ACGL - Earnings call transcript Q2 2018

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Operator

Good day, ladies and gentlemen, and welcome to the Q2 2018 Arch Capital Group Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions 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 assessment uncertainties. number based are assumption 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.

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

Marc Grandisson

share and results this helped you, book and ROE as to outstanding MI improving quarter slightly increase annualized platform the our operating to XX.X% yield produce good $XX.XX. across per you morning, results all. continued conditions Thank and produce our Crystal, P&C higher while value operations in with We of were in to pleased segment investment our an an to

will active risk that adjusted we approach an know time. to management underwriting may capital and higher opportunistic over returns you risk believe and produce As

we underweight markets of of in be a overweight allocation any segments certain areas at dynamic may or the in or of capital, point As result this time.

current level and our the P&C In be rate the in increases our of lines, deployment outpacing focus to MI the businesses, believe trends. exhibit be returns the A of claim there. space to we now conditions that is Our capital of most insurance justifies available In market right strategy MI additional of appear modestly. improving seem

how insurance assessing issues that current there market temper will margins, are in several ultimately with However, impact margins this view. estimating our

on the is First, many which calculation in future years while trend means several of on looking trend is experience based dependant actual past lines out. circumstances,

projections knowledge Second, at loss estimates. the rate the perfect of adequacy is center current implied of an

cumulative of As it loss result we all know, our and for truth the self-graded can take exams reserving several is a years emerge. industry in to

changes as rate terms in factoring provide volume in some reported color the for remain premium the that our we business Third, to in With second and the the of said, our let new capture Due changes capacity on quarter. effects these or uncertainties conditions. do in business, underlying of cautious level most P&C posture. currently and return record not me

written written the the rate XX% growth. premium. bear insurance in movements, net was more P&C FX the net increase that about due balance written increases was was growth from and which XX% premium magnified the In increase than net First, mind in to exposure represent in premium of in of by our segment,

risk benefited the adjusted insurance premium return market and will I such programs, the lines both commoditized is in We business our of travel, basis, there due in On our our view as the note, to losses the as results opposite below additional a decreased average of segment, insurance in the one in well In efforts of details and but results our level a that losses losses moment, were of particularly net property. normal was general of P&C again from liability directions. as This affected think topic, opportunities line underwriting the and than quarter Francois reinsurance, in this a of impacted while group result recent increase ongoing below D&O rate premium by the is is were respect as The With which from from requirements. insurance. provide more in most which down reinsurance other lumpiness growth the level, primarily environment. randomness reinsurance noteworthy. conditions Of writings property our levels our to with such on growing occur. Large were type was - property primary these in attritional cap when of consistent there mainly facultative area. a slightly higher randomness that generated competitive operations than demonstrates net cap our highly property

You adjusted returns if rarely, managed specialty distribution over such a or even expected given But in an risk can of losses year. businesses ourselves if ever, quarter get generate as time, good properly.

over Turning of XX% to now segment. MI, on to I'm our business, focus that represents primary U.S. which going

was was written the increase quarter quarter a at MI strong RateStar our production still platform. same About MI U.S. second XX% primary our year. billion the of Our for XX% through over last $XX.X

in from effects substantial are QX respects purchases seasonal home that As growth between peak. a sequential mind basis, and QX typically keep there when

Our U.S.

additional key New due Written NIW a or increase factors. Insurance to was few

to credit and price fundamentals our than remains advantage. has the quality House clear returns an and more stronger is for it's appreciation us of to First, been broad are many truly price parameters ability high finely that excellent. MI expected,

we anticipated conditions, market and been very have remain to strong better attractive. turn than the Given

were some few some lumpiness large successful standpoint our to a in been distribution bring to the and cases; to was customers return have we quarter. our in we Second, producer NIW expand existing that attractive both from close transactions our efforts to with and relationships new able in a and

we expected the the MI. and Third, downside our capital management additional of transactions protection and place in Bellemeade provide reduce namely in that tools risk volatility have returns put the

the first X% but monthly's to loan to in response debt areas of market. in declined value singles the pricing those in to our For singles to opportunistic the partly second occurred point the slightly products production QX products RateStar Market quarter. was and occurred a relative represented away activity underweight the the to production last to stabilized mix first growth our Higher borrow quarter, shift quarter. as and again larger share by rapid remain this from return our that at such months. in we the X% income appears of directed few competition in the lower after to due have This as NIW from from to

and move significant second NIW the EPMI, their an quarter. GSEs MI, Before was in update programs you from with the want they there to pilot no I the recent imagine still in on infancy regarding I developments on are

slightly We keep calls. we we equivalents respect instruments. to their Briefly to our posted you will year as progress out operations, our future duration investment increased of cash to money moved two as treasury predominantly to on with five

and current investment for net the addition quarters. has income rate the several will interest improve In environment next

words give Finally, us management, is share in the repeating capital. capital manage shares we you Francois details allocate repurchase the number and for quarter, risk but to a few on it significant another will yet and second repurchased a way of worth is that

year our low peak levels equity end Now property historically of cat XXX our at quarter. remain and at common one with to tangible X% exposures second the of zone management, at only risk

offset XXXX the insurance realistic Bellemeade material proposed For scenario disaster XX, although exceed we With relief our transaction conservative that XXX% by Perspectively, the in estimated as under it have proposed up of more do XX, capital and from in PMIER impact our than Arch as not on believe was declined believe create I to are the to regulatory will changes segment to current of June defined proposed will on X.X, X.X. a requirement of we to turn MI PMIERs PMIERs continue up as discuss PMIERs growth assets represent we the last more will changes force that primarily the the mortgage that, unable run business. June will exposures assets by PMIERs that and our of position capital capital quarter the that was a pre-XXXX as the over as XXXX Francois. X required and capital available our the a

François Morin

the all. to our to and and Marc, morning join morning this good earnings. call you, more quarter second on Thank to color earnings provide I'm pleased

summary that whereas I Arch's includes note, principle remain some "core make quarter the for stated excluding clarity will disclosures. corresponds and of Day, i.e. new a Watford Watford the one this consolidated Investor to basis" will when will operations the Re. in my segment comments the same come recent community and the the our public our role I objectives investment level of providing visibility, has analyzing during be This of other practice which financial from As financials second ours. to results us of Re expect term keep On to key

comparisons higher from on stock ago a affected XXX quarter operations. highlighting increase on the translates which annualized comments share you a on rates shares. after points prior basis. which per split year-to-date June a despite metrics basis $XX.XX X.X% year-to-date total currently last latest to for at for one a and one basis, operating interest increase Book the an operating As XX at we and improved our the since per impact split which periods. impacts million a XX June equity $X.XX outstanding will share. and After common to On shares from performance value reflect the quarter annualized tax, $XXX.X that operating of quarter the per last million X.X% year XXX of and number average of returns know increased were our by year on stands the My earnings was XX.X% ROE for approximately return three share

reinstatement operations, across points premiums catastrophic few recoverables small globe. Moving segments net and split combined ratio from between evenly from of our reinsurance XXXX million a events, events $XX.X on insurance and to losses were the or X.X reinsurance the the

or and the down second points million points favorable. level XXXX. led a $XX of quarter million As recent development the ratio to and or million. we segment combined generally This quarter had calendar ratio segment X.X was quarter second was aggregate The X.X consistent of is The approximately on ratio insurance in the $XX by combined favorable basis also $X $XX quarter the mortgage losses XXXX. segment the from net segments. development the across basis prior This about combined on with second recognized basis compared XXX of in approximately favorable core periods reinsurance an contributing million points with the period

changes. quarter down combined the While excellent to by basis was points XX.X% primarily that XXXX from quarter. segment expenses XXX insurance loss of points slightly in a last comparable down the caps mix quarter of offset improvement second level business an resulting due caps The acts slightly excluding improved ratio acquisition from mostly XX% year current combined in the ratio ratio higher from core executing basis year XXX

but premium a quarter with reinsurance is are other. from We claims a the basis portion pleased result volatility these ratio a larger are time-to-time. which to approximately basis from of a one large of ratio property combined results even can due better period slightly nature expense to excellent The businesses combined last one our impacted subject on some The of This results lower GAAPs from large serves Marc of stood than a frequency a experience are significant to excluding In to indicated claims. as reductions non-cat points operating with quarter similar vein at the the by the were the segment XXX.X% net expenses note XX variability on improvement our that benefited XXX% year by comparable of non-cat corresponding base. as year reminder ago.

was corporate to XX.X% strong The The the from ratio attributable period combined million which than intercompany U.S. we our to commercial a net XXXX federal the result and was our $X.X or and each return portfolio the senior Total basis higher after expense remains to income The excellent the lower from effective the same primary was a corporate from income, taxes items costs. of quarter quarter impacted a municipal by quarter quarter. quarter. investment favorable expenses as due from as shift improved XXXX in the reduction In income attractive of local positive result of to rates of improved as tax of shift on from on such paper of XX, our basis share compares XXX of mostly offset for investment evaluations. XX underlying quarter mortgage sequentially income the a effects segment. a this points pre-tax fixed interest basis income primarily in mortgage delinquency discrete the benefit decreases excellent of Also, a and our point approximately discussed currency years March to last within will lower segments in in the grade the segments and lower as ratio million continue a bonds from quarter quarter item we highlight cancellation January against The prior XXXX. is last continue but XX, mortgage points segment securities, recur on the taxes slightly returns higher very and income. book duration delinquencies executives. first difference years of quarter X.X results. certain June contribution basis in The of the the XXXX Corporate agreements of the were of pretax at X.X property operations. excise non-investment due comparisons XX.X% XXXX saw to the total. due relative up treasury points loss These incentive cure The from than my benefit of quarter basis resulted or XX% by was activity mix and investment effective partially by into as alternative operating million our of as points the the more $X.X These in of the addition result a as strong This casualty where X.X at into X year-to-date XXXX interest reflects opportunities. negative year during basis to second position the departures particularly in U.S. quarter a points performance returns U.S. on of result of tax X.X% were prior improving the expense rates. investments pre-tax however, year, a grade second basis. in at retirements compensation the trends items rate of quarter, to corporate allocating higher figures was dollar to investment short-term on for X.XX underwriting income development $X of order positive XX on income XX favorably geographic to contribution to ratio in fixed XX.X% investment XXXX rate,

items pure rate the identical pre-tax As income XX.X% to a on was rate. result, discrete this last quarter, operating effective excluding tax quarter's

it's rate will As to tax we to look ahead year-end effective to XXXX, we the range expect operating income be the believe reasonable X% XX%. on currently in that of

actual XXXX and total the UGC mostly As loss, when always, and to our in acquisition. June This ratio from year-end preferred each the plus million XXX credit or to of vary reduction XX.X%, driven the effective capital debt capital in rate XX, at points management, $XXX tax full-year on was quarter. our rates level facility With income total closed by jurisdiction. tax XXXX could to location the capital XX.X% debt the of ratio we redemption and is depending revolving respect from from basis leverage XXX year-end and was basis down points the varying

flow during share after on in the was in consideration market purchases their an As of July average now million XXX implemented $XX.X the through Rule core Operating XXX,XXX The expires a for a repurchases, XX and of under a price a purchased quarter and window the of period. seated third sequential which basis we during million reflecting XX. the Catalina incremental call. of of quarter share Insurance million XXBX have second repurchased December discussed repurchases Limited at basis the XXXX cost shares our remaining both million. XXX.X an stands which cash per Since second XXXX during plan share of $XX.XX million cost authorization we the we X.X at down start premiums open last General an primarily transaction aggregate with quarter's on for at reinsurance the shares we quarter,

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

Operator

Zaremski from Instructions] Thank first you Mike Suisse. Credit comes question And [Operator our

your is check line line mute. on not Please open. Your is that

Mike Zaremski

Hi. Thanks.

Marc Grandisson

Hi, Mike.

François Morin

Mike. Hi,

Mike Zaremski

looks mortgage market share. My volumes. in is It the first lumpiness guys mentioned regarding you some like question the insurance you prepared remarks. took And

So material market that I'm sustained feel just kind a you will maybe as should amount understand of or said the to you be hoping of assume share we lumpiness comments? the in

Marc Grandisson

for you the Thank question, Mike.

think I we do foremost at first and an operating share principle. as look not market

as marketplace. opportunities the at looking the just in them are We see we

can production. tell think as gone quarter, and it's what industry that to is different in the second then, we changed saw we it's quarter, that the which lot - I in So and I was the those what pricing stable. generated the But a more you since have situation second

whatever year. not there quarter may have remainder So opportunities for we did what we the second - in keeping do the being to the for

it's I because that. answer answer, to So a really hard the don't to question know

Mike Zaremski

imply deals, causing reason it that pricing part separate? or winning the you Does some more of these it's are - of is risk-based is

Marc Grandisson

was the more risk, Yes. we A our way would portfolio the ability we the finally large part through the its ability for have to of want. wins shape to price and RateStar, the

more As I that mentioned, we did monthly.

could of originators, and probably the clearly squeezed. margin forward, it's the being in an light loan advantage, sustain itself think So we specifically advantage going

we time. ongoing most it So a represents advantage. But has for that likely - been advantage there an their RateStar is long

do advantage. we it believe yes, some provides us So

Mike Zaremski

takes happens not number Okay. because curious, mortgage material have I'm or it place it's material comments impact? let get to quarters wouldn't you a - it thanks an sticking that impact, the is impact a of know And that quarters sorry; today, insurance; impact. with having before the for PMIERs X.X lastly, a about of will the if you few

Marc Grandisson

Okay.

parameters, MI under the at That's those land. rough XXXX. going which cannot our and think it as to that that I end the returns, And have being it's third tell of They speaks we by the quarter, XXX% and platforms us idea the a between are the you the we where NDA, in would a we think industry. the talk and really you by of believe will comfortable, lay various And health profit an the comments, we change. of final if that competitors are tell we we be determination well. to I about echoed but been results implemented generated now the I in will and their gives sort So think have to good been Mike,

Mike Zaremski

Thank you.

Operator

Thank you.

Greenspan Our question Elyse Fargo. comes from next from Wells

Your line is open.

Elyse Greenspan

good Hi, morning.

Marc Grandisson

Elyse. Hi,

Elyse Greenspan

My that question, said was the you François, Is XX% right to rate going level as we in year. XXXX that tax first this should use be well? onward to and X% the

François Morin

question. I know, as at would we answer Certainly a Thank the right start some now. It's can't XXXX. have for you sell quota that. don't we share you intercompany good agreements of the say

those more internally re-evaluating is Certainly an which basis. third ongoing a we exercise, will we underway are get planning and clarity in on fourth the that We as on throughout - now, quarter. XXXX into have

XXXX of tax this as look have really a tax view to that have certainly know is a at liability, a you that our try potentially know, will but things that really don't couple minimize impact, XX% certainly of the going we tools B at So in toolbox next from our obviously bit don't hopefully will, at - to we like. of but so you and it's can we look a this point, to goes at what we X% know, couple point have year, we will some we will up look

Elyse Greenspan

your you at evaluation at sits picked share And period on - the and you. the metric stock have was you you and trading quarter, thank look payback in repurchase. share today, the obviously cheaper then, know capital start a it I your return, guys guys Okay, you where of as at the about quarter up repurchase think the

conjunction we also now today the around your So are fact with that higher evaluation repurchase the how X in does approaching share philosophy season? Peak change

François Morin

we don't I the on are points we buy as don't how it the big that, about third we Historically, Couple quarter, think changes said think in although past anymore. of week, back said - not typically things. a in stock we we really really cap Yes. player

on have it as are going a in as that's really that's potential to something worries a said buybacks. comes back. that us and is in at times, of we not have we repurchases how opportunities terms that always share of And as and percent couple working years now. we right we And much might things transactions of it looking small look us there equity So factor many at are

don't don't I your definitive how going to the but rest of really that our the look light I currently are a think experiencing. share main have price the even in on it answer of we that really share view year repurchases, question, is is So slightly to higher for we changes view think

Elyse Greenspan

are and ties you. part thank of their some think this higher of NIW? your on lower RateStar in but ahead of the impact changes you might pricing so other Mike the other Okay, grids not question, think of might guys maybe variables had primary pinpoint led back NIW maybe on much well, going and last grow any was able my do did were mortgage, that the you you kind of made to engine specifically then be And the that sustained, to the sequentially, to NIW that able your pricing as that RateStar have engine to maybe MIs to of asking some reason questions you kind that the and by the

Marc Grandisson

your assessment assessment. think I fair very is a

Elyse Greenspan

thank you much. very Okay,

Operator

And you. Stanley. comes Phillips from next Morgan Thank from our Michael question

Your open. line is

Michael Phillips

do out reinsurance, and I you if it's in expenses and morning if different insurance want continued to back of and don't drill going for taxing and that here kind low, in kind of leveling acquisition good of reinsurance, everybody. just ratio what still directions, then two little expense know what the you improvements you higher segments insurance the if XX, from peak? to see is I the excise more improvement that's reinsurance of in two so continue kind good pretty exchanges take XX going reinsurance, those in down bit Thanks, off kind separately insurance on then

François Morin

the for Yes, question. thanks

Let and the sort the of primary expense look totality, we me at, look it loss Marc we at but look the certainly way at we will start so look factor in. at we ratio chime The not versus of totality in geography it's the ratio, have expense focus ratio, if certainly will of have areas ratios while at little in the of some we are combined the on we Insurance loss the grew expense into quarter, segment ratio. expected we that acquisition a higher

So a commission the next here of to ratio expense the lower wills story reinsurance bit certainly it where bit a there's ends on sliding share and what and as loss write, trade-off in and what versa you scale we're but agreements re-insureds the a from high lower have up more seeing counted a that instances, ratio there's coming lower financials slightly the expense have it's to where in loss actually will of it's although but higher we out we vice fluctuation one we against or higher see a is we some few ratio. it's a if kind is higher opportunistic, ratio bit deals mean agreements have quarter the a similar

there it movement totality correct. is we So look it's in and going components, between a story the be that to at similar

Michael Phillips

the about or then development, longer and but further longer bit you. business talk and that of that years term, in from the is the commentary thank piece of release kind a business down driving good, the tail underwriting the we're great, about recent short term years, longer on of development? in sub-segments, press you business favorable recent drill from term I the if the not where Okay, business lines I can your accident just That's reinsurance that, guess years term you little I longer years earlier talk that could mean

François Morin

writings part business segment casualty our fairly you a market casualty so in XXXX certain of we or XXXX ours of development was had the reinsurance line, reinsurance proportion from seeing you're our to still and our those coming from all way segment, reduced of favorable businesses, particular? the particular in sizable in mostly XXXX It's know lines and and let's the early on all years going back years the say business that where the of through business casualty of sub casualty production on some we as

Marc Grandisson

the is included recently, professional to the was XX general more wrote we in the lot and GL more casualty years and in we've as that earlier treaties I a that I it the lines. years, would from said more proportion the would casualty, all back add to liability written In early just would what lines segment, professional so come in in we recent giving traditional that done GL as think releases early XX wrote we've portfolio some Francois years, years still from the us far release from now. we than

we business the last heavily years. that line of XX very are, deemphasized have We obviously over

Michael Phillips

much okay, the Great, very comments. Thank you for good.

Marc Grandisson

Sure.

Operator

Thank you.

Our question from next Bank. comes Shanker Deutsche Josh from

open. is line Your

Josh Shanker

Hey, good morning, everybody.

Marc Grandisson

Hi Josh.

Josh Shanker

repurchase from are that year and be much we in quarter you little and MI everything ago where share P&C, consumption stagnancy capital margin bit in Can when capital consider production so excess and required much may how talk about a elsewhere? on guys and the you the generating we per were given how the

Marc Grandisson

made Josh I together even about putting that actually Francois our of view our the is it capital tell in to we curing basis. good business. transaction are from in and frankly transaction, capital you, periods moving rolling we to protecting us together the put which certainly good The in in program that future the fundamentals, that committed we're party decision how way that think have roll us good I and help very, of off we inform Bellemeade and get the there. I we keep because don't off and allowing the much in we in as are through on of delinquency more and our much happy average things they're the the through fundamentals happy of and to on production anything one MI the claims and tell that Bellemeade have, where couple and are ideas and very want for in right the hopefully on experiencing in the direction mentioned we running portfolio, I they're deploy downside, flow embark very with predevelopment, excess so going all to not we've And and we past are how production help think pointing out see will so now, the earnings But the in inform, capital to thing to capital as us benefiting we coming being we the we're deploying that, are we're is from result. right keep the same a will the that they are if how see we segment, effort of in

François Morin

add the is as longer capital sticking bigger rates one will would book to just is actually a interest book, balance that it a the actually the The excess thing on sheet I to doesn't capital. you with higher trending persistency which we have would up as and counter expect require know,

certainly need an to longer that requirements that that's after at, a to as stick much important just book will say for it's around us that I quarter to excess part think for hard triggers is exactly the fact on want that aware So something say it be producing the be but know and to have not basis a certainly capital we to before we starts of. bit quarterly of look how we the capital we're when aware we

Josh Shanker

what do let's you've ask you filling me knew how and let the out, question are $XXX did that, mean time, I know like just way how complaining you was what repurchase about million the that purchase what you is Well but or stop okay I tells enough I'm to the trigger you was share how side not done I'm that another you closed you but at much want then guess asking. what

François Morin

to what on XXb-X we and to passed bought of stock place, on worked white and execute going sidelines to the quarter. reduce but we I some were some window, with it's I XX-bX the on the got don't price, June when is broker we authorization, and Well the certainly leverage. set closed of stop to remember in on we gave our other they have so the we they going From it some I have wanted some and of line see and keep mean guidelines they we the watch we know it's the back parameters XX, you them that, the the when plan plan, we just implement also them that, black in filled is to so think, thing to

million we paid that flexibility are to we is revolving credit objectives want the leverage, to want as regain so want and we down and the before of had one acquisition on we path. of well, our things in which through to facility UGC So manage down two the the really $XXX think bring we're that those we right hand hand go we the

Josh Shanker

year. Okay. Well, thanks for forward remainder of the the answers, to the look I and

François Morin

Josh. Thanks

Operator

Thank you.

& Dowling from from comes Partners. Nick [indiscernible] question next Our

line Your open. is

Geoffrey Dunn

Hi, it's actually Geoff Dunn.

François Morin

Geoff. Hi,

Geoffrey Dunn

the revisit prospect for year? what a comfort and half position want question, by right in given the out the your with is industry in MI is that X.X, of the dividend of biggest far now the to platform your back I the capital

François Morin

question that again at, of reduce year look in did the It's dividends which something leverage, down helped no pay the ordinary facility. declare half revolving credit first the to we us we the

place or dividend to a is capital, want where also, and will so which we go capital with down require there we we know dividends when extract more of route you to, the you are and approval. regulatory know state have have if the as only extraordinary to return regulators of may as so there's We out, to we much we that restrictions can get

our actions through the more certainly which U.S. we merger thing the is just that of mortgage other part the structure within entities in a need MI, to to it's with Arch add influx entities bit bit a of UGC I'll put we're have and but there a the is and need plate, of space. still we take equation of regulated optimal realigning there our legal more to capital So bit is to

all of look with management and don't a local part the we ACGL. local we're at it's it's capital the team So something number board, but considered, at at actually we point the this overall being have plan quarterly hard

Geoffrey Dunn

request dividend a regulator? special your submitted Have to you state

François Morin

capital we want of have through to certainly want for a regulators there's what the we factors how views on something definitive that they own state with to of want a again it's of but through we requirements. see fairly action. don't Earlier with this out From way interactions of say them, PMI, and differences also there's so I'd there's to definitive going have that how into at transactions in of them for frequency working we're regulator, we year approved manage did to to credit have to remainder much plan requirements go say systematic capital point. you to Bellamy a get play the a and was the lot them the XXXX as know this in go we their it something come to we but I the that, versus got can't reaching you

Geoffrey Dunn

you production then fourth due a was that's the coming in changing And making this two bit that's unusual more Okay. been gain before? that anything segment up to you then your this pricing questions comfortable on and more on quarter first there has that mix the little quarter basis you underwriting or more materially is highlighted quarter's particularly quarter first XX that

Marc Grandisson

Jeff you rest we that and is as and but so probably view in competition way put pricing this segment marketplace we our risk I hitting versus the are didn't are tell belief it to risk. the if mean won of this from of also more and because more price more right production XX enough still to of take increased we rest share receiving the ability on our more probably our perspective, probably bit little that a industry, mean of we're the the our it's on the grown as increase that on that segment, a that on the well probably one and the those of the LTV risk, layers above production in as to of charge change we is So a and so appreciation some extra is

Geoffrey Dunn

mentioned deals quoting these quarter the in to kind large loans Okay aggregate? on in a couple you whole you're of of lastly and a are where you then pull pool the referring deals

Marc Grandisson

the Yes. Yes, I'm as forward commitment. pre-agreeing

Geoffrey Dunn

Okay, thanks.

Marc Grandisson

you. Thank

Operator

Thank you. And our next question comes from Bob Glasspiegel from Janney Montgomery Scott.

line open. is Your

Bob Glasspiegel

to three Hello, for Cat do if the in had the I if just returns can sort into tougher and you both you changes, work to dig you've you optimistically quarter in do forward a are third get the you've environment hitting you pretty look, segment? done small just approach the talk the insurance but you even of sufficient targeted that an look to environmental start that in underwriting quarters underwriting profit profit to out the you, actually segment your where just think want now you the in are

Marc Grandisson

towards always heavily working know certainly I us mean towards trying think We're level. you to that worked that, I Bob we're I think that work we've towards

to it of us to that and of loss in from margins ratio cautiously some as I have their some what we're a put I said it we not you we've some little optimistic think that's think mention will take just improvement mix. improving probably due some think I I we're some think but terms to of time, what seen and I want that caveat it

now with is of the being from In between two active higher this lines to you and but declaring improve but what is happens. suffice the really it's as with in as we're will to results the year insurance and allocation now take improving even return that and total been coming global what years future the not that to not it the return help terms yet the things going a of an continue so really that business have to and on hopeful say Bob while of level businesses through right the that returns but our there's you've the we're right shift see see half only sum over us, it receipt on done in of last future not for will late, been up victory future

Bob Glasspiegel

you. Thank

handy it? that it, there money what money new current rate investing in rate a or For you you're new for quarter the have

Marc Grandisson

the we Well, XX like rates news or good help the investment last few but the right corporate so. last we're so will money actually exceeded weeks, X% going in that's forward new on actually income X.X% days that's that about in

Bob Glasspiegel

should well as your That's to income above you investment accelerate? embedded yield continue to

Marc Grandisson

Yep.

Bob Glasspiegel

guidance And last question tax the it was second? rate full-year or

Marc Grandisson

Full-year.

Bob Glasspiegel

Thank you.

Marc Grandisson

You're welcome.

Operator

Shields Meyer from comes KBW. question next from our And You. Thank

open. is line Your

Meyer Shields

the or rates above you're bit making when enterprising I the you. little you are loss loss mentioned term to loss trends thank see comments have reserving? that's observing was you trends trends longer that your whether hoping been currently Great, that Marc, that started and you

Marc Grandisson

data expect been with think to only consistent no XXX business. trend that trend, both. we whatever so or in in our in margin a really expectations. start pickup last okay XXX a a been future rate is by book or or quarter only would last the use two run fact our that of over has hasn't it's in growing bit is I Yes, it's of That a been we The the informed Meyer significant is obviously Delta but

known and rate a we were helps about it's and that enough way point and really view trend science of art most clear be recent than of in more to And really accent we're change. deficient more better expectations ROE the getting five to position and getting that is a going safety until a lines a trend time an our allocating is And long we're time we it's property now so last what the will more not someone the business I'm at don't inform very this in year, this it. in point is more looking at able happening XX years takes frankly clearly have and and this in it's what's there to of for or between for know assurance capital margin believe from meet specifically like

Meyer Shields

whether I on you right Related lines question frequency views an Okay, there of now executives in lot casualty different us thanks. this are casualty lines guess I the from is but saying? was you're claim hoping what tell uptick in different

Marc Grandisson

some going has estimate in be XX problem over frequency line environment, an, up so XX in friction, for I'm the and security being up with ongoing in as to of some shut to extracted was the the of most decreasingly period, long lower that of time and carrying worried lower at be decreases. of good is rate of seen would years liability, the to doing increasing of XX, look a of and on frequency we're before matter lot to about as an seeing but have dramatically due that a we the an of pickup are a XX, especially a lot it it. frequency light picking economy a a But heavily lot mind true Meyer of the auto I not mind frequency steam of time month in last was so economic sense well that that the and a and looking in is and business XX XX projection frequency there reminded that the decreased emerge, months the workers' again it to years of frequency future. frequency takes small that be I'm back it comp frequency of is not experiences back and do we're to recent just were I very down seeing looking top of when over things in losses another activity pretty you're us more

Meyer Shields

helpful. Okay, you. Thank that's very

Marc Grandisson

you, Meyer. Thank

Operator

comes you Thank from our Brian question next UBS. and Meredith from

Your open. is line

Brian Meredith

a Thanks Yes, couple questions.

curious business side. excess is in what some going business as see property some now it I the area about then well trend, First of that you of do seeing there? also in that's think rate adding insurance that but that on you business pickup What's the rates attraction right property just on you're on you there, new one know talk your

Marc Grandisson

book rate marketplace, which over players that ENS ENS to including the more increases areas of We're is business, So the we London of seek believe the ENS trend. see some certain our been in excess rate not business. because rate, also question opportunities ones to on to the buying viable rate in large that the dislocation able in the an opportunity. global have portfolio to small hurdle slide in player of have that some seeing the and as nature so yes, it's to side where we the portfolio is been that property some There's but commercial of

say in actually I going way following have terms going the not the matter because of as to we there that coverage but X% we are write. seen in property of in placements business soon extra being believe there's world-wide On of this that area long faculty I and have in terms so bought although able reasons as this nation's mention we to it increases see notes. some and not and carriers what's the space and also to are complete opportunities my an property think and we working one where that the we're doesn't of just it's finalized a on want rate replacement widespread, no conditions because up towards the better, getting some quilt capacity bit giving kick trend, to arise certainly shrinking of pick rate one conditions do on some We have, is it's meaning it's specifically increase but we and up X% that larger in us would we've an to risk little play, have to on to a is what to pick the the it ENS X% choose like

Brian Meredith

question, try elaborate that combined kind to get maybe to can't at that at next segment stuff, a bit at when ratio the XXX? consistently combined to an just little and down it XX selection return to be then access. Investor ratios some business XXX to Marc, here maybe risk be insurance try And you're the what to initiatives about expenses was maybe a talk doing Day little improved on creates think sitting Right. I bit of you're of

Marc Grandisson

Correct.

years done of think for as integration there's on we identified though right some and currently opportunity have a for we've need develop things an and as done no area the to going initial instance can be platform. and multiple really we're we're then do take IT that will doing it's I So things such but it we that now to even we little more is

So are to and some going are are to will cost and happens in But are we to we it's of they a employees time overseas some that give have and decrease give us it be - there there. we lower that what things, talking you when jurisdiction will ourselves leveraging that we be working on forward I initiatives couple try the tell get integrating some it. happen services, that of will

Brian Meredith

you. Okay, great. Thank

Marc Grandisson

Welcome, welcome.

Operator

comes you. Gutterman And from Ian Thank Balyasny. question next our from

open. is line Your

Ian Gutterman

Hi, thanks.

you I So we is can't lunch are early, is even ask it? yet. for

Marc Grandisson

Ian. Hi,

Ian Gutterman

That for first, thank script that in slower are So to. the you was cadence used doing helpful. François, a we

first to the you expected on tax. my for is So you about specifically why than it's lower talk follow-up the Can coming year? question

François Morin

question of Well, It plan. all when no out. started reform, tax thinking the the about to figure that the gone on after by. I mean was a we was year, trying there based lot uncertainty

more the you a the estimates in and we gone on profitability we they back by gave bit what have from. all the have we units clarity just it come months jurisdiction February, actuals we saw when updating. local what So was and and where now of to that's Six are the related

with that we it's particular fact just points say. couple one on any a forecast really down It's replaced pinpoint come the can't more I to plan thing actuals. So why let's

Ian Gutterman

I It's would from more U.S. Okay. the guess would has earnings obviously. internal not would have can be upside - your I I MI in more come the thought turn model. I in which I have But that to thought model guess obviously my

So like if I have would higher you would mix geographic anything. have the thought if anything advised

if actions know were I or… were that taking offset there other trying So don't you to

Marc Grandisson

different rate, offline. not a There I that the we quarter on is a XX% big move think is can mortgage things There to difference. - the it offs The there. we other share right XX.X get down mean do can book it that so XX% one a tax brings it's couple directions. in that it of I

more lot hard give clarity So point. over to range at this this kind you a of really it's

François Morin

primary And is business, this U.S. Ian. the

with your it Bermuda is in the different also of for segment have which benefit a U.S. some tax. would Just

Ian Gutterman

For sure, for sure.

François Morin

yes. So,

Ian Gutterman

And the parts book the on you amount from the it Okay. then geographies? same us I was year is last fac parts happened Any of the can of coming color the losses? [ph] about you different what it or give mean dollar is on give somewhere to color bill different there? or us [indiscernible] book,

Marc Grandisson

don't we really any - well, It's for business different. of that It's mean is I in XX this or again one It's point, quarter. that, And major one we that - over we at than re-evaluate our that event trend performance quarter class been it. very that's happening we to No us other later, in more coincidence exact going off. see it came are have to it's but it's months years. book mean same unfortunate as anything I question that a move that It's underwriting the yes, the that some don't of with But We into really the force happy one does look some that in decisions? forward. see problematic. we

François Morin

I loss last that in mean… they different versus and are nature. No, year

Ian Gutterman

Yes.

François Morin

types occupancy. very is I it yes, mean a of it's fire a It's lumpy types very - - And Exactly. loss, that - business. different like but risk, very book different a it's in characteristics, nature. different different of of coverage different

here no we you loss. losses. sitting could As quarters with having Q Ian, We five Q are on have

Ian Gutterman

I in near fire press Europe? an that about read island happened in somewhere it this the Okay. Was that the call maybe

François Morin

No, that was not that one.

Ian Gutterman

I see think course obviously or trying am was over normal I should year - that? fact, have of the full-year mean the normal I a just than QX, Well, but there last to Okay, just bad year, worse okay. just [indiscernible] year. And think see but year how the about like maybe 'XX, what's I average in about

Marc Grandisson

been it's healthy, and has - last years year a what sticks for than very not that year, giving are we a returns not comfortable running long am the years in It yes, that that book I except been than expected year. last - XX pricing of but want profitable think proprietary, are very out. the shown it's keep together. for business Everything average. But we all then is it us worse business. long to am actually one year you one I term term we been below when the for Last has

Ian Gutterman

trying be this quarters, think a to trying every a once would it once Qs - to of like given am I eight once five this sense are. with unusual how I once volatility probably have of quarter, sort in about to every four a Okay. like last every the am row normal eight get bad quarters, not two years? every QX quarter

Marc Grandisson

don't a I question, very Ian. know It's the answer good that. to

Ian Gutterman

Okay. Fair enough. Fair enough.

Okay, and on quickly mortgage. just then

Marc Grandisson

Sure.

Ian Gutterman

obvious. healthy. last any You the the of affordability wouldn't end you too little news softness have there talked be signs gone than more the price of are It fast like about geographies - just that the know MI high environment where a become up And certain sort I has that like an feels obviously maybe seeing is incremental issue? in market. a may month guess But I being of that's maybe the which seems that? emerging. over I bit fairly feels mean But broader

Marc Grandisson

just ago. are price is in. you know, That's wider refinancing. the is years The it rates appreciation. four the won't purchase being bit you that increasing. their possibly I credit market nature though little the market find as describe would there the home than to the buyers. MI we the And business time it's way and tell first or of have three more was a house risks I that types soft. of There of And that are business

but higher I more So are that appropriate homebuyers. risks. would tends and those it's certainly LTVs what RateStar there we - I that's and they the market but think believe from pricing for believe of first time our to is with be perspective - the are, the just nature and And

Ian Gutterman

was margin impacting all. yes, I sure, For credit affordability at - was wondering just

So, it doesn't like… sound

Marc Grandisson

long-term above Affordability XX% actually the is trend.

DTI equally in but cities all not is like It's still it's The affordability So decent. XX. still affordability other all equivalent is and created Francisco about certainly country, San there.

not that it's bad. So,

Ian Gutterman

it Thank Okay, good. sounds you. perfect,

Marc Grandisson

Welcome.

Operator

And from our question Sachs. comes from Thank next [indiscernible] you. Goldman

line is Your open.

Marc Grandisson

Ian. Hi,

Operator

on your line. like mute. that Please And your line turn any conference Sir, check not not back would check our to is further showing the no am mute. on questions now remarks. from that closing is please I I Mr. over line Again, Grandisson phone for to

Marc Grandisson

to season. we the after you. to wind you Welcome to call, the Thank Thank Francois you, talking look forward guys. and

Operator

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

a all may You day. wonderful disconnect. Everyone have

Arch Capital (ACGL) 1 Aug 182018 Q2 Earnings call transcript