ACGL 10-K & 10-Q changes, risk factors and insider trading

•We operate in a highly competitive environment.environment, and we may not be able to compete successfully in our industry.

•The effects of inflation, trade and tariff disputes and global recessionary and other economic conditions impact the insurance and reinsurance industry in ways which may negatively impact our business, financial condition and results of operations.

•Claims for natural and man-made catastrophic events could cause large losses and substantial volatility in our results of operations and could have a material adverse effect on our financial position and results of operations.

•Our insuranceinsurance, reinsurance and reinsurancemortgage subsidiaries are subject to supervision and regulation. Changes to existing regulation and supervisory standards, or failure to comply with applicable requirements, could adversely affect our business and results of operations.

•TheSanctions imposition of sanctionsimposed by the U.S., U.K. and EU on Russia and Russia-related businesses hashave impacted certain sectors in which we write business.

•Our information technology systems and our pace of adoption of new technologies, such as generativeincluding AI, may not be adequate to meet the demands of our customers or impact negatively our ability to compete with our peers.

•The implementation of the Basel III Capital Accord and Federal Housing Finance Agency (“FHFA”)’sFHFA’s Enterprise RegulatorRegulatory Capital Framework may adversely affect the use of mortgage insurance and SRT and CRT opportunities.

RiskRisks Relating to Our Company

•We expect to becomeare subject to increased taxation in Bermuda as a result of the recently adopted Bermuda CIT Act, effective January 1, 2025 and may become subject to increased taxation in other countries as a result of the implementation of the OECD's plan on “Base Erosion and Profit Shifting.”

Historically, insurers and reinsurers have experienced significant fluctuations in operating results due to competition, frequency of occurrence or severity of catastrophic events, levels of capacity, general economic conditions, inflation, changes in equity, debt and other investment markets, changes in legislation, case law and prevailing concepts of liability and other factors. Demand for reinsurance is influenced significantly by the underwriting results of primary insurers and prevailing general economic conditions. The supply of insurance and reinsurance is related to prevailing prices and levels of surplus capacity that, in turn, may fluctuate in response to changes in rates of return being realized in the insurance and reinsurance industry on both underwriting and investment sides. As a result, the insurance and reinsurance business historically has been a cyclical industry characterized by periods of intense price competition due to excessive underwriting capacity as well as periods when shortages of capacity permitted favorable premium levels and changes in terms and conditions. The supply of insurance and reinsurance is increasing, either as a result of capital provided by new entrants or by the commitment of additional capital by existing insurers or reinsurers. Continued increases in the supply of insurance and reinsurance may have consequences for us, including fewer contracts written, lower New Insurance Written (“NIW”), lower premium rates, increased expenses for customer acquisition and retention, and less favorable policy terms and conditions.

The effects of inflation, trade and tariff disputes and global recessionary and other economic conditions impact the insurance and reinsurance industry in ways which may negatively impact our business, financial condition and results of operations.

While our business has not been directly impacted by the existing and proposed Trump administration tariffs on imported goods, there may be a ripple effect on how these impact certain industries where we provide insurance or reinsurance. It is too early to determine the long-term effect, if any, of the Trump administration tariff policy, but sustained escalation of tariffs and trade disputes may result in a global economic slowdown which impacts us and our clients. In addition, it is anticipated that the Trump administration will promulgate a number of executive orders or propose legislation that could impact our industry. We cannot predict with certainty the impact of these actions on our business and results of operations.

Claims for natural and man-made catastrophic events could cause large losses and substantial volatility in our results of operations and could have a material adverse effect on our financial position and results of operations.

We have large aggregate exposures to natural and man-made catastrophic events. Natural catastrophes can be caused by various events, including hurricanes, floods, wildfires, tsunamis, windstorms, earthquakes, hailstorms, tornadoes, explosions, severe winter weather, fires, droughts and other natural disasters. The frequency and severity of natural catastrophe activity has also been greater in recent years due to climate change caused in part by human actions and other related factors. Catastrophic events caused by humans may include acts of war, acts of terrorism and political instability. Catastrophes can cause losses in non-property business such as workers’ compensation or general liability. In addition to the nature of the property business, we believe that economic and geographic trends affecting insured property, including inflation, property value appreciation and geographic concentration tend to generally increase the size of losses from catastrophic events over time. Actual losses from future catastrophic events have varied materially from estimates due to the inherent uncertainties in making such determinations resulting from several factors, including the potential inaccuracies and inadequacies in the data provided by clients, brokers and ceding companies, the modeling techniques and the application of such techniques, the contingent nature of business interruption exposures, the effects of any resultant demand surge on claims activity and attendant coverage issues. In estimating our losses from catastrophic events our considerations can include factors such as overall market losses, additional claims information from our clients, multiple model views and proprietary scenario testing. All of the catastrophe modeling tools that we use or rely on to evaluate our catastrophe exposures are therefore based on significant assumptions and judgments and are subject to error and misestimation. As a result, our estimated exposures could be materially different than our actual results.

Our insuranceinsurance, reinsurance and reinsurancemortgage subsidiaries are subject to supervision and regulation. Changes to existing regulation and supervisory standards, or failure to comply with applicable requirements, could adversely affect our business and results of operation.

We may not be able to comply fully with, or obtain appropriate exemptions from, these statutes and regulations, which could result in restrictions on our ability to do business or undertake activities that are regulated in one or more of the jurisdictions in which we conduct business and could subject us to fines and other sanctions. RegulatoryLocal and regulatory authorities also may seek to exercise their supervisory or enforcement authority in new or more extensive ways, such as imposing increased capital requirements.requirements Itor limiting or impeding the oversight that we are able to exercise over our subsidiaries. Additionally, it is possible that requirements or guidance under one jurisdiction, such as the U.S.,jurisdiction may be contradictory or divergent from requirements or guidance in other jurisdictions where we operate such as the EU.operate. Examples mayinclude bedisclosure requirements relating to climate change disclosures and goalssustainability. andRegulatory diversity, equity and inclusion programs. Any of these actions, if they occur,fragmentation could affect the competitive market, how we are regulated and the way we conduct our business and manage our capital and could result in lower revenues and higher costs. As a result, such actions could have a material effect on our results of operations and financial condition.

Governments, regulators, legislators and influential non-governmental organizations (“NGOs”) continue to focus on enactingdevelop laws, regulations and other requirements relatingrelated to climate change. RegulatorRegulatory and shareholder focusscrutiny onof potential “greenwashing” also continues. We are subject to some of these changing laws, regulationsevolving and publicoften unpredictable requirements and policy debates, which are difficult to predictforecast andor quantify and may haveadversely an adverse impact onaffect our business. Legislative andor regulatory initiativesactions, andas well as court decisions following major catastrophes, could forcerequire expansion of certainbroader insurance coverages for catastrophe claimscoverage or otherwise adverselynegatively impact our business.operations. Additionally,In addition, climate‑related regulatory changes in regulations or policies relating to climate change or our own leadershipstrategic decisionsresponses implemented as a result of assessing the impact ofto climate changerisks oncould increase our businessoperating may result in an increase in the cost of doing business,costs or a decrease inreduce premiums in certain linesbusiness of business.lines.

We are subject to CSRD and other EU and U.K. regulationsclimate‑related relatingdisclosure toregulations, climate disclosures and goals. These regulationswhich require more extensive reporting on climate and other social factors beyondthan current U.S. requirements.rules. TheProposed changes by the European Commission recently proposed changes to sustainability reporting requirements which may impactfurther affect our reporting obligations. We cannot predict how these proposals or other changes inevolving sustainability requirements inacross any of theour jurisdictions in which we operate will impact our operations, customers andor shareholders.

Our efforts to address these exposuresrisks are based in partrely on the outcomes of our loss ‑mitigation measures andmeasures, risk modeling, our financialoperating results of operations and our communicationsengagement with our customers and shareholders. We also continue to monitor changes across our industry and geographiesgeographic developments, and theour Board regularly considers these exposuresexposures. regularly.Although Wewe may maketake strategic businessactions decisionsin response to address or respond to some of the legal and policy changes relating to climate change, butchanges, there is no assurance that these decisionsactions will adequatelyfully address thesethe exposuresrisks or that they will not result in aavoid material adverse effecteffects on our results of operations,results, financial condition or share price.

TheSanctions imposition of sanctionsimposed by the U.S., U.K. and EU on Russia and Russia-related businesses hashave impacted certain sectors in which we write business.

The ongoing Russia-Ukraine hostilities have created a high level of uncertainty as well as disruptiondisruptions in certain sectors of the global economy. It is impossible to predict whether Russia will expand hostilities to other countries in Europe or elsewhere. A furtherThe prolonged war mayhas also create continued uncertainty inimpacted the global economyenergy sector and resulted in the form of oil shortages, inflationary pressures, loss of confidence and general increase in risks worldwide. InAdditionally, response to this aggression, the governments of the U.S., U.K., EU and other countries implemented several sanctions programs relating to, among other things, the import and transportation of Russian oil and gas and other goods originating in Russia. Sanctions imposed also target entities, individuals and financial institutions which support Russia’s military and defense systems. Certaincertain lines of business we write have been impacted by the sanctions, such as the marine and energy lines of business, although the extent of the impact will depend on the outcome of the war in Ukraine and the nature of future sanctions packages or potential rescindment of some or all of the Russia sanctions currently in place.packages. It is possible that the U.S. approach to Russian sanctions may diverge from that of the U.K. and EU in the future, which may cause uncertainty in certain lines of business such as marine and energy.

Shareholders, investors and regulators have placedhistorically increased attentionfocused on climate change and sustainability-relatedsustainability issues,matters, leading to evolving and sometimes conflicting expectations and standards. We are committed to evaluating and, where appropriate, incorporating sustainability practices in our business. Our leadership and Board are actively engaged in understanding prevailing views onassess these issues and assessingevaluate where incorporating sustainability practices is appropriate for our business operations to ensure that our business strategy reflects our values.business. Changes to governmental, investor and societal priorities on climate change and sustainability-related practices could adversely impact our reputation, share price and results of operation or result in litigation.

We have substantial exposure to unexpected, large losses resulting from man-made catastrophic events, such as acts of war, regional hostilities, acts of terrorism, political instability, social unrestunrest, cyber attacks and pandemics similar to the COVID-19 pandemic. These risks are inherently unpredictable. It is difficult to predict the timing of such events with statistical certainty or estimate the amount of loss any given occurrence will generate. In certain instances, we specifically insure and reinsure risks resulting from acts of terrorism. We may also insure against risk related to cybersecurity and cyber attacks. In addition, our exposure to cyber attacks includes exposure to ‘silent cyber’ risks, meaning risks and potential losses associated with policies where cyber risk is not specifically included nor excluded in the policies. Even in cases where we attempt to exclude losses from terrorism, cybersecurity and certain other similar risks from some coverages written by us, we may not be successful in doing so. Moreover, irrespective of the clarity and inclusiveness of policy language, there can be no assurance that a court or arbitration panel will not limit enforceability of policy language or otherwise issue a ruling adverse to us. Accordingly, while we believe our reinsurance programs, together with the coverage provided under the Terrorism Risk Insurance Act of 2002, as amended (“TRIPTRIA”) are sufficient to reasonably limit our net losses relating to potential future terrorist attacks, we can offer no assurance that our available capital will be adequate to cover losses when they materialize. To the extent that an act of terrorism is certified by the Secretary of the Treasury and aggregate industry insured losses resulting from the act of terrorism exceeds the prescribed program trigger, our U.S. insurance operations may be covered under TRIPTRIA for up to 80% subject to (i) a mandatory deductible of 20% of our prior year’s direct earned premium for covered property and liability coverages, and (ii) an industry aggregate retention of $37.5$53.4 billion. The program trigger for calendar year 20242025 and any program year thereafter through 2027 is $200 million. If an act (or acts) of terrorism result in covered losses exceeding the $100 billion annual limit, insurers with losses exceeding their deductibles will not be responsible for additional losses. It is not possible to completely eliminate our exposure to unforecasted or unpredictable events, and to the extent that losses from such risks occur, our financial condition and results of operations could be materially adversely affected.

We seek to limit our loss exposure by writing a number of our reinsurance contracts on an excess of loss basis, adhering to maximum limitations on reinsurance written in defined geographical zones, limiting program size for each client and prudent underwriting of each program written. In the case of proportional treaties, we may seek per occurrence limitations or loss ratio caps to limit the impact of losses from any one or series of events. In our insurance operations, we seek to limit our exposure through the purchase of reinsurance. For our U.S. mortgage insurance business, in addition to utilizing reinsurance, we have developed a proprietary risk model that simulates the maximum probable loss resulting from a severe economic event impacting the housing market. We also seek to limit our loss exposure by geographic diversification, including by pricing adjustments in our U.S. mortgage insurance business. Geographic pricing decisions and zone limitations involve significant underwriting judgments, including the determination of the area of the zones and the inclusion of a particular policy within a particular zone’s limits. Various provisions of our policies, negotiated to limit our risk, such as limitations or exclusions from coverage or choice of forum, may not be enforceable in the manner we intend, as it is possible that a court or regulatory authority could nullify or void an exclusion or limitation, or legislation could be enacted modifying or barring the use of these exclusions and limitations. Disputes relating to coverage and choice of legal forum may also arise. Underwriting is inherently a matter of judgment, involving important assumptions about matters that are inherently unpredictable and beyond our control, and for which historical experience and probability analysis may not provide sufficient guidance. One or more catastrophic events or severe economic events could result in claims that substantially exceed our expectations, or the protections set forth in our policies could be voided, which, in either case, could have a material adverse effect on our financial condition or our results of operations, possibly to the extent of eliminating our shareholders’ equity. In addition, factors such as global climate change limit the value of historical experience and therefore further limit the effectiveness of our loss limitation methods. See “Catastrophic Events and Severe Economic Events” in Item 7 for further details. Depending on business opportunities and the mix of business that may comprise our insurance, reinsurance and mortgage insurance portfolio, we may seek to adjust our self-imposed limitations on probable maximum pre-tax loss for catastrophe exposed business and mortgage default exposed business.

We manage risk using reinsurance, retrocessional coverage and capital markets transactions. Our insurance subsidiaries typically cede a portion of their premiums through pro rata, excess of loss and facultative reinsurance agreements. Our reinsurance subsidiaries purchase a limited amount of retrocessional coverage as part of their aggregate risk management program. In addition, our reinsurance subsidiaries participate in “common account” retrocessional arrangements for certain pro rata treaties. Such arrangements reduce the effect of individual or aggregate losses to all companies participating on such treaties, including the reinsurers, such as our reinsurance subsidiaries, and the ceding company. Economic conditions, including but not limited to recessionary conditions,unemployment, inflation, declining home prices or the impact of climate change could also have a material impact on our ability to manage our risk aggregations through reinsurance or capital markets transactions. The availability and cost of excess of loss reinsurance sold into the capital markets is subject to investor appetite and market conditions when compared to the terms and yield opportunities of other similar investment opportunities. As a result of these factors, we may not be able to successfully mitigate risk through reinsurance and retrocessional arrangements.

Our information technology systems and our pace of adoption of new technologies, such as generativeincluding AI, may not be adequate to meet the demands of our customers or impact negatively our ability to compete with our peers.

We are dependent on our information technology systems to conduct our business and drive strategic decisions based on data analytics. Our information technology systems also support areas of our business, such as mortgage servicing or underwriting pricing portals where we connect with third-partythird party information technology systems. Accordingly, we are highly dependent on the effective operation, availability and integrity of these systems. While we believe that the systems are adequate to service our business, there can be no assurance that they will operate in all manners in which we intend, possess all of the functionality required by customers currently or in the future or continuously operate without significant disruption.

Our customers and regulators require that our information technology systems perform as intended, whether they are hosted by us, managed by a third-partythird party on our behalf or rely on seamless electronic integrations with customer systems. Regulators and customers regularly request information about our cybersecurity program and disaster recovery plans. We use AI in areas of our business and, to a much more limited extent, carefully vetted generative AI capabilities. We must continually invest significant resources in maintaining, monitoring and enhancing our information technology systems’ capabilities to meet customer needs and business strategy. Our business, financial condition and operating results may be adversely affected if we do not adequately maintain our information technology systems, both internal and third-party,third party, and continuously test and upgrade them. We continuously evaluate the adequacy of our information technology systems in order to ensure that we are utilizing the most appropriate technologies and innovating or adopting new technologies to support our underwriting business. With new technologies emerging at a rapid pace, there is no assurance that we will be able to evaluate and integrate new technologies or update our existing systems to keep pace with our competitors and customer needs.

We rely on information technology systems to securely process, transmit, store and protect the confidential and electronic information, financial data and proprietary models that are critical to our business. Furthermore, a significant portion of the communications between our employees and our business partners and service providers depends on information technology and electronic information exchange. Like all companies, our information technology systems and the systems of third-partiesthird parties that we do business with are vulnerable to data breaches, interruptions or failures due to events that may be beyond our control, including, but not limited to, natural disasters, power outages, theft, terrorist attacks, computer viruses, hackers, employee or vendor error or misconduct, malicious actors, errors in usage or deepfake or social engineering or schemes, phishing attacks, other external hazards and general technology failures. In 2024, our operations, like many others, were affected by a significant incident relating to a third-party vendor’s faulty software update. While the impact of this event was not material to our business and operations, we are vulnerable to such incidents that are beyond our control.

We rely on certain third-partythird party technology service providers and other service providers, notably major cloud providers, Software-as-a-Service (or “SaaS”) solutions, and on-premise software, including proprietary and open source solutions. We also outsource certain business processes to third parties and may continue do so in the future. This practice exposes us to increased risks if those third-partythird systemsparty systems, including AI technologies that may be in use, are not maintained and monitored in accordance with contractual termsterms, regulations or due to human error. There is no assurance that we will not be materially adversely affected by such incidents impacting our critical and important functions. See Item 1C, “Cybersecurity” for additional information.

The sophistication of cybersecurity threats, AI-powered cyber attacks such as deep fakes and brute force attacks, continues to increase. We and/or our SaaS or other third-partythird party providers are exposed to these risks and other cybersecurity risks which may arise in the future.

Similar to our competitors, a ratings downgrade or the potential for such a downgrade, or failure to obtain a necessary rating, could adversely affect our relationships with agents, brokers, wholesalers, intermediaries, clients and other distributors of our existing and new products and services. Some of theour assumed reinsurance agreements assumed by our reinsurance operations include provisions that a ratings downgrade or other specified triggering event with respect to our reinsurance operations, such as a reduction in surplus by specified amounts during specified periods, provide our ceding company clients certain rights, including, the right to terminate the subject reinsurance agreement and/or to require us to post additional collateral. Any ratings downgrade or failure to obtain a necessary rating could adversely affect our ability to compete in our markets, could cause our premiums and earnings to decrease and could have a material adverse impact on our financial condition and results of operations. In some cases, a downgrade in ratings of certain of our operating subsidiaries may constitute an event of default under our credit facilities.

We can offer no assurances that our ratings will remain at their current levels or that any of our ratings which are under review or watch by ratings agencies will remain unchanged.levels. Changes in the criteria used by rating agencies may impact our capital position, our capital requirements and the treatment of certain items on our balance sheet. It is possible that rating agencies may modify their evaluation criteria, heighten the level of scrutiny they apply when analyzing companies in our industry, adjust upward the capital and other requirements employed in their models and/or discontinue recognition of credit and debt instruments or other structures deployed for maintenance of certain rating levels. We may need to raise additional funds through equity or debt financings or other investments. Any equity or debt financing, if available at all, may be on terms that are unfavorable to us. Equity financings could be dilutive to our existing shareholders and could result in the issuance of securities that have rights, preferences and privileges that are senior to those of our outstanding securities. If we are not able to obtain adequate capital through such financings or through our investment strategy, our business, results of operations and financial condition could be adversely affected. See “Capital Resources” in Item 7 for further details.

We operate within an ERM framework designed to identify, assess and monitor our risks. We consider underwriting, reserving, investment, credit, group and operational risk in our ERM framework. Losses, reputational damage, regulatory finesfines, supervisory criticism, contractual disputes and litigation are among the adverse impacts which can arise if we fail to operate an effective ERM framework. OperationalOur operational risks include the ongoing obligation to comply with applicable laws, regulations, regulatory expectations, and legal standards across all jurisdictions where Arch conducts business. Additionally, operational risk and losses can result from, among other things, fraud, errors, failure to document transactions properly or to obtain proper internal authorization, failure to comply with regulatory requirements,requirements across all jurisdictions where Arch conducts business, information technology or information security failures and failure to train employees appropriately or adequately. We continuously enhance our operating procedures and internal controls to effectively support our business and our regulatory and reporting requirements. As a result of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple error or mistake or circumvention of controls. There can be no assurance that our control system will succeed in achieving its stated goals under all potential future conditions. Any ineffectiveness in our controls or procedures could have a material adverse effect on our business. For further information on our ERM framework, see “Enterprise Risk Management” in Item 1.

We must comply with all applicable economic sanctions and anti-bribery laws and regulations of the U.S. and other foreign jurisdictions where we operate. U.S. laws and regulations applicable to us and others who provide insurance and reinsurance include the economic trade sanctions laws and regulations administered by the Treasury’s Office of Foreign Assets Control as well as certain laws administered by the U.S. Department of State. New sanctions regimes may be initiated, or existing sanctions expanded or lifted, at any time, which can immediately impact our business activities. Since the Russian invasion of Ukraine in February 2022, there have been several sanctions packages imposed by the U.S., U.K. and EU which impact our business. The sanctions are complex, numerous and nuanced, requiring close review and assessment as they pertain to our business. We are also subject to the U.S. Foreign Corrupt Practices Act and other anti-bribery laws such as the U.K. Bribery Act that generally bar corrupt payments or unreasonable gifts to foreign governments or officials. Although we have policies and controls in place designed to ensure compliance with these laws and regulations, it is possible that an employee or intermediary could fail to comply with applicable laws and regulations. In addition, we may interpret a complex sanction in a way which may differ from a regulator. In these cases, we could be exposed to fines, criminal penalties and other sanctions. Such violations could limit our ability to conduct business and/or damage our reputation, resulting in a material adverse effect on our financial condition and results of operations.

Disruption in the financial markets and the downturn in global economic activity resulting from geopolitical conflict or economic decisions/trade wars, elevated financing rates, property market declines or other macro-and micro-economic conditions could adversely affect the valuation of securities in our investment portfolio. Credit deterioration spread widening and/or equity market volatility could result in temporary or permanent impairment. Elevated levels of inflation could drive higher U.S. and global interest rates, negatively impacting asset prices, particularly in fixed income and undermine financial flexibility of operating businesses. In addition, a lack of pricing transparency, decreased market liquidity, the strengthening or weakening of foreign currencies against the U.S. Dollar, individually or in tandem, could have a material adverse effect on our results through realized losses, impairments and changes in unrealized positions in our investment portfolio. Furthermore, issuers of the investments we hold under the equity method of accounting report their financial information to us one month to three months following the end of the reporting period. Accordingly, the adverse impact of any disruptions in global financial markets on equity method income from these investments would likely not be reflected in our current quarter results and would instead be reported in the subsequent quarter.

The mix of business in our insured loan portfolio may affect losses. The presence of multiple higher-risk characteristics in a loan materially increases the likelihood of a claim unless there are other characteristics to mitigate the risk. TheChanges mixin underwriting standards, loan terms or credit evaluation methodologies (including those driven by the GSEs, regulators or market competition) could result in a higher‑ risk mortgage insurance portfolio and increase the frequency and severity of higher-risk loans, including affordable housing loansclaims, which oftencould have higher-riska characteristics,material couldadverse increaseeffect losseson our business, results of operation and harm our financial performance.condition. The geographic mix of our insured loan portfolio could also increase losses and harm our financial performance.

Mortgage insurance premiums are set at the time coverage is procured, based in part on the expected duration of the coverage. We cannot cancel mortgage insurance coverage or adjust renewal premiums during the life of the policy. Thus, higher than anticipated claims generally cannot be offset by premium increases on policies in force or mitigated by our non-renewal or cancellation of insurance coverage. Further, in the U.S., to the extent that the insured cancels coverage as a result of prior home price appreciation, the duration of coverage will be shorter, and we will receive less premium. The premiums charged, and the associated investment income, may not be adequate to compensate us for the risks and costs associated with the insurance coverage provided to customers. Intense competition within the private mortgage insurance industry and the potential for new entrants could result in lower premiums and/or negatively impact our level of NIW. A decrease in the amount of premium received or an increase in the number or size of claims, compared to what we anticipate, could adversely affect our results of operations and financial condition.

The frequency and severity of claims we incur is uncertain and will depend largely on general economic factors outside of our control, including, among others, changes in unemployment and home prices affordability. Inflated home prices followed by a decline in home values could significantly decrease a borrower’s equity in their home, which would limit their ability to sell the property without incurring a loss and could increase the frequency and severity of claims. MonthlyChanges interestto ratecredit changesscoring models, data inputs or evaluation frameworks could result in Australiaborrowers orbeing theassessed as lower risk than their actual performance ultimately reflect, increasing cost of homeowners insuranceuncertainty in the U.S. could make a borrower’s monthly housing-related payment obligations increasedefault and couldclaim increase the frequency of claims. Deteriorating economic conditions, potentiallyperformance due to prolongedmodel recessionary conditions increasing levels of unemployment and inflation, could adversely affect the performance of our mortgage insurance portfolio and could adversely affect our results of operations and financial condition.changes.

The size of the U.S. and Australian mortgage insurance market depends in large part upon the volume of low down payment home mortgage originations. FactorsIncreases to mortgage interest rates have materially increased financing costs, and as a result have decreased the number of qualified borrowers and the volume of low down payment mortgage originations. Other factors affecting the volume of low down payment mortgage originations include, among others: restrictions on mortgage credit due to stringent underwriting standards and liquidity issues affecting lenders; changes in affordability due to increased mortgage interest rates and home prices, and other economic conditions in the U.S., Australian and regional economies; population trends, including the rate of household formation and immigration; supply constraints and increased building costs; and U.S. government housing policy, and Australian government housing policy.policy, Increasesincluding policies encouraging loans to mortgagefirst interesttime rateshome have materially increased financing costs, and as a result may decrease the number of qualified borrowers and the volume of low down payment mortgage originations.buyers.

OnThe Februaryprivate 22,mortgage insurers’ principal government competitor in the U.S. is the Federal Housing Administration (“FHA”). In 2023, the FHA reduced its annual mortgage insurance premium rates by 30bps from .85% to .55% for most single family mortgages endorsed on or after March 20, 2023. This takes the annual premium from 0.85% down to 0.55% for most FHA borrowers.mortgages. This change, and any future changes to the FHA program may, cause a decline in the volume of low down payment home mortgages purchased by the GSEs and negatively impact the amount of mortgage insurance we write in the U.S.

The FHFA as conservator of the GSEs continues to evaluate loan level price adjustments (“LLPAs”) and guarantees fees assessed by the GSEs when purchasing loans. During 2022 and 2023, the FHFA implemented a series of changes to update the GSEs’ single-family guarantee fee pricing framework to increase support for creditworthy borrowers limited by income or by wealth, while also increasing pricing to other categories of loans (such as high balance mortgages and mortgages on second homes) to foster capital accumulation. Future pricing changes, which may include increasing LLPAs and guarantee fees, limiting the purchase of certain categories of loans, or restricting loan limits could cause a decline in the volume of low-downlow down payment home mortgage purchases by the GSEs, could decrease demand for mortgage insurance,GSEs and could decreasenegatively ourimpact U.S. new insurance written and reduce mortgage insurance revenues.

On January 2, 2025, the U.S. Department of Treasury (the “Treasury Department”) and FHFA announced an agreement to amend the preferred stock purchase agreements between the Treasury Department and the GSEs, originally entered into in September 2008, in order to, among other things, codify the requirement that Treasury consent before the conservatorships can be terminated, memorialize that ending the conservatorship should be based on consideration of the financial condition of the GSEs and the potential impact on the housing market, and outline an agreed upon process for eventual public input. If any GSE reformreform, including privatization, is adopted,pursued, whether through legislation or administrative action, it could impact the current role of private mortgage insurance as credit enhancement, including its reduction or elimination. Passage and timing of any comprehensive GSE reform or incremental change (legislative or administrative) is uncertain, making the actual impact on the mortgage insurance industry difficult to predict. Furthermore, the FHFA and/or the GSEs could chosechoose to reduce the amount of CRT protection purchased on their loan portfolios, which could reduce the CRT investment opportunities available for reinsurers. Future legislative,legislative or administrative action or changes to business practices related to the use or requirement for credit enhancement could have a material adverse impact on the Company.

The PMIERs apply to AMIC and UGRIC, which are eligible mortgage insurers. The PMIERs impose limitations on the type of risk insured, the forms and insurance policies issued, standards for the geographic and customer diversification of risk, acceptable underwriting practices, quality assurance, loss mitigation, claims handling, standards for certain reinsurance cessions and financial requirements, among other things. The financial requirements require a mortgage insurer’s available assets to meet or exceed “minimum required assets” as of each quarter end. In August 2024, the GSEs updated PMIERs to incorporate new deductions to the definition of available assets for investment risk. This update will becomebecame effective March 31, 2025, but the impact will be phased in through September 30, 2026. Arch MI U.S.’s minimum required assets under the PMIERs will be determined, in part, by the particular risk profiles of the loans it insures. If, absent other changes, Arch MI U.S.’s mix of business changes to include more loans with higher loan-to-value ratios or lower credit scores, it will have a higher minimum required asset amount under the PMIERs and, accordingly, be required to hold more capital in order to maintain GSE eligibility. Our eligible mortgage insurers each satisfied the PMIERs’ financial requirements as of December 31, 2024.2025. While we intend to continue to comply with these requirements, there can be no assurance that the GSEs will not change the PMIERs or that AMIC or UGRIC will continue as eligible mortgage insurers. If either or both of the GSEs were to cease to consider AMIC or UGRIC as eligible mortgage insurers and, therefore, cease accepting our mortgage insurance products, our results of operations and financial condition would be adversely affected.

The implementation of the Basel III Capital Accord and FHFA’s Enterprise RegulatorRegulatory Capital Framework may adversely affect the use of mortgage insurance and SRT and CRT opportunities.

With certain exceptions, the Basel III Rules became effective on January 1, 2014. In December 2017, the Basel Committee on Banking Supervision published final revisions to the Basel Capital Accord which is informally denominated in the U.S.U.S., as “Basel III Endgame.” The Basel Committee expects the new rules to be fully implemented by January 2027.

Our mortgage segment continued to deliver a steady level of earnings for our shareholders,earnings, generating $1.1$1.0 billion of underwriting income in 2024,2025, resulting in the thirdfourth consecutive year ofexceeding delivering overthe $1 billion of underwriting income.threshold. While new originations remain tempered by relatively highlower mortgage interestrates rates,are underlyingbeginning to support increased origination activity, the current market is still constrained due to affordability challenges. Underlying fundamentals remained strong and our U.S. market share was stable as industry pricing discipline held. Our team remains focused on underwriting discipline, expense management and enhancing our data and analytical platforms to further optimize the business. The persistency of our in forcein-force U.S. primary mortgage insurance portfolio remained a healthy 82.1%81.8% and theour delinquency rate remained low. We continue to expect the mortgage segment to serve as a steady diversifying contributor to our overall earnings and generate attractive underwriting income given the high credit quality of our in-force portfolio.

Book value per share represents total common shareholders’ equity available to Arch divided by the number of common shares and common share equivalents outstanding. Management uses growth in book value per share as a key measure of the value generated for our common shareholders each period and believes that book value per share is the key driver of Arch Capital’s share price over time. Book value per share is impacted by, among other factors, our underwriting results, investment returns and share repurchase activity, which has an accretive or dilutive impact on book value per share depending on the purchase price. Book value per share was $65.11 at December 31, 2025, a 22.6% increase from $53.11 at December 31, 2024,2024. aThe 13.1%growth increasein frombook $46.94value atper Decembershare 31,in 2023,2025 primarily reflected strong underwriting and aninvestment increase of 23.8% when incorporating the impact of the $1.9 billion special dividend paid to common shareholders in December 2024.returns.

Operating return on average common equity (“Operating ROAE”) represents annualized after-tax operating income available to Arch common shareholders divided by average common shareholders’ equity available to Arch during the period. After-tax operating income available to Arch common shareholders, a “non-GAAP measure” as defined in the SEC rules, represents net income available to Arch common shareholders, excluding net realized gains or losses (which includesincludes, but is not limited to, realized and unrealized changes in the fair value of equity securities and assets accounted for using the fair value option, realized and unrealized gains or losses on derivative instruments, changes in the allowance for credit losses on financial assets and gains or losses realized from the acquisition or disposition of subsidiaries), equity in net income or loss of investments accounted for using the equity method, net foreign exchange gains or losses, transaction costs and other, loss on redemption of preferred shares and income taxes. Management uses Operating ROAE as a key measure of the return generated to Arch common shareholders. See “Comment on Non-GAAP Financial Measures.”

Our annualized net income return on average common equity was 22.8%20.1% for 2024,2025, compared to 29.7%22.8% for 2023.2024. Our Operating ROAE was 18.9%17.1% for 2024,2025, compared to 21.6%18.9% for 2023.2024. Returns for 2024the 2025 period reflected strong underwriting and investment returns, albeit with an elevated level of catastrophe activity.returns.

Total return for 20242025 primarily reflected the effects of sustainedlower higherbond interestyields, ratesa availableweaker inU.S. dollar and equity market returns. The portfolio slightly underperformed their benchmark returns, primarily due to the market,impairment alongand withsale growthof incertain investedalternative assetsinvestments dueaccounted infor partusing the equity method. The allocation of our portfolio remained neutral relative to strongour operatingtargeted cash flows.benchmark. We continue to maintain a relatively short duration on our fixed income portfolio of 3.313.34 years at December 31, 2024.2025.

Throughout this filing, we present our operations in the way we believe will be the most meaningful and useful to investors, analysts, rating agencies and others who use our financial information in evaluating the performance of our company. This presentation includes the use of after-tax operating income available to Arch common shareholders, which is defined as net income available to Arch common shareholders, excluding net realized gains or losses (which includesincludes, but is not limited to, realized and unrealized changes in the fair value of equity securities and assets accounted for using the fair value option, realized and unrealized gains or losses on derivative instruments, changes in the allowance for credit losses on financial assets and gains or losses realized from the acquisition or disposition of subsidiaries), equity in net income or loss of investments accounted for using the equity method, net foreign exchange gains or losses, transaction costs and other, net of income taxes (which for the 2023 fourth quarter includes a one-time deferred income tax benefit related to the enactment of Bermuda’s new corporate income tax),taxes, and the use of annualized operating return on average common equity. The presentation of after-tax operating income available to Arch common shareholders and annualized operating return on average common equity are non-GAAP financial measures as defined in Regulation G. The reconciliation of such measures to net income available to Arch common shareholders and annualized net income return on average common equity (the most directly comparable GAAP financial measures) in accordance with Regulation G is included under “Results of Operations” below.

We believe that net realized gains or losses, equity in net income or loss of investments accounted for using the equity method, net foreign exchange gains or losses and transaction costs and other in any particular period are not indicative of the performance of, or trends in, our business. Although net realized gains or losses, equity in net income or loss of investments accounted for using the equity method and net foreign exchange gains or losses are an integral part of our operations, the decision to realize these items are independent of the insurance underwriting process and result, in large part, from general economic and financial market conditions. Furthermore, certain users of our financial information believe that, for many companies, the timing of the realization of investment gains or losses is largely opportunistic. In addition, changes in the allowance for credit losses and net impairment losses recognized in earnings on the Company’sour investments represent other-than-temporary declines in expected recovery values on securities without actual realization. Furthermore, we exclude net realized gains or losses from the acquisition or disposition of subsidiaries, due to their non-recurring nature, such items are not indicative of the performance of, or trends in, our business performance.

The use of the equity method on certain of our investments in certain funds that invest in fixed maturity securities is driven by the ownership structure of such funds (either limited partnerships or limited liability companies). In applying the equity method, these investments are initially recorded at cost and are subsequently adjusted based on our proportionate share of the net income or loss of the funds (which include changes in the market value of the underlying securities in the funds). This method of accounting is different from the way in which we account for our other investments; and the timing of the recognition of equity in net income or loss of investments accounted for using the equity method may differ from gains or losses in the future upon sale or maturity of such investments.

Our presentation of segment information includes the use of a current year loss ratio which excludes favorable or adverse development in prior year loss reserves. This ratio is a non-GAAP financial measure as defined in Regulation G. The reconciliation of such measure to the loss ratio (the most directly comparable GAAP financial measure) in accordance with Regulation G is shown on the individual segment pages. Management utilizes the current year loss ratio in its analysis of the underwriting performance of each of our underwriting segments. Effective in the 2025 period, the ‘Other operating expense ratio’ includes ‘Other underwriting income.’

(1) Net realized gains or losses includeinclude, but is not limited to, realized and unrealized changes in the fair value of equity securities and assets accounted for using the fair value option, realized and unrealized gains and losses on derivative instruments, changes in the allowance for credit losses on financial assets and gains or losses realized from the acquisition or disposition of subsidiaries.

(2) Income tax on net realized gains or losses, equity in net income or loss of investments accounted for using the equity method, net foreign exchange gains or losses and transaction costs and other reflects the relative mix reported by jurisdiction and the varying tax rates in each jurisdiction. The 2023 results were impacted by the establishment of a net deferred income tax asset of $1.18 billion, or $3.10 per share, related to the enactment of Bermuda’s new corporate income tax.

We classify our businesses into three underwriting segments: insurance, reinsurance and mortgage. Our insurance, reinsurance and mortgage segments each have managers who are responsible for the overall profitability of their respective segments and who are directly accountable to our chief operating decision makers,decision-makers, the Chief Executive Officer of Arch Capital and the Chief Financial Officer and Treasurer of Arch Capital. The chief operating decisiondecision- makers do not assess performance, measure return on equity or make resource allocation decisions on a line of business basis. Management measures segment performance for our three underwriting segments based on underwriting income or loss. We do not manage our assets by underwriting segment, with the exception of goodwill and intangible assets and accordingly,accordingly investment income is not allocated to each underwriting segment.

We determined our reportable segments using the management approach described in accounting guidance regarding disclosures about segments of an enterprise and related information. The accounting policies of the segments are the same as those used for the preparation of our consolidated financial statements. IntersegmentInter-segment business is allocated to the segment accountable for the underwriting results.

Net premiums written by the insurance segment were 17.3%13.4% higher in 20242025 than in 2023 (7.0% excluding the MCE Acquisition).2024. Growth in net premiums written primarily reflected the impact of the MCE Acquisition along with an increases in most lines of business due in part to new business opportunities and rate changes.Acquisition.

Net premiums written are primarily earned on a pro rata basis over the terms of the policies for all products, usually 12 months. Net premiums earned by the insurance segment were 21.7%17.3% higher in 20242025 than in 2023 (10.5% excluding the MCE Acquisition),2024, reflecting changes in net premiums written over the previous five quarters.

The insurance segment’s current year loss ratio in 2025 was 3.8consistent pointswith higher in 2024 than in 2023.2024. The 20242025 loss ratio included 4.64.4 points of current year catastrophic event activity, primarily related to Hurricanes Helene and Milton, compared to 2.74.6 points in 2023.2024. The current year loss ratio for 2024the 2025 period also reflected the impact of ratethe increasesMCE Acquisition and changes in mix of business.

Net premiums written by the reinsurance segment were 18.2%1.7% higherlower in 20242025 than in 2023.2024. The growthlower inlevel of net premiums written primarily reflected non-renewals and share decreases in the specialty line of business offset, in part, by increases in all lines of business, primarily due to new business, rate increases and growth in existing accounts.casualty.

Other underwriting incomeincome, which includes revenue earned from underwriting-related activities covered under existing service contracts was $159 million in 2024 was $9 million,2025, compared to $17$9 million in 2023.2024.

The reinsurance segment’s current year loss ratio was 4.41.5 points higherlower in 20242025 than in 2023.2024. The 20242025 loss ratio included 11.88.5 points for current year catastrophic event activityactivity, primarily related to the California wildfires, compared to 11.8 points in 2024, primarily related to Hurricanes MiltonMilton, and Helene,Helene and a series of other global events, compared to 6.8 points in 2023.events. The current year loss ratio for 20242025 also reflected the impact of rate increases and changes in mix of business.

The underwriting expense ratio for the reinsurance segment was 23.5%24.0% in 2024,2025, compared to 26.1%23.5% in 2023,2024. withThe increase in the decrease2025 period primarily duereflected tolower growthprofit inand netsliding premiumsscale earned.commissions on ceded business.

Net premiums written for 20242025 were 5.7%4.7% higherlower than in 2023.2024. The increasereduction in net premiums written in 2024the 2025 period primarily reflected a lower levelgross premiums written and expenses related to tender offers of premiums ceded tocertain Bellemeade entities.Re mortgage insurance linked notes.

The persistency rate of the U.S. primary portfolio of mortgage loans was 81.8% at December 31, 2025 compared to 82.1% at December 31, 2024 compared to 83.6% at December 31, 2023.2024. The persistency rate represents the percentage of mortgage insurance in force at the beginning of a 12-month12 month period that remains in force at the end of such period.

Net premiums earned for 20242025 were 6.3%4.8% higherlower than in 2023,2024, reflecting changes in net premiums written over the previous five quarters.

Other underwriting income, which is primarily related to GSE risk-sharing transactions services and our whole mortgage loan purchase and sell program,services, was $22 million for 2025, compared to $17 million for 2024, compared to $14 million for 2023.2024.

The mortgage segment’s current year loss ratio was 2.21.2 points lowerhigher in 20242025 compared to 2023.2024. The lowerhigher current year loss ratio forin 20242025 period reflected aslightly lowerhigher averagenew casedelinquencies reserveand perthe default.impact of the Bellemeade Re tender offers noted above. The percentage of loans in default on U.S. primary mortgage insurance increased from 1.74% at December 31, 2023 to 2.09% at December 31, 2024.2024 to 2.17% at December 31, 2025.

The underwriting expense ratio for the mortgage segment was 17.0%15.0% for 2024,2025, compared to 18.2%17.0% for 2023.2024. The decrease wasin the 2025 period primarily due toreflects a lower levelheadcount as a result of profitthe commissions2024 onvoluntary U.S.separation primary business, along with a higher level of net premiums earned.program.

The Company’s corporate results include net investment income, net realized gains or losses,losses (which includes, but is not limited to, realized and unrealized changes in the fair value of equity securities and assets accounted for using the fair value option, realized and unrealized gains or losses on derivative instruments, changes in the allowance for credit losses on financial assets and gains or losses realized from the acquisition or disposition of subsidiaries), equity in net income or loss of investments accounted for using the equity method, other income (loss),or loss, corporate expenses, transaction costs and other, amortization of intangible assets, interest expense, net foreign exchange gains or losses, income taxes items (which for 2023 reflects the establishment of a net deferred income tax asset related to the enactment of Bermuda’s new corporate income tax),taxes, income from operating affiliates and items related to our non-cumulative preferred shares.

(1) IncludesAmounts interestinclude incomedividends and other distributions on operating cash, distributions from investment funds, term loan investments, funds held balances, cash balances and other items.

(2) Investment expenses were approximately 0.26%0.23% of average invested assets for 2024,2025, consistentcompared withto 0.26% for 2023.2024.

The pre-tax investment income yield was 4.25%4.11% for 2024,2025, compared to 3.53%4.25% for 2023. The growth in net investment income for 2024 compared to 2023 primarily reflected higher yields available in the financial markets.2024. The pre-tax investment income yields were calculated based on amortized cost. Net cash flow from operating activities contributed $6.7$6.2 billion in 2024,2025, which increased our invested asset base and contributed to the growth in net investment income. Net investment income in 2024 was partially impacted by a $1.9 billion special dividend paid to common shareholders in December which required us to sell certain investments. Yields on future investment income may vary based on financial market conditions, investment allocation decisions and other factors.

We recorded net realized gains of $464 million for 2025, compared to net realized gains of $197 million for 2024,2024. comparedAmounts in both periods reflected sales of investments as well as the impact of financial market movements on the Company’s equity securities and investments accounted for under the fair value option method. Amounts in the 2025 period also include losses related to netthe realizedimpairment lossesand sale of $165certain millionalternative investments accounted for 2023.under the equity method. Currently, our portfolio is actively managed to maximize total return within certain guidelines. The effect of financial market movements on the investment portfolio will directly impact net realized gains or losses as the portfolio is rebalanced. Net realized gains or losses from the sale of fixed maturities primarily results from our decisions to reduce credit exposure, to change duration targets, to rebalance our portfolios or due to relative value determinations.

Corporate expenses were $57 million for 2025, compared to $119 million for 2024, compared to $96 million for 2023.2024. Such amountsexpenses primarily represent certain holding company costs necessary to support our worldwide operations and costs associated with operating as a publicly traded company. The 2025 period reflected Bermuda substance-based tax credits enacted in December 2025 with retroactive effect to January 1, 2025.

Transaction costs and other were $75 million for 2025, compared to $81 million for 2024,2024. comparedThe to $6 millionamounts for 2023.both Thethe 2025 and 2024 periodperiods primarily includesreflect direct costs related to the MCE Acquisition and ongoing integration efforts.

Amortization of intangible assets for 20242025 was $235$193 million, compared to $95$235 million for 2023.2024. Amounts in 2024both 2025 and 20232024 primarily related to amortization of finite-lived intangible assets withacquired theas increasepart in 2024 primarily related toof the MCE Acquisition. See note 2, “Acquisition.”

Net foreign exchange gainslosses for 20242025 were $75$128 million, compared to net foreign exchange lossesgains for 20232024 of $60$75 million. Amounts in such periods were primarily unrealized and resulted from the effects of revaluing our net insurance liabilities required to be settled in foreign currencies at each balance sheet date.

Our income tax provision on income before income taxes resulted in an expense of 7.7%14.7% for 2024,2025, compared to aan benefitexpense of 24.5%7.7% for 2023. The 2023 provision reflected the establishment of a net deferred income tax asset of $1.18 billion related to the enactment of Bermuda’s new corporate income tax.2024. Our effective tax rate fluctuates from year to year consistent with the relative mix of income or loss reported by jurisdiction and the varying tax rates in each jurisdiction. The increase in the 2025 period is primarily attributed to the enactment of the Corporate Income Tax Act 2023 by the Government of Bermuda, which established a 15% corporate income tax effective January 1, 2025. See note 15, “Income Taxes,” to our consolidated financial statements in Item 8.

Arch Capital Group Ltd. (“Arch Capital” and, together with its subsidiaries, “Arch”, “the Company”, “we”, “our” or “us”) is a publicly listed Bermuda exempted company with approximately $26.9$28.3 billion in capital at MarchJune 31,30, 2026 and, through operations in Bermuda, the United States, Europe, Canada and Australia, writes insurance, reinsurance and mortgage insurance on a worldwide basis.

We delivered a strong 2026 firstsecond quarter, with attractive underwriting margins reflecting the disciplined execution of our underwriting and capital management strategies. For the quarter, we generated an annualized net income return on average common equity and an annualized operating return on average common equity of 17.8%18.0% and 15.4%,15.3%, respectively. See “Comment on Non-GAAP Financial Measures.” Critical to our cycle management is emphasizing risk selection, as we continue to leverage our diversified specialty platform and the expertise of our underwriting teams. We invest and use data and analytics to sharpen insights, enhance risk selection and deliver a differentiated customer experience while fostering a culture that attracts the best-in-class talent. We believe our balance sheet is in excellent health, giving us optionality as we remain prudent stewards of the capital entrusted to us by our shareholders. Our strong balance sheet permits us to both invest in our business and return capital to investors. During the 2026 firstsecond quarter, we repurchased $78312.4 million common shares for an aggregate $1.2 billion. Through the first half of Archthe commonyear, we have repurchased approximately 94% of our net income in our own shares.

Our reinsurance segment contributed $441$410 million of underwriting income in the 2026 firstsecond quarter, benefiting from disciplinedrelatively underwritinglight andcatastrophe a favorable portfolio mix.losses. Net premiums written were $2.2$1.8 billion, down roughly 6%10% when compared to the 2025 firstsecond quarter, reflecting pricing pressures and higher retentions by cedants in certain property and short‑tail lines.lines along with targeted increased retrocessions. As increased capacity has contributed to competitive conditions across portions of the reinsurance market, our underwriting teams are working to actively managemanaging the cycle by selectively writing new business where returns are attractive and reduceadjusting participation where pricing does not meet our minimum return thresholds. At the same time, our scale, market position and access to traditional reinsurance and third party capital allow us to continue providing meaningful solutions to brokers and cedants while managing our net risk profile.

Our mortgage segment continued to deliver a steady level of earnings, generating $221$220 million of underwriting income in the 2026 firstsecond quarter. New originations remained modest due to affordability challenges tied to mortgage rates and home prices, which continued to constrain demand. We believe the underlying fundamentals of our mortgage portfolio remain strong, and our U.S. market share was stable. The persistency of our in-force U.S. primary mortgage insurance portfolio remained a healthy 80.7%,79.9%, and our delinquency rate remained low. We continue to expect the mortgage segment to serve as a steady diversifying contributor to our overall earnings and generate attractive underwriting income given the high credit quality and embedded equity of our in-force portfolio.

Book value per share represents total common shareholders’ equity available to Arch divided by the number of common shares outstanding. Management uses growth in book value per share as a key measure of the value generated for our common shareholders each period and believes that book value per share is the key driver of Arch Capital’s share price over time. Book value per share is impacted by, among other factors, our underwriting results, investment returns and share repurchase activity, which has an accretive or dilutive impact on book value per share depending on the purchase price. Book value per share was $68.04 at June 30, 2026, compared to $66.19 at March 31, 2026, comparedand to $65.11$59.17 at DecemberJune 31, 2025, and $55.15 at March 31,30, 2025. The 1.7%2.8% increase in book value per share for the 2026 firstsecond quarter primarily reflected strong underwriting returns.and investment returns, partially offset by $1.2 billion of shares purchased at an average price higher than the book value per share.

Our annualized net income return on average common equity was 17.8%18.0% for the 2026 firstsecond quarter, compared to 11.1%22.9% for the 2025 firstsecond quarter.quarter, and 17.9% for the six months ended June 30, 2026, compared to 17.0% for the 2025 period. Our Operating ROAE was 15.4%15.3% for the 2026 firstsecond quarter, compared to 11.5%18.2% for the 2025 firstsecond quarter.quarter Returnand 15.4% for the six months ended June 30, 2026, compared to 14.8% for the 2025 period. Returns for the 2026 periods reflected strong underwriting and investment returns.

Total return for the 2026 first quarterperiods reflected interest income and gains on risk assets outweighing the impact of higherrising interestUS ratesTreasury onyields. ourThe fixedportfolio incomeslightly portfolio.underperformed their benchmark returns, primarily due to a small underweight to alternatives. We continue to maintain a relatively short duration on our fixed income portfolio of 3.433.50 years at MarchJune 31,30, 2026, in line with our asset allocation targets.

The benchmark return index is a customized combination of indices intended to approximate a target portfolio by asset mix and average credit quality with a fixed income component matching the approximate estimated duration and currency mix of our insurance and reinsurance liabilities. It is recalibrated annually. Although the estimated fixed income duration and average credit quality of this index will move as the duration and rating of its constituent securities change, generally we do not adjust the composition of the benchmark return index during the year except to incorporate changes to the mix of liability currencies and durations noted above. The benchmark return index should not be interpreted as expressing a preference for or aversion to any particular sector or sector weight. At MarchJune 31,30, 2026, the fixed income portion of the benchmark had an average credit quality of “A1” by Moody’s and an estimated fixed income duration of 3.173.34 years.

Our presentation of segment information includes the use of a current year loss ratio which excludes favorable or adverse development in prior year loss reserves. This ratio is a non-GAAP financial measure as defined in Regulation G. The reconciliation of such measure to the loss ratio (the most directly comparable GAAP financial measure) in accordance with Regulation G is shown on the individual segment pages. Management utilizes the current year loss ratio in its analysis of the underwriting performance of each of our underwriting segments. Effective in the 2025 first quarter, theThe ‘Other operating expense ratio’ includes ‘Other underwriting income.’

2026 FirstSecond Quarter versus 2025 Period. Gross premiums written by the insurance segment in the 2026 firstsecond quarter were 2.0%2.9% higherlower than in the 2025 firstsecond quarter, while net premiums written were 1.4%5.1% lower than in the 2025 firstsecond quarter. Adjusting for the non-renewal of certain programs related to the MCE Acquisition, net premiums written would have increaseddecreased by 1.1%1.8% compared to the same quarter one year ago.

Net premiums written are primarily earned on a pro rata basis over the terms of the policies for all products, usually 12 months. Net premiums earned reflect changes in net premiums written over the previous five quarters. Net premiums earned for the 2026 firstsecond quarter were 0.6%4.5% higherlower than in the 2025 firstsecond quarter.quarter, while net premiums earned for the six months ended June 30, 2026 were 2.0% lower than in the 2025 period.

Other underwriting income, which includes revenue earned from underwriting-related activities covered under existing service contracts, was $11$15 million for the 2026 firstsecond quarter, compared to $3$13 million for the 2025 firstsecond quarter.quarter, and $26 million for the six months ended June 30, 2026, compared to $16 million for the 2025 period.

2026 FirstSecond Quarter versus 2025 Period. The insurance segment’s current year loss ratio in the 2026 firstsecond quarter was 6.04.2 points lowerhigher than in the 2025 firstsecond quarter. The 2026 firstsecond quarter loss ratio reflected 4.27.6 points of current year catastrophic activity, primarily related to the Iran conflict and severe conductive storms in the U.S., compared to 9.52.9 points of current year catastrophic activity in the 2025 firstsecond quarter, primarily related to California wildfires.quarter. The balance of the change in the loss ratio resulted, in part, from changes in mix of business.

The insurance segment’s net favorable development was $14$27 million, or 0.71.4 points, for the 2026 firstsecond quarter, compared to $17$8 million, or 0.90.4 points, for the 2025 firstsecond quarter.quarter, and $41 million, or 1.1 points, for the six months ended June 30, 2026, compared to $25 million, or 0.6 points, for the 2025 period. See note 6, “Reserve for Losses and Loss Adjustment Expenses,” to our consolidated financial statements for information about the insurance segment’s prior year reserve development.

2026 FirstSecond Quarter versus 2025 Period. The insurance segment’s underwriting expense ratio was 36.3%35.5% in the 2026 firstsecond quarter, compared to 34.1%33.6% in the 2025 firstsecond quarter. The 2026 second quarter ratio reflected transitional expenses associated with the MCE Acquisition, and a lower level of net premiums earned compared to the 2025 second quarter. In the 2025 firstsecond quarter, the impact of the MCE Acquisition lowered the underwriting expense ratio by approximately 1.90.6 points, primarily due to the effects of the fair value estimation of the assets acquired at closing, including the non-recognition of deferred acquisition costs. The 2026 first quarter also included higher compensation costs compared to the 2025 first quarter and transitional expenses associated with the MCE Acquisition.

The Company’s reinsurance segment offers reinsurance products on a worldwide basis. Lines of business include: casualty; marine and aviation; specialty; property catastrophe; property excluding property catastrophe; specialty; and other.

2026 FirstSecond Quarter versus 2025 Period. Gross premiums written by the reinsurance segment in the 2026 firstsecond quarter were 2.3%0.2% lowerhigher than in the 2025 firstsecond quarter, while net premiums written were 6.0%10.4% lower than in the 2025 firstsecond quarter. TheReductions lower level ofin net premiums written this quarter waswere primarilydue, duein part, to anon-renewals, reductionshare inreductions propertyas catastrophewell businessas writtentargeted atincreased January 1, amplified by a lower level of reinstatement premiums relative to the 2025 first quarter, which included reinstatement premiums related to the California wildfires.retrocessions.

Net premiums written, irrespective of the class of business, are generally earned on a pro rata basis over the terms of the underlying policies or reinsurance contracts. Net premiums earned reflect changes in net premiums written over the previous five quarters. Net premiums earned for the 2026 firstsecond quarter were 9.7%12.8% lower than in the 2025 firstsecond quarter.quarter, while net premiums earned for the six months ended June 30, 2026 were 11.3% lower than in the 2025 period.

Other underwriting income, which includes revenue earned from underwriting-related activities covered under existing service contracts, was $37 million for the 2026 firstsecond quarter, compared to $39$46 million for the 2025 firstsecond quarter.quarter, and $74 million for the six months ended June 30, 2026, compared to $85 million for the 2025 period.

2026 FirstSecond Quarter versus 2025 Period. The reinsurance segment’s current year loss ratio in the 2026 firstsecond quarter was 12.81.9 points lowerhigher than in the 2025 firstsecond quarter. The 2026 firstsecond quarter loss ratio reflected 5.43.0 points of current year catastrophic activity, compared to 21.75.5 points of current year catastrophic activity in the 2025 firstsecond quarter, primarily related to California wildfires.quarter. The balance of the change in the loss ratio resulted,primarily in part,resulted from changes in the mix of business.business, due in part to increased retrocessions on short-tailed lines.

The reinsurance segment’s net favorable development was $152$97 million, or 8.35.3 points, for the 2026 firstsecond quarter, compared to $119$81 million, or 5.93.9 points, for the 2025 firstsecond quarter.quarter, and $249 million, or 6.8 points, for the six months ended June 30, 2026, compared to $200 million, or 4.9 points, for the 2025 period. See note 6, “Reserve for Losses and Loss Adjustment Expenses,” to our consolidated financial statements for information about the reinsurance segment’s prior year reserve development.

2026 FirstSecond Quarter versus 2025 Period. The underwriting expense ratio for the reinsurance segment was 24.2%22.9% in the 2026 firstsecond quarter, compared to 24.9%24.4% in the 2025 firstsecond quarter.quarter, Thewith 2025the first quarter amount included a lower level of contingent commissions on ceded business,decrease primarily due toreflecting the impact of thehigher Californiaprofit wildfires.commissions on retrocessions.

2026 FirstSecond Quarter versus 2025 Period. Gross premiums written by the mortgage segment in the 2026 firstsecond quarter were 3.1%0.3% lowerhigher than in the 2025 firstsecond quarter, drivenwith growth in international business offset by lowera reduction in U.S. monthly premium business.volume. Net premiums written were flat7.5% comparedhigher tothan in the 2025 firstsecond quarter, reflecting lowerthe cessionstermination of certain Bellemeade Re and quota share agreements on U.S. primary business.

The persistency rate was 80.7%79.9% for the Arch MI U.S. portfolio of primary mortgage insurance policies at MarchJune 31,30, 2026, compared to 81.9% at MarchJune 31,30, 2025. The persistency rate represents the percentage of mortgage insurance in force at the beginning of a 12 month period that remains in force at the end of such period.

2026 FirstSecond Quarter versus 2025 Period. Net premiums earned for the 2026 firstsecond quarter were 5.3%1.4% lowerhigher than in the 2025 firstsecond quarter, primarily reflecting lowerchanges cancellationin relatednet premiums associatedwritten withover CRTthe transactions.previous five quarters.

Other underwriting income, which is primarily related to GSE credit risk-sharing transactions, was $11$5 million for the 2026 firstsecond quarter, consistent with $11$3 million for the 2025 firstsecond quarter.quarter, and $16 million for the six months ended June 30, 2026, compared to $14 million for the 2025 period.

2026 FirstSecond Quarter versus 2025 Period. The mortgage segment’s current year loss ratio was 3.00.6 points higher in the 2026 firstsecond quarter than in the 2025 firstsecond quarter. The 2026current first quarteryear loss ratio reflectedfor modestlythe higher2026 levelsecond ofquarter delinquencieswas thanrelatively inflat compared to the 2025 firstsecond quarter.

The mortgage segment’s net favorable development was $54$45 million, or 19.215.7 points, for the 2026 firstsecond quarter, compared to $61$64 million, or 20.422.8 points, for the 2025 firstsecond quarter.quarter, and $99 million, or 17.4 points, for the six months ended June 30, 2026, compared to $125 million, or 21.6 points, for the 2025 period. See note 6, “Reserve for Losses and Loss Adjustment Expenses,” to our consolidated financial statements for information about the mortgage segment’s prior year reserve development.

2026 FirstSecond Quarter versus 2025 Period. The underwriting expense ratio for the mortgage segment was 17.0%16.3% in the 2026 firstsecond quarter, compared to 15.0%16.4% in the 2025 firstsecond quarter. The increase was primarily due to higher gross acquisition expenses and lower ceding and profit commissions on U.S. primary mortgage business. The 2026 first quarter ratio also reflected the impact of a lower level of net premiums earned.

(2) Investment expenses were approximately 0.29%0.24% of average invested assets for the 2026 firstsecond quarter, compared to 0.32%0.25% for the 2025 firstsecond quarter.quarter, and 0.26% for the six months ended June 30, 2026, consistent with 0.28% for the 2025 period.

The higher level of net investment income for the 2026 periodperiods primarily reflected growth in average invested assets, due in part to strong operating cash flows. Net cash flow from operating activities contributed $1.2$2.5 billion for the threesix months ended MarchJune 31,30, 2026. The pre-tax investment income yield, calculated based on amortized cost and on an annualized basis, was 3.99%3.91% for the 2026 firstsecond quarter, compared to 4.16%4.25% for the 2025 firstsecond quarter.quarter, and 3.98% for the six months ended June 30, 2026, compared to 4.19% for the 2025 period.

Corporate expenses were $31$12 million for the 2026 firstsecond quarter, compared to $50$29 million for the 2025 firstsecond quarter.quarter, and $43 million for the six months ended June 30, 2026, compared to $79 million for the 2025 period. Such amounts primarily represent certain holding company costs necessary to support our worldwide operations and costs associated with operating as a publicly traded company. The decline in the 2026 first quarterperiods primarily reflected the benefit of Bermuda qualified refundable tax credits.

Transaction costs and other for the 2026 firstsecond quarter was $18$32 million, compared to $10$18 million for the 2025 firstsecond quarter.quarter, and $50 million for the six months ended June 30, 2026, compared to $28 million for the 2025 period. Amounts in both periods primarily includes direct costs related to the MCE Acquisition.

Other income for the 2026 firstsecond quarter was a loss of $5$30 million, compared to a loss of $2$18 million for the 2025 firstsecond quarter.quarter, and $25 million for the six months ended June 30, 2026, compared to $16 million for the 2025 period. Amounts in both periods primarily reflect changes in the cash surrender value of our investment in corporate-owned life insurance.

Amortization of intangible assets for the 2026 firstsecond quarter was $30 million, compared to $49$48 million for the 2025 firstsecond quarter.quarter, and $60 million for the six months ended June 30, 2026, compared to $97 million for the 2025 period. Amounts in both periods reflected the amortization of intangible assetsprimarily related to the MCE Acquisition.

Interest expense was $37$44 million for the 2026 firstsecond quarter, compared to $35$38 million for the 2025 firstsecond quarter.quarter, and $81 million for the six months ended June 30, 2026, compared to $73 million for the 2025 period. Interest expense primarily reflects amounts related to our outstanding senior notes. See note 11, “Commitments and Contingencies," to our consolidated financial statements for additional information.

Net realized losses for the 2026 firstsecond quarter were $87$17 million, compared to net realized gains of $3$229 million for the 2025 firstsecond quarter. Net realized losses were $104 million for the six months ended June 30, 2026, compared to net realized gains of $232 million for the 2025 period. Amounts in both periods reflected sales of investments as well as thenet impactunrealized ofgains or losses related to financial market movements on the Company’s equity securities and investments accounted for under the fair value option method. Currently,Amounts ourin portfoliothe is2026 activelyperiods managedalso include a litigation-related loss contingency recorded pursuant to maximizeASC total450, returnwhile withinamounts certain guidelines. The effect of financial market movements onin the investment2025 portfolioperiods will directly impact net realized gains orinclude losses asrelated the portfolio is adjusted and rebalanced. Net realized gains or losses fromto the sale of fixedcertain maturitiesalternative primarilyinvestments resultsaccounted fromfor ourunder decisionsthe toequity reduce credit exposure, to change duration targets, to rebalance our portfolios or due to relative value determinations.method.

Net realized gains or losses also include, but are not limited to,include realized and unrealized changes in the fair value of equity securities and assets accounted for using the fair value option, realized and unrealized gains or losses on derivative instruments, changes in the allowance for credit losses on financial assets and gains or losses realized from the acquisition or disposition of subsidiaries.subsidiaries See note 8, “Investment Information—Net Realized Gains (Losses)” and note 8, “Investment Information—Allowance for Expected Credit Losses,” to our consolidated financial statements for additional information.

Equity in net income of investments accounted for using the equity method was $160$196 million in the 2026 firstsecond quarter, compared to $53$162 million for the 2025 firstsecond quarter.quarter, and $356 million for the six months ended June 30, 2026, compared to $215 million for the 2025 period. Such investments are generally recorded on a one to three month lag based on the availability of reports from the investment funds. Investment funds accounted for using the equity method totaled $6.7$6.9 billion at MarchJune 31,30, 2026, compared to $6.5 billion at December 31, 2025. See note 8, “Investment Information—Investments Accounted For Using the Equity Method,” to our consolidated financial statements for additional information.