The following financial supplement is provided to assist in your understanding of Arch Capital Group Ltd. (“Arch”) and its subsidiaries (collectively, the “Company”).
This report is for informational purposes only. It should be read in conjunction with documents filed by Arch with the U.S. Securities and Exchange Commission, including the most recent Annual Report on Form 10-K and the Quarterly Reports on Form 10-Q. Please refer to the Company’s website at www.archgroup.com for further information describing Arch.
Contacts
Arch Capital Group Ltd.
Investor Relations
François Morin: (441) 278-9250
Donald Watson: (914) 872-3616; dwatson@archgroup.com
All financial information contained herein is unaudited, however, certain information relating to the consolidated balance sheet at December 31, 2020 is derived from or agrees to audited financial information. During the 2021 first quarter, the Company changed its presentation of ‘income (loss) from operating affiliates’ on its consolidated statements of income for all periods presented to reclass such item from ‘other income (loss)’. The Company also changed its presentation of ‘investment in operating affiliates’ on its consolidated balance sheet for all periods presented to reclass such item from ‘other assets’. Unless otherwise noted, all data is in thousands, except for share and per share amounts and ratio information.
In March 2014, the Company invested $100.0 million to acquire common equity and a warrant to purchase additional common equity of Somers Holdings Ltd. (formerly Watford Holdings Ltd.). In accordance with GAAP, the Company consolidated the results of Somers Holdings Ltd. (“Somers”) in its financial statements. Somers was considered a variable interest entity and the Company concluded that it was the primary beneficiary of Somers, through June 30, 2021. As such, 100% of the results of Somers were included in the Company’s consolidated financial statements as of and for the periods ended June 30, 2021. The portion of Somers’ earnings owned by third parties was recorded in the consolidated statements of income as ‘amounts attributable to noncontrolling interests.’ In addition, through June 30, 2021 the Company reflected Somers’ redeemable preference shares in the mezzanine section of the Company’s consolidated balance sheets as ‘redeemable noncontrolling interests’. In July 2021, the Company announced the completion of the previously disclosed acquisition of Somers by Greysbridge. Based on the governing documents of Greysbridge, the Company has concluded that, while it will retain significant influence over Somers, Somers no longer constitutes a variable interest entity. Accordingly, effective July 1, 2021, Arch no longer consolidates the results of Somers in its consolidated financial statements and footnotes.
The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. This release or any other written or oral statements made by or on behalf of Arch and its subsidiaries may include forward-looking statements, which reflect the Company’s current views with respect to future events and financial performance. All statements other than statements of historical fact included in or incorporated by reference in this release are forward-looking statements.
Forward-looking statements can generally be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe” or “continue” or their negative or variations or similar terminology. Forward-looking statements involve the Company’s current assessment of risks and uncertainties. Actual events and results may differ materially from those expressed or implied in these statements. A non-exclusive list of the important factors that could cause actual results to differ materially from those in such forward-looking statements includes the following: adverse general economic and market conditions; increased competition; pricing and policy term trends; fluctuations in the actions of rating agencies and the Company’s ability to maintain and improve the Company’s ratings; investment performance; the loss and addition of key personnel; the adequacy of the Company’s loss reserves, severity and/or frequency of losses, greater than expected loss ratios and adverse development on claim and/or claim expense liabilities; greater frequency or severity of unpredictable natural and man-made catastrophic events; including pandemics such as COVID-19; the impact of acts of terrorism and acts of war; changes in regulations and/or tax laws in the United States or elsewhere; the Company’s ability to successfully integrate, establish and maintain operating procedures as well as integrate the businesses we have acquired or may acquire into the existing operations; changes in accounting principles or policies; material differences between actual and expected assessments for guaranty funds and mandatory pooling arrangements; availability and cost to the Company of reinsurance to manage gross and net exposures; the failure of others to meet their obligations to the Company; changes in the method for determining the London Inter-bank Offered Rate (“LIBOR”) and the replacement of LIBOR with alternative benchmark rates and other factors identified in the Company’s filings with the U.S. Securities and Exchange Commission.
The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with other cautionary statements that are included herein or elsewhere. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on the Company’s behalf are expressly qualified in their entirety by these cautionary statements. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
2
Arch Capital Group Ltd. and Subsidiaries
Financial Highlights
The following table presents financial highlights (1):
(U.S. Dollars in thousands, except share data)
Three Months Ended
Year Ended
December 31,
December 31,
2021
2020
Change
2021
2020
Change
Underwriting results:
Gross premiums written
$
2,861,575
$
2,170,831
31.8
%
$
12,463,788
$
9,632,691
29.4
%
Net premiums written
2,034,427
1,660,298
22.5
%
8,663,635
6,900,127
25.6
%
Net premiums earned
2,083,630
1,668,299
24.9
%
7,750,330
6,431,584
20.5
%
Underwriting income (loss) (2)
471,611
229,542
105.5
%
1,239,740
481,069
157.7
%
Loss ratio
47.8
%
61.0
%
(13.2)
55.8
%
66.1
%
(10.3)
Acquisition expense ratio
17.2
%
13.5
%
3.7
16.0
%
14.1
%
1.9
Other operating expense ratio
12.6
%
12.1
%
0.5
12.5
%
12.7
%
(0.2)
Combined ratio
77.6
%
86.6
%
(9.0)
84.3
%
92.9
%
(8.6)
Net investment income
$
90,454
$
87,992
2.8
%
$
346,808
$
401,908
(13.7)
%
Per diluted share
$
0.23
$
0.21
9.5
%
$
0.87
$
0.98
(11.2)
%
Net income available to Arch common shareholders
$
613,081
$
533,141
15.0
%
$
2,093,405
$
1,363,909
53.5
%
Per diluted share
$
1.58
$
1.30
21.5
%
$
5.23
$
3.32
57.5
%
After-tax operating income available to Arch common shareholders (2)
$
493,257
$
230,417
114.1
%
$
1,434,930
$
557,108
157.6
%
Per diluted share
$
1.27
$
0.56
126.8
%
$
3.58
$
1.36
163.2
%
Comprehensive income (loss) available to Arch
$
509,482
$
646,082
(21.1)
%
$
1,603,354
$
1,682,325
(4.7)
%
Net cash provided by operating activities
$
800,004
$
507,017
57.8
%
$
3,380,701
$
2,705,054
25.0
%
Weighted average common shares and common share equivalents outstanding — diluted
388,869,378
410,281,852
(5.2)
%
400,345,936
410,259,455
(2.4)
%
Financial measures:
Change in book value per common share during period
3.5
%
5.4
%
(1.9)
10.7
%
14.7
%
(4.0)
Annualized net income return on average common equity
19.4
%
17.8
%
1.6
16.7
%
11.8
%
4.9
Annualized operating return on average common equity (2)
15.6
%
7.7
%
7.9
11.5
%
4.8
%
6.7
Total return on investments (3)
0.39
%
2.46
%
-207 bps
1.90
%
7.77
%
-587 bps
(1)Presented on a ‘core’ basis which excludes amounts related to the ‘other’ segment (i.e., results of Somers). See ‘Comments on Regulation G’ for a further discussion of the presentation of ‘core’ results.
(2)See ‘Comments on Regulation G’ for a further discussion of consolidated underwriting income or loss, after-tax operating income or loss available to Arch common shareholders and annualized operating return on average common equity.
(3)Total return on investments includes net investment income, equity in net income (loss) of investment funds accounted for using the equity method, net realized gains and losses and the change in unrealized gains and losses and is calculated on a pre-tax basis and before investment expenses. See ‘Comments on Regulation G’ for a further discussion of the presentation of total return on investments.
3
Arch Capital Group Ltd. and Subsidiaries
Consolidated Statements of Income
(U.S. Dollars in thousands, except share data)
Three Months Ended
Year Ended
December 31,
September 30,
June 30,
March 31,
December 31,
December 31,
December 31,
2021
2021
2021
2021
2020
2021
2020
Revenues
Net premiums earned
$
2,083,630
$
1,929,337
$
2,120,909
$
1,948,422
$
1,811,045
$
8,082,298
$
6,991,935
Net investment income
90,454
88,195
111,613
98,856
114,458
389,118
519,608
Net realized gains (losses)
59,517
(25,040)
202,907
142,461
353,333
379,845
823,460
Other underwriting income
3,160
7,274
5,529
6,110
7,852
22,073
26,784
Equity in net income (loss) of investment funds accounted for using the equity method
67,132
105,398
122,186
71,686
89,286
366,402
146,693
Other income (loss)
9,093
(3,960)
6,852
(1,741)
(36)
10,244
29
Total revenues
2,312,986
2,101,204
2,569,996
2,265,794
2,375,938
9,249,980
8,508,509
Expenses
Losses and loss adjustment expenses
(995,853)
(1,226,019)
(1,159,831)
(1,203,100)
(1,127,385)
(4,584,803)
(4,689,599)
Acquisition expenses
(357,539)
(306,015)
(335,143)
(304,481)
(254,828)
(1,303,178)
(1,004,842)
Other operating expenses
(261,787)
(230,832)
(244,943)
(261,033)
(215,697)
(998,595)
(875,176)
Corporate expenses
(18,150)
(19,672)
(15,951)
(25,384)
(25,335)
(79,157)
(81,988)
Amortization of intangible assets
(33,132)
(20,135)
(15,286)
(14,402)
(19,196)
(82,955)
(69,031)
Interest expense
(32,248)
(33,176)
(35,700)
(38,346)
(38,419)
(139,470)
(143,456)
Net foreign exchange gains (losses)
3,163
36,078
(17,775)
20,063
(72,209)
41,529
(83,634)
Total expenses
(1,695,546)
(1,799,771)
(1,824,629)
(1,826,683)
(1,753,069)
(7,146,629)
(6,947,726)
Income (loss) before income taxes and income (loss) from operating affiliates
617,440
301,433
745,367
439,111
622,869
2,103,351
1,560,783
Income tax expense
(34,406)
(4,137)
(51,179)
(38,860)
(34,059)
(128,582)
(111,838)
Income (loss) from operating affiliates
40,641
124,119
24,476
75,457
10,504
264,693
16,766
Net income (loss)
623,675
421,415
718,664
475,708
599,314
2,239,462
1,465,711
Net (income) loss attributable to noncontrolling interests
(410)
(1,473)
(43,178)
(37,552)
(55,770)
(82,613)
(60,190)
Net income (loss) attributable to Arch
623,265
419,942
675,486
438,156
543,544
2,156,849
1,405,521
Preferred dividends
(10,184)
(16,090)
(11,666)
(10,403)
(10,403)
(48,343)
(41,612)
Loss on redemption of preferred shares
—
(15,101)
—
—
—
(15,101)
—
Net income (loss) available to Arch common shareholders
$
613,081
$
388,751
$
663,820
$
427,753
$
533,141
$
2,093,405
$
1,363,909
Comprehensive income (loss) available to Arch
$
509,482
$
239,078
$
699,705
$
155,089
$
646,082
$
1,603,354
$
1,682,325
Net income (loss) per common share and common share equivalent
Basic
$
1.62
$
1.00
$
1.67
$
1.07
$
1.32
$
5.34
$
3.38
Diluted
$
1.58
$
0.98
$
1.63
$
1.05
$
1.30
$
5.23
$
3.32
Weighted average common shares and common share equivalents outstanding
Basic
379,431,442
389,274,220
397,743,402
400,807,895
403,005,335
391,748,715
403,062,179
Diluted
388,869,378
397,903,347
406,485,994
409,223,253
410,281,852
400,345,936
410,259,455
4
Arch Capital Group Ltd. and Subsidiaries
Consolidated Balance Sheets
(U.S. Dollars in thousands, except share data)
December 31,
September 30,
June 30,
March 31,
December 31,
2021
2021
2021
2021
2020
Assets
Investments:
Fixed maturities available for sale, at fair value
$
17,998,109
$
16,768,363
$
18,073,779
$
18,723,035
$
18,717,825
Short-term investments available for sale, at fair value
1,734,716
3,069,965
2,248,613
1,269,631
1,924,922
Collateral received under securities lending, at fair value
—
—
172,116
143,894
301,096
Equity securities, at fair value
1,804,170
1,790,640
1,693,552
1,532,906
1,444,830
Other investments
1,973,550
2,043,970
4,571,497
4,435,354
4,324,796
Investments accounted for using the equity method
3,077,611
2,741,293
2,539,124
2,256,327
2,047,889
Total investments
26,588,156
26,414,231
29,298,681
28,361,147
28,761,358
Cash
858,668
1,137,721
1,234,059
941,951
906,448
Accrued investment income
85,453
75,832
96,546
101,108
103,299
Securities pledged under securities lending, at fair value
—
—
168,548
140,949
294,912
Investment in operating affiliates
1,135,655
1,111,825
731,810
739,783
129,291
Premiums receivable
2,633,280
2,807,720
2,866,578
2,618,175
2,064,586
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses
5,880,735
5,358,852
4,314,515
4,041,076
4,500,802
Contractholder receivables
1,828,691
1,824,990
1,882,948
1,919,655
1,986,924
Ceded unearned premiums
1,729,455
1,824,910
1,541,093
1,406,489
1,234,075
Deferred acquisition costs
901,841
893,665
1,013,657
919,740
790,708
Receivable for securities sold
60,179
84,019
309,234
199,424
92,743
Goodwill and intangible assets
944,983
963,322
667,153
679,509
692,863
Other assets
2,453,849
2,286,649
2,357,064
2,135,261
1,724,288
Total assets
$
45,100,945
$
44,783,736
$
46,481,886
$
44,204,267
$
43,282,297
Liabilities
Reserve for losses and loss adjustment expenses
$
17,757,156
$
17,331,047
$
17,196,648
$
16,443,952
$
16,513,929
Unearned premiums
6,011,942
6,165,114
6,011,369
5,549,127
4,838,965
Reinsurance balances payable
1,583,253
1,403,929
1,079,106
919,125
683,263
Contractholder payables
1,832,127
1,828,474
1,887,418
1,925,508
1,995,562
Collateral held for insured obligations
242,352
254,259
235,618
222,245
215,581
Senior notes
2,724,394
2,724,149
2,861,728
2,861,417
2,861,113
Revolving credit agreement borrowings
—
—
155,687
155,687
155,687
Securities lending payable
—
—
172,109
143,886
301,089
Payable for securities purchased
64,850
357,531
586,881
386,453
218,779
Other liabilities
1,329,742
1,321,470
1,332,843
1,565,861
1,510,888
Total liabilities
31,545,816
31,385,973
31,519,407
30,173,261
29,294,856
Redeemable noncontrolling interests
9,233
10,237
57,533
57,670
58,548
Shareholders’ equity
Non-cumulative preferred shares
830,000
830,000
1,280,000
780,000
780,000
Common shares
648
648
647
645
643
Additional paid-in capital
2,085,075
2,061,906
2,028,919
2,014,741
1,977,794
Retained earnings
14,455,868
13,842,787
13,454,036
12,790,216
12,362,463
Accumulated other comprehensive income (loss), net of deferred income tax
(64,600)
49,184
230,048
205,827
488,895
Common shares held in treasury, at cost
(3,761,095)
(3,396,999)
(3,007,578)
(2,694,957)
(2,503,909)
Total shareholders’ equity available to Arch
13,545,896
13,387,526
13,986,072
13,096,472
13,105,886
Non-redeemable noncontrolling interests
—
—
918,874
876,864
823,007
Total shareholders’ equity
13,545,896
13,387,526
14,904,946
13,973,336
13,928,893
Total liabilities, noncontrolling interests and shareholders’ equity
$
45,100,945
$
44,783,736
$
46,481,886
$
44,204,267
$
43,282,297
Common shares and common share equivalents outstanding, net of treasury shares
378,923,894
387,257,752
396,771,251
403,313,377
406,720,642
Book value per common share (1)
$
33.56
$
32.43
$
32.02
$
30.54
$
30.31
(1) Excludes the effects of stock options and restricted stock units outstanding.
5
Arch Capital Group Ltd. and Subsidiaries
Consolidated Statements of Changes in Shareholders’ Equity
(U.S. Dollars in thousands)
Three Months Ended
Year Ended
December 31,
September 30,
June 30,
March 31,
December 31,
December 31,
December 31,
2021
2021
2021
2021
2020
2021
2020
Non-cumulative preferred shares
Balance at beginning of period
$
830,000
$
1,280,000
$
780,000
$
780,000
$
780,000
$
780,000
$
780,000
Preferred shares issued
—
—
500,000
—
—
500,000
—
Preferred shares redeemed
—
(450,000)
—
—
—
(450,000)
—
Balance at beginning and end of period
$
830,000
$
830,000
$
1,280,000
$
780,000
$
780,000
$
830,000
$
780,000
Common shares
Balance at beginning of period
648
647
645
643
642
643
638
Common shares issued, net
—
1
2
2
1
5
5
Balance at end of period
648
648
647
645
643
648
643
Additional paid-in capital
Balance at beginning of period
2,061,906
2,028,919
2,014,741
1,977,794
1,950,782
1,977,794
1,889,683
Issue costs on preferred shares
—
—
(14,179)
—
—
(14,179)
—
Reversal of original issue costs on redeemed preferred shares
—
15,101
—
—
—
15,101
—
Amortization of share-based compensation
14,774
14,216
16,490
40,573
14,663
86,053
70,535
All other
8,395
3,670
11,867
(3,626)
12,349
20,306
17,576
Balance at end of period
2,085,075
2,061,906
2,028,919
2,014,741
1,977,794
2,085,075
1,977,794
Retained earnings
Balance at beginning of period
13,842,787
13,454,036
12,790,216
12,362,463
11,829,322
12,362,463
11,021,006
Cumulative effect of an accounting change (1)
—
—
—
—
—
—
(22,452)
Balance at beginning of period, as adjusted
13,842,787
13,454,036
12,790,216
12,362,463
11,829,322
12,362,463
10,998,554
Net income
623,675
421,415
718,664
475,708
599,314
2,239,462
1,465,711
Amounts attributable to noncontrolling interests
(410)
(1,473)
(43,178)
(37,552)
(55,770)
(82,613)
(60,190)
Preferred share dividends
(10,184)
(16,090)
(11,666)
(10,403)
(10,403)
(48,343)
(41,612)
Loss on redemption of preferred shares
—
(15,101)
—
—
—
(15,101)
—
Balance at end of period
14,455,868
13,842,787
13,454,036
12,790,216
12,362,463
14,455,868
12,362,463
Accumulated other comprehensive income (loss), net of deferred income tax
Balance at beginning of period
49,184
230,048
205,827
488,895
386,357
488,895
212,091
Change in unrealized appreciation (decline) in value of available-for-sale investments
(103,391)
(147,825)
17,991
(254,584)
63,008
(487,809)
242,809
Change in foreign currency translation adjustments
Adjustments to reconcile net income to net cash provided by operating activities:
Net realized (gains) losses
(60,054)
11,736
(218,042)
(161,007)
(366,942)
(427,367)
(844,625)
Equity in net (income) or loss of investment. funds accounted for using the equity method and other income or loss
(91,400)
(191,622)
(45,089)
(135,939)
(78,257)
(464,050)
(47,951)
Amortization of intangible assets
33,132
20,135
15,286
14,402
19,196
82,955
69,031
Share-based compensation
14,791
14,739
16,752
40,812
14,829
87,094
71,262
Changes in:
Reserve for losses and loss adjustment expenses, net
213,979
599,706
388,352
560,153
445,758
1,762,190
2,113,827
Unearned premiums, net
(49,203)
146,592
278,615
560,035
(53,030)
936,039
445,781
Premiums receivable
161,884
(65,707)
(173,141)
(608,250)
143,123
(685,214)
(318,643)
Deferred acquisition costs
(15,277)
(33,073)
(88,192)
(126,701)
(36,710)
(263,243)
(143,948)
Reinsurance balances payable
(118,506)
287,110
91,255
240,206
(139,670)
500,065
65,950
Other items, net
86,983
(196,052)
(134,733)
(96,574)
7,444
(340,376)
10,110
Net cash provided by operating activities
800,004
1,014,979
849,727
762,845
555,055
3,427,555
2,886,505
Investing Activities
Purchases of fixed maturity investments
(5,581,835)
(6,315,639)
(12,023,416)
(11,530,968)
(5,714,394)
(35,451,858)
(39,765,277)
Purchases of equity securities
(196,529)
(358,177)
(311,355)
(309,419)
(239,162)
(1,175,480)
(1,595,010)
Purchases of other investments
(509,040)
(316,922)
(602,173)
(430,961)
(966,841)
(1,859,096)
(1,808,727)
Proceeds from sales of fixed maturity investments
3,509,653
6,937,404
12,213,254
10,917,134
5,404,479
33,577,445
37,949,346
Proceeds from sales of equity securities
222,512
153,343
257,304
284,986
415,471
918,145
1,147,264
Proceeds from sales, redemptions and maturities of other investments
277,614
715,370
448,958
323,591
237,771
1,765,533
1,029,578
Proceeds from redemptions and maturities of fixed maturity investments
394,343
428,576
384,794
421,042
225,842
1,628,755
871,134
Net settlements of derivative instruments
27,758
(85,116)
(30,374)
47,660
15,716
(40,072)
179,006
Net (purchases) sales of short-term investments
1,338,070
(794,712)
(967,261)
589,175
129,670
165,272
(1,029,681)
Change in cash collateral related to securities lending
—
826
(826)
—
—
—
81,210
Purchase of operating affiliate, net
—
(207,567)
—
(546,349)
—
(753,916)
—
Impact of the deconsolidation of a variable interest entity
—
(349,202)
—
—
—
(349,202)
—
Purchases of fixed assets
(6,987)
(10,822)
(11,095)
(12,490)
(13,155)
(41,394)
(39,872)
Other
(162,007)
(156,968)
41,701
(246,590)
69,795
(523,864)
(62,197)
Net cash provided by (used for) investing activities
(686,448)
(359,606)
(600,489)
(493,189)
(434,808)
(2,139,732)
(3,043,226)
Financing Activities
Proceeds from issuance of preferred shares, net
—
—
485,821
—
—
485,821
—
Redemption of preferred shares
—
(450,000)
—
—
—
(450,000)
—
Purchases of common shares under share repurchase program
(362,097)
(386,882)
(306,049)
(179,266)
(7,986)
(1,234,294)
(83,472)
Proceeds from common shares issued, net
6,137
96
10,193
(10,008)
11,532
6,418
1,876
Proceeds from borrowings
—
—
—
—
—
—
1,018,793
Repayments of borrowings
—
—
—
—
(55,000)
—
(359,000)
Change in cash collateral related to securities lending
—
(826)
826
—
—
—
(81,210)
Change in third party investment in non-redeemable noncontrolling interests
—
—
—
15,971
—
15,971
(2,867)
Dividends paid to redeemable noncontrolling interests
—
—
(959)
(948)
(1,404)
(1,907)
(4,945)
Other
18,474
(49,391)
29,587
(1,948)
18,449
(3,278)
73,715
Preferred dividends paid
(10,184)
(17,291)
(10,402)
(10,403)
(10,403)
(48,280)
(41,612)
Net cash provided by (used for) financing activities
(347,670)
(904,294)
209,017
(186,602)
(44,812)
(1,229,549)
521,278
Effects of exchange rate changes on foreign currency cash and restricted cash
(24)
(20,633)
(7,306)
(6,084)
28,136
(34,047)
22,289
Increase (decrease) in cash and restricted cash
(234,138)
(269,554)
450,949
76,970
103,571
24,227
386,846
Cash and restricted cash, beginning of period
1,548,909
1,818,463
1,367,514
1,290,544
1,186,973
1,290,544
903,698
Cash and restricted cash, end of period
$
1,314,771
$
1,548,909
$
1,818,463
$
1,367,514
$
1,290,544
$
1,314,771
$
1,290,544
Income taxes paid (received)
$
84,371
$
61,343
$
133,997
$
7,099
$
56,126
$
286,810
$
202,940
Interest paid
$
63,498
$
1,104
$
73,711
$
988
$
72,936
$
139,301
$
133,491
Net cash provided by operating activities, excluding the ‘other’ segment
$
800,004
$
1,014,979
$
809,790
$
755,928
$
507,017
$
3,380,701
$
2,705,054
7
Arch Capital Group Ltd. and Subsidiaries
Segment Information — Overview
The Company classifies its businesses into three underwriting segments — insurance, reinsurance and mortgage — and two other operating segments — ‘other’ and corporate segment. The Company’s Insurance, Reinsurance and Mortgage segments each have managers who are responsible for the overall profitability of their respective segments and who are directly accountable to the Company’s chief operating decision makers, the Chief Executive Officer of Arch, the Chief Financial Officer and Treasurer of Arch and the President and Chief Underwriting Officer of Arch. The chief operating decision makers do not assess performance, measure return on equity or make resource allocation decisions on a line of business basis. Management measures segment performance for its three core underwriting segments based on underwriting income or loss. The Company does not manage its assets by underwriting segment and, accordingly, investment income is not allocated to each underwriting segment.
The Company determined its reportable operating segments using the management approach described in accounting guidance regarding disclosures about segments of an enterprise and related information. The accounting policies of the segments are the same as those used for the preparation of the Company’s consolidated financial statements. Intersegment business is allocated to the segment accountable for the underwriting results.
Insurance Segment
The insurance segment consists of the Company’s insurance underwriting units which offer specialty product lines on a worldwide basis. Product lines include:
• Construction and national accounts: primary and excess casualty coverages to middle and large accounts in the construction industry and a wide range of products for middle and large national accounts, specializing in loss sensitive primary casualty insurance programs (including large deductible, self-insured retention and retrospectively rated programs).
• Excess and surplus casualty: primary and excess casualty insurance coverages, including middle market energy business, and contract binding, which primarily provides casualty coverage through a network of appointed agents to small and medium risks.
• Lenders products: collateral protection, debt cancellation and service contract reimbursement products to banks, credit unions, automotive dealerships and original equipment manufacturers and other specialty programs that pertain to automotive lending and leasing.
• Professional lines: directors’ and officers’ liability, errors and omissions liability, employment practices liability, fiduciary liability, crime, professional indemnity and other financial related coverages for corporate, private equity, venture capital, real estate investment trust, limited partnership, financial institution and not-for-profit clients of all sizes and medical professional and general liability insurance coverages for the healthcare industry. The business is predominately written on a claims-made basis.
• Programs: primarily package policies, underwriting workers’ compensation and umbrella liability business in support of desirable package programs, targeting program managers with unique expertise and niche products offering general liability, commercial automobile, inland marine and property business with minimal catastrophe exposure.
• Property, energy, marine and aviation: primary and excess general property insurance coverages, including catastrophe-exposed property coverage, for commercial clients. Coverages for marine include hull, war, specie and liability. Aviation and stand alone terrorism are also offered.
• Travel, accident and health: specialty travel and accident and related insurance products for individual, group travelers, travel agents and suppliers, as well as accident and health, which provides accident, disability and medical plan insurance coverages for employer groups, medical plan members, students and other participant groups.
• Other: includes alternative market risks (including captive insurance programs), excess workers’ compensation and employer’s liability insurance coverages for qualified self-insured groups, associations and trusts, and contract and commercial surety coverages, including contract bonds (payment and performance bonds) primarily for medium and large contractors and commercial surety bonds for Fortune 1,000 companies and smaller transaction business programs.
8
Arch Capital Group Ltd. and Subsidiaries
Segment Information — Overview
Reinsurance Segment
The reinsurance segment consists of the Company’s reinsurance underwriting units which offer specialty product lines on a worldwide basis. Product lines include:
•Casualty: provides coverage to ceding company clients on third party liability and workers’ compensation exposures from ceding company clients, primarily on a treaty basis. Exposures include, among others, executive assurance, professional liability, workers’ compensation, excess and umbrella liability, excess motor and healthcare business.
•Marine and aviation: provides coverage for energy, hull, cargo, specie, liability and transit, and aviation business, including airline and general aviation risks. Business written may also include space business, which includes coverages for satellite assembly, launch and operation for commercial space programs.
•Other specialty: provides coverage to ceding company clients for proportional motor and other lines including surety, accident and health, workers’ compensation catastrophe, agriculture, trade credit and political risk.
•Property catastrophe: provides protection for most catastrophic losses that are covered in the underlying policies written by reinsureds, including hurricane, earthquake, flood, tornado, hail and fire, and coverage for other perils on a case-by-case basis. Property catastrophe reinsurance provides coverage on an excess of loss basis when aggregate losses and loss adjustment expense from a single occurrence of a covered peril exceed the retention specified in the contract.
•Property excluding property catastrophe: provides coverage for both personal lines and commercial property exposures and principally covers buildings, structures, equipment and contents. The primary perils in this business include fire, explosion, collapse, riot, vandalism, wind, tornado, flood and earthquake. Business is assumed on both a proportional and excess of loss basis. In addition, facultative business is written which focuses on commercial property risks on an excess of loss basis.
•Other. includes life reinsurance business on both a proportional and non-proportional basis, casualty clash business and, in limited instances, non-traditional business which is intended to provide insurers with risk management solutions that complement traditional reinsurance.
Mortgage Segment
The mortgage segment includes the Company’s underwriting units which offer mortgage insurance and reinsurance products worldwide basis. Underwriting units include:
•U.S. primary mortgage insurance: offers private mortgage insurance through Arch Mortgage Insurance Company and United Guaranty Residential Insurance Company (combined “Arch MI U.S.”), both approved eligible mortgage insurers by Fannie Mae and Freddie Mac. Arch MI U.S. also includes Arch Mortgage Guaranty Company, which is not a government sponsored enterprise “GSE” approved entity.
•U.S. credit risk transfer (CRT) and other: underwrites CRT transactions, which are predominantly with GSEs, and other U.S. reinsurance transactions.
•International mortgage insurance/reinsurance: underwrites mortgage insurance and reinsurance outside of the U.S.
Corporate Segment
The corporate segment results include net investment income, net realized gains or losses (which includes changes in the allowance for credit losses on financial assets and net impairment losses recognized in earnings), equity in net income or loss of investment funds accounted for using the equity method, other income (loss), corporate expenses, transaction costs and other, amortization of intangible assets, interest expense, net foreign exchange gains or losses, income taxes items, income or loss from operating affiliates and items related to the Company’s non-cumulative preferred shares. Such amounts exclude the results of the ‘other’ segment.
Other Segment
Through June 30, 2021, the ‘other’ segment included the results of Somers. Pursuant to GAAP, Somers was considered a variable interest entity and the Company concluded that it was the primary beneficiary of Somers. As such, the Company consolidated the results of Somers in its consolidated financial statements through June 30, 2021. The portion of Somers’ earnings attributable to third party investors was recorded in the consolidated statements of income as ‘amounts attributable to noncontrolling interests.’ Management measures segment performance for the ‘other’ segment based on net income or loss. In July 2021, the Company announced the completion of the previously disclosed acquisition of Somers by Greysbridge. Based on the governing documents of Greysbridge, the Company has concluded that, while it retains significant influence over Somers, Somers no longer constitutes a variable interest entity. Accordingly, effective July 1, 2021, Arch no longer consolidates the results of Somers in its consolidated financial statements.
9
Arch Capital Group Ltd. and Subsidiaries
Segment Information
(U.S. Dollars in thousands)
Three Months Ended
December 31, 2021
Insurance
Reinsurance
Mortgage
Sub-total (Core)
Other
Total
Gross premiums written (1)
$
1,486,362
$
1,013,090
$
364,134
$
2,861,575
$
—
$
2,861,575
Premiums ceded
(450,376)
(303,949)
(74,834)
(827,148)
—
(827,148)
Net premiums written
1,035,986
709,141
289,300
2,034,427
—
2,034,427
Change in unearned premiums
(33,089)
70,676
11,616
49,203
—
49,203
Net premiums earned
1,002,897
779,817
300,916
2,083,630
—
2,083,630
Other underwriting income (loss)
—
521
2,639
3,160
—
3,160
Losses and loss adjustment expenses
(594,108)
(430,180)
28,435
(995,853)
—
(995,853)
Acquisition expenses
(188,724)
(155,694)
(13,121)
(357,539)
—
(357,539)
Other operating expenses
(149,520)
(61,954)
(50,313)
(261,787)
—
(261,787)
Underwriting income (loss)
$
70,545
$
132,510
$
268,556
471,611
—
471,611
Net investment income
90,454
—
90,454
Net realized gains (losses)
59,517
—
59,517
Equity in net income (loss) of investment funds accounted for using the equity method
67,132
—
67,132
Other income (loss)
9,093
—
9,093
Corporate expenses (2)
(17,840)
—
(17,840)
Transaction costs and other (2)
(310)
—
(310)
Amortization of intangible assets
(33,132)
—
(33,132)
Interest expense
(32,248)
—
(32,248)
Net foreign exchange gains (losses)
3,163
—
3,163
Income (loss) before income taxes and income (loss) from operating affiliates
617,440
—
617,440
Income tax (expense) benefit
(34,406)
—
(34,406)
Income (loss) from operating affiliates
40,641
—
40,641
Net income (loss)
623,675
—
623,675
Dividends attributable to redeemable noncontrolling interests
(410)
—
(410)
Net income (loss) available to Arch
623,265
—
623,265
Preferred dividends
(10,184)
—
(10,184)
Loss on redemption of preferred shares
—
—
—
Net income (loss) available to Arch common shareholders
$
613,081
$
—
$
613,081
Underwriting Ratios
Loss ratio
59.2
%
55.2
%
(9.4)
%
47.8
%
—
%
47.8
%
Acquisition expense ratio
18.8
%
20.0
%
4.4
%
17.2
%
—
%
17.2
%
Other operating expense ratio
14.9
%
7.9
%
16.7
%
12.6
%
—
%
12.6
%
Combined ratio
92.9
%
83.1
%
11.7
%
77.6
%
—
%
77.6
%
Net premiums written to gross premiums written
69.7
%
70.0
%
79.4
%
71.1
%
—
%
71.1
%
Total investable assets
$
27,442,153
$
—
$
27,442,153
Total assets
45,100,945
—
45,100,945
Total liabilities
31,545,816
—
31,545,816
(1) Certain amounts included in the gross premiums written of each segment are related to intersegment transactions and are included in the gross premiums written of each segment. Accordingly, the sum of gross premiums written for each segment does not agree to the total gross premiums written as shown in the table above due to the elimination of intersegment transactions in the total.
(2) Certain expenses have been excluded from ‘corporate expenses’ and reflected in ‘Transaction costs and other.’ See ‘Comments on Regulation G’ for a further discussion of such items.
10
Arch Capital Group Ltd. and Subsidiaries
Segment Information
(U.S. Dollars in thousands)
Three Months Ended
December 31, 2020
Insurance
Reinsurance
Mortgage
Sub-total (Core)
Other
Total
Gross premiums written (1)
$
1,244,227
$
537,912
$
389,662
$
2,170,831
$
138,237
$
2,256,514
Premiums ceded
(406,490)
(47,018)
(57,995)
(510,533)
(40,520)
(498,499)
Net premiums written
837,737
490,894
331,667
1,660,298
97,717
1,758,015
Change in unearned premiums
(89,299)
93,180
4,120
8,001
45,029
53,030
Net premiums earned
748,438
584,074
335,787
1,668,299
142,746
1,811,045
Other underwriting income (loss)
—
2,687
4,667
7,354
498
7,852
Losses and loss adjustment expenses
(541,821)
(392,734)
(83,623)
(1,018,178)
(109,207)
(1,127,385)
Acquisition expenses
(101,055)
(98,532)
(25,936)
(225,523)
(29,305)
(254,828)
Other operating expenses
(118,206)
(42,180)
(42,024)
(202,410)
(13,287)
(215,697)
Underwriting income (loss)
$
(12,644)
$
53,315
$
188,871
229,542
(8,555)
220,987
Net investment income
87,992
26,466
114,458
Net realized gains (losses)
289,817
63,516
353,333
Equity in net income (loss) of investment funds accounted for using the equity method
89,286
—
89,286
Other income (loss)
(36)
—
(36)
Corporate expenses (2)
(17,085)
—
(17,085)
Transaction costs and other (2)
(4,210)
(4,040)
(8,250)
Amortization of intangible assets
(19,196)
—
(19,196)
Interest expense
(33,615)
(4,804)
(38,419)
Net foreign exchange gains (losses)
(62,349)
(9,860)
(72,209)
Income (loss) before income taxes and income (loss) from operating affiliates
560,146
62,723
622,869
Income tax (expense) benefit
(33,700)
(359)
(34,059)
Income (loss) from operating affiliates
10,504
—
10,504
Net income (loss)
536,950
62,364
599,314
Dividends attributable to redeemable noncontrolling interests
(1,124)
(992)
(2,116)
Amounts attributable to nonredeemable noncontrolling interests
—
(53,654)
(53,654)
Net income (loss) available to Arch
535,826
7,718
543,544
Preferred dividends
(10,403)
—
(10,403)
Net income (loss) available to Arch common shareholders
$
525,423
$
7,718
$
533,141
Underwriting Ratios
Loss ratio
72.4
%
67.2
%
24.9
%
61.0
%
76.5
%
62.3
%
Acquisition expense ratio
13.5
%
16.9
%
7.7
%
13.5
%
20.5
%
14.1
%
Other operating expense ratio
15.8
%
7.2
%
12.5
%
12.1
%
9.3
%
11.9
%
Combined ratio
101.7
%
91.3
%
45.1
%
86.6
%
106.3
%
88.3
%
Net premiums written to gross premiums written
67.3
%
91.3
%
85.1
%
76.5
%
70.7
%
77.9
%
Total investable assets
$
26,856,295
$
2,657,612
$
29,513,907
Total assets
39,791,983
3,490,314
43,282,297
Total liabilities
26,789,149
2,505,707
29,294,856
(1) Certain amounts included in the gross premiums written of each segment are related to intersegment transactions and are included in the gross premiums written of each segment. Accordingly, the sum of gross premiums written for each segment does not agree to the total gross premiums written as shown in the table above due to the elimination of intersegment transactions in the total.
(2) Certain expenses have been excluded from ‘corporate expenses’ and reflected in ‘Transaction costs and other.’ See ‘Comments on Regulation G’ for a further discussion of such items.
11
Arch Capital Group Ltd. and Subsidiaries
Segment Information
(U.S. Dollars in thousands)
Year Ended
December 31, 2021
Insurance
Reinsurance
Mortgage
Sub-total (Core)
Other
Total
Gross premiums written (1)
$
5,867,734
$
5,093,930
$
1,507,825
$
12,463,788
$
457,465
$
12,752,487
Premiums ceded
(1,719,541)
(1,839,556)
(246,757)
(3,800,153)
(102,763)
(3,734,150)
Net premiums written
4,148,193
3,254,374
1,261,068
8,663,635
354,702
9,018,337
Change in unearned premiums
(521,725)
(413,931)
22,351
(913,305)
(22,734)
(936,039)
Net premiums earned
3,626,468
2,840,443
1,283,419
7,750,330
331,968
8,082,298
Other underwriting income (loss)
—
3,669
17,665
21,334
739
22,073
Losses and loss adjustment expenses
(2,344,365)
(1,924,719)
(56,677)
(4,325,761)
(259,042)
(4,584,803)
Acquisition expenses
(606,265)
(536,754)
(97,418)
(1,240,437)
(62,741)
(1,303,178)
Other operating expenses
(558,906)
(212,810)
(194,010)
(965,726)
(32,869)
(998,595)
Underwriting income (loss)
$
116,932
$
169,829
$
952,979
1,239,740
(21,945)
1,217,795
Net investment income
346,808
42,310
389,118
Net realized gains (losses)
299,207
80,638
379,845
Equity in net income (loss) of investment funds accounted for using the equity method
366,402
—
366,402
Other income (loss)
10,244
—
10,244
Corporate expenses (2)
(77,119)
—
(77,119)
Transaction costs and other (2)
(1,103)
(935)
(2,038)
Amortization of intangible assets
(82,057)
(898)
(82,955)
Interest expense
(131,060)
(8,410)
(139,470)
Net foreign exchange gains (losses)
42,854
(1,325)
41,529
Income (loss) before income taxes and income (loss) from operating affiliates
2,013,916
89,435
2,103,351
Income tax (expense) benefit
(128,348)
(234)
(128,582)
Income (loss) from operating affiliates
264,693
—
264,693
Net income (loss)
2,150,261
89,201
2,239,462
Dividends attributable to redeemable noncontrolling interests
(2,346)
(1,953)
(4,299)
Amounts attributable to nonredeemable noncontrolling interests
—
(78,314)
(78,314)
Net income (loss) available to Arch
2,147,915
8,934
2,156,849
Preferred dividends
(48,343)
—
(48,343)
Loss on redemption of preferred shares
(15,101)
—
(15,101)
Net income (loss) available to Arch common shareholders
$
2,084,471
$
8,934
$
2,093,405
Underwriting Ratios
Loss ratio
64.6
%
67.8
%
4.4
%
55.8
%
78.0
%
56.7
%
Acquisition expense ratio
16.7
%
18.9
%
7.6
%
16.0
%
18.9
%
16.1
%
Other operating expense ratio
15.4
%
7.5
%
15.1
%
12.5
%
9.9
%
12.4
%
Combined ratio
96.7
%
94.2
%
27.1
%
84.3
%
106.8
%
85.2
%
Net premiums written to gross premiums written
70.7
%
63.9
%
83.6
%
69.5
%
77.5
%
70.7
%
(1) Certain amounts included in the gross premiums written of each segment are related to intersegment transactions and are included in the gross premiums written of each segment. Accordingly, the sum of gross premiums written for each segment does not agree to the total gross premiums written as shown in the table above due to the elimination of intersegment transactions in the total.
(2) Certain expenses have been excluded from ‘corporate expenses’ and reflected in ‘Transaction costs and other.’ See ‘Comments on Regulation G’ for a further discussion of such items.
12
Arch Capital Group Ltd. and Subsidiaries
Segment Information
(U.S. Dollars in thousands)
Year Ended
December 31, 2020
Insurance
Reinsurance
Mortgage
Sub-total (Core)
Other
Total
Gross premiums written (1)
$
4,688,562
$
3,472,086
$
1,473,999
$
9,632,691
$
728,546
$
10,088,068
Premiums ceded
(1,525,655)
(1,014,716)
(194,149)
(2,732,564)
(190,957)
(2,650,352)
Net premiums written
3,162,907
2,457,370
1,279,850
6,900,127
537,589
7,437,716
Change in unearned premiums
(291,487)
(295,141)
118,085
(468,543)
22,762
(445,781)
Net premiums earned
2,871,420
2,162,229
1,397,935
6,431,584
560,351
6,991,935
Other underwriting income (loss)
(31)
4,454
20,316
24,739
2,045
26,784
Losses and loss adjustment expenses
(2,092,453)
(1,628,320)
(528,344)
(4,249,117)
(440,482)
(4,689,599)
Acquisition expenses
(418,483)
(354,048)
(134,240)
(906,771)
(98,071)
(1,004,842)
Other operating expenses
(489,153)
(168,011)
(162,202)
(819,366)
(55,810)
(875,176)
Underwriting income (loss)
$
(128,700)
$
16,304
$
593,465
481,069
(31,967)
449,102
Net investment income
401,908
117,700
519,608
Net realized gains (losses)
813,781
9,679
823,460
Equity in net income (loss) of investment funds accounted for using the equity method
146,693
—
146,693
Other income (loss)
29
—
29
Corporate expenses (2)
(68,492)
—
(68,492)
Transaction costs and other (2)
(9,456)
(4,040)
(13,496)
Amortization of intangible assets
(69,031)
—
(69,031)
Interest expense
(120,214)
(23,242)
(143,456)
Net foreign exchange gains (losses)
(80,161)
(3,473)
(83,634)
Income (loss) before income taxes and income (loss) from operating affiliates
1,496,126
64,657
1,560,783
Income tax (expense) benefit
(111,812)
(26)
(111,838)
Income (loss) from operating affiliates
16,766
—
16,766
Net income (loss)
1,401,080
64,631
1,465,711
Dividends attributable to redeemable noncontrolling interests
(2,997)
(4,117)
(7,114)
Amounts attributable to nonredeemable noncontrolling interests
—
(53,076)
(53,076)
Net income (loss) available to Arch
1,398,083
7,438
1,405,521
Preferred dividends
(41,612)
—
(41,612)
Net income (loss) available to Arch common shareholders
$
1,356,471
$
7,438
$
1,363,909
Underwriting Ratios
Loss ratio
72.9
%
75.3
%
37.8
%
66.1
%
78.6
%
67.1
%
Acquisition expense ratio
14.6
%
16.4
%
9.6
%
14.1
%
17.5
%
14.4
%
Other operating expense ratio
17.0
%
7.8
%
11.6
%
12.7
%
10.0
%
12.5
%
Combined ratio
104.5
%
99.5
%
59.0
%
92.9
%
106.1
%
94.0
%
Net premiums written to gross premiums written
67.5
%
70.8
%
86.8
%
71.6
%
73.8
%
73.7
%
(1) Certain amounts included in the gross premiums written of each segment are related to intersegment transactions and are included in the gross premiums written of each segment. Accordingly, the sum of gross premiums written for each segment does not agree to the total gross premiums written as shown in the table above due to the elimination of intersegment transactions in the total.
(2) Certain expenses have been excluded from ‘corporate expenses’ and reflected in ‘Transaction costs and other.’ See ‘Comments on Regulation G’ for a further discussion of such items.
13
Arch Capital Group Ltd. and Subsidiaries
Segment Information — Insurance Segment
(U.S. Dollars in thousands)
Three Months Ended
Year Ended
December 31,
September 30,
June 30,
March 31,
December 31,
December 31,
December 31,
2021
2021
2021
2021
2020
2021
2020
Gross premiums written
$
1,486,362
$
1,596,619
$
1,368,867
$
1,415,886
$
1,244,227
$
5,867,734
$
4,688,562
Premiums ceded
(450,376)
(442,806)
(405,312)
(421,047)
(406,490)
(1,719,541)
(1,525,655)
Net premiums written
1,035,986
1,153,813
963,555
994,839
837,737
4,148,193
3,162,907
Change in unearned premiums
(33,089)
(215,143)
(98,128)
(175,365)
(89,299)
(521,725)
(291,487)
Net premiums earned
1,002,897
938,670
865,427
819,474
748,438
3,626,468
2,871,420
Other underwriting income (loss)
—
—
—
—
—
—
(31)
Losses and loss adjustment expenses
(594,108)
(668,630)
(545,880)
(535,747)
(541,821)
(2,344,365)
(2,092,453)
Acquisition expenses
(188,724)
(152,467)
(136,852)
(128,222)
(101,055)
(606,265)
(418,483)
Other operating expenses
(149,520)
(138,931)
(133,342)
(137,113)
(118,206)
(558,906)
(489,153)
Underwriting income (loss)
$
70,545
$
(21,358)
$
49,353
$
18,392
$
(12,644)
$
116,932
$
(128,700)
Underwriting Ratios
Loss ratio
59.2
%
71.2
%
63.1
%
65.4
%
72.4
%
64.6
%
72.9
%
Acquisition expense ratio
18.8
%
16.2
%
15.8
%
15.6
%
13.5
%
16.7
%
14.6
%
Other operating expense ratio
14.9
%
14.8
%
15.4
%
16.7
%
15.8
%
15.4
%
17.0
%
Combined ratio
92.9
%
102.2
%
94.3
%
97.7
%
101.7
%
96.7
%
104.5
%
Catastrophic activity and prior year development:
Current accident year catastrophic events, net of reinsurance and reinstatement premiums
2.0
%
12.2
%
3.2
%
5.1
%
8.3
%
5.6
%
9.5
%
Net (favorable) adverse development in prior year loss reserves, net of related adjustments
(0.3)
%
(0.5)
%
(0.3)
%
(0.7)
%
(0.2)
%
(0.4)
%
(0.2)
%
Combined ratio excluding catastrophic activity and prior year development (1)
91.2
%
90.5
%
91.4
%
93.3
%
93.6
%
91.5
%
95.2
%
Net premiums written to gross premiums written
69.7
%
72.3
%
70.4
%
70.3
%
67.3
%
70.7
%
67.5
%
(1)See ‘Comments on Regulation G’ for further discussion.
14
Arch Capital Group Ltd. and Subsidiaries
Segment Information — Insurance Segment
(U.S. Dollars in thousands)
Three Months Ended
Year Ended
December 31,
September 30,
June 30,
March 31,
December 31,
December 31,
December 31,
2021
2021
2021
2021
2020
2021
2020
Net premiums written
Professional lines (1)
$
373,752
36.1
%
$
310,185
26.9
%
$
254,961
26.5
%
$
238,246
23.9
%
$
217,306
25.9
%
$
1,177,144
28.4
%
$
743,486
23.5
%
Property, energy, marine and aviation
177,632
17.1
%
215,062
18.6
%
207,762
21.6
%
170,498
17.1
%
179,455
21.4
%
770,954
18.6
%
619,034
19.6
%
Excess and surplus casualty (2)
101,199
9.8
%
98,320
8.5
%
74,346
7.7
%
85,593
8.6
%
88,319
10.5
%
359,458
8.7
%
297,330
9.4
%
Programs
92,002
8.9
%
196,048
17.0
%
149,373
15.5
%
158,401
15.9
%
96,743
11.5
%
595,824
14.4
%
437,973
13.8
%
Travel, accident and health
79,176
7.6
%
62,837
5.4
%
71,071
7.4
%
92,306
9.3
%
29,959
3.6
%
305,390
7.4
%
212,974
6.7
%
Construction and national accounts
78,956
7.6
%
92,253
8.0
%
77,579
8.1
%
134,792
13.5
%
102,171
12.2
%
383,580
9.2
%
364,104
11.5
%
Lenders products
32,833
3.2
%
38,905
3.4
%
40,386
4.2
%
34,860
3.5
%
38,307
4.6
%
146,984
3.5
%
156,119
4.9
%
Other (3)
100,436
9.7
%
140,203
12.2
%
88,077
9.1
%
80,143
8.1
%
85,477
10.2
%
408,859
9.9
%
331,887
10.5
%
Total
$
1,035,986
100.0
%
$
1,153,813
100.0
%
$
963,555
100.0
%
$
994,839
100.0
%
$
837,737
100.0
%
$
4,148,193
100.0
%
$
3,162,907
100.0
%
Underwriting location
United States
$
680,840
65.7
%
$
797,395
69.1
%
$
658,964
68.4
%
$
675,840
67.9
%
$
527,824
63.0
%
$
2,813,039
67.8
%
$
2,158,415
68.2
%
Europe
292,591
28.2
%
301,877
26.2
%
254,602
26.4
%
276,122
27.8
%
266,761
31.8
%
1,125,192
27.1
%
856,572
27.1
%
Other
62,555
6.0
%
54,541
4.7
%
49,989
5.2
%
42,877
4.3
%
43,152
5.2
%
209,962
5.1
%
147,920
4.7
%
Total
$
1,035,986
100.0
%
$
1,153,813
100.0
%
$
963,555
100.0
%
$
994,839
100.0
%
$
837,737
100.0
%
$
4,148,193
100.0
%
$
3,162,907
100.0
%
Net premiums earned
Professional lines (1)
$
280,041
27.9
%
$
249,007
26.5
%
$
214,098
24.7
%
$
199,671
24.4
%
$
180,858
24.2
%
$
942,817
26.0
%
$
655,872
22.8
%
Property, energy, marine and aviation
189,813
18.9
%
187,905
20.0
%
167,716
19.4
%
157,259
19.2
%
151,456
20.2
%
702,693
19.4
%
517,247
18.0
%
Excess and surplus casualty (2)
85,713
8.5
%
84,048
9.0
%
72,899
8.4
%
75,367
9.2
%
74,579
10.0
%
318,027
8.8
%
270,620
9.4
%
Programs
137,754
13.7
%
137,299
14.6
%
118,974
13.7
%
112,840
13.8
%
110,651
14.8
%
506,867
14.0
%
432,854
15.1
%
Travel, accident and health
87,212
8.7
%
56,102
6.0
%
62,610
7.2
%
49,666
6.1
%
24,726
3.3
%
255,590
7.0
%
190,944
6.6
%
Construction and national accounts
88,263
8.8
%
94,523
10.1
%
95,849
11.1
%
102,671
12.5
%
101,243
13.5
%
381,306
10.5
%
387,934
13.5
%
Lenders products
34,451
3.4
%
33,030
3.5
%
46,396
5.4
%
40,081
4.9
%
32,832
4.4
%
153,958
4.2
%
114,687
4.0
%
Other (3)
99,650
9.9
%
96,756
10.3
%
86,885
10.0
%
81,919
10.0
%
72,093
9.6
%
365,210
10.1
%
301,262
10.5
%
Total
$
1,002,897
100.0
%
$
938,670
100.0
%
$
865,427
100.0
%
$
819,474
100.0
%
$
748,438
100.0
%
$
3,626,468
100.0
%
$
2,871,420
100.0
%
(1) Includes professional liability, executive assurance and healthcare business.
(2) Includes casualty and contract binding business.
(3) Includes alternative markets, excess workers’ compensation and surety business.
15
Arch Capital Group Ltd. and Subsidiaries
Segment Information — Reinsurance Segment
(U.S. Dollars in thousands)
Three Months Ended
Year Ended
December 31,
September 30,
June 30,
March 31,
December 31,
December 31,
December 31,
2021
2021
2021
2021
2020
2021
2020
Gross premiums written
$
1,013,090
$
1,251,760
$
1,358,020
$
1,471,060
$
537,912
$
5,093,930
$
3,472,086
Premiums ceded
(303,949)
(630,371)
(433,288)
(471,948)
(47,018)
(1,839,556)
(1,014,716)
Net premiums written
709,141
621,389
924,732
999,112
490,894
3,254,374
2,457,370
Change in unearned premiums
70,676
57,313
(187,708)
(354,212)
93,180
(413,931)
(295,141)
Net premiums earned
779,817
678,702
737,024
644,900
584,074
2,840,443
2,162,229
Other underwriting income (loss)
521
3,293
1,053
(1,198)
2,687
3,669
4,454
Losses and loss adjustment expenses
(430,180)
(545,846)
(463,823)
(484,870)
(392,734)
(1,924,719)
(1,628,320)
Acquisition expenses
(155,694)
(129,450)
(133,585)
(118,025)
(98,532)
(536,754)
(354,048)
Other operating expenses
(61,954)
(45,647)
(44,695)
(60,514)
(42,180)
(212,810)
(168,011)
Underwriting income (loss)
$
132,510
$
(38,948)
$
95,974
$
(19,707)
$
53,315
$
169,829
$
16,304
Underwriting Ratios
Loss ratio
55.2
%
80.4
%
62.9
%
75.2
%
67.2
%
67.8
%
75.3
%
Acquisition expense ratio
20.0
%
19.1
%
18.1
%
18.3
%
16.9
%
18.9
%
16.4
%
Other operating expense ratio
7.9
%
6.7
%
6.1
%
9.4
%
7.2
%
7.5
%
7.8
%
Combined ratio
83.1
%
106.2
%
87.1
%
102.9
%
91.3
%
94.2
%
99.5
%
Catastrophic activity and prior year development:
Current accident year catastrophic events, net of reinsurance and reinstatement premiums
6.7
%
32.6
%
2.5
%
22.7
%
16.1
%
15.4
%
19.1
%
Net (favorable) adverse development in prior year loss reserves, net of related adjustments
(6.4)
%
(9.6)
%
(2.5)
%
(3.8)
%
(6.9)
%
(5.6)
%
(5.6)
%
Combined ratio excluding catastrophic activity and prior year development (1)
82.8
%
83.2
%
87.1
%
84.0
%
82.1
%
84.4
%
86.0
%
Net premiums written to gross premiums written
70.0
%
49.6
%
68.1
%
67.9
%
91.3
%
63.9
%
70.8
%
(1)See ‘Comments on Regulation G’ for further discussion.
16
Arch Capital Group Ltd. and Subsidiaries
Segment Information — Reinsurance Segment
(U.S. Dollars in thousands)
Three Months Ended
Year Ended
December 31,
September 30,
June 30,
March 31,
December 31,
December 31,
December 31,
2021
2021
2021
2021
2020
2021
2020
Net premiums written
Property excluding property catastrophe
$
225,127
31.7
%
$
237,025
38.1
%
$
249,101
26.9
%
$
292,833
29.3
%
$
150,643
30.7
%
$
1,004,086
30.9
%
$
697,086
28.4
%
Other specialty (1)
207,812
29.3
%
167,006
26.9
%
296,325
32.0
%
284,331
28.5
%
147,012
29.9
%
955,474
29.4
%
709,308
28.9
%
Casualty (2)
176,952
25.0
%
187,066
30.1
%
225,890
24.4
%
218,256
21.8
%
103,989
21.2
%
808,164
24.8
%
542,319
22.1
%
Marine and aviation
40,708
5.7
%
19,159
3.1
%
50,248
5.4
%
61,638
6.2
%
31,418
6.4
%
171,753
5.3
%
141,414
5.8
%
Property catastrophe
35,536
5.0
%
(7,125)
(1.1)
%
87,642
9.5
%
117,207
11.7
%
37,317
7.6
%
233,260
7.2
%
286,210
11.6
%
Other (3)
23,006
3.2
%
18,258
2.9
%
15,526
1.7
%
24,847
2.5
%
20,515
4.2
%
81,637
2.5
%
81,033
3.3
%
Total
$
709,141
100.0
%
$
621,389
100.0
%
$
924,732
100.0
%
$
999,112
100.0
%
$
490,894
100.0
%
$
3,254,374
100.0
%
$
2,457,370
100.0
%
Underwriting location
Bermuda
$
340,108
48.0
%
$
221,336
35.6
%
$
477,609
51.6
%
$
518,241
51.9
%
$
187,727
38.2
%
$
1,557,294
47.9
%
$
1,001,990
40.8
%
United States
201,079
28.4
%
207,815
33.4
%
211,509
22.9
%
208,101
20.8
%
148,994
30.4
%
828,504
25.5
%
687,622
28.0
%
Europe and other
167,954
23.7
%
192,238
30.9
%
235,614
25.5
%
272,770
27.3
%
154,173
31.4
%
868,576
26.7
%
767,758
31.2
%
Total
$
709,141
100.0
%
$
621,389
100.0
%
$
924,732
100.0
%
$
999,112
100.0
%
$
490,894
100.0
%
$
3,254,374
100.0
%
$
2,457,370
100.0
%
Net premiums earned
Property excluding property catastrophe
$
235,731
30.2
%
$
210,280
31.0
%
$
202,780
27.5
%
$
187,782
29.1
%
$
162,456
27.8
%
$
836,573
29.5
%
$
562,208
26.0
%
Other specialty (1)
247,437
31.7
%
195,649
28.8
%
211,817
28.7
%
163,898
25.4
%
158,817
27.2
%
818,801
28.8
%
626,409
29.0
%
Casualty (2)
174,180
22.3
%
159,697
23.5
%
183,846
24.9
%
149,031
23.1
%
144,808
24.8
%
666,754
23.5
%
549,056
25.4
%
Marine and aviation
40,256
5.2
%
29,818
4.4
%
42,773
5.8
%
40,108
6.2
%
33,062
5.7
%
152,955
5.4
%
109,624
5.1
%
Property catastrophe
55,453
7.1
%
61,107
9.0
%
76,167
10.3
%
88,011
13.6
%
59,986
10.3
%
280,738
9.9
%
237,736
11.0
%
Other (3)
26,760
3.4
%
22,151
3.3
%
19,641
2.7
%
16,070
2.5
%
24,945
4.3
%
84,622
3.0
%
77,196
3.6
%
Total
$
779,817
100.0
%
$
678,702
100.0
%
$
737,024
100.0
%
$
644,900
100.0
%
$
584,074
100.0
%
$
2,840,443
100.0
%
$
2,162,229
100.0
%
(1) Includes proportional motor, surety, accident and health, workers’ compensation catastrophe, agriculture, trade credit and other.
(2) Includes executive assurance, professional liability, workers’ compensation, excess motor, healthcare and other.
(3) Includes life, casualty clash and other.
17
Arch Capital Group Ltd. and Subsidiaries
Segment Information — Mortgage Segment
(U.S. Dollars in thousands)
Three Months Ended
Year Ended
December 31,
September 30,
June 30,
March 31,
December 31,
December 31,
December 31,
2021
2021
2021
2021
2020
2021
2020
Gross premiums written
$
364,134
$
360,934
$
391,511
$
391,246
$
389,662
$
1,507,825
$
1,473,999
Premiums ceded
(74,834)
(60,207)
(55,665)
(56,051)
(57,995)
(246,757)
(194,149)
Net premiums written
289,300
300,727
335,846
335,195
331,667
1,261,068
1,279,850
Change in unearned premiums
11,616
11,238
(1,625)
1,122
4,120
22,351
118,085
Net premiums earned
300,916
311,965
334,221
336,317
335,787
1,283,419
1,397,935
Other underwriting income (1)
2,639
3,981
4,148
6,897
4,667
17,665
20,316
Losses and loss adjustment expenses
28,435
(11,543)
(9,880)
(63,689)
(83,623)
(56,677)
(528,344)
Acquisition expenses
(13,121)
(24,098)
(30,117)
(30,082)
(25,936)
(97,418)
(134,240)
Other operating expenses
(50,313)
(46,254)
(48,312)
(49,131)
(42,024)
(194,010)
(162,202)
Underwriting income
$
268,556
$
234,051
$
250,060
$
200,312
$
188,871
$
952,979
$
593,465
Underwriting Ratios
Loss ratio
(9.4)
%
3.7
%
3.0
%
18.9
%
24.9
%
4.4
%
37.8
%
Acquisition expense ratio
4.4
%
7.7
%
9.0
%
8.9
%
7.7
%
7.6
%
9.6
%
Other operating expense ratio
16.7
%
14.8
%
14.5
%
14.6
%
12.5
%
15.1
%
11.6
%
Combined ratio
11.7
%
26.2
%
26.5
%
42.4
%
45.1
%
27.1
%
59.0
%
Net (favorable) adverse development in prior year loss reserves, net of related adjustments
(24.2)
%
(15.5)
%
(13.1)
%
(3.4)
%
(2.4)
%
(13.8)
%
(1.4)
%
Combined ratio excluding prior year development (2)
35.9
%
41.7
%
39.6
%
45.8
%
47.5
%
40.9
%
60.4
%
Net premiums written to gross premiums written
79.4
%
83.3
%
85.8
%
85.7
%
85.1
%
83.6
%
86.8
%
Net premiums written by underwriting location
United States
$
210,988
$
221,315
$
234,645
$
247,529
$
250,747
$
914,477
$
1,021,950
Other
78,312
79,412
101,201
87,666
80,920
346,591
257,900
Total
$
289,300
$
300,727
$
335,846
$
335,195
$
331,667
$
1,261,068
$
1,279,850
United States %
72.9
%
73.6
%
69.9
%
73.8
%
75.6
%
72.5
%
79.8
%
Other %
27.1
%
26.4
%
30.1
%
26.2
%
24.4
%
27.5
%
20.2
%
(1) Primarily related to income earned on various risk-sharing products offered to government sponsored enterprises and mortgage lenders.
(2) See ‘Comments on Regulation G’ for further discussion.
18
Arch Capital Group Ltd. and Subsidiaries
Segment Information — Mortgage Segment
(U.S. Dollars in millions)
December 31, 2021
September 30, 2021
June 30, 2021
March 31, 2021
December 31, 2020
Insurance In Force (IIF) (1)
U.S. primary mortgage insurance
$
280,945
61.0
%
$
280,379
61.3
%
$
277,887
65.8
%
$
276,179
64.7
%
$
280,579
66.2
%
U.S. credit risk transfer (CRT) and other (2)
110,018
23.9
%
108,203
23.6
%
103,970
24.6
%
111,159
26.0
%
103,535
24.4
%
International mortgage insurance/reinsurance (3)
69,655
15.1
%
69,127
15.1
%
40,580
9.6
%
39,678
9.3
%
39,425
9.3
%
Total
$
460,618
100.0
%
$
457,709
100.0
%
$
422,437
100.0
%
$
427,016
100.0
%
$
423,539
100.0
%
Risk In Force (RIF) (4)
U.S. primary mortgage insurance
$
70,619
84.3
%
$
70,320
84.8
%
$
69,587
90.3
%
$
69,234
89.9
%
$
70,522
90.5
%
U.S. credit risk transfer and other (2)
5,120
6.1
%
4,817
5.8
%
4,706
6.1
%
5,107
6.6
%
4,699
6.0
%
International mortgage insurance/reinsurance (3)
7,983
9.5
%
7,803
9.4
%
2,727
3.5
%
2,680
3.5
%
2,673
3.4
%
Total
$
83,722
100.0
%
$
82,940
100.0
%
$
77,020
100.0
%
$
77,021
100.0
%
$
77,894
100.0
%
Supplemental disclosures for U.S. primary mortgage insurance:
Total RIF by credit quality (FICO score):
>=740
$
42,451
60.1
%
$
41,927
59.6
%
$
41,156
59.1
%
$
40,230
58.1
%
$
40,774
57.8
%
680-739
23,646
33.5
%
23,732
33.7
%
23,663
34.0
%
24,006
34.7
%
24,498
34.7
%
620-679
4,196
5.9
%
4,323
6.1
%
4,401
6.3
%
4,607
6.7
%
4,837
6.9
%
<620
326
0.5
%
338
0.5
%
367
0.5
%
391
0.6
%
413
0.6
%
Total
$
70,619
100.0
%
$
70,320
100.0
%
$
69,587
100.0
%
$
69,234
100.0
%
$
70,522
100.0
%
Weighted average FICO score
746
745
745
744
743
Total RIF by Loan-To-Value (LTV):
95.01% and above
$
7,538
10.7
%
$
7,708
11.0
%
$
7,975
11.5
%
$
8,310
12.0
%
$
8,643
12.3
%
90.01% to 95.00%
38,829
55.0
%
38,378
54.6
%
37,619
54.1
%
37,193
53.7
%
37,877
53.7
%
85.01% to 90.00%
20,006
28.3
%
19,980
28.4
%
19,784
28.4
%
19,648
28.4
%
20,013
28.4
%
85.00% and below
4,246
6.0
%
4,254
6.0
%
4,209
6.0
%
4,083
5.9
%
3,989
5.7
%
Total
$
70,619
100.0
%
$
70,320
100.0
%
$
69,587
100.0
%
$
69,234
100.0
%
$
70,522
100.0
%
Weighted average LTV
92.8
%
92.8
%
92.8
%
92.8
%
92.8
%
Total RIF by State:
Texas
$
5,594
7.9
%
$
5,590
7.9
%
$
5,560
8.0
%
$
5,569
8.0
%
$
5,636
8.0
%
California
5,559
7.9
%
5,451
7.8
%
5,324
7.7
%
5,343
7.7
%
5,261
7.5
%
Florida
3,303
4.7
%
3,344
4.8
%
3,367
4.8
%
3,544
5.1
%
3,632
5.2
%
Illinois
2,933
4.2
%
2,920
4.2
%
2,832
4.1
%
2,728
3.9
%
2,762
3.9
%
North Carolina
2,921
4.1
%
2,921
4.2
%
2,924
4.2
%
2,610
3.8
%
2,622
3.7
%
Minnesota
2,916
4.1
%
2,936
4.2
%
2,973
4.3
%
2,452
3.5
%
2,520
3.6
%
Georgia
2,902
4.1
%
2,908
4.1
%
2,886
4.1
%
2,929
4.2
%
2,959
4.2
%
Massachusetts
2,537
3.6
%
2,519
3.6
%
2,459
3.5
%
2,434
3.5
%
2,464
3.5
%
Michigan
2,492
3.5
%
2,500
3.6
%
2,509
3.6
%
2,035
2.9
%
2,073
2.9
%
Virginia
2,446
3.5
%
2,412
3.4
%
2,372
3.4
%
2,458
3.6
%
2,526
3.6
%
Other
37,016
52.4
%
36,819
52.4
%
36,381
52.3
%
37,132
53.6
%
38,067
54.0
%
Total
$
70,619
100.0
%
$
70,320
100.0
%
$
69,587
100.0
%
$
69,234
100.0
%
$
70,522
100.0
%
Weighted average coverage (end of period RIF divided by IIF)
25.1
%
25.1
%
25.0
%
25.1
%
25.1
%
U.S. mortgage insurance total RIF, net of reinsurance (5)
$
54,574
$
54,847
$
55,557
$
55,503
$
56,658
Analysts’ persistency (6)
62.4
%
57.7
%
54.8
%
54.1
%
58.7
%
Risk-to-capital ratio -- Arch MI U.S. (7)
8.0:1
8.6:1
8.5:1
8.7:1
9.3:1
PMIER sufficiency ratio -- Arch MI U.S. (8)
197
%
195
%
196
%
190
%
173
%
(1) The aggregate dollar amount of each insured mortgage loan’s current principal balance.
(5) Total RIF for the U.S. mortgage insurance operations (see note 4) after external reinsurance.
(2) Includes all CRT transactions, which are predominantly with GSEs, and other U.S. reinsurance transactions.
(6) Represents the % of IIF at the beginning of a 12-mo. period that remained in force at the end of the period.
(3) International mortgage insurance and reinsurance with risk primarily located in Australia and to lesser extent Europe and Asia.
(7) Represents current (non-delinquent) RIF, net of reinsurance, divided by statutory capital (estimate for December 31, 2021).
(4) The aggregate dollar amount of each insured mortgage loan’s current principal balance multiplied by the insurance coverage percentage specified in the policy for insurance policies issued and after contract limits and/or loss ratio caps for risk-sharing or reinsurance transactions
(8) Calculated as available assets divided by required assets as defined within PMIERs (estimate for December 31, 2021). There was approximately $1.9 billion of excess available assets at December 31, 2021.
19
Arch Capital Group Ltd. and Subsidiaries
Segment Information — Mortgage Segment
(U.S. Dollars in millions, except policy/loan/claim count)
Three Months Ended
December 31, 2021
September 30, 2021
June 30, 2021
March 31, 2021
December 31, 2020
Supplemental disclosures for U.S. primary mortgage insurance:
Total new insurance written (NIW) (1)
$
22,544
$
27,841
$
28,372
$
27,019
$
38,011
Total NIW by credit quality (FICO score):
>=740
$
14,349
63.6
%
$
17,514
62.9
%
$
19,240
67.8
%
$
17,818
65.9
%
$
25,128
66.1
%
680-739
7,238
32.1
%
9,012
32.4
%
8,113
28.6
%
8,418
31.2
%
11,877
31.2
%
620-679
957
4.2
%
1,315
4.7
%
1,019
3.6
%
783
2.9
%
1,006
2.6
%
Total
$
22,544
100.0
%
$
27,841
100.0
%
$
28,372
100.0
%
$
27,019
100.0
%
$
38,011
100.0
%
Total NIW by LTV:
95.01% and above
$
1,475
6.5
%
$
1,554
5.6
%
$
1,484
5.2
%
$
1,608
6.0
%
$
2,475
6.5
%
90.01% to 95.00%
11,382
50.5
%
14,240
51.1
%
13,936
49.1
%
12,288
45.5
%
17,783
46.8
%
85.01% to 90.00%
6,677
29.6
%
8,394
30.1
%
8,675
30.6
%
8,312
30.8
%
11,014
29.0
%
85.00% and below
3,010
13.4
%
3,653
13.1
%
4,277
15.1
%
4,811
17.8
%
6,739
17.7
%
Total
$
22,544
100.0
%
$
27,841
100.0
%
$
28,372
100.0
%
$
27,019
100.0
%
$
38,011
100.0
%
Total NIW monthly vs. single:
Monthly
$
21,623
95.9
%
$
26,515
95.2
%
$
26,725
94.2
%
$
24,989
92.5
%
$
35,672
93.8
%
Single
921
4.1
%
1,326
4.8
%
1,647
5.8
%
2,030
7.5
%
2,339
6.2
%
Total
$
22,544
100.0
%
$
27,841
100.0
%
$
28,372
100.0
%
$
27,019
100.0
%
$
38,011
100.0
%
Total NIW purchase vs. refinance:
Purchase
$
21,174
93.9
%
$
25,711
92.3
%
$
25,010
88.2
%
$
20,505
75.9
%
$
29,584
77.8
%
Refinance
1,370
6.1
%
2,130
7.7
%
3,362
11.8
%
6,514
24.1
%
8,427
22.2
%
Total
$
22,544
100.0
%
$
27,841
100.0
%
$
28,372
100.0
%
$
27,019
100.0
%
$
38,011
100.0
%
Ending number of policies in force (PIF) (2)
1,171,835
1,188,768
1,199,918
1,214,245
1,245,771
Rollforward of insured loans in default:
Beginning delinquent number of loans
31,770
37,319
46,914
52,234
58,362
Plus: new notices
9,071
8,068
7,425
10,990
14,564
Less: cures
(13,038)
(13,410)
(16,793)
(16,131)
(20,457)
Less: paid claims
(158)
(207)
(227)
(179)
(235)
Ending delinquent number of loans (2)
27,645
31,770
37,319
46,914
52,234
Ending percentage of loans in default (2)
2.36
%
2.67
%
3.11
%
3.86
%
4.19
%
Losses:
Number of claims paid
158
207
227
179
235
Total paid claims (in thousands)
$
8,131
$
7,551
$
8,415
$
6,882
$
9,344
Average per claim (in thousands)
$
51.5
$
36.5
$
37.1
$
38.4
$
39.8
Severity (3)
83.0
%
78.7
%
80.3
%
82.0
%
87.2
%
Average case reserve per default (in thousands)
$
26.7
$
23.5
$
19.5
$
15.2
$
12.6
(1) The original principal balance of all loans that received coverage during the period.
(2) Includes first lien primary and pool policies.
(3) Represents total paid claims divided by RIF of loans for which claims were paid.
20
Arch Capital Group Ltd. and Subsidiaries
Segment Information — Mortgage Segment
Supplemental disclosures for U.S. primary mortgage insurance:
(U.S. Dollars in millions)
December 31, 2021
December 31, 2020
Loss Reserves, Net (1)
Primary IIF (2)
Primary RIF (3)
Delinquency Rate
Loss Reserves, Net (1)
Primary IIF (2)
Primary RIF (3)
Delinquency Rate
% of Total
Total
% of Total
Total
% of Total
% of Total
Total
% of Total
Total
% of Total
Policy year:
2011 and prior
27.0
%
$
11,245
4.0
%
$
2,509
3.6
%
9.24
%
28.3
%
$
14,588
5.2
%
$
3,327
4.7
%
11.36
%
2012
1.0
%
1,785
0.6
%
451
0.6
%
2.33
%
1.3
%
3,651
1.3
%
992
1.4
%
2.98
%
2013
2.6
%
4,206
1.5
%
1,148
1.6
%
2.63
%
3.0
%
7,546
2.7
%
2,107
3.0
%
3.30
%
2014
1.9
%
4,822
1.7
%
1,328
1.9
%
3.14
%
2.2
%
8,261
2.9
%
2,273
3.2
%
4.06
%
2015
3.0
%
8,703
3.1
%
2,340
3.3
%
2.67
%
3.4
%
15,032
5.4
%
4,048
5.7
%
3.72
%
2016
7.6
%
14,344
5.1
%
3,841
5.4
%
3.29
%
8.8
%
24,958
8.9
%
6,648
9.4
%
4.77
%
2017
10.9
%
13,128
4.7
%
3,436
4.9
%
4.09
%
12.9
%
24,748
8.8
%
6,413
9.1
%
5.52
%
2018
15.2
%
14,046
5.0
%
3,562
5.0
%
5.28
%
16.8
%
27,304
9.7
%
6,918
9.8
%
6.76
%
2019
15.2
%
25,841
9.2
%
6,467
9.2
%
3.13
%
17.8
%
48,304
17.2
%
12,001
17.0
%
4.61
%
2020
12.5
%
82,502
29.4
%
20,341
28.8
%
0.97
%
5.5
%
106,187
37.8
%
25,795
36.6
%
0.76
%
2021
3.2
%
100,323
35.7
%
25,196
35.7
%
0.29
%
Total
100.0
%
$
280,945
100.0
%
$
70,619
100.0
%
2.36
%
100.0
%
$
280,579
100.0
%
$
70,522
100.0
%
4.19
%
(1) Total reserves for losses and loss adjustment expenses, net of recoverables, was $710.7 million at December 31, 2021, compared to $649.7 million at December 31, 2020.
(2) The aggregate dollar amount of each insured mortgage loan’s current principal balance.
(3) The aggregate dollar amount of each insured mortgage loan’s current principal balance multiplied by the insurance coverage percentage specified in the policy for insurance policies issued and after contract limits and/or loss ratio caps for risk-sharing transactions.
21
Arch Capital Group Ltd. and Subsidiaries
Segment Information - Consolidated Excluding the 'Other' Segment (Sub-Total (Core))
(U.S. Dollars in thousands)
Three Months Ended
Year Ended
December 31,
September 30,
June 30,
March 31,
December 31,
December 31,
December 31,
2021
2021
2021
2021
2020
2021
2020
Gross premiums written
$
2,861,575
$
3,207,415
$
3,117,505
$
3,277,293
$
2,170,831
$
12,463,788
$
9,632,691
Premiums ceded
(827,148)
(1,131,486)
(893,372)
(948,147)
(510,533)
(3,800,153)
(2,732,564)
Net premiums written
2,034,427
2,075,929
2,224,133
2,329,146
1,660,298
8,663,635
6,900,127
Change in unearned premiums
49,203
(146,592)
(287,461)
(528,455)
8,001
(913,305)
(468,543)
Net premiums earned
2,083,630
1,929,337
1,936,672
1,800,691
1,668,299
7,750,330
6,431,584
Other underwriting income (loss)
3,160
7,274
5,201
5,699
7,354
21,334
24,739
Losses and loss adjustment expenses
(995,853)
(1,226,019)
(1,019,583)
(1,084,306)
(1,018,178)
(4,325,761)
(4,249,117)
Acquisition expenses
(357,539)
(306,015)
(300,554)
(276,329)
(225,523)
(1,240,437)
(906,771)
Other operating expenses
(261,787)
(230,832)
(226,349)
(246,758)
(202,410)
(965,726)
(819,366)
Underwriting income (loss)
$
471,611
$
173,745
$
395,387
$
198,997
$
229,542
$
1,239,740
$
481,069
Underwriting Ratios
Loss ratio
47.8
%
63.5
%
52.6
%
60.2
%
61.0
%
55.8
%
66.1
%
Acquisition expense ratio
17.2
%
15.9
%
15.5
%
15.3
%
13.5
%
16.0
%
14.1
%
Other operating expense ratio
12.6
%
12.0
%
11.7
%
13.7
%
12.1
%
12.5
%
12.7
%
Combined ratio
77.6
%
91.4
%
79.8
%
89.2
%
86.6
%
84.3
%
92.9
%
Catastrophic activity and prior year development:
Current accident year catastrophic events, net of reinsurance and reinstatement premiums
3.5
%
17.4
%
2.4
%
10.5
%
9.4
%
8.3
%
10.7
%
Net (favorable) adverse development in prior year loss reserves, net of related adjustments
(6.0)
%
(6.1)
%
(3.3)
%
(2.3)
%
(3.0)
%
(4.5)
%
(2.3)
%
Combined ratio excluding catastrophic activity and prior year development (1)
80.1
%
80.1
%
80.7
%
81.0
%
80.2
%
80.5
%
84.5
%
Components of losses and loss adjustment expenses incurred (1)
Paid losses and loss adjustment expenses
$
783,806
$
626,291
$
684,087
$
572,589
$
652,077
$
2,666,773
$
2,351,208
Change in unpaid losses and loss adjustment expenses
212,047
599,728
335,496
511,717
366,101
1,658,988
1,897,909
Total losses and loss adjustment expenses
$
995,853
$
1,226,019
$
1,019,583
$
1,084,306
$
1,018,178
$
4,325,761
$
4,249,117
Net premiums written to gross premiums written
71.1
%
64.7
%
71.3
%
71.1
%
76.5
%
69.5
%
71.6
%
(1)See ‘Comments on Regulation G’ for further discussion.
22
Arch Capital Group Ltd. and Subsidiaries
Segment Information — Selected Information on Losses and Loss Adjustment Expenses
(U.S. Dollars in thousands)
Three Months Ended
Year Ended
December 31,
September 30,
June 30,
March 31,
December 31,
December 31,
December 31,
2021
2021
2021
2021
2020
2021
2020
Estimated net (favorable) adverse development in prior year loss reserves, net of related adjustments (1)
Net impact on underwriting results:
Insurance
$
(2,990)
$
(4,439)
$
(2,640)
$
(5,474)
$
(1,158)
$
(15,543)
$
(5,218)
Reinsurance
(49,762)
(65,439)
(18,309)
(24,765)
(40,472)
(158,275)
(121,131)
Mortgage
(72,865)
(48,416)
(43,883)
(11,492)
(8,151)
(176,656)
(19,081)
Total
$
(125,617)
$
(118,294)
$
(64,832)
$
(41,731)
$
(49,781)
$
(350,474)
$
(145,430)
Impact on losses and loss adjustment expenses:
Insurance
$
(3,115)
$
(5,066)
$
(3,998)
$
(4,057)
$
(1,906)
$
(16,236)
$
(7,821)
Reinsurance
(59,219)
(72,319)
(20,476)
(26,809)
(40,156)
(178,823)
(133,954)
Mortgage
(70,419)
(45,124)
(43,102)
(10,913)
(8,151)
(169,558)
(18,983)
Total
$
(132,753)
$
(122,509)
$
(67,576)
$
(41,779)
$
(50,213)
$
(364,617)
$
(160,758)
Impact on acquisition expenses:
Insurance
$
125
$
627
$
1,358
$
(1,417)
$
748
$
693
$
2,603
Reinsurance
9,457
6,880
2,167
2,044
(316)
20,548
12,823
Mortgage
(2,446)
(3,292)
(781)
(579)
—
(7,098)
(98)
Total
$
7,136
$
4,215
$
2,744
$
48
$
432
$
14,143
$
15,328
Impact on combined ratio:
Insurance
(0.3)
%
(0.5)
%
(0.3)
%
(0.7)
%
(0.2)
%
(0.4)
%
(0.2)
%
Reinsurance
(6.4)
%
(9.6)
%
(2.5)
%
(3.8)
%
(6.9)
%
(5.6)
%
(5.6)
%
Mortgage
(24.2)
%
(15.5)
%
(13.1)
%
(3.4)
%
(2.4)
%
(13.8)
%
(1.4)
%
Total
(6.0)
%
(6.1)
%
(3.3)
%
(2.3)
%
(3.0)
%
(4.5)
%
(2.3)
%
Impact on loss ratio:
Insurance
(0.3)
%
(0.5)
%
(0.5)
%
(0.5)
%
(0.3)
%
(0.4)
%
(0.3)
%
Reinsurance
(7.6)
%
(10.7)
%
(2.8)
%
(4.2)
%
(6.9)
%
(6.3)
%
(6.2)
%
Mortgage
(23.4)
%
(14.5)
%
(12.9)
%
(3.2)
%
(2.4)
%
(13.2)
%
(1.4)
%
Total
(6.4)
%
(6.3)
%
(3.5)
%
(2.3)
%
(3.0)
%
(4.7)
%
(2.5)
%
Impact on acquisition expense ratio:
Insurance
0.0
%
0.0
%
0.2
%
(0.2)
%
0.1
%
0.0
%
0.1
%
Reinsurance
1.2
%
1.1
%
0.3
%
0.4
%
0.0
%
0.7
%
0.6
%
Mortgage
(0.8)
%
(1.0)
%
(0.2)
%
(0.2)
%
0.0
%
(0.6)
%
0.0
%
Total
0.4
%
0.2
%
0.2
%
0.0
%
0.0
%
0.2
%
0.2
%
Estimated net losses incurred from current accident year catastrophic events (2)
Insurance
$
20,312
$
114,433
$
27,999
$
41,876
$
62,398
$
204,620
$
272,175
Reinsurance
51,966
221,431
18,467
146,379
93,959
438,243
413,114
Total
$
72,278
$
335,864
$
46,466
$
188,255
$
156,357
$
642,863
$
685,289
Impact on combined ratio:
Insurance
2.0
%
12.2
%
3.2
%
5.1
%
8.3
%
5.6
%
9.5
%
Reinsurance
6.7
%
32.6
%
2.5
%
22.7
%
16.1
%
15.4
%
19.1
%
Total
3.5
%
17.4
%
2.4
%
10.5
%
9.4
%
8.3
%
10.7
%
Estimated impact of COVID-19 event, net of reinsurance and reinstatement premiums, included in current accident year catastrophic events (3)
Insurance
$
(9)
$
(584)
$
178
$
572
$
(75)
$
157
$
117,372
Reinsurance
(482)
$
779
703
15
446
1,015
154,634
Total
$
(491)
$
195
$
881
$
587
$
371
$
1,172
$
272,006
Impact on combined ratio:
Insurance
0.0
%
(0.1)
%
0.0
%
0.1
%
0.0
%
0.0
%
4.1
%
Reinsurance
(0.1)
%
0.1
%
0.1
%
0.0
%
0.1
%
0.0
%
7.2
%
Total
0.0
%
0.0
%
0.0
%
0.0
%
0.0
%
0.0
%
4.2
%
(1)Presented on a ‘core’ basis which excludes amounts related to the ‘other’ segment (i.e., results of Somers). See ‘Comments on Regulation G’ for a further discussion of the presentation of ‘core’ results.
(2)Equals estimated losses from catastrophic events occurring in the current accident year (e.g. natural catastrophes, man-made events, pandemic events), net of reinsurance and reinstatement premiums. As regards the natural catastrophe estimates included within, amounts shown for the insurance segment are for named catastrophic events only, while amounts shown for the reinsurance segment include (i) named events with over $5 million of losses incurred by its Bermuda and Europe operations and (ii) all catastrophe losses incurred by its U.S. operations. Amounts not applicable for the mortgage segment.
(3)Equals estimated losses for exposures through December 31, 2021 to the COVID-19 global pandemic, net of reinsurance and reinstatement premiums. The amounts represent a subset of the estimated losses for the current accident year catastrophic events.
23
Arch Capital Group Ltd. and Subsidiaries
Investment Information — Investable Asset Summary and Investment Portfolio Metrics
The following table summarizes the Company’s investable assets and portfolio metrics (1):
(U.S. Dollars in thousands)
December 31,
September 30,
June 30,
March 31,
December 31,
2021
2021
2021
2021
2020
Investable assets (1) (2):
Fixed maturities available for sale, at fair value
$
17,998,109
65.6
%
$
16,768,363
61.5
%
$
17,448,357
63.9
%
$
18,136,604
68.9
%
$
18,104,322
67.4
%
Fixed maturities—fair value option (3)
416,698
1.5
%
414,007
1.5
%
417,700
1.5
%
360,616
1.4
%
388,191
1.4
%
Fixed maturities pledged under securities lending agreements, at fair value
—
0.0
%
—
0.0
%
156,056
0.6
%
130,152
0.5
%
278,783
1.0
%
Total fixed maturities
18,414,807
67.1
%
17,182,370
63.0
%
18,022,113
66.0
%
18,627,372
70.7
%
18,771,296
69.9
%
Equity securities, at fair value
1,804,170
6.6
%
1,790,640
6.6
%
1,595,929
5.8
%
1,470,592
5.6
%
1,392,420
5.2
%
Equity securities—fair value option (3)
26,493
0.1
%
24,523
0.1
%
25,158
0.1
%
25,640
0.1
%
27,555
0.1
%
Equity securities pledged under securities lending agreements, at fair value
—
0.0
%
—
0.0
%
12,492
0.0
%
10,797
0.0
%
16,129
0.1
%
Total equity securities
1,830,663
6.7
%
1,815,163
6.7
%
1,633,579
6.0
%
1,507,029
5.7
%
1,436,104
5.3
%
Other investments—fair value option (3)
1,432,553
5.2
%
1,489,759
5.5
%
1,512,317
5.5
%
1,527,999
5.8
%
1,480,347
5.5
%
Other investable assets (3)
—
0.0
%
—
0.0
%
500,000
1.8
%
500,000
1.9
%
500,000
1.9
%
Total other investments
1,432,553
5.2
%
1,489,759
5.5
%
2,012,317
7.4
%
2,027,999
7.7
%
1,980,347
7.4
%
Investments accounted for using the equity method (4)
3,077,611
11.2
%
2,741,293
10.0
%
2,539,124
9.3
%
2,256,327
8.6
%
2,047,889
7.6
%
Short-term investments available for sale, at fair value
1,734,716
6.3
%
3,069,965
11.3
%
2,248,613
8.2
%
1,269,631
4.8
%
1,924,922
7.2
%
Short-term investments—fair value option (3)
97,806
0.4
%
115,681
0.4
%
131,403
0.5
%
140,329
0.5
%
138,318
0.5
%
Total short-term investments
1,832,522
6.7
%
3,185,646
11.7
%
2,380,016
8.7
%
1,409,960
5.4
%
2,063,240
7.7
%
Cash
858,668
3.1
%
1,137,721
4.2
%
884,857
3.2
%
705,787
2.7
%
694,997
2.6
%
Securities transactions entered into but not settled at the balance sheet date
(4,671)
0.0
%
(273,512)
(1.0)
%
(180,592)
(0.7)
%
(195,875)
(0.7)
%
(137,578)
(0.5)
%
Total investable assets held by the Company
$
27,442,153
100.0
%
$
27,278,440
100.0
%
$
27,291,414
100.0
%
$
26,338,599
100.0
%
$
26,856,295
100.0
%
Average effective duration (in years)
2.70
2.68
2.31
2.71
3.01
Average S&P/Moody’s credit ratings (5)
AA-/Aa3
AA-/Aa3
AA/Aa1
AA-/Aa3
AA/Aa2
Embedded book yield (before investment expenses)
1.63
%
1.54
%
1.45
%
1.59
%
1.56
%
(1) Presented on a ‘core’ basis which excludes amounts related to the ‘other’ segment (i.e., results of Somers. See ‘Comments on Regulation G’ for a further discussion of the presentation of ‘core’ results. Such amounts are summarized as follows:
Investable assets in ‘other’ segment:
Cash
$
—
$
—
$
349,202
$
236,164
$
211,451
Investments accounted for using the fair value option
—
—
1,984,919
1,880,770
1,790,385
Fixed maturities available for sale, at fair value
—
—
625,422
586,431
613,503
Equity securities, at fair value
—
—
97,623
62,314
52,410
Securities sold but not yet purchased
—
—
(28,068)
(34,097)
(21,679)
Securities transactions entered into but not settled at the balance sheet date
—
—
(97,055)
8,846
11,542
Total investable assets included in ‘other’ segment
$
—
$
—
$
2,932,043
$
2,740,428
$
2,657,612
(2) This table excludes the collateral received and reinvested and includes the securities pledged under securities lending agreements, at fair value.
(3) Included in “other investments” on the balance sheet.
(4) Changes in the carrying value of investment funds accounted for using the equity method are recorded as “equity in net income (loss) of investment funds accounted for using the equity method” rather than as an unrealized gain or loss component of accumulated other comprehensive income.
(5) Average credit ratings on the Company’s investment portfolio on securities with ratings assigned by Standard & Poor’s (“S&P”) and Moody’s Investors Service (“Moody’s”).
24
Arch Capital Group Ltd. and Subsidiaries
Investment Information — Composition of Net Investment Income, Yield and Total Return
The following table summarizes the Company’s net investment income, yield and total return (1):
(U.S. Dollars in thousands, except share data)
Three Months Ended
Year Ended
December 31,
September 30,
June 30,
March 31,
December 31,
December 31,
December 31,
2021
2021
2021
2021
2020
2021
2020
Composition of net investment income (1):
Fixed maturities
$
74,846
$
75,964
$
77,709
$
79,017
$
80,942
$
307,536
$
358,804
Equity securities (dividends)
18,295
9,867
8,282
5,650
9,695
42,094
28,007
Short-term investments
3,325
1,858
972
644
1,129
6,799
6,573
Other (2)
12,712
19,114
21,026
15,559
15,053
68,411
77,951
Gross investment income
109,178
106,803
107,989
100,870
106,819
424,840
471,335
Investment expenses
(18,724)
(18,608)
(18,559)
(22,141)
(18,827)
(78,032)
(69,427)
Net investment income
$
90,454
$
88,195
$
89,430
$
78,729
$
87,992
$
346,808
$
401,908
Per share
$
0.23
$
0.22
$
0.22
$
0.19
$
0.21
$
0.87
$
0.98
Investment income yield, at amortized cost (1) (3):
Pre-tax
1.46
%
1.41
%
1.47
%
1.31
%
1.45
%
1.41
%
1.78
%
After-tax
1.27
%
1.24
%
1.30
%
1.14
%
1.26
%
1.24
%
1.56
%
Total return on investments (1) (4)
0.39
%
0.01
%
1.58
%
(0.18)
%
2.46
%
1.90
%
7.77
%
(1)Presented on a ‘core’ basis which excludes amounts related to the ‘other’ segment (i.e., results of Somers). See ‘Comments on Regulation G’ for a further discussion of the presentation of ‘core’ results.
(2)Amounts include dividends and other distributions on investment funds, term loan investments, funds held balances, cash balances and other.
(3)Presented on an annualized basis and excluding the impact of investments for which returns are not included within investment income, such as investments accounted for using the equity method and certain equities.
(4)Total return on investments includes net investment income, equity in net income or loss of investment funds accounted for using the equity method, net realized gains and losses (excluding changes in allowance for credit loses on non-investment related financial assets) and the change in unrealized gains or losses and is calculated on a pre-tax basis and before investment expenses. See ‘Comments on Regulation G’ for a further discussion of the presentation of total return on investments.
25
Arch Capital Group Ltd. and Subsidiaries
Investment Information — Composition of Fixed Maturities
The following table summarizes the Company’s fixed maturities and fixed maturities pledged under securities lending agreements (1):
(U.S. Dollars in thousands)
Fair Value
Gross Unrealized Gains
Gross Unrealized Losses
Net Unrealized Gains (Losses)
Allowance for Credit Losses
Amortized Cost
Fair Value / Amortized Cost
Fair Value % of Total
At December 31, 2021
Corporates
$
6,941,879
$
104,170
$
(69,194)
$
34,976
$
(2,037)
$
6,908,940
100.5
%
37.7
%
U.S. government and government agencies
4,772,764
10,076
(45,967)
(35,891)
—
4,808,655
99.3
%
25.9
%
Municipal bonds
404,666
18,724
(1,409)
17,315
(2)
387,353
104.5
%
2.2
%
Non-U.S. government securities
2,144,079
54,048
(34,749)
19,299
(82)
2,124,862
100.9
%
11.6
%
Asset-backed securities
2,696,458
6,540
(11,108)
(4,568)
(708)
2,701,734
99.8
%
14.6
%
Commercial mortgage-backed securities
1,046,484
1,740
(3,117)
(1,377)
(6)
1,047,867
99.9
%
5.7
%
Residential mortgage-backed securities
408,477
2,825
(5,410)
(2,585)
(48)
411,110
99.4
%
2.2
%
Total
$
18,414,807
$
198,123
$
(170,954)
$
27,169
$
(2,883)
$
18,390,521
100.1
%
100.0
%
At December 31, 2020
Corporates
$
8,039,745
$
405,071
$
(30,666)
$
374,405
$
(700)
$
7,666,040
104.9
%
42.8
%
U.S. government and government agencies
5,354,863
21,490
(12,587)
8,903
—
5,345,960
100.2
%
28.5
%
Municipal bonds
492,734
27,189
(3,835)
23,354
(11)
469,391
105.0
%
2.6
%
Non-U.S. government securities
2,310,157
143,054
(7,958)
135,096
—
2,175,061
106.2
%
12.3
%
Asset-backed securities
1,566,188
18,689
(7,635)
11,054
(1,090)
1,556,224
100.6
%
8.3
%
Commercial mortgage-backed securities
390,990
8,722
(2,954)
5,768
(122)
385,344
101.5
%
2.1
%
Residential mortgage-backed securities
616,619
8,934
(4,280)
4,654
(278)
612,243
100.7
%
3.3
%
Total
$
18,771,296
$
633,149
$
(69,915)
$
563,234
$
(2,201)
$
18,210,263
103.1
%
100.0
%
(1) Presented on a ‘core’ basis which excludes amounts related to the ‘other’ segment (i.e., results of Somers). See ‘Comments on Regulation G’ for a further discussion of the presentation of ‘core’ results.
26
Arch Capital Group Ltd. and Subsidiaries
Investment Information — Credit Quality Distribution and Maturity Profile
The following table summarizes the credit quality distribution and maturity profile of the Company’s fixed maturities and fixed maturities pledged under securities lending agreements (1):
(U.S. Dollars in thousands)
December 31,
September 30,
June 30,
March 31,
December 31,
2021
2021
2021
2021
2020
Credit quality distribution of total fixed maturities (2) (3):
U.S. government and government agencies (4)
$
5,063,191
27.5
%
$
4,830,467
28.1
%
$
5,221,296
29.0
%
$
5,432,191
29.2
%
$
5,963,758
31.8
%
AAA
3,783,386
20.5
%
3,257,679
19.0
%
3,432,285
19.0
%
3,145,642
16.9
%
3,117,046
16.6
%
AA
2,459,413
13.4
%
2,217,452
12.9
%
2,004,442
11.1
%
2,069,764
11.1
%
2,063,738
11.0
%
A
2,943,594
16.0
%
2,773,104
16.1
%
3,268,661
18.1
%
3,878,113
20.8
%
3,760,280
20.0
%
BBB
2,936,398
15.9
%
2,807,788
16.3
%
2,896,453
16.1
%
2,829,202
15.2
%
2,699,201
14.4
%
BB
501,588
2.7
%
522,357
3.0
%
544,730
3.0
%
622,448
3.3
%
574,189
3.1
%
B
371,747
2.0
%
348,036
2.0
%
330,639
1.8
%
331,144
1.8
%
268,095
1.4
%
Lower than B
43,756
0.2
%
43,751
0.3
%
48,230
0.3
%
57,659
0.3
%
54,795
0.3
%
Not rated
311,734
1.7
%
381,736
2.2
%
275,377
1.5
%
261,209
1.4
%
270,194
1.4
%
Total fixed maturities, at fair value
$
18,414,807
100.0
%
$
17,182,370
100.0
%
$
18,022,113
100.0
%
$
18,627,372
100.0
%
$
18,771,296
100.0
%
Maturity profile of total fixed maturities (2):
Due in one year or less
$
318,572
1.7
%
$
430,048
2.5
%
$
442,507
2.5
%
$
376,026
2.0
%
$
327,899
1.7
%
Due after one year through five years
8,536,801
46.4
%
8,035,751
46.8
%
9,873,037
54.8
%
10,913,524
58.6
%
10,424,114
55.5
%
Due after five years through ten years
4,807,858
26.1
%
4,601,049
26.8
%
4,185,053
23.2
%
4,054,083
21.8
%
4,901,382
26.1
%
Due after 10 years
600,157
3.3
%
437,895
2.5
%
452,460
2.5
%
510,405
2.7
%
544,104
2.9
%
14,263,388
77.5
%
13,504,743
78.6
%
14,953,057
83.0
%
15,854,038
85.1
%
16,197,499
86.3
%
Mortgage-backed securities
408,477
2.2
%
405,797
2.4
%
374,565
2.1
%
558,584
3.0
%
616,619
3.3
%
Commercial mortgage-backed securities
1,046,484
5.7
%
579,424
3.4
%
267,574
1.5
%
256,598
1.4
%
390,990
2.1
%
Asset-backed securities
2,696,458
14.6
%
2,692,406
15.7
%
2,426,917
13.5
%
1,958,152
10.5
%
1,566,188
8.3
%
Total fixed maturities, at fair value
$
18,414,807
100.0
%
$
17,182,370
100.0
%
$
18,022,113
100.0
%
$
18,627,372
100.0
%
$
18,771,296
100.0
%
(1) Presented on a ‘core’ basis which excludes amounts related to the ‘other’ segment (i.e., results of Somers). See ‘Comments on Regulation G’ for a further discussion of the presentation of ‘core’ results.
(2) This table excludes the collateral received and reinvested and includes the fixed maturities pledged under securities lending agreements, at fair value.
(3) For individual fixed maturities, S&P ratings are used. In the absence of an S&P rating, ratings from Moody’s are used, followed by ratings from Fitch Ratings.
(4) Includes U.S. government-sponsored agency mortgage backed securities and agency commercial mortgage backed securities.
27
Arch Capital Group Ltd. and Subsidiaries
Investment Information — Analysis of Corporate Exposures
The following table summarizes the Company’s corporate bonds by sector (1):
(U.S. Dollars in thousands)
December 31,
September 30,
June 30,
March 31,
December 31,
2021
2021
2021
2021
2020
Sector:
Industrials
$
3,082,440
44.4
%
$
3,227,049
47.6
%
$
3,873,768
52.5
%
$
4,744,615
57.6
%
$
4,940,996
61.5
%
Financials
3,397,199
48.9
%
3,132,330
46.2
%
2,974,254
40.3
%
2,868,957
34.8
%
2,432,719
30.3
%
Utilities
363,468
5.2
%
381,737
5.6
%
474,845
6.4
%
521,551
6.3
%
584,869
7.3
%
Covered bonds
4,511
0.1
%
2,661
0.0
%
3,022
0.0
%
2,029
0.0
%
2,013
0.0
%
All other (2)
94,261
1.4
%
34,166
0.5
%
49,461
0.7
%
96,619
1.2
%
79,148
1.0
%
Total
$
6,941,879
100.0
%
$
6,777,943
100.0
%
$
7,375,350
100.0
%
$
8,233,771
100.0
%
$
8,039,745
100.0
%
Credit quality distribution (3):
AAA
$
122,008
1.8
%
$
114,395
1.7
%
$
141,983
1.9
%
$
151,195
1.8
%
$
220,584
2.7
%
AA
1,006,360
14.5
%
946,277
14.0
%
890,624
12.1
%
961,880
11.7
%
995,742
12.4
%
A
2,414,764
34.8
%
2,293,741
33.8
%
2,742,121
37.2
%
3,431,522
41.7
%
3,313,349
41.2
%
BBB
2,453,904
35.3
%
2,530,014
37.3
%
2,687,944
36.4
%
2,684,300
32.6
%
2,574,823
32.0
%
BB
463,072
6.7
%
477,833
7.0
%
499,327
6.8
%
582,086
7.1
%
540,397
6.7
%
B
355,993
5.1
%
329,581
4.9
%
311,611
4.2
%
312,362
3.8
%
258,035
3.2
%
Lower than B
30,878
0.4
%
30,365
0.4
%
31,600
0.4
%
33,667
0.4
%
30,625
0.4
%
Not rated
94,900
1.4
%
55,737
0.8
%
70,140
1.0
%
76,759
0.9
%
106,190
1.3
%
Total
$
6,941,879
100.0
%
$
6,777,943
100.0
%
$
7,375,350
100.0
%
$
8,233,771
100.0
%
$
8,039,745
100.0
%
(1) Presented on a ‘core’ basis which excludes amounts related to the ‘other’ segment (i.e., results of Somers). See ‘Comments on Regulation G’ for a further discussion of the presentation of ‘core’ results.
(2) Includes sovereign securities, supranational securities and other.
(3) For individual fixed maturities, S&P ratings are used. In the absence of an S&P rating, ratings from Moody’s are used, followed by ratings from Fitch Ratings.
The following table summarizes the Company’s top ten exposures to fixed income corporate issuers by fair value at December 31, 2021 (1):
(U.S. Dollars in thousands)
Fair Value
% of Asset Class
% of Investable Assets
Credit Quality (2)
Issuer:
Bank of America Corporation
$
406,807
5.9
%
1.5
%
A-/A2
JPMorgan Chase & Co.
338,647
4.9
%
1.2
%
A-/A2
The Goldman Sachs Group, Inc.
237,628
3.4
%
0.9
%
BBB+/A2
Citigroup Inc.
220,915
3.2
%
0.8
%
BBB+/A3
Morgan Stanley
198,106
2.9
%
0.7
%
BBB+/A1
Wells Fargo & Company
183,261
2.6
%
0.7
%
BBB+/A1
Blackstone Inc.
128,138
1.8
%
0.5
%
NA/Baa3
Dai-ichi Life Holdings, Inc.
109,924
1.6
%
0.4
%
AA-/A1
Apple Inc.
109,008
1.6
%
0.4
%
AA+/Aaa
Westpac Banking Corporation
107,678
1.6
%
0.4
%
AA-/Aa3
Total
$
2,040,112
29.4
%
7.4
%
(1) Presented on a ‘core’ basis which excludes amounts related to the ‘other’ segment (i.e., results of Somers). See ‘Comments on Regulation G’ for a further discussion of the presentation of ‘core’ results.
(2) Average credit ratings assigned by S&P and Moody’s, respectively.
28
Arch Capital Group Ltd. and Subsidiaries
Investment Information — Structured Securities
The following table provides the composition of the Company’s structured securities at December 31, 2021 (1):
(U.S. Dollars in thousands)
Agencies
AAA
AA
A
BBB
Non-Investment Grade
Total
Residential mortgage-backed securities
$
268,229
$
86,344
$
40,502
$
2,444
$
6
$
10,952
$
408,477
Commercial mortgage-backed securities
22,198
710,692
141,065
6,990
67,555
97,984
1,046,484
Asset-backed securities
—
1,548,239
230,922
397,242
367,504
152,551
2,696,458
Total
$
290,427
$
2,345,275
$
412,489
$
406,676
$
435,065
$
261,487
$
4,151,419
(1) Presented on a ‘core’ basis which excludes amounts related to the ‘other’ segment (i.e., results of Somers). See ‘Comments on Regulation G’ for a further discussion of the presentation of ‘core’ results.
29
Arch Capital Group Ltd. and Subsidiaries
Comments on Regulation G
Throughout this financial supplement, the Company presents its operations in the way it believes will be the most meaningful and useful to investors, analysts, rating agencies and others who use the Company’s financial information in evaluating the performance of the Company. This presentation includes the use of after-tax operating income available to Arch common shareholders, which is defined as net income available to Arch common shareholders, excluding net realized gains or losses (which includes changes in the allowance for credit losses on financial assets and net impairment losses recognized in earnings), equity in net income or loss of investment funds accounted for using the equity method, net foreign exchange gains or losses, transaction costs and other and loss on redemption of preferred shares, net of income taxes, and the use of annualized operating return on average common equity. The presentation of after-tax operating income available to Arch common shareholders and annualized operating return on average common equity are non-GAAP financial measures as defined in Regulation G. The reconciliation of such measures to net income available to Arch common shareholders and annualized net income return on average common equity (the most directly comparable GAAP financial measures) in accordance with Regulation G is included on the following page.
The Company believes that net realized gains or losses, equity in net income or loss of investment funds accounted for using the equity method, net foreign exchange gains or losses, transaction costs and other and loss on redemption of preferred shares in any particular period are not indicative of the performance of, or trends in, the Company’s business performance. Although net realized gains or losses, equity in net income or loss of investment funds accounted for using the equity method and net foreign exchange gains or losses are an integral part of the Company’s operations, the decision to realize investment gains or losses, the recognition of the change in the carrying value of investments accounted for using the fair value option in net realized gains or losses, the recognition of equity in net income or loss of investment funds accounted for using the equity method and the recognition of foreign exchange gains or losses are independent of the insurance underwriting process and result, in large part, from general economic and financial market conditions. Furthermore, certain users of the Company’s financial information believe that, for many companies, the timing of the realization of investment gains or losses is largely opportunistic. In addition, changes in the allowance for credit losses and net impairment losses recognized in earnings on the Company’s investments represent other-than-temporary declines in expected recovery values on securities without actual realization. The use of the equity method on certain of the Company’s investments in certain funds that invest in fixed maturity securities is driven by the ownership structure of such funds (either limited partnerships or limited liability companies). In applying the equity method, these investments are initially recorded at cost and are subsequently adjusted based on the Company’s proportionate share of the net income or loss of the funds (which include changes in the fair value of the underlying securities in the funds). This method of accounting is different from the way the Company accounts for its other fixed maturity securities and the timing of the recognition of equity in net income or loss of investment funds accounted for using the equity method may differ from gains or losses in the future upon sale or maturity of such investments. Transaction costs and other include advisory, financing, legal, severance, incentive compensation and other transaction costs related to acquisitions. The Company believes that transaction costs and other, due to their non-recurring nature, are not indicative of the performance of, or trends in, the Company’s business performance. The loss on redemption of preferred shares related to the redemption of the Company's Series E preferred shares in September 2021 had no impact on shareholders' equity or cash flows. Due to these reasons, the Company excludes net realized gains or losses, equity in net income or loss of investment funds accounted for using the equity method, net foreign exchange gains or losses, transaction costs and other and loss on redemption of preferred shares from the calculation of after-tax operating income or loss available to Arch common shareholders.
The Company believes that showing net income available to Arch common shareholders exclusive of the items referred to above reflects the underlying fundamentals of the Company’s business since the Company evaluates the performance of and manages its business to produce an underwriting profit. In addition to presenting net income available to Arch common shareholders, the Company believes that this presentation enables investors and other users of the Company’s financial information to analyze the Company’s performance in a manner similar to how the Company’s management analyzes performance. The Company also believes that this measure follows industry practice and, therefore, allows the users of the Company’s financial information to compare the Company’s performance with its industry peer group. The Company believes that the equity analysts and certain rating agencies which follow the Company and the insurance industry as a whole generally exclude these items from their analyses for the same reasons.
In addition, through June 30, 2021, the Company’s presentation included the use of information prepared on a ‘core’ basis, which excluded amounts related to the ‘other’ segment (i.e., results of Somers). Information provided on a ‘core’ basis represent non-GAAP financial measures as defined in Regulation G. Pursuant to GAAP, Somers was considered a variable interest entity and the Company concluded that it was the primary beneficiary of Somers through June 30, 2021. As such, the Company consolidated the results of Somers in its consolidated financial statements. The Company’s presentation of information on a ‘core’ basis enabled investors and other users of the Company’s financial information to analyze the Company’s performance in a manner similar to how the Company’s management analyzed performance. See ‘Segment Information’ for a further discussion of segment results and a reconciliation of core and consolidated results. In the 2020 fourth quarter, Arch, Somers, and Greysbridge Ltd., a wholly-owned subsidiary of Arch, entered into an Agreement and Plan of Merger (as amended, the “Merger Agreement”). Arch assigned its rights under the Merger Agreement to Greysbridge Holdings Ltd. (“Greysbridge”). The merger and the related Greysbridge equity financing closed on July 1, 2021. Effective July 1, 2021, Somers is wholly owned by Greysbridge, and Greysbridge is owned 40% by Arch and 30% by certain funds managed by Kelso & Company and 30% by certain funds managed by Warburg Pincus LLC. Based on the governing documents of Greysbridge, we concluded that, while we retain significant influence over Greysbridge, Greysbridge does not constitute a variable interest entity. Accordingly, effective July 1, 2021, we no longer consolidate the results of Somers in our consolidated financial statements and footnotes.
The Company’s segment information includes the presentation of consolidated underwriting income or loss and a subtotal of underwriting income or loss on a ‘core’ basis (for periods prior to July 1, 2021). Such measures represent the pre-tax profitability of the Company’s underwriting operations and include net premiums earned plus other underwriting income, less losses and loss adjustment expenses, acquisition expenses and other operating expenses. Other operating expenses include those operating expenses that are incremental and/or directly attributable to the Company’s individual underwriting operations. Underwriting income or loss does not incorporate items included in the Company’s corporate segment. While these measures are presented in the Segment Information footnote to the Company’s Consolidated Financial Statements, they are considered non-GAAP financial measures when presented elsewhere on a consolidated basis. The reconciliations of underwriting income or loss to income before income taxes (the most directly comparable GAAP financial measure) on a consolidated basis and a ‘core’ basis (for periods prior to July 1, 2021), in accordance with Regulation G, is shown on pages 10 to 13.
In addition, the Company’s segment information includes the use of a combined ratio excluding catastrophic activity and prior year development, for the insurance and reinsurance segments, and a combined ratio excluding prior year development, for the mortgage segment. These ratios are non-GAAP financial measures as defined in Regulation G. The reconciliation of such measures to the combined ratio (the most directly comparable GAAP financial measure) in accordance with Regulation G are shown on the individual segment pages. The Company’s management utilizes the adjusted combined ratios excluding current accident year catastrophic events and favorable or adverse development in prior year loss reserves in its analysis of the underwriting performance of each of its underwriting segments.
Total return on investments includes investment income, equity in net income or loss of investment funds accounted for using the equity method, net realized gains and losses (excluding changes in the allowance for credit losses on non-investment related financial assets) and the change in unrealized gains and losses generated by Arch’s investment portfolio. Total return is calculated on a pre-tax basis and before investment expenses, excludes amounts reflected in the ‘other’ segment, and reflects the effect of financial market conditions along with foreign currency fluctuations. Management uses total return on investments as a key measure of the return generated to Arch common shareholders, and compares the return generated by the Company’s investment portfolio against benchmark returns during the periods presented.
30
Arch Capital Group Ltd. and Subsidiaries
Operating Income Reconciliation and Annualized Operating Return on Average Common Equity
The following table summarizes the Company’s consolidated financial data, including a reconciliation of net income (loss) available to Arch common shareholders to after-tax operating income (loss) available to Arch common shareholders and related diluted per share results. Each line item reflects the impact of the Company’s ownership of Somers’ outstanding common equity through June 30, 2021:
(U.S. Dollars in thousands, except share data)
Three Months Ended
Year Ended
December 31,
September 30,
June 30,
March 31,
December 31,
December 31,
December 31,
2021
2021
2021
2021
2020
2021
2020
Net income available to Arch common shareholders
$
613,081
$
388,751
$
663,820
$
427,753
$
533,141
$
2,093,405
$
1,363,909
Net realized (gains) losses
(59,517)
25,040
(167,438)
(105,551)
(297,801)
(307,466)
(814,808)
Equity in net (income) loss of investment funds accounted for using the equity method
(67,132)
(105,398)
(122,186)
(71,686)
(89,286)
(366,402)
(146,693)
Net foreign exchange (gains) losses
(3,221)
(36,078)
17,888
(21,332)
63,588
(42,743)
80,591
Transaction costs and other
310
1,036
(1,421)
1,274
4,718
1,199
9,964
Loss on redemption of preferred shares
—
15,101
—
—
—
15,101
—
Income tax expense (benefit) (1)
9,736
6,236
16,553
9,311
16,057
41,836
64,145
After-tax operating income available to Arch common shareholders
$
493,257
$
294,688
$
407,216
$
239,769
$
230,417
$
1,434,930
$
557,108
Diluted per common share results:
Net income available to Arch common shareholders
$
1.58
$
0.98
$
1.63
$
1.05
$
1.30
$
5.23
$
3.32
Net realized (gains) losses
(0.16)
0.05
(0.41)
(0.25)
(0.72)
(0.77)
(1.98)
Equity in net (income) loss of investment funds accounted for using the equity method
(0.17)
(0.26)
(0.30)
(0.18)
(0.22)
(0.92)
(0.36)
Net foreign exchange (gains) losses
(0.01)
(0.09)
0.04
(0.05)
0.15
(0.11)
0.20
Transaction costs and other
0.00
0.00
0.00
0.00
0.01
0.00
0.02
Loss on redemption of preferred shares
—
0.04
—
—
—
0.04
0.00
Income tax expense (benefit) (1)
0.03
0.02
0.04
0.02
0.04
0.11
0.16
After-tax operating income available to Arch common shareholders
$
1.27
$
0.74
$
1.00
$
0.59
$
0.56
$
3.58
$
1.36
Weighted average common shares and common share equivalents outstanding - diluted
388,869,378
397,903,347
406,485,994
409,223,253
410,281,852
400,345,936
410,259,455
Beginning common shareholders’ equity
$
12,557,526
$
12,706,072
$
12,316,472
$
12,325,886
$
11,671,997
$
12,325,886
$
10,717,371
Ending common shareholders’ equity
12,715,896
12,557,526
12,706,072
12,316,472
12,325,886
12,715,896
12,325,886
Average common shareholders’ equity
$
12,636,711
$
12,631,799
$
12,511,272
$
12,321,179
$
11,998,942
$
12,520,891
$
11,521,629
Annualized net income return on average common equity
19.4
%
12.3
%
21.2
%
13.9
%
17.8
%
16.7
%
11.8
%
Annualized operating return on average common equity
15.6
%
9.3
%
13.0
%
7.8
%
7.7
%
11.5
%
4.8
%
(1)Income tax expense on net realized gains or losses (which includes changes in the allowance for credit losses on financial assets and net impairment losses recognized in earnings), equity in net income (loss) of investment funds accounted for using the equity method, net foreign exchange gains or losses and transaction costs and other reflects the relative mix reported by jurisdiction and the varying tax rates in each jurisdiction.
31
Arch Capital Group Ltd. and Subsidiaries
Operating Income and Effective Tax Rate Calculations
The following table provides a reconciliation of income (loss) before income taxes to after-tax operating income (loss) available to Arch common shareholders and an analysis of the effective tax rate on pre-tax operating income (loss) available to Arch common shareholders:
(U.S. Dollars in thousands)
Three Months Ended
Year Ended
December 31,
September 30,
June 30,
March 31,
December 31,
December 31,
December 31,
2021
2021
2021
2021
2020
2021
2020
Arch Operating Income Components (1):
Income (loss) before income taxes and income (loss) from operating affiliates
$
617,440
$
301,433
$
697,799
$
397,244
$
560,146
$
2,013,916
$
1,496,126
Net realized (gains) losses
(59,517)
25,040
(163,394)
(101,336)
(289,817)
(299,207)
(813,781)
Equity in net (income) loss of investment funds accounted for using the equity method
(67,132)
(105,398)
(122,186)
(71,686)
(89,286)
(366,402)
(146,693)
Net foreign exchange (gains) losses
(3,163)
(36,078)
17,892
(21,505)
62,349
(42,854)
80,161
Transaction costs and other
(171)
(437)
(2,018)
1,390
3,086
(1,236)
6,459
Income (loss) from operating affiliates
40,641
124,119
24,476
75,457
10,504
264,693
16,766
Pre-tax operating income
528,098
308,679
452,569
279,564
256,982
1,568,910
639,038
Arch share of ‘other’ segment operating income (loss) (2)
—
—
733
198
1,526
931
7,353
Pre-tax operating income available to Arch (b)
528,098
308,679
453,302
279,762
258,508
1,569,841
646,391
Income tax expense (benefit) (a)
(24,657)
2,099
(34,420)
(29,590)
(17,688)
(86,568)
(47,671)
After-tax operating income available to Arch
503,441
310,778
418,882
250,172
240,820
1,483,273
598,720
Preferred dividends
(10,184)
(16,090)
(11,666)
(10,403)
(10,403)
(48,343)
(41,612)
After-tax operating income available to Arch common shareholders
$
493,257
$
294,688
$
407,216
$
239,769
$
230,417
$
1,434,930
$
557,108
Effective tax rate on pre-tax operating income (loss) available to Arch (a)/(b)
4.7
%
(0.7)
%
7.6
%
10.6
%
6.8
%
5.5
%
7.4
%
(1) Line items are presented on a ‘core’ basis, excluding amounts related to the ‘other’ segment (i.e., results of Somers). See ‘Comments on Regulation G’ for a further discussion of the presentation of ‘core’ results.
(2) Balances in the ‘other’ segment and a calculation of Arch’s share of the ‘other’ segment operating income (loss) is as follows:
(U.S. Dollars in thousands)
Three Months Ended
Year Ended
December 31,
September 30,
June 30,
March 31,
December 31,
December 31,
December 31,
2021
2021
2021
2021
2020
2021
2020
Balances in ‘other’ segment:
Underwriting income (loss)
$
—
$
—
$
(8,866)
$
(13,079)
$
(8,555)
$
(21,945)
$
(31,967)
Net investment income
—
—
22,183
20,127
26,466
42,310
117,700
Interest expense
—
—
(4,261)
(4,149)
(4,804)
(8,410)
(23,242)
Amortization of intangible assets
—
—
(898)
—
—
(898)
—
Preferred dividends
—
—
(981)
(972)
(992)
(1,953)
(4,117)
Pre-tax operating income (loss) available to common shareholders
—
—
7,177
1,927
12,115
9,104
58,374
Arch ownership (4)
n/a
n/a
10
%
10
%
13
%
n/a
13
%
Arch share of ‘Other’ segment operating income (loss) (3)
$
—
$
—
$
733
$
198
$
1,526
$
931
$
7,353
(3) Excludes amounts attributable to net realized gains or losses and net foreign exchange gains or losses in the ‘other’ segment (see ‘Segment Information’).
(4) Effective July 1, 2021, Somers is wholly owned by Greysbridge and Greysbridge is owned 40% by the Company, accordingly, the Company no longer consolidates the results of Somers in its consolidated financial statements. See ‘Comments on Regulation G’ for a further discussion of the presentation of ‘core’ results.
32
Arch Capital Group Ltd. and Subsidiaries
Capital Structure and Share Repurchase Activity
The following table provides an analysis of the Company’s capital structure (1):
(U.S. Dollars in thousands, except share data)
December 31,
September 30,
June 30,
March 31,
December 31,
2021
2021
2021
2021
2020
Debt:
Arch senior notes, due May 1, 2034 ($300,000 principal, 7.35%)
Arch Finance senior notes, due December 15, 2026 ($500,000 principal, 4.011%) (3)
500,000
500,000
500,000
500,000
500,000
Arch Finance senior notes, due December 15, 2046 ($450,000 principal, 5.031%) (3)
450,000
450,000
450,000
450,000
450,000
Arch senior notes, due June 30, 2050 ($1,000,000 principal, 3.635%)
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
Deferred debt costs on senior notes
(25,606)
(25,851)
(26,097)
(26,340)
(26,577)
Revolving credit agreement borrowings, due December 17, 2024 (variable)
—
—
—
—
—
Total debt
$
2,724,394
$
2,724,149
$
2,723,903
$
2,723,660
$
2,723,423
Shareholders’ equity available to Arch:
Series E non-cumulative preferred shares (5.25%)
—
—
450,000
450,000
450,000
Series F non-cumulative preferred shares (5.45%)
330,000
330,000
330,000
330,000
330,000
Series G non-cumulative preferred shares (4.55%)
500,000
500,000
500,000
—
—
Common shareholders’ equity (a)
12,715,896
12,557,526
12,706,072
12,316,472
12,325,886
Total shareholders’ equity available to Arch
$
13,545,896
$
13,387,526
$
13,986,072
$
13,096,472
$
13,105,886
Total capital available to Arch
$
16,270,290
$
16,111,675
$
16,709,975
$
15,820,132
$
15,829,309
Common shares outstanding, net of treasury shares (b)
378,923,894
387,257,752
396,771,251
403,313,377
406,720,642
Book value per common share (4) (a)/(b)
$
33.56
$
32.43
$
32.02
$
30.54
$
30.31
Leverage ratios:
Senior notes/total capital available to Arch
16.7
%
16.9
%
16.3
%
17.2
%
17.2
%
Revolving credit agreement borrowings/total capital available to Arch
—
%
—
%
—
%
—
%
—
%
Debt/total capital available to Arch
16.7
%
16.9
%
16.3
%
17.2
%
17.2
%
Preferred/total capital available to Arch
5.1
%
5.2
%
7.7
%
4.9
%
4.9
%
Debt and preferred/total capital available to Arch
21.8
%
22.1
%
24.0
%
22.1
%
22.1
%
(1) Presented on a ‘core’ basis which excludes amounts related to the ‘other’ segment (i.e., results of Somers). See ‘Comments on Regulation G’ for a further discussion of the presentation of ‘core’ results.
(2) Issued by Arch Capital Group (U.S.) Inc. (“Arch-U.S.”), a wholly owned subsidiary of Arch, and fully and unconditionally guaranteed by Arch.
(3) Issued by Arch Capital Finance LLC (“Arch Finance”), a wholly owned subsidiary of Arch U.S. MI Holdings Inc., and fully and unconditionally guaranteed by Arch.
(4) Excludes the effects of stock options, restricted and performance stock units outstanding.
The following table provides the impact of share repurchases under the Company’s share repurchase program:
(U.S. Dollars in thousands except share data)
Three Months Ended
Cumulative
December 31,
September 30,
June 30,
March 31,
December 31,
December 31,
2021
2021
2021
2021
2020
2021
Effect of share repurchases:
Aggregate cost of shares repurchased
$
362,097
$
386,882
$
306,049
$
179,266
$
7,986
$
5,286,060
Shares repurchased
8,668,100
9,704,956
7,805,455
5,308,319
250,714
420,678,912
Average price per share repurchased
$
41.77
$
39.86
$
39.21
$
33.77
$
31.85
$
12.57
Remaining share repurchase authorization (1)
$
1,182,234
(1) Repurchases under the share repurchase authorization may be effected from time to time in open market or privately negotiated transactions through December 31, 2022.