For the 2017 fourth quarter, the Company reports:
-
Net income available to Arch common shareholders of $203.5 million, or
$1.46 per share, a 9.9% annualized return on average common equity,
and after-tax operating income to Arch common shareholders, a non-GAAP
measure, of $187.4 million, or $1.34 per share, a 9.1% return on
average common equity;
-
Book value per common share of $60.91 at December 31, 2017, a 2.2%
increase in the 2017 fourth quarter and a 10.4% increase for the year;
-
Pre-tax catastrophic losses, net of reinsurance and reinstatement
premiums1, of $0.8 million, reflecting $68.4 million from
the California wildfires, $1.5 million from other events and $69.1
million of reductions on the 2017 third quarter hurricane events;
-
Favorable development in prior year loss reserves, net of related
adjustments1, of $50.9 million;
-
Combined ratio excluding catastrophic activity and prior year
development1 of 87.0%;
-
Charge of $21.5 million related to the revaluation of the Company’s
net deferred tax asset1 as a result of a lower U.S.
corporate income tax rate beginning in 2018. Effective tax rate on
pre-tax operating income of 15.4%, excluding the charge.
PEMBROKE, Bermuda--(BUSINESS WIRE)--
Arch Capital Group Ltd. (NASDAQ:ACGL) reports that net income available
to Arch common shareholders for the 2017 fourth quarter was $203.5
million, or $1.46 per share, compared to $62.4 million, or $0.50 per
share, for the 2016 fourth quarter. For the year ended December 31,
2017, the Company reported net income available to Arch common
shareholders of $566.5 million, or $4.07 per share, compared to $664.7
million, or $5.33 per share, for the 2016 period. The Company’s net
income available to Arch common shareholders produced an annualized
return on average common equity of 9.9% for the 2017 fourth quarter,
compared to 3.9% for the 2016 fourth quarter, and 7.2% for the year
ended December 31, 2017, compared to 10.9% for the year ended December
31, 2016. All earnings per share amounts discussed in this release are
on a diluted basis.
The Company’s book value per common share was $60.91 at December 31,
2017, a 2.2% increase from $59.61 per share reported at September 30,
2017 and a 10.4% increase from $55.19 per share at December 31, 2016.
The Company also reported after-tax operating income to Arch common
shareholders, a non-GAAP measure, of $187.4 million, or $1.34 per share,
for the 2017 fourth quarter, compared to after-tax operating income to
Arch common shareholders of $141.5 million, or $1.13 per share, for the
2016 fourth quarter. For the year ended December 31, 2017, the Company
reported after-tax operating income available to Arch common
shareholders of $447.2 million, or $3.21 per share, compared to $577.4
million, or $4.63 per share, for the 2016 period. The Company’s
after-tax operating income available to Arch common shareholders
produced an annualized return on average common equity of 9.1% for the
2017 fourth quarter, compared to 8.7% for the 2016 fourth quarter, and
5.7% for the year ended December 31, 2017, compared to 9.4% for the year
ended December 31, 2016. See ‘Comments on Regulation G’ for further
details.
1 |
|
Excluding the ‘other’ segment (i.e., results of Watford
Re). See ‘Comments on Regulation G’ for further discussion.
|
The following table summarizes the Company’s underwriting results, both
on a consolidated basis and a consolidated basis excluding the ‘other’
segment (i.e., results of Watford Re). See ‘Comments on
Regulation G’ for a reconciliation of underwriting income (loss) to
income (loss) before income taxes and net income (loss) available to
Arch common shareholders.
|
(U.S. dollars in thousands)
|
| Consolidated |
| Consolidated Excluding ‘Other’ Segment (1) |
| | Three Months Ended December 31, | | Three Months Ended December 31, |
| | 2017 |
| 2016 |
| % Change | | 2017 |
| 2016 |
| % Change |
| | | | | | | | | | | |
|
|
Gross premiums written
| |
$
|
1,452,530
| | |
$
|
1,155,467
| | |
25.7
| | |
$
|
1,391,247
| | |
$
|
1,121,338
| | |
24.1
| |
|
Net premiums written
| |
1,111,015
| | |
872,315
| | |
27.4
| | |
995,714
| | |
764,925
| | |
30.2
| |
|
Net premiums earned
| |
1,224,755
| | |
968,855
| | |
26.4
| | |
1,094,409
| | |
847,405
| | |
29.1
| |
|
Underwriting income
| |
182,111
| | |
114,096
| | |
59.6
| | |
206,012
| | |
117,362
| | |
75.5
| |
| | | | | | % Point | | | | | | % Point |
| Underwriting Ratios | | | | | | Change | | | | | | Change |
|
Loss ratio
| |
55.4
|
%
| |
57.2
|
%
| |
(1.8
|
)
| |
51.4
|
%
| |
55.4
|
%
| |
(4.0
|
)
|
|
Underwriting expense ratio
| |
30.9
|
%
| |
33.0
|
%
| |
(2.1
|
)
| |
31.1
|
%
| |
32.9
|
%
| |
(1.8
|
)
|
|
Combined ratio
| |
86.3
|
%
| |
90.2
|
%
| |
(3.9
|
)
| |
82.5
|
%
| |
88.3
|
%
| |
(5.8
|
)
|
| | | | | | | | | | | |
|
|
Combined ratio excluding catastrophic activity and prior year
development (2)
| | | | | | | |
87.0
|
%
| |
90.7
|
%
| |
(3.7
|
)
|
|
(1)
|
|
Pursuant to generally accepted accounting principles, the Company
concluded that Watford Re is considered a variable interest entity
and that the Company is the primary beneficiary of Watford Re. As
such, the Company consolidates the results of Watford Re (i.e., the
‘other’ segment) in its consolidated financial statements, although
it only owns approximately 11% of Watford Re’s common equity.
|
|
(2)
| |
See ‘Comments on Regulation G’ for further discussion.
|
|
|
The following table summarizes the Company’s consolidated financial
data, including a reconciliation of net income or loss available to Arch
common shareholders to after-tax operating income or loss available to
Arch common shareholders and related diluted per share results:
|
(U.S. dollars in thousands, except share data)
|
| Three Months Ended |
| Year Ended |
| | December 31, | | December 31, |
| | 2017 |
| 2016 | | 2017 |
| 2016 |
|
Net income available to Arch common shareholders
| |
$
|
203,535
| | |
$
|
62,396
| | |
$
|
566,502
| | |
$
|
664,668
| |
|
Net realized (gains) losses
| |
(36,906
|
)
| |
98,477
| | |
(148,836
|
)
| |
(77,081
|
)
|
|
Net impairment losses recognized in earnings
| |
1,723
| | |
13,593
| | |
7,138
| | |
30,442
| |
|
Equity in net (income) loss of investment funds accounted for using
the equity method
| |
(30,402
|
)
| |
(16,421
|
)
| |
(142,286
|
)
| |
(48,475
|
)
|
|
Net foreign exchange (gains) losses
| |
27,994
| | |
(35,547
|
)
| |
113,613
| | |
(31,987
|
)
|
|
UGC transaction costs and other
| |
901
| | |
34,587
| | |
22,150
| | |
41,729
| |
|
Loss on redemption of preferred shares
| |
—
| | |
—
| | |
6,735
| | |
—
| |
|
Income tax expense (benefit) (1)
| |
20,559
|
| |
(15,557
|
)
| |
22,139
|
| |
(1,852
|
)
|
|
After-tax operating income available to Arch common shareholders
| |
$
|
187,404
|
| |
$
|
141,528
|
| |
$
|
447,155
|
| |
$
|
577,444
|
|
| | | | | | | |
|
Diluted per common share results: | | | | | | | | |
|
Net income available to Arch common shareholders
| |
$
|
1.46
| | |
$
|
0.50
| | |
$
|
4.07
| | |
$
|
5.33
| |
|
Net realized (gains) losses
| |
(0.27
|
)
| |
0.78
| | |
(1.07
|
)
| |
(0.62
|
)
|
|
Net impairment losses recognized in earnings
| |
0.01
| | |
0.11
| | |
0.05
| | |
0.24
| |
|
Equity in net (income) loss of investment funds accounted for using
the equity method
| |
(0.22
|
)
| |
(0.13
|
)
| |
(1.02
|
)
| |
(0.38
|
)
|
|
Net foreign exchange (gains) losses
| |
0.20
| | |
(0.28
|
)
| |
0.81
| | |
(0.26
|
)
|
|
UGC transaction costs and other
| |
0.01
| | |
0.27
| | |
0.16
| | |
0.33
| |
|
Loss on redemption of preferred shares
| |
0.00
| | |
—
| | |
0.05
| | |
—
| |
|
Income tax expense (benefit) (1)
| |
0.15
|
| |
(0.12
|
)
| |
0.16
|
| |
(0.01
|
)
|
|
After-tax operating income available to Arch common shareholders
| |
$
|
1.34
|
| |
$
|
1.13
|
| |
$
|
3.21
|
| |
$
|
4.63
|
|
| | | | | | | |
|
|
Weighted average common shares and common share equivalents
outstanding-diluted
| |
139,578,630
| | |
125,427,259
| | |
139,261,675
| | |
124,717,493
| |
| | | | | | | |
|
|
Beginning common shareholders’ equity
| |
$
|
8,138,589
| | |
$
|
6,538,983
| | |
$
|
7,481,163
| | |
$
|
5,841,542
| |
|
Ending common shareholders’ equity
| |
8,324,047
|
| |
7,481,163
|
| |
8,324,047
|
| |
7,481,163
|
|
|
Average common shareholders’ equity
| |
$
|
8,231,318
|
| |
$
|
6,471,392
|
| |
$
|
7,902,605
|
| |
$
|
6,113,718
|
|
| | | | | | | |
|
|
Annualized return on average common equity
| |
9.9
|
%
| |
3.9
|
%
| |
7.2
|
%
| |
10.9
|
%
|
|
Annualized operating return on average common equity
| |
9.1
|
%
| |
8.7
|
%
| |
5.7
|
%
| |
9.4
|
%
|
|
(1)
|
|
Income tax expense on net realized gains or losses, 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, UGC transaction costs and other and loss
on redemption of preferred shares reflects the relative mix reported
by jurisdiction and the varying tax rates in each jurisdiction. For
the 2017 fourth quarter and year ended December 31, 2017, such
amounts include the $21.5 million expense as a result of revaluing
the Company’s net deferred tax asset due to the reduction in the
U.S. corporate income tax rate from 35% to 21% effective January 1,
2018.
|
|
|
Each line item in the table above reflects the impact of the Company’s
approximate 11% ownership of Watford Re’s common equity. See ‘Comments
on Regulation G’ for a discussion of non-GAAP financial measures.
Segment Information
The following section provides analysis on the Company’s 2017 fourth
quarter performance by operating segment.For additional details
regarding the Company’s operating segments, please refer to the
Company’s Financial Supplement dated December 31, 2017. The Company’s
segment information includes the use of underwriting income (loss) and a
combined ratio excluding catastrophic activity and prior year
development for the insurance segment and reinsurance segment and a
combined ratio excluding prior year development for the mortgage
segment. Such items are non-GAAP financial measures (see ‘Comments on
Regulation G’ for further details).
Insurance Segment |
|
|
|
| Three Months Ended December 31, |
|
(U.S. dollars in thousands)
| | 2017 |
| 2016 |
| % Change |
| | | | | |
|
|
Gross premiums written
| |
$
|
767,456
| | |
$
|
707,519
| | |
8.5
| |
|
Net premiums written
| |
512,867
| | |
465,861
| | |
10.1
| |
|
Net premiums earned
| |
554,633
| | |
514,087
| | |
7.9
| |
| | | | | |
|
|
Underwriting income
| |
$
|
9,047
| | |
$
|
3,468
| | |
160.9
| |
| | | | | |
|
| Underwriting Ratios | | | | | | % Point Change |
|
Loss ratio
| |
66.7
|
%
| |
67.7
|
%
| |
(1.0
|
)
|
|
Underwriting expense ratio
| |
31.6
|
%
| |
31.6
|
%
| |
—
|
|
|
Combined ratio
| |
98.3
|
%
| |
99.3
|
%
| |
(1.0
|
)
|
| | | | | |
|
|
Catastrophic activity and prior year development:
| | | | | | |
|
Current accident year catastrophic events, net of reinsurance and
reinstatement premiums
| |
(1.3
|
)%
| |
4.6
|
%
| |
(5.9
|
)
|
|
Net (favorable) adverse development in prior year loss reserves, net
of related adjustments
| |
(0.1
|
)%
| |
(1.5
|
)%
| |
1.4
|
|
|
Combined ratio excluding catastrophic activity and prior year
development (1)
| |
99.7
|
%
| |
96.2
|
%
| |
3.5
|
|
|
(1)
|
|
See ‘Comments on Regulation G’ for further discussion.
|
|
|
Gross premiums written by the insurance segment in the 2017 fourth
quarter were 8.5% higher than in the 2016 fourth quarter while net
premiums written were 10.1% higher than in the 2016 fourth quarter. The
higher level of net premiums written reflected increases in national
accounts, which included $10 million of adjustment premiums from a
single large account, and in programs, due to the continued effects of
two newer programs. In addition, net premiums written increased in
travel, due to new business, and in professional lines, reflecting
increases in small and medium sized accounts. Net premiums earned by the
insurance segment in the 2017 fourth quarter were 7.9% higher than in
the 2016 fourth quarter, and reflect changes in net premiums written
over the previous five quarters.
The 2017 fourth quarter loss ratio reflected a benefit of 1.3 points for
current year catastrophic activity, which reflected a reduction of 1.8
points from reserve releases on Hurricanes Harvey, Irma and Maria, while
the California wildfires contributed 0.5 points of expense. The 2016
fourth quarter loss ratio included 4.6 points of catastrophic activity.
Estimated net favorable development in prior year loss reserves, before
related adjustments, reduced the loss ratio by 0.3 points in the 2017
fourth quarter, compared to 1.6 points in the 2016 fourth quarter. The
balance of the change in the 2017 fourth quarter loss ratio resulted, in
part, from a higher level of large attritional losses in the 2017 fourth
quarter and changes in the mix of business.
The underwriting expense ratio was 31.6% in the 2017 fourth quarter,
consistent with the 2016 fourth quarter.
Reinsurance Segment |
|
|
|
| Three Months Ended December 31, |
|
(U.S. dollars in thousands)
| | 2017 |
| 2016 |
| % Change |
| | | | | |
|
|
Gross premiums written
| |
$
|
289,348
| | |
$
|
276,593
| | |
4.6
| |
|
Net premiums written
| |
210,166
| | |
206,120
| | |
2.0
| |
|
Net premiums earned
| |
259,495
| | |
251,841
| | |
3.0
| |
|
Other underwriting income
| |
10,193
| | |
13,744
| | |
(25.8
|
)
|
| | | | | |
|
|
Underwriting income
| |
$
|
24,617
| | |
$
|
67,829
| | |
(63.7
|
)
|
| | | | | |
|
| | | | | | % Point |
| Underwriting Ratios | | | | | | Change |
|
Loss ratio
| |
54.8
|
%
| |
44.5
|
%
| |
10.3
| |
|
Underwriting expense ratio
| |
39.7
|
%
| |
34.0
|
%
| |
5.7
|
|
|
Combined ratio
| |
94.5
|
%
| |
78.5
|
%
| |
16.0
|
|
| | | | | |
|
|
Catastrophic activity and prior year development:
| | | | | | |
|
Current accident year catastrophic events, net of reinsurance and
reinstatement premiums
| |
3.0
|
%
| |
4.1
|
%
| |
(1.1
|
)
|
|
Net (favorable) adverse development in prior year loss reserves, net
of related adjustments
| |
(11.7
|
)%
| |
(16.7
|
)%
| |
5.0
|
|
|
Combined ratio excluding catastrophic activity and prior year
development (1)
| |
103.2
|
%
| |
91.1
|
%
| |
12.1
|
|
|
(1)
|
|
See ‘Comments on Regulation G’ for further discussion.
|
|
|
Gross premiums written by the reinsurance segment in the 2017 fourth
quarter were 4.6% higher than in the 2016 fourth quarter, while net
premiums written were 2.0% higher than in the 2016 fourth quarter. The
increase in net premiums written in the 2017 fourth quarter reflected
growth in other specialty business, primarily in international motor
quota share contracts. Such amounts were partially offset by reductions
in property excluding property catastrophe business, primarily related
to a targeted reduction in onshore energy writings. Net premiums earned
by the reinsurance segment in the 2017 fourth quarter were 3.0% higher
than in the 2016 fourth quarter, and reflect changes in net premiums
written over the previous five quarters.
The 2017 fourth quarter loss ratio included 2.3 points of current year
catastrophic activity, including 25.3 points related to the California
wildfires, with a reduction of 22.8 points on Hurricanes Harvey, Irma
and Maria, due to lower initial loss emergence. The 2016 fourth quarter
loss ratio included 4.5 points of catastrophic activity. Estimated net
favorable development in prior year loss reserves, before related
adjustments, reduced the loss ratio by 12.4 points in the 2017 fourth
quarter, compared to 16.7 points in the 2016 fourth quarter. The
estimated net favorable development in the 2017 fourth quarter primarily
resulted from better than expected claims emergence in short-tail
business from more recent underwriting years and in longer-tail business
across earlier underwriting years. The balance of the change in the 2017
fourth quarter loss ratio resulted, in part, from a higher level of
onshore energy losses and changes in the mix of business while the 2016
fourth quarter benefited from a higher level of retrocessional
recoveries.
The underwriting expense ratio was 39.7% in the 2017 fourth quarter,
compared to 34.0% in the 2016 fourth quarter. As previously disclosed,
the Company entered into intercompany loss portfolio transfers effective
on December 31, 2017 that transferred $1.36 billion of net retained
reserves for losses and allocated loss adjustment expenses between its
subsidiaries. The acquisition expense ratio for the 2017 fourth quarter
included 5.3 points of federal excise taxes in connection with such
activity. The comparison of the underwriting expense ratios also
reflected changes in the mix and type of business.
Mortgage Segment |
|
|
|
| Three Months Ended December 31, |
|
(U.S. dollars in thousands)
| | 2017 |
| 2016 |
| % Change |
| | | | | |
|
|
Gross premiums written
| |
$
|
335,338
| | |
$
|
138,285
| | |
142.5
| |
|
Net premiums written
| |
272,681
| | |
92,944
| | |
193.4
| |
|
Net premiums earned
| |
280,281
| | |
81,477
| | |
244.0
| |
|
Other underwriting income
| |
3,738
| | |
4,354
| | |
(14.1
|
)
|
| | | | | |
|
|
Underwriting income
| |
$
|
172,348
| | |
$
|
46,065
| | |
274.1
| |
| | | | | |
|
| | | | | | % Point |
| Underwriting Ratios | | | | | | Change |
|
Loss ratio
| |
17.8
|
%
| |
10.9
|
%
| |
6.9
| |
|
Underwriting expense ratio
| |
22.1
|
%
| |
37.9
|
%
| |
(15.8
|
)
|
|
Combined ratio
| |
39.9
|
%
| |
48.8
|
%
| |
(8.9
|
)
|
| | | | | |
|
|
Prior year development:
| | | | | | |
|
Net (favorable) adverse development in prior year loss reserves, net
of related adjustments
| |
(7.2
|
)%
| |
(6.0
|
)%
| |
(1.2
|
)
|
|
Combined ratio excluding prior year development (1)
| |
47.1
|
%
| |
54.8
|
%
| |
(7.7
|
)
|
|
(1)
|
|
See ‘Comments on Regulation G’ for further discussion.
|
|
|
The mortgage segment includes the Company’s U.S. mortgage insurance
operations (“Arch MI U.S.”), international mortgage insurance and
reinsurance operations as well as government sponsored enterprise
(“GSE”) credit-risk sharing transactions. On December 31, 2016, the
Company completed the acquisition of United Guaranty Corporation (“UGC”)
from American International Group, Inc. (“AIG”). As such, the 2017
fourth quarter results in the table above reflects the combination of
Arch and UGC while the 2016 fourth quarter does not.
Gross premiums written by the mortgage segment in the 2017 fourth
quarter were significantly higher than in the 2016 fourth quarter,
primarily reflecting growth in insurance in force due to the acquisition
of UGC. Premiums ceded for the 2017 fourth quarter were primarily
related to the 50% quota share reinsurance agreement to AIG, covering
2014 to 2016 policy years of UGC business on a run-off basis, while the
2016 fourth quarter reflected the retrocession of $40.1 million of
Australian mortgage reinsurance business. The increase in net premiums
earned for the 2017 fourth quarter reflected the acquisition of UGC as
well as growth in insurance in force over the last twelve months.
Arch MI U.S. generated $14.4 billion of new insurance written (“NIW”)
during the 2017 fourth quarter, compared to $17.7 billion during the
2017 third quarter, with the sequential decline primarily due to typical
seasonality in purchase market activity. Monthly premium policies
contributed 88.7% of 2017 fourth quarter NIW, compared to 87.0% in the
2017 third quarter.
The loss ratio for the 2017 fourth quarter reflected estimated net
favorable development in prior year loss reserves, before related
adjustments, of 7.2 points, compared to 7.8 points in the 2017 third
quarter. The estimated net favorable development in the 2017 periods was
primarily driven by lower than expected claim rates and subrogation
activity. The loss ratio for the 2017 fourth quarter included
approximately $10.4 million, or 3.7 points, primarily stemming from a
higher level of delinquencies emanating from new notices from areas
impacted by the 2017 third quarter hurricanes and a catch-up of 2017
reported losses from one lender. The ending percentage of loans in
default on first lien business increased to 2.23% at December 31, 2017,
from 1.98% at September 30, 2017, primarily due to the hurricane-related
activity noted above.
The mortgage segment’s underwriting expense ratio was 22.1% in the 2017
fourth quarter, compared to 20.6% in the 2017 third quarter. The higher
underwriting expense ratio in the 2017 fourth quarter primarily
reflected an increase in amortization of deferred acquisition costs as a
result of the UGC acquisition.
At December 31, 2017, the mortgage segment’s risk-in-force (before
reinsurance) of $70.3 billion consisted of $64.9 billion from Arch MI
U.S. with the remainder from reinsurance and risk-sharing operations.
For additional information on the mortgage segment, please refer to the
Company’s Financial Supplement dated December 31, 2017.
Corporate and Non-Underwriting
Corporate and non-underwriting results include net investment income,
other income (loss), corporate expenses, UGC transaction costs and
other, amortization of intangible assets, interest expense, items
related to the Company’s non-cumulative preferred shares, net realized
gains or losses, net impairment losses included in earnings, equity in
net income or loss of investment funds accounted for using the equity
method, net foreign exchange gains or losses and income taxes. Such
amounts exclude the results of the ‘other’ segment.
Net investment income for the 2017 fourth quarter was $0.71 per share,
or $99.6 million, compared to $0.56 per share, or $70.1 million, for the
2016 fourth quarter. The 2017 fourth quarter net investment income
reflected income on the acquired UGC portfolio and a higher level of
income on fund investments. The annualized pre-tax investment income
yield was 2.08% for the 2017 fourth quarter, compared to 1.92% for the
2016 fourth quarter.
Corporate expenses were $13.1 million for the 2017 fourth quarter,
compared to $11.5 million for the 2016 fourth quarter, with the increase
primarily due to higher compensation costs. UGC transaction costs and
other were $0.9 million for the 2017 fourth quarter, compared to $3.0
million in the 2017 third quarter, with amounts for both quarters
primarily related to severance and severance related costs. Amortization
of intangible assets for the 2017 fourth quarter was $31.8 million,
compared to $4.9 million for the 2016 fourth quarter, with the increase
primarily related to the UGC acquisition.
Interest expense for the 2017 fourth quarter was $25.7 million, compared
to $15.5 million for the 2016 fourth quarter, with the increase
primarily reflecting the impact of the issuance of the Company’s 2026
and 2046 senior notes in December 2016 and the higher level of
borrowings under the Company’s revolving credit agreement. During the
2017 fourth quarter, the Company repaid $25.0 million of revolving
borrowings.
Preferred dividends for the 2017 fourth quarter were $11.1 million,
compared to $11.6 million for the 2016 fourth quarter. In December 2017,
the Company issued $100 million of 5.45% Series F preferred shares and
received net proceeds of $97.6 million. On January 2, 2018, the Company
redeemed the remaining $92.6 million of 6.75% Series C preferred shares.
As such, both issuances are outstanding at December 31, 2017 and, in
accordance with GAAP, the Company will record a loss of $2.7 million to
remove original issuance costs related to the redeemed shares from
additional paid-in capital in the 2018 first quarter. Such adjustment
will have no impact on total shareholders’ equity or cash flows.
For additional information on the Company’s capital structure, please
refer to the Financial Supplement dated December 31, 2017.
On a pre-tax basis, net foreign exchange losses for the 2017 fourth
quarter were $27.9 million, compared to net foreign exchange gains for
the 2016 fourth quarter of $35.2 million. For both periods, such amounts
were primarily unrealized and resulted from the effects of revaluing the
Company’s net insurance liabilities required to be settled in foreign
currencies at each balance sheet date. Changes in the value of
available-for-sale investments held in foreign currencies due to foreign
currency rate movements are reflected as a direct increase or decrease
to shareholders’ equity and are not included in the consolidated
statements of income. Although the Company generally attempts to match
the currency of its projected liabilities with investments in the same
currencies, the Company may elect to over or underweight one or more
currencies from time to time, which could increase the Company’s
exposure to foreign currency fluctuations and increase the volatility of
the Company’s shareholders’ equity.
The Company’s effective tax rate on income before income taxes (based on
the Company’s annual effective tax rate) was an expense of 20.9% for the
2017 fourth quarter and an expense of 17.1% for the year ended December
31, 2017, compared to a benefit of 19.9% for the 2016 fourth quarter and
an expense of 4.3% for the 2016 period. The 2017 amounts reflected an
expense of $21.5 million due to the revaluation of the Company’s net
deferred tax asset resulting from the change in the U.S. corporate
income tax rate from 35% to 21% effective January 1, 2018. The Company’s
effective tax rate on pre-tax operating income available to Arch
shareholders was 15.4% for the 2017 fourth quarter and 17.6% for the
year ended December 31, 2017, compared to 2.1% for the 2016 fourth
quarter and 5.2% for the 2016 period. The Company’s effective tax rate
fluctuates from year to year based upon the relative mix of income or
loss reported by jurisdiction, the level of catastrophic loss activity
incurred, and the varying tax rates in each jurisdiction.
Conference Call
The Company will hold a conference call for investors and analysts at
11:00 a.m. Eastern Time on February 13, 2018. A live webcast of this
call will be available via the Investors section of the Company’s
website at http://www.archcapgroup.com.
A telephone replay of the conference call also will be available
beginning on February 13, 2018 at 2:00 p.m. Eastern Time until February
20, 2018 at midnight Eastern Time. To access the replay, domestic
callers should dial 855-859-2056, and international callers should dial
404-537-3406 (passcode 4685749 for all callers).
Please refer to the Company’s Financial Supplement dated December 31,
2017, which is available via the Investors section of the Company’s
website at http://www.archcapgroup.com.
The Financial Supplement provides additional detail regarding the
financial performance of the Company. From time to time, the Company
posts additional financial information and presentations to its website,
including information with respect to its subsidiaries. Investors and
other recipients of this information are encouraged to check the
Company’s website regularly for additional information regarding the
Company.
Arch Capital Group Ltd., a Bermuda-based company with approximately
$11.30 billion in capital at December 31, 2017, provides insurance,
reinsurance and mortgage insurance on a worldwide basis through its
wholly owned subsidiaries.
Comments on Regulation G
Throughout this release, 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 and that
investors and such other persons benefit from having a consistent basis
for comparison between quarters and for comparison with other companies
within the industry. These measures may not, however, be comparable to
similarly titled measures used by companies outside of the insurance
industry. Investors are cautioned not to place undue reliance on these
non-GAAP financial measures in assessing the Company’s overall financial
performance.
This presentation includes the use of “after-tax operating income or
loss available to Arch common shareholders,” which is defined as net
income available to Arch common shareholders, excluding net realized
gains or losses, 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, UGC 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 return on average common equity (the most
directly comparable GAAP financial measures) in accordance with
Regulation G is included on the following page of this release.
The Company believes that net realized gains or losses, 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, UGC 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, net impairment
losses recognized in earnings, 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 net impairment 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, 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. UGC transaction costs and other include advisory,
financing, legal, severance, incentive compensation and other
transaction costs related to the UGC acquisition. During the 2016 fourth
quarter, UGC transaction costs and other included non-recurring expenses
related to a change in the Company’s approach on the deferral of certain
internal underwriting costs which are no longer being deferred. The
Company believes that UGC 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 C
preferred shares in September 2017 and had no impact on shareholders'
equity or cash flows. Due to these reasons, the Company excludes net
realized gains or losses, 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, UGC 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. In addition, for the 2017 fourth quarter and year
ended December 31, 2017, income tax expense included $21.5 million
charge due to the revaluation of the Company’s net deferred tax asset
resulting from the reduction in the U.S. corporate income tax rate from
35% to 21% effective January 1, 2018. Due to the non-recurring nature of
this item, the Company excluded it from after-tax operating income
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.
The Company’s segment information includes the presentation of
consolidated underwriting income or loss and a subtotal of underwriting
income or loss before the contribution from the ‘other’ segment. Such
measures represent the pre-tax profitability of its 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
(non-underwriting) 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 subtotal before the contribution from the ‘other’ segment, in
accordance with Regulation G, is shown on the following pages.
Management measures segment performance for its three underwriting
segments based on underwriting income or loss. The Company does not
manage its assets by underwriting segment and, accordingly, investment
income and other non-underwriting related items are not allocated to
each underwriting segment. As noted earlier, the ‘other’ segment
includes the results of Watford Re. Watford Re has its own management
and board of directors that is responsible for the overall profitability
of the ‘other’ segment. For the ‘other’ segment, performance is measured
based on net income or loss. The Company does not guarantee or provide
credit support for Watford Re, and the Company’s financial exposure to
Watford Re is limited to its investment in Watford Re’s common and
preferred shares and counterparty credit risk (mitigated by collateral)
arising from reinsurance transactions. Along with consolidated
underwriting income, the Company provides a subtotal of underwriting
income or loss before the contribution from the ‘other’ segment and
believes that this presentation enables investors and other users of the
Company’s financial information to analyze the Company’s underwriting
performance in a manner similar to how the Company’s management analyzes
performance.
In addition, the Company’s segment information includes the use of a
combined ratio excluding catastrophic activity and prior year
development for the insurance segment and reinsurance segment 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 ratio 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.
The following tables summarize the Company’s results by segment for the
2017 fourth quarter and 2016 fourth quarter and a reconciliation of
underwriting income or loss to income or loss before income taxes and
net income or loss available to Arch common shareholders:
|
(U.S. Dollars in thousands)
|
| Three Months Ended |
| | December 31, 2017 |
| | Insurance |
| Reinsurance |
| Mortgage |
| Sub-total |
| Other |
| Total |
|
Gross premiums written (1)
| |
$
|
767,456
| | |
$
|
289,348
| | |
$
|
335,338
| | |
$
|
1,391,247
| | |
$
|
127,173
| | |
$
|
1,452,530
| |
|
Premiums ceded
| |
(254,589
|
)
| |
(79,182
|
)
| |
(62,657
|
)
| |
(395,533
|
)
| |
(11,872
|
)
| |
(341,515
|
)
|
|
Net premiums written
| |
512,867
| | |
210,166
| | |
272,681
| | |
995,714
| | |
115,301
| | |
1,111,015
| |
|
Change in unearned premiums
| |
41,766
|
| |
49,329
|
| |
7,600
|
| |
98,695
|
| |
15,045
|
| |
113,740
|
|
|
Net premiums earned
| |
554,633
| | |
259,495
| | |
280,281
| | |
1,094,409
| | |
130,346
| | |
1,224,755
| |
|
Other underwriting income
| |
—
| | |
10,193
| | |
3,738
| | |
13,931
| | |
803
| | |
14,734
| |
|
Losses and loss adjustment expenses
| |
(370,069
|
)
| |
(142,254
|
)
| |
(49,762
|
)
| |
(562,085
|
)
| |
(116,790
|
)
| |
(678,875
|
)
|
|
Acquisition expenses
| |
(87,261
|
)
| |
(66,612
|
)
| |
(24,363
|
)
| |
(178,236
|
)
| |
(30,643
|
)
| |
(208,879
|
)
|
|
Other operating expenses
| |
(88,256
|
)
| |
(36,205
|
)
| |
(37,546
|
)
| |
(162,007
|
)
| |
(7,617
|
)
| |
(169,624
|
)
|
|
Underwriting income (loss)
| |
$
|
9,047
|
| |
$
|
24,617
|
| |
$
|
172,348
|
| |
206,012
| | |
(23,901
|
)
| |
182,111
| |
| | | | | | | | | | | |
|
|
Net investment income
| | | | | | | |
99,613
| | |
25,802
| | |
125,415
| |
|
Net realized gains (losses)
| | | | | | | |
38,136
| | |
(11,158
|
)
| |
26,978
| |
|
Net impairment losses recognized in earnings
| | | | | | | |
(1,723
|
)
| |
—
| | |
(1,723
|
)
|
|
Equity in net income (loss) of investment funds accounted for using
the equity method
| | | | | | | |
30,402
| | |
—
| | |
30,402
| |
|
Other income (loss)
| | | | | | | |
547
| | |
—
| | |
547
| |
|
Corporate expenses
| | | | | | | |
(13,085
|
)
| |
—
| | |
(13,085
|
)
|
|
UGC transaction costs and other
| | | | | | | |
(901
|
)
| |
—
| | |
(901
|
)
|
|
Amortization of intangible assets
| | | | | | | |
(31,836
|
)
| |
—
| | |
(31,836
|
)
|
|
Interest expense
| | | | | | | |
(25,660
|
)
| |
(4,836
|
)
| |
(30,496
|
)
|
|
Net foreign exchange gains (losses)
| | | | | | | |
(27,894
|
)
| |
(913
|
)
| |
(28,807
|
)
|
| Income (loss) before income taxes | | | | | | | |
273,611
| | |
(15,006
|
)
| |
258,605
| |
|
Income tax expense
| | | | | | | |
(56,813
|
)
| |
—
|
| |
(56,813
|
)
|
| Net income (loss) | | | | | | | |
216,798
| | |
(15,006
|
)
| |
201,792
| |
|
Dividends attributable to redeemable noncontrolling interests
| | | | | | | |
—
| | |
(4,588
|
)
| |
(4,588
|
)
|
|
Amounts attributable to nonredeemable noncontrolling interests
| | | | | | | |
—
|
| |
17,436
|
| |
17,436
|
|
| Net income (loss) available to Arch | | | | | | | |
216,798
| | |
(2,158
|
)
| |
214,640
| |
|
Preferred dividends
| | | | | | | |
(11,105
|
)
| |
—
|
| |
(11,105
|
)
|
| Net income (loss) available to Arch common shareholders | | | | | | | |
$
|
205,693
|
| |
$
|
(2,158
|
)
| |
$
|
203,535
|
|
| | | | | | | | | | | |
|
| Underwriting Ratios | | | | | | | | | | | | |
|
Loss ratio
| |
66.7
|
%
| |
54.8
|
%
| |
17.8
|
%
| |
51.4
|
%
| |
89.6
|
%
| |
55.4
|
%
|
|
Acquisition expense ratio
| |
15.7
|
%
| |
25.7
|
%
| |
8.7
|
%
| |
16.3
|
%
| |
23.5
|
%
| |
17.1
|
%
|
|
Other operating expense ratio
| |
15.9
|
%
| |
14.0
|
%
| |
13.4
|
%
| |
14.8
|
%
| |
5.8
|
%
| |
13.8
|
%
|
|
Combined ratio
| |
98.3
|
%
| |
94.5
|
%
| |
39.9
|
%
| |
82.5
|
%
| |
118.9
|
%
| |
86.3
|
%
|
| | | | | | | | | | | |
|
|
Net premiums written to gross premiums written
| |
66.8
|
%
| |
72.6
|
%
| |
81.3
|
%
| |
71.6
|
%
| |
90.7
|
%
| |
76.5
|
%
|
|
(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.
|
|
|
|
(U.S. Dollars in thousands)
|
| Three Months Ended |
| | December 31, 2016 |
| | Insurance |
| Reinsurance |
| Mortgage |
| Sub-total |
| Other |
| Total |
|
Gross premiums written (1)
| |
$
|
707,519
| | |
$
|
276,593
| | |
$
|
138,285
| | |
$
|
1,121,338
| | |
$
|
113,467
| | |
$
|
1,155,467
| |
|
Premiums ceded
| |
(241,658
|
)
| |
(70,473
|
)
| |
(45,341
|
)
| |
(356,413
|
)
| |
(6,077
|
)
| |
(283,152
|
)
|
|
Net premiums written
| |
465,861
| | |
206,120
| | |
92,944
| | |
764,925
| | |
107,390
| | |
872,315
| |
|
Change in unearned premiums
| |
48,226
|
| |
45,721
|
| |
(11,467
|
)
| |
82,480
|
| |
14,060
|
| |
96,540
|
|
|
Net premiums earned
| |
514,087
| | |
251,841
| | |
81,477
| | |
847,405
| | |
121,450
| | |
968,855
| |
|
Other underwriting income
| |
—
| | |
13,744
| | |
4,354
| | |
18,098
| | |
824
| | |
18,922
| |
|
Losses and loss adjustment expenses
| |
(348,226
|
)
| |
(112,149
|
)
| |
(8,841
|
)
| |
(469,216
|
)
| |
(84,659
|
)
| |
(553,875
|
)
|
|
Acquisition expenses
| |
(75,244
|
)
| |
(51,552
|
)
| |
(4,843
|
)
| |
(131,639
|
)
| |
(34,204
|
)
| |
(165,843
|
)
|
|
Other operating expenses
| |
(87,149
|
)
| |
(34,055
|
)
| |
(26,082
|
)
| |
(147,286
|
)
| |
(6,677
|
)
| |
(153,963
|
)
|
|
Underwriting income (loss)
| |
$
|
3,468
|
| |
$
|
67,829
|
| |
$
|
46,065
|
| |
117,362
| | |
(3,266
|
)
| |
114,096
| |
| | | | | | | | | | | |
|
|
Net investment income
| | | | | | | |
70,105
| | |
20,946
| | |
91,051
| |
|
Net realized gains (losses)
| | | | | | | |
(99,149
|
)
| |
6,088
| | |
(93,061
|
)
|
|
Net impairment losses recognized in earnings
| | | | | | | |
(13,593
|
)
| |
—
| | |
(13,593
|
)
|
|
Equity in net income (loss) of investment funds accounted for using
the equity method
| | | | | | | |
16,421
| | |
—
| | |
16,421
| |
|
Other income (loss)
| | | | | | | |
(368
|
)
| |
—
| | |
(368
|
)
|
|
Corporate expenses
| | | | | | | |
(11,470
|
)
| |
—
| | |
(11,470
|
)
|
|
UGC transaction costs and other
| | | | | | | |
(34,587
|
)
| |
—
| | |
(34,587
|
)
|
|
Amortization of intangible assets
| | | | | | | |
(4,850
|
)
| |
—
| | |
(4,850
|
)
|
|
Interest expense
| | | | | | | |
(15,481
|
)
| |
(3,058
|
)
| |
(18,539
|
)
|
|
Net foreign exchange gains (losses)
| | | | | | | |
35,221
|
| |
2,955
|
| |
38,176
|
|
| Income before income taxes | | | | | | | |
59,611
| | |
23,665
| | |
83,276
| |
|
Income tax (expense) benefit
| | | | | | | |
12,298
|
| |
—
|
| |
12,298
|
|
| Net income | | | | | | | |
71,909
| | |
23,665
| | |
95,574
| |
|
Dividends attributable to redeemable noncontrolling interests
| | | | | | | |
—
| | |
(4,588
|
)
| |
(4,588
|
)
|
|
Amounts attributable to nonredeemable noncontrolling interests
| | | | | | | |
—
|
| |
(16,973
|
)
| |
(16,973
|
)
|
| Net income available to Arch | | | | | | | |
71,909
| | |
2,104
| | |
74,013
| |
|
Preferred dividends
| | | | | | | |
(11,617
|
)
| |
—
|
| |
(11,617
|
)
|
| Net income available to Arch common shareholders | | | | | | | |
$
|
60,292
|
| |
$
|
2,104
|
| |
$
|
62,396
|
|
| | | | | | | | | | | |
|
| Underwriting Ratios | | | | | | | | | | | | |
|
Loss ratio
| |
67.7
|
%
| |
44.5
|
%
| |
10.9
|
%
| |
55.4
|
%
| |
69.7
|
%
| |
57.2
|
%
|
|
Acquisition expense ratio
| |
14.6
|
%
| |
20.5
|
%
| |
5.9
|
%
| |
15.5
|
%
| |
28.2
|
%
| |
17.1
|
%
|
|
Other operating expense ratio
| |
17.0
|
%
| |
13.5
|
%
| |
32.0
|
%
| |
17.4
|
%
| |
5.5
|
%
| |
15.9
|
%
|
|
Combined ratio
| |
99.3
|
%
| |
78.5
|
%
| |
48.8
|
%
| |
88.3
|
%
| |
103.4
|
%
| |
90.2
|
%
|
| | | | | | | | | | | |
|
|
Net premiums written to gross premiums written
| |
65.8
|
%
| |
74.5
|
%
| |
67.2
|
%
| |
68.2
|
%
| |
94.6
|
%
| |
75.5
|
%
|
|
(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.
|
|
|
Cautionary Note Regarding Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 (“PSLRA”) provides
a “safe harbor” for forward-looking statements. This release or any
other written or oral statements made by or on behalf of the Company 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, for purposes of the PSLRA or
otherwise, can generally be identified by the use of forward-looking
terminology such as “may,” “will,” “expect,” “intend,” “estimate,”
“anticipate,” “believe” or “continue” and similar statements of a future
or forward-looking nature 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. Important factors
that could cause actual events or results to differ materially from
those indicated in such statements are discussed below and elsewhere in
this release and in the Company’s periodic reports filed with the
Securities and Exchange Commission (the “SEC”), and include:
-
the Company’s ability to successfully implement its business strategy
during “soft” as well as “hard” markets;
-
acceptance of the Company’s business strategy, security and financial
condition by rating agencies and regulators, as well as by brokers and
its insureds and reinsureds;
-
the integration of United Guaranty Corporation and any other
businesses the Company has acquired or may acquire into its existing
operations;
-
the Company’s ability to maintain or improve its ratings, which may be
affected by its ability to raise additional equity or debt financings,
by ratings agencies’ existing or new policies and practices, as well
as other factors described herein;
-
general economic and market conditions (including inflation, interest
rates, foreign currency exchange rates, prevailing credit terms and
the depth and duration of a recession) and conditions specific to the
reinsurance and insurance markets (including the length and magnitude
of the current “soft” market) in which the Company operates;
-
competition, including increased competition, on the basis of pricing,
capacity (including alternative sources of capital), coverage terms or
other factors;
-
developments in the world’s financial and capital markets and the
Company’s access to such markets;
-
the Company’s ability to successfully enhance, integrate and maintain
operating procedures (including information technology) to effectively
support its current and new business;
-
the loss of key personnel;
-
accuracy of those estimates and judgments utilized in the preparation
of the Company’s financial statements, including those related to
revenue recognition, insurance and other reserves, reinsurance
recoverables, investment valuations, intangible assets, bad debts,
income taxes, contingencies and litigation, and any determination to
use the deposit method of accounting, which for a relatively new
insurance and reinsurance company, like the Company, are even more
difficult to make than those made in a mature company since relatively
limited historical information has been reported to the Company
through December 31, 2017;
-
greater than expected loss ratios on business written by the Company
and adverse development on claim and/or claim expense liabilities
related to business written by its insurance and reinsurance
subsidiaries;
-
severity and/or frequency of losses;
-
claims resulting from natural or man-made catastrophic events in the
Company’s insurance, reinsurance and mortgage businesses could cause
large losses and substantial volatility in our results of operations;
-
acts of terrorism, political unrest and other hostilities or other
unforecasted and unpredictable events;
-
availability to the Company of reinsurance to manage its gross and net
exposures and the cost of such reinsurance;
-
the failure of reinsurers, managing general agents, third party
administrators or others to meet their obligations to the Company;
-
the timing of loss payments being faster or the receipt of reinsurance
recoverables being slower than anticipated by the Company;
-
the Company’s investment performance, including legislative or
regulatory developments that may adversely affect the fair value of
the Company’s investments;
-
changes in general economic conditions, including new or continued
sovereign debt concerns in Eurozone countries or downgrades of U.S.
securities by credit rating agencies, which could affect the Company’s
business, financial condition and results of operations;
-
the volatility of the Company’s shareholders’ equity from foreign
currency fluctuations, which could increase due to us not matching
portions of the Company’s projected liabilities in foreign currencies
with investments in the same currencies;
-
losses relating to aviation business and business produced by a
certain managing underwriting agency for which the Company may be
liable to the purchaser of its prior reinsurance business or to others
in connection with the May 5, 2000 asset sale described in the
Company’s periodic reports filed with the SEC;
-
changes in accounting principles or policies or in the Company’s
application of such accounting principles or policies;
-
changes in the political environment of certain countries in which the
Company operates, underwrites business or invests;
-
statutory or regulatory developments, including as to tax policy
matters and insurance and other regulatory matters such as the
adoption of proposed legislation that would affect
Bermuda-headquartered companies and/or Bermuda-based insurers or
reinsurers and/or changes in regulations or tax laws applicable to the
Company, its subsidiaries, brokers or customers, including the
recently enacted Tax Cuts and Jobs Act of 2017; and
-
the other matters set forth under Item 1A “Risk Factors”, Item 7
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations” and other sections of the Company’s Annual
Report on Form 10-K, as well as the other factors set forth in the
Company’s other documents on file with the SEC, and management’s
response to any of the aforementioned factors.
All subsequent written and oral forward-looking statements attributable
to the Company or persons acting on its behalf are expressly qualified
in their entirety by these cautionary statements. 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. 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.
View source version on businesswire.com: http://www.businesswire.com/news/home/20180212006276/en/
Arch Capital Group Ltd.
Mark D. Lyons, 441-278-9250
or
Investor
Relations
Donald Watson, 914-872-3616
dwatson@archcapservices.com
Source: Arch Capital Group Ltd.