Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
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Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Financial Statements, Financial Statement Schedules and Exhibits.
**1.**Financial Statements
Included in Part II – see Item 8 of this report.
**2.**Financial Statement Schedules
| Page No. | |||||
| II. Condensed Financial Information of Registrant | |||||
| As of December 31, 2021 and 2020, and for the years ended December 31, 2021, 2020 and 2019 | 175 | ||||
| III. Supplementary Insurance Information | |||||
| For the years ended December 31, 2021, 2020 and 2019 | 178 | ||||
| IV. Reinsurance | |||||
| For the years ended December 31, 2021, 2020 and 2019 | 179 | ||||
| VI. Supplementary Information for Property and Casualty Insurance Underwriters | |||||
| For the years ended December 31, 2021, 2020 and 2019 | 180 |
Schedules other than those listed above are omitted for the reason that they are not applicable or the information is provided in Item 8 of this report.
| ARCH CAPITAL | 169 | 2021 FORM 10-K |
3. Exhibits
| ARCH CAPITAL | 170 | 2021 FORM 10-K |
| ARCH CAPITAL | 171 | 2021 FORM 10-K |
† Management contract or compensatory plan or arrangement.
| ARCH CAPITAL | 172 | 2021 FORM 10-K |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| ARCH CAPITAL GROUP LTD. (Registrant) | |||||||||||
| By: | /s/ Marc Grandisson | ||||||||||
| Name: | Marc Grandisson | ||||||||||
| Title: | Chief Executive Officer (Principal Executive Officer) |
February 25, 2022
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| Name | Title | Date | ||||||
| /s/ Marc Grandisson | ||||||||
| Marc Grandisson | Chief Executive Officer (Principal Executive Officer) | February 25, 2022 | ||||||
| /s/ François Morin | ||||||||
| François Morin | Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) and Treasurer | February 25, 2022 | ||||||
| * | ||||||||
| John M. Pasquesi | Chairman of the Board | February 25, 2022 | ||||||
| * | ||||||||
| John L. Bunce, Jr. | Director | February 25, 2022 | ||||||
| * | ||||||||
| Eric W. Doppstadt | Director | February 25, 2022 | ||||||
| * | ||||||||
| Francis Ebong | Director | February 25, 2022 | ||||||
| * | ||||||||
| Laurie S. Goodman | Director | February 25, 2022 |
| ARCH CAPITAL | 173 | 2021 FORM 10-K |
| Name | Title | Date | ||||||
| * | ||||||||
| Moira Kilcoyne | Director | February 25, 2022 | ||||||
| * | ||||||||
| Eileen Mallesch | Director | February 25, 2022 | ||||||
| * | ||||||||
| Louis J. Paglia | Director | February 25, 2022 | ||||||
| * | ||||||||
| Brian S. Posner | Director | February 25, 2022 | ||||||
| * | ||||||||
| Eugene S. Sunshine | Director | February 25, 2022 | ||||||
| * | ||||||||
| John D. Vollaro | Director | February 25, 2022 | ||||||
| * | ||||||||
| Thomas R. Watjen | Director | February 25, 2022 | ||||||
- By François Morin, as attorney-in-fact and agent, pursuant to a power of attorney, a copy of which has been filed with the Securities and Exchange Commission as Exhibit 24 to this report.
| /s/ François Morin | |||||
| Name: | François Morin Attorney-in-Fact |
| ARCH CAPITAL | 174 | 2021 FORM 10-K |
SCHEDULE II
ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(U.S. dollars in thousands)
Balance Sheet
(Parent Company Only)
| December 31, | |||||||||||||||||||||||||||||
| 2021 | 2020 | ||||||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||
| Total investments | $ | 2,038 | $ | 172 | |||||||||||||||||||||||||
| Cash | 16,317 | 18,932 | |||||||||||||||||||||||||||
| Investments in subsidiaries | 14,822,024 | 14,377,529 | |||||||||||||||||||||||||||
| Investment in operating affiliates | 6,877 | 7,731 | |||||||||||||||||||||||||||
| Due from subsidiaries and affiliates | 11 | — | |||||||||||||||||||||||||||
| Other assets | 9,604 | 10,659 | |||||||||||||||||||||||||||
| Total assets | $ | 14,856,871 | $ | 14,415,023 | |||||||||||||||||||||||||
| Liabilities | |||||||||||||||||||||||||||||
| Senior notes | $ | 1,286,208 | $ | 1,285,867 | |||||||||||||||||||||||||
| Due to subsidiaries and affiliates | — | — | |||||||||||||||||||||||||||
| Other liabilities | 24,767 | 23,270 | |||||||||||||||||||||||||||
| Total liabilities | 1,310,975 | 1,309,137 | |||||||||||||||||||||||||||
| Shareholders' Equity | |||||||||||||||||||||||||||||
| Non-cumulative preferred shares | 830,000 | 780,000 | |||||||||||||||||||||||||||
| Common shares ($0.0011 par, shares issued: 583,289,850 and 579,000,841) | 648 | 643 | |||||||||||||||||||||||||||
| Additional paid-in capital | 2,085,075 | 1,977,794 | |||||||||||||||||||||||||||
| Retained earnings | 14,455,868 | 12,362,463 | |||||||||||||||||||||||||||
| Accumulated other comprehensive income (loss), net of deferred income tax | (64,600) | 488,895 | |||||||||||||||||||||||||||
| Common shares held in treasury, at cost (shares: 204,365,956 and 172,280,199) | (3,761,095) | (2,503,909) | |||||||||||||||||||||||||||
| Total shareholders' equity | $ | 13,545,896 | $ | 13,105,886 | |||||||||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 14,856,871 | $ | 14,415,023 |
The financial information for the parent company (Arch Capital Group Ltd.) should be read in conjunction with the Consolidated Financial Statements and Notes thereto.
| ARCH CAPITAL | 175 | 2021 FORM 10-K |
SCHEDULE II
(continued)
ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(U.S. dollars in thousands)
Statement of Income
(Parent Company Only)
| Year Ended | |||||||||||||||||
| December 31, | |||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| Revenues | |||||||||||||||||
| Net investment income | $ | 1,524 | $ | 53 | $ | 212 | |||||||||||
| Net realized gains (losses) | — | (2,110) | — | ||||||||||||||
| Total revenues | 1,524 | (2,057) | 212 | ||||||||||||||
| Expenses | |||||||||||||||||
| Corporate expenses | 71,818 | 65,566 | 62,701 | ||||||||||||||
| Interest expense | 58,741 | 40,445 | 22,154 | ||||||||||||||
| Net foreign exchange (gains) losses | 7 | 3 | 1 | ||||||||||||||
| Total expenses | 130,566 | 106,014 | 84,856 | ||||||||||||||
| Income (loss) before income taxes and income (loss) from operating affiliates | (129,042) | (108,071) | (84,644) | ||||||||||||||
| Income (loss) from operating affiliates | (590) | (437) | (762) | ||||||||||||||
| Income (loss) before equity in net income of subsidiaries | (129,632) | (108,508) | (85,406) | ||||||||||||||
| Equity in net income of subsidiaries | 2,286,481 | 1,514,029 | 1,721,725 | ||||||||||||||
| Net income available to Arch | 2,156,849 | 1,405,521 | 1,636,319 | ||||||||||||||
| Preferred dividends | (48,343) | (41,612) | (41,612) | ||||||||||||||
| Loss on redemption of preferred shares | (15,101) | — | — | ||||||||||||||
| Net income available to Arch common shareholders | $ | 2,093,405 | $ | 1,363,909 | $ | 1,594,707 |
The financial information for the parent company (Arch Capital Group Ltd.) should be read in conjunction with the Consolidated Financial Statements and Notes thereto.
| ARCH CAPITAL | 176 | 2021 FORM 10-K |
SCHEDULE II
(continued)
ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(U.S. dollars in thousands)
Statement of Cash Flows
(Parent Company Only)
| Year Ended | |||||||||||||||||
| December 31, | |||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| Operating Activities: | |||||||||||||||||
| Net Cash Provided By Operating Activities | $ | 1,727,529 | $ | 124,751 | $ | 52,487 | |||||||||||
| Investing Activities: | |||||||||||||||||
| Net (purchases) sales of short-term investments | (1,866) | (130) | 61 | ||||||||||||||
| Capital contributed to subsidiaries | (487,161) | (988,975) | (2,121) | ||||||||||||||
| Purchase of fixed assets | (783) | (15) | (162) | ||||||||||||||
| Net Cash Used For Investing Activities | (489,810) | (989,120) | (2,222) | ||||||||||||||
| Financing Activities: | |||||||||||||||||
| Purchases of common shares under share repurchase program | (1,234,294) | (83,472) | (2,871) | ||||||||||||||
| Proceeds from common shares issued, net | 6,418 | 1,876 | 6,203 | ||||||||||||||
| Proceeds from issuance of preferred shares, net | 485,821 | — | — | ||||||||||||||
| Redemption of preferred shares | (450,000) | — | — | ||||||||||||||
| Proceeds from borrowings | — | 988,393 | — | ||||||||||||||
| Preferred dividends paid | (48,280) | (41,612) | (41,612) | ||||||||||||||
| Net Cash Used For Financing Activities | (1,240,335) | 865,185 | (38,280) | ||||||||||||||
| Increase (decrease) in cash and restricted cash | (2,616) | 816 | 11,985 | ||||||||||||||
| Cash and restricted cash, beginning of year | 18,960 | 18,144 | 6,159 | ||||||||||||||
| Cash and restricted cash, end of period | $ | 16,344 | $ | 18,960 | $ | 18,144 |
The financial information for the parent company (Arch Capital Group Ltd.) should be read in conjunction with the Consolidated Financial Statements and Notes thereto.
| ARCH CAPITAL | 177 | 2021 FORM 10-K |
SCHEDULE III
ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
SUPPLEMENTARY INSURANCE INFORMATION
(U.S. dollars in thousands)
| Deferred Acquisition Costs | Reserves for Losses and Loss Adjustment Expenses | Unearned Premiums | Net Premiums Earned | Net Investment Income (1) | Net Losses and Loss Adjustment Expenses Incurred | Amortization of Deferred Acquisition Costs | Other Operating Expenses (2) | Net Premiums Written | |||||||||||||||||||||
| December 31, 2021 | |||||||||||||||||||||||||||||
| Insurance | $378,265 | $9,810,622 | $2,937,664 | $3,626,468 | NM | $2,344,365 | $606,265 | $558,906 | $4,148,193 | ||||||||||||||||||||
| Reinsurance | 424,390 | 6,878,721 | 2,263,264 | 2,840,443 | NM | 1,924,719 | 536,754 | 212,810 | 3,254,374 | ||||||||||||||||||||
| Mortgage | 99,186 | 1,067,813 | 811,014 | 1,283,419 | NM | 56,677 | 97,418 | 194,010 | 1,261,068 | ||||||||||||||||||||
| Other | 331,968 | NM | 259,042 | 62,741 | 32,869 | 354,702 | |||||||||||||||||||||||
| Total | $901,841 | $17,757,156 | $6,011,942 | $8,082,298 | NM | $4,584,803 | $1,303,178 | $998,595 | $9,018,337 | ||||||||||||||||||||
| December 31, 2020 | |||||||||||||||||||||||||||||
| Insurance | $254,833 | $8,989,930 | $2,334,225 | $2,871,420 | NM | $2,092,453 | $418,483 | $489,153 | $3,162,907 | ||||||||||||||||||||
| Reinsurance | 278,422 | 5,027,742 | 1,356,983 | 2,162,229 | NM | 1,628,320 | 354,048 | 168,011 | 2,457,370 | ||||||||||||||||||||
| Mortgage | 203,748 | 976,673 | 740,043 | 1,397,935 | NM | 528,344 | 134,240 | 162,202 | 1,279,850 | ||||||||||||||||||||
| Other | 53,705 | 1,519,583 | 407,714 | 560,351 | NM | 440,482 | 98,071 | 55,810 | 537,589 | ||||||||||||||||||||
| Total | $790,708 | $16,513,928 | $4,838,965 | $6,991,935 | NM | $4,689,599 | $1,004,842 | $875,176 | $7,437,716 | ||||||||||||||||||||
| December 31, 2019 | |||||||||||||||||||||||||||||
| Insurance | $188,684 | $7,900,328 | $1,991,496 | $2,397,080 | NM | $1,615,475 | $361,614 | $454,770 | $2,641,726 | ||||||||||||||||||||
| Reinsurance | 197,856 | 4,270,013 | 971,776 | 1,466,389 | NM | 1,011,329 | 239,032 | 141,484 | 1,602,723 | ||||||||||||||||||||
| Mortgage | 182,816 | 457,872 | 937,370 | 1,366,340 | NM | 53,513 | 134,319 | 153,092 | 1,261,756 | ||||||||||||||||||||
| Other | 64,044 | 1,263,629 | 438,907 | 556,689 | NM | 453,135 | 105,980 | 51,651 | 532,862 | ||||||||||||||||||||
| Total | $633,400 | $13,891,842 | $4,339,549 | $5,786,498 | NM | $3,133,452 | $840,945 | $800,997 | $6,039,067 |
(1) The Company does not manage its assets by segment and, accordingly, net investment income is not allocated to each underwriting segment. See note 4, “Segment Information,” to our consolidated financial statements in Item 8 for information related to the ‘other’ segment.
(2) Certain other operating expenses relate to the Company’s corporate segment. Such amounts are not reflected in the table above. See note 4, “Segment Information,” to our consolidated financial statements in Item 8 for information related to the corporate segment.
| ARCH CAPITAL | 178 | 2021 FORM 10-K |
SCHEDULE IV
ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
REINSURANCE
(U.S. dollars in thousands)
| Gross Amount | Ceded to Other Companies (1) | Assumed From Other Companies (1) | Net Amount | Percentage of Amount Assumed to Net | |||||||||||||||||||||||||
| Year Ended December 31, 2021 | |||||||||||||||||||||||||||||
| Premiums Written: | |||||||||||||||||||||||||||||
| Insurance | $ | 5,833,873 | $ | (1,719,541) | $ | 33,861 | $ | 4,148,193 | 0.8 | % | |||||||||||||||||||
| Reinsurance | 408,520 | (1,839,556) | 4,685,410 | 3,254,374 | 144.0 | % | |||||||||||||||||||||||
| Mortgage | 1,213,333 | (246,757) | 294,492 | 1,261,068 | 23.4 | % | |||||||||||||||||||||||
| Other | 251,106 | (102,763) | 206,359 | 354,702 | 58.2 | % | |||||||||||||||||||||||
| Total | $ | 7,706,832 | $ | (3,734,150) | $ | 5,045,655 | $ | 9,018,337 | 55.9 | % | |||||||||||||||||||
| Year Ended December 31, 2020 | |||||||||||||||||||||||||||||
| Premiums Written: | |||||||||||||||||||||||||||||
| Insurance | $ | 4,659,416 | $ | (1,525,655) | $ | 29,146 | $ | 3,162,907 | 0.9 | % | |||||||||||||||||||
| Reinsurance | 305,435 | (1,014,716) | 3,166,651 | 2,457,370 | 128.9 | % | |||||||||||||||||||||||
| Mortgage | 1,192,316 | (194,149) | 281,683 | 1,279,850 | 22.0 | % | |||||||||||||||||||||||
| Other | 396,743 | (190,957) | 331,803 | 537,589 | 61.7 | % | |||||||||||||||||||||||
| Total | $ | 6,553,910 | $ | (2,650,352) | $ | 3,534,158 | $ | 7,437,716 | 47.5 | % | |||||||||||||||||||
| Year Ended December 31, 2019 | |||||||||||||||||||||||||||||
| Premiums Written: | |||||||||||||||||||||||||||||
| Insurance | $ | 3,879,752 | $ | (1,266,267) | $ | 28,241 | $ | 2,641,726 | 1.1 | % | |||||||||||||||||||
| Reinsurance | 238,229 | (720,500) | 2,084,994 | 1,602,723 | 130.1 | % | |||||||||||||||||||||||
| Mortgage | 1,224,373 | (204,509) | 241,892 | 1,261,756 | 19.2 | % | |||||||||||||||||||||||
| Other | 339,169 | (222,019) | 415,712 | 532,862 | 78.0 | % | |||||||||||||||||||||||
| Total | $ | 5,681,523 | $ | (2,099,893) | $ | 2,457,437 | $ | 6,039,067 | 40.7 | % |
(1) Certain amounts included in the gross premiums written of each segment are related to intersegment transactions and are included in the gross premiums written of each segment. Accordingly, the sum of gross premiums written for each segment does not agree to the total gross premiums written as shown in the table above due to the elimination of intersegment transactions in the total.
| ARCH CAPITAL | 179 | 2021 FORM 10-K |
SCHEDULE VI
ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION FOR PROPERTY AND CASUALTY INSURANCE UNDERWRITERS
(U.S. dollars in thousands)
| Column A | Column B | Column C | Column D | Column E | Column F | Column G | Column H | Column I | Column J | Column K | |||||||||||||||||||||||||
| Affiliation with Registrant | Deferred Acquisition Costs | Reserves for Losses and Loss Adjustment Expenses | Discount, if any, deducted in Column C | Unearned Premiums | Net Premiums Earned | Net Investment Income | Net Losses and Loss Adjustment Expenses Incurred Related to | Amortization of Deferred Acquisition Costs | Net Paid Losses and Loss Adjustment Expenses | Net Premiums Written | |||||||||||||||||||||||||
| (a) Current Year | (b) Prior Years | ||||||||||||||||||||||||||||||||||
| Consolidated Subsidiaries | |||||||||||||||||||||||||||||||||||
| 2021 | $ | 901,841 | $ | 17,757,156 | $ | 55,575 | $ | 6,011,942 | $ | 8,082,298 | $ | 389,118 | $ | 4,940,987 | $ | (356,184) | $ | 1,303,178 | $ | 2,826,551 | $ | 9,018,337 | |||||||||||||
| 2020 | 790,708 | 16,513,929 | 23,326 | 4,838,965 | 6,991,935 | 519,608 | 4,851,051 | (161,452) | 1,004,842 | 2,661,117 | 7,437,716 | ||||||||||||||||||||||||
| 2019 | 633,400 | 13,891,842 | 22,012 | 4,339,549 | 5,786,498 | 627,738 | 3,297,037 | (163,585) | 840,945 | 2,383,255 | 6,039,067 |
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