Form 8-K - Current report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

Current Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

February 14, 2024

Date of Report (Date of earliest event reported)

Arch Capital Group Ltd.

(Exact name of registrant as specified in its charter)

Bermuda

001-16209

98-0374481

(State or other
jurisdiction of
incorporation or
organization)

(Commission File Number)

(I.R.S. Employer
Identification No.)

Waterloo House, Ground Floor, 100 Pitts Bay Road, Pembroke HM 08, Bermuda

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code:

(441) 278-9250

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class

Trading Symbol (s)

Name of each exchange on which registered

Common shares, $0.0011 par value per share

ACGL

NASDAQ

Stock Market

Depositary shares, each representing a 1/1,000th interest in a 5.45% Series F preferred share

ACGLO

NASDAQ

Stock Market

Depositary shares, each representing a 1/1,000th interest in a 4.55% Series G preferred share

ACGLN

NASDAQ

Stock Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

ITEM 2.02 Results of Operations and Financial Condition.

On February 14, 2024, Arch Capital Group Ltd. issued a press release reporting its earnings and the availability of its financial supplement for the quarter ended December 31, 2023. The press release and financial supplement are attached to this Current Report on Form 8-K as Exhibit 99.1 and Exhibit 99.2, respectively, and are incorporated herein by reference.

The information in this Current Report on Form 8-K, including the information set forth in Exhibit 99.1 and Exhibit 99.2, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

ITEM 9.01 Financial Statements and Exhibits.

(d): The following exhibits are being filed herewith.


EXHIBIT NO.						DESCRIPTION
99.1						Press Release dated February 14, 2024 announcing the earnings of Arch Capital Group Ltd. for the quarter ended December 31, 2023
99.2						2023 Fourth Quarter Financial Supplement
104						Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


	ARCH CAPITAL GROUP LTD.


Date: February 14, 2024	By:	/s/ François Morin
		Name:	François Morin
		Title:	Executive Vice President, Chief Financial Officer and Treasurer


						EXHIBIT 99.1
			PRESS RELEASE			Arch Capital Group Ltd.
			NASDAQ Symbol: ACGL			Waterloo House, Ground Floor
			For Immediate Release			100 Pitts Bay Road
			February 14, 2024			Pembroke HM 08 Bermuda

ARCH CAPITAL GROUP LTD. REPORTS 2023 FOURTH QUARTER RESULTS

PEMBROKE, BERMUDA--(BUSINESS WIRE)--Arch Capital Group Ltd. (NASDAQ: ACGL; “Arch,” “our” or “the Company”) announces its 2023 fourth quarter results. The results included:

•Net income available to Arch common shareholders of $2.3 billion, or $6.12 per share, representing a 58.2% annualized net income return on average common equity, compared to net income available to Arch common shareholders of $849 million, or $2.26 per share, for the 2022 fourth quarter.

•Fourth quarter results were impacted by the establishment of a net deferred tax asset of $1.18 billion, or $3.10 per share, related to the enactment of Bermuda’s new corporate income tax.

•After-tax operating income available to Arch common shareholders(1) of $945 million, or $2.49 per share, representing a 23.7% annualized operating return on average common equity(1), compared to $806 million, or $2.14 per share, for the 2022 fourth quarter.

•Pre-tax current accident year catastrophic losses for the Company’s insurance and reinsurance segments, net of reinsurance and reinstatement premiums(1), of $137 million.

•Favorable development in prior year loss reserves, net of related adjustments(1), of $135 million.

•Combined ratio excluding catastrophic activity and prior year development(1) of 78.9%, compared to 82.0% for the 2022 fourth quarter.

•Book value per common share of $46.94 at December 31, 2023, a 21.5% increase from September 30, 2023.

Marc Grandisson, Chief Executive Officer of ACGL commented: “We finished 2023 on an excellent note, closing the books with a stellar 21.6% operating return on equity for the year and growing our book value per share by 43.9%. We are bullish about our prospects for 2024 as our underwriters continue to lean into the excellent conditions prevalent in most of the markets where we operate.”

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 December 31,
		2023			2022			% Change
Gross premiums written		$	4,251		$	3,795		12.0
Net premiums written		3,261			3,035			7.4
Net premiums earned		3,344			2,761			21.1
Underwriting income		715			734			(2.6)
Underwriting Ratios								% Point Change
Loss ratio		49.0		%	45.0		%	4.0
Underwriting expense ratio		29.9		%	28.5		%	1.4
Combined ratio		78.9		%	73.5		%	5.4

Combined ratio excluding catastrophic activity and prior year development (1)		78.9		%	82.0		%	(3.1)

(1) Presentation represents a “non-GAAP” financial measure as defined in Regulation G. See ‘Comments on Regulation G’ 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 Regulation G’ for a discussion of non-GAAP financial measures):


(U.S. Dollars in millions, except per share data)	Three Months Ended
	December 31,
	2023			2022
Net income available to Arch common shareholders	$	2,324		$	849
Net realized (gains) losses (1)	(189)			(80)

Equity in net (income) loss of investment funds accounted for using the equity method	(102)			(40)
Net foreign exchange (gains) losses	60			81
Transaction costs and other	4			—

Income tax expense (benefit) (2)	(1,152)			(4)
After-tax operating income available to Arch common shareholders	$	945		$	806

Diluted per common share results:
Net income available to Arch common shareholders	$	6.12		$	2.26
Net realized (gains) losses (1)	(0.50)			(0.22)

Equity in net (income) loss of investment funds accounted for using the equity method	(0.27)			(0.11)
Net foreign exchange (gains) losses	0.16			0.22
Transaction costs and other	0.01			0.00

Income tax expense (benefit) (2)	(3.03)			(0.01)
After-tax operating income available to Arch common shareholders	$	2.49		$	2.14

Weighted average common shares and common share equivalents outstanding — diluted	379.8			375.9

Beginning common shareholders’ equity	$	14,409		$	10,966
Ending common shareholders’ equity	17,523			12,080
Average common shareholders’ equity	$	15,966		$	11,523

Annualized net income return on average common equity	58.2		%	29.5		%
Annualized operating return on average common equity	23.7		%	28.0		%

(1) Net realized gains or losses 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 and losses on derivative instruments and changes in the allowance for credit losses on financial assets.

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

Segment Information

The following section provides analysis on the Company’s 2023 fourth quarter performance by operating segment. For additional details regarding the Company’s operating segments, please refer to the Company’s Financial Supplement dated December 31, 2023. The Company’s segment information includes the use of underwriting income (loss) and a combined ratio excluding catastrophic activity and prior year development. Such items are non-GAAP financial measures (see ‘Comments on Regulation G’ for further details).

Insurance Segment


	Three Months Ended December 31,
(U.S. Dollars in millions)	2023			2022			% Change

Gross premiums written	$	1,934		$	1,644		17.6
Net premiums written	1,449			1,217			19.1
Net premiums earned	1,449			1,244			16.5

Underwriting income	$	99		$	98		1.0

Underwriting Ratios							% Point Change
Loss ratio	58.4		%	58.7		%	(0.3)
Underwriting expense ratio	34.7		%	33.4		%	1.3
Combined ratio	93.1		%	92.1		%	1.0

Catastrophic activity and prior year development:
Current accident year catastrophic events, net of reinsurance and reinstatement premiums	3.8		%	2.8		%	1.0
Net (favorable) adverse development in prior year loss reserves, net of related adjustments	(0.5)		%	(0.3)		%	(0.2)
Combined ratio excluding catastrophic activity and prior year development	89.8		%	89.6		%	0.2

Gross premiums written by the insurance segment in the 2023 fourth quarter were 17.6% higher than in the 2022 fourth quarter, while net premiums written were 19.1% higher than in the 2022 fourth quarter. Growth in net premiums written reflected increases in most lines of business, due in part to new business opportunities, increases in existing accounts and rate changes. In addition, the insurance segment retained a higher portion of business written in the 2023 fourth quarter than in the 2022 fourth quarter. Net premiums earned in the 2023 fourth quarter were 16.5% higher than in the 2022 fourth quarter, and reflect changes in net premiums written over the previous five quarters.

The 2023 fourth quarter loss ratio reflected 3.8 points of current year catastrophic activity, spread across a series of global events, compared to 2.8 points of catastrophic activity in the 2022 fourth quarter. Estimated net favorable development of prior year loss reserves, before related adjustments, reduced the loss ratio by 0.6 points in the 2023 fourth quarter, compared to 0.5 points in the 2022 fourth quarter. The improvement in the 2023 fourth quarter loss ratio also reflected the impact of rate increases and changes in mix of business.

The underwriting expense ratio was 34.7% in the 2023 fourth quarter, compared to 33.4% in the 2022 fourth quarter, with the increase primarily related to higher incentive compensation costs.

Reinsurance Segment


	Three Months Ended December 31,
(U.S. Dollars in millions)	2023			2022			% Change

Gross premiums written	$	1,971		$	1,797		9.7
Net premiums written	1,557			1,543			0.9
Net premiums earned	1,620			1,225			32.2
Other underwriting income (loss)	8			(1)			n/m

Underwriting income	$	330		$	263		25.5

Underwriting Ratios							% Point Change
Loss ratio	52.3		%	52.9		%	(0.6)
Underwriting expense ratio	27.7		%	25.5		%	2.2
Combined ratio	80.0		%	78.4		%	1.6

Catastrophic activity and prior year development:
Current accident year catastrophic events, net of reinsurance and reinstatement premiums	5.1		%	0.0		%	5.1
Net (favorable) adverse development in prior year loss reserves, net of related adjustments	(1.3)		%	(4.5)		%	3.2
Combined ratio excluding catastrophic activity and prior year development	76.2		%	82.9		%	(6.7)

Gross premiums written by the reinsurance segment in the 2023 fourth quarter were 9.7% higher than in the 2022 fourth quarter, while net premiums written were 0.9% higher than in the 2022 fourth quarter. The comparison of gross and net premiums written were affected by a few non-recurring transactions in the 2022 fourth quarter, primarily impacting the other specialty line of business. Absent these items, gross and net premiums written would have been higher than in the 2022 fourth quarter by 23.1% and 25.6%, respectively. The growth in net premiums written primarily reflected increases in property excluding property catastrophe and other specialty lines, due in part to rate increases, new business opportunities and growth in existing accounts. Net premiums earned in the 2023 fourth quarter were 32.2% higher than in the 2022 fourth quarter, and reflect changes in net premiums written over the previous five quarters.

The 2023 fourth quarter loss ratio reflected 5.4 points of current year catastrophic activity, spread across a series of global events, compared to minimal catastrophic activity in the 2022 fourth quarter. Estimated net favorable development of prior year loss reserves, before related adjustments, reduced the loss ratio by 1.6 points in the 2023 fourth quarter, compared to 5.2 points in the 2022 fourth quarter. The improvement in the 2023 fourth quarter loss ratio also reflected the impact of rate increases and changes in mix of business.

The underwriting expense ratio was 27.7% in the 2023 fourth quarter, compared to 25.5% in the 2022 fourth quarter, with the increase primarily related to the non-recurring transactions in the 2022 fourth quarter noted above and a higher level of incentive compensation costs in the 2023 fourth quarter.

Mortgage Segment


	Three Months Ended December 31,
(U.S. Dollars in millions)	2023			2022			% Change

Gross premiums written	$	350		$	356		(1.7)
Net premiums written	255			275			(7.3)
Net premiums earned	275			292			(5.8)
Other underwriting income (loss)	2			2			—

Underwriting income	$	286		$	373		(23.3)

Underwriting Ratios							% Point Change
Loss ratio	(20.6)		%	(46.9)		%	26.3
Underwriting expense ratio	17.3		%	19.8		%	(2.5)
Combined ratio	(3.3)		%	(27.1)		%	23.8

Prior year development:
Net (favorable) adverse development in prior year loss reserves, net of related adjustments	(39.0)		%	(72.1)		%	33.1
Combined ratio excluding prior year development	35.7		%	45.0		%	(9.3)

Gross premiums written by the mortgage segment in the 2023 fourth quarter were 1.7% lower than in the 2022 fourth quarter, while net premiums written were 7.3% lower. The reduction in net premiums written in the 2023 fourth quarter primarily reflected a higher level of premiums ceded, with $17 million of one-time payments related to the termination of eight Bellemeade agreements. Net premiums earned in the 2023 fourth quarter were 5.8% lower than in the 2022 fourth quarter, primarily due to termination of the Bellemeade agreements.

Estimated net favorable development of prior year loss reserves, before related adjustments, decreased the loss ratio by 36.6 points, primarily related to the 2022 accident year from the U.S. first lien portfolio and to a lesser extent the 2020 and 2021 accident years, compared to 71.1 points in the 2022 fourth quarter. Such amounts were primarily related to better than expected cure rates. The 2023 fourth quarter loss ratio, excluding net favorable development, was down compared to the 2022 fourth quarter, reflecting lower estimated claim rates partially offset by slightly higher new delinquencies.

The underwriting expense ratio was 17.3% in the 2023 fourth quarter, compared to 19.8% in the 2022 fourth quarter. The decrease was primarily due to higher level of ceding and profit commissions on ceded U.S. primary business.

Corporate Segment

The corporate segment results include net investment income, net realized gains or losses (which includes 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 and changes in the allowance for credit losses on financial assets), equity in net income or loss of investment funds accounted for using the equity method, other income (loss), corporate expenses, transaction costs and other, amortization of intangible assets, interest expense, net foreign exchange gains or losses, income tax items (which for the 2023 fourth quarter reflects the establishment of a net deferred tax asset related to the enactment of Bermuda’s new corporate income tax), 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
		December 31,			September 30,			December 31,
		2023			2023			2022
Pre-tax net investment income		$	313		$	269		$	181
Per share		$	0.82		$	0.71		$	0.48

Equity in net income (loss) of investment funds accounted for using the equity method		$	102		$	59		$	40
Per share		$	0.27		$	0.16		$	0.11

Pre-tax investment income yield, at amortized cost (1)		4.11		%	3.68		%	2.80		%

Total return on investments (2)		4.76		%	(0.40)		%	2.60		%

(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) Presentation represents a “non-GAAP” financial measure as defined in Regulation G. See ‘Comments on Regulation G’ for further details.

The growth in net investment income in the 2023 fourth quarter primarily reflected the effects of higher interest rates available in the market, along with growth in invested assets due in part to strong operating cash flows. Net realized gains were $189 million for the 2023 fourth quarter, compared to net realized gains of $80 million in the 2022 fourth quarter, and reflected sales of investments as well as the impact of financial market movements on the Company’s derivatives, equity securities and investments accounted for under the fair value option method.

On a pre-tax basis, net foreign exchange losses for the 2023 fourth quarter were $59 million, compared to net foreign exchange losses of $81 million for the 2022 fourth 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.

On December 27, 2023, the Government of Bermuda enacted the Corporate Income Tax Act 2023, which will apply a 15% corporate income tax to certain Bermuda businesses in fiscal years beginning on or after January 1, 2025. The act includes a provision referred to as the economic transition adjustment, which is intended to provide a fair and equitable transition into the tax regime. Pursuant to this legislation, the Company recorded a $1.18 billion net deferred tax asset in the fourth quarter of 2023, expected to be utilized predominantly over a 10-year period. The Company expects to incur and pay increased taxes in Bermuda beginning in 2025.

The Company’s effective tax rate on income before income taxes was a benefit of 85.6% for the 2023 fourth quarter and a benefit of 24.5% for the year ended December 31, 2023, compared to an expense of 6.6% for the 2022 fourth quarter and an expense of 5.1% for the year ended December 31, 2022. The Company’s effective tax rate on income before income taxes included the one-time deferred tax benefit mentioned above. The Company’s effective tax rate on pre-tax operating income available to Arch common shareholders was 7.3% for the 2023 fourth quarter and 8.0% for the year ended December 31, 2023, compared to 7.5% for the 2022 fourth quarter and 6.2% for the year ended December 31, 2022. 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 2023 fourth quarter was $69 million, or $0.18 per share, compared to $36 million, or $0.10 per share, for the 2022 fourth quarter, and primarily reflects amounts related to the Company’s investment in Somers Group Holdings Ltd. and Coface SA.

Conference Call

The Company will hold a conference call for investors and analysts at 11:00 a.m. Eastern Time on February 15, 2024. A live webcast of this call will be available via the Investors section of the Company’s website at http://www.archgroup.com/investors. A recording of the webcast will be available in the Investors section of the Company’s website approximately two hours after the event concludes and will be archived on the site for one year.

Please refer to the Company’s Financial Supplement dated December 31, 2023, which is available via the Investors section of the Company’s website at http://www.archgroup.com/investors. The Financial Supplement provides additional detail regarding the financial performance of the Company. From time to time, the Company posts additional financial information and presentations to its website, including information with respect to its subsidiaries. Investors and other recipients of this information are encouraged to check the Company’s website regularly for additional information regarding the Company.

Arch Capital Group Ltd., is a publicly listed Bermuda exempted company with approximately $21.1 billion in capital at December 31, 2023. Arch, which is part of the S&P 500 index, provides insurance, reinsurance and mortgage insurance on a worldwide basis through its wholly owned subsidiaries.

Comments on Regulation G

Throughout this release, the Company presents its operations in the way it believes will be the most meaningful and useful to investors, analysts, rating agencies and others who use the Company’s financial information in evaluating the performance of the Company and that investors and such other persons benefit from having a consistent basis for comparison between quarters and for comparison with other companies within the industry. These measures may not, however, be comparable to similarly titled measures used by companies outside of the insurance industry. Investors are cautioned not to place undue reliance on these non-GAAP financial measures in assessing the Company’s overall financial performance.

This presentation includes the use of “after-tax operating income or loss available to Arch common shareholders,” which is defined as net income available to Arch common shareholders, excluding net realized gains or losses (which includes changes in the allowance for credit losses on financial assets and net impairment losses recognized in earnings), equity in net income or loss of investment funds accounted for using the equity method, net foreign exchange gains or losses, transaction costs and other, net of income taxes (which for the 2023 fourth quarter reflects the establishment of a net deferred tax asset related to the enactment of Bermuda’s new corporate income tax), 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 on page 2 of this release.

The Company believes that net realized gains or losses, equity in net income or loss of investment funds 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, the Company’s business performance. Although net realized gains or losses, equity in net income or loss of investment funds accounted for using the equity method and net foreign exchange gains or losses are an integral part of the Company’s 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 the Company’s financial information believe that, for many companies, the timing of the realization of investment gains or losses is largely opportunistic. In addition, changes in the allowance for credit losses and net impairment losses recognized in earnings on the Company’s investments represent other-than-temporary declines in expected recovery values on securities without actual realization.

The use of the equity method on certain of the Company’s investments in certain funds that invest in fixed maturity securities is driven by the ownership structure of such funds (either limited partnerships or limited liability companies). In applying the equity method, these investments are initially recorded at cost and are subsequently adjusted based on the Company’s proportionate share of the net income or loss of the funds (which include changes in the fair value of the underlying securities in the funds). This method of accounting is different from the way the Company accounts for its other fixed maturity securities and the timing of the recognition of equity in net income or loss of investment funds 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 advisory, financing, legal, severance, incentive compensation and other costs related to acquisitions. The Company believes that transaction costs and other, due to their non-recurring nature, are not indicative of the performance of, or trends in, the Company’s business performance.

In the 2023 fourth quarter, the Company established a net deferred tax benefit of $1.18 billion consistent with the transition provisions specified in the Bermuda Corporate Income Tax Act of 2023. Due to the non-recurring nature of this one-time item, the Company believes that excluding this item from after-tax operating income or loss available to common shareholders provides the user with a better evaluation of the Company’s ongoing business performance.

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

The Company’s segment information includes the presentation of consolidated underwriting income or loss and a subtotal of underwriting income or loss. Such measures represent the pre-tax profitability of its 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 the Company’s individual underwriting operations. Underwriting income or loss does not incorporate items included in the Company’s corporate segment. While these measures are presented in the Segment Information footnote to the Company’s 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 on the following pages.

Management measures segment performance for its three underwriting segments based on underwriting income or loss. The Company does not manage its assets by underwriting segment and, accordingly, investment income, income from operating affiliates and other corporate segment related items are not allocated to each underwriting segment.

In addition, the Company’s segment information includes the use of a combined ratio excluding catastrophic activity and prior year development, for the insurance and reinsurance segments, and a combined ratio excluding prior year development, for the mortgage segment. These ratios are non-GAAP financial measures as defined in Regulation G. The reconciliation of such measures to the combined ratio (the most directly comparable GAAP financial measure) in accordance with Regulation G are shown on the individual segment pages. The Company’s management utilizes the adjusted combined ratios excluding current accident year catastrophic events and favorable or adverse development in prior year loss reserves in its analysis of the underwriting performance of each of its underwriting segments.

Total return on investments includes investment income, equity in net income or loss of investment funds accounted for using the equity method, net realized gains and losses (excluding changes in the allowance for credit losses on non-investment related financial assets) and the change in unrealized gains and 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. Management uses total return on investments as a key measure of the return generated to Arch common shareholders, and compares the return generated by the Company’s investment portfolio against benchmark returns during the periods presented.

The following tables summarize the Company’s results by segment for the 2023 fourth quarter and 2022 fourth quarter and a reconciliation of underwriting income or loss to income or loss before income taxes and net income or loss available to Arch common shareholders:


(U.S. Dollars in millions)	Three Months Ended
	December 31, 2023
	Insurance			Reinsurance			Mortgage			Total
Gross premiums written (1)	$	1,934		$	1,971		$	350		$	4,251
Premiums ceded	(485)			(414)			(95)			(990)
Net premiums written	1,449			1,557			255			3,261
Change in unearned premiums	—			63			20			83
Net premiums earned	1,449			1,620			275			3,344
Other underwriting income (loss)	—			8			2			10
Losses and loss adjustment expenses	(846)			(848)			57			(1,637)
Acquisition expenses	(277)			(365)			(1)			(643)
Other operating expenses	(227)			(85)			(47)			(359)
Underwriting income (loss)	$	99		$	330		$	286		715

Net investment income										313
Net realized gains (losses)										189

Equity in net income (loss) of investment funds accounted for using the equity method										102
Other income (loss)										17
Corporate expenses (2)										(27)
Transaction costs and other (2)										(4)
Amortization of intangible assets										(24)
Interest expense										(34)
Net foreign exchange gains (losses)										(59)
Income (loss) before income taxes and income (loss) from operating affiliates										1,188
Income tax benefit (expense)										1,076
Income (loss) from operating affiliates										69
Net income (loss)										2,333
Dividends attributable to redeemable noncontrolling interests										1

Net income (loss) available to Arch										2,334
Preferred dividends										(10)

Net income (loss) available to Arch common shareholders										$	2,324

Underwriting Ratios
Loss ratio	58.4		%	52.3		%	(20.6)		%	49.0		%
Acquisition expense ratio	19.1		%	22.5		%	0.2		%	19.2		%
Other operating expense ratio	15.6		%	5.2		%	17.1		%	10.7		%
Combined ratio	93.1		%	80.0		%	(3.3)		%	78.9		%

Net premiums written to gross premiums written	74.9		%	79.0		%	72.9		%	76.7		%

(1) Certain amounts included in the gross premiums written of each segment are related to intersegment transactions and are included in the gross premiums written of each segment. Accordingly, the sum of gross premiums written for each segment does not agree to the total gross premiums written as shown in the table above due to the elimination of intersegment transactions in the total.

(2) Certain expenses have been excluded from ‘corporate expenses’ and reflected in ‘Transaction costs and other.’ See ‘Comments on Regulation G’ for a further discussion of such items.


(U.S. Dollars in millions)	Three Months Ended
	December 31, 2022
	Insurance			Reinsurance			Mortgage			Total
Gross premiums written (1)	$	1,644		$	1,797		$	356		$	3,795
Premiums ceded	(427)			(254)			(81)			(760)
Net premiums written	1,217			1,543			275			3,035
Change in unearned premiums	27			(318)			17			(274)
Net premiums earned	1,244			1,225			292			2,761
Other underwriting income (loss)	—			(1)			2			1
Losses and loss adjustment expenses	(730)			(648)			137			(1,241)
Acquisition expenses	(244)			(244)			(13)			(501)
Other operating expenses	(172)			(69)			(45)			(286)
Underwriting income (loss)	$	98		$	263		$	373		734

Net investment income										181
Net realized gains (losses)										80

Equity in net income (loss) of investment funds accounted for using the equity method										40
Other income (loss)										8
Corporate expenses (2)										(17)
Transaction costs and other (2)										—
Amortization of intangible assets										(26)
Interest expense										(32)
Net foreign exchange gains (losses)										(81)
Income (loss) before income taxes and income (loss) from operating affiliates										887
Income tax benefit (expense)										(61)
Income (loss) from operating affiliates										36
Net income (loss)										862
Dividends attributable to redeemable noncontrolling interests										(3)

Net income (loss) available to Arch										859
Preferred dividends										(10)

Net income (loss) available to Arch common shareholders										$	849

Underwriting Ratios
Loss ratio	58.7		%	52.9		%	(46.9)		%	45.0		%
Acquisition expense ratio	19.6		%	19.9		%	4.4		%	18.1		%
Other operating expense ratio	13.8		%	5.6		%	15.4		%	10.4		%
Combined ratio	92.1		%	78.4		%	(27.1)		%	73.5		%

Net premiums written to gross premiums written	74.0		%	85.9		%	77.2		%	80.0		%

(2) Certain expenses have been excluded from ‘corporate expenses’ and reflected in ‘Transaction costs and other.’ See ‘Comments on Regulation G’ for a further discussion of such items.

Cautionary Note Regarding Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 (“PSLRA”) provides a “safe harbor” for forward-looking statements. This release or any other written or oral statements made by or on behalf of the Company may include forward-looking statements, which reflect the Company’s current views with respect to future events and financial performance. All statements other than statements of historical fact included in or incorporated by reference in this release are forward-looking statements. Forward-looking statements, for purposes of the PSLRA or otherwise, can generally be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe” or “continue” and similar statements of a future or forward-looking nature or their negative or variations or similar terminology.

Forward-looking statements involve the Company’s current assessment of risks and uncertainties. Actual events and results may differ materially from those expressed or implied in these statements. Important factors that could cause actual events or results to differ materially from those indicated in such statements are discussed below and elsewhere in this release and in the Company’s periodic reports filed with the Securities and Exchange Commission (the “SEC”), and include:

•the Company’s ability to successfully implement its business strategy during “soft” as well as “hard” markets;

•acceptance of the Company’s business strategy, security and financial condition by rating agencies and regulators, as well as by brokers and its insureds and reinsureds;

•the Company’s ability to consummate acquisitions and integrate any businesses it has acquired or may acquire into its existing operations;

•the Company’s ability to maintain or improve its ratings, which may be affected by its ability to raise additional equity or debt financings, by ratings agencies’ existing or new policies and practices, as well as other factors described herein;

•general economic and market conditions (including inflation, interest rates, unemployment, housing prices, foreign currency exchange rates, prevailing credit terms and the depth and duration of a recession, including those resulting from COVID-19) and conditions specific to the reinsurance and insurance markets in which the Company operates;

•competition, including increased competition, on the basis of pricing, capacity (including alternative sources of capital), coverage terms or other factors;

•developments in the world’s financial and capital markets and the Company’s access to such markets;

•the Company’s ability to successfully enhance, integrate and maintain operating procedures (including information technology) to effectively support its current and new business;

•the loss and addition of key personnel;

•material differences between actual and expected assessments for guaranty funds and mandatory pooling arrangements;

•accuracy of those estimates and judgments utilized in the preparation of the Company’s financial statements, including those related to revenue recognition, insurance and other reserves, reinsurance recoverables, investment valuations, intangible assets, bad debts, income taxes, deferred tax assets, contingencies and litigation, and any determination to use the deposit method of accounting;

•greater than expected loss ratios on business written by the Company and adverse development on claim and/or claim expense liabilities related to business written by its insurance and reinsurance subsidiaries;

•the adequacy of the Company’s loss reserves;

•severity and/or frequency of losses;

•greater frequency or severity of unpredictable natural and man-made catastrophic events;

•claims resulting from natural or man-made catastrophic events or severe economic events in the Company’s insurance, reinsurance and mortgage businesses could cause large losses and substantial volatility in the Company’s results of operations;

•the effect of climate change on the Company’s business;

•the effect of contagious diseases (including COVID-19) on the Company’s business;

•acts of terrorism, geopolitical political unrest and other regional and global hostilities or other unforecasted and unpredictable events;

•availability to the Company of reinsurance to manage its gross and net exposures and the cost of such reinsurance;

•the failure of reinsurers, managing general agents, third party administrators or others to meet their obligations to the Company;

•the timing of loss payments being faster or the receipt of reinsurance recoverables being slower than anticipated by the Company;

•the Company’s investment performance, including legislative or regulatory developments that may adversely affect the fair value of the Company’s investments;

•changes in general economic conditions, including new or continued sovereign debt concerns or downgrades of U.S. securities by credit rating agencies, which could affect the Company’s business, financial condition and results of operations;

•the volatility of the Company’s shareholders’ equity from foreign currency fluctuations, which could increase due to us not matching portions of the Company’s projected liabilities in foreign currencies with investments in the same currencies;

•changes in accounting principles or policies or in the Company’s application of such accounting principles or policies;

•changes in the political environment of certain countries in which the Company operates, underwrites business or invests;

•an incident, disruption in operations or other cyber event caused by cyber attacks, the use of artificial intelligence technologies or other technology on the Company’s systems or those of the Company’s business partners and service providers, which could negatively impact the Company’s business and/or expose the Company to litigation;

•statutory or regulatory developments, including as to tax matters and insurance and other regulatory matters such as the adoption of legislation that affects Bermuda-headquartered companies and/or Bermuda-based insurers or reinsurers and/or changes in regulations or tax laws applicable to the Company, its subsidiaries, brokers or customers, including the implementation of the Organization for Economic Cooperation and Development (“OECD”) Pillar I and Pillar II initiative and the enactment of the Bermuda corporate income tax; and

•the other matters set forth under Item 1A “Risk Factors”, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other sections of the Company’s Annual Report on Form 10-K, as well as the other factors set forth in the Company’s other documents on file with the SEC, and management’s response to any of the aforementioned factors.

All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with other cautionary statements that are included herein or elsewhere. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.


Contacts
Arch Capital Group Ltd.			Investor Relations
François Morin: (441) 278-9250			Donald Watson: (914) 872-3616; dwatson@archgroup.com


Source - Arch Capital Group Ltd.
arch-corporate

EXHIBIT 99.2




			Arch Capital Group Ltd.
			Waterloo House, Ground Floor
			100 Pitts Bay Road
			Pembroke HM 08 Bermuda

Financial Supplement

December 31, 2023

The following financial supplement is provided to assist in your understanding of Arch Capital Group Ltd. (“Arch”) and its subsidiaries (collectively, the “Company”).

This report is for informational purposes only. It should be read in conjunction with documents filed by Arch with the U.S. Securities and Exchange Commission, including the most recent Annual Report on Form 10-K and the Quarterly Reports on Form 10-Q. Please refer to the Company’s website at www.archgroup.com for further information describing Arch.




Arch Capital Group Ltd.			Investor Relations
François Morin: (441) 278-9250			Donald Watson: (914) 872-3616; dwatson@archgroup.com

Arch Capital Group Ltd. and Subsidiaries

Table of Contents


			Page

I.	Financial Highlights		3

II.	Consolidated Financial Statements
	a.	Consolidated Statements of Income	4

	b.	Consolidated Balance Sheets	5
	c.	Consolidated Statements of Changes in Shareholders’ Equity	6
	d.	Consolidated Statements of Cash Flows	7

III.	Segment Information
	a.	Overview	8
	b.	Consolidated Results	9
	c.	Insurance Segment Results	13
	d.	Reinsurance Segment Results	15
	e.	Mortgage Segment Results	17
	f.	Segment Consolidated Results	22
	g.	Selected Information on Losses and Loss Adjustment Expenses	23

IV.	Investment Information
	a.	Investable Asset Summary and Investment Portfolio Metrics	24
	b.	Composition of Net Investment Income, Yield and Total Return	25
	c.	Composition of Fixed Maturities	26
	d.	Credit Quality Distribution and Maturity Profile	27
	e.	Analysis of Corporate Exposures	28
	f.	Structured Securities	29

V.	Other
	a.	Comments on Regulation G	30
	b.	Operating Income Reconciliation and Annualized Operating Return on Average Common Equity	31
	c.	Operating Income and Effective Tax Rate Calculations	32
	d.	Capital Structure and Share Repurchase Activity	33


			1

Arch Capital Group Ltd. and Subsidiaries

Basis of Presentation

All financial information contained herein is unaudited, however, certain information relating to the consolidated balance sheet at December 31, 2022 is derived from or agrees to audited financial information. Unless otherwise noted, all amounts are in millions, except for per share amounts and ratio information. Amounts presented have been rounded for presentation purposes and may not reconcile due to rounding differences.

Cautionary Note Regarding Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. This release or any other written or oral statements made by or on behalf of Arch and its subsidiaries may include forward-looking statements, which reflect the Company’s current views with respect to future events and financial performance. All statements other than statements of historical fact included in or incorporated by reference in this release are forward-looking statements.

Forward-looking statements can generally be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe” or “continue” or their negative or variations or similar terminology. Forward-looking statements involve the Company’s current assessment of risks and uncertainties. Actual events and results may differ materially from those expressed or implied in these statements. A non-exclusive list of the important factors that could cause actual results to differ materially from those in such forward-looking statements includes the following: adverse general economic and market conditions; increased competition; pricing and policy term trends; fluctuations in the actions of rating agencies and the Company’s ability to maintain and improve the Company’s ratings; investment performance; the loss and addition of key personnel; the adequacy of the Company’s loss reserves, severity and/or frequency of losses, greater than expected loss ratios and adverse development on claim and/or claim expense liabilities; greater frequency or severity of unpredictable natural and man-made catastrophic events, including pandemics such as COVID-19; the impact of acts of terrorism and acts of war; changes in regulations and/or tax laws in the United States or elsewhere; the Company’s ability to successfully integrate, establish and maintain operating procedures as well as integrate the businesses we have acquired or may acquire into the existing operations; changes in accounting principles or policies; material differences between actual and expected assessments for guaranty funds and mandatory pooling arrangements; availability and cost to the Company of reinsurance to manage gross and net exposures; the failure of others to meet their obligations to the Company; an incident, disruption in operations or other cyber event caused by cyber attacks, the use of artificial intelligence technologies or other technology on the Company’s systems or those of the Company’s business partners and service providers, which could negatively impact the Company’s business and/or expose the Company to litigation; and other factors identified in the Company’s filings with the U.S. Securities and Exchange Commission.

The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with other cautionary statements that are included herein or elsewhere. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on the Company’s behalf are expressly qualified in their entirety by these cautionary statements. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.


			2

Arch Capital Group Ltd. and Subsidiaries

Financial Highlights

The following table presents financial highlights:


(U.S. Dollars and shares in millions, except per share data)	Three Months Ended								Year Ended
	December 31,								December 31,
	2023			2022			Change		2023			2022			Change
Underwriting results:
Gross premiums written	$	4,251		$	3,795		12.0	%	$	18,403		$	15,327		20.1	%
Net premiums written	3,261			3,035			7.4	%	13,468			11,078			21.6	%
Net premiums earned	3,344			2,761			21.1	%	12,440			9,679			28.5	%
Underwriting income (loss) (1)	715			734			(2.6)	%	2,612			1,796			45.4	%

Loss ratio	49.0		%	45.0		%	4.0		50.2		%	51.9		%	(1.7)
Acquisition expense ratio	19.2		%	18.1		%	1.1		18.6		%	18.0		%	0.6
Other operating expense ratio	10.7		%	10.4		%	0.3		10.5		%	11.7		%	(1.2)
Combined ratio	78.9		%	73.5		%	5.4		79.3		%	81.6		%	(2.3)

Net investment income	$	313		$	181		72.9	%	$	1,023		$	496		106.3	%
Per diluted share	$	0.82		$	0.48		70.8	%	$	2.70		$	1.31		106.1	%

Net income available to Arch common shareholders	$	2,324		$	849		173.7	%	$	4,403		$	1,436		206.6	%
Per diluted share	$	6.12		$	2.26		170.8	%	$	11.62		$	3.80		205.8	%

After-tax operating income available to Arch common shareholders (1)	$	945		$	806		17.2	%	$	3,201		$	1,840		74.0	%
Per diluted share	$	2.49		$	2.14		16.4	%	$	8.45		$	4.87		73.5	%

Comprehensive income (loss) available to Arch	$	3,111		$	1,105		181.5	%	$	5,413		$	(105)		n/m

Net cash provided by operating activities	$	1,665		$	982		69.6	%	$	5,749		$	3,816		50.7	%

Weighted average common shares and common share equivalents outstanding — diluted	379.8			375.9			1.0	%	378.8			377.6			0.3	%

Financial measures:
Change in book value per common share during period	21.5		%	9.9		%	11.6		43.9		%	(2.8)		%	46.7

Annualized net income return on average common equity	58.2		%	29.5		%	28.7		29.7		%	11.6		%	18.1
Annualized operating return on average common equity (1)	23.7		%	28.0		%	(4.3)		21.6		%	14.8		%	6.8

Total return on investments (2)	4.76		%	2.60		%	215 bps		7.57		%	(6.45)		%	1402 bps

(1)See ‘Comments on Regulation G’ for a further discussion of consolidated underwriting income or loss, after-tax operating income or loss available to Arch common shareholders and annualized operating return on average common equity.

(2)Total return on investments includes investment income, equity in net income (loss) of investment funds accounted for using the equity method, net realized gains and losses and the change in unrealized gains and losses and is calculated on a pre-tax basis and before investment expenses. See ‘Comments on Regulation G’ for a further discussion of the presentation of total return on investments.


			3

Arch Capital Group Ltd. and Subsidiaries

Consolidated Statements of Income


(U.S. Dollars and shares in millions, except per share data)	Three Months Ended										Year Ended
	December 31,		September 30,		June 30,		March 31,		December 31,		December 31,		December 31,
	2023		2023		2023		2023		2022		2023		2022
Revenues


Net premiums earned	$	3,344	$	3,248	$	2,965	$	2,883	$	2,761	$	12,440	$	9,679
Net investment income	313		269		242		199		181		1,023		496
Net realized gains (losses)	189		(248)		(123)		17		80		(165)		(663)

Other underwriting income	10		5		6		10		1		31		13
Equity in net income (loss) of investment funds accounted for using the equity method	102		59		69		48		40		278		115
Other income (loss)	17		(4)		3		11		8		27		(27)
Total revenues	3,975		3,329		3,162		3,168		3,071		13,634		9,613

Expenses
Losses and loss adjustment expenses	(1,637)		(1,647)		(1,491)		(1,471)		(1,241)		(6,246)		(5,028)
Acquisition expenses	(643)		(575)		(561)		(533)		(501)		(2,312)		(1,740)
Other operating expenses	(359)		(310)		(313)		(319)		(286)		(1,301)		(1,128)
Corporate expenses	(31)		(20)		(21)		(30)		(17)		(102)		(95)
Amortization of intangible assets	(24)		(24)		(24)		(23)		(26)		(95)		(106)
Interest expense	(34)		(34)		(33)		(32)		(32)		(133)		(131)
Net foreign exchange gains (losses)	(59)		22		(5)		(18)		(81)		(60)		102
Total expenses	(2,787)		(2,588)		(2,448)		(2,426)		(2,184)		(10,249)		(8,126)

Income (loss) before income taxes and income (loss) from operating affiliates	1,188		741		714		742		887		3,385		1,487
Income tax (expense) benefit	1,076		(72)		(67)		(64)		(61)		873		(80)
Income (loss) from operating affiliates	69		54		22		39		36		184		75
Net income (loss)	2,333		723		669		717		862		4,442		1,482
Net (income) loss attributable to noncontrolling interests	1		—		2		(2)		(3)		1		(6)
Net income (loss) attributable to Arch	2,334		723		671		715		859		4,443		1,476
Preferred dividends	(10)		(10)		(10)		(10)		(10)		(40)		(40)

Net income (loss) available to Arch common shareholders	$	2,324	$	713	$	661	$	705	$	849	$	4,403	$	1,436

Comprehensive income (loss) available to Arch	$	3,111	$	589	$	649	$	1,064	$	1,105	$	5,413	$	(105)

Net income (loss) per common share and common share equivalent
Basic	$	6.29	$	1.93	$	1.79	$	1.92	$	2.32	$	11.94	$	3.90
Diluted	$	6.12	$	1.88	$	1.75	$	1.87	$	2.26	$	11.62	$	3.80

Weighted average common shares and common share equivalents outstanding
Basic	369.6		369.2		368.7		367.3		365.9		368.7		368.6
Diluted	379.8		379.4		378.4		377.6		375.9		378.8		377.6


			4

Arch Capital Group Ltd. and Subsidiaries

Consolidated Balance Sheets


(U.S. Dollars and shares in millions, except per share data)	December 31,		September 30,		June 30,		March 31,		December 31,
	2023		2023		2023		2023		2022
Assets
Investments:
Fixed maturities available for sale, at fair value	$	23,553	$	22,485	$	21,434	$	20,692	$	19,683
Short-term investments available for sale, at fair value	2,063		1,682		1,702		1,553		1,332

Equity securities, at fair value	1,186		894		911		859		860

Other investments	2,488		2,068		1,846		1,776		1,644
Investments accounted for using the equity method	4,566		4,251		4,073		3,896		3,774
Total investments	33,856		31,380		29,966		28,776		27,293
Cash	917		859		904		803		855
Accrued investment income	236		217		233		163		159


Investment in operating affiliates	1,119		1,000		973		1,015		965
Premiums receivable	4,644		4,937		5,296		4,513		3,625
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses	7,064		6,821		6,717		6,612		6,564
Contractholder receivables	1,814		1,805		1,761		1,750		1,731
Ceded unearned premiums	2,170		2,444		2,459		2,116		1,799
Deferred acquisition costs	1,531		1,483		1,452		1,355		1,264
Receivable for securities sold	63		59		97		84		12
Goodwill and intangible assets	731		739		775		785		804

Other assets	4,761		3,483		3,223		3,131		2,919
Total assets	$	58,906	$	55,227	$	53,856	$	51,103	$	47,990

Liabilities
Reserve for losses and loss adjustment expenses	$	22,752	$	21,836	$	21,268	$	20,758	$	20,032
Unearned premiums	8,808		9,074		9,052		8,218		7,337
Reinsurance balances payable	2,000		2,215		2,191		1,819		1,530
Contractholder payables	1,817		1,807		1,764		1,752		1,734
Collateral held for insured obligations	259		274		275		252		249
Senior notes	2,726		2,726		2,726		2,726		2,725


Payable for securities purchased	247		417		526		262		95
Other liabilities	1,942		1,637		1,411		1,317		1,367
Total liabilities	40,551		39,986		39,213		37,104		35,069

Redeemable noncontrolling interests	2		2		2		11		11

Shareholders’ equity
Non-cumulative preferred shares	830		830		830		830		830

Common shares	1		1		1		1		1
Additional paid-in capital	2,327		2,297		2,278		2,260		2,211
Retained earnings	20,295		17,971		17,258		16,597		15,892
Accumulated other comprehensive income (loss), net of deferred income tax	(676)		(1,453)		(1,319)		(1,297)		(1,646)
Common shares held in treasury, at cost	(4,424)		(4,407)		(4,407)		(4,403)		(4,378)


Total shareholders’ equity	18,353		15,239		14,641		13,988		12,910
Total liabilities, noncontrolling interests and shareholders’ equity	$	58,906	$	55,227	$	53,856	$	51,103	$	47,990

Common shares and common share equivalents outstanding, net of treasury shares	373.3		373.1		372.9		372.2		370.3
Book value per common share (1)	$	46.94	$	38.62	$	37.04	$	35.35	$	32.62

(1) Excludes the effects of stock options and restricted stock units outstanding.


			5

Arch Capital Group Ltd. and Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity


(U.S. Dollars in millions)	Three Months Ended										Year Ended
	December 31,		September 30,		June 30,		March 31,		December 31,		December 31,		December 31,
	2023		2023		2023		2023		2022		2023		2022
Non-cumulative preferred shares



Balance at beginning and end of period	$	830	$	830	$	830	$	830	$	830	$	830	$	830







Common shares


Balance at beginning and end of period	1		1		1		1		1		1		1

Additional paid-in capital
Balance at beginning of period	2,297		2,278		2,260		2,211		2,187		2,211		2,085





Amortization of share-based compensation	20		15		17		41		8		93		88



All other	10		4		1		8		16		23		38
Balance at end of period	2,327		2,297		2,278		2,260		2,211		2,327		2,211

Retained earnings
Balance at beginning of period	17,971		17,258		16,597		15,892		15,043		15,892		14,456


Net income	2,333		723		669		717		862		4,442		1,482
Amounts attributable to noncontrolling interests	1		—		2		(2)		(3)		1		(6)
Preferred share dividends	(10)		(10)		(10)		(10)		(10)		(40)		(40)

Balance at end of period	20,295		17,971		17,258		16,597		15,892		20,295		15,892

Accumulated other comprehensive income (loss), net of deferred income tax
Balance at beginning of period	(1,453)		(1,319)		(1,297)		(1,646)		(1,892)		(1,646)		(65)

Change in unrealized appreciation (decline) in value of available-for-sale investments	721		(94)		(24)		344		161		947		(1,525)
Change in foreign currency translation adjustments	56		(40)		2		5		85		23		(56)
Balance at end of period	(676)		(1,453)		(1,319)		(1,297)		(1,646)		(676)		(1,646)

Common shares held in treasury, at cost
Balance at beginning of period	(4,407)		(4,407)		(4,403)		(4,378)		(4,373)		(4,378)		(3,761)
Shares repurchased for treasury	(17)		—		(4)		(25)		(5)		(46)		(617)
Balance at end of period	(4,424)		(4,407)		(4,407)		(4,403)		(4,378)		(4,424)		(4,378)



Total shareholders’ equity	$	18,353	$	15,239	$	14,641	$	13,988	$	12,910	$	18,353	$	12,910


			6

Arch Capital Group Ltd. and Subsidiaries

Consolidated Statements of Cash Flows


(U.S. Dollars in millions)	Three Months Ended										Year Ended
	December 31,		September 30,		June 30,		March 31,		December 31,		December 31,		December 31,
	2023		2023		2023		2023		2022		2023		2022
Operating Activities
Net income (loss)	$	2,333	$	723	$	669	$	717	$	862	$	4,442	$	1,482
Adjustments to reconcile net income to net cash provided by operating activities:
Net realized (gains) losses	(185)		257		127		(17)		(91)		182		651

Equity in net (income) or loss of investment funds accounted for using the equity method and other income or loss	(111)		(55)		17		(66)		47		(215)		154
Amortization of intangible assets	24		24		24		23		26		95		106
Share-based compensation	20		15		17		41		8		93		88
Changes in:
Reserve for losses and loss adjustment expenses, net	534		584		417		603		336		2,138		1,890
Unearned premiums, net	(83)		107		463		541		274		1,028		1,399
Premiums receivable	352		315		(777)		(871)		(14)		(981)		(1,110)
Deferred acquisition costs	(45)		(38)		(77)		(75)		(132)		(235)		(374)
Reinsurance balances payable	(237)		40		373		279		(164)		455		(36)
Deferred income tax assets, net	(1,201)		(18)		24		34		38		(1,161)		(121)
Other items, net	264		16		(126)		(246)		(208)		(92)		(313)
Net cash provided by operating activities	1,665		1,970		1,151		963		982		5,749		3,816
Investing Activities
Purchases of fixed maturity investments	(5,038)		(4,184)		(4,939)		(3,901)		(3,325)		(18,062)		(16,390)
Purchases of equity securities	(280)		(72)		(96)		(8)		(10)		(456)		(797)
Purchases of other investments	(1,059)		(555)		(291)		(266)		(450)		(2,171)		(1,720)
Proceeds from sales of fixed maturity investments	4,450		2,576		4,045		3,034		1,854		14,105		11,844
Proceeds from sales of equity securities	72		55		86		75		14		288		1,554
Proceeds from sales, redemptions and maturities of other investments	423		144		105		96		145		768		1,220
Proceeds from redemptions and maturities of fixed maturity investments	192		221		188		180		137		781		715
Net settlements of derivative instruments	119		(115)		32		14		37		50		(69)

Net (purchases) sales of short-term investments	(373)		10		(125)		(208)		619		(696)		467




Purchases of fixed assets	(15)		(11)		(15)		(11)		(13)		(52)		(50)
Other	(23)		(4)		5		(1)		(3)		(23)		125
Net cash provided by (used for) investing activities	(1,532)		(1,935)		(1,005)		(996)		(995)		(5,468)		(3,101)
Financing Activities


Purchases of common shares under share repurchase program	—		—		—		—		—		—		(586)
Proceeds from common shares issued, net	(7)		5		18		(18)		9		(2)		6




Change in third party investment in redeemable noncontrolling interests	—		—		(22)		—		—		(22)		—

Other	—		(2)		(1)		(2)		(1)		(5)		(86)
Preferred dividends paid	(10)		(10)		(10)		(10)		(10)		(40)		(40)
Net cash provided by (used for) financing activities	(17)		(7)		(15)		(30)		(2)		(69)		(706)
Effects of exchange rate changes on foreign currency cash and restricted cash	27		(26)		7		5		30		13		(50)
Increase (decrease) in cash and restricted cash	143		2		138		(58)		15		225		(41)
Cash and restricted cash, beginning of period	1,355		1,353		1,215		1,273		1,258		1,273		1,314
Cash and restricted cash, end of period	$	1,498	$	1,355	$	1,353	$	1,215	$	1,273	$	1,498	$	1,273
Income taxes paid (received)	$	140	$	54	$	69	$	4	$	53	$	267	$	255
Interest paid	$	64	$	—	$	63	$	—	$	63	$	127	$	128


			7

Arch Capital Group Ltd. and Subsidiaries

Segment Information — Overview

The Company’s 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 the Company’s chief operating decision makers, the Chief Executive Officer, the Chief Financial Officer and Treasurer and the President and Chief Underwriting Officer. The chief operating decision makers do not assess performance, measure return on equity or make resource allocation decisions on a line of business basis. Management measures segment performance for its three underwriting segments based on underwriting income or loss. The Company does not manage its assets by underwriting segment and, accordingly, investment income is not allocated to each underwriting segment.

The Company determined its reportable operating 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 the Company’s consolidated financial statements. Intersegment business is allocated to the segment accountable for the underwriting results.

Insurance Segment

The insurance segment consists of the Company’s insurance underwriting units which offer specialty product lines on a worldwide basis. Product lines include:

• Construction and national accounts: primary and excess casualty coverages for middle market and large construction accounts, a comprehensive range of products for middle market accounts in specialty industries and casualty solutions for large national accounts, including loss sensitive primary insurance programs (large deductible, self-insured retention and retrospectively rated programs).

• Excess and surplus casualty: primary and excess casualty insurance coverages written on a non-admitted basis.

• Professional lines: directors’ and officers’ liability, errors and omissions liability, employment practices liability, fiduciary liability, crime, professional indemnity and other financial related coverages for corporate, private equity, venture capital, real estate investment trust, limited partnership, financial institution and not-for-profit clients of all sizes, cyber insurance, and medical professional and general liability insurance coverages for the healthcare industry. The business is predominately written on a claims-made basis.

• Programs: primarily targeting program managers with unique expertise and niche products offering some combination of general liability, commercial automobile, property, inland marine, umbrella and workers’ compensation.

• Property, energy, marine and aviation: primary and excess general property insurance coverages, including catastrophe-exposed property coverage, for commercial clients. Coverages for marine include hull, cargo, war, specie and liability. Aviation, standalone terrorism and political risks are also offered. Coverage may be provided for operational and construction risk.

• Travel, accident and health: specialty travel and accident and related insurance products for individual, group travelers, travel agents and suppliers, as well as accident and health, which provides accident, disability and medical plan insurance coverages for employer groups, medical plan members, students and other participant groups.

•Warranty and lenders solutions: collateral protection, debt cancellation and service contract reimbursement products to banks, credit unions, automotive dealerships and original equipment manufacturers and other specialty programs that pertain to automotive lending and leasing.

• Other: includes alternative market risks (including captive insurance programs), excess workers’ compensation and employer’s liability insurance coverages for qualified self-insured groups, associations and trusts, and contract, commercial and transactional surety coverages.

Reinsurance Segment

The reinsurance segment consists of the Company’s reinsurance underwriting units which offer specialty product lines on a worldwide basis. Reinsurance agreements are typically offered on a proportional and/or excess of loss basis and provide coverage to ceding company clients for specific underlying written policies. Product lines include:

•Casualty: provides coverage on third party liability exposures including, among others, executive assurance, professional liability, excess and umbrella liability, excess motor and healthcare business, and workers’ compensation. Business is assumed primarily on a treaty basis, with some facultative coverages also offered.

•Marine and aviation: provides coverage for energy, hull, cargo, specie, liability and transit, and aviation business, including airline and general aviation risks. Business written may also include space business, which includes coverages for satellite assembly, launch and operation for commercial space programs.

•Other specialty: provides coverage for proportional motor reinsurance, whole account multi-line treaties, cyber, trade credit and surety, accident and health, workers’ compensation catastrophe, agriculture and political risk, among others.

•Property catastrophe: provides protection for most types of catastrophic losses, including hurricane, earthquake, flood, tornado, hail and fire, and for other perils on a case-by-case basis. Excess of loss coverages are triggered when aggregate losses and loss adjustment expense from a single occurrence of a covered peril exceed the retention specified in the contract.

•Property excluding property catastrophe: provides coverage for personal lines and/or commercial property exposures and principally covers buildings, structures, equipment and contents. The primary perils in this business include fire, explosion, collapse, riot, vandalism, wind, tornado, flood and earthquake. Business is assumed on either a treaty or facultative basis.

•Other: primarily includes life reinsurance business.

Mortgage Segment

The mortgage segment includes the Company’s underwriting units which offer mortgage insurance and reinsurance products on a worldwide basis. Underwriting units include:

•U.S. primary mortgage insurance: offers private mortgage insurance through Arch Mortgage Insurance Company and United Guaranty Residential Insurance Company (combined “Arch MI U.S.”), both approved eligible mortgage insurers by Fannie Mae and Freddie Mac. Arch MI U.S. also includes Arch Mortgage Guaranty Company, which is not a government sponsored enterprise (“GSE”) approved entity.

•U.S. credit risk transfer (“CRT”) and other: underwrites CRT transactions, which are predominantly with GSEs, and other U.S. reinsurance transactions.

•International mortgage insurance/reinsurance: underwrites mortgage insurance and reinsurance outside of the U.S.

Corporate Segment

The corporate segment results include net investment income, net realized gains or losses (which includes 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 and changes in the allowance for credit losses on financial assets), equity in net income or loss of investment funds accounted for using the equity method, other income (loss), corporate expenses, transaction costs and other, amortization of intangible assets, interest expense, net foreign exchange gains or losses, income taxes items (which for the 2023 fourth quarter reflects the establishment of a net deferred tax asset related to the enactment of Bermuda’s new corporate income tax), income or loss from operating affiliates and items related to the Company’s non cumulative preferred shares.


			8

Arch Capital Group Ltd. and Subsidiaries

Segment Information


(U.S. Dollars in millions)	Three Months Ended
	December 31, 2023
	Insurance			Reinsurance			Mortgage			Total
Gross premiums written (1)	$	1,934		$	1,971		$	350		$	4,251
Premiums ceded	(485)			(414)			(95)			(990)
Net premiums written	1,449			1,557			255			3,261
Change in unearned premiums	—			63			20			83
Net premiums earned	1,449			1,620			275			3,344
Other underwriting income (loss)	—			8			2			10
Losses and loss adjustment expenses	(846)			(848)			57			(1,637)
Acquisition expenses	(277)			(365)			(1)			(643)
Other operating expenses	(227)			(85)			(47)			(359)
Underwriting income (loss)	$	99		$	330		$	286		715

Net investment income										313
Net realized gains (losses)										189

Equity in net income (loss) of investment funds accounted for using the equity method										102
Other income (loss)										17
Corporate expenses (2)										(27)
Transaction costs and other (2)										(4)
Amortization of intangible assets										(24)
Interest expense										(34)
Net foreign exchange gains (losses)										(59)
Income (loss) before income taxes and income (loss) from operating affiliates										1,188
Income tax (expense) benefit										1,076
Income (loss) from operating affiliates										69
Net income (loss)										2,333
Net (income) loss attributable to noncontrolling interests										1

Net income (loss) available to Arch										2,334
Preferred dividends										(10)

Net income (loss) available to Arch common shareholders										$	2,324

Underwriting Ratios
Loss ratio	58.4		%	52.3		%	(20.6)		%	49.0		%
Acquisition expense ratio	19.1		%	22.5		%	0.2		%	19.2		%
Other operating expense ratio	15.6		%	5.2		%	17.1		%	10.7		%
Combined ratio	93.1		%	80.0		%	(3.3)		%	78.9		%

Net premiums written to gross premiums written	74.9		%	79.0		%	72.9		%	76.7		%

Total investable assets										$	34,589
Total assets										58,906
Total liabilities										40,551

(2) Certain expenses have been excluded from ‘corporate expenses’ and reflected in ‘Transaction costs and other.’ See ‘Comments on Regulation G’ for a further discussion of such items.


			9

Arch Capital Group Ltd. and Subsidiaries

Segment Information


(U.S. Dollars in millions)	Three Months Ended
	December 31, 2022
	Insurance			Reinsurance			Mortgage			Total
Gross premiums written (1)	$	1,644		$	1,797		$	356		$	3,795
Premiums ceded	(427)			(254)			(81)			(760)
Net premiums written	1,217			1,543			275			3,035
Change in unearned premiums	27			(318)			17			(274)
Net premiums earned	1,244			1,225			292			2,761
Other underwriting income (loss)	—			(1)			2			1
Losses and loss adjustment expenses	(730)			(648)			137			(1,241)
Acquisition expenses	(244)			(244)			(13)			(501)
Other operating expenses	(172)			(69)			(45)			(286)
Underwriting income (loss)	$	98		$	263		$	373		734

Net investment income										181
Net realized gains (losses)										80

Equity in net income (loss) of investment funds accounted for using the equity method										40
Other income (loss)										8
Corporate expenses (2)										(17)
Transaction costs and other (2)										—
Amortization of intangible assets										(26)
Interest expense										(32)
Net foreign exchange gains (losses)										(81)
Income (loss) before income taxes and income (loss) from operating affiliates										887
Income tax (expense) benefit										(61)
Income (loss) from operating affiliates										36
Net income (loss)										862
Net (income) loss attributable to noncontrolling interests										(3)

Net income (loss) available to Arch										859
Preferred dividends										(10)

Net income (loss) available to Arch common shareholders										$	849

Underwriting Ratios
Loss ratio	58.7		%	52.9		%	(46.9)		%	45.0		%
Acquisition expense ratio	19.6		%	19.9		%	4.4		%	18.1		%
Other operating expense ratio	13.8		%	5.6		%	15.4		%	10.4		%
Combined ratio	92.1		%	78.4		%	(27.1)		%	73.5		%

Net premiums written to gross premiums written	74.0		%	85.9		%	77.2		%	80.0		%

Total investable assets										$	28,065
Total assets										47,990
Total liabilities										35,069

(2) Certain expenses have been excluded from ‘corporate expenses’ and reflected in ‘Transaction costs and other.’ See ‘Comments on Regulation G’ for a further discussion of such items.


			10

Arch Capital Group Ltd. and Subsidiaries

Segment Information


(U.S. Dollars in millions)	Year Ended
	December 31, 2023
	Insurance			Reinsurance			Mortgage			Total
Gross premiums written (1)	$	7,911		$	9,113		$	1,387		$	18,403
Premiums ceded	(2,049)			(2,559)			(335)			(4,935)
Net premiums written	5,862			6,554			1,052			13,468
Change in unearned premiums	(416)			(718)			106			(1,028)
Net premiums earned	5,446			5,836			1,158			12,440
Other underwriting income (loss)	—			17			14			31
Losses and loss adjustment expenses	(3,122)			(3,227)			103			(6,246)
Acquisition expenses	(1,055)			(1,240)			(17)			(2,312)
Other operating expenses	(819)			(288)			(194)			(1,301)
Underwriting income (loss)	$	450		$	1,098		$	1,064		2,612

Net investment income										1,023
Net realized gains (losses)										(165)

Equity in net income (loss) of investment funds accounted for using the equity method										278
Other income (loss)										27
Corporate expenses (2)										(96)
Transaction costs and other (2)										(6)
Amortization of intangible assets										(95)
Interest expense										(133)
Net foreign exchange gains (losses)										(60)
Income (loss) before income taxes and income (loss) from operating affiliates										3,385
Income tax (expense) benefit										873
Income (loss) from operating affiliates										184
Net income (loss)										4,442
Net (income) loss attributable to noncontrolling interests										1

Net income (loss) available to Arch										4,443
Preferred dividends										(40)

Net income (loss) available to Arch common shareholders										$	4,403

Underwriting Ratios
Loss ratio	57.3		%	55.3		%	(8.9)		%	50.2		%
Acquisition expense ratio	19.4		%	21.2		%	1.4		%	18.6		%
Other operating expense ratio	15.0		%	4.9		%	16.8		%	10.5		%
Combined ratio	91.7		%	81.4		%	9.3		%	79.3		%

Net premiums written to gross premiums written	74.1		%	71.9		%	75.8		%	73.2		%

(2) Certain expenses have been excluded from ‘corporate expenses’ and reflected in ‘Transaction costs and other.’ See ‘Comments on Regulation G’ for a further discussion of such items.


			11

Arch Capital Group Ltd. and Subsidiaries

Segment Information


(U.S. Dollars in millions)	Year Ended
	December 31, 2022
	Insurance			Reinsurance			Mortgage			Total
Gross premiums written (1)	$	6,931		$	6,948		$	1,455		$	15,327
Premiums ceded	(1,910)			(2,024)			(322)			(4,249)
Net premiums written	5,021			4,924			1,133			11,078
Change in unearned premiums	(461)			(965)			27			(1,399)
Net premiums earned	4,560			3,959			1,160			9,679
Other underwriting income (loss)	—			5			8			13
Losses and loss adjustment expenses	(2,784)			(2,568)			324			(5,028)
Acquisition expenses	(887)			(813)			(40)			(1,740)
Other operating expenses	(665)			(268)			(195)			(1,128)
Underwriting income (loss)	$	224		$	315		$	1,257		1,796

Net investment income										496
Net realized gains (losses)										(663)

Equity in net income (loss) of investment funds accounted for using the equity method										115
Other income (loss)										(27)
Corporate expenses (2)										(95)
Transaction costs and other (2)										—
Amortization of intangible assets										(106)
Interest expense										(131)
Net foreign exchange gains (losses)										102
Income (loss) before income taxes and income (loss) from operating affiliates										1,487
Income tax (expense) benefit										(80)
Income (loss) from operating affiliates										75
Net income (loss)										1,482
Net (income) loss attributable to noncontrolling interests										(6)

Net income (loss) available to Arch										1,476
Preferred dividends										(40)

Net income (loss) available to Arch common shareholders										$	1,436

Underwriting Ratios
Loss ratio	61.0		%	64.9		%	(28.0)		%	51.9		%
Acquisition expense ratio	19.4		%	20.5		%	3.5		%	18.0		%
Other operating expense ratio	14.6		%	6.8		%	16.8		%	11.7		%
Combined ratio	95.0		%	92.2		%	(7.7)		%	81.6		%

Net premiums written to gross premiums written	72.4		%	70.9		%	77.9		%	72.3		%

(2) Certain expenses have been excluded from ‘corporate expenses’ and reflected in ‘Transaction costs and other.’ See ‘Comments on Regulation G’ for a further discussion of such items.


			12

Arch Capital Group Ltd. and Subsidiaries

Segment Information — Insurance Segment


(U.S. Dollars in millions)	Three Months Ended															Year Ended
	December 31,			September 30,			June 30,			March 31,			December 31,			December 31,			December 31,
	2023			2023			2023			2023			2022			2023			2022
Gross premiums written	$	1,934		$	2,043		$	1,955		$	1,979		$	1,644		$	7,911		$	6,931
Premiums ceded	(485)			(521)			(501)			(542)			(427)			(2,049)			(1,910)
Net premiums written	1,449			1,522			1,454			1,437			1,217			5,862			5,021
Change in unearned premiums	—			(110)			(126)			(180)			27			(416)			(461)
Net premiums earned	1,449			1,412			1,328			1,257			1,244			5,446			4,560

Losses and loss adjustment expenses	(846)			(812)			(761)			(703)			(730)			(3,122)			(2,784)
Acquisition expenses	(277)			(269)			(264)			(245)			(244)			(1,055)			(887)
Other operating expenses	(227)			(202)			(195)			(195)			(172)			(819)			(665)
Underwriting income (loss)	$	99		$	129		$	108		$	114		$	98		$	450		$	224

Underwriting Ratios
Loss ratio	58.4		%	57.5		%	57.3		%	55.9		%	58.7		%	57.3		%	61.0		%
Acquisition expense ratio	19.1		%	19.1		%	19.9		%	19.5		%	19.6		%	19.4		%	19.4		%
Other operating expense ratio	15.6		%	14.3		%	14.7		%	15.5		%	13.8		%	15.0		%	14.6		%
Combined ratio	93.1		%	90.9		%	91.9		%	90.9		%	92.1		%	91.7		%	95.0		%

Catastrophic activity and prior year development:
Current accident year catastrophic events, net of reinsurance and reinstatement premiums	3.8		%	2.6		%	2.6		%	1.6		%	2.8		%	2.7		%	5.3		%
Net (favorable) adverse development in prior year loss reserves, net of related adjustments	(0.5)		%	(0.8)		%	(0.5)		%	(0.5)		%	(0.3)		%	(0.6)		%	(0.2)		%
Combined ratio excluding catastrophic activity and prior year development (1)	89.8		%	89.1		%	89.8		%	89.8		%	89.6		%	89.6		%	89.9		%





Net premiums written to gross premiums written	74.9		%	74.5		%	74.4		%	72.6		%	74.0		%	74.1		%	72.4		%

(1)See ‘Comments on Regulation G’ for further discussion.


			13

Arch Capital Group Ltd. and Subsidiaries

Segment Information — Insurance Segment


(U.S. Dollars in millions)	Three Months Ended																				Year Ended
	December 31,				September 30,				June 30,				March 31,				December 31,				December 31,				December 31,
	2023				2023				2023				2023				2022				2023				2022
Net Premiums Written by Underwriting Unit
Professional lines	$	356	24.6	%	$	375	24.6	%	$	342	23.5	%	$	328	22.8	%	$	393	32.3	%	$	1,401	23.9	%	$	1,502	29.9	%
Property, energy, marine and aviation	282		19.5	%	342		22.5	%	320		22.0	%	275		19.1	%	190		15.6	%	1,219		20.8	%	878		17.5	%
Programs	189		13.0	%	202		13.3	%	210		14.4	%	141		9.8	%	130		10.7	%	742		12.7	%	611		12.2	%
Construction and national accounts	182		12.6	%	129		8.5	%	144		9.9	%	173		12.0	%	135		11.1	%	628		10.7	%	470		9.4	%
Excess and surplus casualty	144		9.9	%	130		8.5	%	135		9.3	%	131		9.1	%	129		10.6	%	540		9.2	%	461		9.2	%
Travel, accident and health	127		8.8	%	126		8.3	%	126		8.7	%	180		12.5	%	106		8.7	%	559		9.5	%	484		9.6	%
Warranty and lenders solutions	53		3.7	%	51		3.4	%	42		2.9	%	89		6.2	%	36		3.0	%	235		4.0	%	139		2.8	%
Other	116		8.0	%	167		11.0	%	135		9.3	%	120		8.4	%	98		8.1	%	538		9.2	%	476		9.5	%
Total	$	1,449	100.0	%	$	1,522	100.0	%	$	1,454	100.0	%	$	1,437	100.0	%	$	1,217	100.0	%	$	5,862	100.0	%	$	5,021	100.0	%








Net Premiums Written by Underwriting Location
United States	$	936	64.6	%	$	986	64.8	%	$	965	66.4	%	$	893	62.1	%	$	788	64.7	%	$	3,780	64.5	%	$	3,342	66.6	%
Europe	423		29.2	%	455		29.9	%	416		28.6	%	480		33.4	%	351		28.8	%	1,774		30.3	%	1,405		28.0	%
Other	90		6.2	%	81		5.3	%	73		5.0	%	64		4.5	%	78		6.4	%	308		5.3	%	274		5.5	%
Total	$	1,449	100.0	%	$	1,522	100.0	%	$	1,454	100.0	%	$	1,437	100.0	%	$	1,217	100.0	%	$	5,862	100.0	%	$	5,021	100.0	%

Net Premiums Earned by Underwriting Unit
Professional lines	$	352	24.3	%	$	363	25.7	%	$	355	26.7	%	$	349	27.8	%	$	368	29.6	%	$	1,419	26.1	%	$	1,314	28.8	%
Property, energy, marine and aviation	312		21.5	%	288		20.4	%	237		17.8	%	227		18.1	%	215		17.3	%	1,064		19.5	%	772		16.9	%
Programs	185		12.8	%	167		11.8	%	162		12.2	%	144		11.5	%	151		12.1	%	658		12.1	%	590		12.9	%
Construction and national accounts	155		10.7	%	147		10.4	%	133		10.0	%	126		10.0	%	126		10.1	%	561		10.3	%	432		9.5	%
Excess and surplus casualty	133		9.2	%	126		8.9	%	116		8.7	%	111		8.8	%	104		8.4	%	486		8.9	%	393		8.6	%
Travel, accident and health	134		9.2	%	148		10.5	%	147		11.1	%	128		10.2	%	124		10.0	%	557		10.2	%	492		10.8	%
Warranty and lenders solutions	43		3.0	%	43		3.0	%	49		3.7	%	50		4.0	%	36		2.9	%	185		3.4	%	128		2.8	%
Other	135		9.3	%	130		9.2	%	129		9.7	%	122		9.7	%	120		9.6	%	516		9.5	%	439		9.6	%
Total	$	1,449	100.0	%	$	1,412	100.0	%	$	1,328	100.0	%	$	1,257	100.0	%	$	1,244	100.0	%	$	5,446	100.0	%	$	4,560	100.0	%


			14

Arch Capital Group Ltd. and Subsidiaries

Segment Information — Reinsurance Segment


(U.S. Dollars in millions)	Three Months Ended															Year Ended
	December 31,			September 30,			June 30,			March 31,			December 31,			December 31,			December 31,
	2023			2023			2023			2023			2022			2023			2022
Gross premiums written	$	1,971		$	2,138		$	2,544		$	2,460		$	1,797		$	9,113		$	6,948
Premiums ceded	(414)			(576)			(835)			(734)			(254)			(2,559)			(2,024)
Net premiums written	1,557			1,562			1,709			1,726			1,543			6,554			4,924
Change in unearned premiums	63			(19)			(366)			(396)			(318)			(718)			(965)
Net premiums earned	1,620			1,543			1,343			1,330			1,225			5,836			3,959
Other underwriting income (loss)	8			2			3			4			(1)			17			5
Losses and loss adjustment expenses	(848)			(870)			(743)			(766)			(648)			(3,227)			(2,568)
Acquisition expenses	(365)			(304)			(290)			(281)			(244)			(1,240)			(813)
Other operating expenses	(85)			(61)			(68)			(74)			(69)			(288)			(268)
Underwriting income (loss)	$	330		$	310		$	245		$	213		$	263		$	1,098		$	315

Underwriting Ratios
Loss ratio	52.3		%	56.4		%	55.3		%	57.6		%	52.9		%	55.3		%	64.9		%
Acquisition expense ratio	22.5		%	19.7		%	21.6		%	21.1		%	19.9		%	21.2		%	20.5		%
Other operating expense ratio	5.2		%	3.9		%	5.0		%	5.6		%	5.6		%	4.9		%	6.8		%
Combined ratio	80.0		%	80.0		%	81.9		%	84.3		%	78.4		%	81.4		%	92.2		%

Catastrophic activity and prior year development:
Current accident year catastrophic events, net of reinsurance and reinstatement premiums	5.1		%	9.3		%	6.3		%	4.4		%	—		%	6.3		%	12.9		%
Net (favorable) adverse development in prior year loss reserves, net of related adjustments	(1.3)		%	(2.8)		%	(1.8)		%	(3.4)		%	(4.5)		%	(2.3)		%	(4.3)		%
Combined ratio excluding catastrophic activity and prior year development (1)	76.2		%	73.5		%	77.4		%	83.3		%	82.9		%	77.4		%	83.6		%





Net premiums written to gross premiums written	79.0		%	73.1		%	67.2		%	70.2		%	85.9		%	71.9		%	70.9		%

(1)See ‘Comments on Regulation G’ for further discussion.


			15

Arch Capital Group Ltd. and Subsidiaries

Segment Information — Reinsurance Segment


(U.S. Dollars in millions)	Three Months Ended																				Year Ended
	December 31,				September 30,				June 30,				March 31,				December 31,				December 31,				December 31,
	2023				2023				2023				2023				2022				2023				2022
Net Premiums Written by Underwriting Unit
Other specialty	$	787	50.5	%	$	527	33.7	%	$	479	28.0	%	$	619	35.9	%	$	803	52.0	%	$	2,412	36.8	%	$	1,983	40.3	%
Property excluding property catastrophe	414		26.6	%	593		38.0	%	457		26.7	%	446		25.8	%	340		22.0	%	1,910		29.1	%	1,276		25.9	%
Casualty	215		13.8	%	273		17.5	%	231		13.5	%	283		16.4	%	264		17.1	%	1,002		15.3	%	973		19.8	%
Property catastrophe	63		4.0	%	76		4.9	%	469		27.4	%	257		14.9	%	55		3.6	%	865		13.2	%	416		8.4	%
Marine and aviation	42		2.7	%	54		3.5	%	55		3.2	%	99		5.7	%	51		3.3	%	250		3.8	%	167		3.4	%
Other	36		2.3	%	39		2.5	%	18		1.1	%	22		1.3	%	30		1.9	%	115		1.8	%	109		2.2	%
Total	$	1,557	100.0	%	$	1,562	100.0	%	$	1,709	100.0	%	$	1,726	100.0	%	$	1,543	100.0	%	$	6,554	100.0	%	$	4,924	100.0	%













Net Premiums Written by Underwriting Location
Bermuda	$	723	46.4	%	$	708	45.3	%	$	958	56.1	%	$	899	52.1	%	$	910	59.0	%	$	3,288	50.2	%	$	2,561	52.0	%
United States	466		29.9	%	461		29.5	%	408		23.9	%	421		24.4	%	377		24.4	%	1,756		26.8	%	1,247		25.3	%
Europe and other	368		23.6	%	393		25.2	%	343		20.1	%	406		23.5	%	256		16.6	%	1,510		23.0	%	1,116		22.7	%
Total	$	1,557	100.0	%	$	1,562	100.0	%	$	1,709	100.0	%	$	1,726	100.0	%	$	1,543	100.0	%	$	6,554	100.0	%	$	4,924	100.0	%

Net Premiums Earned by Underwriting Unit
Other specialty	$	598	36.9	%	$	505	32.7	%	$	483	36.0	%	$	511	38.4	%	$	532	43.4	%	$	2,097	35.9	%	$	1,378	34.8	%
Property excluding property catastrophe	484		29.9	%	449		29.1	%	358		26.7	%	354		26.6	%	310		25.3	%	1,645		28.2	%	1,090		27.5	%
Casualty	230		14.2	%	264		17.1	%	258		19.2	%	253		19.0	%	220		18.0	%	1,005		17.2	%	855		21.6	%
Property catastrophe	215		13.3	%	219		14.2	%	169		12.6	%	139		10.5	%	77		6.3	%	742		12.7	%	367		9.3	%
Marine and aviation	56		3.5	%	66		4.3	%	56		4.2	%	51		3.8	%	50		4.1	%	229		3.9	%	159		4.0	%
Other	37		2.3	%	40		2.6	%	19		1.4	%	22		1.7	%	36		2.9	%	118		2.0	%	110		2.8	%
Total	$	1,620	100.0	%	$	1,543	100.0	%	$	1,343	100.0	%	$	1,330	100.0	%	$	1,225	100.0	%	$	5,836	100.0	%	$	3,959	100.0	%


			16

Arch Capital Group Ltd. and Subsidiaries

Segment Information — Mortgage Segment


(U.S. Dollars in millions)	Three Months Ended															Year Ended
	December 31,			September 30,			June 30,			March 31,			December 31,			December 31,			December 31,
	2023			2023			2023			2023			2022			2023			2022
Gross premiums written	$	350		$	347		$	347		$	343		$	356		$	1,387		$	1,455
Premiums ceded	(95)			(76)			(82)			(82)			(81)			(335)			(322)
Net premiums written	255			271			265			261			275			1,052			1,133
Change in unearned premiums	20			22			29			35			17			106			27
Net premiums earned	275			293			294			296			292			1,158			1,160
Other underwriting income	2			3			3			6			2			14			8
Losses and loss adjustment expenses	57			35			13			(2)			137			103			324
Acquisition expenses	(1)			(2)			(7)			(7)			(13)			(17)			(40)
Other operating expenses	(47)			(47)			(50)			(50)			(45)			(194)			(195)
Underwriting income	$	286		$	282		$	253		$	243		$	373		$	1,064		$	1,257

Underwriting Ratios
Loss ratio	(20.6)		%	(12.1)		%	(4.5)		%	0.6		%	(46.9)		%	(8.9)		%	(28.0)		%
Acquisition expense ratio	0.2		%	0.6		%	2.4		%	2.5		%	4.4		%	1.4		%	3.5		%
Other operating expense ratio	17.1		%	16.2		%	17.1		%	16.9		%	15.4		%	16.8		%	16.8		%
Combined ratio	(3.3)		%	4.7		%	15.0		%	20.0		%	(27.1)		%	9.3		%	(7.7)		%

Net (favorable) adverse development in prior year loss reserves, net of related adjustments	(39.0)		%	(33.5)		%	(28.7)		%	(24.6)		%	(72.1)		%	(31.3)		%	(48.6)		%
Combined ratio excluding prior year development (1)	35.7		%	38.2		%	43.7		%	44.6		%	45.0		%	40.6		%	40.9		%

Net premiums written to gross premiums written	72.9		%	78.1		%	76.4		%	76.1		%	77.2		%	75.8		%	77.9		%

(1) See ‘Comments on Regulation G’ for further discussion.


			17

Arch Capital Group Ltd. and Subsidiaries

Segment Information — Mortgage Segment


(U.S. Dollars in millions)	Three Months Ended																				Year Ended
	December 31,				September 30,				June 30,				March 31,				December 31,				December 31,				December 31,
	2023				2023				2023				2023				2022				2023				2022
Net Premiums Written by Underwriting Unit
U.S. primary mortgage insurance	$	175	68.6	%	$	190	70.1	%	$	186	70.2	%	$	186	71.3	%	$	187	68.0	%	$	737	70.1	%	$	769	67.9	%
U.S. credit risk transfer (CRT) and other	56		22.0	%	57		21.0	%	54		20.4	%	53		20.3	%	53		19.3	%	220		20.9	%	196		17.3	%
International mortgage insurance/reinsurance	24		9.4	%	24		8.9	%	25		9.4	%	22		8.4	%	35		12.7	%	95		9.0	%	168		14.8	%
Total	$	255	100.0	%	$	271	100.0	%	$	265	100.0	%	$	261	100.0	%	$	275	100.0	%	$	1,052	100.0	%	$	1,133	100.0	%

Net Premiums Written by Underwriting Location
United States	$	176	69.0	%	$	192	70.8	%	$	187	70.6	%	$	188	72.0	%	$	190	69.1	%	$	743	70.6	%	$	781	68.9	%
Other	79		31.0	%	79		29.2	%	78		29.4	%	73		28.0	%	85		30.9	%	309		29.4	%	352		31.1	%
Total	$	255	100.0	%	$	271	100.0	%	$	265	100.0	%	$	261	100.0	%	$	275	100.0	%	$	1,052	100.0	%	$	1,133	100.0	%

Net Premiums Earned by Underwriting Unit
U.S. primary mortgage insurance	$	177	64.4	%	$	192	65.5	%	$	194	66.0	%	$	196	66.2	%	$	197	67.5	%	$	759	65.5	%	$	804	69.3	%
U.S. credit risk transfer (CRT) and other	55		20.0	%	58		19.8	%	54		18.4	%	53		17.9	%	53		18.2	%	220		19.0	%	196		16.9	%
International mortgage insurance/reinsurance	43		15.6	%	43		14.7	%	46		15.6	%	47		15.9	%	42		14.4	%	179		15.5	%	160		13.8	%
Total	$	275	100.0	%	$	293	100.0	%	$	294	100.0	%	$	296	100.0	%	$	292	100.0	%	$	1,158	100.0	%	$	1,160	100.0	%


(U.S. Dollars in millions)
	December 31, 2023				September 30, 2023				June 30, 2023				March 31, 2023				December 31, 2022
Insurance In Force (IIF) (1)
U.S. primary mortgage insurance	$	290,764	57.1	%	$	292,903	57.4	%	$	293,902	56.6	%	$	294,244	57.3	%	$	295,651	57.6	%
U.S. credit risk transfer (CRT) and other	149,098		29.3	%	152,453		29.9	%	154,983		29.9	%	147,731		28.8	%	145,087		28.3	%
International mortgage insurance/reinsurance	69,473		13.6	%	65,107		12.8	%	70,117		13.5	%	71,327		13.9	%	72,315		14.1	%
Total	$	509,335	100.0	%	$	510,463	100.0	%	$	519,002	100.0	%	$	513,302	100.0	%	$	513,053	100.0	%

Risk In Force (RIF) (2)
U.S. primary mortgage insurance	$	75,527	84.6	%	$	75,850	84.9	%	$	75,941	84.5	%	$	75,770	84.8	%	$	75,806	84.8	%
U.S. credit risk transfer and other	6,156		6.9	%	6,478		7.2	%	6,556		7.3	%	6,286		7.0	%	6,245		7.0	%
International mortgage insurance/reinsurance	7,562		8.5	%	7,034		7.9	%	7,385		8.2	%	7,333		8.2	%	7,369		8.2	%
Total	$	89,245	100.0	%	$	89,362	100.0	%	$	89,882	100.0	%	$	89,389	100.0	%	$	89,420	100.0	%




(1) The aggregate dollar amount of each insured mortgage loan’s current principal balance. Such amounts are shown before external reinsurance.
(2) The aggregate dollar amount of each insured mortgage loan’s current principal balance multiplied by the insurance coverage percentage specified in the policy for insurance policies issued and after contract limits and/or loss ratio caps for risk-sharing or reinsurance transactions. Such amounts are shown before external reinsurance.


			18

Arch Capital Group Ltd. and Subsidiaries

Segment Information — Mortgage Segment

The following table provides supplemental disclosures for the Company’s U.S. primary mortgage insurance operations:


(U.S. Dollars in millions)
	December 31, 2023					September 30, 2023					June 30, 2023					March 31, 2023					December 31, 2022












Total RIF by credit quality (FICO score):
>=740	$	46,796		62.0	%	$	46,990		62.0	%	$	46,978		61.9	%	$	46,788		61.8	%	$	46,812		61.8	%
680-739	24,990			33.1	%	25,055			33.0	%	25,083			33.0	%	25,016			33.0	%	24,945			32.9	%
620-679	3,497			4.6	%	3,554			4.7	%	3,622			4.8	%	3,699			4.9	%	3,772			5.0	%
<620	244			0.3	%	251			0.3	%	258			0.3	%	267			0.4	%	277			0.4	%
Total	$	75,527		100.0	%	$	75,850		100.0	%	$	75,941		100.0	%	$	75,770		100.0	%	$	75,806		100.0	%
Weighted average FICO score	748					748					748					748					750
Total RIF by Loan-To-Value (LTV):
95.01% and above	$	7,067		9.4	%	$	7,113		9.4	%	$	7,151		9.4	%	$	7,215		9.5	%	$	7,289		9.6	%
90.01% to 95.00%	44,669			59.1	%	44,675			58.9	%	44,496			58.6	%	44,066			58.2	%	43,681			57.6	%
85.01% to 90.00%	20,490			27.1	%	20,565			27.1	%	20,627			27.2	%	20,665			27.3	%	20,851			27.5	%
85.00% and below	3,301			4.4	%	3,497			4.6	%	3,667			4.8	%	3,824			5.0	%	3,985			5.3	%
Total	$	75,527		100.0	%	$	75,850		100.0	%	$	75,941		100.0	%	$	75,770		100.0	%	$	75,806		100.0	%
Weighted average LTV	93.0		%			93.0		%			93.0		%			92.9		%			92.8		%
Total RIF by State:
California	$	6,162		8.2	%	$	6,235		8.2	%	$	6,317		8.3	%	$	6,369		8.4	%	$	6,341		8.4	%
Texas	5,972			7.9	%	6,081			8.0	%	6,159			8.1	%	6,179			8.2	%	6,151			8.1	%
North Carolina	3,248			4.3	%	3,258			4.3	%	3,239			4.3	%	3,191			4.2	%	3,160			4.2	%
Georgia	3,081			4.1	%	3,116			4.1	%	3,155			4.2	%	3,167			4.2	%	3,169			4.2	%
Minnesota	3,069			4.1	%	3,060			4.0	%	3,023			4.0	%	2,994			4.0	%	3,003			4.0	%
Florida	3,007			4.0	%	3,086			4.1	%	3,167			4.2	%	3,225			4.3	%	3,268			4.3	%
Illinois	2,986			4.0	%	2,994			3.9	%	3,010			4.0	%	3,054			4.0	%	3,081			4.1	%
Massachusetts	2,858			3.8	%	2,841			3.7	%	2,834			3.7	%	2,822			3.7	%	2,809			3.7	%
Michigan	2,773			3.7	%	2,722			3.6	%	2,661			3.5	%	2,626			3.5	%	2,618			3.5	%
Virginia	2,578			3.4	%	2,605			3.4	%	2,619			3.4	%	2,634			3.5	%	2,656			3.5	%
Other	39,793			52.7	%	39,852			52.5	%	39,757			52.4	%	39,509			52.1	%	39,550			52.2	%
Total	$	75,527		100.0	%	$	75,850		100.0	%	$	75,941		100.0	%	$	75,770		100.0	%	$	75,806		100.0	%
Weighted average coverage (end of period RIF divided by IIF)	26.0		%			25.9		%			25.8		%			25.8		%			25.6		%
U.S. mortgage insurance total RIF, net of reinsurance (1)	$	58,146				$	56,946				$	57,019				$	57,001				$	57,151
Analysts’ persistency (2)	83.6		%			83.9		%			83.0		%			81.7		%			79.5		%
Risk-to-capital ratio -- Arch MI U.S. (3)	7.3:1					6.6:1					6.9:1					6.9:1					7.2:1
PMIER sufficiency ratio -- Arch MI U.S. (4)	213		%			245		%			245		%			248		%			236		%


(1) Total RIF for the U.S. mortgage insurance operations after external reinsurance.
(2) Represents the % of IIF at the beginning of a 12-mo. period that remained in force at the end of the period.
(3) Represents current (non-delinquent) RIF, net of reinsurance, divided by statutory capital (estimate for December 31, 2023).
(4) Calculated as available assets divided by required assets as defined within PMIERs (estimate for December 31, 2023). There was approximately $1.9 billion of excess available assets at December 31, 2023.


			19

Arch Capital Group Ltd. and Subsidiaries

Segment Information — Mortgage Segment

The following table provides supplemental disclosures for the Company’s U.S. primary mortgage insurance operations:


(U.S. Dollars in millions, except policy/loan/claim count)	Three Months Ended
	December 31, 2023					September 30, 2023					June 30, 2023					March 31, 2023					December 31, 2022
Total new insurance written (NIW) (1)	$	9,351				$	11,494				$	12,292				$	10,394				$	11,413

Total NIW by credit quality (FICO score):
>=740	$	6,058		64.8	%	$	7,646		66.5	%	$	8,151		66.3	%	$	6,672		64.2	%	$	7,155		62.7	%
680-739	2,990			32.0	%	3,520			30.6	%	3,832			31.2	%	3,490			33.6	%	3,992			35.0	%
620-679	301			3.2	%	326			2.8	%	308			2.5	%	229			2.2	%	265			2.3	%
<620	2			0.0	%	2			0.0	%	1			0.0	%	3			0.0	%	1			0.0	%
Total	$	9,351		100.0	%	$	11,494		100.0	%	$	12,292		100.0	%	$	10,394		100.0	%	$	11,413		100.0	%

Total NIW by LTV:
95.01% and above	$	548		5.9	%	$	880		7.7	%	$	635		5.2	%	$	519		5.0	%	$	555		4.9	%
90.01% to 95.00%	5,095			54.5	%	6,306			54.9	%	6,855			55.8	%	6,043			58.1	%	6,725			58.9	%
85.01% to 90.00%	2,746			29.4	%	3,126			27.2	%	3,516			28.6	%	2,772			26.7	%	3,040			26.6	%
85.00% and below	962			10.3	%	1,182			10.3	%	1,286			10.5	%	1,060			10.2	%	1,093			9.6	%
Total	$	9,351		100.0	%	$	11,494		100.0	%	$	12,292		100.0	%	$	10,394		100.0	%	$	11,413		100.0	%

Total NIW monthly vs. single:
Monthly	$	8,827		94.4	%	$	10,712		93.2	%	$	11,870		96.6	%	$	10,106		97.2	%	$	11,090		97.2	%
Single	524			5.6	%	782			6.8	%	422			3.4	%	288			2.8	%	323			2.8	%
Total	$	9,351		100.0	%	$	11,494		100.0	%	$	12,292		100.0	%	$	10,394		100.0	%	$	11,413		100.0	%

Total NIW purchase vs. refinance:
Purchase	$	9,224		98.6	%	$	11,334		98.6	%	$	12,063		98.1	%	$	10,201		98.1	%	$	11,202		98.2	%
Refinance	127			1.4	%	160			1.4	%	229			1.9	%	193			1.9	%	211			1.8	%
Total	$	9,351		100.0	%	$	11,494		100.0	%	$	12,292		100.0	%	$	10,394		100.0	%	$	11,413		100.0	%

Ending number of policies in force (PIF) (2)	1,117,480					1,129,351					1,138,681					1,147,081					1,160,219

Rollforward of insured loans in default:
Beginning delinquent number of loans	18,644					18,286					18,975					20,567					20,214
Plus: new notices	10,854					10,138					9,028					9,476					10,068
Less: cures	(9,801)					(9,545)					(9,505)					(10,853)					(9,564)
Less: paid claims	(240)					(235)					(212)					(215)					(151)


Ending delinquent number of loans (2)	19,457					18,644					18,286					18,975					20,567

Ending percentage of loans in default (2)	1.74		%			1.65		%			1.61		%			1.65		%			1.77		%

Losses:
Number of claims paid	240					235					212					215					151
Total paid claims (in thousands)	$	7,401				$	6,602				$	5,715				$	7,185				$	4,547
Average paid per claim (in thousands)	$	30.8				$	28.1				$	27.0				$	33.4				$	30.1
Severity (3)	77.8		%			64.0		%			61.5		%			81.8		%			69.5		%

Average case reserve per default (in thousands)	$	17.7				$	21.2				$	23.1				$	23.0				$	21.1

(1) The original principal balance of all loans that received coverage during the period.

(2) Includes first lien primary and pool policies.

(3) Represents total paid claims divided by RIF of loans for which claims were paid.


			20

Arch Capital Group Ltd. and Subsidiaries

Segment Information — Mortgage Segment

The following table provides supplemental disclosures for the Company’s U.S. primary mortgage insurance operations:


(U.S. Dollars in millions)

	December 31, 2023												December 31, 2022
	Loss Reserves, Net (1)		Primary IIF (2)				Primary RIF (3)				Delinquency Rate		Loss Reserves, Net (1)		Primary IIF (2)				Primary RIF (3)				Delinquency Rate
	% of Total		Total		% of Total		Total		% of Total				% of Total		Total		% of Total		Total		% of Total
Policy year:
2013 and prior	29.5	%	$	10,859	3.7	%	$	2,738	3.6	%	6.55	%	36.1	%	$	12,931	4.4	%	$	3,222	4.3	%	7.07	%
2014	1.5	%	2,442		0.8	%	649		0.9	%	2.89	%	1.9	%	3,696		1.3	%	1,012		1.3	%	2.61	%
2015	2.0	%	4,691		1.6	%	1,244		1.6	%	1.98	%	2.4	%	6,236		2.1	%	1,680		2.2	%	2.08	%
2016	4.8	%	7,525		2.6	%	2,025		2.7	%	2.50	%	5.8	%	10,225		3.5	%	2,744		3.6	%	2.66	%
2017	7.0	%	7,600		2.6	%	2,023		2.7	%	3.13	%	9.1	%	9,508		3.2	%	2,521		3.3	%	3.06	%
2018	9.0	%	8,512		2.9	%	2,207		2.9	%	4.04	%	11.6	%	10,260		3.5	%	2,625		3.5	%	4.11	%
2019	9.1	%	15,767		5.4	%	4,074		5.4	%	2.40	%	10.2	%	19,096		6.5	%	4,840		6.4	%	2.36	%
2020	12.1	%	51,349		17.7	%	13,357		17.7	%	1.17	%	11.3	%	65,141		22.0	%	16,414		21.7	%	1.20	%
2021	14.8	%	76,667		26.4	%	19,812		26.2	%	1.12	%	9.9	%	89,621		30.3	%	22,740		30.0	%	0.95	%
2022	8.8	%	63,899		22.0	%	16,755		22.2	%	0.89	%	1.7	%	68,937		23.3	%	18,008		23.8	%	0.20	%
2023	1.3	%	41,453		14.3	%	10,643		14.1	%	0.26	%
Total	100.0	%	$	290,764	100.0	%	$	75,527	100.0	%	1.74	%	100.0	%	$	295,651	100.0	%	$	75,806	100.0	%	1.77	%

(1) Total reserves for losses and loss adjustment expenses, net of recoverables, was $323.6 million at December 31, 2023, compared to $415.2 million at December 31, 2022.

(2) The aggregate dollar amount of each insured mortgage loan’s current principal balance.

(3) The aggregate dollar amount of each insured mortgage loan’s current principal balance multiplied by the insurance coverage percentage specified in the policy for insurance policies issued and after contract limits and/or loss ratio caps for risk-sharing transactions.


			21

Arch Capital Group Ltd. and Subsidiaries

Segment Information - Consolidated


(U.S. Dollars in millions)	Three Months Ended															Year Ended
	December 31,			September 30,			June 30,			March 31,			December 31,			December 31,			December 31,
	2023			2023			2023			2023			2022			2023			2022
Gross premiums written	$	4,251		$	4,527		$	4,845		$	4,780		$	3,795		$	18,403		$	15,327
Premiums ceded	(990)			(1,172)			(1,417)			(1,356)			(760)			(4,935)			(4,249)
Net premiums written	3,261			3,355			3,428			3,424			3,035			13,468			11,078
Change in unearned premiums	83			(107)			(463)			(541)			(274)			(1,028)			(1,399)
Net premiums earned	3,344			3,248			2,965			2,883			2,761			12,440			9,679
Other underwriting income (loss)	10			5			6			10			1			31			13
Losses and loss adjustment expenses	(1,637)			(1,647)			(1,491)			(1,471)			(1,241)			(6,246)			(5,028)
Acquisition expenses	(643)			(575)			(561)			(533)			(501)			(2,312)			(1,740)
Other operating expenses	(359)			(310)			(313)			(319)			(286)			(1,301)			(1,128)
Underwriting income (loss) (1)	$	715		$	721		$	606		$	570		$	734		$	2,612		$	1,796

Underwriting Ratios
Loss ratio	49.0		%	50.7		%	50.3		%	51.0		%	45.0		%	50.2		%	51.9		%
Acquisition expense ratio	19.2		%	17.7		%	18.9		%	18.5		%	18.1		%	18.6		%	18.0		%
Other operating expense ratio	10.7		%	9.5		%	10.6		%	11.1		%	10.4		%	10.5		%	11.7		%
Combined ratio	78.9		%	77.9		%	79.8		%	80.6		%	73.5		%	79.3		%	81.6		%

Catastrophic activity and prior year development:
Current accident year catastrophic events, net of reinsurance and reinstatement premiums	4.1		%	5.6		%	4.0		%	2.7		%	1.3		%	4.1		%	7.8		%
Net (favorable) adverse development in prior year loss reserves, net of related adjustments	(4.1)		%	(4.7)		%	(3.9)		%	(4.3)		%	(9.8)		%	(4.2)		%	(7.7)		%
Combined ratio excluding catastrophic activity and prior year development (1)	78.9		%	77.0		%	79.7		%	82.2		%	82.0		%	79.4		%	81.5		%





Components of losses and loss adjustment expenses incurred
Paid losses and loss adjustment expenses	$	1,096		$	1,058		$	1,072		$	867		$	904		$	4,093		$	3,141
Change in unpaid losses and loss adjustment expenses	541			589			419			604			337			2,153			1,887
Total losses and loss adjustment expenses	$	1,637		$	1,647		$	1,491		$	1,471		$	1,241		$	6,246		$	5,028

Net premiums written to gross premiums written	76.7		%	74.1		%	70.8		%	71.6		%	80.0		%	73.2		%	72.3		%

(1)See ‘Comments on Regulation G’ for further discussion.


			22

Arch Capital Group Ltd. and Subsidiaries

Segment Information — Selected Information on Losses and Loss Adjustment Expenses


(U.S. Dollars in millions)	Three Months Ended															Year Ended
	December 31,			September 30,			June 30,			March 31,			December 31,			December 31,			December 31,
	2023			2023			2023			2023			2022			2023			2022





Estimated net (favorable) adverse development in prior year loss reserves, net of related adjustments
Net impact on underwriting results:
Insurance	$	(7)		$	(11)		$	(7)		$	(7)		$	(4)		$	(32)		$	(11)
Reinsurance	(21)			(43)			(25)			(46)			(55)			(135)			(167)
Mortgage	(107)			(98)			(84)			(73)			(211)			(362)			(564)
Total	$	(135)		$	(152)		$	(116)		$	(126)		$	(270)		$	(529)		$	(742)
Impact on losses and loss adjustment expenses:
Insurance	$	(8)		$	(10)		$	(12)		$	(12)		$	(6)		$	(42)		$	(25)
Reinsurance	(26)			(44)			(29)			(53)			(63)			(152)			(190)
Mortgage	(101)			(92)			(80)			(71)			(208)			(344)			(554)
Total	$	(135)		$	(146)		$	(121)		$	(136)		$	(277)		$	(538)		$	(769)
Impact on acquisition expenses:
Insurance	$	1		$	(1)		$	5		$	5		$	2		$	10		$	14
Reinsurance	5			1			4			7			8			17			23
Mortgage	(6)			(6)			(4)			(2)			(3)			(18)			(10)
Total	$	—		$	(6)		$	5		$	10		$	7		$	9		$	27
Impact on combined ratio:
Insurance	(0.5)		%	(0.8)		%	(0.5)		%	(0.5)		%	(0.3)		%	(0.6)		%	(0.2)		%
Reinsurance	(1.3)		%	(2.8)		%	(1.8)		%	(3.4)		%	(4.5)		%	(2.3)		%	(4.3)		%
Mortgage	(39.0)		%	(33.5)		%	(28.7)		%	(24.6)		%	(72.1)		%	(31.3)		%	(48.6)		%
Total	(4.1)		%	(4.7)		%	(3.9)		%	(4.3)		%	(9.8)		%	(4.2)		%	(7.7)		%
Impact on loss ratio:
Insurance	(0.6)		%	(0.7)		%	(0.9)		%	(0.9)		%	(0.5)		%	(0.8)		%	(0.6)		%
Reinsurance	(1.6)		%	(2.8)		%	(2.2)		%	(4.0)		%	(5.2)		%	(2.6)		%	(4.8)		%
Mortgage	(36.6)		%	(31.4)		%	(27.2)		%	(23.9)		%	(71.1)		%	(29.7)		%	(47.8)		%
Total	(4.0)		%	(4.5)		%	(4.1)		%	(4.7)		%	(10.0)		%	(4.3)		%	(7.9)		%
Impact on acquisition expense ratio:
Insurance	0.1		%	(0.1)		%	0.4		%	0.4		%	0.2		%	0.2		%	0.4		%
Reinsurance	0.3		%	0.0		%	0.4		%	0.6		%	0.7		%	0.3		%	0.5		%
Mortgage	(2.4)		%	(2.1)		%	(1.5)		%	(0.7)		%	(1.0)		%	(1.6)		%	(0.8)		%
Total	(0.1)		%	(0.2)		%	0.2		%	0.4		%	0.2		%	0.1		%	0.2		%
Estimated net losses incurred from current accident year catastrophic events (1)
Insurance	$	55		$	37		$	35		$	20		$	34		$	147		$	241
Reinsurance	82			143			84			59			—			368			512
Total	$	137		$	180		$	119		$	79		$	34		$	515		$	753
Impact on combined ratio:
Insurance	3.8		%	2.6		%	2.6		%	1.6		%	2.8		%	2.7		%	5.3		%
Reinsurance	5.1		%	9.3		%	6.3		%	4.4		%	0.0		%	6.3		%	12.9		%
Total	4.1		%	5.6		%	4.0		%	2.7		%	1.3		%	4.1		%	7.8		%

(1)Equals estimated losses from catastrophic events occurring in the current accident year (e.g. natural catastrophes, man-made events, pandemic events), net of reinsurance and reinstatement premiums. As regards the natural catastrophe estimates included within, amounts shown for the insurance segment are for named catastrophic events only, while amounts shown for the reinsurance segment include (i) named events with over $5 million of losses incurred by its Bermuda and Europe operations and (ii) all catastrophe losses incurred by its U.S. operations. Amounts not applicable for the mortgage segment.


			23

Arch Capital Group Ltd. and Subsidiaries

Investment Information — Investable Asset Summary and Investment Portfolio Metrics

The following table summarizes the Company’s investable assets and portfolio metrics:


(U.S. Dollars in millions)	December 31,				September 30,				June 30,				March 31,				December 31,
	2023				2023				2023				2023				2022
Investable assets:
Fixed maturities available for sale, at fair value	$	23,553	68.1	%	$	22,485	70.5	%	$	21,434	70.4	%	$	20,692	70.4	%	$	19,683	70.1	%
Fixed maturities—fair value option (1)	683		2.0	%	644		2.0	%	659		2.2	%	631		2.1	%	554		2.0	%

Total fixed maturities	24,236		70.1	%	23,129		72.5	%	22,093		72.6	%	21,323		72.5	%	20,237		72.1	%

Equity securities, at fair value	1,186		3.4	%	894		2.8	%	911		3.0	%	859		2.9	%	860		3.1	%
Equity securities—fair value option (1)	7		0.0	%	7		0.0	%	7		0.0	%	7		0.0	%	14		0.0	%

Total equity securities	1,193		3.4	%	901		2.8	%	918		3.0	%	866		2.9	%	874		3.1	%

Other investments—fair value option (1)	1,777		5.1	%	1,404		4.4	%	1,172		3.9	%	1,121		3.8	%	1,043		3.7	%



Investments accounted for using the equity method (2)	4,566		13.2	%	4,251		13.3	%	4,073		13.4	%	3,896		13.3	%	3,774		13.4	%

Short-term investments available for sale, at fair value	2,063		6.0	%	1,682		5.3	%	1,702		5.6	%	1,553		5.3	%	1,332		4.7	%
Short-term investments—fair value option (1)	21		0.1	%	13		0.0	%	8		0.0	%	17		0.1	%	33		0.1	%

Total short-term investments	2,084		6.0	%	1,695		5.3	%	1,710		5.6	%	1,570		5.3	%	1,365		4.9	%

Cash	917		2.7	%	859		2.7	%	904		3.0	%	803		2.7	%	855		3.0	%


Securities transactions entered into but not settled at the balance sheet date	(184)		(0.5)	%	(358)		(1.1)	%	(429)		(1.4)	%	(178)		(0.6)	%	(83)		(0.3)	%
Total investable assets held by the Company	$	34,589	100.0	%	$	31,881	100.0	%	$	30,441	100.0	%	$	29,401	100.0	%	$	28,065	100.0	%

Average effective duration (in years)	2.91				2.97				3.03				2.89				2.89

Average S&P/Moody’s credit ratings (3)	AA-/Aa3				AA-/Aa3				AA-/Aa3				AA-/Aa3				AA-/Aa3

(1) Included in “other investments” on the balance sheet.

(2) Changes in the carrying value of investment funds accounted for using the equity method are recorded as “equity in net income (loss) of investment funds accounted for using the equity method” rather than as an unrealized gain or loss component of accumulated other comprehensive income.

(3) Average credit ratings on the Company’s investment portfolio on securities with ratings assigned by Standard & Poor’s (“S&P”) and Moody’s Investors Service (“Moody’s”).


			24

Arch Capital Group Ltd. and Subsidiaries

Investment Information — Composition of Net Investment Income, Yield and Total Return

The following table summarizes the Company’s net investment income, yield and total return:


(U.S. Dollars in millions, except per share data)	Three Months Ended															Year Ended
	December 31,			September 30,			June 30,			March 31,			December 31,			December 31,			December 31,
	2023			2023			2023			2023			2022			2023			2022
Composition of net investment income:
Fixed maturities	$	272		$	243		$	214		$	188		$	158		$	917		$	469
Short-term investments	20			19			15			14			13			68			29
Equity securities (dividends)	7			5			6			4			6			22			22
Other (1)	33			22			25			13			18			93			47
Gross investment income	332			289			260			219			195			1,100			567
Investment expenses	(19)			(20)			(18)			(20)			(14)			(77)			(71)
Net investment income	$	313		$	269		$	242		$	199		$	181		$	1,023		$	496
Per share	$	0.82		$	0.71		$	0.64		$	0.53		$	0.48		$	2.70		$	1.31

Equity in net income (loss) of investment funds accounted for using the equity method	102			59			69			48			40			278			115
Per share	$	0.27		$	0.16		$	0.18		$	0.13		$	0.11		$	0.73		$	0.30


Investment income yield, at amortized cost (2):
Pre-tax	4.11		%	3.68		%	3.50		%	3.03		%	2.80		%	3.53		%	1.99		%
After-tax	3.59		%	3.18		%	3.05		%	2.58		%	2.41		%	3.06		%	1.70		%

Total return on investments (3)	4.76		%	(0.40)		%	0.56		%	2.54		%	2.60		%	7.57		%	(6.45)		%

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

(2)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.

(3)Total return on investments includes investment income, equity in net income or loss of investment funds accounted for using the equity method, net realized gains and losses (excluding changes in allowance for credit losses on non-investment related financial assets) and the change in unrealized gains or losses and is calculated on a pre-tax basis and before investment expenses. See ‘Comments on Regulation G’ for a further discussion of the presentation of total return on investments.


			25

Arch Capital Group Ltd. and Subsidiaries

Investment Information — Composition of Fixed Maturities

The following table summarizes the Company’s fixed maturities:


(U.S. Dollars in millions)	Fair Value		Gross Unrealized Gains		Gross Unrealized Losses		Net Unrealized Gains (Losses)		Allowance for Credit Losses		Amortized Cost		Fair Value / Amortized Cost		Fair Value % of Total
At December 31, 2023
Corporates	$	11,517	$	157	$	(464)	$	(307)	$	(20)	$	11,844	97.2	%	47.5	%
U.S. government and government agencies	5,827		63		(86)		(23)		—		5,850		99.6	%	24.0	%
Asset-backed securities	2,252		11		(55)		(44)		(5)		2,301		97.9	%	9.3	%
Non-U.S. government securities	2,068		33		(100)		(67)		(1)		2,136		96.8	%	8.5	%
Commercial mortgage-backed securities	1,213		3		(34)		(31)		(2)		1,246		97.4	%	5.0	%
Residential mortgage-backed securities	1,103		7		(66)		(59)		—		1,162		94.9	%	4.6	%
Municipal bonds	256		1		(20)		(19)		—		275		93.1	%	1.1	%
Total	$	24,236	$	275	$	(825)	$	(550)	$	(28)	$	24,814	97.7	%	100.0	%

At December 31, 2022
Corporates	$	8,563	$	55	$	(781)	$	(726)	$	(30)	$	9,319	91.9	%	42.3	%
U.S. government and government agencies	5,167		15		(343)		(328)		—		5,495		94.0	%	25.5	%
Asset-backed securities	1,929		1		(107)		(106)		(6)		2,041		94.5	%	9.5	%
Non-U.S. government securities	2,317		9		(238)		(229)		(2)		2,548		90.9	%	11.4	%
Commercial mortgage-backed securities	1,047		1		(58)		(57)		(3)		1,107		94.6	%	5.2	%
Residential mortgage-backed securities	795		5		(87)		(82)		—		877		90.6	%	3.9	%
Municipal bonds	419		3		(33)		(30)		—		449		93.3	%	2.1	%
Total	$	20,237	$	89	$	(1,647)	$	(1,558)	$	(41)	$	21,836	92.7	%	100.0	%


			26

Arch Capital Group Ltd. and Subsidiaries

Investment Information — Credit Quality Distribution and Maturity Profile

The following table summarizes the credit quality distribution and maturity profile of the Company’s fixed maturities:


(U.S. Dollars in millions)	December 31,				September 30,				June 30,				March 31,				December 31,
	2023				2023				2023				2023				2022
Credit quality distribution of total fixed maturities (1):
U.S. government and government agencies (2)	$	6,493	26.8	%	$	6,359	27.5	%	$	5,282	23.9	%	$	5,274	24.7	%	$	5,831	28.8	%
AAA	4,305		17.8	%	4,164		18.0	%	3,985		18.0	%	3,826		17.9	%	3,617		17.9	%
AA	2,165		8.9	%	2,061		8.9	%	2,285		10.3	%	2,136		10.0	%	2,214		10.9	%
A	4,629		19.1	%	4,523		19.6	%	4,810		21.8	%	4,540		21.3	%	3,993		19.7	%
BBB	5,058		20.9	%	4,390		19.0	%	4,165		18.9	%	3,875		18.2	%	3,324		16.4	%
BB	698		2.9	%	773		3.3	%	770		3.5	%	711		3.3	%	560		2.8	%
B	389		1.6	%	352		1.5	%	366		1.7	%	384		1.8	%	377		1.9	%
Lower than B	15		0.1	%	16		0.1	%	16		0.1	%	18		0.1	%	12		0.1	%
Not rated	484		2.0	%	491		2.1	%	414		1.9	%	559		2.6	%	309		1.5	%
Total fixed maturities, at fair value	$	24,236	100.0	%	$	23,129	100.0	%	$	22,093	100.0	%	$	21,323	100.0	%	$	20,237	100.0	%

Maturity profile of total fixed maturities:
Due in one year or less	$	516	2.1	%	$	706	3.1	%	$	594	2.7	%	$	505	2.4	%	$	534	2.6	%
Due after one year through five years	13,279		54.8	%	13,272		57.4	%	12,399		56.1	%	11,739		55.1	%	11,292		55.8	%
Due after five years through ten years	5,420		22.4	%	4,679		20.2	%	4,630		21.0	%	4,616		21.6	%	4,156		20.5	%
Due after 10 years	453		1.9	%	61		0.3	%	123		0.6	%	242		1.1	%	484		2.4	%
	19,668		81.2	%	18,718		80.9	%	17,746		80.3	%	17,102		80.2	%	16,466		81.4	%
Residential mortgage-backed securities	1,103		4.6	%	965		4.2	%	860		3.9	%	823		3.9	%	795		3.9	%
Commercial mortgage-backed securities	1,213		5.0	%	1,102		4.8	%	1,082		4.9	%	1,035		4.9	%	1,047		5.2	%
Asset-backed securities	2,252		9.3	%	2,344		10.1	%	2,405		10.9	%	2,363		11.1	%	1,929		9.5	%
Total fixed maturities, at fair value	$	24,236	100.0	%	$	23,129	100.0	%	$	22,093	100.0	%	$	21,323	100.0	%	$	20,237	100.0	%

(1) 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.

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


			27

Arch Capital Group Ltd. and Subsidiaries

Investment Information — Analysis of Corporate Exposures

The following table summarizes the Company’s corporate bonds by sector:


(U.S. Dollars in millions)	December 31,				September 30,				June 30,				March 31,				December 31,
	2023				2023				2023				2023				2022
Sector:
Industrials	$	5,525	48.0	%	$	4,918	46.0	%	$	4,988	47.0	%	$	4,672	46.6	%	$	3,463	40.4	%
Financials	4,523		39.3	%	4,326		40.5	%	4,334		40.8	%	4,329		43.2	%	4,246		49.6	%
Utilities	1,039		9.0	%	962		9.0	%	927		8.7	%	798		8.0	%	546		6.4	%

All other (1)	430		3.7	%	478		4.5	%	367		3.5	%	223		2.2	%	308		3.6	%
Total	$	11,517	100.0	%	$	10,684	100.0	%	$	10,616	100.0	%	$	10,022	100.0	%	$	8,563	100.0	%

Credit quality distribution (2):
AAA	$	295	2.6	%	$	297	2.8	%	$	227	2.1	%	$	176	1.8	%	$	178	2.1	%
AA	1,038		9.0	%	938		8.8	%	913		8.6	%	869		8.7	%	767		9.0	%
A	4,043		35.1	%	3,936		36.8	%	4,197		39.5	%	3,994		39.9	%	3,266		38.1	%
BBB	4,744		41.2	%	4,118		38.5	%	3,885		36.6	%	3,628		36.2	%	3,096		36.2	%
BB	634		5.5	%	715		6.7	%	714		6.7	%	658		6.6	%	541		6.3	%
B	389		3.4	%	351		3.3	%	365		3.4	%	383		3.8	%	371		4.3	%
Lower than B	15		0.1	%	16		0.1	%	16		0.2	%	18		0.2	%	12		0.1	%
Not rated	359		3.1	%	313		2.9	%	299		2.8	%	296		3.0	%	332		3.9	%
Total	$	11,517	100.0	%	$	10,684	100.0	%	$	10,616	100.0	%	$	10,022	100.0	%	$	8,563	100.0	%

(1) Includes sovereign securities, supranational securities and other.

(2) 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.

The following table summarizes the Company’s top ten exposures to fixed income corporate issuers by fair value at December 31, 2023:


(U.S. Dollars in millions)	Fair Value		% of Asset Class		% of Investable Assets		Credit Quality (1)
Issuer:
Bank of America Corporation	$	383	3.3	%	1.1	%	A-/A1
JPMorgan Chase & Co.	361		3.1	%	1.0	%	A-/A1
Morgan Stanley	338		2.9	%	1.0	%	A-/A1
The Goldman Sachs Group, Inc.	230		2.0	%	0.7	%	BBB+/A2
Citigroup Inc.	229		2.0	%	0.7	%	BBB+/A3
Wells Fargo & Company	171		1.5	%	0.5	%	BBB+/A1
Blue Owl Capital Inc.	165		1.4	%	0.5	%	BBB-/Baa3
Roche Holding AG	147		1.3	%	0.4	%	AA/Aa2
Blackstone Inc.	138		1.2	%	0.4	%	BBB/Baa3
UBS Group AG	128		1.1	%	0.4	%	A/A2
Total	$	2,290	19.9	%	6.6	%

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


			28

Arch Capital Group Ltd. and Subsidiaries

Investment Information — Structured Securities

The following table provides the composition of the Company’s structured securities:


(U.S. Dollars in millions)	Agencies		AAA		AA		A		BBB		Non-Investment Grade		Total
At December 31, 2023
Residential mortgage-backed securities	$	658	$	416	$	29	$	—	$	—	$	—	$	1,103
Commercial mortgage-backed securities	7		757		198		45		126		80		1,213
Asset-backed securities	—		1,302		231		440		170		109		2,252
Total	$	665	$	2,475	$	458	$	485	$	296	$	189	$	4,568

At December 31, 2022
Residential mortgage-backed securities	$	645	$	106	$	28	$	—	$	—	$	16	$	795
Commercial mortgage-backed securities	18		682		152		32		82		81		1,047
Asset-backed securities	—		1,135		184		350		119		141		1,929
Total	$	663	$	1,923	$	364	$	382	$	201	$	238	$	3,771


			29

Arch Capital Group Ltd. and Subsidiaries

Comments on Regulation G

Throughout this financial supplement, the Company presents its operations in the way it believes will be the most meaningful and useful to investors, analysts, rating agencies and others who use the Company’s financial information in evaluating the performance of the 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 includes changes in the allowance for credit losses on financial assets and net impairment losses recognized in earnings), equity in net income or loss of investment funds accounted for using the equity method, net foreign exchange gains or losses, transaction costs and other, net of income taxes (which for the 2023 fourth quarter includes a one-time deferred tax benefit related to the enactment of Bermuda’s new corporate income tax), 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 on the following page.

The Company believes that net realized gains or losses, equity in net income or loss of investment funds 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, the Company’s business. Although net realized gains or losses, equity in net income or loss of investment funds accounted for using the equity method and net foreign exchange gains or losses are an integral part of the Company’s 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 the Company’s financial information believe that, for many companies, the timing of the realization of investment gains or losses is largely opportunistic. In addition, changes in the allowance for credit losses and net impairment losses recognized in earnings on the Company’s investments represent other-than-temporary declines in expected recovery values on securities without actual realization.

Transaction costs and other include advisory, financing, legal, severance, incentive compensation and other transaction costs related to acquisitions. The Company believes that transaction costs and other, due to their non-recurring nature, are not indicative of the performance of, or trends in, the Company’s business performance.

The Company’s segment information includes the presentation of consolidated underwriting income or loss and a subtotal of underwriting income or loss. Such measures represent the pre-tax profitability of the Company’s 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 the Company’s individual underwriting operations. Underwriting income or loss does not incorporate items included in the Company’s corporate segment. While these measures are presented in the Segment Information footnote to the Company’s 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 on pages 9 to 12.

Total return on investments includes investment income, equity in net income or loss of investment funds accounted for using the equity method, net realized gains and losses (excluding changes in the allowance for credit losses on non-investment related financial assets) and the change in unrealized gains and losses generated by the Company’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. Management uses total return on investments as a key measure of the return generated to Arch common shareholders, and compares the return generated by the Company’s investment portfolio against benchmark returns during the periods presented.


			30

Arch Capital Group Ltd. and Subsidiaries

Operating Income Reconciliation and Annualized Operating Return on Average Common Equity

The following table summarizes the Company’s consolidated financial data, including a reconciliation of net income (loss) available to Arch common shareholders to after-tax operating income (loss) available to Arch common shareholders and related diluted per share results:


(U.S. Dollars and shares in millions, except per share data)	Three Months Ended															Year Ended
	December 31,			September 30,			June 30,			March 31,			December 31,			December 31,			December 31,
	2023			2023			2023			2023			2022			2023			2022
Net income available to Arch common shareholders	$	2,324		$	713		$	661		$	705		$	849		$	4,403		$	1,436
Net realized (gains) losses (1)	(189)			248			123			(17)			(80)			165			663

Equity in net (income) loss of investment funds accounted for using the equity method	(102)			(59)			(69)			(48)			(40)			(278)			(115)
Net foreign exchange (gains) losses	60			(22)			6			18			81			62			(102)
Transaction costs and other	4			1			2			(1)			—			6			—

Income tax expense (benefit) (2)	(1,152)			(5)			3			(3)			(4)			(1,157)			(42)
After-tax operating income available to Arch common shareholders	$	945		$	876		$	726		$	654		$	806		$	3,201		$	1,840

Diluted per common share results:
Net income available to Arch common shareholders	$	6.12		$	1.88		$	1.75		$	1.87		$	2.26		$	11.62		$	3.80
Net realized (gains) losses (1)	(0.50)			0.65			0.33			(0.05)			(0.22)			0.44			1.76

Equity in net (income) loss of investment funds accounted for using the equity method	(0.27)			(0.16)			(0.18)			(0.13)			(0.11)			(0.73)			(0.31)
Net foreign exchange (gains) losses	0.16			(0.05)			0.01			0.05			0.22			0.16			(0.27)
Transaction costs and other	0.01			0.00			0.00			0.00			0.00			0.01			0.00

Income tax expense (benefit) (2)	(3.03)			(0.01)			0.01			(0.01)			(0.01)			(3.05)			(0.11)
After-tax operating income available to Arch common shareholders	$	2.49		$	2.31		$	1.92		$	1.73		$	2.14		$	8.45		$	4.87

Weighted average common shares and common share equivalents outstanding - diluted	379.8			379.4			378.4			377.6			375.9			378.8			377.6

Beginning common shareholders’ equity	$	14,409		$	13,811		$	13,158		$	12,080		$	10,966		$	12,080		$	12,716
Ending common shareholders’ equity	17,523			14,409			13,811			13,158			12,080			17,523			12,080
Average common shareholders’ equity	$	15,966		$	14,110		$	13,485		$	12,619		$	11,523		$	14,802		$	12,398

Annualized net income return on average common equity	58.2		%	20.2		%	19.6		%	22.3		%	29.5		%	29.7		%	11.6		%
Annualized operating return on average common equity	23.7		%	24.8		%	21.5		%	20.7		%	28.0		%	21.6		%	14.8		%


			31

Arch Capital Group Ltd. and Subsidiaries

Operating Income and Effective Tax Rate Calculations

The following table provides a reconciliation of income (loss) before income taxes to after-tax operating income (loss) available to Arch common shareholders and an analysis of the effective tax rate on pre-tax operating income (loss) available to Arch common shareholders:


(U.S. Dollars in millions)	Three Months Ended															Year Ended
	December 31,			September 30,			June 30,			March 31,			December 31,			December 31,			December 31,
	2023			2023			2023			2023			2022			2023			2022
Arch Operating Income Components:
Income (loss) before income taxes and income (loss) from operating affiliates	$	1,188		$	741		$	714		$	742		$	887		$	3,385		$	1,487
Net realized (gains) losses	(189)			248			123			(17)			(80)			165			663

Equity in net (income) loss of investment funds accounted for using the equity method	(102)			(59)			(69)			(48)			(40)			(278)			(115)
Net foreign exchange (gains) losses	60			(22)			8			16			79			62			(106)
Transaction costs and other	4			1			2			(1)			—			6			—
Income (loss) from operating affiliates	69			54			22			39			36			184			75


Pre-tax operating income available to Arch (b)	1,030			963			800			731			882			3,524			2,004
Income tax (expense) benefit (a)	(75)			(77)			(64)			(67)			(66)			(283)			(124)
After-tax operating income available to Arch	955			886			736			664			816			3,241			1,880
Preferred dividends	(10)			(10)			(10)			(10)			(10)			(40)			(40)
After-tax operating income available to Arch common shareholders	$	945		$	876		$	726		$	654		$	806		$	3,201		$	1,840

Effective tax rate on pre-tax operating income (loss) available to Arch (a)/(b)	7.3		%	8.0		%	8.0		%	9.2		%	7.5		%	8.0		%	6.2		%


			32

Arch Capital Group Ltd. and Subsidiaries

Capital Structure and Share Repurchase Activity

The following table provides an analysis of the Company’s capital structure:


(U.S. Dollars and shares in millions, except per share data)	December 31,			September 30,			June 30,			March 31,			December 31,
	2023			2023			2023			2023			2022
Debt:
Arch senior notes, due May 1, 2034 ($300 principal, 7.35%)	$	300		$	300		$	300		$	300		$	300
Arch-U.S. senior notes, due Nov. 1, 2043 ($500 principal, 5.144%) (1)	500			500			500			500			500
Arch Finance senior notes, due December 15, 2026 ($500 principal, 4.011%) (2)	500			500			500			500			500
Arch Finance senior notes, due December 15, 2046 ($450 principal, 5.031%) (2)	450			450			450			450			450
Arch senior notes, due June 30, 2050 ($1,000 principal, 3.635%)	1,000			1,000			1,000			1,000			1,000
Deferred debt costs on senior notes	(24)			(24)			(24)			(24)			(25)
Revolving credit agreement borrowings, due August 23, 2028	—			—			—			—			—
Total debt	$	2,726		$	2,726		$	2,726		$	2,726		$	2,725

Shareholders’ equity available to Arch:


Series F non-cumulative preferred shares (5.45%)	330			330			330			330			330
Series G non-cumulative preferred shares (4.55%)	500			500			500			500			500
Common shareholders’ equity (a)	17,523			14,409			13,811			13,158			12,080
Total shareholders’ equity available to Arch	$	18,353		$	15,239		$	14,641		$	13,988		$	12,910

Total capital available to Arch	$	21,079		$	17,965		$	17,367		$	16,714		$	15,635

Common shares outstanding, net of treasury shares (b)	373.3			373.1			372.9			372.2			370.3

Book value per common share (3) (a)/(b)	$	46.94		$	38.62		$	37.04		$	35.35		$	32.62

Leverage ratios:
Senior notes/total capital available to Arch	12.9		%	15.2		%	15.7		%	16.3		%	17.4		%
Revolving credit agreement borrowings/total capital available to Arch	—		%	—		%	—		%	—		%	—		%
Debt/total capital available to Arch	12.9		%	15.2		%	15.7		%	16.3		%	17.4		%
Preferred/total capital available to Arch	3.9		%	4.6		%	4.8		%	5.0		%	5.3		%
Debt and preferred/total capital available to Arch	16.9		%	19.8		%	20.5		%	21.3		%	22.7		%

(1) Issued by Arch Capital Group (U.S.) Inc. (“Arch-U.S.”), a wholly owned subsidiary of Arch, and fully and unconditionally guaranteed by Arch.

(2) Issued by Arch Capital Finance LLC (“Arch Finance”), a wholly owned subsidiary of Arch U.S. MI Holdings Inc., and fully and unconditionally guaranteed by Arch.

(3) Excludes the effects of stock options, restricted and performance stock units outstanding.

The following table provides the impact of share repurchases under the Company’s share repurchase program:


(U.S. Dollars and shares in millions, except per share data)	Three Months Ended										Cumulative
	December 31,		September 30,		June 30,		March 31,		December 31,		December 31,
	2023		2023		2023		2023		2022		2023
Effect of share repurchases:
Aggregate cost of shares repurchased	$	—	$	—	$	—	$	—	$	—	$	5,872
Shares repurchased	—		—		—		—		—		433.6
Average price per share repurchased	$	—	$	—	$	—	$	—	$	—	$	13.54




Remaining share repurchase authorization (1)											$	1,000

(1) Repurchases under the share repurchase authorization may be effected from time to time in open market or privately negotiated transactions through December 31, 2024.


			33

Document and Entity Information Cover	Feb. 14, 2024
Document and Entity Information [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Feb. 14, 2024
Entity Registrant Name	Arch Capital Group Ltd.
Entity Central Index Key	0000947484
Entity Incorporation, State or Country Code	D0
Entity File Number	001-16209
Entity Tax Identification Number	98-0374481
Entity Address, Address Line One	Waterloo House, Ground Floor
Entity Address, Address Line Two	100 Pitts Bay Road
Entity Address, City or Town	Pembroke
Entity Address, Postal Zip Code	HM 08
Entity Address, Country	BM
City Area Code	441
Local Phone Number	278-9250
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Entity Emerging Growth Company	false
Common shares
Entity Listings [Line Items]
Title of 12(b) Security	Common shares, $0.0011 par value per share
Trading Symbol	ACGL
Security Exchange Name	NASDAQ
Series F Depositary Share Equivalent
Entity Listings [Line Items]
Title of 12(b) Security	Depositary shares, each representing a 1/1,000th interest in a 5.45% Series F preferred share
Trading Symbol	ACGLO
Security Exchange Name	NASDAQ
Series G Depositary Share Equivalent
Entity Listings [Line Items]
Title of 12(b) Security	Depositary shares, each representing a 1/1,000th interest in a 4.55% Series G preferred share
Trading Symbol	ACGLN
Security Exchange Name	NASDAQ

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