Arch Capital Group Ltd. (NASDAQ: ACGL; “Arch,” “our” or “the Company”) announced its 2026 second quarter results. The results included:
- Net income available to Arch common shareholders of $1.0 billion, or $3.00 per share, representing an 18.0% annualized net income return on average common equity, compared to net income available to Arch common shareholders of $1.2 billion, or $3.23 per share, for the 2025 second quarter.
- After-tax operating income available to Arch common shareholders (1) of $893 million, or $2.56 per share, representing a 15.3% annualized operating return on average common equity (1), compared to $979 million, or $2.58 per share, for the 2025 second quarter.
- Pre-tax current accident year catastrophic losses for the Company’s insurance and reinsurance segments, net of reinsurance and reinstatement premiums, of $201 million.
- Favorable development in prior year loss reserves, net of related adjustments, of $165 million.
- Combined ratio excluding catastrophic activity and prior year development (1) of 82.5%, compared to 80.9% for the 2025 second quarter.
- Share repurchases of $1.2 billion.
- Book value per common share of $68.04 at June 30, 2026, a 2.8% increase from March 31, 2026.
“We delivered a strong quarter, driven by solid underwriting performance across our three segments, reflecting the continued strength of our diversified platform and disciplined execution across the enterprise,” said Arch CEO Nicolas Papadopoulo. “Our leadership positions in Specialty Insurance, including our Mortgage and Reinsurance operations, provide us with a meaningful competitive advantage. Clients not only come to us for capacity, but also for our underwriting expertise, claims capabilities, creative solutions and valuable perspectives that help them better manage risk.”
All earnings per share amounts discussed in this release are on a diluted basis. The following table summarizes the Company’s underwriting results:
|
(U.S. Dollars in millions) |
Three Months Ended June 30, |
|||||||
|
2026 |
2025 |
% Change |
||||||
|
Gross premiums written |
$ |
6,126 |
$ |
6,196 |
(1.1) |
|||
|
Net premiums written |
4,049 |
4,348 |
(6.9) |
|||||
|
Net premiums earned |
3,985 |
4,337 |
(8.1) |
|||||
|
Underwriting income(1) |
657 |
818 |
(19.7) |
|||||
|
Underwriting Ratios |
% Point Change |
|||||||
|
Loss ratio |
55.1% |
53.1% |
2.0 |
|||||
|
Underwriting expense ratio (2) |
28.4% |
28.1% |
0.3 |
|||||
|
Combined ratio |
83.5% |
81.2% |
2.3 |
|||||
|
Combined ratio excluding catastrophic activity and prior year development(1) |
82.5% |
80.9% |
1.6 |
|||||
|
(1) |
See ‘Comments on Non-GAAP Financial Measures’ for further details. |
|
|
(2) |
The ‘Underwriting expense ratio’ includes ‘Other underwriting income.’ See ‘Comments on Non-GAAP Financial Measures’ for further details. |
The following table summarizes the Company’s 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 and related diluted per share results (see ‘Comments on Non-GAAP Financial Measures’ for further details):
|
(U.S. Dollars in millions, except per share data) |
Three Months Ended |
||||
|
June 30, |
|||||
|
2026 |
2025 |
||||
|
Net income available to Arch common shareholders |
$ |
1,047 |
$ |
1,227 |
|
|
Net realized (gains) losses (1) |
17 |
(229) |
|||
|
Equity in net (income) of investments accounted for using the equity method |
(196) |
(162) |
|||
|
Net foreign exchange (gains) losses |
(10) |
88 |
|||
|
Transaction costs and other |
32 |
18 |
|||
|
Income tax expense (benefit) (2) |
3 |
37 |
|||
|
After-tax operating income available to Arch common shareholders |
$ |
893 |
$ |
979 |
|
|
Diluted per common share results: |
|||||
|
Net income available to Arch common shareholders |
$ |
3.00 |
$ |
3.23 |
|
|
Net realized (gains) losses (1) |
0.05 |
(0.60) |
|||
|
Equity in net (income) of investments accounted for using the equity method |
(0.56) |
(0.43) |
|||
|
Net foreign exchange (gains) losses |
(0.03) |
0.23 |
|||
|
Transaction costs and other |
0.09 |
0.05 |
|||
|
Income tax expense (benefit) (2) |
0.01 |
0.10 |
|||
|
After-tax operating income available to Arch common shareholders |
$ |
2.56 |
$ |
2.58 |
|
|
Weighted average common shares and common share equivalents outstanding — diluted |
348.8 |
379.9 |
|||
|
Beginning common shareholders’ equity |
$ |
23,358 |
$ |
20,715 |
|
|
Ending common shareholders’ equity |
23,200 |
22,211 |
|||
|
Average common shareholders’ equity |
$ |
23,279 |
$ |
21,463 |
|
|
Annualized net income return on average common equity |
18.0% |
22.9% |
|||
|
Annualized operating return on average common equity |
15.3% |
18.2% |
|||
|
(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 and losses on derivative instruments, changes in the allowance for credit losses on financial assets and gains and losses realized from the acquisition or disposition of subsidiaries. |
|
|
(2) |
Income tax expense (benefit) on net realized gains or losses, equity in net income 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
The following section provides analysis on the Company’s 2026 second quarter performance by reportable segments. For additional details regarding the Company’s reportable segments, please refer to the Company’s Financial Supplement dated June 30, 2026. On August 1, 2024, the insurance segment completed the acquisition of the U.S. MidCorp and Entertainment insurance businesses from Allianz (MCE Acquisition). The Company’s segment information includes the use of underwriting income (loss) and a combined ratio excluding catastrophic activity and prior year development (see ‘Comments on Non-GAAP Financial Measures’ for further details).
Insurance Segment
|
Three Months Ended June 30, |
|||||||
|
(U.S. Dollars in millions) |
2026 |
2025 |
% Change |
||||
|
Gross premiums written |
$ |
2,603 |
$ |
2,681 |
(2.9) |
||
|
Net premiums written |
1,933 |
2,036 |
(5.1) |
||||
|
Net premiums earned |
1,880 |
1,969 |
(4.5) |
||||
|
Other underwriting income |
15 |
13 |
15.4 |
||||
|
Underwriting income |
$ |
27 |
$ |
129 |
(79.1) |
||
|
Underwriting Ratios |
% Point Change |
||||||
|
Loss ratio |
63.0% |
59.8% |
3.2 |
||||
|
Underwriting expense ratio |
35.5% |
33.6% |
1.9 |
||||
|
Combined ratio |
98.5% |
93.4% |
5.1 |
||||
|
Catastrophic activity and prior year development: |
|||||||
|
Current accident year catastrophic events, net of reinsurance and reinstatement premiums |
8.0% |
2.9% |
5.1 |
||||
|
Net (favorable) adverse development in prior year loss reserves, net of related adjustments |
|||||||
|
Loss ratio impact |
(1.4)% |
(0.4)% |
(1.0) |
||||
|
Underwriting expense ratio impact |
0.3% |
0.3% |
— |
||||
|
Total impact |
(1.1)% |
(0.1)% |
(1.0) |
||||
|
Combined ratio excluding catastrophic activity and prior year development |
91.6% |
90.6% |
1.0 |
||||
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. Net premiums earned in the 2026 second quarter were 4.5% lower than in the 2025 second quarter and reflect changes in net premiums written over the previous five quarters.
The 2026 second quarter loss ratio reflected 7.6 points of current year catastrophic activity, compared to 2.9 points in the 2025 second quarter. Estimated net favorable development of prior year loss reserves, before related adjustments, reduced the loss ratio by 1.4 points in the 2026 second quarter, compared to 0.4 points in the 2025 second quarter. The balance of the change in the loss ratio resulted, in part, from changes in the mix of business.
The 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.
Reinsurance Segment
|
Three Months Ended June 30, |
|||||||
|
(U.S. Dollars in millions) |
2026 |
2025 |
% Change |
||||
|
Gross premiums written |
$ |
3,202 |
$ |
3,196 |
0.2 |
||
|
Net premiums written |
1,844 |
2,059 |
(10.4) |
||||
|
Net premiums earned |
1,820 |
2,087 |
(12.8) |
||||
|
Other underwriting income |
37 |
46 |
(19.6) |
||||
|
Underwriting income |
$ |
410 |
$ |
451 |
(9.1) |
||
|
Underwriting Ratios |
% Point Change |
||||||
|
Loss ratio |
54.6% |
54.1% |
0.5 |
||||
|
Underwriting expense ratio |
22.9% |
24.4% |
(1.5) |
||||
|
Combined ratio |
77.5% |
78.5% |
(1.0) |
||||
|
Catastrophic activity and prior year development: |
|||||||
|
Current accident year catastrophic events, net of reinsurance and reinstatement premiums |
2.8% |
4.6% |
(1.8) |
||||
|
Net (favorable) adverse development in prior year loss reserves, net of related adjustments |
|||||||
|
Loss ratio impact |
(5.3)% |
(3.9)% |
(1.4) |
||||
|
Underwriting expense ratio impact |
0.1% |
0.6% |
(0.5) |
||||
|
Total impact |
(5.2)% |
(3.3)% |
(1.9) |
||||
|
Combined ratio excluding catastrophic activity and prior year development |
79.9% |
77.2% |
2.7 |
||||
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. Net premiums earned in the 2026 second quarter were 12.8% lower than in the 2025 second quarter and reflect changes in net premiums written over the previous five quarters.
The 2026 second quarter loss ratio reflected 3.0 points of current year catastrophic activity, compared to 5.5 points in the 2025 second quarter. Estimated net favorable development of prior year loss reserves, before related adjustments, reduced the loss ratio by 5.3 points in the 2026 second quarter, compared to 3.9 points in the 2025 second quarter. The balance of the change in the loss ratio resulted, in part, from changes in the mix of business.
The underwriting expense ratio 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.
Mortgage Segment
|
Three Months Ended June 30, |
|||||||
|
(U.S. Dollars in millions) |
2026 |
2025 |
% Change |
||||
|
Gross premiums written |
$ |
324 |
$ |
323 |
0.3 |
||
|
Net premiums written |
272 |
253 |
7.5 |
||||
|
Net premiums earned |
285 |
281 |
1.4 |
||||
|
Other underwriting income |
5 |
3 |
66.7 |
||||
|
Underwriting income |
$ |
220 |
$ |
238 |
(7.6) |
||
|
Underwriting Ratios |
% Point Change |
||||||
|
Loss ratio |
6.5% |
(1.2)% |
7.7 |
||||
|
Underwriting expense ratio |
16.3% |
16.4% |
(0.1) |
||||
|
Combined ratio |
22.8% |
15.2% |
7.6 |
||||
|
Prior year development: |
|||||||
|
Net (favorable) adverse development in prior year loss reserves, net of related adjustments |
|||||||
|
Loss ratio impact |
(15.7)% |
(22.8)% |
7.1 |
||||
|
Underwriting expense ratio impact |
(1.3)% |
(1.3)% |
— |
||||
|
Total impact |
(17.0)% |
(24.1)% |
7.1 |
||||
|
Combined ratio excluding prior year development |
39.8% |
39.3% |
0.5 |
||||
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 and quota share agreements on U.S. primary business. Net premiums earned were relatively flat, increasing 1.4%.
Estimated net favorable development of prior year loss reserves, before related adjustments, decreased the loss ratio by 15.7 points, compared to 22.8 points in the 2025 second quarter. Such amounts were primarily related to better than expected cure rates. The 2026 second quarter loss ratio, excluding net favorable development, was relatively flat compared to the 2025 second quarter.
The underwriting expense ratio was 16.3% in the 2026 second quarter, consistent with the 16.4% ratio reported in the 2025 second quarter.
Corporate
The Company’s 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 and losses on derivative instruments, changes in the allowance for credit losses on financial assets and gains and 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), corporate benefit (expenses), transaction costs and other, amortization of intangible assets, interest expense, net foreign exchange gains or losses, income tax items, income or loss from operating affiliates and items related to the Company’s non-cumulative preferred shares.
Investment returns were as follows:
|
(U.S. Dollars in millions, except per share data) |
Three Months Ended |
||||||||
|
June 30, |
March 31, |
June 30, |
|||||||
|
2026 |
2026 |
2025 |
|||||||
|
Pre-tax net investment income |
$ |
417 |
$ |
408 |
$ |
405 |
|||
|
Per share |
$ |
1.20 |
$ |
1.13 |
$ |
1.07 |
|||
|
Equity in net income of investments accounted for using the equity method |
$ |
196 |
$ |
160 |
$ |
162 |
|||
|
Per share |
$ |
0.56 |
$ |
0.44 |
$ |
0.43 |
|||
|
Pre-tax investment income yield, at amortized cost (1) |
3.91% |
3.99% |
4.25% |
||||||
|
Total return on investments (2) |
1.62% |
0.10% |
3.09% |
||||||
|
(1) |
Presented on an annualized basis and excluding the impact of investments for which returns are not included within investment income, such as investments accounted for using the equity method and certain equities. |
|
|
(2) |
See ‘Comments on Non-GAAP Financial Measures’ for further details. |
Net investment income for the 2026 second quarter, compared to the 2025 second quarter, primarily reflected growth in average invested assets, due in part to strong operating cash flows. Net realized losses were $17 million for the 2026 second quarter, compared to net realized gains of $229 million in the 2025 second quarter.
Corporate expenses for the 2026 second quarter were $12 million, compared to $29 million for the 2025 second quarter. Such expenses 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 second quarter primarily reflected the benefit of Bermuda qualified refundable tax credits.
Amortization of intangible assets was $30 million for the 2026 second quarter, compared to $48 million for the 2025 second quarter.
On June 9, 2026, the Company completed a public offering of $2.0 billion of senior notes, consisting of $600 million of 5.250% senior notes due in 2036 and $1.4 billion of 5.950% senior notes due in 2056. The Company expects to use the net proceeds from this offering to repay its 4.011% senior notes due in 2026, fund purchases from the cash tender offers described below, and for general corporate purposes. On June 16, 2026, the Company completed the cash tender offers for certain outstanding senior notes, with Arch Capital Group (U.S.) Inc. repurchasing $218.7 million of its 5.144% senior notes due in 2043, and Arch Capital Finance LLC repurchasing $199.1 million of its 5.031% senior notes due in 2046. This resulted in a total pre-tax realized gain of $16 million for the 2026 second quarter. Interest expense for the 2026 second quarter was $44 million, compared to $38 million for the 2025 second quarter, with the increase resulting from the Company’s capital raising activity.
On a pre-tax basis, net foreign exchange gains were $10 million for the 2026 second quarter, compared to net foreign exchange losses of $88 million for the 2025 second quarter. For both periods, such amounts were primarily unrealized and resulted from the effects of revaluing the Company’s net insurance liabilities required to be settled in foreign currencies at each balance sheet date. Changes in the value of available-for-sale investments held in foreign currencies due to foreign currency rate movements are reflected as a direct increase or decrease to shareholders’ equity and are not included in the consolidated statements of income.
The Company’s effective tax rate on income before income taxes (based on the Company’s annual effective tax rate) was 13.4% for the 2026 second quarter, compared to 14.7% for the 2025 second quarter. The Company’s effective tax rate on pre-tax operating income available to Arch common shareholders was 15.1% for the 2026 second quarter, compared to 15.2% for the 2025 second quarter. The effective tax rate may fluctuate from period to period based upon the relative mix of income or loss reported by jurisdiction, the level of catastrophic loss activity incurred, and the varying tax rates in each jurisdiction.
Income from operating affiliates for the 2026 second quarter was $46 million, or $0.13 per share, compared to $40 million, or $0.11 per share, for the 2025 second quarter, and primarily reflects amounts related to the Company’s investment in Somers Group Holdings Ltd. and Coface SA.
