10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the period ended June 30, 2015
Or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number:  001-26456

ARCH CAPITAL GROUP LTD.

(Exact name of registrant as specified in its charter)

Bermuda

(State or other jurisdiction of incorporation or organization)

Not Applicable

(I.R.S. Employer Identification No.)

Waterloo House, Ground Floor

100 Pitts Bay Road, Pembroke HM 08

(Address of principal executive offices)

(441) 278-9250

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ     No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ     No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated Filer þ Accelerated Filer o Non-accelerated Filer o Smaller reporting company o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o   No þ

As of July 31, 2015, there were 122,441,665 common shares, $0.0033 par value per share, of the registrant outstanding.

ARCH CAPITAL GROUP LTD.

INDEX

	Page No.
PART I. Financial Information
Item 1 — Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm	2
Consolidated Balance Sheets
June 30, 2015 (unaudited) and December 31, 2014	3
Consolidated Statements of Income
For the three and six month periods ended June 30, 2015 and 2014 (unaudited)	4
Consolidated Statements of Comprehensive Income
For the three and six month periods ended June 30, 2015 and 2014 (unaudited)	5
Consolidated Statements of Changes in Shareholders’ Equity
For the six month periods ended June 30, 2015 and 2014 (unaudited)	6
Consolidated Statements of Cash Flows
For the six month periods ended June 30, 2015 and 2014 (unaudited)	7
Notes to Consolidated Financial Statements (unaudited)	8
Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations	43
Item 3 — Quantitative and Qualitative Disclosures About Market Risk	79
Item 4 — Controls and Procedures	79
PART II. Other Information
Item 1 — Legal Proceedings	79
Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds	80
Item 5 — Other Information	80
Item 6 — Exhibits	80

1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of

Arch Capital Group Ltd.:

We have reviewed the accompanying consolidated balance sheet of Arch Capital Group Ltd. and its subsidiaries (the “Company”) as of June 30, 2015, and the related consolidated statements of income and comprehensive income for the three-month and six-month periods ended June 30, 2015 and June 30,2014, and the consolidated statements of changes in shareholders’ equity and cash flows for the six-month periods ended June 30, 2015 and June 30,2014. These interim financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States).  A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters.  It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole.  Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, 2014, and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for the year then ended (not presented herein), and in our report dated February 27, 2015, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet information as of December 31, 2014, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived.

/s/ PricewaterhouseCoopers LLP

New York, New York

August 7, 2015

2

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (U.S. dollars in thousands, except share data)
	(Unaudited)
	June 30, 2015			December 31, 2014
Assets
Investments:
Fixed maturities available for sale, at fair value (amortized cost: $9,945,598 and $10,701,557)	$	9,927,603		$	10,750,770
Short-term investments available for sale, at fair value (amortized cost: $878,437 and $801,758)	875,727			797,226
Collateral received under securities lending, at fair value (amortized cost: $373,909 and $40,473)	377,897			44,301
Equity securities available for sale, at fair value (cost: $615,055 and $562,534)	701,623			658,182
Other investments available for sale, at fair value (cost: $333,438 and $264,747)	377,677			296,224
Investments accounted for using the fair value option	2,613,487			2,425,053
Investments accounted for using the equity method	472,926			349,014
Total investments	15,346,940			15,320,770
Cash	525,074			485,702
Accrued investment income	80,129			74,316
Securities pledged under securities lending, at fair value (amortized cost: $374,447 and $52,076)	373,969			50,802
Premiums receivable	1,181,636			948,695
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses	1,831,227			1,812,845
Contractholder receivables	1,393,138			1,309,192
Prepaid reinsurance premiums	442,141			377,078
Deferred acquisition costs, net	448,647			414,525
Receivable for securities sold	454,057			78,170
Goodwill and intangible assets	102,518			109,539
Other assets	905,449			1,024,447
Total assets	$	23,084,925		$	22,006,081
Liabilities
Reserve for losses and loss adjustment expenses	$	9,082,281		$	9,036,448
Unearned premiums	2,442,923			2,231,578
Reinsurance balances payable	252,462			219,312
Contractholder payables	1,393,138			1,309,192
Deposit accounting liabilities	277,523			327,384
Senior notes	791,222			791,141
Revolving credit agreement borrowings	100,000			100,000
Securities lending payable	383,965			50,529
Payable for securities purchased	468,015			128,413
Other liabilities	756,005			693,438
Total liabilities	15,947,534			14,887,435
Commitments and Contingencies
Redeemable noncontrolling interests	204,996			219,512
Shareholders' Equity
Non-cumulative preferred shares	325,000			325,000
Common shares ($0.0033 par, shares issued: 172,780,590 and 171,672,408)	576			572
Additional paid-in capital	437,533			383,073
Retained earnings	7,242,728			6,854,571
Accumulated other comprehensive income, net of deferred income tax	66,441			128,856
Common shares held in treasury, at cost (shares: 50,376,681 and 44,304,474)	(1,934,763		)	(1,562,019		)
Total shareholders' equity available to Arch	6,137,515			6,130,053
Non-redeemable noncontrolling interests	794,880			769,081
Total shareholders' equity	6,932,395			6,899,134
Total liabilities, noncontrolling interests and shareholders' equity	$	23,084,925		$	22,006,081

See Notes to Consolidated Financial Statements

3

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (U.S. dollars in thousands, except share data)
	(Unaudited)						(Unaudited)
	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015			2014
Revenues
Net premiums written	$	943,580		$	971,928		$	2,010,575		$	2,036,918
Change in unearned premiums	(142		)	(64,776		)	(156,873		)	(269,986		)
Net premiums earned	943,438			907,152			1,853,702			1,766,932
Net investment income	86,963			72,990			165,957			139,984
Net realized gains (losses)	(35,725		)	54,144			47,623			73,841
Other-than-temporary impairment losses	(1,126		)	(14,749		)	(8,373		)	(17,720		)
Less investment impairments recognized in other comprehensive income, before taxes	13			—			1,461			—
Net impairment losses recognized in earnings	(1,113		)	(14,749		)	(6,912		)	(17,720		)
Other underwriting income	7,717			2,033			19,253			3,615
Equity in net income of investment funds accounted for using the equity method	16,167			9,240			22,056			12,493
Other income	2,205			4,850			317			2,746
Total revenues	1,019,652			1,035,660			2,101,996			1,981,891
Expenses
Losses and loss adjustment expenses	519,426			485,518			1,013,142			921,758
Acquisition expenses	175,425			158,158			338,501			318,500
Other operating expenses	168,608			156,350			326,490			302,149
Interest expense	4,011			14,334			16,747			28,738
Net foreign exchange losses (gains)	19,583			2,294			(46,918		)	8,857
Total expenses	887,053			816,654			1,647,962			1,580,002
Income before income taxes	132,599			219,006			454,034			401,889
Income tax expense	(6,780		)	(7,289		)	(19,458		)	(11,027		)
Net income	$	125,819		$	211,717		$	434,576		$	390,862
Amounts attributable to noncontrolling interests	(10,029		)	(3,701		)	(35,450		)	(346		)
Net income available to Arch	115,790			208,016			399,126			390,516
Preferred dividends	(5,485		)	(5,485		)	(10,969		)	(10,969		)
Net income available to Arch common shareholders	$	110,305		$	202,531		$	388,157		$	379,547
Net income per common share
Basic	$	0.91		$	1.53		$	3.16		$	2.87
Diluted	$	0.88		$	1.48		$	3.05		$	2.78
Weighted average common shares and common share equivalents outstanding
Basic	121,719,214			132,650,634			122,957,384			132,256,462
Diluted	125,885,420			136,889,944			127,156,713			136,716,889

See Notes to Consolidated Financial Statements

4

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (U.S. dollars in thousands)
	(Unaudited)						(Unaudited)
	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015			2014
Comprehensive Income
Net income	$	125,819		$	211,717		$	434,576		$	390,862
Other comprehensive income (loss), net of deferred income tax
Unrealized appreciation (decline) in value of available-for-sale investments:
Unrealized holding gains (losses) arising during period	(81,935		)	108,428			2,369			179,781
Portion of other-than-temporary impairment losses recognized in other comprehensive income, net of deferred income tax	(13		)	—			(1,461		)	—
Reclassification of net realized gains, net of income taxes, included in net income	(21,214		)	(8,285		)	(52,146		)	(29,534		)
Foreign currency translation adjustments	11,580			10,021			(11,177		)	8,672
Comprehensive income	34,237			321,881			372,161			549,781
Amounts attributable to noncontrolling interests	(10,029		)	(3,701		)	(35,450		)	(346		)
Comprehensive income available to Arch	$	24,208		$	318,180		$	336,711		$	549,435

See Notes to Consolidated Financial Statements

5

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (U.S. dollars in thousands)
	(Unaudited)
	Six Months Ended
	June 30,
	2015			2014
Non-cumulative preferred shares
Balance at beginning and end of period	$	325,000		$	325,000
Common shares
Balance at beginning of year	572			565
Common shares issued, net	4			5
Balance at end of period	576			570
Additional paid-in capital
Balance at beginning of year	383,073			299,517
Common shares issued, net	7,378			6,360
Exercise of stock options	9,624			11,233
Amortization of share-based compensation	36,044			35,627
Other	1,414			471
Balance at end of period	437,533			353,208
Retained earnings
Balance at beginning of year	6,854,571			6,042,154
Net income	434,576			390,862
Amounts attributable to noncontrolling interests	(35,450		)	(346		)
Preferred share dividends	(10,969		)	(10,969		)
Balance at end of period	7,242,728			6,421,701
Accumulated other comprehensive income
Balance at beginning of year	128,856			74,964
Unrealized appreciation in value of available-for-sale investments, net of deferred income tax:
Balance at beginning of year	161,598			80,692
Unrealized holding (losses) gains arising during period, net of reclassification adjustment	(49,777		)	150,247
Portion of other-than-temporary impairment losses recognized in other comprehensive income, net of deferred income tax	(1,461		)	—
Balance at end of period	110,360			230,939
Foreign currency translation adjustments:
Balance at beginning of year	(32,742		)	(5,728		)
Foreign currency translation adjustments	(11,177		)	8,672
Balance at end of period	(43,919		)	2,944
Balance at end of period	66,441			233,883
Common shares held in treasury, at cost
Balance at beginning of year	(1,562,019		)	(1,094,704		)
Shares repurchased for treasury	(372,744		)	(10,259		)
Balance at end of period	(1,934,763		)	(1,104,963		)
Total shareholders’ equity available to Arch	6,137,515			6,229,399
Non-redeemable noncontrolling interests	794,880			792,340
Total shareholders’ equity	$	6,932,395		$	7,021,739

See Notes to Consolidated Financial Statements

6

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (U.S. dollars in thousands)
	(Unaudited)
	Six Months Ended
	June 30,
	2015			2014
Operating Activities
Net income	$	434,576		$	390,862
Adjustments to reconcile net income to net cash provided by operating activities:
Net realized gains	(60,818		)	(87,520		)
Net impairment losses recognized in earnings	6,912			17,720
Equity in net income or loss of investment funds accounted for using the equity method and other income or loss	(10,349		)	(135		)
Share-based compensation	36,044			35,627
Changes in:
Reserve for losses and loss adjustment expenses, net of unpaid losses and loss adjustment expenses recoverable	91,616			60,474
Unearned premiums, net of prepaid reinsurance premiums	156,873			269,986
Premiums receivable	(206,642		)	(325,953		)
Deferred acquisition costs, net	(39,009		)	(55,822		)
Reinsurance balances payable	19,657			65,803
Other liabilities	(94,841		)	43,133
Other items	51,180			38,888
Net Cash Provided By Operating Activities	385,199			453,063
Investing Activities
Purchases of fixed maturity investments	(14,641,391		)	(14,311,748		)
Purchases of equity securities	(288,535		)	(174,687		)
Purchases of other investments	(1,273,780		)	(1,022,987		)
Proceeds from sales of fixed maturity investments	14,355,519			13,204,854
Proceeds from sales of equity securities	272,343			98,687
Proceeds from sales, redemptions and maturities of other investments	1,078,675			618,707
Proceeds from redemptions and maturities of fixed maturity investments	474,984			432,040
Proceeds from investment in joint venture	40,000			—
Net sales of short-term investments	3,707			430,304
Change in cash collateral related to securities lending	(18,329		)	18,701
Purchase of business, net of cash acquired	818			(235,578		)
Purchases of furniture, equipment and other assets	(43,165		)	(10,360		)
Net Cash Used For Investing Activities	(39,154		)	(952,067		)
Financing Activities
Purchases of common shares under share repurchase program	(361,877		)	—
Proceeds from common shares issued, net	2,178			2,521
Change in cash collateral related to securities lending	18,329			(18,701		)
Third party investment in non-redeemable noncontrolling interests	—			796,903
Third party investment in redeemable noncontrolling interests	—			219,233
Dividends paid to redeemable noncontrolling interests	(9,313		)	(4,816		)
Other	55,018			4,706
Preferred dividends paid	(10,969		)	(10,969		)
Net Cash Provided By (Used For) Financing Activities	(306,634		)	988,877
Effects of exchange rate changes on foreign currency cash	(39		)	2,513
Increase in cash	39,372			492,386
Cash beginning of year	485,702			434,057
Cash end of period	$	525,074		$	926,443
Income taxes paid	$	25,992		$	8,279
Interest paid	$	25,076		$	21,696

See Notes to Consolidated Financial Statements

7

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.General

Arch Capital Group Ltd. (“ACGL”) is a Bermuda public limited liability company which provides insurance and reinsurance on a worldwide basis through its subsidiaries (together with ACGL, the “Company”). The Company’s consolidated financial statements include the results of Watford Holdings Ltd., the parent of Watford Re Ltd. (see Note 3).

The interim consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). All significant intercompany transactions and balances have been eliminated in consolidation. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and assumptions. In the opinion of management, the accompanying unaudited interim consolidated financial statements reflect all adjustments (consisting of normally recurring accruals) necessary for a fair statement of results on an interim basis. The results of any interim period are not necessarily indicative of the results for a full year or any future periods.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted; however, management believes that the disclosures are adequate to make the information presented not misleading. This report should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 (“2014 Form 10-K”), including the Company’s audited consolidated financial statements and related notes.

The Company has reclassified the presentation of certain prior year information to conform to the current presentation. Such reclassifications had no effect on the Company’s net income, comprehensive income, shareholders’ equity or cash flows. Tabular amounts are in U.S. Dollars in thousands, except share amounts, unless otherwise noted.

Acquisition of Gulf Reinsurance Limited

In May 2008, the Company provided $100.0 million of funding to Gulf Reinsurance Limited, a wholly owned subsidiary of Gulf Re Holdings Limited (collectively, “Gulf Re”), pursuant to the joint venture agreement with Gulf Investment Corporation GSC (“GIC”). Under the agreement, Arch Re Bermuda and GIC each owned 50% of Gulf Re. The Company entered into a number of strategic initiatives related to Gulf Re in the 2014 fourth quarter, including an agreement to acquire complete ownership and effective control of Gulf Re. Such agreement was approved by the Dubai Financial Services Authority in April 2015 and the transaction closed on May 14, 2015. Pursuant to the agreement, Gulf Re distributed $130.6 million in total to the Company and GIC, and Gulf Re maintained $50.7 million of equity capital. The Company purchased GIC’s remaining investment in Gulf Re for $25.6 million through a transfer of fixed maturity investments. GIC will continue to participate equally with the Company in the financial results of Gulf Re and have the ability to purchase shares in Gulf Re over the next seven years. The acquisition resulted in no goodwill or other intangible assets as the fair value of Gulf Re was equal to its book value at closing.

2.    Recent Accounting Pronouncements

Recently Issued Accounting Standards Adopted

The Company adopted accounting guidance in the 2015 second quarter which changes the accounting for repurchase and resale-to-maturity agreements by requiring that such agreements be recognized as financing arrangements, and requires that a transfer of a financial asset and a repurchase agreement entered into contemporaneously be accounted for separately. The new accounting guidance also requires additional disclosures about certain transferred financial assets accounted for as sales and certain securities lending transactions. Disclosures are not required to be presented for comparative periods before the effective date. See Note 6, “Investment Information—Securities Lending Agreements.”

The Company adopted accounting guidance in the 2015 second quarter which relates to the presentation of debt issuance costs. Such guidance requires presentation of debt issuance costs in the balance sheet as a deduction from the carrying amount of the related debt liability instead of a deferred charge. The Company previously included its debt issuance costs within ‘other assets.’ The guidance was applied retrospectively and resulted in reductions in ‘other assets’ and ‘senior notes’ at June 30, 2015

8

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

of $8.8 million, respectively, and $8.9 million at December 31, 2014, respectively. The adoption of this change in accounting principle did not impact the Company’s shareholders’ equity or net income.

The Company adopted accounting guidance pertaining to the categorization within the fair value hierarchy of certain investments measured at fair value using the net asset value per share as a practical expedient. These investments are no longer required to be categorized within the fair value hierarchy but are still required to be reported in the fair value hierarchy table to permit reconciliation back to the consolidated balance sheet. Additionally, certain disclosures are no longer applicable for investments that are eligible to be measured using the practical expedient, but for which the practical expedient was not elected. The guidance was applied retrospectively and only impacted the Company’s disclosures. See Note 7, “Fair Value.”

Recently Issued Accounting Standards Not Yet Adopted

An accounting standard was issued in the 2014 second quarter which will change the manner in which most companies recognize revenue. The standard requires that revenue reflect the transfer of goods or services to customers based on the consideration or payment the company expects to be entitled to in exchange for those goods or services; however, the standard does not change the accounting for insurance contracts or financial instruments. The new standard also requires enhanced disclosures about revenue. This accounting guidance is effective in the 2018 first quarter and may be applied on a full retrospective or modified retrospective approach. The Company is assessing the impact the implementation of this standard will have on its consolidated financial statements.

An accounting standard was issued in the 2015 first quarter providing targeted improvements to consolidation guidance for limited partnerships and other similarly structured entities. The new standard addresses instances where a reporting entity consolidates another entity when the reporting entity is simply acting on the behalf of others, amongst other related issues. While the standard is targeted, the application is relevant for all companies that are required to assess whether or not to consolidate certain entities. The standard is effective in the 2016 first quarter and early adoption is permitted. The Company is assessing the impact the implementation of this standard will have on its consolidated financial statements.

A new accounting standard was issued in the 2015 second quarter requiring new disclosures about the reserve for losses and loss adjustment expenses for short-duration insurance contracts. These disclosures will provide additional insight into an insurance entity’s ability to underwrite and anticipate costs associated with claims. This accounting guidance is effective for the 2016 annual reporting period and interim periods thereafter and should be applied retrospectively. The Company is assessing the impact the implementation of this standard will have on its consolidated financial statements.

3.Variable Interest Entity and Noncontrolling Interests

Variable interest entity

On March 20, 2014, the Company invested $100.0 million and acquired approximately 11% of Watford Holdings Ltd.’s common equity and a warrant to purchase additional common equity. Watford Holdings Ltd. is the parent of Watford Re Ltd., a multi-line Bermuda reinsurance company (together with Watford Holdings Ltd., “Watford Re”). Watford Re is considered a variable interest entity (“VIE”) and the Company concluded that it is the primary beneficiary of Watford Re. As such, the results of Watford Re are included in the Company’s consolidated financial statements.

The Company concluded that Watford Re represents a separate operating segment and provides the income statement and total investable assets, total assets and total liabilities of Watford Re within Note 5. At June 30, 2015, Watford Re’s liabilities included unearned premiums of $247.6 million and reserves for losses and loss adjustment expenses of $173.2 million, some of which is related to transactions with the Company. For the six months ended June 30, 2015, Watford Re generated $137.8 million of cash provided by operating activities and $40.3 million of cash provided by financing activities, partially offset by $134.9 million of cash used for investing activities.

Because Watford Re is an independent company, the assets of Watford Re can be used only to settle obligations of Watford Re and Watford Re is solely responsible for its own liabilities and commitments. The Company’s financial exposure to Watford Re is limited to its investment in Watford Re’s common shares and counterparty credit risk (mitigated by collateral) arising from the reinsurance transactions.

9

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Non-redeemable noncontrolling interests

The Company accounts for the portion of Watford Re’s common equity attributable to third party investors in the shareholders’ equity section of its consolidated balance sheets. The noncontrolling ownership in Watford Re’s common shares was approximately 89% at June 30, 2015. The portion of Watford Re’s income or loss attributable to third party investors is recorded in the consolidated statements of income in ‘amounts attributable to noncontrolling interests.’ The following table sets forth activity in the non-redeemable noncontrolling interests:

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2015		2014			2015		2014
Balance, beginning of period	$	789,594	$	793,496		$	769,081	$	—
Sale of shares to noncontrolling interests	—		—			—		796,903
Amounts attributable to noncontrolling interests	5,286		(1,156		)	25,799		(4,563		)
Balance, end of period	$	794,880	$	792,340		$	794,880	$	792,340

Redeemable noncontrolling interests

The Company accounts for redeemable noncontrolling interests in the mezzanine section of its consolidated balance sheets in accordance with applicable accounting guidance. Such redeemable noncontrolling interests relate to the 9,065,200 cumulative redeemable preference shares (“Watford Preference Shares”) issued in late March 2014 with a par value of $0.01 per share and a liquidation preference of $25.00 per share. Preferred dividends, including the accretion of the discount and issuance costs, are included in ‘amounts attributable to noncontrolling interests’ in the Company’s consolidated statements of income. The following table sets forth activity in the redeemable non-controlling interests:

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2015			2014		2015			2014
Balance, beginning of period	$	219,604		$	219,234	$	219,512		$	—
Sale of shares to noncontrolling interests	—			—		—			219,233
Shares acquired by the Company (1)	(14,700		)	—		(14,700		)	—
Accretion of preference share issuance costs	92			92		184			93
Balance, end of period	$	204,996		$	219,326	$	204,996		$	219,326

_________________________________________________

(1) During the 2015 second quarter, the Company acquired Gulf Re, which owns 600,000 Watford Preference Shares. Such shares, net of a discount, along with related dividends and accretion of the discount, are eliminated in consolidation.

The portion of Watford Re’s income or loss attributable to third party investors is recorded in the consolidated statements of income in ‘amounts attributable to noncontrolling interests’ as summarized in the table below:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015			2014
Amounts attributable to non-redeemable noncontrolling interests	$	(5,286	)	$	1,156		$	(25,799	)	$	4,563
Dividends attributable to redeemable noncontrolling interests	(4,743		)	(4,857		)	(9,651		)	(4,909		)
Amounts attributable to noncontrolling interests	$	(10,029	)	$	(3,701	)	$	(35,450	)	$	(346	)

10

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4.    Earnings Per Common Share

The following table sets forth the computation of basic and diluted earnings per common share:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015			2014
Numerator:
Net income	$	125,819		$	211,717		$	434,576		$	390,862
Amounts attributable to noncontrolling interests	(10,029		)	(3,701		)	(35,450		)	(346		)
Net income available to Arch	115,790			208,016			399,126			390,516
Preferred dividends	(5,485		)	(5,485		)	(10,969		)	(10,969		)
Net income available to Arch common shareholders	$	110,305		$	202,531		$	388,157		$	379,547
Denominator:
Weighted average common shares outstanding — basic	121,719,214			132,650,634			122,957,384			132,256,462
Effect of dilutive common share equivalents:
Nonvested restricted shares	1,258,741			1,144,621			1,334,633			1,236,408
Stock options (1)	2,907,465			3,094,689			2,864,696			3,224,019
Weighted average common shares and common share equivalents outstanding — diluted	125,885,420			136,889,944			127,156,713			136,716,889
Earnings per common share:
Basic	$	0.91		$	1.53		$	3.16		$	2.87
Diluted	$	0.88		$	1.48		$	3.05		$	2.78

_________________________________________________

(1) Certain stock options were not included in the computation of diluted earnings per share where the exercise price of the stock options exceeded the average market price and would have been anti-dilutive or where, when applying the treasury stock method to in-the-money options, the sum of the proceeds, including unrecognized compensation, exceeded the average market price and would have been anti-dilutive. For the 2015 second quarter and 2014 second quarter, the number of stock options excluded were 1,009,113 and 978,237, respectively. For the six months ended June 30, 2015 and 2014, the number of stock options excluded were 1,187,162 and 1,318,662, respectively.

11

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

5.    Segment Information

The Company classifies its businesses into three underwriting segments — insurance, reinsurance and mortgage — and two other operating segments — ‘other’ and corporate (non-underwriting). The Company determined its reportable segments using the management approach described in accounting guidance regarding disclosures about segments of an enterprise and related information. The accounting policies of the segments are the same as those used for the preparation of the Company’s consolidated financial statements. Intersegment business is allocated to the segment accountable for the underwriting results.

The Company’s insurance, reinsurance and mortgage segments each have managers who are responsible for the overall profitability of their respective segments and who are directly accountable to the Company’s chief operating decision makers, the Chairman, President and Chief Executive Officer of ACGL and the Chief Financial Officer of ACGL. The chief operating decision makers do not assess performance, measure return on equity or make resource allocation decisions on a line of business basis. Management measures segment performance for its three underwriting segments based on underwriting income or loss. The Company does not manage its assets by underwriting segment, with the exception of goodwill and intangible assets, and, accordingly, investment income is not allocated to each underwriting segment.

The insurance segment consists of the Company’s insurance underwriting units which offer specialty product lines on a worldwide basis. Product lines include: construction and national accounts; excess and surplus casualty; lenders products; professional lines; programs; property, energy, marine and aviation; travel, accident and health; and other (consisting of alternative markets, excess workers' compensation and surety business).

The reinsurance segment consists of the Company’s reinsurance underwriting units which offer specialty product lines on a worldwide basis. Product lines include: casualty; marine and aviation; other specialty; property catastrophe; property excluding property catastrophe (losses on a single risk, both excess of loss and pro rata); and other (consisting of life reinsurance, casualty clash and other).

The mortgage segment consists of the Company’s mortgage insurance and reinsurance business and includes the results of Arch Mortgage Insurance Company (“Arch MI U.S.”). Arch MI U.S. is approved as an eligible mortgage insurer by Federal National Mortgage Association (“Fannie Mae”) and Federal Home Loan Mortgage Corporation (“Freddie Mac”), each a government sponsored enterprise, or “GSE.” Arch MI U.S. provides mortgage insurance to banks, credit unions and other lenders nationwide. The mortgage segment also provides reinsurance on a global basis, direct mortgage insurance in Europe and various risk-sharing products to government agencies and mortgage lenders.

The corporate (non-underwriting) segment results include net investment income, other income (loss), other expenses incurred by the Company, interest expense, net realized gains or losses, net impairment losses included in earnings, equity in net income or loss of investment funds accounted for using the equity method, net foreign exchange gains or losses, income taxes and items related to the Company’s non-cumulative preferred shares. Such amounts exclude the results of the ‘other’ segment.

The ‘other’ segment includes the results of Watford Re (see Note 3). Watford Re has its own management and board of directors that is responsible for the overall profitability of the ‘other’ segment. For the ‘other’ segment, performance is measured based on net income or loss.

12

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following tables summarize the Company’s underwriting income or loss by segment, together with a reconciliation of underwriting income or loss to net income available to common shareholders:

	Three Months Ended
	June 30, 2015
	Insurance			Reinsurance			Mortgage			Sub-Total			Other			Total
Gross premiums written (1)	$	744,810		$	342,101		$	68,572		$	1,155,253		$	127,954		$	1,199,209
Premiums ceded	(235,743		)	(89,446		)	(6,902		)	(331,861		)	(7,766		)	(255,629		)
Net premiums written	509,067			252,655			61,670			823,392			120,188			943,580
Change in unearned premiums	758			21,310			(9,211		)	12,857			(12,999		)	(142		)
Net premiums earned	509,825			273,965			52,459			836,249			107,189			943,438
Other underwriting income	521			2,658			3,686			6,865			852			7,717
Losses and loss adjustment expenses	(320,926		)	(111,183		)	(9,639		)	(441,748		)	(77,678		)	(519,426		)
Acquisition expenses, net	(76,723		)	(58,360		)	(10,200		)	(145,283		)	(30,142		)	(175,425		)
Other operating expenses	(89,054		)	(39,007		)	(19,679		)	(147,740		)	(3,450		)	(151,190		)
Underwriting income (loss)	$	23,643		$	68,073		$	16,627		108,343			(3,229		)	105,114
Net investment income										67,171			19,792			86,963
Net realized gains (losses)										(26,860		)	(8,865		)	(35,725		)
Net impairment losses recognized in earnings										(1,113		)	—			(1,113		)
Equity in net income of investment funds accounted for using the equity method										16,167			—			16,167
Other income (loss)										2,205			—			2,205
Other expenses										(17,418		)	—			(17,418		)
Interest expense										(4,011		)	—			(4,011		)
Net foreign exchange gains (losses)										(22,571		)	2,988			(19,583		)
Income (loss) before income taxes										121,913			10,686			132,599
Income tax expense										(6,780		)	—			(6,780		)
Net income (loss)										115,133			10,686			125,819
Dividends attributable to redeemable noncontrolling interests										—			(4,743		)	(4,743		)
Amounts attributable to noncontrolling interests										—			(5,286		)	(5,286		)
Net income (loss) available to Arch										115,133			657			115,790
Preferred dividends										(5,485		)	—			(5,485		)
Net income (loss) available to Arch common shareholders										$	109,648		$	657		$	110,305
Underwriting Ratios
Loss ratio	62.9		%	40.6		%	18.4		%	52.8		%	72.5		%	55.1		%
Acquisition expense ratio	15.0		%	21.3		%	19.4		%	17.4		%	28.1		%	18.6		%
Other operating expense ratio	17.5		%	14.2		%	37.5		%	17.7		%	3.2		%	16.0		%
Combined ratio	95.4		%	76.1		%	75.3		%	87.9		%	103.8		%	89.7		%
Goodwill and intangible assets	$	30,968		$	2,420		$	69,130		$	102,518		$	—		$	102,518
Total investable assets										$	14,513,554		$	1,340,574		$	15,854,128
Total assets										21,323,611			1,761,314			23,084,925
Total liabilities										15,299,256			648,278			15,947,534

_________________________________________________

(1) Certain amounts included in the gross premiums written of each segment are related to intersegment transactions. Accordingly, the sum of gross premiums written for each segment does not agree to the total gross premiums written as shown in the table above due to the elimination of intersegment transactions in the total.

13

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

	Three Months Ended
	June 30, 2014
	Insurance			Reinsurance			Mortgage			Sub-Total			Other			Total
Gross premiums written (1)	$	852,231		$	349,841		$	55,476		$	1,256,934		$	54,562		$	1,271,761
Premiums ceded	(273,349		)	(58,994		)	(5,079		)	(336,808		)	(2,760		)	(299,833		)
Net premiums written	578,882			290,847			50,397			920,126			51,802			971,928
Change in unearned premiums	(71,170		)	44,780			436			(25,954		)	(38,822		)	(64,776		)
Net premiums earned	507,712			335,627			50,833			894,172			12,980			907,152
Other underwriting income	514			303			1,216			2,033			—			2,033
Losses and loss adjustment expenses	(311,526		)	(150,325		)	(15,473		)	(477,324		)	(8,194		)	(485,518		)
Acquisition expenses, net	(76,449		)	(66,035		)	(11,481		)	(153,965		)	(4,193		)	(158,158		)
Other operating expenses	(85,829		)	(37,666		)	(16,288		)	(139,783		)	(1,635		)	(141,418		)
Underwriting income (loss)	$	34,422		$	81,904		$	8,807		125,133			(1,042		)	124,091
Net investment income										72,458			532			72,990
Net realized gains (losses)										50,966			3,178			54,144
Net impairment losses recognized in earnings										(14,749		)	—			(14,749		)
Equity in net income of investment funds accounted for using the equity method										9,240			—			9,240
Other income (loss)										4,850			—			4,850
Other expenses										(15,279		)	347			(14,932		)
Interest expense										(14,334		)	—			(14,334		)
Net foreign exchange gains (losses)										(2,764		)	470			(2,294		)
Income (loss) before income taxes										215,521			3,485			219,006
Income tax expense										(7,289		)	—			(7,289		)
Net income (loss)										208,232			3,485			211,717
Dividends attributable to redeemable noncontrolling interests										—			(4,857		)	(4,857		)
Amounts attributable to noncontrolling interests										—			1,156			1,156
Net income (loss) available to Arch										208,232			(216		)	208,016
Preferred dividends										(5,485		)	—			(5,485		)
Net income (loss) available to Arch common shareholders										$	202,747		$	(216	)	$	202,531
Underwriting Ratios
Loss ratio	61.4		%	44.8		%	30.4		%	53.4		%	63.1		%	53.5		%
Acquisition expense ratio	15.1		%	19.7		%	22.6		%	17.2		%	32.3		%	17.4		%
Other operating expense ratio	16.9		%	11.2		%	32.0		%	15.6		%	12.6		%	15.6		%
Combined ratio	93.4		%	75.7		%	85.0		%	86.2		%	108.0		%	86.5		%
Goodwill and intangible assets	$	24,498		$	4,942		$	89,281		$	118,721		$	—		$	118,721
Total investable assets										$	14,688,808		$	1,114,719		$	15,803,527
Total assets										21,204,129			1,363,318			22,567,447
Total liabilities										15,072,875			253,507			15,326,382

_________________________________________________

(1) Certain amounts included in the gross premiums written of each segment are related to intersegment transactions. Accordingly, the sum of gross premiums written for each segment does not agree to the total gross premiums written as shown in the table above due to the elimination of intersegment transactions in the total.

14

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

	Six Months Ended
	June 30, 2015
	Insurance			Reinsurance			Mortgage			Sub-Total			Other			Total
Gross premiums written (1)	$	1,510,963		$	827,213		$	129,113		$	2,466,931		$	256,587		$	2,541,231
Premiums ceded	(459,893		)	(226,015		)	(15,572		)	(701,122		)	(11,821		)	(530,656		)
Net premiums written	1,051,070			601,198			113,541			1,765,809			244,766			2,010,575
Change in unearned premiums	(33,331		)	(47,516		)	(10,715		)	(91,562		)	(65,311		)	(156,873		)
Net premiums earned	1,017,739			553,682			102,826			1,674,247			179,455			1,853,702
Other underwriting income	948			4,087			11,404			16,439			2,814			19,253
Losses and loss adjustment expenses	(638,822		)	(223,715		)	(23,448		)	(885,985		)	(127,157		)	(1,013,142		)
Acquisition expenses, net	(151,801		)	(114,964		)	(20,618		)	(287,383		)	(51,118		)	(338,501		)
Other operating expenses	(177,173		)	(77,051		)	(40,048		)	(294,272		)	(5,455		)	(299,727		)
Underwriting income (loss)	$	50,891		$	142,039		$	30,116		223,046			(1,461		)	221,585
Net investment income										137,459			28,498			165,957
Net realized gains (losses)										38,649			8,974			47,623
Net impairment losses recognized in earnings										(6,912		)	—			(6,912		)
Equity in net income of investment funds accounted for using the equity method										22,056			—			22,056
Other income (loss)										317			—			317
Other expenses										(26,763		)	—			(26,763		)
Interest expense										(16,747		)	—			(16,747		)
Net foreign exchange gains (losses)										44,282			2,636			46,918
Income (loss) before income taxes										415,387			38,647			454,034
Income tax expense										(19,458		)	—			(19,458		)
Net income (loss)										395,929			38,647			434,576
Dividends attributable to redeemable noncontrolling interests										—			(9,651		)	(9,651		)
Amounts attributable to noncontrolling interests										—			(25,799		)	(25,799		)
Net income (loss) available to Arch										395,929			3,197			399,126
Preferred dividends										(10,969		)	—			(10,969		)
Net income (loss) available to Arch common shareholders										$	384,960		$	3,197		$	388,157
Underwriting Ratios
Loss ratio	62.8		%	40.4		%	22.8		%	52.9		%	70.9		%	54.7		%
Acquisition expense ratio	14.9		%	20.8		%	20.1		%	17.2		%	28.5		%	18.3		%
Other operating expense ratio	17.4		%	13.9		%	38.9		%	17.6		%	3.0		%	16.2		%
Combined ratio	95.1		%	75.1		%	81.8		%	87.7		%	102.4		%	89.2		%

_________________________________________________

(1) Certain amounts included in the gross premiums written of each segment are related to intersegment transactions. Accordingly, the sum of gross premiums written for each segment does not agree to the total gross premiums written as shown in the table above due to the elimination of intersegment transactions in the total.

15

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

	Six Months Ended
	June 30, 2014
	Insurance			Reinsurance			Mortgage			Sub-Total			Other			Total
Gross premiums written (1)	$	1,582,877		$	866,894		$	103,383		$	2,552,070		$	86,756		$	2,566,897
Premiums ceded	(458,393		)	(132,121		)	(9,718		)	(599,148		)	(2,760		)	(529,979		)
Net premiums written	1,124,484			734,773			93,665			1,952,922			83,996			2,036,918
Change in unearned premiums	(139,271		)	(57,798		)	(4,067		)	(201,136		)	(68,850		)	(269,986		)
Net premiums earned	985,213			676,975			89,598			1,751,786			15,146			1,766,932
Other underwriting income	1,014			619			1,982			3,615			—			3,615
Losses and loss adjustment expenses	(598,296		)	(289,961		)	(23,951		)	(912,208		)	(9,550		)	(921,758		)
Acquisition expenses, net	(153,381		)	(139,468		)	(20,635		)	(313,484		)	(5,016		)	(318,500		)
Other operating expenses	(166,973		)	(73,861		)	(30,164		)	(270,998		)	(2,744		)	(273,742		)
Underwriting income (loss)	$	67,577		$	174,304		$	16,830		258,711			(2,164		)	256,547
Net investment income										139,451			533			139,984
Net realized gains (losses)										70,663			3,178			73,841
Net impairment losses recognized in earnings										(17,720		)	—			(17,720		)
Equity in net income of investment funds accounted for using the equity method										12,493			—			12,493
Other income (loss)										2,746			—			2,746
Other expenses										(26,078		)	(2,329		)	(28,407		)
Interest expense										(28,738		)	—			(28,738		)
Net foreign exchange gains (losses)										(9,420		)	563			(8,857		)
Income (loss) before income taxes										402,108			(219		)	401,889
Income tax expense										(11,027		)	—			(11,027		)
Net income (loss)										391,081			(219		)	390,862
Dividends attributable to redeemable noncontrolling interests										—			(4,909		)	(4,909		)
Amounts attributable to noncontrolling interests										—			4,563			4,563
Net income (loss) available to Arch										391,081			(565		)	390,516
Preferred dividends										(10,969		)	—			(10,969		)
Net income (loss) available to Arch common shareholders										$	380,112		$	(565	)	$	379,547
Underwriting Ratios
Loss ratio	60.7		%	42.8		%	26.7		%	52.1		%	63.1		%	52.2		%
Acquisition expense ratio	15.6		%	20.6		%	23.0		%	17.9		%	33.1		%	18.0		%
Other operating expense ratio	16.9		%	10.9		%	33.7		%	15.5		%	18.1		%	15.5		%
Combined ratio	93.2		%	74.3		%	83.4		%	85.5		%	114.3		%	85.7		%

_________________________________________________

(1) Certain amounts included in the gross premiums written of each segment are related to intersegment transactions. Accordingly, the sum of gross premiums written for each segment does not agree to the total gross premiums written as shown in the table above due to the elimination of intersegment transactions in the total.

16

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

6.    Investment Information

At June 30, 2015, total investable assets of $15.85 billion included $14.51 billion managed by the Company and $1.34 billion attributable to Watford Re.

Available For Sale Investments

The following table summarizes the fair value and cost or amortized cost of the Company’s investments classified as available for sale:

	Estimated Fair Value		Gross Unrealized Gains		Gross Unrealized Losses			Cost or Amortized Cost		OTTI Unrealized Losses (2)
June 30, 2015
Fixed maturities (1):
Corporate bonds	$	2,833,849	$	26,401	$	(51,717	)	$	2,859,165	$	(681	)
Mortgage backed securities	837,680		12,315		(4,231		)	829,596		(3,564		)
Municipal bonds	1,760,384		19,601		(9,004		)	1,749,787		—
Commercial mortgage backed securities	832,159		6,760		(4,922		)	830,321		—
U.S. government and government agencies	1,899,868		8,463		(3,720		)	1,895,125		—
Non-U.S. government securities	786,276		10,343		(32,720		)	808,653		—
Asset backed securities	1,351,356		7,324		(3,364		)	1,347,396		(22		)
Total	10,301,572		91,207		(109,678		)	10,320,043		(4,267		)
Equity securities	701,623		105,174		(18,606		)	615,055		—
Other investments	377,677		46,166		(1,927		)	333,438		—
Short-term investments	875,727		55		(2,767		)	878,439		—
Total	$	12,256,599	$	242,602	$	(132,978	)	$	12,146,975	$	(4,267	)
December 31, 2014
Fixed maturities (1):
Corporate bonds	$	3,108,513	$	37,928	$	(38,974	)	$	3,109,559	$	(317	)
Mortgage backed securities	943,343		18,843		(3,842		)	928,342		(3,307		)
Municipal bonds	1,494,122		31,227		(1,044		)	1,463,939		—
Commercial mortgage backed securities	1,114,528		14,594		(3,822		)	1,103,756		—
U.S. government and government agencies	1,447,972		8,345		(1,760		)	1,441,387		—
Non-U.S. government securities	1,015,153		21,311		(37,203		)	1,031,045		—
Asset backed securities	1,677,941		8,425		(6,089		)	1,675,605		(22		)
Total	10,801,572		140,673		(92,734		)	10,753,633		(3,646		)
Equity securities	658,182		109,012		(13,364		)	562,534		—
Other investments	296,224		31,839		(362		)	264,747		—
Short-term investments	797,226		738		(5,270		)	801,758		—
Total	$	12,553,204	$	282,262	$	(111,730	)	$	12,382,672	$	(3,646	)

_________________________________________________

(1) In securities lending transactions, the Company receives collateral in excess of the fair value of the securities pledged. For purposes of this table, the Company has excluded the collateral received under securities lending, at fair value and included the securities pledged under securities lending, at fair value. See “—Securities Lending Agreements.”

(2) Represents the total other-than-temporary impairments (“OTTI”) recognized in accumulated other comprehensive income (“AOCI”). It does not include the change in fair value subsequent to the impairment measurement date. At June 30, 2015, the net unrealized gain related to securities for which a non-credit OTTI was recognized in AOCI was $0.3 million, compared to a net unrealized gain of $0.9 million at December 31, 2014.

17

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table summarizes, for all available for sale securities in an unrealized loss position, the fair value and gross unrealized loss by length of time the security has been in a continual unrealized loss position:

	Less than 12 Months					12 Months or More					Total
	Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses
June 30, 2015
Fixed maturities (1):
Corporate bonds	$	1,659,276	$	(40,616	)	$	92,244	$	(11,101	)	$	1,751,520	$	(51,717	)
Mortgage backed securities	437,043		(3,574		)	45,082		(657		)	482,125		(4,231		)
Municipal bonds	784,691		(8,562		)	3,530		(442		)	788,221		(9,004		)
Commercial mortgage backed securities	374,338		(4,912		)	2,893		(10		)	377,231		(4,922		)
U.S. government and government agencies	426,224		(3,720		)	—		—			426,224		(3,720		)
Non-U.S. government securities	431,360		(16,841		)	77,314		(15,879		)	508,674		(32,720		)
Asset backed securities	281,650		(2,161		)	130,987		(1,203		)	412,637		(3,364		)
Total	4,394,582		(80,386		)	352,050		(29,292		)	4,746,632		(109,678		)
Equity securities	286,325		(18,606		)	—		—			286,325		(18,606		)
Other investments	89,863		(1,927		)	—		—			89,863		(1,927		)
Short-term investments	60,287		(2,767		)	—		—			60,287		(2,767		)
Total	$	4,831,057	$	(103,686	)	$	352,050	$	(29,292	)	$	5,183,107	$	(132,978	)
December 31, 2014
Fixed maturities (1):
Corporate bonds	$	1,309,637	$	(32,903	)	$	148,963	$	(6,071	)	$	1,458,600	$	(38,974	)
Mortgage backed securities	293,624		(1,476		)	59,107		(2,366		)	352,731		(3,842		)
Municipal bonds	210,614		(588		)	13,643		(456		)	224,257		(1,044		)
Commercial mortgage backed securities	232,147		(770		)	125,894		(3,052		)	358,041		(3,822		)
U.S. government and government agencies	618,381		(1,626		)	3,438		(134		)	621,819		(1,760		)
Non-U.S. government securities	510,766		(31,172		)	46,910		(6,031		)	557,676		(37,203		)
Asset backed securities	612,950		(2,486		)	243,452		(3,603		)	856,402		(6,089		)
Total	3,788,119		(71,021		)	641,407		(21,713		)	4,429,526		(92,734		)
Equity securities	181,002		(13,364		)	—		—			181,002		(13,364		)
Other investments	59,638		(362		)	—		—			59,638		(362		)
Short-term investments	79,271		(5,270		)	—		—			79,271		(5,270		)
Total	$	4,108,030	$	(90,017	)	$	641,407	$	(21,713	)	$	4,749,437	$	(111,730	)

_________________________________________________

(1) In securities lending transactions, the Company receives collateral in excess of the fair value of the securities pledged. For purposes of this table, the Company has excluded the collateral received under securities lending, at fair value and included the securities pledged under securities lending, at fair value. See “—Securities Lending Agreements.”

At June 30, 2015, on a lot level basis, approximately 2,620 security lots out of a total of approximately 5,580 security lots were in an unrealized loss position and the largest single unrealized loss from a single lot in the Company’s fixed maturity portfolio was $2.9 million. At December 31, 2014, on a lot level basis, approximately 1,900 security lots out of a total of approximately 4,790 security lots were in an unrealized loss position and the largest single unrealized loss from a single lot in the Company’s fixed maturity portfolio was $2.9 million.

18

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The contractual maturities of the Company’s fixed maturities are shown in the following table. Expected maturities, which are management’s best estimates, will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	June 30, 2015				December 31, 2014
Maturity	Estimated Fair Value		Amortized Cost		Estimated Fair Value		Amortized Cost
Due in one year or less	$	369,356	$	374,710	$	235,930	$	233,794
Due after one year through five years	4,101,484		4,106,002		4,074,562		4,077,408
Due after five years through 10 years	2,468,013		2,487,840		2,475,726		2,461,356
Due after 10 years	341,524		344,178		279,542		273,372
	7,280,377		7,312,730		7,065,760		7,045,930
Mortgage backed securities	837,680		829,596		943,343		928,342
Commercial mortgage backed securities	832,159		830,321		1,114,528		1,103,756
Asset backed securities	1,351,356		1,347,396		1,677,941		1,675,605
Total (1)	$	10,301,572	$	10,320,043	$	10,801,572	$	10,753,633

_________________________________________________

(1) In securities lending transactions, the Company receives collateral in excess of the fair value of the securities pledged. For purposes of this table, the Company has excluded the collateral received under securities lending, at fair value and included the securities pledged under securities lending, at fair value. See “—Securities Lending Agreements.”

Securities Lending Agreements

From time to time, the Company enters into securities lending agreements with financial institutions to enhance investment income. The Company loans certain of its securities to third parties, primarily major brokerage firms, for short periods of time through a lending agent. The Company maintains legal control over the securities it lends, retains the earnings and cash flows associated with the loaned securities and receives a fee from the borrower for the temporary use of the securities. An indemnification agreement with the lending agent protects the Company in the event a borrower becomes insolvent or fails to return any of the securities on loan to the Company.

The Company receives collateral in the form of cash or securities. Cash collateral primarily consists of short-term investments. At June 30, 2015, the fair value of the cash collateral received on securities lending was $62.6 million, which included $5.7 million that was reinvested in sub-prime mortgage backed securities, and the fair value of security collateral received was $315.1 million. At December 31, 2014, the fair value of the cash collateral received on securities lending was $44.3 million, which included $5.8 million that was reinvested in sub-prime mortgage backed securities, and the fair value of security collateral received was nil.

The Company’s securities lending transactions were accounted for as secured borrowings with significant investment categories as follows:

	June 30, 2015
	Remaining Contractual Maturity of the Agreements
Securities Lending Transactions	Overnight and Continuous		Less than 30 Days		30-90 Days		90 Days or More		Total
U.S. government and government agencies	$	335,233	$	—	$	—	$	—	$	335,233
Corporate bonds	44,139		—		—		—		44,139
Equity securities	4,593		—		—		—		4,593
Total	$	383,965	$	—	$	—	$	—	$	383,965
Gross amount of recognized liabilities for securities lending in offsetting disclosure in Note 8									$	—
Amounts related to securities lending not included in offsetting disclosure in Note 8									$	383,965

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ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Other Investments

The following table summarizes the Company’s other investments, including available for sale and fair value option components:

	June 30, 2015		December 31, 2014
Available for sale:
Asian and emerging markets	$	287,666	$	236,586
Investment grade fixed income	58,829		59,638
Credit related funds	13,773		—
Other	17,409		—
Total available for sale	377,677		296,224
Fair value option:
Term loan investments (par value: $1,077,945 and $1,094,337)	1,061,696		1,073,649
Mezzanine debt funds	115,019		121,341
Credit related funds	138,070		114,436
Investment grade fixed income	60,383		69,108
Asian and emerging markets	26,494		25,800
Other (1)	189,709		137,094
Total fair value option	1,591,371		1,541,428
Total	$	1,969,048	$	1,837,652

_________________________________________________

(1) Includes fund investments with strategies in mortgage servicing rights, transportation and infrastructure assets and other.

Certain of the Company’s other investments are in investment funds for which the Company has the option to redeem at agreed upon values as described in each investment fund’s subscription agreement. Depending on the terms of the various subscription agreements, investments in investment funds may be redeemed daily, monthly, quarterly or on other terms. Two common redemption restrictions which may impact the Company’s ability to redeem these investment funds are gates and lockups. A gate is a suspension of redemptions which may be implemented by the general partner or investment manager of the fund in order to defer, in whole or in part, the redemption request in the event the aggregate amount of redemption requests exceeds a predetermined percentage of the investment fund’s net assets which may otherwise hinder the general partner or investment manager’s ability to liquidate holdings in an orderly fashion in order to generate the cash necessary to fund extraordinarily large redemption payouts. A lockup period is the initial amount of time an investor is contractually required to hold the security before having the ability to redeem. If the investment funds are eligible to be redeemed, the time to redeem such fund can take weeks or months following the notification.

Fair Value Option

The following table summarizes the Company’s assets and liabilities which are accounted for using the fair value option:

	June 30, 2015		December 31, 2014
Fixed maturities	$	854,170	$	632,024
Other investments	1,591,371		1,541,428
Short-term investments	167,698		251,601
Equity securities	248		—
Investments accounted for using the fair value option	$	2,613,487	$	2,425,053

20

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Net Investment Income

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

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015			2014
Fixed maturities	$	71,275		$	65,869		$	139,871		$	128,318
Term loan investments	18,033			6,908			32,777			12,577
Equity securities (dividends)	2,578			3,271			5,257			6,192
Short-term investments	225			107			421			512
Other (1)	10,489			9,100			23,236			13,819
Gross investment income	102,600			85,255			201,562			161,418
Investment expenses	(15,637		)	(12,265		)	(35,605		)	(21,434		)
Net investment income	$	86,963		$	72,990		$	165,957		$	139,984

_________________________________________________

(1) Includes income distributions from investment funds and other items.

Net Realized Gains (Losses)

Net realized gains (losses) were as follows, excluding other-than-temporary impairment provisions:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015			2014
Available for sale securities:
Gross gains on investment sales	$	82,233		$	56,763		$	179,824		$	122,814
Gross losses on investment sales	(58,974		)	(33,028		)	(114,134		)	(73,041		)
Change in fair value of assets and liabilities accounted for using the fair value option:
Fixed maturities	(5,191		)	10,984			(8,493		)	9,341
Other investments	785			17,985			7,072			28,761
Equity securities	(69		)	—			(71		)	—
Short-term investments	(4,375		)	—			1,471			—
Derivative instruments (1)	(41,496		)	12,402			(4,820		)	(366		)
Other (2)	(8,638		)	(10,962		)	(13,226		)	(13,668		)
Net realized gains (losses)	$	(35,725	)	$	54,144		$	47,623		$	73,841

_________________________________________________

(1) See Note 8 for information on the Company’s derivative instruments.

(2) Includes the re-measurement of contingent consideration liability amounts.

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ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Other-Than-Temporary Impairments

The Company performs quarterly reviews of its available for sale investments in order to determine whether declines in fair value below the amortized cost basis were considered other-than-temporary in accordance with applicable guidance. The following table details the net impairment losses recognized in earnings by asset class:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015			2014
Fixed maturities:
Mortgage backed securities	$	(326	)	$	—		$	(1,398	)	$	—
Corporate bonds	(10		)	(664		)	(1,986		)	(664		)
Asset backed securities	—			(5		)	—			(11		)
Total	(336		)	(669		)	(3,384		)	(675		)
Short-term investments	—			—			(2,341		)	—
Equity securities	(124		)	(278		)	(253		)	(278		)
Other investments	(653		)	(13,802		)	(934		)	(16,767		)
Net impairment losses recognized in earnings	$	(1,113	)	$	(14,749	)	$	(6,912	)	$	(17,720	)

A description of the methodology and significant inputs used to measure the amount of net impairment losses recognized in earnings 2015 second quarter is as follows:

• Other investments — the Company utilized information received from fund managers and positive and negative evidence, including the business prospects, recent events, industry and market data and other factors. Net impairment losses for the 2015 second quarter related to a reduction in the carrying value of one fund investment;

• Mortgage backed securities — the Company utilized underlying data provided by asset managers, cash flow projections and additional information from credit agencies in order to determine an expected recovery value for each security. The analysis includes expected cash flow projections under base case and stress case scenarios which modify the expected default expectations and loss severities and slow down prepayment assumptions. The significant inputs in the models include the expected default rates, delinquency rates and foreclosure costs. Net impairment losses for the 2015 second quarter primarily resulted from small adjustments in a number of holdings. The amortized cost basis of the mortgage backed securities were adjusted down, if required, to the expected recovery value calculated in the OTTI review process;

• Equity securities – the Company utilized information received from asset managers on common stocks, including the business prospects, recent events, industry and market data and other factors. For certain equities which were in an unrealized loss position and where the Company determined that it did not have the intent or ability to hold such securities for a reasonable period of time by which the fair value of the securities would increase and the Company would recover its cost, the cost basis of such securities was adjusted down accordingly.

The Company believes that the $4.3 million of OTTI included in accumulated other comprehensive income at June 30, 2015 on the securities which were considered by the Company to be impaired was due to market and sector-related factors (i.e., not credit losses). At June 30, 2015, the Company did not intend to sell these securities, or any other securities which were in an unrealized loss position, and determined that it is more likely than not that the Company will not be required to sell such securities before recovery of their cost basis.

22

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table provides a roll forward of the amount related to credit losses recognized in earnings for which a portion of an OTTI was recognized in accumulated other comprehensive income:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015			2014
Balance at start of period	$	24,344		$	47,256		$	20,196		$	60,062
Credit loss impairments recognized on securities not previously impaired	281			—			4,770			—
Credit loss impairments recognized on securities previously impaired	55			5			134			11
Reductions for increases in cash flows expected to be collected that are recognized over the remaining life of the security	—			—			—			—
Reductions for securities sold during the period	(3,774		)	(25,820		)	(4,194		)	(38,632		)
Balance at end of period	$	20,906		$	21,441		$	20,906		$	21,441

Restricted Assets

The Company is required to maintain assets on deposit, which primarily consist of fixed maturities, with various regulatory authorities to support its insurance and reinsurance operations. The Company’s insurance and reinsurance subsidiaries maintain assets in trust accounts as collateral for insurance and reinsurance transactions with affiliated companies and also have investments in segregated portfolios primarily to provide collateral or guarantees for letters of credit to third parties. See Note 9 for further details. The following table details the value of the Company’s restricted assets:

	June 30, 2015		December 31, 2014
Assets used for collateral or guarantees:
Affiliated transactions	$	3,651,244	$	4,138,527
Third party agreements	1,040,156		970,120
Deposits with U.S. regulatory authorities	406,777		337,981
Trust funds	60,864		72,461
Total restricted assets	$	5,159,041	$	5,519,089

23

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

7.    Fair Value

Accounting guidance regarding fair value measurements addresses how companies should measure fair value when they are required to use a fair value measure for recognition or disclosure purposes under GAAP and provides a common definition of fair value to be used throughout GAAP. It defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly fashion between market participants at the measurement date. In addition, it establishes a three-level valuation hierarchy for the disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The level in the hierarchy within which a given fair value measurement falls is determined based on the lowest level input that is significant to the measurement (Level 1 being the highest priority and Level 3 being the lowest priority).

The levels in the hierarchy are defined as follows:

Level 1: Inputs to the valuation methodology are observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets

Level 2: Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument

Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement

Following is a description of the valuation methodologies used for securities measured at fair value, as well as the general classification of such securities pursuant to the valuation hierarchy. The Company reviews its securities measured at fair value and discusses the proper classification of such investments with investment advisers and others.

The Company determines the existence of an active market based on its judgment as to whether transactions for the financial instrument occur in such market with sufficient frequency and volume to provide reliable pricing information. The independent pricing sources obtain market quotations and actual transaction prices for securities that have quoted prices in active markets. The Company uses quoted values and other data provided by nationally recognized independent pricing sources as inputs into its process for determining fair values of its fixed maturity investments. To validate the techniques or models used by pricing sources, the Company's review process includes, but is not limited to: (i) quantitative analysis (e.g., comparing the quarterly return for each managed portfolio to its target benchmark, with significant differences identified and investigated); (ii) a review of the average number of prices obtained in the pricing process and the range of resulting fair values; (iii) initial and ongoing evaluation of methodologies used by outside parties to calculate fair value; (iv) a comparison of the fair value estimates to the Company’s knowledge of the current market; (v) a comparison of the pricing services' fair values to other pricing services' fair values for the same investments; and (vi) periodic back-testing, which includes randomly selecting purchased or sold securities and comparing the executed prices to the fair value estimates from the pricing service. A price source hierarchy was maintained in order to determine which price source would be used (i.e., a price obtained from a pricing service with more seniority in the hierarchy will be used over a less senior one in all cases). The hierarchy prioritizes pricing services based on availability and reliability and assigns the highest priority to index providers. Based on the above review, the Company will challenge any prices for a security or portfolio which are considered not to be representative of fair value. The Company did not adjust any of the prices obtained from the independent pricing sources at June 30, 2015.

In certain circumstances, when fair values are unavailable from these independent pricing sources, quotes are obtained directly from broker-dealers who are active in the corresponding markets. Such quotes are subject to the validation procedures noted above. Of the $14.97 billion of financial assets and liabilities measured at fair value at June 30, 2015, approximately $301.7 million, or 2.0%, were priced using non-binding broker-dealer quotes. Of the $15.06 billion of financial assets and liabilities measured at fair value at December 31, 2014, approximately $260.8 million, or 1.7%, were priced using non-binding broker-dealer quotes.

Fixed maturities. The Company uses the market approach valuation technique to estimate the fair value of its fixed maturity securities, when possible. The market approach includes obtaining prices from independent pricing services, such as index providers and pricing vendors, as well as to a lesser extent quotes from broker-dealers. The independent pricing sources obtain market quotations and actual transaction prices for securities that have quoted prices in active markets. Each source has its own proprietary method for determining the fair value of securities that are not actively traded. In general, these methods involve the use of “matrix pricing” in which the independent pricing source uses observable market inputs including, but not

24

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

limited to, investment yields, credit risks and spreads, benchmarking of like securities, broker-dealer quotes, reported trades and sector groupings to determine a reasonable fair value.

The following describes the significant inputs generally used to determine the fair value of the Company’s fixed maturity securities by asset class:

• U.S. government and government agencies — valuations provided by independent pricing services, with all prices provided through index providers and pricing vendors. The Company determined that all U.S. Treasuries would be classified as Level 1 securities due to observed levels of trading activity, the high number of strongly correlated pricing quotes received on U.S. Treasuries and other factors. The fair values of U.S. government agency securities are generally determined using the spread above the risk-free yield curve. As the yields for the risk-free yield curve and the spreads for these securities are observable market inputs, the fair values of U.S. government agency securities are classified within Level 2.

• Corporate bonds — valuations provided by independent pricing services, substantially all through index providers and pricing vendors with a small amount through broker-dealers. The fair values of these securities are generally determined using the spread above the risk-free yield curve. These spreads are generally obtained from the new issue market, secondary trading and from broker-dealers who trade in the relevant security market. As the significant inputs used in the pricing process for corporate bonds are observable market inputs, the fair value of these securities are classified within Level 2.

• Mortgage-backed securities — valuations provided by independent pricing services, substantially all through pricing vendors and index providers with a small amount through broker-dealers. The fair values of these securities are generally determined through the use of pricing models (including Option Adjusted Spread) which use spreads to determine the expected average life of the securities. These spreads are generally obtained from the new issue market, secondary trading and from broker-dealers who trade in the relevant security market. The pricing services also review prepayment speeds and other indicators, when applicable. As the significant inputs used in the pricing process for mortgage-backed securities are observable market inputs, the fair value of these securities are classified within Level 2.

• Municipal bonds — valuations provided by independent pricing services, with all prices provided through index providers and pricing vendors. The fair values of these securities are generally determined using spreads obtained from broker-dealers who trade in the relevant security market, trade prices and the new issue market. As the significant inputs used in the pricing process for municipal bonds are observable market inputs, the fair value of these securities are classified within Level 2.

• Commercial mortgage-backed securities — valuations provided by independent pricing services, substantially all through index providers and pricing vendors with a small amount through broker-dealers. The fair values of these securities are generally determined through the use of pricing models which use spreads to determine the appropriate average life of the securities. These spreads are generally obtained from the new issue market, secondary trading and from broker-dealers who trade in the relevant security market. The pricing services also review prepayment speeds and other indicators, when applicable. As the significant inputs used in the pricing process for commercial mortgage-backed securities are observable market inputs, the fair value of these securities are classified within Level 2.

• Non-U.S. government securities — valuations provided by independent pricing services, with all prices provided through index providers and pricing vendors. The fair values of these securities are generally based on international indices or valuation models which include daily observed yield curves, cross-currency basis index spreads and country credit spreads. As the significant inputs used in the pricing process for non-U.S. government securities are observable market inputs, the fair value of these securities are classified within Level 2.

• Asset-backed securities — valuations provided by independent pricing services, substantially all through index providers and pricing vendors with a small amount through broker-dealers. The fair values of these securities generally determined through the use of pricing models (including Option Adjusted Spread) which use spreads to determine the appropriate average life of the securities. These spreads are generally obtained from the new issue market, secondary trading and from broker-dealers who trade in the relevant security market. The pricing services also review prepayment speeds and other indicators, when applicable. As the significant inputs used in the pricing process for asset-backed securities are observable market inputs, the fair value of these securities are classified within Level 2.

25

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

During the 2015 second quarter, the Company transferred $44.6 million of U.S. government agency securities from Level 1 to Level 2 based on a review of the pricing of such securities, as described above.

Equity securities. The Company determined that exchange-traded equity securities would be included in Level 1 as their fair values are based on quoted market prices in active markets. Other equity securities are included in Level 2 of the valuation hierarchy.

Other investments. The Company determined that exchange-traded investments in mutual funds would be included in Level 1 as their fair values are based on quoted market prices in active markets. Other investments also include term loan investments for which fair values are estimated by using quoted prices of term loan investments with similar characteristics, pricing models or matrix pricing. Such investments are generally classified within Level 2. The fair values for certain of the Company’s other investments are determined using net asset values as advised by external fund managers. The net asset value is based on the fund manager’s valuation of the underlying holdings in accordance with the fund’s governing documents. In accordance with applicable accounting guidance, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy.

During the 2015 second quarter, the Company transferred $99.7 million of other investments from Level 2 to Level 1 based on a review of the pricing of such securities, as described above.

Derivative instruments. The Company’s futures contracts, foreign currency forward contracts, interest rate swaps and other derivatives trade in the over-the-counter derivative market. The Company uses the market approach valuation technique to estimate the fair value for these derivatives based on significant observable market inputs from third party pricing vendors, non-binding broker-dealer quotes and/or recent trading activity. As the significant inputs used in the pricing process for these derivative instruments are observable market inputs, the fair value of these securities are classified within Level 2.

Short-term investments. The Company determined that certain of its short-term investments held in highly liquid money market-type funds would be included in Level 1 as their fair values are based on quoted market prices in active markets. The fair values of other short-term investments are generally determined using the spread above the risk-free yield curve and are classified within Level 2.

Contingent consideration liability. The contingent consideration liability (included in ‘other liabilities’ in the consolidated balance sheets) resulted from the acquisition of CMG Mortgage Insurance Company and its affiliated mortgage insurance companies and is remeasured at fair value at each balance sheet date. Changes in fair value are recognized in ‘net realized gains (losses).’ To determine the fair value of the contingent consideration liability, the Company estimates future payments using an income approach based on modeled inputs which include a weighted average cost of capital. The Company determined that the contingent consideration liability would be included within Level 3.

26

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table presents the Company’s financial assets and liabilities measured at fair value by level at June 30, 2015:

				Estimated Fair Value Measurements Using:
	Estimated Fair Value			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets measured at fair value:
Available for sale securities:
Fixed maturities (1):
Corporate bonds	$	2,833,849		$	—	$	2,833,849		$	—
Mortgage backed securities	837,680			—		837,680			—
Municipal bonds	1,760,384			—		1,760,384			—
Commercial mortgage backed securities	832,159			—		832,159			—
U.S. government and government agencies	1,899,868			1,878,893		20,975			—
Non-U.S. government securities	786,276			—		786,276			—
Asset backed securities	1,351,356			—		1,293,856			57,500
Total	10,301,572			1,878,893		8,365,179			57,500
Equity securities	701,623			698,078		3,545			—
Short-term investments	875,727			870,738		4,989			—
Other investments	89,611			89,611		—			—
Other investments measured at net asset value (2)	288,066
Total other investments	377,677			89,611		—			—
Derivative instruments (3)	20,142			—		20,142			—
Fair value option:
Corporate bonds	682,569			—		682,569			—
Non-U.S. government bonds	89,168			—		89,168			—
Mortgage backed securities	58,565			—		58,565			—
Asset backed securities	23,868			—		23,868			—
Short-term investments	167,698			167,698		—			—
Equity securities	248			248		—			—
Other investments	1,158,567			96,871		1,061,696			—
Other investments measured at net asset value (2)	432,804
Total	2,613,487			264,817		1,915,866			—
Total assets measured at fair value	$	14,890,228		$	3,802,137	$	10,309,721		$	57,500
Liabilities measured at fair value:
Contingent consideration liability	$	(71,256	)	$	—	$	—		$	(71,256	)
Derivative instruments (3)	(11,731		)	—		(11,731		)	—
Total liabilities measured at fair value	$	(82,987	)	$	—	$	(11,731	)	$	(71,256	)

_________________________________________________

(1) In securities lending transactions, the Company receives collateral in excess of the fair value of the securities pledged. For purposes of this table, the Company has excluded the collateral received under securities lending, at fair value and included the securities pledged under securities lending, at fair value. See Note 6, “Investment Information—Securities Lending Agreements.”

(2) In accordance with applicable accounting guidance, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets.

(3) See Note 8, “Derivative Instruments.”

27

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table presents the Company’s financial assets and liabilities measured at fair value by level at December 31, 2014:

				Estimated Fair Value Measurements Using:
	Estimated Fair Value			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets measured at fair value:
Available for sale securities:
Fixed maturities (1):
Corporate bonds	$	3,108,513		$	—	$	3,108,513		$	—
Mortgage backed securities	943,343			—		943,343			—
Municipal bonds	1,494,122			—		1,494,122			—
Commercial mortgage backed securities	1,114,528			—		1,114,528			—
U.S. government and government agencies	1,447,972			1,447,972		—			—
Non-U.S. government securities	1,015,153			—		1,015,153			—
Asset backed securities	1,677,941			—		1,620,441			57,500
Total	10,801,572			1,447,972		9,296,100			57,500
Equity securities	658,182			658,182		—			—
Short-term investments	797,226			759,621		37,605			—
Other investments	97,372			—		97,372			—
Other investments measured at net asset value (2)	198,852
Total other investments	296,224			—		97,372			—
Derivative instruments (3)	15,876			—		15,876			—
Fair value option:
Corporate bonds	497,101			—		497,101			—
Non-U.S. government bonds	88,411			—		88,411			—
Mortgage backed securities	22,190			—		22,190			—
Asset backed securities	24,322			—		24,322			—
Short-term investments	251,601			250,580		1,021			—
Equity securities	—			—		—			—
Other investments	1,140,266			—		1,140,266			—
Other investments measured at net asset value (2)	401,162
Total	2,425,053			250,580		1,773,311			—
Total assets measured at fair value	$	14,994,133		$	3,116,355	$	11,220,264		$	57,500
Liabilities measured at fair value:
Contingent consideration liability	$	(61,845	)	$	—	$	—		$	(61,845	)
Derivative instruments (3)	(5,397		)	—		(5,397		)	—
Total liabilities measured at fair value	$	(67,242	)	$	—	$	(5,397	)	$	(61,845	)

_________________________________________________

(1) In securities lending transactions, the Company receives collateral in excess of the fair value of the securities pledged. For purposes of this table, the Company has excluded the collateral received under securities lending, at fair value and included the securities pledged under securities lending, at fair value. See Note 6, “Investment Information—Securities Lending Agreements.”

(2) In accordance with applicable accounting guidance, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets.

(3) See Note 8, “Derivative Instruments.”

28

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table presents a reconciliation of the beginning and ending balances for all financial assets and liabilities measured at fair value on a recurring basis using Level 3 inputs:

	Assets										Liabilities
s	Available For Sale						Fair Value Option
	Asset Backed Securities		Corporate Bonds		Other Investments		Other Investments		Total		Contingent Consideration Liability
Three Months Ended June 30, 2015
Balance at beginning of period	$	57,500	$	—	$	—	$	—	$	57,500	$	(66,461	)
Total gains or (losses) (realized/unrealized)
Included in earnings (1)	—		—		—		—		—		(4,795		)
Included in other comprehensive income	—		—		—		—		—		—
Purchases, issuances, sales and settlements
Purchases	—		—		—		—		—		—
Issuances	—		—		—		—		—		—
Sales	—		—		—		—		—		—
Settlements	—		—		—		—		—		—
Transfers in and/or out of Level 3	—		—		—		—		—		—
Balance at end of period	$	57,500	$	—	$	—	$	—	$	57,500	$	(71,256	)
Three Months Ended June 30, 2014
Balance at beginning of period	$	—	$	—	$	—	$	—	$	—	$	(43,156	)
Total gains or (losses) (realized/unrealized)
Included in earnings (1)	—		—		—		—		—		(9,943		)
Included in other comprehensive income	—		—		—		—		—		—
Purchases, issuances, sales and settlements
Purchases	—		—		—		—		—		—
Issuances	—		—		—		—		—		—
Sales	—		—		—		—		—		—
Settlements	—		—		—		—		—		—
Transfers in and/or out of Level 3	—		—		—		—		—		—
Balance at end of period	$	—	$	—	$	—	$	—	$	—	$	(53,099	)

Six Months Ended June 30, 2015
Balance at beginning of period	$	57,500	$	—		$	—		$	—		$	57,500		$	(61,845	)
Total gains or (losses) (realized/unrealized)
Included in earnings (1)	—		—			—			—			—			(8,343		)
Included in other comprehensive income	—		—			—			—			—			—
Purchases, issuances, sales and settlements
Purchases	—		—			—			—			—			—
Issuances	—		—			—			—			—			(1,068		)
Sales	—		—			—			—			—			—
Settlements	—		—			—			—			—			—
Transfers in and/or out of Level 3	—		—			—			—			—			—
Balance at end of period	$	57,500	$	—		$	—		$	—		$	57,500		$	(71,256	)
Six Months Ended June 30, 2014
Balance at beginning of period	$	—	$	2,045		$	170,420		$	377,525		$	549,990		$	—
Total gains or (losses) (realized/unrealized)
Included in earnings (1)	—		—			—			—			—			(11,337		)
Included in other comprehensive income	—		—			—			—			—			—
Purchases, issuances, sales and settlements
Purchases	—		—			—			—			—			—
Issuances	—		—			—			—			—			(41,762		)
Sales	—		(2,045		)	—			—			(2,045		)	—
Settlements	—		—			—			—			—			—
Transfers in and/or out of Level 3 (2)	—		—			(170,420		)	(377,525		)	(547,945		)	—
Balance at end of period	$	—	$	—		$	—		$	—		$	—		$	(53,099	)

_________________________________________________

(1) Gains or losses on fixed maturities available for sale were included in net realized gains (losses) while gains or losses on other investments were included in net realized gains (losses) or net investment income. Gains or losses on the contingent consideration liability were included in net realized gains (losses).

(2) In accordance with applicable accounting guidance, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The transfers out of Level 3 presented in this table are intended to permit reconciliation to information previously presented.

29

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Financial Instruments Disclosed, But Not Carried, At Fair Value

The Company uses various financial instruments in the normal course of its business. The carrying values of cash, accrued investment income, receivable for securities sold, certain other assets, payable for securities purchased and certain other liabilities approximated their fair values at June 30, 2015, due to their respective short maturities. As these financial instruments are not actively traded, their respective fair values are classified within Level 2.

At June 30, 2015, the senior notes of ACGL were carried at their cost, net of debt issuance costs, of $296.8 million and had a fair value of $382.5 million while the senior notes of Arch-U.S. were carried at their cost, net of debt issuance costs, of $494.4 million and had a fair value of $514.2 million. The fair values of the senior notes were obtained from a third party pricing service and are based on observable market inputs. As such, the fair value of the senior notes is classified within Level 2.

8.Derivative Instruments

The Company’s investment strategy allows for the use of derivative securities. The Company’s derivative instruments are recorded on its consolidated balance sheets at fair value. The Company utilizes exchange traded U.S. Treasury note, Eurodollar and other futures contracts and commodity futures to manage portfolio duration or replicate investment positions in its portfolios and the Company routinely utilizes foreign currency forward contracts, currency options, index futures contracts and other derivatives as part of its total return objective. In addition, certain of the Company’s investments are managed in portfolios which incorporate the use of foreign currency forward contracts which are intended to provide an economic hedge against foreign currency movements.

In addition, the Company purchases to-be-announced mortgage backed securities (“TBAs”) as part of its investment strategy. TBAs represent commitments to purchase a future issuance of agency mortgage backed securities. For the period between purchase of a TBA and issuance of the underlying security, the Company’s position is accounted for as a derivative. The Company purchases TBAs in both long and short positions to enhance investment performance and as part of its overall investment strategy.

The Company did not hold any derivatives which were designated as hedging instruments at June 30, 2015 or December 31, 2014. The following table summarizes information on the fair values and notional values of the Company’s derivative instruments.  

	Estimated Fair Value
	Asset Derivatives		Liability Derivatives			Net Derivatives			Notional Value (1)
June 30, 2015
Futures contracts (2)	$	192	$	(1,064	)	$	(872	)	$	1,683,928
Foreign currency forward contracts (2)	14,452		(7,403		)	7,049			1,180,054
TBAs (3)	203,522		(158,718		)	44,804			344,758
Other (2)	5,498		(3,264		)	2,234			1,624,187
Total	$	223,664	$	(170,449	)	$	53,215
December 31, 2014
Futures contracts (2)	$	2,156	$	(1,907	)	$	249		$	2,549,027
Foreign currency forward contracts (2)	10,511		(1,145		)	9,366			397,106
TBAs (3)	10,592		—			10,592			10,056
Other (2)	3,209		(2,345		)	864			735,684
Total	$	26,468	$	(5,397	)	$	21,071

_________________________________________________

(1) Represents the absolute notional value of all outstanding contracts, consisting of long and short positions.

(2) The fair value of asset derivatives are included in ‘other assets’ and the fair value of liability derivatives are included in ‘other liabilities.’

(3) The fair value of TBAs are included in ‘fixed maturities available for sale, at fair value.’

The Company’s derivative instruments can be traded under master netting agreements, which establish terms that apply to all derivative transactions with a counterparty. In the event of a bankruptcy or other stipulated event of default, such agreements provide that the non-defaulting party may elect to terminate all outstanding derivative transactions, in which case all individual derivative positions (loss or gain) with a counterparty are closed out and netted and replaced with a single amount, usually

30

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

referred to as the termination amount, which is expressed in a single currency. The resulting single net amount, where positive, is payable to the party “in-the-money” regardless of whether or not it is the defaulting party, unless the parties have agreed that only the non-defaulting party is entitled to receive a termination payment where the net amount is positive and is in its favor. Effectively, contractual close-out netting reduces derivatives credit exposure from gross to net exposure. At June 30, 2015, asset derivatives and liability derivatives of $204.3 million and $159.0 million, respectively, were subject to a master netting agreement, compared to $25.3 million and $5.4 million, respectively, at December 31, 2014. The remaining derivatives included in the table above were not subject to a master netting agreement.

All realized and unrealized contract gains and losses on the Company’s derivative instruments are reflected in net realized gains (losses) in the consolidated statements of income, as summarized in the following table:

	Three Months Ended						Six Months Ended
Derivatives not designated as	June 30,						June 30,
hedging instruments:	2015			2014			2015			2014
Net realized gains (losses):
Futures contracts	$	(31,446	)	$	15,185		$	(12,120	)	$	5,323
Foreign currency forward contracts	(8,724		)	(1,811		)	8,095			(4,068		)
TBAs	(182		)	(270		)	304			(307		)
Other	(1,144		)	(702		)	(1,099		)	(1,314		)
Total	$	(41,496	)	$	12,402		$	(4,820	)	$	(366	)

9.Commitments and Contingencies

Letter of Credit and Revolving Credit Facilities

As of June 30, 2015, the Company had a $300 million unsecured revolving loan and letter of credit facility and a $500 million secured letter of credit facility (the “Credit Agreement”). The Credit Agreement expires on June 30, 2019. In addition, the Company had access to secured letter of credit facilities of approximately $229.4 million as of June 30, 2015, which are available on a limited basis and for limited purposes (together with the secured portion of the Credit Agreement and these letter of credit facilities, the “LOC Facilities”). At June 30, 2015, the Company had $456.3 million in outstanding letters of credit under the LOC Facilities, which were secured by investments with a fair value of $521.9 million, and had $100.0 million of borrowings outstanding under the Credit Agreement. The Company was in compliance with all covenants contained in the LOC Facilities at June 30, 2015.

As of June 30, 2015, Watford Re reduced its $200 million letter of credit facility to $100 million and extended the term of the facility an additional year expiring on May 19, 2016. Watford Re also entered into an $800 million secured credit facility on June 2, 2015, that provides for borrowings and the issuance of letters of credit not to exceed $400 million. That credit facility expires on June 4, 2018. At June 30, 2015, Watford Re had $36.5 million in outstanding letters of credit. Watford Re was in compliance with all covenants contained in both of its credit facilities at June 30, 2015.

Investment Commitments

The Company’s investment commitments, which are primarily related to agreements entered into by the Company to invest in funds and separately managed accounts when called upon, were approximately $1.12 billion at June 30, 2015, compared to $968.9 million at December 31, 2014.

10.Share Transactions

Share Repurchases

The board of directors of ACGL has authorized the investment in ACGL’s common shares through a share repurchase program. Since the inception of the share repurchase program, ACGL has repurchased approximately 124.0 million common shares for an aggregate purchase price of $3.60 billion. During the 2015 second quarter and six months ended June 30, 2015, ACGL repurchased 3.2 million and 5.9 million common shares, respectively, for an aggregate purchase price of $199.0 million and $361.9 million, respectively. During the 2014 second quarter and six months ended June 30, 2014, ACGL did not repurchase any common shares. At June 30, 2015, $525.3 million of share repurchases were available under the program. The

31

timing and amount of the repurchase transactions under this program will depend on a variety of factors, including market conditions and corporate and regulatory considerations.

Share-Based Compensation

During the 2015 second quarter, the Company made a stock grant of 534,267 stock appreciation rights and stock options and 559,332 restricted shares and units to certain employees and directors with weighted average grant-date fair values of $16.09 and $62.51, respectively. During the 2014 second quarter, the Company made a stock grant of 551,836 stock appreciation rights and stock options and 571,108 restricted shares and units to certain employees and directors with weighted average grant-date fair values of $15.23 and $57.25, respectively. The stock appreciation rights and stock options were valued at the grant date using the Black-Scholes option pricing model. Such values are being amortized over the respective substantive vesting period. For awards granted to retirement-eligible employees where no service is required for the employee to retain the award, the grant date fair value is immediately recognized as compensation expense at the grant date because the employee is able to retain the award without continuing to provide service. For employees near retirement eligibility, attribution of compensation cost is over the period from the grant date to the retirement eligibility date.

2015 Long Term Incentive and Share Award Plan (the “2015 Plan”)

The 2015 Plan became effective as of May 13, 2015 following approval by shareholders of the Company. The 2015 Plan is intended to provide for competitive compensation opportunities, to encourage long-term service, to recognize individual contributions and reward achievement of performance goals and to promote the creation of long-term value for shareholders by aligning the interests of such persons with those of shareholders. The 2015 Plan provides for the grant to eligible employees and directors stock options, stock appreciation rights, restricted shares, restricted share units payable in common shares or cash, share awards in lieu of cash awards, dividend equivalents and other share-based awards. The 2015 Plan will terminate as to future awards on February 26, 2025.

The number of common shares reserved for grants of awards under the 2015 Plan, subject to anti-dilution adjustments in the event of certain changes in the Company’s capital structure, is 4,300,000. In addition, no more than 50% of such common shares may be issued in connection with full value awards (i.e., awards other than stock options or stock appreciation rights) and no more than 2,000,000 common shares may be issued as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended. At June 30, 2015, 3,235,680 shares are available for grant under the 2015 Plan.

11.Income Taxes

ACGL is incorporated under the laws of Bermuda and, under current Bermuda law, is not obligated to pay any taxes in Bermuda based upon income or capital gains. The Company has received a written undertaking from the Minister of Finance in Bermuda under the Exempted Undertakings Tax Protection Act 1966 that, in the event that any legislation is enacted in Bermuda imposing any tax computed on profits, income, gain or appreciation on any capital asset, or any tax in the nature of estate duty or inheritance tax, such tax will not be applicable to ACGL or any of its operations until March 31, 2035. This undertaking does not, however, prevent the imposition of taxes on any person ordinarily resident in Bermuda or any company in respect of its ownership of real property or leasehold interests in Bermuda.

ACGL and its non-U.S. subsidiaries will be subject to U.S. federal income tax only to the extent that they derive U.S. source income that is subject to U.S. withholding tax or income that is effectively connected with the conduct of a trade or business within the U.S. and is not exempt from U.S. tax under an applicable income tax treaty with the U.S. ACGL and its non-U.S. subsidiaries will be subject to a withholding tax on dividends from U.S. investments and interest from certain U.S. payors (subject to reduction by any applicable income tax treaty). ACGL and its non-U.S. subsidiaries intend to conduct their operations in a manner that will not cause them to be treated as engaged in a trade or business in the United States and, therefore, will not be required to pay U.S. federal income taxes (other than U.S. excise taxes on insurance and reinsurance premium and withholding taxes on dividends and certain other U.S. source investment income). However, because there is uncertainty as to the activities which constitute being engaged in a trade or business within the United States, there can be no assurances that the U.S. Internal Revenue Service will not contend successfully that ACGL or its non-U.S. subsidiaries are engaged in a trade or business in the United States. If ACGL or any of its non-U.S. subsidiaries were subject to U.S. income tax, ACGL’s shareholders’ equity and earnings could be materially adversely affected. ACGL has subsidiaries and branches that operate in various jurisdictions around the world that are subject to tax in the jurisdictions in which they operate. The significant jurisdictions in which ACGL’s subsidiaries and branches are subject to tax are the United States, United Kingdom, Ireland, Canada, Switzerland and Denmark.

32

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The Company’s income tax provision on income before income taxes resulted in an expense of 4.3% for the six months ended June 30, 2015, compared to an expense of 2.7% for the 2014 period. The Company’s effective tax rate, which is based upon the expected annual effective tax rate, may fluctuate from period to period based on the relative mix of income or loss reported by jurisdiction and the varying tax rates in each jurisdiction. The Company had a net deferred tax asset of $143.9 million at June 30, 2015, compared to $131.0 million at December 31, 2014. In addition, the Company paid$26.0 million in income taxes for the six months ended June 30, 2015, while the Company paid$8.3 million for the 2014 period.

12.Other Comprehensive Income (Loss)

The following tables present details about amounts reclassified from accumulated other comprehensive income and the tax effects allocated to each component of other comprehensive income (loss):

		Amounts Reclassified from AOCI
	Consolidated Statement of Income	Three Months Ended						Six Months Ended
Details About	Line Item That Includes	June 30,						June 30,
AOCI Components	Reclassification	2015			2014			2015			2014
Unrealized appreciation on available-for-sale investments
	Net realized gains (losses)	$	23,259		$	23,735		$	65,690		$	49,773
	Other-than-temporary impairment losses	(1,126		)	(14,749		)	(8,373		)	(17,720		)
	Total before tax	22,133			8,986			57,317			32,053
	Income tax (expense) benefit	(919		)	(701		)	(5,171		)	(2,519		)
	Net of tax	$	21,214		$	8,285		$	52,146		$	29,534

	Before Tax Amount			Tax Expense (Benefit)			Net of Tax Amount
Three Months Ended June 30, 2015
Unrealized appreciation (decline) in value of investments:
Unrealized holding gains (losses) arising during period	$	(96,629	)	$	(14,694	)	$	(81,935	)
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)	(13		)	—			(13		)
Less reclassification of net realized gains (losses) included in net income	22,133			919			21,214
Foreign currency translation adjustments	11,697			117			11,580
Other comprehensive income (loss)	$	(107,078	)	$	(15,496	)	$	(91,582	)
Three Months Ended June 30, 2014
Unrealized appreciation (decline) in value of investments:
Unrealized holding gains (losses) arising during period	$	115,150		$	6,722		$	108,428
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)	—			—			—
Less reclassification of net realized gains (losses) included in net income	8,986			701			8,285
Foreign currency translation adjustments	10,021			—			10,021
Other comprehensive income (loss)	$	116,185		$	6,021		$	110,164
Six Months Ended June 30, 2015
Unrealized appreciation (decline) in value of investments:
Unrealized holding gains (losses) arising during period	$	(2,242	)	$	(4,611	)	$	2,369
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)	(1,461		)	—			(1,461		)
Less reclassification of net realized gains (losses) included in net income	57,317			5,171			52,146
Foreign currency translation adjustments	(11,929		)	(752		)	(11,177		)
Other comprehensive income (loss)	$	(72,949	)	$	(10,534	)	$	(62,415	)
Six Months Ended June 30, 2014
Unrealized appreciation (decline) in value of investments:
Unrealized holding gains (losses) arising during period	$	190,550		$	10,769		$	179,781
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)	—			—			—
Less reclassification of net realized gains (losses) included in net income	32,053			2,519			29,534
Foreign currency translation adjustments	8,672			—			8,672
Other comprehensive income (loss)	$	167,169		$	8,250		$	158,919

33

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

13.Guarantor Financial Information

The following tables present condensed financial information for ACGL, Arch Capital Group (U.S.) Inc. (“Arch-U.S.”), a 100% owned subsidiary of ACGL, and ACGL’s other subsidiaries.

		June 30, 2015
Condensed Consolidating Balance Sheet		ACGL (Parent Guarantor)		Arch-U.S. (Subsidiary Issuer)		Other ACGL Subsidiaries		Consolidating Adjustments and Eliminations			ACGL Consolidated
Assets
Total investments		$	471	$	55,047	$	15,306,122	$	(14,700	)	$	15,346,940
Cash		10,864		6,928		507,282		—			525,074
Investments in subsidiaries		6,530,452		1,688,419		—		(8,218,871		)	—
Due from subsidiaries and affiliates		11		47,798		417,231		(465,040		)	—
Premiums receivable		—		—		1,620,756		(439,120		)	1,181,636
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses		—		—		5,741,646		(3,910,419		)	1,831,227
Contractholder receivables		—		—		1,393,138		—			1,393,138
Prepaid reinsurance premiums		—		—		1,595,550		(1,153,409		)	442,141
Deferred acquisition costs, net		—		—		448,647		—			448,647
Other assets		4,208		46,157		2,274,796		(409,039		)	1,916,122
	Total assets	$	6,546,006	$	1,844,349	$	29,305,168	$	(14,610,598	)	$	23,084,925
Liabilities
Reserve for losses and loss adjustment expenses		$	—	$	—	$	12,970,720	$	(3,888,439	)	$	9,082,281
Unearned premiums		—		—		3,596,332		(1,153,409		)	2,442,923
Reinsurance balances payable		—		—		678,216		(425,754		)	252,462
Contractholder payables		—		—		1,393,138		—			1,393,138
Deposit accounting liabilities		—		—		495,121		(217,598		)	277,523
Senior notes		296,834		494,388		—		—			791,222
Revolving credit agreement borrowings		100,000		—		—		—			100,000
Due to subsidiaries and affiliates		402		35,000		429,638		(465,040		)	—
Other liabilities		11,255		44,917		1,778,600		(226,787		)	1,607,985
	Total liabilities	408,491		574,305		21,341,765		(6,377,027		)	15,947,534
Redeemable noncontrolling interests		—		—		219,696		(14,700		)	204,996
Shareholders’ Equity
Total shareholders’ equity available to Arch		6,137,515		1,270,044		6,948,827		(8,218,871		)	6,137,515
Non-redeemable noncontrolling interests		—		—		794,880		—			794,880
	Total shareholders’ equity	6,137,515		1,270,044		7,743,707		(8,218,871		)	6,932,395
	Total liabilities, noncontrolling interests and shareholders’ equity	$	6,546,006	$	1,844,349	$	29,305,168	$	(14,610,598	)	$	23,084,925

34

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

		December 31, 2014
Condensed Consolidating Balance Sheet		ACGL (Parent Guarantor)		Arch-U.S. (Subsidiary Issuer)		Other ACGL Subsidiaries		Consolidating Adjustments and Eliminations			ACGL Consolidated
Assets
Total investments		$	107	$	62,867	$	15,257,796	$	—		$	15,320,770
Cash		3,218		2,787		479,697		—			485,702
Investments in subsidiaries		6,536,644		1,685,185		—		(8,221,829		)	—
Due from subsidiaries and affiliates		48		7,517		370,429		(377,994		)	—
Premiums receivable		—		—		1,331,511		(382,816		)	948,695
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses		—		—		5,584,973		(3,772,128		)	1,812,845
Contractholder receivables		—		—		1,309,192		—			1,309,192
Prepaid reinsurance premiums		—		—		1,373,008		(995,930		)	377,078
Deferred acquisition costs, net		—		—		414,525		—			414,525
Other assets		4,386		43,921		1,705,546		(416,579		)	1,337,274
	Total assets	$	6,544,403	$	1,802,277	$	27,826,677	$	(14,167,276	)	$	22,006,081
Liabilities
Reserve for losses and loss adjustment expenses		$	—	$	—	$	12,784,030	$	(3,747,582	)	$	9,036,448
Unearned premiums		—		—		3,227,508		(995,930		)	2,231,578
Reinsurance balances payable		—		—		589,289		(369,977		)	219,312
Contractholder payables		—		—		1,309,192		—			1,309,192
Deposit accounting liabilities		—		—		587,050		(259,666		)	327,384
Senior notes		296,796		494,345		—		—			791,141
Revolving credit agreement borrowings		100,000		—		—		—			100,000
Due to subsidiaries and affiliates		417		7,505		370,072		(377,994		)	—
Other liabilities		17,137		49,403		1,000,138		(194,298		)	872,380
	Total liabilities	414,350		551,253		19,867,279		(5,945,447		)	14,887,435
Redeemable noncontrolling interests		—		—		219,512		—			219,512
Shareholders’ Equity
Total shareholders’ equity available to Arch		6,130,053		1,251,024		6,970,805		(8,221,829		)	6,130,053
Non-redeemable noncontrolling interests		—		—		769,081		—			769,081
	Total shareholders’ equity	6,130,053		1,251,024		7,739,886		(8,221,829		)	6,899,134
	Total liabilities, noncontrolling interests and shareholders’ equity	$	6,544,403	$	1,802,277	$	27,826,677	$	(14,167,276	)	$	22,006,081

35

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

		Three Months Ended June 30, 2015
Condensed Consolidating Statement of Income and Comprehensive Income		ACGL (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other ACGL Subsidiaries			Consolidating Adjustments and Eliminations			ACGL Consolidated
Revenues
Net premiums earned		$	—		$	—		$	943,438		$	—		$	943,438
Net investment income		—			800			87,154			(991		)	86,963
Net realized gains (losses)		—			1			(35,726		)	—			(35,725		)
Net impairment losses recognized in earnings		—			—			(1,113		)	—			(1,113		)
Other underwriting income		—			—			7,717			—			7,717
Equity in net income of investment funds accounted for using the equity method		—			—			16,167			—			16,167
Other income (loss)		—			—			2,205			—			2,205
	Total revenues	—			801			1,019,842			(991		)	1,019,652
Expenses
Losses and loss adjustment expenses		—			—			519,426			—			519,426
Acquisition expenses		—			—			175,425			—			175,425
Other operating expenses		16,900			1,012			150,696			—			168,608
Interest expense		5,862			6,769			(7,793		)	(827		)	4,011
Net foreign exchange losses (gains)		—			—			6,942			12,641			19,583
	Total expenses	22,762			7,781			844,696			11,814			887,053
Income (loss) before income taxes		(22,762		)	(6,980		)	175,146			(12,805		)	132,599
Income tax (expense) benefit		—			3,697			(10,477		)	—			(6,780		)
Income (loss) before equity in net income of subsidiaries		(22,762		)	(3,283		)	164,669			(12,805		)	125,819
Equity in net income of subsidiaries		138,552			14,077			—			(152,629		)	—
Net income		115,790			10,794			164,669			(165,434		)	125,819
Amounts attributable to noncontrolling interests		—			—			(10,193		)	164			(10,029		)
Net income available to Arch		115,790			10,794			154,476			(165,270		)	115,790
Preferred dividends		(5,485		)	—			—			—			(5,485		)
Net income available to Arch common shareholders		$	110,305		$	10,794		$	154,476		$	(165,270	)	$	110,305
Comprehensive income (loss) available to Arch		$	24,208		$	(13,505	)	$	50,249		$	(36,744	)	$	24,208

36

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

		Three Months Ended June 30, 2014
Condensed Consolidating Statement of Income and Comprehensive Income		ACGL (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other ACGL Subsidiaries			Consolidating Adjustments and Eliminations			ACGL Consolidated
Revenues
Net premiums earned		$	—		$	—		$	907,152		$	—		$	907,152
Net investment income		—			—			80,380			(7,390		)	72,990
Net realized gains (losses)		—			—			54,144			—			54,144
Net impairment losses recognized in earnings		—			—			(14,749		)	—			(14,749		)
Other underwriting income		—			—			2,033			—			2,033
Equity in net income of investment funds accounted for using the equity method		—			—			9,240			—			9,240
Other income (loss)		—			—			4,850			—			4,850
	Total revenues	—			—			1,043,050			(7,390		)	1,035,660
Expenses
Losses and loss adjustment expenses		—			—			485,518			—			485,518
Acquisition expenses		—			—			158,158			—			158,158
Other operating expenses		15,250			494			140,606			—			156,350
Interest expense		5,854			6,448			9,422			(7,390		)	14,334
Net foreign exchange losses (gains)		—			—			1,054			1,240			2,294
	Total expenses	21,104			6,942			794,758			(6,150		)	816,654
Income (loss) before income taxes		(21,104		)	(6,942		)	248,292			(1,240		)	219,006
Income tax (expense) benefit		—			3,294			(10,583		)	—			(7,289		)
Income (loss) before equity in net income of subsidiaries		(21,104		)	(3,648		)	237,709			(1,240		)	211,717
Equity in net income of subsidiaries		229,120			9,334			—			(238,454		)	—
Net income		208,016			5,686			237,709			(239,694		)	211,717
Amounts attributable to noncontrolling interests		—			—			(3,701		)	—			(3,701		)
Net income available to Arch		208,016			5,686			234,008			(239,694		)	208,016
Preferred dividends		(5,485		)	—			—			—			(5,485		)
Net income available to Arch common shareholders		$	202,531		$	5,686		$	234,008		$	(239,694	)	$	202,531
Comprehensive income (loss) available to Arch		$	318,180		$	23,186		$	335,348		$	(358,534	)	$	318,180

37

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

		Six Months Ended June 30, 2015
Condensed Consolidating Statement of Income and Comprehensive Income		ACGL (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other ACGL Subsidiaries			Consolidating Adjustments and Eliminations			ACGL Consolidated
Revenues
Net premiums earned		$	—		$	—		$	1,853,702		$	—		$	1,853,702
Net investment income		—			805			173,164			(8,012		)	165,957
Net realized gains (losses)		—			1			47,622			—			47,623
Net impairment losses recognized in earnings		—			—			(6,912		)	—			(6,912		)
Other underwriting income		—			—			19,253			—			19,253
Equity in net income of investment funds accounted for using the equity method		—			—			22,056			—			22,056
Other income (loss)		—			—			317			—			317
	Total revenues	—			806			2,109,202			(8,012		)	2,101,996
Expenses
Losses and loss adjustment expenses		—			—			1,013,142			—			1,013,142
Acquisition expenses		—			—			338,501			—			338,501
Other operating expenses		25,532			2,271			298,687			—			326,490
Interest expense		11,718			13,135			(258		)	(7,848		)	16,747
Net foreign exchange losses (gains)		—			—			(32,688		)	(14,230		)	(46,918		)
	Total expenses	37,250			15,406			1,617,384			(22,078		)	1,647,962
Income (loss) before income taxes		(37,250		)	(14,600		)	491,818			14,066			454,034
Income tax (expense) benefit		—			5,110			(24,568		)	—			(19,458		)
Income (loss) before equity in net income of subsidiaries		(37,250		)	(9,490		)	467,250			14,066			434,576
Equity in net income of subsidiaries		436,376			28,572			—			(464,948		)	—
Net income		399,126			19,082			467,250			(450,882		)	434,576
Amounts attributable to noncontrolling interests		—			—			(35,614		)	164			(35,450		)
Net income available to Arch		399,126			19,082			431,636			(450,718		)	399,126
Preferred dividends		(10,969		)	—			—			—			(10,969		)
Net income available to Arch common shareholders		$	388,157		$	19,082		$	431,636		$	(450,718	)	$	388,157
Comprehensive income (loss) available to Arch		$	336,711		$	(1,755	)	$	383,442		$	(381,687	)	$	336,711

38

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

		Six Months Ended June 30, 2014
Condensed Consolidating Statement of Income and Comprehensive Income		ACGL (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other ACGL Subsidiaries			Consolidating Adjustments and Eliminations			ACGL Consolidated
Revenues
Net premiums earned		$	—		$	—		$	1,766,932		$	—		$	1,766,932
Net investment income		—			—			157,381			(17,397		)	139,984
Net realized gains (losses)		—			—			73,841			—			73,841
Net impairment losses recognized in earnings		—			—			(17,720		)	—			(17,720		)
Other underwriting income		—			—			3,615			—			3,615
Equity in net income of investment funds accounted for using the equity method		—			—			12,493			—			12,493
Other income (loss)		—			—			2,746			—			2,746
	Total revenues	—			—			1,999,288			(17,397		)	1,981,891
Expenses
Losses and loss adjustment expenses		—			—			921,758			—			921,758
Acquisition expenses		—			—			318,500			—			318,500
Other operating expenses		25,557			1,471			275,121			—			302,149
Interest expense		11,707			12,962			21,466			(17,397		)	28,738
Net foreign exchange losses (gains)		—			—			6,795			2,062			8,857
	Total expenses	37,264			14,433			1,543,640			(15,335		)	1,580,002
Income (loss) before income taxes		(37,264		)	(14,433		)	455,648			(2,062		)	401,889
Income tax (expense) benefit		—			6,082			(17,109		)	—			(11,027		)
Income (loss) before equity in net income of subsidiaries		(37,264		)	(8,351		)	438,539			(2,062		)	390,862
Equity in net income of subsidiaries		427,780			31,486			—			(459,266		)	—
Net income		390,516			23,135			438,539			(461,328		)	390,862
Amounts attributable to noncontrolling interests		—			—			(346		)	—			(346		)
Net income available to Arch		390,516			23,135			438,193			(461,328		)	390,516
Preferred dividends		(10,969		)	—			—			—			(10,969		)
Net income available to Arch common shareholders		$	379,547		$	23,135		$	438,193		$	(461,328	)	$	379,547
Comprehensive income (loss) available to Arch		$	549,435		$	40,406		$	587,467		$	(627,873	)	$	549,435

39

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

		Six Months Ended June 30, 2015
Condensed Consolidating Statement of Cash Flows		ACGL (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other ACGL Subsidiaries			Consolidating Adjustments and Eliminations			ACGL Consolidated
Operating Activities
	Net Cash Provided By (Used For) Operating Activities	$	378,703		$	8,282		$	433,833		$	(435,619	)	$	385,199
Investing Activities
Purchases of fixed maturity investments		—			—			(14,641,391		)	—			(14,641,391		)
Purchases of equity securities		—			—			(288,535		)	—			(288,535		)
Purchases of other investments		—			—			(1,273,780		)	—			(1,273,780		)
Proceeds from the sales of fixed maturity investments		—			20,002			14,335,517			—			14,355,519
Proceeds from the sales of equity securities		—			—			272,343			—			272,343
Proceeds from the sales, redemptions and maturities of other investments		—			—			1,078,675			—			1,078,675
Proceeds from redemptions and maturities of fixed maturity investments		—			—			474,984			—			474,984
Proceeds from investment in joint venture		—			—			40,000			—			40,000
Net purchases (sales) of short-term investments		(365		)	(12,171		)	16,243			—			3,707
Change in cash collateral related to securities lending		—			—			(18,329		)	—			(18,329		)
Contributions to subsidiaries		—			—			(9,290		)	9,290			—
Intercompany loans issued		—			(39,500		)	(27,500		)	67,000			—
Purchase of business, net of cash acquired		—			—			818			—			818
Purchases of furniture, equipment and other assets		(24		)	—			(43,141		)	—			(43,165		)
	Net Cash Provided By (Used For) Investing Activities	(389		)	(31,669		)	(83,386		)	76,290			(39,154		)
Financing Activities
Purchases of common shares under share repurchase program		(361,877		)	—			—			—			(361,877		)
Proceeds from common shares issued, net		2,178			—			9,290			(9,290		)	2,178
Proceeds from intercompany borrowings		—			27,500			39,500			(67,000		)	—
Change in cash collateral related to securities lending		—			—			18,329			—			18,329
Dividends paid to redeemable noncontrolling interests		—			—			(9,632		)	319			(9,313		)
Dividends paid to parent		—			—			(435,300		)	435,300			—
Other		—			28			54,990			—			55,018
Preferred dividends paid		(10,969		)	—			—			—			(10,969		)
	Net Cash Provided By (Used For) Financing Activities	(370,668		)	27,528			(322,823		)	359,329			(306,634		)
Effects of exchange rates changes on foreign currency cash		—			—			(39		)	—			(39		)
Increase (decrease) in cash		7,646			4,141			27,585			—			39,372
Cash beginning of year		3,218			2,787			479,697			—			485,702
Cash end of period		$	10,864		$	6,928		$	507,282		$	—		$	525,074

40

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

		Six Months Ended June 30, 2014
Condensed Consolidating Statement of Cash Flows		ACGL (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other ACGL Subsidiaries			Consolidating Adjustments and Eliminations			ACGL Consolidated
Operating Activities
	Net Cash Provided By (Used For) Operating Activities	$	10,099		$	424		$	474,565		$	(32,025	)	$	453,063
Investing Activities
Purchases of fixed maturity investments		—			(78,509		)	(14,233,239		)	—			(14,311,748		)
Purchases of equity securities		—			—			(174,687		)	—			(174,687		)
Purchases of other investments		—			—			(1,022,987		)	—			(1,022,987		)
Proceeds from the sales of fixed maturity investments		—			—			13,204,854			—			13,204,854
Proceeds from the sales of equity securities		—			—			98,687			—			98,687
Proceeds from the sales of other investments		—			—			618,707			—			618,707
Proceeds from redemptions and maturities of fixed maturity investments		—			—			432,040			—			432,040
Net (purchases) sales of short-term investments		(31		)	408,779			21,556			—			430,304
Change in cash collateral related to securities lending		—			—			18,701			—			18,701
Contributions to subsidiaries		—			(313,207		)	(100,000		)	413,207			—
Intercompany loans issued		—			—			10,250			(10,250		)	—
Purchase of business, net of cash acquired		—			—			(235,578		)	—			(235,578		)
Purchases of furniture, equipment and other assets		(128		)	—			(10,232		)	—			(10,360		)
	Net Cash Provided By (Used For) Investing Activities	(159		)	17,063			(1,371,928		)	402,957			(952,067		)
Financing Activities
Proceeds from common shares issued, net		2,521			—			413,207			(413,207		)	2,521
Repayments of intercompany borrowings		—			(10,250		)	—			10,250			—
Change in cash collateral related to securities lending		—			—			(18,701		)	—			(18,701		)
Third party investment in non-redeemable noncontrolling interests		—			—			796,903			—			796,903
Third party investment in redeemable noncontrolling interests		—			—			219,233			—			219,233
Dividends paid to redeemable noncontrolling interests		—			—			(4,816		)	—			(4,816		)
Dividends paid to parent		—			—			(32,025		)	32,025			—
Other		—			—			4,706			—			4,706
Preferred dividends paid		(10,969		)	—			—			—			(10,969		)
	Net Cash Provided By (Used For) Financing Activities	(8,448		)	(10,250		)	1,378,507			(370,932		)	988,877
Effects of exchange rates changes on foreign currency cash		—			—			2,513			—			2,513
Increase in cash		1,492			7,237			483,657			—			492,386
Cash beginning of year		3,223			509			430,325			—			434,057
Cash end of period		$	4,715		$	7,746		$	913,982		$	—		$	926,443

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ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

14.Legal Proceedings

The Company, in common with the insurance industry in general, is subject to litigation and arbitration in the normal course of its business. As of June 30, 2015, the Company was not a party to any litigation or arbitration which is expected by management to have a material adverse effect on the Company’s results of operations and financial condition and liquidity.

15.Transactions with Related Parties

Kewsong Lee, a director of ACGL, is a Managing Director and Deputy Chief Investment Officer for Corporate Private Equity of The Carlyle Group (“Carlyle”). As part of its investment philosophy, the Company’s investment portfolio includes investments in funds managed by Carlyle. As of June 30, 2015, the Company had aggregate commitments of $670.9 million to funds managed by Carlyle, of which $374.1 million was unfunded. The Company may make additional commitments to funds managed by Carlyle from time to time. During the six months ended June 30, 2015 and 2014, the Company made aggregate capital contributions to funds managed by Carlyle of $25.6 million and $29.8 million, respectively, and received aggregate cash distributions from funds managed by Carlyle of $19.8 million and $37.2 million, respectively.

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ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a discussion and analysis of our financial condition and results of operations. This should be read in conjunction with our consolidated financial statements included in Item 1 of this report and also our Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2014 (“2014 Form 10-K”). In addition, readers should review “Risk Factors” set forth in Item 1A of Part I of our 2014 Form 10-K. Tabular amounts are in U.S. Dollars in thousands, except share amounts, unless otherwise noted.

Arch Capital Group Ltd. (“ACGL” and, together with its subsidiaries, “we” or “us”) is a Bermuda public limited liability company with approximately $7.03 billion in capital at June 30, 2015 and, through operations in Bermuda, the United States, Europe and Canada, writes specialty lines of property and casualty insurance and reinsurance, as well as mortgage insurance and reinsurance, on a worldwide basis.

Current Outlook

The broad market environment continues to be competitive in our business reflecting a continuation of softening in pricing and broadening pressures on terms and conditions. In the primary markets in which our insurance business participates, we obtained rate increases during the 2015 second quarter in longer tailed lines of business, although below our view of loss cost trends, while we experienced rate decreases in short tailed lines. Competitive conditions in the property sector have negatively impacted primary property rates and, accordingly, our premium volume in those lines. In our reinsurance business, softening pricing and continued pressure on terms and conditions led us to continue to reduce writings in certain lines in the 2015 second quarter. With the continued low interest rate environment, additional increases are needed in many lines in order for us to achieve our return requirements. Our underwriting teams continue to execute a disciplined strategy by emphasizing small and medium-sized accounts over large accounts.

Arch Mortgage Insurance Company (“Arch MI U.S.”) continues to expand into the U.S. mortgage insurance marketplace. As of June 30, 2015, Arch MI U.S. reviewed and approved 748 master policy applications from banks, with 40 national accounts and the balance consisting of regional banks. In addition, Arch MI U.S. has approved master policy applications from 80% of the top 25 mortgage originators for conforming mortgages sold to the GSEs with mortgage insurance.

Our objective is to achieve an average operating return on average equity of 15% or greater over the insurance cycle, which we believe to be an attractive return to our common shareholders given the risks we assume. We continue to look for opportunities to find acceptable books of business to underwrite without sacrificing underwriting discipline and continue to write a portion of our overall book in catastrophe-exposed business which has the potential to increase the volatility of our operating results.

Changing economic conditions could have a material impact on the frequency and severity of claims and, therefore, could negatively impact our underwriting returns. In addition, volatility in the financial markets could continue to significantly affect our investment returns, reported results and shareholders’ equity. We consider the potential impact of economic trends in the estimation process for establishing unpaid losses and loss adjustment expenses and in determining our investment strategies. In addition, weakness of the U.S., European countries and other key economies, projected budget deficits for the U.S., European countries and other governments and the consequences associated with potential downgrades of securities of the U.S., European countries and other governments by credit rating agencies is inherently unpredictable and could have a material adverse effect on financial markets and economic conditions in the U.S. and throughout the world. In turn, this could have a material adverse effect on our business, financial condition and results of operations and, in particular, this could have a material adverse effect on the value and liquidity of securities in our investment portfolio.

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Natural Catastrophe Risk

We monitor our natural catastrophe risk globally for all perils and regions, in each case, where we believe there is significant exposure. Our models employ both proprietary and vendor-based systems and include cross-line correlations for property, marine, offshore energy, aviation, workers compensation and personal accident. Currently, we seek to limit our 1-in-250 year return period net probable maximum pre-tax loss from a severe catastrophic event in any geographic zone to approximately 25% of total shareholders’ equity available to Arch. We reserve the right to change this threshold at any time. Based on in-force exposure estimated as of July 1, 2015, our modeled peak zone catastrophe exposure was a windstorm affecting the Northeastern U.S., with a net probable maximum pre-tax loss of $541 million, followed by windstorms affecting the Gulf of Mexico and Florida Tri-County with net probable maximum pre-tax losses of $522 million and $445 million, respectively. Our exposures to other perils, such as U.S. earthquake and international events, was less than the exposures arising from U.S. windstorms and hurricanes in both periods. As of July 1, 2015, our modeled peak zone earthquake exposure (Los Angeles earthquake) represented approximately 55% of our peak zone catastrophe exposure, and our modeled peak zone international exposure (U.K. windstorm) was substantially less than both our peak zone windstorm and earthquake exposures.

Net probable maximum pre-tax loss estimates are net of expected reinsurance recoveries, before income tax and before excess reinsurance reinstatement premiums. Loss estimates are reflective of the zone indicated and not the entire portfolio. Since hurricanes and windstorms can affect more than one zone and make multiple landfalls, our loss estimates include clash estimates from other zones. The loss estimates shown above do not represent our maximum exposures and it is highly likely that our actual incurred losses would vary materially from the modeled estimates. There can be no assurances that we will not suffer a net loss greater than 25% of total shareholders’ equity available to Arch from one or more catastrophic events due to several factors, including the inherent uncertainties in estimating the frequency and severity of such events and the margin of error in making such determinations resulting from potential inaccuracies and inadequacies in the data provided by clients and brokers, the modeling techniques and the application of such techniques or as a result of a decision to change the percentage of shareholders’ equity exposed to a single catastrophic event. Actual losses may also increase if our reinsurers fail to meet their obligations to us or the reinsurance protections purchased by us are exhausted or are otherwise unavailable. See “Risk Factors—Risk Relating to Our Industry” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Natural and Man-Made Catastrophic Events” in our 2014 Form 10-K.

Financial Measures

Management uses the following three key financial indicators in evaluating our performance and measuring the overall growth in value generated for ACGL’s common shareholders:

Book Value per Common Share

Book value per common share represents total common shareholders’ equity available to Arch divided by the number of common shares outstanding. Management uses growth in book value per common share as a key measure of the value generated for our common shareholders each period and believes that book value per common share is the key driver of ACGL’s share price over time. Book value per common share is impacted by, among other factors, our underwriting results, investment returns and share repurchase activity, which has an accretive or dilutive impact on book value per common share depending on the purchase price. Book value per common share was $47.49 at June 30, 2015, compared to $47.80 at March 31, 2015 and $43.73 at June 30, 2014. The 0.6%decrease in the 2015 second quarter primarily reflected the dilutive impact of share repurchase activity, while the 8.6%increase over the trailing twelve months reflected strong investment and underwriting returns.

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Operating Return on Average Common Equity

Operating return on average common equity (“Operating ROAE”) represents annualized after-tax operating income available to Arch common shareholders divided by the average of beginning and ending common shareholders’ equity available to Arch during the period. After-tax operating income available to Arch common shareholders, a “non-GAAP measure” as defined in the SEC rules, represents net income available to Arch common shareholders, excluding net realized gains or losses, net impairment losses recognized in earnings, equity in net income or loss of investment funds accounted for using the equity method and net foreign exchange gains or losses, net of income taxes. Management uses Operating ROAE as a key measure of the return generated to common shareholders and has set an objective to achieve an average Operating ROAE of 15% or greater over the insurance cycle, which it believes to be an attractive return to common shareholders given the risks we assume. See “Comment on Non-GAAP Financial Measures.” Our Operating ROAE was 9.9% for the 2015 second quarter, compared to 11.2% for the 2014 second quarter, and 10.2% for the six months ended June 30, 2015, compared to 11.6% for the 2014 period. Operating ROAE for the 2015 periods reflected a lower level of underwriting income, reflecting market conditions and changes in mix of business, and a higher level of average common equity compared to the 2014 periods.

Total Return on Investments

Total return on investments includes investment income, equity in net income or loss of investment funds accounted for using the equity method, net realized gains and losses and the change in unrealized gains and losses generated by Arch’s investment portfolio. Total return is calculated on a pre-tax basis and before investment expenses, excluding amounts reflected in the ‘other’ segment, and reflects the effect of financial market conditions along with foreign currency fluctuations. Management uses total return on investments as a key measure of the return generated to Arch common shareholders on the capital held in the business, and compares the return generated by our investment portfolio against benchmark returns which we measured our portfolio against during the periods.

The benchmark return index is a customized combination of indices intended to approximate a target portfolio by asset mix and average credit quality while also matching the approximate estimated duration and currency mix of our insurance and reinsurance liabilities. Although the estimated duration and average credit quality of this index will move as the duration and rating of its constituent securities change, generally we do not adjust the composition of the benchmark return index except to incorporate the currency mix as noted above. The benchmark return index should not be interpreted as expressing a preference for or aversion to any particular sector or sector weight. The index is intended solely to provide, unlike many master indices that change based on the size of their constituent indices, a relatively stable basket of investable indices.

At June 30, 2015, the benchmark return index had an average credit quality of “Aa2” by Moody’s Investors Service (“Moody’s”), an estimated duration of 3.01 years and included weightings to the following indices:

	Weighting
The Bank of America Merrill Lynch 1-10 Year AA U.S. Corporate & Yankees Index	21.250	%
The Bank of America Merrill Lynch 1-5 Year U.S. Treasury Index	13.000
The Bank of America Merrill Lynch U.S. Mortgage Backed Securities Index	11.875
Barclays Capital CMBS, AAA Index	10.000
The Bank of America Merrill Lynch 1-10 Year U.S. Municipal Securities Index	7.125
The Bank of America Merrill Lynch 1-10 Year EMU Governments Index	5.500
The Bank of America Merrill Lynch U.S. High Yield Constrained Index	5.500
The Bank of America Merrill Lynch U.S. Bullet Agency Securities 1-10 Years Index	5.000
MSCI All Country World Gross Total Return Index	5.000
The Bank of America Merrill Lynch 0-3 Month U.S. Treasury Bill Index	5.000
The Bank of America Merrill Lynch 5-10 Year U.S. Treasury Index	3.250
The Bank of America Merrill Lynch 1-5 Year U.K. Gilt Index	3.000
The Bank of America Merrill Lynch 1-10 Year Australian Governments Index	2.500
The Bank of America Merrill Lynch 1-5 Year CAD Governments Index	2.000
Total	100.000	%

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The following table summarizes the pre-tax total return (before investment expenses) of investments managed by Arch compared to the benchmark return against which we measured our portfolio during the periods:

	Arch Portfolio		Benchmark Return
Pre-tax total return (before investment expenses):
2015 second quarter	(0.04	)%	(0.15	)%
2014 second quarter	1.80	%	1.73	%
Six Months Ended June 30, 2015	1.07	%	0.14	%
Six Months Ended June 30, 2014	2.84	%	3.08	%

Total return for the 2015 second quarter reflected the impact of the U.S. Dollar weakening against the British Pound Sterling, Euro and other major currencies on non-U.S. Dollar denominated investments and benefited from strong returns on alternatives and non-investment grade fixed income securities. Excluding the effects of foreign exchange, total return was (0.38)% for the 2015 second quarter, compared to 1.63% for the 2014 second quarter.

Comment on Non-GAAP Financial Measures

Throughout this filing, we present our operations in the way we believe will be the most meaningful and useful to investors, analysts, rating agencies and others who use our financial information in evaluating the performance of our company. This presentation includes the use of after-tax operating income available to Arch common shareholders, which is defined as net income available to Arch common shareholders, excluding net realized gains or losses, net impairment losses recognized in earnings, equity in net income or loss of investment funds accounted for using the equity method and net foreign exchange gains or losses, net of income taxes. The presentation of after-tax operating income available to Arch common shareholders is a “non-GAAP financial measure” as defined in Regulation G. The reconciliation of such measure to net income available to Arch common shareholders (the most directly comparable GAAP financial measure) in accordance with Regulation G is included under “Results of Operations” below.

We believe that net realized gains or losses, net impairment losses recognized in earnings, equity in net income or loss of investment funds accounted for using the equity method and net foreign exchange gains or losses in any particular period are not indicative of the performance of, or trends in, our business. Although net realized gains or losses, net impairment losses recognized in earnings, equity in net income or loss of investment funds accounted for using the equity method and net foreign exchange gains or losses are an integral part of our operations, the decision to realize investment gains or losses, the recognition of the change in the carrying value of investments accounted for using the fair value option in net realized gains or losses, the recognition of net impairment losses, the recognition of equity in net income or loss of investment funds accounted for using the equity method and the recognition of foreign exchange gains or losses are independent of the insurance underwriting process and result, in large part, from general economic and financial market conditions. Furthermore, certain users of our financial information believe that, for many companies, the timing of the realization of investment gains or losses is largely opportunistic. In addition, net impairment losses recognized in earnings on our investments represent other-than-temporary declines in expected recovery values on securities without actual realization. The use of the equity method on certain of our investments in certain funds that invest in fixed maturity securities is driven by the ownership structure of such funds (either limited partnerships or limited liability companies). In applying the equity method, these investments are initially recorded at cost and are subsequently adjusted based on our proportionate share of the net income or loss of the funds (which include changes in the market value of the underlying securities in the funds). This method of accounting is different from the way we account for our other fixed maturity securities and the timing of the recognition of equity in net income or loss of investment funds accounted for using the equity method may differ from gains or losses in the future upon sale or maturity of such investments. Due to these reasons, we exclude net realized gains or losses, net impairment losses recognized in earnings, equity in net income or loss of investment funds accounted for using the equity method and net foreign exchange gains or losses from the calculation of after-tax operating income available to Arch common shareholders.

We believe that showing net income available to Arch common shareholders exclusive of the items referred to above reflects the underlying fundamentals of our business since we evaluate the performance of and manage our business to produce an underwriting profit. In addition to presenting net income available to Arch common shareholders, we believe that this presentation enables investors and other users of our financial information to analyze our performance in a manner similar to how management analyzes performance. We also believe that this measure follows industry practice and, therefore, allows the users of financial information to compare our performance with our industry peer group. We believe that the equity analysts and certain rating agencies which follow us and the insurance industry as a whole generally exclude these items from their analyses for the same reasons.

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RESULTS OF OPERATIONS

The following table summarizes, on an after-tax basis, our consolidated financial data, including a reconciliation of after-tax operating income available to Arch common shareholders to net income available to Arch common shareholders:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015			2014
After-tax operating income available to Arch common shareholders	$	145,956		$	160,669		$	295,802		$	325,073
Net realized gains (losses), net of tax	(28,074		)	50,267			33,860			68,540
Net impairment losses recognized in earnings, net of tax	(1,113		)	(14,749		)	(6,912		)	(17,720		)
Equity in net income of investment funds accounted for using the equity method, net of tax	16,113			9,054			21,645			12,218
Net foreign exchange gains (losses), net of tax	(22,577		)	(2,710		)	43,762			(8,564		)
Net income available to Arch common shareholders	$	110,305		$	202,531		$	388,157		$	379,547

Segment Information

We classify our businesses into three underwriting segments — insurance, reinsurance and mortgage — and two other operating segments — ‘other’ and corporate (non-underwriting). Our insurance, reinsurance and mortgage segments each have managers who are responsible for the overall profitability of their respective segments and who are directly accountable to our chief operating decision makers, the Chairman, President and Chief Executive Officer of ACGL and the Chief Financial Officer of ACGL. The chief operating decision makers do not assess performance, measure return on equity or make resource allocation decisions on a line of business basis. Management measures segment performance for our three underwriting segments based on underwriting income or loss. We do not manage our assets by underwriting segment, with the exception of goodwill and intangible assets, and, accordingly, investment income is not allocated to each underwriting segment.

We determined our reportable segments using the management approach described in accounting guidance regarding disclosures about segments of an enterprise and related information. The accounting policies of the segments are the same as those used for the preparation of our consolidated financial statements. Intersegment business is allocated to the segment accountable for the underwriting results. The corporate (non-underwriting) segment results include net investment income, other income (loss), other expenses incurred by us, interest expense, net realized gains or losses, net impairment losses included in earnings, equity in net income or loss of investment funds accounted for using the equity method, net foreign exchange gains or losses, income taxes and items related to our non-cumulative preferred shares. Such amounts exclude the results of the ‘other’ segment.

The mortgage segment consists of our mortgage insurance and reinsurance business and includes the results of Arch MI U.S. Arch MI U.S. is approved as an eligible mortgage insurer by Federal National Mortgage Association (“Fannie Mae”) and Federal Home Loan Mortgage Corporation (“Freddie Mac”), each a government sponsored enterprise, or “GSE.” Arch MI U.S. provides mortgage insurance to banks, credit unions and other lenders nationwide. The mortgage segment also provides reinsurance on a global basis, direct mortgage insurance in Europe and various risk-sharing products to government agencies and mortgage lenders.

In March 2014, we invested $100.0 million and acquired approximately 11% of Watford Holdings Ltd.’s common equity and a warrant to purchase additional common equity. Watford Holdings Ltd. is the parent of Watford Re Ltd., a multi-line Bermuda reinsurance company (together with Watford Holdings Ltd., “Watford Re”). Watford Re is considered a variable interest entity (“VIE”) and we concluded that we are the primary beneficiary of Watford Re. As such, the results of Watford Re are included in our consolidated financial statements. The ‘other’ segment includes the results of Watford Re. Watford Re has its own management and board of directors that is responsible for the overall profitability of its results. The portion of Watford Re’s earnings attributable to third party investors is recorded in the consolidated statements of income as ‘amounts attributable to noncontrolling interests.’ For the ‘other’ segment, performance is measured based on net income or loss.

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Insurance Segment

The following table sets forth our insurance segment’s underwriting results:

	Three Months Ended June 30,								Six Months Ended June 30,
	2015			2014			% Change		2015			2014			% Change
Gross premiums written	$	744,810		$	852,231		(12.6	)	$	1,510,963		$	1,582,877		(4.5	)
Premiums ceded	(235,743		)	(273,349		)			(459,893		)	(458,393		)
Net premiums written	509,067			578,882			(12.1	)	1,051,070			1,124,484			(6.5	)
Change in unearned premiums	758			(71,170		)			(33,331		)	(139,271		)
Net premiums earned	509,825			507,712			0.4		1,017,739			985,213			3.3
Other underwriting income	521			514					948			1,014
Losses and loss adjustment expenses	(320,926		)	(311,526		)			(638,822		)	(598,296		)
Acquisition expenses, net	(76,723		)	(76,449		)			(151,801		)	(153,381		)
Other operating expenses	(89,054		)	(85,829		)			(177,173		)	(166,973		)
Underwriting income	$	23,643		$	34,422		(31.3	)	$	50,891		$	67,577		(24.7	)
Underwriting Ratios							% Point Change								% Point Change
Loss ratio	62.9		%	61.4		%	1.5		62.8		%	60.7		%	0.6
Acquisition expense ratio	15.0		%	15.1		%	(0.1	)	14.9		%	15.6		%	0.2
Other operating expense ratio	17.5		%	16.9		%	0.6		17.4		%	16.9		%	0.2
Combined ratio	95.4		%	93.4		%	2.0		95.1		%	93.2		%	1.0

The insurance segment consists of our insurance underwriting units which offer specialty product lines on a worldwide basis. Product lines include:

• Construction and national accounts: primary and excess casualty coverages to middle and large accounts in the construction industry and a wide range of products for middle and large national accounts, specializing in loss sensitive primary casualty insurance programs (including large deductible, self-insured retention and retrospectively rated programs).

• Excess and surplus casualty: primary and excess casualty insurance coverages, including middle market energy business, and contract binding, which primarily provides casualty coverage through a network of appointed agents to small and medium risks.

• Lenders products: collateral protection, debt cancellation and service contract reimbursement products to banks, credit unions, automotive dealerships and original equipment manufacturers and other specialty programs that pertain to automotive lending and leasing.

• Professional lines: directors’ and officers’ liability, errors and omissions liability, employment practices liability, fiduciary liability, crime, professional indemnity and other financial related coverages for corporate, private equity, venture capital, real estate investment trust, limited partnership, financial institution and not-for-profit clients of all sizes and medical professional and general liability insurance coverages for the healthcare industry. The business is predominately written on a claims-made basis.

• Programs: primarily package policies, underwriting workers’ compensation and umbrella liability business in support of desirable package programs, targeting program managers with unique expertise and niche products offering general liability, commercial automobile, inland marine and property business with minimal catastrophe exposure.

• Property, energy, marine and aviation: primary and excess general property insurance coverages, including catastrophe-exposed property coverage, for commercial clients. Coverages for marine include hull, war, specie and liability. Aviation and stand alone terrorism are also offered.

• Travel, accident and health: specialty travel and accident and related insurance products for individual, group travelers, travel agents and suppliers, as well as accident and health, which provides accident, disability and medical plan insurance coverages for employer groups, medical plan members, students and other participant groups.

• Other: includes alternative market risks (including captive insurance programs), excess workers’ compensation and employer’s liability insurance coverages for qualified self-insured groups, associations and trusts, and contract and commercial surety coverages, including contract bonds (payment and performance bonds) primarily for medium and large contractors and commercial surety bonds for Fortune 1,000 companies and smaller transaction business programs.

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Premiums Written.

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
	Amount		%	Amount		%	Amount		%	Amount		%
Programs	$	106,179	20.9	$	126,722	21.9	$	224,376	21.3	$	248,962	22.1
Professional lines	100,100		19.7	114,411		19.8	211,278		20.1	237,319		21.1
Construction and national accounts	77,096		15.1	79,171		13.7	173,599		16.5	174,668		15.5
Property, energy, marine and aviation	62,049		12.2	84,530		14.6	120,716		11.5	147,286		13.1
Excess and surplus casualty	53,971		10.6	58,789		10.2	103,341		9.8	102,729		9.1
Travel, accident and health	35,416		7.0	34,393		5.9	74,328		7.1	75,231		6.7
Lenders products	24,011		4.7	24,909		4.3	46,827		4.5	46,915		4.2
Other	50,245		9.9	55,957		9.7	96,605		9.2	91,374		8.1
Total	$	509,067	100.0	$	578,882	100.0	$	1,051,070	100.0	$	1,124,484	100.0

2015 Second Quarter versus 2014 Second Quarter. Gross premiums written by the insurance segment in the 2015 second quarter were 12.6%lower than in the 2014 second quarter, while net premiums written were 12.1%lower than in the 2014 second quarter. Changes in foreign currency rates resulted in a decrease in net premiums written in the 2015 second quarter of approximately $8 million, or 1.4%, compared to the 2014 second quarter. The lower level of net premiums written reflected reductions in property, energy and marine business, programs, professional lines and alternative markets business. The decrease in property, energy and marine business reflected rate decreases and strategic reductions in certain lines, while the reduction in program business reflected underwriting decisions to terminate two programs. The decline in professional lines was primarily related to the timing of premiums on renewal accounts while the decrease in alternative markets primarily reflected changes in renewal dates on business acquired as part of the renewal rights agreement entered into in the 2014 second quarter.

Six Months Ended June 30, 2015 versus 2014. Gross premiums written by the insurance segment for the six months ended June 30, 2015 were 4.5%lower than in the 2014 period, while net premiums written were 6.5%lower than in the 2014 period. The differential in gross versus net premiums written primarily resulted from growth in alternative markets business which is subject to a high level of cessions, primarily to captives. The lower level of net premiums written reflected reductions in property, energy and marine business, professional lines and programs. The decrease in property, energy and marine business reflected rate decreases and strategic reductions in certain lines. The decline in professional lines was primarily related to the timing of premiums on renewal accounts, while the reduction in program business reflected underwriting decisions to terminate two programs.

Net Premiums Earned.

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
	Amount		%	Amount		%	Amount		%	Amount		%
Programs	$	112,942	22.2	$	114,043	22.5	$	228,906	22.5	$	223,224	22.7
Professional lines	107,420		21.1	116,031		22.9	215,292		21.2	228,775		23.2
Construction and national accounts	71,580		14.0	72,064		14.2	143,810		14.1	141,053		14.3
Property, energy, marine and aviation	53,825		10.6	66,221		13.0	108,906		10.7	127,810		13.0
Excess and surplus casualty	51,709		10.1	43,600		8.6	104,056		10.2	82,707		8.4
Travel, accident and health	39,979		7.8	30,645		6.0	73,711		7.2	58,710		6.0
Lenders products	21,259		4.2	22,763		4.5	44,118		4.3	46,595		4.7
Other	51,111		10.0	42,345		8.3	98,940		9.7	76,339		7.7
Total	$	509,825	100.0	$	507,712	100.0	$	1,017,739	100.0	$	985,213	100.0

Net premiums written are primarily earned on a pro rata basis over the terms of the policies for all products, usually 12 months. Net premiums earned in the 2015 second quarter were 0.4%higher than in the 2014 second quarter and 3.3%higher for the six months ended June 30, 2015 than in the 2014 period. Net premiums earned reflect changes in net premiums written over the previous five quarters.

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Losses and Loss Adjustment Expenses.

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2015		2014		2015		2014
Current year	66.5	%	65.2	%	65.5	%	64.2	%
Prior period reserve development	(3.6	)%	(3.8	)%	(2.7	)%	(3.5	)%
Loss ratio	62.9	%	61.4	%	62.8	%	60.7	%

Current Year Loss Ratio.

The insurance segment’s current year loss ratio in the 2015 second quarter was 1.3 points higher than in the 2014 second quarter and 1.3 points higher for the six months ended June 30, 2015 than in the 2014 period. The 2015 second quarter loss ratio reflected 1.2 points of current year catastrophic activity, compared to 0.7 points in the 2014 second quarter. The loss ratio for the six months ended June 30, 2015 reflected 0.9 points of current year catastrophic activity, compared to 0.6 points for the 2014 period. The loss ratios for the 2015 periods also reflected the impact of changes in the mix of business and a higher level of non-catastrophic large loss activity than in the 2014 periods.

Prior Period Reserve Development.

2015 Second Quarter: The insurance segment’s net favorable development of $18.6 million, or 3.6 points, consisted of $13.6 million of net favorable development in short-tailed lines and $5.0 million of net favorable development in medium-tailed and long-tailed lines. Favorable development in short-tailed lines primarily consisted of reductions in property (including special risk other than marine) reserves from the 2011 to 2014 accident years (i.e., the year in which a loss occurred), primarily due to varying levels of reported claims activity. Development on the 2005 to 2014 named catastrophic events was adverse by $0.8 million in the quarter. Net favorable development in medium-tailed and long-tailed lines reflected favorable development in marine reserves, primarily from the 2013 accident year, in surety reserves, primarily from the 2012 and 2013 accident years, and in casualty reserves, primarily from the 2007 to 2009 accident years. In addition, the insurance segment’s results reflected net favorable development in professional lines of $0.7 million, including favorable development in healthcare reserves, primarily from the 2008 to 2011 accident years, partially offset by an increase in reserves on professional liability and executive assurance reserves, primarily in the 2009 and 2011 accident years due to a small number of large losses, largely offset by favorable development in other accident years.

2014 Second Quarter: The insurance segment’s net favorable development of $19.4 million, or 3.8 points, consisted of $26.2 million of net favorable development in short-tailed lines and $6.8 million of net adverse development in medium-tailed and long-tailed lines. Favorable development in short-tailed lines primarily consisted of reductions in property (including special risk other than marine) reserves from the 2010 and 2013 accident years, primarily due to varying levels of reported claims activity. Development on the 2005 to 2013 named catastrophic events was favorable by $4.4 million in the quarter. Net adverse development in medium-tailed and long-tailed lines reflected increases in construction reserves of $12.6 million, primarily resulting from higher reported losses in the 2011 to 2013 accident years, and net increases in professional lines of $2.6 million, reflecting adverse development in international professional liability from recent accident years and favorable development in healthcare business across most accident years. In addition, the insurance segment results reflected favorable development in marine business of $6.0 million and surety business of $2.0 million.

Six Months Ended June 30, 2015: The insurance segment’s net favorable development of $27.3 million, or 2.7 points, consisted of $25.6 million of net favorable development in short-tailed lines and $1.7 million of net favorable development in medium-tailed and long-tailed lines. Favorable development in short-tailed lines primarily consisted of reductions in property (including special risk other than marine) reserves from the 2008 to 2014 accident years, primarily due to varying levels of reported claims activity. Development on the 2005 to 2014 named catastrophic events was favorable by $2.9 million for the 2015 period. Net favorable development in medium-tailed and long-tailed lines reflected favorable development in marine reserves, primarily from the 2010 to 2013 accident years, and in surety reserves, primarily from the 2009 to 2013 accident years. In addition, the insurance segment’s results reflected net favorable development in professional lines of $3.1 million, including favorable development in healthcare reserves, primarily from the 2007 to 2012 accident years, and in executive assurance reserves across most accident years, partially offset by an increase in reserves on professional liability reserves, primarily in the 2011 and 2012 accident years.

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Six Months Ended June 30, 2014: The insurance segment’s net favorable development of $35.0 million, or 3.5 points, consisted of $40.6 million of net favorable development in short-tailed lines and $5.6 million of net adverse development in medium-tailed and long-tailed lines. Favorable development in short-tailed lines primarily consisted of reductions in property (including special risk other than marine) reserves from the 2008 and 2012 accident years, primarily due to varying levels of reported claims activity. Development on the 2005 to 2013 named catastrophic events was favorable by $6.2 million for the 2014 period. Net adverse development in medium-tailed and long-tailed lines reflected increases in construction reserves of $14.0 million and in program reserves of $13.7 million, both reflecting higher reported losses in the 2011 to 2013 accident years. In addition, the insurance segment results reflected favorable development in professional lines, reflecting favorable development in healthcare business across most accident years and other professional lines from earlier accident years, and in marine business.

Underwriting Expenses.

2015 Second Quarter versus 2014 Second Quarter: The insurance segment’s underwriting expense ratio was 32.5% in the 2015 second quarter, compared to 32.0% in the 2014 second quarter. The acquisition expense ratio was 15.0% in the 2015 second quarter, compared to 15.1% in the 2014 second quarter. The other operating expense ratio was 17.5% for the 2015 second quarter, compared to 16.9% for the 2014 second quarter, and consistent with the 2015 first quarter ratio.

Six Months Ended June 30, 2015 versus 2014: The insurance segment’s underwriting expense ratio was 32.3% for the six months ended June 30, 2015, compared to 32.5% in the 2014 period. The acquisition expense ratio was 14.9% for the six months ended June 30, 2015, compared to 15.6% in the 2014 period. The lower ratio for the six months ended June 30, 2015 primarily resulted from an increase in ceding commission rates and was impacted by changes in development of prior year loss reserves which increased the ratio by 0.5 points for the six months ended June 30, 2015, compared to 0.8 points in the 2014 period. The other operating expense ratio was 17.4% for the six months ended June 30, 2015, compared to 16.9% for the 2014 period, reflecting a higher level of aggregate expenses.

Reinsurance Segment

The following table sets forth our reinsurance segment’s underwriting results:

	Three Months Ended June 30,								Six Months Ended June 30,
	2015			2014			% Change		2015			2014			% Change
Gross premiums written	$	342,101		$	349,841		(2.2	)	$	827,213		$	866,894		(4.6	)
Premiums ceded	(89,446		)	(58,994		)			(226,015		)	(132,121		)
Net premiums written	252,655			290,847			(13.1	)	601,198			734,773			(18.2	)
Change in unearned premiums	21,310			44,780					(47,516		)	(57,798		)
Net premiums earned	273,965			335,627			(18.4	)	553,682			676,975			(18.2	)
Other underwriting income	2,658			303					4,087			619
Losses and loss adjustment expenses	(111,183		)	(150,325		)			(223,715		)	(289,961		)
Acquisition expenses, net	(58,360		)	(66,035		)			(114,964		)	(139,468		)
Other operating expenses	(39,007		)	(37,666		)			(77,051		)	(73,861		)
Underwriting income	$	68,073		$	81,904		(16.9	)	$	142,039		$	174,304		(18.5	)
Underwriting Ratios							% Point Change								% Point Change
Loss ratio	40.6		%	44.8		%	(4.2	)	40.4		%	42.8		%	0.4
Acquisition expense ratio	21.3		%	19.7		%	1.6		20.8		%	20.6		%	0.2
Other operating expense ratio	14.2		%	11.2		%	3.0		13.9		%	10.9		%	0.1
Combined ratio	76.1		%	75.7		%	0.4		75.1		%	74.3		%	0.7

The reinsurance segment consists of our reinsurance underwriting units which offer specialty product lines on a worldwide basis. Product lines include:

• Casualty: provides coverage to ceding company clients on third party liability and workers’ compensation exposures from ceding company clients, primarily on a treaty basis. Exposures include, among others, executive assurance, professional liability, workers’ compensation, excess and umbrella liability, excess motor and healthcare business.

• Marine and aviation: provides coverage for energy, hull, cargo, specie, liability and transit, and aviation business, including airline and general aviation risks. Business written may also include space business, which includes coverages for satellite assembly, launch and operation for commercial space programs.

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• Other specialty: provides coverage to ceding company clients for proportional motor and other lines including surety, accident and health, workers’ compensation catastrophe, agriculture, trade credit and political risk.

• Property catastrophe: provides protection for most catastrophic losses that are covered in the underlying policies written by reinsureds, including hurricane, earthquake, flood, tornado, hail and fire, and coverage for other perils on a case-by-case basis. Property catastrophe reinsurance provides coverage on an excess of loss basis when aggregate losses and loss adjustment expense from a single occurrence of a covered peril exceed the retention specified in the contract.

• Property excluding property catastrophe: provides coverage for both personal lines and commercial property exposures and principally covers buildings, structures, equipment and contents. The primary perils in this business include fire, explosion, collapse, riot, vandalism, wind, tornado, flood and earthquake. Business is assumed on both a proportional and excess of loss basis. In addition, facultative business is written which focuses on commercial property risks on an excess of loss basis.

• Other. includes life reinsurance business on both a proportional and non-proportional basis, casualty clash business and, in limited instances, non-traditional business which is intended to provide insurers with risk management solutions that complement traditional reinsurance.

Premiums Written.

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
	Amount		%	Amount		%	Amount		%	Amount		%
Other specialty	$	72,134	28.6	$	105,721	36.3	$	173,282	28.8	$	253,330	34.5
Casualty	64,778		25.6	67,823		23.3	182,636		30.4	194,536		26.5
Property excluding property catastrophe	57,005		22.6	54,887		18.9	146,929		24.4	150,014		20.4
Property catastrophe	46,046		18.2	53,986		18.6	61,489		10.2	106,498		14.5
Marine and aviation	9,461		3.7	6,880		2.4	30,305		5.0	23,791		3.2
Other	3,231		1.3	1,550		0.5	6,557		1.1	6,604		0.9
Total	$	252,655	100.0	$	290,847	100.0	$	601,198	100.0	$	734,773	100.0
Pro rata	$	128,976	51.0	$	123,663	42.5	$	259,211	43.1	$	297,860	40.5
Excess of loss	123,679		49.0	167,184		57.5	341,987		56.9	436,913		59.5
Total	$	252,655	100.0	$	290,847	100.0	$	601,198	100.0	$	734,773	100.0

2015 Second Quarter versus 2014 Second Quarter. Gross premiums written by the reinsurance segment in the 2015 second quarter were 2.2%lower than in the 2014 second quarter, while net premiums written were 13.1%lower than in the 2014 second quarter. The difference in gross versus net premiums written primarily reflects an increase in cessions to Watford Re in the 2015 second quarter compared to the 2014 second quarter. Changes in foreign currency rates resulted in a decrease in net premiums written in the 2015 second quarter of approximately $14 million, or 4.8%, compared to the 2014 second quarter. The lower level of net premiums written reflected decreases in other specialty and property catastrophe business. The decrease in other specialty reflected non-renewals and share decreases in response to current market conditions, primarily in proportional motor contracts. The lower level of property catastrophe business reflected non-renewals and share decreases, also in response to current market conditions.

Six Months Ended June 30, 2015 versus 2014. Gross premiums written by the reinsurance segment for the six months ended June 30, 2015 were 4.6%lower than in the 2014 period, while net premiums written were 18.2%lower than in the 2014 period. The differential in gross versus net premiums written primarily reflects an increase in cessions of premiums to Watford Re for the six months ended June 30, 2015 compared to the 2014 period. The lower level of net premiums written reflected decreases in other specialty and property catastrophe business. The decrease in other specialty reflected non-renewals and share decreases in response to current market conditions, primarily in proportional motor contracts. The lower level of property catastrophe business reflected non-renewals and share decreases, also in response to current market conditions.

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Net Premiums Earned.

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
	Amount		%	Amount		%	Amount		%	Amount		%
Other specialty	$	80,256	29.3	$	118,504	35.3	$	164,054	29.6	$	233,442	34.5
Casualty	83,186		30.4	90,176		26.9	156,567		28.3	168,922		25.0
Property excluding property catastrophe	69,600		25.4	69,172		20.6	149,364		27.0	144,546		21.4
Property catastrophe	24,325		8.9	39,870		11.9	51,595		9.3	89,664		13.2
Marine and aviation	13,423		4.9	15,259		4.5	26,036		4.7	34,154		5.0
Other	3,175		1.2	2,646		0.8	6,066		1.1	6,247		0.9
Total	$	273,965	100.0	$	335,627	100.0	$	553,682	100.0	$	676,975	100.0
Pro rata	$	143,835	52.5	$	178,344	53.1	$	297,350	53.7	$	365,781	54.0
Excess of loss	130,130		47.5	157,283		46.9	256,332		46.3	311,194		46.0
Total	$	273,965	100.0	$	335,627	100.0	$	553,682	100.0	$	676,975	100.0

Net premiums written, irrespective of the class of business, are generally earned on a pro rata basis over the terms of the underlying policies or reinsurance contracts. Net premiums earned for the 2015 second quarter were 18.4%lower than in the 2014 second quarter and 18.2%lower for the six months ended June 30, 2015 than in the 2014 period. Net premiums earned reflect changes in net premiums written over the previous five quarters.

Losses and Loss Adjustment Expenses.

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2015		2014		2015		2014
Current year	61.7	%	65.4	%	61.3	%	63.4	%
Prior period reserve development	(21.1	)%	(20.6	)%	(20.9	)%	(20.6	)%
Loss ratio	40.6	%	44.8	%	40.4	%	42.8	%

Current Year Loss Ratio.

The reinsurance segment’s current year loss ratio in the 2015 second quarter was 3.7 points lower than in the 2014 second quarter and 2.1 points lower for the six months ended June 30, 2015 than in the 2014 period. The 2015 second quarter loss ratio reflected 3.7 points of current year catastrophic activity, compared to 4.1 points in the 2014 second quarter. The loss ratio for the six months ended June 30, 2015 reflected 2.1 points of current year catastrophic activity, compared to 2.5 points for the 2014 period. The current year loss ratio for the 2015 second quarter and six months ended June 30, 2015 also reflects changes in the mix of business earned due, in part, to a lower contribution from property catastrophe business.

Prior Period Reserve Development.

2015 Second Quarter: The reinsurance segment’s net favorable development of $57.8 million, or 21.1 points, consisted of $21.2 million from short-tailed lines and $36.6 million from long-tailed and medium-tailed lines. Favorable development in short-tailed lines included $18.4 million from property catastrophe and property other than property catastrophe reserves, primarily from the 2012 to 2014 underwriting years (i.e., all premiums and losses attributable to contracts having an inception or renewal date within the given twelve-month period). Contained within this release was favorable development from the 2005 to 2014 named catastrophic events of $8.3 million. The net reduction of loss estimates for the reinsurance segment’s short-tailed lines primarily resulted from varying levels of reported and paid claims activity than previously anticipated which led to decreases in certain loss ratio selections during the period. Favorable development in long-tailed lines reflected reductions in casualty reserves of $36.3 million based on varying levels of reported and paid claims activity, primarily from the 2003 to 2009 underwriting years.

2014 Second Quarter: The reinsurance segment’s net favorable development of $69.1 million, or 20.6 points, consisted of $37.2 million from short-tailed lines and $31.9 million from long-tailed and medium-tailed lines. Favorable development in short-tailed lines included $29.4 million from property catastrophe and property other than property catastrophe reserves,

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primarily from the 2012 and 2013 underwriting years. Contained within this release was favorable development from the 2005 to 2013 named catastrophic events of $11.0 million. The net reduction of loss estimates for the reinsurance segment’s short-tailed lines primarily resulted from varying levels of reported and paid claims activity than previously anticipated which led to decreases in certain loss ratio selections during the period. Favorable development in long-tailed lines reflected reductions in casualty reserves of $24.7 million, primarily from the 2003 to 2007 underwriting years based on varying levels of reported and paid claims activity, and a reduction of $4.3 million in marine and aviation reserves, across all underwriting years.

Six Months Ended June 30, 2015: The reinsurance segment’s net favorable development of $115.8 million, or 20.9 points, consisted of $60.4 million from short-tailed lines and $55.4 million from long-tailed and medium-tailed lines. Favorable development in short-tailed lines included $45.9 million from property catastrophe and property other than property catastrophe reserves, primarily from the 2012 to 2014 underwriting years. Contained within this release was favorable development from the 2005 to 2014 named catastrophic events of $10.3 million. The net reduction of loss estimates for the reinsurance segment’s short-tailed lines primarily resulted from varying levels of reported and paid claims activity than previously anticipated which led to decreases in certain loss ratio selections during the period. Favorable development in long-tailed lines reflected reductions in casualty reserves of $52.2 million, primarily from the 2003 to 2009 underwriting years based on varying levels of reported and paid claims activity, and a reduction of $3.2 million in marine and aviation reserves, primarily from the 2010 to 2012 underwriting years.

Six Months Ended June 30, 2014: The reinsurance segment’s net favorable development of $139.5 million, or 20.6 points, consisted of $88.4 million from short-tailed lines and $51.1 million from long-tailed and medium-tailed lines. Favorable development in short-tailed lines included $67.9 million from property catastrophe and property other than property catastrophe reserves, primarily from the 2011 to 2013 underwriting years. Contained within this release was favorable development from the 2005 to 2013 named catastrophic events of $9.4 million. The net reduction of loss estimates for the reinsurance segment’s short-tailed lines primarily resulted from varying levels of reported and paid claims activity than previously anticipated which led to decreases in certain loss ratio selections during the period. Favorable development in long-tailed lines reflected reductions in casualty reserves of $40.1 million, primarily from the 2003 to 2007 underwriting years based on varying levels of reported and paid claims activity, and a reduction of $8.6 million in marine and aviation reserves, across all underwriting years.

Underwriting Expenses.

2015 Second Quarter versus 2014 Second Quarter: The underwriting expense ratio for the reinsurance segment was 35.5% in the 2015 second quarter, compared to 30.9% in the 2014 second quarter. The acquisition expense ratio for the 2015 second quarter was 21.3%, compared to 19.7% for the 2014 second quarter. The comparison of the acquisition expense ratios in each period is influenced by, among other things, the mix and type of business written and earned, including a lower contribution from property catastrophe business than in the 2014 second quarter, and an increase in the level of ceding commissions. The operating expense ratio for the 2015 second quarter was 14.2%, compared to 11.2% in the 2014 second quarter, primarily reflecting the lower level of net premiums earned.

Six Months Ended June 30, 2015 versus 2014: The underwriting expense ratio for the reinsurance segment was 34.7% for the six months ended June 30, 2015, compared to 31.5% in the 2014 period. The acquisition expense ratio was 20.8% for the six months ended June 30, 2015, compared to 20.6% in the 2014 period. The comparison of the acquisition expense ratios in each period is influenced by, among other things, the mix and type of business written and earned, including a lower contribution from property catastrophe business than in the 2014 period. The operating expense ratio for the six months ended June 30, 2015 was 13.9%, compared to 10.9% in the 2014 period, primarily reflecting the lower level of net premiums earned.

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Mortgage Segment

The following table sets forth our mortgage segment’s underwriting results:

	Three Months Ended June 30,								Six Months Ended June 30,
	2015			2014			% Change		2015			2014			% Change
Gross premiums written	$	68,572		$	55,476		23.6		$	129,113		$	103,383		24.9
Premiums ceded	(6,902		)	(5,079		)			(15,572		)	(9,718		)
Net premiums written	61,670			50,397			22.4		113,541			93,665			21.2
Change in unearned premiums	(9,211		)	436					(10,715		)	(4,067		)
Net premiums earned	52,459			50,833			3.2		102,826			89,598			14.8
Other underwriting income	3,686			1,216					11,404			1,982
Losses and loss adjustment expenses	(9,639		)	(15,473		)			(23,448		)	(23,951		)
Acquisition expenses, net	(10,200		)	(11,481		)			(20,618		)	(20,635		)
Other operating expenses	(19,679		)	(16,288		)			(40,048		)	(30,164		)
Underwriting income	$	16,627		$	8,807		88.8		$	30,116		$	16,830		78.9
Underwriting Ratios							% Point Change								% Point Change
Loss ratio	18.4		%	30.4		%	(12.0	)	22.8		%	26.7		%	0.1
Acquisition expense ratio	19.4		%	22.6		%	(3.2	)	20.1		%	23.0		%	0.3
Other operating expense ratio	37.5		%	32.0		%	5.5		38.9		%	33.7		%	0.2
Combined ratio	75.3		%	85.0		%	(9.7	)	81.8		%	83.4		%	0.6

Premiums Written.

The following table sets forth our mortgage segment’s net premiums written by client location and underwriting location (i.e., where the business is underwritten):

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
	Amount		%	Amount		%	Amount		%	Amount		%
Net premiums written by client location:
United States	$	47,460	77.0	$	46,111	91.5	93,282		82.2	82,667		88.3
Other	14,210		23.0	4,286		8.5	20,259		17.8	10,998		11.7
Total	$	61,670	100.0	$	50,397	100.0	$	113,541	100.0	$	93,665	100.0
Net premiums written by underwriting location:
United States	$	30,589	49.6	$	24,594	48.8	$	58,545	51.6	$	41,325	44.1
Other	31,081		50.4	25,803		51.2	54,996		48.4	52,340		55.9
Total	$	61,670	100.0	$	50,397	100.0	$	113,541	100.0	$	93,665	100.0

2015 Second Quarter versus 2014 Second Quarter. Net premiums written in the 2015 second quarter included $30.6 million of business underwritten by Arch MI U.S., compared to $24.6 million in the 2014 second quarter. The 2015 second quarter amount reflected $23.8 million from credit union clients and $6.8 million from banks and other mortgage originators while substantially all of the 2014 second quarter amount related to credit union clients. Premiums written on reinsurance treaties covering U.S. and international mortgages were higher by $5.3 million compared to the 2014 second quarter. The persistency rate, which represents the percentage of mortgage insurance in force at the beginning of a 12-month period that remains in force at the end of such period, of the Arch MI U.S. portfolio of mortgage loans was 78.2% at June 30, 2015, compared to 80.9% at December 31, 2014. The decline in persistency was due to policy terminations resulting from low interest rates and associated mortgage refinance activity.

Six Months Ended June 30, 2015 versus 2014. Net premiums written for the six months ended June 30, 2015 included $58.5 million of business underwritten by Arch MI U.S., including $47.5 million from credit union clients and $11.0 million from banks and other originators, compared to $41.3 million for the 2014 period. The 2014 period reflected five months of activity for Arch MI U.S. due to the acquisition date of January 30, 2014.

Arch MI U.S. generated $2.71 billion of new insurance written (“NIW”) during the 2015 second quarter, of which approximately 50% was from bank channel clients. NIW represents the original principal balance of all loans that received coverage during the period.

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The following table provides details on the NIW generated by Arch MI U.S. for the last four quarters:

(U.S. Dollars in millions)	Three Months Ended												Six Months Ended
	June 30, 2015			March 31, 2015			December 31, 2014			September 30, 2014			June 30, 2015
	Amount		%	Amount		%	Amount		%	Amount		%	Amount		%
Total new insurance written (NIW)	$	2,709		$	1,808		$	1,359		$	1,982		$	4,517
Total NIW by credit quality (FICO score):
>=740	$	1,723	63.6	$	1,064	58.8	$	730	53.7	$	1,279	64.5	$	2,787	61.7
680-739	842		31.1	602		33.3	480		35.3	629		31.7	1,444		32.0
620-679	143		5.3	142		7.9	149		11.0	74		3.7	285		6.3
<620	1		—	—		—	—		—	$	—	—	1		—
Total	$	2,709	100.0	$	1,808	100.0	$	1,359	100.0	$	1,982	100.0	$	4,517	100.0
Total NIW by LTV:
95.01% and above	$	165	6.1	$	86	4.8	$	79	5.8	$	81	4.1	$	251	5.6
90.01% to 95.00%	1,227		45.3	682		37.7	620		45.6	904		45.6	1,909		42.3
85.01% to 90.00%	908		33.5	583		32.2	389		28.6	646		32.6	1,491		33.0
85.01% and below	409		15.1	457		25.3	271		19.9	351		17.7	866		19.2
Total	$	2,709	100.0	$	1,808	100.0	$	1,359	100.0	$	1,982	100.0	$	4,517	100.0
Total NIW purchase vs. refinance:
Purchase	$	1,830	67.6	$	918	50.8	$	950	69.9	$	1,234	62.3	$	2,748	60.8
Refinance	879		32.4	890		49.2	409		30.1	748		37.7	1,769		39.2
Total	$	2,709	100.0	$	1,808	100.0	$	1,359	100.0	$	1,982	100.0	$	4,517	100.0

Net Premiums Earned.

The following table sets forth our mortgage segment’s net premiums earned by underwriting location:

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
	Amount		%	Amount		%	Amount		%	Amount		%
Net premiums earned by underwriting location:
United States	$	27,450	52.3	$	24,819	48.8	$	52,969	51.5	$	41,675	46.5
Other	25,009		47.7	26,014		51.2	49,857		48.5	47,923		53.5
Total	$	52,459	100.0	$	50,833	100.0	$	102,826	100.0	$	89,598	100.0

Net premiums earned for the 2015 periods were higher than in the 2014 periods, primarily due to the acquisition of Arch MI U.S. along with a higher earned contribution from the mortgage segment’s quota share reinsurance business.

Losses and Loss Adjustment Expenses.

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2015		2014		2015		2014
Current year	20.5	%	30.2	%	26.4	%	27.9	%
Prior period reserve development	(2.1	)%	0.2	%	(3.6	)%	(1.2	)%
Loss ratio	18.4	%	30.4	%	22.8	%	26.7	%

Unlike property and casualty business for which we estimate ultimate losses on premiums earned, losses on mortgage insurance business are only recorded at the time a borrower is delinquent on their mortgage, in accordance with mortgage insurance industry practice. Because our mortgage insurance reserving process does not take into account the impact of future losses from loans that are not in default, mortgage insurance loss reserves are not an estimate of ultimate losses. In addition to establishing loss reserves for loans in default, under GAAP, we are required to establish a premium deficiency reserve for our mortgage insurance products if the amount of expected future losses for a particular product and maintenance costs for such product exceeds expected future premiums, existing reserves and the anticipated investment income for such product. We evaluate whether a premium deficiency exists quarterly. No such reserve was established for the six months ended June 30, 2015.

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The mortgage segment’s current year loss ratio was 9.7 points lower in the 2015 second quarter compared to the 2014 second quarter and 1.5 points lower for the six months ended June 30, 2015 than in the 2014 period. The current year loss ratio for the 2015 periods reflect changes in the mix of business earned, when compared to the 2014 periods. The mortgage segment’s net favorable development for the 2015 second quarter of $1.1 million, or 2.1 points, and $3.7 million, or 3.6 points, for the six months ended June 30, 2015 was spread across a number of underwriting years.

Underwriting Expenses.

2015 Second Quarter versus 2014 Second Quarter. The underwriting expense ratio for the mortgage segment was 56.9% in the 2015 second quarter, compared to 54.6% in the 2014 second quarter. The acquisition expense ratio was 19.4% for the 2015 second quarter, compared to 22.6% for the 2014 second quarter. The operating expense ratio was 37.5% for the 2015 second quarter, compared to 32.0% in the 2014 second quarter. As the mortgage segment’s mix is expected to shift more towards U.S. mortgage insurance business, the underwriting expense ratio is expected to stay at an elevated rate until Arch MI U.S. reaches scale with respect to non-credit union clientele.

Six Months Ended June 30, 2015 versus 2014. The underwriting expense ratio for the mortgage segment was 59.0% for the six months ended June 30, 2015, compared to 56.7% for the 2014 period. The acquisition expense ratio was 20.1% for the six months ended June 30, 2015, compared to 23.0% for the 2014 period. The operating expense ratio was 38.9% for the six months ended June 30, 2015, compared to 33.7% in the 2014 period.

Other Segment

As noted earlier, the ‘other’ segment includes the results of Watford Re. See note 3, “Variable Interest Entity and Noncontrolling Interests” and note 5, “Segment Information,” of the notes accompanying our consolidated financial statements for additional information. The following table sets forth the results of our ‘other’ segment:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015			2014
Gross premiums written	$	127,954		$	54,562		$	256,587		$	86,756
Premiums ceded	(7,766		)	(2,760		)	(11,821		)	(2,760		)
Net premiums written	120,188			51,802			244,766			83,996
Change in unearned premiums	(12,999		)	(38,822		)	(65,311		)	(68,850		)
Net premiums earned	107,189			12,980			179,455			15,146
Other underwriting income	852			—			2,814			—
Losses and loss adjustment expenses	(77,678		)	(8,194		)	(127,157		)	(9,550		)
Acquisition expenses, net	(30,142		)	(4,193		)	(51,118		)	(5,016		)
Other operating expenses	(3,450		)	(1,635		)	(5,455		)	(2,744		)
Underwriting income (loss)	(3,229		)	(1,042		)	(1,461		)	(2,164		)
Net investment income	19,792			532			28,498			533
Other expenses	—			347			—			(2,329		)
Net realized gains (losses)	(8,865		)	3,178			8,974			3,178
Net foreign exchange gains (losses)	2,988			470			2,636			563
Net income (loss)	10,686			3,485			38,647			(219		)
Dividends attributable to redeemable noncontrolling interests (1)	(4,743		)	(4,857		)	(9,651		)	(4,909		)
Net income (loss) attributable to common interests	5,943			(1,372		)	28,996			(5,128		)
Amounts attributable to nonredeemable noncontrolling interests (1)	(5,286		)	1,156			(25,799		)	4,563
Net income (loss) available to Arch	$	657		$	(216	)	$	3,197		$	(565	)
Underwriting Ratios
Loss ratio	72.5		%	63.1		%	70.9		%	63.1		%
Acquisition expense ratio	28.1		%	32.3		%	28.5		%	33.1		%
Other operating expense ratio	3.2		%	12.6		%	3.0		%	18.1		%
Combined ratio	103.8		%	108.0		%	102.4		%	114.3		%
Total investable assets	$	1,340,574		$	1,114,719
Total assets	1,761,314			1,363,318
Total liabilities	648,278			253,507

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(1)     Recorded as ‘amounts attributable to noncontrolling interests’ in the consolidated statements of income.

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Other Income or Expense Items (excluding amounts related to the ‘other’ segment)

Net Investment Income. The components of net investment income were derived from the following sources:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015			2014
Fixed maturities	$	61,191		$	64,499		$	123,559		$	126,948
Term loan investments	4,566			5,233			8,841			10,902
Equity securities	2,742			3,271			5,421			6,192
Short-term investments	183			103			378			508
Other (1)	10,472			9,067			23,209			13,785
Gross investment income	79,154			82,173			161,408			158,335
Investment expenses (2)	(11,983		)	(9,715		)	(23,949		)	(18,884		)
Net investment income	$	67,171		$	72,458		$	137,459		139,451

_________________________________________________

(1) Amounts include dividends and interest distributions on investment funds and other items.

(2) Investment expenses were approximately 0.37% of average invested assets for the 2015 second quarter, compared to 0.29% for the 2014 second quarter, and 0.39% for the six months ended June 30, 2015, compared to 0.29% for the 2014 period.

The pre-tax investment income yield, calculated based on amortized cost and on an annualized basis, was 2.05% for the 2015 second quarter, compared to 2.05% for the 2014 second quarter, and 2.07% for the six months ended June 30, 2015, compared to 2.07% for the 2014 period. The comparability of net investment income between the periods was influenced by our share repurchase program, as well as the effects of low prevailing interest rates available in the market. Yields in the future may vary based on financial market conditions, investment allocation decisions and other factors.

Other Income (Loss). We record income or loss from certain investments using the equity method on a three month lag basis based on the availability of their financial statements, including income or loss on our investment in Gulf Reinsurance Limited (“Gulf Re”) for the period prior to the closing of our acquisition of Gulf Re on May 14, 2015. In addition, other income (loss) from time to time includes certain non-recurring items. We recorded other income of $2.2 million in the 2015 second quarter, primarily related to Gulf Re, compared to $4.9 million in the 2014 second quarter, which reflected a large non-recurring item. For the six months ended June 30, 2015, other income was $0.3 million, compared to $2.7 million for the 2014 period.

Equity in Net Income of Investment Funds Accounted for Using the Equity Method. We recorded $16.2 million of equity in net income related to investment funds accounted for using the equity method in the 2015 second quarter, compared to $9.2 million for the 2014 second quarter, and $22.1 million for the six months ended June 30, 2015, compared to $12.5 million for the 2014 period. We use the equity method on certain investment funds due to their ownership structure, which are typically structured as limited partnerships, where we do not have a controlling interest and are not the primary beneficiary. In applying the equity method, these investments are initially recorded at cost and are subsequently adjusted based on our proportionate share of the net income or loss of the funds (which include changes in the market value of the underlying securities in the funds). Such investments are generally recorded on a one to three month lag based on the availability of reports from the investment funds. Certain of these funds employ leverage to achieve a higher rate of return on their assets under management. While leverage presents opportunities for increasing the total return of such investments, it may increase losses as well. Fluctuations in the carrying value of the investment funds accounted for using the equity method may increase the volatility of our reported results of operations. Investment funds accounted for using the equity method totaled $472.9 million at June 30, 2015, compared to $349.0 million at December 31, 2014.  

Net Realized Gains or Losses. We recorded net realized losses of $26.9 million for the 2015 second quarter, compared to net realized gains of $51.0 million for the 2014 second quarter, and net realized gains of $38.6 million for the six months ended June 30, 2015, compared to net realized gains of $70.7 million for the 2014 period. Currently, our portfolio is actively managed to maximize total return within certain guidelines. In assessing returns under this approach, we include net investment income, net realized gains and losses and the change in unrealized gains and losses generated by our investment portfolio. The effect of financial market movements on the investment portfolio will directly impact net realized gains and losses as the portfolio is adjusted and rebalanced. Net realized gains or losses from the sale of fixed maturities primarily resulted from our decisions to reduce credit exposure, to change duration targets, to rebalance our portfolios or due to relative value determinations. Net realized gains or losses also included realized and unrealized contract gains and losses on our derivative instruments, changes in the fair value of assets and liabilities accounted for using the fair value option along with re-measurement of contingent

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consideration liability amounts. See note 6, “Investment Information—Net Realized Gains (Losses),” of the notes accompanying our consolidated financial statements for additional information.

Net Impairment Losses Recognized in Earnings. On a quarterly basis, we perform reviews of our available for sale investments to determine whether declines in fair value below the cost basis are considered other-than-temporary in accordance with applicable accounting guidance regarding the recognition and presentation of other-than-temporary impairments. We recorded $1.1 million of OTTI for the 2015 second quarter, compared to $14.7 million for the 2014 second quarter, and $6.9 million for the six months ended June 30, 2015, compared to $17.7 million for the 2014 period. The OTTI recorded for the 2015 second quarter primarily related to a reduction in the carrying value of one fund investment while the OTTI recorded for the six months ended June 30, 2015 included impairments on a short-term investment due to the decline of the Euro against the U.S. Dollar, a small number of corporate bonds based on information received from external investment managers and other items. See note 6, “Investment Information—Other-Than-Temporary Impairments,” of the notes accompanying our consolidated financial statements for additional information.

Other Expenses. Other expenses, which are included in our other operating expenses and part of corporate and other (non-underwriting), were $17.4 million for the 2015 second quarter, compared to $15.3 million for the 2014 second quarter, and $26.8 million for the six months ended June 30, 2015, compared to $26.1 million for the 2014 period. Such amounts primarily represent certain holding company costs necessary to support our worldwide insurance and reinsurance operations, share based compensation expense and costs associated with operating as a publicly traded company.

Interest expense. Interest expense was $4.0 million for the 2015 second quarter, compared to $14.3 million for the 2014 second quarter, and $16.7 million for the six months ended June 30, 2015, compared to $28.7 million for the 2014 period. The lower level of interest expense in the 2015 periods primarily resulted from an $8.4 million reduction in interest expense in the 2015 second quarter on a deposit accounting liability (i.e., a contract that, in accordance with GAAP, does not pass risk transfer). The reduction resulted from a reassessment of the estimated ultimate liability due to a determination that paid losses were expected to be lower than previously anticipated.

Net Foreign Exchange Gains or Losses. Net foreign exchange losses for the 2015 second quarter were $22.6 million, compared to net foreign exchange losses for the 2014 second quarter of $2.8 million. Net foreign exchange gains for the six months ended June 30, 2015 were $44.3 million, compared to net foreign exchange losses for the 2014 period of $9.4 million. Amounts in all periods were primarily unrealized and resulted from the effects of revaluing our net insurance liabilities required to be settled in foreign currencies at each balance sheet date. Changes in the value of investments held in foreign currencies due to foreign currency rate movements are reflected as a direct increase or decrease to shareholders’ equity and are not included in the consolidated statements of income. We have not matched a portion of our projected liabilities in foreign currencies with investments in the same currencies and may not match such amounts in future periods, which could increase our exposure to foreign currency fluctuations and increase the volatility of our shareholders’ equity.

Income tax expense. Our income tax provision on income before income taxes resulted in an expense of 5.1% for the 2015 second quarter, compared to 3.4% for the 2014 second quarter, and 4.3% for the six months ended June 30, 2015, compared to 2.7% for the 2014 period. Our effective tax rate, which is based upon the expected annual effective tax rate, may fluctuate from period to period based on the relative mix of income or loss reported by jurisdiction and the varying tax rates in each jurisdiction.

CRITICAL ACCOUNTING POLICIES, ESTIMATES AND RECENT ACCOUNTING PRONOUNCEMENTS

Critical accounting policies, estimates and recent accounting pronouncements are discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our 2014 Form 10-K, updated where applicable in the notes accompanying our consolidated financial statements.

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FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Financial Condition

Investable Assets

At June 30, 2015, total investable assets of $15.85 billion included $14.51 billion managed by Arch and $1.34 billion included in the ‘other’ segment (i.e., attributable to Watford Re).

Investable Assets Managed by Arch

The finance and investment committee of our board of directors establishes our investment policies and sets the parameters for creating guidelines for our investment managers. The finance and investment committee reviews the implementation of the investment strategy on a regular basis. Our current approach stresses preservation of capital, market liquidity and diversification of risk. While maintaining our emphasis on preservation of capital and liquidity, we expect our portfolio to become more diversified and, as a result, we may expand into areas which are not currently part of our investment strategy. Our Chief Investment Officer administers the investment portfolio, oversees our investment managers, formulates investment strategy in conjunction with our finance and investment committee and directly manages certain portions of our fixed income and equity portfolios.

The following table summarizes the fair value of the investable assets managed by Arch:

	June 30, 2015			December 31, 2014
	Amount		% of Total	Amount			% of Total
Investable assets (1) (2):
Fixed maturities available for sale, at fair value	$	9,927,603	68.4	$	10,750,770		73.6
Fixed maturities, at fair value (3)	387,941		2.7	377,053			2.6
Fixed maturities pledged under securities lending agreements, at fair value	373,969		2.6	50,802			0.4
Total fixed maturities	10,689,513		73.7	11,178,625			76.6
Short-term investments available for sale, at fair value	875,727		6.0	797,226			5.5
Cash	470,011		3.2	474,247			3.2
Equity securities available for sale, at fair value	701,623		4.8	658,182			4.5
Equity securities, at fair value (3)	248		—	—			—
Other investments available for sale, at fair value	377,677		2.6	296,224			2.0
Other investments, at fair value (3)	899,763		6.2	878,774			6.0
Investments accounted for using the equity method (4)	472,926		3.3	349,014			2.4
Securities transactions entered into but not settled at the balance sheet date	26,066		0.2	(32,802		)	(0.2	)
Total investable assets managed by Arch	$	14,513,554	100.0	$	14,599,490		100.0

_________________________________________________

(1) The table above excludes investable assets attributable to the ‘other’ segment. See “Investable Assets in the ‘Other’ Segment.”

(2) In securities lending transactions, we receive collateral in excess of the fair value of the securities pledged. For purposes of this table, we have excluded the collateral received under securities lending, at fair value and included the securities pledged under securities lending, at fair value.

(3) Represents investments which are carried at fair value under the fair value option and reflected as “investments accounted for using the fair value option” on our balance sheet. Changes in the carrying value of such investments are recorded in net realized gains or losses.

(4) Changes in the carrying value of investment funds accounted for using the equity method are recorded as “equity in net income (loss) of investment funds accounted for using the equity method” rather than as an unrealized gain or loss component of accumulated other comprehensive income.

At June 30, 2015, our fixed income portfolio, which includes fixed maturity securities and short-term investments, had average credit quality ratings from Standard & Poor’s Rating Services (“S&P”)/Moody’s of “AA/Aa2” and an average yield to maturity (embedded book yield), before investment expenses, of 2.07%. At December 31, 2014, our fixed income portfolio had average credit quality ratings from S&P/Moody’s of “AA/Aa2” and an average yield to maturity of 2.18%. Our investment portfolio had an average effective duration of 3.05 years at June 30, 2015, compared to 3.34 years at December 31, 2014. At June 30, 2015, approximately $9.60 billion, or 66%, of total investable assets managed by Arch were internally managed, compared to $9.87 billion, or 68%, at December 31, 2014.

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The following table summarizes our fixed maturities and fixed maturities pledged under securities lending agreements (“Fixed Maturities”) by type:

	Estimated Fair Value		Gross Unrealized Gains		Gross Unrealized Losses			Cost or Amortized Cost
June 30, 2015
Corporate bonds	$	3,080,648	$	26,401	$	(51,717	)	$	3,105,964
Mortgage backed securities	896,245		12,315		(4,231		)	888,161
Municipal bonds	1,760,384		19,601		(9,004		)	1,749,787
Commercial mortgage backed securities	832,159		6,760		(4,922		)	830,321
U.S. government and government agencies	1,899,868		8,463		(3,720		)	1,895,125
Non-U.S. government securities	868,853		10,343		(32,720		)	891,230
Asset backed securities	1,351,356		7,324		(3,364		)	1,347,396
Total	$	10,689,513	$	91,207	$	(109,678	)	$	10,707,984
December 31, 2014
Corporate bonds	$	3,379,139	$	37,928	$	(38,974	)	$	3,380,185
Mortgage backed securities	965,533		18,843		(3,842		)	950,532
Municipal bonds	1,494,122		31,227		(1,044		)	1,463,939
Commercial mortgage backed securities	1,114,528		14,594		(3,822		)	1,103,756
U.S. government and government agencies	1,447,972		8,345		(1,760		)	1,441,387
Non-U.S. government securities	1,099,390		21,311		(37,203		)	1,115,282
Asset backed securities	1,677,941		8,425		(6,089		)	1,675,605
Total	$	11,178,625	$	140,673	$	(92,734	)	$	11,130,686

The following table provides the credit quality distribution of our Fixed Maturities:

	June 30, 2015			December 31, 2014
Rating (1)	Estimated Fair Value		% of Total	Estimated Fair Value		% of Total
U.S. government and government agencies (2)	$	2,593,318	24.3	$	2,245,489	20.1
AAA	3,639,910		34.1	4,299,060		38.5
AA	1,967,666		18.4	1,917,392		17.2
A	1,474,583		13.8	1,739,922		15.6
BBB	337,517		3.2	339,395		3.0
BB	212,561		2.0	157,232		1.4
B	170,859		1.6	184,869		1.7
Lower than B	136,784		1.3	154,823		1.4
Not rated	156,315		1.3	140,443		1.1
Total	$	10,689,513	100.0	$	11,178,625	100.0

_________________________________________________

(1) For individual fixed maturities, S&P ratings are used. In the absence of an S&P rating, ratings from Moody’s are used, followed by ratings from Fitch Ratings.

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

At June 30, 2015, below-investment grade securities comprised approximately 6% of our Fixed Maturities, compared to 6% at December 31, 2014. In accordance with our investment strategy, we invest in high yield fixed income securities which are included in “Corporate bonds.” Upon issuance, these securities are typically rated below investment grade (i.e., rating assigned by the major rating agencies of “BB+” or less). At June 30, 2015, corporate bonds represented 70% of the total below investment grade securities at fair value, mortgage backed securities represented 15% of the total and 15% were in other classes. At December 31, 2014, corporate bonds represented 69% of the total below investment grade securities at fair value, mortgage backed securities represented 22% of the total and 9% were in other classes. Unrealized losses include the impact of foreign exchange movements on certain securities denominated in foreign currencies and, as such, the amount of securities in an unrealized loss position fluctuates due to foreign currency movements.

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

	June 30, 2015						December 31, 2014
Severity of Unrealized Loss	Estimated Fair Value		Gross Unrealized Losses			% of Total Gross Unrealized Losses	Estimated Fair Value		Gross Unrealized Losses			% of Total Gross Unrealized Losses
0-10%	$	4,484,276	$	(60,708	)	55.4	$	4,181,313	$	(55,498	)	59.8
10-20%	237,006		(41,294		)	37.7	239,158		(33,111		)	35.7
20-30%	23,844		(6,497		)	5.9	5,618		(1,990		)	2.1
Greater than 30%	1,506		(1,179		)	1.1	3,437		(2,135		)	2.3
Total	$	4,746,632	$	(109,678	)	100.0	$	4,429,526	$	(92,734	)	100.0

The following table provides information on the severity of the unrealized loss position as a percentage of amortized cost for non-investment grade Fixed Maturities which were in an unrealized loss position:

	June 30, 2015						December 31, 2014
Severity of Unrealized Loss	Estimated Fair Value		Gross Unrealized Losses			% of Total Gross Unrealized Losses	Estimated Fair Value		Gross Unrealized Losses			% of Total Gross Unrealized Losses
0-10%	$	163,243	$	(4,258	)	3.9	$	141,986	$	(3,728	)	4.0
10-20%	13,141		(2,128		)	1.9	20,127		(3,530		)	3.8
20-30%	3,132		(871		)	0.8	5,618		(1,990		)	2.1
Greater than 30%	650		(765		)	0.7	3,434		(2,133		)	2.3
Total	$	180,166	$	(8,022	)	7.3	$	171,165	$	(11,381	)	12.3

We determine estimated recovery values for our Fixed Maturities following a review of the business prospects, credit ratings, estimated loss given default factors and information received from asset managers and rating agencies for each security. For structured securities, we utilize underlying data, where available, for each security provided by asset managers and additional information from credit agencies in order to determine an expected recovery value for each security. The analysis provided by the asset managers includes expected cash flow projections under base case and stress case scenarios which modify expected default expectations and loss severities and slow down prepayment assumptions.

The following table summarizes our top ten exposures to fixed income corporate issuers by fair value at June 30, 2015, excluding guaranteed amounts and covered bonds:

	Estimated Fair Value		Credit Rating (1)
Apple Inc.	$	81,071	AA+/Aa1
General Electric Co.	75,677		AA+/A1
Exxon Mobil Corp.	71,048		AAA/Aaa
International Business Machines Corp.	69,076		AA-/Aa3
Microsoft Corporation	59,000		AAA/Aaa
Porsche Automobil Holding SE	56,999		A/A2
Chevron Corp.	54,335		AA/Aa1
Daimler AG	50,662		A-/A3
Oracle Corporation	50,051		AA-/A1
Toyota Motor Corporation	46,020		AA-/Aa3
Total	$	613,939

_________________________________________________

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

Our portfolio includes investments, such as mortgage-backed securities, which are subject to prepayment risk. At June 30, 2015, our investments in residential mortgage-backed securities (“MBS”) amounted to approximately $896.2 million, or 6.2% of total investable assets managed by Arch, compared to $965.5 million, or 6.6%, at December 31, 2014.  As with other fixed income investments, the fair value of these securities fluctuates depending on market and other general economic conditions and the interest rate environment. Changes in interest rates can expose us to changes in the prepayment rate on these investments. In periods of declining interest rates, mortgage prepayments generally increase and MBS are prepaid more quickly, requiring us to reinvest the proceeds at the then current market rates. Conversely, in periods of rising rates, mortgage prepayments generally fall, preventing us from taking full advantage of the higher level of rates. However, economic conditions may curtail prepayment activity if refinancing becomes more difficult, thus limiting prepayments on MBS. Our portfolio also

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includes commercial mortgage backed securities (“CMBS”). At June 30, 2015, CMBS constituted approximately $832.2 million, or 5.7% of total investable assets managed by Arch, compared to $1.11 billion, or 7.6%, at December 31, 2014.

Delinquencies and losses with respect to residential mortgage loans from certain vintage years have increased since 2007 and may continue to increase, particularly in the sub-prime sector. In addition, during this period, residential property values in many states have declined or remained stable, after extended periods during which those values appreciated. A continued decline or an extended flattening in those values may result in additional increases in delinquencies and losses on residential mortgage loans generally, especially with respect to second homes and investment properties, and with respect to any residential mortgage loans where the aggregate loan amounts (including any subordinated loans) are close to or greater than the related property values. These developments may have a significant adverse effect on the prices of loans and securities, including those in our investment portfolio. The situation continues to have wide ranging consequences, including downward pressure on economic growth and the potential for increased insurance and reinsurance exposures, which could have an adverse impact on our results of operations, financial condition, business and operations. In addition, the commercial real estate market has experienced price deterioration, which could lead to increased delinquencies and defaults on commercial real estate mortgages.

The following table provides information on our MBS and CMBS at June 30, 2015, excluding amounts guaranteed by the U.S. government:

					Estimated Fair Value
	Issuance Year	Amortized Cost		Average Credit Quality	Total		% of Amortized Cost		% of Investable Assets Managed by Arch
Non-agency MBS:	2003-2008	$	113,967	CC+	$	122,725	107.7	%	0.8	%
	2009	24,481		AAA	24,328		99.4	%	0.2	%
	2010	18,943		AA	18,511		97.7	%	0.1	%
	2013	28,555		AAA	28,418		99.5	%	0.2	%
	2014	44,747		AA	44,734		100.0	%	0.3	%
	2015	24,824		AA-	24,370		98.2	%	0.2	%
Total non-agency MBS		$	255,517	BB+	$	263,086	103.0	%	1.8	%
Non-agency CMBS:	2002-2008	38,887		BBB+	39,660		102.0	%	0.3	%
	2009	364		BBB-	367		100.8	%	—	%
	2010	10,312		AAA	10,505		101.9	%	0.1	%
	2011	44,008		AAA	44,291		100.6	%	0.3	%
	2012	66,343		AAA	67,460		101.7	%	0.5	%
	2013	117,096		AA+	119,660		102.2	%	0.8	%
	2014	283,569		AAA	284,337		100.3	%	2.0	%
	2015	209,712		AAA	205,588		98.0	%	1.4	%
Total non-agency CMBS		$	770,291	AA+	$	771,868	100.2	%	5.3	%

	Non-Agency		Non-Agency
Additional Statistics:	MBS		CMBS (1)
Weighted average loan age (months)	74		25
Weighted average life (months) (2)	48		54
Weighted average loan-to-value % (3)	57.1	%	53.1	%
Total delinquencies (4)	9.7	%	0.5	%
Current credit support % (5)	13.3	%	39.2	%

_________________________________________________

(1) Loans defeased with government/agency obligations were not material to the collateral underlying our CMBS holdings.

(2) The weighted average life for MBS is based on the interest rates in effect at June 30, 2015. The weighted average life for CMBS reflects the average life of the collateral underlying our CMBS holdings.

(3) The range of loan-to-values is 18% to 106% on MBS and 7% to 203% on CMBS.

(4) Total delinquencies includes 60 days and over.

(5) Current credit support % represents the % for a collateralized mortgage obligation (“CMO”) or CMBS class/tranche from other subordinate classes in the same CMO or CMBS deal.

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The following table provides information on our asset backed securities (“ABS”) at June 30, 2015:

						Estimated Fair Value
	Amortized Cost		Average Credit Quality	Weighted Average Credit Support		Total		% of Amortized Cost		% of Investable Assets Managed by Arch
Sector:
Credit cards	$	488,734	AAA	16	%	$	490,188	100.3	%	3.4	%
Autos	331,042		AAA	26	%	332,204		100.4	%	2.3	%
Loans	274,485		AA-	27	%	275,156		100.2	%	1.9	%
Equipment	156,103		AA-	10	%	155,391		99.5	%	1.1	%
Other (1)	97,032		A	17	%	98,417		101.4	%	0.7	%
Total ABS (2)	$	1,347,396	AA+			$	1,351,356	100.3	%	9.3	%

_________________________________________________

(1) Including rate reduction bonds, commodities, home equity, U.K. securitized and other.

(2) The effective duration of the total ABS was 1.7 years at June 30, 2015.

At June 30, 2015, our fixed income portfolio included $20.9 million par value in sub-prime securities with a fair value of $11.9 million and average credit quality ratings from S&P/Moody’s of “CCC-/Caa3.” At December 31, 2014, our fixed income portfolio included $16.9 million par value in sub-prime securities with a fair value of $8.5 million and average credit quality ratings from S&P/Moody’s of “CCC/Caa3.” Such amounts were primarily in the home equity sector of our ABS, with the balance in other ABS, MBS and CMBS sectors. We define sub-prime mortgage-backed securities as investments in which the underlying loans primarily exhibit one or more of the following characteristics: low FICO scores, above-prime interest rates, high loan-to-value ratios or high debt-to-income ratios. In addition, the portfolio of collateral backing our securities lending program contained $5.7 million fair value of sub-prime securities with average credit quality ratings from S&P/Moody’s of “CCC/Ca” at June 30, 2015, compared to $5.8 million and “CCC/Ca” at December 31, 2014.

The following table provides information on the fair value of our Eurozone investments at June 30, 2015:

	Sovereign (2)		Financial Corporates		Other Corporates		Bank Loans (3)		Equities and Other		Total
Country (1)
Netherlands	$	95,510	$	8,630	$	52,424	$	10,890	$	—	$	167,454
Germany	85,932		—		31,776		27,549		62		145,319
Ireland	—		—		30,963		118		13,974		45,055
Supranational (4)	34,233		—		—		—		—		34,233
Luxembourg	—		—		28,203		5,816		—		34,019
France	2,107		1,755		5,187		4,019		5,872		18,940
Belgium	9,920		—		—		—		—		9,920
Slovenia	1,722		—		—		—		—		1,722
Austria	902		—		—		168		—		1,070
Italy	—		—		558		459		—		1,017
Spain	—		—		817		—		—		817
Greece	60		—		—		—		—		60
Total	$	230,386	$	10,385	$	149,928	$	49,019	$	19,908	$	459,626

_________________________________________________

(1) The country allocations set forth in the table are based on various assumptions made by us in assessing the country in which the underlying credit risk resides, including a review of the jurisdiction of organization, business operations and other factors. Based on such analysis, we do not believe that we have any other Eurozone investments at June 30, 2015.

(2) Sovereign includes securities issued and/or guaranteed by Eurozone governments.

(3) Included in “investments accounted for using the fair value option.”

(4) Includes World Bank, European Investment Bank, International Finance Corp. and European Bank for Reconstruction and Development.

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At June 30, 2015, our equity portfolio included $701.9 million of equity securities, compared to $658.2 million at December 31, 2014. Our equity portfolio includes publicly traded common stocks in the natural resources, energy, consumer staples and other sectors. The following table provides information on the severity of the unrealized loss position as a percentage of cost for all equity securities classified as available for sale which were in an unrealized loss position:

	June 30, 2015						December 31, 2014
Severity of Unrealized Loss	Estimated Fair Value		Gross Unrealized Losses			% of Total Gross Unrealized Losses	Estimated Fair Value		Gross Unrealized Losses			% of Total Gross Unrealized Losses
0-10%	$	214,643	$	(8,389	)	45.1	$	127,467	$	(4,973	)	37.2
10-20%	66,495		(8,611		)	46.3	47,880		(6,546		)	49.0
20-30%	5,051		(1,446		)	7.8	5,328		(1,695		)	12.7
Greater than 30%	136		(160		)	0.9	327		(150		)	1.1
Total	$	286,325	$	(18,606	)	100.0	$	181,002	$	(13,364	)	100.0

On a quarterly basis, we evaluate the unrealized losses of our equity securities by issuer and forecast a reasonable period of time by which the fair value of the securities would increase and we would recover the cost basis. All of the unrealized losses on equity securities were on holdings which have been in a continual unrealized loss position for less than 12 months at June 30, 2015. We believe that a reasonable period of time exists to allow for recovery of the cost basis of our equity securities that are in an unrealized loss position at June 30, 2015.

The following table summarizes our other investments:

	June 30, 2015		December 31, 2014
Available for sale:
Asian and emerging markets	$	287,666	$	236,586
Investment grade fixed income	58,829		59,638
Credit related funds	13,773		—
Other	17,409		—
Total available for sale	377,677		296,224
Fair value option:
Term loan investments (par value: $370,186 and $415,462)	370,088		410,995
Mezzanine debt funds	115,019		121,341
Credit related funds	138,070		114,436
Investment grade fixed income	60,383		69,108
Asian and emerging markets	26,494		25,800
Other (1)	189,709		137,094
Total fair value option	899,763		878,774
Total	$	1,277,440	$	1,174,998

________________________________________________

(1) Includes fund investments with strategies in mortgage servicing rights, transportation and infrastructure assets and other.

Certain of our other investments are in investment funds for which we have the option to redeem at agreed upon values as described in each investment fund’s subscription agreement. Depending on the terms of the various subscription agreements, investments in investment funds may be redeemed daily, monthly, quarterly or on other terms. Two common redemption restrictions which may impact our ability to redeem these investment funds are gates and lockups. A gate is a suspension of redemptions which may be implemented by the general partner or investment manager of the fund in order to defer, in whole or in part, the redemption request in the event the aggregate amount of redemption requests exceeds a predetermined percentage of the investment fund’s net assets which may otherwise hinder the general partner or investment manager’s ability to liquidate holdings in an orderly fashion in order to generate the cash necessary to fund extraordinarily large redemption payouts. A lockup period is the initial amount of time an investor is contractually required to hold the security before having the ability to redeem. If our investment is eligible to be redeemed, the time to redeem such investment can take weeks or months following the notification.

Certain of our investment managers may use leverage to achieve a higher rate of return on their assets under management, primarily those included in “other investments available for sale, at fair value,” “investments accounted for using the fair value option” and “investments accounted for using the equity method” on our balance sheet. While leverage presents opportunities for increasing the total return of such investments, it may increase losses as well. Accordingly, any event that adversely affects the value of the underlying holdings would be magnified to the extent leverage is used and our potential losses would be

65

magnified. In addition, the structures used to generate leverage may lead to such investments being required to meet covenants based on market valuations and asset coverage. Market valuation declines could force the sale of investments into a depressed market, which may result in significant additional losses. Alternatively, the levered investments may attempt to delever by raising additional equity or potentially changing the terms of the established financing arrangements. We may choose to participate in the additional funding of such investments.

Our investment strategy allows for the use of derivative instruments. We utilize various derivative instruments such as futures contracts to enhance investment performance, replicate investment positions or manage market exposures and duration risk that would be allowed under our investment guidelines if implemented in other ways. See note 8, “Derivative Instruments,” of the notes accompanying our consolidated financial statements for additional disclosures concerning derivatives.

Accounting guidance regarding fair value measurements addresses how companies should measure fair value when they are required to use a fair value measure for recognition or disclosure purposes under GAAP and provides a common definition of fair value to be used throughout GAAP. See note 7, “Fair Value,” of the notes accompanying our consolidated financial statements for a summary of our financial assets and liabilities measured at fair value at June 30, 2015 and December 31, 2014 segregated by level in the fair value hierarchy.

Investable Assets in the ‘Other’ Segment

Investable assets in the ‘other’ segment are managed by Watford Re. The board of directors of Watford Re establishes their investment policies and guidelines. Watford Re’s investments are accounted for using the fair value option with changes in the carrying value of such investments recorded in net realized gains or losses. The following table summarizes investable assets in the ‘other’ segment:

	June 30, 2015			December 31, 2014
Cash	$	55,063		$	11,455
Investments accounted for using the fair value option:
Term loan investments (par value: $707,759 and $678,875)	691,608			662,654
Fixed maturities	466,229			254,971
Short-term investments	167,698			251,601
Total investments accounted for using the fair value option	1,325,535			1,169,226
Securities transactions entered into but not settled at the balance sheet date	(40,024		)	(17,441		)
Total investable assets included in ‘other’ segment	$	1,340,574		$	1,163,240

Premiums Receivable and Reinsurance Recoverables

At June 30, 2015, 82.0% of premiums receivable of $1.18 billion represented amounts not yet due, while amounts in excess of 90 days overdue were 4.2% of the total. At December 31, 2014, 80.9% of premiums receivable of $948.7 million represented amounts not yet due, while amounts in excess of 90 days overdue were 5.4% of the total. Approximately 6.4% of the $20.8 million of paid losses and loss adjustment expenses recoverable at June 30, 2015 were more than 90 days overdue, while 1.0% of the $34.5 million of paid losses and loss adjustment expenses recoverable at December 31, 2014 were more than 90 days overdue. Our reserves for doubtful accounts were approximately $14.6 million at June 30, 2015, compared to $13.4 million at December 31, 2014.

At June 30, 2015, approximately 82.4% of reinsurance recoverables on paid and unpaid losses (not including prepaid reinsurance premiums) of $1.83 billion were due from carriers which had an A.M. Best rating of “A-” or better and the largest reinsurance recoverables from any one carrier was approximately 3.5% of total shareholders’ equity available to Arch. At December 31, 2014, approximately 83.0% of reinsurance recoverables on paid and unpaid losses (not including prepaid reinsurance premiums) of $1.81 billion were due from carriers which had an A.M. Best rating of “A-” or better and the largest reinsurance recoverables from any one carrier was approximately 3.7% of total shareholders’ equity available to Arch.

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

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015			2014
Premiums Written
Direct	$	776,996		$	875,134		$	1,571,429		$	1,621,123
Assumed	422,213			396,627			969,802			945,774
Ceded	(255,629		)	(299,833		)	(530,656		)	(529,979		)
Net	$	943,580		$	971,928		$	2,010,575		$	2,036,918
Premiums Earned
Direct	$	746,837		$	734,022		$	1,481,054		$	1,415,910
Assumed	428,254			396,158			825,505			778,456
Ceded	(231,653		)	(223,028		)	(452,857		)	(427,434		)
Net	$	943,438		$	907,152		$	1,853,702		$	1,766,932
Losses and Loss Adjustment Expenses
Direct	$	462,967		$	435,863		$	893,808		$	821,578
Assumed	214,103			165,614			373,648			309,635
Ceded	(157,644		)	(115,959		)	(254,314		)	(209,455		)
Net	$	519,426		$	485,518		$	1,013,142		$	921,758

Reserves for Losses and Loss Adjustment Expenses

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

At June 30, 2015 and December 31, 2014, our Loss Reserves, net of unpaid losses and loss adjustment expenses recoverable, by type and by operating segment were as follows:

	June 30, 2015		December 31, 2014
Insurance:
Case reserves	$	1,459,522	$	1,459,040
IBNR reserves	3,072,105		3,066,962
Total net reserves	4,531,627		4,526,002
Reinsurance:
Case reserves	778,045		794,838
Additional case reserves	31,603		97,413
IBNR reserves	1,650,819		1,658,468
Total net reserves	2,460,467		2,550,719
Mortgage:
Case reserves	91,883		96,092
IBNR reserves	21,686		21,709
Total net reserves	113,569		117,801
Other:
Case reserves	36,094		12,010
IBNR reserves	130,105		51,613
Total net reserves	166,199		63,623
Total:
Case reserves	2,365,544		2,361,980
Additional case reserves	31,603		97,413
IBNR reserves	4,874,715		4,798,752
Total net reserves	$	7,271,862	$	7,258,145

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At June 30, 2015 and December 31, 2014, the insurance segment’s Loss Reserves by major line of business, net of unpaid losses and loss adjustment expenses recoverable, were as follows:

	June 30, 2015		December 31, 2014
Professional lines (1)	$	1,419,778	$	1,453,770
Construction and national accounts	843,289		806,007
Programs	688,042		669,601
Excess and surplus casualty (2)	687,783		683,305
Property, energy, marine and aviation	355,763		407,730
Travel, accident and health	58,017		60,888
Lenders products	38,524		40,579
Other (3)	440,431		404,122
Total net reserves	$	4,531,627	$	4,526,002

_________________________________________________

(1) Includes professional liability, executive assurance and healthcare business.

(2) Includes casualty and contract binding business.

(3) Includes alternative markets, excess workers’ compensation and surety business.

At June 30, 2015 and December 31, 2014, the reinsurance segment’s Loss Reserves by major line of business, net of unpaid losses and loss adjustment expenses recoverable, were as follows:

	June 30, 2015		December 31, 2014
Casualty (1)	$	1,406,049	$	1,432,203
Other specialty (2)	431,100		448,418
Property excluding property catastrophe (3)	325,147		346,610
Marine and aviation	145,921		139,318
Property catastrophe	100,476		128,436
Other (4)	51,774		55,734
Total net reserves	$	2,460,467	$	2,550,719

 _________________________________________________

(1) Includes executive assurance, professional liability, workers’ compensation, excess motor, healthcare and other.

(2) Includes non-excess motor, surety, accident and health, workers’ compensation catastrophe, agriculture, trade credit and other.

(3) Includes facultative business.

(4) Includes life, casualty clash and other.

Mortgage Operations Supplemental Information

The mortgage segment’s insurance in force (“IIF”), which represents the aggregate dollar amount of each insured mortgage loan’s original principal balance, and risk in force (“RIF”), which represents the aggregate dollar amount of each insured mortgage loan’s current principal balance multiplied by the insurance coverage percentage specified in the policy for insurance policies issued, were as follows for the preceding four quarters:

(U.S. Dollars in millions)	June 30, 2015			March 31, 2015			December 31, 2014			September 30, 2014
	Amount		% of Total	Amount		% of Total	Amount		% of Total	Amount		% of Total
Insurance In Force (IIF):
U.S. mortgage insurance	$	24,175	41.6	$	22,984	40.9	$	22,402	47.1	$	22,055	46.3
Mortgage reinsurance	19,245		33.1	20,262		36.1	20,772		43.7	21,097		44.3
Other (1)	14,734		25.3	12,944		23.0	4,400		9.2	4,464		9.4
Total	$	58,154	100.0	$	56,190	100.0	$	47,574	100.0	$	47,616	100.0
Risk In Force (RIF) (2):
U.S. mortgage insurance	$	6,053	56.8	$	5,733	54.3	$	5,600	55.3	$	5,506	54.4
Mortgage reinsurance	3,923		36.8	4,209		39.9	4,393		43.4	4,483		44.3
Other (1)	684		6.4	619		5.9	136		1.3	136		1.3
Total	$	10,660	100.0	$	10,561	100.0	$	10,129	100.0	$	10,125	100.0
Ending number of policies in force	137,724			133,079			131,111			129,665

_________________________________________________

(1)    Includes risk-sharing products offered to government sponsored enterprises and mortgage lenders and international insurance business.        

(2) For international business and risk-sharing products, the calculation is based on the maximum claim amount which we are exposed to on each insured mortgage loan. For certain of our mortgage reinsurance treaties, such amount incorporates loss ratio caps.

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The following table provides supplemental disclosures for our mortgage segment’s U.S. mortgage insurance operations related to RIF:

(U.S. Dollars in millions)	June 30, 2015				March 31, 2015				December 31, 2014				September 30, 2014
	Amount			% of Total	Amount			% of Total	Amount			% of Total	Amount			% of Total
Total RIF by credit quality (FICO):
>=740	$	3,238		53.5	$	3,009		52.5	$	2,917		52.1	$	2,864		52.0
680-739	1,994			32.9	1,895			33.1	1,846			33.0	1,803			32.7
620-679	696			11.5	698			12.2	700			12.5	694			12.6
<620	125			2.1	131			2.3	137			2.4	145			2.6
Total	$	6,053		100.0	$	5,733		100.0	$	5,600		100.0	$	5,506		100.0
Weighted average FICO score	735				734				733				733
Total RIF by Loan-To-Value (LTV):
95.01% and above	$	1,093		18.1	$	1,102		19.2	$	1,123		20.1	$	1,139		20.7
90.01% to 95.00%	2,959			48.9	2,742			47.8	2,652			47.4	2,558			46.5
85.01% to 90.00%	1,685			27.8	1,590			27.7	1,552			27.7	1,544			28.0
85.00% and below	316			5.2	299			5.2	273			4.9	265			4.8
Total	$	6,053		100.0	$	5,733		100.0	$	5,600		100.0	$	5,506		100.0
Weighted average LTV	93.2		%		93.3		%		93.4		%		93.4		%
Total RIF by State:
Wisconsin	$	554		9.2	$	536		9.3	$	538		9.6	$	532		9.7
California	527			8.7	492			8.6	480			8.6	474			8.6
Texas	325			5.4	307			5.4	302			5.4	293			5.3
Florida	297			4.9	280			4.9	273			4.9	271			4.9
Minnesota	291			4.8	278			4.8	274			4.9	271			4.9
Washington	243			4.0	234			4.1	232			4.1	231			4.2
Massachusetts	217			3.6	213			3.7	210			3.8	209			3.8
Virginia	215			3.6	206			3.6	200			3.6	196			3.6
Alaska	208			3.4	209			3.6	209			3.7	207			3.8
Michigan	200			3.3	186			3.2	181			3.2	176			3.2
Others	2,976			49.2	2,792			48.7	2,701			48.2	2,646			48.1
Total	$	6,053		100.0	$	5,733		100.0	$	5,600		100.0	$	5,506		100.0
Weighted average coverage (1)	25.0		%		24.9		%		25.0		%		25.0		%
Analysts’ persistency (2)	78.2		%		79.6		%		80.9		%		81.2		%
Risk-to-capital ratio (3)	9.7:1				9.3:1				9.5:1				9.3:1

_________________________________________________

(1) Represents the end of period RIF divided by end of period IIF.

(2) Represents the percentage of IIF at the beginning of a 12-month period that remained in force at the end of the period.        

(3) Represents total current (non-delinquent) RIF, net of reinsurance, divided by total statutory capital. Ratio calculated for Arch MI U.S. only (estimate for June 30, 2015).

The following table provides supplemental disclosures for our mortgage segment’s U.S. mortgage insurance operations related to insured loans and loss metrics:

(U.S. Dollars in thousands, except loan count)	Three Months Ended												Six Months Ended
	June 30, 2015			March 31, 2015			December 31, 2014			September 30, 2014			June 30, 2015
Rollforward of insured loans in default:
Beginning delinquent number of loans	3,006			3,474			3,625			3,641			3,474
Plus: new notices	1,145			1,190			1,402			1,553			2,335
Less: cures	(1,011		)	(1,376		)	(1,202		)	(1,168		)	(2,387		)
Less: paid claims	(292		)	(288		)	(351		)	(397		)	(580		)
Less: delinquent rescissions and denials	2			6			—			(4		)	8
Ending delinquent number of loans	2,850			3,006			3,474			3,625			2,850
Ending percentage of loans in default	2.1		%	2.3		%	2.6		%	2.8		%
Losses:
Number of claims paid	292			288			351			397			580
Total paid claims	$	12,672		$	12,180		$	15,358		$	17,093		$	24,852
Average per claim	$	43.4		$	42.3		$	43.8		$	43.1		$	42.8
Severity (1)	97.0		%	97.1		%	99.2		%	93.7		%	97.1		%
Average reserve per default	$	32.9		$	33.1		$	27.5		$	27.1

_________________________________________________

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

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Shareholders’ Equity and Book Value per Common Share

Total shareholders’ equity available to Arch was $6.14 billion at June 30, 2015, compared to $6.13 billion at December 31, 2014. The increase was primarily attributable to net income, reflecting contributions from both underwriting and investing activities, largely offset by share purchases.

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

(U.S. dollars in thousands, except share data)	June 30, 2015		December 31, 2014
Calculation of book value per common share:
Total shareholders’ equity available to Arch	$	6,137,515	$	6,130,053
Less preferred shareholders’ equity	325,000		325,000
Common shareholders’ equity available to Arch	$	5,812,515	$	5,805,053
Common shares outstanding, net of treasury shares (1)	122,403,909		127,367,934
Book value per common share	$	47.49	$	45.58

_________________________________________________

(1) Excludes the effects of 7,913,680 and 7,804,033 stock options and 438,155 and 447,073 restricted stock units outstanding at June 30, 2015 and December 31, 2014, respectively.

Liquidity and Capital Resources

ACGL is a holding company whose assets primarily consist of the shares in its subsidiaries. Generally, ACGL depends on its available cash resources, liquid investments and dividends or other distributions from its subsidiaries to make payments, including the payment of debt service obligations and operating expenses it may incur and any dividends or liquidation amounts with respect to the non-cumulative preferred shares and common shares. ACGL’s readily available cash, short-term investments and marketable securities, excluding amounts held by our regulated insurance and reinsurance subsidiaries, totaled $11.3 million at June 30, 2015, compared to $3.3 million at December 31, 2014. During 2015, ACGL received dividends of $410.3 million from Arch Reinsurance Ltd. (“Arch Re Bermuda”), our Bermuda-based reinsurer and insurer.

The ability of our regulated insurance and reinsurance subsidiaries to pay dividends or make distributions or other payments to us is dependent on their ability to meet applicable regulatory standards. Under Bermuda law, Arch Re Bermuda is required to maintain statutory capital (i.e., the amount by which the value of its statutory assets exceed its statutory liabilities) equal to or in excess of its minimum solvency margin equal to the greatest of (1) $100.0 million, (2) 50% of net premiums written (being gross premiums written less any premiums ceded by Arch Re Bermuda, but Arch Re Bermuda may not deduct more than 25% of gross premiums when computing net premiums written), (3) 15% of net aggregated losses and loss expense provisions and other insurance reserves and (4) 25% of its enhanced capital requirement (“ECR”) as reported at the end of the relevant year. Arch Re Bermuda is prohibited from declaring or paying any dividends during any financial year if it is not in compliance with its ECR, minimum solvency margin or minimum liquidity ratio. In addition, Arch Re Bermuda is prohibited from declaring or paying in any financial year dividends of more than 25% of its total statutory capital and surplus (as shown on its previous financial year’s statutory balance sheet) unless it files, at least seven days before payment of such dividends, with the Bermuda Monetary Authority (“BMA”) an affidavit stating that it will continue to meet the required margins. In addition, Arch Re Bermuda is prohibited, without prior approval of the BMA, from reducing by 15% or more its total statutory capital, as set out in its previous year’s statutory financial statements. As a Class 4 insurer, Arch Re Bermuda is required to maintain available statutory capital and surplus pertaining to its general business at a level equal to or in excess of its ECR which is established by reference to either the BSCR model (“BSCR”) or an approved internal capital model. At December 31, 2014, as determined under Bermuda law, Arch Re Bermuda had statutory capital of $2.40 billion ($2.36 billion at December 31, 2013) and statutory capital and surplus of $5.42 billion ($5.42 billion at December 31, 2013), which amounts were in compliance with Arch Re Bermuda’s ECR at such date. Such amounts include ownership interests in U.S. insurance and reinsurance subsidiaries. Accordingly, Arch Re Bermuda can pay approximately $945.4 million to ACGL during the remainder of 2015 without providing an affidavit to the BMA, as discussed above. Under BMA guidelines, the value of the assets of our insurance group (i.e., the group of companies that conducts exclusively, or mainly, insurance business) must exceed the amount of the group’s liabilities by the aggregate minimum margin of solvency of each qualifying member of the group (the “Group MSM”). A member is a qualifying member of the insurance group if it is subject to solvency requirements in the jurisdiction in which it is registered. We were in compliance with the Group MSM at December 31, 2014.

Our U.S. insurance and reinsurance subsidiaries are subject to insurance laws and regulations in the jurisdictions in which they operate. The ability of our regulated insurance subsidiaries to pay dividends or make distributions is dependent on their ability to meet applicable regulatory standards. These regulations include restrictions that limit the amount of dividends or other

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distributions, such as loans or cash advances, available to shareholders without prior approval of the insurance regulatory authorities. Dividends or distributions, if any, made by Arch Re U.S. would result in an increase in available capital at Arch Capital Group (U.S.) Inc. (“Arch-U.S.”), a wholly-owned subsidiary of ACGL. During 2015, Arch-U.S. received dividends of $25 million from Arch Re U.S. Arch Re U.S. can declare a maximum of approximately $85 million of dividends during the remainder of 2015 subject to the approval of the Commissioner of the Delaware Department of Insurance (“Commissioner”). In addition, with respect to dividends in excess of the $85 million (extraordinary dividend), no payment can be made until (1) 30 days after the Commissioner has received notice of the declaration thereof and has not within such period disapproved such payment; or (2) the Commissioner shall have approved the payment within the 30-day period. Delaware insurance laws also require that the statutory surplus of Arch Re U.S. following any dividend or distribution be reasonable in relation to its outstanding liabilities and adequate to its financial needs.

Arch MI U.S. is currently approved by the GSEs as an eligible mortgage insurer. In addition to existing eligibility requirements applicable to all eligible mortgage insurers, the GSEs imposed conditions in connection with their approvals of Arch MI U.S. as a qualified mortgage insurer. These conditions require, among other things, that Arch MI U.S.: (i) maintain minimum capital funding of $400 million which may consist of statutory capital (policyholders’ surplus plus contingency reserves), dedicated reinsurance trust assets for any primary business reinsured and a value for purchased technology assets; (ii) maintain minimum statutory capital (defined as policyholders’ surplus plus contingency reserves) of no less than $260 million; (iii) maintain a risk-to-capital ratio of no greater than 18 to 1; and (iv) refrain from paying dividends to affiliates for three years commencing February 2014. On December 31, 2015, these requirements will be superceded by the GSEs’ revised private mortgage insurer eligibility requirements discussed below.

In addition to meeting applicable regulatory standards, the ability of our insurance and reinsurance subsidiaries to pay dividends to intermediate parent companies owned by Arch Re Bermuda is also constrained by our dependence on the financial strength ratings of our insurance and reinsurance subsidiaries from independent rating agencies. The ratings from these agencies depend to a large extent on the capitalization levels of our insurance and reinsurance subsidiaries. We believe that ACGL has sufficient cash resources and available dividend capacity to service its indebtedness and other current outstanding obligations.

Our insurance and reinsurance subsidiaries are required to maintain assets on deposit, which primarily consist of fixed maturities, with various regulatory authorities to support their operations. The assets on deposit are available to settle insurance and reinsurance liabilities to third parties. Our insurance and reinsurance subsidiaries maintain assets in trust accounts as collateral for insurance and reinsurance transactions with affiliated companies and also have investments in segregated portfolios primarily to provide collateral or guarantees for letters of credit to third parties. At June 30, 2015 and December 31, 2014, such amounts approximated $5.16 billion and $5.52 billion, respectively.

Our non-U.S. operations account for a significant percentage of our net premiums written. In general, the business written by our non-U.S. operations, which is heavily weighted towards reinsurance business, has been more profitable than the business written in our U.S. operations, which is weighted more towards insurance business. In general, our reinsurance segment has operated at a higher margin than our insurance segment, which is due to prevailing market conditions and the mix and type of business written. Historically, the most profitable line of business has been catastrophe-exposed property reinsurance, which is written primarily in our non-U.S. operations. Additionally, a significant component of our pre-tax income is generated through our investment performance. We hold a substantial amount of our investable assets in our non-U.S. operations and, accordingly, a large portion of our investment income is produced in our non-U.S. operations. In addition, ACGL, through its subsidiaries, provides financial support to certain of its insurance subsidiaries and affiliates, through certain reinsurance arrangements beneficial to the ratings of such subsidiaries. Our U.S.-based insurance and reinsurance groups enter into separate reinsurance arrangements with Arch Re Bermuda covering individual lines of business. For the 2014 calendar year, the U.S. groups ceded business to Arch Re Bermuda at an aggregate net cession rate (i.e., net of third party reinsurance) of approximately 53%, compared to 55% for 2013. All of the above factors have resulted in the non-U.S. group providing a higher contribution to our overall pre-tax income in the current period than the percentage of net premiums written would indicate.

Except as described in the above paragraph, or where express reinsurance, guarantee or other financial support contractual arrangements are in place, each of ACGL’s subsidiaries or affiliates is solely responsible for its own liabilities and commitments (and no other ACGL subsidiary or affiliate is so responsible). Any reinsurance arrangements, guarantees or other financial support contractual arrangements that are in place are solely for the benefit of the ACGL subsidiary or affiliate involved and third parties (creditors or insureds of such entity) are not express beneficiaries of such arrangements.

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

	Six Months Ended
	June 30,
	2015			2014
Total cash provided by (used for):
Operating activities	$	385,199		$	453,063
Investing activities	(39,154		)	(952,067		)
Financing activities	(306,634		)	988,877
Effects of exchange rate changes on foreign currency cash	(39		)	2,513
Increase (decrease) in cash	$	39,372		$	492,386

• Cash provided by operating activities for the six months ended June 30, 2015 was lower than in the 2014 period. The decrease in operating cash flows reflected an increase in outflows related to claim payments, including amounts which are reimbursable from insureds, reinsurers and others. For the six months ended June 30, 2015, net outflows to Watford Re on affiliated transactions increased compared to the 2014 period. Excluding Watford Re’s operating cash flows, our cash flow from operating activities was $247.4 million, compared to $451.6 million.

• Cash used for investing activities for the six months ended June 30, 2015 was lower than in the 2014 period. Activity for the six months ended June 30, 2015 reflected proceeds from sales of investments to fund our share repurchase program, while the 2014 period reflected the initial investing activity of Watford Re along with funds used in connection with our acquisition of Arch MI U.S.

• Cash used for financing activities for the six months ended June 30, 2015 primarily reflects $361.9 million of repurchases under our share repurchase program, while cash provided by financing activities in the 2014 period reflected the capital raising of Watford Re.

Our insurance and reinsurance operations provide liquidity in that premiums are received in advance, sometimes substantially in advance, of the time losses are paid. The period of time from the occurrence of a claim through the settlement of the liability may extend many years into the future. Sources of liquidity include cash flows from operations, financing arrangements or routine sales of investments.

As part of Arch’s investment strategy, we seek to establish a level of cash and highly liquid short-term and intermediate-term securities which, combined with expected cash flow, is believed by us to be adequate to meet our foreseeable payment obligations. However, due to the nature of our operations, cash flows are affected by claim payments that may comprise large payments on a limited number of claims and which can fluctuate from year to year. We believe that our liquid investments and cash flow will provide us with sufficient liquidity in order to meet our claim payment obligations. However, the timing and amounts of actual claim payments related to recorded Loss Reserves vary based on many factors, including large individual losses, changes in the legal environment, as well as general market conditions. The ultimate amount of the claim payments could differ materially from our estimated amounts. Certain lines of business written by us, such as excess casualty, have loss experience characterized as low frequency and high severity. The foregoing may result in significant variability in loss payment patterns. The impact of this variability can be exacerbated by the fact that the timing of the receipt of reinsurance recoverables owed to us may be slower than anticipated by us. Therefore, the irregular timing of claim payments can create significant variations in cash flows from operations between periods and may require us to utilize other sources of liquidity to make these payments, which may include the sale of investments or utilization of existing or new credit facilities or capital market transactions. If the source of liquidity is the sale of investments, we may be forced to sell such investments at a loss, which may be material.

Our investments in certain securities, including certain fixed income and structured securities, investments in funds accounted for using the equity method, other investments and our investments in Watford Re may be illiquid due to contractual provisions or investment market conditions. If we require significant amounts of cash on short notice in excess of anticipated cash requirements, then we may have difficulty selling these investments in a timely manner or may be forced to sell or terminate them at unfavorable values.

At June 30, 2015, total investable assets of $15.85 billion included $14.51 billion managed by Arch and $1.34 billion included in the ‘other’ segment (i.e., attributable to Watford Re). The primary goals of our asset liability management process are to satisfy the insurance liabilities, manage the interest rate risk embedded in those insurance liabilities and maintain sufficient liquidity to cover fluctuations in projected liability cash flows, including debt service obligations. Generally, the expected principal and interest payments produced by our fixed income portfolio adequately fund the estimated runoff of our

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insurance reserves. Although this is not an exact cash flow match in each period, the substantial degree by which the fair value of the fixed income portfolio exceeds the expected present value of the net insurance liabilities, as well as the positive cash flow from newly sold policies and the large amount of high quality liquid bonds, provide assurance of our ability to fund the payment of claims and to service our outstanding debt without having to sell securities at distressed prices or access credit facilities. Our unfunded investment commitments totaled approximately $1.12 billion at June 30, 2015.

Changes in general economic conditions, including new or continued sovereign debt concerns in Eurozone countries or downgrades of U.S. securities by credit rating agencies, could have a material adverse effect on financial markets and economic conditions in the U.S. and throughout the world. In turn, this could have a material adverse effect on our business, financial condition and results of operations and, in particular, this could have a material adverse effect on the value and liquidity of securities in our investment portfolio. Our investment portfolio as of June 30, 2015 included $230.4 million of securities issued and/or guaranteed by Eurozone governments at fair value, $1.90 billion of obligations of the U.S. government and government agencies at fair value and $1.76 billion of municipal bonds at fair value. Please refer to Item 1A “Risk Factors” of our 2014 Form 10-K for a discussion of other risks relating to our business and investment portfolio.

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

We monitor our capital adequacy on a regular basis and will seek to adjust our capital base (up or down) according to the needs of our business. The future capital requirements of our business will depend on many factors, including our ability to write new business successfully and to establish premium rates and reserves at levels sufficient to cover losses. Our ability to underwrite is largely dependent upon the quality of our claims paying and financial strength ratings as evaluated by independent rating agencies. In particular, we require (1) sufficient capital to maintain our financial strength ratings, as issued by several ratings agencies, at a level considered necessary by management to enable our key operating subsidiaries to compete; (2) sufficient capital to enable our underwriting subsidiaries to meet the capital adequacy tests performed by statutory agencies in the U.S. and other key markets; and (3) letters of credit and other forms of collateral that are necessary for our non-U.S. operating companies because they are “non-admitted” under U.S. state insurance regulations.

On April 17, 2015, Fannie Mae and Freddie Mac (the GSEs) issued revised requirements for private mortgage insurers, including Arch MI U.S. These revised Private Mortgage Insurer Eligibility Requirements (“PMIERs”) are effective December 31, 2015. Proposed PMIERs had been released for public comment by the Federal Housing Finance Agency in July 2014. The revised PMIERs establish new standards that mortgage insurers must meet in order to insure loans sold to or guaranteed by the GSEs. The PMIERs’ financial requirements are based in part on a risk-based, required assets model and employ a grid approach based upon a number of factors, including vintage (origination year), original loan-to-value and original credit score of performing loans and the delinquency status of non-performing loans. No later than March 1, 2016, mortgage insurers must certify to the GSEs that they meet all of the requirements of the PMIERs or identify specific requirements that they do not meet. If a mortgage insurer is unable to meet the financial requirements of the PMIERs, it must submit by March 31, 2016 a transition plan to the GSEs for their review and approval. Mortgage insurers that have not met the financial requirements of the PMIERs by June 30, 2017 will be subject to remediation actions by the GSEs. The available assets required to satisfy the revised financial requirements of the PMIERs at any point in time will be affected by many factors, including macro-economic conditions, the size and composition of Arch MI U.S.’s mortgage insurance portfolio at the applicable point in time, and the amount of ceded risk that may be deducted by Arch MI U.S. in its calculation of “minimum required assets.” Based upon our interpretation of the revised PMIERs and Arch MI U.S.’s mortgage insurance portfolio and balance sheet as of June 30, 2015, we believe that Arch MI U.S. currently satisfies the PMIERs’ financial requirements.

In December 2013, Arch-U.S., a wholly-owned subsidiary of ACGL, completed a public offering of $500.0 million principal amount of 5.144% senior notes issued at par and due November 1, 2043 (“Arch-U.S. Senior Notes”), fully and unconditionally guaranteed by ACGL (the “Guarantee”). The Arch-U.S. Senior Notes and the Guarantee are unsecured and unsubordinated obligations of Arch-U.S. and ACGL, respectively, and rank equally and ratably with the other unsecured and unsubordinated indebtedness of Arch-U.S. and ACGL, respectively. A portion of the proceeds from the offering were used to fund the acquisition of the mortgage operations noted below. In addition, the proceeds are available for other corporate purposes.

Pursuant to our 2014 acquisition of CMG Mortgage Insurance Company and its affiliated mortgage insurance companies (the “CMG Entities”), we are required to make contingent consideration payments based on the closing book value of the pre-closing portfolio of the CMG Entities as re-calculated over an earn-out period and payable at the third, fifth and sixth anniversaries after closing (subject to a one time extension period of one to three years at the sellers’ discretion). The maximum

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amount of contingent consideration payments is $136.9 million over the earn-out period (or 150% of the closing book value of the CMG Entities less amounts paid at closing). To the extent that the adjusted book value of the CMG Entities drops below the cumulative amount paid by us, no additional payments would be due.

As part of our capital management program, we may seek to raise additional capital or may seek to return capital to our shareholders through share repurchases, cash dividends or other methods (or a combination of such methods). Any such determination will be at the discretion of our board of directors and will be dependent upon our profits, financial requirements and other factors, including legal restrictions, rating agency requirements and such other factors as our board of directors deems relevant.

The board of directors of ACGL has authorized the investment in ACGL’s common shares through a share repurchase program. Since the inception of the share repurchase program through June 30, 2015, ACGL has repurchased 124.0 million common shares for an aggregate purchase price of $3.60 billion. At June 30, 2015, approximately $525.3 million of share repurchases were available under the program. Repurchases under this authorization may be effected from time to time in open market or privately negotiated transactions through December 31, 2016. The timing and amount of the repurchase transactions under this program will depend on a variety of factors, including market conditions and corporate and regulatory considerations. We will continue to monitor our share price and, depending upon results of operations, market conditions and the development of the economy, as well as other factors, we will consider share repurchases on an opportunistic basis.

To the extent that our existing capital is insufficient to fund our future operating requirements or maintain such ratings, we may need to raise additional funds through financings or limit our growth. We can provide no assurance that, if needed, we would be able to obtain additional funds through financing on satisfactory terms or at all. Adverse developments in the financial markets, such as disruptions, uncertainty or volatility in the capital and credit markets, may result in realized and unrealized capital losses that could have a material adverse effect on our results of operations, financial position and our businesses, and may also limit our access to capital required to operate our business.

If we are not able to obtain adequate capital, our business, results of operations and financial condition could be adversely affected, which could include, among other things, the following possible outcomes: (1) potential downgrades in the financial strength ratings assigned by ratings agencies to our operating subsidiaries, which could place those operating subsidiaries at a competitive disadvantage compared to higher-rated competitors; (2) reductions in the amount of business that our operating subsidiaries are able to write in order to meet capital adequacy-based tests enforced by statutory agencies; and (3) any resultant ratings downgrades could, among other things, affect our ability to write business and increase the cost of bank credit and letters of credit. In addition, under certain of the reinsurance agreements assumed by our reinsurance operations, upon the occurrence of a ratings downgrade or other specified triggering event with respect to our reinsurance operations, such as a reduction in surplus by specified amounts during specified periods, our ceding company clients may be provided with certain rights, including, among other things, the right to terminate the subject reinsurance agreement and/or to require that our reinsurance operations post additional collateral.

In addition to common share capital, we depend on external sources of finance to support our underwriting activities, which can be in the form (or any combination) of debt securities, preference shares, common equity and bank credit facilities providing loans and/or letters of credit. As noted above, equity or debt financing, if available at all, may be on terms that are unfavorable to us. In the case of equity financings, dilution to our shareholders could result, and, in any case, such securities may have rights, preferences and privileges that are senior to those of our outstanding securities.

In June 2014, we entered into a five-year agreement for a $300 million unsecured revolving loan and letter of credit facility and a $500 million secured letter of credit facility. Under the terms of the agreement, Arch Re U.S. and Arch Re Bermuda are limited to issuing $100 million of unsecured letters of credit as part of the unsecured revolving loan. In addition, we have access to secured letter of credit facilities of approximately $229.4 million, which are available on a limited basis and for limited purposes. Refer to note 9, “Commitments and Contingencies—Letter of Credit and Revolving Credit Facilities,” of the notes accompanying our consolidated financial statements for a discussion of our available facilities, applicable covenants on such facilities and available capacity.

In March 2015, ACGL and Arch-U.S. filed a universal shelf registration statement with the SEC. This registration statement allows for the possible future offer and sale by us of various types of securities, including unsecured debt securities, preference shares, common shares, warrants, share purchase contracts and units and depositary shares. The shelf registration statement enables us to efficiently access the public debt and/or equity capital markets in order to meet our future capital needs. The shelf registration statement also allows selling shareholders to resell common shares that they own in one or more offerings from time to time. We will not receive any proceeds from any shares offered by the selling shareholders. This report is not an

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offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state.

At June 30, 2015, total capital available to Arch of $7.03 billion consisted of $791.2 million of senior notes, representing 11.3% of the total, $100.0 million of revolving credit agreement borrowings due in June 2019, representing 1.4% of the total, $325.0 million of preferred shares, representing 4.6% of the total, and common shareholders’ equity of $5.81 billion, representing 82.7% of the total. At December 31, 2014, total capital available to Arch of $7.02 billion consisted of $791.1 million of senior notes, representing 11.3% of the total, $100.0 million of revolving credit agreement borrowings due in August 2014, representing 1.4% of the total, $325.0 million of preferred shares, representing 4.6% of the total, and common shareholders’ equity of $5.81 billion, representing 82.7% of the total.

Off-Balance Sheet Arrangements

Off-balance sheet arrangements are discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our 2014 Form 10-K.

Market Sensitive Instruments and Risk Management

In accordance with the SEC’s Financial Reporting Release No. 48, we performed a sensitivity analysis to determine the effects that market risk exposures could have on the future earnings, fair values or cash flows of our financial instruments as of June 30, 2015. Market risk represents the risk of changes in the fair value of a financial instrument and is comprised of several components, including liquidity, basis and price risks. An analysis of material changes in market risk exposures at June 30, 2015 that affect the quantitative and qualitative disclosures presented in our 2014 Form 10-K (see section captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Market Sensitive Instruments and Risk Management”) were as follows:

Investment Market Risk

Fixed Income Securities. We invest in interest rate sensitive securities, primarily debt securities. We consider the effect of interest rate movements on the fair value of our fixed maturities, fixed maturities pledged under securities lending agreements, short-term investments and certain of our other investments which invest in fixed income securities and the corresponding change in unrealized appreciation. As interest rates rise, the fair value of our interest rate sensitive securities falls, and the converse is also true. Based on historical observations, there is a low probability that all interest rate yield curves would shift in the same direction at the same time. Accordingly, the actual effect of interest rate movements may differ materially from the amounts set forth in the following tables.

The following table summarizes the effect that an immediate, parallel shift in the interest rate yield curve would have had on our fixed income securities (including amounts attributable to the ‘other’ segment):

	Interest Rate Shift in Basis Points
(U.S. dollars in millions)	-100			-50			—		+50			+100
June 30, 2015
Total fair value	$	15,066.9		$	14,845.0		$	14,627.2	$	14,399.0		$	14,181.9
Change from base	3.01		%	1.49		%			(1.56		)%	(3.04		)%
Change in unrealized value	$	439.7		$	217.8				$	(228.2	)	$	(445.3	)
December 31, 2014
Total fair value	$	14,753.8		$	14,523.4		$	14,292.1	$	14,067.5		$	13,850.4
Change from base	3.23		%	1.62		%			(1.57		)%	(3.09		)%
Change in unrealized value	$	461.7		$	231.3				$	(224.6	)	$	(441.7	)

In addition, we consider the effect of credit spread movements on the fair value of our fixed maturities, fixed maturities pledged under securities lending agreements, short-term investments and certain of our other investments and investment funds accounted for using the equity method which invest in fixed income securities and the corresponding change in unrealized appreciation. As credit spreads widen, the fair value of our fixed income securities falls, and the converse is also true.

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The following table summarizes the effect that an immediate, parallel shift in credit spreads in a static interest rate environment would have had on our fixed income securities (including amounts attributable to the ‘other’ segment):

	Credit Spread Shift in Basis Points
(U.S. dollars in millions)	-100			-50			—		+50			+100
June 30, 2015
Total fair value	$	15,041.1		$	14,833.9		$	14,627.2	$	14,421.1		$	14,215.8
Change from base	2.83		%	1.41		%			(1.41		)%	(2.81		)%
Change in unrealized value	$	413.9		$	206.7				$	(206.1	)	$	(411.4	)
December 31, 2014
Total fair value	$	14,572.5		$	14,446.9		$	14,292.1	$	14,151.2		$	14,012.8
Change from base	1.96		%	1.08		%			(0.99		)%	(1.95		)%
Change in unrealized value	$	280.4		$	154.8				$	(140.9	)	$	(279.3	)

Another method that attempts to measure portfolio risk is Value-at-Risk (“VaR”). VaR attempts to take into account a broad cross-section of risks facing a portfolio by utilizing relevant securities volatility data skewed towards the most recent months and quarters. VaR measures the amount of a portfolio at risk for outcomes 1.65 standard deviations from the mean based on normal market conditions over a one year time horizon and is expressed as a percentage of the portfolio’s initial value. In other words, 95% of the time, should the risks taken into account in the VaR model perform per their historical tendencies, the portfolio’s loss in any one year period is expected to be less than or equal to the calculated VaR, stated as a percentage of the measured portfolio’s initial value. As of June 30, 2015, our portfolio’s VaR was estimated to be 3.00%, compared to an estimated 2.86% at December 31, 2014.

Certain Other Investments and Equity Securities. Our investment portfolio includes certain other investments which do not invest in fixed income securities along with equity holdings. At June 30, 2015 and December 31, 2014, the fair value of such investments totaled $701.9 million and $658.2 million, respectively. These investments are exposed to price risk, which is the potential loss arising from decreases in fair value. An immediate hypothetical 10% decline in the value of each position would reduce the fair value of such investments by approximately $70.2 million and $65.8 million at June 30, 2015 and December 31, 2014, respectively, and would have decreased book value per common share by approximately $0.57 and $0.52, respectively. An immediate hypothetical 10% increase in the value of each position would increase the fair value of such investments by approximately $70.2 million and $65.8 million at June 30, 2015 and December 31, 2014, respectively, and would have increased book value per common share by approximately $0.57 and $0.52, respectively.

Investment-Related Derivatives. Derivative instruments may be used to enhance investment performance, replicate investment positions or manage market exposures and duration risk that would be allowed under our investment guidelines if implemented in other ways. The fair values of those derivatives are based on quoted market prices. See note 8, “Derivative Instruments,” of the notes accompanying our consolidated financial statements for additional disclosures concerning derivatives. At June 30, 2015, the notional value of all derivative instruments (excluding to-be-announced mortgage backed securities which are included in the fixed income securities analysis above and foreign currency forward contracts which are included in the foreign currency exchange risk analysis below) was $2.65 billion, compared to $3.28 billion at December 31, 2014. If the underlying exposure of each investment-related derivative held at June 30, 2015 depreciated by 100 basis points, it would have resulted in a reduction in net income of approximately $26.5 million, and a decrease in book value per common share of approximately $0.22 per share, compared to $32.8 million and $0.26 per share, respectively, on investment-related derivatives held at December 31, 2014. If the underlying exposure of each investment-related derivative held at June 30, 2015 appreciated by 100 basis points, it would have resulted in an increase in net income of approximately $26.5 million, and an increase in book value per common share of approximately $0.22 per share, compared to $32.8 million and $0.26 per share, respectively, on investment-related derivatives held at December 31, 2014.

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

Foreign Currency Exchange Risk

Foreign currency rate risk is the potential change in value, income and cash flow arising from adverse changes in foreign currency exchange rates. Through our subsidiaries and branches located in various foreign countries, we conduct our insurance and reinsurance operations in a variety of local currencies other than the U.S. Dollar. We generally hold investments in foreign currencies which are intended to mitigate our exposure to foreign currency fluctuations in our net insurance liabilities. We may also utilize foreign currency forward contracts and currency options as part of our investment strategy. See note 8, “Derivative Instruments,” of the notes accompanying our consolidated financial statements for additional information.

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

(U.S. dollars in thousands, except per share data)	June 30, 2015			December 31, 2014
Net assets (liabilities), denominated in foreign currencies, excluding shareholders’ equity and derivatives	$	(79,399	)	$	35,372
Shareholders’ equity denominated in foreign currencies (1)	338,794			336,565
Net foreign currency forward contracts outstanding (2)	(120,054		)	(308,149		)
Net exposures denominated in foreign currencies	$	139,341		$	63,788
Pre-tax impact of a hypothetical 10% appreciation of the U.S. Dollar against foreign currencies:
Shareholders’ equity	$	(13,934	)	$	(6,379	)
Book value per common share	$	(0.11	)	$	(0.05	)
Pre-tax impact of a hypothetical 10% decline of the U.S. Dollar against foreign currencies:
Shareholders’ equity	$	13,934		$	6,379
Book value per common share	$	0.11		$	0.05

_________________________________________________

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

(2) Represents the net notional value of outstanding foreign currency forward contracts in U.S. Dollars.

As a result of the current financial and economic environment as well as the potential for additional investment returns, we may not match a portion of our projected liabilities in foreign currencies with investments in the same currencies, which would increase our exposure to foreign currency fluctuations and increase the volatility in our results of operations. Historical observations indicate a low probability that all foreign currency exchange rates would shift against the U.S. Dollar in the same direction and at the same time and, accordingly, the actual effect of foreign currency rate movements may differ materially from the amounts set forth above. For further discussion on foreign exchange activity, please refer to “—Results of Operations.”

Cautionary Note Regarding Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 (“PSLRA”) provides a “safe harbor” for forward-looking statements. This release or any other written or oral statements made by or on behalf of us may include forward-looking statements, which reflect our current views with respect to future events and financial performance. All statements other than statements of historical fact included in or incorporated by reference in this release are forward-looking statements. Forward-looking statements, for purposes of the PSLRA or otherwise, can generally be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe” or “continue” and similar statements of a future or forward-looking nature or their negative or variations or similar terminology.

Forward-looking statements involve our current assessment of risks and uncertainties. Actual events and results may differ materially from those expressed or implied in these statements. Important factors that could cause actual events or results to differ materially from those indicated in such statements are discussed below and elsewhere in this release and in our periodic reports filed with the Securities and Exchange Commission (the “SEC”), and include:

• our ability to successfully implement our business strategy during “soft” as well as “hard” markets;

• acceptance of our business strategy, security and financial condition by rating agencies and regulators, as well as by brokers and our insureds and reinsureds;

• our ability to maintain or improve our ratings, which may be affected by our ability to raise additional equity or debt financings, by ratings agencies’ existing or new policies and practices, as well as other factors described herein;

• general economic and market conditions (including inflation, interest rates, foreign currency exchange rates, prevailing credit terms and the depth and duration of a recession) and conditions specific to the reinsurance and insurance markets (including the length and magnitude of the current “soft” market) in which we operate;

• competition, including increased competition, on the basis of pricing, capacity, coverage terms or other factors;

• developments in the world’s financial and capital markets and our access to such markets;

• our ability to successfully enhance, integrate and maintain operating procedures (including information technology) to effectively support our current and new business;

• the loss of key personnel;

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• the integration of businesses we have acquired or may acquire into our existing operations;

• accuracy of those estimates and judgments utilized in the preparation of our financial statements, including those related to revenue recognition, insurance and other reserves, reinsurance recoverables, investment valuations, intangible assets, bad debts, income taxes, contingencies and litigation, and any determination to use the deposit method of accounting, which for a relatively new insurance and reinsurance company, like our company, are even more difficult to make than those made in a mature company since relatively limited historical information has been reported to us through June 30, 2015;

• greater than expected loss ratios on business written by us and adverse development on claim and/or claim expense liabilities related to business written by our insurance and reinsurance subsidiaries;

• severity and/or frequency of losses;

• claims for natural or man-made catastrophic events in our insurance or reinsurance business could cause large losses and substantial volatility in our results of operations;

• acts of terrorism, political unrest and other hostilities or other unforecasted and unpredictable events;

• availability to us of reinsurance to manage our gross and net exposures and the cost of such reinsurance;

• the failure of reinsurers, managing general agents, third party administrators or others to meet their obligations to us;

• the timing of loss payments being faster or the receipt of reinsurance recoverables being slower than anticipated by us;

• our investment performance, including legislative or regulatory developments that may adversely affect the fair value of our investments;

• changes in general economic conditions, including new or continued sovereign debt concerns in Eurozone countries or downgrades of U.S. securities by credit rating agencies, which could affect our business, financial condition and results of operations;

• the volatility of our shareholders’ equity from foreign currency fluctuations, which could increase due to us not matching portions of our projected liabilities in foreign currencies with investments in the same currencies;

• losses relating to aviation business and business produced by a certain managing underwriting agency for which we may be liable to the purchaser of our prior reinsurance business or to others in connection with the May 5, 2000 asset sale described in our periodic reports filed with the SEC;

• changes in accounting principles or policies or in our application of such accounting principles or policies;

• changes in the political environment of certain countries in which we operate or underwrite business;

• statutory or regulatory developments, including as to tax policy and matters and insurance and other regulatory matters such as the adoption of proposed legislation that would affect Bermuda-headquartered companies and/or Bermuda-based insurers or reinsurers and/or changes in regulations or tax laws applicable to us, our subsidiaries, brokers or customers; and

• the other matters set forth under Item 1A “Risk Factors”, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other sections of our Annual Report on Form 10-K, as well as the other factors set forth in our other documents on file with the SEC, and management’s response to any of the aforementioned factors.

All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with other cautionary statements that are included herein or elsewhere. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Other Financial Information

The consolidated financial statements as of June 30, 2015 and for the three month and six month periods ended June 30, 2015 and 2014 have been reviewed by PricewaterhouseCoopers LLP, an independent registered public accounting firm. Their report (dated August 7, 2015) is included on page 2. The report of PricewaterhouseCoopers LLP states that they did not audit and they do not express an opinion on that unaudited financial information. Accordingly, the degree of reliance on their report on such information should be restricted in light of the limited nature of the review procedures applied. PricewaterhouseCoopers LLP is not subject to the liability provisions of Section 11 of the Securities Act of 1933 for their report

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on the unaudited financial information because that report is not a “report” or a “part” of the registration statement prepared or certified by PricewaterhouseCoopers LLP within the meaning of Sections 7 and 11 of the Securities Act of 1933.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Reference is made to the information appearing above under the subheading “Market Sensitive Instruments and Risk Management” under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which information is hereby incorporated by reference.

ITEM 4.  CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

In connection with the filing of this Form 10-Q, our management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of disclosure controls and procedures pursuant to applicable Exchange Act Rules as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of the end of and during the period covered by this report with respect to information being recorded, processed, summarized and reported within time periods specified in the SEC’s rules and forms and with respect to timely communication to them and other members of management responsible for preparing periodic reports of all material information required to be disclosed in this report as it relates to ACGL and its consolidated subsidiaries.

We continue to enhance our operating procedures and internal controls to effectively support our business and our regulatory and reporting requirements. Our management does not expect that our disclosure controls or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. As a result of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons or by collusion of two or more people. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. As a result of the inherent limitations in a cost-effective control system, misstatement due to error or fraud may occur and not be detected. Accordingly, our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the disclosure controls and procedures are met.

Changes in Internal Controls Over Financial Reporting

There have been no changes in internal control over financial reporting that occurred during the fiscal quarter ended June 30, 2015 that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting.

PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings

We, in common with the insurance industry in general, are subject to litigation and arbitration in the normal course of our business. As of June 30, 2015, we were not a party to any litigation or arbitration which is expected by management to have a material adverse effect on our results of operations and financial condition and liquidity.

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Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

The following table summarizes our purchases of our common shares for the 2015 second quarter:

	Issuer Purchases of Equity Securities
Period	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that  May Yet be Purchased Under the Plan or Programs (2)
4/1/2015 - 4/30/2015	377,572	$	61.50	376,778	$	701,071
5/1/2015 - 5/31/2015	1,955,503	62.33		1,824,129	$	587,429
6/1/2015 - 6/30/2015	971,579	64.42		965,068	$	525,263
Total	3,304,654	$	62.85	3,165,975	$	525,263

_________________________________________________

(1) Includes repurchases by ACGL of shares, from time to time, from employees in order to facilitate the payment of withholding taxes on restricted shares granted and the exercise of stock appreciation rights. We purchased these shares at their fair value, as determined by reference to the closing price of our common shares on the day the restricted shares vested or the stock appreciation rights were exercised.

(2) Remaining amount available at June 30, 2015 under ACGL’s share repurchase authorization, under which repurchases may be effected from time to time in open market or privately negotiated transactions through December 31, 2016.

Item 5.  Other Information

In accordance with Section 10a(i)(2) of the Securities Exchange Act of 1934, as amended, we are responsible for disclosing non-audit services to be provided by our independent auditor, PricewaterhouseCoopers LLP, which are approved by the Audit Committee of our board of directors. During the 2015 second quarter, the Audit Committee approved engagements of PricewaterhouseCoopers LLP for permitted non-audit services, which consisted of tax consulting services, tax compliance services and other accounting consulting services.

Item 6.  Exhibits

Exhibit No.	Description
10.1	Restricted Share Agreement with Arch Capital Group Ltd. substantially in the form signed by the Non-Employee Directors of Arch Capital Group Ltd. for May 7, 2015 grants
10.2	Restricted Share Agreement with Arch Capital Group Ltd. substantially in the form signed by each of Constantine Iordanou, Mark D. Lyons, Marc Grandisson, W. Preston Hutchings, David McElroy and Louis T. Petrillo for May 13, 2015 grants
10.3	Non-Qualified Stock Option Agreement with Constantine Iordanou, Mark D. Lyons, Marc Grandisson, W. Preston Hutchings, David McElroy and Louis T. Petrillo for May 13, 2015 grants
10.4	Restricted Share Unit Agreement, dated as of May 13, 2015, between Arch Capital Group Ltd. and David McElroy
10.5	Arch Capital Group Ltd. 2015 Long Term Incentive and Share Award Plan*
15	Accountants’ Awareness Letter (regarding unaudited interim financial information)
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	The following financial information from Arch Capital Group Ltd.’s Quarterly Report for the quarter ended June 30, 2015 formatted in XBRL: (i) Consolidated Balance Sheets at June 30, 2015 and December 31, 2014; (ii) Consolidated Statements of Income for the three and six month periods ended June 30, 2015 and 2014; (iii) Consolidated Statements of Comprehensive Income for the three and six month periods ended June 30, 2015 and 2014; (iv) Consolidated Statements of Changes in Shareholders’ Equity for the six month periods ended June 30, 2015 and 2014; (v) Consolidated Statements of Cash Flows for the six month periods ended June 30, 2015 and 2014; and (vi) Notes to Consolidated Financial Statements.

* Filed as an exhibit to our Definitive Proxy Statement, as filed with the SEC on March 26, 2015, and incorporated by reference.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ARCH CAPITAL GROUP LTD.
	(REGISTRANT)
	/s/ Constantine Iordanou
Date: August 7, 2015	Constantine Iordanou
	President and Chief Executive Officer (Principal Executive Officer) and Chairman of the Board of Directors
	/s/ Mark D. Lyons
Date: August 7, 2015	Mark D. Lyons
	Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)

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EXHIBIT INDEX

Exhibit No.	Description
10.1	Restricted Share Agreement with Arch Capital Group Ltd. substantially in the form signed by the Non-Employee Directors of Arch Capital Group Ltd. for May 7, 2015 grants
10.2	Restricted Share Agreement with Arch Capital Group Ltd. substantially in the form signed by each of Constantine Iordanou, Mark D. Lyons, Marc Grandisson, W. Preston Hutchings, David McElroy and Louis T. Petrillo for May 13, 2015 grants
10.3	Non-Qualified Stock Option Agreement with Constantine Iordanou, Mark D. Lyons, Marc Grandisson, W. Preston Hutchings, David McElroy and Louis T. Petrillo for May 13, 2015 grants
10.4	Restricted Share Unit Agreement, dated as of May 13, 2015, between Arch Capital Group Ltd. and David McElroy
10.5	Arch Capital Group Ltd. 2015 Long Term Incentive and Share Award Plan*
15	Accountants’ Awareness Letter (regarding unaudited interim financial information)
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	The following financial information from Arch Capital Group Ltd.’s Quarterly Report for the quarter ended June 30, 2015 formatted in XBRL: (i) Consolidated Balance Sheets at June 30, 2015 and December 31, 2014; (ii) Consolidated Statements of Income for the three and six month periods ended June 30, 2015 and 2014; (iii) Consolidated Statements of Comprehensive Income for the three and six month periods ended June 30, 2015 and 2014; (iv) Consolidated Statements of Changes in Shareholders’ Equity for the six month periods ended June 30, 2015 and 2014; (v) Consolidated Statements of Cash Flows for the six month periods ended June 30, 2015 and 2014; and (vi) Notes to Consolidated Financial Statements.

* Filed as an exhibit to our Definitive Proxy Statement, as filed with the SEC on March 26, 2015, and incorporated by reference.

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EX-10.1

Exhibit 10.1

ARCH CAPITAL GROUP LTD.
Restricted Share Agreement

THIS AGREEMENT, dated as of May 7, 2015, between Arch Capital Group Ltd. (the “Company”), a Bermuda company, and __ (the “Director”).

WHEREAS, the following terms reflect the Company’s 2012 Long Term Incentive and Share Award Plan (the “Plan”);

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the parties hereto agree as follows.

1.Award of Shares.  Pursuant to the provisions of the Plan, the terms of which are incorporated herein by reference, the Director is hereby awarded 1,201 Restricted Shares (the “Award”), subject to the terms and conditions herein set forth. Capitalized terms used herein and not defined shall have the meanings set forth in the Plan. In the event of any conflict between this Agreement and the Plan, the Plan shall control.

2.Terms and Conditions.  It is understood and agreed that the Award of Restricted Shares evidenced hereby is subject to the following terms and conditions:

(a)    Vesting of Award. Subject to Section 2(b) below and the other terms and conditions of this Agreement, this Award shall become vested on May 1, 2016. Unless otherwise provided by the Company, all dividends and other amounts receivable in connection with any adjustments to the Shares under Section 4(c) of the Plan shall be subject to the vesting schedule in this Section 2(a). Notwithstanding the foregoing, if a Change in Control occurs and the Director ceases to be a director of the Company for any reason, then the Restricted Shares shall become immediately vested in full upon such termination of service.

“Change in Control” shall mean:

(A) any person (within the meaning of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), other than a Permitted Person, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of Voting Securities representing 50% or more of the total voting power or value of all the then outstanding Voting Securities; or

(B) the individuals who, as of the date hereof, constitute the Board of Directors of the Company (the “Board”) together with those who become directors subsequent to such date and whose recommendation, election or nomination for election to the Board was approved by a vote of at least a

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majority of the directors then still in office who either were directors as of such date or whose recommendation, election or nomination for election was previously so approved, cease for any reason to constitute a majority of the members of the Board; or

(C) the consummation of a merger, consolidation, recapitalization, liquidation, sale or disposition by the Company of all or substantially all of the Company's assets, or reorganization of the Company, other than any such transaction which would (x) result in more than 50% of the total voting power and value represented by the voting securities of the surviving entity outstanding immediately after such transaction being beneficially owned by the former shareholders of the Company and (y) not otherwise be deemed a Change in Control under subparagraphs (A) or (B) of this paragraph.

“Permitted Persons” means (A) the Company; (B) any Related Party; or (C) any group (as defined in Rule 13b-3 under the Exchange Act) comprised of any or all of the foregoing.

“Related Party” means (A) a majority-owned subsidiary of the Company; (B) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any majority-owned subsidiary of the Company; or (C) any entity, 50% or more of the voting power of which is owned directly or indirectly by the shareholders of the Company in substantially the same proportion as their ownership of Voting Securities immediately prior to the transaction.

“Voting Security” means any security of the Company which carries the right to vote generally in the election of directors.

(b)    Termination of Service; Forfeiture of Unvested Shares. Except as otherwise set forth in Section 2(a) above, in the event the Director ceases to be a director of the Company prior to the date the Restricted Shares otherwise become vested due to his or her death or Permanent Disability (as defined in the Company’s Incentive Compensation Plan), the Restricted Shares shall become immediately vested in full upon such termination of service. If the Director ceases to be a director of the Company for any other reason prior to the date the Restricted Shares become vested, the Award shall be forfeited by the Director and become the property of the Company.

(c)    Certificates.  Each certificate issued in respect of Restricted Shares awarded hereunder shall be issued in book entry format with the Company’s transfer agent

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and shall bear a legend disclosing the restrictions on transferability imposed on such Restricted Shares by this Agreement (the “Restrictive Legend”). Upon the vesting of Restricted Shares pursuant to Section 2(a) hereof and the satisfaction of any withholding tax liability pursuant to Section 5 hereof, such vested Shares, not bearing the Restrictive Legend, shall be delivered to the Director.

(d)    Rights of a Stockholder.  Prior to the time a Restricted Share is fully vested hereunder, the Director shall have no right to transfer, pledge, hypothecate or otherwise encumber such Restricted Shares. During such period, the Director shall have all other rights of a stockholder, including, but not limited to, the right to vote and to receive dividends (subject to Section 2(a) hereof) at the time paid on such Restricted Shares.

(e)    No Right to Continued Services. This Award shall not confer upon the Director any right with respect to continuance of services with the Company nor shall this Award interfere with the right of the Company to terminate the Director’s services at any time.

3.Transfer of Shares. The Shares delivered hereunder, or any interest therein, may be sold, assigned, pledged, hypothecated, encumbered, or transferred or disposed of in any other manner, in whole or in part, only in compliance with the terms, conditions and restrictions as set forth in the governing instruments of the Company, applicable United States federal and state securities laws or any other applicable laws or regulations and the terms and conditions hereof.

4.Expenses of Issuance of Shares. The issuance of stock certificates hereunder shall be without charge to the Director. The Company shall pay, and indemnify the Director from and against any issuance, stamp or documentary taxes (other than transfer taxes) or charges imposed by any governmental body, agency or official (other than income taxes) or by reason of the issuance of Shares.

5.Withholding. No later than the date of vesting of (or the date of an election by the Director under Section 83(b) of the Code with respect to) the Award granted hereunder, the Director shall make arrangements satisfactory to the Committee regarding payment of any federal, state or local taxes of any kind required by law to be withheld at such time with respect to such Award and the Company shall, to the extent permitted or required by law, have the right to deduct from any payment of any kind otherwise due to the Director, federal, state and local taxes of any kind required by law to be withheld at such time.

6.References.  References herein to rights and obligations of the Director shall apply, where appropriate, to the Director’s legal representative or estate without regard to whether specific reference to such legal representative or estate is contained in a particular provision of this Agreement.

7.Notices.  Any notice required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given when delivered personally or by courier, or sent by certified or registered mail, postage prepaid, return receipt requested, duly addressed to the party concerned at the address indicated below or to such changed address as such party may subsequently by similar process give notice of:

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If to the Company:

Arch Capital Group Ltd.Waterloo House

100 Pitts Bay RoadPembroke HM 08, Bermuda Attn.: Secretary

If to the Director:

To the last address delivered to the Company by the Director in the manner set forth herein.

8.Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to principles of conflict of laws.

9.Entire Agreement. This Agreement and the Plan constitute the entire agreement among the parties relating to the subject matter hereof, and any previous agreement or understanding among the parties with respect thereto is superseded by this Agreement and the Plan.

10.Counterparts.  This Agreement may be executed in two counterparts, each of which shall constitute one and the same instrument.

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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.

ARCH CAPITAL GROUP LTD.

By: /s/ Dawna Ferguson    

Dawna Ferguson

Secretary

/s/ Director Signature    

EX-10.2

Exhibit 10.2

ARCH CAPITAL GROUP LTD.
Restricted Share Agreement

THIS AGREEMENT, dated as of May 13, 2015, between Arch Capital Group Ltd. (the “Company”), a Bermuda company, and _ (the “Employee”).

WHEREAS, the Employee has been granted the following award under the Company’s 2015 Long Term Incentive and Share Award Plan (the “Plan”);

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the parties hereto agree as follows.

1.    Award of Shares.  Pursuant to the provisions of the Plan, the terms of which are incorporated herein by reference, the Employee is hereby awarded __ Restricted Shares (the “Award”), subject to the terms and conditions herein set forth. Capitalized terms used herein and not defined shall have the meanings set forth in the Plan. In the event of any conflict between this Agreement and the Plan, the Plan shall control.

2.    Terms and Conditions.  It is understood and agreed that the Award of Restricted Shares evidenced hereby is subject to the following terms and conditions:

(a)    Vesting of Award. Subject to Section 2(b) below and the other terms and conditions of this Agreement, this Award shall become vested in three equal annual installments on the first, second and third anniversaries of the date hereof. Unless otherwise provided by the Company, all dividends and other amounts receivable in connection with any adjustments to the Shares under Section 4(c) of the Plan shall be subject to the vesting schedule in this Section 2(a).

(b)    Termination of Service; Forfeiture of Unvested Shares.

(i)    In the event the Employee ceases to be an employee of the Company prior to the date the Restricted Shares otherwise become vested due to his or her death or Permanent Disability (as defined in the Company’s Incentive Compensation Plan on the date hereof), the Restricted Shares shall become immediately vested in full upon such termination of employment.

(ii)    In the event of termination of employment (other than by the Company for Cause, as such term is defined in the Company’s Incentive Compensation Plan on the date hereof, and other than as set forth in Section 2(b)(i) or (iii) hereof) after the attainment of Retirement Age (as defined in the Company’s Incentive Compensation Plan on the date hereof), the Restricted Shares shall continue to vest on the schedule set forth in Section 2(a) above so long as the Employee does not engage in any activity in competition with any activity of the Company or any of its Subsidiaries other than serving on the board of directors (or similar governing body) of another company or as a consultant for no more than 26 weeks per calendar year (“Competitive Activity”). In the event the Employee engages in a Competitive Activity, any unvested Restricted Shares shall be forfeited by the Employee and become the property of the Company.

(iii)    In the event the Employee ceases to be an employee of the Company after a Change in Control (as defined below) due to termination (A) by the Company not for Cause or (B) by the Employee for Good Reason (as defined in the Employment Agreement, dated as of __, between the Employee and the Company), in either case, on or before the second anniversary of the occurrence of the Change in Control, the Restricted Shares, to the extent not already vested, shall become immediately vested in full upon such termination of employment.

(iv)    If the Employee ceases to be an Employee of the Company for any other reason prior to the date the Restricted Shares become vested, the Award shall be forfeited by the Employee and become the property of the Company.

(v)    For purposes of this Agreement, service with any of the Company’s Subsidiaries (as defined in the Plan) shall be considered to be service with the Company.

(vi)    “Change in Control” shall mean:

(A) any person (within the meaning of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), other than a Permitted Person, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of Voting Securities representing 50% or more of the total voting power or value of all the then outstanding Voting Securities; or

(B) the individuals who, as of the date hereof, constitute the Board of Directors of the Company (the “Board”) together with those who become directors subsequent to such date and whose recommendation, election or nomination for election to the Board was approved by a vote of at least a majority of the directors then still in office who either were directors as of such date or whose recommendation, election or nomination for election was previously so approved, cease for any reason to constitute a majority of the members of the Board; or

(C) the consummation of a merger, consolidation, recapitalization, liquidation, sale or disposition by the Company of all or substantially all of the Company's assets, or reorganization of the Company, other than any such transaction which would (x) result in more than 50% of the total voting power and value represented by the voting securities of the surviving entity outstanding immediately after such transaction being beneficially owned by the former shareholders of the Company and (y) not otherwise be deemed a Change in Control under subparagraphs (A) or (B) of this paragraph.

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“Permitted Persons” means (A) the Company; (B) any Related Party; or (C) any group (as defined in Rule 13b-3 under the Exchange Act) comprised of any or all of the foregoing.

“Related Party” means (A) a majority-owned subsidiary of the Company; (B) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any majority-owned subsidiary of the Company; or (C) any entity, 50% or more of the voting power of which is owned directly or indirectly by the shareholders of the Company in substantially the same proportion as their ownership of Voting Securities immediately prior to the transaction.

“Voting Security” means any security of the Company which carries the right to vote generally in the election of directors.

(c)    Certificates.  Each certificate issued in respect of Restricted Shares awarded hereunder shall be issued in book entry format with the Company’s transfer agent and shall bear a legend disclosing the restrictions on transferability imposed on such Restricted Shares by this Agreement (the “Restrictive Legend”). Upon the vesting of Restricted Shares pursuant to Section 2 hereof and the satisfaction of any withholding tax liability pursuant to Section 5 hereof, such vested Shares, not bearing the Restrictive Legend, shall be delivered to the Employee.

(d)    Rights of a Stockholder.  Prior to the time a Restricted Share is fully vested hereunder, the Employee shall have no right to transfer, pledge, hypothecate or otherwise encumber such Restricted Share. During such period, the Employee shall have all other rights of a stockholder, including, but not limited to, the right to vote and to receive dividends (subject to Section 2(a) hereof) at the time paid on such Restricted Shares.

(e)    No Right to Continued Employment. This Award shall not confer upon the Employee any right with respect to continuance of employment by the Company nor shall this Award interfere with the right of the Company to terminate the Employee’s employment at any time.

3.    Transfer of Shares. The Shares delivered hereunder, or any interest therein, may be sold, assigned, pledged, hypothecated, encumbered, or transferred or disposed of in any other manner, in whole or in part, only in compliance with the terms, conditions and restrictions as set forth in the governing instruments of the Company, applicable United States federal and state securities laws or any other applicable laws or regulations and the terms and conditions hereof.

4.    Expenses of Issuance of Shares. The issuance of stock certificates hereunder shall be without charge to the Employee. The Company shall pay any issuance, stamp or documentary taxes (other than transfer taxes) or charges imposed by any governmental body, agency or official (other than income taxes) or by reason of the issuance of Shares.

5.    Withholding. No later than the date of vesting of (or the date of an election by the Employee under Section 83(b) of the Code with respect to) the Award granted hereunder, the Employee shall pay to the Company or make arrangements satisfactory to the Committee regarding payment of any federal, state or local taxes of any kind required by law to be withheld at such time

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with respect to such Award and the Company shall, to the extent permitted or required by law, have the right to deduct from any payment of any kind otherwise due to the Employee, federal, state and local taxes of any kind required by law to be withheld at such time.

6.    References.  References herein to rights and obligations of the Employee shall apply, where appropriate, to the Employee’s legal representative or estate without regard to whether specific reference to such legal representative or estate is contained in a particular provision of this Agreement.

7.    Notices.  Any notice required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given when delivered personally or by courier, or sent by certified or registered mail, postage prepaid, return receipt requested, duly addressed to the party concerned at the address indicated below or to such changed address as such party may subsequently by similar process give notice of:

If to the Company:

Arch Capital Group Ltd.Waterloo House
100 Pitts Bay RoadPembroke HM 08 Bermuda

Attn.: Secretary

If to the Employee:

To the last address delivered to the Company by the
Employee in the manner set forth herein.

8.    Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of New York, without giving effect to principles of conflict of laws.

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9.    Entire Agreement. This Agreement and the Plan constitute the entire agreement among the parties relating to the subject matter hereof, and any previous agreement or understanding among the parties with respect thereto is superseded by this Agreement and the Plan.

10.    Counterparts.  This Agreement may be executed in two counterparts, each of which shall constitute one and the same instrument.

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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.

ARCH CAPITAL GROUP LTD.

By: /s/ Dawna Ferguson    Name: Dawna Ferguson
Title: Secretary

/s/ Employee Signature    

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EX-10.3

Exhibit 10.3

ARCH CAPITAL GROUP LTD.
Non-Qualified Stock Option Agreement

FOR GOOD AND VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, Arch Capital Group Ltd. (the “Company”), a Bermuda company, hereby grants to ___, an employee of the Company on the date hereof (the “Option Holder”), the option to purchase common shares, $0.0033 par value per share, of the Company (“Shares”), upon the following terms:

WHEREAS, the Option Holder has been granted the following award under the Company’s 2015 Long Term Incentive and Share Award Plan (the “Plan”);

(a)Grant. The Option Holder is hereby granted an option (the “Option”) to purchase ___ Shares (the “Option Shares”) pursuant to the Plan, the terms of which are incorporated herein by reference. The Option is granted as of May 13, 2015, (the “Date of Grant”) and such grant is subject to the terms and conditions herein and the terms and conditions of the applicable provisions of the Plan. This Option shall not be treated as an incentive stock option as defined in Section 422 of the Internal Revenue Code of 1986, as amended. In the event of any conflict between this Agreement and the Plan, the Plan shall control.

(b)Status of Option Shares. Upon issue, the Option Shares shall rank equally in all respects with the other Shares.

(c)Option Price. The purchase price for the Option Shares shall be, except as herein provided, $62.505 per Option Share, hereinafter sometimes referred to as the “Option Price,” payable immediately in full upon the exercise of the Option.

(d)Term of Option. The Option may be exercised only during the period (the “Option Period”) set forth in paragraph (f) below and shall remain exercisable until the tenth anniversary of the Date of Grant. Thereafter, the Option Holder shall cease to have any rights in respect thereof. The right to exercise the Option shall be subject to sooner termination as provided in paragraph (j) below.

(e)No Rights of Shareholder. The Option Holder shall not, by virtue hereof, be entitled to any rights of a shareholder in the Company, either at law or in equity.

(f)Exercisability. Except as otherwise set forth in paragraph (j) below, the Option shall become exercisablein three equal annual installments on the first, second and third anniversaries of the Date of Grant, in each case subject to paragraph (j) below. Subject to paragraph (j) below, the Option may be exercised at any time or from time to time during the Option Period in regard to all or any portion of the Option which is then exercisable, as may be adjusted pursuant to paragraph (g) below.

(g)Anti-dilution Adjustment. For the avoidance of doubt, the terms of Section 4(c) of the Plan, relating to anti-dilution adjustments, will apply to the Option.

(h)Nontransferability. The Option, or any interest therein, may not be assigned or otherwise transferred, disposed of or encumbered by the Option Holder, other than by will or by the laws of descent and distribution. During the lifetime of the Option Holder, the Option shall be exercisable only by the Option Holder or by his or her guardian or legal representative. Notwithstanding the foregoing, the Option may be transferred by the Option Holder to members of his or her “immediate family” or to a trust or other entity established for the exclusive benefit of solely one or more members of the Option Holder’s “immediate family.” Any Option held by the transferee will continue to be subject to the same terms and conditions that were applicable to the Option immediately prior to the transfer, except that the Option will be transferable by the transferee only by will or the laws of descent and distribution. For purposes hereof, “immediate family” means the Option Holder’s children, stepchildren, grandchildren, parents, stepparents, grandparents, spouse, siblings (including half brother and sisters), in laws, and relationships arising because of legal adoption.

(i)Exercise of Option. In order to exercise the Option, the Option Holder shall, in the manner directed by the Company, specify the whole number of Option Shares in respect of which the Option is being exercised, accompanied by payment, in a manner acceptable to the Company (which shall include a broker assisted exercise arrangement), of the Option Price for the Option Shares for which the Option is being exercised. Payment to the Company in cash or Shares already owned by the Option Holder (provided that the Option Holder has owned such Shares for a minimum period of six months or has purchased such Shares on the open market) and having a total Fair Market Value equal to the exercise price, or in a combination of cash and such Shares, shall be deemed acceptable for purposes hereof. In addition, in lieu of making payment of the exercise price of the Option and receiving the number of Shares for which the Option is being exercised as described above, the Option Holder may instead elect to exercise the Option by making no cash exercise price payment but having the Company issue to the Option Holder the number of Shares (rounded down to the nearest whole number) equal to the net result obtained by (A) subtracting the exercise price per Share from the Fair Market Value per Share on the date of exercise, (B) multiplying the difference by the number of Shares for which the Option is being exercised, and (C) dividing the product by the Fair Market Value per Share on the date of exercise. For the avoidance of doubt, if the calculation in the immediately preceding sentence results in a negative number, no Shares will be issued upon exercise. Option Shares will be issued accordingly by the Company, and a share certificate dispatched or electronic delivery of such Option Shares to the Option Holder within 30 days.

The Company shall not be required to issue fractional Shares upon the exercise of the Option. If any fractional interest in a Share would be deliverable upon the exercise of the Option in whole or in part but for the provisions of this paragraph, the Company, in lieu of delivering any such fractional share therefor, shall pay a cash adjustment therefor in an amount

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equal to their Fair Market Value multiplied by the fraction of the fractional share which would otherwise have been issued hereunder. Anything to the contrary herein notwithstanding, the Company shall not be obligated to issue any Option Shares hereunder if the issuance of such Option Shares would violate the provision of any applicable law, in which event the Company shall, as soon as practicable, take whatever action it reasonably can so that such Option Shares may be issued without resulting in such violations of law.

(j)Termination of Service.

1.In the event the Option Holder ceases to be an employee of the Company due to the Option Holder’s death or Permanent Disability (as defined in the Company’s Incentive Compensation Plan on the date hereof), the Option, to the extent not already exercisable in full, shall become immediately exercisable in full and shall continue to be exercisable by the Option Holder (or the Option Holder’s Beneficiary or estate in the event of the Option Holder’s death) for a period of three years following such termination of employment (but not beyond the Option Period).

2.In the event of termination of employment (other than by the Company for Cause, as such term is defined in the Company’s Incentive Compensation Plan on the date hereof and other than as set forth in paragraphs (j)(1) or (j)(3) hereof) after the attainment of Retirement Age (as defined in the Company’s Incentive Compensation Plan on the date hereof), the Option shall continue to become exercisable on the schedule set forth in paragraph (f) above so long as the Option Holder does not engage in any activity in competition with any activity of the Company or any of its Subsidiaries other than serving on the board of directors (or similar governing body) of another company or as a consultant for no more than 26 weeks per calendar year (“Competitive Activity”) and shall continue to be exercisable by the Option Holder (or the Option Holder’s Beneficiary or estate in the event of the Option Holder’s death) for the remainder of the Option Period. In the event the Option Holder engages in a Competitive Activity, (A) the Option, to the extent then exercisable, may be exercised for 30 days following the date on which the Option Holder engages in such Competitive Activity (but not beyond the Option Period) and (B) the Option, to the extent then not exercisable, shall be immediately forfeited.

3.In the event the Option Holder ceases to be an employee of the Company after a Change in Control (as defined below) due to termination (A) by the Company not for Cause or (B) by the Option Holder for Good Reason (as defined in the Employment Agreement, as of __, between the Option Holder and the Company), in either case, on or before the second anniversary of the occurrence of the Change in Control, the Option, to the extent not already exercisable in full, shall become immediately exercisable in full and shall continue to be exercisable by the Option Holder for a period of 90 days following such termination of employment (but not beyond the Option Period).

4.In the event that the Option Holder ceases to be an employee of the Company for any other reason, except due to a termination of the Option Holder’s

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employment by the Company for Cause, (A) the Option, to the extent then exercisable, may be exercised for 90 days following termination of employment (but not beyond the Option Period) and (B) the Option, to the extent then not exercisable, shall be immediately forfeited.

5.In the event of a termination of the Option Holder’s employment for Cause, the Option shall immediately cease to be exercisable and shall be immediately forfeited.

6.For purposes of this Option, service with any of the Company’s Subsidiaries (as defined in the Plan) shall be considered to be service with the Company.

7.“Change in Control” shall mean:

(A) any person (within the meaning of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), other than a Permitted Person, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of Voting Securities representing 50% or more of the total voting power or value of all the then outstanding Voting Securities; or

(B) the individuals who, as of the date hereof, constitute the Board of Directors of the Company (the “Board”) together with those who become directors subsequent to such date and whose recommendation, election or nomination for election to the Board was approved by a vote of at least a majority of the directors then still in office who either were directors as of such date or whose recommendation, election or nomination for election was previously so approved, cease for any reason to constitute a majority of the members of the Board; or

(C) the consummation of a merger, consolidation, recapitalization, liquidation, sale or disposition by the Company of all or substantially all of the Company's assets, or reorganization of the Company, other than any such transaction which would (x) result in more than 50% of the total voting power and value represented by the voting securities of the surviving entity outstanding immediately after such transaction being beneficially owned by the former shareholders of the Company and (y) not otherwise be deemed a Change in Control under subparagraphs (A) or (B) of this paragraph.

“Permitted Persons” means (A) the Company; (B) any Related Party; or (C) any group (as defined in Rule 13b-3 under the Exchange Act) comprised of any or all of the foregoing.

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“Related Party” means (A) a majority-owned subsidiary of the Company; (B) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any majority-owned subsidiary of the Company; or (C) any entity, 50% or more of the voting power of which is owned directly or indirectly by the shareholders of the Company in substantially the same proportion as their ownership of Voting Securities immediately prior to the transaction.

“Voting Security” means any security of the Company which carries the right to vote generally in the election of directors.

(k)Obligations as to Capital. The Company agrees that it will at all times maintain authorized and unissued share capital sufficient to fulfill all of its obligations under the Option.

(l)Transfer of Shares. The Option, the Option Shares, or any interest in either, may be sold, assigned, pledged, hypothecated, encumbered, or transferred or disposed of in any other manner, in whole or in part, only in compliance with the terms, conditions and restrictions as set forth in the governing instruments of the Company, applicable United States federal and state securities laws and the terms and conditions hereof.

(m)Expenses of Issuance of Option Shares. The issuance of stock certificates or the electronic delivery of Option Shares upon the exercise of the Option in whole or in part, shall be without charge to the Option Holder. The Company shall pay any issuance, stamp or documentary taxes (other than transfer taxes) or charges imposed by any governmental body, agency or official (other than income taxes) by reason of the exercise of the Option in whole or in part or the resulting issuance of the Option Shares.

(n)Withholding. No later than the date of exercise of the Option granted hereunder, the Option Holder shall pay to the Company or make arrangements satisfactory to the Committee regarding payment of any federal, state or local taxes of any kind required by law to be withheld upon the exercise of such Option and the Company shall, to the extent permitted or required by law, have the right to deduct from any payment of any kind otherwise due to the Option Holder, federal, state and local taxes of any kind required by law to be withheld upon the exercise of such Option.

(o)References. References herein to rights and obligations of the Option Holder shall apply, where appropriate, to the Option Holder’s legal representative or estate without regard to whether specific reference to such legal representative or estate is contained in a particular provision of this Option.

(p)Notices. Any notice required or permitted to be given under this agreement shall be in writing and shall be deemed to have been given when delivered personally or by courier, or sent by certified or registered mail, postage prepaid, return

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receipt requested, duly addressed to the party concerned at the address indicated below or to such changed address as such party may subsequently by similar process give notice of:

If to the Company:

Arch Capital Group Ltd.:

Waterloo House, Ground Floor100 Pitts Bay RoadPembroke HM 08 Bermuda
Attn: Secretary

If to the Option Holder:

The last address delivered to the Company by the Option Holder in the manner set forth herein.

(q)Governing Law. This agreement shall be governed by and construed in accordance with the laws of New York, without giving effect to principles of conflict of laws thereof.

(r)Entire Agreement. This agreement and the Plan constitute the entire agreement among the parties relating to the subject matter hereof, and any previous agreement or understanding among the parties with respect thereto is superseded by this agreement and the Plan.

(s)Counterparts. This agreement may be executed in two counterparts, each of which shall constitute one and the same instrument.

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IN WITNESS WHEREOF, the undersigned have executed this agreement as of the Date of Grant.

ARCH CAPITAL GROUP LTD.

By: /s/ Dawna Ferguson               

Name: Dawna Ferguson

Title: Secretary

/s/ Employee Signature               

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EX-10.4

Exhibit 10.4

ARCH CAPITAL GROUP LTD.Restricted Share Unit Agreement

THIS AGREEMENT, dated as of May 13, 2015, between Arch Capital Group Ltd. (the “Company”), a Bermuda company, and David McElroy (the “Employee”).

WHEREAS, the Employee has been granted the following award under the Company’s 2015 Long Term Incentive and Share Award Plan (the “Plan”);

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the parties hereto agree as follows.

1.Award of Share Units.  Pursuant to the provisions of the Plan, the terms of which are incorporated herein by reference, the Employee is hereby awarded 9,220 Restricted Share Units (the “Award”), subject to the terms and conditions herein set forth. Capitalized terms used herein and not defined shall have the meanings set forth in the Plan. In the event of any conflict between this Agreement and the Plan, the Plan shall control.

2.Terms and Conditions.  It is understood and agreed that the Award of Restricted Share Units evidenced hereby is subject to the following terms and conditions:

(a)Vesting of Award. Subject to Section 2(b) below and the other terms and conditions of this Agreement, this Award shall become vested in three equal annual installments on the first, second and third anniversaries of the date hereof. Unless otherwise provided by the Company, all amounts receivable in connection with any adjustments to the Shares under Section 4(c) of the Plan or Section 2(e) below shall be subject to the vesting schedule in this Section 2(a).

(b)Termination of Service; Forfeiture of Unvested Share Units.

(i)     In the event the Employee ceases to be an employee of the Company prior to the date the Restricted Share Units otherwise become vested due to his or her death or Permanent Disability (as defined in the Company’s Incentive Compensation Plan on the date hereof), the Restricted Share Units shall become immediately vested in full upon such termination of employment.

(ii)    In the event of termination of employment (other than by the Company for Cause, as such term is defined in the Company’s Incentive Compensation Plan on the date hereof, and other than as set forth in Section 2(b)(i) or (iii) hereof) after the attainment of Retirement Age (as defined in the Company’s Incentive Compensation Plan on the date hereof), the Restricted Share Units shall continue to vest on the schedule set forth in paragraph 2(a) above so long as the Employee does not engage in any activity in competition with any activity of the Company or any of its Subsidiaries other than serving on the board of directors (or similar governing body) of another company or as a consultant for no more than 26 weeks per calendar year (“Competitive Activity”). In the event the Employee engages in a Competitive Activity, any unvested Restricted Share Units shall be forfeited by the Employee and become the property of the Company.

(iii)    In the event the Employee ceases to be an employee of the Company after a Change in Control (as defined below) due to termination (A) by the Company not for Cause or (B) by the Employee for Good Reason (as defined in the Employment Agreement dated as of June 5, 2009, and as amended on July 25, 2012, between the Employee and Arch Insurance Group Inc.), in either case, on or before the second anniversary of the occurrence of the Change in Control, the Restricted Share Units, to the extent not already vested, shall become immediately vested in full upon such termination of employment.

(iv)    If the Employee ceases to be an Employee of the Company for any other reason prior to the date the Restricted Share Units become vested, the unvested Restricted Share Units shall be forfeited by the Employee and become the property of the Company.

(v)    For purposes of this Agreement, service with any of the Company’s Subsidiaries (as defined in the Plan) shall be considered to be service with the Company.

(vi)    “Change in Control” shall mean:

(A) any person (within the meaning of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), other than a Permitted Person, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of Voting Securities representing 50% or more of the total voting power or value of all the then outstanding Voting Securities; or

(B) the individuals who, as of the date hereof, constitute the Board of Directors of the Company (the “Board”) together with those who become directors subsequent to such date and whose recommendation, election or nomination for election to the Board was approved by a vote of at least a majority of the directors then still in office who either were directors as of such date or whose recommendation, election or nomination for election was previously so approved, cease for any reason to constitute a majority of the members of the Board; or

(C) the consummation of a merger, consolidation, recapitalization, liquidation, sale or disposition by the Company of all or substantially all of the Company's assets, or reorganization of the Company, other than any such transaction which would (x) result in more than 50% of the total voting power and value represented by the voting securities of the surviving entity outstanding immediately after such transaction being beneficially owned by the former shareholders of the Company and (y) not otherwise be deemed a Change in Control under subparagraphs (A) or (B) of this paragraph.

“Permitted Persons” means (A) the Company; (B) any Related Party; or (C) any group (as defined in Rule 13b-3

2

under the Exchange Act) comprised of any or all of the foregoing.

“Related Party” means (A) a majority-owned subsidiary of the Company; (B) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any majority-owned subsidiary of the Company; or (C) any entity, 50% or more of the voting power of which is owned directly or indirectly by the shareholders of the Company in substantially the same proportion as their ownership of Voting Securities immediately prior to the transaction.

“Voting Security” means any security of the Company which carries the right to vote generally in the election of directors.    

(c)Distribution of Shares.  At the time the Employee ceases to be an employee of the Company for any reason prior to attaining Retirement Age, the Company shall distribute to the Employee (or his or her heirs in the event of the Employee’s death) a number of Shares equal to the number of vested Restricted Share Units then held by the Employee. In the event the Employee ceases to be an employee of the Company after attaining Retirement Age, a number of Shares equal to the number of vested Restricted Share Units held by the Employee will be distributed by the Company to the Employee (or his or her heirs in the event of the Employee’s death) at the later of (i) the time the Employee ceases to be an employee of the Company, and (ii) the date the Restricted Share Units are scheduled to vest pursuant to the schedule set forth in Section 2(a) above (without regard to any acceleration of such vesting), so long as the Restricted Share Units are not forfeited before such time as provided in Section 2(b).

(d)Rights and Restrictions.  The Restricted Share Units shall not be transferable, other than pursuant to will or the laws of descent and distribution. Prior to vesting of the Restricted Share Units and delivery of the Shares to the Employee following his termination of employment, the Employee shall not have any rights or privileges of a shareholder as to the Shares subject to the Award. Specifically, the Employee shall not have the right to receive dividends or the right to vote such Shares prior to vesting of the Award and delivery of the Shares.

(e)Anti-dilution Adjustment. For the avoidance of doubt, the terms of Section 4(c) of the Plan, relating to anti-dilution adjustments, will apply to the Restricted Share Units.

(f)Dividend Equivalents. As of each date on which a cash dividend is paid on Shares, there shall be granted to the Employee that number of additional Restricted Share Units (including fractional units) determined by (i) multiplying the amount of such dividend per Share by the number of Restricted Share Units held by the Employee, and (ii) dividing the total so determined by the Fair Market Value of a Share on the date of payment of such cash dividend. The Restricted Share Units granted pursuant to this Section 2(f) will have the same terms and conditions (including vesting dates) as the Restricted Share Units with respect to which they are granted.

(g)No Right to Continued Employment. This Award shall not confer upon the Employee any right with respect to continuance of employment by the Company nor shall this Award interfere with the right of the Company to terminate the Employee’s employment at any time.

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3.Transfer of Shares. The Shares delivered hereunder, or any interest therein, may be sold, assigned, pledged, hypothecated, encumbered, or transferred or disposed of in any other manner, in whole or in part, only in compliance with the terms, conditions and restrictions as set forth in the governing instruments of the Company, applicable United States federal and state securities laws or any other applicable laws or regulations and the terms and conditions hereof.

4.Expenses of Issuance of Shares. The issuance of stock certificates hereunder shall be without charge to the Employee. The Company shall pay any issuance, stamp or documentary taxes (other than transfer taxes) or charges imposed by any governmental body, agency or official (other than income taxes) or by reason of the issuance of Shares.

5.Withholding. The Employee shall pay to the Company or make arrangements satisfactory to the Committee regarding payment of any federal, state or local taxes of any kind required by law to be withheld with respect to the Award and the Company shall, to the extent permitted or required by law, have the right to deduct from any payment of any kind otherwise due to the Employee, federal, state and local taxes of any kind required by law to be withheld.

6.References.  References herein to rights and obligations of the Employee shall apply, where appropriate, to the Employee’s legal representative or estate without regard to whether specific reference to such legal representative or estate is contained in a particular provision of this Agreement.

7.Notices.  Any notice required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given when delivered personally or by courier, or sent by certified or registered mail, postage prepaid, return receipt requested, duly addressed to the party concerned at the address indicated below or to such changed address as such party may subsequently by similar process give notice of:

If to the Company:

Arch Capital Group Ltd.Waterloo House
100 Pitts Bay RoadPembroke HM 08 Bermuda

Attn.: Secretary

If to the Employee:

To the last address delivered to the Company by the
Employee in the manner set forth herein.

8.Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of New York, without giving effect to principles of conflict of laws.

9.Entire Agreement. This Agreement and the Plan constitute the entire agreement among the parties relating to the subject matter hereof, and any previous agreement or understanding among the parties with respect thereto is superseded by this Agreement and the Plan.

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10.Counterparts.  This Agreement may be executed in two counterparts, each of which shall constitute one and the same instrument.

11.    Section 409A. It is intended that this Agreement and the Award will comply with Section 409A of the Code (and any regulations and guidelines issued thereunder), to the extent the Agreement and Award are subject thereto, and the Agreement shall be interpreted on a basis consistent with such intent. If an amendment of the Agreement is necessary in order for it to comply with Section 409A, the parties hereto will negotiate in good faith to amend the Agreement in a manner that preserves the original intent of the parties to the extent reasonably possible. Notwithstanding any provision of this Agreement to the contrary, for purposes of any provision of this Agreement providing for the distribution of any Shares upon or following a termination of employment that is considered deferred compensation under Section 409A, references to the Employee’s “termination of employment” (and corollary terms) with the Company shall be construed to refer to the Employee’s “separation from service” (within the meaning of Treas. Reg. Section 1.409A-1(h)) with the Company. Notwithstanding any provision to the contrary in this Agreement, if the Employee is deemed on the date of his or her “separation from service” (within the meaning of Treas. Reg. Section 1.409A-1(h)) to be a “specified employee” (within the meaning of Treas. Reg. Section 1.409A-1(i)), then with regard to any payment that is considered deferred compensation under Section 409A payable on account of a “separation from service” that is required to be delayed pursuant to Section 409A(a)(2)(B) of the Code (after taking into account any applicable exceptions to such requirement), such payment shall not be made prior to the earlier of (i) the expiration of the six (6)-month period measured from the date of the Employee’s “separation from service,” or (ii) the date of the Employee’s death (the “Delay Period”). Upon the expiration of the Delay Period, all payments delayed pursuant hereto (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid to the Employee in a lump sum and any remaining payments due under this Agreement shall be paid in accordance with the normal payment dates specified for them herein. Whenever payments under this Agreement are to be made in installments, each such installment shall be deemed to be a separate payment for purposes of Section 409A. No action or failure to act, pursuant to this Section 11 shall subject the Company to any claim, liability, or expense, and the Company shall not have any obligation to indemnify or otherwise protect the Employee from the obligation to pay any taxes, interest or penalties pursuant to Section 409A of the Code.

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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.

ARCH CAPITAL GROUP LTD.

By: /s/ Dawna Ferguson    Name: Dawna Ferguson
Title: Secretary

/s/ David McElroy    

David McElroy

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EX-15

Exhibit 15

Securities and Exchange Commission

100 F Street, N.E.

Washington, DC 20549

Commissioners:

We are aware that our report dated August 7, 2015 on our review of interim financial information of Arch Capital Group Ltd. and its subsidiaries (the “Company”) for the three-month and six-month periods ended June 30, 2015 and June 30, 2014 and included in the Company's quarterly report on Form 10-Q for the quarter ended June 30, 2015 is incorporated by reference in the Registration Statements on Forms S-3 (Registration No. 333-202440, Registration No. 333-180329) and in the Registration Statements on Forms S-8 (Registration No. 333- 99974, Registration No. 333-86145, Registration No. 333-82772, Registration No. 333-72182, Registration No. 333-98971, Registration No. 333-124422, Registration No. 333-142835, Registration No. 333-181308 and Registration No. 333-203993).

Very truly yours,

/s/ PricewaterhouseCoopers LLP

New York, New York

August 7, 2015

EX-31.1

Exhibit 31.1

Certification

of Chief Executive Officer

Pursuant to Section 302 of the

Sarbanes-Oxley Act of 2002

I, Constantine Iordanou, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Arch Capital Group Ltd.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in the report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and to the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	August 7, 2015
By:	/s/ Constantine Iordanou
Name:	Constantine Iordanou
Title:	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification

of Chief Financial Officer

Pursuant to Section 302 of the

Sarbanes-Oxley Act of 2002

I, Mark D. Lyons, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Arch Capital Group Ltd.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in the report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and to the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	August 7, 2015
By:	/s/ Mark D. Lyons
Name:	Mark D. Lyons
Title:	Executive Vice President, Chief Financial Officer and Treasurer

EX-32.1

Exhibit 32.1

Certification Pursuant to Chapter 63, Title 18 United States Code §1350

As Adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Arch Capital Group Ltd. (the “Company”) on Form 10-Q for the period ending June 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Constantine Iordanou, as President and Chief Executive Officer of the Company, certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934; and

(2) the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 7, 2015

 /s/ Constantine Iordanou

Constantine Iordanou

President and Chief Executive Officer

A signed original of this written statement required by Section 906 or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Arch Capital Group Ltd. and will be retained by Arch Capital Group Ltd. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

Certification Pursuant to Chapter 63, Title 18 United States Code §1350

As Adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Arch Capital Group Ltd. (the “Company”) on Form 10-Q for the period ending June 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Mark D. Lyons, as Executive Vice President, Chief Financial Officer and Treasurer of the Company, certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934; and

(2) the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 7, 2015

 /s/ Mark D. Lyons

Mark D. Lyons

Executive Vice President,

Chief Financial Officer and Treasurer

A signed original of this written statement required by Section 906 or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Arch Capital Group Ltd. and will be retained by Arch Capital Group Ltd. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Segment Information - Summary of underwriting income or loss by segment (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Segment Reporting Information [Line Items]
Gross premiums written		$ 1,199,209	$ 1,271,761	$ 2,541,231	$ 2,566,897
Premiums ceded		(255,629)	(299,833)	(530,656)	(529,979)
Net premiums written		943,580	971,928	2,010,575	2,036,918
Change in unearned premiums		(142)	(64,776)	(156,873)	(269,986)
Net premiums earned		943,438	907,152	1,853,702	1,766,932
Other underwriting income		7,717	2,033	19,253	3,615
Losses and loss adjustment expenses		(519,426)	(485,518)	(1,013,142)	(921,758)
Acquisition expenses, net		(175,425)	(158,158)	(338,501)	(318,500)
Other operating expenses		(151,190)	(141,418)	(299,727)	(273,742)
Underwriting income (loss)		105,114	124,091	221,585	256,547
Net investment income		86,963	72,990	165,957	139,984
Net realized gains (losses)		(35,725)	54,144	47,623	73,841
Net impairment losses recognized in earnings		(1,113)	(14,749)	(6,912)	(17,720)
Equity in net income (loss) of investment funds accounted for using the equity method		16,167	9,240	22,056	12,493
Other income (loss)		2,205	4,850	317	2,746
Other expenses		(17,418)	(14,932)	(26,763)	(28,407)
Interest expense		(4,011)	(14,334)	(16,747)	(28,738)
Net foreign exchange gains (losses)		(19,583)	(2,294)	46,918	(8,857)
Income before income taxes		132,599	219,006	454,034	401,889
Income tax expense		(6,780)	(7,289)	(19,458)	(11,027)
Net income (loss)		125,819	211,717	434,576	390,862
Dividends attributable to redeemable noncontrolling interests		(4,743)	(4,857)	(9,651)	(4,909)
Amounts attributable to non-redeemable noncontrolling interests		(5,286)	1,156	(25,799)	4,563
Net income available to Arch		115,790	208,016	399,126	390,516
Preferred dividends		(5,485)	(5,485)	(10,969)	(10,969)
Net income (loss) available to Arch common shareholders		$ 110,305	$ 202,531	$ 388,157	$ 379,547
Underwriting Ratios
Loss ratio		55.10%	53.50%	54.70%	52.20%
Acquisition expense ratio		18.60%	17.40%	18.30%	18.00%
Other operating expense ratio		16.00%	15.60%	16.20%	15.50%
Combined ratio		89.70%	86.50%	89.20%	85.70%
Goodwill and intangible assets		$ 102,518	$ 118,721	$ 102,518	$ 118,721	$ 109,539
Total investable assets		15,854,128	15,803,527	15,854,128	15,803,527
Total assets		23,084,925	22,567,447	23,084,925	22,567,447	22,006,081
Total liabilities		15,947,534	15,326,382	15,947,534	15,326,382	$ 14,887,435
Sub-Total
Segment Reporting Information [Line Items]
Gross premiums written	[1]	1,155,253	1,256,934	2,466,931	2,552,070
Premiums ceded		(331,861)	(336,808)	(701,122)	(599,148)
Net premiums written		823,392	920,126	1,765,809	1,952,922
Change in unearned premiums		12,857	(25,954)	(91,562)	(201,136)
Net premiums earned		836,249	894,172	1,674,247	1,751,786
Other underwriting income		6,865	2,033	16,439	3,615
Losses and loss adjustment expenses		(441,748)	(477,324)	(885,985)	(912,208)
Acquisition expenses, net		(145,283)	(153,965)	(287,383)	(313,484)
Other operating expenses		(147,740)	(139,783)	(294,272)	(270,998)
Underwriting income (loss)		108,343	125,133	223,046	258,711
Net investment income		67,171	72,458	137,459	139,451
Net realized gains (losses)		(26,860)	50,966	38,649	70,663
Net impairment losses recognized in earnings		(1,113)	(14,749)	(6,912)	(17,720)
Equity in net income (loss) of investment funds accounted for using the equity method		16,167	9,240	22,056	12,493
Other income (loss)		2,205	4,850	317	2,746
Other expenses		(17,418)	(15,279)	(26,763)	(26,078)
Interest expense		(4,011)	(14,334)	(16,747)	(28,738)
Net foreign exchange gains (losses)		(22,571)	(2,764)	44,282	(9,420)
Income before income taxes		121,913	215,521	415,387	402,108
Income tax expense		(6,780)	(7,289)	(19,458)	(11,027)
Net income (loss)		115,133	208,232	395,929	391,081
Dividends attributable to redeemable noncontrolling interests		0	0	0	0
Amounts attributable to non-redeemable noncontrolling interests		0	0	0	0
Net income available to Arch		115,133	208,232	395,929	391,081
Preferred dividends		(5,485)	(5,485)	(10,969)	(10,969)
Net income (loss) available to Arch common shareholders		$ 109,648	$ 202,747	$ 384,960	$ 380,112
Underwriting Ratios
Loss ratio		52.80%	53.40%	52.90%	52.10%
Acquisition expense ratio		17.40%	17.20%	17.20%	17.90%
Other operating expense ratio		17.70%	15.60%	17.60%	15.50%
Combined ratio		87.90%	86.20%	87.70%	85.50%
Goodwill and intangible assets		$ 102,518	$ 118,721	$ 102,518	$ 118,721
Total investable assets		14,513,554	14,688,808	14,513,554	14,688,808
Total assets		21,323,611	21,204,129	21,323,611	21,204,129
Total liabilities		15,299,256	15,072,875	15,299,256	15,072,875
Sub-Total | Insurance
Segment Reporting Information [Line Items]
Gross premiums written	[1]	744,810	852,231	1,510,963	1,582,877
Premiums ceded		(235,743)	(273,349)	(459,893)	(458,393)
Net premiums written		509,067	578,882	1,051,070	1,124,484
Change in unearned premiums		758	(71,170)	(33,331)	(139,271)
Net premiums earned		509,825	507,712	1,017,739	985,213
Other underwriting income		521	514	948	1,014
Losses and loss adjustment expenses		(320,926)	(311,526)	(638,822)	(598,296)
Acquisition expenses, net		(76,723)	(76,449)	(151,801)	(153,381)
Other operating expenses		(89,054)	(85,829)	(177,173)	(166,973)
Underwriting income (loss)		$ 23,643	$ 34,422	$ 50,891	$ 67,577
Underwriting Ratios
Loss ratio		62.90%	61.40%	62.80%	60.70%
Acquisition expense ratio		15.00%	15.10%	14.90%	15.60%
Other operating expense ratio		17.50%	16.90%	17.40%	16.90%
Combined ratio		95.40%	93.40%	95.10%	93.20%
Goodwill and intangible assets		$ 30,968	$ 24,498	$ 30,968	$ 24,498
Sub-Total | Reinsurance
Segment Reporting Information [Line Items]
Gross premiums written	[1]	342,101	349,841	827,213	866,894
Premiums ceded		(89,446)	(58,994)	(226,015)	(132,121)
Net premiums written		252,655	290,847	601,198	734,773
Change in unearned premiums		21,310	44,780	(47,516)	(57,798)
Net premiums earned		273,965	335,627	553,682	676,975
Other underwriting income		2,658	303	4,087	619
Losses and loss adjustment expenses		(111,183)	(150,325)	(223,715)	(289,961)
Acquisition expenses, net		(58,360)	(66,035)	(114,964)	(139,468)
Other operating expenses		(39,007)	(37,666)	(77,051)	(73,861)
Underwriting income (loss)		$ 68,073	$ 81,904	$ 142,039	$ 174,304
Underwriting Ratios
Loss ratio		40.60%	44.80%	40.40%	42.80%
Acquisition expense ratio		21.30%	19.70%	20.80%	20.60%
Other operating expense ratio		14.20%	11.20%	13.90%	10.90%
Combined ratio		76.10%	75.70%	75.10%	74.30%
Goodwill and intangible assets		$ 2,420	$ 4,942	$ 2,420	$ 4,942
Sub-Total | Mortgage
Segment Reporting Information [Line Items]
Gross premiums written	[1]	68,572	55,476	129,113	103,383
Premiums ceded		(6,902)	(5,079)	(15,572)	(9,718)
Net premiums written		61,670	50,397	113,541	93,665
Change in unearned premiums		(9,211)	436	(10,715)	(4,067)
Net premiums earned		52,459	50,833	102,826	89,598
Other underwriting income		3,686	1,216	11,404	1,982
Losses and loss adjustment expenses		(9,639)	(15,473)	(23,448)	(23,951)
Acquisition expenses, net		(10,200)	(11,481)	(20,618)	(20,635)
Other operating expenses		(19,679)	(16,288)	(40,048)	(30,164)
Underwriting income (loss)		$ 16,627	$ 8,807	$ 30,116	$ 16,830
Underwriting Ratios
Loss ratio		18.40%	30.40%	22.80%	26.70%
Acquisition expense ratio		19.40%	22.60%	20.10%	23.00%
Other operating expense ratio		37.50%	32.00%	38.90%	33.70%
Combined ratio		75.30%	85.00%	81.80%	83.40%
Goodwill and intangible assets		$ 69,130	$ 89,281	$ 69,130	$ 89,281
Other
Segment Reporting Information [Line Items]
Gross premiums written	[1]	127,954	54,562	256,587	86,756
Premiums ceded		(7,766)	(2,760)	(11,821)	(2,760)
Net premiums written		120,188	51,802	244,766	83,996
Change in unearned premiums		(12,999)	(38,822)	(65,311)	(68,850)
Net premiums earned		107,189	12,980	179,455	15,146
Other underwriting income		852	0	2,814	0
Losses and loss adjustment expenses		(77,678)	(8,194)	(127,157)	(9,550)
Acquisition expenses, net		(30,142)	(4,193)	(51,118)	(5,016)
Other operating expenses		(3,450)	(1,635)	(5,455)	(2,744)
Underwriting income (loss)		(3,229)	(1,042)	(1,461)	(2,164)
Net investment income		19,792	532	28,498	533
Net realized gains (losses)		(8,865)	3,178	8,974	3,178
Net impairment losses recognized in earnings		0	0	0	0
Equity in net income (loss) of investment funds accounted for using the equity method		0	0	0	0
Other income (loss)		0	0	0	0
Other expenses		0	347	0	(2,329)
Interest expense		0	0	0	0
Net foreign exchange gains (losses)		2,988	470	2,636	563
Income before income taxes		10,686	3,485	38,647	(219)
Income tax expense		0	0	0	0
Net income (loss)		10,686	3,485	38,647	(219)
Dividends attributable to redeemable noncontrolling interests		(4,743)	(4,857)	(9,651)	(4,909)
Amounts attributable to non-redeemable noncontrolling interests		(5,286)	1,156	(25,799)	4,563
Net income available to Arch		657	(216)	3,197	(565)
Preferred dividends		0	0	0	0
Net income (loss) available to Arch common shareholders		$ 657	$ (216)	$ 3,197	$ (565)
Underwriting Ratios
Loss ratio		72.50%	63.10%	70.90%	63.10%
Acquisition expense ratio		28.10%	32.30%	28.50%	33.10%
Other operating expense ratio		3.20%	12.60%	3.00%	18.10%
Combined ratio		103.80%	108.00%	102.40%	114.30%
Goodwill and intangible assets		$ 0	$ 0	$ 0	$ 0
Total investable assets		1,340,574	1,114,719	1,340,574	1,114,719
Total assets		1,761,314	1,363,318	1,761,314	1,363,318
Total liabilities		$ 648,278	$ 253,507	$ 648,278	$ 253,507

[1] Certain amounts included in the gross premiums written of each segment are related to intersegment transactions. Accordingly, the sum of gross premiums written for each segment does not agree to the total gross premiums written as shown in the table above due to the elimination of intersegment transactions in the total.

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Fair Value - Rollforward of Level 3 assets and liabilities (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance at beginning of period		$ 57,500	$ 0	$ 57,500	$ 549,990
Total gains or (losses) (realized/unrealized) - included in earnings	[1]	0	0	0	0
Total gains or (losses) (realized/unrealized) - included in other comprehensive income		0	0	0	0
Purchases, issuances, sales and settlements
Purchases		0	0	0	0
Issuances		0	0	0	0
Sales		0	0	0	(2,045)
Settlements		0	0	0	0
Transfers in and/or out of Level 3		0	0	0	(547,945)	[2]
Balance at end of period		57,500	0	57,500	0
Contingent consideration liability
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance at beginning of period		(66,461)	(43,156)	(61,845)	0
Total gains or (losses) (realized/unrealized) - included in earnings	[1]	(4,795)	(9,943)	(8,343)	(11,337)
Total gains or (losses) (realized/unrealized) - included in other comprehensive income		0	0	0	0
Purchases, issuances, sales and settlements
Purchases		0	0	0	0
Issuances		0	0	(1,068)	(41,762)
Sales		0	0	0	0
Settlements		0	0	0	0
Transfers in and/or out of Level 3		0	0	0	0	[2]
Balance at end of period		(71,256)	(53,099)	(71,256)	(53,099)
Available for sale | Asset backed securities
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance at beginning of period		57,500	0	57,500	0
Total gains or (losses) (realized/unrealized) - included in earnings	[1]	0	0	0	0
Total gains or (losses) (realized/unrealized) - included in other comprehensive income		0	0	0	0
Purchases, issuances, sales and settlements
Purchases		0	0	0	0
Issuances		0	0	0	0
Sales		0	0	0	0
Settlements		0	0	0	0
Transfers in and/or out of Level 3		0	0	0	0	[2]
Balance at end of period		57,500	0	57,500	0
Available for sale | Corporate bonds
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance at beginning of period		0	0	0	2,045
Total gains or (losses) (realized/unrealized) - included in earnings	[1]	0	0	0	0
Total gains or (losses) (realized/unrealized) - included in other comprehensive income		0	0	0	0
Purchases, issuances, sales and settlements
Purchases		0	0	0	0
Issuances		0	0	0	0
Sales		0	0	0	(2,045)
Settlements		0	0	0	0
Transfers in and/or out of Level 3		0	0	0	0	[2]
Balance at end of period		0	0	0	0
Available for sale | Other investments
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance at beginning of period		0	0	0	170,420
Total gains or (losses) (realized/unrealized) - included in earnings	[1]	0	0	0	0
Total gains or (losses) (realized/unrealized) - included in other comprehensive income		0	0	0	0
Purchases, issuances, sales and settlements
Purchases		0	0	0	0
Issuances		0	0	0	0
Sales		0	0	0	0
Settlements		0	0	0	0
Transfers in and/or out of Level 3		0	0	0	(170,420)	[2]
Balance at end of period		0	0	0	0
Fair value option | Other investments
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance at beginning of period		0	0	0	377,525
Total gains or (losses) (realized/unrealized) - included in earnings	[1]	0	0	0	0
Total gains or (losses) (realized/unrealized) - included in other comprehensive income		0	0	0	0
Purchases, issuances, sales and settlements
Purchases		0	0	0	0
Issuances		0	0	0	0
Sales		0	0	0	0
Settlements		0	0	0	0
Transfers in and/or out of Level 3		0	0	0	(377,525)	[2]
Balance at end of period		$ 0	$ 0	$ 0	$ 0

[1] Gains or losses on fixed maturities available for sale were included in net realized gains (losses) while gains or losses on other investments were included in net realized gains (losses) or net investment income. Gains or losses on the contingent consideration liability were included in net realized gains (losses).

[2] In accordance with applicable accounting guidance, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The transfers out of Level 3 presented in this table are intended to permit reconciliation to information previously presented.

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Investment Information - Net realized gains and losses (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Net realized gains and losses:
Available for sale securities, gross gains on investment sales		$ 82,233	$ 56,763	$ 179,824	$ 122,814
Available for sale securities, gross losses on investment sales		(58,974)	(33,028)	(114,134)	(73,041)
Derivative instruments	[1]	(41,496)	12,402	(4,820)	(366)
Other	[2]	(8,638)	(10,962)	(13,226)	(13,668)
Net realized gains (losses)		(35,725)	54,144	47,623	73,841
Fixed Maturities
Net realized gains and losses:
Change in fair value of assets and liabilities accounted for using the fair value option		(5,191)	10,984	(8,493)	9,341
Other investments
Net realized gains and losses:
Change in fair value of assets and liabilities accounted for using the fair value option		785	17,985	7,072	28,761
Equity securities
Net realized gains and losses:
Change in fair value of assets and liabilities accounted for using the fair value option		(69)	0	(71)	0
Short-term investments
Net realized gains and losses:
Change in fair value of assets and liabilities accounted for using the fair value option		$ (4,375)	$ 0	$ 1,471	$ 0

[1] See Note 8 for information on the Company’s derivative instruments.

[2] Includes the re-measurement of contingent consideration liability amounts.

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Fair Value - Narrative (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Fair Value Disclosures [Abstract]
Total assets and liabilities measured at fair value	$ 14,970,000	$ 15,060,000
Total assets and liabilities measured at fair value priced using non-binding broker quotes	$ 301,700	$ 260,800
Total assets and liabilities measured at fair value priced using non-binding broker quotes (percentage)	2.00%	1.70%
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Senior notes	$ 791,222	$ 791,141
Reportable Legal Entities | ACGL (Parent Guarantor)
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Senior notes	296,834	296,796
Estimated fair value of senior notes	382,500
Reportable Legal Entities | Arch-U.S. (Subsidiary Issuer)
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Senior notes	494,388	$ 494,345
Estimated fair value of senior notes	514,200
US government agency securities
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Transfers from Level 1 to Level 2	44,600
Other investments
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Fair Value, Assets, Level 2 to Level 1 Transfers, Amount	$ 99,700

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Investment Information - Fair value option (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Fair Value, Option, Quantitative Disclosures [Line Items]
Investments accounted for using the fair value option	$ 2,613,487	$ 2,425,053
Fixed Maturities
Fair Value, Option, Quantitative Disclosures [Line Items]
Investments accounted for using the fair value option	854,170	632,024
Other investments
Fair Value, Option, Quantitative Disclosures [Line Items]
Investments accounted for using the fair value option	1,591,371	1,541,428
Short-term investments
Fair Value, Option, Quantitative Disclosures [Line Items]
Investments accounted for using the fair value option	167,698	251,601
Equity securities
Fair Value, Option, Quantitative Disclosures [Line Items]
Investments accounted for using the fair value option	$ 248	$ 0

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Recent Accounting Pronouncements (Details) - USD ($) $ in Millions	3 Months Ended	12 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Accounting Standards Update 2015-03 | Other assets and senior notes
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Effect of adoption	$ 8.8	$ 8.9

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Commitments and Contingencies (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014
Line of Credit Facility [Abstract]
Revolving credit agreement borrowings	$ 100,000		$ 100,000
Unfunded Investment Commitments [Abstract]
Investment commitments	1,120,000		$ 968,900
LOC Facilities [Member]
Line of Credit Facility [Abstract]
Letters of credit outstanding, amount	456,300
Investments pledged as collateral	521,900
Other secured letter of credit facilities
Line of Credit Facility [Abstract]
Maximum borrowing capacity	$ 229,400
Credit Agreement
Line of Credit Facility [Abstract]
Credit facility expiration date	Jun. 30, 2019
Revolving credit agreement borrowings	$ 100,000
Unsecured revolving loan and letter of credit facility
Line of Credit Facility [Abstract]
Maximum borrowing capacity	300,000
Secured letter of credit facility
Line of Credit Facility [Abstract]
Maximum borrowing capacity	500,000
Watford Holdings Ltd | Line of credit
Line of Credit Facility [Abstract]
Maximum borrowing capacity	$ 100,000	$ 200,000
Credit facility expiration date	May 19, 2016
Letters of credit outstanding, amount	$ 36,500
Watford Holdings Ltd | Letter of credit
Line of Credit Facility [Abstract]
Maximum borrowing capacity	400,000
Watford Holdings Ltd | Other secured letter of credit facilities
Line of Credit Facility [Abstract]
Maximum borrowing capacity	$ 800,000
Line of Credit Facility, Initiation Date	Jun. 02, 2015
Credit facility expiration date	Jun. 04, 2018

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Earnings Per Common Share (Tables)

6 Months Ended

Jun. 30, 2015

Earnings Per Share [Abstract]

Schedule of computation of basic and diluted earnings per common share

The following table sets forth the computation of basic and diluted earnings per common share:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015			2014
Numerator:
Net income	$	125,819		$	211,717		$	434,576		$	390,862
Amounts attributable to noncontrolling interests	(10,029		)	(3,701		)	(35,450		)	(346		)
Net income available to Arch	115,790			208,016			399,126			390,516
Preferred dividends	(5,485		)	(5,485		)	(10,969		)	(10,969		)
Net income available to Arch common shareholders	$	110,305		$	202,531		$	388,157		$	379,547
Denominator:
Weighted average common shares outstanding — basic	121,719,214			132,650,634			122,957,384			132,256,462
Effect of dilutive common share equivalents:
Nonvested restricted shares	1,258,741			1,144,621			1,334,633			1,236,408
Stock options (1)	2,907,465			3,094,689			2,864,696			3,224,019
Weighted average common shares and common share equivalents outstanding — diluted	125,885,420			136,889,944			127,156,713			136,716,889
Earnings per common share:
Basic	$	0.91		$	1.53		$	3.16		$	2.87
Diluted	$	0.88		$	1.48		$	3.05		$	2.78

_________________________________________________

(1) Certain stock options were not included in the computation of diluted earnings per share where the exercise price of the stock options exceeded the average market price and would have been anti-dilutive or where, when applying the treasury stock method to in-the-money options, the sum of the proceeds, including unrecognized compensation, exceeded the average market price and would have been anti-dilutive. For the 2015 second quarter and 2014 second quarter, the number of stock options excluded were 1,009,113 and 978,237, respectively. For the six months ended June 30, 2015 and 2014, the number of stock options excluded were 1,187,162 and 1,318,662, respectively.

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Investment Information - Other than temporary impairments rollforward (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Rollforward:
Balance at start of period	$ 24,344	$ 47,256	$ 20,196	$ 60,062
Credit loss impairments recognized on securities not previously impaired	281	0	4,770	0
Credit loss impairments recognized on securities previously impaired	55	5	134	11
Reductions for increases in cash flows expected to be collected that are recognized over the remaining life of the security	0	0	0	0
Reductions for securities sold during the period	(3,774)	(25,820)	(4,194)	(38,632)
Balance at end of period	$ 20,906	$ 21,441	$ 20,906	$ 21,441

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Investment Information - Aging of available for sale securities in an unrealized loss position (Details) - USD ($) $ in Thousands		Jun. 30, 2015	Dec. 31, 2014
Available for sale securities:
Estimated Fair Value - Less than 12 Months		$ 4,831,057	$ 4,108,030
Gross Unrealized Losses - Less than 12 Months		(103,686)	(90,017)
Estimated Fair Value - 12 Months or More		352,050	641,407
Gross Unrealized Losses - 12 Months or More		(29,292)	(21,713)
Estimated Fair Value - Total		5,183,107	4,749,437
Gross Unrealized Losses - Total		(132,978)	(111,730)
Fixed maturities
Available for sale securities:
Estimated Fair Value - Less than 12 Months	[1]	4,394,582	3,788,119
Gross Unrealized Losses - Less than 12 Months	[1]	(80,386)	(71,021)
Estimated Fair Value - 12 Months or More	[1]	352,050	641,407
Gross Unrealized Losses - 12 Months or More	[1]	(29,292)	(21,713)
Estimated Fair Value - Total	[1]	4,746,632	4,429,526
Gross Unrealized Losses - Total	[1]	(109,678)	(92,734)
Fixed maturities | Corporate bonds
Available for sale securities:
Estimated Fair Value - Less than 12 Months	[1]	1,659,276	1,309,637
Gross Unrealized Losses - Less than 12 Months	[1]	(40,616)	(32,903)
Estimated Fair Value - 12 Months or More	[1]	92,244	148,963
Gross Unrealized Losses - 12 Months or More	[1]	(11,101)	(6,071)
Estimated Fair Value - Total	[1]	1,751,520	1,458,600
Gross Unrealized Losses - Total	[1]	(51,717)	(38,974)
Fixed maturities | Mortgage backed securities
Available for sale securities:
Estimated Fair Value - Less than 12 Months	[1]	437,043	293,624
Gross Unrealized Losses - Less than 12 Months	[1]	(3,574)	(1,476)
Estimated Fair Value - 12 Months or More	[1]	45,082	59,107
Gross Unrealized Losses - 12 Months or More	[1]	(657)	(2,366)
Estimated Fair Value - Total	[1]	482,125	352,731
Gross Unrealized Losses - Total	[1]	(4,231)	(3,842)
Fixed maturities | Municipal bonds
Available for sale securities:
Estimated Fair Value - Less than 12 Months	[1]	784,691	210,614
Gross Unrealized Losses - Less than 12 Months	[1]	(8,562)	(588)
Estimated Fair Value - 12 Months or More	[1]	3,530	13,643
Gross Unrealized Losses - 12 Months or More	[1]	(442)	(456)
Estimated Fair Value - Total	[1]	788,221	224,257
Gross Unrealized Losses - Total	[1]	(9,004)	(1,044)
Fixed maturities | Commercial mortgage backed securities
Available for sale securities:
Estimated Fair Value - Less than 12 Months	[1]	374,338	232,147
Gross Unrealized Losses - Less than 12 Months	[1]	(4,912)	(770)
Estimated Fair Value - 12 Months or More	[1]	2,893	125,894
Gross Unrealized Losses - 12 Months or More	[1]	(10)	(3,052)
Estimated Fair Value - Total	[1]	377,231	358,041
Gross Unrealized Losses - Total	[1]	(4,922)	(3,822)
Fixed maturities | US government and government agencies
Available for sale securities:
Estimated Fair Value - Less than 12 Months	[1]	426,224	618,381
Gross Unrealized Losses - Less than 12 Months	[1]	(3,720)	(1,626)
Estimated Fair Value - 12 Months or More	[1]	0	3,438
Gross Unrealized Losses - 12 Months or More	[1]	0	(134)
Estimated Fair Value - Total	[1]	426,224	621,819
Gross Unrealized Losses - Total	[1]	(3,720)	(1,760)
Fixed maturities | Non-US government securities
Available for sale securities:
Estimated Fair Value - Less than 12 Months	[1]	431,360	510,766
Gross Unrealized Losses - Less than 12 Months	[1]	(16,841)	(31,172)
Estimated Fair Value - 12 Months or More	[1]	77,314	46,910
Gross Unrealized Losses - 12 Months or More	[1]	(15,879)	(6,031)
Estimated Fair Value - Total	[1]	508,674	557,676
Gross Unrealized Losses - Total	[1]	(32,720)	(37,203)
Fixed maturities | Asset backed securities
Available for sale securities:
Estimated Fair Value - Less than 12 Months	[1]	281,650	612,950
Gross Unrealized Losses - Less than 12 Months	[1]	(2,161)	(2,486)
Estimated Fair Value - 12 Months or More	[1]	130,987	243,452
Gross Unrealized Losses - 12 Months or More	[1]	(1,203)	(3,603)
Estimated Fair Value - Total	[1]	412,637	856,402
Gross Unrealized Losses - Total	[1]	(3,364)	(6,089)
Equity securities
Available for sale securities:
Estimated Fair Value - Less than 12 Months		286,325	181,002
Gross Unrealized Losses - Less than 12 Months		(18,606)	(13,364)
Estimated Fair Value - 12 Months or More		0	0
Gross Unrealized Losses - 12 Months or More		0	0
Estimated Fair Value - Total		286,325	181,002
Gross Unrealized Losses - Total		(18,606)	(13,364)
Other investments
Available for sale securities:
Estimated Fair Value - Less than 12 Months		89,863	59,638
Gross Unrealized Losses - Less than 12 Months		(1,927)	(362)
Estimated Fair Value - 12 Months or More		0	0
Gross Unrealized Losses - 12 Months or More		0	0
Estimated Fair Value - Total		89,863	59,638
Gross Unrealized Losses - Total		(1,927)	(362)
Short-term investments
Available for sale securities:
Estimated Fair Value - Less than 12 Months		60,287	79,271
Gross Unrealized Losses - Less than 12 Months		(2,767)	(5,270)
Estimated Fair Value - 12 Months or More		0	0
Gross Unrealized Losses - 12 Months or More		0	0
Estimated Fair Value - Total		60,287	79,271
Gross Unrealized Losses - Total		$ (2,767)	$ (5,270)

[1] In securities lending transactions, the Company receives collateral in excess of the fair value of the securities pledged. For purposes of this table, the Company has excluded the collateral received under securities lending, at fair value and included the securities pledged under securities lending, at fair value. See “—Securities Lending Agreements.”

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Variable Interest Entities and Noncontrolling Interests - Income or loss attributable to third party investors (Details) - Consolidation Items [Domain] - Entity [Domain] - Equity Component [Domain] - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Noncontrolling Interest [Line Items]
Amounts attributable to non-redeemable noncontrolling interests	$ (5,286)	$ 1,156	$ (25,799)	$ 4,563
Amounts attributable to redeemable noncontrolling interests	(4,743)	(4,857)	(9,651)	(4,909)
Amounts attributable to noncontrolling interests	$ (10,029)	$ (3,701)	$ (35,450)	$ (346)

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Investment Information - Narrative (Details) $ in Thousands		6 Months Ended	12 Months Ended
		Jun. 30, 2015 USD ($) lots	Dec. 31, 2014 USD ($) lots	Jun. 30, 2014 USD ($)
Narrative items:
Investable assets		$ 15,854,128		$ 15,803,527
OTTI unrealized losses at current fair value		$ 300	$ 900
Continuous unrealized loss, qualitative disclosures:
Number of positions in an unrealized loss position (lots) | lots		2,620	1,900
Total number of positions (lots) | lots		5,580	4,790
Largest single loss		$ 2,900	$ 2,900
OTTI unrealized losses (gains)	[1]	4,267	$ 3,646
Underwriting segments
Narrative items:
Investable assets		14,513,554		14,688,808
Other
Narrative items:
Investable assets		$ 1,340,574		$ 1,114,719

[1] Represents the total other-than-temporary impairments (“OTTI”) recognized in accumulated other comprehensive income (“AOCI”). It does not include the change in fair value subsequent to the impairment measurement date. At June 30, 2015, the net unrealized gain related to securities for which a non-credit OTTI was recognized in AOCI was $0.3 million, compared to a net unrealized gain of $0.9 million at December 31, 2014.

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Other Comprehensive Income (Loss) - Amounts reclassified from accumulated other comprehensive income (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Other-than-temporary impairment losses	$ (1,126)	$ (14,749)	$ (8,373)	$ (17,720)
Income before income taxes	132,599	219,006	454,034	401,889
Income tax expense	(6,780)	(7,289)	(19,458)	(11,027)
Net of tax	115,790	208,016	399,126	390,516
Reclassification out of accumulated other comprehensive income | Unrealized appreciation on available-for-sale investments
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net realized gains	23,259	23,735	65,690	49,773
Other-than-temporary impairment losses	(1,126)	(14,749)	(8,373)	(17,720)
Income before income taxes	22,133	8,986	57,317	32,053
Income tax expense	(919)	(701)	(5,171)	(2,519)
Net of tax	$ 21,214	$ 8,285	$ 52,146	$ 29,534

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Investment Information - Net investment income (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Net investment income:
Gross investment income		$ 102,600	$ 85,255	$ 201,562	$ 161,418
Investment expenses		(15,637)	(12,265)	(35,605)	(21,434)
Net investment income		86,963	72,990	165,957	139,984
Fixed Maturities
Net investment income:
Gross investment income		71,275	65,869	139,871	128,318
Term loan investments
Net investment income:
Gross investment income		18,033	6,908	32,777	12,577
Equity securities (dividends)
Net investment income:
Gross investment income		2,578	3,271	5,257	6,192
Short-term investments
Net investment income:
Gross investment income		225	107	421	512
Other
Net investment income:
Gross investment income	[1]	$ 10,489	$ 9,100	$ 23,236	$ 13,819

[1] Includes income distributions from investment funds and other items.

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Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2015

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Recently Issued Accounting Standards Adopted

The Company adopted accounting guidance in the 2015 second quarter which changes the accounting for repurchase and resale-to-maturity agreements by requiring that such agreements be recognized as financing arrangements, and requires that a transfer of a financial asset and a repurchase agreement entered into contemporaneously be accounted for separately. The new accounting guidance also requires additional disclosures about certain transferred financial assets accounted for as sales and certain securities lending transactions. Disclosures are not required to be presented for comparative periods before the effective date. See Note 6, “Investment Information—Securities Lending Agreements.”

The Company adopted accounting guidance in the 2015 second quarter which relates to the presentation of debt issuance costs. Such guidance requires presentation of debt issuance costs in the balance sheet as a deduction from the carrying amount of the related debt liability instead of a deferred charge. The Company previously included its debt issuance costs within ‘other assets.’ The guidance was applied retrospectively and resulted in reductions in ‘other assets’ and ‘senior notes’ at June 30, 2015 of $8.8 million, respectively, and $8.9 million at December 31, 2014, respectively. The adoption of this change in accounting principle did not impact the Company’s shareholders’ equity or net income.

The Company adopted accounting guidance pertaining to the categorization within the fair value hierarchy of certain investments measured at fair value using the net asset value per share as a practical expedient. These investments are no longer required to be categorized within the fair value hierarchy but are still required to be reported in the fair value hierarchy table to permit reconciliation back to the consolidated balance sheet. Additionally, certain disclosures are no longer applicable for investments that are eligible to be measured using the practical expedient, but for which the practical expedient was not elected. The guidance was applied retrospectively and only impacted the Company’s disclosures. See Note 7, “Fair Value.”

Recently Issued Accounting Standards Not Yet Adopted

An accounting standard was issued in the 2014 second quarter which will change the manner in which most companies recognize revenue. The standard requires that revenue reflect the transfer of goods or services to customers based on the consideration or payment the company expects to be entitled to in exchange for those goods or services; however, the standard does not change the accounting for insurance contracts or financial instruments. The new standard also requires enhanced disclosures about revenue. This accounting guidance is effective in the 2018 first quarter and may be applied on a full retrospective or modified retrospective approach. The Company is assessing the impact the implementation of this standard will have on its consolidated financial statements.

An accounting standard was issued in the 2015 first quarter providing targeted improvements to consolidation guidance for limited partnerships and other similarly structured entities. The new standard addresses instances where a reporting entity consolidates another entity when the reporting entity is simply acting on the behalf of others, amongst other related issues. While the standard is targeted, the application is relevant for all companies that are required to assess whether or not to consolidate certain entities. The standard is effective in the 2016 first quarter and early adoption is permitted. The Company is assessing the impact the implementation of this standard will have on its consolidated financial statements.

A new accounting standard was issued in the 2015 second quarter requiring new disclosures about the reserve for losses and loss adjustment expenses for short-duration insurance contracts. These disclosures will provide additional insight into an insurance entity’s ability to underwrite and anticipate costs associated with claims. This accounting guidance is effective for the 2016 annual reporting period and interim periods thereafter and should be applied retrospectively. The Company is assessing the impact the implementation of this standard will have on its consolidated financial statements.

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Other Comprehensive Income (Loss) - Components of other comprehensive income (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Before tax amount:
Unrealized holding gains (losses) arising during period, before tax	$ (96,629)	$ 115,150	$ (2,242)	$ 190,550
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss), before tax	(13)	0	(1,461)	0
Less reclassification of net realized gains included in net income, before tax	22,133	8,986	57,317	32,053
Foreign currency translation adjustments, before tax	11,697	10,021	(11,929)	8,672
Other comprehensive income (loss), before tax	(107,078)	116,185	(72,949)	167,169
Tax expense (benefit):
Unrealized holding gains (losses) arising during period, tax	(14,694)	6,722	(4,611)	10,769
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss), tax	0	0	0	0
Less reclassification of net realized gains included in net income, tax	919	701	5,171	2,519
Foreign currency translation adjustments, tax	117	0	(752)	0
Other comprehensive income (loss), tax	(15,496)	6,021	(10,534)	8,250
Net of tax amount:
Unrealized holding gains (losses) arising during period, net of tax	(81,935)	108,428	2,369	179,781
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss), net of tax	(13)	0	(1,461)	0
Less reclassification of net realized gains included in net income, net of tax	21,214	8,285	52,146	29,534
Foreign currency translation adjustments, net of tax	11,580	10,021	(11,177)	8,672
Net current period other comprehensive income (loss)	$ (91,582)	$ 110,164	$ (62,415)	$ 158,919

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Investment Information - Maturity profile of available for sale securities) (Details) - USD ($) $ in Thousands		Jun. 30, 2015	Dec. 31, 2014
Estimated Fair Value:
Estimated fair value		$ 9,927,603	$ 10,750,770
Amortized Cost:
Amortized cost		9,945,598	10,701,557
Fixed maturities
Estimated Fair Value:
Due in one year or less		369,356	235,930
Due after one year through five years		4,101,484	4,074,562
Due after five years through 10 years		2,468,013	2,475,726
Due after 10 years		341,524	279,542
Single maturity date		7,280,377	7,065,760
Estimated fair value	[1]	10,301,572	10,801,572
Amortized Cost:
Due in one year or less		374,710	233,794
Due after one year through five years		4,106,002	4,077,408
Due after five years through 10 years		2,487,840	2,461,356
Due after 10 years		344,178	273,372
Single maturity date		7,312,730	7,045,930
Amortized cost	[1]	10,320,043	10,753,633
Fixed maturities | Mortgage backed securities
Estimated Fair Value:
Securities without single maturity date		837,680	943,343
Amortized Cost:
Securities without single maturity date		829,596	928,342
Fixed maturities | Commercial mortgage backed securities
Estimated Fair Value:
Securities without single maturity date		832,159	1,114,528
Amortized Cost:
Securities without single maturity date		830,321	1,103,756
Fixed maturities | Asset backed securities
Estimated Fair Value:
Securities without single maturity date		1,351,356	1,677,941
Amortized Cost:
Securities without single maturity date		$ 1,347,396	$ 1,675,605

[1] In securities lending transactions, the Company receives collateral in excess of the fair value of the securities pledged. For purposes of this table, the Company has excluded the collateral received under securities lending, at fair value and included the securities pledged under securities lending, at fair value. See “—Securities Lending Agreements.”

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Derivative Instruments (Tables)

6 Months Ended

Jun. 30, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Fair value and notional amount of derivatives

The following table summarizes information on the fair values and notional values of the Company’s derivative instruments.  

	Estimated Fair Value
	Asset Derivatives		Liability Derivatives			Net Derivatives			Notional Value (1)
June 30, 2015
Futures contracts (2)	$	192	$	(1,064	)	$	(872	)	$	1,683,928
Foreign currency forward contracts (2)	14,452		(7,403		)	7,049			1,180,054
TBAs (3)	203,522		(158,718		)	44,804			344,758
Other (2)	5,498		(3,264		)	2,234			1,624,187
Total	$	223,664	$	(170,449	)	$	53,215
December 31, 2014
Futures contracts (2)	$	2,156	$	(1,907	)	$	249		$	2,549,027
Foreign currency forward contracts (2)	10,511		(1,145		)	9,366			397,106
TBAs (3)	10,592		—			10,592			10,056
Other (2)	3,209		(2,345		)	864			735,684
Total	$	26,468	$	(5,397	)	$	21,071

_________________________________________________

(1) Represents the absolute notional value of all outstanding contracts, consisting of long and short positions.

(2) The fair value of asset derivatives are included in ‘other assets’ and the fair value of liability derivatives are included in ‘other liabilities.’

(3) The fair value of TBAs are included in ‘fixed maturities available for sale, at fair value.’

Summary of net realized gains (losses) recorded in the consolidated statements of income

All realized and unrealized contract gains and losses on the Company’s derivative instruments are reflected in net realized gains (losses) in the consolidated statements of income, as summarized in the following table:

	Three Months Ended						Six Months Ended
Derivatives not designated as	June 30,						June 30,
hedging instruments:	2015			2014			2015			2014
Net realized gains (losses):
Futures contracts	$	(31,446	)	$	15,185		$	(12,120	)	$	5,323
Foreign currency forward contracts	(8,724		)	(1,811		)	8,095			(4,068		)
TBAs	(182		)	(270		)	304			(307		)
Other	(1,144		)	(702		)	(1,099		)	(1,314		)
Total	$	(41,496	)	$	12,402		$	(4,820	)	$	(366	)

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Fair Value (Tables)

6 Months Ended

Jun. 30, 2015

Fair Value Disclosures [Abstract]

Fair value hierarchy

The following table presents the Company’s financial assets and liabilities measured at fair value by level at June 30, 2015:

				Estimated Fair Value Measurements Using:
	Estimated Fair Value			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets measured at fair value:
Available for sale securities:
Fixed maturities (1):
Corporate bonds	$	2,833,849		$	—	$	2,833,849		$	—
Mortgage backed securities	837,680			—		837,680			—
Municipal bonds	1,760,384			—		1,760,384			—
Commercial mortgage backed securities	832,159			—		832,159			—
U.S. government and government agencies	1,899,868			1,878,893		20,975			—
Non-U.S. government securities	786,276			—		786,276			—
Asset backed securities	1,351,356			—		1,293,856			57,500
Total	10,301,572			1,878,893		8,365,179			57,500
Equity securities	701,623			698,078		3,545			—
Short-term investments	875,727			870,738		4,989			—
Other investments	89,611			89,611		—			—
Other investments measured at net asset value (2)	288,066
Total other investments	377,677			89,611		—			—
Derivative instruments (3)	20,142			—		20,142			—
Fair value option:
Corporate bonds	682,569			—		682,569			—
Non-U.S. government bonds	89,168			—		89,168			—
Mortgage backed securities	58,565			—		58,565			—
Asset backed securities	23,868			—		23,868			—
Short-term investments	167,698			167,698		—			—
Equity securities	248			248		—			—
Other investments	1,158,567			96,871		1,061,696			—
Other investments measured at net asset value (2)	432,804
Total	2,613,487			264,817		1,915,866			—
Total assets measured at fair value	$	14,890,228		$	3,802,137	$	10,309,721		$	57,500
Liabilities measured at fair value:
Contingent consideration liability	$	(71,256	)	$	—	$	—		$	(71,256	)
Derivative instruments (3)	(11,731		)	—		(11,731		)	—
Total liabilities measured at fair value	$	(82,987	)	$	—	$	(11,731	)	$	(71,256	)

_________________________________________________

(1) In securities lending transactions, the Company receives collateral in excess of the fair value of the securities pledged. For purposes of this table, the Company has excluded the collateral received under securities lending, at fair value and included the securities pledged under securities lending, at fair value. See Note 6, “Investment Information—Securities Lending Agreements.”

(2) In accordance with applicable accounting guidance, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets.

(3) See Note 8, “Derivative Instruments.”

The following table presents the Company’s financial assets and liabilities measured at fair value by level at December 31, 2014:

				Estimated Fair Value Measurements Using:
	Estimated Fair Value			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets measured at fair value:
Available for sale securities:
Fixed maturities (1):
Corporate bonds	$	3,108,513		$	—	$	3,108,513		$	—
Mortgage backed securities	943,343			—		943,343			—
Municipal bonds	1,494,122			—		1,494,122			—
Commercial mortgage backed securities	1,114,528			—		1,114,528			—
U.S. government and government agencies	1,447,972			1,447,972		—			—
Non-U.S. government securities	1,015,153			—		1,015,153			—
Asset backed securities	1,677,941			—		1,620,441			57,500
Total	10,801,572			1,447,972		9,296,100			57,500
Equity securities	658,182			658,182		—			—
Short-term investments	797,226			759,621		37,605			—
Other investments	97,372			—		97,372			—
Other investments measured at net asset value (2)	198,852
Total other investments	296,224			—		97,372			—
Derivative instruments (3)	15,876			—		15,876			—
Fair value option:
Corporate bonds	497,101			—		497,101			—
Non-U.S. government bonds	88,411			—		88,411			—
Mortgage backed securities	22,190			—		22,190			—
Asset backed securities	24,322			—		24,322			—
Short-term investments	251,601			250,580		1,021			—
Equity securities	—			—		—			—
Other investments	1,140,266			—		1,140,266			—
Other investments measured at net asset value (2)	401,162
Total	2,425,053			250,580		1,773,311			—
Total assets measured at fair value	$	14,994,133		$	3,116,355	$	11,220,264		$	57,500
Liabilities measured at fair value:
Contingent consideration liability	$	(61,845	)	$	—	$	—		$	(61,845	)
Derivative instruments (3)	(5,397		)	—		(5,397		)	—
Total liabilities measured at fair value	$	(67,242	)	$	—	$	(5,397	)	$	(61,845	)

_________________________________________________

(1) In securities lending transactions, the Company receives collateral in excess of the fair value of the securities pledged. For purposes of this table, the Company has excluded the collateral received under securities lending, at fair value and included the securities pledged under securities lending, at fair value. See Note 6, “Investment Information—Securities Lending Agreements.”

(2) In accordance with applicable accounting guidance, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets.

(3) See Note 8, “Derivative Instruments.”

Rollforward of Level 3 investments

The following table presents a reconciliation of the beginning and ending balances for all financial assets and liabilities measured at fair value on a recurring basis using Level 3 inputs:

	Assets										Liabilities
s	Available For Sale						Fair Value Option
	Asset Backed Securities		Corporate Bonds		Other Investments		Other Investments		Total		Contingent Consideration Liability
Three Months Ended June 30, 2015
Balance at beginning of period	$	57,500	$	—	$	—	$	—	$	57,500	$	(66,461	)
Total gains or (losses) (realized/unrealized)
Included in earnings (1)	—		—		—		—		—		(4,795		)
Included in other comprehensive income	—		—		—		—		—		—
Purchases, issuances, sales and settlements
Purchases	—		—		—		—		—		—
Issuances	—		—		—		—		—		—
Sales	—		—		—		—		—		—
Settlements	—		—		—		—		—		—
Transfers in and/or out of Level 3	—		—		—		—		—		—
Balance at end of period	$	57,500	$	—	$	—	$	—	$	57,500	$	(71,256	)
Three Months Ended June 30, 2014
Balance at beginning of period	$	—	$	—	$	—	$	—	$	—	$	(43,156	)
Total gains or (losses) (realized/unrealized)
Included in earnings (1)	—		—		—		—		—		(9,943		)
Included in other comprehensive income	—		—		—		—		—		—
Purchases, issuances, sales and settlements
Purchases	—		—		—		—		—		—
Issuances	—		—		—		—		—		—
Sales	—		—		—		—		—		—
Settlements	—		—		—		—		—		—
Transfers in and/or out of Level 3	—		—		—		—		—		—
Balance at end of period	$	—	$	—	$	—	$	—	$	—	$	(53,099	)

Six Months Ended June 30, 2015
Balance at beginning of period	$	57,500	$	—		$	—		$	—		$	57,500		$	(61,845	)
Total gains or (losses) (realized/unrealized)
Included in earnings (1)	—		—			—			—			—			(8,343		)
Included in other comprehensive income	—		—			—			—			—			—
Purchases, issuances, sales and settlements
Purchases	—		—			—			—			—			—
Issuances	—		—			—			—			—			(1,068		)
Sales	—		—			—			—			—			—
Settlements	—		—			—			—			—			—
Transfers in and/or out of Level 3	—		—			—			—			—			—
Balance at end of period	$	57,500	$	—		$	—		$	—		$	57,500		$	(71,256	)
Six Months Ended June 30, 2014
Balance at beginning of period	$	—	$	2,045		$	170,420		$	377,525		$	549,990		$	—
Total gains or (losses) (realized/unrealized)
Included in earnings (1)	—		—			—			—			—			(11,337		)
Included in other comprehensive income	—		—			—			—			—			—
Purchases, issuances, sales and settlements
Purchases	—		—			—			—			—			—
Issuances	—		—			—			—			—			(41,762		)
Sales	—		(2,045		)	—			—			(2,045		)	—
Settlements	—		—			—			—			—			—
Transfers in and/or out of Level 3 (2)	—		—			(170,420		)	(377,525		)	(547,945		)	—
Balance at end of period	$	—	$	—		$	—		$	—		$	—		$	(53,099	)

_________________________________________________

(1) Gains or losses on fixed maturities available for sale were included in net realized gains (losses) while gains or losses on other investments were included in net realized gains (losses) or net investment income. Gains or losses on the contingent consideration liability were included in net realized gains (losses).

(2) In accordance with applicable accounting guidance, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The transfers out of Level 3 presented in this table are intended to permit reconciliation to information previously presented.

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Derivative Instruments (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Derivative offsetting [Abstract]
Derivative assets subject to master netting agreements		$ 204,300		$ 204,300		$ 25,300
Derivative liabilities subject to master netting agreements		159,000		159,000		5,400
Net realized gains (losses) on derivative instruments
Net realized gains (losses) on derivative instruments	[1]	(41,496)	$ 12,402	(4,820)	$ (366)
Not Designated as Hedging Instrument [Member]
Derivative [Line Items]
Asset derivatives - fair value		223,664		223,664		26,468
Liability derivatives - fair value		(170,449)		(170,449)		(5,397)
Net derivatives - fair value		53,215		53,215		21,071
Net realized gains (losses) on derivative instruments
Net realized gains (losses) on derivative instruments		(41,496)	12,402	(4,820)	(366)
Not Designated as Hedging Instrument [Member] | Futures contracts
Derivative [Line Items]
Net derivatives - fair value	[2]	(872)		(872)		249
Net derivatives - notional value	[2],[3]	1,683,928		1,683,928		2,549,027
Net realized gains (losses) on derivative instruments
Net realized gains (losses) on derivative instruments		(31,446)	15,185	(12,120)	5,323
Not Designated as Hedging Instrument [Member] | Futures contracts | Other assets
Derivative [Line Items]
Asset derivatives - fair value	[2]	192		192		2,156
Not Designated as Hedging Instrument [Member] | Futures contracts | Other liabilities
Derivative [Line Items]
Liability derivatives - fair value	[2]	(1,064)		(1,064)		(1,907)
Not Designated as Hedging Instrument [Member] | Foreign currency forward contracts
Derivative [Line Items]
Net derivatives - fair value	[2]	7,049		7,049		9,366
Net derivatives - notional value	[2],[3]	1,180,054		1,180,054		397,106
Net realized gains (losses) on derivative instruments
Net realized gains (losses) on derivative instruments		(8,724)	(1,811)	8,095	(4,068)
Not Designated as Hedging Instrument [Member] | Foreign currency forward contracts | Other assets
Derivative [Line Items]
Asset derivatives - fair value	[2]	14,452		14,452		10,511
Not Designated as Hedging Instrument [Member] | Foreign currency forward contracts | Other liabilities
Derivative [Line Items]
Liability derivatives - fair value	[2]	(7,403)		(7,403)		(1,145)
Not Designated as Hedging Instrument [Member] | TBAs
Derivative [Line Items]
Net derivatives - fair value	[4]	44,804		44,804		10,592
Net derivatives - notional value	[3],[4]	344,758		344,758		10,056
Net realized gains (losses) on derivative instruments
Net realized gains (losses) on derivative instruments		(182)	(270)	304	(307)
Not Designated as Hedging Instrument [Member] | TBAs | Fixed maturities available for sale
Derivative [Line Items]
Asset derivatives - fair value	[4]	203,522		203,522		10,592
Liability derivatives - fair value	[4]	(158,718)		(158,718)		0
Not Designated as Hedging Instrument [Member] | Other
Derivative [Line Items]
Net derivatives - fair value	[2]	2,234		2,234		864
Net derivatives - notional value	[2],[3]	1,624,187		1,624,187		735,684
Net realized gains (losses) on derivative instruments
Net realized gains (losses) on derivative instruments		(1,144)	$ (702)	(1,099)	$ (1,314)
Not Designated as Hedging Instrument [Member] | Other | Other assets
Derivative [Line Items]
Asset derivatives - fair value	[2]	5,498		5,498		3,209
Not Designated as Hedging Instrument [Member] | Other | Other liabilities
Derivative [Line Items]
Liability derivatives - fair value	[2]	$ (3,264)		$ (3,264)		$ (2,345)

[1] See Note 8 for information on the Company’s derivative instruments.

[2] The fair value of asset derivatives are included in ‘other assets’ and the fair value of liability derivatives are included in ‘other liabilities.’

[3] Represents the absolute notional value of all outstanding contracts, consisting of long and short positions.

[4] The fair value of TBAs are included in ‘fixed maturities available for sale, at fair value.’

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Investment Information - Securities lending agreements (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Disclosure Investment Information [Abstract]
Fair value of cash collateral received on securities lending	$ 62,600
Approximate fair value of sub-prime securities backing the securities lending program	5,700	$ 5,800
Fair value of non-cash collateral received on securities lending	315,100	0
Collateral received under securities lending, at fair value (amortized cost: $373,909 and $40,473)	377,897	44,301
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items]
Securities lending payable	383,965	$ 50,529
Gross amount of recognized liabilities for securities lending in offsetting disclosure in Note 8	0
Amounts related to securities lending not included in offsetting disclosure in Note 8	383,965
US government and government agencies
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items]
Securities lending payable	335,233
Corporate bonds
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items]
Securities lending payable	44,139
Equity securities
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items]
Securities lending payable	4,593
Overnight and continuous
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items]
Securities lending payable	383,965
Overnight and continuous | US government and government agencies
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items]
Securities lending payable	335,233
Overnight and continuous | Corporate bonds
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items]
Securities lending payable	44,139
Overnight and continuous | Equity securities
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items]
Securities lending payable	4,593
Less than 30 days
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items]
Securities lending payable	0
Less than 30 days | US government and government agencies
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items]
Securities lending payable	0
Less than 30 days | Corporate bonds
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items]
Securities lending payable	0
Less than 30 days | Equity securities
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items]
Securities lending payable	0
30 - 90 days
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items]
Securities lending payable	0
30 - 90 days | US government and government agencies
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items]
Securities lending payable	0
30 - 90 days | Corporate bonds
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items]
Securities lending payable	0
30 - 90 days | Equity securities
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items]
Securities lending payable	0
90 days or more
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items]
Securities lending payable	0
90 days or more | US government and government agencies
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items]
Securities lending payable	0
90 days or more | Corporate bonds
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items]
Securities lending payable	0
90 days or more | Equity securities
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items]
Securities lending payable	$ 0

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Other Comprehensive Income (Loss) (Tables)

6 Months Ended

Jun. 30, 2015

Comprehensive Income Note Disclosure [Abstract]

Details about amounts reclassified from AOCI

The following tables present details about amounts reclassified from accumulated other comprehensive income and the tax effects allocated to each component of other comprehensive income (loss):

		Amounts Reclassified from AOCI
	Consolidated Statement of Income	Three Months Ended						Six Months Ended
Details About	Line Item That Includes	June 30,						June 30,
AOCI Components	Reclassification	2015			2014			2015			2014
Unrealized appreciation on available-for-sale investments
	Net realized gains (losses)	$	23,259		$	23,735		$	65,690		$	49,773
	Other-than-temporary impairment losses	(1,126		)	(14,749		)	(8,373		)	(17,720		)
	Total before tax	22,133			8,986			57,317			32,053
	Income tax (expense) benefit	(919		)	(701		)	(5,171		)	(2,519		)
	Net of tax	$	21,214		$	8,285		$	52,146		$	29,534

Schedule of comprehensive income (loss)

	Before Tax Amount			Tax Expense (Benefit)			Net of Tax Amount
Three Months Ended June 30, 2015
Unrealized appreciation (decline) in value of investments:
Unrealized holding gains (losses) arising during period	$	(96,629	)	$	(14,694	)	$	(81,935	)
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)	(13		)	—			(13		)
Less reclassification of net realized gains (losses) included in net income	22,133			919			21,214
Foreign currency translation adjustments	11,697			117			11,580
Other comprehensive income (loss)	$	(107,078	)	$	(15,496	)	$	(91,582	)
Three Months Ended June 30, 2014
Unrealized appreciation (decline) in value of investments:
Unrealized holding gains (losses) arising during period	$	115,150		$	6,722		$	108,428
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)	—			—			—
Less reclassification of net realized gains (losses) included in net income	8,986			701			8,285
Foreign currency translation adjustments	10,021			—			10,021
Other comprehensive income (loss)	$	116,185		$	6,021		$	110,164
Six Months Ended June 30, 2015
Unrealized appreciation (decline) in value of investments:
Unrealized holding gains (losses) arising during period	$	(2,242	)	$	(4,611	)	$	2,369
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)	(1,461		)	—			(1,461		)
Less reclassification of net realized gains (losses) included in net income	57,317			5,171			52,146
Foreign currency translation adjustments	(11,929		)	(752		)	(11,177		)
Other comprehensive income (loss)	$	(72,949	)	$	(10,534	)	$	(62,415	)
Six Months Ended June 30, 2014
Unrealized appreciation (decline) in value of investments:
Unrealized holding gains (losses) arising during period	$	190,550		$	10,769		$	179,781
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)	—			—			—
Less reclassification of net realized gains (losses) included in net income	32,053			2,519			29,534
Foreign currency translation adjustments	8,672			—			8,672
Other comprehensive income (loss)	$	167,169		$	8,250		$	158,919

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Guarantor Financial Information (Tables)

6 Months Ended

Jun. 30, 2015

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Condensed consolidating balance sheet

		June 30, 2015
Condensed Consolidating Balance Sheet		ACGL (Parent Guarantor)		Arch-U.S. (Subsidiary Issuer)		Other ACGL Subsidiaries		Consolidating Adjustments and Eliminations			ACGL Consolidated
Assets
Total investments		$	471	$	55,047	$	15,306,122	$	(14,700	)	$	15,346,940
Cash		10,864		6,928		507,282		—			525,074
Investments in subsidiaries		6,530,452		1,688,419		—		(8,218,871		)	—
Due from subsidiaries and affiliates		11		47,798		417,231		(465,040		)	—
Premiums receivable		—		—		1,620,756		(439,120		)	1,181,636
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses		—		—		5,741,646		(3,910,419		)	1,831,227
Contractholder receivables		—		—		1,393,138		—			1,393,138
Prepaid reinsurance premiums		—		—		1,595,550		(1,153,409		)	442,141
Deferred acquisition costs, net		—		—		448,647		—			448,647
Other assets		4,208		46,157		2,274,796		(409,039		)	1,916,122
	Total assets	$	6,546,006	$	1,844,349	$	29,305,168	$	(14,610,598	)	$	23,084,925
Liabilities
Reserve for losses and loss adjustment expenses		$	—	$	—	$	12,970,720	$	(3,888,439	)	$	9,082,281
Unearned premiums		—		—		3,596,332		(1,153,409		)	2,442,923
Reinsurance balances payable		—		—		678,216		(425,754		)	252,462
Contractholder payables		—		—		1,393,138		—			1,393,138
Deposit accounting liabilities		—		—		495,121		(217,598		)	277,523
Senior notes		296,834		494,388		—		—			791,222
Revolving credit agreement borrowings		100,000		—		—		—			100,000
Due to subsidiaries and affiliates		402		35,000		429,638		(465,040		)	—
Other liabilities		11,255		44,917		1,778,600		(226,787		)	1,607,985
	Total liabilities	408,491		574,305		21,341,765		(6,377,027		)	15,947,534
Redeemable noncontrolling interests		—		—		219,696		(14,700		)	204,996
Shareholders’ Equity
Total shareholders’ equity available to Arch		6,137,515		1,270,044		6,948,827		(8,218,871		)	6,137,515
Non-redeemable noncontrolling interests		—		—		794,880		—			794,880
	Total shareholders’ equity	6,137,515		1,270,044		7,743,707		(8,218,871		)	6,932,395
	Total liabilities, noncontrolling interests and shareholders’ equity	$	6,546,006	$	1,844,349	$	29,305,168	$	(14,610,598	)	$	23,084,925

		December 31, 2014
Condensed Consolidating Balance Sheet		ACGL (Parent Guarantor)		Arch-U.S. (Subsidiary Issuer)		Other ACGL Subsidiaries		Consolidating Adjustments and Eliminations			ACGL Consolidated
Assets
Total investments		$	107	$	62,867	$	15,257,796	$	—		$	15,320,770
Cash		3,218		2,787		479,697		—			485,702
Investments in subsidiaries		6,536,644		1,685,185		—		(8,221,829		)	—
Due from subsidiaries and affiliates		48		7,517		370,429		(377,994		)	—
Premiums receivable		—		—		1,331,511		(382,816		)	948,695
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses		—		—		5,584,973		(3,772,128		)	1,812,845
Contractholder receivables		—		—		1,309,192		—			1,309,192
Prepaid reinsurance premiums		—		—		1,373,008		(995,930		)	377,078
Deferred acquisition costs, net		—		—		414,525		—			414,525
Other assets		4,386		43,921		1,705,546		(416,579		)	1,337,274
	Total assets	$	6,544,403	$	1,802,277	$	27,826,677	$	(14,167,276	)	$	22,006,081
Liabilities
Reserve for losses and loss adjustment expenses		$	—	$	—	$	12,784,030	$	(3,747,582	)	$	9,036,448
Unearned premiums		—		—		3,227,508		(995,930		)	2,231,578
Reinsurance balances payable		—		—		589,289		(369,977		)	219,312
Contractholder payables		—		—		1,309,192		—			1,309,192
Deposit accounting liabilities		—		—		587,050		(259,666		)	327,384
Senior notes		296,796		494,345		—		—			791,141
Revolving credit agreement borrowings		100,000		—		—		—			100,000
Due to subsidiaries and affiliates		417		7,505		370,072		(377,994		)	—
Other liabilities		17,137		49,403		1,000,138		(194,298		)	872,380
	Total liabilities	414,350		551,253		19,867,279		(5,945,447		)	14,887,435
Redeemable noncontrolling interests		—		—		219,512		—			219,512
Shareholders’ Equity
Total shareholders’ equity available to Arch		6,130,053		1,251,024		6,970,805		(8,221,829		)	6,130,053
Non-redeemable noncontrolling interests		—		—		769,081		—			769,081
	Total shareholders’ equity	6,130,053		1,251,024		7,739,886		(8,221,829		)	6,899,134
	Total liabilities, noncontrolling interests and shareholders’ equity	$	6,544,403	$	1,802,277	$	27,826,677	$	(14,167,276	)	$	22,006,081

Condensed consolidating statement of income and comprehensive income

		Three Months Ended June 30, 2015
Condensed Consolidating Statement of Income and Comprehensive Income		ACGL (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other ACGL Subsidiaries			Consolidating Adjustments and Eliminations			ACGL Consolidated
Revenues
Net premiums earned		$	—		$	—		$	943,438		$	—		$	943,438
Net investment income		—			800			87,154			(991		)	86,963
Net realized gains (losses)		—			1			(35,726		)	—			(35,725		)
Net impairment losses recognized in earnings		—			—			(1,113		)	—			(1,113		)
Other underwriting income		—			—			7,717			—			7,717
Equity in net income of investment funds accounted for using the equity method		—			—			16,167			—			16,167
Other income (loss)		—			—			2,205			—			2,205
	Total revenues	—			801			1,019,842			(991		)	1,019,652
Expenses
Losses and loss adjustment expenses		—			—			519,426			—			519,426
Acquisition expenses		—			—			175,425			—			175,425
Other operating expenses		16,900			1,012			150,696			—			168,608
Interest expense		5,862			6,769			(7,793		)	(827		)	4,011
Net foreign exchange losses (gains)		—			—			6,942			12,641			19,583
	Total expenses	22,762			7,781			844,696			11,814			887,053
Income (loss) before income taxes		(22,762		)	(6,980		)	175,146			(12,805		)	132,599
Income tax (expense) benefit		—			3,697			(10,477		)	—			(6,780		)
Income (loss) before equity in net income of subsidiaries		(22,762		)	(3,283		)	164,669			(12,805		)	125,819
Equity in net income of subsidiaries		138,552			14,077			—			(152,629		)	—
Net income		115,790			10,794			164,669			(165,434		)	125,819
Amounts attributable to noncontrolling interests		—			—			(10,193		)	164			(10,029		)
Net income available to Arch		115,790			10,794			154,476			(165,270		)	115,790
Preferred dividends		(5,485		)	—			—			—			(5,485		)
Net income available to Arch common shareholders		$	110,305		$	10,794		$	154,476		$	(165,270	)	$	110,305
Comprehensive income (loss) available to Arch		$	24,208		$	(13,505	)	$	50,249		$	(36,744	)	$	24,208

		Three Months Ended June 30, 2014
Condensed Consolidating Statement of Income and Comprehensive Income		ACGL (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other ACGL Subsidiaries			Consolidating Adjustments and Eliminations			ACGL Consolidated
Revenues
Net premiums earned		$	—		$	—		$	907,152		$	—		$	907,152
Net investment income		—			—			80,380			(7,390		)	72,990
Net realized gains (losses)		—			—			54,144			—			54,144
Net impairment losses recognized in earnings		—			—			(14,749		)	—			(14,749		)
Other underwriting income		—			—			2,033			—			2,033
Equity in net income of investment funds accounted for using the equity method		—			—			9,240			—			9,240
Other income (loss)		—			—			4,850			—			4,850
	Total revenues	—			—			1,043,050			(7,390		)	1,035,660
Expenses
Losses and loss adjustment expenses		—			—			485,518			—			485,518
Acquisition expenses		—			—			158,158			—			158,158
Other operating expenses		15,250			494			140,606			—			156,350
Interest expense		5,854			6,448			9,422			(7,390		)	14,334
Net foreign exchange losses (gains)		—			—			1,054			1,240			2,294
	Total expenses	21,104			6,942			794,758			(6,150		)	816,654
Income (loss) before income taxes		(21,104		)	(6,942		)	248,292			(1,240		)	219,006
Income tax (expense) benefit		—			3,294			(10,583		)	—			(7,289		)
Income (loss) before equity in net income of subsidiaries		(21,104		)	(3,648		)	237,709			(1,240		)	211,717
Equity in net income of subsidiaries		229,120			9,334			—			(238,454		)	—
Net income		208,016			5,686			237,709			(239,694		)	211,717
Amounts attributable to noncontrolling interests		—			—			(3,701		)	—			(3,701		)
Net income available to Arch		208,016			5,686			234,008			(239,694		)	208,016
Preferred dividends		(5,485		)	—			—			—			(5,485		)
Net income available to Arch common shareholders		$	202,531		$	5,686		$	234,008		$	(239,694	)	$	202,531
Comprehensive income (loss) available to Arch		$	318,180		$	23,186		$	335,348		$	(358,534	)	$	318,180

		Six Months Ended June 30, 2015
Condensed Consolidating Statement of Income and Comprehensive Income		ACGL (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other ACGL Subsidiaries			Consolidating Adjustments and Eliminations			ACGL Consolidated
Revenues
Net premiums earned		$	—		$	—		$	1,853,702		$	—		$	1,853,702
Net investment income		—			805			173,164			(8,012		)	165,957
Net realized gains (losses)		—			1			47,622			—			47,623
Net impairment losses recognized in earnings		—			—			(6,912		)	—			(6,912		)
Other underwriting income		—			—			19,253			—			19,253
Equity in net income of investment funds accounted for using the equity method		—			—			22,056			—			22,056
Other income (loss)		—			—			317			—			317
	Total revenues	—			806			2,109,202			(8,012		)	2,101,996
Expenses
Losses and loss adjustment expenses		—			—			1,013,142			—			1,013,142
Acquisition expenses		—			—			338,501			—			338,501
Other operating expenses		25,532			2,271			298,687			—			326,490
Interest expense		11,718			13,135			(258		)	(7,848		)	16,747
Net foreign exchange losses (gains)		—			—			(32,688		)	(14,230		)	(46,918		)
	Total expenses	37,250			15,406			1,617,384			(22,078		)	1,647,962
Income (loss) before income taxes		(37,250		)	(14,600		)	491,818			14,066			454,034
Income tax (expense) benefit		—			5,110			(24,568		)	—			(19,458		)
Income (loss) before equity in net income of subsidiaries		(37,250		)	(9,490		)	467,250			14,066			434,576
Equity in net income of subsidiaries		436,376			28,572			—			(464,948		)	—
Net income		399,126			19,082			467,250			(450,882		)	434,576
Amounts attributable to noncontrolling interests		—			—			(35,614		)	164			(35,450		)
Net income available to Arch		399,126			19,082			431,636			(450,718		)	399,126
Preferred dividends		(10,969		)	—			—			—			(10,969		)
Net income available to Arch common shareholders		$	388,157		$	19,082		$	431,636		$	(450,718	)	$	388,157
Comprehensive income (loss) available to Arch		$	336,711		$	(1,755	)	$	383,442		$	(381,687	)	$	336,711

		Six Months Ended June 30, 2014
Condensed Consolidating Statement of Income and Comprehensive Income		ACGL (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other ACGL Subsidiaries			Consolidating Adjustments and Eliminations			ACGL Consolidated
Revenues
Net premiums earned		$	—		$	—		$	1,766,932		$	—		$	1,766,932
Net investment income		—			—			157,381			(17,397		)	139,984
Net realized gains (losses)		—			—			73,841			—			73,841
Net impairment losses recognized in earnings		—			—			(17,720		)	—			(17,720		)
Other underwriting income		—			—			3,615			—			3,615
Equity in net income of investment funds accounted for using the equity method		—			—			12,493			—			12,493
Other income (loss)		—			—			2,746			—			2,746
	Total revenues	—			—			1,999,288			(17,397		)	1,981,891
Expenses
Losses and loss adjustment expenses		—			—			921,758			—			921,758
Acquisition expenses		—			—			318,500			—			318,500
Other operating expenses		25,557			1,471			275,121			—			302,149
Interest expense		11,707			12,962			21,466			(17,397		)	28,738
Net foreign exchange losses (gains)		—			—			6,795			2,062			8,857
	Total expenses	37,264			14,433			1,543,640			(15,335		)	1,580,002
Income (loss) before income taxes		(37,264		)	(14,433		)	455,648			(2,062		)	401,889
Income tax (expense) benefit		—			6,082			(17,109		)	—			(11,027		)
Income (loss) before equity in net income of subsidiaries		(37,264		)	(8,351		)	438,539			(2,062		)	390,862
Equity in net income of subsidiaries		427,780			31,486			—			(459,266		)	—
Net income		390,516			23,135			438,539			(461,328		)	390,862
Amounts attributable to noncontrolling interests		—			—			(346		)	—			(346		)
Net income available to Arch		390,516			23,135			438,193			(461,328		)	390,516
Preferred dividends		(10,969		)	—			—			—			(10,969		)
Net income available to Arch common shareholders		$	379,547		$	23,135		$	438,193		$	(461,328	)	$	379,547
Comprehensive income (loss) available to Arch		$	549,435		$	40,406		$	587,467		$	(627,873	)	$	549,435

Condensed consolidating statement of cash flows

		Six Months Ended June 30, 2015
Condensed Consolidating Statement of Cash Flows		ACGL (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other ACGL Subsidiaries			Consolidating Adjustments and Eliminations			ACGL Consolidated
Operating Activities
	Net Cash Provided By (Used For) Operating Activities	$	378,703		$	8,282		$	433,833		$	(435,619	)	$	385,199
Investing Activities
Purchases of fixed maturity investments		—			—			(14,641,391		)	—			(14,641,391		)
Purchases of equity securities		—			—			(288,535		)	—			(288,535		)
Purchases of other investments		—			—			(1,273,780		)	—			(1,273,780		)
Proceeds from the sales of fixed maturity investments		—			20,002			14,335,517			—			14,355,519
Proceeds from the sales of equity securities		—			—			272,343			—			272,343
Proceeds from the sales, redemptions and maturities of other investments		—			—			1,078,675			—			1,078,675
Proceeds from redemptions and maturities of fixed maturity investments		—			—			474,984			—			474,984
Proceeds from investment in joint venture		—			—			40,000			—			40,000
Net purchases (sales) of short-term investments		(365		)	(12,171		)	16,243			—			3,707
Change in cash collateral related to securities lending		—			—			(18,329		)	—			(18,329		)
Contributions to subsidiaries		—			—			(9,290		)	9,290			—
Intercompany loans issued		—			(39,500		)	(27,500		)	67,000			—
Purchase of business, net of cash acquired		—			—			818			—			818
Purchases of furniture, equipment and other assets		(24		)	—			(43,141		)	—			(43,165		)
	Net Cash Provided By (Used For) Investing Activities	(389		)	(31,669		)	(83,386		)	76,290			(39,154		)
Financing Activities
Purchases of common shares under share repurchase program		(361,877		)	—			—			—			(361,877		)
Proceeds from common shares issued, net		2,178			—			9,290			(9,290		)	2,178
Proceeds from intercompany borrowings		—			27,500			39,500			(67,000		)	—
Change in cash collateral related to securities lending		—			—			18,329			—			18,329
Dividends paid to redeemable noncontrolling interests		—			—			(9,632		)	319			(9,313		)
Dividends paid to parent		—			—			(435,300		)	435,300			—
Other		—			28			54,990			—			55,018
Preferred dividends paid		(10,969		)	—			—			—			(10,969		)
	Net Cash Provided By (Used For) Financing Activities	(370,668		)	27,528			(322,823		)	359,329			(306,634		)
Effects of exchange rates changes on foreign currency cash		—			—			(39		)	—			(39		)
Increase (decrease) in cash		7,646			4,141			27,585			—			39,372
Cash beginning of year		3,218			2,787			479,697			—			485,702
Cash end of period		$	10,864		$	6,928		$	507,282		$	—		$	525,074

		Six Months Ended June 30, 2014
Condensed Consolidating Statement of Cash Flows		ACGL (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other ACGL Subsidiaries			Consolidating Adjustments and Eliminations			ACGL Consolidated
Operating Activities
	Net Cash Provided By (Used For) Operating Activities	$	10,099		$	424		$	474,565		$	(32,025	)	$	453,063
Investing Activities
Purchases of fixed maturity investments		—			(78,509		)	(14,233,239		)	—			(14,311,748		)
Purchases of equity securities		—			—			(174,687		)	—			(174,687		)
Purchases of other investments		—			—			(1,022,987		)	—			(1,022,987		)
Proceeds from the sales of fixed maturity investments		—			—			13,204,854			—			13,204,854
Proceeds from the sales of equity securities		—			—			98,687			—			98,687
Proceeds from the sales of other investments		—			—			618,707			—			618,707
Proceeds from redemptions and maturities of fixed maturity investments		—			—			432,040			—			432,040
Net (purchases) sales of short-term investments		(31		)	408,779			21,556			—			430,304
Change in cash collateral related to securities lending		—			—			18,701			—			18,701
Contributions to subsidiaries		—			(313,207		)	(100,000		)	413,207			—
Intercompany loans issued		—			—			10,250			(10,250		)	—
Purchase of business, net of cash acquired		—			—			(235,578		)	—			(235,578		)
Purchases of furniture, equipment and other assets		(128		)	—			(10,232		)	—			(10,360		)
	Net Cash Provided By (Used For) Investing Activities	(159		)	17,063			(1,371,928		)	402,957			(952,067		)
Financing Activities
Proceeds from common shares issued, net		2,521			—			413,207			(413,207		)	2,521
Repayments of intercompany borrowings		—			(10,250		)	—			10,250			—
Change in cash collateral related to securities lending		—			—			(18,701		)	—			(18,701		)
Third party investment in non-redeemable noncontrolling interests		—			—			796,903			—			796,903
Third party investment in redeemable noncontrolling interests		—			—			219,233			—			219,233
Dividends paid to redeemable noncontrolling interests		—			—			(4,816		)	—			(4,816		)
Dividends paid to parent		—			—			(32,025		)	32,025			—
Other		—			—			4,706			—			4,706
Preferred dividends paid		(10,969		)	—			—			—			(10,969		)
	Net Cash Provided By (Used For) Financing Activities	(8,448		)	(10,250		)	1,378,507			(370,932		)	988,877
Effects of exchange rates changes on foreign currency cash		—			—			2,513			—			2,513
Increase in cash		1,492			7,237			483,657			—			492,386
Cash beginning of year		3,223			509			430,325			—			434,057
Cash end of period		$	4,715		$	7,746		$	913,982		$	—		$	926,443

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General

6 Months Ended

Jun. 30, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

General

General

Arch Capital Group Ltd. (“ACGL”) is a Bermuda public limited liability company which provides insurance and reinsurance on a worldwide basis through its subsidiaries (together with ACGL, the “Company”). The Company’s consolidated financial statements include the results of Watford Holdings Ltd., the parent of Watford Re Ltd. (see Note 3).

The interim consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). All significant intercompany transactions and balances have been eliminated in consolidation. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and assumptions. In the opinion of management, the accompanying unaudited interim consolidated financial statements reflect all adjustments (consisting of normally recurring accruals) necessary for a fair statement of results on an interim basis. The results of any interim period are not necessarily indicative of the results for a full year or any future periods.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted; however, management believes that the disclosures are adequate to make the information presented not misleading. This report should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 (“2014 Form 10-K”), including the Company’s audited consolidated financial statements and related notes.

The Company has reclassified the presentation of certain prior year information to conform to the current presentation. Such reclassifications had no effect on the Company’s net income, comprehensive income, shareholders’ equity or cash flows. Tabular amounts are in U.S. Dollars in thousands, except share amounts, unless otherwise noted.

Acquisition of Gulf Reinsurance Limited

In May 2008, the Company provided $100.0 million of funding to Gulf Reinsurance Limited, a wholly owned subsidiary of Gulf Re Holdings Limited (collectively, “Gulf Re”), pursuant to the joint venture agreement with Gulf Investment Corporation GSC (“GIC”). Under the agreement, Arch Re Bermuda and GIC each owned 50% of Gulf Re. The Company entered into a number of strategic initiatives related to Gulf Re in the 2014 fourth quarter, including an agreement to acquire complete ownership and effective control of Gulf Re. Such agreement was approved by the Dubai Financial Services Authority in April 2015 and the transaction closed on May 14, 2015. Pursuant to the agreement, Gulf Re distributed $130.6 million in total to the Company and GIC, and Gulf Re maintained $50.7 million of equity capital. The Company purchased GIC’s remaining investment in Gulf Re for $25.6 million through a transfer of fixed maturity investments. GIC will continue to participate equally with the Company in the financial results of Gulf Re and have the ability to purchase shares in Gulf Re over the next seven years. The acquisition resulted in no goodwill or other intangible assets as the fair value of Gulf Re was equal to its book value at closing.

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General (Details) - Gulf Re - USD ($) $ in Millions	May. 14, 2015	May. 31, 2008
Business Acquisition [Line Items]
Investment in joint venture, at cost		$ 100.0
Joint venture, ownership percentage		50.00%
Total distributions paid by investee	$ 130.6
Equity capital of investee	50.7
Transfer of securities	$ 25.6
Co-venturer share purchase option period	7 years

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Segment Information - Narrative (Details)	6 Months Ended
	Jun. 30, 2015 segment
Underwriting segments
Segment Reporting Information [Line Items]
Number of underwriting segments	3
Other
Segment Reporting Information [Line Items]
Number of underwriting segments	2

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Fair Value - Fair Value Hierarchy (Details) - Recurring - USD ($) $ in Thousands		Jun. 30, 2015	Dec. 31, 2014
Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		$ 3,802,137	$ 3,116,355
Liabilities measured at fair value		0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Contingent consideration liability
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities measured at fair value		0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Derivative instruments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities measured at fair value	[1]	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fixed maturities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	[2]	1,878,893	1,447,972
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fixed maturities | Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	[2]	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fixed maturities | Mortgage backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	[2]	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fixed maturities | Municipal bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	[2]	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fixed maturities | Commercial mortgage backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	[2]	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fixed maturities | US government and government agencies
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	[2]	1,878,893	1,447,972
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fixed maturities | Non-US government securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	[2]	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fixed maturities | Asset backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	[2]	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Equity securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		698,078	658,182
Quoted Prices in Active Markets for Identical Assets (Level 1) | Short-term investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		870,738	759,621
Quoted Prices in Active Markets for Identical Assets (Level 1) | Other investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		89,611	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Other investments at fair value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		89,611	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Derivative instruments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	[1]	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair value option
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		264,817	250,580
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair value option | Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair value option | Mortgage backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair value option | Non-US government securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair value option | Asset backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair value option | Short-term investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		167,698	250,580
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair value option | Equity securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		248
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair value option | Other investments fair value option
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		96,871	0
Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		10,309,721	11,220,264
Liabilities measured at fair value		(11,731)	(5,397)
Significant Other Observable Inputs (Level 2) | Contingent consideration liability
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities measured at fair value		0	0
Significant Other Observable Inputs (Level 2) | Derivative instruments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities measured at fair value	[1]	(11,731)	(5,397)
Significant Other Observable Inputs (Level 2) | Fixed maturities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	[2]	8,365,179	9,296,100
Significant Other Observable Inputs (Level 2) | Fixed maturities | Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	[2]	2,833,849	3,108,513
Significant Other Observable Inputs (Level 2) | Fixed maturities | Mortgage backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	[2]	837,680	943,343
Significant Other Observable Inputs (Level 2) | Fixed maturities | Municipal bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	[2]	1,760,384	1,494,122
Significant Other Observable Inputs (Level 2) | Fixed maturities | Commercial mortgage backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	[2]	832,159	1,114,528
Significant Other Observable Inputs (Level 2) | Fixed maturities | US government and government agencies
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	[2]	20,975	0
Significant Other Observable Inputs (Level 2) | Fixed maturities | Non-US government securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	[2]	786,276	1,015,153
Significant Other Observable Inputs (Level 2) | Fixed maturities | Asset backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	[2]	1,293,856	1,620,441
Significant Other Observable Inputs (Level 2) | Equity securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		3,545	0
Significant Other Observable Inputs (Level 2) | Short-term investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		4,989	37,605
Significant Other Observable Inputs (Level 2) | Other investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		0	97,372
Significant Other Observable Inputs (Level 2) | Other investments at fair value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		0	97,372
Significant Other Observable Inputs (Level 2) | Derivative instruments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	[1]	20,142	15,876
Significant Other Observable Inputs (Level 2) | Fair value option
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		1,915,866	1,773,311
Significant Other Observable Inputs (Level 2) | Fair value option | Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		682,569	497,101
Significant Other Observable Inputs (Level 2) | Fair value option | Mortgage backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		58,565	22,190
Significant Other Observable Inputs (Level 2) | Fair value option | Non-US government securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		89,168	88,411
Significant Other Observable Inputs (Level 2) | Fair value option | Asset backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		23,868	24,322
Significant Other Observable Inputs (Level 2) | Fair value option | Short-term investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		0	1,021
Significant Other Observable Inputs (Level 2) | Fair value option | Equity securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		0
Significant Other Observable Inputs (Level 2) | Fair value option | Other investments fair value option
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		1,061,696	1,140,266
Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		57,500	57,500
Liabilities measured at fair value		(71,256)	(61,845)
Significant Unobservable Inputs (Level 3) | Contingent consideration liability
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities measured at fair value		(71,256)	(61,845)
Significant Unobservable Inputs (Level 3) | Derivative instruments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities measured at fair value	[1]	0	0
Significant Unobservable Inputs (Level 3) | Fixed maturities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	[2]	57,500	57,500
Significant Unobservable Inputs (Level 3) | Fixed maturities | Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	[2]	0	0
Significant Unobservable Inputs (Level 3) | Fixed maturities | Mortgage backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	[2]	0	0
Significant Unobservable Inputs (Level 3) | Fixed maturities | Municipal bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	[2]	0	0
Significant Unobservable Inputs (Level 3) | Fixed maturities | Commercial mortgage backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	[2]	0	0
Significant Unobservable Inputs (Level 3) | Fixed maturities | US government and government agencies
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	[2]	0	0
Significant Unobservable Inputs (Level 3) | Fixed maturities | Non-US government securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	[2]	0	0
Significant Unobservable Inputs (Level 3) | Fixed maturities | Asset backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	[2]	57,500	57,500
Significant Unobservable Inputs (Level 3) | Equity securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		0	0
Significant Unobservable Inputs (Level 3) | Short-term investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		0	0
Significant Unobservable Inputs (Level 3) | Other investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		0	0
Significant Unobservable Inputs (Level 3) | Other investments at fair value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		0	0
Significant Unobservable Inputs (Level 3) | Derivative instruments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	[1]	0	0
Significant Unobservable Inputs (Level 3) | Fair value option
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		0	0
Significant Unobservable Inputs (Level 3) | Fair value option | Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		0	0
Significant Unobservable Inputs (Level 3) | Fair value option | Mortgage backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		0	0
Significant Unobservable Inputs (Level 3) | Fair value option | Non-US government securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		0	0
Significant Unobservable Inputs (Level 3) | Fair value option | Asset backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		0	0
Significant Unobservable Inputs (Level 3) | Fair value option | Short-term investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		0	0
Significant Unobservable Inputs (Level 3) | Fair value option | Equity securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		0
Significant Unobservable Inputs (Level 3) | Fair value option | Other investments fair value option
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		0	0
Estimated Fair Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		14,890,228	14,994,133
Liabilities measured at fair value		(82,987)	(67,242)
Estimated Fair Value | Contingent consideration liability
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities measured at fair value		(71,256)	(61,845)
Estimated Fair Value | Derivative instruments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities measured at fair value	[1]	(11,731)	(5,397)
Estimated Fair Value | Fixed maturities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		10,301,572	10,801,572
Estimated Fair Value | Fixed maturities | Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		2,833,849	3,108,513
Estimated Fair Value | Fixed maturities | Mortgage backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		837,680	943,343
Estimated Fair Value | Fixed maturities | Municipal bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		1,760,384	1,494,122
Estimated Fair Value | Fixed maturities | Commercial mortgage backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		832,159	1,114,528
Estimated Fair Value | Fixed maturities | US government and government agencies
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		1,899,868	1,447,972
Estimated Fair Value | Fixed maturities | Non-US government securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		786,276	1,015,153
Estimated Fair Value | Fixed maturities | Asset backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		1,351,356	1,677,941
Estimated Fair Value | Equity securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		701,623	658,182
Estimated Fair Value | Short-term investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		875,727	797,226
Estimated Fair Value | Other investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		377,677	296,224
Estimated Fair Value | Other investments at fair value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		89,611	97,372
Estimated Fair Value | Other investments measured at net asset value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	[3]	288,066	198,852
Estimated Fair Value | Derivative instruments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	[1]	20,142	15,876
Estimated Fair Value | Fair value option
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		2,613,487	2,425,053
Estimated Fair Value | Fair value option | Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		682,569	497,101
Estimated Fair Value | Fair value option | Mortgage backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		58,565	22,190
Estimated Fair Value | Fair value option | Non-US government securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		89,168	88,411
Estimated Fair Value | Fair value option | Asset backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		23,868	24,322
Estimated Fair Value | Fair value option | Short-term investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		167,698	251,601
Estimated Fair Value | Fair value option | Equity securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		248
Estimated Fair Value | Fair value option | Other investments fair value option
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		1,158,567	1,140,266
Estimated Fair Value | Fair value option | Other investments measured at net asset value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	[3]	$ 432,804	$ 401,162

[1] See Note 8, “Derivative Instruments.”

[2] In securities lending transactions, the Company receives collateral in excess of the fair value of the securities pledged. For purposes of this table, the Company has excluded the collateral received under securities lending, at fair value and included the securities pledged under securities lending, at fair value. See Note 6, “Investment Information—Securities Lending Agreements.”

[3] In accordance with applicable accounting guidance, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets.

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Unaudited Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Investments:
Fixed maturities available for sale, at fair value (amortized cost: $9,945,598 and $10,701,557)	$ 9,927,603	$ 10,750,770
Short-term investments available for sale, at fair value (amortized cost: $878,437 and $801,758)	875,727	797,226
Collateral received under securities lending, at fair value (amortized cost: $373,909 and $40,473)	377,897	44,301
Equity securities available for sale, at fair value (cost: $615,055 and $562,534)	701,623	658,182
Other investments available for sale, at fair value (cost: $333,438 and $264,747)	377,677	296,224
Investments accounted for using the fair value option	2,613,487	2,425,053
Investments accounted for using the equity method	472,926	349,014
Total investments	15,346,940	15,320,770
Cash	525,074	485,702
Accrued investment income	80,129	74,316
Securities pledged under securities lending, at fair value (amortized cost: $374,447 and $52,076)	373,969	50,802
Premiums receivable	1,181,636	948,695
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses	1,831,227	1,812,845
Contractholder receivables	1,393,138	1,309,192
Prepaid reinsurance premiums	442,141	377,078
Deferred acquisition costs, net	448,647	414,525
Receivable for securities sold	454,057	78,170
Goodwill and intangible assets	102,518	109,539
Other assets	905,449	1,024,447
Total assets	23,084,925	22,006,081
Liabilities
Reserve for losses and loss adjustment expenses	9,082,281	9,036,448
Unearned premiums	2,442,923	2,231,578
Reinsurance balances payable	252,462	219,312
Contractholder payables	1,393,138	1,309,192
Deposit accounting liabilities	277,523	327,384
Senior notes	791,222	791,141
Revolving credit agreement borrowings	100,000	100,000
Securities lending payable	383,965	50,529
Payable for securities purchased	468,015	128,413
Other liabilities	756,005	693,438
Total liabilities	$ 15,947,534	$ 14,887,435
Commitments and Contingencies
Redeemable noncontrolling interests	$ 204,996	$ 219,512
Shareholders' Equity
Non-cumulative preferred shares	325,000	325,000
Common shares ($0.0033 par, shares issued: 172,780,590 and 171,672,408)	576	572
Additional paid-in capital	437,533	383,073
Retained earnings	7,242,728	6,854,571
Accumulated other comprehensive income, net of deferred income tax	66,441	128,856
Common shares held in treasury, at cost (shares: 50,376,681 and 44,304,474)	(1,934,763)	(1,562,019)
Total shareholders' equity available to Arch	6,137,515	6,130,053
Non-redeemable noncontrolling interests	794,880	769,081
Total shareholders' equity	6,932,395	6,899,134
Total liabilities, noncontrolling interests and shareholders' equity	$ 23,084,925	$ 22,006,081

XML

Investment Information - Other investments (Details) - USD ($) $ in Thousands		Jun. 30, 2015	Dec. 31, 2014
Schedule Of Other Investments [Line Items]
Other investments and fair value option investments		$ 1,969,048	$ 1,837,652
Available for sale
Schedule Of Other Investments [Line Items]
Other investments and fair value option investments		377,677	296,224
Available for sale | Investment grade fixed income
Schedule Of Other Investments [Line Items]
Other investments and fair value option investments		58,829	59,638
Available for sale | Non-investment grade fixed income
Schedule Of Other Investments [Line Items]
Other investments and fair value option investments		13,773	0
Available for sale | Asian and emerging markets
Schedule Of Other Investments [Line Items]
Other investments and fair value option investments		287,666	236,586
Available for sale | Other
Schedule Of Other Investments [Line Items]
Other investments and fair value option investments		17,409	0
Fair value option
Schedule Of Other Investments [Line Items]
Other investments and fair value option investments		1,591,371	1,541,428
Fair value option | Term loan investments
Schedule Of Other Investments [Line Items]
Other investments and fair value option investments		1,061,696	1,073,649
Other investments par		1,077,945	1,094,337
Fair value option | Mezzanine debt funds
Schedule Of Other Investments [Line Items]
Other investments and fair value option investments		115,019	121,341
Fair value option | Credit related funds
Schedule Of Other Investments [Line Items]
Other investments and fair value option investments		138,070	114,436
Fair value option | Investment grade fixed income
Schedule Of Other Investments [Line Items]
Other investments and fair value option investments		60,383	69,108
Fair value option | Asian and emerging markets
Schedule Of Other Investments [Line Items]
Other investments and fair value option investments		26,494	25,800
Fair value option | Other
Schedule Of Other Investments [Line Items]
Other investments and fair value option investments	[1]	$ 189,709	$ 137,094

[1] Includes fund investments with strategies in mortgage servicing rights, transportation and infrastructure assets and other.

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Unaudited Consolidated Statements of Changes in Shareholders' Equity - USD ($) $ in Thousands	Total	Non-cumulative preferred shares	Common shares	Additional paid-in capital	Retained earnings	Accumulated other comprehensive income	Unrealized gains on available-for-sale securities	Foreign currency translation adjustments	Common shares held in treasury, at cost
Balance at beginning of year at Dec. 31, 2013		$ 325,000	$ 565	$ 299,517	$ 6,042,154	$ 74,964	$ 80,692	$ (5,728)	$ (1,094,704)
Common shares issued, net			5	6,360
Exercise of stock options				11,233
Amortization of share-based compensation				35,627
Other				471
Net income	$ 390,862				390,862
Amounts attributable to noncontrolling interests	(346)				(346)
Preferred share dividends	(10,969)				(10,969)
Unrealized holding (losses) gains arising during period, net of reclassification adjustment							150,247
Portion of other-than-temporary impairment losses recognized in other comprehensive income, net of deferred income tax	0						0
Foreign currency translation adjustments	8,672							8,672
Shares repurchased for treasury									(10,259)
Balance at end of period at Jun. 30, 2014	6,229,399	325,000	570	353,208	6,421,701	233,883	230,939	2,944	(1,104,963)
Non-redeemable noncontrolling interests, end of period at Jun. 30, 2014	792,340
Total shareholders’ equity at Jun. 30, 2014	7,021,739
Net income	211,717
Amounts attributable to noncontrolling interests	(3,701)
Preferred share dividends	(5,485)
Portion of other-than-temporary impairment losses recognized in other comprehensive income, net of deferred income tax	0
Foreign currency translation adjustments	10,021
Balance at end of period at Jun. 30, 2014	6,229,399	325,000	570	353,208	6,421,701	233,883	230,939	2,944	(1,104,963)
Non-redeemable noncontrolling interests, end of period at Jun. 30, 2014	792,340
Total shareholders’ equity at Jun. 30, 2014	7,021,739
Balance at beginning of year at Dec. 31, 2014	6,130,053	325,000	572	383,073	6,854,571	128,856	161,598	(32,742)	(1,562,019)
Common shares issued, net			4	7,378
Exercise of stock options				9,624
Amortization of share-based compensation				36,044
Other				1,414
Net income	434,576				434,576
Amounts attributable to noncontrolling interests	(35,450)				(35,450)
Preferred share dividends	(10,969)				(10,969)
Unrealized holding (losses) gains arising during period, net of reclassification adjustment							(49,777)
Portion of other-than-temporary impairment losses recognized in other comprehensive income, net of deferred income tax	(1,461)						(1,461)
Foreign currency translation adjustments	(11,177)							(11,177)
Shares repurchased for treasury									(372,744)
Balance at end of period at Jun. 30, 2015	6,137,515	325,000	576	437,533	7,242,728	66,441	110,360	(43,919)	(1,934,763)
Non-redeemable noncontrolling interests, end of period at Jun. 30, 2015	794,880
Total shareholders’ equity at Jun. 30, 2015	6,932,395
Net income	125,819
Amounts attributable to noncontrolling interests	(10,029)
Preferred share dividends	(5,485)
Portion of other-than-temporary impairment losses recognized in other comprehensive income, net of deferred income tax	(13)
Foreign currency translation adjustments	11,580
Balance at end of period at Jun. 30, 2015	6,137,515	$ 325,000	$ 576	$ 437,533	$ 7,242,728	$ 66,441	$ 110,360	$ (43,919)	$ (1,934,763)
Non-redeemable noncontrolling interests, end of period at Jun. 30, 2015	794,880
Total shareholders’ equity at Jun. 30, 2015	$ 6,932,395

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Share Transactions - Share-based compensation and LTIP (Details) - $ / shares	3 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Stock appreciation rights and options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock grant amount (in shares)	534,267	551,836
Weighted average grant date fair value (in dollars per share)	$ 16.09	$ 15.23
Restricted shares and units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock grant amount (in shares)	559,332	571,108
Weighted average grant date fair value (in dollars per share)	$ 62.51	$ 57.25
2015 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares reserved for grants of awards	4,300,000
Maximum number of incentive stock options	2,000,000
Shares available for grant	3,235,680

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Variable Interest Entities and Noncontrolling Interests - Non-redeemable noncontrolling interests (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Noncontrolling Interest [Line Items]
Non-redeemable noncontrolling interests, beginning of period			$ 769,081
Amounts attributable to noncontrolling interests	$ 5,286	$ (1,156)	25,799	$ (4,563)
Non-redeemable noncontrolling interests, end of period	794,880	792,340	794,880	792,340
Watford Re
Noncontrolling Interest [Line Items]
Non-redeemable noncontrolling interests, beginning of period	789,594	793,496	769,081	0
Sale of shares to noncontrolling interests	0	0	0	796,903
Amounts attributable to noncontrolling interests	5,286	(1,156)	25,799	(4,563)
Non-redeemable noncontrolling interests, end of period	$ 794,880	$ 792,340	$ 794,880	$ 792,340
Common shares | Watford Re
Noncontrolling Interest [Line Items]
Noncontrolling interest, ownership percentage by noncontrolling owners	89.00%		89.00%

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Guarantor Financial Information - Condensed consolidating statement of cash flows (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Operating Activities
Net Cash Provided by (Used in) Operating Activities	$ 385,199	$ 453,063
Investing Activities
Purchases of fixed maturity investments	(14,641,391)	(14,311,748)
Purchases of equity securities	(288,535)	(174,687)
Purchases of other investments	(1,273,780)	(1,022,987)
Proceeds from the sale of fixed maturity investments	14,355,519	13,204,854
Proceeds from the sale of equity securities	272,343	98,687
Proceeds from sales, redemptions and maturities of other investments	1,078,675	618,707
Proceeds from redemptions and maturities of fixed maturity investments	474,984	432,040
Proceeds from investment in joint venture	40,000	0
Net (purchases) sales of short-term investments	3,707	430,304
Change in cash collateral related to securities lending	(18,329)	18,701
Contributions to subsidiaries	0	0
Intercompany loans issued	0	0
Purchase of business, net of cash acquired	818	(235,578)
Purchases of furniture, equipment and other assets	(43,165)	(10,360)
Net Cash Used For Investing Activities	(39,154)	(952,067)
Financing Activities
Purchases of common shares under share repurchase program	(361,877)	0
Proceeds from common shares issued, net	2,178	2,521
Proceeds from intercompany borrowings	0
Repayments of intercompany borrowings		0
Change in cash collateral related to securities lending	18,329	(18,701)
Third party investment in non-redeemable noncontrolling interests	0	796,903
Third party investment in redeemable noncontrolling interests	0	219,233
Dividends paid to redeemable noncontrolling interests	(9,313)	(4,816)
Dividends paid to parent	0	0
Other	55,018	4,706
Preferred dividends paid	(10,969)	(10,969)
Net Cash Provided By (Used For) Financing Activities	(306,634)	988,877
Effects of exchange rate changes on foreign currency cash	(39)	2,513
Increase (decrease) in cash	39,372	492,386
Cash beginning of year	485,702	434,057
Cash end of period	525,074	926,443
Reportable Legal Entities | ACGL (Parent Guarantor)
Operating Activities
Net Cash Provided by (Used in) Operating Activities	378,703	10,099
Investing Activities
Purchases of fixed maturity investments	0	0
Purchases of equity securities	0	0
Purchases of other investments	0	0
Proceeds from the sale of fixed maturity investments	0	0
Proceeds from the sale of equity securities	0	0
Proceeds from sales, redemptions and maturities of other investments	0	0
Proceeds from redemptions and maturities of fixed maturity investments	0	0
Proceeds from investment in joint venture	0
Net (purchases) sales of short-term investments	(365)	(31)
Change in cash collateral related to securities lending	0	0
Contributions to subsidiaries	0	0
Intercompany loans issued	0	0
Purchase of business, net of cash acquired	0	0
Purchases of furniture, equipment and other assets	(24)	(128)
Net Cash Used For Investing Activities	(389)	(159)
Financing Activities
Purchases of common shares under share repurchase program	(361,877)
Proceeds from common shares issued, net	2,178	2,521
Proceeds from intercompany borrowings	0
Repayments of intercompany borrowings		0
Change in cash collateral related to securities lending	0	0
Third party investment in non-redeemable noncontrolling interests		0
Third party investment in redeemable noncontrolling interests		0
Dividends paid to redeemable noncontrolling interests	0	0
Dividends paid to parent	0	0
Other	0	0
Preferred dividends paid	(10,969)	(10,969)
Net Cash Provided By (Used For) Financing Activities	(370,668)	(8,448)
Effects of exchange rate changes on foreign currency cash	0	0
Increase (decrease) in cash	7,646	1,492
Cash beginning of year	3,218	3,223
Cash end of period	10,864	4,715
Reportable Legal Entities | Arch-U.S. (Subsidiary Issuer)
Operating Activities
Net Cash Provided by (Used in) Operating Activities	8,282	424
Investing Activities
Purchases of fixed maturity investments	0	(78,509)
Purchases of equity securities	0	0
Purchases of other investments	0	0
Proceeds from the sale of fixed maturity investments	20,002	0
Proceeds from the sale of equity securities	0	0
Proceeds from sales, redemptions and maturities of other investments	0	0
Proceeds from redemptions and maturities of fixed maturity investments	0	0
Proceeds from investment in joint venture	0
Net (purchases) sales of short-term investments	(12,171)	408,779
Change in cash collateral related to securities lending	0	0
Contributions to subsidiaries	0	(313,207)
Intercompany loans issued	(39,500)	0
Purchase of business, net of cash acquired	0	0
Purchases of furniture, equipment and other assets	0	0
Net Cash Used For Investing Activities	(31,669)	17,063
Financing Activities
Purchases of common shares under share repurchase program	0
Proceeds from common shares issued, net	0	0
Proceeds from intercompany borrowings	27,500
Repayments of intercompany borrowings		(10,250)
Change in cash collateral related to securities lending	0	0
Third party investment in non-redeemable noncontrolling interests		0
Third party investment in redeemable noncontrolling interests		0
Dividends paid to redeemable noncontrolling interests	0	0
Dividends paid to parent	0	0
Other	28	0
Preferred dividends paid	0	0
Net Cash Provided By (Used For) Financing Activities	27,528	(10,250)
Effects of exchange rate changes on foreign currency cash	0	0
Increase (decrease) in cash	4,141	7,237
Cash beginning of year	2,787	509
Cash end of period	6,928	7,746
Reportable Legal Entities | Other ACGL Subsidiaries
Operating Activities
Net Cash Provided by (Used in) Operating Activities	433,833	474,565
Investing Activities
Purchases of fixed maturity investments	(14,641,391)	(14,233,239)
Purchases of equity securities	(288,535)	(174,687)
Purchases of other investments	(1,273,780)	(1,022,987)
Proceeds from the sale of fixed maturity investments	14,335,517	13,204,854
Proceeds from the sale of equity securities	272,343	98,687
Proceeds from sales, redemptions and maturities of other investments	1,078,675	618,707
Proceeds from redemptions and maturities of fixed maturity investments	474,984	432,040
Proceeds from investment in joint venture	40,000
Net (purchases) sales of short-term investments	16,243	21,556
Change in cash collateral related to securities lending	(18,329)	18,701
Contributions to subsidiaries	(9,290)	(100,000)
Intercompany loans issued	(27,500)	10,250
Purchase of business, net of cash acquired	818	(235,578)
Purchases of furniture, equipment and other assets	(43,141)	(10,232)
Net Cash Used For Investing Activities	(83,386)	(1,371,928)
Financing Activities
Purchases of common shares under share repurchase program	0
Proceeds from common shares issued, net	9,290	413,207
Proceeds from intercompany borrowings	39,500
Repayments of intercompany borrowings		0
Change in cash collateral related to securities lending	18,329	(18,701)
Third party investment in non-redeemable noncontrolling interests		796,903
Third party investment in redeemable noncontrolling interests		219,233
Dividends paid to redeemable noncontrolling interests	(9,632)	(4,816)
Dividends paid to parent	(435,300)	(32,025)
Other	54,990	4,706
Preferred dividends paid	0	0
Net Cash Provided By (Used For) Financing Activities	(322,823)	1,378,507
Effects of exchange rate changes on foreign currency cash	(39)	2,513
Increase (decrease) in cash	27,585	483,657
Cash beginning of year	479,697	430,325
Cash end of period	507,282	913,982
Consolidating Adjustments and Eliminations
Operating Activities
Net Cash Provided by (Used in) Operating Activities	(435,619)	(32,025)
Investing Activities
Purchases of fixed maturity investments	0	0
Purchases of equity securities	0	0
Purchases of other investments	0	0
Proceeds from the sale of fixed maturity investments	0	0
Proceeds from the sale of equity securities	0	0
Proceeds from sales, redemptions and maturities of other investments	0	0
Proceeds from redemptions and maturities of fixed maturity investments	0	0
Proceeds from investment in joint venture	0
Net (purchases) sales of short-term investments	0	0
Change in cash collateral related to securities lending	0	0
Contributions to subsidiaries	9,290	413,207
Intercompany loans issued	67,000	(10,250)
Purchase of business, net of cash acquired	0	0
Purchases of furniture, equipment and other assets	0	0
Net Cash Used For Investing Activities	76,290	402,957
Financing Activities
Purchases of common shares under share repurchase program	0
Proceeds from common shares issued, net	(9,290)	(413,207)
Proceeds from intercompany borrowings	(67,000)
Repayments of intercompany borrowings		10,250
Change in cash collateral related to securities lending	0	0
Third party investment in non-redeemable noncontrolling interests		0
Third party investment in redeemable noncontrolling interests		0
Dividends paid to redeemable noncontrolling interests	319	0
Dividends paid to parent	435,300	32,025
Other	0	0
Preferred dividends paid	0	0
Net Cash Provided By (Used For) Financing Activities	359,329	(370,932)
Effects of exchange rate changes on foreign currency cash	0	0
Increase (decrease) in cash	0	0
Cash beginning of year	0	0
Cash end of period	$ 0	$ 0

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Transactions with Related Parties (Notes)

6 Months Ended

Jun. 30, 2015

Related Party Transactions [Abstract]

Transactions with Related Parties

Transactions with Related Parties

Kewsong Lee, a director of ACGL, is a Managing Director and Deputy Chief Investment Officer for Corporate Private Equity of The Carlyle Group (“Carlyle”). As part of its investment philosophy, the Company’s investment portfolio includes investments in funds managed by Carlyle. As of June 30, 2015, the Company had aggregate commitments of $670.9 million to funds managed by Carlyle, of which $374.1 million was unfunded. The Company may make additional commitments to funds managed by Carlyle from time to time. During the six months ended June 30, 2015 and 2014, the Company made aggregate capital contributions to funds managed by Carlyle of $25.6 million and $29.8 million, respectively, and received aggregate cash distributions from funds managed by Carlyle of $19.8 million and $37.2 million, respectively.

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Variable Interest Entities and Noncontrolling Interests - Redeemable noncontrolling interests (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Redeemable Noncontrolling Interest [Line Items]
Redeemable noncontrolling interests, beginning of period			$ 219,512
Redeemable noncontrolling interests, end of period	$ 204,996		204,996
Watford Re
Redeemable Noncontrolling Interest [Line Items]
Redeemable noncontrolling interests, beginning of period	219,604	$ 219,234	219,512	$ 0
Sale of shares to noncontrolling interests	0	0	0	219,233
Shares acquired by the Company	(14,700)	0	(14,700)	0
Accretion of preference share issuance costs	92	92	184	93
Redeemable noncontrolling interests, end of period	$ 204,996	$ 219,326	$ 204,996	$ 219,326
Cumulative redeemable preference shares | Watford Re
Redeemable Noncontrolling Interest [Line Items]
Preference shares, number of shares issued	9,065,200		9,065,200
Par value per share	$ 0.01		$ 0.01
Liquidation preference per share	$ 25.00		$ 25.00
Gulf Re | Cumulative redeemable preference shares | Watford Re
Redeemable Noncontrolling Interest [Line Items]
Number of shares in VIE owned by acquired company	600,000

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Variable Interest Entities and Noncontrolling Interests (Tables)

6 Months Ended

Jun. 30, 2015

Noncontrolling Interest [Abstract]

Activity in non-redeemable noncontrolling interests

The following table sets forth activity in the non-redeemable noncontrolling interests:

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2015		2014			2015		2014
Balance, beginning of period	$	789,594	$	793,496		$	769,081	$	—
Sale of shares to noncontrolling interests	—		—			—		796,903
Amounts attributable to noncontrolling interests	5,286		(1,156		)	25,799		(4,563		)
Balance, end of period	$	794,880	$	792,340		$	794,880	$	792,340

Activity in redeemable noncontrolling interests

The following table sets forth activity in the redeemable non-controlling interests:

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2015			2014		2015			2014
Balance, beginning of period	$	219,604		$	219,234	$	219,512		$	—
Sale of shares to noncontrolling interests	—			—		—			219,233
Shares acquired by the Company (1)	(14,700		)	—		(14,700		)	—
Accretion of preference share issuance costs	92			92		184			93
Balance, end of period	$	204,996		$	219,326	$	204,996		$	219,326

_________________________________________________

(1) During the 2015 second quarter, the Company acquired Gulf Re, which owns 600,000 Watford Preference Shares. Such shares, net of a discount, along with related dividends and accretion of the discount, are eliminated in consolidation.

Portion of income or loss attributable to third party investors

The portion of Watford Re’s income or loss attributable to third party investors is recorded in the consolidated statements of income in ‘amounts attributable to noncontrolling interests’ as summarized in the table below:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015			2014
Amounts attributable to non-redeemable noncontrolling interests	$	(5,286	)	$	1,156		$	(25,799	)	$	4,563
Dividends attributable to redeemable noncontrolling interests	(4,743		)	(4,857		)	(9,651		)	(4,909		)
Amounts attributable to noncontrolling interests	$	(10,029	)	$	(3,701	)	$	(35,450	)	$	(346	)

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Unaudited Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Operating Activities
Net income	$ 434,576	$ 390,862
Adjustments to reconcile net income to net cash provided by operating activities:
Net realized gains	(60,818)	(87,520)
Net impairment losses recognized in earnings	6,912	17,720
Equity in net income or loss of investment funds accounted for using the equity method and other income or loss	(10,349)	(135)
Share-based compensation	36,044	35,627
Changes in:
Reserve for losses and loss adjustment expenses, net of unpaid losses and loss adjustment expenses recoverable	91,616	60,474
Unearned premiums, net of prepaid reinsurance premiums	156,873	269,986
Premiums receivable	(206,642)	(325,953)
Deferred acquisition costs, net	(39,009)	(55,822)
Reinsurance balances payable	19,657	65,803
Other liabilities	(94,841)	43,133
Other items	51,180	38,888
Net Cash Provided By Operating Activities	385,199	453,063
Investing Activities
Purchases of fixed maturity investments	(14,641,391)	(14,311,748)
Purchases of equity securities	(288,535)	(174,687)
Purchases of other investments	(1,273,780)	(1,022,987)
Proceeds from the sale of fixed maturity investments	14,355,519	13,204,854
Proceeds from the sale of equity securities	272,343	98,687
Proceeds from sales, redemptions and maturities of other investments	1,078,675	618,707
Proceeds from redemptions and maturities of fixed maturity investments	474,984	432,040
Proceeds from investment in joint venture	40,000	0
Net sales of short-term investments	3,707	430,304
Change in cash collateral related to securities lending	(18,329)	18,701
Purchase of business, net of cash acquired	818	(235,578)
Purchases of furniture, equipment and other assets	(43,165)	(10,360)
Net Cash Used For Investing Activities	(39,154)	(952,067)
Financing Activities
Purchases of common shares under share repurchase program	(361,877)	0
Proceeds from common shares issued, net	2,178	2,521
Change in cash collateral related to securities lending	18,329	(18,701)
Third party investment in non-redeemable noncontrolling interests	0	796,903
Third party investment in redeemable noncontrolling interests	0	219,233
Dividends paid to redeemable noncontrolling interests	(9,313)	(4,816)
Other	55,018	4,706
Preferred dividends paid	(10,969)	(10,969)
Net Cash Provided By (Used For) Financing Activities	(306,634)	988,877
Effects of exchange rate changes on foreign currency cash	(39)	2,513
Increase in cash	39,372	492,386
Cash beginning of year	485,702	434,057
Cash end of period	525,074	926,443
Income taxes paid	25,992	8,279
Interest paid	$ 25,076	$ 21,696

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Unaudited Consolidated Balance Sheets (Parentheticals) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Fixed maturities available for sale, at amortized cost	$ 9,945,598	$ 10,701,557
Short-term investments available for sale, at amortized cost	878,437	801,758
Collateral received under securities lending, at amortized cost	373,909	40,473
Equity securities, at cost	615,055	562,534
Other investments available for sale, at cost	333,438	264,747
Securities pledged under securities lending, at amortized cost	$ 374,447	$ 52,076
Common shares, par value per share	$ 0.0033	$ 0.0033
Common shares issued (shares)	172,780,590	171,672,408
Common shares held in treasury (shares)	50,376,681	44,304,474

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Share Transactions

6 Months Ended

Jun. 30, 2015

Stockholders' Equity Note [Abstract]

Share Transactions

Share Transactions

Share Repurchases

The board of directors of ACGL has authorized the investment in ACGL’s common shares through a share repurchase program. Since the inception of the share repurchase program, ACGL has repurchased approximately 124.0 million common shares for an aggregate purchase price of $3.60 billion. During the 2015 second quarter and six months ended June 30, 2015, ACGL repurchased 3.2 million and 5.9 million common shares, respectively, for an aggregate purchase price of $199.0 million and $361.9 million, respectively. During the 2014 second quarter and six months ended June 30, 2014, ACGL did not repurchase any common shares. At June 30, 2015, $525.3 million of share repurchases were available under the program. The timing and amount of the repurchase transactions under this program will depend on a variety of factors, including market conditions and corporate and regulatory considerations.

Share-Based Compensation

During the 2015 second quarter, the Company made a stock grant of 534,267 stock appreciation rights and stock options and 559,332 restricted shares and units to certain employees and directors with weighted average grant-date fair values of $16.09 and $62.51, respectively. During the 2014 second quarter, the Company made a stock grant of 551,836 stock appreciation rights and stock options and 571,108 restricted shares and units to certain employees and directors with weighted average grant-date fair values of $15.23 and $57.25, respectively. The stock appreciation rights and stock options were valued at the grant date using the Black-Scholes option pricing model. Such values are being amortized over the respective substantive vesting period. For awards granted to retirement-eligible employees where no service is required for the employee to retain the award, the grant date fair value is immediately recognized as compensation expense at the grant date because the employee is able to retain the award without continuing to provide service. For employees near retirement eligibility, attribution of compensation cost is over the period from the grant date to the retirement eligibility date.

2015 Long Term Incentive and Share Award Plan (the “2015 Plan”)

The 2015 Plan became effective as of May 13, 2015 following approval by shareholders of the Company. The 2015 Plan is intended to provide for competitive compensation opportunities, to encourage long-term service, to recognize individual contributions and reward achievement of performance goals and to promote the creation of long-term value for shareholders by aligning the interests of such persons with those of shareholders. The 2015 Plan provides for the grant to eligible employees and directors stock options, stock appreciation rights, restricted shares, restricted share units payable in common shares or cash, share awards in lieu of cash awards, dividend equivalents and other share-based awards. The 2015 Plan will terminate as to future awards on February 26, 2025.

The number of common shares reserved for grants of awards under the 2015 Plan, subject to anti-dilution adjustments in the event of certain changes in the Company’s capital structure, is 4,300,000. In addition, no more than 50% of such common shares may be issued in connection with full value awards (i.e., awards other than stock options or stock appreciation rights) and no more than 2,000,000 common shares may be issued as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended. At June 30, 2015, 3,235,680 shares are available for grant under the 2015 Plan.

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Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2015	Jul. 31, 2015
Document and Entity Information [Abstract]
Entity Registrant Name	ARCH CAPITAL GROUP LTD.
Entity Central Index Key	0000947484
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Document Type	10-Q
Document Period End Date	Jun. 30, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q2
Amendment Flag	false
Entity Common Stock, Shares Outstanding		122,441,665

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Income Taxes

6 Months Ended

Jun. 30, 2015

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

ACGL is incorporated under the laws of Bermuda and, under current Bermuda law, is not obligated to pay any taxes in Bermuda based upon income or capital gains. The Company has received a written undertaking from the Minister of Finance in Bermuda under the Exempted Undertakings Tax Protection Act 1966 that, in the event that any legislation is enacted in Bermuda imposing any tax computed on profits, income, gain or appreciation on any capital asset, or any tax in the nature of estate duty or inheritance tax, such tax will not be applicable to ACGL or any of its operations until March 31, 2035. This undertaking does not, however, prevent the imposition of taxes on any person ordinarily resident in Bermuda or any company in respect of its ownership of real property or leasehold interests in Bermuda.

ACGL and its non-U.S. subsidiaries will be subject to U.S. federal income tax only to the extent that they derive U.S. source income that is subject to U.S. withholding tax or income that is effectively connected with the conduct of a trade or business within the U.S. and is not exempt from U.S. tax under an applicable income tax treaty with the U.S. ACGL and its non-U.S. subsidiaries will be subject to a withholding tax on dividends from U.S. investments and interest from certain U.S. payors (subject to reduction by any applicable income tax treaty). ACGL and its non-U.S. subsidiaries intend to conduct their operations in a manner that will not cause them to be treated as engaged in a trade or business in the United States and, therefore, will not be required to pay U.S. federal income taxes (other than U.S. excise taxes on insurance and reinsurance premium and withholding taxes on dividends and certain other U.S. source investment income). However, because there is uncertainty as to the activities which constitute being engaged in a trade or business within the United States, there can be no assurances that the U.S. Internal Revenue Service will not contend successfully that ACGL or its non-U.S. subsidiaries are engaged in a trade or business in the United States. If ACGL or any of its non-U.S. subsidiaries were subject to U.S. income tax, ACGL’s shareholders’ equity and earnings could be materially adversely affected. ACGL has subsidiaries and branches that operate in various jurisdictions around the world that are subject to tax in the jurisdictions in which they operate. The significant jurisdictions in which ACGL’s subsidiaries and branches are subject to tax are the United States, United Kingdom, Ireland, Canada, Switzerland and Denmark.

The Company’s income tax provision on income before income taxes resulted in an expense of 4.3% for the six months ended June 30, 2015, compared to an expense of 2.7% for the 2014 period. The Company’s effective tax rate, which is based upon the expected annual effective tax rate, may fluctuate from period to period based on the relative mix of income or loss reported by jurisdiction and the varying tax rates in each jurisdiction. The Company had a net deferred tax asset of $143.9 million at June 30, 2015, compared to $131.0 million at December 31, 2014. In addition, the Company paid$26.0 million in income taxes for the six months ended June 30, 2015, while the Company paid$8.3 million for the 2014 period.

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Unaudited Consolidated Statements of Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Revenues
Net premiums written	$ 943,580	$ 971,928	$ 2,010,575	$ 2,036,918
Change in unearned premiums	(142)	(64,776)	(156,873)	(269,986)
Net premiums earned	943,438	907,152	1,853,702	1,766,932
Net investment income	86,963	72,990	165,957	139,984
Net realized gains (losses)	(35,725)	54,144	47,623	73,841
Other-than-temporary impairment losses	(1,126)	(14,749)	(8,373)	(17,720)
Less investment impairments recognized in other comprehensive income, before taxes	13	0	1,461	0
Net impairment losses recognized in earnings	(1,113)	(14,749)	(6,912)	(17,720)
Other underwriting income	7,717	2,033	19,253	3,615
Equity in net income of investment funds accounted for using the equity method	16,167	9,240	22,056	12,493
Other income	2,205	4,850	317	2,746
Total revenues	1,019,652	1,035,660	2,101,996	1,981,891
Expenses
Losses and loss adjustment expenses	519,426	485,518	1,013,142	921,758
Acquisition expenses	175,425	158,158	338,501	318,500
Other operating expenses	168,608	156,350	326,490	302,149
Interest expense	4,011	14,334	16,747	28,738
Net foreign exchange losses (gains)	19,583	2,294	(46,918)	8,857
Total expenses	887,053	816,654	1,647,962	1,580,002
Income before income taxes	132,599	219,006	454,034	401,889
Income tax expense	(6,780)	(7,289)	(19,458)	(11,027)
Net income	125,819	211,717	434,576	390,862
Amounts attributable to noncontrolling interests	(10,029)	(3,701)	(35,450)	(346)
Net income available to Arch	115,790	208,016	399,126	390,516
Preferred dividends	(5,485)	(5,485)	(10,969)	(10,969)
Net income available to Arch common shareholders	$ 110,305	$ 202,531	$ 388,157	$ 379,547
Net income per common share
Basic (per share)	$ 0.91	$ 1.53	$ 3.16	$ 2.87
Diluted (per share)	$ 0.88	$ 1.48	$ 3.05	$ 2.78
Weighted average common shares and common share equivalents outstanding
Basic (shares)	121,719,214	132,650,634	122,957,384	132,256,462
Diluted (shares)	125,885,420	136,889,944	127,156,713	136,716,889

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Segment Information

6 Months Ended

Jun. 30, 2015

Segment Reporting [Abstract]

Segment Information

Segment Information

The Company classifies its businesses into three underwriting segments — insurance, reinsurance and mortgage — and two other operating segments — ‘other’ and corporate (non-underwriting). The Company determined its reportable segments using the management approach described in accounting guidance regarding disclosures about segments of an enterprise and related information. The accounting policies of the segments are the same as those used for the preparation of the Company’s consolidated financial statements. Intersegment business is allocated to the segment accountable for the underwriting results.

The Company’s insurance, reinsurance and mortgage segments each have managers who are responsible for the overall profitability of their respective segments and who are directly accountable to the Company’s chief operating decision makers, the Chairman, President and Chief Executive Officer of ACGL and the Chief Financial Officer of ACGL. The chief operating decision makers do not assess performance, measure return on equity or make resource allocation decisions on a line of business basis. Management measures segment performance for its three underwriting segments based on underwriting income or loss. The Company does not manage its assets by underwriting segment, with the exception of goodwill and intangible assets, and, accordingly, investment income is not allocated to each underwriting segment.

The insurance segment consists of the Company’s insurance underwriting units which offer specialty product lines on a worldwide basis. Product lines include: construction and national accounts; excess and surplus casualty; lenders products; professional lines; programs; property, energy, marine and aviation; travel, accident and health; and other (consisting of alternative markets, excess workers' compensation and surety business).

The reinsurance segment consists of the Company’s reinsurance underwriting units which offer specialty product lines on a worldwide basis. Product lines include: casualty; marine and aviation; other specialty; property catastrophe; property excluding property catastrophe (losses on a single risk, both excess of loss and pro rata); and other (consisting of life reinsurance, casualty clash and other).

The mortgage segment consists of the Company’s mortgage insurance and reinsurance business and includes the results of Arch Mortgage Insurance Company (“Arch MI U.S.”). Arch MI U.S. is approved as an eligible mortgage insurer by Federal National Mortgage Association (“Fannie Mae”) and Federal Home Loan Mortgage Corporation (“Freddie Mac”), each a government sponsored enterprise, or “GSE.” Arch MI U.S. provides mortgage insurance to banks, credit unions and other lenders nationwide. The mortgage segment also provides reinsurance on a global basis, direct mortgage insurance in Europe and various risk-sharing products to government agencies and mortgage lenders.

The corporate (non-underwriting) segment results include net investment income, other income (loss), other expenses incurred by the Company, interest expense, net realized gains or losses, net impairment losses included in earnings, equity in net income or loss of investment funds accounted for using the equity method, net foreign exchange gains or losses, income taxes and items related to the Company’s non-cumulative preferred shares. Such amounts exclude the results of the ‘other’ segment.

The ‘other’ segment includes the results of Watford Re (see Note 3). Watford Re has its own management and board of directors that is responsible for the overall profitability of the ‘other’ segment. For the ‘other’ segment, performance is measured based on net income or loss.

The following tables summarize the Company’s underwriting income or loss by segment, together with a reconciliation of underwriting income or loss to net income available to common shareholders:

	Three Months Ended
	June 30, 2015
	Insurance			Reinsurance			Mortgage			Sub-Total			Other			Total
Gross premiums written (1)	$	744,810		$	342,101		$	68,572		$	1,155,253		$	127,954		$	1,199,209
Premiums ceded	(235,743		)	(89,446		)	(6,902		)	(331,861		)	(7,766		)	(255,629		)
Net premiums written	509,067			252,655			61,670			823,392			120,188			943,580
Change in unearned premiums	758			21,310			(9,211		)	12,857			(12,999		)	(142		)
Net premiums earned	509,825			273,965			52,459			836,249			107,189			943,438
Other underwriting income	521			2,658			3,686			6,865			852			7,717
Losses and loss adjustment expenses	(320,926		)	(111,183		)	(9,639		)	(441,748		)	(77,678		)	(519,426		)
Acquisition expenses, net	(76,723		)	(58,360		)	(10,200		)	(145,283		)	(30,142		)	(175,425		)
Other operating expenses	(89,054		)	(39,007		)	(19,679		)	(147,740		)	(3,450		)	(151,190		)
Underwriting income (loss)	$	23,643		$	68,073		$	16,627		108,343			(3,229		)	105,114
Net investment income										67,171			19,792			86,963
Net realized gains (losses)										(26,860		)	(8,865		)	(35,725		)
Net impairment losses recognized in earnings										(1,113		)	—			(1,113		)
Equity in net income of investment funds accounted for using the equity method										16,167			—			16,167
Other income (loss)										2,205			—			2,205
Other expenses										(17,418		)	—			(17,418		)
Interest expense										(4,011		)	—			(4,011		)
Net foreign exchange gains (losses)										(22,571		)	2,988			(19,583		)
Income (loss) before income taxes										121,913			10,686			132,599
Income tax expense										(6,780		)	—			(6,780		)
Net income (loss)										115,133			10,686			125,819
Dividends attributable to redeemable noncontrolling interests										—			(4,743		)	(4,743		)
Amounts attributable to noncontrolling interests										—			(5,286		)	(5,286		)
Net income (loss) available to Arch										115,133			657			115,790
Preferred dividends										(5,485		)	—			(5,485		)
Net income (loss) available to Arch common shareholders										$	109,648		$	657		$	110,305
Underwriting Ratios
Loss ratio	62.9		%	40.6		%	18.4		%	52.8		%	72.5		%	55.1		%
Acquisition expense ratio	15.0		%	21.3		%	19.4		%	17.4		%	28.1		%	18.6		%
Other operating expense ratio	17.5		%	14.2		%	37.5		%	17.7		%	3.2		%	16.0		%
Combined ratio	95.4		%	76.1		%	75.3		%	87.9		%	103.8		%	89.7		%
Goodwill and intangible assets	$	30,968		$	2,420		$	69,130		$	102,518		$	—		$	102,518
Total investable assets										$	14,513,554		$	1,340,574		$	15,854,128
Total assets										21,323,611			1,761,314			23,084,925
Total liabilities										15,299,256			648,278			15,947,534

_________________________________________________

(1) Certain amounts included in the gross premiums written of each segment are related to intersegment transactions. Accordingly, the sum of gross premiums written for each segment does not agree to the total gross premiums written as shown in the table above due to the elimination of intersegment transactions in the total.

	Three Months Ended
	June 30, 2014
	Insurance			Reinsurance			Mortgage			Sub-Total			Other			Total
Gross premiums written (1)	$	852,231		$	349,841		$	55,476		$	1,256,934		$	54,562		$	1,271,761
Premiums ceded	(273,349		)	(58,994		)	(5,079		)	(336,808		)	(2,760		)	(299,833		)
Net premiums written	578,882			290,847			50,397			920,126			51,802			971,928
Change in unearned premiums	(71,170		)	44,780			436			(25,954		)	(38,822		)	(64,776		)
Net premiums earned	507,712			335,627			50,833			894,172			12,980			907,152
Other underwriting income	514			303			1,216			2,033			—			2,033
Losses and loss adjustment expenses	(311,526		)	(150,325		)	(15,473		)	(477,324		)	(8,194		)	(485,518		)
Acquisition expenses, net	(76,449		)	(66,035		)	(11,481		)	(153,965		)	(4,193		)	(158,158		)
Other operating expenses	(85,829		)	(37,666		)	(16,288		)	(139,783		)	(1,635		)	(141,418		)
Underwriting income (loss)	$	34,422		$	81,904		$	8,807		125,133			(1,042		)	124,091
Net investment income										72,458			532			72,990
Net realized gains (losses)										50,966			3,178			54,144
Net impairment losses recognized in earnings										(14,749		)	—			(14,749		)
Equity in net income of investment funds accounted for using the equity method										9,240			—			9,240
Other income (loss)										4,850			—			4,850
Other expenses										(15,279		)	347			(14,932		)
Interest expense										(14,334		)	—			(14,334		)
Net foreign exchange gains (losses)										(2,764		)	470			(2,294		)
Income (loss) before income taxes										215,521			3,485			219,006
Income tax expense										(7,289		)	—			(7,289		)
Net income (loss)										208,232			3,485			211,717
Dividends attributable to redeemable noncontrolling interests										—			(4,857		)	(4,857		)
Amounts attributable to noncontrolling interests										—			1,156			1,156
Net income (loss) available to Arch										208,232			(216		)	208,016
Preferred dividends										(5,485		)	—			(5,485		)
Net income (loss) available to Arch common shareholders										$	202,747		$	(216	)	$	202,531
Underwriting Ratios
Loss ratio	61.4		%	44.8		%	30.4		%	53.4		%	63.1		%	53.5		%
Acquisition expense ratio	15.1		%	19.7		%	22.6		%	17.2		%	32.3		%	17.4		%
Other operating expense ratio	16.9		%	11.2		%	32.0		%	15.6		%	12.6		%	15.6		%
Combined ratio	93.4		%	75.7		%	85.0		%	86.2		%	108.0		%	86.5		%
Goodwill and intangible assets	$	24,498		$	4,942		$	89,281		$	118,721		$	—		$	118,721
Total investable assets										$	14,688,808		$	1,114,719		$	15,803,527
Total assets										21,204,129			1,363,318			22,567,447
Total liabilities										15,072,875			253,507			15,326,382

_________________________________________________

(1) Certain amounts included in the gross premiums written of each segment are related to intersegment transactions. Accordingly, the sum of gross premiums written for each segment does not agree to the total gross premiums written as shown in the table above due to the elimination of intersegment transactions in the total.

	Six Months Ended
	June 30, 2015
	Insurance			Reinsurance			Mortgage			Sub-Total			Other			Total
Gross premiums written (1)	$	1,510,963		$	827,213		$	129,113		$	2,466,931		$	256,587		$	2,541,231
Premiums ceded	(459,893		)	(226,015		)	(15,572		)	(701,122		)	(11,821		)	(530,656		)
Net premiums written	1,051,070			601,198			113,541			1,765,809			244,766			2,010,575
Change in unearned premiums	(33,331		)	(47,516		)	(10,715		)	(91,562		)	(65,311		)	(156,873		)
Net premiums earned	1,017,739			553,682			102,826			1,674,247			179,455			1,853,702
Other underwriting income	948			4,087			11,404			16,439			2,814			19,253
Losses and loss adjustment expenses	(638,822		)	(223,715		)	(23,448		)	(885,985		)	(127,157		)	(1,013,142		)
Acquisition expenses, net	(151,801		)	(114,964		)	(20,618		)	(287,383		)	(51,118		)	(338,501		)
Other operating expenses	(177,173		)	(77,051		)	(40,048		)	(294,272		)	(5,455		)	(299,727		)
Underwriting income (loss)	$	50,891		$	142,039		$	30,116		223,046			(1,461		)	221,585
Net investment income										137,459			28,498			165,957
Net realized gains (losses)										38,649			8,974			47,623
Net impairment losses recognized in earnings										(6,912		)	—			(6,912		)
Equity in net income of investment funds accounted for using the equity method										22,056			—			22,056
Other income (loss)										317			—			317
Other expenses										(26,763		)	—			(26,763		)
Interest expense										(16,747		)	—			(16,747		)
Net foreign exchange gains (losses)										44,282			2,636			46,918
Income (loss) before income taxes										415,387			38,647			454,034
Income tax expense										(19,458		)	—			(19,458		)
Net income (loss)										395,929			38,647			434,576
Dividends attributable to redeemable noncontrolling interests										—			(9,651		)	(9,651		)
Amounts attributable to noncontrolling interests										—			(25,799		)	(25,799		)
Net income (loss) available to Arch										395,929			3,197			399,126
Preferred dividends										(10,969		)	—			(10,969		)
Net income (loss) available to Arch common shareholders										$	384,960		$	3,197		$	388,157
Underwriting Ratios
Loss ratio	62.8		%	40.4		%	22.8		%	52.9		%	70.9		%	54.7		%
Acquisition expense ratio	14.9		%	20.8		%	20.1		%	17.2		%	28.5		%	18.3		%
Other operating expense ratio	17.4		%	13.9		%	38.9		%	17.6		%	3.0		%	16.2		%
Combined ratio	95.1		%	75.1		%	81.8		%	87.7		%	102.4		%	89.2		%

_________________________________________________

(1) Certain amounts included in the gross premiums written of each segment are related to intersegment transactions. Accordingly, the sum of gross premiums written for each segment does not agree to the total gross premiums written as shown in the table above due to the elimination of intersegment transactions in the total.

	Six Months Ended
	June 30, 2014
	Insurance			Reinsurance			Mortgage			Sub-Total			Other			Total
Gross premiums written (1)	$	1,582,877		$	866,894		$	103,383		$	2,552,070		$	86,756		$	2,566,897
Premiums ceded	(458,393		)	(132,121		)	(9,718		)	(599,148		)	(2,760		)	(529,979		)
Net premiums written	1,124,484			734,773			93,665			1,952,922			83,996			2,036,918
Change in unearned premiums	(139,271		)	(57,798		)	(4,067		)	(201,136		)	(68,850		)	(269,986		)
Net premiums earned	985,213			676,975			89,598			1,751,786			15,146			1,766,932
Other underwriting income	1,014			619			1,982			3,615			—			3,615
Losses and loss adjustment expenses	(598,296		)	(289,961		)	(23,951		)	(912,208		)	(9,550		)	(921,758		)
Acquisition expenses, net	(153,381		)	(139,468		)	(20,635		)	(313,484		)	(5,016		)	(318,500		)
Other operating expenses	(166,973		)	(73,861		)	(30,164		)	(270,998		)	(2,744		)	(273,742		)
Underwriting income (loss)	$	67,577		$	174,304		$	16,830		258,711			(2,164		)	256,547
Net investment income										139,451			533			139,984
Net realized gains (losses)										70,663			3,178			73,841
Net impairment losses recognized in earnings										(17,720		)	—			(17,720		)
Equity in net income of investment funds accounted for using the equity method										12,493			—			12,493
Other income (loss)										2,746			—			2,746
Other expenses										(26,078		)	(2,329		)	(28,407		)
Interest expense										(28,738		)	—			(28,738		)
Net foreign exchange gains (losses)										(9,420		)	563			(8,857		)
Income (loss) before income taxes										402,108			(219		)	401,889
Income tax expense										(11,027		)	—			(11,027		)
Net income (loss)										391,081			(219		)	390,862
Dividends attributable to redeemable noncontrolling interests										—			(4,909		)	(4,909		)
Amounts attributable to noncontrolling interests										—			4,563			4,563
Net income (loss) available to Arch										391,081			(565		)	390,516
Preferred dividends										(10,969		)	—			(10,969		)
Net income (loss) available to Arch common shareholders										$	380,112		$	(565	)	$	379,547
Underwriting Ratios
Loss ratio	60.7		%	42.8		%	26.7		%	52.1		%	63.1		%	52.2		%
Acquisition expense ratio	15.6		%	20.6		%	23.0		%	17.9		%	33.1		%	18.0		%
Other operating expense ratio	16.9		%	10.9		%	33.7		%	15.5		%	18.1		%	15.5		%
Combined ratio	93.2		%	74.3		%	83.4		%	85.5		%	114.3		%	85.7		%

_________________________________________________

(1) Certain amounts included in the gross premiums written of each segment are related to intersegment transactions. Accordingly, the sum of gross premiums written for each segment does not agree to the total gross premiums written as shown in the table above due to the elimination of intersegment transactions in the total.

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Earnings Per Common Share

6 Months Ended

Jun. 30, 2015

Earnings Per Share [Abstract]

Earnings Per Common Share

Earnings Per Common Share

The following table sets forth the computation of basic and diluted earnings per common share:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015			2014
Numerator:
Net income	$	125,819		$	211,717		$	434,576		$	390,862
Amounts attributable to noncontrolling interests	(10,029		)	(3,701		)	(35,450		)	(346		)
Net income available to Arch	115,790			208,016			399,126			390,516
Preferred dividends	(5,485		)	(5,485		)	(10,969		)	(10,969		)
Net income available to Arch common shareholders	$	110,305		$	202,531		$	388,157		$	379,547
Denominator:
Weighted average common shares outstanding — basic	121,719,214			132,650,634			122,957,384			132,256,462
Effect of dilutive common share equivalents:
Nonvested restricted shares	1,258,741			1,144,621			1,334,633			1,236,408
Stock options (1)	2,907,465			3,094,689			2,864,696			3,224,019
Weighted average common shares and common share equivalents outstanding — diluted	125,885,420			136,889,944			127,156,713			136,716,889
Earnings per common share:
Basic	$	0.91		$	1.53		$	3.16		$	2.87
Diluted	$	0.88		$	1.48		$	3.05		$	2.78

_________________________________________________

(1) Certain stock options were not included in the computation of diluted earnings per share where the exercise price of the stock options exceeded the average market price and would have been anti-dilutive or where, when applying the treasury stock method to in-the-money options, the sum of the proceeds, including unrecognized compensation, exceeded the average market price and would have been anti-dilutive. For the 2015 second quarter and 2014 second quarter, the number of stock options excluded were 1,009,113 and 978,237, respectively. For the six months ended June 30, 2015 and 2014, the number of stock options excluded were 1,187,162 and 1,318,662, respectively.

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General (Policies)

6 Months Ended

Jun. 30, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of presentation

The interim consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). All significant intercompany transactions and balances have been eliminated in consolidation.

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and assumptions. In the opinion of management, the accompanying unaudited interim consolidated financial statements reflect all adjustments (consisting of normally recurring accruals) necessary for a fair statement of results on an interim basis. The results of any interim period are not necessarily indicative of the results for a full year or any future periods.

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Other Comprehensive Income (Loss)

6 Months Ended

Jun. 30, 2015

Comprehensive Income Note Disclosure [Abstract]

Other Comprehensive Income (Loss)

Other Comprehensive Income (Loss)

The following tables present details about amounts reclassified from accumulated other comprehensive income and the tax effects allocated to each component of other comprehensive income (loss):

		Amounts Reclassified from AOCI
	Consolidated Statement of Income	Three Months Ended						Six Months Ended
Details About	Line Item That Includes	June 30,						June 30,
AOCI Components	Reclassification	2015			2014			2015			2014
Unrealized appreciation on available-for-sale investments
	Net realized gains (losses)	$	23,259		$	23,735		$	65,690		$	49,773
	Other-than-temporary impairment losses	(1,126		)	(14,749		)	(8,373		)	(17,720		)
	Total before tax	22,133			8,986			57,317			32,053
	Income tax (expense) benefit	(919		)	(701		)	(5,171		)	(2,519		)
	Net of tax	$	21,214		$	8,285		$	52,146		$	29,534

	Before Tax Amount			Tax Expense (Benefit)			Net of Tax Amount
Three Months Ended June 30, 2015
Unrealized appreciation (decline) in value of investments:
Unrealized holding gains (losses) arising during period	$	(96,629	)	$	(14,694	)	$	(81,935	)
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)	(13		)	—			(13		)
Less reclassification of net realized gains (losses) included in net income	22,133			919			21,214
Foreign currency translation adjustments	11,697			117			11,580
Other comprehensive income (loss)	$	(107,078	)	$	(15,496	)	$	(91,582	)
Three Months Ended June 30, 2014
Unrealized appreciation (decline) in value of investments:
Unrealized holding gains (losses) arising during period	$	115,150		$	6,722		$	108,428
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)	—			—			—
Less reclassification of net realized gains (losses) included in net income	8,986			701			8,285
Foreign currency translation adjustments	10,021			—			10,021
Other comprehensive income (loss)	$	116,185		$	6,021		$	110,164
Six Months Ended June 30, 2015
Unrealized appreciation (decline) in value of investments:
Unrealized holding gains (losses) arising during period	$	(2,242	)	$	(4,611	)	$	2,369
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)	(1,461		)	—			(1,461		)
Less reclassification of net realized gains (losses) included in net income	57,317			5,171			52,146
Foreign currency translation adjustments	(11,929		)	(752		)	(11,177		)
Other comprehensive income (loss)	$	(72,949	)	$	(10,534	)	$	(62,415	)
Six Months Ended June 30, 2014
Unrealized appreciation (decline) in value of investments:
Unrealized holding gains (losses) arising during period	$	190,550		$	10,769		$	179,781
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)	—			—			—
Less reclassification of net realized gains (losses) included in net income	32,053			2,519			29,534
Foreign currency translation adjustments	8,672			—			8,672
Other comprehensive income (loss)	$	167,169		$	8,250		$	158,919

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Derivative Instruments

6 Months Ended

Jun. 30, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

Derivative Instruments

The Company’s investment strategy allows for the use of derivative securities. The Company’s derivative instruments are recorded on its consolidated balance sheets at fair value. The Company utilizes exchange traded U.S. Treasury note, Eurodollar and other futures contracts and commodity futures to manage portfolio duration or replicate investment positions in its portfolios and the Company routinely utilizes foreign currency forward contracts, currency options, index futures contracts and other derivatives as part of its total return objective. In addition, certain of the Company’s investments are managed in portfolios which incorporate the use of foreign currency forward contracts which are intended to provide an economic hedge against foreign currency movements.

In addition, the Company purchases to-be-announced mortgage backed securities (“TBAs”) as part of its investment strategy. TBAs represent commitments to purchase a future issuance of agency mortgage backed securities. For the period between purchase of a TBA and issuance of the underlying security, the Company’s position is accounted for as a derivative. The Company purchases TBAs in both long and short positions to enhance investment performance and as part of its overall investment strategy.

The Company did not hold any derivatives which were designated as hedging instruments at June 30, 2015 or December 31, 2014. The following table summarizes information on the fair values and notional values of the Company’s derivative instruments.  

	Estimated Fair Value
	Asset Derivatives		Liability Derivatives			Net Derivatives			Notional Value (1)
June 30, 2015
Futures contracts (2)	$	192	$	(1,064	)	$	(872	)	$	1,683,928
Foreign currency forward contracts (2)	14,452		(7,403		)	7,049			1,180,054
TBAs (3)	203,522		(158,718		)	44,804			344,758
Other (2)	5,498		(3,264		)	2,234			1,624,187
Total	$	223,664	$	(170,449	)	$	53,215
December 31, 2014
Futures contracts (2)	$	2,156	$	(1,907	)	$	249		$	2,549,027
Foreign currency forward contracts (2)	10,511		(1,145		)	9,366			397,106
TBAs (3)	10,592		—			10,592			10,056
Other (2)	3,209		(2,345		)	864			735,684
Total	$	26,468	$	(5,397	)	$	21,071

_________________________________________________

(1) Represents the absolute notional value of all outstanding contracts, consisting of long and short positions.

(2) The fair value of asset derivatives are included in ‘other assets’ and the fair value of liability derivatives are included in ‘other liabilities.’

(3) The fair value of TBAs are included in ‘fixed maturities available for sale, at fair value.’

The Company’s derivative instruments can be traded under master netting agreements, which establish terms that apply to all derivative transactions with a counterparty. In the event of a bankruptcy or other stipulated event of default, such agreements provide that the non-defaulting party may elect to terminate all outstanding derivative transactions, in which case all individual derivative positions (loss or gain) with a counterparty are closed out and netted and replaced with a single amount, usually referred to as the termination amount, which is expressed in a single currency. The resulting single net amount, where positive, is payable to the party “in-the-money” regardless of whether or not it is the defaulting party, unless the parties have agreed that only the non-defaulting party is entitled to receive a termination payment where the net amount is positive and is in its favor. Effectively, contractual close-out netting reduces derivatives credit exposure from gross to net exposure. At June 30, 2015, asset derivatives and liability derivatives of $204.3 million and $159.0 million, respectively, were subject to a master netting agreement, compared to $25.3 million and $5.4 million, respectively, at December 31, 2014. The remaining derivatives included in the table above were not subject to a master netting agreement.

All realized and unrealized contract gains and losses on the Company’s derivative instruments are reflected in net realized gains (losses) in the consolidated statements of income, as summarized in the following table:

	Three Months Ended						Six Months Ended
Derivatives not designated as	June 30,						June 30,
hedging instruments:	2015			2014			2015			2014
Net realized gains (losses):
Futures contracts	$	(31,446	)	$	15,185		$	(12,120	)	$	5,323
Foreign currency forward contracts	(8,724		)	(1,811		)	8,095			(4,068		)
TBAs	(182		)	(270		)	304			(307		)
Other	(1,144		)	(702		)	(1,099		)	(1,314		)
Total	$	(41,496	)	$	12,402		$	(4,820	)	$	(366	)

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Income Taxes (Details) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Income Tax Disclosure [Abstract]
Effective tax rate on income before income taxes (percentage)	4.30%	2.70%
Net deferred tax assets	$ 143.9		$ 131.0
Income taxes paid	$ 26.0	$ 8.3

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Investment Information

6 Months Ended

Jun. 30, 2015

Disclosure Investment Information [Abstract]

Investment Information

Investment Information

At June 30, 2015, total investable assets of $15.85 billion included $14.51 billion managed by the Company and $1.34 billion attributable to Watford Re.

Available For Sale Investments

The following table summarizes the fair value and cost or amortized cost of the Company’s investments classified as available for sale:

	Estimated Fair Value		Gross Unrealized Gains		Gross Unrealized Losses			Cost or Amortized Cost		OTTI Unrealized Losses (2)
June 30, 2015
Fixed maturities (1):
Corporate bonds	$	2,833,849	$	26,401	$	(51,717	)	$	2,859,165	$	(681	)
Mortgage backed securities	837,680		12,315		(4,231		)	829,596		(3,564		)
Municipal bonds	1,760,384		19,601		(9,004		)	1,749,787		—
Commercial mortgage backed securities	832,159		6,760		(4,922		)	830,321		—
U.S. government and government agencies	1,899,868		8,463		(3,720		)	1,895,125		—
Non-U.S. government securities	786,276		10,343		(32,720		)	808,653		—
Asset backed securities	1,351,356		7,324		(3,364		)	1,347,396		(22		)
Total	10,301,572		91,207		(109,678		)	10,320,043		(4,267		)
Equity securities	701,623		105,174		(18,606		)	615,055		—
Other investments	377,677		46,166		(1,927		)	333,438		—
Short-term investments	875,727		55		(2,767		)	878,439		—
Total	$	12,256,599	$	242,602	$	(132,978	)	$	12,146,975	$	(4,267	)
December 31, 2014
Fixed maturities (1):
Corporate bonds	$	3,108,513	$	37,928	$	(38,974	)	$	3,109,559	$	(317	)
Mortgage backed securities	943,343		18,843		(3,842		)	928,342		(3,307		)
Municipal bonds	1,494,122		31,227		(1,044		)	1,463,939		—
Commercial mortgage backed securities	1,114,528		14,594		(3,822		)	1,103,756		—
U.S. government and government agencies	1,447,972		8,345		(1,760		)	1,441,387		—
Non-U.S. government securities	1,015,153		21,311		(37,203		)	1,031,045		—
Asset backed securities	1,677,941		8,425		(6,089		)	1,675,605		(22		)
Total	10,801,572		140,673		(92,734		)	10,753,633		(3,646		)
Equity securities	658,182		109,012		(13,364		)	562,534		—
Other investments	296,224		31,839		(362		)	264,747		—
Short-term investments	797,226		738		(5,270		)	801,758		—
Total	$	12,553,204	$	282,262	$	(111,730	)	$	12,382,672	$	(3,646	)

_________________________________________________

(1) In securities lending transactions, the Company receives collateral in excess of the fair value of the securities pledged. For purposes of this table, the Company has excluded the collateral received under securities lending, at fair value and included the securities pledged under securities lending, at fair value. See “—Securities Lending Agreements.”

(2) Represents the total other-than-temporary impairments (“OTTI”) recognized in accumulated other comprehensive income (“AOCI”). It does not include the change in fair value subsequent to the impairment measurement date. At June 30, 2015, the net unrealized gain related to securities for which a non-credit OTTI was recognized in AOCI was $0.3 million, compared to a net unrealized gain of $0.9 million at December 31, 2014.

The following table summarizes, for all available for sale securities in an unrealized loss position, the fair value and gross unrealized loss by length of time the security has been in a continual unrealized loss position:

	Less than 12 Months					12 Months or More					Total
	Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses
June 30, 2015
Fixed maturities (1):
Corporate bonds	$	1,659,276	$	(40,616	)	$	92,244	$	(11,101	)	$	1,751,520	$	(51,717	)
Mortgage backed securities	437,043		(3,574		)	45,082		(657		)	482,125		(4,231		)
Municipal bonds	784,691		(8,562		)	3,530		(442		)	788,221		(9,004		)
Commercial mortgage backed securities	374,338		(4,912		)	2,893		(10		)	377,231		(4,922		)
U.S. government and government agencies	426,224		(3,720		)	—		—			426,224		(3,720		)
Non-U.S. government securities	431,360		(16,841		)	77,314		(15,879		)	508,674		(32,720		)
Asset backed securities	281,650		(2,161		)	130,987		(1,203		)	412,637		(3,364		)
Total	4,394,582		(80,386		)	352,050		(29,292		)	4,746,632		(109,678		)
Equity securities	286,325		(18,606		)	—		—			286,325		(18,606		)
Other investments	89,863		(1,927		)	—		—			89,863		(1,927		)
Short-term investments	60,287		(2,767		)	—		—			60,287		(2,767		)
Total	$	4,831,057	$	(103,686	)	$	352,050	$	(29,292	)	$	5,183,107	$	(132,978	)
December 31, 2014
Fixed maturities (1):
Corporate bonds	$	1,309,637	$	(32,903	)	$	148,963	$	(6,071	)	$	1,458,600	$	(38,974	)
Mortgage backed securities	293,624		(1,476		)	59,107		(2,366		)	352,731		(3,842		)
Municipal bonds	210,614		(588		)	13,643		(456		)	224,257		(1,044		)
Commercial mortgage backed securities	232,147		(770		)	125,894		(3,052		)	358,041		(3,822		)
U.S. government and government agencies	618,381		(1,626		)	3,438		(134		)	621,819		(1,760		)
Non-U.S. government securities	510,766		(31,172		)	46,910		(6,031		)	557,676		(37,203		)
Asset backed securities	612,950		(2,486		)	243,452		(3,603		)	856,402		(6,089		)
Total	3,788,119		(71,021		)	641,407		(21,713		)	4,429,526		(92,734		)
Equity securities	181,002		(13,364		)	—		—			181,002		(13,364		)
Other investments	59,638		(362		)	—		—			59,638		(362		)
Short-term investments	79,271		(5,270		)	—		—			79,271		(5,270		)
Total	$	4,108,030	$	(90,017	)	$	641,407	$	(21,713	)	$	4,749,437	$	(111,730	)

_________________________________________________

(1) In securities lending transactions, the Company receives collateral in excess of the fair value of the securities pledged. For purposes of this table, the Company has excluded the collateral received under securities lending, at fair value and included the securities pledged under securities lending, at fair value. See “—Securities Lending Agreements.”

At June 30, 2015, on a lot level basis, approximately 2,620 security lots out of a total of approximately 5,580 security lots were in an unrealized loss position and the largest single unrealized loss from a single lot in the Company’s fixed maturity portfolio was $2.9 million. At December 31, 2014, on a lot level basis, approximately 1,900 security lots out of a total of approximately 4,790 security lots were in an unrealized loss position and the largest single unrealized loss from a single lot in the Company’s fixed maturity portfolio was $2.9 million.

The contractual maturities of the Company’s fixed maturities are shown in the following table. Expected maturities, which are management’s best estimates, will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	June 30, 2015				December 31, 2014
Maturity	Estimated Fair Value		Amortized Cost		Estimated Fair Value		Amortized Cost
Due in one year or less	$	369,356	$	374,710	$	235,930	$	233,794
Due after one year through five years	4,101,484		4,106,002		4,074,562		4,077,408
Due after five years through 10 years	2,468,013		2,487,840		2,475,726		2,461,356
Due after 10 years	341,524		344,178		279,542		273,372
	7,280,377		7,312,730		7,065,760		7,045,930
Mortgage backed securities	837,680		829,596		943,343		928,342
Commercial mortgage backed securities	832,159		830,321		1,114,528		1,103,756
Asset backed securities	1,351,356		1,347,396		1,677,941		1,675,605
Total (1)	$	10,301,572	$	10,320,043	$	10,801,572	$	10,753,633

_________________________________________________

(1) In securities lending transactions, the Company receives collateral in excess of the fair value of the securities pledged. For purposes of this table, the Company has excluded the collateral received under securities lending, at fair value and included the securities pledged under securities lending, at fair value. See “—Securities Lending Agreements.”

Securities Lending Agreements

From time to time, the Company enters into securities lending agreements with financial institutions to enhance investment income. The Company loans certain of its securities to third parties, primarily major brokerage firms, for short periods of time through a lending agent. The Company maintains legal control over the securities it lends, retains the earnings and cash flows associated with the loaned securities and receives a fee from the borrower for the temporary use of the securities. An indemnification agreement with the lending agent protects the Company in the event a borrower becomes insolvent or fails to return any of the securities on loan to the Company.

The Company receives collateral in the form of cash or securities. Cash collateral primarily consists of short-term investments. At June 30, 2015, the fair value of the cash collateral received on securities lending was $62.6 million, which included $5.7 million that was reinvested in sub-prime mortgage backed securities, and the fair value of security collateral received was $315.1 million. At December 31, 2014, the fair value of the cash collateral received on securities lending was $44.3 million, which included $5.8 million that was reinvested in sub-prime mortgage backed securities, and the fair value of security collateral received was nil.

The Company’s securities lending transactions were accounted for as secured borrowings with significant investment categories as follows:

	June 30, 2015
	Remaining Contractual Maturity of the Agreements
Securities Lending Transactions	Overnight and Continuous		Less than 30 Days		30-90 Days		90 Days or More		Total
U.S. government and government agencies	$	335,233	$	—	$	—	$	—	$	335,233
Corporate bonds	44,139		—		—		—		44,139
Equity securities	4,593		—		—		—		4,593
Total	$	383,965	$	—	$	—	$	—	$	383,965
Gross amount of recognized liabilities for securities lending in offsetting disclosure in Note 8									$	—
Amounts related to securities lending not included in offsetting disclosure in Note 8									$	383,965

Other Investments

The following table summarizes the Company’s other investments, including available for sale and fair value option components:

	June 30, 2015		December 31, 2014
Available for sale:
Asian and emerging markets	$	287,666	$	236,586
Investment grade fixed income	58,829		59,638
Credit related funds	13,773		—
Other	17,409		—
Total available for sale	377,677		296,224
Fair value option:
Term loan investments (par value: $1,077,945 and $1,094,337)	1,061,696		1,073,649
Mezzanine debt funds	115,019		121,341
Credit related funds	138,070		114,436
Investment grade fixed income	60,383		69,108
Asian and emerging markets	26,494		25,800
Other (1)	189,709		137,094
Total fair value option	1,591,371		1,541,428
Total	$	1,969,048	$	1,837,652

_________________________________________________

(1) Includes fund investments with strategies in mortgage servicing rights, transportation and infrastructure assets and other.

Certain of the Company’s other investments are in investment funds for which the Company has the option to redeem at agreed upon values as described in each investment fund’s subscription agreement. Depending on the terms of the various subscription agreements, investments in investment funds may be redeemed daily, monthly, quarterly or on other terms. Two common redemption restrictions which may impact the Company’s ability to redeem these investment funds are gates and lockups. A gate is a suspension of redemptions which may be implemented by the general partner or investment manager of the fund in order to defer, in whole or in part, the redemption request in the event the aggregate amount of redemption requests exceeds a predetermined percentage of the investment fund’s net assets which may otherwise hinder the general partner or investment manager’s ability to liquidate holdings in an orderly fashion in order to generate the cash necessary to fund extraordinarily large redemption payouts. A lockup period is the initial amount of time an investor is contractually required to hold the security before having the ability to redeem. If the investment funds are eligible to be redeemed, the time to redeem such fund can take weeks or months following the notification.

Fair Value Option

The following table summarizes the Company’s assets and liabilities which are accounted for using the fair value option:

	June 30, 2015		December 31, 2014
Fixed maturities	$	854,170	$	632,024
Other investments	1,591,371		1,541,428
Short-term investments	167,698		251,601
Equity securities	248		—
Investments accounted for using the fair value option	$	2,613,487	$	2,425,053

Net Investment Income

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

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015			2014
Fixed maturities	$	71,275		$	65,869		$	139,871		$	128,318
Term loan investments	18,033			6,908			32,777			12,577
Equity securities (dividends)	2,578			3,271			5,257			6,192
Short-term investments	225			107			421			512
Other (1)	10,489			9,100			23,236			13,819
Gross investment income	102,600			85,255			201,562			161,418
Investment expenses	(15,637		)	(12,265		)	(35,605		)	(21,434		)
Net investment income	$	86,963		$	72,990		$	165,957		$	139,984

_________________________________________________

(1) Includes income distributions from investment funds and other items.

Net Realized Gains (Losses)

Net realized gains (losses) were as follows, excluding other-than-temporary impairment provisions:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015			2014
Available for sale securities:
Gross gains on investment sales	$	82,233		$	56,763		$	179,824		$	122,814
Gross losses on investment sales	(58,974		)	(33,028		)	(114,134		)	(73,041		)
Change in fair value of assets and liabilities accounted for using the fair value option:
Fixed maturities	(5,191		)	10,984			(8,493		)	9,341
Other investments	785			17,985			7,072			28,761
Equity securities	(69		)	—			(71		)	—
Short-term investments	(4,375		)	—			1,471			—
Derivative instruments (1)	(41,496		)	12,402			(4,820		)	(366		)
Other (2)	(8,638		)	(10,962		)	(13,226		)	(13,668		)
Net realized gains (losses)	$	(35,725	)	$	54,144		$	47,623		$	73,841

_________________________________________________

(1) See Note 8 for information on the Company’s derivative instruments.

(2) Includes the re-measurement of contingent consideration liability amounts.

Other-Than-Temporary Impairments

The Company performs quarterly reviews of its available for sale investments in order to determine whether declines in fair value below the amortized cost basis were considered other-than-temporary in accordance with applicable guidance. The following table details the net impairment losses recognized in earnings by asset class:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015			2014
Fixed maturities:
Mortgage backed securities	$	(326	)	$	—		$	(1,398	)	$	—
Corporate bonds	(10		)	(664		)	(1,986		)	(664		)
Asset backed securities	—			(5		)	—			(11		)
Total	(336		)	(669		)	(3,384		)	(675		)
Short-term investments	—			—			(2,341		)	—
Equity securities	(124		)	(278		)	(253		)	(278		)
Other investments	(653		)	(13,802		)	(934		)	(16,767		)
Net impairment losses recognized in earnings	$	(1,113	)	$	(14,749	)	$	(6,912	)	$	(17,720	)

A description of the methodology and significant inputs used to measure the amount of net impairment losses recognized in earnings 2015 second quarter is as follows:

• Other investments — the Company utilized information received from fund managers and positive and negative evidence, including the business prospects, recent events, industry and market data and other factors. Net impairment losses for the 2015 second quarter related to a reduction in the carrying value of one fund investment;

• Mortgage backed securities — the Company utilized underlying data provided by asset managers, cash flow projections and additional information from credit agencies in order to determine an expected recovery value for each security. The analysis includes expected cash flow projections under base case and stress case scenarios which modify the expected default expectations and loss severities and slow down prepayment assumptions. The significant inputs in the models include the expected default rates, delinquency rates and foreclosure costs. Net impairment losses for the 2015 second quarter primarily resulted from small adjustments in a number of holdings. The amortized cost basis of the mortgage backed securities were adjusted down, if required, to the expected recovery value calculated in the OTTI review process;

• Equity securities – the Company utilized information received from asset managers on common stocks, including the business prospects, recent events, industry and market data and other factors. For certain equities which were in an unrealized loss position and where the Company determined that it did not have the intent or ability to hold such securities for a reasonable period of time by which the fair value of the securities would increase and the Company would recover its cost, the cost basis of such securities was adjusted down accordingly.

The Company believes that the $4.3 million of OTTI included in accumulated other comprehensive income at June 30, 2015 on the securities which were considered by the Company to be impaired was due to market and sector-related factors (i.e., not credit losses). At June 30, 2015, the Company did not intend to sell these securities, or any other securities which were in an unrealized loss position, and determined that it is more likely than not that the Company will not be required to sell such securities before recovery of their cost basis.

The following table provides a roll forward of the amount related to credit losses recognized in earnings for which a portion of an OTTI was recognized in accumulated other comprehensive income:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015			2014
Balance at start of period	$	24,344		$	47,256		$	20,196		$	60,062
Credit loss impairments recognized on securities not previously impaired	281			—			4,770			—
Credit loss impairments recognized on securities previously impaired	55			5			134			11
Reductions for increases in cash flows expected to be collected that are recognized over the remaining life of the security	—			—			—			—
Reductions for securities sold during the period	(3,774		)	(25,820		)	(4,194		)	(38,632		)
Balance at end of period	$	20,906		$	21,441		$	20,906		$	21,441

Restricted Assets

The Company is required to maintain assets on deposit, which primarily consist of fixed maturities, with various regulatory authorities to support its insurance and reinsurance operations. The Company’s insurance and reinsurance subsidiaries maintain assets in trust accounts as collateral for insurance and reinsurance transactions with affiliated companies and also have investments in segregated portfolios primarily to provide collateral or guarantees for letters of credit to third parties. See Note 9 for further details. The following table details the value of the Company’s restricted assets:

	June 30, 2015		December 31, 2014
Assets used for collateral or guarantees:
Affiliated transactions	$	3,651,244	$	4,138,527
Third party agreements	1,040,156		970,120
Deposits with U.S. regulatory authorities	406,777		337,981
Trust funds	60,864		72,461
Total restricted assets	$	5,159,041	$	5,519,089

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Fair Value

6 Months Ended

Jun. 30, 2015

Fair Value Disclosures [Abstract]

Fair Value

Fair Value

Accounting guidance regarding fair value measurements addresses how companies should measure fair value when they are required to use a fair value measure for recognition or disclosure purposes under GAAP and provides a common definition of fair value to be used throughout GAAP. It defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly fashion between market participants at the measurement date. In addition, it establishes a three-level valuation hierarchy for the disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The level in the hierarchy within which a given fair value measurement falls is determined based on the lowest level input that is significant to the measurement (Level 1 being the highest priority and Level 3 being the lowest priority).

The levels in the hierarchy are defined as follows:

Level 1: Inputs to the valuation methodology are observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets

Level 2: Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument

Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement

Following is a description of the valuation methodologies used for securities measured at fair value, as well as the general classification of such securities pursuant to the valuation hierarchy. The Company reviews its securities measured at fair value and discusses the proper classification of such investments with investment advisers and others.

The Company determines the existence of an active market based on its judgment as to whether transactions for the financial instrument occur in such market with sufficient frequency and volume to provide reliable pricing information. The independent pricing sources obtain market quotations and actual transaction prices for securities that have quoted prices in active markets. The Company uses quoted values and other data provided by nationally recognized independent pricing sources as inputs into its process for determining fair values of its fixed maturity investments. To validate the techniques or models used by pricing sources, the Company's review process includes, but is not limited to: (i) quantitative analysis (e.g., comparing the quarterly return for each managed portfolio to its target benchmark, with significant differences identified and investigated); (ii) a review of the average number of prices obtained in the pricing process and the range of resulting fair values; (iii) initial and ongoing evaluation of methodologies used by outside parties to calculate fair value; (iv) a comparison of the fair value estimates to the Company’s knowledge of the current market; (v) a comparison of the pricing services' fair values to other pricing services' fair values for the same investments; and (vi) periodic back-testing, which includes randomly selecting purchased or sold securities and comparing the executed prices to the fair value estimates from the pricing service. A price source hierarchy was maintained in order to determine which price source would be used (i.e., a price obtained from a pricing service with more seniority in the hierarchy will be used over a less senior one in all cases). The hierarchy prioritizes pricing services based on availability and reliability and assigns the highest priority to index providers. Based on the above review, the Company will challenge any prices for a security or portfolio which are considered not to be representative of fair value. The Company did not adjust any of the prices obtained from the independent pricing sources at June 30, 2015.

In certain circumstances, when fair values are unavailable from these independent pricing sources, quotes are obtained directly from broker-dealers who are active in the corresponding markets. Such quotes are subject to the validation procedures noted above. Of the $14.97 billion of financial assets and liabilities measured at fair value at June 30, 2015, approximately $301.7 million, or 2.0%, were priced using non-binding broker-dealer quotes. Of the $15.06 billion of financial assets and liabilities measured at fair value at December 31, 2014, approximately $260.8 million, or 1.7%, were priced using non-binding broker-dealer quotes.

Fixed maturities. The Company uses the market approach valuation technique to estimate the fair value of its fixed maturity securities, when possible. The market approach includes obtaining prices from independent pricing services, such as index providers and pricing vendors, as well as to a lesser extent quotes from broker-dealers. The independent pricing sources obtain market quotations and actual transaction prices for securities that have quoted prices in active markets. Each source has its own proprietary method for determining the fair value of securities that are not actively traded. In general, these methods involve the use of “matrix pricing” in which the independent pricing source uses observable market inputs including, but not limited to, investment yields, credit risks and spreads, benchmarking of like securities, broker-dealer quotes, reported trades and sector groupings to determine a reasonable fair value.

The following describes the significant inputs generally used to determine the fair value of the Company’s fixed maturity securities by asset class:

• U.S. government and government agencies — valuations provided by independent pricing services, with all prices provided through index providers and pricing vendors. The Company determined that all U.S. Treasuries would be classified as Level 1 securities due to observed levels of trading activity, the high number of strongly correlated pricing quotes received on U.S. Treasuries and other factors. The fair values of U.S. government agency securities are generally determined using the spread above the risk-free yield curve. As the yields for the risk-free yield curve and the spreads for these securities are observable market inputs, the fair values of U.S. government agency securities are classified within Level 2.

• Corporate bonds — valuations provided by independent pricing services, substantially all through index providers and pricing vendors with a small amount through broker-dealers. The fair values of these securities are generally determined using the spread above the risk-free yield curve. These spreads are generally obtained from the new issue market, secondary trading and from broker-dealers who trade in the relevant security market. As the significant inputs used in the pricing process for corporate bonds are observable market inputs, the fair value of these securities are classified within Level 2.

• Mortgage-backed securities — valuations provided by independent pricing services, substantially all through pricing vendors and index providers with a small amount through broker-dealers. The fair values of these securities are generally determined through the use of pricing models (including Option Adjusted Spread) which use spreads to determine the expected average life of the securities. These spreads are generally obtained from the new issue market, secondary trading and from broker-dealers who trade in the relevant security market. The pricing services also review prepayment speeds and other indicators, when applicable. As the significant inputs used in the pricing process for mortgage-backed securities are observable market inputs, the fair value of these securities are classified within Level 2.

• Municipal bonds — valuations provided by independent pricing services, with all prices provided through index providers and pricing vendors. The fair values of these securities are generally determined using spreads obtained from broker-dealers who trade in the relevant security market, trade prices and the new issue market. As the significant inputs used in the pricing process for municipal bonds are observable market inputs, the fair value of these securities are classified within Level 2.

• Commercial mortgage-backed securities — valuations provided by independent pricing services, substantially all through index providers and pricing vendors with a small amount through broker-dealers. The fair values of these securities are generally determined through the use of pricing models which use spreads to determine the appropriate average life of the securities. These spreads are generally obtained from the new issue market, secondary trading and from broker-dealers who trade in the relevant security market. The pricing services also review prepayment speeds and other indicators, when applicable. As the significant inputs used in the pricing process for commercial mortgage-backed securities are observable market inputs, the fair value of these securities are classified within Level 2.

• Non-U.S. government securities — valuations provided by independent pricing services, with all prices provided through index providers and pricing vendors. The fair values of these securities are generally based on international indices or valuation models which include daily observed yield curves, cross-currency basis index spreads and country credit spreads. As the significant inputs used in the pricing process for non-U.S. government securities are observable market inputs, the fair value of these securities are classified within Level 2.

• Asset-backed securities — valuations provided by independent pricing services, substantially all through index providers and pricing vendors with a small amount through broker-dealers. The fair values of these securities generally determined through the use of pricing models (including Option Adjusted Spread) which use spreads to determine the appropriate average life of the securities. These spreads are generally obtained from the new issue market, secondary trading and from broker-dealers who trade in the relevant security market. The pricing services also review prepayment speeds and other indicators, when applicable. As the significant inputs used in the pricing process for asset-backed securities are observable market inputs, the fair value of these securities are classified within Level 2.

During the 2015 second quarter, the Company transferred $44.6 million of U.S. government agency securities from Level 1 to Level 2 based on a review of the pricing of such securities, as described above.

Equity securities. The Company determined that exchange-traded equity securities would be included in Level 1 as their fair values are based on quoted market prices in active markets. Other equity securities are included in Level 2 of the valuation hierarchy.

Other investments. The Company determined that exchange-traded investments in mutual funds would be included in Level 1 as their fair values are based on quoted market prices in active markets. Other investments also include term loan investments for which fair values are estimated by using quoted prices of term loan investments with similar characteristics, pricing models or matrix pricing. Such investments are generally classified within Level 2. The fair values for certain of the Company’s other investments are determined using net asset values as advised by external fund managers. The net asset value is based on the fund manager’s valuation of the underlying holdings in accordance with the fund’s governing documents. In accordance with applicable accounting guidance, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy.

During the 2015 second quarter, the Company transferred $99.7 million of other investments from Level 2 to Level 1 based on a review of the pricing of such securities, as described above.

Derivative instruments. The Company’s futures contracts, foreign currency forward contracts, interest rate swaps and other derivatives trade in the over-the-counter derivative market. The Company uses the market approach valuation technique to estimate the fair value for these derivatives based on significant observable market inputs from third party pricing vendors, non-binding broker-dealer quotes and/or recent trading activity. As the significant inputs used in the pricing process for these derivative instruments are observable market inputs, the fair value of these securities are classified within Level 2.

Short-term investments. The Company determined that certain of its short-term investments held in highly liquid money market-type funds would be included in Level 1 as their fair values are based on quoted market prices in active markets. The fair values of other short-term investments are generally determined using the spread above the risk-free yield curve and are classified within Level 2.

Contingent consideration liability. The contingent consideration liability (included in ‘other liabilities’ in the consolidated balance sheets) resulted from the acquisition of CMG Mortgage Insurance Company and its affiliated mortgage insurance companies and is remeasured at fair value at each balance sheet date. Changes in fair value are recognized in ‘net realized gains (losses).’ To determine the fair value of the contingent consideration liability, the Company estimates future payments using an income approach based on modeled inputs which include a weighted average cost of capital. The Company determined that the contingent consideration liability would be included within Level 3.

The following table presents the Company’s financial assets and liabilities measured at fair value by level at June 30, 2015:

				Estimated Fair Value Measurements Using:
	Estimated Fair Value			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets measured at fair value:
Available for sale securities:
Fixed maturities (1):
Corporate bonds	$	2,833,849		$	—	$	2,833,849		$	—
Mortgage backed securities	837,680			—		837,680			—
Municipal bonds	1,760,384			—		1,760,384			—
Commercial mortgage backed securities	832,159			—		832,159			—
U.S. government and government agencies	1,899,868			1,878,893		20,975			—
Non-U.S. government securities	786,276			—		786,276			—
Asset backed securities	1,351,356			—		1,293,856			57,500
Total	10,301,572			1,878,893		8,365,179			57,500
Equity securities	701,623			698,078		3,545			—
Short-term investments	875,727			870,738		4,989			—
Other investments	89,611			89,611		—			—
Other investments measured at net asset value (2)	288,066
Total other investments	377,677			89,611		—			—
Derivative instruments (3)	20,142			—		20,142			—
Fair value option:
Corporate bonds	682,569			—		682,569			—
Non-U.S. government bonds	89,168			—		89,168			—
Mortgage backed securities	58,565			—		58,565			—
Asset backed securities	23,868			—		23,868			—
Short-term investments	167,698			167,698		—			—
Equity securities	248			248		—			—
Other investments	1,158,567			96,871		1,061,696			—
Other investments measured at net asset value (2)	432,804
Total	2,613,487			264,817		1,915,866			—
Total assets measured at fair value	$	14,890,228		$	3,802,137	$	10,309,721		$	57,500
Liabilities measured at fair value:
Contingent consideration liability	$	(71,256	)	$	—	$	—		$	(71,256	)
Derivative instruments (3)	(11,731		)	—		(11,731		)	—
Total liabilities measured at fair value	$	(82,987	)	$	—	$	(11,731	)	$	(71,256	)

_________________________________________________

(1) In securities lending transactions, the Company receives collateral in excess of the fair value of the securities pledged. For purposes of this table, the Company has excluded the collateral received under securities lending, at fair value and included the securities pledged under securities lending, at fair value. See Note 6, “Investment Information—Securities Lending Agreements.”

(2) In accordance with applicable accounting guidance, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets.

(3) See Note 8, “Derivative Instruments.”

The following table presents the Company’s financial assets and liabilities measured at fair value by level at December 31, 2014:

				Estimated Fair Value Measurements Using:
	Estimated Fair Value			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets measured at fair value:
Available for sale securities:
Fixed maturities (1):
Corporate bonds	$	3,108,513		$	—	$	3,108,513		$	—
Mortgage backed securities	943,343			—		943,343			—
Municipal bonds	1,494,122			—		1,494,122			—
Commercial mortgage backed securities	1,114,528			—		1,114,528			—
U.S. government and government agencies	1,447,972			1,447,972		—			—
Non-U.S. government securities	1,015,153			—		1,015,153			—
Asset backed securities	1,677,941			—		1,620,441			57,500
Total	10,801,572			1,447,972		9,296,100			57,500
Equity securities	658,182			658,182		—			—
Short-term investments	797,226			759,621		37,605			—
Other investments	97,372			—		97,372			—
Other investments measured at net asset value (2)	198,852
Total other investments	296,224			—		97,372			—
Derivative instruments (3)	15,876			—		15,876			—
Fair value option:
Corporate bonds	497,101			—		497,101			—
Non-U.S. government bonds	88,411			—		88,411			—
Mortgage backed securities	22,190			—		22,190			—
Asset backed securities	24,322			—		24,322			—
Short-term investments	251,601			250,580		1,021			—
Equity securities	—			—		—			—
Other investments	1,140,266			—		1,140,266			—
Other investments measured at net asset value (2)	401,162
Total	2,425,053			250,580		1,773,311			—
Total assets measured at fair value	$	14,994,133		$	3,116,355	$	11,220,264		$	57,500
Liabilities measured at fair value:
Contingent consideration liability	$	(61,845	)	$	—	$	—		$	(61,845	)
Derivative instruments (3)	(5,397		)	—		(5,397		)	—
Total liabilities measured at fair value	$	(67,242	)	$	—	$	(5,397	)	$	(61,845	)

_________________________________________________

(1) In securities lending transactions, the Company receives collateral in excess of the fair value of the securities pledged. For purposes of this table, the Company has excluded the collateral received under securities lending, at fair value and included the securities pledged under securities lending, at fair value. See Note 6, “Investment Information—Securities Lending Agreements.”

(2) In accordance with applicable accounting guidance, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets.

(3) See Note 8, “Derivative Instruments.”

The following table presents a reconciliation of the beginning and ending balances for all financial assets and liabilities measured at fair value on a recurring basis using Level 3 inputs:

	Assets										Liabilities
s	Available For Sale						Fair Value Option
	Asset Backed Securities		Corporate Bonds		Other Investments		Other Investments		Total		Contingent Consideration Liability
Three Months Ended June 30, 2015
Balance at beginning of period	$	57,500	$	—	$	—	$	—	$	57,500	$	(66,461	)
Total gains or (losses) (realized/unrealized)
Included in earnings (1)	—		—		—		—		—		(4,795		)
Included in other comprehensive income	—		—		—		—		—		—
Purchases, issuances, sales and settlements
Purchases	—		—		—		—		—		—
Issuances	—		—		—		—		—		—
Sales	—		—		—		—		—		—
Settlements	—		—		—		—		—		—
Transfers in and/or out of Level 3	—		—		—		—		—		—
Balance at end of period	$	57,500	$	—	$	—	$	—	$	57,500	$	(71,256	)
Three Months Ended June 30, 2014
Balance at beginning of period	$	—	$	—	$	—	$	—	$	—	$	(43,156	)
Total gains or (losses) (realized/unrealized)
Included in earnings (1)	—		—		—		—		—		(9,943		)
Included in other comprehensive income	—		—		—		—		—		—
Purchases, issuances, sales and settlements
Purchases	—		—		—		—		—		—
Issuances	—		—		—		—		—		—
Sales	—		—		—		—		—		—
Settlements	—		—		—		—		—		—
Transfers in and/or out of Level 3	—		—		—		—		—		—
Balance at end of period	$	—	$	—	$	—	$	—	$	—	$	(53,099	)

Six Months Ended June 30, 2015
Balance at beginning of period	$	57,500	$	—		$	—		$	—		$	57,500		$	(61,845	)
Total gains or (losses) (realized/unrealized)
Included in earnings (1)	—		—			—			—			—			(8,343		)
Included in other comprehensive income	—		—			—			—			—			—
Purchases, issuances, sales and settlements
Purchases	—		—			—			—			—			—
Issuances	—		—			—			—			—			(1,068		)
Sales	—		—			—			—			—			—
Settlements	—		—			—			—			—			—
Transfers in and/or out of Level 3	—		—			—			—			—			—
Balance at end of period	$	57,500	$	—		$	—		$	—		$	57,500		$	(71,256	)
Six Months Ended June 30, 2014
Balance at beginning of period	$	—	$	2,045		$	170,420		$	377,525		$	549,990		$	—
Total gains or (losses) (realized/unrealized)
Included in earnings (1)	—		—			—			—			—			(11,337		)
Included in other comprehensive income	—		—			—			—			—			—
Purchases, issuances, sales and settlements
Purchases	—		—			—			—			—			—
Issuances	—		—			—			—			—			(41,762		)
Sales	—		(2,045		)	—			—			(2,045		)	—
Settlements	—		—			—			—			—			—
Transfers in and/or out of Level 3 (2)	—		—			(170,420		)	(377,525		)	(547,945		)	—
Balance at end of period	$	—	$	—		$	—		$	—		$	—		$	(53,099	)

_________________________________________________

(1) Gains or losses on fixed maturities available for sale were included in net realized gains (losses) while gains or losses on other investments were included in net realized gains (losses) or net investment income. Gains or losses on the contingent consideration liability were included in net realized gains (losses).

(2) In accordance with applicable accounting guidance, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The transfers out of Level 3 presented in this table are intended to permit reconciliation to information previously presented.

Financial Instruments Disclosed, But Not Carried, At Fair Value

The Company uses various financial instruments in the normal course of its business. The carrying values of cash, accrued investment income, receivable for securities sold, certain other assets, payable for securities purchased and certain other liabilities approximated their fair values at June 30, 2015, due to their respective short maturities. As these financial instruments are not actively traded, their respective fair values are classified within Level 2.

At June 30, 2015, the senior notes of ACGL were carried at their cost, net of debt issuance costs, of $296.8 million and had a fair value of $382.5 million while the senior notes of Arch-U.S. were carried at their cost, net of debt issuance costs, of $494.4 million and had a fair value of $514.2 million. The fair values of the senior notes were obtained from a third party pricing service and are based on observable market inputs. As such, the fair value of the senior notes is classified within Level 2.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2015

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Letter of Credit and Revolving Credit Facilities

As of June 30, 2015, the Company had a $300 million unsecured revolving loan and letter of credit facility and a $500 million secured letter of credit facility (the “Credit Agreement”). The Credit Agreement expires on June 30, 2019. In addition, the Company had access to secured letter of credit facilities of approximately $229.4 million as of June 30, 2015, which are available on a limited basis and for limited purposes (together with the secured portion of the Credit Agreement and these letter of credit facilities, the “LOC Facilities”). At June 30, 2015, the Company had $456.3 million in outstanding letters of credit under the LOC Facilities, which were secured by investments with a fair value of $521.9 million, and had $100.0 million of borrowings outstanding under the Credit Agreement. The Company was in compliance with all covenants contained in the LOC Facilities at June 30, 2015.

As of June 30, 2015, Watford Re reduced its $200 million letter of credit facility to $100 million and extended the term of the facility an additional year expiring on May 19, 2016. Watford Re also entered into an $800 million secured credit facility on June 2, 2015, that provides for borrowings and the issuance of letters of credit not to exceed $400 million. That credit facility expires on June 4, 2018. At June 30, 2015, Watford Re had $36.5 million in outstanding letters of credit. Watford Re was in compliance with all covenants contained in both of its credit facilities at June 30, 2015.

Investment Commitments

The Company’s investment commitments, which are primarily related to agreements entered into by the Company to invest in funds and separately managed accounts when called upon, were approximately $1.12 billion at June 30, 2015, compared to $968.9 million at December 31, 2014.

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Guarantor Financial Information - Condensed consolidating statement of income and comprehensive income (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Revenues
Net premiums earned	$ 943,438	$ 907,152	$ 1,853,702	$ 1,766,932
Net investment income	86,963	72,990	165,957	139,984
Net realized gains (losses)	(35,725)	54,144	47,623	73,841
Net impairment losses recognized in earnings	(1,113)	(14,749)	(6,912)	(17,720)
Other underwriting income	7,717	2,033	19,253	3,615
Equity in net income of investment funds accounted for using the equity method	16,167	9,240	22,056	12,493
Other income (loss)	2,205	4,850	317	2,746
Total revenues	1,019,652	1,035,660	2,101,996	1,981,891
Expenses
Losses and loss adjustment expenses	519,426	485,518	1,013,142	921,758
Acquisition expenses	175,425	158,158	338,501	318,500
Other operating expenses	168,608	156,350	326,490	302,149
Interest expense	4,011	14,334	16,747	28,738
Net foreign exchange losses (gains)	19,583	2,294	(46,918)	8,857
Total expenses	887,053	816,654	1,647,962	1,580,002
Income (loss) before income taxes	132,599	219,006	454,034	401,889
Income tax expense (benefit)	(6,780)	(7,289)	(19,458)	(11,027)
Income (loss) before equity in net income of subsidiaries	125,819	211,717	434,576	390,862
Equity in net income of subsidiaries	0	0	0	0
Net income	125,819	211,717	434,576	390,862
Amounts attributable to noncontrolling interests	(10,029)	(3,701)	(35,450)	(346)
Net income available to Arch	115,790	208,016	399,126	390,516
Preferred dividends	(5,485)	(5,485)	(10,969)	(10,969)
Net income (loss) available to Arch common shareholders	110,305	202,531	388,157	379,547
Comprehensive income (loss) available to Arch	24,208	318,180	336,711	549,435
Reportable Legal Entities | ACGL (Parent Guarantor)
Revenues
Net premiums earned	0	0	0	0
Net investment income	0	0	0	0
Net realized gains (losses)	0	0	0	0
Net impairment losses recognized in earnings	0	0	0	0
Other underwriting income	0	0	0	0
Equity in net income of investment funds accounted for using the equity method	0	0	0	0
Other income (loss)	0	0	0	0
Total revenues	0	0	0	0
Expenses
Losses and loss adjustment expenses	0	0	0	0
Acquisition expenses	0	0	0	0
Other operating expenses	16,900	15,250	25,532	25,557
Interest expense	5,862	5,854	11,718	11,707
Net foreign exchange losses (gains)	0	0	0	0
Total expenses	22,762	21,104	37,250	37,264
Income (loss) before income taxes	(22,762)	(21,104)	(37,250)	(37,264)
Income tax expense (benefit)	0	0	0	0
Income (loss) before equity in net income of subsidiaries	(22,762)	(21,104)	(37,250)	(37,264)
Equity in net income of subsidiaries	138,552	229,120	436,376	427,780
Net income	115,790	208,016	399,126	390,516
Amounts attributable to noncontrolling interests	0	0	0	0
Net income available to Arch	115,790	208,016	399,126	390,516
Preferred dividends	(5,485)	(5,485)	(10,969)	(10,969)
Net income (loss) available to Arch common shareholders	110,305	202,531	388,157	379,547
Comprehensive income (loss) available to Arch	24,208	318,180	336,711	549,435
Reportable Legal Entities | Arch-U.S. (Subsidiary Issuer)
Revenues
Net premiums earned	0	0	0	0
Net investment income	800	0	805	0
Net realized gains (losses)	1	0	1	0
Net impairment losses recognized in earnings	0	0	0	0
Other underwriting income	0	0	0	0
Equity in net income of investment funds accounted for using the equity method	0	0	0	0
Other income (loss)	0	0	0	0
Total revenues	801	0	806	0
Expenses
Losses and loss adjustment expenses	0	0	0	0
Acquisition expenses	0	0	0	0
Other operating expenses	1,012	494	2,271	1,471
Interest expense	6,769	6,448	13,135	12,962
Net foreign exchange losses (gains)	0	0	0	0
Total expenses	7,781	6,942	15,406	14,433
Income (loss) before income taxes	(6,980)	(6,942)	(14,600)	(14,433)
Income tax expense (benefit)	3,697	3,294	5,110	6,082
Income (loss) before equity in net income of subsidiaries	(3,283)	(3,648)	(9,490)	(8,351)
Equity in net income of subsidiaries	14,077	9,334	28,572	31,486
Net income	10,794	5,686	19,082	23,135
Amounts attributable to noncontrolling interests	0	0	0	0
Net income available to Arch	10,794	5,686	19,082	23,135
Preferred dividends	0	0	0	0
Net income (loss) available to Arch common shareholders	10,794	5,686	19,082	23,135
Comprehensive income (loss) available to Arch	(13,505)	23,186	(1,755)	40,406
Reportable Legal Entities | Other ACGL Subsidiaries
Revenues
Net premiums earned	943,438	907,152	1,853,702	1,766,932
Net investment income	87,154	80,380	173,164	157,381
Net realized gains (losses)	(35,726)	54,144	47,622	73,841
Net impairment losses recognized in earnings	(1,113)	(14,749)	(6,912)	(17,720)
Other underwriting income	7,717	2,033	19,253	3,615
Equity in net income of investment funds accounted for using the equity method	16,167	9,240	22,056	12,493
Other income (loss)	2,205	4,850	317	2,746
Total revenues	1,019,842	1,043,050	2,109,202	1,999,288
Expenses
Losses and loss adjustment expenses	519,426	485,518	1,013,142	921,758
Acquisition expenses	175,425	158,158	338,501	318,500
Other operating expenses	150,696	140,606	298,687	275,121
Interest expense	(7,793)	9,422	(258)	21,466
Net foreign exchange losses (gains)	6,942	1,054	(32,688)	6,795
Total expenses	844,696	794,758	1,617,384	1,543,640
Income (loss) before income taxes	175,146	248,292	491,818	455,648
Income tax expense (benefit)	(10,477)	(10,583)	(24,568)	(17,109)
Income (loss) before equity in net income of subsidiaries	164,669	237,709	467,250	438,539
Equity in net income of subsidiaries	0	0	0	0
Net income	164,669	237,709	467,250	438,539
Amounts attributable to noncontrolling interests	(10,193)	(3,701)	(35,614)	(346)
Net income available to Arch	154,476	234,008	431,636	438,193
Preferred dividends	0	0	0	0
Net income (loss) available to Arch common shareholders	154,476	234,008	431,636	438,193
Comprehensive income (loss) available to Arch	50,249	335,348	383,442	587,467
Consolidating Adjustments and Eliminations
Revenues
Net premiums earned	0	0	0	0
Net investment income	(991)	(7,390)	(8,012)	(17,397)
Net realized gains (losses)	0	0	0	0
Net impairment losses recognized in earnings	0	0	0	0
Other underwriting income	0	0	0	0
Equity in net income of investment funds accounted for using the equity method	0	0	0	0
Other income (loss)	0	0	0	0
Total revenues	(991)	(7,390)	(8,012)	(17,397)
Expenses
Losses and loss adjustment expenses	0	0	0	0
Acquisition expenses	0	0	0	0
Other operating expenses	0	0	0	0
Interest expense	(827)	(7,390)	(7,848)	(17,397)
Net foreign exchange losses (gains)	12,641	1,240	(14,230)	2,062
Total expenses	11,814	(6,150)	(22,078)	(15,335)
Income (loss) before income taxes	(12,805)	(1,240)	14,066	(2,062)
Income tax expense (benefit)	0	0	0	0
Income (loss) before equity in net income of subsidiaries	(12,805)	(1,240)	14,066	(2,062)
Equity in net income of subsidiaries	(152,629)	(238,454)	(464,948)	(459,266)
Net income	(165,434)	(239,694)	(450,882)	(461,328)
Amounts attributable to noncontrolling interests	164	0	164	0
Net income available to Arch	(165,270)	(239,694)	(450,718)	(461,328)
Preferred dividends	0	0	0	0
Net income (loss) available to Arch common shareholders	(165,270)	(239,694)	(450,718)	(461,328)
Comprehensive income (loss) available to Arch	$ (36,744)	$ (358,534)	$ (381,687)	$ (627,873)

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Transactions with Related Parties (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Related Party Transaction [Line Items]
Investment commitments	$ 1,120,000		$ 1,120,000		$ 968,900
Purchases of other investments			1,273,780	$ 1,022,987
Common director | The Carlyle Group
Related Party Transaction [Line Items]
Investment commitments	670,900		670,900
Unfunded commitments	374,100		$ 374,100
Purchases of other investments	25,600	$ 29,800
Aggregate distributions received	$ 19,800	$ 37,200

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Guarantor Financial Information - Condensed consolidating balance sheet (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014	Jun. 30, 2014	Dec. 31, 2013
Assets
Total investments	$ 15,346,940	$ 15,320,770
Cash	525,074	485,702	$ 926,443	$ 434,057
Investments in subsidiaries	0	0
Due from subsidiaries and affiliates	0	0
Premiums receivable	1,181,636	948,695
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses	1,831,227	1,812,845
Contractholder receivables	1,393,138	1,309,192
Prepaid reinsurance premiums	442,141	377,078
Deferred acquisition costs, net	448,647	414,525
Other assets	1,916,122	1,337,274
Total assets	23,084,925	22,006,081	22,567,447
Liabilities
Reserve for losses and loss adjustment expenses	9,082,281	9,036,448
Unearned premiums	2,442,923	2,231,578
Reinsurance balances payable	252,462	219,312
Contractholder payables	1,393,138	1,309,192
Deposit accounting liabilities	277,523	327,384
Senior notes	791,222	791,141
Revolving credit agreement borrowings	100,000	100,000
Due to subsidiaries and affiliates	0	0
Other liabilities	1,607,985	872,380
Total liabilities	15,947,534	14,887,435	15,326,382
Redeemable noncontrolling interests	204,996	219,512
Shareholders' Equity
Total shareholders’ equity available to Arch	6,137,515	6,130,053	6,229,399
Non-redeemable noncontrolling interests	794,880	769,081	792,340
Total shareholders’ equity	6,932,395	6,899,134	7,021,739
Total liabilities, noncontrolling interests and shareholders’ equity	23,084,925	22,006,081
Reportable Legal Entities | ACGL (Parent Guarantor)
Assets
Total investments	471	107
Cash	10,864	3,218	4,715	3,223
Investments in subsidiaries	6,530,452	6,536,644
Due from subsidiaries and affiliates	11	48
Premiums receivable	0	0
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses	0	0
Contractholder receivables	0	0
Prepaid reinsurance premiums	0	0
Deferred acquisition costs, net	0	0
Other assets	4,208	4,386
Total assets	6,546,006	6,544,403
Liabilities
Reserve for losses and loss adjustment expenses	0	0
Unearned premiums	0	0
Reinsurance balances payable	0	0
Contractholder payables	0	0
Deposit accounting liabilities	0	0
Senior notes	296,834	296,796
Revolving credit agreement borrowings	100,000	100,000
Due to subsidiaries and affiliates	402	417
Other liabilities	11,255	17,137
Total liabilities	408,491	414,350
Redeemable noncontrolling interests	0	0
Shareholders' Equity
Total shareholders’ equity available to Arch	6,137,515	6,130,053
Non-redeemable noncontrolling interests	0	0
Total shareholders’ equity	6,137,515	6,130,053
Total liabilities, noncontrolling interests and shareholders’ equity	6,546,006	6,544,403
Reportable Legal Entities | Arch-U.S. (Subsidiary Issuer)
Assets
Total investments	55,047	62,867
Cash	6,928	2,787	7,746	509
Investments in subsidiaries	1,688,419	1,685,185
Due from subsidiaries and affiliates	47,798	7,517
Premiums receivable	0	0
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses	0	0
Contractholder receivables	0	0
Prepaid reinsurance premiums	0	0
Deferred acquisition costs, net	0	0
Other assets	46,157	43,921
Total assets	1,844,349	1,802,277
Liabilities
Reserve for losses and loss adjustment expenses	0	0
Unearned premiums	0	0
Reinsurance balances payable	0	0
Contractholder payables	0	0
Deposit accounting liabilities	0	0
Senior notes	494,388	494,345
Revolving credit agreement borrowings	0	0
Due to subsidiaries and affiliates	35,000	7,505
Other liabilities	44,917	49,403
Total liabilities	574,305	551,253
Redeemable noncontrolling interests	0	0
Shareholders' Equity
Total shareholders’ equity available to Arch	1,270,044	1,251,024
Non-redeemable noncontrolling interests	0	0
Total shareholders’ equity	1,270,044	1,251,024
Total liabilities, noncontrolling interests and shareholders’ equity	1,844,349	1,802,277
Reportable Legal Entities | Other ACGL Subsidiaries
Assets
Total investments	15,306,122	15,257,796
Cash	507,282	479,697	913,982	430,325
Investments in subsidiaries	0	0
Due from subsidiaries and affiliates	417,231	370,429
Premiums receivable	1,620,756	1,331,511
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses	5,741,646	5,584,973
Contractholder receivables	1,393,138	1,309,192
Prepaid reinsurance premiums	1,595,550	1,373,008
Deferred acquisition costs, net	448,647	414,525
Other assets	2,274,796	1,705,546
Total assets	29,305,168	27,826,677
Liabilities
Reserve for losses and loss adjustment expenses	12,970,720	12,784,030
Unearned premiums	3,596,332	3,227,508
Reinsurance balances payable	678,216	589,289
Contractholder payables	1,393,138	1,309,192
Deposit accounting liabilities	495,121	587,050
Senior notes	0	0
Revolving credit agreement borrowings	0	0
Due to subsidiaries and affiliates	429,638	370,072
Other liabilities	1,778,600	1,000,138
Total liabilities	21,341,765	19,867,279
Redeemable noncontrolling interests	219,696	219,512
Shareholders' Equity
Total shareholders’ equity available to Arch	6,948,827	6,970,805
Non-redeemable noncontrolling interests	794,880	769,081
Total shareholders’ equity	7,743,707	7,739,886
Total liabilities, noncontrolling interests and shareholders’ equity	29,305,168	27,826,677
Consolidating Adjustments and Eliminations
Assets
Total investments	(14,700)	0
Cash	0	0	$ 0	$ 0
Investments in subsidiaries	(8,218,871)	(8,221,829)
Due from subsidiaries and affiliates	(465,040)	(377,994)
Premiums receivable	(439,120)	(382,816)
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses	(3,910,419)	(3,772,128)
Contractholder receivables	0	0
Prepaid reinsurance premiums	(1,153,409)	(995,930)
Deferred acquisition costs, net	0	0
Other assets	(409,039)	(416,579)
Total assets	(14,610,598)	(14,167,276)
Liabilities
Reserve for losses and loss adjustment expenses	(3,888,439)	(3,747,582)
Unearned premiums	(1,153,409)	(995,930)
Reinsurance balances payable	(425,754)	(369,977)
Contractholder payables	0	0
Deposit accounting liabilities	(217,598)	(259,666)
Senior notes	0	0
Revolving credit agreement borrowings	0	0
Due to subsidiaries and affiliates	(465,040)	(377,994)
Other liabilities	(226,787)	(194,298)
Total liabilities	(6,377,027)	(5,945,447)
Redeemable noncontrolling interests	(14,700)	0
Shareholders' Equity
Total shareholders’ equity available to Arch	(8,218,871)	(8,221,829)
Non-redeemable noncontrolling interests	0	0
Total shareholders’ equity	(8,218,871)	(8,221,829)
Total liabilities, noncontrolling interests and shareholders’ equity	$ (14,610,598)	$ (14,167,276)

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Variable Interest Entities and Noncontrolling Interests - Variable interest entity (Details) - USD ($) $ in Thousands	1 Months Ended	6 Months Ended
	Mar. 31, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Variable Interest Entity [Line Items]
Unearned premiums		$ 2,442,923		$ 2,231,578
Reserve for losses and loss adjustment expenses		9,082,281		$ 9,036,448
Net cash provided by operating activities		385,199	$ 453,063
Net cash provided by financing activities		(306,634)	988,877
Net cash provided by (used in) investing activities		(39,154)	$ (952,067)
Variable Interest Entity, Primary Beneficiary | Watford Holdings Ltd
Variable Interest Entity [Line Items]
Initial investment contribution amount	$ 100,000
Ownership percentage	11.00%
Variable Interest Entity, Primary Beneficiary | Watford Re
Variable Interest Entity [Line Items]
Unearned premiums		247,600
Reserve for losses and loss adjustment expenses		173,200
Net cash provided by operating activities		137,800
Net cash provided by financing activities		40,300
Net cash provided by (used in) investing activities		$ (134,900)

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Investment Information - Restricted assets (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Restricted Assets [Line Items]
Restricted assets	$ 5,159,041	$ 5,519,089
Collateral or guarantees - affiliated transactions
Restricted Assets [Line Items]
Restricted assets	3,651,244	4,138,527
Collateral or guarantees - third party agreements
Restricted Assets [Line Items]
Restricted assets	1,040,156	970,120
Deposits with US regulatory authorities
Restricted Assets [Line Items]
Restricted assets	406,777	337,981
Trust funds
Restricted Assets [Line Items]
Restricted assets	$ 60,864	$ 72,461

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Legal Proceedings

6 Months Ended

Jun. 30, 2015

Disclosure Legal Proceedings [Abstract]

Legal Proceedings

Legal Proceedings

The Company, in common with the insurance industry in general, is subject to litigation and arbitration in the normal course of its business. As of June 30, 2015, the Company was not a party to any litigation or arbitration which is expected by management to have a material adverse effect on the Company’s results of operations and financial condition and liquidity.

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Segment Information (Tables)

6 Months Ended

Jun. 30, 2015

Segment Reporting [Abstract]

Analysis of underwriting income by segment and reconciliation to net income available to common shareholders

The following tables summarize the Company’s underwriting income or loss by segment, together with a reconciliation of underwriting income or loss to net income available to common shareholders:

	Three Months Ended
	June 30, 2015
	Insurance			Reinsurance			Mortgage			Sub-Total			Other			Total
Gross premiums written (1)	$	744,810		$	342,101		$	68,572		$	1,155,253		$	127,954		$	1,199,209
Premiums ceded	(235,743		)	(89,446		)	(6,902		)	(331,861		)	(7,766		)	(255,629		)
Net premiums written	509,067			252,655			61,670			823,392			120,188			943,580
Change in unearned premiums	758			21,310			(9,211		)	12,857			(12,999		)	(142		)
Net premiums earned	509,825			273,965			52,459			836,249			107,189			943,438
Other underwriting income	521			2,658			3,686			6,865			852			7,717
Losses and loss adjustment expenses	(320,926		)	(111,183		)	(9,639		)	(441,748		)	(77,678		)	(519,426		)
Acquisition expenses, net	(76,723		)	(58,360		)	(10,200		)	(145,283		)	(30,142		)	(175,425		)
Other operating expenses	(89,054		)	(39,007		)	(19,679		)	(147,740		)	(3,450		)	(151,190		)
Underwriting income (loss)	$	23,643		$	68,073		$	16,627		108,343			(3,229		)	105,114
Net investment income										67,171			19,792			86,963
Net realized gains (losses)										(26,860		)	(8,865		)	(35,725		)
Net impairment losses recognized in earnings										(1,113		)	—			(1,113		)
Equity in net income of investment funds accounted for using the equity method										16,167			—			16,167
Other income (loss)										2,205			—			2,205
Other expenses										(17,418		)	—			(17,418		)
Interest expense										(4,011		)	—			(4,011		)
Net foreign exchange gains (losses)										(22,571		)	2,988			(19,583		)
Income (loss) before income taxes										121,913			10,686			132,599
Income tax expense										(6,780		)	—			(6,780		)
Net income (loss)										115,133			10,686			125,819
Dividends attributable to redeemable noncontrolling interests										—			(4,743		)	(4,743		)
Amounts attributable to noncontrolling interests										—			(5,286		)	(5,286		)
Net income (loss) available to Arch										115,133			657			115,790
Preferred dividends										(5,485		)	—			(5,485		)
Net income (loss) available to Arch common shareholders										$	109,648		$	657		$	110,305
Underwriting Ratios
Loss ratio	62.9		%	40.6		%	18.4		%	52.8		%	72.5		%	55.1		%
Acquisition expense ratio	15.0		%	21.3		%	19.4		%	17.4		%	28.1		%	18.6		%
Other operating expense ratio	17.5		%	14.2		%	37.5		%	17.7		%	3.2		%	16.0		%
Combined ratio	95.4		%	76.1		%	75.3		%	87.9		%	103.8		%	89.7		%
Goodwill and intangible assets	$	30,968		$	2,420		$	69,130		$	102,518		$	—		$	102,518
Total investable assets										$	14,513,554		$	1,340,574		$	15,854,128
Total assets										21,323,611			1,761,314			23,084,925
Total liabilities										15,299,256			648,278			15,947,534

_________________________________________________

(1) Certain amounts included in the gross premiums written of each segment are related to intersegment transactions. Accordingly, the sum of gross premiums written for each segment does not agree to the total gross premiums written as shown in the table above due to the elimination of intersegment transactions in the total.

	Three Months Ended
	June 30, 2014
	Insurance			Reinsurance			Mortgage			Sub-Total			Other			Total
Gross premiums written (1)	$	852,231		$	349,841		$	55,476		$	1,256,934		$	54,562		$	1,271,761
Premiums ceded	(273,349		)	(58,994		)	(5,079		)	(336,808		)	(2,760		)	(299,833		)
Net premiums written	578,882			290,847			50,397			920,126			51,802			971,928
Change in unearned premiums	(71,170		)	44,780			436			(25,954		)	(38,822		)	(64,776		)
Net premiums earned	507,712			335,627			50,833			894,172			12,980			907,152
Other underwriting income	514			303			1,216			2,033			—			2,033
Losses and loss adjustment expenses	(311,526		)	(150,325		)	(15,473		)	(477,324		)	(8,194		)	(485,518		)
Acquisition expenses, net	(76,449		)	(66,035		)	(11,481		)	(153,965		)	(4,193		)	(158,158		)
Other operating expenses	(85,829		)	(37,666		)	(16,288		)	(139,783		)	(1,635		)	(141,418		)
Underwriting income (loss)	$	34,422		$	81,904		$	8,807		125,133			(1,042		)	124,091
Net investment income										72,458			532			72,990
Net realized gains (losses)										50,966			3,178			54,144
Net impairment losses recognized in earnings										(14,749		)	—			(14,749		)
Equity in net income of investment funds accounted for using the equity method										9,240			—			9,240
Other income (loss)										4,850			—			4,850
Other expenses										(15,279		)	347			(14,932		)
Interest expense										(14,334		)	—			(14,334		)
Net foreign exchange gains (losses)										(2,764		)	470			(2,294		)
Income (loss) before income taxes										215,521			3,485			219,006
Income tax expense										(7,289		)	—			(7,289		)
Net income (loss)										208,232			3,485			211,717
Dividends attributable to redeemable noncontrolling interests										—			(4,857		)	(4,857		)
Amounts attributable to noncontrolling interests										—			1,156			1,156
Net income (loss) available to Arch										208,232			(216		)	208,016
Preferred dividends										(5,485		)	—			(5,485		)
Net income (loss) available to Arch common shareholders										$	202,747		$	(216	)	$	202,531
Underwriting Ratios
Loss ratio	61.4		%	44.8		%	30.4		%	53.4		%	63.1		%	53.5		%
Acquisition expense ratio	15.1		%	19.7		%	22.6		%	17.2		%	32.3		%	17.4		%
Other operating expense ratio	16.9		%	11.2		%	32.0		%	15.6		%	12.6		%	15.6		%
Combined ratio	93.4		%	75.7		%	85.0		%	86.2		%	108.0		%	86.5		%
Goodwill and intangible assets	$	24,498		$	4,942		$	89,281		$	118,721		$	—		$	118,721
Total investable assets										$	14,688,808		$	1,114,719		$	15,803,527
Total assets										21,204,129			1,363,318			22,567,447
Total liabilities										15,072,875			253,507			15,326,382

_________________________________________________

(1) Certain amounts included in the gross premiums written of each segment are related to intersegment transactions. Accordingly, the sum of gross premiums written for each segment does not agree to the total gross premiums written as shown in the table above due to the elimination of intersegment transactions in the total.

	Six Months Ended
	June 30, 2015
	Insurance			Reinsurance			Mortgage			Sub-Total			Other			Total
Gross premiums written (1)	$	1,510,963		$	827,213		$	129,113		$	2,466,931		$	256,587		$	2,541,231
Premiums ceded	(459,893		)	(226,015		)	(15,572		)	(701,122		)	(11,821		)	(530,656		)
Net premiums written	1,051,070			601,198			113,541			1,765,809			244,766			2,010,575
Change in unearned premiums	(33,331		)	(47,516		)	(10,715		)	(91,562		)	(65,311		)	(156,873		)
Net premiums earned	1,017,739			553,682			102,826			1,674,247			179,455			1,853,702
Other underwriting income	948			4,087			11,404			16,439			2,814			19,253
Losses and loss adjustment expenses	(638,822		)	(223,715		)	(23,448		)	(885,985		)	(127,157		)	(1,013,142		)
Acquisition expenses, net	(151,801		)	(114,964		)	(20,618		)	(287,383		)	(51,118		)	(338,501		)
Other operating expenses	(177,173		)	(77,051		)	(40,048		)	(294,272		)	(5,455		)	(299,727		)
Underwriting income (loss)	$	50,891		$	142,039		$	30,116		223,046			(1,461		)	221,585
Net investment income										137,459			28,498			165,957
Net realized gains (losses)										38,649			8,974			47,623
Net impairment losses recognized in earnings										(6,912		)	—			(6,912		)
Equity in net income of investment funds accounted for using the equity method										22,056			—			22,056
Other income (loss)										317			—			317
Other expenses										(26,763		)	—			(26,763		)
Interest expense										(16,747		)	—			(16,747		)
Net foreign exchange gains (losses)										44,282			2,636			46,918
Income (loss) before income taxes										415,387			38,647			454,034
Income tax expense										(19,458		)	—			(19,458		)
Net income (loss)										395,929			38,647			434,576
Dividends attributable to redeemable noncontrolling interests										—			(9,651		)	(9,651		)
Amounts attributable to noncontrolling interests										—			(25,799		)	(25,799		)
Net income (loss) available to Arch										395,929			3,197			399,126
Preferred dividends										(10,969		)	—			(10,969		)
Net income (loss) available to Arch common shareholders										$	384,960		$	3,197		$	388,157
Underwriting Ratios
Loss ratio	62.8		%	40.4		%	22.8		%	52.9		%	70.9		%	54.7		%
Acquisition expense ratio	14.9		%	20.8		%	20.1		%	17.2		%	28.5		%	18.3		%
Other operating expense ratio	17.4		%	13.9		%	38.9		%	17.6		%	3.0		%	16.2		%
Combined ratio	95.1		%	75.1		%	81.8		%	87.7		%	102.4		%	89.2		%

_________________________________________________

(1) Certain amounts included in the gross premiums written of each segment are related to intersegment transactions. Accordingly, the sum of gross premiums written for each segment does not agree to the total gross premiums written as shown in the table above due to the elimination of intersegment transactions in the total.

	Six Months Ended
	June 30, 2014
	Insurance			Reinsurance			Mortgage			Sub-Total			Other			Total
Gross premiums written (1)	$	1,582,877		$	866,894		$	103,383		$	2,552,070		$	86,756		$	2,566,897
Premiums ceded	(458,393		)	(132,121		)	(9,718		)	(599,148		)	(2,760		)	(529,979		)
Net premiums written	1,124,484			734,773			93,665			1,952,922			83,996			2,036,918
Change in unearned premiums	(139,271		)	(57,798		)	(4,067		)	(201,136		)	(68,850		)	(269,986		)
Net premiums earned	985,213			676,975			89,598			1,751,786			15,146			1,766,932
Other underwriting income	1,014			619			1,982			3,615			—			3,615
Losses and loss adjustment expenses	(598,296		)	(289,961		)	(23,951		)	(912,208		)	(9,550		)	(921,758		)
Acquisition expenses, net	(153,381		)	(139,468		)	(20,635		)	(313,484		)	(5,016		)	(318,500		)
Other operating expenses	(166,973		)	(73,861		)	(30,164		)	(270,998		)	(2,744		)	(273,742		)
Underwriting income (loss)	$	67,577		$	174,304		$	16,830		258,711			(2,164		)	256,547
Net investment income										139,451			533			139,984
Net realized gains (losses)										70,663			3,178			73,841
Net impairment losses recognized in earnings										(17,720		)	—			(17,720		)
Equity in net income of investment funds accounted for using the equity method										12,493			—			12,493
Other income (loss)										2,746			—			2,746
Other expenses										(26,078		)	(2,329		)	(28,407		)
Interest expense										(28,738		)	—			(28,738		)
Net foreign exchange gains (losses)										(9,420		)	563			(8,857		)
Income (loss) before income taxes										402,108			(219		)	401,889
Income tax expense										(11,027		)	—			(11,027		)
Net income (loss)										391,081			(219		)	390,862
Dividends attributable to redeemable noncontrolling interests										—			(4,909		)	(4,909		)
Amounts attributable to noncontrolling interests										—			4,563			4,563
Net income (loss) available to Arch										391,081			(565		)	390,516
Preferred dividends										(10,969		)	—			(10,969		)
Net income (loss) available to Arch common shareholders										$	380,112		$	(565	)	$	379,547
Underwriting Ratios
Loss ratio	60.7		%	42.8		%	26.7		%	52.1		%	63.1		%	52.2		%
Acquisition expense ratio	15.6		%	20.6		%	23.0		%	17.9		%	33.1		%	18.0		%
Other operating expense ratio	16.9		%	10.9		%	33.7		%	15.5		%	18.1		%	15.5		%
Combined ratio	93.2		%	74.3		%	83.4		%	85.5		%	114.3		%	85.7		%

_________________________________________________

(1) Certain amounts included in the gross premiums written of each segment are related to intersegment transactions. Accordingly, the sum of gross premiums written for each segment does not agree to the total gross premiums written as shown in the table above due to the elimination of intersegment transactions in the total.

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Investment Information - Other than temporary impairments recognized in earnings (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Net impairment losses recognized in earnings	$ (1,113)	$ (14,749)	$ (6,912)	$ (17,720)
Fixed Maturities
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Net impairment losses recognized in earnings	(336)	(669)	(3,384)	(675)
Fixed Maturities | Mortgage backed securities
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Net impairment losses recognized in earnings	(326)	0	(1,398)	0
Fixed Maturities | Corporate bonds
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Net impairment losses recognized in earnings	(10)	(664)	(1,986)	(664)
Fixed Maturities | Asset backed securities
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Net impairment losses recognized in earnings	0	(5)	0	(11)
Short-term investments
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Net impairment losses recognized in earnings	0	0	(2,341)	0
Equity securities
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Net impairment losses recognized in earnings	(124)	(278)	(253)	(278)
Other investments
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Net impairment losses recognized in earnings	$ (653)	$ (13,802)	$ (934)	$ (16,767)

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Investment Information - Summary of available for sale securities (Details) - USD ($) $ in Thousands		6 Months Ended	12 Months Ended
		Jun. 30, 2015	Dec. 31, 2014
Available for sale securities:
Estimated Fair Value		$ 12,256,599	$ 12,553,204
Gross Unrealized Gains		242,602	282,262
Gross Unrealized Losses		(132,978)	(111,730)
Cost or Amortized Cost		12,146,975	12,382,672
OTTI Unrealized Losses	[1]	(4,267)	(3,646)
Fixed maturities
Available for sale securities:
Estimated Fair Value		10,301,572	10,801,572
Gross Unrealized Gains	[2]	91,207	140,673
Gross Unrealized Losses	[2]	(109,678)	(92,734)
Cost or Amortized Cost	[2]	10,320,043	10,753,633
OTTI Unrealized Losses	[1],[2]	(4,267)	(3,646)
Fixed maturities | Corporate bonds
Available for sale securities:
Estimated Fair Value		2,833,849	3,108,513
Gross Unrealized Gains	[2]	26,401	37,928
Gross Unrealized Losses	[2]	(51,717)	(38,974)
Cost or Amortized Cost	[2]	2,859,165	3,109,559
OTTI Unrealized Losses	[1],[2]	(681)	(317)
Fixed maturities | Mortgage backed securities
Available for sale securities:
Estimated Fair Value		837,680	943,343
Gross Unrealized Gains	[2]	12,315	18,843
Gross Unrealized Losses	[2]	(4,231)	(3,842)
Cost or Amortized Cost	[2]	829,596	928,342
OTTI Unrealized Losses	[1],[2]	(3,564)	(3,307)
Fixed maturities | Municipal bonds
Available for sale securities:
Estimated Fair Value		1,760,384	1,494,122
Gross Unrealized Gains	[2]	19,601	31,227
Gross Unrealized Losses	[2]	(9,004)	(1,044)
Cost or Amortized Cost	[2]	1,749,787	1,463,939
OTTI Unrealized Losses	[1],[2]	0	0
Fixed maturities | Commercial mortgage backed securities
Available for sale securities:
Estimated Fair Value		832,159	1,114,528
Gross Unrealized Gains	[2]	6,760	14,594
Gross Unrealized Losses	[2]	(4,922)	(3,822)
Cost or Amortized Cost	[2]	830,321	1,103,756
OTTI Unrealized Losses	[1],[2]	0	0
Fixed maturities | US government and government agencies
Available for sale securities:
Estimated Fair Value		1,899,868	1,447,972
Gross Unrealized Gains	[2]	8,463	8,345
Gross Unrealized Losses	[2]	(3,720)	(1,760)
Cost or Amortized Cost	[2]	1,895,125	1,441,387
OTTI Unrealized Losses	[1],[2]	0	0
Fixed maturities | Non-US government securities
Available for sale securities:
Estimated Fair Value		786,276	1,015,153
Gross Unrealized Gains	[2]	10,343	21,311
Gross Unrealized Losses	[2]	(32,720)	(37,203)
Cost or Amortized Cost	[2]	808,653	1,031,045
OTTI Unrealized Losses	[1],[2]	0	0
Fixed maturities | Asset backed securities
Available for sale securities:
Estimated Fair Value		1,351,356	1,677,941
Gross Unrealized Gains	[2]	7,324	8,425
Gross Unrealized Losses	[2]	(3,364)	(6,089)
Cost or Amortized Cost	[2]	1,347,396	1,675,605
OTTI Unrealized Losses	[1],[2]	(22)	(22)
Equity securities
Available for sale securities:
Estimated Fair Value		701,623	658,182
Gross Unrealized Gains		105,174	109,012
Gross Unrealized Losses		(18,606)	(13,364)
Cost or Amortized Cost		615,055	562,534
OTTI Unrealized Losses	[1]	0	0
Other investments
Available for sale securities:
Estimated Fair Value		377,677	296,224
Gross Unrealized Gains		46,166	31,839
Gross Unrealized Losses		(1,927)	(362)
Cost or Amortized Cost		333,438	264,747
OTTI Unrealized Losses	[1]	0	0
Short-term investments
Available for sale securities:
Estimated Fair Value		875,727	797,226
Gross Unrealized Gains		55	738
Gross Unrealized Losses		(2,767)	(5,270)
Cost or Amortized Cost		878,439	801,758
OTTI Unrealized Losses	[1]	$ 0	$ 0

[1] Represents the total other-than-temporary impairments (“OTTI”) recognized in accumulated other comprehensive income (“AOCI”). It does not include the change in fair value subsequent to the impairment measurement date. At June 30, 2015, the net unrealized gain related to securities for which a non-credit OTTI was recognized in AOCI was $0.3 million, compared to a net unrealized gain of $0.9 million at December 31, 2014.

[2] In securities lending transactions, the Company receives collateral in excess of the fair value of the securities pledged. For purposes of this table, the Company has excluded the collateral received under securities lending, at fair value and included the securities pledged under securities lending, at fair value. See “—Securities Lending Agreements.”

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Unaudited Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Comprehensive Income
Net income	$ 125,819	$ 211,717	$ 434,576	$ 390,862
Unrealized appreciation (decline) in value of available-for-sale investments:
Unrealized holding gains (losses) arising during period	(81,935)	108,428	2,369	179,781
Portion of other-than-temporary impairment losses recognized in other comprehensive income, net of deferred income tax	(13)	0	(1,461)	0
Reclassification of net realized gains, net of income taxes, included in net income	(21,214)	(8,285)	(52,146)	(29,534)
Foreign currency translation adjustments	11,580	10,021	(11,177)	8,672
Comprehensive income	34,237	321,881	372,161	549,781
Amounts attributable to noncontrolling interests	(10,029)	(3,701)	(35,450)	(346)
Comprehensive income available to Arch	$ 24,208	$ 318,180	$ 336,711	$ 549,435

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Variable Interest Entities and Noncontrolling Interests

6 Months Ended

Jun. 30, 2015

Noncontrolling Interest [Abstract]

Variable Interest Entity and Noncontrolling Interests

Variable Interest Entity and Noncontrolling Interests

Variable interest entity

On March 20, 2014, the Company invested $100.0 million and acquired approximately 11% of Watford Holdings Ltd.’s common equity and a warrant to purchase additional common equity. Watford Holdings Ltd. is the parent of Watford Re Ltd., a multi-line Bermuda reinsurance company (together with Watford Holdings Ltd., “Watford Re”). Watford Re is considered a variable interest entity (“VIE”) and the Company concluded that it is the primary beneficiary of Watford Re. As such, the results of Watford Re are included in the Company’s consolidated financial statements.

The Company concluded that Watford Re represents a separate operating segment and provides the income statement and total investable assets, total assets and total liabilities of Watford Re within Note 5. At June 30, 2015, Watford Re’s liabilities included unearned premiums of $247.6 million and reserves for losses and loss adjustment expenses of $173.2 million, some of which is related to transactions with the Company. For the six months ended June 30, 2015, Watford Re generated $137.8 million of cash provided by operating activities and $40.3 million of cash provided by financing activities, partially offset by $134.9 million of cash used for investing activities.

Because Watford Re is an independent company, the assets of Watford Re can be used only to settle obligations of Watford Re and Watford Re is solely responsible for its own liabilities and commitments. The Company’s financial exposure to Watford Re is limited to its investment in Watford Re’s common shares and counterparty credit risk (mitigated by collateral) arising from the reinsurance transactions.

Non-redeemable noncontrolling interests

The Company accounts for the portion of Watford Re’s common equity attributable to third party investors in the shareholders’ equity section of its consolidated balance sheets. The noncontrolling ownership in Watford Re’s common shares was approximately 89% at June 30, 2015. The portion of Watford Re’s income or loss attributable to third party investors is recorded in the consolidated statements of income in ‘amounts attributable to noncontrolling interests.’ The following table sets forth activity in the non-redeemable noncontrolling interests:

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2015		2014			2015		2014
Balance, beginning of period	$	789,594	$	793,496		$	769,081	$	—
Sale of shares to noncontrolling interests	—		—			—		796,903
Amounts attributable to noncontrolling interests	5,286		(1,156		)	25,799		(4,563		)
Balance, end of period	$	794,880	$	792,340		$	794,880	$	792,340

Redeemable noncontrolling interests

The Company accounts for redeemable noncontrolling interests in the mezzanine section of its consolidated balance sheets in accordance with applicable accounting guidance. Such redeemable noncontrolling interests relate to the 9,065,200 cumulative redeemable preference shares (“Watford Preference Shares”) issued in late March 2014 with a par value of $0.01 per share and a liquidation preference of $25.00 per share. Preferred dividends, including the accretion of the discount and issuance costs, are included in ‘amounts attributable to noncontrolling interests’ in the Company’s consolidated statements of income. The following table sets forth activity in the redeemable non-controlling interests:

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2015			2014		2015			2014
Balance, beginning of period	$	219,604		$	219,234	$	219,512		$	—
Sale of shares to noncontrolling interests	—			—		—			219,233
Shares acquired by the Company (1)	(14,700		)	—		(14,700		)	—
Accretion of preference share issuance costs	92			92		184			93
Balance, end of period	$	204,996		$	219,326	$	204,996		$	219,326

_________________________________________________

(1) During the 2015 second quarter, the Company acquired Gulf Re, which owns 600,000 Watford Preference Shares. Such shares, net of a discount, along with related dividends and accretion of the discount, are eliminated in consolidation.

The portion of Watford Re’s income or loss attributable to third party investors is recorded in the consolidated statements of income in ‘amounts attributable to noncontrolling interests’ as summarized in the table below:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015			2014
Amounts attributable to non-redeemable noncontrolling interests	$	(5,286	)	$	1,156		$	(25,799	)	$	4,563
Dividends attributable to redeemable noncontrolling interests	(4,743		)	(4,857		)	(9,651		)	(4,909		)
Amounts attributable to noncontrolling interests	$	(10,029	)	$	(3,701	)	$	(35,450	)	$	(346	)

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Share Transactions - Share repurchases (Details) - Jun. 30, 2015 - Common shares - USD ($) shares in Millions, $ in Millions	Total	Total
Class of Stock [Line Items]
Cumulative number of shares acquired since inception of share repurchase program		124.0
Aggregate purchase price of shares acquired since inception of share repurchase program		$ 3,600.0
Treasury stock, shares acquired (shares)	3.2	5.9
Treasury stock, value of shares acquired	$ 199.0	$ 361.9
Remaining authorized repurchase amount	$ 525.3	$ 525.3

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Investment Information (Tables)

6 Months Ended

Jun. 30, 2015

Disclosure Investment Information [Abstract]

Summary of fair value and cost or amortized cost of available for sale securities

The following table summarizes the fair value and cost or amortized cost of the Company’s investments classified as available for sale:

	Estimated Fair Value		Gross Unrealized Gains		Gross Unrealized Losses			Cost or Amortized Cost		OTTI Unrealized Losses (2)
June 30, 2015
Fixed maturities (1):
Corporate bonds	$	2,833,849	$	26,401	$	(51,717	)	$	2,859,165	$	(681	)
Mortgage backed securities	837,680		12,315		(4,231		)	829,596		(3,564		)
Municipal bonds	1,760,384		19,601		(9,004		)	1,749,787		—
Commercial mortgage backed securities	832,159		6,760		(4,922		)	830,321		—
U.S. government and government agencies	1,899,868		8,463		(3,720		)	1,895,125		—
Non-U.S. government securities	786,276		10,343		(32,720		)	808,653		—
Asset backed securities	1,351,356		7,324		(3,364		)	1,347,396		(22		)
Total	10,301,572		91,207		(109,678		)	10,320,043		(4,267		)
Equity securities	701,623		105,174		(18,606		)	615,055		—
Other investments	377,677		46,166		(1,927		)	333,438		—
Short-term investments	875,727		55		(2,767		)	878,439		—
Total	$	12,256,599	$	242,602	$	(132,978	)	$	12,146,975	$	(4,267	)
December 31, 2014
Fixed maturities (1):
Corporate bonds	$	3,108,513	$	37,928	$	(38,974	)	$	3,109,559	$	(317	)
Mortgage backed securities	943,343		18,843		(3,842		)	928,342		(3,307		)
Municipal bonds	1,494,122		31,227		(1,044		)	1,463,939		—
Commercial mortgage backed securities	1,114,528		14,594		(3,822		)	1,103,756		—
U.S. government and government agencies	1,447,972		8,345		(1,760		)	1,441,387		—
Non-U.S. government securities	1,015,153		21,311		(37,203		)	1,031,045		—
Asset backed securities	1,677,941		8,425		(6,089		)	1,675,605		(22		)
Total	10,801,572		140,673		(92,734		)	10,753,633		(3,646		)
Equity securities	658,182		109,012		(13,364		)	562,534		—
Other investments	296,224		31,839		(362		)	264,747		—
Short-term investments	797,226		738		(5,270		)	801,758		—
Total	$	12,553,204	$	282,262	$	(111,730	)	$	12,382,672	$	(3,646	)

_________________________________________________

(1) In securities lending transactions, the Company receives collateral in excess of the fair value of the securities pledged. For purposes of this table, the Company has excluded the collateral received under securities lending, at fair value and included the securities pledged under securities lending, at fair value. See “—Securities Lending Agreements.”

(2) Represents the total other-than-temporary impairments (“OTTI”) recognized in accumulated other comprehensive income (“AOCI”). It does not include the change in fair value subsequent to the impairment measurement date. At June 30, 2015, the net unrealized gain related to securities for which a non-credit OTTI was recognized in AOCI was $0.3 million, compared to a net unrealized gain of $0.9 million at December 31, 2014.

Summary of available for sale securities in a continual unrealized loss position

The following table summarizes, for all available for sale securities in an unrealized loss position, the fair value and gross unrealized loss by length of time the security has been in a continual unrealized loss position:

	Less than 12 Months					12 Months or More					Total
	Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses
June 30, 2015
Fixed maturities (1):
Corporate bonds	$	1,659,276	$	(40,616	)	$	92,244	$	(11,101	)	$	1,751,520	$	(51,717	)
Mortgage backed securities	437,043		(3,574		)	45,082		(657		)	482,125		(4,231		)
Municipal bonds	784,691		(8,562		)	3,530		(442		)	788,221		(9,004		)
Commercial mortgage backed securities	374,338		(4,912		)	2,893		(10		)	377,231		(4,922		)
U.S. government and government agencies	426,224		(3,720		)	—		—			426,224		(3,720		)
Non-U.S. government securities	431,360		(16,841		)	77,314		(15,879		)	508,674		(32,720		)
Asset backed securities	281,650		(2,161		)	130,987		(1,203		)	412,637		(3,364		)
Total	4,394,582		(80,386		)	352,050		(29,292		)	4,746,632		(109,678		)
Equity securities	286,325		(18,606		)	—		—			286,325		(18,606		)
Other investments	89,863		(1,927		)	—		—			89,863		(1,927		)
Short-term investments	60,287		(2,767		)	—		—			60,287		(2,767		)
Total	$	4,831,057	$	(103,686	)	$	352,050	$	(29,292	)	$	5,183,107	$	(132,978	)
December 31, 2014
Fixed maturities (1):
Corporate bonds	$	1,309,637	$	(32,903	)	$	148,963	$	(6,071	)	$	1,458,600	$	(38,974	)
Mortgage backed securities	293,624		(1,476		)	59,107		(2,366		)	352,731		(3,842		)
Municipal bonds	210,614		(588		)	13,643		(456		)	224,257		(1,044		)
Commercial mortgage backed securities	232,147		(770		)	125,894		(3,052		)	358,041		(3,822		)
U.S. government and government agencies	618,381		(1,626		)	3,438		(134		)	621,819		(1,760		)
Non-U.S. government securities	510,766		(31,172		)	46,910		(6,031		)	557,676		(37,203		)
Asset backed securities	612,950		(2,486		)	243,452		(3,603		)	856,402		(6,089		)
Total	3,788,119		(71,021		)	641,407		(21,713		)	4,429,526		(92,734		)
Equity securities	181,002		(13,364		)	—		—			181,002		(13,364		)
Other investments	59,638		(362		)	—		—			59,638		(362		)
Short-term investments	79,271		(5,270		)	—		—			79,271		(5,270		)
Total	$	4,108,030	$	(90,017	)	$	641,407	$	(21,713	)	$	4,749,437	$	(111,730	)

_________________________________________________

(1) In securities lending transactions, the Company receives collateral in excess of the fair value of the securities pledged. For purposes of this table, the Company has excluded the collateral received under securities lending, at fair value and included the securities pledged under securities lending, at fair value. See “—Securities Lending Agreements.”

Contractual maturities of the Company's fixed maturities and fixed maturities pledged under securities lending arrangements

The contractual maturities of the Company’s fixed maturities are shown in the following table. Expected maturities, which are management’s best estimates, will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	June 30, 2015				December 31, 2014
Maturity	Estimated Fair Value		Amortized Cost		Estimated Fair Value		Amortized Cost
Due in one year or less	$	369,356	$	374,710	$	235,930	$	233,794
Due after one year through five years	4,101,484		4,106,002		4,074,562		4,077,408
Due after five years through 10 years	2,468,013		2,487,840		2,475,726		2,461,356
Due after 10 years	341,524		344,178		279,542		273,372
	7,280,377		7,312,730		7,065,760		7,045,930
Mortgage backed securities	837,680		829,596		943,343		928,342
Commercial mortgage backed securities	832,159		830,321		1,114,528		1,103,756
Asset backed securities	1,351,356		1,347,396		1,677,941		1,675,605
Total (1)	$	10,301,572	$	10,320,043	$	10,801,572	$	10,753,633

_________________________________________________

(1) In securities lending transactions, the Company receives collateral in excess of the fair value of the securities pledged. For purposes of this table, the Company has excluded the collateral received under securities lending, at fair value and included the securities pledged under securities lending, at fair value. See “—Securities Lending Agreements.”

Securities lending transactions accounted for as secured borrowings, by significant investment category

The Company’s securities lending transactions were accounted for as secured borrowings with significant investment categories as follows:

	June 30, 2015
	Remaining Contractual Maturity of the Agreements
Securities Lending Transactions	Overnight and Continuous		Less than 30 Days		30-90 Days		90 Days or More		Total
U.S. government and government agencies	$	335,233	$	—	$	—	$	—	$	335,233
Corporate bonds	44,139		—		—		—		44,139
Equity securities	4,593		—		—		—		4,593
Total	$	383,965	$	—	$	—	$	—	$	383,965
Gross amount of recognized liabilities for securities lending in offsetting disclosure in Note 8									$	—
Amounts related to securities lending not included in offsetting disclosure in Note 8									$	383,965

Summary of other investments, including available for sale and fair value option components

The following table summarizes the Company’s other investments, including available for sale and fair value option components:

	June 30, 2015		December 31, 2014
Available for sale:
Asian and emerging markets	$	287,666	$	236,586
Investment grade fixed income	58,829		59,638
Credit related funds	13,773		—
Other	17,409		—
Total available for sale	377,677		296,224
Fair value option:
Term loan investments (par value: $1,077,945 and $1,094,337)	1,061,696		1,073,649
Mezzanine debt funds	115,019		121,341
Credit related funds	138,070		114,436
Investment grade fixed income	60,383		69,108
Asian and emerging markets	26,494		25,800
Other (1)	189,709		137,094
Total fair value option	1,591,371		1,541,428
Total	$	1,969,048	$	1,837,652

_________________________________________________

(1) Includes fund investments with strategies in mortgage servicing rights, transportation and infrastructure assets and other.

Summary of assets and liabilities accounted for using the fair value option

The following table summarizes the Company’s assets and liabilities which are accounted for using the fair value option:

	June 30, 2015		December 31, 2014
Fixed maturities	$	854,170	$	632,024
Other investments	1,591,371		1,541,428
Short-term investments	167,698		251,601
Equity securities	248		—
Investments accounted for using the fair value option	$	2,613,487	$	2,425,053

Components of net investment income

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

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015			2014
Fixed maturities	$	71,275		$	65,869		$	139,871		$	128,318
Term loan investments	18,033			6,908			32,777			12,577
Equity securities (dividends)	2,578			3,271			5,257			6,192
Short-term investments	225			107			421			512
Other (1)	10,489			9,100			23,236			13,819
Gross investment income	102,600			85,255			201,562			161,418
Investment expenses	(15,637		)	(12,265		)	(35,605		)	(21,434		)
Net investment income	$	86,963		$	72,990		$	165,957		$	139,984

_________________________________________________

(1) Includes income distributions from investment funds and other items.

Summary of net realized gains (losses)

Net realized gains (losses) were as follows, excluding other-than-temporary impairment provisions:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015			2014
Available for sale securities:
Gross gains on investment sales	$	82,233		$	56,763		$	179,824		$	122,814
Gross losses on investment sales	(58,974		)	(33,028		)	(114,134		)	(73,041		)
Change in fair value of assets and liabilities accounted for using the fair value option:
Fixed maturities	(5,191		)	10,984			(8,493		)	9,341
Other investments	785			17,985			7,072			28,761
Equity securities	(69		)	—			(71		)	—
Short-term investments	(4,375		)	—			1,471			—
Derivative instruments (1)	(41,496		)	12,402			(4,820		)	(366		)
Other (2)	(8,638		)	(10,962		)	(13,226		)	(13,668		)
Net realized gains (losses)	$	(35,725	)	$	54,144		$	47,623		$	73,841

_________________________________________________

(1) See Note 8 for information on the Company’s derivative instruments.

(2) Includes the re-measurement of contingent consideration liability amounts.

Summary of OTTI recognized in earnings by asset class

The following table details the net impairment losses recognized in earnings by asset class:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015			2014
Fixed maturities:
Mortgage backed securities	$	(326	)	$	—		$	(1,398	)	$	—
Corporate bonds	(10		)	(664		)	(1,986		)	(664		)
Asset backed securities	—			(5		)	—			(11		)
Total	(336		)	(669		)	(3,384		)	(675		)
Short-term investments	—			—			(2,341		)	—
Equity securities	(124		)	(278		)	(253		)	(278		)
Other investments	(653		)	(13,802		)	(934		)	(16,767		)
Net impairment losses recognized in earnings	$	(1,113	)	$	(14,749	)	$	(6,912	)	$	(17,720	)

Rollforward of the amount related to credit losses recognized in earnings for which a portion was recognized in AOCI

The following table provides a roll forward of the amount related to credit losses recognized in earnings for which a portion of an OTTI was recognized in accumulated other comprehensive income:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015			2014
Balance at start of period	$	24,344		$	47,256		$	20,196		$	60,062
Credit loss impairments recognized on securities not previously impaired	281			—			4,770			—
Credit loss impairments recognized on securities previously impaired	55			5			134			11
Reductions for increases in cash flows expected to be collected that are recognized over the remaining life of the security	—			—			—			—
Reductions for securities sold during the period	(3,774		)	(25,820		)	(4,194		)	(38,632		)
Balance at end of period	$	20,906		$	21,441		$	20,906		$	21,441

Summary of restricted assets

The following table details the value of the Company’s restricted assets:

	June 30, 2015		December 31, 2014
Assets used for collateral or guarantees:
Affiliated transactions	$	3,651,244	$	4,138,527
Third party agreements	1,040,156		970,120
Deposits with U.S. regulatory authorities	406,777		337,981
Trust funds	60,864		72,461
Total restricted assets	$	5,159,041	$	5,519,089

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Earnings Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2015		Jun. 30, 2014		Jun. 30, 2015	Jun. 30, 2014
Numerator:
Net income	$ 125,819		$ 211,717		$ 434,576	$ 390,862
Amounts attributable to noncontrolling interests	(10,029)		(3,701)		(35,450)	(346)
Net income available to Arch	115,790		208,016		399,126	390,516
Preferred dividends	(5,485)		(5,485)		(10,969)	(10,969)
Net income (loss) available to Arch common shareholders	$ 110,305		$ 202,531		$ 388,157	$ 379,547
Denominator:
Weighted average common shares outstanding — basic	121,719,214		132,650,634		122,957,384	132,256,462
Effect of dilutive common share equivalents:
Nonvested restricted shares	1,258,741		1,144,621		1,334,633	1,236,408
Stock options	2,907,465	[1]	3,094,689	[1]	2,864,696	3,224,019
Weighted average common shares and common share equivalents outstanding — diluted	125,885,420		136,889,944		127,156,713	136,716,889
Earnings per common share:
Basic (per share)	$ 0.91		$ 1.53		$ 3.16	$ 2.87
Diluted (per share)	$ 0.88		$ 1.48		$ 3.05	$ 2.78
Stock Options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per common share (shares)	1,009,113		978,237		1,187,162	1,318,662

[1] Certain stock options were not included in the computation of diluted earnings per share where the exercise price of the stock options exceeded the average market price and would have been anti-dilutive or where, when applying the treasury stock method to in-the-money options, the sum of the proceeds, including unrecognized compensation, exceeded the average market price and would have been anti-dilutive. For the 2015 second quarter and 2014 second quarter, the number of stock options excluded were 1,009,113 and 978,237, respectively. For the six months ended June 30, 2015 and 2014, the number of stock options excluded were 1,187,162 and 1,318,662, respectively.

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Guarantor Financial Information

6 Months Ended

Jun. 30, 2015

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Guarantor Financial Information

Guarantor Financial Information

The following tables present condensed financial information for ACGL, Arch Capital Group (U.S.) Inc. (“Arch-U.S.”), a 100% owned subsidiary of ACGL, and ACGL’s other subsidiaries.

		June 30, 2015
Condensed Consolidating Balance Sheet		ACGL (Parent Guarantor)		Arch-U.S. (Subsidiary Issuer)		Other ACGL Subsidiaries		Consolidating Adjustments and Eliminations			ACGL Consolidated
Assets
Total investments		$	471	$	55,047	$	15,306,122	$	(14,700	)	$	15,346,940
Cash		10,864		6,928		507,282		—			525,074
Investments in subsidiaries		6,530,452		1,688,419		—		(8,218,871		)	—
Due from subsidiaries and affiliates		11		47,798		417,231		(465,040		)	—
Premiums receivable		—		—		1,620,756		(439,120		)	1,181,636
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses		—		—		5,741,646		(3,910,419		)	1,831,227
Contractholder receivables		—		—		1,393,138		—			1,393,138
Prepaid reinsurance premiums		—		—		1,595,550		(1,153,409		)	442,141
Deferred acquisition costs, net		—		—		448,647		—			448,647
Other assets		4,208		46,157		2,274,796		(409,039		)	1,916,122
	Total assets	$	6,546,006	$	1,844,349	$	29,305,168	$	(14,610,598	)	$	23,084,925
Liabilities
Reserve for losses and loss adjustment expenses		$	—	$	—	$	12,970,720	$	(3,888,439	)	$	9,082,281
Unearned premiums		—		—		3,596,332		(1,153,409		)	2,442,923
Reinsurance balances payable		—		—		678,216		(425,754		)	252,462
Contractholder payables		—		—		1,393,138		—			1,393,138
Deposit accounting liabilities		—		—		495,121		(217,598		)	277,523
Senior notes		296,834		494,388		—		—			791,222
Revolving credit agreement borrowings		100,000		—		—		—			100,000
Due to subsidiaries and affiliates		402		35,000		429,638		(465,040		)	—
Other liabilities		11,255		44,917		1,778,600		(226,787		)	1,607,985
	Total liabilities	408,491		574,305		21,341,765		(6,377,027		)	15,947,534
Redeemable noncontrolling interests		—		—		219,696		(14,700		)	204,996
Shareholders’ Equity
Total shareholders’ equity available to Arch		6,137,515		1,270,044		6,948,827		(8,218,871		)	6,137,515
Non-redeemable noncontrolling interests		—		—		794,880		—			794,880
	Total shareholders’ equity	6,137,515		1,270,044		7,743,707		(8,218,871		)	6,932,395
	Total liabilities, noncontrolling interests and shareholders’ equity	$	6,546,006	$	1,844,349	$	29,305,168	$	(14,610,598	)	$	23,084,925

		December 31, 2014
Condensed Consolidating Balance Sheet		ACGL (Parent Guarantor)		Arch-U.S. (Subsidiary Issuer)		Other ACGL Subsidiaries		Consolidating Adjustments and Eliminations			ACGL Consolidated
Assets
Total investments		$	107	$	62,867	$	15,257,796	$	—		$	15,320,770
Cash		3,218		2,787		479,697		—			485,702
Investments in subsidiaries		6,536,644		1,685,185		—		(8,221,829		)	—
Due from subsidiaries and affiliates		48		7,517		370,429		(377,994		)	—
Premiums receivable		—		—		1,331,511		(382,816		)	948,695
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses		—		—		5,584,973		(3,772,128		)	1,812,845
Contractholder receivables		—		—		1,309,192		—			1,309,192
Prepaid reinsurance premiums		—		—		1,373,008		(995,930		)	377,078
Deferred acquisition costs, net		—		—		414,525		—			414,525
Other assets		4,386		43,921		1,705,546		(416,579		)	1,337,274
	Total assets	$	6,544,403	$	1,802,277	$	27,826,677	$	(14,167,276	)	$	22,006,081
Liabilities
Reserve for losses and loss adjustment expenses		$	—	$	—	$	12,784,030	$	(3,747,582	)	$	9,036,448
Unearned premiums		—		—		3,227,508		(995,930		)	2,231,578
Reinsurance balances payable		—		—		589,289		(369,977		)	219,312
Contractholder payables		—		—		1,309,192		—			1,309,192
Deposit accounting liabilities		—		—		587,050		(259,666		)	327,384
Senior notes		296,796		494,345		—		—			791,141
Revolving credit agreement borrowings		100,000		—		—		—			100,000
Due to subsidiaries and affiliates		417		7,505		370,072		(377,994		)	—
Other liabilities		17,137		49,403		1,000,138		(194,298		)	872,380
	Total liabilities	414,350		551,253		19,867,279		(5,945,447		)	14,887,435
Redeemable noncontrolling interests		—		—		219,512		—			219,512
Shareholders’ Equity
Total shareholders’ equity available to Arch		6,130,053		1,251,024		6,970,805		(8,221,829		)	6,130,053
Non-redeemable noncontrolling interests		—		—		769,081		—			769,081
	Total shareholders’ equity	6,130,053		1,251,024		7,739,886		(8,221,829		)	6,899,134
	Total liabilities, noncontrolling interests and shareholders’ equity	$	6,544,403	$	1,802,277	$	27,826,677	$	(14,167,276	)	$	22,006,081

		Three Months Ended June 30, 2015
Condensed Consolidating Statement of Income and Comprehensive Income		ACGL (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other ACGL Subsidiaries			Consolidating Adjustments and Eliminations			ACGL Consolidated
Revenues
Net premiums earned		$	—		$	—		$	943,438		$	—		$	943,438
Net investment income		—			800			87,154			(991		)	86,963
Net realized gains (losses)		—			1			(35,726		)	—			(35,725		)
Net impairment losses recognized in earnings		—			—			(1,113		)	—			(1,113		)
Other underwriting income		—			—			7,717			—			7,717
Equity in net income of investment funds accounted for using the equity method		—			—			16,167			—			16,167
Other income (loss)		—			—			2,205			—			2,205
	Total revenues	—			801			1,019,842			(991		)	1,019,652
Expenses
Losses and loss adjustment expenses		—			—			519,426			—			519,426
Acquisition expenses		—			—			175,425			—			175,425
Other operating expenses		16,900			1,012			150,696			—			168,608
Interest expense		5,862			6,769			(7,793		)	(827		)	4,011
Net foreign exchange losses (gains)		—			—			6,942			12,641			19,583
	Total expenses	22,762			7,781			844,696			11,814			887,053
Income (loss) before income taxes		(22,762		)	(6,980		)	175,146			(12,805		)	132,599
Income tax (expense) benefit		—			3,697			(10,477		)	—			(6,780		)
Income (loss) before equity in net income of subsidiaries		(22,762		)	(3,283		)	164,669			(12,805		)	125,819
Equity in net income of subsidiaries		138,552			14,077			—			(152,629		)	—
Net income		115,790			10,794			164,669			(165,434		)	125,819
Amounts attributable to noncontrolling interests		—			—			(10,193		)	164			(10,029		)
Net income available to Arch		115,790			10,794			154,476			(165,270		)	115,790
Preferred dividends		(5,485		)	—			—			—			(5,485		)
Net income available to Arch common shareholders		$	110,305		$	10,794		$	154,476		$	(165,270	)	$	110,305
Comprehensive income (loss) available to Arch		$	24,208		$	(13,505	)	$	50,249		$	(36,744	)	$	24,208

		Three Months Ended June 30, 2014
Condensed Consolidating Statement of Income and Comprehensive Income		ACGL (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other ACGL Subsidiaries			Consolidating Adjustments and Eliminations			ACGL Consolidated
Revenues
Net premiums earned		$	—		$	—		$	907,152		$	—		$	907,152
Net investment income		—			—			80,380			(7,390		)	72,990
Net realized gains (losses)		—			—			54,144			—			54,144
Net impairment losses recognized in earnings		—			—			(14,749		)	—			(14,749		)
Other underwriting income		—			—			2,033			—			2,033
Equity in net income of investment funds accounted for using the equity method		—			—			9,240			—			9,240
Other income (loss)		—			—			4,850			—			4,850
	Total revenues	—			—			1,043,050			(7,390		)	1,035,660
Expenses
Losses and loss adjustment expenses		—			—			485,518			—			485,518
Acquisition expenses		—			—			158,158			—			158,158
Other operating expenses		15,250			494			140,606			—			156,350
Interest expense		5,854			6,448			9,422			(7,390		)	14,334
Net foreign exchange losses (gains)		—			—			1,054			1,240			2,294
	Total expenses	21,104			6,942			794,758			(6,150		)	816,654
Income (loss) before income taxes		(21,104		)	(6,942		)	248,292			(1,240		)	219,006
Income tax (expense) benefit		—			3,294			(10,583		)	—			(7,289		)
Income (loss) before equity in net income of subsidiaries		(21,104		)	(3,648		)	237,709			(1,240		)	211,717
Equity in net income of subsidiaries		229,120			9,334			—			(238,454		)	—
Net income		208,016			5,686			237,709			(239,694		)	211,717
Amounts attributable to noncontrolling interests		—			—			(3,701		)	—			(3,701		)
Net income available to Arch		208,016			5,686			234,008			(239,694		)	208,016
Preferred dividends		(5,485		)	—			—			—			(5,485		)
Net income available to Arch common shareholders		$	202,531		$	5,686		$	234,008		$	(239,694	)	$	202,531
Comprehensive income (loss) available to Arch		$	318,180		$	23,186		$	335,348		$	(358,534	)	$	318,180

		Six Months Ended June 30, 2015
Condensed Consolidating Statement of Income and Comprehensive Income		ACGL (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other ACGL Subsidiaries			Consolidating Adjustments and Eliminations			ACGL Consolidated
Revenues
Net premiums earned		$	—		$	—		$	1,853,702		$	—		$	1,853,702
Net investment income		—			805			173,164			(8,012		)	165,957
Net realized gains (losses)		—			1			47,622			—			47,623
Net impairment losses recognized in earnings		—			—			(6,912		)	—			(6,912		)
Other underwriting income		—			—			19,253			—			19,253
Equity in net income of investment funds accounted for using the equity method		—			—			22,056			—			22,056
Other income (loss)		—			—			317			—			317
	Total revenues	—			806			2,109,202			(8,012		)	2,101,996
Expenses
Losses and loss adjustment expenses		—			—			1,013,142			—			1,013,142
Acquisition expenses		—			—			338,501			—			338,501
Other operating expenses		25,532			2,271			298,687			—			326,490
Interest expense		11,718			13,135			(258		)	(7,848		)	16,747
Net foreign exchange losses (gains)		—			—			(32,688		)	(14,230		)	(46,918		)
	Total expenses	37,250			15,406			1,617,384			(22,078		)	1,647,962
Income (loss) before income taxes		(37,250		)	(14,600		)	491,818			14,066			454,034
Income tax (expense) benefit		—			5,110			(24,568		)	—			(19,458		)
Income (loss) before equity in net income of subsidiaries		(37,250		)	(9,490		)	467,250			14,066			434,576
Equity in net income of subsidiaries		436,376			28,572			—			(464,948		)	—
Net income		399,126			19,082			467,250			(450,882		)	434,576
Amounts attributable to noncontrolling interests		—			—			(35,614		)	164			(35,450		)
Net income available to Arch		399,126			19,082			431,636			(450,718		)	399,126
Preferred dividends		(10,969		)	—			—			—			(10,969		)
Net income available to Arch common shareholders		$	388,157		$	19,082		$	431,636		$	(450,718	)	$	388,157
Comprehensive income (loss) available to Arch		$	336,711		$	(1,755	)	$	383,442		$	(381,687	)	$	336,711

		Six Months Ended June 30, 2014
Condensed Consolidating Statement of Income and Comprehensive Income		ACGL (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other ACGL Subsidiaries			Consolidating Adjustments and Eliminations			ACGL Consolidated
Revenues
Net premiums earned		$	—		$	—		$	1,766,932		$	—		$	1,766,932
Net investment income		—			—			157,381			(17,397		)	139,984
Net realized gains (losses)		—			—			73,841			—			73,841
Net impairment losses recognized in earnings		—			—			(17,720		)	—			(17,720		)
Other underwriting income		—			—			3,615			—			3,615
Equity in net income of investment funds accounted for using the equity method		—			—			12,493			—			12,493
Other income (loss)		—			—			2,746			—			2,746
	Total revenues	—			—			1,999,288			(17,397		)	1,981,891
Expenses
Losses and loss adjustment expenses		—			—			921,758			—			921,758
Acquisition expenses		—			—			318,500			—			318,500
Other operating expenses		25,557			1,471			275,121			—			302,149
Interest expense		11,707			12,962			21,466			(17,397		)	28,738
Net foreign exchange losses (gains)		—			—			6,795			2,062			8,857
	Total expenses	37,264			14,433			1,543,640			(15,335		)	1,580,002
Income (loss) before income taxes		(37,264		)	(14,433		)	455,648			(2,062		)	401,889
Income tax (expense) benefit		—			6,082			(17,109		)	—			(11,027		)
Income (loss) before equity in net income of subsidiaries		(37,264		)	(8,351		)	438,539			(2,062		)	390,862
Equity in net income of subsidiaries		427,780			31,486			—			(459,266		)	—
Net income		390,516			23,135			438,539			(461,328		)	390,862
Amounts attributable to noncontrolling interests		—			—			(346		)	—			(346		)
Net income available to Arch		390,516			23,135			438,193			(461,328		)	390,516
Preferred dividends		(10,969		)	—			—			—			(10,969		)
Net income available to Arch common shareholders		$	379,547		$	23,135		$	438,193		$	(461,328	)	$	379,547
Comprehensive income (loss) available to Arch		$	549,435		$	40,406		$	587,467		$	(627,873	)	$	549,435

		Six Months Ended June 30, 2015
Condensed Consolidating Statement of Cash Flows		ACGL (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other ACGL Subsidiaries			Consolidating Adjustments and Eliminations			ACGL Consolidated
Operating Activities
	Net Cash Provided By (Used For) Operating Activities	$	378,703		$	8,282		$	433,833		$	(435,619	)	$	385,199
Investing Activities
Purchases of fixed maturity investments		—			—			(14,641,391		)	—			(14,641,391		)
Purchases of equity securities		—			—			(288,535		)	—			(288,535		)
Purchases of other investments		—			—			(1,273,780		)	—			(1,273,780		)
Proceeds from the sales of fixed maturity investments		—			20,002			14,335,517			—			14,355,519
Proceeds from the sales of equity securities		—			—			272,343			—			272,343
Proceeds from the sales, redemptions and maturities of other investments		—			—			1,078,675			—			1,078,675
Proceeds from redemptions and maturities of fixed maturity investments		—			—			474,984			—			474,984
Proceeds from investment in joint venture		—			—			40,000			—			40,000
Net purchases (sales) of short-term investments		(365		)	(12,171		)	16,243			—			3,707
Change in cash collateral related to securities lending		—			—			(18,329		)	—			(18,329		)
Contributions to subsidiaries		—			—			(9,290		)	9,290			—
Intercompany loans issued		—			(39,500		)	(27,500		)	67,000			—
Purchase of business, net of cash acquired		—			—			818			—			818
Purchases of furniture, equipment and other assets		(24		)	—			(43,141		)	—			(43,165		)
	Net Cash Provided By (Used For) Investing Activities	(389		)	(31,669		)	(83,386		)	76,290			(39,154		)
Financing Activities
Purchases of common shares under share repurchase program		(361,877		)	—			—			—			(361,877		)
Proceeds from common shares issued, net		2,178			—			9,290			(9,290		)	2,178
Proceeds from intercompany borrowings		—			27,500			39,500			(67,000		)	—
Change in cash collateral related to securities lending		—			—			18,329			—			18,329
Dividends paid to redeemable noncontrolling interests		—			—			(9,632		)	319			(9,313		)
Dividends paid to parent		—			—			(435,300		)	435,300			—
Other		—			28			54,990			—			55,018
Preferred dividends paid		(10,969		)	—			—			—			(10,969		)
	Net Cash Provided By (Used For) Financing Activities	(370,668		)	27,528			(322,823		)	359,329			(306,634		)
Effects of exchange rates changes on foreign currency cash		—			—			(39		)	—			(39		)
Increase (decrease) in cash		7,646			4,141			27,585			—			39,372
Cash beginning of year		3,218			2,787			479,697			—			485,702
Cash end of period		$	10,864		$	6,928		$	507,282		$	—		$	525,074

		Six Months Ended June 30, 2014
Condensed Consolidating Statement of Cash Flows		ACGL (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other ACGL Subsidiaries			Consolidating Adjustments and Eliminations			ACGL Consolidated
Operating Activities
	Net Cash Provided By (Used For) Operating Activities	$	10,099		$	424		$	474,565		$	(32,025	)	$	453,063
Investing Activities
Purchases of fixed maturity investments		—			(78,509		)	(14,233,239		)	—			(14,311,748		)
Purchases of equity securities		—			—			(174,687		)	—			(174,687		)
Purchases of other investments		—			—			(1,022,987		)	—			(1,022,987		)
Proceeds from the sales of fixed maturity investments		—			—			13,204,854			—			13,204,854
Proceeds from the sales of equity securities		—			—			98,687			—			98,687
Proceeds from the sales of other investments		—			—			618,707			—			618,707
Proceeds from redemptions and maturities of fixed maturity investments		—			—			432,040			—			432,040
Net (purchases) sales of short-term investments		(31		)	408,779			21,556			—			430,304
Change in cash collateral related to securities lending		—			—			18,701			—			18,701
Contributions to subsidiaries		—			(313,207		)	(100,000		)	413,207			—
Intercompany loans issued		—			—			10,250			(10,250		)	—
Purchase of business, net of cash acquired		—			—			(235,578		)	—			(235,578		)
Purchases of furniture, equipment and other assets		(128		)	—			(10,232		)	—			(10,360		)
	Net Cash Provided By (Used For) Investing Activities	(159		)	17,063			(1,371,928		)	402,957			(952,067		)
Financing Activities
Proceeds from common shares issued, net		2,521			—			413,207			(413,207		)	2,521
Repayments of intercompany borrowings		—			(10,250		)	—			10,250			—
Change in cash collateral related to securities lending		—			—			(18,701		)	—			(18,701		)
Third party investment in non-redeemable noncontrolling interests		—			—			796,903			—			796,903
Third party investment in redeemable noncontrolling interests		—			—			219,233			—			219,233
Dividends paid to redeemable noncontrolling interests		—			—			(4,816		)	—			(4,816		)
Dividends paid to parent		—			—			(32,025		)	32,025			—
Other		—			—			4,706			—			4,706
Preferred dividends paid		(10,969		)	—			—			—			(10,969		)
	Net Cash Provided By (Used For) Financing Activities	(8,448		)	(10,250		)	1,378,507			(370,932		)	988,877
Effects of exchange rates changes on foreign currency cash		—			—			2,513			—			2,513
Increase in cash		1,492			7,237			483,657			—			492,386
Cash beginning of year		3,223			509			430,325			—			434,057
Cash end of period		$	4,715		$	7,746		$	913,982		$	—		$	926,443