Arch Capital Group · 10-Q · Item 2 MD&A

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a discussion and analysis of our financial condition and results of operations. This should be read in conjunction with our consolidated financial statements included in Item 1 of this report and also our Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2025 (“2025 Form 10-K”). In addition, readers should review “Risk Factors” set forth in Item 1A of Part I of our 2025 Form 10-K and “ITEM 1A—Risk Factors” of this Form 10-Q. All amounts are in millions, except per share amounts, unless otherwise noted.

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 $28.3 billion in capital at June 30, 2026 and, through operations in Bermuda, the United States, Europe, Canada and Australia, writes insurance, reinsurance and mortgage insurance on a worldwide basis.

Page No.

Current Outlook

Financial Measures

Comment on Non-GAAP Financial Measures

Results of Operations

Insurance Segment

Reinsurance Segment

Mortgage Segment

Corporate

Critical Accounting Policies, Estimates and Recent Accounting Pronouncements

Financial Condition

Liquidity

Capital Resources

Catastrophic and Severe Economic Events

Market Sensitive Instruments and Risk Management

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CURRENT OUTLOOK

T1We delivered a strong 2026 second 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 18.0% and 15.3%, respectively. See “Comment on Non-GAAP Financial Measures.” T2Critical 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.

T3We 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. T4Our strong balance sheet permits us to both invest in our business and return capital to investors. T5During the 2026 second quarter, we repurchased 12.4 million common shares for an aggregate $1.2 billion. Through the first half of the year, we have repurchased approximately 94% of our net income in our own shares.

T6Although competitive conditions have increased across portions of the insurance and reinsurance markets, we believe the market remains constructive. While there is softening in certain lines, others continue to benefit from favorable pricing and underwriting conditions. We believe in this environment, our diversified specialty platform, underwriting expertise and disciplined approach to cycle management, position us to continue to generate attractive risk-adjusted returns while delivering long-term solutions for our clients. We remain focused on allocating capital to the opportunities that best meet our return objectives while maintaining the flexibility to adapt as market conditions evolve and remaining a reliable business partner throughout the insurance cycle.

T7Our insurance segment reported $27 million of underwriting income for the 2026 second quarter. Growth opportunities remained across most casualty-focused lines of business, including E&S casualty, construction and national accounts in the U.S., as well as select lines of our London market business, including war and terrorism. As a market leader in specialty insurance, we look to support our clients with underwriting expertise, claims capabilities and risk solutions while maintaining disciplined underwriting standards. Our diversified platform provides us with the flexibility to grow in areas where pricing supports our return objectives. These opportunities were partially offset by our decision not to renew certain middle market commercial program business which we acquired from Allianz in 2024 (the “MCE

Acquisition”) along with a reduction in E&S property business due to competitive rate pressure.

Our reinsurance segment contributed $410 million of underwriting income in the 2026 second quarter, benefiting from relatively light catastrophe losses. Net premiums written were $1.8 billion, down roughly 10% when compared to the 2025 second quarter, reflecting pricing pressures and higher retentions by cedants in certain property and short‑tail lines along with targeted increased retrocessions. As increased capacity has contributed to competitive conditions across portions of the reinsurance market, our underwriting teams are actively managing the cycle by selectively writing new business where returns are attractive and adjusting 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 $220 million of underwriting income in the 2026 second 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 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.

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FINANCIAL MEASURES

Management uses the following three key financial indicators in evaluating our performance and measuring the overall growth in value generated for Arch Capital’s common shareholders:

Book Value per Share

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, and $59.17 at June 30, 2025.

The 2.8% increase in book value per share for the 2026 second quarter primarily reflected strong underwriting and investment returns, partially offset by $1.2 billion of shares purchased at an average price higher than the book value per share.

Operating Return on Average Common Equity

Operating return on average common equity (“Operating ROAE”) represents annualized after-tax operating income available to Arch common shareholders divided by the average of beginning and ending common shareholders’ equity available to Arch during the period. After-tax operating income available to Arch common shareholders, a non-GAAP financial measure as defined in Regulation G, represents net income available to Arch common shareholders, excluding net realized gains or losses (which include, but are 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 and income taxes. Management uses Operating ROAE as a key measure of the return generated to common shareholders. See “Comment on Non-GAAP Financial Measures.”

Our annualized net income return on average common equity was 18.0% for the 2026 second quarter, compared to 22.9% for the 2025 second quarter, and 17.9% for the six months ended June 30, 2026, compared to 17.0% for the 2025 period. Our Operating ROAE was 15.3% for the 2026 second quarter, compared to 18.2% for the 2025 second quarter and 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 on Investments

Total return on investments, a non-GAAP financial measure as defined in Regulation G, includes investment income, equity in net income or loss of investments accounted for using the equity method, net realized gains or losses attributable to the investment portfolio and the change in unrealized gains or losses generated by Arch’s investment portfolio. Total return is calculated on a pre-tax basis and before investment expenses and reflects the effect of financial market conditions along with foreign currency fluctuations. In addition, total return incorporates the timing of investment returns during the periods. The following table summarizes our total return compared to the benchmark return against which we measured our portfolio during the periods. See “Comment on Non-GAAP Financial Measures.”

Arch

Portfolio

Benchmark

Return

Pre-tax total return (before investment expenses):

%

%

%

%

%

%

%

%

Total return for the 2026 periods reflected interest income and gains on risk assets outweighing the impact of rising US Treasury yields. The portfolio slightly underperformed their benchmark returns, primarily due to a small underweight to alternatives. T8We continue to maintain a relatively short duration on our fixed income portfolio of 3.50 years at June 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

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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 June 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 3.34 years.

The benchmark return index included weightings to the following indices:

%

ICE BofA 1-10 Year U.S. Corporate Index

Yield on 3-5 Year U.S. Treasury Index plus 5.5%

ICE BofA 1-10 Year U.S. Treasury Index

ICE BofA 0-3 Month U.S. Treasury Index

ICE BofA BB-B U.S. High Yield Constrained Index

JPM CLOIE Investment Grade

ICE BofA 3-5 Year U.S. Agency CMO Excluding IO & PO Index

ICE BofA U.S. Fixed Rate CMBS Index

ICE BofA U.S. Fixed & Floating Rate Asset Backed Securities Index

S&P 500 Total Return Index

ICE BofA 1-5 Year U.K. Gilt Index

ICE BofA German Government 1-5 Year Index

ICE BofA German Government 5-7 Year Index

ICE BofA 1-5 Year Canada Government Index

ICE BofA 15+ Year Canada Government Index

ICE BofA 1-5 Year Australia Government Index

ICE BofA 5-10 Year Australia Government Index

ICE BofA 1-5 Year Japan Government Index

Total

%

COMMENT ON NON-GAAP FINANCIAL MEASURES

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 include, but are 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, income 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 our 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 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.

Transaction costs and other include integration, advisory, financing, legal, severance, incentive compensation and all other transaction costs directly related to acquisitions. We believe that transaction costs and other, due to their nonrecurring nature, are not indicative of the performance of, or trends in, our business performance.

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We believe that showing net income available to Arch common shareholders exclusive of the items referred to above reflects the underlying fundamentals of our business since we evaluate the performance of and manage our business to produce an underwriting profit. In addition to presenting the net income available to Arch common shareholders, we believe that this presentation enables investors and other users of our financial information to analyze our performance in a manner similar to how management analyzes performance. We also believe that this measure follows industry practice and, therefore, allows the users of financial information to compare our performance with our industry peer group. We believe that the equity analysts and certain rating agencies that follow us and the insurance industry as a whole generally exclude these items from their analyses for the same reasons.

Our segment information includes the presentation of consolidated underwriting income or loss. Such measures represent the pre-tax profitability of our underwriting operations and include net premiums earned plus other underwriting income, less losses and loss adjustment expenses, acquisition expenses and other operating expenses. Other operating expenses include those operating expenses that are incremental and/or directly attributable to our individual underwriting operations. Underwriting income or loss does not incorporate certain income and expense items which are included in corporate. While these measures are presented in note 5, “Segment Information,” to our consolidated financial statements, they are considered non-GAAP financial measures when presented elsewhere on a consolidated basis. The reconciliations of underwriting income or loss to income before income taxes (the most directly comparable GAAP financial measure) on a consolidated basis, in accordance with Regulation G, is shown in note 5, “Segment Information” to our consolidated financial statements.

We measure 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, investment income, income from operating affiliates and other non-underwriting related items are not allocated to each underwriting segment.

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. The ‘Other operating expense ratio’ includes ‘Other underwriting income.’

Total return on investments includes investment income, equity in net income or loss of investments accounted for using the equity method, net realized gains or losses (excluding net realized gains or losses on non-investment related financial assets) and the change in unrealized gains or losses generated by Arch’s investment portfolio. Total return is calculated on a pre-tax basis and before investment expenses, and reflects the effect of financial market conditions along with foreign currency fluctuations. In addition, total return incorporates the timing of investment returns during the periods. There is no directly comparable GAAP financial measure for total return. Management uses total return on investments as a key measure of the return generated to Arch common shareholders on the capital held in the business, and compares the return generated by our investment portfolio against benchmark returns which we measured our portfolio against during the periods.

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RESULTS OF OPERATIONS

The following table summarizes our consolidated financial data, including a reconciliation of net income or loss available to Arch common shareholders to after-tax operating income or loss available to Arch common shareholders. See “Comment on Non-GAAP Financial Measures.”

Three Months Ended

Six Months Ended

Net income available to Arch common shareholders

$

$

$

$

Net realized (gains) losses (1)

Equity in net (income) loss of investments accounted for using the equity method

Net foreign exchange (gains) losses

Transaction costs and other

Income tax expense (benefit) (2)

3

After-tax operating income available to Arch common shareholders

$

$

$

$

Beginning common shareholders’ equity

$

$

$

$

Ending common shareholders’ equity

Average common shareholders’ equity

$

$

$

$

Annualized net income return on average common equity %

Annualized operating return on average common equity %

(1) Net realized gains or losses include, but are 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.

(2) Income tax expense 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.

Segment Information

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 (“CODMs”), the Chief Executive Officer of Arch Capital and the Chief Financial Officer and Treasurer of Arch Capital. The CODMs 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 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. Intersegment business is allocated to the segment accountable for the underwriting results.

Insurance Segment

The Company’s insurance segment primarily consists of commercial insurance lines of business, with a focus on specialty insurance products. These products are mainly offered in North America, Bermuda, the United Kingdom, continental Europe and Australia. Products offered in North America include: commercial automobile; commercial multi-peril; other liability-claims made, which includes financial and professional lines; other liability-occurrence, which includes admitted and excess and surplus casualty lines; property and short-tail specialty; workers compensation; and other. Products offered across the Company’s International units include: property and short-tail specialty; and casualty and other.

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The following tables set forth our insurance segment’s underwriting results:

Three Months Ended June 30,

% Change

Gross premiums written

$

$

Premiums ceded

Net premiums written

Change in unearned premiums

Net premiums earned

Other underwriting income (1)

Losses and loss adjustment expenses

Acquisition expenses

Other operating expenses

Underwriting income (loss)

$

$

Underwriting Ratios

% Point

Change

Loss ratio

%

%

Acquisition expense ratio

%

%

Other operating expense ratio (2)

%

%

Combined ratio

%

%

(1) ‘Other underwriting income’ includes revenue earned from underwriting-related activities covered under existing service contracts.

(2) The ‘Other operating expense ratio’ includes ‘Other underwriting income.’ See ‘Comments on Non-GAAP Financial Measures’ for further details.

Six Months Ended June 30,

% Change

Gross premiums written

$

$

Premiums ceded

Net premiums written

Change in unearned premiums

Net premiums earned

Other underwriting income (1)

Losses and loss adjustment expenses

Acquisition expenses

Other operating expenses

Underwriting income (loss)

$

$

Underwriting Ratios

% Point

Change

Loss ratio

%

%

Acquisition expense ratio

%

%

Other operating expense ratio (2)

%

%

Combined ratio

%

%

(1) ‘Other underwriting income’ includes revenue earned from underwriting-related activities covered under existing service contracts.

(2) The ‘Other operating expense ratio’ includes ‘Other underwriting income.’ See ‘Comments on Non-GAAP Financial Measures’ for further details.

Premiums Written.

The following tables set forth our insurance segment’s net premiums written by major line of business:

Three Months Ended June 30,

Amount

%

Amount

%

North America

Other liability - occurrence

$

$

Property and short-tail specialty

Other liability - claims made

Commercial automobile

Commercial multi-peril

Workers compensation

Other

Total North America

International

Property and short-tail specialty

$

$

Casualty and other

Total International

Total

$

$

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

Six Months Ended June 30,

Amount

%

Amount

%

North America

Other liability - occurrence

$

$

Property and short-tail specialty

Other liability - claims made

Commercial automobile

Commercial multi-peril

Workers compensation

Other

Total North America

International

Property and short-tail specialty

$

$

Casualty and other

Total International

Total

$

$

Six Months Ended June 30, 2026 versus 2025 period. Gross premiums written by the insurance segment for the six months ended June 30, 2026 were 0.5% lower than in the 2025 period, while net premiums written were 3.3% lower than in the 2025 period. Adjusting for the non-renewal of

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certain programs related to the MCE Acquisition, net premiums written would have decreased by 0.4% compared to a year ago.

Net Premiums Earned.

The following tables set forth our insurance segment’s net premiums earned by major line of business:

Three Months Ended June 30,

Amount

%

Amount

%

North America

Other liability - occurrence

$

$

Property and short-tail specialty

Other liability - claims made

Commercial automobile

Commercial multi-peril

Workers compensation

Other

Total North America

International

Property and short-tail specialty

$

$

Casualty and other

Total International

Total

$

$

Six Months Ended June 30,

Amount

%

Amount

%

North America

Other liability - occurrence

$

$

Property and short-tail specialty

Other liability - claims made

Commercial automobile

Commercial multi-peril

Workers compensation

Other

Total North America

International

Property and short-tail specialty

$

$

Casualty and other

Total International

Total

$

$

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 second quarter were 4.5% lower than in the 2025 second 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.

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

Losses and Loss Adjustment Expenses.

The table below shows the components of the insurance segment’s loss ratio:

Three Months Ended

Six Months Ended

Current year

%

%

%

%

Prior period reserve development

%

%

%

%

Loss ratio

%

%

%

%

Current Year Loss Ratio.

2026 Second Quarter versus 2025 Period. The insurance segment’s current year loss ratio in the 2026 second quarter was 4.2 points higher than in the 2025 second quarter. The 2026 second quarter loss ratio reflected 7.6 points of current year catastrophic activity, primarily related to the Iran conflict and severe conductive storms in the U.S., compared to 2.9 points of current year catastrophic activity in the 2025 second quarter. The balance of the change in the loss ratio resulted, in part, from changes in mix of business.

Six Months Ended June 30, 2026 versus 2025 Period. The insurance segment’s current year loss ratio for the six months ended June 30, 2026 was 0.7 points lower than in the 2025 period and reflected 5.9 points of current year catastrophic activity, primarily related to the Iran conflict and severe conductive storms in the U.S., compared to 6.1 points in the 2025 period, primarily related to the California wildfires. The balance of the change in the loss ratio resulted, in part, from changes in mix of business.

Prior Period Reserve Development.

The insurance segment’s net favorable development was $27 million, or 1.4 points, for the 2026 second quarter, compared to $8 million, or 0.4 points, for the 2025 second 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.

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Underwriting Expenses.

2026 Second Quarter versus 2025 Period. The insurance segment’s underwriting expense ratio was 35.5% in the 2026 second quarter, compared to 33.6% in the 2025 second 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 second quarter, the impact of the MCE Acquisition lowered the underwriting expense ratio by approximately 0.6 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.

Six Months Ended June 30, 2026 versus 2025 period. The insurance segment’s underwriting expense ratio was 35.9% for the six months ended June 30, 2026, compared to 33.9% for the 2025 period. The 2026 ratio reflected transitional expenses associated with the MCE Acquisition, and a lower level of net premiums earned compared to the 2025 period.

Reinsurance Segment

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; and other.

The following tables set forth our reinsurance segment’s underwriting results:

Three Months Ended June 30,

% Change

Gross premiums written

$

$

Premiums ceded

Net premiums written

Change in unearned premiums

Net premiums earned

Other underwriting income (1)

Losses and loss adjustment expenses

Acquisition expenses

Other operating expenses

Underwriting income

$

$

Underwriting Ratios

% Point

Change

Loss ratio

%

%

Acquisition expense ratio

%

%

Other operating expense ratio (2)

%

%

Combined ratio

%

%

(1) ‘Other underwriting income’ includes revenue earned from underwriting-related activities covered under existing service contracts.

(2) The ‘Other operating expense ratio’ includes ‘Other underwriting income.’ See ‘Comments on Non-GAAP Financial Measures’ for further details.

Six Months Ended June 30,

% Change

Gross premiums written

$

$

Premiums ceded

Net premiums written

Change in unearned premiums

Net premiums earned

Other underwriting income (1)

Losses and loss adjustment expenses

Acquisition expenses

Other operating expenses

Underwriting income (loss)

$

$

Underwriting Ratios

% Point

Change

Loss ratio

%

%

Acquisition expense ratio

%

%

Other operating expense ratio (2)

%

%

Combined ratio

%

%

(1) ‘Other underwriting income’ includes revenue earned from underwriting-related activities covered under existing service contracts.

(2) The ‘Other operating expense ratio’ includes ‘Other underwriting income.’ See ‘Comments on Non-GAAP Financial Measures’ for further details.

Premiums Written.

The following tables set forth our reinsurance segment’s net premiums written by major line of business:

Three Months Ended June 30,

Amount

%

Amount

%

Specialty

$

$

Property excluding property catastrophe

Property catastrophe

Casualty

Marine and aviation

Other

Total

$

$

2026 Second Quarter versus 2025 Period. Gross premiums written by the reinsurance segment in the 2026 second quarter were 0.2% higher than in the 2025 second quarter, while net premiums written were 10.4% lower than in the 2025 second quarter. Reductions in net premiums written this quarter were due, in part, to non-renewals, share reductions as well as targeted increased retrocessions.

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Six Months Ended June 30,

Amount

%

Amount

%

Specialty

$

$

Property excluding property catastrophe

Property catastrophe

Casualty

Marine and aviation

Other

Total

$

$

Six Months Ended June 30, 2026 versus 2025 period. Gross premiums written by the reinsurance segment for the six months ended June 30, 2026 were 1.1% lower than in the 2025 period, while net premiums written were 8.1% lower than in the 2025 period. Reductions in net premiums written in the 2026 period were due, in part, to non-renewals, share reductions as well as targeted increased retrocessions.

Net Premiums Earned.

The following tables set forth our reinsurance segment’s net premiums earned by major line of business:

Three Months Ended June 30,

Amount

%

Amount

%

Specialty

$

$

Property excluding property catastrophe

Property catastrophe

Casualty

Marine and aviation

Other

Total

$

$

Six Months Ended June 30,

Amount

%

Amount

%

Specialty

$

$

Property excluding property catastrophe

Property catastrophe

Casualty

Marine and aviation

Other

Total

$

$

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 second quarter were 12.8% lower than in the 2025 second 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.

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

Losses and Loss Adjustment Expenses.

The table below shows the components of the reinsurance segment’s loss ratio:

Three Months Ended

Six Months Ended

Current year

%

%

%

%

Prior period reserve development

%

%

%

%

Loss ratio

%

%

%

%

Current Year Loss Ratio.

2026 Second Quarter versus 2025 Period. The reinsurance segment’s current year loss ratio in the 2026 second quarter was 1.9 points higher than in the 2025 second quarter. The 2026 second quarter loss ratio reflected 3.0 points of current year catastrophic activity, compared to 5.5 points of current year catastrophic activity in the 2025 second quarter. The balance of the change in the loss ratio primarily resulted from changes in the mix of business, due in part to increased retrocessions on short-tailed lines.

Six Months Ended June 30, 2026 versus 2025 Period. The reinsurance segment’s current year loss ratio for the six months ended June 30, 2026 was 5.4 points lower than in the 2025 period and reflected 4.2 points of current year catastrophic activity, compared to 13.5 points in the 2025 period, primarily related to the California wildfires. The balance of the change in the loss ratio resulted, in part, from changes in mix of business.

Prior Period Reserve Development.

The reinsurance segment’s net favorable development was $97 million, or 5.3 points, for the 2026 second quarter, compared to $81 million, or 3.9 points, for the 2025 second 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.

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Underwriting Expenses.

2026 Second Quarter versus 2025 Period. The underwriting expense ratio for the reinsurance segment was 22.9% in the 2026 second quarter, compared to 24.4% in the 2025 second quarter, with the decrease primarily reflecting the impact of higher profit commissions on retrocessions.

Six Months Ended June 30, 2026 versus 2025 period. The underwriting expense ratio for the reinsurance segment was 23.5% for the six months ended June 30, 2026, compared to 24.6% for the 2025 period.

Mortgage Segment

The Company’s mortgage segment consists of U.S. primary mortgage insurance business written predominantly on loans sold to the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”), each a government sponsored entity (“GSE”) and also through non GSE approved entities (combined “Arch MI U.S.”); reinsurance and underwriting services related to U.S. credit-risk transfer (“CRT”) business which are predominately with the GSEs and other U.S. mortgage reinsurance transactions; and international mortgage insurance and reinsurance business covering loans primarily in Australia and Europe.

The following tables set forth our mortgage segment’s underwriting results:

Three Months Ended June 30,

% Change

Gross premiums written

$

$

Premiums ceded

Net premiums written

Change in unearned premiums

Net premiums earned

Other underwriting income (1)

5

3

Losses and loss adjustment expenses

3

Acquisition expenses

(2)

(1)

Other operating expenses

Underwriting income

$

$

Underwriting Ratios

% Point

Change

Loss ratio

%

%

Acquisition expense ratio

%

%

Other operating expense ratio (2)

%

%

Combined ratio

%

%

(1) ‘Other underwriting income’ includes revenue earned from underwriting-related activities covered under existing service contracts.

(2) The ‘Other operating expense ratio’ includes ‘Other underwriting income.’ See ‘Comments on Non-GAAP Financial Measures’ for further details.

Six Months Ended June 30,

% Change

Gross premiums written

$

$

Premiums ceded

Net premiums written

Change in unearned premiums

Net premiums earned

Other underwriting income (1)

Losses and loss adjustment expenses

—

Acquisition expenses

(5)

Other operating expenses

Underwriting income

$

$

Underwriting Ratios

% Point

Change

Loss ratio

%

—

%

Acquisition expense ratio

%

%

Other operating expense ratio (2)

%

%

Combined ratio

%

%

(1) ‘Other underwriting income’ includes revenue earned from underwriting-related activities covered under existing service contracts.

(2) The ‘Other operating expense ratio’ includes ‘Other underwriting income.’ See ‘Comments on Non-GAAP Financial Measures’ for further details.

Premiums Written.

The following tables set forth our mortgage segment’s net premiums written by major line of business:

Three Months Ended June 30,

Amount

%

Amount

%

U.S. primary mortgage insurance

$

$

U.S. credit risk transfer (CRT) and other

International mortgage insurance/

reinsurance

Total

$

$

2026 Second Quarter versus 2025 Period. Gross premiums written by the mortgage segment in the 2026 second quarter were 0.3% higher than in the 2025 second quarter, with growth in international business offset by a reduction in U.S. monthly premium volume. Net premiums written were 7.5% higher than in the 2025 second quarter, reflecting the termination of certain Bellemeade Re and quota share agreements on U.S. primary business.

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Six Months Ended June 30,

Amount

%

Amount

%

U.S. primary mortgage insurance

$

$

U.S. credit risk transfer (CRT) and other

International mortgage insurance/

reinsurance

Total

$

$

Six Months Ended June 30, 2026 versus 2025 Period. Gross premiums written by the mortgage segment for the six months ended June 30, 2026 were 1.4% lower than in the 2025 period, while net premiums written for the six months ended June 30, 2026 were 3.7% higher than in the 2025 period, reflecting reduced cessions on U.S. primary business.

The persistency rate was 79.9% for the Arch MI U.S. portfolio of primary mortgage insurance policies at June 30, 2026, compared to 81.9% at June 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.

The following tables provide details on the new insurance written (“NIW”) generated by Arch MI U.S. NIW represents the original principal balance of all loans that received coverage during the period.

Three Months Ended June 30,

Amount

%

Amount

%

Total new insurance written (NIW)

$

$

Credit quality:

$

$

3

Total

$

$

Loan-to-value (LTV):

$

$

Total

$

$

Monthly vs. single:

Monthly

$

$

Single

Total

$

$

Purchase vs. refinance:

Purchase

$

$

Refinance

Total

$

$

Six Months Ended June 30,

Amount

%

Amount

%

Total new insurance written (NIW)

$

$

Credit quality:

$

$

6

Total

$

$

Loan-to-value (LTV):

$

$

Total

$

$

Monthly vs. single:

Monthly

$

$

Single

Total

$

$

Purchase vs. refinance:

Purchase

$

$

Refinance

Total

$

$

Net Premiums Earned.

The following tables set forth our mortgage segment’s net premiums earned by major line of business:

Three Months Ended June 30,

Amount

%

Amount

%

U.S. primary mortgage insurance

$

$

U.S. credit risk transfer (CRT) and other

International mortgage insurance/

reinsurance

Total

$

$

2026 Second Quarter versus 2025 Period. Net premiums earned for the 2026 second quarter were 1.4% higher than in the 2025 second quarter, reflecting changes in net premiums written over the previous five quarters.

Six Months Ended June 30,

Amount

%

Amount

%

U.S. primary mortgage insurance

$

$

U.S. credit risk transfer (CRT) and other

International mortgage insurance/

reinsurance

Total

$

$

Six Months Ended June 30, 2026 versus 2025 Period. For the six months ended June 30, 2026, net premiums earned were 2.1% lower than in the 2025 period.

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Other Underwriting Income.

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

Losses and Loss Adjustment Expenses.

The table below shows the components of the mortgage segment’s loss ratio:

Three Months Ended

Six Months Ended

Current year

%

%

%

%

Prior period reserve development

%

%

%

%

Loss ratio

%

%

%

—

%

Current Year Loss Ratio.

2026 Second Quarter versus 2025 Period. The mortgage segment’s current year loss ratio was 0.6 points higher in the 2026 second quarter than in the 2025 second quarter. The current year loss ratio for the 2026 second quarter was relatively flat compared to the 2025 second quarter.

Six Months Ended June 30, 2026 versus 2025 Period. The mortgage segment’s current year loss ratio was 1.7 points higher for the six months ended June 30, 2026 than for the 2025 period. The higher current year loss ratio for the 2026 period reflected slightly higher new delinquencies.

Prior Period Reserve Development.

The mortgage segment’s net favorable development was $45 million, or 15.7 points, for the 2026 second quarter, compared to $64 million, or 22.8 points, for the 2025 second 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.

Underwriting Expenses.

2026 Second Quarter versus 2025 Period. The underwriting expense ratio for the mortgage segment was 16.3% in the 2026 second quarter, compared to 16.4% in the 2025 second quarter.

Six Months Ended June 30, 2026 versus 2025 period. The underwriting expense ratio for the mortgage segment was 16.7% for the six months ended June 30, 2026, compared to 15.8% for the 2025 period.

Corporate

The Company’s corporate results include net investment income, net realized gains or losses (which include, but are 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 or loss, corporate expenses, transaction costs and other, amortization of intangible assets, interest expense, net foreign exchange gains or losses, income taxes, income from operating affiliates and items related to our non-cumulative preferred shares.

Net Investment Income.

The components of net investment income were derived from the following sources:

Three Months Ended

Six Months Ended

Fixed maturities

$

$

$

$

Short-term investments

Equity securities (dividends)

9

Other (1)

Gross investment income

Investment expenses (2)

Net investment income

$

$

$

$

(1) Amounts include dividends and other distributions on investment funds, term loan investments, funds held balances, cash balances and other items.

(2) Investment expenses were approximately 0.24% of average invested assets for the 2026 second quarter, compared to 0.25% for the 2025 second 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 periods primarily reflected growth in average invested assets, due in part to strong operating cash flows. Net cash flow from operating activities contributed $2.5 billion for the six months ended June 30, 2026. The pre-tax investment income yield, calculated based on amortized cost and on an annualized basis, was 3.91% for the 2026 second quarter, compared to 4.25% for the 2025 second quarter, and 3.98% for the six months ended June 30, 2026, compared to 4.19% for the 2025 period.

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Corporate Expenses.

Corporate expenses were $12 million for the 2026 second quarter, compared to $29 million for the 2025 second 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 periods primarily reflected the benefit of Bermuda qualified refundable tax credits.

Transaction Costs and Other.

Transaction costs and other for the 2026 second quarter was $32 million, compared to $18 million for the 2025 second 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 or Losses.

Other income for the 2026 second quarter was $30 million, compared to $18 million for the 2025 second 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.

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

Interest Expense.

Interest expense was $44 million for the 2026 second quarter, compared to $38 million for the 2025 second 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 Gains or Losses.

Net realized losses for the 2026 second quarter were $17 million, compared to net realized gains of $229 million for the 2025 second 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 net unrealized gains or losses related to financial market movements on the Company’s equity securities and investments accounted for under the fair value option method. Amounts in the 2026 periods also include a litigation-related loss contingency recorded pursuant to ASC 450, while amounts in the 2025 periods include losses related to the sale of certain alternative investments accounted for 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 adjusted and 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.

Net realized gains or losses also 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 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 or Losses of Investments Accounted for Using the Equity Method.

Equity in net income of investments accounted for using the equity method was $196 million in the 2026 second quarter, compared to $162 million for the 2025 second 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 $6.9 billion at June 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.

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Net Foreign Exchange Gains or Losses.

Net foreign exchange gains for the 2026 second quarter were $10 million, compared to losses of $88 million for the 2025 second quarter. Net foreign exchange gains for the six months ended June 30, 2026 were $31 million, compared to losses of $115 million for the 2025 period. Amounts in both 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.

Income Tax Expense.

Our income tax provision on income or loss before income taxes, including income or loss from operating affiliates, resulted in an expense of 13.4% for the 2026 second quarter, compared to an expense of 14.7% for the 2025 second quarter, and an expense of 11.1% for the six months ended June 30, 2026, compared to an expense of 15.6% for the 2025 period. See note 14, “Income Taxes” to our consolidated financial statements for additional information.

Income or Losses from Operating Affiliates.

Income from operating affiliates for the 2026 second quarter was $46 million, compared to income of $40 million for the 2025 second quarter, and income of $82 million for the six months ended June 30, 2026, compared to income of $57 million for the 2025 period. Such amounts primarily related to the Company’s investment in Somers Group Holdings Ltd. and Coface SA. See note 8, “Investment Information—Investments in Operating Affiliates,” to our consolidated financial statements for additional information.

CRITICAL ACCOUNTING POLICIES,

ESTIMATES AND RECENT ACCOUNTING PRONOUNCEMENTS

Critical accounting policies, estimates and recent accounting pronouncements are discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our 2025 Form 10-K, updated where applicable in the notes accompanying our consolidated financial statements, including note 1, “Basis of Presentation and Recent Accounting Pronouncements.”

FINANCIAL CONDITION

Investable Assets Held by Arch

At June 30, 2026, approximately $30.5 billion, or 61.6%, of total investable assets held by Arch were internally managed, compared to $29.5 billion, or 62.2%, at December 31, 2025. See note 8, “Investment Information” to our consolidated financial statements for additional information.

The following table summarizes the duration and average credit quality of fixed income assets held by Arch:

Average effective fixed maturities duration (in years)

Average S&P/Moody’s credit ratings (1)

AA-/Aa3

AA-/Aa3

(1)Average credit ratings on our investment portfolio on securities with ratings assigned by S&P and Moody’s.

The following table provides the credit quality distribution of our fixed maturities. For individual fixed maturities, S&P ratings are used. In the absence of an S&P rating, ratings from Moody’s are used, followed by ratings from Fitch Ratings.

Estimated Fair Value

% of

Total

U.S. government and gov’t agencies (1)

$

AAA

AA

A

BBB

BB

B

Lower than B

Not rated

Total

$

U.S. government and gov’t agencies (1)

$

AAA

AA

A

BBB

BB

B

Lower than B

Not rated

Total

$

(1)Includes U.S. government-sponsored agency residential mortgage-backed securities and agency commercial mortgage-backed securities.

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The following table provides information on the severity of the unrealized loss position as a percentage of amortized cost for all fixed maturities which were in an unrealized loss position:

Severity of gross unrealized losses:

Estimated Fair Value

Gross

Unrealized

Losses

% of

Total Gross

Unrealized

Losses

$

$

(5)

Greater than 30%

2

(1)

Total

$

$

$

$

(6)

Greater than 30%

1

(1)

Total

$

$

The following table summarizes our top ten exposures to fixed income corporate issuers by fair value at June 30, 2026, excluding guaranteed amounts and covered bonds:

Estimated Fair Value

Credit

Rating (1)

Morgan Stanley

$

A/A1

The Goldman Sachs Group, Inc.

BBB+/A2

JPMorgan Chase & Co.

A/A1

Citigroup Inc.

A-/A2

Bank of America Corporation

A-/A1

Amazon.com, Inc.

AA/A1

The Toronto-Dominion Bank

A-/A2

UBS Group AG

A/A1

Hyundai Motor Company

A-/A3

Oracle Corporation

BBB/Baa2

Total

$

(1)Average credit ratings as assigned by S&P and Moody’s, respectively.

The following table provides information on our structured securities, which includes residential mortgage-backed securities (“RMBS”), commercial mortgage-backed securities (“CMBS”) and asset-backed securities (“ABS”):

Agencies