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Arch Capital (ACGL)

Participants
Marc Grandisson Chief Executive Officer & Director
Francois Morin Executive Vice President, Chief Financial Officer & Treasurer
Elyse Greenspan Wells Fargo
Jimmy Bhullar JPMorgan
Josh Shanker Bank of America
Ryan Tunis Autonomous Research
Meyer Shields KBW
Phil Stefano Deutsche Bank
Brian Meredith UBS
Call transcript
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Operator

Good day, ladies and gentlemen, and welcome to the second quarter 2021 Arch Capital Group Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we’ll conduct a question-and-answer session and instruction will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded.

Before the company gets started with its update, management wants to first remind everyone that certain statements in today's press release and discussed on this call may constitute forward-looking statements under the federal securities laws. upon a assessments uncertainties. number based are assumptions are to subject of statements management's and current and These risks and actual materially differ results expressed Consequently, implied. or from those may

other information factors investors the review that with the reports filed periodic more time the For risks SEC should that affect from future on may performance, by company are and to time.

definition The forward-looking income Reform like the in would the company forward-looking based Morin. safe which yesterday, is of release facts subject today's and in also, conference, GAAP non-GAAP are reference Sirs, on Management available operating not Private Mr. company's The report current call on Marc on Grandisson you to of will to thereby. press be I meaning your Litigation are company's contained the to X-K some statements that can furnished Francois now the Mr. statements of intends reconciliation Form the certain measures the statements performance. and Act call Additionally, begin. to for company's XXXX. may in the Securities within to introduce earnings the make created and host historical the harbor the be to found contains SEC of website. financial

Marc Grandisson

and chance underwriters time. returns yet that us the our We unleash gives effective. protect Thanks, superior market. our to second through for remains simple markets time Arch generate risk-adjusted hard morning, you and this Liz. quarter Good strategy At We joining our thank playbook best XXXX earnings over tested our call. during soft believe capital

playbook. comes this at straight us from from of stage then expect the should cycle that You

grow will returns threshold, we our increases above As long continue rate support writings. as our to

and a hard stream peaked this seen in after before fully generated earnings XXXX, through have earned. We when market of for P&C prices results were years market of several sustainable the XXXX video

earnings strong in this investment by activity. ROE segments. out operating underwriting good P&C each was evident annualized platform item We strong the returns, in of XX% of that delivered aided underlying income diversified power annualized is And and so quarter. our quarter Arch's a this our this an quarter, again the ROE One stands operating XX% of net

improvement allowed Our teams results to performance. Better and market substantially significant same positioning P&C in quarter net their last overall demonstrate underwriting written insurance our year. over conditions expand grow the premiums

the the improvement attributable years in we was actions, to The trend business in expense We sixth was comfortably of a to cost our consecutive increases several is have as of plus lower lower increases About loss of excess years. are and accident the quarter higher improvement primary past The combined due rate estimates. the and balance at XX% driver underlying of taken across a by policy two-third geography rate this post driven spread. underwriting of XXXX Production ratio. combined loss earned of increased the from lines of level now premium pricing ratio. over quarter improvements year ratio improving ratios, most areas

A&H and to platforms and new growth programs, travel clients. and from current professional Both About net writings. had off an increases retention of on level comes tapered business XX% XX% eased, with still we're the to lines substantial lines, have estimate remaining where insurance from in our in some highs from increases. have rate continue increases seeing previous the growth increases in and price increases US approximately margins. market lines, our in existing been insurance exposure growth lines rate rate While that in rate with excel getting is international reflects higher change. on that We And we're meaningful immune property and improving premium growth

underwriting That's increasing results. share portfolio. arrangements. expertise as portion for share and their and our a deploy strong a years. had reinsurance we of next XXXX, When since also reshape from side-by-side to place capital of always ability of have group good leverage growth business. results quota this playbook based reinsurance as Our in A been dislocate on of why capacity writer experience our markets participation we This part a been seek believe our capital historical need while large producing historical our and clients patterns, the they our quarter few quota has to growth to strong our

As traditional this have increases reinsurance is market insurance as heard, may in increases. notable rate you the rate XOL lag

primary of increases the to be expectations. our XL finding to are not where down premium that we are few They writings. with share opportunities return clients. is quota closer Property enough reduced rate cat XX%, meet we areas preference our current through our one as the So is have

can as substantially specialty of writings and produced than cat and However, segments. also you property see other supplement, our excellent levels premium in grew in marine growth. Casualty

results markets faster our the reflected underwriting The several us to of the expect insurance markets. solutions than we one enables hard our reinsurance that our to is be improvements rate As quarters. primary ongoing leverage creative capital in during over story next Arch with in providing insurance, growth

We have history. throughout a considered this our core capability

our hot very along by reinsurance I market market strategic inflation of quarter on our that at now switch it's reiterate say. our me they working Our and how reaction view Watford to perspective be in which Carpe satisfactory a the to to continues are All Arch. noting for sustainable on no of opportunities standpoint, to purchase the focused as job successfully completed to with we, the all, this inflation hard fears build want at it exception. business of team. a worth we third franchise. industry. Allow a a beginning topic diem is From to our was seizing partners

a lines at establish line-by-line and inflation some workers' X%. say to basis In As I'd X% to underwriters, we this comp the remains inflation price study reserves. on like business low stage,

range. high like liability, in X% general we're excess estimating to be lines to other in inflation However XX% the

cost It's line claims consider a the been five a from of has in inflation. around business loss ground-up of specifics to to inflation across As X% we range when discuss important X% comparison, our for broadly years, point portfolio.

line policy as the for it's Second, in you increases noting points. key for select that or apply reserving to is the attachment excess and layers. The the an in every to start move up the ground-up of business pricing the then best inflation worth curve range upper a in trend rate trend with proper

insurance, of correct is number. in As are is estimating around case often a the uncertainty the and we there lot

cycle. Our philosophy is to keep consistent, through the methodology this

analysis for including the lines, and inflation. some of the the to account increased try we with so-called had supplement In environment possibility the our subjectivity. uncertainty, current in certain Third, also we social and

to allowed adjust typically willing at Arch, but cycle navigate hard reduce soft has a are indications, We that to our margin mind. it, more both, approach. trend all a safety than creating with philosophy This is new in we management time-tested above are us of and opportunistic our not concept the through a to markets,

mortgage now machine, continues quarter. to operating group, turn generating the well-oiled to $XXX which Let's a as operate our of earnings million in

than across and US roughly and throughout Our activity remainder insurance the persistency equity a policies XX% to the decreasing into $XXX steady inventory year portion Delinquency still position where on XXXX. expect our over has more we are of primary billion of we of have Refinance MI. current XX% factors, our the large rates and force expect of improving based in slowed of delinquencies cure, portfolio delinquent strong equity. for remained many including at

by the opportunity remains Outside are across housing remains we rated notices of Australia like second MI in than XXXX market competitive, close the but rational the now of acquire announcement default, the continues quarter at We decline better pre-COVID industry Australia to has this strong. and New quarter. later our which increased as back long-term to US, the our to levels. Westpac's business, writings demonstrated our in LMI X,XXX in to we Pricing levels. expect as

credit strong, the borrowers similar earnings insurance quality portfolio. However, continued the supporting confidence to our XXXX, of our mortgage in from remains

top in quarter the Cup goes Bermuda, which borrow mind for close because, crazy island As weekend. when from remarks, this entire I'll four-day prepared my this marks holiday cricket, here I a Match weekend is cricket of

swinging than The possible, we'll as many do ball the aggressive out. as in bat for P&C critical, about Test and be for being are governed XX that any as always but or We'll long balls XX runs match. you minutes, we're running while as team and possible, isn't sports scoring what fans, games waiting many possible, as runs. details a or of is are think runs it to market, the as to have idea of similar but as just as all must getting the worried be few opportunity favorable the Unlike runs not can. out. for we market of the test that when cricket test your as not to by about cricket a Rather right this play do, is baseball scoring clock. we scoring score batsmen keep we to, for one the become as pitches arises. current clock when is takes defensively that I like long We're completed during cricket first aimlessly, the and

I'll it Francois financials. ball through the Now, to over run to

Francois Morin

and Marc the Thanks day us today. to Classic. first Cup this all morning for joining good you, Thank Bermuda Match on of

on with operations Watford. you results, Before consolidated basis, core the includes a Holdings excellent I consistent the which to second financial provide our the In are quarter more color Watford filings, prior Arch's the remind on results, of practice, i.e. comments segment, our other I excluding Ltd. following term should corresponds that,

we transaction As partnership with Watford you you this Watford be which Pincus how last results, I the our going year with will in on with changes Warburg, report share know, closing, equity in few late closed minutes. Concurrent acquire Kelso. and will making we a forward we in we announced the earlier month interest to in

an in recovery to COVID-related we exclude unit the improvement mix same excluding of one XXX quarter in from rate our business. XX months by ratio accident reflects of benefits quarter ex-cat changes quarter one from our was and producing last same health million year was increases quarter ratio the $XX.XX increased year the we travel, XX.X% the at and combined of insured on XX.X%, income points excellent ago, the the In ago. segment's The due The of insurance quarter. achieved common grew lower year over period operating basis accident earlier, one net As share, shared very X.X% and per per annualized solid had XX.X% June in an value return or XX% Book segment, performing premium average same well the investment the $X written our in resulting our also quarter legs up over share After-tax XX, operating Marc equity. three for stool to each the $XXX.X portfolio ago. growth cats the loss the results. accident the with quarter if in

In since expense addition, lower in growth the ago, was primarily points the year base. the ratio same to the one premium approximately basis XXX by due quarter

reinsurance our but especially specialty for where across XX.X% the and compared on to a growth net rate growth combined As segment's helped new in most year quarter operations, our and written of The lines, topline. basis. cats, one premiums growth lines, our had we in ratio XX.X% accounts of strong the was on XX.X% basis The at accident increases observed excluding same year-over-year ago. other in strong increase casualty stood

last transactions the results. the impact the our increases we points, ratio from we combined series rate quarters. X.X events the compared on the almost from impact stood is improvement basis, net Losses which reinstatement the the over combined XX.X $XX.X As a prior a last The the at entirely by activity of premiums, second ratio stood quarter claims catastrophic quarter past, segment quarter, certain and that On from result XX-month XXXX better of reported in discussed six-plus of claim accident lower underlying the ex-cat to where year have ratio rolling XX events smooths small of on Viola the recoverables have the in and believe of reinsurance points typically or reinsurance loss basis February. XXX observed million American on XX.X% large at months, of in the that result the out basis, can was an North the in months, side, we performance XXXX. and/or across a the analyzed as in storms over globe Uri late points reflected and winter combined quarterly some of activity the XX have

this call transfer of of was impact on income, in the approximately which have the We pandemic an $XX XX% contracts, one force levels, vintage was at which exercise came The In the two-thirds to ultimate of down remains Following force few up solid of stable. was the U.S. million risk million, GSEs trends last peak non-U.S. of activity close quarter quarter. the than for when in loss by the features on received. level Income insurance from Of our year on refinance quarter, prior portfolio. to rate, an by for of the delinquency of driven our during quarters, new mostly insurance Coface. calls of was terms affiliates impact reserves it the the was MI at we during in quarter particular, the the end these ratio for strong book quarter the our combined from reducing at And the note, came delinquencies at the of operating second X.XX% certain coming one-time another first approximate benefit premiums mortgage and COVID-XX very seen now from saw MI segment manageable. is the its it ago. rest in relatively with the end release reflecting underwriting production. XX.X%, the $XX.X reached this credit overall from prior excellent lower the we year reported in quarter call our at had remained segment lower The

ownership a quarter results in our we lag statements. our into financial As reminder, on report a interest Coface's

VIE operating concluded significant Watford, analysis. to event. transaction will the attain we results will the we As Watford new consolidate the of operating quarter have the we along no financial Watford's result, Premia. control regards we longer results in reported our starting of as while proportionate entity, X will gave the income we on financials. reconsideration will revisited with Coface share as our of that to a affiliates, entity XX% documents of forward. be Based line, on third in such rise share affiliates our from the going July And a governing with results, And not other and closing our influence, Accordingly, of the our

quarter, As we the investment for the approximately at basis gain the funds our during income levels during million to and of quarter. using markets. a nonrecurring driven quarter, trade-offs transactions. contributor basis, transaction, return of the full from returned risk a third in investment on closing our $XX of positive on withheld up also year Total was and X.X% the million to a and received view end X.XX investment reflecting income duration tax the report income our geographic XXX our Equity Net the accounting operating expenses the in of for mix in on one-time quarter, of rate, result the sequential for book quarter, key interest income at expect and fixed $XX.X our a our tax in the portfolio return of $XX.X quarter. benefit basis of in million quarter. of The The points the reflecting $XXX in portfolio a dollar investment of funds pretax was items estimated million changes investment rate was the in the equity discrete years pretax a tax one growth by net on approximately lower method remains value. lowest its effective U.S. the internal income the history, the

risk to management. Turning briefly

equity level. cat the million tangible below PML our July event X-in-XXX-year and Northeast for internal natural of down decreased zone limits to approximately Our at basis X.X% peak single return on the to well $XXX of X as net a common

in capital perpetual fixed $XXX June. X.XX% the preferred rate shares million of we issued front, On

of income, shares book or approximately at use of year-to-date we to a net line. preferred proceeds portion corporate all our for $XXX bringing Series share million, general We and in to and million million all approximately the shares in expect year-to-date while outstanding X.X our September redeem an cost $XXX value quarter, Separately, aggregate XXXX non-cumulative amounts remaining over XX% of or to growing top second to E repurchases any the our repurchased purposes. use our

we said returns returns attractive. the to improving shares years where compromising of prospect this our believe current We we At we prices execute for the results leads opportunities and philosophy invest value buying most flexibility. formation and have our demonstrates proponents this with are believe quarter's management. our cycle our in to on we back us since are compelling capital another capital without and believe ability of active represent strong XX As ago, our proposition shareholders

With we to now comments, prepared questions. introductory these take your are

Operator

with Instructions] Fargo. [Operator from first you. Thank Wells question comes Greenspan Elyse Our

Elyse Greenspan

guys question year. you growth this than you right, your Hi. into Thanks. growth you capital on bought of half had than was see. believe thought morning. would thought -- guys I that start first you year My you to said, Good going the back to Francois, earnings just less you more Do you capital. -- And the your enough support

is we in think return that you be willing pickup if capital seems potentially Would to wind back you us? that a year? your during true update have statement just capital? season, the the it excess a just good you should stock can of be buying half level active of And in given like about back So

Francois Morin

Sure.

were more -- wind season. early We're second diversified. somewhat lot careful while yes. our know, share in question, more you pre-mortgage I'd the -- as now, during say days We're buybacks Elyse, years, we're with On and not we the a

that you I used to where able can. mean in as quarter, within is I as and this same repurchases priority shares. second business about think buying to could grow we maybe invest we if are less some or yes, that, in the the of then capital the still throughout to applicable deployment our as So the certainly, we back it the think mean, both is year, that think top or But half the be reason, like share year. reality we we'd business that than of stay saw I constraint more think to But, or do we certainly best second the and be they half things were and doing be.

Elyse Greenspan

still the then, growth positive, we've quarter, insurance of pricing, inflation, rate Okay. right? little from of your came in the increases which of seem guys on positive concern so heard a segment, And throughout the XX% you terms that in bit industry. pretty

So, broadly, on that think as, about do to with have going together? comes you exceed lines obviously, for just environment many its the continue what's how as you sense inflation, long are you trend, guys pricing well just as thinking a pricing of loss different broadly insurance across recognizing, should

Marc Grandisson

question Elyse. answer all momentum think But a riches, right it's lead will us, that there. you the say fair There's to if of that market to the clearly is get I

the rate a I heard for increase and push and on better shared that, in industry. think the adequacy you that to level in getting better level a most calls getting other rate is to among

recognition the the well as in being there's such cat think lower, losses have up. inflation I think that to occurred the uncertainty no need risk a go some have of in included prices as and cyber a there's Obviously, think occurred, that past rates interest between I losses recognition the cat I some -- and that there's events. property

I think you just will quick give I a anecdote.

common needs through that brokers. our theme competitors they that to seems are some that community ours evidenced in you well. reinsurance thread audits, with folks And more or And that have side, the the discussion this is doing of see the with the can that is audit our clients, underwriting be is come done. file of are of to who on the Some as recognizing

secure. very So we're

to pricing think bit way there's this a going quite to more improvement. run I be

Elyse Greenspan

one-off about seen Francois reinsurance kind more just one underlying one-off. And in question book the on on see in it from shift quarter my like, factors expect there I lines your just that was to the the is, a side, the more, comments then we just to in improvement some forward, away ratio go-forward longer loss think guess, within one deterioration we was last was it tail as or that would still sounds that we've from quarter, property, could the the more and of as deteriorate, going you basis? that

Francois Morin

Yeah.

And of rolling but other yeah, good we quoted more there'll a we good starting some If there. you're which a better. it's terms a we say, in is going also -- a months point. casualty business and XX is I would mix, up go -- to in fluctuations think down, right? numbers and But as be The modeling the -- probably the -- terms I bit yeah, ratios it's here wrote there combined maybe specialty wrote more lot of

the pinpoint quoted in of number I to exactly, hard should I'd point. happen kind that obviously few to that good what's mean, it's the -- you going quarters. be I where -- be next everything So But to a the steer rolling XX-month to starting

Marc Grandisson

to all may if be Elyse, improvement reflecting I that I in point. mind, at bear add on. prudent in to tend we early the Arch, mean, also margin

takes So us. where the keep we data as and we'll see to make want sure forward. in we go have mind, just wait I that to

Elyse Greenspan

Okay. Thanks the for That's helpful. color.

Marc Grandisson

you. Thank

Francois Morin

you. Thank

Operator

next question comes JPMorgan. from Our with Bhullar Jimmy

Jimmy Bhullar

Hi. Good morning.

had So first a … just question

Francois Morin

Good morning.

Jimmy Bhullar

your in versus contrast reinsurance what broadly? on can …on the comments side primary seeing you're of pricing sort compare obviously -- and seeing what are pretty you're you positive. and But

Marc Grandisson

Yeah.

would side. that's otherwise as the the So commissions why in on even a have, on more seeding a markets. price basis, activity, the other though insurance much pickup more insurance as share side, lot not they there's hard on quota decreased And have

you're that basis, a you've increases. quota essentially if rate clients think -- participating I terms your you're alongside on share in of taken

would I remarks in have increase the my ascribe, to rate on you reinsurance insurance participation. included quota whatever could the share So

lag to percentage tends from it portfolio. the behind. of the a bit On There's always the typically benefit of is excess because underlying the rate, excess underlying a pricing some little of loss, loss

general. the be percentage. the that, some to for safe gave we're adequacy excess probably a that, loss, price happen probably softer markets that bigger need of primary soon. at the presumably rate say, to expecting I bit extent And a level, So of or But in increase would loss in the probably less to pickup more this of it little get to excess the start think would a

think helps. I market. second a hardening of hope recognition is be of of will derivative I that sort there some a typically that

Jimmy Bhullar

property you may little down are on the in But equally or optimistic signs and insurance? slowing And both be there cat a you bit? sustainability mentioned, optimistic, trend reinsurance you are are pricing the because equally in about of

Marc Grandisson

Yes on loss better. probably to the I said, Because It if excess took think loss. market, got go I get of XXXX to back XXXX, I XXXX lot like of to that, the market there. like excess a

you years of a to It's So excess to way market. their the way its primary of couple need increases a hardening pricing. very reinsurance onto rate start or normal find

So I'm actually. very encouraged

Jimmy Bhullar

And And inflated being the for view on your writing you, just strong. very thinking then good property and lastly about and side mentioned, as you're you obviously into of MI homes? the are quality labor just high values business you market now? But credit is the that how How prices how -- Okay. are factors well. that

Marc Grandisson

for demand you help and is quite pricing the the in supply equilibrium period. housing of terms back or demand such XXXX maintain to on plentiful, the worried. we'd That and was in take were a the while. should XXXX and it If supply supply an But that, would us the be

as to the all market. homes also in under the X.X marketplace. their you the There's to We know as press. find read have built, missing two a It in we while way million million takes to

undervaluation. price house is over there. appreciation the perspective, look our from So, or We at

We our metrics also And we're overvaluations. significant not have from national economist. these seeing

are mortgage at that the is -- So not -- yet concern. low -- pretty another that's And not interest another rate still a X%. X% at rates the

pretty still is affordability the historical to compared So metrics. high,

put a these, direction. if you of tends one I together, all you across think it never it's if mean, positive And Jimmy, everything right? at, in So I dimension, look overall

Jimmy Bhullar

Okay. you. Thank

Marc Grandisson

welcome. You're

Operator

next America. question Josh comes Bank Shanker Our with from of

Josh Shanker

releases mortgage. XXXX ever numbers. And the I've getting last question the or think out, So calls. at in reserves you're the the to asked like for per claim conference why same than trying ask the And loss I'm reserving from Yet look are the I it defaults the look case, XQ reserve again. per to prices I as housing releasing about going what I new figure two the keeps in the I'm reserves. is, more you're potential worse? math delinquencies, appreciating. new at

Francois Morin

Josh. you're very Well, a asking good question,

lot as before has picture, we're more a I going - have still loans in happen you there's think visibility know, how to to that still -- forbearance we big until the mean, an out? to -- whether are whether turn they're process. going How -- know, pan you to cure going as those And to they're or going to claim? they're I that's XX-month are

expire So we -- year, last should the if things their fourth of unless of April this in and will months -- May we look change at the period quarter peak XX-month expire year.

whether or on more when -- So that's a high too not. definitive And we'll how mean were certainly to have reserves visibility. have I again more view

at a current reserve action on to And the But quite before we -- bit to need We're so sit take data. little lot this I'd needs reacting that's again where a on we we a that feel still point. say that there's be levels. settled the

quarter. terms delinquencies, that always new every tweaks the there's of happen In

the assumptions the that frequency delinquencies. how put look we You new at inventory quarter this average, it's severities of smaller and and incidence delinquencies a on rate Again reported that the new get

numbers much. possibility. how more But second big we again I you're too those a That's So very that maybe out. think But I play year. half we'll think -- in bit got more reserve we're a Yes, leverage implying levels. in with our the still know I comfortable wouldn't the there's picture, of

Josh Shanker

I claim fourth million a for up in strengthening in put reserves reserves, for the average I guess the at $XX the year look entire current is So period when the that accident quarter, than to a book? on new in claim XXXX severity of the or the we portfolio, worse potential the -- be average is claims on put think new being the XQ, that currently have terms of

Francois Morin

Yeah.

late notices I The quarter notices, it's forbearance the the so before programs adjustments think that is time out on in I'd we that they some notices worse that terms make the latter. game new delinquent there's for the didn't were ones of we fact any became think could this available really thinking turn started. books a that the been they that than given the in over We have prior that a on possibility year, say the got earlier. that

might bit now they tell. mindset a of delinquent. will of have savings their But a a they they through might turned there's and tried philosophy So gone given lot finally time and all things or and that a that have

So that's behind a numbers. little I think rationale bit of the these the --

Josh Shanker

much you Thank update. the very for Okay.

Operator

with Our from Research. Ryan Tunis next Autonomous question comes

Ryan Tunis

Hey, thanks. me? I guess you Good afternoon guys. Can question. first my Marc, hear

Francois Morin

we Go Yes can. ahead.

Ryan Tunis

that. about Sorry

had a And not in critical. cycle question So with I'm being curious. just I'm management property I cat.

like premium. a So this $XXX year of you it year you ago, looks wrote And million. million $XX wrote

So get incrementally little not less. like a I bit place was the best property it to wrote be, cat but better. is the feels the you environment rate

I the we I'm we conditions So want as XQ decide much into decision just XQ did don't to XXXX, write improve curious of in a as goes bit like that to of what guess little as actually XXXX?

Marc Grandisson

good really a It's question. really,

we book, different Number perception like I right? in else of one, probably a had storm a everyone There's of we -- on just things have a the riskiness couple a wind the January. think cat So happen, right?

three make the more percolated you expected non-model losses definitely look losses, So we way two, seem will over to of years. last There's that right? different at non-model than lot a a that have take the

there's element second of a allocation is well your number is as loss other much They're say to that a a basis, cat and not of also one return. Is Y where almost And an expectancy are in it's one property for or made That's an safety for almost is the use of of needing X margin casualty? a as of forgotten higher in capital? capital. better as quarterly worth would risk-adjusted as clearly those a of saying on consideration. And So that -- result instance a also decisions I daily. a in be cost

quarter or as two at a the manage reinsurance So in able ahead. maybe portfolio to range side as you reoptimize go you're broader the get quarters a on of least your opportunities portfolio specifically, and you

and of your is all have mean, unlucky. lines [ph] it's your of these cat as with me all So probably it betting right? thinking point not when be in realm, a not you return, that's a beyond Property that cat, told at taper sort be the way also view optimizing is other time. a to thing don't out, little it opportunities that's stock this not because are a one perhaps if necessarily that as out I appearing the the back management want provided who Paul bit great of excluding you to juicy manager down

So it's we bit window of think. a a

Ryan Tunis

pre-pandemic interesting. there mortgage Yeah, at surprising I And that guess much makes almost bit seeing just given ratio, That's then notices felt guess in I new attritional loss are I pretty sense. just levels. they're some mean the was yeah like XXXX little insurance, I in none. a and I back

that an is was the sustainable, something XX% unusual this XX% tailwind? is quarter of, kind So this to it or attritional,

Francois Morin

we should how I you get that transaction. with I what that's PYD is be should minus over excluding mentioned where the attritional or plus of XX% loss mean bit prior CRT think a think the in there's noise I about it. Well, a ratio it cycle. quarters And Again

parts But So within I XX% sustainable. that. there's is absolutely moving yes mean,

Ryan Tunis

an guys And excess share if like it. what of I is? then curiosity, just willing out capital your of view just be internal Got position was lastly wondering would to you

Francois Morin

there's -- Well, target that's to mean don't is past. know something what moving because the market I not think -- made public going daily in a And a it's us. we've I we we're right? give the

a give will next but we number, be different. So tomorrow you could then

want just And -- rather to there. it's we the flexibility that's… keep So

Ryan Tunis

I hear you. I'd try. thought I

Francois Morin

Yeah.

Ryan Tunis

guys. Okay. Thanks

Operator

Shields comes question KBW. next from Meyer with Our

Meyer Shields

think Two questions. basic I you. Thank

is that know would that commentary reserves of that there's at Are me phrase a I -- current more because about Arch you elsewhere if and like than of lot current a reserves, past because was that year uncertainties differently. accident Is inflation. you with issue? the it regard slowly have issue, or to First, now releasing prudent of let in

Marc Grandisson

Meyer I actuary you're as think, am. I an

prior So -- part we the So clearly will accident establishing if current reserves. year year, accident you are inflation know that you and impacts of it's recipe right? of

factors. triangle extent we can the to development it's as trying a is you loss within to peg the we're know best a captured So in trend the not historical

it's more think historically our that establishing that on think that mean that been both a I loss means releasing? So we probably have bit Yes, careful sides. Does we I are in pick.

the history people If ratio industry. you the were most in that we combined were of our at back you'll see look insurance group specifically, in what higher much than

bit that except that said X% in like haven't was it's that and we tells changed loss this a of time think certain with you my our view lines, really I So for, point at were do in the more at I to to inflation comments point more. we a appropriate reserving probably in X%, view that where

Meyer Shields

it that's of Okay. think right I the lot and call a sense. makes No

Second How the exposure should question, we cat, about think non-property property in in the reinsurance. book? catastrophe

Marc Grandisson

of definitely part for cat in Francois, $XXX accounting it's the driver it's is of not of but the a but There We're Well, at some less mentioned. million exposure that it's all. definitely exposure. that the there

The of but depends X% at. on lot quota of our business it a depending load had a XX% in share from smaller. again much, these cat kind premium, So much specialty you share you quota sometimes look other higher But on what anywhere you're is writing. some to bit the on

larger So contributor I the through our XL cat PML say the would that, to is portfolio. still

Meyer Shields

you Okay. so Marc. Thanks, Thank much

Marc Grandisson

You’re welcome, Meyer. Thank you.

Operator

from Our Deutsche Bank. Phil Stefano question with next comes

Phil Stefano

and Thanks Yes. morning. good

Marc Grandisson

Good morning.

Phil Stefano

MI the on focused two business. or One

the the of like development million of it was CRT seems the that GSEs of $XX of in to deal. favorable shy due So the and just half cancellation

that, vintage other $XX or of The give sense a years give that what's driving take or the development? you associated with million us can

Francois Morin

give -- more yes be I'll I'll a you Well, specifics. bit

third -- under that's COVID about bit. total right of a from call in half our we've you're yes about that the half kind So deals. across of of I'd -- -- the assumptions across just down under books. brought the just slightly is And it's again all it And little a call was GSE tweaks half little say

It's reserves still on -- those around on MI. a primary US we've international US and the that So book. it's some made like also across are some CRT adjustments deal that

call businesses that some favorable businesses been that development time. And runoff have student just quite second gives of runoff perspective. then a or and So for it loan in under there's XX% on you just lien --

and Phil, So hopefully, the question. that answers gives your you split

Phil Stefano

I Thanks. think, the that's -- ahead. efficiency PMIER's go great. Yes, great. That's ratio sorry And

Francois Morin

No, you go.

Marc Grandisson

good. We're No.

Phil Stefano

Yes.

getting to So the you could state the the PMIER's some sort? efficiency for ratio Maybe, do capital? upstream is talk pushing or XXX%. near regulators you us the and of special do go to a GSEs ability that, to about might let When permission contemplate you up

Francois Morin

Yes. That discussed the quarter -- last as that's works. we in

Second half of begun the process year upstream. we've to we already are the --

US ordinary of be holding to As is regulated you in mentioned some extraordinary have some company the dividend the of It's to it will the it from -- our entities dividends. and

contingency the we're comfortable trapped we'll -- of will it I So we'll to levels of can them and some be think with of and with discussions capital get their have that they'll think know that be get ours. comfortable -- them levels think a that our being in on I'd have we the it -- meet you regulators to of that talking will there's like needs reserves dividend to that. about within lot some the I as current able total

extract we'll year. the dividends I'd So some like think to able that half the to in stay tuned but of be second

Marc Grandisson

without at XXX% second right GSEs can or PMIER. above you GSE. one allowing I are to do the approval for address If The fill any a dividend now

to end the down XXX%. the of to go at it's So year going

as if them we So even that gatekeeper dividend from have of payout. flexibility we think you consider perspective another even that

Phil Stefano

you. Thank Marc. Okay,

Marc Grandisson

Sure.

Operator

Our with next Brian Meredith from UBS. comes question

Brian Meredith

thanks. Yes, of questions couple A quick here.

property was of you like in kind decline exposure. today what And the guess, Southeastern cat your Gulf assuming look last that Florida year? saw that versus in I on reduction your reinsurance just question does First, I'm exposure

Marc Grandisson

some question the we premium if a last not not It's year. Florida Brian. look versus flow. had But decrease it's as you -- first down in thing at one-to-one on But it's

the I a you the of a result if few buying reduction think that things of was will as round portfolio. also to

because market take if necessarily not different also care. it's some all level buying our because to exposure into use this So trying a to reinsurance get we of net like, returns to get we

So only Florida not it's decrease.

Brian Meredith

cetera? Watford the now et It they second any no Got public closed. Any in is of my different question, longer here a you. write And business that or is Got strategy company. Watford anticipating types that with private going could you're you. here cetera deal changes in some then is meaningful forward material hands et

Francois Morin

business was. level should think all pick I'd in to of additional Arch closer was at very clone didn't assumptions high I a you of as but underwriting what I Watford -- a the stuff returns the were more more still of business terms necessarily or Yes, level because mean days focused say think high that on to the Watford was early Re classes investment same than get. the a at much that we're do of longer-tail going up Watford,

So, the Re looks the book Watford call of similar like. to makes it the portfolio what Arch model or it X.X business more

Brian Meredith

Got you.

actually should looks what towards trend towards results Arch trend So, ultimately Re like?

Francois Morin

correct. more so Much Yes.

Brian Meredith

Watford, exposure is there just And going you. or on insurance kicking I'm some your of on then curious Got mortgage of forward? ability any contemplation maybe

Marc Grandisson

there with giving shareholders Watford actually on the quite while. some of a very things been one they've some were also pleased done participate. something Watford. the is That's write actually already It's Yes to that opportunity mortgage the We existing. them for

Francois Morin

The I with -- that's like too only issue an mean Brian. ratings

So, for that's and comfortable. something of that matter terms in GSE regulators getting the ratings do

that's something as So, into look going that they're to well.

Brian Meredith

you. Thank Great.

Marc Grandisson

Thank you.

Operator

to showing like I'm now further for Grandisson remarks. the any turn not I'd over questions. Mr. conference closing Marc to

Marc Grandisson

Thanks for quarter. to our talk off here everyone next be you and Cup you. to Thank and we'll to call and to listen we're Match

Operator

in you conference. gentlemen, today's concludes This for participating the Ladies program. thank and

may You all disconnect.