Q2 2024 Arch Capital Group Ltd Earnings Call

Good day, ladies and gentlemen, and welcome to the Q2 2020 for arch capital earnings Conference call.

Operator: Good day, ladies and gentlemen, and welcome to the Q2 2024 Arch Capital Earnings Conference. This time, all participants are in a listen-only mode.

Good day, ladies and gentlemen, and welcome to the Q2 2024 Arch Capital Earnings Conference.

Speaker Change: At this time all participants are in a listen only mode.

Operator: Next time, all participants are in a listen-only mode.

Operator: Good morning.

Operator: You know, roughly speaking, our insurance book is like, call it less than 15% of our overall premium, what we consider to be traditional casualty in the GL lines of business. So the mix matters.

Operator: Later, we will conduct a question and answer session, and instructions will follow at that time. 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 Law. These statements are based upon management's current assessments and assumptions and are subject to a number of risks and uncertainties. Consequently, actual results may differ materially from those expressed or implied.

Operator: Later, we will conduct a question and answer session and instructions will follow at that time.

Speaker Change: Later, we will conduct a question and answer session and instructions will follow at that time.

Operator: As a reminder, this conference call is being recorded.

Speaker Change: As a reminder, this conference call is being recorded.

Speaker Change: Before the company gets study, but it's update management wants to first remind everyone that certain statements in today's press release and discussed on this call.

Operator: 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 Law. These statements are based upon management current assessments and assumptions and are subject to a number of risks and uncertainties. Consequently, actual results may differ materially from those expressed or implied.

Forward looking statements under the federal Securities laws.

These statements are based upon management's current assessments and assumptions and are subject to a number of risks and uncertainties.

Speaker Change: Consequently, actual results may differ materially from those expressed or implied.

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

Speaker Change: Additionally, certain statements contained in the call that are not based on historical.

Operator: For more information on the risks and other factors that may affect future performance, investors should review periodic reports that are filed by the company with the SEC from time to time. Additionally, certain statements contained in the call that are not based on historical facts are forward-looking statements within the meaning of the Private Securities Diligation Reform Act of 1995. The company intends for forward-looking statements in the call to be subject to the safe harbor created thereby.

Operator: Additionally, certain statements contained in the call that are not based on historical facts are forward-looking statements within the meaning of the Private Securities Diligation Reform Act of 1995.

Speaker Change: Historical facts are forward looking statements within the meaning of the private Securities Litigation Reform Act of 995.

Operator: The company intends to forward looking statements in the call to be subject to the safe harbor created thereby.

Speaker Change: The company intends to forward looking statements in the call to be subject to the safe Harbor created thereby.

Operator: Management also will make reference to certain non-GAAP measures of financial performance.

Speaker Change: Management also will make reference to certain non-GAAP measures of financial performance.

Operator: The reconciliation gap for each non-GAAP financial measure can be found in the company's current report on Form 8K furnished to the SEC yesterday, which contains the company's earnings press release, and is available on the company's website at www.archgroup.com and on the SEC's website at www.sec.gov.

Speaker Change: Constantly issues did gap for each non-GAAP financial measure can be found in the company's current report on form 8-K furnished to the FCC yesterday, which contains the Companys earnings press release.

Operator: Management also will make reference to certain non-GAAP measures of financial performance. The reconciliation gap for each non-GAAP financial measure can be found in the company's current report on Form 8K, which contains the company's earnings press release, and is available on the company's website at www.archgroup.com and on the SEC's website at www.sec.gov. I would now like to introduce your host for today's conference, Mr. Marc Grandisson and Mr. Francois Morin.

Speaker Change: And this available on the company's website at Www Dot group.

Speaker Change: Dot com and on the Sec's website at Www Dot SEC Dot Gov.

Speaker Change: I would now like to introduce your host for today's conference Mr. Mark Grandison and Mr. Francois Morin Sirs, you may now begin.

Operator: I would now like to introduce your host for today's conference.

Operator: Definitely heard Marc's comments on the reasons for the flattening out of property cat growth.

Operator: Certainly the areas where we write the business matters.

Operator: Mr. Marc Grandisson and Mr. Francois Morin.

Marc Grandisson: Sirs, you may now begin. Thank you, Jericho. Good morning, and welcome to Arch's second quarter earnings call. We are pleased to report another highly profitable quarter due to significant contributions from all three underwriting segments and strong investment results. Our ability to successfully deploy capital into this extended hard market has fueled excellent risk-adjusted returns. Coupling our cycle management strategy with an emphasis on returns and consistent discipline execution throughout the enterprise resulted in a record $762 million of underwriting income and an annualized operating ROE of 20.5%. Our results are thanks to our teams that work diligently with deep capability and a long-track record of experience to earn these results.

Operator: Sirs, you may now begin.

Speaker Change: Thank you Jeremy good morning, and welcome to <unk> second quarter earnings call.

Marc Grandisson: Thank you, Jericho.

Marc Grandisson: Would you say the weather forecast had an impact on that?

Marc Grandisson: I mean, we have an international book within that, so it's not only US where I think we've seen more pain.

Marc Grandisson: Good morning and welcome to Arch's second quarter earnings call. We are pleased to report another highly profitable quarter due to significant contributions from all three underwriting segments and strong investment results. Our ability to successfully deploy capital into this extended hard market has fueled excellent risk-adjusted returns. Coupling our cycle management strategy with an emphasis on returns and consistent discipline execution throughout the enterprise resulted in a record $762 million of underwriting income and an annualized operating ROE of 20.5%.

Marc Grandisson: And could you, could we see you reverse course and reaccelerate if pricing is still good in 1-1 and you have a better view of how much of the mid-core business you're keeping?

Marc Grandisson: And in terms of the favorable, you know, the movements in the quarter, I think, yes, in aggregate, we were favorable, mostly in the short tail lines.

Speaker Change: We are pleased to report another highly profitable quarter due to significant contributions from all three underwriting segments and strong investment results.

Marc Grandisson: On the longer tail lines, which is primarily GL, I think we were pretty flat.

Speaker Change: Our ability to successfully deploy capital into this extended hard market as fuel to excellent risk adjusted returns.

Speaker Change: Coupling our cycle management strategy with an emphasis on returns and consistent.

Speaker Change: <unk> execution throughout the enterprise resulted in a record $762 million of underwriting income and an annualized operating Roe of 25%.

Speaker Change: Our results are thanks to our teams that work diligently with deep capability and a long track record of experience to earn these results.

Marc Grandisson: Our results are thanks to our teams that work diligently with deep capability and a long-track record of experience to earn these results.

Marc Grandisson: Broadly speaking, the P&C environment remains excellent, and opportunities for attractive returns are plentiful even as competition normalizes. The duration and breadth of the current hard market for the last several years have been exceptional, and while rate increases are broadly above trend, discipline underwriting requires that we keep our eye on the primary goal, shareholder returns. An overly aggressive appetite for growth could come at the cost of eroding underwriting margins. The art of underwriting in this part of the cycle rests on one's ability to know how hard to push and when to pull back.

Marc Grandisson: Broadly speaking, the P&C environment remains excellent and opportunities for attractive returns are plentiful even as competition normalizes.

Speaker Change: Broadly speaking the P&C environment remains excellent and opportunities for attractive returns are plentiful even as competition normalizes.

Marc Grandisson: The duration and breadth of the current hard market of the last several years has been exceptional, and while rate increases are broadly above trend, discipline underwriting requires that we keep our eye on the primary goal, shareholder returns. An overly aggressive appetite for growth could come at the cost of eroding underwriting margins.

Speaker Change: The duration and breadth of the current hard market over the last several years has been exceptional and while rate increases are broadly above trend disciplined underwriting requires that we keep our eye on the primary goal shareholder returns.

Speaker Change: And overly aggressive appetite for growth could come at a cost of eroding underwriting margins.

Marc Grandisson: The art of underwriting in this part of the cycle rests on one's ability to know how hard to push and when to pull back.

Speaker Change: The art of underwriting in this part of the cycle rests on one's ability to know how hard to push and when to pull back.

Marc Grandisson: At Arch, we strive to be an active yet disciplined market participant, practicing restraint and patience. We believe that capital allocation is one of our most powerful differentiators. Our priority is to deploy capital into our underwriting units first, where we have the knowledge and experience to better price risk. However, we're always assessing other value-creating opportunities. One example is our previously announced intent to acquire Allianz's U.S. Midcorp and Entertainment businesses

Marc Grandisson: At Arch, we strive to be an active yet disciplined market participant, practicing restraint and patience. We believe that capital allocation is one of our most powerful differentiators. Our priority is to deploy capital into our underwriting units first, where we have the knowledge and experience to better price risk.

Speaker Change: At arch, we strive to be inactive yet disciplined market participant practicing restraint and patients.

Speaker Change: We believe that capital allocation is one of our most powerful differentiators our priority is to deploy capital into our underwriting units first while we have the knowledge and experience to better price risk. However, we're always assessing other value creating opportunities. One example is our.

Marc Grandisson: Yes, we believe, we took a conviction that there was a higher likelihood of frequency of events, and you're right, and it could change, you know, this would be a short-term perspective and this will help inform.

Marc Grandisson: You know, whatever new vision or new projection and new belief we have will help us, you know, make a decision as we get into 1-1-25 after the wind season is over.

Marc Grandisson: However, we're always assessing other value-creating opportunities.

Marc Grandisson: One example is our previously announced intent to acquire Allianz's U.S. Midcorp and Entertainment businesses. With regulatory approval on MidCorp Secured, I'm able to share a few thoughts about this strategic acquisition.

Marc Grandisson: Mind you, the business is still very good even with our increased frequency.

Speaker Change: Previously announced intent to acquire <unk> U S mid Corp, and entertainment businesses.

Marc Grandisson: With regulatory approval for MidCorp Secured, I'm able to share a few thoughts about this strategic acquisition. The addition of a talented team and their client relationships gives us a greater presence in the U.S. primary middle market while expanding our cycle management toolkit. We will have more to say about the opportunities in the middle market as we integrate our team. But I'll now take a few moments to highlight the performance of our underwriting units this past quarter.

Marc Grandisson: So it's still a very, very good book of business.

Speaker Change: With regulatory approval on mid Corp secured unable to share a few thoughts about this strategic acquisition the.

Marc Grandisson: The addition of a talented team and their client relationships gives us a greater presence in the U.S. primary middle market while expanding our cycle management toolkit.

Marc Grandisson: We just wanted to have the right balance.

Speaker Change: The addition of a talented team and their client relationships gives us a greater presence in the U S primary and middle market, while expanding our cycle management toolkit.

Marc Grandisson: Got it, thank you.

Marc Grandisson: And then I guess I'm wondering if you guys have your arms wrapped around the CrowdStrike cyber event yet, and if you can help us frame what the losses might be, and if you see any impact on the cyber pricing environment coming out of it.

Marc Grandisson: We will have more to say about the opportunities in the middle market as we integrate our team.

Speaker Change: We will have more to say about the opportunities in the middle market as we integrate our teams.

Marc Grandisson: I'll now take a few moments to highlight the performance of our underwriting units this past quarter. The second quarter results from our property and casualty segments demonstrate the benefits of our strong leadership throughout the ongoing hard market. The reinsurance and insurance segments combined to deliver $475 million of underwriting income and just over $5 billion of gross premium. Reinsurance generated $366 million of underwriting income despite higher frequency of catastrophic events from secondary perils, both in the U.S. and internationally. Higher premium rates and our diversified book of business enabled us to report excellent underwriting results for this segment, which has built a resilient, stable platform.

Speaker Change: I'll now take a few moments to highlight the performance of our underwriting units this past quarter.

Speaker Change: Second quarter results from our property and casualty segments demonstrate the benefits of our strong leadership throughout the ongoing hard market, the reinsurance and insurance segments combined to deliver $475 million of underwriting income and.

Marc Grandisson: The second quarter results from our property and casualty segments demonstrate the benefits of our strong leadership throughout the ongoing hard market. The reinsurance and insurance segments combined to deliver $475 million of underwriting income and just over $5 billion of gross premium. Reinsurance generated $366 million of underwriting income despite the higher frequency of catastrophic events from secondary perils, both in the U.S. and internationally. Higher premium rates and our diversified book of business enabled us to report excellent underwriting results for this segment, which has built a resilient, stable platform. Due to our view of heightened overall storm risk this year, we chose not to grow our property cat writings at the mid-year renewal.

Speaker Change: In just over $5 billion of gross premium written.

Speaker Change: The reinsurance generated $366 million of underwriting income despite higher frequency of catastrophic events from secondary barrels both in the U S and internationally.

Speaker Change: Higher premium rates and our diversified book of business enabled us to report excellent underwriting results for this segment, which has built a resilient stable platform.

Speaker Change: Due to our view of heightened overall storm risk of this year, we chose not to grow our property catastrophic property cat writings at the mid year renewal, we've grown property cat meaningfully over the last few years, but as we learned during the 2002 to 2005 hard market when there are.

Marc Grandisson: Due to our view of heightened overall storm risk this year, we chose not to grow our property cat writings at the mid-year renewal.

Marc Grandisson: We've grown property cat meaningfully over the last few years, but as we learned during the 2002 to 2005 hard market, when there are so many good things happening across the underwriting platform, white-chase returns and cat exposure are at the risk of being unlucky. Property, in general, is very well priced. We just want to have the right balance across our portfolio. As you have heard from others, casualty lines remain an area of interest that we'll continue to monitor as we observe rate increases and ongoing reserve strengthening taking place across the industry. Our insurance segment contributed $109 million of underwriting income in the quarter.

Marc Grandisson: We've grown property cat meaningfully over the last few years, but as we learned during the 2002 to 2005 hard market, when there are so many good things happening across the underwriting platform, white-chase returns and cat exposure are at the risk of being unlucky.

Speaker Change: So many good things happening across the underwriting platform why chase returns and cat exposure at the risk of being on Lucky.

Marc Grandisson: Property in general is very well priced.

Speaker Change: <unk> in general is very well priced we just want to have the right balance across our portfolio.

Marc Grandisson: We just want to have the right balance across our portfolio.

Speaker Change: As you have heard from others casualty lines remain an area of interest that we will continue to monitor as we observe rate increases and ongoing reserve strengthening taking place across the industry.

Marc Grandisson: As you have heard from others, casualty lines remain an area of interest that we'll continue to monitor as we observe rate increases and ongoing reserve strengthening taking place across the industry.

Marc Grandisson: Our insurance segment contributed $109 million of underwriting income in the quarter. Net written premium growth was 7% this quarter compared to the second quarter a year ago.

Speaker Change: Our insurance segment contributed $109 million of underwriting income in the quarter.

Marc Grandisson: Net written premium growth was 7% this quarter compared to the second quarter a year ago. We meaningfully grew premiums in our programs business and in E&S casualty, where rates are improving. In a more competitive market, it's important to be able to quickly reallocate capital to the best relative return opportunities, as we have done in the past and remain well-equipped to do in future quarters. Our international insurance unit continues to benefit from its position as a lead underwriter at Lloyd's, where a disciplined market is providing attractive growth opportunities in specialty lines, moving out of PNC and into our mortgage business.

Speaker Change: Net written premium growth was 7% this quarter compared to the second quarter a year ago.

Marc Grandisson: We meaningfully grew premiums in our programs business and in E&S casualty where rates are improving.

Speaker Change: We meaningfully grew premiums in our programs business and in E&S casualty where rates are improving and.

Marc Grandisson: In a more competitive market, it's important to be able to quickly reallocate capital to the best relative return opportunities as we have done in the past and remain well-equipped to do in future quarters.

Speaker Change: In a more competitive market, it's important to be able to quickly reallocate capital to the best relative return opportunities as we have done in the past and remain well equipped to do in future quarters.

Marc Grandisson: Our international insurance unit continues to benefit from its position as a lead underwriter at Lloyd's, where a disciplined market is providing attractive growth opportunities in specialty lines, moving out of PNC and into our mortgage business.

Speaker Change: Our international instruments unit continues to benefit from its position as our lead underwriter at Lloyds, where a disciplined market is providing attractive growth opportunities in specialty lines.

Speaker Change: Moving out of P&C and into our mortgage business at.

Marc Grandisson: At the risk of repeating myself, the consistently excellent underwriting income delivered by our mortgage segment, quarter over quarter, provides significant value for our shareholders by producing a solid base of sustained earnings. MI underwriting has been solid across the industry since 2009, and the current environment is one that rewards the MI companies underwriting the risk. This quarter, the mortgage segment generated $287 million of underwriting income while increasing new insurance written in the U.S. by 12% from the same quarter a year ago.

Marc Grandisson: At the risk of repeating myself, the consistently excellent underwriting income delivered by our mortgage segment, quarter over quarter, provides significant value for our shareholders by producing a solid base of sustained earnings. MI underwriting has been solid across the industry since 2009 and the current environment is one that rewards the MI companies underwriting the risk. This quarter, the mortgage segment generated $287 million of underwriting income while increasing new insurance written at the U.S. by 12% from the same quarter a year ago.

Speaker Change: At the risk of repeating myself the consistently excellent underwriting income delivered by our mortgage segment quarter over quarter provides significant value for our shareholders by producing a solid base of sustained earnings.

Speaker Change: MRI underwriting has been solid across the industry since 2009, and the current environment is one that rewards the semi companies underwriting the risk this quarter. The mortgage segment generated $287 million of underwriting income, while increasing new insurance written at.

Speaker Change: The U S by 12% from the same quarter a year ago that.

Marc Grandisson: The delinquency rate at USMI remains low compared to historical norms, and the credit quality of our portfolio remains high with policyholders in strong equity positions. We're pleased to have successfully closed our acquisition of RMIC in the second quarter. Although no new business comes with this run-of-the-block, it's emblematic of our ongoing pursuit of finding profitable opportunities in which we can deploy capital. Primarily due to strong cash flows generated by our underwriting operations, our investment portfolio increased to $37.8 billion, generating $364 million of net investment income in the quarter as higher yields continue to move through our portfolio.

Marc Grandisson: The delinquency rate at USMI remains low compared to historical norms and the credit quality of our portfolio remains high with policyholders in strong equity positions.

Speaker Change: The delinquency rate of use semi remains low compared to historical norms and the credit quality of our portfolio remains high with policyholders and strong equity positions.

Marc Grandisson: We're pleased to have successfully closed our acquisition of RMIC in the second quarter.

Speaker Change: We're pleased to have successfully closed our acquisition of our Missy in the second quarter, although known new business comes with this run off block is emblematic of our ongoing pursuit of finding profitable opportunities in which we can deploy capital.

Marc Grandisson: Although no new business comes with this run-of-block, it's emblematic of our ongoing pursuit of finding profitable opportunities in which we can deploy capital, primarily due to strong cash flows generated by our underwriting operations, our investments portfolio increased to $37.8 billion, generating $364 million of net investment income in the quarter as higher yields continue to move through our portfolio.

Speaker Change: Primarily due to strong cash flows generated by our underwriting operations, our investments portfolio increased to $37 $8 billion generating $364 million of net investment income in the quarter as higher yields continue to move through our portfolio.

Speaker Change: The eyes of the World are focused on Paris. This week as the Olympics get into full swing.

Marc Grandisson: The eyes of the world are focused on Paris this week as the Olympics get into full swing. One of the toughest events is the decathlon, an all-around athletics test featuring 10 events over a range of disciplines spread over two days. The decathlon is an incredible physical and mental test that requires maximum performance in every event.

Marc Grandisson: The eyes of the world are focused on Paris this week as the Olympics get into full swing.

Marc Grandisson: One of the toughest events in the decathlon, an all-around athletics test featuring 10 events over a range of disciplines, spread over two days.

Speaker Change: One of the toughest events in the <unk>.

Speaker Change: Catalog and all around Athletics test featuring 10 events over a range of disciplines.

Speaker Change: Fred over two days that the catalog is an incredible physical and mental test that requires maximum performance in every event at.

Marc Grandisson: At the end of the two days, points for all ten events are totaled up, and the individual with the most points is the winner. Similar to a decathlon, in the dynamic insurance market, the ability to perform at a consistently high level across the enterprise is crucial for long-term success, and Arch is built to excel across a multi-discipline market. Our capital allocation helps ensure that we can focus on the lines that give us the best chance to score points. The first event in the decathlon is a 100-meter sprint, and our ability to get out of the gates quickly at the beginning of this hard market positions us to score early.

Marc Grandisson: At the end of the two days, points for all ten events are totaled up and the individual with the most points is the winner, and Arch is built to excel across a multi-discipline market.

Speaker Change: At the end of the two days points for all 10 events are totaled up and the individual with the most points is the winner.

Marc Grandisson: Since then, our P&C and mortgage teams have been racking up lots of points. Add in our investments team clearing the bar in the pole vault, and we have an all-around performance that puts us in serious contention for the gold medal, as you would expect from a world-class leadership team. Before I hand it over to Francois, I need to mention the passing of our friend Dino this past June. Dino was not only an industry legend, but he was also a mentor and tremendous leader who steered this company for over 15 years. Dinos led these earnings calls with his keen insights, principled beliefs, and trademark humor. He was truly one of a kind.

Speaker Change: Similar to the catalog and the dynamic insurance market the ability to perform at a consistently high level across the enterprise is crucial for long term success and arches built to excel across a multi disciplined market.

Marc Grandisson: Our capital allocation helps ensure that we can focus on the lines that give us the best chance to score points.

Speaker Change: Our capital allocation helps ensure that we can focus on the lines that give us the best chance to score points to.

Marc Grandisson: The first event in the decathlon is a 100-meter sprint, and our ability to get out of the gates quickly at the beginning of this hard market positioned us to score early. Since then, our P&C and mortgage teams have been racking up lots of points. Add in our investments team clearing the bar in the pole vault and we have an all-around performance that puts us in serious contention for the gold medal, as you would expect from a world-class leadership team.

Speaker Change: First event in the decathlon is a 100 meter sprint and our ability to get out of the gates quickly at the beginning of this hard market position us to score early since then our P&C and mortgage teams have been racking up lots of points added our investments team clearing the bar in the pole vault and we have an all around performance that puts us.

Marc Grandisson: Well, yeah, on the cloud side, I mean, we're still gathering information in our units, trying to figure out what's out there.

Marc Grandisson: I think, you know, it's something we look at carefully.

Speaker Change: In serious contention for the gold metal as you would expect from a world class leadership team.

Speaker Change: Before I hand, it over to Francois I need to mention the passing of our friend Dino has this past June.

Marc Grandisson: Before I hand it over to Francois, I need to mention the passing of our friend Dino this past June. Dinos was not only an industry legend, he was also a mentor and tremendous leader who steered this company for over 15 years. Dinos led these earnings calls with his keen insights, principled beliefs, and trademark humor. He was truly one of a kind.

Speaker Change: <unk> is not only an industrial legend. He was also a mentor and a tremendous leader who is CEO of this company for over 15 years.

Dino: Dino sled. These earnings calls with this keen insights principled beliefs and trademark humor.

Dino: He was truly one of a kind.

Francois Morin: So, tonight, please raise a glass, be it Uzo, Retsina, or anything of your choosing, to Dinos. You are a myth, my friend, Francois. Thank you, Marc, and good morning to all. As you know, we reported excellent second-quarter results last night with after-tax operating income of $2.57 per share, up 34% from the second quarter of 2023, for an annualized operating return on average common equity of 20.5%. Book value per share was $52.75 as of June 30, up 6.9% for the quarter and 12.4% on a year-to-date basis.

Marc Grandisson: So, tonight, please raise a glass, be it Uzo, Retsina, or anything of your choosing, to Dinos.

Francois Morin: So tonight, please raise a glass beads ouzo retsina or anything of your choosing.

Speaker Change: Two ddos.

Speaker Change: You are Miss my friend Crosswalk.

Francois Morin: You are a myth, my friend, Francois.

Speaker Change: Thank you Mark and good morning to all as you know by now we reported excellent second quarter results last night with after tax operating income of $2 57 per share up 34% from the second quarter of 2023 for an annualized operating return on average common equity of <unk>.

Francois Morin: Thank you Marc and good morning to all. As you know by now, we reported excellent second quarter results last night with after-tax operating income of $2.57 per share, up 34% from the second quarter of 2023, for an annualized operating return on average common equity of 20.5%. Book value per share was $52.75 as of June 30, up 6.9% for the quarter and 12.4% on a year-to-date basis.

Francois Morin: And it's not only necessarily the cyber, but there might be some other lines of business.

Francois Morin: Some, you know, some noise here and there, but collectively in aggregate, we're very comfortable with the level of reserves.

Francois Morin: And, you know, so far our numbers are holding up pretty well.

Speaker Change: 25%.

Speaker Change: Book value per share was $52 75 as of June 30 up six 9% for the quarter and 12, 4% on a year to date basis.

Francois Morin: Once again, our three business segments delivered outstanding results, highlighted by $762 million in underwriting income and a 78.7% combined ratio, 76.7% on an underlying X-cap accident-year basis. We continue to benefit from strong market conditions across our businesses as the pricing environment remains disciplined, giving us confidence in our ability to generate solid returns over the coming quarter. Our underwriting income reflected $124 million of favorable prior development on a pre-tax basis, or 3.5 points on the combined ratio across our three segments.

Francois Morin: Once again, our three business segments delivered outstanding results highlighted by $762 million in underwriting income and a 78.7% combined ratio, 76.7% on an underlying X-cap accident year basis. We continue to benefit from strong market conditions across our businesses as the pricing environment remains disciplined, giving us confidence in our ability to generate solid returns over the coming quarter. Our underwriting income reflected $124 million of favorable prior development on a pre-tax basis or 3.5 points on the combined ratio across our three segments. We recognize favorable development across many lines of business, but primarily in short tail lines in our property and casualty segments and in mortgage due to strong cure activity.

Francois Morin: And what I would add to what Francois just said, and as you know, Jimmy, we're a cycle manager.

Francois Morin: Once again, our three business segments delivered outstanding results highlighted by $762 million in underwriting income and a 78, 7% combined ratio 76, 7% on an underlying ex cat accident year basis.

Francois Morin: We also, you know, didn't write as much, even, you know, the years that we believe are now, you know, still, you know, very soft years.

Francois Morin: So that also prevents you from having to, you know, to having, you know, outsize, you know, surprise.

Francois Morin: And then on a different topic, your capital is building up pretty nicely.

Francois Morin: We continue to benefit from strong market conditions across our businesses as the pricing environment remains disciplined giving us confidence in our ability to generate solid returns over the coming quarters.

Francois Morin: And I'm assuming it's enough to fund your growth.

Francois Morin: Our underwriting income reflected $124 million in favorable prior year development on a pretax basis or three five points on the combined ratio across our three segments. We recognized favorable development across many lines of business, but primarily in short tail lines in our property and casualty <unk>.

Francois Morin: We recognize favorable development across many lines of business, but primarily in short tail lines in our property and casualty segments and in mortgage due to strong cure activity. Catastrophe loss activity was in line with our expectations as we were impacted by a series of events across the globe generating current accident year catastrophe losses of $196 million for the group in the quarter. Approximately 70% of our catastrophe losses this quarter are related to U.S. secondary perils, with the rest coming from a series of international events.

Speaker Change: Rents and in mortgage due to strong cure activity.

Speaker Change: Catastrophe loss activity was in line with our expectations as we were impacted by a series of events across the globe generating current accident year catastrophe losses of $196 million for the group in the quarter.

Francois Morin: Catastrophe loss activity was in line with our expectations as we were impacted by a series of events across the globe generating current accident year catastrophe losses of $196 million for the group in the quarter. Approximately 70% of our catastrophe losses this quarter are related to U.S. secondary perils, with the rest coming from a series of international events.

Speaker Change: Approximately 70% of our catastrophe losses. This quarter are related to U S secondary barrels with the rest coming from a series of international events.

Speaker Change: As of July one our peak zone natural cap <unk> for a single event, one 250 year return level on a net basis declined slightly and now stands at seven 9% of tangible shareholders' equity.

Francois Morin: As of July 1, our peak zone natural cap PML for a single event reached a 250-year return level on a net basis, declined slightly, and now stands at 7.9% of tangible shareholders' equity, well below our internal limit. For the mortgage segment, since this is the first quarter end since we acquired RMIC Companies, Inc., and the subsidiaries that together comprise the runoff mortgage insurance business of Old Republic, there are certain items that I'd like to highlight. First, the acquired book of business represented 3.6 billion, or a 1.2% increase, to our US primary mortgage insurance in force at the end of the quarter.

Francois Morin: As of July 1, our peak zone natural cap PML for a single event won 250-year return level on a net basis, declined slightly, and now stands at 7.9% of tangible shareholders' equity, well below our internal limit.

Francois Morin: Well below our internal limits.

Francois Morin: Second, given the risk and force is from older vintages and has been in runoff since 2011, its makeup resulted in an incremental 19 basis points to our reported delinquency rate at USMI. Absent this transaction, our reported delinquency rate would have improved slightly since last quarter. On the investment front, we earned a combined $531 million pre-tax from net investment income and income from funds accounted for using the equity method, or $1.

Francois Morin: For the mortgage segment, since this is the first quarter end since we acquired RMIC Companies, Inc., and the subsidiaries that together comprise the runoff mortgage insurance business of Old Republic, there are certain items that I'd like to highlight.

Francois Morin: And you have done a couple of acquisitions.

Speaker Change: For the mortgage segment. Since this is the first quarter and since we acquired our Missy companies, Inc. And its subsidiaries that together comprised our run off mortgage insurance business of old Republic. There are certain items that I'd like to highlight first the acquired book of business represented $3 6 billion.

Francois Morin: Or one 2% increase to our U S primary mortgage insurance in force at the end of the quarter.

Francois Morin: Second, given the risk and force is from older vintages and has been in runoff since 2011, its makeup resulted in an incremental 19 basis points to our reported delinquency rate at USMI.

Francois Morin: Second given the risk in force is from older vintages and has been in runoff. Since 2011. Its makeup resulted in an incremental 19 basis points to our reported delinquency rates at U S Army.

Francois Morin: Absent this transaction, our reported delinquency rate would have improved slightly since last quarter.

Francois Morin: Absent this transaction our reported delinquency rate would have improved slightly since last quarter.

Francois Morin: On the investment front, we earned a combined $531 million pretax from net investment income and income from funds accounted using the equity method or $1 39 per share.

Francois Morin: On the investment front, we earned a combined $531 million pre-tax from net investment income and income from funds accounted using the equity method, or $1.39 per share.

Francois Morin: But how do you think about buybacks and or potentially instituting a dividend given?

Francois Morin: Total return for the portfolio came in at 133% for the quarter.

Francois Morin: Total return for the portfolio came in at 1.33% for the quarter. Cash flow from operations remains strong, and at $3.1 billion on a year-to-date basis, we have seen material growth in our investable asset base, which should result in an increasing level of investment income. Our effective tax rate on pre-tax operating income was an expense of 9.5% for the second quarter, with our current expected range of 9 to 11% for the full year 2024.

Francois Morin: Total return for the portfolio came in at 1.33% for the quarter.

Francois Morin: Cash flow from operations remains strong, and at $3.1 billion on a year-to-date basis, we have seen material growth in our investable asset base, which should result in an increasing level of investment income.

Francois Morin: Cash flow from operations remained strong at $3 1 billion on a year to date basis, we have seen material growth in our investable asset base, which should result in an increasing level of investment income.

Francois Morin: Our effective tax rate on a pre tax operating income was an expense of nine 5% for the second quarter with our current expected range of 9% to 11% for the full year 2024.

Francois Morin: Our effective tax rate on a pre-tax operating income was an expense of 9.5% for the second quarter with our current expected range of 9 to 11% for the full year 2024.

Francois Morin: As disclosed last year last week, we now expect on August one close of the transaction to acquire the U S mid Corp, and entertainment insurance businesses from audience.

Francois Morin: As disclosed last year, last week, we now expect an August 1 close of the transaction to acquire the U.S. midcorp and entertainment insurance businesses Amalia. At this time, we do not have new information to share on the estimated financial impact of the transaction beyond what we provided in early April. Starting next quarter, we expect to update this information to help in developing a forward-looking view of the insurance segment's results, including this new business. All in, our balance sheet is in excellent health, with our common shareholder's equity approaching $20 billion in a debt plus preferred-to-capital ratio slightly above 15%.

Francois Morin: As disclosed last year, last week, we now expect an August 1 close of the transaction to acquire the U.S. midcorp and entertainment insurance businesses Amalia.

Francois Morin: At this time, we do not have new information to share on the estimated financial impact of the transaction beyond what we provided in early April. Starting next quarter, we expect to update this information to help in developing a forward-looking view of the insurance segment's results, including this new business.

Francois Morin: At this time, we do not have new information to share on the estimated financial impact of the transaction beyond what we provided in early April <unk>.

Francois Morin: Starting next quarter, we expect to update this information to help in developing a forward looking view of the insurance segment's results, including this new business.

Francois Morin: All in our balance sheet is in excellent health with our common shareholders' equity approaching $20 billion.

Francois Morin: All in, our balance sheet is in excellent health, with our common shareholder's equity approaching $20 billion in a debt plus preferred-to-capital ratio slightly above 15%. We are well-positioned to take advantage of opportunities that may arise as we move forward.

Francois Morin: Net debt plus preferred to capital ratio was slightly above 15%.

Francois Morin: We are well-positioned to take advantage of opportunities that may arise as we move forward. Before I conclude my remarks, I also wanted to build on Marc's comments and share a word of sincere appreciation for the impact D-NOS has had on Arch, its employees, and many others across the industry. While he will certainly be remembered for his energetic personality and his ability to captivate an audience, we are truly grateful for his guidance, vision, and leadership during his career at Arch. Thank you, Dean. Marc?

Francois Morin: We are well positioned to take advantage of opportunities that may arise as we move forward.

Marc Grandisson: Before I conclude my remarks, I also wanted to take a moment to build on Mark's comments on share award a sincere appreciation for the impact <unk> had on arch its employees and many others across the industry.

Francois Morin: Before I conclude my remarks, I also wanted to take a moment to build on Marc's comments and share a word of sincere appreciation for the impact D-NOS had on Arch, its employees, and many others across the industry. While he will certainly be remembered for his energetic personality and his ability to captivate an audience, we are truly grateful for his guidance, vision, and leadership during his career at Arch.

Francois Morin: So we're just going through it as we speak.

Francois Morin: and the Capital Levels Study.

Francois Morin: It's still kind of hard to disentangle.

Francois Morin: Yeah, I mean, that the philosophy has not changed, right?

Francois Morin: I'd say certainly we, you know, we're on track to close the Allianz acquisition tomorrow.

Speaker Change: He will certainly be remembered for his energetic personality and his ability to captivate and audience. We are truly grateful for his guidance vision and leadership during his career at arch. Thank you Dino.

Francois Morin: Thank you, Dean.

Marc Grandisson: Mark now so we don't keep any one from their lunch, which when it was very important to dinos onto your questions.

Francois Morin: Marc?

Francois Morin: I mean, some people are claiming some losses.

Marc Grandisson: No, so we don't keep anyone from their lunch, which we know was very important to Dino. On to your questions. Thank you. If you have a question at this time, please press the star 1 key on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press star 1 again.

Francois Morin: No, so we don't keep anyone from their lunch, which we know was very important to Dino.

Marc Grandisson: On to your questions.

Marc Grandisson: So that that will certainly be a draw on that capital base that we have.

Speaker Change: Thank you.

Marc Grandisson: Thank you.

Marc Grandisson: They're not insured.

Marc Grandisson: We are also, you know, entering the active win season.

Marc Grandisson: If you have a question at this time, please press star 1 key on your touchtone telephone.

Speaker Change: Question at this time, please press star one key on your Touchtone telephone.

Marc Grandisson: If your question has been answered or you wish to remove yourself from the queue, please press star 1 again.

Marc Grandisson: So there's a lot of things going on.

Speaker Change: If your question has been answered or you wish to remove yourself from the queue. Please press star one again.

Operator: And if you are using a speakerphone, please lift the hand. Our first question comes from Elyse Greenspan from Wells Fargo. Hi, thanks. You know, good morning.

Marc Grandisson: And if you are using a speakerphone, please lift the hand.

Speaker Change: If you are using a speaker phone please.

Francois Morin: Sure.

Francois Morin: Okay.

Francois Morin: Our first question comes from Elyse Greenspan from Wells Fargo.

Operator: Our first question comes from Elyse Greenspan from Wells Fargo.

Operator: I think we tend to agree broadly with the market view that, you know, six, five, six hundred million to a billion to sort of it's still a wide range at this point in time.

Operator: So we'll want to take a look at what how that develops.

Elyse Beth Greenspan: Hi, Thanks.

Elyse Beth Greenspan: You know, my first question, you know, I guess is, you know, on the insurance side, right, Marc? I think it's been since probably October, late October of last year with Q3 earnings, we're kind of leading the industry in terms of talking about this casualty market term, and it's been slow to evolve. Maybe it's in line with your expectations, but it just seems it's been slow to get price through those lines.

Operator: Hi, thanks.

Operator: It's going to take a while to to to to know how it develops.

Operator: But absolutely going forward, you know, the fact that we historically have been very, I think, very good stewards of capital.

Elyse Beth Greenspan: Good morning.

Elyse Beth Greenspan: My first question.

Speaker Change: I guess is.

Speaker Change: On neon.

Elyse Beth Greenspan: The insurance side right Mark I think it's been since probably October late October of last year with Q3 earnings you were kind of leading the industry in terms of talking about this casualty market turn.

Speaker Change: And it's been sort of evolve maybe it's in line with your expectations, but it just seem it's been slow to get price.

Speaker Change: Lines, how do you see that transpiring from.

Elyse Beth Greenspan: How do you see that transpiring, you know, from here relative to price increases and casualties? Well, like I said, well, good morning, Elyse. I think the point we made last quarter and the quarter before is that the casualty turn and realizing, you know, and actually how much or how well or bad you're doing in the casualty line takes a while. You know, it has a tail to it.

Speaker Change: From here relative to price increases in casualty lines.

Speaker Change: Well like I said, well good morning, Elyse I think the point, we made last quarter to quarter before is that the casualty turn and realizing.

Elyse Beth Greenspan: You know, good morning.

Elyse Beth Greenspan: I think I would want to I mean, it's not a big number in terms of loss ratio points for all the premium worldwide for cyber, but it certainly is a reminder that there's risk in the portfolio and it's early now.

Elyse Beth Greenspan: We like to deploy it in the business where we can.

Elyse Beth Greenspan: You know, my first question, you know, I guess is, you know, on the on the insurance side, right, Marc, I think it's been since probably October, late October of last year with Q3 earnings, we're kind of leading the industry, you know, in terms of talking about this casualty market term.

Speaker Change: Actually how much all have well have that youre doing in casualty line takes a while.

Elyse Beth Greenspan: And it's been slow to evolve.

Elyse Beth Greenspan: Maybe it's in line with your expectations, but it just seems it's been slow to get price through those lines.

Speaker Change: It has a tail to it it could take five or six years. So I think we're seeing the we're starting to see the early signs of more recent years being a bit more impacted.

Marc Grandisson: It could take five or six years. So I think we're seeing the early signs of recent years being a bit more impacted by the inflation that we saw of late. And I think that it will take a while. People are trying to adjust.

Elyse Beth Greenspan: How do you see that transpiring, you know, from here relative to price increases and casualties?

Marc Grandisson: Well, like I said, well, good morning, Elyse.

Speaker Change: Impacted by the inflation that we saw of late and I think that it will take a while people are trying to adjust we are trying to look at our numbers in the triangles that are actually.

Marc Grandisson: We're trying to, you know, look at the numbers in the triangles that are actually not as good as they used to be. So there's a lot of uncertainty in the space. And I think it will take us several quarters to come to a more stable or better view of the industry. So, you know, the last hard market and casualty started to turn, you know, in 2000. And it, you know, it took until about 2004 to really see the impact and sort of run out of, you know, having to price, you know, and rate increase after that point. So, it takes several years.

Speaker Change: Not as good as it used to be so there's a lot of uncertainty in this space and I think it will take us several quarters to come to a more stable or a better view of the industry. So.

Marc Grandisson: I think the point we made last quarter, the quarter before is that the casualty turn and realizing, you know, and actually how much or how well or bad you're doing in the casualty line takes a while. You know, it has a tail to it. It could take five or six years.

Speaker Change: Last the hard market in casualty.

Speaker Change: <unk> two to turn in <unk> in 2000 and.

Speaker Change: And it took until about 2004 to really see the impact in and sort of have running out of having to price and rate increase after that point. So it takes several years. Unlike the property cat litter least 2022 something happened at the bottom.

Marc Grandisson: Unlike the property cap, right, Elyse, 2022, something happened in the fall. Well, right away, people are adjusting because the cost of goods sold or losses are known. So, this is not surprising to me. I'm expecting a bit more.

Speaker Change: In the fall well right away that people are adjusting because the cost of goods sold our losses are known so it is not surprising to me and I'm expecting a bit more we expecting a bit more we're seeing it through our reinsurance submissions I think people are slowly, but surely recognizing some of these that year's but it takes a while.

Marc Grandisson: We're expecting a bit more, and we're seeing it through our reinsurance submissions. I think people are slowly but surely recognizing some of these bad years, but it takes a while.

Marc Grandisson: We haven't seen that many renewals, but I would expect, you know, rates could still go down a little bit, but probably not as fast as they were going down.

Marc Grandisson: So I think we're seeing the, we're starting to see the early signs of more recent years being a bit more, you know, impacted by the inflation that we saw of late. And I think that it will take a while. People are trying to adjust.

Marc Grandisson: And people are going to probably take a bit of a more of a pause, if you will, to evaluate what it looks like.

Marc Grandisson: It could go either way.

Marc Grandisson: Right.

Marc Grandisson: If CrowdStrike does not, you know, does not create a big loss, it might might reinforce the belief that it's not as risky.

Marc Grandisson: Although having that event, which was not malicious, happened out of nowhere and we were all like out of unable to work for a day.

Marc Grandisson: I think it's a good reminder of people that there's still uncertainty and there's some lost potential there.

Speaker Change: Yes.

Speaker Change: And then in terms of cost.

Marc Grandisson: And then in terms of just, you know, on the insurance side, as you think, you know, the underlying, I guess, margin, right, kind of low 90s in the quarter, given, you know, your views about price and loss trends, does that feel like, you know, kind of the run rate level from? Well, as you know, Elyse, we report the numbers as we see them based on the data that we see. That sort of seems to be the emerging sort of rough average over the last couple of years.

Speaker Change: On the insurance side as you think.

Speaker Change: The underlying I guess margin right kind of low 90 is.

Speaker Change: In the quarter, given your views about price and loss trend does that feel like kind of the run rate level from here.

Speaker Change: Well as we as you know Elyse, we report the numbers as we see it based on the data we see that sort of seems to be the emerging sort of rough our average over the last couple of years.

Marc Grandisson: We're trying to, you know, look at the numbers in the triangles that are actually not as good as they used to be.

Marc Grandisson: So there's a lot of uncertainty in the space. And I think it will take us several quarters to come to a more stable or a better view of the industry.

Marc Grandisson: There's also a mix going on, Elyse, so things are shifting, as you know, from time to time, so it's hard to compare the combined ratio. But right now, based on where we are, it's well within expectation of getting the returns. And our returns on insurance, we believe, are in excess of our long-term target. And then the mortgage releases have held steady at, Q2 was above the Q1 level. Can you just provide, Francois, maybe a little bit more color on what's going on there and how we kind of think about the run rate level of potential releases within the MIT? Great question.

Speaker Change: There is also mix going on a lease or if things are shifting as you know from time to time. So it's hard to compare combined ratio, but right now based on where we are it's well within expectation are getting the returns and our returns on insurance. We believe are in excess of our long term long term target.

Speaker Change: And then the mortgage releases have held.

Speaker Change: Got it.

Speaker Change: Q2 was above the Q1 level can.

Speaker Change: Can you just provide.

Speaker Change: Maybe a little bit more color on what's going on there and how we could kind of think about run rate level of potential releases within the book.

Francois Morin: I think we, I mean, I and many others have been wrong about taking a forward-looking view of releases on the, or favorable developments on mortgages in general. I think, you know, stepping back, I'd say that early in 20, you know, late 22, early 23, we were more cautious about the state of the economy and took a view about new notices and average reserves that we were attaching to these notices that, you know, it was a bit more that didn't, didn't turn out to be the case, right. That turned out to be better than we had expected at that time.

Speaker Change: Great question, I think I mean, I and many others have been wrong about taking a forward looking view of releases on our.

Speaker Change: Our favorable development on mortgage in general I think stepping back I would say that early in 'twenty late 'twenty. Two early 'twenty three we were more cautious about the state of the economy.

Speaker Change: And took a view about new notices and average reserves that we are attaching to these notices that.

Speaker Change: It was a bit more that didn't didn't turn out to be the case right that turned out to be better than what we had expected at that time.

Speaker Change: The fact that we.

Speaker Change: We just had another quarter of kind of more better cure activity.

Francois Morin: The fact that, you know, we just had another quarter of kind of more, you know, better cure activity, you know, I don't think, you know, a lot of these cures this quarter were related to the 2023 accident year. So, you know, we're more positive, I think, I'd say in general about the housing market. So the level of reserve that we're attaching to the new delinquencies is a bit lower than it was a year ago.

Speaker Change: I don't think a lot of these cures this quarter were related to the 2023 accident year or so.

Speaker Change: We're more positive I think I'd say in general about the housing market. So the level of reserving that we're that we're attaching to the new delinquencies is a bit lower than it was a year ago. So maybe directionally, we would not expect to have the same level of reserve releases going forward, but again not knowing for sure how how can.

Francois Morin: So maybe, directionally, we would not expect to have the same level of reserve releases going forward. But again, not knowing for sure how, you know, how quickly people are going to cure unemployment, et cetera. I mean, that will have an impact on the level of reserve releases. Thanks for the color.

Speaker Change: People are going to cure unemployment et cetera, I mean that will be that will have an impact on the on the level of reserve releases.

Speaker Change: Thanks for the color.

Speaker Change: Welcome.

Speaker Change: Our next question comes from the line.

Jimmy Bullard: Our next question comes from the line of Jimmy Bullard from J.P. Morgan. Hi. So first, just a question on reserves. You had favorable development overall, but so did many of your peers, but a lot of the competitors had adverse development and casualty for both older and recent years. It doesn't seem like you had that, but maybe you could go into detail a little bit on the development in the second quarter.

Francois Morin: Thank you.

Speaker Change: <unk> <unk> from Jpmorgan.

Speaker Change: Hi, So first just a question on reserves you had favorable development overall.

Jimmy Bullard: Our next question comes from Andrew Kligerman from TD Security.

Speaker Change: And so did many of your peers, but a lot of the competitors had Edwards development in casualty.

Speaker Change: For both older and recent years doesn't seem like you had that but maybe you could go into.

Speaker Change: Detailed a little bit on the development.

Speaker Change: In the second quarter and then also why do you feel that you are not as susceptible as some of the competitors do all the casualty issues either in your book or maybe in the Woodford block that you inherited.

Jimmy Bullard: And then also, why do you feel that you're not as susceptible as some of the competitors to all the casualty issues, either in your book or maybe in Watford? Yeah, let me take a stab at that. I'm sure Marc will have something to add.

Speaker Change: Yes, let me take a stab of that I'm sure Marc will have something to add I would say on the part to your question.

Francois Morin: In response to your question, Jimmy, I would say, you know, the book of business that we have is, I wouldn't call it a standard commercial general liability book of business that some other competitors have. We don't write a whole lot of commercial auto, for example. So that's another line of business that's been, you know, been a difficult line to get a good handle on the trends and how, you know, inflation has picked up in there.

Jimmy Bullard: Thank you.

Francois Morin: Good morning.

Francois Morin: Good morning.

Jimmy: Jimmy I would say.

Speaker Change: The book of business that we have is I wouldn't call. It a standard commercial general liability book of business that some other competitors have.

Speaker Change: We don't write a whole lot of commercial auto for example, so that's another line of business that's been.

Speaker Change: A difficult line to to get a good handle on the trends and how how inflation has picked up in there. So the books that we have in general liability and I think our smaller we're certainly we think underweight in those lines of business.

Francois Morin: So, you know, the books that we have in general liability, A, I think are smaller, certainly we think underweight than those lines of business. You know, roughly speaking, our insurance book is like, call it less than 15% of our overall premium, what we consider to be traditional casualty in the GL lines of business. So the mix matters.

Francois Morin: So, I was interested in the net written premium area in professional...

Speaker Change: Roughly speaking were.

Speaker Change: Our insurance book is like call it less than 15%, what we've considered to be over overall premium what we consider to be traditional casualty in the GL lines of business.

Speaker Change: So the mix matters.

Francois Morin: Certainly, the areas where we write business matter. I mean, we have an international book within that, so it's not only the US where I think we've seen more pain. And in terms of the favorable, you know, the movements in the quarter, I think, yes, in aggregate, we were favorable, mostly on the short tail lines. On the longer tail lines, which is primarily GL, I think we were pretty flat.

Speaker Change: Certainly the areas, where we write the business matters I mean, we have an international book within that so it's not only U S, where I think that we've seen more pain.

Speaker Change: And then in terms of the favorable.

Speaker Change: <unk> in the quarter I think yes in aggregate we were favorable.

Speaker Change: Mostly in the short tail lines on the longer tail lines, which is primarily GL I think we were pretty flat I think.

Francois Morin: It looked like you were pretty much flattish, supporter year over year at 345, million dollars.

Francois Morin: I think, you know, it's something we look at carefully. Some noise here and there, but collectively, in aggregate, we're very comfortable with the level of reserves. And, you know, so far, our numbers are holding up pretty well. And what I would add to what Francois just said, and as you know, Jimmy, we're a cycle manager. We also, you know, didn't write as much, and even, you know, the years that we believe are now, you know, still, you know, very soft years.

Francois Morin: Could you share some of the puts and takes?

Francois Morin: Was public DNO off a lot?

Speaker Change: Something we look at carefully.

Francois Morin: Did you see a pickup or a decrease in cyber?

Francois Morin: What were some of the big lines?

Speaker Change: Some some noise here and there, but collectively in aggregate, we're very comfortable with the level of reserves in and so far our numbers are holding up pretty well and what I would add to what funds are just said and as you know Jimmy where cycle manager. We also didn't write as much and even.

Francois Morin: How did they move?

Francois Morin: Yeah, there's a lot of things in the professional lines, it's kind of hard to disentangle from your perspective.

Francois Morin: But at a high level, you know, D&O, you know, we're reacting to what's out there, we're still maintaining our positioning, cyber, we're still making exposure rates to go down so that would go the other way, healthcare, we like a lot.

Francois Morin: So we've grown that book of business, this is within the professional lines.

Jimmy: The year that were that we believe are now still very soft here. So that also prevents you from adding too.

Marc Grandisson: So that also prevents you from having to, you know, have, you know, outsize surprises. And then, on a different topic, your capital is building up pretty nicely, and I'm assuming it's enough to fund your growth, and you have done a couple of acquisitions, but how do you think about buybacks and or potentially instituting a dividend given, and the Capital Level Study. I mean, the philosophy has not changed, right?

Jimmy: Two to having outsize no surprise.

Jimmy: And then on a different topic.

Speaker Change: Your capital is building up pretty nicely and I am assuming gets enough to fund your growth.

Speaker Change: And do you have done a couple of acquisitions, but how do you think about.

Speaker Change: Buybacks and or potentially instituting a dividend given the.

Speaker Change: And the capital levels that you have.

Speaker Change: Yes, I mean that the philosophy has not changed right I'd say certainly we.

Marc Grandisson: I'd say certainly we're on track to close the Allianz acquisition tomorrow, so that will certainly be a draw on that capital base that we have. We are also entering the active win season, so we'll want to take a look at how that develops. But absolutely, going forward, the fact that we historically have been, I think, very good stewards of capital. We like to deploy it in the business where we can, but if there are no opportunities beyond what's in front of us in the coming months, we will, you know, we'll do what we've always done, return that capital.

Marc Grandisson: And there's been some re-underwriting of some areas, if you will, at a high level that we're not performing as well.

Speaker Change: We were on track to close the <unk> acquisition Tomorrow, so that.

Marc Grandisson: So there's a lot of things going on all at once.

Marc Grandisson: I think what you're seeing, it was not the 300, you know, the flattish number is really the sum total of many decisions that were independent from one another.

Marc Grandisson: That's really what you can read into this.

Speaker Change: That will certainly be a draw on that capital base that we have.

Speaker Change: We are also entering the active wind season. So we will want to take a look at what how that develops but absolutely going forward. The fact that we historically have been very I think very good stewards of capital.

Speaker Change: He'd like to deploy it in the business, where we can but if there are no opportunities beyond what we what's in front of us.

Marc Grandisson: But if there are no opportunities beyond what we what's in front of us.

Marc Grandisson: In the coming months, we'll do what we've always done is return that capital and it could be in the form of share buybacks or dividends or any other method.

Speaker Change: In the coming months, we will be on what we'll do what we've always done is return that capital.

Marc Grandisson: And it could be in the form of, you know, share buybacks or dividends or any other method. Thank you. Next question. Scouts from Josh Shanker from Bank of America. Yeah, thank you very much. So, Marc, some time in the past, I think one thing you said to me was that the big surprise... was the hard market of 2000-2004, that pricing stayed good for a lot longer than we thought it would, and we pulled back too early. I mean, clearly, you're pulling back here.

Speaker Change: And it could be in the form of share buybacks or dividends or any other method.

Speaker Change: Thank you.

Marc Grandisson: Got it.

Speaker Change: Okay.

Speaker Change: Okay.

Marc Grandisson: And along the same lines in reinsurance, property X catastrophe, it was up quite a bit at $585 million versus $457 million last year.

Marc Grandisson: Our next question.

Speaker Change: Our next question.

Marc Grandisson: Calls from Josh Shanker from Bank of America.

Speaker Change: Comes from Josh Shanker from Bank of America.

Speaker Change: Yes.

Joshua David Shanker: Yes, thank you very much.

Marc Grandisson: What did you like in the property area in reinsurance?

Marc Grandisson: Yeah, thank you very much.

Marc Grandisson: We, well, in there, there's a lot of different lines, but, you know, there's a lot of core to share, some risk access.

Speaker Change: Mark sometime in the past I think one thing you said was that the big surprise.

Marc Grandisson: So, you know, the last hard market and casualty started to turn, you know, in 2000. And it, you know, it took until about 2004 to really see the impact and sort of have running out of, you know, having to price, you know, and rate increase after that point. So, it takes several years.

Marc Grandisson: So, Marc, some time in the past, I think one thing you said to me was that the big surprise.., was from the hard market of 2000-2004, that pricing stayed good for a lot longer than we thought it would, and we pulled back too early.

Speaker Change: <unk> was from the hard market.

Speaker Change: 2007 before that pricing stayed good for a lot longer than we thought it would and we pulled back too early.

Marc Grandisson: Unlike the property cap, right, Elyse, 2022 something happened about in the fall.

Jimmy Bullard: But the growth has decelerated a great deal. Given that you have that 2020 hindsight, how are you looking at this market opportunity? And how long have I been last compared with what you knew?

Marc Grandisson: I mean, clearly, you're pulling back here.

Speaker Change: I mean, clearly youre pulling back here, but the growth has decelerated a great deal.

Jimmy Bullard: But the growth has decelerated a great deal.

Speaker Change: Given that you have that 2020 hindsight how are you looking at this market opportunity and how long it might last compared with what you knew from the past.

Jimmy Bullard: Given that you have that 2020 hindsight, how are you looking at this market opportunity?

Jimmy Bullard: And how long am I last compared with what you knew?

Marc Grandisson: Well, first, Josh, I'm trying to erase from my memory what we did wrong in 2004-05, but thanks for reminding me. What I would tell you, Josh, is that we talk about this at underwriting meetings. Our underwriters and our underwriting executives are acutely aware of that phenomenon. But we also have to remind ourselves that pricing is going up, as we talked about, specifically now in casualty, which seems to be the more acute area. I think it will take a longer time to go down, or it takes longer to get down, right? It goes up an elevator and goes down an escalator.

Jimmy Bullard: Well, right away, the people are adjusting because the cost of goods sold or losses are known.

Jimmy Bullard: Well, first, Josh, I try to erase from my memory what we did wrong in 2004-05, but thanks for reminding me.

Speaker Change: Well first Josh.

Marc Grandisson: So, this is not surprising to me.

Marc Grandisson: I'm expecting a bit more.

Fabio: Fabio <unk> from my memory of what we did rolling in 2045, but thanks for reminding me.

Speaker Change: What I would tell you Josh as we've talked about this at underwriting meetings, our underwriters and our underwriting executives are acutely aware of that phenomenon. We're also off to remind ourselves that pricing is going up as we as we talked about specific non casualty, which seems to be the more in a more acute area.

Marc Grandisson: We're expecting a bit more.

Marc Grandisson: What I would tell you, Josh, is we talk about this at underwriting meetings.

Marc Grandisson: We're seeing it through our reinsurance submissions.

Marc Grandisson: Our underwriters and our underwriting executives are acutely aware of that phenomenon.

Marc Grandisson: We also have a facultative book in there as well.

Marc Grandisson: We also have to remind ourselves that pricing is going up, as we talked about, specifically now in casualty, which seems to be the more acute area.

Marc Grandisson: And all these units are, taking advantage of the hard market still to this day and picking their spots.

Marc Grandisson: And we think the return expectations is not as cat exposed.

Marc Grandisson: There is some cat exposure there, obviously, but we believe the returns are just very, very accretive and very, very favorable.

Marc Grandisson: Some of them are opportunistic by nature, right?

Marc Grandisson: We might be doing a specific deal in some specific peril because we think the market is hard as we speak.

Marc Grandisson: So some of that was also factored in our writing.

Marc Grandisson: So it's a really broad line of business.

Marc Grandisson: As you can see, we love that line.

Marc Grandisson: We love the opportunities there.

Marc Grandisson: I think it will take a longer time to go down, or it takes longer to take down.

Speaker Change: I think it will take it will take a longer time to to go down or it takes longer to take down by it goes up and elevator and it was on an escalator. So thats probably why we would expect the market to be I think we are aware of this now we have more data we have more experience we have an existing platform.

Marc Grandisson: It goes up an elevator and goes down an escalator.

Marc Grandisson: So that's probably why we would expect the market to be. I think we're aware of this. Now we have more data. We have more experience. We have an existing platform, and underwriters. Many of them have been there through the years.

Marc Grandisson: So that's probably why we would expect the market to be.

Marc Grandisson: I think people are slowly but surely recognizing, you know, some of these bad years, but it takes a while.

Marc Grandisson: I think we're aware of this.

Marc Grandisson: Now we have more data.

Marc Grandisson: We have more experience.

Marc Grandisson: It's a bit more complicated, I would say, to underwrite than a property cat, pure property cat book a business, but we've had the expertise and the knowledge and the willingness to do this for a long time.

Marc Grandisson: We have an existing platform, underwriters.

Marc Grandisson: And we would like to be exposed and do more of that line of business in that current return, Yeah, and I'll add to that quickly.

Marc Grandisson: Just on the accounting side, it's important to remember that the property cap line of business is mostly on an XOL basis where we write all the premium on day one, versus this property other than PropertyCat line where the component that is on a quarter share basis, the premium is written evenly throughout the exposure period.

Speaker Change: Underwriters are many of them have been there through those years so.

Marc Grandisson: Many of them have been there through those years.

Marc Grandisson: So, very confident that we will be more judicious, if you will, in terms of holding the line when the market gets a little bit softer. In terms of growth, we still have that close to 11% growth in P&C, which is a big feat. It's a very, very good growth.

Marc Grandisson: So very confident that we will be more judicious, if you will, in terms of holding the line when the market gets a little bit softer.

Speaker Change: Very confident that we will be more judicious if you will in terms of.

Fabio: Holding the line when the market gets a little bit softer in terms of growth, we still have that close to 11% growth in P&C, which is a big feat is still it's a very very good growth, but as I said in my comments and you probably have heard already Josh the market is a little bit more.

Marc Grandisson: In terms of growth, we still have that close to 11% growth in P&C, which is a big feat.

Marc Grandisson: It's a very, very good growth.

Marc Grandisson: But as I said in my comments, and you probably heard already, Josh, the market is a little bit more reaching equilibrium in terms of supplying demand for the risk. So the question that we have to ask ourselves all the time is, if we push too hard, we might dilute the broader margin and return expectations in the marketplace. So we take this, and not only us, by the way; I think the market is broadly, very, very widely, behaving the same way.

Marc Grandisson: But as I said in my comments, and you probably heard already, Josh, the market is a little bit more reaching equilibrium in terms of supply and demand for the risk.

Josh: Reaching equilibrium in terms of supply and demand for the risks so.

Marc Grandisson: So the question that we have to ask ourselves all the time is, if we push too hard, we might dilute the broader margin and return expectations in the marketplace.

Fabio: So the question that we have to ask ourselves all the time as if we push too hard we might dilute the broader margin and return expectations in the marketplace. So we take this and not only us by the way I think the market is broadly very very widely behaving the same way people want to make sure that they get it right and nobody wants to be the first one running out and doing.

Marc Grandisson: So we take this, and not only us, by the way, I think the market is broadly, very, very widely behaving the same way.

Marc Grandisson: People want to make sure that they get it right, and nobody wants to be the first one running out and doing something that will probably jeopardize, or not jeopardize, but maybe take down the returns expectation. You know, it's just that kind of market, Josh, you know, that the equilibrium on the supply and demand for capacity is just coming back more to a more normal level is still still on the side of the underwriters. But it's clearly moving in a more equilibrium state.

Marc Grandisson: People want to make sure that they get it right, and nobody wants to be the first one running out and doing something that will probably jeopardize, or not jeopardize, but maybe take down the returns expectation.

Fabio: Something that will probably.

Fabio: Jeopardize or would not jeopardize but maybe.

Fabio: Take down the returns expectation so.

Marc Grandisson: You know, it's just it's just that kind of market, Josh, you know, the equilibrium on the supply and demand for capacity is just coming back more to more normal level.

Speaker Change: It's just it's just tack on a market Josh the equilibrium on the supply and demand for capacity is just coming back more to normal more normal level is still it's still on the side of the underwriters.

Speaker Change: But it's clearly moving in a more equilibrium state.

Joshua David Shanker: And then continuing on the thought and fondness Jimmy asked, I have a very crude capital model, and I wouldn't recommend anyone else use it, but it does seem like at the pace that the premium is decelerating, you're going to be sitting on some sizable excess capital in a fairly short order. Can you, I guess, talk a little bit about how the Allianz transaction uses capital? That might be incorrect; my assumption is that may be a source that's really causing a capital plug there.

Marc Grandisson: And then in terms of just, you know, on the insurance side, as you think, you know, the, you know, the underlying, I guess, margin, right, kind of low 90s in the quarter, given, you know, your views about price and loss trend is, does that feel like, you know, kind of the run rate level from, Well, as you know, Elyse, we report the numbers as we see it based on the data that we see.

Marc Grandisson: So they could very well be, you know, there's accounts that we wrote at 1.1, for example, that, you know, the ramp up of that premium is taking place over the four quarters of 24 as we write the premium.

Marc Grandisson: It's still still on the side of the underwriters, but it's clearly moving in a more equilibrium state.

Speaker Change: And then on.

Jimmy: On the stocking <unk> Jimmy ask.

Speaker Change: I have a very crude capital model and I wouldnt recommend anyone else use it up.

Speaker Change: But it does seem like at the pace that the premium is be celebrating.

Joshua David Shanker: And then continuing on the thought in fondly on what Jimmy asked, I have a very crude capital model, and I wouldn't recommend anyone else use it, but it does seem like at the pace that the premium is decelerating, you're going to be sitting on some sizable excess capital in a fairly short order.

Speaker Change: You're going to be sitting on.

Speaker Change: Some sizable access capital in a fairly short order.

Joshua David Shanker: That sort of seems to be the emerging sort of rough average over the last couple of years.

Joshua David Shanker: Can you, I guess, talk about a little bit about how the Allianz transaction uses capital?

Speaker Change: Can you I guess talk about a little bit about how the Allianz transaction uses capital that might be.

Joshua David Shanker: There's also a mix going on, Elyse, so things are shifting, as you know, from time to time, so it's hard to compare combined ratio.

Joshua David Shanker: That might be incorrect in my assumption.

Speaker Change: Incorrect my assumption that it may be that may be a source that's really.

Speaker Change: Causing a capital plug there.

Joshua David Shanker: That may be a source that's really causing a capital plug there.

Francois Morin: Or, additionally, am I correct that, on the current trajectory, you have, at the current rate, a real capital buildup that's going to need to be utilized in short order? Well, I mean, first on the Allianz transaction, we, you know, disclosed that the rough amount of capital that we were going to deploy in that transaction is 1.8 billion, which is the premium we're paying to acquire the asset and also the capital that we need to deploy to support the LPT that's coming our way immediately, and then the ramp-up of the new business or the renewals that will end up on our balance sheet. So, you know, a sizable number, and that is, you know, so far, I mean, as far as we know, I mean, things are on track to be kind of at that level.

Joshua David Shanker: But right now, based on where we are, it's well within expectation of getting the returns.

Joshua David Shanker: Or additionally, am I correct that you have, at the current trajectory, a real capital buildup that's going to need to be utilized in short order?

Speaker Change: Additionally, am I correct that you have.

Speaker Change: The trajectory a real capital buildup, that's going to be utilized in short order.

Speaker Change: Well I mean first on the <unk> transaction, we disclosed that we were the rough numbers of capital that we were going to deploy in that transaction is $1 8 billion.

Francois Morin: And our returns on insurance, we believe, are in excess of our long-term target.

Francois Morin: So a little bit of a different kind of accounting policy on those types of, you know, reinsurance agreements and that certainly has an impact on how it shows up in the quarterly numbers.

Francois Morin: Well, I mean, first on the Allianz transaction, we, you know, disclosed that we were, you know, the rough number of capital that we were going to deploy in that transaction is 1.8 billion, which is the premium we're paying to acquire the asset and also the capital that we need to deploy to support the LPT that's coming our way immediately, and then the ramp-up of the new business or the renewals that will end up on our balance sheet.

Francois Morin: And then the mortgage releases have held steady at, Q2 was above the Q1 level.

Francois Morin: Can you just provide, Francois, maybe a little bit more color on what's going on there and how we, kind of think about run rate level of potential releases within the MIT.

Francois Morin: Got it.

Francois Morin: Great question.

Francois Morin: And if I could just sneak one quick one in on the insurance line, the expense ratio picked up by 70 basis points.

Speaker Change: Which is the premium we are paying to acquire the asset and also the capital that we need to deploy to support the LPT that's coming our way immediately and then the ramp up of the new business or the renewals that will end up on our balance sheet. So.

Francois Morin: Should we be thinking about the expense ratio being slightly more elevated as you, take on the Allianz book and invest.

Francois Morin: Well, the investments that we made through this quarter were not related to that, right?

Francois Morin: So they are other opportunities, other efforts that we have underway that were predictive analytics, some tech companies that we've invested in.

Francois Morin: So, you know, sizable number, and that is, you know, so far, I mean, as far as we know, I mean, things are on track to be kind of that level.

Speaker Change: Sizable number.

Speaker Change: And that is so far EMEA as far as we know I mean, there is things are on track to to be kind of at that level.

Speaker Change: Yes.

Francois Morin: You know, to your point, yeah, returns have been excellent, and we're very, you know, proud of that, but we're not going to accumulate capital just that we can't deploy forever. So, the reality is if, you know, give us another couple of quarters, maybe, but, you know, I mean, we'll definitely have a better view of where things stand by, you know, later this year. And then, you know, Mark's been talking about the casualty kind of pick-up potentially, so, you know, if that, you know, accelerates in the third and fourth and quarters and early next year, then we want to have the capital ready to deploy there. So, that's certainly how we think about the big picture, but it's an ongoing discussion we have here. Thank you for the answers. Have a good day. Thank you, too!

Francois Morin: I think we, I mean, I and many others have been wrong about, you know, taking a forward-looking view of releases on the, or favorable development on mortgage in general.

Francois Morin: So we feel it's the right time for us to make those investments given how strong the returns are and we'll see how those develop over time.

Francois Morin: You know, to your point, yeah, I mean, returns have been excellent, and we're very, you know, we're proud of that, but we're not going to accumulate capital just that we can't deploy forever.

Francois Morin: I think, you know, right stepping back, I'd say that early in 20, you know, late 22, early 23, we were more cautious about the state of the economy and took a, you know, a view about, you know, new notices and average reserves that we are attaching to these notices that, you know, it was a bit more that didn't, didn't turn out to be the case, right. That turned out to be better than what we had expected at that time.

Speaker Change: To your point, yes, I mean, the returns have been excellent and we're very we're proud of that.

Francois Morin: The fact that, you know, we just had another quarter of kind of more, you know, better cure activity, you know, I don't think, you know, a lot of these cures this quarter were related to the 2023 accident year.

Francois Morin: So, you know, we're more positive, I think, I'd say in general about the housing market.

Francois Morin: So the level of reserving that we're, that we're attaching to the new delinquencies is a bit lower than it was a year ago.

Speaker Change: But we're not going to accumulate capital just that we can deploy forever. So the reality is if you don't give us.

Francois Morin: So maybe directionally, we would not expect to have the same level of reserve releases going forward.

Francois Morin: They slow down the road, but for now we're very comfortable with the level of investments we're making.

Francois Morin: So, the reality is if, you know, give us another couple of quarters maybe, but, you know, I mean, we'll definitely have, you know, a better view of where things stand by, you know, later this year.

Francois Morin: But again, not knowing for sure how, you know, how quickly people are going to cure unemployment, et cetera.

Francois Morin: In terms of Alliant, we'll give you more information as we move forward, but there will certainly be some integration expenses that will come through in the insurance segment specifically going forward.

Speaker Change: Another couple of quarters, maybe but we'll definitely have.

Marc Grandisson: A better view of where things stand by later this year and then Mark has been talking about the casualty can pick up potentially so youll if that accelerates in the third and fourth quarters. In early next year, then we want to have the capital ready to deploy there. So that's.

Francois Morin: I mean, that will be, they'll have an impact on the level of reserve releases.

Francois Morin: Some of those expenses, though, will be kind of one time and we'll probably report those as part of a transaction cost and others.

Francois Morin: And then, you know, Marc's been talking about the casualty kind of pickup potentially, so, you know, if that, you know, accelerates in the third and fourth and quarters and early next year, then we want to have the capital ready to deploy there.

Francois Morin: So that will clarify that for everybody once we close and after we have some time to digest it.

Francois Morin: But yeah, the investments so far this quarter are for other initiatives.

Francois Morin: Got it.

Francois Morin: So, that's, you know, certainly how we think about a big picture, but it's an ongoing discussion we have here.

Speaker Change: Certainly how we think about a big picture, but it's an ongoing discussion we have here.

Speaker Change: Alright, thanks for the answers have a good day.

Francois Morin: Martin, thank you for the answers.

Speaker Change: Thanks, you too.

Francois Morin: Have a good day.

Speaker Change: Okay.

Michael David Zaremski: Our next question comes from Michael <unk> from BMO.

Joshua David Shanker: Our next question comes from Michael Zaremski from BMO. Thanks. I keep with the theme of casualty and social inflation. We do value your thoughts on this. I guess, can you remind us, Tupar, I believe you've said in the past that ARCH's casualty reserve reviews are more geared towards summer months and related, you know, now that you've been studying your book and the industry a little bit more. I recall last year, you know, not just and Marc, you said, but others have said, too, that they thought that the casualty pressures would be more on large accounts So I don't know if there is or not.

Francois Morin: Thanks for the color.

Francois Morin: Thank you.

Francois Morin: Thank you, too.

Michael David Zaremski: Okay. Thanks.

Joshua David Shanker: Our next question comes from the line of Jimmy Bullard from J.P. Morgan.

Joshua David Shanker: Our next question comes from Brian Meredith from UBS.

Joshua David Shanker: Our next question comes from Michael Zaremski from BMO.

Michael David Zaremski: Keith.

Speaker Change: Theme on casualty and social inflation, especially since we do value or you're.

Speaker Change: Your thoughts on this.

Joshua David Shanker: Hi.

Joshua David Shanker: Yeah, thanks.

Michael David Zaremski: Yes.

Speaker Change: Can you remind us to part B.

Speaker Change #119: I believe you said in the past that arches casualty reserve reviews are more geared towards the summer months and related now that you've been studying.

Joshua David Shanker: So first, just a question on reserves.

Joshua David Shanker: A couple of them here for you guys.

Joshua David Shanker: The first one, I'm just curious, do y'all still stand by the three-year payback period for share buyback when it comes to book value dilution?

Joshua David Shanker: That has been our practice.

Speaker Change: And the industry, a little bit more I would call last year.

Joshua David Shanker: You had favorable development overall, but, And so did many of your peers, but a lot of the competitors had adverse development and casualty for both older and recent years.

Joshua David Shanker: You know, it's not a hard and fast rule.

Speaker Change: Not yet.

Michael David Zaremski: And Mark you had said, but others have said that they thought that the casualty pressures to be more large accounts.

Speaker Change: <unk> been small account, but the data we see so far appear.

Marc Grandisson: Appears to be.

Speaker Change #101: Smaller comp players have had.

Michael David Zaremski: <unk> added to the reserves more so so I don't know if theres.

Michael David Zaremski: Any thoughts there? I'll start with the second part of the question. You're exactly right. I think that I said that the large accounts are ground zero for pressure points on the losses because they have deeper pockets, right? They have larger limits, bigger enterprises, more complex cases, and are more attractive to the plaintiff lawyers. But you're right.

Speaker Change #109: Any thoughts there thanks.

Speaker Change: I'll start with I'll start with the second part of your question Youre exactly right I think that I said that the large account that are ground zero for pressure points on the losses, because they have deeper pockets, where the larger limits bigger enterprises more complex cases, and more attractive to the plaintiff lawyers, but youre right, we have seen as well as everyone else.

Michael David Zaremski: It doesn't seem like you had that, but maybe you could go into.., detail a little bit on the development, in the second quarter.

Michael David Zaremski: I think it's been the practice historically.

Michael David Zaremski: But again, that's part of the framework of how we evaluate various alternatives.

Marc Grandisson: We've seen, as well as everyone else, pressure building with commercial autos as well, even of all sizes, also going through a similar process. And it impacts, obviously, the umbrella portfolio. But you're quite right.

Speaker Change: Building the commercial auto as well even of all size is also going through a similar process and it impacts obviously the umbrella portfolio, but by.

Marc Grandisson: And then also, why do you feel that you're not as susceptible as some of the competitors to all the casualty issues, either in your book or maybe in the Watford?

Speaker Change: You are quite right, we're sort of a second round.

Marc Grandisson: Yeah, let me take a stab at that.

Marc Grandisson: We're sort of in the second round, sort of the rippling effect, starting at ground zero, which is always a larger account, and it sort of slowly but surely ripples through the market. And we're starting to see this impact on the smaller packages as well. Smaller policies, as well, have lower limits. So it's probably easier, well, it seems to be currently in the space, you heard this too, I'm sure, a million dollar limit is what it used to be.

Marc Grandisson: I'm sure Marc will have something to add.

Marc Grandisson: Could we think about extending the payback at some point?

Speaker Change: Sort of the rippling effect, starting in ground zero, which is always a larger accounts and it's sort of slowly but surely ripple through the market and we're starting to see this impact on the smaller on the smaller packages as well smaller policies as well have a lower limit so bobby easier well it seems to be currently in this space you heard this too im sure.

Marc Grandisson: I'd say on the part to your question, Jimmy, I'd say, you know, the book of business that we have is, I wouldn't call it a standard commercial general liability book of business that some other competitors have.

Marc Grandisson: We don't write a whole lot of commercial auto, for example. So that's another line of business that's been, you know, been a difficult line to get a good handle on the trends and how, you know, how inflation has picked up in there.

Marc Grandisson: And the answer is maybe.

Marc Grandisson: So, you know, the books that we have in general liability, A, I think are smaller, certainly we think underweight than those lines of business.

Marc Grandisson: You know, roughly speaking, our insurance book is like, call it less than 15% of our overall premium, what we consider to be traditional casualty in the GL lines of business. So the mix matters.

Marc Grandisson: Certainly the areas where we write the business matters.

Marc Grandisson: I mean, we have an international book within that, so it's not only US where I think we've seen more pain.

Marc Grandisson: Gosh, that's helpful.

Marc Grandisson: Thank you.

Marc Grandisson: We have a team that, between us, you know, leading the effort on Alliant that also were instrumental in integrating United Guaranteed way back in 2017-18, so we have already some good experience there.

Marc Grandisson: And then I guess my next question, you know, thinking about M&A here, it looks like you probably have the financial capacity to still do a reasonable amount of M&A, but do you have the kind of management, or call it management capacity at this point as you're integrating the Allianz business or Firemen's Fund business, you know, over the next, call it, 6 to 12 months to do anything.

Marc Grandisson: So I think we have enough bandwidth for what we're doing now quickly, and if something were to happen, right, Francois, that was really creative and interesting, we would find a way to do this.

Marc Grandisson: You're going to kind of take a pause.

Marc Grandisson: I think that we're not there to work half the time.

Marc Grandisson: Well, I think, Brian, it's also dependent on the opportunity that we have ahead of us, and we can certainly attract people to help us do any other, you know, integration.

Marc Grandisson: If something is very, you know, favorable to us, we'll expand the effort and the work that needs to be to get this done.

Marc Grandisson: And these opportunities, too, are, I mean, I'd say, geography-specific and segment-specific.

Marc Grandisson: So, you know, the Alliance acquisition is purely insurance North America, so that absolutely has taken, you know, center stage, but, you know, if we were to do some other M&A in other parts of the world, in the reinsurance segment, that could be, I mean, it'd be a different team most likely that would contribute.

Marc Grandisson: Makes sense.

Marc Grandisson: And I wonder if there's this quick one, I know you're going to give us some numbers on the Allianz thing, but is there any color you can give us with respect to how does it add to your PMLs?

Marc Grandisson: As we think about it going forward, just looking at the map you provided us, it looked like, you know, there's a decent amount of business and kind of cat exposed, non-materially because it's not as much in our peak zone as, you know, the book is more diversified, more Midwest, more California, less, you know, Florida, which is our peak zone.

Marc Grandisson: So in terms of the 1 in 250 marginal impact.

Marc Grandisson: Great, thank you, appreciate it.

Speaker Change #130: The $1 million limit isn't what it used to be so there's probably more of a pressure to pay the full limit as opposed to before maybe the industry was.

Marc Grandisson: So there's probably more of a pressure to pay the full limit as opposed to before. Maybe the industry was more willing to fight or push back. But again, the million dollar question, because of all the inflation, has changed.

Speaker Change: More willing to fight or pushback, but again, the $1 million because of all the inflation has changed in terms of reserve review I'll say, it but we do a quarterly review of our reserving.

Marc Grandisson: In terms of reserve review, I'll say it again, but we do a quarterly review of our reserves for every line of business that we do. Our actuaries review it every single time, and we have a change in loss ratio that we get reported on, on every line of business and sub-line, quarterly for all the units that we look at. The one thing that we have as another benefit at Arch is that we also have the insurance group and the reinsurance company, so we're able to compare at the high level of the holding company, Francois and I, as to what the trends are developing and what they're looking like. So it's constant.

Marc Grandisson: And in terms of the favorable, you know, the movements in the quarter, I think, yes, in aggregate, we were favorable, mostly in the short tail lines.

Marc Grandisson: On the longer tail lines, which is primarily GL, I think we were pretty flat.

Speaker Change: The lines of business that we do our actuaries.

Speaker Change: Every single time, and we have a change of loss ratio that we get reported on on every line of business sub line quarterly for all the units that we that we look at the one thing that we have is an added benefit at arch is we have also we have the insurance group and our reinsurance companies were able to compare at a high level at the holding company <unk>.

Speaker Change: And what the trends are developing and what they're looking like so it's a constant I think what we used what we may have said to you is we used to do an annual trend analysis now, it's becoming a twice a year analysis and it might accelerate as well and I would assume that most people are using the.

Marc Grandisson: I think, you know, it's something we look at carefully.

Marc Grandisson: I think what we may have said to you is that we used to do an annual trend analysis. Now it's becoming a twice-yearly analysis, and it might accelerate as well. And I would assume that most people are using the same frequency, because, as we talk about all the time, reserving feeds into price.

Marc Grandisson: Some noise here and there, but collectively in aggregate, we're very comfortable with the level of reserves.

Marc Grandisson: And, you know, so far, our numbers are holding up pretty well.

Marc Grandisson: And what I would add to what Francois just said, and as you know, Jimmy, we're a cycle manager.

Marc Grandisson: We also, you know, didn't write as much, and even, you know, the years that we believe are now, you know, still, you know, very soft years.

Marc Grandisson: So that also prevents you from having to, you know, to having, you know, outsize, you know, surprise, and the Capital Level Study.

Marc Grandisson: I mean, the philosophy has not changed, right?

Speaker Change: The same frequency because as we talk about all the time reserving feed into pricing.

Marc Grandisson: I'd say certainly we're on track to close the Allianz acquisition tomorrow, so that will certainly be a draw on that capital base that we have.

Marc Grandisson: We are also entering the active win season, so we'll want to take a look at how that develops.

Marc Grandisson: But absolutely, going forward, the fact that we historically have been, I think, very good stewards of capital.

Marc Grandisson: We like to deploy it in the business where we can, but if there are no opportunities beyond what's in front of us, you know, in the coming months, we will, you know, we'll do what we've always done is return that capital.

Speaker Change: Yes. The one quick thing just to add on reserving, we monitor actual versus expected and experienced quarterly that's a big part of the process and not only not only do we do it against our own expectations, but we monitor against our external actuaries expectation. So we got to two views of how.

Francois Morin: Yeah, the one quick thing just to add on reserving: we monitor actual versus expected experience quarterly. That's a big part of the process. And not only do we do it against our own expectations, but we monitor it against our external actuaries' expectations. So we have two views of how independent groups of actuaries think the business or the reserves should develop over time. And that certainly informs the actions we take every quarter. And to Marc's point, that's done in all the business units regularly. Okay, that's helpful, understood. Just last quickly on, catastrophe levels.

Marc Grandisson: And it could be in the form of, you know, share buybacks or dividends or any other method.

Francois Morin: Thank, Our next question.

Francois Morin: Scouts from Josh Shanker from Bank of America, Yeah, thank you very much.

Francois Morin: So, Marc, some time in the past, I think one thing you said to me was that the big surprise.., was from the hard market of 2000-2004, that pricing stayed good for a lot longer than we thought it would, and we pulled back too early.

Francois Morin: I mean, clearly, you're pulling back here.

Francois Morin: But the growth has decelerated a great deal.

Francois Morin: Given that you have that 2020 hindsight, how are you looking at this market opportunity?

Francois Morin: And how long am I last compared with what you knew?

Francois Morin: Well, first, Josh, I try to erase from my memory what we did wrong in 2004-05, but thanks for reminding me.

Francois Morin: What I would tell you, Josh, is we talk about this at underwriting meetings.

Speaker Change: Independent groups of actuaries.

Speaker Change #168: <unk> or the reserve should develop over time and Thats certainly informs the actions we take every quarter and to Mark's point that is done and all the business units.

Speaker Change: We regularly.

Speaker Change #111: Okay Thats helpful understood.

Speaker Change #106: Quickly on.

Speaker Change: Castro fee levels.

Speaker Change: Since you guys are more open than others.

Michael David Zaremski: I think you guys are more open than others, put in quote normal. The reinsurance segment, that ratio, the load ratio this quarter, is that kind of normal-ish since you guys have grown into property over the years? I've taken you.

Speaker Change: <unk>.

Speaker Change #118: Quote normal.

Speaker Change: The reinsurance segments.

Speaker Change: That ratio load ratio. This quarter is that kind of normal ish. Since you guys have grown into property over the years.

Speaker Change: I think.

Speaker Change #114: Yes, yes.

Francois Morin: Yeah, yeah, no, I think, no, again, repeating what we said before, and it's always hard to appreciate from your perspective, I'm sure, is that reinsurance has more volatility in it. So we tend to look at this on a longer term, you know, average. So sometimes we have a quarter, I'll remind everyone here, sometimes we have a quarter where, you know, the combined act, the current accident year, X cap combined ratio, and reinsurance goes up a little bit.

Speaker Change: No again, repeating what we said before and it's always hard to appreciate from your perspective I am sure that the reinsurance has more volatility into it. So we tend to look at it on a longer term average so sometimes we have a quarter I'll remind everyone here, sometimes we have a quarter, where the combined the current accident year ex cat combined ratio in <unk>.

Speaker Change: Reinsurance goes up a little bit.

Francois Morin: And people say it's a trend, but it's very hard to see, to say this in reinsurance. Sometimes it's above, sometimes it's below. I think this quarter, frankly, we had no lower attritional losses across the, across the reinsurance portfolio. And this is what, that's what explains that.

Speaker Change: And people say, it's a trend, but it's very hard to see to say this in reinsurance sometimes it's above sometimes it's below I think this quarter frankly, we had no lower attritional losses across the across our reinsurance portfolio and this is what this what explains that but if you look on a 12 month basis, it's not as as drastic of a move.

Francois Morin: But if you look at it on a 12-month basis, it's not as, as drastic of a move. Yeah, and I'd add to that also, the catalog that we reported or kind of quoted earlier this year, I mean, we have a view on seasonality of when these losses may or may not hit. I mean, it's imprecise. Does it happen second quarter? Does it happen third quarter?

Speaker Change #178: Yeah, and I'd add to that also in the cat load that we reported there were kind of quoted earlier this year.

Speaker Change #116: We have a view on seasonality of when these losses may or may not hit its imprecise does it happen in second quarter has that been third quarter, it's a little bit of a.

Francois Morin: It's a little bit of a fable, you know; there's historical data to support that. But, you know, big picture, again, what we experienced this quarter was not unexpected, was not, you know, was very much within what we thought was reasonable, given the growth and the size of the book, the fact that it's broader, it's not only US, but a lot of international, and, you know, the different types of exposures that we've reached for primarily. Okay, that's helping.

Speaker Change: There's historical data to support that but.

Speaker Change: Big picture again, what we experienced this quarter was not unexpected was not was very much within what we thought was reasonable given the growth in the size of the book. The fact that it's broader it's not only U S lot of international.

Speaker Change: And.

Speaker Change: The different types of exposures that we that we've reinsured primarily here.

Speaker Change: Okay. That's helpful. I'll sneak one last one quickly on mortgage just on a macro perspective.

Michael David Zaremski: I'll take one last and click on mortgage just on a macro perspective. Home price appreciation continues at a healthy pace, or I guess it resumes at a healthy pace. Was that any factor in the reserve releases? Maybe it was unexpected. Is there anything there from a very high level we can think about? Yeah, it would, right?

Speaker Change: If home price appreciation.

Speaker Change #124: <unk> continues at a healthy pace or I guess, Brazil, and healthy pace with that is that any factor in kind of the reserve releases, maybe it was unexpected or anything there from a very high level, we can think about.

Speaker Change: Yes.

Marc Grandisson: Because by virtue of having house price appreciation, you therefore increase your equity in your home. And the equity in the home, or the lack thereof, is by far, the leading indicator as to whether you're going to have a foreclosure or a loss on your policy. And most of the policies, even if you had another 3% to 4%, whatever we're expecting next year, maybe 4.5% of HP appreciation, the equity will build. And what happens, and this is very simple, the reason why equity matters is because, well, if you're running into trouble, a divorce, you're losing your job, you don't want to lose the equity in the home; you can just turn around and sell it to

Speaker Change #100: Right because by virtue of having.

Speaker Change #100: <unk> House price appreciation you therefore increase your equity in your home and the equity in the home is by far the lack thereof, as a leading indicator as to whether you're going to have a foreclosure or a loss in your policy and most of the policies even.

Speaker Change #100: If you had another 3% to 4% of whatever we're expecting next year, maybe four 5% of HPA appreciation.

Speaker Change #100: The equity will built and what happens and it's very simple right. The reason why equity matters, because while a few are running into trouble the divorce youre, losing a job.

Speaker Change #100: You don't want to lose the equity in the home you can just turn around and sell it to somebody else and then recapture at least portion if not all of the equity that you've built into it that's something that people will do and then there is a healthy market supply and demand market is such that you'll be able to sell your home.

Marc Grandisson: And then recapture at least a portion, if not all of the equity that you've built into it. That's something that people will do. And then there's a healthy market, the supply and demand is such that you'll be able to sell your home and capture that equity even after some expense. So that's what happens in HPA. You know, if it goes too wild like it did in 07-08, but it got into trouble for different reasons altogether.

Speaker Change #100: And capture that equity even after some expenses so thats what happens on the HPA if it goes if.

Speaker Change #125: If it goes to while that could did and those have in OE, but it got into trouble for different reasons altogether I think the credit space and in the way the mortgage had been originated over the last several years.

Marc Grandisson: I think the credit space and the way mortgages have been originated over the last several years, HPA going up right now would be helpful. It's definitely helpful for us as my provider. Thank you. Our next question comes from David Motemaden from Africa. Good morning.

Speaker Change #115: HPA going up right now would be helpful. It's definitely helpful for us as a provider.

Speaker Change #115: Thank you.

Speaker Change #115: Sure.

Speaker Change #100: Yes.

David Kenneth Motemaden: Our next question comes from David <unk>.

Marc Grandisson: Our underwriters and our underwriting executives are acutely aware of that phenomenon.

Marc Grandisson: Our next question comes from Meyer Shields from KBW.

David: From Evercore.

David: Good morning.

David Kenneth Motemaden: I had a question on the underlying loss ratio in the insurance business. It was up a little bit year-over-year. That's despite having a higher mix of short-tail business within the earned premium mix. Could you maybe talk about what was driving the loss ratio? year-on-year, and you know with that conservatism you guys are baking in on the casualty lines or a little bit of the color there. Yeah, it's a pretty small increase, and we don't want to ascribe any more precision to those numbers. They're a judgment call quite often.

Marc Grandisson: We also have to remind ourselves that pricing is going up, as we talked about, specifically now in casualty, which seems to be the more acute area.

Marc Grandisson: Great, thanks so much.

David Kenneth Motemaden: I think it will take a longer time to go down or it takes longer to take down, right?

David Kenneth Motemaden: I had a question on the underlying loss ratio in the insurance business. It was up a little bit year over year.

David Kenneth Motemaden: It goes up an elevator and goes down an escalator.

David Kenneth Motemaden: So that's probably why we would expect the market to be.

David Kenneth Motemaden: I think we're aware of this.

David Kenneth Motemaden: Now we have more data.

David Kenneth Motemaden: Two quick questions.

Speaker Change #122: That's despite having a higher mix of short tail business within the earned premium mix could you maybe talk about.

David Kenneth Motemaden: We have more experience.

David Kenneth Motemaden: First, Marc, I think you and Francois both mentioned the elevation of the, for not growing, is there any reshaping of the portfolio to move further away?

Speaker Change #131: What was driving the loss ratio up year on year and was that conservatism you guys are baking in on the casualty lines are a little bit of color there would be helpful.

David Kenneth Motemaden: We have an existing platform, underwriters.

David Kenneth Motemaden: No, I think that if you look at a high level, I think our exposure is more stable, it may have grown a little bit even on a gross basis, but what happened is we just shaped it through retrocession purchase.

David Kenneth Motemaden: Many of them have been there through those years.

David Kenneth Motemaden: So very confident that we will be more judicious, if you will, in terms of holding the line when the market gets a little bit softer.

David Kenneth Motemaden: In terms of growth, we still have that close to 11% growth in P&C, which is a big feat.

David Kenneth Motemaden: It's a very, very good growth.

Speaker Change #121: It's a pretty small increase in this is.

David Kenneth Motemaden: But as I said in my comments, and you probably heard already, Josh, the market is a little bit more reaching equilibrium in terms of supplying demand for the risk.

David Kenneth Motemaden: That's what we did.

Speaker Change #148: We don't want to describe anymore precision to those numbers there.

David Kenneth Motemaden: So the question that we have to ask ourselves all the time is, if we push too hard, we might dilute the broader margin and return expectations in the marketplace.

David Kenneth Motemaden: And that's how we got back to a more reasonable and more acceptable level of PML.

David Kenneth Motemaden: Okay, that's helpful, and second Just sort of, for the most part, All of these are recent or up-to-date events as we've seen more capital market activity come back, facing that being blamed for pressure.

David Kenneth Motemaden: Public Company Detail Pricing.

Speaker Change #108: Their judgment call quite often times I think it's just a reflection of the mix and perhaps one on the business.

David Kenneth Motemaden: Are you seeing any inflection that coincides.., with recovery.

Francois Morin: I think it's just a reflection of the mix and perhaps one on the business; the actuaries may take a little bit more of a conservative or prudent stance and put a bit more, increasing the loss ratio for a certain year or a certain line of business or product line. That's really all there is to it. I think the variability around this, even at the insurance level, we're a specialty writer, so there are a lot of things going on all at once in our portfolio.

David Kenneth Motemaden: Not really.

Francois Morin: I mean, the third-party capital that we hear, again, even though it's third-party, there's a healthy level of rationality in the behavior.

Speaker Change #113: These may take a little bit more of a conservative prudent stance and put a bit more.

Francois Morin: So we haven't seen, like I said before, crazy players or mavericks in the marketplace.

Speaker Change #108: The increase of loss ratio for a certain year or certain.

Francois Morin: It's a pretty well-behaved marketplace.

Francois Morin: Okay, thank you very much.

Speaker Change #108: Line of business or product line, that's really all there is to it I think the variability around this even in an insurance level, where specialty writer.

Francois Morin: Very much.

Francois Morin: I'm not showing any further questions.

Speaker Change #107: So there is a lot of things going on all at once in our portfolio. It's not very it's not as predictive I guess it is.

Francois Morin: It's not as predictive, I guess, as we wish we could be, but this is also why we believe we can attract higher returns because there's a lot more uncertainty in selecting the loss ratio. I would just attribute it to noise that happens from time to time as well as to mix.

Speaker Change #107: As we as we wish we could be but this is also why we believe we can attract a higher returns because theres a lot more uncertainty in selecting the loss ratio uptick I would just I would just attribute it to noise that happens from time to time as well as mix transferring Toronto.

David Kenneth Motemaden: I don't think they're out of it. Okay? Yep. Great. Thanks. And then, Francois, you mentioned the actual to expected. I was wondering if we could just get a little bit more color on that for the quarter, and then if you guys have changed your view of expected losses, just given it appears like claims payment patterns have been extending. So I'm wondering if that's been reflected as well. Yeah, I think the A versus C works, you know. It's done line by line, year by year.

Speaker Change #107: Yes.

Speaker Change #139: Great. Thanks.

Speaker Change #107: And then Francois you had mentioned the actual to expected.

Speaker Change #112: I'm wondering if we could just get a little bit more color on that for the quarter and then.

Speaker Change #110: If you guys have changed your view of expected losses, just given it appears like claims payment patterns have been extending.

Speaker Change #159: So I'm wondering if that's been reflected as well in your expected.

Speaker Change #110: Expectations.

Speaker Change #120: Yes, I think.

Speaker Change #129: <unk> work.

Speaker Change #144: It's done by line by year, So, yes, there's pockets, where it's puts and takes right. There are some that we run favorable some that there could be a year for one claim shows up and it's going to show adverse but both quarter to date and year to date in aggregate both by segment.

Francois Morin: So yeah, there's pockets where, I mean, it's puts and takes, right? There's some that we run favorable, some that, you know, there could be a year for, you know, one claim shows up, and it's gonna show adverse, but both quarter to date and year to date in aggregate, both by segment, we are, you know, running ahead of expectations, which we didn't take the full credit for that. Some of that favorable experience is showing up in actually favorable prior development, but the indications are giving us a lot of comfort that our reserve base and our reserve levels are adequate to pay the claims.

Speaker Change #110: Sure.

Speaker Change #110: We're running ahead of expectations, which we didn't take the full credit for that some of that favorable experience is showing up in our interactions favor.

Speaker Change #110: Favorable prior year development, but the indications are giving us a lot of comfort that our reserve base in our reserve levels are adequate.

Speaker Change: To pay the claims.

Speaker Change: Absolutely Youre question on patterns that is there is a good attempt good faith attempt to adjust our patterns with the experience that we have again, both internally and the advice or the opinions we get from external actuaries. So that's factored into the expectations that.

Francois Morin: Absolutely your question on patterns, that is, I mean, there's a good attempt, a good faith attempt to adjust the patterns with the experience that we have and both internally and the advice or the opinions we get from external actuaries, so that's factored into the expectations that claims may take longer to develop. And we understand that it's an evolving situation. I mean, it seems that the patterns are changing over time, but that is fully kind of considered in those numbers. Great. Thank you. Welcome.

Speaker Change: Claims, maybe Neil may take longer to develop and.

Neil: We understand that it's an evolving situation.

Neil: It seems that the patterns are changing over time, but that is fully kind of considered in those numbers.

Speaker Change #123: Great. Thank you.

Speaker Change #123: Welcome.

Speaker Change #143: Our next question comes from charging network.

Charles William Lederer: Our next question comes from Charlie Lederer with Citi. Hey, thanks. Good morning.

Francois Morin: Would you like to proceed with any further remarks?

Speaker Change #123: <unk>.

Speaker Change #104: Hey, Thanks, good morning.

Marc Grandisson: I've definitely heard Marc's comments on the reasons for the flattening out of property cat growth. Would you say the weather forecast had an impact on that? And could we, could we see you reverse course and reaccelerate if pricing is still good in 1-1 and you have a better view of how much of the mid-core business you're keeping? I'm going to say this is one of the easiest answers.

Charles William Lederer: Thank you very much, everyone.

Marc Grandisson: We'll talk to you again in October.

Marc Grandisson: Ladies and gentlemen, thank you for participating in today's conference.

Speaker Change #153: Definitely heard remarks comments on the reasons for the flattening out.

Marc Grandisson: This concludes the program.

Marc Grandisson: Good day, ladies and gentlemen, and welcome to the Q2 2024 Arch Capital Earnings Conference.

Marc Grandisson: You may all disconnect.

Speaker Change #103: Property cat growth.

Marc Grandisson: Next time, all participants are in a listen-only mode.

Marc Grandisson: Later, we will conduct a question and answer session and instructions will follow at that time.

Speaker Change #152: Would you say the weather forecast had an impact on that and could you could we see you reverse course and reaccelerate.

Marc Grandisson: As a reminder, this conference call is being recorded.

Marc Grandisson: 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 Law. These statements are based upon management current assessments and assumptions and are subject to a number of risks and uncertainties. Consequently, actual results may differ materially from those expressed or implied.

Marc Grandisson: Good morning and welcome to Arch's second quarter earnings call. We are pleased to report another highly profitable quarter due to significant contributions from all three underwriting segments and strong investment results. Our ability to successfully deploy capital into this extended hard market has fueled excellent risk-adjusted returns. Coupling our cycle management strategy with an emphasis on returns and consistent discipline execution throughout the enterprise resulted in a record $762 million of underwriting income and an annualized operating ROE of 20.5%.

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

Marc Grandisson: Additionally, certain statements contained in the call that are not based on historical facts are forward-looking statements within the meaning of the Private Securities Diligation Reform Act of 1994.

Marc Grandisson: The company intends to forward-looking statements in the call to be subject to the safe harbor created thereby.

Marc Grandisson: Management also will make reference to certain non-GAAP measures of financial performance. The reconciliations to GAAP for each non-GAAP financial measure can be found in the company's current report on Form 8K furnished to the SEC yesterday, which contains the company's earnings press release, and is available on the company's website at www.archgroup.com and on the SEC's website at www.sec.gov.

Marc Grandisson: I would now like to introduce your host for today's conference.

Speaker Change #171: If pricing is still good and one one and you have a better view of how much of the mid core business Youre keeping.

Marc Grandisson: Mr. Marc Grandisson, and Mr. Francois Morin.

Marc Grandisson: Sirs, you may now be- Thank you, Jericho.

Speaker Change #152: John I'm going to say this is one of the easiest answer, yes, and yes to both your questions.

Marc Grandisson: Yes and yes to your question. Yes and yes. Yes, we believe, we took a conviction that there was a higher likelihood of frequency of events, and you're right, and it could change. This would be a short-term perspective, and this will help inform us. You know, whatever new vision or new projection and new belief we have will help us make a decision as we get into 1-1-25 after the wind season is over. Mind you, the business is still very good even with our increased frequency. So it's still a very, very good book of business. We just wanted to have the right balance. Got it, thank you.

Speaker Change #103: Yes, and yes, yes.

Speaker Change #103: Yes, yes, we felt we felt yet we believe we took a conviction that there was a heightened higher.

Speaker Change #133: Likelihood of frequency of events and you are right and it could change this will be a short term perspective, and this will help inform.

Speaker Change #133: Whatever new vision, a new projection and you believe we have will help us.

Speaker Change #151: Make a decision as we get into one 125 of total wind season is over mind you. The business is still very good even with our increased frequency. So we still are very very good book of business. We just wanted to have the right balance.

Speaker Change #182: Got it thank you.

Charles William Lederer: And then I guess I'm wondering if you guys have your arms wrapped around the CrowdStrike cyber event yet, and if you can help us frame what the losses might be, and if you see any impact on the cyber pricing environment coming out of it. Well, yeah, on the cloud side, I mean, we're still gathering information in our units, trying to figure out what's out there. And it's not necessarily cyber, but there might be some other lines of business. So we're just going through it as we speak. It's still kind of hard to disentangle. I mean, some people are claiming some losses. They're not insured.

Speaker Change #150: And then I guess I'm wondering if you guys have your arms wrapped around the crowd strike cyber event, yet and if you can help us frame, what the losses might be and if you see any impact on cyber.

Speaker Change #140: This environment coming out of it.

Speaker Change #172: Yeah on the cloud side I mean, we're still gathering information on our units trying to figure out what's out there and it's held not only.

Speaker Change #177: Necessarily the cyber, but there might be some other lines of business that we're just going through this as we speak is still kind of hard to disentangle I mean, some people are claiming some losses. They don't then uninsured. So there's a lot of things going on.

Speaker Change #155: I think we tend to agree broadly with the market view that $65 $600 million to $1. Two is sort of it's still a wide range at this point in time, its going to take a while to to know how it develops.

Francois Morin: So there's a lot of things going on. I think we tend to agree broadly with the market view that, you know, six, five, six hundred million to a billion is still a wide range at this point in time. It's going to take a while to know how it develops.

Charles William Lederer: So we take this, and not only us, by the way, I think the market is broadly, very, very widely behaving the same way.

Francois Morin: I think I would want to say, it's not a big number in terms of loss ratio points for all the premium worldwide for cyber, but it certainly is a reminder that there's risk in the portfolio and it's early now. We haven't seen that many renewals, but I would expect rates could still go down a little bit, but probably not as fast as they were going down. And people are probably going to take a bit of a pause, if you will, to evaluate what it looks like.

Speaker Change #184: Think I would want to I mean, it's not a big number in terms of loss ratio points for all the premium worldwide for cyber, but it's certainly is a reminder, that there is risk in the portfolio.

Speaker Change #155: It's early now we haven't seen that many renewals, but I would expect.

Speaker Change #140: Rates could still go down a little bit, but probably not as fast as they were going down and people are going to probably take a bit of a more of a pause if you will to evaluate what it looks like it could go either way right. If crops drag does not does not create a big loss might reinforce to believe that it's not as risky, although having that event, which was not malicious hat.

Francois Morin: People want to make sure that they get it right and nobody wants to be the first one running out and doing something that will probably jeopardize, or not jeopardize, but maybe take down the returns expectation.

Francois Morin: It could go either way. Right. If CrowdStrike does not, you know, does not create a big loss, it might might reinforce the belief that it's not as risky. Although having that event, which was not malicious, happened out of nowhere, and we were all unable to work for a day.

Speaker Change #134: And then out of nowhere and we were all like out of in unable to work for a day.

Andrew Scott Kligerman: I think it's a good reminder to people that there's still uncertainty and there's some lost potential there. Thank you. Our next question comes from Andrew Kligerman from TD Security. Thank you. Good morning.

Speaker Change #195: I think it's a good reminder of people that there is still uncertainty in some loss potential there.

Speaker Change #126: Thank you.

Speaker Change #126: Welcome.

Andrew Scott Kligerman: Our next question comes from Andrew <unk> from TD Securities.

Andrew Scott Kligerman: Our results are thanks to our teams that work diligently with deep capability and a long-track record of experience to earn these results.

Andrew: Hey, Thank you good morning so.

Andrew Scott Kligerman: You know, it's just it's just that kind of market, Josh, you know, that the equilibrium on the supply and demand for capacity is just coming back more to more normal level is still still on the side of the underwriters.

Andrew Scott Kligerman: And then continuing on the thought and fondlement Jimmy asked, I have a very crude capital model and I wouldn't recommend anyone else use it, but it does seem like at the pace that the premium is decelerating, you're going to be sitting on some sizable excess capital in a fairly short order.

Andrew Scott Kligerman: Can you, I guess, talk about a little bit about how the Allianz transaction uses capital?

Francois Morin: So, I was interested in the net written premium area in professional... It looked like you were pretty much flattish, supporter year over year at 345 million dollars. Could you share some of the puts and takes? Was public DNO off a lot? Did you see a pickup or a decrease in cyber? What were some of the big lines? How did they move?

Andrew Scott Kligerman: That might be incorrect, my assumption, that may be a source that's really causing a capital plug there.

Andrew Scott Kligerman: Broadly speaking, the P&C environment remains excellent and opportunities for attractive returns are plentiful even as competition normalizes.

Speaker Change #167: In the net written premium there.

Francois Morin: Or, additionally, am I correct that you have, at the current trajectory, a real capital buildup that's going to need to be utilized in short order?

Francois Morin: The duration and breadth of the current hard market of the last several years has been exceptional, and while rate increases are broadly above trend, disciplined underwriting requires that we keep our eye on the primary goal, shareholder return. An overly aggressive appetite for growth could come at the cost of eroding underwriting margins.

Francois Morin: Well, I mean, first on the Allianz transaction, we, you know, disclosed that we were, you know, the rough number of capital that we were going to deploy in that transaction is 1.8 billion, which is the premium we're paying to acquire the asset and also the capital that we need to deploy to support the LPT that's coming our way immediately, and then the ramp-up of the new business or the renewals that will end up on our balance sheet.

Speaker Change #134: In professional lines.

Speaker Change #146: It looked like you were pretty much flattish this quarter year over year at 345.

Andrew: Yeah.

Speaker Change #169: Could you share some of the puts and takes was public D&O awful lot did you see a pickup or a decrease in cyber or what were some of the big lines and how did they move.

Speaker Change #128: Yes, there is a lot of there's a lot of things in the.

Francois Morin: Yeah, there's a lot of things in the professional lines; it's kind of hard to disentangle from your perspective. But at a high level, you know, D&O, you know, we're reacting to what's out there, we're still maintaining our positioning, cyber, we're still making exposure rates go down so that would go the other way, healthcare, we like a lot. So we've grown that book of business; this is within the professional lines. And there's been some re-underwriting of some areas, if you will, at a high level that we're not performing as well.

Speaker Change #161: The professional lines is going to hard to disentangle from your perspective, but at a high level.

Francois Morin: So, you know, sizable number, and that is, you know, so far, I mean, as far as we know, I mean, things are on track to be kind of at that level.

Francois Morin: The art of underwriting in this part of the cycle rests on one's ability to know how hard to push and when to pull back.

Francois Morin: At Arch, we strive to be an active yet disciplined market participant, practicing restraint and patience. We believe that capital allocation is one of our most powerful differentiators. Our priority is to deploy capital into our underwriting units first, where we have the knowledge and experience to better price risk.

Francois Morin: However, we're always assessing other value-creating opportunities.

Speaker Change #156: <unk> D&O, we're reacting to what's out there we're still maintaining our positioning cyber we're still meeting exposure rates will go down so that would go the other way healthcare, we like a lot. So we've grown that book of business. This is within the professional lines and Theres been some re underwriting of some areas. If you will at a high level of debt.

Francois Morin: One example is our previously announced intent to acquire Allianz's U.S. Midcorp and Entertainment business. With regulatory approval on MidCorp Secured, I'm able to share a few thoughts about this strategic acquisition.

Francois Morin: The addition of a talented team and their client relationships gives us a greater presence in the U.S. primary middle market while expanding our cycle management toolkit.

Francois Morin: We will have more to say about the opportunities in the middle market as we integrate our team.

Francois Morin: I'll now take a few moments to highlight the performance of our underwriting units this past quarter. The second quarter results from our property and casualty segments demonstrate the benefits of our strong leadership throughout the ongoing hard market. The reinsurance and insurance segments combined to deliver $475 million of underwriting income and just over $5 billion of gross premium. Reinsurance generated $366 million of underwriting income despite higher frequency of catastrophic events from secondary perils, both in the U.S. and internationally. Higher premium rates and our diversified book of business enabled us to report excellent underwriting results for this segment, which has built a resilient, stable platform.

Francois Morin: Due to our view of heightened overall storm risk this year, we chose not to grow our property cap ratings at the mid-year renewal.

Francois Morin: We've grown property cap meaningfully over the last few years, but as we learned during the 2002 to 2005 hard market, when there are so many good things happening across the underwriting platform, white-chase returns and cap exposure are at the risk of being unlucky.

Francois Morin: Property in general is very well priced.

Francois Morin: We just want to have the right balance across our portfolio.

Francois Morin: As you have heard from others, casualty lines remain an area of interest that we'll continue to monitor as we observe rate increases and ongoing reserve strengthening taking place across the industry.

Speaker Change #142: We're not as performing as well so theres a lot of things going on all at once I think what you're seeing it was not the 300 and the flattish number is really the sum total of many decisions our independent from one another.

Francois Morin: So there's a lot of things going on all at once. I think what you're seeing, it wasn't the 300, you know. The flattish number is really the sum total of many decisions that were independent from one another. That's really what you can read into this.

Francois Morin: You know, to your point, yeah, I mean, returns have been excellent, and we're very, you know, we're proud of that, but we're not going to accumulate capital just that we can't deploy forever.

Francois Morin: So, the reality is if, you know, give us another couple of quarters maybe, but, you know, I mean, we'll definitely have, you know, a better view of where things stand by, you know, later this year.

Speaker Change #142: That's really what you can read into this.

Francois Morin: And along the same lines, in reinsurance, property X catastrophe, it was up quite a bit at $585 million versus $457 million last year. What did you like about the property area in reinsurance? We, well, in there, there's a lot of different lines, but, you know, there's a lot of core to share, some risk access. We also have a facultative book in there as well.

Francois Morin: And then, you know, Mark's been talking about the casualty kind of pick up potentially, so, you know, if that, you know, accelerates in the third and fourth and quarters and early next year, then we want to have the capital ready to deploy there.

Speaker Change #164: Got it.

Francois Morin: So, that's, you know, certainly how we think about a big picture, but it's an ongoing discussion we have here.

Speaker Change #128: Along the same lines in reinsurance property catastrophe it was.

Speaker Change #128: Quite a bit at $585 million versus 457 <unk>.

Speaker Change #150: Last year, what did you like in the property area in reinsurance.

Francois Morin: Thank you for the answers.

Francois Morin: Have a good day.

Speaker Change #162: While they're in there there's a lot of different lines, but theres a lot of quota share. Some risk access. We also have our facultative book in there as well and all of these units are.

Francois Morin: Thank you, too.

Francois Morin: Our next question comes from Michael Zaremski from BMO.

Francois Morin: Thanks.

Francois Morin: He put the theme on casualty and social inflation.

Francois Morin: We do value your thoughts on this.

Francois Morin: I guess, can you remind us, Tupar, I believe you've said in the past that ARCH's casualty reserve reviews are more geared towards summer months and related, you know, now that you've been studying, you know, your book and the industry a little bit more, I recall last year, you know, not just, and Marc, you had said, but others have said, too, that they thought that the casualty pressures would be more large accounts, kind of, than small accounts.

Francois Morin: But the data we see so far.., appears to be the small-account players, have really added to their reserves more so.

Marc Grandisson: And all these units are taking advantage of the hard market still to this day and picking their spots. And we think the return expectations are not as high. There is some risk exposure there, obviously, but we believe the returns are just very, very accretive and very, very favorable. Some of them are opportunistic by nature, right?

Francois Morin: You're exactly right.

Marc Grandisson: So I don't know if there's.

Marc Grandisson: I think that I said that the large account, they're the ground zero for pressure points on the losses because they're deeper pockets, right? They're larger limits, bigger enterprises, more complex cases, and more attractive to the plaintiff lawyers.

Marc Grandisson: Any thoughts there?

Marc Grandisson: But you're right.

Marc Grandisson: I'll start with the second part of the question.

Marc Grandisson: We're sort of a second round, sort of the rippling effect, starting in ground zero, which is always a larger account, and it sort of slowly but surely ripples through the market.

Marc Grandisson: We've seen, as well as everyone else, pressure building, commercial auto as well, even of all sizes, also going through a similar process.

Speaker Change #162: Taken advantage of the hard market is still to this day in picking our spots.

Marc Grandisson: And we're starting to see this impact on the smaller packages, as well.

Marc Grandisson: And it impacts, obviously, the umbrella portfolio.

Marc Grandisson: Smaller policies, as well, have lower limits.

Marc Grandisson: But you're quite right.

Speaker Change #162: And we think the return expectations, it's not as cat exposed.

Speaker Change #162: There was some cat exposure there obviously, but we believe the returns are just very very accretive and very very favorable.

Speaker Change #162: Some of them opportunistic by nature, right, we might be doing the specific deal and some specific payroll because we think the market as hard as we speak. So some of that was also factored in our ratings. So it's a it's a really broad line of business.

Marc Grandisson: We might be doing a specific deal in some specific peril because we think the market is hard as we speak, so some of that was also factored in our writing. So it's a really broad line of business. As you can see, we love that line.

Marc Grandisson: So it's probably easier, well, it seems to be currently in the space, you heard this too, I'm sure, a million dollar limit is what it used to be.

Speaker Change #150: As you can see we love deadline, we love the opportunities there.

Francois Morin: We love the opportunities there. It's a bit more complicated, I would say, to underwrite than a property cat, pure property cat book a business, but we've had the expertise and the knowledge and the willingness to do this for a long time. And we would like to be exposed and do more of that line of business in that current return. Yeah, and I'll add to that quickly. Just on the accounting side, it's important to remember that the property cap line of business is mostly on an XOL basis where we write all the premium on day one, versus this property other than PropertyCat line, where the component that is on a quarter share basis, the premium is written evenly throughout the exposure period.

Speaker Change #157: Yes, it's a bit more complicated I would say to underwrite in a property cap pure property cat book of business, but we've had the expertise and the knowledge and the willingness to do this for a long time and we are.

Speaker Change #157: We really like to we would not.

Speaker Change #157: To be exposed to and do more of that line of business in that current return expectations.

Speaker Change #154: Yeah, and I'll add to that quickly just on the accounting side, it's important to remember that.

Speaker Change #173: Property cap line of business is mostly on an ex <unk> basis, where we write all of the premium on day one.

Speaker Change #165: First is this property other than property Cat line, where the component that is on a quota share basis. The premium is written evenly throughout the exposure period, so they could very well be.

Francois Morin: So they could very well be, you know, accounts that we wrote at 1.1, for example, that the ramp-up of that premium is taking place over the four quarters of 24 as we write the premium. So a little bit of a different kind of accounting policy on those types of reinsurance agreements, and that certainly has an impact on how it shows up in the quarterly numbers. I got it.

Speaker Change #150: There is accounts that we wrote at one one for example of that.

Speaker Change #150: The ramp up of that premium is taking place over the four quarters of 'twenty four as we write the premium so a little bit of a different kind of.

Speaker Change #150: Accounting.

Speaker Change #150: Policy on those types of reinsurance agreements and that certainly has an impact on how it shows up in the quarterly numbers.

Speaker Change #127: Got it and if I could just sneak one quick one in on the insurance line the expense ratio ticked up by 70 basis points should we be thinking about the expense ratio being slightly more elevated as you.

Andrew Scott Kligerman: And if I could just sneak one quick one in on the insurance line, the expense ratio picked up by 70 basis points. Should we be thinking about the expense ratio being slightly more elevated as you take on the Allianz book and invest? Well, the investments that we made this quarter were not related to that, right? So they are other opportunities, other efforts that we have underway that are predictive analytics, some tech companies that we've invested in.

Speaker Change #141: Take on the <unk> book and invest there.

Speaker Change #141: While the investments that we made.

Speaker Change #211: Through this quarter were not related to the App right. So they are other opportunities are there.

Speaker Change #141: Efforts that we have underway that were.

Speaker Change #141: Predictive analytics, some some tech companies.

Speaker Change #141: Companies that we've invested in so we feel it's the right time for us to make those investments given how strong the returns are and.

Andrew Scott Kligerman: So we feel it's the right time for us to make those investments given how strong the returns are, and we'll see how those develop over time. They may slow down the road, but for now, we're very comfortable with the level of investments we're making. In terms of Alliant, we'll give you more information as we move forward, but there will certainly be some integration expenses that will come through in the insurance segment specifically going forward.

Speaker Change #141: We'll see how those develop over time, maybe maybe with a slowdown down the road, but for now we're very comfortable with the level of investments, we're making in terms of all of the answers. We will give you more information as we move forward, but there'll certainly be some integration expenses that will come through in the insurance segment, specifically going forward.

Speaker Change #141: Some of those expenses, though will be kind of one time and we'll probably report those as part of a transaction costs and other so that will clarify that for everybody. Once we close and after we have a time to sometimes to digest it but.

Andrew Scott Kligerman: Some of those expenses, though, will be kind of one-time expenses, and we'll probably report those as part of a transaction cost and others. So that will clarify that for everybody once we close and after we have some time to digest it. But yeah, the investments so far this quarter are for other initiatives.

Speaker Change #181: Yes, the investment so far this quarter or for other initiatives.

Speaker Change #199: Got it.

Speaker Change #141: Okay.

Speaker Change #141: Okay.

Speaker Change #127: Our next question comes from Brian Meredith from UBS.

Brian Robert Meredith: Thank you. Our next question comes from Brian Meredith from UBS. Yeah, thanks. I have a couple of them here for you guys.

Andrew Scott Kligerman: Our insurance segment contributed $109 million of underwriting income in the quarter. Net written premium growth was 7% this quarter compared to the second quarter a year ago.

Brian Robert Meredith: Yes. Thanks, a couple of them here for you guys. The first one I'm just curious do you still stand by the three year payback period for share buyback when it comes to book value dilution.

Francois Morin: The first one, I'm just curious, do you still stand by the three-year payback period for share buyback when it comes to book value dilution? That has been our practice. You know, it's not a hard and fast rule, but I think that's been the practice historically.

Speaker Change #137: That's that hasn't been our practice.

Speaker Change #203: It's not a hard and fast rule I think it has been.

Speaker Change #196: Zap practice, historically, but again thats part of the framework of how we evaluate various alternatives could we think about extending the payback at some point.

Brian Robert Meredith: But again, that's part of the framework of how we evaluate various alternatives. Could we think about extending the payback at some point? And the answer is, maybe. Gosh, that's helpful.

Speaker Change #132: And the answer is maybe.

Speaker Change #147: Got it that's helpful. Thank you and then I guess my next question.

Francois Morin: And then I guess my next question, you know, thinking about M&A here, it looks like you probably have the financial capacity to still do a reasonable amount of M&A, but do you have the kind of management, or call it management capacity at this point, as you're integrating the Allianz business or Fireman's Fund business over the next, call it six to 12 months, to do anything? You're gonna kind of take a pause.

Speaker Change #191: Thinking about M&A here.

Speaker Change #210: It looks like you probably have the financial capacity to still do a reasonable amount of M&A.

Speaker Change #166: Do you have the kind of call it management and strategic management capacity at this point as you're integrating the <unk> business, our Fireman's fund business.

Speaker Change #145: Over the next call. It six to 12 months to do anything you can kind of take a pause here for a while.

Speaker Change #175: Well I think Brian it's also dependent on the opportunity that we have ahead of us and we can certainly attract people to help us do any other.

Marc Grandisson: Well, I think, Brian, it's also dependent on the opportunity that we have ahead of us, and we can certainly attract people to help us do any other, you know, integration. We have a team that, between us, leading the effort on Alliant that also was instrumental in integrating United Guaranteed way back in 2017-18, so we already have some good experience there. So I think we have enough bandwidth for what we're doing now quickly, and if something were to happen, right, Francois, that was really creative and interesting, we would find a way to do that. I think that we're not there to work half the time.

Speaker Change #145: Integration.

Brian Robert Meredith: We have a team that between us.

Brian Robert Meredith: Leading the effort on <unk> that also were instrumental to integrating guaranty way back in 2017 and 18. So we have already some good experience. There. So I think we have we have enough bandwidth for what we're doing now quickly and if something were to happen right across what I was really accretive in an interesting we would find a way to do this I think that we are not there to.

Brian Robert Meredith: To walk at the time, if something is very favorable to us we'll expand the effort and the work that needs to be to get this done and these opportunities to orders I mean, I'd say geography specific and segment specific so.

Francois Morin: If something is very, you know, favorable to us, we'll expand the effort and the work that needs to be done. And these opportunities, too, are, I mean, I'd say, geography-specific and segment-specific. So, you know, the Alliance acquisition is purely insurance North America, so that absolutely has taken, you know, center stage, but, you know, if we were to do some other M&A in other areas, it would make sense. And I wonder if there's this quick one. I know you're going to give us some numbers on the Allianz thing, but is there any color you can give us with respect to how does it add to your

Brian Robert Meredith: The Allianz acquisition is purely insurance North America. So that absolutely has taken center stage, but if we were to do some other M&A in other parts of the world in the reinsurance segment that could be a different theme most likely that would contribute.

Speaker Change #200: Makes sense and I Wonder if there is just a quick one I know you're going to give us some numbers on the Allianz thing but.

Brian Robert Meredith: As we think about it going forward, just looking at the map you provided us, it looked like, you know, there's a decent amount of business and kind of cat exposed non-materially because it's not as much in our peak zone as, you know, the book is more diversified, more Midwest, more California, less, you know, Florida, which is our peak zone. So in terms of the 1 in 250 marginal impact, Great, thank you; I appreciate it. Our next question comes from Meyer Shields from KBW. Great, thanks so much.

Speaker Change #160: Is there any color you can give us with respect to how does it add to European Mills.

Speaker Change #187: How should we think about it going forward just looking at the map you provided us it looked like.

Speaker Change #188: Decent amount of business and kind of cat exposed areas.

Speaker Change #189: Not materially because it's not as much in our peak zone at the book is more diversified more Midwest more California.

Speaker Change #185: Les Florida, which is our peak zone. So in terms of the one or $2 50 marginal impact.

Speaker Change #138: Great. Thank you I appreciate it.

Speaker Change #204: Got it.

Speaker Change #138: Our next question comes from Meyer Shields from <unk>.

Speaker Change #197: Great. Thanks, so much two quick questions first Marc and Francois both mentioned the elevated.

Meyer Shields: Two quick questions. First, Marc, I think you and Francois both mentioned the elevation of the, for not growing. Is there any reshaping of the portfolio to move further away? No, I think that if you look at it from a high level, I think our exposure is more stable; it may have grown a little bit, even on a gross basis, but what happened is we just shaped it through retrocession purchases. That's what we did. And that's how we got back to a more reasonable and more acceptable level of PML. Okay, that's helpful.

Meyer Shields: Frequency predictions for not growing premium was there any reshaping of the portfolio to move further away from frequency events.

Speaker Change #208: No I think that I think that if you look at it at a high level I think our exposure was.

Speaker Change #132: As more stable.

Speaker Change #201: They are growing a little bit on a gross basis, but what happened is we just do know shaped it through retrocession purchases.

Speaker Change #186: What we did.

Speaker Change #186: And Thats, how we got back to a more more.

Speaker Change #186: More reasonable and more.

Speaker Change #186: Acceptable level of PMO.

Speaker Change #180: Okay. That's helpful.

Speaker Change #132: And second.

Speaker Change #132: For the most.

Speaker Change #132: <unk> are up to date events as we've seen more capital market activity comes back come back and we've seen that being blamed for pressure on public D&O pricing are you seeing any inflection there.

Speaker Change #132: That coincide with recovering activity.

Speaker Change #205: Not really I mean, the third party capital that we hear again, even those third party.

Speaker Change #170: There is a healthy level of no.

Speaker Change #170: Rationality.

Speaker Change #132: Behavior, So we havent seen like I said before.

Speaker Change #132: Crazy players or a mavericks in the marketplace, it's a pretty well behaved marketplace.

Speaker Change #158: Okay. Thank you very much.

Speaker Change #158: Okay.

Speaker Change #192: I'm not showing any further questions would you like to proceed with any further remarks.

Speaker Change #192: Thank you very much everyone and we'll talk to you again in October.

Speaker Change #132: Okay.

Speaker Change #176: Ladies and gentlemen, thank you for participating in today's conference. This concludes broker you may all disconnect.

Speaker Change #176: Okay.

Speaker Change #176: [music].

Marc Grandisson: And second, just sort of, for the most part, facing that being blamed for pressure. Public Company Detail Pricing. Are you seeing any inflection that coincides with recovery? Not really.

Meyer Shields: So there's probably more of a pressure to pay the full limit as opposed to before.

Meyer Shields: We meaningfully grew premiums in our programs business and in E&S casualty where rates are improving.

Speaker Change #190: At this time, all participants are in a listen-only mode.

Speaker Change #132: Later, we will conduct a question and answer session and instructions will follow at that time. As a reminder, this conference call is being recorded.

Meyer Shields: I mean, the third-party capital that we hear, again, even though it's third-party, there's a healthy level of rationality in the behavior. So we haven't seen, like I said before, crazy players or mavericks in the marketplace. It's a pretty well-behaved marketplace. Okay. Thank you very much.

Marc Grandisson: Maybe the industry was more willing to fight or push back.

Operator: Very much. I'm not showing any further questions. Would you like to proceed with any further remarks? Thank you very much, everyone.

Meyer Shields: In a more competitive market, it's important to be able to quickly reallocate capital to the best relative return opportunities, as we have done in the past and remain well-equipped to do in future quarters.

Speaker Change #217: 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.

Speaker Change #132: Consequently, actual results may differ materially from those expressed or implied.

Speaker Change #132: Additionally, certain statements contained in the call that are not based on historical facts are forward-looking statements within the meaning of the Private Securities Diligation Reform Act of 1995.

Speaker Change #132: The company intends to forward looking statements in the call to be subject to the safe harbor created thereby.

Speaker Change #132: Management also will make reference to certain non-GAAP measures of financial performance.

Speaker Change #132: The reconciliation gap for each non-GAAP financial measure can be found in the company's current report on Form 8K furnished to the SEC yesterday, which contains the company's earnings press release.

Speaker Change #132: and is available on the company's website at www.archgroup.com and on the SEC's website at www.sec.gov.

Operator: We'll talk to you again in October. Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may all disconnect. ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? [inaudible] ?? ?? ?? ?? ?? ?? ?? ?? Good day, ladies and gentlemen, and welcome to the Q2 2024 Arch Capital Earnings Conference. Next time, all participants are in a listen-only mode.

Operator: But again, the million dollar, because of all the inflation, has changed.

Operator: Our international insurance unit continues to benefit from its position as a lead underwriter at Lloyd's, where a disciplined market is providing attractive growth opportunities in specialty lines, moving out of PNC and into our mortgage business.

Speaker Change #179: I would now like to introduce your hosts for today's conference, Mr. Marc Grandisson and Mr. Francois Morin. Sirs, you may now begin.

Operator: Later, we will conduct a question and answer session, and instructions will follow at that time. 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 Law. These statements are based upon management's current assessments and assumptions and are subject to a number of risks and uncertainties. Consequently, actual results may differ materially from those expressed or implied.

Operator: In terms of reserve review, I'll say it, but we do a quarterly review of our reserving, of every line of business that we do. Our actuaries review it every single time, and we have a change of loss ratio that we get reported on, on every line of business and sub-line, quarterly for all the units that we look at.

Operator: At the risk of repeating myself, the consistently excellent underwriting income delivered by our mortgage segment, quarter over quarter, provides significant value for our shareholders by producing a solid base of sustained earnings. MI underwriting has been solid across the industry since 2009 and the current environment is one that rewards the MI companies underwriting the risk. This quarter, the mortgage segment generated $287 million of underwriting income while increasing new insurance written at the U.S. by 12% from the same quarter a year ago.

Speaker Change #244: Thank You Jericho. Good morning and welcome to ARCH's second quarter earnings call.

Operator: For more information on the risks and other factors that may affect future performance, investors should review periodic reports that are filed by the company with the SEC from time to time. Additionally, certain statements contained in the call that are not based on historical facts are forward-looking statements within the meaning of the Private Securities Diligation Reform Act of 1995. The company intends for forward-looking statements in the call to be subject to the safe harbor created thereby.

Operator: The one thing that we have, as an added benefit at Arch, is we have also, we have the insurance group and the reinsurance company, so we're able to compare at the high level of the holding company, Francois and I, as to what the trends are developing and what they're looking like.

Operator: The delinquency rate at USMI remains low compared to historical norms and the credit quality of our portfolio remains high with policyholders in strong equity positions.

Speaker Change #212: We are pleased to report another highly profitable quarter due to significant contributions from all three underwriting segments and strong investment results.

Operator: Management also will make reference to certain non-GAAP measures of financial performance. The reconciliations to GAAP for each non-GAAP financial measure can be found in the company's current report on Form 8K, which contains the company's earnings press release, and is available on the company's website at www.archgroup.com and on the SEC's website at www.sec.gov. I would now like to introduce your host for today's conference, Mr. Marc Grandisson and Mr. Francois Morin.

Marc Grandisson: Sirs, you may now be- Thank you, Jericho. Good morning, and welcome to Arch's second quarter earnings call. We are pleased to report another highly profitable quarter due to significant contributions from all three underwriting segments and strong investment results. Our ability to successfully deploy capital into this extended hard market has fueled excellent risk-adjusted returns. Coupling our cycle management strategy with an emphasis on returns and consistent discipline execution throughout the enterprise resulted in a record $762 million of underwriting income and an annualized operating ROE of 20.5%. Our results are thanks to our teams that work diligently with deep capability and a long-track record of experience to earn these results.

Speaker Change #179: Our ability to successfully deploy capital into this extended hard market has fueled excellent risk-adjusted returns.

Speaker Change #132: Coupling our cycle management strategy with an emphasis on returns and consistent

Speaker Change #132: Discipline execution throughout the enterprise resulted in a record $762 million of underwriting income and an annualized operating ROE of 20.5%.

Speaker Change #132: Our results are thanks to our teams that work diligently with deep capability and a long track record of experience to earn these results.

Marc Grandisson: Broadly speaking, the P&C environment remains excellent, and opportunities for attractive returns are plentiful even as competition normalizes. The duration and breadth of the current hard market for the last several years have been exceptional, and while rate increases are broadly above trend, disciplined underwriting requires that we keep our eye on the primary goal, shareholder return. An overly aggressive appetite for growth could come at the cost of eroding underwriting margins. The art of underwriting in this part of the cycle rests on one's ability to know how hard to push and when to pull back.

Speaker Change #132: Broadly speaking, the PNC environment remains excellent and opportunities for attractive returns are plentiful even as competition normalizes.

Speaker Change #132: The duration and breadth of the current hard market of the last several years has been exceptional and, while rate increases are broadly above trend, disciplined underwriting requires that we keep our eye on the primary goal, shareholder returns.

Speaker Change #132: An overly aggressive appetite for growth could come at the cost of eroding underwriting margins.

Speaker Change #132: The art of underwriting in this part of the cycle rests on one's ability to know how hard to push and when to pull back.

Marc Grandisson: At Arch, we strive to be an active yet disciplined market participant, practicing restraint and patience. We believe that capital allocation is one of our most powerful differentiators. Our priority is to deploy capital into our underwriting units first, where we have the knowledge and experience to better price risk. However, we're always assessing other value-creating opportunities. One example is our previously announced intent to acquire Allianz's U.S. Midcorp and Entertainment business

Speaker Change #132: At Arch, we strive to be an active yet disciplined market participant, practicing restraint and patience.

Speaker Change #132: We believe that capital allocation is one of our most powerful differentiators.

Speaker Change #132: Our priority is to deploy capital into our underwriting units first, where we have the knowledge and experience to better price risk.

Speaker Change #132: However, we're always assessing other value-creating opportunities. One example is our previously announced intent to acquire Allianz's U.S. Midcorp and Entertainment businesses.

Marc Grandisson: With regulatory approval for MidCorp Secured, I'm able to share a few thoughts about this strategic acquisition. The addition of a talented team and their client relationships gives us a greater presence in the U.S. primary middle market while expanding our cycle management toolkit. We will have more to say about the opportunities in the middle market as we integrate our team. But I'll now take a few moments to highlight the performance of our underwriting units this past quarter.

Speaker Change #132: With regulatory approval on Midcorp secured, I'm able to share a few thoughts about this strategic acquisition.

Speaker Change #132: The addition of a talented team and their client relationships gives us a greater presence in the U.S. primary middle market while expanding our cycle management toolkit.

Speaker Change #132: We will have more to say about the opportunities in the middle market as we integrate our teams.

Speaker Change #132: I'll now take a few moments to highlight the performance of our underwriting units this past quarter.

Marc Grandisson: The second quarter results from our property and casualty segments demonstrate the benefits of our strong leadership throughout the ongoing hard market. The reinsurance and insurance segments combined to deliver $475 million of underwriting income and just over $5 billion of gross premium.

Speaker Change #132: The second quarter results from our property and casualty segments demonstrate the benefits of our strong leadership throughout the ongoing hard market. The reinsurance and insurance segments combined to deliver $475 million of underwriting income and just over $5 billion of gross premium.

Marc Grandisson: Reinsurance generated $366 million of underwriting income despite the higher frequency of catastrophic events from secondary perils, both in the U.S. and internationally. Higher premium rates and our diversified book of business enabled us to report excellent underwriting results for this segment, which has built a resilient, stable platform. Due to our view of heightened overall storm risk this year, we chose not to grow our property cap ratings at the mid-year renewal. We've grown property cap meaningfully over the last few years, but as we learned during the 2002 to 2005 hard market, when there are so many good things happening across the underwriting platform, white-chase returns and cap exposure at the risk of being unlucky. Property, in general, is very well priced.

Speaker Change #132: Reinsurance generated 366 million of underwriting income despite higher frequency of catastrophic events from secondary perils both in the US and internationally.

Speaker Change #132: Higher premium rates and our diversified book of business enabled us to report excellent underwriting results for the segment which has built a resilient stable platform.

Speaker Change #132: Due to our view of heightened overall storm risk this year, we chose not to grow our property cap ratings at the mid-year renewal.

Speaker Change #132: We've grown PropertyCat meaningfully over the last few years, but as we learned during the 2002 to 2005 hard market, when there are so many good things happening across the underwriting platform, why chase returns in cat exposure at the risk of being unlucky?

Marc Grandisson: We just want to have the right balance across our portfolio. As you have heard from others, casualty lines remain an area of interest that we'll continue to monitor as we observe rate increases and ongoing reserve strengthening taking place across the industry. Our insurance segment contributed $109 million of underwriting income in the quarter.

Speaker Change #132: Property in general is very well priced. We just want to have the right balance across our portfolio.

Speaker Change #207: As you have heard from others, casualty lines remain an area of interest that we'll continue to monitor as we observe rate increases and ongoing reserve strengthening taking place across the industry.

Speaker Change #132: Our insurance segment contributed 109 million of underwriting income in the quarter. Net written premium growth was 7% this quarter compared to the second quarter a year ago.

Marc Grandisson: Net written premium growth was 7% this quarter compared to the second quarter a year ago. We meaningfully grew premiums in our programs business and in E&S casualty, where rates are improving. In a more competitive market, it's important to be able to quickly reallocate capital to the best relative return opportunities, as we have done in the past and remain well-equipped to do in future quarters. Our international insurance unit continues to benefit from its position as a lead underwriter at Lloyd's, where a disciplined market is providing attractive growth opportunities in specialty lines, moving out of PNC and into our mortgage business.

Speaker Change #132: We meaningfully grew premiums in our programs business and in E&S casualty where rates are improving.

Speaker Change #132: In a more competitive market, it's important to be able to quickly reallocate capital to the best relative return opportunities, as we have done in the past and remain well equipped to do in future quarters.

Speaker Change #132: Our international insurance unit continues to benefit from its position as a lead underwriter at Lloyd's, where a disciplined market is providing attractive growth opportunities in specialty lines.

Marc Grandisson: At the risk of repeating myself, the consistently excellent underwriting income delivered by our mortgage segment, quarter over quarter, provides significant value for our shareholders by producing a solid base of sustained earnings. MI underwriting has been solid across the industry since 2009, and the current environment is one that rewards the MI companies underwriting the risk. This quarter, the mortgage segment generated $287 million of underwriting income while increasing new insurance written in the U.S. by 12% from the same quarter a year ago.

Speaker Change #132: Moving out of PNC and into our mortgage business.

Speaker Change #132: At the risk of repeating myself, the consistently excellent underwriting income delivered by our mortgage segment, quarter over quarter, provides significant value for our shareholders by producing a solid base of sustained earnings.

Speaker Change #132: MI underwriting has been solid across the industry since 2009 and the current environment is one that rewards the MI companies underwriting the risk.

Speaker Change #132: This quarter, the mortgage segment generated $287 million of underwriting income while increasing new insurance written at the U.S. by 12% from the same quarter a year ago.

Marc Grandisson: The delinquency rate at USMI remains low compared to historical norms, and the credit quality of our portfolio remains high with policyholders in strong equity positions. We're pleased to have successfully closed our acquisition of RMIC in the second quarter. Although no new business comes with this block, it's emblematic of our ongoing pursuit of finding profitable opportunities in which we can deploy capital. Primarily due to strong cash flows generated by our underwriting operations, our investment portfolio increased to $37.8 billion, generating $364 million of net investment income in a quarter as higher yields continue to move through our portfolio.

Speaker Change #132: The delinquency rate at USMI remains low compared to historical norms, and the credit quality of our portfolio remains high, with policyholders in strong equity positions.

Marc Grandisson: We're pleased to have successfully closed our acquisition of RMIC in the second quarter.

Speaker Change #132: We're pleased to have successfully closed our acquisition of RMIC in the second quarter. Although no new business comes with this run of block, it's emblematic of our ongoing pursuit of finding profitable opportunities in which we can deploy capital.

Marc Grandisson: Although no new business comes with this run of block, it's emblematic of our ongoing pursuit of finding profitable opportunities in which we can deploy capital.

Marc Grandisson: Primarily due to strong cash flows generated by our underwriting operations, our investments portfolio increased to $37.8 billion, generating $364 million of net investment income in a quarter as higher yields continue to move through our portfolio.

Speaker Change #132: Primarily due to strong cash flows generated by our underwriting operations, our investments portfolio increased to $37.8 billion, generating $364 million of net investment income in the quarter as higher yields continue to move through our portfolio.

Marc Grandisson: The eyes of the world are focused on Paris this week as the Olympics get into full swing. One of the toughest events is the decathlon, an all-around athletics test featuring 10 events over a range of disciplines spread over two days. The decathlon is an incredible physical and mental test that requires maximum performance in every event. At the end of the two days, points for all ten events are totaled up, and the individual with the most points is the winner.

Marc Grandisson: The eyes of the world are focused on Paris this week as the Olympics get into full swing.

Speaker Change #132: [inaudible]

Speaker Change #194: The eyes of the world are focused on Paris this week as the Olympics get into full swing.

Marc Grandisson: One of the toughest events is the decathlon, an all-around athletics test featuring 10 events over a range of disciplines, spread over two days. The decathlon is an incredible physical and mental test that requires maximum performance in every event. At the end of the two days, points for all ten events are totaled up and the individual with the most points is the winner.

Speaker Change #243: One of the toughest events is the Decathlon, an all-around athletics test featuring 10 events over a range of disciplines, spread over two days.

Speaker Change #222: The Decathlon is an incredible physical and mental test that requires maximum performance in every event. At the end of the two days, points for all ten events are totaled up and the individual with the most points is the winner.

Marc Grandisson: Similar to a decathlon in the dynamic insurance market, the ability to perform at a consistently high level across the enterprise is crucial for long-term success. An arch is built to excel across a multi-discipline market. Our capital allocation helps ensure that we can focus on the lines that give us the best chance to score points. The first event in the decathlon is a 100-meter sprint, and our ability to get out of the gates quickly at the beginning of this hard market positions us to score early.

Marc Grandisson: Similar to a decathlon in the dynamic insurance market, the ability to perform at a consistently high level across the enterprise is crucial for long-term success.

Speaker Change #262: Similar to a decathlon in the dynamic insurance market, the ability to perform at a consistently high level across the enterprise is crucial for long-term success. And Arch is built to excel across a multi-discipline market.

Marc Grandisson: An arch is built to excel across a multi-discipline market.

Marc Grandisson: Our capital allocation helps ensure that we can focus on the lines that give us the best chance to score points.

Speaker Change #194: Our capital allocation helps ensure that we can focus on the lines that give us the best chance to score points.

Marc Grandisson: The first event in the decathlon is a 100-meter sprint, and our ability to get out of the gates quickly at the beginning of this hard market positioned us to score early. Since then, our P&C and mortgage teams have been racking up lots of points. Add in our investments team clearing the bar in the pole vault and we have an all-around performance that puts us in serious contention for the gold medal, as you would expect from a world-class leadership team.

Speaker Change #194: The first event in the decathlon is a 100-meter sprint and our ability to get out of the gates quickly at the beginning of this hard market positioned us to score early. Since then, our P&C and mortgage teams have been racking up lots of points.

Marc Grandisson: Since then, our P&C and mortgage teams have been racking up lots of points. Add in our investments team clearing the bar in the pole vault, and we have an all-around performance that puts us in serious contention for the gold medal, as you would expect from a world-class leadership team. Before I hand it over to Francois, I need to mention the passing of our friend Dino this past June. Dino was not only an industry legend, but he was also a mentor and tremendous leader who steered this company for over 15 years. Dinos led these earnings calls with his keen insights, principled beliefs, and trademark humor. He was truly one of a kind.

Speaker Change #194: Add in our investments team clearing the bar in the pole vault and we have an all-around performance that puts us in serious contention for the gold medal, as you would expect from a world-class leadership team.

Marc Grandisson: Before I hand it over to Francois, I need to mention the passing of our friend Dino this past June. Dinos was not only an industry legend, he was also a mentor and tremendous leader who steered this company for over 15 years. Dinos led these earnings calls with his keen insights, principled beliefs, and trademark humor. He was truly one of a kind. So tonight, please raise a glass, be it Ouzo or Red Sina or anything of your choosing, to Dinos.

Speaker Change #193: Before I hand it over to Francois, I need to mention the passing of our friend Dino this past June .

Speaker Change #229: Dinos was not only an industry legend, he was also a mentor and tremendous leader who steered this company for over 15 years.

Speaker Change #202: Dinos led these earnings calls with his keen insights, principled beliefs, and trademark humor.

Francois Morin: So tonight, please raise a glass, be it Ouzo or Red Sina or anything of your choosing, to Dinos. You are missed, my friend, Francois. And thank you, Marc, and good morning to all. As you know, we reported excellent second-quarter results last night with aftertax operating income of $2.57 per share, up 34% from the second quarter of 2023, for an annualized operating return on average common equity of 20.5%. Book value per share was $52.75 as of June 30, up 6.9% for the quarter and 12.4% on a year-to-date basis.

Francois Morin: He was truly one of a kind.

Francois Morin: So, tonight, please raise a glass, be it Ouzo, or Red Sina, or anything of your choosing, to Dinos.

Francois Morin: You are missed my friend, Francois.

Francois Morin: And thank you, Marc, and good morning to all.

Praswa: You are missed, my friend. Praswa.

Francois Morin: So it's a constant, I think what we may have said to you is we used to do an annual trend analysis. Now it's becoming a twice a year analysis, and it might accelerate as well.

Francois Morin: As you know by now, we reported excellent second quarter results last night with aftertax operating income of $2.57 per share, up 34% from the second quarter of 2023, for an annualized operating return on average common equity of 20.5%. Book value per share was $52.75 as of June 30, up 6.9% for the quarter and 12.4% on a year-to-date basis.

Speaker Change #225: Thank you Marc and good morning to all. As you know by now, we reported excellent second quarter results last night with after-tax operating income of $2.57 per share, up 34% from the second quarter of 2023.

Speaker Change #198: for an annualized operating return on average common equity of 20.5%.

Speaker Change #193: Book value per share was $52.75 as of June 30, up 6.9% for the quarter and 12.4% on a year-to-date basis.

Francois Morin: Once again, our three business segments delivered outstanding results, highlighted by $762 million in underwriting income and a 78.7% combined ratio, 76.7% on an underlying X-cap accident-year basis. We continue to benefit from strong market conditions across our businesses as the pricing environment remains disciplined, giving us confidence in our ability to generate solid returns over the coming quarter. Our underwriting income reflected $124 million of favorable prior development on a pre-tax basis, or 3.5 points on the combined ratio across our three segments.

Francois Morin: And I would assume that most people are using the same frequency, because as we talk about all the time, reserving feeds into price.

Francois Morin: Once again, our three business segments delivered outstanding results highlighted by $762 million in underwriting income and a 78.7% combined ratio, 76.7% on an underlying X-cap accident year basis. We continue to benefit from strong market conditions across our businesses as the pricing environment remains disciplined, giving us confidence in our ability to generate solid returns over the coming quarter. Our underwriting income reflected $124 million of favorable prior development on a pre-tax basis, or 3.5 points on the combined ratio across our three segments. We recognize favorable development across many lines of business, but primarily in short tail lines in our property and casualty segments and in mortgage due to strong cure activity.

Speaker Change #193: Once again, our three business segments delivered outstanding results, highlighted by $762 million in underwriting income and a 78.7% combined ratio, 76.7% on an underlying X-cap accident year basis.

Francois Morin: Yeah, the one quick thing just to add on reserving, we monitor actual versus expected experience quarterly.

Speaker Change #193: We continue to benefit from strong market conditions across our businesses, as the pricing environment remains disciplined, giving us confidence in our ability to generate solid returns over the coming quarters.

Francois Morin: That's a big part of the process.

Francois Morin: And not only do we do it against our own expectations, but we monitor against our external actuaries' expectations. So we got two views of how independent groups of actuaries think the business or the reserves should develop over time.

Francois Morin: And that certainly informs the actions we take every quarter.

Speaker Change #193: Our underwriting income reflected $124 million of favorable prior development on a pre-tax basis or 3.5 points on the combined ratio across our three segments.

Francois Morin: And to Marc's point, that's done in all the business units regularly.

Francois Morin: We recognize favorable development across many lines of business, but primarily in short tail lines in our property and casualty segments and in mortgage due to strong cure activity. Catastrophe loss activity was in line with our expectations as we were impacted by a series of events across the globe generating current accident year catastrophe losses of $196 million for the group in the quarter. Approximately 70% of our catastrophe losses this quarter are related to U.S. secondary perils, with the rest coming from a series of international events.

Francois Morin: Okay, that's helpful, understood.

Speaker Change #193: We recognize favorable development across many lines of business, but primarily in short tail lines in our property and casualty segments, and in mortgage due to strong cure activity.

Francois Morin: Just last quickly on, catastrophe levels.

Francois Morin: Catastrophe loss activity was in line with our expectations as we were impacted by a series of events across the globe generating current accident year catastrophe losses of $196 million for the group in the quarter. Approximately 70% of our catastrophe losses this quarter are related to U.S. secondary perils, with the rest coming from a series of international events.

Speaker Change #193: Catastrophe loss activity was in line with our expectations as we were impacted by a series of events across the globe generating current accident year catastrophe losses of $196 million for the group in the quarter.

Francois Morin: I think you guys are more open than others, put in quote normal.

Speaker Change #193: Approximately 70% of our catastrophe losses this quarter are related to U.S. secondary perils, with the rest coming from a series of international events.

Francois Morin: As of July 1, our peak zone natural cap PML for a single event, one 250-year return level on a net basis, declined slightly and now stands at 7.9% of tangible shareholders' equity, well below our internal limit. For the mortgage segment, since this is the first quarter end since we acquired RMIC Companies, Inc., and the subsidiaries that together comprise the runoff mortgage insurance business of Old Republic, there are certain items that I'd like to highlight. First, the acquired book of business represented $3.6 billion, or a 1.2% increase to our U.S. primary mortgage insurance in force at the end of the quarter.

Francois Morin: The reinsurance segment, that ratio, the load ratio this quarter, is that kind of normal-ish since you guys have grown into property over the years?

Francois Morin: As of July 1, our peak zone natural cap PML for a single event, one 250-year return level on a net basis, declined slightly and now stands at 7.9% of tangible shareholders' equity, well below our internal limit.

Speaker Change #193: As of July 1, our peak zone natural cat PML for a single event, one 250-year return level on a net basis declined slightly and now stands at 7.9% of tangible shareholders' equity, well below our internal limits.

Francois Morin: I've taken you.

Francois Morin: For the mortgage segment, since this is the first quarter end since we acquired RMIC Companies, Inc., and the subsidiaries that together comprise the runoff mortgage insurance business of Old Republic, there are certain items that I'd like to highlight. First, the acquired book of business represented $3.6 billion or a 1.2% increase to our U.S. primary mortgage insurance in force at the end of the quarter.

Speaker Change #193: For the mortgage segment, since this is the first quarter end since we acquired RMIC Companies Inc. and the subsidiaries that together comprise the runoff mortgage insurance business of Old Republic, there are certain items that I'd like to highlight.

Speaker Change #193: First, the acquired book of business represented $3.6 billion or a 1.2% increase to our U.S. primary mortgage insurance in force at the end of the quarter.

Francois Morin: Second, given the risk and forces from older vintages and has been in runoff since 2011, its makeup resulted in an incremental 19 basis points to our reported delinquency rate at USMI. Absent this transaction, our reported delinquency rate would have improved slightly since last quarter. On the investment front, we earned a combined $531 million pre-tax from net investment income and income from funds accounted for using the equity method, or $1.39

Francois Morin: Second, given the risk and forces from older vintages and has been in runoff since 2011, its makeup resulted in an incremental 19 basis points to our reported delinquency rate at USMI.

Speaker Change #193: Second, given the risk and force is from older vintages and has been in runoff since 2011, its makeup resulted in an incremental 19 basis points to our reported delinquency rate at USMI.

Francois Morin: Absent this transaction, our reported delinquency rate would have improved slightly since last quarter.

Speaker Change #193: Absent this transaction, our reported delinquency rate would have improved slightly since last quarter.

Francois Morin: Yeah, yeah, no, I think, no, again, repeating what we said before, and it's always hard to appreciate from your perspective, I'm sure, is that the reinsurance has more volatility into it.

Francois Morin: On the investment front, we earned a combined $531 million pre-tax from net investment income and income from funds accounted using the equity method, or $1.39 per share.

Speaker Change #193: On the investment front, we earned a combined $531 million pre-tax from net investment income and income from funds accounted using the equity method, or $1.39 per share.

Francois Morin: So we tend to look at this on a longer term, you know, average.

Francois Morin: Total return for the portfolio came in at 1.33% for the quarter. Cash flow from operations remains strong, and at $3.1 billion on a year-to-date basis, we have seen material growth in our investable asset base, which should result in an increasing level of investment income. Our effective tax rate on pre-tax operating income was an expense of 9.5% for the second quarter, with our current expected range of 9 to 11% for the full year 2024.

Francois Morin: Total return for the portfolio came in at 1.33% for the quarter.

Speaker Change #193: Total return for the portfolio came in at 1.33% for the quarter.

Francois Morin: Cash flow from operations remains strong, and at $3.1 billion on a year-to-date basis, we have seen material growth in our investable asset base, which should result in an increasing level of investment income.

Speaker Change #193: Cash flow from operations remains strong and at 3.1 billion on a year-to-date basis, we have seen material growth in our investable asset base which should result in an increasing level of investment income.

Francois Morin: Our effective tax rate on a pre-tax operating income was an expense of 9.5% for the second quarter with our current expected range of 9 to 11% for the full year 2024.

Speaker Change #193: Our effective tax rate on a pre-tax operating income was an expense of 9.5% for the second quarter with our current expected range of 9 to 11% for the full year 2024.

Francois Morin: As disclosed last week, we now expect an August 1 close of the transaction to acquire the U.S. Midcorp and Entertainment Insurance Businesses, Amalia. At this time, we do not have new information to share on the estimated financial impact of the transaction beyond what we provided in early April. Starting next quarter, we expect to update this information to help in developing a forward-looking view of the insurance segment's results, including this new business. All in, our balance sheet is in excellent health, with our common shareholder's equity approaching $20 billion in a debt plus preferred to capital ratio slightly above 15%.

Francois Morin: As disclosed last week, we now expect an August 1 close of the transaction to acquire the U.S. Midcorp and Entertainment Insurance Businesses, Amalia.

Speaker Change #193: As disclosed last week, we now expect an August 1 close of the transaction to acquire the U.S. Midcorp and Entertainment Insurance Businesses Amalians.

Francois Morin: At this time, we do not have new information to share on the estimated financial impact of the transaction beyond what we provided in early April. Starting next quarter, we expect to update this information to help in developing a forward-looking view of the insurance segment's results, including this new business.

Speaker Change #193: At this time, we do not have new information to share on the estimated financial impact of the transaction beyond what we provided in early April .

Speaker Change #193: Starting next quarter, we expect to update this information to help in developing a forward-looking view of the insurance segment's results, including this new business.

Francois Morin: All in, our balance sheet is in excellent health, with our common shareholder's equity approaching $20 billion in a debt plus preferred to capital ratio slightly above 15%. We are well positioned to take advantage of opportunities that may arise as we move forward.

Speaker Change #193: All in, our balance sheet is in excellent health with our common shareholders equity approaching 20 billion in a debt plus preferred to capital ratio slightly above 15 percent.

Francois Morin: We are well positioned to take advantage of opportunities that may arise as we move forward. Before I conclude my remarks, I also wanted to build on Marc's comments and share a word of sincere appreciation for the impact D-NOS has had on Arch, its employees, and many others across the industry. While he will certainly be remembered for his energetic personality and his ability to captivate an audience, we are truly grateful for his guidance, vision, and leadership during his career at Arch. Thank you, Dean. Marc?

Speaker Change #193: We are well positioned to take advantage of opportunities that may arise as we move forward.

Francois Morin: So sometimes we have a quarter, I'll remind everyone here, sometimes we have a quarter where, you know, the combined act, the current accident year, you know, X cap combined ratio and reinsurance goes up a little bit.

Francois Morin: Before I conclude my remarks, I also wanted to take a moment to build on Marc's comments and share a word of sincere appreciation for the impact D-NOS had on Arch, its employees, and many others across the industry. While he will certainly be remembered for his energetic personality and his ability to captivate an audience, we are truly grateful for his guidance, vision, and leadership during his career at Arch.

Francois Morin: And people say it's a trend, but it's very hard to see, to say this in reinsurance.

Speaker Change #213: Before I conclude my remarks, I also wanted to take a moment to build on Marc's comments and share a word of sincere appreciation for the impact Dynos had on Arch, its employees, and many others across the industry.

Francois Morin: Sometimes it's above, sometimes it's below.

Speaker Change #220: While he will certainly be remembered for his energetic personality and his ability to captivate an audience, we are truly grateful for his guidance, vision, and leadership during his career at Arch. Thank you, Dinos.

Francois Morin: Thank you, Dean.

Francois Morin: Marc?

Marc Grandisson: Also, we don't keep anyone from their lunch, which we know was very important to Dinos. On to your questions. Thank you. If you have a question at this time, please press the star 1 key on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press star 1 again.

Francois Morin: Also, we don't keep anyone from their lunch, which we know was very important to Dinos.

Speaker Change #193: Marc? Now, so we don't keep anyone from their lunch, which we know was very important to Dinos. On to your questions.

Marc Grandisson: On to your questions.

Marc Grandisson: Thank you.

Marc Grandisson: Thank you. If you have a question at this time, please press star 1 key on your touchtone telephone.

Marc Grandisson: If you have a question at this time, please press star 1 key on your touchtone telephone.

Speaker Change #214: If your question has been answered or you wish to remove yourself from the queue, please press star 1 again. And if you are using a speakerphone, please lift the handset.

Operator: And if you are using a speakerphone, please lift the handle. Our first question comes from Elyse Greenspan from Wells Fargo. Hi, thanks. You know, good morning.

Marc Grandisson: If your question has been answered or you wish to remove yourself from the queue, please press star 1 again.

Speaker Change #214: Our first question comes from Elyse Greenspan from Wells Fargo.

Elyse Beth Greenspan: You know, my first question, you know, I guess is, you know, on the insurance side, right, Marc? I think it's been since probably October, late October of last year with Q3 earnings, we're kind of leading the industry in terms of talking about this casualty market term, and it's been slow to evolve. Maybe it's in line with your expectations, but it just seems it's been slow to get price through those lines.

Elyse Beth Greenspan: Hi, thanks. You know, good morning. You know, my first question, you know, I guess is,

Speaker Change #221: You know, on the...

Marc Grandisson: On the insurance side, right, Marc, I think it's been since probably October , late October of last year with Q3 earnings.

Marc Grandisson: We're kind of leading the industry, you know, in terms of talking about this casualty market turn.

Speaker Change #206: And it's been slow to evolve. Maybe it's in line with your expectations, but it just seems it's been slow to get price through those lines. How do you see that transpiring, you know, from here relative to price increases in casualty lines?

Elyse Beth Greenspan: How do you see that transpiring, you know, from here relative to price increases and casualties? Well, like I said, well, good morning, Elyse. I think the point we made last quarter, the quarter before, is that the casualty turn and realizing, you know, and actually how much, how well or bad you're doing in the casualty line takes a while. You know, it has a tail to it.

Elyse Beth Greenspan: I think this quarter, frankly, we had no lower attritional losses across the, across the reinsurance portfolio.

Elyse Beth Greenspan: And if you are using a speakerphone, please lift the handle.

Elyse Beth Greenspan: And this is what, that's what explains that.

Elyse Beth Greenspan: Our first question comes from Elyse Greenspan from Wells Fargo.

Elyse Beth Greenspan: Hi, thanks.

Speaker Change #215: Well, like I said, well, good morning, Elyse. I think the point we made last quarter, the quarter before, is that the casualty turn and realizing, you know, and actually how much or how well or bad you're doing in casualty line takes a while.

Elyse Beth Greenspan: You know, good morning.

Marc Grandisson: It could take five or six years. So I think we're seeing the early signs of recent years being a bit more impacted by the inflation that we saw of late. And I think that it will take a while. People are trying to adjust.

Marc Grandisson: But if you look at a 12-month basis, it's not as, as drastic of a move.

Marc Grandisson: Yeah, and I'd add to that also, the catalog that we reported or kind of quoted earlier this year, I mean, we have a view on seasonality of when these losses may or may not hit.

Marc Grandisson: It has a tail to it, it could take five or six years. So I think we're seeing the, we're starting to see the early signs of more recent years being a bit more impacted by the inflation that we saw of late.

Marc Grandisson: I mean, it's imprecise.

Marc Grandisson: We're trying to, you know, look at the numbers in the triangles that are actually not as good as they used to be. So there's a lot of uncertainty in the space. And I think it will take us several quarters to come to a more stable or better view of the industry. So, you know, the last hard market and casualty started to turn, you know, in 2000. And it, you know, it took until about 2004 to really see the impact and sort of run out of, you know, having to price, you know, and rate increase after that point.

Marc Grandisson: And I think that it will take a while. People are trying to adjust. We're trying to look at the numbers in the triangles that are actually.

Marc Grandisson: not as good as they used to be. So there's a lot of uncertainty in the space. And I think it will take us several quarters to come to a more stable or a better view of the industry.

Marc Grandisson: You know, the last hard market and casualty started to turn, you know, in 2000.

Speaker Change #193: And it, you know, it took until about 2004 to really see the impact and sort of have running out of, you know, having to price, you know, and rate increase after that point. So, it takes several years. Unlike the property cap, right, Elyse, 2022 something happened, the bottom, in the fall, well, right away the people are adjusting because

Marc Grandisson: So it takes several years, unlike the property cap, right, at least 2022. Something happened in the fall, well, right away that people are adjusting because the cost of goods sold or losses are known. So this is not surprising to me.

Marc Grandisson: I'm expecting a bit more. We're expecting a bit more, and we're seeing it through our reinsurance emissions. I think people are slowly but surely recognizing some of these bad years, but it takes a while.

Speaker Change #267: the cost of goods sold or losses are known. So, this is not surprising to me. I'm expecting a bit more. We're expecting a bit more. We're seeing it through our reinsurance submissions. I think people are slowly but surely recognizing, you know, some of these bad years, but it takes a while.

Marc Grandisson: And then in terms of just, you know, on the insurance side, as you think, the, you know, the underlying, I guess, margin, right, kind of low 90s in the quarter, given, you know, your views about price and loss trends, does that feel like, you know, kind of the run rate level from? Well, as you know, Elyse, we report the numbers as we see them, based on the data we see There's also a mix going on, Elyse, so things are shifting, as you know, from time to time, so it's hard to compare the combined ratio.

Marc Grandisson: Does it happen second quarter?

Marc Grandisson: You know, my first question, you know, I guess is, you know, on the on the insurance side, right, Marc, I think it's been since probably October, late October of last year with Q3 earnings, we're kind of leading the industry, you know, in terms of talking about this casualty market term.

Marc Grandisson: Does it happen third quarter?

Marc Grandisson: And it's been slow to evolve.

Speaker Change #296: And then in terms of just, you know, on the insurance side, as you think, you know, the, you know, the underlying, I guess, margin, right, kind of low 90s in the quarter, given, you know, your views about price and loss trend is, does that feel like, you know, kind of the run rate level from here?

Marc Grandisson: It's a little bit of a, you know, there's historical data to support that.

Speaker Change #193: Well, as you know, Elyse, we report the numbers as we see it based on the data that we see. That sort of seems to be the emerging sort of rough average over the last couple of years.

Speaker Change #245: There's also a mix going on, Elyse, so things are shifting, as you know, from time to time, so it's hard to compare combined ratio. But right now, based on where we are, it's well within expectation of getting the returns, and our returns on insurance, we believe, are in excess of our long-term target.

Marc Grandisson: But right now, based on where we are, it's well within expectation of getting the returns, and our returns on insurance, we believe, are in excess of our long-term target. And then the mortgage releases have held steady at, Q2 was above the Q1 level. Can you just provide, Francois, maybe a little bit more color on what's going on there and how we kind of think about the run rate level of potential releases within the MIT? Great question.

Marc Grandisson: But, you know, big picture, again, what we experienced this quarter was not unexpected, was not, you know, was very much within what we thought was reasonable, given the growth and the size of the book, the fact that it's broader, it's not only US, a lot of international, and, you know, the different types of exposures that we that we've reached for primarily.

Marc Grandisson: Okay, that's helping.

Marc Grandisson: I'll take one last and click in mortgage just on a macro perspective. Home price appreciation continues at a healthy pace, or I guess resumes at a healthy pace.

Speaker Change #241: And then the mortgage releases have held, you know, steady at, you know, 2.2 was above the Q1 level. Can you just provide, you know, Francois, maybe a little bit more color on what's going on there and how we could kind of think about run rate level of potential releases within the MI book?

Marc Grandisson: Was that any factor in kind of the reserve releases?

Marc Grandisson: Maybe it's in line with your expectations, but it just seems it's been slow to get price through those lines.

Francois Morin: I mean, I and many others have been wrong about taking a forward-looking view of releases on the favorable development of mortgages in general. I think, stepping back, I'd say that early in 20, late 22, early 23, we were more cautious about the state of the economy and took a view about new notices and average reserves that we were attaching to these notices that, you know, was a bit more. That didn't turn out to be the case, right?

Marc Grandisson: Maybe it was unexpected.

Marc Grandisson: How do you see that transpiring, you know, from here relative to price increases and casualties?

Francois Morin: Well, like I said, well, good morning, Elyse.

Francois Morin: I think the point we made last quarter, the quarter before, is that the casualty turn and realizing, you know, and actually how much, how well or bad you're doing in casualty line takes a while. You know, it has a tail to it. It could take five or six years.

Francois Morin: Great question, I think we, I mean...

Speaker Change #209: I and many others have been wrong about taking a forward-looking view of releases on the

Francois Morin: So I think we're seeing the, we're starting to see the early signs of more recent years being a bit more, you know, impacted by the inflation that we saw of late. And I think that it will take a while. People are trying to adjust.

Speaker Change #193: or favorable development on mortgage in general. I think, right stepping back, I'd say that early in 20, late 22, early 23, we were more cautious about the state of the economy and took a view about new notices and average reserves that we are attaching to these notices that

Francois Morin: We're trying to, you know, look at the numbers in the triangles that are actually not as good as they used to be.

Francois Morin: So there's a lot of uncertainty in the space. And I think it will take us several quarters to come to a more stable or a better view of the industry.

Speaker Change #193: You know, it was a bit more that didn't turn out to be the case, right, that turned out to be better than what we had expected at that time.

Francois Morin: That turned out to be better than what we had expected at that time. The fact that, you know, we just had another quarter of, again, better cure activity, you know, I don't think, you know, a lot of these cures this quarter were related to the 2023 accident year. So, you know, we're more positive, I think, I'd say in general about the housing market. So the level of reserve that we're attaching to the new delinquencies is a bit lower than it was a year ago.

Speaker Change #193: The fact that, you know, we just had another quarter of, again, a more, you know, better cure activity.

Speaker Change #193: I don't think a lot of these cures this quarter were related to the 2023 accident year. So, we're more positive, I think, I'd say in general about the housing market. So, the level of reserving that we're...

Francois Morin: So maybe, directionally, we would not expect to have the same level of reserve releases going forward. But again, not knowing for sure how, you know, how quickly people are going to cure unemployment, et cetera. I mean, that will have an impact on the level of reserve releases. Thanks for the color.

Speaker Change #193: that we're attaching to the new delinquencies is a bit lower than it was a year ago. So maybe directionally, we would not expect to have the same level of reserve releases going forward. But again, not knowing for sure how quickly people are going to cure unemployment, et cetera.

Speaker Change #193: I mean, they'll have an impact on the level of reserved releases.

Francois Morin: Is there anything there from a very high level we can think about?

Speaker Change #271: Thanks for the color.

Jamie Bullard: Our next question comes from the line of Jamie Bullard from J.P. Morgan. Hi, so first, just a question on reserves. You had favorable development overall, but so did many of your peers, but a lot of the competitors had adverse development and casualty for both older and recent years. It doesn't seem like you had that, but maybe you could go into detail a little bit on the development in the second quarter?

Francois Morin: Yeah, it would, right? Because by virtue of having house price appreciation, you therefore increase your equity in your home.

Jamie Bullard: And the equity in the home is by far, the lack thereof, is a leading indicator as to whether you're going to have a foreclosure or a loss in your policy.

Speaker Change #193: Our next question comes from the line of Jamie Bullard from J.P. Morgan.

Jamie Bullard: And most of the policies, even if you had another 3% to 4%, whatever we're expecting next year, maybe 4.5% of HP appreciation, the equity will build.

Jamie Bullard: Hi. So first, just a question on reserves. You had favorable development overall, but

Jamie Bullard: And so did many of your peers, but a lot of the competitors had adverse development and casualty for both older and recent years. It doesn't seem like you had that, but maybe you could go into detail a little bit on the development.

Jamie Bullard: And then also, why do you feel that you're not as susceptible as some of the competitors to all the casualty issues, either in your book or maybe in Watford? Yeah, let me take a stab at that. I'm sure Marc will have something to add.

Speaker Change #237: in the second quarter? And then also, why do you feel that you're not as susceptible as some of the competitors to all the casualty issues, either in your book or maybe in the Watford blog that you inherited?

Francois Morin: In response to your question, Jimmy, I would say, you know, the book of business that we have is, I wouldn't call it a standard commercial general liability book of business that some other competitors have. We don't write a whole lot of commercial auto, for example. So that's another line of business that's been, you know, been a difficult line to get a good handle on the trends and how, you know, inflation has picked up in there.

Speaker Change #237: Yeah, let me take a stab at that. I'm sure Mark will have something to add. I'd say on the part two of your question,

Speaker Change #237: Jimmy, I'd say, you know, the book of business that we have is, I wouldn't call it a standard commercial, general liability book of business that

Marc Grandisson: some other competitors have.

Marc Grandisson: We don't write a whole lot of commercial auto, for example, so that's another line of business that's been, you know, been a difficult line to get a good handle on the trends and how, you know, how inflation has picked up in there. So, you know, the books that we have in general liability, A, I think are smaller, certainly we think underweight in those lines of business.

Francois Morin: So, you know, the books that we have in general liability, A, I think are smaller, certainly we think underweight in those lines of business. You know, roughly speaking, our insurance book is like, call it less than 15% of our overall premium, what we consider to be traditional casualty in the GL lines of business. So the mix matters.

Marc Grandisson: you know roughly speaking where you know our insurance book is like call it less than 15% what we consider it to be of our overall premium what we consider it to be traditional casualty in the GL lines of business.

Francois Morin: Certainly, the areas where we write business matter. I mean, we have an international book within that, so it's not only the US where I think we've seen more pain. And in terms of the favorable, you know, the movements in the quarter, I think, yes, in aggregate, we were favorable, mostly on the short tail lines. On the longer tail lines, which is primarily GL, I think we were pretty flat.

Marc Grandisson: So the mix matters. Certainly the areas where we write the business matters. I mean, we have an international book within that. So it's not only US where I think we've seen more pain. And in terms of the favorable, you know, the movements in the quarter, I think, yes, in aggregate, we were.

Marc Grandisson: favorable, mostly in the short tail lines. On the longer tail lines, which is primarily GL, I think we were pretty flat. I think, you know, it's something we look at carefully. Some, you know, some noise here and there, but collectively, in aggregate, we're very comfortable with the level of reserves and, you know, so far our numbers are holding up pretty well.

Francois Morin: I think, you know, it's something we look at carefully. Some, you know, some noise here and there, but collectively, in aggregate, we're very comfortable with the level of reserves. And, you know, so far, our numbers are holding up pretty well. And what I would add to what Francois just said, and as you know, Jimmy, we're a cycle manager. We also, you know, didn't write as much, even in the years that we believe are now, you know, still, you know, very soft years.

Francois Morin: And what happens, and it's very simple, the reason why equity matters is because, well, if you're running into trouble, a divorce, you're losing your job, you don't want to lose the equity in the home, you can just turn around and sell it to somebody else. And then recapture at least a portion, if not all of the equity that you've built into it.

Francois Morin: That's something that people will do.

Francois Morin: Our next question, comes from David Motemaden from Africa.

Francois Morin: And then there's a healthy market, supply and demand market is such that you'll be able to sell your home and capture that equity even after some expense.

Francois Morin: So that's what happens in HPA.

Francois Morin: You know, if it goes too wild like it did in 07-08, but it got into trouble for different reasons altogether.

Jimmy: And what I would add to what Francois just said, and as you know, Jimmy, we're a cycle manager. We also, you know, didn't write as much and even, you know...

Francois Morin: I think the credit space and the way the mortgages have been originated over the last several years, you know, HPA going up right now would be helpful.

Francois Morin: It's definitely helpful for us as my provider.

Francois Morin: Thank you.

Marc Grandisson: So that also prevents you from having to, you know, have, you know, outsize surprises. And then, on a different topic, your capital is building up pretty nicely, and I'm assuming it's enough to fund your growth, and you have done a couple of acquisitions, but how do you think about buybacks and or potentially instituting a dividend given, and the Capital Levels Study. Yeah, I mean that the philosophy has not changed, right?

Marc Grandisson: the year that we believe are now, you know, still, you know, very soft years. So that also prevents you from having to, you know, to having, you know, outside, you know, surprise.

Marc Grandisson: Good morning.

Marc Grandisson: I had a question on the underlying loss ratio in the insurance business. It was up a little bit year-over-year. That's despite having a higher mix of short-tail business within the earned premium mix.

Marc Grandisson: Could you maybe talk about... What was driving the loss ratio?

Marc Grandisson: year-on-year and you know with that conservatism you guys are baking in on the casualty lines or a little bit of the color there, Yeah, it's a pretty small increase and we don't want to ascribe any more precision to those numbers.

Marc Grandisson: They're a judgment call quite oftentimes.

Jimmy: And then on a different topic, your capital is building up pretty nicely, and I'm assuming it's enough to fund your growth, and you have done a couple of acquisitions, but how do you think about buybacks or potentially instituting a dividend given the capital levels that you have?

Marc Grandisson: I think it's just a reflection of the mix and perhaps one on the business, the actuaries may take a little bit more of a conservative or prudent stance and put a bit more, increase the loss ratio for a certain year or a certain line of business or product line.

Marc Grandisson: That's really all there is to it.

Marc Grandisson: I think the variability around this, even an insurance level, we're a specialty writer, so there's a lot of things going on all at once in our portfolio.

Marc Grandisson: I'd say certainly we are on track to close the Allianz acquisition tomorrow, so that will certainly be a draw on that capital base that we have. We are also, you know, entering the active win season.

Marc Grandisson: It's not as predictive, I guess, as we wish we could be, but this is also why we believe we can attract higher returns because there's a lot more uncertainty in selecting the loss ratio.

Marc Grandisson: I would just attribute it to noise that happens from time to time as well as mix.

Marc Grandisson: I don't think they're out of it.

Marc Grandisson: Good?

Marc Grandisson: Yep.

Speaker Change #254: Yeah, I mean that, the philosophy has not changed, right? I'd say certainly we, you know, we're on track to close the Allianz acquisition tomorrow so that that will certainly be a draw on that capital base that we have.

Marc Grandisson: Great, thanks.

Marc Grandisson: And then, Francois, you had mentioned the actual to expected.

Speaker Change #234: We are also entering the active wind season, so we'll want to take a look at how that develops.

Speaker Change #234: But absolutely going forward, you know the fact that we historically have been very I think very good stewards of capital We like to deploy it in the business where we can but if there are no opportunities beyond what's in front of us

Francois Morin: So we'll want to take a look at how that develops. But absolutely, going forward, you know, the fact that we historically have been very, I think, very good stewards of capital. We like to deploy it in the business where we can. But if there are no opportunities beyond what we know, what's in front of us.

Francois Morin: In the coming months, we'll do what we've always done, return that capital, and it could be in the form of share buybacks or dividends or any other method. Our next question comes from Josh Shanker from Bank of America. Yeah, thank you very much.

Marc Grandisson: you know, in the coming months, we will, you know, we'll do what we've always done is return that capital and it could be in the form of, you know, share buybacks or dividends or any other method.

Speaker Change #292: Thank you.

Marc Grandisson: Bye.

Francois Morin: Wondering if we could just get a little bit more color on that for the quarter, and then if you guys have changed your view of expected losses, just given it appears like claims payment patterns have been extending.

Marc Grandisson: Our next question comes from Josh Shanker from Bank of America.

Joshua David Shanker: So, Marc, some time in the past, I think one thing you said to me was that the big surprise... was from the hard market of 2000-2004, that pricing stayed good for a lot longer than we thought it would, and we pulled back too early. I mean, clearly, you're pulling back here. But the growth has decelerated a great deal. Given that you have that 2020 hindsight, how are you looking at this market opportunity? And how long have I been last compared with what you knew?

Francois Morin: So I'm wondering if that's been reflected as well.

Joshua David Shanker: Yeah, I think the A versus C work, you know.

Joshua David Shanker: Thank you very much. Marc, sometime in the past, I think one thing you said to me was that the big surprise

Joshua David Shanker: It's done by line by year.

Joshua David Shanker: So you know, the last hard market and casualty started to turn, you know, in 2000. And it, you know, it took until about 2004 to really see the impact and sort of have running out of, you know, having to price, you know, and rate increase after that point.

Joshua David Shanker: So yeah, there's pockets where, I mean, it's puts and takes, right?

Joshua David Shanker: So it takes several years, unlike the property cap, right, at least 2022 something happened about in the fall, well, right away that people are adjusting because the cost of goods sold or losses are known.

Joshua David Shanker: There's some that we run favorable, some that, you know, there could be a year for, you know, one claim shows up and it's gonna show adverse, but both quarter to date and year to date in aggregate, both by segment, we are, you know, running ahead of expectations, which we didn't take the full credit for that.

Joshua David Shanker: So this is not surprising to me.

Joshua David Shanker: Some of that favorable experience is showing up in actually favorable prior development, but the indications are giving us a lot of comfort that our reserve base and our reserve levels are adequate to pay the claims.

Joshua David Shanker: I'm expecting a bit more.

Joshua David Shanker: We're expecting a bit more.

Marc Grandisson: was from the hard market of 2000-2004, that pricing stayed good for a lot longer than we thought it would, and we pulled back too early.

Joshua David Shanker: We're seeing it through our reinsurance emissions.

Joshua David Shanker: Absolutely your question on patterns, that is, I mean, there's a good attempt, good faith attempt to adjust the patterns with the experience that we have.

Joshua David Shanker: And both internally and the advice or the opinions we get from external actuaries, so that's factored into the expectations that claims may take longer to develop.

Joshua David Shanker: And we understand that it's an evolving situation.

Joshua David Shanker: I mean, it seems that the patterns are changing over time, but that is fully kind of considered in those numbers.

Joshua David Shanker: Great.

Speaker Change #303: I mean clearly you're pulling back here but the growth has decelerated a great deal. Given that you have that 2020 hindsight, how are you looking at this market opportunity and how long it might last compared with what you knew from the past?

Joshua David Shanker: Thank you.

Joshua David Shanker: Welcome.

Joshua David Shanker: Thank you.

Joshua David Shanker: Bye.

Joshua David Shanker: Bye.

Marc Grandisson: Well, first, Josh, I'm trying to erase from my memory what we did wrong in 2004-05, but thanks for reminding me. What I would tell you, Josh, is we talk about this at underwriting meetings. Our underwriters and our underwriting executives are acutely aware of that phenomenon. But we also have to remind ourselves that pricing is going up, as we talked about, specifically now in casualty, which seems to be the more acute area. I think it will take a longer time to go down, or it takes longer to get up. It goes up an elevator and goes down an escalator.

Joshua David Shanker: Yeah, well, first Josh's...

Joshua David Shanker: I try to erase from my memory what we did wrong in 2004-05, but thanks for reminding me. What I would tell you, Josh, is we talk about this at underwriting meetings. Our underwriters and our underwriting executives are acutely aware of that phenomenon.

Speaker Change #250: We also have to remind ourselves that pricing is going up as we talked about, specifically non-casualty, which seems to be the more acute area. I think it will take a longer time to go down, or it takes longer to take down, right? It goes up.

Marc Grandisson: I think people are slowly but surely recognizing, you know, some of these bad years, but it takes a while.

Marc Grandisson: So that's probably why we would expect the market to be. I think we're aware of this. Now we have more data. We have more experience. We have an existing platform, and underwriters. Many of them have been there through the years.

Speaker Change #239: and an elevator and goes down an escalator. So that's probably why we would expect the market to be.

Joshua David Shanker: I think we're aware of this, now we have more data.

Speaker Change #281: We have more experience, we have, you know, an existing platform, underwriters, many of them have been there through those years, so...

Marc Grandisson: So, very confident that we will be more judicious, if you will, in terms of holding the line when the market gets a little bit softer. In terms of growth, we still have that close to 11% growth in P&C, which is a big feat. It's a very, very good growth.

Joshua David Shanker: very confident that we will be more

Joshua David Shanker: holding the line when the market gets a little bit softer. In terms of growth, we still have that close to 11% growth in P&C, which is a big feat. It's a very, very good growth. But as I said in my comments, and you probably heard already, Josh,

Marc Grandisson: But as I said in my comments, and you probably heard already, Josh, the market is a little bit closer to reaching equilibrium in terms of supply and demand for the risk. So the question that we have to ask ourselves all the time is, if we push too hard, we might dilute the broader margin and return expectations in the marketplace. So we take this, and not only us, by the way; I think the market is broadly, very, very widely behaving the same way. People want to make sure that they get it right, and nobody wants to be the first one running out and doing something that will probably jeopardize, or not jeopardize, but maybe take down the returns expectation.

Joshua David Shanker: The market is a little bit more, you know, reaching equilibrium in terms of supply and demand for the risk. So, the question that we have to ask ourselves all the time is, if we push too hard, we might dilute.

Joshua David Shanker: the broader you know margin and return expectations in the marketplace so we take this and not only us by the way I think the market is broadly very very widely behaving the same way people want to make sure that they get it right and nobody wants to be the first one running out and you know doing something that will probably you know

Joshua David Shanker: you know, jeopardize or not jeopardize, but maybe, you know, take down the returns expectation. So...

Joshua David Shanker: You know, it's just that kind of market, Josh, the equilibrium on the supply and demand for capacity is just coming back more to a more normal level. It's still still on the side of the underwriters, but it's clearly moving in a more equilibrium state. And then continuing on fondly on what Jimmy asked, I have a very crude capital model, and I wouldn't recommend anyone else use it, but it does seem like at the pace that the premium is decelerating, you're going to be sitting on some sizable excess capital in a fairly short order. Can you, I guess, talk a little bit about how the Allianz transaction uses capital? That might be incorrect in my assumption.

Joshua David Shanker: You know, it's just it's just that kind of market, Josh, you know, that the equilibrium on the supply and demand for capacity is just coming back more to a more normal level. It's still still on the side of the underwriters, but it's clearly, you know, moving in a more equilibrium state.

Joshua David Shanker: And then in terms of just, you know, on the insurance side, as you think, you know, the, you know, the underlying, I guess, margin, right, kind of low 90s, in the quarter, given, you know, your views about price and loss trend is, does that feel like, you know, kind of the run rate level from, Well, as you know, Elyse, we report the numbers as we see it, based on the data we see, that sort of seems to be the emerging sort of rough average over the last couple of years.

Speaker Change #340: I have a very crude capital model and I wouldn't recommend anyone else use it.

Speaker Change #219: But it does seem like at the pace that the premium is decelerating, you're going to be sitting on some sizable excess capital in a fairly short order.

Joshua David Shanker: There's also a mix going on, Elyse, so things are shifting, as you know, from time to time, so it's hard to compare combined ratio.

Speaker Change #295: Can you, I guess, talk about a little bit about how the Allianz...

Speaker Change #227: transaction uses capital that might be incorrect my assumption it may be that may be a source that's really

Francois Morin: That may be a source that's really causing a capital plug there. Or, additionally, am I correct that you have, at the current trajectory, a real capital buildup that's going to need to be utilized in short order? Well, I mean, first on the Allianz transaction, we, you know, disclosed that the rough amount of capital that we were going to deploy in that transaction is 1.8 billion, which is the premium we're paying to acquire the asset and also the capital that we need to deploy to support the LPT that's coming our way immediately, and then the ramp-up of the new business or the renewals that will end up on our balance sheet.

Speaker Change #260: causing a capital plug there. Or additionally, am I correct that you have at the current trajectory a real capital buildup that's going to be need to be utilized in short order?

Francois Morin: But right now, based on where we are, it's well within expectation of getting the returns, and our returns on insurance, we believe, are in excess of our long-term target.

Francois Morin: And then the mortgage releases have held steady at, Q2 was above the Q1 level.

Speaker Change #315: Well, I mean, first on the Allianz transaction, we, you know, disclosed that we were, you know, the rough number of capital that we were going to deploy in that transaction is 1.8 billion.

Speaker Change #227: which is the premium we're paying to acquire the asset and also the capital that we need to deploy to support

Speaker Change #227: The LPT that's coming our way immediately and then the ramp up of the new business or the renewals that will end up on our balance sheet.

Francois Morin: So, you know, a sizable number, and that is, you know, so far, I mean, as far as we know, I mean, things are on track to be kind of that level. To your point, yeah, returns have been excellent, and we're very, you know, proud of that, but we're not going to accumulate capital just so we can't deploy it forever. So, the reality is, maybe, give us another couple of quarters, but, you know, I mean, we'll definitely have a better view of where things stand by, you know, later this year.

Francois Morin: Can you just provide, Francois, maybe a little bit more color on what's going on there and how we, kind of think about run rate level of potential releases within the MRM.

Speaker Change #227: [inaudible]

Speaker Change #263: sizeable number and that is you know so far I mean as far as we know I mean there's things are on track to to be kind of that level

Francois Morin: Great question.

Francois Morin: I mean, I and many others have been wrong about taking a forward-looking view of releases on the favorable development on mortgage in general.

Speaker Change #263: You know, uh...

Speaker Change #327: To your point, yeah, I mean, returns have been excellent and we're very, you know, we're proud of that and...

Francois Morin: I think right stepping back, I'd say that early in 20, late 22, early 23, we were more cautious about the state of the economy and took a view about new notices and average reserves that we are attaching to these notices that, you know, was a bit more, that didn't turn out to be the case, right, that turned out to be better than what we had expected at that time.

Francois Morin: The fact that, you know, we just had another quarter of, again, a more, you know, better cure activity, you know, I don't think, you know, a lot of these cures this quarter were related to the 2023 accident year.

Speaker Change #227: But we're not going to accumulate capital just that we can't deploy forever. So the reality is, if you don't give us another couple of quarters, maybe, but, you know, I mean, we'll definitely have...

Francois Morin: So, you know, we're more positive, I think, I'd say in general about the housing market.

Francois Morin: So the level of reserving that we're attaching to the new delinquencies is a bit lower than it was a year ago.

Francois Morin: So maybe directionally, we would not expect to have the same level of reserve releases going forward.

Francois Morin: But again, not knowing for sure how, you know, how quickly people are going to cure unemployment, et cetera.

Francois Morin: I mean, that will be, they'll have an impact on the level of reserve releases.

Francois Morin: Thanks for the color.

Francois Morin: And then, you know, Marc's been talking about the casualty kind of pickup potentially, so, you know, if that, you know, accelerates in the third and fourth and quarters and early next year, then we want to have the capital ready to deploy there. So, that's certainly how we think about the big picture, but it's an ongoing discussion we have here. Martin, thank you for the answers. Have a good day. Thank you, too!

Speaker Change #227: a better view of where things stand by later this year.

Marc Grandisson: And then, you know, Marc's been talking about the casualty kind of pickup potentially, so, you know, if that, you know, accelerates in the third and fourth and quarters and early next year, then we want to have the capital ready to deploy there. So that's, you know, certainly how we think about a big picture, but it's an ongoing discussion we have here.

Speaker Change #240: All right. Thank you for the answers. Have a good day.

Francois Morin: Our next question comes from Michael Zaremski from BMO. Thanks. He put the theme on casualty and social inflation. We do value your thoughts on this. I guess, can you remind us, two things. First of all, I believe you've said in the past that ARCH's casualty reserve reviews are more geared towards summer months.

Francois Morin: Our next question comes from Charlie Lederer with Citi.

Francois Morin: Our next question comes from the line of Jamie Bullard from J.P. Morgan.

Francois Morin: Hey, thanks.

Francois Morin: Hi, so first, just a question on reserves.

Francois Morin: You had favorable development overall, but and so did many of your peers, but a lot of the competitors had adverse development and casualty for both older and recent years.

Francois Morin: It doesn't seem like you had that, but maybe you could go into, detail a little bit on the development, in the second quarter?

Francois Morin: And then also, why do you feel that you're not as susceptible as some of the competitors to all the casualty issues, either in your book or maybe in the Watford, Yeah, let me take a stab at that.

Speaker Change #277: Our next question comes from Michael Zaremski from BMO.

Francois Morin: I'm sure Marc will have something to add.

Francois Morin: I'd say on the part to your question, Jimmy, I'd say, you know, the book of business that we have is, I wouldn't call it a standard commercial general liability book of business that some other competitors have.

Francois Morin: We don't write a whole lot of commercial auto, for example. So that's another line of business that's been, you know, been a difficult line to get a good handle on the trends and how, you know, how inflation has picked up in there.

Francois Morin: So, you know, the books that we have in general liability, A, I think are smaller, certainly we think underweight in those lines of business.

Michael David Zaremski: Hey, thanks. I'll keep with the theme on casualty and social inflation, you know, especially since we do value your...

Michael David Zaremski: I guess, can you remind us, two-part, I believe you've said in the past that

Speaker Change #227: And Mark you had said, but others have said that they thought that the casualty pressures to be more large accounts kind.

Speaker Change #269: <unk> been small account, but the data we see so far appear.

Speaker Change #269: Appears to be the <unk>.

Speaker Change #230: Smaller com players have had.

Speaker Change #223: <unk> added to the reserves more so so I don't know if theres.

Speaker Change #224: Any thoughts there thanks.

Speaker Change #278: I'll start with I'll start with the second part of your question Youre exactly right I think that I said that the large account that are ground zero for pressure points on the losses, because they have deeper pockets, where the larger limits bigger enterprises more complex cases, and more attractive to the plaintiff lawyers, but youre right, we have seen as well as everyone else.

Speaker Change #278: Building the commercial auto as well even of all size is also going through a similar process and it impacts obviously the umbrella portfolio, but by.

Speaker Change #333: You are quite right, we're sort of a second round.

Speaker Change #309: Sort of the rippling effect, starting in ground zero, which is always a larger account that is sort of slowly, but surely ripple through the market and we're starting to see this impact on the smaller on the smaller packages as well smaller policies as well have a lower limit so bobby easier and it seems to be currently in this space you heard this too I'm sure.

Speaker Change #284: The $1 million limit isn't what it used to be so there's probably more of a pressure to pay the full limit as opposed to before maybe the industry was.

Speaker Change #224: More willing to fight or pushed back, but again, the $1 million because of all the inflation has changed in terms of reserve review I'll say it but we do a quarterly review of our reserving of every line of business that we do our actuaries.

Speaker Change #224: Every every single time, and we have a change of loss ratio that we reported on on every line of business and a sub line quarterly for all the units that we that we look at the one thing that we have is an added benefit at arch is we have also we have the insurance group and our reinsurance company. So we're able to compare at a high level of the holding company Francois.

Speaker Change #357: Trends are developing and what they're looking like so it's a constant I think what we used what we may have said to you is we used to do an annual trend analysis now, it's becoming a twice a year analysis it might accelerate as well and I would assume that most people are using the.

Speaker Change #224: The same frequency because as we talk about all the time reserving feed into pricing.

Speaker Change #275: Yes. The one quick thing just to add on reserving, we monitor actual versus expected and experienced quarterly that's a big part of the process and not only not only do we do it against our own expectations, but we monitor against our external actuaries expectation. So we got to two views of how.

Speaker Change #219: Independent groups of Actuaries think business or the reserve should develop time and Thats certainly informs the actions we take every quarter and to Mark's point that is done and all the business units.

Joshua David Shanker: Regularly.

Speaker Change #216: Okay Thats helpful understood.

Speaker Change #216: And just last quickly on.

Speaker Change #233: <unk> levels.

Speaker Change #242: Since you guys are more open than others.

Speaker Change #242: <unk>.

Speaker Change #259: What unquote normal.

Speaker Change #226: The reinsurance segment.

Speaker Change #334: That ratio load ratio. This quarter is that kind of normal ish. Since you guys have grown into property over the years.

Neal: I think Neal.

Neal: Yes, yes, no I think no again repeating what we said before and it's always hard to appreciate from your perspective I am sure that the reinsurance is as more volatility into it. So we tend to look at this on a longer term average. So sometimes we are a quarter I'll remind everyone here, sometimes we have a quarter, where the combined the current accident year.

Neal: X cat combined ratio and reinsurance goes up a little bit.

Neal: And people say, it's a trend, but it's very hard to see to say this in reinsurance sometimes it's above sometimes it's below I think this quarter frankly, we had lower attritional losses across the across our reinsurance portfolio and this is what this is what explains that but if you look on a 12 month basis, it's not as as drastic of a move.

Speaker Change #279: Yeah, and I'd add to that also the cat load that we reported there are kind of quoted earlier. This year I mean, we have a view on seasonality of when these losses may or may not hit.

Speaker Change #248: And precise does it happen in second quarter is that in third quarter, it's a little bit of.

Speaker Change #248: There's historical data to support that but.

Speaker Change #226: Big picture again, what we experienced this quarter was not unexpected was not was very much within what we thought was reasonable given the growth in the size of the book. The fact that it's broader it's not only U S lot of international.

Speaker Change #216: And.

Speaker Change #216: The different types of exposures that we that we reinsure primarily here.

Speaker Change #272: Okay. That's helpful. I'll sneak one last one quickly on mortgage just on a macro perspective.

Speaker Change #216: Good.

Speaker Change #216: If home price appreciation.

Speaker Change #216: <unk> continues at a healthy pace or I guess, Brazil, and healthy pace with that.

Speaker Change #231: Is that any factor in kind of the reserve releases, maybe it was unexpected or anything there from a very high level, we can think about.

Speaker Change #231: Yes.

Speaker Change #331: Right because by virtue of having.

Speaker Change #304: House price appreciation you therefore increase your equity in your home and the equity in the home is by far the lack thereof, as a leading indicator as to whether you're going to have a foreclosure or a loss in your policy and most of the policies even.

Speaker Change #231: If you had another 3% to 4% of whatever we're expecting next year, maybe four 5% of HPE appreciation the equity were built and what happens and it's very simple right. The reason why equity matters, because while a few are running into trouble the divorce youre, losing a job.

Speaker Change #344: I want to lose the equity in the home you can just turn around and sell it to somebody else and a recapture of leased portion if not all of the equity that you've built into it that's something that people will do it and there is a healthy market supply and demand market is such that you'll be able to sell your home with.

Speaker Change #231: And capture that equity even after some expenses so thats what happens on HPA if it goes.

Speaker Change #289: If it goes to while that could didn't know seven or eight but it got into trouble for different reasons altogether I think the credit space and in the way the mortgage had been originated over the last several years.

Speaker Change #231: <unk>.

Speaker Change #350: HPA going up right now would be helpful. It's definitely helpful for us as a provider.

Speaker Change #216: Thank you.

Speaker Change #216: Sure.

Speaker Change #216: Yeah.

Speaker Change #216: Our next question comes from David <unk>.

David: From Evercore.

Speaker Change #265: Good morning.

David Kenneth Motemaden: I had a question on the underlying loss ratio in the insurance business. It was up a little bit year over year.

Speaker Change #257: That's despite having a higher mix of short tail business within the earned premium mix could you maybe talk about.

Speaker Change #232: What was driving the loss ratio up year on year and was that conservatism you guys are baking in on the casualty lines are a little bit of color there would be helpful.

Speaker Change #228: Yes, it's a pretty small increase and this is.

Speaker Change #288: We don't want to describe anymore precision to those numbers there.

Speaker Change #339: Their judgment call quite often times I think it's just a reflection of the mix and perhaps one on the business. The actuaries may take a little bit more of a conservative or prudent stance and put a bit more.

Speaker Change #228: The increase of loss ratio for a certain year or certain.

Speaker Change #228: Line of business or product line, that's really all there is to it I think the variability around this even on an insurance level, where specialty writer so.

Speaker Change #228: So there's a lot of things going on all at once and our portfolio is not very it's not as predictive I guess it as.

Speaker Change #228: As we as we wish we could be but this is also why we believe we can attract a higher returns because there is a lot more uncertainty in selecting the loss ratio pick I would just I would just attribute it to noise that happens from time to time as well as mix transferring I'm going to add a little bit.

Speaker Change #228: Yes.

Speaker Change #293: Great. Thanks.

Speaker Change #293: And then Francois you had mentioned the actual to expected.

Speaker Change #247: I'm wondering if we could just get a little bit more color on that for the quarter and then.

Speaker Change #268: If you guys have changed your view of expected losses, just given it appears like claims payment patterns have been extending.

Speaker Change #270: So I'm wondering if that's been reflected as well in your expected.

Speaker Change #247: Expectations.

Speaker Change #228: Yes.

Speaker Change #283: <unk> work.

Speaker Change #264: It's done by line by year, So, yes, there's pockets, where it's puts and takes right. There. There is some that we run favorable some that there could be a year for one claim shows up and it's going to show adverse but both quarter to date and year to date in aggregate both by segment.

Speaker Change #264: Sure.

Speaker Change #264: We're running ahead of expectations, which we didn't take the full credit for that some of that favorable experience is showing up in our interaction favor.

Speaker Change #264: Favorable prior year development, but the indications are giving us a lot of comfort that our reserve base in our reserve levels are adequate to pay the claims.

Speaker Change #236: Absolutely Youre question on patterns that is there is a good attempt good faith attempt to adjust.

Speaker Change #236: Just a patterns with the experience that we have again, both internally and the advisor the opinions we get from external actuary. So that's factored into the expectations that.

Speaker Change #236: Claims, maybe Neil may take longer to develop and.

Speaker Change #236: We understand that it's an evolving situation I mean that seems that the patterns are changing over time, but that is fully kind of considered in those numbers.

Speaker Change #280: Great. Thank you.

Speaker Change #236: Welcome.

Charting Network: Our next question comes from charging network.

Charting Network: Citigroup.

Speaker Change #252: Hey, Thanks, good morning.

Speaker Change #326: Definitely heard remarks comments on the reasons for the flattening out.

Speaker Change #249: Property cat growth.

Speaker Change #246: Would you say the weather forecast had an impact on that and could you could we see you reverse course and reaccelerate.

Speaker Change #313: If pricing is still good and one one and you have a better view of how much of the mid core business Youre keeping.

Speaker Change #246: John I'm going to say just wondering easiest answer, yes, and yes to both of your question.

Speaker Change #235: Yes, and yes, yes.

Speaker Change #294: Yes, yes, we probably will be fact, yet we believe we we took a conviction that there was a heightened higher.

Speaker Change #330: Likelihood of frequency of events and you are right and it could change this will be a short term perspective, and this will help inform.

Speaker Change #294: Whatever new vision on your projection and you believe we have will help us.

Speaker Change #317: Make a decision as we get into one 125 of total wind season is over mind you. The business is still very good even with our increased frequency. So it's still a very very good book of business. We just wanted to have the right balance.

Speaker Change #261: Got it thank you.

Speaker Change #329: And then I guess I'm wondering if you guys have your arms wrapped around the crowd strike cyber event yet in <unk>.

Speaker Change #311: Help us frame, what the losses might be and if you see any impact on cyber.

Speaker Change #261: Rising environment coming out of it.

Speaker Change #298: Yes on the cloud side I mean, we're still gathering information on our units trying to figure out what's out there and it's held not only.

Speaker Change #285: Necessarily the cyber, but there might be some other lines of business that we're just going through this as we speak is still kind of hard to disentangle I mean, some people are claiming some losses. They don't then uninsured. So there's a lot of things going on.

Speaker Change #255: I think we tend to agree broadly with the market view that six 500 $600 million to $1 billion to that sort of a it's still a wide range at this point in time, its going to take a while to to know how it develops I think I would want to I mean, it's not a big number in terms of loss ratio points for all the premium worldwide for Ciber.

Speaker Change #235: But it certainly is a reminder, that there is risk in the portfolio.

Speaker Change #343: Early now we haven't seen that many renewals, but I would expect.

Speaker Change #235: Rates could still go down a little bit, but probably not as fast as they were going down and people are going to probably take a bit of a more of a pause if you will to evaluate what it looks like it could go either way right. If crops drag does not does not create a big loss might reinforce to believe that it's not as risky, although having that event, which was not malicious.

Speaker Change #290: And out of nowhere and we were all like out of unable to work for a day.

Speaker Change #235: I think it's a good reminder of people that there is still uncertainty in some loss potential there.

Speaker Change #235: Yeah.

Speaker Change #314: Thank you.

Speaker Change #235: Welcome.

Andrew Scott Kligerman: Our next question comes from Andrew <unk> from TD Securities.

Andrew: Hey, Thank you good morning, so thanks for that.

Speaker Change #256: In the net written premium there.

Speaker Change #300: In professional lines.

Speaker Change #348: It looked like you were pretty much flattish this quarter year over year at 345.

Speaker Change #321: Could you share some of the puts and takes was public D&O awful lot did you see a pickup or a decrease in cyber or what were some of the big lines and how did they move.

Speaker Change #256: Yes, there's a lot of there's a lot of things in that.

Speaker Change #291: Professional lines, that's going to hard to disentangle from your perspective, but at a high level.

Speaker Change #349: D&O, we're reacting to what's out there, we're still maintaining our positioning cyber.

Andrew Scott Kligerman: Still meeting exposure rates they'll go down so that would go the other way healthcare, we like a lot. So we've grown that book of business. This is within the professional lines and Theres been some re underwriting of some areas. If you will at a high level that were not performing as well so theres a lot of things going on all at once I think what you're seeing it was not the three.

Speaker Change #346: The flattish number is really the sum total of many decisions our independent from one another.

Speaker Change #346: That's really what you can read into this.

Speaker Change #312: Got it.

Speaker Change #258: Along the same lines in reinsurance property catastrophe. It was it was up quite a bit at $585 million versus 457 <unk>.

Speaker Change #276: Asked year, what did you like in the property area in reinsurance.

Speaker Change #253: We well in there there's a lot of different lines, but theres a lot of quota share. Some risk access. We also have our facultative book in there as well and all of these units are.

Andrew Scott Kligerman: <unk> taken advantage of the hard market still to this day in picking our spots.

Andrew Scott Kligerman: And we think the return expectations, it's not as cat exposed.

Andrew Scott Kligerman: Within there was some cat exposure there obviously, but we believe the returns are just very very accretive and very very favorable.

Andrew Scott Kligerman: Some of them opportunistic by nature, right, we might be doing the specific deal and some specific barrel because we think the market as hard as we speak. So some of that was also factored in.

Andrew Scott Kligerman: So it's a.

Andrew Scott Kligerman: It's a really broad line of business.

Andrew Scott Kligerman: As you can see we love that line, we loved the opportunities there.

Speaker Change #345: Yes, it's a bit more complicated I would say to underwrite in a property cap pure property cat book of business, but we've had the expertise and the knowledge and the willingness to do this for a long time, and where we really like to we'd like to be exposed and do more of that line of business in that current return expectations.

Speaker Change #322: Yeah, and I'll add to that quickly just on the accounting side. It is important to remember that the property cap line of business is mostly on an ex <unk> basis, where we write all the premium on day one.

Speaker Change #347: Versus this property other than property Cat line, where the component that is on a quota share basis. The premium is written evenly throughout the exposure period, so they could very well be.

Speaker Change #322: There is accounts that we wrote at one one for example of that.

Speaker Change #357: The ramp up of that premium is taking place over the four quarters of 'twenty four as we write the premium so a little bit of a different kind of.

Speaker Change #357: Accounting policy on those types of reinsurance agreements and that certainly has an impact on how it shows up in our quarterly numbers.

Speaker Change #341: Got it and if I could just sneak one quick one in on the insurance line the expense ratio ticked up by 70 basis points should we be thinking about the expense ratio being slightly more elevated as you.

Speaker Change #337: Take on the <unk> book and invest there.

Speaker Change #322: While the investments that we made.

Speaker Change #323: Through this quarter were not related to the App right. So they are other opportunities are there.

Andrew Scott Kligerman: Efforts that we have underway that were <unk>.

Speaker Change #307: Predictive analytics, some some tech companies.

Speaker Change #307: Companies that we've invested in so we feel it's the right time for us to make those investments given how strong the returns are and.

Speaker Change #328: We'll see how those develop over time, maybe maybe with a slowdown down the road, but for now we're very comfortable with the level of investments, we're making in terms of valliant just will give you more information as we move forward, but there'll certainly be some integration expenses that will come through in the insurance segment, specifically going forward.

Speaker Change #328: Some of those expenses that will be kind of one time and we'll probably report those as part of a transaction cost and other so that will clarify that for everybody. Once we close and after we'll have a time to sometimes to digest it but.

Speaker Change #274: Yes, the investment so far this quarter.

Speaker Change #274: For other initiatives.

Speaker Change #324: Got it.

Speaker Change #308: Thank you.

Andrew Scott Kligerman: Welcome.

Andrew Scott Kligerman: Our next question comes from Brian Meredith from UBS.

Brian Robert Meredith: Yes. Thanks, a couple of months here for you guys. The first one I'm just curious do you still stand by the three year payback period for share buyback when it comes to book value dilution.

Speaker Change #250: That's that has been our practice.

Speaker Change #282: It's not a hard and fast rule I think it has been.

Speaker Change #282: Zelle practice, historically, but again thats part of the framework of how we evaluate various alternatives could we think about extending the payback at some point.

Speaker Change #320: And the answer is maybe.

Speaker Change #332: Got it that's helpful. Thank you and then I guess my next question.

Speaker Change #266: Thinking about M&A here it looks like you probably had the financial capacity to still do a reasonable amount of M&A, but do you have the kind of call it management and strategic or call. It management capacity at this point as you're integrating the <unk> business.

Speaker Change #250: Fireman's fund business.

Speaker Change #250: Over the next call. It six to 12 months to do anything you can kind of take a pause here for a while.

Speaker Change #352: Well I think Brian it's also dependent on the opportunity that we have ahead of us and we can certainly attract people to help us do any other.

Speaker Change #250: Integration.

Brian Robert Meredith: We have a team that between us.

Speaker Change #342: Leading the effort on <unk> that also were instrumental to integrating guaranty way back in 2017 18. So we have already some good experience. There. So I think we have we have enough bandwidth for what we're doing now quickly and if something were to happen right across what I was really accretive in an interesting we would find a way to do this I think that we are not there to.

Speaker Change #310: To work at the time, if something is very favorable to us we'll expand the effort and the work that needs to be to get this done and these opportunities to orders I mean, I'd say geography specific and segment specific so the Allianz acquisition is purely insurance North America. So that absolutely has taken center stage.

Speaker Change #250: If we were to do some other M&A in other parts of the world in the reinsurance segment that could be a different team most likely that would contribute.

Speaker Change #336: Makes sense and I Wonder if there is just a quick one I know you're going to give us some numbers on the I'll answer but.

Speaker Change #299: Is there any color you can give us with respect to how does it add to your P&L as.

Speaker Change #305: As we think about it going forward just looking at the map you provided us it looks like <unk>.

Speaker Change #305: Some amount of that business and kind of cat exposed areas.

Speaker Change #286: Not materially because it's not as much in our peak zone at the book is more diversified more Midwest more California.

Les: Les Florida, which is our peak zone. So in terms of the one or $2 50 marginal impact.

Les: Great. Thank you I appreciate it.

Les: Okay.

Les: Our next question comes from Meyer Shields from <unk>.

Speaker Change #297: Great. Thanks, so much two quick questions first Marc and Francois both mentioned the elevated.

Speaker Change #351: Equity predictions for not growing.

Meyer Shields: I mean was there any reshaping of the portfolio to move further away from frequency events.

Speaker Change #325: No I think that I think that if you look at it at a high level I think our exposure was.

Speaker Change #297: As more stable.

Speaker Change #301: They are growing a little bit on a gross basis, but what happened is we just shaped it through retrocession purchases.

Speaker Change #301: What we did.

Speaker Change #286: And Thats, how we got back to a more you know more.

Speaker Change #286: More reasonable or more.

Speaker Change #286: Acceptable level of PMO.

Speaker Change #318: Okay. That's helpful.

Speaker Change #318: And second.

Speaker Change #318: Just sort of for the most.

Speaker Change #357: <unk> are up to date events as we've seen more capital market activity come back come back and we've seen that being blamed for pressure on public company D&O pricing are you seeing any inflection that coincide with recovering activity.

Speaker Change #306: Not really I mean, the third party capital that we hear again, even those third party.

Speaker Change #338: There is a healthy level of no.

Speaker Change #250: Rationality than the <unk>.

Speaker Change #250: Behavior, So we havent seen like I said before.

Speaker Change #250: Crazy players or a mavericks in the marketplace, it's a pretty well behaved marketplace.

Speaker Change #316: Okay. Thank you very much.

Speaker Change #316: Okay.

Speaker Change #319: I'm not showing any further questions would you like to proceed with any critical remarks.

Speaker Change #250: Thank you very much everyone and we'll talk to you again in October.

Speaker Change #250: Okay.

Speaker Change #335: Ladies and gentlemen, thank you for participating in today's conference. This concludes broker you may all disconnect.