Arch Capital Group Ltd. (NASDAQ:ACGL) Q3 2020 Earnings Conference Call - Final Transcript

Oct 30, 2020 • 11:00 am ET

Previous

Arch Capital Group Ltd. (NASDAQ:ACGL) Q3 2020 Earnings Conference Call - Final Transcript

Share
Close

Loading Event

Loading Transcript

Q & A
Operator
Operator

Thank you. [Operator Instructions] Our first question comes from Elyse Greenspan with Wells Fargo. Your line is now open.

Analyst
Elyse Greenspan

Hi, thank you. Good morning.

Executive
Marc Grandisson

Good morning.

Executive
Francois Morin

Good morning.

Analyst
Elyse Greenspan

My first question is on the capital allocation. So, Marc, you laid out five pillars. I just want to confirm, I guess, based off of how you were talking, it sounds like share repurchase is last kind of on the chain right now and I guess -- because it seems like you have such good growth opportunities that you could put your capital to use, just basically to incrementally add to your insurance and reinsurance writings. Am I understanding that correct?

Executive
Marc Grandisson

So yeah. I didn't mean to put them in ranking order. I think that they are probably all fairly equally attractive at this point in time. I think that we are investigating, as you know, on a quarterly basis as to what the opportunities are in various lines of business. I didn't mean to name stock repurchase as the last one of the rank ordering mechanism. I think that is also part and parcel of the discussion. I think that, for the first time in a while, I would argue that the five players actually are, you know, actively making the point for receiving ball, the ball and play -- be part of the game. So I would definitely say that. And we're evaluating, but certainly, our game, number one -- focus number one is to allocate capital to the underwriting units if the returns are there. And that certainly is a -- relatively easier place to deploy, an easier way to see it at this point in time. But everything is up, every -- everybody's playing on the field, on the court, so.

Analyst
Elyse Greenspan

Okay. That's helpful. And then my second question. Your insurance underlying margin 94% in the quarter. Arch had targeted to get to kind of a mid-90s, yet, you guys are kind of there, but there is more, you mentioned a lot of rate, I think, 11% that you're getting in your book of business, which you haven't earned that in yet. So as we think about the earning end the rate you're getting today, plus what seems like incremental rate you could get into 2021, do you have any target for that business? Or is there a way that we can think about the margin profile there, especially since you've kind of hit that target that you laid out?

Executive
Marc Grandisson

Yeah, so let me go back to 95 combine, which I mentioned, I think, three years ago now. I think it was meant to be there as an aspirational target and to shoot for, at that point in time, based on the mix of business and the opportunities that we had in our marketplace. I think this has changed, right. I think now that we are obviously going in that direction very nicely and the market is certainly helping us, I think we still look very heavily into line