ARCH REINSURANCE LTD. AND SUBSIDIARIES (a wholly ...

ARCHREINSURANCELTD.ANDSUBSIDIARIES

(awholly-ownedsubsidiaryofArchCapitalGroupLtd.)

ConsolidatedFinancialStatements

December31,2021and2020

INDEXTOFINANCIALSTATEMENTS

PageNo.

ReportofIndependentAuditors 1

ConsolidatedBalanceSheets

AtDecember31,2021and2020 3

ConsolidatedStatementsofIncome

FortheyearsendedDecember31,2021and2020 4

ConsolidatedStatementsofComprehensiveIncome


ConsolidatedStatementsofChangesinShareholder'sEquity


ConsolidatedStatementsofCashFlows


NotestoConsolidatedFinancialStatementsNote1-General 8Note2-BusinessAcquired 11Note3-SignificantAccountingPolicies 11Note4-VIEandNCI 20Note5-Reserves 23Note6-ShortDurationContracts 26Note7-AllowanceforExpectedCreditLosses 39Note8-Reinsurance 41Note9-Investments 43Note10-FairValue 50Note11-Derivatives 56Note12-OtherComprehensiveIncome(Loss) 57Note13-Taxes 58Note14-RelatedParties 62Note15-Leases 64Note16-Commitments 65Note17-DebtandFinancingArrangements 65Note18-Goodwill&Intangible 66Note19-Shareholder’sEquity 67Note20-ShareBasedCompensation 68Note21-RetirementPlans 71Note22-Legal 71Note23-StatutoryInfo 71Note24-SubsequentEvent 75

Report of Independent Auditors

To the Board of Directors of Arch Reinsurance Ltd.:

Opinion

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, 2021

and December 31, 2020, and the related consolidated statements of income, comprehensive income,

changes in shareholder’s equity and cash flows for the years then ended, including the related notes

(collectively referred to as the “consolidated financial statements”).

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects,

the financial position of the Company as of December 31, 2021 and December 31, 2020, and the results of

its operations and its cash flows for the years then ended in accordance with accounting principles

generally accepted in the United States of America.

Basis for Opinion

We conducted our audit in accordance with auditing standards generally accepted in the United States of

America (US GAAS). Our responsibilities under those standards are further described in the Auditors’

Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are

required to be independent of the Company and to meet our other ethical responsibilities, in accordance

with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have

obtained is sufficient and appropriate to provide a basis for our audit opinion.

Responsibilities of Management 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,

and for 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.

In preparing the financial statements, management is required to evaluate whether there are conditions or

events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as

a going concern for one year after the date the financial statements are available to be issued.

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are

free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that

includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and

therefore is not a guarantee that an audit conducted in accordance with US GAAS will always detect a

material misstatement when it exists. The risk of not detecting a material misstatement resulting from

fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional

omissions, misrepresentations, or the override of internal control. Misstatements are considered material

PricewaterhouseCoopers LLP, 300 Madison Avenue New York, NY 10017

T: 646-471-3000, F: 813-286-6000, www.pwc.com

if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment

made by a reasonable user based on the financial statements.

In performing an audit in accordance with US GAAS, we:

● Exercise professional judgment and maintain professional skepticism throughout the audit.

● Identify and assess the risks of material misstatement of the consolidated financial statements,

whether due to fraud or error, and design and perform audit procedures responsive to those risks.

Such procedures include examining, on a test basis, evidence regarding the amounts and

disclosures in the financial statements.

● Obtain an understanding of internal control relevant to the audit 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, no such opinion is

expressed.

● Evaluate the appropriateness of accounting policies used and the reasonableness of significant

accounting estimates made by management, as well as evaluate the overall presentation of the

consolidated financial statements.

● Conclude whether, in our judgment, there are conditions or events, considered in the aggregate,

that raise substantial doubt about the Company’s ability to continue as a going concern for a

reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the

planned scope and timing of the audit, significant audit findings, and certain internal control-related

matters that we identified during the audit.

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, 2012 to December 31, 2020 on pages 29 to 37 be

presented to supplement the basic financial statements. Such information is the responsibility of

management and, 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 1, 2022

ARCHREINSURANCELTD.ANDSUBSIDIARIESCONSOLIDATEDBALANCESHEETS

(U.S.dollarsinthousands,exceptsharedata)December31,

2021 2020

AssetsInvestments:Fixedmaturitiesavailableforsale,atfairvalue(amortizedcost:$17,968,722and$18,143,305;netofallowanceforcreditlosses:$2,883and$2,397) $ 17,993,007 $ 18,717,825Short-terminvestmentsavailableforsale,atfairvalue(amortizedcost:$1,732,685and$1,922,007;netofallowanceforcreditlosses:$0and$0) 1,732,663 1,922,637Collateralreceivedundersecuritieslending,atfairvalue(amortizedcost:$0and$301,089) — 301,096Equitysecurities,atfairvalue 1,804,170 1,444,830OtherInvestments(portionmeasuredatfairvalue:$1,973,550and$3,824,796) 1,973,550 4,324,796Investmentsaccountedforusingtheequitymethod 3,077,611 2,047,889Totalinvestments 26,581,001 28,759,073

Cash 809,393 860,835Accruedinvestmentincome 85,453 103,299Securitiespledgedundersecuritieslending,atfairvalue(amortizedcost:$0and$294,493) — 294,912Investmentinoperatingaffiliates 1,128,779 121,560

Premiumsreceivable(netofallowanceforcreditlosses:$39,958and$37,781) 2,633,280 2,064,586

Reinsurancerecoverableonunpaidandpaidlossesandlossadjustmentexpenses(netofallowanceforcreditlosses:$13,230and$11,636) 5,880,735 4,500,802

Contractholderreceivables(Netofallowanceforcreditlosses:$3,437and$8,638) 1,828,691 1,986,924Cededunearnedpremiums 1,729,455 1,234,075Deferredacquisitioncosts 901,841 790,708Receivableforsecuritiessold 60,179 92,743Goodwillandintangibleassets 944,983 692,863Otherassets 2,416,776 1,680,191Totalassets $ 45,000,566 $ 43,182,571

LiabilitiesReserveforlossesandlossadjustmentexpenses $ 17,757,156 $ 16,513,929Unearnedpremiums 6,011,942 4,838,965Reinsurancebalancespayable 1,583,253 683,263Contractholderpayables 1,832,127 1,995,562Collateralheldforinsuredobligations 242,352 215,581Seniornotes 1,438,186 1,575,246Revolvingcreditagreementborrowings — 155,687Securitieslendingpayable — 301,089Payableforsecuritiespurchased 64,850 218,779Otherliabilities 1,283,393 1,466,449Totalliabilities 30,213,259 27,964,550

CommitmentsandContingenciesRedeemablenoncontrollinginterests 9,233 58,548Redeemablepreferredshares 111,000 111,000

Shareholder’sEquityCommonshares($1.00par,sharesauthorized:2,625,000,issued:2,549,323) 2,549 2,549Additionalpaid-incapital 5,709,595 5,171,462Retainedearnings 9,021,297 8,566,658Accumulatedothercomprehensiveincome(loss),netofdeferredincometax (66,367) 484,797Totalshareholder’sequityavailabletoArch 14,667,074 14,225,466

Non-redeemablenoncontrollinginterests — 823,007Totalshareholder’sequity 14,667,074 15,048,473Totalliabilities,noncontrollinginterestsandshareholder’sequity $ 45,000,566 $ 43,182,571

SeeNotestoConsolidatedFinancialStatements3

ARCHREINSURANCELTD.ANDSUBSIDIARIESCONSOLIDATEDSTATEMENTSOFINCOME

(U.S.dollarsinthousands,exceptsharedata)YearEndedDecember31,

2021 2020

RevenuesNetpremiumsearned $ 8,082,298 $ 6,991,935Netinvestmentincome 389,116 516,127Netrealizedgains(losses) 379,376 825,377Otherunderwritingincome 22,073 26,784Equityinnetincomeofinvestmentfundsaccountedforusingtheequitymethod 366,402 146,693Otherincome(loss) 10,191 28Totalrevenues 9,249,456 8,506,944

ExpensesLossesandlossadjustmentexpenses 4,584,803 4,689,599Acquisitionexpenses 1,303,178 1,004,842Otheroperatingexpenses 1,005,891 891,732Amortizationofintangibleassets 82,955 69,031Interestexpense 80,728 103,494Netforeignexchange(gains)losses (41,230) 83,150Totalexpenses 7,016,325 6,841,848

Incomebeforeincometaxesandincome(loss)fromoperatingaffiliates 2,233,131 1,665,096

Incometaxes:Currenttaxexpense(benefit) 294,961 194,455Deferredtaxexpense(benefit) (166,951) (83,205)Incometaxexpense 128,010 111,250

Income(loss)fromoperatingaffiliates 265,283 17,202Netincome $ 2,370,404 $ 1,571,048Net(income)lossattributabletononcontrollinginterests (82,613) (60,191)NetincomeavailabletoArch $ 2,287,791 $ 1,510,857Preferreddividends (1,523) —NetincomeavailabletoArchcommonshareholders $ 2,286,268 $ 1,510,857


ARCHREINSURANCELTD.ANDSUBSIDIARIESCONSOLIDATEDSTATEMENTSOFCOMPREHENSIVEINCOME

(U.S.dollarsinthousands)YearEndedDecember31,

2021 2020

ComprehensiveIncomeNetincome $ 2,370,404 $ 1,571,048Othercomprehensiveincome(loss),netofdeferredincometaxUnrealizedappreciation(decline)invalueofavailable-for-saleinvestments:Unrealizedholdinggains(losses)arisingduringperiod (386,617) 678,436Reclassificationofnetrealizedgains(losses),netofincometaxes,includedinnetincome (116,068) (426,182)

Foreigncurrencytranslationadjustments (62,462) 31,079Comprehensiveincome 1,805,257 1,854,381Net(income)lossattributabletononcontrollinginterests (82,613) (60,191)Othercomprehensive(income)lossattributabletononcontrollinginterests 13,984 (9,062)

ComprehensiveincomeavailabletoArch $ 1,736,628 $ 1,785,128


ARCHREINSURANCELTD.ANDSUBSIDIARIESCONSOLIDATEDSTATEMENTSOFCHANGESINSHAREHOLDER’SEQUITY


2021 2020

CommonsharesBalanceatbeginningandendofyear 2,549 2,560Commonsharesissued,net — (11)

Balanceatbeginningandendofyear 2,549 2,549

Additionalpaid-incapital

Balanceatbeginningofyear 5,171,462 4,138,555

Amortizationofshare-basedcompensation 60,861 43,934Capitalcontributionfromparent 487,161 988,700Other (9,889) 273

Balanceatendofyear 5,709,595 5,171,462

RetainedearningsBalanceatbeginningofyear 8,566,658 7,299,888Cumulativeeffectofanaccountingchange — (22,452)

Balanceatbeginningofyear,asadjusted 8,566,658 7,277,436Netincome 2,370,404 1,571,048Net(income)lossattributabletononcontrollinginterests (82,613) (60,191)Preferredsharedividends (1,523) —Dividendspaidtoparent (1,831,629) (221,635)

Balanceatendofyear 9,021,297 8,566,658

Accumulatedothercomprehensiveincome(loss)Balanceatbeginningofyear 484,797 210,524

Unrealizedappreciation(decline)invalueofavailable-for-saleinvestments,netofdeferredincometax:Balanceatbeginningofyear 500,780 258,245Unrealizedholdinggains(losses)arisingduringperiod,netofreclassificationadjustment,netofdeferredincometax (502,686) 252,256Unrealizedholdinggains(losses)duringperiodattributabletononcontrollinginterests 15,188 (9,721)Balanceatendofyear 13,282 500,780

Foreigncurrencytranslationadjustments,netofdeferredincometax:Balanceatbeginningofyear (15,983) (47,721)Foreigncurrencytranslationadjustments (62,462) 31,079Foreigncurrencytranslationadjustmentsattributabletononcontrollinginterests (1,204) 659Balanceatendofyear (79,649) (15,983)

Balanceatendofyear (66,367) 484,797

Totalshareholder’sequityavailabletoArch 14,667,074 14,225,466Non-redeemablenoncontrollinginterests — 823,007Totalshareholder’sequity $ 14,667,074 $ 15,048,473


ARCHREINSURANCELTD.ANDSUBSIDIARIESCONSOLIDATEDSTATEMENTSOFCASHFLOWS


2021 2020

OperatingActivitiesNetincome $ 2,370,404 $ 1,571,048Adjustmentstoreconcilenetincometonetcashprovidedbyoperatingactivities:Netrealized(gains)losses (428,304) (860,865)Netimpairmentlossesrecognizedinearnings 1,037 14,136Equityinnetincomeorlossofinvestmentfundsaccountedforusingtheequitymethodandotherincomeorloss (464,640) (48,387)Amortizationofintangibleassets 82,955 69,031Share-basedcompensation 61,903 44,709

Changesin:Reserveforlossesandlossadjustmentexpenses,netofunpaidlossesandlossadjustmentexpensesrecoverable 1,762,190 2,113,827Unearnedpremiums,netofcededunearnedpremiums 936,039 445,781Premiumsreceivable (685,214) (318,643)Deferredacquisitioncosts (263,243) (143,948)Reinsurancebalancespayable 500,065 65,950Otheritems,net (351,512) 12,450NetCashprovidedbyoperatingactivities 3,521,680 2,965,089

InvestingActivitiesPurchasesoffixedmaturityinvestments (35,446,757) (39,717,280)Purchasesofequitysecurities (1,175,480) (1,595,010)Purchasesofotherinvestments (1,859,096) (1,808,727)Proceedsfromsalesoffixedmaturityinvestments 33,577,445 37,945,742Proceedsfromsalesofequitysecurities 918,145 1,147,264Proceedsfromsales,redemptionsandmaturitiesofotherinvestments 1,765,533 1,029,578Proceedsfromredemptionsandmaturitiesoffixedmaturityinvestments 1,628,755 869,134Netsettlementsofderivativeinstruments (40,072) 179,006Net(purchases)salesofshort-terminvestments 165,039 (1,018,836)Changeincashcollateralrelatedtosecuritieslending — 81,210Purchaseofoperatingaffiliates (753,916) —Impactofthedeconsolidationofthevariableinterestentity (349,202) —Purchasesoffixedassets (39,495) (36,506)Other (524,591) (46,476)

NetcashusedForinvestingactivities (2,133,692) (2,970,901)

FinancingActivitiesCapitalcontributionfromparent 487,161 988,700Proceedsfromborrowings — 30,400Repaymentsofborrowings — (359,000)Changeinsecuritieslendingcollateral — (81,210)Changeinthirdpartyinvestmentinnon-redeemablenoncontrollinginterests 15,971 (2,867)Dividendspaidtoredeemablenoncontrollinginterests (1,907) (4,945)Other (3,277) 73,715Dividendspaidtoparent (1,831,629) (221,635)

NetCashusedforfinancingactivities (1,333,681) 423,158

Effectsofexchangeratechangesonforeigncurrencycashandrestrictedcash (33,742) 22,038

Increase(decrease)incashandrestrictedcashandrestrictedcash 20,565 439,384Cashandrestrictedcash,beginningofyear 1,244,893 805,509Cashandrestrictedcash,endofyear $ 1,265,458 $ 1,244,893

Incometaxespaid(received) $ 286,279 $ 197,556Interestpaid $ 80,901 $ 93,266


1. General

ArchReinsuranceLtd.(“ArchReBermuda”)isaBermudalimitedliabilitycompany,incorporatedinMay2001inBermuda,andisawhollyownedsubsidiaryofArchCapitalGroupLtd.(“ArchCapital”),aBermudaexemptedpubliclimitedliabilitycompany.UnderTheInsuranceAct1978,asamended,andrelatedregulationsofBermuda(the“InsuranceAct”),ArchReBermudaisregisteredasaClass4generalbusinessinsurerandClassClong-terminsurerandislicensedtounderwritebothgeneralandlong-termbusinessonaninsuranceandreinsurancebasis.ArchReBermudaanditssubsidiaries(collectively,the“Company”or“Arch”)provideinsurance,reinsuranceandmortgageinsuranceonaworldwidebasis.

Operations

Insurance Operations. The Company’s insurance operations are conducted in Bermuda, the United States, the UnitedKingdom, Europe, Canada and Australia. The insurance operations in Bermuda are conducted through Arch Insurance(Bermuda), a division of Arch Re Bermuda, and Alternative Re Limited. In the U.S., the Company’s principal insurancesubsidiaries are Arch Insurance Company (“Arch Insurance”), Arch Specialty Insurance Company (“Arch Specialty”), ArchIndemnityInsuranceCompany(“ArchIndemnityInsurance”)andArchProperty&CasualtyInsuranceCompany(“ArchP&C”).Arch Insurance isanadmitted insurer in50states, theDistrictofColumbia,PuertoRico, theU.S.Virgin IslandsandGuam.ArchSpecialtyisanapprovedexcessandsurpluslinesinsurerin50states,theDistrictofColumbia,PuertoRicoandtheU.S.Virgin Islandsandanauthorized insurer inonestate.Arch Indemnity Insurance isanadmitted insurer in50statesandtheDistrictofColumbia.ArchP&C,whichisnotcurrentlywritingbusiness,isanadmittedinsurerin40statesandtheDistrictofColumbiaandisfilingapplicationsforadmissioninallremainingstateswhereitisnotyetadmitted.TheinsurancegroupalsooperatesMcNeil&Company,Inc.(“McNeil”),aspecializedriskmanagerandaprogramadministratorbasedinCortland,NewYork.TheheadquartersfortheU.S.supportoperations(excludingunderwritingunits)fortheinsuranceoperationsisinJerseyCity, New Jersey. The insurance operations have offices throughout the U.S., including five regional offices located inAlpharetta, Georgia, Chicago, Illinois, New York, New York, San Francisco, California, Dallas, Texas and additional branchoffices.

Theinsurancegroup’soperationsinCanadaareconductedthroughArchInsuranceCanadaLtd.(“ArchInsuranceCanada”),aCanada domestic company which is authorized in all Canadian provinces and territories. Arch Insurance Canada isheadquartered in Toronto, Ontario. In 2019, Arch Insurance (EU) Designated Activity Company (formerly, ArchMortgageInsuranceDesignatedActivityCompany) (“Arch Insurance (EU)”), based inDublin, Ireland, receivedauthorization from theCentral Bank of Ireland (“CBOI”) to expand its classes of business as part of the Company’s plan to address the U.K.’sdeparturefromtheEuropeanUnion(“Brexit”).AsofJanuary2020,alloftheinsurancebusinessintheEuropeanUnion(“EU”)previouslywritten by Arch Insurance (U.K.) Limited (formerly Arch Insurance Company (Europe) Limited) (“Arch Insurance(U.K.)”)isnowwrittenthroughArchInsurance(EU).ArchInsurance(EU)hasbranchesinDenmark,ItalyandoutsidetheEUintheU.K.AttheendofDecember2020,ArchInsurance(U.K.)receivedcourtapprovalintheU.K.totransferitslegacybookofbusinesswrittenintheEuropeanEconomicArea(“EEA”)toArchInsurance(EU)underPartVIIoftheU.K.FinancialServicesandMarketAct 2000. InNovember2019, theCompany closed the acquisitionofBarbicanGroupHoldings Limited and itssubsidiaries (“Barbican”).Followingtheacquisition, theCompanyconducts its insuranceoperationsonseveralplatforms inthe U.K., including Arch Insurance (U.K.), the Company’s participation on Lloyd’s of London syndicates of 2012 (“ArchSyndicate2012”)and1955(formerlyBarbicanSyndicate1955)(“ArchSyndicate1955”). Inaddition,ArchManagingAgencyLimited (formerly BarbicanManaging Agency Limited) (“AMAL”) is the managing agent of Arch Syndicate 2012 and ArchSyndicate1955.OurLloyd’s syndicatesprovideusaccess toLloyd’sextensivedistributionnetworkandworldwide licenses.AMALalsoactsasmanagingagentforthirdpartymembersofArchSyndicate1955.WiththeBarbicanacquisition,wealsoacquiredCastelUnderwritingAgenciesLimited(“Castel”)intheU.K.andCastelUnderwritingEuropeBVintheNetherlands,giving us additional underwriting intermediary capabilities for our underwriting platforms. Collectively, the U.K. insuranceoperationsarereferredtoas“ArchU.K.”.ArchU.K.operationsincludetheArchU.K.RegionalDivision,whichunderwritesU.K.commercial lines.ArchU.K. conducts its operations fromLondonandother locations in theU.K. andalsohasbranches inGermany, Italy,SpainandDenmark.ArchUnderwritingatLloyd’s(Australia)PtyLtd,basedinSydney,Australia, isaLloyd’sservicescompanywhichunderwritesexclusivelyforArch’sLloyd’sSyndicates.

ReinsuranceOperations.TheCompany’s reinsuranceoperationsareconductedonaworldwidebasis through the followingreinsurancesubsidiaries:ArchReBermuda,ArchReinsuranceCompany(“ArchReU.S.”),ArchSyndicate2012,ArchSyndicate1955 and Arch Reinsurance Europe Underwriting Designated Activity Company (“Arch Re Europe”). Arch Re Bermuda isheadquartered inHamilton, Bermuda. ArchReBermudahas also been approved as a “certified reinsurer” in certainU.S.statesthatallowreducedcollateralforreinsurancecededtosuchreinsurers.ArchReU.S.islicensedorisanaccreditedorotherwiseapprovedreinsurerin50statesandtheDistrictofColumbiaandPuertoRico,theprovincesofOntarioandQuebecinCanadawith itsprincipalU.S.office inMorristown,NewJersey.Treatyoperations inCanadaareconducted through theCanadian branch of Arch Re U.S. (“Arch Re Canada”). Arch Re U.S. is also an admitted insurer in Guam. The property

ARCHREINSURANCELTD.ANDSUBSIDIARIESNOTESTOCONSOLIDATEDFINANCIALSTATEMENTS

8

facultative reinsurance operations are conducted primarily through Arch Re U.S. The property facultative reinsuranceoperationshaveofficesthroughouttheU.S.,Canada,EuropeandtheU.K.ArchReEurope,licensedandauthorizedasanon-lifereinsurerandalifereinsurer,isheadquarteredinDublin,IrelandwithbranchofficesoutsidetheEEAinZurichandLondon.The acquisition of Barbican in November 2019 also contributed to the Company’s reinsurance operations. AMAL is themanagingagentforthereinsurancebusinessofArchSyndicate2012andArchSyndicate1955.

Mortgage Operations. The Company’s mortgage operations include U.S. and international mortgage insurance andreinsuranceoperationsaswellasparticipationingovernmentsponsoredenterprise(“GSE”)creditrisk-sharingtransactions.TheCompany’smortgagegroupincludesdirectmortgageinsuranceintheU.S.primarilyprovidedbyArchMortgageInsuranceCompany,UnitedGuarantyResidentialInsuranceCompanyandArchMortgageGuarantyCompany(together,“ArchMIU.S.”),mortgagereinsurancebyArchReBermudatomortgageinsurersonbothaproportionalandnon-proportionalbasisglobally;directmortgage insurance in EEA andU.K. providedbyArch Insurance (EU), inAustralia throughArch LMI Pty Ltd. (“ArchLMI”) and Arch Lenders Mortgage Indemnity Limited (formerly Westpac Lenders Mortgage Insurance Limited) (“ArchIndemnity”),andinHongKongbyArchMIAsiaLimited(“ArchMIAsia”);andparticipationinvariousGSEcreditrisk-sharingproductsprovidedprimarilybyArchReBermuda.

In2014,withtheacquisitionofCMGMortgageInsuranceCompanywhichwasrenamed“ArchMortgageInsuranceCompany,”theCompanyenteredtheU.S.mortgageinsurancemarketplace.ArchMortgageInsuranceCompany(“AMIC”)islicensedandoperatesinall50states,theDistrictofColumbiaandPuertoRico.

InDecember2016, theCompany completed theacquisitionofUnitedGuarantyCorporation, aNorthCarolina corporation(“UGC”),and itsprimaryoperatingsubsidiary,UnitedGuarantyResidential InsuranceCompany(“UGRIC”),which is licensedandoperatesinall50statesandtheDistrictofColumbia.AMICandUGRIChaveeachbeenapprovedasaneligiblemortgageinsurerbyFannieMaeandFreddieMac,subjecttomaintainingcertainongoingrequirements(“eligiblemortgageinsurer”).ArchMortgageGuarantyCompany,offersdirectmortgageinsurancetoU.S.mortgagelenderswithrespecttomortgagesthatlenders intend to retain in portfolio or include in non-agency securitizations. ArchMortgageGuaranty Company,which islicensedinall50states,insuresmortgagesthatarenotintendedtobesoldtotheGSEs,anditisthereforenotapprovedbyeitherGSEasaneligiblemortgageinsurer.

In January 2019, Arch LMI was authorized by the Australia Prudential Regulation Authority (“APRA”) to write lenders’mortgageinsurance.InAugust2021,weacquiredWestpacLendersMortgageInsuranceLimited,whichisalsoauthorizedbyAPRA towrite lenders’mortgage insurance, which has since been renamed Arch LendersMortgage Indemnity Ltd (“ArchIndemnity”). ArchLMIandArch Indemnityareheadquartered inSydney,Australiaand focusonprovidingdirect lenders’mortgageinsuranceandreinsurancetotheAustralianmarket.

OtherOperations.In2014,theCompanysponsored,alongwithHPSInvestmentPartners,LLC(formerlyHighbridgePrincipalStrategies,LLC)(“HPS”),theformationofSomersHoldingsLtd.(formerlyWatfordHoldingsLtd.).SomersHoldingsLtd.istheparent of Somers Re Ltd. (formerly Watford Re Ltd.), a multi-line Bermuda reinsurance company (together with SomersHoldingsLtd.,“Somers”).TheCompanyactsasSomers’ reinsuranceunderwritingmanagerandHPSmanagesSomers’non-investment grade credit portfolios, and Arch Investment Management Ltd. (“AIM”), a wholly-owned subsidiary of ArchCapital,managesSomers’investmentgradeportfolios,eachunderseparatelongtermservicesagreements.Somers’strategyistocombineadiversifiedreinsurancebusinesswithadisciplinedinvestmentstrategycomprisedprimarilyofnon-investmentgradecreditassets.Somershasitsownmanagementandboardofdirectorsandisresponsiblefortheoverallprofitabilityofitsresults(seeNote4).

Inthe2020fourthquarter,theCompany,Somers,andGreysbridgeLtd.,awholly-ownedsubsidiaryoftheCompany,enteredintoanAgreementandPlanofMerger(asamended,the“MergerAgreement”).TheCompanyassigneditsrightsundertheMergerAgreement toGreysbridgeHoldings Ltd. (“Greysbridge”). Themerger and the relatedGreysbridgeequity financingclosedonJuly1,2021.EffectiveJuly1,2021,SomersiswhollyownedbyGreysbridge,andGreysbridgeisowned40%bytheCompany, 30% by certain fundsmanaged by Kelso& Company (“Kelso”) and 30% by certain fundsmanaged byWarburgPincus LLC (“Warburg”). Based on the governing documents ofGreysbridge, the Company concluded that,while it retainssignificantinfluenceoverSomers,Somersnolongerconstitutesavariableinterestentity.Accordingly,effectiveJuly1,2021,theCompanynolongerconsolidatestheresultsofSomersinitsconsolidatedfinancialstatementsandfootnotes.(seeNote4).

InJanuary2017,theCompanyandKelsosponsoredtheformationofPremiaHoldingsLtd.PremiaHoldingsLtd.istheparentof Premia Reinsurance Ltd., a multi-line Bermuda reinsurance company (together with Premia Holdings Ltd., “Premia”).


9

Premia’sstrategyistoreinsureoracquirecompaniesorreserveportfoliosinthenon-lifepropertyandcasualtyinsuranceandreinsurance run-off market. Arch Re Bermuda and certain Arch co-investors invested $100.0 million and acquiredapproximately25%ofPremiaaswellaswarrantstopurchaseadditionalcommonequity.AffiliatesofKelsoinvested$300.0millionandacquiredthebalanceofPremiaaswellaswarrantstopurchaseadditionalcommonequity(seeNote14).

In2021, theCompanycompleted the sharepurchaseagreementwithNatixis topurchase29.5%of the commonequityofCoface SA (“Coface”), a France-based leader in the global tradeand credit insurancemarket. This is a long-term, strategicinvestment in Coface, and fits with the Company’s efforts to develop uncorrelated sources of underwriting income. Ourcompanies sharea focuson specialtyunderwritingwhere knowledgeandexpertise create value forour clients, and tradecreditcontributestotheCompany’sspecialty-drivenbusinessmodel.

The Company has reclassified the presentation of certain prior year information to conform to the current presentation,includingthecorrectpresentationof‘income(loss)fromoperatingaffiliates’onitsconsolidatedstatementsofincomeforallperiodspresentedtoreclasssuchitemfrom‘otherincome(loss)’.TheCompanyalsochangeditspresentationof‘investmentinoperatingaffiliates’on its consolidatedbalance sheet forall periodspresented to reclass such item from ‘otherassets’.Such reclassifications had no effect on the Company’s net income, comprehensive income, shareholder’s equity or cashflows.Managementviews the impactof thepriorperiodmisclassificationasnotmaterial to the financial statementsonaquantitative andqualitativebasis. (SeeNote9). Tabular amounts are inU.S.Dollars in thousands, except shareamounts,unlessotherwisenoted.


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2. BusinessAcquired

WestpacLendersMortgageInsuranceLimited(“WLMI”)

On August 31, 2021, the Company completed the acquisition of WLMI, an Australian Prudential Regulation Authorityauthorizedcaptivelendersmortgageinsurance(“LMI”)providertotheWestpacBankingCorporation(“Westpac”).Aspartoftheacquisition,WLMIwillretain itsexistingrisk inforceandremainWestpac’sexclusiveproviderofLMIonnewmortgageoriginations for a period of 10 years. Upon completion of this transaction, the Company renamedWLMI to Arch LendersMortgageIndemnityLimited(“ArchIndemnity”).ArchIndemnitywillbecometheCompany’sprimaryproviderofLMItotheAustralianmarket.

SomersetBridgeGroupLimited,SouthernRockHoldingsLimitedandaffiliates(“SomersetGroup”)

OnAugust6,2021,theCompanycompletedtheacquisitionofSomersetGroup.Theacquisition includesSomersetGroup’smotor insurancemanaginggeneralagent,distributioncapabilitiesthroughdirectandaggregatorchannels,affiliated insurerandfullyintegratedclaimsoperation.

Inconnectionwiththeacquisitionsnotedabove,theCompanyincreaseditsgoodwillandintangibleassetsby$350.1million.

3. SignificantAccountingPolicies

(a)BasisofPresentation

TheconsolidatedfinancialstatementshavebeenpreparedinconformitywithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmerica(“GAAP”)andincludetheaccountsofArchReBermudaanditssubsidiaries,includingArchReU.S.,Arch Capital Group (U.S.) Inc. (“Arch-U.S.”), Arch Insurance, Arch Specialty, Arch P&C, Arch Indemnity Insurance, ArchInsuranceCanada,ArchReEurope,AMIC,UGRIC,ArchMortgageGuarantyCompany,ArchLMI,ArchIndemnity,ArchMIAsia,ArchInsurance(EU),ArchInsurance(U.K.),ArchSyndicate2012,ArchSyndicate1955,andAMAL.Allsignificantintercompanytransactionsandbalanceshavebeeneliminatedinconsolidation.

ThepreparationoffinancialstatementsinconformitywithGAAPrequiresmanagementtomakeestimatesandassumptionsthataffectthereportedamountsofassetsandliabilitiesanddisclosureofcontingentassetsandliabilitiesatthedateofthefinancialstatementsandthereportedamountsof revenuesandexpensesduringthereportingperiod.Actual resultscoulddiffermateriallyfromthoseestimatesandassumptions.TheCompany’sprincipalestimatesinclude:

• Thereserveforlossesandlossadjustmentexpenses;• Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses, including the provision for

uncollectibleamounts;• Estimatesofwrittenandearnedpremiums;• Thevaluationoftheinvestmentportfolioandassessmentofallowanceforcreditlosses;• Thevaluationofpurchasedintangibleassets;• Theassessmentofgoodwillandintangibleassetsforimpairment;and• Thevaluationofdeferredtaxassets.

(b)PremiumRevenuesandRelatedExpenses

Insurance.Insurancepremiumswrittenaregenerallyrecordedatthepolicyinceptionandareprimarilyearnedonaproratabasisoverthetermsofthepoliciesforallproducts,usually12months.Premiumswrittenincludeestimatesthatarederivedfrom multiple sources which include the historical experience of the underlying business, similar business and availableindustry information.Unearnedpremiumreservesrepresenttheportionofpremiumswrittenthatrelatestotheunexpiredtermsofin-forceinsurancepolicies.

Reinsurance.Reinsurancepremiumswritten includeamountsreportedbybrokersandcedingcompanies,supplementedbytheCompany’sownestimatesofpremiumswherereportshavenotbeenreceived.Thedeterminationofpremiumestimatesrequiresa reviewof theCompany’sexperiencewith thecedingcompanies, familiaritywitheachmarket, the timingof thereported information, an analysis and understanding of the characteristics of each line of business, and management’sjudgmentoftheimpactofvariousfactors,includingpremiumorlosstrends,onthevolumeofbusinesswrittenandcededtothe Company. On an ongoing basis, the Company’s underwriters review the amounts reported by these third parties for


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reasonablenessbasedontheirexperienceandknowledgeofthesubjectclassofbusiness,takingintoaccounttheCompany’shistorical experiencewith the brokers or ceding companies. In addition, reinsurance contracts underwhich the CompanyassumesbusinessgenerallycontainspecificprovisionswhichallowtheCompanytoperformauditsofthecedingcompanytoensure compliancewith the terms and conditions of the contract, including accurate and timely reporting of information.Basedon a reviewof all available information,management establishes premiumestimateswhere reports havenot beenreceived. Premiumestimates areupdatedwhennew information is receivedanddifferencesbetween suchestimates andactualamountsarerecordedintheperiodinwhichestimatesarechangedortheactualamountsaredetermined.

ReinsurancepremiumswrittenarerecordedbasedonthetypeofcontractstheCompanywrites.PremiumsontheCompany’sexcess of loss and pro rata reinsurance contracts are estimated when the business is underwritten. For excess of losscontracts,premiumsarerecordedaswrittenbasedonthetermsofthecontract.Estimatesofpremiumswrittenunderproratacontractsarerecordedintheperiodinwhichtheunderlyingrisksareexpectedtoinceptandarebasedoninformationprovided by the brokers and the ceding companies. For multi-year reinsurance treaties which are payable in annualinstallments,generally,onlytheinitialannualinstallmentisincludedaspremiumswrittenatpolicyinceptionduetotheabilityofthereinsuredtocommuteorcancelcoverageduringthetermofthepolicy.Theremainingannualinstallmentsareincludedaspremiumswrittenateachsuccessiveanniversarydatewithinthemulti-yearterm.

Reinsurancepremiumswritten,irrespectiveoftheclassofbusiness,aregenerallyearnedonaproratabasisoverthetermsoftheunderlyingpoliciesorreinsurancecontracts.Contractsandpolicieswrittenona“lossesoccurring”basiscoverclaimsthatmayoccurduringthetermofthecontractorpolicy,whichistypically12months.Accordingly,thepremiumisearnedevenlyovertheterm.Contractswhicharewrittenona“riskattaching”basiscoverclaimswhichattachtotheunderlyinginsurancepolicieswrittenduringthetermsofsuchcontracts.Premiumsearnedonsuchcontractsusuallyextendbeyondtheoriginaltermofthereinsurancecontract,typicallyresultinginrecognitionofpremiumsearnedovera24-monthperiod.CertainoftheCompany’sreinsurancecontractsincludeprovisionsthatadjustpremiumsoracquisitionexpensesbasedupontheexperienceunder the contracts. Premiumswritten and earned, aswell as related acquisition expenses, are recorded based upon theprojectedexperienceundersuchcontracts.

TheCompanyalsowritescertain reinsurancebusiness that is intendedtoprovide insurerswithriskmanagementsolutionsthatcomplementtraditionalreinsurance.Underthesecontracts,theCompanyassumesameasuredamountofinsuranceriskin exchange for an anticipatedmargin, which is typically lower than on traditional reinsurance contracts. The terms andconditionsofthesecontractsmay includeadditionalorreturnpremiumsbasedon lossexperience, losscorridors,sublimitsandcaps.Examplesofsuchbusiness includeaggregatestop-losscoverages, financialquotasharecoveragesandmulti-yearretrospectively rated excess of loss coverages. If these contracts are deemed to transfer risk, they are accounted for asreinsurance.Otherwise,suchcontractsareaccountedforunderthedepositmethod.

Mortgage. Mortgage guaranty insurance policies are contracts that are generally non-cancelable by the insurer, arerenewableata fixedprice,andprovide forpaymentofpremiumsonamonthly,annualorsinglebasis.Uponrenewal, theCompanyisnotabletore-underwriteorre-priceitspolicies.Consistentwithindustryaccountingpractices,premiumswrittenonamonthlybasisareearnedascoverageisprovided.Premiumswrittenonanannualbasisareamortizedonamonthlyproratabasisovertheyearofcoverage.Primarymortgageinsurancepremiumswrittenonpoliciescoveringmorethanoneyeararereferredtoassinglepremiums.Aportionoftherevenuefromsinglepremiumsisrecognizedinpremiumsearnedinthecurrentperiod,andtheremainingportionisdeferredasunearnedpremiumsandearnedovertheestimatedexpirationofriskof thepolicy. If singlepremiumpolicies related to insured loans are canceleddue to repaymentby theborrower and thepolicyisanon-refundableproduct,theremainingunearnedpremiumrelatedtoeachcanceledpolicyisrecognizedasearnedpremiumuponnotificationofthecancellation.

Reinstatementpremiums for theCompany’s insuranceand reinsuranceoperationsare recognizedat the timea losseventoccurs, where coverage limits for the remaining life of the contract are reinstated under pre-defined contract terms.Reinstatementpremiums,ifobligatory,arefullyearnedwhenrecognized.Theaccrualofreinstatementpremiumsisbasedonanestimateoflossesandlossadjustmentexpenses,whichreflectsmanagement’sjudgment.

Premiumestimatesare reviewedbymanagementat leastquarterly.Suchreview includesacomparisonofactual reportedpremiumstoexpectedultimatepremiumsalongwithareviewoftheagingandcollectionofpremiumestimates.Basedonmanagement’sreview,theappropriatenessofthepremiumestimatesisevaluated,andanyadjustmenttotheseestimatesisrecorded in the period in which it becomes known. Adjustments to premium estimates could be material and suchadjustments could directly and significantly impact earnings favorably or unfavorably in the period they are determinedbecausetheestimatedpremiummaybefullyorsubstantiallyearned.Asignificantportionofamountsincludedaspremiums


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receivable,whichrepresentestimatedpremiumswritten,netofcommissions,arenotcurrentlyduebasedonthetermsoftheunderlyingcontracts.

Unearnedpremiumsrepresenttheportionofpremiumswrittenthatisapplicabletotheestimatedunexpiredriskofinsuredloans.Aportionofpremiumpaymentsmayberefundableiftheinsuredcancelscoverage,whichgenerallyoccurswhentheloanisrepaid,theloanamortizestoasufficientlylowamounttotriggeralenderpermittedorlegallyrequiredcancellation,orthevalueof thepropertyhas increasedsufficiently inaccordancewiththetermsof thecontract.Premiumrefundsreducepremiumsearnedintheconsolidatedstatementsofincome.Generally,onlyunearnedpremiumsarerefundable.

Premiumsreceivableincludeamountsreceivablefromagents,brokersandinsuredthatarebothcurrentlydueandamountsnotyetdueoninsurance,reinsuranceandmortgageinsurancepolicies.Premiumsreceivablebalancesarereportednetofanallowance for expected credit losses. The Companymonitors credit risk associated with premiums receivable through itsongoing review of amounts outstanding, aging of the receivable, historical loss data, and counterparty financial strengthmeasures.Theallowancealsoincludesestimateduncollectibleamountsrelatedtodisputerisk.Incertaininstances,creditriskmaybereducedbytheCompany’srighttooffset lossobligationsorunearnedpremiumsagainstpremiumsreceivable.Anyallowance for credit losses is charged tonet realized gains (losses) in theperiod the receivable is recordedand revised insubsequent periods to reflect changes in the Company’s estimate of expected credit losses. See note 7 for additionalinformation.

Acquisition Costs. Acquisition costs that are directly related and incremental to the successful acquisition or renewal ofbusiness aredeferredandamortizedbasedon the typeof contract. TheCompany’s insuranceand reinsuranceoperationscapitalize incrementaldirectexternalcosts thatresult fromacquiringacontractbutdonotcapitalizesalaries,benefitsandotherinternalunderwritingcosts.FortheCompany’smortgageinsuranceoperations,whichincludeasubstantialdirectsalesforce,bothexternalandcertain internaldirect costsaredeferredandamortized.Forpropertyandcasualty insuranceandreinsurancecontracts,deferredacquisitioncostsareamortizedovertheperiod inwhichtherelatedpremiumsareearned.Consistentwithmortgage insurance industryaccountingpractice,amortizationofacquisitioncostsrelatedtothemortgageinsurance contracts for each underwriting year’s book of business is recorded in proportion to estimated gross profits.Estimatedgrossprofitsarecomprisedofearnedpremiumsandlossesandlossadjustmentexpenses.Foreachunderwritingyear, the Company estimates the rate of amortization to reflect actual experience and any changes to persistency or lossdevelopment.

Deferredacquisition costs are carriedat their estimated realizable valueand take intoaccountanticipated lossesand lossadjustmentexpenses,basedonhistoricalandcurrentexperience,andanticipatedinvestmentincome.

Apremiumdeficiencyoccursifthesumofanticipatedlossesandlossadjustmentexpenses,unamortizedacquisitioncostsandmaintenancecostsexceedunearnedpremiums(includingexpectedfuturepremiums)andanticipatedinvestmentincome.Apremium deficiency reserve (“PDR”) is recorded by charging any unamortized acquisition costs to expense to the extentrequiredinordertoeliminatethedeficiency.Ifthepremiumdeficiencyexceedsunamortizedacquisitioncoststhenaliabilityisaccruedfortheexcessdeficiency.

ToassesstheneedforaPDRonmortgageexposures,theCompanydevelopslossprojectionsbasedonmodeledloandefaultsrelatedto itscurrentpolicies inforce.Thisprojection isbasedonrecenttrends indefaultexperience,severityandratesofdefaultedloansmovingtoclaim,aswellasrecenttrendsintherateatwhichloansareprepaid,andincorporatesanticipatedinterestincome.EvaluatingtheexpectedprofitabilityoftheCompany’sexistingmortgageinsurancebusinessandtheneedforaPDRfor itsmortgagebusiness involvessignificantrelianceuponassumptionsandestimateswithregardtothe likelihood,magnitudeandtimingofpotentiallossesandpremiumrevenues.

NopremiumdeficiencychargeswererecordedbytheCompanyduring2021and2020.

(c)DepositAccounting

Certainassumedreinsurancecontractsthataredeemednottotransfer insurancerisk,areaccountedforusingthedepositmethodofaccounting.However,itispossiblethattheCompanycouldincurfinanciallossesonsuchcontracts.Managementexercisessignificantjudgmentintheassumptionsusedindeterminingwhetherassumedcontractsshouldbeaccountedforasreinsurancecontractsordepositcontracts.Forthosecontractsthatcontainonlysignificantunderwritingrisk,theestimatedprofitmarginisdeferredandamortizedoverthecontractperiodandsuchamountisincludedintheCompany’sunderwritingresults.Whentheestimatedprofitmarginisexplicit,themarginisreflectedasotherunderwritingincomeandanyadversefinancialresultsonsuchcontractsarereflectedasincurredlosses.Whentheestimatedprofitmarginisimplicit,themarginisreflected as an offset to paid losses and any adverse financial results on such contracts are reflected as incurred losses.Additionaljudgmentsarerequiredwhenapplyingtheaccountingguidancewithrespecttotherevenuerecognitioncriteriafor


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contractsdeemedtotransferonlysignificantunderwritingrisk.Forthosecontractsthatcontainonlysignificanttimingrisk,anaccretionrateisestablishedatinceptionofthecontractbasedonactuarialestimateswherebythedepositaccountingliabilityisincreasedtotheestimatedamountpayableoverthecontractterm.Theaccretiononthedepositisbasedontheexpectedrateofreturnrequiredtofundtheexpectedfuturepaymentobligations.PeriodicallytheCompanyreassessestheestimatedultimateliabilityandtherelatedexpectedrateofreturn.TheaccretionofthedepositaccountingliabilityaswellaschangestotheestimatedultimateliabilityandtheaccretionratewouldbereflectedaspartofinterestexpenseintheCompany’sresultsofoperations.AnynegativeaccretioninadepositaccountingliabilityisshowninotherunderwritingincomeintheCompany’sresultsofoperations.

Under some of these contracts, the ceding company retains the related assets on a funds-held basis. Such amounts areincludedin“Otherassets”ontheCompany’sbalancesheet.InterestincomeproducedbythoseassetsarerecordedaspartofnetinvestmentincomeintheCompany'sresultsofoperations.

(d)RetroactiveReinsurance

Retroactivereinsurancereimbursesacedingcompanyfor liabilities incurredasaresultofpast insurableeventscoveredbytheunderlyingpoliciesreinsured.Incertaininstances,reinsurancecontractscoverlossesbothonaprospectivebasisandonaretroactivebasisand,accordingly,theCompanybifurcatestheprospectiveandretrospectiveelementsofthesereinsurancecontracts and accounts for each element separately where practical. Underwriting income generated in connection withretroactivereinsurancecontractsisdeferredandamortizedintoincomeoverthesettlementperiodwhilelossesarechargedtoincomeimmediately.Subsequentchangesinestimatedamountortimingofcashflowsundersuchretroactivereinsurancecontracts are accounted for by adjusting the previously deferred amount to the balance thatwould have existed had therevised estimate been available at the inception of the reinsurance transaction,with a corresponding charge or credit toincome.

(e)ReinsuranceCeded

In the normal course of business, the Company purchases reinsurance to increase capacity and to limit the impact ofindividuallossesandeventsonitsunderwritingresultsbyreinsuringcertainlevelsofriskwithotherinsuranceenterprisesorreinsurers.TheCompanyusesprorata,excessoflossandfacultativereinsurancecontracts.Reinsurancecedingcommissionsthatrepresentarecoveryofacquisitioncostsarerecognizedasareductiontoacquisitioncostswhiletheremainingportionisdeferred.Theaccompanyingconsolidatedstatementof incomereflectspremiumsandlossesandlossadjustmentexpensesandacquisitioncosts,netofreinsuranceceded.SeeNote8forinformationontheCompany'sreinsuranceusage.Reinsurancepremiumscededandunpaidlossesandlossadjustmentexpensesrecoverableareestimatedinamannerconsistentwiththatof the original policies issued and the terms of the reinsurance contracts. If the reinsurers are unable to satisfy theirobligationsunder theagreements, theCompany’s insuranceor reinsurance subsidiarieswouldbe liable for suchdefaultedamounts.

Reinsurance recoverables are recorded as assets, predicatedon the reinsurers’ ability tomeet their obligations under thereinsuranceagreements.Incertaininstances,theCompanyobtainscollateral,includinglettersofcreditandtrustaccountstofurtherreducethecreditexposureonitsreinsurancerecoverables.TheCompanyreportsitsreinsurancerecoverablesnetofanallowanceforexpectedcreditloss.TheallowanceisbasedupontheCompany’songoingreviewofamountsoutstanding,thefinancialconditionofitsreinsurers,amountsandformofcollateralobtainedandotherrelevantfactors.Aratingsbasedprobability-of-default and loss-given-defaultmethodology is used to estimate the allowance for expected credit loss. Anyallowanceforcredit losses ischargedtonetrealizedgains(losses) intheperiodtherecoverable isrecordedandrevised insubsequent periods to reflect changes in the Company’s estimate of expected credit losses. See note 7 for additionalinformation.

(f)Cash

Cashincludescashequivalents,whichareinvestmentswithoriginalmaturitiesofthreemonthsorlessthatarenotpartoftheinvestmentportfolio.

(g)RestrictedCash

Restricted cash represents amounts held for the benefit of third parties and is legally or contractually restricted as towithdrawalorusagebytheCompany.Suchamountsareincludedin“Otherassets”ontheCompany’sconsolidatedbalancesheets.


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(h)Investments

TheCompanycurrentlyclassifiessubstantiallyallof itsfixedmaturity investmentsandshort-terminvestmentsas“availableforsale”and,accordingly, theyarecarriedatestimated fairvalue (alsoknownas fairvalue)with thechanges in fairvaluerecordedasanunrealizedgainorlosscomponentofaccumulatedothercomprehensiveincomeinshareholder’sequity.Thefairvalueoffixedmaturitysecuritiesandequitysecuritiesisgenerallydeterminedfromquotationsreceivedfromnationallyrecognized pricing services, or when such prices are not available, by reference to broker or underwriter bid indications.Short-term investments comprise securities due to mature within one year of the date of issue. Short-term investmentsinclude certain cash equivalents which are part of investment portfolios under themanagement of external and internalinvestmentmanagers.

Prior to the termination of its program in 2021, the Company entered into securities lending agreements with financialinstitutions to enhance investment income whereby it loaned certain of its securities to third parties, primarily majorbrokerage firms, for short periods of time through a lending agent. Such securities have been reclassified as “Securitiespledgedundersecuritieslending,atfairvalue.”TheCompanymaintainedlegalcontroloverthesecuritiesitlent,retainedtheearningsandcashflowsassociatedwiththeloanedsecuritiesandreceivedafeefromtheborrowerforthetemporaryuseofthesecurities.Collateralreceivedwasrequiredatarateof102%orgreaterofthefairvalueoftheloanedsecuritiesincludingaccruedinvestmentincomeandwasmonitoredandmaintainedbythelendingagent.Suchcollateralisreflectedas“Collateralreceivedundersecuritieslending,atfairvalue.”

TheCompany’sinvestmentportfolioincludescertainfundsthat,duetotheirownershipstructure,areaccountedforbytheCompanyusingtheequitymethod. Inapplyingtheequitymethod, these investmentsare initially recordedatcostandaresubsequentlyadjustedbasedon theCompany’sproportionateshareof thenet incomeor lossof the funds (which includechangesinthefairvalueoftheunderlyingsecuritiesinthefunds).Suchinvestmentsaregenerallyrecordedonaonetothreemonthlagbasedontheavailabilityofreportsfromtheinvestmentfunds.Changesinthecarryingvalueofsuchinvestmentsarerecordedinnetincomeas“Equityinnetincome(loss)ofinvestmentsaccountedforusingtheequitymethod.”Assuch,fluctuationsinthecarryingvalueoftheinvestmentsaccountedforusingtheequitymethodmayincreasethevolatilityoftheCompany’sreportedresultsofoperations.

TheCompany’s investmentportfolio includesequity securities thatareaccounted forat fair value.Suchholdingsprimarilyincludepublicly tradedcommonstocks.Dividend incomeonequities is reflected innet investment income.Changes in fairvalueonequitysecuritiesareincludedin“Netrealizedgains(losses)”intheconsolidatedstatementofincome.

The Company elected to carry certain fixed maturity securities, equity securities, short-term investments and otherinvestments at fair value under the fair value option afforded by accounting guidance regarding the fair value option forfinancialassetsandliabilities.ThefairvalueforcertainoftheCompany’sotherinvestmentsaredeterminedusingnetassetvalues(“NAVs”)asadvisedbyexternalfundmanagers.TheNAVisbasedonthefundmanager’svaluationoftheunderlyingholdingsinaccordancewiththefund’sgoverningdocuments.

Changesinfairvalueofinvestmentsaccountedforusingthefairvalueoptionareincludedin“Netrealizedgains(losses).”Theprimaryreasonsforelectingthefairvalueoptionweretoaddresssimplificationandcost-benefitconsiderations.

TheCompanyinvests inreverserepurchaseagreementsthataregenerallytreatedascollateralizedreceivables.Receivablesfor reverse repurchase agreements are reflected in “Other investments” or “Short-term investments” in the Company'sconsolidatedbalancesheetdependingontheirterms.Theseagreementsarerecordedattheircontractedresaleamountplusaccrued interest, other than those that are accounted for at fair value. In reverse repurchase transactions, the Companyobtainsaninterestinthepurchasedassetsthatarereceivedascollateral.

The Company invests in limited partner interests and shares of limited liability companies. Such amounts are included ininvestmentsaccountedforusingtheequitymethodandotherinvestments.Theseinvestmentscanoftenhavecharacteristicsofavariable interestentity (“VIE”).AVIErefers toentities thathavecharacteristicssuchas (i) insufficientequityat risk toallowtheentitytofinanceitsactivitieswithoutadditionalfinancialsupportor(ii)instanceswheretheequityinvestors,asagroup, do not have the characteristic of a controlling financial interest. If the Company is determined to be the primarybeneficiary, it is required to consolidate the VIE. The primary beneficiary is defined as the variable interest holder that isdeterminedtohavethecontrollingfinancial interestasaresultofhavingboth(i)thepowertodirecttheactivitiesofaVIEthatmostsignificantlyimpacttheeconomicperformanceoftheVIEand(ii)theobligationtoabsorblossesorrighttoreceivebenefitsfromtheVIEthatcouldpotentiallybesignificanttotheVIE.AtinceptionoftheVIEaswellasonanongoingbasis,theCompanydetermineswhetheritistheprimarybeneficiarybasedonananalysisoftheCompany’slevelofinvolvementintheVIE, thecontractual terms,andtheoverall structureof theVIE.TheCompany'smaximumexposureto losswithrespect to


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theseinvestmentsislimitedtotheinvestmentcarryingamountsreportedintheCompany'sconsolidatedbalancesheetsandanyunfundedcommitment.

The Company conducts a periodic review to identify and evaluate credit based impairments related to the Company’savailableforsaleinvestments.TheCompanyderivesestimatedcreditlossesbycomparingexpectedfuturecashflowstobecollected to the amortized cost of the security. Estimates of expected future cash flows consider among other things,macroeconomic conditions as well as the financial condition, near-term and long-term prospects for the issuer, and thelikelihoodof the recoverabilityofprincipal and interest. Effective January1,2020, credit lossesare recognized throughanallowance account subject to reversal, rather than a reduction in amortized cost. Declines in value attributable to factorsotherthancreditarereportedinothercomprehensiveincomewhiletheallowanceforcreditlossischargedtonetrealizedgains(losses).

ForavailableforsaleinvestmentsthattheCompanyintendstosellorforwhichitismorelikelythannotthattheCompanywouldberequiredtosellbeforeananticipatedrecoveryinvalue,thefullamountoftheimpairmentisincludedinnetrealizedgains (losses). The new cost basis of the investment is the previous amortized cost basis reduced by the impairmentrecognizedinnetrealizedgains(losses).Thenewcostbasisisnotadjustedforanysubsequentrecoveriesinfairvalue.

TheCompanyreportsaccrued investment incomeseparately frominvestmentbalancesandhaselectednottomeasureanallowance for credit losses for accrued investment income.Anyuncollectible accrued interest income iswrittenoff in theperioditisdeemeduncollectible.

PriortoJanuary1,2020,theCompanyperformedquarterlyreviewsofitsinvestmentstodeterminewhetherdeclinesinfairvalue below the cost basis were considered other-than-temporary in accordance with applicable accounting guidanceregarding the recognition and presentation of other-than-temporary-impairment (“OTTI”). The process of determiningwhether a security was other-than-temporarily impaired required judgment and involved analyzing many factors. Thesefactors included(i)ananalysisof the liquidity,businessprospectsandoverall financialconditionof the issuer, (ii) thetimeperiod inwhich therewasa significantdecline in value, (iii) the significanceof thedeclineand (iv) theanalysisof specificcreditevents.Whentherewerecredit-relatedlossesassociatedwithdebtsecuritiesforwhichtheCompanydidnothaveanintenttosellanditwasmorelikelythannotthatitwouldnotberequiredtosellthesecuritybeforerecoveryofitscostbasis,theamountoftheOTTIrelatedtoacreditlosswasrecognizedinearningsandtheamountoftheOTTIrelatedtootherfactors(e.g.,interestrates,marketconditions,etc.)wasrecordedasacomponentofothercomprehensiveincome(loss).Theamountof the credit loss of an impaired debt securitywas the difference between the amortized cost and the greater of (i) thepresentvalueofexpectedfuturecashflowsand(ii)thefairvalueofthesecurity.Ininstanceswherenocreditlossexistedbutitwasmore likely than not that the Companywould have to sell the debt security prior to the anticipated recovery, thedeclineinfairvaluebelowamortizedcostwasrecognizedasanOTTIinearnings.InperiodsaftertherecognitionofanOTTIondebtsecurities,theCompanyaccountedforsuchsecuritiesasiftheyhadbeenpurchasedonthemeasurementdateoftheOTTI at an amortized cost basis equal to theprevious amortized cost basis less theOTTI recognized in earnings. For debtsecurities forwhichOTTIwere recognized in earnings, thedifferencebetween thenewamortized costbasis and the cashflows expected to be collected would be accreted or amortized into net investment income. See Note 9 for additionalinformation.

Netinvestmentincomeincludesinterestanddividendincometogetherwithamortizationofmarketpremiumsanddiscountsand is net of investment management and custody fees. Anticipated prepayments and expected maturities are used inapplying the interest method for certain investments such as mortgage and other asset-backed securities. When actualprepaymentsdiffersignificantlyfromanticipatedprepayments,theeffectiveyieldisrecalculatedtoreflectactualpaymentstodate and anticipated future payments. The net investment in such securities is adjusted to the amount that would haveexistedhadtheneweffectiveyieldbeenappliedsincetheacquisitionofthesecurity.Suchadjustments,ifany,areincludedinnetinvestmentincomewhendetermined.

Investmentgainsorlossesrealizedonthesaleofinvestments,exceptforcertainfundinvestments,aredeterminedonafirst-in,first-outbasisandarereflectedinnetincome.Investmentgainsorlossesrealizedonthesaleofcertainfundinvestmentsaredeterminedonanaveragecostbasis.Unrealizedappreciationordeclineinthevalueofavailableforsalesecurities,whichare carried at fair value, is excluded from net income and recorded as a separate component of accumulated othercomprehensiveincome,netofapplicabledeferredincometax.

(i)DerivativeInstruments

The Company recognizes all derivative instruments, including embedded derivative instruments, at fair value in itsconsolidatedbalancesheets.TheCompanyemploystheuseofderivativeinstrumentswithinitsoperationstomitigaterisks


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arising from assets and liabilities held in foreign currencies as well as part of its overall investment strategy. For suchinstruments,changesinassetsandliabilitiesmeasuredatfairvaluearerecordedas“Netrealizedgains”intheconsolidatedstatementsof income.Inaddition,theCompany’sderivativeinstrumentsincludeamountsrelatedtounderwritingactivitieswherean insuranceorreinsurancecontractmeetstheaccountingdefinitionofaderivative instrument.Forsuchcontracts,changesinfairvaluearereflectedin“Otherunderwritingincome”intheconsolidatedstatementsofincomeastheunderlyingcontract originates from theCompany’s underwriting operations. For 2021 and 2020, the Companydid not designate anyderivative instruments as hedges under the relevant accounting guidance. SeeNote 11 for informationon theCompany’sderivativeinstruments.

(j)ReservesforLossesandLossAdjustmentExpenses

Insurance and Reinsurance.The reserve for losses and loss adjustment expenses consists of estimates of unpaid reportedlosses and loss adjustment expenses and estimates for losses incurred but not reported. The reserve for unpaid reportedlossesandlossadjustmentexpenses,establishedbymanagementbasedonreportsfromcedingcompaniesandclaimsfrominsureds, excludes estimates of amounts related to losses under high deductible policies, and represents the estimatedultimatecostofeventsorconditionsthathavebeenreportedtoorspecificallyidentifiedbytheCompany.Suchreservesaresupplementedbymanagement’sestimatesofreservesforlossesincurredforwhichreportsorclaimshavenotbeenreceived.TheCompany’s reservesarebasedona combinationof reservingmethods, incorporatingbothCompanyand industry lossdevelopment patterns. The Company selects the initial expected loss and loss adjustment expense ratios based oninformationderivedbyitsunderwritersandactuariesduringtheinitialpricingofthebusiness,supplementedbyindustrydatawhereappropriate.Suchratiosconsider,amongother things, ratechangesandchanges in termsandconditions thathavebeen observed in themarket. These estimates are reviewed regularly and, as experience develops and new informationbecomesknown, thereservesareadjustedasnecessary.Suchadjustments, ifany,arereflected in income in theperiod inwhich they are determined. As actual loss information has been reported, the Company has developed its own lossexperienceanditsreservingmethodsincludeotheractuarialtechniques.Overtime,suchtechniqueshavebeengivenfurtherweightinitsreservingprocessbasedonthecontinuingmaturationoftheCompany’sreserves.Inherentintheestimatesofultimatelossesandlossadjustmentexpensesareexpectedtrendsinclaimsseverityandfrequencyandotherfactorswhichmayvarysignificantlyasclaimsaresettled.Accordingly,ultimatelossesandlossadjustmentexpensesmaydiffermateriallyfromtheamountsrecordedintheaccompanyingconsolidatedfinancialstatements.Lossesandlossadjustmentexpensesarerecordedonanundiscountedbasis,exceptforexcessworkers’compensationandemployers’liabilitybusinesswrittenbytheCompany’sinsuranceoperations.

Mortgage. The reserves for mortgage guaranty insurance losses and loss adjustment expenses are the estimated claimsettlementcostsonnoticesofdelinquencythathavebeenreceivedbytheCompany,aswellasloandelinquenciesthathavebeenincurredbuthavenotbeenreportedbythelenders.Consistentwithprimarymortgageinsuranceindustryaccountingpractice,theCompanydoesnotestablish lossreservesfor futureclaimson insured loansthatarenotcurrentlydelinquent(definedastwoormorepaymentsinarrears).TheCompanyestablisheslossreservesonacase-by-casebasiswheninsuredloans are reported delinquent using estimated claim rates and average claim sizes for each cohort, net of any salvagerecoverable.TheCompanyalsoreservesfordelinquenciesthathaveoccurredbuthavenotyetbeenreportedtotheCompanypriortothecloseofanaccountingperiod.Todeterminethisreserve,theCompanyestimatesthenumberofdelinquenciesnot yet reported using historical information regarding late reported delinquencies and applies estimated claim rates andclaimsizesfortheestimateddelinquenciesnotyetreported.

TheestablishmentofreservesacrosstheCompany’soperationsisaninherentlyuncertainprocess,arenecessarilybasedonestimates, and the ultimate net cost may vary from such estimates. The methods for making such estimates and forestablishing the resulting liability are reviewed and updated using the most current information available. Any resultingadjustments,whichmaybematerial,arereflectedincurrentoperations.

(k)ContractholderReceivablesandPayablesandCollateralHeldforInsuredObligations

Certain insurance policies written by the Company’s insurance operations feature large deductibles, primarily in itsconstructionandnationalaccountslineofbusiness.Undersuchcontracts,theCompanyisobligatedtopaytheclaimantforthefullamountoftheclaim.TheCompanyissubsequentlyreimbursedbythepolicyholderforthedeductibleamount.Theseamounts are included on a gross basis in the consolidated balance sheets as contractholder payables and contractholderreceivables.IntheeventthattheCompanyisunabletocollectfromthepolicyholder,theCompanywouldbeliableforsuchdefaultedamounts.Collateral,primarilyintheformoflettersofcredit,cashandtrusts,isobtainedfromthepolicyholdertomitigatetheCompany’screditrisk.IntheinstanceswheretheCompanyreceivescollateralintheformofcash,theCompanyreflectsitin“Collateralheldforinsuredobligations.”


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Contractholder receivables are reported net of an allowance for expected credit losses. The allowance is based upon theCompany’songoingreviewofamountsoutstanding,changesinpolicyholdercreditstanding,amountsandformofcollateralobtained, and other relevant factors. A ratings based probability-of-default and loss-given-defaultmethodology is used toestimatetheallowanceforexpectedcreditlosses.Anyallowanceforcreditlossesischargedtonetrealizedgains(losses)inthe period the receivable is recorded and revised in subsequent periods to reflect changes in the Company’s estimate ofexpectedcreditlosses.Seenote7foradditionalinformation.

(l)ForeignExchange

Assetsand liabilitiesof foreignoperationswhose functional currency isnot theU.S.Dollarare translatedat theprevailingexchange rates at each balance sheet date. Revenues and expenses of such foreign operations are translated at averageexchange rates during the year. The net effect of the translation adjustments for foreign operations is included inaccumulatedother comprehensive income, net of applicable deferred income tax.Monetary assets and liabilities, such aspremiums receivable and the reserve for losses and loss adjustment expenses, denominated in foreign currencies arerevaluedattheexchangerateineffectatthebalancesheetdatewiththeresultingforeignexchangegainsandlossesincludedinnet income.Accountsthatareclassifiedasnon-monetary,suchasdeferredacquisitioncostsandtheunearnedpremiumreserves, are not revalued. In the case of foreign currency denominated fixed maturity securities which are classified as“availableforsale,”thechangeinexchangeratesbetweenthelocalcurrencyinwhichtheinvestmentsaredenominatedandtheCompany’s functional currencyateachbalance sheetdate is included inunrealizedappreciationordecline invalueofsecurities,acomponentofaccumulatedothercomprehensiveincome,netofapplicabledeferredincometax.

(m)IncomeTaxes

Deferredincometaxesreflecttheexpectedfuturetaxconsequencesoftemporarydifferencesbetweenthecarryingamountsofassetsandliabilitiesforfinancialreportingpurposesandamountsusedforincometaxpurposes.Avaluationallowanceisrecorded if it ismore likely thannot that someorallofadeferred taxassetmaynotbe realized.TheCompanyconsidersfuturetaxableincomeandfeasibletaxplanningstrategies inassessingtheneedforavaluationallowance. IntheeventtheCompanydeterminesthatitwillnotbeabletorealizeallorpartofitsdeferredincometaxassetsinthefuture,anadjustmenttothedeferredincometaxassetswouldbechargedtoincomeintheperiodinwhichsuchdeterminationismade.Inaddition,if the Company subsequently assesses that the valuation allowance is no longer needed, a benefit would be recorded toincomeintheperiodinwhichsuchdeterminationismade.SeeNote13formoreinformation.

TheCompanyrecognizesataxbenefitwhereitconcludesthatitismorelikelythannotthatthetaxbenefitwillbesustainedon audit by the taxing authority based solely on the technical merits of the associated tax position. If the recognitionthreshold is met, the Company recognizes a tax benefit measured at the largest amount of the tax benefit that, in theCompany’s judgment, is greater than 50% likely to be realized. The Company records interest and penalties related tounrecognizedtaxbenefitsintheprovisionforincometaxes.

(n)Share-BasedPaymentArrangements

TheCompanyappliesafairvaluebasedmeasurementmethodinaccountingforitsshare-basedpaymentarrangementswitheligibleemployeesanddirectors.Compensationexpenseisestimatedbasedonthefairvalueoftheawardatthegrantdateandisrecognizedinnet incomeovertherequisiteserviceperiodwithacorrespondingincreaseinshareholder’sequity.Novalue isattributedtoawardsthatemployeesforfeitbecausetheyfail tosatisfyvestingconditions.TheCompany’s (i) time-based awards generally vest over a three year period with one-third vesting on each of the first, second and thirdanniversariesofthegrantdateand(ii)performance-basedawardscliffvestaftereachthreeyearperformanceperiodbasedonachievementofthespecifiedperformancecriteria.Theshare-basedcompensationexpenseassociatedwithawardsthathavegradedvestingfeaturesandvestbasedonserviceconditionsonlyiscalculatedonastraight-linebasisovertherequisiteserviceperiodfortheentireaward.Compensationexpenserecognizedinconnectionwithperformanceawards isbasedontheachievementofthespecifiedperformanceandserviceconditions.Thefinalmeasureofcompensationexpenserecognizedover the requisite service period reflects the final performance outcome. During the recognition period compensationexpenseisaccruedbasedontheperformanceconditionthatisprobableofachievement.Forawardsgrantedtoretirement-eligibleemployeeswherenoserviceisrequiredfortheemployeetoretaintheaward,thegrantdatefairvalueisimmediatelyrecognizedascompensationexpenseatthegrantdatebecausetheemployeeisabletoretaintheawardwithoutcontinuingtoprovide service. Foremployeesnear retirementeligibility, attributionof compensation cost isover theperiod from thegrantdatetotheretirementeligibilitydate.ThesechargeshadnoimpactontheCompany’scashflowsortotalshareholder’sequity.SeeNote20forinformationrelatingtotheCompany’sshare-basedpaymentawards.


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(o)GuarantyFundandOtherRelatedAssessments

Liabilities for guaranty fund and other related assessments in the Company’s insurance and reinsurance operations areaccruedwhentheCompanyreceivesnoticethatanamountispayable,orearlierifareasonableestimateoftheassessmentcanbemade.

(p)GoodwillandIntangibleAssets

Goodwill representstheexcessofthepurchasepriceofanacquisitionoverthefairvalueofthenetassetsacquiredand isassignedtotheapplicablereportingunitatacquisition.Goodwillisevaluatedforimpairmentonanannualbasis.Impairmenttests may be performed more frequently if the facts and circumstances indicate a possible impairment. In performingimpairmenttests, theCompanymayfirstassessqualitativefactorstodeterminewhether it ismore likelythannot(that is,morethana50%probability) that the fairvalueofa reportingunitexceeds itscarryingamountasabasis fordeterminingwhetheritisnecessarytoperformgoodwillimpairmenttestdescribedintheaccountingguidance.

Indefinite-lived intangible assets, such as insurance licenses are evaluated for impairment similar to goodwill. Finite-livedintangibleassetsandliabilitiesincludethevalueofacquiredinsuranceandreinsurancecontracts,whichareestimatedbasedon the present value of future expected cash flows and amortized in proportion to the estimated profits expected to berealized.Otherfinite-livedintangibleassets, includingcustomerlists,tradenameandITplatforms,areamortizedovertheirusefullives.Finite-livedintangibleassetsandliabilitiesareperiodicallyreviewedforindicatorsofimpairment.Animpairmentis recognized when the carrying amount is not recoverable from its undiscounted cash flows and is measured as thedifferencebetweenthecarryingamountandfairvalue.

If goodwill or intangible assets are impaired, such assets are written down to their fair values with the related expenserecordedintheCompany’sresultsofoperations.

(q)InvestmentinOperatingAffiliates

Investment in operating affiliates primarily represent the Company’s investments inwhich it has significant influence andwhichareaccountedforundertheequitymethodofaccounting.Inapplyingtheequitymethodofaccounting,investmentsinoperatingaffiliatesareinitiallyrecordedatcostandaresubsequentlyadjustedbasedontheCompany’sproportionateshareofnetincomeorlossoftheoperatingaffiliate.TheCompanyrecordsitsproportionateshareofothercomprehensiveincomeorlossoftheoperatingaffiliateasacomponentofothercomprehensiveincome.Adjustmentsarebasedonthemostrecentlyavailablefinancialinformationfromtheoperatingaffiliate.Changesinthecarryingvalueoftheseinvestmentsarerecordedinincome(loss)fromoperatingaffiliates.

(r)RecentAccountingPronouncements

RecentlyIssuedAccountingStandardsAdopted

TheCompanyadoptedASU2019-12,“SimplifyingtheAccountingforIncomeTaxes.”ThisASUeliminatescertainexceptionsforrecognizingdeferredtaxesforinvestments,performingintraperiodtaxallocationsandcalculatingincometaxesininterimperiods. The ASU also clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. TheadoptionofthisguidancedidnothaveamaterialeffectontheCompany’sconsolidatedfinancialstatements.

RecentlyIssuedAccountingStandardsNotYetAdopted

ASU2020-04,“FacilitationoftheEffectsofReferenceRateReformonFinancialReporting,”was issuedinMarch2020.ThisASUprovidesoptionalexpedientsandexceptions forapplyingGAAPto investments,derivatives,orother transactions thatreference the London Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued because ofreferenceratereform.Alongwiththeoptionalexpedients,theamendmentsincludeageneralprinciplethatpermitsanentitytoconsidercontractmodificationsduetoreferencereformtobeaneventthatdoesnotrequirecontractre-measurementatthe modification date or reassessment of a previous accounting determination. This standard may be elected over timethroughDecember31,2022asreferenceratereformactivitiesoccur.TheCompanyiscurrentlyevaluatingtheimpactofthenewguidanceon its consolidated financial statementsanddoesnotexpect this guidance tohaveamaterial effecton theCompany’sconsolidatedfinancialstatements.


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4. VariableInterestEntityandNoncontrollingInterests

SomersHoldingsLtd.

In March 2014, the Company invested $100.0 million and acquired 2,500,000 common shares of Somers. Somers wasconsideredaVIEandtheCompanyconcludedthatitwastheprimarybeneficiaryofSomers,throughJune30,2021.Assuch,theresultsofSomerswereincludedintheCompany’sconsolidatedfinancialstatementsasofandfortheperiodsendedJune30,2021.

In the 2020 fourth quarter, the Company, Somers and Greysbridge, a wholly-owned subsidiary of Arch, entered into anAgreement and Plan ofMerger (as amended, the “Merger Agreement”). Themerger and the related Greysbridge equityfinancingclosedonJuly1,2021.Effective July1,2021,Somers iswhollyownedbyGreysbridge,andGreysbridge isowned40%bytheCompany,30%bycertaininvestmentfundsmanagedbyKelsoand30%bycertaininvestmentfundsmanagedbyWarburg. Based on the governing documents of Greysbridge, the Company concluded that, while it retains significantinfluence over Somers, Somers no longer constitutes a variable interest entity. Accordingly, effective July 1, 2021, theCompanynolongerconsolidatestheresultsofSomersinitsconsolidatedfinancialstatementsandfootnotes.Beginninginthe2021thirdquarter, theCompanyclassifies its investmentas ‘investments inoperatingaffiliates’ontheCompany’sbalancesheetsandisaccountedforundertheequitymethod.

ThefollowingtableprovidesthecarryingamountandbalancesheetcaptioninwhichtheassetsandliabilitiesofSomerswerereported:

YearEndedDecember31,

2020

AssetsInvestmentsaccountedforusingthefairvalueoption(1) $ 1,790,385Fixedmaturitiesavailableforsale,atfairvalue 655,249Equitysecurities,atfairvalue 52,410Cash 211,451Accruedinvestmentincome 14,679Premiumsreceivable 224,377ReinsurancerecoverableonunpaidandpaidlossesandLAE 286,590Cededunearnedpremiums 122,339Deferredacquisitioncosts,net 53,705Receivableforsecuritiessold 37,423Goodwillandintangibleassets 7,650Otherassets 75,801TotalassetsofconsolidatedVIE $ 3,532,059

LiabilitiesReservesforlossesandlossadjustmentexpenses $ 1,519,583Unearnedpremiums 407,714Reinsurancebalancespayable 63,269Revolvingcreditagreementborrowings 155,687Seniornotes 172,689Payableforsecuritiespurchased 25,881Otherliabilities 193,494TotalliabilitiesofconsolidatedVIE $ 2,538,317

Redeemablenoncontrollinginterests $ 52,398

(1)Includedin“otherinvestments”ontheCompany’sbalancesheet.


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ThefollowingtablesummarizesSomers’cashflowfromoperating,investingandfinancingactivities.

YearEndedDecember31,2021 2020

Totalcashprovidedby(usedfor):Operatingactivities $ 46,991 $ 181,736Investingactivities 96,325 258,589Financingactivities (2,042) (335,776)

Non-redeemablenoncontrollinginterests

Through June 30, 2021, the Company accounted for the portion of Somers’ common equity attributable to third partyinvestors in the shareholder’s equity sectionof its consolidatedbalance sheets. Thenoncontrolling ownership in Somers’commonshareswasapproximately87%atDecember31,2020.TheportionofSomers’ incomeor lossattributabletothirdparty investorswas recorded in theconsolidatedstatementsof income in ‘net (income) lossattributable tononcontrollinginterests.’

Thefollowingtablesetsforthactivityinthenon-redeemablenoncontrollinginterests:

December31,

2021 2020

Balance,beginningofyear $ 823,007 $ 762,777ImpactofdeconsolidationofSomers (918,874) —Additionalpaidincapitalattributabletonon-redeemablenoncontrollinginterests 22,113 1,334Repurchasesattributabletonon-redeemablenoncontrollinginterests — (2,867)Amountsattributabletononcontrollinginterests 78,314 53,076Otheramountsattributabletononcontrollinginterests — (375)Othercomprehensive(income)lossattributabletononcontrollinginterests (4,560) 9,062

Balance,endofyear $ — $ 823,007

Redeemablenoncontrollinginterests

Through June 30, 2021, the Company accounted for redeemable noncontrolling interests in themezzanine section of itsconsolidatedbalance sheets in accordancewith applicable accounting guidance. Such redeemable noncontrolling interestsprimarily related to the Somers Preference Shares issued in lateMarch 2014 with a par value of $0.01 per share and aliquidationpreferenceof$25.00pershare.TheSomersPreferenceShareswereissuedatadiscountedamountof$24.50pershare. Because the redemption features are not solely within the control of Somers, the Company accounted for theredeemablenoncontrolling interests in theSomersPreferenceShares in themezzanine sectionof its consolidatedbalancesheets.

Preferred dividends on the Somers Preference Shares, including the accretion of the discount and issuance costs, was$2.1millionfor2021,comparedto$4.4millionfor2020.

Thefollowingtablesetsforthactivityintheredeemablenon-controllinginterests:December31,

2021 2020

Balance,beginningofyear $ 58,548 $ 55,404ImpactofdeconsolidationofSomers (48,919) —Redemptionofredeemablenoncontrollinginterests — —Accretionofpreferenceshareissuancecosts — 93Other (396) 3,051Balance,endofyear $ 9,233 $ 58,548


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Theportionofincomeorlossattributabletothirdpartyinvestorsisrecordedintheconsolidatedstatementsofincomein‘net(income)lossattributabletononcontrollinginterests’assummarizedinthetablebelow:

December31,

2021 2020

Amountsattributabletonon-redeemablenoncontrollinginterests $ (78,314) $ (53,076)Dividendsattributabletoredeemablenoncontrollinginterests (4,299) (7,114)Net(income)lossattributabletononcontrollinginterests $ (82,613) $ (60,190)

BellemeadeRe

The Company has entered into aggregate excess of loss mortgage reinsurance agreements with various special purposereinsurancecompaniesdomiciledinBermuda(the“BellemeadeAgreements”).AtthetimetheBellemeadeAgreementswereenteredinto,theapplicabilityoftheaccountingguidancethataddressesVIEswasevaluated.AsaresultoftheevaluationoftheBellemeadeAgreements,theCompanyconcludedthattheseentitiesareVIEs.However,giventhatthecedinginsurersdonothavetheunilateralpowertodirectthoseactivitiesthataresignificanttotheireconomicperformance,theCompanydoesnotconsolidatesuchentitiesinitsconsolidatedfinancialstatements.

ThefollowingtablepresentsthetotalassetsoftheBellemeadeentities,aswellastheCompany’smaximumexposuretolossassociatedwiththeseVIEs,calculatedasthemaximumhistoricalobservablespreadbetweenthebenchmarkindexforeachrespectivetransactionandshortterminvestedtrustassetyields.Thebenchmarkindexforagreementseffectivepriorto2021isbasedonone-monthLIBOR,whilethe2021agreementsbenchmarkindexisbasedontheSecuredOvernightFinancingRate(“SOFR”).SOFRisameasureofthecostofborrowingcashovernight,collateralizedbyU.S.Treasurysecurities,andisbasedondirectlyobservableU.S.Treasury-backedrepurchasetransactions.

Dec31,2021 Dec31,2020

MaximumExposuretoLoss MaximumExposuretoLoss

BellemeadeEntities(IssueDate)TotalVIEAssets

On-BalanceSheet(Asset)Liability

Off-BalanceSheet Total

TotalVIEAssets

On-BalanceSheet(Asset)Liability

Off-BalanceSheet Total

Bellemeade2017-1Ltd.(Oct-17) $ 108,368 $ (159) $ 424 $ 265 $ 145,573 $ (245) $ 844 $ 599Bellemeade2018-1Ltd.(Apr-18) 181,136 (528) 1,268 740 250,095 (903) 2,245 1,342Bellemeade2018-2Ltd.(Aug-18) — — — — 108,395 (138) 280 142Bellemeade2018-3Ltd.(Oct-18) 302,563 (1,018) 2,496 1,478 302,563 (1,320) 3,262 1,942Bellemeade2019-1Ltd.(Mar-19) 181,324 (380) 5,807 5,427 219,256 (1,361) 8,461 7,100Bellemeade2019-2Ltd.(Apr-19) 398,316 (515) 3,998 3,483 398,316 (730) 5,201 4,471Bellemeade2019-3Ltd.(Jul-19) 409,859 (584) 3,190 2,606 528,084 (861) 5,079 4,218Bellemeade2019-4Ltd.(Oct-19) 411,954 (462) 4,759 4,297 468,737 (890) 6,676 5,786Bellemeade2020-1Ltd.(Jun-20) — — — — 275,068 (178) 1,012 834Bellemeade2020-2Ltd.(Sep-20)(1) 217,766 (177) 1,984 1,807 423,420 (556) 6,839 6,283Bellemeade2020-3Ltd.(Nov-20)(2) 348,818 (128) 5,793 5,665 418,158 (631) 9,605 8,974Bellemeade2020-4Ltd.(Dec-20)(3) 176,826 (50) 1,630 1,580 321,393 (156) 6,816 6,660Bellemeade2021-1Ltd.(Mar-21)(4) 568,986 (303) 3,283 2,980 — — — —Bellemeade2021-2Ltd.(Jun-21)(5) 522,807 281 4,124 4,405 — — — —Bellemeade2021-3Ltd.(Sep-21)(6) 507,873 (411) 3,446 3,035 — — — —Total $4,336,596 $ (4,434) $ 42,202 $ 37,768 $3,859,058 $ (7,969) $ 56,320 $ 48,351

(1)AtDecember31,2021,$1millionofcoveragefromaseparatepanelofreinsurersisremaining(notreflectedinthistable).(2)AtDecember31,2021,$16millionofcoveragefromaseparatepanelofreinsurersisremaining(notreflectedinthistable).(3)AtDecember31,2021,$9millionofcoveragefromaseparatepanelofreinsurersisremaining(notreflectedinthistable).(4)AtDecember31,2021,$61millionofcoveragefromaseparatepanelofreinsurersisremaining(notreflectedinthistable).(5)AtDecember31,2021,$93millionofcoveragefromaseparatepanelofreinsurersisremaining(notreflectedinthistable).(6)AtDecember31,2021,$131millionofcoveragefromaseparatepanelofreinsurersisremaining(notreflectedinthistable).


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5. ReserveforLossesandLossAdjustmentExpenses

Thefollowingtablerepresentsananalysisoflossesandlossadjustmentexpensesandareconciliationofthebeginningandendingreserveforlossesandlossadjustmentexpenses:


2021 2020Reserveforlossesandlossadjustmentexpensesatbeginningofyear $ 16,513,929 $ 13,891,842Unpaidlossesandlossadjustmentexpensesrecoverable 4,314,855 4,082,650Netreserveforlossesandlossadjustmentexpensesatbeginningofyear 12,199,074 9,809,192

Netincurredlossesandlossadjustmentexpensesrelatingtolossesoccurringin:Currentyear 4,940,987 4,851,051Prioryears (356,184) (161,452)Totalnetincurredlossesandlossadjustmentexpenses 4,584,803 4,689,599

Netlossesandlossadjustmentexpensereservesofacquiredbusiness(1) 104,176 —

Retroactivereinsurancetransactions(2) (444,147) 182,210

ImpactofdeconsolidationofSomers(3) (1,460,611) —

Foreignexchange(gains)losses 1,181 179,190

Netpaidlossesandlossadjustmentexpensesrelatingtolossesoccurringin:Currentyear (734,846) (661,529)Prioryears (2,091,705) (1,999,588)Totalnetpaidlossesandlossadjustmentexpenses (2,826,551) (2,661,117)

Netreserveforlossesandlossadjustmentexpensesatendofyear 12,157,925 12,199,074Unpaidlossesandlossadjustmentexpensesrecoverable 5,599,231 4,314,855Reserveforlossesandlossadjustmentexpensesatendofyear $ 17,757,156 $ 16,513,929

(1)RepresentsactivityrelatedtotheCompany’sacquisitionsin2021(seeNote2)andtheacquisitionofBarbican.(2) See‘RetroactiveReinsuranceTransactions’section.(3) SeeNote4.

2021PriorYearReserveDevelopment

During2021,theCompanyrecordedestimatednetfavorabledevelopmentonprioryearlossreservesof$356.2million,whichconsistedofnetfavorabledevelopmentof$16.2millionfromtheinsuranceoperation,$178.8millionfromthereinsuranceoperation, $169.6million from themortgage operation, partially offset by $8.4million of adverse development from the‘other’operation(activitypriortothedeconsolidationofSomers).

The insurance operation’s net favorable development of $16.2million, or 0.4 points of net earned premium, consisted of$109.8millionofnetfavorabledevelopmentinshort-tailedandlong-tailedlinesmostlyoffsetby$93.5millionofnetadversedevelopment from medium-tailed lines. Net favorable development of $81.7 million in short-tailed lines reflected$38.9millionof favorabledevelopment fromproperty (excludingmarine), primarily from the2018 to2020accident years(i.e.,theyearinwhichalossoccurred),$26.7millionoffavorabledevelopmentinlendersproducts,primarilyfromthe2020accidentyear,and$16.2millionoffavorabledevelopmentontravelandaccident,primarilyfromthe2016to2020accidentyears. Net favorable development of $28.1 million in long-tailed lines reflected favorable development in construction,national accounts and alternative markets, primarily from the 2016 to 2019 accident years, partially offset by adversedevelopment inexecutiveassurance,primarily from the2015,2017and2018accidentyears.Netadversedevelopment inmedium-tailed lines reflected $57.6million of adverse development in contract binding, primarily from the 2013 to 2019accidentyearsand$30.8millionofadversedevelopment inprofessional liability,primarily fromthe2018to2020accidentyears.

Thereinsuranceoperation’snetfavorabledevelopmentof$178.8million,or6.3pointsofnetearnedpremium,consistedof$184.1millionofnetfavorabledevelopmentfromshort-tailedandmedium-tailedlines,partiallyoffsetby$5.3millionofnet


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adverse development from long-tailed lines. Net favorable development of $175.5 million in short-tailed lines reflected$123.3million from other specialty lines, primarily from the 2014 to 2019 underwriting years (i.e., losses attributable tocontracts having an inception or renewal date within the given twelve-month period), and $88.6 million of favorabledevelopmentfrompropertyotherthanpropertycatastrophebusiness,primarilyfromthe2015to2020underwritingyears.Suchamountswerepartiallyoffsetbyadversedevelopmentof$36.4millionfrompropertycatastrophe,primarilyfromthe2020underwritingyear.Adversedevelopment in long-tailed lines reflectedan increase incasualty reserves,primarily fromthe2018underwritingyear.

Themortgageoperation’snetfavorabledevelopmentof$169.6million,or13.2pointsofnetearnedpremium.ApproximatelyathirdofthisdevelopmentcamefromtheU.S.firstlienportfolio,whichbenefitedfromimprovingeconomicconditionsandrisinghomeprices,resultinginreducedclaimrateassumptionsprimarilyassociatedwithpre-pandemicdelinquencies.VariousvintageCRTcontractsalsoexperiencedsimilareffectsandcontributedtothefavorabledevelopment,includingtheeffectofcontractscalledbytheGSEs.Subrogationrecoveriesonsecondlienandstudentloanbusinessandinternationalbusinessalsocontributedtothefavorabledevelopment.

2020PriorYearReserveDevelopment

During2020,theCompanyrecordedestimatednetfavorabledevelopmentonprioryearlossreservesof$161.5million,whichconsistedofnet favorabledevelopmentof$7.8million from the insuranceoperation,$134.0million from the reinsuranceoperation,$19.0millionfromthemortgageoperation,and$0.7millionfromthe‘other’operation.

Theinsuranceoperation’snetfavorabledevelopmentof$7.8million,or0.3pointsofnetearnedpremium,consistedof$83.0million of net favorable development in short-tailed and long-tailed lines partially offset by $75.2 million of net adversedevelopment from medium-tailed lines. Net favorable development of $33.6 million in short-tailed lines reflected$21.6millionof favorabledevelopment fromproperty (excludingmarine),primarily fromthe2015 to2018accidentyears,(i.e.,theyearinwhichalossoccurred)and$8.4millionoffavorabledevelopmentontravelandaccident,primarilyfromthe2019 accident year. Net favorable development of $49.4 million in long-tailed lines included $38.8 million of favorabledevelopmentrelatedtootherbusiness,includingalternativemarketsandexcessworkers’compensation,acrossallaccidentyears, and $9.3million of favorable development related to construction business. Net adverse development inmedium-tailed lines reflected $37.9 million of adverse development in surety business, primarily from the 2019 accident year,$23.1million in contract binding business, primarily from the 2016 to 2019 accident years, and $16.0million in programbusiness,primarilyfromthe2016to2019accidentyears.

Thereinsuranceoperation’snetfavorabledevelopmentof$134.0million,or6.2pointsofnetearnedpremium,consistedof$155.9millionofnetfavorabledevelopmentfromshort-tailedandmedium-tailedlines,partiallyoffsetby$21.9millionofnetadverse development from long-tailed lines. Net favorable development of $144.0 million in short-tailed lines reflected$87.7millionrelatedtopropertycatastropheandpropertyotherthanpropertycatastrophebusiness,primarilyfromthe2015to2019underwritingyears,and$53.6millionfromotherspecialtylines,acrossmostunderwritingyears.Thenetreductionoflossestimates for the reinsuranceoperation’s short-tailed linesprimarily resulted fromvarying levelsof reportedandpaidclaims activity than previously anticipated which led to decreases in certain loss ratio selections during 2020. Adversedevelopment in long-tailed lines reflected an increase in casualty reserves, primarily from the 2012 to 2015 underwritingyears.

The mortgage operation’s net favorable development of $19.0 million, or 1.4 points of net earned premium, included$16.2millionoffavorabledevelopmentonU.S.primarymortgageinsurancebusiness.Suchdevelopmentwasprimarilydrivenbysubrogationrecoveriesonsecondlienbusinessandstudentloanbusiness.

RetroactiveReinsuranceTransactions

In 2021, the Company entered into a retroactive reinsurance transaction with third party reinsurer to reinsure run-offliabilitiesassociatedwithcertainU.S.insuranceexposures.

In2021,theCompanyenteredintoareinsurancetoclosewiththerelatedparty,inconnectionwiththe2018andprioryearsofaccountforcertainLondonsyndicatebusiness.SeeNote14.

In2020,theCompanyenteredintoareinsurance-to-closeagreementrelatedtoathirdpartyarrangementcoveringthe2017andprioryearsofaccountforcertainLondonsyndicatebusiness.


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In 2019, the Company entered into a retroactive reinsurance transaction with third party reinsurer to reinsure run-offliabilitiesassociatedwithcertainU.S.insuranceexposures,whichwascommutedin2020.


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6. ShortDurationContracts

The Company’s reserves for losses and loss adjustment expenses primarily relate to short-duration contractswith variouscharacteristics(e.g.,typeofcoverage,geography,claimsduration).TheCompanyconsideredsuchinformationindeterminingthelevelofdisaggregationfordisclosuresrelatedtoitsshort-durationcontracts,asdetailedinthetablebelow:

Reportableoperations Levelofdisaggregation Includedlinesofbusiness

Insurance Propertyenergy,marineandaviation Propertyenergy,marineandaviation

Thirdpartyoccurrencebusiness Excessandsurpluscasualty(excludingcontractbinding);constructionandnationalaccounts;andother(includingalternativemarketrisks,excessworkers’compensationandemployer’sliabilityinsurancecoverages)

Thirdpartyclaims-madebusiness Professionallines

Multi-lineandotherspecialty Programs;contractbinding(partofexcessandsurpluscasualty);travel,accidentandhealth;lendersproducts;andother(contractandcommercialsuretycoverages)

Reinsurance Casualty Casualty

Propertycatastrophe Propertycatastrophe

Propertyexcludingpropertycatastrophe Propertyexcludingpropertycatastrophe

Marineandaviation Marineandaviation

Otherspecialty Otherspecialty

Mortgage DirectmortgageinsuranceintheU.S. MortgageinsuranceonU.S.primaryexposures

TheCompanydetermined the following tobe insignificant fordisclosurepurposes: (i) certainmortgagebusiness, includingnon-U.S.primarybusiness,secondlienandstudentloanexposures,globalmortgagereinsuranceandparticipationinvariousGSEcreditrisk-sharingproducts;and(ii)certainreinsurancebusiness,includingcasualtyclashandnon-traditionallines,and(iii)amountsassociatedwithSouthernRockHoldingsLimited.SeeNote2.Suchamountsareincludedasreconcilingitems.

TheCompanyisrequiredtoestablishreservesforlossesandlossadjustmentexpenses(“LossReserves”)thatarisefromthebusiness the Company underwrites. Loss Reserves for the insurance, reinsurance and mortgage operations representestimatesoffutureamountsrequiredtopaylossesandlossadjustmentexpensesforinsuredorreinsuredeventswhichhaveoccurred at or before thebalance sheetdate. LossReservesdonot reflect contingency reserve allowances to account forfuturelossoccurrences.Lossesarisingfromfutureeventswillbeestimatedandrecognizedatthetimethelossesareincurredandcouldbesubstantial.

InsuranceOperations

LossReservesfortheinsuranceoperationsarecomprisedofestimatedamountsfor(1)reportedlosses(“casereserves”)and(2) incurredbut not reported losses (“IBNR reserves”).Generally, claimspersonnel determinewhether to establish a casereservefortheestimatedamountoftheultimatesettlementofindividualclaims.Theestimatereflectsthejudgmentofclaimspersonnel basedon general corporate reservingpractices, theexperienceand knowledgeof suchpersonnel regarding thenatureandvalueofthespecifictypeofclaimand,whereappropriate,adviceofcounsel.TheCompanyalsocontractswithanumberofoutsidethirdpartyadministratorsintheclaimsprocesswho,incertaincases,havelimitedauthoritytoestablishcasereserves.Theworkofsuchadministrators is reviewedandmonitoredbyourclaimspersonnel.LossReservesarealsoestablishedtoprovidefor lossadjustmentexpensesandrepresenttheestimatedexpenseofsettlingclaims, including legalandotherfeesandthegeneralexpensesofadministeringtheclaimsadjustmentprocess.Periodically,adjustmentstothecasereservesmaybemadeasadditionalinformationisreportedorpaymentsaremade.IBNRreservesareestablishedtoprovideforincurredclaimswhichhavenotyetbeenreportedatthebalancesheetdateaswellastoadjustforanyprojectedvarianceincasereserving.Actuariesestimateultimatelossesandlossadjustmentexpensesusingvariousgenerallyacceptedactuarialmethodsappliedtoknownlossesandotherrelevantinformation.Likecasereserves,IBNRreservesareadjustedasadditionalinformationbecomesknownorpaymentsaremade. Theprocessof estimating reserves involvesa considerabledegreeofjudgmentbymanagementand,asofanygivendate,isinherentlyuncertain.

Ultimate losses and loss adjustment expenses are generally determinedby projection of claimemergence and settlementpatternsobservedinthepastthatcanreasonablybeexpectedtopersist intothefuture. Inforecastingultimate lossesandlossadjustmentexpenseswith respect toany lineofbusiness,pastexperiencewith respect to that lineofbusiness is the


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primary resource, developed through both industry and company experience, but cannot be relied upon in isolation.Uncertaintiesinestimatingultimatelossesandlossadjustmentexpensesaremagnifiedbythelengthofthetimelagbetweenwhenaclaimactuallyoccursandwhenit isreportedandsettled.Thistimelagissometimesreferredtoasthe“claim-tail.”During this period additional facts regarding coverageswritten in prior accident years, aswell as about actual claims andtrends,maybecomeknownand,asaresult,mayleadtoadjustmentsoftherelatedLossReserves.IftheCompanydeterminesthatanadjustmentisappropriate,theadjustmentisrecordedintheaccountingperiodinwhichsuchdeterminationismade.Accordingly,shouldLossReservesneedtobeincreasedordecreasedinthefuturefromamountscurrentlyestablished,futureresults of operations would be negatively or positively impacted respectively. The Company authorizesmanaging generalagents, general agents and other producers to write program business on the Company’s behalf within prescribedunderwritingauthorities.Thisdelegatedauthorityprocessintroducesadditionalcomplexitytotheactuarialdeterminationofunpaid future lossesand lossadjustmentexpenses. Inorder tomonitoradherence to theunderwritingguidelinesgiven tosuchparties,theCompanyperiodicallyperformsunderwritingandclaimsduediligencereviews.

Indeterminingultimatelossesandlossadjustmentexpenses,thecosttoindemnifyclaimants,provideneededlegaldefenseandotherservicesforinsuredsandadministertheinvestigationandadjustmentofclaimsareconsidered.Theseclaimcostsare influenced by many factors that change over time, such as expanded coverage definitions as a result of new courtdecisions, inflation in costs to repair or replace damaged property, inflation in the cost ofmedical services and legislatedchangesinstatutorybenefits,aswellasbytheparticular,uniquefactsthatpertaintoeachclaim.Asaresult,therateatwhichclaimsaroseinthepastandthecoststosettlethemmaynotalwaysberepresentativeofwhatwilloccurinthefuture.Thefactors influencing changes in claim costs are often difficult to isolate or quantify and developments in paid and incurredlossesfromhistoricaltrendsarefrequentlysubjecttomultipleandconflictinginterpretations.Changesincoveragetermsorclaims handling practices may also cause future experience and/or development patterns to vary from the past. A keyobjectiveofactuariesindevelopingestimatesofultimatelossesandlossadjustmentexpenses,andresultingIBNRreserves,istoidentifyaberrationsandsystemicchangesoccurringwithinhistoricalexperienceandadjustforthemsothatthefuturecanbeprojectedmorereliably.Becauseofthefactorspreviouslydiscussed,thisprocessrequiresthesubstantialuseofinformedjudgmentandisinherentlyuncertain.

Although Loss Reserves are initially determined based on underwriting and pricing analyses, the Company’s insuranceoperationsappliesseveralgenerallyacceptedactuarialmethods,asdiscussedbelow,onaquarterlybasistoevaluatetheLossReserves,inadditiontotheexpectedlossmethod,inparticularforLossReservesfrommorematureaccidentyears(theyearin which a loss occurred). Each quarter, as part of the reserving process, the operations’ actuaries reaffirm that theassumptionsusedinthereservingprocesscontinuetoformasoundbasisfortheprojectionofliabilities.Ifactuallossactivitydiffers substantially fromexpectationsbasedonhistorical information,anadjustment to LossReservesmaybe supported.TheCompanyplacesmoreorlessrelianceonaparticularactuarialmethodbasedonthefactsandcircumstancesatthetimetheestimatesofLossReservesaremade.

Thesemethodsgenerallyfallintooneofthefollowingcategoriesorarehybridsofoneormoreofthefollowingcategories:

• Expected loss methods - thesemethods are based on the assumption that ultimate losses vary proportionately withpremiums.Expectedlossandlossadjustmentexpenseratiosaretypicallydevelopedbasedupontheinformationderivedbyunderwriters andactuariesduring the initial pricingof thebusiness, supplementedby industrydataavailable fromorganizations, suchas statisticalbureausandconsulting firms,whereappropriate. These ratios consider, amongotherthings, rate increases and changes in terms and conditions that have been observed in the market. Expected lossmethodsareusefulforestimatingultimatelossesandlossadjustmentexpensesintheearlyyearsoflong-tailedlinesofbusiness, when little or no paid or incurred loss information is available, and is commonly appliedwhen limited lossexperienceexistsforacompany.

• Historicalincurredlossdevelopmentmethods-thesemethodsassumethattheratiooflossesinoneperiodtolossesinanearlierperiodwillremainconstantinthefuture.Thesemethodsuseincurredlosses(i.e.,thesumofcumulativehistoricallosspaymentsplusoutstandingcasereserves)overdiscreteperiodsoftimetoestimatefuturelosses.Historicalincurredlossdevelopmentmethodsmaybepreferabletohistoricalpaidlossdevelopmentmethodsbecausetheyexplicitlytakeintoaccountopencasesandtheclaimsadjusters’evaluationsofthecosttosettleallknownclaims.However,historicalincurredlossdevelopmentmethodsnecessarilyassumethatcasereservingpracticesareconsistentlyappliedovertime.Therefore,whentherehavebeensignificantchanges inhowcase reservesareestablished,using incurred lossdata toprojectultimatelossesmaybelessreliablethanothermethods.

• Historicalpaid lossdevelopmentmethods - thesemethods, likehistorical incurred lossdevelopmentmethods,assumethattheratiooflossesinoneperiodtolossesinanearlierperiodwillremainconstant.Thesemethodsusehistoricalloss


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paymentsoverdiscreteperiodsoftimetoestimatefuturelossesandnecessarilyassumethatfactorsthathaveaffectedpaidlossesinthepast,suchasinflationortheeffectsoflitigation,willremainconstantinthefuture.Becausehistoricalpaidlossdevelopmentmethodsdonotuseincurredlossestoestimateultimatelosses,theymaybemorereliablethantheothermethodsthatuseincurredlossesinsituationswheretherearesignificantchangesinhowincurredlossesareestablished by a company’s claims adjusters. However, historical paid loss developmentmethods aremore leveraged(meaningthatsmallchangesinpaymentshavealarger impactonestimatesofultimatelosses)thanactuarialmethodsthatuseincurredlossesbecausecumulativelosspaymentstakemuchlongertoequaltheexpectedultimatelossesthancumulative incurredamounts. Inaddition,and for similar reasons,historicalpaid lossdevelopmentmethodsareoftenslowtoreacttosituationswhennewordifferentfactorsarisethanthosethathaveaffectedpaidlossesinthepast.

• Adjusted historical paid and incurred loss development methods - these methods take traditional historical paid andincurredlossdevelopmentmethodsandadjustthemfortheestimatedimpactofchangesfromthepastinfactorssuchasinflation, the speed of claim payments or the adequacy of case reserves. Adjusted historical paid and incurred lossdevelopmentmethods are oftenmore reliablemethods of predicting ultimate losses in periods of significant change,providedtheactuariescandevelopmethodstoreasonablyquantifytheimpactofchanges.Assuch,thesemethodsutilizemorejudgmentthanhistoricalpaidandincurredlossdevelopmentmethods.

• Bornhuetter-Ferguson(“B-F”)paidandincurredlossmethods-thesemethodsutilizeactualpaidandincurredlossesandexpectedpatternsofpaidand incurred losses, takingthe initialexpectedultimate losses intoaccounttodetermineanestimateofexpectedultimate losses.TheB-Fpaidand incurred lossmethodsareusefulwhenthereare fewreportedclaimsandarelativelylessstablepatternofreportedlosses.

• Frequency-Severitymethods-Thesemethodsutilizeactualpaidandincurredclaimexperience,butbreakthedatadowninto its componentpieces: claimcounts,oftenexpressedasa ratio toexposureorpremium (frequency), andaverageclaim size (severity). The component pieces are projected to an ultimate level andmultiplied together to result in anestimateofultimateloss.Thesemethodsareespeciallyusefulwhentheseverityofclaimscanbeconfinedtoarelativelystablerangeofestimatedultimateaverageclaimvalue.

• Additionalanalyses-othermethodologiesareoftenusedinthereservingprocessforspecifictypesofclaimsorevents,suchascatastrophicorotherspecificmajorevents.Theseincludevendorcatastrophemodels,whicharetypicallyusedintheestimationofLossReservesattheearlystageofknowncatastrophiceventsbeforeinformationhasbeenreportedtoaninsurerorreinsurer.

In the initial reservingprocess for short-tail insurance lines (consistingofproperty, energy,marineandaviationandotherexposuresincludingtravel,accidentandhealthandlendersproducts),theCompanyreliesonacombinationofthereservingmethodsdiscussedabove. For catastrophe-exposedbusiness, the reservingprocess also includes theusageof catastrophemodelsforknowneventsandaheavyrelianceonanalysisofindividualcatastrophiceventsandmanagementjudgment.Thedevelopment of losses on short-tail business can be unstable, especially for policies characterized by high severity, lowfrequency losses. As time passes, for a given accident year, additional weight is given to the paid and incurred B-F lossdevelopmentmethodsandeventuallytothehistoricalpaidandincurredlossdevelopmentmethodsinthereservingprocess.The Companymakes a number of key assumptions in their reserving process, including that historical paid and reporteddevelopmentpatternsarestable,catastrophemodelsprovideusefulinformationaboutourexposuretocatastrophiceventsthathaveoccurredandunderwriters’judgmentastopotentiallossexposurescanbereliedon.Theexpectedlossratiosusedintheinitialreservingprocessforshort-tailbusinesshavevariedovertimeduetochangesinpricing,reinsurancestructure,estimatesofcatastrophelosses,policychanges(suchasattachmentpoints,classandlimits)andgeographicaldistribution.Aslossesinshort-taillinesarereportedrelativelyquickly,expectedlossratiosareselectedforthecurrentaccidentyearbasedupon actual attritional loss ratios for earlier accident years, adjusted for rate changes, inflation, changes in reinsuranceprogramsandexpectedattritionallossesbasedonmodeling.Furthermore,ultimatelossesforshort-tailbusinessareknowninareasonablyshortperiodoftime.

In the initial reserving process formedium-tail and long-tail insurance lines (consisting of third party occurrencebusiness,third party claims made business, and other exposures including surety, programs and contract binding exposures), theCompanyprimarilyreliesontheexpectedlossmethod.ThedevelopmentoftheCompany’smedium-tailandlong-tailbusinessmaybeunstable,especiallyiftherearehighseveritymajorevents,asaportionoftheCompany’scasualtybusinessisinhighexcess layers. As time passes, for a given accident year, additional weight is given to the paid and incurred B-F lossdevelopmentmethods andhistorical paid and incurred lossdevelopmentmethods in the reservingprocess. TheCompanymakesanumberofkeyassumptionsinreservingformedium-tailandlong-taillines,includingthatthepricinglossratioisthebestestimateoftheultimatelossratioatthetimethepolicyisenteredinto,thatthelossdevelopmentpatterns,whichare


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based on a combination of company and industry loss development patterns and adjusted to reflect differences in theinsuranceoperations’mixofbusiness,arereasonableandthatclaimspersonnelandunderwritersanalysesofourexposuretomajoreventsareassumedtobethebestestimateofexposuretotheknownclaimsonthoseevents.Theexpectedlossratiosusedintheinitialreservingprocessformedium-tailandlong-tailbusinessforrecentaccidentyearshavevariedovertime,insome cases significantly, from earlier accident years. As the credibility of historical experience for earlier accident yearsincreases,theexperiencefromtheseaccidentyearswillbegivenagreaterweighting intheactuarialanalysistodeterminefutureaccidentyearexpectedlossratios,adjustedforchangesinpricing,losstrends,termsandconditionsandreinsurancestructure.

In2021and2018,theCompanyenteredintolossportfoliotransferandadversedevelopmentcoverreinsuranceagreementsaccounted for as retroactive reinsurance. The agreements transfer Loss Reserves and future favorable or adversedevelopmentoncertain runoffprogramsandcertain thirdpartyoccurrencebusiness,withinmulti-lineandother specialtybusiness(the“CoveredLines”).AsincurredlossesandallocatedlossadjustmentexpensesfortheCoveredLinesarecededtothereinsurer,theCompanyisnotexposedtochangesintheamount,timinganduncertaintyofcashflowsarisingfromtheCoveredLines.Toavoiddistortion,theincurredlossesandallocatedlossadjustmentexpensesandcumulativepaidlossesandlossadjustmentexpensesfortheCoveredLinesareexcludedentirelyfromthetablesbelow.UnpaidlossandlossadjustmentexpensesrecoverableatDecember31,2021included$390.1millionrelatedtosuchreinsuranceagreements.

Thefollowingtablespresentinformationontheinsuranceoperation’sshort-durationinsurancecontracts:

Property,energy,marineandaviation($000’sexceptclaimcount)Incurredlossesandallocatedlossadjustmentexpenses,netofreinsurance December31,2021

TotalofIBNRliabilitiesplusexpected

developmentonreportedclaims

Cumulativenumberofreportedclaims

YearendedDecember31,

Accidentyear

2012unaudited

2013unaudited

2014unaudited

2015unaudited

2016unaudited

2017unaudited

2018unaudited

2019unaudited

2020unaudited 2021

2012 $ 233,149 $ 232,498 $ 205,776 $ 199,469 $ 197,005 $ 192,993 $ 190,770 $ 178,616 $ 178,250 $ 178,343 $ 627 4,2452013 159,102 156,785 149,199 143,400 134,952 133,869 128,624 127,290 126,276 25 4,2432014 148,368 145,957 147,465 136,201 132,307 134,329 135,032 134,942 3,098 3,8842015 112,409 109,865 103,995 102,515 97,852 91,830 91,892 3,804 4,5362016 104,449 101,306 105,657 100,471 96,437 92,553 874 6,1602017 280,715 246,291 235,951 230,439 231,228 8,248 6,4262018 180,981 186,030 173,693 170,057 9,136 5,0202019 179,056 178,564 165,477 6,667 5,0802020 359,394 329,362 66,698 4,1862021 426,870 158,163 2,951

Total $1,947,000

Cumulativepaidlossesandallocatedlossadjustmentexpenses,netofreinsurance2012 $ 20,638 $ 93,394 $ 138,977 $ 161,831 $ 167,540 $ 179,945 $ 181,307 $ 173,184 $ 174,032 $ 174,3842013 32,292 84,936 110,808 120,111 122,244 125,475 123,356 124,688 124,8412014 25,881 53,751 77,892 84,195 87,812 98,553 115,383 122,2962015 23,580 64,953 76,338 86,253 87,926 86,246 87,3162016 24,828 83,552 98,683 97,506 95,002 91,2412017 30,228 139,867 195,532 211,708 215,8952018 30,026 102,285 134,858 142,8382019 26,130 105,380 133,9112020 55,619 194,4872021 90,423

Total 1,377,632Alloutstandingliabilitiesbefore2012,netofreinsurance 17,517

Liabilitiesforlossesandlossadjustmentexpenses,netofreinsurance 586,885


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Thirdpartyoccurrencebusiness($000’sexceptclaimcount)Incurredlossesandallocatedlossadjustmentexpenses,netofreinsurance December31,2021


developmentonreportedclaims



Accidentyear

2012unaudited

2013unaudited

2014unaudited

2015unaudited

2016unaudited

2017unaudited

2018unaudited

2019unaudited

2020unaudited 2021

2012 $ 241,368 $ 263,451 $ 269,204 $ 272,004 $ 258,371 $ 253,758 $ 243,863 $ 244,448 $ 242,332 $ 239,075 $ 43,924 65,7312013 283,228 297,225 307,152 302,165 282,122 274,717 272,849 269,754 270,558 54,640 67,1132014 330,015 336,019 338,890 343,113 339,701 344,197 342,934 343,569 66,498 75,9042015 359,058 391,884 398,908 392,143 391,455 382,722 386,801 91,081 78,7852016 389,832 394,485 406,082 399,571 374,896 367,818 115,303 79,0052017 417,377 417,941 422,624 412,512 407,115 145,130 84,6922018 430,415 453,190 450,937 451,459 189,965 77,7002019 456,353 487,547 481,045 253,849 84,8952020 607,249 616,910 428,750 89,5602021 622,713 543,386 65,477

Total $4,187,063



Liabilitiesforlossesandlossadjustmentexpenses,netofreinsurance $2,885,557

Thirdpartyclaims-madebusiness($000’sexceptclaimcount)Incurredlossesandallocatedlossadjustmentexpenses,netofreinsurance December31,2021


developmentonreported

claims



Accidentyear

2012unaudited

2013unaudited

2014unaudited

2015unaudited

2016unaudited

2017unaudited

2018unaudited

2019unaudited

2020unaudited 2021

2012 $ 317,654 $ 320,207 $ 318,453 $ 313,907 $ 291,316 $ 275,665 $ 277,683 $ 285,163 $ 285,527 $ 286,118 $ 11,570 15,5762013 301,956 320,659 324,442 320,524 294,674 291,205 281,996 271,501 273,948 11,739 15,6962014 264,537 279,846 299,104 279,043 282,058 298,017 292,247 288,318 22,336 15,6762015 258,989 277,615 276,492 260,063 255,432 252,478 267,925 20,617 14,7242016 275,394 291,645 308,453 314,747 322,042 327,230 42,509 15,7492017 271,088 286,565 312,554 308,917 323,854 60,718 16,4042018 273,521 315,085 320,653 337,083 85,411 15,8542019 290,217 318,469 318,498 119,673 12,9822020 384,852 414,580 240,888 10,0492021 516,420 435,910 8,550

Total $3,353,974





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Multi-lineandotherspecialty($000’sexceptclaimcount)Incurredlossesandallocatedlossadjustmentexpenses,netofreinsurance December31,2021



claims



Accidentyear

2012unaudited

2013unaudited

2014unaudited

2015unaudited

2016unaudited

2017unaudited

2018unaudited

2019unaudited

2020unaudited 2021

2012 $ 254,684 $ 265,479 $ 259,582 $ 257,240 $ 256,379 $ 248,066 $ 248,310 $ 245,205 $ 245,260 $ 243,849 $ 2,057 55,2192013 266,089 274,285 265,594 265,672 253,554 254,916 250,252 247,443 246,682 3,461 71,6132014 303,053 327,098 319,706 319,418 318,297 314,300 311,097 310,097 5,770 109,5752015 335,250 358,587 357,364 365,362 357,123 349,895 347,669 7,201 148,9242016 409,367 431,760 428,579 416,724 410,610 408,621 11,032 175,2612017 483,414 502,068 492,166 501,753 505,135 16,867 219,8102018 513,466 565,717 563,969 566,283 32,467 247,0522019 568,337 613,673 641,832 63,880 235,8242020 622,241 572,265 192,056 149,0042021 637,258 361,237 75,250

Total $4,479,691




Thefollowingtablepresentstheaverageannualpercentagepayoutofincurredlossesandallocatedlossadjustmentexpensesbyage,netofreinsurance,asofDecember31,2021:

Averageannualpercentagepayoutofincurredlossesandallocatedlossadjustmentexpensesbyage,netofreinsuranceYear1 Year2 Year3 Year4 Year5 Year6 Year7 Year8 Year9 Year10

Property,energy,marineandaviation 19.3% 43.5% 19.1% 6.6% 1.4% 2.3% 3.2% 0.5% 0.3% 0.2%Thirdpartyoccurrencebusiness 3.3% 9.3% 11.6% 11.0% 9.8% 8.7% 5.4% 4.1% 3.5% 2.1%Thirdpartyclaims-madebusiness 4.4% 18.0% 17.8% 12.3% 12.7% 7.9% 7.0% 4.3% 1.0% 1.7%Multi-lineandotherspecialty 34.7% 29.5% 11.0% 8.6% 4.6% 2.8% 0.7% 0.7% 0.8% (0.1)%

ReinsuranceOperations

Loss Reserves for the Company’s reinsurance operations are comprised of (1) case reserves, (2) additional case reserves(“ACRs”) and (3) IBNR reserves. The Company receives reports of claims notices from ceding companies and records casereservesbasedupontheamountofreservesrecommendedbythecedingcompany.CasereservesmaybesupplementedbyACRs,whichmaybeestimatedbytheCompany’sclaimspersonnelaheadofofficialnotificationfromthecedingcompany,orwhenjudgmentregardingthesizeorseverityoftheknowneventdiffersfromthecedingcompany.Incertaininstances,theCompanyestablishesACRsevenwhenthecedingcompanydoesnotreportanyliabilityonaknownevent.Inaddition,specificclaiminformationreportedbycedingcompaniesorobtainedthroughclaimauditscanalerttheCompanytoemergingtrendssuchaschanging legal interpretationsofcoverageand liability,claimsfromunexpectedsourcesorclassesofbusiness,andsignificant changes in the frequency or severity of individual claims. Such information is often used in the process ofestimatingIBNRreserves.IBNRreservesareestablishedtoprovideforincurredclaimswhichhavenotyetbeenreportedatthebalancesheetdateaswellastoadjustforanyprojectedvarianceincasereserving.Actuariesestimateultimatelossesandloss adjustment expenses using various generally accepted actuarialmethods applied to known losses and other relevantinformation.Likecasereserves,IBNRreservesareadjustedasadditionalinformationbecomesknownorpaymentsaremade.Theprocessofestimating LossReserves involvesa considerabledegreeof judgmentbymanagementand, asof anygivendate,isinherentlyuncertain.

TheestimationofLossReservesforthereinsuranceoperations issubjecttothesameriskfactorsastheestimationofLossReservesfortheinsuranceoperations.Inaddition,theinherentuncertaintiesofestimatingsuchreservesareevengreaterforreinsurers,dueprimarilytothefollowingfactors:(1)theclaim-tailforreinsurersisgenerallylongerbecauseclaimsarefirstreportedtothecedingcompanyandthentothereinsurerthroughoneormoreintermediaries,(2)therelianceonpremium


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estimates,where reportshavenotbeen received from the ceding company, in the reservingprocess, (3) thepotential forwritinganumberofreinsurancecontractswithdifferentcedingcompanieswiththesameexposuretoasinglelossevent,(4)thediversityoflossdevelopmentpatternsamongdifferenttypesofreinsurancecontracts,(5)thenecessaryrelianceontheceding companies for information regarding reported claims and (6) the differing reserving practices among cedingcompanies.

Ultimate losses and loss adjustment expenses are generally determinedby projection of claimemergence and settlementpatternsobservedinthepastthatcanreasonablybeexpectedtopersistintothefuture.Aswiththeinsuranceoperations,the process of estimating Loss Reserves for the reinsurance operations involves a considerable degree of judgment bymanagementand,asofanygivendate,isinherentlyuncertain.Asdiscussedabove,suchuncertaintyisgreaterforreinsurerscompared to insurers. As a result, our reinsurance operations obtain information from numerous sources to assist in theprocess.Pricingactuariesfromthereinsuranceoperationsdevoteconsiderableefforttounderstandingandanalyzingacedingcompany’soperationsandlosshistoryduringtheunderwritingofthebusiness,usingacombinationofcedingcompanyandindustry statistics. Such statistics normally include historical premium and loss data by class of business, individual claiminformationforlargerclaims,distributionsofinsurancelimitsprovided,lossreportingandpaymentpatterns,andratechangehistory.Thisanalysisisusedtoprojectexpectedlossratiosforeachtreatyduringtheupcomingcontractperiod.

Asmentionedabove,therecanbeaconsiderabletimelagfromthetimeaclaimisreportedtoacedingcompanytothetimeit is reported to the reinsurer.The lagcanbe several years in somecasesandmaybeattributed toanumberof reasons,includingthetimeittakestoinvestigateaclaim,delaysassociatedwiththelitigationprocess,thedeteriorationinaclaimant’sphysical condition many years after an accident occurs, the case reserving approach of the ceding company, etc. In thereservingprocess, theCompany assumes that such lags arepredictable, on average, over time and therefore the lags arecontemplatedinthelossreportingpatternsusedintheiractuarialmethods.Thismeansthatthereinsuranceoperationsmustrely on estimates for a longer period of time than does an insurance company. Backlogs in the recording of assumedreinsurancecanalsocomplicatetheaccuracyoflossreserveestimation.AsofDecember31,2021therewerenosignificantbacklogsrelatedtotheprocessingofassumedreinsuranceinformationatourreinsuranceoperations.

The reinsurance operations relies heavily on information reported by ceding companies, as discussed above. In order todeterminetheaccuracyandcompletenessofsuchinformation,underwriters,actuaries,andclaimspersonneloftenperformaudits of ceding companies and regularly review information received from ceding companies for unusual or unexpectedresults.Material findingsareusuallydiscussedwith the ceding companies. TheCompany sometimesencounters situationswheretheydeterminethataclaimpresentationfromacedingcompany isnot inaccordancewithcontractterms. Inthesesituations,theCompanyattemptstoresolvethedisputewiththecedingcompany.Mostsituationsareresolvedamicablyandwithout theneed for litigationorarbitration.However, in the infrequent situationswherea resolution isnotpossible, theCompanywillvigorouslydefenditspositioninsuchdisputes.

Although Loss Reserves are initially determined based on underwriting and pricing analysis, the Company applies severalgenerallyacceptedactuarialmethods,asdiscussedabove,onaquarterlybasistoevaluateitsLossReservesinadditiontotheexpected loss method, in particular for reserves from more mature underwriting years (the year in which business isunderwritten).Eachquarter,aspartofthereservingprocess,theCompany’sactuariesreaffirmthattheassumptionsusedinthereservingprocesscontinuetoformasoundbasisforprojectionofliabilities.Ifactuallossactivitydifferssubstantiallyfromexpectationsbasedonhistoricalinformation,anadjustmenttoLossReservesmaybesupported.EstimatedLossReservesformore mature underwriting years are now based more on actual loss activity and historical patterns than on the initialassumptionsbasedonpricingindications.Morerecentunderwritingyearsrelymoreheavilyoninternalpricingassumptions.TheCompanyplacesmoreorlessrelianceonaparticularactuarialmethodbasedonthefactsandcircumstancesatthetimetheestimatesofLossReservesaremade.

In the initial reserving process for short-tail reinsurance lines (consisting of property excluding property catastrophe andpropertycatastropheexposures),theCompanyreliesonacombinationofthereservingmethodsdiscussedabove.Forknowncatastrophic events, the reservingprocess also includes theusageof catastrophemodels andaheavy relianceonanalysiswhichincludescedingcompanyinquiriesandmanagementjudgment.Thedevelopmentofpropertylossesmaybeunstable,especiallywherethereishighcatastrophicexposure,maybecharacterizedbyhighseverity,lowfrequencylossesforexcessandcatastrophe-exposedbusinessandmaybehighlycorrelatedacrosscontracts.As timepasses, foragivenunderwritingyear,additionalweightisgiventothepaidandincurredB-Flossdevelopmentmethodsandhistoricalpaidandincurredlossdevelopmentmethodsinthereservingprocess.TheCompanymakesanumberofkeyassumptionsinreservingforshort-taillines, including that historical paid and reported development patterns are stable, catastrophe models provide usefulinformation about our exposure to catastrophic events that have occurred and our underwriters’ judgment and guidance


32

receivedfromcedingcompaniesastopotentiallossexposuresmaybereliedon.Theexpectedlossratiosusedintheinitialreservingprocessforpropertyexposureshavevariedovertimeduetochangesinpricing,reinsurancestructure,estimatesofcatastrophe losses, terms and conditions and geographical distribution. As losses in property lines are reported relativelyquickly, expected loss ratios are selected for the current underwriting year incorporating the experience for earlierunderwriting years, adjusted for rate changes, inflation, changes in reinsuranceprograms, expectationsaboutpresent andfuturemarketconditionsandexpectedattritionallossesbasedonmodeling.Duetotheshort-tailnatureofpropertybusiness,reportedlossexperienceemergesquicklyandultimatelossesareknowninareasonablyshortperiodoftime.

Intheinitialreservingprocessformedium-tailandlong-tailreinsurancelines(consistingofcasualty,otherspecialty,marineandaviationandotherexposures),theCompanyprimarilyreliesontheexpectedlossmethod.Thedevelopmentofmedium-tail and long-tail businessmaybeunstable, especially if therearehigh severitymajorevents,withbusinesswrittenonanexcess of loss basis typically having a longer tail than business written on a pro rata basis. As time passes, for a givenunderwritingyear,additionalweight isgiventothepaidandincurredB-F lossdevelopmentmethodsandeventuallytothehistoricalpaidandincurredlossdevelopmentmethodsinthereservingprocess.Ourreinsuranceoperationsmakeanumberofkeyassumptionsinreservingformedium-tailandlong-taillines,includingthatthepricinglossratioisthebestestimateoftheultimatelossratioatthetimethecontractisenteredinto,historicalpaidandreporteddevelopmentpatternsarestableandclaimspersonnelandunderwriters’analysesofourexposuretomajoreventsareourbestestimateofourexposuretotheknownclaimsonthoseevents.Theexpectedlossratiosusedinourreinsuranceoperations’ initialreservingprocessformedium-tailand long-tail contractshavevariedover timedue tochanges inpricing, termsandconditionsandreinsurancestructure. As the credibility of historical experience for earlier underwriting years increases, the experience from theseunderwritingyears isusedintheactuarialanalysistodeterminefutureunderwritingyearexpectedlossratios,adjustedforchangesinpricing,losstrends,termsandconditionsandreinsurancestructure.

Thefollowingtablespresentinformationonthereinsuranceoperations’short-durationinsurancecontracts:

Casualty($000’s)Incurredlossesandallocatedlossadjustmentexpenses,netofreinsurance December31,2021



claims



Accidentyear

2012unaudited

2013unaudited

2014unaudited

2015unaudited

2016unaudited

2017unaudited

2018unaudited

2019unaudited

2020unaudited 2021

2012 $ 143,029 $ 141,202 $ 137,049 $ 125,104 $ 115,131 $ 109,788 $ 118,457 $ 121,721 $ 120,260 $ 119,222 $ 24,441 N/A2013 166,016 159,257 155,066 148,784 136,717 135,155 131,475 135,762 135,959 30,873 N/A2014 216,882 222,109 219,355 233,552 230,019 239,765 240,067 236,378 41,077 N/A2015 223,208 221,922 230,830 238,126 242,180 249,029 252,809 57,345 N/A2016 215,222 227,534 251,415 266,254 273,266 272,689 54,087 N/A2017 270,728 257,088 273,166 301,616 313,605 66,450 N/A2018 281,141 294,820 285,646 290,955 66,572 N/A2019 336,062 348,015 374,002 120,045 N/A2020 386,684 374,912 234,251 N/A2021 445,047 392,885 N/A

Total $2,815,578





33

Propertycatastrophe($000’s)Incurredlossesandallocatedlossadjustmentexpenses,netofreinsurance December31,2021



claims



Accidentyear

2012unaudited

2013unaudited

2014unaudited

2015unaudited

2016unaudited

2017unaudited

2018unaudited

2019unaudited

2020unaudited 2021

2012 $ 149,957 $ 122,942 $ 108,590 $ 102,114 $ 99,885 $ 99,071 $ 97,037 $ 97,145 $ 96,531 $ 96,447 $ 105 N/A2013 67,257 47,780 36,401 31,902 29,345 28,617 27,727 27,865 27,657 (138) N/A2014 45,159 30,877 25,296 22,412 20,652 19,945 19,841 19,615 (10) N/A2015 33,579 18,075 11,580 5,585 3,775 3,130 2,920 67 N/A2016 25,641 18,719 14,575 10,772 8,362 7,426 881 N/A2017 87,504 54,768 50,553 36,846 25,121 (712) N/A2018 77,868 60,418 41,642 27,657 4,783 N/A2019 38,570 24,808 23,534 4,576 N/A2020 267,750 334,185 40,561 N/A2021 316,197 61,821 N/A

Total $ 880,759

Cumulativepaidlossesandallocatedlossadjustmentexpenses,netofreinsurance2012 $ 25,850 $ 70,832 $ 83,822 $ 90,727 $ 92,886 $ 94,015 $ 94,625 $ 95,312 $ 95,414 $ 95,6062013 12,200 19,201 24,038 25,894 27,652 27,891 27,892 28,597 28,3462014 13,622 19,939 18,402 19,231 18,821 19,013 19,154 19,2412015 (3,152) (2,518) 1,786 2,050 1,616 1,705 1,7812016 (6,722) 2,521 2,796 4,082 3,312 3,6682017 30,704 32,228 37,791 27,797 14,9692018 27,497 12,506 24,259 (4,612)2019 3,834 12,680 18,1342020 53,275 155,0632021 64,764

Total 396,960Alloutstandingliabilitiesbefore2012,netofreinsurance 2,449

Liabilitiesforlossesandlossadjustmentexpenses,netofreinsurance $ 486,248

Propertyexcludingpropertycatastrophe($000’s)Incurredlossesandallocatedlossadjustmentexpenses,netofreinsurance December31,2021



claims



Accidentyear

2012unaudited

2013unaudited

2014unaudited

2015unaudited

2016unaudited

2017unaudited

2018unaudited

2019unaudited

2020unaudited 2021

2012 $ 156,162 $ 121,808 $ 123,689 $ 119,124 $ 114,699 $ 112,477 $ 111,001 $ 108,436 $ 102,994 $ 103,367 $ 508 N/A2013 115,473 76,905 70,558 66,208 64,486 63,702 62,504 63,269 62,782 384 N/A2014 143,464 117,448 99,328 90,710 88,438 84,130 82,408 80,940 923 N/A2015 215,095 189,109 184,774 189,045 188,343 177,281 173,659 8,482 N/A2016 177,039 146,307 138,375 136,868 140,681 137,579 12,700 N/A2017 271,713 253,859 240,749 233,153 216,358 13,045 N/A2018 225,638 242,069 238,052 214,942 11,593 N/A2019 216,653 206,997 196,840 17,777 N/A2020 371,752 343,078 51,075 N/A2021 552,066 255,343 N/A

Total $2,081,611





34

Marineandaviation($000’s)Incurredlossesandallocatedlossadjustmentexpenses,netofreinsurance December31,2021



claims



Accidentyear

2012unaudited

2013unaudited

2014unaudited

2015unaudited

2016unaudited

2017unaudited

2018unaudited

2019unaudited

2020unaudited 2021


Total $ 425,590

Cumulativepaidlossesandallocatedlossadjustmentexpenses,netofreinsurance2012 $ 2,658 $ 11,433 $ 27,528 $ 33,313 $ 35,055 $ 36,257 $ 37,746 $ 38,038 $ 38,131 $ 38,1162013 4,945 13,731 18,415 21,388 22,398 23,672 24,049 23,786 23,7532014 4,177 7,985 11,590 12,469 14,645 15,080 15,956 16,0362015 7 13,418 19,023 20,861 22,629 22,306 22,4452016 (7,333) (1,687) 521 3,261 5,864 6,7672017 1,660 6,541 9,367 11,030 11,6322018 2,005 6,968 11,236 13,5852019 10,756 21,580 29,0682020 9,220 26,5192021 8,643

Total 196,564Alloutstandingliabilitiesbefore2012,netofreinsurance 16,855


Otherspecialty($000’s)Incurredlossesandallocatedlossadjustmentexpenses,netofreinsurance December31,2021



claims



Accidentyear

2012unaudited

2013unaudited

2014unaudited

2015unaudited

2016unaudited

2017unaudited

2018unaudited

2019unaudited

2020unaudited 2021


Total $2,946,010





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Casualty 2.5% 7.3% 11.6% 11.3% 9.6% 8.4% 7.7% 5.9% 4.4% 3.0%Propertycatastrophe 21.6% 30.0% 32.8% (14.2)% (11.6)% 2.2% 1.0% 1.2% (0.4)% 0.2%Propertyexcludingpropertycatastrophe 26.7% 38.9% 13.3% 5.8% 3.4% 0.4% 2.0% 0.4% —% —%Marineandaviation 4.9% 26.9% 19.0% 10.3% 7.4% 2.9% 2.4% —% 0.1% —%Otherspecialty 26.3% 34.2% 12.9% 5.2% 4.2% 3.1% 2.1% 0.9% 0.8% (0.1)%

MortgageOperations

TheCompany’smortgageoperationsincludes(1)U.S.primarymortgageinsurance,(2)U.S.creditrisktransferandother,and(3) Internationalmortgage insurance and reinsurance. The latter two categories alongwith second lien and student loanexposures are excluded on the basis of insignificance for the purposes of presenting disclosures related to short durationcontracts.

For primary mortgage insurance business, the Company establishes case reserves for loans that have been reported asdelinquentbyloanservicersaswellasthosethataredelinquentbutnotreported(IBNRreserves).TheCompanyalsoreservesfortheexpensesofadjustingclaimsrelatedtothesedelinquencies.Thetriggerthatcreatesacasereserveestimateisthataninsured loan is reported to us as being twopayments in arrears. The actuarial reviews anddocumentation created in thereservingprocessarecompletedinaccordancewithgenerallyacceptedactuarialstandards.Theselectedassumptionsreflectactuarial judgment basedon the analysis of historical data and experience combinedwith information concerning currentunderwriting,economic,judicial,regulatoryandotherinfluencesonultimateclaimsettlements.

Because the reserving process requires the Company to forecast future conditions, it is inherently uncertain and requiressignificant judgment and estimation. Theuse of different estimateswould result in the establishment of different reservelevels.Additionally,changes inestimatesare likely tooccur fromperiodtoperiodaseconomicconditionschange,andtheultimateliabilitymayvarysignificantlyfromtheestimatesused.Majorriskfactorsinclude(butarenotlimitedto)changesinhomepricesandborrowerequity,whichcanlimittheborrower’sabilitytosellthepropertyandsatisfytheoutstandingloanbalance,andchangesinunemployment,whichcanaffecttheborrower’sincomeandabilitytomakemortgagepayments.TheuniquenatureoftheCOVID-19pandemic,withnohistoricalprecedent,addsfurtheruncertaintytocurrentreserveestimates.

The lead actuarialmethodology used by the Company is a frequency-severitymethod based on the inventory of pendingdelinquencies.Eachmonththeloanservicersreportthedelinquencystatusofeachinsuredloan.Usingthefrequency-severitymethod allows the Company to take advantage of its knowledge of the number of delinquent loans and the coverageprovided(“risksize”)onthoseloansbydirectlyrelatingthereservestotheseamounts.Thedelinquenciesaregroupedintohomogeneouscohortsforanalysis,reflectingproducttypeandageofdelinquency.Aclaimrate isthendevelopedforeachcohortwhichrepresentsthefrequencywithwhichthedelinquenciesbecomeclaims.Theclaimfrequencyratesarebasedonananalysisofthepatternsofemergingcurecountsandclaimcounts,theforeclosurestatusofthependingdelinquencies,theproduct and geographicalmix of the delinquencies and our view of future economic and claim conditions, which includetrends inhomepricesandunemployment.Claimratescanvarymateriallybyageofdelinquency,dependingonthemixofdelinquenciesandeconomicconditions.

Claimsizeseverityestimatesaredeterminedbyexaminingtherisksizesonthedelinquentloansandestimatingtheportionofrisk that will be paid, as well as any expenses. This is done based on a review of historical development patterns, anassessmentofeconomicconditionsand the levelofequity theborrowersmayhave in theirhomes,aswellas consideringeconomic conditionsand lossmitigationopportunities.Mortgage insurance is generallynot subject to large claimsizes, aswith some other lines of insurance. A claim size over $250,000 is rare, and this helps reduce the volatility of claim sizeestimates.

Theclaimrateandclaimsizeassumptionsgeneratecasereservesforthepopulationofreporteddelinquencies.Thereservefor unreported delinquencies (included in IBNR reserves) is estimated by looking at historical patterns of reporting. Claimrates and claim sizes can then be assigned to estimated unreported delinquencies using assumptions made in theestablishmentofcasereserves.

MortgageinsuranceLossReservesareshort-tail,inthesensethatthevastmajorityofdelinquenciesareresolvedwithintwoyears of being reported. Due to the forbearances and foreclosure moratoriums associated with COVID-19, settlementtimelinesmaybeextended.Whilereservesareinitiallyanalyzedbyreservecohort,asdescribedabove,theyarealsorolledup


36

byunderwritingyeartoensurethatreserveassumptionsareconsistentwiththeperformanceoftheunderwritingyear.Theaccuracy of prior reserve assumptions is also checked in hindsight to determine if adjustments to the assumptions areneeded.

LossReserves for theCompany’smortgage reinsurancebusiness andGSE credit-risk sharing transactionsare comprisedofcase reservesand IBNRreserves.TheCompany’smortgage reinsuranceoperations receive reportsofdelinquent loansandclaimsnotices fromcedingcompaniesand recordcase reservesbasedupon theamountof reserves recommendedby thecedingcompany.Inaddition,specificclaimanddelinquencyinformationreportedbycedingcompaniesisusedintheprocessofestimatingIBNRreserves.

Thefollowingtablepresentsinformationonthemortgageoperations’short-durationinsurancecontracts:

U.S.primarymortgageinsurance($000’sexceptclaimcount)Incurredlossesandallocatedlossadjustmentexpenses,netofreinsurance December31,2021



claims

Cumulativenumberofpaidclaims


Accidentyear

2012unaudited

2013unaudited

2014unaudited

2015unaudited

2016unaudited

2017unaudited

2018unaudited

2019unaudited

2020unaudited 2021

2012 $ 520,835 $ 480,592 $ 475,317 $ 469,238 $ 467,296 $ 459,467 $ 458,065 $ 456,286 $ 456,331 $ 456,362 1 15,0802013 469,311 419,668 411,793 405,809 395,693 393,149 390,987 391,062 391,324 1 9,4682014 316,095 297,151 279,434 266,027 265,992 261,091 262,682 262,829 4 6,2992015 222,790 197,238 198,001 194,677 189,235 190,913 190,560 1 4,5542016 183,556 170,532 148,715 140,608 142,392 141,657 1 3,4242017 179,376 132,220 107,255 108,181 109,242 1 2,4742018 132,318 96,357 89,120 87,962 60 1,6352019 108,424 119,253 110,362 181 8512020 420,003 373,533 2,686 1892021 144,375 2,246 11

Total $2,268,206

Cumulativepaidlossesandallocatedlossadjustmentexpenses,netofreinsurance2012 (106,065) 186,605 327,605 395,695 426,024 441,577 448,151 452,348 453,587 453,9862013 41,447 203,957 308,956 353,189 373,909 382,200 386,853 387,894 387,8792014 20,099 129,159 201,925 233,879 247,038 254,175 256,285 256,8752015 16,159 92,431 151,222 171,337 180,321 183,472 184,0252016 11,462 72,201 113,357 127,286 131,161 131,7172017 8,622 48,112 78,650 87,317 89,7562018 3,966 31,478 50,135 55,8532019 2,899 20,105 29,1022020 1,040 4,1442021 469





U.S.Primary 2.7% 34.9% 25.3% 10.5% 4.4% 2.1% 0.9% 0.5% 0.1% 0.1%


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The following table represents a reconciliation of the disclosures of net incurred andpaid loss development tables to thereserveforlossesandlossadjustmentexpensesatDecember31,2021:

December31,2021

NetoutstandingliabilitiesInsurance

Property,energy,marineandaviation $ 586,885Thirdpartyoccurrencebusiness 2,885,557Thirdpartyclaims-madebusiness 1,613,425Multi-lineandotherspecialty 1,125,841

ReinsuranceCasualty 2,106,507Propertycatastrophe 486,248Propertyexcludingpropertycatastrophe 724,034Marineandaviation 245,881Otherspecialty 981,805

MortgageU.S.primary 688,688

Othershortdurationlinesnotincludedindisclosures 441,459

Totalforshortdurationlines 11,886,330

UnpaidlossesandlossadjustmentexpensesrecoverableInsurance

Property,energy,marineandaviation 354,432Thirdpartyoccurrencebusiness 1,537,549Thirdpartyclaims-madebusiness 921,086Multi-lineandotherspecialty 199,485

ReinsuranceCasualty 592,879Propertycatastrophe 484,598Propertyexcludingpropertycatastrophe 118,939Marineandaviation 111,298Otherspecialty 373,292

MortgageU.S.primary 48,259

Othershortdurationlinesnotincludedindisclosures(1) 887,457Intercompanyeliminations (4,146)

Totalforshortdurationlines 5,625,128

Linesotherthanshortduration 76,240Discounting (55,575)Unallocatedclaimsadjustmentexpenses 225,033

245,698

Totalgrossreservesforlossesandlossadjustmentexpenses $17,757,156

(1) Includesunpaidlossandlossadjustmentexpensesrecoverableof$390.1millionrelatedtothelossportfoliotransferreinsuranceagreements.


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7.AllowanceforExpectedCreditLosses

PremiumsReceivable

ThefollowingtableprovidesarollforwardoftheallowanceforexpectedcreditlossesoftheCompany’spremiumreceivables:

December31,2021Premium

Receivables,NetofAllowance

AllowanceforExpectedCredit

Losses

Balanceatbeginningofperiod $ 2,064,586 $ 37,781

Changeforprovisionofexpectedcreditlosses(2) 2,177

Balanceatendofperiod $ 2,663,280 $ 39,958

December31,2020Premium

Receivables,NetofAllowance


Losses


Cumulativeeffectofaccountingchange(1) 6,539

Changeforprovisionofexpectedcreditlosses(2) 10,239


(1) AdoptionofASU2016-13,“FinancialInstruments-CreditLosses(Topic326)”.(2) Amountsdeemeduncollectiblearewritten-offinoperatingexpenses.Forthe2021and2020period,amountswrittenofftotaled$3.8millionand$2.8

million,respectively.

ReinsuranceRecoverables

The Company monitors the financial condition of its reinsurers and attempts to place coverages only with substantial,financially soundcarriers.Although theCompanyhasnotexperiencedanymaterial credit losses todate,an inabilityof itsreinsurersorretrocessionairestomeettheirobligationstoitovertherelevantexposureperiodsforanyreasoncouldhaveamaterialadverseeffectonitsfinancialconditionandresultsofoperations.

The following table provides a roll forward of the allowance for expected credit losses of the Company’s reinsurancerecoverables:

December31,2021ReinsuranceRecoverables,

NetofAllowance


Losses


Changeforprovisionofexpectedcreditlosses 1,594



39

December31,2020ReinsuranceRecoverables,

NetofAllowance


Losses



Changeforprovisionofexpectedcreditlosses (1,738)


(1) AdoptionofASU2016-13,“FinancialInstruments-CreditLosses(Topic326)”.

The following table summarizes the Company’s reinsurance recoverables on paid and unpaid losses (not including cededunearnedpremiums)atDecember31,2021and2020:

December31,2021 2020

Reinsurancerecoverableonunpaidandpaidlossesandlossadjustmentexpenses $ 5,880,735 $ 4,500,802

%duefromcarrierswithA.M.Bestratingof“A-”orbetter 69.7% 63.9%

%duefromallotherratedcarriers 0.1% 0.1%

%duefromallothercarrierswithnoA.M.Bestrating(1) 30.2% 36.0%

Largestbalanceduefromanyonecarrieras%oftotalshareholders’equity(2) 6.7% 1.8%

(1) AtDecember31,2021and2020period,over91%and94%ofsuchamountiscollateralizedthroughreinsurancetrusts,fundswithheldarrangements,lettersofcreditorother,respectively.

(2) The2021periodincludedimpactofdeconsolidationofSomers.SeeNote4.

ContractholderReceivables

The following table provides a roll forward of the allowance for expected credit losses of the Company’s contractholderreceivables:

December31,2021ContractholderReceivables,NetofAllowance


Losses


Changeforprovisionofexpectedcreditlosses (5,201)


December31,2020ContractholderReceivables,NetofAllowance


Losses

Balanceatbeginningofperiod $ 2,119,460 $ —


Changeforprovisionofexpectedcreditlosses 1,975


(1) AdoptionofASU2016-13,“FinancialInstruments-CreditLosses(Topic326)”.


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8. Reinsurance

Inthenormalcourseofbusiness,theCompany’sinsurancesubsidiariescedeaportionoftheirpremiumthroughprorataandexcessoflossreinsuranceagreementsonatreatyorfacultativebasis.TheCompany’sreinsurancesubsidiariesparticipatein“common account” retrocessional arrangements for certain pro rata treaties. Such arrangements reduce the effect ofindividualoraggregatelossestoallcompaniesparticipatingonsuchtreaties,includingthereinsurers,suchastheCompany’sreinsurance subsidiaries, and the ceding company. In addition, the Company’s reinsurance subsidiaries may purchaseretrocessionalcoverageaspartoftheirriskmanagementprogram.TheCompany’smortgagesubsidiariescedeaportionoftheir premium through quota share arrangements and enter into various aggregate excess of loss mortgage reinsuranceagreementswithvariousspecialpurposereinsurancecompanies.Reinsurancerecoverablesarerecordedasassets,predicatedonthereinsurers’abilitytomeettheirobligationsunderthereinsuranceagreements.Ifthereinsurersareunabletosatisfytheir obligations under the agreements, the Company’s insurance or reinsurance subsidiaries would be liable for suchdefaultedamounts.

Theeffectsof reinsuranceon theCompany’swrittenandearnedpremiumsand lossesand lossadjustmentexpenseswithunaffiliatedreinsurerswereasfollows:


PremiumsWrittenDirect $ 7,706,832 $ 6,553,910Assumed 5,045,655 3,534,158Ceded (3,734,150) (2,650,352)Net $ 9,018,337 $ 7,437,716

PremiumsEarnedDirect $ 7,149,794 $ 6,361,451Assumed 4,333,873 3,213,873Ceded (3,401,369) (2,583,389)Net $ 8,082,298 $ 6,991,935

LossesandLossAdjustmentExpensesDirect $ 4,266,758 $ 4,392,392Assumed 2,826,820 2,204,323Ceded (2,508,775) (1,907,116)Net $ 4,584,803 $ 4,689,599


41

BellemeadeRe

The Company has entered into various aggregate excess of loss mortgage reinsurance agreements with various specialpurposereinsurancecompaniesdomiciledinBermuda(the“BellemeadeAgreements”).Fortherespectivecoverageperiods,theCompanywillretainthefirstlayeroftherespectiveaggregatelossesandthespecialpurposereinsurancecompanieswillprovidesecondlayercoverageuptotheoutstandingcoverageamount.TheCompanywillthenretainlossesinexcessoftheoutstanding coverage limit. The aggregate excess of loss reinsurance coverage decreases over a ten-year period as theunderlyingcoveredmortgagesamortize.SeeNote4,“VariableInterestEntityandNoncontrollingInterests.”

ThefollowingtablesummarizestherespectivecoveragesandretentionsatDecember31,2021:

December31,2021

InitialCoverageatIssuance

CurrentCoverage

RemainingRetention,Net

Bellemeade2017-1Ltd.(1) $ 368,114 $ 108,368 $ 125,926Bellemeade2018-1Ltd.(2) 374,460 181,136 122,118Bellemeade2018-3Ltd.(3) 506,110 302,563 128,020Bellemeade2019-1Ltd.(4) 341,790 181,324 97,845Bellemeade2019-2Ltd.(5) 621,022 398,316 156,419Bellemeade2019-3Ltd.(6) 700,920 409,859 181,583Bellemeade2019-4Ltd.(7) 577,267 411,954 116,292Bellemeade2020-2Ltd.(8) 449,167 218,877 222,567Bellemeade2020-3Ltd.(9) 451,816 365,141 154,732Bellemeade2020-4Ltd.(10) 337,013 186,065 129,824Bellemeade2021-1Ltd.(11) 643,577 630,163 149,189Bellemeade2021-2Ltd.(12) 616,017 616,017 139,763Bellemeade2021-3Ltd.(13) 639,391 639,391 140,545Total $ 6,626,664 $ 4,649,174 $ 1,864,823

(1) IssuedinOctober2017,coveringin-forcepoliciesissuedbetweenJanuary1,2017andJune30,2017.(2) IssuedinApril2018,coveringin-forcepoliciesissuedbetweenJuly1,2017andDecember31,2017.(3) IssuedinOctober2018,coveringin-forcepoliciesissuedbetweenJanuary1,2018andJune30,2018.(4) Issued in March 2019, covering in-force policies primarily issued between 2005 to 2008 under United Guaranty Residential Insurance Company

(“UGRIC”);aswellaspoliciesissuedthrough2015underbothUGRICandArchMortgageInsuranceCompany.(5) IssuedinApril2019,coveringin-forcepoliciesissuedbetweenJuly1,2018andDecember31,2018.(6) IssuedinJuly2019,coveringin-forcepoliciesissuedin2016.(7) IssuedinOctober2019,coveringin-forcepoliciesissuedbetweenJanuary1,2019andJune30,2019.(8) IssuedinSeptember2020,coveringin-forcepoliciesissuedbetweenJanuary1,2020andMay31,2020.$423millionwasdirectlyfundedbyBellemeade

2020-2Ltd.withanadditional$26millionofcapacityprovideddirectlytoArchMIU.S.byaseparatepanelofreinsurers.(9) IssuedinNovember2020,coveringin-forcepoliciesissuedbetweenJune1,2020andAugust31,2020.$418millionwasdirectlyfundedbyBellemeade

2020-3Ltd.withanadditional$34millionofcapacityprovideddirectlytoArchMIU.S.byaseparatepanelofreinsurers.(10) Issued in December 2020, covering in-force policies issued between July 1, 2019 and December 31, 2019. $321 million was directly funded by

Bellemeade2020-4Ltd.withanadditional$16millionofcapacityprovideddirectlytoArchMIU.S.byaseparatepanelofreinsurers.(11) Issued inMarch 2021, covering in-force policies issued between September 1, 2020 andNovember 30, 2020.$580millionwas directly funded by

BellemeadeRe2021-1Ltd.withanadditional$64millioncapacityprovideddirectlytoArchMIU.S.byaseparatepanelofreinsurers.(12) IssuedinJune2021,coveringin-forcepoliciesissuedbetweenDecember1,2020andMarch31,2021.$523millionwasdirectlyfundedbyBellemeade

Re2021-2Ltd.viainsurance-linkednotes,withanadditional$93millioncapacityprovideddirectlytoArchMIU.S.byaseparatepanelofreinsurers.(13) IssuedinSeptember2021,coveringin-forcepoliciesissuedbetweenApril1,2021andJune30,2021.$508millionwasdirectlyfundedbyBellemeadeRe

2021-3Ltd.viainsurance-linkednotes,withanadditional$131millioncapacityprovideddirectlytoArchMIU.S.byaseparatepanelofreinsurers.


42

9. InvestmentInformation

AvailableForSaleInvestments

ThefollowingtablesummarizesthefairvalueandcostoramortizedcostoftheCompany’ssecuritiesclassifiedasavailableforsale:

Estimated Gross Gross Allowancefor CostorFair Unrealized Unrealized ExpectedCredit AmortizedValue Gains Losses Losses(2) Cost

December31,2021Fixedmaturities(1):Corporatebonds $ 6,553,333 $ 104,170 $ (69,194) $ (2,037) $ 6,520,394Mortgagebackedsecurities 408,477 2,825 (5,410) (48) 411,110Municipalbonds 404,666 18,724 (1,409) (2) 387,353Commercialmortgagebackedsecurities 1,046,484 1,740 (3,117) (6) 1,047,867U.S.governmentandgovernmentagencies 4,767,662 10,075 (45,967) — 4,803,554Non-U.S.governmentsecurities 2,120,294 54,048 (34,749) (82) 2,101,077Assetbackedsecurities 2,692,091 6,540 (11,108) (708) 2,697,367Total 17,993,007 198,122 (170,954) (2,883) 17,968,722

Short-terminvestments 1,732,663 568 (590) — 1,732,685Total $ 19,725,670 $ 198,690 $ (171,544) $ (2,883) $ 19,701,407

December31,2020Fixedmaturities(1):Corporatebonds $ 7,856,571 $ 414,247 $ (34,388) $ (896) $ 7,477,608Mortgagebackedsecurities 630,001 8,939 (5,028) (278) 626,368Municipalbonds 494,522 27,291 (3,835) (11) 471,077Commercialmortgagebackedsecurities 389,900 8,722 (2,954) (122) 384,254U.S.governmentandgovernmentagencies 5,557,077 22,612 (12,611) — 5,547,076Non-U.S.governmentsecurities 2,433,733 153,891 (8,060) — 2,287,902Assetbackedsecurities 1,634,804 19,225 (10,715) (1,090) 1,627,384Total 18,996,608 654,927 (77,591) (2,397) 18,421,669

Short-terminvestments 1,922,637 2,693 (2,063) — 1,922,007Total $ 20,919,245 $ 657,620 $ (79,654) $ (2,397) $ 20,343,676

(1) Insecuritieslendingtransactions,theCompanyreceivescollateralinexcessofthefairvalueofthefixedmaturitiespledged.Forpurposesofthistable,theCompanyhasexcludedthecollateralreceivedundersecuritieslending,atfairvalueandincludedthesecuritiespledgedundersecuritieslending,atfairvalue.See“SecuritiesLendingAgreements.”

(2) Effective January 1, 2020, the Company adopted ASU 2016-13 and as a result any credit impairment losses on the Company’s available-for-saleinvestmentsarerecordedasanallowance,subjecttoreversal.


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The following table summarizes, for all available for sale securities in an unrealized loss position, the fair value and grossunrealizedlossbylengthoftimethesecurityhasbeeninacontinualunrealizedlossposition:

Lessthan12Months 12MonthsorMore TotalEstimated Gross Estimated Gross Estimated Gross

Fair Unrealized Fair Unrealized Fair UnrealizedValue Losses Value Losses Value Losses

December31,2021Fixedmaturities(1):Corporatebonds $ 3,639,582 $ (63,938) $ 98,867 $ (5,256) $ 3,738,449 $ (69,194)Mortgagebackedsecurities 222,176 (3,545) 46,809 (1,865) 268,985 (5,410)Municipalbonds 26,665 (385) 16,361 (1,024) 43,026 (1,409)Commercialmortgagebackedsecurities 675,603 (2,805) 5,908 (312) 681,511 (3,117)U.S.governmentandgovernmentagencies 4,211,621 (44,180) 33,373 (1,787) 4,244,994 (45,967)Non-U.S.governmentsecurities 1,511,301 (31,983) 62,957 (2,766) 1,574,258 (34,749)Assetbackedsecurities 1,667,002 (9,853) 33,082 (1,255) 1,700,084 (11,108)

Total 11,953,950 (156,689) 297,357 (14,265) 12,251,307 (170,954)Short-terminvestments 284,733 (590) — — 284,733 (590)

Total $12,238,683 $ (157,279) $ 297,357 $ (14,265) $12,536,040 $ (171,544)

December31,2020Fixedmaturities(1):Corporatebonds $ 747,442 $ (33,086) $ 3,934 $ (1,302) $ 751,376 $ (34,388)Mortgagebackedsecurities 284,619 (4,788) 3,637 (240) 288,256 (5,028)Municipalbonds 67,937 (3,835) — — 67,937 (3,835)Commercialmortgagebackedsecurities 126,624 (2,916) 2,655 (38) 129,279 (2,954)U.S.governmentandgovernmentagencies 1,285,907 (12,611) — — 1,285,907 (12,611)Non-U.S.governmentsecurities 543,844 (7,658) 2,441 (402) 546,285 (8,060)Assetbackedsecurities 634,470 (9,110) 57,737 (1,605) 692,207 (10,715)

Total 3,690,843 (74,004) 70,404 (3,587) 3,761,247 (77,591)Short-terminvestments 97,920 (2,063) — — 97,920 (2,063)

Total $ 3,788,763 $ (76,067) $ 70,404 $ (3,587) $ 3,859,167 $ (79,654)

(1) Insecuritieslendingtransactions,theCompanyreceivescollateralinexcessofthefairvalueofthefixedmaturitiespledged.Forpurposesofthistable,theCompanyhasexcludedthecollateralreceivedandreinvestedandincludedthefixedmaturitiespledged.See“SecuritiesLendingAgreements.”In2021,theCompanyterminateditssecuritieslendingprogramandnolongerentersintosecuritieslendingagreementswithfinancialinstitutions.

AtDecember31,2021,onalotlevelbasis,approximately4,700securitylotsoutofatotalofapproximately10,240securitylotswereinanunrealizedlosspositionandthelargestsingleunrealizedlossfromasinglelotintheCompany’sfixedmaturityportfoliowas$1.1million.TheCompanybelievesthatsuchsecuritiesweretemporarily impairedatDecember31,2021. AtDecember31,2020,onalotlevelbasis,approximately2,320securitylotsoutofatotalofapproximately11,180securitylotswere inanunrealized losspositionand the largest singleunrealized loss fromasingle lot in theCompany’s fixedmaturityportfoliowas$0.9million.


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The contractual maturities of the Company’s fixed maturities and fixed maturities pledged under securities lendingagreementsareshowninthefollowingtable.Expectedmaturities,whicharemanagement’sbestestimates,willdifferfromcontractualmaturitiesbecauseborrowersmayhavetherighttocallorprepayobligationswithorwithoutcallorprepaymentpenalties.

December31,2021 December31,2020

MaturityEstimatedFair

Value AmortizedCostEstimatedFair

Value AmortizedCost

Dueinoneyearorless $ 300,889 $ 299,772 $ 348,200 $ 339,951Dueafteroneyearthroughfiveyears 8,350,153 8,334,286 10,629,959 10,340,819Dueafterfiveyearsthrough10years 4,689,155 4,684,393 4,881,564 4,654,754Dueafter10years 505,758 493,927 482,180 448,139

13,845,955 13,812,378 16,341,903 15,783,663Mortgagebackedsecurities 408,477 411,110 630,001 626,368Commercialmortgagebackedsecurities 1,046,484 1,047,867 389,900 384,254Assetbackedsecurities 2,692,091 2,697,367 1,634,804 1,627,384

Total(1) $ 17,993,007 $ 17,968,722 $ 18,996,608 $ 18,421,669

(1) Insecuritieslendingtransactions,theCompanyreceivescollateralinexcessofthefairvalueofthefixedmaturitiespledged.Forpurposesofthistable,theCompanyhasexcludedthecollateralreceivedandreinvestedandincludedthefixedmaturitiespledged.See“SecuritiesLendingAgreements.”In2021,theCompanyterminateditssecuritieslendingprogramandnolongerentersintosecuritieslendingagreementswithfinancialinstitutions.

SecuritiesLendingAgreements

In2021,theCompanyterminateditssecuritieslendingprogramandnolongerentersintosecuritieslendingagreementswithfinancialinstitutionstoenhanceinvestmentincome.Priortotheterminationofthisprogram,theCompanyloanedcertainofitssecuritiestothirdparties,primarilymajorbrokeragefirms,forshortperiodsoftimethroughalendingagent.TheCompanymaintainedlegalcontroloverthesecuritiesitlent(shownas‘Securitiespledgedundersecuritieslending,atfairvalue’ontheCompany’sbalancesheet),retainedtheearningsandcashflowsassociatedwiththeloanedsecuritiesandreceivedafeefromtheborrower for the temporaryuseof the securities.An indemnificationagreementwith the lendingagentprotected theCompanyintheeventaborrowerbecameinsolventorfailedtoreturnanyofthesecuritiesonloanfromtheCompany.

The Company receives collateral (shown as ‘Collateral received under securities lending, at fair value’ on the Company’sbalance sheet) in the form of cash or U.S. government and government agency securities. At December 31, 2021, theCompanyhadnocashcollateralorsecuritycollateralduetotheterminationoftheprogram.AtDecember31,2020,thefairvalueofthecashcollateralreceivedonsecuritieslendingwasnilandthefairvalueofsecuritycollateralreceivedwas$301.1million.

ThecarryingvalueofcollateralheldundertheCompany’ssecurities lendingtransactionsbysignificant investmentcategoryand remaining contractual maturity of the underlying agreements was as follows at December 31, 2020 (no balances atDecember31,2021duetotheterminationoftheprogram):

RemainingContractualMaturityoftheAgreements

OvernightandContinuous

Lessthan30Days 30-90Days 90DaysorMore Total

December31,2020U.S.governmentandgovernmentagencies $ 142,317 $ — $ 139,290 $ — $ 281,607Corporatebonds 3,021 — — — 3,021Equitysecurities 16,461 — — — 16,461

Total $ 161,799 $ — $ 139,290 $ — $ 301,089

GrossamountofrecognizedliabilitiesforsecuritieslendinginoffsettingdisclosureinNote11 $ —

AmountsrelatedtosecuritieslendingnotincludedinoffsettingdisclosureinNote11 $ 301,089

EquitySecurities,atFairValue

At December 31, 2021, the Company held $1.8 billion of equity securities, at fair value, compared to $1.4 billion atDecember31,2020.


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NetInvestmentIncome

Thecomponentsofnetinvestmentincomewerederivedfromthefollowingsources:YearEndedDecember31,2021 2020

Fixedmaturities $ 330,057 $ 412,445Termloans 34,843 84,149Equitysecurities(dividends) 42,396 28,958Short-terminvestments 6,927 10,760Other(1) 62,892 72,277Grossinvestmentincome 477,115 608,589

Investmentexpenses (87,999) (92,462)Netinvestmentincome $ 389,116 $ 516,127

(1)Includesincomedistributionsfrominvestmentfundsandotheritems.

NetRealizedGains(Losses)

Netrealizedgains(losses)wereasfollows:YearEndedDecember31,

2021 2020

Availableforsalesecurities:Grossgainsoninvestmentsales $ 313,886 $ 595,935Grosslossesoninvestmentsales (156,791) (117,282)

Changeinfairvalueofassetsandliabilitiesaccountedforusingthefairvalueoption:Fixedmaturities 7,953 15,881Otherinvestments 116,781 13,656Equitysecurities 13,028 14,629Shortterminvestments 601 2,279

Equitysecuritiesatfairvalue:Netrealizedgains(losses)onsecuritiessold 122,606 26,849Netunrealizedgains(losses)onequitysecuritiesstillheldatreportingdate 48,746 102,394

Allowanceforcreditlosses:Investmentsrelated (2,100) (3,597)Underwritingrelated 1,062 (10,007)

Netimpairmentlosses — (533)Derivativeinstruments(1) (32,390) 179,675Other(2) (54,006) 5,498

Netrealizedgains(losses) $ 379,376 $ 825,377

(1) SeeNote11forinformationontheCompany’sderivativeinstruments.(2)2021periodreflected$33.1millionoflossesrelatedtotheCompany’sdeconsolidationofSomers.


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OtherInvestments

ThefollowingtablesummarizestheCompany’sotherinvestmentsandotherinvestableassets:December31,

2021 2020

Fixedmaturities $ 416,698 $ 843,354Otherinvestments 1,432,553 2,331,885Short-terminvestments 97,806 557,008Equitysecurities 26,493 92,549Investmentsaccountedforusingthefairvalueoption $ 1,973,550 $ 3,824,796

Otherinvestableassets(1) — 500,000Totalotherinvestments $ 1,973,550 $ 4,324,796

(1) Participationinterestsinareceivableofareverserepurchaseagreement

ThefollowingtablesummarizestheCompany’sotherinvestments,asdetailedintheprevioustable,bystrategy:


Lending 536,345 572,636Termloaninvestments 484,950 1,231,731Investmentgradefixedincome 147,810 138,646Privateequity 91,126 48,750Energy 81,692 65,813Creditrelatedfunds 70,278 90,780Infrastructure 20,352 165,516Realestate — 18,013

Total $ 1,432,553 $ 2,331,885

InvestmentsAccountedForUsingtheEquityMethod

ThefollowingtablesummarizestheCompany’sinvestmentsaccountedforusingtheequitymethod,bystrategy:


Creditrelatedfunds 1,022,334 740,060Privateequity 436,042 235,289RealEstate 396,395 258,518Equities 395,090 343,058Lending 376,649 179,629Infrastructure 230,070 175,882Energy 119,141 115,453Fixedincome 101,890 —

Total $ 3,077,611 $ 2,047,889

EquityinNetIncome(Loss)ofInvestmentsAccountedForUsingtheEquityMethod

TheCompanyrecordedequityinnetincomerelatedtoinvestmentsaccountedforusingtheequitymethodof$366.4millionfor2021,comparedto$146.7millionfor2020.Inapplyingtheequitymethod,investmentsareinitiallyrecordedatcostandaresubsequentlyadjustedbasedontheCompany’sproportionateshareofthenetincomeorlossofthefunds(whichincludechangesinthemarketvalueoftheunderlyingsecuritiesinthefunds).Suchinvestmentsaregenerallyrecordedonaonetothreemonthlagbasedontheavailabilityofreportsfromtheinvestmentfunds.

CertainoftheCompany’sotherinvestmentsandinvestmentsaccountedforusingtheequitymethodareininvestmentfundsforwhichtheCompanyhastheoptiontoredeematagreeduponvaluesasdescribedineachinvestmentfund’ssubscriptionagreement. Depending on the terms of the various subscription agreements, investments in investment funds may beredeemed daily, monthly, quarterly or on other terms. Two common redemption restrictions which may impact theCompany’sabilitytoredeemtheseinvestmentfundsaregatesandlockups.Agateisasuspensionofredemptionswhichmaybe implemented by the general partner or investment manager of the fund in order to defer, in whole or in part, theredemptionrequestintheeventtheaggregateamountofredemptionrequestsexceedsapredeterminedpercentageoftheinvestment fund'snetassetswhichmayotherwisehinder thegeneralpartneror investmentmanager's ability to liquidate


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holdings inanorderly fashion inorder togenerate thecashnecessary to fundextraordinarily largeredemptionpayouts.Alockupperiodistheinitialamountoftimeaninvestoriscontractuallyrequiredtoholdthesecuritybeforehavingtheabilitytoredeem. If the investment funds are eligible to be redeemed, the time to redeem such fund can take weeks or monthsfollowingthenotification.

LimitedPartnershipInterests

Inthenormalcourseof itsactivities,theCompanyinvests in limitedpartnershipsaspartof itsoverall investmentstrategy.Suchamountsareincludedin‘Investmentsaccountedforusingtheequitymethod’and‘Investmentsaccountedforusingthefair value option.’ The Company determined that these limited partnership interests represented variable interests in thefundsbecausethegeneralpartnerdidnothaveasignificantinterestinthefunds.TheCompany’smaximumexposuretolosswith respect to these investments is limited to the investment carrying amounts reported in the Company’s consolidatedbalancesheetsandanyunfundedcommitment.

The followingtablesummarizes investments in limitedpartnership interestswhere theCompanyhasavariable interestbybalancesheetitem:


Investmentsaccountedforusingtheequitymethod(1) $ 3,077,611 $ 2,047,889Investmentsaccountedforusingthefairvalueoption(2) 170,595 184,720Total $ 3,248,206 $ 2,232,609

(1) Aggregateunfundedcommitmentswere$2.6billionatDecember31,2021,comparedto$1.8billionatDecember31,2020.(2) Aggregateunfundedcommitmentswere$18.8millionatDecember31,2021,comparedto$35.6millionatDecember31,2020.

InvestmentsinOperatingAffiliates

Investments in which the Company has significant influence over the operating and financial policies are classified as‘investmentsinoperatingaffiliates’ontheCompany’sbalancesheetsandareaccountedforundertheequitymethod.Suchinvestments primarily include theCompany’s investment in Coface SA (“Coface”),Greysbridge andPremia. Investments inCoface and Premia are generally recorded on a three month lag, while the Company’s investment in Greysbridge is notrecordedonalag.

In2021, theCompanycompleted the sharepurchaseagreementwithNatixis topurchase29.5%of the commonequityofCoface,aFrance-basedleaderintheglobaltradecreditinsurancemarket.Theconsiderationpaidwas€9.95pershare,oranaggregate€453million(approximately$546million)includingrelatedfees.Income(loss)fromoperatingaffiliatesreflectedaone-timegainof$74.5million realized from theacquisition.As a resultof equitymethodaccounting rules, approximately$36millionofadditionalgainwasdeferredandwillgenerallyberecognizedoverthenextfiveyears.AsofDecember31,2021,the Company owned approximately 29.86% of the issued shares of Coface, or 30.10% excluding treasury shares, with acarryingvalueof$630.5million.

InJuly2021,theCompanyannouncedthecompletionofthepreviouslydisclosedacquisitionofSomersbyGreysbridgeforacash purchase price of $35.00 per common share. Effective July 1, 2021, Somers is wholly owned by Greysbridge, andGreysbridge is owned 40% by the Company, 30% by certain investment funds managed by Kelso and 30% by certaininvestment funds managed by Warburg. At December 31, 2021 the Company’s carrying value in Greysbridge was$375.7million, which reflected the Company’s aggregate purchase price of $278.9million along with income (loss) fromoperating affiliates,which included a one-time gain of $95.7million recognized from the acquisition. In addition, the ‘netrealizedgains(losses)’lineontheCompany’sconsolidatedstatementsofincomeincludeda$33.1millionlossasaresultofdeconsolidationofSomersintheCompany’sfinancialstatementsfollowingthecloseofthetransaction.SeeNote4.

TheCompanyrecordedincomefromoperatingaffiliatesof$264.7millionfor2021,comparedtoincomeof$16.8millionfor2020. The income fromoperating affiliates for the 2021period, primarily related to theCompany’s recent investments inCofaceandGreysbridge.


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AllowanceforExpectedCreditLosses

ThefollowingtableprovidesarollforwardoftheallowanceforexpectedcreditlossesoftheCompany’ssecuritiesclassifiedasavailableforsale:

YearEndedDecember31,2021

StructuredSecurities(1)

MunicipalBonds

CorporateBonds Total

Balanceatbeginningofperiod $ 1,490 $ 11 $ 896 $ 2,397Additionsforcurrent-periodprovisionforexpectedcreditlosses 602 — 2,858 3,460Additions(reductions)forpreviouslyrecognizedexpectedcreditlosses (847) (9) (320) (1,176)Reductionsduetodisposals(3) (443) — (1,355) (1,798)Balanceatendofperiod $ 802 $ 2 $ 2,079 $ 2,883


StructuredSecurities(1)

MunicipalBonds

CorporateBonds Total

Balanceatbeginningofperiod $ — $ — $ — $ —Cumulativeeffectofaccountingchange(2) 517 — 117 634Additionsforcurrent-periodprovisionforexpectedcreditlosses 2,942 67 7,644 10,653Additions(reductions)forpreviouslyrecognizedexpectedcreditlosses (1,398) 6 (5,638) (7,030)Reductionsduetodisposals (571) (62) (1,227) (1,860)Balanceatendofperiod $ 1,490 $ 11 $ 896 $ 2,397

(1) Includesassetbackedsecurities,mortgagebackedsecuritiesandcommercialmortgagebackedsecurities.(2) AdoptionofASU2016-13,“FinancialInstruments-CreditLosses(Topic326)”.(3)Reductionforthe2021periodprimarilyrelatedtotheCompany’sdeconsolidationofSomers.

RestrictedAssets

TheCompany is requiredtomaintainassetsondeposit,whichprimarilyconsistof fixedmaturities,withvariousregulatoryauthoritiestosupportitsunderwritingoperations.TheCompany’ssubsidiariesmaintainassetsintrustaccountsascollateralfortransactionswithaffiliatedcompaniesandalsohaveinvestmentsinsegregatedportfoliosprimarilytoprovidecollateralorguaranteesforlettersofcredittothirdparties.

ThefollowingtabledetailsthevalueoftheCompany’srestrictedassets:


Assetsusedforcollateralorguarantees:Affiliatedtransactions $ 4,223,955 $ 4,643,334Thirdpartyagreements 2,721,122 3,083,286

DepositswithU.S.regulatoryauthorities 798,100 827,552Depositswithnon-U.S.regulatoryauthorities 506,517 179,099Totalrestrictedassets(1) $ 8,249,694 $ 8,733,271

(1) 2020balancesIncluded$1.0billionrelatedtoSomers.Seenote4.

ReconciliationofCashandRestrictedCash

ThefollowingtabledetailsreconciliationofcashandrestrictedcashwithintheConsolidatedBalanceSheets:


Cash $ 809,393 $ 860,835Restrictedcash(includedin‘otherassets’) 456,065 384,058Cashandrestrictedcash $ 1,265,458 $ 1,244,893


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10. FairValue

AccountingguidanceregardingfairvaluemeasurementsaddresseshowcompaniesshouldmeasurefairvaluewhentheyarerequiredtouseafairvaluemeasureforrecognitionordisclosurepurposesunderGAAPandprovidesacommondefinitionoffairvalue tobeused throughoutGAAP. Itdefines fairvalueas theprice thatwouldbereceived tosellanassetorpaid totransfera liability inanorderly fashionbetweenmarketparticipantsat themeasurementdate. Inaddition, itestablishesathree-level valuation hierarchy for the disclosure of fair valuemeasurements. The valuation hierarchy is based upon thetransparencyofinputstothevaluationofanassetorliabilityasofthemeasurementdate.Thelevelinthehierarchywithinwhich a given fair value measurement falls is determined based on the lowest level input that is significant to themeasurement(Level1beingthehighestpriorityandLevel3beingthelowestpriority).

Thelevelsinthehierarchyaredefinedasfollows:

Level1: Inputstothevaluationmethodologyareobservableinputsthatreflectquotedprices(unadjusted)foridenticalassetsorliabilitiesinactivemarkets

Level2: Inputstothevaluationmethodologyincludequotedpricesforsimilarassetsandliabilitiesinactivemarkets,andinputsthatareobservablefortheassetorliability,eitherdirectlyorindirectly,forsubstantiallythefulltermofthefinancialinstrument

Level3: Inputstothevaluationmethodologyareunobservableandsignificanttothefairvaluemeasurement

Following isadescriptionof thevaluationmethodologiesused forsecuritiesmeasuredat fairvalue,aswellas thegeneralclassificationofsuchsecuritiespursuanttothevaluationhierarchy.TheCompanyreviewsitssecuritiesmeasuredatfairvalueanddiscussestheproperclassificationofsuchinvestmentswithinvestmentadvisersandothers.

TheCompanydeterminestheexistenceofanactivemarketbasedonitsjudgmentastowhethertransactionsforthefinancialinstrument occur in such market with sufficient frequency and volume to provide reliable pricing information. Theindependentpricingsourcesobtainmarketquotationsandactualtransactionpricesforsecuritiesthathavequotedpricesinactive markets. The Company uses quoted values and other data provided by nationally recognized independent pricingsourcesasinputsintoitsprocessfordeterminingfairvaluesofitsfixedmaturityinvestments.Tovalidatethetechniquesormodelsusedbypricingsources, theCompany'sreviewprocess includes,but isnot limitedto: (i)quantitativeanalysis (e.g.,comparingthequarterlyreturnforeachmanagedportfoliotoitstargetbenchmark,withsignificantdifferencesidentifiedandinvestigated);(ii)areviewofthepricesobtainedinthepricingprocessandtherangeofresultingfairvalues;(iii) initialandongoing evaluation of methodologies used by outside parties to calculate fair value; (iv) a comparison of the fair valueestimatestotheCompany’sknowledgeof thecurrentmarket; (v)acomparisonof thepricingservices' fairvaluestootherpricing services' fair values for the same investments; and (vi) periodic back-testing, which includes randomly selectingpurchasedorsoldsecuritiesandcomparingtheexecutedpricestothefairvalueestimatesfromthepricingservice.Apricesourcehierarchywasmaintainedinordertodeterminewhichpricesourcewouldbeused(i.e.,apriceobtainedfromapricingservicewithmoreseniorityinthehierarchywillbeusedoveralesssenioroneinallcases).Thehierarchyprioritizespricingservicesbasedonavailabilityandreliabilityandassignsthehighestprioritytoindexproviders.Basedontheabovereview,theCompanywillchallengeanypricesforasecurityorportfoliowhichareconsiderednottoberepresentativeoffairvalue.

In certain circumstances, when fair values are unavailable from these independent pricing sources, quotes are obtaineddirectly from broker-dealers who are active in the corresponding markets. Such quotes are subject to the validationproceduresnotedabove.Ofthe$23.8billionoffinancialassetsandliabilitiesmeasuredatfairvalueatDecember31,2021,approximately $7.7million, or 0.0%,were priced using non-binding broker-dealer quotes. Of the $26.5 billion of financialassetsandliabilitiesmeasuredatfairvalueatDecember31,2020,approximately$150.1million,or0.6%,werepricedusingnon-bindingbroker-dealerquotes.

Fixedmaturities

TheCompanyusesthemarketapproachvaluationtechniquetoestimatethefairvalueofitsfixedmaturitysecurities,whenpossible. The market approach includes obtaining prices from independent pricing services, such as index providers andpricing vendors, aswell as to a lesser extent quotes frombroker-dealers. The independent pricing sources obtainmarketquotations and actual transactionprices for securities that havequotedprices in activemarkets. Each source has its ownproprietarymethodfordeterminingthefairvalueofsecuritiesthatarenotactivelytraded.Ingeneral,thesemethodsinvolvetheuseof“matrixpricing”inwhichtheindependentpricingsourceusesobservablemarketinputsincluding,butnotlimitedto, investment yields, credit risks and spreads, benchmarking of like securities, broker-dealer quotes, reported trades and


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sector groupings to determine a reasonable fair value. The following describes the significant inputs generally used todeterminethefairvalueoftheCompany’sfixedmaturitysecuritiesbyassetclass:

• U.S. governmentandgovernmentagencies—valuationsprovidedby independentpricing services,withall pricesprovidedthroughindexprovidersandpricingvendors.TheCompanydeterminedthatallU.S.TreasurieswouldbeclassifiedasLevel1securitiesduetoobservedlevelsoftradingactivity,thehighnumberofstronglycorrelatedpricingquotesreceivedonU.S.Treasuriesandother factors. The fair valuesofU.S. governmentagency securitiesaregenerallydeterminedusing thespread above the risk-free yield curve. As the yields for the risk-free yield curve and the spreads for these securities areobservablemarketinputs,thefairvaluesofU.S.governmentagencysecuritiesareclassifiedwithinLevel2.

• Corporatebonds—valuations providedby independent pricing services, substantially all through indexprovidersandpricingvendorswithasmallamountthroughbroker-dealers.Thefairvaluesofthesesecuritiesaregenerallydeterminedusingthespreadabovetherisk-freeyieldcurve.Thesespreadsaregenerallyobtainedfromthenewissuemarket,secondarytrading and from broker-dealers who trade in the relevant security market. As the significant inputs used in the pricingprocessforcorporatebondsareobservablemarketinputs,thefairvalueofthesesecuritiesareclassifiedwithinLevel2.

• Mortgage-backedsecurities—valuationsprovidedbyindependentpricingservices,substantiallyallthroughpricingvendors and indexproviderswith a small amount throughbroker-dealers. The fair valuesof these securities are generallydetermined through the use of pricing models (including Option Adjusted Spread) which use spreads to determine theexpectedaveragelifeofthesecurities.Thesespreadsaregenerallyobtainedfromthenewissuemarket,secondarytradingandfrombroker-dealerswhotradeintherelevantsecuritymarket.Thepricingservicesalsoreviewprepaymentspeedsandother indicators,when applicable. As the significant inputs used in the pricing process formortgage-backed securities areobservablemarketinputs,thefairvalueofthesesecuritiesareclassifiedwithinLevel2.

• Municipal bonds— valuations provided by independent pricing services, with all prices provided through indexproviders and pricing vendors. The fair values of these securities are generally determined using spreads obtained frombroker-dealerswho trade in the relevant securitymarket, tradepricesand thenew issuemarket.As the significant inputsusedinthepricingprocessformunicipalbondsareobservablemarketinputs,thefairvalueofthesesecuritiesareclassifiedwithinLevel2.

• Commercial mortgage-backed securities — valuations provided by independent pricing services, substantially allthroughindexprovidersandpricingvendorswithasmallamountthroughbroker-dealers.Thefairvaluesofthesesecuritiesaregenerallydeterminedthroughtheuseofpricingmodelswhichusespreadstodeterminetheappropriateaveragelifeofthesecurities.Thesespreadsaregenerallyobtainedfromthenewissuemarket,secondarytradingandfrombroker-dealerswho trade in the relevant securitymarket. As the significant inputs used in the pricing process for commercialmortgage-backedsecuritiesareobservablemarketinputs,thefairvalueofthesesecuritiesareclassifiedwithinLevel2.

• Non-U.S. government securities — valuations provided by independent pricing services, with all prices providedthroughindexprovidersandpricingvendors.Thefairvaluesofthesesecuritiesaregenerallybasedoninternationalindicesorvaluationmodelswhichincludedailyobservedyieldcurves,cross-currencybasisindexspreadsandcountrycreditspreads.Asthesignificant inputsused in thepricingprocess fornon-U.S.governmentsecuritiesareobservablemarket inputs, the fairvalueofthesesecuritiesareclassifiedwithinLevel2.

• Asset-backed securities — valuations provided by independent pricing services, substantially all through indexprovidersandpricingvendorswithasmallamountthroughbroker-dealers.Thefairvaluesofthesesecuritiesaregenerallydetermined through the use of pricing models (including Option Adjusted Spread) which use spreads to determine theappropriateaveragelifeofthesecurities.Thesespreadsaregenerallyobtainedfromthenewissuemarket,secondarytradingandfrombroker-dealerswhotrade intherelevantsecuritymarket.Asthesignificant inputsused inthepricingprocessforasset-backedsecuritiesareobservablemarket inputs,thefairvalueofthesesecuritiesareclassifiedwithinLevel2.AsmallnumberofsecuritiesareincludedinLevel3duetoalowleveloftransparencyontheinputsusedinthepricingprocess.

Equitysecurities

TheCompanydeterminedthatexchange-tradedequitysecuritieswouldbeincludedinLevel1astheirfairvaluesarebasedonquotedmarketprices in activemarkets.Other equity securities are included in Level 2of the valuationhierarchy.A smallnumberofsecuritiesareincludedinLevel3duetothelackofanavailableindependentpricesourceforsuchsecurities.Asthesignificantinputsusedtopricethesesecuritiesareunobservable,thefairvalueofsuchsecuritiesareclassifiedasLevel3.


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Otherinvestments

TheCompanydeterminedthatexchange-traded investmentswouldbe included inLevel1astheir fairvaluesarebasedonquoted market prices in active markets. Other investments also include term loan investments for which fair values areestimatedbyusingquotedpricesoftermloaninvestmentswithsimilarcharacteristics,pricingmodelsormatrixpricing.SuchinvestmentsaregenerallyclassifiedwithinLevel2.AsmallnumberofsecuritiesareincludedinLevel3duetothelackofanavailableindependentpricesourceforsuchsecurities.

Derivativeinstruments

TheCompany’sfuturescontracts,foreigncurrencyforwardcontracts, interestrateswapsandotherderivativestradeintheover-the-counterderivativemarket.TheCompanyusesthemarketapproachvaluationtechniquetoestimatethefairvaluefor these derivatives based on significant observablemarket inputs from third party pricing vendors, non-binding broker-dealer quotes and/or recent trading activity. As the significant inputs used in the pricing process for these derivativeinstrumentsareobservablemarketinputs,thefairvalueofthesesecuritiesareclassifiedwithinLevel2.

Short-terminvestments

The Company determined that certain of its short-term investments held in highly liquid moneymarket-type funds, U.S.Treasurybillsandcommercialpaperwouldbe includedinLevel1astheirfairvaluesarebasedonquotedmarketprices inactivemarkets.Thefairvaluesofothershort-terminvestmentsaregenerallydeterminedusingthespreadabovetherisk-freeyieldcurveandareclassifiedwithinLevel2.

Residentialmortgageloans

TheCompany’s residentialmortgage loans (included in ‘other assets’ in the consolidatedbalance sheets) includeamountsrelated to the Company’s wholemortgage loan purchase and sell program. Fair values of residential mortgage loans aregenerally determined based onmarket prices. As significant inputs used in pricing process for these residentialmortgageloansareobservablemarketinputs,thefairvalueofthesesecuritiesareclassifiedwithinLevel2.

Contingentconsiderationliabilities

Contingentconsiderationliabilities(includedin‘Otherliabilities’intheconsolidatedbalancesheets)includeamountsrelatedto theCompany’sacquisitions.Suchamountsare remeasuredat fairvalueateachbalancesheetdatewithchanges in fairvalue recognized in ‘Net realized gains (losses).’ To determine the fair value of contingent consideration liabilities, theCompanyestimatesfuturepaymentsusinganincomeapproachbasedonmodeledinputswhichincludeaweightedaveragecostofcapital.TheCompanydeterminedthatcontingentconsiderationliabilitieswouldbeincludedwithinLevel3.


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The following tablepresents theCompany’s financialassetsand liabilitiesmeasuredat fairvalueby levelatDecember31,2021:

FairValueMeasurementUsing:

EstimatedFairValue

QuotedPricesinActiveMarketsforIdenticalAssets

(Level1)

SignificantOtherObservableInputs

(Level2)

SignificantUnobservable

Inputs(Level3)

Assetsmeasuredatfairvalue:Availableforsalesecurities:Fixedmaturities:Corporatebonds $ 6,553,333 $ — $ 6,553,320 $ 13Mortgagebackedsecurities 408,477 — 408,477 —Municipalbonds 404,666 — 404,666 —Commercialmortgagebackedsecurities 1,046,484 — 1,046,484 —U.S.governmentandgovernmentagencies 4,767,662 4,739,415 28,247 —Non-U.S.governmentsecurities 2,120,294 — 2,120,294 —Assetbackedsecurities 2,692,091 — 2,688,744 3,347Total 17,993,007 4,739,415 13,250,232 3,360

Equitysecurities,atfairvalue 1,804,170 1,762,864 38,388 2,918

Short-terminvestments 1,732,663 1,050,769 681,894 —

Derivativeinstruments(3) 127,121 — 127,121 —

Residentialmortgageloans 49,847 — 49,847 —

Fairvalueoption:Corporatebonds 388,546 — 388,546 —Non-U.S.governmentbonds 23,785 — 23,785 —Assetbackedsecurities 4,367 — 4,367 —Short-terminvestments 97,806 528 97,278 —Equitysecurities 26,493 21,745 — 4,748Otherinvestments 310,798 20,352 262,465 27,981Otherinvestmentsmeasuredatnetassetvalue(1) 1,121,755Total 1,973,550 42,625 776,441 32,729Totalassetsmeasuredatfairvalue $ 23,680,358 $ 7,595,673 $ 14,923,923 $ 39,007

Liabilitiesmeasuredatfairvalue:Contingentconsiderationliabilities $ (16,960) — — (16,960)Securitiessoldbutnotyetpurchased(2) — — — —Derivativeinstruments(3) (54,224) — (54,224) —Totalliabilitiesmeasuredatfairvalue $ (71,184) $ — $ (54,224) $ (16,960)

(1) In accordancewith applicable accounting guidance, certain investments that aremeasured at fair value using the net asset value per share (or itsequivalent)practicalexpedienthavenotbeenclassifiedinthefairvaluehierarchy.Thefairvalueamountspresentedinthistableareintendedtopermitreconciliationofthefairvaluehierarchytotheamountspresentedintheconsolidatedbalancesheets.

(2) RepresentstheCompany’sobligationstodeliversecuritiesthatitdidnotownatthetimeofsale.Suchamountsareincludedin“Otherliabilities”ontheCompany’sconsolidatedbalancesheets.

(3) SeeNote11.


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The following tablepresents theCompany’s financialassetsand liabilitiesmeasuredat fairvalueby levelatDecember31,2020:

FairValueMeasurementUsing:

EstimatedFairValue

QuotedPricesinActiveMarketsforIdenticalAssets

(Level1)

SignificantOtherObservableInputs

(Level2)

SignificantUnobservable

Inputs(Level3)

Assetsmeasuredatfairvalue(1):Availableforsalesecurities:Fixedmaturities:Corporatebonds $ 7,856,571 $ — $ 7,856,558 $ 13Mortgagebackedsecurities 630,001 — 630,001 —Municipalbonds 494,522 — 494,522 —Commercialmortgagebackedsecurities 389,900 — 389,900 —U.S.governmentandgovernmentagencies 5,557,077 5,463,356 93,721 —Non-U.S.governmentsecurities 2,433,733 — 2,433,733 —Assetbackedsecurities 1,634,804 — 1,631,378 3,426Total 18,996,608 5,463,356 13,529,813 3,439

Equitysecurities,atfairvalue 1,460,959 1,401,653 17,291 42,015

Short-terminvestments 1,922,637 1,918,280 4,357 —

Derivativeinstruments(4) 177,383 — 177,383 —

Fairvalueoption:Corporatebonds 651,294 — 650,309 985Non-U.S.governmentbonds 35,263 — 35,263 —Mortgagebackedsecurities 3,282 — 3,282 —Commercialmortgagebackedsecurities 1,090 — 1,090 —Assetbackedsecurities 152,151 — 152,151 —U.S.governmentandgovernmentagencies 274 164 110 —Short-terminvestments 557,008 420,131 136,877 —Equitysecurities 92,549 23,373 188 68,988Otherinvestments 1,134,229 51,149 1,015,977 67,103Otherinvestmentsmeasuredatnetassetvalue(2) 1,197,656Total 3,824,796 494,817 1,995,247 137,076Totalassetsmeasuredatfairvalue $ 26,382,383 $ 9,278,106 $ 15,724,091 $ 182,530

Liabilitiesmeasuredatfairvalue:Contingentconsiderationliabilities (461) — — (461)Securitiessoldbutnotyetpurchased(3) (21,679) — (21,679) —Derivativeinstruments(4) (108,705) — (108,705) —Totalliabilitiesmeasuredatfairvalue $ (130,845) $ — $ (130,384) $ (461)

(1) Insecuritieslendingtransactions,theCompanyreceivescollateral inexcessofthefairvalueofthesecuritiespledged.Forpurposesofthistable,theCompanyhasexcludedthecollateralreceivedundersecuritieslending,atfairvalueandincludedthesecuritiespledgedundersecuritieslending,atfairvalue.SeeNote9.

(2) In accordancewith applicable accounting guidance, certain investments that aremeasured at fair value using the net asset value per share (or itsequivalent)practicalexpedienthavenotbeenclassifiedinthefairvaluehierarchy.Thefairvalueamountspresentedinthistableareintendedtopermitreconciliationofthefairvaluehierarchytotheamountspresentedintheconsolidatedbalancesheets.

(3) RepresentstheCompany’sobligationstodeliversecuritiesthatitdidnotownatthetimeofsale.Suchamountsareincludedin“Otherliabilities”ontheCompany’sconsolidatedbalancesheets.

(4) SeeNote11.


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ThefollowingtablepresentsareconciliationofthebeginningandendingbalancesforallfinancialassetsandliabilitiesmeasuredatfairvalueonarecurringbasisusingLevel3inputsfor2021and2020:

Assets Liabilities

AvailableForSale FairValueOption FairValue

StructuredSecurities

(1)CorporateBonds

CorporateBonds

OtherInvestments

EquitySecurities

EquitySecurities

ContingentConsiderationLiabilities


Balanceatbeginningofyear $ 3,426 $ 13 $ 985 $ 67,103 $ 68,988 $ 42,015 $ (461)

Totalgainsor(losses)(realized/unrealized)

Includedinearnings(2) (135) — 13 868 4,941 1,958 — Includedinothercomprehensiveincome 133 — — — — — —

Purchases,issuances,salesandsettlements

Purchases — — — 13,213 — 5,718 (16,494) Issuances — — — — — — — Sales(3) — — (998) (53,203) (69,181) (46,773) — Settlements (77) — — — — — (5)

Transfersinand/oroutofLevel3 — — — — — — — Balanceatendofyear $ 3,347 $ 13 $ — $ 27,981 $ 4,748 $ 2,918 $ (16,960)


Balanceatbeginningofyear $ 5,216 $ 8,851 $ 932 $ 68,817 $ 58,094 $ 55,889 $ (7,998)

Totalgainsor(losses)(realized/unrealized)

Includedinearnings(2) — (5,865) (13) (314) 10,894 8,214 (72)

Includedinothercomprehensiveincome (169) 397 — — — — —

Purchases,issuances,salesandsettlements

Purchases — — 66 52,449 — 4,030 —

Issuances — — — — — — —

Sales — — — (56,833) — (26,118) —

Settlements (1,413) (1,462) — — — — 7,609

Transfersinand/oroutofLevel3 (208) (1,908) — 2,984 — — —

Balanceatendofyear $ 3,426 $ 13 $ 985 $ 67,103 $ 68,988 $ 42,015 $ (461)

(1) Includesassetbackedsecurities,mortgagebackedsecuritiesandcommercialmortgagebackedsecurities.(2)Gainsorlosseswereincludedinnetrealizedgains(losses).(3) Salesforthe2021periodprimarilyrelatestotheCompany’sdeconsolidationofSomers.

FinancialInstrumentsDisclosed,ButNotCarried,AtFairValue

TheCompanyusesvarious financial instruments in thenormal courseof itsbusiness. Thecarryingvaluesof cash, accruedinvestment income, receivable for securities sold, certain other assets, payable for securities purchased and certain otherliabilities approximated their fair valuesatDecember31,2021,due to their respective shortmaturities.As these financialinstrumentsarenotactivelytraded,theirrespectivefairvaluesareclassifiedwithinLevel2.

AtDecember31,2021,theCompany’sseniornoteswerecarriedattheircost,netofdebtissuancecosts,of$1.4billionandhada fair valueof$1.8billion.AtDecember31,2020, theCompany’s seniornoteswerecarriedat their cost,netofdebtissuancecosts,of$1.6billionandhadafairvalueof$2.1billion.Thefairvaluesoftheseniornoteswereobtainedfromathirdpartypricingserviceandarebasedonobservablemarketinputs.Assuch,thefairvalueoftheseniornotesisclassifiedwithinLevel2.

FairValueMeasurementsonaNon-RecurringBasis

TheCompanymeasuresthefairvalueofcertainassetsonanon-recurringbasis,generallyquarterly,annually,orwheneventsor changes in circumstances indicate that the carryingamountof theassetsmaynotbe recoverable.Theseassets includeinvestmentsaccountedforusingtheequitymethod,certainotherinvestments,goodwillandintangibleassets,andlong-livedassets.

TheCompanyusesavarietyoftechniquestomeasurethefairvalueoftheseassetswhenappropriate,asdescribedbelow:

Investmentsaccountedforusingtheequitymethod.WhentheCompanydeterminesthatthecarryingvalueoftheseassetsmaynotberecoverable,theCompanyrecordstheassetsatfairvaluewiththelossrecognizedinincome.Insuchcases,the


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Companymeasures the fair valueof theseassetsusing the techniquesdiscussedabove in “FairValueMeasurementsonaRecurringBasis.”

GoodwillandIntangibleAssets.TheCompanytestsgoodwillandintangibleassetsannuallyforimpairmentwhenevereventsorchangesincircumstancesindicatethecarryingamountmaynotberecoverable.WhentheCompanydeterminesgoodwilland intangible assetsmaybe impaired, theCompanyuses techniques includingdiscountedexpected future cash flows, tomeasurefairvalue.

Long-Lived Assets. The Company tests its long-lived assets for impairment whenever events or changes in circumstancesindicatethecarryingamountofalong-livedassetmaynotberecoverable.

11. DerivativeInstruments

TheCompany’s investmentstrategyallowsfortheuseofderivativeinstruments.TheCompany’sderivativeinstrumentsarerecorded on its consolidated balance sheets at fair value. The Company utilizes exchange traded U.S. Treasury note,Eurodollarandotherfuturescontractsandcommodityfuturestomanageportfoliodurationorreplicateinvestmentpositionsin its portfolios and the Company routinely utilizes foreign currency forward contracts, currency options, index futurescontracts andotherderivatives as part of its total returnobjective. In addition, certainof theCompany’s investments aremanaged in portfolioswhich incorporate the use of foreign currency forward contractswhich are intended to provide aneconomichedgeagainstforeigncurrencymovements.

Inaddition,theCompanypurchasesto-be-announcedmortgagebackedsecurities(“TBAs”)aspartofitsinvestmentstrategy.TBAsrepresentcommitmentstopurchaseafuture issuanceofagencymortgagebackedsecurities.Fortheperiodbetweenpurchase of a TBA and issuance of the underlying security, the Company’s position is accounted for as a derivative. TheCompany purchases TBAs in both long and short positions to enhance investment performance and as part of its overallinvestmentstrategy.

ThefollowingtablesummarizesinformationonthefairvaluesandnotionalvaluesoftheCompany’sderivativeinstruments:EstimatedFairValue

AssetDerivatives

LiabilityDerivatives

NotionalValue(1)

December31,2021Futurescontracts(2) $ 34,999 $ (9,808) $2,826,564Foreigncurrencyforwardcontracts(2) 7,734 (11,390) 915,962TBAs 11,227 — 11,227Other(2) 73,161 (33,026) 3,736,773Total $ 127,121 $ (54,224)

December31,2020Futurescontracts(2) $ 11,046 $ (4,496) $3,099,796Foreigncurrencyforwardcontracts(2) 52,716 (6,202) 1,656,729TBAs — — —Other(2) 113,621 (98,007) 5,763,919Total $ 177,383 $(108,705)

(1) Representstheabsolutenotionalvalueofalloutstandingcontracts,consistingoflongandshortpositions.(2) Thefairvalueofassetderivativesareincludedin‘otherassets’andthefairvalueofliabilityderivativesareincludedin‘otherliabilities.’

TheCompanydidnotholdanyderivativeswhichweredesignatedashedginginstrumentsatDecember31,2021or2020.

TheCompany’sderivativeinstrumentscanbetradedundermasternettingagreements,whichestablishtermsthatapplytoall derivative transactions with a counterparty. In the event of a bankruptcy or other stipulated event of default, suchagreements provide that thenon-defaulting partymay elect to terminate all outstandingderivative transactions, inwhichcase all individual derivative positions (loss or gain) with a counterparty are closed out and netted and replaced withasingleamount,usuallyreferredtoastheterminationamount,whichisexpressedinasinglecurrency.Theresultingsinglenet amount, where positive, is payable to the party “in-the-money” regardless of whether or not it is the defaulting


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party,unlessthepartieshaveagreedthatonlythenon-defaultingpartyisentitledtoreceiveaterminationpaymentwherethenetamountispositiveandisinitsfavor.

AtDecember31,2021,$122.3millionand$53.9million,respectively,ofassetderivativesandliabilityderivativesweresubjectto a master netting agreement compared to $138.8 million and $93.0 million, respectively, at December 31, 2020. Theremainingderivativesincludedinthetableabovewerenotsubjecttoamasternettingagreement.

RealizedandunrealizedcontractgainsandlossesontheCompany’sderivativeinstrumentsarereflectedinnetrealizedgains(losses)intheconsolidatedstatementsofincome,assummarizedinthefollowingtable:

Derivativesnotdesignatedashedginginstruments


2021 2020

Netrealizedgains(losses):Futurescontracts $ (15,262) $ 114,987Foreigncurrencyforwardcontracts (39,755) 49,974TBAs (233) 1,129Other 22,860 13,585Total $ (32,390) $ 179,675

12.OtherComprehensiveIncome(Loss)

ThefollowingtablepresentsthechangesineachcomponentofAOCI,netofnoncontrollinginterests:

UnrealizedAppreciationonAvailable-For-

SaleInvestments

ForeignCurrencyTranslationAdjustments Total

YearEndedDecember31,2021Beginningbalance $ 500,780 $ (15,983) $ 484,797Othercomprehensiveincome(loss)beforereclassifications (371,430) (63,666) (435,096)Amountsreclassifiedfromaccumulatedothercomprehensiveincome (116,068) — (116,068)

Netcurrentperiodothercomprehensiveincome(loss) (487,498) (63,666) (551,164)Endingbalance $ 13,282 $ (79,649) $ (66,367)

YearEndedDecember31,2020Beginningbalance $ 258,245 $ (47,721) $ 210,524Othercomprehensiveincome(loss)beforereclassifications 668,717 31,738 700,455Amountsreclassifiedfromaccumulatedothercomprehensiveincome (426,182) — (426,182)

Netcurrentperiodothercomprehensiveincome(loss) 242,535 31,738 274,273Endingbalance $ 500,780 $ (15,983) $ 484,797

Thefollowingtablepresentsdetailsaboutamountsreclassifiedfromaccumulatedothercomprehensiveincome:

ConsolidatedStatementofIncome AmountsReclassedfromAOCILineItemThatIncludes YearEndedDecember31,

DetailsAboutAOCIComponents Reclassification 2021 2020

Unrealizedappreciationonavailable-for-saleinvestmentsNetrealizedgains $ 157,095 $ 478,652Provisionforcreditlosses (2,099) (3,597)Other-than-temporaryimpairmentlosses — (533)Totalbeforetax 154,996 474,522Incometaxexpense (38,928) (48,340)Netoftax $ 116,068 $ 426,182


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Followingaretherelatedtaxeffectsallocatedtoeachcomponentofothercomprehensiveincome(loss):Before Tax NetTax Expense ofTax

Amount (Benefit) Amount

YearEndedDecember31,2021Unrealizedappreciation(decline)invalueofinvestments:Unrealizedholdinggains(losses)arisingduringperiod $ (406,462) $ (19,845) $ (386,617)

Lessreclassificationofnetrealizedgains(losses)includedinnetincome 154,996 38,928 116,068Foreigncurrencytranslationadjustments (62,403) 59 (62,462)Othercomprehensiveincome(loss) $ (623,861) $ (58,714) $ (565,147)

YearEndedDecember31,2020Unrealizedappreciation(decline)invalueofinvestments:Unrealizedholdinggains(losses)arisingduringperiod $ 754,290 $ 75,854 $ 678,436

Lessreclassificationofnetrealizedgains(losses)includedinnetincome 474,522 48,340 426,182Foreigncurrencytranslationadjustments 31,449 370 31,079Othercomprehensiveincome(loss) $ 311,217 $ 27,884 $ 283,333

13. IncomeTaxes

ArchReBermuda is incorporatedunderthe lawsofBermudaand,undercurrentBermuda law, isnotobligatedtopayanytaxesinBermudabaseduponincomeorcapitalgains.TheCompanyhasreceivedawrittenundertakingfromtheMinisterofFinance in Bermuda under the Exempted Undertakings Tax Protection Act 1966 that, in the event that any legislation isenactedinBermudaimposinganytaxcomputedonprofits,income,gainorappreciationonanycapitalasset,oranytaxinthenatureofestatedutyorinheritancetax,suchtaxwillnotbeapplicabletoArchCapitaloranyofitsoperationsuntilMarch31,2035.Thisundertakingdoesnot,however,preventtheimpositionoftaxesonanypersonordinarilyresidentinBermudaoranycompanyinrespectofitsownershipofrealpropertyorleaseholdinterestsinBermuda.

ArchReBermudaanditsnon-U.S.subsidiarieswillbesubjecttoU.S.federal incometaxonlytotheextentthattheyderiveU.S.sourceincomethatissubjecttoU.S.withholdingtaxorincomethatiseffectivelyconnectedwiththeconductofatradeor businesswithin theU.S. and is not exempt fromU.S. tax under an applicable income tax treatywith theU.S. Arch ReBermudaand itsnon-U.S. subsidiarieswillbesubject toawithholdingtaxondividends fromU.S. investmentsand interestfrom certain U.S. payors (subject to reduction by any applicable income tax treaty). Arch Re Bermuda and its non-U.S.subsidiariesintendtoconducttheiroperationsinamannerthatwillnotcausethemtobetreatedasengagedinatradeorbusiness in theUnitedStatesand, therefore,will notbe required topayU.S. federal income taxes (other thanU.S. excisetaxeson insuranceandreinsurancepremiumandwithholdingtaxesondividendsandcertainotherU.S.source investmentincome).However, because there is uncertainty as to the activitieswhich constitutebeingengaged in a tradeorbusinesswithintheUnitedStates,therecanbenoassurancesthattheU.S.InternalRevenueServicewillnotcontendsuccessfullythatArchReBermudaoritsnon-U.S.subsidiariesareengagedinatradeorbusinessintheUnitedStates.IfArchReBermudaoranyofitsnon-U.S.subsidiariesweresubjecttoU.S.incometax,ArchReBermuda’sshareholder’sequityandearningscouldbemateriallyadverselyaffected.ArchReBermudahassubsidiariesandbranchesthatoperateinvariousjurisdictionsaroundtheworld that are subject to tax in the jurisdictions inwhich they operate. The significant jurisdictions inwhich Arch ReBermuda’ssubsidiariesandbranchesaresubjecttotaxaretheUnitedStates,UnitedKingdom,Ireland,Canada,Switzerland,AustraliaandDenmark.


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Thecomponentsofincometaxesattributabletooperationswereasfollows:YearEndedDecember31,2021 2020

Currentexpense(benefit):UnitedStates $ 284,275 $ 178,535Non-U.S. 10,686 15,920

294,961 194,455Deferredexpense(benefit):UnitedStates (123,261) (86,530)Non-U.S. (43,690) 3,325

(166,951) (83,205)Incometaxexpense(benefit) $ 128,010 $ 111,250

TheCompany’sincomeorlossbeforeincometaxeswasearnedinthefollowingjurisdictions:YearEndedDecember31,2021 2020

Income(Loss)BeforeIncomeTaxes:Bermuda $ 1,647,535 $ 1,217,387UnitedStates 643,239 407,372Other 207,640 57,540Total $ 2,498,414 $ 1,682,299

Theexpectedtaxprovisioncomputedonpre-taxincomeorlossattheweightedaveragetaxratehasbeencalculatedasthesum of the pre-tax income in each jurisdiction multiplied by that jurisdiction’s applicable statutory tax rate. The 2021applicablestatutorytaxratesbyjurisdictionwereasfollows:Bermuda(0.0%),UnitedStates(21.0%),UnitedKingdom(19.0%),Ireland (12.5%), Denmark (22.0%), Canada (26.5%), Gibraltar (12.5%), Australia (30.0%), Hong Kong (16.5%) and theNetherlands(25.0%).

A reconciliationof thedifferencebetween theprovision for income taxes and theexpected taxprovisionat theweightedaveragetaxratefollows:


Expectedincometaxexpense(benefit)computedonpre-taxincomeatweightedaverageincometaxrate $ 158,230 $ 112,597Addition(reduction)inincometaxexpense(benefit)resultingfrom:Tax-exemptinvestmentincome (23,572) (1,824)Mealsandentertainment 379 547Statetaxes,netofU.S.federaltaxbenefit 20,978 5,027Foreignbranchtaxes 1,998 2,094Prioryearadjustment (1,432) 3,983Foreignexchangegains&losses 1,190 (1,736)Changesinapplicabletaxrate 447 —Dividendwithholdingtaxes 12,211 7,105Changeinvaluationallowance (40,764) 12,797Contingentconsideration — 9Sharebasedcompensation (5,339) (2,533)Intercompanyloanwrite-off — (22,083)Other 3,684 (4,733)

Incometaxexpense(benefit) $ 128,010 $ 111,250

Theeffectofachangeintaxlawsorratesondeferredtaxassetsandliabilitiesisrecognizedinincomeintheperiodinwhichsuchchangeisenacted.


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Deferred income tax assets and liabilities reflect temporary differences based on enacted tax rates between the carryingamountsofassetsand liabilities for financial reportingand incometaxpurposes.Significantcomponentsof theCompany’sdeferredincometaxassetsandliabilitieswereasfollows:

December31,

2021 2020

Deferredincometaxassets:Netoperatingloss $ 87,960 $ 67,142Uncrystalizedlosses — 2,926Discountingofnetlossreserves 72,001 74,247Netunearnedpremiumreserve 75,483 66,368Compensationliabilities 28,062 27,351Foreigntaxcreditcarryforward 20,058 19,160Interestexpense 755 622Goodwillandintangibleassets — 14,450Baddebtreserves 10,252 10,842Leaseliability 115,041 23,604Netunrealizedforeignexchangelosses 21,453 165Netunrealizeddeclineofinvestments 166 —Other,net — 2,173

Deferredtaxassetsbeforevaluationallowance 431,231 309,050Valuationallowance (43,953) (88,255)

Deferredtaxassetsnetofvaluationallowance 387,278 220,795Deferredincometaxliabilities:Depreciationandamortization — (495)Deferredpolicyacquisitioncosts (25,612) (42,045)Depositaccountingliability (1,578) (1,751)Goodwillandintangibles (70,549) —Lloydsyearofaccountdeferral (12,514) —Contingencyreserve (49,486) (64,593)Investmentrelated (7,492) (9,571)Netunrealizedappreciationofinvestments (8,377) (66,681)Rightofuseasset (17,406) (19,239)Other,net (271) (844)

Totaldeferredtaxliabilities (193,285) (205,219)Netdeferredincometaxassets(liabilities) $ 193,993 $ 15,576

TheCompanyprovidesavaluationallowancetoreducecertaindeferredtaxassetstoanamountwhichmanagementexpectsto more likely than not be realized. As of December 31, 2021, the Company’s valuation allowance was $44.0 million,compared to $88.3million at December 31, 2020. The valuation allowance in both periods was primarily attributable tovaluation allowances on the Company’s U.K., Canadian and Australian operations and certain other deferred tax assetsrelatingtolosscarryforwardsthathavealimiteduse.


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AtDecember31,2021,theCompany’snetoperatinglosscarryforwardsandtaxcreditswereasfollows:

December31,

2021 Expiration

OperatingLossCarryforwards:UnitedKingdom 259,235 NoexpirationIreland 9,032 NoexpirationAustralia 39,981 NoexpirationHongKong 23,203 NoexpirationUnitedStates(1) 29,508 Various

TaxCredits:U.K.foreigntaxcredits 20,058 Noexpiration

(1)OnJanuary30,2014,theCompany’sU.S.mortgageoperationsunderwentanownershipchangeforU.S.federalincometaxpurposesasaresultoftheCompany’sacquisitionoftheCMGEntities.Asaresultofthisownershipchange,alimitationhasbeenimposedupontheutilizationofapproximately$7.6millionoftheCompany’sexistingU.S.netoperatinglosscarryforwards.Utilizationislimitedtoapproximately$0.6millionperyearinaccordancewithSection382oftheInternalRevenueCodeof1986asamended(“theCode”).

TheCompany’sU.S.mortgageoperationsareeligibleforataxdeduction,subjecttocertainlimitations,underSection832(e)oftheCodeforamountsrequiredbystatelaworregulationtobesetasideinstatutorycontingencyreserves.Thedeductionisallowedonly to theextent that theCompanypurchasesnon-interestbearingU.S.MortgageGuarantyTax and LossBonds(“T&LBonds”) issuedby theU.S. TreasuryDepartment in an amountequal to the taxbenefit derived fromdeducting anyportionofthestatutorycontingencyreserves.T&Lbondsarereflectedin‘otherassets’ontheCompany’sbalancesheetandtotaledapproximately$31.6millionatDecember31,2021,comparedto$88.1millionatDecember31,2020.

DeferredincometaxliabilitieshavenotbeenaccruedwithrespecttotheundistributedearningsoftheCompany’sU.S.,U.K.andIrelandsubsidiariesasitistheCompany’sintentionthatallsuchearningswillbeindefinitelyreinvested.Iftheearningsweretobedistributed,asdividendsorotherwise,suchamountsmaybesubjecttowithholdingtaxinthejurisdictionofthepaying entity. The Company no longer intends to indefinitely reinvest earnings from the Company's Canada subsidiary,however, no incomeorwithholding taxes have been accrued as the Canada subsidiary does not have positive cumulativeearnings and profits and therefore a distribution from this particular subsidiarywould not be subject to income taxes orwithholding taxes. Potential tax implications of repatriation from the Company’s unremitted earnings that are indefinitelyreinvestedaredrivenbyfactsatthetimeofdistribution.Thereforeitisnotpracticabletoestimatetheincometaxliabilitiesthat might be incurred if such earnings were remitted. Distributions from the U.K. or Ireland would not be subject towithholdingtaxandnodeferredincometaxliabilitywouldneedtobeaccrued.

TheCompanyrecognizesinterestandpenaltiesrelatingtounrecognizedtaxbenefitsintheprovisionforincometaxes.AsofDecember 31, 2021, the Company’s total unrecognized tax benefits, including interest and penalties,were $2.0million. Ifrecognized,thefullamountoftheunrecognizedtaxbenefitwouldimpacttheconsolidatedeffectivetaxrate.Areconciliationofthebeginningandendingamountofunrecognizedtaxbenefitsisasfollows:


Balanceatbeginningofyear $ 2,008 $ 2,008Additionsbasedontaxpositionsrelatedtothecurrentyear — —Additionsfortaxpositionsofprioryears — —

Balanceatendofyear $ 2,008 $ 2,008


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TheCompany,itssubsidiariesandbranchesfileincometaxreturnsinvariousfederal,stateandlocalandforeignjurisdictions.Thefollowingtabledetailsopentaxyearsthatarepotentiallysubjecttoexaminationbylocaltaxauthorities,inthefollowingmajorjurisdictions:

Jurisdiction TaxYears

UnitedStates 2015-2021UnitedKingdom 2020-2021Ireland 2017-2021Canada 2017-2021Switzerland 2018-2021Denmark 2017-2021Australia 2017-2021

AsofDecember31,2021,theCompany’scurrentincometaxpayable(includedin“Otherliabilities”)was$14.7million.

14. TransactionswithRelatedParties

In 2017, the Company acquired approximately 25% of Premia Holdings Ltd. Premia Holdings Ltd. is the parent of PremiaReinsurance Ltd., a multi-line Bermuda reinsurance company (together with Premia Holdings Ltd., “Premia”). Premia’sstrategy is to reinsure or acquire companies or reserve portfolios in the non-life property and casualty insurance andreinsurance run-off market. Arch Re Bermuda and certain Arch co-investors invested $100.0 million and acquiredapproximately25%ofPremiaaswellaswarrantstopurchaseadditionalcommonequity.ArchhasappointedtwodirectorstoserveonthesevenpersonboardofdirectorsofPremia.ArchReBermudaisprovidinga25%quotasharereinsurancetreatyoncertainbusinesswrittenbyPremia.

In the2021 first quarter, as part of theCompany’s acquisitionofBarbican, theCompanyentered into an agreementwithPremiaManagingAgency Limited for the reinsurance to closeof Syndicate 1955’s 2018underwriting year of account intoPremiaSyndicate1884’s2021underwritingyearofaccount.ThereinsurancetoclosecoverslegacybusinessunderwrittenbySyndicate1955ontheunderwriting2018andprioryearsofaccountandundertheagreement,approximately$380millionofnetliabilitieswastransferredtoSyndicate1844,withaneffectivedateofJanuary1,2021.TheCompanyhasnoreinsurancerecoverableonunpaidandpaid lossesor fundsheld liabilityatDecember31,2021,compareto$199.8millionand$149.6million,respectivelyatDecember31,2020.

In July2021, followingconsummationof theMergerAgreementand the relatedGreysbridgeequity financing,pursuant towhich Somers is wholly owned by Greysbridge, and Greysbridge is owned 40% by the Company, 30% by certain fundsmanaged by Kelso and 30% by certain funds managed by Warburg, the Company entered into certain reinsurancetransactionswith Somers. For 2021, the Company ceded premiumswritten related to such transactions of $453.9million(whichincludesreinsurancetransactionsinforceaswellasthoseenteredintoinconjunctionwiththeMergerAgreement).Inaddition,SomerspaidcertainacquisitioncostsandadministrativefeestotheCompany.AtDecember31,2021,theCompanyrecorded a reinsurance recoverable on unpaid and paid losses from Somers of $902.8million and a reinsurance balancepayabletoSomersof$258.4million.SeeNote4.

The Company has a put/call option that was entered into in connection with the Greysbridge equity financing, wherebybeginningJanuary1,2024theCompanywillhaveacallright(butnottheobligation)andWarburgandKelsowilleachhaveaputright(butnottheobligation)tobuy/sellonethirdoftheirinitialsharesannuallyatthetangiblebookvaluepershareofGreysbridgeforthemostrecentlyendedfiscalquarter.

AsofDecember31,2021,theCompanyowns$35.0millioninaggregateprincipalamountofSomers6.5%seniornotes,dueJuly2,2029andapproximately6.6%ofSomers’preferenceshares.

During2021and2020,theCompanyincurredapproximately$27.8millionand$20.3millionforservicesthatareprovidedbyArch Global Services Inc. and Arch Global Services (Cyprus) Ltd. (collectively, “Global Services”). Such fees were incurredpursuanttothetermsofservicesagreementsbetweenArchReBermudaandcertainofitssubsidiariesandenteredintowithGlobalServices,andareincludedin“Otheroperatingexpenses”intheconsolidatedstatementsofincome.

During 2021 and 2020, the Company incurred approximately $35.3million and $31.9million, respectively, of investmentservice fees to Arch Investment Management Ltd. (“AIM”). Such fees are incurred pursuant to the terms of specific


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investmentserviceagreementsbetweenArchReBermudaandcertainofitssubsidiariesandAIM,andareincludedin“Netinvestmentincome”intheconsolidatedstatementsofincomeisnetofthesefees.

Inthe2020fourthquarter,theCompanyacquiredArchCapitalServicesInc.(“ACSI”)fromArchCapital,itsparentcompany.Inreturn,theCompanyissued11,1001.31%SeriesACumulativeRedeemablePreferenceShares(the“PreferredShares”)withaliquidation preference of $10,000 per share to Arch Capital. ACSI was valued at $111.0 million in the transaction. TheCompanysubsequentlysoldalloftheACSIsharestoArchCapitalGroup(U.S.)Inc.for$111.0milliononDecember30,2020.ACSIconvertedtoanLLC(ACSLLC)onDecember31,2020.During2020,theCompanyincurredapproximately$86.7millionofadministrativeandsupportservicefeestoACSIanditssubsidiary,ArchInternationalServicesInc.SuchfeeswereincurredpursuanttothetermsofspecificadministrativeandsupportserviceagreementsbetweenArchReBermudaandcertainofitssubsidiariesandACSIanditssubsidiary,ArchInternationalServicesInc.,andareincludedin“Otheroperatingexpenses”intheconsolidatedstatementsofincome.

15. Leases

Intheordinarycourseofbusiness,theCompanyrenewsandentersintonewleasesforofficepropertyandequipment.Atthelease inception date, the Company determines whether a contract contains a lease and its classification as a finance oroperatinglease.PrimarilyalloftheCompany’sleasesareclassifiedasoperatingleases.TheCompany’soperatingleaseshaveremaining leasetermsofupto11years, someofwhich includeoptions toextendthe leaseterm.TheCompanyconsidersthese options when determining the lease term and measuring its lease liability and right-of-use asset. In addition, theCompany’sleaseagreementsdonotcontainanymaterialresidualvalueguaranteesormaterialrestrictivecovenants.

Short-term operating leases with an initial term of twelvemonths or less were excluded on the Company's consolidatedbalancesheetandrepresentaninconsequentialamountofoperatingleaseexpense.

Asmost leasesdonotprovidean implicitrate,theCompanyuses its incrementalborrowingratebasedonthe informationavailableattheleasecommencementdateindeterminingthepresentvalueofleasepayments.

AdditionalinformationregardingtheCompany’soperatingleasesisasfollows:December 31,

2021 2020

Operatingleasecosts $ 27,618 $ 27,715

Cashpaymentsincludedinthemeasurementofleaseliabilitiesreportedinoperatingcashflows $ 27,972 $ 26,136Right-of-useassetsobtainedinexchangefornewleaseliabilities $ 22,686 $ 9,336Right-of-useassets(1) $ 98,935 $ 104,066Operatingleaseliability(1) $ 118,188 $ 124,223Weightedaveragediscountrate 3.9% 3.9%Weightedaverageremainingleaseterm 6.2 5.6

(1)Theright-of-useassetsareincludedin‘otherassets’whiletheoperatingleaseliabilityisincludedin‘otherliabilities.’

ThefollowingtablepresentsthecontractualmaturitiesoftheCompany'soperatingleaseliabilitiesatDecember31,2021:

YearsEndingDecember31,2022 $ 27,2912023 21,9482024 20,9292025 16,1012026 13,342Thereafter 34,172Totalundiscountedleaseliability 133,783Less:presentvalueadjustment (14,895)Operatingleaseliability $ 118,888

Alloftheseleasesarefortherentalofofficespace,withexpirationtermsthatrangefrom2022to2033.Rentalexpensewasapproximately$27.6millionand$27.7millionfor2021and2020,respectively.


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16. CommitmentsandContingencies

ConcentrationsofCreditRisk

The creditworthiness of a counterparty is evaluated by the Company, taking into account credit ratings assigned byindependent agencies. The credit approval process involves an assessment of factors, including, among others, thecounterparty,countryandindustrycreditexposurelimits.Collateralmayberequired,atthediscretionoftheCompany,oncertaintransactionsbasedonthecreditworthinessofthecounterparty.

The areas where significant concentrations of credit risk may exist include unpaid losses and loss adjustment expensesrecoverable, contractholder receivables, cededunearnedpremiums,paid lossesand loss adjustmentexpenses recoverablenet of reinsurance balances payable, investments and cash and cash equivalent balances. A credit exposure exists withrespecttoreinsurancerecoverablesastheymaybecomeuncollectible.TheCompanymanagesitscreditriskinitsreinsurancerelationships by transacting with reinsurers that it considers financially sound and, if necessary, the Company may holdcollateralintheformoffunds,trustaccountsand/orirrevocablelettersofcredit.Thiscollateralcanbedrawnonforamountsthat remain unpaid beyond specified time periods on an individual reinsurer basis. In addition, certain insurance policieswrittenbytheCompany’sinsuranceoperationsfeaturelargedeductibles,primarilyinitsconstructionandnationalaccountslinesofbusiness.Undersuchcontracts,theCompanyisobligatedtopaytheclaimantforthefullamountoftheclaim.TheCompanyissubsequentlyreimbursedbythepolicyholderforthedeductibleamount.Theseamountsareincludedonagrossbasisintheconsolidatedbalancesheetsincontractholderpayablesandcontractholderreceivables,respectively.Intheeventthat the Company is unable to collect from the policyholder, the Company would be liable for such defaulted amounts.Collateral, primarily in the form of letters of credit, cash and trusts, is obtained from the policyholder to mitigate theCompany’s credit risk. In the instanceswhere thecompany receivescollateral in the formofcash, theCompany recordsarelatedliabilityin“Collateralheldforinsuredobligations.”

Inaddition,theCompanyunderwritesasignificantamountofitsbusinessthroughbrokersandacreditriskexistsshouldanyofthesebrokersbeunabletofulfilltheircontractualobligationswithrespecttothepaymentsofinsuranceandreinsurancebalancesowedtotheCompany.Thefollowingtablesummarizesthepercentageof theCompany’sgrosspremiumswrittengeneratedfromorplacedbythelargestbrokers:

BrokerYearEndedDecember31,

2021 2020

Marsh&McLennanCompaniesanditssubsidiaries 18.3% 13.3%AonCorporationanditssubsidiaries 12.2% 12.0%

Nootherbrokerandnooneinsuredorreinsuredaccountedformorethan10%ofgrosspremiumswrittenfor2021and2020.

TheCompany’savailableforsale investmentportfolio ismanaged inaccordancewithguidelinesthathavebeentailoredtomeet specific investment strategies, including standards of diversification,which limit the allowable holdings of any singleissue.Therewerenoinvestmentsinanyentityinexcessof10%oftheCompany’sshareholder’sequityatDecember31,2021otherthaninvestmentsissuedorguaranteedbytheUnitedStatesgovernmentoritsagencies.

InvestmentCommitments

TheCompany’sinvestmentcommitments,whichareprimarilyrelatedtoagreementsenteredintobytheCompanytoinvestin funds and separately managed accounts when called upon, were approximately $3.0 billion and $2.1 billion atDecember31,2021and2020,respectively.

PurchaseObligations

TheCompanyhasalsoenteredintocertainagreementswhichcommittheCompanytopurchasegoodsorservices,primarilyrelatedtosoftwareandcomputerizedsystems.Suchpurchaseobligationswereapproximately$96.6millionand$34.7millionatDecember31,2021and2020,respectively.

EmploymentandOtherArrangements

AtDecember31,2021, theCompanyhasentered intoemploymentagreementswithcertainof itsexecutiveofficers.Suchemployment arrangements provide for compensation in the form of base salary, annual bonus, share-based awards,participationintheCompany’semployeebenefitprogramsandthereimbursementsofexpenses.


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LoanswithAffiliates

ArchCapitaldependsonitsavailablecashresources,liquidinvestmentsanddividendsorotherdistributionsfromsubsidiariestomakepayments,includingthepaymentofdebtserviceobligationsandoperatingexpensesitmayincurandanypaymentsofdividends,redemptionamountsorliquidationamountswithrespecttopreferredsharesandcommonshares,andtofundthe share repurchase program. During the course of 2021 and 2020, Arch Capital requested cash advances fromArch ReBermuda.ArchReBermudaagreed toprovidesuchcashadvances toArchCapital in the formof interest free loanswhichwererepayableupondemand.ArchReBermudaadvanced$1.8billionin2021and$221.6millionin2020toArchCapitalonsuchterms.The loanbalancesduetoArchReBermudaweresubsequentlyforgivenandconverted intodividendpaymentswhichreducedtheoutstandingloanbalanceduefromArchCapitalateachbalancesheetdatetonil.

17. DebtandFinancingArrangements

TheCompany’sseniornotespayableatDecember31,2021and2020wereasfollows:

CarryingAmountatInterest Principal December31,(Fixed) Amount 2021 2020

2043notes(1) 5.144% $ 500,000 $ 495,063 $ 494,9442026notes(2) 4.011% 500,000 497,633 497,2112046notes(3) 5.031% 450,000 445,490 445,402Somersnotes(4) 137,689

$ 1,450,000 $ 1,438,186 $ 1,575,246

(1) SeniornotesofArch-U.S.,awholly-ownedsubsidiaryofArchReBermuda, issuedonDecember13,2013anddueNovember1,2043(“2043notes”),fullyandunconditionallyguaranteedbyArchCapital.

(2)SeniornotesofArchCapitalFinanceLLC(“ArchFinance”),awholly-ownedfinancesubsidiaryofArchReBermuda,issuedonDecember8,2016anddueDecember15,2026(“2026notes”),fullyandunconditionallyguaranteedbyArchCapital.

(3) SeniornotesofArchFinanceissuedonDecember8,2016anddueDecember15,2046(“2046notes”),fullyandunconditionallyguaranteedbyArchCapital.

(4)SeniornotesofSomersissuedonJuly2,2019anddueJuly2,2029(“SomersSeniorNotes”),reflectingtheeliminationofamountsownedbyArch-U.S.EffectiveJuly1,2021,theCompanynolongerconsolidatesSomersinitsFinancials.SeeNote4.

During2021and2020,theCompanymadeinterestpaymentsof$80.9millionand$93.3million,respectively,relatedtoitsseniornotesandotherfinancingarrangements.

LetterofCreditandRevolvingCreditFacilities

Inthenormalcourseofitsoperations,theCompanyentersintoagreementswithfinancialinstitutionstoobtainsecuredandunsecuredcreditfacilities.

OnDecember17,2019,ArchCapitalandcertainofitssubsidiariesenteredintoa$750.0millionfive-yearcreditfacility(the“Credit Facility”)witha syndicationof lenders.TheCredit Facility consistsofa$250.0million secured facility for lettersofcredit(the“SecuredFacility”)anda$500.0millionunsecuredfacilityforrevolvingloansandlettersofcredit(the“UnsecuredFacility”). Obligations of each borrower under the Secured Facility for letters of credit are secured by cash and eligiblesecuritiesofsuchborrowerheldincollateralaccounts.CommitmentsundertheCreditFacilitymaybeincreasedupto,butnotexceeding,anaggregateof$1.3billion.ArchCapitalhasaone-timeoptiontoconvertanyoralloutstandingrevolvingloansofArchCapitaland/orArch-U.S.totermloanswiththesametermsastherevolvingloansexceptthatanyprepaymentsmaynotbere-borrowed.Arch-U.S.guaranteestheobligationsofArchCapital,andArchCapitalguaranteestheobligationsofArch-U.S.BorrowingsofrevolvingloansmaybemadeatavariableratebasedonLIBORoranalternativebaserateattheoptionofArchCapital.ArchCapitalanditslendersmayagreeonaLIBORsuccessorrateattheappropriatetimetoaddressthereplacementofLIBOR.SecuredlettersofcreditareavailableforissuanceonbehalfofcertainArchCapitalsubsidiaries.TheCreditFacilityisstructuredsuchthateachpartythatrequestsaletterofcreditorborrowingdoessoonlyforitselfanditsownobligations.

The Credit Facility contains certain restrictive covenants customary for facilities of this type, including restrictions onindebtedness,consolidatedtangiblenetworth,minimumshareholders’equitylevelsandminimumfinancialstrengthratings.ArchCapitalanditssubsidiarieswhicharepartytotheagreementwereincompliancewithallcovenantscontainedthereinatDecember31,2021.


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Commitments under the Credit Facility will expire on December 17, 2024, and all loans then outstanding must berepaid.LettersofcreditissuedundertheUnsecuredFacilitywillnothaveanexpirationdatelaterthanDecember17,2025.Under the $250.0million secured letter of credit facility, Arch Capital’s subsidiaries had $240.4million of letters of creditoutstandingandremainingcapacityof$9.6millionatDecember31,2021. Inaddition,certainofArchCapital’ssubsidiarieshadoutstandingsecuredandunsecuredlettersofcreditof$26.0millionand$290.0millionrespectively,whichwereissuedinthenormalcourseofbusiness.

Whenissued,allsecuredlettersofcreditaresecuredbyaportionoftheinvestmentportfolio.AtDecember31,2021,theselettersofcreditweresecuredbyinvestmentswithafairvalueof$348.4million.

TheCompany’soutstandingrevolvingcreditagreementborrowingswereasfollows:


2021 2020

Somers $ 155,687Totalrevolvingcreditagreementborrowings $ — $ 155,687

FederalHomeLoanBankMembership

Certainsubsidiariesof theCompanyaremembersofFederalHomeLoanBanks (“FHLBs”).MembersmayborrowfromtheFHLBs at competitive rates subject to certain conditions. Conditions include maintaining sufficient collateral deposits forfunding and a requirement to hold stock in the FHLBs related to both membership and outstanding advances. AtDecember31,2021and2020,theCompanyhad$80.0millionofadvancesoutstandingundertheFHLBprogram,includedin‘otherliabilities’ontheCompany’sbalancesheet,securedbyinvestmentswithafairvalueof$80.2million.

18. GoodwillandIntangibleAssets

Thefollowingtableshowsananalysisofgoodwillandintangibleassets:

Goodwill

Intangibleassetswithanindefinitelife

Intangibleassetswithfinitelife Total

NetbalanceatDecember31,2019 $ 326,551 $ 85,911 $ 325,621 $ 738,083Acquisitions — — 39,178 39,178Amortization — — (69,031) (69,031)Foreigncurrencymovementsandotheradjustment (11,922) (6,692) 3,247 (15,367)

NetbalanceatDecember31,2020 314,629 79,219 299,015 692,863Acquisitions(1) 31,677 — 318,459 350,136Amortization — — (82,955) (82,955)ImpactofdeconsolidationofSomers(2) — (7,650) — (7,650)Foreigncurrencymovementsandotheradjustment (1,441) (212) (5,758) (7,411)

NetbalanceatDecember31,2021 $ 344,865 $ 71,357 $ 528,761 $ 944,983

GrossbalanceatDecember31,2021 $ 342,842 $ 70,246 $ 1,099,158 $ 1,512,246Accumulatedamortization — — (568,695) (568,695)Foreigncurrencymovementsandotheradjustment 2,023 1,111 (1,702) 1,432

NetbalanceatDecember31,2021 $ 344,865 $ 71,357 $ 528,761 $ 944,983

(1) CertainamountsfortheCompany’2021acquisitionsareconsideredprovisional.(2) SeeNote4.


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Thefollowingtablepresentsthecomponentsofgoodwillandintangibleassets:

GrossBalanceAccumulatedAmortization

ForeignCurrencyTranslation

AdjustmentandOther

NetBalance

December31,2021Acquiredinsurancecontracts $ 451,505 $ (409,592) $ 339 $ 42,252Operatingplatform 52,674 (48,838) 56 3,892Distributionrelationships 599,378 (117,158) (2,211) 480,009Goodwill 342,842 — 2,023 344,865Insurancelicenses 48,331 — — 48,331Syndicatecapacity 21,915 — 1,111 23,026Unfavorableservicecontract (9,533) 9,435 — (98)Other 5,134 (2,542) 114 2,706Total $ 1,512,246 $ (568,695) $ 1,432 $ 944,983

December31,2020Acquiredinsurancecontracts $ 451,505 $ (381,349) $ 284 $ 70,440Operatingplatform 52,674 (44,347) 60 8,387Distributionrelationships 282,001 (68,239) 3,446 217,208Goodwill 318,043 — (3,414) 314,629Insurancelicenses 55,981 — — 55,981Syndicatecapacity 21,915 — 1,324 23,239Unfavorableservicecontract (9,533) 9,147 — (386)Other 5,134 (1,896) 127 3,365Total $ 1,177,720 $ (486,684) $ 1,827 $ 692,863

TheestimatedremainingamortizationexpensefortheCompany’sintangibleassetswithfinitelivesisasfollows:

2022 $ 109,144

2023 99,620

2024 79,410

2025 44,523

2026 35,252

2027andthereafter 160,812

Total $ 528,761

TheestimatedremainingusefullivesoftheseassetsrangefromonetofifteenyearsatDecember31,2021.

19. Shareholder’sEquity

AuthorizedandIssued

The authorized share capital of the Company consists of 2,625,000 common shares, par value of $1.00 per share, atDecember31,2021and2020.The issuedsharecapitaloftheCompanyconsistsof2,549,323commonshares,parvalueof$1.00pershareatDecember31,2021and2020.OnDecember14,2020,theCompanyre-designated11,100commonsharesasPreferredShares,andissuedallofthe11,100PreferredSharestoACGLinexchangefor1,000ACSIsharesonDecember15,2020.


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SeriesACumulativeRedeemablePreferredShares

OnDecember15,2020,theCompanyissuedalloftheauthorized11,100PreferredShares,witha$1.00parvalueand$10,000liquidationpreferencepershare.

HoldersofthePreferredShareswillbeentitledtoreceivedividendpayments.Thedividendswillbecomputedonthebasisofa360-dayyearoftwelve30-daymonthsatanannualrateof1.31%.

Except in specified circumstances relating to certain regulations or corporate events, the Preference Shares may beredeemed,attheoptionoftheCompany,inwholeorinpartatanytimewithoutpenaltyataredemptionpriceof$10,000pershareplusallaccruedbutunpaiddividends.

20. Share-BasedCompensation

LongTermIncentiveandShareAwardPlans

Arch Capital utilizes share-based compensation plans for officers, other employees and directors of Arch Capital and itssubsidiaries,includingArchReBermuda,toprovidecompetitivecompensationopportunities,toencouragelong-termservice,torecognizeindividualcontributionsandrewardachievementofperformancegoalsandtopromotethecreationoflong-termvalueforArchCapitalshareholdersbyaligningtheinterestsofsuchpersonswiththoseofshareholders.

The2018Long-TermIncentiveandShareAwardPlan(the“2018Plan”)becameeffectiveasofMay9,2018followingapprovalby shareholders of Arch Capital. The 2018 Plan provides for the issuance of restricted stock units, performance units,restrictedshares,performanceshares,stockoptionsandstockappreciationrights(“SAR”)andotherequity-basedawardstoemployees and directors of Arch Capital and subsidiaries. The 2018 Plan authorizes the issuance of 34,500,000 commonsharesandwillterminateastofutureawardsonFebruary28,2028.AtDecember31,2021,9,909,950sharesareavailableforfutureissuance.

The2015LongTermIncentiveandShareAwardPlan(the(“2015Plan”)authorizestheissuanceof12,900,000commonsharesandbecameeffectiveasofMay7,2015followingapprovalbyshareholdersofArchCapital.The2015Planprovidesfortheissuanceofshare-basedawardstoemployeesanddirectorsofArchCapitalandsubsidiariesandwillterminateastofutureawardsonFebruary26,2025.AtDecember31,2021,606,942sharesareavailableforfutureissuance.

The2012LongTermIncentiveandShareAwardPlan(the“2012Plan”)becameeffectiveasofMay9,2012followingapprovalbyshareholdersofArchCapital.The2012Planauthorizedtheissuanceof22,301,772commonsharesandwasfullyusedonFebruary28,2022.AtDecember31,2021,320,272sharesareavailableforgrantunderthe2012Plan.

UponArchCapitalshareholderapprovalonMay6,2016,theAmendedandRestatedArchCapitalGroupLtd.2007EmployeeSharePurchasePlan(the“ESPP”)becameeffectiveandatotalof4,689,777commonshareswerereservedforissuance.Thepurpose of the ESPP is to give employees of Arch Capital and its subsidiaries an opportunity to purchase common sharesthroughpayrolldeductions,therebyencouragingemployeestoshareintheeconomicgrowthandsuccessofArchCapitalandits subsidiaries. The ESPP is designed to qualify as an “employee share purchase plan” under Section 423of theCode.AtDecember31,2021,approximately1,608,354sharesremainavailableforissuance.

StockOptionsandStockAppreciationRights

ArchCapitalgenerallyissuesstockoptionsandSARstoeligibleemployees,withexercisepricesequaltothefairmarketvaluesof Arch Capital’s Common Shares on the grant dates. Such grants generally vest over a three year periodwith one-thirdvestingonthefirst,secondandthirdanniversariesofthegrantdate.

Thegrantdate fair value isdeterminedusing theBlack-Scholesoptionvaluationmodel. Theexpected lifeassumptionwasbasedonanexpected termanalysis,which incorporatedArchCapital’shistoricalexerciseexperience.Expectedvolatility isbasedontheArchCapital’sdailyhistoricaltradingdataofitscommonshares.Thetablebelowsummarizestheassumptionsused.


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Dividendyield —% —%Expectedvolatility 24.2% 16.6%Riskfreeinterestrate 1.0% 1.2%Expectedoptionlife 6.0years 6.0years

AsummaryofstockoptionandSARactivityunderArchCapital’sLongTermIncentiveandShareAwardPlansduring2021ispresentedbelow:


NumberofOptions/SARs

WeightedAverage

ExercisePrice

WeightedAverage

ContractualTermAggregate

IntrinsicValue

Outstanding,beginningofyear 7,945,022 $ 23.95Granted 786,159 $ 35.85Exercised (1,385,971) $ 17.02Forfeitedorexpired (66,714) $ 35.49Outstanding,endofyear 7,278,496 $ 26.45 4.88 $ 131,033Exercisable,endofyear 5,696,643 $ 23.72 3.93 $ 118,109

TheaggregateintrinsicvalueofstockoptionsandSARsexercisedrepresentsthedifferencebetweentheexercisepriceofthestockoptionsandSARsandtheclosingmarketpriceoftheCompany’scommonsharesontheexercisedates.During2021,theCompanyreceivedproceedsof$10.0millionfromtheexerciseofstockoptionsandrecognizedataxbenefitof$5.4millionfromtheexerciseofstockoptionsandSARs.


Weightedaveragegrantdatefairvalue $ 9.21 $ 8.14

AggregateintrinsicvalueofOptions/SARsexercised $ 31,632 $ 19,112

RestrictedCommonSharesandRestrictedUnits

ArchCapitalalso issues restrictedshareandunitawards toeligibleemployees, forwhich the fairvalue isequal to the fairmarketvaluesofArchCapital’scommonshareson thegrantdates.Restrictedshareandunitawardsgenerallyvestoverathreeyearperiodwithone-thirdvestingonthefirst,secondandthirdanniversariesofthegrantdate.

AsummaryofrestrictedshareandrestrictedunitactivityunderArchCapital’sLongTermIncentiveandShareAwardPlansfor2021ispresentedbelow:


RestrictedCommonShares

RestrictedUnit

Awards

UnvestedShares:Unvestedbalance,beginningofyear 1,341,395 1,120,752Granted 878,877 175,962Vested (354,875) (555,085)Forfeited (99,907) (41,945)Unvestedbalance,endofyear 1,765,490 699,684

WeightedAverageGrantDateFairValue:Unvestedbalance,beginningofyear $ 36.87 $ 31.43Granted $ 35.87 $ 35.94Vested $ 38.20 $ 30.46Forfeited $ 36.27 $ 32.23Unvestedbalance,endofyear $ 36.14 $ 33.29

The following table presents the weighted average grant date fair value of restricted shares and restricted unit awardsgrantedandtheaggregatefairvalueofrestrictedsharesandunitawardsvestingineachyear.


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Restrictedsharesandrestrictedunitawardsgranted 1,054,839 1,684,086Weightedaveragegrantdatefairvalue $ 35.88 $ 36.50Aggregatefairvalueofvestedrestrictedsharesandunitsawards $ 42,965 $ 30,794

TheaggregateintrinsicvalueofrestrictedunitsoutstandingatDecember31,2021was$31.1million.

PerformanceAwards

ArchCapitalalsoissuesperformanceshareandunitawards(“performanceawards”)toeligibleemployees,whichareearnedbased on the achievement of pre-established threshold, target andmaximum goals over three-year performance periods.Finalpayoutsdependonthelevelofachievementalongwitheachemployeescontinuedservicethroughthevestdate,andcan vary between 0% and 200%. The grant date fair value of the performance awards ismeasured using aMonte Carlosimulationmodel,whichincorporatedtheassumptionssummarizedinthetablebelow.Expectedvolatility isbasedonArchCapital’s daily historical trading data of its common shares. The cumulative compensation expense recognized andunrecognized as of any reporting period date represents the adjusted estimate of performance shares and units thatwillultimatelybeawarded,valuedattheiroriginalgrantdatefairvalues.


Expectedvolatility 37.5% 18.1%Riskfreeinterestrate 0.3% 1.1%

PerformanceShares

PerformanceUnits

UnvestedShares:

Unvestedbalance,beginningofyear 747,652 32,065Granted 281,458 10,698Performanceadjustment(1)(2) (13,863) 11,447Vested (219,105) (24,440)Unvestedbalance,endofyear 796,142 29,770

WeightedAverageGrantDateFairValue:Unvestedbalance,beginningofyear $ 35.36 $ 33.48Granted $ 37.38 $ 37.38Performanceadjustment(1)(2) $ 24.65 $ 24.71Vested $ 24.65 $ 24.71Unvestedbalance,endofyear $ 39.21 $ 38.71

(1) Theperformanceadjustmentrepresentsthedifferencebetweenthenumberofperformancesharesgrantedandearned,whichvestedfollowingtheendoftheperformanceperiod.Theperformancesharesweregrantedatthemaximumlevelofachievement.

(2) TheperformanceadjustmentrepresentsthechangeinPSUs,whichvestedfollowingtheendoftheperformanceperiod.Theperformanceunitsweregrantedatthetargetlevelofachievement.

Thefollowingtablepresentstheweightedaveragegrantdatefairvaluesofperformanceawardsgranted.YearEndedDecember31,2021 2020

Performanceawards 292,156 436,776Weightedaveragegrantdatefairvalue $ 37.38 $ 38.59

The issuanceof share-basedawardsandamortization thereonhasnoeffecton theCompany’s consolidated shareholder’sequity.


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Share-BasedCompensationExpense

Thefollowingtablespresentpre-taxandafter-taxshare-basedcompensationexpenserecognizedaswellastheunrecognizedcompensation cost associated with unvested awards and the weighted average period over which it is expected to berecognized.


Pre-TaxStockoptionsandSARs $ 7,784 $ 7,384Restrictedshareandunitawards 40,362 35,947Performanceawards 9,607 7,252ESPP 3,587 2,029Total $ 61,340 $ 52,612

After-TaxStockoptionsandSARs $ 6,395 $ 6,028Restrictedshareandunitawards 32,894 29,264Performanceawards 7,831 5,903ESPP 3,306 1,871Total $ 50,426 $ 43,066

December31,2021

StockOptionsandSARs

RestrictedCommonSharesand

UnitsPerformance

ShareandUnits

Unrecognizedcompensationcostrelatedtounvestedawards $ 5,416 $ 41,003 3,551Weightedaveragerecognitionperiod(years) 1.06 1.28 0.6

21. RetirementPlans

Forpurposesofprovidingemployeeswithretirementbenefits,theCompanymaintainsdefinedcontributionretirementplans.Contributionsarebasedontheparticipants’eligiblecompensation.For2021and2020,theCompanyexpensedapproximately$57.8millionand$50.6million,respectively,relatedtotheseretirementplans.

22. LegalProceedings

TheCompany,incommonwiththeinsuranceindustryingeneral,issubjecttolitigationandarbitrationinthenormalcourseofitsbusiness.AsofDecember31,2021,theCompanywasnotapartytoanylitigationorarbitrationwhichisexpectedbymanagementtohaveamaterialadverseeffectontheCompany’sresultsofoperationsandfinancialconditionandliquidity.

23. StatutoryInformation

Arch Re Bermuda and its insurance and reinsurance subsidiaries are subject to insurance and/or reinsurance laws andregulations in the jurisdictions in which they operate. These regulations include certain restrictions on the amount ofdividends or other distributions available to shareholders without prior approval of the insurance regulatory authorities.During2021and2020,ArchReBermudapaiddividendstoArchCapitalof$1.8billionand$221.6million,respectively.


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The actual and required statutory capital and surplus for Arch Re Bermuda and its principal operating subsidiaries atDecember31,2021and2020wasasfollows:


Actualcapitalandsurplus(1):Bermuda $17,528,510 $17,390,943Ireland 958,200 883,337UnitedStates 5,600,652 4,904,840UnitedKingdom 902,002 967,440Canada 70,063 64,286Australia 283,693 64,507

Requiredcapitalandsurplus:Bermuda $ 5,661,301 $ 5,234,121Ireland 794,933 701,161UnitedStates 1,717,646 1,644,324UnitedKingdom 563,164 601,662Canada 42,513 37,441Australia 214,022 19,370

(1) Suchamountsincludeownershipinterestsinaffiliatedinsuranceandreinsurancesubsidiaries.

There were no state-prescribed or permitted regulatory accounting practices for any of the Company’s insurance orreinsuranceentitiesthatresultedinreportedstatutorysurplusthatdifferedfromthatwhichwouldhavebeenreportedunderthe prescribed practices of the respective regulatory authorities, including the National Association of InsuranceCommissioners.Thedifferencesbetweenstatutoryfinancialstatementsandstatementsprepared inaccordancewithGAAPvarybyjurisdiction,however,withtheprimarydifferencesbeingthatstatutoryfinancialstatementsmaynotreflectdeferredacquisitioncosts,certainnetdeferredtaxassets,goodwillandintangibleassets,unrealizedappreciationordepreciationondebtsecuritiesandcertainunauthorizedreinsurancerecoverablesandincludecontingencyreserves.

Thestatutorynetincome(loss)fortheCompany’sprincipaloperatingsubsidiariesfor2021and2020wasasfollows:


Statutorynetincome(loss):

Bermuda $ 2,370,746 $ 1,579,889

Ireland 25,191 18,397

UnitedStates 345,790 143,271

UnitedKingdom 35,286 4,078

Canada 6,985 (1,049)

Australia 11,874 (8,601)

Bermuda

UndertheBermudaInsuranceAct1978andrelatedregulations,eachasamended(the“InsuranceAct”),ArchReBermudaisregisteredasaClass4insurerandlong-terminsurerandisrequiredtomaintainminimumstatutorycapitalandsurplusequaltothegreaterofaminimumsolvencymarginandtheenhancedcapitalrequirement(“ECR”)asdeterminedbytheBermudaMonetaryAuthority(“BMA”).TheECRiscalculatedbasedontheBermudaSolvencyCapitalRequirementmodel,arisk-basedmodelthattakesintoaccounttheriskcharacteristicsofdifferentaspectsofthecompany’sbusiness.AtDecember31,2021and2020,theactualandrequiredcapitalandsurpluswerebasedontheeconomicbalancesheetrequirements.

Under the Insurance Act, Arch Re Bermuda is restricted with respect to the payment of dividends. Arch Re Bermuda isprohibitedfromdeclaringorpayinginanyfinancialyeardividendsofmorethan25%ofitstotalstatutorycapitalandsurplus(asshownonitspreviousfinancialyear’sstatutorybalancesheet)unlessitfiles,atleastsevendaysbeforepaymentofsuchdividends,withtheBMAanaffidavitstatingthat itwillcontinuetomeettherequiredmargins followingthedeclarationofthose dividends. Accordingly, Arch Re Bermuda can pay approximately $3.8 billion to Arch Capital during 2022 withoutprovidinganaffidavittotheBMA.


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Ireland

TheCompanyhasthreeIrishsubsidiaries:ArchReEurope,anauthorizedlifeandnon-lifereinsurer,ArchInsurance(EU),anauthorized non-life insurer and Arch Underwriting Europe, a registered insurance and reinsurance intermediary. Irishauthorized reinsurers and insurers, such as Arch Re Europe, Arch Insurance (EU) and Irish intermediaries, such as ArchUnderwriters Europe, are also subject to the general body of Irish laws and regulations including the provisions of theCompaniesAct2014.AspartoftheCompany’sBrexitplan,ArchInsurance(EU)receivedapprovalfromtheCentralBankofIreland(“CBOI”)toexpandthenatureofitsbusinessin2019commencedwritinginsurancelinesintheEuropeanEconomicAreain2020,andthePartVIITransferwascompletedattheendofDecember2020.ArchReEurope,ArchInsurance(EU)andArch Underwriters Europe are subject to the supervision of the CBOI and must comply with Irish insurance acts andregulationsaswellaswithdirectionsandguidanceissuedbytheCBOI.ArchReEuropeandArchInsurance(EU)arerequiredtomaintainaminimumlevelofcapital.AtDecember31,2021and2020,theserequirementsweremet.

Theamountofdividendsthesesubsidiariesarepermittedtodeclareislimitedtoaccumulated,realizedprofits,sofarasnotpreviouslyutilizedbydistributionorcapitalization,lessitsaccumulated,realizedlosses,sofarasnotpreviouslywrittenoffina reductionor reorganizationof capitaldulymade. The solvencyand capital requirementsmust still bemet followinganydistribution.Dividendsordistributions,ifany,madebyArchReEuropewouldresultinanincreaseinavailablecapitalatArchReBermuda.

UnitedStates

TheCompany’sU.S.insuranceandreinsurancesubsidiariesaresubjecttoinsurancelawsandregulationsinthejurisdictionsinwhichtheyoperate.TheabilityoftheCompany’sregulatedinsurancesubsidiariestopaydividendsormakedistributions isdependent on their ability to meet applicable regulatory standards. These regulations include restrictions that limit theamountofdividendsorotherdistributions,suchasloansorcashadvances,availabletoshareholderswithoutpriorapprovaloftheinsuranceregulatoryauthorities.

Dividends or distributions, if any, made by Arch Re U.S. would result in an increase in available capital at Arch-U.S., theCompany’sU.S.holdingcompany.ArchReU.S.candeclareamaximumofapproximately$217.5millionofdividendsduring2022subjecttotheapprovaloftheCommissioneroftheDelawareDepartmentofInsurance.

AMIC and UGRIC have each been approved as an eligible mortgage insurer by FannieMae and FreddieMac, subject tomaintainingcertainongoing requirements (“eligiblemortgage insurers”). InApril2015, theGSEspublishedcomprehensive,revisedrequirements,knownasthePrivateMortgageInsurerEligibilityRequirementsor“PMIERs.”AsclarifiedandrevisedbytheGuidance Letters issuedby theGSEs inDecember 2016 andMarch 2017, the PMIERs apply to the Company’s eligiblemortgageinsurers,butdonotapplytoArchMortgageGuarantyCompany,whichisnotGSE-approved.

TheamountofassetsrequiredtosatisfytherevisedfinancialrequirementsofthePMIERsatanypointintimewillbeaffectedbymanyfactors,includingmacro-economicconditions,thesizeandcompositionofoureligiblemortgageinsurers’mortgageinsuranceportfolioatthepointintime,andtheamountofriskcededtoreinsurersthatmaybedeductedinourcalculationof“minimumrequiredassets.”

The Company’s U.S. mortgage insurance subsidiaries are subject to detailed regulation by their domiciliary and primaryregulators,theWisconsinOfficeoftheCommissionerofInsurance(“WisconsinOCI”)forAMICandArchMortgageGuarantyCompany, theNorthCarolinaDepartmentof Insurance (“NCDOI”) forUGRIC,andby state insurancedepartments ineachstateinwhichtheyarelicensed.Asmandatedbystateinsurancelaws,mortgageinsurersaregenerallymono-linecompaniesrestricted towritinga single typeof insurancebusiness, suchasmortgage insurancebusiness. Eachcompany is subject toeitherWisconsinorNorthCarolinastatutoryrequirementsastopaymentofdividends.Generally,bothWisconsinandNorthCarolinalawprecludesanydividendbeforegivingatleast30days’noticetotheWisconsinOCIorNCDOI,asapplicable,andprohibitspayinganydividendunlessitisfairandreasonabletodoso.Inaddition,thestateregulatorsandtheGSEslimitorrestrictoureligiblemortgageinsurers’abilitytopaystockholderdividendsorotherwisereturncapitaltoshareholders.Underrespective states law, ourU.S.mortgage subsidiaries can declare amaximumof approximately $194.1million of ordinarydividendsin2022,however,dividendcapacityislimitedbytherespectivecompaniesunassignedsurplusamounts.Incertaininstances,approvalbytheGSEswouldberequiredfordividendsorotherformsofreturnofcapitaltoshareholdersduetotherequirementsunderPMIERs,includingtheminimumrequiredassetsimposedonoureligiblemortgageinsurersbytheGSEs.SuchdividendwouldresultinanincreaseinavailablecapitalatArchU.S.MIHoldingsInc.,asubsidiaryofArch-U.S.

MortgageinsurancecompanieslicensedinWisconsinorNorthCarolinaarerequiredtoestablishcontingencylossreservesforpurposes of statutory accounting in an amount equal to at least 50% of net earned premiums. These amounts generallycannotbewithdrawnforaperiodof10yearsandareseparateliabilitiesforstatutoryaccountingpurposes,whichaffectsthe


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abilitytopaydividends.However,withpriorregulatoryapproval,amortgageinsurancecompanymaymakeearlywithdrawalsfromthecontingencyreservewhenincurredlossesexceed35%ofnetpremiumsearnedinacalendaryear.

UnderWisconsinandNorthCarolina law,aswellas thatof14otherstates,amortgage insurermustmaintainaminimumamountofstatutorycapitalrelativetoitsrisk inforceinorderforthemortgageinsurertocontinuetowritenewbusiness.Whileformulationsofminimumcapitalvaryincertainjurisdictions,themostcommonmeasureappliedallowsforamaximumrisk-to-capital ratio of 25 to 1. Wisconsin and North Carolina both require a mortgage insurer to maintain a “minimumpolicyholderposition”calculatedinaccordancewiththeirrespectiveregulations.Policyholders'positionconsistsprimarilyofstatutory policyholders' surplus plus the statutory contingency reserve, less ceded reinsurance. While the statutorycontingencyreserveisreportedasaliabilityonthestatutorybalancesheet,forrisk-to-capitalratiocalculations,itisincludedascapitalforpurposesofstatutorycapital.

UnitedKingdom

ThePrudentialRegulationAuthority(“PRA”)andtheFinancialConductAuthority(“FCA”)regulateinsuranceandreinsurancecompanies and the FCA regulates firms carrying on insurance mediation activities operating in the U.K., both under theFinancial Services andMarketsAct 2000. TheCompany’sU.K. insuranceoperations are conducted throughArch Insurance(U.K.),ArchSyndicate2012andArchSyndicate1955.AMAListhemanagingagentofArchSyndicate2012andArchSyndicate1955.ArchSyndicate2012andArchSyndicate1955provideaccesstoLloyd’sextensivedistributionnetworkandworldwidelicenses. AMAL also acts asmanaging agent for third partymembers of Arch Syndicate 1955. All U.K. companies are alsosubjecttoarangeofstatutoryprovisions,includingthelawsandregulationsoftheCompaniesActs2006(asamended)(the“U.K.CompaniesActs”).

Arch Insurance (U.K.) andAMALmustmaintain amargin of solvency at all times under the Solvency II Directive from theEuropeanInsuranceandOccupationalPensionsAuthority.Theregulationsstipulatethatinsurersarerequiredtomaintaintheminimumcapitalrequirementandsolvencycapitalrequirementatalltimes.AtDecember31,2021and2020,oursubsidiarieswereincompliancewiththeserequirements.

As corporatemembers of Lloyd’s, AMAL (asmanaging agent of Arch Syndicate 2012 and Arch Syndicate 1955) and eachsyndicate’s respective corporate members are subject to the oversight of the Council of Lloyd’s. The capital required tosupport a Syndicate’s underwriting capacity, or funds at Lloyd’s, is assessed annually and is determined by Lloyd’s inaccordance with the capital adequacy rules established by the PRA. The Company has provided capital to support theunderwritingofArchSyndicate2012andArchSyndicate1955intheformofpledgedassetsandlettersofcreditprovidedbyArch Re Bermuda. The amount which the Company provides as funds at Lloyd’s is not available for distribution to theCompanyforthepaymentofdividends.Lloyd’sissupervisedbythePRAandrequiredtoimplementcertainrulesprescribedbythePRAundertheLloyd’sActof1982regardingtheoperationoftheLloyd’smarket.Withrespecttomanagingagentsandcorporatemembers,Lloyd’sprescribescertainminimumstandardsrelatingtomanagementandcontrol,solvencyandotherrequirementsandmonitorsmanagingagents’compliancewithsuchstandards.

UnderU.K. law,allU.K. companiesare restricted fromdeclaringadividend to their shareholdersunless theyhave“profitsavailablefordistribution.”Thecalculationastowhetheracompanyhassufficientprofitsisbasedonitsaccumulatedrealizedprofitsminusitsaccumulatedrealizedlosses.U.K.insuranceregulatorylawsdonotprohibitthepaymentofdividends,butthePRAorFCA,asapplicable,requiresthatinsurancecompaniesandinsuranceintermediariesmaintaincertainsolvencymarginsandmayrestrictthepaymentofadividendbyArchInsurance(U.K.)andAMAL.

Canada

Arch Insurance Canada and the Canadian branch of Arch Re U.S. (“Arch Re Canada”) are subject to federal, as well asprovincialandterritorial,regulationinCanada.TheOfficeoftheSuperintendentofFinancialInstitutions(“OSFI”)isthefederalregulatorybodythat,undertheInsuranceCompaniesAct(Canada),regulatesfederalCanadianandnon-Canadianinsurancecompaniesoperating inCanada.Arch InsuranceCanadaandArchReCanadaaresubjecttoregulation intheprovincesandterritoriesinwhichtheyunderwriteinsurance/reinsurance,andtheprimarygoalof insurance/reinsuranceregulationattheprovincialandterritoriallevelsistogovernthemarketconductofinsurance/reinsurancecompanies.ArchInsuranceCanadaislicensed tocarryon insurancebusinessbyOSFIand ineachprovinceand territory.ArchReCanada is licensed tocarry-onreinsurancebusinessbyOSFIandintheprovincesofOntarioandQuebec.

UndertheInsuranceCompaniesAct(Canada),ArchInsuranceCanadaisrequiredtomaintainanadequateamountofcapitalinCanada,calculatedinaccordancewithatestpromulgatedbyOSFIcalledtheMinimumCapitalTest(“MCT”),andArchReCanadaisrequiredtomaintainanadequatemarginofassetsover liabilities inCanada,calculatedinaccordancewithatest


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promulgatedbyOSFIcalledtheBranchAdequacyofAssetsTest.Dividendsordistributions, ifany,madebyArch InsuranceCanadawouldresultinanincreaseinavailablecapitalatArchInsuranceCompany(see“—UnitedStates”section).

Australia

The Australian Prudential Regulation Authority (“APRA”) is an independent statutory authority responsible for prudentialsupervisionof institutionsacrossbanking, insuranceand superannuationandpromotes financial stability inAustralia.ArchIndemnityhasbeenauthorizedtoconductmonolinelenders’mortgageinsurancebusinessinAustraliasinceJune2002andwasacquiredbytheCompanyonAugust30,2021.ArchLMIPtyLtd.(“ArchLMI”)wasauthorizedbyAPRAinJanuary2019toconductmonoline lenders’mortgage insurancebusiness inAustralia.Major regulatory requirements thatareapplicable toArch LMI and Arch Indemnity as general as an insurance providers in Australia include requirements onminimum capitallevels and compliance with corporate governance standards, including the risk management strategy for our Australianmortgageinsurancebusiness.AtDecember31,2021and2020,theserequirementsweremet.

TheCompanyalsoconductspropertyandcasualty insurancebusiness inAustraliathroughtheCompany’sLloyd’splatform.This insurancebusiness ismanagedby anddistributed through local coverholders and is subject to Lloyd’s Supervision. Inaddition,thebusinessissubjecttolocalAustralianprudentialregulatoryoversightbyAPRA,andadditionalseparatefinancialservicesmarketconductregulationbytheAustralianSecuritiesandInvestmentsCommission.

24. SubsequentEvent

BellemeadeRe2022-1Ltd.

In January 2022, the Company announced that it has obtained over $315 million of indemnity reinsurance on a poolrepresenting approximately $6.3 billion of mortgages from Bellemeade Re 2022-1 Ltd., a special purpose reinsurer. Thecoverage was obtained by issuing approximately $283.5 million in bonds and $33 million in direct reinsurance. ThistransactionlargelycoversaportfolioofpoliciesissuedfromJulythroughNovember2021.

RussiaInvasionofUkraine

TheeventsrelatedtotherecentRussianinvasionofUkrainehaveresultedineconomic,financial,sectoralandothertargetedsanctions issued by government and regulatory bodies in the U.S., U.K., European Union and other countries. ArchReinsuranceLtd.anditssubsidiaries(“Arch”)mustcomplywithallapplicablesanctions,tradecontrolsandrelatedlawsandregulationsinthejurisdictionswhereweoperate. Archiscloselymonitoringourunderwritingandinvestmentportfolios inlightofthesenewsanctions.Wecontinuetoevaluateourexposuretothesesanctions,aswellasthepossibleimpactoftheseeventson theglobaleconomyand financialmarkets.While the impacton thebusiness remainsuncertain,Arch isactivelymonitoring the situation in Ukrainewith a particular focus on the holdings and valuation of the Company’s investments,incurred losses, and premium volume, all of which are impacted by the increased volatility and uncertainty. Due to therecentnessoftheseevents,weareunabletoestimatetheeffectsofthesemattersonourprospectiveresultsofoperationsorfinancialcondition.


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