ARCH CAPITAL GROUP LTD

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

(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 or losses on derivative instruments, changes in the allowance for credit losses on financial assets and gains or losses realized from the acquisition or disposition of subsidiaries.

(2) Income tax expense on net realized gains or losses, equity in net income or loss of 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.

Segment Information

We classify our businesses into three underwriting segments: insurance, reinsurance and mortgage. Our insurance, reinsurance and mortgage segments each have managers who are responsible for the overall profitability of their respective segments and who are directly accountable to our chief operating decision makers. 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 our three underwriting segments based on underwriting income or loss. We do not manage our assets by underwriting segment, with the exception of goodwill and intangible assets, and accordingly, investment income is not allocated to each underwriting segment.

We determined our reportable segments using the management approach described in accounting guidance regarding disclosures about segments of an enterprise and related information. The accounting policies of the segments are the same as those used for the preparation of our consolidated financial statements. Intersegment business is allocated to the segment accountable for the underwriting results.

Insurance Segment

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

The insurance segment consists of our 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 primarily 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, stand-alone 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.

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

2024 Second Quarter versus 2023 Period. Gross premiums written by the insurance segment in the 2024 second quarter were 7.5% higher than in the 2023 second quarter, while net premiums written were 7.2% higher. Growth in net premiums written reflected increases in most lines of business due in part to new business opportunities and rate changes.

Six Months Ended June 30, 2024 versus 2023 period. Gross premiums written by the insurance segment for the six months ended June 30, 2024 were 7.5% higher than in the 2023 period, while net premiums written were 7.2% higher than in the 2023 period. Growth in net premiums written reflected increases in most lines of business due in part to new business opportunities and rate changes.

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

Net premiums written are primarily earned on a pro rata basis over the terms of the policies for all products, usually 12 months. Net premiums earned reflect changes in net premiums written over the previous five quarters. Net premiums earned for the 2024 second quarter were 11.3% higher than in the 2023 second quarter while net premiums earned for the six months ended June 30, 2024 were 13.3% higher than in the 2023 period.

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

2024 Second Quarter versus 2023 Period. The insurance segment’s current year loss ratio in the 2024 second quarter was 0.6 points lower than in the 2023 second quarter. The 2024 second quarter loss ratio reflected 2.0 points of current year catastrophic activity, spread across a series of global events, compared to 2.7 points of catastrophic activity for the 2023 second quarter. The current year loss ratio for the 2024 second quarter also reflected the impact of rate increases and changes in mix of business.

Six Months Ended June 30, 2024 versus 2023 Period. The insurance segment’s current year loss ratio for the six months ended June 30, 2024 was 1.1 points higher than in the 2023 period and reflected 1.9 points of current year catastrophic activity, spread across series of global events, compared to 2.1 points in the 2023 period. The current year loss ratio for the 2024 period included activity related to the Baltimore bridge collapse and also reflected the impact of rate increases and changes in mix of business.

The insurance segment’s net favorable development was $5 million, or 0.3 points, for the 2024 second quarter, compared to $12 million, or 0.9 points, for the 2023 second quarter, and $15 million, or 0.5 points, for the six months ended June 30, 2024, compared to $24 million, or 0.9 points, for the 2023 period. Seenote 5, “Reserve for Losses and Loss Adjustment Expenses,” to our consolidated financial statements for information about the insurance segment’s prior year reserve development.

2024 Second Quarter versus 2023 Period. The insurance segment’s underwriting expense ratio was 35.3% in the 2024 second quarter, compared to 34.6% in the 2023 second quarter, with the increase reflecting a higher level of aggregate operating expenses.

Six Months Ended June 30, 2024 versus 2023 period. The insurance segment’s underwriting expense ratio was 35.2% for the six months ended June 30, 2024, compared to 34.8% for the 2023 period, with the increase reflecting a higher level of aggregate operating expenses.

Reinsurance Segment

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

The reinsurance segment consists of our 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 or aggregation of losses from 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 basis or facultative basis.

Other: primarily includes life reinsurance business.

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

2024 Second Quarter versus 2023 Period. Gross premiums written by the reinsurance segment in the 2024 second quarter were 15.6% higher than in the 2023 second quarter, while net premiums written were 13.9% higher. The growth in net premiums written reflected increases in all lines of business due in part to rate increases, new business opportunities and growth in existing accounts.

Six Months Ended June 30, 2024 versus 2023 period. Gross premiums written by the reinsurance segment for the six months ended June 30, 2024 were 28.1% higher than in the 2023 period, while net premiums written were 22.6% higher than in the 2023 period. The growth in net premiums written reflected increases in all lines of business due in part to rate increases, new business opportunities and growth in existing accounts.

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

Net premiums written, irrespective of the class of business, are generally earned on a pro rata basis over the terms of the underlying policies or reinsurance contracts. Net premiums earned reflect changes in net premiums written over the previous five quarters. Net premiums earned for the 2024 second quarter were 32.5% higher than in the 2023 second quarter, while net premiums earned for the six months ended June 30, 2024 were 28.9% higher than in the 2023 period.

Other Underwriting Income (Loss).

Other underwriting income for the 2024 second quarter was $1 million, compared to $3 million for the 2023 second quarter, and $3 million for the six months ended June 30, 2024, compared to $7 million for the 2023 period.

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

2024 Second Quarter versus 2023 Period. The reinsurance segment’s current year loss ratio in the 2024 second quarter was 0.9 points higher than in the 2023 second quarter. The 2024 second quarter loss ratio reflected 10.0 points of current year catastrophic activity, spread across a series of global events, compared to 6.7 points of catastrophic activity in the 2023 second quarter. The current year loss ratio for the 2024 second quarter also reflected the impact of rate increases and changes in mix of business.

Six Months Ended June 30, 2024 versus 2023 Period. The reinsurance segment’s current year loss ratio for the six months ended June 30, 2024 was 2.5 points lower than in the 2023 period and reflected 6.1 points of current year catastrophic activity, consistent with 6.1 points in the 2023 period. The current year loss ratio for the 2024 period included activity related to the Baltimore bridge collapse and also reflected the impact of rate increases and changes in mix of business.

The reinsurance segment’s net favorable development was $34 million, or 1.9 points, for the 2024 second quarter, compared to $29 million, or 2.2 points, for the 2023 second quarter, and $74 million, or 2.2 points, for the six months ended June 30, 2024, compared to $82 million, or 3.0 points, for the 2023 period. See note 5, “Reserve for Losses and Loss Adjustment Expenses,” to our consolidated financial statements for information about the reinsurance segment’s prior year reserve development.

2024 Second Quarter versus 2023 Period. The underwriting expense ratio for the reinsurance segment was 23.0% in the 2024 second quarter, compared to 26.6% in the 2023 second quarter, with the decrease primarily due to a lower acquisition expense ratio and the beneficial effect of growth in net premiums earned.

Six Months Ended June 30, 2024 versus 2023 period. The underwriting expense ratio for the reinsurance segment was 23.6% for the six months ended June 30, 2024, compared to 26.6% for the 2023 period, with the decrease primarily due to a lower acquisition expense ratio and the beneficial effect of growth in net premiums earned.

Mortgage Segment

Our mortgage operations include U.S. and international mortgage insurance and reinsurance operations as well as participation in GSE credit risk-sharing transactions.

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

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

2024 Second Quarter versus 2023 Period. Gross premiums written by the mortgage segment in the 2024 second quarter were 2.0% lower than in the 2023 second quarter, while net premiums written were 4.2% higher. The increase in net premiums written in the 2024 second quarter primarily reflected a lower level of Bellemeade premiums ceded, due in part to the termination of certain Bellemeade agreements in the 2023 fourth quarter.

Six Months Ended June 30, 2024 versus 2023 Period. Gross premiums written by the mortgage segment for the six months ended June 30, 2024 were 1.3% lower than in the 2023 period, while net premiums written for the six months ended June 30, 2024 were 5.1% higher than in the 2023 period. The increase in net premiums written in the 2024 period primarily reflected a lower level of Bellemeade premiums ceded, due in part to the termination of certain Bellemeade agreements in the 2023 fourth quarter.

The persistency rate was 83.3% for the Arch MI U.S. portfolio of primary mortgage insurance policies at June 30, 2024, compared to 83.0% at June 30, 2023. The persistency rate represents the percentage of mortgage insurance in force at the beginning of a 12-month period that remains in force at the end of such period.

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

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

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

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

2024 Second Quarter versus 2023 Period. Net premiums earned for the 2024 second quarter were 4.4% higher than in the 2023 second quarter. The increase in net premiums earned in the 2024 second quarter primarily reflected a lower level of Bellemeade premiums ceded, due in part to the termination of certain Bellemeade agreements in the 2023 fourth quarter.

Six Months Ended June 30, 2024 versus 2023 Period. For the six months ended June 30, 2024, net premiums earned were 3.7% higher than in the 2023 period. The increase in net premiums earned in the 2024 period primarily reflected a lower level of Bellemeade premiums ceded, due in part to the termination of certain Bellemeade agreements in the 2023 fourth quarter.

Other Underwriting Income (Loss).

Other underwriting income, which is primarily related to GSE credit risk-sharing transactions, was $2 million for the 2024 second quarter, compared to $3 million for the 2023 second quarter.

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

2024 Second Quarter versus 2023 Period. The mortgage segment’s current year loss ratio was 4.4 points lower in the 2024 second quarter than in the 2023 second quarter. The lower current year loss ratio for the 2024 second quarter reflected a decrease in estimated claim rates, partially offset by slightly higher new delinquencies.

Six Months Ended June 30, 2024 versus 2023 Period. The mortgage segment’s current year loss ratio was 3.9 points lower for the six months ended June 30, 2024 than for the 2023 period. The lower current year loss ratio for the 2024 period reflected a decrease in estimated claim rates, partially offset by slightly higher new delinquencies.

The mortgage segment’s net favorable development was $82 million, or 26.9 points, for the 2024 second quarter, compared to $80 million, or 27.2 points, for the 2023 second quarter, and $156 million, or 25.6 points, for the six months ended June 30, 2024, compared to $151 million, or 25.6 points, for the 2023 period. Seenote 5, “Reserve for Losses and Loss Adjustment Expenses,” to our consolidated financial statements for information about the mortgage segment’s prior year reserve development.

2024 Second Quarter versus 2023 Period. The underwriting expense ratio for the mortgage segment was 16.0% in the 2024 second quarter, compared to 19.5% in the 2023 second quarter. The decrease was primarily due to a higher level of ceding and profit commissions on U.S. primary business, along with a higher level of net premiums earned.

Six Months Ended June 30, 2024 versus 2023 period. The underwriting expense ratio for the mortgage segment was 16.8% for the six months ended June 30, 2024, compared to 19.4% for the 2023 period. The decrease was primarily due to a higher level of ceding and profit commissions on U.S. primary business, along with a higher level of net premiums earned.

Corporate

The Company’s corporate 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 or losses on derivative instruments, changes in the allowance for credit losses on financial assets and gains or losses realized from the acquisition or disposition of subsidiaries), equity in net income or loss of investments accounted for using the equity method, other income or loss, corporate expenses, transaction costs and other, amortization of intangible assets, interest expense, net foreign exchange gains or losses, income taxes, income from operating affiliates and items related to our non-cumulative preferred shares.

Net Investment Income.

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

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

(2) Investment expenses were approximately 0.26% of average invested assets for the 2024 second quarter, consistent with 0.26% for the 2023 second quarter, and 0.27% for the six months ended June 30, 2024, compared to 0.26% for the 2023 period.

The higher level of net investment income for the 2024 periods was primarily related to higher yields available in the financial market. The pre-tax investment income yield, calculated based on amortized cost and on an annualized basis, was 4.39% for the 2024 second quarter, compared to 3.50% for the 2023 second quarter, and 4.36% for the six months ended June 30, 2024, compared to 3.33% for the 2023 period. Net cash flow from operating activities contributed $3.1 billion for the six months ended June 30, 2024, which has grown our invested asset base and contributed to the increase in net investment income.

Corporate Expenses.

Corporate expenses were $23 million for the 2024 second quarter, compared to $20 million for the 2023 second quarter, and $69 million for the six months ended June 30, 2024, compared to $49 million for the 2023 period. Such amounts primarily represent certain holding company costs necessary to support our worldwide operations and costs associated with operating as a publicly traded company. The increase in corporate expenses was primarily due to higher incentive compensation costs.

Transaction Costs and Other.

Transaction costs and other for the 2024 second quarter was $18 million, compared to $1 million for the 2023 second quarter, and $25 million for the six months ended June 30, 2024, compared to $2 million for the 2023 period. The amounts in both periods primarily related to our acquisition activity.

Other Income or Losses.

Other income for the 2024 second quarter was $8 million, compared to $3 million for the 2023 second quarter, and $22 million for the six months ended June 30, 2024, compared to $14 million for the 2023 period. Amounts in both periods primarily reflect changes in the cash surrender value of our investment in corporate-owned life insurance.

Amortization of Intangible Assets.

Amortization of intangible assets for the 2024 second quarter was $27 million, compared to $24 million for the 2023 second quarter, and $48 million for the six months ended June 30, 2024, compared to $47 million for the 2023 period. Amounts in both periods primarily attributed to amortization of finite-lived intangible assets.

Interest Expense.

Interest expense was $35 million for the 2024 second quarter, compared to $33 million for the 2023 second quarter, and $69 million for the six months ended June 30, 2024, compared to $65 million for the 2023 period. Interest expense primarily reflects amounts related to our outstanding senior notes.

Net Realized Gains or Losses.

Net realized gains for the 2024 second quarter were $122 million, compared to net realized losses of $123 million for the 2023 second quarter. Net realized gains were $189 million for the six months ended June 30, 2024, compared to net realized losses of $106 million for the 2023 period. Amounts in both periods reflected sales of investments as well as the impact of financial market movements on the Company’s equity securities and investments accounted for under the fair value option method. Net realized gains for the 2024 second quarter also include benefits related to both the sale of, and acquisition of subsidiaries. Currently, our portfolio is actively managed to maximize total return within certain guidelines. The effect of financial market movements on the investment portfolio will directly impact net realized gains or losses as the portfolio is adjusted and rebalanced. Net realized gains or losses from the sale of fixed maturities primarily results from our decisions to reduce credit exposure, to change duration targets, to rebalance our portfolios or due to relative value determinations.

Net realized gains or losses also include realized and unrealized changes in the fair value of equity securities and assets accounted for using the fair value option, realized and unrealized gains or losses on derivative instruments, changes in the allowance for credit losses on financial assets and gains or losses realized from the acquisition or disposition of subsidiaries Seenote 7, “Investment Information—Net Realized Gains (Losses)” andnote 7, “Investment Information—Allowance for Expected Credit Losses,” to our consolidated financial statements for additional information.

Equity in Net Income or Losses of Investment Funds Accounted for Using the Equity Method.

Equity in net income of investment funds accounted for using the equity method was $167 million in the 2024 second quarter, compared to $69 million for the 2023 second quarter, and $266 million for the six months ended June 30, 2024, compared to $117 million for the 2023 period. Such investments are generally recorded on a one to three month lag based on the availability of reports from the investment funds. Investment funds accounted for using the equity method totaled $5.0 billion at June 30, 2024, compared to $4.6 billion at December 31, 2023. Seenote 7, “Investment Information—Investments Accounted For Using the Equity Method,” to our consolidated financial statements for additional information.

Net Foreign Exchange Gains or Losses.

Net foreign exchange gains for the 2024 second quarter were $1 million, compared to losses of $5 million for the 2023 second quarter. Net foreign exchange gains for the six months ended June 30, 2024 were $32 million, compared to losses of $23 million for the 2023 period. Amounts in both

periods were primarily unrealized and resulted from the effects of revaluing our net insurance liabilities required to be settled in foreign currencies at each balance sheet date.

Income Tax Expense.

Our income tax provision on income or loss before income taxes, including income or loss from operating affiliates, resulted in an expense of 7.1% for the 2024 second quarter, compared to an expense of 9.2% for the 2023 second quarter, and an expense of 7.7% for the six months ended June 30, 2024, compared to an expense of 8.6% for the 2023 period. Seenote 13, “Income Taxes” to our consolidated financial statements for additional information.

Income or Losses from Operating Affiliates.

Income from operating affiliates for 2024 second quarter was $45 million, compared to income of $22 million for the 2023 second quarter, and income of $100 million for the six months ended June 30, 2024, compared to income of $61 million for the 2023 period. Seenote 7, “Investment Information—Investments in Operating Affiliates,” to our consolidated financial statements for additional information.

CRITICAL ACCOUNTING POLICIES,

ESTIMATES AND RECENT ACCOUNTING PRONOUNCEMENTS

Critical accounting policies, estimates and recent accounting pronouncements are discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our 2023 Form 10-K, updated where applicable in the notes accompanying our consolidated financial statements, including note 1, “Basis of Presentation and Recent Accounting Pronouncements.”

FINANCIAL CONDITION

Investable Assets Held by Arch

At June 30, 2024, approximately $23.3 billion, or 62%, of total investable assets held by Arch were internally managed, compared to $21.9 billion, or 63%, at December 31, 2023. Seenote 7, “Investment Information” to our consolidated financial statements for additional information.

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

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

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

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

The following table summarizes our top ten exposures to fixed income corporate issuers by fair value at June 30, 2024, excluding guaranteed amounts and covered bonds:

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

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

The following table summarizes our equity securities, which include investments in exchange traded funds:

(1)Primarily in technology, consumer non-cyclical, communications, financial and industrial sectors at June 30, 2024.

(2)Primarily in corporate exposures at June 30, 2024.

(3)Primarily in financials, consumer staples, industrials and energy sectors at June 30, 2024.

For details on our other investments and other investable assets, seenote 7, “Investment Information—Other Investments” to our consolidated financial statements.

For details on our investments accounted for using the equity method, seenote 7, “Investment Information—Investments Accounted For Using the Equity Method,” to our consolidated financial statements.

Our investment strategy allows for the use of derivative instruments. We utilize various derivative instruments such as futures contracts to enhance investment performance, replicate investment positions or manage market exposures and duration risk that would be allowed under our investment guidelines if implemented in other ways. Seenote 9, “Derivative Instruments,” to our consolidated financial statements for additional disclosures related to derivatives.

Accounting guidance regarding fair value measurements addresses how companies should measure fair value when they are required to use a fair value measure for recognition or disclosure purposes under GAAP and provides a common definition of fair value to be used throughout GAAP. Seenote 8, “Fair Value,” to our consolidated financial statements for a summary of our financial assets and liabilities measured at fair value, segregated by level in the fair value hierarchy.

Reinsurance

The effects of reinsurance on written and earned premiums and losses and loss adjustment expenses (“LAE”) with unaffiliated reinsurers were as follows:

Seenote 6, “Allowance for Expected Credit Losses,” to our consolidated financial statements for information about our reinsurance recoverables and related allowance for credit losses.

Bellemeade Re

We have entered into aggregate excess of loss mortgage reinsurance agreements with various special purpose reinsurance companies domiciled in Bermuda (the “Bellemeade Agreements”). For the respective coverage periods, we will retain the first layer of the respective aggregate losses and the special purpose reinsurance companies will provide second layer coverage up to the outstanding coverage amount. We will then retain losses in excess of the outstanding coverage limit. The aggregate excess of loss reinsurance coverage generally decreases over a ten-year period as the underlying covered mortgages amortize, unless provisional call options embedded within certain of the Bellemeade Agreements are executed or if pre-defined delinquency triggering events occur.

The following table summarizes the respective coverages and retentions at June 30, 2024:

(1) Issued in September 2021, covering in-force policies issued between April 1, 2021 and June 30, 2021. $508 million was directly funded by Bellemeade Re 2021-3 Ltd. via insurance-linked notes, with an additional $131 million capacity provided directly to Arch MI U.S. by a separate panel of reinsurers.

(2) Issued in January 2022, covering in-force policies issued between July 1, 2021 and November 30, 2021. $284 million was directly funded by Bellemeade Re 2022-1 Ltd. via insurance-linked notes, with an additional $33 million capacity provided directly to Arch MI U.S. by a separate panel of reinsurers.

(3) Issued in September 2022, covering in-force policies issued between November 1, 2021 and June 30, 2022. $201 million was directly funded by Bellemeade Re 2022-2 Ltd. via insurance-linked notes, with an additional $126 million capacity provided directly to Arch MI U.S. by a separate panel of reinsurers.

(4) Issued in October 2023, covering in-force policies issued between January 1, 2023 and September 30, 2023. $186 million was directly funded by Bellemeade Re 2023-1 Ltd. via insurance-linked notes, with an additional $47 million capacity provided directly to Arch MI U.S. by a separate panel of reinsurers.

Reserve for Losses and Loss Adjustment Expenses

We establish reserve for losses and loss adjustment expenses (“Loss Reserves”) which represent estimates involving actuarial and statistical projections, at a given point in time, of our expectations of the ultimate settlement and administration costs of losses incurred. Estimating Loss Reserves is inherently difficult. We utilize actuarial models as well as available historical insurance industry loss ratio experience and loss development patterns to assist in the establishment of Loss Reserves. Actual losses and loss adjustment expenses paid will deviate, perhaps substantially, from the reserve estimates reflected in our financial statements.

At June 30, 2024 and December 31, 2023, our Loss Reserves, net of unpaid losses and loss adjustment expenses recoverable, by type and by operating segment were as follows:

At June 30, 2024 and December 31, 2023, the insurance segment’s Loss Reserves by major line of business, net of unpaid losses and loss adjustment expenses recoverable, were as follows:

At June 30, 2024 and December 31, 2023, the reinsurance segment’s Loss Reserves by major line of business, net of unpaid losses and loss adjustment expenses recoverable, were as follows:

At June 30, 2024 and December 31, 2023, the mortgage segment’s Loss Reserves by major line of business, net of unpaid losses and loss adjustment expenses recoverable, were as follows:

(1) At June 30, 2024, 40.0% of total net reserves represents policy years 2014 and prior and the remainder from later policy years. At December 31, 2023, 31.0% of total net reserves represent policy years 2014 and prior and the remainder from later policy years.

Mortgage Operations Supplemental Information

On June 3, 2024, we completed the acquisition of RMIC Companies, Inc., and its wholly-owned subsidiaries (“RMIC”) that, together, comprise the run-off mortgage insurance business of Old Republic International Corporation. The acquired business had been in runoff since 2011 and represented $3.6 billion of insurance in force at June 30, 2024.

The mortgage segment’s insurance in force (“IIF”) and risk in force (“RIF”) were as follows at June 30, 2024 and December 31, 2023:

(1)Represents 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. Such amounts are shown before external reinsurance.

The IIF and RIF for our U.S. primary mortgage insurance business by policy year were as follows at June 30, 2024:

(1)Represents the ending percentage of loans in default.

The IIF and RIF for our U.S. primary mortgage insurance business by policy year were as follows at December 31, 2023:

(1)Represents the ending percentage of loans in default.

The following tables provide supplemental disclosures on risk in force for our U.S. primary mortgage insurance business at June 30, 2024 and December 31, 2023:

The following table provides supplemental disclosures for our U.S. primary mortgage insurance business related to insured loans and loss metrics:

(1)Represents delinquent loans related to the acquisition of RMIC.

(2)Includes first lien primary and pool policies.

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

The risk to capital ratio, which represents total current (non-delinquent) risk in force, net of reinsurance, divided by total statutory capital, for Arch MI U.S. was approximately 7.4 to 1 at June 30, 2024, compared to 7.3 to 1 at December 31, 2023.

Shareholders’ Equity and Book Value per Share

The following table presents the calculation of book value per share:

(1)Excludes the effects of 10.9 million and 12.5 million stock options and 0.4 million and 0.4 million restricted stock units outstanding at June 30, 2024 and December 31, 2023, respectively.

LIQUIDITY

Liquidity is a measure of our ability to access sufficient cash flows to meet the short-term and long-term cash requirements of our business operations.

Arch Capital is a holding company whose assets primarily consist of the shares in its subsidiaries. Generally, Arch Capital depends on its available cash resources, liquid investments and dividends or other distributions from its subsidiaries to make payments, including the payment of debt service obligations and operating expenses it may incur and any dividends or liquidation amounts with respect to our preferred and common shares.

For the six months ended June 30, 2024, Arch Capital received dividends of $119 million from Arch Reinsurance Ltd. (“Arch Re Bermuda”), our Bermuda based reinsurer and insurer, which can pay approximately $4.7 billion to Arch Capital during the remainder of 2024 without providing an affidavit to the Bermuda Monetary Authority.

We expect that our liquidity needs, including our anticipated (re)insurance obligations and operating and capital expenditure needs, for the next 12 months and for the foreseeable future thereafter, will be met by funds generated from underwriting activities and investment income, as well as by our balance of cash, short-term investments, proceeds on the sale or maturity of our investments, and our credit facilities.

Cash Flows

The following table summarizes our cash flows from operating, investing and financing activities:

•Cash provided by operating activities for the six months ended June 30, 2024 was higher than in the 2023 period. Activity for the six months ended June 30, 2024 primarily reflected a higher level of premiums collected than in the 2023 period.

•Cash used for investing activities for the six months ended June 30, 2024 was higher than in the 2023 period. Activity for the six months ended June 30, 2024 reflected higher net purchases than in the 2023 period due in part to the investment of operating cash flows.

•Cash used for financing activities for the six months ended June 30, 2024 was lower than in the 2023 period, reflecting common share activity.

CAPITAL RESOURCES

The following table provides an analysis of our capital structure:

Arch MI U.S. is required to maintain compliance with the GSEs requirements, known as the Private Mortgage Insurer Eligibility Requirements or “PMIERs.” The financial requirements require an eligible mortgage insurer’s available assets, which generally include only the most liquid assets of an insurer, to meet or exceed “minimum required assets” as of each quarter end. Minimum required assets are calculated from PMIERs tables with several risk dimensions (including origination year, original loan-to-value and original credit score of performing loans, and the delinquency status of non-performing loans) and are subject to a minimum amount. Arch MI U.S. satisfied the PMIERs’ financial requirements with an estimated PMIER sufficiency ratio of 196% at June 30, 2024, compared to 213% at December 31, 2023.

Arch Capital, through its subsidiaries, provides financial support to certain of its insurance subsidiaries and affiliates, through certain reinsurance arrangements beneficial to the ratings of such subsidiaries. Historically, our insurance, reinsurance and mortgage insurance subsidiaries have entered into separate reinsurance arrangements with Arch Re Bermuda covering individual lines of business.

GUARANTOR INFORMATION

The below table provides a description of our senior notes payable at June 30, 2024:

(1)Fully and unconditionally guaranteed by Arch Capital.

Our senior notes were issued by Arch Capital, Arch Capital Group (U.S.) Inc. (“Arch-U.S.”) and Arch Capital Finance LLC (“Arch Finance”). Arch-U.S. is a wholly-owned subsidiary of Arch Capital and Arch Finance is a wholly-owned finance subsidiary of Arch-U.S. Our 2034 senior notes and 2050 senior notes issued by Arch Capital are unsecured and unsubordinated obligations of Arch Capital and ranked equally with all of its existing and future unsecured and unsubordinated indebtedness. The 2043 senior notes issued by Arch-U.S. are unsecured and unsubordinated obligations of Arch-U.S. and Arch Capital and rank equally and ratably with the other unsecured and unsubordinated indebtedness of Arch-U.S. and Arch Capital. The 2026 senior notes and 2046 senior notes issued by Arch Finance are unsecured and unsubordinated obligations of Arch Finance and Arch Capital and rank equally and ratably with the other unsecured and unsubordinated indebtedness of Arch Finance and Arch Capital.

Arch-U.S. and Arch Finance depend on their available cash resources, liquid investments and dividends or other distributions from their subsidiaries or affiliates to make payments, including the payment of debt service obligations and operating expenses they may incur.

The following tables present condensed financial information for Arch Capital (parent guarantor) and Arch-U.S. (subsidiary issuer):