Arch Capital Group Q3 2026 Earnings Call Transcript

Arch Capital Group (NASDAQ:ACGL) reported third-quarter financial results on Wednesday. The transcript from the company’s third-quarter earnings call has been provided below.

This transcript is brought to you by Benzinga APIs. For real-time access to our entire catalog, please visit https://www.benzinga.com/apis/ for a consultation.

View the webcast at https://events.q4inc.com/attendee/484856890/guest

Summary

Arch Capital Group reported strong Q3 2026 results with $910 million in after-tax operating income, translating to $2.67 per share and a 16% annualized return on average common equity.

The company returned approximately $1.4 billion to shareholders through buybacks and saw an increase in tangible book value per share by 15% year-over-year.

The Insurance segment showed a 7.8% increase in gross premiums written, while Reinsurance premiums declined by 8% due to competitive market conditions.

The Mortgage segment’s underwriting income was $201 million, with strong portfolio quality despite high mortgage rates limiting new origination.

Investment income contributed significantly with $451 million pre-tax, boosted by strong equity method investment performance.

Management highlighted strategic investments in data and analytics to enhance risk selection and maintain selective capital deployment.

The future outlook remains cautiously optimistic, with a focus on disciplined underwriting and capital management amid evolving market conditions.

Full Transcript

OPERATOR

Good day, ladies and gentlemen, and welcome to the 3Q 2026 Arch Capital Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. As a reminder, this conference call is being recorded. Before the Company gets started with its update, management wants to first remind everyone that certain statements in yesterday’s press release and discussed on this call may constitute forward-looking statements under the federal securities laws. These statements are based upon management’s current assessments and assumptions and are subject to a number of risks and uncertainties. Consequently, actual results may differ materially from those expressed or implied.

For more information on the risks and other factors that may affect future performance, investors should review periodic reports that are filed by the Company with the SEC from time to time, including our annual report on Form 10-K for the 2025 fiscal year. Additionally, certain statements contained in the call that are not based on historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The Company intends the forward-looking statements in the call to be subject to the safe harbor created thereby. Management will also make reference to certain non-GAAP measures of financial performance.

The reconciliations to GAAP for each non-GAAP financial measure can be found in the Company’s current report on Form 8-K furnished to the SEC yesterday, which contains the Company’s earnings press release and is available on the Company’s website and on the SEC’s website at www.sec.gov. I would now like to introduce your hosts for today’s conference, Mr. Nicholas Papadopoulo and Mr. Francois Morin. Sirs, you may begin.

Nicolas Papadopoulo (Director, Board of Directors)

Good morning and welcome to Arch’s third quarter earnings call. Arch delivered very strong results this quarter, reflecting excellent underwriting performance across each of our businesses and a relatively low level of catastrophe activity. After tax, operating income was $910 million, or $2.67 per share, resulting in an annualized operating return on average common equity of 16%. Strong returns from our equity method investment contributed to an annualized net income return on average common equity of 18.1%.

Despite increasingly competitive market conditions, we continue to generate strong returns, reflecting our ability to proactively shift capital to optimize long-term returns. This is the essence of cycle management, and given this dynamic, we were able to return approximately $1.4 billion to our common shareholders through buybacks in the quarter. Book value per share was essentially flat in the quarter. However, it’s worth noting that tangible book value per share, excluding AOCI, increased approximately 15% from a year ago.

Arch’s brand, underwriting expertise, and relationships—combined with our diversified platform—give us broad access to business across insurance and reinsurance. In addition, continuing investments in data and analytics enhance our risk selection and provide deeper insight into our portfolios. Each of these elements allows us to be highly selective about where and how we deploy capital. Importantly, we are led by returns. Therefore, premium growth is not the ultimate objective.

We continue to act on what we see—growing where returns remain attractive and exercising restraint where they do not. Let me now turn to our segment performance, starting with Insurance. Insurance generated $108 million of underwriting income in the quarter, with a combined ratio of 94.4%, and a current accident-year combined ratio excluding catastrophes of 89.2%. Gross premiums written increased 7.8% and net premiums written increased 2.7% compared to the same quarter last year. Premium growth in the quarter benefited from a new captive program in Alternative Markets and increased writings of marine warbridge coverage related to the Iran conflict.

The premium growth we saw this quarter was stronger than the underlying trend for the year-to-date. Adjusting for the planned reduction in middle-market commercial program business, gross premiums written increased 4.2% and net premiums written increased 1.6% compared to the first nine months of last year. This low single-digit underlying growth is consistent with our expectation given current market conditions. In North America, we continue to see opportunities across excess and surplus casualty, construction, and national account casualty, where rate and market conditions remain attractive.

Internationally, we continue to benefit from our position as a lead market across many classes at Lloyd’s. At the same time, property and short-tail markets remain more competitive, while rate increases have moderated in some of our casualty lines. We continue to believe that adverse development emerging across the industry from more recent accident years reinforces the need for casualty pricing to remain at or above loss-cost trend. Moving to Reinsurance, which delivered $393 million of underwriting income in the quarter with a combined ratio of 78.3%, aided by light catastrophe activity. Gross premiums written declined approximately 8% compared with the same quarter last year, reflecting abundant reinsurance capacity, particularly in property and short-tail lines. Consistent with our cycle management approach, we are reducing participation where returns no longer meet our objectives and increasingly leveraging third-party capital to manage net exposure and optimize returns on our own capital.

While casualty generally remains attractive, additional capacity continues to enter the market. We will not chase growth for the sake of growth. We will remain patient and deploy capital where pricing and terms and conditions appropriately reflect the underlying risk. Our objective is not to become an index of the overall market. Our global reach, underwriting expertise, and third-party capital platform allow us to take advantage of opportunities as they emerge and to construct a portfolio that delivers our required risk-adjusted returns.

Our Mortgage segment generated $201 million of underwriting income in the quarter and continues to be a valuable contributor to our results. New origination volume remains constrained primarily due to mortgage interest rates currently above 7%, limiting near-term growth opportunities. Importantly, the underlying quality of our in-force portfolio remains strong. In U.S. MI, favorable reserve development has moderated from prior years, while positive homeowner credit conditions continue to support a low delinquency rate of 2.2% at September 30th.

Higher mortgage rates also support persistency by reducing voluntary refinancing activity. Our business outside of primary U.S. mortgage insurance brought $66 million of net premium in the quarter, and we continue to see opportunities in these businesses, providing diversification from our U.S. MI business. As always, the mortgage team remains focused on disciplined execution, optimizing the platform, and managing expenses in line with the market environment.

Finally, investments contributed $451 million of pre-tax net investment income in the quarter. Our equity method investment also performed very well, contributing $224 million to pre-tax net income. With $49.2 billion of investable assets, investment income is expected to remain an important contributor to Arch’s overall earnings. Last Friday, Arch celebrated its 25th anniversary. I want to recognize this milestone and thank our employees for what we have built together: a global franchise, a strong brand, and perhaps most importantly, a unique culture anchored in our values. I also want to thank our investors for the confidence they have placed in Arch over the past 25 years. As I reflect on my 25 years at Arch, one thing has remained consistent—our ability to adapt and generate attractive returns across very different market environments.

That has been our legacy for the first 25 years, and it remains our focus for the next 25. Today, we are operating in a transitioning market where conditions are becoming increasingly uneven, and as this quarter’s results demonstrate, we are prepared for that environment and we welcome the challenge. The market will continue to evolve, but our core principles will not. We will remain disciplined underwriters and thoughtful stewards of capital, always focused on producing superior risk-adjusted returns over the long term.

That gives me confidence in Arch’s position today and the opportunities ahead over the next 25 years. With that, I will turn the call over to Francois.

Francois Morin (EVP, Chief Financial Officer and Treasurer)

Thank you, Nicholas, and good morning to all. As you saw last night, our third quarter results were highlighted by strong underwriting performance and solid investment results. Capital management and capital returns also remained very much at the forefront of our initiatives this quarter as we took advantage of an attractive share price to repurchase 14.8 million of our common shares at an aggregate cost of 1.4 billion. In the quarter, through nine months of 2026, we have repurchased approximately 109% of our net income in our own shares.

While our first choice will always be to invest our capital in the business, a transitioning business environment presents an avenue to return excess capital to our shareholders. Turning to our operating performance for the quarter, our three business segments delivered excellent underlying results with an overall ex-cat accident year combined ratio of 81.2%, up 70 basis points from the same quarter last year. Our underwriting income included 179 million of favorable prior year development on a pre-tax basis in the third quarter, or 4.5 points on the overall combined ratio. We recognized favorable development in all three of our segments and in many of our lines of business, but mainly in short-tail lines in our P&C segments and in mortgage due to ongoing strong cure activity.

Current year catastrophe losses were 234 million in the quarter, net of reinsurance and reinstatement premiums. These catastrophe losses originated from a variety of events across the globe and include losses associated with the Iran conflict. The insurance segment’s net premiums written increased 2.7% year over year as we were able to grow in select areas where expected returns met our underwriting criteria, primarily in our international operations. These opportunities more than offset the headwinds from the nonrenewal of certain program business discussed on prior calls. The ex-cat accident year loss ratio, net of reinstatement premiums, improved by 170 basis points to 55.8% compared to the same quarter one year ago.

Most of the improvement was due to the benefit of incremental marine war breach earned premium. Our insurance expense ratio was lower this quarter compared to the same quarter one year ago, reflecting the introduction of the Bermuda QRTCs. Turning to our reinsurance segment, net premiums written were down 9.3% from the same quarter one year ago, reflecting reduced writings from lower rates and reduced participations across many lines of business, with the notable exception of casualty where we were able to find growth opportunities. Overall, our ex-cat accident year combined ratio of 78.4% increased 160 basis points from last year due to the shift in line of business mix towards longer tail lines and a more competitive rate environment.

As I mentioned earlier, favorable prior reserve development in the quarter was primarily from short-tail lines with nominal movements in casualty and longer tail lines of business. Our mortgage segment produced another very strong quarter with underwriting income of 201 million. The decrease in underwriting income reflects lower net premiums earned from last quarter, with the reduction occurring in our USMI business due to lower monthly premiums and higher ceded premiums, and in our international operations where last quarter was favorably impacted by single premium terminations. Overall, the credit quality of our in-force portfolio remains very strong, as reflected by a low delinquency rate and favorable cure activity.

Persistency of our in-force portfolio remains at around 80% and is an important factor in the sustainability of future premium flows. On the investment front, we earned a combined 675 million from net investment income and income from funds accounted for using the equity method. Our $1.98 per share pre-tax, up from the $1.76 per share we earned last quarter. We note that the returns from equity method funds contributed 340 basis points to our annualized net return on average common equity on a year-to-date basis and represents an important part, though variable, of our book value growth over time.

Cash flow from operations remained very strong at 1.8 billion for the quarter given the strong underwriting results of our operations. The recent increase in interest rates is also expected to provide a tailwind to net investment income given the short duration of our fixed income portfolio and new money yields outpacing our book yield by approximately 65 to 70 basis points. Income from operating affiliates was 33 million for the quarter, down from 62 million from the same quarter one year ago.

Our effective tax rate on pre-tax operating income was 15.8% reflecting the mix of income by tax jurisdiction. As of October 1, our peak zone natural cat PML for a single event 1-in-250-year return period on a net basis is up slightly to 1.9 billion and now stands at 8.6% of tangible shareholders’ equity. With these introductory comments, we are now prepared to take your questions.

OPERATOR

Thank you. If you would like to ask a question, please signal by pressing star-1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star-1 to ask a question. Our first question comes from the line of Elise Greenspan with Wells Fargo. Your line is open. Please go ahead.

Elise Greenspan (Analyst at Wells Fargo)

Hi. Thanks. Good morning. I guess my first question is just on capital. You guys have been, you know, leaning into, you know, buyback of late. So I was just hoping to get an update on how you’re kind of balancing buyback and how you guys see, you know, some inorganic opportunities that are out there today. And then can you let us know, you know, provide an update on buybacks in the fourth quarter to date in October?

Francois Morin (EVP, Chief Financial Officer and Treasurer)

Yeah, sure. Good morning. Through last night, we bought back just about another hundred million dollars of buybacks in October. And again, our strategy has not changed over time. We look carefully at capital, where best to deploy it. Last quarter was really, and I mentioned it earlier, we thought the stock price was particularly attractive, and we had the opportunity to buy back a meaningful amount of shares in that period. So we seized the opportunity.

How do we think about the rest of the year and 2027? I mean, we’re in a good position. Obviously, our capital base is very strong. We’re generating very strong earnings, and the challenge for us right now is growing. So in an environment where growth is a bit more difficult and we still generate very strong earnings, we’ll be in a position to most likely return back even more capital as we move forward.

Nicolas Papadopoulo (Director, Board of Directors)

Yeah. To answer your question, good morning. We don’t think of inorganic growth as capital management. I think for us, we think more M&A as strategic.

Elise Greenspan (Analyst at Wells Fargo)

Okay. And then my second question, you know, you guys said, right, the underlying insurance growth is kind of in the low single digits right now. Just as you guys think about the market evolving, not only for the fourth quarter, I’m really more interested in 27. You know, how do you see, you know, the underlying growth trending, you know, within the insurance business, you know, over the next, you know, 15 months or so?

Nicolas Papadopoulo (Director, Board of Directors)

So our view hasn’t changed. I think we believe that we’re trading in a pretty good market overall, and we see attractive opportunities in insurance, especially in the casualty lines of business and some of the specialty we write in London, to be able to grow. I mean, there are continued headwinds on the property side that we are aware of. But overall, we feel good about the market we trade in. Yes. If you compare 26 to what could happen in 27, and compared really to 25, we had some headwinds in 26 we talked about, like the nonrenewal of MC programs, the property, cyber D&O. There are some lines that we shrunk because the market wasn’t attractive to us. So now, if you compare 27 versus 26, the reset, we think there’s a good opportunity for us to grow. In 26, our middle market business in the U.S., we think, has an opportunity to grow. So there are a number of areas where, on a relative basis, 27 versus 26, we think we’ll be in an environment that is attractive in some places, and we’ll find a way to go get some of that business.

Elise Greenspan (Analyst at Wells Fargo)

Thank you.

Nicolas Papadopoulo (Director, Board of Directors)

You’re welcome.

OPERATOR

Your next question comes from the line of Pablo Singh with JP Morgan. Your line is open. Please go ahead.

Pablo Singh (Analyst at JP Morgan)

Hi, good morning. First question is on the expense ratio, operating expense ratio. I was hoping you could frame that as we go into next year. Seems like there’s going to be some pressure on your premium base, but at the same time you’re getting a step-up in Bermuda tax credits and then, of course, the normal course expense management initiatives that you’ll be implementing anyway. So just any perspective on how that may turn from here?

Francois Morin (EVP, Chief Financial Officer and Treasurer)

Yeah, if we focus on—I’m assuming the question is more for insurance—the way that we think about it, and we always go back to trailing 12 months, like what’s the run rate? Certainly, as you know, there’s seasonality in some of our expenses and all that. But no question that the Bermuda QRTC is not a one-time event. Right. So it’s sustainable. Yes, in Q3 specifically we didn’t have a Q3 ’25, we had a Q3 ’26. So that’s what we’re trying to certainly communicate in the earnings release, and that’ll be there going forward.

And as you know, and you mentioned it, the credits are expected to go up in ’27 on a percentage basis based on what the Bermuda government is committed to. And then we had a couple of things that we had to absorb this year. We had a little bit of duplication of expenses around the integration of our middle market business that is, for the most part, if not completely behind us in terms of the double counting or double expense. So that will be a benefit. And normal, call it inflationary cost on expenses, we think should track generally closely to the premium growth. So premium expense ratio, you put it all together, we think has a chance to come down a little bit from the current levels.

And, as you mentioned, we’ll be working aggressively to manage our expense base. There’s potential improvements and efficiencies, etc., that we’ll realize over time. But that’s kind of how we think about it.

Pablo Singh (Analyst at JP Morgan)

Thanks. And then the second question on the MI business, and not specifically about the quarter, but I just wanted to get your thoughts on changes on the regulatory side there where there’s a recent pilot announced basically, I think it’s meant to streamline MI cancellation upon reaching some threshold LTVs based on the home market values. So how do you see that affecting your business? Thanks.

Michael Schmeiser (CEO, Global Mortgage Group)

And I think the pilot, what’s been identified. Right, there’s two, you know, I think that there’s the vision or, you know, this acknowledgement that there’s some inertia in terms of—because it’s not a change, per se. The current rules have always been in place. People have the ability to cancel their MI if they reach certain LTV levels, et cetera. So that’s nothing new there. I think they’re trying to, you know, have people realize that there’s this optionality.

They want to encourage it, they want to encourage home affordability and we were fully supportive of that. But, you know, I’d say where the MI product has been truly a massive benefit to promoting home ownership and home affordability is, you know, when we had the stats, we ran the stats recently, last year we, you know, through MI we were able to support 75,000 first-time homebuyers in the U.S. So we think that’s a very positive thing, you know, to promote homeownership and to promote home affordability. So I think, you know, the consensus within the housing market is that there’s definitely room and MI is a big part of that ecosystem.

But, you know, obviously, you know, having people, you know, get beyond a little bit the inertia of cancellation, et cetera. I think they’re trying to develop a mechanism to make that a bit more efficient.

OPERATOR

Thank you. Your next question comes from the line of Alex Scott with Barclays. Your line is open. Please go ahead.

Alex Scott (Analyst at Barclays)

Hey, good morning. Wanted to see if you could dig a little bit more into the international growth for us, specifically the kind of risks you’re taking, the kind of loss experience you’ve seen on that business, in particular if it’s Middle Eastern related.

Nicolas Papadopoulo (Director, Board of Directors)

Yes. So I think we, you know, we are a leader in the London market and whether it’s war on land or marine war, those are coverages where, with others, we provide and we’ve been providing for a while. So I think when we look at what’s happening today in the Middle East, I think we look at the market share of those losses and the premium we get paid and I think we see it more as an opportunity than anything else. I think we trade carefully in that region but we also want to support the insured.

We’ve been insuring for a while in that region. So we take it very seriously and I think we trade carefully, but we see this as doing our job, you know, in helping those insured, you know, at the time where they really need the insurance.

Alex Scott (Analyst at Barclays)

Got it. That’s so helpful, thank you. Could you talk also about just what you’re seeing in terms of private capital emergence in the reinsurance landscape and, you know, property as well and just, you know, how Arch can take advantage of that, but also maybe some of the risks associated with the pricing environment that come along with it. Maybe your high-level perspective on some of that capital.

Nicolas Papadopoulo (Director, Board of Directors)

Yes, third-party capital. It’s a helpful tool, source I think for the industry in general. I think it’s, you know, and as pricing goes down I think it’s a capacity that has a lower cost of capital and the industry has been using it to buy solution to brokers, and Arch is doing that. So on the property side I think it’s been there for a while. I think the supply comes and goes. So I think as a carrier we have to be able to manage that. But I think it’s an interesting and valuable tool to have.

On the casualty side, I think on the reinsurance side, a little bit newer and untested, and it doesn’t look that the product provides as much tail risk. So the question is who has the tail risk, you know, in the infrastructure. And that’s still a question. Thank you.

OPERATOR

Your next question comes from the line of Katie Montezeri with Deutsche Bank. Your line is open. Please go ahead.

Katie Montezeri (Analyst at Deutsche Bank)

Thank you. The first question is on the marine war premiums. As we think about your run-rate underlying loss ratio, could you maybe help us quantify the impact that that had during the quarter? How much did that kind of boost your ex-cat loss ratio this quarter?

Francois Morin (EVP, Chief Financial Officer and Treasurer)

Yeah, I mean I touched on my comments. I think it was most of the improvement. So you compare year over year, that was, you know, pretty much—you know, there’s always updates, gives and takes here and there—but, you know, to try to make it clear or easy for you guys to think about it, that was most of the improvement. So, you know, you can see the premium flows through our International Short Tail and Property Specialty line of business in the supplement and, you know, so it was definitely noticeable.

So that’s why we highlighted it.

Katie Montezeri (Analyst at Deutsche Bank)

Got it. And thanks for the color on the insurance opex. I guess I’ll maybe ask about that on the reinsurance side. Obviously earned premium is coming down, but year-to-date your opex ratio also improved—went down. So can you unpack what’s driving that improvement and is there anything we should keep in mind as we try to run-rate that improvement going forward?

Francois Morin (EVP, Chief Financial Officer and Treasurer)

I mean the nuance, or maybe the difference, for reinsurance is there’s certainly some profit commissions on third-party capital that come into play here and it’s been a relatively benign CAT environment the last couple of years. So, you know, are we, you know, earning—or is that a run rate? I mean that’s for you guys to decide whether, you know, on a more normalized CAT year we would probably have slightly less in terms of profit commissions. But the rest—I mean it’s, again, our teams are working hard to manage the expense base and kind of have that not be lined up with the growth and the premium.

But that’s, again, just back on the profit commissions—that may be the one thing on reinsurance that is something to think about.

OPERATOR

Your next question comes from the line of Andrew Kligerman with TD Cowen. Your line is open. Please go ahead.

Andrew Kligerman (Analyst at TD Cowen)

Morning. Skip my follow-up and ask this question that has a couple of pieces to it. So I heard Nicolas say that casualty is attracting much more capital now. And at the same time I think, Nicolas, you also said that you’re seeing a lot of growth opportunities in insurance casualty. And then later I think Francois was saying he sees opportunities in casualty and reinsurance for growth. So it seems like that’s the growth area. So what I’m hoping to hear is: A) where in both segments do you see the growth opportunities?

And B)—and maybe I should reverse the order—and the second part of it is, in both segments, what are rates, terms and conditions doing? I hear in reinsurance it’s getting a little softer in terms of ceding commissions and maybe terms. So that’s it.

Nicolas Papadopoulo (Director, Board of Directors)

Yes, I think you’re right in the sense that the opportunity in casualty is probably more clear on the insurance side than it is on the reinsurance side. And in insurance, you know, we mentioned in my comments the lines of business that we’ve been growing. I think we have a decent value proposition, lots of data and historical data on the segments we’re writing in. So we’re not writing the entire market in casualty. On the insurance side we’re writing—you know, we’re not targeting the large account excess towers, which we think is still challenging.

But the rest—I mean the E&S casualty and some of the other specialty we write, like construction—we feel very good about, you know, our brand and our expertise and the solution we’re solving for clients in the current market environment. On the reinsurance side it’s a little different. I think the underlying business that our guys target is very similar to what we do on the insurance side. But the terms and conditions are probably not where we’d want them to be. So I think for them to be able to like a piece of business, you need both the underlying to be attractive and the terms and conditions to be attractive. And despite the fact that some of the major players have withdrawn, you know, there’s still an abundance of smaller players that are providing enough capacity to keep those terms and conditions, in our view, too high.

So we find opportunities, but they are not as likely as in the insurance group. And the role of third-party capital adds another dimension to the supply on the reinsurance side. So I think it contributes to more supply, which makes it, you know, more difficult to find growth.

Andrew Kligerman (Analyst at TD Cowen)

Thanks, that was helpful. Maybe anything you could say on rates in casualty, just in general.

Nicolas Papadopoulo (Director, Board of Directors)

So primary casualty rates, you know, have been decelerating but they’re still above loss trend. I think we still think that it’s adequate overall.

Andrew Kligerman (Analyst at TD Cowen)

Thank you.

OPERATOR

Your next question comes from the line of Josh Shanker with Bank of America. Your line is open. Please go ahead.

Josh Shanker (Analyst at Bank of America)

Yeah, thank you. Good morning, everybody. So over the past year you’ve returned 100% of your earnings to shareholders, and if you look at comprehensive income you’ve returned more than 100%. So it gets to the question—you might be pushing into excess capital here. How big is that excess capital cushion that you could be returning 100% of your capital or more for a while? And where does the Bermuda tax credit sit in that sort of capital availability?

Francois Morin (EVP, Chief Financial Officer and Treasurer)

Well, I know you’re hoping I’m going to give you the number, and I’m not. So that’s like—good try on that one. But, yeah, no question. I mean, right? Excess capital—we talk about it a lot. We certainly, you know, don’t look to carry excess capital, you know, too much of it. And we were in a position, you know, a few years ago when we are, you know, and our results have been very strong the last few years. And, you know, we didn’t buy back a whole lot in ’24.

We started buying back a little bit last year and more so in the second half of the year, and a lot this year. So no question that the stock price, you know, is a factor in how much we return, how quickly. But yeah, we have accumulated a lot of excess capital over the years and there’s still some on the balance sheet. It’s not, you know—as we’ve said before—it’s not burning in our pockets. We’re not going to go waste it and we’re very careful with it.

And we want to be, you know, again, if there’s a good opportunity where we can put it to work in the business, absolutely. That’s always our top priority. But, you know, let’s—you know, you look at our numbers, we do still have some excess capital that at the right time will be certainly, you know, absent some opportunity to deploy in the business, will return to shareholders. So that’s part of that. And part B of your question in terms of the Bermuda tax—there’s no new development.

So we have talked about this potential kind of DTA going away. Is it going to be in the fourth quarter? Is it going to be next year? Is it not going to happen? There’s a lot of discussions with both the Bermuda government and OECD and lots of interested parties. So we’re waiting, we’ll see. We’ll hear more probably over the coming months. But right now, no new news to communicate.

Josh Shanker (Analyst at Bank of America)

Well, it’s like it’s probably about $900 million. Do you internally give yourself any capital credit for it to the rating agencies? How do you think about it when you’re assessing your capital cushion?

Francois Morin (EVP, Chief Financial Officer and Treasurer)

I mean, it’s capital, but internally we look at it with and without. So we take the view and we always run analyses with and without it because it’s a possibility that we lose it. It’s not a certainty. So for us, it’s important to run scenarios or run models— Both ways.

Josh Shanker (Analyst at Bank of America)

All right, thank you for the details.

OPERATOR

Your next question comes from the line of Roland Mayer with RBC Capital Markets. Your line is open. Please go ahead.

Roland Mayer (Analyst at RBC Capital Markets)

Hi, good morning. I wanted to go off Pablo’s MI question. Could you maybe walk through the amount of capital that backs the pre-2023 loans that have significant HPA? I assume there would be significant luck there if there was a regulatory change or the friction was reduced via AI?

OPERATOR

Sorry, Roland, we couldn’t quite—can you repeat the question? That didn’t come through clear to us. Sorry. We’re not— I mean, can you hear me? Did we lose them, or— Yeah, we can hear you. Sorry, a little bit better.

Michael Schmeiser (CEO, Global Mortgage Group)

Well, again, it’s in the supplement that you can look at the risk in force for pre-23. We have the risk in force by year. So call it pre-23, it’s somewhere around 25% of our risk in force. And again, we’ve got a category for 2016 and prior, which goes back longer. But big picture, call it 25% of the risk in force. Again, the executive order is very specific that it’s going to be prospective. So it’s a fair question you asked, but for us right now, it’s not a concern. We’re supportive of the initiative, but at this point, more to come in how the pilot program is going to work and what it’s going to achieve.

Francois Morin (EVP, Chief Financial Officer and Treasurer)

I mean, again, there’s a variety of considerations. We were in a blackout period, so we put a 10b5-1 plan in place and there are limits on it, et cetera. So now that we’ll be back in the open market—open window starting tomorrow—we’ll see what we do. But I don’t want you guys to read too much into what happened on a daily basis because there’s a lot of considerations that go into it. Thank you.

OPERATOR

Your next question comes from the line of David Motemaden with Evercore ISI. Your line is open. Please go ahead. A gentle reminder to unmute locally.

David Motemaden (Analyst at Evercore ISI)

Hi. Thanks. Sorry about that. You guys have spoken a bit about how you expect low single-digit insurance growth going forward. I’m wondering if you could just share your view on the reinsurance side, and maybe just touch on how you’re thinking about the 1/1 property cat renewals.

Nicolas Papadopoulo (Director, Board of Directors)

Yes. We really don’t give guidance, so keep that in mind. Clearly we expect some continued pressure on the short-tail book, catastrophic excess of loss, and other property, which is a big part of the portfolio in reinsurance—much bigger part than the insurance. So that will put pressure on the top line. But we like the market we are in, so I think we are trading well. We have a big book, we have great brands, we are still finding opportunities, and we also take underwriting actions as pricings are going down. So you have to put all of this together and figure out where we’re going to end up at 1/1. The market on the property side, due to the fact that it has been a light catastrophe year, you can expect continued pressure on the rates.

David Motemaden (Analyst at Evercore ISI)

Got it. No, thanks. That makes sense. Thought it was worth a try to ask about—maybe just following up. It’s interesting to hear you talk about casualty pricing still being attractive, but it sounds like moderating within North America E&S casualty and large account casualty. But at the same time, the Lloyd’s pricing is moderating. It sounds like you said pricing is still above loss trend on casualty just broadly in insurance. Is that—how narrow is that now?

Has that been narrowing enough where that could potentially get to a point where you guys are thinking about pulling back, or do you still think there’s still a pretty good runway to continue to grow in casualty?

Nicolas Papadopoulo (Director, Board of Directors)

So first correction is I think I said the pricing in casualty has decelerated and now it’s about loss trend to below. So I think that margin now is zero or turning negative. That’s one. The business we write we think has still very good margin in it. So there is a decent run rate in front of us for us to continue to find the business attractive.

Francois Morin (EVP, Chief Financial Officer and Treasurer)

So I think, just to clarify, we still like the absolute returns. It’s just that on a relative basis it’s not improving, but it’s holding up. So we are still chasing or hoping to get more of that business because on an absolute level, returns meet our threshold and it’s good business.

David Motemaden (Analyst at Evercore ISI)

Great. Appreciate that. Thank you.

Nicolas Papadopoulo (Director, Board of Directors)

You’re welcome.

OPERATOR

Your next question comes from the line of Tracy Bengigi with Wolfe Research. Your line is open. Please go ahead.

Tracy Bengigi (Analyst at Wolfe Research)

Morning. I hate to be the dead horse on capital, but it was great to hear that you’re in a position to return even more capital as you move forward. Your buybacks this quarter were quite remarkable on a payout ratio basis. But I’m curious if, in any way, that level was debt funded. I’ll just point out that out of your $2 billion debt raise, about $1.1 billion was incremental debt and the balance was pre-funding. I’m also curious how you factor in negative marks in your capital return capabilities.

I know at least S&P Capital cares.

Francois Morin (EVP, Chief Financial Officer and Treasurer)

Well, part one: no question that, yeah, we talked about it last quarter, the debt raise in June—about $1.1 billion of incrementally new capital, effectively, that we earmarked for general corporate purposes. And sure, buybacks being one of those. The buybacks in the third quarter—where does it come from exactly? It’s all the same pot of money. But you’re right, that certainly helped support the buybacks in the third quarter. Our debt-to-capital ratio is still very low. We’ve got a debt maturing in December that will reduce it further—$500 million that’ll be redeemed or repaid back in December. So we’re still in a very, very low leverage position in terms of debt to capital. So in terms of, again, people ask about M&A, we’ve got capacity here, and we want to maintain that capacity. It’s just that we ended up effectively being at a level that was probably a little bit too conservative pre this debt issuance.

So we’re still in a very good spot. And discussions with rating agencies, they are, I’d say, very supportive of our approach and our philosophy around capital management. So right now, no concerns. And the mark-to-market—if the question part B is more on the move in interest rates—I think the impact for us was noticeable, obviously, in the third quarter, but not in a material way that we have issues that we have to think about.

Tracy Bengigi (Analyst at Wolfe Research)

Great. duration. Yeah, yeah, understood. The big picture question: Arch is known for cycle management, but in the last soft cycle you were much smaller and perhaps more nimble. So how should we expect you to navigate this soft cycle? Is it fair to assume maybe a less intense push on non-renewals?

Nicolas Papadopoulo (Director, Board of Directors)

So on the reinsurance side I would say yes. But again, we have different tools today than we had back then. If you look at our gross number and seeded number and net number on the reinsurance side, the last portion of our premium is already ceded to sidecars or third-party capital. For us the philosophy is to really manage the net portfolio and ultimately stay in front of our clients. We have a leadership position, and really figuring out and working with property capital which, as I mentioned, have lower cost of capital to be able to find solutions for cedants and brokers.

So that’s how we see it. And on the insurance side, I think it’s a little different because our brand and our relationship with distribution partners is a lot more relevant than it was probably five or six years ago. There is a flight to quality in terms of the companies distribution partners want to trade with, so we’re benefiting from that. And the solutions we provide—and I think a lot more data analytical work that we’ve done to manage our portfolio—is a lot more granular.

So I think we can maintain margin by just attacking a small portion of the business that is the worst part of any one portfolio. We are much more granular in terms of our approach. I don’t expect that managing the cycle in the next three or four years will mean cutting large portions of our business on the insurance side. I think it will be more being very laser-focused on the worst business in each of our portfolios and making sure that we change the mix toward business in that portfolio that have a better loss ratio.

That’s how we see it.

Tracy Bengigi (Analyst at Wolfe Research)

Thank you.

Nicolas Papadopoulo (Director, Board of Directors)

You’re welcome.

OPERATOR

Your next question comes from the line of Brian Meredith with UBS. Your line is open. Please go ahead.

Brian Meredith (Analyst at UBS)

Yeah, thanks. Yeah, just quickly here, Francois, on the Iran conflict premiums that you had in the quarter—the marine stuff—I’m assuming that as long as the war is going on, you’re still writing that business. So should we expect you’ll see similar benefits in the fourth quarter from that, or is the business just not as profitable as you maybe think it is? Maybe you’re bowing it back.

Francois Morin (EVP, Chief Financial Officer and Treasurer)

No, you should absolutely expect similar levels in the fourth quarter. Beyond that, it’ll be a function of—just have to watch the news and you’ll get a sense. But no question that the business is still priced, we think, at a very attractive level. There’s inherent risk in that business—we get it, we understand it. Nicolas touched on it. We’re doing it carefully. But in terms of the amount of premium that we expect to write in the fourth quarter, I would expect a similar amount.

Brian Meredith (Analyst at UBS)

Makes sense. Thank you. And then second question, just bigger picture: we’re continuing to hear a lot about business moving from the non-admitted market to the admitted markets. I’m just curious, are you seeing that happening yourself? You know, obviously you’ve got non-admitted and admitted, and then when that happens, is that good or bad for you all if I think about going from non-admitted to admitted?

Nicolas Papadopoulo (Director, Board of Directors)

Anecdotally we hear that. We hear some of our wholesale brokers when they lose an account and we lose the account complaining that it stayed with the retailer, so they found an admitted market. It’s true on property and real estate, and it’s true on casualty. But we don’t have a good line of sight into specific numbers, but certainly we’re hearing more of it. For us, we have very different channels. Certain products we write on E&S basis, certain products we write on the retail basis. So when the wholesaler loses the business to the retail market, it hurts our E&S franchise for those particular risks. I don’t think we pick them up on the retail side because we don’t want channel conflict.

Brian Meredith (Analyst at UBS)

Makes sense. Thank you.

OPERATOR

Your next question comes from the line of Ba Puan with Morgan Stanley. Your line is open. Please go ahead.

Sid (Analyst at Morgan Stanley)

Hey, this is Sid on for Bob. One more question on the Iran conflict. I know you guys mentioned it impacted the cat losses in insurance too. I was wondering if you could give us a sense of what was the premium and the cat loss dollar amounts in that.

Francois Morin (EVP, Chief Financial Officer and Treasurer)

Well, I mean it’s a lot less on the loss side. And the 230 million or so of cat losses, it’s a lot less than half of that number in the quarter. We don’t disclose individual numbers by events, so that’s how we think about it. And in terms of premium, again I pointed to you there is some premium on the reinsurance side that we’re getting also given our reinsurance structures of some syndicates at Lloyd’s. So we’re picking that up, but that’s smaller. The bigger impact is on insurance, and I pointed you to the volume or the premium numbers in the supplement in the international line of business for short-tail property. So that’s how you can get a sense of the amount of business we wrote there.

Sid (Analyst at Morgan Stanley)

Okay, thanks. And then follow up just on capital management. Do you have any thoughts on continuing or accelerating share repurchases for the quarter versus potentially doing another special dividend?

Francois Morin (EVP, Chief Financial Officer and Treasurer)

I mean, at this point, given the stock price, I think we’re certainly more in favor, or I think share buybacks make more sense to how we think about returning capital. So that would be the preferred approach at this point. And the pace, and we touched on it earlier, I think there’s no set kind of number that we try to get to. It’s a reaction a little bit to stock price, what we see in the market. So could it go up, could it go down? I mean, we don’t know.

Ultimately it’ll be something that happens over time.

Sid (Analyst at Morgan Stanley)

Okay, thank you so much. Appreciate it.

OPERATOR

Your next question comes from the line of Mike Zaremski with BMO. Your line is open. Please go ahead.

Mike Zaremski (Analyst at BMO Capital Markets)

Hey, thanks. Maybe first kind of a macro question. Given you guys have a bird’s-eye view into a lot of markets in terms of data center-related premiums, a couple industry executives have talked about kind of 10 billion net new insurance premiums in the marketplace this year and likely to grow in the future. Just kind of curious if from your vantage point you’re seeing an opportunity there and you think that the opportunity is really indeed that large.

Nicolas Papadopoulo (Director, Board of Directors)

So yes, I think the number, talking to the major brokers and if you look at what they write and sum them up, I think it sounds right around 10 billion new business. For us it’s an opportunity, but it’s not a big opportunity. I think we write it out of a London office, and we have a construction team there that participates on some of the panels. But premium-wise I don’t think it’s a game-changer for us.

Mike Zaremski (Analyst at BMO Capital Markets)

Got it. And follow-up on some of your playing offense, and I know you’ve been playing a bit of offense in E&S casualty for a while. Is that more like small account or middle? I think you said it’s not large. Just kind of curious what sandbox that is.

Nicolas Papadopoulo (Director, Board of Directors)

Yeah, so it’s not the national account like the big chains or the big retailers. We are more in the, I would say, middle market. I think the average account premium is in the hundreds of thousands. So it’s not small; we’re not competing with the binding authority or the small E&S. We are more in the middle market, and our insureds are the construction companies, the energy companies, but not the really national retail accounts.

Mike Zaremski (Analyst at BMO Capital Markets)

Got it. And maybe just sneaking one last one in, probably an easy one. Reinsurance margins continue to be excellent, especially on the underlying loss ratio basis. If the consensus is right that reinsurance pricing continues to decelerate or decline, should we just continue to expect the underlying loss ratio to kind of glide up from low 60s to mid 60s? I know there’s lots of moving parts there, but directionally?

Francois Morin (EVP, Chief Financial Officer and Treasurer)

I mean certainly it should go up. I think just the reality of rates coming down a little, I don’t think it’s going to be like that. It’s not going to be a stair step. It’s going to happen gradually, and maybe it plateaus if rates kind of stabilize. But yeah, I mean it probably could go up a couple hundred basis points maybe over the next little while, depending again on how 1/1 renewals will have an impact, etc. And then the mix obviously is always part of the answer.

Mike Zaremski (Analyst at BMO Capital Markets)

Thank you.

OPERATOR

Your next question comes from the line of Meyer Shields with KBW. Your line is open. Please go ahead.

Meyer Shields (Analyst at KBW)

Great. Thanks so much for fitting me in. I just had a couple of quick questions. One, corporate expense was only 22 million in the quarter. Is anything unusual there?

Francois Morin (EVP, Chief Financial Officer and Treasurer)

Well, again, the QRTCs being quarter over year over year, that’s part of the answer, right? No question that we didn’t have QRTC credits in Q3 of ’25; we had them this quarter. So that’s most of it. There’s also a variety of expenses that we had last year, consulting, etc. So it’s too many to list. But the big item this quarter was definitely QRTCs. And again, that’s sustainable, so as you look forward, something to think about.

Meyer Shields (Analyst at KBW)

Okay, perfect. And second, does the rising interest rate environment have any implications for loss trends for short-tail lines?

Nicolas Papadopoulo (Director, Board of Directors)

I would say it’s neutral because the rate is applied to the values on the short-tail lines. If the underwriter does a good job or if the broker does a good job, insured values should be adjusted to reflect the inflation. It’s never perfect, so as inflation steps up, there may be momentarily an adjustment that we make to estimate the catch-up that needs to happen for the replacement cost. But I think it’s not a big factor, except in transition time.

Meyer Shields (Analyst at KBW)

Okay, perfect. Thank you so much.

OPERATOR

Your next question comes from the line of Chris Hartwell with Autonomous Research. Your line is open. Please go ahead.

Chris Hartwell (Analyst at Autonomous Research)

Good morning and thank you for taking my questions. A couple of hopefully quick ones. First of all, just on reinsurance, I think into and post Monte Carlo, the brokers have been increasingly talking about the need for reinsurance to take more frequency. Given what we’ve seen on pricing over the course of this year, I was wondering your views on how much scope there is for the reinsurance industry collectively and also your attitude to accepting that increased frequency.

Nicolas Papadopoulo (Director, Board of Directors)

So we don’t have an issue with frequency. I think we have to recognize that it’s harder to price than severity, and for us we are agnostic as long as we get paid for the risk we take. We do a lot of sublayers; we used to do it and we still do some. What the brokers have been talking about is selling more sublayers. With pricing going up, attachment points have raised up, and so there is an opportunity to bring the attachment point of the programs down.

And I think we will support that as long as we get paid for the risk.

Chris Hartwell (Analyst at Autonomous Research)

Okay, thank you. And secondly, just on some of the news story that’s been around one of your equity investments, Coface, in recent weeks, I wondered if you could just, I guess, remind me of your thoughts and views around that specific investment and how important that relationship is to you.

Francois Morin (EVP, Chief Financial Officer and Treasurer)

It’s very important. I think we actually love the investment. I think it’s been good. It’s been good to us too, so there’s nothing to complain. And we like the business. We like the management team there, the CEO. We have a lot of confidence in their ability and they’ve done a great job. They were really the number three player, and I think now they’re probably competing to be the number one player in the space. We like it a lot. And I think the structure—yes, it’s an investment—but we think of it as a quota share on a top-notch credit insurer. It’s a slightly different structure, but the results have been terrific and we’re very happy with it.

OPERATOR

Your next question comes from the line of Yaron Kinar with Mizuho. Your line is open. Please go ahead.

Yaron Kinar (Analyst at Mizuho)

Thanks for taking my questions here. First one, hopefully quick one. Just with the riots that we’ve seen in France and across Europe, just want to confirm that that should not really drive any significant losses for the industry and certainly for you.

Nicolas Papadopoulo (Director, Board of Directors)

Yeah, I mean for us, and the industry as well, I think our understanding is it’s de minimis. I’ve seen numbers about, call it, a billion dollars—maybe even it could be ongoing. It seems like every Saturday the French get together to protest a bit more. But it’s not something we do in a big way, so for us I wouldn’t expect anything material in the fourth quarter on that.

Yaron Kinar (Analyst at Mizuho)

Okay. And then my second question may be a little unfair to ask or difficult to answer, but I’ll try anyway. With the appetite that you guys still have in casualty, particularly in reinsurance, it does stand out a bit relative to what we’re hearing from other executives in the industry. I’m just trying to figure out why that would be. Ultimately, my assumption is that the terms and conditions and the pricing doesn’t really fluctuate a whole lot from one reinsured to the other.

So what is it that allows you to see this as a more active liability or risk than others? Is it that you have a lower cost of capital, or are there other parameters that I’m missing here?

Nicolas Papadopoulo (Director, Board of Directors)

I think it’s a better loss experience than our competitors. I think we didn’t write a lot of casualty back in 2015, 2016, 2017. We started to write a bit more in 2021. But ultimately our loss pick hasn’t really moved, and so that gives us confidence that we’ve the right terms and conditions on the reinsurance supporting the book of business that, closer to what we do on the insurance side, I think is good business.

OPERATOR

Your next question comes from the line of David Motemaden with Evercore ISI. Your line is open. Please go ahead.

David Motemaden (Analyst at Evercore ISI)

Hey guys, thanks for taking my follow-up. Just a quick one on the insurance underlying loss ratio. If I just sort of assume that all of the improvement year on year is coming from the Iran incremental premiums, it was basically flat year on year at 57.5, which is up quite a bit versus the first couple quarters, which I know there’s seasonality, but you had also improved the loss ratio year on year in the first half versus roughly flat in 3Q. So I’m wondering if there’s anything else underneath that or if it’s just purely a mix dynamic.

Francois Morin (EVP, Chief Financial Officer and Treasurer)

Yeah, I mean we, again, we would steer you to look at trailing 12 months. I think that’s certainly how we look at it. There’s always going to be some noise one quarter, good or bad, and that influences the latest. So yeah, this quarter might be a little bit elevated. There’s a couple of claims here and there. But our view is what we’ve done last 12 months, even if you adjust for the Iran conflict, is, call it, flattish in terms of compared to a year ago.

And given that we’ll have some of the underwriting actions we’ve taken with programs as we look forward, we’d like to think that that range that we’re talking about in terms of ex-cat accident-year loss ratio is kind of generally in the right direction for ’27.

David Motemaden (Analyst at Evercore ISI)

Awesome. Thank you.

Francois Morin (EVP, Chief Financial Officer and Treasurer)

You’re welcome.

OPERATOR

I’m not showing any further questions. I would now like to turn the conference over to Mr. Nicolas Papadopoulo for closing remarks. Ladies and gentlemen, thank you for participating in today’s conference. This concludes the program. You may all disconnect.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.