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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period endedMarch 31, 2024
Or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 001-16209

 archlogorgbsolida36.jpg
ARCH CAPITAL GROUP LTD.
(Exact name of registrant as specified in its charter)
Bermuda98-0374481
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
Waterloo House, Ground Floor
100 Pitts Bay Road, PembrokeHM 08,Bermuda(441)278-9250
(Address of principal executive offices)(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each classTrading Symbol (s)Name of each exchange on which registered
Common shares, $0.0011 par value per shareACGLNASDAQ Stock Market
Depositary shares, each representing a 1/1000th interest in a 5.45% Series F preferred share
ACGLO
NASDAQ Stock Market
Depositary shares, each representing a 1/1000th interest in a 4.55% Series G preferred share
ACGLN
NASDAQ Stock Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑     No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer Accelerated Filer Non-accelerated Filer Smaller reporting company 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.
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of May 3, 2024, there were 375,494,237 common shares, $0.0011 par value per share, of the registrant outstanding.


ARCH CAPITAL GROUP LTD.
 
INDEX TO FORM 10-Q
 
ARCH CAPITAL
 1
2024 FIRST QUARTER FORM 10-Q

PART I. FINANCIAL INFORMATION
Cautionary Note Regarding Forward-Looking Statements 
The Private Securities Litigation Reform Act of 1995 (“PSLRA”) provides a “safe harbor” for forward-looking statements. This report or any other written or oral statements made by or on behalf of us may include forward-looking statements, which reflect our 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 report 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 our 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 report and in our periodic reports filed with the Securities and Exchange Commission (“SEC”), and include:
our ability to successfully implement our business strategy during “soft” as well as “hard” markets;
acceptance of our business strategy, security and financial condition by rating agencies and regulators, as well as by brokers and our insureds and reinsureds;
our ability to consummate acquisitions and integrate the business we have acquired or may acquire into our existing operations;
our ability to maintain or improve our ratings, which may be affected by our 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 we operate;
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 our access to such markets;
our ability to successfully enhance, integrate and maintain operating procedures (including information technology) to effectively support our 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 our financial statements, including those related to revenue recognition, insurance and other reserves, reinsurance recoverables, investment valuations, intangible assets, bad debts, income taxes, deferred income tax assets, contingencies and litigation, and any determination to use the deposit method of accounting;
greater than expected loss ratios on business written by us and adverse development on claim and/or claim expense liabilities related to business written by our insurance, reinsurance and mortgage 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 for natural or man-made catastrophic events or severe economic events in our insurance, reinsurance and mortgage businesses could cause large losses and substantial volatility in our results of operations;
the effect of climate change on our business;
the effect of contagious diseases (including COVID-19) on our business;
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2024 FIRST QUARTER FORM 10-Q

acts of terrorism, political unrest and other hostilities or other unforecasted and unpredictable events;
availability to us of reinsurance to manage our 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 us;
the timing of loss payments being faster or the receipt of reinsurance recoverables being slower than anticipated by us;
our investment performance, including legislative or regulatory developments that may adversely affect the fair value of our investments;
changes in general economic conditions, including sovereign debt concerns or downgrades of U.S. securities by credit rating agencies, which could affect our business, financial condition and results of operations;
the volatility of our shareholders’ equity from foreign currency fluctuations, which could increase due to us not matching portions of our projected liabilities in foreign currencies with investments in the same currencies;
changes in accounting principles or policies or in our application of such accounting principles or policies;
changes in the political environment of certain countries in which we operate or underwrite business;
an incident, disruption in operations or other cyber event caused by cyber attacks, the use of artificial intelligence technologies or other technology on our systems or those of our business partners and service providers, which could negatively impact our business and/or expose us to litigation;
statutory or regulatory developments, including as to tax matters and insurance and other regulatory matters such as the adoption of proposed legislation that would affect Bermuda-headquartered companies and/or Bermuda-based insurers or reinsurers and/or changes in regulations or tax laws applicable to us, our subsidiaries, brokers or customers, including the implementation of the Organization for Economic Cooperation and Development (“OECD”) Pillar I and Pillar II initiatives and the possible enactment of a recently proposed 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 our Annual Report on Form 10-K for the year ended December 31, 2023, as well as the other factors set forth in our 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 us or persons acting on our 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’s forward-looking statements speak only as of the date of this report or as of the date they are made, and we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. 

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2024 FIRST QUARTER FORM 10-Q

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
 Page No.
  
March 31, 2024 and December 31, 2023 (unaudited)
For the three month periods ended March 31, 2024 and 2023 (unaudited)
For the three month periods ended March 31, 2024 and 2023 (unaudited)
Consolidated Statements of Changes in Shareholders’ Equity
For the three month periods ended March 31, 2024 and 2023 (unaudited)
For the three month periods ended March 31, 2024 and 2023 (unaudited)
Notes to Consolidated Financial Statements (unaudited)

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ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(U.S. dollars and shares in millions)
(Unaudited)
March 31,
2024
December 31,
2023
Assets  
Investments:  
Fixed maturities available for sale, at fair value (amortized cost: $24,338 and $24,131; net of allowance for credit losses: $32 and $28)
$23,628 $23,553 
Short-term investments available for sale, at fair value (amortized cost: $2,143 and $2,064; net of allowance for credit losses: $0 and $0)
2,142 2,063 
Equity securities, at fair value1,720 1,186 
Other investments, at fair value2,886 2,488 
Investments accounted for using the equity method4,842 4,566 
Total investments35,218 33,856 
Cash993 917 
Accrued investment income236 236 
Investment in operating affiliates1,174 1,119 
Premiums receivable (net of allowance for credit losses: $32 and $34)
5,765 4,644 
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses (net of allowance for credit losses: $16 and $21)
7,509 7,064 
Contractholder receivables (net of allowance for credit losses: $3 and $3)
1,907 1,814 
Ceded unearned premiums2,717 2,170 
Deferred acquisition costs1,625 1,531 
Receivable for securities sold166 63 
Goodwill and intangible assets778 731 
Other assets4,680 4,761 
Total assets$62,768 $58,906 
Liabilities
Reserve for losses and loss adjustment expenses$23,705 $22,752 
Unearned premiums9,971 8,808 
Reinsurance balances payable2,497 2,000 
Contractholder payables1,910 1,817 
Collateral held for insured obligations263 259 
Senior notes2,727 2,726 
Payable for securities purchased433 247 
Other liabilities1,905 1,942 
Total liabilities43,411 40,551 
Commitments and contingencies (refer to Note 10)
Redeemable noncontrolling interests2 2 
Shareholders' Equity
Non-cumulative preferred shares830 830 
Common shares ($0.0011 par, shares issued: 594.3 and 591.9)
1 1 
Additional paid-in capital2,401 2,327 
Retained earnings21,405 20,295 
Accumulated other comprehensive income (loss), net of deferred income tax(821)(676)
Common shares held in treasury, at cost (shares: 219.0 and 218.5)
(4,461)(4,424)
Total shareholders' equity available to Arch19,355 18,353 
Total liabilities, noncontrolling interests and shareholders' equity$62,768 $58,906 
See Notes to Consolidated Financial Statements

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2024 FIRST QUARTER FORM 10-Q


ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(U.S. dollars and shares in millions, except per share data)
(Unaudited)
Three Months Ended
March 31,
 20242023
Revenues  
Net premiums earned$3,422 $2,883 
Net investment income327 199 
Net realized gains (losses)67 17 
Other underwriting income12 10 
Equity in net income (loss) of investment funds accounted for using the equity method99 48 
Other income (loss)14 11 
Total revenues3,941 3,168 
Expenses
Losses and loss adjustment expenses1,728 1,471 
Acquisition expenses607 533 
Other operating expenses363 319 
Corporate expenses53 30 
Amortization of intangible assets21 23 
Interest expense34 32 
Net foreign exchange (gains) losses(31)18 
Total expenses2,775 2,426 
Income (loss) before income taxes and income (loss) from operating affiliates1,166 742 
Income tax (expense) benefit(101)(64)
Income (loss) from operating affiliates55 39 
Net income (loss)$1,120 $717 
Net (income) loss attributable to noncontrolling interests (2)
Net income (loss) available to Arch1,120 715 
Preferred dividends(10)(10)
Net income (loss) available to Arch common shareholders$1,110 $705 
Net income per common share and common share equivalent  
Basic$2.99 $1.92 
Diluted$2.92 $1.87 
Weighted average common shares and common share equivalents outstanding
Basic370.9 367.3 
Diluted380.5 377.6 



See Notes to Consolidated Financial Statements

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2024 FIRST QUARTER FORM 10-Q


ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(U.S. dollars in millions)
(Unaudited)
Three Months Ended
March 31,
 20242023
Comprehensive Income
Net income (loss)$1,120 $717 
Other comprehensive income (loss), net of deferred income tax
Unrealized appreciation (decline) in value of available-for-sale investments:
Unrealized holding gains (losses) arising during period(141)245 
Reclassification of net realized (gains) losses, included in net income (loss)29 99 
Foreign currency translation adjustments(33)5 
Comprehensive income (loss)975 1,066 
Net (income) loss attributable to noncontrolling interests (2)
Comprehensive income (loss) available to Arch$975 $1,064 
See Notes to Consolidated Financial Statements

ARCH CAPITAL
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2024 FIRST QUARTER FORM 10-Q


ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(U.S. dollars in millions)

(Unaudited)
Three Months Ended
March 31,
 20242023
Non-cumulative preferred shares
Balance at beginning and end of period$830 $830 
Common shares
Balance at beginning and end of period1 1 
Additional paid-in capital
Balance at beginning of period2,327 2,211 
Amortization of share-based compensation68 41 
Other changes6 8 
Balance at end of period2,401 2,260 
Retained earnings
Balance at beginning of period20,295 15,892 
Net income (loss)1,120 717 
Net (income) loss attributable to noncontrolling interests (2)
Preferred share dividends(10)(10)
Balance at end of period21,405 16,597 
Accumulated other comprehensive income (loss), net of deferred income tax
Balance at beginning of period(676)(1,646)
Unrealized appreciation (decline) in value of available-for-sale investments, net of deferred income tax:
Balance at beginning of period(565)(1,512)
Unrealized holding gains (losses) during period, net of reclassification adjustment(112)344 
Balance at end of period(677)(1,168)
Foreign currency translation adjustments, net of deferred income tax:
Balance at beginning of period(111)(134)
Foreign currency translation adjustments(33)5 
Balance at end of period(144)(129)
Balance at end of period(821)(1,297)
Common shares held in treasury, at cost
Balance at beginning of period(4,424)(4,378)
Shares repurchased for treasury(37)(25)
Balance at end of period(4,461)(4,403)
Total shareholders’ equity$19,355 $13,988 
See Notes to Consolidated Financial Statements

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ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. dollars in millions)
(Unaudited)
Three Months Ended
March 31,
 20242023
Operating Activities  
Net income (loss)$1,120 $717 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Net realized (gains) losses(52)(17)
Equity in net (income) or loss of investment funds accounted for using the equity method and other income or loss(112)(66)
Amortization of intangible assets21 23 
Share-based compensation68 41 
Changes in:
Reserve for losses and loss adjustment expenses, net of unpaid losses and loss adjustment expenses recoverable660 603 
Unearned premiums, net of ceded unearned premiums663 541 
Premiums receivable(1,159)(871)
Deferred acquisition costs(82)(75)
Reinsurance balances payable521 279 
Deferred income tax assets, net24 34 
Other items, net(108)(246)
Net cash provided by operating activities1,564 963 
Investing Activities  
Purchases of fixed maturity investments(8,325)(3,901)
Purchases of equity securities(509)(8)
Purchases of other investments(494)(266)
Proceeds from sales of fixed maturity investments7,529 3,034 
Proceeds from sales of equity securities65 75 
Proceeds from sales, redemptions and maturities of other investments116 96 
Proceeds from redemptions and maturities of fixed maturity investments363 180 
Net settlements of derivative instruments5 14 
Net (purchases) sales of short-term investments(90)(208)
Purchases of fixed assets(15)(11)
Other(54)(1)
Net cash used for investing activities(1,409)(996)
Financing Activities  
Proceeds from common shares issued, net(32)(18)
Other (2)
Preferred dividends paid(10)(10)
Net cash used for financing activities(42)(30)
Effects of exchange rate changes on foreign currency cash and restricted cash(11)5 
Increase (decrease) in cash and restricted cash102 (58)
Cash and restricted cash, beginning of year1,498 1,273 
Cash and restricted cash, end of period$1,600 $1,215 
Income taxes paid (received)(6)4 
Interest paid  

See Notes to Consolidated Financial Statements

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2024 FIRST QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.    Basis of Presentation and Recent Accounting Pronouncements
General
Arch Capital Group Ltd. (“Arch Capital”) is a publicly listed Bermuda exempted company which provides insurance, reinsurance and mortgage insurance on a worldwide basis through its wholly-owned subsidiaries. As used herein, the “Company” means Arch Capital and its subsidiaries.
Basis of Presentation
The interim consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). All significant intercompany transactions and balances have been eliminated in consolidation. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates and assumptions. In the opinion of management, the accompanying unaudited interim consolidated financial statements reflect all adjustments (consisting of normally recurring accruals) necessary for a fair statement of results on an interim basis. The results of any interim period are not necessarily indicative of the results for a full year or any future periods. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted; however, management believes that the disclosures are adequate to make the information presented not misleading. This report should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (“2023 Form 10-K”), including the Company’s audited consolidated financial statements and related notes.
The Company has reclassified the presentation of certain prior year information to conform to the current presentation. Such reclassifications had no effect on the Company’s net income, comprehensive income, shareholders’ equity or cash flows. All amounts are in millions, except per share amounts, unless otherwise noted.
Recent Accounting Pronouncements
For information regarding additional accounting standards that the Company has not yet adopted, see note 3(t), “Significant Accounting Policies—Recent Accounting Pronouncements,” of the notes to consolidated financial statements in the Company’s 2023 Form 10-K.
2.    Share Transactions
Share-Based Compensation
During the 2024 first quarter, the Company granted 0.4 million stock options, 0.5 million performance share awards and performance share units (“PSAs/PSUs”) and 0.7 million restricted shares and units to certain employees. The stock options were valued at the grant date using the Black-Scholes option pricing model. The weighted average grant-date fair value of the stock options, PSAs/PSUs and restricted shares and units granted during the 2024 first quarter were approximately $30.73, $93.28 and $87.22 per share, respectively. Such values are being amortized over the respective substantive vesting period.
During the 2023 first quarter, the Company granted 0.5 million stock options, 0.6 million PSAs/PSUs and 0.8 million restricted shares and units to certain employees. The stock options were valued at the grant date using the Black-Scholes option pricing model. The weighted average grant-date fair value of the stock options, PSAs/PSUs and restricted shares and units granted during the 2023 first quarter were approximately $23.49, $74.06 and $69.25 per share, respectively. Such values are being amortized over the respective substantive vesting period.
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ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
3.    Earnings Per Common Share
The following table sets forth the computation of basic and diluted earnings per common share:
Three Months Ended
March 31,
 20242023
Numerator:
Net income (loss)$1,120 $717 
Net (income) loss attributable to noncontrolling interests (2)
Net income (loss) available to Arch1,120 715 
Preferred dividends(10)(10)
Net income (loss) available to Arch common shareholders$1,110 $705 
Denominator:
Weighted average common shares and common share equivalents outstanding — basic370.9 367.3 
Effect of dilutive common share equivalents:
Nonvested restricted shares2.3 2.8 
Stock options (1)7.3 7.5 
Weighted average common shares and common share equivalents outstanding — diluted380.5 377.6 
Earnings per common share:
Basic$2.99 $1.92 
Diluted$2.92 $1.87 
(1)    Certain stock options were not included in the computation of diluted earnings per share where the exercise price of the stock options exceeded the average market price and would have been anti-dilutive or where, when applying the treasury stock method to in-the-money options, the sum of the proceeds, including unrecognized compensation, exceeded the average market price and would have been anti-dilutive. For the 2024 first quarter and 2023 first quarter, the number of stock options excluded were 0.6 million and 0.5 million, respectively.
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ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
4.    Segment Information
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 are the Company’s chief operating decision makers. They 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, with the exception of goodwill and intangible assets, and accordingly, investment income is not allocated to each underwriting segment.
The Company determined its reportable segments using the management approach described in accounting guidance regarding disclosures about segments of an enterprise and related information. The accounting policies of the segments are the same as those used for the preparation of the Company’s consolidated financial statements. Intersegment business is allocated to the segment accountable for the underwriting results.
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; excess and surplus casualty; professional lines; programs; property, energy, marine and aviation; travel, accident and health; warranty and lenders solutions; and other (consisting of alternative markets, excess workers' compensation and surety business).
The reinsurance segment consists of the Company’s reinsurance underwriting units which offer specialty product lines on a worldwide basis. Product lines include: casualty; marine and aviation; other specialty; property catastrophe; property excluding property catastrophe (losses on a single risk, both excess of loss and pro rata); and other (consisting of life reinsurance, casualty clash and other).
The mortgage segment includes the Company’s U.S. primary mortgage insurance business, investment and services related to U.S. credit-risk transfer (“CRT”) which are predominately with government sponsored enterprises (“GSEs”) and international mortgage insurance and reinsurance operations. Arch Mortgage Insurance Company and United Guaranty Residential Insurance Company (combined “Arch MI U.S.”) are approved as eligible mortgage insurers by Federal National Mortgage Association (“Fannie Mae”) and Federal Home Loan Mortgage Corporation (“Freddie Mac”), each a GSE. Arch MI U.S. also includes Arch Mortgage Guaranty Company, which is not a GSE-approved entity.
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, income or loss from operating affiliates and items related to the Company’s non-cumulative preferred shares.

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ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The following tables summarize the Company’s underwriting income or loss by segment, together with a reconciliation of underwriting income or loss to net income available to Arch common shareholders:
Three Months Ended
March 31, 2024
 InsuranceReinsuranceMortgageTotal
Gross premiums written (1)$2,126 $3,467 $341 $5,933 
Premiums ceded (1)(584)(1,201)(64)(1,848)
Net premiums written1,542 2,266 277 4,085 
Change in unearned premiums(91)(600)28 (663)
Net premiums earned1,451 1,666 305 3,422 
Other underwriting income (loss) 2 10 12 
Losses and loss adjustment expenses(854)(883)9 (1,728)
Acquisition expenses(276)(331) (607)
Other operating expenses(235)(75)(53)(363)
Underwriting income (loss)$86 $379 $271 736 
Net investment income327 
Net realized gains (losses)67 
Equity in net income (loss) of investment funds accounted for using the equity method99 
Other income (loss)14 
Corporate expenses (2)(46)
Transaction costs and other (2)(7)
Amortization of intangible assets(21)
Interest expense(34)
Net foreign exchange gains (losses)31 
Income (loss) before income taxes and income (loss) from operating affiliates1,166 
Income tax (expense) benefit(101)
Income (loss) from operating affiliates55 
Net income (loss) available to Arch1,120 
Preferred dividends(10)
Net income (loss) available to Arch common shareholders$1,110 
Underwriting Ratios
Loss ratio58.9 %53.0 %(3.0)%50.5 %
Acquisition expense ratio19.0 %19.9 % %17.7 %
Other operating expense ratio16.2 %4.5 %17.5 %10.6 %
Combined ratio94.1 %77.4 %14.5 %78.8 %
Goodwill and intangible assets$293 $121 $364 $778 
(1)    Certain assumed and ceded amounts related to intersegment transactions are included in individual segment results. Accordingly, the sum of such transactions for each segment does not agree to the total due to eliminations.
(2)    Certain expenses have been excluded from ‘corporate expenses’ and reflected in ‘transaction costs and other.’

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ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Three Months Ended
March 31, 2023
 InsuranceReinsuranceMortgageTotal
Gross premiums written (1)$1,979 $2,460 $343 $4,780 
Premiums ceded (1)(542)(734)(82)(1,356)
Net premiums written1,437 1,726 261 3,424 
Change in unearned premiums(180)(396)35 (541)
Net premiums earned1,257 1,330 296 2,883 
Other underwriting income (loss) 4 6 10 
Losses and loss adjustment expenses(703)(766)(2)(1,471)
Acquisition expenses(245)(281)(7)(533)
Other operating expenses(195)(74)(50)(319)
Underwriting income (loss)$114 $213 $243 570 
Net investment income199 
Net realized gains (losses)17 
Equity in net income (loss) of investment funds accounted for using the equity method48 
Other income (loss)11 
Corporate expenses (2)(29)
Transaction costs and other (2)(1)
Amortization of intangible assets(23)
Interest expense(32)
Net foreign exchange gains (losses)(18)
Income (loss) before income taxes and income (loss) from operating affiliates742 
Income tax (expense) benefit(64)
Income (loss) from operating affiliates39 
Net income (loss)717 
Net (income) loss attributable to noncontrolling interests(2)
Net income (loss) available to Arch715 
Preferred dividends(10)
Net income (loss) available to Arch common shareholders$705 
Underwriting Ratios    
Loss ratio55.9 %57.6 %0.6 %51.0 %
Acquisition expense ratio19.5 %21.1 %2.5 %18.5 %
Other operating expense ratio15.5 %5.6 %16.9 %11.1 %
Combined ratio90.9 %84.3 %20.0 %80.6 %
Goodwill and intangible assets$228 $142 $415 $785 

(1)    Certain assumed and ceded amounts related to intersegment transactions are included in individual segment results. Accordingly, the sum of such transactions for each segment does not agree to the total due to eliminations.
(2)    Certain expenses have been excluded from ‘corporate expenses’ and reflected in ‘transaction costs and other.’


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ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
5.    Reserve for Losses and Loss Adjustment Expenses
The following table represents an analysis of losses and loss adjustment expenses and a reconciliation of the beginning and ending reserve for losses and loss adjustment expenses:
Three Months Ended
March 31,
20242023
Reserve for losses and loss adjustment expenses at beginning of period
$22,752 $20,032 
Unpaid losses and loss adjustment expenses recoverable
6,690 6,280 
Net reserve for losses and loss adjustment expenses at beginning of period
16,062 13,752 
Net incurred losses and loss adjustment expenses relating to losses occurring in:
Current year
1,852 1,607 
Prior years
(124)(136)
Total net incurred losses and loss adjustment expenses
1,728 1,471 
Net foreign exchange (gains) losses and other
(84)55 
Net paid losses and loss adjustment expenses relating to losses occurring in:
Current year
(92)(140)
Prior years
(978)(727)
Total net paid losses and loss adjustment expenses
(1,070)(867)
Net reserve for losses and loss adjustment expenses at end of period
16,636 14,411 
Unpaid losses and loss adjustment expenses recoverable
7,069 6,347 
Reserve for losses and loss adjustment expenses at end of period
$23,705 $20,758 

Development on Prior Year Loss Reserves
2024 First Quarter
During the 2024 first quarter, the Company recorded net favorable development on prior year loss reserves of $124 million, which consisted of $10 million from the insurance segment, $40 million from the reinsurance segment and $74 million from the mortgage segment.
The insurance segment’s net favorable development of $10 million, or 0.7 loss ratio points, for the 2024 first quarter consisted of $30 million of net favorable development in short-tailed and long-tailed lines and $20 million of net adverse development in medium-tailed lines. Net favorable development in short-tailed lines included $18 million of favorable development in property (excluding marine), primarily from the 2019, 2022 and 2023 accident years (i.e., the year in which a loss occurred), and $10 million of favorable development related to travel and accident business, primarily from the 2022 and 2023 accident years. Net favorable development in long-tailed lines included $7 million of favorable development in executive assurance business, primarily from the 2018 to 2021 accident years, and $3 million of favorable development in alternative markets business, primarily from 2020 and prior accident years, which was partially offset by $7 million of adverse development in construction and national accounts, primarily
from the 2023 accident year. Net adverse development in medium-tailed lines included $17 million of adverse development in marine business, primarily from the 2022 accident year.
The reinsurance segment’s net favorable development of $40 million, or 2.4 loss ratio points, for the 2024 first quarter consisted of $44 million of net favorable development in short-tailed lines and $4 million of net adverse development in medium and long-tailed lines. Net favorable development in short-tailed lines included $33 million of favorable development related to other specialty business, primarily from the 2019 to 2023 underwriting years (i.e., all premiums and losses attributable to contracts having an inception or renewal date within the given twelve-month period), and $21 million of favorable development related to property other than property catastrophe business, primarily from the 2022 and 2023 underwriting years, which was partially offset by $8 million of adverse development from property catastrophe business, primarily from the 2023 underwriting year. Net adverse development in medium-tailed lines included $2 million in marine and aviation lines, primarily from the 2020 and 2023 underwriting years, while net adverse development in long-tailed lines reflected $2 million of adverse development in casualty business, primarily from the 2017 underwriting year.
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ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The mortgage segment’s net favorable development was $74 million, or 24.4 loss ratio points, for the 2024 first quarter. Such amounts were primarily related to reductions on reserves for delinquent loans associated with the U.S. first lien portfolio from the 2022 and 2023 accident years. The Company’s credit risk transfer and international businesses also contributed to the favorable development.
2023 First Quarter
During the 2023 first quarter, the Company recorded net favorable development on prior year loss reserves of $136 million, which consisted of $12 million from the insurance segment, $53 million from the reinsurance segment and $71 million from the mortgage segment.
The insurance segment’s net favorable development of $12 million, or 0.9 loss ratio points, for the 2023 first quarter consisted of $25 million of net favorable development in short-tailed and long-tailed lines and $13 million of net adverse development in medium-tailed lines. Net favorable development in short-tailed lines reflected $9 million of favorable development in property (excluding marine), primarily from 2020 and 2022 accident years, $8 million of favorable development related to travel and accident business, primarily from the 2020 to 2022 accident years, and $7 million of favorable development in warranty and lenders solutions, primarily from the 2022 accident year. Net favorable development in long-tailed lines of $1 million included favorable development in executive assurance business, partially offset by adverse development in casualty and healthcare. Net adverse development in medium-tailed lines included $18 million of adverse development in professional liability business, primarily from the 2017 to 2019 accident years, partially offset by favorable development in marine business of $7 million, primarily from the 2021 and 2022 accident years.
The reinsurance segment’s net favorable development of $53 million, or 4.0 loss ratio points, for the 2023 first quarter consisted of $49 million of net favorable development in short-tailed lines and $3 million of net favorable development in medium-tailed and long-tailed lines. Net favorable development in short-tailed lines reflected $23 million of favorable development related to property other than property catastrophe business, across most underwriting years, $18 million of favorable development related to other specialty and other short-tailed lines, primarily from the 2020 and 2021 underwriting years, and $8 million of favorable development related to property catastrophe business, primarily from the 2018, 2019 and 2022 underwriting years. Net favorable development in medium-tailed lines included $2 million in marine and aviation lines, while net favorable development in long-tailed lines included $3 million in casualty business.
The mortgage segment’s net favorable development was $71 million, or 23.9 loss ratio points, for the 2023 first quarter. Such amounts were primarily related to reductions on reserves for loans becoming delinquent after the onset of the COVID-19 pandemic. The Company’s credit risk transfer and international businesses also contributed to the favorable development.
6.    Allowance for Expected Credit Losses
Premiums Receivable
The following table provides a roll forward of the allowance for expected credit losses of the Company’s premium receivables:
Premium Receivables, Net of AllowanceAllowance for Expected Credit Losses
Three Months Ended March 31, 2024
Balance at beginning of period$4,644 $34 
Change for provision of expected credit losses (1) $(2)
Balance at end of period$5,765 $32 
Three Months Ended March 31, 2023
Balance at beginning of period$3,625 $35 
Change for provision of expected credit losses (1) $1 
Balance at end of period$4,513 $36 
(1)Amounts deemed uncollectible are written-off in operating expenses. For the 2024 first quarter and 2023 first quarter, amounts written off were nil and $1 million, respectively.
Reinsurance Recoverables
The following table provides a roll forward of the allowance for expected credit losses of the Company’s reinsurance recoverables:
Reinsurance Recoverables, Net of AllowanceAllowance for Expected Credit Losses
Three Months Ended March 31, 2024
Balance at beginning of period$7,064 $21 
Change for provision of expected credit losses(5)
Balance at end of period$7,509 $16 
Three Months Ended March 31, 2023
Balance at beginning of period$6,564 $22 
Change for provision of expected credit losses(1)
Balance at end of period$6,612 $21 
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ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The following table summarizes the Company’s reinsurance recoverables on paid and unpaid losses (not including ceded unearned premiums):
March 31,
December 31
20242023
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses$7,509$7,064
% due from carriers with A.M. Best rating of “A-” or better66.6 %66.8 %
% due from all other rated carriers %0.1 %
% due from all other carriers with no A.M. Best rating (1)33.4 %33.1 %
Largest balance due from any one carrier as % of total shareholders’ equity7.1 %7.2 %
(1)    At March 31, 2024 and December 31, 2023 over 94% and 95% of such amount were collateralized through reinsurance trusts, funds withheld arrangements, letters of credit or other, respectively.

Contractholder Receivables
The following table provides a roll forward of the allowance for expected credit losses of the Company’s contractholder receivables:
Contract-holder Receivables, Net of AllowanceAllowance for Expected Credit Losses
Three Months Ended March 31, 2024
Balance at beginning of period$1,814 $3 
Change for provision of expected credit losses 
Balance at end of period$1,907 $3 
Three Months Ended March 31, 2023
Balance at beginning of period$1,731 $3 
Change for provision of expected credit losses(1)
Balance at end of period1,750 $2 

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ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
7.    Investment Information

Available For Sale Investments
The following table summarizes the fair value and cost or amortized cost of the Company’s securities classified as available for sale:
Estimated
Fair
Value
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Allowance for Expected Credit Losses Cost or
Amortized
Cost
March 31, 2024
Fixed maturities:
Corporate bonds$11,698 $98 $(442)$(24)$12,066 
U.S. government and government agencies4,370 6 (109) 4,473 
Asset backed securities2,762 15 (44)(5)2,796 
Non-U.S. government securities2,195 20 (113)(1)2,289 
Commercial mortgage backed securities1,197 3 (30)(2)1,226 
Residential mortgage backed securities1,179 4 (69) 1,244 
Municipal bonds227 1 (18) 244 
Total23,628 147 (825)(32)24,338 
Short-term investments2,142 2 (3) 2,143 
Total$25,770 $149 $(828)$(32)$26,481 
December 31, 2023
Fixed maturities:
Corporate bonds$10,855 $157 $(464)$(20)$11,182 
U.S. government and government agencies5,814 63 (86) 5,837 
Asset backed securities2,250 11 (55)(5)2,299 
Non-U.S. government securities2,062 33