Good day, ladies and gentlemen, and welcome to the Second Quarter 2020 Arch Capital Group Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. Before the company gets started with its update, management wants to first remind everyone that certain statements in today's press release and discussed on this call may constitute forward-looking statements under the federal securities laws. These statements are based upon management's current assessments and assumptions and are subject to a number of risks and uncertainties. Consequently, actual results may differ materially from those expressed or implied. For more information on the risks and other factors that may affect future performance, investors should review periodic reports that are filed by the company with the SEC from time-to-time. Additionally, certain statements contained in the call that are not based on historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The company intends the forward-looking statements in the call to be subject to the Safe Harbor created thereby. Management also will make reference to some non-GAAP measures of financial performance. The reconciliation to GAAP and definition of operating income can be found in the company's current report on Form 8-K furnished to the SEC yesterday, which contains the company's earnings press release and is available on the company's website. I would now like to introduce your host for today's conference, Mr. Marc Grandisson and Mr. François Morin. Sirs you may begin.

Thanks, Liz. Good morning and welcome to our second quarter earnings call. On a reported basis, Arch had an acceptable quarter despite COVID-19 related economic disruptions. Our operating results were good from the underlying accident year ex-cat combined ratio perspective as each segment that benefited from the recent rate improvements. All three segments are poised to see the opportunities to grow based on the underwriting returns outlook. Consequently this quarter, rate improvements continue to enable us to expand our writings in our property casualty units as we increasingly achieve acceptable risk-adjusted returns. We know from experience that this environment is an appropriate time to raise additional capital so that we can more significantly take advantage of this hardening P&C market. As we have discussed in previous earnings calls, we continuously rank order our capital allocation opportunities among and within the units. And today P&C insurance and reinsurance prospects have moved up the scale even as MI returns improved at the same time. To be sure, we are experiencing unprecedented times across our world and the insurance industry. There is still much uncertainty from the pandemic and its ultimate impact. The P&C industry faces emerging claims trends the possibility of long-lasting lower investment returns and a strain from on-model cat losses and chronic underpricing from the soft market years. This new reality points to the need for further premium rate increases for the foreseeable future. While not all lines are fully attractive on an absolute basis, the positive momentum is evident and has accelerated through the second quarter. Turning to our operating segments, I'd like to begin with the mortgage insurance segment. Reported delinquencies were 5.1% at June 30, 2020 and came in better than our expectation last quarter, which was at the early onset of the COVID-19 pandemic. As you…

Thank you. [Operator Instructions] Our first question comes from Elyse Greenspan with Wells Fargo.

Hi, thanks. Good morning. My first question on the property casualty side, you guys seem pretty optimistic and started to see – saw a continuation of pretty good growth in the quarter. And so you guys don't disclose the capital supporting, your property casualty versus the mortgage business, but if we're sitting outside the company and we just want to get a sense of the opportunity at hand and the capital that you have given the recent debt raise could you potentially if it really is a strong market double the size of your insurance book of business on your current capital base?

I think it's a fair assessment. I think in general you could think of capital allocation on premium from the P&C as a 1:1 that sort of, gives you a range for capital usage but certainly the ability is there. And I would say that is also informed by how you develop it right? Elyse if you -- property care is a different and capital requirements and then other lines of business such as quota share, let's say, on the reinsurance side on liability. So there's a lot -- there's plenty of room for us to grow.

Great. And then on the mortgage side of things, you guys see some pretty helpful color that the current delinquency rate is about 30% to 40% lower than where you thought it would have been. So as you set the new guide for the outlook for the underwriting -- positive underwriting mortgage income for the rest of the year in that 70% to 80% combined ratio can you give us a sense of where you expect delinquency rates to trend in the third and the fourth quarter? François Morin: Well we don't really -- we had -- the quarterly movements are a bit harder to predict. But I mean we had forecasted last quarter somewhere around a 10% or so delinquency rate by the end of the year. We think -- right now we're thinking that it will be more like around 8%. So obviously, we're monitoring weekly and we get data that comes in from all our servicers et cetera, but that's kind of where we're at. There's about 8% delinquency rate by the end of the year.

Yes. I think to add to this Elyse. I would -- just to add to this Elyse, I would say that this is it's a one quarter data point so it will take us we still take a longer-term view and are not fully all reflecting the decrease or the lesser delinquency that we had. We had reported versus what we expected where you get 30% to 40% and then François told you a 20% increase. That tells you sort of a level where we're thoughtful and measured in the way we want to recognize any immediate improvement.

That's helpful. And then my last question. You guys have pointed to the severity per claim. I believe you said it was about 50% higher than some of the claims you settled in the quarter just given the higher housing values, I believe. If I look in your supplement on the mortgage page, the average case reserve per default went down to 6,900 in the quarter and it has been 14,400. Why would that number have gone down if you're actually setting up more for the current claims? I'm just trying to reconcile those numbers. François Morin: Yes. The average is very much a function of the percentage of the delinquencies that are effectively in early stages of delinquency. So if you think of all these newly reported delinquencies in the quarter they carry again effectively a 5-or-so percent claim rate versus the older-stage delinquencies and the percentages go up as the more mature the later-stage mature delinquencies we have. So it's really -- there's no changes in assumptions. I'd say it's really just the way the mix of the portfolio or the mix of the delinquencies that we currently have changes over time. And this was really as you know the first quarter where we had a large surge of delinquencies coming from the pandemic.

Okay. Thanks. I appreciate all the color. François Morin: Thanks, Elyse.

You’re welcome.

Our next question comes from Mike Zaremski with Crédit Suisse.

Hey, good morning. I guess sticking with MI so clearly there -- feels like there's some conservatism kind of built in that you expect the delinquency rate to continue moving north. Is the government stimulus kind of a big x factor in terms of like the -- how the $600 weekly unemployment insurance subsidy whether that continues or not? Just trying to think about -- or I mean you can just should we just probably be looking at unemployment levels as well? Just trying to think about how to gauge because clearly results have been good so far much better than expected which is great.

So Mike, I think, the easy question is unemployment matters it is a contributing factor that would precipitate if you will in delinquency and in claims ultimately. The number one, the leading indicators as I said in my notes that will tell you whether there's a heightened increased risk of delinquencies is really the house price in there. So to the extent that the house prices are stable or keep on going up or that there is -- which is another way to say as long as there's reasonable amount of equity in the house, we have found that borrowers do not tend to walk away from their obligation to mortgages. I know. So if you saw the great financial crisis what happened is we had a combination of house price decreases and unemployment so it sort of contributed to the acceleration and a more of an acute delinquency rate that we saw in the great financial crisis which we are not seeing right now. So what we're focusing on -- of course we look at what the government is doing that's going to be helpful. And I think we'll see more of this impact at the end of the forbearance period. But for now the house price index is extremely encouraging to us and really is a leading indicator on the propensity for homeowners to default.

Okay. That makes sense and that's helpful. Then in terms of -- we get a number of questions about the court cases in the United Kingdom the FCA has kind of been writing about that. Is that contemplated in your COVID IBNR whether those court cases go for or against the industry?

Yes. We've taken a conservative approach and we actually had reserves for it as the end of March. So we have reserved for it appropriately with fairly good level of reinsurance against it so we're pretty much reserved there. If things -- it could presumably could be good news going forward for us there.

Okay. And just lastly quickly I'm sure other people will ask about kind of the segments. Any thoughts on new capital entering the broader insurance and reinsurance marketplaces? Do you feel that capital will continue then or is it having an impact on your ability to play offense at this point or is it still just a drop in the bucket? Any color would be helpful. Thanks.

So Mike, it's a little bit of everything you mentioned. I would say that the capital needs that are out there that we see in terms of client trying to find solutions and towers of coverage is meaning a place, a new place, a new home. We would need a significant amount of capital to neutralize that impact if you will. So we're seeing actually acceleration even though there are -- there's more capital being raised and new entrants as we speak thinking about coming in. We're not seeing any ebbing of the rate pressure that we see right now. And I think the demand for capital are pretty high. There's a couple of large players that were really providing a lot of capacity acute capacity in very, very high capacity mongers in the industry have pulled out significantly, so that means that there's a lot of other capital that needs to find its way around to support it. So I would say that, we are not seeing -- we hear what's out there, what's happening. We're encouraged by -- we raised some more capital and there's other folks such as ourselves who have access to the business, access to the clients and relationships. We're able to raise capital. It bodes well for the health of those companies. But any new entrants, it will take them a while to get ramped up and I don't think it's impossible. I think it's totally doable, but it's certainly not something that we're losing sleep over.

Thank you.

Our next question comes from Yaron Kinar with Goldman Sachs.

Hi, everybody. First question on MI and then a couple on the COVID losses. So in MI, I haven't really seen any significant pullback from that market. So I guess should I take that to mean that even with all the COVID economic uncertainty you still view it as a pretty attractive business?

Yes, it is still very attractive. I would even argue on that the production in the second quarter and as we speak is actually better than it was six months or a year ago where the rates that's -- rate pressures and also quality of underwriting quality of the originations is a lot better than it was even a year ago. So yes there is a lot more activity. The activity Yaron to be fair is also driven by the refinancing market which was not there and by -- dropping the mortgage rate below 3% that does create more business back into the market. As a result of that there's a lot of prepay, right? There's a higher level of the lower level of persistency which means that there's more churn, if you will in the portfolio of business. So I think it's just a reflection of people coming out of their current -- they're coming out of their higher mortgage rate and it's just refinancing at a low level which still makes economic sense. Now we're on the receiving end to grow. That's what we have such we believe much higher NIWs than otherwise would have been in a more stable marketplace.

Got it. That's helpful. And then with regards to the COVID losses maybe a couple of questions there. One when you talk about IBNR, do you include only events or losses from events that have already occurred or do you also include events in the future that are probable very probable to occur? François Morin: Well I mean that's a -- I mean a good question which as you know people are -- I think companies are may be answering that, I don't want to say, differently. But I think the words - we have to be careful with how we use the words, right? So I'd say, no question that we can only reserve for incidents or occurrences that have happened before June 30. I mean that's under GAAP. And anybody that tells you they're reserving for occurrences that are going to happen in the third or fourth quarter, I just don't know how you can do that. What we have done is, set again a high level I think a prudent level of IBNR on both insurance and reinsurance on things that we know happened or think have happened right? I mean the whole concept of IBNR. So we have certain claims that have been reported. We don't know. And certainly when you get into structures or when you're in an excess position, you're somewhat making a judgment on whether the claim will attach in your layer etcetera and that's where there's a bit more -- there's a bit of art that goes on and not necessarily tons of data or science around it. So I think the answer to us is, we've reserved for everything through June 30 and we would say there's an ultimate right? So the truly our best estimate of what we think the exposure is and that's where we are. I mean we can't really do more than that at this point given the accounting rules and guidelines.

Got it. And then final question also with regards to COVID, between first quarter and second quarter the increase in loss and COVID losses is some of that coming from IBNRs that you had already set up in 1Q, but then took a second look and realized they need to be higher or is that from really new lines of business and new areas that had not been not previously reserved for? François Morin: Well I'd say it's a bit of both. I mean I would say on the insurance side for example at Q1 we had reserved primarily in set IBNR primarily in our international book because again back to the in the U.K. in particular property book or regional property book there we were of the opinion that there was exposure there. We took action and we booked IBNR on that. I'd say in the second quarter for example we booked and I mentioned it on national accounts that's where we have workers' comp exposure. Again if you want to be very technical at one point, I mean the deaths or the occurrences hadn't happened at the end of March they started to take place especially with health care workers as an example in April and May. So that's when we -- that's what we reserved for in the second quarter. I'd say on the reinsurance side, it's a bit murkier. It's not -- we're somewhat at the mercy or have to have discussions with our scenes and on the property cat book for example. We had booked a little bit of IBNR at the end of Q1. But through additional discussions and investigations and file reviews in the second quarter we booked a bit more on that front and the same is true in trade credit. So hopefully that answers, it but it's a bit of both I'd say.

That is helpful. And maybe one other one if I could sneak it in. On the BI front in reinsurance, the increases in COVID losses that you're reserving for today are those coming more from international accounts or more from the U.S.? François Morin: Correct more international. Absolutely. As you know we have exposure. I mean -- Continental Europe in particular there's France here there's certain countries where the BI coverage is more implicit and provided by the primary policies so those are some of the examples that we -- or policies that we -- or treaties that we're reserving for at this point.

Thank you very much.

Our next question comes from Josh Shanker with Bank of America.

Can we talk a little bit about July and how it compared with -- noticing for mortgage defaults?

Can you repeat the question please Josh?

Yes. Can we talk about -- compare May June July -- of you receiving notices for forbearance and defaults?

Yes. I think we -- I think the one place the one thing that we could say I mean it's -- the data is probably lagging a little bit from our perspective. But the good one to look at is the -- there's information back now I think and the MBA is providing information as to what is their estimate surveying the market and their clients as to who -- what's the forbearance percentage. I think it was pretty much plateauing as we got into May -- towards the end of May into June and through the second - first or second week of July and it's gotten down since then. So we're about 6.1% based on that metric in percent of forbearance from the GSE portfolio from the industry data and now it's at 5.49% as of July 13, I believe this last week. So we've seen a decrease right now Josh. Whether it continues that way or goes back up again. As you know a lot of people pay on the first of the month, but we'll probably have more information and a better clear picture as to what August look -- July looks like in the middle of August.

Okay. Thank you. And do you have any evidence one way or the other what RateStar has had any discernible difference in claim behavior -- I should say, claim-noticing behavior compared to how a lot of your competitors were pricing risk prior to your -- to adopting your methods?

Yes, I think, it does. It has had an impact. I think when we talk about cycle management. We also were doing it possibly a little bit more under the radar screen and MI. I think that our RateStar approach with all the parameters actually took us away from a higher than 95 LTV, higher DTIs in certain geographical areas. So yes, we do believe if we adjust for all the variation. I mean, it's not a huge differential, but there is a slight improvement or a slight difference going to our advantage in terms of our delinquencies based on our portfolio and the risk that we underwrote for the last four, five years.

All right. And one last one. I think you mentioned the change in AML. I don't think you mentioned the RDS change or maybe I missed it. Where is RDS as a percent of -- directly as of the end of the quarter? François Morin: Still right at 8% pretty flat. We've -- a couple of movements across the kind of contributions, but yes 8% of tangible book.

Thank you for all the answers. François Morin: You’re welcome.

Thanks, Josh.

Our next question comes from Ryan Tunis with Autonomous Research.

Hey, Thanks. Appreciate the MI guidance, I realize all this is like literally impossible to nail down, but I'll go ahead and I'll push on it a little bit more, because it is interesting. So when you think about the full year delinquency rate in your mind what are you thinking the percentage of forbearances are going to be of I think you said what was it 8%? How much of that is forbearance versus what you think of as like a real delinquency?

Well, the forbearance that we will declare -- that we will report that we're reporting to you are delinquencies by definition, right? So it's very hard to see I know what you're asking. And I think the one thing that we will tell you about projecting forbearance rates and delinquency rates in this forbearance world is that data is very, very hard to get and it's lagging a fair amount, so very difficult for us to tell you.

And, I guess, my follow-up too is, how are you planning on treating these delinquencies as they age? Like you're obviously using a pretty conservative incidence rate of 5%. I mean, as those move into the -- as those age to six months or whatever like are you going to keep it at 5% or are you going to assume something bigger than that?

I think it's -- there are two moving parts of that 5% Ryan. One is the -- it comes up really as our pre-COVID NODs to ultimate, which was 7.9% and we gave a discount about 33% haircut by virtue of being a forbearance. So as we move forward that 7.9%, which is a claim that's aged three months versus a claim that's aged two years or nine months even though it's a forbearance, we might have to increase those rates. But at the same time if the forbearance programs are getting better we might give a bit more discount or less discount. So it's a really, really -- and you're right you just pointed at the beginning of your comments. I think I should have probably let you answer your own question, which is it's pretty much impossible to answer at this point in time. But right -- and we have -- all we have is a 7.9% pre-COVID ultimate NODs, which was starting point getting some discount, recognizing that the regular forbearance program on hurricanes, which it is not right now -- is as low as 2%. So we're try to find our way around that environment, also recognizing that the delinquencies out of this crisis this COVID-19 will be longer to resolve, because the forbearance program as we all know will last for 12 months. So it's going to be -- it's going to take us a while to really understand the underlying fundamental characteristics of those risks. And to add all this -- to all of this if that wasn't enough, we'll have remediation programs put in place by the GSEs, which presumably should help a tremendous amount. But again, it remains very early to see -- to say.

Understood. And then lastly, Mark, this is purely hypothetical, but if you had $1 of capital for the next year or two years and you can only allocate it to reinsurance or primary insurance, is there a clear preference for which one you allocate it to?

How many years?

Two years.

Man, so to me you're asking me to choose among my kids. I got three kids, I love dearly.

I would split it in three -- three ways or I mean, which way I would like to know…

I mean, to me it's not an all or nothing. But I do believe right now at this point in time, which is I think what you're getting into, which I mentioned in my comments the returns on the reinsurance are quicker to a high level get quicker. But in terms of value creation over the longer time insurance will get there and get traction. It just takes a longer time to accumulate business at a higher level so -- but the problem with the reinsurance it's great for a couple of years but then you might lose that business. So it's not an all or nothing kind of situation. I wouldn't want to go, let's say, all-in in reinsurance even though they have higher ROEs sooner at the cost of losing long-term value creation from the insurance unit.

Thanks for the color. Appreciate it.

Yes.

Our next question comes from Meyer Shields with KBW.

Thank you. I wanted to follow-up on that question, but in a different direction. You talked about reinsurance maybe recovering faster than insurance. How is the current hardening cycle playing out in terms of speed relative to past cycles? Is there any observable difference?

Not really. I would say that we -- Meyer we may have that discussion before. A hard market never happens overnight. It takes five signal – two, three quarters. Losses have to develop. Management team have to figure out what they want to do and put pressure on their underwriting team. So it's no -- it's not unlike others that we've seen before. I would say that we were going to a strengthening of the market conditions even before COVID-19, I think that COVID is probably accelerating the reaction and the willingness and the boldness that we see in the underwriting teams around the industry. But there are still pockets Meyer where people seem to be a little bit aloof in what's going around. And these are the areas we're not growing as much as we should. But I know every cycle turn is different, but I'm not seeing significant difference. It does take-up -- and well one last thing, I will tell you. The one thing about this one is that, we have yet to see is the 1/1 renewal on reinsurance is a really important renewal date, so we'll have a lot more sense as to how quickly and how reactive the market will be as we head into this one.

Okay. No. That's very helpful. Thank you. In the past, we've been, I guess, targeting improvements within insurance that would get to a 95% combined. And when we look to the lens of current pricing, is there an update in terms of what that 95% can become?

I hope it's lower. But all kidding aside Meyer, I think that the 95% was put in place as an aspirational number two, three years ago. Now, two years ago now in an interest environment that was different. So, I think right now what we're processing it through -- this was sort of an aspirational as a guiding sort of target for our insurance group. I think right now what we're seeing is we're going through every different line of business and business units and attributing capital and return on investment and we're pitching everything to get to the right level. So, 95% is an over-simplistic way of looking at this. But all things being equal I think I would expect it to be lower right for the industry and that's also why you'll probably see a bit more pressure on the pricing around us in the industry.

Okay, perfect. And then final question if I can just in terms of whether you've had to take into account whether it's COVID or something like that that's so remote or other pressures whether you've dialed up your overall last year numbers in insurance or reinsurance? François Morin: Not in a meaningful way. I think -- I mean we've been pretty cautious. And I think I've been I'd say realistic about what the loss trends have been and what we expect them to be going forward. As you know we haven't relied exclusively on kind of the last five or 10 years of data. We superimposed our own views on what a more normalized view of loss trends is or should be. And I think we're still very comfortable with where we were at and recognizing that yes COVID is a bit of an outlier. But at this point, haven't really factored in any material changes in our loss trends in how we price the business.

Okay, fantastic. Thank you so much.

Our next question comes from Brian Meredith with UBS.

Yes, thanks. A couple here for you. First one, I don't think you mentioned it, but was there any benefit at all in the quarter from just lower frequency of economic activity kind of from a claims perspective in any lines of business? François Morin: I mean there are some indications that in some places yes, there's lower economic activity which will translate to lower losses or claims. We really haven't reflected that yet. I mean we want to take a cautious approach on that, so I'd like to think that maybe there's some to come down the road but for now we haven't factored that in anywhere in our numbers.

Great. And then second question I'm just curious Marc as you look at I guess the HEALS Act here there's a component into it of kind of liability call it indemnification. As you think about it if that doesn't go through is that a potential issue here for you and the insurance industry? And how do you kind of think about it from an underwriting perspective here going forward?

I missed the word you said Brian. Could you repeat the early part of your question?

Well, it's -- basically curious about protection or what you think about as far as the economy reopening here and potential liability associated with kind of COVID-19. The current I think it's called the HEALS Act or the CARES 2 Act has got some language in there trying to grant businesses and immunity for it right? I'm just curious of your thoughts around that. And if you're interested for insurance?

Well, it's not good. They're going to allocate more liability to us or presumption to us is not good. But I think in this sense these laws are always there. There's always things that are happening. We're going to have to react to what we see when we see it. That's all I can tell you Brian. It's very hard to sit here and go through what impact it is. If we were to react and do this full drill about everything that goes and a bill that's proposed it would take a lot of our time. So, we'll react to it when we'll react to it, right?

Yes. And Marc I think you get it wrong. I think you mistake my question. My question more is from your insurance policies perspective as you look going forward as the economy reopens up there's clearly EPLI exposures or GL exposures all sorts of exposures to potentially present themselves as benefits. How do you -- how are you thinking about that from an underwriting perspective?

Well, we have written policies that have EPLI exposure, we have GL exposures but we are not a large risk writer. We don't write the large insurers so that's certainly something that would be helpful to us. We would argue that a lot of the larger claims a lot of the focus from the low risk plaintiff bar would be focused on the larger deeper pocket insurer, so that's one thing we have for us. We also have a fairly amount -- a good healthy amount of reinsurance, so we're not overly concerned with the sideways change.

Yes. Got you. Okay. And then another just quick one here. Your travel insurance I'm just curious how big of a book is that? And obviously we're probably going to see some continued pressures there for the rest of the year.

Yes, it was originally about a couple of hundred million dollars of premium and now it's down -- I mean you could see the numbers you can multiply by four. I don't need to -- 250 actually for the year. So that's -- it's been -- it's taken a big dent and that also explains why the growth was more tested this quarter than otherwise could have been.

Great. And then one other just quick one here for you. I know you guys launched the sidecar guesses in the first quarter. Any thoughts about additional kind of alternative capacity here to potentially capture some of the good attractive opportunities in reinsurance?

It's a good question Brian. You're trying to get us to say something we don't want to say we can't say and we won't say. We don't mention about we certainly are always on the lookout to raise capital to deploy it with third party a lot of discussions are happening all over. We'll have probably more update as we see it happen and we'll be communicating to you to the extent it's appropriate but how much more it is clearly -- yes.

Great. Great. Great. And last one just quickly any updates on Coface?

Coface strategically is still something we really very much think is valuable for the shareholders. There's a lot going on. We're still going through the process of approval process and we're keeping a keen eye on what's happening. I think they reported results yesterday which were better than The Street expected. So, hopefully if that goes. It's also there as well a developing situation with them.

Great. Thank you.

Our next question comes from Phil Stefano with Deutsche Bank.

Yes, thanks. Just a quick one on the Bellemeade transaction. I'm thinking about the potential for these moving forward. I guess it seems like the Bellemeade deal that was done in the past quarter just given its attachment was probably more for S&P capital credit than PMIERs. When we saw an MI pure play come out with their own ILN transaction which is in my mind more of a traditional attachment point in the low single digits but the spreads on that and the pricing was significantly higher. How are you thinking about the managing of tail risk that Bellemeade provides versus just the capital credit that could be from playing I would think something that could be considered well above the working layers for the MI reinsurance coverage and the capital relief that something like that might provide?

Yes, it's a good question. I think it's always something we evaluate when and if we place or look at options that are in front of us. You're correct this one attaches -- the last one attaches above the PMIERs credit, but we're still very much in -- we have a healthy PMIERs ratio so that didn't really concern us too much. At this point not to say that next time or down the road, we may not go back to a lower attachment point. But yes, the focus was really -- yes it's an available source of capital. From a rating agency point of view, S&P you're correct it covers that. It provides us coverage there. And also we felt as being the first one out of the gate even before the GSEs to go back and access the capital markets was we thought a very strong message demonstrated. Again ,I touched on it the quality the book and the investor base is still very has a lot of interest and appetite for the product, so I think we were happy with the placement. No question it's always too expensive. We'd like to see the price to come down. We hope they do down the road. But for the time being given the economics in front of us we were -- I think it was a good move on our part.

Got it. And to the extent that you guys have a disclosure wish list that you keep in the background, I think it might be helpful to see the USMI disaggregated from the international and the mortgage reinsurance book just been the significant differences in how those businesses are reserved for? Thanks for appreciating. François Morin : See you, back. Thank you.

Our next question comes from Geoffrey Dunn with Dowling & Partners.

Thanks. Good morning. I guess first just a quick number question. Can you quantify the impact of the accelerated singles in the quarter?

Did we do that? I think it's about $50 million.

$50 million, okay. And then let's think forward past the end of new forbearance so early next year, so given what you know about the economy now obviously very different from a couple of months ago. How would you think about claim rates on new notices without forbearance? Because again you pointed out it's very different with home prices remains to be seen if we're going into a recession or not. And I think Marc last quarter you suggested, we might be looking at 13%, 14% given what you knew then. So what do you think about that type of number as you get into early 2021 based on what you know today?

I think the 5% is probably -- this is like on NODs or you're talking about ultimate claims rate for the portfolio?

On NODs. So new notices coming in forbearance goes away.

NODs, yes. Right. I think we were at 7.9% pre-COVID. I think that the forbearance should be pretty helpful and to bring it up -- not bring up to the 13%, 14% you just mentioned, I mentioned first quarter. That's probably -- my gut would tell me a slight increase for a little while until we see things shake out and things came back to more normalcy. And I think reverting back to some kind of level. I think the forbearance program were to play out to the way it should play out. It's still very uncertain as you know Geoff. I think that we should get back to -- it might stay elevated for a while maybe 12%, 13% for a little while but it should go back down at some point for next year I would say.

Okay. Alright. So you do think given what you know about the economy and built-up equity that you could still see 12% type of incidence assumption?

Yes. Yes on NODs, right? On new NODs for regular piece not for the forbearance piece? The forbearance piece we gave -- we did give a discount, right? There's a discount to that. So yes then just got it from – right. Congrats, yes.

All right. Thank you. François Morin : Quick, I mean before you go on to the next one, Geoff quick update for you. The actual impact of the singles was $27 million in the quarter. Just correction to Marc $50 million.

Thanks, again.

Okay. Go with $51 million. François Morin : You’re welcome.

Our next question comes from Jimmy Bhullar with JPMorgan.

Hi. I just had a question on pricing and just how you think about the interplay between the decline in exposures if the economy remains weak and how that could affect demand and pricing? And relatedly what else is out there that you think could potentially derail the momentum that you've seen in pricing both in insurance and reinsurance?

I mean it's hard to predict the future. As you know -- my God! I think if everything resolves, I mean even if things resolved for the better, I think the momentum that we've seen in the first quarter, late 2019, early 2020 I think we would still see some momentum. I think it would be just a matter of degree how much higher the rates could go. But I do believe the momentum was there for a turnover market way before pre-COVID-19. COVID-19 like I said before exacerbated the need for rate and accelerate the need for rate.

And then there's been a lot of talk about sort of ILS and trapped capacity and what do you think about when either some of the capacity gets relieved or potentially gets absorbed? And once there's clarity on that do you think by this time next year like a lot of the trapped capital would actually be out?

It's a possibility. I mean that's also assuming there's no more cat occurring this year. But this is a long-lasting cat event so it's not as clear as having a quake let's say in March. And I guess in a year out it's still developing but you have a better sense for wanting to or would be willing to release capital. This one will take a bit longer to process through, right? For instance, you could have arguments in courts and new ways and new push back on the insurance industry to pay claims in a property cycle. And that would take -- that could take another 1.5 years or two years to resolve. So, there's a lot more uncertainty in terms of timing finding resolution of the ultimate prices. So, it's a lot less certain that it will take only a year to get through it.

Thank you.

Sure.

Our next question comes from Jamie Inglis with Philo Smith.

Hi. Good afternoon. I wanted to follow-up on the conversation we've been having about forbearance programs and to what extent delinquencies get cured get claims -- turn into claims sort of, et cetera. And I appreciate that we don't know what's going to happen going forward, but I'm wondering if you could speak to what you learned in previous forbearance programs and how that affects your thinking about your current book? And if -- and what you learned in there? Was it -- did you learn anything about LTVs geographies sort of, et cetera? And how does that apply to your existing book today?

I think we have done reserving in the past, considering all the dimensions you just talked about, I think that we had the -- the beautiful thing about the prior hurricanes or the beautiful thing in a way is that we have prior hurricanes and prior events that we can go back to and look at the experience. This definitely help us put I guess, boundaries around what could happen, but this one is very unusual in the length of the forbearance program and the breadth and how widely spread it is. And I think we also have to throw in there the $600 per week unemployment benefits and the distribution that we talked about. Some regions are more heavily affected than others. So I think everything gets in the mix Jimmy -- Jamie. It's not just one dimension. And I think what we've learned is that, we sort of can use the historical forbearance experience as sort of as a range of possible outcome. But, we actually are digging heavily, heavily into developing a much more refined view of a forbearance-specific programs, such as the one we're facing right now. And we may never use it again, but at least we're in the process of readjusting our development claims model called ARMOR that we have internally. So, we're -- it's still very much developing and we're learning on the fly. François Morin: Yeah. Two things I'll add quickly to that. As Mark mentioned, the historically forbearance delinquencies most of them cure. I mean -- and we made comment that the 2% kind of claim rate. So that's obviously a very positive sign, but that's again more localized and it's a short-term issue. So, I mean understandable that these delinquencies most of them would cure. So that would be one extreme that would be a very good result in this situation. Maybe a little counter to that, as you may know, many of the claims or the mortgages or loans and forbearance up to 40% were actually still current, up until recently. So, in the early days of the second quarter, many loans had accessed the forbearance programs, but remained current and made their mortgage payments. The data now suggests that that percentage has come down. So the reality is, now we'll get a few more loans that have turned delinquent that were historically current or had been current in forbearance, but now have turned delinquent. So, that's a bit of a data point that we're monitoring, but that kind of gives us a bit of -- not necessarily concerned, but we have to understand better so that we can refine our estimates as we move forward, because the 2% ultimate claim rate may not be achievable or probably won't be what we end up with in this current situation.

Okay. Thank you. Appreciate it. Good luck in future. François Morin: Thank you, Jamie.

I'm not showing any further questions. I would now like to turn the conference over to Mr. Marc Grandisson for closing remarks.

Thanks for joining us this quarter. Please stay safe. Have a nice rest of the summer, and we'll talk to you in the fall again. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may all disconnect.