PEMBROKE, Bermuda--(BUSINESS WIRE)--
Arch Capital Group Ltd. (NASDAQ:ACGL) announces its 2018 third quarter
results. The results included:
-
Net income available to Arch common shareholders of $217.0 million, or
$0.53 per share, a 10.2% annualized return on average common equity,
compared to a net loss of $52.8 million, or $0.13 per share, for the
2017 third quarter;
-
After-tax operating income available to Arch common shareholders, a
non-GAAP measure, of $242.3 million, or $0.59 per share, an 11.4%
annualized return on average common equity, compared to a net loss of
$107.1 million, or $0.26 per share, for the 2017 third quarter;
-
Pre-tax current accident year catastrophic losses, net of reinsurance
and reinstatement premiums(1), of $58.2 million, primarily
related to Hurricane Florence and Typhoon Jebi;
-
Favorable development in prior year loss reserves, net of related
adjustments(1), of $77.6 million;
-
Combined ratio excluding catastrophic activity and prior year
development(1) of 81.8%;
-
Book value per common share of $21.15 at September 30, 2018, a 2.3%
increase in the 2018 third quarter and a 6.4% increase for the
trailing twelve months;
-
Share repurchases of $11.0 million.
All earnings per share amounts discussed in this release are on a
diluted basis. The following table summarizes the Company’s underwriting
results, both (i) on a consolidated basis and (ii) on a consolidated
basis excluding the ‘other’ segment (i.e., results of Watford Re,
as defined below):
|
(U.S. dollars in thousands)
|
|
|
| Consolidated | |
|
| Consolidated Excluding ‘Other’ Segment (1) |
|
| | | | Three Months Ended September 30, | | | | Three Months Ended September 30, |
|
| | | | 2018 |
|
| 2017 |
|
| % Change | | | | 2018 |
|
| 2017 |
|
| % Change |
|
|
Gross premiums written
| | | |
$
|
1,731,328
| | | |
$
|
1,648,246
| | | |
5.0
| | | |
$
|
1,622,532
| | | |
$
|
1,557,179
| | | |
4.2
| |
|
Net premiums written
| | | |
1,333,553
| | | |
1,325,403
| | | |
0.6
| | | |
1,181,876
| | | |
1,171,676
| | | |
0.9
| |
|
Net premiums earned
| | | |
1,290,878
| | | |
1,261,886
| | | |
2.3
| | | |
1,155,255
| | | |
1,133,256
| | | |
1.9
| |
|
Underwriting income (loss)
| | | |
234,581
| | | |
(142,172
|
)
| | |
n/m
| | | |
234,790
| | | |
(107,617
|
)
| | |
n/m
| |
| Underwriting Ratios | | | | | | | | | | % Point Change | | | | | | | | | | % Point Change |
|
|
Loss ratio
| | | |
54.2
|
%
| | |
82.9
|
%
| | |
(28.7
|
)
| | |
52.1
|
%
| | |
81.4
|
%
| | |
(29.3
|
)
|
|
Underwriting expense ratio
| | | |
28.1
|
%
| | |
28.9
|
%
| | |
(0.8
|
)
| | |
28.0
|
%
| | |
28.6
|
%
| | |
(0.6
|
)
|
|
Combined ratio
| | | |
82.3
|
%
| | |
111.8
|
%
| | |
(29.5
|
)
| | |
80.1
|
%
| | |
110.0
|
%
| | |
(29.9
|
)
|
|
Combined ratio excluding catastrophic activity and prior year
development
| | | | | | | | | | | | | |
81.8
|
%
| | |
84.4
|
%
| | |
(2.6
|
)
|
|
(1)
|
|
Excluding the ‘other’ segment. See ‘Comments on Regulation G’ for
further details.
|
| |
|
Pursuant to GAAP, the Company consolidates the results of Watford
Holdings Ltd. in its financial statements, although it only owns
approximately 11% of Watford Holdings Ltd.’s common equity. Watford
Holdings Ltd. is the parent of Watford Re Ltd., a multi-line Bermuda
reinsurance company (together with Watford Holdings Ltd., “Watford Re”).
See ‘Comments on Regulation G’ for further details.
In addition, the Company estimates that its 2018 fourth quarter results
will be negatively impacted by Hurricane Michael, which occurred in
October 2018, in the range of $40 million to $60 million, net of
reinsurance and reinstatement premiums. This pre-tax preliminary loss
estimate is based on industry insured losses ranging from $7 billion to
$10 billion. The Company’s preliminary estimate for Hurricane Michael is
based on currently available information derived from modeling
techniques, industry assessments of exposure, preliminary claims
information obtained from the Company’s clients and brokers to date and
a review of in-force contracts. The Company’s actual losses from this
event may vary materially from the estimates due to the inherent
uncertainties in making such determinations resulting from several
factors, including the preliminary nature of available information, the
potential inaccuracies and inadequacies in the data provided by clients
and brokers, the modeling techniques and the application of such
techniques, the contingent nature of business interruption exposures,
the effects of any resultant demand surge on claims activity and
attendant coverage issues. In addition, actual losses may increase if
the Company’s reinsurers fail to meet their obligations to the Company
or the reinsurance protections purchased by the Company are exhausted or
are otherwise unavailable.
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 |
|
| Nine Months Ended |
| | | | September 30, | | | September 30, |
| | | | 2018 |
|
| 2017 | | | 2018 |
|
| 2017 |
|
Net income (loss) available to Arch common shareholders
| | | |
$
|
217,006
| | | |
$
|
(52,760
|
)
| | |
$
|
587,525
| | | |
$
|
362,967
| |
|
Net realized (gains) losses
| | | |
47,528
| | | |
(64,344
|
)
| | |
220,718
| | | |
(111,930
|
)
|
|
Net impairment losses recognized in earnings
| | | |
492
| | | |
1,878
| | | |
1,124
| | | |
5,415
| |
|
Equity in net (income) loss of investment funds accounted for using
the equity method
| | | |
(15,982
|
)
| | |
(31,090
|
)
| | |
(52,523
|
)
| | |
(111,884
|
)
|
|
Net foreign exchange (gains) losses
| | | |
(7,539
|
)
| | |
27,811
| | | |
(39,021
|
)
| | |
85,619
| |
|
Transaction costs and other
| | | |
1,091
| | | |
2,990
| | | |
8,829
| | | |
21,249
| |
|
Loss on redemption of preferred shares
| | | |
—
| | | |
6,735
| | | |
2,710
| | | |
6,735
| |
|
Income tax expense (benefit) (1)
| | | |
(316
|
)
| | |
1,647
|
| | |
(9,343
|
)
| | |
1,580
|
|
|
After-tax operating income (loss) available to Arch common
shareholders
| | | |
$
|
242,280
|
| | |
$
|
(107,133
|
)
| | |
$
|
720,019
|
| | |
$
|
259,751
|
|
| | | | | | | | | | | | |
|
Diluted per common share results: | | | | | | | | | | | | | |
|
Net income (loss) available to Arch common shareholders
| | | |
$
|
0.53
| | | |
$
|
(0.13
|
)
| | |
$
|
1.42
| | | |
$
|
0.87
| |
|
Net realized (gains) losses
| | | |
0.12
| | | |
(0.15
|
)
| | |
0.53
| | | |
(0.26
|
)
|
|
Net impairment losses recognized in earnings
| | | |
0.00
| | | |
0.00
| | | |
0.00
| | | |
0.01
| |
|
Equity in net (income) loss of investment funds accounted for using
the equity method
| | | |
(0.04
|
)
| | |
(0.08
|
)
| | |
(0.13
|
)
| | |
(0.27
|
)
|
|
Net foreign exchange (gains) losses
| | | |
(0.02
|
)
| | |
0.07
| | | |
(0.09
|
)
| | |
0.20
| |
|
Transaction costs and other
| | | |
0.00
| | | |
0.01
| | | |
0.02
| | | |
0.05
| |
|
Loss on redemption of preferred shares
| | | |
—
| | | |
0.02
| | | |
0.01
| | | |
0.02
| |
|
Income tax expense (benefit) (1)
| | | |
0.00
|
| | |
0.00
|
| | |
(0.02
|
)
| | |
0.00
|
|
|
After-tax operating income (loss) available to Arch common
shareholders
| | | |
$
|
0.59
|
| | |
$
|
(0.26
|
)
| | |
$
|
1.74
|
| | |
$
|
0.62
|
|
| | | | | | | | | | | | |
|
|
Weighted average common shares and common share equivalents
outstanding — diluted (2)
| | | |
411,721,214
| | | |
404,656,353
| | | |
413,993,192
| | | |
417,666,972
| |
| | | | | | | | | | | | |
|
|
Beginning common shareholders’ equity
| | | |
$
|
8,383,755
| | | |
$
|
8,126,332
| | | |
$
|
8,324,047
| | | |
$
|
7,481,163
| |
|
Ending common shareholders’ equity
| | | |
8,575,148
|
| | |
8,138,589
|
| | |
8,575,148
|
| | |
8,138,589
|
|
|
Average common shareholders’ equity
| | | |
$
|
8,479,452
|
| | |
$
|
8,132,461
|
| | |
$
|
8,449,598
|
| | |
$
|
7,809,876
|
|
| | | | | | | | | | | | |
|
|
Annualized return on average common equity
| | | |
10.2
|
%
| | |
(2.6
|
)%
| | |
9.3
|
%
| | |
6.2
|
%
|
|
Annualized operating return on average common equity
| | | |
11.4
|
%
| | |
(5.3
|
)%
| | |
11.4
|
%
| | |
4.4
|
%
|
|
(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, 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.
|
|
(2)
| |
Due to the net loss recorded in the 2017 third quarter, diluted
weighted average common shares and common share equivalents
outstanding for such period do not include the effect of dilutive
securities since the inclusion of such securities is anti-dilutive
to per share results. Due to the net gain reported for all other
periods presented, weighted average common shares and common share
equivalents outstanding for such periods reflect the effect of
dilutive securities.
|
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 2018 third
quarter performance by operating segment.For additional details
regarding the Company’s operating segments, please refer to the
Company’s Financial Supplement dated September 30, 2018. The Company’s
segment information includes the use of underwriting income (loss) and a
combined ratio excluding catastrophic activity (if applicable for the
segment) and prior year development. Such items are non-GAAP financial
measures (see ‘Comments on Regulation G’ for further details).
Insurance Segment |
|
|
| | |
| | | | Three Months Ended September 30, |
|
|
(U.S. dollars in thousands)
| | | | 2018 |
|
| 2017 |
|
| % Change |
|
| | | | | | | | | | |
|
|
Gross premiums written
| | | |
$
|
836,820
| | | |
$
|
787,447
| | | |
6.3
| |
|
Net premiums written
| | | |
576,852
| | | |
564,931
| | | |
2.1
| |
|
Net premiums earned
| | | |
561,058
| | | |
535,165
| | | |
4.8
| |
| | | | | | | | | | |
|
|
Underwriting income (loss)
| | | |
$
|
(26,713
|
)
| | |
$
|
(207,143
|
)
| | |
n/m
| |
| | | | | | | | | | |
|
| Underwriting Ratios | | | | | | | | | | % Point Change |
|
|
Loss ratio
| | | |
73.0
|
%
| | |
106.3
|
%
| | |
(33.3
|
)
|
|
Underwriting expense ratio
| | | |
31.8
|
%
| | |
32.4
|
%
| | |
(0.6
|
)
|
|
Combined ratio
| | | |
104.8
|
%
| | |
138.7
|
%
| | |
(33.9
|
)
|
| | | | | | | | | | |
|
|
Catastrophic activity and prior year development:
| | | | | | | | | | | |
|
Current accident year catastrophic events, net of reinsurance and
reinstatement premiums
| | | |
5.8
|
%
| | |
40.1
|
%
| | |
(34.3
|
)
|
|
Net (favorable) adverse development in prior year loss reserves, net
of related adjustments
| | | |
(1.2
|
)%
| | |
(0.3
|
)%
| | |
(0.9
|
)
|
|
Combined ratio excluding catastrophic activity and prior year
development (1)
| | | |
100.2
|
%
| | |
98.9
|
%
| | |
1.3
|
|
|
(1)
|
|
See ‘Comments on Regulation G’ for further discussion.
|
| |
|
Gross premiums written by the insurance segment in the 2018 third
quarter were 6.3% higher than in the 2017 third quarter while net
premiums written were 2.1% higher than in the 2017 third quarter. The
increase in net premiums written reflected growth in travel insurance,
due to both new business and growth in existing accounts, and in
property, primarily due to new business and rate increases. Net premiums
earned by the insurance segment in the 2018 third quarter were 4.8%
higher than in the 2017 third quarter, and reflect changes in net
premiums written over the previous five quarters.
The 2018 third quarter loss ratio reflected 5.8 points for current year
catastrophic activity, primarily related to Hurricane Florence, compared
to 40.1 points in the 2017 third quarter, primarily related to
Hurricanes Harvey, Irma and Maria. Estimated net favorable development
in prior year loss reserves, before related adjustments, reduced the
loss ratio by 1.1 points in the 2018 third quarter, compared to 0.6
points in the 2017 third quarter. The balance of the change in the 2018
third quarter loss ratio resulted, in part, from a higher level of large
attritional losses.
The underwriting expense ratio was 31.8% in the 2018 third quarter,
compared to 32.4% in the 2017 third quarter, reflecting changes in the
mix and type of business.
Reinsurance Segment |
|
|
| | |
| | | | Three Months Ended September 30, |
|
|
(U.S. dollars in thousands)
| | | | 2018 |
|
| 2017 |
|
| % Change |
|
| | | | | | | | | | |
|
|
Gross premiums written
| | | |
$
|
435,396
| | | |
$
|
422,083
| | | |
3.2
| |
|
Net premiums written
| | | |
311,691
| | | |
316,694
| | | |
(1.6
|
)
|
|
Net premiums earned
| | | |
293,273
| | | |
323,573
| | | |
(9.4
|
)
|
|
Other underwriting income (loss)
| | | |
1,387
| | | |
1,728
| | | |
(19.7
|
)
|
| | | | | | | | | | |
|
|
Underwriting income (loss)
| | | |
$
|
30,944
| | | |
$
|
(86,862
|
)
| | |
n/m
| |
| | | | | | | | | | |
|
| Underwriting Ratios | | | | | | | | | | % Point Change |
|
|
Loss ratio
| | | |
62.5
|
%
| | |
98.5
|
%
| | |
(36.0
|
)
|
|
Underwriting expense ratio
| | | |
27.4
|
%
| | |
28.9
|
%
| | |
(1.5
|
)
|
|
Combined ratio
| | | |
89.9
|
%
| | |
127.4
|
%
| | |
(37.5
|
)
|
| | | | | | | | | | |
|
|
Catastrophic activity and prior year development:
| | | | | | | | | | | |
|
Current accident year catastrophic events, net of reinsurance and
reinstatement premiums
| | | |
8.7
|
%
| | |
41.2
|
%
| | |
(32.5
|
)
|
|
Net (favorable) adverse development in prior year loss reserves, net
of related adjustments
| | | |
(11.3
|
)%
| | |
(10.7
|
)%
| | |
(0.6
|
)
|
|
Combined ratio excluding catastrophic activity and prior year
development (1)
| | | |
92.5
|
%
| | |
96.9
|
%
| | |
(4.4
|
)
|
|
(1)
|
|
See ‘Comments on Regulation G’ for further discussion.
|
| |
|
Gross premiums written by the reinsurance segment in the 2018 third
quarter were 3.2% higher than in the 2017 third quarter, while net
premiums written were 1.6% lower than in the 2017 third quarter. The
lower change in net premiums written primarily reflects an increase in
retrocessions on other specialty and casualty lines. Net premiums
written for the 2018 third quarter reflected declines in property
catastrophe and casualty lines, partially offset by growth in property
excluding property catastrophe business, primarily due to new accounts.
The reduction in property catastrophe net premiums written primarily
related to a lower level of reinstatement premiums, as the 2017 third
quarter included $15.8 million related to Hurricanes Harvey, Irma and
Maria. The decline in casualty net premiums written was mostly due to
the one-time impact of a retroactive reinsurance contract of $45.4
million recorded in the 2017 third quarter, which was substantially
earned in that period with a corresponding increase in losses and loss
adjustment expenses. A portion of the premium reduction in this line was
offset by new business opportunities in the 2018 third quarter. Net
premiums earned reflect the retroactive reinsurance contract and
reinstatement premium impacts discussed above, as well as changes in net
premiums written over the previous five quarters.
The 2018 third quarter loss ratio included 9.5 points of current year
catastrophic activity, primarily related to Hurricane Florence and
Typhoon Jebi, compared to 46.3 points of catastrophic activity in the
2017 third quarter, primarily related to Hurricanes Harvey, Irma and
Maria. Estimated net favorable development in prior year loss reserves,
before related adjustments, reduced the loss ratio by 11.7 points in the
2018 third quarter, compared to 11.3 points in the 2017 third quarter.
The estimated net favorable development in the 2018 third 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 underwriting expense ratio was 27.4% in the 2018 third quarter,
compared to 28.9% in the 2017 third quarter, reflecting the non-renewal
of certain reinsurance agreements between the Company’s U.S.-based
insurance and reinsurance subsidiaries and Arch Reinsurance Ltd. as of
January 1, 2018, which reduced federal excise taxes incurred by $2.3
million, or 0.8 points, and changes in the mix and type of business.
Mortgage Segment |
|
|
| |
| | | | Three Months Ended September 30, |
|
(U.S. dollars in thousands)
| | | | 2018 |
|
| 2017 |
|
| % Change |
| | | | | | | | | |
|
|
Gross premiums written
| | | |
$
|
350,559
| | | |
$
|
347,951
| | | |
0.7
| |
|
Net premiums written
| | | |
293,333
| | | |
290,051
| | | |
1.1
| |
|
Net premiums earned
| | | |
300,924
| | | |
274,518
| | | |
9.6
| |
|
Other underwriting income
| | | |
3,733
| | | |
3,599
| | | |
3.7
| |
| | | | | | | | | |
|
|
Underwriting income
| | | |
$
|
230,559
| | | |
$
|
186,388
| | | |
23.7
| |
| | | | | | | | | |
|
| Underwriting Ratios | | | | | | | | | | % Point Change |
|
Loss ratio
| | | |
3.2
|
%
| | |
12.8
|
%
| | |
(9.6
|
)
|
|
Underwriting expense ratio
| | | |
21.4
|
%
| | |
20.6
|
%
| | |
0.8
|
|
|
Combined ratio
| | | |
24.6
|
%
| | |
33.4
|
%
| | |
(8.8
|
)
|
| | | | | | | | | |
|
|
Prior year development:
| | | | | | | | | | |
|
Net (favorable) adverse development in prior year loss reserves, net
of related adjustments
| | | |
(12.5
|
)%
| | |
(7.8
|
)%
| | |
(4.7
|
)
|
|
Combined ratio excluding prior year development (1)
| | | |
37.1
|
%
| | |
41.2
|
%
| | |
(4.1
|
)
|
|
(1)
|
|
See ‘Comments on Regulation G’ for further discussion.
|
| |
|
Gross premiums written by the mortgage segment in the 2018 third quarter
were 0.7% higher than in the 2017 third quarter, while net premiums
written were 1.1% higher than in the 2017 third quarter. The growth in
gross premiums written primarily reflected an increase in U.S. monthly
premium business and government sponsored enterprise (“GSE”) credit-risk
sharing transactions, partially offset by a lower level of U.S. single
premium business and a decrease in Australian mortgage reinsurance
business. Net premiums written for the 2018 third quarter reflected a
higher level of ceded premiums related to the new Bellemeade transaction
in the 2018 third quarter, while the 2017 third quarter reflected higher
retrocessions of Australian mortgage reinsurance business. The increase
in net premiums earned for the 2018 third quarter primarily reflected
the growth in insurance in force in the U.S. over the last twelve
months. Insurance in force increased to $372.8 billion at September 30,
2018, compared to $346.2 billion at September 30, 2017.
Arch MI U.S. generated $21.4 billion of new insurance written (“NIW”) in
the 2018 third quarter, compared to $17.7 billion in the 2017 third
quarter, as a higher level of purchase market activity more than offset
a reduction in single premium business. Monthly premium policies
contributed 92.6% of NIW in the 2018 third quarter, compared to 87.0% in
the 2017 third quarter.
The loss ratio for the 2018 third quarter reflected 2.8 points of
favorable current year development on delinquencies from the first half
of 2018 which cured in the period, and estimated net favorable
development in prior year loss reserves, before related adjustments, of
12.8 points, compared to 7.8 points in the 2017 third quarter. The
estimated net favorable development in the 2018 third quarter was
primarily driven by lower than expected claim rates on first lien
business and subrogation activity on second lien business. The
percentage of loans in default on first lien business decreased to 1.60%
at September 30, 2018, from 1.70% at June 30, 2018.
The mortgage segment’s underwriting expense ratio was 21.4% in the 2018
third quarter, compared to 20.6% in the 2017 third quarter, reflecting a
higher level of acquisition expenses due to higher NIW and a lower level
of other operating expenses.
At September 30, 2018, the mortgage segment’s risk-in-force (before
reinsurance) of $75.5 billion consisted of $69.8 billion from Arch MI
U.S. with the remainder from reinsurance and credit-risk sharing
operations. For additional information on the mortgage segment, please
refer to the Company’s Financial Supplement dated September 30, 2018.
Corporate and Non-Underwriting
Corporate and non-underwriting results include net investment income,
other income (loss), corporate expenses, 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.
Pre-tax net investment income for the 2018 third quarter was $0.28 per
share, or $114.3 million, compared to $0.23 per share, or $94.1 million,
for the 2017 third quarter. The 2018 third quarter net investment income
reflected the reinvestment of fixed income securities at higher
available yields and a shift from municipal bonds to corporates. The
annualized pre-tax investment income yield was 2.45% for the 2018 third
quarter, compared to 2.00% for the 2017 third quarter.
Amortization of intangible assets for the 2018 third quarter was $26.3
million, compared to $31.8 million for the 2017 third quarter. Amounts
in both periods primarily related to amortization of finite-lived
intangible assets related to the UGC acquisition, as disclosed in the
Company’s Form 10-K.
Interest expense for the 2018 third quarter was $24.7 million, compared
to $26.3 million for the 2017 third quarter, reflecting the lower
revolving credit agreement borrowings outstanding partially offset by
higher borrowing costs. Preferred dividends for the 2018 third quarter
were $10.4 million, compared to $12.4 million for the 2017 third quarter.
On a pre-tax basis, net foreign exchange gains for the 2018 third
quarter were $7.1 million, compared to net foreign exchange losses for
the 2017 third quarter of $27.8 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 12.8% for the 2018 third
quarter, while the effective tax rate on pre-tax operating income
available to Arch common shareholders was 11.8% for the 2018 third
quarter. The effective tax rates for the 2018 third quarter included a
discrete income tax expense of $5.6 million which had the effect of
increasing the 2018 third quarter effective tax rate on operating income
available to Arch common shareholders by 1.9%. The discrete tax item in
the 2018 third quarter primarily relates to the Company’s change in
judgment regarding the realizability of certain deferred tax assets,
partially offset by tax benefits associated with share-based
compensation. The Company’s effective tax rate fluctuates from period to
period 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. The Company currently expects
that its annual effective tax rate on pre-tax operating income available
to Arch common shareholders for the year ended December 31, 2018 will be
in the range of 9% to 12%.
Conference Call
The Company will hold a conference call for investors and analysts at
11:00 a.m. Eastern Time on October 31, 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 October 31, 2018 at 2:00 p.m. Eastern Time until November
7, 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 4079781 for all callers).
Please refer to the Company’s Financial Supplement dated September 30,
2018, 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
$11.21 billion in capital at September 30, 2018, 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, 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, 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. transaction costs and other include advisory, financing,
legal, severance, incentive compensation and other 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 C
preferred shares in January 2018 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, 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.
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 (if applicable for the
segment) and prior year development. 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
2018 third quarter and 2017 third 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 |
| | | | | September 30, 2018 |
| | | | | Insurance |
|
| Reinsurance |
|
| Mortgage |
|
| Sub-total |
|
| Other |
|
| Total |
|
Gross premiums written (1)
| | | | |
$
|
836,820
| | | |
$
|
435,396
| | | |
$
|
350,559
| | | |
$
|
1,622,532
| | | |
$
|
185,033
| | | |
$
|
1,731,328
| |
|
Premiums ceded
| | | | |
(259,968
|
)
| | |
(123,705
|
)
| | |
(57,226
|
)
| | |
(440,656
|
)
| | |
(33,356
|
)
| | |
(397,775
|
)
|
|
Net premiums written
| | | | |
576,852
| | | |
311,691
| | | |
293,333
| | | |
1,181,876
| | | |
151,677
| | | |
1,333,553
| |
|
Change in unearned premiums
| | | | |
(15,794
|
)
| | |
(18,418
|
)
| | |
7,591
|
| | |
(26,621
|
)
| | |
(16,054
|
)
| | |
(42,675
|
)
|
|
Net premiums earned
| | | | |
561,058
| | | |
293,273
| | | |
300,924
| | | |
1,155,255
| | | |
135,623
| | | |
1,290,878
| |
|
Other underwriting income
| | | | |
—
| | | |
1,387
| | | |
3,733
| | | |
5,120
| | | |
703
| | | |
5,823
| |
|
Losses and loss adjustment expenses
| | | | |
(409,435
|
)
| | |
(183,413
|
)
| | |
(9,615
|
)
| | |
(602,463
|
)
| | |
(96,957
|
)
| | |
(699,420
|
)
|
|
Acquisition expenses
| | | | |
(88,255
|
)
| | |
(50,367
|
)
| | |
(33,361
|
)
| | |
(171,983
|
)
| | |
(29,619
|
)
| | |
(201,602
|
)
|
|
Other operating expenses
| | | | |
(90,081
|
)
| | |
(29,936
|
)
| | |
(31,122
|
)
| | |
(151,139
|
)
| | |
(9,959
|
)
| | |
(161,098
|
)
|
|
Underwriting income (loss)
| | | | |
$
|
(26,713
|
)
| | |
$
|
30,944
|
| | |
$
|
230,559
|
| | |
234,790
| | | |
(209
|
)
| | |
234,581
| |
| | | | | | | | | | | | | | | | | | | |
|
|
Net investment income
| | | | | | | | | | | | | |
114,328
| | | |
29,696
| | | |
144,024
| |
|
Net realized gains (losses)
| | | | | | | | | | | | | |
(47,010
|
)
| | |
(4,695
|
)
| | |
(51,705
|
)
|
|
Net impairment losses recognized in earnings
| | | | | | | | | | | | | |
(492
|
)
| | |
—
| | | |
(492
|
)
|
|
Equity in net income (loss) of investment funds accounted for using
the equity method
| | | | | | | | | | | | | |
15,982
| | | |
—
| | | |
15,982
| |
|
Other income
| | | | | | | | | | | | | |
(726
|
)
| | |
—
| | | |
(726
|
)
|
|
Corporate expenses
| | | | | | | | | | | | | |
(13,244
|
)
| | |
—
| | | |
(13,244
|
)
|
|
Transaction costs and other
| | | | | | | | | | | | | |
(1,091
|
)
| | |
—
| | | |
(1,091
|
)
|
|
Amortization of intangible assets
| | | | | | | | | | | | | |
(26,315
|
)
| | |
—
| | | |
(26,315
|
)
|
|
Interest expense
| | | | | | | | | | | | | |
(24,666
|
)
| | |
(5,064
|
)
| | |
(29,730
|
)
|
|
Net foreign exchange gains (losses)
| | | | | | | | | | | | | |
7,130
|
| | |
3,708
|
| | |
10,838
|
|
| Income before income taxes | | | | | | | | | | | | | |
258,686
| | | |
23,436
| | | |
282,122
| |
|
Income tax expense
| | | | | | | | | | | | | |
(33,356
|
)
| | |
—
|
| | |
(33,356
|
)
|
| Net income | | | | | | | | | | | | | |
225,330
| | | |
23,436
| | | |
248,766
| |
|
Dividends attributable to redeemable noncontrolling interests
| | | | | | | | | | | | | |
—
| | | |
(4,599
|
)
| | |
(4,599
|
)
|
|
Amounts attributable to nonredeemable noncontrolling interests
| | | | | | | | | | | | | |
—
|
| | |
(16,759
|
)
| | |
(16,759
|
)
|
| Net income available to Arch | | | | | | | | | | | | | |
225,330
| | | |
2,078
| | | |
227,408
| |
|
Preferred dividends
| | | | | | | | | | | | | |
(10,402
|
)
| | |
—
|
| | |
(10,402
|
)
|
| Net income available to Arch common shareholders | | | | | | | | | | | | | |
$
|
214,928
|
| | |
$
|
2,078
|
| | |
$
|
217,006
|
|
| | | | | | | | | | | | | | | | | | | |
|
| Underwriting Ratios | | | | | | | | | | | | | | | | | | | | |
|
Loss ratio
| | | | |
73.0
|
%
| | |
62.5
|
%
| | |
3.2
|
%
| | |
52.1
|
%
| | |
71.5
|
%
| | |
54.2
|
%
|
|
Acquisition expense ratio
| | | | |
15.7
|
%
| | |
17.2
|
%
| | |
11.1
|
%
| | |
14.9
|
%
| | |
21.8
|
%
| | |
15.6
|
%
|
|
Other operating expense ratio
| | | | |
16.1
|
%
| | |
10.2
|
%
| | |
10.3
|
%
| | |
13.1
|
%
| | |
7.3
|
%
| | |
12.5
|
%
|
|
Combined ratio
| | | | |
104.8
|
%
| | |
89.9
|
%
| | |
24.6
|
%
| | |
80.1
|
%
| | |
100.6
|
%
| | |
82.3
|
%
|
| | | | | | | | | | | | | | | | | | | |
|
|
Net premiums written to gross premiums written
| | | | |
68.9
|
%
| | |
71.6
|
%
| | |
83.7
|
%
| | |
72.8
|
%
| | |
82.0
|
%
| | |
77.0
|
%
|
|
(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 |
| | | | | September 30, 2017 |
| | | | | Insurance |
|
| Reinsurance |
|
| Mortgage |
|
| Sub-total |
|
| Other |
|
| Total |
|
Gross premiums written (1)
| | | | |
$
|
787,447
| | | |
$
|
422,083
| | | |
$
|
347,951
| | | |
$
|
1,557,179
| | | |
$
|
166,198
| | | |
$
|
1,648,246
| |
|
Premiums ceded
| | | | |
(222,516
|
)
| | |
(105,389
|
)
| | |
(57,900
|
)
| | |
(385,503
|
)
| | |
(12,471
|
)
| | |
(322,843
|
)
|
|
Net premiums written
| | | | |
564,931
| | | |
316,694
| | | |
290,051
| | | |
1,171,676
| | | |
153,727
| | | |
1,325,403
| |
|
Change in unearned premiums
| | | | |
(29,766
|
)
| | |
6,879
|
| | |
(15,533
|
)
| | |
(38,420
|
)
| | |
(25,097
|
)
| | |
(63,517
|
)
|
|
Net premiums earned
| | | | |
535,165
| | | |
323,573
| | | |
274,518
| | | |
1,133,256
| | | |
128,630
| | | |
1,261,886
| |
|
Other underwriting income (loss)
| | | | |
—
| | | |
1,728
| | | |
3,599
| | | |
5,327
| | | |
737
| | | |
6,064
| |
|
Losses and loss adjustment expenses
| | | | |
(568,795
|
)
| | |
(318,609
|
)
| | |
(35,156
|
)
| | |
(922,560
|
)
| | |
(123,581
|
)
| | |
(1,046,141
|
)
|
|
Acquisition expenses
| | | | |
(82,638
|
)
| | |
(57,340
|
)
| | |
(21,803
|
)
| | |
(161,781
|
)
| | |
(32,073
|
)
| | |
(193,854
|
)
|
|
Other operating expenses
| | | | |
(90,875
|
)
| | |
(36,214
|
)
| | |
(34,770
|
)
| | |
(161,859
|
)
| | |
(8,268
|
)
| | |
(170,127
|
)
|
|
Underwriting income (loss)
| | | | |
$
|
(207,143
|
)
| | |
$
|
(86,862
|
)
| | |
$
|
186,388
|
| | |
(107,617
|
)
| | |
(34,555
|
)
| | |
(142,172
|
)
|
| | | | | | | | | | | | | | | | | | | |
|
|
Net investment income
| | | | | | | | | | | | | |
94,127
| | | |
22,332
| | | |
116,459
| |
|
Net realized gains (losses)
| | | | | | | | | | | | | |
64,104
| | | |
2,171
| | | |
66,275
| |
|
Net impairment losses recognized in earnings
| | | | | | | | | | | | | |
(1,878
|
)
| | |
—
| | | |
(1,878
|
)
|
|
Equity in net income (loss) of investment funds accounted for using
the equity method
| | | | | | | | | | | | | |
31,090
| | | |
—
| | | |
31,090
| |
|
Other income (loss)
| | | | | | | | | | | | | |
(342
|
)
| | |
—
| | | |
(342
|
)
|
|
Corporate expenses
| | | | | | | | | | | | | |
(14,108
|
)
| | |
—
| | | |
(14,108
|
)
|
|
Transaction costs and other
| | | | | | | | | | | | | |
(2,990
|
)
| | |
—
| | | |
(2,990
|
)
|
|
Amortization of intangible assets
| | | | | | | | | | | | | |
(31,824
|
)
| | |
—
| | | |
(31,824
|
)
|
|
Interest expense
| | | | | | | | | | | | | |
(26,264
|
)
| | |
(3,246
|
)
| | |
(29,510
|
)
|
|
Net foreign exchange gains (losses)
| | | | | | | | | | | | | |
(27,785
|
)
| | |
(243
|
)
| | |
(28,028
|
)
|
| Income (loss) before income taxes | | | | | | | | | | | | | |
(23,487
|
)
| | |
(13,541
|
)
| | |
(37,028
|
)
|
|
Income tax (expense) benefit
| | | | | | | | | | | | | |
(8,168
|
)
| | |
(21
|
)
| | |
(8,189
|
)
|
| Net income (loss) | | | | | | | | | | | | | |
(31,655
|
)
| | |
(13,562
|
)
| | |
(45,217
|
)
|
|
Dividends attributable to redeemable noncontrolling interests
| | | | | | | | | | | | | |
—
| | | |
(4,586
|
)
| | |
(4,586
|
)
|
|
Amounts attributable to nonredeemable noncontrolling interests
| | | | | | | | | | | | | |
—
|
| | |
16,147
|
| | |
16,147
|
|
| Net income (loss) available to Arch | | | | | | | | | | | | | |
(31,655
|
)
| | |
(2,001
|
)
| | |
(33,656
|
)
|
|
Preferred dividends
| | | | | | | | | | | | | |
(12,369
|
)
| | |
—
| | | |
(12,369
|
)
|
|
Loss on redemption of preferred shares
| | | | | | | | | | | | | |
(6,735
|
)
| | |
—
|
| | |
(6,735
|
)
|
| Net income (loss) available to Arch common shareholders | | | | | | | | | | | | | |
$
|
(50,759
|
)
| | |
$
|
(2,001
|
)
| | |
$
|
(52,760
|
)
|
| | | | | | | | | | | | | | | | | | | |
|
| Underwriting Ratios | | | | | | | | | | | | | | | | | | | | |
|
Loss ratio
| | | | |
106.3
|
%
| | |
98.5
|
%
| | |
12.8
|
%
| | |
81.4
|
%
| | |
96.1
|
%
| | |
82.9
|
%
|
|
Acquisition expense ratio
| | | | |
15.4
|
%
| | |
17.7
|
%
| | |
7.9
|
%
| | |
14.3
|
%
| | |
24.9
|
%
| | |
15.4
|
%
|
|
Other operating expense ratio
| | | | |
17.0
|
%
| | |
11.2
|
%
| | |
12.7
|
%
| | |
14.3
|
%
| | |
6.4
|
%
| | |
13.5
|
%
|
|
Combined ratio
| | | | |
138.7
|
%
| | |
127.4
|
%
| | |
33.4
|
%
| | |
110.0
|
%
| | |
127.4
|
%
| | |
111.8
|
%
|
| | | | | | | | | | | | | | | | | | | |
|
|
Net premiums written to gross premiums written
| | | | |
71.7
|
%
| | |
75.0
|
%
| | |
83.4
|
%
| | |
75.2
|
%
| | |
92.5
|
%
| | |
80.4
|
%
|
|
(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 any 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 September 30, 2018;
-
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;
-
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 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: https://www.businesswire.com/news/home/20181030006053/en/
Arch Capital Group Ltd.
François Morin, 441-278-9250
or
Investor
Relations
Donald Watson, 914-872-3616
dwatson@archcapservices.com
Source: Arch Capital Group Ltd.