ARCH CAPITAL GROUP LTD.

Arch Capital Group Ltd. (Arch) is a publicly listed Bermuda exempted company operating in the insurance, reinsurance, and mortgage insurance sectors globally. As of December 31, 2025, the company reported approximately $26.9 billion in capital ¹. Arch focuses on writing specialty lines of insurance and reinsurance and is part of the S&P 500 index. The company generated $16.5 billion of net premiums and reported net income available to Arch common shareholders of $4.4 billion for 2025 ². Book value per share stood at $65.11 at December 31, 2025, an increase from $53.11 per share at December 31, 2024 ³. Arch has a history of strategic acquisitions and expansions, including the acquisition of Allianz’s U.S. Middle Market Property and Casualty insurance business and U.S. Entertainment business on August 1, 2024, and the acquisition of United Guaranty Corporation in 2016 ⁴. The company also holds strategic investments in other entities such as a 30% ownership in Greysbridge Holdings Ltd. and a 29.5% stake in Coface SA ⁵.

Arch's core business model revolves around generating underwriting profit through disciplined risk selection and pricing across its three primary segments: insurance, reinsurance, and mortgage. The company emphasizes talent-intensive business and aims to operate profitably on both a gross and net basis. Revenue is primarily generated from premiums on insurance, reinsurance, and mortgage insurance policies. The company utilizes a multi-channel distribution system, working with international, national, and regional retail and wholesale brokers, as well as managing general agencies and program administrators. Arch also employs data and strategic analytics, including AI technology, to drive data-driven decisions and streamline processes ⁶.

The insurance segment operates in Bermuda, the U.S., the U.K., Europe, Canada, and Australia. In the U.S., Arch focuses on various specialty lines on both an admitted and non-admitted basis through subsidiaries like Arch Insurance Company and Arch Specialty Insurance Company. The August 1, 2024, acquisition of Allianz’s U.S. Middle Market Property and Casualty insurance business and U.S. Entertainment business is a key part of the growth strategy, enhancing capabilities in the U.S. middle markets and entering the entertainment insurance niche ⁷. International insurance operations include Arch Insurance Canada Ltd., Arch Insurance (EU) Designated Activity Company for European Union business, and Lloyd's Syndicates (Arch Syndicate 2012 and Arch Syndicate 1955) in the U.K. ⁸. The segment's strategy is to capitalize on profitable underwriting opportunities, centralize underwriting responsibility, maintain disciplined underwriting standards, provide superior claims management, promote efficient distribution, and grow strategic partnerships ⁹.

The reinsurance segment conducts operations worldwide through Arch Re Bermuda, Arch Re U.S., Lloyd's Syndicates, and Arch Re Europe. Arch Re Bermuda is dual-licensed as a Class 4 general business insurer and Class C long-term insurer in Bermuda ¹⁰. Arch Re U.S. is licensed or accredited in 50 states, the District of Columbia, and Puerto Rico, and in Ontario and Quebec, Canada ¹¹. The segment's strategy is to actively select and manage risks, maintain flexibility to respond to changing market conditions, and maintain a low-cost structure ¹². The reinsurance group writes both proportional and non-proportional business, including treaty and facultative business, with a focus on less commoditized classes of coverage such as specialty, property, and casualty reinsurance treaties ¹³.

The mortgage segment includes mortgage insurance and reinsurance in the U.S. and internationally, as well as participation in government sponsored enterprise (GSE) credit risk-sharing transactions. U.S. direct mortgage insurance is primarily provided through Arch Mortgage Insurance Company (AMIC), United Guaranty Residential Insurance Company (UGRIC), and Arch Mortgage Guaranty Company (AMG) ¹⁴. International mortgage operations include Arch Insurance (EU) for Europe and the U.K., and Arch Indemnity in Australia ¹⁵. The strategy for the mortgage group is to capitalize on financial capacity, technology, and experienced management to offer mortgage insurance, reinsurance, and other risk-sharing products, while maintaining a disciplined credit risk philosophy and diversifying revenues globally ¹⁶.

For the fiscal year ended December 31, 2025, Arch Capital reported total investable assets of $47.4 billion ¹⁷. The company repurchased approximately $1.9 billion worth of common shares in 2025 ¹⁸. The total remaining authorization under the share repurchase program was $1.1 billion at December 31, 2025 ¹⁹. Unpaid and paid losses and loss adjustment expenses recoverable were approximately $9.5 billion at December 31, 2025 ²⁰.

In terms of year-over-year comparisons, book value per share increased from $53.11 at December 31, 2024, to $65.11 at December 31, 2025 ²¹. Gross premiums written from the largest single mortgage insurance customer in the U.S. (including branches and affiliates) decreased from 6.2% in 2024 to 5.3% in 2025 ²². The percentage of gross premiums written on the top 10 mortgage customers increased from 25.2% in 2024 to 25.8% in 2025 ²³.

Significant operational developments during the period include the August 1, 2024, acquisition of Allianz’s U.S. Middle Market Property and Casualty insurance business and U.S. Entertainment business ²⁴. In May 2024, the company completed the sale of Castel Underwriting Agencies Limited ²⁵. Arch Re Bermuda was recognized as an "Alien Reinsurer" by the U.S. Department of the Treasury, Bureau of Fiscal Services (BFS) in October 2024 ²⁶. The GSEs updated PMIERs in August 2024 to incorporate new deductions to the definition of available assets for investment risk, effective March 31, 2025, with a phased impact through September 30, 2026 ²⁷.

Management's specific guidance for the upcoming period is not explicitly provided in terms of revenue, margin, or EPS figures. However, the company notes that the Bermuda Corporate Income Tax Act (CIT Act), effective January 1, 2025, and the implementation of OECD Pillar II initiatives, including the "under-taxed profit rule," which is now effective in several jurisdictions where Arch and its affiliates operate, resulted in an increase to the 2025 effective tax rate and aggregate tax liability ²⁸. The company does not believe the amendments to Section 59A of the Code relating to the base erosion and anti-abuse tax (BEAT), effective for taxable years beginning after December 31, 2025, will have a material impact on its U.S. operations, effective tax rate, cash taxes, or intercompany arrangements ²⁹.

A major growth area for Arch is the expansion of its U.S. middle market presence through the acquisition of Allianz’s U.S. Middle Market Property and Casualty insurance business and U.S. Entertainment business, completed on August 1, 2024 ³⁰. This acquisition is described as an important part of the company's growth strategy, enhancing capabilities in the U.S. middle markets and representing an attractive entry into the entertainment insurance market, a new niche for Arch ³¹. The company aims to build a diversified platform across the insurance segment with a continued focus on specialty risks and customer solutions, while also focusing on continued expansion in continental Europe and optimizing opportunities in the London market ³².

Another growth vector is the diversification of revenues by capitalizing on international opportunities within the mortgage segment. This includes the acquisition of Arch Indemnity in Australia in 2021 and continued growth in insuring and reinsuring European banks ³³. The company believes that diversifying revenues on a global basis is a key operating principle for the mortgage group ³⁴.

Regarding operational outlook, the company is continuously enhancing its operating procedures and internal controls to effectively support its business and regulatory requirements ³⁵. Arch also continuously evaluates the adequacy of its information technology systems to ensure it is utilizing the most appropriate technologies and innovating or adopting new technologies to support its underwriting business ³⁶. The company employs AI technology and analytics to drive data-driven decisions, streamline processes, and help serve customers and partners, with the use of AI technology vetted through an AI governance framework ³⁷.

In terms of planned capital allocation, the Board of Directors has approved common share repurchase authorizations under its share repurchase program. Since its inception through December 31, 2025, Arch Capital has repurchased 455 million common shares for an aggregate purchase price of $7.8 billion ³⁸. At December 31, 2025, the total remaining authorization under the share repurchase program was $1.1 billion ³⁹. In 2025, the company repurchased approximately $1.9 billion worth of common shares ⁴⁰. The timing and amount of future repurchase transactions will depend on various factors, including results of operations, market conditions, and economic development ⁴¹.

Management explicitly flagged several structural headwinds and execution risks. The ongoing Russia-Ukraine hostilities have created disruptions in certain sectors of the global economy, impacting lines of business such as marine and energy ⁴². There is also a possibility that the U.S. approach to Russian sanctions may diverge from that of the U.K. and EU, causing uncertainty in certain business lines ⁴³. Additionally, recent U.S. policies and actions, such as those relating to Venezuela and Greenland, may jeopardize global alliances and create geopolitical uncertainty, potentially leading to volatile global capital markets, sanctions, trade restrictions, and harm to international relationships ⁴⁴.

Geographic, regulatory, and macro factors are also identified as constraints. The size of the U.S. and Australian mortgage insurance market is dependent on the volume of low down payment home mortgage originations, which has been negatively impacted by increases to mortgage interest rates ⁴⁵. Changes to the Federal Housing Administration (FHA) program, such as the 2023 reduction in annual mortgage insurance premium rates by 30bps from 0.85% to 0.55% for most single-family mortgages, may cause a decline in the volume of low down payment home mortgages purchased by the GSEs and negatively impact U.S. new insurance written ⁴⁶. The Australian Government's First Home Guarantee Scheme (HGS), which provides a free guarantee to lenders for eligible first home buyers, has negatively impacted the amount of mortgage insurance Arch writes in Australia ⁴⁷. The GSEs' updated PMIERs in August 2024, incorporating new deductions to the definition of available assets for investment risk, will be phased in through September 30, 2026, potentially affecting capital requirements ⁴⁸.

Arch Capital faces material risks including intense competition in the worldwide insurance markets from major U.S. and non-U.S. insurers and reinsurers, many with greater resources and longer client relationships ⁴⁹. The highly cyclical nature of the insurance and reinsurance industry can lead to periods of excess underwriting capacity and unfavorable premium rates ⁵⁰. Inflation, trade and tariff disputes, and other economic conditions, such as higher interest rates, can negatively impact the adequacy of loss reserves, especially in longer-tailed lines, and affect the market value of the investment portfolio or the size of the mortgage origination market ⁵¹. The company has large aggregate exposures to natural catastrophic events, which have increased in frequency and severity due to climate change, potentially causing large losses and substantial volatility in results ⁵². Regulatory changes and supervisory standards across various jurisdictions, including those related to climate change and the company's designation as an Internationally Active Insurance Group (IAIG) in August 2024, could adversely affect business operations, potentially leading to increased capital requirements or fines ⁵³. Geopolitical tensions, hostilities, war, terrorism, cyber attacks, and general political instability pose unpredictable risks, with potential for large losses even in areas where exclusions are attempted, and could materially adversely affect financial condition and results of operations ⁵⁴. Underwriting and reserving for losses are inherently uncertain, based on actuarial and statistical projections that may prove inaccurate, leading to required increases in loss reserves and reductions in net income ⁵⁵. The availability and cost of reinsurance and retrocessional coverage may be limited, and counterparty credit risk from reinsurers or retrocessionaires could result in losses if they fail to meet their obligations ⁵⁶. Reliance on third-party managing general agents and mortgage lenders for delegated underwriting exposes the company to risks of agents exceeding authority, fraud, or breaches of obligations, which could materially adversely affect financial condition ⁵⁷. Emerging claim and coverage issues, including new or expanded theories of liability, may impose new financial obligations or require unplanned product modifications ⁵⁸. Acquisitions and expansions, such as the MCE Acquisition, expose the company to integration challenges, funding needs, and risks of acquired assets being lower or liabilities greater than expected ⁵⁹. Inadequate or outdated information technology systems, or issues with the rapid adoption of new technologies including AI, could fail to meet customer demands, impact competitiveness, or lead to reputational damage and regulatory fines if AI systems do not perform as anticipated or result in unlawful discrimination ⁶⁰. Cybersecurity incidents, including AI-powered attacks, data breaches, and ransomware, could lead to loss of business data, operational disruption, regulatory action, and fines, despite existing technical and organizational measures ⁶¹. A ratings downgrade or failure to obtain a necessary rating could adversely affect client relationships, reduce premiums and earnings, and potentially trigger events of default under credit facilities ⁶². The company's ability to attract and retain talented employees is crucial for executing its business strategy, and failure to compete for talent could adversely impact its ability to realize its strategy ⁶³. Ineffectiveness in the Enterprise Risk Management (ERM) framework, operating procedures, or internal controls could lead to losses, reputational damage, regulatory fines, and litigation ⁶⁴. Credit risk exposure exists in surety and other insurance lines where policyholders may default on obligations ⁶⁵. Non-compliance with economic trade sanctions and foreign bribery laws, such as those related to Russia, could result in fines, criminal penalties, and reputational damage ⁶⁶. Adverse developments in financial markets, including inflation, global recessionary pressures, and geopolitical conflict, can lead to realized and unrealized losses on the investment portfolio and limit access to capital ⁶⁷. Foreign currency exchange rate fluctuations, particularly for the Euro, British Pound Sterling, Australian Dollar, and Canadian Dollar, may adversely affect financial results ⁶⁸. The determination of current expected credit losses (CECL) allowances on investments is highly subjective and could materially impact results ⁶⁹. Reinsurance subsidiaries may be required to provide collateral to ceding companies, and an inability to do so could significantly and negatively affect operations ⁷⁰. The ultimate performance of mortgage insurance portfolios remains uncertain, with changes in underwriting standards, loan terms, or credit evaluation methodologies potentially increasing claims frequency and severity ⁷¹. Declining volumes of low down payment mortgage originations, due to increased interest rates or government housing policies like the FHA premium rate reduction or Australia's Home Guarantee Scheme, could reduce mortgage insurance revenues ⁷². Changes to the role of GSEs in the U.S. housing market, including eligibility requirements for mortgage insurers or their use of Credit Risk Transfer (CRT), could negatively impact operations ⁷³. The implementation of the Basel III Capital Accord and FHFA's Enterprise Regulatory Capital Framework may adversely affect the use of mortgage insurance and SRT/CRT opportunities ⁷⁴. Provisions in the company's bye-laws and shareholder agreements may hinder takeovers or changes in management ⁷⁵. Regulatory limitations exist on the ownership and transfer of common shares ⁷⁶. As a holding company, Arch Capital is dependent on dividends and distributions from its operating subsidiaries ⁷⁷. Market conditions and unpredictable factors could adversely affect market prices for preferred shares, and dividends on preferred shares are non-cumulative ⁷⁸. Preferred shares are equity and subordinate to existing and future indebtedness, with limited voting rights ⁷⁹.

Management's overall tone emphasizes a disciplined, specialty-focused approach to underwriting across its global insurance, reinsurance, and mortgage segments, underpinned by a strong capital base and experienced teams. They highlight the company's common purpose of "Enabling Possibility" for customers, communities, and employees, supported by a collaborative, results-driven culture ⁸⁰. Management explicitly states that the Bermuda Corporate Income Tax Act (CIT Act), effective January 1, 2025, and the implementation of OECD Pillar II initiatives, including the "under-taxed profit rule," which is now effective in several jurisdictions, resulted in an increase to the 2025 effective tax rate and aggregate tax liability ⁸¹. However, they do not expect the amendments to Section 59A of the Code relating to the base erosion and anti-abuse tax (BEAT), effective for taxable years beginning after December 31, 2025, to have a material impact on its U.S. operations, effective tax rate, cash taxes, or intercompany arrangements ⁸².

Three strategic priorities emphasized by management for the period ahead include: first, capitalizing on profitable underwriting opportunities and maintaining disciplined underwriting standards across all segments, leveraging experienced management, underwriting teams, and strategic analytics to drive decisions ⁸³. Second, growing strategic partnerships and acquiring or building strategic businesses in niche areas or lines of business, exemplified by the August 1, 2024, acquisition of Allianz’s U.S. Middle Market Property and Casualty insurance business and U.S. Entertainment business, which is seen as an important part of the growth strategy and an attractive entry into a new niche ⁸⁴. Third, creating or acquiring scalable and diversified underwriting platforms that can adapt to underwriting cycles, with a focus on continued expansion in continental Europe and optimizing opportunities in the London market for the insurance segment, and diversifying revenues globally within the mortgage segment through international opportunities ⁸⁵. Management also underscores the importance of attracting, developing, and retaining high-performing talent, offering competitive compensation, comprehensive benefits, and career growth opportunities, including internship and Early Career Programs ⁸⁶.