Bermuda
|
Not applicable
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
|
|
Waterloo House, Ground Floor
|
|
100 Pitts Bay Road, Pembroke HM 08, Bermuda
|
(441) 278-9250
|
(Address of principal executive offices)
|
(Registrant’s telephone number, including area code)
|
Title of each class
|
Name of each exchange on which registered
|
Common Shares, $0.0033 par value per share
|
NASDAQ Stock Market (Common Shares)
|
6.75% Non-Cumulative Preferred Shares, Series C, $0.01 par value per share
|
New York Stock Exchange
|
5.25% Non-Cumulative Preferred Shares, Series E, $0.01 par value per share
|
NASDAQ Stock Market
|
DOCUMENTS INCORPORATED BY REFERENCE
|
|
Portions of Part III and Part IV
incorporate by reference our definitive proxy statement for the 2017 annual meeting of shareholders to be filed with the Securities and Exchange Commission pursuant to Regulation 14A before May 1, 2017.
|
|
|
|
ARCH CAPITAL GROUP LTD.
|
||
TABLE OF CONTENTS
|
||
|
|
|
Item
|
|
Page
|
|
|
|
PART I
|
||
|
|
|
|
|
|
PART II
|
||
|
|
|
|
|
|
PART III
|
||
|
|
|
|
|
|
PART IV
|
||
|
|
|
|
ACGL 2016 FORM 10-K
|
1
|
•
|
our ability to successfully implement our business strategy during “soft” as well as “hard” markets;
|
•
|
acceptance of our business strategy, security and financial condition by rating agencies and regulators, as well as by brokers and our insureds and reinsureds;
|
•
|
the integration of United Guaranty Corporation and any other businesses we have acquired or may acquire into our existing operations;
|
•
|
our ability to maintain or improve our ratings, which may be affected by our 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, unemployment, housing prices, 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 we operate;
|
•
|
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 our access to such markets;
|
•
|
our ability to successfully enhance, integrate and maintain operating procedures (including information technology) to effectively support our current and new business;
|
•
|
the loss of key personnel;
|
•
|
accuracy of those estimates and judgments utilized in the preparation of our 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 our company, are even more difficult to make than those made in a mature company since relatively limited historical information has been reported to us through December 31, 2016;
|
•
|
greater than expected loss ratios on business written by us and adverse development on claim and/or claim expense liabilities related to business written by our insurance and reinsurance subsidiaries;
|
•
|
severity and/or frequency of losses;
|
•
|
claims for natural or man-made catastrophic events in our insurance or reinsurance business 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 us of reinsurance to manage our 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 us;
|
•
|
the timing of loss payments being faster or the receipt of reinsurance recoverables being slower than anticipated by us;
|
•
|
our investment performance, including legislative or regulatory developments that may adversely affect the fair value of our investments;
|
|
ACGL 2016 FORM 10-K
|
2
|
•
|
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 our business, financial condition and results of operations;
|
•
|
the volatility of our shareholders’ equity from foreign currency fluctuations, which could increase due to us not matching portions of our 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 we may be liable to the purchaser of our prior reinsurance business or to others in connection with the May 5, 2000 asset sale described in our periodic reports filed with the SEC;
|
•
|
changes in accounting principles or policies or in our application of such accounting principles or policies;
|
•
|
changes in the political environment of certain countries in which we operate or underwrite business;
|
•
|
statutory or regulatory developments, including as to tax policy and 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 us, our subsidiaries, brokers or customers; 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 this Annual Report on Form 10-K, as well as the other factors set forth in Arch Capital Group Ltd.’s other documents on file with the SEC, and management’s response to any of the aforementioned factors.
|
|
ACGL 2016 FORM 10-K
|
3
|
|
ACGL 2016 FORM 10-K
|
4
|
|
ACGL 2016 FORM 10-K
|
5
|
•
|
Capitalize on profitable underwriting opportunities
. Our insurance group believes that its experienced management and underwriting teams are positioned to locate and identify business with attractive risk/reward characteristics. As profitable underwriting opportunities are identified, our insurance group will continue to seek to make additions to its product portfolio in order to take advantage of market trends. This includes adding underwriting and other professionals with specific expertise in specialty lines of insurance.
|
•
|
Centralize responsibility for underwriting
. Our insurance group consists of a range of product lines. The underwriting executive in charge of each product line oversees all aspects of the underwriting product development process within such product line. Our insurance group believes that centralizing the control of such product line with the respective underwriting executive allows for close management of underwriting and creates clear accountability for results. Our U.S. insurance group has four regional offices, and the executive in charge of each region is primarily responsible for all aspects of the marketing and distribution of our insurance group’s products, including the management of broker and other producer relationships in such executive’s respective region. In our non-U.S. offices, a similar philosophy is observed, with responsibility for the management of each product line residing with the senior underwriting executive in charge of such product line.
|
•
|
Maintain a disciplined underwriting philosophy
. Our insurance group’s underwriting philosophy is to generate an underwriting profit through prudent risk selection and proper pricing. Our insurance group believes that the key to this approach is adherence to uniform underwriting standards across all types of business. Our insurance group’s senior management closely monitors the underwriting process.
|
•
|
Focus on providing superior claims management
. Our insurance group believes that claims handling is an integral component of credibility in the market for insurance products. Therefore, our insurance group believes that its ability to handle claims expeditiously and satisfactorily is a key to its success. Our insurance group employs experienced claims professionals and also utilizes experienced external claims managers (third party administrators) where appropriate.
|
|
ACGL 2016 FORM 10-K
|
6
|
•
|
Utilize a brokerage distribution system
. Our insurance group believes that by utilizing a brokerage distribution system, consisting of select international, national and regional brokers, both wholesale and retail, it can efficiently access a broad customer base while maintaining underwriting control and discipline.
|
•
|
Grow strategic partnerships in stable and niche areas.
Our insurance group aims to build more integrated long-term alignment with strategic partners offering superior access to niche opportunities, quality scalable businesses, or lines with reliable defensive qualities.
|
•
|
Construction and national accounts:
primary and excess casualty coverages to middle and large accounts in the construction industry and a wide range of products for middle and large national accounts, specializing in loss sensitive primary casualty insurance programs (including large deductible, self-insured retention and retrospectively rated programs).
|
•
|
Excess and surplus casualty:
primary and excess casualty insurance coverages, including middle market energy business, and contract binding, which primarily provides casualty coverage through a network of appointed agents to small and medium risks.
|
•
|
Lenders products:
collateral protection, debt cancellation and service contract reimbursement products to banks, credit unions, automotive dealerships and original equipment manufacturers and other specialty programs that pertain to automotive lending and leasing.
|
•
|
Professional lines:
directors’ and officers’ liability, errors and omissions liability, employment practices liability, fiduciary liability, crime, professional indemnity and other financial related coverages for corporate, private equity, venture capital, real estate investment trust, limited partnership, financial institution and not-for-profit clients of all sizes and medical professional and general liability insurance coverages for the healthcare industry. The business is predominately written on a claims-made basis.
|
•
|
Programs:
primarily package policies, underwriting workers’ compensation and umbrella liability business in support of desirable package programs, targeting program managers with unique expertise and niche products offering general liability, commercial automobile, inland marine and property business with minimal catastrophe exposure.
|
•
|
Property, energy, marine and aviation:
primary and excess general property insurance coverages, including catastrophe-exposed property coverage, for commercial
|
•
|
Travel, accident and health:
specialty travel and accident and related insurance products for individual, group travelers, travel agents and suppliers, as well as accident and health, which provides accident, disability and medical plan insurance coverages for employer groups, medical plan members, students and other participant groups.
|
•
|
Other:
includes alternative market risks (including captive insurance programs), excess workers’ compensation and employer’s liability insurance coverages for qualified self-insured groups, associations and trusts, and contract and commercial surety coverages, including contract bonds (payment and performance bonds) primarily for medium and large contractors and commercial surety bonds for Fortune 1000 companies and smaller transaction business programs.
|
•
|
risk selection;
|
•
|
desired attachment point;
|
•
|
limits and retention management;
|
•
|
due diligence, including financial condition, claims history, management, and product, class and territorial exposure;
|
•
|
underwriting authority and appropriate approvals; and
|
•
|
collaborative decision making.
|
|
ACGL 2016 FORM 10-K
|
7
|
|
Year Ended December 31,
|
||||||||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||||||||
Amount
|
|
%
|
|
Amount
|
|
%
|
|
Amount
|
|
%
|
|||||||
Professional lines
|
$
|
440,149
|
|
|
21
|
|
$
|
434,024
|
|
|
21
|
|
$
|
476,604
|
|
|
22
|
Programs
|
330,322
|
|
|
16
|
|
423,157
|
|
|
21
|
|
480,580
|
|
|
22
|
|||
Construction and national accounts
|
328,997
|
|
|
16
|
|
299,463
|
|
|
15
|
|
286,994
|
|
|
13
|
|||
Travel, accident and health
|
224,380
|
|
|
11
|
|
160,132
|
|
|
8
|
|
145,732
|
|
|
7
|
|||
Excess and surplus casualty
|
214,863
|
|
|
10
|
|
204,856
|
|
|
10
|
|
212,519
|
|
|
10
|
|||
Property, energy, marine and aviation
|
175,376
|
|
|
9
|
|
203,186
|
|
|
10
|
|
244,640
|
|
|
11
|
|||
Lenders products
|
105,650
|
|
|
5
|
|
106,916
|
|
|
5
|
|
100,407
|
|
|
5
|
|||
Other
|
252,544
|
|
|
12
|
|
213,937
|
|
|
11
|
|
199,178
|
|
|
9
|
|||
Total
|
$
|
2,072,281
|
|
|
100
|
|
$
|
2,045,671
|
|
|
100
|
|
$
|
2,146,654
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
By client location
|
|
|
|
|
|
|
|
|
|
|
|
||||||
United States
|
$
|
1,718,415
|
|
|
83
|
|
$
|
1,710,918
|
|
|
84
|
|
$
|
1,726,181
|
|
|
80
|
Europe
|
173,423
|
|
|
8
|
|
187,020
|
|
|
9
|
|
240,136
|
|
|
11
|
|||
Asia and Pacific
|
93,752
|
|
|
5
|
|
64,638
|
|
|
3
|
|
79,564
|
|
|
4
|
|||
Other
|
86,691
|
|
|
4
|
|
83,095
|
|
|
4
|
|
100,773
|
|
|
5
|
|||
Total
|
$
|
2,072,281
|
|
|
100
|
|
$
|
2,045,671
|
|
|
100
|
|
$
|
2,146,654
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
By underwriting location
|
|
|
|
|
|
|
|
|
|
|
|
||||||
United States
|
$
|
1,690,208
|
|
|
82
|
|
$
|
1,673,867
|
|
|
82
|
|
$
|
1,688,887
|
|
|
79
|
Europe
|
327,034
|
|
|
16
|
|
317,998
|
|
|
16
|
|
394,430
|
|
|
18
|
|||
Other
|
55,039
|
|
|
3
|
|
53,806
|
|
|
3
|
|
63,337
|
|
|
3
|
|||
Total
|
$
|
2,072,281
|
|
|
100
|
|
$
|
2,045,671
|
|
|
100
|
|
$
|
2,146,654
|
|
|
100
|
|
ACGL 2016 FORM 10-K
|
8
|
•
|
Actively select and manage risks
. Our reinsurance group only underwrites business that meets certain profitability criteria, and it emphasizes disciplined underwriting over premium growth. To this end, our reinsurance group maintains centralized control over reinsurance underwriting guidelines and authorities.
|
•
|
Maintain flexibility and respond to changing market conditions
. Our reinsurance group’s organizational structure and philosophy allows it to take advantage of increases or changes in demand or favorable pricing trends. Our reinsurance group believes that its existing platforms in Bermuda, the U.S., Europe, Dubai and Canada, broad underwriting expertise and substantial capital facilitate adjustments to its mix of business geographically and by line and type of coverage. Our reinsurance group believes that this flexibility allows it to participate in those market opportunities that provide the greatest potential for underwriting profitability.
|
•
|
Maintain a low cost structure
. Our reinsurance group believes that maintaining tight control over its staffing level and operating primarily as a broker market reinsurer permits it to maintain low operating costs relative to its capital and premiums.
|
|
ACGL 2016 FORM 10-K
|
9
|
•
|
Casualty:
provides coverage to ceding company clients on third party liability and workers’ compensation exposures from ceding company clients, primarily on a treaty basis. Exposures include, among others, executive assurance, professional liability, workers’ compensation, excess and umbrella liability, excess motor and healthcare business.
|
•
|
Marine and aviation:
provides coverage for energy, hull, cargo, specie, liability and transit, and aviation business, including airline and general aviation risks. Business written may also include space business, which includes coverages for satellite assembly, launch and operation for commercial space programs.
|
•
|
Other specialty:
provides coverage to ceding company clients for proportional motor and other lines, including surety, accident and health, workers’ compensation catastrophe, agriculture, trade credit and political risk.
|
•
|
Property catastrophe:
provides protection for most catastrophic losses that are covered in the underlying policies written by reinsureds, including hurricane, earthquake, flood, tornado, hail and fire, and coverage for other perils on a case-by-case basis. Property catastrophe reinsurance provides coverage on an excess of loss basis when aggregate losses and loss adjustment expense from a single occurrence or aggregation of losses from a covered peril exceed the retention specified in the contract.
|
•
|
Property excluding property catastrophe:
provides coverage for both personal lines and commercial property exposures and principally covers buildings, structures, equipment and contents. The primary perils in this business include fire, explosion, collapse, riot, vandalism, wind, tornado, flood and earthquake. Business is assumed on both a proportional and excess of loss basis. In addition, facultative business is written which focuses on individual commercial property risks on an excess of loss basis.
|
•
|
Other.
includes life reinsurance business on both a proportional and non-proportional basis, casualty clash
|
•
|
adequacy of underlying rates for a specific class of business and territory;
|
•
|
the reputation of the proposed cedent and the likelihood of establishing a long-term relationship with the cedent, the geographic area in which the cedent does business, together with its catastrophe exposures, and our aggregate exposures in that area;
|
•
|
historical loss data for the cedent and, where available, for the industry as a whole in the relevant regions, in order to compare the cedent’s historical loss experience to industry averages;
|
•
|
projections of future loss frequency and severity; and
|
•
|
the perceived financial strength of the cedent.
|
|
ACGL 2016 FORM 10-K
|
10
|
|
Year Ended December 31,
|
||||||||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||||||||
Amount
|
|
%
|
|
Amount
|
|
%
|
|
Amount
|
|
%
|
|||||||
Other specialty
|
$
|
348,852
|
|
|
33
|
|
$
|
298,794
|
|
|
29
|
|
$
|
405,126
|
|
|
32
|
Casualty
|
305,252
|
|
|
29
|
|
303,093
|
|
|
29
|
|
317,996
|
|
|
25
|
|||
Property excluding property catastrophe
|
267,548
|
|
|
25
|
|
280,511
|
|
|
27
|
|
343,043
|
|
|
27
|
|||
Property catastrophe
|
75,789
|
|
|
7
|
|
91,620
|
|
|
9
|
|
137,471
|
|
|
11
|
|||
Marine and aviation
|
37,790
|
|
|
4
|
|
50,834
|
|
|
5
|
|
50,444
|
|
|
4
|
|||
Other
|
18,625
|
|
|
2
|
|
13,556
|
|
|
1
|
|
11,911
|
|
|
1
|
|||
Total
|
$
|
1,053,856
|
|
|
100
|
|
$
|
1,038,408
|
|
|
100
|
|
$
|
1,265,991
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
By client location
|
|
|
|
|
|
|
|
|
|
|
|
||||||
United States
|
$
|
448,763
|
|
|
43
|
|
$
|
470,484
|
|
|
45
|
|
$
|
589,255
|
|
|
47
|
Europe
|
337,168
|
|
|
32
|
|
307,165
|
|
|
30
|
|
355,735
|
|
|
28
|
|||
Asia and Pacific
|
111,821
|
|
|
11
|
|
94,609
|
|
|
9
|
|
142,626
|
|
|
11
|
|||
Bermuda
|
74,347
|
|
|
7
|
|
80,888
|
|
|
8
|
|
77,620
|
|
|
6
|
|||
Other
|
81,757
|
|
|
8
|
|
85,262
|
|
|
8
|
|
100,755
|
|
|
8
|
|||
Total
|
$
|
1,053,856
|
|
|
100
|
|
$
|
1,038,408
|
|
|
100
|
|
$
|
1,265,991
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
By underwriting location
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Bermuda
|
$
|
277,625
|
|
|
26
|
|
$
|
281,985
|
|
|
27
|
|
$
|
394,351
|
|
|
31
|
United States
|
432,683
|
|
|
41
|
|
439,190
|
|
|
42
|
|
492,891
|
|
|
39
|
|||
Europe
|
308,415
|
|
|
29
|
|
298,790
|
|
|
29
|
|
343,823
|
|
|
27
|
|||
Other
|
35,133
|
|
|
3
|
|
18,443
|
|
|
2
|
|
34,926
|
|
|
3
|
|||
Total
|
$
|
1,053,856
|
|
|
100
|
|
$
|
1,038,408
|
|
|
100
|
|
$
|
1,265,991
|
|
|
100
|
|
ACGL 2016 FORM 10-K
|
11
|
•
|
Expand our U.S. mortgage insurance business
. Prior to our 2014 acquisition, AMIC (formerly CMG Mortgage Insurance Company) was the leading provider of mortgage insurance products and services to credit unions in the U.S. We broadened its customer base into national and regional banks and mortgage originators while maintaining and increasing its share of the mortgage insurance credit union market. The acquisition of UGC, a leading provider of mortgage insurance products and services to national and
|
•
|
Capitalize on profitable underwriting opportunities
. Our mortgage group believes that its experienced management, analytics and underwriting teams are positioned to identify and evaluate business with attractive risk/reward characteristics.
|
•
|
Maintain a disciplined credit risk philosophy
. Our mortgage group’s credit risk philosophy is to generate underwriting profit through disciplined credit risk analysis and proper pricing. Our mortgage group believes that the key to this approach is adherence to uniform underwriting standards across all phases of the applicable housing and mortgage lending cycles.
|
•
|
Provide superior and innovative mortgage products and services
. Our mortgage group believes that it can leverage its financial capacity, experience across insurance product lines, and its analytics and technology to provide innovative products and superior service. The mortgage group believes that its delivery of tailored products that meet the specific, evolving needs of its customers will be a key to the group’s success.
|
•
|
Direct mortgage insurance in the United States
. Under their monoline insurance licenses, each of Arch’s eligible mortgage insurers may only offer private mortgage insurance covering first lien, one-to-four family residential mortgages. Nearly all of our mortgage insurance written provides first loss protection on loans originated by mortgage lenders and sold to the GSEs. Each GSE’s Congressional charter generally prohibits it from purchasing a mortgage where the principal balance of the mortgage is in excess of 80% of the value of the property securing the mortgage unless the excess portion of the mortgage is protected against default by lender recourse, participation or by a qualified insurer. As a result, such “high loan-to-value mortgages” purchased by Fannie Mae or Freddie Mac generally are insured with private mortgage insurance.
|
|
ACGL 2016 FORM 10-K
|
12
|
•
|
Direct mortgage insurance in Europe and other countries where we identify profitable underwriting opportunities
. Since 2011, Arch MI Europe has offered mortgage insurance to European mortgage lenders. Arch MI Europe’s mortgage insurance is primarily purchased by European mortgage lenders in order to reduce lenders’ credit risk and regulatory capital requirements associated with the insured mortgages. In certain European countries, lenders purchase mortgage insurance to facilitate regulatory compliance with respect to high loan-to-value residential lending. Arch MI Europe offers mortgage insurance on both a “flow” basis to cover new originations and through structured transactions to cover one or more portfolios of previously originated residential loans.
|
•
|
Reinsurance
. Arch Re Bermuda provides quota share reinsurance covering U.S. and international mortgages. Such amounts include a quota share reinsurance agreement with PMI pursuant to which it agreed to provide 100% quota share indemnity reinsurance to PMI for all certificates of insurance that were issued by PMI from January 1, 2009 through December 31, 2011 that were not in default as of an agreed upon effective date. Other than this quota share, no PMI legacy mortgage insurance exposures were assumed.
|
•
|
Other credit risk-sharing products
. In addition to providing traditional mortgage insurance and reinsurance, we offer various credit risk-sharing products to government agencies and mortgage lenders. The GSEs have reduced their exposure to mortgage risk and continue to shift more of it to the private sector, creating opportunities for insurers to assume additional mortgage risk. In 2013, Arch Re Bermuda became the first (re)insurance company to participate in Freddie Mac’s program to transfer certain credit risk in its single-family portfolio to the private sector. Since that time, Arch Re Bermuda and its affiliates have regularly participated in both Fannie Mae and Freddie Mac risk sharing programs.
|
•
|
ability and willingness of the mortgage borrower to pay its obligations under the mortgage loan being insured;
|
•
|
characteristics of the mortgage loan being insured and value of the collateral securing the mortgage loan;
|
•
|
financial strength, quality of operations and reputation of the lender originating the mortgage loan;
|
•
|
expected future home price movements which vary by geography;
|
•
|
projections of future loss frequency and severity; and
|
•
|
adequacy of premium rates.
|
|
Year Ended December 31,
|
||||||||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||||||||
Amount
|
|
%
|
|
Amount
|
|
%
|
|
Amount
|
|
%
|
|||||||
By client location
|
|
|
|
|
|
|
|
|
|
|
|
||||||
United States
|
$
|
280,509
|
|
|
72
|
|
$
|
193,617
|
|
|
72
|
|
$
|
184,333
|
|
|
90
|
Other
|
110,957
|
|
|
28
|
|
73,876
|
|
|
28
|
|
20,504
|
|
|
10
|
|||
Total
|
$
|
391,466
|
|
|
100
|
|
$
|
267,493
|
|
|
100
|
|
$
|
204,837
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
By underwriting location
|
|
|
|
|
|
|
|
|
|
|
|
||||||
United States
|
$
|
186,826
|
|
|
48
|
|
$
|
125,317
|
|
|
47
|
|
$
|
98,809
|
|
|
48
|
Other
|
204,640
|
|
|
52
|
|
142,176
|
|
|
53
|
|
106,028
|
|
|
52
|
|||
Total
|
$
|
391,466
|
|
|
100
|
|
$
|
267,493
|
|
|
100
|
|
$
|
204,837
|
|
|
100
|
|
ACGL 2016 FORM 10-K
|
13
|
•
|
paying the insurance coverage percentage specified in the certificate of insurance multiplied by the loss amount;
|
•
|
in the event the property is sold pursuant to an approved prearranged sale, paying the lesser of (i) 100% of the loss amount less the proceeds of sale of the property, or (ii) the specified coverage percentage multiplied by the loss amount; or
|
•
|
paying 100% of the loss amount in exchange for the insured’s conveyance to us of good and marketable title to the property, with us then selling the property for our own account.
|
|
ACGL 2016 FORM 10-K
|
14
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Reserve for losses and loss adjustment expenses at beginning of year
|
$
|
9,125,250
|
|
|
$
|
9,036,448
|
|
|
$
|
8,824,696
|
|
Unpaid losses and loss adjustment expenses recoverable
|
1,828,837
|
|
|
1,778,303
|
|
|
1,748,250
|
|
|||
Net reserve for losses and loss adjustment expenses at beginning of year
|
7,296,413
|
|
|
7,258,145
|
|
|
7,076,446
|
|
|||
|
|
|
|
|
|
||||||
Net incurred losses and loss adjustment expenses relating to losses occurring in:
|
|
|
|
|
|
||||||
Current year
|
2,455,563
|
|
|
2,336,026
|
|
|
2,246,152
|
|
|||
Prior years
|
(269,964
|
)
|
|
(285,123
|
)
|
|
(326,902
|
)
|
|||
Total net incurred losses and loss adjustment expenses
|
2,185,599
|
|
|
2,050,903
|
|
|
1,919,250
|
|
|||
|
|
|
|
|
|
||||||
Net losses and loss adjustment expense reserves of acquired business (1)
|
551,096
|
|
|
262
|
|
|
120,671
|
|
|||
|
|
|
|
|
|
||||||
Foreign exchange (gains) losses
|
(102,367
|
)
|
|
(143,653
|
)
|
|
(160,486
|
)
|
|||
|
|
|
|
|
|
||||||
Net paid losses and loss adjustment expenses relating to losses occurring in:
|
|
|
|
|
|
||||||
Current year
|
(445,700
|
)
|
|
(454,179
|
)
|
|
(347,270
|
)
|
|||
Prior years
|
(1,367,656
|
)
|
|
(1,415,065
|
)
|
|
(1,350,466
|
)
|
|||
Total net paid losses and loss adjustment expenses
|
(1,813,356
|
)
|
|
(1,869,244
|
)
|
|
(1,697,736
|
)
|
|||
|
|
|
|
|
|
||||||
Net reserve for losses and loss adjustment expenses at end of year
|
8,117,385
|
|
|
7,296,413
|
|
|
7,258,145
|
|
|||
Unpaid losses and loss adjustment expenses recoverable
|
2,083,575
|
|
|
1,828,837
|
|
|
1,778,303
|
|
|||
Reserve for losses and loss adjustment expenses at end of year
|
$
|
10,200,960
|
|
|
$
|
9,125,250
|
|
|
$
|
9,036,448
|
|
(1)
|
2016 amount relates to our acquisition of UGC while the 2014 amount relates to our acquisition of AMIC.
|
|
ACGL 2016 FORM 10-K
|
15
|
|
December 31, 2016
|
|
December 31, 2015
|
||||||||||
|
Amount
|
|
%
|
|
Amount
|
|
%
|
||||||
Investable assets (1) (2):
|
|
|
|
|
|
|
|
||||||
Fixed maturities available for sale, at fair value
|
$
|
13,426,577
|
|
|
72.0
|
|
|
$
|
10,459,353
|
|
|
71.4
|
|
Fixed maturities, at fair value (3)
|
364,856
|
|
|
2.0
|
|
|
367,780
|
|
|
2.5
|
|
||
Fixed maturities pledged under securities lending agreements, at fair value
|
730,341
|
|
|
3.9
|
|
|
373,304
|
|
|
2.5
|
|
||
Total fixed maturities
|
14,521,774
|
|
|
77.9
|
|
|
11,200,437
|
|
|
76.5
|
|
||
Short-term investments available for sale, at fair value
|
612,005
|
|
|
3.3
|
|
|
587,904
|
|
|
4.0
|
|
||
Short-term investments, at fair value (3)
|
64,542
|
|
|
0.3
|
|
|
—
|
|
|
—
|
|
||
Cash
|
768,049
|
|
|
4.1
|
|
|
444,776
|
|
|
3.0
|
|
||
Equity securities available for sale, at fair value
|
518,041
|
|
|
2.8
|
|
|
618,405
|
|
|
4.2
|
|
||
Equity securities, at fair value (3)
|
25,328
|
|
|
0.1
|
|
|
798
|
|
|
—
|
|
||
Equity securities pledged under securities lending agreements, at fair value
|
14,639
|
|
|
0.1
|
|
|
10,777
|
|
|
0.1
|
|
||
Other investments available for sale, at fair value
|
167,970
|
|
|
0.9
|
|
|
300,476
|
|
|
2.1
|
|
||
Other investments, at fair value (3)
|
1,108,871
|
|
|
6.0
|
|
|
908,809
|
|
|
6.2
|
|
||
Investments accounted for using the equity method (4)
|
811,273
|
|
|
4.4
|
|
|
592,973
|
|
|
4.0
|
|
||
Securities transactions entered into but not settled at the balance sheet date
|
23,697
|
|
|
0.1
|
|
|
(20,524
|
)
|
|
(0.1
|
)
|
||
Total investable assets held by Arch
|
$
|
18,636,189
|
|
|
100.0
|
|
|
$
|
14,644,831
|
|
|
100.0
|
|
(1)
|
The table above excludes investable assets attributable to the ‘other’ segment. Such amounts are summarized as follows:
|
(U.S. dollars in thousands)
|
December 31,
2016 |
|
December 31,
2015 |
||||
Investable assets in ‘other’ segment:
|
|
|
|
||||
Cash
|
$
|
74,893
|
|
|
$
|
108,550
|
|
Investments accounted for using the fair value option
|
1,857,623
|
|
|
1,617,107
|
|
||
Securities sold but not yet purchased
|
(33,157
|
)
|
|
(30,583
|
)
|
||
Securities transactions entered into but not settled at the balance sheet date
|
(41,596
|
)
|
|
1,033
|
|
||
Total investable assets included in ‘other’ segment
|
$
|
1,857,763
|
|
|
$
|
1,696,107
|
|
(2)
|
This table excludes the collateral received and reinvested and includes the fixed maturities pledged under securities lending agreements, at fair value.
|
(3)
|
Represents investments which are carried at fair value under the fair value option and reflected as “investments accounted for using the fair value option” on our balance sheet. Changes in the carrying value of such investments are recorded in net realized gains or losses.
|
(4)
|
Changes in the carrying value of investment funds accounted for using the equity method are recorded as “equity in net income (loss) of investment funds accounted for using the equity method” rather than as an unrealized gain or loss component of accumulated other comprehensive income.
|
|
ACGL 2016 FORM 10-K
|
16
|
|
|
December 31, 2016
|
|
December 31, 2015
|
||||||||||
Rating (1)
|
|
Fair Value
|
|
%
|
|
Fair Value
|
|
%
|
||||||
U.S. government and government agencies (2)
|
|
$
|
3,210,899
|
|
|
22.1
|
|
|
$
|
3,060,869
|
|
|
27.3
|
|
AAA
|
|
3,918,739
|
|
|
27.0
|
|
|
4,000,750
|
|
|
35.7
|
|
||
AA
|
|
3,148,226
|
|
|
21.7
|
|
|
1,651,760
|
|
|
14.7
|
|
||
A
|
|
2,338,834
|
|
|
16.1
|
|
|
1,431,138
|
|
|
12.8
|
|
||
BBB
|
|
1,203,942
|
|
|
8.3
|
|
|
457,251
|
|
|
4.1
|
|
||
BB
|
|
226,321
|
|
|
1.6
|
|
|
203,426
|
|
|
1.8
|
|
||
B
|
|
156,405
|
|
|
1.1
|
|
|
138,770
|
|
|
1.2
|
|
||
Lower than B
|
|
90,833
|
|
|
0.6
|
|
|
130,545
|
|
|
1.2
|
|
||
Not rated
|
|
227,574
|
|
|
1.6
|
|
|
125,928
|
|
|
1.1
|
|
||
Total
|
|
$
|
14,521,774
|
|
|
100.0
|
|
|
$
|
11,200,437
|
|
|
100.0
|
|
(1)
|
For individual fixed maturities, S&P ratings are used. In the absence of an S&P rating, ratings from Moody’s are used, followed by ratings from Fitch Ratings.
|
(2)
|
Includes U.S. government-sponsored agency mortgage backed securities and agency commercial mortgage backed securities.
|
|
Arch
|
|
Benchmark
|
||
|
Portfolio (1)
|
|
Return
|
||
Pre-tax total return (before investment expenses):
|
|
|
|
||
Year Ended December 31, 2016
|
2.07
|
%
|
|
2.13
|
%
|
Year Ended December 31, 2015
|
0.41
|
%
|
|
(0.38
|
)%
|
Year Ended December 31, 2014
|
3.21
|
%
|
|
2.58
|
%
|
(1)
|
Our investment expenses were approximately
0.34%
,
0.35%
and
0.28%
, respectively, of average invested assets in
2016
,
2015
and
2014
.
|
|
ACGL 2016 FORM 10-K
|
17
|
|
ACGL 2016 FORM 10-K
|
18
|
|
ACGL 2016 FORM 10-K
|
19
|
|
ACGL 2016 FORM 10-K
|
20
|
|
ACGL 2016 FORM 10-K
|
21
|
•
|
Approved Group Actuary
. The Group is required to appoint an individual approved by the BMA to be the Group Actuary. The Group Actuary must provide an opinion on the Group’s technical provisions as recorded in the Group statutory economic balance sheet.
|
•
|
Annual Group Financial Statements.
The Group is required to prepare and submit, on an annual basis, financial statements prepared in accordance with either IFRS or GAAP, together with statutory financial statements. The financial statements must be audited annually by the Group’s approved auditor who is required to prepare an auditor’s report thereon in accordance with generally accepted auditing standards. The statutory financial
|
•
|
Annual Group Statutory Financial Return and Annual Group Capital and Solvency Return.
The Group is required to prepare an annual Group statutory financial return and an annual Group capital and solvency return. The annual Group capital and solvency return must include an annual opinion of the Group Actuary. Both the annual Group statutory financial return and the annual Group capital and solvency return must be submitted to the BMA by the Designated Insurer within five months after its financial year end (unless specifically extended).
|
•
|
Quarterly Group Financial Statements.
The Designated Insurer is required to file quarterly financial returns for the Group with the BMA on or before the last day of the months in May, August and November of each year.
|
•
|
Public Disclosures
. Pursuant to recent amendments to the Insurance Act, all Groups are required to prepare and file with the BMA, and also publish on their website, a financial condition report.
|
•
|
Group Solvency Self Assessment (“GSSA”).
The Group Rules require the board of directors of the parent company of the Group (the “Parent Board”) to establish solvency self assessment procedures that factor in all the foreseeable reasonably material risks. Such procedures should be carried out at least annually and assess the quality and quantity of the capital required to adequately cover the risks to which the Group is exposed. Such procedures must also be an integral part of the Group’s risk management framework and be reviewed and evaluated on a regular basis by the Parent Board. In particular, the GSSA should, among other things, demonstrate consideration of the relationship between risk management, the quality and quantity of capital resources, the impact of risk mitigation techniques and diversification and correlation effects between material risks; a description of the Group’s risk appetite; be forward-looking; include appropriate stress and scenario testing and appropriately reflect all assets and liabilities, material off-balance sheet arrangements, material intra group transactions, relevant managerial practices, systems and controls and a valuation basis that is aligned with the risk characteristics and business model of the Group.
|
•
|
Group Minimum Solvency Margin (“Group MSM”) and Group Enhanced Capital Requirement (“Group ECR”).
|
|
ACGL 2016 FORM 10-K
|
22
|
•
|
Group Eligible Capital.
To enable the BMA to better assess the quality of the group’s capital resources, the Designated Insurer is required to disclose the makeup of the Group’s capital in accordance with a 3-tiered eligible capital system. Under the eligible capital requirements, all of the Group’s capital instruments are classified as either basic or ancillary capital which in turn are classified into one of 3 tiers based on their “loss absorbency” characteristics. Highest quality capital is classified as Tier 1 Capital, lesser quality capital is classified as either Tier 2 Capital or Tier 3 Capital. A minimum threshold of Tier 1 and maximum thresholds of Tier 2 and Tier 3 Capital are used to satisfy the Group MSM and Group ECR requirements are specified under the rules. Tier 1, Tier 2 and Tier 3 Capital may, until January 1, 2024, include capital instruments that do not satisfy the requirement that the instrument be non-redeemable or settled only with the issuance of an instrument of equal or higher quality upon a breach, or if redemption would cause a breach, of the Group ECR.
|
•
|
Group Governance
. The Group Rules require the Parent Board to establish and effectively implement corporate governance policies and procedures, which it must be periodically review to ensure they continue to support the overall organizational strategy of the group. In particular, the Parent Board must: ensure that operational and oversight responsibilities of the group are clearly defined and documented and that the reporting of material deficiencies and fraudulent activities are transparent and devoid of conflicts of interest; establish systems for identifying on a risk sensitive basis those policies and
|
|
ACGL 2016 FORM 10-K
|
23
|
|
ACGL 2016 FORM 10-K
|
24
|
|
ACGL 2016 FORM 10-K
|
25
|
|
ACGL 2016 FORM 10-K
|
26
|
|
ACGL 2016 FORM 10-K
|
27
|
|
ACGL 2016 FORM 10-K
|
28
|
|
ACGL 2016 FORM 10-K
|
29
|
|
ACGL 2016 FORM 10-K
|
30
|
|
ACGL 2016 FORM 10-K
|
31
|
|
ACGL 2016 FORM 10-K
|
32
|
|
ACGL 2016 FORM 10-K
|
33
|
|
ACGL 2016 FORM 10-K
|
34
|
|
ACGL 2016 FORM 10-K
|
35
|
|
ACGL 2016 FORM 10-K
|
36
|
|
ACGL 2016 FORM 10-K
|
37
|
|
ACGL 2016 FORM 10-K
|
38
|
•
|
a citizen or resident of the United States,
|
•
|
a corporation or entity treated as a corporation created or organized in or under the laws of the United States, any state thereof, or the District of Columbia,
|
•
|
an estate the income of which is subject to United States federal income taxation regardless of its source,
|
•
|
a trust if either (x) a court within the United States is able to exercise primary supervision over the administration of such trust and one or more United States persons have the authority to control all substantial decisions of such trust or (y) the trust has a valid election in effect to be treated as a United States person for U.S. federal income tax purposes or
|
•
|
any other person or entity that is treated for U.S. federal income tax purposes as if it were one of the foregoing.
|
|
ACGL 2016 FORM 10-K
|
39
|
|
ACGL 2016 FORM 10-K
|
40
|
•
|
For any year in which ACGL is not a PFIC, no income tax consequences would result.
|
•
|
For any year in which ACGL is a PFIC, the shareholder would include in its taxable income a proportionate share of the net ordinary income and net capital gains of ACGL and certain of its non-U.S. subsidiaries.
|
|
ACGL 2016 FORM 10-K
|
41
|
|
ACGL 2016 FORM 10-K
|
42
|
|
ACGL 2016 FORM 10-K
|
43
|
|
ACGL 2016 FORM 10-K
|
44
|
|
ACGL 2016 FORM 10-K
|
45
|
|
ACGL 2016 FORM 10-K
|
46
|
|
ACGL 2016 FORM 10-K
|
47
|
|
ACGL 2016 FORM 10-K
|
48
|
|
ACGL 2016 FORM 10-K
|
49
|
|
ACGL 2016 FORM 10-K
|
50
|
|
ACGL 2016 FORM 10-K
|
51
|
|
ACGL 2016 FORM 10-K
|
52
|
|
ACGL 2016 FORM 10-K
|
53
|
|
ACGL 2016 FORM 10-K
|
54
|
|
ACGL 2016 FORM 10-K
|
55
|
|
ACGL 2016 FORM 10-K
|
56
|
|
ACGL 2016 FORM 10-K
|
57
|
|
ACGL 2016 FORM 10-K
|
58
|
|
ACGL 2016 FORM 10-K
|
59
|
|
ACGL 2016 FORM 10-K
|
60
|
|
ACGL 2016 FORM 10-K
|
61
|
|
ACGL 2016 FORM 10-K
|
62
|
|
ACGL 2016 FORM 10-K
|
63
|
|
ACGL 2016 FORM 10-K
|
64
|
•
|
whether dividends have been declared and are likely to be declared on any series of our preferred shares from time to time;
|
•
|
our creditworthiness, financial condition, performance and prospects;
|
•
|
whether the ratings on any series of our preferred shares provided by any ratings agency have changed;
|
•
|
the market for similar securities; and
|
•
|
economic, financial, geopolitical, regulatory or judicial events that affect us and/or the insurance or financial markets generally.
|
|
ACGL 2016 FORM 10-K
|
65
|
|
ACGL 2016 FORM 10-K
|
66
|
|
ACGL 2016 FORM 10-K
|
67
|
|
ACGL 2016 FORM 10-K
|
68
|
ITEM 2.
|
PROPERTIES
|
ITEM 3.
|
LEGAL PROCEEDINGS
|
ITEM 4.
|
MINE SAFETY DISCLOSURES
|
ITEM 5.
|
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|
|
2016
|
|
2015
|
||||||||||||
|
High
|
|
Low
|
|
High
|
|
Low
|
||||||||
1st Quarter
|
|
$71.67
|
|
|
|
$59.83
|
|
|
|
$63.01
|
|
|
|
$57.67
|
|
2nd Quarter
|
|
$73.12
|
|
|
|
$67.50
|
|
|
|
$68.01
|
|
|
|
$59.78
|
|
3rd Quarter
|
|
$85.16
|
|
|
|
$68.85
|
|
|
|
$74.98
|
|
|
|
$64.28
|
|
4th Quarter
|
|
$88.41
|
|
|
|
$76.47
|
|
|
|
$78.81
|
|
|
|
$67.98
|
|
|
ACGL 2016 FORM 10-K
|
69
|
|
|
Issuer Purchases of Common Shares
|
|||||||||||
Period
|
|
Total Number of Shares Purchased (1)
|
|
Average Price Paid per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
|
Approximate Dollar Value of Shares that May Yet be Purchased Under the Plan or Programs (2)
|
|||||
10/1/2016-10/31/2016
|
|
8,263
|
|
$
|
77.59
|
|
|
—
|
|
|
$
|
446,501
|
|
11/1/2016-11/30/2016
|
|
5,364
|
|
$
|
79.33
|
|
|
—
|
|
|
$
|
446,501
|
|
12/1/2016-12/31/2016
|
|
19,131
|
|
$
|
85.93
|
|
|
—
|
|
|
$
|
446,501
|
|
Total
|
|
32,758
|
|
$
|
82.74
|
|
|
—
|
|
|
$
|
446,501
|
|
(1)
|
Includes repurchases by ACGL of shares, from time to time, from employees in order to facilitate the payment of withholding taxes on restricted shares granted and the exercise of stock appreciation rights. We purchased these shares at their fair market value, as determined by reference to the closing price of our common shares on the day the restricted shares vested or the stock appreciation rights were exercised.
|
(2)
|
Remaining amount available at
December 31, 2016
under ACGL’s share repurchase authorization, under which repurchases may be effected from time to time in open market or privately negotiated transactions through December 31, 2019.
|
|
|
Issuer Purchases of Preferred Shares
|
||||||||||
Period
|
|
Total Number of Shares Purchased (1)
|
|
Average Price Paid per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
|
Approximate Dollar Value of Shares that May Yet be Purchased Under the Plan or Programs
|
||||
12/1/2016-12/31/2016
|
|
97,807
|
|
$
|
25.48
|
|
|
—
|
|
|
—
|
|
Total
|
|
97,807
|
|
$
|
25.48
|
|
|
—
|
|
|
—
|
|
|
ACGL 2016 FORM 10-K
|
70
|
|
|
Base Period
|
|
|
|
|
|
||||||||||||
|
Company Name/Index
|
12/31/11
|
12/31/12
|
|
12/31/13
|
|
12/31/14
|
|
12/31/15
|
|
12/31/16
|
|
|||||||
l
|
Arch Capital Group Ltd.
|
|
$100.00
|
|
|
$118.24
|
|
|
$160.33
|
|
|
$158.74
|
|
|
$187.35
|
|
|
$231.78
|
|
n
|
S&P 500 Index
|
|
$100.00
|
|
|
$116.00
|
|
|
$153.57
|
|
|
$174.60
|
|
|
$177.01
|
|
|
$198.18
|
|
p
|
S&P 500 Property & Casualty Insurance Index
|
|
$100.00
|
|
|
$120.11
|
|
|
$166.10
|
|
|
$192.25
|
|
|
$210.57
|
|
|
$243.65
|
|
(1)
|
Stock price appreciation plus dividends.
|
(2)
|
The above graph assumes that the value of the investment was $100 on December 31, 2011.
|
(3)
|
This graph is not “soliciting material,” is not deemed filed with the SEC and is not to be incorporated by reference in any filing by us under the Securities Act of 1933 or the Securities and Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
|
|
ACGL 2016 FORM 10-K
|
71
|
ITEM 6.
|
SELECTED FINANCIAL DATA
|
(U.S. dollars in thousands except share data)
|
Year Ended December 31,
|
||||||||||||||||||
2016
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
|||||||||||
Statement of Income Data: (1)
|
|
|
|
|
|
|
|
|
|
||||||||||
Net premiums written
|
$
|
4,031,391
|
|
|
$
|
3,817,531
|
|
|
$
|
3,891,938
|
|
|
$
|
3,351,367
|
|
|
$
|
3,052,235
|
|
Net premiums earned
|
3,884,822
|
|
|
3,733,905
|
|
|
3,593,748
|
|
|
3,145,952
|
|
|
2,935,140
|
|
|||||
Net investment income
|
366,742
|
|
|
348,090
|
|
|
302,585
|
|
|
267,219
|
|
|
294,895
|
|
|||||
Equity in net income (loss) of investment funds accounted for using the equity method
|
48,475
|
|
|
25,455
|
|
|
19,883
|
|
|
35,701
|
|
|
73,510
|
|
|||||
Net realized gains (losses)
|
137,586
|
|
|
(185,842
|
)
|
|
102,917
|
|
|
74,018
|
|
|
194,228
|
|
|||||
Total revenues
|
4,463,556
|
|
|
3,936,590
|
|
|
3,988,873
|
|
|
3,526,157
|
|
|
3,482,381
|
|
|||||
Income before income taxes
|
855,552
|
|
|
567,194
|
|
|
844,247
|
|
|
734,770
|
|
|
586,368
|
|
|||||
Net income
|
$
|
824,178
|
|
|
$
|
526,582
|
|
|
$
|
821,260
|
|
|
$
|
703,119
|
|
|
$
|
590,815
|
|
Net (income) loss attributable to noncontrolling interests
|
(131,440
|
)
|
|
11,156
|
|
|
13,095
|
|
|
—
|
|
|
—
|
|
|||||
Net income available to Arch
|
692,738
|
|
|
537,738
|
|
|
834,355
|
|
|
703,119
|
|
|
590,815
|
|
|||||
Preferred dividends
|
(28,070
|
)
|
|
(21,938
|
)
|
|
(21,938
|
)
|
|
(21,938
|
)
|
|
(25,079
|
)
|
|||||
Loss on repurchase of preferred shares
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(10,612
|
)
|
|||||
Net income available to Arch common shareholders
|
$
|
664,668
|
|
|
$
|
515,800
|
|
|
$
|
812,417
|
|
|
$
|
681,181
|
|
|
$
|
555,124
|
|
Diluted net income per share
|
$
|
5.33
|
|
|
$
|
4.09
|
|
|
$
|
6.02
|
|
|
$
|
5.02
|
|
|
$
|
4.02
|
|
Cash dividends per share
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
After-tax operating income available to Arch common shareholders (2)
|
$
|
577,444
|
|
|
$
|
565,199
|
|
|
$
|
617,312
|
|
|
$
|
589,103
|
|
|
$
|
348,058
|
|
After-tax operating income available to Arch common shareholders per share — diluted (2)
|
$
|
4.63
|
|
|
$
|
4.48
|
|
|
$
|
4.58
|
|
|
$
|
4.34
|
|
|
$
|
2.52
|
|
After-tax return on average common equity (3)
|
10.9
|
%
|
|
8.9
|
%
|
|
14.7
|
%
|
|
13.5
|
%
|
|
12.3
|
%
|
|||||
After-tax operating return on average common equity (3)
|
9.4
|
%
|
|
9.7
|
%
|
|
11.2
|
%
|
|
11.7
|
%
|
|
7.7
|
%
|
|||||
Weighted average common shares and common share equivalents outstanding — diluted (3)
|
124,717,493
|
|
|
126,038,743
|
|
|
134,922,322
|
|
|
135,777,183
|
|
|
138,258,847
|
|
(1)
|
Amounts reflect a cumulative effect of an accounting change. See note
1
, “General,” of the notes accompanying our consolidated financial statements for additional information.
|
(2)
|
After-tax operating income available to Arch common shareholders is defined as net income available to Arch common shareholders, excluding 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, UGC transaction costs and other and loss on repurchase of preferred shares, net of income taxes. The presentation of after-tax operating income available to Arch common shareholders is a “non-GAAP financial measure” as defined in Regulation G. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—General—Comment on Non-GAAP Financial Measures” for further details.
|
(3)
|
Equals after-tax operating income available to Arch common shareholders divided by the average of beginning and ending common shareholders’ equity for each period presented. For the 2016 period, the return on average common shareholders’ equity reflects the weighted impact of the $1.10 billion of convertible non-voting common equivalent preferred shares, which were issued on December 31, 2016 as part of the UGC acquisition. For the 2015 and prior periods, the average common shareholders’ equity balances in each period reflect a cumulative effect of an accounting change. See note
1
, “General,” of the notes accompanying our consolidated financial statements for additional information.
|
|
ACGL 2016 FORM 10-K
|
72
|
(U.S. dollars in thousands except share data)
|
December 31,
|
||||||||||||||||||
2016
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
|||||||||||
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Total investable assets (1)
|
$
|
20,493,952
|
|
|
$
|
16,340,938
|
|
|
$
|
15,762,730
|
|
|
$
|
14,049,525
|
|
|
$
|
13,045,134
|
|
Premiums receivable
|
1,072,435
|
|
|
983,443
|
|
|
948,695
|
|
|
753,924
|
|
|
688,873
|
|
|||||
Reinsurance recoverables on unpaid and paid losses and loss adjustment expenses
|
2,114,138
|
|
|
1,867,373
|
|
|
1,812,845
|
|
|
1,804,330
|
|
|
1,870,037
|
|
|||||
Total assets (2)
|
29,372,109
|
|
|
23,138,931
|
|
|
21,967,742
|
|
|
19,518,715
|
|
|
17,778,189
|
|
|||||
Reserves for losses and loss adjustment expenses:
|
|
|
|
|
|
|
|
|
|
||||||||||
Before unpaid losses and loss adjustment expenses recoverable
|
10,200,960
|
|
|
9,125,250
|
|
|
9,036,448
|
|
|
8,824,696
|
|
|
8,933,292
|
|
|||||
Net of unpaid losses and loss adjustment expenses recoverable
|
8,117,385
|
|
|
7,296,413
|
|
|
7,258,145
|
|
|
7,076,446
|
|
|
7,104,222
|
|
|||||
Unearned premiums:
|
|
|
|
|
|
|
|
|
|
||||||||||
Before ceded unearned premiums
|
3,406,870
|
|
|
2,333,932
|
|
|
2,231,578
|
|
|
1,896,365
|
|
|
1,647,978
|
|
|||||
Net of ceded unearned premiums
|
2,547,303
|
|
|
1,906,323
|
|
|
1,854,500
|
|
|
1,568,022
|
|
|
1,349,494
|
|
|||||
Senior notes
|
1,732,258
|
|
|
791,306
|
|
|
791,141
|
|
|
790,960
|
|
|
296,657
|
|
|||||
Revolving credit agreement borrowings
|
756,650
|
|
|
530,434
|
|
|
100,000
|
|
|
100,000
|
|
|
100,000
|
|
|||||
Total liabilities
|
20,060,984
|
|
|
16,028,376
|
|
|
14,887,435
|
|
|
13,909,558
|
|
|
12,644,541
|
|
|||||
Total shareholders’ equity (2)
|
9,105,572
|
|
|
6,905,373
|
|
|
6,860,795
|
|
|
5,609,157
|
|
|
5,133,648
|
|
|||||
Total shareholders' equity available to Arch (2)
|
8,253,718
|
|
|
6,166,542
|
|
|
6,091,714
|
|
|
5,609,157
|
|
|
5,133,648
|
|
|||||
Preferred shareholders' equity
|
772,555
|
|
|
325,000
|
|
|
325,000
|
|
|
325,000
|
|
|
325,000
|
|
|||||
Common shareholders' equity available to Arch (2)
|
$
|
7,481,163
|
|
|
$
|
5,841,542
|
|
|
$
|
5,766,714
|
|
|
$
|
5,284,157
|
|
|
$
|
4,808,648
|
|
Common shares and common share equivalents outstanding, net of treasury shares (3)
|
135,550,337
|
|
|
122,627,783
|
|
|
127,367,934
|
|
|
133,674,884
|
|
|
133,842,613
|
|
|||||
Book value per share (2) (4)
|
$
|
55.19
|
|
|
$
|
47.64
|
|
|
$
|
45.28
|
|
|
$
|
39.53
|
|
|
$
|
35.93
|
|
(1)
|
This table excludes the collateral received and reinvested and includes the securities pledged under securities lending agreements, at fair value.
|
(2)
|
Balances for December 31, 2015 and prior periods reflect a cumulative effect of an accounting change. See note
1
, “General,” of the notes accompanying our consolidated financial statements for additional information.
|
(3)
|
Reflects the impact of the $1.10 billion of convertible non-voting common equivalent preferred shares, which were issued on December 31, 2016 as part of the UGC acquisition.
|
(4)
|
Excludes the effects of stock options and restricted stock units.
|
|
ACGL 2016 FORM 10-K
|
73
|
ITEM 7.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
ACGL 2016 FORM 10-K
|
74
|
|
ACGL 2016 FORM 10-K
|
75
|
|
Arch
Portfolio (1)
|
|
Benchmark
Return
|
Pre-tax total return (before investment expenses):
|
|
|
|
Year Ended December 31, 2016
|
2.07%
|
|
2.13%
|
Year Ended December 31, 2015
|
0.41%
|
|
-0.38%
|
Year Ended December 31, 2014
|
3.21%
|
|
2.58%
|
(1)
|
Our investment expenses were approximately
0.34%
,
0.35%
and
0.28%
, respectively, of average invested assets in
2016
,
2015
and
2014
.
|
|
ACGL 2016 FORM 10-K
|
76
|
|
%
|
|
BoAML 1-10 Year AA U.S. Corporate & Yankees Index
|
21.25
|
%
|
BoAML 1-5 Year U.S. Treasury Index
|
13.00
|
|
BoAML U.S. Mortgage Backed Securities Index
|
10.00
|
|
BoAML 3-5 Year Fixed Rate Asset Backed Securities Index
|
7.00
|
|
BoAML 1-10 Year U.S. Municipal Securities Index
|
7.00
|
|
BoAML U.S. High Yield Constrained Index
|
5.50
|
|
BoAML 0-3 Month U.S. Treasury Bill Index
|
5.00
|
|
Barclays CMBS Inv. Grade, AAA Rated Index
|
5.00
|
|
Barclays Agency Bullet, 1-10 Year Index
|
5.00
|
|
MSCI All Country World Gross Total Return Index
|
5.00
|
|
BoAML 1-10 Year Euro Government Index
|
4.50
|
|
BoAML 5-10 Year U.S. Treasury Index
|
3.25
|
|
BoAML 1-5 Year U.K. Gilt Index
|
3.00
|
|
BoAML 1-10 Year Australian Governments Index
|
2.50
|
|
BoAML 1-5 Year Canada Government Index
|
1.50
|
|
BoAML Euro Government Index
|
1.00
|
|
BoAML 20+ Year Canada Government Index
|
0.50
|
|
Total
|
100.00
|
%
|
|
ACGL 2016 FORM 10-K
|
77
|
|
ACGL 2016 FORM 10-K
|
78
|
|
|
|
|
||||||||
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Net income available to Arch common shareholders
|
$
|
664,668
|
|
|
$
|
515,800
|
|
|
$
|
812,417
|
|
Net realized (gains) losses
|
(77,081
|
)
|
|
108,690
|
|
|
(130,026
|
)
|
|||
Net impairment losses recognized in earnings
|
30,442
|
|
|
20,116
|
|
|
30,150
|
|
|||
Equity in net (income) loss of investment funds accounted for using the equity method
|
(48,475
|
)
|
|
(25,456
|
)
|
|
(19,883
|
)
|
|||
Net foreign exchange (gains) losses
|
(31,987
|
)
|
|
(63,011
|
)
|
|
(82,777
|
)
|
|||
UGC transaction costs and other
|
41,729
|
|
|
—
|
|
|
—
|
|
|||
Income tax expense (benefit)
|
(1,852
|
)
|
|
9,060
|
|
|
7,431
|
|
|||
After-tax operating income available to Arch common shareholders
|
$
|
577,444
|
|
|
$
|
565,199
|
|
|
$
|
617,312
|
|
|
|
|
|
|
|
||||||
Beginning common shareholders’ equity
|
$
|
5,841,542
|
|
|
$
|
5,766,714
|
|
|
$
|
5,284,157
|
|
Ending common
shareholders’ equity
|
7,481,163
|
|
|
5,841,542
|
|
|
5,766,714
|
|
|||
Average common shareholders’ equity (1)
|
$
|
6,113,718
|
|
|
$
|
5,804,128
|
|
|
$
|
5,525,436
|
|
|
|
|
|
|
|
||||||
Annualized return on average common equity %
|
10.9
|
|
|
8.9
|
|
|
14.7
|
|
|||
Annualized operating return on average common equity %
|
9.4
|
|
|
9.7
|
|
|
11.2
|
|
|
Year Ended December 31,
|
|||||||||
|
2016
|
|
2015
|
|
% Change
|
|||||
Gross premiums written
|
$
|
3,027,049
|
|
|
$
|
2,944,018
|
|
|
2.8
|
|
Premiums ceded
|
(954,768
|
)
|
|
(898,347
|
)
|
|
|
|||
Net premiums written
|
2,072,281
|
|
|
2,045,671
|
|
|
1.3
|
|
||
Change in unearned premiums
|
1,623
|
|
|
(863
|
)
|
|
|
|||
Net premiums earned
|
2,073,904
|
|
|
2,044,808
|
|
|
1.4
|
|
||
Other underwriting income
|
—
|
|
|
1,993
|
|
|
|
|||
Losses and loss adjustment expenses
|
(1,359,313
|
)
|
|
(1,292,647
|
)
|
|
|
|||
Acquisition expenses
|
(304,066
|
)
|
|
(299,317
|
)
|
|
|
|||
Other operating expenses
|
(353,782
|
)
|
|
(354,416
|
)
|
|
|
|||
Underwriting income (loss)
|
$
|
56,743
|
|
|
$
|
100,421
|
|
|
(43.5
|
)
|
|
|
|
|
|
|
|||||
Underwriting Ratios
|
|
|
|
|
% Point Change
|
|||||
Loss ratio
|
65.5
|
%
|
|
63.2
|
%
|
|
2.3
|
|
||
Acquisition expense ratio
|
14.7
|
%
|
|
14.6
|
%
|
|
0.1
|
|
||
Other operating expense ratio
|
17.1
|
%
|
|
17.3
|
%
|
|
(0.2
|
)
|
||
Combined ratio
|
97.3
|
%
|
|
95.1
|
%
|
|
2.2
|
|
|
ACGL 2016 FORM 10-K
|
79
|
|
Year Ended December 31,
|
|||||||||
|
2015
|
|
2014
|
|
% Change
|
|||||
Gross premiums written
|
$
|
2,944,018
|
|
|
$
|
3,008,669
|
|
|
(2.1
|
)
|
Premiums ceded
|
(898,347
|
)
|
|
(862,015
|
)
|
|
|
|||
Net premiums written
|
2,045,671
|
|
|
2,146,654
|
|
|
(4.7
|
)
|
||
Change in unearned premiums
|
(863
|
)
|
|
(129,284
|
)
|
|
|
|||
Net premiums earned
|
2,044,808
|
|
|
2,017,370
|
|
|
1.4
|
|
||
Other underwriting income
|
1,993
|
|
|
2,135
|
|
|
|
|||
Losses and loss adjustment expenses
|
(1,292,647
|
)
|
|
(1,260,953
|
)
|
|
|
|||
Acquisition expenses
|
(299,317
|
)
|
|
(316,308
|
)
|
|
|
|||
Other operating expenses
|
(354,416
|
)
|
|
(335,157
|
)
|
|
|
|||
Underwriting income (loss)
|
$
|
100,421
|
|
|
$
|
107,087
|
|
|
(6.2
|
)
|
|
|
|
|
|
|
|||||
Underwriting Ratios
|
|
|
|
|
% Point Change
|
|||||
Loss ratio
|
63.2
|
%
|
|
62.5
|
%
|
|
0.7
|
|
||
Acquisition expense ratio
|
14.6
|
%
|
|
15.7
|
%
|
|
(1.1
|
)
|
||
Other operating expense ratio
|
17.3
|
%
|
|
16.6
|
%
|
|
0.7
|
|
||
Combined ratio
|
95.1
|
%
|
|
94.8
|
%
|
|
0.3
|
|
•
|
Construction and national accounts:
primary and excess casualty coverages to middle and large accounts in the construction industry and a wide range of products for middle and large national accounts, specializing in loss sensitive primary casualty insurance programs (including large deductible, self-insured retention and retrospectively rated programs).
|
•
|
Excess and surplus casualty:
primary and excess casualty insurance coverages, including middle market energy business, and contract binding, which primarily provides casualty coverage through a network of appointed agents to small and medium risks.
|
•
|
Lenders products:
collateral protection, debt cancellation and service contract reimbursement products to banks, credit unions, automotive dealerships and original equipment manufacturers and other specialty programs that pertain to automotive lending and leasing.
|
•
|
Professional lines:
directors’ and officers’ liability, errors and omissions liability, employment practices liability, fiduciary liability, crime, professional indemnity and other financial related coverages for corporate, private equity, venture capital, real estate investment trust, limited partnership, financial institution and not-for-profit clients of all sizes and medical professional and general liability insurance coverages for the healthcare industry. The business is predominately written on a claims-made basis.
|
•
|
Programs:
primarily package policies, underwriting workers’ compensation and umbrella liability business in support of desirable package programs, targeting program managers with unique expertise and niche products
|
•
|
Property, energy, marine and aviation:
primary and excess general property insurance coverages, including catastrophe-exposed property coverage, for commercial clients. Coverages for marine include hull, war, specie and liability. Aviation and stand-alone terrorism are also offered.
|
•
|
Travel, accident and health:
specialty travel and accident and related insurance products for individual, group travelers, travel agents and suppliers, as well as accident and health, which provides accident, disability and medical plan insurance coverages for employer groups, medical plan members, students and other participant groups.
|
•
|
Other:
includes alternative market risks (including captive insurance programs), excess workers’ compensation and employer’s liability insurance coverages for qualified self-insured groups, associations and trusts, and contract and commercial surety coverages, including contract bonds (payment and performance bonds) primarily for medium and large contractors and commercial surety bonds for Fortune 1000 companies and smaller transaction business programs.
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
||||||||
|
Amount
|
|
%
|
|
Amount
|
|
%
|
||||
Professional lines
|
$
|
440,149
|
|
|
21.2
|
|
$
|
434,024
|
|
|
21.2
|
Construction and national accounts
|
328,997
|
|
|
15.9
|
|
299,463
|
|
|
14.6
|
||
Programs
|
330,322
|
|
|
15.9
|
|
423,157
|
|
|
20.7
|
||
Travel, accident and health
|
224,380
|
|
|
10.8
|
|
160,132
|
|
|
7.8
|
||
Excess and surplus casualty
|
214,863
|
|
|
10.4
|
|
204,856
|
|
|
10.0
|
||
Property, energy, marine and aviation
|
175,376
|
|
|
8.5
|
|
203,186
|
|
|
9.9
|
||
Lenders products
|
105,650
|
|
|
5.1
|
|
106,916
|
|
|
5.2
|
||
Other
|
252,544
|
|
|
12.2
|
|
213,937
|
|
|
10.5
|
||
Total
|
$
|
2,072,281
|
|
|
100.0
|
|
$
|
2,045,671
|
|
|
100.0
|
|
ACGL 2016 FORM 10-K
|
80
|
|
Year Ended December 31,
|
||||||||||
|
2015
|
|
2014
|
||||||||
|
Amount
|
|
%
|
|
Amount
|
|
%
|
||||
Professional lines
|
$
|
434,024
|
|
|
21.2
|
|
$
|
476,604
|
|
|
22.2
|
Construction and national accounts
|
299,463
|
|
|
14.6
|
|
286,994
|
|
|
13.4
|
||
Programs
|
423,157
|
|
|
20.7
|
|
480,580
|
|
|
22.4
|
||
Travel, accident and health
|
160,132
|
|
|
7.8
|
|
145,732
|
|
|
6.8
|
||
Excess and surplus casualty
|
204,856
|
|
|
10.0
|
|
212,519
|
|
|
9.9
|
||
Property, energy, marine and aviation
|
203,186
|
|
|
9.9
|
|
244,640
|
|
|
11.4
|
||
Lenders products
|
106,916
|
|
|
5.2
|
|
100,407
|
|
|
4.7
|
||
Other
|
213,937
|
|
|
10.5
|
|
199,178
|
|
|
9.3
|
||
Total
|
$
|
2,045,671
|
|
|
100.0
|
|
$
|
2,146,654
|
|
|
100.0
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
||||||||
|
Amount
|
|
%
|
|
Amount
|
|
%
|
||||
Professional lines
|
$
|
431,391
|
|
|
20.8
|
|
$
|
424,968
|
|
|
20.8
|
Construction and national accounts
|
322,072
|
|
|
15.5
|
|
296,828
|
|
|
14.5
|
||
Programs
|
357,715
|
|
|
17.2
|
|
446,512
|
|
|
21.8
|
||
Travel, accident and health
|
219,169
|
|
|
10.6
|
|
153,578
|
|
|
7.5
|
||
Excess and surplus casualty
|
219,046
|
|
|
10.6
|
|
208,091
|
|
|
10.2
|
||
Property, energy, marine and aviation
|
188,938
|
|
|
9.1
|
|
216,127
|
|
|
10.6
|
||
Lenders products
|
98,517
|
|
|
4.8
|
|
90,906
|
|
|
4.4
|
||
Other
|
237,056
|
|
|
11.4
|
|
207,798
|
|
|
10.2
|
||
Total
|
$
|
2,073,904
|
|
|
100.0
|
|
$
|
2,044,808
|
|
|
100.0
|
|
Year Ended December 31,
|
||||||||||
|
2015
|
|
2014
|
||||||||
|
Amount
|
|
%
|
|
Amount
|
|
%
|
||||
Professional lines
|
$
|
424,968
|
|
|
20.8
|
|
$
|
456,508
|
|
|
22.6
|
Construction and national accounts
|
296,828
|
|
|
14.5
|
|
277,811
|
|
|
13.8
|
||
Programs
|
446,512
|
|
|
21.8
|
|
460,392
|
|
|
22.8
|
||
Travel, accident and health
|
153,578
|
|
|
7.5
|
|
127,691
|
|
|
6.3
|
||
Excess and surplus casualty
|
208,091
|
|
|
10.2
|
|
182,024
|
|
|
9.0
|
||
Property, energy, marine and aviation
|
216,127
|
|
|
10.6
|
|
244,974
|
|
|
12.1
|
||
Lenders products
|
90,906
|
|
|
4.4
|
|
94,438
|
|
|
4.7
|
||
Other
|
207,798
|
|
|
10.2
|
|
173,532
|
|
|
8.6
|
||
Total
|
$
|
2,044,808
|
|
|
100.0
|
|
$
|
2,017,370
|
|
|
100.0
|
|
ACGL 2016 FORM 10-K
|
81
|
|
ACGL 2016 FORM 10-K
|
82
|
|
Year Ended December 31,
|
|||||||||
|
2016
|
|
2015
|
|
% Change
|
|||||
Gross premiums written
|
$
|
1,494,397
|
|
|
$
|
1,419,022
|
|
|
5.3
|
|
Premiums ceded
|
(440,541
|
)
|
|
(380,614
|
)
|
|
|
|||
Net premiums written
|
1,053,856
|
|
|
1,038,408
|
|
|
1.5
|
|
||
Change in unearned premiums
|
2,376
|
|
|
38,727
|
|
|
|
|||
Net premiums earned
|
1,056,232
|
|
|
1,077,135
|
|
|
(1.9
|
)
|
||
Other underwriting income
|
36,403
|
|
|
10,606
|
|
|
|
|||
Losses and loss adjustment expenses
|
(475,762
|
)
|
|
(440,350
|
)
|
|
|
|||
Acquisition expenses
|
(212,375
|
)
|
|
(223,632
|
)
|
|
|
|||
Other operating expenses
|
(143,408
|
)
|
|
(155,811
|
)
|
|
|
|||
Underwriting income
|
$
|
261,090
|
|
|
$
|
267,948
|
|
|
(2.6
|
)
|
|
|
|
|
|
|
|||||
Underwriting Ratios
|
|
|
|
|
% Point Change
|
|
||||
Loss ratio
|
45.0
|
%
|
|
40.9
|
%
|
|
4.1
|
|
||
Acquisition expense ratio
|
20.1
|
%
|
|
20.8
|
%
|
|
(0.7
|
)
|
||
Other operating expense ratio
|
13.6
|
%
|
|
14.5
|
%
|
|
(0.9
|
)
|
||
Combined ratio
|
78.7
|
%
|
|
76.2
|
%
|
|
2.5
|
|
|
Year Ended December 31,
|
|||||||||
|
2015
|
|
2014
|
|
% Change
|
|||||
Gross premiums written
|
$
|
1,419,022
|
|
|
$
|
1,527,245
|
|
|
(7.1
|
)
|
Premiums ceded
|
(380,614
|
)
|
|
(261,254
|
)
|
|
|
|||
Net premiums written
|
1,038,408
|
|
|
1,265,991
|
|
|
(18.0
|
)
|
||
Change in unearned premiums
|
38,727
|
|
|
13,337
|
|
|
|
|||
Net premiums earned
|
1,077,135
|
|
|
1,279,328
|
|
|
(15.8
|
)
|
||
Other underwriting income
|
10,606
|
|
|
3,167
|
|
|
|
|||
Losses and loss adjustment expenses
|
(440,350
|
)
|
|
(532,450
|
)
|
|
|
|||
Acquisition expenses
|
(223,632
|
)
|
|
(261,438
|
)
|
|
|
|||
Other operating expenses
|
(155,811
|
)
|
|
(147,964
|
)
|
|
|
|||
Underwriting income
|
$
|
267,948
|
|
|
$
|
340,643
|
|
|
(21.3
|
)
|
|
|
|
|
|
|
|||||
Underwriting Ratios
|
|
|
|
|
% Point Change
|
|||||
Loss ratio
|
40.9
|
%
|
|
41.6
|
%
|
|
(0.7
|
)
|
||
Acquisition expense ratio
|
20.8
|
%
|
|
20.4
|
%
|
|
0.4
|
|
||
Other operating expense ratio
|
14.5
|
%
|
|
11.6
|
%
|
|
2.9
|
|
||
Combined ratio
|
76.2
|
%
|
|
73.6
|
%
|
|
2.6
|
|
•
|
Casualty:
provides coverage to ceding company clients on third party liability and workers’ compensation exposures from ceding company clients, primarily on a treaty basis. Exposures include, among others, executive assurance, professional liability, workers’ compensation, excess and umbrella liability, excess motor and healthcare business.
|
•
|
Marine and aviation:
provides coverage for energy, hull, cargo, specie, liability and transit, and aviation business, including airline and general aviation risks. Business written may also include space business, which includes coverages for satellite assembly, launch and operation for commercial space programs.
|
•
|
Other specialty:
provides coverage to ceding company clients for proportional motor and other lines, including surety, accident and health, workers’ compensation catastrophe, agriculture, trade credit and political risk.
|
•
|
Property catastrophe:
provides protection for most catastrophic losses that are covered in the underlying policies written by reinsureds, including hurricane, earthquake, flood, tornado, hail and fire, and coverage for other perils on a case-by-case basis. Property catastrophe reinsurance provides coverage on an excess of loss basis when aggregate losses and loss adjustment expense from a single occurrence or aggregation of losses from a covered peril exceed the retention specified in the contract.
|
•
|
Property excluding property catastrophe:
provides coverage for both personal lines and commercial property exposures and principally covers buildings, structures, equipment and contents. The primary perils in this business include fire, explosion, collapse, riot, vandalism, wind, tornado, flood and earthquake. Business is assumed on both a proportional and excess of loss basis. In addition, facultative business is written which focuses on individual commercial property risks on an excess of loss basis.
|
•
|
Other:
includes life reinsurance business on both a proportional and non-proportional basis, casualty clash business and, in limited instances, non-traditional business which is intended to provide insurers with risk management solutions that complement traditional reinsurance.
|
|
ACGL 2016 FORM 10-K
|
83
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
||||||||
|
Amount
|
|
%
|
|
Amount
|
|
%
|
||||
Other specialty
|
$
|
348,852
|
|
|
33.1
|
|
$
|
298,794
|
|
|
28.8
|
Casualty
|
305,252
|
|
|
29.0
|
|
303,093
|
|
|
29.2
|
||
Property excluding property catastrophe
|
267,548
|
|
|
25.4
|
|
280,511
|
|
|
27.0
|
||
Property catastrophe
|
75,789
|
|
|
7.2
|
|
91,620
|
|
|
8.8
|
||
Marine and aviation
|
37,790
|
|
|
3.6
|
|
50,834
|
|
|
4.9
|
||
Other
|
18,625
|
|
|
1.8
|
|
13,556
|
|
|
1.3
|
||
Total
|
$
|
1,053,856
|
|
|
100.0
|
|
$
|
1,038,408
|
|
|
100.0
|
|
|
|
|
|
|
|
|
||||
Pro rata
|
$
|
558,671
|
|
|
53.0
|
|
$
|
537,556
|
|
|
51.8
|
Excess of loss
|
495,185
|
|
|
47.0
|
|
500,852
|
|
|
48.2
|
||
Total
|
$
|
1,053,856
|
|
|
100.0
|
|
$
|
1,038,408
|
|
|
100.0
|
|
Year Ended December 31,
|
||||||||||
|
2015
|
|
2014
|
||||||||
|
Amount
|
|
%
|
|
Amount
|
|
%
|
||||
Other specialty
|
$
|
298,794
|
|
|
28.8
|
|
$
|
405,126
|
|
|
32.0
|
Casualty
|
303,093
|
|
|
29.2
|
|
317,996
|
|
|
25.1
|
||
Property excluding property catastrophe
|
280,511
|
|
|
27.0
|
|
343,043
|
|
|
27.1
|
||
Property catastrophe
|
91,620
|
|
|
8.8
|
|
137,471
|
|
|
10.9
|
||
Marine and aviation
|
50,834
|
|
|
4.9
|
|
50,444
|
|
|
4.0
|
||
Other
|
13,556
|
|
|
1.3
|
|
11,911
|
|
|
0.9
|
||
Total
|
$
|
1,038,408
|
|
|
100.0
|
|
$
|
1,265,991
|
|
|
100.0
|
|
|
|
|
|
|
|
|
||||
Pro rata
|
$
|
537,556
|
|
|
51.8
|
|
$
|
663,135
|
|
|
52.4
|
Excess of loss
|
500,852
|
|
|
48.2
|
|
602,856
|
|
|
47.6
|
||
Total
|
$
|
1,038,408
|
|
|
100.0
|
|
$
|
1,265,991
|
|
|
100.0
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
||||||||
|
Amount
|
|
%
|
|
Amount
|
|
%
|
||||
Other specialty
|
$
|
329,994
|
|
|
31.2
|
|
$
|
311,307
|
|
|
28.9
|
Casualty
|
300,160
|
|
|
28.4
|
|
310,249
|
|
|
28.8
|
||
Property excluding property catastrophe
|
282,018
|
|
|
26.7
|
|
295,487
|
|
|
27.4
|
||
Property catastrophe
|
73,803
|
|
|
7.0
|
|
96,865
|
|
|
9.0
|
||
Marine and aviation
|
52,579
|
|
|
5.0
|
|
50,808
|
|
|
4.7
|
||
Other
|
17,678
|
|
|
1.7
|
|
12,419
|
|
|
1.2
|
||
Total
|
$
|
1,056,232
|
|
|
100.0
|
|
$
|
1,077,135
|
|
|
100.0
|
|
|
|
|
|
|
|
|
||||
Pro rata
|
$
|
561,986
|
|
|
53.2
|
|
$
|
563,585
|
|
|
52.3
|
Excess of loss
|
494,246
|
|
|
46.8
|
|
513,550
|
|
|
47.7
|
||
Total
|
$
|
1,056,232
|
|
|
100.0
|
|
$
|
1,077,135
|
|
|
100.0
|
|
Year Ended December 31,
|
||||||||||
|
2015
|
|
2014
|
||||||||
|
Amount
|
|
%
|
|
Amount
|
|
%
|
||||
Other specialty
|
$
|
311,307
|
|
|
28.9
|
|
$
|
424,725
|
|
|
33.2
|
Casualty
|
310,249
|
|
|
28.8
|
|
327,518
|
|
|
25.6
|
||
Property excluding property catastrophe
|
295,487
|
|
|
27.4
|
|
303,496
|
|
|
23.7
|
||
Property catastrophe
|
96,865
|
|
|
9.0
|
|
150,761
|
|
|
11.8
|
||
Marine and aviation
|
50,808
|
|
|
4.7
|
|
61,118
|
|
|
4.8
|
||
Other
|
12,419
|
|
|
1.2
|
|
11,710
|
|
|
0.9
|
||
Total
|
$
|
1,077,135
|
|
|
100.0
|
|
$
|
1,279,328
|
|
|
100.0
|
|
|
|
|
|
|
|
|
||||
Pro rata
|
$
|
563,585
|
|
|
52.3
|
|
$
|
686,201
|
|
|
53.6
|
Excess of loss
|
513,550
|
|
|
47.7
|
|
593,127
|
|
|
46.4
|
||
Total
|
$
|
1,077,135
|
|
|
100.0
|
|
$
|
1,279,328
|
|
|
100.0
|
|
ACGL 2016 FORM 10-K
|
84
|
|
Year Ended December 31,
|
|||||||
|
2016
|
|
2015
|
|
2014
|
|||
Current year
|
65.7
|
%
|
|
61.8
|
%
|
|
62.5
|
%
|
Prior period reserve development
|
(20.7
|
)%
|
|
(20.9
|
)%
|
|
(20.9
|
)%
|
Loss ratio
|
45.0
|
%
|
|
40.9
|
%
|
|
41.6
|
%
|
|
ACGL 2016 FORM 10-K
|
85
|
|
Year Ended December 31,
|
|||||||||
|
2016
|
|
2015
|
|
% Change
|
|||||
Gross premiums written
|
$
|
499,725
|
|
|
$
|
295,557
|
|
|
69.1
|
|
Premiums ceded
|
(108,259
|
)
|
|
(28,064
|
)
|
|
|
|||
Net premiums written
|
391,466
|
|
|
267,493
|
|
|
46.3
|
|
||
Change in unearned premiums
|
(104,750
|
)
|
|
(53,383
|
)
|
|
|
|||
Net premiums earned
|
286,716
|
|
|
214,110
|
|
|
33.9
|
|
||
Other underwriting income
|
17,024
|
|
|
18,430
|
|
|
|
|||
Losses and loss adjustment expenses
|
(28,943
|
)
|
|
(40,247
|
)
|
|
|
|||
Acquisition expenses
|
(32,065
|
)
|
|
(45,076
|
)
|
|
|
|||
Other operating expenses
|
(101,293
|
)
|
|
(82,370
|
)
|
|
|
|||
Underwriting income
|
$
|
141,439
|
|
|
$
|
64,847
|
|
|
118.1
|
|
|
|
|
|
|
|
|||||
Underwriting Ratios
|
|
|
|
|
% Point Change
|
|
||||
Loss ratio
|
10.1
|
%
|
|
18.8
|
%
|
|
(8.7
|
)
|
||
Acquisition expense ratio
|
11.2
|
%
|
|
21.1
|
%
|
|
(9.9
|
)
|
||
Other operating expense ratio
|
35.3
|
%
|
|
38.5
|
%
|
|
(3.2
|
)
|
||
Combined ratio
|
56.6
|
%
|
|
78.4
|
%
|
|
(21.8
|
)
|
|
Year Ended December 31,
|
|||||||||
|
2015
|
|
2014
|
|
% Change
|
|||||
Gross premiums written
|
$
|
295,557
|
|
|
$
|
227,356
|
|
|
30.0
|
|
Premiums ceded
|
(28,064
|
)
|
|
(22,519
|
)
|
|
|
|||
Net premiums written
|
267,493
|
|
|
204,837
|
|
|
30.6
|
|
||
Change in unearned premiums
|
(53,383
|
)
|
|
(11,264
|
)
|
|
|
|||
Net premiums earned
|
214,110
|
|
|
193,573
|
|
|
10.6
|
|
||
Other underwriting income
|
18,430
|
|
|
4,840
|
|
|
|
|||
Losses and loss adjustment expenses
|
(40,247
|
)
|
|
(55,674
|
)
|
|
|
|||
Acquisition expenses
|
(45,076
|
)
|
|
(49,400
|
)
|
|
|
|||
Other operating expenses
|
(82,370
|
)
|
|
(66,891
|
)
|
|
|
|||
Underwriting income
|
$
|
64,847
|
|
|
$
|
26,448
|
|
|
145.2
|
|
|
|
|
|
|
|
|||||
Underwriting Ratios
|
|
|
|
|
% Point Change
|
|||||
Loss ratio
|
18.8
|
%
|
|
28.8
|
%
|
|
(10.0
|
)
|
||
Acquisition expense ratio
|
21.1
|
%
|
|
25.5
|
%
|
|
(4.4
|
)
|
||
Other operating expense ratio
|
38.5
|
%
|
|
34.6
|
%
|
|
3.9
|
|
||
Combined ratio
|
78.4
|
%
|
|
88.9
|
%
|
|
(10.5
|
)
|
|
ACGL 2016 FORM 10-K
|
86
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Net premiums written by client location
|
|
|
|
|
|
||||||
United States
|
$
|
280,509
|
|
|
$
|
193,617
|
|
|
$
|
184,333
|
|
Other
|
110,957
|
|
|
73,876
|
|
|
20,504
|
|
|||
Total
|
$
|
391,466
|
|
|
$
|
267,493
|
|
|
$
|
204,837
|
|
|
|
|
|
|
|
||||||
Net premiums written by underwriting location
|
|
|
|
|
|
||||||
United States
|
$
|
186,826
|
|
|
$
|
125,317
|
|
|
$
|
98,809
|
|
Other
|
204,640
|
|
|
142,176
|
|
|
106,028
|
|
|||
Total
|
$
|
391,466
|
|
|
$
|
267,493
|
|
|
$
|
204,837
|
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Net premiums earned by client location
|
|
|
|
|
|
||||||
United States
|
$
|
265,527
|
|
|
$
|
202,930
|
|
|
$
|
187,194
|
|
Other
|
21,189
|
|
|
11,180
|
|
|
6,379
|
|
|||
Total
|
$
|
286,716
|
|
|
$
|
214,110
|
|
|
$
|
193,573
|
|
|
|
|
|
|
|
||||||
Net premiums earned by underwriting location
|
|
|
|
|
|
||||||
United States
|
$
|
155,929
|
|
|
$
|
113,062
|
|
|
$
|
92,236
|
|
Other
|
130,787
|
|
|
101,048
|
|
|
101,337
|
|
|||
Total
|
$
|
286,716
|
|
|
$
|
214,110
|
|
|
$
|
193,573
|
|
|
Year Ended December 31,
|
|||||||
|
2016
|
|
2015
|
|
2014
|
|||
Current year
|
17.5
|
%
|
|
24.5
|
%
|
|
29.3
|
%
|
Prior period reserve development
|
(7.4
|
)%
|
|
(5.7
|
)%
|
|
(0.5
|
)%
|
Loss ratio
|
10.1
|
%
|
|
18.8
|
%
|
|
28.8
|
%
|
|
ACGL 2016 FORM 10-K
|
87
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Fixed maturities
|
$
|
242,310
|
|
|
$
|
241,389
|
|
|
$
|
257,387
|
|
Term loan investments
|
26,550
|
|
|
19,290
|
|
|
21,521
|
|
|||
Equity securities
|
13,823
|
|
|
14,339
|
|
|
13,005
|
|
|||
Short-term investments
|
3,619
|
|
|
574
|
|
|
904
|
|
|||
Other (1)
|
39,750
|
|
|
41,721
|
|
|
28,803
|
|
|||
Gross investment income
|
326,052
|
|
|
317,313
|
|
|
321,620
|
|
|||
Investment expenses (2)
|
(48,859
|
)
|
|
(45,633
|
)
|
|
(37,284
|
)
|
|||
Net investment income
|
$
|
277,193
|
|
|
$
|
271,680
|
|
|
$
|
284,336
|
|
(1)
|
Amounts include dividends and income distributions on investment funds and other items.
|
(2)
|
Investment expenses were approximately
0.34%
of average invested assets for
2016
, compared to
0.35%
for
2015
and
0.28%
for
2014
.
|
|
ACGL 2016 FORM 10-K
|
88
|
|
ACGL 2016 FORM 10-K
|
89
|
|
December 31,
|
||||||
|
2016
|
|
2015
|
||||
Insurance:
|
|
|
|
||||
Case reserves
|
$
|
1,414,603
|
|
|
$
|
1,434,986
|
|
IBNR reserves
|
3,187,451
|
|
3,080,122
|
||||
Total net reserves
|
4,602,054
|
|
|
4,515,108
|
|
||
Reinsurance:
|
|
|
|
||||
Case reserves
|
762,730
|
|
|
699,860
|
|
||
Additional case reserves
|
92,524
|
|
99,343
|
||||
IBNR reserves
|
1,517,983
|
|
1,593,186
|
||||
Total net reserves
|
2,373,237
|
|
|
2,392,389
|
|
||
Mortgage:
|
|
|
|
||||
Case reserves
|
593,222
|
|
|
86,278
|
|
||
IBNR reserves
|
59,791
|
|
23,211
|
||||
Total net reserves
|
653,013
|
|
|
109,489
|
|
||
Other:
|
|
|
|
||||
Case reserves
|
125,703
|
|
|
64,875
|
|
||
Additional case reserves
|
9,513
|
|
|
5,199
|
|
||
IBNR reserves
|
353,865
|
|
|
209,353
|
|
||
Total net reserves
|
489,081
|
|
|
279,427
|
|
||
Total:
|
|
|
|
||||
Case reserves
|
2,896,258
|
|
|
2,285,999
|
|
||
Additional case reserves
|
102,037
|
|
104,542
|
||||
IBNR reserves
|
5,119,090
|
|
4,905,872
|
||||
Total net reserves
|
$
|
8,117,385
|
|
|
$
|
7,296,413
|
|
|
December 31,
|
||||||
|
2016
|
|
2015
|
||||
Professional lines (1)
|
$
|
1,293,667
|
|
|
$
|
1,346,882
|
|
Construction and national accounts
|
976,109
|
|
|
876,278
|
|
||
Excess and surplus casualty (2)
|
687,305
|
|
|
682,286
|
|
||
Programs
|
667,677
|
|
|
687,405
|
|
||
Property, energy, marine and aviation
|
302,057
|
|
|
330,104
|
|
||
Travel, accident and health
|
72,726
|
|
|
64,537
|
|
||
Lenders products
|
42,147
|
|
|
44,273
|
|
||
Other (3)
|
560,366
|
|
|
483,343
|
|
||
Total net reserves
|
$
|
4,602,054
|
|
|
$
|
4,515,108
|
|
(1)
|
Includes professional liability, executive assurance and healthcare business.
|
(2)
|
Includes casualty and contract binding business.
|
(3)
|
Includes alternative markets, excess workers’ compensation and surety business.
|
|
ACGL 2016 FORM 10-K
|
90
|
|
December 31,
|
||||||
|
2016
|
|
2015
|
||||
Casualty
|
$
|
1,355,362
|
|
|
$
|
1,386,084
|
|
Other specialty
|
428,205
|
|
|
420,865
|
|
||
Property excluding property catastrophe
|
297,200
|
|
|
301,757
|
|
||
Marine and aviation
|
147,700
|
|
|
137,969
|
|
||
Property catastrophe
|
86,026
|
|
|
94,991
|
|
||
Other
|
58,744
|
|
|
50,723
|
|
||
Total net reserves
|
$
|
2,373,237
|
|
|
$
|
2,392,389
|
|
INSURANCE SEGMENT
|
Higher Expected Loss Ratios
|
|
Slower Loss Development Patterns
|
||||
Reserving lines selected assumptions:
|
|
|
|
||||
Property, energy, marine and aviation
|
5 points
|
|
|
3 months
|
|
||
Third party occurrence business (1)
|
10
|
|
|
6
|
|
||
Third party claims-made business (2)
|
10
|
|
|
6
|
|
||
All other (3)
|
10
|
|
|
6
|
|
||
|
|
|
|
||||
Increase (decrease) in Loss Reserves:
|
|
|
|
||||
Property, energy, marine and aviation
|
$
|
15,680
|
|
|
$
|
21,340
|
|
Third party occurrence business (1)
|
108,499
|
|
|
93,982
|
|
||
Third party claims-made business (2)
|
224,098
|
|
|
156,134
|
|
||
All other (3)
|
123,784
|
|
|
128,724
|
|
INSURANCE SEGMENT
|
Lower Expected Loss Ratios
|
|
Faster Loss Development Patterns
|
||||
Reserving lines selected assumptions:
|
|
|
|
||||
Property, energy, marine and aviation
|
(5) points
|
|
|
(3) months
|
|
||
Third party occurrence business
|
(10)
|
|
|
(6)
|
|
||
Third party claims-made business
|
(10)
|
|
|
(6)
|
|
||
Multi-line and other specialty
|
(10)
|
|
|
(6)
|
|
||
|
|
|
|
||||
Increase (decrease) in Loss Reserves:
|
|
|
|
||||
Property, energy, marine and aviation
|
$
|
(15,680
|
)
|
|
$
|
(15,992
|
)
|
Third party occurrence business
|
(108,499
|
)
|
|
(76,809
|
)
|
||
Third party claims-made business
|
(224,098
|
)
|
|
(130,545
|
)
|
||
Multi-line and other specialty
|
(123,784
|
)
|
|
(102,506
|
)
|
REINSURANCE SEGMENT
|
Higher Expected Loss Ratios
|
|
Slower Loss Development Patterns
|
||||
Reserving lines selected assumptions:
|
|
|
|
||||
Casualty
|
10 points
|
|
|
6 months
|
|
||
Property catastrophe
|
5
|
|
|
3
|
|
||
Property excluding property catastrophe
|
5
|
|
|
3
|
|
||
Marine and aviation
|
5
|
|
|
3
|
|
||
Other specialty
|
5
|
|
|
3
|
|
||
Other
|
5
|
|
|
3
|
|
||
|
|
|
|
||||
Increase (decrease) in Loss Reserves:
|
|
|
|
||||
Casualty
|
$
|
113,511
|
|
|
$
|
132,275
|
|
Property catastrophe
|
12,799
|
|
|
14,617
|
|
||
Property excluding property catastrophe
|
17,046
|
|
|
37,022
|
|
||
Marine and aviation
|
7,799
|
|
|
12,099
|
|
||
Other specialty
|
37,572
|
|
|
20,113
|
|
||
Other
|
3,937
|
|
|
2,179
|
|
REINSURANCE SEGMENT
|
Lower Expected Loss Ratios
|
|
Faster Loss Development Patterns
|
||||
Reserving lines selected assumptions:
|
|
|
|
||||
Casualty
|
(10) points
|
|
|
(6) months
|
|
||
Property catastrophe
|
(5)
|
|
|
(3)
|
|
||
Property excluding property catastrophe
|
(5)
|
|
|
(3)
|
|
||
Marine and aviation
|
(5)
|
|
|
(3)
|
|
||
Other specialty
|
(5)
|
|
|
(3)
|
|
||
Other
|
(5)
|
|
|
(3)
|
|
||
|
|
|
|
||||
Increase (decrease) in Loss Reserves:
|
|
|
|
||||
Casualty
|
$
|
(113,511
|
)
|
|
$
|
(104,681
|
)
|
Property catastrophe
|
(12,799
|
)
|
|
(10,296
|
)
|
||
Property excluding property catastrophe
|
(17,046
|
)
|
|
(35,321
|
)
|
||
Marine and aviation
|
(7,799
|
)
|
|
(12,251
|
)
|
||
Other specialty
|
(37,572
|
)
|
|
(35,161
|
)
|
||
Other
|
(3,937
|
)
|
|
(2,031
|
)
|
|
ACGL 2016 FORM 10-K
|
91
|
|
Insurance
|
|
Reinsurance
|
|
Mortgage
|
|
Total
|
||||||||
Loss
Reserves (1)
|
|
$4,602,054
|
|
|
|
$2,373,237
|
|
|
|
$653,013
|
|
|
|
$7,628,304
|
|
|
|
|
|
|
|
|
|
||||||||
Simulation results:
|
|
|
|
|
|
|
|
||||||||
90th percentile (2)
|
|
$5,591,394
|
|
|
|
$3,002,464
|
|
|
|
$781,521
|
|
|
|
$8,955,759
|
|
10th percentile (3)
|
|
$3,702,815
|
|
|
|
$1,834,192
|
|
|
|
$533,222
|
|
|
|
$6,416,379
|
|
(1)
|
Net of reinsurance recoverables. Excludes amounts reflected in the ‘other’ segment.
|
(2)
|
Simulation results indicate that a 90% probability exists that the net reserves for losses and loss adjustment expenses will not exceed the indicated amount.
|
(3)
|
Simulation results indicate that a 10% probability exists that the net reserves for losses and loss adjustment expenses will be at or below the indicated amount.
|
|
ACGL 2016 FORM 10-K
|
92
|
(U.S. Dollars in millions, except policy count)
|
December 31, 2016
|
|
September 30, 2016
|
|
June 30, 2016
|
|
March 31, 2016
|
||||||||||||||||||||
|
Amount
|
|
%
|
|
Amount
|
|
%
|
|
Amount
|
|
%
|
|
Amount
|
|
%
|
||||||||||||
Insurance In Force (IIF) (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. mortgage insurance
|
$
|
234,518
|
|
|
74
|
|
|
$
|
40,258
|
|
|
35
|
|
|
$
|
33,367
|
|
|
31
|
|
|
$
|
28,433
|
|
|
31
|
|
Mortgage reinsurance
|
24,315
|
|
|
8
|
|
|
22,071
|
|
|
19
|
|
|
22,242
|
|
|
21
|
|
|
22,393
|
|
|
24
|
|
||||
Other (3)
|
56,776
|
|
|
18
|
|
|
53,826
|
|
|
46
|
|
|
52,926
|
|
|
49
|
|
|
41,172
|
|
|
45
|
|
||||
Total
|
$
|
315,609
|
|
|
100
|
|
|
$
|
116,155
|
|
|
100
|
|
|
$
|
108,535
|
|
|
100
|
|
|
$
|
91,998
|
|
|
100
|
|
Risk In Force (RIF) (2):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. mortgage insurance
|
$
|
59,712
|
|
|
93
|
|
|
$
|
10,168
|
|
|
69
|
|
|
$
|
8,396
|
|
|
65
|
|
|
$
|
7,165
|
|
|
63
|
|
Mortgage reinsurance
|
2,489
|
|
|
4
|
|
|
2,557
|
|
|
17
|
|
|
2,567
|
|
|
20
|
|
|
2,661
|
|
|
23
|
|
||||
Other (3)
|
2,242
|
|
|
4
|
|
|
2,104
|
|
|
14
|
|
|
1,993
|
|
|
15
|
|
|
1,636
|
|
|
14
|
|
||||
Total
|
$
|
64,443
|
|
|
100
|
|
|
$
|
14,829
|
|
|
100
|
|
|
$
|
12,956
|
|
|
100
|
|
|
$
|
11,462
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Ending number of policies in force
|
1,153,630
|
|
|
|
|
199,661
|
|
|
|
|
172,666
|
|
|
|
|
153,984
|
|
|
|
(1)
|
The aggregate dollar amount of each insured mortgage loan’s current principal balance.
|
(2)
|
The aggregate amount of each insured mortgage loan’s current principal balance multiplied by the insurance coverage percentage specified in the policy for insurance policies issued and after contract limits and/or loss ratio caps for risk-sharing or reinsurance transactions.
|
(3)
|
Includes GSE credit risk-sharing transactions and international insurance business.
|
(U.S. Dollars in thousands, except loan and claim count)
|
|
|
Three Months Ended
|
|
Year Ended
|
||||||||||||||
|
December 31,
2016 |
|
September 30,
2016 |
|
June 30,
2016 |
|
March 31,
2016 |
|
December 31, 2016
|
||||||||||
Rollforward of insured loans in default:
|
|
|
|
|
|
|
|
|
|
||||||||||
Beginning delinquent number of loans
|
2,423
|
|
|
2,245
|
|
|
2,325
|
|
|
2,702
|
|
|
2,702
|
|
|||||
Plus: new notices
|
1,161
|
|
|
1,251
|
|
|
1,033
|
|
|
1,048
|
|
|
4,493
|
|
|||||
Less: cures
|
(1,026
|
)
|
|
(925
|
)
|
|
(919
|
)
|
|
(1,206
|
)
|
|
(4,076
|
)
|
|||||
Less: paid claims
|
(153
|
)
|
|
(151
|
)
|
|
(193
|
)
|
|
(222
|
)
|
|
(719
|
)
|
|||||
Less: delinquent rescissions and denials
|
(2
|
)
|
|
3
|
|
|
(1
|
)
|
|
3
|
|
|
3
|
|
|||||
Plus: acquired delinquent loans (1)
|
27,288
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
27,288
|
|
|||||
Ending delinquent number of loans
|
29,691
|
|
|
2,423
|
|
|
2,245
|
|
|
2,325
|
|
|
29,691
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Ending percentage of loans in default
|
2.6
|
%
|
|
1.2
|
%
|
|
1.3
|
%
|
|
1.5
|
%
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Losses:
|
|
|
|
|
|
|
|
|
|
||||||||||
Number of claims paid
|
153
|
|
|
151
|
|
|
193
|
|
|
222
|
|
|
719
|
|
|||||
Total paid claims
|
$
|
6,080
|
|
|
$
|
5,513
|
|
|
$
|
7,744
|
|
|
$
|
9,168
|
|
|
$
|
28,505
|
|
Average per claim
|
$
|
39.7
|
|
|
$
|
36.5
|
|
|
$
|
40.1
|
|
|
$
|
41.3
|
|
|
$
|
39.6
|
|
Severity (2)
|
92.3
|
%
|
|
90.4
|
%
|
|
94.8
|
%
|
|
93.9
|
%
|
|
93.1
|
%
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Average reserve per default
|
$
|
20.5
|
|
|
$
|
25.2
|
|
|
$
|
27.8
|
|
|
$
|
32.1
|
|
|
|
(
1)
|
Includes first lien primary and pool policies.
|
(2)
|
Represents total paid claims divided by RIF of loans for which claims were paid.
|
|
ACGL 2016 FORM 10-K
|
93
|
(U.S. Dollars in millions)
|
December 31, 2016
|
|
September 30, 2016
|
|
June 30, 2016
|
|
March 31, 2016
|
||||||||||||||||||||
|
Amount
|
|
%
|
|
Amount
|
|
%
|
|
Amount
|
|
%
|
|
Amount
|
|
%
|
||||||||||||
Total RIF by credit quality (FICO):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
>=740
|
$
|
34,867
|
|
|
58
|
|
|
$
|
5,817
|
|
|
57
|
|
|
$
|
4,766
|
|
|
57
|
|
|
$
|
3,995
|
|
|
56
|
|
680-739
|
18,976
|
|
|
32
|
|
|
3,425
|
|
|
34
|
|
|
2,779
|
|
|
33
|
|
|
2,354
|
|
|
33
|
|
||||
620-679
|
5,050
|
|
|
9
|
|
|
834
|
|
|
8
|
|
|
753
|
|
|
9
|
|
|
712
|
|
|
10
|
|
||||
<620
|
819
|
|
|
1
|
|
|
92
|
|
|
1
|
|
|
98
|
|
|
1
|
|
|
104
|
|
|
2
|
|
||||
Total
|
$
|
59,712
|
|
|
100
|
|
|
$
|
10,168
|
|
|
100
|
|
|
$
|
8,396
|
|
|
100
|
|
|
$
|
7,165
|
|
|
100
|
|
Weighted average FICO score
|
743
|
|
|
|
|
742
|
|
|
|
|
741
|
|
|
|
|
739
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Total RIF by Loan-to-Value (LTV):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
95.01% and above
|
$
|
5,781
|
|
|
10
|
|
|
$
|
1,221
|
|
|
12
|
|
|
$
|
1,135
|
|
|
14
|
|
|
$
|
1,052
|
|
|
15
|
|
90.01% to 95.00%
|
32,986
|
|
|
55
|
|
|
5,430
|
|
|
53
|
|
|
4,379
|
|
|
52
|
|
|
3,677
|
|
|
51
|
|
||||
85.01% to 90.00%
|
18,140
|
|
|
30
|
|
|
2,982
|
|
|
29
|
|
|
2,438
|
|
|
29
|
|
|
2,056
|
|
|
29
|
|
||||
85.00% and below
|
2,805
|
|
|
5
|
|
|
535
|
|
|
5
|
|
|
444
|
|
|
5
|
|
|
380
|
|
|
5
|
|
||||
Total
|
$
|
59,712
|
|
|
100
|
|
|
$
|
10,168
|
|
|
100
|
|
|
$
|
8,396
|
|
|
100
|
|
|
$
|
7,165
|
|
|
100
|
|
Weighted average LTV
|
92.9
|
%
|
|
|
|
92.9
|
%
|
|
|
|
92.9
|
%
|
|
|
|
93.0
|
%
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Total RIF by State:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Texas
|
$
|
4,961
|
|
|
8
|
|
|
$
|
583
|
|
|
6
|
|
|
$
|
469
|
|
|
6
|
|
|
$
|
401
|
|
|
6
|
|
California
|
3,222
|
|
|
5
|
|
|
865
|
|
|
9
|
|
|
727
|
|
|
9
|
|
|
622
|
|
|
9
|
|
||||
Virginia
|
2,586
|
|
|
4
|
|
|
377
|
|
|
4
|
|
|
300
|
|
|
4
|
|
|
237
|
|
|
3
|
|
||||
Florida
|
2,367
|
|
|
4
|
|
|
544
|
|
|
5
|
|
|
422
|
|
|
5
|
|
|
345
|
|
|
5
|
|
||||
Washington
|
2,331
|
|
|
4
|
|
|
302
|
|
|
3
|
|
|
279
|
|
|
3
|
|
|
261
|
|
|
4
|
|
||||
Georgia
|
2,111
|
|
|
4
|
|
|
301
|
|
|
3
|
|
|
247
|
|
|
3
|
|
|
215
|
|
|
3
|
|
||||
Illinois
|
2,090
|
|
|
4
|
|
|
348
|
|
|
3
|
|
|
279
|
|
|
3
|
|
|
218
|
|
|
3
|
|
||||
Maryland
|
2,080
|
|
|
4
|
|
|
299
|
|
|
3
|
|
|
241
|
|
|
3
|
|
|
199
|
|
|
3
|
|
||||
Minnesota
|
1,986
|
|
|
3
|
|
|
388
|
|
|
4
|
|
|
351
|
|
|
4
|
|
|
319
|
|
|
5
|
|
||||
Ohio
|
1,916
|
|
|
3
|
|
|
312
|
|
|
3
|
|
|
260
|
|
|
3
|
|
|
212
|
|
|
3
|
|
||||
Others
|
34,062
|
|
|
57
|
|
|
5,849
|
|
|
58
|
|
|
4,821
|
|
|
57
|
|
|
4,136
|
|
|
58
|
|
||||
Total
|
$
|
59,712
|
|
|
100
|
|
|
$
|
10,168
|
|
|
100
|
|
|
$
|
8,396
|
|
|
100
|
|
|
$
|
7,165
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Weighted average coverage (1)
|
25.5
|
%
|
|
|
|
25.3
|
%
|
|
|
|
25.2
|
%
|
|
|
|
25.2
|
%
|
|
|
||||||||
Analysts’ persistency (2)
|
76.1
|
%
|
|
|
|
75.4
|
%
|
|
|
|
75.6
|
%
|
|
|
|
74.2
|
%
|
|
|
||||||||
Risk-to-capital ratio (3)
|
12.0:1
|
|
|
|
|
15.4:1
|
|
|
|
|
12.4:1
|
|
|
|
|
11.1:1
|
|
|
|
||||||||
U.S. mortgage insurance total RIF, net of reinsurance (4)
|
$
|
42,183
|
|
|
|
|
$
|
8,918
|
|
|
|
|
$
|
7,198
|
|
|
|
|
$
|
6,274
|
|
|
|
(1)
|
Represents the end of period RIF divided by end of period IIF.
|
(2)
|
Represents the percentage of IIF at the beginning of a 12-month period that remained in force at the end of the period.
|
(3)
|
Represents total current (non-delinquent) RIF, net of reinsurance, divided by total statutory capital. Ratio calculated for GSE eligible mortgage insurers (estimate for
December 31, 2016
including UGC).
|
(4)
|
Total RIF for the U.S. mortgage insurance operations after external reinsurance.
|
|
ACGL 2016 FORM 10-K
|
94
|
|
ACGL 2016 FORM 10-K
|
95
|
|
December 31, 2016
|
||||||||||
|
Gross Amount
|
|
Acquisition Expenses
|
|
Net
Amount |
||||||
|
|
|
|
|
|
||||||
Casualty
|
$
|
205,016
|
|
|
$
|
(64,563
|
)
|
|
$
|
140,453
|
|
Other specialty
|
141,943
|
|
|
(39,392
|
)
|
|
102,551
|
|
|||
Property excluding property catastrophe
|
64,483
|
|
|
(21,544
|
)
|
|
42,939
|
|
|||
Marine and aviation
|
30,560
|
|
|
(8,669
|
)
|
|
21,891
|
|
|||
Property catastrophe
|
1,158
|
|
|
(66
|
)
|
|
1,092
|
|
|||
Other
|
55,569
|
|
|
(12,657
|
)
|
|
42,912
|
|
|||
Total
|
$
|
498,729
|
|
|
$
|
(146,891
|
)
|
|
$
|
351,838
|
|
|
ACGL 2016 FORM 10-K
|
96
|
|
ACGL 2016 FORM 10-K
|
97
|
•
|
Investable Assets Held by Arch
|
|
ACGL 2016 FORM 10-K
|
98
|
Investable assets (1):
|
Estimated
Fair Value
|
|
% of
Total
|
|||
December 31, 2016
|
|
|
|
|||
Fixed maturities (2)
|
$
|
14,521,774
|
|
|
77.9
|
|
Short-term investments (2)
|
676,547
|
|
|
3.6
|
|
|
Cash
|
768,049
|
|
|
4.1
|
|
|
Equity securities (2)
|
558,008
|
|
|
3.0
|
|
|
Other investments (2)
|
1,276,841
|
|
|
6.9
|
|
|
Investments accounted for using the equity method
|
811,273
|
|
|
4.4
|
|
|
Securities transactions entered into but not settled at the balance sheet date
|
23,697
|
|
|
0.1
|
|
|
Total investable assets held by Arch
|
$
|
18,636,189
|
|
|
100.0
|
|
|
|
|
|
|||
December 31, 2015
|
|
|
|
|||
Fixed maturities (2)
|
$
|
11,200,437
|
|
|
76.5
|
|
Short-term investments (2)
|
587,904
|
|
|
4.0
|
|
|
Cash
|
444,776
|
|
|
3.0
|
|
|
Equity securities (2)
|
629,980
|
|
|
4.3
|
|
|
Other investments (2)
|
1,209,285
|
|
|
8.3
|
|
|
Investments accounted for using the equity method
|
592,973
|
|
|
4.0
|
|
|
Securities transactions entered into but not settled at the balance sheet date
|
(20,524
|
)
|
|
(0.1
|
)
|
|
Total investable assets held by Arch
|
$
|
14,644,831
|
|
|
100.0
|
|
(1)
|
In securities lending transactions, we receive collateral in excess of the fair value of the securities pledged. For purposes of this table, we have excluded the collateral received under securities lending, at fair value and included the securities pledged under securities lending, at fair value.
|
(2)
|
Includes investments carried as available for sale, at fair value and at fair value under the fair value option.
|
|
Estimated
Fair Value
|
|
% of
Total
|
|||
December 31, 2016
|
|
|
|
|
||
Corporate bonds
|
$
|
4,696,079
|
|
|
32.3
|
|
Mortgage backed securities
|
504,677
|
|
|
3.5
|
|
|
Municipal bonds
|
3,713,434
|
|
|
25.6
|
|
|
Commercial mortgage backed securities
|
536,051
|
|
|
3.7
|
|
|
U.S. government and government agencies
|
2,804,811
|
|
|
19.3
|
|
|
Non-U.S. government securities
|
1,142,735
|
|
|
7.9
|
|
|
Asset backed securities
|
1,123,987
|
|
|
7.7
|
|
|
Total
|
$
|
14,521,774
|
|
|
100.0
|
|
|
|
|
|
|||
December 31, 2015
|
|
|
|
|
||
Corporate bonds
|
$
|
2,960,694
|
|
|
26.4
|
|
Mortgage backed securities
|
812,557
|
|
|
7.3
|
|
|
Municipal bonds
|
1,626,281
|
|
|
14.5
|
|
|
Commercial mortgage backed securities
|
764,152
|
|
|
6.8
|
|
|
U.S. government and government agencies
|
2,423,455
|
|
|
21.6
|
|
|
Non-U.S. government securities
|
992,792
|
|
|
8.9
|
|
|
Asset backed securities
|
1,620,506
|
|
|
14.5
|
|
|
Total
|
$
|
11,200,437
|
|
|
100.0
|
|
|
ACGL 2016 FORM 10-K
|
99
|
|
Estimated Fair Value
|
|
% of
Total
|
|||
December 31, 2016
|
|
|
|
|||
U.S. government and gov’t agencies (1)
|
$
|
3,210,899
|
|
|
22.1
|
|
AAA
|
3,918,739
|
|
|
27.0
|
|
|
AA
|
3,148,226
|
|
|
21.7
|
|
|
A
|
2,338,834
|
|
|
16.1
|
|
|
BBB
|
1,203,942
|
|
|
8.3
|
|
|
BB
|
226,321
|
|
|
1.6
|
|
|
B
|
156,405
|
|
|
1.1
|
|
|
Lower than B
|
90,833
|
|
|
0.6
|
|
|
Not rated
|
227,574
|
|
|
1.6
|
|
|
Total
|
$
|
14,521,774
|
|
|
100.0
|
|
|
|
|
|
|||
December 31, 2015
|
|
|
|
|||
U.S. government and gov’t agencies (1)
|
$
|
3,060,869
|
|
|
27.3
|
|
AAA
|
4,000,750
|
|
|
35.7
|
|
|
AA
|
1,651,760
|
|
|
14.7
|
|
|
A
|
1,431,138
|
|
|
12.8
|
|
|
BBB
|
457,251
|
|
|
4.1
|
|
|
BB
|
203,426
|
|
|
1.8
|
|
|
B
|
138,770
|
|
|
1.2
|
|
|
Lower than B
|
130,545
|
|
|
1.2
|
|
|
Not rated
|
125,928
|
|
|
1.1
|
|
|
Total
|
$
|
11,200,437
|
|
|
100.0
|
|
(1)
|
Includes U.S. government-sponsored agency mortgage backed securities and agency commercial mortgage backed securities.
|
Severity of gross unrealized losses:
|
Estimated Fair Value
|
|
Gross
Unrealized
Losses
|
|
% of
Total Gross
Unrealized
Losses
|
|||||
December 31, 2016
|
|
|
|
|
|
|||||
0-10%
|
$
|
7,078,582
|
|
|
$
|
(127,909
|
)
|
|
71.6
|
|
10-20%
|
155,403
|
|
|
(24,219
|
)
|
|
13.5
|
|
||
20-30%
|
89,887
|
|
|
(25,929
|
)
|
|
14.5
|
|
||
Greater than 30%
|
1,496
|
|
|
(702
|
)
|
|
0.4
|
|
||
Total
|
$
|
7,325,368
|
|
|
$
|
(178,759
|
)
|
|
100.0
|
|
|
|
|
|
|
|
|||||
December 31, 2015
|
|
|
|
|
|
|||||
0-10%
|
$
|
6,956,754
|
|
|
$
|
(74,229
|
)
|
|
54.4
|
|
10-20%
|
173,441
|
|
|
(28,789
|
)
|
|
21.1
|
|
||
20-30%
|
86,997
|
|
|
(26,227
|
)
|
|
19.2
|
|
||
Greater than 30%
|
10,638
|
|
|
(7,160
|
)
|
|
5.2
|
|
||
Total
|
$
|
7,227,830
|
|
|
$
|
(136,405
|
)
|
|
100.0
|
|
Severity of gross unrealized losses:
|
Estimated Fair Value
|
|
Gross Unrealized Losses
|
|
% of
Total Gross
Unrealized
Losses
|
|||||
December 31, 2016
|
|
|
|
|
|
|||||
0-10%
|
$
|
155,258
|
|
|
$
|
(3,978
|
)
|
|
2.2
|
|
10-20%
|
7,727
|
|
|
(1,235
|
)
|
|
0.7
|
|
||
20-30%
|
2,313
|
|
|
(727
|
)
|
|
0.4
|
|
||
Greater than 30%
|
1,496
|
|
|
(701
|
)
|
|
0.4
|
|
||
Total
|
$
|
166,794
|
|
|
$
|
(6,641
|
)
|
|
3.7
|
|
|
|
|
|
|
|
|||||
December 31, 2015
|
|
|
|
|
|
|||||
0-10%
|
$
|
176,343
|
|
|
$
|
(5,139
|
)
|
|
3.8
|
|
10-20%
|
28,707
|
|
|
(4,807
|
)
|
|
3.5
|
|
||
20-30%
|
12,500
|
|
|
(4,410
|
)
|
|
3.2
|
|
||
Greater than 30%
|
10,520
|
|
|
(7,107
|
)
|
|
5.2
|
|
||
Total
|
$
|
228,070
|
|
|
$
|
(21,463
|
)
|
|
15.7
|
|
|
Estimated Fair Value
|
|
Credit
Rating (1)
|
||
Microsoft Corporation
|
$
|
89,820
|
|
|
AAA/Aaa
|
Apple Inc.
|
72,861
|
|
|
AAA/Aaa
|
|
Bank of New York Mellon Corp.
|
67,360
|
|
|
AA+/Aa1
|
|
Oracle Corporation
|
66,058
|
|
|
A/A1
|
|
JPMorgan Chase & Co
|
64,470
|
|
|
AA-/A1
|
|
Royal Dutch Shell PLC
|
58,019
|
|
|
A-/A3
|
|
Daimler AG
|
53,042
|
|
|
A/Aa2
|
|
Bank of America Corporation
|
51,193
|
|
|
A/A3
|
|
MetLife, Inc.
|
49,576
|
|
|
BBB+/Baa1
|
|
Massmutual Global Funding II Corp
|
47,767
|
|
|
AA-/Aa3
|
|
Total
|
$
|
620,166
|
|
|
|
(1)
|
Average credit ratings as assigned by S&P and Moody’s, respectively.
|
|
ACGL 2016 FORM 10-K
|
100
|
Issuance
Year
|
|
Amortized
Cost
|
|
Average
Credit
Quality
|
|
Estimated Fair Value
|
||||
2004-2008
|
|
$
|
43,603
|
|
|
C+
|
|
$
|
47,426
|
|
2011
|
|
276
|
|
|
AA+
|
|
273
|
|
||
2012
|
|
142
|
|
|
AAA
|
|
145
|
|
||
2013
|
|
85
|
|
|
AAA
|
|
75
|
|
||
2014
|
|
3,367
|
|
|
B-
|
|
3,368
|
|
||
2015
|
|
1,959
|
|
|
BBB-
|
|
1,944
|
|
||
2016
|
|
59,562
|
|
|
AA+
|
|
58,258
|
|
||
Total RMBS
|
|
$
|
108,994
|
|
|
BB+
|
|
$
|
111,489
|
|
|
|
|
|
|
|
|
||||
2002-2008
|
|
33,973
|
|
|
AA
|
|
33,295
|
|
||
2009
|
|
380
|
|
|
BBB-
|
|
379
|
|
||
2010
|
|
374
|
|
|
B+
|
|
367
|
|
||
2012
|
|
25,795
|
|
|
AAA
|
|
25,831
|
|
||
2013
|
|
84,090
|
|
|
AAA
|
|
85,709
|
|
||
2014
|
|
159,369
|
|
|
AA+
|
|
160,202
|
|
||
2015
|
|
122,142
|
|
|
AAA
|
|
120,377
|
|
||
2016
|
|
100,666
|
|
|
AA+
|
|
96,991
|
|
||
Total CMBS
|
|
$
|
526,789
|
|
|
AA+
|
|
$
|
523,151
|
|
|
|
Non-Agency
|
|
Non-Agency
|
||
Additional Statistics:
|
|
RMBS
|
|
CMBS (1)
|
||
Weighted average loan age (months)
|
|
71
|
|
|
29
|
|
Weighted average life (months) (2)
|
|
90
|
|
|
80
|
|
Weighted average loan-to-value % (3)
|
|
60.6
|
%
|
|
56.3
|
%
|
Total delinquencies (4)
|
|
6.9
|
%
|
|
0.3
|
%
|
Current credit support % (5)
|
|
14.6
|
%
|
|
33.5
|
%
|
(1)
|
Loans defeased with government/agency obligations were not material to the collateral underlying our CMBS holdings.
|
(2)
|
The weighted average life for RMBS is based on the interest rates in effect at
December 31, 2016
. The weighted average life for CMBS reflects the average life of the collateral underlying our CMBS holdings.
|
(3)
|
The range of loan-to-values is
16%
to
93%
on RMBS and
0%
to
412%
on CMBS.
|
(4)
|
Total delinquencies includes 60 days and over.
|
(5)
|
Current credit support percentage represents the percentage for a collateralized mortgage obligation (“CMO”) or CMBS class/tranche from other subordinate classes in the same CMO or CMBS deal.
|
|
ACGL 2016 FORM 10-K
|
101
|
|
|
|
|
Weighted Average
|
|
|
|||||||
Sector
|
|
Amortized
Cost
|
|
Credit
Quality
|
|
Credit Support
|
|
Estimated Fair Value
|
|||||
Credit cards
|
|
$
|
613,355
|
|
|
AAA
|
|
17
|
%
|
|
$
|
611,492
|
|
Autos
|
|
262,514
|
|
|
AAA
|
|
30
|
%
|
|
262,181
|
|
||
Loans
|
|
83,467
|
|
|
BBB
|
|
22
|
%
|
|
83,464
|
|
||
Equipment
|
|
103,985
|
|
|
AA
|
|
5
|
%
|
|
104,520
|
|
||
Other (1)
|
|
60,295
|
|
|
BB
|
|
16
|
%
|
|
62,330
|
|
||
Total ABS (2)
|
|
$
|
1,123,616
|
|
|
AA+
|
|
|
|
$
|
1,123,987
|
|
(1)
|
Including rate reduction bonds, commodities, home equity, U.K. securitized and other.
|
(2)
|
The effective duration of the total ABS was
1.5
years at
December 31, 2016
.
|
Country (1)
|
Sovereign
(2)
|
|
Corporate Bonds
|
|
Other
(3)
|
|
Total
|
||||||||
Netherlands
|
$
|
90,951
|
|
|
$
|
137,414
|
|
|
$
|
3,712
|
|
|
$
|
232,077
|
|
Germany
|
74,772
|
|
|
41,520
|
|
|
7,458
|
|
|
123,750
|
|
||||
France
|
302
|
|
|
55,972
|
|
|
11,136
|
|
|
67,410
|
|
||||
Luxembourg
|
—
|
|
|
23,386
|
|
|
2,522
|
|
|
25,908
|
|
||||
Belgium
|
13,878
|
|
|
7,638
|
|
|
1
|
|
|
21,517
|
|
||||
Ireland
|
—
|
|
|
1,818
|
|
|
5,905
|
|
|
7,723
|
|
||||
Supranational (4)
|
7,454
|
|
|
—
|
|
|
—
|
|
|
7,454
|
|
||||
Italy
|
—
|
|
|
—
|
|
|
4,403
|
|
|
4,403
|
|
||||
Spain
|
—
|
|
|
—
|
|
|
3,720
|
|
|
3,720
|
|
||||
Finland
|
—
|
|
|
—
|
|
|
3,576
|
|
|
3,576
|
|
||||
Greece
|
81
|
|
|
711
|
|
|
—
|
|
|
792
|
|
||||
Total
|
$
|
187,438
|
|
|
$
|
268,459
|
|
|
$
|
42,433
|
|
|
$
|
498,330
|
|
(1)
|
The country allocations set forth in the table are based on various assumptions made by us in assessing the country in which the underlying credit risk resides, including a review of the jurisdiction of organization, business operations and other factors. Based on such analysis, we do not believe that we have any other Eurozone investments at
December 31, 2016
.
|
(2)
|
Includes securities issued and/or guaranteed by Eurozone governments.
|
(3)
|
Includes bank loans, equities and other.
|
(4)
|
Includes World Bank, European Investment Bank, International Finance Corp. and European Bank for Reconstruction and Development.
|
Severity of gross unrealized losses:
|
Estimated Fair Value
|
|
Gross
Unrealized
Losses
|
|
% of
Total Gross
Unrealized
Losses
|
|||||
December 31, 2016
|
|
|
|
|
|
|||||
0-10%
|
$
|
214,364
|
|
|
$
|
(8,776
|
)
|
|
50.1
|
|
10-20%
|
52,034
|
|
|
(7,100
|
)
|
|
40.5
|
|
||
20-30%
|
1,983
|
|
|
(607
|
)
|
|
3.5
|
|
||
Greater than 30%
|
1,000
|
|
|
(1,034
|
)
|
|
5.9
|
|
||
Total
|
$
|
269,381
|
|
|
$
|
(17,517
|
)
|
|
100.0
|
|
|
|
|
|
|
|
|||||
December 31, 2015
|
|
|
|
|
|
|||||
0-10%
|
$
|
176,451
|
|
|
$
|
(5,926
|
)
|
|
33.3
|
|
10-20%
|
39,728
|
|
|
(6,528
|
)
|
|
36.7
|
|
||
20-30%
|
13,700
|
|
|
(4,164
|
)
|
|
23.4
|
|
||
Greater than 30%
|
2,396
|
|
|
(1,178
|
)
|
|
6.6
|
|
||
Total
|
$
|
232,275
|
|
|
$
|
(17,796
|
)
|
|
100.0
|
|
|
ACGL 2016 FORM 10-K
|
102
|
|
December 31,
2016 |
|
December 31,
2015 |
||||
Available for sale:
|
|
|
|
||||
Asian and emerging markets
|
$
|
84,778
|
|
|
$
|
206,861
|
|
Investment grade fixed income
|
33,923
|
|
|
31,370
|
|
||
Credit related funds
|
7,469
|
|
|
22,512
|
|
||
Other
|
41,800
|
|
|
39,733
|
|
||
Total available for sale
|
167,970
|
|
|
300,476
|
|
||
Fair value option:
|
|
|
|
||||
Term loan investments (par value: $385,436 and $356,096)
|
378,877
|
|
|
345,855
|
|
||
Mezzanine debt funds
|
127,943
|
|
|
121,589
|
|
||
Credit related funds
|
218,298
|
|
|
219,049
|
|
||
Investment grade fixed income
|
75,468
|
|
|
63,053
|
|
||
Asian and emerging markets
|
178,568
|
|
|
34,761
|
|
||
Other (1)
|
129,717
|
|
|
124,502
|
|
||
Total fair value option
|
1,108,871
|
|
|
908,809
|
|
||
Total
|
$
|
1,276,841
|
|
|
$
|
1,209,285
|
|
(1)
|
Includes fund investments with strategies in mortgage servicing rights, transportation and infrastructure assets and other.
|
•
|
Investable Assets in the ‘Other’ Segment
|
|
ACGL 2016 FORM 10-K
|
103
|
|
December 31,
2016 |
|
December 31,
2015 |
||||
Cash
|
$
|
74,893
|
|
|
$
|
108,550
|
|
Investments accounted for using the fair value option:
|
|
|
|
||||
Term loan investments (par value: $823,101 and $841,047)
|
811,922
|
|
|
762,162
|
|
||
Fixed maturities
|
734,260
|
|
|
569,022
|
|
||
Short-term investments
|
309,127
|
|
|
285,923
|
|
||
Equity securities
|
2,314
|
|
|
—
|
|
||
Total investments accounted for using the fair value option
|
1,857,623
|
|
|
1,617,107
|
|
||
Securities sold but not yet purchased
|
(33,157
|
)
|
|
(30,583
|
)
|
||
Securities transactions entered into but not settled at the balance sheet date
|
(41,596
|
)
|
|
1,033
|
|
||
Total investable assets included in ‘other’ segment
|
$
|
1,857,763
|
|
|
$
|
1,696,107
|
|
|
% of Total
|
|
A.M. Best
Rating (1)
|
|
Everest Reinsurance Company
|
9.4
|
|
|
A+
|
Munich Reinsurance America, Inc.
|
8.6
|
|
|
A+
|
Hannover Rückversicherung AG
|
4.9
|
|
|
A+
|
Partner Reinsurance Company of the U.S.
|
4.8
|
|
|
A
|
Swiss Reinsurance America Corporation
|
4.7
|
|
|
A+
|
Lloyd’s syndicates (2)
|
4.7
|
|
|
A
|
XL Catlin plc
|
4.4
|
|
|
A
|
Transatlantic Reinsurance Company
|
4.3
|
|
|
A+
|
Berkley Insurance Company
|
4.0
|
|
|
A+
|
Odyssey America Reinsurance Corporation (3)
|
3.7
|
|
|
A
|
Allied World Assurance Company, Ltd.
|
2.4
|
|
|
A
|
All other (4)
|
44.1
|
|
|
|
Total
|
100.0
|
|
|
|
(1)
|
The financial strength ratings are as of February 16, 2017 and were assigned by A.M. Best based on its opinion of the insurer’s financial strength as of such date. An explanation of the ratings listed in the table follows: the rating of “A+” is designated “Superior”; and the “A” rating is designated “Excellent.”
|
(2)
|
The A.M. Best group rating of “A” (Excellent) has been applied to all Lloyd’s syndicates.
|
(3)
|
A significant portion of amounts due from Odyssey America Reinsurance Corporation is collateralized through reinsurance trusts.
|
(4)
|
Such amount included 19.9% due from companies rated “A-” or better and 24.2% from companies not rated. For items not rated, over 90% of such amount is collateralized through reinsurance trusts or letters of credit.
|
|
ACGL 2016 FORM 10-K
|
104
|
(U.S. dollars in thousands, except share data)
|
December 31,
|
||||||
2016
|
|
2015
|
|||||
Total shareholders’ equity available to Arch (2)
|
$
|
8,253,718
|
|
|
$
|
6,166,542
|
|
Less preferred shareholders’ equity
|
772,555
|
|
|
325,000
|
|
||
Common shareholders’ equity available to Arch (2)
|
$
|
7,481,163
|
|
|
$
|
5,841,542
|
|
Common shares and common share equivalents outstanding, net of treasury shares (1)
|
135,550,337
|
|
122,627,783
|
||||
Book value per share (2)
|
$
|
55.19
|
|
|
$
|
47.64
|
|
(1)
|
Excludes the effects of
6,872,494
and
7,482,462
stock options and
381,461
and
413,364
restricted stock units outstanding at
December 31, 2016
and
December 31, 2015
, respectively.
|
(2)
|
Balance for December 31, 2015 reflects a cumulative effect of an accounting change. See note
1
, “General,” of the notes accompanying our consolidated financial statements for additional information.
|
|
ACGL 2016 FORM 10-K
|
105
|
|
ACGL 2016 FORM 10-K
|
106
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Total cash provided by (used for):
|
|
|
|
|
|
||||||
Operating activities
|
$
|
1,109,913
|
|
|
$
|
705,128
|
|
|
$
|
997,815
|
|
Investing activities
|
(2,602,714
|
)
|
|
(357,038
|
)
|
|
(422,879
|
)
|
|||
Financing activities
|
1,830,042
|
|
|
(367,529
|
)
|
|
(515,880
|
)
|
|||
Effects of exchange rate changes on foreign currency cash
|
(13,967
|
)
|
|
(10,031
|
)
|
|
(18,686
|
)
|
|||
Increase (decrease) in cash
|
$
|
323,274
|
|
|
$
|
(29,470
|
)
|
|
$
|
40,370
|
|
|
ACGL 2016 FORM 10-K
|
107
|
|
ACGL 2016 FORM 10-K
|
108
|
|
ACGL 2016 FORM 10-K
|
109
|
|
ACGL 2016 FORM 10-K
|
110
|
|
ACGL 2016 FORM 10-K
|
111
|
|
ACGL 2016 FORM 10-K
|
112
|
|
Payment due by period
|
||||||||||||||||||
|
Total
|
|
Less than
1 year
|
|
1-3
years
|
|
3-5
years
|
|
More than
5 years
|
||||||||||
Operating activities
|
|
|
|
|
|
|
|
|
|
||||||||||
Estimated gross payments for losses and loss adjustment expenses (1)
|
$
|
10,200,960
|
|
|
$
|
2,636,891
|
|
|
$
|
3,008,378
|
|
|
$
|
1,545,090
|
|
|
$
|
3,010,601
|
|
Deposit accounting liabilities (2)
|
22,150
|
|
|
1,038
|
|
|
1,015
|
|
|
1,652
|
|
|
18,445
|
|
|||||
Contractholder payables (3)
|
1,716,435
|
|
|
565,485
|
|
|
617,697
|
|
|
239,557
|
|
|
293,696
|
|
|||||
Operating lease obligations
|
178,096
|
|
|
29,881
|
|
|
56,578
|
|
|
42,166
|
|
|
49,471
|
|
|||||
Purchase obligations
|
24,807
|
|
|
18,280
|
|
|
6,527
|
|
|
—
|
|
|
—
|
|
|||||
Contingent consideration liabilities (6)
|
95,193
|
|
|
28,215
|
|
|
33,489
|
|
|
33,489
|
|
|
—
|
|
|||||
Investing activities
|
|
|
|
|
|
|
|
|
|
||||||||||
Unfunded investment commitments (4)
|
1,286,218
|
|
|
1,286,218
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Financing activities
|
|
|
|
|
|
|
|
|
|
||||||||||
Securities lending payable (5)
|
762,554
|
|
|
762,554
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Senior notes (including interest payments)
|
3,710,810
|
|
|
93,192
|
|
|
180,929
|
|
|
180,929
|
|
|
3,255,760
|
|
|||||
Contingent consideration liabilities (6)
|
41,762
|
|
|
41,762
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Capital lease obligations
|
25,420
|
|
|
10,784
|
|
|
14,636
|
|
|
—
|
|
|
—
|
|
|||||
Revolving credit agreement borrowings (7)
|
500,000
|
|
|
500,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total
|
$
|
18,564,405
|
|
|
$
|
5,974,300
|
|
|
$
|
3,919,249
|
|
|
$
|
2,042,883
|
|
|
$
|
6,627,973
|
|
(1)
|
The estimated expected contractual commitments related to the reserves for losses and loss adjustment expenses are presented on a gross basis (
i.e.
, not reflecting any corresponding reinsurance recoverable amounts that would be due to us). It should be noted that until a claim has been presented to us, determined to be valid, quantified and settled, there is no known obligation on an individual transaction basis, and while estimable in the aggregate, the timing and amount contain significant uncertainty. Approximately 63% of our reserves for losses and loss adjustment expenses were incurred but not reported at
December 31, 2016
.
|
(2)
|
The estimated expected contractual commitments related to deposit accounting liabilities have been estimated using projected cash flows from the underlying contracts. It should be noted that, due to the nature of such liabilities, the timing and amount contain significant uncertainty.
|
(3)
|
Certain insurance policies written by our insurance operations feature large deductibles, primarily in construction and national accounts lines. Under such contracts, we are obligated to pay the claimant for the full amount of the claim and are subsequently reimbursed by the policyholder for the deductible amount. In the event we are unable to collect from the policyholder, we would be liable for such defaulted amounts.
|
(4)
|
Unfunded investment commitments are callable by our investment managers. We have assumed that such investments will be funded in the next year but the funding may occur over a longer period of time, due to market conditions and other factors.
|
(5)
|
As part of our securities lending program, we loan securities to third parties and receive collateral in the form of cash or securities. Such collateral is due back to the third parties at the close of the securities lending transactions, a majority of which is overnight and continuous by nature.
|
(6)
|
Pursuant to our 2014 acquisition of the CMG Entities, we are required to make contingent consideration payments based on the closing book value of the pre-closing portfolio of the CMG Entities as re-calculated over an earn-out period and payable at the third, fifth and sixth anniversaries after closing (subject to a one time extension period of one to three years at the sellers’ discretion). The maximum amount of contingent consideration payments over the earn-out period is $136.9 million (or 150% of the closing book value of the CMG Entities less amounts paid at closing). For purposes of this table, the maximum exposure has been shown using an estimated payout pattern.
|
(7)
|
Amounts outstanding under credit facilities include $100 million borrowed by ACGL and $400 million borrowed by Arch U.S. MI Holdings Inc., its wholly owned subsidiary. Due to the variable nature of the interest payments on these borrowings and the ability to repay such borrowings at will, no interest payments have been reflected.
|
|
ACGL 2016 FORM 10-K
|
113
|
(U.S. dollars in billions)
|
Interest Rate Shift in Basis Points
|
||||||||||||||||||
-100
|
|
-50
|
|
-
|
|
+50
|
|
+100
|
|||||||||||
Dec. 31, 2016
|
|
|
|
|
|
|
|
|
|
||||||||||
Total fair value
|
$
|
17.95
|
|
|
$
|
17.62
|
|
|
$
|
17.31
|
|
|
$
|
17.00
|
|
|
$
|
16.70
|
|
Change from base
|
3.7
|
%
|
|
1.8
|
%
|
|
|
|
(1.8
|
)%
|
|
(3.5
|
)%
|
||||||
Change in unrealized value
|
$
|
0.64
|
|
|
$
|
0.31
|
|
|
|
|
$
|
(0.31
|
)
|
|
$
|
(0.61
|
)
|
||
Dec. 31, 2015
|
|
|
|
|
|
|
|
|
|
||||||||||
Total fair value
|
$
|
14.04
|
|
|
$
|
13.80
|
|
|
$
|
13.57
|
|
|
$
|
13.34
|
|
|
$
|
13.12
|
|
Change from base
|
3.4
|
%
|
|
1.7
|
%
|
|
|
|
(1.7
|
)%
|
|
(3.3
|
)%
|
||||||
Change in unrealized value
|
$
|
0.47
|
|
|
$
|
0.23
|
|
|
|
|
$
|
(0.23
|
)
|
|
$
|
(0.45
|
)
|
|
ACGL 2016 FORM 10-K
|
114
|
(U.S. dollars in billions)
|
Credit Spread Shift in Percentage
|
||||||||||||||||||
-100
|
|
-50
|
|
-
|
|
+50
|
|
+100
|
|||||||||||
Dec. 31, 2016
|
|
|
|
|
|
|
|
|
|
||||||||||
Total fair value
|
$
|
17.79
|
|
|
$
|
17.55
|
|
|
$
|
17.31
|
|
|
$
|
17.07
|
|
|
$
|
16.83
|
|
Change from base
|
2.8
|
%
|
|
1.4
|
%
|
|
|
|
(1.4
|
)%
|
|
(2.8
|
)%
|
||||||
Change in unrealized value
|
$
|
0.48
|
|
|
$
|
0.24
|
|
|
|
|
$
|
(0.24
|
)
|
|
$
|
(0.48
|
)
|
||
Dec. 31, 2015
|
|
|
|
|
|
|
|
|
|
||||||||||
Total fair value
|
$
|
13.97
|
|
|
$
|
13.77
|
|
|
$
|
13.57
|
|
|
$
|
13.37
|
|
|
$
|
13.17
|
|
Change from base
|
3.0
|
%
|
|
1.5
|
%
|
|
|
|
(1.5
|
)%
|
|
(3.0
|
)%
|
||||||
Change in unrealized value
|
$
|
0.40
|
|
|
$
|
0.20
|
|
|
|
|
$
|
(0.20
|
)
|
|
$
|
(0.40
|
)
|
|
ACGL 2016 FORM 10-K
|
115
|
(U.S. dollars in thousands, except
per share data)
|
December 31,
2016 |
|
December 31,
2015 |
||||
Net assets (liabilities), denominated in foreign currencies, excluding shareholders’ equity and derivatives
|
$
|
(63,077
|
)
|
|
$
|
(163,199
|
)
|
Shareholders’ equity denominated in foreign currencies (1)
|
290,752
|
|
|
328,133
|
|
||
Net foreign currency forward contracts outstanding (2)
|
(250,263
|
)
|
|
(97,658
|
)
|
||
Net exposures denominated in foreign currencies
|
$
|
(22,588
|
)
|
|
$
|
67,276
|
|
|
|
|
|
||||
Pre-tax impact of a hypothetical 10% appreciation of the U.S. Dollar against foreign currencies:
|
|
|
|
|
|
||
Shareholders’ equity
|
$
|
2,259
|
|
|
$
|
(6,728
|
)
|
Book value per share
|
$
|
0.02
|
|
|
$
|
(0.05
|
)
|
|
|
|
|
||||
Pre-tax impact of a hypothetical 10% decline of the U.S. Dollar against foreign currencies:
|
|
|
|
|
|
||
Shareholders’ equity
|
$
|
(2,259
|
)
|
|
$
|
6,728
|
|
Book value per share
|
$
|
(0.02
|
)
|
|
$
|
0.05
|
|
(1)
|
Represents capital contributions held in the foreign currencies of our operating units.
|
(2)
|
Represents the net notional value of outstanding foreign currency forward contracts.
|
ITEM 7A.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
|
ACGL 2016 FORM 10-K
|
116
|
Index to Financial Statements
|
Page No.
|
|
|
|
|
|
|
|
|
||
|
At December 31, 2016 and December 31, 2015
|
|
|
|
|
|
||
|
For the years ended December 31, 2016, 2015 and 2014
|
|
|
|
|
|
||
|
For the years ended December 31, 2016, 2015 and 2014
|
|
|
|
|
|
||
|
For the years ended December 31, 2016, 2015 and 2014
|
|
|
|
|
|
||
|
For the years ended December 31, 2016, 2015 and 2014
|
|
|
|
|
Notes to Consolidated Financial Statements
|
|
|
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
|
ACGL 2016 FORM 10-K
|
117
|
|
ACGL 2016 FORM 10-K
|
118
|
ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (U.S. dollars in thousands, except share data) |
|||||||
|
December 31,
|
||||||
|
2016
|
|
2015
|
||||
Assets
|
|
|
|
||||
Investments:
|
|
|
|
||||
Fixed maturities available for sale, at fair value (amortized cost: $13,522,671 and $10,515,440)
|
$
|
13,426,577
|
|
|
$
|
10,459,353
|
|
Short-term investments available for sale, at fair value (amortized cost: $611,878 and $591,141)
|
612,005
|
|
|
587,904
|
|
||
Collateral received under securities lending, at fair value (amortized cost: $762,554 and $385,984)
|
762,565
|
|
|
389,336
|
|
||
Equity securities available for sale, at fair value (cost: $475,085 and $543,767)
|
518,041
|
|
|
618,405
|
|
||
Other investments available for sale, at fair value (cost: $149,077 and $261,343)
|
167,970
|
|
|
300,476
|
|
||
Investments accounted for using the fair value option
|
3,421,220
|
|
|
2,894,494
|
|
||
Investments accounted for using the equity method
|
811,273
|
|
|
592,973
|
|
||
Total investments
|
19,719,651
|
|
|
15,842,941
|
|
||
|
|
|
|
||||
Cash
|
842,942
|
|
|
553,326
|
|
||
Accrued investment income
|
124,483
|
|
|
87,206
|
|
||
Securities pledged under securities lending, at fair value (amortized cost: $746,409 and $386,411)
|
744,980
|
|
|
384,081
|
|
||
Premiums receivable
|
1,072,435
|
|
|
983,443
|
|
||
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses
|
2,114,138
|
|
|
1,867,373
|
|
||
Contractholder receivables
|
1,717,436
|
|
|
1,486,296
|
|
||
Ceded unearned premiums
|
859,567
|
|
|
427,609
|
|
||
Deferred acquisition costs
|
447,560
|
|
|
382,829
|
|
||
Receivable for securities sold
|
58,284
|
|
|
45,505
|
|
||
Goodwill and intangible assets
|
781,553
|
|
|
97,531
|
|
||
Other assets
|
889,080
|
|
|
980,791
|
|
||
Total assets
|
$
|
29,372,109
|
|
|
$
|
23,138,931
|
|
|
|
|
|
||||
Liabilities
|
|
|
|
||||
Reserve for losses and loss adjustment expenses
|
$
|
10,200,960
|
|
|
$
|
9,125,250
|
|
Unearned premiums
|
3,406,870
|
|
|
2,333,932
|
|
||
Reinsurance balances payable
|
300,407
|
|
|
224,120
|
|
||
Contractholder payables
|
1,717,436
|
|
|
1,486,296
|
|
||
Collateral held for insured obligations
|
301,406
|
|
|
248,982
|
|
||
Deposit accounting liabilities
|
22,150
|
|
|
260,364
|
|
||
Senior notes
|
1,732,258
|
|
|
791,306
|
|
||
Revolving credit agreement borrowings
|
756,650
|
|
|
530,434
|
|
||
Securities lending payable
|
762,554
|
|
|
393,844
|
|
||
Payable for securities purchased
|
76,183
|
|
|
64,996
|
|
||
Other liabilities
|
784,110
|
|
|
568,852
|
|
||
Total liabilities
|
20,060,984
|
|
|
16,028,376
|
|
||
|
|
|
|
||||
Commitments and Contingencies
|
|
|
|
||||
Redeemable noncontrolling interests
|
205,553
|
|
|
205,182
|
|
||
|
|
|
|
||||
Shareholders’ Equity
|
|
|
|
||||
Non-cumulative preferred shares
|
772,555
|
|
|
325,000
|
|
||
Convertible non-voting common equivalent preferred shares
|
1,101,304
|
|
|
—
|
|
||
Common shares ($0.0033 par, shares issued: 174,644,101 and 173,107,849)
|
582
|
|
|
577
|
|
||
Additional paid-in capital
|
531,687
|
|
|
467,339
|
|
||
Retained earnings
|
7,996,701
|
|
|
7,332,032
|
|
||
Accumulated other comprehensive income (loss), net of deferred income tax
|
(114,541
|
)
|
|
(16,502
|
)
|
||
Common shares held in treasury, at cost (shares: 51,856,584 and 50,480,066)
|
(2,034,570
|
)
|
|
(1,941,904
|
)
|
||
Total shareholders' equity available to Arch
|
8,253,718
|
|
|
6,166,542
|
|
||
Non-redeemable noncontrolling interests
|
851,854
|
|
|
738,831
|
|
||
Total shareholders' equity
|
9,105,572
|
|
|
6,905,373
|
|
||
Total liabilities, noncontrolling interests and shareholders' equity
|
$
|
29,372,109
|
|
|
$
|
23,138,931
|
|
|
ACGL 2016 FORM 10-K
|
119
|
ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (U.S. dollars in thousands, except share data) |
|||||||||||
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Revenues
|
|
|
|
|
|
||||||
Net premiums written
|
$
|
4,031,391
|
|
|
$
|
3,817,531
|
|
|
$
|
3,891,938
|
|
Change in unearned premiums
|
(146,569
|
)
|
|
(83,626
|
)
|
|
(298,190
|
)
|
|||
Net premiums earned
|
3,884,822
|
|
|
3,733,905
|
|
|
3,593,748
|
|
|||
Net investment income
|
366,742
|
|
|
348,090
|
|
|
302,585
|
|
|||
Net realized gains (losses)
|
137,586
|
|
|
(185,842
|
)
|
|
102,917
|
|
|||
Other-than-temporary impairment losses
|
(30,794
|
)
|
|
(26,152
|
)
|
|
(30,470
|
)
|
|||
Less investment impairments recognized in other
comprehensive income, before taxes
|
352
|
|
|
6,036
|
|
|
320
|
|
|||
Net impairment losses recognized in earnings
|
(30,442
|
)
|
|
(20,116
|
)
|
|
(30,150
|
)
|
|||
|
|
|
|
|
|
||||||
Other underwriting income
|
57,173
|
|
|
35,497
|
|
|
10,142
|
|
|||
Equity in net income of investment funds accounted
for using the equity method
|
48,475
|
|
|
25,455
|
|
|
19,883
|
|
|||
Other income (loss)
|
(800
|
)
|
|
(399
|
)
|
|
(10,252
|
)
|
|||
Total revenues
|
4,463,556
|
|
|
3,936,590
|
|
|
3,988,873
|
|
|||
|
|
|
|
|
|
||||||
Expenses
|
|
|
|
|
|
||||||
Losses and loss adjustment expenses
|
2,185,599
|
|
|
2,050,903
|
|
|
1,919,250
|
|
|||
Acquisition expenses
|
678,033
|
|
|
681,476
|
|
|
657,262
|
|
|||
Other operating expenses
|
633,025
|
|
|
607,516
|
|
|
556,280
|
|
|||
Corporate expenses
|
81,746
|
|
|
49,745
|
|
|
49,944
|
|
|||
Interest expense
|
66,252
|
|
|
45,874
|
|
|
45,634
|
|
|||
Net foreign exchange (gains) losses
|
(36,651
|
)
|
|
(66,118
|
)
|
|
(83,744
|
)
|
|||
Total expenses
|
3,608,004
|
|
|
3,369,396
|
|
|
3,144,626
|
|
|||
|
|
|
|
|
|
||||||
Income before income taxes
|
855,552
|
|
|
567,194
|
|
|
844,247
|
|
|||
|
|
|
|
|
|
||||||
Income taxes:
|
|
|
|
|
|
||||||
Current tax expense
|
50,745
|
|
|
44,194
|
|
|
30,550
|
|
|||
Deferred tax (benefit) expense
|
(19,371
|
)
|
|
(3,582
|
)
|
|
(7,563
|
)
|
|||
Income tax expense
|
31,374
|
|
|
40,612
|
|
|
22,987
|
|
|||
|
|
|
|
|
|
||||||
Net income
|
$
|
824,178
|
|
|
$
|
526,582
|
|
|
$
|
821,260
|
|
Net (income) loss attributable to noncontrolling interests
|
(131,440
|
)
|
|
11,156
|
|
|
13,095
|
|
|||
Net income available to Arch
|
692,738
|
|
|
537,738
|
|
|
834,355
|
|
|||
Preferred dividends
|
(28,070
|
)
|
|
(21,938
|
)
|
|
(21,938
|
)
|
|||
Net income available to Arch common shareholders
|
$
|
664,668
|
|
|
$
|
515,800
|
|
|
$
|
812,417
|
|
|
|
|
|
|
|
||||||
Net income per common share and common share equivalent
|
|
|
|
|
|
||||||
Basic
|
$
|
5.50
|
|
|
$
|
4.24
|
|
|
$
|
6.21
|
|
Diluted
|
$
|
5.33
|
|
|
$
|
4.09
|
|
|
$
|
6.02
|
|
|
|
|
|
|
|
||||||
Weighted average common shares and common share
equivalents outstanding
|
|
|
|
|
|
||||||
Basic
|
120,792,114
|
|
|
121,786,127
|
|
|
130,817,610
|
|
|||
Diluted
|
124,717,493
|
|
|
126,038,743
|
|
|
134,922,322
|
|
|
ACGL 2016 FORM 10-K
|
120
|
ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (U.S. dollars in thousands) |
|||||||||||
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Comprehensive Income
|
|
|
|
|
|
||||||
Net income
|
$
|
824,178
|
|
|
$
|
526,582
|
|
|
$
|
821,260
|
|
Other comprehensive income (loss), net of deferred income tax
|
|
|
|
|
|
||||||
Unrealized appreciation (decline) in value of available-for-sale investments:
|
|
|
|
|
|
||||||
Unrealized holding gains (losses) arising during period
|
(21,013
|
)
|
|
(77,244
|
)
|
|
146,330
|
|
|||
Portion of other-than-temporary impairment losses recognized in other comprehensive income, net of deferred income tax
|
(352
|
)
|
|
(6,036
|
)
|
|
(320
|
)
|
|||
Reclassification of net realized gains, net of income taxes,
included in net income
|
(56,361
|
)
|
|
(28,233
|
)
|
|
(65,104
|
)
|
|||
Foreign currency translation adjustments
|
(20,381
|
)
|
|
(34,111
|
)
|
|
(27,014
|
)
|
|||
Comprehensive income
|
726,071
|
|
|
380,958
|
|
|
875,152
|
|
|||
Net (income) loss attributable to noncontrolling interests
|
(131,440
|
)
|
|
11,156
|
|
|
13,095
|
|
|||
Other comprehensive (income) loss attributable to noncontrolling interests
|
68
|
|
|
265
|
|
|
—
|
|
|||
Comprehensive income available to Arch
|
$
|
594,699
|
|
|
$
|
392,379
|
|
|
$
|
888,247
|
|
|
ACGL 2016 FORM 10-K
|
121
|
ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (U.S. dollars in thousands) |
|||||||||||
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Non-cumulative preferred shares
|
|
|
|
|
|
||||||
Balance at beginning of year
|
$
|
325,000
|
|
|
$
|
325,000
|
|
|
$
|
325,000
|
|
Series E preferred shares issued
|
450,000
|
|
|
—
|
|
|
—
|
|
|||
Series C preferred shares repurchased
|
(2,445
|
)
|
|
—
|
|
|
—
|
|
|||
Balance at end of year
|
772,555
|
|
|
325,000
|
|
|
325,000
|
|
|||
|
|
|
|
|
|
||||||
Convertible non-voting common equivalent preferred shares
|
|
|
|
|
|
||||||
Balance at beginning of year
|
—
|
|
|
—
|
|
|
—
|
|
|||
Series D preferred shares issued
|
1,101,304
|
|
|
—
|
|
|
—
|
|
|||
Balance at end of year
|
1,101,304
|
|
|
—
|
|
|
—
|
|
|||
|
|
|
|
|
|
||||||
Common shares
|
|
|
|
|
|
||||||
Balance at beginning of year
|
577
|
|
|
572
|
|
|
565
|
|
|||
Common shares issued, net
|
5
|
|
|
5
|
|
|
7
|
|
|||
Balance at end of year
|
582
|
|
|
577
|
|
|
572
|
|
|||
|
|
|
|
|
|
||||||
Additional paid-in capital
|
|
|
|
|
|
||||||
Balance at beginning of year
|
467,339
|
|
|
383,073
|
|
|
299,517
|
|
|||
Common shares issued, net
|
11,919
|
|
|
10,576
|
|
|
9,590
|
|
|||
Issue costs on Series E preferred shares
|
(15,101
|
)
|
|
—
|
|
|
—
|
|
|||
Exercise of stock options
|
9,448
|
|
|
15,926
|
|
|
18,662
|
|
|||
Amortization of share-based compensation
|
56,581
|
|
|
56,096
|
|
|
54,789
|
|
|||
Other
|
1,501
|
|
|
1,668
|
|
|
515
|
|
|||
Balance at end of year
|
531,687
|
|
|
467,339
|
|
|
383,073
|
|
|||
|
|
|
|
|
|
||||||
Retained earnings
|
|
|
|
|
|
||||||
Balance at beginning of year
|
7,332,032
|
|
|
6,816,232
|
|
|
6,042,154
|
|
|||
Cumulative effect of an accounting change (1)
|
—
|
|
|
—
|
|
|
(38,339
|
)
|
|||
Balance at beginning of year, as adjusted
|
7,332,032
|
|
|
6,816,232
|
|
|
6,003,815
|
|
|||
Net income
|
824,178
|
|
|
526,582
|
|
|
821,260
|
|
|||
Net (income) loss attributable to noncontrolling interests
|
(131,440
|
)
|
|
11,156
|
|
|
13,095
|
|
|||
Preferred share dividends
|
(28,070
|
)
|
|
(21,938
|
)
|
|
(21,938
|
)
|
|||
Balance at end of year
|
7,996,701
|
|
|
7,332,032
|
|
|
6,816,232
|
|
|||
|
|
|
|
|
|
||||||
Accumulated other comprehensive income (loss)
|
|
|
|
|
|
||||||
Balance at beginning of year
|
(16,502
|
)
|
|
128,856
|
|
|
74,964
|
|
|||
Unrealized appreciation (decline) in value of available-for-sale investments, net of deferred income tax:
|
|
|
|
|
|
||||||
Balance at beginning of year
|
50,085
|
|
|
161,598
|
|
|
80,692
|
|
|||
Unrealized holding gains (losses) arising during period, net of reclassification adjustment
|
(77,374
|
)
|
|
(105,477
|
)
|
|
81,226
|
|
|||
Portion of other-than-temporary impairment losses recognized in other
comprehensive income, net of deferred income tax
|
(352
|
)
|
|
(6,036
|
)
|
|
(320
|
)
|
|||
Balance at end of year
|
(27,641
|
)
|
|
50,085
|
|
|
161,598
|
|
|||
Foreign currency translation adjustments, net of deferred income tax:
|
|
|
|
|
|
||||||
Balance at beginning of year
|
(66,587
|
)
|
|
(32,742
|
)
|
|
(5,728
|
)
|
|||
Foreign currency translation adjustments
|
(20,381
|
)
|
|
(34,111
|
)
|
|
(27,014
|
)
|
|||
Foreign currency translation adjustments attributable to noncontrolling interests
|
68
|
|
|
266
|
|
|
—
|
|
|||
Balance at end of year
|
(86,900
|
)
|
|
(66,587
|
)
|
|
(32,742
|
)
|
|||
Balance at end of year
|
(114,541
|
)
|
|
(16,502
|
)
|
|
128,856
|
|
|||
|
|
|
|
|
|
||||||
Common shares held in treasury, at cost
|
|
|
|
|
|
||||||
Balance at beginning of year
|
(1,941,904
|
)
|
|
(1,562,019
|
)
|
|
(1,094,704
|
)
|
|||
Shares repurchased for treasury
|
(92,666
|
)
|
|
(379,885
|
)
|
|
(467,315
|
)
|
|||
Balance at end of year
|
(2,034,570
|
)
|
|
(1,941,904
|
)
|
|
(1,562,019
|
)
|
|||
|
|
|
|
|
|
||||||
Total shareholders’ equity available to Arch
|
8,253,718
|
|
|
6,166,542
|
|
|
6,091,714
|
|
|||
Non-redeemable noncontrolling interests
|
851,854
|
|
|
738,831
|
|
|
769,081
|
|
|||
Total shareholders’ equity
|
$
|
9,105,572
|
|
|
$
|
6,905,373
|
|
|
$
|
6,860,795
|
|
|
ACGL 2016 FORM 10-K
|
122
|
ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (U.S. dollars in thousands) |
|||||||||||
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Operating Activities
|
|
|
|
|
|
||||||
Net income
|
$
|
824,178
|
|
|
$
|
526,582
|
|
|
$
|
821,260
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Net realized losses (gains)
|
(178,507
|
)
|
|
149,961
|
|
|
(127,511
|
)
|
|||
Net impairment losses recognized in earnings
|
30,442
|
|
|
20,116
|
|
|
30,150
|
|
|||
Equity in net income or loss of investment funds accounted for using the
equity method and other income or loss
|
5,644
|
|
|
3,857
|
|
|
13,340
|
|
|||
Share-based compensation
|
56,581
|
|
|
56,096
|
|
|
54,789
|
|
|||
Changes in:
|
|
|
|
|
|
||||||
Reserve for losses and loss adjustment expenses, net of unpaid losses
and loss adjustment expenses recoverable
|
372,244
|
|
|
181,658
|
|
|
156,211
|
|
|||
Unearned premiums, net of ceded unearned premiums
|
146,569
|
|
|
83,626
|
|
|
298,190
|
|
|||
Premiums receivable
|
(71,613
|
)
|
|
(26,783
|
)
|
|
(217,035
|
)
|
|||
Deferred acquisition costs
|
(38,597
|
)
|
|
(29,008
|
)
|
|
(81,584
|
)
|
|||
Reinsurance balances payable
|
31,542
|
|
|
(5,885
|
)
|
|
26,699
|
|
|||
Other liabilities
|
222,069
|
|
|
45,223
|
|
|
101,757
|
|
|||
Other items
|
(3,908
|
)
|
|
(7,537
|
)
|
|
(39,136
|
)
|
|||
Net Cash Provided By Operating Activities
|
1,396,644
|
|
|
997,906
|
|
|
1,037,130
|
|
|||
|
|
|
|
|
|
||||||
Investing Activities
|
|
|
|
|
|
||||||
Purchases of fixed maturity investments
|
(35,532,810
|
)
|
|
(29,451,873
|
)
|
|
(28,745,279
|
)
|
|||
Purchases of equity securities
|
(665,702
|
)
|
|
(515,413
|
)
|
|
(520,817
|
)
|
|||
Purchases of other investments
|
(1,389,406
|
)
|
|
(1,749,525
|
)
|
|
(1,590,648
|
)
|
|||
Proceeds from sales of fixed maturity investments
|
34,559,966
|
|
|
28,094,047
|
|
|
26,823,189
|
|
|||
Proceeds from sales of equity securities
|
751,728
|
|
|
564,011
|
|
|
411,362
|
|
|||
Proceeds from sales, redemptions and maturities of other investments
|
1,149,328
|
|
|
1,250,883
|
|
|
941,798
|
|
|||
Proceeds from redemptions and maturities of fixed maturity investments
|
755,007
|
|
|
748,529
|
|
|
762,995
|
|
|||
Net settlements of derivative instruments
|
(17,068
|
)
|
|
(5,056
|
)
|
|
34,372
|
|
|||
Proceeds from investment in joint venture
|
—
|
|
|
40,000
|
|
|
—
|
|
|||
Net sales (purchases) of short-term investments
|
(123,410
|
)
|
|
169,095
|
|
|
577,126
|
|
|||
Change in cash collateral related to securities lending
|
(155,248
|
)
|
|
(6,662
|
)
|
|
57,470
|
|
|||
Acquisitions, net of cash
|
(1,992,720
|
)
|
|
818
|
|
|
(237,106
|
)
|
|||
Purchases of fixed assets
|
(15,303
|
)
|
|
(15,736
|
)
|
|
(19,883
|
)
|
|||
Change in other assets
|
(45,905
|
)
|
|
(36,993
|
)
|
|
—
|
|
|||
Net Cash Used For Investing Activities
|
(2,721,543
|
)
|
|
(913,875
|
)
|
|
(1,505,421
|
)
|
|||
|
|
|
|
|
|
||||||
Financing Activities
|
|
|
|
|
|
||||||
Proceeds from issuance of preferred shares, net
|
434,899
|
|
|
—
|
|
|
—
|
|
|||
Purchases of common shares under share repurchase program
|
(75,256
|
)
|
|
(365,383
|
)
|
|
(454,137
|
)
|
|||
Proceeds from common shares issued, net
|
(2,418
|
)
|
|
4,861
|
|
|
6,827
|
|
|||
Proceeds from borrowings
|
1,386,741
|
|
|
431,362
|
|
|
—
|
|
|||
Repayments of borrowings
|
(219,171
|
)
|
|
—
|
|
|
—
|
|
|||
Change in cash collateral related to securities lending
|
155,248
|
|
|
6,662
|
|
|
(57,470
|
)
|
|||
Third party investment in non-redeemable noncontrolling interests
|
—
|
|
|
—
|
|
|
796,903
|
|
|||
Third party investment in redeemable noncontrolling interests
|
—
|
|
|
—
|
|
|
219,233
|
|
|||
Dividends paid to redeemable noncontrolling interests
|
(17,989
|
)
|
|
(18,307
|
)
|
|
(14,448
|
)
|
|||
Other
|
1,685
|
|
|
(41,913
|
)
|
|
64,973
|
|
|||
Preferred dividends paid
|
(28,070
|
)
|
|
(21,938
|
)
|
|
(21,938
|
)
|
|||
Net Cash Provided By (Used For) Financing Activities
|
1,635,669
|
|
|
(4,656
|
)
|
|
539,943
|
|
|||
|
|
|
|
|
|
||||||
Effects of exchange rate changes on foreign currency cash
|
(21,154
|
)
|
|
(11,751
|
)
|
|
(20,007
|
)
|
|||
|
|
|
|
|
|
||||||
Increase in cash
|
289,616
|
|
|
67,624
|
|
|
51,645
|
|
|||
Cash beginning of year
|
553,326
|
|
|
485,702
|
|
|
434,057
|
|
|||
Cash end of year
|
$
|
842,942
|
|
|
$
|
553,326
|
|
|
$
|
485,702
|
|
|
|
|
|
|
|
||||||
Income taxes paid
|
$
|
50,621
|
|
|
$
|
40,273
|
|
|
$
|
20,923
|
|
Interest paid
|
$
|
63,288
|
|
|
$
|
52,728
|
|
|
$
|
46,429
|
|
Non-cash consideration paid in convertible non-voting common equivalent preferred shares
|
$
|
1,101,304
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
ACGL 2016 FORM 10-K
|
123
|
|
ACGL 2016 FORM 10-K
|
124
|
|
|
Total
|
|
Useful Life
|
||
Purchase price
|
|
|
|
|
||
Cash paid
|
|
$
|
2,159,524
|
|
|
|
Convertible non-voting common equivalent preferred shares (1)
|
|
1,101,304
|
|
|
|
|
Total purchase price (a)
|
|
$
|
3,260,828
|
|
|
|
|
|
|
|
|
||
Assets acquired
|
|
|
|
|
||
Cash
|
|
$
|
187,715
|
|
|
|
Investments, at fair value
|
|
3,404,267
|
|
|
|
|
Accrued investment income
|
|
33,770
|
|
|
|
|
Premiums receivable
|
|
34,545
|
|
|
|
|
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses
|
|
27,280
|
|
|
|
|
Ceded unearned premiums
|
|
302,090
|
|
|
|
|
Intangible asset -- acquired insurance contracts
|
|
350,000
|
|
|
9 years
|
|
Intangible asset -- distribution relationships
|
|
115,000
|
|
|
20 years
|
|
Intangible asset -- operating platform
|
|
15,000
|
|
|
5 years
|
|
Intangible asset -- insurance licenses
|
|
27,000
|
|
|
Indefinite
|
|
Other assets acquired
|
|
133,222
|
|
|
|
|
Total assets acquired
|
|
4,629,889
|
|
|
|
|
|
|
|
|
|
||
Liabilities acquired
|
|
|
|
|
||
Reserves for losses and loss adjustment expenses
|
|
$
|
577,268
|
|
|
|
Unearned premiums
|
|
837,175
|
|
|
|
|
Reinsurance balances payable
|
|
49,295
|
|
|
|
|
Other liabilities acquired
|
|
94,081
|
|
|
|
|
Total liabilities acquired
|
|
1,557,819
|
|
|
|
|
Net assets acquired (b)
|
|
$
|
3,072,070
|
|
|
|
Goodwill (a)-(b)
|
|
$
|
188,758
|
|
|
|
|
Unaudited Pro Forma
|
||||||
|
Year Ended December 31,
|
||||||
|
2016
|
|
2015
|
||||
Total revenues
|
$
|
5,311,729
|
|
|
$
|
4,840,084
|
|
Net income available to Arch common shareholders
|
$
|
913,882
|
|
|
$
|
718,463
|
|
Net income per common share and common share equivalent
|
|
|
|
||||
Basic
|
$6.84
|
|
$5.34
|
||||
Diluted
|
$6.65
|
|
$5.18
|
|
ACGL 2016 FORM 10-K
|
125
|
|
ACGL 2016 FORM 10-K
|
126
|
|
ACGL 2016 FORM 10-K
|
127
|
|
ACGL 2016 FORM 10-K
|
128
|
|
ACGL 2016 FORM 10-K
|
129
|
|
ACGL 2016 FORM 10-K
|
130
|
|
ACGL 2016 FORM 10-K
|
131
|
|
ACGL 2016 FORM 10-K
|
132
|
|
ACGL 2016 FORM 10-K
|
133
|
|
ACGL 2016 FORM 10-K
|
134
|
4
.
|
Variable Interest Entity and Noncontrolling Interests
|
|
December 31,
|
||||||
|
2016
|
|
2015
|
||||
Assets
|
|
|
|
||||
Investments accounted for using the fair value option
|
$
|
1,857,623
|
|
|
$
|
1,617,107
|
|
Cash
|
74,893
|
|
|
108,550
|
|
||
Accrued investment income
|
17,017
|
|
|
19,249
|
|
||
Premiums receivable
|
189,911
|
|
|
162,263
|
|
||
Reinsurance recoverable on unpaid and paid losses and LAE
|
24,420
|
|
|
14,135
|
|
||
Ceded unearned premiums
|
12,145
|
|
|
11,129
|
|
||
Deferred acquisition costs, net
|
86,379
|
|
|
75,443
|
|
||
Receivable for securities sold
|
1,326
|
|
|
34,095
|
|
||
Goodwill and intangible assets
|
7,650
|
|
|
—
|
|
||
Other assets
|
111,386
|
|
|
80,361
|
|
||
Total assets of consolidated VIE
|
$
|
2,382,750
|
|
|
$
|
2,122,332
|
|
|
|
|
|
||||
Liabilities
|
|
|
|
||||
Reserves for losses and loss adjustment expenses
|
$
|
510,809
|
|
|
$
|
290,997
|
|
Unearned premiums
|
293,480
|
|
|
249,980
|
|
||
Reinsurance balances payable
|
12,289
|
|
|
14,005
|
|
||
Revolving credit agreement borrowings
|
256,650
|
|
|
430,434
|
|
||
Payable for securities purchased
|
42,922
|
|
|
33,062
|
|
||
Other liabilities
|
88,976
|
|
|
53,624
|
|
||
Total liabilities of consolidated VIE
|
$
|
1,205,126
|
|
|
$
|
1,072,102
|
|
|
|
|
|
||||
Redeemable noncontrolling interests
|
$
|
220,253
|
|
|
$
|
219,882
|
|
|
ACGL 2016 FORM 10-K
|
135
|
|
December 31,
|
||||||
|
2016
|
|
2015
|
||||
Balance, beginning of year
|
$
|
738,831
|
|
|
$
|
769,081
|
|
Sale of shares to noncontrolling interests
|
—
|
|
|
—
|
|
||
Amounts attributable to noncontrolling interests
|
113,091
|
|
|
(29,984
|
)
|
||
Foreign currency translation adjustments
|
(68
|
)
|
|
(266
|
)
|
||
Balance, end of year
|
$
|
851,854
|
|
|
$
|
738,831
|
|
|
December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Balance, beginning of year
|
$
|
205,182
|
|
|
$
|
219,512
|
|
|
$
|
—
|
|
Sale of shares to noncontrolling interests
|
—
|
|
|
—
|
|
|
219,233
|
|
|||
Shares acquired by the Company (1)
|
—
|
|
|
(14,700
|
)
|
|
—
|
|
|||
Accretion of preference share issuance costs
|
371
|
|
|
370
|
|
|
279
|
|
|||
Balance, end of year
|
$
|
205,553
|
|
|
$
|
205,182
|
|
|
$
|
219,512
|
|
|
December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Amounts attributable to non-redeemable noncontrolling interests
|
$
|
(113,091
|
)
|
|
$
|
29,984
|
|
|
$
|
27,823
|
|
Dividends attributable to redeemable noncontrolling interests
|
(18,349
|
)
|
|
(18,828
|
)
|
|
(14,728
|
)
|
|||
Net (income) loss attributable to noncontrolling interests
|
$
|
(131,440
|
)
|
|
$
|
11,156
|
|
|
$
|
13,095
|
|
|
ACGL 2016 FORM 10-K
|
136
|
|
|
|
Maximum Exposure to Loss
|
||||||||||||
|
Total VIE Assets
|
|
On-Balance Sheet
|
|
Off-Balance Sheet
|
|
Total
|
||||||||
Bellemeade Re I Ltd.
|
$
|
156,551
|
|
|
$
|
401
|
|
|
$
|
1,310
|
|
|
$
|
1,711
|
|
Bellemeade Re II Ltd.
|
298,578
|
|
|
9
|
|
|
1,103
|
|
|
1,112
|
|
||||
Total
|
$
|
455,129
|
|
|
$
|
410
|
|
|
$
|
2,413
|
|
|
$
|
2,823
|
|
•
|
Construction and national accounts:
primary and excess casualty coverages to middle and large accounts in the construction industry and a wide range of products for middle and large national accounts, specializing in loss sensitive primary casualty insurance programs (including large deductible, self-insured retention and retrospectively rated programs).
|
•
|
Excess and surplus casualty:
primary and excess casualty insurance coverages, including middle market energy business, and contract binding, which primarily provides casualty coverage through a network of appointed agents to small and medium risks.
|
•
|
Lenders products:
collateral protection, debt cancellation and service contract reimbursement products to banks, credit unions, automotive dealerships and original equipment manufacturers and other specialty programs that pertain to automotive lending and leasing.
|
•
|
Professional lines:
directors’ and officers’ liability, errors and omissions liability, employment practices liability, fiduciary liability, crime, professional indemnity and other financial related coverages for corporate, private equity, venture capital, real estate investment trust, limited partnership, financial institution and not-for-profit clients of all sizes and medical professional and general liability insurance coverages for the healthcare industry. The business is predominately written on a claims-made basis.
|
•
|
Programs:
primarily package policies, underwriting workers’ compensation and umbrella liability business in support of desirable package programs, targeting program managers with unique expertise and niche products offering general liability, commercial automobile, inland marine and property business with minimal catastrophe exposure.
|
•
|
Property, energy, marine and aviation:
primary and excess general property insurance coverages, including catastrophe-exposed property coverage, for commercial clients. Coverages for marine include hull, war, specie and liability. Aviation and stand-alone terrorism are also offered.
|
•
|
Travel, accident and health:
specialty travel and accident and related insurance products for individual, group
|
|
ACGL 2016 FORM 10-K
|
137
|
•
|
Other:
includes alternative market risks (including captive insurance programs), excess workers’ compensation and employer’s liability insurance coverages for qualified self-insured groups, associations and trusts, and contract and commercial surety coverages, including contract bonds (payment and performance bonds) primarily for medium and large contractors and commercial surety bonds for Fortune 1000 companies and smaller transaction business programs.
|
•
|
Casualty:
provides coverage to ceding company clients on third party liability and workers’ compensation exposures from ceding company clients, primarily on a treaty basis. Exposures include, among others, executive assurance, professional liability, workers’ compensation, excess and umbrella liability, excess motor and healthcare business.
|
•
|
Marine and aviation:
provides coverage for energy, hull, cargo, specie, liability and transit, and aviation business, including airline and general aviation risks. Business written may also include space business, which includes coverages for satellite assembly, launch and operation for commercial space programs.
|
•
|
Other specialty:
provides coverage to ceding company clients for proportional motor and other lines including surety, accident and health, workers’ compensation catastrophe, agriculture, trade credit and political risk.
|
•
|
Property catastrophe:
provides protection for most catastrophic losses that are covered in the underlying policies written by reinsureds, including hurricane, earthquake, flood, tornado, hail and fire, and coverage for other perils on a case-by-case basis. Property catastrophe reinsurance provides coverage on an excess of loss basis when aggregate losses and loss adjustment expense from a single occurrence of a covered peril exceed the retention specified in the contract.
|
•
|
Property excluding property catastrophe:
provides coverage for both personal lines and commercial property exposures and principally covers buildings, structures, equipment and contents. The primary perils in this business include fire, explosion, collapse, riot, vandalism, wind, tornado, flood and earthquake. Business is assumed on both a proportional and excess of loss basis. In addition, facultative business is written which focuses on commercial property risks on an excess of loss basis.
|
•
|
Other.
includes life reinsurance business on both a proportional and non-proportional basis, casualty clash business and, in limited instances, non-traditional business which is intended to provide insurers with risk management solutions that complement traditional reinsurance.
|
|
ACGL 2016 FORM 10-K
|
138
|
|
Year Ended December 31, 2016
|
||||||||||||||||||||||
|
Insurance
|
|
Reinsurance
|
|
Mortgage
|
|
Sub-Total
|
|
Other
|
|
Total
|
||||||||||||
Gross premiums written (1)
|
$
|
3,027,049
|
|
|
$
|
1,494,397
|
|
|
$
|
499,725
|
|
|
$
|
5,019,363
|
|
|
$
|
535,094
|
|
|
$
|
5,202,134
|
|
Premiums ceded
|
(954,768
|
)
|
|
(440,541
|
)
|
|
(108,259
|
)
|
|
(1,501,760
|
)
|
|
(21,306
|
)
|
|
(1,170,743
|
)
|
||||||
Net premiums written
|
2,072,281
|
|
|
1,053,856
|
|
|
391,466
|
|
|
3,517,603
|
|
|
513,788
|
|
|
4,031,391
|
|
||||||
Change in unearned premiums
|
1,623
|
|
|
2,376
|
|
|
(104,750
|
)
|
|
(100,751
|
)
|
|
(45,818
|
)
|
|
(146,569
|
)
|
||||||
Net premiums earned
|
2,073,904
|
|
|
1,056,232
|
|
|
286,716
|
|
|
3,416,852
|
|
|
467,970
|
|
|
3,884,822
|
|
||||||
Other underwriting income
|
—
|
|
|
36,403
|
|
|
17,024
|
|
|
53,427
|
|
|
3,746
|
|
|
57,173
|
|
||||||
Losses and loss adjustment expenses
|
(1,359,313
|
)
|
|
(475,762
|
)
|
|
(28,943
|
)
|
|
(1,864,018
|
)
|
|
(321,581
|
)
|
|
(2,185,599
|
)
|
||||||
Acquisition expenses
|
(304,066
|
)
|
|
(212,375
|
)
|
|
(32,065
|
)
|
|
(548,506
|
)
|
|
(129,527
|
)
|
|
(678,033
|
)
|
||||||
Other operating expenses (2)
|
(353,782
|
)
|
|
(143,408
|
)
|
|
(101,293
|
)
|
|
(598,483
|
)
|
|
(25,163
|
)
|
|
(623,646
|
)
|
||||||
Underwriting income (loss)
|
$
|
56,743
|
|
|
$
|
261,090
|
|
|
$
|
141,439
|
|
|
459,272
|
|
|
(4,555
|
)
|
|
454,717
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net investment income
|
|
|
|
|
|
|
277,193
|
|
|
89,549
|
|
|
366,742
|
|
|||||||||
Net realized gains (losses)
|
|
|
|
|
|
|
69,586
|
|
|
68,000
|
|
|
137,586
|
|
|||||||||
Net impairment losses recognized in earnings
|
|
|
|
|
|
|
(30,442
|
)
|
|
—
|
|
|
(30,442
|
)
|
|||||||||
Equity in net income (loss) of investment funds accounted for using the equity method
|
|
|
|
|
|
|
48,475
|
|
|
—
|
|
|
48,475
|
|
|||||||||
Other income (loss)
|
|
|
|
|
|
|
(800
|
)
|
|
—
|
|
|
(800
|
)
|
|||||||||
Corporate expenses (2)
|
|
|
|
|
|
|
(49,396
|
)
|
|
—
|
|
|
(49,396
|
)
|
|||||||||
UGC transaction costs and other (2)
|
|
|
|
|
|
|
(41,729
|
)
|
|
—
|
|
|
(41,729
|
)
|
|||||||||
Interest expense
|
|
|
|
|
|
|
(53,464
|
)
|
|
(12,788
|
)
|
|
(66,252
|
)
|
|||||||||
Net foreign exchange gains (losses)
|
|
|
|
|
|
|
31,409
|
|
|
5,242
|
|
|
36,651
|
|
|||||||||
Income (loss) before income taxes
|
|
|
|
|
|
|
710,104
|
|
|
145,448
|
|
|
855,552
|
|
|||||||||
Income tax expense
|
|
|
|
|
|
|
(31,375
|
)
|
|
1
|
|
|
(31,374
|
)
|
|||||||||
Net income (loss)
|
|
|
|
|
|
|
678,729
|
|
|
145,449
|
|
|
824,178
|
|
|||||||||
Dividends attributable to redeemable noncontrolling interests
|
|
|
|
|
|
|
—
|
|
|
(18,349
|
)
|
|
(18,349
|
)
|
|||||||||
Amounts attributable to noncontrolling interests
|
|
|
|
|
|
|
—
|
|
|
(113,091
|
)
|
|
(113,091
|
)
|
|||||||||
Net income (loss) available to Arch
|
|
|
|
|
|
|
678,729
|
|
|
14,009
|
|
|
692,738
|
|
|||||||||
Preferred dividends
|
|
|
|
|
|
|
(28,070
|
)
|
|
—
|
|
|
(28,070
|
)
|
|||||||||
Net income (loss) available to Arch common shareholders
|
|
|
|
|
|
|
$
|
650,659
|
|
|
$
|
14,009
|
|
|
$
|
664,668
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Underwriting Ratios
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Loss ratio
|
65.5
|
%
|
|
45.0
|
%
|
|
10.1
|
%
|
|
54.6
|
%
|
|
68.7
|
%
|
|
56.3
|
%
|
||||||
Acquisition expense ratio
|
14.7
|
%
|
|
20.1
|
%
|
|
11.2
|
%
|
|
16.1
|
%
|
|
27.7
|
%
|
|
17.5
|
%
|
||||||
Other operating expense ratio
|
17.1
|
%
|
|
13.6
|
%
|
|
35.3
|
%
|
|
17.5
|
%
|
|
5.4
|
%
|
|
16.1
|
%
|
||||||
Combined ratio
|
97.3
|
%
|
|
78.7
|
%
|
|
56.6
|
%
|
|
88.2
|
%
|
|
101.8
|
%
|
|
89.9
|
%
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Goodwill and intangible assets
|
$
|
25,206
|
|
|
$
|
956
|
|
|
$
|
747,741
|
|
|
$
|
773,903
|
|
|
$
|
7,650
|
|
|
$
|
781,553
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Total investable assets
|
|
|
|
|
|
|
$
|
18,636,189
|
|
|
$
|
1,857,763
|
|
|
$
|
20,493,952
|
|
||||||
Total assets
|
|
|
|
|
|
|
26,989,359
|
|
|
2,382,750
|
|
|
29,372,109
|
|
|||||||||
Total liabilities
|
|
|
|
|
|
|
18,855,858
|
|
|
1,205,126
|
|
|
20,060,984
|
|
(1)
|
Certain amounts included in the gross premiums written of each segment are related to intersegment transactions. Accordingly, the sum of gross premiums written for each segment does not agree to the total gross premiums written as shown in the table above due to the elimination of intersegment transactions in the total.
|
(2)
|
Certain expenses have been excluded from ‘corporate expenses’ and ‘other operating expenses’ totaling
$32.3 million
and
$9.4 million
, respectively, and reflected in ‘UGC transaction costs and other.’ See ‘Comments on Regulation G’ for a further discussion of the presentation of such items.
|
|
ACGL 2016 FORM 10-K
|
139
|
|
Year Ended December 31, 2015
|
||||||||||||||||||||||
|
Insurance
|
|
Reinsurance
|
|
Mortgage
|
|
Sub-Total
|
|
Other
|
|
Total
|
||||||||||||
Gross premiums written (1)
|
$
|
2,944,018
|
|
|
$
|
1,419,022
|
|
|
$
|
295,557
|
|
|
$
|
4,656,723
|
|
|
$
|
488,899
|
|
|
$
|
4,797,163
|
|
Premiums ceded
|
(898,347
|
)
|
|
(380,614
|
)
|
|
(28,064
|
)
|
|
(1,305,151
|
)
|
|
(22,940
|
)
|
|
(979,632
|
)
|
||||||
Net premiums written
|
2,045,671
|
|
|
1,038,408
|
|
|
267,493
|
|
|
3,351,572
|
|
|
465,959
|
|
|
3,817,531
|
|
||||||
Change in unearned premiums
|
(863
|
)
|
|
38,727
|
|
|
(53,383
|
)
|
|
(15,519
|
)
|
|
(68,107
|
)
|
|
(83,626
|
)
|
||||||
Net premiums earned
|
2,044,808
|
|
|
1,077,135
|
|
|
214,110
|
|
|
3,336,053
|
|
|
397,852
|
|
|
3,733,905
|
|
||||||
Other underwriting income
|
1,993
|
|
|
10,606
|
|
|
18,430
|
|
|
31,029
|
|
|
4,468
|
|
|
35,497
|
|
||||||
Losses and loss adjustment expenses
|
(1,292,647
|
)
|
|
(440,350
|
)
|
|
(40,247
|
)
|
|
(1,773,244
|
)
|
|
(277,659
|
)
|
|
(2,050,903
|
)
|
||||||
Acquisition expenses, net
|
(299,317
|
)
|
|
(223,632
|
)
|
|
(45,076
|
)
|
|
(568,025
|
)
|
|
(113,451
|
)
|
|
(681,476
|
)
|
||||||
Other operating expenses
|
(354,416
|
)
|
|
(155,811
|
)
|
|
(82,370
|
)
|
|
(592,597
|
)
|
|
(14,919
|
)
|
|
(607,516
|
)
|
||||||
Underwriting income (loss)
|
$
|
100,421
|
|
|
$
|
267,948
|
|
|
$
|
64,847
|
|
|
433,216
|
|
|
(3,709
|
)
|
|
429,507
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net investment income
|
|
|
|
|
|
|
271,680
|
|
|
76,410
|
|
|
348,090
|
|
|||||||||
Net realized gains (losses)
|
|
|
|
|
|
|
(99,133
|
)
|
|
(86,709
|
)
|
|
(185,842
|
)
|
|||||||||
Net impairment losses recognized in earnings
|
|
|
|
|
|
|
(20,116
|
)
|
|
—
|
|
|
(20,116
|
)
|
|||||||||
Equity in net income (loss) of investment funds accounted for using the equity method
|
|
|
|
|
|
|
25,455
|
|
|
—
|
|
|
25,455
|
|
|||||||||
Other income (loss)
|
|
|
|
|
|
|
(399
|
)
|
|
—
|
|
|
(399
|
)
|
|||||||||
Corporate expenses
|
|
|
|
|
|
|
(49,745
|
)
|
|
—
|
|
|
(49,745
|
)
|
|||||||||
Interest expense
|
|
|
|
|
|
|
(41,518
|
)
|
|
(4,356
|
)
|
|
(45,874
|
)
|
|||||||||
Net foreign exchange gains (losses)
|
|
|
|
|
|
|
62,624
|
|
|
3,494
|
|
|
66,118
|
|
|||||||||
Income (loss) before income taxes
|
|
|
|
|
|
|
582,064
|
|
|
(14,870
|
)
|
|
567,194
|
|
|||||||||
Income tax expense
|
|
|
|
|
|
|
(40,612
|
)
|
|
—
|
|
|
(40,612
|
)
|
|||||||||
Net income (loss)
|
|
|
|
|
|
|
541,452
|
|
|
(14,870
|
)
|
|
526,582
|
|
|||||||||
Dividends attributable to redeemable noncontrolling interests
|
|
|
|
|
|
|
—
|
|
|
(18,828
|
)
|
|
(18,828
|
)
|
|||||||||
Amounts attributable to noncontrolling interests
|
|
|
|
|
|
|
—
|
|
|
29,984
|
|
|
29,984
|
|
|||||||||
Net income (loss) available to Arch
|
|
|
|
|
|
|
541,452
|
|
|
(3,714
|
)
|
|
537,738
|
|
|||||||||
Preferred dividends
|
|
|
|
|
|
|
(21,938
|
)
|
|
—
|
|
|
(21,938
|
)
|
|||||||||
Net income (loss) available to Arch common shareholders
|
|
|
|
|
|
|
$
|
519,514
|
|
|
$
|
(3,714
|
)
|
|
$
|
515,800
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Underwriting Ratios
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Loss ratio
|
63.2
|
%
|
|
40.9
|
%
|
|
18.8
|
%
|
|
53.2
|
%
|
|
69.8
|
%
|
|
54.9
|
%
|
||||||
Acquisition expense ratio
|
14.6
|
%
|
|
20.8
|
%
|
|
21.1
|
%
|
|
17.0
|
%
|
|
28.5
|
%
|
|
18.3
|
%
|
||||||
Other operating expense ratio
|
17.3
|
%
|
|
14.5
|
%
|
|
38.5
|
%
|
|
17.8
|
%
|
|
3.7
|
%
|
|
16.3
|
%
|
||||||
Combined ratio
|
95.1
|
%
|
|
76.2
|
%
|
|
78.4
|
%
|
|
88.0
|
%
|
|
102.0
|
%
|
|
89.5
|
%
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Goodwill and intangible assets
|
$
|
28,810
|
|
|
$
|
1,875
|
|
|
$
|
66,846
|
|
|
$
|
97,531
|
|
|
$
|
—
|
|
|
$
|
97,531
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Total investable assets
|
|
|
|
|
|
|
$
|
14,644,831
|
|
|
$
|
1,696,107
|
|
|
$
|
16,340,938
|
|
||||||
Total assets
|
|
|
|
|
|
|
21,016,599
|
|
|
2,122,332
|
|
|
23,138,931
|
|
|||||||||
Total liabilities
|
|
|
|
|
|
|
14,956,274
|
|
|
1,072,102
|
|
|
16,028,376
|
|
(1)
|
Certain amounts included in the gross premiums written of each segment are related to intersegment transactions. 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.
|
|
ACGL 2016 FORM 10-K
|
140
|
|
Year Ended December 31, 2014
|
||||||||||||||||||||||
|
Insurance
|
|
Reinsurance
|
|
Mortgage
|
|
Sub-Total
|
|
Other
|
|
Total
|
||||||||||||
Gross premiums written (1)
|
$
|
3,008,669
|
|
|
$
|
1,527,245
|
|
|
$
|
227,356
|
|
|
$
|
4,760,394
|
|
|
$
|
288,627
|
|
|
$
|
4,840,616
|
|
Premiums ceded
|
(862,015
|
)
|
|
(261,254
|
)
|
|
(22,519
|
)
|
|
(1,142,912
|
)
|
|
(14,171
|
)
|
|
(948,678
|
)
|
||||||
Net premiums written
|
2,146,654
|
|
|
1,265,991
|
|
|
204,837
|
|
|
3,617,482
|
|
|
274,456
|
|
|
3,891,938
|
|
||||||
Change in unearned premiums
|
(129,284
|
)
|
|
13,337
|
|
|
(11,264
|
)
|
|
(127,211
|
)
|
|
(170,979
|
)
|
|
(298,190
|
)
|
||||||
Net premiums earned
|
2,017,370
|
|
|
1,279,328
|
|
|
193,573
|
|
|
3,490,271
|
|
|
103,477
|
|
|
3,593,748
|
|
||||||
Other underwriting income
|
2,135
|
|
|
3,167
|
|
|
4,840
|
|
|
10,142
|
|
|
—
|
|
|
10,142
|
|
||||||
Losses and loss adjustment expenses
|
(1,260,953
|
)
|
|
(532,450
|
)
|
|
(55,674
|
)
|
|
(1,849,077
|
)
|
|
(70,173
|
)
|
|
(1,919,250
|
)
|
||||||
Acquisition expenses, net
|
(316,308
|
)
|
|
(261,438
|
)
|
|
(49,400
|
)
|
|
(627,146
|
)
|
|
(30,116
|
)
|
|
(657,262
|
)
|
||||||
Other operating expenses
|
(335,157
|
)
|
|
(147,964
|
)
|
|
(66,891
|
)
|
|
(550,012
|
)
|
|
(6,268
|
)
|
|
(556,280
|
)
|
||||||
Underwriting income (loss)
|
$
|
107,087
|
|
|
$
|
340,643
|
|
|
$
|
26,448
|
|
|
474,178
|
|
|
(3,080
|
)
|
|
471,098
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net investment income
|
|
|
|
|
|
|
284,336
|
|
|
18,249
|
|
|
302,585
|
|
|||||||||
Net realized gains (losses)
|
|
|
|
|
|
|
133,384
|
|
|
(30,467
|
)
|
|
102,917
|
|
|||||||||
Net impairment losses recognized in earnings
|
|
|
|
|
|
|
(30,150
|
)
|
|
—
|
|
|
(30,150
|
)
|
|||||||||
Equity in net income (loss) of investment funds accounted for using the equity method
|
|
|
|
|
|
|
19,883
|
|
|
—
|
|
|
19,883
|
|
|||||||||
Other income (loss)
|
|
|
|
|
|
|
(10,252
|
)
|
|
—
|
|
|
(10,252
|
)
|
|||||||||
Corporate expenses
|
|
|
|
|
|
|
(47,615
|
)
|
|
(2,329
|
)
|
|
(49,944
|
)
|
|||||||||
Interest expense
|
|
|
|
|
|
|
(45,634
|
)
|
|
—
|
|
|
(45,634
|
)
|
|||||||||
Net foreign exchange gains (losses)
|
|
|
|
|
|
|
82,658
|
|
|
1,086
|
|
|
83,744
|
|
|||||||||
Income (loss) before income taxes
|
|
|
|
|
|
|
860,788
|
|
|
(16,541
|
)
|
|
844,247
|
|
|||||||||
Income tax benefit
|
|
|
|
|
|
|
(22,987
|
)
|
|
—
|
|
|
(22,987
|
)
|
|||||||||
Net income (loss)
|
|
|
|
|
|
|
837,801
|
|
|
(16,541
|
)
|
|
821,260
|
|
|||||||||
Dividends attributable to redeemable noncontrolling interests
|
|
|
|
|
|
|
—
|
|
|
(14,728
|
)
|
|
(14,728
|
)
|
|||||||||
Amounts attributable to noncontrolling interests
|
|
|
|
|
|
|
—
|
|
|
27,823
|
|
|
27,823
|
|
|||||||||
Net income (loss) available to Arch
|
|
|
|
|
|
|
837,801
|
|
|
(3,446
|
)
|
|
834,355
|
|
|||||||||
Preferred dividends
|
|
|
|
|
|
|
(21,938
|
)
|
|
—
|
|
|
(21,938
|
)
|
|||||||||
Net income (loss) available to Arch common shareholders
|
|
|
|
|
|
|
$
|
815,863
|
|
|
$
|
(3,446
|
)
|
|
$
|
812,417
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Underwriting Ratios
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Loss ratio
|
62.5
|
%
|
|
41.6
|
%
|
|
28.8
|
%
|
|
53.0
|
%
|
|
67.8
|
%
|
|
53.4
|
%
|
||||||
Acquisition expense ratio
|
15.7
|
%
|
|
20.4
|
%
|
|
25.5
|
%
|
|
18.0
|
%
|
|
29.1
|
%
|
|
18.3
|
%
|
||||||
Other operating expense ratio
|
16.6
|
%
|
|
11.6
|
%
|
|
34.6
|
%
|
|
15.8
|
%
|
|
6.1
|
%
|
|
15.5
|
%
|
||||||
Combined ratio
|
94.8
|
%
|
|
73.6
|
%
|
|
88.9
|
%
|
|
86.8
|
%
|
|
103.0
|
%
|
|
87.2
|
%
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Goodwill and intangible assets
|
$
|
28,331
|
|
|
$
|
3,333
|
|
|
$
|
77,875
|
|
|
$
|
109,539
|
|
|
$
|
—
|
|
|
$
|
109,539
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Total investable assets
|
|
|
|
|
|
|
$
|
14,599,490
|
|
|
$
|
1,163,240
|
|
|
$
|
15,762,730
|
|
||||||
Total assets
|
|
|
|
|
|
|
20,485,226
|
|
|
1,482,516
|
|
|
21,967,742
|
|
|||||||||
Total liabilities
|
|
|
|
|
|
|
14,488,775
|
|
|
398,660
|
|
|
14,887,435
|
|
(1)
|
Certain amounts included in the gross premiums written of each segment are related to intersegment transactions. 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.
|
|
ACGL 2016 FORM 10-K
|
141
|
INSURANCE SEGMENT
|
Year Ended December 31,
|
||||||||||
2016
|
|
2015
|
|
2014
|
|||||||
Net premiums written (1)
|
|
|
|
|
|
||||||
Professional lines (2)
|
$
|
440,149
|
|
|
$
|
434,024
|
|
|
$
|
476,604
|
|
Construction and national accounts
|
328,997
|
|
|
299,463
|
|
|
286,994
|
|
|||
Programs
|
330,322
|
|
|
423,157
|
|
|
480,580
|
|
|||
Travel, accident and health
|
224,380
|
|
|
160,132
|
|
|
145,732
|
|
|||
Excess and surplus casualty (3)
|
214,863
|
|
|
204,856
|
|
|
212,519
|
|
|||
Property, energy, marine and aviation
|
175,376
|
|
|
203,186
|
|
|
244,640
|
|
|||
Lenders products
|
105,650
|
|
|
106,916
|
|
|
100,407
|
|
|||
Other (4)
|
252,544
|
|
|
213,937
|
|
|
199,178
|
|
|||
Total
|
$
|
2,072,281
|
|
|
$
|
2,045,671
|
|
|
$
|
2,146,654
|
|
|
|
|
|
|
|
||||||
Net premiums earned (1)
|
|
|
|
|
|
||||||
Professional lines (2)
|
$
|
431,391
|
|
|
$
|
424,968
|
|
|
$
|
456,508
|
|
Construction and national accounts
|
322,072
|
|
|
296,828
|
|
|
277,811
|
|
|||
Programs
|
357,715
|
|
|
446,512
|
|
|
460,392
|
|
|||
Travel, accident and health
|
219,169
|
|
|
153,578
|
|
|
127,691
|
|
|||
Excess and surplus casualty (3)
|
219,046
|
|
|
208,091
|
|
|
182,024
|
|
|||
Property, energy, marine and aviation
|
188,938
|
|
|
216,127
|
|
|
244,974
|
|
|||
Lenders products
|
98,517
|
|
|
90,906
|
|
|
94,438
|
|
|||
Other (4)
|
237,056
|
|
|
207,798
|
|
|
173,532
|
|
|||
Total
|
$
|
2,073,904
|
|
|
$
|
2,044,808
|
|
|
$
|
2,017,370
|
|
|
|
|
|
|
|
||||||
Net premiums written by client location (1)
|
|
|
|
|
|
||||||
United States
|
$
|
1,718,415
|
|
|
$
|
1,710,918
|
|
|
$
|
1,726,181
|
|
Europe
|
173,423
|
|
|
187,020
|
|
|
240,136
|
|
|||
Asia and Pacific
|
93,752
|
|
|
64,638
|
|
|
79,564
|
|
|||
Other
|
86,691
|
|
|
83,095
|
|
|
100,773
|
|
|||
Total
|
$
|
2,072,281
|
|
|
$
|
2,045,671
|
|
|
$
|
2,146,654
|
|
|
|
|
|
|
|
||||||
Net premiums written by underwriting location (1)
|
|
|
|
|
|
||||||
United States
|
$
|
1,690,208
|
|
|
$
|
1,673,867
|
|
|
$
|
1,688,887
|
|
Europe
|
327,034
|
|
|
317,998
|
|
|
394,430
|
|
|||
Other
|
55,039
|
|
|
53,806
|
|
|
63,337
|
|
|||
Total
|
$
|
2,072,281
|
|
|
$
|
2,045,671
|
|
|
$
|
2,146,654
|
|
(1)
|
Insurance segment results include premiums written and earned assumed through intersegment transactions and exclude premiums written and earned ceded through intersegment transactions.
|
(2)
|
Includes professional liability, executive assurance and healthcare business.
|
(3)
|
Includes casualty and contract binding business.
|
(4)
|
Includes alternative markets, excess workers' compensation and surety business.
|
|
ACGL 2016 FORM 10-K
|
142
|
REINSURANCE SEGMENT
|
Year Ended December 31,
|
||||||||||
2016
|
|
2015
|
|
2014
|
|||||||
Net premiums written (1)
|
|
|
|
|
|
||||||
Other specialty (2)
|
$
|
348,852
|
|
|
$
|
298,794
|
|
|
$
|
405,126
|
|
Casualty (3)
|
305,252
|
|
|
303,093
|
|
|
317,996
|
|
|||
Property excluding property catastrophe (4)
|
267,548
|
|
|
280,511
|
|
|
343,043
|
|
|||
Property catastrophe
|
75,789
|
|
|
91,620
|
|
|
137,471
|
|
|||
Marine and aviation
|
37,790
|
|
|
50,834
|
|
|
50,444
|
|
|||
Other (5)
|
18,625
|
|
|
13,556
|
|
|
11,911
|
|
|||
Total
|
$
|
1,053,856
|
|
|
$
|
1,038,408
|
|
|
$
|
1,265,991
|
|
|
|
|
|
|
|
||||||
Net premiums earned (1)
|
|
|
|
|
|
||||||
Other specialty (2)
|
$
|
329,994
|
|
|
$
|
311,307
|
|
|
$
|
424,725
|
|
Casualty (3)
|
300,160
|
|
|
310,249
|
|
|
327,518
|
|
|||
Property excluding property catastrophe (4)
|
282,018
|
|
|
295,487
|
|
|
303,496
|
|
|||
Property catastrophe
|
73,803
|
|
|
96,865
|
|
|
150,761
|
|
|||
Marine and aviation
|
52,579
|
|
|
50,808
|
|
|
61,118
|
|
|||
Other (5)
|
17,678
|
|
|
12,419
|
|
|
11,710
|
|
|||
Total
|
$
|
1,056,232
|
|
|
$
|
1,077,135
|
|
|
$
|
1,279,328
|
|
|
|
|
|
|
|
||||||
Net premiums written (1)
|
|
|
|
|
|
||||||
Pro rata
|
$
|
558,671
|
|
|
$
|
537,556
|
|
|
$
|
663,135
|
|
Excess of loss
|
495,185
|
|
|
500,852
|
|
|
602,856
|
|
|||
Total
|
$
|
1,053,856
|
|
|
$
|
1,038,408
|
|
|
$
|
1,265,991
|
|
|
|
|
|
|
|
||||||
Net premiums earned (1)
|
|
|
|
|
|
||||||
Pro rata
|
$
|
561,986
|
|
|
$
|
563,585
|
|
|
$
|
686,201
|
|
Excess of loss
|
494,246
|
|
|
513,550
|
|
|
593,127
|
|
|||
Total
|
$
|
1,056,232
|
|
|
$
|
1,077,135
|
|
|
$
|
1,279,328
|
|
|
|
|
|
|
|
||||||
Net premiums written by client location (1)
|
|
|
|
|
|
||||||
United States
|
$
|
448,763
|
|
|
$
|
470,484
|
|
|
$
|
589,255
|
|
Europe
|
337,168
|
|
|
307,165
|
|
|
355,735
|
|
|||
Asia and Pacific
|
111,821
|
|
|
94,609
|
|
|
142,626
|
|
|||
Bermuda
|
74,347
|
|
|
80,888
|
|
|
77,620
|
|
|||
Other
|
81,757
|
|
|
85,262
|
|
|
100,755
|
|
|||
Total
|
$
|
1,053,856
|
|
|
$
|
1,038,408
|
|
|
$
|
1,265,991
|
|
|
|
|
|
|
|
||||||
Net premiums written by underwriting location (1)
|
|
|
|
|
|
||||||
United States
|
$
|
432,683
|
|
|
$
|
439,190
|
|
|
$
|
492,891
|
|
Bermuda
|
277,625
|
|
|
281,985
|
|
|
394,351
|
|
|||
Europe
|
308,415
|
|
|
298,790
|
|
|
343,823
|
|
|||
Other
|
35,133
|
|
|
18,443
|
|
|
34,926
|
|
|||
Total
|
$
|
1,053,856
|
|
|
$
|
1,038,408
|
|
|
$
|
1,265,991
|
|
(1)
|
Reinsurance segment results include premiums written and earned assumed through intersegment transactions and exclude premiums written and earned ceded through intersegment transactions.
|
(3)
|
Includes executive assurance, professional liability, workers’ compensation, excess motor, healthcare and other.
|
(4)
|
Includes facultative business.
|
(5)
|
Includes life, casualty clash and other.
|
|
ACGL 2016 FORM 10-K
|
143
|
|
Year Ended December 31,
|
||||||||||
MORTGAGE SEGMENT
|
2016
|
|
2015
|
|
2014
|
||||||
Net premiums written by client location
|
|
|
|
|
|
||||||
United States
|
$
|
280,509
|
|
|
$
|
193,617
|
|
|
$
|
184,333
|
|
Other
|
110,957
|
|
|
73,876
|
|
|
20,504
|
|
|||
Total
|
$
|
391,466
|
|
|
$
|
267,493
|
|
|
$
|
204,837
|
|
|
|
|
|
|
|
||||||
Net premiums written by underwriting location
|
|
|
|
|
|
||||||
United States
|
$
|
186,826
|
|
|
$
|
125,317
|
|
|
$
|
98,809
|
|
Other
|
204,640
|
|
|
142,176
|
|
|
106,028
|
|
|||
Total
|
$
|
391,466
|
|
|
$
|
267,493
|
|
|
$
|
204,837
|
|
|
|
|
|
|
|
||||||
Net premiums earned by client location
|
|
|
|
|
|
||||||
United States
|
$
|
265,527
|
|
|
$
|
202,930
|
|
|
$
|
187,194
|
|
Other
|
21,189
|
|
|
11,180
|
|
|
6,379
|
|
|||
Total
|
$
|
286,716
|
|
|
$
|
214,110
|
|
|
$
|
193,573
|
|
|
|
|
|
|
|
||||||
Net premiums earned by underwriting location
|
|
|
|
|
|
||||||
United States
|
$
|
155,929
|
|
|
$
|
113,062
|
|
|
$
|
92,236
|
|
Other
|
130,787
|
|
|
101,048
|
|
|
101,337
|
|
|||
Total
|
$
|
286,716
|
|
|
$
|
214,110
|
|
|
$
|
193,573
|
|
OTHER SEGMENT
|
Year Ended December 31,
|
||||||||||
2016
|
|
2015
|
|
2014
|
|||||||
Net premiums written (1)
|
|
|
|
|
|
||||||
Casualty (2)
|
$
|
313,600
|
|
|
$
|
320,619
|
|
|
$
|
179,054
|
|
Other specialty (3)
|
121,635
|
|
|
112,666
|
|
|
66,524
|
|
|||
Property catastrophe
|
11,462
|
|
|
12,441
|
|
|
9,280
|
|
|||
Property excluding property catastrophe
|
701
|
|
|
2,892
|
|
|
564
|
|
|||
Marine and aviation
|
1,709
|
|
|
1,256
|
|
|
1,251
|
|
|||
Other (4)
|
64,681
|
|
|
16,085
|
|
|
17,783
|
|
|||
Total
|
$
|
513,788
|
|
|
$
|
465,959
|
|
|
$
|
274,456
|
|
|
|
|
|
|
|
||||||
Net premiums earned (1)
|
|
|
|
|
|
||||||
Casualty (2)
|
$
|
305,676
|
|
|
$
|
275,708
|
|
|
$
|
72,395
|
|
Other specialty (3)
|
116,859
|
|
|
101,588
|
|
|
24,157
|
|
|||
Property catastrophe
|
11,421
|
|
|
12,540
|
|
|
5,115
|
|
|||
Property excluding property catastrophe
|
1,436
|
|
|
1,340
|
|
|
182
|
|
|||
Marine and aviation
|
1,811
|
|
|
1,585
|
|
|
789
|
|
|||
Other (4)
|
30,767
|
|
|
5,091
|
|
|
839
|
|
|||
Total
|
$
|
467,970
|
|
|
$
|
397,852
|
|
|
$
|
103,477
|
|
|
|
|
|
|
|
||||||
Net premiums written by client location (1)
|
|
|
|
|
|
||||||
United States
|
$
|
344,445
|
|
|
$
|
350,228
|
|
|
$
|
186,795
|
|
Europe
|
97,459
|
|
|
67,279
|
|
|
54,131
|
|
|||
Bermuda
|
68,945
|
|
|
39,414
|
|
|
27,977
|
|
|||
Other
|
2,939
|
|
|
9,038
|
|
|
5,553
|
|
|||
Total
|
$
|
513,788
|
|
|
$
|
465,959
|
|
|
$
|
274,456
|
|
(1)
|
Other segment results include premiums written and earned assumed through intersegment transactions and exclude premiums written and earned ceded through intersegment transactions.
|
(2)
|
Includes professional liability, excess motor, programs and other.
|
(3)
|
Includes proportional motor and other.
|
(4)
|
Includes mortgage and other.
|
|
ACGL 2016 FORM 10-K
|
144
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Reserve for losses and loss adjustment expenses at beginning of year
|
$
|
9,125,250
|
|
|
$
|
9,036,448
|
|
|
$
|
8,824,696
|
|
Unpaid losses and loss adjustment expenses recoverable
|
1,828,837
|
|
|
1,778,303
|
|
|
1,748,250
|
|
|||
Net reserve for losses and loss adjustment expenses at beginning of year
|
7,296,413
|
|
|
7,258,145
|
|
|
7,076,446
|
|
|||
|
|
|
|
|
|
||||||
Net incurred losses and loss adjustment expenses relating to losses occurring in:
|
|
|
|
|
|
||||||
Current year
|
2,455,563
|
|
|
2,336,026
|
|
|
2,246,152
|
|
|||
Prior years
|
(269,964
|
)
|
|
(285,123
|
)
|
|
(326,902
|
)
|
|||
Total net incurred losses and loss adjustment expenses
|
2,185,599
|
|
|
2,050,903
|
|
|
1,919,250
|
|
|||
|
|
|
|
|
|
||||||
Net losses and loss adjustment expense reserves of acquired business (1)
|
551,096
|
|
|
262
|
|
|
120,671
|
|
|||
|
|
|
|
|
|
||||||
Foreign exchange (gains) losses
|
(102,367
|
)
|
|
(143,653
|
)
|
|
(160,486
|
)
|
|||
|
|
|
|
|
|
||||||
Net paid losses and loss adjustment expenses relating to losses occurring in:
|
|
|
|
|
|
||||||
Current year
|
(445,700
|
)
|
|
(454,179
|
)
|
|
(347,270
|
)
|
|||
Prior years
|
(1,367,656
|
)
|
|
(1,415,065
|
)
|
|
(1,350,466
|
)
|
|||
Total net paid losses and loss adjustment expenses
|
(1,813,356
|
)
|
|
(1,869,244
|
)
|
|
(1,697,736
|
)
|
|||
|
|
|
|
|
|
||||||
Net reserve for losses and loss adjustment expenses at end of year
|
8,117,385
|
|
|
7,296,413
|
|
|
7,258,145
|
|
|||
Unpaid losses and loss adjustment expenses recoverable
|
2,083,575
|
|
|
1,828,837
|
|
|
1,778,303
|
|
|||
Reserve for losses and loss adjustment expenses at end of year
|
$
|
10,200,960
|
|
|
$
|
9,125,250
|
|
|
$
|
9,036,448
|
|
(1)
|
The 2016 amount related to the acquisition of UGC while the 2014 amount related to the acquisition of Arch MI U.S.
|
|
ACGL 2016 FORM 10-K
|
145
|
|
ACGL 2016 FORM 10-K
|
146
|
Reportable segment
|
|
Level of disaggregation
|
|
Included lines of business
|
Insurance
|
|
Property energy, marine and aviation
|
|
Property energy, marine and aviation
|
|
|
Third party occurrence business
|
|
Excess and surplus casualty (excluding contract binding); construction and national accounts; and other (including
alternative market risks, excess workers’ compensation and employer’s liability insurance coverages)
|
|
|
Third party claims-made business
|
|
Professional lines
|
|
|
Multi-line and other specialty
|
|
Programs; contract binding (part of excess and surplus casualty); travel, accident and health; lenders products; and other (c
ontract and commercial surety coverages)
|
|
|
|
|
|
Reinsurance
|
|
Casualty
|
|
Casualty
|
|
|
Property catastrophe
|
|
Property catastrophe
|
|
|
Property excluding property catastrophe
|
|
Property excluding property catastrophe
|
|
|
Marine and aviation
|
|
Marine and aviation
|
|
|
Other specialty
|
|
Other specialty
|
|
|
|
|
|
Mortgage
|
|
Direct mortgage insurance in the U.S.
|
|
Mortgage insurance on U.S. primary exposures
|
|
ACGL 2016 FORM 10-K
|
147
|
•
|
Expected loss methods
- these methods are based on the assumption that ultimate losses vary proportionately with premiums. Expected loss and loss adjustment expense ratios are typically developed based upon the information derived by underwriters and actuaries during the initial pricing of the business, supplemented by industry data available from organizations, such as statistical bureaus and consulting firms, where appropriate. These ratios consider, among other things, rate increases and changes in terms and conditions that have been observed in the market. Expected loss methods are useful for estimating ultimate losses and loss adjustment expenses in the early years of long-tailed lines of business, when little or no paid or incurred loss information is available, and is commonly applied when limited loss experience exists for a company.
|
•
|
Historical incurred loss development methods
- these methods assume that the ratio of losses in one period to losses in an earlier period will remain constant in the future. These methods use incurred losses (
i.e.
, the sum of cumulative historical loss payments plus outstanding case reserves) over discrete periods of time to estimate future losses. Historical incurred loss development methods may be preferable to historical paid loss development methods because they explicitly take into account open cases and the claims adjusters’ evaluations of the cost to settle all known claims. However, historical incurred loss development methods necessarily assume that case reserving practices are consistently applied over time. Therefore, when there have been significant changes in how case reserves are established, using incurred loss data to project ultimate losses may be less reliable than other methods.
|
•
|
Historical paid loss development methods
- these methods, like historical incurred loss development methods, assume that the ratio of losses in one period to losses in an earlier period will remain constant. These methods use historical loss payments over discrete periods of time to estimate future losses and necessarily assume that factors that have affected paid losses in the past, such as inflation or the
|
|
ACGL 2016 FORM 10-K
|
148
|
•
|
Adjusted historical paid and incurred loss development methods
- these methods take traditional historical paid and incurred loss development methods and adjust them for the estimated impact of changes from the past in factors such as inflation, the speed of claim payments or the adequacy of case reserves. Adjusted historical paid and incurred loss development methods are often more reliable methods of predicting ultimate losses in periods of significant change, provided the actuaries can develop methods to reasonably quantify the impact of changes. As such, these methods utilize more judgment than historical paid and incurred loss development methods.
|
•
|
Bornhuetter-Ferguson (“B-F”) paid and incurred loss methods
- these methods utilize actual paid and incurred losses and expected patterns of paid and incurred losses, taking the initial expected ultimate losses into account to determine an estimate of expected ultimate losses. The B-F paid and incurred loss methods are useful when there are few reported claims and a relatively less stable pattern of reported losses.
|
•
|
Additional analyses
- other methodologies are often used in the reserving process for specific types of claims or events, such as catastrophic or other specific major events. These include vendor catastrophe models, which are typically used in the estimation of loss reserves at the early stage of known catastrophic events before information has been reported to an insurer or reinsurer.
|
|
ACGL 2016 FORM 10-K
|
149
|
|
ACGL 2016 FORM 10-K
|
150
|
Third party claims-made business ($000’s except claim count)
|
|||||||||||||||||||||||||||||||||||||||||||||||
Incurred losses and allocated loss adjustment expenses, net of reinsurance
|
|
December 31, 2016
|
|||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
Total of IBNR liabilities plus expected development on reported claims
|
|
Cumulative
number of reported claims
|
|||||||||||||||||||||||||||||||||||||||||
|
|
Year ended December 31,
|
|
|
|||||||||||||||||||||||||||||||||||||||||||
Accident year
|
|
2007
unaudited |
|
2008
unaudited |
|
2009 unaudited
|
|
2010
unaudited |
|
2011 unaudited
|
|
2012
unaudited |
|
2013
unaudited |
|
2014
unaudited |
|
2015
unaudited |
|
2016
|
|
|
|||||||||||||||||||||||||
2007
|
|
$
|
313,327
|
|
|
$
|
333,142
|
|
|
$
|
330,096
|
|
|
$
|
310,623
|
|
|
$
|
300,065
|
|
|
$
|
295,111
|
|
|
$
|
279,908
|
|
|
$
|
279,060
|
|
|
$
|
281,838
|
|
|
$
|
284,328
|
|
|
$
|
10,943
|
|
|
7,720
|
|
2008
|
|
|
|
320,029
|
|
|
371,723
|
|
|
383,498
|
|
|
389,285
|
|
|
375,226
|
|
|
385,537
|
|
|
389,148
|
|
|
377,994
|
|
|
365,249
|
|
|
12,868
|
|
|
9,015
|
|
||||||||||||
2009
|
|
|
|
|
|
283,463
|
|
|
317,012
|
|
|
307,431
|
|
|
305,911
|
|
|
302,656
|
|
|
303,022
|
|
|
306,165
|
|
|
302,116
|
|
|
13,747
|
|
|
10,742
|
|
|||||||||||||
2010
|
|
|
|
|
|
|
|
283,569
|
|
|
309,727
|
|
|
332,382
|
|
|
338,122
|
|
|
331,809
|
|
|
315,178
|
|
|
297,514
|
|
|
32,880
|
|
|
12,088
|
|
||||||||||||||
2011
|
|
|
|
|
|
|
|
|
|
281,279
|
|
|
323,922
|
|
|
315,357
|
|
|
310,093
|
|
|
315,591
|
|
|
293,510
|
|
|
38,377
|
|
|
11,626
|
|
|||||||||||||||
2012
|
|
|
|
|
|
|
|
|
|
|
|
309,371
|
|
|
313,500
|
|
|
312,254
|
|
|
307,283
|
|
|
282,944
|
|
|
60,737
|
|
|
14,350
|
|
||||||||||||||||
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
294,863
|
|
|
312,946
|
|
|
316,776
|
|
|
312,915
|
|
|
113,414
|
|
|
13,685
|
|
|||||||||||||||||
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
259,705
|
|
|
274,880
|
|
|
292,489
|
|
|
119,174
|
|
|
12,839
|
|
||||||||||||||||||
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
254,152
|
|
|
271,435
|
|
|
174,944
|
|
|
13,194
|
|
|||||||||||||||||||
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
269,549
|
|
|
225,772
|
|
|
10,239
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,972,049
|
|
|
|
|
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||
2007
|
|
$
|
9,840
|
|
|
$
|
57,758
|
|
|
$
|
110,737
|
|
|
$
|
144,064
|
|
|
$
|
166,272
|
|
|
$
|
196,781
|
|
|
$
|
215,120
|
|
|
$
|
223,237
|
|
|
$
|
231,871
|
|
|
$
|
239,677
|
|
|
|
|
|
|||
2008
|
|
|
|
18,644
|
|
|
73,431
|
|
|
131,715
|
|
|
174,184
|
|
|
207,946
|
|
|
233,022
|
|
|
245,246
|
|
|
283,796
|
|
|
288,782
|
|
|
|
|
|
||||||||||||||
2009
|
|
|
|
|
|
11,406
|
|
|
55,499
|
|
|
107,932
|
|
|
149,558
|
|
|
186,663
|
|
|
201,419
|
|
|
235,436
|
|
|
244,876
|
|
|
|
|
|
|||||||||||||||
2010
|
|
|
|
|
|
|
|
13,914
|
|
|
70,907
|
|
|
128,465
|
|
|
163,200
|
|
|
198,603
|
|
|
215,170
|
|
|
229,464
|
|
|
|
|
|
||||||||||||||||
2011
|
|
|
|
|
|
|
|
|
|
13,570
|
|
|
71,303
|
|
|
128,086
|
|
|
171,287
|
|
|
204,263
|
|
|
223,086
|
|
|
|
|
|
|||||||||||||||||
2012
|
|
|
|
|
|
|
|
|
|
|
|
17,584
|
|
|
68,132
|
|
|
119,412
|
|
|
162,316
|
|
|
185,328
|
|
|
|
|
|
||||||||||||||||||
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,829
|
|
|
85,894
|
|
|
135,420
|
|
|
175,063
|
|
|
|
|
|
|||||||||||||||||||
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,709
|
|
|
62,711
|
|
|
127,515
|
|
|
|
|
|
||||||||||||||||||||
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,960
|
|
|
50,999
|
|
|
|
|
|
|||||||||||||||||||||
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,354
|
|
|
|
|
|
||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,775,144
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
All outstanding liabilities before 2007, net of reinsurance
|
|
|
53,954
|
|
|
|
|
|
|||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
Liabilities for losses and loss adjustment expenses, net of reinsurance
|
|
|
$
|
1,250,859
|
|
|
|
|
|
|
ACGL 2016 FORM 10-K
|
151
|
|
|
Average annual percentage payout of incurred losses and allocated loss adjustment expenses by age, net of reinsurance
|
||||||||||||||||||||||||||||
|
|
Year 1
|
|
Year 2
|
|
Year 3
|
|
Year 4
|
|
Year 5
|
|
Year 6
|
|
Year 7
|
|
Year 8
|
|
Year 9
|
|
Year 10
|
||||||||||
Property, energy, marine and aviation
|
|
19.6
|
%
|
|
32.5
|
%
|
|
19.8
|
%
|
|
10.0
|
%
|
|
6.8
|
%
|
|
2.8
|
%
|
|
1.1
|
%
|
|
0.5
|
%
|
|
0.8
|
%
|
|
0.3
|
%
|
Third party occurrence business
|
|
2.5
|
%
|
|
7.5
|
%
|
|
10.2
|
%
|
|
11.5
|
%
|
|
13.1
|
%
|
|
10.6
|
%
|
|
8.3
|
%
|
|
4.6
|
%
|
|
4.7
|
%
|
|
6.8
|
%
|
Third party claims-made business
|
|
4.6
|
%
|
|
17.4
|
%
|
|
18.3
|
%
|
|
13.1
|
%
|
|
10.1
|
%
|
|
6.9
|
%
|
|
6.5
|
%
|
|
5.5
|
%
|
|
2.2
|
%
|
|
2.7
|
%
|
Other
|
|
28.1
|
%
|
|
25.6
|
%
|
|
13.2
|
%
|
|
11.6
|
%
|
|
7.0
|
%
|
|
4.0
|
%
|
|
3.0
|
%
|
|
2.1
|
%
|
|
1.7
|
%
|
|
1.2
|
%
|
|
ACGL 2016 FORM 10-K
|
152
|
|
ACGL 2016 FORM 10-K
|
153
|
|
ACGL 2016 FORM 10-K
|
154
|
Property excluding property catastrophe ($000’s)
|
||||||||||||||||||||||||||||||||||||||||||||||
Incurred losses and allocated loss adjustment expenses, net of reinsurance
|
|
December 31, 2016
|
||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
Total of IBNR liabilities plus expected development on reported claims
|
|
Cumulative
number of reported claims
|
||||||||||||||||||||||||||||||||||||||||
|
|
Year ended December 31,
|
|
|
||||||||||||||||||||||||||||||||||||||||||
Accident year
|
|
2007
unaudited |
|
2008
unaudited |
|
2009 unaudited
|
|
2010
unaudited |
|
2011 unaudited
|
|
2012
unaudited |
|
2013
unaudited |
|
2014
unaudited |
|
2015
unaudited |
|
2016
|
|
|
||||||||||||||||||||||||
2007
|
|
$
|
142,050
|
|
|
$
|
128,558
|
|
|
$
|
122,590
|
|
|
$
|
111,925
|
|
|
$
|
109,247
|
|
|
$
|
105,659
|
|
|
$
|
105,646
|
|
|
$
|
104,460
|
|
|
$
|
105,754
|
|
|
$
|
101,832
|
|
|
$
|
729
|
|
|
N/A
|
2008
|
|
|
|
210,512
|
|
|
185,509
|
|
|
189,154
|
|
|
194,523
|
|
|
189,762
|
|
|
186,879
|
|
|
184,860
|
|
|
184,388
|
|
|
178,561
|
|
|
2,465
|
|
|
N/A
|
||||||||||||
2009
|
|
|
|
|
|
215,218
|
|
|
192,530
|
|
|
170,108
|
|
|
163,338
|
|
|
162,588
|
|
|
160,510
|
|
|
157,665
|
|
|
148,172
|
|
|
2,710
|
|
|
N/A
|
|||||||||||||
2010
|
|
|
|
|
|
|
|
142,014
|
|
|
127,666
|
|
|
117,476
|
|
|
111,888
|
|
|
109,942
|
|
|
107,820
|
|
|
104,063
|
|
|
3,226
|
|
|
N/A
|
||||||||||||||
2011
|
|
|
|
|
|
|
|
|
|
205,149
|
|
|
178,301
|
|
|
165,807
|
|
|
162,099
|
|
|
157,962
|
|
|
156,675
|
|
|
5,986
|
|
|
N/A
|
|||||||||||||||
2012
|
|
|
|
|
|
|
|
|
|
|
|
155,491
|
|
|
121,156
|
|
|
123,121
|
|
|
118,551
|
|
|
114,131
|
|
|
6,232
|
|
|
N/A
|
||||||||||||||||
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
114,884
|
|
|
76,420
|
|
|
70,090
|
|
|
65,771
|
|
|
5,854
|
|
|
N/A
|
|||||||||||||||||
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
142,589
|
|
|
116,738
|
|
|
98,649
|
|
|
12,300
|
|
|
N/A
|
||||||||||||||||||
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
212,989
|
|
|
187,633
|
|
|
25,827
|
|
|
N/A
|
|||||||||||||||||||
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
174,752
|
|
|
79,520
|
|
|
N/A
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,330,239
|
|
|
|
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||
2007
|
|
$
|
36,890
|
|
|
$
|
74,745
|
|
|
$
|
89,947
|
|
|
$
|
94,729
|
|
|
$
|
97,857
|
|
|
$
|
98,887
|
|
|
$
|
100,484
|
|
|
$
|
100,642
|
|
|
$
|
99,871
|
|
|
$
|
99,859
|
|
|
|
|
|
||
2008
|
|
|
|
55,694
|
|
|
124,489
|
|
|
145,496
|
|
|
159,947
|
|
|
165,559
|
|
|
171,634
|
|
|
172,666
|
|
|
172,516
|
|
|
173,437
|
|
|
|
|
|
|||||||||||||
2009
|
|
|
|
|
|
65,920
|
|
|
116,161
|
|
|
133,401
|
|
|
137,739
|
|
|
139,566
|
|
|
142,078
|
|
|
143,190
|
|
|
143,998
|
|
|
|
|
|
||||||||||||||
2010
|
|
|
|
|
|
|
|
37,675
|
|
|
76,223
|
|
|
87,938
|
|
|
93,069
|
|
|
95,253
|
|
|
96,401
|
|
|
97,045
|
|
|
|
|
|
|||||||||||||||
2011
|
|
|
|
|
|
|
|
|
|
47,248
|
|
|
120,354
|
|
|
140,156
|
|
|
144,623
|
|
|
146,674
|
|
|
147,773
|
|
|
|
|
|
||||||||||||||||
2012
|
|
|
|
|
|
|
|
|
|
|
|
25,988
|
|
|
77,704
|
|
|
92,807
|
|
|
101,457
|
|
|
102,402
|
|
|
|
|
|
|||||||||||||||||
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,862
|
|
|
42,427
|
|
|
49,464
|
|
|
52,643
|
|
|
|
|
|
||||||||||||||||||
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,402
|
|
|
62,598
|
|
|
71,411
|
|
|
|
|
|
|||||||||||||||||||
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,211
|
|
|
118,223
|
|
|
|
|
|
||||||||||||||||||||
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,210
|
|
|
|
|
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,040,001
|
|
|
|
|
|
||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
All outstanding liabilities before 2007, net of reinsurance
|
|
|
4,509
|
|
|
|
|
|
||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
Liabilities for losses and loss adjustment expenses, net of reinsurance
|
|
|
$
|
294,747
|
|
|
|
|
|
|
ACGL 2016 FORM 10-K
|
155
|
Other specialty ($000’s)
|
||||||||||||||||||||||||||||||||||||||||||||||
Incurred losses and allocated loss adjustment expenses, net of reinsurance
|
|
December 31, 2016
|
||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
Total of IBNR liabilities plus expected development on reported claims
|
|
Cumulative
number of reported claims
|
||||||||||||||||||||||||||||||||||||||||
|
|
Year ended December 31,
|
|
|
||||||||||||||||||||||||||||||||||||||||||
Accident year
|
|
2007
unaudited |
|
2008
unaudited |
|
2009 unaudited
|
|
2010
unaudited |
|
2011 unaudited
|
|
2012
unaudited |
|
2013
unaudited |
|
2014
unaudited |
|
2015
unaudited |
|
2016
|
|
|
||||||||||||||||||||||||
2007
|
|
$
|
55,559
|
|
|
$
|
41,032
|
|
|
$
|
37,663
|
|
|
$
|
34,588
|
|
|
$
|
31,588
|
|
|
$
|
30,292
|
|
|
$
|
30,346
|
|
|
$
|
30,539
|
|
|
$
|
30,001
|
|
|
$
|
29,542
|
|
|
$
|
1,508
|
|
|
N/A
|
2008
|
|
|
|
42,296
|
|
|
35,752
|
|
|
32,445
|
|
|
28,650
|
|
|
26,775
|
|
|
28,541
|
|
|
27,106
|
|
|
26,987
|
|
|
26,021
|
|
|
2,264
|
|
|
N/A
|
||||||||||||
2009
|
|
|
|
|
|
59,371
|
|
|
48,707
|
|
|
43,703
|
|
|
37,716
|
|
|
35,608
|
|
|
33,618
|
|
|
34,789
|
|
|
35,224
|
|
|
2,760
|
|
|
N/A
|
|||||||||||||
2010
|
|
|
|
|
|
|
|
42,433
|
|
|
32,330
|
|
|
25,673
|
|
|
23,465
|
|
|
22,465
|
|
|
22,119
|
|
|
21,879
|
|
|
1,965
|
|
|
N/A
|
||||||||||||||
2011
|
|
|
|
|
|
|
|
|
|
109,167
|
|
|
94,121
|
|
|
90,278
|
|
|
88,641
|
|
|
86,776
|
|
|
85,405
|
|
|
3,290
|
|
|
N/A
|
|||||||||||||||
2012
|
|
|
|
|
|
|
|
|
|
|
|
211,292
|
|
|
201,403
|
|
|
191,347
|
|
|
185,979
|
|
|
183,891
|
|
|
19,920
|
|
|
N/A
|
||||||||||||||||
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
243,333
|
|
|
218,117
|
|
|
208,819
|
|
|
205,432
|
|
|
31,524
|
|
|
N/A
|
|||||||||||||||||
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
268,335
|
|
|
250,573
|
|
|
252,528
|
|
|
50,079
|
|
|
N/A
|
||||||||||||||||||
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
204,749
|
|
|
196,298
|
|
|
55,630
|
|
|
N/A
|
|||||||||||||||||||
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
217,117
|
|
|
106,192
|
|
|
N/A
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,253,337
|
|
|
|
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||
2007
|
|
$
|
7,457
|
|
|
$
|
21,293
|
|
|
$
|
24,682
|
|
|
$
|
25,581
|
|
|
$
|
26,218
|
|
|
$
|
26,324
|
|
|
$
|
26,576
|
|
|
$
|
27,048
|
|
|
$
|
27,058
|
|
|
$
|
27,105
|
|
|
|
|
|
||
2008
|
|
|
|
5,074
|
|
|
14,292
|
|
|
19,727
|
|
|
20,932
|
|
|
21,603
|
|
|
23,303
|
|
|
22,664
|
|
|
23,265
|
|
|
23,317
|
|
|
|
|
|
|||||||||||||
2009
|
|
|
|
|
|
8,989
|
|
|
26,785
|
|
|
29,591
|
|
|
29,462
|
|
|
29,419
|
|
|
29,297
|
|
|
29,782
|
|
|
30,538
|
|
|
|
|
|
||||||||||||||
2010
|
|
|
|
|
|
|
|
3,998
|
|
|
13,229
|
|
|
16,288
|
|
|
17,298
|
|
|
18,085
|
|
|
18,670
|
|
|
18,887
|
|
|
|
|
|
|||||||||||||||
2011
|
|
|
|
|
|
|
|
|
|
27,956
|
|
|
55,853
|
|
|
67,577
|
|
|
72,081
|
|
|
75,412
|
|
|
77,102
|
|
|
|
|
|
||||||||||||||||
2012
|
|
|
|
|
|
|
|
|
|
|
|
42,894
|
|
|
114,990
|
|
|
136,209
|
|
|
146,641
|
|
|
153,986
|
|
|
|
|
|
|||||||||||||||||
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54,446
|
|
|
114,017
|
|
|
138,843
|
|
|
154,794
|
|
|
|
|
|
||||||||||||||||||
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67,189
|
|
|
143,024
|
|
|
178,004
|
|
|
|
|
|
|||||||||||||||||||
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53,500
|
|
|
111,864
|
|
|
|
|
|
||||||||||||||||||||
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62,865
|
|
|
|
|
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
838,462
|
|
|
|
|
|
||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
All outstanding liabilities before 2007, net of reinsurance
|
|
|
7,336
|
|
|
|
|
|
||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
Liabilities for losses and loss adjustment expenses, net of reinsurance
|
|
|
$
|
422,211
|
|
|
|
|
|
|
|
Average annual percentage payout of incurred losses and allocated loss adjustment expenses by age, net of reinsurance
|
||||||||||||||||||||||||||||
|
|
Year 1
|
|
Year 2
|
|
Year 3
|
|
Year 4
|
|
Year 5
|
|
Year 6
|
|
Year 7
|
|
Year 8
|
|
Year 9
|
|
Year 10
|
||||||||||
Casualty
|
|
1.7
|
%
|
|
7.1
|
%
|
|
10.0
|
%
|
|
11.2
|
%
|
|
12.4
|
%
|
|
9.3
|
%
|
|
7.3
|
%
|
|
5.4
|
%
|
|
3.9
|
%
|
|
3.4
|
%
|
Property catastrophe
|
|
28.7
|
%
|
|
24.4
|
%
|
|
10.3
|
%
|
|
7.8
|
%
|
|
3.6
|
%
|
|
1.8
|
%
|
|
1.1
|
%
|
|
0.1
|
%
|
|
(0.6
|
)%
|
|
0.2
|
%
|
Property excluding property catastrophe
|
|
32.3
|
%
|
|
36.3
|
%
|
|
11.9
|
%
|
|
5.1
|
%
|
|
1.9
|
%
|
|
1.6
|
%
|
|
0.9
|
%
|
|
0.2
|
%
|
|
(0.1
|
)%
|
|
—
|
%
|
Marine and aviation
|
|
10.1
|
%
|
|
24.6
|
%
|
|
17.4
|
%
|
|
10.8
|
%
|
|
2.2
|
%
|
|
7.5
|
%
|
|
1.9
|
%
|
|
2.4
|
%
|
|
—
|
%
|
|
0.5
|
%
|
Other specialty
|
|
25.4
|
%
|
|
37.3
|
%
|
|
13.2
|
%
|
|
4.4
|
%
|
|
2.7
|
%
|
|
2.2
|
%
|
|
0.2
|
%
|
|
2.0
|
%
|
|
0.1
|
%
|
|
0.2
|
%
|
|
ACGL 2016 FORM 10-K
|
156
|
|
ACGL 2016 FORM 10-K
|
157
|
Average annual percentage payout of incurred losses and allocated loss adjustment expenses by age, net of reinsurance
|
|||||||||||||||
|
|
Year 1
|
|
Year 2
|
|
Year 3
|
|
Year 4
|
|
Year 5
|
|||||
U.S. Primary
|
|
1.8
|
%
|
|
45.1
|
%
|
|
27.4
|
%
|
|
12.7
|
%
|
|
6.5
|
%
|
|
December 31, 2016
|
||
Net outstanding liabilities
|
|
||
Insurance
|
|
||
Property, energy, marine and aviation
|
$
|
295,259
|
|
Third party occurrence business
|
1,885,237
|
|
|
Third party claims-made business
|
1,250,859
|
|
|
Multi-line and other specialty
|
1,050,185
|
|
|
Reinsurance
|
|
||
Casualty
|
1,352,426
|
|
|
Property catastrophe
|
85,631
|
|
|
Property excluding property catastrophe
|
294,747
|
|
|
Marine and aviation
|
147,651
|
|
|
Other specialty
|
422,211
|
|
|
Mortgage
|
|
||
U.S. primary
|
564,682
|
|
|
Other short duration lines not included in disclosures
|
602,324
|
|
|
Total for short duration lines
|
7,951,212
|
|
|
|
|
||
Unpaid losses and loss adjustment expenses recoverable
|
|
||
Insurance
|
|
||
Property, energy, marine and aviation
|
230,421
|
|
|
Third party occurrence business
|
946,133
|
|
|
Third party claims-made business
|
689,470
|
|
|
Multi-line and other specialty
|
137,503
|
|
|
Reinsurance
|
|
||
Casualty
|
306,229
|
|
|
Property catastrophe
|
43,271
|
|
|
Property excluding property catastrophe
|
28,620
|
|
|
Marine and aviation
|
18,708
|
|
|
Other specialty
|
29,330
|
|
|
Mortgage
|
|
||
U.S. primary
|
26,420
|
|
|
Other short duration lines not included in disclosures
|
11,693
|
|
|
Intercompany eliminations
|
(388,295
|
)
|
|
Total for short duration lines
|
2,079,503
|
|
|
|
|
||
Lines other than short duration
|
20,111
|
|
|
Discounting
|
(18,246
|
)
|
|
Unallocated claims adjustment expenses
|
168,380
|
|
|
|
170,245
|
|
|
|
|
||
Total gross reserves for losses and loss adjustment expenses
|
$
|
10,200,960
|
|
|
ACGL 2016 FORM 10-K
|
158
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Premiums Written
|
|
|
|
|
|
||||||
Direct
|
$
|
3,337,690
|
|
|
$
|
3,086,919
|
|
|
$
|
3,100,946
|
|
Assumed
|
1,864,444
|
|
|
1,710,244
|
|
|
1,739,670
|
|
|||
Ceded
|
(1,170,743
|
)
|
|
(979,632
|
)
|
|
(948,678
|
)
|
|||
Net
|
$
|
4,031,391
|
|
|
$
|
3,817,531
|
|
|
$
|
3,891,938
|
|
|
|
|
|
|
|
||||||
Premiums Earned
|
|
|
|
|
|
||||||
Direct
|
$
|
3,192,653
|
|
|
$
|
3,002,508
|
|
|
$
|
2,914,755
|
|
Assumed
|
1,730,884
|
|
|
1,659,456
|
|
|
1,574,049
|
|
|||
Ceded
|
(1,038,715
|
)
|
|
(928,059
|
)
|
|
(895,056
|
)
|
|||
Net
|
$
|
3,884,822
|
|
|
$
|
3,733,905
|
|
|
$
|
3,593,748
|
|
|
|
|
|
|
|
||||||
Losses and Loss Adjustment Expenses
|
|
|
|
|
|
||||||
Direct
|
$
|
1,976,853
|
|
|
$
|
1,830,785
|
|
|
$
|
1,763,492
|
|
Assumed
|
847,038
|
|
|
752,304
|
|
|
621,346
|
|
|||
Ceded
|
(638,292
|
)
|
|
(532,186
|
)
|
|
(465,588
|
)
|
|||
Net
|
$
|
2,185,599
|
|
|
$
|
2,050,903
|
|
|
$
|
1,919,250
|
|
|
ACGL 2016 FORM 10-K
|
159
|
|
Estimated
|
|
Gross
|
|
Gross
|
|
Cost or
|
|
OTTI
|
||||||||||
|
Fair
|
|
Unrealized
|
|
Unrealized
|
|
Amortized
|
|
Unrealized
|
||||||||||
|
Value
|
|
Gains
|
|
Losses
|
|
Cost
|
|
Losses (2)
|
||||||||||
December 31, 2016
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed maturities (1):
|
|
|
|
|
|
|
|
|
|
||||||||||
Corporate bonds
|
$
|
4,392,373
|
|
|
$
|
27,606
|
|
|
$
|
(46,905
|
)
|
|
$
|
4,411,672
|
|
|
$
|
(2,285
|
)
|
Mortgage backed securities
|
490,093
|
|
|
4,794
|
|
|
(8,357
|
)
|
|
493,656
|
|
|
(3,323
|
)
|
|||||
Municipal bonds
|
3,713,434
|
|
|
8,554
|
|
|
(29,154
|
)
|
|
3,734,034
|
|
|
(201
|
)
|
|||||
Commercial mortgage backed securities
|
536,051
|
|
|
2,876
|
|
|
(6,508
|
)
|
|
539,683
|
|
|
—
|
|
|||||
U.S. government and government agencies
|
2,804,540
|
|
|
9,319
|
|
|
(24,437
|
)
|
|
2,819,658
|
|
|
—
|
|
|||||
Non-U.S. government securities
|
1,096,440
|
|
|
19,036
|
|
|
(56,872
|
)
|
|
1,134,276
|
|
|
—
|
|
|||||
Asset backed securities
|
1,123,987
|
|
|
6,897
|
|
|
(6,526
|
)
|
|
1,123,616
|
|
|
(22
|
)
|
|||||
Total
|
14,156,918
|
|
|
79,082
|
|
|
(178,759
|
)
|
|
14,256,595
|
|
|
(5,831
|
)
|
|||||
Equity securities
|
532,680
|
|
|
62,627
|
|
|
(17,517
|
)
|
|
487,570
|
|
|
—
|
|
|||||
Other investments
|
167,970
|
|
|
21,358
|
|
|
(2,465
|
)
|
|
149,077
|
|
|
—
|
|
|||||
Short-term investments
|
612,005
|
|
|
272
|
|
|
(145
|
)
|
|
611,878
|
|
|
—
|
|
|||||
Total
|
$
|
15,469,573
|
|
|
$
|
163,339
|
|
|
$
|
(198,886
|
)
|
|
$
|
15,505,120
|
|
|
$
|
(5,831
|
)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
December 31, 2015
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed maturities (1):
|
|
|
|
|
|
|
|
|
|
||||||||||
Corporate bonds
|
$
|
2,725,729
|
|
|
$
|
15,978
|
|
|
$
|
(60,508
|
)
|
|
$
|
2,770,259
|
|
|
$
|
(3,553
|
)
|
Mortgage backed securities
|
754,870
|
|
|
9,872
|
|
|
(5,334
|
)
|
|
750,332
|
|
|
(3,350
|
)
|
|||||
Municipal bonds
|
1,626,281
|
|
|
27,014
|
|
|
(1,534
|
)
|
|
1,600,801
|
|
|
—
|
|
|||||
Commercial mortgage backed securities
|
764,152
|
|
|
3,269
|
|
|
(6,978
|
)
|
|
767,861
|
|
|
—
|
|
|||||
U.S. government and government agencies
|
2,423,455
|
|
|
6,228
|
|
|
(9,978
|
)
|
|
2,427,205
|
|
|
—
|
|
|||||
Non-U.S. government securities
|
917,664
|
|
|
10,414
|
|
|
(39,122
|
)
|
|
946,372
|
|
|
—
|
|
|||||
Asset backed securities
|
1,620,506
|
|
|
3,307
|
|
|
(12,951
|
)
|
|
1,630,150
|
|
|
(22
|
)
|
|||||
Total
|
10,832,657
|
|
|
76,082
|
|
|
(136,405
|
)
|
|
10,892,980
|
|
|
(6,925
|
)
|
|||||
Equity securities
|
629,182
|
|
|
94,341
|
|
|
(17,796
|
)
|
|
552,637
|
|
|
—
|
|
|||||
Other investments
|
300,476
|
|
|
43,798
|
|
|
(4,665
|
)
|
|
261,343
|
|
|
—
|
|
|||||
Short-term investments
|
587,904
|
|
|
187
|
|
|
(3,425
|
)
|
|
591,142
|
|
|
—
|
|
|||||
Total
|
$
|
12,350,219
|
|
|
$
|
214,408
|
|
|
$
|
(162,291
|
)
|
|
$
|
12,298,102
|
|
|
$
|
(6,925
|
)
|
(1)
|
In securities lending transactions, the Company receives collateral in excess of the fair value of the fixed maturities pledged. For purposes of this table, the Company has excluded the collateral received under securities lending, at fair value and included the securities pledged under securities lending, at fair value. See “—Securities Lending Agreements.”
|
(2)
|
Represents the total other-than-temporary impairments (“OTTI”) recognized in accumulated other comprehensive income (“AOCI”). It does not include the change in fair value subsequent to the impairment measurement date. At
December 31, 2016
, the net unrealized gain related to securities for which a non-credit OTTI was recognized in AOCI was
$2.8 million
, compared to a net unrealized loss of
$1.4 million
at
December 31, 2015
.
|
|
ACGL 2016 FORM 10-K
|
160
|
|
Less than 12 Months
|
|
12 Months or More
|
|
Total
|
||||||||||||||||||
|
Estimated
|
|
Gross
|
|
Estimated
|
|
Gross
|
|
Estimated
|
|
Gross
|
||||||||||||
|
Fair
|
|
Unrealized
|
|
Fair
|
|
Unrealized
|
|
Fair
|
|
Unrealized
|
||||||||||||
|
Value
|
|
Losses
|
|
Value
|
|
Losses
|
|
Value
|
|
Losses
|
||||||||||||
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Fixed maturities (1):
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Corporate bonds
|
$
|
1,700,813
|
|
|
$
|
(43,011
|
)
|
|
$
|
46,902
|
|
|
$
|
(3,894
|
)
|
|
$
|
1,747,715
|
|
|
$
|
(46,905
|
)
|
Mortgage backed securities
|
402,699
|
|
|
(8,134
|
)
|
|
6,105
|
|
|
(223
|
)
|
|
408,804
|
|
|
(8,357
|
)
|
||||||
Municipal bonds
|
1,513,308
|
|
|
(28,504
|
)
|
|
29,636
|
|
|
(650
|
)
|
|
1,542,944
|
|
|
(29,154
|
)
|
||||||
Commercial mortgage backed securities
|
231,374
|
|
|
(6,331
|
)
|
|
5,635
|
|
|
(177
|
)
|
|
237,009
|
|
|
(6,508
|
)
|
||||||
U.S. government and government agencies
|
1,888,018
|
|
|
(24,437
|
)
|
|
—
|
|
|
—
|
|
|
1,888,018
|
|
|
(24,437
|
)
|
||||||
Non-U.S. government securities
|
807,598
|
|
|
(56,872
|
)
|
|
—
|
|
|
—
|
|
|
807,598
|
|
|
(56,872
|
)
|
||||||
Asset backed securities
|
627,557
|
|
|
(5,465
|
)
|
|
65,723
|
|
|
(1,061
|
)
|
|
693,280
|
|
|
(6,526
|
)
|
||||||
Total
|
7,171,367
|
|
|
(172,754
|
)
|
|
154,001
|
|
|
(6,005
|
)
|
|
7,325,368
|
|
|
(178,759
|
)
|
||||||
Equity securities
|
269,381
|
|
|
(17,517
|
)
|
|
—
|
|
|
—
|
|
|
269,381
|
|
|
(17,517
|
)
|
||||||
Other investments
|
39,299
|
|
|
(2,465
|
)
|
|
—
|
|
|
—
|
|
|
39,299
|
|
|
(2,465
|
)
|
||||||
Short-term investments
|
29,146
|
|
|
(145
|
)
|
|
—
|
|
|
—
|
|
|
29,146
|
|
|
(145
|
)
|
||||||
Total
|
$
|
7,509,193
|
|
|
$
|
(192,881
|
)
|
|
$
|
154,001
|
|
|
$
|
(6,005
|
)
|
|
$
|
7,663,194
|
|
|
$
|
(198,886
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Fixed maturities (1):
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Corporate bonds
|
$
|
1,810,988
|
|
|
$
|
(37,445
|
)
|
|
$
|
129,896
|
|
|
$
|
(23,063
|
)
|
|
$
|
1,940,884
|
|
|
$
|
(60,508
|
)
|
Mortgage backed securities
|
487,018
|
|
|
(4,508
|
)
|
|
48,991
|
|
|
(826
|
)
|
|
536,009
|
|
|
(5,334
|
)
|
||||||
Municipal bonds
|
269,015
|
|
|
(1,303
|
)
|
|
9,692
|
|
|
(231
|
)
|
|
278,707
|
|
|
(1,534
|
)
|
||||||
Commercial mortgage backed securities
|
511,261
|
|
|
(6,639
|
)
|
|
20,596
|
|
|
(339
|
)
|
|
531,857
|
|
|
(6,978
|
)
|
||||||
U.S. government and government agencies
|
1,991,163
|
|
|
(9,978
|
)
|
|
—
|
|
|
—
|
|
|
1,991,163
|
|
|
(9,978
|
)
|
||||||
Non-U.S. government securities
|
458,414
|
|
|
(13,494
|
)
|
|
138,792
|
|
|
(25,628
|
)
|
|
597,206
|
|
|
(39,122
|
)
|
||||||
Asset backed securities
|
1,217,163
|
|
|
(9,328
|
)
|
|
134,841
|
|
|
(3,623
|
)
|
|
1,352,004
|
|
|
(12,951
|
)
|
||||||
Total
|
6,745,022
|
|
|
(82,695
|
)
|
|
482,808
|
|
|
(53,710
|
)
|
|
7,227,830
|
|
|
(136,405
|
)
|
||||||
Equity securities
|
232,275
|
|
|
(17,796
|
)
|
|
—
|
|
|
—
|
|
|
232,275
|
|
|
(17,796
|
)
|
||||||
Other investments
|
93,614
|
|
|
(4,665
|
)
|
|
—
|
|
|
—
|
|
|
93,614
|
|
|
(4,665
|
)
|
||||||
Short-term investments
|
30,625
|
|
|
(3,425
|
)
|
|
—
|
|
|
—
|
|
|
30,625
|
|
|
(3,425
|
)
|
||||||
Total
|
$
|
7,101,536
|
|
|
$
|
(108,581
|
)
|
|
$
|
482,808
|
|
|
$
|
(53,710
|
)
|
|
$
|
7,584,344
|
|
|
$
|
(162,291
|
)
|
(1)
|
In securities lending transactions, the Company receives collateral in excess of the fair value of the fixed maturities pledged. For purposes of this table, the Company has excluded the collateral received and reinvested and included the fixed maturities pledged. See “—Securities Lending Agreements.”
|
|
ACGL 2016 FORM 10-K
|
161
|
|
|
December 31, 2016
|
|
December 31, 2015
|
||||||||||||
Maturity
|
|
Estimated Fair Value
|
|
Amortized Cost
|
|
Estimated Fair Value
|
|
Amortized Cost
|
||||||||
Due in one year or less
|
|
$
|
560,830
|
|
|
$
|
557,675
|
|
|
$
|
337,898
|
|
|
$
|
341,595
|
|
Due after one year through five years
|
|
6,158,148
|
|
|
6,211,099
|
|
|
4,644,516
|
|
|
4,677,230
|
|
||||
Due after five years through 10 years
|
|
4,676,847
|
|
|
4,710,017
|
|
|
2,214,413
|
|
|
2,228,638
|
|
||||
Due after 10 years
|
|
610,962
|
|
|
620,849
|
|
|
496,302
|
|
|
497,174
|
|
||||
|
|
12,006,787
|
|
|
12,099,640
|
|
|
7,693,129
|
|
|
7,744,637
|
|
||||
Mortgage backed securities
|
|
490,093
|
|
|
493,656
|
|
|
754,870
|
|
|
750,332
|
|
||||
Commercial mortgage backed securities
|
|
536,051
|
|
|
539,683
|
|
|
764,152
|
|
|
767,861
|
|
||||
Asset backed securities
|
|
1,123,987
|
|
|
1,123,616
|
|
|
1,620,506
|
|
|
1,630,150
|
|
||||
Total
|
|
$
|
14,156,918
|
|
|
$
|
14,256,595
|
|
|
$
|
10,832,657
|
|
|
$
|
10,892,980
|
|
|
ACGL 2016 FORM 10-K
|
162
|
|
December 31,
|
||||||
|
2016
|
|
2015
|
||||
Available for sale securities:
|
|
|
|
||||
Asian and emerging markets
|
$
|
84,778
|
|
|
$
|
206,861
|
|
Investment grade fixed income
|
33,923
|
|
|
31,370
|
|
||
Credit related funds
|
7,469
|
|
|
22,512
|
|
||
Other
|
41,800
|
|
|
39,733
|
|
||
Total available for sale
|
167,970
|
|
|
300,476
|
|
||
Fair value option:
|
|
|
|
||||
Term loan investments (par value: $1,208,537 and $1,197,143)
|
1,190,799
|
|
|
1,108,017
|
|
||
Mezzanine debt funds
|
127,943
|
|
|
121,589
|
|
||
Credit related funds
|
218,298
|
|
|
219,049
|
|
||
Investment grade fixed income
|
75,468
|
|
|
63,053
|
|
||
Asian and emerging markets
|
178,568
|
|
|
34,761
|
|
||
Other (1)
|
129,717
|
|
|
124,502
|
|
||
Total fair value option
|
1,920,793
|
|
|
1,670,971
|
|
||
Total
|
$
|
2,088,763
|
|
|
$
|
1,971,447
|
|
(1)
|
Includes fund investments with strategies in mortgage servicing rights, transportation and infrastructure assets and other.
|
|
December 31,
|
||||||
|
2016
|
|
2015
|
||||
Fixed maturities
|
$
|
1,099,116
|
|
|
$
|
936,802
|
|
Other investments
|
1,920,793
|
|
|
1,670,971
|
|
||
Short-term investments
|
373,669
|
|
|
285,923
|
|
||
Equity securities
|
27,642
|
|
|
798
|
|
||
Investments accounted for using the fair value option
|
$
|
3,421,220
|
|
|
$
|
2,894,494
|
|
|
December 31,
|
||||||
|
2016
|
|
2015
|
||||
Investments accounted for using the equity method (1)
|
$
|
800,970
|
|
|
$
|
584,158
|
|
Investments accounted for using the fair value option (2)
|
90,804
|
|
|
90,969
|
|
||
Total
|
$
|
891,774
|
|
|
$
|
675,127
|
|
(1)
|
Aggregate unfunded commitments were
$776.6 million
at
December 31, 2016
, compared to
$535.4 million
at
December 31, 2015
.
|
(2)
|
Aggregate unfunded commitments were
$16.7 million
at
December 31, 2016
, compared to
$22.7 million
at
December 31, 2015
.
|
|
ACGL 2016 FORM 10-K
|
163
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Fixed maturities
|
$
|
295,502
|
|
|
$
|
283,998
|
|
|
$
|
265,219
|
|
Term loan investments
|
92,568
|
|
|
71,120
|
|
|
39,940
|
|
|||
Equity securities
|
12,536
|
|
|
13,534
|
|
|
13,005
|
|
|||
Short-term investments
|
6,071
|
|
|
669
|
|
|
1,888
|
|
|||
Other (1)
|
40,247
|
|
|
41,807
|
|
|
28,869
|
|
|||
Gross investment income
|
446,924
|
|
|
411,128
|
|
|
348,921
|
|
|||
Investment expenses
|
(80,182
|
)
|
|
(63,038
|
)
|
|
(46,336
|
)
|
|||
Net investment income
|
$
|
366,742
|
|
|
$
|
348,090
|
|
|
$
|
302,585
|
|
(1)
|
Includes income distributions from investment funds and other items.
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Available for sale securities:
|
|
|
|
|
|
||||||
Gross gains on investment sales
|
$
|
309,896
|
|
|
$
|
281,786
|
|
|
$
|
248,031
|
|
Gross losses on investment sales
|
(214,447
|
)
|
|
(218,970
|
)
|
|
(145,808
|
)
|
|||
Change in fair value of assets and liabilities accounted for using the fair value option:
|
|
|
|
|
|
||||||
Fixed maturities
|
47,890
|
|
|
(84,620
|
)
|
|
(20,743
|
)
|
|||
Other investments
|
58,687
|
|
|
(122,171
|
)
|
|
2,672
|
|
|||
Equity securities
|
366
|
|
|
(85
|
)
|
|
—
|
|
|||
Short-term investments
|
93
|
|
|
1,462
|
|
|
(395
|
)
|
|||
Derivative instruments (1)
|
(22,612
|
)
|
|
(7,114
|
)
|
|
43,934
|
|
|||
Other (2)
|
(42,287
|
)
|
|
(36,130
|
)
|
|
(24,774
|
)
|
|||
Net realized gains (losses)
|
$
|
137,586
|
|
|
$
|
(185,842
|
)
|
|
$
|
102,917
|
|
(1)
|
See Note
11
for information on the Company’s derivative instruments.
|
(2)
|
Includes the re-measurement of contingent consideration liability amounts.
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Fixed maturities:
|
|
|
|
|
|
||||||
Mortgage backed securities
|
$
|
(964
|
)
|
|
$
|
(1,794
|
)
|
|
$
|
(1,525
|
)
|
Corporate bonds
|
(5,674
|
)
|
|
(10,841
|
)
|
|
(2,062
|
)
|
|||
Non-U.S. government securities
|
(823
|
)
|
|
—
|
|
|
—
|
|
|||
Commercial mortgage backed securities
|
—
|
|
|
—
|
|
|
(7
|
)
|
|||
Asset backed securities
|
(14,736
|
)
|
|
—
|
|
|
(40
|
)
|
|||
Municipal bonds
|
(726
|
)
|
|
—
|
|
|
—
|
|
|||
Total
|
(22,923
|
)
|
|
(12,635
|
)
|
|
(3,634
|
)
|
|||
Short-term investments
|
—
|
|
|
(2,341
|
)
|
|
—
|
|
|||
Equity securities
|
(3,990
|
)
|
|
(4,206
|
)
|
|
(1,106
|
)
|
|||
Other investments
|
(3,529
|
)
|
|
(934
|
)
|
|
(25,410
|
)
|
|||
Net impairment losses recognized in earnings
|
$
|
(30,442
|
)
|
|
$
|
(20,116
|
)
|
|
$
|
(30,150
|
)
|
•
|
Asset backed securities – the Company utilized underlying data provided by asset managers, cash flow projections and additional information from credit agencies in order to determine an expected recovery value for each security. Impairment losses primarily reflected reductions in two securities following an analysis of expected cash flows;
|
•
|
Corporate bonds – the Company reviewed the business prospects, credit ratings, estimated loss given default factors, foreign currency impacts and information received from asset managers and rating agencies for certain corporate bonds. Impairment losses primarily resulted from reductions on non-investment grade corporate bonds in the energy sector, reflecting current market conditions;
|
•
|
Equity securities – the Company utilized information received from asset managers on common stocks, including the business prospects, recent events, industry and market data and other factors. Impairment losses were
|
|
ACGL 2016 FORM 10-K
|
164
|
•
|
Other investments – the Company utilized information received from fund managers and positive and negative evidence, including the business prospects, recent events, industry and market data and other factors. Impairment losses reflected a reduction on certain funds which were in an unrealized loss position for a significant length of time.
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Balance at start of year
|
$
|
26,875
|
|
|
$
|
20,196
|
|
|
$
|
60,062
|
|
Credit loss impairments recognized on securities not previously impaired
|
2,186
|
|
|
12,777
|
|
|
691
|
|
|||
Credit loss impairments recognized on securities previously impaired
|
582
|
|
|
1,673
|
|
|
162
|
|
|||
Reductions for increases in cash flows expected to be collected that are recognized over the remaining life of the security
|
—
|
|
|
—
|
|
|
—
|
|
|||
Reductions for securities sold during the period
|
(16,505
|
)
|
|
(7,771
|
)
|
|
(40,719
|
)
|
|||
Balance at end of year
|
$
|
13,138
|
|
|
$
|
26,875
|
|
|
$
|
20,196
|
|
|
December 31,
|
||||||
|
2016
|
|
2015
|
||||
Assets used for collateral or guarantees:
|
|
|
|
||||
Affiliated transactions
|
$
|
3,871,971
|
|
|
$
|
3,810,104
|
|
Third party agreements
|
1,513,079
|
|
|
1,286,257
|
|
||
Deposits with U.S. regulatory authorities
|
472,890
|
|
|
391,458
|
|
||
Deposits with non-U.S. regulatory authorities
|
44,399
|
|
|
38,230
|
|
||
Total restricted assets
|
$
|
5,902,339
|
|
|
$
|
5,526,049
|
|
Level 1:
|
Inputs to the valuation methodology are observable inputs that reflect quoted prices (unadjusted) for
identical
assets or liabilities in
active markets
|
Level 2:
|
Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument
|
Level 3:
|
Inputs to the valuation methodology are unobservable and significant to the fair value measurement
|
|
ACGL 2016 FORM 10-K
|
165
|
|
ACGL 2016 FORM 10-K
|
166
|
|
ACGL 2016 FORM 10-K
|
167
|
|
|
|
Fair Value Measurement Using:
|
||||||||||||
|
Estimated
Fair Value
|
|
Quoted Prices in Active Markets for Identical Assets
(Level 1)
|
|
Significant Other Observable Inputs
(Level 2)
|
|
Significant Unobservable Inputs
(Level 3)
|
||||||||
Assets measured at fair value:
|
|
|
|
|
|
|
|
||||||||
Available for sale securities:
|
|
|
|
|
|
|
|
||||||||
Fixed maturities (1):
|
|
|
|
|
|
|
|
||||||||
Corporate bonds
|
$
|
4,392,373
|
|
|
$
|
—
|
|
|
$
|
4,374,029
|
|
|
$
|
18,344
|
|
Mortgage backed securities
|
490,093
|
|
|
—
|
|
|
490,093
|
|
|
—
|
|
||||
Municipal bonds
|
3,713,434
|
|
|
—
|
|
|
3,713,434
|
|
|
—
|
|
||||
Commercial mortgage backed securities
|
536,051
|
|
|
—
|
|
|
536,051
|
|
|
—
|
|
||||
U.S. government and government agencies
|
2,804,540
|
|
|
2,691,575
|
|
|
112,965
|
|
|
—
|
|
||||
Non-U.S. government securities
|
1,096,440
|
|
|
—
|
|
|
1,096,440
|
|
|
—
|
|
||||
Asset backed securities
|
1,123,987
|
|
|
—
|
|
|
1,112,698
|
|
|
11,289
|
|
||||
Total
|
14,156,918
|
|
|
2,691,575
|
|
|
11,435,710
|
|
|
29,633
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Equity securities
|
532,680
|
|
|
529,695
|
|
|
2,985
|
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Short-term investments
|
612,005
|
|
|
608,862
|
|
|
3,143
|
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Other investments
|
112,313
|
|
|
112,313
|
|
|
—
|
|
|
—
|
|
||||
Other investments measured at net asset value (2)
|
55,657
|
|
|
|
|
|
|
|
|||||||
Total other investments
|
167,970
|
|
|
112,313
|
|
|
—
|
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Derivative instruments (4)
|
28,410
|
|
|
—
|
|
|
28,410
|
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Fair value option:
|
|
|
|
|
|
|
|
||||||||
Corporate bonds
|
790,935
|
|
|
—
|
|
|
790,935
|
|
|
—
|
|
||||
Non-U.S. government bonds
|
61,747
|
|
|
—
|
|
|
61,747
|
|
|
—
|
|
||||
Mortgage backed securities
|
18,624
|
|
|
—
|
|
|
18,624
|
|
|
—
|
|
||||
Asset backed securities
|
30,324
|
|
|
—
|
|
|
30,324
|
|
|
—
|
|
||||
U.S. government and government agencies
|
197,486
|
|
|
197,486
|
|
|
—
|
|
|
—
|
|
||||
Short-term investments
|
373,669
|
|
|
309,127
|
|
|
64,542
|
|
|
—
|
|
||||
Equity securities
|
27,642
|
|
|
25,328
|
|
|
2,314
|
|
|
—
|
|
||||
Other investments
|
1,226,242
|
|
|
80,706
|
|
|
1,120,536
|
|
|
25,000
|
|
||||
Other investments measured at net asset value (2)
|
694,551
|
|
|
|
|
|
|
|
|||||||
Total
|
3,421,220
|
|
|
612,647
|
|
|
2,089,022
|
|
|
25,000
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Total assets measured at fair value
|
$
|
18,919,203
|
|
|
$
|
4,555,092
|
|
|
$
|
13,559,270
|
|
|
$
|
54,633
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities measured at fair value:
|
|
|
|
|
|
|
|
||||||||
Contingent consideration liabilities
|
$
|
(122,350
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(122,350
|
)
|
Securities sold but not yet purchased (3)
|
(33,157
|
)
|
|
—
|
|
|
(33,157
|
)
|
|
—
|
|
||||
Derivative instruments (4)
|
(26,049
|
)
|
|
—
|
|
|
(26,049
|
)
|
|
—
|
|
||||
Total liabilities measured at fair value
|
$
|
(181,556
|
)
|
|
$
|
—
|
|
|
$
|
(59,206
|
)
|
|
$
|
(122,350
|
)
|
(1)
|
In securities lending transactions, the Company receives collateral in excess of the fair value of the securities pledged. For purposes of this table, the Company has excluded the collateral received under securities lending, at fair value and included the securities pledged under securities lending, at fair value. See Note
9
, “Investment Information—Securities Lending Agreements.”
|
(2)
|
In accordance with applicable accounting guidance, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets.
|
(3)
|
Represents the Company’s obligations to deliver securities that it did not own at the time of sale. Such amounts are included in “other liabilities” on the Company’s consolidated balance sheets.
|
(4)
|
See Note
11
, “Derivative Instruments.”
|
|
ACGL 2016 FORM 10-K
|
168
|
|
|
|
Fair Value Measurement Using:
|
||||||||||||
|
Estimated
Fair Value
|
|
Quoted Prices in Active Markets for Identical Assets
(Level 1)
|
|
Significant Other Observable Inputs
(Level 2)
|
|
Significant Unobservable Inputs
(Level 3)
|
||||||||
Assets measured at fair value:
|
|
|
|
|
|
|
|
||||||||
Available for sale securities:
|
|
|
|
|
|
|
|
||||||||
Fixed maturities (1):
|
|
|
|
|
|
|
|
||||||||
Corporate bonds
|
$
|
2,725,729
|
|
|
$
|
—
|
|
|
$
|
2,709,361
|
|
|
$
|
16,368
|
|
Mortgage backed securities
|
754,870
|
|
|
—
|
|
|
754,870
|
|
|
—
|
|
||||
Municipal bonds
|
1,626,281
|
|
|
—
|
|
|
1,626,281
|
|
|
—
|
|
||||
Commercial mortgage backed securities
|
764,152
|
|
|
—
|
|
|
764,152
|
|
|
—
|
|
||||
U.S. government and government agencies
|
2,423,455
|
|
|
2,378,662
|
|
|
44,793
|
|
|
—
|
|
||||
Non-U.S. government securities
|
917,664
|
|
|
—
|
|
|
917,664
|
|
|
—
|
|
||||
Asset backed securities
|
1,620,506
|
|
|
—
|
|
|
1,563,006
|
|
|
57,500
|
|
||||
Total
|
10,832,657
|
|
|
2,378,662
|
|
|
8,380,127
|
|
|
73,868
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Equity securities
|
629,182
|
|
|
627,441
|
|
|
1,741
|
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Short-term investments
|
587,904
|
|
|
572,604
|
|
|
15,300
|
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Other investments
|
99,159
|
|
|
99,159
|
|
|
—
|
|
|
—
|
|
||||
Other investments measured at net asset value (2)
|
201,317
|
|
|
|
|
|
|
|
|||||||
Total other investments
|
300,476
|
|
|
99,159
|
|
|
—
|
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Derivative instruments (4)
|
20,022
|
|
|
—
|
|
|
20,022
|
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Fair value option:
|
|
|
|
|
|
|
|
||||||||
Corporate bonds
|
771,733
|
|
|
—
|
|
|
771,733
|
|
|
—
|
|
||||
Non-U.S. government bonds
|
81,824
|
|
|
—
|
|
|
81,824
|
|
|
—
|
|
||||
Mortgage backed securities
|
57,687
|
|
|
—
|
|
|
57,687
|
|
|
—
|
|
||||
Asset backed securities
|
25,444
|
|
|
—
|
|
|
25,444
|
|
|
—
|
|
||||
U.S. government and government agencies
|
114
|
|
|
114
|
|
|
—
|
|
|
—
|
|
||||
Short-term investments
|
285,923
|
|
|
285,923
|
|
|
—
|
|
|
—
|
|
||||
Equity securities
|
798
|
|
|
798
|
|
|
—
|
|
|
—
|
|
||||
Other investments
|
1,176,312
|
|
|
68,295
|
|
|
1,108,017
|
|
|
—
|
|
||||
Other investments measured at net asset value (2)
|
494,659
|
|
|
|
|
|
|
|
|||||||
Total
|
2,894,494
|
|
|
355,130
|
|
|
2,044,705
|
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Total assets measured at fair value
|
$
|
15,264,735
|
|
|
$
|
4,032,996
|
|
|
$
|
10,461,895
|
|
|
$
|
73,868
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities measured at fair value:
|
|
|
|
|
|
|
|
||||||||
Contingent consideration liabilities
|
$
|
(96,048
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(96,048
|
)
|
Securities sold but not yet purchased (3)
|
(30,583
|
)
|
|
—
|
|
|
(30,583
|
)
|
|
—
|
|
||||
Derivative instruments (4)
|
(11,863
|
)
|
|
—
|
|
|
(11,863
|
)
|
|
—
|
|
||||
Total liabilities measured at fair value
|
$
|
(138,494
|
)
|
|
$
|
—
|
|
|
$
|
(42,446
|
)
|
|
$
|
(96,048
|
)
|
(1)
|
In securities lending transactions, the Company receives collateral in excess of the fair value of the securities pledged. For purposes of this table, the Company has excluded the collateral received under securities lending, at fair value and included the securities pledged under securities lending, at fair value. See Note
9
, “Investment Information—Securities Lending Agreements.”
|
(2)
|
In accordance with applicable accounting guidance, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets.
|
(3)
|
Represents the Company’s obligations to deliver securities that it did not own at the time of sale. Such amounts are included in “other liabilities” on the Company’s consolidated balance sheets.
|
(4)
|
See Note
11
, “Derivative Instruments.”
|
|
ACGL 2016 FORM 10-K
|
169
|
|
|
|
Assets
|
|
Liabilities
|
||||||||||||||
|
Available For Sale
|
|
Fair Value Option
|
|
|
|
|
||||||||||||
|
Asset Backed Securities
|
|
Corporate Bonds
|
|
Other Investments
|
|
Total
|
|
Contingent
Consideration
Liabilities
|
||||||||||
Year Ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
||||||||||
Balance at beginning of year
|
$
|
57,500
|
|
|
$
|
16,368
|
|
|
$
|
—
|
|
|
$
|
73,868
|
|
|
$
|
(96,048
|
)
|
Total gains or (losses) (realized/unrealized)
|
|
|
|
|
|
|
|
|
|
||||||||||
Included in earnings (1)
|
(14,730
|
)
|
|
1,200
|
|
|
—
|
|
|
(13,530
|
)
|
|
(26,912
|
)
|
|||||
Included in other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
74
|
|
|||||
Purchases, issuances, sales and settlements
|
|
|
|
|
|
|
|
|
|
||||||||||
Purchases
|
—
|
|
|
776
|
|
|
—
|
|
|
776
|
|
|
—
|
|
|||||
Issuances
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Sales
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Settlements
|
(31,481
|
)
|
|
—
|
|
|
—
|
|
|
(31,481
|
)
|
|
536
|
|
|||||
Transfers in and/or out of Level 3
|
—
|
|
|
—
|
|
|
25,000
|
|
|
25,000
|
|
|
—
|
|
|||||
Balance at end of year
|
$
|
11,289
|
|
|
$
|
18,344
|
|
|
$
|
25,000
|
|
|
$
|
54,633
|
|
|
$
|
(122,350
|
)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Year Ended December 31, 2015
|
|
|
|
|
|
|
|
|
|
||||||||||
Balance at beginning of year
|
$
|
57,500
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
57,500
|
|
|
$
|
(61,845
|
)
|
Total gains or (losses) (realized/unrealized)
|
|
|
|
|
|
|
|
|
|
||||||||||
Included in earnings (1)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(33,135
|
)
|
|||||
Included in other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Purchases, issuances, sales and settlements
|
|
|
|
|
|
|
|
|
|
||||||||||
Purchases
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Issuances
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,068
|
)
|
|||||
Sales
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Settlements
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Transfers in and/or out of Level 3
|
—
|
|
|
16,368
|
|
|
—
|
|
|
16,368
|
|
|
—
|
|
|||||
Balance at end of year
|
$
|
57,500
|
|
|
$
|
16,368
|
|
|
$
|
—
|
|
|
$
|
73,868
|
|
|
$
|
(96,048
|
)
|
(1)
|
Gains or losses on asset backed securities were included in net impairment losses recognized in earnings while gains or losses on corporate bonds and contingent consideration liabilities were included in net realized gains (losses).
|
|
ACGL 2016 FORM 10-K
|
170
|
|
Estimated Fair Value
|
|
|
||||||||
|
Asset
Derivatives |
|
Liability Derivatives
|
|
Notional
Value (1)
|
||||||
December 31, 2016
|
|
|
|
|
|
|
|
|
|||
Futures contracts (2)
|
$
|
360
|
|
|
$
|
(9,398
|
)
|
|
$
|
1,655,530
|
|
Foreign currency forward contracts (2)
|
9,354
|
|
|
(12,941
|
)
|
|
1,186,386
|
|
|||
TBAs (3)
|
—
|
|
|
—
|
|
|
—
|
|
|||
Other (2)
|
20,287
|
|
|
(3,710
|
)
|
|
1,014,863
|
|
|||
Total
|
$
|
30,001
|
|
|
$
|
(26,049
|
)
|
|
|
||
|
|
|
|
|
|
||||||
December 31, 2015
|
|
|
|
|
|
|
|
|
|||
Futures contracts (2)
|
$
|
2,816
|
|
|
$
|
(1,202
|
)
|
|
$
|
1,797,115
|
|
Foreign currency forward contracts (2)
|
9,336
|
|
|
(6,344
|
)
|
|
773,619
|
|
|||
TBAs (3)
|
6,525
|
|
|
—
|
|
|
6,316
|
|
|||
Other (2)
|
7,870
|
|
|
(4,317
|
)
|
|
1,694,935
|
|
|||
Total
|
$
|
26,547
|
|
|
$
|
(11,863
|
)
|
|
|
(1)
|
Represents the absolute notional value of all outstanding contracts, consisting of long and short positions.
|
(2)
|
The fair value of asset derivatives are included in ‘other assets’ and the fair value of liability derivatives are included in ‘other liabilities.’ Such amounts include risk in force on GSE credit-risk sharing transactions that are accounted for as derivatives.
|
(3)
|
The fair value of TBAs are included in ‘fixed maturities available for sale, at fair value.’
|
|
ACGL 2016 FORM 10-K
|
171
|
Derivatives not designated as hedging instruments
|
Year Ended December 31,
|
||||||||||
2016
|
|
2015
|
|
2014
|
|||||||
Net realized gains (losses):
|
|
|
|
|
|
||||||
Futures contracts
|
$
|
(5,474
|
)
|
|
$
|
(21,533
|
)
|
|
$
|
30,444
|
|
Foreign currency forward contracts
|
(9,588
|
)
|
|
16,045
|
|
|
13,430
|
|
|||
TBAs
|
577
|
|
|
1,452
|
|
|
(342
|
)
|
|||
Other
|
(8,127
|
)
|
|
(3,078
|
)
|
|
402
|
|
|||
Total
|
$
|
(22,612
|
)
|
|
$
|
(7,114
|
)
|
|
$
|
43,934
|
|
|
Unrealized Appreciation on Available-For-Sale Investments
|
|
Foreign Currency Translation Adjustments
|
|
Total
|
||||||
Year Ended December 31, 2016
|
|
|
|
|
|
||||||
Beginning balance
|
$
|
50,085
|
|
|
$
|
(66,587
|
)
|
|
$
|
(16,502
|
)
|
Other comprehensive income (loss) before reclassifications
|
(21,365
|
)
|
|
(20,313
|
)
|
|
(41,678
|
)
|
|||
Amounts reclassified from accumulated other comprehensive income
|
(56,361
|
)
|
|
—
|
|
|
(56,361
|
)
|
|||
Net current period other comprehensive income (loss)
|
(77,726
|
)
|
|
(20,313
|
)
|
|
(98,039
|
)
|
|||
Ending balance
|
$
|
(27,641
|
)
|
|
$
|
(86,900
|
)
|
|
$
|
(114,541
|
)
|
|
|
|
|
|
|
||||||
Year Ended December 31, 2015
|
|
|
|
|
|
||||||
Beginning balance
|
$
|
161,598
|
|
|
$
|
(32,742
|
)
|
|
$
|
128,856
|
|
Other comprehensive income (loss) before reclassifications
|
(83,280
|
)
|
|
(33,845
|
)
|
|
(117,125
|
)
|
|||
Amounts reclassified from accumulated other comprehensive income
|
(28,233
|
)
|
|
—
|
|
|
(28,233
|
)
|
|||
Net current period other comprehensive income (loss)
|
(111,513
|
)
|
|
(33,845
|
)
|
|
(145,358
|
)
|
|||
Ending balance
|
$
|
50,085
|
|
|
$
|
(66,587
|
)
|
|
$
|
(16,502
|
)
|
|
|
|
|
|
|
||||||
Year Ended December 31, 2014
|
|
|
|
|
|
||||||
Beginning balance
|
$
|
80,692
|
|
|
$
|
(5,728
|
)
|
|
$
|
74,964
|
|
Other comprehensive income (loss) before reclassifications
|
146,010
|
|
|
(27,014
|
)
|
|
118,996
|
|
|||
Amounts reclassified from accumulated other comprehensive income
|
(65,104
|
)
|
|
—
|
|
|
(65,104
|
)
|
|||
Net current period other comprehensive income (loss)
|
80,906
|
|
|
(27,014
|
)
|
|
53,892
|
|
|||
Ending balance
|
$
|
161,598
|
|
|
$
|
(32,742
|
)
|
|
$
|
128,856
|
|
|
ACGL 2016 FORM 10-K
|
172
|
|
Before Tax
|
|
Tax Expense
|
|
Net of Tax
|
||||||
|
Amount
|
|
(Benefit)
|
|
Amount
|
||||||
Year Ended December 31, 2016
|
|
|
|
|
|
||||||
Unrealized appreciation (decline) in value of investments:
|
|
|
|
|
|
||||||
Unrealized holding gains (losses) arising during period
|
$
|
(26,159
|
)
|
|
$
|
(5,146
|
)
|
|
$
|
(21,013
|
)
|
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)
|
(352
|
)
|
|
—
|
|
|
(352
|
)
|
|||
Less reclassification of net realized gains (losses) included in net income
|
64,654
|
|
|
8,293
|
|
|
56,361
|
|
|||
Foreign currency translation adjustments
|
(20,120
|
)
|
|
261
|
|
|
(20,381
|
)
|
|||
Other comprehensive income (loss)
|
$
|
(111,285
|
)
|
|
$
|
(13,178
|
)
|
|
$
|
(98,107
|
)
|
|
|
|
|
|
|
||||||
Year Ended December 31, 2015
|
|
|
|
|
|
||||||
Unrealized appreciation (decline) in value of investments:
|
|
|
|
|
|
||||||
Unrealized holding gains (losses) arising during period
|
$
|
(77,311
|
)
|
|
$
|
(67
|
)
|
|
$
|
(77,244
|
)
|
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)
|
(6,036
|
)
|
|
—
|
|
|
(6,036
|
)
|
|||
Less reclassification of net realized gains (losses) included in net income
|
36,665
|
|
|
8,432
|
|
|
28,233
|
|
|||
Foreign currency translation adjustments
|
(35,679
|
)
|
|
(1,568
|
)
|
|
(34,111
|
)
|
|||
Other comprehensive income (loss)
|
$
|
(155,691
|
)
|
|
$
|
(10,067
|
)
|
|
$
|
(145,624
|
)
|
|
|
|
|
|
|
||||||
Year Ended December 31, 2014
|
|
|
|
|
|
||||||
Unrealized appreciation (decline) in value of investments:
|
|
|
|
|
|
||||||
Unrealized holding gains (losses) arising during period
|
$
|
161,685
|
|
|
$
|
15,355
|
|
|
$
|
146,330
|
|
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)
|
(320
|
)
|
|
—
|
|
|
(320
|
)
|
|||
Less reclassification of net realized gains (losses) included in net income
|
71,753
|
|
|
6,649
|
|
|
65,104
|
|
|||
Foreign currency translation adjustments
|
(27,014
|
)
|
|
—
|
|
|
(27,014
|
)
|
|||
Other comprehensive income (loss)
|
$
|
62,598
|
|
|
$
|
8,706
|
|
|
$
|
53,892
|
|
|
ACGL 2016 FORM 10-K
|
173
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Numerator:
|
|
|
|
|
|
||||||
Net income
|
$
|
824,178
|
|
|
$
|
526,582
|
|
|
$
|
821,260
|
|
Amounts attributable to noncontrolling interests
|
(131,440
|
)
|
|
11,156
|
|
|
13,095
|
|
|||
Net income available to Arch
|
692,738
|
|
|
537,738
|
|
|
834,355
|
|
|||
Preferred dividends
|
(28,070
|
)
|
|
(21,938
|
)
|
|
(21,938
|
)
|
|||
Net income available to Arch common shareholders
|
$
|
664,668
|
|
|
$
|
515,800
|
|
|
$
|
812,417
|
|
|
|
|
|
|
|
||||||
Denominator:
|
|
|
|
|
|
||||||
Weighted average common shares outstanding
|
120,757,243
|
|
|
121,786,127
|
|
|
130,817,610
|
|
|||
Series D preferred securities (1)
|
34,871
|
|
|
—
|
|
|
—
|
|
|||
Weighted average common shares outstanding – basic
|
120,792,114
|
|
|
121,786,127
|
|
|
130,817,610
|
|
|||
Effect of dilutive common share equivalents:
|
|
|
|
|
|
||||||
Nonvested restricted shares
|
1,292,359
|
|
|
1,253,938
|
|
|
1,128,540
|
|
|||
Stock options (2)
|
2,633,020
|
|
|
2,998,678
|
|
|
2,976,172
|
|
|||
Weighted average common shares and common share
equivalents outstanding – diluted
|
124,717,493
|
|
|
126,038,743
|
|
|
134,922,322
|
|
|||
|
|
|
|
|
|
||||||
Earnings per common share:
|
|
|
|
|
|
||||||
Basic
|
$
|
5.50
|
|
|
$
|
4.24
|
|
|
$
|
6.21
|
|
Diluted
|
$
|
5.33
|
|
|
$
|
4.09
|
|
|
$
|
6.02
|
|
(1)
|
The company has determined that, based on a review of the terms, features and rights of the Company’s non-voting common equivalent preferred shares compared to the rights of the Company’s common shareholders, the underlying
12,762,820
common shares that the convertible securities convert to were common share equivalents at the time of their issuance.
|
(2)
|
Certain stock options were not included in the computation of diluted earnings per share where the exercise price of the stock options exceeded the average market price and would have been anti-dilutive or where, when applying the treasury stock method to in-the-money options, the sum of the proceeds, including unrecognized compensation, exceeded the average market price and would have been anti-dilutive. For
2016
,
2015
and
2014
, the number of stock options excluded were
722,729
,
799,535
and
1,435,955
, respectively.
|
|
ACGL 2016 FORM 10-K
|
174
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Current expense (benefit):
|
|
|
|
|
|
||||||
United States
|
$
|
40,300
|
|
|
$
|
37,186
|
|
|
$
|
29,749
|
|
Non-U.S.
|
10,445
|
|
|
7,008
|
|
|
801
|
|
|||
|
50,745
|
|
|
44,194
|
|
|
30,550
|
|
|||
Deferred expense (benefit):
|
|
|
|
|
|
||||||
United States
|
(14,641
|
)
|
|
(4,893
|
)
|
|
(8,168
|
)
|
|||
Non-U.S.
|
(4,730
|
)
|
|
1,311
|
|
|
605
|
|
|||
|
(19,371
|
)
|
|
(3,582
|
)
|
|
(7,563
|
)
|
|||
Income tax expense
|
$
|
31,374
|
|
|
$
|
40,612
|
|
|
$
|
22,987
|
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Income Before Income Taxes:
|
|
|
|
|
|
||||||
Bermuda
|
$
|
801,155
|
|
|
$
|
508,561
|
|
|
$
|
794,926
|
|
United States
|
51,577
|
|
|
57,527
|
|
|
53,055
|
|
|||
Other
|
2,820
|
|
|
1,106
|
|
|
(3,734
|
)
|
|||
Total
|
$
|
855,552
|
|
|
$
|
567,194
|
|
|
$
|
844,247
|
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Expected income tax expense (benefit) computed on pre-tax income
at weighted average income tax rate
|
$
|
17,365
|
|
|
$
|
20,058
|
|
|
$
|
18,178
|
|
Addition (reduction) in income tax expense (benefit) resulting from:
|
|
|
|
|
|
||||||
Tax-exempt investment income
|
(8,830
|
)
|
|
(9,588
|
)
|
|
(8,048
|
)
|
|||
Meals and entertainment
|
954
|
|
|
897
|
|
|
711
|
|
|||
State taxes, net of U.S. federal tax benefit
|
1,073
|
|
|
858
|
|
|
1,281
|
|
|||
Foreign branch taxes
|
5,496
|
|
|
1,456
|
|
|
464
|
|
|||
Prior year adjustment
|
(4,756
|
)
|
|
2,510
|
|
|
320
|
|
|||
Foreign exchange gains & losses
|
223
|
|
|
670
|
|
|
746
|
|
|||
Changes in applicable tax rate
|
1,209
|
|
|
40
|
|
|
(51
|
)
|
|||
Dividend withholding taxes
|
3,319
|
|
|
6,323
|
|
|
3,276
|
|
|||
Change in valuation allowance
|
4,730
|
|
|
2,917
|
|
|
(736
|
)
|
|||
Contingent consideration
|
9,353
|
|
|
11,548
|
|
|
6,763
|
|
|||
Uncertain tax position
|
—
|
|
|
2,008
|
|
|
—
|
|
|||
Other
|
1,238
|
|
|
915
|
|
|
83
|
|
|||
Income tax expense (benefit)
|
$
|
31,374
|
|
|
$
|
40,612
|
|
|
$
|
22,987
|
|
|
ACGL 2016 FORM 10-K
|
175
|
|
December 31,
|
||||||
|
2016
|
|
2015
|
||||
Deferred income tax assets:
|
|
|
|
||||
Net operating loss
|
$
|
13,061
|
|
|
$
|
11,436
|
|
AMT credit carryforward
|
5,350
|
|
|
5,304
|
|
||
Discounting of net loss reserves
|
64,220
|
|
|
54,373
|
|
||
Deferred ceding commission
|
15,505
|
|
|
—
|
|
||
Net unearned premium reserve
|
71,760
|
|
|
33,579
|
|
||
Compensation liabilities
|
37,757
|
|
|
29,069
|
|
||
Foreign tax credit carryforward
|
6,421
|
|
|
6,215
|
|
||
Interest expense
|
2,678
|
|
|
1,972
|
|
||
Goodwill and intangible assets
|
4,946
|
|
|
2,683
|
|
||
Tax and loss bonds
|
16,212
|
|
|
14,150
|
|
||
Net unrealized foreign exchange gains
|
1,308
|
|
|
1,573
|
|
||
Net unrealized decline of investments
|
7,384
|
|
|
—
|
|
||
Other, net
|
23,407
|
|
|
21,273
|
|
||
Deferred tax assets before valuation allowance
|
270,009
|
|
|
181,627
|
|
||
Valuation allowance
|
(17,028
|
)
|
|
(13,816
|
)
|
||
Deferred tax assets net of valuation allowance
|
252,981
|
|
|
167,811
|
|
||
Deferred income tax liabilities:
|
|
|
|
||||
Depreciation and amortization
|
(7,038
|
)
|
|
(7,368
|
)
|
||
Deferred acquisition costs, net
|
—
|
|
|
(164
|
)
|
||
Deposit accounting liability
|
(4,078
|
)
|
|
(4,151
|
)
|
||
Contingency reserve
|
(19,400
|
)
|
|
(15,289
|
)
|
||
Net unrealized appreciation of investments
|
—
|
|
|
(4,103
|
)
|
||
Other, net
|
(1,228
|
)
|
|
(1,042
|
)
|
||
Total deferred tax liabilities
|
(31,744
|
)
|
|
(32,117
|
)
|
||
Net deferred income tax assets
|
$
|
221,237
|
|
|
$
|
135,694
|
|
|
ACGL 2016 FORM 10-K
|
176
|
|
December 31,
|
||||||
|
2016
|
|
2015
|
||||
|
|
|
|
||||
Balance at beginning of year
|
$
|
2,008
|
|
|
$
|
—
|
|
Additions based on tax positions related to the current year
|
—
|
|
|
517
|
|
||
Additions for tax positions of prior years
|
—
|
|
|
1,491
|
|
||
Reductions for tax positions of prior years
|
—
|
|
|
—
|
|
||
Settlements
|
—
|
|
|
—
|
|
||
Balance at end of year
|
$
|
2,008
|
|
|
$
|
2,008
|
|
Jurisdiction
|
|
Tax Years
|
United States
|
|
2013-2016
|
United Kingdom
|
|
2011-2016
|
Ireland
|
|
2012-2016
|
Canada
|
|
2012-2016
|
Switzerland
|
|
2011-2016
|
Denmark
|
|
2013-2016
|
|
ACGL 2016 FORM 10-K
|
177
|
|
ACGL 2016 FORM 10-K
|
178
|
2017
|
$
|
29,881
|
|
2018
|
29,781
|
|
|
2019
|
26,796
|
|
|
2020
|
23,837
|
|
|
2021
|
18,330
|
|
|
Thereafter
|
49,471
|
|
|
Total
|
$
|
178,096
|
|
|
ACGL 2016 FORM 10-K
|
179
|
|
Goodwill
|
|
Intangible assets (indefinite life)
|
|
Intangible assets (finite life)
|
|
Total
|
||||||||
Net balance at Dec. 31, 2014
|
$
|
14,946
|
|
|
$
|
33,524
|
|
|
$
|
61,069
|
|
|
$
|
109,539
|
|
Acquisitions
|
663
|
|
|
—
|
|
|
10,844
|
|
|
11,507
|
|
||||
Amortization
|
—
|
|
|
—
|
|
|
(22,968
|
)
|
|
(22,968
|
)
|
||||
Foreign currency translation adjustment
|
(73
|
)
|
|
—
|
|
|
(474
|
)
|
|
(547
|
)
|
||||
Net balance at Dec. 31, 2015
|
15,536
|
|
|
33,524
|
|
|
48,471
|
|
|
97,531
|
|
||||
Acquisitions
|
188,758
|
|
|
34,650
|
|
|
481,049
|
|
|
704,457
|
|
||||
Amortization
|
—
|
|
|
—
|
|
|
(19,335
|
)
|
|
(19,335
|
)
|
||||
Foreign currency translation adjustment
|
(272
|
)
|
|
—
|
|
|
(828
|
)
|
|
(1,100
|
)
|
||||
Net balance at Dec. 31, 2016
|
$
|
204,021
|
|
|
$
|
68,174
|
|
|
$
|
509,358
|
|
|
$
|
781,553
|
|
|
|
|
|
|
|
|
|
||||||||
Gross balance at Dec. 31, 2016
|
$
|
204,386
|
|
|
$
|
68,174
|
|
|
$
|
616,801
|
|
|
$
|
889,361
|
|
Accumulated amortization
|
—
|
|
|
—
|
|
|
(105,742
|
)
|
|
(105,742
|
)
|
||||
Foreign currency translation adjustment
|
(364
|
)
|
|
—
|
|
|
(1,701
|
)
|
|
(2,066
|
)
|
||||
Net balance at Dec. 31, 2016
|
$
|
204,021
|
|
|
$
|
68,174
|
|
|
$
|
509,358
|
|
|
$
|
781,553
|
|
|
ACGL 2016 FORM 10-K
|
180
|
|
Gross Balance
|
|
Accumulated
Amortization |
|
Foreign Currency Translation Adjustment
|
|
Net
Balance
|
||||||||
December 31, 2016
|
|
|
|
|
|
|
|
||||||||
Acquired insurance contracts
|
$
|
435,067
|
|
|
$
|
(72,771
|
)
|
|
$
|
(150
|
)
|
|
$
|
362,146
|
|
Operating platform
|
44,900
|
|
|
(17,442
|
)
|
|
—
|
|
|
27,458
|
|
||||
Distribution relationships
|
145,311
|
|
|
(20,675
|
)
|
|
(1,551
|
)
|
|
123,085
|
|
||||
Goodwill
|
204,386
|
|
|
—
|
|
|
(364
|
)
|
|
204,022
|
|
||||
Insurance licenses
|
68,174
|
|
|
—
|
|
|
—
|
|
|
68,174
|
|
||||
Unfavorable service contract
|
(9,533
|
)
|
|
5,762
|
|
|
—
|
|
|
(3,771
|
)
|
||||
Other
|
1,056
|
|
|
(616
|
)
|
|
—
|
|
|
440
|
|
||||
Total
|
$
|
889,361
|
|
|
$
|
(105,742
|
)
|
|
$
|
(2,066
|
)
|
|
$
|
781,553
|
|
|
|
|
|
|
|
|
|
||||||||
December 31, 2015
|
|
|
|
|
|
|
|
||||||||
Acquired insurance contracts
|
$
|
85,032
|
|
|
$
|
(62,377
|
)
|
|
$
|
(152
|
)
|
|
$
|
22,503
|
|
Operating platform
|
29,900
|
|
|
(11,462
|
)
|
|
—
|
|
|
18,438
|
|
||||
Distribution relationships
|
29,296
|
|
|
(16,355
|
)
|
|
(722
|
)
|
|
12,219
|
|
||||
Goodwill
|
15,628
|
|
|
—
|
|
|
(92
|
)
|
|
15,536
|
|
||||
Insurance licenses
|
33,524
|
|
|
—
|
|
|
—
|
|
|
33,524
|
|
||||
Unfavorable service contract
|
(9,533
|
)
|
|
4,192
|
|
|
—
|
|
|
(5,341
|
)
|
||||
Other
|
1,057
|
|
|
(405
|
)
|
|
—
|
|
|
652
|
|
||||
Total
|
$
|
184,904
|
|
|
$
|
(86,407
|
)
|
|
$
|
(966
|
)
|
|
$
|
97,531
|
|
|
Year Ended December 31,
|
|||||||
|
2016
|
|
2015
|
|
2014
|
|||
Common Shares:
|
|
|
|
|
|
|||
Shares issued and outstanding, beginning of year
|
173,107,849
|
|
|
171,672,408
|
|
|
169,560,591
|
|
Shares issued (1)
|
1,149,112
|
|
|
1,001,667
|
|
|
1,493,524
|
|
Restricted shares issued, net of cancellations
|
387,140
|
|
|
433,774
|
|
|
618,293
|
|
Shares issued and outstanding, end of year
|
174,644,101
|
|
|
173,107,849
|
|
|
171,672,408
|
|
Common shares in treasury, end of year
|
(51,856,584
|
)
|
|
(50,480,066
|
)
|
|
(44,304,474
|
)
|
Shares issued and outstanding, end of year
|
122,787,517
|
|
|
122,627,783
|
|
|
127,367,934
|
|
(1)
|
Includes shares issued from the exercise of stock options and stock appreciation rights, and shares issued from the employee share purchase plan.
|
|
ACGL 2016 FORM 10-K
|
181
|
|
ACGL 2016 FORM 10-K
|
182
|
|
ACGL 2016 FORM 10-K
|
183
|
|
Year Ended December 31,
|
|||||||
|
2016
|
|
2015
|
|
2014
|
|||
Dividend yield
|
0.0
|
%
|
|
0.0
|
%
|
|
0.0
|
%
|
Expected volatility
|
21.7
|
%
|
|
22.1
|
%
|
|
22.8
|
%
|
Risk free interest rate
|
1.4
|
%
|
|
1.8
|
%
|
|
1.9
|
%
|
Expected option life
|
6.0 years
|
|
|
6.0 years
|
|
|
6.0 years
|
|
|
ACGL 2016 FORM 10-K
|
184
|
|
Year Ended December 31, 2016
|
|||||
|
Number of
Options / SARs
|
|
Weighted Average Exercise Price
|
|||
Outstanding, beginning of year
|
7,482,462
|
|
|
$
|
38.07
|
|
Granted
|
696,817
|
|
|
$
|
70.55
|
|
Exercised
|
(1,260,856
|
)
|
|
$
|
24.45
|
|
Forfeited or expired
|
(45,929
|
)
|
|
$
|
56.80
|
|
Outstanding, end of year
|
6,872,494
|
|
|
$
|
43.74
|
|
Exercisable, end of year
|
5,015,020
|
|
|
$
|
39.62
|
|
|
Year Ended December 31, 2016
|
||||||
|
Restricted
Common
Shares
|
|
Restricted
Unit
Awards
|
||||
Unvested Shares:
|
|
|
|
||||
Unvested balance, beginning of year
|
1,800,593
|
|
|
264,629
|
|
||
Granted
|
417,956
|
|
|
63,024
|
|
||
Vested
|
(541,409
|
)
|
|
(89,054
|
)
|
||
Forfeited
|
(30,816
|
)
|
|
(15,113
|
)
|
||
Unvested balance, end of year
|
1,646,324
|
|
|
223,486
|
|
||
|
|
|
|
||||
Weighted Average Grant Date Fair Value:
|
|
|
|
||||
Unvested balance, beginning of year
|
$
|
51.94
|
|
|
$
|
51.33
|
|
Granted
|
$
|
71.76
|
|
|
$
|
71.50
|
|
Vested
|
$
|
57.72
|
|
|
$
|
56.20
|
|
Forfeited
|
$
|
57.76
|
|
|
$
|
54.84
|
|
Unvested balance, end of year
|
$
|
54.96
|
|
|
$
|
54.84
|
|
|
ACGL 2016 FORM 10-K
|
185
|
|
December 31,
|
||||||
|
2016
|
|
2015
|
||||
Actual capital and surplus (1):
|
|
|
|
||||
Bermuda
|
$
|
8,960,248
|
|
|
$
|
6,397,010
|
|
Ireland
|
607,410
|
|
|
559,996
|
|
||
United States
|
4,660,855
|
|
|
1,564,056
|
|
||
United Kingdom
|
340,300
|
|
|
395,197
|
|
||
Canada
|
71,247
|
|
|
67,436
|
|
||
|
|
|
|
||||
Required capital and surplus:
|
|
|
|
||||
Bermuda
|
$
|
3,077,684
|
|
|
$
|
2,129,064
|
|
Ireland
|
283,544
|
|
|
459,271
|
|
||
United States
|
1,811,938
|
|
|
488,794
|
|
||
United Kingdom
|
276,928
|
|
|
321,462
|
|
||
Canada
|
35,858
|
|
|
36,360
|
|
(1)
|
Such amounts include ownership interests in affiliated insurance and reinsurance subsidiaries.
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Statutory net income (loss):
|
|
|
|
|
|
||||||
Bermuda
|
$
|
886,492
|
|
|
$
|
514,151
|
|
|
$
|
692,676
|
|
Ireland
|
26,935
|
|
|
29,041
|
|
|
43,197
|
|
|||
United States
|
67,826
|
|
|
76,604
|
|
|
46,110
|
|
|||
United Kingdom
|
(7,512
|
)
|
|
(6,924
|
)
|
|
13,016
|
|
|||
Canada
|
621
|
|
|
(1,098
|
)
|
|
1,517
|
|
|
ACGL 2016 FORM 10-K
|
187
|
|
ACGL 2016 FORM 10-K
|
188
|
|
Fourth
Quarter
|
|
Third
Quarter
|
|
Second
Quarter
|
|
First
Quarter
|
||||||||
Year Ended December 31, 2016
|
|
|
|
|
|
|
|
||||||||
Net premiums written
|
$
|
872,315
|
|
|
$
|
1,014,278
|
|
|
$
|
1,023,563
|
|
|
$
|
1,121,235
|
|
Net premiums earned
|
968,855
|
|
|
958,403
|
|
|
1,005,985
|
|
|
951,579
|
|
||||
Net investment income
|
91,051
|
|
|
93,618
|
|
|
88,338
|
|
|
93,735
|
|
||||
Net realized gains (losses)
|
(93,061
|
)
|
|
125,105
|
|
|
68,218
|
|
|
37,324
|
|
||||
Net impairment losses recognized in earnings
|
(13,593
|
)
|
|
(3,867
|
)
|
|
(5,343
|
)
|
|
(7,639
|
)
|
||||
Underwriting income
|
109,246
|
|
|
122,782
|
|
|
111,746
|
|
|
110,943
|
|
||||
Net income attributable to Arch
|
74,013
|
|
|
252,872
|
|
|
211,055
|
|
|
154,798
|
|
||||
Preferred dividends
|
(11,617
|
)
|
|
(5,484
|
)
|
|
(5,485
|
)
|
|
(5,484
|
)
|
||||
Net income available to Arch common shareholders
|
62,396
|
|
|
247,388
|
|
|
205,570
|
|
|
149,314
|
|
||||
Net income per common share -- basic
|
$
|
0.51
|
|
|
$
|
2.05
|
|
|
$
|
1.70
|
|
|
$
|
1.24
|
|
Net income per common share -- diluted
|
$
|
0.50
|
|
|
$
|
1.98
|
|
|
$
|
1.65
|
|
|
$
|
1.20
|
|
|
|
|
|
|
|
|
|
||||||||
Year Ended December 31, 2015
|
|
|
|
|
|
|
|
||||||||
Net premiums written
|
$
|
834,984
|
|
|
$
|
971,972
|
|
|
$
|
943,580
|
|
|
$
|
1,066,995
|
|
Net premiums earned
|
943,520
|
|
|
936,683
|
|
|
943,438
|
|
|
910,264
|
|
||||
Net investment income
|
95,900
|
|
|
86,233
|
|
|
86,963
|
|
|
78,994
|
|
||||
Net realized gains (losses)
|
(143,767
|
)
|
|
(89,698
|
)
|
|
(35,725
|
)
|
|
83,348
|
|
||||
Net impairment losses recognized in earnings
|
(7,336
|
)
|
|
(5,868
|
)
|
|
(1,113
|
)
|
|
(5,799
|
)
|
||||
Underwriting income
|
113,143
|
|
|
94,779
|
|
|
105,114
|
|
|
116,471
|
|
||||
Net income attributable to Arch
|
58,579
|
|
|
80,033
|
|
|
115,790
|
|
|
283,336
|
|
||||
Preferred dividends
|
(5,485
|
)
|
|
(5,484
|
)
|
|
(5,485
|
)
|
|
(5,484
|
)
|
||||
Net income available to Arch common shareholders
|
53,094
|
|
|
74,549
|
|
|
110,305
|
|
|
277,852
|
|
||||
Net income per common share -- basic
|
$
|
0.44
|
|
|
$
|
0.62
|
|
|
$
|
0.91
|
|
|
$
|
2.24
|
|
Net income per common share -- diluted
|
$
|
0.42
|
|
|
$
|
0.60
|
|
|
$
|
0.88
|
|
|
$
|
2.16
|
|
|
ACGL 2016 FORM 10-K
|
189
|
|
December 31, 2016
|
||||||||||||||||||
Condensed Consolidating Balance Sheet
|
ACGL (Parent Guarantor)
|
|
Arch-U.S. (Subsidiary Issuer)
|
|
Other ACGL Subsidiaries
|
|
Consolidating Adjustments and Eliminations
|
|
ACGL Consolidated
|
||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
||||||||||
Total investments
|
$
|
2,612
|
|
|
$
|
41,672
|
|
|
$
|
19,690,067
|
|
|
$
|
(14,700
|
)
|
|
$
|
19,719,651
|
|
Cash
|
1,687
|
|
|
71,955
|
|
|
769,300
|
|
|
—
|
|
|
842,942
|
|
|||||
Investments in subsidiaries
|
8,660,586
|
|
|
3,716,681
|
|
|
—
|
|
|
(12,377,267
|
)
|
|
—
|
|
|||||
Due from subsidiaries and affiliates
|
14,297
|
|
|
51,298
|
|
|
1,866,681
|
|
|
(1,932,276
|
)
|
|
—
|
|
|||||
Premiums receivable
|
—
|
|
|
—
|
|
|
1,579,865
|
|
|
(507,430
|
)
|
|
1,072,435
|
|
|||||
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses
|
—
|
|
|
—
|
|
|
6,114,518
|
|
|
(4,000,380
|
)
|
|
2,114,138
|
|
|||||
Contractholder receivables
|
—
|
|
|
—
|
|
|
1,717,436
|
|
|
—
|
|
|
1,717,436
|
|
|||||
Ceded unearned premiums
|
—
|
|
|
—
|
|
|
1,985,311
|
|
|
(1,125,744
|
)
|
|
859,567
|
|
|||||
Deferred acquisition costs
|
—
|
|
|
—
|
|
|
577,461
|
|
|
(129,901
|
)
|
|
447,560
|
|
|||||
Other assets
|
15,725
|
|
|
49,244
|
|
|
2,683,339
|
|
|
(149,928
|
)
|
|
2,598,380
|
|
|||||
Total assets
|
$
|
8,694,907
|
|
|
$
|
3,930,850
|
|
|
$
|
36,983,978
|
|
|
$
|
(20,237,626
|
)
|
|
$
|
29,372,109
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Liabilities
|
|
|
|
|
|
|
|
|
|
||||||||||
Reserve for losses and loss adjustment expenses
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
14,164,191
|
|
|
$
|
(3,963,231
|
)
|
|
$
|
10,200,960
|
|
Unearned premiums
|
—
|
|
|
—
|
|
|
4,532,614
|
|
|
(1,125,744
|
)
|
|
3,406,870
|
|
|||||
Reinsurance balances payable
|
—
|
|
|
—
|
|
|
807,837
|
|
|
(507,430
|
)
|
|
300,407
|
|
|||||
Contractholder payables
|
—
|
|
|
—
|
|
|
1,717,436
|
|
|
—
|
|
|
1,717,436
|
|
|||||
Collateral held for insured obligations
|
—
|
|
|
—
|
|
|
301,406
|
|
|
|
|
301,406
|
|
||||||
Deposit accounting liabilities
|
—
|
|
|
—
|
|
|
22,150
|
|
|
—
|
|
|
22,150
|
|
|||||
Senior notes
|
296,957
|
|
|
494,525
|
|
|
940,776
|
|
|
—
|
|
|
1,732,258
|
|
|||||
Revolving credit agreement borrowings
|
100,000
|
|
|
—
|
|
|
656,650
|
|
|
—
|
|
|
756,650
|
|
|||||
Due to subsidiaries and affiliates
|
26,270
|
|
|
535,584
|
|
|
1,370,422
|
|
|
(1,932,276
|
)
|
|
—
|
|
|||||
Other liabilities
|
17,962
|
|
|
54,823
|
|
|
1,867,040
|
|
|
(316,978
|
)
|
|
1,622,847
|
|
|||||
Total liabilities
|
441,189
|
|
|
1,084,932
|
|
|
26,380,522
|
|
|
(7,845,659
|
)
|
|
20,060,984
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Redeemable noncontrolling interests
|
—
|
|
|
—
|
|
|
220,253
|
|
|
(14,700
|
)
|
|
205,553
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Shareholders' Equity
|
|
|
|
|
|
|
|
|
|
||||||||||
Total shareholders' equity available to Arch
|
8,253,718
|
|
|
2,845,918
|
|
|
9,531,349
|
|
|
(12,377,267
|
)
|
|
8,253,718
|
|
|||||
Non-redeemable noncontrolling interests
|
—
|
|
|
—
|
|
|
851,854
|
|
|
—
|
|
|
851,854
|
|
|||||
Total shareholders' equity
|
8,253,718
|
|
|
2,845,918
|
|
|
10,383,203
|
|
|
(12,377,267
|
)
|
|
9,105,572
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Total liabilities, noncontrolling interests and shareholders' equity
|
$
|
8,694,907
|
|
|
$
|
3,930,850
|
|
|
$
|
36,983,978
|
|
|
$
|
(20,237,626
|
)
|
|
$
|
29,372,109
|
|
|
ACGL 2016 FORM 10-K
|
190
|
|
December 31, 2015
|
||||||||||||||||||
Condensed Consolidating Balance Sheet
|
ACGL (Parent Guarantor)
|
|
Arch-U.S. (Subsidiary Issuer)
|
|
Other ACGL Subsidiaries
|
|
Consolidating Adjustments and Eliminations
|
|
ACGL Consolidated
|
||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
||||||||||
Total investments
|
$
|
50
|
|
|
$
|
42,210
|
|
|
$
|
15,815,381
|
|
|
$
|
(14,700
|
)
|
|
$
|
15,842,941
|
|
Cash
|
6,809
|
|
|
17,023
|
|
|
529,494
|
|
|
—
|
|
|
553,326
|
|
|||||
Investments in subsidiaries
|
6,570,835
|
|
|
1,712,757
|
|
|
—
|
|
|
(8,283,592
|
)
|
|
—
|
|
|||||
Due from subsidiaries and affiliates
|
23
|
|
|
48,811
|
|
|
384,469
|
|
|
(433,303
|
)
|
|
—
|
|
|||||
Premiums receivable
|
—
|
|
|
—
|
|
|
1,376,310
|
|
|
(392,867
|
)
|
|
983,443
|
|
|||||
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses
|
—
|
|
|
—
|
|
|
5,783,452
|
|
|
(3,916,079
|
)
|
|
1,867,373
|
|
|||||
Contractholder receivables
|
—
|
|
|
—
|
|
|
1,486,296
|
|
|
—
|
|
|
1,486,296
|
|
|||||
Ceded unearned premiums
|
—
|
|
|
—
|
|
|
1,511,795
|
|
|
(1,084,186
|
)
|
|
427,609
|
|
|||||
Deferred acquisition costs
|
—
|
|
|
—
|
|
|
382,829
|
|
|
—
|
|
|
382,829
|
|
|||||
Other assets
|
4,138
|
|
|
45,522
|
|
|
2,131,588
|
|
|
(586,134
|
)
|
|
1,595,114
|
|
|||||
Total assets
|
$
|
6,581,855
|
|
|
$
|
1,866,323
|
|
|
$
|
29,401,614
|
|
|
$
|
(14,710,861
|
)
|
|
$
|
23,138,931
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Liabilities
|
|
|
|
|
|
|
|
|
|
||||||||||
Reserve for losses and loss adjustment expenses
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
13,010,608
|
|
|
$
|
(3,885,358
|
)
|
|
$
|
9,125,250
|
|
Unearned premiums
|
—
|
|
|
—
|
|
|
3,418,118
|
|
|
(1,084,186
|
)
|
|
2,333,932
|
|
|||||
Reinsurance balances payable
|
—
|
|
|
—
|
|
|
603,586
|
|
|
(379,466
|
)
|
|
224,120
|
|
|||||
Contractholder payables
|
—
|
|
|
—
|
|
|
1,486,296
|
|
|
—
|
|
|
1,486,296
|
|
|||||
Collateral held for insured obligations
|
—
|
|
|
—
|
|
|
248,982
|
|
|
—
|
|
|
248,982
|
|
|||||
Deposit accounting liabilities
|
—
|
|
|
—
|
|
|
463,507
|
|
|
(203,143
|
)
|
|
260,364
|
|
|||||
Senior notes
|
296,874
|
|
|
494,432
|
|
|
—
|
|
|
—
|
|
|
791,306
|
|
|||||
Revolving credit agreement borrowings
|
100,000
|
|
|
—
|
|
|
430,434
|
|
|
—
|
|
|
530,434
|
|
|||||
Due to subsidiaries and affiliates
|
26
|
|
|
35,000
|
|
|
398,277
|
|
|
(433,303
|
)
|
|
—
|
|
|||||
Other liabilities
|
18,413
|
|
|
50,890
|
|
|
1,385,500
|
|
|
(427,111
|
)
|
|
1,027,692
|
|
|||||
Total liabilities
|
415,313
|
|
|
580,322
|
|
|
21,445,308
|
|
|
(6,412,567
|
)
|
|
16,028,376
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Redeemable noncontrolling interests
|
—
|
|
|
—
|
|
|
219,882
|
|
|
(14,700
|
)
|
|
205,182
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Shareholders' Equity
|
|
|
|
|
|
|
|
|
|
||||||||||
Total shareholders' equity available to Arch
|
6,166,542
|
|
|
1,286,001
|
|
|
6,997,593
|
|
|
(8,283,594
|
)
|
|
6,166,542
|
|
|||||
Non-redeemable noncontrolling interests
|
—
|
|
|
—
|
|
|
738,831
|
|
|
—
|
|
|
738,831
|
|
|||||
Total shareholders' equity
|
6,166,542
|
|
|
1,286,001
|
|
|
7,736,424
|
|
|
(8,283,594
|
)
|
|
6,905,373
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Total liabilities, noncontrolling interests and shareholders' equity
|
$
|
6,581,855
|
|
|
$
|
1,866,323
|
|
|
$
|
29,401,614
|
|
|
$
|
(14,710,861
|
)
|
|
$
|
23,138,931
|
|
|
ACGL 2016 FORM 10-K
|
191
|
|
Year Ended December 31, 2016
|
||||||||||||||||||
Condensed Consolidating Statement of Income and Comprehensive Income
|
ACGL (Parent Guarantor)
|
|
Arch-U.S. (Subsidiary Issuer)
|
|
Other ACGL Subsidiaries
|
|
Consolidating Adjustments and Eliminations
|
|
ACGL Consolidated
|
||||||||||
Revenues
|
|
|
|
|
|
|
|
|
|
||||||||||
Net premiums earned
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,884,822
|
|
|
$
|
—
|
|
|
$
|
3,884,822
|
|
Net investment income
|
694
|
|
|
3,162
|
|
|
393,114
|
|
|
(30,228
|
)
|
|
366,742
|
|
|||||
Net realized gains (losses)
|
12
|
|
|
5
|
|
|
137,569
|
|
|
—
|
|
|
137,586
|
|
|||||
Net impairment losses recognized in earnings
|
—
|
|
|
—
|
|
|
(30,442
|
)
|
|
—
|
|
|
(30,442
|
)
|
|||||
Other underwriting income
|
—
|
|
|
—
|
|
|
73,671
|
|
|
(16,498
|
)
|
|
57,173
|
|
|||||
Equity in net income (loss) of investment funds accounted for using the equity method
|
—
|
|
|
—
|
|
|
48,475
|
|
|
—
|
|
|
48,475
|
|
|||||
Other income (loss)
|
180
|
|
|
—
|
|
|
(980
|
)
|
|
—
|
|
|
(800
|
)
|
|||||
Total revenues
|
886
|
|
|
3,167
|
|
|
4,506,229
|
|
|
(46,726
|
)
|
|
4,463,556
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Expenses
|
|
|
|
|
|
|
|
|
|
||||||||||
Losses and loss adjustment expenses
|
—
|
|
|
—
|
|
|
2,185,599
|
|
|
—
|
|
|
2,185,599
|
|
|||||
Acquisition expenses
|
—
|
|
|
—
|
|
|
678,033
|
|
|
—
|
|
|
678,033
|
|
|||||
Other operating expenses
|
—
|
|
|
—
|
|
|
633,025
|
|
|
—
|
|
|
633,025
|
|
|||||
Corporate expenses
|
49,540
|
|
|
1,940
|
|
|
30,266
|
|
|
—
|
|
|
81,746
|
|
|||||
Interest expense
|
23,769
|
|
|
27,165
|
|
|
60,757
|
|
|
(45,439
|
)
|
|
66,252
|
|
|||||
Net foreign exchange (gains) losses
|
—
|
|
|
—
|
|
|
(17,217
|
)
|
|
(19,434
|
)
|
|
(36,651
|
)
|
|||||
Total expenses
|
73,309
|
|
|
29,105
|
|
|
3,570,463
|
|
|
(64,873
|
)
|
|
3,608,004
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Income (loss) before income taxes
|
(72,423
|
)
|
|
(25,938
|
)
|
|
935,766
|
|
|
18,147
|
|
|
855,552
|
|
|||||
Income tax (expense) benefit
|
—
|
|
|
8,676
|
|
|
(40,050
|
)
|
|
—
|
|
|
(31,374
|
)
|
|||||
Income (loss) before equity in net income of subsidiaries
|
(72,423
|
)
|
|
(17,262
|
)
|
|
895,716
|
|
|
18,147
|
|
|
824,178
|
|
|||||
Equity in net income of subsidiaries
|
765,161
|
|
|
54,497
|
|
|
—
|
|
|
(819,658
|
)
|
|
—
|
|
|||||
Net income
|
692,738
|
|
|
37,235
|
|
|
895,716
|
|
|
(801,511
|
)
|
|
824,178
|
|
|||||
Net (income) loss attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
(132,727
|
)
|
|
1,287
|
|
|
(131,440
|
)
|
|||||
Net income available to Arch
|
692,738
|
|
|
37,235
|
|
|
762,989
|
|
|
(800,224
|
)
|
|
692,738
|
|
|||||
Preferred dividends
|
(28,070
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(28,070
|
)
|
|||||
Net income available to Arch common shareholders
|
$
|
664,668
|
|
|
$
|
37,235
|
|
|
$
|
762,989
|
|
|
$
|
(800,224
|
)
|
|
$
|
664,668
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Comprehensive income (loss) available to Arch
|
$
|
594,699
|
|
|
$
|
13,444
|
|
|
$
|
684,447
|
|
|
$
|
(697,891
|
)
|
|
$
|
594,699
|
|
|
ACGL 2016 FORM 10-K
|
192
|
|
Year Ended December 31, 2015
|
||||||||||||||||||
Condensed Consolidating Statement of Income and Comprehensive Income
|
ACGL (Parent Guarantor)
|
|
Arch-U.S. (Subsidiary Issuer)
|
|
Other ACGL Subsidiaries
|
|
Consolidating Adjustments and Eliminations
|
|
ACGL Consolidated
|
||||||||||
Revenues
|
|
|
|
|
|
|
|
|
|
||||||||||
Net premiums earned
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,733,905
|
|
|
$
|
—
|
|
|
$
|
3,733,905
|
|
Net investment income
|
1
|
|
|
2,342
|
|
|
368,413
|
|
|
(22,666
|
)
|
|
348,090
|
|
|||||
Net realized gains (losses)
|
—
|
|
|
1
|
|
|
(185,843
|
)
|
|
—
|
|
|
(185,842
|
)
|
|||||
Net impairment losses recognized in earnings
|
—
|
|
|
—
|
|
|
(20,116
|
)
|
|
—
|
|
|
(20,116
|
)
|
|||||
Other underwriting income
|
—
|
|
|
—
|
|
|
35,739
|
|
|
(242
|
)
|
|
35,497
|
|
|||||
Equity in net income (loss) of investment funds accounted for using the equity method
|
—
|
|
|
—
|
|
|
25,455
|
|
|
—
|
|
|
25,455
|
|
|||||
Other income (loss)
|
—
|
|
|
—
|
|
|
(399
|
)
|
|
—
|
|
|
(399
|
)
|
|||||
Total revenues
|
1
|
|
|
2,343
|
|
|
3,957,154
|
|
|
(22,908
|
)
|
|
3,936,590
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Expenses
|
|
|
|
|
|
|
|
|
|
||||||||||
Losses and loss adjustment expenses
|
—
|
|
|
—
|
|
|
2,050,903
|
|
|
—
|
|
|
2,050,903
|
|
|||||
Acquisition expenses
|
—
|
|
|
—
|
|
|
681,476
|
|
|
—
|
|
|
681,476
|
|
|||||
Other operating expenses
|
—
|
|
|
—
|
|
|
607,516
|
|
|
—
|
|
|
607,516
|
|
|||||
Corporate expenses
|
48,107
|
|
|
3,689
|
|
|
(2,051
|
)
|
|
—
|
|
|
49,745
|
|
|||||
Interest expense
|
23,450
|
|
|
26,502
|
|
|
18,024
|
|
|
(22,102
|
)
|
|
45,874
|
|
|||||
Net foreign exchange (gains) losses
|
—
|
|
|
—
|
|
|
(41,622
|
)
|
|
(24,496
|
)
|
|
(66,118
|
)
|
|||||
Total expenses
|
71,557
|
|
|
30,191
|
|
|
3,314,246
|
|
|
(46,598
|
)
|
|
3,369,396
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Income (loss) before income taxes
|
(71,556
|
)
|
|
(27,848
|
)
|
|
642,908
|
|
|
23,690
|
|
|
567,194
|
|
|||||
Income tax (expense) benefit
|
—
|
|
|
9,732
|
|
|
(50,344
|
)
|
|
—
|
|
|
(40,612
|
)
|
|||||
Income (loss) before equity in net income of subsidiaries
|
(71,556
|
)
|
|
(18,116
|
)
|
|
592,564
|
|
|
23,690
|
|
|
526,582
|
|
|||||
Equity in net income of subsidiaries
|
609,294
|
|
|
50,156
|
|
|
—
|
|
|
(659,450
|
)
|
|
—
|
|
|||||
Net income
|
537,738
|
|
|
32,040
|
|
|
592,564
|
|
|
(635,760
|
)
|
|
526,582
|
|
|||||
Net (income) loss attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
10,351
|
|
|
805
|
|
|
11,156
|
|
|||||
Net income available to Arch
|
537,738
|
|
|
32,040
|
|
|
602,915
|
|
|
(634,955
|
)
|
|
537,738
|
|
|||||
Preferred dividends
|
(21,938
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(21,938
|
)
|
|||||
Net income available to Arch common shareholders
|
$
|
515,800
|
|
|
$
|
32,040
|
|
|
$
|
602,915
|
|
|
$
|
(634,955
|
)
|
|
$
|
515,800
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Comprehensive income (loss) available to Arch
|
$
|
392,379
|
|
|
$
|
838
|
|
|
$
|
482,047
|
|
|
$
|
(482,885
|
)
|
|
$
|
392,379
|
|
|
ACGL 2016 FORM 10-K
|
193
|
|
Year Ended December 31, 2014
|
||||||||||||||||||
Condensed Consolidating Statement of Income and Comprehensive Income
|
ACGL (Parent Guarantor)
|
|
Arch-U.S. (Subsidiary Issuer)
|
|
Other ACGL Subsidiaries
|
|
Consolidating Adjustments and Eliminations
|
|
ACGL Consolidated
|
||||||||||
Revenues
|
|
|
|
|
|
|
|
|
|
||||||||||
Net premiums earned
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,593,748
|
|
|
$
|
—
|
|
|
$
|
3,593,748
|
|
Net investment income
|
—
|
|
|
—
|
|
|
326,831
|
|
|
(24,246
|
)
|
|
302,585
|
|
|||||
Net realized gains (losses)
|
—
|
|
|
5
|
|
|
102,912
|
|
|
—
|
|
|
102,917
|
|
|||||
Net impairment losses recognized in earnings
|
—
|
|
|
—
|
|
|
(30,150
|
)
|
|
—
|
|
|
(30,150
|
)
|
|||||
Other underwriting income
|
—
|
|
|
—
|
|
|
10,142
|
|
|
—
|
|
|
10,142
|
|
|||||
Equity in net income (loss) of investment funds accounted for using the equity method
|
—
|
|
|
—
|
|
|
19,883
|
|
|
—
|
|
|
19,883
|
|
|||||
Other income (loss)
|
—
|
|
|
—
|
|
|
(10,252
|
)
|
|
—
|
|
|
(10,252
|
)
|
|||||
Total revenues
|
—
|
|
|
5
|
|
|
4,013,114
|
|
|
(24,246
|
)
|
|
3,988,873
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Expenses
|
|
|
|
|
|
|
|
|
|
||||||||||
Losses and loss adjustment expenses
|
—
|
|
|
—
|
|
|
1,919,250
|
|
|
—
|
|
|
1,919,250
|
|
|||||
Acquisition expenses
|
—
|
|
|
—
|
|
|
657,262
|
|
|
—
|
|
|
657,262
|
|
|||||
Other operating expenses
|
—
|
|
|
—
|
|
|
556,280
|
|
|
—
|
|
|
556,280
|
|
|||||
Corporate expenses
|
46,074
|
|
|
3,387
|
|
|
483
|
|
|
—
|
|
|
49,944
|
|
|||||
Interest expense
|
23,423
|
|
|
25,817
|
|
|
20,640
|
|
|
(24,246
|
)
|
|
45,634
|
|
|||||
Net foreign exchange (gains) losses
|
—
|
|
|
—
|
|
|
(53,222
|
)
|
|
(30,522
|
)
|
|
(83,744
|
)
|
|||||
Total expenses
|
69,497
|
|
|
29,204
|
|
|
3,100,693
|
|
|
(54,768
|
)
|
|
3,144,626
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Income (loss) before income taxes
|
(69,497
|
)
|
|
(29,199
|
)
|
|
912,421
|
|
|
30,522
|
|
|
844,247
|
|
|||||
Income tax (expense) benefit
|
—
|
|
|
10,125
|
|
|
(33,112
|
)
|
|
—
|
|
|
(22,987
|
)
|
|||||
Income (loss) before equity in net income of subsidiaries
|
(69,497
|
)
|
|
(19,074
|
)
|
|
879,309
|
|
|
30,522
|
|
|
821,260
|
|
|||||
Equity in net income of subsidiaries
|
903,852
|
|
|
53,584
|
|
|
—
|
|
|
(957,436
|
)
|
|
—
|
|
|||||
Net income
|
834,355
|
|
|
34,510
|
|
|
879,309
|
|
|
(926,914
|
)
|
|
821,260
|
|
|||||
Net (income) loss attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
13,095
|
|
|
—
|
|
|
13,095
|
|
|||||
Net income available to Arch
|
834,355
|
|
|
34,510
|
|
|
892,404
|
|
|
(926,914
|
)
|
|
834,355
|
|
|||||
Preferred dividends
|
(21,938
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(21,938
|
)
|
|||||
Net income available to Arch common shareholders
|
$
|
812,417
|
|
|
$
|
34,510
|
|
|
$
|
892,404
|
|
|
$
|
(926,914
|
)
|
|
$
|
812,417
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Comprehensive income (loss) available to Arch
|
$
|
888,247
|
|
|
$
|
33,671
|
|
|
$
|
976,821
|
|
|
$
|
(1,010,492
|
)
|
|
$
|
888,247
|
|
|
ACGL 2016 FORM 10-K
|
194
|
|
Year Ended December 31, 2016
|
||||||||||||||||||
Condensed Consolidating Statement
of Cash Flows
|
ACGL (Parent Guarantor)
|
|
Arch-U.S. (Subsidiary Issuer)
|
|
Other ACGL Subsidiaries
|
|
Consolidating Adjustments and Eliminations
|
|
ACGL Consolidated
|
||||||||||
Operating Activities
|
|
|
|
|
|
|
|
|
|
||||||||||
Net Cash Provided By (Used For)
Operating Activities
|
$
|
148,211
|
|
|
$
|
6,395
|
|
|
$
|
1,465,166
|
|
|
$
|
(223,128
|
)
|
|
$
|
1,396,644
|
|
Investing Activities
|
|
|
|
|
|
|
|
|
|
||||||||||
Purchases of fixed maturity investments
|
—
|
|
|
—
|
|
|
(35,532,810
|
)
|
|
—
|
|
|
(35,532,810
|
)
|
|||||
Purchases of equity securities
|
—
|
|
|
—
|
|
|
(665,702
|
)
|
|
—
|
|
|
(665,702
|
)
|
|||||
Purchases of other investments
|
—
|
|
|
—
|
|
|
(1,389,406
|
)
|
|
—
|
|
|
(1,389,406
|
)
|
|||||
Proceeds from the sales of fixed maturity investments
|
—
|
|
|
—
|
|
|
34,559,966
|
|
|
—
|
|
|
34,559,966
|
|
|||||
Proceeds from the sales of equity securities
|
—
|
|
|
—
|
|
|
751,728
|
|
|
—
|
|
|
751,728
|
|
|||||
Proceeds from the sales, redemptions and maturities of other investments
|
—
|
|
|
—
|
|
|
1,149,328
|
|
|
—
|
|
|
1,149,328
|
|
|||||
Proceeds from redemptions and maturities of fixed maturity investments
|
—
|
|
|
41,500
|
|
|
713,507
|
|
|
—
|
|
|
755,007
|
|
|||||
Net settlements of derivative instruments
|
—
|
|
|
—
|
|
|
(17,068
|
)
|
|
—
|
|
|
(17,068
|
)
|
|||||
Net (purchases) sales of short-term investments
|
(2,075
|
)
|
|
(40,963
|
)
|
|
(80,372
|
)
|
|
—
|
|
|
(123,410
|
)
|
|||||
Change in cash collateral related to securities lending
|
—
|
|
|
—
|
|
|
(155,248
|
)
|
|
—
|
|
|
(155,248
|
)
|
|||||
Contributions to subsidiaries
|
(479,912
|
)
|
|
(887,650
|
)
|
|
(546,269
|
)
|
|
1,913,831
|
|
|
—
|
|
|||||
Intercompany loans issued
|
—
|
|
|
—
|
|
|
(1,460,000
|
)
|
|
1,460,000
|
|
|
—
|
|
|||||
Purchase of business, net of cash acquired
|
—
|
|
|
—
|
|
|
(1,992,720
|
)
|
|
—
|
|
|
(1,992,720
|
)
|
|||||
Purchases of fixed assets
|
(8
|
)
|
|
—
|
|
|
(15,295
|
)
|
|
—
|
|
|
(15,303
|
)
|
|||||
Change in other assets
|
2,000
|
|
|
—
|
|
|
(47,905
|
)
|
|
—
|
|
|
(45,905
|
)
|
|||||
Net Cash Provided By (Used For)
Investing Activities
|
(479,995
|
)
|
|
(887,113
|
)
|
|
(4,728,266
|
)
|
|
3,373,831
|
|
|
(2,721,543
|
)
|
|||||
Financing Activities
|
|
|
|
|
|
|
|
|
|
||||||||||
Proceeds from preferred shares issued, net
|
434,899
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
434,899
|
|
|||||
Purchases of common shares under share repurchase program
|
(75,256
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(75,256
|
)
|
|||||
Proceeds from common shares issued, net
|
(2,418
|
)
|
|
435,450
|
|
|
1,478,381
|
|
|
(1,913,831
|
)
|
|
(2,418
|
)
|
|||||
Proceeds from intercompany borrowings
|
—
|
|
|
500,000
|
|
|
960,000
|
|
|
(1,460,000
|
)
|
|
—
|
|
|||||
Proceeds from borrowings
|
—
|
|
|
—
|
|
|
1,386,741
|
|
|
—
|
|
|
1,386,741
|
|
|||||
Repayments of borrowings
|
—
|
|
|
—
|
|
|
(219,171
|
)
|
|
—
|
|
|
(219,171
|
)
|
|||||
Change in cash collateral related to securities lending
|
—
|
|
|
—
|
|
|
155,248
|
|
|
—
|
|
|
155,248
|
|
|||||
Dividends paid to redeemable noncontrolling interests
|
—
|
|
|
—
|
|
|
(19,264
|
)
|
|
1,275
|
|
|
(17,989
|
)
|
|||||
Dividends paid to parent (1)
|
—
|
|
|
—
|
|
|
(221,853
|
)
|
|
221,853
|
|
|
—
|
|
|||||
Other
|
(2,493
|
)
|
|
200
|
|
|
3,978
|
|
|
—
|
|
|
1,685
|
|
|||||
Preferred dividends paid
|
(28,070
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(28,070
|
)
|
|||||
Net Cash Provided By (Used For)
Financing Activities
|
326,662
|
|
|
935,650
|
|
|
3,524,060
|
|
|
(3,150,703
|
)
|
|
1,635,669
|
|
|||||
Effects of exchange rates changes on foreign currency cash
|
—
|
|
|
—
|
|
|
(21,154
|
)
|
|
—
|
|
|
(21,154
|
)
|
|||||
Increase (decrease) in cash
|
(5,122
|
)
|
|
54,932
|
|
|
239,806
|
|
|
—
|
|
|
289,616
|
|
|||||
Cash beginning of year
|
6,809
|
|
|
17,023
|
|
|
529,494
|
|
|
—
|
|
|
553,326
|
|
|||||
Cash end of year
|
$
|
1,687
|
|
|
$
|
71,955
|
|
|
$
|
769,300
|
|
|
$
|
—
|
|
|
$
|
842,942
|
|
(1)
|
Dividends paid are included in net cash provided by (used for) operating activities in the ACGL (Parent Guarantor) and/or Arch-U.S. (Subsidiary Issuer) columns.
|
|
ACGL 2016 FORM 10-K
|
195
|
|
Year Ended December 31, 2015
|
||||||||||||||||||
Condensed Consolidating Statement
of Cash Flows
|
ACGL (Parent Guarantor)
|
|
Arch-U.S. (Subsidiary Issuer)
|
|
Other ACGL Subsidiaries
|
|
Consolidating Adjustments and Eliminations
|
|
ACGL Consolidated
|
||||||||||
Operating Activities
|
|
|
|
|
|
|
|
|
|
||||||||||
Net Cash Provided By (Used For)
Operating Activities
|
$
|
404,144
|
|
|
$
|
5,505
|
|
|
$
|
1,074,021
|
|
|
$
|
(485,764
|
)
|
|
$
|
997,906
|
|
Investing Activities
|
|
|
|
|
|
|
|
|
|
||||||||||
Purchases of fixed maturity investments
|
—
|
|
|
(3,505
|
)
|
|
(29,448,368
|
)
|
|
—
|
|
|
(29,451,873
|
)
|
|||||
Purchases of equity securities
|
(8,070
|
)
|
|
—
|
|
|
(507,343
|
)
|
|
—
|
|
|
(515,413
|
)
|
|||||
Purchases of other investments
|
—
|
|
|
—
|
|
|
(1,749,525
|
)
|
|
—
|
|
|
(1,749,525
|
)
|
|||||
Proceeds from the sales of fixed maturity investments
|
—
|
|
|
24,507
|
|
|
28,069,540
|
|
|
—
|
|
|
28,094,047
|
|
|||||
Proceeds from the sales of equity securities
|
—
|
|
|
—
|
|
|
564,011
|
|
|
—
|
|
|
564,011
|
|
|||||
Proceeds from the sales, redemptions and maturities of other investments
|
—
|
|
|
—
|
|
|
1,250,883
|
|
|
—
|
|
|
1,250,883
|
|
|||||
Proceeds from redemptions and maturities of fixed maturity investments
|
—
|
|
|
—
|
|
|
748,529
|
|
|
—
|
|
|
748,529
|
|
|||||
Net settlements of derivative instruments
|
—
|
|
|
—
|
|
|
(5,056
|
)
|
|
—
|
|
|
(5,056
|
)
|
|||||
Proceeds from investment in joint venture
|
—
|
|
|
—
|
|
|
40,000
|
|
|
—
|
|
|
40,000
|
|
|||||
Net (purchases) sales of short-term investments
|
57
|
|
|
(338
|
)
|
|
169,376
|
|
|
—
|
|
|
169,095
|
|
|||||
Change in cash collateral related to securities lending
|
—
|
|
|
—
|
|
|
(6,662
|
)
|
|
—
|
|
|
(6,662
|
)
|
|||||
Contributions to subsidiaries
|
(10,000
|
)
|
|
—
|
|
|
(49,348
|
)
|
|
59,348
|
|
|
—
|
|
|||||
Intercompany loans issued
|
—
|
|
|
(39,500
|
)
|
|
(27,500
|
)
|
|
67,000
|
|
|
—
|
|
|||||
Purchase of business, net of cash acquired
|
—
|
|
|
—
|
|
|
818
|
|
|
—
|
|
|
818
|
|
|||||
Purchases of fixed assets
|
(80
|
)
|
|
—
|
|
|
(15,656
|
)
|
|
—
|
|
|
(15,736
|
)
|
|||||
Change in other assets
|
—
|
|
|
—
|
|
|
(36,993
|
)
|
|
—
|
|
|
(36,993
|
)
|
|||||
Net Cash Provided By (Used For)
Investing Activities
|
(18,093
|
)
|
|
(18,836
|
)
|
|
(1,003,294
|
)
|
|
126,348
|
|
|
(913,875
|
)
|
|||||
Financing Activities
|
|
|
|
|
|
|
|
|
|
||||||||||
Purchases of common shares under share repurchase program
|
(365,383
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(365,383
|
)
|
|||||
Proceeds from common shares issued, net
|
4,861
|
|
|
—
|
|
|
59,348
|
|
|
(59,348
|
)
|
|
4,861
|
|
|||||
Proceeds from intercompany borrowings
|
—
|
|
|
27,500
|
|
|
39,500
|
|
|
(67,000
|
)
|
|
—
|
|
|||||
Proceeds from borrowings
|
—
|
|
|
—
|
|
|
431,362
|
|
|
—
|
|
|
431,362
|
|
|||||
Change in cash collateral related to securities lending
|
—
|
|
|
—
|
|
|
6,662
|
|
|
—
|
|
|
6,662
|
|
|||||
Dividends paid to redeemable noncontrolling interests
|
—
|
|
|
—
|
|
|
(19,263
|
)
|
|
956
|
|
|
(18,307
|
)
|
|||||
Dividends paid to parent (1)
|
—
|
|
|
—
|
|
|
(484,808
|
)
|
|
484,808
|
|
|
—
|
|
|||||
Other
|
—
|
|
|
67
|
|
|
(41,980
|
)
|
|
—
|
|
|
(41,913
|
)
|
|||||
Preferred dividends paid
|
(21,938
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(21,938
|
)
|
|||||
Net Cash Provided By (Used For)
Financing Activities
|
(382,460
|
)
|
|
27,567
|
|
|
(9,179
|
)
|
|
359,416
|
|
|
(4,656
|
)
|
|||||
Effects of exchange rates changes on foreign currency cash
|
—
|
|
|
—
|
|
|
(11,751
|
)
|
|
—
|
|
|
(11,751
|
)
|
|||||
Increase (decrease) in cash
|
3,591
|
|
|
14,236
|
|
|
49,797
|
|
|
—
|
|
|
67,624
|
|
|||||
Cash beginning of year
|
3,218
|
|
|
2,787
|
|
|
479,697
|
|
|
—
|
|
|
485,702
|
|
|||||
Cash end of year
|
$
|
6,809
|
|
|
$
|
17,023
|
|
|
$
|
529,494
|
|
|
$
|
—
|
|
|
$
|
553,326
|
|
(1)
|
Dividends paid are included in net cash provided by (used for) operating activities in the ACGL (Parent Guarantor) and/or Arch-U.S. (Subsidiary Issuer) columns.
|
|
ACGL 2016 FORM 10-K
|
196
|
|
Year Ended December 31, 2014
|
||||||||||||||||||
Condensed Consolidating Statement
of Cash Flows
|
ACGL (Parent Guarantor)
|
|
Arch-U.S. (Subsidiary Issuer)
|
|
Other ACGL Subsidiaries
|
|
Consolidating Adjustments and Eliminations
|
|
ACGL Consolidated
|
||||||||||
Operating Activities
|
|
|
|
|
|
|
|
|
|
||||||||||
Net Cash Provided By (Used For)
Operating Activities
|
$
|
467,091
|
|
|
$
|
8,142
|
|
|
$
|
1,077,597
|
|
|
$
|
(515,700
|
)
|
|
$
|
1,037,130
|
|
Investing Activities
|
|
|
|
|
|
|
|
|
|
||||||||||
Purchases of fixed maturity investments
|
—
|
|
|
(78,509
|
)
|
|
(28,666,770
|
)
|
|
—
|
|
|
(28,745,279
|
)
|
|||||
Purchases of equity securities
|
—
|
|
|
—
|
|
|
(520,817
|
)
|
|
—
|
|
|
(520,817
|
)
|
|||||
Purchases of other investments
|
—
|
|
|
—
|
|
|
(1,590,648
|
)
|
|
—
|
|
|
(1,590,648
|
)
|
|||||
Proceeds from the sales of fixed maturity investments
|
—
|
|
|
16,011
|
|
|
26,807,178
|
|
|
—
|
|
|
26,823,189
|
|
|||||
Proceeds from the sales of equity securities
|
—
|
|
|
—
|
|
|
411,362
|
|
|
—
|
|
|
411,362
|
|
|||||
Proceeds from the sales, redemptions and maturities of other investments
|
—
|
|
|
—
|
|
|
941,798
|
|
|
—
|
|
|
941,798
|
|
|||||
Proceeds from redemptions and maturities of fixed maturity investments
|
—
|
|
|
—
|
|
|
762,995
|
|
|
—
|
|
|
762,995
|
|
|||||
Net settlements of derivative instruments
|
—
|
|
|
—
|
|
|
34,372
|
|
|
—
|
|
|
34,372
|
|
|||||
Net (purchases) sales of short-term investments
|
2,423
|
|
|
408,591
|
|
|
166,112
|
|
|
—
|
|
|
577,126
|
|
|||||
Change in cash collateral related to securities lending
|
—
|
|
|
—
|
|
|
57,470
|
|
|
—
|
|
|
57,470
|
|
|||||
Contributions to subsidiaries
|
—
|
|
|
(341,707
|
)
|
|
(128,825
|
)
|
|
470,532
|
|
|
—
|
|
|||||
Intercompany loans issued
|
—
|
|
|
(7,500
|
)
|
|
31,464
|
|
|
(23,964
|
)
|
|
—
|
|
|||||
Purchase of business, net of cash acquired
|
—
|
|
|
—
|
|
|
(237,106
|
)
|
|
—
|
|
|
(237,106
|
)
|
|||||
Purchases of fixed assets
|
(271
|
)
|
|
—
|
|
|
(19,612
|
)
|
|
—
|
|
|
(19,883
|
)
|
|||||
Net Cash Provided By (Used For)
Investing Activities
|
2,152
|
|
|
(3,114
|
)
|
|
(1,951,027
|
)
|
|
446,568
|
|
|
(1,505,421
|
)
|
|||||
Financing Activities
|
|
|
|
|
|
|
|
|
|
||||||||||
Purchases of common shares under share repurchase program
|
(454,137
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(454,137
|
)
|
|||||
Proceeds from common shares issued, net
|
6,827
|
|
|
—
|
|
|
470,532
|
|
|
(470,532
|
)
|
|
6,827
|
|
|||||
Proceeds from intercompany borrowings
|
—
|
|
|
7,500
|
|
|
7,500
|
|
|
(15,000
|
)
|
|
—
|
|
|||||
Repayments of intercompany borrowings
|
—
|
|
|
(10,250
|
)
|
|
(28,714
|
)
|
|
38,964
|
|
|
—
|
|
|||||
Change in cash collateral relating to securities lending
|
—
|
|
|
—
|
|
|
(57,470
|
)
|
|
—
|
|
|
(57,470
|
)
|
|||||
Third party investment in non-redeemable
|
—
|
|
|
—
|
|
|
796,903
|
|
|
—
|
|
|
796,903
|
|
|||||
Third party investment in redeemable
|
—
|
|
|
—
|
|
|
219,233
|
|
|
—
|
|
|
219,233
|
|
|||||
Dividends paid to redeemable noncontrolling
|
—
|
|
|
—
|
|
|
(14,448
|
)
|
|
—
|
|
|
(14,448
|
)
|
|||||
Dividends paid to parent (1)
|
—
|
|
|
—
|
|
|
(515,700
|
)
|
|
515,700
|
|
|
—
|
|
|||||
Other
|
—
|
|
|
—
|
|
|
64,973
|
|
|
—
|
|
|
64,973
|
|
|||||
Preferred dividends paid
|
(21,938
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(21,938
|
)
|
|||||
Net Cash Provided By (Used For)
Financing Activities
|
(469,248
|
)
|
|
(2,750
|
)
|
|
942,809
|
|
|
69,132
|
|
|
539,943
|
|
|||||
Effects of exchange rates changes on foreign currency cash
|
—
|
|
|
—
|
|
|
(20,007
|
)
|
|
—
|
|
|
(20,007
|
)
|
|||||
Increase (decrease) in cash
|
(5
|
)
|
|
2,278
|
|
|
49,372
|
|
|
—
|
|
|
51,645
|
|
|||||
Cash beginning of year
|
3,223
|
|
|
509
|
|
|
430,325
|
|
|
—
|
|
|
434,057
|
|
|||||
Cash end of year
|
$
|
3,218
|
|
|
$
|
2,787
|
|
|
$
|
479,697
|
|
|
$
|
—
|
|
|
$
|
485,702
|
|
(1)
|
Dividends paid are included in net cash provided by (used for) operating activities in the ACGL (Parent Guarantor) and/or Arch-U.S. (Subsidiary Issuer) columns.
|
|
ACGL 2016 FORM 10-K
|
197
|
|
ACGL 2016 FORM 10-K
|
198
|
ITEM 9.
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
|
ACGL 2016 FORM 10-K
|
199
|
ITEM 10.
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
ITEM 11.
|
EXECUTIVE COMPENSATION
|
|
ACGL 2016 FORM 10-K
|
200
|
ITEM 12.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|
|
Column A
|
|
|
Column B
|
|
Column C
|
|
||||
Plan Category
|
Number of Securities to be Issued Upon Exercise of Outstanding Stock Options(1), Warrants and Rights
|
|
|
Weighted-Average Exercise Price of Outstanding
Stock Options(1), Warrants and Rights ($)
|
|
Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column A
|
|
||||
Equity compensation plans approved by security holders
|
7,253,955
|
|
|
|
$
|
43.74
|
|
|
4,490,955
|
|
|
Equity compensation plans not approved by security holders
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
Total
|
7,253,955
|
|
|
|
$
|
43.74
|
|
|
4,490,955
|
|
(2)
|
(1)
|
Includes all vested and unvested stock options outstanding of
6,872,494
and restricted stock units outstanding of
381,461
. The weighted average exercise price does not take into account restricted stock units. In addition, the weighted average remaining contractual life of the Company's outstanding exercisable stock options and SARs at
December 31, 2016
was
5.5
years.
|
(2)
|
Includes
1,383,896
common shares remaining available for future issuance under our Employee Share Purchase Plan and
3,107,059
common shares remaining available for future issuance under our equity compensation plans. Shares available for future issuance under our equity compensation plans may be issued in the form of stock options, SARs, restricted shares, restricted share units payable in common shares or cash, share awards in lieu of cash awards, dividend equivalents, performance shares and performance units and other share-based awards. In addition,
1,680,257
common shares, or
54.1%
of the
3,107,059
common shares remaining available for future issuance may be issued in connection with full value awards (
i.e.
, awards other than stock options or SARs).
|
ITEM 13.
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|
ITEM 14.
|
PRINCIPAL ACCOUNTANT FEES AND SERVICES
|
|
ACGL 2016 FORM 10-K
|
201
|
ITEM 15.
|
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|
1.
|
Financial Statements
|
|
Page No.
|
|
|
|
|
For the years ended December 31, 2016, 2015 and 2014
|
|
|
|
|
|
For the years ended December 31, 2016, 2015 and 2014
|
|
|
|
|
|
For the years ended December 31, 2016, 2015 and 2014
|
|
ACGL 2016 FORM 10-K
|
202
|
Exhibit No.
|
|
Description
|
3.1
|
|
Memorandum of Association of ACGL(b)
|
3.2
|
|
Bye-Laws of ACGL(pp)
|
3.3
|
|
ACGL Certificate of Deposit of Memorandum of Increase of Share Capital(u)
|
4.1.1
|
|
Certificate of Designations of Series C Non-Cumulative Preferred Shares(x)
|
4.1.2
|
|
Certificate of Designations of Series D Preferred Shares (filed herewith)
|
4.1.3
|
|
Certificate of Designations of Series E Non-Cumulative Preferred Shares(rr)
|
4.2.1
|
|
Specimen Common Share Certificate(c)
|
4.2.2
|
|
Specimen Series C Non-Cumulative Preferred Share Certificate(x)
|
4.2.3
|
|
Specimen Series E Non-Cumulative Preferred Share Certificate(rr)
|
4.3
|
|
Indenture and First Supplemental Indenture, dated as of May 4, 2004, between ACGL, as issuer, and JPMorgan Chase Bank, N.A. (formerly JPMorgan Chase Bank) (“JPMCB”) , as trustee(h)
|
4.3
|
|
Indenture and First Supplemental Indenture, dated as of December 13, 2013, between Arch Capital Group (U.S.) Inc. (“Arch U.S.”), as issuer, ACGL, as guarantor, and The Bank of New York Mellon, as trustee(gg)
|
4.4
|
|
Deposit Agreement, dated September 29, 2016, between ACGL, as issuer, and American Stock Transfer & Trust Company, LLC, as depositary, registrar and transfer agent and as dividend disbursing agent and redemption agent, and the holders from time to time of the depositary receipts(rr)
|
4.5
|
|
Form of Depositary Receipt(rr)
|
4.6
|
|
Indenture and First Supplemental Indenture, dated as of December 8, 2016, between Arch Capital Finance LLC,as issuer, ACGL, as guarantor, and The Bank of New York Mellon, as trustee(ss)
|
4.7
|
|
Investor Rights Agreement, dated as of December 31, 2016, between ACGL and American International Group, Inc. (filed herewith)
|
10.1.1
|
|
ACGL 2002 Long Term Incentive and Share Award Plan (“2002 Plan”)(e)†
|
10.1.2
|
|
First Amendment to the 2002 Plan(f)†
|
10.1.3
|
|
Second Amendment to the 2002 Plan(q)†
|
10.2
|
|
Third Amended and Restated ACGL Incentive Compensation Plan(pp)†
|
10.3.1
|
|
ACGL 2007 Long Term Incentive and Share Award Plan(m)†
|
10.3.2
|
|
ACGL 2012 Long Term Incentive and Share Award Plan(w)†
|
10.3.4
|
|
ACGL 2015 Long Term Incentive and Share Award Plan(ll)†
|
10.3.5
|
|
ACGL Amended and Restated 2007 Employee Share Purchase Plan(oo)†
|
10.4.1
|
|
Restricted Share Unit Agreement with ACGL-Constantine Iordanou-February 20, 2003 grant (“February RSU Agreement”)(g), First Amendment to February RSU Agreement-December 9, 2008 grant(q) and Second Amendment to February RSU Agreement-July 9, 2009 grant(r)†
|
10.4.2
|
|
Restricted Share Unit Agreement with ACGL-Mark D. Lyons-May 9, 2008 grant(p), May 6, 2009 grant(s), May 5, 2010 grant(t), May 6, 2011 grant(v) and May 9, 2012 grant(aa)†
|
10.4.3
|
|
Restricted Share Unit Agreement with ACGL-David McElroy-September 6, 2012 grant(ee) and May 9, 2013 grant(ff)†
|
10.4.4
|
|
Restricted Share Agreement with ACGL-Mark D. Lyons-September 6, 2012 grant(ee)†
|
10.4.5
|
|
Restricted Share Agreements with ACGL substantially in the form signed by each of Constantine Iordanou, Louis T. Petrillo, W. Preston Hutchings and Marc Grandisson-November 12, 2012 grants(ee)†
|
10.4.6
|
|
Restricted Share Agreements with ACGL substantially in the form signed by each of Constantine Iordanou, Louis T. Petrillo, W. Preston Hutchings, David H. McElroy and Marc Grandisson-May 9, 2012 grant(aa)†
|
10.4.7
|
|
Restricted Share Agreements with ACGL substantially in the form signed by each of Constantine Iordanou, Louis T. Petrillo, W. Preston Hutchings, Mark D. Lyons and Marc Grandisson-May 9, 2013 grants(ff)†
|
10.4.8
|
|
Restricted Share Agreement with ACGL. substantially in the form signed by the Non-Employee Directors of ACGL-May 9, 2014 grants(ii)†
|
10.4.9
|
|
Restricted Share Agreement with ACGL substantially in the form signed by each of Constantine Iordanou, Mark D. Lyons, Marc Grandisson, W. Preston Hutchings and Louis T. Petrillo-May 13, 2014 grants(ii)†
|
10.4.10
|
|
Restricted Share Unit Agreement with ACGL-David McElroy-May 13, 2014 grant(ii)†
|
10.4.11
|
|
Restricted Share Agreement with ACGL substantially in the form signed by each of Louis J. Paglia and Eugene S. Sunshine-July 14, 2014 grants(kk)†
|
10.4.12
|
|
Restricted Share Agreement with ACGL-Marc Grandisson-November 6, 2014 grant(mm)†
|
|
ACGL 2016 FORM 10-K
|
203
|
10.4.13
|
|
Restricted Share Agreement with ACGL substantially in the form signed by the Non-Employee Directors of ACGL-May 7, 2015 grants(nn)†
|
10.4.14
|
|
Restricted Share Agreement with ACGL substantially in the form signed by each of Constantine Iordanou, Mark D. Lyons, Marc Grandisson, W. Preston Hutchings, David McElroy and Louis T. Petrillo-May 13, 2015 grants(nn)†
|
10.4.15
|
|
Restricted Share Unit Agreement with ACGL-David McElroy-May 13, 2015 grant(nn)†
|
10.4.16
|
|
Restricted Share Agreement with ACGL substantially in the form signed by the Non-Employee Directors of ACGL-May 6, 2016 grants(pp)†
|
10.4.17
|
|
Restricted Share Agreement with ACGL substantially in the form signed by each of Constantine Iordanou, Mark D. Lyons, Marc Grandisson, W. Preston Hutchings, David McElroy and Louis T. Petrillo-May 13, 2016 grants(pp)†
|
10.4.18
|
|
Restricted Share Unit Agreement with ACGL-David McElroy-May 13, 2016(pp)†
|
10.5.1
|
|
Stock Option Agreement with ACGL-Marc Grandisson-November 15, 2005 grant(k)†
|
10.5.2
|
|
Stock Option Agreements with ACGL and Constantine Iordanou, John D. Vollaro and Marc Grandisson-February 23, 2006 grants(l)†
|
10.5.3
|
|
Stock Option Agreement with ACGL-W. Preston Hutchings-February 23, 2006 grant(l)†
|
10.5.4
|
|
Non-Qualified Stock Option Agreement with Constantine Iordanou, Mark D. Lyons, Marc Grandisson, W. Preston Hutchings, David McElroy and Louis T. Petrillo-May 13, 2015 grants(nn)†
|
10.5.5
|
|
Non-Qualified Stock Option Agreement with Constantine Iordanou, Mark D. Lyons, Marc Grandisson, W. Preston Hutchings, David McElroy and Louis T. Petrillo-May 13, 2016 grants(pp)†
|
10.5.6
|
|
Non-Qualified Stock Option Agreement with Constantine Iordanou -February 26, 2016 grants(pp)†
|
10.6.1
|
|
Share Appreciation Right Agreement with ACGL substantially in the form signed by Louis T. Petrillo and W. Preston Hutchings-May 11, 2007 grants(n)†
|
10.6.2
|
|
Share Appreciation Right Agreement with ACGL substantially in the form signed by Constantine Iordanou, John D. Vollaro and Marc Grandisson-May 11, 2007 grants(n)†
|
10.6.3
|
|
Share Appreciation Right Agreement with ACGL substantially in the form signed by each of Constantine Iordanou, John D. Vollaro, Marc Grandisson, W. Preston Hutchings, Mark D. Lyons and Louis T. Petrillo-May 9, 2008 grants(p)†
|
10.6.4
|
|
Share Appreciation Right Agreement with ACGL substantially in the form signed by each of Constantine Iordanou, Marc Grandisson, W. Preston Hutchings, Mark D. Lyons, John D. Vollaro and Louis T. Petrillo-May 6, 2009 grants(s)†
|
10.6.5
|
|
Share Appreciation Right Agreement with ACGL substantially in the form signed by each of Constantine Iordanou, Marc Grandisson, W. Preston Hutchings, Mark D. Lyons and Louis T. Petrillo-May 5, 2010 grants(t) May 6, 2011 grants(v), May 9, 2012 grants(aa) and May 9, 2013 grants (includes David H. McElroy)(ff)†
|
10.6.6
|
|
Share Appreciation Right Agreement with ACGL-Constantine Iordanou-February 25, 2010 grant(aa),February 29, 2012 grant(aa) and September 6, 2012 grants(ee)†
|
10.6.7
|
|
Share Appreciation Right Agreement with ACGL-David H. McElroy-June 8, 2009 grant(cc) and September 6, 2012 grants(ee)†
|
10.6.8
|
|
Share Appreciation Right Agreement with ACGL-Mark D. Lyons-September 6, 2012 grant(ee)†
|
10.6.9
|
|
Share Appreciation Right Agreement with ACGL substantially in the form signed by each of Constantine Iordanou, Marc Grandisson, W. Preston Hutchings and Louis T. Petrillo-November 12, 2012 grants(ee)†
|
10.6.10
|
|
Share Appreciation Right Agreement with ACGL substantially in the form signed by each of Constantine Iordanou, Mark D. Lyons, Marc Grandisson, W. Preston Hutchings, David McElroy and Louis T. Petrillo for May 13, 2014 grants(ii)†
|
10.6.11
|
|
Share Appreciation Right Agreement with ACGL-Mark D. Lyons-February 28, 2014 grant(ii)†
|
10.6.12
|
|
Share Appreciation Right Agreement with ACGL-Constantine Iordanou-February 28, 2014 grant(ii)†
|
10.6.13
|
|
Share Appreciation Right Agreement with ACGL-Marc Grandisson-November 6, 2014 grant(mm)†
|
10.6.14
|
|
Share Appreciation Right Agreement with ACGL- Constantine Iordanou-February 27, 2015(pp)†
|
10.7
|
|
Employment and Change in Control Agreement, dated as of May 5, 2000, between ACGL and Louis T. Petrillo(a) and Amendment to Change in Control Agreement, dated as of December 31, 2008(q)†
|
10.8
|
|
Employment Agreement, dated as of October 23, 2001, among ACGL, Arch Re Bermuda and Marc Grandisson(d), First Amendment to same, dated as of November 16, 2005(k) and Second Amendment to same, dated as of November 24, 2008(q)†
|
10.9
|
|
Employment Letter Agreement, dated as of May 29, 2005, between ACGL and W. Preston Hutchings(j) and Amendment to same, dated as of May 21, 2008(o)†
|
10.10
|
|
Employment Agreement, dated as of July 25, 2012, between ACGL and Mark D. Lyons(y)†
|
10.11
|
|
Employment Agreement, dated as of June 5, 2009, between Arch Insurance Group Inc. and David McElroy(z) and Amendment to same, dated as of July 25, 2012(z)†
|
10.12.
|
|
Amended and Restated Employment Agreement, dated October 1, 2014, between ACGL and Constantine Iordanou(jj)†
|
10.13.1
|
|
Employment Agreement, dated as of September 17, 2003, between ACGL and John D. Vollaro(g)†
|
|
ACGL 2016 FORM 10-K
|
204
|
10.13.2
|
|
Amendment to Employment Agreement, dated February 27, 2015, between ACGL and John D. Vollaro(mm)†
|
10.14
|
|
Assumption of Change in Control Agreements(c)†
|
10.15
|
|
Arch U.S. Executive Supplemental Non-Qualified Savings and Retirement Plan(q)†
|
10.16
|
|
Asset Purchase Agreement, dated as of February 7, 2013 (“PMI Asset Purchase Agreement”), by and among the Receiver of PMI Mortgage Insurance Co. in Rehabilitation on behalf of PMI Mortgage Insurance Co. (the “Receiver”), Arch U.S. MI Services Inc. and Arch U.S.(bb) and the Amendment No.1, dated as of May 31, 2013, to the PMI Asset Purchase Agreement (dd)
|
10.17
|
|
Stock Purchase Agreement, dated as of February 7, 2013 (“CMG Stock Purchase Agreement”), by and among the Receiver, CMFG Life Insurance Company, CMG Mortgage Insurance Company, Arch U.S. MI Holdings Inc. and Arch U.S.(bb) and Amendment No. 1, dated as of May 31, 2013, to the CMG Stock Purchase Agreement(dd)
|
10.18
|
|
Stock Purchase Agreement, dated as of August 15, 2016, between ACGL and American International Group, Inc.(qq)
|
10.19
|
|
Second Amended and Restated Credit Agreement, dated as of October 26, 2016, by and among ACGL., certain of its subsidiaries as subsidiary borrowers, Bank of America, N.A., as Administrative Agent, Fronting Bank and L/C Administrator, and the lenders party thereto(hh)
|
12
|
|
Statement regarding computation of ratios (filed herewith)
|
18
|
|
Letter of PricewaterhouseCoopers LLP, dated March 1, 2017, relating to change in accounting principle (filed herewith)
|
21
|
|
Subsidiaries of Registrant (filed herewith)
|
23
|
|
Consent of PricewaterhouseCoopers LLP (filed herewith)
|
24
|
|
Power of Attorney (filed herewith)
|
25
|
|
Form T-1 Statement of Eligibility of Trustee(i)(gg)
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
|
32.1
|
|
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)
|
32.2
|
|
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)
|
101
|
|
The following financial information from ACGL’s Annual Report on Form 10-K for the year ended December 31, 2016 formatted in XBRL: (i) Consolidated Balance Sheets at December 31, 2016 and 2015; (ii) Consolidated Statements of Income for the years ended December 31, 2016, 2015 and 2014; (iii) Consolidated Statements of Comprehensive Income for the years ended December 31, 2016, 2015 and 2014; (iv) Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2016, 2015 and 2014; (v) Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015 and 2014; and (vi) Notes to Consolidated Financial Statements (filed herewith)
|
(a)
|
Filed as an exhibit to our Report on Form 8-K, as filed with the SEC on September 8, 2000, and incorporated by reference.
|
(b)
|
Filed as an annex to our Definitive Proxy Statement/Prospectus included in our Registration Statement on Form S-4 (No. 333-45418), as filed with the SEC on September 26, 2000, and incorporated by reference.
|
(c)
|
Filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2000, as filed with the SEC on April 2, 2001, and incorporated by reference.
|
(d)
|
Filed as an exhibit to our Report on Form 8-K, as filed with the SEC on January 4, 2002, and incorporated by reference.
|
(e)
|
Filed as an exhibit to our Report on Form 10-Q for the period ended June 30, 2002, as filed with the SEC on August 14, 2002, and incorporated by reference.
|
(f)
|
Filed as an exhibit to our Report on Form 10-Q for the period ended September 30, 2003, as filed with the SEC on November 12, 2003, and incorporated by reference.
|
(g)
|
Filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2003, as filed with the SEC on March 10, 2004, and incorporated by reference.
|
(h)
|
Filed as an exhibit to our Report on Form 8-K, as filed with the SEC on May 7, 2004, and incorporated by reference.
|
(i)
|
Revised form of agreement originally filed as an exhibit to our Report on Form 8-K, as filed with the SEC on September 28, 2004, and incorporated by reference.
|
(j)
|
Filed as an exhibit to our Report on Form 8-K, as filed with the SEC on June 9, 2005, and incorporated by reference.
|
(k)
|
Filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2005, as filed with the SEC on March 13, 2006, and incorporated by reference.
|
(l)
|
Filed as an exhibit to our Report on Form 10-Q for the period ending September 30, 2006, as filed with the SEC on November 9, 2006, and incorporated by reference.
|
(m)
|
Filed as an appendix to our Definitive Proxy Statement, as filed with the SEC on April 3, 2007, and incorporated by reference.
|
(n)
|
Filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2007, as filed with the SEC on February 29, 2008, and incorporated by reference.
|
|
ACGL 2016 FORM 10-K
|
205
|
(o)
|
Filed as an exhibit to our Report on Form 10-Q for the period ending June 30, 2008, as filed with the SEC on August 8, 2008, and incorporated by reference.
|
(p)
|
Filed as an exhibit to our Report on Form 10-Q for the period ending September 30, 2008, as filed with the SEC on November 10, 2008, and incorporated by reference.
|
(q)
|
Filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2008, as filed with the SEC on March 2, 2009, and incorporated by reference.
|
(r)
|
Filed as an exhibit to our Report on Form 10-Q for the period ending September 30, 2009, as filed with the SEC on November 9, 2009, and incorporated by reference.
|
(s)
|
Filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2009, as filed with the SEC on February 26, 2010, and incorporated by reference.
|
(t)
|
Filed as an exhibit to our Report on Form 10-Q for the period ending September 30, 2010, as filed with the SEC on November 8, 2010, and incorporated by reference.
|
(u)
|
Filed as an exhibit to our Annual Report on Form 10-K for the period ending December 31, 2010, as filed with the SEC on February 28, 2011, and incorporated by reference.
|
(v)
|
Filed as an exhibit to our Report on Form 10-Q for the period ending September 30, 2011, as filed with the SEC on November 8, 2011, and incorporated by reference.
|
(w)
|
Filed as an appendix to our Definitive Proxy Statement, as filed with the SEC on March 27, 2012, and incorporated by reference.
|
(x)
|
Filed as an exhibit to our Report on Form 8-K, as filed with the SEC on April 2, 2012, and incorporated by reference.
|
(y)
|
Filed as an exhibit to our Report on Form 8-K, as filed with the SEC on July 30, 2012, and incorporated by reference.
|
(z)
|
Filed as an exhibit to our Report on Form 10-Q for the period ending June 30, 2012, as filed with the SEC on August 8, 2012, and incorporated by reference.
|
(aa)
|
Filed as an exhibit to our Report on Form 10-Q for the period ending September 30, 2012, as filed with the SEC on November 9, 2012, and incorporated by reference.
|
(bb)
|
Filed as an exhibit to our Report on Form 8-K, as filed with the SEC on February 8, 2013, and incorporated by reference.
|
(cc)
|
Filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2012, as filed with the SEC on March 1, 2013, and incorporated by reference.
|
(dd)
|
Filed as an exhibit to our Report on Form 8-K, as filed with the SEC on June 5, 2013, and incorporated by reference.
|
(ee)
|
Filed as an exhibit to our Report on Form 10-Q for the period ending June 30, 2013, as filed with the SEC on August 9, 2013, and incorporated by reference.
|
(ff)
|
Filed as an exhibit to our Report on Form 10-Q for the period ending September 30, 2013, as filed with the SEC on November 8, 2013, and incorporated by reference.
|
(gg)
|
Filed as an exhibit to our Report on Form 8-K, as filed with the SEC on December 13, 2013, and incorporated by reference.
|
(hh)
|
Filed as an exhibit to our Report on Form 8-K, as filed with the SEC on October 26, 2016, and incorporated by reference.
|
(ii)
|
Filed as an exhibit to our Report on Form 10-Q for the period ending June 30, 2014, as filed with the SEC on August 8, 2014, and incorporated by reference.
|
(jj)
|
Filed as an exhibit to our Report on Form 8-K, as filed with the SEC on October 6, 2014, and incorporated by reference.
|
(kk)
|
Filed as an exhibit to our Report on Form 10-Q for the period ending September 30, 2014, as filed with the SEC on November 7, 2014, and incorporated by reference.
|
(ll)
|
Filed as an appendix to our Definitive Proxy Statement, as filed with the SEC on March 26, 2015, and incorporated by reference.
|
(mm)
|
Filed as an exhibit to our Report on Form 10-Q for the period ending March 31, 2015, as filed with the SEC on May 8, 2015, and incorporated by reference.
|
(nn)
|
Filed as an exhibit to our Report on Form 10-Q for the period ending June 30, 2015, as filed with the SEC on August 7, 2015, and incorporated by reference.
|
(oo)
|
Filed as an appendix to our Definitive Proxy Statement, as filed with the SEC on March 23, 2016, and incorporated by reference.
|
(pp)
|
Filed as an exhibit to our Report on Form 10-Q for the period ending June 30, 2016, as filed with the SEC on August 5, 2016, and incorporated by reference.
|
(qq)
|
Filed as an exhibit to our Report on Form 8-K, as filed with the SEC on August 16, 2016, and incorporated by reference.
|
(rr)
|
Filed as an exhibit to our Report on Form 8-K, as filed with the SEC on September 29, 2016, and incorporated by reference.
|
(ss)
|
Filed as an exhibit to our Report on Form 8-K, as filed with the SEC on December 9, 2016, and incorporated by reference.
|
|
ACGL 2016 FORM 10-K
|
206
|
|
ARCH CAPITAL GROUP LTD.
(Registrant)
|
||
|
By:
|
/s/ Constantine Iordanou
|
|
|
|
Name:
|
Constantine Iordanou
|
|
|
Title:
|
Chairman of the Board of Directors and
Chief Executive Officer
|
|
ACGL 2016 FORM 10-K
|
207
|
Name
|
Title
|
Date
|
|
|
|
*
|
|
|
Louis J. Paglia
|
Director
|
March 1, 2017
|
|
|
|
*
|
|
|
John M. Pasquesi
|
Director
|
March 1, 2017
|
|
|
|
*
|
|
|
Brian S. Posner
|
Director
|
March 1, 2017
|
|
|
|
*
|
|
|
Eugene S. Sunshine
|
Director
|
March 1, 2017
|
|
|
|
*
|
|
|
John D. Vollaro
|
Director
|
March 1, 2017
|
*
|
By Mark D. Lyons, as attorney-in-fact and agent, pursuant to a power of attorney, a copy of which has been filed with the Securities and Exchange Commission as Exhibit 24 to this report.
|
|
|
/s/ Mark D. Lyons
|
|
Name:
|
Mark D. Lyons
Attorney-in-Fact
|
|
ACGL 2016 FORM 10-K
|
208
|
|
Deferred Acquisition Costs
|
Reserves for Losses and Loss Adjustment Expenses
|
Unearned Premiums
|
Net Premiums Earned
|
Net Investment Income (1)
|
Net Losses and Loss Adjustment Expenses Incurred
|
Amortization of Deferred Acquisition Costs
|
Other Operating Expenses (2)
|
Net Premiums Written
|
||||||||||||||||
December 31, 2016
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Insurance
|
|
$152,983
|
|
|
$6,502,745
|
|
|
$1,403,822
|
|
|
$2,073,904
|
|
NM
|
|
$1,359,313
|
|
|
$304,066
|
|
|
$353,782
|
|
|
$2,072,281
|
|
Reinsurance
|
121,806
|
|
2,506,239
|
|
532,759
|
|
1,056,232
|
|
NM
|
475,762
|
|
212,375
|
|
143,408
|
|
1,053,856
|
|
||||||||
Mortgage
|
86,392
|
|
681,167
|
|
1,176,809
|
|
286,716
|
|
NM
|
28,943
|
|
32,065
|
|
101,293
|
|
391,466
|
|
||||||||
Other
|
86,379
|
|
510,809
|
|
293,480
|
|
467,970
|
|
NM
|
321,581
|
|
129,527
|
|
25,163
|
|
513,788
|
|
||||||||
Total
|
|
$447,560
|
|
|
$10,200,960
|
|
|
$3,406,870
|
|
|
$3,884,822
|
|
NM
|
|
$2,185,599
|
|
|
$678,033
|
|
|
$623,646
|
|
|
$4,031,391
|
|
December 31, 2015
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Insurance
|
|
$131,081
|
|
|
$6,217,777
|
|
|
$1,364,000
|
|
|
$2,044,808
|
|
NM
|
|
$1,292,647
|
|
|
$299,317
|
|
|
$354,416
|
|
|
$2,045,671
|
|
Reinsurance
|
123,226
|
|
2,506,441
|
|
531,385
|
|
1,077,135
|
|
NM
|
440,350
|
|
223,632
|
|
155,811
|
|
1,038,408
|
|
||||||||
Mortgage
|
53,079
|
|
110,035
|
|
188,567
|
|
214,110
|
|
NM
|
40,247
|
|
45,076
|
|
82,370
|
|
267,493
|
|
||||||||
Other
|
75,443
|
|
290,997
|
|
249,980
|
|
397,852
|
|
NM
|
277,659
|
|
113,451
|
|
14,919
|
|
465,959
|
|
||||||||
Total
|
|
$382,829
|
|
|
$9,125,250
|
|
|
$2,333,932
|
|
|
$3,733,905
|
|
NM
|
|
$2,050,903
|
|
|
$681,476
|
|
|
$607,516
|
|
|
$3,817,531
|
|
December 31, 2014
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Insurance
|
|
$142,703
|
|
|
$6,204,523
|
|
|
$1,337,934
|
|
|
$2,017,370
|
|
NM
|
|
$1,260,953
|
|
|
$316,308
|
|
|
$335,157
|
|
|
$2,146,654
|
|
Reinsurance
|
133,324
|
|
2,647,341
|
|
582,341
|
|
1,279,328
|
|
NM
|
532,450
|
|
261,438
|
|
147,964
|
|
1,265,991
|
|
||||||||
Mortgage
|
38,321
|
|
118,256
|
|
131,289
|
|
193,573
|
|
NM
|
55,674
|
|
49,400
|
|
66,891
|
|
204,837
|
|
||||||||
Other
|
49,529
|
|
66,328
|
|
180,014
|
|
103,477
|
|
NM
|
70,173
|
|
30,116
|
|
6,268
|
|
274,456
|
|
||||||||
Total
|
|
$363,877
|
|
|
$9,036,448
|
|
|
$2,231,578
|
|
|
$3,593,748
|
|
NM
|
|
$1,919,250
|
|
|
$657,262
|
|
|
$556,280
|
|
|
$3,891,938
|
|
(1)
|
The Company does not manage its assets by segment and, accordingly, net investment income is not allocated to each underwriting segment. See Note
5
for information related to the ‘other’ segment.
|
(2)
|
Certain other operating expenses relate to the Company’s corporate segment (non-underwriting). Such amounts are not reflected in the table above. See Note
5
.
|
|
ACGL 2016 FORM 10-K
|
209
|
|
Gross Amount
|
|
Ceded to Other Companies (1)
|
|
Assumed From Other Companies (1)
|
|
Net
Amount |
|
Percentage of Amount Assumed to Net
|
|||||||||
Year Ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
|||||||||
Premiums Written:
|
|
|
|
|
|
|
|
|
|
|||||||||
Insurance
|
$
|
2,999,106
|
|
|
$
|
(954,768
|
)
|
|
$
|
27,943
|
|
|
$
|
2,072,281
|
|
|
1.3
|
%
|
Reinsurance
|
62,427
|
|
|
(440,541
|
)
|
|
1,431,970
|
|
|
1,053,856
|
|
|
135.9
|
%
|
||||
Mortgage
|
209,351
|
|
|
(108,259
|
)
|
|
290,374
|
|
|
391,466
|
|
|
74.2
|
%
|
||||
Other
|
66,806
|
|
|
(21,306
|
)
|
|
468,288
|
|
|
513,788
|
|
|
91.1
|
%
|
||||
Total
|
$
|
3,337,690
|
|
|
$
|
(1,170,743
|
)
|
|
$
|
1,864,444
|
|
|
$
|
4,031,391
|
|
|
46.2
|
%
|
Year Ended December 31, 2015
|
|
|
|
|
|
|
|
|
|
|||||||||
Premiums Written:
|
|
|
|
|
|
|
|
|
|
|||||||||
Insurance
|
$
|
2,908,906
|
|
|
$
|
(898,347
|
)
|
|
$
|
35,112
|
|
|
$
|
2,045,671
|
|
|
1.7
|
%
|
Reinsurance
|
28,510
|
|
|
(380,614
|
)
|
|
1,390,512
|
|
|
1,038,408
|
|
|
133.9
|
%
|
||||
Mortgage
|
137,338
|
|
|
(28,064
|
)
|
|
158,219
|
|
|
267,493
|
|
|
59.1
|
%
|
||||
Other
|
12,165
|
|
|
(22,940
|
)
|
|
476,734
|
|
|
465,959
|
|
|
102.3
|
%
|
||||
Total
|
$
|
3,086,919
|
|
|
$
|
(979,632
|
)
|
|
$
|
1,710,244
|
|
|
$
|
3,817,531
|
|
|
44.8
|
%
|
Year Ended December 31, 2014
|
|
|
|
|
|
|
|
|
|
|||||||||
Premiums Written:
|
|
|
|
|
|
|
|
|
|
|||||||||
Insurance
|
$
|
2,974,996
|
|
|
$
|
(862,015
|
)
|
|
$
|
33,673
|
|
|
$
|
2,146,654
|
|
|
1.6
|
%
|
Reinsurance
|
22,405
|
|
|
(261,255
|
)
|
|
1,504,841
|
|
|
1,265,991
|
|
|
118.9
|
%
|
||||
Mortgage
|
103,545
|
|
|
(22,519
|
)
|
|
123,811
|
|
|
204,837
|
|
|
60.4
|
%
|
||||
Other
|
$
|
0
|
|
|
$
|
(14,171
|
)
|
|
$
|
288,627
|
|
|
$
|
274,456
|
|
|
105.2
|
%
|
Total
|
$
|
3,100,946
|
|
|
$
|
(948,678
|
)
|
|
$
|
1,739,670
|
|
|
$
|
3,891,938
|
|
|
44.7
|
%
|
(1)
|
Certain amounts included in the gross premiums written of each segment are related to intersegment transactions and are included in the gross premiums written of each segment. Accordingly, the sum of gross premiums written for each segment does not agree to the total gross premiums written as shown in the table above due to the elimination of intersegment transactions in the total.
|
|
ACGL 2016 FORM 10-K
|
210
|
|
ACGL 2016 FORM 10-K
|
211
|
OS
1
|
OS
0
|
OS
1
=
|
the sum of Common Shares issued immediately after the opening of business on the effective date of such share subdivision, split or combination; and
|
OS
0
=
|
the sum of Common Shares issued immediately prior to the effective date of such share subdivision, split or combination.
|
|
|
Page
|
|
ARTICLE I REGISTRATION RIGHTS
|
|
|
|
|
1.1
|
Shelf Registrations
|
|
1.2
|
Demand Registrations
|
|
1.3
|
Inclusion of Other Securities; Priority
|
|
1.4
|
Restrictions on Registration
|
|
1.5
|
Piggyback Registrations
|
|
1.6
|
Holdback Agreement
|
|
1.7
|
Registration Procedures
|
|
1.8
|
Registration Expenses
|
|
1.9
|
Indemnification
|
|
1.10
|
Participation in Underwritten Registrations
|
|
1.11
|
Rule 144 and 144A Reporting
|
|
1.12
|
Miscellaneous
|
|
1.13
|
Subject to Transfer Restrictions
|
|
|
|
|
|
ARTICLE II COVENANTS
|
|
|
|
|
2.1
|
Transfer Restrictions
|
|
2.2
|
Standstill
|
|
2.3
|
Redemptions and Accelerated Share Repurchases
|
|
2.4
|
Open-Market Repurchases
|
|
2.5
|
Ownership Threshold
|
|
2.6
|
Listing
|
|
2.7
|
Private Sale and Legends
|
|
|
|
|
|
ARTICLE III TAX MATTERS
|
|
|
|
|
3.1
|
Tax Return Information
|
|
3.2
|
PFIC and CFC Information
|
|
3.3
|
QEF Election
|
|
3.4
|
Retention of Tax Information
|
|
|
|
|
|
ARTICLE IV MISCELLANEOUS
|
|
|
|
|
4.1
|
Term
|
|
4.2
|
Notices
|
|
4.3
|
Investor Actions
|
|
4.4
|
No Partnership
|
|
4.5
|
Memorandum of Association
|
|
4.6
|
Amendments and Waivers
|
|
4.7
|
Assignment of Registration Rights
|
|
4.8
|
Assignment
|
|
4.9
|
Severability
|
|
4.10
|
Counterparts
|
|
4.11
|
Entire Agreement
|
|
4.12
|
Governing Law; Arbitration; Waiver of Jury Trial
|
|
4.13
|
Agent for Service of Process
|
|
4.14
|
Specific Performance
|
|
4.15
|
No Third Party Beneficiaries
|
|
4.16
|
Defined Terms
|
|
4.17
|
Interpretation
|
|
4.18
|
Further Assurances
|
Arch Capital Group Ltd. and Subsidiaries
|
|||||||||||||||||||
Computation of Ratio of Earnings to Fixed Charges and Preference Dividends
|
|||||||||||||||||||
(in thousands, except ratios)
|
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Years Ended December 31,
|
||||||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Income before income taxes
|
$
|
855,552
|
|
|
$
|
567,194
|
|
|
$
|
844,247
|
|
|
$
|
734,770
|
|
|
$
|
586,368
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Equity in net income or loss of investees
|
4,844
|
|
|
3,458
|
|
|
(947
|
)
|
|
52,238
|
|
|
(43,632
|
)
|
|||||
Fixed charges
|
93,573
|
|
|
73,065
|
|
|
67,767
|
|
|
33,304
|
|
|
34,223
|
|
|||||
Watford preference dividends (1)
|
(19,264
|
)
|
|
(19,264
|
)
|
|
(14,448
|
)
|
|
—
|
|
|
—
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Income available for fixed charges
|
$
|
934,705
|
|
|
$
|
624,453
|
|
|
$
|
896,619
|
|
|
$
|
820,312
|
|
|
$
|
576,959
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed charges:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest and amortization on indebtedness
|
66,252
|
|
|
45,874
|
|
|
45,634
|
|
|
27,060
|
|
|
28,525
|
|
|||||
Watford preference dividends (1)
|
19,264
|
|
|
19,264
|
|
|
14,448
|
|
|
—
|
|
|
—
|
|
|||||
Estimate of interest component within rental expense, net of sublease income (2)
|
8,057
|
|
|
7,927
|
|
|
7,685
|
|
|
6,244
|
|
|
5,698
|
|
|||||
Total fixed charges
|
93,573
|
|
|
73,065
|
|
|
67,767
|
|
|
33,304
|
|
|
34,223
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Preference dividends (3)
|
28,070
|
|
|
21,938
|
|
|
21,938
|
|
|
21,938
|
|
|
25,079
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Total fixed charges and preference dividends
|
$
|
121,643
|
|
|
$
|
95,003
|
|
|
$
|
89,705
|
|
|
$
|
55,242
|
|
|
$
|
59,302
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Ratio of earnings to fixed charges
|
10.0
|
|
|
8.5
|
|
|
13.2
|
|
|
24.6
|
|
|
16.9
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Ratio of earnings to fixed charges and preference dividends
|
7.7
|
|
|
6.6
|
|
|
10.0
|
|
|
14.8
|
|
|
9.7
|
|
(1)
|
Dividends attributable to preference shares issued by Watford Holdings Ltd.
|
(2)
|
Represents a reasonable approximation of the interest cost component of rental expense, net of sublease income, incurred by the Company.
|
(3)
|
Dividends attributable to preference shares issued by ACGL.
|
Name
|
|
Jurisdiction of Incorporation
|
|
|
|
Alternative Re Holdings Limited
|
|
Bermuda
|
|
|
|
Alternative Re Limited
|
|
Bermuda
|
|
|
|
Alternative Underwriting Services, Ltd.
|
|
Bermuda
|
|
|
|
Alwyn Insurance Company Limited
|
|
Gibraltar
|
|
|
|
Arch Capital Finance (Ireland) Limited
|
|
Ireland
|
|
|
|
Arch Capital Finance LLC
|
|
Delaware
|
|
|
|
Arch Capital Group (U.S.) Inc.
|
|
Delaware
|
|
|
|
Arch Capital Holdings Ltd.
|
|
Bermuda
|
|
|
|
Arch Capital Services Inc.
|
|
Delaware
|
|
|
|
Arch Europe Insurance Services Ltd
|
|
United Kingdom
|
|
|
|
Arch Excess & Surplus Insurance Company
|
|
Missouri
|
|
|
|
Arch Financial Holdings Australia Pty Ltd
|
|
Australia
|
|
|
|
Arch Financial Holdings B.V.
|
|
Netherlands
|
|
|
|
Arch Financial Holdings Europe I Limited
|
|
Ireland
|
|
|
|
Arch Financial Holdings Europe II Limited
|
|
Ireland
|
|
|
|
Arch Financial Holdings Europe III Limited
|
|
Ireland
|
|
|
|
Arch Fulfillment Operations Inc.
|
|
Delaware
|
|
|
|
Arch Global Services (Cyprus) Ltd.
|
|
Cyprus
|
|
|
|
Arch Global Services Holdings Ltd.
|
|
Bermuda
|
|
|
|
Arch Global Services Inc.
|
|
Philippines
|
|
|
|
Arch Indemnity Insurance Company
|
|
Missouri
|
|
|
|
Arch Insurance Canada Ltd.
|
|
Canada
|
|
|
|
Arch Insurance Company
|
|
Missouri
|
|
|
|
Arch Insurance Company (Europe) Limited
|
|
United Kingdom
|
|
|
|
Arch Insurance Group Inc.
|
|
Delaware
|
|
|
|
Arch Insurance Solutions Inc.
|
|
Delaware
|
|
|
|
Arch International Services Inc.
|
|
Delaware
|
|
|
|
Arch Investments I LLC
|
|
Delaware
|
|
|
|
Arch Investment Holdings I Ltd.
|
|
Bermuda
|
|
|
|
Arch Investment Holdings II Ltd.
|
|
Bermuda
|
|
|
|
Arch Investment Holdings III Ltd.
|
|
Bermuda
|
|
|
|
Arch Investment Holdings IV Ltd.
|
|
Bermuda
|
|
|
|
Arch Investment Management Ltd.
|
|
Bermuda
|
|
|
|
Arch Investment Holdings (Cyprus) Ltd.
|
|
Cyprus
|
|
|
|
Arch Investment Property Holdings Ltd.
|
|
Bermuda
|
|
|
|
Arch LMI Pty Ltd
|
|
Australia
|
|
|
|
Arch Mortgage Assurance Company
|
|
Wisconsin
|
|
|
|
Arch Mortgage Insurance Designated Activity Company
|
|
Ireland
|
|
|
|
Arch Mortgage Guaranty Company
|
|
Wisconsin
|
|
|
|
Arch Mortgage Insurance Company
|
|
Wisconsin
|
|
|
|
Arch Mortgage Reinsurance Company
|
|
Wisconsin
|
|
|
|
Arch Mortgage Risk Transfer Holdings Inc.
|
|
Delaware
|
|
|
|
Arch Mortgage Risk Transfer PCC Inc.
|
|
District of Columbia
|
|
|
|
Arch Re Accident & Health ApS
|
|
Denmark
|
|
|
|
Arch Re Facultative Underwriters Inc.
|
|
Delaware
|
|
|
|
Arch Reinsurance Company
|
|
Delaware
|
|
|
|
Arch Reinsurance Europe Underwriting Designated Activity Company
|
|
Ireland
|
|
|
|
Arch Reinsurance Ltd.
|
|
Bermuda
|
|
|
|
Arch Risk Transfer Services Ltd.
|
|
Bermuda
|
|
|
|
Arch Specialty Insurance Agency Inc.
|
|
Missouri
|
|
|
|
Arch Specialty Insurance Company
|
|
Missouri
|
|
|
|
Arch Structured Mortgage Insurance Company
|
|
North Carolina
|
|
|
|
Arch Syndicate Investments Ltd
|
|
United Kingdom
|
|
|
|
Arch Underwriters Ltd.
|
|
Bermuda
|
|
|
|
Arch Underwriters Europe Limited
|
|
Ireland
|
|
|
|
Arch Underwriters (Gulf) Limited
|
|
Dubai International Financial Centre
|
|
|
|
Arch Underwriting Agency (Australia) Pty. Ltd.
|
|
Australia
|
|
|
|
Arch Underwriting Agency LLC
|
|
Delaware
|
|
|
|
Arch Underwriting at Lloyd’s Ltd
|
|
United Kingdom
|
|
|
|
Arch Underwriting at Lloyd’s (Australia) Pty Ltd
|
|
Australia
|
|
|
|
Arch Underwriters Inc.
|
|
Delaware
|
|
|
|
Arch Underwriting Managers at Lloyd’s (South Africa) (Pty) Limited
|
|
Republic of South Africa
|
|
|
|
Arch U.S. MI Holdings Inc.
|
|
Delaware
|
|
|
|
Arch U.S. MI Services Inc.
|
|
Delaware
|
|
|
|
First American Services Corporation
|
|
Missouri
|
|
|
|
Gulf Re Holdings Limited
|
|
Jersey (Channel Islands)
|
|
|
|
Gulf Reinsurance Limited
|
|
Dubai International Financial Centre
|
|
|
|
UG Shared Services, Inc.
|
|
North Carolina
|
|
|
|
United Guaranty Commercial Insurance Company of North Carolina
|
|
North Carolina
|
|
|
|
United Guaranty Corporation
|
|
North Carolina
|
|
|
|
United Guaranty Credit Insurance Company
|
|
North Carolina
|
|
|
|
United Guaranty Insurance Company
|
|
North Carolina
|
|
|
|
United Guaranty Mortgage Indemnity Company
|
|
North Carolina
|
|
|
|
United Guaranty Mortgage Insurance Company
|
|
North Carolina
|
|
|
|
United Guaranty Mortgage Insurance Company of North Carolina
|
|
North Carolina
|
|
|
|
United Guaranty Partners Insurance Company
|
|
Vermont
|
|
|
|
United Guaranty Residential Insurance Company
|
|
North Carolina
|
|
|
|
United Guaranty Residential Insurance Company of North Carolina
|
|
North Carolina
|
|
|
|
United Guaranty Services, Inc.
|
|
North Carolina
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Constantine P. Iordanou
Constantine P. Iordanou
|
|
Chairman of the Board of Directors, President and Chief Executive Officer (Principal Executive Officer)
|
|
February 23, 2017
|
/s/ Mark D. Lyons
Mark D. Lyons
|
|
Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
|
|
February 23, 2017
|
/s/ John L. Bunce, Jr.
John L. Bunce, Jr.
|
|
Director
|
|
February 23, 2017
|
/s/ Eric W. Doppstadt
Eric W. Doppstadt
|
|
Director
|
|
February 23, 2017
|
/s/ Kewsong Lee
Kewsong Lee
|
|
Director
|
|
February 23, 2017
|
/s/ Yiorgos Lillikas
Yiorgos Lillikas
|
|
Director
|
|
February 23, 2017
|
/s/ Louis J. Paglia
Louis J. Paglia
|
|
Director
|
|
February 23, 2017
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ John M. Pasquesi
John M. Pasquesi
|
|
Director
|
|
February 22, 2017
|
/s/ Brian S. Posner
Brian S. Posner
|
|
Director
|
|
February 23, 2017
|
/s/ Eugene S. Sunshine
Eugene S. Sunshine
|
|
Director
|
|
February 23, 2017
|
/s/ John D. Vollaro
John D. Vollaro
|
|
Director
|
|
February 23, 2017
|
1.
|
I have reviewed this annual report on Form 10-K of Arch Capital Group Ltd.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in the report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and to the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
1.
|
I have reviewed this annual report on Form 10-K of Arch Capital Group Ltd.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in the report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and to the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
(1)
|
the Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934; and
|
(2)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
(1)
|
the Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934; and
|
(2)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|