety of tools for risk-based pricing and traditional managing mortgage and credit approach constructs reinsurance reduce risk portfolios risk expo
Slide 11: Mortgage Segment: Insurance In Force and Underwriting Income
Mortgage Segment Insurance In Force (IIF) and Underwriting Income *Underwriting income for 1Q21 is for the trailing 12 months ended March 31, 2021 © 2021 Arch Capital Group Ltd. All rights reserved. 11
Slide 12: Private Mortgage Insurance vs FHA/VA Origination
Private Mortgage Insurance vs FHA/VA Origination PMIs’ share of insured originations has generally been increasing since the Great Recession, but declined slightly in 2020 due to heavy refi activity. Market Shares of Insured Originations 100% 7% 13% 90% 17% 16% 27% 33% 80% 70% 31% 60% 28% 23% 50% 67
Slide 13: Pandemic Led Rise In US Delinquency Rate
Pandemic Led Rise In US Delinquency Rate Arch MI US Delinquency Rate 5.5% 5.14% 5.0% 4.69% 4.5% 4.19% 3.86% 4.0% 3.5% 3.0% 2.57% 2.5% 2.25% 2.23% 2.02% 1.98% 1.98% 2.0% 1.70% 1.60% 1.60% 1.54% 1.45% 1.48% 1.54% 1.42% 1.5% 1.0% 0.5% 0.0% 12/31/16 3/31/17 6/30/17 9/30/17 12/31/17 3/31/18 6/30/18 9/30/
Slide 14: Equity Position of Delinquent Borrowers
Equity Click Position to edit Masteroftitle Delinquent style Borrowers Distribution of Arch Insured Loans by Estimated Mark-to-Market LTV* 40% 35% 30% 25% % of Loans 20% 15% 10% 5% 0% < 70% 70% - 79% 80% - 89% > 90% Mark-to-Market LTV Delinquent Policies in Force All Policies in Force An Estimated 9
Slide 15: Arch MI US – Bellemeade Reinsurance Coverage by Deal
Arch MI US – Bellemeade Reinsurance Coverage by Deal March 31, 2021 ($ in millions) Bellemeade Re Insurance-Linked Notes Key Metrics (1)* 2017-1 2018-1 2018-2 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) Coverage dates for policies issued between (2) 1/17
Slide 16: Arch MI US – Bellemeade Reinsurance Coverage by Deal (notes)
Arch MI US – Bellemeade Reinsurance Coverage by Deal (1) Through March 31, 2021, including the $219M of reinsurance coverage provided directly by a panel of reinsurers through traditional excess of loss agreements, Arch Mortgage Insurance Company and United Guaranty Residential Insurance Company ("U
Slide 17: Key Terms of Bellemeade Re 2021-1
Key Terms of Bellemeade Re 2021-1 Cedants United Guaranty Residential Insurance Co. and Arch Mortgage Insurance Co. Reinsurer Bellemeade Re 2021-1 Ltd. (Bellemeade Re), a special purpose reinsurer domiciled in Bermuda Effective Date March 30, 2021 Maturity March 25, 2031 (optional call on Ma
Slide 18: Arch MI US – Bellemeade Reinsurance Coverage by Vintage
Arch MI US – Bellemeade Reinsurance Coverage by Vintage As of March 31, 2021 ($ in millions) © 2021 Arch Capital Group Ltd. All rights reserved. 18
Slide 19: 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 20: 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 21: 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 22: Higher, More Consistent, 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 23: Growth and Book Value
Growth Click to editand Booktitle Master Value style Book value per common share1 $35.00 $30.00 $25.00 $20.00 $15.00 $30.31 $30.54 $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