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Segment Information
 9 Months Ended
Sep. 30, 2020
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 (which includes changes in the allowance for credit losses on financial assets and 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 and income taxes. Such amounts exclude the results of the ‘other’ segment.
The ‘other’ segment includes the results of Watford (see note 11). 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
September 30, 2020
 InsuranceReinsuranceMortgageSub-TotalOtherTotal
Gross premiums written (1)$1,206,328 $1,004,590 $346,248 $2,556,914 $197,480 $2,681,032 
Premiums ceded(382,167)(400,388)(47,783)(830,086)(50,164)(806,888)
Net premiums written824,161 604,202 298,465 1,726,828 147,316 1,874,144 
Change in unearned premiums(105,007)(49,704)52,944 (101,767)(1,285)(103,052)
Net premiums earned719,154 554,498 351,409 1,625,061 146,031 1,771,092 
Other underwriting income (loss)(31)298 4,600 4,867 546 5,413 
Losses and loss adjustment expenses(525,321)(422,084)(153,055)(1,100,460)(115,813)(1,216,273)
Acquisition expenses(102,420)(85,388)(35,716)(223,524)(24,418)(247,942)
Other operating expenses(122,541)(41,818)(36,708)(201,067)(14,619)(215,686)
Underwriting income (loss)$(31,159)$5,506 $130,530 104,877 (8,273)96,604 
Net investment income99,857 28,655 128,512 
Net realized gains (losses)210,984 69,515 280,499 
Equity in net income (loss) of investment funds accounted for using the equity method126,735 — 126,735 
Other income (loss)919 — 919 
Corporate expenses (2)(16,263)— (16,263)
Transaction costs and other (2)(1,674)— (1,674)
Amortization of intangible assets(16,715)— (16,715)
Interest expense(36,224)(5,119)(41,343)
Net foreign exchange gains (losses)(38,681)(6,204)(44,885)
Income (loss) before income taxes433,815 78,574 512,389 
Income tax (expense) benefit(23,638)(69)(23,707)
Net income (loss)410,177 78,505 488,682 
Amounts attributable to redeemable noncontrolling interests(882)(993)(1,875)
Amounts attributable to nonredeemable noncontrolling interests— (67,768)(67,768)
Net income (loss) available to Arch409,295 9,744 419,039 
Preferred dividends(10,403)— (10,403)
Net income (loss) available to Arch common shareholders$398,892 $9,744 $408,636 
Underwriting Ratios
Loss ratio73.0 %76.1 %43.6 %67.7 %79.3 %68.7 %
Acquisition expense ratio14.2 %15.4 %10.2 %13.8 %16.7 %14.0 %
Other operating expense ratio17.0 %7.5 %10.4 %12.4 %10.0 %12.2 %
Combined ratio104.2 %99.0 %64.2 %93.9 %106.0 %94.9 %
Goodwill and intangible assets$282,146 $20,319 $403,662 $706,127 $7,650 $713,777 
(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
September 30, 2019
 InsuranceReinsuranceMortgageSub-TotalOtherTotal
Gross premiums written (1)$1,005,874 $662,572 $375,092 $2,043,292 $249,960 $2,181,121 
Premiums ceded(302,034)(226,096)(57,703)(585,587)(94,208)(567,664)
Net premiums written703,840 436,476 317,389 1,457,705 155,752 1,613,457 
Change in unearned premiums(98,504)(72,621)25,611 (145,514)(29,920)(175,434)
Net premiums earned605,336 363,855 343,000 1,312,191 125,832 1,438,023 
Other underwriting income (loss)— (1,208)3,955 2,747 579 3,326 
Losses and loss adjustment expenses(422,782)(270,379)(13,080)(706,241)(96,214)(802,455)
Acquisition expenses(91,259)(62,393)(34,396)(188,048)(23,072)(211,120)
Other operating expenses(115,408)(32,533)(37,003)(184,944)(11,568)(196,512)
Underwriting income (loss)$(24,113)$(2,658)$262,476 235,705 (4,443)231,262 
Net investment income126,874 34,614 161,488 
Net realized gains (losses)80,014 (18,659)61,355 
Equity in net income (loss) of investment funds accounted for using the equity method17,130 — 17,130 
Other income (loss)1,338 — 1,338 
Corporate expenses (2)(15,066)— (15,066)
Transaction costs and other (2)(1,995)— (1,995)
Amortization of intangible assets(20,003)— (20,003)
Interest expense(23,237)(8,091)(31,328)
Net foreign exchange gains (losses)29,794 3,330 33,124 
Income (loss) before income taxes430,554 6,751 437,305 
Income tax (expense) benefit(38,116)— (38,116)
Net income (loss)392,438 6,751 399,189 
Amounts attributable to redeemable noncontrolling interests— (6,600)(6,600)
Amounts attributable to nonredeemable noncontrolling interests— (136)(136)
Net income (loss) available to Arch392,438 15 392,453 
Preferred dividends(10,403)— (10,403)
Net income (loss) available to Arch common shareholders$382,035 $15 $382,050 
Underwriting Ratios     
Loss ratio69.8 %74.3 %3.8 %53.8 %76.5 %55.8 %
Acquisition expense ratio15.1 %17.1 %10.0 %14.3 %18.3 %14.7 %
Other operating expense ratio19.1 %8.9 %10.8 %14.1 %9.2 %13.7 %
Combined ratio104.0 %100.3 %24.6 %82.2 %104.0 %84.2 %
Goodwill and intangible assets$158,990 $— $457,860 $616,850 $7,650 $624,500 

(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.’
Nine Months Ended
September 30, 2020
 InsuranceReinsuranceMortgageSub-TotalOtherTotal
Gross premiums written (1)$3,444,335 $2,934,174 $1,084,337 $7,461,860 $590,309 $7,831,554 
Premiums ceded(1,119,165)(967,698)(136,154)(2,222,031)(150,437)(2,151,853)
Net premiums written2,325,170 1,966,476 948,183 5,239,829 439,872 5,679,701 
Change in unearned premiums(202,188)(388,321)113,965 (476,544)(22,267)(498,811)
Net premiums earned2,122,982 1,578,155 1,062,148 4,763,285 417,605 5,180,890 
Other underwriting income (loss)(31)1,767 15,649 17,385 1,547 18,932 
Losses and loss adjustment expenses(1,550,632)(1,235,586)(444,721)(3,230,939)(331,275)(3,562,214)
Acquisition expenses(317,428)(255,516)(108,304)(681,248)(68,766)(750,014)
Other operating expenses(370,947)(125,831)(120,178)(616,956)(42,523)(659,479)
Underwriting income (loss)$(116,056)$(37,011)$404,594 251,527 (23,412)228,115 
Net investment income313,916 91,234 405,150 
Net realized gains (losses)523,964 (53,837)470,127 
Equity in net income (loss) of investment funds accounted for using the equity method57,407 — 57,407 
Other income (loss)6,327 — 6,327 
Corporate expenses (2)(51,407)— (51,407)
Transaction costs and other (2)(5,246)— (5,246)
Amortization of intangible assets(49,835)— (49,835)
Interest expense(86,599)(18,438)(105,037)
Net foreign exchange gains (losses)(17,812)6,387 (11,425)
Income (loss) before income taxes942,242 1,934 944,176 
Income tax (expense) benefit(78,112)333 (77,779)
Net income (loss)864,130 2,267 866,397 
Dividends attributable to redeemable noncontrolling interests(1,873)(3,125)(4,998)
Amounts attributable to nonredeemable noncontrolling interests— 578 578 
Net income (loss) available to Arch862,257 (280)861,977 
Preferred dividends(31,209)— (31,209)
Net income (loss) available to Arch common shareholders$831,048 $(280)$830,768 
Underwriting Ratios     
Loss ratio73.0 %78.3 %41.9 %67.8 %79.3 %68.8 %
Acquisition expense ratio15.0 %16.2 %10.2 %14.3 %16.5 %14.5 %
Other operating expense ratio17.5 %8.0 %11.3 %13.0 %10.2 %12.7 %
Combined ratio105.5 %102.5 %63.4 %95.1 %106.0 %96.0 %
(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.’
Nine Months Ended
September 30, 2019
 InsuranceReinsuranceMortgageSub-TotalOtherTotal
Gross premiums written (1)$2,867,753 $1,890,974 $1,095,607 $5,853,574 $598,627 $6,196,809 
Premiums ceded(914,751)(627,120)(149,358)(1,690,469)(178,118)(1,613,195)
Net premiums written1,953,002 1,263,854 946,249 4,163,105 420,509 4,583,614 
Change in unearned premiums(201,719)(186,450)72,436 (315,733)2,735 (312,998)
Net premiums earned1,751,283 1,077,404 1,018,685 3,847,372 423,244 4,270,616 
Other underwriting income (loss)— 4,393 11,867 16,260 1,844 18,104 
Losses and loss adjustment expenses(1,168,677)(751,147)(50,226)(1,970,050)(318,480)(2,288,530)
Acquisition expenses(265,177)(173,504)(98,722)(537,403)(81,654)(619,057)
Other operating expenses(338,327)(102,197)(116,697)(557,221)(39,368)(596,589)
Underwriting income (loss)$(20,898)$54,949 $764,907 798,958 (14,414)784,544 
Net investment income371,161 102,314 473,475 
Net realized gains (losses)316,201 6,167 322,368 
Equity in net income (loss) of investment funds accounted for using the equity method96,533 — 96,533 
Other income (loss)3,550 — 3,550 
Corporate expenses (2)(47,911)— (47,911)
Transaction costs and other (2)(5,363)— (5,363)
Amortization of intangible assets(60,214)— (60,214)
Interest expense(70,094)(19,579)(89,673)
Net foreign exchange gains (losses)28,779 2,918 31,697 
Income (loss) before income taxes1,431,600 77,406 1,509,006 
Income tax (expense) benefit(128,454)(20)(128,474)
Net income (loss)1,303,146 77,386 1,380,532 
Dividends attributable to redeemable noncontrolling interests— (15,778)(15,778)
Amounts attributable to nonredeemable noncontrolling interests— (54,819)(54,819)
Net income (loss) available to Arch1,303,146 6,789 1,309,935 
Preferred dividends(31,209)— (31,209)
Net income (loss) available to Arch common shareholders$1,271,937 $6,789 $1,278,726 
Underwriting Ratios     
Loss ratio66.7 %69.7 %4.9 %51.2 %75.2 %53.6 %
Acquisition expense ratio15.1 %16.1 %9.7 %14.0 %19.3 %14.5 %
Other operating expense ratio19.3 %9.5 %11.5 %14.5 %9.3 %14.0 %
Combined ratio101.1 %95.3 %26.1 %79.7 %103.8 %82.1 %

(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.’