Investor Presentation

US Primary MI Delinquency Statistics As of August 31, 2020

© 2020 Arch Capital Group Ltd. All rights reserved.

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The Private Securities Litigation Reform Act of 1995 ("PSLRA") provides a "safe harbor" for forward-looking statements. This release or any other written or oral statements made by or on behalf of Arch Capital Group Ltd. and its subsidiaries may include forward−looking statements, which reflect our current views with respect to future events and financial performance. All statements other than statements of historical fact included in or incorporated by reference in this release are forward-looking statements.

Forward-looking statements, for purposes of the PSLRA or otherwise, can generally be identified by the use of forward-looking terminology such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe" or "continue" and similar statements of a future or forward-looking nature or their negative or variations or similar terminology. Forward−looking statements involve our current assessment of risks and uncertainties. Actual events and results may differ materially from those expressed or implied in these statements. A non-exclusive list of the important factors that could cause actual results to differ materially from those in such forward-looking statements includes the following: adverse general economic and market conditions; increased competition; pricing and policy term trends; fluctuations in the actions of rating agencies and our ability to maintain and improve our ratings; investment performance; the loss of key personnel; the adequacy of our loss reserves, severity and/or frequency of losses, greater than expected loss ratios and adverse development on claim and/or claim expense liabilities; greater frequency or severity of unpredictable natural and man-made catastrophic events; the effect of contagious diseases (including COVID-19); the impact of acts of terrorism and acts of war; changes in regulations and/or tax laws in the United States or elsewhere; our ability to successfully integrate, establish and maintain operating procedures as well as integrate the businesses we have acquired or may acquire into the existing operations; changes in accounting principles or policies; material differences between actual and expected assessments for guaranty funds and mandatory pooling arrangements; availability and cost to us of reinsurance to manage our gross and net exposures; the failure of others to meet their obligations to us; changes in the method for determining the London Inter-bank Offered Rate ("LIBOR") and the potential replacement of LIBOR and other factors identified in our filings with the U.S. Securities and Exchange Commission ("SEC").

The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with other cautionary statements that are included herein or elsewhere. All subsequent written and oral forward−looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. We undertake no obligation to publicly update or revise any forward−looking statement, whether as a result of new information, future events or otherwise.

This presentation contains non-GAAP financial measures as defined by Regulation G of the rules of the SEC. Arch Capital Group Ltd. (the "Company") believes these non-GAAP measures provide users of its financial information meaningful and useful insight in evaluating the performance of the Company. Investors should consider non-GAAP measures in addition to, and not as a substitute for, or superior to, the comparable GAAP measures. The reconciliation to GAAP and definition of operating income can be found in the Current Report on Form 8-K furnished to the SEC by the Company in connection with its most recent earnings press release, and is also available on the Company's website: www.archcapgroup.com. From time to time, the Company posts additional financial information and presentations to its website, including information with respect to its subsidiaries, and investors and other recipients of this information are encouraged to check the website.

© 2017 Arch Capital Group Ltd. All rights reserved.

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© 202019 Arch Capital Group Ltd. All rights reserved.

Arch MI US Delinquency Rate

Arch MI US Delinquency Rate

5.5%

5.14%

4.98%

4.82%

5.0%

4.5%

4.0%

3.5%

3.0%

2.23%

2.5%

1.98%

1.70%

2.0%

1.60%

1.60%

1.54%

1.45%

1.48%

1.54%

1.42%

1.5%

1.0%

4Q17

1Q18

2Q18

3Q18

4Q18

1Q19

2Q19

3Q19

4Q19

1Q20

2Q20

7/31/20

8/31/20

1st Lien Delinquent Inventory Roll-Forward

(# of loans)

7/31/20

8/31/20

Beginning Inventory

64,667

62,478

Plus: New Notices

8,069

5,912

Less: Cures

(10,171)

(7,996)

Less: Paid Claims

(87)

(70)

Ending Inventory

62,478

60,324

Polices in Force

1,255,604

1,251,815

Delinquency Rate

4.98%

4.82%

As of 6/30/2020, PMIERs sufficiency ratio: 161% - Calculated as available assets divided by required assets as defined within PMIERs; $1.35 billion of excess available assets.

© 2020 Arch Capital Group Ltd. All rights reserved.

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Arch MI US - Bellemeade Reinsurance Coverage by Deal

August 31, 2020 ($ in millions)

Bellemeade Re Insurance-Linked Notes Key Metrics (1)*

2017-1

2018-1

2018-2

2018-3

2019-1

2019-2

2019-3

2019-4

2020-1(8)(10)

2020-2(9)(10)

Coverage dates for policies issued between (2)

1/17-6/17

7/17-12/17

4/13-12/15

1/18-6/18

2005-2008(3)

7/18-12/18

2016

1/19-6/19

7/19-12/19

1/20-5/20

Initial Risk in Force

7,362

7,489

12,809

7,970

5,944

8,872

9,284

7,216

10,571

7,187

Current Risk in force

3,549

4,312

6,368

4,115

3,587

4,523

5,963

4,765

9,535

7,021

Initial coverage at issuance date

368

374

653

506

342

621

701

577

529

449

Current coverage

146

250

216

303

219

398

528

469

529

449

Arch's retention layer

166

169

352

179

208

222

232

162

793

252

Claims paid under Arch's retention layer

4

2

4

2

12

2

1

-

-

-

Delinquency % (4)(11)

6.07%

6.06%

3.74%

6.98%

9.21%

7.99%

5.28%

6.32%

2.63%

0.62%

Delinquency trigger % (5)

5.00%

5.00%

4.00%

5.00%

8.00%

5.00%

4.00%

5.00%

N/A

N/A

Initial Attachment % (cumulative losses as % of RIF)

2.25%

2.25%

2.75%

2.25%

3.50%

2.50%

2.50%

2.25%

7.50%

3.50%

Initial Detachment % (cumulative losses as % of RIF)

7.25%

7.25%

7.85%

8.60%

9.25%

9.50%

10.05%

10.25%

12.50%

9.75%

Current Attachment % (6) (cumulative losses as % of RIF)

4.67%

3.91%

5.53%

4.36%

5.80%

4.90%

3.89%

3.41%

8.32%

3.58%

Current Detachment % (7) (cumulative losses as % of RIF)

8.77%

9.71%

8.92%

11.71%

11.91%

13.71%

12.75%

13.25%

13.86%

9.98%

  1. Through August 31, 2020, notwithstanding the $105M of reinsurance coverage provided directly by a panel of reinsurers mentioned below in Notes (8) and (9), Arch Mortgage Insurance Company and UGRIC (together "Arch MI" or the "Company"), has entered into various aggregate excess of loss mortgage reinsurance agreements with special purpose reinsurance companies ("SPRs") domiciled in Bermuda (the "Bellemeade Agreements"). The SPRs are not subsidiaries or affiliates of the Company. Based on applicable accounting guidance, the Company does not consolidate the SPRs in its consolidated financial statements.
  2. An immaterial number of loans in each transaction have coverage dates outside of the indicated ranges.
  3. Policies primarily issued between 2005 and 2008 under United Guaranty Residential Insurance Company ("UGRIC"); as well as policies issued through 2015 under both UGRIC and Arch Mortgage Insurance

Company.

  1. Represents the percentage of risk in force that is 60 or more days delinquent.
  2. When delinquency triggers reached then bond amortization stops and coverage remains constant.
  3. Represents the amount of cumulative losses as a percentage of current risk in force that the Company retains prior to the Bellemeade notes absorbing losses.
  4. Represents the amount of cumulative losses as a percentage of current risk in force that must be reached before the Company restarts absorbing losses again.
  5. $450 million was directly funded by Bellemeade Re 2020-1 Ltd. via insurance-linked notes, with an additional $79 million capacity provided directly to the Company by a separate panel of reinsurers. Total initial coverage at issuance date is $529 million.
  6. $423 million was directly funded by Bellemeade Re 2020-2 Ltd. via insurance-linked notes, with an additional $26 million capacity provided directly to the Company by a separate panel of reinsurers. Total initial coverage at issuance date is $449 million.
  7. The Bellemeade 2020-1 and 2020-2 delinquency triggers are not driven by a static delinquency percentage, but occurs when the average sixty-day plus delinquency amount from the prior three periods is equal to or exceeds 75% of all subordinate tranches.
  8. This information regarding delinquencies and cures is reported to Arch MI from loan servicers. Delinquency reporting, particularly on a monthly basis, may be affected by several factors, including the date on which the report is generated and transmitted to Arch MI, updated information submitted by servicers and by the timing of servicing transfers.
    * Numbers may not foot due to rounding.

© 2020 Arch Capital Group Ltd. All rights reserved.

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Arch Capital Group Ltd. published this content on 25 September 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 25 September 2020 20:04:01 UTC