Arch Capital : Non-U.S. Subsidiary Information Document

ARCH REINSURANCE LTD. AND SUBSIDIARIES

(a wholly-owned subsidiary of Arch Capital Group Ltd.)

Consolidated Financial Statements

December 31, 2020 and 2019

INDEX TO FINANCIAL STATEMENTS
	Page No.
Report of Independent Auditors	1
Consolidated Balance Sheets
At December 31, 2020 and 2019	3
Consolidated Statements of Income
For the years ended December 31, 2020 and 2019	4
Consolidated Statements of Comprehensive Income
For the years ended December 31, 2020 and 2019	5
Consolidated Statements of Changes in Shareholder's Equity
For the years ended December 31, 2020 and 2019	6
Consolidated Statements of Cash Flows
For the years ended December 31, 2020 and 2019	7
Notes to Consolidated Financial Statements	8

Report of Independent Auditors

To the Board of Directors of Arch Reinsurance Ltd.:

We have audited the accompanying consolidated financial statements of Arch Reinsurance Ltd. and its subsidiaries (the "Company"), which comprise the consolidated balance sheets as of December 31, 2020 and December 31, 2019, and the related consolidated statements of income, comprehensive income, changes in shareholder's equity and cash flows for the years then ended.

Management's Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors' Responsibility

Our responsibility is to express an opinion on the consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Arch Reinsurance Ltd. and its subsidiaries as of December 31, 2020 and December 31, 2019, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Other Matter

Accounting principles generally accepted in the United States of America require that the incurred and paid loss development for the years ended December 31, 2011 to December 31, 2019 on pages 30 to 38 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Financial Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required

supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

New York, New York

April 2, 2021

ARCH REINSURANCE LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands, except share data)

		December 31,
		2020			2019
Assets
Investments:
Fixed maturities available for sale, at fair value (amortized cost: $18,143,305 and $16,593,210; net of
allowance for credit losses: $2,397 at December 31, 2020)	$	18,717,825	$	16,888,927
Short-term investments available for sale, at fair value (amortized cost: $1,922,006 and $957,085; net
of allowance for credit losses: $0 at December 31, 2020)		1,922,637			956,353
Collateral received under securities lending, at fair value (amortized cost: $301,089 and $388,366)		301,096			388,376
Equity securities, at fair value		1,444,830			838,925
Other Investments (portion measured at fair value:$ 3,824,796 and $3,663,477)		4,324,796			3,663,477
Investments accounted for using the equity method		2,047,889			1,660,396
Total investments		28,759,073			24,396,454
Cash		860,835			631,536
Accrued investment income		103,299			117,920
Securities pledged under securities lending, at fair value (amortized cost: $294,493 and $378,910)		294,912			379,868
Premiums receivable (net of allowance for credit losses: $37,781 and $21,003)		2,064,586			1,778,717
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses (net of allowance
for credit losses: $11,636 and 1,364)		4,500,802			4,346,816
Contractholder receivables (Net of allowance for credit losses: $8,638 and $0)		1,986,924			2,119,460
Ceded unearned premiums		1,234,075			1,234,683
Deferred acquisition costs		790,708			633,400
Receivable for securities sold		92,743			24,133
Goodwill and intangible assets		692,863			738,083
Other assets		1,801,751			1,281,833
Total assets	$	43,182,571		$	37,682,903
Liabilities
Reserve for losses and loss adjustment expenses	$	16,513,929	$	13,891,842
Unearned premiums		4,838,965			4,339,549
Reinsurance balances payable		683,263			667,072
Contractholder payables		1,995,562			2,119,460
Collateral held for insured obligations		215,581			206,698
Senior notes		1,575,246			1,574,372
Revolving credit agreement borrowings		155,687			484,287
Securities lending payable		301,089			388,366
Payable for securities purchased		218,779			87,579
Other liabilities		1,466,449			1,453,970
Total liabilities		27,964,550			25,213,195
Commitments and Contingencies
Redeemable noncontrolling interests		58,548			55,404
Redeemable preferred shares		111,000			-
Shareholder's Equity
Common shares ($1.00 par, shares authorized: 2,625,000, issued: 2,549,323)		2,549			2,560
Additional paid-in capital		5,171,462			4,138,555
Retained earnings		8,566,658			7,299,888
Accumulated other comprehensive income (loss), net of deferred income tax		484,797			210,524
Total shareholder's equity available to Arch		14,225,466			11,651,527
Non-redeemable noncontrolling interests		823,007			762,777
Total shareholder's equity		15,048,473			12,414,304
Total liabilities, noncontrolling interests and shareholder's equity	$	43,182,571		$	37,682,903

See Notes to Consolidated Financial Statements

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