x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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March 31, 2017
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Or
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Bermuda
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Not applicable
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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Waterloo House, Ground Floor
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100 Pitts Bay Road, Pembroke HM 08, Bermuda
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(441) 278-9250
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(Address of principal executive offices)
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(Registrant’s telephone number, including area code)
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Item
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Page No.
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PART I
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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PART II
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Item 1.
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Item 1A.
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Item 2.
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Item 5.
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Item 6.
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ACGL 2017 FIRST QUARTER FORM 10-Q
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1
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•
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our ability to successfully implement our business strategy during “soft” as well as “hard” markets;
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•
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acceptance of our business strategy, security and financial condition by rating agencies and regulators, as well as by brokers and our insureds and reinsureds;
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•
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the integration of United Guaranty and any other businesses we have acquired or may acquire into our existing operations;
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•
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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;
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•
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general economic and market conditions (including inflation, interest rates, foreign currency exchange rates, prevailing credit terms and the depth and duration of a recession) and conditions specific to the reinsurance and insurance markets (including the length and magnitude of the current “soft” market) in which we operate;
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•
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competition, including increased competition, on the basis of pricing, capacity (including alternative forms of capital), coverage terms or other factors;
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•
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developments in the world’s financial and capital markets and our access to such markets;
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•
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our ability to successfully enhance, integrate and maintain operating procedures (including information technology) to effectively support our current and new business;
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•
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the loss of key personnel;
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•
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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
March 31, 2017
;
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•
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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;
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•
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severity and/or frequency of losses;
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•
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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;
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•
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acts of terrorism, political unrest and other hostilities or other unforecasted and unpredictable events;
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•
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availability to us of reinsurance to manage our gross and net exposures and the cost of such reinsurance;
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•
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the failure of reinsurers, managing general agents, third party administrators or others to meet their obligations to us;
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•
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the timing of loss payments being faster or the receipt of reinsurance recoverables being slower than anticipated by us;
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•
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our investment performance, including legislative or regulatory developments that may adversely affect the fair value of our investments;
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ACGL 2017 FIRST QUARTER FORM 10-Q
|
2
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•
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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;
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•
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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;
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•
|
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;
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•
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changes in accounting principles or policies or in our application of such accounting principles or policies;
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•
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changes in the political environment of certain countries in which we operate or underwrite business;
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•
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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
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•
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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 our Annual Report on Form 10-K for the year ended December 31, 2016, as well as the other factors set forth in our other documents on file with the SEC, and management’s response to any of the aforementioned factors.
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ACGL 2017 FIRST QUARTER FORM 10-Q
|
3
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Page No.
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March 31, 2017 (unaudited) and December 31, 2016
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For the three month periods ended March 31, 2017 and 2016 (unaudited)
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For the three month periods ended March 31, 2017 and 2016 (unaudited)
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For the three month periods ended March 31, 2017 and 2016 (unaudited)
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For the three month periods ended March 31, 2017 and 2016 (unaudited)
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Notes to Consolidated Financial Statements (unaudited)
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ACGL 2017 FIRST QUARTER FORM 10-Q
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4
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ACGL 2017 FIRST QUARTER FORM 10-Q
|
5
|
ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands, except share data)
|
|||||||
|
(Unaudited)
|
|
|
||||
|
March 31,
2017 |
|
December 31,
2016 |
||||
Assets
|
|
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|
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|
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Investments:
|
|
|
|
|
|
||
Fixed maturities available for sale, at fair value (amortized cost: $13,767,375 and $13,522,671)
|
$
|
13,745,932
|
|
|
$
|
13,426,577
|
|
Short-term investments available for sale, at fair value (amortized cost: $803,624 and $611,878)
|
803,619
|
|
|
612,005
|
|
||
Collateral received under securities lending, at fair value (amortized cost: $538,353 and $762,554)
|
538,361
|
|
|
762,565
|
|
||
Equity securities available for sale, at fair value (cost: $369,189 and $475,085)
|
428,594
|
|
|
518,041
|
|
||
Other investments available for sale, at fair value (cost: $197,431 and $149,077)
|
228,437
|
|
|
167,970
|
|
||
Investments accounted for using the fair value option
|
3,648,120
|
|
|
3,421,220
|
|
||
Investments accounted for using the equity method
|
861,607
|
|
|
811,273
|
|
||
Total investments
|
20,254,670
|
|
|
19,719,651
|
|
||
|
|
|
|
||||
Cash
|
703,754
|
|
|
842,942
|
|
||
Accrued investment income
|
104,168
|
|
|
124,483
|
|
||
Securities pledged under securities lending, at fair value (amortized cost: $524,758 and $746,409)
|
525,569
|
|
|
744,980
|
|
||
Premiums receivable
|
1,254,048
|
|
|
1,072,435
|
|
||
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses
|
2,133,148
|
|
|
2,114,138
|
|
||
Contractholder receivables
|
1,766,340
|
|
|
1,717,436
|
|
||
Ceded unearned premiums
|
941,923
|
|
|
859,567
|
|
||
Deferred acquisition costs
|
487,925
|
|
|
447,560
|
|
||
Receivable for securities sold
|
239,678
|
|
|
58,284
|
|
||
Goodwill and intangible assets
|
750,315
|
|
|
781,553
|
|
||
Other assets
|
930,688
|
|
|
889,080
|
|
||
Total assets
|
$
|
30,092,226
|
|
|
$
|
29,372,109
|
|
|
|
|
|
||||
Liabilities
|
|
|
|
||||
Reserve for losses and loss adjustment expenses
|
$
|
10,296,821
|
|
|
$
|
10,200,960
|
|
Unearned premiums
|
3,631,259
|
|
|
3,406,870
|
|
||
Reinsurance balances payable
|
321,285
|
|
|
300,407
|
|
||
Contractholder payables
|
1,766,340
|
|
|
1,717,436
|
|
||
Collateral held for insured obligations
|
327,161
|
|
|
301,406
|
|
||
Senior notes
|
1,732,410
|
|
|
1,732,258
|
|
||
Revolving credit agreement borrowings
|
734,961
|
|
|
756,650
|
|
||
Securities lending payable
|
538,353
|
|
|
762,554
|
|
||
Payable for securities purchased
|
389,649
|
|
|
76,183
|
|
||
Other liabilities
|
674,313
|
|
|
806,260
|
|
||
Total liabilities
|
20,412,552
|
|
|
20,060,984
|
|
||
|
|
|
|
||||
Commitments and Contingencies
|
|
|
|
|
|
||
Redeemable noncontrolling interests
|
205,644
|
|
|
205,553
|
|
||
|
|
|
|
||||
Shareholders' Equity
|
|
|
|
||||
Non-cumulative preferred shares
|
772,555
|
|
|
772,555
|
|
||
Convertible non-voting common equivalent preferred shares
|
1,101,304
|
|
|
1,101,304
|
|
||
Common shares ($0.0033 par, shares issued: 174,935,104 and 174,644,101)
|
583
|
|
|
582
|
|
||
Additional paid-in capital
|
548,053
|
|
|
531,687
|
|
||
Retained earnings
|
8,238,296
|
|
|
7,996,701
|
|
||
Accumulated other comprehensive income (loss), net of deferred income tax
|
(15,677
|
)
|
|
(114,541
|
)
|
||
Common shares held in treasury, at cost (shares: 51,907,618 and 51,856,584)
|
(2,039,270
|
)
|
|
(2,034,570
|
)
|
||
Total shareholders' equity available to Arch
|
8,605,844
|
|
|
8,253,718
|
|
||
Non-redeemable noncontrolling interests
|
868,186
|
|
|
851,854
|
|
||
Total shareholders' equity
|
9,474,030
|
|
|
9,105,572
|
|
||
Total liabilities, noncontrolling interests and shareholders' equity
|
$
|
30,092,226
|
|
|
$
|
29,372,109
|
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
6
|
ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(U.S. dollars in thousands, except share data)
|
|||||||
|
(Unaudited)
|
||||||
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2017
|
|
2016
|
||||
Revenues
|
|
|
|
|
|
||
Net premiums written
|
$
|
1,276,260
|
|
|
$
|
1,121,235
|
|
Change in unearned premiums
|
(159,243
|
)
|
|
(169,656
|
)
|
||
Net premiums earned
|
1,117,017
|
|
|
951,579
|
|
||
Net investment income
|
117,874
|
|
|
93,735
|
|
||
Net realized gains (losses)
|
34,153
|
|
|
37,324
|
|
||
|
|
|
|
||||
Other-than-temporary impairment losses
|
(1,807
|
)
|
|
(7,737
|
)
|
||
Less investment impairments recognized in other comprehensive income, before taxes
|
—
|
|
|
98
|
|
||
Net impairment losses recognized in earnings
|
(1,807
|
)
|
|
(7,639
|
)
|
||
|
|
|
|
||||
Other underwriting income
|
4,633
|
|
|
5,047
|
|
||
Equity in net income (loss) of investment funds accounted for using the equity method
|
48,088
|
|
|
6,655
|
|
||
Other income (loss)
|
(782
|
)
|
|
(25
|
)
|
||
Total revenues
|
1,319,176
|
|
|
1,086,676
|
|
||
|
|
|
|
||||
Expenses
|
|
|
|
||||
Losses and loss adjustment expenses
|
552,570
|
|
|
522,949
|
|
||
Acquisition expenses
|
182,289
|
|
|
167,838
|
|
||
Other operating expenses
|
174,719
|
|
|
150,148
|
|
||
Corporate expenses
|
27,792
|
|
|
9,383
|
|
||
Amortization of intangible assets
|
31,294
|
|
|
4,748
|
|
||
Interest expense
|
28,676
|
|
|
16,107
|
|
||
Net foreign exchange losses (gains)
|
19,404
|
|
|
23,566
|
|
||
Total expenses
|
1,016,744
|
|
|
894,739
|
|
||
|
|
|
|
||||
Income before income taxes
|
302,432
|
|
|
191,937
|
|
||
Income tax expense
|
(28,397
|
)
|
|
(16,310
|
)
|
||
Net income
|
$
|
274,035
|
|
|
$
|
175,627
|
|
Net (income) loss attributable to noncontrolling interests
|
(20,908
|
)
|
|
(20,829
|
)
|
||
Net income available to Arch
|
253,127
|
|
|
154,798
|
|
||
Preferred dividends
|
(11,218
|
)
|
|
(5,484
|
)
|
||
Net income available to Arch common shareholders
|
$
|
241,909
|
|
|
$
|
149,314
|
|
|
|
|
|
||||
Net income per common share and common share equivalent
|
|
|
|
|
|
||
Basic
|
$
|
1.80
|
|
|
$
|
1.24
|
|
Diluted
|
$
|
1.74
|
|
|
$
|
1.20
|
|
|
|
|
|
||||
Weighted average common shares and common share equivalents outstanding
|
|
|
|
||||
Basic
|
134,034,927
|
|
|
120,428,179
|
|
||
Diluted
|
139,047,672
|
|
|
124,496,496
|
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
7
|
ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(U.S. dollars in thousands)
|
|||||||
|
(Unaudited)
|
||||||
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2017
|
|
2016
|
||||
Comprehensive Income
|
|
|
|
||||
Net income
|
$
|
274,035
|
|
|
$
|
175,627
|
|
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
|
100,792
|
|
|
132,981
|
|
||
Portion of other-than-temporary impairment losses recognized in other comprehensive income, net of deferred income tax
|
—
|
|
|
(98
|
)
|
||
Reclassification of net realized (gains) losses, net of income taxes, included in net income
|
(5,044
|
)
|
|
(32,223
|
)
|
||
Foreign currency translation adjustments
|
3,124
|
|
|
17,313
|
|
||
Comprehensive income
|
372,907
|
|
|
293,600
|
|
||
Net (income) loss attributable to noncontrolling interests
|
(20,908
|
)
|
|
(20,829
|
)
|
||
Foreign currency translation adjustments attributable to noncontrolling interests
|
(8
|
)
|
|
158
|
|
||
Comprehensive income available to Arch
|
$
|
351,991
|
|
|
$
|
272,929
|
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
8
|
ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(U.S. dollars in thousands)
|
|||||||
|
(Unaudited)
|
||||||
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2017
|
|
2016
|
||||
Non-cumulative preferred shares
|
|
|
|
|
|
||
Balance at beginning and end of period
|
$
|
772,555
|
|
|
$
|
325,000
|
|
|
|
|
|
||||
Convertible non-voting common equivalent preferred shares
|
|
|
|
||||
Balance at beginning and end of period
|
1,101,304
|
|
|
—
|
|
||
|
|
|
|
||||
Common shares
|
|
|
|
||||
Balance at beginning of year
|
582
|
|
|
577
|
|
||
Common shares issued, net
|
1
|
|
|
2
|
|
||
Balance at end of period
|
583
|
|
|
579
|
|
||
|
|
|
|
||||
Additional paid-in capital
|
|
|
|
|
|
||
Balance at beginning of year
|
531,687
|
|
|
467,339
|
|
||
Common shares issued, net
|
(1
|
)
|
|
—
|
|
||
Exercise of stock options
|
710
|
|
|
4,222
|
|
||
Amortization of share-based compensation
|
15,657
|
|
|
14,265
|
|
||
Other
|
—
|
|
|
117
|
|
||
Balance at end of period
|
548,053
|
|
|
485,943
|
|
||
|
|
|
|
||||
Retained earnings
|
|
|
|
|
|
||
Balance at beginning of year
|
7,996,701
|
|
|
7,332,032
|
|
||
Cumulative effect of an accounting change (1)
|
(314
|
)
|
|
—
|
|
||
Balance at beginning of year, as adjusted
|
7,996,387
|
|
|
7,332,032
|
|
||
Net income
|
274,035
|
|
|
175,627
|
|
||
Net (income) loss attributable to noncontrolling interests
|
(20,908
|
)
|
|
(20,829
|
)
|
||
Preferred share dividends
|
(11,218
|
)
|
|
(5,484
|
)
|
||
Balance at end of period
|
8,238,296
|
|
|
7,481,346
|
|
||
|
|
|
|
||||
Accumulated other comprehensive income (loss), net of deferred income tax
|
|
|
|
||||
Balance at beginning of year
|
(114,541
|
)
|
|
(16,502
|
)
|
||
Unrealized appreciation (decline) in value of available-for-sale investments, net of deferred income tax:
|
|
|
|
||||
Balance at beginning of year
|
(27,641
|
)
|
|
50,085
|
|
||
Unrealized holding gains (losses) arising during period, net of reclassification adjustment
|
95,748
|
|
|
100,758
|
|
||
Portion of other-than-temporary impairment losses recognized in other comprehensive income, net of deferred income tax
|
—
|
|
|
(98
|
)
|
||
Balance at end of period
|
68,107
|
|
|
150,745
|
|
||
Foreign currency translation adjustments:
|
|
|
|
||||
Balance at beginning of year
|
(86,900
|
)
|
|
(66,587
|
)
|
||
Foreign currency translation adjustments
|
3,124
|
|
|
17,313
|
|
||
Foreign currency translation adjustments attributable to noncontrolling interests
|
(8
|
)
|
|
158
|
|
||
Balance at end of period
|
(83,784
|
)
|
|
(49,116
|
)
|
||
Balance at end of period
|
(15,677
|
)
|
|
101,629
|
|
||
|
|
|
|
||||
Common shares held in treasury, at cost
|
|
|
|
||||
Balance at beginning of year
|
(2,034,570
|
)
|
|
(1,941,904
|
)
|
||
Shares repurchased for treasury
|
(4,700
|
)
|
|
(77,345
|
)
|
||
Balance at end of period
|
(2,039,270
|
)
|
|
(2,019,249
|
)
|
||
|
|
|
|
||||
Total shareholders’ equity available to Arch
|
8,605,844
|
|
|
6,375,248
|
|
||
Non-redeemable noncontrolling interests
|
868,186
|
|
|
754,915
|
|
||
Total shareholders’ equity
|
$
|
9,474,030
|
|
|
$
|
7,130,163
|
|
(1)
|
See Note 2, “Recent Accounting Pronouncements,” for details.
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
9
|
ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. dollars in thousands)
|
|||||||
|
(Unaudited)
|
||||||
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2017
|
|
2016
|
||||
Operating Activities
|
|
|
|
|
|
||
Net income
|
$
|
274,035
|
|
|
$
|
175,627
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Net realized (gains) losses
|
(40,855
|
)
|
|
(43,034
|
)
|
||
Net impairment losses recognized in earnings
|
1,807
|
|
|
7,639
|
|
||
Equity in net income or loss of investment funds accounted for using the equity method and other income or loss
|
(36,141
|
)
|
|
3,243
|
|
||
Amortization of intangible assets
|
31,294
|
|
|
4,748
|
|
||
Share-based compensation
|
15,657
|
|
|
14,265
|
|
||
Changes in:
|
|
|
|
||||
Reserve for losses and loss adjustment expenses, net of unpaid losses and loss adjustment expenses recoverable
|
53,027
|
|
|
111,255
|
|
||
Unearned premiums, net of ceded unearned premiums
|
159,243
|
|
|
169,656
|
|
||
Premiums receivable
|
(176,350
|
)
|
|
(217,348
|
)
|
||
Deferred acquisition costs
|
(41,728
|
)
|
|
(30,050
|
)
|
||
Reinsurance balances payable
|
20,114
|
|
|
51,929
|
|
||
Other items, net
|
(51,985
|
)
|
|
74,613
|
|
||
Net Cash Provided By Operating Activities
|
208,118
|
|
|
322,543
|
|
||
Investing Activities
|
|
|
|
|
|
||
Purchases of fixed maturity investments
|
(10,476,918
|
)
|
|
(8,133,537
|
)
|
||
Purchases of equity securities
|
(143,833
|
)
|
|
(128,263
|
)
|
||
Purchases of other investments
|
(427,039
|
)
|
|
(305,198
|
)
|
||
Proceeds from sales of fixed maturity investments
|
10,386,746
|
|
|
7,827,536
|
|
||
Proceeds from sales of equity securities
|
253,347
|
|
|
216,012
|
|
||
Proceeds from sales, redemptions and maturities of other investments
|
317,518
|
|
|
211,125
|
|
||
Proceeds from redemptions and maturities of fixed maturity investments
|
174,718
|
|
|
163,894
|
|
||
Net settlements of derivative instruments
|
(3,921
|
)
|
|
21,091
|
|
||
Net (purchases) sales of short-term investments
|
(397,851
|
)
|
|
(65,594
|
)
|
||
Change in cash collateral related to securities lending
|
180,946
|
|
|
(43,118
|
)
|
||
Purchases of fixed assets
|
(5,194
|
)
|
|
(3,952
|
)
|
||
Other
|
19,603
|
|
|
6,737
|
|
||
Net Cash Provided By (Used For) Investing Activities
|
(121,878
|
)
|
|
(233,267
|
)
|
||
Financing Activities
|
|
|
|
|
|
||
Purchases of common shares under share repurchase program
|
—
|
|
|
(75,256
|
)
|
||
Proceeds from common shares issued, net
|
(3,990
|
)
|
|
202
|
|
||
Repayments of borrowings
|
(22,000
|
)
|
|
(74,171
|
)
|
||
Change in cash collateral related to securities lending
|
(180,946
|
)
|
|
43,118
|
|
||
Dividends paid to redeemable noncontrolling interests
|
(4,497
|
)
|
|
(4,497
|
)
|
||
Other
|
(5,018
|
)
|
|
29,115
|
|
||
Preferred dividends paid
|
(11,218
|
)
|
|
(5,484
|
)
|
||
Net Cash Provided By (Used For) Financing Activities
|
(227,669
|
)
|
|
(86,973
|
)
|
||
|
|
|
|
||||
Effects of exchange rate changes on foreign currency cash
|
2,241
|
|
|
2,332
|
|
||
|
|
|
|
||||
Increase (decrease) in cash
|
(139,188
|
)
|
|
4,635
|
|
||
Cash beginning of year
|
842,942
|
|
|
553,326
|
|
||
Cash end of period
|
$
|
703,754
|
|
|
$
|
557,961
|
|
|
|
|
|
||||
Income taxes paid
|
$
|
711
|
|
|
$
|
2,504
|
|
Interest paid
|
$
|
5,829
|
|
|
$
|
3,813
|
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
10
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
11
|
3
.
|
Variable Interest Entities and Noncontrolling Interests
|
|
March 31,
|
|
December 31,
|
|
|||
|
2017
|
|
2016
|
||||
Assets
|
|
|
|
||||
Investments accounted for using the fair value option
|
$
|
1,976,466
|
|
|
$
|
1,857,623
|
|
Cash
|
47,566
|
|
|
74,893
|
|
||
Accrued investment income
|
14,066
|
|
|
17,017
|
|
||
Premiums receivable
|
196,866
|
|
|
189,911
|
|
||
Reinsurance recoverable on unpaid and paid losses and LAE
|
25,673
|
|
|
24,420
|
|
||
Ceded unearned premiums
|
16,383
|
|
|
12,145
|
|
||
Deferred acquisition costs
|
93,227
|
|
|
86,379
|
|
||
Receivable for securities sold
|
19,235
|
|
|
1,326
|
|
||
Goodwill and intangible assets
|
7,650
|
|
|
7,650
|
|
||
Other assets
|
116,336
|
|
|
111,386
|
|
||
Total assets of consolidated VIE
|
$
|
2,513,468
|
|
|
$
|
2,382,750
|
|
|
|
|
|
||||
Liabilities
|
|
|
|
||||
Reserves for losses and loss adjustment expenses
|
$
|
566,175
|
|
|
$
|
510,809
|
|
Unearned premiums
|
319,677
|
|
|
293,480
|
|
||
Reinsurance balances payable
|
15,171
|
|
|
12,289
|
|
||
Revolving credit agreement borrowings
|
234,961
|
|
|
256,650
|
|
||
Payable for securities purchased
|
81,216
|
|
|
42,922
|
|
||
Other liabilities
|
100,198
|
|
|
88,976
|
|
||
Total liabilities of consolidated VIE
|
$
|
1,317,398
|
|
|
$
|
1,205,126
|
|
|
|
|
|
||||
Redeemable noncontrolling interests
|
$
|
220,344
|
|
|
$
|
220,253
|
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
12
|
|
March 31,
|
||||||
|
2017
|
|
2016
|
||||
Three Months Ended
|
|
|
|
||||
Balance, beginning of period
|
$
|
851,854
|
|
|
$
|
738,831
|
|
Amounts attributable to noncontrolling interests
|
16,324
|
|
|
16,242
|
|
||
Foreign currency translation adjustments attributable to noncontrolling interests
|
8
|
|
|
(158
|
)
|
||
Balance, end of period
|
$
|
868,186
|
|
|
$
|
754,915
|
|
|
March 31,
|
||||||
|
2017
|
|
2016
|
||||
Three Months Ended
|
|
|
|
||||
Balance, beginning of period
|
$
|
205,553
|
|
|
$
|
205,182
|
|
Accretion of preference share issuance costs
|
91
|
|
|
92
|
|
||
Balance, end of period
|
$
|
205,644
|
|
|
$
|
205,274
|
|
|
March 31,
|
||||||
|
2017
|
|
2016
|
||||
Three Months Ended
|
|
|
|
||||
Amounts attributable to non-redeemable noncontrolling interests
|
$
|
(16,324
|
)
|
|
$
|
(16,242
|
)
|
Dividends attributable to redeemable noncontrolling interests
|
(4,584
|
)
|
|
(4,587
|
)
|
||
Net (income) loss attributable to noncontrolling interests
|
$
|
(20,908
|
)
|
|
$
|
(20,829
|
)
|
|
|
|
Maximum Exposure to Loss
|
||||||||||||
|
Total VIE Assets
|
|
On-Balance Sheet
|
|
Off-Balance Sheet
|
|
Total
|
||||||||
Bellemeade I
|
$
|
146,200
|
|
|
$
|
351
|
|
|
$
|
1,310
|
|
|
$
|
1,661
|
|
Bellemeade II
|
283,777
|
|
|
54
|
|
|
1,103
|
|
|
1,157
|
|
||||
Total
|
$
|
429,977
|
|
|
$
|
405
|
|
|
$
|
2,413
|
|
|
$
|
2,818
|
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
13
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2017
|
|
2016
|
||||
Numerator:
|
|
|
|
||||
Net income
|
$
|
274,035
|
|
|
$
|
175,627
|
|
Amounts attributable to noncontrolling interests
|
(20,908
|
)
|
|
(20,829
|
)
|
||
Net income available to Arch
|
253,127
|
|
|
154,798
|
|
||
Preferred dividends
|
(11,218
|
)
|
|
(5,484
|
)
|
||
Net income available to Arch common shareholders
|
$
|
241,909
|
|
|
$
|
149,314
|
|
|
|
|
|
||||
Denominator:
|
|
|
|
||||
Weighted average common shares outstanding
|
121,272,107
|
|
|
120,428,179
|
|
||
Series D preferred shares (1)
|
12,762,820
|
|
|
—
|
|
||
Weighted average common shares and common share equivalents outstanding — basic
|
134,034,927
|
|
|
120,428,179
|
|
||
Effect of dilutive common share equivalents:
|
|
|
|
||||
Nonvested restricted shares
|
1,646,555
|
|
|
1,460,654
|
|
||
Stock options (2)
|
3,366,190
|
|
|
2,607,663
|
|
||
Weighted average common shares and common share equivalents outstanding — diluted
|
139,047,672
|
|
|
124,496,496
|
|
||
|
|
|
|
||||
Earnings per common share:
|
|
|
|
||||
Basic
|
$
|
1.80
|
|
|
$
|
1.24
|
|
Diluted
|
$
|
1.74
|
|
|
$
|
1.20
|
|
(1)
|
Such shares are convertible non-voting common equivalent preferred shares issued in connection with the UGC acquisition.
|
(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 the
2017 first quarter
and
2016 first quarter
, the number of stock options excluded were
263,475
and
607,208
, respectively.
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
14
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
15
|
|
Three Months Ended
|
||||||||||||||||||||||
|
March 31, 2017
|
||||||||||||||||||||||
|
Insurance
|
|
Reinsurance
|
|
Mortgage
|
|
Sub-Total
|
|
Other
|
|
Total
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Gross premiums written (1)
|
$
|
782,281
|
|
|
$
|
475,782
|
|
|
$
|
348,623
|
|
|
$
|
1,606,686
|
|
|
$
|
154,120
|
|
|
$
|
1,657,990
|
|
Premiums ceded
|
(234,095
|
)
|
|
(166,092
|
)
|
|
(73,925
|
)
|
|
(474,112
|
)
|
|
(10,434
|
)
|
|
(381,730
|
)
|
||||||
Net premiums written
|
548,186
|
|
|
309,690
|
|
|
274,698
|
|
|
1,132,574
|
|
|
143,686
|
|
|
1,276,260
|
|
||||||
Change in unearned premiums
|
(42,540
|
)
|
|
(64,839
|
)
|
|
(30,175
|
)
|
|
(137,554
|
)
|
|
(21,689
|
)
|
|
(159,243
|
)
|
||||||
Net premiums earned
|
505,646
|
|
|
244,851
|
|
|
244,523
|
|
|
995,020
|
|
|
121,997
|
|
|
1,117,017
|
|
||||||
Other underwriting income
|
—
|
|
|
(306
|
)
|
|
4,123
|
|
|
3,817
|
|
|
816
|
|
|
4,633
|
|
||||||
Losses and loss adjustment expenses
|
(332,641
|
)
|
|
(105,454
|
)
|
|
(29,065
|
)
|
|
(467,160
|
)
|
|
(85,410
|
)
|
|
(552,570
|
)
|
||||||
Acquisition expenses, net
|
(74,868
|
)
|
|
(46,147
|
)
|
|
(28,766
|
)
|
|
(149,781
|
)
|
|
(32,508
|
)
|
|
(182,289
|
)
|
||||||
Other operating expenses
|
(88,126
|
)
|
|
(37,533
|
)
|
|
(41,870
|
)
|
|
(167,529
|
)
|
|
(7,190
|
)
|
|
(174,719
|
)
|
||||||
Underwriting income (loss)
|
$
|
10,011
|
|
|
$
|
55,411
|
|
|
$
|
148,945
|
|
|
214,367
|
|
|
(2,295
|
)
|
|
212,072
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net investment income
|
|
|
|
|
|
|
95,812
|
|
|
22,062
|
|
|
117,874
|
|
|||||||||
Net realized gains (losses)
|
|
|
|
|
|
|
28,512
|
|
|
5,641
|
|
|
34,153
|
|
|||||||||
Net impairment losses recognized in earnings
|
|
|
|
|
|
|
(1,807
|
)
|
|
—
|
|
|
(1,807
|
)
|
|||||||||
Equity in net income (loss) of investment funds accounted for using the equity method
|
|
|
|
|
|
|
48,088
|
|
|
—
|
|
|
48,088
|
|
|||||||||
Other income (loss)
|
|
|
|
|
|
|
(782
|
)
|
|
—
|
|
|
(782
|
)
|
|||||||||
Corporate expenses (2)
|
|
|
|
|
|
|
(12,208
|
)
|
|
—
|
|
|
(12,208
|
)
|
|||||||||
UGC transaction costs and other (2)
|
|
|
|
|
|
|
(15,584
|
)
|
|
—
|
|
|
(15,584
|
)
|
|||||||||
Amortization of intangible assets
|
|
|
|
|
|
|
(31,294
|
)
|
|
—
|
|
|
(31,294
|
)
|
|||||||||
Interest expense
|
|
|
|
|
|
|
(25,756
|
)
|
|
(2,920
|
)
|
|
(28,676
|
)
|
|||||||||
Net foreign exchange gains (losses)
|
|
|
|
|
|
|
(19,845
|
)
|
|
441
|
|
|
(19,404
|
)
|
|||||||||
Income (loss) before income taxes
|
|
|
|
|
|
|
279,503
|
|
|
22,929
|
|
|
302,432
|
|
|||||||||
Income tax expense
|
|
|
|
|
|
|
(28,397
|
)
|
|
—
|
|
|
(28,397
|
)
|
|||||||||
Net income (loss)
|
|
|
|
|
|
|
251,106
|
|
|
22,929
|
|
|
274,035
|
|
|||||||||
Dividends attributable to redeemable noncontrolling interests
|
|
|
|
|
|
|
—
|
|
|
(4,584
|
)
|
|
(4,584
|
)
|
|||||||||
Amounts attributable to noncontrolling interests
|
|
|
|
|
|
|
—
|
|
|
(16,324
|
)
|
|
(16,324
|
)
|
|||||||||
Net income (loss) available to Arch
|
|
|
|
|
|
|
251,106
|
|
|
2,021
|
|
|
253,127
|
|
|||||||||
Preferred dividends
|
|
|
|
|
|
|
(11,218
|
)
|
|
—
|
|
|
(11,218
|
)
|
|||||||||
Net income (loss) available to Arch common shareholders
|
|
|
|
|
|
|
$
|
239,888
|
|
|
$
|
2,021
|
|
|
$
|
241,909
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Underwriting Ratios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Loss ratio
|
65.8
|
%
|
|
43.1
|
%
|
|
11.9
|
%
|
|
46.9
|
%
|
|
70.0
|
%
|
|
49.5
|
%
|
||||||
Acquisition expense ratio
|
14.8
|
%
|
|
18.8
|
%
|
|
11.8
|
%
|
|
15.1
|
%
|
|
26.6
|
%
|
|
16.3
|
%
|
||||||
Other operating expense ratio
|
17.4
|
%
|
|
15.3
|
%
|
|
17.1
|
%
|
|
16.8
|
%
|
|
5.9
|
%
|
|
15.6
|
%
|
||||||
Combined ratio
|
98.0
|
%
|
|
77.2
|
%
|
|
40.8
|
%
|
|
78.8
|
%
|
|
102.5
|
%
|
|
81.4
|
%
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Goodwill and intangible assets
|
$
|
24,371
|
|
|
$
|
773
|
|
|
$
|
717,521
|
|
|
$
|
742,665
|
|
|
$
|
7,650
|
|
|
$
|
750,315
|
|
(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 reflected in ‘UGC transaction costs and other.’
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
16
|
|
Three Months Ended
|
||||||||||||||||||||||
|
March 31, 2016
|
||||||||||||||||||||||
|
Insurance
|
|
Reinsurance
|
|
Mortgage
|
|
Sub-Total
|
|
Other
|
|
Total
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Gross premiums written (1)
|
$
|
798,553
|
|
|
$
|
481,390
|
|
|
$
|
111,280
|
|
|
$
|
1,391,061
|
|
|
$
|
148,606
|
|
|
$
|
1,437,966
|
|
Premiums ceded
|
(248,789
|
)
|
|
(160,566
|
)
|
|
(4,767
|
)
|
|
(413,960
|
)
|
|
(4,472
|
)
|
|
(316,731
|
)
|
||||||
Net premiums written
|
549,764
|
|
|
320,824
|
|
|
106,513
|
|
|
977,101
|
|
|
144,134
|
|
|
1,121,235
|
|
||||||
Change in unearned premiums
|
(36,675
|
)
|
|
(59,616
|
)
|
|
(44,748
|
)
|
|
(141,039
|
)
|
|
(28,617
|
)
|
|
(169,656
|
)
|
||||||
Net premiums earned
|
513,089
|
|
|
261,208
|
|
|
61,765
|
|
|
836,062
|
|
|
115,517
|
|
|
951,579
|
|
||||||
Other underwriting income
|
—
|
|
|
325
|
|
|
3,793
|
|
|
4,118
|
|
|
929
|
|
|
5,047
|
|
||||||
Losses and loss adjustment expenses
|
(323,609
|
)
|
|
(111,598
|
)
|
|
(8,629
|
)
|
|
(443,836
|
)
|
|
(79,113
|
)
|
|
(522,949
|
)
|
||||||
Acquisition expenses, net
|
(74,348
|
)
|
|
(54,758
|
)
|
|
(5,793
|
)
|
|
(134,899
|
)
|
|
(32,939
|
)
|
|
(167,838
|
)
|
||||||
Other operating expenses
|
(85,058
|
)
|
|
(36,258
|
)
|
|
(23,494
|
)
|
|
(144,810
|
)
|
|
(5,338
|
)
|
|
(150,148
|
)
|
||||||
Underwriting income (loss)
|
$
|
30,074
|
|
|
$
|
58,919
|
|
|
$
|
27,642
|
|
|
116,635
|
|
|
(944
|
)
|
|
115,691
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net investment income
|
|
|
|
|
|
|
70,409
|
|
|
23,326
|
|
|
93,735
|
|
|||||||||
Net realized gains (losses)
|
|
|
|
|
|
|
31,862
|
|
|
5,462
|
|
|
37,324
|
|
|||||||||
Net impairment losses recognized in earnings
|
|
|
|
|
|
|
(7,639
|
)
|
|
—
|
|
|
(7,639
|
)
|
|||||||||
Equity in net income (loss) of investment funds accounted for using the equity method
|
|
|
|
|
|
|
6,655
|
|
|
—
|
|
|
6,655
|
|
|||||||||
Other income (loss)
|
|
|
|
|
|
|
(25
|
)
|
|
—
|
|
|
(25
|
)
|
|||||||||
Corporate expenses
|
|
|
|
|
|
|
(9,383
|
)
|
|
—
|
|
|
(9,383
|
)
|
|||||||||
Amortization of intangible assets
|
|
|
|
|
|
|
(4,748
|
)
|
|
—
|
|
|
(4,748
|
)
|
|||||||||
Interest expense
|
|
|
|
|
|
|
(12,627
|
)
|
|
(3,480
|
)
|
|
(16,107
|
)
|
|||||||||
Net foreign exchange gains (losses)
|
|
|
|
|
|
|
(22,041
|
)
|
|
(1,525
|
)
|
|
(23,566
|
)
|
|||||||||
Income (loss) before income taxes
|
|
|
|
|
|
|
169,098
|
|
|
22,839
|
|
|
191,937
|
|
|||||||||
Income tax expense
|
|
|
|
|
|
|
(16,310
|
)
|
|
—
|
|
|
(16,310
|
)
|
|||||||||
Net income (loss)
|
|
|
|
|
|
|
152,788
|
|
|
22,839
|
|
|
175,627
|
|
|||||||||
Dividends attributable to redeemable noncontrolling interests
|
|
|
|
|
|
|
—
|
|
|
(4,587
|
)
|
|
(4,587
|
)
|
|||||||||
Amounts attributable to noncontrolling interests
|
|
|
|
|
|
|
—
|
|
|
(16,242
|
)
|
|
(16,242
|
)
|
|||||||||
Net income (loss) available to Arch
|
|
|
|
|
|
|
152,788
|
|
|
2,010
|
|
|
154,798
|
|
|||||||||
Preferred dividends
|
|
|
|
|
|
|
(5,484
|
)
|
|
—
|
|
|
(5,484
|
)
|
|||||||||
Net income (loss) available to Arch common shareholders
|
|
|
|
|
|
|
$
|
147,304
|
|
|
$
|
2,010
|
|
|
$
|
149,314
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Underwriting Ratios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Loss ratio
|
63.1
|
%
|
|
42.7
|
%
|
|
14.0
|
%
|
|
53.1
|
%
|
|
68.5
|
%
|
|
55.0
|
%
|
||||||
Acquisition expense ratio
|
14.5
|
%
|
|
21.0
|
%
|
|
9.4
|
%
|
|
16.1
|
%
|
|
28.5
|
%
|
|
17.6
|
%
|
||||||
Other operating expense ratio
|
16.6
|
%
|
|
13.9
|
%
|
|
38.0
|
%
|
|
17.3
|
%
|
|
4.6
|
%
|
|
15.8
|
%
|
||||||
Combined ratio
|
94.2
|
%
|
|
77.6
|
%
|
|
61.4
|
%
|
|
86.5
|
%
|
|
101.6
|
%
|
|
88.4
|
%
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Goodwill and intangible assets
|
$
|
27,825
|
|
|
$
|
1,713
|
|
|
$
|
63,132
|
|
|
$
|
92,670
|
|
|
$
|
—
|
|
|
$
|
92,670
|
|
(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 2017 FIRST QUARTER FORM 10-Q
|
17
|
|
Three Months Ended March 31,
|
||||||
|
2017
|
|
2016
|
||||
Reserve for losses and loss adjustment expenses at beginning of year
|
$
|
10,200,960
|
|
|
$
|
9,125,250
|
|
Unpaid losses and loss adjustment expenses recoverable
|
2,083,575
|
|
|
1,828,837
|
|
||
Net reserve for losses and loss adjustment expenses at beginning of year
|
8,117,385
|
|
|
7,296,413
|
|
||
|
|
|
|
||||
Net incurred losses and loss adjustment expenses relating to losses occurring in:
|
|
|
|
||||
Current year
|
635,775
|
|
|
578,978
|
|
||
Prior years
|
(83,205
|
)
|
|
(56,029
|
)
|
||
Total net incurred losses and loss adjustment expenses
|
552,570
|
|
|
522,949
|
|
||
|
|
|
|
||||
Net foreign exchange losses (gains)
|
31,278
|
|
|
33,575
|
|
||
|
|
|
|
||||
Net paid losses and loss adjustment expenses relating to losses occurring in:
|
|
|
|
||||
Current year
|
(34,957
|
)
|
|
(49,079
|
)
|
||
Prior years
|
(464,585
|
)
|
|
(362,595
|
)
|
||
Total net paid losses and loss adjustment expenses
|
(499,542
|
)
|
|
(411,674
|
)
|
||
|
|
|
|
||||
Net reserve for losses and loss adjustment expenses at end of year
|
8,201,691
|
|
|
7,441,263
|
|
||
Unpaid losses and loss adjustment expenses recoverable
|
2,095,130
|
|
|
1,937,724
|
|
||
Reserve for losses and loss adjustment expenses at end of period
|
$
|
10,296,821
|
|
|
$
|
9,378,987
|
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
18
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
19
|
|
Estimated
Fair
Value
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Cost or
Amortized
Cost
|
|
OTTI
Unrealized
Losses (2)
|
||||||||||
March 31, 2017
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed maturities (1):
|
|
|
|
|
|
|
|
|
|
||||||||||
Corporate bonds
|
$
|
4,546,756
|
|
|
$
|
31,033
|
|
|
$
|
(36,615
|
)
|
|
$
|
4,552,338
|
|
|
$
|
(1,876
|
)
|
Mortgage backed securities
|
412,023
|
|
|
5,210
|
|
|
(2,712
|
)
|
|
409,525
|
|
|
(3,323
|
)
|
|||||
Municipal bonds
|
2,519,112
|
|
|
14,332
|
|
|
(17,411
|
)
|
|
2,522,191
|
|
|
(201
|
)
|
|||||
Commercial mortgage backed securities
|
590,521
|
|
|
3,485
|
|
|
(6,040
|
)
|
|
593,076
|
|
|
—
|
|
|||||
U.S. government and government agencies
|
3,266,908
|
|
|
7,940
|
|
|
(11,152
|
)
|
|
3,270,120
|
|
|
—
|
|
|||||
Non-U.S. government securities
|
1,295,366
|
|
|
26,017
|
|
|
(39,356
|
)
|
|
1,308,705
|
|
|
—
|
|
|||||
Asset backed securities
|
1,638,347
|
|
|
8,984
|
|
|
(4,910
|
)
|
|
1,634,273
|
|
|
(22
|
)
|
|||||
Total
|
14,269,033
|
|
|
97,001
|
|
|
(118,196
|
)
|
|
14,290,228
|
|
|
(5,422
|
)
|
|||||
Equity securities
|
431,062
|
|
|
66,628
|
|
|
(6,660
|
)
|
|
371,094
|
|
|
—
|
|
|||||
Other investments
|
228,437
|
|
|
31,844
|
|
|
(838
|
)
|
|
197,431
|
|
|
—
|
|
|||||
Short-term investments
|
803,619
|
|
|
120
|
|
|
(125
|
)
|
|
803,624
|
|
|
—
|
|
|||||
Total
|
$
|
15,732,151
|
|
|
$
|
195,593
|
|
|
$
|
(125,819
|
)
|
|
$
|
15,662,377
|
|
|
$
|
(5,422
|
)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
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
|
)
|
(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 “—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
March 31, 2017
, the net unrealized
gain
related to securities for which a non-credit OTTI was recognized in AOCI was
$2.0 million
, compared to a net unrealized
gain
of
$2.8 million
at
December 31, 2016
.
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
20
|
|
Less than 12 Months
|
|
12 Months or More
|
|
Total
|
||||||||||||||||||
|
Estimated
Fair Value |
|
Gross
Unrealized
Losses
|
|
Estimated
Fair Value |
|
Gross
Unrealized
Losses
|
|
Estimated
Fair Value |
|
Gross
Unrealized
Losses
|
||||||||||||
March 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Fixed maturities (1):
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Corporate bonds
|
$
|
1,832,009
|
|
|
$
|
(34,331
|
)
|
|
$
|
26,288
|
|
|
$
|
(2,284
|
)
|
|
$
|
1,858,297
|
|
|
$
|
(36,615
|
)
|
Mortgage backed securities
|
137,291
|
|
|
(2,652
|
)
|
|
4,150
|
|
|
(60
|
)
|
|
141,441
|
|
|
(2,712
|
)
|
||||||
Municipal bonds
|
1,043,998
|
|
|
(16,890
|
)
|
|
25,004
|
|
|
(521
|
)
|
|
1,069,002
|
|
|
(17,411
|
)
|
||||||
Commercial mortgage backed securities
|
304,022
|
|
|
(5,890
|
)
|
|
3,928
|
|
|
(150
|
)
|
|
307,950
|
|
|
(6,040
|
)
|
||||||
U.S. government and government agencies
|
1,803,247
|
|
|
(11,152
|
)
|
|
—
|
|
|
—
|
|
|
1,803,247
|
|
|
(11,152
|
)
|
||||||
Non-U.S. government securities
|
914,310
|
|
|
(39,153
|
)
|
|
13,924
|
|
|
(203
|
)
|
|
928,234
|
|
|
(39,356
|
)
|
||||||
Asset backed securities
|
662,917
|
|
|
(4,257
|
)
|
|
40,477
|
|
|
(653
|
)
|
|
703,394
|
|
|
(4,910
|
)
|
||||||
Total
|
6,697,794
|
|
|
(114,325
|
)
|
|
113,771
|
|
|
(3,871
|
)
|
|
6,811,565
|
|
|
(118,196
|
)
|
||||||
Equity securities
|
134,646
|
|
|
(6,660
|
)
|
|
—
|
|
|
—
|
|
|
134,646
|
|
|
(6,660
|
)
|
||||||
Other investments
|
25,189
|
|
|
(838
|
)
|
|
—
|
|
|
—
|
|
|
25,189
|
|
|
(838
|
)
|
||||||
Short-term investments
|
43,717
|
|
|
(125
|
)
|
|
—
|
|
|
—
|
|
|
43,717
|
|
|
(125
|
)
|
||||||
Total
|
$
|
6,901,346
|
|
|
$
|
(121,948
|
)
|
|
$
|
113,771
|
|
|
$
|
(3,871
|
)
|
|
$
|
7,015,117
|
|
|
$
|
(125,819
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
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
|
)
|
(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 “—Securities Lending Agreements.”
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
21
|
|
|
March 31, 2017
|
|
December 31, 2016
|
||||||||||||
Maturity
|
|
Estimated
Fair
Value
|
|
Amortized
Cost
|
|
Estimated
Fair Value |
|
Amortized
Cost
|
||||||||
Due in one year or less
|
|
$
|
633,926
|
|
|
$
|
632,468
|
|
|
$
|
560,830
|
|
|
$
|
557,675
|
|
Due after one year through five years
|
|
7,197,090
|
|
|
7,217,033
|
|
|
6,158,148
|
|
|
6,211,099
|
|
||||
Due after five years through 10 years
|
|
3,337,574
|
|
|
3,339,974
|
|
|
4,676,847
|
|
|
4,710,017
|
|
||||
Due after 10 years
|
|
459,552
|
|
|
463,879
|
|
|
610,962
|
|
|
620,849
|
|
||||
|
|
11,628,142
|
|
|
11,653,354
|
|
|
12,006,787
|
|
|
12,099,640
|
|
||||
Mortgage backed securities
|
|
412,023
|
|
|
409,525
|
|
|
490,093
|
|
|
493,656
|
|
||||
Commercial mortgage backed securities
|
|
590,521
|
|
|
593,076
|
|
|
536,051
|
|
|
539,683
|
|
||||
Asset backed securities
|
|
1,638,347
|
|
|
1,634,273
|
|
|
1,123,987
|
|
|
1,123,616
|
|
||||
Total (1)
|
|
$
|
14,269,033
|
|
|
$
|
14,290,228
|
|
|
$
|
14,156,918
|
|
|
$
|
14,256,595
|
|
(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 “—Securities Lending Agreements.”
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
22
|
|
March 31,
2017 |
|
December 31,
2016 |
||||
Available for sale:
|
|
|
|
||||
Asian and emerging markets
|
$
|
109,084
|
|
|
$
|
84,778
|
|
Investment grade fixed income
|
52,016
|
|
|
33,923
|
|
||
Credit related funds
|
11,003
|
|
|
7,469
|
|
||
Other
|
56,334
|
|
|
41,800
|
|
||
Total available for sale
|
228,437
|
|
|
167,970
|
|
||
Fair value option:
|
|
|
|
||||
Term loan investments (par value: $1,145,832 and $1,208,537)
|
1,123,568
|
|
|
1,190,799
|
|
||
Mezzanine debt funds
|
109,334
|
|
|
127,943
|
|
||
Credit related funds
|
208,707
|
|
|
218,298
|
|
||
Investment grade fixed income
|
82,718
|
|
|
75,468
|
|
||
Asian and emerging markets
|
205,150
|
|
|
178,568
|
|
||
Other (1)
|
165,837
|
|
|
129,717
|
|
||
Total fair value option
|
1,895,314
|
|
|
1,920,793
|
|
||
Total
|
$
|
2,123,751
|
|
|
$
|
2,088,763
|
|
(1)
|
Includes fund investments with strategies in mortgage servicing rights, transportation, infrastructure and other.
|
|
March 31,
2017 |
|
December 31,
2016 |
||||
Fixed maturities
|
$
|
1,112,945
|
|
|
$
|
1,099,116
|
|
Other investments
|
1,895,314
|
|
|
1,920,793
|
|
||
Short-term investments
|
581,508
|
|
|
373,669
|
|
||
Equity securities
|
58,353
|
|
|
27,642
|
|
||
Investments accounted for using the fair value option
|
$
|
3,648,120
|
|
|
$
|
3,421,220
|
|
|
March 31,
2017 |
|
December 31,
2016 |
||||
Investments accounted for using the equity method (1)
|
$
|
861,607
|
|
|
$
|
800,970
|
|
Investments accounted for using the fair value option (2)
|
89,726
|
|
|
90,804
|
|
||
Total
|
$
|
951,333
|
|
|
$
|
891,774
|
|
(1)
|
Aggregate unfunded commitments were
$797.6 million
at
March 31, 2017
, compared to
$776.6 million
at
December 31, 2016
.
|
(2)
|
Aggregate unfunded commitments were
$66.7 million
at
March 31, 2017
, compared to
$16.7 million
at
December 31, 2016
.
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
23
|
|
March 31,
|
||||||
|
2017
|
|
2016
|
||||
Three Months Ended
|
|
|
|
||||
Fixed maturities
|
$
|
94,393
|
|
|
$
|
73,673
|
|
Term loan investments
|
21,170
|
|
|
20,012
|
|
||
Equity securities (dividends)
|
2,643
|
|
|
3,435
|
|
||
Short-term investments
|
1,759
|
|
|
496
|
|
||
Other (1)
|
18,410
|
|
|
13,743
|
|
||
Gross investment income
|
138,375
|
|
|
111,359
|
|
||
Investment expenses
|
(20,501
|
)
|
|
(17,624
|
)
|
||
Net investment income
|
$
|
117,874
|
|
|
$
|
93,735
|
|
(1)
|
Includes income distributions from investment funds and other items.
|
|
March 31,
|
||||||
|
2017
|
|
2016
|
||||
Three Months Ended
|
|
|
|
||||
Available for sale securities:
|
|
|
|
|
|
||
Gross gains on investment sales
|
$
|
69,175
|
|
|
$
|
107,819
|
|
Gross losses on investment sales
|
(61,362
|
)
|
|
(63,131
|
)
|
||
Change in fair value of assets and liabilities accounted for using the fair value option:
|
|
|
|
||||
Fixed maturities
|
20,541
|
|
|
(333
|
)
|
||
Other investments
|
17,248
|
|
|
(21,548
|
)
|
||
Equity securities
|
3,545
|
|
|
36
|
|
||
Short-term investments
|
4
|
|
|
(422
|
)
|
||
Derivative instruments (1)
|
(9,181
|
)
|
|
20,732
|
|
||
Other (2)
|
(5,817
|
)
|
|
(5,829
|
)
|
||
Net realized gains (losses)
|
$
|
34,153
|
|
|
$
|
37,324
|
|
(1)
|
See Note
9
for information on the Company’s derivative instruments.
|
(2)
|
Includes the re-measurement of contingent consideration liability amounts.
|
|
March 31,
|
||||||
|
2017
|
|
2016
|
||||
Three Months Ended
|
|
|
|
||||
Fixed maturities:
|
|
|
|
|
|
||
Mortgage backed securities
|
$
|
(1,319
|
)
|
|
$
|
(473
|
)
|
Corporate bonds
|
(1
|
)
|
|
(4,880
|
)
|
||
Non-U.S. government securities
|
(198
|
)
|
|
(181
|
)
|
||
Asset backed securities
|
—
|
|
|
(6
|
)
|
||
Total
|
(1,518
|
)
|
|
(5,540
|
)
|
||
Equity securities
|
(186
|
)
|
|
(1,102
|
)
|
||
Other investments
|
(103
|
)
|
|
(997
|
)
|
||
Net impairment losses recognized in earnings
|
$
|
(1,807
|
)
|
|
$
|
(7,639
|
)
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
24
|
|
March 31,
|
||||||
|
2017
|
|
2016
|
||||
Three Months Ended
|
|
|
|
||||
Balance at start of period
|
$
|
13,138
|
|
|
$
|
26,875
|
|
Credit loss impairments recognized on securities not previously impaired
|
—
|
|
|
1,063
|
|
||
Credit loss impairments recognized on securities previously impaired
|
23
|
|
|
522
|
|
||
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
|
(624
|
)
|
|
(10,169
|
)
|
||
Balance at end of period
|
$
|
12,537
|
|
|
$
|
18,291
|
|
|
March 31,
2017 |
|
December 31,
2016 |
||||
Assets used for collateral or guarantees:
|
|
|
|
|
|
||
Affiliated transactions
|
$
|
3,991,217
|
|
|
$
|
3,871,971
|
|
Third party agreements
|
1,545,255
|
|
|
1,513,079
|
|
||
Deposits with U.S. regulatory authorities
|
528,594
|
|
|
472,890
|
|
||
Deposits with non-U.S. regulatory authorities
|
45,332
|
|
|
44,399
|
|
||
Total restricted assets
|
$
|
6,110,398
|
|
|
$
|
5,902,339
|
|
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 2017 FIRST QUARTER FORM 10-Q
|
25
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
26
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
27
|
|
|
|
Estimated Fair Value Measurements 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 (1):
|
|
|
|
|
|
|
|
|
|
|
|
||||
Available for sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fixed maturities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate bonds
|
$
|
4,546,756
|
|
|
$
|
—
|
|
|
$
|
4,528,155
|
|
|
$
|
18,601
|
|
Mortgage backed securities
|
412,023
|
|
|
—
|
|
|
412,023
|
|
|
—
|
|
||||
Municipal bonds
|
2,519,112
|
|
|
—
|
|
|
2,519,112
|
|
|
—
|
|
||||
Commercial mortgage backed securities
|
590,521
|
|
|
—
|
|
|
590,521
|
|
|
—
|
|
||||
U.S. government and government agencies
|
3,266,908
|
|
|
3,192,592
|
|
|
74,316
|
|
|
—
|
|
||||
Non-U.S. government securities
|
1,295,366
|
|
|
—
|
|
|
1,295,366
|
|
|
—
|
|
||||
Asset backed securities
|
1,638,347
|
|
|
—
|
|
|
1,627,710
|
|
|
10,637
|
|
||||
Total
|
14,269,033
|
|
|
3,192,592
|
|
|
11,047,203
|
|
|
29,238
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Equity securities
|
431,062
|
|
|
427,762
|
|
|
3,300
|
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Short-term investments
|
803,619
|
|
|
796,075
|
|
|
7,544
|
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Other investments
|
126,112
|
|
|
122,773
|
|
|
3,339
|
|
|
—
|
|
||||
Other investments measured at net asset value (2)
|
102,325
|
|
|
|
|
|
|
|
|||||||
Total other investments
|
228,437
|
|
|
122,773
|
|
|
3,339
|
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Derivative instruments (4)
|
29,059
|
|
|
—
|
|
|
29,059
|
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Fair value option:
|
|
|
|
|
|
|
|
||||||||
Corporate bonds
|
817,690
|
|
|
—
|
|
|
817,690
|
|
|
—
|
|
||||
Non-U.S. government bonds
|
55,504
|
|
|
—
|
|
|
55,504
|
|
|
—
|
|
||||
Mortgage backed securities
|
16,489
|
|
|
—
|
|
|
16,489
|
|
|
—
|
|
||||
Asset backed securities
|
16,198
|
|
|
—
|
|
|
16,198
|
|
|
—
|
|
||||
U.S. government and government agencies
|
207,064
|
|
|
207,064
|
|
|
—
|
|
|
—
|
|
||||
Short-term investments
|
581,508
|
|
|
580,315
|
|
|
1,193
|
|
|
—
|
|
||||
Equity securities
|
58,353
|
|
|
55,311
|
|
|
3,042
|
|
|
—
|
|
||||
Other investments
|
1,338,661
|
|
|
90,475
|
|
|
1,223,186
|
|
|
25,000
|
|
||||
Other investments measured at net asset value (2)
|
556,653
|
|
|
|
|
|
|
|
|||||||
Total
|
3,648,120
|
|
|
933,165
|
|
|
2,133,302
|
|
|
25,000
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Total assets measured at fair value
|
$
|
19,409,330
|
|
|
$
|
5,472,367
|
|
|
$
|
13,223,747
|
|
|
$
|
54,238
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities measured at fair value:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Contingent consideration liabilities
|
$
|
(125,544
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(125,544
|
)
|
Securities sold but not yet purchased (3)
|
(59,430
|
)
|
|
—
|
|
|
(59,430
|
)
|
|
—
|
|
||||
Derivative instruments (4)
|
(22,227
|
)
|
|
—
|
|
|
(22,227
|
)
|
|
—
|
|
||||
Total liabilities measured at fair value
|
$
|
(207,201
|
)
|
|
$
|
—
|
|
|
$
|
(81,657
|
)
|
|
$
|
(125,544
|
)
|
(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
7
, “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
9
, “Derivative Instruments.”
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
28
|
|
|
|
Estimated Fair Value Measurements 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 (1):
|
|
|
|
|
|
|
|
|
|
|
|
||||
Available for sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fixed maturities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
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
7
, “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
9
, “Derivative Instruments.”
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
29
|
|
Assets
|
|
Liabilities
|
||||||||||||||||
s
|
Available For Sale
|
|
Fair Value Option
|
|
|
|
|
||||||||||||
|
Asset Backed Securities
|
|
Corporate
Bonds
|
|
Other
Investments
|
|
Total
|
|
Contingent Consideration Liabilities
|
||||||||||
Three Months Ended March 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Balance at beginning of period
|
$
|
11,289
|
|
|
$
|
18,344
|
|
|
$
|
25,000
|
|
|
$
|
54,633
|
|
|
$
|
(122,350
|
)
|
Total gains or (losses) (realized/unrealized)
|
|
|
|
|
|
|
|
|
|
||||||||||
Included in earnings (1)
|
707
|
|
|
257
|
|
|
—
|
|
|
964
|
|
|
(3,646
|
)
|
|||||
Included in other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Purchases, issuances, sales and settlements
|
|
|
|
|
|
|
|
|
|
||||||||||
Purchases
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Issuances
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Sales
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Settlements
|
(1,359
|
)
|
|
—
|
|
|
—
|
|
|
(1,359
|
)
|
|
452
|
|
|||||
Transfers in and/or out of Level 3
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Balance at end of period
|
$
|
10,637
|
|
|
$
|
18,601
|
|
|
$
|
25,000
|
|
|
$
|
54,238
|
|
|
$
|
(125,544
|
)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Three Months Ended March 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Balance at beginning of period
|
$
|
57,500
|
|
|
$
|
16,368
|
|
|
$
|
—
|
|
|
$
|
73,868
|
|
|
$
|
(96,048
|
)
|
Total gains or (losses) (realized/unrealized)
|
|
|
|
|
|
|
|
|
|
||||||||||
Included in earnings (1)
|
—
|
|
|
(1,202
|
)
|
|
—
|
|
|
(1,202
|
)
|
|
(5,198
|
)
|
|||||
Included in other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Purchases, issuances, sales and settlements
|
|
|
|
|
|
|
|
|
|
||||||||||
Purchases
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Issuances
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Sales
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Settlements
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
536
|
|
|||||
Transfers in and/or out of Level 3
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Balance at end of period
|
$
|
57,500
|
|
|
$
|
15,166
|
|
|
$
|
—
|
|
|
$
|
72,666
|
|
|
$
|
(100,710
|
)
|
(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 2017 FIRST QUARTER FORM 10-Q
|
30
|
|
Estimated Fair Value
|
|
|
||||||||
|
Asset Derivatives
|
|
Liability Derivatives
|
|
Notional
Value (1)
|
||||||
March 31, 2017
|
|
|
|
|
|
||||||
Futures contracts (2)
|
$
|
3,550
|
|
|
$
|
(4,489
|
)
|
|
$
|
2,276,070
|
|
Foreign currency forward contracts (2)
|
7,363
|
|
|
(11,435
|
)
|
|
1,264,235
|
|
|||
TBAs (3)
|
32,011
|
|
|
(32,791
|
)
|
|
63,966
|
|
|||
Other (2)
|
18,146
|
|
|
(6,303
|
)
|
|
1,552,009
|
|
|||
Total
|
$
|
61,070
|
|
|
$
|
(55,018
|
)
|
|
|
||
|
|
|
|
|
|
||||||
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
|
)
|
|
|
(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.’
|
(3)
|
The fair value of TBAs are included in ‘fixed maturities available for sale, at fair value.’
|
Derivatives not designated as
|
|
March 31,
|
||||||
hedging instruments:
|
|
2017
|
|
2016
|
||||
|
|
|
|
|
||||
Three Months Ended
|
|
|
|
|
||||
Net realized gains (losses):
|
|
|
|
|
||||
Futures contracts
|
|
$
|
7,720
|
|
|
$
|
26,451
|
|
Foreign currency forward contracts
|
|
(11,766
|
)
|
|
(4,752
|
)
|
||
TBAs
|
|
(65
|
)
|
|
297
|
|
||
Other
|
|
(5,070
|
)
|
|
(1,264
|
)
|
||
Total
|
|
$
|
(9,181
|
)
|
|
$
|
20,732
|
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
31
|
|
Before Tax Amount
|
|
Tax Expense (Benefit)
|
|
Net of Tax Amount
|
||||||
Three Months Ended March 31, 2017
|
|
|
|
|
|
||||||
Unrealized appreciation (decline) in value of investments:
|
|
|
|
|
|
||||||
Unrealized holding gains (losses) arising during period
|
$
|
111,472
|
|
|
$
|
10,680
|
|
|
$
|
100,792
|
|
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|||
Less reclassification of net realized gains (losses) included in net income
|
6,006
|
|
|
962
|
|
|
5,044
|
|
|||
Foreign currency translation adjustments
|
3,165
|
|
|
41
|
|
|
3,124
|
|
|||
Other comprehensive income (loss)
|
$
|
108,631
|
|
|
$
|
9,759
|
|
|
$
|
98,872
|
|
|
|
|
|
|
|
||||||
Three Months Ended March 31, 2016
|
|
|
|
|
|
||||||
Unrealized appreciation (decline) in value of investments:
|
|
|
|
|
|
||||||
Unrealized holding gains (losses) arising during period
|
$
|
152,174
|
|
|
$
|
19,193
|
|
|
$
|
132,981
|
|
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)
|
(98
|
)
|
|
—
|
|
|
(98
|
)
|
|||
Less reclassification of net realized gains (losses) included in net income
|
36,950
|
|
|
4,727
|
|
|
32,223
|
|
|||
Foreign currency translation adjustments
|
17,860
|
|
|
547
|
|
|
17,313
|
|
|||
Other comprehensive income (loss)
|
$
|
132,986
|
|
|
$
|
15,013
|
|
|
$
|
117,973
|
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
32
|
|
|
March 31, 2017
|
||||||||||||||||||
Condensed Consolidating Balance Sheet
|
ACGL (Parent Guarantor)
|
|
Arch-U.S. (Subsidiary Issuer)
|
|
Other ACGL Subsidiaries
|
|
Consolidating Adjustments and Eliminations
|
|
ACGL Consolidated
|
|||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total investments
|
$
|
256
|
|
|
$
|
41,715
|
|
|
$
|
20,227,399
|
|
|
$
|
(14,700
|
)
|
|
$
|
20,254,670
|
|
|
Cash
|
10,177
|
|
|
42,745
|
|
|
650,832
|
|
|
—
|
|
|
703,754
|
|
||||||
Investments in subsidiaries
|
8,992,903
|
|
|
3,843,774
|
|
|
—
|
|
|
(12,836,677
|
)
|
|
—
|
|
||||||
Due from subsidiaries and affiliates
|
1,626
|
|
|
52,032
|
|
|
1,868,171
|
|
|
(1,921,829
|
)
|
|
—
|
|
||||||
Premiums receivable
|
—
|
|
|
—
|
|
|
1,891,983
|
|
|
(637,935
|
)
|
|
1,254,048
|
|
||||||
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses
|
—
|
|
|
—
|
|
|
6,209,021
|
|
|
(4,075,873
|
)
|
|
2,133,148
|
|
||||||
Contractholder receivables
|
—
|
|
|
—
|
|
|
1,766,340
|
|
|
—
|
|
|
1,766,340
|
|
||||||
Ceded unearned premiums
|
—
|
|
|
—
|
|
|
2,201,994
|
|
|
(1,260,071
|
)
|
|
941,923
|
|
||||||
Deferred acquisition costs
|
—
|
|
|
—
|
|
|
638,415
|
|
|
(150,490
|
)
|
|
487,925
|
|
||||||
Goodwill and intangible assets
|
—
|
|
|
—
|
|
|
750,315
|
|
|
—
|
|
|
750,315
|
|
||||||
Other assets
|
14,730
|
|
|
55,658
|
|
|
1,893,742
|
|
|
(164,027
|
)
|
|
1,800,103
|
|
||||||
|
Total assets
|
$
|
9,019,692
|
|
|
$
|
4,035,924
|
|
|
$
|
38,098,212
|
|
|
$
|
(21,061,602
|
)
|
|
$
|
30,092,226
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Liabilities
|
|
|
|
|
|
|
|
|
|
|||||||||||
Reserve for losses and loss adjustment expenses
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
14,337,192
|
|
|
$
|
(4,040,371
|
)
|
|
$
|
10,296,821
|
|
|
Unearned premiums
|
—
|
|
|
—
|
|
|
4,891,330
|
|
|
(1,260,071
|
)
|
|
3,631,259
|
|
||||||
Reinsurance balances payable
|
—
|
|
|
—
|
|
|
959,221
|
|
|
(637,936
|
)
|
|
321,285
|
|
||||||
Contractholder payables
|
—
|
|
|
—
|
|
|
1,766,340
|
|
|
—
|
|
|
1,766,340
|
|
||||||
Collateral held for insured obligations
|
—
|
|
|
—
|
|
|
327,161
|
|
|
|
|
327,161
|
|
|||||||
Senior notes
|
296,979
|
|
|
494,548
|
|
|
940,883
|
|
|
—
|
|
|
1,732,410
|
|
||||||
Revolving credit agreement borrowings
|
100,000
|
|
|
—
|
|
|
634,961
|
|
|
—
|
|
|
734,961
|
|
||||||
Due to subsidiaries and affiliates
|
2,044
|
|
|
541,400
|
|
|
1,378,384
|
|
|
(1,921,828
|
)
|
|
—
|
|
||||||
Other liabilities
|
14,825
|
|
|
61,055
|
|
|
1,876,454
|
|
|
(350,019
|
)
|
|
1,602,315
|
|
||||||
|
Total liabilities
|
413,848
|
|
|
1,097,003
|
|
|
27,111,926
|
|
|
(8,210,225
|
)
|
|
20,412,552
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Redeemable noncontrolling interests
|
—
|
|
|
—
|
|
|
220,344
|
|
|
(14,700
|
)
|
|
205,644
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total shareholders’ equity available to Arch
|
8,605,844
|
|
|
2,938,921
|
|
|
9,897,756
|
|
|
(12,836,677
|
)
|
|
8,605,844
|
|
||||||
Non-redeemable noncontrolling interests
|
—
|
|
|
—
|
|
|
868,186
|
|
|
—
|
|
|
868,186
|
|
||||||
|
Total shareholders’ equity
|
8,605,844
|
|
|
2,938,921
|
|
|
10,765,942
|
|
|
(12,836,677
|
)
|
|
9,474,030
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total liabilities, noncontrolling interests and shareholders’ equity
|
$
|
9,019,692
|
|
|
$
|
4,035,924
|
|
|
$
|
38,098,212
|
|
|
$
|
(21,061,602
|
)
|
|
$
|
30,092,226
|
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
33
|
|
|
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
|
|
||||||
Goodwill and intangible assets
|
—
|
|
|
—
|
|
|
781,553
|
|
|
—
|
|
|
781,553
|
|
||||||
Other assets
|
15,725
|
|
|
49,244
|
|
|
1,901,786
|
|
|
(149,928
|
)
|
|
1,816,827
|
|
||||||
|
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 2017 FIRST QUARTER FORM 10-Q
|
34
|
|
|
Three Months Ended March 31, 2017
|
||||||||||||||||||
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
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,117,017
|
|
|
$
|
—
|
|
|
$
|
1,117,017
|
|
|
Net investment income
|
5
|
|
|
816
|
|
|
137,981
|
|
|
(20,928
|
)
|
|
117,874
|
|
||||||
Net realized gains (losses)
|
—
|
|
|
—
|
|
|
34,153
|
|
|
—
|
|
|
34,153
|
|
||||||
Net impairment losses recognized in earnings
|
—
|
|
|
—
|
|
|
(1,807
|
)
|
|
—
|
|
|
(1,807
|
)
|
||||||
Other underwriting income
|
—
|
|
|
—
|
|
|
4,633
|
|
|
—
|
|
|
4,633
|
|
||||||
Equity in net income (loss) of investment funds accounted for using the equity method
|
—
|
|
|
—
|
|
|
48,088
|
|
|
—
|
|
|
48,088
|
|
||||||
Other income (loss)
|
171
|
|
|
—
|
|
|
(953
|
)
|
|
—
|
|
|
(782
|
)
|
||||||
|
Total revenues
|
176
|
|
|
816
|
|
|
1,339,112
|
|
|
(20,928
|
)
|
|
1,319,176
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Expenses
|
|
|
|
|
|
|
|
|
|
|||||||||||
Losses and loss adjustment expenses
|
—
|
|
|
—
|
|
|
552,570
|
|
|
—
|
|
|
552,570
|
|
||||||
Acquisition expenses
|
—
|
|
|
—
|
|
|
182,289
|
|
|
—
|
|
|
182,289
|
|
||||||
Other operating expenses
|
—
|
|
|
—
|
|
|
174,719
|
|
|
—
|
|
|
174,719
|
|
||||||
Corporate expenses
|
17,247
|
|
|
2,008
|
|
|
8,537
|
|
|
—
|
|
|
27,792
|
|
||||||
Amortization of intangible assets
|
—
|
|
|
—
|
|
|
31,294
|
|
|
—
|
|
|
31,294
|
|
||||||
Interest expense
|
6,015
|
|
|
11,930
|
|
|
31,336
|
|
|
(20,605
|
)
|
|
28,676
|
|
||||||
Net foreign exchange (gains) losses
|
—
|
|
|
—
|
|
|
15,348
|
|
|
4,056
|
|
|
19,404
|
|
||||||
|
Total expenses
|
23,262
|
|
|
13,938
|
|
|
996,093
|
|
|
(16,549
|
)
|
|
1,016,744
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Income (loss) before income taxes
|
(23,086
|
)
|
|
(13,122
|
)
|
|
343,019
|
|
|
(4,379
|
)
|
|
302,432
|
|
||||||
Income tax (expense) benefit
|
—
|
|
|
4,873
|
|
|
(33,270
|
)
|
|
—
|
|
|
(28,397
|
)
|
||||||
Income (loss) before equity in net income of subsidiaries
|
(23,086
|
)
|
|
(8,249
|
)
|
|
309,749
|
|
|
(4,379
|
)
|
|
274,035
|
|
||||||
Equity in net income of subsidiaries
|
276,213
|
|
|
77,373
|
|
|
—
|
|
|
(353,586
|
)
|
|
—
|
|
||||||
Net income
|
253,127
|
|
|
69,124
|
|
|
309,749
|
|
|
(357,965
|
)
|
|
274,035
|
|
||||||
Net (income) loss attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
(21,231
|
)
|
|
323
|
|
|
(20,908
|
)
|
||||||
Net income available to Arch
|
253,127
|
|
|
69,124
|
|
|
288,518
|
|
|
(357,642
|
)
|
|
253,127
|
|
||||||
Preferred dividends
|
(11,218
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(11,218
|
)
|
||||||
Net income available to Arch common shareholders
|
$
|
241,909
|
|
|
$
|
69,124
|
|
|
$
|
288,518
|
|
|
$
|
(357,642
|
)
|
|
$
|
241,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Comprehensive income (loss) available to Arch
|
$
|
351,991
|
|
|
$
|
87,781
|
|
|
$
|
224,173
|
|
|
$
|
(311,954
|
)
|
|
$
|
351,991
|
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
35
|
|
|
Three Months Ended March 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
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
951,579
|
|
|
$
|
—
|
|
|
$
|
951,579
|
|
|
Net investment income
|
1
|
|
|
773
|
|
|
100,261
|
|
|
(7,300
|
)
|
|
93,735
|
|
||||||
Net realized gains (losses)
|
—
|
|
|
—
|
|
|
37,324
|
|
|
—
|
|
|
37,324
|
|
||||||
Net impairment losses recognized in earnings
|
—
|
|
|
—
|
|
|
(7,639
|
)
|
|
—
|
|
|
(7,639
|
)
|
||||||
Other underwriting income
|
—
|
|
|
—
|
|
|
5,319
|
|
|
(272
|
)
|
|
5,047
|
|
||||||
Equity in net income (loss) of investment funds accounted for using the equity method
|
—
|
|
|
—
|
|
|
6,655
|
|
|
—
|
|
|
6,655
|
|
||||||
Other income (loss)
|
206
|
|
|
—
|
|
|
(231
|
)
|
|
—
|
|
|
(25
|
)
|
||||||
|
Total revenues
|
207
|
|
|
773
|
|
|
1,093,268
|
|
|
(7,572
|
)
|
|
1,086,676
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Expenses
|
|
|
|
|
|
|
|
|
|
|||||||||||
Losses and loss adjustment expenses
|
—
|
|
|
—
|
|
|
522,949
|
|
|
—
|
|
|
522,949
|
|
||||||
Acquisition expenses
|
—
|
|
|
—
|
|
|
167,838
|
|
|
—
|
|
|
167,838
|
|
||||||
Other operating expenses
|
—
|
|
|
—
|
|
|
150,148
|
|
|
—
|
|
|
150,148
|
|
||||||
Corporate expenses
|
9,355
|
|
|
582
|
|
|
(554
|
)
|
|
—
|
|
|
9,383
|
|
||||||
Amortization of intangible assets
|
—
|
|
|
—
|
|
|
4,748
|
|
|
—
|
|
|
4,748
|
|
||||||
Interest expense
|
5,934
|
|
|
6,672
|
|
|
10,752
|
|
|
(7,251
|
)
|
|
16,107
|
|
||||||
Net foreign exchange (gains) losses
|
—
|
|
|
—
|
|
|
16,495
|
|
|
7,071
|
|
|
23,566
|
|
||||||
|
Total expenses
|
15,289
|
|
|
7,254
|
|
|
872,376
|
|
|
(180
|
)
|
|
894,739
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Income (loss) before income taxes
|
(15,082
|
)
|
|
(6,481
|
)
|
|
220,892
|
|
|
(7,392
|
)
|
|
191,937
|
|
||||||
Income tax (expense) benefit
|
—
|
|
|
2,244
|
|
|
(18,554
|
)
|
|
—
|
|
|
(16,310
|
)
|
||||||
Income (loss) before equity in net income of subsidiaries
|
(15,082
|
)
|
|
(4,237
|
)
|
|
202,338
|
|
|
(7,392
|
)
|
|
175,627
|
|
||||||
Equity in net income of subsidiaries
|
169,880
|
|
|
22,866
|
|
|
—
|
|
|
(192,746
|
)
|
|
—
|
|
||||||
Net income
|
154,798
|
|
|
18,629
|
|
|
202,338
|
|
|
(200,138
|
)
|
|
175,627
|
|
||||||
Net (income) loss attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
(21,150
|
)
|
|
321
|
|
|
(20,829
|
)
|
||||||
Net income available to Arch
|
154,798
|
|
|
18,629
|
|
|
181,188
|
|
|
(199,817
|
)
|
|
154,798
|
|
||||||
Preferred dividends
|
(5,484
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,484
|
)
|
||||||
Net income available to Arch common shareholders
|
$
|
149,314
|
|
|
$
|
18,629
|
|
|
$
|
181,188
|
|
|
$
|
(199,817
|
)
|
|
$
|
149,314
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Comprehensive income (loss) available to Arch
|
$
|
272,929
|
|
|
$
|
58,649
|
|
|
$
|
292,251
|
|
|
$
|
(350,900
|
)
|
|
$
|
272,929
|
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
36
|
|
|
Three Months Ended March 31, 2017
|
||||||||||||||||||||
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
|
$
|
701
|
|
|
$
|
(3,257
|
)
|
|
$
|
264,088
|
|
|
$
|
(53,414
|
)
|
|
$
|
208,118
|
|
||
Investing Activities
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Purchases of fixed maturity investments
|
—
|
|
|
—
|
|
|
(10,476,918
|
)
|
|
—
|
|
|
(10,476,918
|
)
|
||||||||
Purchases of equity securities
|
—
|
|
|
—
|
|
|
(143,833
|
)
|
|
—
|
|
|
(143,833
|
)
|
||||||||
Purchases of other investments
|
—
|
|
|
—
|
|
|
(427,039
|
)
|
|
—
|
|
|
(427,039
|
)
|
||||||||
Proceeds from the sales of fixed maturity investments
|
—
|
|
|
—
|
|
|
10,386,746
|
|
|
—
|
|
|
10,386,746
|
|
||||||||
Proceeds from the sales of equity securities
|
—
|
|
|
—
|
|
|
253,347
|
|
|
—
|
|
|
253,347
|
|
||||||||
Proceeds from the sales, redemptions and maturities of other investments
|
—
|
|
|
—
|
|
|
317,518
|
|
|
—
|
|
|
317,518
|
|
||||||||
Proceeds from redemptions and maturities of fixed maturity investments
|
—
|
|
|
—
|
|
|
174,718
|
|
|
—
|
|
|
174,718
|
|
||||||||
Net settlements of derivative instruments
|
—
|
|
|
—
|
|
|
(3,921
|
)
|
|
—
|
|
|
(3,921
|
)
|
||||||||
Net (purchases) sales of short-term investments
|
2,356
|
|
|
(43
|
)
|
|
(400,164
|
)
|
|
—
|
|
|
(397,851
|
)
|
||||||||
Change in cash collateral related to securities lending
|
—
|
|
|
—
|
|
|
180,946
|
|
|
—
|
|
|
180,946
|
|
||||||||
Contributions to subsidiaries
|
—
|
|
|
(25,900
|
)
|
|
(60,050
|
)
|
|
85,950
|
|
|
—
|
|
||||||||
Purchases of fixed assets
|
—
|
|
|
(10
|
)
|
|
(5,184
|
)
|
|
—
|
|
|
(5,194
|
)
|
||||||||
Other
|
20,641
|
|
|
—
|
|
|
19,603
|
|
|
(20,641
|
)
|
|
19,603
|
|
||||||||
|
Net Cash Provided By (Used For) Investing Activities
|
22,997
|
|
|
(25,953
|
)
|
|
(184,231
|
)
|
|
65,309
|
|
|
(121,878
|
)
|
|||||||
Financing Activities
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Proceeds from common shares issued, net
|
(3,990
|
)
|
|
—
|
|
|
85,950
|
|
|
(85,950
|
)
|
|
(3,990
|
)
|
||||||||
Proceeds from borrowings
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Repayments of borrowings
|
—
|
|
|
—
|
|
|
(22,000
|
)
|
|
—
|
|
|
(22,000
|
)
|
||||||||
Change in cash collateral related to securities lending
|
—
|
|
|
—
|
|
|
(180,946
|
)
|
|
—
|
|
|
(180,946
|
)
|
||||||||
Dividends paid to redeemable noncontrolling interests
|
—
|
|
|
—
|
|
|
(4,816
|
)
|
|
319
|
|
|
(4,497
|
)
|
||||||||
Dividends paid to parent (1)
|
—
|
|
|
—
|
|
|
(53,095
|
)
|
|
53,095
|
|
|
—
|
|
||||||||
Other
|
—
|
|
|
—
|
|
|
(25,659
|
)
|
|
20,641
|
|
|
(5,018
|
)
|
||||||||
Preferred dividends paid
|
(11,218
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(11,218
|
)
|
||||||||
|
Net Cash Provided By (Used For) Financing Activities
|
(15,208
|
)
|
|
—
|
|
|
(200,566
|
)
|
|
(11,895
|
)
|
|
(227,669
|
)
|
|||||||
Effects of exchange rates changes on foreign currency cash
|
—
|
|
|
—
|
|
|
2,241
|
|
|
—
|
|
|
2,241
|
|
||||||||
Increase (decrease) in cash
|
8,490
|
|
|
(29,210
|
)
|
|
(118,468
|
)
|
|
—
|
|
|
(139,188
|
)
|
||||||||
Cash beginning of year
|
1,687
|
|
|
71,955
|
|
|
769,300
|
|
|
—
|
|
|
842,942
|
|
||||||||
Cash end of period
|
$
|
10,177
|
|
|
$
|
42,745
|
|
|
$
|
650,832
|
|
|
$
|
—
|
|
|
$
|
703,754
|
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
37
|
|
|
Three Months Ended March 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
|
$
|
83,892
|
|
|
$
|
(4,740
|
)
|
|
$
|
340,558
|
|
|
$
|
(97,167
|
)
|
|
$
|
322,543
|
|
||
Investing Activities
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Purchases of fixed maturity investments
|
—
|
|
|
—
|
|
|
(8,133,537
|
)
|
|
—
|
|
|
(8,133,537
|
)
|
||||||||
Purchases of equity securities
|
—
|
|
|
—
|
|
|
(128,263
|
)
|
|
—
|
|
|
(128,263
|
)
|
||||||||
Purchases of other investments
|
—
|
|
|
—
|
|
|
(305,198
|
)
|
|
—
|
|
|
(305,198
|
)
|
||||||||
Proceeds from the sales of fixed maturity investments
|
—
|
|
|
—
|
|
|
7,827,536
|
|
|
—
|
|
|
7,827,536
|
|
||||||||
Proceeds from the sales of equity securities
|
—
|
|
|
—
|
|
|
216,012
|
|
|
—
|
|
|
216,012
|
|
||||||||
Proceeds from the sales, redemptions and maturities of other investments
|
—
|
|
|
—
|
|
|
211,125
|
|
|
—
|
|
|
211,125
|
|
||||||||
Proceeds from redemptions and maturities of fixed maturity investments
|
—
|
|
|
—
|
|
|
163,894
|
|
|
—
|
|
|
163,894
|
|
||||||||
Net settlements of derivative instruments
|
—
|
|
|
—
|
|
|
21,091
|
|
|
—
|
|
|
21,091
|
|
||||||||
Net (purchases) sales of short-term investments
|
(60
|
)
|
|
(30
|
)
|
|
(65,504
|
)
|
|
—
|
|
|
(65,594
|
)
|
||||||||
Change in cash collateral related to securities lending
|
—
|
|
|
—
|
|
|
(43,118
|
)
|
|
—
|
|
|
(43,118
|
)
|
||||||||
Contributions to subsidiaries
|
(3,300
|
)
|
|
—
|
|
|
(2,779
|
)
|
|
6,079
|
|
|
—
|
|
||||||||
Purchases of fixed assets
|
(8
|
)
|
|
—
|
|
|
(3,944
|
)
|
|
—
|
|
|
(3,952
|
)
|
||||||||
Other
|
—
|
|
|
—
|
|
|
6,737
|
|
|
—
|
|
|
6,737
|
|
||||||||
|
Net Cash Provided By (Used For) Investing Activities
|
(3,368
|
)
|
|
(30
|
)
|
|
(235,948
|
)
|
|
6,079
|
|
|
(233,267
|
)
|
|||||||
Financing Activities
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Purchases of common shares under share repurchase program
|
(75,256
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(75,256
|
)
|
||||||||
Proceeds from common shares issued, net
|
202
|
|
|
—
|
|
|
6,079
|
|
|
(6,079
|
)
|
|
202
|
|
||||||||
Repayments of borrowings
|
—
|
|
|
—
|
|
|
(74,171
|
)
|
|
—
|
|
|
(74,171
|
)
|
||||||||
Change in cash collateral related to securities lending
|
—
|
|
|
—
|
|
|
43,118
|
|
|
—
|
|
|
43,118
|
|
||||||||
Dividends paid to redeemable noncontrolling interests
|
—
|
|
|
—
|
|
|
(4,816
|
)
|
|
319
|
|
|
(4,497
|
)
|
||||||||
Dividends paid to parent (1)
|
—
|
|
|
—
|
|
|
(96,848
|
)
|
|
96,848
|
|
|
—
|
|
||||||||
Other
|
—
|
|
|
184
|
|
|
28,931
|
|
|
—
|
|
|
29,115
|
|
||||||||
Preferred dividends paid
|
(5,484
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,484
|
)
|
||||||||
|
Net Cash Provided By (Used For) Financing Activities
|
(80,538
|
)
|
|
184
|
|
|
(97,707
|
)
|
|
91,088
|
|
|
(86,973
|
)
|
|||||||
Effects of exchange rates changes on foreign currency cash
|
—
|
|
|
—
|
|
|
2,332
|
|
|
—
|
|
|
2,332
|
|
||||||||
Increase (decrease) in cash
|
(14
|
)
|
|
(4,586
|
)
|
|
9,235
|
|
|
—
|
|
|
4,635
|
|
||||||||
Cash beginning of year
|
6,809
|
|
|
17,023
|
|
|
529,494
|
|
|
—
|
|
|
553,326
|
|
||||||||
Cash end of period
|
$
|
6,795
|
|
|
$
|
12,437
|
|
|
$
|
538,729
|
|
|
$
|
—
|
|
|
$
|
557,961
|
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
38
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
39
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
40
|
|
Arch
Portfolio
|
|
Benchmark
Return
|
||
2017 First Quarter
|
1.70
|
%
|
|
1.49
|
%
|
2016 First Quarter
|
1.82
|
%
|
|
2.43
|
%
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
41
|
|
%
|
|
BoAML 1-10 Year U.S. Corporate & All Yankees, A - AAA Rated Index
|
20.00
|
%
|
BoAML 1-5 Year U.S. Treasury Index
|
13.00
|
|
BoAML 1-10 Year U.S. Municipal Securities Index
|
17.00
|
|
BoAML 3-5 Year Fixed Rate Asset Backed Securities Index
|
7.00
|
|
BoAML 5-10 Year U.S. Treasury Index
|
5.00
|
|
Barclays CMBS Inv. Grade, AAA Rated Index
|
5.00
|
|
MSCI All Country World Gross Total Return Index
|
5.00
|
|
BoAML German Government Index
|
4.50
|
|
BoAML U.S. Mortgage Backed Securities Index
|
4.00
|
|
Hedge Fund Research HFRX Fixed Income Credit Index
|
2.50
|
|
Hedge Fund Research HFRX Equal Weighted Strategies
|
2.50
|
|
BoAML U.S. High Yield Constrained Index
|
2.50
|
|
BoAML 1-5 Year U.K. Gilt Index
|
2.50
|
|
BoAML 1-10 Year Australian Governments Index
|
2.50
|
|
S&P Leveraged Loan Index
|
2.50
|
|
BoAML 0-3 Month U.S. Treasury Bill Index
|
2.00
|
|
BoAML 1-5 Year Canada Government Index
|
1.50
|
|
BoAML U.K. Gilt 25+ Year Index
|
0.50
|
|
BoAML 20+ Year Canada Government Index
|
0.50
|
|
Total
|
100.00
|
%
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
42
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
43
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2017
|
|
2016
|
||||
Net income available to Arch common shareholders
|
$
|
241,909
|
|
|
$
|
149,314
|
|
Net realized (gains) losses
|
(29,134
|
)
|
|
(32,464
|
)
|
||
Net impairment losses recognized in earnings
|
1,807
|
|
|
7,639
|
|
||
Equity in net (income) loss of investment funds accounted for using the equity method
|
(48,088
|
)
|
|
(6,655
|
)
|
||
Net foreign exchange (gains) losses
|
19,796
|
|
|
22,209
|
|
||
UGC transaction costs and other
|
15,584
|
|
|
—
|
|
||
Income tax (benefit) expense (1)
|
(3,909
|
)
|
|
5,699
|
|
||
After-tax operating income available to Arch common shareholders
|
$
|
197,965
|
|
|
$
|
145,742
|
|
|
|
|
|
||||
Beginning common shareholders’ equity
|
$
|
7,481,163
|
|
|
$
|
5,841,542
|
|
Ending common shareholders’ equity
|
7,833,289
|
|
|
6,050,248
|
|
||
Average common shareholders’ equity
|
$
|
7,657,226
|
|
|
$
|
5,945,895
|
|
|
|
|
|
||||
Annualized return on average common equity %
|
12.6
|
|
|
10.0
|
|
||
Annualized operating return on average
common equity %
|
10.3
|
|
|
9.8
|
|
(1)
|
Income tax on net realized gains or losses, net impairment losses recognized in earnings, equity in net income or loss of investment funds accounted for using the equity method, net foreign exchange gains or losses and UGC transaction costs and other reflects the relative mix reported by jurisdiction and the varying tax rates in each jurisdiction.
|
|
Three Months Ended March 31,
|
|||||||||
|
2017
|
|
2016
|
|
% Change
|
|||||
Gross premiums written
|
$
|
782,281
|
|
|
$
|
798,553
|
|
|
(2.0
|
)
|
Premiums ceded
|
(234,095
|
)
|
|
(248,789
|
)
|
|
|
|||
Net premiums written
|
548,186
|
|
|
549,764
|
|
|
(0.3
|
)
|
||
Change in unearned premiums
|
(42,540
|
)
|
|
(36,675
|
)
|
|
|
|||
Net premiums earned
|
505,646
|
|
|
513,089
|
|
|
(1.5
|
)
|
||
Other underwriting income
|
—
|
|
|
—
|
|
|
|
|
||
Losses and loss adjustment expenses
|
(332,641
|
)
|
|
(323,609
|
)
|
|
|
|
||
Acquisition expenses
|
(74,868
|
)
|
|
(74,348
|
)
|
|
|
|
||
Other operating expenses
|
(88,126
|
)
|
|
(85,058
|
)
|
|
|
|
||
Underwriting income
|
$
|
10,011
|
|
|
$
|
30,074
|
|
|
(66.7
|
)
|
|
|
|
|
|
|
|||||
Underwriting Ratios
|
|
|
|
|
|
|
% Point
Change |
|||
Loss ratio
|
65.8
|
%
|
|
63.1
|
%
|
|
2.7
|
|
||
Acquisition expense ratio
|
14.8
|
%
|
|
14.5
|
%
|
|
0.3
|
|
||
Other operating expense ratio
|
17.4
|
%
|
|
16.6
|
%
|
|
0.8
|
|
||
Combined ratio
|
98.0
|
%
|
|
94.2
|
%
|
|
3.8
|
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
44
|
|
Three Months Ended March 31,
|
||||||||||||
|
2017
|
|
2016
|
||||||||||
|
Amount
|
|
%
|
|
Amount
|
|
%
|
||||||
Professional lines
|
$
|
108,468
|
|
|
19.8
|
|
|
$
|
109,467
|
|
|
19.9
|
|
Construction and national accounts
|
99,977
|
|
|
18.2
|
|
|
104,474
|
|
|
19.0
|
|
||
Programs
|
99,957
|
|
|
18.2
|
|
|
89,784
|
|
|
16.3
|
|
||
Travel, accident and health
|
65,528
|
|
|
12.0
|
|
|
57,263
|
|
|
10.4
|
|
||
Excess and surplus casualty
|
45,832
|
|
|
8.4
|
|
|
53,657
|
|
|
9.8
|
|
||
Property, energy, marine and aviation
|
40,104
|
|
|
7.3
|
|
|
49,975
|
|
|
9.1
|
|
||
Lenders products
|
24,705
|
|
|
4.5
|
|
|
24,784
|
|
|
4.5
|
|
||
Other
|
63,615
|
|
|
11.6
|
|
|
60,360
|
|
|
11.0
|
|
||
Total
|
$
|
548,186
|
|
|
100.0
|
|
|
$
|
549,764
|
|
|
100.0
|
|
|
Three Months Ended March 31,
|
||||||||||||
|
2017
|
|
2016
|
||||||||||
|
Amount
|
|
%
|
|
Amount
|
|
%
|
||||||
Professional lines
|
$
|
108,638
|
|
|
21.5
|
|
|
$
|
104,944
|
|
|
20.5
|
|
Construction and national accounts
|
77,423
|
|
|
15.3
|
|
|
77,043
|
|
|
15.0
|
|
||
Programs
|
85,180
|
|
|
16.8
|
|
|
98,501
|
|
|
19.2
|
|
||
Travel, accident and health
|
58,481
|
|
|
11.6
|
|
|
47,545
|
|
|
9.3
|
|
||
Excess and surplus casualty
|
51,007
|
|
|
10.1
|
|
|
54,965
|
|
|
10.7
|
|
||
Property, energy, marine and aviation
|
38,078
|
|
|
7.5
|
|
|
49,037
|
|
|
9.6
|
|
||
Lenders products
|
24,099
|
|
|
4.8
|
|
|
24,402
|
|
|
4.8
|
|
||
Other
|
62,740
|
|
|
12.4
|
|
|
56,652
|
|
|
11.0
|
|
||
Total
|
$
|
505,646
|
|
|
100.0
|
|
|
$
|
513,089
|
|
|
100.0
|
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
45
|
|
Three Months Ended
|
||||
|
March 31,
|
||||
|
2017
|
|
2016
|
||
Current year
|
66.2
|
%
|
|
64.3
|
%
|
Prior period reserve development
|
(0.4
|
)%
|
|
(1.2
|
)%
|
Loss ratio
|
65.8
|
%
|
|
63.1
|
%
|
|
Three Months Ended March 31,
|
|||||||||
|
2017
|
|
2016
|
|
% Change
|
|||||
Gross premiums written
|
$
|
475,782
|
|
|
$
|
481,390
|
|
|
(1.2
|
)
|
Premiums ceded
|
(166,092
|
)
|
|
(160,566
|
)
|
|
|
|||
Net premiums written
|
309,690
|
|
|
320,824
|
|
|
(3.5
|
)
|
||
Change in unearned premiums
|
(64,839
|
)
|
|
(59,616
|
)
|
|
|
|||
Net premiums earned
|
244,851
|
|
|
261,208
|
|
|
(6.3
|
)
|
||
Other underwriting income
|
(306
|
)
|
|
325
|
|
|
|
|
||
Losses and loss adjustment expenses
|
(105,454
|
)
|
|
(111,598
|
)
|
|
|
|
||
Acquisition expenses
|
(46,147
|
)
|
|
(54,758
|
)
|
|
|
|
||
Other operating expenses
|
(37,533
|
)
|
|
(36,258
|
)
|
|
|
|
||
Underwriting income
|
$
|
55,411
|
|
|
$
|
58,919
|
|
|
(6.0
|
)
|
|
|
|
|
|
|
|||||
Underwriting Ratios
|
|
|
|
|
% Point
Change |
|||||
Loss ratio
|
43.1
|
%
|
|
42.7
|
%
|
|
0.4
|
|
||
Acquisition expense ratio
|
18.8
|
%
|
|
21.0
|
%
|
|
(2.2
|
)
|
||
Other operating expense ratio
|
15.3
|
%
|
|
13.9
|
%
|
|
1.4
|
|
||
Combined ratio
|
77.2
|
%
|
|
77.6
|
%
|
|
(0.4
|
)
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
46
|
|
Three Months Ended March 31,
|
||||||||||||
|
2017
|
|
2016
|
||||||||||
|
Amount
|
|
%
|
|
Amount
|
|
%
|
||||||
Other specialty
|
$
|
114,418
|
|
|
36.9
|
|
|
$
|
100,820
|
|
|
31.4
|
|
Casualty
|
110,620
|
|
|
35.7
|
|
|
126,483
|
|
|
39.4
|
|
||
Property excluding property catastrophe
|
75,387
|
|
|
24.3
|
|
|
73,723
|
|
|
23.0
|
|
||
Property catastrophe
|
(7,477
|
)
|
|
(2.4
|
)
|
|
(2,295
|
)
|
|
(0.7
|
)
|
||
Marine and aviation
|
9,541
|
|
|
3.1
|
|
|
17,540
|
|
|
5.5
|
|
||
Other
|
7,201
|
|
|
2.3
|
|
|
4,553
|
|
|
1.4
|
|
||
Total
|
$
|
309,690
|
|
|
100.0
|
|
|
$
|
320,824
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
||||||
Pro rata
|
$
|
129,016
|
|
|
41.7
|
|
|
$
|
112,209
|
|
|
35.0
|
|
Excess of loss
|
180,674
|
|
|
58.3
|
|
|
208,615
|
|
|
65.0
|
|
||
Total
|
$
|
309,690
|
|
|
100.0
|
|
|
$
|
320,824
|
|
|
100.0
|
|
|
Three Months Ended March 31,
|
||||||||||||
|
2017
|
|
2016
|
||||||||||
|
Amount
|
|
%
|
|
Amount
|
|
%
|
||||||
Other specialty
|
$
|
69,965
|
|
|
28.6
|
|
|
$
|
74,249
|
|
|
28.4
|
|
Casualty
|
72,968
|
|
|
29.8
|
|
|
76,053
|
|
|
29.1
|
|
||
Property excluding property catastrophe
|
69,852
|
|
|
28.5
|
|
|
71,953
|
|
|
27.5
|
|
||
Property catastrophe
|
16,177
|
|
|
6.6
|
|
|
17,953
|
|
|
6.9
|
|
||
Marine and aviation
|
9,490
|
|
|
3.9
|
|
|
17,878
|
|
|
6.8
|
|
||
Other
|
6,399
|
|
|
2.6
|
|
|
3,122
|
|
|
1.2
|
|
||
Total
|
$
|
244,851
|
|
|
100.0
|
|
|
$
|
261,208
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
||||||
Pro rata
|
$
|
133,092
|
|
|
54.4
|
|
|
$
|
139,693
|
|
|
53.5
|
|
Excess of loss
|
111,759
|
|
|
45.6
|
|
|
121,515
|
|
|
46.5
|
|
||
Total
|
$
|
244,851
|
|
|
100.0
|
|
|
$
|
261,208
|
|
|
100.0
|
|
|
Three Months Ended
|
||||
|
March 31,
|
||||
|
2017
|
|
2016
|
||
Current year
|
66.5
|
%
|
|
60.8
|
%
|
Prior period reserve development
|
(23.4
|
)%
|
|
(18.1
|
)%
|
Loss ratio
|
43.1
|
%
|
|
42.7
|
%
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
47
|
|
Three Months Ended March 31,
|
|||||||||
|
2017
|
|
2016
|
|
% Change
|
|||||
Gross premiums written
|
$
|
348,623
|
|
|
$
|
111,280
|
|
|
213.3
|
|
Premiums ceded
|
(73,925
|
)
|
|
(4,767
|
)
|
|
|
|||
Net premiums written
|
274,698
|
|
|
106,513
|
|
|
157.9
|
|
||
Change in unearned premiums
|
(30,175
|
)
|
|
(44,748
|
)
|
|
|
|||
Net premiums earned
|
244,523
|
|
|
61,765
|
|
|
295.9
|
|
||
Other underwriting income
|
4,123
|
|
|
3,793
|
|
|
|
|
||
Losses and loss adjustment expenses
|
(29,065
|
)
|
|
(8,629
|
)
|
|
|
|
||
Acquisition expenses
|
(28,766
|
)
|
|
(5,793
|
)
|
|
|
|
||
Other operating expenses
|
(41,870
|
)
|
|
(23,494
|
)
|
|
|
|
||
Underwriting income
|
$
|
148,945
|
|
|
$
|
27,642
|
|
|
438.8
|
|
|
|
|
|
|
|
|||||
Underwriting Ratios
|
|
|
|
|
|
|
% Point
Change |
|||
Loss ratio
|
11.9
|
%
|
|
14.0
|
%
|
|
(2.1
|
)
|
||
Acquisition expense ratio
|
11.8
|
%
|
|
9.4
|
%
|
|
2.4
|
|
||
Other operating expense ratio
|
17.1
|
%
|
|
38.0
|
%
|
|
(20.9
|
)
|
||
Combined ratio
|
40.8
|
%
|
|
61.4
|
%
|
|
(20.6
|
)
|
|
Three Months Ended March 31,
|
||||||||||||
|
2017
|
|
2016
|
||||||||||
|
Amount
|
|
%
|
|
Amount
|
|
%
|
||||||
Client location:
|
|
|
|
|
|
|
|
||||||
United States
|
$
|
241,136
|
|
|
87.8
|
|
|
$
|
55,803
|
|
|
52.4
|
|
Other
|
33,562
|
|
|
12.2
|
|
|
50,710
|
|
|
47.6
|
|
||
Total
|
$
|
274,698
|
|
|
100.0
|
|
|
$
|
106,513
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
||||||
Underwriting location:
|
|
|
|
|
|
|
|
||||||
United States
|
$
|
216,729
|
|
|
78.9
|
|
|
$
|
35,330
|
|
|
33.2
|
|
Other
|
57,969
|
|
|
21.1
|
|
|
71,183
|
|
|
66.8
|
|
||
Total
|
$
|
274,698
|
|
|
100.0
|
|
|
$
|
106,513
|
|
|
100.0
|
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
48
|
(U.S. Dollars in millions)
|
Three Months Ended March 31,
|
||||||||||||
2017
|
|
2016
|
|||||||||||
|
Amount
|
|
%
|
|
Amount
|
|
%
|
||||||
Total new insurance written (NIW) (1)
|
$
|
12,660
|
|
|
|
|
$
|
2,906
|
|
|
|
||
|
|
|
|
|
|
|
|
||||||
Credit quality (FICO):
|
|
|
|
|
|
|
|
||||||
>=740
|
$
|
7,184
|
|
|
56.7
|
|
|
$
|
1,808
|
|
|
62.2
|
|
680-739
|
4,615
|
|
|
36.5
|
|
|
959
|
|
|
33.0
|
|
||
620-679
|
861
|
|
|
6.8
|
|
|
139
|
|
|
4.8
|
|
||
Total
|
$
|
12,660
|
|
|
100.0
|
|
|
$
|
2,906
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
||||||
Loan-to-value (LTV):
|
|
|
|
|
|
|
|
||||||
95.01% and above
|
$
|
972
|
|
|
7.7
|
|
|
$
|
175
|
|
|
6.0
|
|
90.01% to 95.00%
|
5,985
|
|
|
47.3
|
|
|
1,233
|
|
|
42.4
|
|
||
85.01% to 90.00%
|
4,061
|
|
|
32.1
|
|
|
1,021
|
|
|
35.1
|
|
||
85.01% and below
|
1,642
|
|
|
13.0
|
|
|
477
|
|
|
16.4
|
|
||
Total
|
$
|
12,660
|
|
|
100.0
|
|
|
$
|
2,906
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
||||||
Monthly vs. single:
|
|
|
|
|
|
|
|
||||||
Monthly
|
$
|
10,368
|
|
|
81.9
|
|
|
$
|
2,189
|
|
|
75.3
|
|
Single
|
2,292
|
|
|
18.1
|
|
|
717
|
|
|
24.7
|
|
||
Total
|
$
|
12,660
|
|
|
100.0
|
|
|
$
|
2,906
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
||||||
Purchase vs. refinance:
|
|
|
|
|
|
|
|
||||||
Purchase
|
$
|
10,720
|
|
|
84.7
|
|
|
$
|
2,055
|
|
|
70.7
|
|
Refinance
|
1,940
|
|
|
15.3
|
|
|
851
|
|
|
29.3
|
|
||
Total
|
$
|
12,660
|
|
|
100.0
|
|
|
$
|
2,906
|
|
|
100.0
|
|
(1)
|
Represents the original principal balance of all loans that received coverage during the period.
|
|
Three Months Ended March 31,
|
||||||||||||
|
2017
|
|
2016
|
||||||||||
|
Amount
|
|
%
|
|
Amount
|
|
%
|
||||||
Client Location:
|
|
|
|
|
|
|
|
||||||
United States
|
$
|
236,031
|
|
|
96.5
|
|
|
$
|
57,132
|
|
|
92.5
|
|
Other
|
8,492
|
|
|
3.5
|
|
|
4,633
|
|
|
7.5
|
|
||
Total
|
$
|
244,523
|
|
|
100.0
|
|
|
$
|
61,765
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
||||||
Underwriting location:
|
|
|
|
|
|
|
|
||||||
United States
|
$
|
208,699
|
|
|
85.3
|
|
|
$
|
32,520
|
|
|
52.7
|
|
Other
|
35,824
|
|
|
14.7
|
|
|
29,245
|
|
|
47.3
|
|
||
Total
|
$
|
244,523
|
|
|
100.0
|
|
|
$
|
61,765
|
|
|
100.0
|
|
|
Three Months Ended
|
||||
|
March 31,
|
||||
|
2017
|
|
2016
|
||
Current year
|
21.5
|
%
|
|
18.4
|
%
|
Prior period reserve development
|
(9.6
|
)%
|
|
(4.4
|
)%
|
Loss ratio
|
11.9
|
%
|
|
14.0
|
%
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
49
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2017
|
|
2016
|
||||
Fixed maturities
|
$
|
82,781
|
|
|
$
|
59,001
|
|
Term loan investments
|
3,114
|
|
|
4,858
|
|
||
Equity securities
|
2,966
|
|
|
3,756
|
|
||
Short-term investments
|
1,441
|
|
|
458
|
|
||
Other (1)
|
18,120
|
|
|
13,672
|
|
||
Gross investment income
|
108,422
|
|
|
81,745
|
|
||
Investment expenses (2)
|
(12,610
|
)
|
|
(11,336
|
)
|
||
Net investment income
|
$
|
95,812
|
|
|
$
|
70,409
|
|
(1)
|
Amounts include dividends and interest distributions on investment funds and other items.
|
(2)
|
Investment expenses were approximately
0.28%
of average invested assets for the
2017 first quarter
, compared to
0.33%
for the
2016 first quarter
.
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
50
|
•
|
Investable Assets Held by Arch
|
Investable assets (1):
|
Estimated
Fair Value
|
|
% of
Total
|
|||
March 31, 2017
|
|
|
|
|||
Fixed maturities (2)
|
$
|
14,678,019
|
|
|
77.9
|
|
Short-term investments
|
879,178
|
|
|
4.7
|
|
|
Cash
|
656,188
|
|
|
3.5
|
|
|
Equity securities (2)
|
486,373
|
|
|
2.6
|
|
|
Other investments (2)
|
1,360,234
|
|
|
7.2
|
|
|
Investments accounted for using the equity method
|
861,607
|
|
|
4.6
|
|
|
Securities transactions entered into but not settled at the balance sheet date
|
(87,990
|
)
|
|
(0.5
|
)
|
|
Total investable assets held by Arch
|
$
|
18,833,609
|
|
|
100.0
|
|
|
|
|
|
|||
December 31, 2016
|
|
|
|
|||
Fixed maturities (2)
|
$
|
14,521,774
|
|
|
77.9
|
|
Short-term investments
|
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
|
|
(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.
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
51
|
|
Estimated
Fair Value
|
|
% of
Total
|
|||
March 31, 2017
|
|
|
|
|
||
Corporate bonds
|
$
|
4,902,600
|
|
|
33.4
|
|
Mortgage backed securities
|
425,235
|
|
|
2.9
|
|
|
Municipal bonds
|
2,519,112
|
|
|
17.2
|
|
|
Commercial mortgage backed securities
|
590,521
|
|
|
4.0
|
|
|
U.S. government and government agencies
|
3,266,908
|
|
|
22.3
|
|
|
Non-U.S. government securities
|
1,335,296
|
|
|
9.1
|
|
|
Asset backed securities
|
1,638,347
|
|
|
11.2
|
|
|
Total
|
$
|
14,678,019
|
|
|
100.0
|
|
|
|
|
|
|||
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
|
|
|
Estimated Fair Value
|
|
% of
Total
|
|||
March 31, 2017
|
|
|
|
|||
U.S. government and gov’t agencies (1)
|
$
|
3,583,161
|
|
|
24.4
|
|
AAA
|
4,665,048
|
|
|
31.8
|
|
|
AA
|
2,700,952
|
|
|
18.4
|
|
|
A
|
2,108,293
|
|
|
14.4
|
|
|
BBB
|
860,615
|
|
|
5.9
|
|
|
BB
|
298,703
|
|
|
2.0
|
|
|
B
|
154,028
|
|
|
1.0
|
|
|
Lower than B
|
87,373
|
|
|
0.6
|
|
|
Not rated
|
219,846
|
|
|
1.5
|
|
|
Total
|
$
|
14,678,019
|
|
|
100.0
|
|
|
|
|
|
|||
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
|
|
(1)
|
Includes U.S. government-sponsored agency residential 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
|
|||||
March 31, 2017
|
|
|
|
|
|
|||||
0-10%
|
$
|
6,645,673
|
|
|
$
|
(82,518
|
)
|
|
69.8
|
|
10-20%
|
93,996
|
|
|
(15,585
|
)
|
|
13.2
|
|
||
20-30%
|
70,753
|
|
|
(19,427
|
)
|
|
16.4
|
|
||
Greater than 30%
|
1,143
|
|
|
(666
|
)
|
|
0.6
|
|
||
Total
|
$
|
6,811,565
|
|
|
$
|
(118,196
|
)
|
|
100.0
|
|
|
|
|
|
|
|
|||||
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
|
|
|
Estimated Fair Value
|
|
Credit
Rating (1)
|
||
Microsoft Corporation
|
$
|
148,440
|
|
|
AAA/Aaa
|
Apple Inc.
|
121,246
|
|
|
AA+/Aa1
|
|
JPMorgan Chase & Co.
|
109,874
|
|
|
A-/A3
|
|
The Bank of New York Mellon Corporation
|
103,531
|
|
|
A/A1
|
|
Wells Fargo & Company
|
87,047
|
|
|
A/A2
|
|
Citigroup Inc.
|
76,039
|
|
|
A-/Baa1
|
|
Daimler AG
|
71,214
|
|
|
A/A2
|
|
Bayerische Motoren Werke Aktiengesellschaft
|
71,278
|
|
|
A+/A1
|
|
MetLife, Inc.
|
65,844
|
|
|
AA-/Aa3
|
|
Honda Motor Co., Ltd.
|
58,897
|
|
|
A+/A1
|
|
Total
|
$
|
913,410
|
|
|
|
(1)
|
Average credit ratings as assigned by S&P and Moody’s, respectively.
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
52
|
|
Agencies
|
|
Investment Grade
|
|
Below Investment Grade
|
|
Total
|
||||||||
March 31, 2017
|
|
|
|
|
|
|
|
||||||||
RMBS
|
$
|
311,538
|
|
|
$
|
66,226
|
|
|
$
|
47,471
|
|
|
$
|
425,235
|
|
CMBS
|
4,717
|
|
|
569,206
|
|
|
16,598
|
|
|
590,521
|
|
||||
ABS
|
—
|
|
|
1,529,991
|
|
|
108,356
|
|
|
1,638,347
|
|
||||
Total
|
$
|
316,255
|
|
|
$
|
2,165,423
|
|
|
$
|
172,425
|
|
|
$
|
2,654,103
|
|
|
|
|
|
|
|
|
|
||||||||
December 31, 2016
|
|
|
|
|
|
|
|
||||||||
RMBS
|
$
|
393,188
|
|
|
$
|
60,600
|
|
|
$
|
50,889
|
|
|
$
|
504,677
|
|
CMBS
|
12,900
|
|
|
513,266
|
|
|
9,885
|
|
|
536,051
|
|
||||
ABS
|
—
|
|
|
1,077,614
|
|
|
46,373
|
|
|
1,123,987
|
|
||||
Total
|
$
|
406,088
|
|
|
$
|
1,651,480
|
|
|
$
|
107,147
|
|
|
$
|
2,164,715
|
|
Severity of gross unrealized losses:
|
Estimated Fair Value
|
|
Gross
Unrealized
Losses
|
|
% of
Total Gross
Unrealized
Losses
|
|||||
March 31, 2017
|
|
|
|
|
|
|||||
0-10%
|
$
|
121,148
|
|
|
$
|
(2,809
|
)
|
|
42.2
|
|
10-20%
|
9,568
|
|
|
(1,498
|
)
|
|
22.5
|
|
||
20-30%
|
1,929
|
|
|
(565
|
)
|
|
8.5
|
|
||
Greater than 30%
|
2,001
|
|
|
(1,788
|
)
|
|
26.8
|
|
||
Total
|
$
|
134,646
|
|
|
$
|
(6,660
|
)
|
|
100.0
|
|
|
|
|
|
|
|
|||||
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
|
|
Country (1)
|
Sovereign
(2)
|
|
Corporate Bonds
|
|
Other
(3)
|
|
Total
|
||||||||
Netherlands
|
$
|
87,779
|
|
|
$
|
129,512
|
|
|
$
|
3,589
|
|
|
$
|
220,880
|
|
Germany
|
101,884
|
|
|
42,375
|
|
|
9,775
|
|
|
154,034
|
|
||||
France
|
—
|
|
|
36,889
|
|
|
24,410
|
|
|
61,299
|
|
||||
Luxembourg
|
1,088
|
|
|
31,528
|
|
|
3,552
|
|
|
36,168
|
|
||||
Belgium
|
27,580
|
|
|
7,634
|
|
|
1
|
|
|
35,215
|
|
||||
Austria
|
16,558
|
|
|
—
|
|
|
—
|
|
|
16,558
|
|
||||
Ireland
|
—
|
|
|
10,634
|
|
|
4,373
|
|
|
15,007
|
|
||||
Spain
|
—
|
|
|
1,088
|
|
|
11,700
|
|
|
12,788
|
|
||||
Supranational (4)
|
7,417
|
|
|
—
|
|
|
—
|
|
|
7,417
|
|
||||
Italy
|
—
|
|
|
—
|
|
|
6,515
|
|
|
6,515
|
|
||||
Portugal
|
—
|
|
|
—
|
|
|
552
|
|
|
552
|
|
||||
Greece
|
81
|
|
|
235
|
|
|
—
|
|
|
316
|
|
||||
Total
|
$
|
242,387
|
|
|
$
|
259,895
|
|
|
$
|
64,467
|
|
|
$
|
566,749
|
|
(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
March 31, 2017
.
|
(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.
|
|
March 31,
2017 |
|
December 31,
2016 |
||||
Available for sale:
|
|
|
|
||||
Asian and emerging markets
|
$
|
109,084
|
|
|
$
|
84,778
|
|
Investment grade fixed income
|
52,016
|
|
|
33,923
|
|
||
Credit related funds
|
11,003
|
|
|
7,469
|
|
||
Other
|
56,334
|
|
|
41,800
|
|
||
Total available for sale
|
228,437
|
|
|
167,970
|
|
||
Fair value option:
|
|
|
|
||||
Term loan investments (par value: $393,384 and $385,436)
|
360,051
|
|
|
378,877
|
|
||
Mezzanine debt funds
|
109,334
|
|
|
127,943
|
|
||
Credit related funds
|
208,707
|
|
|
218,298
|
|
||
Investment grade fixed income
|
82,718
|
|
|
75,468
|
|
||
Asian and emerging markets
|
205,150
|
|
|
178,568
|
|
||
Other (1)
|
165,837
|
|
|
129,717
|
|
||
Total fair value option
|
1,131,797
|
|
|
1,108,871
|
|
||
Total
|
$
|
1,360,234
|
|
|
$
|
1,276,841
|
|
(1)
|
Includes fund investments with strategies in mortgage servicing rights, transportation and infrastructure assets and other.
|
•
|
Investable Assets in the ‘Other’ Segment
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
53
|
|
March 31,
2017 |
|
December 31,
2016 |
||||
Investments accounted for using the fair value option:
|
|
|
|
||||
Other investments
|
$
|
763,517
|
|
|
$
|
811,922
|
|
Fixed maturities
|
703,959
|
|
|
734,260
|
|
||
Short-term investments
|
505,949
|
|
|
309,127
|
|
||
Equity securities
|
3,042
|
|
|
2,314
|
|
||
Total
|
1,976,467
|
|
|
1,857,623
|
|
||
Cash
|
47,566
|
|
|
74,893
|
|
||
Securities sold but not yet purchased
|
(59,430
|
)
|
|
(33,157
|
)
|
||
Securities transactions entered into but not settled at the balance sheet date
|
(61,981
|
)
|
|
(41,596
|
)
|
||
Total investable assets included in ‘other’ segment
|
$
|
1,902,622
|
|
|
$
|
1,857,763
|
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
54
|
|
March 31,
2017 |
|
December 31,
2016 |
||||
Insurance segment:
|
|
|
|
|
|
||
Case reserves
|
$
|
1,417,387
|
|
|
$
|
1,414,603
|
|
IBNR reserves
|
3,232,482
|
|
|
3,187,451
|
|
||
Total net reserves
|
4,649,869
|
|
|
4,602,054
|
|
||
Reinsurance segment:
|
|
|
|
||||
Case reserves
|
786,740
|
|
|
762,730
|
|
||
Additional case reserves
|
79,446
|
|
|
92,524
|
|
||
IBNR reserves
|
1,524,737
|
|
|
1,517,983
|
|
||
Total net reserves
|
2,390,923
|
|
|
2,373,237
|
|
||
Mortgage segment:
|
|
|
|
||||
Case reserves
|
547,405
|
|
|
593,222
|
|
||
IBNR reserves
|
70,611
|
|
|
59,791
|
|
||
Total net reserves (1)
|
618,016
|
|
|
653,013
|
|
||
Other segment:
|
|
|
|
||||
Case reserves
|
146,571
|
|
|
125,703
|
|
||
Additional case reserves
|
8,092
|
|
|
9,513
|
|
||
IBNR reserves
|
388,220
|
|
|
353,865
|
|
||
Total net reserves
|
542,883
|
|
|
489,081
|
|
||
Total:
|
|
|
|
|
|
||
Case reserves
|
2,898,103
|
|
|
2,896,258
|
|
||
Additional case reserves
|
87,538
|
|
|
102,037
|
|
||
IBNR reserves
|
5,216,050
|
|
|
5,119,090
|
|
||
Total net reserves
|
$
|
8,201,691
|
|
|
$
|
8,117,385
|
|
(1)
|
Includes $566.2 million of net reserves from U.S. primary mortgage insurance business, of which 75.8% represents policy years 2007 and prior, 11.9% from 2008 and the remainder from later policy years.
|
|
March 31,
2017 |
|
December 31,
2016 |
||||
Insurance segment:
|
|
|
|
||||
Professional lines (1)
|
$
|
1,315,038
|
|
|
$
|
1,293,667
|
|
Construction and national accounts
|
1,006,271
|
|
|
976,109
|
|
||
Excess and surplus casualty (2)
|
690,956
|
|
|
687,305
|
|
||
Programs
|
659,737
|
|
|
667,677
|
|
||
Property, energy, marine and aviation
|
278,158
|
|
|
302,057
|
|
||
Travel, accident and health
|
75,571
|
|
|
72,726
|
|
||
Lenders products
|
44,823
|
|
|
42,147
|
|
||
Other (3)
|
579,315
|
|
|
560,366
|
|
||
Total net reserves
|
$
|
4,649,869
|
|
|
$
|
4,602,054
|
|
(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.
|
|
March 31,
2017 |
|
December 31,
2016 |
||||
Reinsurance segment:
|
|
|
|
||||
Casualty (1)
|
$
|
1,375,775
|
|
|
$
|
1,355,362
|
|
Other specialty (2)
|
438,494
|
|
|
428,205
|
|
||
Property excluding property catastrophe (3)
|
296,054
|
|
|
297,200
|
|
||
Marine and aviation
|
139,786
|
|
|
147,700
|
|
||
Property catastrophe
|
79,564
|
|
|
86,026
|
|
||
Other (4)
|
61,250
|
|
|
58,744
|
|
||
Total net reserves
|
$
|
2,390,923
|
|
|
$
|
2,373,237
|
|
(1)
|
Includes executive assurance, professional liability, workers’ compensation, excess motor, healthcare and other.
|
(2)
|
Includes non-excess motor, surety, accident and health, workers’ compensation catastrophe, agriculture, trade credit and other.
|
(3)
|
Includes facultative business.
|
(4)
|
Includes life, casualty clash and other.
|
(U.S. Dollars in millions)
|
March 31, 2017
|
|
December 31, 2016
|
||||||||||
Amount
|
|
%
|
|
Amount
|
|
%
|
|||||||
Insurance In Force (IIF) (1):
|
|
|
|
|
|
|
|
||||||
U.S. primary mortgage insurance
|
$
|
237,769
|
|
|
73.1
|
|
|
$
|
234,518
|
|
|
74.3
|
|
Mortgage reinsurance
|
25,846
|
|
|
7.9
|
|
|
24,315
|
|
|
7.7
|
|
||
Other (2)
|
61,596
|
|
|
18.9
|
|
|
56,776
|
|
|
18.0
|
|
||
Total
|
$
|
325,211
|
|
|
100.0
|
|
|
$
|
315,609
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
||||||
Risk In Force (RIF) (3):
|
|
|
|
|
|
|
|
||||||
U.S. primary mortgage insurance
|
$
|
60,591
|
|
|
92.5
|
|
|
$
|
59,712
|
|
|
92.7
|
|
Mortgage reinsurance
|
2,494
|
|
|
3.8
|
|
|
2,489
|
|
|
3.9
|
|
||
Other (2)
|
2,409
|
|
|
3.7
|
|
|
2,242
|
|
|
3.5
|
|
||
Total
|
$
|
65,494
|
|
|
100.0
|
|
|
$
|
64,443
|
|
|
100.0
|
|
(1)
|
Represents the aggregate dollar amount of each insured mortgage loan’s current principal balance.
|
(2)
|
Includes GSE credit risk-sharing transactions and international insurance business.
|
(3)
|
Represents the aggregate dollar amount of each insured mortgage loan’s current principal balance multiplied by the insurance coverage percentage specified in the policy for insurance policies issued and after contract limits and/or loss ratio caps for credit risk-sharing or reinsurance transactions.
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
55
|
(U.S. Dollars in millions)
|
IIF
|
|
RIF
|
|
Delinquency
|
|||||||||||
Amount
|
|
%
|
|
Amount
|
|
%
|
|
Rate (1)
|
||||||||
Policy year:
|
|
|
|
|
|
|
|
|
|
|||||||
2007 and prior
|
$
|
24,317
|
|
|
10.2
|
|
|
$
|
5,568
|
|
|
9.2
|
|
|
10.70
|
%
|
2008
|
6,503
|
|
|
2.7
|
|
|
1,603
|
|
|
2.6
|
|
|
7.11
|
%
|
||
2009
|
1,556
|
|
|
0.7
|
|
|
368
|
|
|
0.6
|
|
|
2.37
|
%
|
||
2010
|
1,641
|
|
|
0.7
|
|
|
440
|
|
|
0.7
|
|
|
1.71
|
%
|
||
2011
|
4,780
|
|
|
2.0
|
|
|
1,304
|
|
|
2.2
|
|
|
1.10
|
%
|
||
2012
|
16,367
|
|
|
6.9
|
|
|
4,464
|
|
|
7.4
|
|
|
0.62
|
%
|
||
2013
|
26,639
|
|
|
11.2
|
|
|
7,202
|
|
|
11.9
|
|
|
0.68
|
%
|
||
2014
|
27,507
|
|
|
11.6
|
|
|
7,286
|
|
|
12.0
|
|
|
0.66
|
%
|
||
2015
|
48,717
|
|
|
20.5
|
|
|
12,413
|
|
|
20.5
|
|
|
0.34
|
%
|
||
2016
|
67,162
|
|
|
28.2
|
|
|
16,803
|
|
|
27.7
|
|
|
0.13
|
%
|
||
2017
|
12,580
|
|
|
5.3
|
|
|
3,140
|
|
|
5.2
|
|
|
0.01
|
%
|
||
Total
|
$
|
237,769
|
|
|
100.0
|
|
|
$
|
60,591
|
|
|
100.0
|
|
|
2.25
|
%
|
(1)
|
Represents the ending percentage of loans in default.
|
(U.S. Dollars in millions)
|
March 31, 2017
|
|
December 31, 2016
|
||||||||||
Amount
|
|
%
|
|
Amount
|
|
%
|
|||||||
Credit quality (FICO):
|
|
|
|
|
|
|
|
||||||
>=740
|
$
|
35,396
|
|
|
58.4
|
|
|
$
|
34,867
|
|
|
58.4
|
|
680-739
|
19,343
|
|
|
31.9
|
|
|
18,976
|
|
|
31.8
|
|
||
620-679
|
5,065
|
|
|
8.4
|
|
|
5,050
|
|
|
8.5
|
|
||
<620
|
787
|
|
|
1.3
|
|
|
819
|
|
|
1.4
|
|
||
Total
|
$
|
60,591
|
|
|
100.0
|
|
|
$
|
59,712
|
|
|
100.0
|
|
Weighted average FICO score
|
743
|
|
|
|
|
743
|
|
|
|
||||
|
|
|
|
|
|
|
|
||||||
Loan-to-value (LTV):
|
|
|
|
|
|
|
|
||||||
95.01% and above
|
$
|
5,808
|
|
|
9.6
|
|
|
$
|
5,781
|
|
|
9.7
|
|
90.01% to 95.00%
|
33,617
|
|
|
55.5
|
|
|
32,986
|
|
|
55.2
|
|
||
85.01% to 90.00%
|
18,346
|
|
|
30.3
|
|
|
18,140
|
|
|
30.4
|
|
||
85.00% and below
|
2,820
|
|
|
4.7
|
|
|
2,805
|
|
|
4.7
|
|
||
Total
|
$
|
60,591
|
|
|
100.0
|
|
|
$
|
59,712
|
|
|
100.0
|
|
Weighted average LTV
|
92.9
|
%
|
|
|
|
92.9
|
%
|
|
|
||||
|
|
|
|
|
|
|
|
||||||
Total RIF, net of external reinsurance
|
$
|
43,606
|
|
|
|
|
$
|
42,183
|
|
|
|
(U.S. Dollars in millions)
|
March 31, 2017
|
|
December 31, 2016
|
||||||||||
Amount
|
|
%
|
|
Amount
|
|
%
|
|||||||
Total RIF by State:
|
|
|
|
|
|
|
|
||||||
Texas
|
$
|
4,995
|
|
|
8.2
|
|
|
$
|
4,961
|
|
|
8.3
|
|
California
|
3,333
|
|
|
5.5
|
|
|
3,222
|
|
|
5.4
|
|
||
Virginia
|
2,625
|
|
|
4.3
|
|
|
2,586
|
|
|
4.3
|
|
||
Florida
|
2,467
|
|
|
4.1
|
|
|
2,367
|
|
|
4.0
|
|
||
Washington
|
2,313
|
|
|
3.8
|
|
|
2,331
|
|
|
3.9
|
|
||
North Carolina
|
2,278
|
|
|
3.8
|
|
|
2,245
|
|
|
3.8
|
|
||
Georgia
|
2,153
|
|
|
3.6
|
|
|
2,111
|
|
|
3.5
|
|
||
Illinois
|
2,109
|
|
|
3.5
|
|
|
2,090
|
|
|
3.5
|
|
||
Maryland
|
2,107
|
|
|
3.5
|
|
|
2,080
|
|
|
3.5
|
|
||
Minnesota
|
2,003
|
|
|
3.3
|
|
|
1,986
|
|
|
3.3
|
|
||
Others
|
34,208
|
|
|
56.5
|
|
|
33,733
|
|
|
56.5
|
|
||
Total
|
$
|
60,591
|
|
|
100.0
|
|
|
$
|
59,712
|
|
|
100.0
|
|
(U.S. Dollars in thousands, except policy, loan and claim count)
|
|
Three Months Ended
|
||||||
|
March 31,
2017 |
|
December 31,
2016 |
|||||
Roll-forward of insured loans in default:
|
|
|
|
|
||||
Beginning delinquent number of loans
|
|
29,691
|
|
|
2,423
|
|
||
New notices
|
|
9,863
|
|
|
1,161
|
|
||
Cures
|
|
(11,707
|
)
|
|
(1,028
|
)
|
||
Paid claims
|
|
(1,613
|
)
|
|
(153
|
)
|
||
Acquired delinquent loans
|
|
—
|
|
|
27,288
|
|
||
Ending delinquent number of loans (1)
|
|
26,234
|
|
|
29,691
|
|
||
|
|
|
|
|
||||
Ending number of policies in force (1)
|
|
1,164,929
|
|
|
1,153,630
|
|
||
|
|
|
|
|
||||
Delinquency rate (1)
|
|
2.25
|
%
|
|
2.57
|
%
|
||
|
|
|
|
|
||||
Losses:
|
|
|
|
|
||||
Number of claims paid
|
|
1,613
|
|
|
153
|
|
||
Total paid claims
|
|
$
|
70,784
|
|
|
$
|
6,080
|
|
Average per claim
|
|
$
|
43.9
|
|
|
$
|
39.7
|
|
Severity (2)
|
|
102.0
|
%
|
|
92.3
|
%
|
||
Average reserve per default (in thousands) (1)
|
|
$
|
20.4
|
|
|
$
|
20.5
|
|
(1)
|
Includes first lien primary and pool policies.
|
(2)
|
Represents total paid claims divided by RIF of loans for which claims were paid.
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
56
|
(U.S. dollars in thousands, except
share data)
|
March 31,
2017 |
|
December 31,
2016 |
||||
Total shareholders’ equity available to Arch
|
$
|
8,605,844
|
|
|
$
|
8,253,718
|
|
Less preferred shareholders’ equity
|
772,555
|
|
|
772,555
|
|
||
Common shareholders’ equity available to Arch
|
$
|
7,833,289
|
|
|
$
|
7,481,163
|
|
Common shares and common share equivalents outstanding, net of treasury shares (1)
|
135,790,306
|
|
|
135,550,337
|
|
||
Book value per share
|
$
|
57.69
|
|
|
$
|
55.19
|
|
(1)
|
Excludes the effects of
6,664,166
and
6,872,494
stock options and
375,687
and
381,461
restricted stock units outstanding at
March 31, 2017
and
December 31, 2016
, respectively.
|
(U.S. dollars in thousands, except
share data)
|
March 31,
2017 |
|
December 31,
2016 |
||||
Debt:
|
|
|
|
||||
ACGL senior notes, due May 2034
|
$
|
296,979
|
|
|
$
|
296,957
|
|
Arch-U.S. senior notes, due Nov 2043 (1)
|
494,548
|
|
|
494,525
|
|
||
ACF senior notes, due Dec 2026 (2)
|
495,778
|
|
|
495,689
|
|
||
ACF senior notes, due Dec 2046 (2)
|
445,105
|
|
|
445,087
|
|
||
Revolving credit agreement borrowings due Oct 2021
|
500,000
|
|
|
500,000
|
|
||
Total
|
$
|
2,232,410
|
|
|
$
|
2,232,258
|
|
|
|
|
|
||||
Shareholders’ equity available to Arch:
|
|
|
|
||||
Series C non-cumulative preferred shares
|
$
|
322,555
|
|
|
$
|
322,555
|
|
Series E non-cumulative preferred shares
|
450,000
|
|
|
450,000
|
|
||
Common shareholders’ equity
|
7,833,289
|
|
|
7,481,163
|
|
||
Total
|
$
|
8,605,844
|
|
|
$
|
8,253,718
|
|
|
|
|
|
||||
Total capital available to Arch
|
$
|
10,838,254
|
|
|
$
|
10,485,976
|
|
|
|
|
|
||||
Debt to total capital (%)
|
20.6
|
|
|
21.3
|
|
||
Debt and prefered to total capital (%)
|
27.7
|
|
|
28.7
|
|
(1)
|
Issued by Arch Capital Group (U.S.) Inc., a wholly owned subsidiary of ACGL, and fully and unconditionally guaranteed by ACGL.
|
(2)
|
Issued by Arch Capital Finance LLC (“ACF”), a wholly owned subsidiary of Arch U.S. MI Holdings Inc., and fully and unconditionally guaranteed by ACGL.
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2017
|
|
2016
|
||||
Total cash provided by (used for):
|
|
|
|
|
|
||
Operating activities
|
$
|
146,194
|
|
|
$
|
257,279
|
|
Investing activities
|
(61,334
|
)
|
|
(189,559
|
)
|
||
Financing activities
|
(198,961
|
)
|
|
(35,664
|
)
|
||
Effects of exchange rate changes on foreign currency cash
|
2,240
|
|
|
2,199
|
|
||
Increase (decrease) in cash
|
$
|
(111,861
|
)
|
|
$
|
34,255
|
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
57
|
(U.S. dollars in
billions)
|
Interest Rate Shift in Basis Points
|
||||||||||||||||||
-100
|
|
-50
|
|
—
|
|
+50
|
|
+100
|
|||||||||||
Mar. 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total fair value
|
$
|
18.31
|
|
|
$
|
17.99
|
|
|
$
|
17.69
|
|
|
$
|
17.41
|
|
|
$
|
17.12
|
|
Change from base
|
3.50
|
%
|
|
1.70
|
%
|
|
|
|
(1.60
|
)%
|
|
(3.20
|
)%
|
||||||
Change in unrealized value
|
$
|
0.62
|
|
|
$
|
0.30
|
|
|
|
|
$
|
(0.28
|
)
|
|
$
|
(0.57
|
)
|
||
|
|
|
|
|
|
|
|
|
|
||||||||||
Dec. 31, 2016
|
|
|
|
|
|
|
|
|
|
||||||||||
Total fair value
|
$
|
17.95
|
|
|
$
|
17.62
|
|
|
$
|
17.31
|
|
|
$
|
17.00
|
|
|
$
|
16.70
|
|
Change from base
|
3.70
|
%
|
|
1.80
|
%
|
|
|
|
(1.80
|
)%
|
|
(3.50
|
)%
|
||||||
Change in unrealized value
|
$
|
0.64
|
|
|
$
|
0.31
|
|
|
|
|
$
|
(0.31
|
)
|
|
$
|
(0.61
|
)
|
(U.S. dollars in
billions) |
Credit Spread Shift in Percentage Points
|
||||||||||||||||||
-100
|
|
-50
|
|
—
|
|
+50
|
|
+100
|
|||||||||||
Mar. 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total fair value
|
$
|
18.15
|
|
|
$
|
17.92
|
|
|
$
|
17.69
|
|
|
$
|
17.46
|
|
|
$
|
17.23
|
|
Change from base
|
2.60
|
%
|
|
1.30
|
%
|
|
|
|
(1.30
|
)%
|
|
(2.60
|
)%
|
||||||
Change in unrealized value
|
$
|
0.46
|
|
|
$
|
0.23
|
|
|
|
|
$
|
(0.23
|
)
|
|
$
|
(0.46
|
)
|
||
|
|
|
|
|
|
|
|
|
|
||||||||||
Dec. 31, 2016
|
|
|
|
|
|
|
|
|
|
||||||||||
Total fair value
|
$
|
17.79
|
|
|
$
|
17.55
|
|
|
$
|
17.31
|
|
|
$
|
17.07
|
|
|
$
|
16.83
|
|
Change from base
|
2.80
|
%
|
|
1.40
|
%
|
|
|
|
(1.40
|
)%
|
|
(2.80
|
)%
|
||||||
Change in unrealized value
|
$
|
0.48
|
|
|
$
|
0.24
|
|
|
|
|
$
|
(0.24
|
)
|
|
$
|
(0.48
|
)
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
58
|
(U.S. dollars in thousands, except
per share data)
|
March 31,
2017 |
|
December 31,
2016 |
||||
Net assets (liabilities), denominated in foreign currencies, excluding shareholders’ equity and derivatives
|
$
|
(94,663
|
)
|
|
$
|
(63,077
|
)
|
Shareholders’ equity denominated in foreign currencies (1)
|
295,185
|
|
|
290,752
|
|
||
Net foreign currency forward contracts outstanding (2)
|
(169,480
|
)
|
|
(250,263
|
)
|
||
Net exposures denominated in foreign currencies
|
$
|
31,042
|
|
|
$
|
(22,588
|
)
|
|
|
|
|
||||
Pre-tax impact of a hypothetical 10% appreciation of the U.S. Dollar against foreign currencies:
|
|
|
|
|
|
||
Shareholders’ equity
|
$
|
(3,104
|
)
|
|
$
|
2,259
|
|
Book value per common share
|
$
|
(0.02
|
)
|
|
$
|
0.02
|
|
|
|
|
|
||||
Pre-tax impact of a hypothetical 10% decline of the U.S. Dollar against foreign currencies:
|
|
|
|
|
|
||
Shareholders’ equity
|
$
|
3,104
|
|
|
$
|
(2,259
|
)
|
Book value per common share
|
$
|
0.02
|
|
|
$
|
(0.02
|
)
|
(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.
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
59
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
60
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
61
|
|
|
Issuer Purchases of Equity Securities
|
||||||||||||
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)
|
||||||
1/1/2017 - 1/31/2017
|
|
13,410
|
|
|
$
|
87.39
|
|
|
—
|
|
|
$
|
446,501
|
|
2/1/2017 - 2/28/2017
|
|
28,758
|
|
|
93.52
|
|
|
—
|
|
|
$
|
446,501
|
|
|
3/1/2017 - 3/31/2017
|
|
8,866
|
|
|
94.59
|
|
|
—
|
|
|
$
|
446,501
|
|
|
Total
|
|
51,034
|
|
|
$
|
92.10
|
|
|
—
|
|
|
$
|
446,501
|
|
(1)
|
Represents 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 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
March 31, 2017
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.
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
62
|
Exhibit No.
|
|
Description
|
|
|
|
10.1
|
|
First Amendment to Third Amended and Restated Incentive Compensation Plan
|
15
|
|
Accountants’ Awareness Letter (regarding unaudited interim financial information)
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
32.1
|
|
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
32.2
|
|
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
101
|
|
The following financial information from Arch Capital Group Ltd.’s Quarterly Report for the quarter ended March 31, 2017 formatted in XBRL: (i) Consolidated Balance Sheets at March 31, 2017 and December 31, 2016; (ii) Consolidated Statements of Income for the three month periods ended March 31, 2017 and 2016; (iii) Consolidated Statements of Comprehensive Income for the three month periods ended March 31, 2017 and 2016; (iv) Consolidated Statements of Changes in Shareholders’ Equity for the three month periods ended March 31, 2017 and 2016; (v) Consolidated Statements of Cash Flows for the three month periods ended March 31, 2017 and 2016; and (vi) Notes to Consolidated Financial Statements.
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
63
|
|
|
ARCH CAPITAL GROUP LTD.
|
|
|
(REGISTRANT)
|
|
|
|
|
|
/s/ Constantine Iordanou
|
Date: May 5, 2017
|
|
Constantine Iordanou
|
|
|
Chief Executive Officer (Principal Executive Officer) and Chairman of the Board of Directors
|
|
|
|
|
|
/s/ Mark D. Lyons
|
Date: May 5, 2017
|
|
Mark D. Lyons
|
|
|
Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
64
|
Exhibit No.
|
|
Description
|
|
|
|
10.1
|
|
First Amendment to Third Amended and Restated Incentive Compensation Plan
|
15
|
|
Accountants’ Awareness Letter (regarding unaudited interim financial information)
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
32.1
|
|
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
32.2
|
|
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
101
|
|
The following financial information from Arch Capital Group Ltd.’s Quarterly Report for the quarter ended March 31, 2017 formatted in XBRL: (i) Consolidated Balance Sheets at March 31, 2017 and December 31, 2016; (ii) Consolidated Statements of Income for the three month periods ended March 31, 2017 and 2016; (iii) Consolidated Statements of Comprehensive Income for the three month periods ended March 31, 2017 and 2016; (iv) Consolidated Statements of Changes in Shareholders’ Equity for the three month periods ended March 31, 2017 and 2016; (v) Consolidated Statements of Cash Flows for the three month periods ended March 31, 2017 and 2016; and (vi) Notes to Consolidated Financial Statements.
|
|
ACGL 2017 FIRST QUARTER FORM 10-Q
|
65
|
1.
|
I have reviewed this quarterly report on Form 10-Q 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 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.
|
|
Date:
|
May 5, 2017
|
|
|
|
|
By:
|
/s/ Constantine Iordanou
|
|
Name:
|
Constantine Iordanou
|
|
Title:
|
Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q 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 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.
|
|
Date:
|
May 5, 2017
|
|
|
|
|
By:
|
/s/ Mark D. Lyons
|
|
Name:
|
Mark D. Lyons
|
|
Title:
|
Executive Vice President, Chief Financial Officer and Treasurer
|
(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 such report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
Date:
|
May 5, 2017
|
|
|
|
|
By:
|
/s/ Constantine Iordanou
|
|
Name:
|
Constantine Iordanou
|
|
Title:
|
Chief Executive Officer
|
(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 such report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
Date:
|
May 5, 2017
|
|
|
|
|
By:
|
/s/ Mark D. Lyons
|
|
Name:
|
Mark D. Lyons
|
|
Title:
|
Executive Vice President, Chief Financial Officer and Treasurer
|