Arch Capital Group Q2 2025 Earnings Report

Arch Capital Group EPS Results

• Actual EPS: $2.58
• Consensus EPS: $2.30
• Beat/Miss: Beat by +$0.28
• One Year Ago EPS: $2.57

Arch Capital Group Revenue Results

• Actual Revenue: $4.35 billion
• Expected Revenue: $4.29 billion
• Beat/Miss: Beat by +$59.16 million
• YoY Revenue Growth: N/A

Arch Capital Group Announcement Details

• Quarter: Q2 2025
• Date: 7/29/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, July 30, 2025
• Conference Call Time: 10:00AM ET

Arch Capital Group (NASDAQ:ACGL), together with its subsidiaries, provides insurance, reinsurance, and mortgage insurance products worldwide. The company's Insurance segment offers primary and excess casualty coverages; loss sensitive primary casualty insurance programs; directors' and officers' liability, errors and omissions liability, employment practices and fiduciary liability, crime, professional indemnity, and other financial related coverages; medical professional and general liability insurance coverages; and workers' compensation and umbrella liability, as well as commercial automobile and inland marine products. It also provides property, energy, marine, and aviation insurance; travel insurance; accident, disability, and medical plan insurance coverages; captive insurance programs; employer's liability; contract and commercial surety coverages; and collateral protection, debt cancellation, and service contract reimbursement products. This segment markets its products through a group of licensed independent retail and wholesale brokers. Its Reinsurance segment provides casualty reinsurance for third party liability exposures; marine and aviation; motor reinsurance, whole account multi-line treaties, cyber, trade credit, surety, accident and health, workers' compensation catastrophe, agriculture, trade credit, and political risk products; reinsurance protection for catastrophic losses, and personal lines and commercial property exposures; life reinsurance; casualty clash; and risk management solutions. This segment markets its reinsurance products through brokers. The company's Mortgage segment offers direct mortgage insurance and mortgage reinsurance. The company was founded in 1995 and is based in Pembroke, Bermuda.

Arch Capital Group Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Q2 after-tax operating income reached $979 million with operating EPS of $2.58 and book value per share up 11.4% year-to-date, reflecting strong financial execution.
• Positive Sentiment: Reinsurance segment generated $451 million in underwriting income and achieved 8.7% gross written premium growth, driven by casualty expansions and targeted property catastrophe writings in Florida.
• Positive Sentiment: Mortgage segment delivered $238 million of underwriting income, supported by a high-quality in-force portfolio and strong persistency despite low new origination volumes.
• Positive Sentiment: Investable assets rose 4.4% in Q2, net investment income increased 7%, and the company repurchased $161 million of shares in July (totaling $360 million YTD), highlighting proactive capital deployment.
• Negative Sentiment: Competitive pressure remains intense in excess E&S property, excess D&O and cyber lines, prompting Arch to maintain a cautious stance and prioritize margins over volume in those areas.

Presentation

[Operator]

Good day, ladies and gentlemen, and welcome to the Second Quarter twenty twenty five 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.

[Operator]

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 ks for the 2024 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.

[Operator]

Management also will 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 eight ks furnished to the SEC yesterday, which contains the company's earnings press release and is available on the company's website at www.archgroup.com and on the SEC's website at www.sec.gov. I would now like to introduce your host for today's conference call, Mr. Nicolas Papadopoulos and Mr. Francois Morin.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

Good morning, and welcome to Archie's second quarter earnings call. We are pleased to report another solid quarter with after tax operating income of $979,000,000 resulting in an operating earnings per share of $2.58 On a year to date basis, we have grown book value per share by 11.4%, a strong outcome that reflects our focus on execution and long term value creation for our shareholders. We achieved this result by staying true to our core principle of cycle management where we actively grow our writings in lines of business that offer attractive returns while selectively reducing exposure areas where risk adjusted returns fall short of our targets. This disciplined underwriting approach paired with proactive capital management positions us to consistently generate superior returns across market cycles. P and C market conditions were largely consistent with the first quarter.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

Some sectors are seeing increased price competitions while others continue to achieve rate improvements. In the current environment, much of our growth is because of the strengths of our relationship with distribution partners and insurance. This not only reflects Arch's increased scale, but also the increased relevance of our platform, one built on a broad and flexible set of capabilities. Underwriting expertise, supported by our advanced data and analytics capabilities, enables us to deliver valuable insight and innovative solution that help our customer achieve their ambitions. Ultimately, the strengths of our relationships, our commitment to consistently deliver meaningful customer value, and our ability to respond quickly to changing market condition are significant differentiators in today's environment.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

As we've discussed on previous calls, there isn't one underwriting cycle, but many. This principle was reinforced last month where Paul Ingray, Arch's former chairman and one of its founder, spoke to a gathering of our top leaders. It was a unique opportunity for our newer team members to hear directly from someone whose vision continued to influence our culture and operations. In addition to sharing stories from Arch's early days, Paul reminded us of the enduring value of a diversified platform, a core part of Arch's original vision. He explained that the insurance market is comprised of 1,000 points of light, each representing a potential opportunity, while the intensity and location of some of those light may have shifted today's underwriting environment, many continue to shine.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

Our role, as always, is to find those with the greatest potential. Our message is this. The P and C industry still presents meaningful opportunities for disciplined underwriters to generate attractive risk adjusted return on capital. Now I will briefly walk through segment performance, starting with our property and casualty insurance group. Our underwriting income for the quarter was $129,000,000,000 and and net premium returns surpassed $2,000,000,000, up 30.7% from the 2024.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

This growth was largely driven by acquisition of The US middle market and entertainment businesses, which contributed $451,000,000 in net premium return. Organic growth outside the acquisition was modest. We remain focused on integrating the new unit with client retention and portfolio optimization progressing in line with expectation. Growing our presence in the small and midsized market is central to our strategy. As well in North America, rate increases broadly offset loss trends.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

We saw selective growth in casualty lines, particularly in the alternative market, E and S casualty, and large account casualty, where pricing continued to outpace loss trends. However, competitive pressure persists in E and S property, excess DNO and cyber. While pricing in excess DNO and cyber appears to be stabilizing, we are maintaining a cautious stance and prioritizing margin over volume in these lines. Internationally, our Lloyd's and London market business are experiencing increased but rational competition. Our long term investment in establishing a leadership position at Lloyd's continued to yield strong result reflected in favorable signing and our ability to attract top tier underwriting talent.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

The reinsurance segment delivered strong second quarter results, generating $451,000,000 in underwriting income and over $2,000,000,000 in net premium written. The underlying business is attractive with gross written premium increasing 8.7% compared to the 2024. We grew our casualty reinsurance premium year over year supported by selective new business and rate improvements. We also expanded our property catastrophe writings, particularly in Florida, where we identified attractive risk adjusted returns and responded to increased clients' demand for additional limits. Specialty lines remain a strategic focus, and our teams bound several new opportunities this quarter.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

That said, our property portfolio other than cat excess of loss contracted, as cedents retained more risk and margin on certain portion of the portfolio fell below our target. We are actively managing our exposure in these areas to maintain underwriting discipline and long term profitability. We were generally pleased with the state of the media catastrophe excess of loss renewals. Pricing was slightly down, but terms and conditions were stable with primary insurer maintaining higher attentions. Overall, catastrophe excess of loss margin remain attractive.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

The broader insurance market continued to exhibit discipline. We are growing selectively focusing focusing on areas where margins are attractive. We are committed to pursuing the brightest opportunities, those offering the strongest risk adjusted return. Our mortgage segment delivered $238,000,000 of underwriting income in the second quarter. Mortgage originations remained relatively low, reflecting the impact of higher mortgage rates on affordability.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

Still, the strengths of our global in force portfolio and high persistency allows the mortgage group to provide steady profitability and valuable earnings diversification even with lower volumes of new insurance written in recent years. Despite ongoing economic uncertainty and low origination activity, we remain confident in the quality and durability of our in force portfolio, which is a core driver of our mortgage earnings. Investable assets grew 4.4% in the second quarter, benefiting from our strong premium growth and cash flow. Net investment income rose 7% from the first quarter to $4.00 $5,000,000 with overall yields remaining elevated. Archie's ability to dynamically adapt to multiple underwriting cycle continues to sell us apart.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

This is a function of both our founding principle and a culture that prioritizes and rewards underwriting profit over premium volume. Even in a competitive environment, our global diversified platform offer many points of lights for our underwriting teams to pursue. For a company with a strong underwriting culture like Arch, this remains a market where we can deliver differentiated performance and maximize long term shareholder return. I will now turn the call over to Francois, who will provide more details on the financial results before we open the line for your questions.

[François Morin, CFO & Treasurer at Arch Capital Group]

Thank you, Nicolas, and good morning to all. Last night, we reported our second quarter results with after tax operating income of $2.58 per share, resulting in an annualized operating return on average common equity of 18.2%. These operating earnings, combined with a high level of realized gains, solid contributions from our equity method investments and a noticeable appreciation in our fixed maturities investment portfolio, resulted in our book value per share growing by 7.3% in the quarter. Similar to last quarter, our three business segments delivered excellent underlying results with an overall ex cat accident year combined ratio of 80.9%, down 10 basis points from last quarter. Our underwriting income included $139,000,000 of favorable prior year development on a pretax basis in the second quarter or 03/2002 points on the overall combined ratio.

[François Morin, CFO & Treasurer at Arch Capital Group]

We recognized favorable development across all three of our segments and in many of our lines of business. The most significant improvements were, once again, most seen in short tail lines in our Reinsurance segment and in mortgage due to strong cure activity. Current year catastrophe losses at $154,000,000 net of reinsurance and reinstatement premiums were slightly below last year's level for the same quarter and were primarily the result of severe convective storms in The U. S. This is the fourth and last quarter where we are separately reporting the contribution of the Midcorp Entertainment Unit to the Insurance segment financial results.

[François Morin, CFO & Treasurer at Arch Capital Group]

For the quarter, net premiums written for the acquired businesses were $451,000,000 contributing 28.9 points to the reported year over year premium growth for this segment and generally consistent with last quarter. The strong premium volume this quarter reflects the seasonality of the business, with the second quarter generally having the most significant renewal activity. We are now on track to write slightly more than $1,500,000,000 of annualized premium for the first year of owning this business, which is slightly higher than the forecast at the time of the acquisition. The inclusion of the acquired business in the segment's results increased the current accident year ex cat combined ratio by 40 basis points. This can be further broken down to include the other operating expense ratio that was lowered by 40 basis points, the current year acquisition expense ratio that was lowered by 20 basis points due to the write off of deferred acquisition costs for the acquired business at closing under purchase GAAP.

[François Morin, CFO & Treasurer at Arch Capital Group]

As expected, this benefit has become less significant as policies written before the acquisition date have rolled off. And the accident year ex cat loss ratio that was 100 basis points higher, reflecting the underlying results of the Acornet business. The Reinsurance segment produced its best quarter ever in terms of pretax underwriting income, reflecting the underlying profitability of the business written over the last few quarters and the absence of significant catastrophe activity. Of note, the 5.8% growth in net premium written in the quarter was muted due to the timing of certain ceded premium accruals. The effect of this change in timing was to reduce our net premiums written in the property catastrophe line of business by approximately $94,000,000 this quarter.

[François Morin, CFO & Treasurer at Arch Capital Group]

We expect to record an equivalent offsetting benefit in net premiums written next quarter. Overall, this item should not have a significant impact on net premiums earned. Once again, our mortgage segment delivered another very strong quarter with underwriting income of $238,000,000 We note that these results reflect the completion of tender offers for two Bellameade re securities at a onetime cost of $15,000,000 We expect that this expense will be recouped through lower levels of ceded premium over time, mostly through the 2027, and will ultimately result in a net economic benefit to us. The delinquency rate for our U. S.

[François Morin, CFO & Treasurer at Arch Capital Group]

MI business decreased slightly to a very low 1.93% as new notices of default were more than offset by strong cure activity. On the investment front, we earned a combined $567,000,000 from net investment income and income from funds accounted using the equity method for $1.5 per share pretax. Net investment income in the next few quarters should grow in line with the size of our investment portfolio as our portfolio book yield and new money yield have converged in the last few quarters. Income from operating affiliates was comparable to the amount in the same quarter last year with contributions from both CoFAS and Summers REIT. Cash flow from operations remained strong at approximately $1,100,000,000 for the quarter.

[François Morin, CFO & Treasurer at Arch Capital Group]

As of January 1, our peak zone natural camp PML on a single event one in two hundred year 51 in two fifty year return level on a net basis increased slightly to $1,900,000,000 and now stands at 8.6% of tangible shareholders' equity. Our PML remains well below our internal limits. On the capital management front, we repurchased $161,000,000 of our shares in the month of July in addition to the $360,000,000 worth of common shares repurchased this year through the end of the second quarter. In closing, our strong balance sheet, affirmed by a recent credit ratings upgrade and our diversified platform position us well to deliver superior results in the periods ahead. With these introductory comments, we are now prepared to take your questions. Jenny?

[Operator]

Thank Our first question comes from Elyse Greenspan from Wells Fargo. Your line is now open.

[Elyse Greenspan, Managing Director at Wells Fargo]

Hi, thanks. Good morning. My first question is just on the Insurance segment. If we back out MCE, right, growth was around two percent in the quarter. It feels like based on commentary, the market was stable.

[Elyse Greenspan, Managing Director at Wells Fargo]

So maybe that's about where you guys are running in the short term. But I know obviously there's a lot of business lines that triangulate into that number. So we're just hoping to get kind of a forward view just on premium growth within the insurance segment unlike the ex MCE piece.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

Yes. It is. Hi. Good morning. Yeah.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

Think so so the story here is that, again, we as I described in my opening remark, we the pivoting where the opportunities are and kind of, you know, adding out where the where we think the business is as attractive. So so this quarter, I think we we we we we like the casualty line. So I think we we grew in the in the casualty lines. And and I think we we grew on international business. And we have we have a big book of professional lines.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

So as those market conditions were more competitive and more difficult to trade, that had a negative headwind on on the premium for the quarter. But the the good news there is that it looks like, you know, the the the rate decreases on both, you know, excess DNO and and cyber leveling off. So I think we you know, as we as we look to the future, I think I don't have a crystal ball, you know, we we we think the the favorable wind on the on the casualty should support additional growth, and that's what I can say.

[Elyse Greenspan, Managing Director at Wells Fargo]

Thanks. And then my second question was just on capital. It sounds like right Francois capital return like share repurchase picked up in July. Just kind of looking for current thoughts just around excess capital levels and just willingness, I guess, to lean into buyback as we go through the third quarter and get into the peak of one season?

[François Morin, CFO & Treasurer at Arch Capital Group]

Sure. Yes. I mean, as you've seen terrific results in the second quarter, so our capital position remains very strong. Think no question that we're still working hard trying to deploy that capital in the business. That's always our top priority.

[François Morin, CFO & Treasurer at Arch Capital Group]

We still think there's opportunities to do that, but maybe not to the full extent of which the capital generation we've been able to achieve. So no question that capital return is a focus area for us, something we no different now than it's ever been. We look at it on a regular basis with management and the Board for sure. And no question that capital return in the second half of the year, I mean, we think we'll be there, not knowing again what opportunities might be in front of us. But we look at both share buybacks and potentially dividend if we need to.

[François Morin, CFO & Treasurer at Arch Capital Group]

Those will will be very much part of that. And, you know, historically, we've kinda slowed down a little bit, you know, during the wind season. I don't think we necessarily you know, we're we're a different company, I'd say, right now. So we're going to keep looking at the opportunity in front of us. But certainly, at current price levels, we find the stock to be attractive, and we'd be more than happy to buy back as we move forward.

[Elyse Greenspan, Managing Director at Wells Fargo]

And then just my last one. Was there any adverse development in the quarter from The UK Russia aviation ruling? And if it was even small, if you could just let us know the number?

[François Morin, CFO & Treasurer at Arch Capital Group]

Well, we don't I mean, no question that we we have, you know, we have some adverse in the sense that, yes, we we increased our our IDNR for both on the insurance and the reinsurance side. The reality is these again, we're not big players in that space, but, you know, the the the claims have evolved, and, know, that was basically absorbed within our IBNR through short tail lines. So what you're seeing and what we'll, you know, we'll dispose more of in in our 10 Q is no adverse in total. We still have favorable in total. But, yeah, we reflected some changes, some new developments in the Ukraine Russia conflict.

[Elyse Greenspan, Managing Director at Wells Fargo]

Thank you.

[François Morin, CFO & Treasurer at Arch Capital Group]

You're welcome.

[Operator]

Thank you. And your next question is from Mike Zaremski from BMO. Your line is now open.

[Michael Zaremski, MD & Senior Equity Research Analyst at BMO Capital Markets]

Hey, morning. Thanks. On the prepared remarks, you made comments about expanding the PropCat writings, I believe in Florida, particularly. Just maybe just macro levels, I feel like you all have been excellent underwriters and continue to be in PropCAT especially. Would you say that expected ROEs are I don't know if you're willing to kind of put a quarter around them in the 20s, down from the 30s?

[Michael Zaremski, MD & Senior Equity Research Analyst at BMO Capital Markets]

Or just I guess we get asked a lot about is can prop cat reinsurance pricing continue to decline off excellent levels? So the consensus is yes. But just curious, given the rate of decrease over the past year, how do ROEs kind of look in terms of risk reward?

[Nicolas Papadopoulo, CEO at Arch Capital Group]

Yeah. I we I believe that ROEs are still very attractive. And just to qualify, I think the the price decrease, you know, it might be is not always across the board. I think, for instance, in Florida, what what what we've seen is most of the competition is really on the higher layer. And at this renewal, I think, you know, the the FHLF move up their attachment points.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

So there was a a need for a capacity below the FHLF and by the size of the FETF. So I think, you know, we we actually were able to to write, you know, more below the goal and and and by the side because we are able to to to write across across the board. So I think and below the FTS, I think the the price decrease were, you know, pretty flat, I think. So I think it's so I think we we we you know, if you if you if you look at where we come from, probably the, you know, a year ago, probably the price where we we had gone through a 100%. Oh, you know, we increased it.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

I think we we've seen somewhat decrease, but, you know, the business remain really attractive as we can as we see it.

[Michael Zaremski, MD & Senior Equity Research Analyst at BMO Capital Markets]

Okay. Got it. That's helpful. Maybe pivoting to the strategy about growing your presence in the, SME marketplace. I know you've been doing that strategically, inorganically, inorganically.

[Michael Zaremski, MD & Senior Equity Research Analyst at BMO Capital Markets]

But I'm just curious, maybe you'd be willing to elaborate. Is there kind of a specific pocket that's really high up on the wish list like U. S. Retail, traditional main market? Or is it kind of a broad appetite to just go continue going kind of down market more broadly?

[Nicolas Papadopoulo, CEO at Arch Capital Group]

I think for for us, I think we we really start in the in the mid market that you've seen with the the acquisition we've made of the of the Alliance portfolio. And that's that's our sweet spot. You know, we we we come from the larger accounts. So I think we we had, you know, strategic aspiration to to grow in the upper middle market. And I think that's why the acquisition fits strategically well.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

And I think the the the strategy thesis behind it. I think it's it's even more compelling today than it was when when we did the deals.

[François Morin, CFO & Treasurer at Arch Capital Group]

Yeah. And I'd add to that that, you know, while I mean I mean, truly small business is not an immediate action item. I mean, who I mean, down the road, I mean, who knows where where things go, but it's a different animal. I think the the the the technology, the system, the distribution. So let let us focus on the middle market acquisition.

[François Morin, CFO & Treasurer at Arch Capital Group]

There's a lot we need to do with it, a lot we want to do with it. We're we're you know, we're things are are going well, but, I mean, it's still early days. So I think there there's a there's a lot we can, a lot of value we can generate from that asset, and that'll be the focus for the short term.

[Michael Zaremski, MD & Senior Equity Research Analyst at BMO Capital Markets]

Okay. And and, maybe I'll sneak one last one in. Maybe just I'm gonna stick, I guess, high level. Mortgage insurance continues just to be a a gift that keeps giving. You know, there's we're seeing some data points on your data too, but maybe less so.

[Michael Zaremski, MD & Senior Equity Research Analyst at BMO Capital Markets]

But delinquency rates going a bit higher, but we're still seeing good still some levels of HPA. You know, I guess just more broadly, has anything changed over the last couple of quarters in terms of the mortgage outlook other than I think we clearly know the top line in The U. S. Is going to continue to be negative. But any macro data points that are kind of changing Arch's kind of viewpoint on a medium term basis?

[François Morin, CFO & Treasurer at Arch Capital Group]

I wouldn't say anything's changed our viewpoint. Certainly, the housing market data has itself evolved a little bit, which was is maybe in line with how we thought about home prices going forward. For example, we have shied away or we've been, I think, underweight in certain geographical areas that seem to be currently under pressure in terms of home prices, maybe even coming down in some of those places. So that's been part of our, I'd say, approach is to manage our production or manage our new insurance written strategically with having a focus on where we thought home prices would be more sustainable and less risky, I'd say. So that's maybe one data point.

[François Morin, CFO & Treasurer at Arch Capital Group]

Again, it it I mean, what's happening or what seems to happen and the, you know, what data seems to be in line with how we we approach the business going in. But, you know, bottom line is, yeah, we we our portfolio has been constructed to be a little bit gonna, you know, again, staying away from the high risk areas, high risk not only geo geographical areas, but types of loans, so high LTV, high DTI. So that's been kinda a little bit, you know, how we constructed the portfolio, and so far, that seems to be paying off well for us.

[Michael Zaremski, MD & Senior Equity Research Analyst at BMO Capital Markets]

Thank you.

[François Morin, CFO & Treasurer at Arch Capital Group]

You're welcome.

[Operator]

Thank you. Your next question is from K. B. Montezari from Deutsche Bank. Your line is now open.

[Cave Montazeri, Analyst at Deutsche Bank]

Thank you. My first question is on the Florida market. Can you give us a bit more color? Is it mainly, like, the tort reform from two years ago that are feeding through that are that's making the market a bit more attractive now? Can you, like, maybe break down a bit more, what's making Florida a lot more attractive now?

[Nicolas Papadopoulo, CEO at Arch Capital Group]

So I think so I I think the top reform had an impact, I think, on the signed benefits. So we've seen the the local companies, you know, attrition loss ratio dropping from, you know, the fifties plus to now in the twenties. So the the nice thing for us I think we mostly write excess of loss in in in Florida. The nice thing for us is that to afford them the money to buy, you know, the reinsurance they need to protect the the the capital investors that put in those in those companies. So that and and pay a price that's, you know, if you buy a limited amount of capacity, you pay one price.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

But as they're looking to buy closer to the 100 or 200 your return, you know, they they they have to spend more money. So I think that that's what what has made, you know, the the and and the storm, so if you did a number of storms that have deployed, I mean, the market attractive on an excess of not basis.

[Cave Montazeri, Analyst at Deutsche Bank]

Helpful. Thanks. And my follow-up, sticking with reinsurance, The 5.8% growth you said had a bit of negative impact, from the timing point of view, of some business that you said was $94,000,000 negative impact. So does that mean that your bringing growth in reinsurance in the quarter would have been double digit this quarter adjusting for that? And if so, what are the pockets of growth that you were able to just lean on for leaning to for reinsurance.

[Cave Montazeri, Analyst at Deutsche Bank]

I mean, Florida is one of them. Was there anything else that you want to flag?

[François Morin, CFO & Treasurer at Arch Capital Group]

No. I mean, yeah, you're right. I mean, again, it's timing issue, so it's really something that typically would happen in Q3. It happened in Q2 in terms of seeing the premium. If you adjust for the $94,000,000 correct, the the the net written premium growth for the segment would have been double digits, you know, slightly higher than the gross written premium growth of 8% or so.

[François Morin, CFO & Treasurer at Arch Capital Group]

Right? So in mind, and and we bought a little bit less, you know, reinsurance in some pockets. So, I mean, that that that's part of the strategy along the way. So I think those two numbers in terms of written premium are are aligned. And and if you convert more specifically the growth to property cap, you you see property cap premium growth, call it, you know, higher than the segment.

[François Morin, CFO & Treasurer at Arch Capital Group]

Right? So 20% range. And that that was really the story, I'd say, this quarter. I think, you know, we saw some some attractive opportunities in property cap. And, you know, the rest, as you know, there's offsetting in other property and other specialty, but, you know, a good part of the story would have been in in broadcast. There was and there was in fact,

[Nicolas Papadopoulo, CEO at Arch Capital Group]

there was more demand in the marketplace. So I think we were able to secure and that's why I want to be food with attractive pricing. So we it's not only, you know, getting market share. It's mostly, you know, being able to go along with the the need or support the needs of our our major clients as they buy more limits. So that that's really the big big reason for the growth.

[François Morin, CFO & Treasurer at Arch Capital Group]

That's very helpful. Thank you.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

You're welcome.

[Operator]

Thank you. And your next question is from Andrew Kligerman from D. D. Cowen. Your line is now open.

[Andrew Kligerman, Managing Director at TD Securities]

Hey, good morning. So in reinsurance, you mentioned that you're growing in casualty. And I'm kind of curious, on a lot of the calls that we've heard so far, casualty rates in general, I'll I'll pinpoint them at around ten percent. But I'm hearing reinsurance pricing in the casualty area has come down a bit. So I'm I'm wondering if you could give a little more color on what you're seeing on the primary level in various casualty lines and what's happening in reinsurance, particularly for Orange?

[Nicolas Papadopoulo, CEO at Arch Capital Group]

Yes. So the story of casualty business, I think it's mostly quota share. So I think, you know, the story of the primary side and the reinsurance side as far as the underlying business is is very similar. And there, I think we we've seen rates, you know, as you said, probably in the that all all exceeding trends. So I think it it makes it, you know, and and we are selectively growing both on the insurance and trying to grow on the on on the reinsurance.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

I think where where where you you see the the difference in market behavior is I think there is a there is a lot of supply on the on the reinsure on the reinsurance side, and it's difficult for for many of the market to to expand their writing because, you know, there's a lot of a lot of the competition is also looking to to to expand. So that translates in terms and conditions and city conditions not not changing because if you looked at the experience of those portfolios and based on the, you know, the the the prior year of development, you you would route probably some of those some of those three days to have lower ceiling commissions.

[Andrew Kligerman, Managing Director at TD Securities]

I see. Thank you for that. And and then just shifting over to Midcorp. Could you give an update on where you are in the process of incorporating data and analytics? Is the performance the underwriting performance where you've you know, is it where you expected it?

[Andrew Kligerman, Managing Director at TD Securities]

And and and when do you think mid corp could kind of pivot to growth?

[Nicolas Papadopoulo, CEO at Arch Capital Group]

Yes. So I would say that the you know, it's it's a process. It's a long process. It feels so the integration is actually pretty much on track. I think the now we've almost almost entirely all over the the book over to Arch.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

And so that's almost done. I think, you know, yeah, I want to remind you that we're still a year away from the the full separation with Alliance. So that's hanging there. But we feel we feel good about, you know, the rollover of the book. We feel good about the the the team and the and the underlying business that we've acquired.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

I mean and, again, as I said earlier, the strategic thesis, I think, is even more more compelling in our views.

[François Morin, CFO & Treasurer at Arch Capital Group]

And I see that to the middle market book, part of the overall acquisition, I think, has you know, the the pricing environment is is good, is attractive. So that's that's, I'd say, exciting for us. I think that's a an opportunity for us as we move forward in a you know, gives us another opportunity set to to to get into and then kinda pursue aggressively. So I'd say we're we're excited about that. I mean, the platform is there.

[François Morin, CFO & Treasurer at Arch Capital Group]

The distribution is there and the team the team and then, you know, the the rate environment we think will support it. So that's that's the deposit sign. Thank you.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

You're welcome.

[Operator]

Thank you. And your next question is from Josh Shanker from Bank of America. Your line is now open.

[Josh Shanker, Managing Director at Bank of America]

Yes. Thank you. So looking at your commentary about Florida and the general attractiveness of property cat market, you can't help but look at the underwriting, see how they've declined. There were some one off transactions in 2Q 'twenty four. Can you square how much of the business a year ago was just a few unique things that really boosted the numbers and what a normalized year over year growth rate might be for the property cat line and the property other line reinsurance?

[Nicolas Papadopoulo, CEO at Arch Capital Group]

Yes. I think it's your question is your question is other property? I just want to make sure. So I'm

[Josh Shanker, Managing Director at Bank of America]

I'm looking at both. I mean, the the the premium volumes are down fairly dramatically from where they were a year ago, but you're leaning in and you like the lines. There's a disconnect there, so I'm trying to bridge that.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

On the test side, I think I'll let Francois explain because I think we we talked about it earlier so we can go there. On the on the other on the other property, I think the command we'd like to make is that it's really we have to yeah. That you understand. It's really a mixed bag of line of business, you know, a bit of homeowner, a bit of commercial, you know, it's geographically diverse. You have US, Canada, international.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

Yeah. Five and three d. So so I think the the the the reduction in other property this quarter is really driven by, as I said, by people we may have some students, you know, deciding not to buy some revision, you know, in certain of the sub segment of the book based on the companies not meeting their, you know, their their their targets because, you know, for instance, in EMS, we've seen some drastic reduction. And also, you know, a couple of decisions that our team made, and one of them is the big deal not to not to renew a contract. A So I think, you know, overall, I think the the business remain very attractive, but it has to be it has to be managed.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

So I think this and I would contrast the experience of the other property with a similar experience we have in specialty. We are there, you know, it's also a mixed bag of lines of business. And there, I think, you know, headwinds have been cyber, but this quarter, on the international side, we were able to to land a few large transactions. And so we are up significantly there. So I think you you have to, you know, reinsurances as we deploy, you know, we do large deals.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

I think you have to be able to accept the volatility quarter over quarter. You know, some of it is going up. You love it when it goes up, but, you know, it's sometimes it it it goes the other way. I think that's what happened in other properties this quarter.

[François Morin, CFO & Treasurer at Arch Capital Group]

So Yeah. And just to finish up again on property cat, I mean, Josh, once you adjust for this timing issue on on the the the retro prop cap, again, up, call it, 20% year over year in that in the in the quarter. So that's I I think that's a reflection. You know, big picture, again, we we like both prop cap and property other than property cap. Still very attractive business.

[François Morin, CFO & Treasurer at Arch Capital Group]

But to Nicholas' point specifically, you know, there's a you know, the reality, there's some transactions that don't always kinda come back or, you know, change in their form or their substance and, you know, the scenes by us, etcetera. So that's that's been that that's that's truly what what happened this quarter. And, you know, unfortunately, I can't help you on on how third and fourth quarters are gonna look like, but we think there's it's still a very attractive market.

[Josh Shanker, Managing Director at Bank of America]

Just in terms of the impact on acquisition cost ratios, did that cause a onetime unusual item that we should feature anything about going forward for normalization?

[François Morin, CFO & Treasurer at Arch Capital Group]

Not in a big way. Acquisition for reinsurance, where you see the variability sometimes is more on the profit commission. So I mean, the underlying performance of the book will will end up having maybe a more a bigger impact. So the fact that these, you know, a nonrenewable and or growth, I think, generally speaking, should not have a, in and of itself, a significant impact. Thank you.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

You're welcome.

[Operator]

Thank you. And your next question is from David Montemaden from Evercore ISI. Your line is now open.

[David Motemaden, MD & Senior Equity Research Analyst - Insurance & Business Services at Evercore ISI]

Hi, thanks. Good morning. On sticking with the Reinsurance segment, the press release had called out some attritional losses, higher attritional losses within the underlying loss ratio there. I'm wondering if you could just elaborate on the nature of those, what lines? Or was it just kind of things swing one way or the other any given quarter, just sort of normal volatility?

[François Morin, CFO & Treasurer at Arch Capital Group]

Yeah. I mean, there's no question that when we compare year over year last year was maybe one of our best quarters ever. There's, you know, literally not much that went on in the, call it, large attritional space. This quarter, we had a, I mean, a little bit of a a of a with the Air India crash. We had a couple of refineries that exploded.

[François Morin, CFO & Treasurer at Arch Capital Group]

I mean, those make the news, you know, we don't we're not here to I'm not gonna get into all the details of each one of them, but, you know, that explains a little bit the volatility. I mean, that's the business the business word. Right? So so, you know, I think the takeaway is that there's nothing alarming. It's part of the normal volatility in the book.

[François Morin, CFO & Treasurer at Arch Capital Group]

Again, we go back to our preferred way of looking at it on a trailing trailing twelve month basis to, I mean, at least temper some of these kinda shocks or kinda events that may or may not happen in a given quarter, but that's really the story. So a couple of large claims that just happened to take place this quarter, and we didn't have those a year ago.

[David Motemaden, MD & Senior Equity Research Analyst - Insurance & Business Services at Evercore ISI]

Got it. No, thanks for that. Makes sense. And then just also just sticking with the reinsurance business. So I think you had called out specialty lines there remaining a strategic focus and that there were some new opportunities that were bound in this quarter.

[David Motemaden, MD & Senior Equity Research Analyst - Insurance & Business Services at Evercore ISI]

Wondering if your outlook has changed at all in terms of the growth outlook there, how the pipeline is looking and if you see this sort of growth being sustained?

[Nicolas Papadopoulo, CEO at Arch Capital Group]

So, you know, on specialty, I think the the the headwinds have been really cyber. You know, we have we have the decent size book of cyber, so that has been on the, you know, pricing pressure. So I think that that probably, you know, as we we we we need not allocated as much capital to the line than than than we did for the year ago. But I think the you know, again, it's a mixed bag of lines of business. And a lot of those lines of business, you know, we we we like to go.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

So the question is, you know, our kids, you know, doing the work they need to do to to generate those opportunities. So we landed a couple this quarter. I think we we want to do more. I mean, but in the competitive market, you know, it's sometimes hard to find, you know, a new opportunity, new business in house. So I think I think I think I'm positive on the outlook, but, you know, whether we find those opportunities or not, you know, I can tell.

[François Morin, CFO & Treasurer at Arch Capital Group]

Great. Thank you. Welcome.

[Operator]

Thank you. And your next question is from Alex Scott from Barclays. Your line is now open.

[Alex Scott, Equity Research Analyst at Barclays]

Hi. I wanted to ask about the insurance segment and I guess just wanted to see if you could provide an update on sort of how far you are through some of the mid corp remediation and just maybe high level comments on how we should think about some of the benefits from that, which would help margins and any potential offsets from just thinking through like pricing versus loss cost trend spread and whether there's deterioration?

[Nicolas Papadopoulo, CEO at Arch Capital Group]

I think, you know, I think we're going as I explained earlier, we're going through the integration. I think we we feel good about, you know, where we are today. I think the the the only area, I think, that I would highlight in terms of performance is probably on the program side. I think we we've taken some action on the organization on the program side that should lead to some performance improvements right over over the next twelve to eighteen months. So that that's, you know, that's the only thing that I think you'd be able to to to to to see.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

Yeah. But we we're doing a lot of work, but, you know, that work will be you know, it it will it will it will take time. But the the action of the program, you know, over the next and it's a trailing team out should be able to to see some of the types of that.

[François Morin, CFO & Treasurer at Arch Capital Group]

Yeah. No loss ratio. On the expense ratio, I'd say the the operating expense benefit that we're getting in terms of scale, I think, are are sustainable. Right? So there there is no question that adding, call it, a billion and a half of premium to to the insurance segment with, you know, not necessarily a corresponding amount of, you know, operating expense in terms of IT and management, etcetera.

[François Morin, CFO & Treasurer at Arch Capital Group]

That's the benefit that we think is here to stay. Yep.

[Alex Scott, Equity Research Analyst at Barclays]

That'll make sense. Follow-up I have, so on insurance, are you seeing any changes in just the dynamics with admitted versus E and S in terms of volume? Mean, if I kind of go back to the, I guess, part of the rationale to buy Midcorp, you guys sort of bought this entity and at some point having you know, more of a presence in admitted may may be very helpful if, know, volume and appetite kind of returns to admitted in a way you could ease that growth opportunity. I mean, is that are we closer to that? Are you seeing any of that kind of opportunities that take, you know, some of what was going in the into the E and S market?

[Nicolas Papadopoulo, CEO at Arch Capital Group]

Yeah. I think I think the mid corp business, I think, is very different from the the the E and S business. We we we we arrived today. I think the e n s business we arrived today, I think, is very distressed. I think the mid core business is most mostly property led, low severity.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

So that business doesn't lend itself to to be in the NS market. And I think the, you know, the the the attractiveness of the of the mid core business is it's difficult to access. It's limited access. I think we we have to buy a platform to become a player into in the space. So I think it you know, we've been trying to be a bigger player in that space for probably the last five or six years. But, you know, scale matters and ability to connect to have, you know, decent size property limits in the hundreds of millions to to solve the problem of the of the agency network, I think, is key. So I think those are two different business, and the attractiveness of the of the mid core business is really that it it's less subject to to to cycle, and it's more you have a a higher you know, the value proposition, the thing you do for the reason is more with the with the agent and the and the issue. You provide multi line, you know, and there is one agent. So I think it's a maybe it's it's a different it's a different business.

[François Morin, CFO & Treasurer at Arch Capital Group]

Well, I mean, a little bit related to that, Alex, I think there's know, there's still you know, we still see business falling into the E and S market. I mean, slightly different again than what would be what would be middle market to us at least. But, yeah, E and S markets are growing, maybe not as fast as they were the last few years. There's some maybe moderation in how much how much of the business is shifting over because, again, as you know, like, in middle markets, you need to get rates approved, etcetera. So that takes time, and some of that work has has taken place.

[François Morin, CFO & Treasurer at Arch Capital Group]

So, you know, and many carriers are maybe in a slightly better position in some areas to retain that business. But, you know, E and S market is still, you know, big picture, doing doing well. Yeah.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

I think one comment on the DNS side. I think we see you know, as long as we have this issue with social inflation, then I think we see more of the casualty business flowing into the DNS market because you can write it at your own price with your, you know, a flexible set of exclusion that is not always available in the end market. So I think that that trend, I view, will continue.

[François Morin, CFO & Treasurer at Arch Capital Group]

Thanks. You're welcome.

[Operator]

Thank you. And your next question is from Andrew Anderson from Jefferies. Your line is now open.

[Andrew Andersen, VP - Equity Research at Jefferies Financial Group]

Hey, good morning. You had mentioned some casualty pricing above loss trend. And I think in the past, your view of loss trend was maybe two to 2.5 points above CPI and for excess layers perhaps even higher. Can you just provide us with your latest view on on loss trends?

[Nicolas Papadopoulo, CEO at Arch Capital Group]

Yes. So it would be it would be unchanged, think, I would say. I mean, single digit on the the primary and the double digit on the on the excess. I think that's what we used and I would say unchanged compared to a year ago.

[Andrew Andersen, VP - Equity Research at Jefferies Financial Group]

Thanks. And then just on the mortgage segment, you know, I think some mortgage associations are talking about originations picking up in 2026. Are you kind of thinking about that as we turn to next year? Or are you still envisioning more of a softer market there?

[François Morin, CFO & Treasurer at Arch Capital Group]

Great question. Think, as you know, I mean, forecasts are going to get updated. We still see, at least for the next little while, mortgage rates kind of staying where they're at. That's certainly that's not ideal in the sense of creating housing more housing demand. But we'll see.

[François Morin, CFO & Treasurer at Arch Capital Group]

I mean, into '26, maybe things will change a little bit. Maybe interest rates come down at that point and mortgage rates follow. But yeah. I mean, that's something we look at very carefully. But for the I mean, too early to really have a clear view of that at this time. Thank you. You're welcome.

[Operator]

Thank you. And your next question is from Brian Meredith from UBS. Your line is now open.

[Brian Meredith, Managing Director at UBS Group]

Hey, just two quick ones here. The first one, just following back up on the MCE program business. Can you scale it How much business is that? And did you just start non renewing? I was surprised you said it's another twelve to eighteen months before we're going to see the benefits there given I thought you started to get notifications when you closed the deal.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

Yeah. So I think the of of the total, it's probably a third, I would say. A third was forearm. And that's not why we bought yeah. I want to be clear.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

So we bought we bought, you know, the the portfolio for the other two firms. So that that Yep. We've we've been able to scrutinize. And as you know, Ryan, it takes time. You know, it takes time.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

You have a you know, just put to the end. So I think we, you know, we mostly taken underwriting actions and looked at, you know, the list of forum we could and then review when the time comes and talking to the NGS to give them enough notice. So I think that's where that's where we are. So I think expect most of the effects to start in 2026.

[François Morin, CFO & Treasurer at Arch Capital Group]

And and, Brian, on that, just to be clear, on an earned basis, right, so on a written basis, some of these, you know, some of the actions were taken, you know, late last year, early this year, so that that that on a written basis, you will start to see some some reductions or some, you know, some changes in the '25. But the the the full twelve to eighteen months on an earned basis is is really why. I mean, that that has these the earnings kind of take a bit longer to come through.

[Brian Meredith, Managing Director at UBS Group]

All right. That makes sense. And then the second one, Francois, I'm just curious, could you give maybe an update on where we stand with Bermuda tax credits, not the DTA stuff, but the credits that I know the Bermuda Monetary Authority has been talking about providing?

[François Morin, CFO & Treasurer at Arch Capital Group]

Unfortunately, no official news. I mean, it's certainly being discussed and worked on. We are, you know, hopeful. I mean, we were optimistic really that, you know, we'll to a a good place with the Bermuda government. You know?

[François Morin, CFO & Treasurer at Arch Capital Group]

It it's we love Bermuda. I I think the Bermuda government I know the Bermuda government likes Arch and others being on the island, so we're we're a big part of the community here. And it's I mean, it'll be effectively, it's a negotiation with not only the Bermuda kind of involved parties, but there's the OECD that kinda has a little bit of of some oversight there. So we're expecting more development in, call it, the third quarter, late kinda late third quarter and and, you know, with hopefully some some kinda actionable items in the fourth quarter for us. So we'll we'll give you an update next quarter.

[François Morin, CFO & Treasurer at Arch Capital Group]

But right now, I mean, there's nothing official that we know of that we can really share with everybody here.

[Brian Meredith, Managing Director at UBS Group]

That's helpful. Thanks. And just quickly too, Franco, on that one. If indeed these do happen to come through, are they a credit to your taxes? Or do they sit somewhere else in the P and L?

[François Morin, CFO & Treasurer at Arch Capital Group]

Well, what's been talked about in big picture is a jobs credit effectively from the Bermuda government, and that would most likely come through as a reduction to our operating expenses. So the tax rate per se would not be impacted, but it would impact, I mean, mostly well, all places where we have, you know, operating expenses in Bermuda. So for us, it'd be in each of our segments because we have Bermuda based, you know, expenses in each of the three segments. It would also impact a little bit our investment income because we your expenses flow through that. We've got our investment professionals here based in Bermuda.

[François Morin, CFO & Treasurer at Arch Capital Group]

Also, it would impact our corporate expenses because Nicholas and I and others are based here in Bermuda. So that's where it would hit a couple of different spots on the income statement, but would come through again as an offset to operating expenses.

[Brian Meredith, Managing Director at UBS Group]

Very helpful. Thanks.

[François Morin, CFO & Treasurer at Arch Capital Group]

You're welcome.

[Operator]

Thank you. And your next question is from Meyer Shields from KBW. Your line is now open.

[Meyer Shields, Managing Director at Keefe, Bruyette & Woods (KBW)]

Thanks so much and good morning. Two quick modeling questions. First, if we add back the 20 basis points of, I guess, acquisition accounting impact for the Insurance segment's acquisition expense ratio, is that a good run rate going forward? Or are the changes in the program business going to change that as well?

[François Morin, CFO & Treasurer at Arch Capital Group]

I mean, I I would start there. I mean, the the again, the benefits or the the impact, call it, to the ratio as we as our underwriting actions on the program's business kinda materialize, we'd like to think that, you know, we we can get more than that. Exactly when that takes place or when that, you know, again, shows up in in our underlying performance, It's a little bit it's not that clear, right? But we'd like to think that we can do better than that. Not later this year, it'll be in 2026.

[Meyer Shields, Managing Director at Keefe, Bruyette & Woods (KBW)]

Okay. Perfect. That's helpful. And then second, just because Midcorp, I think in the past you've talked about having a significant property exposure. And a couple of carriers this spring season have talked about particularly benign weather and low non cat losses.

[Meyer Shields, Managing Director at Keefe, Bruyette & Woods (KBW)]

And I was wondering if you saw anything like that in the mid core book.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

I think, yeah, this quarter was a pretty low cat quarter. So I think, you know, when we started, we got a little bit unlucky, I think, with some of the hurricanes and and then the wildfire. But I think for for the first time this quarter, I think we got a low cat quarter. So I I agree with sentiment here.

[Meyer Shields, Managing Director at Keefe, Bruyette & Woods (KBW)]

Okay. Fantastic. Thank you.

[François Morin, CFO & Treasurer at Arch Capital Group]

You're welcome.

[Operator]

Thank you. And your next question is from Jamie Fuller from JPMorgan. Your line is now open.

[Jimmy Bhullar, Equity Research Analyst at JP Morgan]

Hi. So had a question just differentiating between pricing movements versus price adequacy. If you look across your business, where is it that you're seeing attractive growth opportunities across reinsurance and insurance versus maybe highlight some of the lines where you might have been active in the past, but you just feel like the risk reward is not that compelling?

[Nicolas Papadopoulo, CEO at Arch Capital Group]

Yes. So I think most of the casualty line, I said earlier, we see price you know, being greater than the the loss trends. So I think that's and I think if I don't think the entire I said this in prior calls. I don't think the the entire casualty market is attracted to us, but there is selected pockets of that market, especially in the excess and surplus side of the market, the more specialty that both both on the insurance and reinsurance, we we have a strong appetite to to grow. And I think on the insurance is our team is very specialized.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

So so I think we have high confidence that they they'll be able to find the right opportunity. And I think on the reinsurance, it's really backing the right underwriting teams. People that have, you know, expertise in in driving the liability portion of those risks that are difficult to price. I think we also have, I think, some some some ability to to to grow into of our retail casualty where we are primary because I think we our value proposition I mean, it's a competitive marketplace, and I think our value proposition resonates well with the big retailers and the and the and the mid market retailers. So I think we we we we like that.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

I think we you know, as as I said in in my prepared remark, we have, you know, built in London, think, a a decent franchise and leading capabilities that kind of should or should, you know, help us, you know, continue to to grow despite, you know, more competitive marketplace. And I think this, you know, mid cost certainly is an area where we think, you know, we're still getting double digit rate increases. And I think as we as we continue to integrate the platform, I think we, you know, I think we have a decent based on the value proposition that we have, we have a ability to grow, I think. In terms of the areas that are more challenged, you know, mentioned them earlier, I think, because, you know, cyber, that's not new. ENS ENS property, I think, still a very attractive, like, levels, but I think your competition is fierce.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

I think so. I think it's area that we we we are watching we're watching carefully. And

[Jimmy Bhullar, Equity Research Analyst at JP Morgan]

And on then on MI, like, obviously, if rates decline, there would be a pickup in growth. But do you think a decline in rates overall would be a positive for the business or negative given that there's a high likelihood that if rates decline a decent amount and persistency suffers and the in force book, which is producing very high margins, might begin to run off a lot faster? So what's sort of an ideal scenario for the MI business from a profitability standpoint, and how do you view declines in interest rates affecting that?

[François Morin, CFO & Treasurer at Arch Capital Group]

Yeah. I I think, I mean, we we do all this work. Right? I mean, a function of how much rate, what it would take in terms of rate declines for for our imports book to have more propensity to refinance. So if it if rates drop, you know, 50 bps, it's not a big deal for us.

[François Morin, CFO & Treasurer at Arch Capital Group]

I think I think we see more benefit in terms of home homes being more affordable. So I think the new production would would overtake that kinda, you know, negative in terms of refinancing. So but if there's a big refinancing boom, then, you know and, yeah, we pick up that share. So it's, you know, it's it's and and and, obviously, we we like the in force book a lot. I think it's it's high quality.

[François Morin, CFO & Treasurer at Arch Capital Group]

It's got a lot of home equity built into those those mortgages. So, you know, we we we we wouldn't mind giving up a little bit of that in exchange for, you know, new business. But, you know, absent a you I'd say, I'd say significant drop in interest, I think the in force book will stay with us for quite some time. Yeah.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

We have some room in that respect.

[Jimmy Bhullar, Equity Research Analyst at JP Morgan]

Okay. Thank you.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

You're welcome.

[Operator]

Thank you. And your next question is from Wes Carmichael from Autonomous Research. Your line is open.

[Wes Carmichael, Senior Analyst at Autonomous Research]

Good morning. And I know we're over time, so I'll just keep it to one. But I had a question on reinsurance. From some of our conversations with some industry participants, it sounds like there was a bit of a return of aggregate treaties with mid years. So I was just curious how you think about your exposure to aggregates and if your appetite at all has changed to write that business?

[Nicolas Papadopoulo, CEO at Arch Capital Group]

I, you know, I I don't think so in the much anything that's material. By the way, for the recall, we always write aggregate treaties, but we it's a very small portion of what we do. And I think, yeah, flavor of the day a few years back was aggregate drop down and all the good all the all the good stuff that you see in a software market. We we we haven't seen a huge comeback, and our team haven't, you know, supported, you know, the the few that have come to the market.

[François Morin, CFO & Treasurer at Arch Capital Group]

Got it. Thank you.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

You're welcome.

[Operator]

Thank you. And your next question is from Elyse Greenspan from Wells Fargo. Your line is now open.

[Elyse Greenspan, Managing Director at Wells Fargo]

Hi, thanks. I just had a follow-up, I guess, coming back to some of the Midcorp discussion. I guess, we were talking about, right, just the programs piece of it, which I know is going to have an impact on the margin. But I know when you guys announced the deal, right, the goal was to get this business right in line with legacy Arch, right? So obviously, the 100 basis point drag on the underlying loss ratio in the quarter.

[Elyse Greenspan, Managing Director at Wells Fargo]

Can you just and it sounds like right, the program piece will impact Can you take us through like, should we start to see some improvement relative to mid core and serving as like a tailwind to that insurance segment underlying loss ratio next year and then it picks up more steam in '27. I just want to understand the cadence of kind of the improvement in the mid court margin and the trajectory to get in line with legacy Arch.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

Yes. Our long term, you know, take this for making the acquisition and I think the targeted profitability, I think, is unchanged. I mean, the the the timing, it's hard to, you know, it's hard to predict. We're doing a ton of work around it preparing, you know, again. But, yeah, I don't have a crystal ball as far as what the market will do, but, you know, around us.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

But I think the the thing we feel good is that the the assumption that we use, I think we'll be able to realize all the time. So

[Operator]

Okay, thank you.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

You're welcome. Thank

[Operator]

you. I am not showing any further questions. I would now like to turn the conference call over to Mr. Nicolas de Vadopoulos for closing remarks.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

Yes. So I want to thank you all for participating in the call and wish everyone a great summer. Definitely, Francois and I, we we need to take some a bit of time off. And I want to wait you to wait you out one more time, you know, that, you know, we think the market we trade in is is very attractive. And and the challenge our challenge and, you know, a lot of challenge around this market is really generating a new business.

[Nicolas Papadopoulo, CEO at Arch Capital Group]

I think that's really that's really it. Again, thank you and enjoy the summer.

[Operator]

Thank you, ladies and gentlemen, for participating in today's conference. This concludes the program. You may all disconnect your lines.

Participants

Executives

• Nicolas Papadopoulo, CEO
• François Morin, CFO & Treasurer

Analysts

• Elyse Greenspan, Managing Director at Wells Fargo
• Michael Zaremski, MD & Senior Equity Research Analyst at BMO Capital Markets
• Cave Montazeri, Analyst at Deutsche Bank
• Andrew Kligerman, Managing Director at TD Securities
• Josh Shanker, Managing Director at Bank of America
• David Motemaden, MD & Senior Equity Research Analyst - Insurance & Business Services at Evercore ISI
• Alex Scott, Equity Research Analyst at Barclays
• Andrew Andersen, VP - Equity Research at Jefferies Financial Group
• Brian Meredith, Managing Director at UBS Group
• Meyer Shields, Managing Director at Keefe, Bruyette & Woods (KBW)
• Jimmy Bhullar, Equity Research Analyst at JP Morgan
• Wes Carmichael, Senior Analyst at Autonomous Research