10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019
Or
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number:  001-16209

 

ARCH CAPITAL GROUP LTD.

(Exact name of registrant as specified in its charter)

Bermuda				98-0374481
(State or other jurisdiction of incorporation or organization)				(I.R.S. Employer Identification No.)
Waterloo House, Ground Floor
100 Pitts Bay Road,	Pembroke	HM 08,	Bermuda	(441)	278-9250
(Address of principal executive offices)				(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class	Trading Symbol (s)	Name of each exchange on which registered
Common shares, $0.0011 par value per share	ACGL	NASDAQ	Stock Market
Depositary shares, each representing a 1/100th interest in a 5.25% Series E preferred share	ACGLP	NASDAQ	Stock Market
Depositary shares, each representing a 1/100th interest in a 5.45% Series F preferred share	ACGLO	NASDAQ	Stock Market

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 ☑     No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☑     No ☐

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

Large Accelerated Filer ☑ Accelerated Filer ☐ Non-accelerated Filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of August 1, 2019, there were 404,987,803 common shares, $0.0011 par value per share, of the registrant outstanding.

ARCH CAPITAL GROUP LTD.

INDEX TO FORM 10-Q

		Page No.
	PART I
	Financial Information	2
Item 1.	Consolidated Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	49
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	73
Item 4.	Controls and Procedures	74
	PART II
	Other Information	75
Item 1.	Legal Proceedings	75
Item 1A.	Risk Factors	75
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	75
Item 3.	Defaults Upon Senior Securities	76
Item 4.	Mine Safety Disclosures	76
Item 5.	Other Information	76
Item 6.	Exhibits	77
	Signatures	78

ARCH CAPITAL  1 2019 SECOND QUARTER FORM 10-Q

PART I.  FINANCIAL INFORMATION

Cautionary Note Regarding Forward-Looking Statements 

The Private Securities Litigation Reform Act of 1995 (“PSLRA”) provides a “safe harbor” for forward-looking statements. This report 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 report 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 report 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;

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

• 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, unemployment, housing prices, 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 (including alternative sources of capital), 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;

• 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, 2019;

• 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 or severe economic events in our insurance, reinsurance and mortgage businesses could cause large losses and substantial volatility in our results of operations;

• the effect of climate change on our business;

• 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;

ARCH CAPITAL  2 2019 SECOND QUARTER FORM 10-Q

• 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;

• 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;

• a disruption caused by cyber-attacks or other technology breaches or failures on us or our business partners and service providers, which could negatively impact our business and/or expose us to litigation;

• statutory or regulatory developments, including as to tax 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, including the Tax Cuts and Jobs Act of 2017; 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 for the year ended December 31, 2018, 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. 

ARCH CAPITAL  3 2019 SECOND QUARTER FORM 10-Q

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

	Page No.
Report of Independent Registered Public Accounting Firm	5
Consolidated Balance Sheets
June 30, 2019 (unaudited) and December 31, 2018	6
Consolidated Statements of Income
For the three and six month periods ended June 30, 2019 and 2018 (unaudited)	7
Consolidated Statements of Comprehensive Income
For the three and six month periods ended June 30, 2019 and 2018 (unaudited)	8
Consolidated Statements of Changes in Shareholders’ Equity
For the three and six month periods ended June 30, 2019 and 2018 (unaudited)	9
Consolidated Statements of Cash Flows
For the six month periods ended June 30, 2019 and 2018 (unaudited)	10
Notes to Consolidated Financial Statements (unaudited)
Note 1 - Basis of Presentation and Recent Accounting Pronouncements	11
Note 2 - Share Transactions	12
Note 3 - Earnings Per Common Share	13
Note 4 - Segment Information	14
Note 5 - Reserve for Losses and Loss Adjustment Expenses	19
Note 6 - Investment Information	22
Note 7 - Fair Value	28
Note 8 - Derivative Instruments	34
Note 9 - Commitments and Contingencies	35
Note 10 - Leases	35
Note 11 - Variable Interest Entities and Noncontrolling Interests	36
Note 12 - Other Comprehensive Income (Loss)	39
Note 13 - Guarantor Financial Information	40
Note 14 - Income Taxes	48
Note 15 - Legal Proceedings	48
Note 16 - Subsequent Events	48

ARCH CAPITAL  4 2019 SECOND QUARTER FORM 10-Q

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Arch Capital Group Ltd.

Results of Review of Interim Financial Statements

We have reviewed the accompanying consolidated balance sheet of Arch Capital Group Ltd. and its subsidiaries (the “Company”) as of June 30, 2019, and the related consolidated statements of income, comprehensive income, and changes in shareholders’ equity for each of the three-month and six-month periods ended June 30, 2019 and 2018, and the consolidated statements of cash flows for the six-month periods ended June 30, 2019 and 2018, including the related notes (collectively referred to as the “interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of the Company as of December 31, 2018, 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 28, 2019, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2018, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

These interim financial statements are the responsibility of the Company’s management. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. 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 PCAOB, 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.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

New York, NY

August 7, 2019

ARCH CAPITAL  5 2019 SECOND QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (U.S. dollars in thousands, except share data)
	(Unaudited)
	June 30, 2019			December 31, 2018
Assets
Investments:
Fixed maturities available for sale, at fair value (amortized cost: $15,584,662 and $14,829,902)	$	15,881,732		$	14,699,010
Short-term investments available for sale, at fair value (amortized cost: $822,157 and $956,238)	821,961			955,880
Collateral received under securities lending, at fair value (amortized cost: $450,312 and $274,125)	450,320			274,133
Equity securities, at fair value	670,943			338,899
Investments accounted for using the fair value option	3,721,035			3,983,571
Investments accounted for using the equity method	1,581,972			1,493,791
Total investments	23,127,963			21,745,284
Cash	605,316			646,556
Accrued investment income	119,252			114,641
Securities pledged under securities lending, at fair value (amortized cost: $436,699 and $266,786)	440,510			268,395
Premiums receivable	1,606,040			1,299,150
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses	3,171,257			2,919,372
Contractholder receivables	2,102,544			2,079,111
Ceded unearned premiums	1,136,728			975,469
Deferred acquisition costs	600,740			569,574
Receivable for securities sold	164,592			36,246
Goodwill and intangible assets	641,010			634,920
Other assets	1,135,718			929,611
Total assets	$	34,851,670		$	32,218,329
Liabilities
Reserve for losses and loss adjustment expenses	$	12,230,316		$	11,853,297
Unearned premiums	4,056,860			3,753,636
Reinsurance balances payable	531,990			393,107
Contractholder payables	2,102,544			2,079,111
Collateral held for insured obligations	237,056			236,630
Senior notes	1,733,865			1,733,528
Revolving credit agreement borrowings	491,006			455,682
Securities lending payable	450,312			274,125
Payable for securities purchased	294,109			90,034
Other liabilities	904,438			911,500
Total liabilities	23,032,496			21,780,650
Commitments and Contingencies
Redeemable noncontrolling interests	206,475			206,292
Shareholders' Equity
Non-cumulative preferred shares	780,000			780,000
Common shares ($0.0011 par, shares issued: 573,761,683 and 570,737,283)	638			634
Additional paid-in capital	1,847,949			1,793,781
Retained earnings	10,322,975			9,426,299
Accumulated other comprehensive income (loss), net of deferred income tax	206,827			(178,720		)
Common shares held in treasury, at cost (shares: 168,874,149 and 168,282,449)	(2,401,037		)	(2,382,167		)
Total shareholders' equity available to Arch	10,757,352			9,439,827
Non-redeemable noncontrolling interests	855,347			791,560
Total shareholders' equity	11,612,699			10,231,387
Total liabilities, noncontrolling interests and shareholders' equity	$	34,851,670		$	32,218,329

See Notes to Consolidated Financial Statements

ARCH CAPITAL 6 2019 SECOND QUARTER FORM 10-Q

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,
	2019			2018			2019			2018
Revenues
Net premiums written	$	1,444,898		$	1,298,896		$	2,970,157		$	2,711,440
Change in unearned premiums	18,829			37,867			(137,564		)	(139,778		)
Net premiums earned	1,463,727			1,336,763			2,832,593			2,571,662
Net investment income	155,038			135,668			311,987			262,392
Net realized gains (losses)	120,806			(76,611		)	262,371			(187,609		)
Other-than-temporary impairment losses	(49		)	(470		)	(1,358		)	(632		)
Less investment impairments recognized in other comprehensive income, before taxes	—			—			—			—
Net impairment losses recognized in earnings	(49		)	(470		)	(1,358		)	(632		)
Other underwriting income	5,953			3,874			14,778			9,223
Equity in net income of investment funds accounted for using the equity method	32,536			8,472			79,403			36,541
Other income	1,129			3,113			2,212			3,187
Total revenues	1,779,140			1,410,809			3,501,986			2,694,764
Expenses
Losses and loss adjustment expenses	767,543			726,153			1,486,075			1,363,013
Acquisition expenses	210,089			202,838			407,937			394,214
Other operating expenses	198,914			176,181			400,077			351,196
Corporate expenses	18,251			22,512			36,213			37,824
Amortization of intangible assets	19,794			26,472			40,211			53,208
Interest expense	29,280			30,344			58,345			60,980
Net foreign exchange (gains) losses	4,952			(53,706		)	1,427			(33,985		)
Total expenses	1,248,823			1,130,794			2,430,285			2,226,450
Income before income taxes	530,317			280,015			1,071,701			468,314
Income tax expense	(44,472		)	(23,668		)	(90,358		)	(45,583		)
Net income	$	485,845		$	256,347		$	981,343		$	422,731
Net (income) loss attributable to noncontrolling interests	(16,891		)	(12,701		)	(63,861		)	(28,662		)
Net income available to Arch	468,954			243,646			917,482			394,069
Preferred dividends	(10,403		)	(10,403		)	(20,806		)	(20,840		)
Loss on redemption of preferred shares	—			—			—			(2,710		)
Net income available to Arch common shareholders	$	458,551		$	233,243		$	896,676		$	370,519
Net income per common share and common share equivalent
Basic	$	1.14		$	0.58		$	2.24		$	0.91
Diluted	$	1.12		$	0.56		$	2.19		$	0.89
Weighted average common shares and common share equivalents outstanding
Basic	401,482,784			404,800,421			400,837,181			406,162,508
Diluted	410,899,483			413,111,205			409,755,250			415,460,756

See Notes to Consolidated Financial Statements

ARCH CAPITAL 7 2019 SECOND QUARTER FORM 10-Q

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,
	2019			2018			2019			2018
Comprehensive Income
Net income	$	485,845		$	256,347		$	981,343		$	422,731
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	222,473			(85,271		)	448,360			(251,948		)
Reclassification of net realized (gains) losses, net of income taxes, included in net income (loss)	(55,345		)	36,643			(65,566		)	99,104
Foreign currency translation adjustments	4,267			(12,595		)	9,783			(11,313		)
Comprehensive income	657,240			195,124			1,373,920			258,574
Net (income) loss attributable to noncontrolling interests	(16,891		)	(12,701		)	(63,861		)	(28,662		)
Other comprehensive (income) loss attributable to noncontrolling interests	(2,891		)	1,077			(7,030		)	1,750
Comprehensive income available to Arch	$	637,458		$	183,500		$	1,303,029		$	231,662

See Notes to Consolidated Financial Statements

ARCH CAPITAL 8 2019 SECOND QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (U.S. dollars in thousands)
	(Unaudited)						(Unaudited)
	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Non-cumulative preferred shares
Balance at beginning of period	$	780,000		$	780,000		$	780,000		$	872,555
Preferred shares redeemed	—			—			—			(92,555		)
Balance at end of period	780,000			780,000			780,000			780,000
Convertible non-voting common equivalent preferred shares
Balance at beginning of period	—			—			—			489,627
Preferred shares converted to common shares	—			—			—			(489,627		)
Balance at end of period	—			—			—			—
Common shares
Balance at beginning of period	636			630			634			611
Common shares issued, net	2			3			4			22
Balance at end of period	638			633			638			633
Additional paid-in capital
Balance at beginning of period	1,819,605			1,737,978			1,793,781			1,230,617
Preferred shares converted to common shares	—			—			—			489,608
Other changes	28,344			22,628			54,168			40,381
Balance at end of period	1,847,949			1,760,606			1,847,949			1,760,606
Retained earnings
Balance at beginning of period	9,864,424			8,849,959			9,426,299			8,562,889
Cumulative effect of an accounting change	—			—			—			149,794
Balance at beginning of period, as adjusted	9,864,424			8,849,959			9,426,299			8,712,683
Net income	485,845			256,347			981,343			422,731
Net (income) loss attributable to noncontrolling interests	(16,891		)	(12,701		)	(63,861		)	(28,662		)
Preferred share dividends	(10,403		)	(10,403		)	(20,806		)	(20,840		)
Loss on redemption of preferred shares	—			—			—			(2,710		)
Balance at end of period	10,322,975			9,083,202			10,322,975			9,083,202
Accumulated other comprehensive income (loss), net of deferred income tax
Balance at beginning of period	38,323			(134,009		)	(178,720		)	118,044
Unrealized appreciation (decline) in value of available-for-sale investments, net of deferred income tax:
Balance at beginning of period	97,202			(96,238		)	(114,178		)	157,400
Cumulative effect of an accounting change	—			—			—			(149,794		)
Balance at beginning of period, as adjusted	97,202			(96,238		)	(114,178		)	7,606
Unrealized holding gains (losses) during period, net of reclassification adjustment	167,128			(48,628		)	382,794			(152,844		)
Unrealized holding gains (losses) during period attributable to noncontrolling interests	(2,703		)	1,513			(6,989		)	1,885
Balance at end of period	261,627			(143,353		)	261,627			(143,353		)
Foreign currency translation adjustments, net of deferred income tax:
Balance at beginning of period	(58,879		)	(37,771		)	(64,542		)	(39,356		)
Foreign currency translation adjustments	4,267			(12,595		)	9,783			(11,313		)
Foreign currency translation adjustments attributable to noncontrolling interests	(188		)	(438		)	(41		)	(135		)
Balance at end of period	(54,800		)	(50,804		)	(54,800		)	(50,804		)
Balance at end of period	206,827			(194,157		)	206,827			(194,157		)
Common shares held in treasury, at cost
Balance at beginning of period	(2,388,392		)	(2,084,186		)	(2,382,167		)	(2,077,741		)
Shares repurchased for treasury	(12,645		)	(182,343		)	(18,870		)	(188,788		)
Balance at end of period	(2,401,037		)	(2,266,529		)	(2,401,037		)	(2,266,529		)
Total shareholders’ equity available to Arch	10,757,352			9,163,755			10,757,352			9,163,755
Non-redeemable noncontrolling interests	855,347			861,153			855,347			861,153
Total shareholders’ equity	$	11,612,699		$	10,024,908		$	11,612,699		$	10,024,908

See Notes to Consolidated Financial Statements

ARCH CAPITAL 9 2019 SECOND QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (U.S. dollars in thousands)
	(Unaudited)
	Six Months Ended
	June 30,
	2019			2018
Operating Activities
Net income	$	981,343		$	422,731
Adjustments to reconcile net income to net cash provided by operating activities:
Net realized (gains) losses	(264,293		)	177,442
Net impairment losses recognized in earnings	1,358			632
Equity in net income or loss of investment funds accounted for using the equity method and other income or loss	(45,720		)	(13,543		)
Amortization of intangible assets	40,211			53,208
Share-based compensation	41,537			35,419
Changes in:
Reserve for losses and loss adjustment expenses, net of unpaid losses and loss adjustment expenses recoverable	154,396			(77,891		)
Unearned premiums, net of ceded unearned premiums	137,564			139,778
Premiums receivable	(302,050		)	(236,950		)
Deferred acquisition costs	(24,790		)	(35,111		)
Reinsurance balances payable	139,415			88,961
Other items, net	(146,447		)	(57,790		)
Net cash provided by (used for) operating activities	712,524			496,886
Investing Activities
Purchases of fixed maturity investments	(16,332,646		)	(16,867,570		)
Purchases of equity securities	(431,939		)	(679,663		)
Purchases of other investments	(677,063		)	(1,017,147		)
Proceeds from sales of fixed maturity investments	15,632,482			16,090,543
Proceeds from sales of equity securities	176,701			622,068
Proceeds from sales, redemptions and maturities of other investments	534,698			773,298
Proceeds from redemptions and maturities of fixed maturity investments	244,949			511,448
Net settlements of derivative instruments	87,701			4,498
Net sales of short-term investments	201,520			451,901
Change in cash collateral related to securities lending	7,590			176,304
Purchases of fixed assets	(16,359		)	(13,242		)
Other	(174,578		)	49,961
Net cash provided by (used for) investing activities	(746,944		)	102,399
Financing Activities
Redemption of preferred shares	—			(92,555		)
Purchases of common shares under share repurchase program	(2,871		)	(173,575		)
Proceeds from common shares issued, net	(557		)	(13,851		)
Proceeds from borrowings	62,800			130,579
Repayments of borrowings	(27,538		)	(373,000		)
Change in cash collateral related to securities lending	(7,590		)	(176,304		)
Dividends paid to redeemable noncontrolling interests	(8,994		)	(8,994		)
Other	(3,529		)	(4,489		)
Preferred dividends paid	(20,806		)	(20,840		)
Net cash provided by (used for) financing activities	(9,085		)	(733,029		)
Effects of exchange rate changes on foreign currency cash and restricted cash	1,937			(10,431		)
Increase (decrease) in cash and restricted cash	(41,568		)	(144,175		)
Cash and restricted cash, beginning of year	724,643			727,284
Cash and restricted cash, end of period	$	683,075		$	583,109

See Notes to Consolidated Financial Statements

ARCH CAPITAL 10 2019 SECOND QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.    Basis of Presentation and Recent Accounting Pronouncements

General

Arch Capital Group Ltd. (“Arch Capital”) is a Bermuda public limited liability company which provides insurance, reinsurance and mortgage insurance on a worldwide basis through its wholly-owned subsidiaries. As used herein, the “Company” means Arch Capital and its subsidiaries. The Company’s consolidated financial statements include the results of Watford Holdings Ltd. and its wholly owned subsidiaries. See note 11.

On January 1, 2019, the Company’s U.K. insurance operations entered into a transaction with The Ardonagh Group to acquire renewal rights for a U.K. commercial lines book of business, consisting of commercial property, casualty, motor, professional liability, personal accident and travel business.

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. 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 materially 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, 2018 (“2018 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.

Recent Accounting Pronouncements

Recently Issued Accounting Standards Adopted

The Company adopted ASU 2016-02, “Leases (Topic 842)”, which provides a new comprehensive model for lease accounting. Topic 842 requires a lessee to recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. The Company adopted the modified retrospective approach of this standard, that resulted in the recognition of a right-of-use asset of  $147.9 million as part of other assets and a lease liability of $163.6 million as part of other liabilities in the consolidated balance sheet as of January 1, 2019. The Company de-recognized the liability for deferred rent that was required under the previous guidance.

In addition, the Company adopted ASU 2018-11, “Leases: Targeted Improvements (Topic 842),” which provides an additional (optional) transition method to adopt the new lease standard. The Company adopted the alternative transition method and elected to utilize a cumulative-effect adjustment to the opening balance of the retained earnings for the year of adoption. As such, the Company’s reporting for the comparative periods prior to the adoption continue to be presented in the financial statements in accordance with previous lease accounting guidance. The Company also adopted the practical expedients as a package which allows the Company to not reassess (1) whether any expired or existing contracts are or contain leases (2) the lease classification for any expired or existing leases (3) initial direct costs for any existing leases and (4) to account for the lease and non lease components as a single lease component. In addition to electing the practical expedients as a package, the Company elected to include hindsight to determine the lease term of existing leases, and made an accounting policy election to not apply the recognition requirements to short-term leases (lease term of less than twelve months). The cumulative effect adjustment to the opening balance of retained earnings was zero. The adoption of the updated guidance did not have a material effect on the Company’s results of operations or liquidity.

The Company adopted ASU 2018-07 “Improvements to Nonemployee Share-Based Payment Accounting,” which was issued in June 2018 to simplify the accounting for share-based payments granted to nonemployees for goods and services. Under this ASU, most of the guidance on such payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. The ASU is effective for reporting periods beginning after December 15, 2018. This guidance and the adoption of this provision did not have a material effect on the Company's financial position, results of operations or cash flows.

ARCH CAPITAL  11 2019 SECOND QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The Company adopted ASU 2018-02 “Income Statement-Reporting Comprehensive Income (Topic 220) - Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,” which was issued in February 2018 to allow the reclassification of the stranded tax effects in accumulated other comprehensive income (“AOCI”) resulting from the Tax Cuts and Jobs Act of 2017 (“Tax Cuts Act”). Current guidance requires the effect of a change in tax laws or rates on deferred tax balances to be reported in income from continuing operations in the accounting period that includes the period of enactment, even if the related income tax effects were originally charged or credited directly to AOCI. The amount of the reclassification would include the effect of the change in the U.S. federal corporate income tax rate on the gross deferred tax amounts and related valuation allowances, if any, at the date of the enactment of the Tax Cuts Act related to items in AOCI. The updated guidance is effective for reporting periods beginning after December 15, 2018 and is to be applied retrospectively to each period in which the effect of the Tax Cuts Act related to items remaining in AOCI are recognized or at the beginning of the period of adoption. The adoption of this ASU did not have a material effect on the Company’s results of operations, financial position or liquidity.

The Company adopted ASU 2017-08 “Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities,” which was issued in March, 2017. This ASU shortens the amortization period for certain callable debt securities held at a premium and requires the premium to be amortized to the earliest call date. However, the new guidance does not require an accounting change for securities held at a discount whose discount continues to be amortized to maturity. The standard is effective for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. The adoption of the guidance requires a modified retrospective approach with a cumulative-effect adjustment to retained earnings. The adoption of this ASU did not have a material effect on the Company’s consolidated financial statements.

Recently Issued Accounting Standards Not Yet Adopted

For information regarding additional accounting standards that the Company has not yet adopted, see note 3(q), “Significant Accounting Policies—Recent Accounting Pronouncements,” of the notes to consolidated financial statements in the Company’s 2018 Form 10-K.

2.    Share Transactions

Share Repurchases 

The board of directors of Arch Capital has authorized the investment in Arch Capital’s common shares through a share

repurchase program. Since the inception of the share repurchase program, Arch Capital has repurchased 386.3 million common shares for an aggregate purchase price of $3.97 billion. For the six months ended June 30, 2019, Arch Capital repurchased 0.1 million shares under the share repurchase program with an aggregate purchase price of $2.9 million. Arch Capital repurchased 6.5 million shares under the share repurchase program with an aggregate purchase price of $173.6 million during the six months ended June 30, 2018. At June 30, 2019, $160.9 million of share repurchases were available under the program, which may be effected from time to time in open market or privately negotiated transactions through December 31, 2019. 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.

Conversion of Convertible Non-Voting Common Equivalent Preferred Shares  

In March 2018, Arch Capital completed an underwritten public secondary offering of 17.0 million common shares (split adjusted) by American International Group, Inc. (“AIG”) following transfer of 0.6 million Series D convertible non-voting common equivalent preferred shares (“Series D Preferred Shares”). Proceeds from the sale of common shares pursuant to the public offering were received by AIG. At June 30, 2019, no Series D Preferred Shares were outstanding.

Series C Preferred Shares

On January 2, 2018, Arch Capital redeemed all outstanding 6.75% Series C non-cumulative preferred shares. The preferred shares were redeemed at a redemption price equal to $25 per share, plus all declared and unpaid dividends to (but excluding) the redemption date. In accordance with GAAP, following the redemption, original issuance costs related to such shares were removed from additional paid-in capital and recorded as a “loss on redemption of preferred shares.” Such adjustment had no impact on total shareholders’ equity or cash flows.

ARCH CAPITAL  12 2019 SECOND QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

3.    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,
	2019			2018			2019			2018
Numerator:
Net income	$	485,845		$	256,347		$	981,343		$	422,731
Amounts attributable to noncontrolling interests	(16,891		)	(12,701		)	(63,861		)	(28,662		)
Net income available to Arch	468,954			243,646			917,482			394,069
Preferred dividends	(10,403		)	(10,403		)	(20,806		)	(20,840		)
Loss on redemption of preferred shares	—			—			—			(2,710		)
Net income available to Arch common shareholders	$	458,551		$	233,243		$	896,676		$	370,519
Denominator:
Weighted average common shares outstanding	401,482,784			404,800,421			400,837,181			399,485,135
Series D preferred shares (1)	—			—			—			6,677,373
Weighted average common shares and common share equivalents outstanding — basic	401,482,784			404,800,421			400,837,181			406,162,508
Effect of dilutive common share equivalents:
Nonvested restricted shares	1,937,626			1,575,749			1,720,417			1,837,356
Stock options (2)	7,479,073			6,735,035			7,197,652			7,460,892
Weighted average common shares and common share equivalents outstanding — diluted	410,899,483			413,111,205			409,755,250			415,460,756
Earnings per common share:
Basic	$	1.14		$	0.58		$	2.24		$	0.91
Diluted	$	1.12		$	0.56		$	2.19		$	0.89

(1) Such shares are convertible non-voting common equivalent preferred shares issued in connection with the UGC acquisition. See note 2.

(2) 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 2019 second quarter and 2018 second quarter, the number of stock options excluded were 2,016,830 and 5,350,733, respectively. For the six months ended June 30, 2019 and 2018 period, the number of stock options excluded were 2,560,755 and 5,372,789, respectively.

ARCH CAPITAL  13 2019 SECOND QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4.    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 President and Chief Executive Officer of Arch Capital, and the Chief Financial Officer of Arch Capital. 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 includes the Company’s U.S. and international mortgage insurance and reinsurance operations as well as government sponsored enterprise (“GSE”) credit-risk sharing transactions. Arch Mortgage Insurance Company and United Guaranty Residential Insurance Company (combined “Arch MI U.S.”) are approved as eligible mortgage insurers by Federal National Mortgage Association (“Fannie Mae”) and Federal Home Loan Mortgage Corporation (“Freddie Mac”), each a GSE.

The corporate (non-underwriting) segment results include net investment income, other income (loss), corporate expenses, transaction costs and other, interest expense, items related to the Company’s non-cumulative preferred shares, 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 and income taxes. Such amounts exclude the results of the ‘other’ segment.

The ‘other’ segment includes the results of Watford Holdings Ltd. Watford Holdings Ltd. is the parent of Watford Re Ltd., a multi-line Bermuda reinsurance company (together with Watford Holdings Ltd., “Watford Re”) (see note 11). 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.

ARCH CAPITAL  14 2019 SECOND QUARTER FORM 10-Q

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 Arch common shareholders:

	Three Months Ended
	June 30, 2019
	Insurance			Reinsurance			Mortgage			Sub-Total			Other			Total
Gross premiums written (1)	$	919,925		$	545,547		$	364,465		$	1,829,829		$	161,978		$	1,937,809
Premiums ceded	(292,095		)	(169,457		)	(42,857		)	(504,301		)	(42,608		)	(492,911		)
Net premiums written	627,830			376,090			321,608			1,325,528			119,370			1,444,898
Change in unearned premiums	(35,388		)	(8,906		)	31,175			(13,119		)	31,948			18,829
Net premiums earned	592,442			367,184			352,783			1,312,409			151,318			1,463,727
Other underwriting income (loss)	—			1,224			4,056			5,280			673			5,953
Losses and loss adjustment expenses	(389,172		)	(240,958		)	(25,997		)	(656,127		)	(111,416		)	(767,543		)
Acquisition expenses	(91,094		)	(56,785		)	(32,654		)	(180,533		)	(29,556		)	(210,089		)
Other operating expenses	(109,523		)	(33,960		)	(39,819		)	(183,302		)	(15,612		)	(198,914		)
Underwriting income (loss)	$	2,653		$	36,705		$	258,369		297,727			(4,593		)	293,134
Net investment income										123,038			32,000			155,038
Net realized gains (losses)										125,112			(4,306		)	120,806
Net impairment losses recognized in earnings										(49		)	—			(49		)
Equity in net income (loss) of investment funds accounted for using the equity method										32,536			—			32,536
Other income (loss)										1,129			—			1,129
Corporate expenses (2)										(16,073		)	—			(16,073		)
Transaction costs and other (2)										(2,178		)	—			(2,178		)
Amortization of intangible assets										(19,794		)	—			(19,794		)
Interest expense										(23,375		)	(5,905		)	(29,280		)
Net foreign exchange gains (losses)										(6,190		)	1,238			(4,952		)
Income before income taxes										511,883			18,434			530,317
Income tax expense										(44,452		)	(20		)	(44,472		)
Net income										467,431			18,414			485,845
Dividends attributable to redeemable noncontrolling interests										—			(4,590		)	(4,590		)
Amounts attributable to nonredeemable noncontrolling interests										—			(12,301		)	(12,301		)
Net income available to Arch										467,431			1,523			468,954
Preferred dividends										(10,403		)	—			(10,403		)
Net income available to Arch common shareholders										$	457,028		$	1,523		$	458,551
Underwriting Ratios
Loss ratio	65.7		%	65.6		%	7.4		%	50.0		%	73.6		%	52.4		%
Acquisition expense ratio	15.4		%	15.5		%	9.3		%	13.8		%	19.5		%	14.4		%
Other operating expense ratio	18.5		%	9.2		%	11.3		%	14.0		%	10.3		%	13.6		%
Combined ratio	99.6		%	90.3		%	28.0		%	77.8		%	103.4		%	80.4		%
Goodwill and intangible assets	$	157,440		$	—		$	475,920		$	633,360		$	7,650		$	641,010

(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.

(2) Certain expenses have been excluded from ‘corporate expenses’ and reflected in ‘transaction costs and other.’

ARCH CAPITAL  15 2019 SECOND QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

	Three Months Ended
	June 30, 2018
	Insurance			Reinsurance			Mortgage			Sub-Total			Other			Total
Gross premiums written (1)	$	769,372		$	490,327		$	330,990		$	1,591,202		$	175,175		$	1,696,544
Premiums ceded	(245,265		)	(136,247		)	(50,867		)	(432,892		)	(34,589		)	(397,648		)
Net premiums written	524,107			354,080			280,123			1,158,310			140,586			1,298,896
Change in unearned premiums	22,342			(13,762		)	10,355			18,935			18,932			37,867
Net premiums earned	546,449			340,318			290,478			1,177,245			159,518			1,336,763
Other underwriting income (loss)	—			(129		)	3,315			3,186			688			3,874
Losses and loss adjustment expenses	(357,465		)	(229,956		)	(21,591		)	(609,012		)	(117,141		)	(726,153		)
Acquisition expenses	(90,670		)	(50,142		)	(27,737		)	(168,549		)	(34,289		)	(202,838		)
Other operating expenses	(92,680		)	(35,678		)	(38,729		)	(167,087		)	(9,094		)	(176,181		)
Underwriting income (loss)	$	5,634		$	24,413		$	205,736		235,783			(318		)	235,465
Net investment income										107,761			27,907			135,668
Net realized gains (losses)										(59,545		)	(17,066		)	(76,611		)
Net impairment losses recognized in earnings										(470		)	—			(470		)
Equity in net income (loss) of investment funds accounted for using the equity method										8,472			—			8,472
Other income (loss)										3,113			—			3,113
Corporate expenses (2)										(15,604		)	—			(15,604		)
Transaction costs and other (2)										(6,908		)	—			(6,908		)
Amortization of intangible assets										(26,472		)	—			(26,472		)
Interest expense										(26,058		)	(4,286		)	(30,344		)
Net foreign exchange gains (losses)										46,211			7,495			53,706
Income before income taxes										266,283			13,732			280,015
Income tax expense										(23,644		)	(24		)	(23,668		)
Net income										242,639			13,708			256,347
Dividends attributable to redeemable noncontrolling interests										—			(4,585		)	(4,585		)
Amounts attributable to nonredeemable noncontrolling interests										—			(8,116		)	(8,116		)
Net income available to Arch										242,639			1,007			243,646
Preferred dividends										(10,403		)	—			(10,403		)
Net income available to Arch common shareholders										$	232,236		$	1,007		$	233,243
Underwriting Ratios
Loss ratio	65.4		%	67.6		%	7.4		%	51.7		%	73.4		%	54.3		%
Acquisition expense ratio	16.6		%	14.7		%	9.5		%	14.3		%	21.5		%	15.2		%
Other operating expense ratio	17.0		%	10.5		%	13.3		%	14.2		%	5.7		%	13.2		%
Combined ratio	99.0		%	92.8		%	30.2		%	80.2		%	100.6		%	82.7		%
Goodwill and intangible assets	$	20,724		$	—		$	564,634		$	585,358		$	7,650		$	593,008

(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.

(2) Certain expenses have been excluded from ‘corporate expenses’ and reflected in ‘transaction costs and other.’

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 Arch common shareholders:

ARCH CAPITAL  16 2019 SECOND QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

	Six Months Ended
	June 30, 2019
	Insurance			Reinsurance			Mortgage			Sub-Total			Other			Total
Gross premiums written (1)	$	1,861,879		$	1,228,402		$	720,515		$	3,810,282		$	348,667		$	4,015,688
Premiums ceded	(612,717		)	(401,024		)	(91,655		)	(1,104,882		)	(83,910		)	(1,045,531		)
Net premiums written	1,249,162			827,378			628,860			2,705,400			264,757			2,970,157
Change in unearned premiums	(103,215		)	(113,829		)	46,825			(170,219		)	32,655			(137,564		)
Net premiums earned	1,145,947			713,549			675,685			2,535,181			297,412			2,832,593
Other underwriting income (loss)	—			5,601			7,912			13,513			1,265			14,778
Losses and loss adjustment expenses	(745,895		)	(480,768		)	(37,146		)	(1,263,809		)	(222,266		)	(1,486,075		)
Acquisition expenses	(173,918		)	(111,111		)	(64,326		)	(349,355		)	(58,582		)	(407,937		)
Other operating expenses	(222,919		)	(69,664		)	(79,694		)	(372,277		)	(27,800		)	(400,077		)
Underwriting income (loss)	$	3,215		$	57,607		$	502,431		563,253			(9,971		)	553,282
Net investment income										244,287			67,700			311,987
Net realized gains (losses)										237,545			24,826			262,371
Net impairment losses recognized in earnings										(1,358		)	—			(1,358		)
Equity in net income (loss) of investment funds accounted for using the equity method										79,403			—			79,403
Other income (loss)										2,212			—			2,212
Corporate expenses (2)										(32,845		)	—			(32,845		)
Transaction costs and other (2)										(3,368		)	—			(3,368		)
Amortization of intangible assets										(40,211		)	—			(40,211		)
Interest expense										(46,857		)	(11,488		)	(58,345		)
Net foreign exchange gains (losses)										(1,015		)	(412		)	(1,427		)
Income before income taxes										1,001,046			70,655			1,071,701
Income tax expense										(90,338		)	(20		)	(90,358		)
Net income										910,708			70,635			981,343
Dividends attributable to redeemable noncontrolling interests										—			(9,178		)	(9,178		)
Amounts attributable to nonredeemable noncontrolling interests										—			(54,683		)	(54,683		)
Net income available to Arch										910,708			6,774			917,482
Preferred dividends										(20,806		)	—			(20,806		)
Net income available to Arch common shareholders										$	889,902		$	6,774		$	896,676
Underwriting Ratios
Loss ratio	65.1		%	67.4		%	5.5		%	49.9		%	74.7		%	52.5		%
Acquisition expense ratio	15.2		%	15.6		%	9.5		%	13.8		%	19.7		%	14.4		%
Other operating expense ratio	19.5		%	9.8		%	11.8		%	14.7		%	9.3		%	14.1		%
Combined ratio	99.8		%	92.8		%	26.8		%	78.4		%	103.7		%	81.0		%

(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.

(2) Certain expenses have been excluded from ‘corporate expenses’ and reflected in ‘transaction costs and other.’

ARCH CAPITAL  17 2019 SECOND QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

	Six Months Ended
	June 30, 2018
	Insurance			Reinsurance			Mortgage			Sub-Total			Other			Total
Gross premiums written (1)	$	1,592,750		$	1,067,810		$	652,168		$	3,312,807		$	389,045		$	3,534,758
Premiums ceded	(492,445		)	(331,977		)	(97,004		)	(921,505		)	(68,907		)	(823,318		)
Net premiums written	1,100,305			735,833			555,164			2,391,302			320,138			2,711,440
Change in unearned premiums	(15,119		)	(116,343		)	15,556			(115,906		)	(23,872		)	(139,778		)
Net premiums earned	1,085,186			619,490			570,720			2,275,396			296,266			2,571,662
Other underwriting income (loss)	—			1,103			6,731			7,834			1,389			9,223
Losses and loss adjustment expenses	(711,195		)	(371,631		)	(65,057		)	(1,147,883		)	(215,130		)	(1,363,013		)
Acquisition expenses	(175,839		)	(98,461		)	(54,304		)	(328,604		)	(65,610		)	(394,214		)
Other operating expenses	(184,654		)	(71,249		)	(77,500		)	(333,403		)	(17,793		)	(351,196		)
Underwriting income (loss)	$	13,498		$	79,252		$	380,590		473,340			(878		)	472,462
Net investment income										208,004			54,388			262,392
Net realized gains (losses)										(171,404		)	(16,205		)	(187,609		)
Net impairment losses recognized in earnings										(632		)	—			(632		)
Equity in net income (loss) of investment funds accounted for using the equity method										36,541			—			36,541
Other income (loss)										3,187			—			3,187
Corporate expenses (2)										(30,086		)	—			(30,086		)
Transaction costs and other (2)										(7,738		)	—			(7,738		)
Amortization of intangible assets										(53,208		)	—			(53,208		)
Interest expense										(51,965		)	(9,015		)	(60,980		)
Net foreign exchange gains (losses)										31,172			2,813			33,985
Income before income taxes										437,211			31,103			468,314
Income tax expense										(45,556		)	(27		)	(45,583		)
Net income										391,655			31,076			422,731
Dividends attributable to redeemable noncontrolling interests										—			(9,170		)	(9,170		)
Amounts attributable to nonredeemable noncontrolling interests										—			(19,492		)	(19,492		)
Net income available to Arch										391,655			2,414			394,069
Preferred dividends										(20,840		)	—			(20,840		)
Loss on redemption of preferred shares										(2,710		)	—			(2,710		)
Net income available to Arch common shareholders										$	368,105		$	2,414		$	370,519
Underwriting Ratios
Loss ratio	65.5		%	60.0		%	11.4		%	50.4		%	72.6		%	53.0		%
Acquisition expense ratio	16.2		%	15.9		%	9.5		%	14.4		%	22.1		%	15.3		%
Other operating expense ratio	17.0		%	11.5		%	13.6		%	14.7		%	6.0		%	13.7		%
Combined ratio	98.7		%	87.4		%	34.5		%	79.5		%	100.7		%	82.0		%

(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.

(2) Certain expenses have been excluded from ‘corporate expenses’ and reflected in ‘transaction costs and other.’

ARCH CAPITAL  18 2019 SECOND QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

5.    Reserve for Losses and Loss Adjustment Expenses

The following table represents an analysis of losses and loss adjustment expenses and a reconciliation of the beginning and ending reserve for losses and loss adjustment expenses:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Reserve for losses and loss adjustment expenses at beginning of period	$	12,010,041		$	11,496,205		$	11,853,297		$	11,383,792
Unpaid losses and loss adjustment expenses recoverable	2,970,159			2,446,990			2,814,291			2,464,910
Net reserve for losses and loss adjustment expenses at beginning of period	9,039,882			9,049,215			9,039,006			8,918,882
Net incurred losses and loss adjustment expenses relating to losses occurring in:
Current year	805,728			790,742			1,563,692			1,478,627
Prior years	(38,185		)	(64,589		)	(77,617		)	(115,614		)
Total net incurred losses and loss adjustment expenses	767,543			726,153			1,486,075			1,363,013
Retroactive reinsurance transactions (1)	—			(420,404		)	(225,500		)	(420,404		)
Net foreign exchange (gains) losses	(1,277		)	(120,292		)	(1,781		)	(76,278		)
Net paid losses and loss adjustment expenses relating to losses occurring in:
Current year	(61,148		)	(59,022		)	(125,488		)	(95,022		)
Prior years	(539,481		)	(403,062		)	(966,793		)	(917,603		)
Total net paid losses and loss adjustment expenses	(600,629		)	(462,084		)	(1,092,281		)	(1,012,625		)
Net reserve for losses and loss adjustment expenses at end of period	9,205,519			8,772,588			9,205,519			8,772,588
Unpaid losses and loss adjustment expenses recoverable	3,024,797			2,651,749			3,024,797			2,651,749
Reserve for losses and loss adjustment expenses at end of period	$	12,230,316		$	11,424,337		$	12,230,316		$	11,424,337

(1) During the 2019 first quarter and 2018 second quarter, a subsidiary of the Company entered into two separate retroactive reinsurance transactions with third party reinsurers to reinsure run-off liabilities associated with certain U.S. exposures.

Development on Prior Year Loss Reserves

2019 Second Quarter

During the 2019 second quarter, the Company recorded net favorable development on prior year loss reserves of $38.2 million, which consisted of $2.6 million of favorable development from the insurance segment, $12.7 million from the reinsurance segment, $22.8 million from the mortgage segment and $0.1 million from the ‘other’ segment.

The insurance segment’s net favorable development of $2.6 million, or 0.4 loss ratio points, for the 2019 second quarter consisted of $8.0 million of net favorable development in short-tailed lines, $10.4 million of net adverse development in medium-tailed lines and $4.9 million of net favorable development in long-tailed lines. Net favorable development in short-tailed lines primarily resulted from property (including special risk other than marine) reserves across all accident years (i.e., the year in which a loss occurred). Net adverse development in medium-tailed lines primarily resulted from $15.5 million of adverse development on program business. Such amounts were partially offset by $5.1 million of net favorable development in other medium-tailed lines, including

surety business and professional liability, across most accident years. Net favorable development in long-tailed lines primarily resulted from reductions in executive assurance reserves of $5.1 million, primarily from the 2008 to 2014 accident years.

The reinsurance segment’s net favorable development of $12.7 million, or 3.5 loss ratio points, for the 2019 second quarter consisted of $1.8 million of net favorable development from short-tailed lines and $10.9 million of net favorable development from long-tailed and medium-tailed lines. Net favorable development in short-tailed lines primarily resulted from other specialty lines across most underwriting years (i.e., all premiums and losses attributable to contracts having an inception or renewal date within the given twelve-month period) and in property other than property catastrophe reserves from earlier underwriting years, partially offset by a small amount of adverse development from property catastrophe and property other than property catastrophe reserves in the 2015 and 2018 underwriting years. Favorable development in long-tailed and medium-tailed lines reflected reductions in casualty and marine reserves from most underwriting years.

The mortgage segment’s net favorable development was $22.8 million, or 6.5 loss ratio points, for the 2019 second quarter. The 2019 second quarter development was primarily driven by

ARCH CAPITAL  19 2019 SECOND QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

continued favorable claim rates on first lien business and subrogation recoveries on second lien business.

2018 Second Quarter

During the 2018 second quarter, the Company recorded net favorable development on prior year loss reserves of $64.6 million, which consisted of $6.1 million from the insurance segment, $33.0 million from the reinsurance segment, $23.3 million from the mortgage segment and adverse development of $2.2 million from the ‘other’ segment.

The insurance segment’s net favorable development of $6.1 million, or 1.1 loss ratio points, for the 2018 second quarter consisted of $13.9 million of net favorable development in short-tailed lines and $14.3 million of net favorable development in long-tailed lines, partially offset by $22.1 million of net adverse development in medium-tailed lines. Net favorable development in short-tailed lines primarily resulted from property (including special risk other than marine) reserves from the 2010 to 2017 accident years while net favorable development in long-tailed lines primarily resulted from reductions in executive assurance reserves of $6.9 million, primarily from the 2007 to 2011 accident years, and in healthcare reserves of $4.9 million, primarily from the 2003 accident year. Net adverse development in medium-tailed lines reflected $11.6 million of adverse development in program business, primarily driven by a few inactive programs that were non-renewed in 2015 and early in 2016 and $18.0 million of adverse development on contract binding business, primarily from the 2014 to 2016 accident years. Such amounts were partially offset by $7.6 million of net favorable development in other medium-tailed lines, including professional liability and surety business, across most accident years.

The reinsurance segment’s net favorable development of $33.0 million, or 9.7 loss ratio points, for the 2018 second quarter consisted of $22.2 million from short-tailed lines and $10.8 million from long-tailed and medium-tailed lines. Favorable development in short-tailed lines included $19.3 million from property catastrophe and property other than property catastrophe reserves, across most underwriting years, reflecting lower 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 and medium-tailed lines reflected reductions in marine reserves of $3.8 million, across most accident years, and in casualty reserves of $6.9 million based on varying levels of reported and paid claims activity, primarily from the 2003 to 2010 underwriting years.

The mortgage segment’s net favorable development was $23.3 million, or 8.0 loss ratio points, for the 2018 second quarter. The 2018 second quarter development was primarily driven by continued lower than expected claim rates on first lien business and subrogation recoveries on second lien business.

Six Months Ended June 30, 2019

During the six months ended June 30, 2019, the Company recorded net favorable development on prior year loss reserves of $77.6 million, which consisted of $7.0 million from the insurance segment, $11.0 million from the reinsurance segment, $59.4 million from the mortgage segment and $0.1 million from the ‘other’ segment.

The insurance segment’s net favorable development of $7.0 million, or 0.6 loss ratio points, for the 2019 period consisted of $17.7 million of net favorable development in short-tailed lines and $6.6 million of net favorable development in long-tailed lines, partially offset by $17.3 million of net adverse development in medium-tailed lines. Net favorable development in short-tailed lines primarily resulted from property (including special risk other than marine) reserves from the 2010 to 2018 accident years. Net favorable development in long-tailed lines reflected net reductions in executive assurance reserves of $5.7 million, primarily from the 2013 and 2015 accident years. Net adverse development in medium-tailed lines reflected $23.2 million of adverse development in program business, primarily from the 2018 accident year, and $9.7 million of adverse development on contract binding business, across most accident years. Such amounts were partially offset by $15.6 million of net favorable development in other medium-tailed lines, including professional liability, marine and surety business, across most accident years.

The reinsurance segment’s net favorable development of $11.0 million, or 1.5 loss ratio points, for the 2019 period consisted of $4.3 million of net adverse development from short-tailed lines, offset by $15.3 million of net favorable development from long-tailed and medium-tailed lines. Net adverse development in short-tailed lines reflected $17.9 million from property catastrophe and property other than property catastrophe reserves, reflecting an increase in reserves on Typhoon Jebi in the 2019 first quarter of $16.0 million following receipt of updated information from cedents and additional updated industry data. Such amounts were partially offset by $10.2 million of favorable development on other specialty lines, primarily from the 2016 to 2018 underwriting years. Favorable development in long-tailed and medium-tailed lines reflected reductions in casualty reserves of $9.1 million based on varying levels of reported and paid claims activity, primarily from the 2002 to 2007 underwriting years, and favorable development in marine reserves of $6.2 million, primarily from the 2015 to 2018 underwriting years.

The mortgage segment’s net favorable development was $59.4 million, or 8.8 loss ratio points, for the 2019 period. The 2019 development was primarily driven by continued lower than expected claim rates on first lien business and subrogation recoveries on second lien business.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Six Months Ended June 30, 2018

During the six months ended June 30, 2018, the Company recorded net favorable development on prior year loss reserves of $115.6 million, which consisted of $8.2 million from the insurance segment, $69.6 million from the reinsurance segment, $36.3 million from the mortgage segment and $1.6 million from the ‘other’ segment.

The insurance segment’s net favorable development of $8.2 million, or 0.8 loss ratio points, for the 2018 period consisted of $22.7 million of net favorable development in short-tailed lines and $17.2 million of net favorable development in long-tailed lines, partially offset by $31.7 million of net adverse development in medium-tailed lines. Net favorable development in short-tailed lines primarily resulted from property (including special risk other than marine) reserves from the 2010 and 2017 accident years. Net favorable development in long-tailed lines reflected net reductions in executive assurance reserves of $7.5 million, primarily from the 2008 to 2015 accident years, and in healthcare reserves of $7.0 million, primarily from the 2003 accident year. Net adverse development in medium-tailed lines reflected $21.9 million of adverse development in program business, primarily driven by a few inactive programs that were non-renewed in 2015 and early in 2016 and $25.6 million of adverse development on contract binding business, primarily from the 2014 to 2016 accident years. Such amounts were partially offset by $15.8 million of net favorable development in other medium-tailed lines, including professional liability and surety business, across most accident years.

The reinsurance segment’s net favorable development of $69.6 million, or 11.2 loss ratio points, for the 2018 period consisted of $51.1 million from short-tailed lines and $18.5 million from long-tailed and medium-tailed lines. Favorable development in short-tailed lines included $40.4 million from property catastrophe and property other than property catastrophe reserves, across most underwriting years, reflecting lower 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 and medium-tailed lines reflected reductions in casualty reserves of $8.1 million based on varying levels of reported and paid claims activity, primarily from the 2002 to 2010 underwriting years, and favorable development in marine reserves of $10.0 million across most underwriting years.

The mortgage segment’s net favorable development was $36.3 million, or 6.4 loss ratio points, for the 2018 period. The 2018 development was primarily driven by continued lower than expected claim rates on first lien business and subrogation recoveries on second lien business.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

6.    Investment Information

At June 30, 2019, total investable assets of $23.55 billion included $20.78 billion held by the Company and $2.77 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 securities classified as available for sale:

	Estimated Fair Value		Gross Unrealized Gains		Gross Unrealized Losses			Cost or Amortized Cost		OTTI Unrealized Losses (2)
June 30, 2019
Fixed maturities (1):
Corporate bonds	$	6,044,081	$	166,372	$	(19,805	)	$	5,897,514	$	—
Mortgage backed securities	523,019		11,385		(187		)	511,821		(6		)
Municipal bonds	582,497		21,755		(58		)	560,800		—
Commercial mortgage backed securities	686,707		21,272		(228		)	665,663		—
U.S. government and government agencies	4,906,996		68,017		(2,051		)	4,841,030		—
Non-U.S. government securities	1,928,752		45,881		(36,125		)	1,918,996		—
Asset backed securities	1,636,897		28,133		(3,480		)	1,612,244		—
Total	16,308,949		362,815		(61,934		)	16,008,068		(6		)
Short-term investments	821,961		284		(480		)	822,157		—
Total	$	17,130,910	$	363,099	$	(62,414	)	$	16,830,225	$	(6	)
December 31, 2018
Fixed maturities (1):
Corporate bonds	$	5,537,548	$	14,476	$	(105,428	)	$	5,628,500	$	(69	)
Mortgage backed securities	541,193		3,991		(3,216		)	540,418		(6		)
Municipal bonds	1,013,395		5,380		(11,891		)	1,019,906		—
Commercial mortgage backed securities	729,442		2,650		(10,751		)	737,543		—
U.S. government and government agencies	3,758,698		27,189		(8,474		)	3,739,983		—
Non-U.S. government securities	1,771,338		14,477		(50,948		)	1,807,809		—
Asset backed securities	1,600,896		8,060		(14,798		)	1,607,634		—
Total	14,952,510		76,223		(205,506		)	15,081,793		(75		)
Short-term investments	955,880		36		(394		)	956,238		—
Total	$	15,908,390	$	76,259	$	(205,900	)	$	16,038,031	$	(75	)

(1) In securities lending transactions, the Company receives collateral in excess of the fair value of the fixed maturities 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, 2019 the net unrealized loss related to securities for which a non-credit OTTI was recognized in AOCI was $0.01 million, compared to net unrealized loss of $0.04 million at December 31, 2018.

ARCH CAPITAL  22 2019 SECOND QUARTER FORM 10-Q

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, 2019
Fixed maturities (1):
Corporate bonds	$	259,361	$	(10,678	)	$	375,478	$	(9,127	)	$	634,839	$	(19,805	)
Mortgage backed securities	19,612		(169		)	261		(18		)	19,873		(187		)
Municipal bonds	—		—			12,489		(58		)	12,489		(58		)
Commercial mortgage backed securities	18,917		(106		)	23,198		(122		)	42,115		(228		)
U.S. government and government agencies	906,497		(1,711		)	104,692		(340		)	1,011,189		(2,051		)
Non-U.S. government securities	1,092,560		(33,985		)	124,466		(2,140		)	1,217,026		(36,125		)
Asset backed securities	312,033		(1,901		)	130,002		(1,579		)	442,035		(3,480		)
Total	2,608,980		(48,550		)	770,586		(13,384		)	3,379,566		(61,934		)
Short-term investments	53,431		(480		)	—		—			53,431		(480		)
Total	$	2,662,411	$	(49,030	)	$	770,586	$	(13,384	)	$	3,432,997	$	(62,414	)
December 31, 2018
Fixed maturities (1):
Corporate bonds	$	2,983,195	$	(68,910	)	$	1,234,865	$	(36,518	)	$	4,218,060	$	(105,428	)
Mortgage backed securities	84,296		(695		)	109,009		(2,521		)	193,305		(3,216		)
Municipal bonds	233,081		(2,074		)	408,155		(9,817		)	641,236		(11,891		)
Commercial mortgage backed securities	223,341		(2,831		)	193,956		(7,920		)	417,297		(10,751		)
U.S. government and government agencies	635,049		(1,354		)	391,102		(7,120		)	1,026,151		(8,474		)
Non-U.S. government securities	1,028,340		(35,524		)	389,671		(15,424		)	1,418,011		(50,948		)
Asset backed securities	533,592		(8,832		)	368,095		(5,966		)	901,687		(14,798		)
Total	5,720,894		(120,220		)	3,094,853		(85,286		)	8,815,747		(205,506		)
Short-term investments	122,878		(394		)	—		—			122,878		(394		)
Total	$	5,843,772	$	(120,614	)	$	3,094,853	$	(85,286	)	$	8,938,625	$	(205,900	)

(1) In securities lending transactions, the Company receives collateral in excess of the fair value of the fixed maturities 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, 2019, on a lot level basis, approximately 1,690 security lots out of a total of approximately 8,730 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 $3.1 million. At December 31, 2018, on a lot level basis, approximately 5,870 security lots out of a total of approximately 8,450 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 $2.6 million.

ARCH CAPITAL  23 2019 SECOND QUARTER FORM 10-Q

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, 2019				December 31, 2018
Maturity	Estimated Fair Value		Amortized Cost		Estimated Fair Value		Amortized Cost
Due in one year or less	$	414,736	$	413,481	$	276,682	$	279,135
Due after one year through five years	9,833,517		9,702,349		8,666,297		8,738,944
Due after five years through 10 years	3,028,435		2,923,881		2,919,232		2,951,582
Due after 10 years	185,638		178,629		218,768		226,537
	13,462,326		13,218,340		12,080,979		12,196,198
Mortgage backed securities	523,019		511,821		541,193		540,418
Commercial mortgage backed securities	686,707		665,663		729,442		737,543
Asset backed securities	1,636,897		1,612,244		1,600,896		1,607,634
Total (1)	$	16,308,949	$	16,008,068	$	14,952,510	$	15,081,793

(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

The Company enters into securities lending agreements with financial institutions to enhance investment income whereby it 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 from the Company.

The Company receives collateral in the form of cash or securities. Cash collateral primarily consists of short term investments. At June 30, 2019, the fair value of the cash collateral received on securities lending was $11.4 million and the fair value of security collateral received was $438.9 million. At December 31, 2018, the fair value of the cash collateral received on securities lending was $19.0 million, and the fair value of security collateral received was $255.1 million.

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

	Remaining Contractual Maturity of the Agreements
	Overnight and Continuous		Less than 30 Days		30-90 Days		90 Days or More		Total
June 30, 2019
U.S. government and government agencies	$	216,856	$	—	$	217,722	$	—	$	434,578
Corporate bonds	2,356		—		—		—		2,356
Equity securities	13,378		—		—		—		13,378
Total	$	232,590	$	—	$	217,722	$	—	$	450,312
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									$	450,312
December 31, 2018
U.S. government and government agencies	$	219,276	$	—	$	32,583	$	—	$	251,859
Corporate bonds	7,129		—		—		—		7,129
Equity securities	15,137		—		—		—		15,137
Total	$	241,542	$	—	$	32,583	$	—	$	274,125
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									$	274,125

ARCH CAPITAL  24 2019 SECOND QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Equity Securities, at Fair Value

At June 30, 2019, the Company held $670.9 million of equity securities, at fair value, compared to $338.9 million at December 31, 2018. Such holdings include publicly traded common stocks in the natural resources, energy, consumer staples and other sectors and exchange-traded funds.

Other Investments

The following table summarizes the Company’s other investments which are included in investments accounted for using the fair value option, by strategy:

	June 30, 2019		December 31, 2018
Term loan investments (par value: $1,427,330 and $1,369,216)	$	1,341,445	$	1,282,287
Lending	585,954		524,112
Credit related funds	166,673		202,123
Energy	123,547		117,509
Investment grade fixed income	86,808		101,902
Infrastructure	49,260		45,371
Private equity	23,925		24,383
Real estate	16,906		14,252
Total	$	2,394,518	$	2,311,939

Investments Accounted For Using the Equity Method

The following table summarizes the Company’s investments accounted for using the equity method, by strategy:

	June 30, 2019		December 31, 2018
Credit related funds	$	436,118	$	429,402
Equities	324,525		375,273
Real estate	251,891		232,647
Lending	193,397		125,041
Private equity	131,863		114,019
Infrastructure	141,744		113,748
Energy	102,434		103,661
Total	$	1,581,972	$	1,493,791

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 which are accounted for using the fair value option:

	June 30, 2019		December 31, 2018
Fixed maturities	$	965,161	$	1,245,562
Other investments	2,394,518		2,311,939
Short-term investments	257,465		322,177
Equity securities	103,891		103,893
Investments accounted for using the fair value option	$	3,721,035	$	3,983,571

Limited Partnership Interests

In the normal course of its activities, the Company invests in limited partnerships as part of its overall investment strategy. Such amounts are included in ‘investments accounted for using the equity method’ and ‘investments accounted for using the fair value option.’ The Company has determined that it is not required to consolidate these investments because it is not the primary beneficiary of the funds. The Company’s maximum exposure to loss with respect to these investments is limited to the investment carrying amounts reported in the Company’s consolidated balance sheet and any unfunded commitment.

The following table summarizes investments in limited partnership interests where the Company has a variable interest by balance sheet line item:

	June 30, 2019		December 31, 2018
Investments accounted for using the equity method (1)	1,581,972		1,493,791
Investments accounted for using the fair value option (2)	178,977		162,398
Total	$	1,760,949	$	1,656,189

(1) Aggregate unfunded commitments were $1.41 billion at June 30, 2019, compared to $1.22 billion at December 31, 2018.

(2) Aggregate unfunded commitments were $63.6 million at June 30, 2019, compared to $117.5 million at December 31, 2018.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Net Investment Income

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

	June 30,
	2019			2018
Three Months Ended
Fixed maturities	$	125,018		$	115,110
Term loans	24,730			20,763
Equity securities	4,368			4,777
Short-term investments	3,859			4,392
Other (1)	18,523			17,405
Gross investment income	176,498			162,447
Investment expenses	(21,460		)	(26,779		)
Net investment income	$	155,038		$	135,668
Six Months Ended
Fixed maturities	$	254,817		$	222,997
Term loans	49,346			40,527
Equity securities	7,356			7,345
Short-term investments	8,038			9,252
Other (1)	39,719			35,015
Gross investment income	359,276			315,136
Investment expenses	(47,289		)	(52,744		)
Net investment income	$	311,987		$	262,392

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

Net Realized Gains (Losses)

Net realized gains (losses) were as follows, excluding net impairment losses recognized in earnings:

	June 30,
	2019			2018
Three Months Ended
Available for sale securities:
Gross gains on investment sales	$	75,090		$	18,777
Gross losses on investment sales	(15,281		)	(57,711		)
Change in fair value of assets and liabilities accounted for using the fair value option:
Fixed maturities	11,429			(22,927		)
Other investments	(33,780		)	(254		)
Equity securities	6,414			1,230
Short-term investments	(1,392		)	(136		)
Equity securities, at fair value:
Net realized gains (losses) on sales during the period	(6,644		)	(5,918		)
Net unrealized gains (losses) on equity securities still held at reporting date	22,632			(7,278		)
Derivative instruments (1)	63,966			(2,146		)
Other (2)	(1,628		)	(248		)
Net realized gains (losses)	$	120,806		$	(76,611	)
Six Months Ended
Available for sale securities:
Gross gains on investment sales	$	118,455		$	33,742
Gross losses on investment sales	(46,937		)	(140,262		)
Change in fair value of assets and liabilities accounted for using the fair value option:
Fixed maturities	42,577			(40,478		)
Other investments	(15,585		)	(6,628		)
Equity securities	10,680			7,898
Short-term investments	(672		)	(287		)
Equity securities, at fair value:
Net realized gains (losses) on sales during the period	4,286			(11,286		)
Net unrealized gains (losses) on equity securities still held at reporting date	59,768			(14,861		)
Derivative instruments (1)	99,837			(6,109		)
Other (2)	(10,038		)	(9,338		)
Net realized gains (losses)	$	262,371		$	(187,609	)

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

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

Equity in Net Income (Loss) of Investment Funds Accounted for Using the Equity Method

The Company recorded $32.5 million of equity in net income related to investment funds accounted for using the equity method in the 2019 second quarter, compared to $8.5 million for the 2018 second quarter, and $79.4 million for the six months ended June 30, 2019, compared to $36.5 million for the 2018 period. In applying the equity method, investments are initially recorded at cost and are subsequently adjusted based on the Company’s proportionate share of the net income or loss of the

ARCH CAPITAL  26 2019 SECOND QUARTER FORM 10-Q

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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.

Net Impairment Losses Recognized in Earnings

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:

	June 30,
	2019			2018
Three Months Ended
Fixed maturities:
Mortgage backed securities	$	(24	)	$	(81	)
Corporate bonds	(25		)	(241		)
Asset backed securities	—			(148		)
Total	(49		)	(470		)
Net impairment losses recognized in earnings	$	(49	)	$	(470	)
Six Months Ended
Fixed maturities:
Mortgage backed securities	$	(555	)	$	(123	)
Corporate bonds	(590		)	(361		)
Asset backed securities	(213		)	(148		)
Total	(1,358		)	(632		)
Net impairment losses recognized in earnings	$	(1,358	)	$	(632	)

 

Net impairment losses recognized in earnings in the 2019 periods were primarily related to foreign currency fluctuations and other impairments on corporate bonds and other securities.

The Company believes that the minimal amount of OTTI included in accumulated other comprehensive income at June 30, 2019 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, 2019, 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:

	June 30,
	2019			2018
Three Months Ended
Balance at start of period	$	346		$	767
Credit loss impairments recognized on securities not previously impaired	—			—
Credit loss impairments recognized on securities previously impaired	—			—
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	—			(69		)
Balance at end of period	$	346		$	698
Six Months Ended
Balance at start of year	$	637		$	767
Credit loss impairments recognized on securities not previously impaired	—			—
Credit loss impairments recognized on securities previously impaired	—			—
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	(291		)	(69		)
Balance at end of period	$	346		$	698

Restricted Assets

The Company is required to maintain assets on deposit, which primarily consist of fixed maturities, with various regulatory authorities to support its underwriting operations. The Company’s subsidiaries maintain assets in trust accounts as collateral for 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 16, “Commitments and Contingencies,” of the notes to consolidated financial statements in the Company’s 2018 Form 10-K. The following table details the value of the Company’s restricted assets:

	June 30, 2019		December 31, 2018
Assets used for collateral or guarantees:
Affiliated transactions	$	4,758,653	$	4,623,483
Third party agreements	2,612,380		2,181,682
Deposits with U.S. regulatory authorities	788,750		689,114
Deposits with non-U.S. regulatory authorities	62,449		59,624
Total restricted assets	$	8,222,232	$	7,553,903

ARCH CAPITAL  27 2019 SECOND QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

In addition, Watford Re maintains a secured credit facility to provide borrowing capacity for investment purposes and a total return swap agreement and maintains assets pledged as collateral for such purposes. The Company does not guarantee or provide credit support for Watford Re, and the Company’s financial exposure to Watford Re is limited to its investment in Watford Re’s senior notes, common and preferred shares and counterparty credit risk (mitigated by collateral) arising from reinsurance transactions. As of June 30, 2019 and December 31, 2018 Watford Re held $1.1 billion and $1.3 billion, respectively, in pledged assets to collateralize Watford Re’s credit facility mentioned above.

Reconciliation of Cash and Restricted Cash

The following table details reconciliation of cash and restricted cash within the Consolidated Balance Sheets:

	June 30, 2019		December 31, 2018
Cash	$	605,316	$	646,556
Restricted cash (included in ‘other assets’)	$	77,759	$	78,087
Cash and restricted cash	$	683,075	$	724,643

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, 2019.

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 $21.66 billion of financial assets and liabilities measured at fair value at June 30, 2019,

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

approximately $183.8 million, or 0.9%, were priced using non-binding broker-dealer quotes. Of the $20.41 billion of financial assets and liabilities measured at fair value at December 31, 2018, approximately $217.9 million, or 1.1%, 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. A small number of securities are included in Level 3 due to a low level of transparency on the inputs used in the pricing process. During the 2019 second quarter, the Company transferred $23.9 million of corporate bonds from Level 2 to Level 3 based on a review of the pricing of such securities, as described above.

•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. A small number of securities are included in Level 3 due to a low level of transparency on the inputs used in the pricing process.

•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 are generally determined through the use of pricing models (including Option

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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.

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. A small number of securities are included in Level 3 due to the lack of an available independent price source for such securities. As the significant inputs used to price these securities are unobservable, the fair value of such securities are classified as Level 3. During the 2019 second quarter, the Company transferred $107.4 million of equity securities from Level 2 to Level 3 based on a review of the pricing of such securities, as described above.

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. A small number of

securities are included in Level 3 due to the lack of an available independent price source for such securities. During the 2019 second quarter, the Company transferred $44.6 million of other investments from Level 2 to Level 3 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, Treasury bills and commercial paper 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 liabilities

Contingent consideration liabilities (included in ‘other liabilities’ in the consolidated balance sheets) include amounts related to the acquisition of CMG Mortgage Insurance Company and its affiliated mortgage insurance companies and other acquisitions. Such amounts are remeasured at fair value at each balance sheet date with changes in fair value recognized in ‘net realized gains (losses).’ To determine the fair value of contingent consideration liabilities, 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 contingent consideration liabilities would be included within Level 3.

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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, 2019:

				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 (1):
Available for sale securities:
Fixed maturities:
Corporate bonds	$	6,044,081		$	—	$	6,036,439		$	7,642
Mortgage backed securities	523,019			—		522,729			290
Municipal bonds	582,497			—		582,497			—
Commercial mortgage backed securities	686,707			—		686,707			—
U.S. government and government agencies	4,906,996			4,746,260		160,736			—
Non-U.S. government securities	1,928,752			—		1,928,752			—
Asset backed securities	1,636,897			—		1,636,897			—
Total	16,308,949			4,746,260		11,554,757			7,932
Short-term investments	821,961			803,337		18,624			—
Equity securities, at fair value	684,236			620,508		12,516			51,212
Derivative instruments (4)	30,653			—		30,653			—
Fair value option:
Corporate bonds	673,431			—		647,328			26,103
Non-U.S. government bonds	56,416			—		56,416			—
Mortgage backed securities	16,076			—		16,076			—
Municipal bonds	6,731			—		6,731			—
Commercial mortgage backed securities	—			—		—			—
Asset backed securities	208,019			—		208,019			—
U.S. government and government agencies	4,488			4,378		110			—
Short-term investments	257,465			247,216		10,249			—
Equity securities	103,891			47,157		589			56,145
Other investments	1,394,344			41,176		1,257,895			95,273
Other investments measured at net asset value (2)	1,000,174
Total	3,721,035			339,927		2,203,413			177,521
Total assets measured at fair value	$	21,566,834		$	6,510,032	$	13,819,963		$	236,665
Liabilities measured at fair value:
Contingent consideration liabilities	$	(7,825	)	$	—	$	—		$	(7,825	)
Securities sold but not yet purchased (3)	(48,823		)	—		(48,823		)	—
Derivative instruments (4)	(38,363		)	—		(38,363		)	—
Total liabilities measured at fair value	$	(95,011	)	$	—	$	(87,186	)	$	(7,825	)

(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, “—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) Represents the Company’s obligations to deliver securities that it did not own at the time of sale. Such amounts are included in “other liabilities” on the Company’s consolidated balance sheets.

(4) See note 8.

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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, 2018:

				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 (1):
Available for sale securities:
Fixed maturities:
Corporate bonds	$	5,537,548		$	—	$	5,529,407		$	8,141
Mortgage backed securities	541,193			—		540,884			309
Municipal bonds	1,013,395			—		1,013,395			—
Commercial mortgage backed securities	729,442			—		729,438			4
U.S. government and government agencies	3,758,698			3,657,181		101,517			—
Non-U.S. government securities	1,771,338			—		1,771,338			—
Asset backed securities	1,600,896			—		1,600,896			—
Total	14,952,510			3,657,181		11,286,875			8,454
Equity securities	353,794			321,927		31,867			—
Short-term investments	955,880			875,881		79,999			—
Derivative instruments (4)	73,893			—		73,893			—
Fair value option:
Corporate bonds	852,585			—		846,827			5,758
Non-U.S. government bonds	79,066			—		79,066			—
Mortgage backed securities	16,731			—		16,731			—
Municipal bonds	7,144			—		7,144			—
Commercial mortgage backed securities	—			—		—			—
Asset backed securities	178,790			—		178,790			—
U.S. government and government agencies	111,246			111,138		108			—
Short-term investments	322,177			278,579		43,598			—
Equity securities	103,893			48,827		55,066			—
Other investments	1,254,220			39,107		1,152,408			62,705
Other investments measured at net asset value (2)	1,057,719
Total	3,983,571			477,651		2,379,738			68,463
Total assets measured at fair value	$	20,319,648		$	5,332,640	$	13,852,372		$	76,917
Liabilities measured at fair value:
Contingent consideration liabilities	$	(66,665	)	$	—	$	—		$	(66,665	)
Securities sold but not yet purchased (3)	(7,790		)	—		(7,790		)	—
Derivative instruments (4)	(20,664		)	—		(20,664		)	—
Total liabilities measured at fair value	$	(95,119	)	$	—	$	(28,454	)	$	(66,665	)

(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, “—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) Represents the Company’s obligations to deliver securities that it did not own at the time of sale. Such amounts are included in “other liabilities” on the Company’s consolidated balance sheets.

(4) See note 8.

ARCH CAPITAL  32 2019 SECOND QUARTER FORM 10-Q

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								Fair Value
	Structured Securities (1)			Corporate Bonds			Corporate Bonds			Other Investments			Equity Securities		Equity Securities		Contingent Consideration Liabilities
Three Months Ended June 30, 2019
Balance at beginning of period	$	302		$	7,567		$	2,233		$	62,329		$	—	$	—	$	(68,121	)
Total gains or (losses) (realized/unrealized)
Included in earnings (2)	—			—			(49		)	(11,614		)	—		—		(423		)
Included in other comprehensive income	1			102			—			—			—		—		—
Purchases, issuances, sales and settlements
Purchases	—			429			—			—			—		—		—
Issuances	—			—			—			—			—		—		—
Sales	—			—			—			(74		)	—		—		—
Settlements	(13		)	(456		)	—			—			—		—		60,719
Transfers in and/or out of Level 3	—			—			23,919			44,632			56,145		51,212		—
Balance at end of period	$	290		$	7,642		$	26,103		$	95,273		$	56,145	$	51,212	$	(7,825	)
Three Months Ended June 30, 2018
Balance at beginning of period	$	5,413		$	9,152		$	11,872		$	58,452		$	—	$	—	$	(62,449	)
Total gains or (losses) (realized/unrealized)
Included in earnings (2)	3			—			(537		)	336			—		—		(1,481		)
Included in other comprehensive income	(4		)	(316		)	—			—			—		—		—
Purchases, issuances, sales and settlements
Purchases	—			393			—			—			—		—		—
Issuances	—			—			—			—			—		—		—
Sales	(5,003		)	—			—			(74		)	—		—		—
Settlements	(33		)	(456		)	—			(500		)	—		—		—
Transfers in and/or out of Level 3	—			—			—			—			—		—		—
Balance at end of period	$	376		$	8,773		$	11,335		$	58,214		$	—	$	—	$	(63,930	)
Six Months Ended June 30, 2019
Balance at beginning of year	$	313		$	8,141		$	5,758		$	62,705		$	—	$	—	$	(66,665	)
Total gains or (losses) (realized/unrealized)
Included in earnings (2)	1,757			—			(339		)	(11,316		)	—		—		(1,331		)
Included in other comprehensive income	5			(16		)	—			—			—		—		—
Purchases, issuances, sales and settlements
Purchases	—			429			—			—			—		—		—
Issuances	—			—			—			—			—		—		(548		)
Sales	(1,757		)	—			(3,235		)	(148		)	—		—		—
Settlements	(28		)	(912		)	—			(600		)	—		—		60,719
Transfers in and/or out of Level 3	—			—			23,919			44,632			56,145		51,212		—
Balance at end of period	$	290		$	7,642		$	26,103		$	95,273		$	56,145	$	51,212	$	(7,825	)
Six Months Ended June 30, 2018
Balance at beginning of year	$	5,927		$	9,460		$	12,217		$	59,167		$	—	$	—	$	(60,996	)
Total gains or (losses) (realized/unrealized)
Included in earnings (2)	4			—			(612		)	(379		)	—		—		(2,934		)
Included in other comprehensive income	(8		)	(168		)	—			—			—		—		—
Purchases, issuances, sales and settlements
Purchases	—			393			—			—			—		—		—
Issuances	—			—			—			—			—		—		—
Sales	(5,003		)	—			—			(74		)	—		—		—
Settlements	(544		)	(912		)	(270		)	(500		)	—		—		—
Transfers in and/or out of Level 3	—			—			—			—			—		—		—
Balance at end of period	$	376		$	8,773		$	11,335		$	58,214		$	—	$	—	$	(63,930	)

(1) Includes asset backed securities, mortgage backed securities and commercial mortgage backed securities.

(2) Gains or losses were included in net realized gains (losses).

ARCH CAPITAL  33 2019 SECOND QUARTER FORM 10-Q

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, 2019, 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, 2019, the Company’s senior notes were carried at their cost, net of debt issuance costs, of $1.73 billion and had a fair value of $2.09 billion. At December 31, 2018, Company’s senior notes were carried at their cost, net of debt issuance costs, of $1.73 billion and had a fair value of $1.88 billion. 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 values of the senior notes are classified within Level 2.

8.    Derivative Instruments

The Company’s investment strategy allows for the use of derivative instruments. 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 following table summarizes information on the fair values and notional values of the Company’s derivative instruments:

	Estimated Fair Value
	Asset Derivatives		Liability Derivatives			Notional Value (1)
June 30, 2019
Futures contracts (2)	$	5,438	$	(1,586	)	$	4,354,852
Foreign currency forward contracts (2)	3,190		(10,352		)	939,940
TBAs (3)	15,509		—			14,846
Other (2)	22,025		(26,425		)	3,493,526
Total	$	46,162	$	(38,363	)
December 31, 2018
Futures contracts (2)	$	51,800	$	(2,115	)	$	3,153,518
Foreign currency forward contracts (2)	8,147		(7,796		)	1,008,907
TBAs (3)	8,292		—			8,132
Other (2)	13,946		(10,753		)	2,213,981
Total	$	82,185	$	(20,664	)

(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 did not hold any derivatives which were designated as hedging instruments at June 30, 2019 or December 31, 2018.

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. Contractual close-out netting reduces derivatives credit exposure from gross to net exposure. The remaining derivatives included in the table above were not subject to a master netting agreement.

At June 30, 2019, asset derivatives and liability derivatives of $46.2 million and $38.4 million, respectively, were subject to a master netting agreement, compared to $80.4 million and $18.9 million, respectively, at December 31, 2018. The remaining derivatives included in the preceding table were not subject to a master netting agreement.

ARCH CAPITAL  34 2019 SECOND QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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:

Derivatives not designated as	June 30,
hedging instruments:	2019			2018
Three Months Ended
Net realized gains (losses):
Futures contracts	$	66,973		$	(240	)
Foreign currency forward contracts	(5,365		)	(1,692		)
TBAs	48			—
Other	2,310			(214		)
Total	$	63,966		$	(2,146	)
Six Months Ended
Net realized gains (losses):
Futures contracts	$	94,309		$	4,790
Foreign currency forward contracts	(19,074		)	(7,616		)
TBAs	238			(97		)
Other	24,364			(3,186		)
Total	$	99,837		$	(6,109	)

9.    Commitments and Contingencies

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 $1.92 billion at June 30, 2019, compared to $1.77 billion at December 31, 2018.

Interest Paid

Interest paid on the Company’s senior notes and other borrowings were $60.9 million for the six months ended June 30, 2019, consistent with $60.9 million for the 2018 period.

10.    Leases

In the ordinary course of business, the Company renews and enters into new leases for office property and equipment. At the lease inception date, the Company determines whether a contract contains a lease and its classification as a finance or operating lease. Primarily all of the Company’s leases are classified as operating leases. The Company’s operating leases have remaining lease terms of up to 12 years, some of which include options to extend the lease term. The Company considers these options when determining the lease term and measuring its lease liability and right-of-use asset. In addition, the Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Short-term operating leases with an initial term of twelve months or less were excluded on the Company's consolidated balance sheet and represent an inconsequential amount of operating lease expense.

As most leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments.

Additional information regarding the Company’s operating leases is as follows:

	June 30,
	2019
Three Months Ended
Operating lease costs	$	7,244
Cash payments included in the measurement of lease liabilities reported in operating cash flows	$	7,685
Right-of-use assets obtained in exchange for new lease liabilities	$	4,420
Right-of-use assets (1)	$	134,061
Operating lease liability (1)	$	150,341
Weighted average discount rate	3.9		%
Weighted average remaining lease term	6.5 years
Six Months Ended
Operating lease costs	$	14,860
Cash payments included in the measurement of lease liabilities reported in operating cash flows	$	14,585
Right-of-use assets obtained in exchange for new lease liabilities	$	4,420
Right-of-use assets (1)	$	134,061
Operating lease liability (1)	$	150,341
Weighted average discount rate	3.9		%
Weighted average remaining lease term	6.5 years

(1) The right-of-use assets are included in ‘other assets’ while the operating lease liability is included in ‘other liabilities.’

The following table presents the contractual maturities of the Company's operating lease liabilities at June 30, 2019:

Years Ending December 31,
2019 (remainder)	$	9,985
2020	32,036
2021	30,673
2022	27,365
2023	22,667
2024 and thereafter	55,610
Total undiscounted lease liability	$	178,336
Less: present value adjustment	(27,995		)
Operating lease liability	$	150,341

ARCH CAPITAL  35 2019 SECOND QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

At December 31, 2018, the future minimum rental commitments, exclusive of escalation clauses and maintenance costs and net of rental income, for all of the Company’s operating leases was as follows:

2019	$	31,088
2020	30,491
2021	29,351
2022	26,068
2023	21,408
2024 and thereafter	54,745
Total	$	193,151

11. Variable Interest Entities and Noncontrolling Interests

Watford Holdings Ltd.

In March 2014, the Company invested $100.0 million and acquired 2,500,000 common shares, approximately 11% of Watford Holdings Ltd.’s outstanding common equity, and a warrant to purchase up to 975,503 additional common shares. The warrants expire on March 31, 2020. The exercise price of the warrants is determined on the date of exercise based on certain targeted returns for existing common shareholders. Watford Holdings Ltd.’s common shares are listed on the Nasdaq Select Global Market under the ticker symbol “WTRE”.

Watford Re is considered a 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 does not guarantee or provide credit support for Watford Re, and the Company’s financial exposure to Watford Re is limited to its investment in Watford Re’s senior notes, common and preferred shares and counterparty credit risk (mitigated by collateral) arising from reinsurance transactions.

The following table provides the carrying amount and balance sheet caption in which the assets and liabilities of Watford Re are reported:

	June 30,		December 31,
	2019		2018
Assets
Investments accounted for using the fair value option	$	1,972,947	$	2,312,003
Fixed maturities available for sale, at fair value	732,454		393,351
Equity securities, at fair value	64,703		32,206
Cash	68,977		63,529
Accrued investment income	16,916		19,461
Premiums receivable	228,588		227,301
Reinsurance recoverable on unpaid and paid losses and LAE	123,961		86,445
Ceded unearned premiums	79,513		61,587
Deferred acquisition costs	71,557		80,858
Receivable for securities sold	29,425		24,507
Goodwill and intangible assets	7,650		7,650
Other assets	71,837		63,959
Total assets of consolidated VIE	$	3,468,528	$	3,372,857
Liabilities
Reserve for losses and loss adjustment expenses	$	1,126,080	$	1,032,760
Unearned premiums	375,323		390,114
Reinsurance balances payable	23,312		21,034
Revolving credit agreement borrowings	491,006		455,682
Payable for securities purchased	51,216		60,142
Other liabilities (1)	219,120		302,524
Total liabilities of consolidated VIE	$	2,286,057	$	2,262,256
Redeemable noncontrolling interests	$	221,175	$	220,992

(1) Includes certain borrowings related to investing activities.

For the six months ended June 30, 2019, Watford Re generated $115.9 million of cash provided by operating activities, $135.7 million of cash used for investing activities and $25.6 million of cash provided by financing activities, compared to $92.4 million of cash provided by operating activities, $168.0 million of cash used for investing activities and $2.1 million of cash used for financing activities for the six months ended June 30, 2018.

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, 2019. The portion of Watford Re’s income or loss attributable to third party investors is recorded in the consolidated statements of income in ‘net (income) loss attributable to noncontrolling interests.’

ARCH CAPITAL  36 2019 SECOND QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

	June 30,
	2019		2018
Three Months Ended
Balance, beginning of period	$	838,081	$	854,112
Additional paid in capital attributable to noncontrolling interests	2,074		—
Amounts attributable to noncontrolling interests	12,301		8,116
Other comprehensive income (loss) attributable to noncontrolling interests	2,891		(1,075		)
Balance, end of period	$	855,347	$	861,153
Six Months Ended
Balance, beginning of year	$	791,560	$	843,411
Additional paid in capital attributable to noncontrolling interests	2,074		—
Amounts attributable to noncontrolling interests	54,683		19,492
Other comprehensive income (loss) attributable to noncontrolling interests	7,030		(1,750		)
Balance, end of period	$	855,347	$	861,153

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. The Watford Preference Shares were issued at a discounted amount of $24.50 per share. Preferred dividends, including the accretion of the discount and issuance costs, are included in ‘net (income) loss attributable to noncontrolling interests’ in the Company’s consolidated statements of income.

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

	June 30,
	2019		2018
Three Months Ended
Balance, beginning of period	$	206,383	$	206,013
Accretion of preference share issuance costs	92		92
Balance, end of period	$	206,475	$	206,105
Six Months Ended
Balance, beginning of year	$	206,292	$	205,922
Accretion of preference share issuance costs	183		183
Balance, end of period	$	206,475	$	206,105

The portion of Watford Re’s income or loss attributable to third party investors, recorded in the Company’s consolidated statements of income in ‘net (income) loss attributable to noncontrolling interests,’ are summarized in the table below:

	June 30,
	2019			2018
Three Months Ended
Amounts attributable to non-redeemable noncontrolling interests	$	(12,301	)	$	(8,116	)
Dividends attributable to redeemable noncontrolling interests	(4,590		)	(4,585		)
Net (income) loss attributable to noncontrolling interests	$	(16,891	)	$	(12,701	)
Six Months Ended
Amounts attributable to non-redeemable noncontrolling interests	$	(54,683	)	$	(19,492	)
Dividends attributable to redeemable noncontrolling interests	(9,178		)	(9,170		)
Net (income) loss attributable to noncontrolling interests	$	(63,861	)	$	(28,662	)

Bellemeade Re

The Company has entered into various aggregate excess of loss mortgage reinsurance agreements with various special purpose reinsurance companies domiciled in Bermuda (the “Bellemeade Agreements”). At the time the Bellemeade Agreements were entered into, the applicability of the accounting guidance that addresses VIEs was evaluated. As a result of the evaluation of the Bellemeade Agreements, the Company concluded that these entities are VIEs. However, given that the ceding insurers do not have the unilateral power to direct those activities that are significant to their economic performance, the Company does not consolidate such entities in its consolidated financial statements.

ARCH CAPITAL  37 2019 SECOND QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table presents the total assets of the Bellemeade entities, as well as the Company’s maximum exposure to loss associated with these VIEs, calculated as the maximum historical observable spread between the one month LIBOR, the basis for the contractual payments to bond holders, and short term invested trust asset yields.

			Maximum Exposure to Loss
Bellemeade Entities (Issue Date)	Total VIE Assets		On-Balance Sheet (Asset) Liability			Off-Balance Sheet		Total
Jun 30, 2019
Bellemeade 2015-1 Ltd. (Jul-15)	$	19,103	$	(4	)	$	17	$	13
Bellemeade 2017-1 Ltd. (Oct-17)	277,554		(657		)	4,892		4,235
Bellemeade 2018-1 Ltd. (Apr-18)	374,460		(1,965		)	7,799		5,834
Bellemeade 2018-2 Ltd. (Aug-18)	571,129		(1,957		)	5,265		3,308
Bellemeade 2018-3 Ltd. (Oct-18)	506,110		(2,213		)	7,251		5,038
Bellemeade 2019-1 Ltd. (Mar-19)	329,085		(237		)	4,842		4,605
Bellemeade 2019-2 Ltd. (Apr-19)	621,022		(408		)	11,206		10,798
Total	$	2,698,463	$	(7,441	)	$	41,272	$	33,831
Dec 31, 2018
Bellemeade 2015-1 Ltd. (Jul-15)	$	43,246	$	112		$	498	$	610
Bellemeade 2017-1 Ltd. (Oct-17)	304,373		165			1,312		1,477
Bellemeade 2018-1 Ltd. (Apr-18)	374,460		132			3,539		3,671
Bellemeade 2018-2 Ltd. (Aug-18)	653,278		874			4,005		4,879
Bellemeade 2018-3 Ltd. (Oct-18)	506,110		469			1,836		2,305
Total	$	1,881,467	$	1,752		$	11,190	$	12,942

See note 16.

ARCH CAPITAL  38 2019 SECOND QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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	2019			2018			2019			2018
Unrealized appreciation on available-for-sale investments
	Net realized gains (losses)	$	59,809		$	(38,935	)	$	71,518		$	(106,521	)
	Other-than-temporary impairment losses	(49		)	(470		)	(1,358		)	(632		)
	Total before tax	59,760			(39,405		)	70,160			(107,153		)
	Income tax (expense) benefit	(4,415		)	2,762			(4,594		)	8,049
	Net of tax	$	55,345		$	(36,643	)	$	65,566		$	(99,104	)

	Before Tax Amount			Tax Expense (Benefit)			Net of Tax Amount
Three Months Ended June 30, 2019
Unrealized appreciation (decline) in value of investments:
Unrealized holding gains (losses) arising during period	$	248,074		$	25,601		$	222,473
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)	—			—			—
Less reclassification of net realized gains (losses) included in net income	59,760			4,415			55,345
Foreign currency translation adjustments	4,409			142			4,267
Other comprehensive income (loss)	$	192,723		$	21,328		$	171,395
Three Months Ended June 30, 2018
Unrealized appreciation (decline) in value of investments:
Unrealized holding gains (losses) arising during period	$	(88,034	)	$	(2,763	)	$	(85,271	)
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)	—			—			—
Less reclassification of net realized gains (losses) included in net income	(39,405		)	(2,762		)	(36,643		)
Foreign currency translation adjustments	(12,701		)	(106		)	(12,595		)
Other comprehensive income (loss)	$	(61,330	)	$	(107	)	$	(61,223	)
Six Months Ended June 30, 2019
Unrealized appreciation (decline) in value of investments:
Unrealized holding gains (losses) arising during period	$	503,064		$	54,704		$	448,360
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)	—			—			—
Less reclassification of net realized gains (losses) included in net income	70,160			4,594			65,566
Foreign currency translation adjustments	10,053			270			9,783
Other comprehensive income (loss)	$	442,957		$	50,380		$	392,577
Six Months Ended June 30, 2018
Unrealized appreciation (decline) in value of investments:
Unrealized holding gains (losses) arising during period	$	(277,977	)	$	(26,029	)	$	(251,948	)
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)	—			—			—
Less reclassification of net realized gains (losses) included in net income	(107,153		)	(8,049		)	(99,104		)
Foreign currency translation adjustments	(11,269		)	44			(11,313		)
Other comprehensive income (loss)	$	(182,093	)	$	(17,936	)	$	(164,157	)

ARCH CAPITAL  39 2019 SECOND QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

13.     Guarantor Financial Information

The following tables present condensed financial information for Arch Capital, Arch Capital Group (U.S.) Inc. (“Arch-U.S.”), a 100% owned subsidiary of Arch Capital, and Arch Capital’s other subsidiaries. The senior notes of Arch-U.S. due November 1, 2043 are fully and unconditionally guaranteed by Arch Capital.

		June 30, 2019
Condensed Consolidating Balance Sheet		Arch Capital (Parent Guarantor)		Arch-U.S. (Subsidiary Issuer)		Other Arch Capital Subsidiaries		Consolidating Adjustments and Eliminations			Arch Capital Consolidated
Assets
Total investments		$	40	$	483,904	$	22,693,719	$	(49,700	)	$	23,127,963
Cash		10,750		47,875		546,691		—			605,316
Investments in subsidiaries		11,045,465		4,493,198		—		(15,538,663		)	—
Due from subsidiaries and affiliates		332		2		1,881,929		(1,882,263		)	—
Premiums receivable		—		—		2,291,360		(685,320		)	1,606,040
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses		—		—		8,618,279		(5,447,022		)	3,171,257
Contractholder receivables		—		—		2,102,544		—			2,102,544
Ceded unearned premiums		—		—		1,984,219		(847,491		)	1,136,728
Deferred acquisition costs		—		—		658,992		(58,252		)	600,740
Goodwill and intangible assets		—		—		641,010		—			641,010
Other assets		22,950		40,345		1,953,732		(156,955		)	1,860,072
	Total assets	$	11,079,537	$	5,065,324	$	43,372,475	$	(24,665,666	)	$	34,851,670
Liabilities
Reserve for losses and loss adjustment expenses		$	—	$	—	$	17,430,847	$	(5,200,531	)	$	12,230,316
Unearned premiums		—		—		4,904,351		(847,491		)	4,056,860
Reinsurance balances payable		—		—		1,217,310		(685,320		)	531,990
Contractholder payables		—		—		2,102,544		—			2,102,544
Collateral held for insured obligations		—		—		237,056					237,056
Senior notes		297,201		494,776		941,888		—			1,733,865
Revolving credit agreement borrowings		—		—		491,006		—			491,006
Due to subsidiaries and affiliates		9		536,747		1,345,507		(1,882,263		)	—
Other liabilities		24,975		64,956		2,055,626		(496,698		)	1,648,859
	Total liabilities	322,185		1,096,479		30,726,135		(9,112,303		)	23,032,496
Redeemable noncontrolling interests		—		—		221,175		(14,700		)	206,475
Shareholders’ Equity
Total shareholders’ equity available to Arch		10,757,352		3,968,845		11,569,818		(15,538,663		)	10,757,352
Non-redeemable noncontrolling interests		—		—		855,347		—			855,347
	Total shareholders’ equity	10,757,352		3,968,845		12,425,165		(15,538,663		)	11,612,699
	Total liabilities, noncontrolling interests and shareholders’ equity	$	11,079,537	$	5,065,324	$	43,372,475	$	(24,665,666	)	$	34,851,670

ARCH CAPITAL  40 2019 SECOND QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

		December 31, 2018
Condensed Consolidating Balance Sheet		Arch Capital (Parent Guarantor)		Arch-U.S. (Subsidiary Issuer)		Other Arch Capital Subsidiaries		Consolidating Adjustments and Eliminations			Arch Capital Consolidated
Assets
Total investments		$	104	$	452,674	$	21,307,206	$	(14,700	)	$	21,745,284
Cash		6,125		5,940		634,491		—			646,556
Investments in subsidiaries		9,735,256		3,999,243		—		(13,734,499		)	—
Due from subsidiaries and affiliates		9		2		1,802,686		(1,802,697		)	—
Premiums receivable		—		—		1,834,389		(535,239		)	1,299,150
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses		—		—		8,618,660		(5,699,288		)	2,919,372
Contractholder receivables		—		—		2,079,111		—			2,079,111
Ceded unearned premiums		—		—		1,730,262		(754,793		)	975,469
Deferred acquisition costs		—		—		618,535		(48,961		)	569,574
Goodwill and intangible assets		—		—		634,920		—			634,920
Other assets		12,588		80,949		1,466,438		(211,082		)	1,348,893
	Total assets	$	9,754,082	$	4,538,808	$	40,726,698	$	(22,801,259	)	$	32,218,329
Liabilities
Reserve for losses and loss adjustment expenses		$	—	$	—	$	17,345,142	$	(5,491,845	)	$	11,853,297
Unearned premiums		—		—		4,508,429		(754,793		)	3,753,636
Reinsurance balances payable		—		—		928,346		(535,239		)	393,107
Contractholder payables		—		—		2,079,111		—			2,079,111
Collateral held for insured obligations		—		—		236,630		—			236,630
Senior notes		297,150		494,723		941,655		—			1,733,528
Revolving credit agreement borrowings		—		—		455,682		—			455,682
Due to subsidiaries and affiliates		—		536,805		1,265,892		(1,802,697		)	—
Other liabilities		17,105		26,270		1,699,768		(467,484		)	1,275,659
	Total liabilities	314,255		1,057,798		29,460,655		(9,052,058		)	21,780,650
Redeemable noncontrolling interests		—		—		220,992		(14,700		)	206,292
Shareholders’ Equity
Total shareholders’ equity available to Arch		9,439,827		3,481,010		10,253,491		(13,734,501		)	9,439,827
Non-redeemable noncontrolling interests		—		—		791,560		—			791,560
	Total shareholders’ equity	9,439,827		3,481,010		11,045,051		(13,734,501		)	10,231,387
	Total liabilities, noncontrolling interests and shareholders’ equity	$	9,754,082	$	4,538,808	$	40,726,698	$	(22,801,259	)	$	32,218,329

ARCH CAPITAL  41 2019 SECOND QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

		Three Months Ended June 30, 2019
Condensed Consolidating Statement of Income and Comprehensive Income		Arch Capital (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other Arch Capital Subsidiaries			Consolidating Adjustments and Eliminations			Arch Capital Consolidated
Revenues
Net premiums earned		$	—		$	—		$	1,463,727		$	—		$	1,463,727
Net investment income		38			2,847			174,738			(22,585		)	155,038
Net realized gains (losses)		—			5,825			115,620			(639		)	120,806
Net impairment losses recognized in earnings		—			—			(49		)	—			(49		)
Other underwriting income		—			—			5,953			—			5,953
Equity in net income (loss) of investment funds accounted for using the equity method		—			(64		)	32,600			—			32,536
Other income (loss)		(242		)	—			1,371			—			1,129
	Total revenues	(204		)	8,608			1,793,960			(23,224		)	1,779,140
Expenses
Losses and loss adjustment expenses		—			—			767,543			—			767,543
Acquisition expenses		—			—			210,089			—			210,089
Other operating expenses		—			—			198,914			—			198,914
Corporate expenses		15,293			2,115			843			—			18,251
Amortization of intangible assets		—			—			19,794			—			19,794
Interest expense		5,538			11,996			34,012			(22,266		)	29,280
Net foreign exchange (gains) losses		—			—			(1,187		)	6,139			4,952
	Total expenses	20,831			14,111			1,230,008			(16,127		)	1,248,823
Income (loss) before income taxes		(21,035		)	(5,503		)	563,952			(7,097		)	530,317
Income tax (expense) benefit		—			1,301			(45,773		)	—			(44,472		)
Income (loss) before equity in net income of subsidiaries		(21,035		)	(4,202		)	518,179			(7,097		)	485,845
Equity in net income of subsidiaries		489,989			148,747			—			(638,736		)	—
Net income		468,954			144,545			518,179			(645,833		)	485,845
Net (income) loss attributable to noncontrolling interests		—			—			(17,210		)	319			(16,891		)
Net income available to Arch		468,954			144,545			500,969			(645,514		)	468,954
Preferred dividends		(10,403		)	—			—			—			(10,403		)
Net income available to Arch common shareholders		$	458,551		$	144,545		$	500,969		$	(645,514	)	$	458,551
Comprehensive income available to Arch		$	637,458		$	231,120		$	663,685		$	(894,805	)	$	637,458

ARCH CAPITAL  42 2019 SECOND QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

		Three Months Ended June 30, 2018
Condensed Consolidating Statement of Income and Comprehensive Income		Arch Capital (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other Arch Capital Subsidiaries			Consolidating Adjustments and Eliminations			Arch Capital Consolidated
Revenues
Net premiums earned		$	—		$	—		$	1,336,763		$	—		$	1,336,763
Net investment income		15			560			157,532			(22,439		)	135,668
Net realized gains (losses)		—			—			(76,611		)	—			(76,611		)
Net impairment losses recognized in earnings		—			—			(470		)	—			(470		)
Other underwriting income		—			—			3,874			—			3,874
Equity in net income (loss) of investment funds accounted for using the equity method		—			—			8,472			—			8,472
Other income (loss)		2,339			—			774			—			3,113
	Total revenues	2,354			560			1,430,334			(22,439		)	1,410,809
Expenses
Losses and loss adjustment expenses		—			—			726,153			—			726,153
Acquisition expenses		—			—			202,838			—			202,838
Other operating expenses		—			—			176,181			—			176,181
Corporate expenses		16,642			470			5,400			—			22,512
Amortization of intangible assets		—			—			26,472			—			26,472
Interest expense		5,537			12,013			34,911			(22,117		)	30,344
Net foreign exchange (gains) losses		—			—			(43,357		)	(10,349		)	(53,706		)
	Total expenses	22,179			12,483			1,128,598			(32,466		)	1,130,794
Income (loss) before income taxes		(19,825		)	(11,923		)	301,736			10,027			280,015
Income tax (expense) benefit		—			2,477			(26,145		)	—			(23,668		)
Income (loss) before equity in net income of subsidiaries		(19,825		)	(9,446		)	275,591			10,027			256,347
Equity in net income of subsidiaries		263,471			86,727			—			(350,198		)	—
Net income (loss)		243,646			77,281			275,591			(340,171		)	256,347
Net (income) loss attributable to noncontrolling interests		—			—			(13,023		)	322			(12,701		)
Net income (loss) available to Arch		243,646			77,281			262,568			(339,849		)	243,646
Preferred dividends		(10,403		)	—			—			—			(10,403		)
Net income (loss) available to Arch common shareholders		$	233,243		$	77,281		$	262,568		$	(339,849	)	$	233,243
Comprehensive income available to Arch		$	183,500		$	70,066		$	212,802		$	(282,868	)	$	183,500

ARCH CAPITAL  43 2019 SECOND QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

		Six Months Ended June 30, 2019
Condensed Consolidating Statement of Income and Comprehensive Income		Arch Capital (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other Arch Capital Subsidiaries			Consolidating Adjustments and Eliminations			Arch Capital Consolidated
Revenues
Net premiums earned		$	—		$	—		$	2,832,593		$	—		$	2,832,593
Net investment income		84			6,526			350,410			(45,033		)	311,987
Net realized gains (losses)		—			14,343			253,673			(5,645		)	262,371
Net impairment losses recognized in earnings		—			—			(1,358		)	—			(1,358		)
Other underwriting income		—			—			14,778			—			14,778
Equity in net income (loss) of investment funds accounted for using the equity method		—			(64		)	79,467			—			79,403
Other income (loss)		(481		)	—			2,693			—			2,212
	Total revenues	(397		)	20,805			3,532,256			(50,678		)	3,501,986
Expenses
Losses and loss adjustment expenses		—			—			1,486,075			—			1,486,075
Acquisition expenses		—			—			407,937			—			407,937
Other operating expenses		—			—			400,077			—			400,077
Corporate expenses		31,600			4,281			332			—			36,213
Amortization of intangible assets		—			—			40,211			—			40,211
Interest expense		11,076			23,947			67,718			(44,396		)	58,345
Net foreign exchange (gains) losses		2			—			(1,310		)	2,735			1,427
	Total expenses	42,678			28,228			2,401,040			(41,661		)	2,430,285
Income (loss) before income taxes		(43,075		)	(7,423		)	1,131,216			(9,017		)	1,071,701
Income tax (expense) benefit		—			1,844			(92,202		)	—			(90,358		)
Income (loss) before equity in net income of subsidiaries		(43,075		)	(5,579		)	1,039,014			(9,017		)	981,343
Equity in net income of subsidiaries		960,557			285,301			—			(1,245,858		)	—
Net income		917,482			279,722			1,039,014			(1,254,875		)	981,343
Net (income) loss attributable to noncontrolling interests		—			—			(64,499		)	638			(63,861		)
Net income available to Arch		917,482			279,722			974,515			(1,254,237		)	917,482
Preferred dividends		(20,806		)	—			—			—			(20,806		)
Net income available to Arch common shareholders		$	896,676		$	279,722		$	974,515		$	(1,254,237	)	$	896,676
Comprehensive income available to Arch		$	1,303,029		$	469,276		$	1,352,225		$	(1,821,501	)	$	1,303,029

ARCH CAPITAL  44 2019 SECOND QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

		Six Months Ended June 30, 2018
Condensed Consolidating Statement of Income and Comprehensive Income		Arch Capital (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other Arch Capital Subsidiaries			Consolidating Adjustments and Eliminations			Arch Capital Consolidated
Revenues
Net premiums earned		$	—		$	—		$	2,571,662		$	—		$	2,571,662
Net investment income		35			818			306,299			(44,760		)	262,392
Net realized gains (losses)		29			(7		)	(187,631		)	—			(187,609		)
Net impairment losses recognized in earnings		—			—			(632		)	—			(632		)
Other underwriting income		—			—			9,223			—			9,223
Equity in net income (loss) of investment funds accounted for using the equity method		—			—			36,541			—			36,541
Other income (loss)		2,261			—			926			—			3,187
	Total revenues	2,325			811			2,736,388			(44,760		)	2,694,764
Expenses
Losses and loss adjustment expenses		—			—			1,363,013			—			1,363,013
Acquisition expenses		—			—			394,214			—			394,214
Other operating expenses		—			—			351,196			—			351,196
Corporate expenses		32,811			759			4,254			—			37,824
Amortization of intangible assets		—			—			53,208			—			53,208
Interest expense		11,073			23,939			70,083			(44,115		)	60,980
Net foreign exchange (gains) losses		29			—			(26,921		)	(7,093		)	(33,985		)
	Total expenses	43,913			24,698			2,209,047			(51,208		)	2,226,450
Income (loss) before income taxes		(41,588		)	(23,887		)	527,341			6,448			468,314
Income tax (expense) benefit		—			5,428			(51,011		)	—			(45,583		)
Income (loss) before equity in net income of subsidiaries		(41,588		)	(18,459		)	476,330			6,448			422,731
Equity in net income of subsidiaries		435,657			173,147			—			(608,804		)	—
Net income		394,069			154,688			476,330			(602,356		)	422,731
Net (income) loss attributable to noncontrolling interests		—			—			(29,307		)	645			(28,662		)
Net income available to Arch		394,069			154,688			447,023			(601,711		)	394,069
Preferred dividends		(20,840		)	—			—			—			(20,840		)
Loss on redemption of preferred shares		(2,710		)	—			—			—			(2,710		)
Net income available to Arch common shareholders		$	370,519		$	154,688		$	447,023		$	(601,711	)	$	370,519
Comprehensive income available to Arch		$	231,662		$	76,603		$	291,883		$	(368,486	)	$	231,662

ARCH CAPITAL  45 2019 SECOND QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

		Six Months Ended June 30, 2019
Condensed Consolidating Statement of Cash Flows		Arch Capital (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other Arch Capital Subsidiaries			Consolidating Adjustments and Eliminations			Arch Capital Consolidated
Operating Activities
	Net Cash Provided By (Used For) Operating Activities	$	30,946		$	24,059		$	749,885		$	(92,366	)	$	712,524
Investing Activities
Purchases of fixed maturity investments		—			(358,996		)	(15,973,650		)	—			(16,332,646		)
Purchases of equity securities		—			(56,441		)	(447,742		)	72,244			(431,939		)
Purchases of other investments		—			(17,891		)	(659,172		)	—			(677,063		)
Proceeds from the sales of fixed maturity investments		—			452,729			15,179,753			—			15,632,482
Proceeds from the sales of equity securities		—			—			248,945			(72,244		)	176,701
Proceeds from the sales, redemptions and maturities of other investments		—			391			534,307			—			534,698
Proceeds from redemptions and maturities of fixed maturity investments		—			100			244,849			—			244,949
Net settlements of derivative instruments		—			—			87,701			—			87,701
Net (purchases) sales of short-term investments		64			(2,015		)	203,471			—			201,520
Change in cash collateral related to securities lending		—			—			7,590			—			7,590
Contributions to subsidiaries		(2,121		)	—			(59,527		)	61,648			—
Issuance of intercompany loans		—			—			(53,828		)	53,828			—
Purchases of fixed assets		(32		)	—			(16,327		)	—			(16,359		)
Other		—			—			(174,578		)	—			(174,578		)
	Net Cash Provided By (Used For) Investing Activities	(2,089		)	17,877			(878,208		)	115,476			(746,944		)
Financing Activities
Purchases of common shares under share repurchase program		(2,871		)	—			—			—			(2,871		)
Proceeds from common shares issued, net		(557		)	—			61,648			(61,648		)	(557		)
Proceeds from intercompany borrowings		—			—			53,828			(53,828		)	—
Proceeds from borrowings		—			—			62,800			—			62,800
Repayments of borrowings		—			—			(27,538		)	—			(27,538		)
Change in cash collateral related to securities lending		—			—			(7,590		)	—			(7,590		)
Dividends paid to redeemable noncontrolling interests		—			—			(9,632		)	638			(8,994		)
Dividends paid to parent (1)		—			—			(91,728		)	91,728			—
Other		—			—			(3,529		)	—			(3,529		)
Preferred dividends paid		(20,806		)	—			—			—			(20,806		)
	Net Cash Provided By (Used For) Financing Activities	(24,234		)	—			38,259			(23,110		)	(9,085		)
Effects of exchange rates changes on foreign currency cash and restricted cash		—			—			1,937			—			1,937
Increase (decrease) in cash and restricted cash		4,623			41,936			(88,127		)	—			(41,568		)
Cash and restricted cash, beginning of year		6,159			5,940			712,544			—			724,643
Cash and restricted cash, end of period		$	10,782		$	47,876		$	624,417		$	—		$	683,075

(1)     Dividends received by parent are included in net cash provided by (used for) operating activities.

ARCH CAPITAL  46 2019 SECOND QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

		Six Months Ended June 30, 2018
Condensed Consolidating Statement of Cash Flows		Arch Capital (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other Arch Capital Subsidiaries			Consolidating Adjustments and Eliminations			Arch Capital Consolidated
Operating Activities
	Net Cash Provided By (Used For) Operating Activities	$	201,487		$	149,576		$	1,010,703		$	(864,880	)	$	496,886
Investing Activities
Purchases of fixed maturity investments		—			(125,440		)	(17,347,846		)	605,716			(16,867,570		)
Purchases of equity securities		—			—			(679,663		)	—			(679,663		)
Purchases of other investments		—			—			(1,017,147		)	—			(1,017,147		)
Proceeds from the sales of fixed maturity investments		—			33,793			16,662,466			(605,716		)	16,090,543
Proceeds from the sales of equity securities		—			—			622,068			—			622,068
Proceeds from the sales, redemptions and maturities of other investments		—			—			773,298			—			773,298
Proceeds from redemptions and maturities of fixed maturity investments		—			—			511,448			—			511,448
Net settlements of derivative instruments		—			—			4,498			—			4,498
Net (purchases) sales of short-term investments		96,446			(59,798		)	415,253			—			451,901
Change in cash collateral related to securities lending		—			—			176,304			—			176,304
Contributions to subsidiaries		—			(1,000		)	(22,595		)	23,595			—
Purchases of fixed assets		(71		)	—			(13,171		)	—			(13,242		)
Other		(4		)	—			49,965			—			49,961
	Net Cash Provided By (Used For) Investing Activities	96,371			(152,445		)	134,878			23,595			102,399
Financing Activities
Redemption of preferred shares		(92,555		)	—			—			—			(92,555		)
Purchases of common shares under share repurchase program		(173,575		)	—			—			—			(173,575		)
Proceeds from common shares issued, net		(13,851		)	—			23,595			(23,595		)	(13,851		)
Proceeds from borrowings		—			—			130,579			—			130,579
Repayments of borrowings		—			—			(373,000		)	—			(373,000		)
Change in cash collateral related to securities lending		—			—			(176,304		)	—			(176,304		)
Dividends paid to redeemable noncontrolling interests		—			—			(9,632		)	638			(8,994		)
Dividends paid to parent (1)		—			—			(864,242		)	864,242			—
Other		—			—			(4,489		)	—			(4,489		)
Preferred dividends paid		(20,840		)	—			—			—			(20,840		)
	Net Cash Provided By (Used For) Financing Activities	(300,821		)	—			(1,273,493		)	841,285			(733,029		)
Effects of exchange rates changes on foreign currency cash and restricted cash		—			—			(10,431		)	—			(10,431		)
Increase (decrease) in cash and restricted cash		(2,963		)	(2,869		)	(138,343		)	—			(144,175		)
Cash and restricted cash, beginning of year		10,048			30,380			686,856			—			727,284
Cash and restricted cash, end of period		$	7,085		$	27,511		$	548,513		$	—		$	583,109

(1)     Dividends received by parent are included in net cash provided by (used for) operating activities.

ARCH CAPITAL  47 2019 SECOND QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

14.    Income Taxes

The Company’s income tax provision on income before income taxes resulted in an expense of 8.4% for the six months ended June 30, 2019, compared to an expense of 9.7% for the 2018 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. For interim reporting purposes, the Company has calculated its annual effective tax rate for the full year of 2019 by treating excess tax benefits that arise from the accounting for stock based compensation as a discrete item. As such, this amount is not included when projecting the Company’s full year annual effective tax rate but rather is accounted for at the U.S. Federal statutory rate of 21% after applying the projected full year annual effective tax rate to actual six months results before the discrete item. The impact of the discrete item resulted in a benefit of 0.4% for the six months ended June 30, 2019.

The Company had a net deferred tax liability of $49.5 million at June 30, 2019, compared to a net deferred tax asset of $22.5 million at December 31, 2018. The change is primarily a result of the appreciation of the Company’s fixed maturities from December 31, 2018 to June 30, 2019. In addition, the Company paid $43.5 million and recovered $46.5 million of income taxes for the six months ended June 30, 2019 and 2018, respectively.

15.    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, 2019, 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.

16.    Subsequent Events

Bellemeade Re 2019-3 Ltd.

In July 2019, the Company’s first-lien U.S. mortgage insurance subsidiaries entered into an aggregate excess of loss reinsurance agreement with Bellemeade Re 2019-3 Ltd. (“Bellemeade 2019-3”), a special purpose reinsurance company domiciled in Bermuda. The Bellemeade 2019-3 agreement provides for up to $700.9 million of aggregate excess of loss reinsurance coverage at inception in excess of $232.1 million of aggregate losses for new delinquencies on a portfolio of in-force policies issued in 2016. The coverage amount decreases over a ten-year period as the underlying covered mortgages amortize.

Bellemeade 2019-3 financed the coverage through the issuance of mortgage insurance-linked notes in an aggregate amount of

approximately $700.9 million to unrelated investors (the “Notes”). The maturity date of the Notes is July 25, 2029. The Notes will be redeemed prior to maturity upon the occurrence of a mandatory termination event or if the ceding insurers trigger a termination of the reinsurance agreement following the occurrence of an optional termination event. All of the proceeds paid to Bellemeade 2019-3 from the sale of the Notes were deposited into a reinsurance trust as security for Bellemeade 2019-3’s obligations. At all times, funds in the reinsurance trust account are required to be invested in high credit quality money market funds.

Watford Re Capital Transactions

On July 2, 2019, Watford Holdings Ltd. completed an offering of $175.0 million in aggregate principal amount of its 6.5% senior notes, due July 2, 2029 (“Watford Senior Notes”). Interest on such notes will be paid semi-annually in arrears on each January 2 and July 2, commencing January 2, 2020. The $172.4 million net proceeds from the offering were used to redeem a portion of Watford Holdings Ltd.’s outstanding preference shares.

On August 1, 2019, Watford Holdings Ltd. redeemed 6,919,998 of its 9,065,200 total issued and outstanding Watford Preference Shares. The Watford Preference Shares were redeemed at a total redemption price of $25.19748 per share, inclusive of all declared and unpaid dividends, with accumulation of any undeclared dividends on or after June 30, 2019.

The Company purchased $35.0 million in aggregate principal amount of the Watford Senior Notes. In addition, the Company received $11.5 million pursuant to the redemption of Watford Preference Shares.

Business Acquisition

On July 30, 2019, the Company announced that it has entered into an agreement to purchase Barbican Group Holdings Limited from funds managed by Carlson Capital, a U.S. based alternative asset management firm. The acquisition includes Barbican Managing Agency Limited, Lloyd’s Syndicate 1955, Lloyd’s Syndicate 1856, Lloyd’s Special Purpose Arrangement 6132, Castel Underwriting Agencies Limited and other associated entities. The transaction is subject to regulatory approval and is expected to close in the late third or early fourth quarter of 2019.

ARCH CAPITAL  48 2019 SECOND QUARTER FORM 10-Q

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, 2018 (“2018 Form 10-K”). In addition, readers should review “Risk Factors” set forth in Item 1A of Part I of our 2018 Form 10-K. Tabular amounts are in U.S. Dollars in thousands, except share amounts, unless otherwise noted.

Arch Capital Group Ltd. (“Arch Capital” and, together with its subsidiaries, “Arch”, “we” or “us”) is a Bermuda public limited liability company with approximately $12.49 billion in capital at June 30, 2019 and, through operations in Bermuda, the United States, Europe, Canada and Australia, writes insurance, reinsurance and mortgage insurance on a worldwide basis.

CURRENT OUTLOOK

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.

Market conditions in our property casualty segments continued to improve in the 2019 second quarter, with upward rate movement in property and select casualty lines, and we selectively increased our writings. Our underwriting teams continue to execute a disciplined strategy by emphasizing small and medium-sized accounts over large accounts, shrinking premiums in more commoditized lines such as general liability and by utilizing reinsurance purchases to reduce volatility on large account, high capacity business. We believe that the improvement in the markets reflects broader economic growth, particularly in the U.S. Across the property and casualty industry, we have seen several market opportunities where we have increased our capital deployment, notably in the London markets and excess and surplus lines in the U.S. However, the spread between rate changes and loss trend continues to be a key variable in assessing expected returns and can be difficult to quantify precisely, particularly in specialty lines. Writings in net property catastrophe-exposed business continued to remain low in the 2019 second quarter.

Our mortgage segment continues to experience generally favorable market conditions. Although pricing remains competitive in the U.S., borrower credit quality and the general economy remain strong. Our results continue to reflect our success in making high quality credit underwriting risk decisions and building customer relationships.

Arch remains committed to providing solutions across many offerings as the marketplace evolves, including the mortgage credit risk transfer programs initiated by government sponsored enterprises, or “GSEs,” in 2018. Such programs have continued to generate business. In addition, we completed three Bellemeade risk transfers in March, April and July 2019, increasing our protection for mortgage tail risk.

FINANCIAL MEASURES

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

Book Value per Share

Book value per share represents total common shareholders’ equity available to Arch divided by the number of common shares outstanding. Management uses growth in book value per share as a key measure of the value generated for our common shareholders each period and believes that book value per share is the key driver of Arch Capital’s share price over time. Book value per 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 share depending on the purchase price.

Book value per share was $24.64 at June 30, 2019, compared to $23.12 at March 31, 2019 and $20.68 at June 30, 2018. The 6.6% increase for the 2019 second quarter reflected strong underwriting results and the impact of a decrease in interest rates on our fixed income securities while the 19.2% increase over the trailing twelve months reflected strong underwriting results and investment returns.

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 financial

ARCH CAPITAL  49 2019 SECOND QUARTER FORM 10-Q

measure as defined in Regulation G, 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, net foreign exchange gains or losses, transaction costs and other, loss on redemption of preferred shares and income taxes. Management uses Operating ROAE as a key measure of the return generated to common shareholders. See “Comment on Non-GAAP Financial Measures.”

Our Operating ROAE was 13.1% for the 2019 second quarter, compared to 11.6% for the 2018 second quarter, and 12.7% for the six months ended June 30, 2019, compared to 11.4% for the 2018 period. The 2019 and 2018 returns reflected favorable mortgage insurance underwriting performance, strong investment returns and a low level of catastrophic activity.

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, excludes amounts reflected in the ‘other’ segment, and reflects the effect of financial market conditions along with foreign currency fluctuations. In addition, total return incorporates the timing of investment returns during the periods. The following table summarizes our total return compared to the benchmark return against which we measured our portfolio during the periods. See “Comment on Non-GAAP Financial Measures.”

	Arch Portfolio		Benchmark Return
Pre-tax total return (before investment expenses):
2019 Second Quarter	2.37	%	2.17	%
2018 Second Quarter	(0.19	)%	(0.21	)%
Six Months Ended June 30, 2019	5.14	%	5.05	%
Six Months Ended June 30, 2018	(0.51	)%	(0.89	)%

Total return for the 2019 periods reflected the impact of a decline in interest rates, which increased the total return on our investment grade fixed income portfolio, aided by favorable returns on equities.

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 changes to the mix of liability currencies and durations 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, 2019, the benchmark return index had an average credit quality of “Aa3” by Moody’s Investors Service (“Moody’s”), and an estimated duration of 3.06 years.

The benchmark return index included weightings to the following indices:

	%
ICE BoAML 1-10 Year AAA - A U.S. Corporate Index	21.00	%
ICE BoAML 1-5 Year U.S. Treasury Index	15.00
ICE BoAML 3-5 Year Fixed Rate Asset Backed Securities Index	7.00
ICE BoAML 1-10 Year U.S. Municipal Securities Index	5.00
Bloomberg Barclays CMBS Invest Grade Aaa Total Return Index	5.00
MSCI ACWI Net Total Return USD Index	5.00
Hedge Fund Research HFRX Fixed Income Credit Index	5.00
Hedge Fund Research HFRX Equal Weighted Strategies	5.00
ICE BoAML 1-10 Year BBB U.S. Corporate Index	4.00
ICE BoAML German Government 1-10 Year Index	4.00
ICE BoAML U.S. Mortgage Backed Securities Index	4.00
ICE BoAML 0-3 Month U.S. Treasury Bill Index	4.00
ICE BoAML 1-5 Year U.K. Gilt Index	3.50
ICE BoAML 5-10 Year U.S. Treasury Index	3.00
ICE BoAML 1-5 Year Australian Governments Index	3.00
ICE BoAML U.S. High Yield Constrained Index	2.50
S&P Leveraged Loan Total Return Index	2.50
ICE BoAML 1-5 Year Canada Government Index	1.00
ICE BoAML 20+ Year Canada Government Index	0.50
Total	100.00	%

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, net foreign exchange gains or losses, transaction costs and other, loss on redemption of preferred shares and income taxes, and the use of annualized operating return on average common equity. The presentation of after-tax operating income available to Arch common

ARCH CAPITAL  50 2019 SECOND QUARTER FORM 10-Q

shareholders and annualized operating return on average common equity are non-GAAP financial measures as defined in Regulation G. The reconciliation of such measures to net income available to Arch common shareholders and annualized return on average common equity (the most directly comparable GAAP financial measures) 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, net foreign exchange gains or losses, transaction costs and other and loss on redemption of preferred shares 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. Transaction costs and other include advisory, financing, legal, severance, incentive compensation and other transaction costs related to acquisitions. We believe that transaction costs and other, due to their non-recurring nature, are not indicative of the performance of, or trends in, our business performance. The loss on redemption of preferred shares related to the redemption of our Series C preferred shares in January 2018 and had no impact on shareholders' equity or cash flows. 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, net foreign exchange gains or losses, transaction costs and other and loss on redemption of preferred shares 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.

Our segment information includes the presentation of consolidated underwriting income or loss and a subtotal of underwriting income or loss before the contribution from the ‘other’ segment. Such measures represent the pre-tax profitability of our underwriting operations and include net premiums earned plus other underwriting income, less losses and loss adjustment expenses, acquisition expenses and other operating expenses. Other operating expenses include those operating expenses that are incremental and/or directly attributable to our individual underwriting operations. Underwriting income or loss does not incorporate items included in our corporate (non-underwriting) segment. While these measures are presented in note 4, “Segment Information,” of the notes accompanying our consolidated financial statements, they are considered non-GAAP financial measures when presented elsewhere on a consolidated basis. The reconciliations of underwriting income or loss to income before income taxes (the most directly comparable GAAP financial measure) on a consolidated basis and a subtotal before the contribution from the ‘other’ segment, in accordance with Regulation G, is shown in note 4, “Segment Information” to our consolidated financial statements.

We measure 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 intangibles and, accordingly, investment income and other non-underwriting related items are not allocated to each underwriting segment. For the ‘other’ segment, performance is measured based on net income or loss.

Along with consolidated underwriting income, we provide a subtotal of underwriting income or loss before the contribution from the ‘other’ segment. The ‘other’ segment includes the

ARCH CAPITAL  51 2019 SECOND QUARTER FORM 10-Q

results of Watford Holdings Ltd. Watford Holdings Ltd. is the parent of Watford Re Ltd., a multi-line Bermuda reinsurance company (together with Watford Holdings Ltd., “Watford Re”). Pursuant to generally accepted accounting principles, Watford Re is considered a variable interest entity and we concluded that we are the primary beneficiary of Watford Re. As such, we consolidate the results of Watford Re in our consolidated financial statements, although we only own approximately 11% of Watford Re’s common equity. Watford Re has its own management and board of directors that is responsible for its overall profitability. In addition, we do not guarantee or provide credit support for Watford Re. Since 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. Our financial exposure to Watford Re is limited to our investment in Watford Re’s common and preferred shares and counterparty credit risk (mitigated by collateral) arising from the reinsurance transactions. We believe that presenting certain information excluding the ‘other’ segment enables investors and other users of our financial information to analyze our performance in a manner similar to how our management analyzes performance.

Our presentation of segment information includes the use of a current year loss ratio which excludes favorable or adverse development in prior year loss reserves. This ratio is a non-GAAP financial measure as defined in Regulation G. The reconciliation of such measure to the loss ratio (the most directly comparable GAAP financial measure) in accordance with Regulation G is shown on the individual segment pages. Management utilizes the current year loss ratio in its analysis of the underwriting performance of each of our underwriting segments.

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, excludes amounts reflected in the ‘other’ segment, and reflects the effect of financial market conditions along with foreign currency fluctuations. In addition, total return incorporates the timing of investment returns during the periods. There is no directly comparable GAAP financial measure for total return. 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.

RESULTS OF OPERATIONS

The following table summarizes our consolidated financial data, including a reconciliation of net income or loss available to Arch common shareholders to after-tax operating income or loss available to Arch common shareholders. Each line item reflects the impact of our approximate 11% ownership of Watford Re’s common equity.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Net income available to Arch common shareholders	$	458,551		$	233,243		$	896,676		$	370,519
Net realized (gains) losses	(124,637		)	61,426			(240,281		)	173,190
Net impairment losses recognized in earnings	49			470			1,358			632
Equity in net (income) loss of investment funds accounted for using the equity method	(32,536		)	(8,472		)	(79,403		)	(36,541		)
Net foreign exchange (gains) losses	6,054			(47,038		)	1,060			(31,482		)
Transaction costs and other	2,178			6,908			3,368			7,738
Loss on redemption of preferred shares	—			—			—			2,710
Income tax expense (benefit) (1)	7,774			(3,941		)	10,552			(9,027		)
After-tax operating income available to Arch common shareholders	$	317,433		$	242,596		$	593,330		$	477,739
Beginning common shareholders’ equity	$	9,334,596		$	8,370,372		$	8,659,827		$	8,324,047
Ending common shareholders’ equity	9,977,352			8,383,755			9,977,352			8,383,755
Average common shareholders’ equity	$	9,655,974		$	8,377,064		$	9,318,590		$	8,353,901
Annualized return on average common equity %	19.0			11.1			19.2			8.9
Annualized operating return on average common equity %	13.1			11.6			12.7			11.4

(1) Income tax on 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, net foreign exchange gains or losses, transaction costs and other and loss on redemption of preferred shares reflects the relative mix reported by jurisdiction and the varying tax rates in each jurisdiction.

ARCH CAPITAL  52 2019 SECOND QUARTER FORM 10-Q

Segment Information

We classify our businesses into three underwriting segments — insurance, reinsurance and mortgage — and two other operating segments — corporate (non-underwriting) and ‘other.’ 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 President and Chief Executive Officer of Arch Capital and the Chief Financial Officer of Arch Capital. 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.

Insurance Segment

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

	Three Months Ended June 30,
	2019			2018			% Change
Gross premiums written	$	919,925		$	769,372		19.6
Premiums ceded	(292,095		)	(245,265		)
Net premiums written	627,830			524,107			19.8
Change in unearned premiums	(35,388		)	22,342
Net premiums earned	592,442			546,449			8.4
Losses and loss adjustment expenses	(389,172		)	(357,465		)
Acquisition expenses	(91,094		)	(90,670		)
Other operating expenses	(109,523		)	(92,680		)
Underwriting income	$	2,653		$	5,634		(52.9	)
Underwriting Ratios							% Point Change
Loss ratio	65.7		%	65.4		%	0.3
Acquisition expense ratio	15.4		%	16.6		%	(1.2	)
Other operating expense ratio	18.5		%	17.0		%	1.5
Combined ratio	99.6		%	99.0		%	0.6

	Six Months Ended June 30,
	2019			2018			% Change
Gross premiums written	$	1,861,879		$	1,592,750		16.9
Premiums ceded	(612,717		)	(492,445		)
Net premiums written	1,249,162			1,100,305			13.5
Change in unearned premiums	(103,215		)	(15,119		)
Net premiums earned	1,145,947			1,085,186			5.6
Losses and loss adjustment expenses	(745,895		)	(711,195		)
Acquisition expenses	(173,918		)	(175,839		)
Other operating expenses	(222,919		)	(184,654		)
Underwriting income (loss)	$	3,215		$	13,498		(76.2	)
Underwriting Ratios							% Point Change
Loss ratio	65.1		%	65.5		%	(0.4	)
Acquisition expense ratio	15.2		%	16.2		%	(1.0	)
Other operating expense ratio	19.5		%	17.0		%	2.5
Combined ratio	99.8		%	98.7		%	1.1

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

ARCH CAPITAL  53 2019 SECOND QUARTER FORM 10-Q

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.

Premiums Written.

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

	Three Months Ended June 30,
	2019			2018
	Amount		%	Amount		%
Professional Lines	$	121,679	19.4	$	108,298	20.7
Programs	108,671		17.3	100,178		19.1
Property, energy, marine and aviation	103,819		16.5	62,121		11.9
Travel, accident and health	76,537		12.2	63,222		12.1
Construction and national accounts	60,888		9.7	66,384		12.7
Excess and surplus casualty	58,466		9.3	40,042		7.6
Lenders products	22,373		3.6	22,290		4.3
Other	75,397		12.0	61,572		11.7
Total	$	627,830	100.0	$	524,107	100.0

2019 Second Quarter versus 2018 Second Quarter. Gross premiums written by the insurance segment in the 2019 second quarter were 19.6% higher than in the 2018 second quarter, while net premiums written were 19.8% higher. Approximately one third of the growth in net premiums written resulted from our acquisition of renewal rights of a U.K. commercial lines book of business on January 1, 2019. The remainder was due to growth in existing accounts and rate increases across most lines of business.

	Six Months Ended June 30,
	2019			2018
	Amount		%	Amount		%
Professional Lines	$	250,913	20.1	$	228,087	20.7
Programs	209,843		16.8	196,734		17.9
Property, energy, marine and aviation	174,305		14.0	114,248		10.4
Travel, accident and health	164,641		13.2	143,746		13.1
Construction and national accounts	156,243		12.5	164,812		15.0
Excess and surplus casualty	103,631		8.3	81,964		7.4
Lenders products	44,788		3.6	44,274		4.0
Other	144,798		11.6	126,440		11.5
Total	$	1,249,162	100.0	$	1,100,305	100.0

Six Months Ended June 30, 2019 versus 2018 period. Gross premiums written by the insurance segment for the six months ended June 30, 2019 were 16.9% higher than in the 2018 period, while net premiums written were 13.5% higher than in the 2018 period. Growth in net premiums written resulted from our acquisition of renewal rights of a U.K. commercial lines book of business on January 1, 2019, growth in existing accounts and rate increases across most lines of business. The percentage increase in gross premiums written is higher than the increase in net premiums written due to a single large national account, for which the premium written in the quarter was substantially ceded.

Net Premiums Earned.

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

	Three Months Ended June 30,
	2019			2018
	Amount		%	Amount		%
Professional Lines	$	115,667	19.5	$	112,226	20.5
Programs	102,687		17.3	97,333		17.8
Property, energy, marine and aviation	68,995		11.6	50,840		9.3
Travel, accident and health	83,636		14.1	74,754		13.7
Construction and national accounts	76,795		13.0	81,784		15.0
Excess and surplus casualty	47,858		8.1	40,049		7.3
Lenders products	23,570		4.0	23,161		4.2
Other	73,234		12.4	66,302		12.1
Total	$	592,442	100.0	$	546,449	100.0

ARCH CAPITAL  54 2019 SECOND QUARTER FORM 10-Q

	Six Months Ended June 30,
	2019			2018
	Amount		%	Amount		%
Professional Lines	$	230,458	20.1	$	228,244	21.0
Programs	200,173		17.5	192,344		17.7
Property, energy, marine and aviation	128,633		11.2	99,443		9.2
Travel, accident and health	155,211		13.5	141,589		13.0
Construction and national accounts	152,726		13.3	158,996		14.7
Excess and surplus casualty	90,227		7.9	86,593		8.0
Lenders products	46,802		4.1	45,977		4.2
Other	141,717		12.4	132,000		12.2
Total	$	1,145,947	100.0	$	1,085,186	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 2019 second quarter were 8.4% higher than in the 2018 second quarter. For the six months ended June 30, 2019, net premiums earned were 5.6% higher than in the 2018 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 insurance segment’s loss ratio:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Current year	66.1	%	66.5	%	65.7	%	66.3	%
Prior period reserve development	(0.4	)%	(1.1	)%	(0.6	)%	(0.8	)%
Loss ratio	65.7	%	65.4	%	65.1	%	65.5	%

Current Year Loss Ratio.

The insurance segment’s current year loss ratio in the 2019 second quarter was 0.4 points lower than in the 2018 second quarter and reflected 0.4 points of current year catastrophic activity, compared to 1.4 points in the 2018 second quarter. The insurance segment’s current year loss ratio for the six months ended June 30, 2019 was 0.6 points lower than in the 2018 period and reflected 0.2 points of current year catastrophic activity, compared to 0.8 points in the 2018 period. The balance of the change in the 2018 loss ratios resulted, in part, from changes in mix of business and the level of large attritional losses.

Prior Period Reserve Development.

The insurance segment’s net favorable development was $2.6 million, or 0.4 points, for the 2019 second quarter, compared to $6.1 million, or 1.1 points, for the 2018 second quarter, and

$7.0 million, or 0.6 points, for the six months ended June 30, 2019, compared to $8.2 million, or 0.8 points, for the 2018 period. See note 5, “Reserve for Losses and Loss Adjustment Expenses,” to our consolidated financial statements for information about the insurance segment’s prior year reserve development.

Underwriting Expenses.

2019 Second Quarter versus 2018 Second Quarter. The insurance segment’s underwriting expense ratio was 33.9% in the 2019 second quarter, compared to 33.6% in the 2018 second quarter. Operating expenses increased in the 2019 second quarter due to our recent acquisitions, as well as growth in headcount, primarily in the areas of underwriting and technology. The resulting increase in the expense ratio was partially offset by the growth in net premiums earned.

Six Months Ended June 30, 2019 versus 2018 period. The insurance segment’s underwriting expense ratio was 34.7% for the six months ended June 30, 2019, compared to 33.2% for the 2018 period. Operating expenses increased for the six months ended June 30, 2019 due to the recent acquisitions by the Company, as well as growth in headcount, primarily in the areas of underwriting and technology. The resulting increase in the expense ratio was partially offset by the growth in net premiums earned.

Reinsurance Segment 

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

	Three Months Ended June 30,
	2019			2018			% Change
Gross premiums written	$	545,547		$	490,327		11.3
Premiums ceded	(169,457		)	(136,247		)
Net premiums written	376,090			354,080			6.2
Change in unearned premiums	(8,906		)	(13,762		)
Net premiums earned	367,184			340,318			7.9
Other underwriting income	1,224			(129		)
Losses and loss adjustment expenses	(240,958		)	(229,956		)
Acquisition expenses	(56,785		)	(50,142		)
Other operating expenses	(33,960		)	(35,678		)
Underwriting income	$	36,705		$	24,413		50.4
Underwriting Ratios							% Point Change
Loss ratio	65.6		%	67.6		%	(2.0	)
Acquisition expense ratio	15.5		%	14.7		%	0.8
Other operating expense ratio	9.2		%	10.5		%	(1.3	)
Combined ratio	90.3		%	92.8		%	(2.5	)

ARCH CAPITAL  55 2019 SECOND QUARTER FORM 10-Q

	Six Months Ended June 30,
	2019			2018			% Change
Gross premiums written	$	1,228,402		$	1,067,810		15.0
Premiums ceded	(401,024		)	(331,977		)
Net premiums written	827,378			735,833			12.4
Change in unearned premiums	(113,829		)	(116,343		)
Net premiums earned	713,549			619,490			15.2
Other underwriting income	5,601			1,103
Losses and loss adjustment expenses	(480,768		)	(371,631		)
Acquisition expenses	(111,111		)	(98,461		)
Other operating expenses	(69,664		)	(71,249		)
Underwriting income (loss)	$	57,607		$	79,252		(27.3	)
Underwriting Ratios							% Point Change
Loss ratio	67.4		%	60.0		%	7.4
Acquisition expense ratio	15.6		%	15.9		%	(0.3	)
Other operating expense ratio	9.8		%	11.5		%	(1.7	)
Combined ratio	92.8		%	87.4		%	5.4

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.

•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 or aggregation of losses from 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 individual 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 tables set forth our reinsurance segment’s net premiums written by major line of business:

	Three Months Ended June 30,
	2019			2018
	Amount		%	Amount		%
Other specialty	$	129,174	34.3	$	155,081	43.8
Casualty	78,025		20.7	68,113		19.2
Property excluding property catastrophe	96,050		25.5	77,876		22.0
Property catastrophe	46,594		12.4	35,045		9.9
Marine and aviation	15,619		4.2	10,061		2.8
Other	10,628		2.8	7,904		2.2
Total	$	376,090	100.0	$	354,080	100.0

2019 Second Quarter versus 2018 Second Quarter. Gross premiums written by the reinsurance segment in the 2019 second quarter were 11.3% higher than in the 2018 second quarter, while net premiums written were 6.2% higher. The increase in gross premiums written is primarily a result of growth in property business, with a significant amount being retroceded. The increase in net premiums written in the 2019 second quarter reflected growth from select new business opportunities across most lines of business. This was partially offset by a decline in other specialty business, primarily reflecting a reduction in U.K motor business with one cedent in the period.

	Six Months Ended June 30,
	2019			2018
	Amount		%	Amount		%
Other specialty	$	269,651	32.6	$	294,073	40.0
Casualty	246,509		29.8	198,289		26.9
Property excluding property catastrophe	198,790		24.0	163,046		22.2
Property catastrophe	49,977		6.0	42,677		5.8
Marine and aviation	31,577		3.8	20,073		2.7
Other	30,874		3.7	17,675		2.4
Total	$	827,378	100.0	$	735,833	100.0

Six Months Ended June 30, 2019 versus 2018 period. Gross premiums written by the reinsurance segment for the six months ended June 30, 2019 were 15.0% higher than in the 2018 period, while net premiums written were 12.4% higher than in the 2018 period. The increase in gross premiums written is primarily a

ARCH CAPITAL  56 2019 SECOND QUARTER FORM 10-Q

result of growth in property business, with a significant amount being retroceded. The increase in net premiums written for the six months ended June 30, 2019 reflected growth from select new business opportunities across most lines of business, partially offset by a decline in other specialty business, primarily reflecting a reduction in U.K motor business with one cedent in the period.

Net Premiums Earned.

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

	Three Months Ended June 30,
	2019			2018
	Amount		%	Amount		%
Other specialty	$	136,573	37.2	$	149,648	44.0
Casualty	103,164		28.1	85,009		25.0
Property excluding property catastrophe	85,479		23.3	70,849		20.8
Property catastrophe	18,537		5.0	15,716		4.6
Marine and aviation	12,498		3.4	10,089		3.0
Other	10,933		3.0	9,007		2.6
Total	$	367,184	100.0	$	340,318	100.0

	Six Months Ended June 30,
	2019			2018
	Amount		%	Amount		%
Other specialty	$	258,094	36.2	$	253,365	40.9
Casualty	194,788		27.3	154,381		24.9
Property excluding property catastrophe	169,271		23.7	139,603		22.5
Property catastrophe	37,269		5.2	34,103		5.5
Marine and aviation	23,557		3.3	19,478		3.1
Other	30,570		4.3	18,560		3.0
Total	$	713,549	100.0	$	619,490	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. For the 2019 second quarter, net premiums earned were 7.9% higher than in the 2018 second quarter. For the six months ended June 30, 2019, net premiums earned were 15.2% higher than in the 2018 period.

Other Underwriting Income (Loss).

Other underwriting income (loss) for the 2019 second quarter was $1.2 million, compared to $(0.1) million for the 2018 second quarter, and $5.6 million for the six months ended June 30, 2019, compared to $1.1 million for the 2018 period.

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,
	2019		2018		2019		2018
Current year	69.1	%	77.3	%	68.9	%	71.2	%
Prior period reserve development	(3.5	)%	(9.7	)%	(1.5	)%	(11.2	)%
Loss ratio	65.6	%	67.6	%	67.4	%	60.0	%

Current Year Loss Ratio.

The reinsurance segment’s current year loss ratio in the 2019 second quarter was 8.2 points lower than in the 2018 second quarter and reflected 1.3 points of current year catastrophic activity, compared to 2.2 points in the 2018 second quarter. The reinsurance segment’s current year loss ratio for the six months ended June 30, 2019 was 2.3 points lower than in the 2018 period and reflected 1.7 points of current year catastrophic activity, compared to 1.4 points in the 2018 period. In addition, the current year loss ratio for the 2019 periods reflected a lower level of large attritional loss activity than in the 2018 periods.

Prior Period Reserve Development.

The reinsurance segment’s net favorable development was $12.7 million, or 3.5 points, for the 2019 second quarter, compared to $33.0 million, or 9.7 points, for the 2018 second quarter, and $11.0 million, or 1.5 points, for the six months ended June 30, 2019, compared to $69.6 million, or 11.2 points, for the 2018 period. See note 5, “Reserve for Losses and Loss Adjustment Expenses,” to our consolidated financial statements for information about the reinsurance segment’s prior year reserve development.

Underwriting Expenses.

2019 Second Quarter versus 2018 Second Quarter. The underwriting expense ratio for the reinsurance segment was 24.7% in the 2019 second quarter, compared to 25.2% in the 2018 second quarter, reflecting growth in net premiums earned and changes in mix of business.

Six Months Ended June 30, 2019 versus 2018 period. The underwriting expense ratio for the reinsurance segment was 25.4% for the six months ended June 30, 2019, compared to 27.4% for the 2018 period.

Mortgage Segment 

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

ARCH CAPITAL  57 2019 SECOND QUARTER FORM 10-Q

primarily through Arch Mortgage Insurance Company and United Guaranty Residential Insurance Company (together, “Arch MI U.S.”), mortgage reinsurance by Arch Reinsurance Ltd. (“Arch Re Bermuda”) to mortgage insurers on both a proportional and non-proportional basis globally; direct mortgage insurance in Europe through Arch Insurance (EU) Designated Activity Company (“Arch MI Europe”) and in Hong Kong through Arch MI Asia Limited (“Arch MI Asia”); and participation in various GSE credit risk-sharing products primarily through Arch Re Bermuda.

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

	Three Months Ended June 30,
	2019			2018			% Change
Gross premiums written	$	364,465		$	330,990		10.1
Premiums ceded	(42,857		)	(50,867		)
Net premiums written	321,608			280,123			14.8
Change in unearned premiums	31,175			10,355
Net premiums earned	352,783			290,478			21.4
Other underwriting income	4,056			3,315
Losses and loss adjustment expenses	(25,997		)	(21,591		)
Acquisition expenses	(32,654		)	(27,737		)
Other operating expenses	(39,819		)	(38,729		)
Underwriting income	$	258,369		$	205,736		25.6
Underwriting Ratios							% Point Change
Loss ratio	7.4		%	7.4		%	—
Acquisition expense ratio	9.3		%	9.5		%	(0.2	)
Other operating expense ratio	11.3		%	13.3		%	(2.0	)
Combined ratio	28.0		%	30.2		%	(2.2	)

	Six Months Ended June 30,
	2019			2018			% Change
Gross premiums written	$	720,515		$	652,168		10.5
Premiums ceded	(91,655		)	(97,004		)
Net premiums written	628,860			555,164			13.3
Change in unearned premiums	46,825			15,556
Net premiums earned	675,685			570,720			18.4
Other underwriting income	7,912			6,731
Losses and loss adjustment expenses	(37,146		)	(65,057		)
Acquisition expenses	(64,326		)	(54,304		)
Other operating expenses	(79,694		)	(77,500		)
Underwriting income	$	502,431		$	380,590		32.0
Underwriting Ratios							% Point Change
Loss ratio	5.5		%	11.4		%	(5.9	)
Acquisition expense ratio	9.5		%	9.5		%	—
Other operating expense ratio	11.8		%	13.6		%	(1.8	)
Combined ratio	26.8		%	34.5		%	(7.7	)

Premiums Written.

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

	Three Months Ended June 30,
	2019			2018
	Amount		%	Amount		%
Underwriting location:
United States	$	258,774	80.5	$	229,715	82.0
Other	62,834		19.5	50,408		18.0
Total	$	321,608	100.0	$	280,123	100.0

2019 Second Quarter versus 2018 Second Quarter. Gross premiums written by the mortgage segment in the 2019 second quarter were 10.1% higher than in the 2018 second quarter, while net premiums written were 14.8% higher. The growth in net premiums written primarily reflected an increase in monthly premium business due to growth in insurance in force, partially offset by higher ceded premiums related to Bellemeade transactions. In addition, net premiums written for the 2019 second quarter included $17.1 million due to the novation of a quota share reinsurance arrangement on international business.

	Six Months Ended June 30,
	2019			2018
	Amount		%	Amount		%
Underwriting location:
United States	$	514,154	81.8	$	450,892	81.2
Other	114,706		18.2	104,272		18.8
Total	$	628,860	100.0	$	555,164	100.0

Six Months Ended June 30, 2019 versus 2018 period. Gross premiums written by the mortgage segment for the six months ended June 30, 2019 were 10.5% higher than in the 2018 period, while net premiums written were 13.3% higher. The growth in net premiums written primarily reflected an increase in monthly premium business due to growth in insurance in force, partially offset by higher ceded premiums related to Bellemeade transactions. In addition, net premiums written for the six months ended June 30, 2019 included $17.1 million due to the novation of a quota share reinsurance arrangement on international business.

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 80.9% at June 30, 2019, compared to 81.5% at December 31, 2018.

ARCH CAPITAL  58 2019 SECOND QUARTER FORM 10-Q

Arch MI U.S. generated $17.2 billion of new insurance written (“NIW”) in the 2019 second quarter, compared to $19.9 billion in the 2018 second quarter. NIW represents the original principal balance of all loans that received coverage during the period. Monthly premium policies contributed 92.9% of NIW in the 2019 second quarter, compared to 94.3% for the 2018 second quarter.

The following tables provide details on the NIW generated by Arch MI U.S.:

(U.S. Dollars in millions)	Three Months Ended June 30,
	2019			2018
	Amount		%	Amount		%
Total new insurance written (NIW) (1)	$	17,161		$	19,944
Credit quality (FICO):
>=740	$	9,862	57.5	$	11,308	56.7
680-739	6,139		35.8	7,182		36.0
620-679	1,160		6.8	1,454		7.3
Total	$	17,161	100.0	$	19,944	100.0
Loan-to-value (LTV):
95.01% and above	$	2,530	14.7	$	2,835	14.2
90.01% to 95.00%	7,497		43.7	9,205		46.2
85.01% to 90.00%	5,026		29.3	5,910		29.6
85.01% and below	2,108		12.3	1,994		10.0
Total	$	17,161	100.0	$	19,944	100.0
Monthly vs. single:
Monthly	$	15,935	92.9	$	18,814	94.3
Single	1,226		7.1	1,130		5.7
Total	$	17,161	100.0	$	19,944	100.0
Purchase vs. refinance:
Purchase	$	14,992	87.4	$	18,871	94.6
Refinance	2,169		12.6	1,073		5.4
Total	$	17,161	100.0	$	19,944	100.0

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

(U.S. Dollars in millions)	Six Months Ended June 30,
	2019			2018
	Amount		%	Amount		%
Total new insurance written (NIW) (1)	$	28,368		$	31,317
Credit quality (FICO):
>=740	$	16,212	57.1	$	17,920	57.2
680-739	10,180		35.9	11,224		35.8
620-679	1,976		7.0	2,173		6.9
Total	$	28,368	100.0	$	31,317	100.0
Loan-to-value (LTV):
95.01% and above	$	4,338	15.3	$	4,097	13.1
90.01% to 95.00%	12,472		44.0	14,341		45.8
85.01% to 90.00%	8,175		28.8	9,553		30.5
85.01% and below	3,383		11.9	3,326		10.6
Total	$	28,368	100.0	$	31,317	100.0
Monthly vs. single:
Monthly	$	26,198	92.4	$	29,204	93.3
Single	2,170		7.6	2,113		6.7
Total	$	28,368	100.0	$	31,317	100.0
Purchase vs. refinance:
Purchase	$	25,281	89.1	$	29,159	93.1
Refinance	3,087		10.9	2,158		6.9
Total	$	28,368	100.0	$	31,317	100.0

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

Net Premiums Earned.

The following tables set forth our mortgage segment’s net premiums earned by underwriting location:

	Three Months Ended June 30,
	2019			2018
	Amount		%	Amount		%
Underwriting location:
United States	$	282,062	80.0	$	247,897	85.3
Other	70,721		20.0	42,581		14.7
Total	$	352,783	100.0	$	290,478	100.0

	Six Months Ended June 30,
	2019			2018
	Amount		%	Amount		%
Underwriting location:
United States	$	556,535	82.4	$	486,038	85.2
Other	119,150		17.6	84,682		14.8
Total	$	675,685	100.0	$	570,720	100.0

Net premiums earned for the 2019 second quarter were 21.4% higher than in the 2018 second quarter. For the six months ended June 30, 2019, net premiums earned were 18.4% higher than in the 2018 period. The increases were primarily due to growth in U.S. insurance in force.

ARCH CAPITAL  59 2019 SECOND QUARTER FORM 10-Q

Other Underwriting Income.

Other underwriting income, which is primarily related to older GSE credit risk-sharing transactions receiving derivative accounting treatment, was $4.1 million for the 2019 second quarter, compared to $3.3 million for the 2018 second quarter. and $7.9 million for the six months ended June 30, 2019, compared to $6.7 million for the 2018 period.

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,
	2019		2018		2019		2018
Current year	13.9	%	15.4	%	14.3	%	17.8	%
Prior period reserve development	(6.5	)%	(8.0	)%	(8.8	)%	(6.4	)%
Loss ratio	7.4	%	7.4	%	5.5	%	11.4	%

Current Year Loss Ratio.

The mortgage segment’s current year loss ratio was 1.5 points lower in the 2019 second quarter than in the 2018 second quarter. The mortgage segment’s current year loss ratio was 3.5 points lower for the six months ended June 30, 2019 than for the 2018 period. The lower current year loss ratios for the 2019 periods reflect the current favorable macroeconomic environment.

Prior Period Reserve Development.

The mortgage segment’s net favorable development was $22.8 million, or 6.5 points, for the 2019 second quarter, compared to $23.3 million, or 8.0 points, for the 2018 second quarter, and $59.4 million, or 8.8 points, for the six months ended June 30, 2019, compared to $36.3 million, or 6.4 points, for the 2018 period. See note 5, “Reserve for Losses and Loss Adjustment Expenses,” to our consolidated financial statements for information about the mortgage segment’s prior year reserve development.

Underwriting Expenses.

2019 Second Quarter versus 2018 Second Quarter. The underwriting expense ratio for the mortgage segment was 20.6% in the 2019 second quarter, compared to 22.8% in the 2018 second quarter. The lower ratio in the 2019 second quarter primarily resulted from the higher level of net premiums earned.

Six Months Ended June 30, 2019 versus 2018 period. The underwriting expense ratio for the mortgage segment was 21.3% for the six months ended June 30, 2019, compared to 23.1% for the 2018 period. The lower underwriting expense

ratio in the 2019 period primarily resulted from the higher level of net premiums earned.

Corporate (Non-Underwriting) Segment

The corporate (non-underwriting) segment results include net investment income, other income (loss), corporate expenses, transaction costs and other, amortization of intangible assets, interest expense, items related to our non-cumulative preferred shares, 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 and income taxes. Such amounts exclude the results of 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,
	2019			2018			2019			2018
Fixed maturities	$	111,335		$	98,968		$	221,986		$	191,406
Equity securities	3,494			4,232			5,740			6,982
Short-term investments	3,448			4,225			7,746			8,174
Other (1)	20,115			19,242			43,059			38,471
Gross investment income	138,392			126,667			278,531			245,033
Investment expenses (2)	(15,354		)	(18,906		)	(34,244		)	(37,029		)
Net investment income	$	123,038		$	107,761		$	244,287		208,004

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

(2) Investment expenses were approximately 0.38% of average invested assets for the 2019 second quarter, compared to 0.40% for the 2018 second quarter, and 0.35% for the six months ended June 30, 2019, compared to 0.37% for the 2018 period.

The higher level of net investment income for the 2019 periods reflected growth in invested assets, the reinvestment of fixed income securities at higher available yields and the shift from municipal bonds to corporates. The pre-tax investment income yield, calculated based on amortized cost and on an annualized basis, was 2.62% for the 2019 second quarter, compare to 2.32% for the 2018 second quarter, and 2.64% for the six months ended June 30, 2019, compared to 2.23% for the 2018 period.

Corporate Expenses.

Corporate expenses were $16.1 million for the 2019 second quarter, compared to $15.6 million for the 2018 second quarter, and $32.8 million for the six months ended June 30, 2019, compared to $30.1 million for the 2018 period. The increase in corporate expenses in the 2019 periods primarily reflected higher incentive compensation costs.

ARCH CAPITAL  60 2019 SECOND QUARTER FORM 10-Q

Transaction Costs and Other.

Transaction costs and other were $2.2 million for the 2019 second quarter, compared to $6.9 million for the 2018 second quarter, and $3.4 million for the six months ended June 30, 2019, compared to $7.7 million for the 2018 period. Amounts in 2019 primarily related to recent acquisition activity while the 2018 activity primarily related to severance and related costs.

Amortization of Intangible Assets.

Amortization of intangible assets for the 2019 second quarter was $19.8 million, compared to $26.5 million for the 2018 second quarter, and $40.2 million for the six months ended June 30, 2019, compared to $53.2 million for the 2018 period. Such expenses primarily related to the UGC acquisition, while the 2019 periods also included amortization related to the previously announced acquisitions of (i) renewal rights of a U.K. commercial lines book of business on January 1, 2019; and (ii) McNeil &Co. on December 6, 2018. See the consolidated financial statements contained in our 2018 Form 10-K for disclosures on our amortization pattern.

Interest Expense.

Interest expense was $23.4 million for the 2019 second quarter, compared to the $26.1 million for the 2018 second quarter, and $46.9 million for the six months ended June 30, 2019, compared to $52.0 million for the 2018 period. The lower level in the 2019 periods reflected the paydown of revolving credit agreement borrowings in the second half of 2018.

Loss on Redemption of Preferred Shares.

In January 2018, we redeemed all remaining 6.75% Series C preferred shares and, in accordance with GAAP, recorded a loss of $2.7 million to remove original issuance costs related to the redeemed shares from additional paid-in capital. Such adjustment had no impact on total shareholders’ equity or cash flows.

Net Realized Gains or Losses.

We recorded net realized gains of $125.1 million for the 2019 second quarter, compared to net realized losses of $59.5 million for the 2018 second quarter, and net realized gains of $237.5 million for the six months ended June 30, 2019, compared to net realized losses of $171.4 million for the 2018 period. Currently, our portfolio is actively managed to maximize total return within certain guidelines. The effect of financial market movements on the investment portfolio will directly impact net realized gains and losses as the portfolio is adjusted and rebalanced. Net realized gains or losses from the sale of fixed maturities primarily results from our decisions to reduce credit exposure, to change duration targets, to rebalance our portfolios or due to relative value determinations. Net realized gains or losses also include realized and unrealized contract gains and losses on our derivative instruments, changes in the fair value

of assets accounted for using the fair value option and in the fair value of equities, along with re-measurement of contingent consideration liability amounts. See note 6, “Investment Information—Net Realized Gains (Losses),” to our consolidated financial statements for additional information.

Net Impairment Losses Recognized in Earnings.

We recorded minimal impairment losses for the 2019 second quarter, compared to $0.5 million for the 2018 second quarter, and $1.4 million for the six months ended June 30, 2019, compared to $0.6 million for the 2018 period. See note 6, “Investment Information—Other-Than-Temporary Impairments,” to our consolidated financial statements for additional information.

Equity in Net Income (Loss) of Investment Funds Accounted for Using the Equity Method.

We recorded $32.5 million of equity in net income related to investment funds accounted for using the equity method in the 2019 second quarter, compared to $8.5 million of income for the 2018 second quarter, and $79.4 million of income for the six months ended June 30, 2019, compared to $36.5 million for the 2018 period. Investment funds accounted for using the equity method totaled $1.58 billion at June 30, 2019, compared to $1.49 billion at December 31, 2018. See note 6, “Investment Information—Investments Accounted For Using the Equity Method,” to our consolidated financial statements for additional information.

Net Foreign Exchange Gains or Losses.

Net foreign exchange losses for the 2019 second quarter were $6.2 million, compared to net foreign exchange gains for the 2018 second quarter of $46.2 million. Net foreign exchange losses for the six months ended June 30, 2019 were $1.0 million, compared to net foreign exchange gains for the 2018 period of $31.2 million. Amounts in both periods were primarily unrealized and resulted from the effects of revaluing our net insurance liabilities required to be settled in foreign currencies at each balance sheet date.

Income Tax Expense.

Our income tax provision on income (loss) before income taxes resulted in an expense of 8.7% for the 2019 second quarter and 9.0% for the six months ended June 30, 2019, compared to 8.9% for the 2018 second quarter and 10.4% for the six months ended June 30, 2018 . The effective tax rates for the 2019 second quarter and six months ended June 30, 2019 included a discrete income tax benefit of $2.5 million and $4.3 million, respectively, related to share based compensation. 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.

ARCH CAPITAL  61 2019 SECOND QUARTER FORM 10-Q

Other Segment 

The ‘other’ segment includes the results of Watford Re. Pursuant to generally accepted accounting principles, Watford Re is considered a variable interest entity and we concluded that we are the primary beneficiary of Watford Re. As such, we consolidate the results of Watford Re in our consolidated financial statements, although we only own approximately 11% of Watford Re’s common equity. See note 11, “Variable Interest Entities and Noncontrolling Interests,” and note 4, “Segment Information,” to our consolidated financial statements for additional information on Watford Re.

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 2018 Form 10-K, updated where applicable in the notes accompanying our consolidated financial statements, including note 1, “Basis of Presentation and Recent Accounting Pronouncements.”

FINANCIAL CONDITION

Investable Assets 

At June 30, 2019, total investable assets held by Arch were $20.78 billion, excluding the $2.77 billion included in the ‘other’ segment (i.e., attributable to Watford Re).

Investable Assets Held by Arch 

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

Investable assets (1):	Estimated Fair Value			% of Total
June 30, 2019
Fixed maturities (2)	$	15,959,794		76.8
Short-term investments (2)	847,250			4.1
Cash	536,339			2.6
Equity securities (2)	666,900			3.2
Other investments (2)	1,327,134			6.4
Investments accounted for using the equity method	1,581,972			7.6
Securities transactions entered into but not settled at the balance sheet date	(142,726		)	(0.7	)
Total investable assets held by Arch	$	20,776,663		100.0
Average effective duration (in years)	3.52
Average S&P/Moody’s credit ratings (3)	AA/Aa2
Embedded book yield (4)	2.87		%
December 31, 2018
Fixed maturities (2)	$	14,881,902		76.1
Short-term investments (2)	995,926			5.1
Cash	583,027			3.0
Equity securities (2)	368,843			1.9
Other investments (2)	1,261,525			6.4
Investments accounted for using the equity method	1,493,791			7.6
Securities transactions entered into but not settled at the balance sheet date	(18,153		)	(0.1	)
Total investable assets held by Arch	$	19,566,861		100.0
Average effective duration (in years)	3.38
Average S&P/Moody’s credit ratings (3)	AA/Aa2
Embedded book yield (4)	2.89		%

(1) 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.

(2) Includes investments carried at fair value under the fair value option.

(3) Average credit ratings on our investment portfolio on securities with ratings by Standard & Poor’s Rating Services (“S&P”) and Moody’s Investors Service (“Moody’s”).

(4) Before investment expenses.

At June 30, 2019, approximately $14.96 billion, or 72.0%, of total investable assets held by Arch were internally managed, compared to $14.08 billion, or 72.0%, at December 31, 2018.

ARCH CAPITAL  62 2019 SECOND QUARTER FORM 10-Q

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

	Estimated Fair Value		% of Total
June 30, 2019
Corporate bonds	$	6,281,897	39.4
Mortgage backed securities	513,760		3.2
Municipal bonds	581,378		3.6
Commercial mortgage backed securities	686,707		4.3
U.S. government and government agencies	4,545,169		28.5
Non-U.S. government securities	1,847,023		11.6
Asset backed securities	1,503,860		9.4
Total	$	15,959,794	100.0
December 31, 2018
Corporate bonds	$	5,735,526	38.5
Mortgage backed securities	535,763		3.6
Municipal bonds	1,012,308		6.8
Commercial mortgage backed securities	729,442		4.9
U.S. government and government agencies	3,601,269		24.2
Non-U.S. government securities	1,713,891		11.5
Asset backed securities	1,553,703		10.4
Total	$	14,881,902	100.0

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

	Estimated Fair Value		% of Total
June 30, 2019
U.S. government and gov’t agencies (1)	$	5,030,769	31.5
AAA	3,325,260		20.8
AA	1,831,265		11.5
A	3,439,690		21.6
BBB	1,465,219		9.2
BB	361,389		2.3
B	226,885		1.4
Lower than B	60,858		0.4
Not rated	218,459		1.4
Total	$	15,959,794	100.0
December 31, 2018
U.S. government and gov’t agencies (1)	$	4,194,676	28.2
AAA	3,551,039		23.9
AA	2,129,336		14.3
A	3,069,656		20.6
BBB	1,251,205		8.4
BB	275,201		1.8
B	183,614		1.2
Lower than B	61,271		0.4
Not rated	165,904		1.1
Total	$	14,881,902	100.0

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

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

Severity of gross unrealized losses:	Estimated Fair Value		Gross Unrealized Losses			% of Total Gross Unrealized Losses
June 30, 2019
0-10%	$	3,323,262	$	(51,874	)	83.8
10-20%	54,735		(9,486		)	15.3
20-30%	1,496		(460		)	0.7
Greater than 30%	73		(114		)	0.2
Total	$	3,379,566	$	(61,934	)	100.0
December 31, 2018
0-10%	$	8,722,837	$	(190,170	)	92.5
10-20%	87,188		(13,012		)	6.3
20-30%	3,359		(1,058		)	0.5
Greater than 30%	2,363		(1,266		)	0.6
Total	$	8,815,747	$	(205,506	)	100.0

The following table summarizes our top ten exposures to fixed income corporate issuers by fair value at June 30, 2019, excluding guaranteed amounts and covered bonds:

	Estimated Fair Value		Credit Rating (1)
Bank of America Corporation	$	234,672	A-/A2
JPMorgan Chase & Co.	228,144		A-/A2
Wells Fargo & Company	216,814		A/A1
Citigroup Inc.	207,673		A/A1
Apple Inc.	144,498		AA+/Aa1
Morgan Stanley	117,638		BBB+/A3
Nestle S.A.	112,919		AA-/Aa2
American Express Company	112,584		BBB+/A3
BP P.L.C.	109,805		A-/A1
The Goldman Sachs Group, Inc.	108,946		BBB+/A3
Total	$	1,593,693

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

ARCH CAPITAL  63 2019 SECOND QUARTER FORM 10-Q

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

	Agencies		Investment Grade		Below Investment Grade		Total
Jun 30, 2019
RMBS	$	381,380	$	95,023	$	37,357	$	513,760
CMBS	104,220		560,602		21,885		686,707
ABS	—		1,431,312		72,548		1,503,860
Total	$	485,600	$	2,086,937	$	131,790	$	2,704,327
Dec 31, 2018
RMBS	$	488,862	$	15,410	$	31,491	$	535,763
CMBS	104,547		602,865		22,030		729,442
ABS	—		1,485,150		68,553		1,553,703
Total	$	593,409	$	2,103,425	$	122,074	$	2,818,908

At June 30, 2019, our structured securities included $41.0 million par value in sub-prime securities with a fair value of $34.2 million and average credit quality ratings from S&P/Moody’s of “CCC-/Caa3,” compared to $38.2 million par value with a fair value of $31.7 million and average credit quality ratings of “CCC-/Caa3” at December 31, 2018.

At June 30, 2019, our investment portfolio included $666.9 million of equity securities, compared to $368.8 million at December 31, 2018. Our equity portfolio includes publicly traded common stocks in the natural resources, energy, consumer staples and other sectors and exchange-traded funds.

The following table summarizes our other investments which are included in investments accounted for using the fair value option, by strategy:

	June 30, 2019		December 31, 2018
Lending	$	585,954	$	524,112
Term loan investments	$	274,061	$	281,486
Energy	123,547		117,509
Credit related funds	166,673		152,510
Investment grade fixed income	86,808		101,902
Infrastructure	49,260		45,371
Private equity	23,925		24,383
Real estate	16,906		14,252
Total	$	1,327,134	$	1,261,525

For details on our investments accounted for using the equity method, see note 6, “Investment Information—Investments Accounted For Using the Equity Method,” to our consolidated financial statements.

Our investment strategy allows for the use of derivative instruments. We utilize various derivative instruments such as futures contracts to enhance investment performance, replicate investment positions or manage market exposures and duration

risk that would be allowed under our investment guidelines if implemented in other ways. See note 8, “Derivative Instruments,” to our consolidated financial statements for additional disclosures related to derivatives.

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

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 its 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, 2019			December 31, 2018
Investments accounted for using the fair value option:
Other investments	$	1,067,384		$	1,050,414
Fixed maturities	616,863			922,819
Short-term investments	232,176			282,131
Equity securities	56,524			56,638
Total	1,972,947			2,312,002
Fixed maturities available for sale, at fair value	697,453			393,351
Equity securities, at fair value	64,703			32,206
Cash	68,977			63,529
Securities sold but not yet purchased	(48,823		)	(7,790		)
Securities transactions entered into but not settled at the balance sheet date	13,209			(35,635		)
Total investable assets included in ‘other’ segment	$	2,768,466		$	2,757,663

ARCH CAPITAL  64 2019 SECOND QUARTER FORM 10-Q

Reinsurance

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

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Premiums written:
Direct	$	1,373,825		$	1,158,772		$	2,737,331		$	2,359,134
Assumed	563,984			537,772			1,278,357			1,175,624
Ceded	(492,911		)	(397,648		)	(1,045,531		)	(823,318		)
Net	$	1,444,898		$	1,298,896		$	2,970,157		$	2,711,440
Premiums earned:
Direct	$	1,335,558		$	1,174,372		$	2,601,621		$	2,322,048
Assumed	574,899			534,485			1,108,178			980,454
Ceded	(446,730		)	(372,094		)	(877,206		)	(730,840		)
Net	$	1,463,727		$	1,336,763		$	2,832,593		$	2,571,662
Losses and LAE:
Direct	$	705,235		$	520,473		$	1,321,297		$	1,088,939
Assumed	388,237			340,969			726,637			561,279
Ceded	(325,929		)	(135,289		)	(561,859		)	(287,205		)
Net	$	767,543		$	726,153		$	1,486,075		$	1,363,013

Reinsurance Recoverables

The following table summarizes our reinsurance recoverables on paid and unpaid losses (not including ceded unearned premiums) at June 30, 2019 and December 31, 2018:

	June 30, 2019			December 31, 2018
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses	$	3,171,257		$	2,919,372
% due from carriers with A.M. Best rating of “A-” or better	58.7		%	63.0		%
% due from unrated fully collateralized reinsurers (1)	16.9		%	12.9		%
% due from all other carriers with no A.M. Best rating (2)	24.4		%	24.1		%
Largest balance due from any one carrier as % of total shareholders’ equity	1.9		%	2.7		%

(1) Such amount is fully collateralized through reinsurance trusts.

(2) Over 90% of such amount is collateralized through reinsurance trusts or letters of credit.

Growth in items not rated in 2019 is primarily due to recoverables from a third party reinsurer related to a retroactive reinsurance transaction to reinsure liabilities associated with certain U.S. insurance exposures. Such amounts are fully collateralized. See note 5, “Reserve for Losses and Loss

Adjustment Expenses,” to our consolidated financial statements for additional information.

Bellemeade Re

We have entered into various aggregate excess of loss mortgage reinsurance agreements with various special purpose reinsurance companies domiciled in Bermuda (the “Bellemeade Agreements”). For the respective coverage periods, we will retain the first layer of the respective aggregate losses and the special purpose reinsurance companies will provide second layer coverage up to the outstanding coverage amount. We will then retain losses in excess of the outstanding coverage limit. The aggregate excess of loss reinsurance coverage decreases over a ten-year period as the underlying covered mortgages amortize.

The following table summarizes the respective coverages and retentions at June 30, 2019:

	Initial Coverage at Issuance		Coverage at Jun. 30, 2019		First Layer Retention
Bellemeade 2015-1 Ltd. (1)	$	300,000	$	19,103	$	129,900
Bellemeade 2017-1 Ltd. (2)	368,100		277,554		165,700
Bellemeade 2018-1 Ltd. (3)	374,460		374,460		168,510
Bellemeade 2018-2 Ltd. (4)	653,278		571,129		352,258
Bellemeade 2018-3 Ltd. (5)	506,110		506,110		179,331
Bellemeade 2019-1 Ltd. (6)	341,790		329,085		208,046
Bellemeade 2019-2 Ltd. (7)	621,022		621,022		221,794

(1) Issued in July 2015, covering in-force policies issued between January 1, 2009 and March 31, 2013.

(2) Issued in October 2017, covering in-force policies issued between January 1, 2017 and June 30, 2017.

(3) Issued in April 2018, covering in-force policies issued between July 1, 2017 and December 31, 2017.

(4) Issued in August 2018, covering in-force policies issued between April 1, 2013 and December 31, 2015.

(5) Issued in October 2018, covering in-force policies issued between January 1, 2018 and June 30, 2018.

(6) Issued in March 2019, covering in-force policies primarily issued between 2005-2008 under United Guaranty Residential Insurance Company (“UGRIC”); as well as policies issued through 2015 under both UGRIC and Arch Mortgage Insurance Company.

(7) Issued in April 2019, covering in-force policies issued between July 1, 2018 and December 31, 2018.

In July 2019, we entered into an aggregate excess of loss reinsurance agreement with Bellemeade Re 2019-3 Ltd. Such agreement provides for up to $700.9 million of aggregate excess of loss reinsurance coverage at inception in excess of $232.1 million of aggregate losses for new delinquencies on a portfolio of in-force policies issued in 2016.

Reserve for Losses and Loss Adjustment Expenses 

We establish reserve for losses and loss adjustment expenses (“Loss Reserves”) which represent estimates involving actuarial and statistical projections, at a given point in time, of our expectations of the ultimate settlement and administration

ARCH CAPITAL  65 2019 SECOND QUARTER FORM 10-Q

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, 2019 and December 31, 2018, our Loss Reserves, net of unpaid losses and loss adjustment expenses recoverable, by type and by operating segment were as follows:

	June 30, 2019		December 31, 2018
Insurance segment:
Case reserves	$	1,481,510	$	1,489,644
IBNR reserves	3,242,209		3,266,796
Total net reserves	4,723,719		4,756,440
Reinsurance segment:
Case reserves	1,169,285		1,082,917
Additional case reserves	172,932		191,002
IBNR reserves	1,672,645		1,578,907
Total net reserves	3,014,862		2,852,826
Mortgage segment:
Case reserves	302,426		355,606
IBNR reserves	151,224		122,304
Total net reserves (1)	453,650		477,910
Other segment:
Case reserves	431,960		364,052
Additional case reserves	25,640		36,512
IBNR reserves	555,688		551,266
Total net reserves	1,013,288		951,830
Total:
Case reserves	3,385,181		3,292,219
Additional case reserves	198,572		227,514
IBNR reserves	5,621,766		5,519,273
Total net reserves	$	9,205,519	$	9,039,006

(1) At June 30, 2019, total net reserves include $330.1 million from U.S. mortgage insurance business, of which 66.7% represents policy years 2009 and prior and the remainder from later policy years. At December 31, 2018, total net reserves include $375.8 million from U.S. mortgage insurance business, of which 73.4% represents policy years 2009 and prior and the remainder from later policy years.

At June 30, 2019 and December 31, 2018, 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, 2019		December 31, 2018
Insurance segment:
Professional lines (1)	$	1,255,253	$	1,247,914
Construction and national accounts	1,200,490		1,166,143
Excess and surplus casualty (2)	508,926		631,370
Programs	527,190		482,045
Property, energy, marine and aviation	338,868		388,710
Travel, accident and health	88,704		83,836
Lenders products	49,447		52,007
Other (3)	754,841		704,415
Total net reserves	$	4,723,719	$	4,756,440

(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, 2019 and December 31, 2018, 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, 2019		December 31, 2018
Reinsurance segment:
Casualty (1)	$	1,589,727	$	1,551,550
Other specialty (2)	662,535		582,420
Property excluding property catastrophe	447,549		422,612
Marine and aviation	131,644		130,683
Property catastrophe	110,570		90,635
Other (3)	72,837		74,926
Total net reserves	$	3,014,862	$	2,852,826

(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 life, casualty clash and other.

ARCH CAPITAL  66 2019 SECOND QUARTER FORM 10-Q

Mortgage Operations Supplemental Information

The mortgage segment’s insurance in force (“IIF”) and risk in force (“RIF”) were as follows at June 30, 2019 and December 31, 2018:

(U.S. Dollars in millions)	June 30, 2019			December 31, 2018
	Amount		%	Amount		%
Insurance In Force (IIF) (1):
U.S. primary mortgage insurance	$	279,297	69.1	$	276,538	72.1
Mortgage reinsurance	26,286		6.5	25,975		6.8
Other (2)	98,335		24.3	81,147		21.2
Total	$	403,918	100.0	$	383,660	100.0
Risk In Force (RIF) (3):
U.S. primary mortgage insurance	$	71,760	91.8	$	70,995	92.3
Mortgage reinsurance	2,182		2.8	2,217		2.9
Other (2)	4,260		5.4	3,728		4.8
Total	$	78,202	100.0	$	76,940	100.0

(1) Represents the aggregate dollar amount of each insured mortgage loan’s current principal balance.

(2) Includes GSE credit risk-sharing transactions and international insurance business.

(3) 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 and after contract limits and/or loss ratio caps for credit risk-sharing or reinsurance transactions.

The insurance in force and risk in force for our U.S. primary mortgage insurance business by policy year were as follows at June 30, 2019:

(U.S. Dollars in millions)	IIF			RIF			Delinquency
	Amount		%	Amount		%	Rate (1)
Policy year:
2009 and prior	$	19,182	6.9	$	4,397	6.1	8.23	%
2010	519		0.2	139		0.2	2.45	%
2011	2,091		0.7	582		0.8	1.59	%
2012	7,613		2.7	2,122		3.0	0.83	%
2013	14,800		5.3	4,125		5.7	0.84	%
2014	16,251		5.8	4,454		6.2	0.98	%
2015	30,289		10.8	8,003		11.2	0.73	%
2016	47,334		16.9	12,233		17.0	0.79	%
2017	50,603		18.1	12,918		18.0	0.65	%
2018	62,753		22.5	15,831		22.1	0.37	%
2019	27,862		10.0	6,956		9.7	0.05	%
Total	$	279,297	100.0	$	71,760	100.0	1.45	%

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

The insurance in force and risk in force for our U.S. primary mortgage insurance business by policy year were as follows at December 31, 2018:

(U.S. Dollars in millions)	IIF			RIF			Delinquency
	Amount		%	Amount		%	Rate (1)
Policy year:
2009 and prior	$	21,210	7.7	$	4,900	6.9	8.90	%
2010	646		0.2	175		0.2	2.62	%
2011	2,530		0.9	701		1.0	1.57	%
2012	9,650		3.5	2,664		3.8	0.78	%
2013	16,823		6.1	4,676		6.6	0.89	%
2014	18,274		6.6	4,947		7.0	0.97	%
2015	33,781		12.2	8,849		12.5	0.69	%
2016	52,324		18.9	13,407		18.9	0.77	%
2017	54,287		19.6	13,793		19.4	0.55	%
2018	67,013		24.2	16,883		23.8	0.15	%
Total	$	276,538	100.0	$	70,995	100.0	1.60	%

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

The following tables provide supplemental disclosures on risk in force for our U.S. primary mortgage insurance business at June 30, 2019 and December 31, 2018:

(U.S. Dollars in millions)	June 30, 2019				December 31, 2018
	Amount			%	Amount			%
Credit quality (FICO):
>=740	$	41,333		57.6	$	41,066		57.8
680-739	24,488			34.1	23,954			33.7
620-679	5,494			7.7	5,485			7.7
<620	445			0.6	490			0.7
Total	$	71,760		100.0	$	70,995		100.0
Weighted average FICO score	743				743
Loan-to-value (LTV):
95.01% and above	$	8,535		11.9	$	7,918		11.2
90.01% to 95.00%	39,777			55.4	39,370			55.5
85.01% to 90.00%	20,419			28.5	20,643			29.1
85.00% and below	3,029			4.2	3,064			4.3
Total	$	71,760		100.0	$	70,995		100.0
Weighted average LTV	93.1		%		93.0		%
Total RIF, net of external reinsurance	$	56,562			$	55,755

ARCH CAPITAL  67 2019 SECOND QUARTER FORM 10-Q

(U.S. Dollars in millions)	June 30, 2019			December 31, 2018
	Amount		%	Amount		%
Total RIF by State:
Texas	$	5,509	7.7	$	5,491	7.7
California	4,736		6.6	4,505		6.3
Florida	3,699		5.2	3,541		5.0
Virginia	2,916		4.1	2,931		4.1
Georgia	2,599		3.6	2,573		3.6
Illinois	2,536		3.5	2,482		3.5
North Carolina	2,462		3.4	2,505		3.5
Minnesota	2,434		3.4	2,400		3.4
Washington	2,421		3.4	2,408		3.4
Maryland	2,420		3.4	2,407		3.4
Others	40,028		55.8	39,752		56.0
Total	$	71,760	100.0	$	70,995	100.0

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

(U.S. Dollars in thousands, except policy, loan and claim count)	Six Months Ended
	June 30,
	2019			2018
Roll-forward of insured loans in default:
Beginning delinquent number of loans	20,665			27,068
New notices	18,617			17,792
Cures	(18,907		)	(21,865		)
Paid claims	(1,614		)	(1,958		)
Ending delinquent number of loans (1)	18,761			21,037
Ending number of policies in force (1)	1,292,215			1,239,565
Delinquency rate (1)	1.45		%	1.70		%
Losses:
Number of claims paid	1,614			1,958
Total paid claims	$	65,519		$	83,534
Average per claim	$	40.6		$	42.7
Severity (2)	97.0		%	101.6		%
Average reserve per default (in thousands)	$	16.1		$	19.3

(1) Includes first lien primary and pool policies.

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

The risk-to-capital ratio, which represents total current (non-delinquent) risk in force, net of reinsurance, divided by total statutory capital, for Arch MI U.S. was approximately 11.4 to 1 at June 30, 2019, compared to 13.0 to 1 at December 31, 2018.

Shareholders’ Equity and Book Value per Share

Total shareholders’ equity available to Arch was $10.76 billion at June 30, 2019, compared to $9.44 billion at December 31, 2018. The increase reflected strong underwriting and investment returns.

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

(U.S. dollars in thousands, except  share data)	June 30, 2019		December 31, 2018
Total shareholders’ equity available to Arch	$	10,757,352	$	9,439,827
Less preferred shareholders’ equity	780,000		780,000
Common shareholders’ equity available to Arch	$	9,977,352	$	8,659,827
Common shares and common share equivalents outstanding, net of treasury shares (1)	404,887,534		402,454,834
Book value per share	$	24.64	$	21.52

(1) Excludes the effects of 19,607,588 and 20,076,593 stock options and 1,693,203 and 1,307,304 restricted stock units outstanding at June 30, 2019 and December 31, 2018, respectively.

LIQUIDITY

This section does not include information specific to Watford Re. We do not guarantee or provide credit support for Watford Re, and our financial exposure to Watford Re is limited to our investment in Watford Re’s common and preferred shares and counterparty credit risk (mitigated by collateral) arising from reinsurance transactions with Watford Re.

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

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

For the six months ended June 30, 2019, Arch Capital received dividends of $67.1 million from Arch Re Bermuda, our Bermuda-based reinsurer and insurer, which can pay approximately $2.56 billion to Arch Capital during the remainder of 2019 without providing an affidavit to the Bermuda Monetary Authority (“BMA”).

We expect that our liquidity needs, including our anticipated (re)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.

ARCH CAPITAL  68 2019 SECOND QUARTER FORM 10-Q

Cash Flows

The following table summarizes our cash flows from operating, investing and financing activities, excluding amounts related to the ‘other’ segment (i.e., Watford Re). See note 11, “Variable Interest Entities and Noncontrolling Interests,” for cash flows related to Watford Re.

	Six Months Ended
	June 30,
	2019			2018
Total cash provided by (used for):
Operating activities	$	597,276		$	404,451
Investing activities	(611,199		)	270,381
Financing activities	(35,352		)	(731,613		)
Effects of exchange rate changes on foreign currency cash	2,259			(9,024		)
Increase (decrease) in cash and restricted cash	$	(47,016	)	$	(65,805	)

•Cash provided by operating activities for the six months ended June 30, 2019 reflected a higher level of premiums collected than in the 2018 period.

•Cash used for investing activities for the six months ended June 30, 2019 was higher than in the 2018 period, reflecting a higher level of securities purchased.

•Cash used for financing activities for the six months ended June 30, 2019 was lower than in the 2018 period. The 2018 period reflected $250.0 million of paydowns on our revolving credit agreement borrowings, $173.6 million of repurchases under our share repurchase program and $92.6 million related to redemption of our Series C preferred shares in January 2018.

CAPITAL RESOURCES

This section does not include information specific to Watford Re. We do not guarantee or provide credit support for Watford Re, and our financial exposure to Watford Re is limited to our investment in Watford Re’s common and preferred shares and counterparty credit risk (mitigated by collateral) arising from reinsurance transactions with Watford Re.

The following table provides an analysis of our capital structure:

(U.S. dollars in thousands, except  share data)	Jun 30, 2019			Dec 31, 2018
Debt:
Senior notes, due May 2034	$	300,000		$	300,000
Arch-U.S. senior notes, due Nov 2043 (1)	500,000			500,000
Arch Finance senior notes, due Dec 2026 (1)	500,000			500,000
Arch Finance senior notes, due Dec 2046 (1)	450,000			450,000
Deferred debt costs on senior notes	(16,135		)	(16,472		)
Revolving credit agreement borrowings due Oct 2021 (2)	—			—
Total	$	1,733,865		$	1,733,528
Shareholders’ equity available to Arch:
Series E non-cumulative preferred shares	$	450,000		$	450,000
Series F non-cumulative preferred shares	330,000			330,000
Common shareholders’ equity	9,977,352			8,659,827
Total	$	10,757,352		$	9,439,827
Total capital available to Arch	$	12,491,217		$	11,173,355
Debt to total capital (%)	13.9			15.5
Preferred to total capital (%)	6.2			7.0
Debt and preferred to total capital (%)	20.1			22.5

(1) Fully and unconditionally guaranteed by Arch Capital.

(2) $500 million unsecured facility for revolving loans and letters of credit.

Arch Capital and Arch-U.S. are each holding companies and, accordingly, they conduct substantially all of their operations through their operating subsidiaries. Arch Capital Finance LLC (“Arch Finance”) is a wholly owned subsidiary of Arch U.S. MI Holdings Inc. As a result, Arch Capital, Arch-U.S. and Arch Finance's cash flows and their ability to service their debt depends upon the earnings of their operating subsidiaries, or affiliates in the case of Arch Finance, and on their ability to distribute the earnings, loans or other payments from such subsidiaries or affiliates to Arch Capital, Arch-U.S. and Arch Finance, respectively.

In addition, Arch MI U.S. is required to maintain compliance with the GSEs requirements, known as the Private Mortgage Insurer Eligibility Requirements or “PMIERs.” The financial requirements require an eligible mortgage insurer’s available assets, which generally include only the most liquid assets of an insurer, to meet or exceed “minimum required assets” as of each quarter end. Minimum required assets are calculated from PMIERs tables with several risk dimensions (including origination year, original loan-to-value and original credit score of performing loans, and the delinquency status of non-performing loans) and are subject to a minimum amount. Arch MI U.S. satisfied the PMIERs’ financial requirements as of June 30, 2019 with an estimated PMIER sufficiency ratio of 163%, compared to 141% at December 31, 2018.

ARCH CAPITAL  69 2019 SECOND QUARTER FORM 10-Q

Pursuant to our 2014 acquisition of the CMG Mortgage Insurance Company and its affiliated mortgage insurance companies, we made a contingent consideration payment of $61.5 million in April 2019. The maximum amount of remaining contingent consideration payments over the remaining earn-out period is $6.7 million.

Arch Capital, through its subsidiaries, provides financial support to certain of its insurance subsidiaries and affiliates, through certain reinsurance arrangements beneficial to the ratings of such subsidiaries. Historically, our insurance, reinsurance and mortgage insurance subsidiaries have entered into separate reinsurance arrangements with Arch Re Bermuda covering individual lines of business. The reinsurance agreements between our U.S.-based property casualty insurance and reinsurance subsidiaries and Arch Re Bermuda were canceled on a cutoff basis as of January 1, 2018. As a result, the level of subject business ceded to Arch Re Bermuda for the reported periods was substantially lower than in 2017 and prior periods.

SHARE REPURCHASE PROGRAM

The board of directors of Arch Capital has authorized the investment in Arch Capital’s common shares through a share repurchase program. For the six months ended June 30, 2019, Arch Capital repurchased 0.1 million shares under the share repurchase program with an aggregate purchase price of $2.9 million. Since the inception of the share repurchase program through June 30, 2019, Arch Capital has repurchased 386.3 million common shares for an aggregate purchase price of $3.97 billion. At June 30, 2019, approximately $160.9 million of share repurchases were available under the program, which may be effected from time to time in open market or privately negotiated transactions through December 31, 2019.

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.

CATASTROPHIC EVENTS AND SEVERE ECONOMIC EVENTS

We have large aggregate exposures to natural and man-made catastrophic events and severe economic events. Catastrophes can be caused by various events, including hurricanes, floods, windstorms, earthquakes, hailstorms, tornadoes, explosions, severe winter weather, fires, droughts and other natural disasters. Catastrophes can also cause losses in non-property business such as mortgage insurance, workers’ compensation or general liability. In addition to the nature of property

business, we believe that economic and geographic trends affecting insured property, including inflation, property value appreciation and geographic concentration, tend to generally increase the size of losses from catastrophic events over time.

Our models employ both proprietary and vendor-based systems and include cross-line correlations for property, marine, offshore energy, aviation, workers compensation and personal accident. We seek to limit the probable maximum pre-tax loss to a specific level for severe catastrophic events. Currently, we seek to limit our 1-in-250 year return period net probable maximum loss from a severe catastrophic event in any geographic zone to approximately 25% of 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, 2019, our modeled peak zone catastrophe exposure was a windstorm affecting the Northeastern U.S., with a net probable maximum pre-tax loss of $398 million, followed by windstorms affecting Florida Tri-County and the Gulf of Mexico regions with net probable maximum pre-tax losses of $368 million and $352 million, respectively. Our exposures to other perils, such as U.S. earthquake and international events, were less than the exposures arising from U.S. windstorms and hurricanes. As of July 1, 2019, our modeled peak zone earthquake exposure (San Francisco earthquake) represented approximately 69% of our peak zone catastrophe exposure, and our modeled peak zone international exposure (Japan earthquake) was substantially less than both our peak zone windstorm and earthquake exposures.

Effective July 1, 2019, our insurance operations had in effect a reinsurance program which provided coverage for certain property-catastrophe related losses equal to $275 million in excess of various retentions per occurrence.

We also have significant exposure to losses due to mortgage defaults resulting from severe economic events in the future. For our U.S. mortgage insurance business, we have developed a proprietary risk model (“Realistic Disaster Scenario” or “RDS”) that simulates the maximum loss resulting from a severe economic downturn impacting the housing market. The RDS models the collective impact of adverse conditions for key economic indicators, the most significant of which is a decline in home prices. The RDS model projects paths of future home prices, unemployment rates, income levels and interest rates and assumes correlation across states and geographic regions.  The resulting future performance of our in-force portfolio is then estimated under the economic stress scenario, reflecting loan and borrower information. 

Currently, we seek to limit our modeled RDS loss from a severe economic event to approximately 25% of total tangible shareholders’ equity available to Arch (total shareholders’ equity available to Arch less goodwill and intangible assets).

ARCH CAPITAL  70 2019 SECOND QUARTER FORM 10-Q

We reserve the right to change this threshold at any time. Based on in-force exposure estimated as of July 1, 2019, our modeled RDS loss was approximatly10% of tangible shareholders’ equity available to Arch.

Net probable maximum loss estimates are net of expected reinsurance recoveries, before income tax and before excess reinsurance reinstatement premiums. RDS loss estimates are net of expected reinsurance recoveries and after income tax. Catastrophe loss estimates are reflective of the zone indicated and not the entire portfolio. Since hurricanes and windstorms can affect more than one zone and make multiple landfalls, our catastrophe loss estimates include clash estimates from other zones. Our catastrophe loss estimates and RDS loss estimates do not represent our maximum exposures and it is highly likely that our actual incurred losses would vary materially from the modeled estimates. There can be no assurances that we will not suffer pre-tax losses greater than 25% of our total shareholders' equity or tangible shareholders’ equity from one or more catastrophic events or severe economic 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 or severe economic event. In addition, actual losses may increase if our reinsurers fail to meet their obligations to us or the reinsurance protections purchased by us are exhausted or are otherwise unavailable. See “Risk Factors—Risks Relating to Our Industry” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Catastrophic Events and Severe Economic Events” in our 2018 Form 10-K.

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 2018 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, 2019. 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. We have not included Watford Re in the following analyses as we do not guarantee or provide credit support for Watford Re, and our financial exposure to Watford Re is limited to our

investment in Watford Re’s common and preferred shares and counterparty credit risk (mitigated by collateral) arising from reinsurance transactions.

An analysis of material changes in market risk exposures at June 30, 2019 that affect the quantitative and qualitative disclosures presented in our 2018 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. Furthermore, at times interest rate movements in certain credit sectors exhibit a much lower correlation to changes in U.S. Treasury yields. Accordingly, the actual effect of interest rate movements may differ materially from the amounts set forth in the following tables.

The following table summarizes the effect that an immediate, parallel shift in the interest rate yield curve would have had on our fixed income securities:

(U.S. dollars in  billions)	Interest Rate Shift in Basis Points
	-100			-50			—		+50			+100
Jun 30, 2019
Total fair value	$	20.24		$	19.91		$	19.57	$	19.22		$	18.89
Change from base	3.4		%	1.7		%			(1.8		)%	(3.5		)%
Change in unrealized value	$	0.67		$	0.33				$	(0.35	)	$	(0.69	)
Dec 31, 2018
Total fair value	$	19.23		$	18.91		$	18.62	$	18.30		$	17.98
Change from base	3.3		%	1.6		%			(1.7		)%	(3.4		)%
Change in unrealized value	$	0.61		$	0.30				$	(0.32	)	$	(0.63	)

In addition, we consider the effect of credit spread movements on the market 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.

ARCH CAPITAL  71 2019 SECOND QUARTER FORM 10-Q

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:

(U.S. dollars in  billions)	Credit Spread Shift in Percentage Points
	-100			-50			—		+50			+100
Jun 30, 2019
Total fair value	$	19.96		$	19.77		$	19.57	$	19.38		$	19.18
Change from base	2.0		%	1.0		%			(1.0		)%	(2.0		)%
Change in unrealized value	$	0.39		$	0.20				$	(0.20	)	$	(0.39	)
Dec 31, 2018
Total fair value	$	19.08		$	18.84		$	18.62	$	18.39		$	18.15
Change from base	2.5		%	1.2		%			(1.2		)%	(2.5		)%
Change in unrealized value	$	0.47		$	0.22				$	(0.22	)	$	(0.47	)

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, 2019, our portfolio’s VaR was estimated to be 3.31% compared to an estimated 3.02% at December 31, 2018.

Equity Securities. At June 30, 2019 and December 31, 2018, the fair value of our investments in equity securities totaled $666.9 million and $368.8 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 $66.7 million and $36.9 million at June 30, 2019 and December 31, 2018, respectively, and would have decreased book value per share by approximately $0.16 and $0.09, respectively. An immediate hypothetical 10% increase in the value of each position would increase the fair value of such investments by approximately $66.7 million and $36.9 million at June 30, 2019 and December 31, 2018, respectively, and would have increased book value per share by approximately $0.16 and $0.09, respectively.

Investment-Related Derivatives. At June 30, 2019, 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 $7.85 billion, compared to $4.95

billion at December 31, 2018. If the underlying exposure of each investment-related derivative held at June 30, 2019 depreciated by 100 basis points, it would have resulted in a reduction in net income of approximately $78.5 million, and a decrease in book value per share of approximately $0.19 per share, compared to $49.5 million and $0.12 per share, respectively, on investment-related derivatives held at December 31, 2018. If the underlying exposure of each investment-related derivative held at June 30, 2019 appreciated by 100 basis points, it would have resulted in an increase in net income of approximately $78.5 million, and an increase in book value per share of approximately $0.19 per share, compared to $49.5 million and $0.12 per share, respectively, on investment-related derivatives held at December 31, 2018. See note 8, “Derivative Instruments,” to our consolidated financial statements for additional disclosures concerning derivatives.

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

Foreign Currency Exchange Risk

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

ARCH CAPITAL  72 2019 SECOND QUARTER FORM 10-Q

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, 2019			December 31, 2018
Net assets (liabilities), denominated in foreign currencies, excluding shareholders’ equity and derivatives	$	(326,838	)	$	(561,311	)
Shareholders’ equity denominated in foreign currencies (1)	598,443			478,678
Net foreign currency forward contracts outstanding (2)	181,655			241,442
Net exposures denominated in foreign currencies	$	453,260		$	158,809
Pre-tax impact of a hypothetical 10% appreciation of the U.S. Dollar against foreign currencies:
Shareholders’ equity	$	(45,326	)	$	(15,881	)
Book value per share	$	(0.11	)	$	(0.04	)
Pre-tax impact of a hypothetical 10% decline of the U.S. Dollar against foreign currencies:
Shareholders’ equity	$	45,326		$	15,881
Book value per share	$	0.11		$	0.04

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

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

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

Effects of Inflation

We do not believe that inflation has had a material effect on our consolidated results of operations, except insofar as inflation may affect our reserve for losses and loss adjustment expenses and interest rates. The potential exists, after a catastrophe loss, for the development of inflationary pressures in a local economy. The anticipated effects of inflation on us are considered in our catastrophe loss models. The actual effects of inflation on our results cannot be accurately known until claims are ultimately settled.

OTHER FINANCIAL INFORMATION

The consolidated financial statements as of June 30, 2019 and for the three month and six month periods ended June 30, 2019 and 2018 have been reviewed by PricewaterhouseCoopers LLP, the registrant's independent public accountants, whose report is included as an exhibit to this filing. 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 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. 

ARCH CAPITAL  73 2019 SECOND QUARTER FORM 10-Q

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 Arch Capital 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 quarter ended June 30, 2019 that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting.

ARCH CAPITAL  74 2019 SECOND QUARTER FORM 10-Q

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, 2019, 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.

ITEM 1A. RISK FACTORS

There were no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2018.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table summarizes our purchases of common shares for the 2019 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)
4/1/2019 - 4/30/2019	17,802	$	32.62	—	$	160,867
5/1/2019 - 5/31/2019	333,431	33.71		—	$	160,867
6/1/2019 - 6/30/2019	23,317	35.42		—	$	160,867
Total	374,550	$	33.76	—

(1) Represents repurchases by Arch Capital 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, 2019 under Arch Capital’s share repurchase authorization, under which repurchases may be effected from time to time in open market or privately negotiated transactions through December 31, 2019.

ARCH CAPITAL  75 2019 SECOND QUARTER FORM 10-Q

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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 2019 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.

Disclosure of Certain Activities Under Section 13(r) of the Securities Exchange Act of 1934

Section 13(r) of the Securities Exchange Act of 1934, as amended, requires an issuer to disclose in its annual or quarterly reports whether it or an affiliate knowingly engaged in certain activities described in that section, including certain activities related to Iran during the period covered by the report.

Certain of our non-U.S. subsidiaries underwrite insurance and facultative reinsurance on a global basis to non-U.S. insureds and insurers, including for liability, marine, aviation and energy risks. Coverage provided to non-Iranian business may indirectly cover an exposure in Iran. For example, certain of our operations underwrite global marine hull and cargo policies that provide coverage for vessels navigating into and out of ports worldwide, including Iran. For the quarter ended June 30, 2019, there has been no material amount of premium allocated or apportioned to activities relating to Iran, and we are unable to attribute gross revenues or net profits from any such policies because they insure multiple voyages and fleets containing multiple ships. Such non-U.S. subsidiaries will continue to provide such coverage only to the extent permitted by applicable law.

ARCH CAPITAL  76 2019 SECOND QUARTER FORM 10-Q

ITEM 6. EXHIBITS 

		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	Original Number	Date Filed	Filed Herewith
15	Accountants’ Awareness Letter (regarding unaudited interim financial information)				X
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002				X
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002				X
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002				X
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002				X
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

ARCH CAPITAL  77 2019 SECOND QUARTER FORM 10-Q

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/ Marc Grandisson
Date: August 7, 2019	Marc Grandisson
	President and Chief Executive Officer (Principal Executive Officer)
	/s/ François Morin
Date: August 7, 2019	François Morin
	Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)

ARCH CAPITAL  78 2019 SECOND QUARTER FORM 10-Q

EX-15

Exhibit 15

August 7, 2019

Securities and Exchange Commission

100 F Street, N.E.

Washington, DC 20549

Commissioners:

We are aware that our report dated August 7, 2019, on our review of interim financial information of Arch Capital Group Ltd., which appears in this Quarterly Report on Form 10-Q, is incorporated by reference in the Registration Statements on Form S-3 (Nos. 333-221344, 333-221344-01 and 333-221344-02) and in the Registration Statements on Form S-8 (Nos. 333-211193, 333-98971, 333-142835, 333-181308, 333-203993 and 333-224783) of Arch Capital Group Ltd.

Very truly yours,

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

New York, NY

1 of 1

EX-31.1

Exhibit 31.1

Certification

of Chief Executive Officer

Pursuant to Section 302 of the

Sarbanes-Oxley Act of 2002

I, Marc Grandisson, 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 the audit committee of the 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, 2019
By:	/s/ Marc Grandisson
Name:	Marc Grandisson
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, François Morin, 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 the audit committee of the 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, 2019
By:	/s/ François Morin
Name:	François Morin
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, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Marc Grandisson, 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, 2019
By:	/s/ Marc Grandisson
Name:	Marc Grandisson
Title:	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, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), François Morin, 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, 2019
By:	/s/ François Morin
Name:	François Morin
Title:	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

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2019	Aug. 01, 2019
Document and Entity Information [Abstract]
Document Type	10-Q
Document Period End Date	Jun. 30, 2019
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2019
Current Fiscal Year End Date	--12-31
Document Quarterly Report	true
Document Transition Report	false
Entity Registrant Name	ARCH CAPITAL GROUP LTD.
Entity Central Index Key	0000947484
Entity Incorporation, State or Country Code	D0
Entity Tax Identification Number	98-0374481
Entity Address, Address Line One	Waterloo House, Ground Floor
Entity Address, Address Line Two	100 Pitts Bay Road,
Entity Address, City or Town	Pembroke
Entity Address, Postal Zip Code	HM 08,
Entity Address, Country	BM
City Area Code	(441)
Local Phone Number	278-9250
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity File Number	001-16209
Amendment Flag	false
Entity Listings [Line Items]
Entity Common Stock, Shares Outstanding		404,987,803
Common shares
Entity Listings [Line Items]
Title of 12(b) Security	Common shares, $0.0011 par value per share
Trading Symbol	ACGL
Security Exchange Name	NASDAQ
Depositary Series E Preferred Stock
Entity Listings [Line Items]
Title of 12(b) Security	Depositary shares, each representing a 1/100th interest in a 5.25% Series E preferred share
Trading Symbol	ACGLP
Security Exchange Name	NASDAQ
Depositary Series F Preferred Stock
Entity Listings [Line Items]
Title of 12(b) Security	Depositary shares, each representing a 1/100th interest in a 5.45% Series F preferred share
Trading Symbol	ACGLO
Security Exchange Name	NASDAQ

XML

Unaudited Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Investments:
Fixed maturities available for sale, at fair value (amortized cost: $15,584,662 and $14,829,902)	$ 15,881,732	$ 14,699,010
Short-term investments available for sale, at fair value (amortized cost: $822,157 and $956,238)	821,961	955,880
Collateral received under securities lending, at fair value (amortized cost: $450,312 and $274,125)	450,320	274,133
Equity securities, at fair value	670,943	338,899
Investments accounted for using the fair value option	3,721,035	3,983,571
Investments accounted for using the equity method	1,581,972	1,493,791
Total investments	23,127,963	21,745,284
Cash	605,316	646,556
Accrued investment income	119,252	114,641
Securities pledged under securities lending, at fair value (amortized cost: $436,699 and $266,786)	440,510	268,395
Premiums receivable	1,606,040	1,299,150
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses	3,171,257	2,919,372
Contractholder receivables	2,102,544	2,079,111
Ceded unearned premiums	1,136,728	975,469
Deferred acquisition costs	600,740	569,574
Receivable for securities sold	164,592	36,246
Goodwill and intangible assets	641,010	634,920
Other assets	1,135,718	929,611
Total assets	34,851,670	32,218,329
Liabilities
Reserve for losses and loss adjustment expenses	12,230,316	11,853,297
Unearned premiums	4,056,860	3,753,636
Reinsurance balances payable	531,990	393,107
Contractholder payables	2,102,544	2,079,111
Collateral held for insured obligations	237,056	236,630
Senior notes	1,733,865	1,733,528
Revolving credit agreement borrowings	491,006	455,682
Securities lending payable	450,312	274,125
Payable for securities purchased	294,109	90,034
Other liabilities	904,438	911,500
Total liabilities	23,032,496	21,780,650
Commitments and Contingencies
Redeemable noncontrolling interests	206,475	206,292
Shareholders' Equity
Non-cumulative preferred shares	780,000	780,000
Common shares ($0.0011 par, shares issued: 573,761,683 and 570,737,283)	638	634
Additional paid-in capital	1,847,949	1,793,781
Retained earnings	10,322,975	9,426,299
Accumulated other comprehensive income (loss), net of deferred income tax	206,827	(178,720)
Common shares held in treasury, at cost (shares: 168,874,149 and 168,282,449)	(2,401,037)	(2,382,167)
Total shareholders' equity available to Arch	10,757,352	9,439,827
Non-redeemable noncontrolling interests	855,347	791,560
Total shareholders' equity	11,612,699	10,231,387
Total liabilities, noncontrolling interests and shareholders' equity	$ 34,851,670	$ 32,218,329

XML

Unaudited Consolidated Balance Sheets (Parentheticals) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Fixed maturities available for sale, at amortized cost	$ 15,584,662	$ 14,829,902
Short-term investments available for sale, at amortized cost	822,157	956,238
Collateral received under securities lending, at amortized cost	450,312	274,125
Securities pledged under securities lending, at amortized cost	$ 436,699	$ 266,786
Common shares, par value per share	$ 0.0011	$ 0.0011
Common shares issued (shares)	573,761,683	570,737,283
Common shares held in treasury (shares)	168,874,149	168,282,449

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Unaudited Consolidated Statements of Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Revenues
Net premiums written	$ 1,444,898	$ 1,298,896	$ 2,970,157	$ 2,711,440
Change in unearned premiums	18,829	37,867	(137,564)	(139,778)
Net premiums earned	1,463,727	1,336,763	2,832,593	2,571,662
Net investment income	155,038	135,668	311,987	262,392
Net realized gains (losses)	120,806	(76,611)	262,371	(187,609)
Other-than-temporary impairment losses	(49)	(470)	(1,358)	(632)
Less investment impairments recognized in other comprehensive income, before taxes	0	0	0	0
Net impairment losses recognized in earnings	(49)	(470)	(1,358)	(632)
Other underwriting income	5,953	3,874	14,778	9,223
Equity in net income of investment funds accounted for using the equity method	32,536	8,472	79,403	36,541
Other income	1,129	3,113	2,212	3,187
Total revenues	1,779,140	1,410,809	3,501,986	2,694,764
Expenses
Losses and loss adjustment expenses	767,543	726,153	1,486,075	1,363,013
Acquisition expenses	210,089	202,838	407,937	394,214
Other operating expenses	198,914	176,181	400,077	351,196
Corporate expenses	18,251	22,512	36,213	37,824
Amortization of intangible assets	19,794	26,472	40,211	53,208
Interest expense	29,280	30,344	58,345	60,980
Net foreign exchange (gains) losses	4,952	(53,706)	1,427	(33,985)
Total expenses	1,248,823	1,130,794	2,430,285	2,226,450
Income before income taxes	530,317	280,015	1,071,701	468,314
Income tax expense	(44,472)	(23,668)	(90,358)	(45,583)
Net income	485,845	256,347	981,343	422,731
Net (income) loss attributable to noncontrolling interests	(16,891)	(12,701)	(63,861)	(28,662)
Net income available to Arch	468,954	243,646	917,482	394,069
Preferred dividends	(10,403)	(10,403)	(20,806)	(20,840)
Loss on redemption of preferred shares	0	0	0	(2,710)
Net income available to Arch common shareholders	$ 458,551	$ 233,243	$ 896,676	$ 370,519
Net income per common share and common share equivalent
Basic (per share)	$ 1.14	$ 0.58	$ 2.24	$ 0.91
Diluted (per share)	$ 1.12	$ 0.56	$ 2.19	$ 0.89
Weighted average common shares and common share equivalents outstanding
Basic (shares)	401,482,784	404,800,421	400,837,181	406,162,508
Diluted (shares)	410,899,483	413,111,205	409,755,250	415,460,756

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Unaudited Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Comprehensive Income
Net income	$ 485,845	$ 256,347	$ 981,343	$ 422,731
Unrealized appreciation (decline) in value of available-for-sale investments:
Unrealized holding gains (losses) arising during period	222,473	(85,271)	448,360	(251,948)
Reclassification of net realized (gains) losses, net of income taxes, included in net income (loss)	(55,345)	36,643	(65,566)	99,104
Foreign currency translation adjustments	4,267	(12,595)	9,783	(11,313)
Comprehensive income	657,240	195,124	1,373,920	258,574
Net (income) loss attributable to noncontrolling interests	(16,891)	(12,701)	(63,861)	(28,662)
Other comprehensive (income) loss attributable to noncontrolling interests	(2,891)	1,077	(7,030)	1,750
Comprehensive income available to Arch	$ 637,458	$ 183,500	$ 1,303,029	$ 231,662

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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 (loss), net of deferred income tax	Unrealized appreciation (decline) in value of available-for-sale securities, net of deferred income tax	Foreign currency translation adjustments	Common shares held in treasury, at cost	Convertible non-voting common equivalent preferred shares
Balance at beginning of period, as adjusted					$ 8,712,683		$ 7,606
Balance at beginning of period at Dec. 31, 2017		$ 872,555	$ 611	$ 1,230,617	8,562,889	$ 118,044	157,400	$ (39,356)	$ (2,077,741)	$ 489,627
Cumulative effect of an accounting change at Dec. 31, 2017					149,794		(149,794)
Preferred shares redeemed		(92,555)
Preferred shares converted to common shares				489,608						(489,627)
Common shares issued, net			22
Other changes				40,381
Net income	$ 422,731				422,731
Net (income) loss attributable to noncontrolling interests	(28,662)				(28,662)
Preferred share dividends	(20,840)				(20,840)
Loss on redemption of preferred shares	(2,710)				(2,710)
Unrealized holding gains (losses) during period, net of reclassification adjustment							(152,844)
Unrealized holding gains (losses) during period attributable to noncontrolling interests							1,885
Foreign currency translation adjustments	(11,313)							(11,313)
Foreign currency translation adjustments attributable to noncontrolling interests								(135)
Shares repurchased for treasury	(173,600)								(188,788)
Balance at end of period at Jun. 30, 2018	9,163,755	780,000	633	1,760,606	9,083,202	(194,157)	(143,353)	(50,804)	(2,266,529)	0
Non-redeemable noncontrolling interests, end of period at Jun. 30, 2018	861,153
Total shareholders’ equity at Jun. 30, 2018	10,024,908
Balance at beginning of period, as adjusted					8,849,959		(96,238)
Balance at beginning of period at Mar. 31, 2018		780,000	630	1,737,978	8,849,959	(134,009)	(96,238)	(37,771)	(2,084,186)	0
Cumulative effect of an accounting change at Mar. 31, 2018					0		0
Preferred shares redeemed		0
Preferred shares converted to common shares				0						0
Common shares issued, net			3
Other changes				22,628
Net income	256,347				256,347
Net (income) loss attributable to noncontrolling interests	(12,701)				(12,701)
Preferred share dividends	(10,403)				(10,403)
Loss on redemption of preferred shares	0				0
Unrealized holding gains (losses) during period, net of reclassification adjustment							(48,628)
Unrealized holding gains (losses) during period attributable to noncontrolling interests							1,513
Foreign currency translation adjustments	(12,595)							(12,595)
Foreign currency translation adjustments attributable to noncontrolling interests								(438)
Shares repurchased for treasury									(182,343)
Balance at end of period at Jun. 30, 2018	9,163,755	780,000	633	1,760,606	9,083,202	(194,157)	(143,353)	(50,804)	(2,266,529)	0
Non-redeemable noncontrolling interests, end of period at Jun. 30, 2018	861,153
Total shareholders’ equity at Jun. 30, 2018	10,024,908
Balance at beginning of period, as adjusted					9,426,299		(114,178)
Balance at beginning of period at Dec. 31, 2018	9,439,827	780,000	634	1,793,781	9,426,299	(178,720)	(114,178)	(64,542)	(2,382,167)	0
Cumulative effect of an accounting change at Dec. 31, 2018					0		0
Preferred shares redeemed		0
Preferred shares converted to common shares				0						0
Common shares issued, net			4
Other changes				54,168
Net income	981,343				981,343
Net (income) loss attributable to noncontrolling interests	(63,861)				(63,861)
Preferred share dividends	(20,806)				(20,806)
Loss on redemption of preferred shares	0				0
Unrealized holding gains (losses) during period, net of reclassification adjustment							382,794
Unrealized holding gains (losses) during period attributable to noncontrolling interests							(6,989)
Foreign currency translation adjustments	9,783							9,783
Foreign currency translation adjustments attributable to noncontrolling interests								(41)
Shares repurchased for treasury	(2,900)								(18,870)
Balance at end of period at Jun. 30, 2019	10,757,352	780,000	638	1,847,949	10,322,975	206,827	261,627	(54,800)	(2,401,037)	0
Non-redeemable noncontrolling interests, end of period at Jun. 30, 2019	855,347
Total shareholders’ equity at Jun. 30, 2019	11,612,699
Balance at beginning of period, as adjusted					9,864,424		97,202
Balance at beginning of period at Mar. 31, 2019		780,000	636	1,819,605	9,864,424	38,323	97,202	(58,879)	(2,388,392)	0
Cumulative effect of an accounting change at Mar. 31, 2019					0		0
Preferred shares redeemed		0
Preferred shares converted to common shares				0						0
Common shares issued, net			2
Other changes				28,344
Net income	485,845				485,845
Net (income) loss attributable to noncontrolling interests	(16,891)				(16,891)
Preferred share dividends	(10,403)				(10,403)
Loss on redemption of preferred shares	0				0
Unrealized holding gains (losses) during period, net of reclassification adjustment							167,128
Unrealized holding gains (losses) during period attributable to noncontrolling interests							(2,703)
Foreign currency translation adjustments	4,267							4,267
Foreign currency translation adjustments attributable to noncontrolling interests								(188)
Shares repurchased for treasury									(12,645)
Balance at end of period at Jun. 30, 2019	10,757,352	$ 780,000	$ 638	$ 1,847,949	$ 10,322,975	$ 206,827	$ 261,627	$ (54,800)	$ (2,401,037)	$ 0
Non-redeemable noncontrolling interests, end of period at Jun. 30, 2019	855,347
Total shareholders’ equity at Jun. 30, 2019	$ 11,612,699

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Unaudited Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Operating Activities
Net income	$ 981,343	$ 422,731
Adjustments to reconcile net income to net cash provided by operating activities:
Net realized (gains) losses	(264,293)	177,442
Net impairment losses recognized in earnings	1,358	632
Equity in net income or loss of investment funds accounted for using the equity method and other income or loss	(45,720)	(13,543)
Amortization of intangible assets	40,211	53,208
Share-based compensation	41,537	35,419
Changes in:
Reserve for losses and loss adjustment expenses, net of unpaid losses and loss adjustment expenses recoverable	154,396	(77,891)
Unearned premiums, net of ceded unearned premiums	137,564	139,778
Premiums receivable	(302,050)	(236,950)
Deferred acquisition costs	(24,790)	(35,111)
Reinsurance balances payable	139,415	88,961
Other items, net	(146,447)	(57,790)
Net cash provided by (used for) operating activities	712,524	496,886
Investing Activities
Purchases of fixed maturity investments	(16,332,646)	(16,867,570)
Purchases of equity securities	(431,939)	(679,663)
Purchases of other investments	(677,063)	(1,017,147)
Proceeds from sales of fixed maturity investments	15,632,482	16,090,543
Proceeds from sales of equity securities	176,701	622,068
Proceeds from sales, redemptions and maturities of other investments	534,698	773,298
Proceeds from redemptions and maturities of fixed maturity investments	244,949	511,448
Net settlements of derivative instruments	87,701	4,498
Net sales of short-term investments	201,520	451,901
Change in cash collateral related to securities lending	7,590	176,304
Purchases of fixed assets	(16,359)	(13,242)
Other	(174,578)	49,961
Net cash provided by (used for) investing activities	(746,944)	102,399
Financing Activities
Redemption of preferred shares	0	(92,555)
Purchases of common shares under share repurchase program	(2,871)	(173,575)
Proceeds from common shares issued, net	(557)	(13,851)
Proceeds from borrowings	62,800	130,579
Repayments of borrowings	(27,538)	(373,000)
Change in cash collateral related to securities lending	(7,590)	(176,304)
Dividends paid to redeemable noncontrolling interests	(8,994)	(8,994)
Other	(3,529)	(4,489)
Preferred dividends paid	(20,806)	(20,840)
Net cash provided by (used for) financing activities	(9,085)	(733,029)
Effects of exchange rate changes on foreign currency cash and restricted cash	1,937	(10,431)
Increase (decrease) in cash and restricted cash	(41,568)	(144,175)
Cash and restricted cash, beginning of year	724,643	727,284
Cash and restricted cash, end of period	$ 683,075	$ 583,109

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Basis of Presentation and Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation and Recent Accounting Pronouncements

Basis of Presentation and Recent Accounting Pronouncements

General

Arch Capital Group Ltd. (“Arch Capital”) is a Bermuda public limited liability company which provides insurance, reinsurance and mortgage insurance on a worldwide basis through its wholly-owned subsidiaries. As used herein, the “Company” means Arch Capital and its subsidiaries. The Company’s consolidated financial statements include the results of Watford Holdings Ltd. and its wholly owned subsidiaries. See note 11.

On January 1, 2019, the Company’s U.K. insurance operations entered into a transaction with The Ardonagh Group to acquire renewal rights for a U.K. commercial lines book of business, consisting of commercial property, casualty, motor, professional liability, personal accident and travel business.

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. 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 materially 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, 2018 (“2018 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.

Recent Accounting Pronouncements

Recently Issued Accounting Standards Adopted

The Company adopted ASU 2016-02, “Leases (Topic 842)”, which provides a new comprehensive model for lease accounting. Topic 842 requires a lessee to recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. The Company adopted the modified retrospective approach of this standard, that resulted in the recognition of a right-of-use asset of  $147.9 million as part of other assets and a lease liability of $163.6 million as part of other liabilities in the consolidated balance sheet as of January 1, 2019. The Company de-recognized the liability for deferred rent that was required under the previous guidance.

In addition, the Company adopted ASU 2018-11, “Leases: Targeted Improvements (Topic 842),” which provides an additional (optional) transition method to adopt the new lease standard. The Company adopted the alternative transition method and elected to utilize a cumulative-effect adjustment to the opening balance of the retained earnings for the year of adoption. As such, the Company’s reporting for the comparative periods prior to the adoption continue to be presented in the financial statements in accordance with previous lease accounting guidance. The Company also adopted the practical expedients as a package which allows the Company to not reassess (1) whether any expired or existing contracts are or contain leases (2) the lease classification for any expired or existing leases (3) initial direct costs for any existing leases and (4) to account for the lease and non lease components as a single lease component. In addition to electing the practical expedients as a package, the Company elected to include hindsight to determine the lease term of existing leases, and made an accounting policy election to not apply the recognition requirements to short-term leases (lease term of less than twelve months). The cumulative effect adjustment to the opening balance of retained earnings was zero. The adoption of the updated guidance did not have a material effect on the Company’s results of operations or liquidity.

The Company adopted ASU 2018-07 “Improvements to Nonemployee Share-Based Payment Accounting,” which was issued in June 2018 to simplify the accounting for share-based payments granted to nonemployees for goods and services. Under this ASU, most of the guidance on such payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. The ASU is effective for reporting periods beginning after December 15, 2018. This guidance and the adoption of this provision did not have a material effect on the Company's financial position, results of operations or cash flows.

The Company adopted ASU 2018-02 “Income Statement-Reporting Comprehensive Income (Topic 220) - Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,” which was issued in February 2018 to allow the reclassification of the stranded tax effects in accumulated other comprehensive income (“AOCI”) resulting from the Tax Cuts and Jobs Act of 2017 (“Tax Cuts Act”). Current guidance requires the effect of a change in tax laws or rates on deferred tax balances to be reported in income from continuing operations in the accounting period that includes the period of enactment, even if the related income tax effects were originally charged or credited directly to AOCI. The amount of the reclassification would include the effect of the change in the U.S. federal corporate income tax rate on the gross deferred tax amounts and related valuation allowances, if any, at the date of the enactment of the Tax Cuts Act related to items in AOCI. The updated guidance is effective for reporting periods beginning after December 15, 2018 and is to be applied retrospectively to each period in which the effect of the Tax Cuts Act related to items remaining in AOCI are recognized or at the beginning of the period of adoption. The adoption of this ASU did not have a material effect on the Company’s results of operations, financial position or liquidity.

The Company adopted ASU 2017-08 “Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities,” which was issued in March, 2017. This ASU shortens the amortization period for certain callable debt securities held at a premium and requires the premium to be amortized to the earliest call date. However, the new guidance does not require an accounting change for securities held at a discount whose discount continues to be amortized to maturity. The standard is effective for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. The adoption of the guidance requires a modified retrospective approach with a cumulative-effect adjustment to retained earnings. The adoption of this ASU did not have a material effect on the Company’s consolidated financial statements.

Recently Issued Accounting Standards Not Yet Adopted

For information regarding additional accounting standards that the Company has not yet adopted, see note 3(q), “Significant Accounting Policies—Recent Accounting Pronouncements,” of the notes to consolidated financial statements in the Company’s 2018 Form 10-K.

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Share Transactions

6 Months Ended

Jun. 30, 2019

Stockholders' Equity Note [Abstract]

Share Transactions

Share Transactions

Share Repurchases 

The board of directors of Arch Capital has authorized the investment in Arch Capital’s common shares through a share

repurchase program. Since the inception of the share repurchase program, Arch Capital has repurchased 386.3 million common shares for an aggregate purchase price of $3.97 billion. For the six months ended June 30, 2019, Arch Capital repurchased 0.1 million shares under the share repurchase program with an aggregate purchase price of $2.9 million. Arch Capital repurchased 6.5 million shares under the share repurchase program with an aggregate purchase price of $173.6 million during the six months ended June 30, 2018. At June 30, 2019, $160.9 million of share repurchases were available under the program, which may be effected from time to time in open market or privately negotiated transactions through December 31, 2019. 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.

Conversion of Convertible Non-Voting Common Equivalent Preferred Shares  

In March 2018, Arch Capital completed an underwritten public secondary offering of 17.0 million common shares (split adjusted) by American International Group, Inc. (“AIG”) following transfer of 0.6 million Series D convertible non-voting common equivalent preferred shares (“Series D Preferred Shares”). Proceeds from the sale of common shares pursuant to the public offering were received by AIG. At June 30, 2019, no Series D Preferred Shares were outstanding.

Series C Preferred Shares

On January 2, 2018, Arch Capital redeemed all outstanding 6.75% Series C non-cumulative preferred shares. The preferred shares were redeemed at a redemption price equal to $25 per share, plus all declared and unpaid dividends to (but excluding) the redemption date. In accordance with GAAP, following the redemption, original issuance costs related to such shares were removed from additional paid-in capital and recorded as a “loss on redemption of preferred shares.” Such adjustment had no impact on total shareholders’ equity or cash flows.

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Earnings Per Common Share

6 Months Ended

Jun. 30, 2019

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,
	2019			2018			2019			2018
Numerator:
Net income	$	485,845		$	256,347		$	981,343		$	422,731
Amounts attributable to noncontrolling interests	(16,891		)	(12,701		)	(63,861		)	(28,662		)
Net income available to Arch	468,954			243,646			917,482			394,069
Preferred dividends	(10,403		)	(10,403		)	(20,806		)	(20,840		)
Loss on redemption of preferred shares	—			—			—			(2,710		)
Net income available to Arch common shareholders	$	458,551		$	233,243		$	896,676		$	370,519
Denominator:
Weighted average common shares outstanding	401,482,784			404,800,421			400,837,181			399,485,135
Series D preferred shares (1)	—			—			—			6,677,373
Weighted average common shares and common share equivalents outstanding — basic	401,482,784			404,800,421			400,837,181			406,162,508
Effect of dilutive common share equivalents:
Nonvested restricted shares	1,937,626			1,575,749			1,720,417			1,837,356
Stock options (2)	7,479,073			6,735,035			7,197,652			7,460,892
Weighted average common shares and common share equivalents outstanding — diluted	410,899,483			413,111,205			409,755,250			415,460,756
Earnings per common share:
Basic	$	1.14		$	0.58		$	2.24		$	0.91
Diluted	$	1.12		$	0.56		$	2.19		$	0.89

(1) Such shares are convertible non-voting common equivalent preferred shares issued in connection with the UGC acquisition. See note 2.

(2)

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 2019 second quarter and 2018 second quarter, the number of stock options excluded were 2,016,830 and 5,350,733, respectively. For the six months ended June 30, 2019 and 2018 period, the number of stock options excluded were 2,560,755 and 5,372,789, respectively.

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Segment Information

6 Months Ended

Jun. 30, 2019

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 President and Chief Executive Officer of Arch Capital, and the Chief Financial Officer of Arch Capital. 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 includes the Company’s U.S. and international mortgage insurance and reinsurance operations as well as government sponsored enterprise (“GSE”) credit-risk sharing transactions. Arch Mortgage Insurance Company and United Guaranty Residential Insurance Company (combined “Arch MI U.S.”) are approved as eligible mortgage insurers by Federal National Mortgage Association (“Fannie Mae”) and Federal Home Loan Mortgage Corporation (“Freddie Mac”), each a GSE.

The corporate (non-underwriting) segment results include net investment income, other income (loss), corporate expenses, transaction costs and other, interest expense, items related to the Company’s non-cumulative preferred shares, 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 and income taxes. Such amounts exclude the results of the ‘other’ segment.

The ‘other’ segment includes the results of Watford Holdings Ltd. Watford Holdings Ltd. is the parent of Watford Re Ltd., a multi-line Bermuda reinsurance company (together with Watford Holdings Ltd., “Watford Re”) (see note 11). 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 Arch common shareholders:

	Three Months Ended
	June 30, 2019
	Insurance			Reinsurance			Mortgage			Sub-Total			Other			Total
Gross premiums written (1)	$	919,925		$	545,547		$	364,465		$	1,829,829		$	161,978		$	1,937,809
Premiums ceded	(292,095		)	(169,457		)	(42,857		)	(504,301		)	(42,608		)	(492,911		)
Net premiums written	627,830			376,090			321,608			1,325,528			119,370			1,444,898
Change in unearned premiums	(35,388		)	(8,906		)	31,175			(13,119		)	31,948			18,829
Net premiums earned	592,442			367,184			352,783			1,312,409			151,318			1,463,727
Other underwriting income (loss)	—			1,224			4,056			5,280			673			5,953
Losses and loss adjustment expenses	(389,172		)	(240,958		)	(25,997		)	(656,127		)	(111,416		)	(767,543		)
Acquisition expenses	(91,094		)	(56,785		)	(32,654		)	(180,533		)	(29,556		)	(210,089		)
Other operating expenses	(109,523		)	(33,960		)	(39,819		)	(183,302		)	(15,612		)	(198,914		)
Underwriting income (loss)	$	2,653		$	36,705		$	258,369		297,727			(4,593		)	293,134
Net investment income										123,038			32,000			155,038
Net realized gains (losses)										125,112			(4,306		)	120,806
Net impairment losses recognized in earnings										(49		)	—			(49		)
Equity in net income (loss) of investment funds accounted for using the equity method										32,536			—			32,536
Other income (loss)										1,129			—			1,129
Corporate expenses (2)										(16,073		)	—			(16,073		)
Transaction costs and other (2)										(2,178		)	—			(2,178		)
Amortization of intangible assets										(19,794		)	—			(19,794		)
Interest expense										(23,375		)	(5,905		)	(29,280		)
Net foreign exchange gains (losses)										(6,190		)	1,238			(4,952		)
Income before income taxes										511,883			18,434			530,317
Income tax expense										(44,452		)	(20		)	(44,472		)
Net income										467,431			18,414			485,845
Dividends attributable to redeemable noncontrolling interests										—			(4,590		)	(4,590		)
Amounts attributable to nonredeemable noncontrolling interests										—			(12,301		)	(12,301		)
Net income available to Arch										467,431			1,523			468,954
Preferred dividends										(10,403		)	—			(10,403		)
Net income available to Arch common shareholders										$	457,028		$	1,523		$	458,551
Underwriting Ratios
Loss ratio	65.7		%	65.6		%	7.4		%	50.0		%	73.6		%	52.4		%
Acquisition expense ratio	15.4		%	15.5		%	9.3		%	13.8		%	19.5		%	14.4		%
Other operating expense ratio	18.5		%	9.2		%	11.3		%	14.0		%	10.3		%	13.6		%
Combined ratio	99.6		%	90.3		%	28.0		%	77.8		%	103.4		%	80.4		%
Goodwill and intangible assets	$	157,440		$	—		$	475,920		$	633,360		$	7,650		$	641,010

(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.

(2) Certain expenses have been excluded from ‘corporate expenses’ and reflected in ‘transaction costs and other.’

	Three Months Ended
	June 30, 2018
	Insurance			Reinsurance			Mortgage			Sub-Total			Other			Total
Gross premiums written (1)	$	769,372		$	490,327		$	330,990		$	1,591,202		$	175,175		$	1,696,544
Premiums ceded	(245,265		)	(136,247		)	(50,867		)	(432,892		)	(34,589		)	(397,648		)
Net premiums written	524,107			354,080			280,123			1,158,310			140,586			1,298,896
Change in unearned premiums	22,342			(13,762		)	10,355			18,935			18,932			37,867
Net premiums earned	546,449			340,318			290,478			1,177,245			159,518			1,336,763
Other underwriting income (loss)	—			(129		)	3,315			3,186			688			3,874
Losses and loss adjustment expenses	(357,465		)	(229,956		)	(21,591		)	(609,012		)	(117,141		)	(726,153		)
Acquisition expenses	(90,670		)	(50,142		)	(27,737		)	(168,549		)	(34,289		)	(202,838		)
Other operating expenses	(92,680		)	(35,678		)	(38,729		)	(167,087		)	(9,094		)	(176,181		)
Underwriting income (loss)	$	5,634		$	24,413		$	205,736		235,783			(318		)	235,465
Net investment income										107,761			27,907			135,668
Net realized gains (losses)										(59,545		)	(17,066		)	(76,611		)
Net impairment losses recognized in earnings										(470		)	—			(470		)
Equity in net income (loss) of investment funds accounted for using the equity method										8,472			—			8,472
Other income (loss)										3,113			—			3,113
Corporate expenses (2)										(15,604		)	—			(15,604		)
Transaction costs and other (2)										(6,908		)	—			(6,908		)
Amortization of intangible assets										(26,472		)	—			(26,472		)
Interest expense										(26,058		)	(4,286		)	(30,344		)
Net foreign exchange gains (losses)										46,211			7,495			53,706
Income before income taxes										266,283			13,732			280,015
Income tax expense										(23,644		)	(24		)	(23,668		)
Net income										242,639			13,708			256,347
Dividends attributable to redeemable noncontrolling interests										—			(4,585		)	(4,585		)
Amounts attributable to nonredeemable noncontrolling interests										—			(8,116		)	(8,116		)
Net income available to Arch										242,639			1,007			243,646
Preferred dividends										(10,403		)	—			(10,403		)
Net income available to Arch common shareholders										$	232,236		$	1,007		$	233,243
Underwriting Ratios
Loss ratio	65.4		%	67.6		%	7.4		%	51.7		%	73.4		%	54.3		%
Acquisition expense ratio	16.6		%	14.7		%	9.5		%	14.3		%	21.5		%	15.2		%
Other operating expense ratio	17.0		%	10.5		%	13.3		%	14.2		%	5.7		%	13.2		%
Combined ratio	99.0		%	92.8		%	30.2		%	80.2		%	100.6		%	82.7		%
Goodwill and intangible assets	$	20,724		$	—		$	564,634		$	585,358		$	7,650		$	593,008

(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.

(2) Certain expenses have been excluded from ‘corporate expenses’ and reflected in ‘transaction costs and other.’

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 Arch common shareholders:

	Six Months Ended
	June 30, 2019
	Insurance			Reinsurance			Mortgage			Sub-Total			Other			Total
Gross premiums written (1)	$	1,861,879		$	1,228,402		$	720,515		$	3,810,282		$	348,667		$	4,015,688
Premiums ceded	(612,717		)	(401,024		)	(91,655		)	(1,104,882		)	(83,910		)	(1,045,531		)
Net premiums written	1,249,162			827,378			628,860			2,705,400			264,757			2,970,157
Change in unearned premiums	(103,215		)	(113,829		)	46,825			(170,219		)	32,655			(137,564		)
Net premiums earned	1,145,947			713,549			675,685			2,535,181			297,412			2,832,593
Other underwriting income (loss)	—			5,601			7,912			13,513			1,265			14,778
Losses and loss adjustment expenses	(745,895		)	(480,768		)	(37,146		)	(1,263,809		)	(222,266		)	(1,486,075		)
Acquisition expenses	(173,918		)	(111,111		)	(64,326		)	(349,355		)	(58,582		)	(407,937		)
Other operating expenses	(222,919		)	(69,664		)	(79,694		)	(372,277		)	(27,800		)	(400,077		)
Underwriting income (loss)	$	3,215		$	57,607		$	502,431		563,253			(9,971		)	553,282
Net investment income										244,287			67,700			311,987
Net realized gains (losses)										237,545			24,826			262,371
Net impairment losses recognized in earnings										(1,358		)	—			(1,358		)
Equity in net income (loss) of investment funds accounted for using the equity method										79,403			—			79,403
Other income (loss)										2,212			—			2,212
Corporate expenses (2)										(32,845		)	—			(32,845		)
Transaction costs and other (2)										(3,368		)	—			(3,368		)
Amortization of intangible assets										(40,211		)	—			(40,211		)
Interest expense										(46,857		)	(11,488		)	(58,345		)
Net foreign exchange gains (losses)										(1,015		)	(412		)	(1,427		)
Income before income taxes										1,001,046			70,655			1,071,701
Income tax expense										(90,338		)	(20		)	(90,358		)
Net income										910,708			70,635			981,343
Dividends attributable to redeemable noncontrolling interests										—			(9,178		)	(9,178		)
Amounts attributable to nonredeemable noncontrolling interests										—			(54,683		)	(54,683		)
Net income available to Arch										910,708			6,774			917,482
Preferred dividends										(20,806		)	—			(20,806		)
Net income available to Arch common shareholders										$	889,902		$	6,774		$	896,676
Underwriting Ratios
Loss ratio	65.1		%	67.4		%	5.5		%	49.9		%	74.7		%	52.5		%
Acquisition expense ratio	15.2		%	15.6		%	9.5		%	13.8		%	19.7		%	14.4		%
Other operating expense ratio	19.5		%	9.8		%	11.8		%	14.7		%	9.3		%	14.1		%
Combined ratio	99.8		%	92.8		%	26.8		%	78.4		%	103.7		%	81.0		%

(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.

(2) Certain expenses have been excluded from ‘corporate expenses’ and reflected in ‘transaction costs and other.’

	Six Months Ended
	June 30, 2018
	Insurance			Reinsurance			Mortgage			Sub-Total			Other			Total
Gross premiums written (1)	$	1,592,750		$	1,067,810		$	652,168		$	3,312,807		$	389,045		$	3,534,758
Premiums ceded	(492,445		)	(331,977		)	(97,004		)	(921,505		)	(68,907		)	(823,318		)
Net premiums written	1,100,305			735,833			555,164			2,391,302			320,138			2,711,440
Change in unearned premiums	(15,119		)	(116,343		)	15,556			(115,906		)	(23,872		)	(139,778		)
Net premiums earned	1,085,186			619,490			570,720			2,275,396			296,266			2,571,662
Other underwriting income (loss)	—			1,103			6,731			7,834			1,389			9,223
Losses and loss adjustment expenses	(711,195		)	(371,631		)	(65,057		)	(1,147,883		)	(215,130		)	(1,363,013		)
Acquisition expenses	(175,839		)	(98,461		)	(54,304		)	(328,604		)	(65,610		)	(394,214		)
Other operating expenses	(184,654		)	(71,249		)	(77,500		)	(333,403		)	(17,793		)	(351,196		)
Underwriting income (loss)	$	13,498		$	79,252		$	380,590		473,340			(878		)	472,462
Net investment income										208,004			54,388			262,392
Net realized gains (losses)										(171,404		)	(16,205		)	(187,609		)
Net impairment losses recognized in earnings										(632		)	—			(632		)
Equity in net income (loss) of investment funds accounted for using the equity method										36,541			—			36,541
Other income (loss)										3,187			—			3,187
Corporate expenses (2)										(30,086		)	—			(30,086		)
Transaction costs and other (2)										(7,738		)	—			(7,738		)
Amortization of intangible assets										(53,208		)	—			(53,208		)
Interest expense										(51,965		)	(9,015		)	(60,980		)
Net foreign exchange gains (losses)										31,172			2,813			33,985
Income before income taxes										437,211			31,103			468,314
Income tax expense										(45,556		)	(27		)	(45,583		)
Net income										391,655			31,076			422,731
Dividends attributable to redeemable noncontrolling interests										—			(9,170		)	(9,170		)
Amounts attributable to nonredeemable noncontrolling interests										—			(19,492		)	(19,492		)
Net income available to Arch										391,655			2,414			394,069
Preferred dividends										(20,840		)	—			(20,840		)
Loss on redemption of preferred shares										(2,710		)	—			(2,710		)
Net income available to Arch common shareholders										$	368,105		$	2,414		$	370,519
Underwriting Ratios
Loss ratio	65.5		%	60.0		%	11.4		%	50.4		%	72.6		%	53.0		%
Acquisition expense ratio	16.2		%	15.9		%	9.5		%	14.4		%	22.1		%	15.3		%
Other operating expense ratio	17.0		%	11.5		%	13.6		%	14.7		%	6.0		%	13.7		%
Combined ratio	98.7		%	87.4		%	34.5		%	79.5		%	100.7		%	82.0		%

(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.

(2)

Certain expenses have been excluded from ‘corporate expenses’ and reflected in ‘transaction costs and other.’

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Reserve for Losses and Loss Adjustment Expenses

6 Months Ended

Jun. 30, 2019

Liability for Future Policy Benefits and Unpaid Claims and Claims Adjustment Expense [Abstract]

Reserve for losses and loss adjustment expenses

Reserve for Losses and Loss Adjustment Expenses

The following table represents an analysis of losses and loss adjustment expenses and a reconciliation of the beginning and ending reserve for losses and loss adjustment expenses:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Reserve for losses and loss adjustment expenses at beginning of period	$	12,010,041		$	11,496,205		$	11,853,297		$	11,383,792
Unpaid losses and loss adjustment expenses recoverable	2,970,159			2,446,990			2,814,291			2,464,910
Net reserve for losses and loss adjustment expenses at beginning of period	9,039,882			9,049,215			9,039,006			8,918,882
Net incurred losses and loss adjustment expenses relating to losses occurring in:
Current year	805,728			790,742			1,563,692			1,478,627
Prior years	(38,185		)	(64,589		)	(77,617		)	(115,614		)
Total net incurred losses and loss adjustment expenses	767,543			726,153			1,486,075			1,363,013
Retroactive reinsurance transactions (1)	—			(420,404		)	(225,500		)	(420,404		)
Net foreign exchange (gains) losses	(1,277		)	(120,292		)	(1,781		)	(76,278		)
Net paid losses and loss adjustment expenses relating to losses occurring in:
Current year	(61,148		)	(59,022		)	(125,488		)	(95,022		)
Prior years	(539,481		)	(403,062		)	(966,793		)	(917,603		)
Total net paid losses and loss adjustment expenses	(600,629		)	(462,084		)	(1,092,281		)	(1,012,625		)
Net reserve for losses and loss adjustment expenses at end of period	9,205,519			8,772,588			9,205,519			8,772,588
Unpaid losses and loss adjustment expenses recoverable	3,024,797			2,651,749			3,024,797			2,651,749
Reserve for losses and loss adjustment expenses at end of period	$	12,230,316		$	11,424,337		$	12,230,316		$	11,424,337

(1) During the 2019 first quarter and 2018 second quarter, a subsidiary of the Company entered into two separate retroactive reinsurance transactions with third party reinsurers to reinsure run-off liabilities associated with certain U.S. exposures.

Development on Prior Year Loss Reserves

2019 Second Quarter

During the 2019 second quarter, the Company recorded net favorable development on prior year loss reserves of $38.2 million, which consisted of $2.6 million of favorable development from the insurance segment, $12.7 million from the reinsurance segment, $22.8 million from the mortgage segment and $0.1 million from the ‘other’ segment.

The insurance segment’s net favorable development of $2.6 million, or 0.4 loss ratio points, for the 2019 second quarter consisted of $8.0 million of net favorable development in short-tailed lines, $10.4 million of net adverse development in medium-tailed lines and $4.9 million of net favorable development in long-tailed lines. Net favorable development in short-tailed lines primarily resulted from property (including special risk other than marine) reserves across all accident years (i.e., the year in which a loss occurred). Net adverse development in medium-tailed lines primarily resulted from $15.5 million of adverse development on program business. Such amounts were partially offset by $5.1 million of net favorable development in other medium-tailed lines, including

surety business and professional liability, across most accident years. Net favorable development in long-tailed lines primarily resulted from reductions in executive assurance reserves of $5.1 million, primarily from the 2008 to 2014 accident years.

The reinsurance segment’s net favorable development of $12.7 million, or 3.5 loss ratio points, for the 2019 second quarter consisted of $1.8 million of net favorable development from short-tailed lines and $10.9 million of net favorable development from long-tailed and medium-tailed lines. Net favorable development in short-tailed lines primarily resulted from other specialty lines across most underwriting years (i.e., all premiums and losses attributable to contracts having an inception or renewal date within the given twelve-month period) and in property other than property catastrophe reserves from earlier underwriting years, partially offset by a small amount of adverse development from property catastrophe and property other than property catastrophe reserves in the 2015 and 2018 underwriting years. Favorable development in long-tailed and medium-tailed lines reflected reductions in casualty and marine reserves from most underwriting years.

The mortgage segment’s net favorable development was $22.8 million, or 6.5 loss ratio points, for the 2019 second quarter. The 2019 second quarter development was primarily driven by

continued favorable claim rates on first lien business and subrogation recoveries on second lien business.

2018 Second Quarter

During the 2018 second quarter, the Company recorded net favorable development on prior year loss reserves of $64.6 million, which consisted of $6.1 million from the insurance segment, $33.0 million from the reinsurance segment, $23.3 million from the mortgage segment and adverse development of $2.2 million from the ‘other’ segment.

The insurance segment’s net favorable development of $6.1 million, or 1.1 loss ratio points, for the 2018 second quarter consisted of $13.9 million of net favorable development in short-tailed lines and $14.3 million of net favorable development in long-tailed lines, partially offset by $22.1 million of net adverse development in medium-tailed lines. Net favorable development in short-tailed lines primarily resulted from property (including special risk other than marine) reserves from the 2010 to 2017 accident years while net favorable development in long-tailed lines primarily resulted from reductions in executive assurance reserves of $6.9 million, primarily from the 2007 to 2011 accident years, and in healthcare reserves of $4.9 million, primarily from the 2003 accident year. Net adverse development in medium-tailed lines reflected $11.6 million of adverse development in program business, primarily driven by a few inactive programs that were non-renewed in 2015 and early in 2016 and $18.0 million of adverse development on contract binding business, primarily from the 2014 to 2016 accident years. Such amounts were partially offset by $7.6 million of net favorable development in other medium-tailed lines, including professional liability and surety business, across most accident years.

The reinsurance segment’s net favorable development of $33.0 million, or 9.7 loss ratio points, for the 2018 second quarter consisted of $22.2 million from short-tailed lines and $10.8 million from long-tailed and medium-tailed lines. Favorable development in short-tailed lines included $19.3 million from property catastrophe and property other than property catastrophe reserves, across most underwriting years, reflecting lower 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 and medium-tailed lines reflected reductions in marine reserves of $3.8 million, across most accident years, and in casualty reserves of $6.9 million based on varying levels of reported and paid claims activity, primarily from the 2003 to 2010 underwriting years.

The mortgage segment’s net favorable development was $23.3 million, or 8.0 loss ratio points, for the 2018 second quarter. The 2018 second quarter development was primarily driven by continued lower than expected claim rates on first lien business and subrogation recoveries on second lien business.

Six Months Ended June 30, 2019

During the six months ended June 30, 2019, the Company recorded net favorable development on prior year loss reserves of $77.6 million, which consisted of $7.0 million from the insurance segment, $11.0 million from the reinsurance segment, $59.4 million from the mortgage segment and $0.1 million from the ‘other’ segment.

The insurance segment’s net favorable development of $7.0 million, or 0.6 loss ratio points, for the 2019 period consisted of $17.7 million of net favorable development in short-tailed lines and $6.6 million of net favorable development in long-tailed lines, partially offset by $17.3 million of net adverse development in medium-tailed lines. Net favorable development in short-tailed lines primarily resulted from property (including special risk other than marine) reserves from the 2010 to 2018 accident years. Net favorable development in long-tailed lines reflected net reductions in executive assurance reserves of $5.7 million, primarily from the 2013 and 2015 accident years. Net adverse development in medium-tailed lines reflected $23.2 million of adverse development in program business, primarily from the 2018 accident year, and $9.7 million of adverse development on contract binding business, across most accident years. Such amounts were partially offset by $15.6 million of net favorable development in other medium-tailed lines, including professional liability, marine and surety business, across most accident years.

The reinsurance segment’s net favorable development of $11.0 million, or 1.5 loss ratio points, for the 2019 period consisted of $4.3 million of net adverse development from short-tailed lines, offset by $15.3 million of net favorable development from long-tailed and medium-tailed lines. Net adverse development in short-tailed lines reflected $17.9 million from property catastrophe and property other than property catastrophe reserves, reflecting an increase in reserves on Typhoon Jebi in the 2019 first quarter of $16.0 million following receipt of updated information from cedents and additional updated industry data. Such amounts were partially offset by $10.2 million of favorable development on other specialty lines, primarily from the 2016 to 2018 underwriting years. Favorable development in long-tailed and medium-tailed lines reflected reductions in casualty reserves of $9.1 million based on varying levels of reported and paid claims activity, primarily from the 2002 to 2007 underwriting years, and favorable development in marine reserves of $6.2 million, primarily from the 2015 to 2018 underwriting years.

The mortgage segment’s net favorable development was $59.4 million, or 8.8 loss ratio points, for the 2019 period. The 2019 development was primarily driven by continued lower than expected claim rates on first lien business and subrogation recoveries on second lien business.

Six Months Ended June 30, 2018

During the six months ended June 30, 2018, the Company recorded net favorable development on prior year loss reserves of $115.6 million, which consisted of $8.2 million from the insurance segment, $69.6 million from the reinsurance segment, $36.3 million from the mortgage segment and $1.6 million from the ‘other’ segment.

The insurance segment’s net favorable development of $8.2 million, or 0.8 loss ratio points, for the 2018 period consisted of $22.7 million of net favorable development in short-tailed lines and $17.2 million of net favorable development in long-tailed lines, partially offset by $31.7 million of net adverse development in medium-tailed lines. Net favorable development in short-tailed lines primarily resulted from property (including special risk other than marine) reserves from the 2010 and 2017 accident years. Net favorable development in long-tailed lines reflected net reductions in executive assurance reserves of $7.5 million, primarily from the 2008 to 2015 accident years, and in healthcare reserves of $7.0 million, primarily from the 2003 accident year. Net adverse development in medium-tailed lines reflected $21.9 million of adverse development in program business, primarily driven by a few inactive programs that were non-renewed in 2015 and early in 2016 and $25.6 million of adverse development on contract binding business, primarily from the 2014 to 2016 accident years. Such amounts were partially offset by $15.8 million of net favorable development in other medium-tailed lines, including professional liability and surety business, across most accident years.

The reinsurance segment’s net favorable development of $69.6 million, or 11.2 loss ratio points, for the 2018 period consisted of $51.1 million from short-tailed lines and $18.5 million from long-tailed and medium-tailed lines. Favorable development in short-tailed lines included $40.4 million from property catastrophe and property other than property catastrophe reserves, across most underwriting years, reflecting lower 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 and medium-tailed lines reflected reductions in casualty reserves of $8.1 million based on varying levels of reported and paid claims activity, primarily from the 2002 to 2010 underwriting years, and favorable development in marine reserves of $10.0 million across most underwriting years.

The mortgage segment’s net favorable development was $36.3 million, or 6.4 loss ratio points, for the 2018 period. The 2018 development was primarily driven by continued lower than expected claim rates on first lien business and subrogation recoveries on second lien business.

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Investment Information

6 Months Ended

Jun. 30, 2019

Disclosure Investment Information [Abstract]

Investment Information

Investment Information

At June 30, 2019, total investable assets of $23.55 billion included $20.78 billion held by the Company and $2.77 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 securities classified as available for sale:

	Estimated Fair Value		Gross Unrealized Gains		Gross Unrealized Losses			Cost or Amortized Cost		OTTI Unrealized Losses (2)
June 30, 2019
Fixed maturities (1):
Corporate bonds	$	6,044,081	$	166,372	$	(19,805	)	$	5,897,514	$	—
Mortgage backed securities	523,019		11,385		(187		)	511,821		(6		)
Municipal bonds	582,497		21,755		(58		)	560,800		—
Commercial mortgage backed securities	686,707		21,272		(228		)	665,663		—
U.S. government and government agencies	4,906,996		68,017		(2,051		)	4,841,030		—
Non-U.S. government securities	1,928,752		45,881		(36,125		)	1,918,996		—
Asset backed securities	1,636,897		28,133		(3,480		)	1,612,244		—
Total	16,308,949		362,815		(61,934		)	16,008,068		(6		)
Short-term investments	821,961		284		(480		)	822,157		—
Total	$	17,130,910	$	363,099	$	(62,414	)	$	16,830,225	$	(6	)
December 31, 2018
Fixed maturities (1):
Corporate bonds	$	5,537,548	$	14,476	$	(105,428	)	$	5,628,500	$	(69	)
Mortgage backed securities	541,193		3,991		(3,216		)	540,418		(6		)
Municipal bonds	1,013,395		5,380		(11,891		)	1,019,906		—
Commercial mortgage backed securities	729,442		2,650		(10,751		)	737,543		—
U.S. government and government agencies	3,758,698		27,189		(8,474		)	3,739,983		—
Non-U.S. government securities	1,771,338		14,477		(50,948		)	1,807,809		—
Asset backed securities	1,600,896		8,060		(14,798		)	1,607,634		—
Total	14,952,510		76,223		(205,506		)	15,081,793		(75		)
Short-term investments	955,880		36		(394		)	956,238		—
Total	$	15,908,390	$	76,259	$	(205,900	)	$	16,038,031	$	(75	)

(1) In securities lending transactions, the Company receives collateral in excess of the fair value of the fixed maturities 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, 2019 the net unrealized loss related to securities for which a non-credit OTTI was recognized in AOCI was $0.01 million, compared to net unrealized loss of $0.04 million at December 31, 2018.

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, 2019
Fixed maturities (1):
Corporate bonds	$	259,361	$	(10,678	)	$	375,478	$	(9,127	)	$	634,839	$	(19,805	)
Mortgage backed securities	19,612		(169		)	261		(18		)	19,873		(187		)
Municipal bonds	—		—			12,489		(58		)	12,489		(58		)
Commercial mortgage backed securities	18,917		(106		)	23,198		(122		)	42,115		(228		)
U.S. government and government agencies	906,497		(1,711		)	104,692		(340		)	1,011,189		(2,051		)
Non-U.S. government securities	1,092,560		(33,985		)	124,466		(2,140		)	1,217,026		(36,125		)
Asset backed securities	312,033		(1,901		)	130,002		(1,579		)	442,035		(3,480		)
Total	2,608,980		(48,550		)	770,586		(13,384		)	3,379,566		(61,934		)
Short-term investments	53,431		(480		)	—		—			53,431		(480		)
Total	$	2,662,411	$	(49,030	)	$	770,586	$	(13,384	)	$	3,432,997	$	(62,414	)
December 31, 2018
Fixed maturities (1):
Corporate bonds	$	2,983,195	$	(68,910	)	$	1,234,865	$	(36,518	)	$	4,218,060	$	(105,428	)
Mortgage backed securities	84,296		(695		)	109,009		(2,521		)	193,305		(3,216		)
Municipal bonds	233,081		(2,074		)	408,155		(9,817		)	641,236		(11,891		)
Commercial mortgage backed securities	223,341		(2,831		)	193,956		(7,920		)	417,297		(10,751		)
U.S. government and government agencies	635,049		(1,354		)	391,102		(7,120		)	1,026,151		(8,474		)
Non-U.S. government securities	1,028,340		(35,524		)	389,671		(15,424		)	1,418,011		(50,948		)
Asset backed securities	533,592		(8,832		)	368,095		(5,966		)	901,687		(14,798		)
Total	5,720,894		(120,220		)	3,094,853		(85,286		)	8,815,747		(205,506		)
Short-term investments	122,878		(394		)	—		—			122,878		(394		)
Total	$	5,843,772	$	(120,614	)	$	3,094,853	$	(85,286	)	$	8,938,625	$	(205,900	)

(1) In securities lending transactions, the Company receives collateral in excess of the fair value of the fixed maturities 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, 2019, on a lot level basis, approximately 1,690 security lots out of a total of approximately 8,730 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 $3.1 million. At December 31, 2018, on a lot level basis, approximately 5,870 security lots out of a total of approximately 8,450 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 $2.6 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, 2019				December 31, 2018
Maturity	Estimated Fair Value		Amortized Cost		Estimated Fair Value		Amortized Cost
Due in one year or less	$	414,736	$	413,481	$	276,682	$	279,135
Due after one year through five years	9,833,517		9,702,349		8,666,297		8,738,944
Due after five years through 10 years	3,028,435		2,923,881		2,919,232		2,951,582
Due after 10 years	185,638		178,629		218,768		226,537
	13,462,326		13,218,340		12,080,979		12,196,198
Mortgage backed securities	523,019		511,821		541,193		540,418
Commercial mortgage backed securities	686,707		665,663		729,442		737,543
Asset backed securities	1,636,897		1,612,244		1,600,896		1,607,634
Total (1)	$	16,308,949	$	16,008,068	$	14,952,510	$	15,081,793

(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

The Company enters into securities lending agreements with financial institutions to enhance investment income whereby it 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 from the Company.

The Company receives collateral in the form of cash or securities. Cash collateral primarily consists of short term investments. At June 30, 2019, the fair value of the cash collateral received on securities lending was $11.4 million and the fair value of security collateral received was $438.9 million. At December 31, 2018, the fair value of the cash collateral received on securities lending was $19.0 million, and the fair value of security collateral received was $255.1 million.

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

	Remaining Contractual Maturity of the Agreements
	Overnight and Continuous		Less than 30 Days		30-90 Days		90 Days or More		Total
June 30, 2019
U.S. government and government agencies	$	216,856	$	—	$	217,722	$	—	$	434,578
Corporate bonds	2,356		—		—		—		2,356
Equity securities	13,378		—		—		—		13,378
Total	$	232,590	$	—	$	217,722	$	—	$	450,312
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									$	450,312
December 31, 2018
U.S. government and government agencies	$	219,276	$	—	$	32,583	$	—	$	251,859
Corporate bonds	7,129		—		—		—		7,129
Equity securities	15,137		—		—		—		15,137
Total	$	241,542	$	—	$	32,583	$	—	$	274,125
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									$	274,125

Equity Securities, at Fair Value

At June 30, 2019, the Company held $670.9 million of equity securities, at fair value, compared to $338.9 million at December 31, 2018. Such holdings include publicly traded common stocks in the natural resources, energy, consumer staples and other sectors and exchange-traded funds.

Other Investments

The following table summarizes the Company’s other investments which are included in investments accounted for using the fair value option, by strategy:

	June 30, 2019		December 31, 2018
Term loan investments (par value: $1,427,330 and $1,369,216)	$	1,341,445	$	1,282,287
Lending	585,954		524,112
Credit related funds	166,673		202,123
Energy	123,547		117,509
Investment grade fixed income	86,808		101,902
Infrastructure	49,260		45,371
Private equity	23,925		24,383
Real estate	16,906		14,252
Total	$	2,394,518	$	2,311,939

Investments Accounted For Using the Equity Method

The following table summarizes the Company’s investments accounted for using the equity method, by strategy:

	June 30, 2019		December 31, 2018
Credit related funds	$	436,118	$	429,402
Equities	324,525		375,273
Real estate	251,891		232,647
Lending	193,397		125,041
Private equity	131,863		114,019
Infrastructure	141,744		113,748
Energy	102,434		103,661
Total	$	1,581,972	$	1,493,791

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 which are accounted for using the fair value option:

	June 30, 2019		December 31, 2018
Fixed maturities	$	965,161	$	1,245,562
Other investments	2,394,518		2,311,939
Short-term investments	257,465		322,177
Equity securities	103,891		103,893
Investments accounted for using the fair value option	$	3,721,035	$	3,983,571

Limited Partnership Interests

In the normal course of its activities, the Company invests in limited partnerships as part of its overall investment strategy. Such amounts are included in ‘investments accounted for using the equity method’ and ‘investments accounted for using the fair value option.’ The Company has determined that it is not required to consolidate these investments because it is not the primary beneficiary of the funds. The Company’s maximum exposure to loss with respect to these investments is limited to the investment carrying amounts reported in the Company’s consolidated balance sheet and any unfunded commitment.

The following table summarizes investments in limited partnership interests where the Company has a variable interest by balance sheet line item:

	June 30, 2019		December 31, 2018
Investments accounted for using the equity method (1)	1,581,972		1,493,791
Investments accounted for using the fair value option (2)	178,977		162,398
Total	$	1,760,949	$	1,656,189

(1) Aggregate unfunded commitments were $1.41 billion at June 30, 2019, compared to $1.22 billion at December 31, 2018.

(2) Aggregate unfunded commitments were $63.6 million at June 30, 2019, compared to $117.5 million at December 31, 2018.

Net Investment Income

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

	June 30,
	2019			2018
Three Months Ended
Fixed maturities	$	125,018		$	115,110
Term loans	24,730			20,763
Equity securities	4,368			4,777
Short-term investments	3,859			4,392
Other (1)	18,523			17,405
Gross investment income	176,498			162,447
Investment expenses	(21,460		)	(26,779		)
Net investment income	$	155,038		$	135,668
Six Months Ended
Fixed maturities	$	254,817		$	222,997
Term loans	49,346			40,527
Equity securities	7,356			7,345
Short-term investments	8,038			9,252
Other (1)	39,719			35,015
Gross investment income	359,276			315,136
Investment expenses	(47,289		)	(52,744		)
Net investment income	$	311,987		$	262,392

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

Net Realized Gains (Losses)

Net realized gains (losses) were as follows, excluding net impairment losses recognized in earnings:

	June 30,
	2019			2018
Three Months Ended
Available for sale securities:
Gross gains on investment sales	$	75,090		$	18,777
Gross losses on investment sales	(15,281		)	(57,711		)
Change in fair value of assets and liabilities accounted for using the fair value option:
Fixed maturities	11,429			(22,927		)
Other investments	(33,780		)	(254		)
Equity securities	6,414			1,230
Short-term investments	(1,392		)	(136		)
Equity securities, at fair value:
Net realized gains (losses) on sales during the period	(6,644		)	(5,918		)
Net unrealized gains (losses) on equity securities still held at reporting date	22,632			(7,278		)
Derivative instruments (1)	63,966			(2,146		)
Other (2)	(1,628		)	(248		)
Net realized gains (losses)	$	120,806		$	(76,611	)
Six Months Ended
Available for sale securities:
Gross gains on investment sales	$	118,455		$	33,742
Gross losses on investment sales	(46,937		)	(140,262		)
Change in fair value of assets and liabilities accounted for using the fair value option:
Fixed maturities	42,577			(40,478		)
Other investments	(15,585		)	(6,628		)
Equity securities	10,680			7,898
Short-term investments	(672		)	(287		)
Equity securities, at fair value:
Net realized gains (losses) on sales during the period	4,286			(11,286		)
Net unrealized gains (losses) on equity securities still held at reporting date	59,768			(14,861		)
Derivative instruments (1)	99,837			(6,109		)
Other (2)	(10,038		)	(9,338		)
Net realized gains (losses)	$	262,371		$	(187,609	)

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

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

Equity in Net Income (Loss) of Investment Funds Accounted for Using the Equity Method

The Company recorded $32.5 million of equity in net income related to investment funds accounted for using the equity method in the 2019 second quarter, compared to $8.5 million for the 2018 second quarter, and $79.4 million for the six months ended June 30, 2019, compared to $36.5 million for the 2018 period. In applying the equity method, investments are initially recorded at cost and are subsequently adjusted based on the Company’s 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.

Net Impairment Losses Recognized in Earnings

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:

	June 30,
	2019			2018
Three Months Ended
Fixed maturities:
Mortgage backed securities	$	(24	)	$	(81	)
Corporate bonds	(25		)	(241		)
Asset backed securities	—			(148		)
Total	(49		)	(470		)
Net impairment losses recognized in earnings	$	(49	)	$	(470	)
Six Months Ended
Fixed maturities:
Mortgage backed securities	$	(555	)	$	(123	)
Corporate bonds	(590		)	(361		)
Asset backed securities	(213		)	(148		)
Total	(1,358		)	(632		)
Net impairment losses recognized in earnings	$	(1,358	)	$	(632	)

 

Net impairment losses recognized in earnings in the 2019 periods were primarily related to foreign currency fluctuations and other impairments on corporate bonds and other securities.

The Company believes that the minimal amount of OTTI included in accumulated other comprehensive income at June 30, 2019 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, 2019, 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:

	June 30,
	2019			2018
Three Months Ended
Balance at start of period	$	346		$	767
Credit loss impairments recognized on securities not previously impaired	—			—
Credit loss impairments recognized on securities previously impaired	—			—
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	—			(69		)
Balance at end of period	$	346		$	698
Six Months Ended
Balance at start of year	$	637		$	767
Credit loss impairments recognized on securities not previously impaired	—			—
Credit loss impairments recognized on securities previously impaired	—			—
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	(291		)	(69		)
Balance at end of period	$	346		$	698

Restricted Assets

The Company is required to maintain assets on deposit, which primarily consist of fixed maturities, with various regulatory authorities to support its underwriting operations. The Company’s subsidiaries maintain assets in trust accounts as collateral for 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 16, “Commitments and Contingencies,” of the notes to consolidated financial statements in the Company’s 2018 Form 10-K. The following table details the value of the Company’s restricted assets:

	June 30, 2019		December 31, 2018
Assets used for collateral or guarantees:
Affiliated transactions	$	4,758,653	$	4,623,483
Third party agreements	2,612,380		2,181,682
Deposits with U.S. regulatory authorities	788,750		689,114
Deposits with non-U.S. regulatory authorities	62,449		59,624
Total restricted assets	$	8,222,232	$	7,553,903

In addition, Watford Re maintains a secured credit facility to provide borrowing capacity for investment purposes and a total return swap agreement and maintains assets pledged as collateral for such purposes. The Company does not guarantee or provide credit support for Watford Re, and the Company’s financial exposure to Watford Re is limited to its investment in Watford Re’s senior notes, common and preferred shares and counterparty credit risk (mitigated by collateral) arising from reinsurance transactions. As of June 30, 2019 and December 31, 2018 Watford Re held $1.1 billion and $1.3 billion, respectively, in pledged assets to collateralize Watford Re’s credit facility mentioned above.

Reconciliation of Cash and Restricted Cash

The following table details reconciliation of cash and restricted cash within the Consolidated Balance Sheets:

	June 30, 2019		December 31, 2018
Cash	$	605,316	$	646,556
Restricted cash (included in ‘other assets’)	$	77,759	$	78,087
Cash and restricted cash	$	683,075	$	724,643

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Fair Value

6 Months Ended

Jun. 30, 2019

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, 2019.

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 $21.66 billion of financial assets and liabilities measured at fair value at June 30, 2019,

approximately $183.8 million, or 0.9%, were priced using non-binding broker-dealer quotes. Of the $20.41 billion of financial assets and liabilities measured at fair value at December 31, 2018, approximately $217.9 million, or 1.1%, 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. A small number of securities are included in Level 3 due to a low level of transparency on the inputs used in the pricing process. During the 2019 second quarter, the Company transferred $23.9 million of corporate bonds from Level 2 to Level 3 based on a review of the pricing of such securities, as described above.

•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. A small number of securities are included in Level 3 due to a low level of transparency on the inputs used in the pricing process.

•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 are 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.

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. A small number of securities are included in Level 3 due to the lack of an available independent price source for such securities. As the significant inputs used to price these securities are unobservable, the fair value of such securities are classified as Level 3. During the 2019 second quarter, the Company transferred $107.4 million of equity securities from Level 2 to Level 3 based on a review of the pricing of such securities, as described above.

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. A small number of

securities are included in Level 3 due to the lack of an available independent price source for such securities. During the 2019 second quarter, the Company transferred $44.6 million of other investments from Level 2 to Level 3 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, Treasury bills and commercial paper 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 liabilities

Contingent consideration liabilities (included in ‘other liabilities’ in the consolidated balance sheets) include amounts related to the acquisition of CMG Mortgage Insurance Company and its affiliated mortgage insurance companies and other acquisitions. Such amounts are remeasured at fair value at each balance sheet date with changes in fair value recognized in ‘net realized gains (losses).’ To determine the fair value of contingent consideration liabilities, 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 contingent consideration liabilities 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, 2019:

				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 (1):
Available for sale securities:
Fixed maturities:
Corporate bonds	$	6,044,081		$	—	$	6,036,439		$	7,642
Mortgage backed securities	523,019			—		522,729			290
Municipal bonds	582,497			—		582,497			—
Commercial mortgage backed securities	686,707			—		686,707			—
U.S. government and government agencies	4,906,996			4,746,260		160,736			—
Non-U.S. government securities	1,928,752			—		1,928,752			—
Asset backed securities	1,636,897			—		1,636,897			—
Total	16,308,949			4,746,260		11,554,757			7,932
Short-term investments	821,961			803,337		18,624			—
Equity securities, at fair value	684,236			620,508		12,516			51,212
Derivative instruments (4)	30,653			—		30,653			—
Fair value option:
Corporate bonds	673,431			—		647,328			26,103
Non-U.S. government bonds	56,416			—		56,416			—
Mortgage backed securities	16,076			—		16,076			—
Municipal bonds	6,731			—		6,731			—
Commercial mortgage backed securities	—			—		—			—
Asset backed securities	208,019			—		208,019			—
U.S. government and government agencies	4,488			4,378		110			—
Short-term investments	257,465			247,216		10,249			—
Equity securities	103,891			47,157		589			56,145
Other investments	1,394,344			41,176		1,257,895			95,273
Other investments measured at net asset value (2)	1,000,174
Total	3,721,035			339,927		2,203,413			177,521
Total assets measured at fair value	$	21,566,834		$	6,510,032	$	13,819,963		$	236,665
Liabilities measured at fair value:
Contingent consideration liabilities	$	(7,825	)	$	—	$	—		$	(7,825	)
Securities sold but not yet purchased (3)	(48,823		)	—		(48,823		)	—
Derivative instruments (4)	(38,363		)	—		(38,363		)	—
Total liabilities measured at fair value	$	(95,011	)	$	—	$	(87,186	)	$	(7,825	)

(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, “—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) Represents the Company’s obligations to deliver securities that it did not own at the time of sale. Such amounts are included in “other liabilities” on the Company’s consolidated balance sheets.

(4) See note 8.

The following table presents the Company’s financial assets and liabilities measured at fair value by level at December 31, 2018:

				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 (1):
Available for sale securities:
Fixed maturities:
Corporate bonds	$	5,537,548		$	—	$	5,529,407		$	8,141
Mortgage backed securities	541,193			—		540,884			309
Municipal bonds	1,013,395			—		1,013,395			—
Commercial mortgage backed securities	729,442			—		729,438			4
U.S. government and government agencies	3,758,698			3,657,181		101,517			—
Non-U.S. government securities	1,771,338			—		1,771,338			—
Asset backed securities	1,600,896			—		1,600,896			—
Total	14,952,510			3,657,181		11,286,875			8,454
Equity securities	353,794			321,927		31,867			—
Short-term investments	955,880			875,881		79,999			—
Derivative instruments (4)	73,893			—		73,893			—
Fair value option:
Corporate bonds	852,585			—		846,827			5,758
Non-U.S. government bonds	79,066			—		79,066			—
Mortgage backed securities	16,731			—		16,731			—
Municipal bonds	7,144			—		7,144			—
Commercial mortgage backed securities	—			—		—			—
Asset backed securities	178,790			—		178,790			—
U.S. government and government agencies	111,246			111,138		108			—
Short-term investments	322,177			278,579		43,598			—
Equity securities	103,893			48,827		55,066			—
Other investments	1,254,220			39,107		1,152,408			62,705
Other investments measured at net asset value (2)	1,057,719
Total	3,983,571			477,651		2,379,738			68,463
Total assets measured at fair value	$	20,319,648		$	5,332,640	$	13,852,372		$	76,917
Liabilities measured at fair value:
Contingent consideration liabilities	$	(66,665	)	$	—	$	—		$	(66,665	)
Securities sold but not yet purchased (3)	(7,790		)	—		(7,790		)	—
Derivative instruments (4)	(20,664		)	—		(20,664		)	—
Total liabilities measured at fair value	$	(95,119	)	$	—	$	(28,454	)	$	(66,665	)

(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, “—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) Represents the Company’s obligations to deliver securities that it did not own at the time of sale. Such amounts are included in “other liabilities” on the Company’s consolidated balance sheets.

(4) See note 8.

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								Fair Value
	Structured Securities (1)			Corporate Bonds			Corporate Bonds			Other Investments			Equity Securities		Equity Securities		Contingent Consideration Liabilities
Three Months Ended June 30, 2019
Balance at beginning of period	$	302		$	7,567		$	2,233		$	62,329		$	—	$	—	$	(68,121	)
Total gains or (losses) (realized/unrealized)
Included in earnings (2)	—			—			(49		)	(11,614		)	—		—		(423		)
Included in other comprehensive income	1			102			—			—			—		—		—
Purchases, issuances, sales and settlements
Purchases	—			429			—			—			—		—		—
Issuances	—			—			—			—			—		—		—
Sales	—			—			—			(74		)	—		—		—
Settlements	(13		)	(456		)	—			—			—		—		60,719
Transfers in and/or out of Level 3	—			—			23,919			44,632			56,145		51,212		—
Balance at end of period	$	290		$	7,642		$	26,103		$	95,273		$	56,145	$	51,212	$	(7,825	)
Three Months Ended June 30, 2018
Balance at beginning of period	$	5,413		$	9,152		$	11,872		$	58,452		$	—	$	—	$	(62,449	)
Total gains or (losses) (realized/unrealized)
Included in earnings (2)	3			—			(537		)	336			—		—		(1,481		)
Included in other comprehensive income	(4		)	(316		)	—			—			—		—		—
Purchases, issuances, sales and settlements
Purchases	—			393			—			—			—		—		—
Issuances	—			—			—			—			—		—		—
Sales	(5,003		)	—			—			(74		)	—		—		—
Settlements	(33		)	(456		)	—			(500		)	—		—		—
Transfers in and/or out of Level 3	—			—			—			—			—		—		—
Balance at end of period	$	376		$	8,773		$	11,335		$	58,214		$	—	$	—	$	(63,930	)
Six Months Ended June 30, 2019
Balance at beginning of year	$	313		$	8,141		$	5,758		$	62,705		$	—	$	—	$	(66,665	)
Total gains or (losses) (realized/unrealized)
Included in earnings (2)	1,757			—			(339		)	(11,316		)	—		—		(1,331		)
Included in other comprehensive income	5			(16		)	—			—			—		—		—
Purchases, issuances, sales and settlements
Purchases	—			429			—			—			—		—		—
Issuances	—			—			—			—			—		—		(548		)
Sales	(1,757		)	—			(3,235		)	(148		)	—		—		—
Settlements	(28		)	(912		)	—			(600		)	—		—		60,719
Transfers in and/or out of Level 3	—			—			23,919			44,632			56,145		51,212		—
Balance at end of period	$	290		$	7,642		$	26,103		$	95,273		$	56,145	$	51,212	$	(7,825	)
Six Months Ended June 30, 2018
Balance at beginning of year	$	5,927		$	9,460		$	12,217		$	59,167		$	—	$	—	$	(60,996	)
Total gains or (losses) (realized/unrealized)
Included in earnings (2)	4			—			(612		)	(379		)	—		—		(2,934		)
Included in other comprehensive income	(8		)	(168		)	—			—			—		—		—
Purchases, issuances, sales and settlements
Purchases	—			393			—			—			—		—		—
Issuances	—			—			—			—			—		—		—
Sales	(5,003		)	—			—			(74		)	—		—		—
Settlements	(544		)	(912		)	(270		)	(500		)	—		—		—
Transfers in and/or out of Level 3	—			—			—			—			—		—		—
Balance at end of period	$	376		$	8,773		$	11,335		$	58,214		$	—	$	—	$	(63,930	)

(1) Includes asset backed securities, mortgage backed securities and commercial mortgage backed securities.

(2) Gains or losses were included in net realized gains (losses).

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, 2019, 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, 2019, the Company’s senior notes were carried at their cost, net of debt issuance costs, of $1.73 billion and had a fair value of $2.09 billion. At December 31, 2018, Company’s senior notes were carried at their cost, net of debt issuance costs, of $1.73 billion and had a fair value of $1.88 billion. 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 values of the senior notes are classified within Level 2.

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Derivative Instruments

6 Months Ended

Jun. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

Derivative Instruments

The Company’s investment strategy allows for the use of derivative instruments. 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 following table summarizes information on the fair values and notional values of the Company’s derivative instruments:

	Estimated Fair Value
	Asset Derivatives		Liability Derivatives			Notional Value (1)
June 30, 2019
Futures contracts (2)	$	5,438	$	(1,586	)	$	4,354,852
Foreign currency forward contracts (2)	3,190		(10,352		)	939,940
TBAs (3)	15,509		—			14,846
Other (2)	22,025		(26,425		)	3,493,526
Total	$	46,162	$	(38,363	)
December 31, 2018
Futures contracts (2)	$	51,800	$	(2,115	)	$	3,153,518
Foreign currency forward contracts (2)	8,147		(7,796		)	1,008,907
TBAs (3)	8,292		—			8,132
Other (2)	13,946		(10,753		)	2,213,981
Total	$	82,185	$	(20,664	)

(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 did not hold any derivatives which were designated as hedging instruments at June 30, 2019 or December 31, 2018.

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. Contractual close-out netting reduces derivatives credit exposure from gross to net exposure. The remaining derivatives included in the table above were not subject to a master netting agreement.

At June 30, 2019, asset derivatives and liability derivatives of $46.2 million and $38.4 million, respectively, were subject to a master netting agreement, compared to $80.4 million and $18.9 million, respectively, at December 31, 2018. The remaining derivatives included in the preceding table were not subject to a master netting agreement.

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:

Derivatives not designated as	June 30,
hedging instruments:	2019			2018
Three Months Ended
Net realized gains (losses):
Futures contracts	$	66,973		$	(240	)
Foreign currency forward contracts	(5,365		)	(1,692		)
TBAs	48			—
Other	2,310			(214		)
Total	$	63,966		$	(2,146	)
Six Months Ended
Net realized gains (losses):
Futures contracts	$	94,309		$	4,790
Foreign currency forward contracts	(19,074		)	(7,616		)
TBAs	238			(97		)
Other	24,364			(3,186		)
Total	$	99,837		$	(6,109	)

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

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 $1.92 billion at June 30, 2019, compared to $1.77 billion at December 31, 2018.

Interest Paid

Interest paid on the Company’s senior notes and other borrowings were $60.9 million for the six months ended June 30, 2019, consistent with $60.9 million for the 2018 period.

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Leases

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Leases

Leases

In the ordinary course of business, the Company renews and enters into new leases for office property and equipment. At the lease inception date, the Company determines whether a contract contains a lease and its classification as a finance or operating lease. Primarily all of the Company’s leases are classified as operating leases. The Company’s operating leases have remaining lease terms of up to 12 years, some of which include options to extend the lease term. The Company considers these options when determining the lease term and measuring its lease liability and right-of-use asset. In addition, the Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Short-term operating leases with an initial term of twelve months or less were excluded on the Company's consolidated balance sheet and represent an inconsequential amount of operating lease expense.

As most leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments.

Additional information regarding the Company’s operating leases is as follows:

	June 30,
	2019
Three Months Ended
Operating lease costs	$	7,244
Cash payments included in the measurement of lease liabilities reported in operating cash flows	$	7,685
Right-of-use assets obtained in exchange for new lease liabilities	$	4,420
Right-of-use assets (1)	$	134,061
Operating lease liability (1)	$	150,341
Weighted average discount rate	3.9		%
Weighted average remaining lease term	6.5 years
Six Months Ended
Operating lease costs	$	14,860
Cash payments included in the measurement of lease liabilities reported in operating cash flows	$	14,585
Right-of-use assets obtained in exchange for new lease liabilities	$	4,420
Right-of-use assets (1)	$	134,061
Operating lease liability (1)	$	150,341
Weighted average discount rate	3.9		%
Weighted average remaining lease term	6.5 years

(1) The right-of-use assets are included in ‘other assets’ while the operating lease liability is included in ‘other liabilities.’

The following table presents the contractual maturities of the Company's operating lease liabilities at June 30, 2019:

Years Ending December 31,
2019 (remainder)	$	9,985
2020	32,036
2021	30,673
2022	27,365
2023	22,667
2024 and thereafter	55,610
Total undiscounted lease liability	$	178,336
Less: present value adjustment	(27,995		)
Operating lease liability	$	150,341

At December 31, 2018, the future minimum rental commitments, exclusive of escalation clauses and maintenance costs and net of rental income, for all of the Company’s operating leases was as follows:

2019	$	31,088
2020	30,491
2021	29,351
2022	26,068
2023	21,408
2024 and thereafter	54,745
Total	$	193,151

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Variable Interest Entities and Noncontrolling Interests

6 Months Ended

Jun. 30, 2019

Noncontrolling Interest [Abstract]

Variable Interest Entity and Noncontrolling Interests

Variable Interest Entities and Noncontrolling Interests

Watford Holdings Ltd.

In March 2014, the Company invested $100.0 million and acquired 2,500,000 common shares, approximately 11% of Watford Holdings Ltd.’s outstanding common equity, and a warrant to purchase up to 975,503 additional common shares. The warrants expire on March 31, 2020. The exercise price of the warrants is determined on the date of exercise based on certain targeted returns for existing common shareholders. Watford Holdings Ltd.’s common shares are listed on the Nasdaq Select Global Market under the ticker symbol “WTRE”.

Watford Re is considered a 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 does not guarantee or provide credit support for Watford Re, and the Company’s financial exposure to Watford Re is limited to its investment in Watford Re’s senior notes, common and preferred shares and counterparty credit risk (mitigated by collateral) arising from reinsurance transactions.

The following table provides the carrying amount and balance sheet caption in which the assets and liabilities of Watford Re are reported:

	June 30,		December 31,
	2019		2018
Assets
Investments accounted for using the fair value option	$	1,972,947	$	2,312,003
Fixed maturities available for sale, at fair value	732,454		393,351
Equity securities, at fair value	64,703		32,206
Cash	68,977		63,529
Accrued investment income	16,916		19,461
Premiums receivable	228,588		227,301
Reinsurance recoverable on unpaid and paid losses and LAE	123,961		86,445
Ceded unearned premiums	79,513		61,587
Deferred acquisition costs	71,557		80,858
Receivable for securities sold	29,425		24,507
Goodwill and intangible assets	7,650		7,650
Other assets	71,837		63,959
Total assets of consolidated VIE	$	3,468,528	$	3,372,857
Liabilities
Reserve for losses and loss adjustment expenses	$	1,126,080	$	1,032,760
Unearned premiums	375,323		390,114
Reinsurance balances payable	23,312		21,034
Revolving credit agreement borrowings	491,006		455,682
Payable for securities purchased	51,216		60,142
Other liabilities (1)	219,120		302,524
Total liabilities of consolidated VIE	$	2,286,057	$	2,262,256
Redeemable noncontrolling interests	$	221,175	$	220,992

(1) Includes certain borrowings related to investing activities.

For the six months ended June 30, 2019, Watford Re generated $115.9 million of cash provided by operating activities, $135.7 million of cash used for investing activities and $25.6 million of cash provided by financing activities, compared to $92.4 million of cash provided by operating activities, $168.0 million of cash used for investing activities and $2.1 million of cash used for financing activities for the six months ended June 30, 2018.

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, 2019. The portion of Watford Re’s income or loss attributable to third party investors is recorded in the consolidated statements of income in ‘net (income) loss attributable to noncontrolling interests.’

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

	June 30,
	2019		2018
Three Months Ended
Balance, beginning of period	$	838,081	$	854,112
Additional paid in capital attributable to noncontrolling interests	2,074		—
Amounts attributable to noncontrolling interests	12,301		8,116
Other comprehensive income (loss) attributable to noncontrolling interests	2,891		(1,075		)
Balance, end of period	$	855,347	$	861,153
Six Months Ended
Balance, beginning of year	$	791,560	$	843,411
Additional paid in capital attributable to noncontrolling interests	2,074		—
Amounts attributable to noncontrolling interests	54,683		19,492
Other comprehensive income (loss) attributable to noncontrolling interests	7,030		(1,750		)
Balance, end of period	$	855,347	$	861,153

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. The Watford Preference Shares were issued at a discounted amount of $24.50 per share. Preferred dividends, including the accretion of the discount and issuance costs, are included in ‘net (income) loss attributable to noncontrolling interests’ in the Company’s consolidated statements of income.

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

	June 30,
	2019		2018
Three Months Ended
Balance, beginning of period	$	206,383	$	206,013
Accretion of preference share issuance costs	92		92
Balance, end of period	$	206,475	$	206,105
Six Months Ended
Balance, beginning of year	$	206,292	$	205,922
Accretion of preference share issuance costs	183		183
Balance, end of period	$	206,475	$	206,105

The portion of Watford Re’s income or loss attributable to third party investors, recorded in the Company’s consolidated statements of income in ‘net (income) loss attributable to noncontrolling interests,’ are summarized in the table below:

	June 30,
	2019			2018
Three Months Ended
Amounts attributable to non-redeemable noncontrolling interests	$	(12,301	)	$	(8,116	)
Dividends attributable to redeemable noncontrolling interests	(4,590		)	(4,585		)
Net (income) loss attributable to noncontrolling interests	$	(16,891	)	$	(12,701	)
Six Months Ended
Amounts attributable to non-redeemable noncontrolling interests	$	(54,683	)	$	(19,492	)
Dividends attributable to redeemable noncontrolling interests	(9,178		)	(9,170		)
Net (income) loss attributable to noncontrolling interests	$	(63,861	)	$	(28,662	)

Bellemeade Re

The Company has entered into various aggregate excess of loss mortgage reinsurance agreements with various special purpose reinsurance companies domiciled in Bermuda (the “Bellemeade Agreements”). At the time the Bellemeade Agreements were entered into, the applicability of the accounting guidance that addresses VIEs was evaluated. As a result of the evaluation of the Bellemeade Agreements, the Company concluded that these entities are VIEs. However, given that the ceding insurers do not have the unilateral power to direct those activities that are significant to their economic performance, the Company does not consolidate such entities in its consolidated financial statements.

The following table presents the total assets of the Bellemeade entities, as well as the Company’s maximum exposure to loss associated with these VIEs, calculated as the maximum historical observable spread between the one month LIBOR, the basis for the contractual payments to bond holders, and short term invested trust asset yields.

			Maximum Exposure to Loss
Bellemeade Entities (Issue Date)	Total VIE Assets		On-Balance Sheet (Asset) Liability			Off-Balance Sheet		Total
Jun 30, 2019
Bellemeade 2015-1 Ltd. (Jul-15)	$	19,103	$	(4	)	$	17	$	13
Bellemeade 2017-1 Ltd. (Oct-17)	277,554		(657		)	4,892		4,235
Bellemeade 2018-1 Ltd. (Apr-18)	374,460		(1,965		)	7,799		5,834
Bellemeade 2018-2 Ltd. (Aug-18)	571,129		(1,957		)	5,265		3,308
Bellemeade 2018-3 Ltd. (Oct-18)	506,110		(2,213		)	7,251		5,038
Bellemeade 2019-1 Ltd. (Mar-19)	329,085		(237		)	4,842		4,605
Bellemeade 2019-2 Ltd. (Apr-19)	621,022		(408		)	11,206		10,798
Total	$	2,698,463	$	(7,441	)	$	41,272	$	33,831
Dec 31, 2018
Bellemeade 2015-1 Ltd. (Jul-15)	$	43,246	$	112		$	498	$	610
Bellemeade 2017-1 Ltd. (Oct-17)	304,373		165			1,312		1,477
Bellemeade 2018-1 Ltd. (Apr-18)	374,460		132			3,539		3,671
Bellemeade 2018-2 Ltd. (Aug-18)	653,278		874			4,005		4,879
Bellemeade 2018-3 Ltd. (Oct-18)	506,110		469			1,836		2,305
Total	$	1,881,467	$	1,752		$	11,190	$	12,942

See note 16.

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Other Comprehensive Income (Loss)

6 Months Ended

Jun. 30, 2019

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	2019			2018			2019			2018
Unrealized appreciation on available-for-sale investments
	Net realized gains (losses)	$	59,809		$	(38,935	)	$	71,518		$	(106,521	)
	Other-than-temporary impairment losses	(49		)	(470		)	(1,358		)	(632		)
	Total before tax	59,760			(39,405		)	70,160			(107,153		)
	Income tax (expense) benefit	(4,415		)	2,762			(4,594		)	8,049
	Net of tax	$	55,345		$	(36,643	)	$	65,566		$	(99,104	)

	Before Tax Amount			Tax Expense (Benefit)			Net of Tax Amount
Three Months Ended June 30, 2019
Unrealized appreciation (decline) in value of investments:
Unrealized holding gains (losses) arising during period	$	248,074		$	25,601		$	222,473
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)	—			—			—
Less reclassification of net realized gains (losses) included in net income	59,760			4,415			55,345
Foreign currency translation adjustments	4,409			142			4,267
Other comprehensive income (loss)	$	192,723		$	21,328		$	171,395
Three Months Ended June 30, 2018
Unrealized appreciation (decline) in value of investments:
Unrealized holding gains (losses) arising during period	$	(88,034	)	$	(2,763	)	$	(85,271	)
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)	—			—			—
Less reclassification of net realized gains (losses) included in net income	(39,405		)	(2,762		)	(36,643		)
Foreign currency translation adjustments	(12,701		)	(106		)	(12,595		)
Other comprehensive income (loss)	$	(61,330	)	$	(107	)	$	(61,223	)
Six Months Ended June 30, 2019
Unrealized appreciation (decline) in value of investments:
Unrealized holding gains (losses) arising during period	$	503,064		$	54,704		$	448,360
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)	—			—			—
Less reclassification of net realized gains (losses) included in net income	70,160			4,594			65,566
Foreign currency translation adjustments	10,053			270			9,783
Other comprehensive income (loss)	$	442,957		$	50,380		$	392,577
Six Months Ended June 30, 2018
Unrealized appreciation (decline) in value of investments:
Unrealized holding gains (losses) arising during period	$	(277,977	)	$	(26,029	)	$	(251,948	)
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)	—			—			—
Less reclassification of net realized gains (losses) included in net income	(107,153		)	(8,049		)	(99,104		)
Foreign currency translation adjustments	(11,269		)	44			(11,313		)
Other comprehensive income (loss)	$	(182,093	)	$	(17,936	)	$	(164,157	)

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Guarantor Financial Information

6 Months Ended

Jun. 30, 2019

Condensed Financial Information Disclosure [Abstract]

Guarantor Financial Information

Guarantor Financial Information

The following tables present condensed financial information for Arch Capital, Arch Capital Group (U.S.) Inc. (“Arch-U.S.”), a 100% owned subsidiary of Arch Capital, and Arch Capital’s other subsidiaries. The senior notes of Arch-U.S. due November 1, 2043 are fully and unconditionally guaranteed by Arch Capital.

		June 30, 2019
Condensed Consolidating Balance Sheet		Arch Capital (Parent Guarantor)		Arch-U.S. (Subsidiary Issuer)		Other Arch Capital Subsidiaries		Consolidating Adjustments and Eliminations			Arch Capital Consolidated
Assets
Total investments		$	40	$	483,904	$	22,693,719	$	(49,700	)	$	23,127,963
Cash		10,750		47,875		546,691		—			605,316
Investments in subsidiaries		11,045,465		4,493,198		—		(15,538,663		)	—
Due from subsidiaries and affiliates		332		2		1,881,929		(1,882,263		)	—
Premiums receivable		—		—		2,291,360		(685,320		)	1,606,040
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses		—		—		8,618,279		(5,447,022		)	3,171,257
Contractholder receivables		—		—		2,102,544		—			2,102,544
Ceded unearned premiums		—		—		1,984,219		(847,491		)	1,136,728
Deferred acquisition costs		—		—		658,992		(58,252		)	600,740
Goodwill and intangible assets		—		—		641,010		—			641,010
Other assets		22,950		40,345		1,953,732		(156,955		)	1,860,072
	Total assets	$	11,079,537	$	5,065,324	$	43,372,475	$	(24,665,666	)	$	34,851,670
Liabilities
Reserve for losses and loss adjustment expenses		$	—	$	—	$	17,430,847	$	(5,200,531	)	$	12,230,316
Unearned premiums		—		—		4,904,351		(847,491		)	4,056,860
Reinsurance balances payable		—		—		1,217,310		(685,320		)	531,990
Contractholder payables		—		—		2,102,544		—			2,102,544
Collateral held for insured obligations		—		—		237,056					237,056
Senior notes		297,201		494,776		941,888		—			1,733,865
Revolving credit agreement borrowings		—		—		491,006		—			491,006
Due to subsidiaries and affiliates		9		536,747		1,345,507		(1,882,263		)	—
Other liabilities		24,975		64,956		2,055,626		(496,698		)	1,648,859
	Total liabilities	322,185		1,096,479		30,726,135		(9,112,303		)	23,032,496
Redeemable noncontrolling interests		—		—		221,175		(14,700		)	206,475
Shareholders’ Equity
Total shareholders’ equity available to Arch		10,757,352		3,968,845		11,569,818		(15,538,663		)	10,757,352
Non-redeemable noncontrolling interests		—		—		855,347		—			855,347
	Total shareholders’ equity	10,757,352		3,968,845		12,425,165		(15,538,663		)	11,612,699
	Total liabilities, noncontrolling interests and shareholders’ equity	$	11,079,537	$	5,065,324	$	43,372,475	$	(24,665,666	)	$	34,851,670

		December 31, 2018
Condensed Consolidating Balance Sheet		Arch Capital (Parent Guarantor)		Arch-U.S. (Subsidiary Issuer)		Other Arch Capital Subsidiaries		Consolidating Adjustments and Eliminations			Arch Capital Consolidated
Assets
Total investments		$	104	$	452,674	$	21,307,206	$	(14,700	)	$	21,745,284
Cash		6,125		5,940		634,491		—			646,556
Investments in subsidiaries		9,735,256		3,999,243		—		(13,734,499		)	—
Due from subsidiaries and affiliates		9		2		1,802,686		(1,802,697		)	—
Premiums receivable		—		—		1,834,389		(535,239		)	1,299,150
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses		—		—		8,618,660		(5,699,288		)	2,919,372
Contractholder receivables		—		—		2,079,111		—			2,079,111
Ceded unearned premiums		—		—		1,730,262		(754,793		)	975,469
Deferred acquisition costs		—		—		618,535		(48,961		)	569,574
Goodwill and intangible assets		—		—		634,920		—			634,920
Other assets		12,588		80,949		1,466,438		(211,082		)	1,348,893
	Total assets	$	9,754,082	$	4,538,808	$	40,726,698	$	(22,801,259	)	$	32,218,329
Liabilities
Reserve for losses and loss adjustment expenses		$	—	$	—	$	17,345,142	$	(5,491,845	)	$	11,853,297
Unearned premiums		—		—		4,508,429		(754,793		)	3,753,636
Reinsurance balances payable		—		—		928,346		(535,239		)	393,107
Contractholder payables		—		—		2,079,111		—			2,079,111
Collateral held for insured obligations		—		—		236,630		—			236,630
Senior notes		297,150		494,723		941,655		—			1,733,528
Revolving credit agreement borrowings		—		—		455,682		—			455,682
Due to subsidiaries and affiliates		—		536,805		1,265,892		(1,802,697		)	—
Other liabilities		17,105		26,270		1,699,768		(467,484		)	1,275,659
	Total liabilities	314,255		1,057,798		29,460,655		(9,052,058		)	21,780,650
Redeemable noncontrolling interests		—		—		220,992		(14,700		)	206,292
Shareholders’ Equity
Total shareholders’ equity available to Arch		9,439,827		3,481,010		10,253,491		(13,734,501		)	9,439,827
Non-redeemable noncontrolling interests		—		—		791,560		—			791,560
	Total shareholders’ equity	9,439,827		3,481,010		11,045,051		(13,734,501		)	10,231,387
	Total liabilities, noncontrolling interests and shareholders’ equity	$	9,754,082	$	4,538,808	$	40,726,698	$	(22,801,259	)	$	32,218,329

		Three Months Ended June 30, 2019
Condensed Consolidating Statement of Income and Comprehensive Income		Arch Capital (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other Arch Capital Subsidiaries			Consolidating Adjustments and Eliminations			Arch Capital Consolidated
Revenues
Net premiums earned		$	—		$	—		$	1,463,727		$	—		$	1,463,727
Net investment income		38			2,847			174,738			(22,585		)	155,038
Net realized gains (losses)		—			5,825			115,620			(639		)	120,806
Net impairment losses recognized in earnings		—			—			(49		)	—			(49		)
Other underwriting income		—			—			5,953			—			5,953
Equity in net income (loss) of investment funds accounted for using the equity method		—			(64		)	32,600			—			32,536
Other income (loss)		(242		)	—			1,371			—			1,129
	Total revenues	(204		)	8,608			1,793,960			(23,224		)	1,779,140
Expenses
Losses and loss adjustment expenses		—			—			767,543			—			767,543
Acquisition expenses		—			—			210,089			—			210,089
Other operating expenses		—			—			198,914			—			198,914
Corporate expenses		15,293			2,115			843			—			18,251
Amortization of intangible assets		—			—			19,794			—			19,794
Interest expense		5,538			11,996			34,012			(22,266		)	29,280
Net foreign exchange (gains) losses		—			—			(1,187		)	6,139			4,952
	Total expenses	20,831			14,111			1,230,008			(16,127		)	1,248,823
Income (loss) before income taxes		(21,035		)	(5,503		)	563,952			(7,097		)	530,317
Income tax (expense) benefit		—			1,301			(45,773		)	—			(44,472		)
Income (loss) before equity in net income of subsidiaries		(21,035		)	(4,202		)	518,179			(7,097		)	485,845
Equity in net income of subsidiaries		489,989			148,747			—			(638,736		)	—
Net income		468,954			144,545			518,179			(645,833		)	485,845
Net (income) loss attributable to noncontrolling interests		—			—			(17,210		)	319			(16,891		)
Net income available to Arch		468,954			144,545			500,969			(645,514		)	468,954
Preferred dividends		(10,403		)	—			—			—			(10,403		)
Net income available to Arch common shareholders		$	458,551		$	144,545		$	500,969		$	(645,514	)	$	458,551
Comprehensive income available to Arch		$	637,458		$	231,120		$	663,685		$	(894,805	)	$	637,458

		Three Months Ended June 30, 2018
Condensed Consolidating Statement of Income and Comprehensive Income		Arch Capital (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other Arch Capital Subsidiaries			Consolidating Adjustments and Eliminations			Arch Capital Consolidated
Revenues
Net premiums earned		$	—		$	—		$	1,336,763		$	—		$	1,336,763
Net investment income		15			560			157,532			(22,439		)	135,668
Net realized gains (losses)		—			—			(76,611		)	—			(76,611		)
Net impairment losses recognized in earnings		—			—			(470		)	—			(470		)
Other underwriting income		—			—			3,874			—			3,874
Equity in net income (loss) of investment funds accounted for using the equity method		—			—			8,472			—			8,472
Other income (loss)		2,339			—			774			—			3,113
	Total revenues	2,354			560			1,430,334			(22,439		)	1,410,809
Expenses
Losses and loss adjustment expenses		—			—			726,153			—			726,153
Acquisition expenses		—			—			202,838			—			202,838
Other operating expenses		—			—			176,181			—			176,181
Corporate expenses		16,642			470			5,400			—			22,512
Amortization of intangible assets		—			—			26,472			—			26,472
Interest expense		5,537			12,013			34,911			(22,117		)	30,344
Net foreign exchange (gains) losses		—			—			(43,357		)	(10,349		)	(53,706		)
	Total expenses	22,179			12,483			1,128,598			(32,466		)	1,130,794
Income (loss) before income taxes		(19,825		)	(11,923		)	301,736			10,027			280,015
Income tax (expense) benefit		—			2,477			(26,145		)	—			(23,668		)
Income (loss) before equity in net income of subsidiaries		(19,825		)	(9,446		)	275,591			10,027			256,347
Equity in net income of subsidiaries		263,471			86,727			—			(350,198		)	—
Net income (loss)		243,646			77,281			275,591			(340,171		)	256,347
Net (income) loss attributable to noncontrolling interests		—			—			(13,023		)	322			(12,701		)
Net income (loss) available to Arch		243,646			77,281			262,568			(339,849		)	243,646
Preferred dividends		(10,403		)	—			—			—			(10,403		)
Net income (loss) available to Arch common shareholders		$	233,243		$	77,281		$	262,568		$	(339,849	)	$	233,243
Comprehensive income available to Arch		$	183,500		$	70,066		$	212,802		$	(282,868	)	$	183,500

		Six Months Ended June 30, 2019
Condensed Consolidating Statement of Income and Comprehensive Income		Arch Capital (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other Arch Capital Subsidiaries			Consolidating Adjustments and Eliminations			Arch Capital Consolidated
Revenues
Net premiums earned		$	—		$	—		$	2,832,593		$	—		$	2,832,593
Net investment income		84			6,526			350,410			(45,033		)	311,987
Net realized gains (losses)		—			14,343			253,673			(5,645		)	262,371
Net impairment losses recognized in earnings		—			—			(1,358		)	—			(1,358		)
Other underwriting income		—			—			14,778			—			14,778
Equity in net income (loss) of investment funds accounted for using the equity method		—			(64		)	79,467			—			79,403
Other income (loss)		(481		)	—			2,693			—			2,212
	Total revenues	(397		)	20,805			3,532,256			(50,678		)	3,501,986
Expenses
Losses and loss adjustment expenses		—			—			1,486,075			—			1,486,075
Acquisition expenses		—			—			407,937			—			407,937
Other operating expenses		—			—			400,077			—			400,077
Corporate expenses		31,600			4,281			332			—			36,213
Amortization of intangible assets		—			—			40,211			—			40,211
Interest expense		11,076			23,947			67,718			(44,396		)	58,345
Net foreign exchange (gains) losses		2			—			(1,310		)	2,735			1,427
	Total expenses	42,678			28,228			2,401,040			(41,661		)	2,430,285
Income (loss) before income taxes		(43,075		)	(7,423		)	1,131,216			(9,017		)	1,071,701
Income tax (expense) benefit		—			1,844			(92,202		)	—			(90,358		)
Income (loss) before equity in net income of subsidiaries		(43,075		)	(5,579		)	1,039,014			(9,017		)	981,343
Equity in net income of subsidiaries		960,557			285,301			—			(1,245,858		)	—
Net income		917,482			279,722			1,039,014			(1,254,875		)	981,343
Net (income) loss attributable to noncontrolling interests		—			—			(64,499		)	638			(63,861		)
Net income available to Arch		917,482			279,722			974,515			(1,254,237		)	917,482
Preferred dividends		(20,806		)	—			—			—			(20,806		)
Net income available to Arch common shareholders		$	896,676		$	279,722		$	974,515		$	(1,254,237	)	$	896,676
Comprehensive income available to Arch		$	1,303,029		$	469,276		$	1,352,225		$	(1,821,501	)	$	1,303,029

		Six Months Ended June 30, 2018
Condensed Consolidating Statement of Income and Comprehensive Income		Arch Capital (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other Arch Capital Subsidiaries			Consolidating Adjustments and Eliminations			Arch Capital Consolidated
Revenues
Net premiums earned		$	—		$	—		$	2,571,662		$	—		$	2,571,662
Net investment income		35			818			306,299			(44,760		)	262,392
Net realized gains (losses)		29			(7		)	(187,631		)	—			(187,609		)
Net impairment losses recognized in earnings		—			—			(632		)	—			(632		)
Other underwriting income		—			—			9,223			—			9,223
Equity in net income (loss) of investment funds accounted for using the equity method		—			—			36,541			—			36,541
Other income (loss)		2,261			—			926			—			3,187
	Total revenues	2,325			811			2,736,388			(44,760		)	2,694,764
Expenses
Losses and loss adjustment expenses		—			—			1,363,013			—			1,363,013
Acquisition expenses		—			—			394,214			—			394,214
Other operating expenses		—			—			351,196			—			351,196
Corporate expenses		32,811			759			4,254			—			37,824
Amortization of intangible assets		—			—			53,208			—			53,208
Interest expense		11,073			23,939			70,083			(44,115		)	60,980
Net foreign exchange (gains) losses		29			—			(26,921		)	(7,093		)	(33,985		)
	Total expenses	43,913			24,698			2,209,047			(51,208		)	2,226,450
Income (loss) before income taxes		(41,588		)	(23,887		)	527,341			6,448			468,314
Income tax (expense) benefit		—			5,428			(51,011		)	—			(45,583		)
Income (loss) before equity in net income of subsidiaries		(41,588		)	(18,459		)	476,330			6,448			422,731
Equity in net income of subsidiaries		435,657			173,147			—			(608,804		)	—
Net income		394,069			154,688			476,330			(602,356		)	422,731
Net (income) loss attributable to noncontrolling interests		—			—			(29,307		)	645			(28,662		)
Net income available to Arch		394,069			154,688			447,023			(601,711		)	394,069
Preferred dividends		(20,840		)	—			—			—			(20,840		)
Loss on redemption of preferred shares		(2,710		)	—			—			—			(2,710		)
Net income available to Arch common shareholders		$	370,519		$	154,688		$	447,023		$	(601,711	)	$	370,519
Comprehensive income available to Arch		$	231,662		$	76,603		$	291,883		$	(368,486	)	$	231,662

		Six Months Ended June 30, 2019
Condensed Consolidating Statement of Cash Flows		Arch Capital (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other Arch Capital Subsidiaries			Consolidating Adjustments and Eliminations			Arch Capital Consolidated
Operating Activities
	Net Cash Provided By (Used For) Operating Activities	$	30,946		$	24,059		$	749,885		$	(92,366	)	$	712,524
Investing Activities
Purchases of fixed maturity investments		—			(358,996		)	(15,973,650		)	—			(16,332,646		)
Purchases of equity securities		—			(56,441		)	(447,742		)	72,244			(431,939		)
Purchases of other investments		—			(17,891		)	(659,172		)	—			(677,063		)
Proceeds from the sales of fixed maturity investments		—			452,729			15,179,753			—			15,632,482
Proceeds from the sales of equity securities		—			—			248,945			(72,244		)	176,701
Proceeds from the sales, redemptions and maturities of other investments		—			391			534,307			—			534,698
Proceeds from redemptions and maturities of fixed maturity investments		—			100			244,849			—			244,949
Net settlements of derivative instruments		—			—			87,701			—			87,701
Net (purchases) sales of short-term investments		64			(2,015		)	203,471			—			201,520
Change in cash collateral related to securities lending		—			—			7,590			—			7,590
Contributions to subsidiaries		(2,121		)	—			(59,527		)	61,648			—
Issuance of intercompany loans		—			—			(53,828		)	53,828			—
Purchases of fixed assets		(32		)	—			(16,327		)	—			(16,359		)
Other		—			—			(174,578		)	—			(174,578		)
	Net Cash Provided By (Used For) Investing Activities	(2,089		)	17,877			(878,208		)	115,476			(746,944		)
Financing Activities
Purchases of common shares under share repurchase program		(2,871		)	—			—			—			(2,871		)
Proceeds from common shares issued, net		(557		)	—			61,648			(61,648		)	(557		)
Proceeds from intercompany borrowings		—			—			53,828			(53,828		)	—
Proceeds from borrowings		—			—			62,800			—			62,800
Repayments of borrowings		—			—			(27,538		)	—			(27,538		)
Change in cash collateral related to securities lending		—			—			(7,590		)	—			(7,590		)
Dividends paid to redeemable noncontrolling interests		—			—			(9,632		)	638			(8,994		)
Dividends paid to parent (1)		—			—			(91,728		)	91,728			—
Other		—			—			(3,529		)	—			(3,529		)
Preferred dividends paid		(20,806		)	—			—			—			(20,806		)
	Net Cash Provided By (Used For) Financing Activities	(24,234		)	—			38,259			(23,110		)	(9,085		)
Effects of exchange rates changes on foreign currency cash and restricted cash		—			—			1,937			—			1,937
Increase (decrease) in cash and restricted cash		4,623			41,936			(88,127		)	—			(41,568		)
Cash and restricted cash, beginning of year		6,159			5,940			712,544			—			724,643
Cash and restricted cash, end of period		$	10,782		$	47,876		$	624,417		$	—		$	683,075

(1)     Dividends received by parent are included in net cash provided by (used for) operating activities.

		Six Months Ended June 30, 2018
Condensed Consolidating Statement of Cash Flows		Arch Capital (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other Arch Capital Subsidiaries			Consolidating Adjustments and Eliminations			Arch Capital Consolidated
Operating Activities
	Net Cash Provided By (Used For) Operating Activities	$	201,487		$	149,576		$	1,010,703		$	(864,880	)	$	496,886
Investing Activities
Purchases of fixed maturity investments		—			(125,440		)	(17,347,846		)	605,716			(16,867,570		)
Purchases of equity securities		—			—			(679,663		)	—			(679,663		)
Purchases of other investments		—			—			(1,017,147		)	—			(1,017,147		)
Proceeds from the sales of fixed maturity investments		—			33,793			16,662,466			(605,716		)	16,090,543
Proceeds from the sales of equity securities		—			—			622,068			—			622,068
Proceeds from the sales, redemptions and maturities of other investments		—			—			773,298			—			773,298
Proceeds from redemptions and maturities of fixed maturity investments		—			—			511,448			—			511,448
Net settlements of derivative instruments		—			—			4,498			—			4,498
Net (purchases) sales of short-term investments		96,446			(59,798		)	415,253			—			451,901
Change in cash collateral related to securities lending		—			—			176,304			—			176,304
Contributions to subsidiaries		—			(1,000		)	(22,595		)	23,595			—
Purchases of fixed assets		(71		)	—			(13,171		)	—			(13,242		)
Other		(4		)	—			49,965			—			49,961
	Net Cash Provided By (Used For) Investing Activities	96,371			(152,445		)	134,878			23,595			102,399
Financing Activities
Redemption of preferred shares		(92,555		)	—			—			—			(92,555		)
Purchases of common shares under share repurchase program		(173,575		)	—			—			—			(173,575		)
Proceeds from common shares issued, net		(13,851		)	—			23,595			(23,595		)	(13,851		)
Proceeds from borrowings		—			—			130,579			—			130,579
Repayments of borrowings		—			—			(373,000		)	—			(373,000		)
Change in cash collateral related to securities lending		—			—			(176,304		)	—			(176,304		)
Dividends paid to redeemable noncontrolling interests		—			—			(9,632		)	638			(8,994		)
Dividends paid to parent (1)		—			—			(864,242		)	864,242			—
Other		—			—			(4,489		)	—			(4,489		)
Preferred dividends paid		(20,840		)	—			—			—			(20,840		)
	Net Cash Provided By (Used For) Financing Activities	(300,821		)	—			(1,273,493		)	841,285			(733,029		)
Effects of exchange rates changes on foreign currency cash and restricted cash		—			—			(10,431		)	—			(10,431		)
Increase (decrease) in cash and restricted cash		(2,963		)	(2,869		)	(138,343		)	—			(144,175		)
Cash and restricted cash, beginning of year		10,048			30,380			686,856			—			727,284
Cash and restricted cash, end of period		$	7,085		$	27,511		$	548,513		$	—		$	583,109

(1)     Dividends received by parent are included in net cash provided by (used for) operating activities.

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Income Taxes

6 Months Ended

Jun. 30, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company’s income tax provision on income before income taxes resulted in an expense of 8.4% for the six months ended June 30, 2019, compared to an expense of 9.7% for the 2018 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. For interim reporting purposes, the Company has calculated its annual effective tax rate for the full year of 2019 by treating excess tax benefits that arise from the accounting for stock based compensation as a discrete item. As such, this amount is not included when projecting the Company’s full year annual effective tax rate but rather is accounted for at the U.S. Federal statutory rate of 21% after applying the projected full year annual effective tax rate to actual six months results before the discrete item. The impact of the discrete item resulted in a benefit of 0.4% for the six months ended June 30, 2019.

The Company had a net deferred tax liability of $49.5 million at June 30, 2019, compared to a net deferred tax asset of $22.5 million at December 31, 2018. The change is primarily a result of the appreciation of the Company’s fixed maturities from December 31, 2018 to June 30, 2019. In addition, the Company paid $43.5 million and recovered $46.5 million of income taxes for the six months ended June 30, 2019 and 2018, respectively.

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Legal Proceedings

6 Months Ended

Jun. 30, 2019

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, 2019, 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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Subsequent Events

6 Months Ended

Jun. 30, 2019

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

Bellemeade Re 2019-3 Ltd.

In July 2019, the Company’s first-lien U.S. mortgage insurance subsidiaries entered into an aggregate excess of loss reinsurance agreement with Bellemeade Re 2019-3 Ltd. (“Bellemeade 2019-3”), a special purpose reinsurance company domiciled in Bermuda. The Bellemeade 2019-3 agreement provides for up to $700.9 million of aggregate excess of loss reinsurance coverage at inception in excess of $232.1 million of aggregate losses for new delinquencies on a portfolio of in-force policies issued in 2016. The coverage amount decreases over a ten-year period as the underlying covered mortgages amortize.

Bellemeade 2019-3 financed the coverage through the issuance of mortgage insurance-linked notes in an aggregate amount of

approximately $700.9 million to unrelated investors (the “Notes”). The maturity date of the Notes is July 25, 2029. The Notes will be redeemed prior to maturity upon the occurrence of a mandatory termination event or if the ceding insurers trigger a termination of the reinsurance agreement following the occurrence of an optional termination event. All of the proceeds paid to Bellemeade 2019-3 from the sale of the Notes were deposited into a reinsurance trust as security for Bellemeade 2019-3’s obligations. At all times, funds in the reinsurance trust account are required to be invested in high credit quality money market funds.

Watford Re Capital Transactions

On July 2, 2019, Watford Holdings Ltd. completed an offering of $175.0 million in aggregate principal amount of its 6.5% senior notes, due July 2, 2029 (“Watford Senior Notes”). Interest on such notes will be paid semi-annually in arrears on each January 2 and July 2, commencing January 2, 2020. The $172.4 million net proceeds from the offering were used to redeem a portion of Watford Holdings Ltd.’s outstanding preference shares.

On August 1, 2019, Watford Holdings Ltd. redeemed 6,919,998 of its 9,065,200 total issued and outstanding Watford Preference Shares. The Watford Preference Shares were redeemed at a total redemption price of $25.19748 per share, inclusive of all declared and unpaid dividends, with accumulation of any undeclared dividends on or after June 30, 2019.

The Company purchased $35.0 million in aggregate principal amount of the Watford Senior Notes. In addition, the Company received $11.5 million pursuant to the redemption of Watford Preference Shares.

Business Acquisition

On July 30, 2019, the Company announced that it has entered into an agreement to purchase Barbican Group Holdings Limited from funds managed by Carlson Capital, a U.S. based alternative asset management firm. The acquisition includes Barbican Managing Agency Limited, Lloyd’s Syndicate 1955, Lloyd’s Syndicate 1856, Lloyd’s Special Purpose Arrangement 6132, Castel Underwriting Agencies Limited and other associated entities. The transaction is subject to regulatory approval and is expected to close in the late third or early fourth quarter of 2019.

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Basis of Presentation and Recent Accounting Pronouncements (Policies)

6 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of accounting

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 materially 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.

Recent accounting pronouncements

Recently Issued Accounting Standards Adopted

The Company adopted ASU 2016-02, “Leases (Topic 842)”, which provides a new comprehensive model for lease accounting. Topic 842 requires a lessee to recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. The Company adopted the modified retrospective approach of this standard, that resulted in the recognition of a right-of-use asset of  $147.9 million as part of other assets and a lease liability of $163.6 million as part of other liabilities in the consolidated balance sheet as of January 1, 2019. The Company de-recognized the liability for deferred rent that was required under the previous guidance.

In addition, the Company adopted ASU 2018-11, “Leases: Targeted Improvements (Topic 842),” which provides an additional (optional) transition method to adopt the new lease standard. The Company adopted the alternative transition method and elected to utilize a cumulative-effect adjustment to the opening balance of the retained earnings for the year of adoption. As such, the Company’s reporting for the comparative periods prior to the adoption continue to be presented in the financial statements in accordance with previous lease accounting guidance. The Company also adopted the practical expedients as a package which allows the Company to not reassess (1) whether any expired or existing contracts are or contain leases (2) the lease classification for any expired or existing leases (3) initial direct costs for any existing leases and (4) to account for the lease and non lease components as a single lease component. In addition to electing the practical expedients as a package, the Company elected to include hindsight to determine the lease term of existing leases, and made an accounting policy election to not apply the recognition requirements to short-term leases (lease term of less than twelve months). The cumulative effect adjustment to the opening balance of retained earnings was zero. The adoption of the updated guidance did not have a material effect on the Company’s results of operations or liquidity.

The Company adopted ASU 2018-07 “Improvements to Nonemployee Share-Based Payment Accounting,” which was issued in June 2018 to simplify the accounting for share-based payments granted to nonemployees for goods and services. Under this ASU, most of the guidance on such payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. The ASU is effective for reporting periods beginning after December 15, 2018. This guidance and the adoption of this provision did not have a material effect on the Company's financial position, results of operations or cash flows.

The Company adopted ASU 2018-02 “Income Statement-Reporting Comprehensive Income (Topic 220) - Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,” which was issued in February 2018 to allow the reclassification of the stranded tax effects in accumulated other comprehensive income (“AOCI”) resulting from the Tax Cuts and Jobs Act of 2017 (“Tax Cuts Act”). Current guidance requires the effect of a change in tax laws or rates on deferred tax balances to be reported in income from continuing operations in the accounting period that includes the period of enactment, even if the related income tax effects were originally charged or credited directly to AOCI. The amount of the reclassification would include the effect of the change in the U.S. federal corporate income tax rate on the gross deferred tax amounts and related valuation allowances, if any, at the date of the enactment of the Tax Cuts Act related to items in AOCI. The updated guidance is effective for reporting periods beginning after December 15, 2018 and is to be applied retrospectively to each period in which the effect of the Tax Cuts Act related to items remaining in AOCI are recognized or at the beginning of the period of adoption. The adoption of this ASU did not have a material effect on the Company’s results of operations, financial position or liquidity.

The Company adopted ASU 2017-08 “Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities,” which was issued in March, 2017. This ASU shortens the amortization period for certain callable debt securities held at a premium and requires the premium to be amortized to the earliest call date. However, the new guidance does not require an accounting change for securities held at a discount whose discount continues to be amortized to maturity. The standard is effective for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. The adoption of the guidance requires a modified retrospective approach with a cumulative-effect adjustment to retained earnings. The adoption of this ASU did not have a material effect on the Company’s consolidated financial statements.

Recently Issued Accounting Standards Not Yet Adopted

For information regarding additional accounting standards that the Company has not yet adopted, see note 3(q), “Significant Accounting Policies—Recent Accounting Pronouncements,” of the notes to consolidated financial statements in the Company’s 2018 Form 10-K.

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Earnings Per Common Share (Tables)

6 Months Ended

Jun. 30, 2019

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,
	2019			2018			2019			2018
Numerator:
Net income	$	485,845		$	256,347		$	981,343		$	422,731
Amounts attributable to noncontrolling interests	(16,891		)	(12,701		)	(63,861		)	(28,662		)
Net income available to Arch	468,954			243,646			917,482			394,069
Preferred dividends	(10,403		)	(10,403		)	(20,806		)	(20,840		)
Loss on redemption of preferred shares	—			—			—			(2,710		)
Net income available to Arch common shareholders	$	458,551		$	233,243		$	896,676		$	370,519
Denominator:
Weighted average common shares outstanding	401,482,784			404,800,421			400,837,181			399,485,135
Series D preferred shares (1)	—			—			—			6,677,373
Weighted average common shares and common share equivalents outstanding — basic	401,482,784			404,800,421			400,837,181			406,162,508
Effect of dilutive common share equivalents:
Nonvested restricted shares	1,937,626			1,575,749			1,720,417			1,837,356
Stock options (2)	7,479,073			6,735,035			7,197,652			7,460,892
Weighted average common shares and common share equivalents outstanding — diluted	410,899,483			413,111,205			409,755,250			415,460,756
Earnings per common share:
Basic	$	1.14		$	0.58		$	2.24		$	0.91
Diluted	$	1.12		$	0.56		$	2.19		$	0.89

(1) Such shares are convertible non-voting common equivalent preferred shares issued in connection with the UGC acquisition. See note 2.

(2)

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 2019 second quarter and 2018 second quarter, the number of stock options excluded were 2,016,830 and 5,350,733, respectively. For the six months ended June 30, 2019 and 2018 period, the number of stock options excluded were 2,560,755 and 5,372,789, respectively.

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Segment Information (Tables)

6 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

Analysis of underwriting income or loss 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 Arch common shareholders:

	Three Months Ended
	June 30, 2019
	Insurance			Reinsurance			Mortgage			Sub-Total			Other			Total
Gross premiums written (1)	$	919,925		$	545,547		$	364,465		$	1,829,829		$	161,978		$	1,937,809
Premiums ceded	(292,095		)	(169,457		)	(42,857		)	(504,301		)	(42,608		)	(492,911		)
Net premiums written	627,830			376,090			321,608			1,325,528			119,370			1,444,898
Change in unearned premiums	(35,388		)	(8,906		)	31,175			(13,119		)	31,948			18,829
Net premiums earned	592,442			367,184			352,783			1,312,409			151,318			1,463,727
Other underwriting income (loss)	—			1,224			4,056			5,280			673			5,953
Losses and loss adjustment expenses	(389,172		)	(240,958		)	(25,997		)	(656,127		)	(111,416		)	(767,543		)
Acquisition expenses	(91,094		)	(56,785		)	(32,654		)	(180,533		)	(29,556		)	(210,089		)
Other operating expenses	(109,523		)	(33,960		)	(39,819		)	(183,302		)	(15,612		)	(198,914		)
Underwriting income (loss)	$	2,653		$	36,705		$	258,369		297,727			(4,593		)	293,134
Net investment income										123,038			32,000			155,038
Net realized gains (losses)										125,112			(4,306		)	120,806
Net impairment losses recognized in earnings										(49		)	—			(49		)
Equity in net income (loss) of investment funds accounted for using the equity method										32,536			—			32,536
Other income (loss)										1,129			—			1,129
Corporate expenses (2)										(16,073		)	—			(16,073		)
Transaction costs and other (2)										(2,178		)	—			(2,178		)
Amortization of intangible assets										(19,794		)	—			(19,794		)
Interest expense										(23,375		)	(5,905		)	(29,280		)
Net foreign exchange gains (losses)										(6,190		)	1,238			(4,952		)
Income before income taxes										511,883			18,434			530,317
Income tax expense										(44,452		)	(20		)	(44,472		)
Net income										467,431			18,414			485,845
Dividends attributable to redeemable noncontrolling interests										—			(4,590		)	(4,590		)
Amounts attributable to nonredeemable noncontrolling interests										—			(12,301		)	(12,301		)
Net income available to Arch										467,431			1,523			468,954
Preferred dividends										(10,403		)	—			(10,403		)
Net income available to Arch common shareholders										$	457,028		$	1,523		$	458,551
Underwriting Ratios
Loss ratio	65.7		%	65.6		%	7.4		%	50.0		%	73.6		%	52.4		%
Acquisition expense ratio	15.4		%	15.5		%	9.3		%	13.8		%	19.5		%	14.4		%
Other operating expense ratio	18.5		%	9.2		%	11.3		%	14.0		%	10.3		%	13.6		%
Combined ratio	99.6		%	90.3		%	28.0		%	77.8		%	103.4		%	80.4		%
Goodwill and intangible assets	$	157,440		$	—		$	475,920		$	633,360		$	7,650		$	641,010

(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.

(2) Certain expenses have been excluded from ‘corporate expenses’ and reflected in ‘transaction costs and other.’

	Three Months Ended
	June 30, 2018
	Insurance			Reinsurance			Mortgage			Sub-Total			Other			Total
Gross premiums written (1)	$	769,372		$	490,327		$	330,990		$	1,591,202		$	175,175		$	1,696,544
Premiums ceded	(245,265		)	(136,247		)	(50,867		)	(432,892		)	(34,589		)	(397,648		)
Net premiums written	524,107			354,080			280,123			1,158,310			140,586			1,298,896
Change in unearned premiums	22,342			(13,762		)	10,355			18,935			18,932			37,867
Net premiums earned	546,449			340,318			290,478			1,177,245			159,518			1,336,763
Other underwriting income (loss)	—			(129		)	3,315			3,186			688			3,874
Losses and loss adjustment expenses	(357,465		)	(229,956		)	(21,591		)	(609,012		)	(117,141		)	(726,153		)
Acquisition expenses	(90,670		)	(50,142		)	(27,737		)	(168,549		)	(34,289		)	(202,838		)
Other operating expenses	(92,680		)	(35,678		)	(38,729		)	(167,087		)	(9,094		)	(176,181		)
Underwriting income (loss)	$	5,634		$	24,413		$	205,736		235,783			(318		)	235,465
Net investment income										107,761			27,907			135,668
Net realized gains (losses)										(59,545		)	(17,066		)	(76,611		)
Net impairment losses recognized in earnings										(470		)	—			(470		)
Equity in net income (loss) of investment funds accounted for using the equity method										8,472			—			8,472
Other income (loss)										3,113			—			3,113
Corporate expenses (2)										(15,604		)	—			(15,604		)
Transaction costs and other (2)										(6,908		)	—			(6,908		)
Amortization of intangible assets										(26,472		)	—			(26,472		)
Interest expense										(26,058		)	(4,286		)	(30,344		)
Net foreign exchange gains (losses)										46,211			7,495			53,706
Income before income taxes										266,283			13,732			280,015
Income tax expense										(23,644		)	(24		)	(23,668		)
Net income										242,639			13,708			256,347
Dividends attributable to redeemable noncontrolling interests										—			(4,585		)	(4,585		)
Amounts attributable to nonredeemable noncontrolling interests										—			(8,116		)	(8,116		)
Net income available to Arch										242,639			1,007			243,646
Preferred dividends										(10,403		)	—			(10,403		)
Net income available to Arch common shareholders										$	232,236		$	1,007		$	233,243
Underwriting Ratios
Loss ratio	65.4		%	67.6		%	7.4		%	51.7		%	73.4		%	54.3		%
Acquisition expense ratio	16.6		%	14.7		%	9.5		%	14.3		%	21.5		%	15.2		%
Other operating expense ratio	17.0		%	10.5		%	13.3		%	14.2		%	5.7		%	13.2		%
Combined ratio	99.0		%	92.8		%	30.2		%	80.2		%	100.6		%	82.7		%
Goodwill and intangible assets	$	20,724		$	—		$	564,634		$	585,358		$	7,650		$	593,008

(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.

(2) Certain expenses have been excluded from ‘corporate expenses’ and reflected in ‘transaction costs and other.’

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 Arch common shareholders:

	Six Months Ended
	June 30, 2019
	Insurance			Reinsurance			Mortgage			Sub-Total			Other			Total
Gross premiums written (1)	$	1,861,879		$	1,228,402		$	720,515		$	3,810,282		$	348,667		$	4,015,688
Premiums ceded	(612,717		)	(401,024		)	(91,655		)	(1,104,882		)	(83,910		)	(1,045,531		)
Net premiums written	1,249,162			827,378			628,860			2,705,400			264,757			2,970,157
Change in unearned premiums	(103,215		)	(113,829		)	46,825			(170,219		)	32,655			(137,564		)
Net premiums earned	1,145,947			713,549			675,685			2,535,181			297,412			2,832,593
Other underwriting income (loss)	—			5,601			7,912			13,513			1,265			14,778
Losses and loss adjustment expenses	(745,895		)	(480,768		)	(37,146		)	(1,263,809		)	(222,266		)	(1,486,075		)
Acquisition expenses	(173,918		)	(111,111		)	(64,326		)	(349,355		)	(58,582		)	(407,937		)
Other operating expenses	(222,919		)	(69,664		)	(79,694		)	(372,277		)	(27,800		)	(400,077		)
Underwriting income (loss)	$	3,215		$	57,607		$	502,431		563,253			(9,971		)	553,282
Net investment income										244,287			67,700			311,987
Net realized gains (losses)										237,545			24,826			262,371
Net impairment losses recognized in earnings										(1,358		)	—			(1,358		)
Equity in net income (loss) of investment funds accounted for using the equity method										79,403			—			79,403
Other income (loss)										2,212			—			2,212
Corporate expenses (2)										(32,845		)	—			(32,845		)
Transaction costs and other (2)										(3,368		)	—			(3,368		)
Amortization of intangible assets										(40,211		)	—			(40,211		)
Interest expense										(46,857		)	(11,488		)	(58,345		)
Net foreign exchange gains (losses)										(1,015		)	(412		)	(1,427		)
Income before income taxes										1,001,046			70,655			1,071,701
Income tax expense										(90,338		)	(20		)	(90,358		)
Net income										910,708			70,635			981,343
Dividends attributable to redeemable noncontrolling interests										—			(9,178		)	(9,178		)
Amounts attributable to nonredeemable noncontrolling interests										—			(54,683		)	(54,683		)
Net income available to Arch										910,708			6,774			917,482
Preferred dividends										(20,806		)	—			(20,806		)
Net income available to Arch common shareholders										$	889,902		$	6,774		$	896,676
Underwriting Ratios
Loss ratio	65.1		%	67.4		%	5.5		%	49.9		%	74.7		%	52.5		%
Acquisition expense ratio	15.2		%	15.6		%	9.5		%	13.8		%	19.7		%	14.4		%
Other operating expense ratio	19.5		%	9.8		%	11.8		%	14.7		%	9.3		%	14.1		%
Combined ratio	99.8		%	92.8		%	26.8		%	78.4		%	103.7		%	81.0		%

(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.

(2) Certain expenses have been excluded from ‘corporate expenses’ and reflected in ‘transaction costs and other.’

	Six Months Ended
	June 30, 2018
	Insurance			Reinsurance			Mortgage			Sub-Total			Other			Total
Gross premiums written (1)	$	1,592,750		$	1,067,810		$	652,168		$	3,312,807		$	389,045		$	3,534,758
Premiums ceded	(492,445		)	(331,977		)	(97,004		)	(921,505		)	(68,907		)	(823,318		)
Net premiums written	1,100,305			735,833			555,164			2,391,302			320,138			2,711,440
Change in unearned premiums	(15,119		)	(116,343		)	15,556			(115,906		)	(23,872		)	(139,778		)
Net premiums earned	1,085,186			619,490			570,720			2,275,396			296,266			2,571,662
Other underwriting income (loss)	—			1,103			6,731			7,834			1,389			9,223
Losses and loss adjustment expenses	(711,195		)	(371,631		)	(65,057		)	(1,147,883		)	(215,130		)	(1,363,013		)
Acquisition expenses	(175,839		)	(98,461		)	(54,304		)	(328,604		)	(65,610		)	(394,214		)
Other operating expenses	(184,654		)	(71,249		)	(77,500		)	(333,403		)	(17,793		)	(351,196		)
Underwriting income (loss)	$	13,498		$	79,252		$	380,590		473,340			(878		)	472,462
Net investment income										208,004			54,388			262,392
Net realized gains (losses)										(171,404		)	(16,205		)	(187,609		)
Net impairment losses recognized in earnings										(632		)	—			(632		)
Equity in net income (loss) of investment funds accounted for using the equity method										36,541			—			36,541
Other income (loss)										3,187			—			3,187
Corporate expenses (2)										(30,086		)	—			(30,086		)
Transaction costs and other (2)										(7,738		)	—			(7,738		)
Amortization of intangible assets										(53,208		)	—			(53,208		)
Interest expense										(51,965		)	(9,015		)	(60,980		)
Net foreign exchange gains (losses)										31,172			2,813			33,985
Income before income taxes										437,211			31,103			468,314
Income tax expense										(45,556		)	(27		)	(45,583		)
Net income										391,655			31,076			422,731
Dividends attributable to redeemable noncontrolling interests										—			(9,170		)	(9,170		)
Amounts attributable to nonredeemable noncontrolling interests										—			(19,492		)	(19,492		)
Net income available to Arch										391,655			2,414			394,069
Preferred dividends										(20,840		)	—			(20,840		)
Loss on redemption of preferred shares										(2,710		)	—			(2,710		)
Net income available to Arch common shareholders										$	368,105		$	2,414		$	370,519
Underwriting Ratios
Loss ratio	65.5		%	60.0		%	11.4		%	50.4		%	72.6		%	53.0		%
Acquisition expense ratio	16.2		%	15.9		%	9.5		%	14.4		%	22.1		%	15.3		%
Other operating expense ratio	17.0		%	11.5		%	13.6		%	14.7		%	6.0		%	13.7		%
Combined ratio	98.7		%	87.4		%	34.5		%	79.5		%	100.7		%	82.0		%

(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.

(2)

Certain expenses have been excluded from ‘corporate expenses’ and reflected in ‘transaction costs and other.’

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Reserve for Losses and Loss Adjustment Expenses (Tables)

6 Months Ended

Jun. 30, 2019

Liability for Future Policy Benefits and Unpaid Claims and Claims Adjustment Expense [Abstract]

Analysis of losses and loss adjustment expenses and reconciliation of beginning and ending reserve balances

The following table represents an analysis of losses and loss adjustment expenses and a reconciliation of the beginning and ending reserve for losses and loss adjustment expenses:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Reserve for losses and loss adjustment expenses at beginning of period	$	12,010,041		$	11,496,205		$	11,853,297		$	11,383,792
Unpaid losses and loss adjustment expenses recoverable	2,970,159			2,446,990			2,814,291			2,464,910
Net reserve for losses and loss adjustment expenses at beginning of period	9,039,882			9,049,215			9,039,006			8,918,882
Net incurred losses and loss adjustment expenses relating to losses occurring in:
Current year	805,728			790,742			1,563,692			1,478,627
Prior years	(38,185		)	(64,589		)	(77,617		)	(115,614		)
Total net incurred losses and loss adjustment expenses	767,543			726,153			1,486,075			1,363,013
Retroactive reinsurance transactions (1)	—			(420,404		)	(225,500		)	(420,404		)
Net foreign exchange (gains) losses	(1,277		)	(120,292		)	(1,781		)	(76,278		)
Net paid losses and loss adjustment expenses relating to losses occurring in:
Current year	(61,148		)	(59,022		)	(125,488		)	(95,022		)
Prior years	(539,481		)	(403,062		)	(966,793		)	(917,603		)
Total net paid losses and loss adjustment expenses	(600,629		)	(462,084		)	(1,092,281		)	(1,012,625		)
Net reserve for losses and loss adjustment expenses at end of period	9,205,519			8,772,588			9,205,519			8,772,588
Unpaid losses and loss adjustment expenses recoverable	3,024,797			2,651,749			3,024,797			2,651,749
Reserve for losses and loss adjustment expenses at end of period	$	12,230,316		$	11,424,337		$	12,230,316		$	11,424,337

(1) During the 2019 first quarter and 2018 second quarter, a subsidiary of the Company entered into two separate retroactive reinsurance transactions with third party reinsurers to reinsure run-off liabilities associated with certain U.S. exposures.

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Investment Information (Tables)

6 Months Ended

Jun. 30, 2019

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 securities classified as available for sale:

	Estimated Fair Value		Gross Unrealized Gains		Gross Unrealized Losses			Cost or Amortized Cost		OTTI Unrealized Losses (2)
June 30, 2019
Fixed maturities (1):
Corporate bonds	$	6,044,081	$	166,372	$	(19,805	)	$	5,897,514	$	—
Mortgage backed securities	523,019		11,385		(187		)	511,821		(6		)
Municipal bonds	582,497		21,755		(58		)	560,800		—
Commercial mortgage backed securities	686,707		21,272		(228		)	665,663		—
U.S. government and government agencies	4,906,996		68,017		(2,051		)	4,841,030		—
Non-U.S. government securities	1,928,752		45,881		(36,125		)	1,918,996		—
Asset backed securities	1,636,897		28,133		(3,480		)	1,612,244		—
Total	16,308,949		362,815		(61,934		)	16,008,068		(6		)
Short-term investments	821,961		284		(480		)	822,157		—
Total	$	17,130,910	$	363,099	$	(62,414	)	$	16,830,225	$	(6	)
December 31, 2018
Fixed maturities (1):
Corporate bonds	$	5,537,548	$	14,476	$	(105,428	)	$	5,628,500	$	(69	)
Mortgage backed securities	541,193		3,991		(3,216		)	540,418		(6		)
Municipal bonds	1,013,395		5,380		(11,891		)	1,019,906		—
Commercial mortgage backed securities	729,442		2,650		(10,751		)	737,543		—
U.S. government and government agencies	3,758,698		27,189		(8,474		)	3,739,983		—
Non-U.S. government securities	1,771,338		14,477		(50,948		)	1,807,809		—
Asset backed securities	1,600,896		8,060		(14,798		)	1,607,634		—
Total	14,952,510		76,223		(205,506		)	15,081,793		(75		)
Short-term investments	955,880		36		(394		)	956,238		—
Total	$	15,908,390	$	76,259	$	(205,900	)	$	16,038,031	$	(75	)

(1) In securities lending transactions, the Company receives collateral in excess of the fair value of the fixed maturities 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, 2019 the net unrealized loss related to securities for which a non-credit OTTI was recognized in AOCI was $0.01 million, compared to net unrealized loss of $0.04 million at December 31, 2018

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, 2019
Fixed maturities (1):
Corporate bonds	$	259,361	$	(10,678	)	$	375,478	$	(9,127	)	$	634,839	$	(19,805	)
Mortgage backed securities	19,612		(169		)	261		(18		)	19,873		(187		)
Municipal bonds	—		—			12,489		(58		)	12,489		(58		)
Commercial mortgage backed securities	18,917		(106		)	23,198		(122		)	42,115		(228		)
U.S. government and government agencies	906,497		(1,711		)	104,692		(340		)	1,011,189		(2,051		)
Non-U.S. government securities	1,092,560		(33,985		)	124,466		(2,140		)	1,217,026		(36,125		)
Asset backed securities	312,033		(1,901		)	130,002		(1,579		)	442,035		(3,480		)
Total	2,608,980		(48,550		)	770,586		(13,384		)	3,379,566		(61,934		)
Short-term investments	53,431		(480		)	—		—			53,431		(480		)
Total	$	2,662,411	$	(49,030	)	$	770,586	$	(13,384	)	$	3,432,997	$	(62,414	)
December 31, 2018
Fixed maturities (1):
Corporate bonds	$	2,983,195	$	(68,910	)	$	1,234,865	$	(36,518	)	$	4,218,060	$	(105,428	)
Mortgage backed securities	84,296		(695		)	109,009		(2,521		)	193,305		(3,216		)
Municipal bonds	233,081		(2,074		)	408,155		(9,817		)	641,236		(11,891		)
Commercial mortgage backed securities	223,341		(2,831		)	193,956		(7,920		)	417,297		(10,751		)
U.S. government and government agencies	635,049		(1,354		)	391,102		(7,120		)	1,026,151		(8,474		)
Non-U.S. government securities	1,028,340		(35,524		)	389,671		(15,424		)	1,418,011		(50,948		)
Asset backed securities	533,592		(8,832		)	368,095		(5,966		)	901,687		(14,798		)
Total	5,720,894		(120,220		)	3,094,853		(85,286		)	8,815,747		(205,506		)
Short-term investments	122,878		(394		)	—		—			122,878		(394		)
Total	$	5,843,772	$	(120,614	)	$	3,094,853	$	(85,286	)	$	8,938,625	$	(205,900	)

(1) In securities lending transactions, the Company receives collateral in excess of the fair value of the fixed maturities 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, 2019				December 31, 2018
Maturity	Estimated Fair Value		Amortized Cost		Estimated Fair Value		Amortized Cost
Due in one year or less	$	414,736	$	413,481	$	276,682	$	279,135
Due after one year through five years	9,833,517		9,702,349		8,666,297		8,738,944
Due after five years through 10 years	3,028,435		2,923,881		2,919,232		2,951,582
Due after 10 years	185,638		178,629		218,768		226,537
	13,462,326		13,218,340		12,080,979		12,196,198
Mortgage backed securities	523,019		511,821		541,193		540,418
Commercial mortgage backed securities	686,707		665,663		729,442		737,543
Asset backed securities	1,636,897		1,612,244		1,600,896		1,607,634
Total (1)	$	16,308,949	$	16,008,068	$	14,952,510	$	15,081,793

(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:

	Remaining Contractual Maturity of the Agreements
	Overnight and Continuous		Less than 30 Days		30-90 Days		90 Days or More		Total
June 30, 2019
U.S. government and government agencies	$	216,856	$	—	$	217,722	$	—	$	434,578
Corporate bonds	2,356		—		—		—		2,356
Equity securities	13,378		—		—		—		13,378
Total	$	232,590	$	—	$	217,722	$	—	$	450,312
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									$	450,312
December 31, 2018
U.S. government and government agencies	$	219,276	$	—	$	32,583	$	—	$	251,859
Corporate bonds	7,129		—		—		—		7,129
Equity securities	15,137		—		—		—		15,137
Total	$	241,542	$	—	$	32,583	$	—	$	274,125
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									$	274,125

Summary of other investments

The following table summarizes the Company’s other investments which are included in investments accounted for using the fair value option, by strategy:

	June 30, 2019		December 31, 2018
Term loan investments (par value: $1,427,330 and $1,369,216)	$	1,341,445	$	1,282,287
Lending	585,954		524,112
Credit related funds	166,673		202,123
Energy	123,547		117,509
Investment grade fixed income	86,808		101,902
Infrastructure	49,260		45,371
Private equity	23,925		24,383
Real estate	16,906		14,252
Total	$	2,394,518	$	2,311,939

Summary of investments accounted for using equity method

The following table summarizes the Company’s investments accounted for using the equity method, by strategy:

	June 30, 2019		December 31, 2018
Credit related funds	$	436,118	$	429,402
Equities	324,525		375,273
Real estate	251,891		232,647
Lending	193,397		125,041
Private equity	131,863		114,019
Infrastructure	141,744		113,748
Energy	102,434		103,661
Total	$	1,581,972	$	1,493,791

Summary of assets and liabilities accounted for using the fair value option

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

	June 30, 2019		December 31, 2018
Fixed maturities	$	965,161	$	1,245,562
Other investments	2,394,518		2,311,939
Short-term investments	257,465		322,177
Equity securities	103,891		103,893
Investments accounted for using the fair value option	$	3,721,035	$	3,983,571

Summary of investments in limited partnership interests where the Company has a variable interest

The following table summarizes investments in limited partnership interests where the Company has a variable interest by balance sheet line item:

	June 30, 2019		December 31, 2018
Investments accounted for using the equity method (1)	1,581,972		1,493,791
Investments accounted for using the fair value option (2)	178,977		162,398
Total	$	1,760,949	$	1,656,189

(1) Aggregate unfunded commitments were $1.41 billion at June 30, 2019, compared to $1.22 billion at December 31, 2018.

(2)

Aggregate unfunded commitments were $63.6 million at June 30, 2019, compared to $117.5 million at December 31, 2018.

Components of net investment income

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

	June 30,
	2019			2018
Three Months Ended
Fixed maturities	$	125,018		$	115,110
Term loans	24,730			20,763
Equity securities	4,368			4,777
Short-term investments	3,859			4,392
Other (1)	18,523			17,405
Gross investment income	176,498			162,447
Investment expenses	(21,460		)	(26,779		)
Net investment income	$	155,038		$	135,668
Six Months Ended
Fixed maturities	$	254,817		$	222,997
Term loans	49,346			40,527
Equity securities	7,356			7,345
Short-term investments	8,038			9,252
Other (1)	39,719			35,015
Gross investment income	359,276			315,136
Investment expenses	(47,289		)	(52,744		)
Net investment income	$	311,987		$	262,392

(1)

Includes income distributions from investment funds and other items.

Summary of net realized gains (losses), excluding other-than-temporary impairment provisions

Net realized gains (losses) were as follows, excluding net impairment losses recognized in earnings:

	June 30,
	2019			2018
Three Months Ended
Available for sale securities:
Gross gains on investment sales	$	75,090		$	18,777
Gross losses on investment sales	(15,281		)	(57,711		)
Change in fair value of assets and liabilities accounted for using the fair value option:
Fixed maturities	11,429			(22,927		)
Other investments	(33,780		)	(254		)
Equity securities	6,414			1,230
Short-term investments	(1,392		)	(136		)
Equity securities, at fair value:
Net realized gains (losses) on sales during the period	(6,644		)	(5,918		)
Net unrealized gains (losses) on equity securities still held at reporting date	22,632			(7,278		)
Derivative instruments (1)	63,966			(2,146		)
Other (2)	(1,628		)	(248		)
Net realized gains (losses)	$	120,806		$	(76,611	)
Six Months Ended
Available for sale securities:
Gross gains on investment sales	$	118,455		$	33,742
Gross losses on investment sales	(46,937		)	(140,262		)
Change in fair value of assets and liabilities accounted for using the fair value option:
Fixed maturities	42,577			(40,478		)
Other investments	(15,585		)	(6,628		)
Equity securities	10,680			7,898
Short-term investments	(672		)	(287		)
Equity securities, at fair value:
Net realized gains (losses) on sales during the period	4,286			(11,286		)
Net unrealized gains (losses) on equity securities still held at reporting date	59,768			(14,861		)
Derivative instruments (1)	99,837			(6,109		)
Other (2)	(10,038		)	(9,338		)
Net realized gains (losses)	$	262,371		$	(187,609	)

(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:

	June 30,
	2019			2018
Three Months Ended
Fixed maturities:
Mortgage backed securities	$	(24	)	$	(81	)
Corporate bonds	(25		)	(241		)
Asset backed securities	—			(148		)
Total	(49		)	(470		)
Net impairment losses recognized in earnings	$	(49	)	$	(470	)
Six Months Ended
Fixed maturities:
Mortgage backed securities	$	(555	)	$	(123	)
Corporate bonds	(590		)	(361		)
Asset backed securities	(213		)	(148		)
Total	(1,358		)	(632		)
Net impairment losses recognized in earnings	$	(1,358	)	$	(632	)

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:

	June 30,
	2019			2018
Three Months Ended
Balance at start of period	$	346		$	767
Credit loss impairments recognized on securities not previously impaired	—			—
Credit loss impairments recognized on securities previously impaired	—			—
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	—			(69		)
Balance at end of period	$	346		$	698
Six Months Ended
Balance at start of year	$	637		$	767
Credit loss impairments recognized on securities not previously impaired	—			—
Credit loss impairments recognized on securities previously impaired	—			—
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	(291		)	(69		)
Balance at end of period	$	346		$	698

Summary of restricted assets

The following table details the value of the Company’s restricted assets:

	June 30, 2019		December 31, 2018
Assets used for collateral or guarantees:
Affiliated transactions	$	4,758,653	$	4,623,483
Third party agreements	2,612,380		2,181,682
Deposits with U.S. regulatory authorities	788,750		689,114
Deposits with non-U.S. regulatory authorities	62,449		59,624
Total restricted assets	$	8,222,232	$	7,553,903

Reconciliation of cash and restricted cash

The following table details reconciliation of cash and restricted cash within the Consolidated Balance Sheets:

	June 30, 2019		December 31, 2018
Cash	$	605,316	$	646,556
Restricted cash (included in ‘other assets’)	$	77,759	$	78,087
Cash and restricted cash	$	683,075	$	724,643

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Fair Value (Tables)

6 Months Ended

Jun. 30, 2019

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, 2019:

				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 (1):
Available for sale securities:
Fixed maturities:
Corporate bonds	$	6,044,081		$	—	$	6,036,439		$	7,642
Mortgage backed securities	523,019			—		522,729			290
Municipal bonds	582,497			—		582,497			—
Commercial mortgage backed securities	686,707			—		686,707			—
U.S. government and government agencies	4,906,996			4,746,260		160,736			—
Non-U.S. government securities	1,928,752			—		1,928,752			—
Asset backed securities	1,636,897			—		1,636,897			—
Total	16,308,949			4,746,260		11,554,757			7,932
Short-term investments	821,961			803,337		18,624			—
Equity securities, at fair value	684,236			620,508		12,516			51,212
Derivative instruments (4)	30,653			—		30,653			—
Fair value option:
Corporate bonds	673,431			—		647,328			26,103
Non-U.S. government bonds	56,416			—		56,416			—
Mortgage backed securities	16,076			—		16,076			—
Municipal bonds	6,731			—		6,731			—
Commercial mortgage backed securities	—			—		—			—
Asset backed securities	208,019			—		208,019			—
U.S. government and government agencies	4,488			4,378		110			—
Short-term investments	257,465			247,216		10,249			—
Equity securities	103,891			47,157		589			56,145
Other investments	1,394,344			41,176		1,257,895			95,273
Other investments measured at net asset value (2)	1,000,174
Total	3,721,035			339,927		2,203,413			177,521
Total assets measured at fair value	$	21,566,834		$	6,510,032	$	13,819,963		$	236,665
Liabilities measured at fair value:
Contingent consideration liabilities	$	(7,825	)	$	—	$	—		$	(7,825	)
Securities sold but not yet purchased (3)	(48,823		)	—		(48,823		)	—
Derivative instruments (4)	(38,363		)	—		(38,363		)	—
Total liabilities measured at fair value	$	(95,011	)	$	—	$	(87,186	)	$	(7,825	)

(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, “—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) Represents the Company’s obligations to deliver securities that it did not own at the time of sale. Such amounts are included in “other liabilities” on the Company’s consolidated balance sheets.

(4) See note 8.

The following table presents the Company’s financial assets and liabilities measured at fair value by level at December 31, 2018:

				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 (1):
Available for sale securities:
Fixed maturities:
Corporate bonds	$	5,537,548		$	—	$	5,529,407		$	8,141
Mortgage backed securities	541,193			—		540,884			309
Municipal bonds	1,013,395			—		1,013,395			—
Commercial mortgage backed securities	729,442			—		729,438			4
U.S. government and government agencies	3,758,698			3,657,181		101,517			—
Non-U.S. government securities	1,771,338			—		1,771,338			—
Asset backed securities	1,600,896			—		1,600,896			—
Total	14,952,510			3,657,181		11,286,875			8,454
Equity securities	353,794			321,927		31,867			—
Short-term investments	955,880			875,881		79,999			—
Derivative instruments (4)	73,893			—		73,893			—
Fair value option:
Corporate bonds	852,585			—		846,827			5,758
Non-U.S. government bonds	79,066			—		79,066			—
Mortgage backed securities	16,731			—		16,731			—
Municipal bonds	7,144			—		7,144			—
Commercial mortgage backed securities	—			—		—			—
Asset backed securities	178,790			—		178,790			—
U.S. government and government agencies	111,246			111,138		108			—
Short-term investments	322,177			278,579		43,598			—
Equity securities	103,893			48,827		55,066			—
Other investments	1,254,220			39,107		1,152,408			62,705
Other investments measured at net asset value (2)	1,057,719
Total	3,983,571			477,651		2,379,738			68,463
Total assets measured at fair value	$	20,319,648		$	5,332,640	$	13,852,372		$	76,917
Liabilities measured at fair value:
Contingent consideration liabilities	$	(66,665	)	$	—	$	—		$	(66,665	)
Securities sold but not yet purchased (3)	(7,790		)	—		(7,790		)	—
Derivative instruments (4)	(20,664		)	—		(20,664		)	—
Total liabilities measured at fair value	$	(95,119	)	$	—	$	(28,454	)	$	(66,665	)

(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, “—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) Represents the Company’s obligations to deliver securities that it did not own at the time of sale. Such amounts are included in “other liabilities” on the Company’s consolidated balance sheets.

(4)

See note 8.

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								Fair Value
	Structured Securities (1)			Corporate Bonds			Corporate Bonds			Other Investments			Equity Securities		Equity Securities		Contingent Consideration Liabilities
Three Months Ended June 30, 2019
Balance at beginning of period	$	302		$	7,567		$	2,233		$	62,329		$	—	$	—	$	(68,121	)
Total gains or (losses) (realized/unrealized)
Included in earnings (2)	—			—			(49		)	(11,614		)	—		—		(423		)
Included in other comprehensive income	1			102			—			—			—		—		—
Purchases, issuances, sales and settlements
Purchases	—			429			—			—			—		—		—
Issuances	—			—			—			—			—		—		—
Sales	—			—			—			(74		)	—		—		—
Settlements	(13		)	(456		)	—			—			—		—		60,719
Transfers in and/or out of Level 3	—			—			23,919			44,632			56,145		51,212		—
Balance at end of period	$	290		$	7,642		$	26,103		$	95,273		$	56,145	$	51,212	$	(7,825	)
Three Months Ended June 30, 2018
Balance at beginning of period	$	5,413		$	9,152		$	11,872		$	58,452		$	—	$	—	$	(62,449	)
Total gains or (losses) (realized/unrealized)
Included in earnings (2)	3			—			(537		)	336			—		—		(1,481		)
Included in other comprehensive income	(4		)	(316		)	—			—			—		—		—
Purchases, issuances, sales and settlements
Purchases	—			393			—			—			—		—		—
Issuances	—			—			—			—			—		—		—
Sales	(5,003		)	—			—			(74		)	—		—		—
Settlements	(33		)	(456		)	—			(500		)	—		—		—
Transfers in and/or out of Level 3	—			—			—			—			—		—		—
Balance at end of period	$	376		$	8,773		$	11,335		$	58,214		$	—	$	—	$	(63,930	)
Six Months Ended June 30, 2019
Balance at beginning of year	$	313		$	8,141		$	5,758		$	62,705		$	—	$	—	$	(66,665	)
Total gains or (losses) (realized/unrealized)
Included in earnings (2)	1,757			—			(339		)	(11,316		)	—		—		(1,331		)
Included in other comprehensive income	5			(16		)	—			—			—		—		—
Purchases, issuances, sales and settlements
Purchases	—			429			—			—			—		—		—
Issuances	—			—			—			—			—		—		(548		)
Sales	(1,757		)	—			(3,235		)	(148		)	—		—		—
Settlements	(28		)	(912		)	—			(600		)	—		—		60,719
Transfers in and/or out of Level 3	—			—			23,919			44,632			56,145		51,212		—
Balance at end of period	$	290		$	7,642		$	26,103		$	95,273		$	56,145	$	51,212	$	(7,825	)
Six Months Ended June 30, 2018
Balance at beginning of year	$	5,927		$	9,460		$	12,217		$	59,167		$	—	$	—	$	(60,996	)
Total gains or (losses) (realized/unrealized)
Included in earnings (2)	4			—			(612		)	(379		)	—		—		(2,934		)
Included in other comprehensive income	(8		)	(168		)	—			—			—		—		—
Purchases, issuances, sales and settlements
Purchases	—			393			—			—			—		—		—
Issuances	—			—			—			—			—		—		—
Sales	(5,003		)	—			—			(74		)	—		—		—
Settlements	(544		)	(912		)	(270		)	(500		)	—		—		—
Transfers in and/or out of Level 3	—			—			—			—			—		—		—
Balance at end of period	$	376		$	8,773		$	11,335		$	58,214		$	—	$	—	$	(63,930	)

(1) Includes asset backed securities, mortgage backed securities and commercial mortgage backed securities.

(2) Gains or losses were included in net realized gains (losses).

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Derivative Instruments (Tables)

6 Months Ended

Jun. 30, 2019

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			Notional Value (1)
June 30, 2019
Futures contracts (2)	$	5,438	$	(1,586	)	$	4,354,852
Foreign currency forward contracts (2)	3,190		(10,352		)	939,940
TBAs (3)	15,509		—			14,846
Other (2)	22,025		(26,425		)	3,493,526
Total	$	46,162	$	(38,363	)
December 31, 2018
Futures contracts (2)	$	51,800	$	(2,115	)	$	3,153,518
Foreign currency forward contracts (2)	8,147		(7,796		)	1,008,907
TBAs (3)	8,292		—			8,132
Other (2)	13,946		(10,753		)	2,213,981
Total	$	82,185	$	(20,664	)

(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

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:

Derivatives not designated as	June 30,
hedging instruments:	2019			2018
Three Months Ended
Net realized gains (losses):
Futures contracts	$	66,973		$	(240	)
Foreign currency forward contracts	(5,365		)	(1,692		)
TBAs	48			—
Other	2,310			(214		)
Total	$	63,966		$	(2,146	)
Six Months Ended
Net realized gains (losses):
Futures contracts	$	94,309		$	4,790
Foreign currency forward contracts	(19,074		)	(7,616		)
TBAs	238			(97		)
Other	24,364			(3,186		)
Total	$	99,837		$	(6,109	)

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Leases (Tables)

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Additional information regarding operating leases

Additional information regarding the Company’s operating leases is as follows:

	June 30,
	2019
Three Months Ended
Operating lease costs	$	7,244
Cash payments included in the measurement of lease liabilities reported in operating cash flows	$	7,685
Right-of-use assets obtained in exchange for new lease liabilities	$	4,420
Right-of-use assets (1)	$	134,061
Operating lease liability (1)	$	150,341
Weighted average discount rate	3.9		%
Weighted average remaining lease term	6.5 years
Six Months Ended
Operating lease costs	$	14,860
Cash payments included in the measurement of lease liabilities reported in operating cash flows	$	14,585
Right-of-use assets obtained in exchange for new lease liabilities	$	4,420
Right-of-use assets (1)	$	134,061
Operating lease liability (1)	$	150,341
Weighted average discount rate	3.9		%
Weighted average remaining lease term	6.5 years

(1)

The right-of-use assets are included in ‘other assets’ while the operating lease liability is included in ‘other liabilities.’

Contractual maturities of lease liabilities

The following table presents the contractual maturities of the Company's operating lease liabilities at June 30, 2019:

Years Ending December 31,
2019 (remainder)	$	9,985
2020	32,036
2021	30,673
2022	27,365
2023	22,667
2024 and thereafter	55,610
Total undiscounted lease liability	$	178,336
Less: present value adjustment	(27,995		)
Operating lease liability	$	150,341

Future minimum rental commitments

At December 31, 2018, the future minimum rental commitments, exclusive of escalation clauses and maintenance costs and net of rental income, for all of the Company’s operating leases was as follows:

2019	$	31,088
2020	30,491
2021	29,351
2022	26,068
2023	21,408
2024 and thereafter	54,745
Total	$	193,151

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Variable Interest Entities and Noncontrolling Interests (Tables)

6 Months Ended

Jun. 30, 2019

Noncontrolling Interest [Abstract]

Carrying value of assets and liabilities of variable interest entity

The following table provides the carrying amount and balance sheet caption in which the assets and liabilities of Watford Re are reported:

	June 30,		December 31,
	2019		2018
Assets
Investments accounted for using the fair value option	$	1,972,947	$	2,312,003
Fixed maturities available for sale, at fair value	732,454		393,351
Equity securities, at fair value	64,703		32,206
Cash	68,977		63,529
Accrued investment income	16,916		19,461
Premiums receivable	228,588		227,301
Reinsurance recoverable on unpaid and paid losses and LAE	123,961		86,445
Ceded unearned premiums	79,513		61,587
Deferred acquisition costs	71,557		80,858
Receivable for securities sold	29,425		24,507
Goodwill and intangible assets	7,650		7,650
Other assets	71,837		63,959
Total assets of consolidated VIE	$	3,468,528	$	3,372,857
Liabilities
Reserve for losses and loss adjustment expenses	$	1,126,080	$	1,032,760
Unearned premiums	375,323		390,114
Reinsurance balances payable	23,312		21,034
Revolving credit agreement borrowings	491,006		455,682
Payable for securities purchased	51,216		60,142
Other liabilities (1)	219,120		302,524
Total liabilities of consolidated VIE	$	2,286,057	$	2,262,256
Redeemable noncontrolling interests	$	221,175	$	220,992

(1)

Includes certain borrowings related to investing activities.

Activity in non-redeemable noncontrolling interests

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

	June 30,
	2019		2018
Three Months Ended
Balance, beginning of period	$	838,081	$	854,112
Additional paid in capital attributable to noncontrolling interests	2,074		—
Amounts attributable to noncontrolling interests	12,301		8,116
Other comprehensive income (loss) attributable to noncontrolling interests	2,891		(1,075		)
Balance, end of period	$	855,347	$	861,153
Six Months Ended
Balance, beginning of year	$	791,560	$	843,411
Additional paid in capital attributable to noncontrolling interests	2,074		—
Amounts attributable to noncontrolling interests	54,683		19,492
Other comprehensive income (loss) attributable to noncontrolling interests	7,030		(1,750		)
Balance, end of period	$	855,347	$	861,153

Activity in redeemable noncontrolling interests

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

	June 30,
	2019		2018
Three Months Ended
Balance, beginning of period	$	206,383	$	206,013
Accretion of preference share issuance costs	92		92
Balance, end of period	$	206,475	$	206,105
Six Months Ended
Balance, beginning of year	$	206,292	$	205,922
Accretion of preference share issuance costs	183		183
Balance, end of period	$	206,475	$	206,105

Portion of income or loss attributable to third party investors

The portion of Watford Re’s income or loss attributable to third party investors, recorded in the Company’s consolidated statements of income in ‘net (income) loss attributable to noncontrolling interests,’ are summarized in the table below:

	June 30,
	2019			2018
Three Months Ended
Amounts attributable to non-redeemable noncontrolling interests	$	(12,301	)	$	(8,116	)
Dividends attributable to redeemable noncontrolling interests	(4,590		)	(4,585		)
Net (income) loss attributable to noncontrolling interests	$	(16,891	)	$	(12,701	)
Six Months Ended
Amounts attributable to non-redeemable noncontrolling interests	$	(54,683	)	$	(19,492	)
Dividends attributable to redeemable noncontrolling interests	(9,178		)	(9,170		)
Net (income) loss attributable to noncontrolling interests	$	(63,861	)	$	(28,662	)

Total assets and maximum exposure to loss associated with VIEs

The following table presents the total assets of the Bellemeade entities, as well as the Company’s maximum exposure to loss associated with these VIEs, calculated as the maximum historical observable spread between the one month LIBOR, the basis for the contractual payments to bond holders, and short term invested trust asset yields.

			Maximum Exposure to Loss
Bellemeade Entities (Issue Date)	Total VIE Assets		On-Balance Sheet (Asset) Liability			Off-Balance Sheet		Total
Jun 30, 2019
Bellemeade 2015-1 Ltd. (Jul-15)	$	19,103	$	(4	)	$	17	$	13
Bellemeade 2017-1 Ltd. (Oct-17)	277,554		(657		)	4,892		4,235
Bellemeade 2018-1 Ltd. (Apr-18)	374,460		(1,965		)	7,799		5,834
Bellemeade 2018-2 Ltd. (Aug-18)	571,129		(1,957		)	5,265		3,308
Bellemeade 2018-3 Ltd. (Oct-18)	506,110		(2,213		)	7,251		5,038
Bellemeade 2019-1 Ltd. (Mar-19)	329,085		(237		)	4,842		4,605
Bellemeade 2019-2 Ltd. (Apr-19)	621,022		(408		)	11,206		10,798
Total	$	2,698,463	$	(7,441	)	$	41,272	$	33,831
Dec 31, 2018
Bellemeade 2015-1 Ltd. (Jul-15)	$	43,246	$	112		$	498	$	610
Bellemeade 2017-1 Ltd. (Oct-17)	304,373		165			1,312		1,477
Bellemeade 2018-1 Ltd. (Apr-18)	374,460		132			3,539		3,671
Bellemeade 2018-2 Ltd. (Aug-18)	653,278		874			4,005		4,879
Bellemeade 2018-3 Ltd. (Oct-18)	506,110		469			1,836		2,305
Total	$	1,881,467	$	1,752		$	11,190	$	12,942

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Other Comprehensive Income (Loss) (Tables)

6 Months Ended

Jun. 30, 2019

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	2019			2018			2019			2018
Unrealized appreciation on available-for-sale investments
	Net realized gains (losses)	$	59,809		$	(38,935	)	$	71,518		$	(106,521	)
	Other-than-temporary impairment losses	(49		)	(470		)	(1,358		)	(632		)
	Total before tax	59,760			(39,405		)	70,160			(107,153		)
	Income tax (expense) benefit	(4,415		)	2,762			(4,594		)	8,049
	Net of tax	$	55,345		$	(36,643	)	$	65,566		$	(99,104	)

Schedule of comprehensive income (loss)

	Before Tax Amount			Tax Expense (Benefit)			Net of Tax Amount
Three Months Ended June 30, 2019
Unrealized appreciation (decline) in value of investments:
Unrealized holding gains (losses) arising during period	$	248,074		$	25,601		$	222,473
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)	—			—			—
Less reclassification of net realized gains (losses) included in net income	59,760			4,415			55,345
Foreign currency translation adjustments	4,409			142			4,267
Other comprehensive income (loss)	$	192,723		$	21,328		$	171,395
Three Months Ended June 30, 2018
Unrealized appreciation (decline) in value of investments:
Unrealized holding gains (losses) arising during period	$	(88,034	)	$	(2,763	)	$	(85,271	)
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)	—			—			—
Less reclassification of net realized gains (losses) included in net income	(39,405		)	(2,762		)	(36,643		)
Foreign currency translation adjustments	(12,701		)	(106		)	(12,595		)
Other comprehensive income (loss)	$	(61,330	)	$	(107	)	$	(61,223	)
Six Months Ended June 30, 2019
Unrealized appreciation (decline) in value of investments:
Unrealized holding gains (losses) arising during period	$	503,064		$	54,704		$	448,360
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)	—			—			—
Less reclassification of net realized gains (losses) included in net income	70,160			4,594			65,566
Foreign currency translation adjustments	10,053			270			9,783
Other comprehensive income (loss)	$	442,957		$	50,380		$	392,577
Six Months Ended June 30, 2018
Unrealized appreciation (decline) in value of investments:
Unrealized holding gains (losses) arising during period	$	(277,977	)	$	(26,029	)	$	(251,948	)
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)	—			—			—
Less reclassification of net realized gains (losses) included in net income	(107,153		)	(8,049		)	(99,104		)
Foreign currency translation adjustments	(11,269		)	44			(11,313		)
Other comprehensive income (loss)	$	(182,093	)	$	(17,936	)	$	(164,157	)

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Guarantor Financial Information (Tables)

6 Months Ended

Jun. 30, 2019

Condensed Financial Information Disclosure [Abstract]

Condensed consolidating balance sheet

		June 30, 2019
Condensed Consolidating Balance Sheet		Arch Capital (Parent Guarantor)		Arch-U.S. (Subsidiary Issuer)		Other Arch Capital Subsidiaries		Consolidating Adjustments and Eliminations			Arch Capital Consolidated
Assets
Total investments		$	40	$	483,904	$	22,693,719	$	(49,700	)	$	23,127,963
Cash		10,750		47,875		546,691		—			605,316
Investments in subsidiaries		11,045,465		4,493,198		—		(15,538,663		)	—
Due from subsidiaries and affiliates		332		2		1,881,929		(1,882,263		)	—
Premiums receivable		—		—		2,291,360		(685,320		)	1,606,040
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses		—		—		8,618,279		(5,447,022		)	3,171,257
Contractholder receivables		—		—		2,102,544		—			2,102,544
Ceded unearned premiums		—		—		1,984,219		(847,491		)	1,136,728
Deferred acquisition costs		—		—		658,992		(58,252		)	600,740
Goodwill and intangible assets		—		—		641,010		—			641,010
Other assets		22,950		40,345		1,953,732		(156,955		)	1,860,072
	Total assets	$	11,079,537	$	5,065,324	$	43,372,475	$	(24,665,666	)	$	34,851,670
Liabilities
Reserve for losses and loss adjustment expenses		$	—	$	—	$	17,430,847	$	(5,200,531	)	$	12,230,316
Unearned premiums		—		—		4,904,351		(847,491		)	4,056,860
Reinsurance balances payable		—		—		1,217,310		(685,320		)	531,990
Contractholder payables		—		—		2,102,544		—			2,102,544
Collateral held for insured obligations		—		—		237,056					237,056
Senior notes		297,201		494,776		941,888		—			1,733,865
Revolving credit agreement borrowings		—		—		491,006		—			491,006
Due to subsidiaries and affiliates		9		536,747		1,345,507		(1,882,263		)	—
Other liabilities		24,975		64,956		2,055,626		(496,698		)	1,648,859
	Total liabilities	322,185		1,096,479		30,726,135		(9,112,303		)	23,032,496
Redeemable noncontrolling interests		—		—		221,175		(14,700		)	206,475
Shareholders’ Equity
Total shareholders’ equity available to Arch		10,757,352		3,968,845		11,569,818		(15,538,663		)	10,757,352
Non-redeemable noncontrolling interests		—		—		855,347		—			855,347
	Total shareholders’ equity	10,757,352		3,968,845		12,425,165		(15,538,663		)	11,612,699
	Total liabilities, noncontrolling interests and shareholders’ equity	$	11,079,537	$	5,065,324	$	43,372,475	$	(24,665,666	)	$	34,851,670

		December 31, 2018
Condensed Consolidating Balance Sheet		Arch Capital (Parent Guarantor)		Arch-U.S. (Subsidiary Issuer)		Other Arch Capital Subsidiaries		Consolidating Adjustments and Eliminations			Arch Capital Consolidated
Assets
Total investments		$	104	$	452,674	$	21,307,206	$	(14,700	)	$	21,745,284
Cash		6,125		5,940		634,491		—			646,556
Investments in subsidiaries		9,735,256		3,999,243		—		(13,734,499		)	—
Due from subsidiaries and affiliates		9		2		1,802,686		(1,802,697		)	—
Premiums receivable		—		—		1,834,389		(535,239		)	1,299,150
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses		—		—		8,618,660		(5,699,288		)	2,919,372
Contractholder receivables		—		—		2,079,111		—			2,079,111
Ceded unearned premiums		—		—		1,730,262		(754,793		)	975,469
Deferred acquisition costs		—		—		618,535		(48,961		)	569,574
Goodwill and intangible assets		—		—		634,920		—			634,920
Other assets		12,588		80,949		1,466,438		(211,082		)	1,348,893
	Total assets	$	9,754,082	$	4,538,808	$	40,726,698	$	(22,801,259	)	$	32,218,329
Liabilities
Reserve for losses and loss adjustment expenses		$	—	$	—	$	17,345,142	$	(5,491,845	)	$	11,853,297
Unearned premiums		—		—		4,508,429		(754,793		)	3,753,636
Reinsurance balances payable		—		—		928,346		(535,239		)	393,107
Contractholder payables		—		—		2,079,111		—			2,079,111
Collateral held for insured obligations		—		—		236,630		—			236,630
Senior notes		297,150		494,723		941,655		—			1,733,528
Revolving credit agreement borrowings		—		—		455,682		—			455,682
Due to subsidiaries and affiliates		—		536,805		1,265,892		(1,802,697		)	—
Other liabilities		17,105		26,270		1,699,768		(467,484		)	1,275,659
	Total liabilities	314,255		1,057,798		29,460,655		(9,052,058		)	21,780,650
Redeemable noncontrolling interests		—		—		220,992		(14,700		)	206,292
Shareholders’ Equity
Total shareholders’ equity available to Arch		9,439,827		3,481,010		10,253,491		(13,734,501		)	9,439,827
Non-redeemable noncontrolling interests		—		—		791,560		—			791,560
	Total shareholders’ equity	9,439,827		3,481,010		11,045,051		(13,734,501		)	10,231,387
	Total liabilities, noncontrolling interests and shareholders’ equity	$	9,754,082	$	4,538,808	$	40,726,698	$	(22,801,259	)	$	32,218,329

Condensed consolidating statement of income and comprehensive income

		Three Months Ended June 30, 2019
Condensed Consolidating Statement of Income and Comprehensive Income		Arch Capital (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other Arch Capital Subsidiaries			Consolidating Adjustments and Eliminations			Arch Capital Consolidated
Revenues
Net premiums earned		$	—		$	—		$	1,463,727		$	—		$	1,463,727
Net investment income		38			2,847			174,738			(22,585		)	155,038
Net realized gains (losses)		—			5,825			115,620			(639		)	120,806
Net impairment losses recognized in earnings		—			—			(49		)	—			(49		)
Other underwriting income		—			—			5,953			—			5,953
Equity in net income (loss) of investment funds accounted for using the equity method		—			(64		)	32,600			—			32,536
Other income (loss)		(242		)	—			1,371			—			1,129
	Total revenues	(204		)	8,608			1,793,960			(23,224		)	1,779,140
Expenses
Losses and loss adjustment expenses		—			—			767,543			—			767,543
Acquisition expenses		—			—			210,089			—			210,089
Other operating expenses		—			—			198,914			—			198,914
Corporate expenses		15,293			2,115			843			—			18,251
Amortization of intangible assets		—			—			19,794			—			19,794
Interest expense		5,538			11,996			34,012			(22,266		)	29,280
Net foreign exchange (gains) losses		—			—			(1,187		)	6,139			4,952
	Total expenses	20,831			14,111			1,230,008			(16,127		)	1,248,823
Income (loss) before income taxes		(21,035		)	(5,503		)	563,952			(7,097		)	530,317
Income tax (expense) benefit		—			1,301			(45,773		)	—			(44,472		)
Income (loss) before equity in net income of subsidiaries		(21,035		)	(4,202		)	518,179			(7,097		)	485,845
Equity in net income of subsidiaries		489,989			148,747			—			(638,736		)	—
Net income		468,954			144,545			518,179			(645,833		)	485,845
Net (income) loss attributable to noncontrolling interests		—			—			(17,210		)	319			(16,891		)
Net income available to Arch		468,954			144,545			500,969			(645,514		)	468,954
Preferred dividends		(10,403		)	—			—			—			(10,403		)
Net income available to Arch common shareholders		$	458,551		$	144,545		$	500,969		$	(645,514	)	$	458,551
Comprehensive income available to Arch		$	637,458		$	231,120		$	663,685		$	(894,805	)	$	637,458

		Three Months Ended June 30, 2018
Condensed Consolidating Statement of Income and Comprehensive Income		Arch Capital (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other Arch Capital Subsidiaries			Consolidating Adjustments and Eliminations			Arch Capital Consolidated
Revenues
Net premiums earned		$	—		$	—		$	1,336,763		$	—		$	1,336,763
Net investment income		15			560			157,532			(22,439		)	135,668
Net realized gains (losses)		—			—			(76,611		)	—			(76,611		)
Net impairment losses recognized in earnings		—			—			(470		)	—			(470		)
Other underwriting income		—			—			3,874			—			3,874
Equity in net income (loss) of investment funds accounted for using the equity method		—			—			8,472			—			8,472
Other income (loss)		2,339			—			774			—			3,113
	Total revenues	2,354			560			1,430,334			(22,439		)	1,410,809
Expenses
Losses and loss adjustment expenses		—			—			726,153			—			726,153
Acquisition expenses		—			—			202,838			—			202,838
Other operating expenses		—			—			176,181			—			176,181
Corporate expenses		16,642			470			5,400			—			22,512
Amortization of intangible assets		—			—			26,472			—			26,472
Interest expense		5,537			12,013			34,911			(22,117		)	30,344
Net foreign exchange (gains) losses		—			—			(43,357		)	(10,349		)	(53,706		)
	Total expenses	22,179			12,483			1,128,598			(32,466		)	1,130,794
Income (loss) before income taxes		(19,825		)	(11,923		)	301,736			10,027			280,015
Income tax (expense) benefit		—			2,477			(26,145		)	—			(23,668		)
Income (loss) before equity in net income of subsidiaries		(19,825		)	(9,446		)	275,591			10,027			256,347
Equity in net income of subsidiaries		263,471			86,727			—			(350,198		)	—
Net income (loss)		243,646			77,281			275,591			(340,171		)	256,347
Net (income) loss attributable to noncontrolling interests		—			—			(13,023		)	322			(12,701		)
Net income (loss) available to Arch		243,646			77,281			262,568			(339,849		)	243,646
Preferred dividends		(10,403		)	—			—			—			(10,403		)
Net income (loss) available to Arch common shareholders		$	233,243		$	77,281		$	262,568		$	(339,849	)	$	233,243
Comprehensive income available to Arch		$	183,500		$	70,066		$	212,802		$	(282,868	)	$	183,500

		Six Months Ended June 30, 2019
Condensed Consolidating Statement of Income and Comprehensive Income		Arch Capital (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other Arch Capital Subsidiaries			Consolidating Adjustments and Eliminations			Arch Capital Consolidated
Revenues
Net premiums earned		$	—		$	—		$	2,832,593		$	—		$	2,832,593
Net investment income		84			6,526			350,410			(45,033		)	311,987
Net realized gains (losses)		—			14,343			253,673			(5,645		)	262,371
Net impairment losses recognized in earnings		—			—			(1,358		)	—			(1,358		)
Other underwriting income		—			—			14,778			—			14,778
Equity in net income (loss) of investment funds accounted for using the equity method		—			(64		)	79,467			—			79,403
Other income (loss)		(481		)	—			2,693			—			2,212
	Total revenues	(397		)	20,805			3,532,256			(50,678		)	3,501,986
Expenses
Losses and loss adjustment expenses		—			—			1,486,075			—			1,486,075
Acquisition expenses		—			—			407,937			—			407,937
Other operating expenses		—			—			400,077			—			400,077
Corporate expenses		31,600			4,281			332			—			36,213
Amortization of intangible assets		—			—			40,211			—			40,211
Interest expense		11,076			23,947			67,718			(44,396		)	58,345
Net foreign exchange (gains) losses		2			—			(1,310		)	2,735			1,427
	Total expenses	42,678			28,228			2,401,040			(41,661		)	2,430,285
Income (loss) before income taxes		(43,075		)	(7,423		)	1,131,216			(9,017		)	1,071,701
Income tax (expense) benefit		—			1,844			(92,202		)	—			(90,358		)
Income (loss) before equity in net income of subsidiaries		(43,075		)	(5,579		)	1,039,014			(9,017		)	981,343
Equity in net income of subsidiaries		960,557			285,301			—			(1,245,858		)	—
Net income		917,482			279,722			1,039,014			(1,254,875		)	981,343
Net (income) loss attributable to noncontrolling interests		—			—			(64,499		)	638			(63,861		)
Net income available to Arch		917,482			279,722			974,515			(1,254,237		)	917,482
Preferred dividends		(20,806		)	—			—			—			(20,806		)
Net income available to Arch common shareholders		$	896,676		$	279,722		$	974,515		$	(1,254,237	)	$	896,676
Comprehensive income available to Arch		$	1,303,029		$	469,276		$	1,352,225		$	(1,821,501	)	$	1,303,029

		Six Months Ended June 30, 2018
Condensed Consolidating Statement of Income and Comprehensive Income		Arch Capital (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other Arch Capital Subsidiaries			Consolidating Adjustments and Eliminations			Arch Capital Consolidated
Revenues
Net premiums earned		$	—		$	—		$	2,571,662		$	—		$	2,571,662
Net investment income		35			818			306,299			(44,760		)	262,392
Net realized gains (losses)		29			(7		)	(187,631		)	—			(187,609		)
Net impairment losses recognized in earnings		—			—			(632		)	—			(632		)
Other underwriting income		—			—			9,223			—			9,223
Equity in net income (loss) of investment funds accounted for using the equity method		—			—			36,541			—			36,541
Other income (loss)		2,261			—			926			—			3,187
	Total revenues	2,325			811			2,736,388			(44,760		)	2,694,764
Expenses
Losses and loss adjustment expenses		—			—			1,363,013			—			1,363,013
Acquisition expenses		—			—			394,214			—			394,214
Other operating expenses		—			—			351,196			—			351,196
Corporate expenses		32,811			759			4,254			—			37,824
Amortization of intangible assets		—			—			53,208			—			53,208
Interest expense		11,073			23,939			70,083			(44,115		)	60,980
Net foreign exchange (gains) losses		29			—			(26,921		)	(7,093		)	(33,985		)
	Total expenses	43,913			24,698			2,209,047			(51,208		)	2,226,450
Income (loss) before income taxes		(41,588		)	(23,887		)	527,341			6,448			468,314
Income tax (expense) benefit		—			5,428			(51,011		)	—			(45,583		)
Income (loss) before equity in net income of subsidiaries		(41,588		)	(18,459		)	476,330			6,448			422,731
Equity in net income of subsidiaries		435,657			173,147			—			(608,804		)	—
Net income		394,069			154,688			476,330			(602,356		)	422,731
Net (income) loss attributable to noncontrolling interests		—			—			(29,307		)	645			(28,662		)
Net income available to Arch		394,069			154,688			447,023			(601,711		)	394,069
Preferred dividends		(20,840		)	—			—			—			(20,840		)
Loss on redemption of preferred shares		(2,710		)	—			—			—			(2,710		)
Net income available to Arch common shareholders		$	370,519		$	154,688		$	447,023		$	(601,711	)	$	370,519
Comprehensive income available to Arch		$	231,662		$	76,603		$	291,883		$	(368,486	)	$	231,662

Condensed consolidating statement of cash flows

		Six Months Ended June 30, 2019
Condensed Consolidating Statement of Cash Flows		Arch Capital (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other Arch Capital Subsidiaries			Consolidating Adjustments and Eliminations			Arch Capital Consolidated
Operating Activities
	Net Cash Provided By (Used For) Operating Activities	$	30,946		$	24,059		$	749,885		$	(92,366	)	$	712,524
Investing Activities
Purchases of fixed maturity investments		—			(358,996		)	(15,973,650		)	—			(16,332,646		)
Purchases of equity securities		—			(56,441		)	(447,742		)	72,244			(431,939		)
Purchases of other investments		—			(17,891		)	(659,172		)	—			(677,063		)
Proceeds from the sales of fixed maturity investments		—			452,729			15,179,753			—			15,632,482
Proceeds from the sales of equity securities		—			—			248,945			(72,244		)	176,701
Proceeds from the sales, redemptions and maturities of other investments		—			391			534,307			—			534,698
Proceeds from redemptions and maturities of fixed maturity investments		—			100			244,849			—			244,949
Net settlements of derivative instruments		—			—			87,701			—			87,701
Net (purchases) sales of short-term investments		64			(2,015		)	203,471			—			201,520
Change in cash collateral related to securities lending		—			—			7,590			—			7,590
Contributions to subsidiaries		(2,121		)	—			(59,527		)	61,648			—
Issuance of intercompany loans		—			—			(53,828		)	53,828			—
Purchases of fixed assets		(32		)	—			(16,327		)	—			(16,359		)
Other		—			—			(174,578		)	—			(174,578		)
	Net Cash Provided By (Used For) Investing Activities	(2,089		)	17,877			(878,208		)	115,476			(746,944		)
Financing Activities
Purchases of common shares under share repurchase program		(2,871		)	—			—			—			(2,871		)
Proceeds from common shares issued, net		(557		)	—			61,648			(61,648		)	(557		)
Proceeds from intercompany borrowings		—			—			53,828			(53,828		)	—
Proceeds from borrowings		—			—			62,800			—			62,800
Repayments of borrowings		—			—			(27,538		)	—			(27,538		)
Change in cash collateral related to securities lending		—			—			(7,590		)	—			(7,590		)
Dividends paid to redeemable noncontrolling interests		—			—			(9,632		)	638			(8,994		)
Dividends paid to parent (1)		—			—			(91,728		)	91,728			—
Other		—			—			(3,529		)	—			(3,529		)
Preferred dividends paid		(20,806		)	—			—			—			(20,806		)
	Net Cash Provided By (Used For) Financing Activities	(24,234		)	—			38,259			(23,110		)	(9,085		)
Effects of exchange rates changes on foreign currency cash and restricted cash		—			—			1,937			—			1,937
Increase (decrease) in cash and restricted cash		4,623			41,936			(88,127		)	—			(41,568		)
Cash and restricted cash, beginning of year		6,159			5,940			712,544			—			724,643
Cash and restricted cash, end of period		$	10,782		$	47,876		$	624,417		$	—		$	683,075

(1)     Dividends received by parent are included in net cash provided by (used for) operating activities.

		Six Months Ended June 30, 2018
Condensed Consolidating Statement of Cash Flows		Arch Capital (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other Arch Capital Subsidiaries			Consolidating Adjustments and Eliminations			Arch Capital Consolidated
Operating Activities
	Net Cash Provided By (Used For) Operating Activities	$	201,487		$	149,576		$	1,010,703		$	(864,880	)	$	496,886
Investing Activities
Purchases of fixed maturity investments		—			(125,440		)	(17,347,846		)	605,716			(16,867,570		)
Purchases of equity securities		—			—			(679,663		)	—			(679,663		)
Purchases of other investments		—			—			(1,017,147		)	—			(1,017,147		)
Proceeds from the sales of fixed maturity investments		—			33,793			16,662,466			(605,716		)	16,090,543
Proceeds from the sales of equity securities		—			—			622,068			—			622,068
Proceeds from the sales, redemptions and maturities of other investments		—			—			773,298			—			773,298
Proceeds from redemptions and maturities of fixed maturity investments		—			—			511,448			—			511,448
Net settlements of derivative instruments		—			—			4,498			—			4,498
Net (purchases) sales of short-term investments		96,446			(59,798		)	415,253			—			451,901
Change in cash collateral related to securities lending		—			—			176,304			—			176,304
Contributions to subsidiaries		—			(1,000		)	(22,595		)	23,595			—
Purchases of fixed assets		(71		)	—			(13,171		)	—			(13,242		)
Other		(4		)	—			49,965			—			49,961
	Net Cash Provided By (Used For) Investing Activities	96,371			(152,445		)	134,878			23,595			102,399
Financing Activities
Redemption of preferred shares		(92,555		)	—			—			—			(92,555		)
Purchases of common shares under share repurchase program		(173,575		)	—			—			—			(173,575		)
Proceeds from common shares issued, net		(13,851		)	—			23,595			(23,595		)	(13,851		)
Proceeds from borrowings		—			—			130,579			—			130,579
Repayments of borrowings		—			—			(373,000		)	—			(373,000		)
Change in cash collateral related to securities lending		—			—			(176,304		)	—			(176,304		)
Dividends paid to redeemable noncontrolling interests		—			—			(9,632		)	638			(8,994		)
Dividends paid to parent (1)		—			—			(864,242		)	864,242			—
Other		—			—			(4,489		)	—			(4,489		)
Preferred dividends paid		(20,840		)	—			—			—			(20,840		)
	Net Cash Provided By (Used For) Financing Activities	(300,821		)	—			(1,273,493		)	841,285			(733,029		)
Effects of exchange rates changes on foreign currency cash and restricted cash		—			—			(10,431		)	—			(10,431		)
Increase (decrease) in cash and restricted cash		(2,963		)	(2,869		)	(138,343		)	—			(144,175		)
Cash and restricted cash, beginning of year		10,048			30,380			686,856			—			727,284
Cash and restricted cash, end of period		$	7,085		$	27,511		$	548,513		$	—		$	583,109

(1)     Dividends received by parent are included in net cash provided by (used for) operating activities.

XML

Basis of Presentation and Recent Accounting Pronouncements (Details) - USD ($)	Jun. 30, 2019	Mar. 31, 2019	Jan. 01, 2019	Dec. 31, 2018	Mar. 31, 2018	Dec. 31, 2017
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating lease liability	$ 150,341,000
ASU 2018-11
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative effect of an accounting change			$ 0
Retained earnings
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative effect of an accounting change		$ 0		$ 0	$ 0	$ 149,794,000
Accumulated other comprehensive income (loss), net of deferred income tax
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative effect of an accounting change		$ 0		$ 0	$ 0	$ (149,794,000)
Other assets
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Right-of-use assets	134,061,000
Other assets | ASU 2016-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Right-of-use assets			147,900,000
Other liabilities
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating lease liability	$ 150,341,000
Other liabilities | ASU 2016-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating lease liability			$ 163,600,000

XML

Share Transactions - Share repurchases (Details) - USD ($) shares in Millions, $ in Millions	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Class of Stock [Line Items]
Treasury stock, shares acquired (shares)	0.1	6.5
Shares repurchased for treasury	$ 2.9	$ 173.6
Common shares
Class of Stock [Line Items]
Cumulative number of shares acquired since inception of share repurchase program	386.3
Aggregate purchase price of shares acquired since inception of share repurchase program	$ 3,970.0
Remaining authorized repurchase amount	$ 160.9

XML

Share Transactions - Conversion of Non-voting common equivalent preferred shares (Details) - shares shares in Millions	1 Months Ended
	Mar. 31, 2018	Jun. 30, 2018
Class of Stock [Line Items]
Number of common shares issued on conversion	17.0
Number of convertible shares transferred		0.6

XML

Share Transactions - Series C Preferred Shares (Details) - Series C Preferred Shares	Jan. 02, 2018 $ / shares
Class of Stock [Line Items]
Preferred shares, dividend rate	6.75%
Preferred shares, redemption price	$ 25

XML

Earnings Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Numerator:
Net income		$ 485,845	$ 256,347	$ 981,343	$ 422,731
Amounts attributable to noncontrolling interests		(16,891)	(12,701)	(63,861)	(28,662)
Net income available to Arch		468,954	243,646	917,482	394,069
Preferred dividends		(10,403)	(10,403)	(20,806)	(20,840)
Loss on redemption of preferred shares		0	0	0	(2,710)
Net income available to Arch common shareholders		$ 458,551	$ 233,243	$ 896,676	$ 370,519
Denominator:
Weighted average common shares outstanding		401,482,784	404,800,421	400,837,181	399,485,135
Series D preferred shares	[1]	0	0	0	6,677,373
Weighted average common shares outstanding — basic		401,482,784	404,800,421	400,837,181	406,162,508
Effect of dilutive common share equivalents:
Nonvested restricted shares		1,937,626	1,575,749	1,720,417	1,837,356
Stock options	[2]	7,479,073	6,735,035	7,197,652	7,460,892
Weighted average common shares and common share equivalents outstanding — diluted		410,899,483	413,111,205	409,755,250	415,460,756
Earnings per common share:
Basic (per share)		$ 1.14	$ 0.58	$ 2.24	$ 0.91
Diluted (per share)		$ 1.12	$ 0.56	$ 2.19	$ 0.89
Stock options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per common share (shares)		2,016,830	5,350,733	2,560,755	5,372,789

[1] Such shares are convertible non-voting common equivalent preferred shares issued in connection with the UGC acquisition.

[2] 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 2019 second quarter and 2018 second quarter, the number of stock options excluded were 2,016,830 and 5,350,733, respectively. For the six months ended June 30, 2019 and 2018 period, the number of stock options excluded were 2,560,755 and 5,372,789, respectively.

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Segment Information - Summary of underwriting income or loss by segment (Details) $ in Thousands		3 Months Ended			6 Months Ended
		Jun. 30, 2019 USD ($)		Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($) segment		Jun. 30, 2018 USD ($)		Dec. 31, 2018 USD ($)
Segment Reporting Information [Line Items]
Gross premiums written		$ 1,937,809		$ 1,696,544	$ 4,015,688		$ 3,534,758
Premiums ceded		(492,911)		(397,648)	(1,045,531)		(823,318)
Net premiums written		1,444,898		1,298,896	2,970,157		2,711,440
Change in unearned premiums		18,829		37,867	(137,564)		(139,778)
Net premiums earned		1,463,727		1,336,763	2,832,593		2,571,662
Other underwriting income		5,953		3,874	14,778		9,223
Losses and loss adjustment expenses		(767,543)		(726,153)	(1,486,075)		(1,363,013)
Acquisition expenses, net		(210,089)		(202,838)	(407,937)		(394,214)
Other operating expenses		(198,914)		(176,181)	(400,077)		(351,196)
Underwriting income (loss)		293,134		235,465	553,282		472,462
Net investment income		155,038		135,668	311,987		262,392
Net realized gains (losses)		120,806		(76,611)	262,371		(187,609)
Net impairment losses recognized in earnings		(49)		(470)	(1,358)		(632)
Equity in net income of investment funds accounted for using the equity method		32,536		8,472	79,403		36,541
Other income (loss)		1,129		3,113	2,212		3,187
Corporate expenses		(16,073)	[1]	(15,604)	(32,845)	[1]	(30,086)	[1]
Transaction costs and other		(2,178)	[1]	(6,908)	(3,368)	[1]	(7,738)	[1]
Amortization of intangible assets		(19,794)		(26,472)	(40,211)		(53,208)
Interest expense		(29,280)		(30,344)	(58,345)		(60,980)
Net foreign exchange gains (losses)		(4,952)		53,706	(1,427)		33,985
Income before income taxes		530,317		280,015	1,071,701		468,314
Income tax expense		(44,472)		(23,668)	(90,358)		(45,583)
Net income		485,845		256,347	981,343		422,731
Dividends attributable to redeemable noncontrolling interests		(4,590)		(4,585)	(9,178)		(9,170)
Amounts attributable to non-redeemable noncontrolling interests		(12,301)		(8,116)	(54,683)		(19,492)
Net income available to Arch		468,954		243,646	917,482		394,069
Preferred dividends		(10,403)		(10,403)	(20,806)		(20,840)
Loss on redemption of preferred shares		0		0	0		(2,710)
Net income available to Arch common shareholders		$ 458,551		$ 233,243	$ 896,676		$ 370,519
Underwriting Ratios
Loss ratio		52.40%		54.30%	52.50%		53.00%
Acquisition expense ratio		14.40%		15.20%	14.40%		15.30%
Other operating expense ratio		13.60%		13.20%	14.10%		13.70%
Combined ratio		80.40%		82.70%	81.00%		82.00%
Goodwill and intangible assets		$ 641,010		$ 593,008	$ 641,010		$ 593,008		$ 634,920
Other
Segment Reporting Information [Line Items]
Number of segments | segment					2
Gross premiums written	[2]	161,978		175,175	$ 348,667		389,045
Premiums ceded		(42,608)		(34,589)	(83,910)		(68,907)
Net premiums written		119,370		140,586	264,757		320,138
Change in unearned premiums		31,948		18,932	32,655		(23,872)
Net premiums earned		151,318		159,518	297,412		296,266
Other underwriting income		673		688	1,265		1,389
Losses and loss adjustment expenses		(111,416)		(117,141)	(222,266)		(215,130)
Acquisition expenses, net		(29,556)		(34,289)	(58,582)		(65,610)
Other operating expenses		(15,612)		(9,094)	(27,800)		(17,793)
Underwriting income (loss)		(4,593)		(318)	(9,971)		(878)
Net investment income		32,000		27,907	67,700		54,388
Net realized gains (losses)		(4,306)		(17,066)	24,826		(16,205)
Net impairment losses recognized in earnings		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
Corporate expenses		0	[1]	0	0	[1]	0	[1]
Transaction costs and other		0	[1]	0	0	[1]	0	[1]
Amortization of intangible assets		0		0	0		0
Interest expense		(5,905)		(4,286)	(11,488)		(9,015)
Net foreign exchange gains (losses)		1,238		7,495	(412)		2,813
Income before income taxes		18,434		13,732	70,655		31,103
Income tax expense		(20)		(24)	(20)		(27)
Net income		18,414		13,708	70,635		31,076
Dividends attributable to redeemable noncontrolling interests		(4,590)		(4,585)	(9,178)		(9,170)
Amounts attributable to non-redeemable noncontrolling interests		(12,301)		(8,116)	(54,683)		(19,492)
Net income available to Arch		1,523		1,007	6,774		2,414
Preferred dividends		0		0	0		0
Loss on redemption of preferred shares							0
Net income available to Arch common shareholders		$ 1,523		$ 1,007	$ 6,774		$ 2,414
Underwriting Ratios
Loss ratio		73.60%		73.40%	74.70%		72.60%
Acquisition expense ratio		19.50%		21.50%	19.70%		22.10%
Other operating expense ratio		10.30%		5.70%	9.30%		6.00%
Combined ratio		103.40%		100.60%	103.70%		100.70%
Goodwill and intangible assets		$ 7,650		$ 7,650	$ 7,650		$ 7,650
Sub-Total
Segment Reporting Information [Line Items]
Number of segments | segment					3
Gross premiums written	[2]	1,829,829		1,591,202	$ 3,810,282		3,312,807
Premiums ceded		(504,301)		(432,892)	(1,104,882)		(921,505)
Net premiums written		1,325,528		1,158,310	2,705,400		2,391,302
Change in unearned premiums		(13,119)		18,935	(170,219)		(115,906)
Net premiums earned		1,312,409		1,177,245	2,535,181		2,275,396
Other underwriting income		5,280		3,186	13,513		7,834
Losses and loss adjustment expenses		(656,127)		(609,012)	(1,263,809)		(1,147,883)
Acquisition expenses, net		(180,533)		(168,549)	(349,355)		(328,604)
Other operating expenses		(183,302)		(167,087)	(372,277)		(333,403)
Underwriting income (loss)		297,727		235,783	563,253		473,340
Net investment income		123,038		107,761	244,287		208,004
Net realized gains (losses)		125,112		(59,545)	237,545		(171,404)
Net impairment losses recognized in earnings		(49)		(470)	(1,358)		(632)
Equity in net income of investment funds accounted for using the equity method		32,536		8,472	79,403		36,541
Other income (loss)		1,129		3,113	2,212		3,187
Corporate expenses		(16,073)	[1]	(15,604)	(32,845)	[1]	(30,086)	[1]
Transaction costs and other		(2,178)	[1]	(6,908)	(3,368)	[1]	(7,738)	[1]
Amortization of intangible assets		(19,794)		(26,472)	(40,211)		(53,208)
Interest expense		(23,375)		(26,058)	(46,857)		(51,965)
Net foreign exchange gains (losses)		(6,190)		46,211	(1,015)		31,172
Income before income taxes		511,883		266,283	1,001,046		437,211
Income tax expense		(44,452)		(23,644)	(90,338)		(45,556)
Net income		467,431		242,639	910,708		391,655
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		467,431		242,639	910,708		391,655
Preferred dividends		(10,403)		(10,403)	(20,806)		(20,840)
Loss on redemption of preferred shares							(2,710)
Net income available to Arch common shareholders		$ 457,028		$ 232,236	$ 889,902		$ 368,105
Underwriting Ratios
Loss ratio		50.00%		51.70%	49.90%		50.40%
Acquisition expense ratio		13.80%		14.30%	13.80%		14.40%
Other operating expense ratio		14.00%		14.20%	14.70%		14.70%
Combined ratio		77.80%		80.20%	78.40%		79.50%
Goodwill and intangible assets		$ 633,360		$ 585,358	$ 633,360		$ 585,358
Sub-Total | Insurance
Segment Reporting Information [Line Items]
Gross premiums written	[2]	919,925		769,372	1,861,879		1,592,750
Premiums ceded		(292,095)		(245,265)	(612,717)		(492,445)
Net premiums written		627,830		524,107	1,249,162		1,100,305
Change in unearned premiums		(35,388)		22,342	(103,215)		(15,119)
Net premiums earned		592,442		546,449	1,145,947		1,085,186
Other underwriting income		0		0	0		0
Losses and loss adjustment expenses		(389,172)		(357,465)	(745,895)		(711,195)
Acquisition expenses, net		(91,094)		(90,670)	(173,918)		(175,839)
Other operating expenses		(109,523)		(92,680)	(222,919)		(184,654)
Underwriting income (loss)		$ 2,653		$ 5,634	$ 3,215		$ 13,498
Underwriting Ratios
Loss ratio		65.70%		65.40%	65.10%		65.50%
Acquisition expense ratio		15.40%		16.60%	15.20%		16.20%
Other operating expense ratio		18.50%		17.00%	19.50%		17.00%
Combined ratio		99.60%		99.00%	99.80%		98.70%
Goodwill and intangible assets		$ 157,440		$ 20,724	$ 157,440		$ 20,724
Sub-Total | Reinsurance
Segment Reporting Information [Line Items]
Gross premiums written	[2]	545,547		490,327	1,228,402		1,067,810
Premiums ceded		(169,457)		(136,247)	(401,024)		(331,977)
Net premiums written		376,090		354,080	827,378		735,833
Change in unearned premiums		(8,906)		(13,762)	(113,829)		(116,343)
Net premiums earned		367,184		340,318	713,549		619,490
Other underwriting income		1,224		(129)	5,601		1,103
Losses and loss adjustment expenses		(240,958)		(229,956)	(480,768)		(371,631)
Acquisition expenses, net		(56,785)		(50,142)	(111,111)		(98,461)
Other operating expenses		(33,960)		(35,678)	(69,664)		(71,249)
Underwriting income (loss)		$ 36,705		$ 24,413	$ 57,607		$ 79,252
Underwriting Ratios
Loss ratio		65.60%		67.60%	67.40%		60.00%
Acquisition expense ratio		15.50%		14.70%	15.60%		15.90%
Other operating expense ratio		9.20%		10.50%	9.80%		11.50%
Combined ratio		90.30%		92.80%	92.80%		87.40%
Goodwill and intangible assets		$ 0		$ 0	$ 0		$ 0
Sub-Total | Mortgage
Segment Reporting Information [Line Items]
Gross premiums written	[2]	364,465		330,990	720,515		652,168
Premiums ceded		(42,857)		(50,867)	(91,655)		(97,004)
Net premiums written		321,608		280,123	628,860		555,164
Change in unearned premiums		31,175		10,355	46,825		15,556
Net premiums earned		352,783		290,478	675,685		570,720
Other underwriting income		4,056		3,315	7,912		6,731
Losses and loss adjustment expenses		(25,997)		(21,591)	(37,146)		(65,057)
Acquisition expenses, net		(32,654)		(27,737)	(64,326)		(54,304)
Other operating expenses		(39,819)		(38,729)	(79,694)		(77,500)
Underwriting income (loss)		$ 258,369		$ 205,736	$ 502,431		$ 380,590
Underwriting Ratios
Loss ratio		7.40%		7.40%	5.50%		11.40%
Acquisition expense ratio		9.30%		9.50%	9.50%		9.50%
Other operating expense ratio		11.30%		13.30%	11.80%		13.60%
Combined ratio		28.00%		30.20%	26.80%		34.50%
Goodwill and intangible assets		$ 475,920		$ 564,634	$ 475,920		$ 564,634

[1] Certain expenses have been excluded from ‘corporate expenses’ and reflected in ‘transaction costs and other.’

[2] 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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Reserve for Losses and Loss Adjustment Expenses - Reconciliation of beginning and ending balances of losses and loss adjustment reserves (Details) - USD ($) $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2019		Jun. 30, 2018		Jun. 30, 2019	Jun. 30, 2018
Liability for Future Policy Benefits and Unpaid Claims and Claims Adjustment Expense [Abstract]
Reserve for losses and loss adjustment expenses at beginning of period	$ 12,010,041		$ 11,496,205		$ 11,853,297	$ 11,383,792
Unpaid losses and loss adjustment expenses recoverable	2,970,159		2,446,990		2,814,291	2,464,910
Net reserve for losses and loss adjustment expenses at beginning of period	9,039,882		9,049,215		9,039,006	8,918,882
Net incurred losses and loss adjustment expenses relating to losses occurring in:
Current year	805,728		790,742		1,563,692	1,478,627
Prior years	(38,185)		(64,589)		(77,617)	(115,614)
Total net incurred losses and loss adjustment expenses	767,543		726,153		1,486,075	1,363,013
Retroactive reinsurance transaction	0	[1]	(420,404)	[1]	(225,500)	(420,404)
Net foreign exchange (gains) losses	(1,277)		(120,292)		(1,781)	(76,278)
Net paid losses and loss adjustment expenses relating to losses occurring in:
Current year	(61,148)		(59,022)		(125,488)	(95,022)
Prior years	(539,481)		(403,062)		(966,793)	(917,603)
Total net paid losses and loss adjustment expenses	(600,629)		(462,084)		(1,092,281)	(1,012,625)
Net reserve for losses and loss adjustment expenses at end of period	9,205,519		8,772,588		9,205,519	8,772,588
Unpaid losses and loss adjustment expenses recoverable	3,024,797		2,651,749		3,024,797	2,651,749
Reserve for losses and loss adjustment expenses at end of period	$ 12,230,316		$ 11,424,337		$ 12,230,316	$ 11,424,337

[1] During the 2019 first quarter

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Reserve for Losses and Loss Adjustment Expenses - Prior year development (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items]
Prior year development	$ (38,185)	$ (64,589)	$ (77,617)	$ (115,614)
Underwriting segments | Insurance
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items]
Prior year development	$ (2,600)	$ (6,100)	$ (7,000)	$ (8,200)
Percentage of prior year development	0.40%	1.10%	0.60%	0.80%
Underwriting segments | Insurance | Short Tailed Lines
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items]
Prior year development	$ (8,000)	$ (13,900)	$ (17,700)	$ (22,700)
Underwriting segments | Insurance | Medium Tailed Lines
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items]
Prior year development	10,400	22,100	17,300	31,700
Underwriting segments | Insurance | Medium Tailed Lines | Programs
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items]
Prior year development	15,500	11,600	23,200	21,900
Underwriting segments | Insurance | Medium Tailed Lines | Contract binding
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items]
Prior year development		18,000	9,700	25,600
Underwriting segments | Insurance | Medium Tailed Lines | Other product lines
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items]
Prior year development	(5,100)	(7,600)	(15,600)	(15,800)
Underwriting segments | Insurance | Long Tailed Lines
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items]
Prior year development	(4,900)	(14,300)	(6,600)	(17,200)
Underwriting segments | Insurance | Long Tailed Lines | Executive assurance
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items]
Prior year development	(5,100)	(6,900)	(5,700)	(7,500)
Underwriting segments | Insurance | Long Tailed Lines | Healthcare
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items]
Prior year development		(4,900)		(7,000)
Underwriting segments | Reinsurance
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items]
Prior year development	$ (12,700)	$ (33,000)	$ (11,000)	$ (69,600)
Percentage of prior year development	3.50%	9.70%	1.50%	11.20%
Underwriting segments | Reinsurance | Short Tailed Lines
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items]
Prior year development	$ (1,800)	$ (22,200)	$ 4,300	$ (51,100)
Underwriting segments | Reinsurance | Short Tailed Lines | Property catastrophe and property other than property catastrophe
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items]
Prior year development		(19,300)	17,900	(40,400)
Underwriting segments | Reinsurance | Short Tailed Lines | Property catastrophe and property other than property catastrophe | Typhoon Jebi
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items]
Prior year development			16,000
Underwriting segments | Reinsurance | Short Tailed Lines | Other specialty lines
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items]
Prior year development			(10,200)
Underwriting segments | Reinsurance | Medium Tailed And Long Tailed Lines
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items]
Prior year development	(10,900)	(10,800)	(15,300)	(18,500)
Underwriting segments | Reinsurance | Medium Tailed And Long Tailed Lines | Casualty
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items]
Prior year development		(6,900)	(9,100)	(8,100)
Underwriting segments | Reinsurance | Medium Tailed And Long Tailed Lines | Marine
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items]
Prior year development		(3,800)	(6,200)	(10,000)
Underwriting segments | Mortgage
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items]
Prior year development	$ (22,800)	$ (23,300)	$ (59,400)	$ (36,300)
Percentage of prior year development	6.50%	8.00%	8.80%	6.40%
Underwriting segments | Other
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items]
Prior year development	$ (100)	$ (2,200)	$ (100)	$ (1,600)

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Investment Information - Summary of available for sale securities (Details) - USD ($) $ in Thousands		6 Months Ended	12 Months Ended
		Jun. 30, 2019	Dec. 31, 2018
Available for sale securities:
Estimated Fair Value		$ 17,130,910	$ 15,908,390
Gross Unrealized Gains		363,099	76,259
Gross Unrealized Losses		(62,414)	(205,900)
Cost or Amortized Cost		16,830,225	16,038,031
OTTI Unrealized Losses		(6)	(75)
Fixed maturities
Available for sale securities:
Estimated Fair Value		16,308,949	14,952,510
Gross Unrealized Gains	[1]	362,815	76,223
Gross Unrealized Losses	[1]	(61,934)	(205,506)
Cost or Amortized Cost	[1]	16,008,068	15,081,793
OTTI Unrealized Losses	[1],[2]	(6)	(75)
Fixed maturities | Corporate bonds
Available for sale securities:
Estimated Fair Value		6,044,081	5,537,548
Gross Unrealized Gains	[1]	166,372	14,476
Gross Unrealized Losses	[1]	(19,805)	(105,428)
Cost or Amortized Cost	[1]	5,897,514	5,628,500
OTTI Unrealized Losses	[1],[2]	0	(69)
Fixed maturities | Mortgage backed securities
Available for sale securities:
Estimated Fair Value		523,019	541,193
Gross Unrealized Gains	[1]	11,385	3,991
Gross Unrealized Losses	[1]	(187)	(3,216)
Cost or Amortized Cost	[1]	511,821	540,418
OTTI Unrealized Losses	[1],[2]	(6)	(6)
Fixed maturities | Municipal bonds
Available for sale securities:
Estimated Fair Value		582,497	1,013,395
Gross Unrealized Gains	[1]	21,755	5,380
Gross Unrealized Losses	[1]	(58)	(11,891)
Cost or Amortized Cost	[1]	560,800	1,019,906
OTTI Unrealized Losses	[1],[2]	0	0
Fixed maturities | Commercial mortgage backed securities
Available for sale securities:
Estimated Fair Value		686,707	729,442
Gross Unrealized Gains	[1]	21,272	2,650
Gross Unrealized Losses	[1]	(228)	(10,751)
Cost or Amortized Cost	[1]	665,663	737,543
OTTI Unrealized Losses	[1],[2]	0	0
Fixed maturities | US government and government agencies
Available for sale securities:
Estimated Fair Value		4,906,996	3,758,698
Gross Unrealized Gains	[1]	68,017	27,189
Gross Unrealized Losses	[1]	(2,051)	(8,474)
Cost or Amortized Cost	[1]	4,841,030	3,739,983
OTTI Unrealized Losses	[1],[2]	0	0
Fixed maturities | Non-US government securities
Available for sale securities:
Estimated Fair Value		1,928,752	1,771,338
Gross Unrealized Gains	[1]	45,881	14,477
Gross Unrealized Losses	[1]	(36,125)	(50,948)
Cost or Amortized Cost	[1]	1,918,996	1,807,809
OTTI Unrealized Losses	[1],[2]	0	0
Fixed maturities | Asset backed securities
Available for sale securities:
Estimated Fair Value		1,636,897	1,600,896
Gross Unrealized Gains	[1]	28,133	8,060
Gross Unrealized Losses	[1]	(3,480)	(14,798)
Cost or Amortized Cost	[1]	1,612,244	1,607,634
OTTI Unrealized Losses	[1],[2]	0	0
Short-term investments
Available for sale securities:
Estimated Fair Value		821,961	955,880
Gross Unrealized Gains		284	36
Gross Unrealized Losses		(480)	(394)
Cost or Amortized Cost		822,157	956,238
OTTI Unrealized Losses	[2]	$ 0	$ 0

[1] In securities lending transactions, the Company receives collateral in excess of the fair value of the fixed maturities 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, 2019 the net unrealized loss related to securities for which a non-credit OTTI was recognized in AOCI was $0.01 million, compared to net unrealized loss of $0.04 million at December 31, 2018

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Investment Information - Aging of available for sale securities in an unrealized loss position (Details) - USD ($) $ in Thousands		Jun. 30, 2019	Dec. 31, 2018
Available for sale securities:
Estimated Fair Value - Less than 12 Months		$ 2,662,411	$ 5,843,772
Gross Unrealized Losses - Less than 12 Months		(49,030)	(120,614)
Estimated Fair Value - 12 Months or More		770,586	3,094,853
Gross Unrealized Losses - 12 Months or More		(13,384)	(85,286)
Estimated Fair Value - Total		3,432,997	8,938,625
Gross Unrealized Losses - Total		(62,414)	(205,900)
Fixed maturities
Available for sale securities:
Estimated Fair Value - Less than 12 Months	[1]	2,608,980	5,720,894
Gross Unrealized Losses - Less than 12 Months	[1]	(48,550)	(120,220)
Estimated Fair Value - 12 Months or More	[1]	770,586	3,094,853
Gross Unrealized Losses - 12 Months or More	[1]	(13,384)	(85,286)
Estimated Fair Value - Total	[1]	3,379,566	8,815,747
Gross Unrealized Losses - Total	[1]	(61,934)	(205,506)
Fixed maturities | Corporate bonds
Available for sale securities:
Estimated Fair Value - Less than 12 Months	[1]	259,361	2,983,195
Gross Unrealized Losses - Less than 12 Months	[1]	(10,678)	(68,910)
Estimated Fair Value - 12 Months or More	[1]	375,478	1,234,865
Gross Unrealized Losses - 12 Months or More	[1]	(9,127)	(36,518)
Estimated Fair Value - Total	[1]	634,839	4,218,060
Gross Unrealized Losses - Total	[1]	(19,805)	(105,428)
Fixed maturities | Mortgage backed securities
Available for sale securities:
Estimated Fair Value - Less than 12 Months	[1]	19,612	84,296
Gross Unrealized Losses - Less than 12 Months	[1]	(169)	(695)
Estimated Fair Value - 12 Months or More	[1]	261	109,009
Gross Unrealized Losses - 12 Months or More	[1]	(18)	(2,521)
Estimated Fair Value - Total	[1]	19,873	193,305
Gross Unrealized Losses - Total	[1]	(187)	(3,216)
Fixed maturities | Municipal bonds
Available for sale securities:
Estimated Fair Value - Less than 12 Months	[1]	0	233,081
Gross Unrealized Losses - Less than 12 Months	[1]	0	(2,074)
Estimated Fair Value - 12 Months or More	[1]	12,489	408,155
Gross Unrealized Losses - 12 Months or More	[1]	(58)	(9,817)
Estimated Fair Value - Total	[1]	12,489	641,236
Gross Unrealized Losses - Total	[1]	(58)	(11,891)
Fixed maturities | Commercial mortgage backed securities
Available for sale securities:
Estimated Fair Value - Less than 12 Months	[1]	18,917	223,341
Gross Unrealized Losses - Less than 12 Months	[1]	(106)	(2,831)
Estimated Fair Value - 12 Months or More	[1]	23,198	193,956
Gross Unrealized Losses - 12 Months or More	[1]	(122)	(7,920)
Estimated Fair Value - Total	[1]	42,115	417,297
Gross Unrealized Losses - Total	[1]	(228)	(10,751)
Fixed maturities | US government and government agencies
Available for sale securities:
Estimated Fair Value - Less than 12 Months	[1]	906,497	635,049
Gross Unrealized Losses - Less than 12 Months	[1]	(1,711)	(1,354)
Estimated Fair Value - 12 Months or More	[1]	104,692	391,102
Gross Unrealized Losses - 12 Months or More	[1]	(340)	(7,120)
Estimated Fair Value - Total	[1]	1,011,189	1,026,151
Gross Unrealized Losses - Total	[1]	(2,051)	(8,474)
Fixed maturities | Non-US government securities
Available for sale securities:
Estimated Fair Value - Less than 12 Months	[1]	1,092,560	1,028,340
Gross Unrealized Losses - Less than 12 Months	[1]	(33,985)	(35,524)
Estimated Fair Value - 12 Months or More	[1]	124,466	389,671
Gross Unrealized Losses - 12 Months or More	[1]	(2,140)	(15,424)
Estimated Fair Value - Total	[1]	1,217,026	1,418,011
Gross Unrealized Losses - Total	[1]	(36,125)	(50,948)
Fixed maturities | Asset backed securities
Available for sale securities:
Estimated Fair Value - Less than 12 Months	[1]	312,033	533,592
Gross Unrealized Losses - Less than 12 Months	[1]	(1,901)	(8,832)
Estimated Fair Value - 12 Months or More	[1]	130,002	368,095
Gross Unrealized Losses - 12 Months or More	[1]	(1,579)	(5,966)
Estimated Fair Value - Total	[1]	442,035	901,687
Gross Unrealized Losses - Total	[1]	(3,480)	(14,798)
Short-term investments
Available for sale securities:
Estimated Fair Value - Less than 12 Months		53,431	122,878
Gross Unrealized Losses - Less than 12 Months		(480)	(394)
Estimated Fair Value - 12 Months or More		0	0
Gross Unrealized Losses - 12 Months or More		0	0
Estimated Fair Value - Total		53,431	122,878
Gross Unrealized Losses - Total		$ (480)	$ (394)

[1] In securities lending transactions, the Company receives collateral in excess of the fair value of the fixed maturities 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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Investment Information - Maturity profile of available for sale securities) (Details) - USD ($) $ in Thousands		Jun. 30, 2019	Dec. 31, 2018
Estimated Fair Value:
Estimated fair value		$ 15,881,732	$ 14,699,010
Amortized Cost:
Amortized cost		15,584,662	14,829,902
Fixed maturities
Estimated Fair Value:
Due in one year or less		414,736	276,682
Due after one year through five years		9,833,517	8,666,297
Due after five years through 10 years		3,028,435	2,919,232
Due after 10 years		185,638	218,768
Single maturity date		13,462,326	12,080,979
Estimated fair value	[1]	16,308,949	14,952,510
Amortized Cost:
Due in one year or less		413,481	279,135
Due after one year through five years		9,702,349	8,738,944
Due after five years through 10 years		2,923,881	2,951,582
Due after 10 years		178,629	226,537
Single maturity date		13,218,340	12,196,198
Amortized cost	[1]	16,008,068	15,081,793
Fixed maturities | Mortgage backed securities
Estimated Fair Value:
Securities without single maturity date		523,019	541,193
Amortized Cost:
Securities without single maturity date		511,821	540,418
Fixed maturities | Commercial mortgage backed securities
Estimated Fair Value:
Securities without single maturity date		686,707	729,442
Amortized Cost:
Securities without single maturity date		665,663	737,543
Fixed maturities | Asset backed securities
Estimated Fair Value:
Securities without single maturity date		1,636,897	1,600,896
Amortized Cost:
Securities without single maturity date		$ 1,612,244	$ 1,607,634

[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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Investment Information - Securities lending agreements (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Disclosure Investment Information [Abstract]
Fair value of cash collateral received on securities lending	$ 11,400	$ 19,000
Fair value of non-cash collateral received on securities lending	438,900	255,100
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items]
Securities lending payable	450,312	274,125
Gross amount of recognized liabilities for securities lending in offsetting disclosure in note 8	0	0
Amounts related to securities lending not included in offsetting disclosure in note 8	450,312	274,125
US government and government agencies
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items]
Securities lending payable	434,578	251,859
Corporate bonds
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items]
Securities lending payable	2,356	7,129
Equity securities
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items]
Securities lending payable	13,378	15,137
Overnight and continuous
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items]
Securities lending payable	232,590	241,542
Overnight and continuous | US government and government agencies
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items]
Securities lending payable	216,856	219,276
Overnight and continuous | Corporate bonds
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items]
Securities lending payable	2,356	7,129
Overnight and continuous | Equity securities
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items]
Securities lending payable	13,378	15,137
Less than 30 days
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items]
Securities lending payable	0	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	0
Less than 30 days | Corporate bonds
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items]
Securities lending payable	0	0
Less than 30 days | Equity securities
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items]
Securities lending payable	0	0
30 - 90 days
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items]
Securities lending payable	217,722	32,583
30 - 90 days | US government and government agencies
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items]
Securities lending payable	217,722	32,583
30 - 90 days | Corporate bonds
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items]
Securities lending payable	0	0
30 - 90 days | Equity securities
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items]
Securities lending payable	0	0
90 days or more
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items]
Securities lending payable	0	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	0
90 days or more | Corporate bonds
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items]
Securities lending payable	0	0
90 days or more | Equity securities
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items]
Securities lending payable	$ 0	$ 0

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Investment Information - Other investments (Details) - Fair value option - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Schedule Of Other Investments [Line Items]
Other investments	$ 2,394,518	$ 2,311,939
Term loan investments
Schedule Of Other Investments [Line Items]
Other investments	1,341,445	1,282,287
Other investments par	1,427,330	1,369,216
Lending
Schedule Of Other Investments [Line Items]
Other investments	585,954	524,112
Credit related funds
Schedule Of Other Investments [Line Items]
Other investments	166,673	202,123
Energy
Schedule Of Other Investments [Line Items]
Other investments	123,547	117,509
Investment grade fixed income
Schedule Of Other Investments [Line Items]
Other investments	86,808	101,902
Infrastructure
Schedule Of Other Investments [Line Items]
Other investments	49,260	45,371
Private equity
Schedule Of Other Investments [Line Items]
Other investments	23,925	24,383
Real estate
Schedule Of Other Investments [Line Items]
Other investments	$ 16,906	$ 14,252

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Investment Information - Equity method investments (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Schedule of Equity Method Investments [Line Items]
Investments accounted for using the equity method	$ 1,581,972	$ 1,493,791
Credit related funds
Schedule of Equity Method Investments [Line Items]
Investments accounted for using the equity method	436,118	429,402
Equity securities
Schedule of Equity Method Investments [Line Items]
Investments accounted for using the equity method	324,525	375,273
Real estate
Schedule of Equity Method Investments [Line Items]
Investments accounted for using the equity method	251,891	232,647
Lending
Schedule of Equity Method Investments [Line Items]
Investments accounted for using the equity method	193,397	125,041
Private equity
Schedule of Equity Method Investments [Line Items]
Investments accounted for using the equity method	131,863	114,019
Infrastructure
Schedule of Equity Method Investments [Line Items]
Investments accounted for using the equity method	141,744	113,748
Energy
Schedule of Equity Method Investments [Line Items]
Investments accounted for using the equity method	$ 102,434	$ 103,661

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Investment Information - Fair value option (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Fair Value, Option, Quantitative Disclosures [Line Items]
Investments accounted for using the fair value option	$ 3,721,035	$ 3,983,571
Fixed maturities
Fair Value, Option, Quantitative Disclosures [Line Items]
Investments accounted for using the fair value option	965,161	1,245,562
Other investments
Fair Value, Option, Quantitative Disclosures [Line Items]
Investments accounted for using the fair value option	2,394,518	2,311,939
Short-term investments
Fair Value, Option, Quantitative Disclosures [Line Items]
Investments accounted for using the fair value option	257,465	322,177
Equity securities
Fair Value, Option, Quantitative Disclosures [Line Items]
Investments accounted for using the fair value option	$ 103,891	$ 103,893

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Investment Information - Limited partnership interests (Details) - USD ($) $ in Thousands		Jun. 30, 2019	Dec. 31, 2018
Schedule of Equity Method Investments [Line Items]
Maximum Exposure to Loss		$ 1,760,949	$ 1,656,189
Aggregate unfunded commitments		1,920,000	1,770,000
Equity method investments
Schedule of Equity Method Investments [Line Items]
Maximum Exposure to Loss	[1]	1,581,972	1,493,791
Aggregate unfunded commitments		1,410,000	1,220,000
Fair value option
Schedule of Equity Method Investments [Line Items]
Maximum Exposure to Loss	[2]	178,977	162,398
Aggregate unfunded commitments		$ 63,600	$ 117,500

[1] Aggregate unfunded commitments were $1.41 billion at June 30, 2019, compared to $1.22 billion at December 31, 2018.

[2] Aggregate unfunded commitments were $63.6 million at June 30, 2019, compared to $117.5 million at December 31, 2018.

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Investment Information - Net investment income (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Net investment income:
Gross investment income		$ 176,498	$ 162,447	$ 359,276	$ 315,136
Investment expenses		(21,460)	(26,779)	(47,289)	(52,744)
Net investment income		155,038	135,668	311,987	262,392
Fixed maturities
Net investment income:
Gross investment income		125,018	115,110	254,817	222,997
Term loans
Net investment income:
Gross investment income		24,730	20,763	49,346	40,527
Equity securities
Net investment income:
Gross investment income		4,368	4,777	7,356	7,345
Short-term investments
Net investment income:
Gross investment income		3,859	4,392	8,038	9,252
Other
Net investment income:
Gross investment income	[1]	$ 18,523	$ 17,405	$ 39,719	$ 35,015

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

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Investment Information - Net realized gains and losses (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Net realized gains and losses:
Available for sale securities, gross gains on investment sales		$ 75,090	$ 18,777	$ 118,455	$ 33,742
Available for sale securities, gross losses on investment sales		(15,281)	(57,711)	(46,937)	(140,262)
Net realized gains (losses) on sales during the period		(6,644)	(5,918)	4,286	(11,286)
Net unrealized gains (losses) on equity securities still held at reporting date		22,632	(7,278)	59,768	(14,861)
Derivative instruments	[1]	63,966	(2,146)	99,837	(6,109)
Other	[2]	(1,628)	(248)	(10,038)	(9,338)
Net realized gains (losses)		120,806	(76,611)	262,371	(187,609)
Fixed maturities
Net realized gains and losses:
Change in fair value of assets and liabilities accounted for using the fair value option		11,429	(22,927)	42,577	(40,478)
Other investments
Net realized gains and losses:
Change in fair value of assets and liabilities accounted for using the fair value option		(33,780)	(254)	(15,585)	(6,628)
Equity securities
Net realized gains and losses:
Change in fair value of assets and liabilities accounted for using the fair value option		6,414	1,230	10,680	7,898
Short-term investments
Net realized gains and losses:
Change in fair value of assets and liabilities accounted for using the fair value option		$ (1,392)	$ (136)	$ (672)	$ (287)

[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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Investment Information - Net impairment losses recognized in earnings (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Net impairment losses recognized in earnings	$ (49)	$ (470)	$ (1,358)	$ (632)
Fixed maturities
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Net impairment losses recognized in earnings	(49)	(470)	(1,358)	(632)
Fixed maturities | Mortgage backed securities
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Net impairment losses recognized in earnings	(24)	(81)	(555)	(123)
Fixed maturities | Corporate bonds
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Net impairment losses recognized in earnings	(25)	(241)	(590)	(361)
Fixed maturities | Asset backed securities
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Net impairment losses recognized in earnings	$ 0	$ (148)	$ (213)	$ (148)

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Investment Information - Other than temporary impairments rollforward (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Rollforward:
Balance at start of period	$ 346	$ 767	$ 637	$ 767
Credit loss impairments recognized on securities not previously impaired	0	0	0	0
Credit loss impairments recognized on securities previously impaired	0	0	0	0
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	0	(69)	(291)	(69)
Balance at end of period	$ 346	$ 698	$ 346	$ 698

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Investment Information - Restricted assets (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Restricted Assets [Line Items]
Restricted assets	$ 8,222,232	$ 7,553,903
Collateral or guarantees - affiliated transactions
Restricted Assets [Line Items]
Restricted assets	4,758,653	4,623,483
Collateral or guarantees - third party agreements
Restricted Assets [Line Items]
Restricted assets	2,612,380	2,181,682
Deposits with US regulatory authorities
Restricted Assets [Line Items]
Restricted assets	788,750	689,114
Deposits with non-US regulatory authorities
Restricted Assets [Line Items]
Restricted assets	62,449	59,624
Watford Re
Restricted Assets [Line Items]
Assets pledged as collateral	$ 1,100,000	$ 1,300,000

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Investment Information - Cash and restricted cash (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018	Jun. 30, 2018	Dec. 31, 2017
Disclosure Investment Information [Abstract]
Cash	$ 605,316	$ 646,556
Restricted cash (included in ‘other assets’)	77,759	78,087
Cash and restricted cash	$ 683,075	$ 724,643	$ 583,109	$ 727,284

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Investment Information - Narrative (Details) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2019 USD ($) lots	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($) lots	Jun. 30, 2018 USD ($)	Dec. 31, 2018 USD ($) lots
Narrative items:
Investable assets	$ 23,550,000		$ 23,550,000
Equity in net income of investment funds accounted for using the equity method	32,536	$ 8,472	79,403	$ 36,541
OTTI unrealized (losses) gains at current fair value	$ (10)		$ (10)		$ (40)
Continuous unrealized loss, qualitative disclosures:
Number of positions in an unrealized loss position (lots) | lots	1,690		1,690		5,870
Total number of positions (lots) | lots	8,730		8,730		8,450
Largest single loss	$ 3,100		$ 3,100		$ 2,600
Equity securities, at fair value	670,943		670,943		338,899
OTTI unrealized losses (gains)			$ 6		$ 75
Minimum
Narrative items:
Time lag for reporting			1 month
Maximum
Narrative items:
Time lag for reporting			3 months
Underwriting segments
Narrative items:
Investable assets	20,780,000		$ 20,780,000
Equity in net income of investment funds accounted for using the equity method	32,536	8,472	79,403	36,541
Other
Narrative items:
Investable assets	2,770,000		2,770,000
Equity in net income of investment funds accounted for using the equity method	$ 0	$ 0	$ 0	$ 0

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Fair Value - Fair Value Hierarchy (Details) - Recurring - USD ($) $ in Thousands		Jun. 30, 2019	Dec. 31, 2018
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		$ 6,510,032	$ 5,332,640
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) | Securities sold but not yet purchased
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) | Derivative instruments
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) | Fixed maturities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	[2]	4,746,260	3,657,181
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]	4,746,260	3,657,181
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		620,508	321,927
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		803,337	875,881
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		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		339,927	477,651
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 | Municipal 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 | Commercial 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 | US government and government agencies
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		4,378	111,138
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		247,216	278,579
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		47,157	48,827
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		41,176	39,107
Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		13,819,963	13,852,372
Liabilities measured at fair value		(87,186)	(28,454)
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) | Securities sold but not yet purchased
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities measured at fair value	[1]	(48,823)	(7,790)
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		(38,363)	(20,664)
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]	11,554,757	11,286,875
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]	6,036,439	5,529,407
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]	522,729	540,884
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]	582,497	1,013,395
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]	686,707	729,438
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]	160,736	101,517
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]	1,928,752	1,771,338
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]	1,636,897	1,600,896
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		12,516	31,867
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		18,624	79,999
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		30,653	73,893
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		2,203,413	2,379,738
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		647,328	846,827
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		16,076	16,731
Significant Other Observable Inputs (Level 2) | Fair value option | Municipal bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		6,731	7,144
Significant Other Observable Inputs (Level 2) | Fair value option | Commercial mortgage backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		0	0
Significant Other Observable Inputs (Level 2) | Fair value option | US government and government agencies
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		110	108
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		56,416	79,066
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		208,019	178,790
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		10,249	43,598
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		589	55,066
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		1,257,895	1,152,408
Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		236,665	76,917
Liabilities measured at fair value		(7,825)	(66,665)
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		(7,825)	(66,665)
Significant Unobservable Inputs (Level 3) | Securities sold but not yet purchased
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) | Derivative instruments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities measured at fair value		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]	7,932	8,454
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]	7,642	8,141
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]	290	309
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	4
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]	0	0
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		51,212	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) | Derivative instruments
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
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		177,521	68,463
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		26,103	5,758
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 | Municipal 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 | Commercial 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 | US government and government agencies
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		56,145	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		95,273	62,705
Estimated Fair Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		21,566,834	20,319,648
Liabilities measured at fair value		(95,011)	(95,119)
Estimated Fair Value | Contingent consideration liability
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities measured at fair value		(7,825)	(66,665)
Estimated Fair Value | Securities sold but not yet purchased
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities measured at fair value	[1]	(48,823)	(7,790)
Estimated Fair Value | Derivative instruments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities measured at fair value		(38,363)	(20,664)
Estimated Fair Value | Fixed maturities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		16,308,949	14,952,510
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		6,044,081	5,537,548
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		523,019	541,193
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		582,497	1,013,395
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		686,707	729,442
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		4,906,996	3,758,698
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		1,928,752	1,771,338
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		1,636,897	1,600,896
Estimated Fair Value | Equity securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		684,236	353,794
Estimated Fair Value | Short-term investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		821,961	955,880
Estimated Fair Value | Derivative instruments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		30,653	73,893
Estimated Fair Value | Fair value option
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		3,721,035	3,983,571
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		673,431	852,585
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		16,076	16,731
Estimated Fair Value | Fair value option | Municipal bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		6,731	7,144
Estimated Fair Value | Fair value option | Commercial mortgage backed securities
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 option | US government and government agencies
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value		4,488	111,246
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		56,416	79,066
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		208,019	178,790
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		257,465	322,177
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		103,891	103,893
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		1,394,344	1,254,220
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]	$ 1,000,174	$ 1,057,719

[1] Represents the Company’s obligations to deliver securities that it did not own at the time of sale. Such amounts are included in “other liabilities” on the Company’s consolidated balance sheets.

[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, “—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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Fair Value - Rollforward of Level 3 assets and liabilities (Details) - Recurring - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Contingent consideration liability
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance at beginning of period		$ (68,121)	$ (62,449)	$ (66,665)	$ (60,996)
Total gains or (losses) (realized/unrealized) - included in earnings	[1]	(423)	(1,481)	(1,331)	(2,934)
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	(548)	0
Sales		0	0	0	0
Settlements		60,719	0	(60,719)	0
Transfers in and/or out of Level 3		0	0	0	0
Balance at end of period		(7,825)	(63,930)	(7,825)	(63,930)
Available for sale | Structured securities
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance at beginning of period	[2]	302	5,413	313	5,927
Total gains or (losses) (realized/unrealized) - included in earnings	[1],[2]	0	3	1,757	4
Total gains or (losses) (realized/unrealized) - included in other comprehensive income	[2]	1	(4)	5	(8)
Purchases, issuances, sales and settlements
Purchases	[2]	0	0	0	0
Issuances	[2]	0	0	0	0
Sales	[2]	0	(5,003)	(1,757)	(5,003)
Settlements	[2]	(13)	(33)	(28)	(544)
Transfers in and/or out of Level 3	[2]	0	0	0	0
Balance at end of period	[2]	290	376	290	376
Available for sale | Corporate bonds
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance at beginning of period		7,567	9,152	8,141	9,460
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		102	(316)	(16)	(168)
Purchases, issuances, sales and settlements
Purchases		429	393	429	393
Issuances		0	0	0	0
Sales		0	0	0	0
Settlements		(456)	(456)	(912)	(912)
Transfers in and/or out of Level 3		0	0	0	0
Balance at end of period		7,642	8,773	7,642	8,773
Fair value option | Corporate bonds
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance at beginning of period		2,233	11,872	5,758	12,217
Total gains or (losses) (realized/unrealized) - included in earnings	[1]	(49)	(537)	(339)	(612)
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	(3,235)	0
Settlements		0	0	0	(270)
Transfers in and/or out of Level 3		23,919	0	23,919	0
Balance at end of period		26,103	11,335	26,103	11,335
Fair value option | Other investments
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance at beginning of period		62,329	58,452	62,705	59,167
Total gains or (losses) (realized/unrealized) - included in earnings	[1]	(11,614)	336	(11,316)	(379)
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		(74)	(74)	(148)	(74)
Settlements		0	(500)	(600)	(500)
Transfers in and/or out of Level 3		44,632	0	44,632	0
Balance at end of period		95,273	58,214	95,273	58,214
Fair value option | Equity securities
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance at beginning of period		0	0	0	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		56,145	0	56,145	0
Balance at end of period		56,145	0	56,145	0
Equity securities
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance at beginning of period		0	0	0	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		51,212	0	51,212	0
Balance at end of period		$ 51,212	$ 0	$ 51,212	$ 0

[1] Gains or losses were included in net realized gains (losses).

[2] Includes asset backed securities, mortgage backed securities and commercial mortgage backed securities.

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Fair Value - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Fair Value Disclosures [Abstract]
Total assets and liabilities measured at fair value	$ 21,660,000	$ 20,410,000
Total assets and liabilities measured at fair value priced using non-binding broker quotes	$ 183,800	$ 217,900
Total assets and liabilities measured at fair value priced using non-binding broker quotes (percentage)	0.90%	1.10%
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Senior notes	$ 1,733,865	$ 1,733,528
Estimated fair value of senior notes	2,090,000	$ 1,880,000
Equity securities
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Transfers from Level 2 to Level 3	107,400
Fair value option | Corporate bonds
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Transfers from Level 2 to Level 3	23,900
Fair value option | Other investments
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Transfers from Level 2 to Level 3	$ 44,600

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Derivative Instruments (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Derivative offsetting [Abstract]
Derivative assets subject to master netting agreements		$ 46,200		$ 46,200		$ 80,400
Derivative liabilities subject to master netting agreements		38,400		38,400		18,900
Net realized gains (losses) on derivative instruments
Net realized gains (losses) on derivative instruments	[1]	63,966	$ (2,146)	99,837	$ (6,109)
Not Designated as Hedging Instrument [Member]
Derivative [Line Items]
Asset derivatives - fair value		46,162		46,162		82,185
Liability derivatives - fair value		(38,363)		(38,363)		(20,664)
Net realized gains (losses) on derivative instruments
Net realized gains (losses) on derivative instruments		63,966	(2,146)	99,837	(6,109)
Not Designated as Hedging Instrument [Member] | Futures contracts
Derivative [Line Items]
Net derivatives - notional value	[2],[3]	4,354,852		4,354,852		3,153,518
Net realized gains (losses) on derivative instruments
Net realized gains (losses) on derivative instruments		66,973	(240)	94,309	4,790
Not Designated as Hedging Instrument [Member] | Futures contracts | Other assets
Derivative [Line Items]
Asset derivatives - fair value	[3]	5,438		5,438		51,800
Not Designated as Hedging Instrument [Member] | Futures contracts | Other liabilities
Derivative [Line Items]
Liability derivatives - fair value	[3]	(1,586)		(1,586)		(2,115)
Not Designated as Hedging Instrument [Member] | Foreign currency forward contracts
Derivative [Line Items]
Net derivatives - notional value	[2],[3]	939,940		939,940		1,008,907
Net realized gains (losses) on derivative instruments
Net realized gains (losses) on derivative instruments		(5,365)	(1,692)	(19,074)	(7,616)
Not Designated as Hedging Instrument [Member] | Foreign currency forward contracts | Other assets
Derivative [Line Items]
Asset derivatives - fair value	[3]	3,190		3,190		8,147
Not Designated as Hedging Instrument [Member] | Foreign currency forward contracts | Other liabilities
Derivative [Line Items]
Liability derivatives - fair value	[3]	(10,352)		(10,352)		(7,796)
Not Designated as Hedging Instrument [Member] | TBAs
Derivative [Line Items]
Net derivatives - notional value	[2],[4]	14,846		14,846		8,132
Net realized gains (losses) on derivative instruments
Net realized gains (losses) on derivative instruments		48	0	238	(97)
Not Designated as Hedging Instrument [Member] | TBAs | Fixed maturities available for sale
Derivative [Line Items]
Asset derivatives - fair value	[4]	15,509		15,509		8,292
Liability derivatives - fair value	[4]	0		0		0
Not Designated as Hedging Instrument [Member] | Other
Derivative [Line Items]
Net derivatives - notional value	[2],[3]	3,493,526		3,493,526		2,213,981
Net realized gains (losses) on derivative instruments
Net realized gains (losses) on derivative instruments		2,310	$ (214)	24,364	$ (3,186)
Not Designated as Hedging Instrument [Member] | Other | Other assets
Derivative [Line Items]
Asset derivatives - fair value	[3]	22,025		22,025		13,946
Not Designated as Hedging Instrument [Member] | Other | Other liabilities
Derivative [Line Items]
Liability derivatives - fair value	[3]	$ (26,425)		$ (26,425)		$ (10,753)

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

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

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

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

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Commitments and Contingencies (Details) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Commitments and Contingencies Disclosure [Abstract]
Investment commitments	$ 1,920.0		$ 1,770.0
Interest expense on senior notes and other borrowings	$ 60.9	$ 60.9

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Leases - Additional information (Details) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2019 USD ($)	Jun. 30, 2019 USD ($)
Lessee, Lease, Description [Line Items]
Operating lease costs	$ 7,244	$ 14,860
Cash payments included in the measurement of lease liabilities reported in operating cash flows	7,685	14,585
Right-of-use assets obtained in exchange for new lease liabilities	4,420	4,420
Lease liability	$ 150,341	$ 150,341
Weighted average discount rate	3.90%	3.90%
Weighted average remaining lease term in years	6 years 6 months	6 years 6 months
Maximum
Lessee, Lease, Description [Line Items]
Operating lease term	12 years	12 years
Other assets
Lessee, Lease, Description [Line Items]
Right-of-use assets	$ 134,061	$ 134,061
Other liabilities
Lessee, Lease, Description [Line Items]
Lease liability	$ 150,341	$ 150,341

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Leases - Contractual maturities and future minimum rental payments (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Contractual maturities of operating lease liabilities
2019 (remainder)	$ 9,985
2020	32,036
2021	30,673
2022	27,365
2023	22,667
2024 and thereafter	55,610
Total undiscounted lease liability	178,336
Less: present value adjustment	(27,995)
Operating lease liability	$ 150,341
Future minimum rental commitments:
2019		$ 31,088
2020		30,491
2021		29,351
2022		26,068
2023		21,408
2024 and thereafter		54,745
Total future minimum payments		$ 193,151

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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, 2019	Jun. 30, 2018
Variable Interest Entity [Line Items]
Net cash provided by operating activities		$ 712,524	$ 496,886
Net cash used for investing activities		(746,944)	102,399
Net cash used for financing activities		(9,085)	(733,029)
Variable Interest Entity, Primary Beneficiary | Watford Holdings Ltd
Variable Interest Entity [Line Items]
Initial investment contribution amount	$ 100,000
Number of shares acquired	2,500,000
Ownership percentage	11.00%
Number of shares called by warrants	975,503
Variable Interest Entity, Primary Beneficiary | Watford Re
Variable Interest Entity [Line Items]
Net cash provided by operating activities		115,900	92,400
Net cash used for investing activities		(135,700)	(168,000)
Net cash used for financing activities		$ 25,600	$ (2,100)

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Variable Interest Entities and Noncontrolling Interests - Carrying amount of assets and liabilities of variable interest entity (Details) - USD ($) $ in Thousands		Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017
Variable Interest Entity [Line Items]
Investments accounted for using the fair value option		$ 3,721,035		$ 3,983,571
Fixed maturities available for sale, at fair value		15,881,732		14,699,010
Equity securities, at fair value		670,943		338,899
Cash		605,316		646,556
Accrued investment income		119,252		114,641
Premiums receivable		1,606,040		1,299,150
Reinsurance recoverable on unpaid and paid losses and LAE		3,171,257		2,919,372
Ceded unearned premiums		1,136,728		975,469
Deferred acquisition costs		600,740		569,574
Receivable for securities sold		164,592		36,246
Goodwill and intangible assets		641,010		634,920	$ 593,008
Other assets		1,135,718		929,611
Total assets		34,851,670		32,218,329
Reserve for losses and loss adjustment expenses		12,230,316	$ 12,010,041	11,853,297	11,424,337	$ 11,496,205	$ 11,383,792
Unearned premiums		4,056,860		3,753,636
Reinsurance balances payable		531,990		393,107
Revolving credit agreement borrowings		491,006		455,682
Payable for securities purchased		294,109		90,034
Other liabilities		904,438		911,500
Total liabilities of consolidated VIE		23,032,496		21,780,650
Redeemable noncontrolling interests		206,475		206,292
Watford Re
Variable Interest Entity [Line Items]
Redeemable noncontrolling interests		206,475	$ 206,383	206,292	$ 206,105	$ 206,013	$ 205,922
Variable Interest Entity, Primary Beneficiary | Watford Re
Variable Interest Entity [Line Items]
Investments accounted for using the fair value option		1,972,947		2,312,003
Fixed maturities available for sale, at fair value		732,454		393,351
Equity securities, at fair value		64,703		32,206
Cash		68,977		63,529
Accrued investment income		16,916		19,461
Premiums receivable		228,588		227,301
Reinsurance recoverable on unpaid and paid losses and LAE		123,961		86,445
Ceded unearned premiums		79,513		61,587
Deferred acquisition costs		71,557		80,858
Receivable for securities sold		29,425		24,507
Goodwill and intangible assets		7,650		7,650
Other assets		71,837		63,959
Total assets		3,468,528		3,372,857
Reserve for losses and loss adjustment expenses		1,126,080		1,032,760
Unearned premiums		375,323		390,114
Reinsurance balances payable		23,312		21,034
Revolving credit agreement borrowings		491,006		455,682
Payable for securities purchased		51,216		60,142
Other liabilities	[1]	219,120		302,524
Total liabilities of consolidated VIE		2,286,057		2,262,256
Redeemable noncontrolling interests		$ 221,175		$ 220,992

[1] Includes certain borrowings related to investing activities.

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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, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Noncontrolling Interest [Line Items]
Non-redeemable noncontrolling interests, beginning of period			$ 791,560
Amounts attributable to noncontrolling interests	$ 12,301	$ 8,116	54,683	$ 19,492
Other comprehensive (income) loss attributable to noncontrolling interests	2,891	(1,077)	7,030	(1,750)
Non-redeemable noncontrolling interests, end of period	855,347	861,153	855,347	861,153
Watford Re
Noncontrolling Interest [Line Items]
Non-redeemable noncontrolling interests, beginning of period	838,081	854,112	791,560	843,411
Additional paid in capital attributable to noncontrolling interests	2,074	0	2,074	0
Amounts attributable to noncontrolling interests	12,301	8,116	54,683	19,492
Other comprehensive (income) loss attributable to noncontrolling interests	2,891	(1,075)	7,030	(1,750)
Non-redeemable noncontrolling interests, end of period	$ 855,347	$ 861,153	$ 855,347	$ 861,153
Common shares | Watford Re
Noncontrolling Interest [Line Items]
Noncontrolling interest, ownership percentage by noncontrolling owners	89.00%		89.00%

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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, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Redeemable Noncontrolling Interest [Line Items]
Redeemable noncontrolling interests, beginning of period			$ 206,292
Redeemable noncontrolling interests, end of period	$ 206,475		206,475
Watford Re
Redeemable Noncontrolling Interest [Line Items]
Redeemable noncontrolling interests, beginning of period	206,383	$ 206,013	206,292	$ 205,922
Accretion of preference share issuance costs	92	92	183	183
Redeemable noncontrolling interests, end of period	$ 206,475	$ 206,105	$ 206,475	$ 206,105
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
Issue price per share	$ 24.50		$ 24.50

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Variable Interest Entities and Noncontrolling Interests - Income or loss attributable to third party investors (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Noncontrolling Interest [Abstract]
Amounts attributable to non-redeemable noncontrolling interests	$ (12,301)	$ (8,116)	$ (54,683)	$ (19,492)
Dividends attributable to redeemable noncontrolling interests	(4,590)	(4,585)	(9,178)	(9,170)
Net (income) loss attributable to noncontrolling interests	$ (16,891)	$ (12,701)	$ (63,861)	$ (28,662)

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Variable Interest Entities and Noncontrolling Interests - Other variable interest entity disclosures (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Variable Interest Entity [Line Items]
Maximum Exposure to Loss	$ 1,760,949	$ 1,656,189
Variable Interest Entity, Not Primary Beneficiary
Variable Interest Entity [Line Items]
Total VIE Assets	2,698,463	1,881,467
Maximum Exposure to Loss - On-Balance Sheet (Asset) Liability	(7,441)	1,752
Maximum Exposure to Loss - Off-Balance Sheet	41,272	11,190
Maximum Exposure to Loss	33,831	12,942
Variable Interest Entity, Not Primary Beneficiary | Bellemeade 2015-1 Ltd. (Jul-15)
Variable Interest Entity [Line Items]
Total VIE Assets	19,103	43,246
Maximum Exposure to Loss - On-Balance Sheet (Asset) Liability	(4)	112
Maximum Exposure to Loss - Off-Balance Sheet	17	498
Maximum Exposure to Loss	13	610
Variable Interest Entity, Not Primary Beneficiary | Bellemeade 2017-1 Ltd. (Oct-17)
Variable Interest Entity [Line Items]
Total VIE Assets	277,554	304,373
Maximum Exposure to Loss - On-Balance Sheet (Asset) Liability	(657)	165
Maximum Exposure to Loss - Off-Balance Sheet	4,892	1,312
Maximum Exposure to Loss	4,235	1,477
Variable Interest Entity, Not Primary Beneficiary | Bellemeade 2018-1 Ltd. (Apr-18)
Variable Interest Entity [Line Items]
Total VIE Assets	374,460	374,460
Maximum Exposure to Loss - On-Balance Sheet (Asset) Liability	(1,965)	132
Maximum Exposure to Loss - Off-Balance Sheet	7,799	3,539
Maximum Exposure to Loss	5,834	3,671
Variable Interest Entity, Not Primary Beneficiary | Bellemeade 2018-2 Ltd. (Aug-18)
Variable Interest Entity [Line Items]
Total VIE Assets	571,129	653,278
Maximum Exposure to Loss - On-Balance Sheet (Asset) Liability	(1,957)	874
Maximum Exposure to Loss - Off-Balance Sheet	5,265	4,005
Maximum Exposure to Loss	3,308	4,879
Variable Interest Entity, Not Primary Beneficiary | Bellemeade 2018-3 Ltd. (Oct-18)
Variable Interest Entity [Line Items]
Total VIE Assets	506,110	506,110
Maximum Exposure to Loss - On-Balance Sheet (Asset) Liability	(2,213)	469
Maximum Exposure to Loss - Off-Balance Sheet	7,251	1,836
Maximum Exposure to Loss	5,038	$ 2,305
Variable Interest Entity, Not Primary Beneficiary | Bellemeade 2019-1 Ltd. (Mar-19)
Variable Interest Entity [Line Items]
Total VIE Assets	329,085
Maximum Exposure to Loss - On-Balance Sheet (Asset) Liability	(237)
Maximum Exposure to Loss - Off-Balance Sheet	4,842
Maximum Exposure to Loss	4,605
Variable Interest Entity, Not Primary Beneficiary | Bellemeade 2019-2 Ltd. (Apr-19)
Variable Interest Entity [Line Items]
Total VIE Assets	621,022
Maximum Exposure to Loss - On-Balance Sheet (Asset) Liability	(408)
Maximum Exposure to Loss - Off-Balance Sheet	11,206
Maximum Exposure to Loss	$ 10,798

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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, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Other-than-temporary impairment losses	$ (49)	$ (470)	$ (1,358)	$ (632)
Income before income taxes	530,317	280,015	1,071,701	468,314
Income tax expense	(44,472)	(23,668)	(90,358)	(45,583)
Net of tax	468,954	243,646	917,482	394,069
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 (losses)	59,809	(38,935)	71,518	(106,521)
Other-than-temporary impairment losses	(49)	(470)	(1,358)	(632)
Income before income taxes	59,760	(39,405)	70,160	(107,153)
Income tax expense	(4,415)	2,762	(4,594)	8,049
Net of tax	$ 55,345	$ (36,643)	$ 65,566	$ (99,104)

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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, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Before tax amount:
Unrealized holding gains (losses) arising during period, before tax	$ 248,074	$ (88,034)	$ 503,064	$ (277,977)
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss), before tax	0	0	0	0
Less reclassification of net realized gains included in net income, before tax	59,760	(39,405)	70,160	(107,153)
Foreign currency translation adjustments, before tax	4,409	(12,701)	10,053	(11,269)
Other comprehensive income (loss), before tax	192,723	(61,330)	442,957	(182,093)
Tax expense (benefit):
Unrealized holding gains (losses) arising during period, tax	25,601	(2,763)	54,704	(26,029)
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	4,415	(2,762)	4,594	(8,049)
Foreign currency translation adjustments, tax	142	(106)	270	44
Other comprehensive income (loss), tax	21,328	(107)	50,380	(17,936)
Net of tax amount:
Unrealized holding gains (losses) arising during period, net of tax	222,473	(85,271)	448,360	(251,948)
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss), net of tax	0	0	0	0
Less reclassification of net realized gains included in net income, net of tax	55,345	(36,643)	65,566	(99,104)
Foreign currency translation adjustments, net of tax	4,267	(12,595)	9,783	(11,313)
Net current period other comprehensive income (loss)	$ 171,395	$ (61,223)	$ 392,577	$ (164,157)

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Guarantor Financial Information - Condensed consolidating balance sheet (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017
Assets
Total investments	$ 23,127,963		$ 21,745,284
Cash	605,316		646,556
Investments in subsidiaries	0		0
Due from subsidiaries and affiliates	0		0
Premiums receivable	1,606,040		1,299,150
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses	3,171,257		2,919,372
Contractholder receivables	2,102,544		2,079,111
Ceded unearned premiums	1,136,728		975,469
Deferred acquisition costs	600,740		569,574
Goodwill and intangible assets	641,010		634,920	$ 593,008
Other assets	1,860,072		1,348,893
Total assets	34,851,670		32,218,329
Liabilities
Reserve for losses and loss adjustment expenses	12,230,316	$ 12,010,041	11,853,297	11,424,337	$ 11,496,205	$ 11,383,792
Unearned premiums	4,056,860		3,753,636
Reinsurance balances payable	531,990		393,107
Contractholder payables	2,102,544		2,079,111
Collateral held for insured obligations	237,056		236,630
Senior notes	1,733,865		1,733,528
Revolving credit agreement borrowings	491,006		455,682
Due to subsidiaries and affiliates	0		0
Other liabilities	1,648,859		1,275,659
Total liabilities	23,032,496		21,780,650
Redeemable noncontrolling interests	206,475		206,292
Shareholders' Equity
Total shareholders’ equity available to Arch	10,757,352		9,439,827	9,163,755
Non-redeemable noncontrolling interests	855,347		791,560	861,153
Total shareholders’ equity	11,612,699		10,231,387	$ 10,024,908
Total liabilities, noncontrolling interests and shareholders’ equity	34,851,670		32,218,329
Reportable Legal Entities | Arch Capital (Parent Guarantor)
Assets
Total investments	40		104
Cash	10,750		6,125
Investments in subsidiaries	11,045,465		9,735,256
Due from subsidiaries and affiliates	332		9
Premiums receivable	0		0
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses	0		0
Contractholder receivables	0		0
Ceded unearned premiums	0		0
Deferred acquisition costs	0		0
Goodwill and intangible assets	0		0
Other assets	22,950		12,588
Total assets	11,079,537		9,754,082
Liabilities
Reserve for losses and loss adjustment expenses	0		0
Unearned premiums	0		0
Reinsurance balances payable	0		0
Contractholder payables	0		0
Collateral held for insured obligations	0		0
Senior notes	297,201		297,150
Revolving credit agreement borrowings	0		0
Due to subsidiaries and affiliates	9		0
Other liabilities	24,975		17,105
Total liabilities	322,185		314,255
Redeemable noncontrolling interests	0		0
Shareholders' Equity
Total shareholders’ equity available to Arch	10,757,352		9,439,827
Non-redeemable noncontrolling interests	0		0
Total shareholders’ equity	10,757,352		9,439,827
Total liabilities, noncontrolling interests and shareholders’ equity	11,079,537		9,754,082
Reportable Legal Entities | Arch-U.S. (Subsidiary Issuer)
Assets
Total investments	483,904		452,674
Cash	47,875		5,940
Investments in subsidiaries	4,493,198		3,999,243
Due from subsidiaries and affiliates	2		2
Premiums receivable	0		0
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses	0		0
Contractholder receivables	0		0
Ceded unearned premiums	0		0
Deferred acquisition costs	0		0
Goodwill and intangible assets	0		0
Other assets	40,345		80,949
Total assets	5,065,324		4,538,808
Liabilities
Reserve for losses and loss adjustment expenses	0		0
Unearned premiums	0		0
Reinsurance balances payable	0		0
Contractholder payables	0		0
Collateral held for insured obligations	0		0
Senior notes	494,776		494,723
Revolving credit agreement borrowings	0		0
Due to subsidiaries and affiliates	536,747		536,805
Other liabilities	64,956		26,270
Total liabilities	1,096,479		1,057,798
Redeemable noncontrolling interests	0		0
Shareholders' Equity
Total shareholders’ equity available to Arch	3,968,845		3,481,010
Non-redeemable noncontrolling interests	0		0
Total shareholders’ equity	3,968,845		3,481,010
Total liabilities, noncontrolling interests and shareholders’ equity	$ 5,065,324		4,538,808
Percentage Ownership of Subsidiary	100.00%
Reportable Legal Entities | Other Arch Capital Subsidiaries
Assets
Total investments	$ 22,693,719		21,307,206
Cash	546,691		634,491
Investments in subsidiaries	0		0
Due from subsidiaries and affiliates	1,881,929		1,802,686
Premiums receivable	2,291,360		1,834,389
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses	8,618,279		8,618,660
Contractholder receivables	2,102,544		2,079,111
Ceded unearned premiums	1,984,219		1,730,262
Deferred acquisition costs	658,992		618,535
Goodwill and intangible assets	641,010		634,920
Other assets	1,953,732		1,466,438
Total assets	43,372,475		40,726,698
Liabilities
Reserve for losses and loss adjustment expenses	17,430,847		17,345,142
Unearned premiums	4,904,351		4,508,429
Reinsurance balances payable	1,217,310		928,346
Contractholder payables	2,102,544		2,079,111
Collateral held for insured obligations	237,056		236,630
Senior notes	941,888		941,655
Revolving credit agreement borrowings	491,006		455,682
Due to subsidiaries and affiliates	1,345,507		1,265,892
Other liabilities	2,055,626		1,699,768
Total liabilities	30,726,135		29,460,655
Redeemable noncontrolling interests	221,175		220,992
Shareholders' Equity
Total shareholders’ equity available to Arch	11,569,818		10,253,491
Non-redeemable noncontrolling interests	855,347		791,560
Total shareholders’ equity	12,425,165		11,045,051
Total liabilities, noncontrolling interests and shareholders’ equity	43,372,475		40,726,698
Consolidating Adjustments and Eliminations
Assets
Total investments	(49,700)		(14,700)
Cash	0		0
Investments in subsidiaries	(15,538,663)		(13,734,499)
Due from subsidiaries and affiliates	(1,882,263)		(1,802,697)
Premiums receivable	(685,320)		(535,239)
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses	(5,447,022)		(5,699,288)
Contractholder receivables	0		0
Ceded unearned premiums	(847,491)		(754,793)
Deferred acquisition costs	(58,252)		(48,961)
Goodwill and intangible assets	0		0
Other assets	(156,955)		(211,082)
Total assets	(24,665,666)		(22,801,259)
Liabilities
Reserve for losses and loss adjustment expenses	(5,200,531)		(5,491,845)
Unearned premiums	(847,491)		(754,793)
Reinsurance balances payable	(685,320)		(535,239)
Contractholder payables	0		0
Collateral held for insured obligations			0
Senior notes	0		0
Revolving credit agreement borrowings	0		0
Due to subsidiaries and affiliates	(1,882,263)		(1,802,697)
Other liabilities	(496,698)		(467,484)
Total liabilities	(9,112,303)		(9,052,058)
Redeemable noncontrolling interests	(14,700)		(14,700)
Shareholders' Equity
Total shareholders’ equity available to Arch	(15,538,663)		(13,734,501)
Non-redeemable noncontrolling interests	0		0
Total shareholders’ equity	(15,538,663)		(13,734,501)
Total liabilities, noncontrolling interests and shareholders’ equity	$ (24,665,666)		$ (22,801,259)

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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, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Revenues
Net premiums earned	$ 1,463,727	$ 1,336,763	$ 2,832,593	$ 2,571,662
Net investment income	155,038	135,668	311,987	262,392
Net realized gains (losses)	120,806	(76,611)	262,371	(187,609)
Net impairment losses recognized in earnings	(49)	(470)	(1,358)	(632)
Other underwriting income	5,953	3,874	14,778	9,223
Equity in net income of investment funds accounted for using the equity method	32,536	8,472	79,403	36,541
Other income (loss)	1,129	3,113	2,212	3,187
Total revenues	1,779,140	1,410,809	3,501,986	2,694,764
Expenses
Losses and loss adjustment expenses	767,543	726,153	1,486,075	1,363,013
Acquisition expenses	210,089	202,838	407,937	394,214
Other operating expenses	198,914	176,181	400,077	351,196
Corporate expenses	18,251	22,512	36,213	37,824
Amortization of intangible assets	19,794	26,472	40,211	53,208
Interest expense	29,280	30,344	58,345	60,980
Net foreign exchange (gains) losses	4,952	(53,706)	1,427	(33,985)
Total expenses	1,248,823	1,130,794	2,430,285	2,226,450
Income (loss) before income taxes	530,317	280,015	1,071,701	468,314
Income tax (expense) benefit	(44,472)	(23,668)	(90,358)	(45,583)
Income (loss) before equity in net income of subsidiaries	485,845	256,347	981,343	422,731
Equity in net income of subsidiaries	0	0	0	0
Net income	485,845	256,347	981,343	422,731
Net (income) loss attributable to noncontrolling interests	(16,891)	(12,701)	(63,861)	(28,662)
Net income available to Arch	468,954	243,646	917,482	394,069
Preferred dividends	(10,403)	(10,403)	(20,806)	(20,840)
Loss on redemption of preferred shares	0	0	0	(2,710)
Net income available to Arch common shareholders	458,551	233,243	896,676	370,519
Comprehensive income available to Arch	637,458	183,500	1,303,029	231,662
Reportable Legal Entities | Arch Capital (Parent Guarantor)
Revenues
Net premiums earned	0	0	0	0
Net investment income	38	15	84	35
Net realized gains (losses)	0	0	0	29
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)	(242)	2,339	(481)	2,261
Total revenues	(204)	2,354	(397)	2,325
Expenses
Losses and loss adjustment expenses	0	0	0	0
Acquisition expenses	0	0	0	0
Other operating expenses	0	0	0	0
Corporate expenses	15,293	16,642	31,600	32,811
Amortization of intangible assets	0	0	0	0
Interest expense	5,538	5,537	11,076	11,073
Net foreign exchange (gains) losses	0	0	2	29
Total expenses	20,831	22,179	42,678	43,913
Income (loss) before income taxes	(21,035)	(19,825)	(43,075)	(41,588)
Income tax (expense) benefit	0	0	0	0
Income (loss) before equity in net income of subsidiaries	(21,035)	(19,825)	(43,075)	(41,588)
Equity in net income of subsidiaries	489,989	263,471	960,557	435,657
Net income	468,954	243,646	917,482	394,069
Net (income) loss attributable to noncontrolling interests	0	0	0	0
Net income available to Arch	468,954	243,646	917,482	394,069
Preferred dividends	(10,403)	(10,403)	(20,806)	(20,840)
Loss on redemption of preferred shares				(2,710)
Net income available to Arch common shareholders	458,551	233,243	896,676	370,519
Comprehensive income available to Arch	637,458	183,500	1,303,029	231,662
Reportable Legal Entities | Arch-U.S. (Subsidiary Issuer)
Revenues
Net premiums earned	0	0	0	0
Net investment income	2,847	560	6,526	818
Net realized gains (losses)	5,825	0	14,343	(7)
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	(64)	0	(64)	0
Other income (loss)	0	0	0	0
Total revenues	8,608	560	20,805	811
Expenses
Losses and loss adjustment expenses	0	0	0	0
Acquisition expenses	0	0	0	0
Other operating expenses	0	0	0	0
Corporate expenses	2,115	470	4,281	759
Amortization of intangible assets	0	0	0	0
Interest expense	11,996	12,013	23,947	23,939
Net foreign exchange (gains) losses	0	0	0	0
Total expenses	14,111	12,483	28,228	24,698
Income (loss) before income taxes	(5,503)	(11,923)	(7,423)	(23,887)
Income tax (expense) benefit	1,301	2,477	1,844	5,428
Income (loss) before equity in net income of subsidiaries	(4,202)	(9,446)	(5,579)	(18,459)
Equity in net income of subsidiaries	148,747	86,727	285,301	173,147
Net income	144,545	77,281	279,722	154,688
Net (income) loss attributable to noncontrolling interests	0	0	0	0
Net income available to Arch	144,545	77,281	279,722	154,688
Preferred dividends	0	0	0	0
Loss on redemption of preferred shares				0
Net income available to Arch common shareholders	144,545	77,281	279,722	154,688
Comprehensive income available to Arch	231,120	70,066	469,276	76,603
Reportable Legal Entities | Other Arch Capital Subsidiaries
Revenues
Net premiums earned	1,463,727	1,336,763	2,832,593	2,571,662
Net investment income	174,738	157,532	350,410	306,299
Net realized gains (losses)	115,620	(76,611)	253,673	(187,631)
Net impairment losses recognized in earnings	(49)	(470)	(1,358)	(632)
Other underwriting income	5,953	3,874	14,778	9,223
Equity in net income of investment funds accounted for using the equity method	32,600	8,472	79,467	36,541
Other income (loss)	1,371	774	2,693	926
Total revenues	1,793,960	1,430,334	3,532,256	2,736,388
Expenses
Losses and loss adjustment expenses	767,543	726,153	1,486,075	1,363,013
Acquisition expenses	210,089	202,838	407,937	394,214
Other operating expenses	198,914	176,181	400,077	351,196
Corporate expenses	843	5,400	332	4,254
Amortization of intangible assets	19,794	26,472	40,211	53,208
Interest expense	34,012	34,911	67,718	70,083
Net foreign exchange (gains) losses	(1,187)	(43,357)	(1,310)	(26,921)
Total expenses	1,230,008	1,128,598	2,401,040	2,209,047
Income (loss) before income taxes	563,952	301,736	1,131,216	527,341
Income tax (expense) benefit	(45,773)	(26,145)	(92,202)	(51,011)
Income (loss) before equity in net income of subsidiaries	518,179	275,591	1,039,014	476,330
Equity in net income of subsidiaries	0	0	0	0
Net income	518,179	275,591	1,039,014	476,330
Net (income) loss attributable to noncontrolling interests	(17,210)	(13,023)	(64,499)	(29,307)
Net income available to Arch	500,969	262,568	974,515	447,023
Preferred dividends	0	0	0	0
Loss on redemption of preferred shares				0
Net income available to Arch common shareholders	500,969	262,568	974,515	447,023
Comprehensive income available to Arch	663,685	212,802	1,352,225	291,883
Consolidating Adjustments and Eliminations
Revenues
Net premiums earned	0	0	0	0
Net investment income	(22,585)	(22,439)	(45,033)	(44,760)
Net realized gains (losses)	(639)	0	(5,645)	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	(23,224)	(22,439)	(50,678)	(44,760)
Expenses
Losses and loss adjustment expenses	0	0	0	0
Acquisition expenses	0	0	0	0
Other operating expenses	0	0	0	0
Corporate expenses	0	0	0	0
Amortization of intangible assets	0	0	0	0
Interest expense	(22,266)	(22,117)	(44,396)	(44,115)
Net foreign exchange (gains) losses	6,139	(10,349)	2,735	(7,093)
Total expenses	(16,127)	(32,466)	(41,661)	(51,208)
Income (loss) before income taxes	(7,097)	10,027	(9,017)	6,448
Income tax (expense) benefit	0	0	0	0
Income (loss) before equity in net income of subsidiaries	(7,097)	10,027	(9,017)	6,448
Equity in net income of subsidiaries	(638,736)	(350,198)	(1,245,858)	(608,804)
Net income	(645,833)	(340,171)	(1,254,875)	(602,356)
Net (income) loss attributable to noncontrolling interests	319	322	638	645
Net income available to Arch	(645,514)	(339,849)	(1,254,237)	(601,711)
Preferred dividends	0	0	0	0
Loss on redemption of preferred shares				0
Net income available to Arch common shareholders	(645,514)	(339,849)	(1,254,237)	(601,711)
Comprehensive income available to Arch	$ (894,805)	$ (282,868)	$ (1,821,501)	$ (368,486)

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Guarantor Financial Information - Condensed consolidating statement of cash flows (Details) - USD ($) $ in Thousands		6 Months Ended
		Jun. 30, 2019	Jun. 30, 2018
Operating Activities
Net Cash Provided by (Used in) Operating Activities		$ 712,524	$ 496,886
Investing Activities
Purchases of fixed maturity investments		(16,332,646)	(16,867,570)
Purchases of equity securities		(431,939)	(679,663)
Purchases of other investments		(677,063)	(1,017,147)
Proceeds from sales of fixed maturity investments		15,632,482	16,090,543
Proceeds from sales of equity securities		176,701	622,068
Proceeds from sales, redemptions and maturities of other investments		534,698	773,298
Proceeds from redemptions and maturities of fixed maturity investments		244,949	511,448
Net settlements of derivative instruments		87,701	4,498
Net (purchases) sales of short-term investments		201,520	451,901
Change in cash collateral related to securities lending		7,590	176,304
Contributions to subsidiaries		0	0
Issuance of intercompany loans		0
Purchases of fixed assets		(16,359)	(13,242)
Other		(174,578)	49,961
Net Cash Provided By (Used For) Investing Activities		(746,944)	102,399
Financing Activities
Redemption of preferred shares		0	(92,555)
Purchases of common shares under share repurchase program		(2,871)	(173,575)
Proceeds from common shares issued, net		(557)	(13,851)
Proceeds from intercompany borrowings		0
Proceeds from borrowings		62,800	130,579
Repayments of borrowings		(27,538)	(373,000)
Change in cash collateral related to securities lending		(7,590)	(176,304)
Dividends paid to redeemable noncontrolling interests		(8,994)	(8,994)
Dividends paid to parent	[1]	0	0
Other		(3,529)	(4,489)
Preferred dividends paid		(20,806)	(20,840)
Net Cash Provided By (Used For) Financing Activities		(9,085)	(733,029)
Effects of exchange rate changes on foreign currency cash and restricted cash		1,937	(10,431)
Increase (decrease) in cash and restricted cash		(41,568)	(144,175)
Cash and restricted cash, beginning of year		724,643	727,284
Cash and restricted cash, end of period		683,075	583,109
Reportable Legal Entities | Arch Capital (Parent Guarantor)
Operating Activities
Net Cash Provided by (Used in) Operating Activities		30,946	201,487
Investing Activities
Purchases of fixed maturity investments		0	0
Purchases of equity securities		0	0
Purchases of other investments		0	0
Proceeds from sales of fixed maturity investments		0	0
Proceeds from sales 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
Net settlements of derivative instruments		0	0
Net (purchases) sales of short-term investments		64	96,446
Change in cash collateral related to securities lending		0	0
Contributions to subsidiaries		(2,121)	0
Issuance of intercompany loans		0
Purchases of fixed assets		(32)	(71)
Other		0	(4)
Net Cash Provided By (Used For) Investing Activities		(2,089)	96,371
Financing Activities
Redemption of preferred shares			(92,555)
Purchases of common shares under share repurchase program		(2,871)	(173,575)
Proceeds from common shares issued, net		(557)	(13,851)
Proceeds from intercompany borrowings		0
Proceeds from borrowings		0	0
Repayments of borrowings		0	0
Change in cash collateral related to securities lending		0	0
Dividends paid to redeemable noncontrolling interests		0	0
Dividends paid to parent	[1]	0	0
Other		0	0
Preferred dividends paid		(20,806)	(20,840)
Net Cash Provided By (Used For) Financing Activities		(24,234)	(300,821)
Effects of exchange rate changes on foreign currency cash and restricted cash		0	0
Increase (decrease) in cash and restricted cash		4,623	(2,963)
Cash and restricted cash, beginning of year		6,159	10,048
Cash and restricted cash, end of period		10,782	7,085
Reportable Legal Entities | Arch-U.S. (Subsidiary Issuer)
Operating Activities
Net Cash Provided by (Used in) Operating Activities		24,059	149,576
Investing Activities
Purchases of fixed maturity investments		(358,996)	(125,440)
Purchases of equity securities		(56,441)	0
Purchases of other investments		(17,891)	0
Proceeds from sales of fixed maturity investments		452,729	33,793
Proceeds from sales of equity securities		0	0
Proceeds from sales, redemptions and maturities of other investments		391	0
Proceeds from redemptions and maturities of fixed maturity investments		100	0
Net settlements of derivative instruments		0	0
Net (purchases) sales of short-term investments		(2,015)	(59,798)
Change in cash collateral related to securities lending		0	0
Contributions to subsidiaries		0	(1,000)
Issuance of intercompany loans		0
Purchases of fixed assets		0	0
Other		0	0
Net Cash Provided By (Used For) Investing Activities		17,877	(152,445)
Financing Activities
Redemption of preferred shares			0
Purchases of common shares under share repurchase program		0	0
Proceeds from common shares issued, net		0	0
Proceeds from intercompany borrowings		0
Proceeds from borrowings		0	0
Repayments of borrowings		0	0
Change in cash collateral related to securities lending		0	0
Dividends paid to redeemable noncontrolling interests		0	0
Dividends paid to parent	[1]	0	0
Other		0	0
Preferred dividends paid		0	0
Net Cash Provided By (Used For) Financing Activities		0	0
Effects of exchange rate changes on foreign currency cash and restricted cash		0	0
Increase (decrease) in cash and restricted cash		41,936	(2,869)
Cash and restricted cash, beginning of year		5,940	30,380
Cash and restricted cash, end of period		47,876	27,511
Reportable Legal Entities | Other Arch Capital Subsidiaries
Operating Activities
Net Cash Provided by (Used in) Operating Activities		749,885	1,010,703
Investing Activities
Purchases of fixed maturity investments		(15,973,650)	(17,347,846)
Purchases of equity securities		(447,742)	(679,663)
Purchases of other investments		(659,172)	(1,017,147)
Proceeds from sales of fixed maturity investments		15,179,753	16,662,466
Proceeds from sales of equity securities		248,945	622,068
Proceeds from sales, redemptions and maturities of other investments		534,307	773,298
Proceeds from redemptions and maturities of fixed maturity investments		244,849	511,448
Net settlements of derivative instruments		87,701	4,498
Net (purchases) sales of short-term investments		203,471	415,253
Change in cash collateral related to securities lending		7,590	176,304
Contributions to subsidiaries		(59,527)	(22,595)
Issuance of intercompany loans		(53,828)
Purchases of fixed assets		(16,327)	(13,171)
Other		(174,578)	49,965
Net Cash Provided By (Used For) Investing Activities		(878,208)	134,878
Financing Activities
Redemption of preferred shares			0
Purchases of common shares under share repurchase program		0	0
Proceeds from common shares issued, net		61,648	23,595
Proceeds from intercompany borrowings		53,828
Proceeds from borrowings		62,800	130,579
Repayments of borrowings		(27,538)	(373,000)
Change in cash collateral related to securities lending		(7,590)	(176,304)
Dividends paid to redeemable noncontrolling interests		(9,632)	(9,632)
Dividends paid to parent	[1]	(91,728)	(864,242)
Other		(3,529)	(4,489)
Preferred dividends paid		0	0
Net Cash Provided By (Used For) Financing Activities		38,259	(1,273,493)
Effects of exchange rate changes on foreign currency cash and restricted cash		1,937	(10,431)
Increase (decrease) in cash and restricted cash		(88,127)	(138,343)
Cash and restricted cash, beginning of year		712,544	686,856
Cash and restricted cash, end of period		624,417	548,513
Consolidating Adjustments and Eliminations
Operating Activities
Net Cash Provided by (Used in) Operating Activities		(92,366)	(864,880)
Investing Activities
Purchases of fixed maturity investments		0	605,716
Purchases of equity securities		72,244	0
Purchases of other investments		0	0
Proceeds from sales of fixed maturity investments		0	(605,716)
Proceeds from sales of equity securities		(72,244)	0
Proceeds from sales, redemptions and maturities of other investments		0	0
Proceeds from redemptions and maturities of fixed maturity investments		0	0
Net settlements of derivative instruments		0	0
Net (purchases) sales of short-term investments		0	0
Change in cash collateral related to securities lending		0	0
Contributions to subsidiaries		61,648	23,595
Issuance of intercompany loans		53,828
Purchases of fixed assets		0	0
Other		0	0
Net Cash Provided By (Used For) Investing Activities		115,476	23,595
Financing Activities
Redemption of preferred shares			0
Purchases of common shares under share repurchase program		0	0
Proceeds from common shares issued, net		(61,648)	(23,595)
Proceeds from intercompany borrowings		(53,828)
Proceeds from borrowings		0	0
Repayments of borrowings		0	0
Change in cash collateral related to securities lending		0	0
Dividends paid to redeemable noncontrolling interests		638	638
Dividends paid to parent	[1]	91,728	864,242
Other		0	0
Preferred dividends paid		0	0
Net Cash Provided By (Used For) Financing Activities		(23,110)	841,285
Effects of exchange rate changes on foreign currency cash and restricted cash		0	0
Increase (decrease) in cash and restricted cash		0	0
Cash and restricted cash, beginning of year		0	0
Cash and restricted cash, end of period		$ 0	$ 0

[1] Dividends received by parent are included in net cash provided by (used for) operating activities

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Income Taxes (Details) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Income Tax Disclosure [Abstract]
Effective tax rate on income before income taxes (percentage)	8.40%	9.70%
Statutory federal tax rate	21.00%
Tax benefit on share-based compensation	0.40%
Net deferred tax liabilities	$ 49.5
Net deferred tax assets			$ 22.5
Income taxes paid (recovered)	$ 43.5	$ (46.5)

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Subsequent Events (Details) - Subsequent Event - USD ($) $ / shares in Units, $ in Millions			1 Months Ended
	Aug. 01, 2019	Jul. 02, 2019	Jul. 31, 2019
Variable Interest Entity, Not Primary Beneficiary | Bellemeade 2019-3 Ltd.
Bellemeade 2019-3 Ltd.
Aggregate excess of loss reinsurance agreement			$ 700.9
Aggregate losses			$ 232.1
Agreement period			10 years
SPV issuance of insurance-linked notes			$ 700.9
Variable Interest Entity, Primary Beneficiary | Watford Holdings Ltd | Senior notes
Watford Holdings Ltd.
Aggregate principal amount of senior notes		$ 175.0
Stated interest rate (percent)		6.50%
Net proceeds on issuance		$ 172.4
Variable Interest Entity, Primary Beneficiary | Watford Holdings Ltd | Preference shares
Watford Holdings Ltd.
Preference shares, number of shares redeemed	6,919,998
Preference shares, number of shares issued			9,065,200
Preference shares, number of shares outstanding			9,065,200
Preferred shares, redemption price	$ 25.19748
Investment in senior notes		$ 35.0
Proceeds from redemption of preference shares	$ 11.5