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 investments accounted for using the equity method, net foreign exchange gains or losses and transaction costs and other reflects the relative mix reported by jurisdiction and the varying tax rates in each jurisdiction.

Segment Information

We classify our businesses into three underwriting segments: insurance, reinsurance and mortgage. Our insurance, reinsurance and mortgage segments each have managers who are responsible for the overall profitability of their respective segments and who are directly accountable to our chief operating decision makers. The Chief Executive Officer and the Chief Financial Officer and Treasurer 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 Company’s insurance segment primarily consists of commercial insurance lines of business, with a focus on specialty insurance products. These products are mainly offered in North America, Bermuda, the United Kingdom, continental Europe and Australia. Products offered in North America include: commercial automobile; commercial multi-peril; other liability-claims made, which includes financial and professional lines; other liability-occurrence, which includes admitted and excess and surplus casualty lines; property and short-tail specialty; workers compensation; and other. Products offered across the Company’s International units include: property and short-tail specialty; and casualty and other.

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

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

2025 First Quarter versus 2024 Period. Gross premiums written by the insurance segment in the 2025 first quarter were 24.4% higher than in the 2024 first quarter (4.8% excluding the MCE Acquisition), while net premiums written were 25.4% higher than in the 2024 first quarter (1.2% excluding the MCE Acquisition). Growth in net premiums written excluding the impact of the MCE Acquisition reflected an increase in commercial automobile and other liability–occurrence due, in part, to new business opportunities and rate changes. These increases were mostly offset by reductions in other liability–claims made where markets remained competitive.

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 2025 first quarter were 28.2% higher than in the 2024 first quarter (1.7% excluding the MCE Acquisition).

Other Underwriting Income (Loss).

Other underwriting income, which includes revenue earned from underwriting-related activities covered under existing service contracts, was $3 million for the 2025 first quarter, compared to nil for the 2024 first quarter.

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

2025 First Quarter versus 2024 Period. The insurance segment’s current year loss ratio in the 2025 first quarter was 7.3 points higher than in the 2024 first quarter. The 2025 first quarter loss ratio reflected 9.5 points of current year catastrophic activity, primarily related to the California wildfires, compared to 2.1 points of activity related to the Baltimore bridge collapse along with 1.9 points of current year catastrophic activity in the 2024 first quarter. The current year loss ratio for the 2025 first quarter also reflected the impact of the MCE Acquisition and changes in mix of business.

The insurance segment’s net favorable development was $17 million, or 0.9 points, for the 2025 first quarter, compared to $10 million, or 0.7 points, for the 2024 first quarter. Seenote 6, “Reserve for Losses and Loss Adjustment Expenses,” to our consolidated financial statements for information about the insurance segment’s prior year reserve development.

2025 First Quarter versus 2024 Period. The insurance segment’s underwriting expense ratio was 34.1% in the 2025 first quarter, compared to 35.2% in the 2024 first quarter. The impact of the MCE Acquisition lowered the underwriting expense ratio by approximately 1.9 points, primarily due to the effects of the fair value estimation of the assets acquired at closing, including the non-recognition of deferred acquisition costs. The value of policies in force at closing is considered within the value of business acquired, which is amortized through amortization of intangibles.

Reinsurance Segment

The Company’s reinsurance segment offers reinsurance products on a worldwide basis. Lines of business include: casualty; marine and aviation; specialty; property catastrophe; property excluding property catastrophe; and other.

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

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

2025 First Quarter versus 2024 Period. Gross premiums written by the reinsurance segment in the 2025 first quarter were 0.8% higher than in the 2024 first quarter, while net premiums written were 2.2% higher. The growth in net premiums written primarily reflected increases in casualty, property catastrophe and property excluding property catastrophe lines, due in part to rate increases, new business opportunities and growth in existing accounts. These increases were mostly offset by a decrease in specialty lines due to non-renewals of structured deals and share reductions.

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 2025 first quarter were 21.7% higher than in the 2024 first quarter.

Other Underwriting Income (Loss).

Other underwriting income, which includes revenue earned from underwriting-related activities covered under existing service contracts, was $39 million for the 2025 first quarter, compared to $2 million for the 2024 first quarter.

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

2025 First Quarter versus 2024 Period. The reinsurance segment’s current year loss ratio in the 2025 first quarter was 17.4 points higher than in the 2024 first quarter. The 2025 first quarter loss ratio reflected 21.7 points of current year catastrophic activity, primarily related to the California wildfires, compared to 3.0 points related to the Baltimore bridge collapse along with 1.9 points of current year catastrophic activity in the 2024 first quarter. The current year loss ratio for the 2025 first quarter also reflected the impact of rate increases and changes in mix of business.

The reinsurance segment’s net favorable development was $119 million, or 5.9 points, for the 2025 first quarter, compared to $40 million, or 2.4 points, for the 2024 first quarter. See note 6, “Reserve for Losses and Loss Adjustment Expenses,” to our consolidated financial statements for information about the reinsurance segment’s prior year reserve development.

2025 First Quarter versus 2024 Period. The underwriting expense ratio for the reinsurance segment was 24.9% in the 2025 first quarter, compared to 24.4% in the 2024 first quarter, with the increase reflecting lower contingent commissions on ceded business in the 2025 first quarter due to higher loss activity.

Mortgage Segment

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

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

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

2025 First Quarter versus 2024 Period. Gross premiums written by the mortgage segment in the 2025 first quarter were 4.4% lower than in the 2024 first quarter, while net premiums written were 4.0% lower. The decrease in net premiums written in the 2025 first quarter primarily reflected a lower level of mortgage originations, mostly in our international businesses.

The persistency rate was 81.9% for the Arch MI U.S. portfolio of primary mortgage insurance policies at March 31, 2025, compared to 83.6% at March 31, 2024. 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.

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

2025 First Quarter versus 2024 Period. Net premiums earned for the 2025 first quarter were 1.6% lower than in the 2024 first quarter, reflecting changes in net premiums written over the previous five quarters.

Underwriting Income (Loss).

Other underwriting income, which is primarily related to GSE credit risk-sharing transactions, was $11 million for the 2025 first quarter, compared to $10 million for the 2024 first quarter.

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

2025 First Quarter versus 2024 Period. The mortgage segment’s current year loss ratio was 0.1 points higher in the 2025 first quarter than in the 2024 first quarter. The ratio was consistent with the 2024 first quarter.

The mortgage segment’s net favorable development was $61 million, or 20.4 points, for the 2025 first quarter, compared to $74 million, or 24.4 points, for the 2024 first quarter. Seenote 6, “Reserve for Losses and Loss Adjustment Expenses,” to our consolidated financial statements for information about the mortgage segment’s prior year reserve development.

2025 First Quarter versus 2024 Period. The underwriting expense ratio for the mortgage segment was 15.0% in the 2025 first quarter, compared to 17.5% in the 2024 first quarter.

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 0.32% of average invested assets for the 2025 first quarter, compared to 0.28% for the 2024 first quarter.

The higher level of net investment income for the 2025 period 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 4.16% for the 2025 first quarter, compared to 4.14% for the 2024 first quarter. Net cash flow from operating activities contributed $1.5 billion for the three months ended March 31, 2025, which has grown our invested asset base and contributed to the increase in net investment income.

Corporate Expenses.

Corporate expenses were $50 million for the 2025 first quarter, compared to $46 million for the 2024 first quarter. 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 2025 first quarter was $10 million, compared to $7 million for the 2024 first quarter. Amounts in both periods primarily includes direct costs related to the MCE Acquisition.

Other Income or Losses.

Other income for the 2025 first quarter was a loss of $2 million, compared to an income of $14 million for the 2024 first quarter. 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 2025 first quarter was $49 million, compared to $21 million for the 2024 first quarter. The increase in the 2025 period was primarily related to the MCE Acquisition.

Interest Expense.

Interest expense was $35 million for the 2025 first quarter, compared to $34 million for the 2024 first quarter. Interest expense primarily reflects amounts related to our outstanding senior notes.

Net Realized Gains or Losses.

Net realized gains for the 2025 first quarter were $3 million, compared to net realized gains of $67 million for the 2024 first quarter. 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. 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 8, “Investment Information—Net Realized Gains (Losses)” andnote 8, “Investment Information—Allowance for Expected Credit Losses,” to our consolidated financial statements for additional information.

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

Equity in net income of investments accounted for using the equity method was $53 million in the 2025 first quarter, compared to $99 million for the 2024 first quarter. Such investments are generally recorded on a one to three month lag based on the availability of reports from the investment funds. Investment funds accounted for using the equity method totaled $6.3 billion at March 31, 2025, compared to $6.0 billion at December 31, 2024. Seenote 8, “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 losses for the 2025 first quarter were $27 million, compared to gains of $31 million for the 2024 first quarter. 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 17.4% for the 2025 first quarter, compared to an expense of 8.3% for the 2024 first quarter. The year-over-year increase is primarily attributed to the Government of Bermuda enacting the Corporate Income Tax Act 2023, which established a 15% corporate income tax effective January 1, 2025. Seenote 14, “Income Taxes” to our consolidated financial statements for additional information.

Income or Losses from Operating Affiliates.

Income from operating affiliates for 2025 first quarter was $17 million, compared to income of $55 million for the 2024 first quarter, and primarily reflects amounts related to the Company’s investment in Somers Group Holdings Ltd. (“Somers”) and Coface SA. The decrease in income from operating affiliates in the 2025 first quarter was primarily driven by lower level of affiliated income from Somers, partly due to the impact of California wildfires. Seenote 8, “Investment Information—Investments in Operating Affiliates,” to our consolidated financial statements for additional information.

CRITICAL ACCOUNTING POLICIES,

ESTIMATES AND RECENT ACCOUNTING PRONOUNCEMENTS

Critical accounting policies, estimates and recent accounting pronouncements are discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our 2024 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 March 31, 2025, approximately $26.3 billion, or 61%, of total investable assets held by Arch were internally managed, compared to $25.6 billion, or 62%, at December 31, 2024. Seenote 8, “Investment Information” to our consolidated financial statements for additional information.

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

(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 March 31, 2025, 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 communications, technology, consumer non-cyclical, financial and industrial sectors at March 31, 2025.

(2)Primarily in structured and corporate exposures at March 31, 2025.

(3)Primarily in technology, financials, healthcare, consumer discretionary and communications sectors at March 31, 2025.

For details on our other investments and other investable assets, seenote 8, “Investment Information—Other Investments” to our consolidated financial statements.

For details on our investments accounted for using the equity method, seenote 8, “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 10, “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 9, “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 7, “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 March 31, 2025:

(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.

(5) Issued in August 2024, covering in-force policies issued between September 1, 2023 and July 31, 2024. $163 million was directly funded by Bellemeade Re 2024-1 Ltd. via insurance-linked notes, with an additional $41 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 March 31, 2025 and December 31, 2024, our Loss Reserves, net of unpaid losses and loss adjustment expenses recoverable, by type and by operating segment were as follows:

At March 31, 2025 and December 31, 2024, the insurance segment’s Loss Reserves by major line of business, net of unpaid losses and loss adjustment expenses recoverable, were as follows:

At March 31, 2025 and December 31, 2024, the reinsurance segment’s Loss Reserves by major line of business, net of unpaid losses and loss adjustment expenses recoverable, were as follows:

At March 31, 2025 and December 31, 2024, 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 March 31, 2025, 34.8% of total net reserves represents policy years 2015 and prior and the remainder from later policy years. At December 31, 2024, 36.1% of total net reserves represent policy years 2015 and prior and the remainder from later policy years.

Mortgage Operations Supplemental Information

The mortgage segment’s insurance in force (“IIF”) and risk in force (“RIF”) were as follows at March 31, 2025 and December 31, 2024:

(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 March 31, 2025:

(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, 2024:

(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 March 31, 2025 and December 31, 2024:

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

(1)Includes first lien primary and pool policies.

(2)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 7.8 to 1 at March 31, 2025, consistent with 7.8 to 1 at December 31, 2024.

Shareholders’ Equity and Book Value per Share

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

(1)Excludes the effects of 12.2 million and 12.4 million stock options and 0.3 million and 0.3 million restricted and performance share units outstanding at March 31, 2025 and December 31, 2024, 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 three months ended March 31, 2025, Arch Capital received dividends of $243 million from Arch Reinsurance Ltd. (“Arch Re Bermuda”), our Bermuda based reinsurer and insurer, which can pay approximately $4.9 billion to Arch Capital during the remainder of 2025 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 three months ended March 31, 2025 was lower than in the 2024 period. Activity for the three months ended March 31, 2025 primarily reflected a higher level of losses paid than in the 2024 period.

Cash used for investing activities for the three months ended March 31, 2025 was lower than in the 2024 period. Activity for the three months ended March 31, 2025 reflected lower net purchases of investments than in the 2024 period, due in part to a higher level of repurchases under our share repurchase program and a higher level of losses paid than in the 2024 period.

Cash used for financing activities for the three months ended March 31, 2025 was higher than in the 2024 period, primarily due to the higher level of repurchases under our share repurchase program. We repurchased $196 million of our common shares in the 2025 period, compared to nil in the 2024 period.

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 186% at March 31, 2025, consistent with 186% at December 31, 2024. On August 21, 2024, Fannie Mae and Freddie Mac (collectively the GSEs) each updated their PMIERs to incorporate new deductions to available assets for investment risk. This update became effective on March 31, 2025, but the impact will be phased in through September 30, 2026. If the GSEs had fully implemented this update to PMIERs as of March 31, 2025, the changes would have reduced available assets by 17% and resulted in a pro-forma PMIERs Sufficiency Ratio of 163%.

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 March 31, 2025:

(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):

CATASTROPHIC AND SEVERE ECONOMIC EVENTS

We have large aggregate exposures to natural and man-made catastrophic events, pandemic events and severe economic events. Natural catastrophes can be caused by various events, including hurricanes, floods, windstorms, earthquakes, hailstorms, tornadoes, explosions, severe winter weather, fires, droughts and other natural disasters. Man-made catastrophic events may include acts of war, acts of terrorism and political instability. Catastrophes can also cause losses in non-property business such as mortgage insurance, workers’ compensation or general liability. In addition to the nature of property business, we believe that economic and geographic trends affecting insured property, including inflation, property value appreciation and geographic concentration, tend to generally increase the size of losses from catastrophic events over time.

Our models employ both proprietary and vendor-based systems and include cross-line correlations for property, marine, offshore energy, aviation, workers compensation and personal accident. We seek to limit the probable maximum pre-tax loss to a specific level for severe catastrophic events. Currently, we seek to limit our 1-in-250 year return period net probable maximum loss from a severe catastrophic event in any geographic zone to approximately 25% of tangible shareholders’ equity available to Arch (total shareholders’ equity available to Arch less goodwill and intangible assets). We reserve the right to change this threshold at any time.

Based on in-force exposure estimated as of April 1, 2025, our modeled peak zone catastrophe exposure was a windstorm affecting the Florida Tri-County regions, with a net probable maximum pre-tax loss of $1.8 billion, or 9% of tangible shareholders’ equity available to Arch, followed by windstorms affecting the Northeastern U.S. and the Gulf of Mexico regions with net probable maximum pre-tax losses of $1.7 billion and $1.5 billion, respectively. Our exposures to other perils, such as U.S. earthquake and international events, were less than the exposures arising from U.S. windstorms and hurricanes. As of April 1, 2025, our modeled peak zone earthquake exposure (San Francisco earthquake) represented approximately 59% of our peak zone catastrophe exposure, and our modeled peak zone international exposure (Germany windstorm) was substantially less than both our peak zone windstorm and earthquake exposures.

We also have significant exposure to losses due to mortgage defaults resulting from severe economic events in the future. For our U.S. mortgage insurance business, we have developed a proprietary risk model (“Realistic Disaster Scenario” or “RDS”) that simulates the maximum loss resulting from a severe economic downturn impacting the housing market. The RDS models the collective impact of

adverse conditions for key economic indicators, the most significant of which is a decline in home prices. The RDS model projects paths of future home prices, unemployment rates, income levels and interest rates and assumes correlation across states and geographic regions. The resulting future performance of our in-force portfolio is then estimated under the economic stress scenario, reflecting loan and borrower information.

Currently, we seek to limit our modeled RDS loss from a severe economic event to approximately 25% of tangible shareholders’ equity available to Arch. We reserve the right to change this threshold at any time. Based on in-force exposure estimated as of April 1, 2025, our modeled RDS loss was approximately $1.0 billion, or 5% of tangible shareholders’ equity available to Arch.

Net probable maximum loss estimates are net of expected reinsurance recoveries, before income tax and before excess reinsurance reinstatement premiums. RDS loss estimates are net of expected reinsurance recoveries and before income tax. Catastrophe loss estimates are reflective of the zone indicated and not the entire portfolio. Since hurricanes and windstorms can affect more than one zone and make multiple landfalls, our catastrophe loss estimates include clash estimates from other zones. Our catastrophe loss estimates and RDS loss estimates do not represent our maximum exposures and it is highly likely that our actual incurred losses would vary materially from the modeled estimates. There can be no assurances that we will not suffer pre-tax losses greater than 25% of our tangible shareholders’ equity from one or more catastrophic events or severe economic events due to several factors. These factors include the inherent uncertainties in estimating the frequency and severity of such events and the margin of error in making such determinations resulting from potential inaccuracies and inadequacies in the data provided by clients and brokers, the modeling techniques and the application of such techniques or as a result of a decision to change the percentage of shareholders' equity exposed to a single catastrophic event or severe economic event. In addition, actual losses may increase if our reinsurers fail to meet their obligations to us or the reinsurance protections purchased by us are exhausted or are otherwise unavailable. See “Risk Factors—Risks Relating to Our Industry” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Catastrophic Events and Severe Economic Events” in our 2024 Form 10-K.

MARKET SENSITIVE INSTRUMENTS AND RISK MANAGEMENT

In accordance with the SEC’s Financial Reporting Release No. 48, we performed a sensitivity analysis to determine the effects that market risk exposures could have on the future earnings, fair values or cash flows of our financial instruments as of March 31, 2025. Market risk represents the risk of changes in the fair value of a financial instrument and is comprised of several components, including liquidity, basis and price risks.

An analysis of material changes in market risk exposures at March 31, 2025 that affect the quantitative and qualitative disclosures presented in our 2024 Form 10-K (see section captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Market Sensitive Instruments and Risk Management”) were as follows:

Investment Market Risk

Fixed Income Securities. We invest in interest rate sensitive securities, primarily debt securities. We consider the effect of interest rate movements on the fair value of our fixed maturities, short-term investments and certain of our other investments, equity securities and investments accounted for using the equity method which invest in fixed income securities (collectively, “Fixed Income Securities”) and the corresponding change in unrealized appreciation. As interest rates rise, the fair value of our Fixed Income Securities falls, and the converse is also true. Based on historical observations, there is a low probability that all interest rate yield curves would shift in the same direction at the same time. Furthermore, at times interest rate movements in certain credit sectors exhibit a much lower correlation to changes in U.S. Treasury yields. Accordingly, the actual effect of interest rate movements may differ materially from the amounts set forth in the following tables.

The following table summarizes the effect that an immediate, parallel shift in the interest rate yield curve would have had on our Fixed Income Securities:

In addition, we consider the effect of credit spread movements on the market value of our Fixed Income Securities and the corresponding change in unrealized value. As credit spreads widen, the fair value of our Fixed Income Securities falls, and the converse is also true. In periods where the spreads on our Fixed Income Securities are much higher than their historical average due to short-term market dislocations, a parallel shift in credit spread levels would result in a much more pronounced change in unrealized value.

The following table summarizes the effect that an immediate, parallel shift in credit spreads in a static interest rate environment would have had on our Fixed Income Securities:

Another method that attempts to measure portfolio risk is Value-at-Risk (“VaR”). VaR measures the worst expected loss under normal market conditions over a specific time interval at a given confidence level. The 1-year 95th percentile parametric VaR reported herein estimates that 95% of the time, the portfolio loss in a one-year horizon would be less than or equal to the calculated number, stated as a percentage of the measured portfolio’s initial value. The VaR is a variance-covariance based estimate, based on linear sensitivities of a portfolio to a broad set of systematic market risk factors and idiosyncratic risk factors mapped to the portfolio exposures. The relationships between the risk factors are estimated using historical data, and the most recent data points are generally given more weight. As of March 31, 2025, our portfolio’s 95th percentile VaR was estimated to be 5.9%, compared to an estimated 5.6% at December 31, 2024. In periods where the volatility of the risk factors mapped to our portfolio’s exposures is higher due to market conditions, the resulting VaR is higher than in other periods.

Equity Securities. At March 31, 2025 and December 31, 2024, the fair value of our investments in equity securities and certain investments accounted for using the equity method with underlying equity strategies totaled $1.4 billion and $1.5 billion, respectively. These investments are exposed to price risk, which is the potential loss arising from decreases in fair value. An immediate hypothetical 10%

decline in the value of each position would reduce the fair value of such investments by approximately $139 million and $149 million at March 31, 2025 and December 31, 2024, respectively, and would have decreased book value per share by approximately $0.37 and $0.40, respectively. An immediate hypothetical 10% increase in the value of each position would increase the fair value of such investments by approximately $139 million and $149 million at March 31, 2025 and December 31, 2024, respectively, and would have increased book value per share by approximately $0.37 and $0.40, respectively.

Investment-Related Derivatives. At March 31, 2025, the notional value of all derivative instruments (excluding foreign currency forward contracts which are included in the foreign currency exchange risk analysis below) was $3.8 billion, compared to $5.0 billion at December 31, 2024. If the underlying exposure of each investment-related derivative held at March 31, 2025 depreciated by 100 basis points, it would have resulted in a reduction in net income of approximately $38 million, and a decrease in book value per share of approximately $0.10 per share, compared to $50 million and $0.13 per share, respectively, on investment-related derivatives held at December 31, 2024. If the underlying exposure of each investment-related derivative held at March 31, 2025 appreciated by 100 basis points, it would have resulted in an increase in net income of approximately $38 million, and an increase in book value per share of approximately $0.10 per share, compared to $50 million and $0.13 per share, respectively, on investment-related derivatives held at December 31, 2024. Seenote 10, “Derivative Instruments,” to our consolidated financial statements for additional disclosures concerning derivatives.

For further discussion on investment activity, please refer to “Financial Condition—Investable Assets.”

Foreign Currency Exchange Risk

Foreign currency rate risk is the potential change in value, income and cash flow arising from adverse changes in foreign currency exchange rates. Through our subsidiaries and branches located in various foreign countries, we conduct our insurance and reinsurance operations in a variety of local currencies other than the U.S. Dollar. We generally hold investments in foreign currencies which are intended to mitigate our exposure to foreign currency fluctuations in our net insurance liabilities. We may also utilize foreign currency forward contracts and currency options as part of our investment strategy. Seenote 10, “Derivative Instruments,” to our consolidated financial statements for additional information.

The following table provides a summary of our net foreign currency exchange exposures, as well as foreign currency derivatives in place to manage these exposures:

(1) Represents capital contributions held in the foreign currencies of our operating units.

(2) Represents the net notional value of outstanding foreign currency forward contracts.

Although we generally attempt to match the currency of our projected liabilities with investments in the same currencies, from time to time we may elect to over or underweight one or more currencies, which could increase our exposure to foreign currency fluctuations and increase the volatility of our shareholders’ equity. Historical observations indicate a low probability that all foreign currency exchange rates would shift against the U.S. Dollar in the same direction and at the same time and, accordingly, the actual effect of foreign currency rate movements may differ materially from the amounts set forth above. For further discussion on foreign exchange activity, please refer to “Results of Operations.”

Effects of Inflation

General economic inflation has increased in recent quarters and may continue to remain at elevated levels for an extended period of time. The potential also exists, after a catastrophe loss or pandemic events, for the development of inflationary pressures in a local economy. This risk may be heightened from time to time by geopolitical tensions, global supply chain disruptions, tariffs, and other contributing factors. This may have a material effect on the adequacy of our reserves for losses and loss adjustment expenses, especially in longer-tailed lines of business, and on the market value of our investment portfolio through rising interest rates. The anticipated effects of inflation are considered in our pricing models, reserving processes and

exposure management, across all lines of business and types of loss including natural catastrophe events. The actual effects of inflation on our results cannot be accurately known until claims are ultimately settled and will vary by the specific type of inflation affecting each line of business.