Bermuda | 0-26456 | N/A | ||
(State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification No.) |
EXHIBIT NO. | DESCRIPTION | |
99.1 | Press Release dated February 10, 2015 announcing the earnings of Arch Capital Group Ltd. for the three month period ended December 31, 2014 | |
99.2 | Fourth Quarter 2014 Financial Supplement |
ARCH CAPITAL GROUP LTD. | |||
Date: February 10, 2015 | By: | /s/ Marc Grandisson | |
Name: | Marc Grandisson | ||
Title: | Chairman and Chief Executive Officer of Arch Worldwide Reinsurance and Mortgage Groups |
EXHIBIT NO. | DESCRIPTION | ||
99.1 | Press Release dated February 10, 2015 announcing the earnings of Arch Capital Group Ltd. for the three month period ended December 31, 2014 | ||
99.2 | Fourth Quarter 2014 Financial Supplement |
![]() | Waterloo House, Ground Floor | |
100 Pitts Bay Road | ||
Pembroke HM 08 Bermuda | ||
441-278-9250 | ||
441-278-9255 fax | ||
PRESS RELEASE | CONTACT: | |
NASDAQ Symbol ACGL | Mark D. Lyons | |
For Immediate Release | Executive Vice President and | |
Chief Financial Officer |
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||||||||
(U.S. dollars in thousands) | 2014 | 2013 | % Change | 2014 | 2013 | % Change | |||||||||||||||
Gross premiums written | $ | 1,069,932 | $ | 955,199 | 12.0 | $ | 4,760,394 | $ | 4,196,623 | 13.4 | |||||||||||
Net premiums written | 804,836 | 748,921 | 7.5 | 3,617,482 | 3,351,367 | 7.9 | |||||||||||||||
Net premiums earned | 869,604 | 839,366 | 3.6 | 3,490,271 | 3,145,952 | 10.9 | |||||||||||||||
Underwriting income | 114,300 | 128,318 | (10.9 | ) | 474,178 | 451,737 | 5.0 | ||||||||||||||
Underwriting Ratios | % Point Change | % Point Change | |||||||||||||||||||
Loss ratio | 52.8 | % | 51.7 | % | 1.1 | 53.0 | % | 53.4 | % | (0.4 | ) | ||||||||||
Acquisition expense ratio | 18.4 | % | 18.8 | % | (0.4 | ) | 18.0 | % | 17.9 | % | 0.1 | ||||||||||
Other operating expense ratio | 16.3 | % | 14.9 | % | 1.4 | 15.8 | % | 14.6 | % | 1.2 | |||||||||||
Combined ratio | 87.5 | % | 85.4 | % | 2.1 | 86.8 | % | 85.9 | % | 0.9 |
Three Months Ended | Year Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
(U.S. dollars in thousands, except share data) | 2014 | 2013 | 2014 | 2013 | |||||||||||
After-tax operating income available to Arch common shareholders | $ | 150,184 | $ | 152,741 | $ | 617,312 | $ | 595,715 | |||||||
Net realized gains, net of tax | 26,847 | 8,584 | 122,863 | 73,844 | |||||||||||
Net impairment losses recognized in earnings, net of tax | (3,837 | ) | (88 | ) | (30,150 | ) | (3,786 | ) | |||||||
Equity in net income of investment funds accounted for using the equity method, net of tax | 2,252 | 5,309 | 19,235 | 35,738 | |||||||||||
Net foreign exchange gains (losses), net of tax | 34,233 | (10,541 | ) | 83,157 | (13,718 | ) | |||||||||
Net income available to Arch common shareholders | $ | 209,679 | $ | 156,005 | $ | 812,417 | $ | 687,793 | |||||||
Diluted per common share results: | |||||||||||||||
After-tax operating income available to Arch common shareholders | $ | 1.15 | $ | 1.12 | $ | 4.58 | $ | 4.39 | |||||||
Net realized gains, net of tax | 0.21 | 0.06 | 0.91 | 0.54 | |||||||||||
Net impairment losses recognized in earnings, net of tax | (0.03 | ) | — | (0.22 | ) | (0.03 | ) | ||||||||
Equity in net income of investment funds accounted for using the equity method, net of tax | 0.01 | 0.04 | 0.14 | 0.27 | |||||||||||
Net foreign exchange gains (losses), net of tax | 0.26 | (0.08 | ) | 0.61 | (0.10 | ) | |||||||||
Net income available to Arch common shareholders | $ | 1.60 | $ | 1.14 | $ | 6.02 | $ | 5.07 | |||||||
Weighted average common shares and common share equivalents outstanding - diluted | 130,855,218 | 136,467,998 | 134,922,322 | 135,777,183 |
(U.S. dollars in thousands, except share data) | December 31, 2014 | December 31, 2013 | |||||
Calculation of book value per common share: | |||||||
Total shareholders’ equity available to Arch | $ | 6,130,053 | $ | 5,647,496 | |||
Less preferred shareholders’ equity | 325,000 | 325,000 | |||||
Common shareholders’ equity available to Arch | 5,805,053 | 5,322,496 | |||||
Common shares outstanding, net of treasury shares (1) | 127,367,934 | 133,674,884 | |||||
Book value per common share | $ | 45.58 | $ | 39.82 |
(1) | Excludes the effects of 7,804,033 and 8,338,480 stock options and 447,073 and 443,710 restricted stock units outstanding at December 31, 2014 and December 31, 2013, respectively. |
(U.S. dollars in thousands, except share data) | Three Months Ended | Year Ended | |||||||||||||
December 31, | December 31, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Components of net investment income (1): | |||||||||||||||
Fixed maturities | $ | 65,978 | $ | 63,376 | $ | 257,387 | $ | 249,833 | |||||||
Term loan investments (2) | 4,902 | 5,069 | 21,521 | 20,608 | |||||||||||
Equity securities (dividends) | 4,034 | 2,091 | 13,005 | 8,919 | |||||||||||
Short-term investments | 244 | 86 | 904 | 1,259 | |||||||||||
Other (3) | 7,122 | 4,924 | 28,803 | 19,710 | |||||||||||
Gross investment income | 82,280 | 75,546 | 321,620 | 300,329 | |||||||||||
Investment expenses | (9,634 | ) | (8,451 | ) | (37,284 | ) | (33,110 | ) | |||||||
Net investment income | $ | 72,646 | $ | 67,095 | $ | 284,336 | $ | 267,219 | |||||||
Per share | $ | 0.56 | $ | 0.49 | $ | 2.11 | $ | 1.97 | |||||||
Investment income yield, at amortized cost (1) (4): | |||||||||||||||
Pre-tax | 2.16 | % | 2.08 | % | 2.08 | % | 2.12 | % | |||||||
After-tax | 2.03 | % | 1.96 | % | 1.94 | % | 1.98 | % | |||||||
Total return (1) (5): | |||||||||||||||
Including effects of foreign exchange | 0.85 | % | 0.97 | % | 3.21 | % | 1.28 | % | |||||||
Excluding effects of foreign exchange | 1.34 | % | 0.85 | % | 4.26 | % | 1.13 | % | |||||||
Cash flow from operations (1) | $ | 226,948 | $ | 223,820 | $ | 997,815 | $ | 850,868 |
(1) | Excludes amounts related to the ‘other’ segment. |
(2) | Included in “investments accounted for using the fair value option” on the Company’s balance sheet. |
(3) | Includes income on other investments, funds held balances, cash balances and other. |
(4) | Presented on an annualized basis and excluding the impact of investments for which returns are not included within investment income, such as investments accounted for using the equity method and certain equities. |
(5) | Includes net investment income, equity in net income or loss of investment funds accounted for using the equity method, net realized gains and losses and the change in unrealized gains or losses generated by the Company’s investment portfolio. Total return is calculated on a pre-tax basis and before investment expenses. |
(U.S. dollars in thousands) | December 31, 2014 | December 31, 2013 | |||||||||||
Amount | % of Total | Amount | % of Total | ||||||||||
Investable assets (1) (2): | |||||||||||||
Fixed maturities available for sale, at fair value | $ | 10,750,770 | 73.6 | $ | 9,571,776 | 68.1 | |||||||
Fixed maturities, at fair value (3) | 377,053 | 2.6 | 448,254 | 3.2 | |||||||||
Fixed maturities pledged under securities lending agreements, at fair value | 50,802 | 0.3 | 105,081 | 0.8 | |||||||||
Total fixed maturities | 11,178,625 | 76.5 | 10,125,111 | 72.1 | |||||||||
Short-term investments available for sale, at fair value | 797,226 | 5.5 | 1,478,367 | 10.5 | |||||||||
Cash | 474,247 | 3.2 | 434,057 | 3.1 | |||||||||
Equity securities available for sale, at fair value | 658,182 | 4.5 | 496,824 | 3.5 | |||||||||
Other investments available for sale, at fair value | 296,224 | 2.0 | 498,310 | 3.6 | |||||||||
Other investments, at fair value (3) | 889,253 | 6.1 | 773,280 | 5.5 | |||||||||
Investments accounted for using the equity method (4) | 349,014 | 2.4 | 244,339 | 1.7 | |||||||||
Securities transactions entered into but not settled at the balance sheet date | (32,802 | ) | (0.2 | ) | (763 | ) | — | ||||||
Total investable assets managed by the Company | $ | 14,609,969 | 100.0 | $ | 14,049,525 | 100.0 | |||||||
Investment portfolio statistics (1): | |||||||||||||
Average effective duration (in years) | 3.34 | 2.62 | |||||||||||
Average credit quality (Standard & Poor’s/Moody’s Investors Service) | AA/Aa2 | AA-/Aa2 | |||||||||||
Embedded book yield (before investment expenses) | 2.18 | % | 2.38 | % |
(1) | Excludes amounts related to the ‘other’ segment. |
(2) | This table excludes the collateral received and reinvested and includes the fixed maturities and short-term investments pledged under securities lending agreements, at fair value. |
(3) | Represents investments which are carried at fair value under the fair value option and reflected as “investments accounted for using the fair value option” on the Company’s balance sheet. Changes in the carrying value of such investments are recorded in net realized gains or losses. |
(4) | Changes in the carrying value of investment funds accounted for using the equity method are recorded as “equity in net income (loss) of investment funds accounted for using the equity method” rather than as an unrealized gain or loss component of accumulated other comprehensive income. |
(U.S. dollars in thousands) | Three Months Ended | Year Ended | |||||||||||||
December 31, | December 31, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Components of losses and loss adjustment expenses incurred | |||||||||||||||
Paid losses and loss adjustment expenses | $ | 428,874 | $ | 439,411 | $ | 1,757,260 | $ | 1,708,817 | |||||||
Change in unpaid losses and loss adjustment expenses | 29,905 | (5,088 | ) | 91,817 | (29,393 | ) | |||||||||
Total losses and loss adjustment expenses | $ | 458,779 | $ | 434,323 | $ | 1,849,077 | $ | 1,679,424 | |||||||
Estimated net (favorable) adverse development in prior year loss reserves, net of related adjustments | |||||||||||||||
Net impact on underwriting results: | |||||||||||||||
Insurance | $ | (9,437 | ) | $ | (2,884 | ) | $ | (44,087 | ) | $ | (35,702 | ) | |||
Reinsurance | (63,192 | ) | (63,200 | ) | (261,519 | ) | (218,034 | ) | |||||||
Mortgage | 858 | (438 | ) | (1,005 | ) | (438 | ) | ||||||||
Total | $ | (71,771 | ) | $ | (66,522 | ) | $ | (306,611 | ) | $ | (254,174 | ) | |||
Impact on losses and loss adjustment expenses: | |||||||||||||||
Insurance | $ | (12,322 | ) | $ | (6,649 | ) | $ | (58,677 | ) | $ | (45,148 | ) | |||
Reinsurance | (66,785 | ) | (63,607 | ) | (267,314 | ) | (217,911 | ) | |||||||
Mortgage | 858 | (983 | ) | (911 | ) | (983 | ) | ||||||||
Total | $ | (78,249 | ) | $ | (71,239 | ) | $ | (326,902 | ) | (264,042 | ) | ||||
Impact on acquisition expenses: | |||||||||||||||
Insurance | $ | 2,885 | $ | 3,765 | $ | 14,590 | $ | 9,446 | |||||||
Reinsurance | 3,593 | 407 | 5,795 | (123 | ) | ||||||||||
Mortgage | — | 545 | (94 | ) | 545 | ||||||||||
Total | $ | 6,478 | $ | 4,717 | $ | 20,291 | $ | 9,868 | |||||||
Impact on combined ratio: | |||||||||||||||
Insurance | (1.8 | )% | (0.6 | )% | (2.2 | )% | (1.9 | )% | |||||||
Reinsurance | (20.7 | )% | (19.0 | )% | (20.4 | )% | (17.9 | )% | |||||||
Mortgage | 1.7 | % | (3.1 | )% | (0.5 | )% | (0.9 | )% | |||||||
Total | (8.3 | )% | (7.9 | )% | (8.8 | )% | (8.1 | )% | |||||||
Impact on loss ratio: | |||||||||||||||
Insurance | (2.4 | )% | (1.3 | )% | (2.9 | )% | (2.4 | )% | |||||||
Reinsurance | (21.8 | )% | (19.2 | )% | (20.9 | )% | (17.9 | )% | |||||||
Mortgage | 1.7 | % | (6.9 | )% | (0.5 | )% | (1.9 | )% | |||||||
Total | (9.0 | )% | (8.5 | )% | (9.4 | )% | (8.4 | )% | |||||||
Impact on acquisition expense ratio: | |||||||||||||||
Insurance | 0.6 | % | 0.7 | % | 0.7 | % | 0.5 | % | |||||||
Reinsurance | 1.1 | % | 0.2 | % | 0.5 | % | — | % | |||||||
Mortgage | — | % | 3.8 | % | — | % | 1.0 | % | |||||||
Total | 0.7 | % | 0.6 | % | 0.6 | % | 0.3 | % | |||||||
Estimated net losses incurred from current accident year catastrophic events (2) | |||||||||||||||
Insurance | $ | 5,671 | $ | 2,203 | $ | 13,982 | $ | 21,563 | |||||||
Reinsurance | 14,237 | 14,583 | 42,145 | 62,188 | |||||||||||
Total | $ | 19,908 | $ | 16,786 | $ | 56,127 | $ | 83,751 | |||||||
Impact on combined ratio: | |||||||||||||||
Insurance | 1.1 | % | 0.4 | % | 0.7 | % | 1.1 | % | |||||||
Reinsurance | 4.7 | % | 4.4 | % | 3.3 | % | 5.1 | % | |||||||
Total | 2.3 | % | 2.0 | % | 1.6 | % | 2.7 | % |
(1) | Excludes amounts related to the ‘other’ segment. |
(2) | Equals estimated losses from catastrophic events occurring in the current accident year, net of reinsurance and reinstatement premiums. Amounts shown for the insurance segment are for named catastrophic events only. Amounts shown for the reinsurance segment include (i) named events with over $5 million of losses incurred by its Bermuda and Europe operations and (ii) all catastrophe losses incurred by its U.S. operations. Amounts not applicable for the mortgage segment. |
Three Months Ended December 31, | ||||||||||
(U.S. dollars in thousands) | 2014 | 2013 | % Change | |||||||
Gross premiums written | $ | 699,109 | $ | 636,949 | 9.8 | |||||
Net premiums written | 483,176 | 440,707 | 9.6 | |||||||
Net premiums earned | 512,770 | 493,264 | 4.0 | |||||||
Underwriting income | 22,856 | 18,653 | 22.5 | |||||||
Underwriting Ratios | % Point Change | |||||||||
Loss ratio | 63.3 | % | 62.4 | % | 0.9 | |||||
Acquisition expense ratio | 15.8 | % | 17.0 | % | (1.2 | ) | ||||
Other operating expense ratio | 16.6 | % | 16.9 | % | (0.3 | ) | ||||
Combined ratio | 95.7 | % | 96.3 | % | (0.6 | ) | ||||
Catastrophic activity and prior year development: | ||||||||||
Current accident year catastrophic events, net of | ||||||||||
reinsurance and reinstatement premiums | 1.1 | % | 0.4 | % | 0.7 | |||||
Net (favorable) adverse development in prior year loss | ||||||||||
reserves, net of related adjustments | (1.8 | )% | (0.6 | )% | (1.2 | ) | ||||
Combined ratio excluding such items | 96.4 | % | 96.5 | % | (0.1 | ) |
Three Months Ended December 31, | ||||||||||
(U.S. dollars in thousands) | 2014 | 2013 | % Change | |||||||
Gross premiums written | $ | 314,604 | $ | 299,818 | 4.9 | |||||
Net premiums written | 268,973 | 287,779 | (6.5 | ) | ||||||
Net premiums earned | 305,805 | 331,929 | (7.9 | ) | ||||||
Underwriting income | 89,902 | 103,599 | (13.2 | ) | ||||||
Underwriting Ratios | % Point Change | |||||||||
Loss ratio | 38.8 | % | 38.6 | % | 0.2 | |||||
Acquisition expense ratio | 20.2 | % | 20.1 | % | 0.1 | |||||
Other operating expense ratio | 12.3 | % | 11.6 | % | 0.7 | |||||
Combined ratio | 71.3 | % | 70.3 | % | 1.0 | |||||
Catastrophic activity and prior year development: | ||||||||||
Current accident year catastrophic events, net of | ||||||||||
reinsurance and reinstatement premiums | 4.7 | % | 4.4 | % | 0.3 | |||||
Net (favorable) adverse development in prior year loss | ||||||||||
reserves, net of related adjustments | (20.7 | )% | (19.0 | )% | (1.7 | ) | ||||
Combined ratio excluding such items | 87.3 | % | 84.9 | % | 2.4 |
Three Months Ended December 31, | ||||||||||
(U.S. dollars in thousands) | 2014 | 2013 | % Change | |||||||
Gross premiums written | $ | 57,584 | $ | 20,435 | 181.8 | |||||
Net premiums written | 52,687 | 20,435 | 157.8 | |||||||
Net premiums earned | 51,029 | 14,173 | 260.0 | |||||||
Underwriting income | 1,542 | 6,066 | (74.6 | ) | ||||||
Underwriting Ratios | % Point Change | |||||||||
Loss ratio | 30.8 | % | (10.8 | )% | 41.6 | |||||
Acquisition expense ratio | 32.9 | % | 46.2 | % | (13.3 | ) | ||||
Other operating expense ratio | 36.9 | % | 23.6 | % | 13.3 | |||||
Combined ratio | 100.6 | % | 59.0 | % | 41.6 | |||||
Net (favorable) adverse development in prior year loss | ||||||||||
reserves, net of related adjustments | 1.7 | % | (3.1 | )% | 4.8 | |||||
Combined ratio excluding prior year development | 98.9 | % | 62.1 | % | 36.8 |
• | the Company’s ability to successfully implement its business strategy during “soft” as well as “hard” markets; |
• | acceptance of the Company’s business strategy, security and financial condition by rating agencies and regulators, as well as by brokers and its insureds and reinsureds; |
• | the Company’s ability to maintain or improve its ratings, which may be affected by its ability to raise additional equity or debt financings, by ratings agencies’ existing or new policies and practices, as well as other factors described herein; |
• | general economic and market conditions (including inflation, interest rates, foreign currency exchange rates, prevailing credit terms and the depth and duration of a recession) and conditions specific to the reinsurance and insurance markets (including the length and magnitude of the current “soft” market) in which the Company operates; |
• | competition, including increased competition, on the basis of pricing, capacity, coverage terms or other factors; |
• | developments in the world’s financial and capital markets and the Company’s access to such markets; |
• | the Company’s ability to successfully enhance, integrate and maintain operating procedures (including information technology) to effectively support its current and new business; |
• | the loss of key personnel; |
• | the integration of businesses the Company has acquired or may acquire into its existing operations; |
• | accuracy of those estimates and judgments utilized in the preparation of the Company’s financial statements, including those related to revenue recognition, insurance and other reserves, reinsurance recoverables, investment valuations, intangible assets, bad debts, income taxes, contingencies and litigation, and any determination to use the deposit method of accounting, which for a relatively new insurance and reinsurance company, like the Company, are even more difficult to make than those made in a mature company since relatively limited historical information has been reported to the Company through December 31, 2014; |
• | greater than expected loss ratios on business written by the Company and adverse development on claim and/or claim expense liabilities related to business written by its insurance and reinsurance subsidiaries; |
• | severity and/or frequency of losses; |
• | claims for natural or man-made catastrophic events in the Company’s insurance or reinsurance business could cause large losses and substantial volatility in its results of operations; |
• | acts of terrorism, political unrest and other hostilities or other unforecasted and unpredictable events; |
• | availability to the Company of reinsurance to manage its gross and net exposures and the cost of such reinsurance; |
• | the failure of reinsurers, managing general agents, third party administrators or others to meet their obligations to the Company; |
• | the timing of loss payments being faster or the receipt of reinsurance recoverables being slower than anticipated by the Company; |
• | the Company’s investment performance, including legislative or regulatory developments that may adversely affect the fair value of the Company’s investments; |
• | the impact of the continued weakness of the U.S., European countries and other key economies, projected budget deficits for the U.S., European countries and other governments and the consequences associated with possible additional downgrades of securities of the U.S., European countries and other governments by credit rating agencies, and the resulting effect on the value of securities in the Company’s investment portfolio as well as the uncertainty in the market generally; |
• | the volatility of the Company’s shareholders’ equity from foreign currency fluctuations, which could increase due to the Company not matching portions of its projected liabilities in foreign currencies with investments in the same currencies in current and future periods. |
• | losses relating to aviation business and business produced by a certain managing underwriting agency for which the Company may be liable to the purchaser of its prior reinsurance business or to others in connection with the May 5, 2000 asset sale described in the Company’s periodic reports filed with the SEC; |
• | changes in accounting principles or policies or in the Company’s application of such accounting principles or policies; |
• | changes in the political environment of certain countries in which the Company operates, underwrites business or invests; |
• | statutory or regulatory developments, including as to tax policy matters and insurance and other regulatory matters such as the adoption of proposed legislation that would affect Bermuda-headquartered companies and/or Bermuda-based insurers or reinsurers and/or changes in regulations or tax laws applicable to the Company, its subsidiaries, brokers or customers; and |
• | the other matters set forth under Item 1A “Risk Factors”, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other sections of the Company’s Annual Report on Form 10-K, as well as the other factors set forth in the Company’s other documents on file with the SEC, and management’s response to any of the aforementioned factors. |
![]() | |
![]() | |
Waterloo House, Ground Floor | |
100 Pitts Bay Road | |
Pembroke HM 08 Bermuda | |
441-278-9250 | |
441-278-9255 fax | |
Contact: | |
Mark D. Lyons | |
Executive Vice President and Chief Financial Officer |
Page | |||
I. | Financial Highlights | ||
II. | Consolidated Financial Statements | ||
c. | Consolidated Statements of Income | ||
a. | Consolidated Statements of Income -- Underwriting Format | ||
b. | Consolidated Balance Sheets | ||
d. | Consolidated Statements of Changes in Shareholders’ Equity | ||
e. | Consolidated Statements of Cash Flows | ||
III. | Segment Information | ||
a. | Overview | ||
b. | Consolidated Results | ||
c. | Insurance Segment Results | ||
d. | Reinsurance Segment Results | ||
e. | Mortgage Segment Results | ||
IV. | Investment Information | ||
a. | Investable Asset Summary and Investment Portfolio Metrics | ||
b. | Composition of Fixed Maturities | ||
c. | Credit Quality Distribution and Maturity Profile | ||
d. | Analysis of Corporate Exposures | ||
e. | Structured Securities | ||
f. | Bank Loan Investments | ||
g. | Eurozone Investments | ||
V. | Other | ||
a. | Comments on Regulation G | ||
b. | Operating Income Reconciliation and Annualized Operating Return on Average Common Equity | ||
c. | Operating Income and Effective Tax Rate Calculations | ||
d. | Capital Structure and Share Repurchase Activity |
1 |
2 |
(U.S. Dollars in thousands, except share data) | Three Months Ended | Year Ended | ||||||||||||||||||||
December 31, | December 31, | |||||||||||||||||||||
2014 | 2013 | Change | 2014 | 2013 | Change | |||||||||||||||||
Underwriting results (1): | ||||||||||||||||||||||
Gross premiums written | $ | 1,069,932 | $ | 955,199 | 12.0 | % | $ | 4,760,394 | $ | 4,196,623 | 13.4 | % | ||||||||||
Net premiums written | 804,836 | 748,921 | 7.5 | % | 3,617,482 | 3,351,367 | 7.9 | % | ||||||||||||||
Net premiums earned | 869,604 | 839,366 | 3.6 | % | 3,490,271 | 3,145,952 | 10.9 | % | ||||||||||||||
Underwriting income | 114,300 | 128,318 | (10.9 | )% | 474,178 | 451,737 | 5.0 | % | ||||||||||||||
Loss ratio | 52.8 | % | 51.7 | % | 1.1 | 53.0 | % | 53.4 | % | (0.4 | ) | |||||||||||
Acquisition expense ratio | 18.4 | % | 18.8 | % | (0.4 | ) | 18.0 | % | 17.9 | % | 0.1 | |||||||||||
Other operating expense ratio | 16.3 | % | 14.9 | % | 1.4 | 15.8 | % | 14.6 | % | 1.2 | ||||||||||||
Combined ratio | 87.5 | % | 85.4 | % | 2.1 | 86.8 | % | 85.9 | % | 0.9 | ||||||||||||
Net investment income (1) | $ | 72,646 | $ | 67,095 | 8.3 | % | $ | 284,336 | $ | 267,219 | 6.4 | % | ||||||||||
Per diluted share | $ | 0.56 | $ | 0.49 | 14.3 | % | $ | 2.11 | $ | 1.97 | 7.1 | % | ||||||||||
Net income available to Arch common shareholders | $ | 209,679 | $ | 156,005 | 34.4 | % | $ | 812,417 | $ | 687,793 | 18.1 | % | ||||||||||
Per diluted share | $ | 1.60 | $ | 1.14 | 40.4 | % | $ | 6.02 | $ | 5.07 | 18.7 | % | ||||||||||
After-tax operating income available to Arch common shareholders (2) | $ | 150,184 | $ | 152,741 | (1.7 | )% | $ | 617,312 | $ | 595,715 | 3.6 | % | ||||||||||
Per diluted share | $ | 1.15 | $ | 1.12 | 2.7 | % | $ | 4.58 | $ | 4.39 | 4.3 | % | ||||||||||
Comprehensive income available to Arch | $ | 241,834 | $ | 194,499 | 24.3 | % | $ | 888,247 | $ | 497,678 | 78.5 | % | ||||||||||
Cash flow from operations (1) | $ | 226,948 | $ | 223,820 | 1.4 | % | $ | 997,815 | $ | 850,868 | 17.3 | % | ||||||||||
Diluted weighted average common shares and common share equivalents outstanding | 130,855,218 | 136,467,998 | (4.1 | )% | 134,922,322 | 135,777,183 | (0.6 | )% | ||||||||||||||
Financial measures: | ||||||||||||||||||||||
Change in book value per common share during period | 3.5 | % | 3.9 | % | (0.4 | ) | 14.5 | % | 10.0 | % | 4.5 | |||||||||||
Annualized operating return on average common equity | 10.4 | % | 11.7 | % | (1.3 | ) | 11.1 | % | 11.7 | % | (0.6 | ) | ||||||||||
Total return on investments (1) (3) | ||||||||||||||||||||||
Including effects of foreign exchange | 0.85 | % | 0.97 | % | -12 bps | 3.21 | % | 1.28 | % | 193 bps | ||||||||||||
Excluding effects of foreign exchange | 1.34 | % | 0.85 | % | 49 bps | 4.26 | % | 1.13 | % | 313 bps |
(1) | Excludes amounts reflected in the ‘other’ segment. |
(2) | See Comments on Regulation G. |
(3) | Total return on investments includes net investment income, equity in net income (loss) of investment funds accounted for using the equity method, net realized gains and losses and the change in unrealized gains and losses generated by the Company’s investment portfolio. Total return is calculated on a pre-tax basis and before investment expenses. |
3 |
(U.S. Dollars in thousands, except share data) | Three Months Ended | Year Ended | ||||||||||||||||||||||||||
December 31, | September 30, | June 30, | March 31, | December 31, | December 31, | December 31, | ||||||||||||||||||||||
2014 | 2014 | 2014 | 2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||||
Net premiums written | $ | 895,481 | $ | 959,539 | $ | 971,928 | $ | 1,064,990 | $ | 748,921 | $ | 3,891,938 | $ | 3,351,367 | ||||||||||||||
Change in unearned premiums | 27,684 | (55,888 | ) | (64,776 | ) | (205,210 | ) | 90,445 | (298,190 | ) | (205,415 | ) | ||||||||||||||||
Net premiums earned | 923,165 | 903,651 | 907,152 | 859,780 | 839,366 | 3,593,748 | 3,145,952 | |||||||||||||||||||||
Net investment income | 82,496 | 80,105 | 72,990 | 66,994 | 67,095 | 302,585 | 267,219 | |||||||||||||||||||||
Net realized gains (losses) | 10,561 | 18,515 | 54,144 | 19,697 | 9,048 | 102,917 | 74,018 | |||||||||||||||||||||
Net impairment losses recognized in earnings | (3,837 | ) | (8,593 | ) | (14,749 | ) | (2,971 | ) | (88 | ) | (30,150 | ) | (3,786 | ) | ||||||||||||||
Other underwriting income | 4,825 | 1,702 | 2,033 | 1,582 | 5,673 | 10,142 | 7,639 | |||||||||||||||||||||
Equity in net income of investment funds accounted for using the equity method | 2,424 | 4,966 | 9,240 | 3,253 | 5,272 | 19,883 | 35,701 | |||||||||||||||||||||
Other income (loss) | (5,183 | ) | (7,815 | ) | 4,850 | (2,104 | ) | (3,288 | ) | (10,252 | ) | (586 | ) | |||||||||||||||
Total revenues | 1,014,451 | 992,531 | 1,035,660 | 946,231 | 923,078 | 3,988,873 | 3,526,157 | |||||||||||||||||||||
Expenses | ||||||||||||||||||||||||||||
Losses and loss adjustment expenses | (495,819 | ) | (501,673 | ) | (485,518 | ) | (436,240 | ) | (434,323 | ) | (1,919,250 | ) | (1,679,424 | ) | ||||||||||||||
Acquisition expenses | (175,215 | ) | (163,547 | ) | (158,158 | ) | (160,342 | ) | (157,521 | ) | (657,262 | ) | (564,103 | ) | ||||||||||||||
Other operating expenses | (154,595 | ) | (149,480 | ) | (156,350 | ) | (145,799 | ) | (135,069 | ) | (606,224 | ) | (500,730 | ) | ||||||||||||||
Interest expense | (12,744 | ) | (4,152 | ) | (14,334 | ) | (14,404 | ) | (9,373 | ) | (45,634 | ) | (27,060 | ) | ||||||||||||||
Net foreign exchange gains (losses) | 36,570 | 56,031 | (2,294 | ) | (6,563 | ) | (9,848 | ) | 83,744 | (12,335 | ) | |||||||||||||||||
Total expenses | (801,803 | ) | (762,821 | ) | (816,654 | ) | (763,348 | ) | (746,134 | ) | (3,144,626 | ) | (2,783,652 | ) | ||||||||||||||
Income before income taxes | 212,648 | 229,710 | 219,006 | 182,883 | 176,944 | 844,247 | 742,505 | |||||||||||||||||||||
Income tax expense | (5,514 | ) | (6,446 | ) | (7,289 | ) | (3,738 | ) | (15,454 | ) | (22,987 | ) | (32,774 | ) | ||||||||||||||
Net income | 207,134 | 223,264 | 211,717 | 179,145 | 161,490 | 821,260 | 709,731 | |||||||||||||||||||||
Amounts attributable to noncontrolling interests | 8,030 | 5,411 | (3,701 | ) | 3,355 | — | 13,095 | — | ||||||||||||||||||||
Net income attributable to Arch | 215,164 | 228,675 | 208,016 | 182,500 | 161,490 | 834,355 | 709,731 | |||||||||||||||||||||
Preferred dividends | (5,485 | ) | (5,484 | ) | (5,485 | ) | (5,484 | ) | (5,485 | ) | (21,938 | ) | (21,938 | ) | ||||||||||||||
Net income available to Arch common shareholders | $ | 209,679 | $ | 223,191 | $ | 202,531 | $ | 177,016 | $ | 156,005 | $ | 812,417 | $ | 687,793 | ||||||||||||||
Comprehensive income (loss) available to Arch | $ | 241,834 | $ | 96,978 | $ | 318,180 | $ | 231,255 | $ | 194,499 | $ | 888,247 | $ | 497,678 | ||||||||||||||
Net income per common share | ||||||||||||||||||||||||||||
Basic | $ | 1.65 | $ | 1.69 | $ | 1.53 | $ | 1.34 | $ | 1.19 | $ | 6.21 | $ | 5.24 | ||||||||||||||
Diluted | $ | 1.60 | $ | 1.64 | $ | 1.48 | $ | 1.30 | $ | 1.14 | $ | 6.02 | $ | 5.07 | ||||||||||||||
Weighted average common shares and common share equivalents outstanding | ||||||||||||||||||||||||||||
Basic | 126,857,041 | 131,945,962 | 132,650,634 | 131,857,910 | 131,631,606 | 130,817,610 | 131,355,392 | |||||||||||||||||||||
Diluted | 130,855,218 | 135,876,605 | 136,889,944 | 136,562,717 | 136,467,998 | 134,922,322 | 135,777,183 |
4 |
(U.S. Dollars in thousands) | Three Months Ended | Year Ended | ||||||||||||||||||||||||||
December 31, | September 30, | June 30, | March 31, | December 31, | December 31, | December 31, | ||||||||||||||||||||||
2014 | 2014 | 2014 | 2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||||
Gross premiums written | $ | 1,113,812 | $ | 1,159,907 | $ | 1,271,761 | $ | 1,295,136 | $ | 955,199 | $ | 4,840,616 | $ | 4,196,623 | ||||||||||||||
Premiums ceded | (218,331 | ) | (200,368 | ) | (299,833 | ) | (230,146 | ) | (206,278 | ) | (948,678 | ) | (845,256 | ) | ||||||||||||||
Net premiums written | 895,481 | 959,539 | 971,928 | 1,064,990 | 748,921 | 3,891,938 | 3,351,367 | |||||||||||||||||||||
Change in unearned premiums | 27,684 | (55,888 | ) | (64,776 | ) | $ | (205,210 | ) | 90,445 | (298,190 | ) | (205,415 | ) | |||||||||||||||
Net premiums earned | 923,165 | 903,651 | 907,152 | 859,780 | 839,366 | 3,593,748 | 3,145,952 | |||||||||||||||||||||
Other underwriting income | 4,825 | 1,702 | 2,033 | 1,582 | 5,673 | 10,142 | 7,639 | |||||||||||||||||||||
Losses and loss adjustment expenses | (495,819 | ) | (501,673 | ) | (485,518 | ) | (436,240 | ) | (434,323 | ) | (1,919,250 | ) | (1,679,424 | ) | ||||||||||||||
Acquisition expenses, net | (175,215 | ) | (163,547 | ) | (158,158 | ) | (160,342 | ) | (157,521 | ) | (657,262 | ) | (564,103 | ) | ||||||||||||||
Other operating expenses | (143,492 | ) | (139,046 | ) | (141,418 | ) | (132,324 | ) | (124,877 | ) | (556,280 | ) | (458,327 | ) | ||||||||||||||
Underwriting income | 113,464 | 101,087 | 124,091 | 132,456 | 128,318 | 471,098 | 451,737 | |||||||||||||||||||||
Net investment income | 82,496 | 80,105 | 72,990 | 66,994 | 67,095 | 302,585 | 267,219 | |||||||||||||||||||||
Net realized gains (losses) | 10,561 | 18,515 | 54,144 | 19,697 | 9,048 | 102,917 | 74,018 | |||||||||||||||||||||
Net impairment losses recognized in earnings | (3,837 | ) | (8,593 | ) | (14,749 | ) | (2,971 | ) | (88 | ) | (30,150 | ) | (3,786 | ) | ||||||||||||||
Equity in net income of investment funds accounted for using the equity method | 2,424 | 4,966 | 9,240 | 3,253 | 5,272 | 19,883 | 35,701 | |||||||||||||||||||||
Other income (loss) | (5,183 | ) | (7,815 | ) | 4,850 | (2,104 | ) | (3,288 | ) | (10,252 | ) | (586 | ) | |||||||||||||||
Other expenses | (11,103 | ) | (10,434 | ) | (14,932 | ) | (13,475 | ) | (10,192 | ) | (49,944 | ) | (42,403 | ) | ||||||||||||||
Interest expense | (12,744 | ) | (4,152 | ) | (14,334 | ) | (14,404 | ) | (9,373 | ) | (45,634 | ) | (27,060 | ) | ||||||||||||||
Net foreign exchange gains (losses) | 36,570 | 56,031 | (2,294 | ) | (6,563 | ) | (9,848 | ) | 83,744 | (12,335 | ) | |||||||||||||||||
Income before income taxes | 212,648 | 229,710 | 219,006 | 182,883 | 176,944 | 844,247 | 742,505 | |||||||||||||||||||||
Income tax expense | (5,514 | ) | (6,446 | ) | (7,289 | ) | (3,738 | ) | (15,454 | ) | (22,987 | ) | (32,774 | ) | ||||||||||||||
Net income | 207,134 | 223,264 | 211,717 | 179,145 | 161,490 | 821,260 | 709,731 | |||||||||||||||||||||
Amounts attributable to noncontrolling interests | 8,030 | 5,411 | (3,701 | ) | 3,355 | — | 13,095 | — | ||||||||||||||||||||
Net income available to Arch | 215,164 | 228,675 | 208,016 | 182,500 | 161,490 | 834,355 | 709,731 | |||||||||||||||||||||
Preferred dividends | (5,485 | ) | (5,484 | ) | (5,485 | ) | (5,484 | ) | (5,485 | ) | (21,938 | ) | (21,938 | ) | ||||||||||||||
Net income available to Arch common shareholders | $ | 209,679 | $ | 223,191 | $ | 202,531 | $ | 177,016 | $ | 156,005 | $ | 812,417 | $ | 687,793 | ||||||||||||||
Underwriting Ratios | ||||||||||||||||||||||||||||
Loss ratio | 53.7 | % | 55.5 | % | 53.5 | % | 50.7 | % | 51.7 | % | 53.4 | % | 53.4 | % | ||||||||||||||
Acquisition expense ratio | 19.0 | % | 18.1 | % | 17.4 | % | 18.6 | % | 18.8 | % | 18.3 | % | 17.9 | % | ||||||||||||||
Other operating expense ratio | 15.5 | % | 15.4 | % | 15.6 | % | 15.4 | % | 14.9 | % | 15.5 | % | 14.6 | % | ||||||||||||||
Combined ratio | 88.2 | % | 89.0 | % | 86.5 | % | 84.7 | % | 85.4 | % | 87.2 | % | 85.9 | % | ||||||||||||||
Net premiums written to gross premiums written | 80.4 | % | 82.7 | % | 76.4 | % | 82.2 | % | 78.4 | % | 80.4 | % | 79.9 | % |
5 |
(U.S. Dollars in thousands, except share data) | December 31, | September 30, | June 30, | March 31, | December 31, | |||||||||||||||
2014 | 2014 | 2014 | 2014 | 2013 | ||||||||||||||||
Assets | ||||||||||||||||||||
Investments: | ||||||||||||||||||||
Fixed maturities available for sale, at fair value | $ | 10,750,770 | $ | 10,733,382 | $ | 10,714,532 | $ | 9,775,730 | $ | 9,571,776 | ||||||||||
Short-term investments available for sale, at fair value | 797,226 | 748,659 | 977,058 | 1,484,280 | 1,478,367 | |||||||||||||||
Investment of funds received under securities lending, at fair value | 44,301 | 104,252 | 82,603 | 96,264 | 100,584 | |||||||||||||||
Equity securities available for sale, at fair value | 658,182 | 582,075 | 608,820 | 548,168 | 496,824 | |||||||||||||||
Other investments available for sale, at fair value | 296,224 | 431,833 | 457,567 | 426,917 | 498,310 | |||||||||||||||
Investments accounted for using the fair value option | 2,435,532 | 2,202,995 | 2,041,091 | 1,256,650 | 1,221,534 | |||||||||||||||
Investments accounted for using the equity method | 349,014 | 307,252 | 281,464 | 255,488 | 244,339 | |||||||||||||||
Total investments | 15,331,249 | 15,110,448 | 15,163,135 | 13,843,497 | 13,611,734 | |||||||||||||||
Cash | 485,702 | 663,726 | 926,443 | 1,569,605 | 434,057 | |||||||||||||||
Accrued investment income | 74,316 | 65,042 | 64,869 | 59,701 | 66,848 | |||||||||||||||
Investment in joint venture | 90,426 | 97,313 | 103,934 | 102,803 | 104,856 | |||||||||||||||
Fixed maturities and short-term investments pledged under securities lending, at fair value | 50,802 | 107,547 | 87,031 | 100,590 | 105,081 | |||||||||||||||
Premiums receivable | 948,695 | 1,027,204 | 1,098,692 | 1,008,375 | 753,924 | |||||||||||||||
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses | 1,812,845 | 1,814,190 | 1,796,403 | 1,790,025 | 1,804,330 | |||||||||||||||
Contractholder receivables | 1,309,192 | 1,286,799 | 1,234,392 | 1,118,991 | 1,064,246 | |||||||||||||||
Prepaid reinsurance premiums | 377,078 | 404,661 | 430,214 | 349,077 | 328,343 | |||||||||||||||
Deferred acquisition costs, net | 414,525 | 409,174 | 399,385 | 384,294 | 342,314 | |||||||||||||||
Receivable for securities sold | 78,170 | 672,259 | 261,669 | 426,431 | 50,555 | |||||||||||||||
Goodwill and intangible assets | 109,539 | 111,528 | 118,721 | 120,875 | 27,319 | |||||||||||||||
Other assets | 927,004 | 840,794 | 888,627 | 926,094 | 872,487 | |||||||||||||||
Total assets | $ | 22,009,543 | $ | 22,610,685 | $ | 22,573,515 | $ | 21,800,358 | $ | 19,566,094 | ||||||||||
Liabilities | ||||||||||||||||||||
Reserve for losses and loss adjustment expenses | $ | 9,036,448 | $ | 8,958,734 | $ | 9,018,989 | $ | 8,938,958 | $ | 8,824,696 | ||||||||||
Unearned premiums | 2,231,578 | 2,303,247 | 2,299,692 | 2,148,475 | 1,896,365 | |||||||||||||||
Reinsurance balances payable | 219,312 | 244,379 | 263,347 | 201,794 | 196,167 | |||||||||||||||
Contractholder payables | 1,309,192 | 1,286,799 | 1,234,392 | 1,118,991 | 1,064,246 | |||||||||||||||
Deposit accounting liabilities | 327,384 | 349,850 | 397,337 | 409,080 | 421,297 | |||||||||||||||
Senior notes | 800,000 | 800,000 | 800,000 | 800,000 | 800,000 | |||||||||||||||
Revolving credit agreement borrowings | 100,000 | 100,000 | 100,000 | 100,000 | 100,000 | |||||||||||||||
Securities lending payable | 50,529 | 110,736 | 89,298 | 103,330 | 107,999 | |||||||||||||||
Payable for securities purchased | 128,413 | 740,953 | 552,075 | 499,473 | 51,318 | |||||||||||||||
Other liabilities | 688,041 | 633,502 | 577,320 | 575,394 | 456,510 | |||||||||||||||
Total liabilities | 14,890,897 | 15,528,200 | 15,332,450 | 14,895,495 | 13,918,598 | |||||||||||||||
Redeemable noncontrolling interests | 219,512 | 219,419 | 219,326 | 219,234 | — | |||||||||||||||
Shareholders’ equity | ||||||||||||||||||||
Non-cumulative preferred shares | 325,000 | 325,000 | 325,000 | 325,000 | 325,000 | |||||||||||||||
Common shares | 572 | 571 | 570 | 567 | 565 | |||||||||||||||
Additional paid-in capital | 383,073 | 366,408 | 353,208 | 320,503 | 299,517 | |||||||||||||||
Retained earnings | 6,854,571 | 6,644,892 | 6,421,701 | 6,219,170 | 6,042,154 | |||||||||||||||
Accumulated other comprehensive income, net of deferred income tax | 128,856 | 102,186 | 233,883 | 123,719 | 74,964 | |||||||||||||||
Common shares held in treasury, at cost | (1,562,019 | ) | (1,358,011 | ) | (1,104,963 | ) | (1,096,826 | ) | (1,094,704 | ) | ||||||||||
Total shareholders’ equity available to Arch | 6,130,053 | 6,081,046 | 6,229,399 | 5,892,133 | 5,647,496 | |||||||||||||||
Non-redeemable noncontrolling interests | 769,081 | 782,020 | 792,340 | 793,496 | — | |||||||||||||||
Total shareholders’ equity | 6,899,134 | 6,863,066 | 7,021,739 | 6,685,629 | 5,647,496 | |||||||||||||||
Total liabilities, noncontrolling interests and shareholders’ equity | $ | 22,009,543 | $ | 22,610,685 | $ | 22,573,515 | $ | 21,800,358 | $ | 19,566,094 | ||||||||||
Common shares outstanding, net of treasury shares | 127,367,934 | 130,700,619 | 135,030,886 | 134,084,138 | 133,674,884 | |||||||||||||||
Book value per common share (1) | $ | 45.58 | $ | 44.04 | $ | 43.73 | $ | 41.52 | $ | 39.82 |
6 |
(U.S. Dollars in thousands) | Three Months Ended | Year Ended | ||||||||||||||||||||||||||
December 31, | September 30, | June 30, | March 31, | December 31, | December 31, | December 31, | ||||||||||||||||||||||
2014 | 2014 | 2014 | 2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||||
Non-Cumulative Preferred Shares | ||||||||||||||||||||||||||||
Balance at beginning and end of period | $ | 325,000 | $ | 325,000 | $ | 325,000 | $ | 325,000 | $ | 325,000 | $ | 325,000 | $ | 325,000 | ||||||||||||||
Common Shares | ||||||||||||||||||||||||||||
Balance at beginning of period | 571 | 570 | 567 | 565 | 565 | 565 | 561 | |||||||||||||||||||||
Common shares issued, net | 1 | 1 | 3 | 2 | — | 7 | 4 | |||||||||||||||||||||
Balance at end of period | 572 | 571 | 570 | 567 | 565 | 572 | 565 | |||||||||||||||||||||
Additional Paid-in Capital | ||||||||||||||||||||||||||||
Balance at beginning of period | 366,408 | 353,208 | 320,503 | 299,517 | 283,449 | 299,517 | 227,778 | |||||||||||||||||||||
Common shares issued, net | 3,189 | 41 | 6,360 | — | 2,654 | 9,590 | 8,237 | |||||||||||||||||||||
Exercise of stock options | 3,771 | 3,658 | 3,179 | 8,054 | 3,123 | 18,662 | 10,561 | |||||||||||||||||||||
Amortization of share-based compensation | 9,671 | 9,491 | 21,452 | 14,175 | 8,932 | 54,789 | 49,237 | |||||||||||||||||||||
Other | 34 | 10 | 1,714 | (1,243 | ) | 1,359 | 515 | 3,704 | ||||||||||||||||||||
Balance at end of period | 383,073 | 366,408 | 353,208 | 320,503 | 299,517 | 383,073 | 299,517 | |||||||||||||||||||||
Retained Earnings | ||||||||||||||||||||||||||||
Balance at beginning of period | 6,644,892 | 6,421,701 | 6,219,170 | 6,042,154 | 5,886,149 | 6,042,154 | 5,354,361 | |||||||||||||||||||||
Net income | 207,134 | 223,264 | 211,717 | 179,145 | 161,490 | 821,260 | 709,731 | |||||||||||||||||||||
Amounts attributable to noncontrolling interests | 8,030 | 5,411 | (3,701 | ) | 3,355 | — | 13,095 | — | ||||||||||||||||||||
Preferred share dividends | (5,485 | ) | (5,484 | ) | (5,485 | ) | (5,484 | ) | (5,485 | ) | (21,938 | ) | (21,938 | ) | ||||||||||||||
Balance at end of period | 6,854,571 | 6,644,892 | 6,421,701 | 6,219,170 | 6,042,154 | 6,854,571 | 6,042,154 | |||||||||||||||||||||
Accumulated Other Comprehensive Income | ||||||||||||||||||||||||||||
Balance at beginning of period | 102,186 | 233,883 | 123,719 | 74,964 | 41,955 | 74,964 | 287,017 | |||||||||||||||||||||
Unrealized appreciation in value of available-for-sale investments, net of deferred income tax: | ||||||||||||||||||||||||||||
Balance at beginning of period | 122,837 | 230,939 | 130,796 | 80,692 | 49,000 | 80,692 | 289,956 | |||||||||||||||||||||
Unrealized holding gains (losses) arising during period, net of reclassification adjustment | 39,081 | (108,102 | ) | 100,143 | 50,104 | 31,692 | 81,226 | (209,089 | ) | |||||||||||||||||||
Portion of other-than-temporary impairment losses recognized in other comprehensive income, net of deferred income tax | (320 | ) | — | — | — | — | (320 | ) | (175 | ) | ||||||||||||||||||
Balance at end of period | 161,598 | 122,837 | 230,939 | 130,796 | 80,692 | 161,598 | 80,692 | |||||||||||||||||||||
Foreign currency translation adjustments: | ||||||||||||||||||||||||||||
Balance at beginning of period | (20,651 | ) | 2,944 | (7,077 | ) | (5,728 | ) | (7,045 | ) | (5,728 | ) | (2,939 | ) | |||||||||||||||
Foreign currency translation adjustments | (12,091 | ) | (23,595 | ) | 10,021 | (1,349 | ) | 1,317 | (27,014 | ) | (2,789 | ) | ||||||||||||||||
Balance at end of period | (32,742 | ) | (20,651 | ) | 2,944 | (7,077 | ) | (5,728 | ) | (32,742 | ) | (5,728 | ) | |||||||||||||||
Balance at end of period | 128,856 | 102,186 | 233,883 | 123,719 | 74,964 | 128,856 | 74,964 | |||||||||||||||||||||
Common Shares Held in Treasury, at Cost | ||||||||||||||||||||||||||||
Balance at beginning of period | (1,358,011 | ) | (1,104,963 | ) | (1,096,826 | ) | (1,094,704 | ) | (1,093,833 | ) | (1,094,704 | ) | (1,025,839 | ) | ||||||||||||||
Shares repurchased for treasury | (204,008 | ) | (253,048 | ) | (8,137 | ) | (2,122 | ) | (871 | ) | (467,315 | ) | (68,865 | ) | ||||||||||||||
Balance at end of period | (1,562,019 | ) | (1,358,011 | ) | (1,104,963 | ) | (1,096,826 | ) | (1,094,704 | ) | (1,562,019 | ) | (1,094,704 | ) | ||||||||||||||
Total shareholders’ equity available to Arch | 6,130,053 | 6,081,046 | 6,229,399 | 5,892,133 | 5,647,496 | 6,130,053 | 5,647,496 | |||||||||||||||||||||
Non-redeemable noncontrolling interests | 769,081 | 782,020 | 792,340 | 793,496 | — | 769,081 | — | |||||||||||||||||||||
Total shareholders’ equity | $ | 6,899,134 | $ | 6,863,066 | $ | 7,021,739 | $ | 6,685,629 | $ | 5,647,496 | $ | 6,899,134 | $ | 5,647,496 |
7 |
(U.S. Dollars in thousands) | Three Months Ended | Year Ended | ||||||||||||||||||||||||||
December 31, | September 30, | June 30, | March 31, | December 31, | December 31, | December 31, | ||||||||||||||||||||||
2014 | 2014 | 2014 | 2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||||
Operating Activities | ||||||||||||||||||||||||||||
Net income | $ | 207,134 | $ | 223,264 | $ | 211,717 | $ | 179,145 | $ | 161,490 | $ | 821,260 | $ | 709,731 | ||||||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||||||||||||||
Net realized (gains) losses | (14,478 | ) | (25,513 | ) | (65,153 | ) | (22,367 | ) | (11,127 | ) | (127,511 | ) | (78,084 | ) | ||||||||||||||
Net impairment losses included in earnings | 3,837 | 8,593 | 14,749 | 2,971 | 88 | 30,150 | 3,786 | |||||||||||||||||||||
Equity in net income or loss of investment funds accounted for using the equity method and other income or loss | 9,556 | 3,919 | (9,694 | ) | 9,559 | 17,190 | 13,340 | 52,824 | ||||||||||||||||||||
Share-based compensation | 9,671 | 9,491 | 21,452 | 14,175 | 8,932 | 54,789 | 49,237 | |||||||||||||||||||||
Changes in: | ||||||||||||||||||||||||||||
Reserve for losses and loss adjustment expenses, net of unpaid losses and loss adjustment expenses recoverable | 61,956 | 33,781 | 50,148 | 10,326 | (5,088 | ) | 156,211 | (29,393 | ) | |||||||||||||||||||
Unearned premiums, net of prepaid reinsurance premiums | (27,684 | ) | 55,888 | 64,776 | 205,210 | (90,445 | ) | 298,190 | 205,415 | |||||||||||||||||||
Premiums receivable | 62,731 | 46,187 | (83,337 | ) | (242,616 | ) | 99,867 | (217,035 | ) | (60,224 | ) | |||||||||||||||||
Deferred acquisition costs, net | (9,464 | ) | (16,298 | ) | (13,834 | ) | (41,988 | ) | (2,155 | ) | (81,584 | ) | (75,948 | ) | ||||||||||||||
Reinsurance balances payable | (22,922 | ) | (16,182 | ) | 60,375 | 5,428 | 4,257 | 26,699 | 6,830 | |||||||||||||||||||
Other liabilities | (16,132 | ) | 74,756 | (16,152 | ) | 59,285 | (14,096 | ) | 101,757 | (29,989 | ) | |||||||||||||||||
Other items, net | (26,734 | ) | (51,290 | ) | 19,847 | 19,041 | 54,907 | (39,136 | ) | 96,683 | ||||||||||||||||||
Net Cash Provided By Operating Activities | 237,471 | 346,596 | 254,894 | 198,169 | 223,820 | 1,037,130 | 850,868 | |||||||||||||||||||||
Investing Activities | ||||||||||||||||||||||||||||
Purchases of fixed maturity investments | (6,714,417 | ) | (7,719,114 | ) | (7,180,677 | ) | (7,131,071 | ) | (5,738,401 | ) | (28,745,279 | ) | (18,174,988 | ) | ||||||||||||||
Purchases of equity securities | (154,239 | ) | (191,891 | ) | (85,460 | ) | (89,227 | ) | (97,602 | ) | (520,817 | ) | (535,857 | ) | ||||||||||||||
Purchases of other investments | (660,790 | ) | (573,704 | ) | (718,533 | ) | (304,454 | ) | (333,794 | ) | (2,257,481 | ) | (1,326,729 | ) | ||||||||||||||
Proceeds from sales of fixed maturity investments | 6,538,323 | 7,080,015 | 6,190,573 | 7,014,281 | 5,319,195 | 26,823,192 | 17,196,614 | |||||||||||||||||||||
Proceeds from sales of equity securities | 106,328 | 206,347 | 49,073 | 49,614 | 89,787 | 411,362 | 462,787 | |||||||||||||||||||||
Proceeds from sales, redemptions and maturities of other investments | 612,099 | 412,194 | 287,531 | 331,176 | 349,111 | 1,643,000 | 1,162,707 | |||||||||||||||||||||
Proceeds from redemptions and maturities of fixed maturities | 126,266 | 204,689 | 263,556 | 168,484 | 136,205 | 762,995 | 731,708 | |||||||||||||||||||||
Net sales (purchases) of short-term investments | (101,262 | ) | 248,084 | 274,042 | 156,262 | (481,645 | ) | 577,126 | (750,613 | ) | ||||||||||||||||||
Change in investment of securities lending collateral | 60,207 | (21,438 | ) | 14,032 | 4,669 | (58,151 | ) | 57,470 | (55,643 | ) | ||||||||||||||||||
Purchase of business, net of cash acquired | (1,528 | ) | — | — | (235,578 | ) | — | (237,106 | ) | — | ||||||||||||||||||
Purchases of furniture, equipment and other | (5,308 | ) | (4,215 | ) | (4,978 | ) | (5,382 | ) | (6,546 | ) | (19,883 | ) | (17,499 | ) | ||||||||||||||
Net Cash Used For Investing Activities | (194,321 | ) | (359,033 | ) | (910,841 | ) | (41,226 | ) | (821,841 | ) | (1,505,421 | ) | (1,307,513 | ) | ||||||||||||||
Financing Activities | ||||||||||||||||||||||||||||
Purchases of common shares under share repurchase program | (202,218 | ) | (251,919 | ) | — | — | — | (454,137 | ) | (57,796 | ) | |||||||||||||||||
Proceeds from common shares issued, net | 3,579 | 727 | (500 | ) | 3,021 | 3,476 | 6,827 | 3,051 | ||||||||||||||||||||
Proceeds from borrowings | — | — | — | — | 494,228 | — | 494,228 | |||||||||||||||||||||
Change in securities lending collateral | (60,207 | ) | 21,438 | (14,032 | ) | (4,669 | ) | 58,151 | (57,470 | ) | 55,643 | |||||||||||||||||
Third party investment in non-redeemable noncontrolling interests | — | — | — | 796,903 | — | 796,903 | — | |||||||||||||||||||||
Third party investment in redeemable noncontrolling interests | — | — | 32,340 | 186,893 | — | 219,233 | — | |||||||||||||||||||||
Dividends paid to redeemable noncontrolling interests | (4,816 | ) | (4,816 | ) | (4,816 | ) | — | — | (14,448 | ) | — | |||||||||||||||||
Other | 58,414 | 1,853 | 3,006 | 1,700 | 45,151 | 64,973 | 50,830 | |||||||||||||||||||||
Preferred dividends paid | (5,485 | ) | (5,484 | ) | (5,485 | ) | (5,484 | ) | (5,485 | ) | (21,938 | ) | (21,938 | ) | ||||||||||||||
Net Cash Provided By (Used For) Financing Activities | (210,733 | ) | (238,201 | ) | 10,513 | 978,364 | 595,521 | 539,943 | 524,018 | |||||||||||||||||||
Effects of exchange rate changes on foreign currency cash | (10,441 | ) | (12,079 | ) | 2,272 | 241 | 416 | (20,007 | ) | (4,357 | ) | |||||||||||||||||
Increase (decrease) in cash | (178,024 | ) | (262,717 | ) | (643,162 | ) | 1,135,548 | (2,084 | ) | 51,645 | 63,016 | |||||||||||||||||
Cash beginning of period | 663,726 | 926,443 | 1,569,605 | 434,057 | 436,141 | 434,057 | 371,041 | |||||||||||||||||||||
Cash end of period | $ | 485,702 | $ | 663,726 | $ | 926,443 | $ | 1,569,605 | $ | 434,057 | $ | 485,702 | $ | 434,057 | ||||||||||||||
Income taxes paid, net | $ | 7,588 | $ | 5,056 | $ | 6,679 | $ | 1,600 | $ | 7,656 | $ | 20,923 | $ | 15,288 | ||||||||||||||
Interest paid | $ | 24,318 | $ | 415 | $ | 21,292 | $ | 404 | $ | 11,442 | $ | 46,429 | $ | 23,733 |
8 |
• | Construction and national accounts: primary and excess casualty coverages to middle and large accounts in the construction industry and a wide range of products for middle and large national accounts, specializing in loss sensitive primary casualty insurance programs (including large deductible, self-insured retention and retrospectively rated programs). |
• | Excess and surplus casualty: primary and excess casualty insurance coverages, including middle market energy business, and contract binding, which primarily provides casualty coverage through a network of appointed agents to small and medium risks. |
• | Lenders products: collateral protection, debt cancellation and service contract reimbursement products to banks, credit unions, automotive dealerships and original equipment manufacturers and other specialty programs that pertain to automotive lending and leasing. |
• | Professional lines: directors’ and officers’ liability, errors and omissions liability, employment practices liability, fiduciary liability, crime, professional indemnity and other financial related coverages for corporate, private equity, venture capital, real estate investment trust, limited partnership, financial institution and not-for-profit clients of all sizes and medical professional and general liability insurance coverages for the healthcare industry. The business is predominately written on a claims-made basis. |
• | Programs: primarily package policies, underwriting workers’ compensation and umbrella liability business in support of desirable package programs, targeting program managers with unique expertise and niche products offering general liability, commercial automobile, inland marine and property business with minimal catastrophe exposure. |
• | Property, energy, marine and aviation: primary and excess general property insurance coverages, including catastrophe-exposed property coverage, for commercial clients. Coverages for marine include hull, war, specie and liability. Aviation and stand alone terrorism are also offered. |
• | Travel, accident and health: specialty travel and accident and related insurance products for individual, group travelers, travel agents and suppliers, as well as accident and health, which provides accident, disability and medical plan insurance coverages for employer groups, medical plan members, students and other participant groups. |
• | Other: includes alternative market risks (including captive insurance programs), excess workers’ compensation and employer’s liability insurance coverages for qualified self-insured groups, associations and trusts, and contract and commercial surety coverages, including contract bonds (payment and performance bonds) primarily for medium and large contractors and commercial surety bonds for Fortune 1,000 companies and smaller transaction business programs. |
9 |
• | Casualty: provides coverage to ceding company clients on third party liability and workers’ compensation exposures from ceding company clients, primarily on a treaty basis. Exposures include, among others, executive assurance, professional liability, workers’ compensation, excess and umbrella liability, excess motor and healthcare business. |
• | Marine and aviation: provides coverage for energy, hull, cargo, specie, liability and transit, and aviation business, including airline and general aviation risks. Business written may also include space business, which includes coverages for satellite assembly, launch and operation for commercial space programs. |
• | Other specialty: provides coverage to ceding company clients for non-excess motor, including U.K. business primarily emanating from one significant client, and other lines including surety, accident and health, workers’ compensation catastrophe, agriculture, trade credit and political risk. |
• | Property catastrophe: provides protection for most catastrophic losses that are covered in the underlying policies written by reinsureds, including hurricane, earthquake, flood, tornado, hail and fire, and coverage for other perils on a case-by-case basis. Property catastrophe reinsurance provides coverage on an excess of loss basis when aggregate losses and loss adjustment expense from a single occurrence of a covered peril exceed the retention specified in the contract. |
• | Property excluding property catastrophe: provides coverage for both personal lines and commercial property exposures and principally covers buildings, structures, equipment and contents. The primary perils in this business include fire, explosion, collapse, riot, vandalism, wind, tornado, flood and earthquake. Business is assumed on both a proportional and excess of loss basis. In addition, facultative business is written which focuses on commercial property risks on an excess of loss basis. |
• | Other. includes life reinsurance business on both a proportional and non-proportional basis, casualty clash business and, in limited instances, non-traditional business which is intended to provide insurers with risk management solutions that complement traditional reinsurance. |
10 |
(U.S. Dollars in thousands) | Three Months Ended | |||||||||||||||||||||||
December 31, 2014 | ||||||||||||||||||||||||
Insurance | Reinsurance | Mortgage | Sub-total | Other | Total | |||||||||||||||||||
Gross premiums written (1) | $ | 699,109 | $ | 314,604 | $ | 57,584 | $ | 1,069,932 | $ | 98,388 | $ | 1,113,812 | ||||||||||||
Premiums ceded | (215,933 | ) | (45,631 | ) | (4,897 | ) | (265,096 | ) | (7,743 | ) | (218,331 | ) | ||||||||||||
Net premiums written | 483,176 | 268,973 | 52,687 | 804,836 | 90,645 | 895,481 | ||||||||||||||||||
Change in unearned premiums | 29,594 | 36,832 | (1,658 | ) | 64,768 | (37,084 | ) | 27,684 | ||||||||||||||||
Net premiums earned | 512,770 | 305,805 | 51,029 | 869,604 | 53,561 | 923,165 | ||||||||||||||||||
Other underwriting income | 622 | 2,333 | 1,870 | 4,825 | — | 4,825 | ||||||||||||||||||
Losses and loss adjustment expenses | (324,338 | ) | (118,705 | ) | (15,736 | ) | (458,779 | ) | (37,040 | ) | (495,819 | ) | ||||||||||||
Acquisition expenses, net | (81,152 | ) | (61,765 | ) | (16,807 | ) | (159,724 | ) | (15,491 | ) | (175,215 | ) | ||||||||||||
Other operating expenses | (85,046 | ) | (37,766 | ) | (18,814 | ) | (141,626 | ) | (1,866 | ) | (143,492 | ) | ||||||||||||
Underwriting income (loss) | $ | 22,856 | $ | 89,902 | $ | 1,542 | 114,300 | (836 | ) | 113,464 | ||||||||||||||
Net investment income | 72,646 | 9,850 | 82,496 | |||||||||||||||||||||
Net realized gains (losses) | 31,310 | (20,749 | ) | 10,561 | ||||||||||||||||||||
Net impairment losses recognized in earnings | (3,837 | ) | — | (3,837 | ) | |||||||||||||||||||
Equity in net income of investment funds accounted for using the equity method | 2,424 | — | 2,424 | |||||||||||||||||||||
Other income (loss) | (5,183 | ) | — | (5,183 | ) | |||||||||||||||||||
Other expenses | (11,103 | ) | — | (11,103 | ) | |||||||||||||||||||
Interest expense | (12,744 | ) | — | (12,744 | ) | |||||||||||||||||||
Net foreign exchange gains (losses) | 34,467 | 2,103 | 36,570 | |||||||||||||||||||||
Income before income taxes | 222,280 | (9,632 | ) | 212,648 | ||||||||||||||||||||
Income tax expense | (5,514 | ) | — | (5,514 | ) | |||||||||||||||||||
Net income | 216,766 | (9,632 | ) | 207,134 | ||||||||||||||||||||
Dividends attributable to redeemable noncontrolling interests | — | (4,909 | ) | (4,909 | ) | |||||||||||||||||||
Amounts attributable to nonredeemable noncontrolling interests | — | 12,939 | 12,939 | |||||||||||||||||||||
Net income available to Arch | 216,767 | (1,603 | ) | 215,164 | ||||||||||||||||||||
Preferred dividends | (5,485 | ) | — | (5,485 | ) | |||||||||||||||||||
Net income available to Arch common shareholders | $ | 211,282 | $ | (1,603 | ) | $ | 209,679 | |||||||||||||||||
Underwriting Ratios | ||||||||||||||||||||||||
Loss ratio | 63.3 | % | 38.8 | % | 30.8 | % | 52.8 | % | 69.2 | % | 53.7 | % | ||||||||||||
Acquisition expense ratio | 15.8 | % | 20.2 | % | 32.9 | % | 18.4 | % | 28.9 | % | 19.0 | % | ||||||||||||
Other operating expense ratio | 16.6 | % | 12.3 | % | 36.9 | % | 16.3 | % | 3.5 | % | 15.5 | % | ||||||||||||
Combined ratio | 95.7 | % | 71.3 | % | 100.6 | % | 87.5 | % | 101.6 | % | 88.2 | % | ||||||||||||
Net premiums written to gross premiums written | 69.1 | % | 85.5 | % | 91.5 | % | 75.2 | % | 92.1 | % | 80.4 | % | ||||||||||||
Total investable assets | $ | 14,609,969 | $ | 1,163,240 | $ | 15,773,209 | ||||||||||||||||||
Total assets | 20,527,027 | 1,482,516 | 22,009,543 | |||||||||||||||||||||
Total liabilities | 14,492,237 | 398,660 | 14,890,897 |
(1) | Certain amounts included in the gross premiums written of each segment are related to intersegment transactions and are included in the gross premiums written of each segment. Accordingly, the sum of gross premiums written for each segment does not agree to the total gross premiums written as shown in the table above due to the elimination of intersegment transactions in the total. |
11 |
(U.S. Dollars in thousands) | Three Months Ended | |||||||||||||||||||||||
December 31, 2013 | ||||||||||||||||||||||||
Insurance | Reinsurance | Mortgage | Sub-total | Other | Total | |||||||||||||||||||
Gross premiums written (1) | $ | 636,949 | $ | 299,818 | $ | 20,435 | $ | 955,199 | $ | — | $ | 955,199 | ||||||||||||
Premiums ceded | (196,242 | ) | (12,039 | ) | — | (206,278 | ) | — | (206,278 | ) | ||||||||||||||
Net premiums written | 440,707 | 287,779 | 20,435 | 748,921 | — | 748,921 | ||||||||||||||||||
Change in unearned premiums | 52,557 | 44,150 | (6,262 | ) | 90,445 | — | 90,445 | |||||||||||||||||
Net premiums earned | 493,264 | 331,929 | 14,173 | 839,366 | — | 839,366 | ||||||||||||||||||
Other underwriting income | 523 | 4,891 | 259 | 5,673 | — | 5,673 | ||||||||||||||||||
Losses and loss adjustment expenses | (307,865 | ) | (127,989 | ) | 1,531 | (434,323 | ) | — | (434,323 | ) | ||||||||||||||
Acquisition expenses, net | (84,098 | ) | (66,876 | ) | (6,547 | ) | (157,521 | ) | — | (157,521 | ) | |||||||||||||
Other operating expenses | (83,171 | ) | (38,356 | ) | (3,350 | ) | (124,877 | ) | — | (124,877 | ) | |||||||||||||
Underwriting income | $ | 18,653 | $ | 103,599 | $ | 6,066 | 128,318 | — | 128,318 | |||||||||||||||
Net investment income | 67,095 | — | 67,095 | |||||||||||||||||||||
Net realized gains (losses) | 9,048 | — | 9,048 | |||||||||||||||||||||
Net impairment losses recognized in earnings | (88 | ) | — | (88 | ) | |||||||||||||||||||
Equity in net income of investment funds accounted for using the equity method | 5,272 | — | 5,272 | |||||||||||||||||||||
Other income (loss) | (3,288 | ) | — | (3,288 | ) | |||||||||||||||||||
Other expenses | (10,192 | ) | — | (10,192 | ) | |||||||||||||||||||
Interest expense | (9,373 | ) | — | (9,373 | ) | |||||||||||||||||||
Net foreign exchange gains (losses) | (9,848 | ) | — | (9,848 | ) | |||||||||||||||||||
Income before income taxes | 176,944 | — | 176,944 | |||||||||||||||||||||
Income tax expense | (15,454 | ) | — | (15,454 | ) | |||||||||||||||||||
Net income | 161,490 | — | 161,490 | |||||||||||||||||||||
Dividends attributable to redeemable noncontrolling interests | — | — | — | |||||||||||||||||||||
Amounts attributable to nonredeemable noncontrolling interests | — | — | — | |||||||||||||||||||||
Net income available to Arch | 161,490 | — | 161,490 | |||||||||||||||||||||
Preferred dividends | (5,485 | ) | — | (5,485 | ) | |||||||||||||||||||
Net income available to Arch common shareholders | $ | 156,005 | $ | — | $ | 156,005 | ||||||||||||||||||
Underwriting Ratios | ||||||||||||||||||||||||
Loss ratio | 62.4 | % | 38.6 | % | (10.8 | )% | 51.7 | % | — | 51.7 | % | |||||||||||||
Acquisition expense ratio | 17.0 | % | 20.1 | % | 46.2 | % | 18.8 | % | — | 18.8 | % | |||||||||||||
Other operating expense ratio | 16.9 | % | 11.6 | % | 23.6 | % | 14.9 | % | — | 14.9 | % | |||||||||||||
Combined ratio | 96.3 | % | 70.3 | % | 59.0 | % | 85.4 | % | — | 85.4 | % | |||||||||||||
Net premiums written to gross premiums written | 69.2 | % | 96.0 | % | 100.0 | % | 78.4 | % | — | 78.4 | % | |||||||||||||
Total investable assets | $ | 14,049,525 | $ | — | $ | 14,049,525 | ||||||||||||||||||
Total assets | 19,566,094 | — | 19,566,094 | |||||||||||||||||||||
Total liabilities | 13,918,598 | — | 13,918,598 |
(1) | Certain amounts included in the gross premiums written of each segment are related to intersegment transactions and are included in the gross premiums written of each segment. Accordingly, the sum of gross premiums written for each segment does not agree to the total gross premiums written as shown in the table above due to the elimination of intersegment transactions in the total. |
12 |
(U.S. Dollars in thousands) | Year Ended | |||||||||||||||||||||||
December 31, 2014 | ||||||||||||||||||||||||
Insurance | Reinsurance | Mortgage | Sub-total | Other | Total | |||||||||||||||||||
Gross premiums written (1) | $ | 3,008,669 | $ | 1,527,245 | $ | 227,356 | $ | 4,760,394 | $ | 288,627 | $ | 4,840,616 | ||||||||||||
Premiums ceded | (862,015 | ) | (261,254 | ) | (22,519 | ) | (1,142,912 | ) | (14,171 | ) | (948,678 | ) | ||||||||||||
Net premiums written | 2,146,654 | 1,265,991 | 204,837 | 3,617,482 | 274,456 | 3,891,938 | ||||||||||||||||||
Change in unearned premiums | (129,284 | ) | 13,337 | (11,264 | ) | (127,211 | ) | (170,979 | ) | (298,190 | ) | |||||||||||||
Net premiums earned | 2,017,370 | 1,279,328 | 193,573 | 3,490,271 | 103,477 | 3,593,748 | ||||||||||||||||||
Other underwriting income | 2,135 | 3,167 | 4,840 | 10,142 | — | 10,142 | ||||||||||||||||||
Losses and loss adjustment expenses | (1,260,953 | ) | (532,450 | ) | (55,674 | ) | (1,849,077 | ) | (70,173 | ) | (1,919,250 | ) | ||||||||||||
Acquisition expenses, net | (316,308 | ) | (261,438 | ) | (49,400 | ) | (627,146 | ) | (30,116 | ) | (657,262 | ) | ||||||||||||
Other operating expenses | (335,157 | ) | (147,964 | ) | (66,891 | ) | (550,012 | ) | (6,268 | ) | (556,280 | ) | ||||||||||||
Underwriting income (loss) | $ | 107,087 | $ | 340,643 | $ | 26,448 | 474,178 | (3,080 | ) | 471,098 | ||||||||||||||
Net investment income | 284,336 | 18,249 | 302,585 | |||||||||||||||||||||
Net realized gains (losses) | 133,384 | (30,467 | ) | 102,917 | ||||||||||||||||||||
Net impairment losses recognized in earnings | (30,150 | ) | — | (30,150 | ) | |||||||||||||||||||
Equity in net income of investment funds accounted for using the equity method | 19,883 | — | 19,883 | |||||||||||||||||||||
Other income (loss) | (10,252 | ) | — | (10,252 | ) | |||||||||||||||||||
Other expenses | (47,615 | ) | (2,329 | ) | (49,944 | ) | ||||||||||||||||||
Interest expense | (45,634 | ) | — | (45,634 | ) | |||||||||||||||||||
Net foreign exchange gains (losses) | 82,658 | 1,086 | 83,744 | |||||||||||||||||||||
Income before income taxes | 860,788 | (16,541 | ) | 844,247 | ||||||||||||||||||||
Income tax expense | (22,987 | ) | — | (22,987 | ) | |||||||||||||||||||
Net income | 837,801 | (16,541 | ) | 821,260 | ||||||||||||||||||||
Dividends attributable to redeemable noncontrolling interests | — | (14,727 | ) | (14,727 | ) | |||||||||||||||||||
Amounts attributable to nonredeemable noncontrolling interests | — | 27,822 | 27,822 | |||||||||||||||||||||
Net income available to Arch | 837,802 | (3,447 | ) | 834,355 | ||||||||||||||||||||
Preferred dividends | (21,938 | ) | — | (21,938 | ) | |||||||||||||||||||
Net income available to Arch common shareholders | $ | 815,864 | $ | (3,447 | ) | $ | 812,417 | |||||||||||||||||
Underwriting Ratios | ||||||||||||||||||||||||
Loss ratio | 62.5 | % | 41.6 | % | 28.8 | % | 53.0 | % | 67.8 | % | 53.4 | % | ||||||||||||
Acquisition expense ratio | 15.7 | % | 20.4 | % | 25.5 | % | 18.0 | % | 29.1 | % | 18.3 | % | ||||||||||||
Other operating expense ratio | 16.6 | % | 11.6 | % | 34.6 | % | 15.8 | % | 6.1 | % | 15.5 | % | ||||||||||||
Combined ratio | 94.8 | % | 73.6 | % | 88.9 | % | 86.8 | % | 103.0 | % | 87.2 | % | ||||||||||||
Net premiums written to gross premiums written | 71.3 | % | 82.9 | % | 90.1 | % | 76.0 | % | 95.1 | % | 80.4 | % |
(1) | Certain amounts included in the gross premiums written of each segment are related to intersegment transactions and are included in the gross premiums written of each segment. Accordingly, the sum of gross premiums written for each segment does not agree to the total gross premiums written as shown in the table above due to the elimination of intersegment transactions in the total. |
13 |
(U.S. Dollars in thousands) | Year Ended | |||||||||||||||||||||||
December 31, 2013 | ||||||||||||||||||||||||
Insurance | Reinsurance | Mortgage | Sub-total | Other | Total | |||||||||||||||||||
Gross premiums written (1) | $ | 2,712,509 | $ | 1,399,621 | $ | 89,570 | $ | 4,196,623 | $ | — | $ | 4,196,623 | ||||||||||||
Premiums ceded | (763,713 | ) | (86,620 | ) | — | (845,256 | ) | — | (845,256 | ) | ||||||||||||||
Net premiums written | 1,948,796 | 1,313,001 | 89,570 | 3,351,367 | — | 3,351,367 | ||||||||||||||||||
Change in unearned premiums | (72,782 | ) | (94,329 | ) | (38,304 | ) | (205,415 | ) | — | (205,415 | ) | |||||||||||||
Net premiums earned | 1,876,014 | 1,218,672 | 51,266 | 3,145,952 | — | 3,145,952 | ||||||||||||||||||
Other underwriting income | 2,122 | 5,258 | 259 | 7,639 | — | 7,639 | ||||||||||||||||||
Losses and loss adjustment expenses | (1,188,445 | ) | (486,236 | ) | (4,743 | ) | (1,679,424 | ) | — | (1,679,424 | ) | |||||||||||||
Acquisition expenses, net | (311,904 | ) | (234,373 | ) | (17,826 | ) | (564,103 | ) | — | (564,103 | ) | |||||||||||||
Other operating expenses | (315,387 | ) | (134,563 | ) | (8,377 | ) | (458,327 | ) | — | (458,327 | ) | |||||||||||||
Underwriting income | $ | 62,400 | $ | 368,758 | $ | 20,579 | 451,737 | — | 451,737 | |||||||||||||||
Net investment income | 267,219 | — | 267,219 | |||||||||||||||||||||
Net realized gains (losses) | 74,018 | — | 74,018 | |||||||||||||||||||||
Net impairment losses recognized in earnings | (3,786 | ) | — | (3,786 | ) | |||||||||||||||||||
Equity in net income of investment funds accounted for using the equity method | 35,701 | — | 35,701 | |||||||||||||||||||||
Other income (loss) | (586 | ) | — | (586 | ) | |||||||||||||||||||
Other expenses | (42,403 | ) | — | (42,403 | ) | |||||||||||||||||||
Interest expense | (27,060 | ) | — | (27,060 | ) | |||||||||||||||||||
Net foreign exchange gains (losses) | (12,335 | ) | — | (12,335 | ) | |||||||||||||||||||
Income before income taxes | 742,505 | — | 742,505 | |||||||||||||||||||||
Income tax expense | (32,774 | ) | — | (32,774 | ) | |||||||||||||||||||
Net income | 709,731 | — | 709,731 | |||||||||||||||||||||
Dividends attributable to redeemable noncontrolling interests | — | — | — | |||||||||||||||||||||
Amounts attributable to nonredeemable noncontrolling interests | — | — | — | |||||||||||||||||||||
Net income available to Arch | 709,731 | — | 709,731 | |||||||||||||||||||||
Preferred dividends | (21,938 | ) | — | (21,938 | ) | |||||||||||||||||||
Net income available to Arch common shareholders | $ | 687,793 | $ | — | $ | 687,793 | ||||||||||||||||||
Underwriting Ratios | ||||||||||||||||||||||||
Loss ratio | 63.3 | % | 39.9 | % | 9.3 | % | 53.4 | % | — | 53.4 | % | |||||||||||||
Acquisition expense ratio | 16.6 | % | 19.2 | % | 34.8 | % | 17.9 | % | — | 17.9 | % | |||||||||||||
Other operating expense ratio | 16.8 | % | 11.0 | % | 16.3 | % | 14.6 | % | — | 14.6 | % | |||||||||||||
Combined ratio | 96.7 | % | 70.1 | % | 60.4 | % | 85.9 | % | — | 85.9 | % | |||||||||||||
Net premiums written to gross premiums written | 71.8 | % | 93.8 | % | 100.0 | % | 79.9 | % | — | 79.9 | % |
(1) | Certain amounts included in the gross premiums written of each segment are related to intersegment transactions and are included in the gross premiums written of each segment. Accordingly, the sum of gross premiums written for each segment does not agree to the total gross premiums written as shown in the table above due to the elimination of intersegment transactions in the total. |
14 |
(U.S. Dollars in thousands) | Three Months Ended | Year Ended | ||||||||||||||||||||||||||
December 31, | September 30, | June 30, | March 31, | December 31, | December 31, | December 31, | ||||||||||||||||||||||
2014 | 2014 | 2014 | 2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||||
Gross premiums written | $ | 699,109 | $ | 726,683 | $ | 852,231 | $ | 730,646 | $ | 636,949 | $ | 3,008,669 | $ | 2,712,509 | ||||||||||||||
Premiums ceded | (215,933 | ) | (187,689 | ) | (273,349 | ) | (185,044 | ) | (196,242 | ) | (862,015 | ) | (763,713 | ) | ||||||||||||||
Net premiums written | 483,176 | 538,994 | 578,882 | 545,602 | 440,707 | 2,146,654 | 1,948,796 | |||||||||||||||||||||
Change in unearned premiums | 29,594 | (19,607 | ) | (71,170 | ) | (68,101 | ) | 52,557 | (129,284 | ) | (72,782 | ) | ||||||||||||||||
Net premiums earned | 512,770 | 519,387 | 507,712 | 477,501 | 493,264 | 2,017,370 | 1,876,014 | |||||||||||||||||||||
Other underwriting income | 622 | 499 | 514 | 500 | 523 | 2,135 | 2,122 | |||||||||||||||||||||
Losses and loss adjustment expenses | (324,338 | ) | (338,319 | ) | (311,526 | ) | (286,770 | ) | (307,865 | ) | (1,260,953 | ) | (1,188,445 | ) | ||||||||||||||
Acquisition expenses, net | (81,152 | ) | (81,775 | ) | (76,449 | ) | (76,932 | ) | (84,098 | ) | (316,308 | ) | (311,904 | ) | ||||||||||||||
Other operating expenses | (85,046 | ) | (83,138 | ) | (85,829 | ) | (81,144 | ) | (83,171 | ) | (335,157 | ) | (315,387 | ) | ||||||||||||||
Underwriting income | $ | 22,856 | $ | 16,654 | $ | 34,422 | $ | 33,155 | $ | 18,653 | $ | 107,087 | $ | 62,400 | ||||||||||||||
Underwriting Ratios | ||||||||||||||||||||||||||||
Loss ratio | 63.3 | % | 65.1 | % | 61.4 | % | 60.1 | % | 62.4 | % | 62.5 | % | 63.3 | % | ||||||||||||||
Acquisition expense ratio | 15.8 | % | 15.7 | % | 15.1 | % | 16.1 | % | 17.0 | % | 15.7 | % | 16.6 | % | ||||||||||||||
Other operating expense ratio | 16.6 | % | 16.0 | % | 16.9 | % | 17.0 | % | 16.9 | % | 16.6 | % | 16.8 | % | ||||||||||||||
Combined ratio | 95.7 | % | 96.8 | % | 93.4 | % | 93.2 | % | 96.3 | % | 94.8 | % | 96.7 | % | ||||||||||||||
Catastrophic activity and prior year development: | ||||||||||||||||||||||||||||
Current accident year catastrophic events, net of | ||||||||||||||||||||||||||||
reinsurance and reinstatement premiums | 1.1 | % | 0.4 | % | 0.7 | % | 0.5 | % | 0.4 | % | 0.7 | % | 1.1 | % | ||||||||||||||
Net (favorable) adverse development in prior year loss | ||||||||||||||||||||||||||||
reserves, net of related adjustments | (1.8 | )% | (1.6 | )% | (3.2 | )% | (2.2 | )% | (0.6 | )% | (2.2 | )% | (1.9 | )% | ||||||||||||||
Combined ratio excluding such items | 96.4 | % | 98.0 | % | 95.9 | % | 94.9 | % | 96.5 | % | 96.3 | % | 97.5 | % | ||||||||||||||
Net premiums written to gross premiums written | 69.1 | % | 74.2 | % | 67.9 | % | 74.7 | % | 69.2 | % | 71.3 | % | 71.8 | % |
15 |
(U.S. Dollars in thousands) | Three Months Ended | Year Ended | |||||||||||||||||||||||||||||||||||||||||||||||
December 31, | September 30, | June 30, | March 31, | December 31, | December 31, | December 31, | |||||||||||||||||||||||||||||||||||||||||||
2014 | 2014 | 2014 | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||||||||||||||||||||||||
Net premiums written | |||||||||||||||||||||||||||||||||||||||||||||||||
Programs | $ | 102,391 | 21.2 | % | $ | 129,227 | 24.0 | % | $ | 126,722 | 21.9 | % | $ | 122,240 | 22.4 | % | $ | 96,781 | 22.0 | % | $ | 480,580 | 22.4 | % | $ | 419,673 | 21.5 | % | |||||||||||||||||||||
Professional lines (1) | 119,487 | 24.7 | % | 119,798 | 22.2 | % | 114,411 | 19.8 | % | 122,908 | 22.5 | % | 106,174 | 24.1 | % | 476,604 | 22.2 | % | 476,193 | 24.4 | % | ||||||||||||||||||||||||||||
Construction and national accounts | 56,984 | 11.8 | % | 55,342 | 10.3 | % | 79,171 | 13.7 | % | 95,497 | 17.5 | % | 66,177 | 15.0 | % | 286,994 | 13.4 | % | 271,110 | 13.9 | % | ||||||||||||||||||||||||||||
Property, energy, marine and aviation | 43,869 | 9.1 | % | 53,485 | 9.9 | % | 84,530 | 14.6 | % | 62,756 | 11.5 | % | 38,064 | 8.6 | % | 244,640 | 11.4 | % | 280,551 | 14.4 | % | ||||||||||||||||||||||||||||
Excess and surplus casualty (2) | 59,238 | 12.3 | % | 50,552 | 9.4 | % | 58,789 | 10.2 | % | 43,940 | 8.1 | % | 48,230 | 10.9 | % | 212,519 | 9.9 | % | 149,286 | 7.7 | % | ||||||||||||||||||||||||||||
Travel, accident and health | 26,001 | 5.4 | % | 44,500 | 8.3 | % | 34,393 | 5.9 | % | 40,838 | 7.5 | % | 22,835 | 5.2 | % | 145,732 | 6.8 | % | 104,903 | 5.4 | % | ||||||||||||||||||||||||||||
Lenders products | 25,693 | 5.3 | % | 27,799 | 5.2 | % | 24,909 | 4.3 | % | 22,006 | 4.0 | % | 23,212 | 5.3 | % | 100,407 | 4.7 | % | 101,576 | 5.2 | % | ||||||||||||||||||||||||||||
Other (3) | 49,513 | 10.2 | % | 58,291 | 10.8 | % | 55,957 | 9.7 | % | 35,417 | 6.5 | % | 39,234 | 8.9 | % | 199,178 | 9.3 | % | 145,504 | 7.5 | % | ||||||||||||||||||||||||||||
Total | $ | 483,176 | 100.0 | % | $ | 538,994 | 100.0 | % | $ | 578,882 | 100.0 | % | $ | 545,602 | 100.0 | % | $ | 440,707 | 100.0 | % | $ | 2,146,654 | 100.0 | % | $ | 1,948,796 | 100.0 | % | |||||||||||||||||||||
Client location | |||||||||||||||||||||||||||||||||||||||||||||||||
United States | $ | 389,125 | 80.5 | % | $ | 448,932 | 83.3 | % | $ | 464,730 | 80.3 | % | $ | 423,394 | 77.6 | % | $ | 363,982 | 82.6 | % | $ | 1,726,181 | 80.4 | % | $ | 1,526,156 | 78.3 | % | |||||||||||||||||||||
Europe | 55,959 | 11.6 | % | 40,810 | 7.6 | % | 57,918 | 10.0 | % | 85,449 | 15.7 | % | 42,437 | 9.6 | % | 240,136 | 11.2 | % | 226,254 | 11.6 | % | ||||||||||||||||||||||||||||
Asia and Pacific | 15,834 | 3.3 | % | 21,314 | 4.0 | % | 23,833 | 4.1 | % | 18,583 | 3.4 | % | 19,188 | 4.4 | % | 79,564 | 3.7 | % | 95,970 | 4.9 | % | ||||||||||||||||||||||||||||
Other | 22,258 | 4.6 | % | 27,938 | 5.2 | % | 32,401 | 5.6 | % | 18,176 | 3.3 | % | 15,100 | 3.4 | % | 100,773 | 4.7 | % | 100,416 | 5.2 | % | ||||||||||||||||||||||||||||
Total | $ | 483,176 | 100.0 | % | $ | 538,994 | 100.0 | % | $ | 578,882 | 100.0 | % | $ | 545,602 | 100.0 | % | $ | 440,707 | 100.0 | % | $ | 2,146,654 | 100.0 | % | $ | 1,948,796 | 100.0 | % | |||||||||||||||||||||
Underwriting location | |||||||||||||||||||||||||||||||||||||||||||||||||
United States | $ | 380,828 | 78.8 | % | $ | 442,193 | 82.0 | % | $ | 449,823 | 77.7 | % | $ | 416,043 | 76.3 | % | $ | 356,452 | 80.9 | % | $ | 1,688,887 | 78.7 | % | $ | 1,478,930 | 75.9 | % | |||||||||||||||||||||
Europe | 86,791 | 18.0 | % | 82,820 | 15.4 | % | 108,115 | 18.7 | % | 116,704 | 21.4 | % | 66,160 | 15.0 | % | 394,430 | 18.4 | % | 389,763 | 20.0 | % | ||||||||||||||||||||||||||||
Other | 15,557 | 3.2 | % | 13,981 | 2.6 | % | 20,944 | 3.6 | % | 12,855 | 2.4 | % | 18,095 | 4.1 | % | 63,337 | 3.0 | % | 80,103 | 4.1 | % | ||||||||||||||||||||||||||||
Total | $ | 483,176 | 100.0 | % | $ | 538,994 | 100.0 | % | $ | 578,882 | 100.0 | % | $ | 545,602 | 100.0 | % | $ | 440,707 | 100.0 | % | $ | 2,146,654 | 100.0 | % | $ | 1,948,796 | 100.0 | % | |||||||||||||||||||||
Net premiums earned | |||||||||||||||||||||||||||||||||||||||||||||||||
Programs | $ | 119,081 | 23.2 | % | $ | 118,087 | 22.7 | % | $ | 114,043 | 22.5 | % | $ | 109,181 | 22.9 | % | $ | 106,038 | 21.5 | % | $ | 460,392 | 22.8 | % | $ | 386,840 | 20.6 | % | |||||||||||||||||||||
Professional lines (1) | 109,529 | 21.4 | % | 118,204 | 22.8 | % | 116,031 | 22.9 | % | 112,744 | 23.6 | % | 117,573 | 23.8 | % | 456,508 | 22.6 | % | 491,791 | 26.2 | % | ||||||||||||||||||||||||||||
Construction and national accounts | 68,529 | 13.4 | % | 68,229 | 13.1 | % | 72,064 | 14.2 | % | 68,989 | 14.4 | % | 67,319 | 13.6 | % | 277,811 | 13.8 | % | 250,729 | 13.4 | % | ||||||||||||||||||||||||||||
Property, energy, marine and aviation | 57,732 | 11.3 | % | 59,432 | 11.4 | % | 66,221 | 13.0 | % | 61,589 | 12.9 | % | 76,874 | 15.6 | % | 244,974 | 12.1 | % | 304,294 | 16.2 | % | ||||||||||||||||||||||||||||
Excess and surplus casualty (2) | 50,601 | 9.9 | % | 48,716 | 9.4 | % | 43,600 | 8.6 | % | 39,107 | 8.2 | % | 35,529 | 7.2 | % | 182,024 | 9.0 | % | 118,395 | 6.3 | % | ||||||||||||||||||||||||||||
Travel, accident and health | 33,990 | 6.6 | % | 34,991 | 6.7 | % | 30,645 | 6.0 | % | 28,065 | 5.9 | % | 27,964 | 5.7 | % | 127,691 | 6.3 | % | 97,135 | 5.2 | % | ||||||||||||||||||||||||||||
Lenders products | 24,252 | 4.7 | % | 23,591 | 4.5 | % | 22,763 | 4.5 | % | 23,832 | 5.0 | % | 25,370 | 5.1 | % | 94,438 | 4.7 | % | 99,847 | 5.3 | % | ||||||||||||||||||||||||||||
Other (3) | 49,056 | 9.6 | % | 48,137 | 9.3 | % | 42,345 | 8.3 | % | 33,994 | 7.1 | % | 36,597 | 7.4 | % | 173,532 | 8.6 | % | 126,983 | 6.8 | % | ||||||||||||||||||||||||||||
Total | $ | 512,770 | 100.0 | % | $ | 519,387 | 100.0 | % | $ | 507,712 | 100.0 | % | $ | 477,501 | 100.0 | % | $ | 493,264 | 100.0 | % | $ | 2,017,370 | 100.0 | % | $ | 1,876,014 | 100.0 | % |
16 |
(U.S. Dollars in thousands) | Three Months Ended | Year Ended | ||||||||||||||||||||||||||
December 31, | September 30, | June 30, | March 31, | December 31, | December 31, | December 31, | ||||||||||||||||||||||
2014 | 2014 | 2014 | 2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||||
Gross premiums written | $ | 314,604 | $ | 345,747 | $ | 349,841 | $ | 517,053 | $ | 299,818 | $ | 1,527,245 | $ | 1,399,621 | ||||||||||||||
Premiums ceded | (45,631 | ) | (83,502 | ) | (58,994 | ) | (73,127 | ) | (12,039 | ) | (261,254 | ) | (86,620 | ) | ||||||||||||||
Net premiums written | 268,973 | 262,245 | 290,847 | 443,926 | 287,779 | 1,265,991 | 1,313,001 | |||||||||||||||||||||
Change in unearned premiums | 36,832 | 34,303 | 44,780 | (102,578 | ) | 44,150 | 13,337 | (94,329 | ) | |||||||||||||||||||
Net premiums earned | 305,805 | 296,548 | 335,627 | 341,348 | 331,929 | 1,279,328 | 1,218,672 | |||||||||||||||||||||
Other underwriting income | 2,333 | 215 | 303 | 316 | 4,891 | 3,167 | 5,258 | |||||||||||||||||||||
Losses and loss adjustment expenses | (118,705 | ) | (123,784 | ) | (150,325 | ) | (139,636 | ) | (127,989 | ) | (532,450 | ) | (486,236 | ) | ||||||||||||||
Acquisition expenses, net | (61,765 | ) | (60,205 | ) | (66,035 | ) | (73,433 | ) | (66,876 | ) | (261,438 | ) | (234,373 | ) | ||||||||||||||
Other operating expenses | (37,766 | ) | (36,337 | ) | (37,666 | ) | (36,195 | ) | (38,356 | ) | (147,964 | ) | (134,563 | ) | ||||||||||||||
Underwriting income | $ | 89,902 | $ | 76,437 | $ | 81,904 | $ | 92,400 | $ | 103,599 | $ | 340,643 | $ | 368,758 | ||||||||||||||
Underwriting Ratios | ||||||||||||||||||||||||||||
Loss ratio | 38.8 | % | 41.7 | % | 44.8 | % | 40.9 | % | 38.6 | % | 41.6 | % | 39.9 | % | ||||||||||||||
Acquisition expense ratio | 20.2 | % | 20.3 | % | 19.7 | % | 21.5 | % | 20.1 | % | 20.4 | % | 19.2 | % | ||||||||||||||
Other operating expense ratio | 12.3 | % | 12.3 | % | 11.2 | % | 10.6 | % | 11.6 | % | 11.6 | % | 11.0 | % | ||||||||||||||
Combined ratio | 71.3 | % | 74.3 | % | 75.7 | % | 73.0 | % | 70.3 | % | 73.6 | % | 70.1 | % | ||||||||||||||
Catastrophic activity and prior year development: | ||||||||||||||||||||||||||||
Current accident year catastrophic events, net of | ||||||||||||||||||||||||||||
reinsurance and reinstatement premiums | 4.7 | % | 4.1 | % | 3.8 | % | 0.9 | % | 4.4 | % | 3.3 | % | 5.1 | % | ||||||||||||||
Net (favorable) adverse development in prior year loss | ||||||||||||||||||||||||||||
reserves, net of related adjustments | (20.7 | )% | (20.4 | )% | (20.2 | )% | (20.5 | )% | (19.0 | )% | (20.4 | )% | (17.9 | )% | ||||||||||||||
Combined ratio excluding such items | 87.3 | % | 90.6 | % | 92.1 | % | 92.6 | % | 84.9 | % | 90.7 | % | 82.9 | % | ||||||||||||||
Net premiums written to gross premiums written | 85.5 | % | 75.8 | % | 83.1 | % | 85.9 | % | 96.0 | % | 82.9 | % | 93.8 | % |
17 |
(U.S. Dollars in thousands) | Three Months Ended | Year Ended | |||||||||||||||||||||||||||||||||||||||||||||||
December 31, | September 30, | June 30, | March 31, | December 31, | December 31, | December 31, | |||||||||||||||||||||||||||||||||||||||||||
2014 | 2014 | 2014 | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||||||||||||||||||||||||
Net premiums written | |||||||||||||||||||||||||||||||||||||||||||||||||
Other specialty (1) | $ | 67,094 | 24.9 | % | $ | 84,702 | 32.3 | % | $ | 105,721 | 36.3 | % | $ | 147,609 | 33.3 | % | $ | 99,382 | 34.5 | % | $ | 405,126 | 32.0 | % | $ | 417,865 | 31.8 | % | |||||||||||||||||||||
Property excluding property catastrophe (2) | 115,843 | 43.1 | % | 77,186 | 29.4 | % | 54,887 | 18.9 | % | 95,127 | 21.4 | % | 62,453 | 21.7 | % | 343,043 | 27.1 | % | 292,536 | 22.3 | % | ||||||||||||||||||||||||||||
Casualty (3) | 59,412 | 22.1 | % | 64,048 | 24.4 | % | 67,823 | 23.3 | % | 126,713 | 28.5 | % | 98,664 | 34.3 | % | 317,996 | 25.1 | % | 306,304 | 23.3 | % | ||||||||||||||||||||||||||||
Property catastrophe | 6,917 | 2.6 | % | 24,056 | 9.2 | % | 53,986 | 18.6 | % | 52,512 | 11.8 | % | 9,923 | 3.4 | % | 137,471 | 10.9 | % | 220,749 | 16.8 | % | ||||||||||||||||||||||||||||
Marine and aviation | 16,886 | 6.3 | % | 9,767 | 3.7 | % | 6,880 | 2.4 | % | 16,911 | 3.8 | % | 13,636 | 4.7 | % | 50,444 | 4.0 | % | 64,380 | 4.9 | % | ||||||||||||||||||||||||||||
Other (4) | 2,821 | 1.0 | % | 2,486 | 0.9 | % | 1,550 | 0.5 | % | 5,054 | 1.1 | % | 3,721 | 1.3 | % | 11,911 | 0.9 | % | 11,167 | 0.9 | % | ||||||||||||||||||||||||||||
Total | $ | 268,973 | 100.0 | % | $ | 262,245 | 100.0 | % | $ | 290,847 | 100.0 | % | $ | 443,926 | 100.0 | % | $ | 287,779 | 100.0 | % | $ | 1,265,991 | 100.0 | % | $ | 1,313,001 | 100.0 | % | |||||||||||||||||||||
Pro rata | $ | 204,803 | 76.1 | % | $ | 160,472 | 61.2 | % | $ | 123,663 | 42.5 | % | $ | 174,197 | 39.2 | % | $ | 224,869 | 78.1 | % | $ | 663,135 | 52.4 | % | $ | 692,024 | 52.7 | % | |||||||||||||||||||||
Excess of loss | 64,170 | 23.9 | % | 101,773 | 38.8 | % | 167,184 | 57.5 | % | 269,729 | 60.8 | % | 62,910 | 21.9 | % | 602,856 | 47.6 | % | 620,977 | 47.3 | % | ||||||||||||||||||||||||||||
Total | $ | 268,973 | 100.0 | % | $ | 262,245 | 100.0 | % | $ | 290,847 | 100.0 | % | $ | 443,926 | 100.0 | % | $ | 287,779 | 100.0 | % | $ | 1,265,991 | 100.0 | % | $ | 1,313,001 | 100.0 | % | |||||||||||||||||||||
Client location | |||||||||||||||||||||||||||||||||||||||||||||||||
United States | $ | 107,392 | 39.9 | % | $ | 123,966 | 47.3 | % | $ | 134,649 | 46.3 | % | $ | 223,248 | 50.3 | % | $ | 157,214 | 54.6 | % | $ | 589,255 | 46.5 | % | $ | 706,388 | 53.8 | % | |||||||||||||||||||||
Europe | 61,967 | 23.0 | % | 62,102 | 23.7 | % | 74,817 | 25.7 | % | 156,849 | 35.3 | % | 68,454 | 23.8 | % | 355,735 | 28.1 | % | 327,059 | 24.9 | % | ||||||||||||||||||||||||||||
Asia and Pacific | 70,122 | 26.1 | % | 24,590 | 9.4 | % | 27,024 | 9.3 | % | 20,890 | 4.7 | % | 18,611 | 6.5 | % | 142,626 | 11.3 | % | 94,252 | 7.2 | % | ||||||||||||||||||||||||||||
Bermuda | 12,011 | 4.5 | % | 25,537 | 9.7 | % | 30,497 | 10.5 | % | 9,575 | 2.2 | % | 16,382 | 5.7 | % | 77,620 | 6.1 | % | 87,047 | 6.6 | % | ||||||||||||||||||||||||||||
Other | 17,481 | 6.5 | % | 26,050 | 9.9 | % | 23,860 | 8.2 | % | 33,364 | 7.5 | % | 27,118 | 9.4 | % | 100,755 | 8.0 | % | 98,255 | 7.5 | % | ||||||||||||||||||||||||||||
Total | $ | 268,973 | 100.0 | % | $ | 262,245 | 100.0 | % | $ | 290,847 | 100.0 | % | $ | 443,926 | 100.0 | % | $ | 287,779 | 100.0 | % | $ | 1,265,991 | 100.0 | % | $ | 1,313,001 | 100.0 | % | |||||||||||||||||||||
Underwriting location | |||||||||||||||||||||||||||||||||||||||||||||||||
Bermuda | $ | 121,459 | 45.2 | % | $ | 65,891 | 25.1 | % | $ | 100,011 | 34.4 | % | $ | 106,990 | 24.1 | % | $ | 57,717 | 20.1 | % | $ | 394,351 | 31.1 | % | $ | 459,467 | 35.0 | % | |||||||||||||||||||||
United States | 90,655 | 33.7 | % | 120,095 | 45.8 | % | 99,636 | 34.3 | % | 182,505 | 41.1 | % | 141,743 | 49.3 | % | 492,891 | 38.9 | % | 507,183 | 38.6 | % | ||||||||||||||||||||||||||||
Europe | 50,539 | 18.8 | % | 64,341 | 24.5 | % | 87,080 | 29.9 | % | 141,863 | 32.0 | % | 79,060 | 27.5 | % | 343,823 | 27.2 | % | 309,129 | 23.5 | % | ||||||||||||||||||||||||||||
Other | 6,320 | 2.3 | % | 11,918 | 4.5 | % | 4,120 | 1.4 | % | 12,568 | 2.8 | % | 9,259 | 3.2 | % | 34,926 | 2.8 | % | 37,222 | 2.8 | % | ||||||||||||||||||||||||||||
Total | $ | 268,973 | 100.0 | % | $ | 262,245 | 100.0 | % | $ | 290,847 | 100.0 | % | $ | 443,926 | 100.0 | % | $ | 287,779 | 100.0 | % | $ | 1,265,991 | 100.0 | % | $ | 1,313,001 | 100.0 | % | |||||||||||||||||||||
Net premiums earned | |||||||||||||||||||||||||||||||||||||||||||||||||
Other specialty (1) | $ | 93,946 | 30.7 | % | $ | 97,337 | 32.8 | % | $ | 118,504 | 35.3 | % | $ | 114,938 | 33.7 | % | $ | 114,964 | 34.6 | % | $ | 424,725 | 33.2 | % | $ | 387,630 | 31.8 | % | |||||||||||||||||||||
Property excluding property catastrophe (2) | 87,287 | 28.5 | % | 71,663 | 24.2 | % | 69,172 | 20.6 | % | 75,374 | 22.1 | % | 72,862 | 22.0 | % | 303,496 | 23.7 | % | 274,719 | 22.5 | % | ||||||||||||||||||||||||||||
Casualty (3) | 79,119 | 25.9 | % | 79,477 | 26.8 | % | 90,176 | 26.9 | % | 78,746 | 23.1 | % | 72,523 | 21.8 | % | 327,518 | 25.6 | % | 241,774 | 19.8 | % | ||||||||||||||||||||||||||||
Property catastrophe | 28,674 | 9.4 | % | 32,423 | 10.9 | % | 39,870 | 11.9 | % | 49,794 | 14.6 | % | 56,263 | 17.0 | % | 150,761 | 11.8 | % | 232,423 | 19.1 | % | ||||||||||||||||||||||||||||
Marine and aviation | 13,854 | 4.5 | % | 13,110 | 4.4 | % | 15,259 | 4.5 | % | 18,895 | 5.5 | % | 11,043 | 3.3 | % | 61,118 | 4.8 | % | 70,105 | 5.8 | % | ||||||||||||||||||||||||||||
Other (4) | 2,925 | 1.0 | % | 2,538 | 0.9 | % | 2,646 | 0.8 | % | 3,601 | 1.1 | % | 4,274 | 1.3 | % | 11,710 | 0.9 | % | 12,021 | 1.0 | % | ||||||||||||||||||||||||||||
Total | $ | 305,805 | 100.0 | % | $ | 296,548 | 100.0 | % | $ | 335,627 | 100.0 | % | $ | 341,348 | 100.0 | % | $ | 331,929 | 100.0 | % | $ | 1,279,328 | 100.0 | % | $ | 1,218,672 | 100.0 | % | |||||||||||||||||||||
Pro rata | $ | 163,590 | 53.5 | % | $ | 156,830 | 52.9 | % | $ | 178,344 | 53.1 | % | $ | 187,437 | 54.9 | % | $ | 177,170 | 53.4 | % | $ | 686,201 | 53.6 | % | $ | 608,586 | 49.9 | % | |||||||||||||||||||||
Excess of loss | 142,215 | 46.5 | % | 139,718 | 47.1 | % | 157,283 | 46.9 | % | 153,911 | 45.1 | % | 154,759 | 46.6 | % | 593,127 | 46.4 | % | 610,086 | 50.1 | % | ||||||||||||||||||||||||||||
Total | $ | 305,805 | 100.0 | % | $ | 296,548 | 100.0 | % | $ | 335,627 | 100.0 | % | $ | 341,348 | 100.0 | % | $ | 331,929 | 100.0 | % | $ | 1,279,328 | 100.0 | % | $ | 1,218,672 | 100.0 | % |
18 |
(U.S. Dollars in thousands) | Three Months Ended | Year Ended | ||||||||||||||||||||||||||
December 31, | September 30, | June 30, | March 31, | December 31, | December 31, | December 31, | ||||||||||||||||||||||
2014 | 2014 | 2014 | 2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||||
Gross premiums written | $ | 57,584 | $ | 66,389 | $ | 55,476 | $ | 47,907 | $ | 20,435 | $ | 227,356 | $ | 89,570 | ||||||||||||||
Premiums ceded | (4,897 | ) | (7,904 | ) | (5,079 | ) | (4,639 | ) | — | (22,519 | ) | — | ||||||||||||||||
Net premiums written | 52,687 | 58,485 | 50,397 | 43,268 | 20,435 | 204,837 | 89,570 | |||||||||||||||||||||
Change in unearned premiums | (1,658 | ) | (5,539 | ) | 436 | (4,503 | ) | (6,262 | ) | (11,264 | ) | (38,304 | ) | |||||||||||||||
Net premiums earned | 51,029 | 52,946 | 50,833 | 38,765 | 14,173 | 193,573 | 51,266 | |||||||||||||||||||||
Other underwriting income (1) | 1,870 | 988 | 1,216 | 766 | 259 | 4,840 | 259 | |||||||||||||||||||||
Losses and loss adjustment expenses | (15,736 | ) | (15,987 | ) | (15,473 | ) | (8,478 | ) | 1,531 | (55,674 | ) | (4,743 | ) | |||||||||||||||
Acquisition expenses, net | (16,807 | ) | (11,958 | ) | (11,481 | ) | (9,154 | ) | (6,547 | ) | (49,400 | ) | (17,826 | ) | ||||||||||||||
Other operating expenses | (18,814 | ) | (17,913 | ) | (16,288 | ) | (13,876 | ) | (3,350 | ) | (66,891 | ) | (8,377 | ) | ||||||||||||||
Underwriting income | $ | 1,542 | $ | 8,076 | $ | 8,807 | $ | 8,023 | $ | 6,066 | $ | 26,448 | $ | 20,579 | ||||||||||||||
Underwriting Ratios | ||||||||||||||||||||||||||||
Loss ratio | 30.8 | % | 30.2 | % | 30.4 | % | 21.9 | % | (10.8 | )% | 28.8 | % | 9.3 | % | ||||||||||||||
Acquisition expense ratio | 32.9 | % | 22.6 | % | 22.6 | % | 23.6 | % | 46.2 | % | 25.5 | % | 34.8 | % | ||||||||||||||
Other operating expense ratio | 36.9 | % | 33.8 | % | 32.0 | % | 35.8 | % | 23.6 | % | 34.6 | % | 16.3 | % | ||||||||||||||
Combined ratio | 100.6 | % | 86.6 | % | 85.0 | % | 81.3 | % | 59.0 | % | 88.9 | % | 60.4 | % | ||||||||||||||
Net (favorable) adverse development in prior year loss | ||||||||||||||||||||||||||||
reserves, net of related adjustments | 1.7 | % | (1.4 | )% | 0.1 | % | (3.0 | )% | (3.1 | )% | (0.5 | )% | (0.9 | )% | ||||||||||||||
Combined ratio excluding prior year development | 98.9 | % | 88.0 | % | 84.9 | % | 84.3 | % | 62.1 | % | 89.4 | % | 61.3 | % | ||||||||||||||
Net premiums written by client location | ||||||||||||||||||||||||||||
United States | $ | 47,027 | $ | 54,639 | $ | 46,111 | $ | 36,556 | $ | 13,310 | $ | 184,333 | $ | 63,692 | ||||||||||||||
Other | 5,660 | 3,846 | 4,286 | 6,712 | 7,125 | 20,504 | 25,878 | |||||||||||||||||||||
Total | $ | 52,687 | $ | 58,485 | $ | 50,397 | $ | 43,268 | $ | 20,435 | $ | 204,837 | $ | 89,570 | ||||||||||||||
Net premiums written by underwriting location | ||||||||||||||||||||||||||||
United States | $ | 25,255 | $ | 32,229 | $ | 24,594 | $ | 16,731 | $ | — | $ | 98,809 | $ | — | ||||||||||||||
Other | 27,432 | 26,256 | 25,803 | 26,537 | 20,435 | 106,028 | 89,570 | |||||||||||||||||||||
Total | $ | 52,687 | $ | 58,485 | $ | 50,397 | $ | 43,268 | $ | 20,435 | $ | 204,837 | $ | 89,570 |
19 |
(U.S. Dollars in millions) | December 31, 2014 | September 30, 2014 | June 30, 2014 | March 31, 2014 | ||||||||||||||||||||||||
Insurance In Force (IIF) (1) | ||||||||||||||||||||||||||||
U.S. mortgage insurance | $ | 22,402 | 47.1 | % | $ | 22,055 | 46.3 | % | $ | 21,168 | 44.9 | % | $ | 21,240 | 46.9 | % | ||||||||||||
Mortgage reinsurance | 20,772 | 43.7 | % | 21,097 | 44.3 | % | 21,405 | 45.4 | % | 21,161 | 46.7 | % | ||||||||||||||||
Other (2) | 4,400 | 9.2 | % | 4,464 | 9.4 | % | 4,586 | 9.7 | % | 2,869 | 6.3 | % | ||||||||||||||||
Total | $ | 47,574 | 100.0 | % | $ | 47,616 | 100.0 | % | $ | 47,159 | 100.0 | % | $ | 45,270 | 100.0 | % | ||||||||||||
Risk In Force (RIF) (3) | ||||||||||||||||||||||||||||
U.S. mortgage insurance | $ | 5,600 | 55.3 | % | $ | 5,506 | 54.4 | % | $ | 5,273 | 52.7 | % | $ | 5,275 | 52.6 | % | ||||||||||||
Mortgage reinsurance | 4,393 | 43.4 | % | 4,483 | 44.3 | % | 4,601 | 46.0 | % | 4,664 | 46.6 | % | ||||||||||||||||
Other (2) | 136 | 1.3 | % | 136 | 1.3 | % | 139 | 1.4 | % | 80 | 0.8 | % | ||||||||||||||||
Total | $ | 10,129 | 100.0 | % | $ | 10,125 | 100.0 | % | $ | 10,013 | 100.0 | % | $ | 10,019 | 100.0 | % | ||||||||||||
Supplemental disclosures for U.S. mortgage insurance: | ||||||||||||||||||||||||||||
Total RIF by credit quality (FICO score): | ||||||||||||||||||||||||||||
>=740 | $ | 2,917 | 52.1 | % | $ | 2,864 | 52.0 | % | $ | 2,687 | 51.0 | % | $ | 2,671 | 50.6 | % | ||||||||||||
680-739 | 1,846 | 33.0 | % | 1,803 | 32.7 | % | 1,724 | 32.7 | % | 1,713 | 32.5 | % | ||||||||||||||||
620-679 | 700 | 12.5 | % | 694 | 12.6 | % | 709 | 13.4 | % | 731 | 13.9 | % | ||||||||||||||||
<620 | 137 | 2.4 | % | 145 | 2.6 | % | 153 | 2.9 | % | 160 | 3.0 | % | ||||||||||||||||
Total | $ | 5,600 | 100.0 | % | $ | 5,506 | 100.0 | % | $ | 5,273 | 100.0 | % | $ | 5,275 | 100.0 | % | ||||||||||||
Weighted average FICO score | 733 | 733 | 731 | 730 | ||||||||||||||||||||||||
Total RIF by Loan-To-Value (LTV): | ||||||||||||||||||||||||||||
95.01% and above | $ | 1,123 | 20.1 | % | $ | 1,139 | 20.7 | % | $ | 1,161 | 22.0 | % | $ | 1,183 | 22.4 | % | ||||||||||||
90.01% to 95.00% | 2,652 | 47.4 | % | 2,558 | 46.5 | % | 2,389 | 45.3 | % | 2,337 | 44.3 | % | ||||||||||||||||
85.01% to 90.00% | 1,552 | 27.7 | % | 1,544 | 28.0 | % | 1,474 | 28.0 | % | 1,494 | 28.3 | % | ||||||||||||||||
85.00% and below | 273 | 4.9 | % | 265 | 4.8 | % | 249 | 4.7 | % | 261 | 4.9 | % | ||||||||||||||||
Total | $ | 5,600 | 100.0 | % | $ | 5,506 | 100.0 | % | $ | 5,273 | 100.0 | % | $ | 5,275 | 100.0 | % | ||||||||||||
Weighted average LTV | 93.4 | % | 93.4 | % | 93.4 | % | 93.4 | % | ||||||||||||||||||||
Total RIF by State: | ||||||||||||||||||||||||||||
Wisconsin | $ | 538 | 9.6 | % | $ | 532 | 9.7 | % | $ | 517 | 9.8 | % | $ | 510 | 9.7 | % | ||||||||||||
California | 480 | 8.6 | % | 474 | 8.6 | % | 454 | 8.6 | % | 460 | 8.7 | % | ||||||||||||||||
Texas | 302 | 5.4 | % | 293 | 5.3 | % | 283 | 5.4 | % | 285 | 5.4 | % | ||||||||||||||||
Minnesota | 274 | 4.9 | % | 271 | 4.9 | % | 258 | 4.9 | % | 255 | 4.8 | % | ||||||||||||||||
Florida | 273 | 4.9 | % | 271 | 4.9 | % | 264 | 5.0 | % | 268 | 5.1 | % | ||||||||||||||||
Washington | 232 | 4.1 | % | 231 | 4.2 | % | 228 | 4.3 | % | 230 | 4.4 | % | ||||||||||||||||
Massachusetts | 210 | 3.8 | % | 209 | 3.8 | % | 204 | 3.9 | % | 203 | 3.8 | % | ||||||||||||||||
Alaska | 209 | 3.7 | % | 207 | 3.8 | % | 202 | 3.8 | % | 201 | 3.8 | % | ||||||||||||||||
Virginia | 200 | 3.6 | % | 196 | 3.6 | % | 186 | 3.5 | % | 185 | 3.5 | % | ||||||||||||||||
New York | 188 | 3.4 | % | 188 | 3.4 | % | 184 | 3.5 | % | 186 | 3.5 | % | ||||||||||||||||
Others | 2,694 | 48.1 | % | 2,634 | 47.8 | % | 2,493 | 47.3 | % | 2,492 | 47.2 | % | ||||||||||||||||
Total | $ | 5,600 | 100.0 | % | $ | 5,506 | 100.0 | % | $ | 5,273 | 100.0 | % | $ | 5,275 | 100.0 | % | ||||||||||||
Weighted average coverage (end of period RIF divided by IIF) | 25.0 | % | 25.0 | % | 24.9 | % | 24.8 | % | ||||||||||||||||||||
Analysts’ persistency (4) | 80.9 | % | 81.2 | % | 80.5 | % | 79.1 | % | ||||||||||||||||||||
Risk-to-capital ratio (5) | 9.5:1 | 9.3:1 | 8.9:1 | 9.0:1 |
20 |
(U.S. Dollars in millions, except policy/loan/claim count) | Three Months Ended | Year Ended | |||||||||||||||||||||||||||||||||
December 31, 2014 | September 30, 2014 | June 30, 2014 | March 31, 2014 (1) | December 31, 2014 (1) | |||||||||||||||||||||||||||||||
Supplemental disclosures for U.S. mortgage insurance: | |||||||||||||||||||||||||||||||||||
Total new insurance written (NIW) (2) | $ | 1,359 | $ | 1,982 | $ | 941 | $ | 639 | $ | 4,921 | |||||||||||||||||||||||||
Total NIW by credit quality (FICO score): | |||||||||||||||||||||||||||||||||||
>=740 | $ | 730 | 53.7 | % | $ | 1,279 | 64.5 | % | $ | 534 | 56.7 | % | $ | 375 | 58.7 | % | $ | 2,918 | 59.3 | % | |||||||||||||||
680-739 | 480 | 35.3 | % | 629 | 31.7 | % | 339 | 36.0 | % | 225 | 35.2 | % | 1,673 | 34.0 | % | ||||||||||||||||||||
620-679 | 149 | 11.0 | % | 74 | 3.7 | % | 68 | 7.2 | % | 39 | 6.1 | % | 330 | 6.7 | % | ||||||||||||||||||||
Total | $ | 1,359 | 100.0 | % | $ | 1,982 | 100.0 | % | $ | 941 | 100.0 | % | $ | 639 | 100.0 | % | $ | 4,921 | 100.0 | % | |||||||||||||||
Total NIW by LTV: | |||||||||||||||||||||||||||||||||||
95.01% and above | $ | 79 | 5.8 | % | $ | 81 | 4.1 | % | $ | 70 | 7.4 | % | $ | 45 | 7.0 | % | $ | 275 | 5.6 | % | |||||||||||||||
90.01% to 95.00% | 620 | 45.6 | % | 904 | 45.6 | % | 500 | 53.1 | % | 330 | 51.6 | % | 2,354 | 47.8 | % | ||||||||||||||||||||
85.01% to 90.00% | 389 | 28.6 | % | 646 | 32.6 | % | 265 | 28.2 | % | 186 | 29.1 | % | 1,486 | 30.2 | % | ||||||||||||||||||||
85.01% and below | 271 | 19.9 | % | 351 | 17.7 | % | 106 | 11.3 | % | 78 | 12.2 | % | 806 | 16.4 | % | ||||||||||||||||||||
Total | $ | 1,359 | 100.0 | % | $ | 1,982 | 100.0 | % | $ | 941 | 100.0 | % | $ | 639 | 100.0 | % | $ | 4,921 | 100.0 | % | |||||||||||||||
Total NIW purchase vs. refinance: | |||||||||||||||||||||||||||||||||||
Purchase | $ | 950 | 69.9 | % | $ | 1,234 | 62.3 | % | $ | 786 | 83.5 | % | $ | 487 | 76.2 | % | $ | 3,457 | 70.2 | % | |||||||||||||||
Refinance | 409 | 30.1 | % | 748 | 37.7 | % | 155 | 16.5 | % | 152 | 23.8 | % | 1,464 | 29.8 | % | ||||||||||||||||||||
Total | $ | 1,359 | 100.0 | % | $ | 1,982 | 100.0 | % | $ | 941 | 100.0 | % | $ | 639 | 100.0 | % | $ | 4,921 | 100.0 | % | |||||||||||||||
Ending number of policies in force (PIF) | 131,111 | 129,665 | 126,347 | 127,019 | |||||||||||||||||||||||||||||||
Rollforward of insured loans in default: | |||||||||||||||||||||||||||||||||||
Beginning delinquent number of loans | 3,625 | 3,641 | 3,858 | 4,469 | 4,469 | ||||||||||||||||||||||||||||||
Plus: new notices | 1,402 | 1,553 | 1,377 | 1,458 | 5,790 | ||||||||||||||||||||||||||||||
Less: cures | (1,202 | ) | (1,168 | ) | (1,202 | ) | (1,635 | ) | (5,207 | ) | |||||||||||||||||||||||||
Less: paid claims | (351 | ) | (397 | ) | (383 | ) | (429 | ) | (1,560 | ) | |||||||||||||||||||||||||
Less: delinquent rescissions and denials | — | (4 | ) | (9 | ) | (5 | ) | (18 | ) | ||||||||||||||||||||||||||
Ending delinquent number of loans | 3,474 | 3,625 | 3,641 | 3,858 | 3,474 | ||||||||||||||||||||||||||||||
Ending percentage of loans in default | 2.6 | % | 2.8 | % | 2.9 | % | 3.0 | % | |||||||||||||||||||||||||||
Losses: | |||||||||||||||||||||||||||||||||||
Number of claims paid | 351 | 397 | 383 | 429 | 1,560 | ||||||||||||||||||||||||||||||
Total paid claims (in thousands) | $ | 15,358 | $ | 17,093 | $ | 16,190 | $ | 18,117 | $ | 66,758 | |||||||||||||||||||||||||
Average per claim (in thousands) | $ | 43.8 | $ | 43.1 | $ | 42.3 | $ | 42.2 | $ | 42.8 | |||||||||||||||||||||||||
Severity (3) | 99.2 | % | 93.7 | % | 93.0 | % | 97.4 | % | 96.3 | % | |||||||||||||||||||||||||
Average reserve per default (in thousands) | $ | 27.5 | $ | 27.1 | $ | 28.1 | $ | 27.5 |
21 |
(U.S. Dollars in thousands) | December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||||||||||||||||||||||
2014 | 2014 | 2014 | 2014 | 2013 | |||||||||||||||||||||||||||||||
Investable assets (1) (2): | |||||||||||||||||||||||||||||||||||
Fixed maturities available for sale, at fair value | $ | 10,750,770 | 73.6 | % | $ | 10,733,382 | 73.6 | % | $ | 10,714,532 | 72.9 | % | $ | 9,775,730 | 68.5 | % | $ | 9,571,776 | 68.1 | % | |||||||||||||||
Fixed maturities, at fair value (3) | 377,053 | 2.6 | % | 359,409 | 2.5 | % | 372,746 | 2.5 | % | 456,826 | 3.2 | % | 448,254 | 3.2 | % | ||||||||||||||||||||
Fixed maturities pledged under securities lending agreements, at fair value | 50,802 | 0.3 | % | 107,547 | 0.7 | % | 82,730 | 0.6 | % | 100,590 | 0.7 | % | 105,081 | 0.7 | % | ||||||||||||||||||||
Total fixed maturities | 11,178,625 | 76.5 | % | 11,200,338 | 76.8 | % | 11,170,008 | 76.0 | % | 10,333,146 | 72.5 | % | 10,125,111 | 72.1 | % | ||||||||||||||||||||
Short-term investments available for sale, at fair value | 797,226 | 5.5 | % | 748,659 | 5.1 | % | 977,058 | 6.7 | % | 1,484,280 | 10.4 | % | 1,478,367 | 10.5 | % | ||||||||||||||||||||
Short-term investments pledged under securities lending agreements, at fair value | — | — | % | — | — | % | 4,301 | — | % | — | — | % | — | — | % | ||||||||||||||||||||
Cash | 474,247 | 3.2 | % | 486,351 | 3.3 | % | 471,721 | 3.2 | % | 486,325 | 3.4 | % | 434,057 | 3.1 | % | ||||||||||||||||||||
Equity securities available for sale, at fair value | 658,182 | 4.5 | % | 582,075 | 4.0 | % | 608,820 | 4.1 | % | 548,168 | 3.8 | % | 496,824 | 3.5 | % | ||||||||||||||||||||
Other investments available for sale, at fair value | 296,224 | 2.0 | % | 431,833 | 3.0 | % | 457,567 | 3.1 | % | 426,917 | 3.0 | % | 498,310 | 3.5 | % | ||||||||||||||||||||
Other investments, at fair value (3) | 889,253 | 6.1 | % | 838,054 | 5.7 | % | 848,864 | 5.8 | % | 799,824 | 5.6 | % | 773,280 | 5.5 | % | ||||||||||||||||||||
Investments accounted for using the equity method (4) | 349,014 | 2.4 | % | 307,252 | 2.1 | % | 281,464 | 1.9 | % | 255,488 | 1.8 | % | 244,339 | 1.7 | % | ||||||||||||||||||||
Securities transactions entered into but not settled at the balance sheet date | (32,802 | ) | (0.2 | )% | (9,835 | ) | (0.1 | )% | (130,922 | ) | (0.9 | )% | (73,042 | ) | (0.5 | )% | (763 | ) | — | % | |||||||||||||||
Total investable assets managed by the Company | $ | 14,609,969 | 100.0 | % | $ | 14,584,727 | 100.0 | % | $ | 14,688,881 | 100.0 | % | $ | 14,261,106 | 100.0 | % | $ | 14,049,525 | 100.0 | % | |||||||||||||||
Average effective duration (in years) | 3.34 | 3.28 | 3.14 | 3.24 | 2.62 | ||||||||||||||||||||||||||||||
Average S&P/Moody’s credit ratings (5) | AA/Aa2 | AA/Aa2 | AA/Aa2 | AA/Aa2 | AA-/Aa2 | ||||||||||||||||||||||||||||||
Embedded book yield (before investment expenses) | 2.18 | % | 2.21 | % | 2.17 | % | 2.27 | % | 2.38 | % |
(U.S. Dollars in thousands) | December 31, | September 30, | March 31, | |||||||||
2014 | 2014 | 2014 | ||||||||||
Investable assets in ‘other’ segment: | ||||||||||||
Cash | $ | 11,455 | $ | 177,375 | $ | 454,722 | ||||||
Investments accounted for using the fair value option | 1,169,226 | 1,005,532 | 819,481 | |||||||||
Securities transactions entered into but not settled at the balance sheet date | (17,441 | ) | (58,859 | ) | (159,484 | ) | ||||||
Total investable assets included in ‘other’ segment | $ | 1,163,240 | $ | 1,124,048 | $ | 1,114,719 |
(4) | Changes in the carrying value of investment funds accounted for using the equity method are recorded as “equity in net income (loss) of investment funds accounted for using the equity method” rather than as an unrealized gain or loss component of accumulated other comprehensive income. |
22 |
(U.S. Dollars in thousands) | Fair Value | Gross Unrealized Gains | Gross Unrealized Losses | Net Unrealized Gains (Losses) | Amortized Cost | Fair Value / Amortized Cost | % of Total | |||||||||||||||||||
At December 31, 2014 | ||||||||||||||||||||||||||
Corporates | $ | 3,295,930 | $ | 36,682 | $ | (37,175 | ) | $ | (493 | ) | $ | 3,296,423 | 100.0 | % | 29.5 | % | ||||||||||
Non-U.S. government-backed corporates | 83,209 | 1,246 | (1,799 | ) | (553 | ) | 83,762 | 99.3 | % | 0.7 | % | |||||||||||||||
U.S. government and government agencies | 1,447,972 | 8,345 | (1,760 | ) | 6,585 | 1,441,387 | 100.5 | % | 13.0 | % | ||||||||||||||||
Agency mortgage-backed securities | 664,151 | 7,481 | (2,133 | ) | 5,348 | 658,803 | 100.8 | % | 5.9 | % | ||||||||||||||||
Non-agency mortgage-backed securities | 301,382 | 11,362 | (1,709 | ) | 9,653 | 291,729 | 103.3 | % | 2.7 | % | ||||||||||||||||
Agency commercial mortgage-backed securities | 133,366 | 183 | (2,971 | ) | (2,788 | ) | 136,154 | 98.0 | % | 1.2 | % | |||||||||||||||
Non-agency commercial mortgage-backed securities | 981,162 | 14,411 | (851 | ) | 13,560 | 967,602 | 101.4 | % | 8.8 | % | ||||||||||||||||
Municipal bonds | 1,494,122 | 31,227 | (1,044 | ) | 30,183 | 1,463,939 | 102.1 | % | 13.4 | % | ||||||||||||||||
Non-U.S. government securities | 1,099,390 | 21,311 | (37,203 | ) | (15,892 | ) | 1,115,282 | 98.6 | % | 9.8 | % | |||||||||||||||
Asset-backed securities | 1,677,941 | 8,425 | (6,089 | ) | 2,336 | 1,675,605 | 100.1 | % | 15.0 | % | ||||||||||||||||
Total | $ | 11,178,625 | $ | 140,673 | $ | (92,734 | ) | $ | 47,939 | $ | 11,130,686 | 100.4 | % | 100.0 | % | |||||||||||
At December 31, 2013 | ||||||||||||||||||||||||||
Corporates | $ | 2,473,901 | $ | 34,529 | $ | (34,204 | ) | $ | 325 | $ | 2,473,576 | 100.0 | % | 24.4 | % | |||||||||||
Non-U.S. government-backed corporates | 127,427 | 760 | (1,333 | ) | (573 | ) | 128,000 | 99.6 | % | 1.3 | % | |||||||||||||||
U.S. government and government agencies | 1,301,809 | 3,779 | (11,242 | ) | (7,463 | ) | 1,309,272 | 99.4 | % | 12.9 | % | |||||||||||||||
Agency mortgage-backed securities | 810,232 | 2,428 | (16,703 | ) | (14,275 | ) | 824,507 | 98.3 | % | 8.0 | % | |||||||||||||||
Non-agency mortgage-backed securities | 363,896 | 13,842 | (5,506 | ) | 8,336 | 355,560 | 102.3 | % | 3.6 | % | ||||||||||||||||
Agency commercial mortgage-backed securities | 172,012 | 1,063 | (6,700 | ) | (5,637 | ) | 177,649 | 96.8 | % | 1.7 | % | |||||||||||||||
Non-agency commercial mortgage-backed securities | 902,485 | 12,909 | (8,524 | ) | 4,385 | 898,100 | 100.5 | % | 8.9 | % | ||||||||||||||||
Municipal bonds | 1,481,738 | 29,378 | (9,730 | ) | 19,648 | 1,462,090 | 101.3 | % | 14.6 | % | ||||||||||||||||
Non-U.S. government securities | 1,159,017 | 14,729 | (19,363 | ) | (4,634 | ) | 1,163,651 | 99.6 | % | 11.4 | % | |||||||||||||||
Asset-backed securities | 1,332,594 | 20,033 | (13,795 | ) | 6,238 | 1,326,356 | 100.5 | % | 13.2 | % | ||||||||||||||||
Total | $ | 10,125,111 | $ | 133,450 | $ | (127,100 | ) | $ | 6,350 | $ | 10,118,761 | 100.1 | % | 100.0 | % |
23 |
(U.S. Dollars in thousands) | December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||||||||||||||||||||||
2014 | 2014 | 2014 | 2014 | 2013 | |||||||||||||||||||||||||||||||
Credit quality distribution of total fixed maturities (1) (2): | |||||||||||||||||||||||||||||||||||
U.S. government and government agencies (3) | $ | 2,245,489 | 20.1 | % | $ | 2,328,587 | 20.8 | % | $ | 2,339,891 | 20.9 | % | $ | 2,070,766 | 20.0 | % | $ | 2,284,053 | 22.6 | % | |||||||||||||||
AAA | 4,299,060 | 38.5 | % | 4,282,341 | 38.2 | % | 4,250,726 | 38.1 | % | 3,833,070 | 37.1 | % | 3,709,872 | 36.6 | % | ||||||||||||||||||||
AA | 1,917,392 | 17.2 | % | 1,964,325 | 17.5 | % | 2,072,825 | 18.6 | % | 2,015,706 | 19.5 | % | 1,720,605 | 17.0 | % | ||||||||||||||||||||
A | 1,739,922 | 15.6 | % | 1,623,894 | 14.5 | % | 1,462,471 | 13.1 | % | 1,373,213 | 13.3 | % | 1,359,193 | 13.4 | % | ||||||||||||||||||||
BBB | 339,395 | 3.0 | % | 322,067 | 2.9 | % | 330,207 | 3.0 | % | 279,207 | 2.7 | % | 304,543 | 3.0 | % | ||||||||||||||||||||
BB | 157,232 | 1.4 | % | 166,799 | 1.5 | % | 169,865 | 1.5 | % | 167,484 | 1.6 | % | 180,125 | 1.8 | % | ||||||||||||||||||||
B | 184,869 | 1.7 | % | 203,395 | 1.8 | % | 195,951 | 1.8 | % | 193,581 | 1.9 | % | 188,119 | 1.9 | % | ||||||||||||||||||||
Lower than B | 154,823 | 1.4 | % | 157,499 | 1.4 | % | 177,309 | 1.6 | % | 215,875 | 2.1 | % | 241,463 | 2.4 | % | ||||||||||||||||||||
Not rated | 140,443 | 1.3 | % | 151,431 | 1.4 | % | 170,763 | 1.5 | % | 184,244 | 1.8 | % | 137,138 | 1.4 | % | ||||||||||||||||||||
Total fixed maturities, at fair value | $ | 11,178,625 | 100.0 | % | $ | 11,200,338 | 100.0 | % | $ | 11,170,008 | 100.0 | % | $ | 10,333,146 | 100.0 | % | $ | 10,125,111 | 100.0 | % | |||||||||||||||
Maturity profile of total fixed maturities (1): | |||||||||||||||||||||||||||||||||||
Due in one year or less | $ | 247,825 | 2.2 | % | $ | 266,002 | 2.4 | % | $ | 222,741 | 2.0 | % | $ | 312,786 | 3.0 | % | $ | 280,187 | 2.8 | % | |||||||||||||||
Due after one year through five years | 4,288,440 | 38.4 | % | 4,409,460 | 39.4 | % | 4,640,884 | 41.5 | % | 4,051,588 | 39.2 | % | 4,005,049 | 39.6 | % | ||||||||||||||||||||
Due after five years through ten years | 2,587,397 | 23.1 | % | 2,310,260 | 20.6 | % | 2,057,463 | 18.4 | % | 1,963,512 | 19.0 | % | 2,049,160 | 20.2 | % | ||||||||||||||||||||
Due after 10 years | 296,961 | 2.7 | % | 273,106 | 2.4 | % | 263,696 | 2.4 | % | 280,970 | 2.7 | % | 209,496 | 2.1 | % | ||||||||||||||||||||
7,420,623 | 66.4 | % | 7,258,828 | 64.8 | % | 7,184,784 | 64.3 | % | 6,608,856 | 64.0 | % | 6,543,892 | 64.6 | % | |||||||||||||||||||||
Mortgage-backed securities | 965,533 | 8.6 | % | 984,767 | 8.8 | % | 1,155,192 | 10.3 | % | 1,127,484 | 10.9 | % | 1,174,128 | 11.6 | % | ||||||||||||||||||||
Commercial mortgage-backed securities | 1,114,528 | 10.0 | % | 1,232,092 | 11.0 | % | 1,119,401 | 10.0 | % | 1,023,055 | 9.9 | % | 1,074,497 | 10.6 | % | ||||||||||||||||||||
Asset-backed securities | 1,677,941 | 15.0 | % | 1,724,651 | 15.4 | % | 1,710,631 | 15.3 | % | 1,573,751 | 15.2 | % | 1,332,594 | 13.2 | % | ||||||||||||||||||||
Total fixed maturities, at fair value | $ | 11,178,625 | 100.0 | % | $ | 11,200,338 | 100.0 | % | $ | 11,170,008 | 100.0 | % | $ | 10,333,146 | 100.0 | % | $ | 10,125,111 | 100.0 | % |
24 |
(U.S. Dollars in thousands) | December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||||||||||||||||||||||
2014 | 2014 | 2014 | 2014 | 2013 | |||||||||||||||||||||||||||||||
Sector: | |||||||||||||||||||||||||||||||||||
Industrials | $ | 1,727,553 | 52.4 | % | $ | 1,557,042 | 47.9 | % | $ | 1,619,675 | 52.4 | % | $ | 1,497,915 | 54.6 | % | $ | 1,408,012 | 56.9 | % | |||||||||||||||
Financials | 1,149,620 | 34.9 | % | 1,237,335 | 38.0 | % | 1,071,628 | 34.7 | % | 775,732 | 28.3 | % | 702,318 | 28.4 | % | ||||||||||||||||||||
Covered bonds | 209,611 | 6.4 | % | 232,292 | 7.1 | % | 235,787 | 7.6 | % | 233,948 | 8.5 | % | 211,160 | 8.5 | % | ||||||||||||||||||||
Utilities | 146,442 | 4.4 | % | 148,331 | 4.6 | % | 128,012 | 4.1 | % | 125,850 | 4.6 | % | 107,756 | 4.4 | % | ||||||||||||||||||||
All other (1) | 62,704 | 1.9 | % | 77,381 | 2.4 | % | 37,221 | 1.2 | % | 111,472 | 4.1 | % | 44,655 | 1.8 | % | ||||||||||||||||||||
Total fixed maturities, at fair value | $ | 3,295,930 | 100.0 | % | $ | 3,252,381 | 100.0 | % | $ | 3,092,323 | 100.0 | % | $ | 2,744,917 | 100.0 | % | $ | 2,473,901 | 100.0 | % | |||||||||||||||
Credit quality distribution (2): | |||||||||||||||||||||||||||||||||||
AAA | $ | 423,819 | 12.9 | % | $ | 446,836 | 13.7 | % | $ | 421,711 | 13.6 | % | $ | 435,552 | 15.9 | % | $ | 312,411 | 12.6 | % | |||||||||||||||
AA | 773,893 | 23.5 | % | 852,197 | 26.2 | % | 843,638 | 27.3 | % | 597,925 | 21.8 | % | 536,110 | 21.7 | % | ||||||||||||||||||||
A | 1,399,218 | 42.5 | % | 1,211,315 | 37.2 | % | 1,059,987 | 34.3 | % | 978,407 | 35.6 | % | 903,956 | 36.5 | % | ||||||||||||||||||||
BBB | 271,826 | 8.2 | % | 262,418 | 8.1 | % | 277,614 | 9.0 | % | 226,918 | 8.3 | % | 246,434 | 10.0 | % | ||||||||||||||||||||
BB | 127,010 | 3.9 | % | 126,557 | 3.9 | % | 126,092 | 4.1 | % | 129,154 | 4.7 | % | 132,271 | 5.3 | % | ||||||||||||||||||||
B | 173,582 | 5.3 | % | 193,645 | 6.0 | % | 180,907 | 5.9 | % | 178,619 | 6.5 | % | 170,831 | 6.9 | % | ||||||||||||||||||||
Lower than B | 20,223 | 0.6 | % | 21,248 | 0.7 | % | 34,213 | 1.1 | % | 40,376 | 1.5 | % | 46,838 | 1.9 | % | ||||||||||||||||||||
Not rated | 106,359 | 3.2 | % | 138,165 | 4.2 | % | 148,161 | 4.8 | % | 157,966 | 5.8 | % | 125,050 | 5.1 | % | ||||||||||||||||||||
Total fixed maturities, at fair value | $ | 3,295,930 | 100.0 | % | $ | 3,252,381 | 100.0 | % | $ | 3,092,323 | 100.0 | % | $ | 2,744,917 | 100.0 | % | $ | 2,473,901 | 100.0 | % |
(U.S. Dollars in thousands) | Fair Value | % of Asset Class | % of Investable Assets | Credit Quality (1) | ||||||||
Issuer: | ||||||||||||
Apple Inc. | $ | 75,226 | 2.3 | % | 0.5 | % | AA+/Aa1 | |||||
General Electric Co. | 74,471 | 2.3 | % | 0.5 | % | AA+/A1 | ||||||
Toyota Motor Corporation | 64,030 | 1.9 | % | 0.4 | % | AA-/Aa3 | ||||||
Porsche Automobil Holding SE | 58,583 | 1.8 | % | 0.4 | % | A/A3 | ||||||
Wells Fargo & Company | 56,958 | 1.7 | % | 0.4 | % | A+/A1 | ||||||
Exxon Mobil Corp. | 56,332 | 1.7 | % | 0.4 | % | AAA/Aaa | ||||||
Daimler AG | 55,951 | 1.7 | % | 0.4 | % | A-/A3 | ||||||
Caterpillar Inc | 49,641 | 1.5 | % | 0.3 | % | A/A2 | ||||||
Royal Dutch Shell PLC | 44,317 | 1.3 | % | 0.3 | % | AA/Aa1 | ||||||
New York Life Insurance Company | 42,801 | 1.3 | % | 0.3 | % | AA+/Aaa | ||||||
Total | $ | 578,310 | 17.5 | % | 4.0 | % |
25 |
(U.S. Dollars in thousands) | Average | Estimated Fair Value | ||||||||||||||||||||||||
Issuance | Amortized | Credit | % of Amortized | % of Investable | Non-Agency | Non-Agency | ||||||||||||||||||||
Year | Cost | Quality | Total | Cost | Assets | Additional Statistics: | MBS | CMBS (1) | ||||||||||||||||||
Non-agency MBS: | 2003-2008 | $ | 126,523 | CCC- | $ | 135,797 | 107.3 | % | 0.9 | % | Wtd. average loan age (months) | 82 | 27 | |||||||||||||
2009 | 28,906 | AAA | 28,718 | 99.3 | % | 0.2 | % | Wtd. average life (months) (2) | 48 | 55 | ||||||||||||||||
2010 | 24,336 | AA+ | 23,915 | 98.3 | % | 0.2 | % | Wtd. average loan-to-value % (3) | 64.2 | % | 57.7 | % | ||||||||||||||
2013 | 90,285 | AAA | 91,304 | 101.1 | % | 0.6 | % | Total delinquencies (4) | 10.4 | % | 0.5 | % | ||||||||||||||
2014 | 21,679 | A+ | 21,648 | 99.9 | % | 0.1 | % | Current credit support % (5) | 11.5 | % | 35.5 | % | ||||||||||||||
Total non-agency MBS | $ | 291,729 | BBB- | $ | 301,382 | 103.3 | % | 2.1 | % | |||||||||||||||||
Non-agency CMBS: | 2002-2008 | $ | 69,512 | AA- | $ | 70,297 | 101.1 | % | 0.5 | % | ||||||||||||||||
2009 | 368 | BBB- | 368 | 100.0 | % | — | % | |||||||||||||||||||
2010 | 43,394 | AAA | 44,905 | 103.5 | % | 0.3 | % | |||||||||||||||||||
2011 | 62,963 | AAA | 63,820 | 101.4 | % | 0.4 | % | |||||||||||||||||||
2012 | 88,584 | AAA | 89,851 | 101.4 | % | 0.6 | % | |||||||||||||||||||
2013 | 239,980 | AAA | 244,559 | 101.9 | % | 1.7 | % | |||||||||||||||||||
2014 | 462,801 | AAA | 467,362 | 101.0 | % | 3.2 | % | |||||||||||||||||||
Total non-agency CMBS | $ | 967,602 | AAA | $ | 981,162 | 101.4 | % | 6.7 | % |
(1) | Loans defeased with government/agency obligations represented were not material to the collateral underlying the Company’s CMBS holdings. |
(2) | The weighted average life for MBS is based on the interest rates in effect at December 31, 2014. The weighted average life for CMBS reflects the average life of the collateral underlying the Company’s CMBS holdings. |
(3) | The range of loan-to-values on MBS is 21% to 99%, while the range of loan-to-values on CMBS is 11% to 100%. |
(4) | Total delinquencies includes 60 days and over. |
(5) | Current credit support % represents the % for a collateralized mortgage obligation (“CMO”) or CMBS class/tranche from other subordinate classes in the same CMO or CMBS deal. |
(U.S. Dollars in thousands) | Average | Weighted | Estimated Fair Value | ||||||||||||||||
Amortized | Credit | Average Credit | % of Amortized | % of Investable | |||||||||||||||
Cost | Quality | Support | Total | Cost | Assets | ||||||||||||||
Sector: | |||||||||||||||||||
Credit cards | $ | 665,529 | AAA | 18 | % | $ | 667,806 | 100.3 | % | 4.6 | % | ||||||||
Loans | 301,681 | AA | 52 | % | 301,121 | 99.8 | % | 2.1 | % | ||||||||||
Autos | 297,384 | AAA | 27 | % | 297,954 | 100.2 | % | 2.0 | % | ||||||||||
Equipment | 195,860 | AA- | 8 | % | 194,629 | 99.4 | % | 1.3 | % | ||||||||||
Other (1) | 215,151 | AA | 13 | % | 216,431 | 100.6 | % | 1.5 | % | ||||||||||
Total ABS (2) | $ | 1,675,605 | AA+ | $ | 1,677,941 | 100.1 | % | 11.5 | % |
(1) | Including rate reduction bonds, commodities, home equity, U.K. securitized and other. |
(2) | The effective duration of the total ABS was 2.1 years at December 31, 2014. The Company’s investment portfolio included sub-prime securities with a par value of $16.9 million and estimated fair value of $8.5 million and an average credit quality of “CCC/Caa3” from S&P/Moody’s at December 31, 2014. Such amounts were primarily in the home equity sector of ABS with the balance in other ABS, MBS and CMBS sectors. In addition, the portfolio of collateral backing the Company’s securities lending program contains sub-prime securities with an estimated fair value of $5.8 million and an average credit quality of “CCC/Ca” from S&P/Moody’s at December 31, 2014. |
26 |
(U.S. Dollars in thousands) | Fair Value | % of Asset Class | % of Investable Assets | |||||||
Composition: | ||||||||||
Investment funds accounted for using the equity method | $ | 4,767 | 1.2 | % | — | % | ||||
Term loan investments (1) | 385,970 | 98.8 | % | 2.6 | % | |||||
Total | $ | 390,737 | 100.0 | % | 2.7 | % | ||||
Currency: | ||||||||||
U.S.-denominated | $ | 274,295 | 70.2 | % | 1.9 | % | ||||
Euro-denominated | 116,442 | 29.8 | % | 0.8 | % | |||||
Total | $ | 390,737 | 100.0 | % | 2.7 | % | ||||
Sector: | ||||||||||
Consumer cyclical | $ | 92,817 | 23.8 | % | 0.6 | % | ||||
Consumer non-cyclical | 81,896 | 21.0 | % | 0.6 | % | |||||
Industrials | 76,375 | 19.5 | % | 0.5 | % | |||||
Utilities | 46,830 | 12.0 | % | 0.3 | % | |||||
Media | 35,626 | 9.1 | % | 0.2 | % | |||||
Basic materials | 31,074 | 8.0 | % | 0.2 | % | |||||
All other | 26,119 | 6.7 | % | 0.2 | % | |||||
Total | $ | 390,737 | 100.0 | % | 2.7 | % | ||||
Weighted average rating factor (Moody's) | B1 |
27 |
(U.S. Dollars in thousands) | Financial | Other | Bank | Equities | ||||||||||||||||||||
Sovereign (2) | Corporates | Corporates | Loans (3) | and Other | Total | |||||||||||||||||||
Country (1): | ||||||||||||||||||||||||
Germany | $ | 174,554 | $ | — | $ | 11,427 | $ | 23,183 | $ | — | $ | 209,164 | ||||||||||||
Netherlands | 107,114 | 1,057 | 59,092 | 16,914 | — | 184,177 | ||||||||||||||||||
Supranational (4) | 59,095 | — | — | — | — | 59,095 | ||||||||||||||||||
Luxembourg | — | 3,289 | 31,974 | 9,426 | 1,871 | 46,560 | ||||||||||||||||||
Belgium | 43,960 | — | — | — | — | 43,960 | ||||||||||||||||||
France | 2,082 | 2,372 | 8,146 | 3,957 | 2,966 | 19,523 | ||||||||||||||||||
Ireland | — | — | 2,807 | 1,542 | — | 4,349 | ||||||||||||||||||
Finland | — | — | — | — | 3,386 | 3,386 | ||||||||||||||||||
Italy | — | — | 1,786 | 416 | — | 2,202 | ||||||||||||||||||
Spain | — | — | — | 1,074 | — | 1,074 | ||||||||||||||||||
Slovenia | 823 | — | — | — | — | 823 | ||||||||||||||||||
Greece | 82 | — | — | — | — | 82 | ||||||||||||||||||
Total | $ | 387,710 | $ | 6,718 | $ | 115,232 | $ | 56,512 | $ | 8,223 | $ | 574,395 |
(1) | The country allocations set forth in the table are based on various assumptions made by the Company 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, the Company does not believe that it has any Eurozone investments from Austria, Estonia, Malta, Portugal or Slovakia at December 31, 2014. |
(2) | Sovereign includes securities issued and/or guaranteed by Eurozone governments. |
(3) | Included in “term loan investments” in the Bank Loan Investments table. |
(4) | Includes World Bank, European Investment Bank, International Finance Corp. and European Bank for Reconstruction and Development. |
28 |
29 |
(U.S. Dollars in thousands, except share data) | Three Months Ended | Year Ended | ||||||||||||||||||||||||||
December 31, | September 30, | June 30, | March 31, | December 31, | December 31, | December 31, | ||||||||||||||||||||||
2014 | 2014 | 2014 | 2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||||
After-tax operating income available to Arch common shareholders | $ | 150,184 | $ | 142,055 | $ | 160,669 | $ | 164,404 | $ | 152,741 | $ | 617,312 | $ | 595,715 | ||||||||||||||
Net realized gains (losses), net of tax | 26,847 | 27,476 | 50,267 | 18,273 | 8,584 | 122,863 | 73,844 | |||||||||||||||||||||
Net impairment losses recognized in earnings, net of tax | (3,837 | ) | (8,593 | ) | (14,749 | ) | (2,971 | ) | (88 | ) | (30,150 | ) | (3,786 | ) | ||||||||||||||
Equity in net income of investment funds accounted for using the equity method, net of tax | 2,252 | 4,765 | 9,054 | 3,164 | 5,309 | 19,235 | 35,738 | |||||||||||||||||||||
Net foreign exchange gains (losses), net of tax | 34,233 | 57,488 | (2,710 | ) | (5,854 | ) | (10,541 | ) | 83,157 | (13,718 | ) | |||||||||||||||||
Net income available to Arch common shareholders | $ | 209,679 | $ | 223,191 | $ | 202,531 | $ | 177,016 | $ | 156,005 | $ | 812,417 | $ | 687,793 | ||||||||||||||
Diluted per common share results: | ||||||||||||||||||||||||||||
After-tax operating income (loss) available to Arch common shareholders | $ | 1.15 | $ | 1.05 | $ | 1.17 | $ | 1.20 | $ | 1.12 | $ | 4.58 | $ | 4.39 | ||||||||||||||
Net realized gains (losses), net of tax | $ | 0.21 | $ | 0.20 | $ | 0.37 | $ | 0.14 | $ | 0.06 | $ | 0.91 | $ | 0.54 | ||||||||||||||
Net impairment losses recognized in earnings, net of tax | $ | (0.03 | ) | $ | (0.06 | ) | $ | (0.11 | ) | $ | (0.02 | ) | $ | — | $ | (0.22 | ) | $ | (0.03 | ) | ||||||||
Equity in net income of investment funds accounted for using the equity method, net of tax | $ | 0.01 | $ | 0.03 | $ | 0.07 | $ | 0.02 | $ | 0.04 | $ | 0.14 | $ | 0.27 | ||||||||||||||
Net foreign exchange gains (losses), net of tax | $ | 0.26 | $ | 0.42 | $ | (0.02 | ) | $ | (0.04 | ) | $ | (0.08 | ) | $ | 0.61 | $ | (0.10 | ) | ||||||||||
Net income available to Arch common shareholders | $ | 1.60 | $ | 1.64 | $ | 1.48 | $ | 1.30 | $ | 1.14 | $ | 6.02 | $ | 5.07 | ||||||||||||||
Weighted average common shares and common share equivalents outstanding — diluted | 130,855,218 | 135,876,605 | 136,889,944 | 136,562,717 | 136,467,998 | 134,922,322 | 135,777,183 |
(U.S. Dollars in thousands) | Three Months Ended | Year Ended | ||||||||||||||||||||||||||
December 31, | September 30, | June 30, | March 31, | December 31, | December 31, | December 31, | ||||||||||||||||||||||
2014 | 2014 | 2014 | 2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||||
After-tax operating income available to Arch common shareholders | $ | 150,184 | $ | 142,055 | $ | 160,669 | $ | 164,404 | $ | 152,741 | $ | 617,312 | $ | 595,715 | ||||||||||||||
Annualized after-tax operating income available to Arch common shareholders (a) | $ | 600,736 | $ | 568,220 | $ | 642,676 | $ | 657,616 | $ | 610,964 | $ | 617,312 | $ | 595,715 | ||||||||||||||
Beginning common shareholders’ equity | $ | 5,756,046 | $ | 5,904,399 | $ | 5,567,133 | $ | 5,322,496 | $ | 5,118,285 | $ | 5,322,496 | $ | 4,843,878 | ||||||||||||||
Ending common shareholders’ equity | 5,805,053 | 5,756,046 | 5,904,399 | 5,567,133 | 5,322,496 | 5,805,053 | 5,322,496 | |||||||||||||||||||||
Average common shareholders’ equity (b) | $ | 5,780,550 | $ | 5,830,223 | $ | 5,735,766 | $ | 5,444,815 | $ | 5,220,391 | $ | 5,563,775 | $ | 5,083,187 | ||||||||||||||
Annualized operating return on average common equity (a)/(b) | 10.4 | % | 9.7 | % | 11.2 | % | 12.1 | % | 11.7 | % | 11.1 | % | 11.7 | % |
30 |
(U.S. Dollars in thousands) | Three Months Ended | Year Ended | ||||||||||||||||||||||||||
December 31, | September 30, | June 30, | March 31, | December 31, | December 31, | December 31, | ||||||||||||||||||||||
2014 | 2014 | 2014 | 2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||||
Arch Operating Income Components (excludes ‘Other’ segment): | ||||||||||||||||||||||||||||
Income before income taxes | $ | 222,280 | $ | 236,400 | $ | 215,521 | $ | 186,587 | $ | 176,944 | $ | 860,788 | $ | 742,505 | ||||||||||||||
Less: | ||||||||||||||||||||||||||||
Net realized gains (losses) | 31,310 | 31,411 | 50,966 | 19,697 | 9,048 | 133,384 | 74,018 | |||||||||||||||||||||
Net impairment losses recognized in earnings | (3,837 | ) | (8,593 | ) | (14,749 | ) | (2,971 | ) | (88 | ) | (30,150 | ) | (3,786 | ) | ||||||||||||||
Equity in net income of investment funds accounted for using the equity method | 2,424 | 4,966 | 9,240 | 3,253 | 5,272 | 19,883 | 35,701 | |||||||||||||||||||||
Net foreign exchange gains (losses) | 34,467 | 57,611 | (2,764 | ) | (6,656 | ) | (9,848 | ) | 82,658 | (12,335 | ) | |||||||||||||||||
Pre-tax operating income | 157,916 | 151,005 | 172,828 | 173,264 | 172,560 | 655,013 | 648,907 | |||||||||||||||||||||
Arch share of ‘Other’ segment operating income (loss) (1) | 452 | 317 | (536 | ) | (442 | ) | — | (209 | ) | — | ||||||||||||||||||
Pre-tax operating income available to Arch (b) | 158,368 | 151,322 | 172,292 | 172,822 | 172,560 | 654,804 | 648,907 | |||||||||||||||||||||
Income tax expense (a) | (2,699 | ) | (3,783 | ) | (6,138 | ) | (2,934 | ) | (14,334 | ) | (15,554 | ) | (31,254 | ) | ||||||||||||||
After-tax operating income available to Arch | 155,669 | 147,539 | 166,154 | 169,888 | 158,226 | 639,250 | 617,653 | |||||||||||||||||||||
Preferred dividends | (5,485 | ) | (5,484 | ) | (5,485 | ) | (5,484 | ) | (5,485 | ) | (21,938 | ) | (21,938 | ) | ||||||||||||||
After-tax operating income available to Arch common shareholders | $ | 150,184 | $ | 142,055 | $ | 160,669 | $ | 164,404 | $ | 152,741 | $ | 617,312 | $ | 595,715 | ||||||||||||||
Effective tax rate on pre-tax operating income available to Arch (a)/(b) | 1.7 | % | 2.5 | % | 3.6 | % | 1.7 | % | 8.3 | % | 2.4 | % | 4.8 | % | ||||||||||||||
Balances in ‘Other’ segment: | ||||||||||||||||||||||||||||
Underwriting income (loss) | $ | (836 | ) | $ | (80 | ) | $ | (1,042 | ) | $ | (1,122 | ) | $ | — | $ | (3,080 | ) | $ | — | |||||||||
Net investment income | 9,850 | 7,866 | 532 | 1 | — | 18,249 | — | |||||||||||||||||||||
Other expenses | — | — | 347 | (2,676 | ) | — | (2,329 | ) | — | |||||||||||||||||||
Preferred dividends | (4,909 | ) | (4,909 | ) | (4,857 | ) | (52 | ) | — | (14,727 | ) | — | ||||||||||||||||
Pre-tax operating income available to common shareholders | 4,105 | 2,877 | (5,020 | ) | (3,849 | ) | — | (1,887 | ) | — | ||||||||||||||||||
Arch ownership | 11 | % | 11 | % | 11 | % | 11 | % | — | 11 | % | — | ||||||||||||||||
Arch share of ‘Other’ segment operating income (loss) (1) | $ | 452 | $ | 317 | $ | (536 | ) | $ | (442 | ) | $ | — | $ | (209 | ) | $ | — |
31 |
(U.S. Dollars in thousands, except share data) | December 31, | September 30, | June 30, | March 31, | December 31, | |||||||||||||||
2014 | 2014 | 2014 | 2014 | 2013 | ||||||||||||||||
Debt: | ||||||||||||||||||||
Senior notes, due May 1, 2034 (7.35%) (1) | $ | 300,000 | $ | 300,000 | $ | 300,000 | $ | 300,000 | $ | 300,000 | ||||||||||
Senior notes, due November 1, 2043 (5.144%) (2) | 500,000 | 500,000 | 500,000 | 500,000 | 500,000 | |||||||||||||||
Revolving credit agreement borrowings, due June 30, 2019 (variable) | 100,000 | 100,000 | 100,000 | 100,000 | 100,000 | |||||||||||||||
Total debt | $ | 900,000 | $ | 900,000 | $ | 900,000 | $ | 900,000 | $ | 900,000 | ||||||||||
Shareholders’ equity available to Arch: | ||||||||||||||||||||
Non-cumulative preferred shares (6.75%) | $ | 325,000 | $ | 325,000 | $ | 325,000 | $ | 325,000 | $ | 325,000 | ||||||||||
Common shareholders’ equity (a) | 5,805,053 | 5,756,046 | 5,904,399 | 5,567,133 | 5,322,496 | |||||||||||||||
Total shareholders’ equity available to Arch | $ | 6,130,053 | $ | 6,081,046 | $ | 6,229,399 | $ | 5,892,133 | $ | 5,647,496 | ||||||||||
Total capital available to Arch | $ | 7,030,053 | $ | 6,981,046 | $ | 7,129,399 | $ | 6,792,133 | $ | 6,547,496 | ||||||||||
Common shares outstanding, net of treasury shares (b) | 127,367,934 | 130,700,619 | 135,030,886 | 134,084,138 | 133,674,884 | |||||||||||||||
Book value per common share (3) (a)/(b) | $ | 45.58 | $ | 44.04 | $ | 43.73 | $ | 41.52 | $ | 39.82 | ||||||||||
Leverage ratios: | ||||||||||||||||||||
Senior notes/total capital | 11.4 | % | 11.5 | % | 11.2 | % | 11.8 | % | 12.2 | % | ||||||||||
Revolving credit agreement borrowings/total capital | 1.4 | % | 1.4 | % | 1.4 | % | 1.5 | % | 1.5 | % | ||||||||||
Debt/total capital | 12.8 | % | 12.9 | % | 12.6 | % | 13.3 | % | 13.7 | % | ||||||||||
Preferred/total capital | 4.6 | % | 4.7 | % | 4.6 | % | 4.8 | % | 5.0 | % | ||||||||||
Debt and preferred/total capital | 17.4 | % | 17.5 | % | 17.2 | % | 18.0 | % | 18.7 | % |
(1) | Issued by Arch Capital Group Ltd. (“ACGL”). |
(2) | Issued by Arch Capital Group (U.S.) Inc., a wholly owned subsidiary of ACGL, and fully and unconditionally guaranteed by ACGL. |
(3) | Excludes the effects of stock options and restricted stock units outstanding. |
(U.S. Dollars in thousands except share data) | Three Months Ended | Cumulative | ||||||||||||||||||||||
December 31, | September 30, | June 30, | March 31, | December 31, | December 31, | |||||||||||||||||||
2014 | 2014 | 2014 | 2014 | 2013 | 2014 | |||||||||||||||||||
Effect of share repurchases: | ||||||||||||||||||||||||
Aggregate cost of shares repurchased | $ | 202,218 | $ | 251,919 | $ | — | $ | — | $ | — | $ | 3,242,022 | ||||||||||||
Shares repurchased | 3,593,114 | 4,593,726 | — | — | — | 118,134,082 | ||||||||||||||||||
Average price per share repurchased | $ | 56.28 | $ | 54.84 | $ | — | $ | — | $ | — | $ | 27.44 | ||||||||||||
Average book value per common share (1) | $ | 44.81 | $ | 43.89 | $ | 42.63 | $ | 40.67 | $ | 39.08 | ||||||||||||||
Average repurchase price-to-book multiple | 1.26 | x | 1.25 | x | — | — | — | |||||||||||||||||
Remaining share repurchase authorization (2) | $ | 887,140 |
(2) | Repurchases under the share repurchase authorization may be effected from time to time in open market or privately negotiated transactions through December 2016. The timing and amount of the repurchase transactions under this program will depend on a variety of factors, including market conditions and corporate and regulatory considerations. |
32 |
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