Allianz Acquisition Strategy
Q: How will Arch enhance the Allianz operation?
A: Arch plans to integrate the Allianz acquisition thoroughly, leveraging data analytics and their strong U.S. presence to enhance operations. They have experience in the middle market and are excited about opportunities to invest and grow this asset. - , -

Reinsurance Market Opportunities
Q: Are you seeing opportunities in casualty reinsurance?
A: The casualty market is experiencing increased discipline in underwriting due to prior uncertainties and inflation. Arch sees more opportunities to grow their casualty book on both insurance and reinsurance sides, leaning into the market as others are cautious. -

Casualty Reserve Development
Q: Any unfavorable development in casualty reserves?
A: There was no material development on long-tail casualty lines across all years. Arch's reserves are holding up nicely, with actual development coming in more favorable than expected. -

Capital Deployment and M&A Plans
Q: How will you deploy excess capital and approach M&A?
A: Arch focuses on deploying capital into the business, including supporting growth and acquisitions like the $1.8 billion Allianz transaction. They have flexibility and are patient in finding ways to deploy capital, with options including cash, debt, or equity depending on circumstances. - , - , -

Baltimore Bridge Loss Impact
Q: Why is your bridge loss higher than peers?
A: Arch has a significant presence in marine liability, including insurance, reinsurance, and retro. They took a conservative view of the loss, booking it as IBNR due to uncertainties. The loss is in line with their market share and expectations. -

Mortgage Insurance Favorability
Q: Will favorable MI prior-year development continue?
A: The mortgage insurance market is performing well, with borrowers in good conditions and programs helping them stay in homes. While uncertain, Arch acknowledges the development has been more favorable than expected over the past 2–3 years. -

Fee Income Contribution
Q: What percentage of earnings is from fee income?
A: Fee income has grown over the years across all segments, but isolating the margin is complex due to co-mingled expenses. It's a significant and growing part of Arch's diversified income sources. -

Professional Lines Growth
Q: What's driving growth in professional lines?
A: Growth is largely attributed to cyber insurance. Arch is expanding teams, including in Europe, to meet high demand. Despite slight rate decreases, cyber remains a favorable proposition and helps in offering value to clients. -

Catastrophe Load Guidance
Q: Any change in cat load expectations?
A: Arch maintains a 6% to 8% catastrophe load for the full year on total premiums. This range is holding up nicely, with renewals going as expected and market conditions favorable. -

Florida Market Outlook
Q: Can you share color on the Florida market?
A: Adjustments in Florida are coming through, but inflation and storm activity remain concerns. Arch expects the Florida market to be well-priced and favorable from a risk-adjusted basis, with no heavy softening anticipated soon. -

Reinsurance Margins Sustainability
Q: Are strong reinsurance margins sustainable?
A: Arch believes the current market is excellent, with a high-quality in-force book. While quarterly results may vary, they recommend looking at trailing 12-month results for a reliable view. -

Other Income and Somers/Coface
Q: Do strong Coface results presage higher income?
A: Coface results are booked on a one-quarter lag, so strong Q1 results will benefit Arch in Q2. Somers' performance is correlated with the reinsurance market, so favorable conditions should positively impact income. - , -

Net-to-Gross Ratio in Reinsurance
Q: Why did net-to-gross ratio tick down?
A: The ratio fluctuates between 65% to 70%; last year's higher ratio was due to a larger transaction. There's been no significant change in reinsurance buying; the current ratio is within normal range. -

M&A Funding Preferences
Q: Do you prefer cash or equity for M&A deals?
A: Historically, Arch prefers using cash and debt over equity to fund M&A, minimizing dilution. However, the approach depends on the specific opportunity and circumstances. - , -

Underlying Insurance Loss Ratio
Q: Is anything affecting the loss ratio?
A: The slight uptick in the underlying loss ratio is part of normal business fluctuations. There are occasional claims, but overall results remain excellent, with no significant issues to highlight. -

Underwriting Appetite and Competition
Q: Where are you seeing increased competition?
A: There's higher appetite in lines like cyber and other short-tail risks. Arch responds by re-evaluating pricing and participation, focusing on clients with better prospects, and adjusting as necessary. -

Cycle Management Amid M&A
Q: Does M&A affect your cycle management?
A: Cycle management remains a core principle. Arch expects less acute cycle management in the Allianz and U.S. middle-market business, adding stability to the portfolio without changing their approach. -

Client Reserve Development
Q: How do you avoid clients' adverse development?
A: Arch is not seeing surprise developments and maintains consistent actual vs. expected results. They were defensive in prior years and have limited exposure to harder-developing areas, positioning them well. -

Capital Deployment Post S&P Model
Q: How much excess capital do you have?
A: Arch is generating significant earnings and focuses on deploying capital into growth and acquisitions. They have flexibility and capacity to raise debt if needed, providing options for future opportunities. -

Somers and Reinsurance Correlation
Q: Is Somers income linked to reinsurance?
A: Yes, Somers' performance correlates with Arch's Bermuda reinsurance unit. While not perfectly aligned, favorable reinsurance market conditions will benefit Somers and, in turn, Arch's income. -