8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 8-K

Current Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

February 13, 2023

Date of Report (Date of earliest event reported) 

Arch Capital Group Ltd.

(Exact name of registrant as specified in its charter)

Bermuda	001-16209	98-0374481
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification No.)

Waterloo House, Ground Floor, 100 Pitts Bay Road, Pembroke HM 08, Bermuda

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code:

(441) 278-9250

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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 1/1,000th interest in a 5.45% Series F preferred share	ACGLO	NASDAQ	Stock Market
Depositary shares, each representing a 1/1,000th interest in a 4.55% Series G preferred share	ACGLN	NASDAQ	Stock Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

    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.  o

ITEM 2.02           Results of Operations and Financial Condition.

On February 13, 2023, Arch Capital Group Ltd. issued a press release reporting its earnings and the availability of its financial supplement for the quarter ended December 31, 2022. The press release and financial supplement are attached to this Current Report on Form 8-K as Exhibit 99.1 and Exhibit 99.2, respectively, and are incorporated herein by reference.

The information in this Current Report on Form 8-K, including the information set forth in Exhibit 99.1 and Exhibit 99.2, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

ITEM 9.01    Financial Statements and Exhibits.

(d):     The following exhibits are being filed herewith.

EXHIBIT NO.	DESCRIPTION
99.1	Press Release dated February 13, 2023 announcing the earnings of Arch Capital Group Ltd. for the quarter ended December 31, 2022
99.2	2022 Fourth Quarter Financial Supplement
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

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SIGNATURES

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

	ARCH CAPITAL GROUP LTD.
Date: February 13, 2023	By:	/s/ François Morin
		Name:	François Morin
		Title:	Executive Vice President, Chief Financial Officer and Treasurer

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EX-99.1

		EXHIBIT 99.1
	PRESS RELEASE	Arch Capital Group Ltd.
	NASDAQ Symbol: ACGL	Waterloo House, Ground Floor
	For Immediate Release	100 Pitts Bay Road
	February 13, 2023	Pembroke HM 08 Bermuda

ARCH CAPITAL GROUP LTD. REPORTS 2022 FOURTH QUARTER RESULTS

PEMBROKE, BERMUDA--(BUSINESS WIRE)--Arch Capital Group Ltd. (NASDAQ: ACGL; “Arch” or “the Company”) announces its 2022 fourth quarter results. The results included:

•Net income available to Arch common shareholders of $849.5 million, or $2.26 per share, a 29.5% annualized net income return on average common equity, compared to $613.1 million, or $1.58 per share, for the 2021 fourth quarter;

•After-tax operating income available to Arch common shareholders(1) of $805.9 million, or $2.14 per share, a 28.0% annualized operating return on average common equity, compared to $493.3 million, or $1.27 per share, for the 2021 fourth quarter;

•Pre-tax current accident year catastrophic losses for the Company’s insurance and reinsurance segments, net of reinsurance and reinstatement premiums (1), of $34.6 million;

•Combined ratio excluding catastrophic activity and prior year development(1) of 82.0%, compared to 80.1% for the 2021 fourth quarter;

•Favorable development in prior year loss reserves, net of related adjustments(1) of $270.1 million;

•Book value per common share of $32.62 at December 31, 2022, a 9.9% increase from September 30, 2022.

All earnings per share amounts discussed in this release are on a diluted basis. The following table summarizes the Company’s underwriting results:

(U.S. Dollars in thousands)	Three Months Ended December 31,
	2022			2021			% Change
Gross premiums written	$	3,795,262		$	2,861,575		32.6
Net premiums written	3,034,636			2,034,427			49.2
Net premiums earned	2,760,919			2,083,630			32.5
Underwriting income	734,264			471,611			55.7
Underwriting Ratios							% Point Change
Loss ratio	45.0		%	47.8		%	(2.8)
Underwriting expense ratio	28.5		%	29.8		%	(1.3)
Combined ratio	73.5		%	77.6		%	(4.1)
Combined ratio excluding catastrophic activity and prior year development (1)	82.0		%	80.1		%	1.9

(1)    Presentation represents a “non-GAAP” financial measure as defined in Regulation G. See ‘Comments on Regulation G’ for further details.

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The following table summarizes the Company’s 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 and related diluted per share results (see ‘Comments on Regulation G’ for a discussion of non-GAAP financial measures):

(U.S. Dollars in thousands, except share data)	Three Months Ended
	December 31,
	2022			2021
Net income available to Arch common shareholders	$	849,504		$	613,081
Net realized (gains) losses	(79,932)			(59,517)
Equity in net (income) loss of investment funds accounted for using the equity method	(40,351)			(67,132)
Net foreign exchange (gains) losses	81,201			(3,221)
Transaction costs and other	358			310
Income tax expense (benefit) (1)	(4,858)			9,736
After-tax operating income available to Arch common shareholders	$	805,922		$	493,257
Diluted per common share results:
Net income available to Arch common shareholders	$	2.26		$	1.58
Net realized (gains) losses	(0.22)			(0.16)
Equity in net (income) loss of investment funds accounted for using the equity method	(0.11)			(0.17)
Net foreign exchange (gains) losses	0.22			(0.01)
Transaction costs and other	0.00			0.00
Income tax expense (benefit) (1)	(0.01)			0.03
After-tax operating income available to Arch common shareholders	$	2.14		$	1.27
Weighted average common shares and common share equivalents outstanding — diluted	375,878,279			388,869,378
Beginning common shareholders’ equity	$	10,965,110		$	12,557,526
Ending common shareholders’ equity	12,080,073			12,715,896
Average common shareholders’ equity	$	11,522,592		$	12,636,711
Annualized net income return on average common equity	29.5		%	19.4		%
Annualized operating return on average common equity	28.0		%	15.6		%

(1)    Income tax expense (benefit) on net realized gains or losses, equity in net income (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.

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Segment Information

The following section provides analysis on the Company’s 2022 fourth quarter performance by operating segment.For additional details regarding the Company’s operating segments, please refer to the Company’s Financial Supplement dated December 31, 2022. The Company’s segment information includes the use of underwriting income (loss) and a combined ratio excluding catastrophic activity and prior year development. Such items are non-GAAP financial measures (see ‘Comments on Regulation G’ for further details).

Insurance Segment

	Three Months Ended December 31,
(U.S. Dollars in thousands)	2022			2021			% Change
Gross premiums written	$	1,644,066		$	1,486,362		10.6
Net premiums written	1,216,730			1,035,986			17.4
Net premiums earned	1,243,587			1,002,897			24.0
Underwriting income	$	97,684		$	70,545		38.5
Underwriting Ratios							% Point Change
Loss ratio	58.7		%	59.2		%	(0.5)
Underwriting expense ratio	33.4		%	33.7		%	(0.3)
Combined ratio	92.1		%	92.9		%	(0.8)
Catastrophic activity and prior year development:
Current accident year catastrophic events, net of reinsurance and reinstatement premiums	2.8		%	2.0		%	0.8
Net (favorable) adverse development in prior year loss reserves, net of related adjustments	(0.3)		%	(0.3)		%	—
Combined ratio excluding catastrophic activity and prior year development	89.6		%	91.2		%	(1.6)

Gross premiums written by the insurance segment in the 2022 fourth quarter were 10.6% higher than in the 2021 fourth quarter while net premiums written were 17.4% higher than in the 2021 fourth quarter. The higher level of net premiums written reflected increases in most lines of business, due in part to rate increases, new business opportunities and growth in existing accounts. In addition, the insurance segment is retaining more business due to ongoing changes in its reinsurance programs, as well as higher levels of growth in lines with a higher retention rate. Net premiums earned in the 2022 fourth quarter were 24.0% higher than in the 2021 fourth quarter, and reflect changes in net premiums written over the previous five quarters.

The 2022 fourth quarter loss ratio reflected 2.8 points of current year catastrophic activity, spread across a series of global events that occurred in 2022, compared to 2.0 points of catastrophic activity in the 2021 fourth quarter. Estimated net favorable development of prior year loss reserves, before related adjustments, reduced the loss ratio by 0.5 points in the 2022 fourth quarter, compared to 0.3 in the 2021 fourth quarter. The improvement in the 2022 fourth quarter loss ratio also reflected the impact of rate increases and changes in mix of business.

The underwriting expense ratio was 33.4% in the 2022 fourth quarter, compared to 33.7% in the 2021 fourth quarter, with the decrease primarily due to growth in net premiums earned.

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Reinsurance Segment

	Three Months Ended December 31,
(U.S. Dollars in thousands)	2022			2021			% Change
Gross premiums written	$	1,797,037		$	1,013,090		77.4
Net premiums written	1,543,382			709,141			117.6
Net premiums earned	1,225,208			779,817			57.1
Other underwriting income (loss)	(943)			521			(281.0)
Underwriting income (loss)	$	263,046		$	132,510		98.5
Underwriting Ratios							% Point Change
Loss ratio	52.9		%	55.2		%	(2.3)
Underwriting expense ratio	25.5		%	27.9		%	(2.4)
Combined ratio	78.4		%	83.1		%	(4.7)
Catastrophic activity and prior year development:
Current accident year catastrophic events, net of reinsurance and reinstatement premiums	0.0		%	6.7		%	(6.7)
Net (favorable) adverse development in prior year loss reserves, net of related adjustments	(4.5)		%	(6.4)		%	1.9
Combined ratio excluding catastrophic activity and prior year development	82.9		%	82.8		%	0.1

Gross premiums written by the reinsurance segment in the 2022 fourth quarter were 77.4% higher than in the 2021 fourth quarter, while net premiums written were 117.6% higher than in the 2021 fourth quarter. The comparison of gross and net premiums written in the 2022 fourth quarter were affected by a few non-recurring transactions, primarily impacting the other specialty line of business. Absent these items, gross and net premiums written would have been higher than in the 2021 fourth quarter by 47.9% and 61.0%, respectively. The growth in net premiums written reflected increases in most lines of business, primarily related to rate increases, new business opportunities and growth in existing accounts. Excluding the transactions mentioned above, net premiums earned in the 2022 fourth quarter were 38.1% higher than in the 2021 fourth quarter, and reflect changes in net premiums written over the previous five quarters.

The 2022 fourth quarter loss ratio reflected minimal current year catastrophic activity, compared to 7.1 points of catastrophic activity in the 2021 fourth quarter. Estimated net favorable development of prior year loss reserves, before related adjustments, reduced the loss ratio by 5.2 points in the 2022 fourth quarter, compared to 7.6 points in the 2021 fourth quarter. In addition, the 2022 fourth quarter loss ratio reflected the impact of rate increases and changes in mix of business. Absent the non-recurring transactions noted above, the 2022 fourth quarter loss ratio would have been 5.0 points lower than reported.

The underwriting expense ratio was 25.5% in the 2022 fourth quarter, compared to 27.9% in the 2021 fourth quarter. Absent the non-recurring transactions noted above, the 2022 fourth quarter underwriting expense ratio would have been 2.0 points higher than reported.

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Mortgage Segment

	Three Months Ended December 31,
(U.S. Dollars in thousands)	2022			2021			% Change
Gross premiums written	$	355,827		$	364,134		(2.3)
Net premiums written	274,524			289,300			(5.1)
Net premiums earned	292,124			300,916			(2.9)
Other underwriting income	2,226			2,639			(15.6)
Underwriting income	$	373,534		$	268,556		39.1
Underwriting Ratios							% Point Change
Loss ratio	(46.9)		%	(9.4)		%	(37.5)
Underwriting expense ratio	19.8		%	21.1		%	(1.3)
Combined ratio	(27.1)		%	11.7		%	(38.8)
Prior year development:
Net (favorable) adverse development in prior year loss reserves, net of related adjustments	(72.1)		%	(24.2)		%	(47.9)
Combined ratio excluding prior year development	45.0		%	35.9		%	9.1

Gross premiums written by the mortgage segment in the 2022 fourth quarter were 2.3% lower than in the 2021 fourth quarter, while net premiums written were 5.1% lower. The decrease in gross premiums written primarily reflected lower origination volume in the Australian market and lower U.S. primary mortgage insurance single premium business, which was partially offset by a higher volume of credit risk transfer contracts. Net premiums earned in the 2022 fourth quarter were 2.9% lower than in the 2021 fourth quarter, primarily due to a reduction in earnings from single premium policy terminations and an increase in ceded premiums earned, partially offset by growth in credit risk transfer business.

Estimated net favorable development of prior year loss reserves, before related adjustments, reduced the loss ratio by 71.1 points, primarily related to reserves on loans becoming delinquent after the onset of the COVID-19 pandemic, compared to 23.4 points in the 2021 fourth quarter. The percentage of loans in default on U.S. primary mortgage insurance business was 1.77% at December 31, 2022, compared to 1.73% at September 30, 2022.

The underwriting expense ratio was 19.8% in the 2022 fourth quarter, compared to 21.1% in the 2021 fourth quarter, with the decrease reflecting lower operating expenses due in part to profit commissions on business ceded related to favorable development of prior year loss reserves in the U.S.

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Corporate Segment

The corporate segment results include net investment income, net realized gains or losses (which includes changes in the allowance for credit losses on financial assets), equity in net income or loss of investment funds accounted for using the equity method, other income (loss), corporate expenses, transaction costs and other, amortization of intangible assets, interest expense, net foreign exchange gains or losses, income taxes items, income or loss from operating affiliates and items related to the Company’s non-cumulative preferred shares.

Investment returns were as follows:

(U.S. Dollars in thousands, except per share data)	Three Months Ended
	December 31,			September 30,			December 31,
	2022			2022			2021
Pre-tax net investment income	$	181,079		$	128,640		$	90,454
Per diluted share	$	0.48		$	0.34		$	0.23
Pre-tax investment income yield, at amortized cost (1)	2.80		%	2.06		%	1.46		%
Total return on investments (2)	2.60		%	(3.01)		%	0.39		%

(1)    Presented on an annualized basis and excluding the impact of investments for which returns are not included within investment income, such as investments accounted for using the equity method and certain equities.

(2)    Presentation represents a “non-GAAP” financial measure as defined in Regulation G. See ‘Comments on Regulation G’ for further details.

The growth in net investment income in the 2022 fourth quarter compared to the 2022 third quarter and 2021 fourth quarter primarily reflects the effects of higher interest rates available in the market. Net realized gains or losses reflect sales of investments along with the impact of financial market movements on the Company’s investment portfolio, including realized and unrealized changes in the fair value of equity securities and assets accounted for using the fair value option, realized and unrealized gains and losses on derivative instruments and changes in the allowance for credit losses on financial assets. On a pre-tax basis, net realized gains for the 2022 fourth quarter were $79.9 million, a substantial portion of which represented unrealized changes in the fair value of equity securities and assets accounted for using the fair value option.

On a pre-tax basis, net foreign exchange losses for the 2022 fourth quarter were $81.2 million, compared to net foreign exchange gains for the 2021 fourth quarter of $3.2 million. For both periods, such amounts were primarily unrealized and resulted from the effects of revaluing the Company’s net insurance liabilities required to be settled in foreign currencies at each balance sheet date. Changes in the value of available-for-sale investments held in foreign currencies due to foreign currency rate movements are reflected as a direct increase or decrease to shareholders’ equity and are not included in the consolidated statements of income. Although the Company generally attempts to match the currency of its projected liabilities with investments in the same currencies, the Company may elect to over or underweight one or more currencies from time to time, which could increase the Company’s exposure to foreign currency fluctuations and increase the volatility of the Company’s shareholders’ equity.

The Company’s effective tax rate on income before income taxes was 6.6% for the 2022 fourth quarter and 5.1% for the year ended December 31, 2022, compared to 5.2% for the 2021 fourth quarter and 5.6% for the year ended December 31, 2021. The Company’s effective tax rate on pre-tax operating income available to Arch common shareholders was 7.5% for the 2022 fourth quarter, compared to 4.7% for the 2021 fourth quarter. The Company’s effective tax rate may fluctuate from period to period based upon the relative mix of income or loss reported by jurisdiction and the varying tax rates in each jurisdiction. The 2022 fourth quarter included a net discrete income tax benefit of $4.1 million, which decreased the effective tax rate on operating income available to Arch common shareholders by 0.5%, compared to a net discrete income tax benefit of $10.6 million for the 2021 fourth quarter, which decreased the effective tax rate on operating income available to Arch common shareholders by 2.0%. The discrete tax items in both periods primarily related to valuation allowance adjustments and prior year true-ups of non-U.S. deferred tax assets.

Income from operating affiliates for the 2022 fourth quarter was $36.2 million, or $0.10 per share, compared to $40.6 million, or $0.10 per share, for the 2021 fourth quarter, and primarily reflects amounts related to the Company’s investment in Somers Group Holdings Ltd. (“Somers”) and Coface SA.

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Conference Call

The Company will hold a conference call for investors and analysts at 11:00 a.m. Eastern Time on February 14, 2023. A live webcast of this call will be available via the Investors section of the Company’s website at http://www.archgroup.com/investors. A recording of the webcast will be available in the Investors section of the Company’s website approximately two hours after the event concludes and will be archived on the site for one year.

Please refer to the Company’s Financial Supplement dated December 31, 2022, which is available via the Investors section of the Company’s website at http://www.archgroup.com/investors. The Financial Supplement provides additional detail regarding the financial performance of the Company. From time to time, the Company posts additional financial information and presentations to its website, including information with respect to its subsidiaries. Investors and other recipients of this information are encouraged to check the Company’s website regularly for additional information regarding the Company.

Arch Capital Group Ltd., is a publicly listed Bermuda exempted company with approximately $15.6 billion in capital at December 31, 2022. Arch, which is part of the S&P 500 index, provides insurance, reinsurance and mortgage insurance on a worldwide basis through its wholly owned subsidiaries.

Comments on Regulation G

Throughout this release, the Company presents its operations in the way it believes will be the most meaningful and useful to investors, analysts, rating agencies and others who use the Company’s financial information in evaluating the performance of the Company and that investors and such other persons benefit from having a consistent basis for comparison between quarters and for comparison with other companies within the industry. These measures may not, however, be comparable to similarly titled measures used by companies outside of the insurance industry. Investors are cautioned not to place undue reliance on these non-GAAP financial measures in assessing the Company’s overall financial performance.

This presentation includes the use of “after-tax operating income or loss available to Arch common shareholders,” which is defined as net income available to Arch common shareholders, excluding 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, transaction costs and other and loss on redemption of preferred shares, net of income taxes, and the use of annualized operating return on average common equity. The presentation of after-tax operating income available to Arch common 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 net income return on average common equity (the most directly comparable GAAP financial measures) in accordance with Regulation G is included on page 2 of this release.

The Company believes that net realized gains or losses, 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, the Company’s business performance. Although net realized gains or losses, 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 the Company’s 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 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 the Company’s financial information believe that, for many companies, the timing of the realization of investment gains or losses is largely opportunistic. In addition, changes in the allowance for credit losses and net impairment losses recognized in earnings on the Company’s investments represent other-than-temporary declines in expected recovery values on securities without actual realization. The use of the equity method on certain of the Company’s 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 the Company’s proportionate share of the net income or loss of the funds (which include changes in the fair value of the underlying securities in the funds). This method of accounting is different from the way the Company accounts for its 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 costs related to acquisitions. The Company believes that transaction costs and other, due to their non-recurring nature, are not indicative of the performance of, or trends in, the Company’s business performance. The loss on redemption of preferred shares related to

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the redemption of the Company's Series E preferred shares in September 2021 had no impact on shareholders' equity or cash flows. Due to these reasons, the Company excludes net realized gains or losses, equity in net income or loss of investment funds accounted for using the equity method, net foreign exchange gains or losses and transaction costs and other from the calculation of after-tax operating income or loss available to Arch common shareholders.

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

The Company’s segment information includes the presentation of consolidated underwriting income or loss and a subtotal of underwriting income or loss. Such measures represent the pre-tax profitability of its 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 the Company’s individual underwriting operations. Underwriting income or loss does not incorporate items included in the Company’s corporate segment. While these measures are presented in the Segment Information footnote to the Company’s 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, in accordance with Regulation G, is shown on the following pages.

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 and, accordingly, investment income, income from operating affiliates and other corporate segment related items are not allocated to each underwriting segment.

In addition, the Company’s segment information includes the use of a combined ratio excluding catastrophic activity and prior year development, for the insurance and reinsurance segments, and a combined ratio excluding prior year development, for the mortgage segment. These ratios are non-GAAP financial measures as defined in Regulation G. The reconciliation of such measures to the combined ratio (the most directly comparable GAAP financial measure) in accordance with Regulation G are shown on the individual segment pages. The Company’s management utilizes the adjusted combined ratios excluding current accident year catastrophic events and favorable or adverse development in prior year loss reserves in its analysis of the underwriting performance of each of its 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 (excluding changes in the allowance for credit losses on non-investment related financial assets) 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 and reflects the effect of financial market conditions along with foreign currency fluctuations. Management uses total return on investments as a key measure of the return generated to Arch common shareholders, and compares the return generated by the Company’s investment portfolio against benchmark returns during the periods presented.

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The following tables summarize the Company’s results by segment for the 2022 fourth quarter and 2021 fourth quarter and a reconciliation of underwriting income or loss to income or loss before income taxes and net income or loss available to Arch common shareholders:

(U.S. Dollars in thousands)	Three Months Ended
	December 31, 2022
	Insurance			Reinsurance			Mortgage			Total
Gross premiums written (1)	$	1,644,066		$	1,797,037		$	355,827		$	3,795,262
Premiums ceded	(427,336)			(253,655)			(81,303)			(760,626)
Net premiums written	1,216,730			1,543,382			274,524			3,034,636
Change in unearned premiums	26,857			(318,174)			17,600			(273,717)
Net premiums earned	1,243,587			1,225,208			292,124			2,760,919
Other underwriting income (loss)	—			(943)			2,226			1,283
Losses and loss adjustment expenses	(729,784)			(648,654)			137,108			(1,241,330)
Acquisition expenses	(244,059)			(243,640)			(12,816)			(500,515)
Other operating expenses	(172,060)			(68,925)			(45,108)			(286,093)
Underwriting income (loss)	$	97,684		$	263,046		$	373,534		734,264
Net investment income										181,079
Net realized gains (losses)										79,932
Equity in net income (loss) of investment funds accounted for using the equity method										40,351
Other income (loss)										8,321
Corporate expenses (2)										(17,462)
Transaction costs and other (2)										(358)
Amortization of intangible assets										(25,722)
Interest expense										(31,700)
Net foreign exchange gains (losses)										(81,224)
Income (loss) before income taxes and income (loss) from operating affiliates										887,481
Income tax expense										(60,919)
Income (loss) from operating affiliates										36,226
Net income (loss)										862,788
Dividends attributable to redeemable noncontrolling interests										(3,100)
Net income (loss) available to Arch										859,688
Preferred dividends										(10,184)
Net income (loss) available to Arch common shareholders										$	849,504
Underwriting Ratios
Loss ratio	58.7		%	52.9		%	(46.9)		%	45.0		%
Acquisition expense ratio	19.6		%	19.9		%	4.4		%	18.1		%
Other operating expense ratio	13.8		%	5.6		%	15.4		%	10.4		%
Combined ratio	92.1		%	78.4		%	(27.1)		%	73.5		%
Net premiums written to gross premiums written	74.0		%	85.9		%	77.2		%	80.0		%

(1)    Certain amounts included in the gross premiums written of each segment are related to intersegment transactions and are included in the gross premiums written of each segment. 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.’ See ‘Comments on Regulation G’ for a further discussion of such items.

9

(U.S. Dollars in thousands)	Three Months Ended
	December 31, 2021
	Insurance			Reinsurance			Mortgage			Total
Gross premiums written (1)	$	1,486,362		$	1,013,090		$	364,134		$	2,861,575
Premiums ceded	(450,376)			(303,949)			(74,834)			(827,148)
Net premiums written	1,035,986			709,141			289,300			2,034,427
Change in unearned premiums	(33,089)			70,676			11,616			49,203
Net premiums earned	1,002,897			779,817			300,916			2,083,630
Other underwriting income (loss)	—			521			2,639			3,160
Losses and loss adjustment expenses	(594,108)			(430,180)			28,435			(995,853)
Acquisition expenses	(188,724)			(155,694)			(13,121)			(357,539)
Other operating expenses	(149,520)			(61,954)			(50,313)			(261,787)
Underwriting income (loss)	$	70,545		$	132,510		$	268,556		471,611
Net investment income										90,454
Net realized gains (losses)										59,517
Equity in net income (loss) of investment funds accounted for using the equity method										67,132
Other income (loss)										9,093
Corporate expenses (2)										(17,840)
Transaction costs and other (2)										(310)
Amortization of intangible assets										(33,132)
Interest expense										(32,248)
Net foreign exchange gains (losses)										3,163
Income (loss) before income taxes and income (loss) from operating affiliates										617,440
Income tax expense										(34,406)
Income (loss) from operating affiliates										40,641
Net income (loss)										623,675
Dividends attributable to redeemable noncontrolling interests										(410)
Net income (loss) available to Arch										623,265
Preferred dividends										(10,184)
Net income (loss) available to Arch common shareholders										$	613,081
Underwriting Ratios
Loss ratio	59.2		%	55.2		%	(9.4)		%	47.8		%
Acquisition expense ratio	18.8		%	20.0		%	4.4		%	17.2		%
Other operating expense ratio	14.9		%	7.9		%	16.7		%	12.6		%
Combined ratio	92.9		%	83.1		%	11.7		%	77.6		%
Net premiums written to gross premiums written	69.7		%	70.0		%	79.4		%	71.1		%

(1)    Certain amounts included in the gross premiums written of each segment are related to intersegment transactions and are included in the gross premiums written of each segment. 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.’ See ‘Comments on Regulation G’ for a further discussion of such items.

10

Cautionary Note Regarding Forward-Looking Statements

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

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

•the Company’s ability to successfully implement its business strategy during “soft” as well as “hard” markets;

•acceptance of the Company’s business strategy, security and financial condition by rating agencies and regulators, as well as by brokers and its insureds and reinsureds;

•the Company’s ability to consummate acquisitions and integrate any businesses it has acquired or may acquire into its existing operations;

•the Company’s ability to maintain or improve its ratings, which may be affected by its 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, including those resulting from COVID-19) and conditions specific to the reinsurance and insurance markets in which the Company operates;

•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 the Company’s access to such markets;

•the Company’s ability to successfully enhance, integrate and maintain operating procedures (including information technology) to effectively support its current and new business;

•the loss and addition of key personnel;

•material differences between actual and expected assessments for guaranty funds and mandatory pooling arrangements;

•accuracy of those estimates and judgments utilized in the preparation of the Company’s 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;

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

•the adequacy of the Company’s loss reserves;

•severity and/or frequency of losses;

•greater frequency or severity of unpredictable natural and man-made catastrophic events;

•claims resulting from natural or man-made catastrophic events or severe economic events in the Company’s insurance, reinsurance and mortgage businesses could cause large losses and substantial volatility in the Company’s results of operations;

•the effect of climate change on the Company’s business;

•the effect of contagious diseases (including COVID-19) on the Company’s business;

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

•availability to the Company of reinsurance to manage its 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 the Company;

11

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

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

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

•uncertainty relating to determination of the London Inter-bank Offered Rate (“LIBOR”) and the phasing out and replacement of LIBOR with alternative benchmark rates;

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

•changes in accounting principles or policies or in the Company’s application of such accounting principles or policies;

•changes in the political environment of certain countries in which the Company operates, underwrites business or invests;

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

•statutory or regulatory developments, including as to tax policy 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 the Company, its subsidiaries, brokers or customers, including new guidance implementing the Tax Cuts and Jobs Act of 2017 and the possible implementation of the Organization for Economic Cooperation and Development (“OECD”) Pillar I and Pillar II initiative; 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 the Company’s Annual Report on Form 10-K, as well as the other factors set forth in the Company’s 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 the Company or persons acting on its 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. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Contacts
Arch Capital Group Ltd.	Investor Relations
François Morin: (441) 278-9250	Donald Watson: (914) 872-3616; dwatson@archgroup.com
Source - Arch Capital Group Ltd.
arch-corporate

12

EX-99.2

EXHIBIT 99.2

	Arch Capital Group Ltd.
	Waterloo House, Ground Floor
	100 Pitts Bay Road
	Pembroke HM 08 Bermuda

Financial Supplement

December 31, 2022

The following financial supplement is provided to assist in your understanding of Arch Capital Group Ltd. (“Arch”) and its subsidiaries (collectively, the “Company”).

This report is for informational purposes only. It should be read in conjunction with documents filed by Arch with the U.S. Securities and Exchange Commission, including the most recent Annual Report on Form 10-K and the Quarterly Reports on Form 10-Q. Please refer to the Company’s website atwww.archgroup.com for further information describing Arch.

Arch Capital Group Ltd.	Investor Relations
François Morin: (441) 278-9250	Donald Watson: (914) 872-3616; dwatson@archgroup.com

Arch Capital Group Ltd. and Subsidiaries

Table of Contents

			Page
I.	Financial Highlights		3
II.	Consolidated Financial Statements
	a.	Consolidated Statements of Income	4
	b.	Consolidated Balance Sheets	5
	c.	Consolidated Statements of Changes in Shareholders’ Equity	6
	d.	Consolidated Statements of Cash Flows	7
III.	Segment Information
	a.	Overview	8
	b.	Consolidated Results	10
	c.	Insurance Segment Results	14
	d.	Reinsurance Segment Results	16
	e.	Mortgage Segment Results	18
	f.	Consolidated Results Excluding ‘Other’ Segment	22
	g.	Selected Information on Losses and Loss Adjustment Expenses	23
IV.	Investment Information
	a.	Investable Asset Summary and Investment Portfolio Metrics	24
	b.	Composition of Net Investment Income, Yield and Total Return	25
	c.	Composition of Fixed Maturities	26
	d.	Credit Quality Distribution and Maturity Profile	27
	e.	Analysis of Corporate Exposures	28
	f.	Structured Securities	29
V.	Other
	a.	Comments on Regulation G	30
	b.	Operating Income Reconciliation and Annualized Operating Return on Average Common Equity	31
	c.	Operating Income and Effective Tax Rate Calculations	32
	d.	Capital Structure and Share Repurchase Activity	33

1

Arch Capital Group Ltd. and Subsidiaries

Basis of Presentation

Basis of Presentation

All financial information contained herein is unaudited, however, certain information relating to the consolidated balance sheet at December 31, 2021 is derived from or agrees to audited financial information. During the 2021 first quarter, the Company changed its presentation of ‘income (loss) from operating affiliates’ on its consolidated statements of income for all periods presented to reclass such item from ‘other income (loss)’. The Company also changed its presentation of ‘investment in operating affiliates’ on its consolidated balance sheet for all periods presented to reclass such item from ‘other assets’. Unless otherwise noted, all data is in thousands, except for share and per share amounts and ratio information.

In March 2014, the Company invested $100.0 million to acquire common equity and a warrant to purchase additional common equity of Somers Group Holdings Ltd. (formerly Watford Holdings Ltd.), (“Somers”). In accordance with GAAP, the Company consolidated the results of Somers in its financial statements. Somers was considered a variable interest entity and the Company concluded that it was the primary beneficiary of Somers, through June 30, 2021. As such, 100% of the results of Somers were included in the Company’s consolidated financial statements as of and for the periods ended June 30, 2021. The portion of Somers’ earnings owned by third parties was recorded in the consolidated statements of income as ‘amounts attributable to noncontrolling interests.’ In addition, through June 30, 2021 the Company reflected Somers’ redeemable preference shares in the mezzanine section of the Company’s consolidated balance sheets as ‘redeemable noncontrolling interests’. In July 2021, the Company announced the completion of the previously disclosed acquisition of Somers by Greysbridge. Based on the governing documents of Greysbridge, the Company has concluded that, while it will retain significant influence over Somers, Somers no longer constitutes a variable interest entity. Accordingly, effective July 1, 2021, Arch no longer consolidates the results of Somers in its consolidated financial statements and footnotes.

Cautionary Note Regarding Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. This release or any other written or oral statements made by or on behalf of Arch and its subsidiaries may include forward-looking statements, which reflect the Company’s current views with respect to future events and financial performance. All statements other than statements of historical fact included in or incorporated by reference in this release are forward-looking statements.

Forward-looking statements can generally be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe” or “continue” or their negative or variations or similar terminology. Forward-looking statements involve the Company’s current assessment of risks and uncertainties. Actual events and results may differ materially from those expressed or implied in these statements. A non-exclusive list of the important factors that could cause actual results to differ materially from those in such forward-looking statements includes the following: adverse general economic and market conditions; increased competition; pricing and policy term trends; fluctuations in the actions of rating agencies and the Company’s ability to maintain and improve the Company’s ratings; investment performance; the loss and addition of key personnel; the adequacy of the Company’s loss reserves, severity and/or frequency of losses, greater than expected loss ratios and adverse development on claim and/or claim expense liabilities; greater frequency or severity of unpredictable natural and man-made catastrophic events; including pandemics such as COVID-19; the impact of acts of terrorism and acts of war; changes in regulations and/or tax laws in the United States or elsewhere; the Company’s ability to successfully integrate, establish and maintain operating procedures as well as integrate the businesses we have acquired or may acquire into the existing operations; changes in accounting principles or policies; material differences between actual and expected assessments for guaranty funds and mandatory pooling arrangements; availability and cost to the Company of reinsurance to manage gross and net exposures; the failure of others to meet their obligations to the Company; uncertainty relating to determination of the London Inter-bank Offered Rate (“LIBOR”) and the phasing out and replacement of LIBOR with alternative benchmark rates; a disruption caused by cyber-attacks or other technology breaches or failures on the Company or the Company’s business partners and service providers, which could negatively impact the Company’s business and/or expose the Company to litigation; and other factors identified in the Company’s filings with the U.S. Securities and Exchange Commission.

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. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on the Company’s behalf are expressly qualified in their entirety by these cautionary statements. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

2

Arch Capital Group Ltd. and Subsidiaries

Financial Highlights

The following table presents financial highlights (1):

(U.S. Dollars in thousands, except share data)	Three Months Ended								Year Ended
	December 31,								December 31,
	2022			2021			Change		2022			2021			Change
Underwriting results:
Gross premiums written	$	3,795,262		$	2,861,575		32.6	%	$	15,326,447		$	12,463,788		23.0	%
Net premiums written	3,034,636			2,034,427			49.2	%	11,077,189			8,663,635			27.9	%
Net premiums earned	2,760,919			2,083,630			32.5	%	9,678,077			7,750,330			24.9	%
Underwriting income (loss) (2)	734,264			471,611			55.7	%	1,796,032			1,239,740			44.9	%
Loss ratio	45.0		%	47.8		%	(2.8)		51.9		%	55.8		%	(3.9)
Acquisition expense ratio	18.1		%	17.2		%	0.9		18.0		%	16.0		%	2.0
Other operating expense ratio	10.4		%	12.6		%	(2.2)		11.7		%	12.5		%	(0.8)
Combined ratio	73.5		%	77.6		%	(4.1)		81.6		%	84.3		%	(2.7)
Net investment income	$	181,079		$	90,454		100.2	%	$	496,547		$	346,808		43.2	%
Per diluted share	$	0.48		$	0.23		108.7	%	$	1.31		$	0.87		50.6	%
Net income available to Arch common shareholders	$	849,504		$	613,081		38.6	%	$	1,436,197		$	2,093,405		(31.4)	%
Per diluted share	$	2.26		$	1.58		43.0	%	$	3.80		$	5.23		(27.3)	%
After-tax operating income available to Arch common shareholders (2)	$	805,922		$	493,257		63.4	%	$	1,840,389		$	1,434,930		28.3	%
Per diluted share	$	2.14		$	1.27		68.5	%	$	4.87		$	3.58		36.0	%
Comprehensive income (loss) available to Arch	$	1,105,345		$	509,482		117.0	%	$	(104,637)		$	1,603,354		(106.5)	%
Net cash provided by operating activities	$	981,510		$	800,004		22.7	%	$	3,815,227		$	3,380,701		12.9	%
Weighted average common shares and common share equivalents outstanding — diluted	375,878,279			388,869,378			(3.3)	%	377,609,767			400,345,936			(5.7)	%
Financial measures:
Change in book value per common share during period	9.9		%	3.5		%	6.4		(2.8)		%	10.7		%	(13.5)
Annualized net income return on average common equity	29.5		%	19.4		%	10.1		11.6		%	16.7		%	(5.1)
Annualized operating return on average common equity (2)	28.0		%	15.6		%	12.4		14.8		%	11.5		%	3.3
Total return on investments (3)	2.60		%	0.39		%	221 bps		(6.45)		%	1.90		%	-835 bps

(1)Presented on a ‘core’ basis which excludes amounts related to the ‘other’ segment (i.e., results of Somers). See ‘Comments on Regulation G’ for a further discussion of the presentation of ‘core’ results.

(2)See ‘Comments on Regulation G’ for a further discussion of consolidated underwriting income or loss, after-tax operating income or loss available to Arch common shareholders and annualized operating return on average common equity.

(3)Total return on investments includes investment income, equity in net income (loss) of investment funds accounted for using the equity method, net realized gains and losses and the change in unrealized gains and losses and is calculated on a pre-tax basis and before investment expenses. See ‘Comments on Regulation G’ for a further discussion of the presentation of total return on investments.

3

Arch Capital Group Ltd. and Subsidiaries

Consolidated Statements of Income

(U.S. Dollars in thousands, except share data)	Three Months Ended										Year Ended
	December 31,		September 30,		June 30,		March 31,		December 31,		December 31,		December 31,
	2022		2022		2022		2022		2021		2022		2021
Revenues
Net premiums earned	$	2,760,919	$	2,470,750	$	2,325,775	$	2,120,633	$	2,083,630	$	9,678,077	$	8,082,298
Net investment income	181,079		128,640		106,392		80,436		90,454		496,547		389,118
Net realized gains (losses)	79,932		(183,673)		(266,579)		(292,414)		59,517		(662,734)		379,845
Other underwriting income	1,283		3,077		2,970		5,897		3,160		13,227		22,073
Equity in net income (loss) of investment funds accounted for using the equity method	40,351		(18,861)		58,061		36,305		67,132		115,856		366,402
Other income (loss)	8,321		(13,684)		(11,777)		(9,025)		9,093		(26,165)		10,244
Total revenues	3,071,885		2,386,249		2,214,842		1,941,832		2,312,986		9,614,808		9,249,980
Expenses
Losses and loss adjustment expenses	(1,241,330)		(1,682,696)		(1,102,656)		(1,000,835)		(995,853)		(5,027,517)		(4,584,803)
Acquisition expenses	(500,515)		(447,587)		(413,319)		(378,159)		(357,539)		(1,739,580)		(1,303,178)
Other operating expenses	(286,093)		(274,747)		(277,392)		(289,943)		(261,787)		(1,128,175)		(998,595)
Corporate expenses	(17,820)		(17,710)		(27,620)		(32,332)		(18,150)		(95,482)		(79,157)
Amortization of intangible assets	(25,722)		(26,104)		(27,207)		(27,167)		(33,132)		(106,200)		(82,955)
Interest expense	(31,700)		(33,063)		(32,795)		(32,708)		(32,248)		(130,266)		(139,470)
Net foreign exchange gains (losses)	(81,224)		90,509		87,775		3,845		3,163		100,905		41,529
Total expenses	(2,184,404)		(2,391,398)		(1,793,214)		(1,757,299)		(1,695,546)		(8,126,315)		(7,146,629)
Income (loss) before income taxes and income (loss) from operating affiliates	887,481		(5,149)		421,628		184,533		617,440		1,488,493		2,103,351
Income tax (expense) benefit	(60,919)		14,900		(22,323)		(11,619)		(34,406)		(79,961)		(128,582)
Income (loss) from operating affiliates	36,226		8,507		4,640		24,518		40,641		73,891		264,693
Net income (loss)	862,788		18,258		403,945		197,432		623,675		1,482,423		2,239,462
Net (income) loss attributable to noncontrolling interests	(3,100)		(1,157)		399		(1,632)		(410)		(5,490)		(82,613)
Net income (loss) attributable to Arch	859,688		17,101		404,344		195,800		623,265		1,476,933		2,156,849
Preferred dividends	(10,184)		(10,184)		(10,184)		(10,184)		(10,184)		(40,736)		(48,343)
Loss on redemption of preferred shares	—		—		—		—		—		—		(15,101)
Net income (loss) available to Arch common shareholders	$	849,504	$	6,917	$	394,160	$	185,616	$	613,081	$	1,436,197	$	2,093,405
Comprehensive income (loss) available to Arch	$	1,105,345	$	(616,461)	$	(204,476)	$	(389,045)	$	509,482	$	(104,637)	$	1,603,354
Net income (loss) per common share and common share equivalent
Basic	$	2.32	$	0.02	$	1.07	$	0.50	$	1.62	$	3.90	$	5.34
Diluted	$	2.26	$	0.02	$	1.04	$	0.48	$	1.58	$	3.80	$	5.23
Weighted average common shares and common share equivalents outstanding
Basic	365,902,520		365,190,527		369,241,193		374,243,812		379,431,442		368,612,197		391,748,715
Diluted	375,878,279		373,727,277		377,952,988		384,194,363		388,869,378		377,609,767		400,345,936

4

Arch Capital Group Ltd. and Subsidiaries

Consolidated Balance Sheets

(U.S. Dollars in thousands, except share data)	December 31,		September 30,		June 30,		March 31,		December 31,
	2022		2022		2022		2022		2021
Assets
Investments:
Fixed maturities available for sale, at fair value	$	19,682,789	$	18,120,727	$	17,585,029	$	17,648,853	$	17,998,109
Short-term investments available for sale, at fair value	1,331,662		1,940,857		2,227,874		2,332,624		1,734,716
Equity securities, at fair value	859,969		809,869		772,689		1,002,572		1,804,170
Other investments	1,644,197		1,578,751		1,634,368		1,686,666		1,973,550
Investments accounted for using the equity method	3,774,310		3,565,946		3,496,341		3,325,543		3,077,611
Total investments	27,292,927		26,016,150		25,716,301		25,996,258		26,588,156
Cash	855,118		813,583		813,548		812,917		858,668
Accrued investment income	158,680		116,263		116,102		82,607		85,453
Investment in operating affiliates	964,604		891,212		967,603		1,144,255		1,135,655
Premiums receivable	3,624,777		3,579,380		3,634,182		3,223,504		2,633,280
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses	6,563,654		6,356,456		5,938,511		5,941,000		5,880,735
Contractholder receivables	1,731,293		1,735,730		1,758,018		1,810,199		1,828,691
Ceded unearned premiums	1,799,197		2,115,539		2,123,915		1,951,960		1,729,455
Deferred acquisition costs	1,263,870		1,122,711		1,069,845		1,001,866		901,841
Receivable for securities sold	12,493		27,042		157,329		116,633		60,179
Goodwill and intangible assets	804,289		806,655		868,014		926,427		944,983
Other assets	2,919,605		2,756,383		2,555,826		2,670,315		2,453,849
Total assets	$	47,990,507	$	46,337,104	$	45,719,194	$	45,677,941	$	45,100,945
Liabilities
Reserve for losses and loss adjustment expenses	$	20,031,943	$	19,288,291	$	18,194,324	$	18,109,107	$	17,757,156
Unearned premiums	7,337,002		7,271,279		7,145,297		6,737,779		6,011,942
Reinsurance balances payable	1,529,919		1,669,592		1,634,700		1,510,906		1,583,253
Contractholder payables	1,733,984		1,738,089		1,761,023		1,813,930		1,832,127
Collateral held for insured obligations	249,238		254,720		251,063		244,502		242,352
Senior notes	2,725,410		2,725,153		2,724,896		2,724,642		2,724,394
Payable for securities purchased	95,041		174,769		292,106		176,452		64,850
Other liabilities	1,367,068		1,411,193		1,289,760		1,431,271		1,329,742
Total liabilities	35,069,605		34,533,086		33,293,169		32,748,589		31,545,816
Redeemable noncontrolling interests	10,829		8,908		8,459		9,763		9,233
Shareholders’ equity
Non-cumulative preferred shares	830,000		830,000		830,000		830,000		830,000
Common shares	654		652		652		651		648
Additional paid-in capital	2,211,444		2,186,599		2,170,661		2,134,241		2,085,075
Retained earnings	15,892,065		15,042,561		15,035,644		14,641,484		14,455,868
Accumulated other comprehensive income (loss), net of deferred income tax	(1,646,170)		(1,891,827)		(1,258,265)		(649,445)		(64,600)
Common shares held in treasury, at cost	(4,377,920)		(4,372,875)		(4,361,126)		(4,037,342)		(3,761,095)
Total shareholders’ equity	12,910,073		11,795,110		12,417,566		12,919,589		13,545,896
Total liabilities, noncontrolling interests and shareholders’ equity	$	47,990,507	$	46,337,104	$	45,719,194	$	45,677,941	$	45,100,945
Common shares and common share equivalents outstanding, net of treasury shares	370,345,997		369,321,990		369,346,815		375,730,891		378,923,894
Book value per common share (1)	$	32.62	$	29.69	$	31.37	$	32.18	$	33.56

(1) Excludes the effects of stock options and restricted stock units outstanding.

5

Arch Capital Group Ltd. and Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity

(U.S. Dollars in thousands)	Three Months Ended										Year Ended
	December 31,		September 30,		June 30,		March 31,		December 31,		December 31,		December 31,
	2022		2022		2022		2022		2021		2022		2021
Non-cumulative preferred shares
Balance at beginning of period	$	830,000	$	830,000	$	830,000	$	830,000	$	830,000	$	830,000	$	780,000
Preferred shares issued	—		—		—		—		—		—		500,000
Preferred shares redeemed	—		—		—		—		—		—		(450,000)
Balance at beginning and end of period	$	830,000	$	830,000	$	830,000	$	830,000	$	830,000	$	830,000	$	830,000
Common shares
Balance at beginning of period	652		652		651		648		648		648		643
Common shares issued, net	2		—		1		3		—		6		5
Balance at end of period	654		652		652		651		648		654		648
Additional paid-in capital
Balance at beginning of period	2,186,599		2,170,661		2,134,241		2,085,075		2,061,906		2,085,075		1,977,794
Issue costs on preferred shares	—		—		—		—		—		—		(14,179)
Reversal of original issue costs on redeemed preferred shares	—		—		—		—		—		—		15,101
Amortization of share-based compensation	7,597		13,518		21,137		45,368		14,774		87,620		86,053
All other	17,248		2,420		15,283		3,798		8,395		38,749		20,306
Balance at end of period	2,211,444		2,186,599		2,170,661		2,134,241		2,085,075		2,211,444		2,085,075
Retained earnings
Balance at beginning of period	15,042,561		15,035,644		14,641,484		14,455,868		13,842,787		14,455,868		12,362,463
Net income	862,788		18,258		403,945		197,432		623,675		1,482,423		2,239,462
Amounts attributable to noncontrolling interests	(3,100)		(1,157)		399		(1,632)		(410)		(5,490)		(82,613)
Preferred share dividends	(10,184)		(10,184)		(10,184)		(10,184)		(10,184)		(40,736)		(48,343)
Loss on redemption of preferred shares	—		—		—		—		—		—		(15,101)
Balance at end of period	15,892,065		15,042,561		15,035,644		14,641,484		14,455,868		15,892,065		14,455,868
Accumulated other comprehensive income (loss), net of deferred income tax
Balance at beginning of period	(1,891,827)		(1,258,265)		(649,445)		(64,600)		49,184		(64,600)		488,895
Change in unrealized appreciation (decline) in value of available-for-sale investments	160,696		(563,174)		(540,295)		(582,077)		(103,391)		(1,524,850)		(487,809)
Change in foreign currency translation adjustments	84,961		(70,388)		(68,525)		(2,768)		(10,393)		(56,720)		(65,686)
Balance at end of period	(1,646,170)		(1,891,827)		(1,258,265)		(649,445)		(64,600)		(1,646,170)		(64,600)
Common shares held in treasury, at cost
Balance at beginning of period	(4,372,875)		(4,361,126)		(4,037,342)		(3,761,095)		(3,396,999)		(3,761,095)		(2,503,909)
Shares repurchased for treasury	(5,045)		(11,749)		(323,784)		(276,247)		(364,096)		(616,825)		(1,257,186)
Balance at end of period	(4,377,920)		(4,372,875)		(4,361,126)		(4,037,342)		(3,761,095)		(4,377,920)		(3,761,095)
Total shareholders’ equity	$	12,910,073	$	11,795,110	$	12,417,566	$	12,919,589	$	13,545,896	$	12,910,073	$	13,545,896

6

Arch Capital Group Ltd. and Subsidiaries

Consolidated Statements of Cash Flows

(U.S. Dollars in thousands)	Three Months Ended										Year Ended
	December 31,		September 30,		June 30,		March 31,		December 31,		December 31,		December 31,
	2022		2022		2022		2022		2021		2022		2021
Operating Activities
Net income (loss)	$	862,788	$	18,258	$	403,945	$	197,432	$	623,675	$	1,482,423	$	2,239,462
Adjustments to reconcile net income to net cash provided by operating activities:
Net realized (gains) losses	(91,112)		187,407		266,060		289,213		(60,054)		651,568		(427,367)
Equity in net (income) or loss of investment funds accounted for using the equity method and other income or loss	46,752		62,590		55,235		(11,420)		(91,400)		153,157		(464,050)
Amortization of intangible assets	25,722		26,104		27,207		27,167		33,132		106,200		82,955
Share-based compensation	7,599		13,511		21,139		45,379		14,791		87,628		87,094
Changes in:
Reserve for losses and loss adjustment expenses, net	335,931		918,602		358,528		275,954		213,979		1,889,015		1,762,190
Unearned premiums, net	273,717		253,024		358,864		513,507		(49,203)		1,399,112		936,039
Premiums receivable	(13,488)		(9,951)		(485,099)		(600,691)		161,884		(1,109,229)		(685,214)
Deferred acquisition costs	(131,690)		(68,466)		(76,912)		(96,999)		(15,277)		(374,067)		(263,243)
Reinsurance balances payable	(163,927)		56,323		146,117		(74,022)		(118,506)		(35,509)		500,065
Other items, net	(170,782)		(77,653)		(172,679)		(13,957)		86,983		(435,071)		(340,376)
Net cash provided by operating activities	981,510		1,379,749		902,405		551,563		800,004		3,815,227		3,427,555
Investing Activities
Purchases of fixed maturity investments	(3,325,173)		(3,359,345)		(2,978,292)		(6,727,665)		(5,581,835)		(16,390,475)		(35,451,858)
Purchases of equity securities	(10,265)		(131,160)		(246,958)		(408,615)		(196,529)		(796,998)		(1,175,480)
Purchases of other investments	(450,358)		(349,715)		(303,725)		(616,659)		(509,040)		(1,720,457)		(1,859,096)
Proceeds from sales of fixed maturity investments	1,853,586		1,911,450		2,025,616		6,053,352		3,509,653		11,844,004		33,577,445
Proceeds from sales of equity securities	14,308		49,596		389,956		1,100,256		222,512		1,554,116		918,145
Proceeds from sales, redemptions and maturities of other investments	145,393		212,346		292,992		570,341		277,614		1,221,072		1,765,533
Proceeds from redemptions and maturities of fixed maturity investments	136,655		133,791		203,320		240,753		394,343		714,519		1,628,755
Net settlements of derivative instruments	37,529		(61,509)		(42,328)		(2,510)		27,758		(68,818)		(40,072)
Net (purchases) sales of short-term investments	619,229		288,012		70,760		(510,752)		1,338,070		467,249		165,272
Purchase of operating affiliate, net	—		—		—		—		—		—		(753,916)
Impact of the deconsolidation of a variable interest entity	—		—		—		—		—		—		(349,202)
Purchases of fixed assets	(13,289)		(14,553)		(12,060)		(11,770)		(6,987)		(51,672)		(41,394)
Other	(2,949)		29,968		97,836		550		(162,007)		125,405		(523,864)
Net cash provided by (used for) investing activities	(995,334)		(1,291,119)		(502,883)		(312,719)		(686,448)		(3,102,055)		(2,139,732)
Financing Activities
Proceeds from issuance of preferred shares, net	—		—		—		—		—		—		485,821
Redemption of preferred shares	—		—		—		—		—		—		(450,000)
Purchases of common shares under share repurchase program	—		(10,147)		(320,688)		(254,988)		(362,097)		(585,823)		(1,234,294)
Proceeds from common shares issued, net	9,523		1,202		13,195		(17,260)		6,137		6,660		6,418
Third party investment in non-redeemable noncontrolling interests	—		—		—		—		—		—		15,971
Dividends paid to redeemable noncontrolling interests	—		—		—		—		—		—		(1,907)
Other	(1,188)		(2,632)		(130,866)		48,859		18,474		(85,827)		(3,278)
Preferred dividends paid	(10,184)		(10,184)		(10,184)		(10,184)		(10,184)		(40,736)		(48,280)
Net cash provided by (used for) financing activities	(1,849)		(21,761)		(448,543)		(233,573)		(347,670)		(705,726)		(1,229,549)
Effects of exchange rate changes on foreign currency cash and restricted cash	30,677		(36,776)		(38,866)		(3,924)		(24)		(48,889)		(34,047)
Increase (decrease) in cash and restricted cash	15,004		30,093		(87,887)		1,347		(234,138)		(41,443)		24,227
Cash and restricted cash, beginning of period	1,258,324		1,228,231		1,316,118		1,314,771		1,548,909		1,314,771		1,290,544
Cash and restricted cash, end of period	$	1,273,328	$	1,258,324	$	1,228,231	$	1,316,118	$	1,314,771	$	1,273,328	$	1,314,771
Income taxes paid (received)	$	53,371	$	72,930	$	119,616	$	9,005	$	84,371	$	254,922	$	286,810
Interest paid	$	63,413	$	416	$	63,948	$	648	$	63,498	$	128,425	$	139,301
Net cash provided by operating activities, excluding the ‘other’ segment	$	981,510	$	1,379,749	$	902,405	$	551,563	$	800,004	$	3,815,227	$	3,380,701

7

Arch Capital Group Ltd. and Subsidiaries

Segment Information — Overview

The Company classifies its businesses into three underwriting segments — insurance, reinsurance and mortgage — and two other operating segments — ‘other’ and corporate segment. 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 Chief Executive Officer of Arch, the Chief Financial Officer and Treasurer of Arch and the President and Chief Underwriting Officer of Arch. 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 core underwriting segments based on underwriting income or loss. The Company does not manage its assets by underwriting segment and, accordingly, investment income is not allocated to each underwriting segment.

The Company determined its reportable operating 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.

Insurance 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: primary and excess casualty coverages for middle market and large construction accounts, a comprehensive range of products for middle market accounts in specialty industries and casualty solutions for large national accounts, including loss sensitive primary insurance programs (large deductible, self-insured retention and retrospectively rated programs).

•    Excess and surplus casualty: primary and excess casualty insurance coverages written on a non-admitted basis.

•    Warranty and lenders solutions: 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, cyber insurance, and medical professional and general liability insurance coverages for the healthcare industry. The business is predominately written on a claims-made basis.

•    Programs: primarily targeting program managers with unique expertise and niche products offering some combination of general liability, commercial automobile, property, inland marine, umbrella and workers’ compensation.

•    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, cargo, war, specie and liability. Aviation, standalone terrorism and political risks are also offered. Coverage may be provided for operational and construction risk.

•    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, commercial and transactional surety coverages.

8

Arch Capital Group Ltd. and Subsidiaries

Segment Information — Overview

Reinsurance Segment

The reinsurance segment consists of the Company’s reinsurance underwriting units which offer specialty product lines on a worldwide basis. Reinsurance agreements are typically offered on a proportional and/or excess of loss basis and provide coverage to ceding company clients for specific underlying written policies. Product lines include:

•Casualty: provides coverage on third party liability exposures including, among others, executive assurance, professional liability, excess and umbrella liability, excess motor and healthcare business, and workers’ compensation. Business is assumed primarily on a treaty basis, with some facultative coverages also offered.

•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 for proportional motor reinsurance, whole account multi-line treaties, cyber, trade credit and surety, accident and health, workers’ compensation catastrophe, agriculture and political risk, among others.

•Property catastrophe: provides protection for most types of catastrophic losses, including hurricane, earthquake, flood, tornado, hail and fire, and for other perils on a case-by-case basis. Excess of loss coverages are triggered when aggregate losses and loss adjustment expense from a single occurrence of a covered peril exceed the retention specified in the contract.

•Property excluding property catastrophe: provides coverage for personal lines and/or 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 either a treaty or facultative basis.

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

Mortgage Segment

The mortgage segment includes the Company’s underwriting units which offer mortgage insurance and reinsurance products on a worldwide basis. Underwriting units include:

•U.S. primary mortgage insurance: offers private mortgage insurance through Arch Mortgage Insurance Company and United Guaranty Residential Insurance Company (combined “Arch MI U.S.”), both approved eligible mortgage insurers by Fannie Mae and Freddie Mac. Arch MI U.S. also includes Arch Mortgage Guaranty Company, which is not a government sponsored enterprise (“GSE”) approved entity.

•U.S. credit risk transfer (“CRT”) and other: underwrites CRT transactions, which are predominantly with GSEs, and other U.S. reinsurance transactions.

•International mortgage insurance/reinsurance: underwrites mortgage insurance and reinsurance outside of the U.S.

Corporate Segment

The corporate segment results include net investment income, 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, other income (loss), corporate expenses, transaction costs and other, amortization of intangible assets, interest expense, net foreign exchange gains or losses, income taxes items, income or loss from operating affiliates and items related to the Company’s non-cumulative preferred shares. Such amounts exclude the results of the ‘other’ segment.

Other Segment

Through June 30, 2021, the ‘other’ segment included the results of Somers. Pursuant to GAAP, Somers was considered a variable interest entity and the Company concluded that it was the primary beneficiary of Somers. As such, the Company consolidated the results of Somers in its consolidated financial statements through June 30, 2021. The portion of Somers’ earnings attributable to third party investors was recorded in the consolidated statements of income as ‘amounts attributable to noncontrolling interests.’ Management measures segment performance for the ‘other’ segment based on net income or loss. In July 2021, the Company announced the completion of the previously disclosed acquisition of Somers by Greysbridge. Based on the governing documents of Greysbridge, the Company has concluded that, while it retains significant influence over Somers, Somers no longer constitutes a variable interest entity. Accordingly, effective July 1, 2021, Arch no longer consolidates the results of Somers in its consolidated financial statements.

9

Arch Capital Group Ltd. and Subsidiaries

Segment Information

(U.S. Dollars in thousands)	Three Months Ended
	December 31, 2022
	Insurance			Reinsurance			Mortgage			Sub-total (Core)			Other			Total
Gross premiums written (1)	$	1,644,066		$	1,797,037		$	355,827		$	3,795,262		$	—		$	3,795,262
Premiums ceded	(427,336)			(253,655)			(81,303)			(760,626)			—			(760,626)
Net premiums written	1,216,730			1,543,382			274,524			3,034,636			—			3,034,636
Change in unearned premiums	26,857			(318,174)			17,600			(273,717)			—			(273,717)
Net premiums earned	1,243,587			1,225,208			292,124			2,760,919			—			2,760,919
Other underwriting income (loss)	—			(943)			2,226			1,283			—			1,283
Losses and loss adjustment expenses	(729,784)			(648,654)			137,108			(1,241,330)			—			(1,241,330)
Acquisition expenses	(244,059)			(243,640)			(12,816)			(500,515)			—			(500,515)
Other operating expenses	(172,060)			(68,925)			(45,108)			(286,093)			—			(286,093)
Underwriting income (loss)	$	97,684		$	263,046		$	373,534		734,264			—			734,264
Net investment income										181,079			—			181,079
Net realized gains (losses)										79,932			—			79,932
Equity in net income (loss) of investment funds accounted for using the equity method										40,351			—			40,351
Other income (loss)										8,321			—			8,321
Corporate expenses (2)										(17,462)			—			(17,462)
Transaction costs and other (2)										(358)			—			(358)
Amortization of intangible assets										(25,722)			—			(25,722)
Interest expense										(31,700)			—			(31,700)
Net foreign exchange gains (losses)										(81,224)			—			(81,224)
Income (loss) before income taxes and income (loss) from operating affiliates										887,481			—			887,481
Income tax (expense) benefit										(60,919)			—			(60,919)
Income (loss) from operating affiliates										36,226			—			36,226
Net income (loss)										862,788			—			862,788
Amounts attributable to redeemable noncontrolling interests										(3,100)			—			(3,100)
Net income (loss) available to Arch										859,688			—			859,688
Preferred dividends										(10,184)			—			(10,184)
Net income (loss) available to Arch common shareholders										$	849,504		$	—		$	849,504
Underwriting Ratios
Loss ratio	58.7		%	52.9		%	(46.9)		%	45.0		%	—		%	45.0		%
Acquisition expense ratio	19.6		%	19.9		%	4.4		%	18.1		%	—		%	18.1		%
Other operating expense ratio	13.8		%	5.6		%	15.4		%	10.4		%	—		%	10.4		%
Combined ratio	92.1		%	78.4		%	(27.1)		%	73.5		%	—		%	73.5		%
Net premiums written to gross premiums written	74.0		%	85.9		%	77.2		%	80.0		%	—		%	80.0		%
Total investable assets										$	28,065,497		$	—		$	28,065,497
Total assets										47,990,507			—			47,990,507
Total liabilities										35,069,605			—			35,069,605

(1)    Certain amounts included in the gross premiums written of each segment are related to intersegment transactions and are included in the gross premiums written of each segment. 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.’ See ‘Comments on Regulation G’ for a further discussion of such items.

10

Arch Capital Group Ltd. and Subsidiaries

Segment Information

(U.S. Dollars in thousands)	Three Months Ended
	December 31, 2021
	Insurance			Reinsurance			Mortgage			Sub-total (Core)			Other			Total
Gross premiums written (1)	$	1,486,362		$	1,013,090		$	364,134		$	2,861,575		$	—		$	2,861,575
Premiums ceded	(450,376)			(303,949)			(74,834)			(827,148)			—			(827,148)
Net premiums written	1,035,986			709,141			289,300			2,034,427			—			2,034,427
Change in unearned premiums	(33,089)			70,676			11,616			49,203			—			49,203
Net premiums earned	1,002,897			779,817			300,916			2,083,630			—			2,083,630
Other underwriting income (loss)	—			521			2,639			3,160			—			3,160
Losses and loss adjustment expenses	(594,108)			(430,180)			28,435			(995,853)			—			(995,853)
Acquisition expenses	(188,724)			(155,694)			(13,121)			(357,539)			—			(357,539)
Other operating expenses	(149,520)			(61,954)			(50,313)			(261,787)			—			(261,787)
Underwriting income (loss)	$	70,545		$	132,510		$	268,556		471,611			—			471,611
Net investment income										90,454			—			90,454
Net realized gains (losses)										59,517			—			59,517
Equity in net income (loss) of investment funds accounted for using the equity method										67,132			—			67,132
Other income (loss)										9,093			—			9,093
Corporate expenses (2)										(17,840)			—			(17,840)
Transaction costs and other (2)										(310)			—			(310)
Amortization of intangible assets										(33,132)			—			(33,132)
Interest expense										(32,248)			—			(32,248)
Net foreign exchange gains (losses)										3,163			—			3,163
Income (loss) before income taxes and income (loss) from operating affiliates										617,440			—			617,440
Income tax (expense) benefit										(34,406)			—			(34,406)
Income (loss) from operating affiliates										40,641			—			40,641
Net income (loss)										623,675			—			623,675
Amounts attributable to redeemable noncontrolling interests										(410)			—			(410)
Net income (loss) available to Arch										623,265			—			623,265
Preferred dividends										(10,184)			—			(10,184)
Net income (loss) available to Arch common shareholders										$	613,081		$	—		$	613,081
Underwriting Ratios
Loss ratio	59.2		%	55.2		%	(9.4)		%	47.8		%	—		%	47.8		%
Acquisition expense ratio	18.8		%	20.0		%	4.4		%	17.2		%	—		%	17.2		%
Other operating expense ratio	14.9		%	7.9		%	16.7		%	12.6		%	—		%	12.6		%
Combined ratio	92.9		%	83.1		%	11.7		%	77.6		%	—		%	77.6		%
Net premiums written to gross premiums written	69.7		%	70.0		%	79.4		%	71.1		%	—		%	71.1		%
Total investable assets										$	27,442,153		$	—		$	27,442,153
Total assets										45,100,945			—			45,100,945
Total liabilities										31,545,816			—			31,545,816

(1)    Certain amounts included in the gross premiums written of each segment are related to intersegment transactions and are included in the gross premiums written of each segment. 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.’ See ‘Comments on Regulation G’ for a further discussion of such items.

11

Arch Capital Group Ltd. and Subsidiaries

Segment Information

(U.S. Dollars in thousands)	Year Ended
	December 31, 2022
	Insurance			Reinsurance			Mortgage			Sub-total (Core)			Other			Total
Gross premiums written (1)	$	6,930,864		$	6,948,438		$	1,454,971		$	15,326,447		$	—		$	15,326,447
Premiums ceded	(1,910,222)			(2,024,462)			(322,400)			(4,249,258)			—			(4,249,258)
Net premiums written	5,020,642			4,923,976			1,132,571			11,077,189			—			11,077,189
Change in unearned premiums	(461,307)			(964,595)			26,790			(1,399,112)			—			(1,399,112)
Net premiums earned	4,559,335			3,959,381			1,159,361			9,678,077			—			9,678,077
Other underwriting income (loss)	—			4,871			8,356			13,227			—			13,227
Losses and loss adjustment expenses	(2,782,945)			(2,568,843)			324,271			(5,027,517)			—			(5,027,517)
Acquisition expenses	(885,866)			(813,555)			(40,159)			(1,739,580)			—			(1,739,580)
Other operating expenses	(665,472)			(267,531)			(195,172)			(1,128,175)			—			(1,128,175)
Underwriting income (loss)	$	225,052		$	314,323		$	1,256,657		1,796,032			—			1,796,032
Net investment income										496,547			—			496,547
Net realized gains (losses)										(662,734)			—			(662,734)
Equity in net income (loss) of investment funds accounted for using the equity method										115,856			—			115,856
Other income (loss)										(26,165)			—			(26,165)
Corporate expenses (2)										(94,390)			—			(94,390)
Transaction costs and other (2)										(1,092)			—			(1,092)
Amortization of intangible assets										(106,200)			—			(106,200)
Interest expense										(130,266)			—			(130,266)
Net foreign exchange gains (losses)										100,905			—			100,905
Income (loss) before income taxes and income (loss) from operating affiliates										1,488,493			—			1,488,493
Income tax (expense) benefit										(79,961)			—			(79,961)
Income (loss) from operating affiliates										73,891			—			73,891
Net income (loss)										1,482,423			—			1,482,423
Amounts attributable to redeemable noncontrolling interests										(5,490)			—			(5,490)
Net income (loss) available to Arch										1,476,933			—			1,476,933
Preferred dividends										(40,736)			—			(40,736)
Net income (loss) available to Arch common shareholders										$	1,436,197		$	—		$	1,436,197
Underwriting Ratios
Loss ratio	61.0		%	64.9		%	(28.0)		%	51.9		%	—		%	51.9		%
Acquisition expense ratio	19.4		%	20.5		%	3.5		%	18.0		%	—		%	18.0		%
Other operating expense ratio	14.6		%	6.8		%	16.8		%	11.7		%	—		%	11.7		%
Combined ratio	95.0		%	92.2		%	(7.7)		%	81.6		%	—		%	81.6		%
Net premiums written to gross premiums written	72.4		%	70.9		%	77.8		%	72.3		%	—		%	72.3		%

(1)    Certain amounts included in the gross premiums written of each segment are related to intersegment transactions and are included in the gross premiums written of each segment. 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.’ See ‘Comments on Regulation G’ for a further discussion of such items.

12

Arch Capital Group Ltd. and Subsidiaries

Segment Information

(U.S. Dollars in thousands)	Year Ended
	December 31, 2021
	Insurance			Reinsurance			Mortgage			Sub-total (Core)			Other			Total
Gross premiums written (1)	$	5,867,734		$	5,093,930		$	1,507,825		$	12,463,788		$	457,465		$	12,752,487
Premiums ceded	(1,719,541)			(1,839,556)			(246,757)			(3,800,153)			(102,763)			(3,734,150)
Net premiums written	4,148,193			3,254,374			1,261,068			8,663,635			354,702			9,018,337
Change in unearned premiums	(521,725)			(413,931)			22,351			(913,305)			(22,734)			(936,039)
Net premiums earned	3,626,468			2,840,443			1,283,419			7,750,330			331,968			8,082,298
Other underwriting income (loss)	—			3,669			17,665			21,334			739			22,073
Losses and loss adjustment expenses	(2,344,365)			(1,924,719)			(56,677)			(4,325,761)			(259,042)			(4,584,803)
Acquisition expenses	(606,265)			(536,754)			(97,418)			(1,240,437)			(62,741)			(1,303,178)
Other operating expenses	(558,906)			(212,810)			(194,010)			(965,726)			(32,869)			(998,595)
Underwriting income (loss)	$	116,932		$	169,829		$	952,979		1,239,740			(21,945)			1,217,795
Net investment income										346,808			42,310			389,118
Net realized gains (losses)										299,207			80,638			379,845
Equity in net income (loss) of investment funds accounted for using the equity method										366,402			—			366,402
Other income (loss)										10,244			—			10,244
Corporate expenses (2)										(77,119)			—			(77,119)
Transaction costs and other (2)										(1,103)			(935)			(2,038)
Amortization of intangible assets										(82,057)			(898)			(82,955)
Interest expense										(131,060)			(8,410)			(139,470)
Net foreign exchange gains (losses)										42,854			(1,325)			41,529
Income (loss) before income taxes and income (loss) from operating affiliates										2,013,916			89,435			2,103,351
Income tax (expense) benefit										(128,348)			(234)			(128,582)
Income (loss) from operating affiliates										264,693			—			264,693
Net income (loss)										2,150,261			89,201			2,239,462
Amounts attributable to redeemable noncontrolling interests										(2,346)			(1,953)			(4,299)
Amounts attributable to nonredeemable noncontrolling interests										—			(78,314)			(78,314)
Net income (loss) available to Arch										2,147,915			8,934			2,156,849
Preferred dividends										(48,343)			—			(48,343)
Loss on redemption of preferred shares										(15,101)			—			(15,101)
Net income (loss) available to Arch common shareholders										$	2,084,471		$	8,934		$	2,093,405
Underwriting Ratios
Loss ratio	64.6		%	67.8		%	4.4		%	55.8		%	78.0		%	56.7		%
Acquisition expense ratio	16.7		%	18.9		%	7.6		%	16.0		%	18.9		%	16.1		%
Other operating expense ratio	15.4		%	7.5		%	15.1		%	12.5		%	9.9		%	12.4		%
Combined ratio	96.7		%	94.2		%	27.1		%	84.3		%	106.8		%	85.2		%
Net premiums written to gross premiums written	70.7		%	63.9		%	83.6		%	69.5		%	77.5		%	70.7		%

(1)    Certain amounts included in the gross premiums written of each segment are related to intersegment transactions and are included in the gross premiums written of each segment. 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.’ See ‘Comments on Regulation G’ for a further discussion of such items.

13

Arch Capital Group Ltd. and Subsidiaries

Segment Information — Insurance Segment

(U.S. Dollars in thousands)	Three Months Ended															Year Ended
	December 31,			September 30,			June 30,			March 31,			December 31,			December 31,			December 31,
	2022			2022			2022			2022			2021			2022			2021
Gross premiums written	$	1,644,066		$	1,862,026		$	1,705,167		$	1,719,605		$	1,486,362		$	6,930,864		$	5,867,734
Premiums ceded	(427,336)			(493,267)			(476,910)			(512,709)			(450,376)			(1,910,222)			(1,719,541)
Net premiums written	1,216,730			1,368,759			1,228,257			1,206,896			1,035,986			5,020,642			4,148,193
Change in unearned premiums	26,857			(181,851)			(126,113)			(180,200)			(33,089)			(461,307)			(521,725)
Net premiums earned	1,243,587			1,186,908			1,102,144			1,026,696			1,002,897			4,559,335			3,626,468
Losses and loss adjustment expenses	(729,784)			(822,663)			(629,759)			(600,739)			(594,108)			(2,782,945)			(2,344,365)
Acquisition expenses	(244,059)			(232,469)			(213,688)			(195,650)			(188,724)			(885,866)			(606,265)
Other operating expenses	(172,060)			(165,499)			(161,088)			(166,825)			(149,520)			(665,472)			(558,906)
Underwriting income (loss)	$	97,684		$	(33,723)		$	97,609		$	63,482		$	70,545		$	225,052		$	116,932
Underwriting Ratios
Loss ratio	58.7		%	69.3		%	57.1		%	58.5		%	59.2		%	61.0		%	64.6		%
Acquisition expense ratio	19.6		%	19.6		%	19.4		%	19.1		%	18.8		%	19.4		%	16.7		%
Other operating expense ratio	13.8		%	13.9		%	14.6		%	16.2		%	14.9		%	14.6		%	15.4		%
Combined ratio	92.1		%	102.8		%	91.1		%	93.8		%	92.9		%	95.0		%	96.7		%
Catastrophic activity and prior year development:
Current accident year catastrophic events, net of reinsurance and reinstatement premiums	2.8		%	13.4		%	1.5		%	3.1		%	2.0		%	5.3		%	5.6		%
Net (favorable) adverse development in prior year loss reserves, net of related adjustments	(0.3)		%	(0.1)		%	(0.4)		%	(0.1)		%	(0.3)		%	(0.2)		%	(0.4)		%
Combined ratio excluding catastrophic activity and prior year development (1)	89.6		%	89.5		%	90.0		%	90.8		%	91.2		%	89.9		%	91.5		%
Net premiums written to gross premiums written	74.0		%	73.5		%	72.0		%	70.2		%	69.7		%	72.4		%	70.7		%

(1)See ‘Comments on Regulation G’ for further discussion.

14

Arch Capital Group Ltd. and Subsidiaries

Segment Information — Insurance Segment

(U.S. Dollars in thousands)	Three Months Ended																				Year Ended
	December 31,				September 30,				June 30,				March 31,				December 31,				December 31,				December 31,
	2022				2022				2022				2022				2021				2022				2021
Net premiums written
Professional Lines	$	393,032	32.3	%	$	412,173	30.1	%	$	349,402	28.4	%	$	347,841	28.8	%	$	373,752	36.1	%	$	1,502,448	29.9	%	$	1,177,144	28.4	%
Property, energy, marine and aviation	190,325		15.6	%	241,357		17.6	%	245,724		20.0	%	200,661		16.6	%	158,120		15.3	%	878,067		17.5	%	722,582		17.4	%
Construction and national accounts	134,997		11.1	%	98,381		7.2	%	100,656		8.2	%	135,683		11.2	%	98,468		9.5	%	469,717		9.4	%	431,952		10.4	%
Programs	129,919		10.7	%	189,263		13.8	%	163,339		13.3	%	129,401		10.7	%	92,002		8.9	%	611,922		12.2	%	595,824		14.4	%
Excess and surplus casualty	129,083		10.6	%	110,917		8.1	%	120,509		9.8	%	100,289		8.3	%	101,199		9.8	%	460,798		9.2	%	359,458		8.7	%
Travel, accident and health	106,111		8.7	%	107,434		7.8	%	105,970		8.6	%	165,332		13.7	%	79,176		7.6	%	484,847		9.7	%	305,390		7.4	%
Warranty and lenders solutions	36,084		3.0	%	41,889		3.1	%	36,042		2.9	%	25,232		2.1	%	32,833		3.2	%	139,247		2.8	%	146,984		3.5	%
Other	97,179		8.0	%	167,345		12.2	%	106,615		8.7	%	102,457		8.5	%	100,436		9.7	%	473,596		9.4	%	408,859		9.9	%
Total	$	1,216,730	100.0	%	$	1,368,759	100.0	%	$	1,228,257	100.0	%	$	1,206,896	100.0	%	$	1,035,986	100.0	%	$	5,020,642	100.0	%	$	4,148,193	100.0	%
Underwriting location
United States	$	786,692	64.7	%	$	915,833	66.9	%	$	842,851	68.6	%	$	794,662	65.8	%	$	680,840	65.7	%	$	3,340,038	66.5	%	$	2,813,039	67.8	%
Europe	351,396		28.9	%	380,063		27.8	%	316,363		25.8	%	357,897		29.7	%	292,591		28.2	%	1,405,719		28.0	%	1,125,192		27.1	%
Other	78,642		6.5	%	72,863		5.3	%	69,043		5.6	%	54,337		4.5	%	62,555		6.0	%	274,885		5.5	%	209,962		5.1	%
Total	$	1,216,730	100.0	%	$	1,368,759	100.0	%	$	1,228,257	100.0	%	$	1,206,896	100.0	%	$	1,035,986	100.0	%	$	5,020,642	100.0	%	$	4,148,193	100.0	%
Net premiums earned
Professional Lines	$	368,475	29.6	%	$	341,833	28.8	%	$	314,115	28.5	%	$	289,813	28.2	%	$	280,041	27.9	%	$	1,314,236	28.8	%	$	942,817	26.0	%
Property, energy, marine and aviation	214,907		17.3	%	202,483		17.1	%	180,663		16.4	%	174,335		17.0	%	179,566		17.9	%	772,388		16.9	%	667,892		18.4	%
Construction and national accounts	125,816		10.1	%	109,905		9.3	%	98,831		9.0	%	97,468		9.5	%	98,510		9.8	%	432,020		9.5	%	416,107		11.5	%
Programs	150,917		12.1	%	150,453		12.7	%	148,681		13.5	%	139,809		13.6	%	137,754		13.7	%	589,860		12.9	%	506,867		14.0	%
Excess and surplus casualty	104,048		8.4	%	100,175		8.4	%	98,369		8.9	%	90,761		8.8	%	85,713		8.5	%	393,353		8.6	%	318,027		8.8	%
Travel, accident and health	123,587		9.9	%	133,445		11.2	%	130,185		11.8	%	104,630		10.2	%	87,212		8.7	%	491,847		10.8	%	255,590		7.0	%
Warranty and lenders solutions	35,787		2.9	%	33,253		2.8	%	27,594		2.5	%	30,588		3.0	%	34,451		3.4	%	127,222		2.8	%	153,958		4.2	%
Other	120,050		9.7	%	115,361		9.7	%	103,706		9.4	%	99,292		9.7	%	99,650		9.9	%	438,409		9.6	%	365,210		10.1	%
Total	$	1,243,587	100.0	%	$	1,186,908	100.0	%	$	1,102,144	100.0	%	$	1,026,696	100.0	%	$	1,002,897	100.0	%	$	4,559,335	100.0	%	$	3,626,468	100.0	%

15

Arch Capital Group Ltd. and Subsidiaries

Segment Information — Reinsurance Segment

(U.S. Dollars in thousands)	Three Months Ended															Year Ended
	December 31,			September 30,			June 30,			March 31,			December 31,			December 31,			December 31,
	2022			2022			2022			2022			2021			2022			2021
Gross premiums written	$	1,797,037		$	1,639,061		$	1,793,398		$	1,718,942		$	1,013,090		$	6,948,438		$	5,093,930
Premiums ceded	(253,655)			(560,225)			(630,764)			(579,818)			(303,949)			(2,024,462)			(1,839,556)
Net premiums written	1,543,382			1,078,836			1,162,634			1,139,124			709,141			4,923,976			3,254,374
Change in unearned premiums	(318,174)			(77,062)			(234,635)			(334,724)			70,676			(964,595)			(413,931)
Net premiums earned	1,225,208			1,001,774			927,999			804,400			779,817			3,959,381			2,840,443
Other underwriting income (loss)	(943)			452			4,526			836			521			4,871			3,669
Losses and loss adjustment expenses	(648,654)			(927,911)			(537,578)			(454,700)			(430,180)			(2,568,843)			(1,924,719)
Acquisition expenses	(243,640)			(208,425)			(189,494)			(171,996)			(155,694)			(813,555)			(536,754)
Other operating expenses	(68,925)			(62,777)			(66,053)			(69,776)			(61,954)			(267,531)			(212,810)
Underwriting income (loss)	$	263,046		$	(196,887)		$	139,400		$	108,764		$	132,510		$	314,323		$	169,829
Underwriting Ratios
Loss ratio	52.9		%	92.6		%	57.9		%	56.5		%	55.2		%	64.9		%	67.8		%
Acquisition expense ratio	19.9		%	20.8		%	20.4		%	21.4		%	20.0		%	20.5		%	18.9		%
Other operating expense ratio	5.6		%	6.3		%	7.1		%	8.7		%	7.9		%	6.8		%	7.5		%
Combined ratio	78.4		%	119.7		%	85.4		%	86.6		%	83.1		%	92.2		%	94.2		%
Catastrophic activity and prior year development:
Current accident year catastrophic events, net of reinsurance and reinstatement premiums	0.0		%	39.1		%	7.1		%	6.7		%	6.7		%	12.9		%	15.4		%
Net (favorable) adverse development in prior year loss reserves, net of related adjustments	(4.5)		%	(4.9)		%	(4.5)		%	(2.8)		%	(6.4)		%	(4.3)		%	(5.6)		%
Combined ratio excluding catastrophic activity and prior year development (1)	82.9		%	85.5		%	82.8		%	82.7		%	82.8		%	83.6		%	84.4		%
Net premiums written to gross premiums written	85.9		%	65.8		%	64.8		%	66.3		%	70.0		%	70.9		%	63.9		%

(1)See ‘Comments on Regulation G’ for further discussion.

16

Arch Capital Group Ltd. and Subsidiaries

Segment Information — Reinsurance Segment

(U.S. Dollars in thousands)	Three Months Ended																				Year Ended
	December 31,				September 30,				June 30,				March 31,				December 31,				December 31,				December 31,
	2022				2022				2022				2022				2021				2022				2021
Net premiums written
Other Specialty	$	803,046	52.0	%	$	381,004	35.3	%	$	434,710	37.4	%	$	363,834	31.9	%	$	207,812	29.3	%	$	1,982,594	40.3	%	$	955,474	29.4	%
Property excluding property catastrophe	339,813		22.0	%	341,809		31.7	%	299,042		25.7	%	295,419		25.9	%	225,127		31.7	%	1,276,083		25.9	%	1,004,086		30.9	%
Casualty	264,461		17.1	%	230,308		21.3	%	212,724		18.3	%	266,455		23.4	%	176,952		25.0	%	973,948		19.8	%	808,164		24.8	%
Property catastrophe	54,697		3.5	%	77,606		7.2	%	154,451		13.3	%	128,971		11.3	%	35,536		5.0	%	415,725		8.4	%	233,260		7.2	%
Marine and aviation	51,354		3.3	%	28,633		2.7	%	35,129		3.0	%	51,817		4.5	%	40,708		5.7	%	166,933		3.4	%	171,753		5.3	%
Other	30,011		1.9	%	19,476		1.8	%	26,578		2.3	%	32,628		2.9	%	23,006		3.2	%	108,693		2.2	%	81,637		2.5	%
Total	$	1,543,382	100.0	%	$	1,078,836	100.0	%	$	1,162,634	100.0	%	$	1,139,124	100.0	%	$	709,141	100.0	%	$	4,923,976	100.0	%	$	3,254,374	100.0	%
Underwriting location
Bermuda	$	910,696	59.0	%	$	520,594	48.3	%	$	589,169	50.7	%	$	541,312	47.5	%	$	340,108	48.0	%	$	2,561,771	52.0	%	$	1,557,294	47.9	%
United States	376,736		24.4	%	312,179		28.9	%	286,925		24.7	%	270,667		23.8	%	201,079		28.4	%	1,246,507		25.3	%	828,504		25.5	%
Europe and other	255,950		16.6	%	246,063		22.8	%	286,540		24.6	%	327,145		28.7	%	167,954		23.7	%	1,115,698		22.7	%	868,576		26.7	%
Total	$	1,543,382	100.0	%	$	1,078,836	100.0	%	$	1,162,634	100.0	%	$	1,139,124	100.0	%	$	709,141	100.0	%	$	4,923,976	100.0	%	$	3,254,374	100.0	%
Net premiums earned
Other Specialty	$	531,799	43.4	%	$	330,142	33.0	%	$	284,321	30.6	%	$	231,618	28.8	%	$	247,437	31.7	%	$	1,377,880	34.8	%	$	818,801	28.8	%
Property excluding property catastrophe	309,878		25.3	%	282,488		28.2	%	266,545		28.7	%	232,529		28.9	%	235,731		30.2	%	1,091,440		27.6	%	836,573		29.5	%
Casualty	220,335		18.0	%	221,636		22.1	%	214,714		23.1	%	197,858		24.6	%	174,180		22.3	%	854,543		21.6	%	666,754		23.5	%
Property catastrophe	77,416		6.3	%	117,820		11.8	%	94,679		10.2	%	77,076		9.6	%	55,453		7.1	%	366,991		9.3	%	280,738		9.9	%
Marine and aviation	50,259		4.1	%	25,182		2.5	%	41,768		4.5	%	42,192		5.2	%	40,256		5.2	%	159,401		4.0	%	152,955		5.4	%
Other	35,521		2.9	%	24,506		2.4	%	25,972		2.8	%	23,127		2.9	%	26,760		3.4	%	109,126		2.8	%	84,622		3.0	%
Total	$	1,225,208	100.0	%	$	1,001,774	100.0	%	$	927,999	100.0	%	$	804,400	100.0	%	$	779,817	100.0	%	$	3,959,381	100.0	%	$	2,840,443	100.0	%

17

Arch Capital Group Ltd. and Subsidiaries

Segment Information — Mortgage Segment

(U.S. Dollars in thousands)	Three Months Ended															Year Ended
	December 31,			September 30,			June 30,			March 31,			December 31,			December 31,			December 31,
	2022			2022			2022			2022			2021			2022			2021
Gross premiums written	$	355,827		$	362,409		$	371,896		$	364,839		$	364,134		$	1,454,971		$	1,507,825
Premiums ceded	(81,303)			(86,230)			(78,148)			(76,719)			(74,834)			(322,400)			(246,757)
Net premiums written	274,524			276,179			293,748			288,120			289,300			1,132,571			1,261,068
Change in unearned premiums	17,600			5,889			1,884			1,417			11,616			26,790			22,351
Net premiums earned	292,124			282,068			295,632			289,537			300,916			1,159,361			1,283,419
Other underwriting income (1)	2,226			2,625			(1,556)			5,061			2,639			8,356			17,665
Losses and loss adjustment expenses	137,108			67,878			64,681			54,604			28,435			324,271			(56,677)
Acquisition expenses	(12,816)			(6,693)			(10,137)			(10,513)			(13,121)			(40,159)			(97,418)
Other operating expenses	(45,108)			(46,471)			(50,251)			(53,342)			(50,313)			(195,172)			(194,010)
Underwriting income	$	373,534		$	299,407		$	298,369		$	285,347		$	268,556		$	1,256,657		$	952,979
Underwriting Ratios
Loss ratio	(46.9)		%	(24.1)		%	(21.9)		%	(18.9)		%	(9.4)		%	(28.0)		%	4.4		%
Acquisition expense ratio	4.4		%	2.4		%	3.4		%	3.6		%	4.4		%	3.5		%	7.6		%
Other operating expense ratio	15.4		%	16.5		%	17.0		%	18.4		%	16.7		%	16.8		%	15.1		%
Combined ratio	(27.1)		%	(5.2)		%	(1.5)		%	3.1		%	11.7		%	(7.7)		%	27.1		%
Net (favorable) adverse development in prior year loss reserves, net of related adjustments	(72.1)		%	(45.1)		%	(40.7)		%	(36.5)		%	(24.2)		%	(48.6)		%	(13.8)		%
Combined ratio excluding prior year development (2)	45.0		%	39.9		%	39.2		%	39.6		%	35.9		%	40.9		%	40.9		%
Net premiums written to gross premiums written	77.2		%	76.2		%	79.0		%	79.0		%	79.4		%	77.8		%	83.6		%
Net premiums written by underwriting location
United States	$	189,650		$	188,290		$	201,166		$	201,150		$	210,988		$	780,256		$	914,477
Other	84,874			87,889			92,582			86,970			78,312			352,315			346,591
Total	$	274,524		$	276,179		$	293,748		$	288,120		$	289,300		$	1,132,571		$	1,261,068
United States %	69.1		%	68.2		%	68.5		%	69.8		%	72.9		%	68.9		%	72.5		%
Other %	30.9		%	31.8		%	31.5		%	30.2		%	27.1		%	31.1		%	27.5		%

(1)     Primarily related to income earned on various risk-sharing products offered to government sponsored enterprises and mortgage lenders.

(2)    See ‘Comments on Regulation G’ for further discussion.

18

Arch Capital Group Ltd. and Subsidiaries

Segment Information — Mortgage Segment

(U.S. Dollars in millions)	December 31, 2022					September 30, 2022					June 30, 2022					March 31, 2022					December 31, 2021
Insurance In Force (IIF) (1)
U.S. primary mortgage insurance	$	295,651		57.6	%	$	294,857		58.8	%	$	291,952		59.8	%	$	283,484		59.7	%	$	280,945		61.0	%
U.S. credit risk transfer (CRT) and other (2)	145,087			28.3	%	143,897			28.7	%	129,203			26.5	%	122,189			25.8	%	110,018			23.9	%
International mortgage insurance/reinsurance (3)	72,315			14.1	%	63,068			12.6	%	67,082			13.7	%	68,800			14.5	%	69,655			15.1	%
Total	$	513,053		100.0	%	$	501,822		100.0	%	$	488,237		100.0	%	$	474,473		100.0	%	$	460,618		100.0	%
Risk In Force (RIF) (4)
U.S. primary mortgage insurance	$	75,806		84.8	%	$	75,343		85.1	%	$	74,258		85.0	%	$	71,699		84.3	%	$	70,619		84.3	%
U.S. credit risk transfer and other (2)	6,245			7.0	%	6,473			7.3	%	6,037			6.9	%	5,670			6.7	%	5,120			6.1	%
International mortgage insurance/reinsurance (3)	7,369			8.2	%	6,727			7.6	%	7,103			8.1	%	7,709			9.1	%	7,983			9.5	%
Total	$	89,420		100.0	%	$	88,543		100.0	%	$	87,398		100.0	%	$	85,078		100.0	%	$	83,722		100.0	%
Supplemental disclosures for U.S. primary mortgage insurance:
Total RIF by credit quality (FICO score):
>=740	$	46,812		61.8	%	$	46,538		61.8	%	$	45,612		61.4	%	$	43,509		60.7	%	$	42,451		60.1	%
680-739	24,945			32.9	%	24,671			32.7	%	24,409			32.9	%	23,827			33.2	%	23,646			33.5	%
620-679	3,772			5.0	%	3,850			5.1	%	3,942			5.3	%	4,052			5.7	%	4,196			5.9	%
<620	277			0.4	%	284			0.4	%	295			0.4	%	311			0.4	%	326			0.5	%
Total	$	75,806		100.0	%	$	75,343		100.0	%	$	74,258		100.0	%	$	71,699		100.0	%	$	70,619		100.0	%
Weighted average FICO score	750					748					747					747					746
Total RIF by Loan-To-Value (LTV):
95.01% and above	$	7,289		9.6	%	$	7,334		9.7	%	$	7,400		10.0	%	$	7,421		10.4	%	$	7,538		10.7	%
90.01% to 95.00%	43,681			57.6	%	43,049			57.1	%	41,951			56.5	%	39,882			55.6	%	38,829			55.0	%
85.01% to 90.00%	20,851			27.5	%	20,876			27.7	%	20,718			27.9	%	20,183			28.1	%	20,006			28.3	%
85.00% and below	3,985			5.3	%	4,084			5.4	%	4,189			5.6	%	4,213			5.9	%	4,246			6.0	%
Total	$	75,806		100.0	%	$	75,343		100.0	%	$	74,258		100.0	%	$	71,699		100.0	%	$	70,619		100.0	%
Weighted average LTV	92.8		%			92.9		%			92.8		%			92.8		%			92.8		%
Total RIF by State:
California	$	6,341		8.4	%	$	6,219		8.3	%	$	6,077		8.2	%	$	5,781		8.1	%	$	5,559		7.9	%
Texas	6,151			8.1	%	6,080			8.1	%	5,971			8.0	%	5,733			8.0	%	5,594			7.9	%
Florida	3,268			4.3	%	3,275			4.3	%	3,301			4.4	%	3,272			4.6	%	3,303			4.7	%
Georgia	3,169			4.2	%	3,150			4.2	%	3,109			4.2	%	2,978			4.2	%	2,902			4.1	%
North Carolina	3,160			4.2	%	3,139			4.2	%	3,075			4.1	%	2,964			4.1	%	2,921			4.1	%
Illinois	3,081			4.1	%	3,087			4.1	%	3,054			4.1	%	2,955			4.1	%	2,933			4.2	%
Minnesota	3,003			4.0	%	2,996			4.0	%	2,980			4.0	%	2,913			4.1	%	2,916			4.1	%
Massachusetts	2,809			3.7	%	2,771			3.7	%	2,684			3.6	%	2,566			3.6	%	2,537			3.6	%
Virginia	2,656			3.5	%	2,647			3.5	%	2,634			3.5	%	2,504			3.5	%	2,446			3.5	%
Michigan	2,618			3.5	%	2,587			3.4	%	2,558			3.4	%	2,509			3.5	%	2,492			3.5	%
Other	39,550			52.2	%	39,392			52.3	%	38,815			52.3	%	37,524			52.3	%	37,016			52.4	%
Total	$	75,806		100.0	%	$	75,343		100.0	%	$	74,258		100.0	%	$	71,699		100.0	%	$	70,619		100.0	%
Weighted average coverage (end of period RIF divided by IIF)	25.6		%			25.6		%			25.4		%			25.3		%			25.1		%
U.S. mortgage insurance total RIF, net of reinsurance (5)	$	57,151				$	56,890				$	56,529				$	54,792				$	54,574
Analysts’ persistency (6)	79.5		%			75.4		%			71.3		%			66.9		%			62.4		%
Risk-to-capital ratio -- Arch MI U.S. (7)	7.2:1					7.6:1					7.8:1					7.8:1					8.0:1
PMIER sufficiency ratio -- Arch MI U.S. (8)	236		%			237		%			219		%			205		%			197		%

(1) The aggregate dollar amount of each insured mortgage loan’s current principal balance.	(5) Total RIF for the U.S. mortgage insurance operations (see note 4) after external reinsurance.
(2) Includes all CRT transactions, which are predominantly with GSEs, and other U.S. reinsurance transactions.	(6) Represents the % of IIF at the beginning of a 12-mo. period that remained in force at the end of the period.
(3) International mortgage insurance and reinsurance with risk primarily located in Australia and to lesser extent Europe and Asia.	(7) Represents current (non-delinquent) RIF, net of reinsurance, divided by statutory capital (estimate for December 31, 2022).
(4) 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 risk-sharing or reinsurance transactions	(8) Calculated as available assets divided by required assets as defined within PMIERs (estimate for December 31, 2022). There was approximately $2.16 billion of excess available assets at December 31, 2022.

19

Arch Capital Group Ltd. and Subsidiaries

Segment Information — Mortgage Segment

(U.S. Dollars in millions, except policy/loan/claim count)	Three Months Ended
	December 31, 2022					September 30, 2022					June 30, 2022					March 31, 2022					December 31, 2021
Supplemental disclosures for U.S. primary mortgage insurance:
Total new insurance written (NIW) (1)	$	11,413				$	17,425				$	23,499				$	20,015				$	22,544
Total NIW by credit quality (FICO score):
>=740	$	7,155		62.7	%	$	11,615		66.7	%	$	16,121		68.6	%	$	13,152		65.7	%	$	14,349		63.6	%
680-739	3,992			35.0	%	5,322			30.5	%	6,800			28.9	%	6,254			31.2	%	7,238			32.1	%
620-679	265			2.3	%	485			2.8	%	576			2.5	%	606			3.0	%	957			4.2	%
<620	1			—	%	3			—	%	2			—	%	3			—	%	—			—	%
Total	$	11,413		100.0	%	$	17,425		100.0	%	$	23,499		100.0	%	$	20,015		100.0	%	$	22,544		100.0	%
Total NIW by LTV:
95.01% and above	$	555		4.9	%	$	973		5.6	%	$	1,195		5.1	%	$	1,096		5.5	%	$	1,475		6.5	%
90.01% to 95.00%	6,725			58.9	%	9,916			56.9	%	13,290			56.6	%	10,778			53.8	%	11,382			50.5	%
85.01% to 90.00%	3,040			26.6	%	4,839			27.8	%	6,591			28.0	%	5,733			28.6	%	6,677			29.6	%
85.00% and below	1,093			9.6	%	1,697			9.7	%	2,423			10.3	%	2,408			12.0	%	3,010			13.4	%
Total	$	11,413		100.0	%	$	17,425		100.0	%	$	23,499		100.0	%	$	20,015		100.0	%	$	22,544		100.0	%
Total NIW monthly vs. single:
Monthly	$	11,090		97.2	%	$	16,911		97.1	%	$	22,872		97.3	%	$	19,201		95.9	%	$	21,623		95.9	%
Single	323			2.8	%	514			2.9	%	627			2.7	%	814			4.1	%	921			4.1	%
Total	$	11,413		100.0	%	$	17,425		100.0	%	$	23,499		100.0	%	$	20,015		100.0	%	$	22,544		100.0	%
Total NIW purchase vs. refinance:
Purchase	$	11,202		98.2	%	$	17,159		98.5	%	$	23,059		98.1	%	$	19,157		95.7	%	$	21,174		93.9	%
Refinance	211			1.8	%	266			1.5	%	440			1.9	%	858			4.3	%	1,370			6.1	%
Total	$	11,413		100.0	%	$	17,425		100.0	%	$	23,499		100.0	%	$	20,015		100.0	%	$	22,544		100.0	%
Ending number of policies in force (PIF) (2)	1,160,219					1,168,735					1,168,147					1,159,020					1,171,835
Rollforward of insured loans in default:
Beginning delinquent number of loans	20,214					20,692					24,270					27,645					31,770
Plus: new notices	10,068					9,515					7,978					8,835					9,071
Less: cures	(9,564)					(9,832)					(11,363)					(12,030)					(13,038)
Less: paid claims	(151)					(161)					(193)					(180)					(158)
Ending delinquent number of loans (2)	20,567					20,214					20,692					24,270					27,645
Ending percentage of loans in default (2)	1.77		%			1.73		%			1.77		%			2.09		%			2.36		%
Losses:
Number of claims paid	151					161					193					180					158
Total paid claims (in thousands)	$	4,547				$	5,223				$	5,626				$	6,016				$	8,131
Average per claim (in thousands)	$	30.1				$	32.4				$	29.2				$	33.4				$	51.5
Severity (3)	69.5		%			72.3		%			72.3		%			78.1		%			83.0		%
Average case reserve per default (in thousands)	$	21.1				$	27.7				$	30.3				$	28.4				$	26.7

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

(2)    Includes first lien primary and pool policies.    

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

20

Arch Capital Group Ltd. and Subsidiaries

Segment Information — Mortgage Segment

Supplemental disclosures for U.S. primary mortgage insurance:

(U.S. Dollars in millions)	December 31, 2022												December 31, 2021
	Loss Reserves, Net (1)		Primary IIF (2)				Primary RIF (3)				Delinquency Rate		Loss Reserves, Net (1)		Primary IIF (2)				Primary RIF (3)				Delinquency Rate
	% of Total		Total		% of Total		Total		% of Total				% of Total		Total		% of Total		Total		% of Total
Policy year:
2012 and prior	33.8	%	$	9,931	3.4	%	$	2,424	3.2	%	8.41	%	27.9	%	$	13,030	4.6	%	$	2,960	4.2	%	8.48	%
2013	2.2	%	3,000		1.0	%	798		1.1	%	1.85	%	2.6	%	4,206		1.5	%	1,148		1.6	%	2.63	%
2014	1.9	%	3,696		1.3	%	1,012		1.3	%	2.61	%	1.9	%	4,822		1.7	%	1,328		1.9	%	3.14	%
2015	2.4	%	6,236		2.1	%	1,680		2.2	%	2.08	%	3.0	%	8,703		3.1	%	2,340		3.3	%	2.67	%
2016	5.8	%	10,225		3.5	%	2,744		3.6	%	2.66	%	7.6	%	14,344		5.1	%	3,841		5.4	%	3.29	%
2017	9.1	%	9,508		3.2	%	2,521		3.3	%	3.06	%	10.9	%	13,128		4.7	%	3,436		4.9	%	4.09	%
2018	11.6	%	10,260		3.5	%	2,625		3.5	%	4.11	%	15.2	%	14,046		5.0	%	3,562		5.0	%	5.28	%
2019	10.2	%	19,096		6.5	%	4,840		6.4	%	2.36	%	15.2	%	25,841		9.2	%	6,467		9.2	%	3.13	%
2020	11.3	%	65,141		22.0	%	16,414		21.7	%	1.20	%	12.5	%	82,502		29.4	%	20,341		28.8	%	0.97	%
2021	9.9	%	89,621		30.3	%	22,740		30.0	%	0.95	%	3.2	%	100,323		35.7	%	25,196		35.7	%	0.29	%
2022	1.7	%	68,937		23.3	%	18,008		23.8	%	0.20	%
Total	100.0	%	$	295,651	100.0	%	$	75,806	100.0	%	1.77	%	100.0	%	$	280,945	100.0	%	$	70,619	100.0	%	2.36	%

(1)    Total reserves for losses and loss adjustment expenses, net of recoverables, was $415.2 million at December 31, 2022, compared to $710.7 million at December 31, 2021.

(2)    The aggregate dollar amount of each insured mortgage loan’s current principal balance.

(3)    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 risk-sharing transactions.

21

Arch Capital Group Ltd. and Subsidiaries

Segment Information - Consolidated Excluding the 'Other' Segment (Sub-Total (Core))

(U.S. Dollars in thousands)	Three Months Ended															Year Ended
	December 31,			September 30,			June 30,			March 31,			December 31,			December 31,			December 31,
	2022			2022			2022			2022			2021			2022			2021
Gross premiums written	$	3,795,262		$	3,860,683		$	3,869,727		$	3,800,775		$	2,861,575		$	15,326,447		$	12,463,788
Premiums ceded	(760,626)			(1,136,909)			(1,185,088)			(1,166,635)			(827,148)			(4,249,258)			(3,800,153)
Net premiums written	3,034,636			2,723,774			2,684,639			2,634,140			2,034,427			11,077,189			8,663,635
Change in unearned premiums	(273,717)			(253,024)			(358,864)			(513,507)			49,203			(1,399,112)			(913,305)
Net premiums earned	2,760,919			2,470,750			2,325,775			2,120,633			2,083,630			9,678,077			7,750,330
Other underwriting income (loss)	1,283			3,077			2,970			5,897			3,160			13,227			21,334
Losses and loss adjustment expenses	(1,241,330)			(1,682,696)			(1,102,656)			(1,000,835)			(995,853)			(5,027,517)			(4,325,761)
Acquisition expenses	(500,515)			(447,587)			(413,319)			(378,159)			(357,539)			(1,739,580)			(1,240,437)
Other operating expenses	(286,093)			(274,747)			(277,392)			(289,943)			(261,787)			(1,128,175)			(965,726)
Underwriting income (loss)	$	734,264		$	68,797		$	535,378		$	457,593		$	471,611		$	1,796,032		$	1,239,740
Underwriting Ratios
Loss ratio	45.0		%	68.1		%	47.4		%	47.2		%	47.8		%	51.9		%	55.8		%
Acquisition expense ratio	18.1		%	18.1		%	17.8		%	17.8		%	17.2		%	18.0		%	16.0		%
Other operating expense ratio	10.4		%	11.1		%	11.9		%	13.7		%	12.6		%	11.7		%	12.5		%
Combined ratio	73.5		%	97.3		%	77.1		%	78.7		%	77.6		%	81.6		%	84.3		%
Catastrophic activity and prior year development:
Current accident year catastrophic events, net of reinsurance and reinstatement premiums	1.3		%	22.3		%	3.5		%	4.0		%	3.5		%	7.8		%	8.3		%
Net (favorable) adverse development in prior year loss reserves, net of related adjustments	(9.8)		%	(7.2)		%	(7.2)		%	(6.1)		%	(6.0)		%	(7.7)		%	(4.5)		%
Combined ratio excluding catastrophic activity and prior year development (1)	82.0		%	82.2		%	80.8		%	80.8		%	80.1		%	81.5		%	80.5		%
Components of losses and loss adjustment expenses incurred (1)
Paid losses and loss adjustment expenses	$	904,261		$	765,542		$	745,134		$	727,011		$	783,806		$	3,141,948		$	2,666,773
Change in unpaid losses and loss adjustment expenses	337,069			917,154			357,522			273,824			212,047			1,885,569			1,658,988
Total losses and loss adjustment expenses	$	1,241,330		$	1,682,696		$	1,102,656		$	1,000,835		$	995,853		$	5,027,517		$	4,325,761
Net premiums written to gross premiums written	80.0		%	70.6		%	69.4		%	69.3		%	71.1		%	72.3		%	69.5		%

(1)See ‘Comments on Regulation G’ for further discussion.

22

Arch Capital Group Ltd. and Subsidiaries

Segment Information — Selected Information on Losses and Loss Adjustment Expenses

(U.S. Dollars in thousands)	Three Months Ended															Year Ended
	December 31,			September 30,			June 30,			March 31,			December 31,			December 31,			December 31,
	2022			2022			2022			2022			2021			2022			2021
Estimated net (favorable) adverse development in prior year loss reserves, net of related adjustments (1)
Net impact on underwriting results:
Insurance	$	(4,206)		$	(1,171)		$	(4,469)		$	(1,406)		$	(2,990)		$	(11,252)		$	(15,543)
Reinsurance	(55,341)			(49,516)			(41,907)			(22,383)			(49,762)			(169,147)			(158,275)
Mortgage	(210,590)			(127,290)			(120,201)			(105,619)			(72,865)			(563,700)			(176,656)
Total	$	(270,137)		$	(177,977)		$	(166,577)		$	(129,408)		$	(125,617)		$	(744,099)		$	(350,474)
Impact on losses and loss adjustment expenses:
Insurance	$	(5,946)		$	(5,411)		$	(6,711)		$	(7,271)		$	(3,115)		$	(25,339)		$	(16,236)
Reinsurance	(63,472)			(49,194)			(46,422)			(32,473)			(59,219)			(191,561)			(178,823)
Mortgage	(207,732)			(126,218)			(118,093)			(102,068)			(70,419)			(554,111)			(169,558)
Total	$	(277,150)		$	(180,823)		$	(171,226)		$	(141,812)		$	(132,753)		$	(771,011)		$	(364,617)
Impact on acquisition expenses:
Insurance	$	1,740		$	4,240		$	2,242		$	5,865		$	125		$	14,087		$	693
Reinsurance	8,131			(322)			4,515			10,090			9,457			22,414			20,548
Mortgage	(2,858)			(1,072)			(2,108)			(3,551)			(2,446)			(9,589)			(7,098)
Total	$	7,013		$	2,846		$	4,649		$	12,404		$	7,136		$	26,912		$	14,143
Impact on combined ratio:
Insurance	(0.3)		%	(0.1)		%	(0.4)		%	(0.1)		%	(0.3)		%	(0.2)		%	(0.4)		%
Reinsurance	(4.5)		%	(4.9)		%	(4.5)		%	(2.8)		%	(6.4)		%	(4.3)		%	(5.6)		%
Mortgage	(72.1)		%	(45.1)		%	(40.7)		%	(36.5)		%	(24.2)		%	(48.6)		%	(13.8)		%
Total	(9.8)		%	(7.2)		%	(7.2)		%	(6.1)		%	(6.0)		%	(7.7)		%	(4.5)		%
Impact on loss ratio:
Insurance	(0.5)		%	(0.5)		%	(0.6)		%	(0.7)		%	(0.3)		%	(0.6)		%	(0.4)		%
Reinsurance	(5.2)		%	(4.9)		%	(5.0)		%	(4.0)		%	(7.6)		%	(4.8)		%	(6.3)		%
Mortgage	(71.1)		%	(44.7)		%	(39.9)		%	(35.3)		%	(23.4)		%	(47.8)		%	(13.2)		%
Total	(10.0)		%	(7.3)		%	(7.4)		%	(6.7)		%	(6.4)		%	(8.0)		%	(4.7)		%
Impact on acquisition expense ratio:
Insurance	0.2		%	0.4		%	0.2		%	0.6		%	0.0		%	0.4		%	0.0		%
Reinsurance	0.7		%	0.0		%	0.5		%	1.2		%	1.2		%	0.5		%	0.7		%
Mortgage	(1.0)		%	(0.4)		%	(0.8)		%	(1.2)		%	(0.8)		%	(0.8)		%	(0.6)		%
Total	0.2		%	0.1		%	0.2		%	0.6		%	0.4		%	0.3		%	0.2		%
Estimated net losses incurred from current accident year catastrophic events (2)
Insurance	$	34,485		$	158,973		$	16,360		$	31,855		$	20,312		$	241,673		$	204,620
Reinsurance	157			391,843			66,021			53,977			51,966			511,998			438,243
Total	$	34,642		$	550,816		$	82,381		$	85,832		$	72,278		$	753,671		$	642,863
Impact on combined ratio:
Insurance	2.8		%	13.4		%	1.5		%	3.1		%	2.0		%	5.3		%	5.6		%
Reinsurance	0.0		%	39.1		%	7.1		%	6.7		%	6.7		%	12.9		%	15.4		%
Total	1.3		%	22.3		%	3.5		%	4.0		%	3.5		%	7.8		%	8.3		%

(1)Presented on a ‘core’ basis which excludes amounts related to the ‘other’ segment (i.e., results of Somers). See ‘Comments on Regulation G’ for a further discussion of the presentation of ‘core’ results.

(2)Equals estimated losses from catastrophic events occurring in the current accident year (e.g. natural catastrophes, man-made events, pandemic events), net of reinsurance and reinstatement premiums. As regards the natural catastrophe estimates included within, amounts shown for the insurance segment are for named catastrophic events only, while amounts shown for the reinsurance segment include (i) named events with over $5 million of losses incurred by its Bermuda and Europe operations and (ii) all catastrophe losses incurred by its U.S. operations. Amounts not applicable for the mortgage segment.

23

Arch Capital Group Ltd. and Subsidiaries

Investment Information — Investable Asset Summary and Investment Portfolio Metrics

The following table summarizes the Company’s investable assets and portfolio metrics:

(U.S. Dollars in thousands)	December 31,				September 30,				June 30,				March 31,				December 31,
	2022				2022				2022				2022				2021
Investable assets:
Fixed maturities available for sale, at fair value	$	19,682,789	70.1	%	$	18,120,727	67.9	%	$	17,585,029	66.6	%	$	17,648,853	66.0	%	$	17,998,109	65.6	%
Fixed maturities—fair value option (1)	554,120		2.0	%	530,303		2.0	%	525,451		2.0	%	426,187		1.6	%	416,698		1.5	%
Total fixed maturities	20,236,909		72.1	%	18,651,030		69.9	%	18,110,480		68.6	%	18,075,040		67.6	%	18,414,807		67.1	%
Equity securities, at fair value	859,969		3.1	%	809,869		3.0	%	772,689		2.9	%	1,002,572		3.7	%	1,804,170		6.6	%
Equity securities—fair value option (1)	13,792		0.0	%	13,905		0.1	%	14,489		0.1	%	21,300		0.1	%	26,493		0.1	%
Total equity securities	873,761		3.1	%	823,774		3.1	%	787,178		3.0	%	1,023,872		3.8	%	1,830,663		6.7	%
Other investments—fair value option (1)	1,043,184		3.7	%	1,005,929		3.8	%	1,054,771		4.0	%	1,226,808		4.6	%	1,432,553		5.2	%
Investments accounted for using the equity method (2)	3,774,310		13.4	%	3,565,946		13.4	%	3,496,341		13.2	%	3,325,543		12.4	%	3,077,611		11.2	%
Short-term investments available for sale, at fair value	1,331,662		4.7	%	1,940,857		7.3	%	2,227,874		8.4	%	2,332,624		8.7	%	1,734,716		6.3	%
Short-term investments—fair value option (1)	33,101		0.1	%	28,614		0.1	%	39,657		0.2	%	12,371		0.0	%	97,806		0.4	%
Total short-term investments	1,364,763		4.9	%	1,969,471		7.4	%	2,267,531		8.6	%	2,344,995		8.8	%	1,832,522		6.7	%
Cash	855,118		3.0	%	813,583		3.0	%	813,548		3.1	%	812,917		3.0	%	858,668		3.1	%
Securities transactions entered into but not settled at the balance sheet date	(82,548)		(0.3)	%	(147,727)		(0.6)	%	(134,777)		(0.5)	%	(59,819)		(0.2)	%	(4,671)		0.0	%
Total investable assets held by the Company	$	28,065,497	100.0	%	$	26,682,006	100.0	%	$	26,395,072	100.0	%	$	26,749,356	100.0	%	$	27,442,153	100.0	%
Average effective duration (in years)	2.89				2.84				2.94				2.93				2.70
Average S&P/Moody’s credit ratings (3)	AA-/Aa3				AA/Aa2				AA-/Aa3				AA-/Aa3				AA-/Aa3

(1)     Included in “other investments” on the balance sheet.

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

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

24

Arch Capital Group Ltd. and Subsidiaries

Investment Information — Composition of Net Investment Income, Yield and Total Return

The following table summarizes the Company’s net investment income, yield and total return (1):

(U.S. Dollars in thousands, except share data)	Three Months Ended															Year Ended
	December 31,			September 30,			June 30,			March 31,			December 31,			December 31,			December 31,
	2022			2022			2022			2022			2021			2022			2021
Composition of net investment income (1):
Fixed maturities	$	157,696		$	123,568		$	105,342		$	82,053		$	74,846		$	468,659		$	307,536
Equity securities (dividends)	5,877			4,261			6,121			6,238			18,295			22,497			42,094
Short-term investments	13,520			9,304			4,120			2,575			3,325			29,519			6,799
Other (2)	17,943			8,644			7,984			12,076			12,712			46,647			68,411
Gross investment income	195,036			145,777			123,567			102,942			109,178			567,322			424,840
Investment expenses	(13,957)			(17,137)			(17,175)			(22,506)			(18,724)			(70,775)			(78,032)
Net investment income	$	181,079		$	128,640		$	106,392		$	80,436		$	90,454		$	496,547		$	346,808
Per share	$	0.48		$	0.34		$	0.28		$	0.21		$	0.23		$	1.31		$	0.87
Equity in net income (loss) of investment funds accounted for using the equity method	40,351			(18,861)			58,061			36,305			67,132			115,856			366,402
Per share	$	0.11		$	(0.05)		$	0.15		$	0.09		$	0.17		$	0.31		$	0.92
Investment income yield, at amortized cost (1) (3):
Pre-tax	2.80		%	2.06		%	1.76		%	1.34		%	1.46		%	1.99		%	1.41		%
After-tax	2.41		%	1.77		%	1.49		%	1.13		%	1.27		%	1.70		%	1.24		%
Total return on investments (1) (4)	2.60		%	(3.01)		%	(3.02)		%	(3.07)		%	0.39		%	(6.45)		%	1.90		%

(1)Presented on a ‘core’ basis which excludes amounts related to the ‘other’ segment (i.e., results of Somers). See ‘Comments on Regulation G’ for a further discussion of the presentation of ‘core’ results.

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

(3)Presented on an annualized basis and excluding the impact of investments for which returns are not included within investment income, such as investments accounted for using the equity method and certain equities.

(4)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 (excluding changes in allowance for credit losses on non-investment related financial assets) and the change in unrealized gains or losses and is calculated on a pre-tax basis and before investment expenses. See ‘Comments on Regulation G’ for a further discussion of the presentation of total return on investments.

25

Arch Capital Group Ltd. and Subsidiaries

Investment Information — Composition of Fixed Maturities

The following table summarizes the Company’s fixed maturities:

(U.S. Dollars in thousands)	Fair Value		Gross Unrealized Gains		Gross Unrealized Losses		Net Unrealized Gains (Losses)		Allowance for Credit Losses		Amortized Cost		Fair Value / Amortized Cost		Fair Value % of Total
At December 31, 2022
Corporates	$	8,562,883	$	55,468	$	(781,353)	$	(725,885)	$	(29,950)	$	9,318,718	91.9	%	42.3	%
U.S. government and government agencies	5,166,591		14,891		(342,963)		(328,072)		—		5,494,663		94.0	%	25.5	%
Municipal bonds	419,166		3,149		(33,360)		(30,211)		(100)		449,477		93.3	%	2.1	%
Non-U.S. government securities	2,317,134		8,870		(237,846)		(228,976)		(1,882)		2,547,992		90.9	%	11.5	%
Asset-backed securities	1,928,469		761		(106,623)		(105,862)		(6,010)		2,040,341		94.5	%	9.5	%
Commercial mortgage-backed securities	1,047,275		608		(57,667)		(57,059)		(3,415)		1,107,749		94.5	%	5.2	%
Residential mortgage-backed securities	795,391		4,933		(86,587)		(81,654)		2		877,043		90.7	%	3.9	%
Total	$	20,236,909	$	88,680	$	(1,646,399)	$	(1,557,719)	$	(41,355)	$	21,835,983	92.7	%	100.0	%
At December 31, 2021
Corporates	$	6,941,879	$	104,170	$	(69,194)	$	34,976	$	(2,037)	$	6,908,940	100.5	%	37.7	%
U.S. government and government agencies	4,772,764		10,076		(45,967)		(35,891)		—		4,808,655		99.3	%	25.9	%
Municipal bonds	404,666		18,724		(1,409)		17,315		(2)		387,353		104.5	%	2.2	%
Non-U.S. government securities	2,144,079		54,048		(34,749)		19,299		(82)		2,124,862		100.9	%	11.6	%
Asset-backed securities	2,696,458		6,540		(11,108)		(4,568)		(708)		2,701,734		99.8	%	14.6	%
Commercial mortgage-backed securities	1,046,484		1,740		(3,117)		(1,377)		(6)		1,047,867		99.9	%	5.7	%
Residential mortgage-backed securities	408,477		2,825		(5,410)		(2,585)		(48)		411,110		99.4	%	2.2	%
Total	$	18,414,807	$	198,123	$	(170,954)	$	27,169	$	(2,883)	$	18,390,521	100.1	%	100.0	%

26

Arch Capital Group Ltd. and Subsidiaries

Investment Information — Credit Quality Distribution and Maturity Profile

The following table summarizes the credit quality distribution and maturity profile of the Company’s fixed maturities:

(U.S. Dollars in thousands)	December 31,				September 30,				June 30,				March 31,				December 31,
	2022				2022				2022				2022				2021
Credit quality distribution of total fixed maturities (1):
U.S. government and government agencies (2)	$	5,829,279	28.8	%	$	5,746,853	30.8	%	$	4,892,483	27.0	%	$	4,981,102	27.6	%	$	5,063,191	27.5	%
AAA	3,616,537		17.9	%	3,344,746		17.9	%	3,352,551		18.5	%	3,171,975		17.5	%	3,783,386		20.5	%
AA	2,214,494		10.9	%	2,030,730		10.9	%	2,064,313		11.4	%	2,222,236		12.3	%	2,459,413		13.4	%
A	3,993,471		19.7	%	3,382,545		18.1	%	3,464,240		19.1	%	3,227,560		17.9	%	2,943,594		16.0	%
BBB	3,324,095		16.4	%	3,001,304		16.1	%	3,114,961		17.2	%	3,181,195		17.6	%	2,936,398		15.9	%
BB	560,213		2.8	%	532,162		2.9	%	551,876		3.0	%	564,762		3.1	%	501,588		2.7	%
B	377,462		1.9	%	357,543		1.9	%	367,275		2.0	%	364,181		2.0	%	371,747		2.0	%
Lower than B	12,029		0.1	%	12,417		0.1	%	4,742		—	%	7,057		—	%	43,756		0.2	%
Not rated	309,329		1.5	%	242,730		1.3	%	298,039		1.6	%	354,972		2.0	%	311,734		1.7	%
Total fixed maturities, at fair value	$	20,236,909	100.0	%	$	18,651,030	100.0	%	$	18,110,480	100.0	%	$	18,075,040	100.0	%	$	18,414,807	100.0	%
Maturity profile of total fixed maturities:
Due in one year or less	$	533,889	2.6	%	$	602,340	3.2	%	$	434,779	2.4	%	$	323,999	1.8	%	$	318,572	1.7	%
Due after one year through five years	11,291,842		55.8	%	10,285,415		55.1	%	9,661,066		53.3	%	9,756,481		54.0	%	8,536,801		46.4	%
Due after five years through ten years	4,155,691		20.5	%	4,031,643		21.6	%	4,261,397		23.5	%	4,296,537		23.8	%	4,807,858		26.1	%
Due after 10 years	484,352		2.4	%	312,381		1.7	%	422,104		2.3	%	535,301		3.0	%	600,157		3.3	%
	16,465,774		81.4	%	15,231,779		81.7	%	14,779,346		81.6	%	14,912,318		82.5	%	14,263,388		77.5	%
Residential mortgage-backed securities	795,391		3.9	%	763,371		4.1	%	698,168		3.9	%	416,138		2.3	%	408,477		2.2	%
Commercial mortgage-backed securities	1,047,275		5.2	%	1,064,238		5.7	%	1,023,088		5.6	%	1,066,365		5.9	%	1,046,484		5.7	%
Asset-backed securities	1,928,469		9.5	%	1,591,642		8.5	%	1,609,878		8.9	%	1,680,219		9.3	%	2,696,458		14.6	%
Total fixed maturities, at fair value	$	20,236,909	100.0	%	$	18,651,030	100.0	%	$	18,110,480	100.0	%	$	18,075,040	100.0	%	$	18,414,807	100.0	%

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

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

27

Arch Capital Group Ltd. and Subsidiaries

Investment Information — Analysis of Corporate Exposures

The following table summarizes the Company’s corporate bonds by sector:

(U.S. Dollars in thousands)	December 31,				September 30,				June 30,				March 31,				December 31,
	2022				2022				2022				2022				2021
Sector:
Industrials	$	3,463,079	40.4	%	$	2,926,134	38.4	%	$	2,928,443	37.5	%	$	2,990,553	39.1	%	$	3,082,440	44.4	%
Financials	4,246,061		49.6	%	4,094,264		53.7	%	4,191,142		53.7	%	4,054,531		53.0	%	3,397,199		48.9	%
Utilities	545,843		6.4	%	483,490		6.3	%	559,150		7.2	%	460,793		6.0	%	363,468		5.2	%
Covered bonds	4,224		0.0	%	3,848		0.1	%	1,720		0.0	%	1,870		0.0	%	4,511		0.1	%
All other (1)	303,676		3.5	%	112,710		1.5	%	130,807		1.7	%	145,934		1.9	%	94,261		1.4	%
Total	$	8,562,883	100.0	%	$	7,620,446	100.0	%	$	7,811,262	100.0	%	$	7,653,681	100.0	%	$	6,941,879	100.0	%
Credit quality distribution (2):
AAA	$	177,808	2.1	%	$	162,906	2.1	%	$	160,327	2.1	%	$	144,047	1.9	%	$	122,008	1.8	%
AA	767,130		9.0	%	823,931		10.8	%	784,206		10.0	%	835,869		10.9	%	1,006,360		14.5	%
A	3,266,251		38.1	%	2,741,063		36.0	%	2,796,539		35.8	%	2,549,426		33.3	%	2,280,498		32.9	%
BBB	3,095,503		36.2	%	2,834,413		37.2	%	2,931,983		37.5	%	2,968,760		38.8	%	2,453,904		35.3	%
BB	541,221		6.3	%	516,986		6.8	%	522,904		6.7	%	550,960		7.2	%	463,072		6.7	%
B	371,457		4.3	%	351,360		4.6	%	353,134		4.5	%	360,902		4.7	%	355,993		5.1	%
Lower than B	11,585		0.1	%	11,390		0.1	%	4,260		0.1	%	6,210		0.1	%	30,878		0.4	%
Not rated	331,928		3.9	%	178,397		2.3	%	257,909		3.3	%	237,507		3.1	%	229,166		3.3	%
Total	$	8,562,883	100.0	%	$	7,620,446	100.0	%	$	7,811,262	100.0	%	$	7,653,681	100.0	%	$	6,941,879	100.0	%

(1)    Includes sovereign securities, supranational securities and other.

(2)    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.

The following table summarizes the Company’s top ten exposures to fixed income corporate issuers by fair value at December 31, 2022:

(U.S. Dollars in thousands)	Fair Value		% of Asset Class		% of Investable Assets		Credit Quality (1)
Issuer:
Bank of America Corporation	$	430,071	5.0	%	1.5	%	A-/A2
JPMorgan Chase & Co.	296,901		3.5	%	1.1	%	A-/A1
Morgan Stanley	290,477		3.4	%	1.0	%	A-/A1
Citigroup Inc.	270,074		3.2	%	1.0	%	BBB+/A3
The Goldman Sachs Group, Inc.	249,547		2.9	%	0.9	%	BBB+/A2
Wells Fargo & Company	242,538		2.8	%	0.9	%	BBB+/A1
Blue Owl Capital Inc.	164,098		1.9	%	0.6	%	BBB-/Baa3
Blackstone Inc.	150,691		1.8	%	0.5	%	BBB-/Baa3
UBS Group AG	130,244		1.5	%	0.5	%	A/Aa3
Spring Funding II Llc	121,221		1.4	%	0.4	%	NA/NA
Total	$	2,345,862	27.4	%	8.4	%

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

28

Arch Capital Group Ltd. and Subsidiaries

Investment Information — Structured Securities

The following table provides the composition of the Company’s structured securities:

(U.S. Dollars in thousands)	Agencies		AAA		AA		A		BBB		Non-Investment Grade		Total
At December 31, 2022
Residential mortgage-backed securities	$	645,008	$	106,077	$	27,881	$	—	$	—	$	16,425	$	795,391
Commercial mortgage-backed securities	17,680		681,578		151,774		32,488		81,556		82,199		1,047,275
Asset-backed securities	—		1,135,331		184,078		349,768		118,507		140,785		1,928,469
Total	$	662,688	$	1,922,986	$	363,733	$	382,256	$	200,063	$	239,409	$	3,771,135
At December 31, 2021
Residential mortgage-backed securities	$	268,229	$	86,344	$	40,502	$	2,444	$	6	$	10,952	$	408,477
Commercial mortgage-backed securities	22,198		710,692		141,065		6,990		67,555		97,984		1,046,484
Asset-backed securities	—		1,548,239		230,922		397,242		367,504		152,551		2,696,458
Total	$	290,427	$	2,345,275	$	412,489	$	406,676	$	435,065	$	261,487	$	4,151,419

29

Arch Capital Group Ltd. and Subsidiaries

Comments on Regulation G

Throughout this financial supplement, the Company presents its operations in the way it believes will be the most meaningful and useful to investors, analysts, rating agencies and others who use the Company’s financial information in evaluating the performance of the 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 (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, transaction costs and other and loss on redemption of preferred shares, net of income taxes, and the use of annualized operating return on average common equity. The presentation of after-tax operating income available to Arch common 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 net income return on average common equity (the most directly comparable GAAP financial measures) in accordance with Regulation G is included on the following page.

The Company believes that net realized gains or losses, 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, the Company’s business performance. Although net realized gains or losses, 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 the Company’s 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 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 the Company’s financial information believe that, for many companies, the timing of the realization of investment gains or losses is largely opportunistic. In addition, changes in the allowance for credit losses and net impairment losses recognized in earnings on the Company’s investments represent other-than-temporary declines in expected recovery values on securities without actual realization. The use of the equity method on certain of the Company’s 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 the Company’s proportionate share of the net income or loss of the funds (which include changes in the fair value of the underlying securities in the funds). This method of accounting is different from the way the Company accounts for its 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. The Company believes that transaction costs and other, due to their non-recurring nature, are not indicative of the performance of, or trends in, the Company’s business performance. The loss on redemption of preferred shares related to the redemption of the Company's Series E preferred shares in September 2021 had no impact on shareholders' equity or cash flows. Due to these reasons, the Company excludes net realized gains or losses, 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 or loss available to Arch common shareholders.

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

In addition, through June 30, 2021, the Company’s presentation included the use of information prepared on a ‘core’ basis, which excluded amounts related to the ‘other’ segment (i.e., results of Somers). Information provided on a ‘core’ basis represent non-GAAP financial measures as defined in Regulation G. Pursuant to GAAP, Somers was considered a variable interest entity and the Company concluded that it was the primary beneficiary of Somers through June 30, 2021. As such, the Company consolidated the results of Somers in its consolidated financial statements. The Company’s presentation of information on a ‘core’ basis enabled investors and other users of the Company’s financial information to analyze the Company’s performance in a manner similar to how the Company’s management analyzed performance. See ‘Segment Information’ for a further discussion of segment results and a reconciliation of core and consolidated results. In the 2020 fourth quarter, Arch, Somers, and Greysbridge Ltd., a wholly-owned subsidiary of Arch, entered into an Agreement and Plan of Merger (as amended, the “Merger Agreement”). Arch assigned its rights under the Merger Agreement to Greysbridge Holdings Ltd. (“Greysbridge”). The merger and the related Greysbridge equity financing closed on July 1, 2021. Effective July 1, 2021, Somers is wholly owned by Greysbridge, and Greysbridge is owned 40% by Arch and 30% by certain funds managed by Kelso & Company and 30% by certain funds managed by Warburg Pincus LLC. Based on the governing documents of Greysbridge, we concluded that, while we retain significant influence over Greysbridge, Greysbridge does not constitute a variable interest entity. Accordingly, effective July 1, 2021, we no longer consolidate the results of Somers in our consolidated financial statements and footnotes.

The Company’s segment information includes the presentation of consolidated underwriting income or loss and a subtotal of underwriting income or loss on a ‘core’ basis (for periods prior to July 1, 2021). Such measures represent the pre-tax profitability of the Company’s 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 the Company’s individual underwriting operations. Underwriting income or loss does not incorporate items included in the Company’s corporate segment. While these measures are presented in the Segment Information footnote to the Company’s 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 ‘core’ basis (for periods prior to July 1, 2021), in accordance with Regulation G, is shown on pages 10 to 13.

In addition, the Company’s segment information includes the use of a combined ratio excluding catastrophic activity and prior year development, for the insurance and reinsurance segments, and a combined ratio excluding prior year development, for the mortgage segment. These ratios are non-GAAP financial measures as defined in Regulation G. The reconciliation of such measures to the combined ratio (the most directly comparable GAAP financial measure) in accordance with Regulation G are shown on the individual segment pages. The Company’s management utilizes the adjusted combined ratios excluding current accident year catastrophic events and favorable or adverse development in prior year loss reserves in its analysis of the underwriting performance of each of its 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 (excluding changes in the allowance for credit losses on non-investment related financial assets) 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. Management uses total return on investments as a key measure of the return generated to Arch common shareholders, and compares the return generated by the Company’s investment portfolio against benchmark returns during the periods presented.

30

Arch Capital Group Ltd. and Subsidiaries

Operating Income Reconciliation and Annualized Operating Return on Average Common Equity

The following table summarizes the Company’s consolidated financial data, including a reconciliation of net income (loss) available to Arch common shareholders to after-tax operating income (loss) available to Arch common shareholders and related diluted per share results. Each line item reflects the impact of the Company’s ownership of Somers’ outstanding common equity through June 30, 2021:

(U.S. Dollars in thousands, except share data)	Three Months Ended															Year Ended
	December 31,			September 30,			June 30,			March 31,			December 31,			December 31,			December 31,
	2022			2022			2022			2022			2021			2022			2021
Net income available to Arch common shareholders	$	849,504		$	6,917		$	394,160		$	185,616		$	613,081		$	1,436,197		$	2,093,405
Net realized (gains) losses	(79,932)			183,674			266,579			292,414			(59,517)			662,735			(307,466)
Equity in net (income) loss of investment funds accounted for using the equity method	(40,351)			18,861			(58,061)			(36,305)			(67,132)			(115,856)			(366,402)
Net foreign exchange (gains) losses	81,201			(90,537)			(87,797)			(3,855)			(3,221)			(100,988)			(42,743)
Transaction costs and other	358			76			261			397			310			1,092			1,199
Loss on redemption of preferred shares	—			—			—			—			—			—			15,101
Income tax expense (benefit) (1)	(4,858)			(13,019)			(8,646)			(16,268)			9,736			(42,791)			41,836
After-tax operating income available to Arch common shareholders	$	805,922		$	105,972		$	506,496		$	421,999		$	493,257		$	1,840,389		$	1,434,930
Diluted per common share results:
Net income available to Arch common shareholders	$	2.26		$	0.02		$	1.04		$	0.48		$	1.58		$	3.80		$	5.23
Net realized (gains) losses	(0.22)			0.48			0.70			0.76			(0.16)			1.76			(0.77)
Equity in net (income) loss of investment funds accounted for using the equity method	(0.11)			0.05			(0.15)			(0.09)			(0.17)			(0.31)			(0.92)
Net foreign exchange (gains) losses	0.22			(0.24)			(0.23)			(0.01)			(0.01)			(0.27)			(0.11)
Transaction costs and other	0.00			0.00			0.00			0.00			0.00			0.00			0.00
Loss on redemption of preferred shares	—			—			—			—			—			—			0.04
Income tax expense (benefit) (1)	(0.01)			(0.03)			(0.02)			(0.04)			0.03			(0.11)			0.11
After-tax operating income available to Arch common shareholders	$	2.14		$	0.28		$	1.34		$	1.10		$	1.27		$	4.87		$	3.58
Weighted average common shares and common share equivalents outstanding - diluted	375,878,279			373,727,277			377,952,988			384,194,363			388,869,378			377,609,767			400,345,936
Beginning common shareholders’ equity	$	10,965,110		$	11,587,566		$	12,089,589		$	12,715,896		$	12,557,526		$	12,715,896		$	12,325,886
Ending common shareholders’ equity	12,080,073			10,965,110			11,587,566			12,089,589			12,715,896			12,080,073			12,715,896
Average common shareholders’ equity	$	11,522,592		$	11,276,338		$	11,838,578		$	12,402,743		$	12,636,711		$	12,397,985		$	12,520,891
Annualized net income return on average common equity	29.5		%	0.2		%	13.3		%	6.0		%	19.4		%	11.6		%	16.7		%
Annualized operating return on average common equity	28.0		%	3.8		%	17.1		%	13.6		%	15.6		%	14.8		%	11.5		%

(1)Income tax expense on 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 (loss) of investment funds accounted for using the equity method, net foreign exchange gains or losses and transaction costs and other reflects the relative mix reported by jurisdiction and the varying tax rates in each jurisdiction.

31

Arch Capital Group Ltd. and Subsidiaries

Operating Income and Effective Tax Rate Calculations

The following table provides a reconciliation of income (loss) before income taxes to after-tax operating income (loss) available to Arch common shareholders and an analysis of the effective tax rate on pre-tax operating income (loss) available to Arch common shareholders:

(U.S. Dollars in thousands)	Three Months Ended															Year Ended
	December 31,			September 30,			June 30,			March 31,			December 31,			December 31,			December 31,
	2022			2022			2022			2022			2021			2022			2021
Arch Operating Income Components (1):
Income (loss) before income taxes and income (loss) from operating affiliates	$	887,481		$	(5,149)		$	421,628		$	184,533		$	617,440		$	1,488,493		$	2,013,916
Net realized (gains) losses	(79,932)			183,673			266,579			292,414			(59,517)			662,734			(299,207)
Equity in net (income) loss of investment funds accounted for using the equity method	(40,351)			18,861			(58,061)			(36,305)			(67,132)			(115,856)			(366,402)
Net foreign exchange (gains) losses	81,224			(90,509)			(87,775)			(3,845)			(3,163)			(100,905)			(42,854)
Transaction costs and other	(2,778)			(1,108)			658			(170)			(171)			(3,398)			(1,236)
Income (loss) from operating affiliates	36,226			8,507			4,640			24,518			40,641			73,891			264,693
Pre-tax operating income	881,870			114,275			547,669			461,145			528,098			2,004,959			1,568,910
Arch share of ‘other’ segment operating income (loss) (2)	—			—			—			—			—			—			931
Pre-tax operating income available to Arch (b)	881,870			114,275			547,669			461,145			528,098			2,004,959			1,569,841
Income tax (expense) benefit (a)	(65,764)			1,881			(30,989)			(28,962)			(24,657)			(123,834)			(86,568)
After-tax operating income available to Arch	816,106			116,156			516,680			432,183			503,441			1,881,125			1,483,273
Preferred dividends	(10,184)			(10,184)			(10,184)			(10,184)			(10,184)			(40,736)			(48,343)
After-tax operating income available to Arch common shareholders	$	805,922		$	105,972		$	506,496		$	421,999		$	493,257		$	1,840,389		$	1,434,930
Effective tax rate on pre-tax operating income (loss) available to Arch (a)/(b)	7.5		%	(1.6)		%	5.7		%	6.3		%	4.7		%	6.2		%	5.5		%

(1)    Line items are presented on a ‘core’ basis, excluding amounts related to the ‘other’ segment (i.e., results of Somers). See ‘Comments on Regulation G’ for a further discussion of the presentation of ‘core’ results.

(2)    Balances in the ‘other’ segment and a calculation of Arch’s share of the ‘other’ segment operating income (loss) is as follows:

(U.S. Dollars in thousands)	Three Months Ended										Year Ended
	December 31,		September 30,		June 30,		March 31,		December 31,		December 31,		December 31,
	2022		2022		2022		2022		2021		2022		2021
Balances in ‘other’ segment:
Underwriting income (loss)	$	—	$	—	$	—	$	—	$	—	$	—	$	(21,945)
Net investment income	—		—		—		—		—		—		42,310
Interest expense	—		—		—		—		—		—		(8,410)
Amortization of intangible assets	—		—		—		—		—		—		(898)
Preferred dividends	—		—		—		—		—		—		(1,953)
Pre-tax operating income (loss) available to common shareholders	—		—		—		—		—		—		9,104
Arch ownership (3)	n/a		n/a		n/a		n/a		n/a		n/a		n/a
Arch share of ‘Other’ segment operating income (loss) (4)	$	—	$	—	$	—	$	—	$	—	$	—	$	931

(3) Effective July 1, 2021, Somers is wholly owned by Greysbridge and Greysbridge is owned 40% by the Company, accordingly, the Company no longer consolidates the results of Somers in its consolidated financial statements. See ‘Comments on Regulation G’ for a further discussion of the presentation of ‘core’ results.

(4) Excludes amounts attributable to net realized gains or losses and net foreign exchange gains or losses in the ‘other’ segment (see ‘Segment Information’).

32

Arch Capital Group Ltd. and Subsidiaries

Capital Structure and Share Repurchase Activity

The following table provides an analysis of the Company’s capital structure (1):

(U.S. Dollars in thousands, except share data)	December 31,			September 30,			June 30,			March 31,			December 31,
	2022			2022			2022			2022			2021
Debt:
Arch senior notes, due May 1, 2034 ($300,000 principal, 7.35%)	$	300,000		$	300,000		$	300,000		$	300,000		$	300,000
Arch-U.S. senior notes, due Nov. 1, 2043 ($500,000 principal, 5.144%) (2)	500,000			500,000			500,000			500,000			500,000
Arch Finance senior notes, due December 15, 2026 ($500,000 principal, 4.011%) (3)	500,000			500,000			500,000			500,000			500,000
Arch Finance senior notes, due December 15, 2046 ($450,000 principal, 5.031%) (3)	450,000			450,000			450,000			450,000			450,000
Arch senior notes, due June 30, 2050 ($1,000,000 principal, 3.635%)	1,000,000			1,000,000			1,000,000			1,000,000			1,000,000
Deferred debt costs on senior notes	(24,590)			(24,847)			(25,104)			(25,358)			(25,606)
Revolving credit agreement borrowings, due December 17, 2024 (variable)	—			—			—			—			—
Total debt	$	2,725,410		$	2,725,153		$	2,724,896		$	2,724,642		$	2,724,394
Shareholders’ equity available to Arch:
Series F non-cumulative preferred shares (5.45%)	330,000			330,000			330,000			330,000			330,000
Series G non-cumulative preferred shares (4.55%)	500,000			500,000			500,000			500,000			500,000
Common shareholders’ equity (a)	12,080,073			10,965,110			11,587,566			12,089,589			12,715,896
Total shareholders’ equity available to Arch	$	12,910,073		$	11,795,110		$	12,417,566		$	12,919,589		$	13,545,896
Total capital available to Arch	$	15,635,483		$	14,520,263		$	15,142,462		$	15,644,231		$	16,270,290
Common shares outstanding, net of treasury shares (b)	370,345,997			369,321,990			369,346,815			375,730,891			378,923,894
Book value per common share (4) (a)/(b)	$	32.62		$	29.69		$	31.37		$	32.18		$	33.56
Leverage ratios:
Senior notes/total capital available to Arch	17.4		%	18.8		%	18.0		%	17.4		%	16.7		%
Revolving credit agreement borrowings/total capital available to Arch	—		%	—		%	—		%	—		%	—		%
Debt/total capital available to Arch	17.4		%	18.8		%	18.0		%	17.4		%	16.7		%
Preferred/total capital available to Arch	5.3		%	5.7		%	5.5		%	5.3		%	5.1		%
Debt and preferred/total capital available to Arch	22.7		%	24.5		%	23.5		%	22.7		%	21.8		%

(1)    Presented on a ‘core’ basis which excludes amounts related to the ‘other’ segment (i.e., results of Somers). See ‘Comments on Regulation G’ for a further discussion of the presentation of ‘core’ results.

(2)    Issued by Arch Capital Group (U.S.) Inc. (“Arch-U.S.”), a wholly owned subsidiary of Arch, and fully and unconditionally guaranteed by Arch.

(3)    Issued by Arch Capital Finance LLC (“Arch Finance”), a wholly owned subsidiary of Arch U.S. MI Holdings Inc., and fully and unconditionally guaranteed by Arch.

(4)    Excludes the effects of stock options, restricted and performance stock units outstanding.

The following table provides the impact of share repurchases under the Company’s share repurchase program:

(U.S. Dollars in thousands except share data)	Three Months Ended										Cumulative
	December 31,		September 30,		June 30,		March 31,		December 31,		December 31,
	2022		2022		2022		2022		2021		2022
Effect of share repurchases:
Aggregate cost of shares repurchased	$	—	$	10,147	$	320,688	$	254,988	$	362,097	$	5,871,883
Shares repurchased	—		236,194		7,090,447		5,564,764		8,668,100		433,570,317
Average price per share repurchased	$	—	$	42.96	$	45.23	$	45.82	$	41.77	$	13.54
Remaining share repurchase authorization (1)											$	1,000,000

(1)    Repurchases under the share repurchase authorization may be effected from time to time in open market or privately negotiated transactions through December 31, 2024.

33

XML

Document and Entity Information Cover	Feb. 13, 2023
Document and Entity Information [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Feb. 13, 2023
Entity Registrant Name	Arch Capital Group Ltd.
Entity Central Index Key	0000947484
Entity Incorporation, State or Country Code	D0
Entity File Number	001-16209
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
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Entity Emerging Growth Company	false
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 F Preferred Shares
Entity Listings [Line Items]
Title of 12(b) Security	Depositary shares, each representing a 1/1,000th interest in a 5.45% Series F preferred share
Trading Symbol	ACGLO
Security Exchange Name	NASDAQ
Depositary Series G Preferred Shares
Entity Listings [Line Items]
Title of 12(b) Security	Depositary shares, each representing a 1/1,000th interest in a 4.55% Series G preferred share
Trading Symbol	ACGLN
Security Exchange Name	NASDAQ