What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-27 compared with 2024-02-23 · 509 added, 606 removed, 2762 unchanged (29% of the section changed)

24 unchanged sentences

Note 11 - Derivative Instruments

Note 12 - VIE and Noncontrolling Interests

Note 12 - Variable interest entities

Note 13 - Other Comprehensive Income (Loss)

11 unchanged sentences

Note 25 - Statutory Information

Note 26 - Subsequent Events

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We believe that our audits provide a reasonable basis for our opinions.

As described in Management’s Report on Internal Control over Financial Reporting, management has excluded the acquired U.S.

Middle Market Property & Casualty and U.S.

Entertainment Property and Casualty Insurance Business (“MCE”) from its assessment of internal control over financial reporting as of December 31, 2024, because it was acquired by the Company in a purchase business combination during 2024.

We have also excluded MCE from our audit of internal control over financial reporting.

MCE represents 1.6% of total assets and 3.5% of total revenues as of and for the year ended December 31, 2024.

Definition and Limitations of Internal Control over Financial Reporting

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A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

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Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of Reserve for Losses and Loss Adjustment Expenses

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For the insurance and reinsurance segments, management estimates ultimate losses and loss adjustment expenses using various generally accepted actuarial methods applied to known losses and other relevant information.

Ultimate losses and loss adjustment expenses are generally determined by extrapolation of claim emergence and settlement patterns observed in the past that can reasonably be expected to persist into the future.

Ultimate losses and loss adjustment expenses are generally determined by projection of claim emergence and settlement patterns observed in the past that can reasonably be expected to persist into the future.

Management makes a number of key assumptions in their reserving process, including estimating loss development patterns and expected loss ratios.

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Developing the independent estimate and evaluating the appropriateness of the key methods and reasonableness of the key assumptions related to loss development patterns, expected loss ratios, frequency and severity, as applicable, involved testing the completeness and accuracy of historical data provided by management.

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Measurement of Deferred Tax Assets related to Certain Identifiable Intangible Assets in Bermuda Entities

As described in Note 15 to the consolidated financial statements, as of December 31, 2023, the Company recognized $1.2 billion in net deferred tax assets related to the Bermuda government’s enactment of the Bermuda Corporate Income Tax Act 2023.

As disclosed by management, the enacted legislation includes a provision referred to as the Economic Transition Adjustment, which requires Bermuda entities to establish tax basis in their assets and liabilities, excluding goodwill, based on fair value as of September 30, 2023.

The most significant deferred tax assets recognized relates to identifiable intangible assets.

Management estimated the fair value of the identifiable intangible assets using discounted cash flow models.

The significant assumptions utilized in the discounted cash flow models included the future revenue and profits expected to be generated by the identifiable intangible assets and the discount rates.

The principal considerations for our determination that performing procedures relating to the measurement of deferred tax assets related to certain identifiable intangible assets in Bermuda entities is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of certain identifiable intangible assets, (ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management’s significant assumptions related to the future revenue and profits expected to be generated by the certain identifiable intangible assets and the discount rates, and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the enactment of the Bermuda Corporate Income Tax Act 2023 including controls over the valuation of certain identifiable intangible assets related to the enactment of the Bermuda Corporate Income Tax Act 2023.

These procedures also included, among others, (i) testing management’s process for developing the fair value estimate of the certain identifiable intangible assets, (ii) evaluating the appropriateness of the discounted cash flow models used by management, (iii) testing the completeness and accuracy of the data used in the models, and (iv) evaluating the reasonableness of the significant assumptions used by management related to the future revenue and profits expected to be generated by the certain identifiable intangible assets and the discount rates.

Evaluating management’s assumptions related to the future revenue and profits expected to be generated by the identifiable intangible assets involved evaluating whether the assumptions used were reasonable considering (i) the consistency with historical revenue and profits generated by the Bermuda entities and (ii) whether the assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the discounted cash flow models and (ii) the reasonableness of the discount rate assumptions.

/s/ PricewaterhouseCoopers LLP

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Preferred dividends ( 40 ) ( 40 ) ( 40 )

Loss on redemption of preferred shares — — ( 15 )

Net income available to Arch common shareholders $ 4,272 $ 4,403 $ 1,436

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Net (income) loss attributable to noncontrolling interests — 1 ( 6 )

Other comprehensive (income) loss attributable to noncontrolling interests — — 14

Comprehensive income available to Arch (loss) $ 4,268 $ 5,413 $ ( 105 )

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Non-cumulative preferred shares

Balance at beginning of year $ 830 $ 830 $ 780

Preferred shares issued — — 500

Preferred shares redeemed — — ( 450 )

Balance at end of year 830 830 830

Balance at beginning and end of year $ 830 $ 830 $ 830

Common shares

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Balance at beginning of year 2,327 2,211 2,085

Issue costs on preferred shares issued — — ( 14 )

Reversal of issue costs on preferred shares redeemed — — 15

Amortization of share-based compensation 133 93 88

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Net (income) loss attributable to noncontrolling interests — 1 ( 6 )

Common share dividends ( 1,881 ) — —

Preferred share dividends ( 40 ) ( 40 ) ( 40 )

Loss on redemption of preferred shares — — ( 15 )

Balance at end of year 22,686 20,295 15,892

5 unchanged sentences

58 947 ( 1,525 )

Unrealized holding gains (losses) during period attributable to noncontrolling interests

Balance at end of year ( 507 ) ( 565 ) ( 1,512 )

2 unchanged sentences

Foreign currency translation adjustments ( 102 ) 23 ( 56 )

Foreign currency translation adjustments attributable to noncontrolling interests — — ( 1 )

Balance at end of year ( 213 ) ( 111 ) ( 134 )

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Net (purchases) sales of short-term investments ( 269 ) ( 696 ) 467

Purchase of operating affiliate — — ( 754 )

Impact of the deconsolidation of the variable interest entity — — ( 349 )

Acquisitions, net of cash 852 — —

Purchases of fixed assets ( 51 ) ( 52 ) ( 50 )

2 unchanged sentences

Financing Activities

Proceeds from issuance of preferred shares, net — — 486

Redemption of preferred shares — — ( 450 )

Purchases of common shares under share repurchase program ( 24 ) — ( 586 )

Proceeds from common shares issued, net 7 ( 2 ) 6

Third party investment in non-redeemable noncontrolling interests — — 16

Third party investment in redeemable noncontrolling interests — ( 22 ) —

Dividends paid to redeemable noncontrolling interests — — ( 2 )

Other ( 5 ) ( 86 ) ( 4 )

Common dividends paid ( 1,866 ) — —

Preferred dividends paid ( 40 ) ( 40 ) ( 40 )

Other ( 2 ) ( 5 ) ( 86 )

Net cash provided by (used for) financing activities ( 1,925 ) ( 69 ) ( 706 )

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Arch Capital Group Ltd.

(“Arch Capital” or “Arch”) is a publicly listed Bermuda exempted company which provides insurance, reinsurance and mortgage insurance on a worldwide basis through its wholly owned subsidiaries.

(“Arch Capital,” “Arch” or the “Company”) is a publicly listed Bermuda exempted company which provides insurance, reinsurance and mortgage insurance on a worldwide basis through its wholly owned subsidiaries.

As used herein, the Company means Arch Capital and its subsidiaries.

Similarly, “Common Shares” means the common shares of Arch Capital.

The Company’s 2021 consolidated financial statements included the results of Somers Group Holdings Ltd.

(formerly Watford Holdings Ltd.) and its wholly owned subsidiaries (“Somers”).

Effective July 1, 2021, Somers is wholly owned by Greysbridge Holdings Ltd., (“Greysbridge”) and Greysbridge is owned 40 % by the Company, 30 % by certain investment funds managed by Kelso & Company (“Kelso”) and 30 % by certain investment funds managed by Warburg Pincus LLC (“Warburg”).

Based on the governing documents of Greysbridge, the Company 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 and footnotes.

See note 12, “Variable Interest Entity and Noncontrolling Interests” .

The Company has reclassified the presentation of certain prior year information to conform to the current presentation.

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All amounts are in millions, except per share amounts, unless otherwise noted.

Westpac Lenders Mortgage Insurance Limited (“WLMI”)

On August 31, 2021, the Company completed the acquisition of WLMI, an Australian Prudential Regulation Authority authorized captive lenders mortgage insurance (“LMI”) provider to the Westpac Banking Corporation (“Westpac”).

As part of the acquisition, WLMI retained its existing risk in force and will remain Westpac’s exclusive provider of LMI on new mortgage originations for a period of 10 years from the acquisition date.

The Company was renamed Arch Lenders Mortgage Indemnity Limited (“Arch Indemnity”) and will be the Company’s primary provider of LMI to the Australian market.

Somerset Bridge Group Limited, Southern Rock Holdings Limited and affiliates (“Somerset Group”)

On August 6, 2021, the Company completed the acquisition of Somerset Group.

The acquisition includes Somerset Group’s motor insurance managing general agent, distribution capabilities through direct and aggregator channels, affiliated insurer and fully integrated claims operation.

In connection with the acquisitions noted above, the Company increased its goodwill and intangible assets by $ 350.1 million.

On August 1, 2024, the Company completed the acquisition of Allianz’s U.S Middle Market Property & Casualty Insurance and U.S.

Entertainment Property and Casualty Insurance Business (“MCE Acquisition”).

This business is written by Fireman’s Fund Insurance Company, an affiliate of Allianz, and its subsidiaries (collectively, the “Business Entities”), in each case, relating to relevant policies with accident years 2016 and onwards (collectively, the “Business”), as well as certain assets of Allianz and its affiliates related to the Business.

In connection with the acquisition of the Business, the Company also entered into certain reinsurance agreements relating to the Business and the Business Entities and other agreements providing for administration and other services for the Business Entities by the Company for the applicable policies being reinsured following the closing.

The acquisition of the Business is an important part of the Company’s growth strategy, and provides a ballast to our existing insurance business.

It further enhances the Company’s capabilities in the U.S.

middle markets and represents an attractive way to enter a new niche entertainment insurance market.

Aggregate cash consideration for the transaction was $ 450 million.

Direct costs related to the acquisition are immaterial, and were expensed as incurred.

These include one-time costs that are directly attributable to third party consulting fees and other professional and legal fees related to the acquisition.

Such costs are included within ‘corporate expenses’ in the consolidated statement of income.

The Business acquired is included within the Company’s insurance segment beginning from the acquisition date.

The following table summarizes the Company’s allocation of the purchase price to the acquired assets and liabilities assumed based on estimated fair values on August 1, 2024.

The fair value of the assets and liabilities are preliminary and may change with offsetting adjustments to goodwill.

The Company may make further adjustments to its purchase price allocation through the end of the permissible one-year measurement period.

Total Useful Life

Purchase price

Cash paid (a) $ 450

Assets Acquired

Cash and investments, at fair value $ 2,332

Premiums receivable, net of commissions 265

Intangible asset -- distribution relationships 220 10 years

Intangible asset -- value of business acquired 165 1 - 2 years

Intangible asset -- other (1) 178 5 - 7 years

Other assets acquired 167

Total assets acquired $ 3,327

Liabilities Acquired

Reserves for losses and loss adjustment expenses $ 2,418

Unearned premiums 636

Other liabilities acquired 69

Total liabilities acquired 3,123

Identifiable net assets acquired (b) $ 204

Goodwill (a) - (b) $ 246

(1) Includes $ 128 million related to the net fair value adjustment to reserves for loss and loss adjustment expenses on August 1, 2024.

The Company recognized goodwill of $ 246 million that is primarily attributed to the expanded presence and long-term growth opportunities in the insurance market provided by this strategic acquisition.

Approximately $ 565 million of the acquired goodwill and intangibles is expected to be deductible for income tax purposes.

At the date of the acquisition, the Company established a net deferred tax asset of $ 24 million related to the estimated fair value of reserves for losses and loss adjustment expenses and unearned premiums.

Intangible assets resulting from the acquisition are amortized as part of ‘amortization of intangible assets’ in the Company’s consolidated statements of income.

The significant fair value adjustments and related future amortization are as follows:

Value of business acquired (“VOBA”)— which represents the present value of the expected underwriting profit within the unearned premium liability, less costs to service the related policies and a risk premium.

The fair value of VOBA was determined after taking into consideration certain key assumptions, including the estimated cost of capital,

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investment yield, loss ratio and related expenses;

Reserves for losses and loss adjustment expenses— to reflect a decrease related to the present value of the reserve for losses and loss adjustment expenses based on the estimated payout patterns, partially offset by an increase in losses and loss adjustment expenses related to the estimated market based risk margin.

The risk margin represents the estimated costs of capital required by a market participant to assume the losses and loss adjustment expenses.

The fair value of the reserve for losses and loss adjustment expenses was determined after taking into consideration certain key assumptions, including the estimated cost of capital, and investment yield.

Distribution relationships— the value of the distribution relationships was determined after taking into consideration certain key assumptions, including the estimated cost of capital, investment yield, retention rates, loss ratios, related expenses and effective tax rates that would impact the expected cash flows from Business policies written on a go forward basis.

The results of the acquired Business have been included in the Company’s consolidated financial statements beginning as of their acquisition date.

It is impracticable to provide historical supplemental pro forma financial information along with revenue and earnings subsequent to the acquisition due to a variety of factors, including access to historical information and the operations of acquirees being integrated within the Company shortly after closing and not operating as discrete operations within the Company’s organizational structure.

Significant Accounting Policies

2 unchanged sentences

(“Arch Re Bermuda”), Arch Reinsurance Company (“Arch Re U.S.”), Arch Capital Group (U.S.) Inc.(“Arch-U.S.”), Arch Insurance Company, Arch Specialty Insurance Company, Arch Property Casualty Insurance Company (“Arch P&C”), Arch Indemnity Insurance Company (“Arch Indemnity Insurance”), Arch Insurance Canada Ltd.

(“Arch Insurance Canada”), Arch Reinsurance Europe Designated Activity Company (“Arch Re Europe”), Arch Mortgage Insurance Company (“AMIC”), Arch Mortgage Guaranty Company (“AMG”), United Guaranty Residential Insurance Company (“UGRIC”), Arch Indemnity, Arch Insurance (EU) Designated Activity Company (“Arch Insurance (EU)”), Arch Insurance (U.K.) Limited (“Arch Insurance (U.K.)”) and the Company’s participation on Lloyd’s of London syndicates:

2012 (“Arch Syndicate 2012”) and 1955 (“Arch Syndicate 1955” and together with Arch Syndicate 2012, the Company’s “Lloyd’s Syndicates”).

(“Arch Indemnity”), Arch Insurance (EU) Designated Activity Company (“Arch Insurance (EU)”), Arch Insurance (U.K.) Limited (“Arch Insurance (U.K.)”) and the Company’s participation on Lloyd’s of London syndicates:

2012 (“Arch Syndicate 2012”)

and 1955 (“Arch Syndicate 1955” and together with Arch Syndicate 2012, the Company’s “Lloyd’s Syndicates”).

All significant intercompany transactions and balances have been eliminated in consolidation.

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• Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses, including the provision for uncollectible amounts;

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• Estimates of written and earned premiums;

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On an ongoing basis, the Company’s underwriters review the amounts reported by these third parties for reasonableness based on their experience and knowledge of the subject class of business, taking into account the Company’s historical experience with the brokers or ceding companies.

In addition, reinsurance contracts under which the Company assumes business generally contain specific provisions which allow the Company to perform audits of the ceding company to ensure compliance with the terms and conditions of the contract, including accurate and timely reporting of information.

In addition, reinsurance contracts under which the Company assumes business

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generally contain specific provisions which allow the Company to perform audits of the ceding company to ensure compliance with the terms and conditions of the contract, including accurate and timely reporting of information.

Based on a review of all available information, management establishes premium estimates where reports have not been received.

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Premiums on the Company’s excess of loss and pro rata reinsurance contracts are estimated when the business is underwritten.

For excess of loss contracts, premiums are recorded as written based on

the terms of the contract.

For excess of loss contracts, premiums are recorded as written based on the terms of the contract.

Estimates of premiums written under pro rata contracts are recorded in the period in which the underlying risks are expected to incept and are based on information provided by the brokers and the ceding companies.

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Under these contracts, the Company assumes a measured amount of insurance risk in exchange for an anticipated margin, which is typically lower than on traditional reinsurance contracts.

The terms and conditions of these contracts may include additional or return premiums based on loss experience, loss corridors, sublimits and caps.

The terms and conditions of these contracts may include additional or return premiums based on loss experience, loss

corridors, sublimits and caps.

Examples of such business include aggregate stop-loss coverages, financial quota share coverages and multi-year retrospectively rated excess of loss coverages.

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Premiums written on an annual basis are amortized on a monthly pro rata basis over the year of coverage.

Primary mortgage insurance premiums written on

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policies covering more than one year are referred to as single premiums.

Primary mortgage insurance premiums written on policies covering more than one year are referred to as single premiums.

A portion of the revenue from single premiums is recognized in premiums earned in the current period, and the remaining portion is deferred as unearned premiums and earned over the estimated expiration of risk of the policy.

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Such review includes a comparison of actual reported premiums to expected ultimate premiums along with a review of the aging and collection of premium estimates.

Based on management’s review, the appropriateness of the premium estimates is evaluated, and any adjustment to these estimates is recorded in the period in which it becomes known.

Based on management’s review, the appropriateness of the premium estimates is evaluated, and any adjustment to these estimates is recorded in the period in which it becomes

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Adjustments to premium estimates could be material and such adjustments could directly and significantly impact earnings favorably or unfavorably in the period they are determined because the estimated premium may be fully or substantially earned.

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Premiums receivable balances are reported net of an allowance for expected credit losses.

The Company monitors credit risk associated with premiums receivable through its ongoing review of amounts outstanding, aging of the receivable, historical loss data, and

counterparty financial strength measures.

The Company monitors credit risk associated with premiums receivable through its ongoing review of amounts outstanding, aging of the receivable, historical loss data, and counterparty financial strength measures.

The allowance also includes estimated uncollectible amounts related to dispute risk.

1 unchanged sentence

Any allowance for credit losses is charged to net realized gains (losses) in the period the receivable is recorded and revised in subsequent periods to reflect changes in the Company’s estimate of expected credit losses.

See note 7, “Allowance for Expected Credit Losses” for additional information.

See note 7 , for additional information.

Acquisition Costs.

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This projection is based on recent trends in default experience, severity and rates of defaulted loans moving to claim, as well as recent trends in the rate at which loans are prepaid, and incorporates anticipated interest income.

Evaluating the expected

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profitability of the Company’s existing mortgage insurance business and the need for a PDR for its mortgage business involves significant reliance upon assumptions and estimates with regard to the likelihood, magnitude and timing of potential losses and premium revenues.

Evaluating the expected profitability of the Company’s existing mortgage insurance business and the need for a PDR for its mortgage business involves significant reliance upon assumptions and estimates with regard to the likelihood, magnitude and timing of potential losses and premium revenues.

No premium deficiency charges were recorded by the Company during 2024, 2023 or 2022.

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Periodically the Company reassesses the estimated ultimate liability and the related expected rate of return.

The accretion of the deposit accounting liability as well as changes to the estimated ultimate liability and the accretion rate would be reflected as part of interest expense in the Company’s results of operations.

The accretion of the deposit

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accounting liability as well as changes to the estimated ultimate liability and the accretion rate would be reflected as part of interest expense in the Company’s results of operations.

Any negative accretion in a deposit accounting liability is shown in other underwriting income in the Company’s results of operations.

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The accompanying consolidated statement of income reflects premiums and losses and loss adjustment expenses and acquisition costs, net of reinsurance ceded.

See note 8, “Reinsurance” for information on the Company's reinsurance usage.

See note 8, for information on the Company's reinsurance usage.

Reinsurance premiums ceded and unpaid losses and loss adjustment expenses recoverable are estimated in a manner consistent with that of the original policies issued and the terms of the reinsurance contracts.

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A ratings based probability-of-default and loss-given-default methodology is used to estimate the allowance for expected credit loss.

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allowance for credit losses is charged to net realized gains (losses) in the period the recoverable is recorded and revised in s ubsequent periods to reflect changes in the Company’s estimate of expected credit losses .

See note 7, “Allowance for Expected Credit Losses” for additional information.

Any allowance for credit losses is charged to net realized gains (losses) in the period the recoverable is recorded and revised in s ubsequent periods to reflect changes in the Company’s estimate of expected credit losses .

See note 7, for additional information.

Cash includes cash equivalents, which are investments with original maturities of three months or less which are not part of the investment portfolio.

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The Company’s investment portfolio includes certain funds that, due to their ownership structure, are accounted for by the Company using the equity method.

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).

In applying the equity method, these investments are initially recorded at cost and are subsequently adjusted based on the Company’s

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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).

Such investments are generally recorded on a one to three month lag based on the availability of reports from the investment funds.

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These investments can often have characteristics of a variable interest entity (“VIE”).

A VIE refers to entities that have characteristics such as (i) insufficient equity at risk to allow the entity to finance its activities without additional financial support or (ii) instances where the equity investors, as a group, do not have the characteristic of a controlling financial interest.

financial interest.

If the Company is determined to be the primary beneficiary, it is required to consolidate the VIE.

The primary beneficiary is defined as the variable interest holder that is determined to have the controlling financial interest as a result of having both (i) the power to direct the activities of a VIE that most significantly impact the economic performance of the VIE and (ii) the obligation to absorb losses or right to receive benefits from the VIE that could potentially be significant to the VIE.

At inception of the VIE as well as on an ongoing basis, the Company determines whether it is the primary beneficiary based on an analysis of the Company’s level of involvement in the VIE, the

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contractual terms, and the overall structure of the VIE.

At inception of the VIE as well as on an ongoing basis, the Company determines whether it is the primary beneficiary based on an analysis of the Company’s level of involvement in the VIE, the contractual terms, and the overall structure of the VIE.

The Company's maximum exposure to loss with respect to these investments is limited to the investment carrying amounts reported in the Company's consolidated balance sheet and any unfunded commitment.

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Net investment income includes interest and dividend income together with amortization of market premiums and discounts and is net of investment management and custody fees.

Anticipated prepayments and expected maturities are used in applying the interest method for certain investments such as mortgage and other asset-backed securities.

Anticipated prepayments and expected maturities are used in applying the interest method for certain investments such as

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mortgage and other asset-backed securities.

When actual prepayments differ significantly from anticipated prepayments, the effective yield is recalculated to reflect actual payments to date and anticipated future payments.

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For the periods ended 2024, 2023, and 2022, the Company did not designate any derivative instruments as hedges under the relevant accounting guidance.

See note 11, “Derivative Instruments” for additional information.

See note 11, for additional information.

(j) Reserves for Losses and Loss Adjustment Expenses

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The reserve for unpaid reported losses and loss adjustment expenses, established by management based on reports from ceding companies and claims from insureds, excludes estimates of amounts related to losses under high deductible policies, and represents the estimated ultimate cost of events or conditions that have been reported to or specifically identified by the Company.

Such reserves are supplemented by management’s estimates of reserves for losses incurred for which reports or claims have not been received.

reserves are supplemented by management’s estimates of reserves for losses incurred for which reports or claims have not been received.

The Company’s reserves are based on a combination of reserving methods, incorporating both Company and industry loss development patterns.

The Company selects the initial expected loss and loss adjustment expense ratios based on information derived by its underwriters and actuaries during the initial pricing of the business, supplemented by industry data where appropriate.

Such ratios consider, among other things, rate changes and

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changes in terms and conditions that have been observed in the market.

Such ratios consider, among other things, rate changes and changes in terms and conditions that have been observed in the market.

These estimates are reviewed regularly and, as experience develops and new information becomes known, the reserves are adjusted as necessary.

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To determine this reserve, the Company estimates the number of delinquencies not yet reported using historical information regarding late reported delinquencies and applies estimated claim rates and claim sizes for the estimated delinquencies not yet reported.

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The establishment of reserves across the Company’s segments is an inherently uncertain process, are necessarily based on estimates, and the ultimate net cost may vary from such estimates.

14 unchanged sentences

See note 7, “Allowance for Expected Credit Losses” for additional information.

See note 7, for additional information.

(l) Foreign Exchange

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The net effect of the translation adjustments for foreign operations is included in accumulated other comprehensive income, net of applicable deferred income tax.

Monetary assets and liabilities, such as premiums receivable and the reserve for losses and loss adjustment expenses, denominated in foreign currencies are revalued at the exchange rate in effect at the balance sheet date with the resulting foreign exchange gains and losses included in net income.

included in net income.

Accounts that are classified as non-monetary, such as deferred acquisition costs and the unearned premium reserves, are not revalued.

In the case of foreign currency denominated fixed maturity securities which are classified as “available for sale,” the change in exchange rates between the local currency in which the investments are denominated and the Company’s functional currency at each balance sheet date is included in unrealized appreciation or

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decline in value of securities, a component of accumulated other comprehensive income, net of applicable deferred income tax.

(m) Income Taxes

4 unchanged sentences

In addition, if the Company subsequently assesses that the valuation allowance is no longer needed, a benefit would be recorded to income in the period in which such determination is made.

See note 15, “Income Taxes” for additional information.

See note 15, for additional information.

The Company recognizes a tax benefit where it concludes that it is more likely than not that the tax benefit will be sustained on audit by the taxing authority based solely on the technical merits of the associated tax position.

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The enacted legislation includes a provision referred to as the Economic Transition Adjustment, which requires Bermuda Constituent entities to establish tax basis in their assets and liabilities, excluding goodwill, based on fair value as of September 30, 2023.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

See note 15, “Income Taxes” for additional information regarding Company’s deferred income tax asset.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the

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measurement date.

See note 15, for additional information regarding Company’s deferred income tax asset.

(n) Share-Based Payment Arrangements

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These charges had no impact on the Company’s cash flows or total shareholders’ equity.

See note 22, “Share-Based Compensation” for information relating to the Company’s share-based payment awards.

See note 22, for information relating to the Company’s share-based payment awards.

(o) Guaranty Fund and Other Related Assessments

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These shares are recorded at cost and result in a reduction of the Company’s shareholders’ equity in its Consolidated Balance Sheets.

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(q) Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price of business combination over the fair value of the net assets acquired and is assigned to the applicable reporting unit at acquisition.

Goodwill is evaluated for impairment on an annual basis.

The annual goodwill impairment test was performed as of October 1, 2024.

Impairment tests may be performed more frequently if the facts and circumstances indicate a possible impairment.

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Changes in the carrying value of these investments are recorded in income (loss) from operating affiliates.

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(s) Funds Held Arrangements

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(t) Recent Accounting Pronouncements

Recently Issued Accounting Standards Not Yet Adopted

ASU 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting,” was issued in March 2020 and amended in December 2022 with ASU 2022-06, “Reference Rate Reform (Topic 848)”.

Recently Issued Accounting Standards Adopted

The Company adopted ASU 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting,” which was issued in March 2020 and amended in December 2022 with ASU 2022-06, “Reference Rate Reform (Topic 848)”.

This ASU provides optional expedients and exceptions for applying GAAP to investments, derivatives, or other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform.

Along with the optional expedients, the amendments include a general principle that permits an entity to consider contract modifications due to reference reform to be an event that does not require contract re-measurement at the modification date or reassessment of a previous accounting determination.

The amendment deferred the sunset date from December 31, 2022 to December 31, 2024.

As a result, this standard can be adopted no later than December 31, 2024, with early adoption permitted.

Based on its current analysis, the Company does not expect that the new guidance will have a material effect on the Company’s consolidated financial statements.

ASU 2023-07, “Segment Reporting – Improvements to Reportable Segments Disclosures,” was issued in November 2023.

This ASU enhances disclosures of significant segment expenses by requiring to disclose significant segment expenses regularly provided to the chief operating decision maker (“CODM”), extend certain annual disclosures to interim periods, and permit more than one measure of segment profit or loss to be reported under certain conditions.

The amendments are effective for the Company in fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption of the amendment is permitted, including adoption in any interim periods for which financial statements have not been issued.

Based on its current analysis, the Company does not expect that the new guidance will have a material effect on the Company’s consolidated financial statements.

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The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

The Company adopted ASU 2023-07, “Segment Reporting – Improvements to Reportable Segments Disclosures,” which was issued in November 2023.

This ASU enhances public entities’ segment disclosures by requiring the disclosures of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), and included within each reported measure of segment profit or loss.

The ASU also extends certain annual disclosures to interim periods and allows the reporting of more than one measure of segment profit or loss under certain conditions.

The adoption of this ASU did not have any effect on the Company’s consolidated financial statements.

Recently Issued Accounting Standards Not Yet Adopted

ASU 2023-09, “Improvements to Income Tax Disclosures,” was issued in December 2023 with the stated purpose of enhancing the transparency and decision usefulness of income tax disclosures.

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The Company is currently evaluating the impact of this standard on the Company’s consolidated financial statements and related disclosures.

Segment Information

The Company classifies its businesses into three underwriting segments – insurance, reinsurance and mortgage – and two operating segments – corporate and ‘other.’ The Company determined its reportable segments using the management approach described in accounting guidance regarding disclosures about segments of an enterprise and related information.

The accounting policies of the segments are the same as those used for the preparation of the Company’s consolidated financial statements.

Intersegment business is allocated to the segment accountable for the underwriting results.

The Company’s insurance, reinsurance and mortgage segments each have managers who are responsible for the overall profitability of their respective segments and who are directly accountable to the Company’s chief operating decision makers, the Chief Executive Officer of Arch Capital, Chief Financial Officer and Treasurer of Arch Capital and the President and Chief Underwriting Officer of Arch Capital.

The chief operating decision makers do not assess performance, measure return on equity or make resource allocation decisions on a line of business basis.

Management measures segment performance for its three underwriting segments based on underwriting income or loss.

The Company does not manage its assets by underwriting segment, with the exception of goodwill and intangible assets, and, accordingly, investment income is not allocated to each underwriting segment.

The insurance segment consists of the Company’s insurance underwriting units which offer specialty product lines on a worldwide basis.

Product lines include:

• Construction and national accounts:

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 primarily on a non-admitted basis.

• 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.

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, stand-alone 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.

• 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.

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.

ASU 2024-03, “Disaggregation of Income Statement Expenses” was issued in November 2024, which requires disaggregated disclosure of income statement expenses for public business entities.

The ASU does not change the expense captions an entity presents on the face of the income statement;

rather, it requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements.

The ASU is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027.

The requirements will be applied prospectively with the option for retrospective application.

Early adoption is permitted.

The Company is currently evaluating the impact of this standard on the Company’s consolidated financial statements and related disclosures.

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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:

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.

Segment Information

The Company classifies its businesses into three segments – insurance, reinsurance and mortgage.

The Company determined its segments using the management approach described in accounting guidance regarding disclosures about segments of an enterprise and related information.

The accounting policies of the segments are the same as those used for the preparation of the Company’s consolidated financial statements.

Intersegment business is allocated to the segment accountable for the underwriting results.

The Company’s insurance, reinsurance and mortgage segments each have managers who are responsible for the overall profitability of their respective segments and who are directly accountable to the Company’s CODMs, the Chief Executive Officer of Arch Capital and the Chief Financial Officer and Treasurer of Arch Capital.

The CODMs 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 segments based on underwriting income or loss.

The Company does not manage its assets by segment, with the exception of goodwill and intangible assets, and, accordingly, investment income is not allocated to each underwriting segment.

The Company’s insurance segment primarily consists of commercial insurance lines of business, with a focus on specialty insurance products.

These products are mainly offered in North America, Bermuda, the United Kingdom, continental Europe and Australia.

Products offered in North America include:

commercial automobile;

commercial multiperil;

other liability—claims made, which includes financial and professional lines;

other liability—occurrence, which includes admitted and excess and surplus casualty lines;

property and short-tail specialty;

workers compensation;

Products offered across the Company’s International units include:

property and short-tail specialty;

and casualty and other.

The Company’s reinsurance segment offers reinsurance products on a worldwide basis.

Product lines of business include:

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 or aggregation of losses from 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 basis or facultative basis.

primarily includes life reinsurance business.

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

Underwriting units include:

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.

also includes AMG, which is not a government sponsored enterprise (“GSE”) approved entity.

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.

The corporate segment results include net investment income, net realized gains or losses (which includes 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), 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.

Through June 30, 2021, the ‘other’ segment included the results of Somers.

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.

See note 12, “Variable Interest Entity and Noncontrolling Interests.”

The Company’s mortgage segment consists of U.S.

primary mortgage insurance business written predominantly on loans sold to the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”), each a government sponsored entity (“GSE”) and also through non GSE approved entities (combined “Arch MI U.S.”);

reinsurance and underwriting services related to U.S.

credit-risk transfer (“CRT”) business which are predominately with the GSEs and other U.S.

mortgage reinsurance transactions;

and international mortgage insurance and reinsurance business covering loans primarily in Australia and Europe.

The Company’s results also include net investment income, net realized gains or losses (which includes realized and unrealized changes in the fair value of equity securities and assets accounted for using the fair value option, realized and unrealized gains or losses on derivative instruments, changes in the allowance for credit losses on financial assets and gains or losses realized from the acquisition or disposition of subsidiaries), 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 tax items, income or loss from operating affiliates and items related to the Company’s non-cumulative preferred shares.

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Year Ended December 31, 2024

Insurance Reinsurance Mortgage Sub-Total Other Total

Insurance Reinsurance Mortgage Total

Gross premiums written (1) $ 9,053 $ 11,112 $ 1,351 $ 21,511

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Income (loss) from operating affiliates 200

Net income (loss) 4,442 — 4,442

Amounts attributable to redeemable noncontrolling interests 1 — 1

Net income (loss) available to Arch 4,312

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Accordingly, the sum of such transactions for each segment does not agree to the total due to eliminations.

(2) Other operating expenses primarily include expenses that are related to compensation and employee benefits, information technology and professional fees.

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Year Ended December 31, 2023

Insurance Reinsurance Mortgage Sub-Total Other Total

Insurance Reinsurance Mortgage Total

Gross premiums written (1) $ 7,911 $ 9,113 $ 1,387 $ 18,403

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Accordingly, the sum of such transactions for each segment does not agree to the total due to eliminations.

(2) Other operating expenses primarily include expenses that are related to compensation and employee benefits, information technology and professional fees.

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Year Ended December 31, 2022

Insurance Reinsurance Mortgage Sub-Total Other Total

Insurance Reinsurance Mortgage Total

Gross premiums written (1) $ 6,931 $ 6,948 $ 1,455 $ 15,327

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Amounts attributable to redeemable noncontrolling interests ( 6 )

Amounts attributable to nonredeemable noncontrolling interests — ( 78 ) ( 78 )

Net income (loss) available to Arch 1,476

Preferred dividends ( 40 )

Loss on redemption of preferred shares ( 15 ) — ( 15 )

Net income (loss) available to Arch common shareholders $ 1,436

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Accordingly, the sum of such transactions for each segment does not agree to the total due to eliminations.

(2) Other operating expenses primarily include expenses that are related to compensation and employee benefits, information technology and professional fees.

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Net premiums earned

Professional lines $ 1,419 $ 1,314 $ 943

Property, energy, marine and aviation 1,064 772 668

Programs 658 590 507

Construction and national accounts 561 432 417

Travel, accident and health 557 492 256

Excess and surplus casualty 486 393 318

Warranty and lenders solutions 185 128 153

North America

Property and short-tail specialty $ 1,165 $ 976 $ 746

Other liability - occurrence 942 618 509

Other liability - claims made 843 866 874

Workers compensation 549 495 415

Commercial automobile 459 343 287

Commercial multi-peril 435 193 197

Other 309 290 255

Total North America 4,702 3,781 3,283

International

Property and short-tail specialty $ 1,050 $ 885 $ 613

Casualty and other 875 780 664

Total International 1,925 1,665 1,277

Total $ 6,627 $ 5,446 $ 4,560

Net premiums written by underwriting location

United States $ 3,780 $ 3,342 $ 2,812

Europe 1,774 1,405 1,126

Other 308 274 211

North America $ 4,869 $ 3,995 $ 3,527

International 2,005 1,867 1,494

Total $ 6,874 $ 5,862 $ 5,021

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Net premiums written by underwriting location

United States $ 1,756 $ 1,247 $ 829

Bermuda $ 3,425 $ 3,288 $ 2,561

United States 2,135 1,756 1,247

Europe and other 2,186 1,510 1,116

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Total $ 1,112 $ 1,052 $ 1,133

(1) Segment results include intersegment transactions.

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OTHER SEGMENT Year Ended December 31,

2023 2022 2021

Net premiums earned (1)

Casualty $ — $ — $ 138

Other specialty — — 118

Property catastrophe — — 15

Property excluding property catastrophe — — 7

Marine and aviation — — —

Total $ — $ — $ 333

Net premiums written by underwriting location (1)

United States $ — $ — $ 63

Europe — — 91

Bermuda — — 199

Total $ — $ — $ 353

(1) Segment results include intersegment transactions.

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Reserve for Losses and Loss Adjustment Expenses

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Net losses and loss adjustment expense reserves of acquired business (1) 2,477 — —

Retroactive reinsurance transactions (2) — — ( 444 )

Impact of deconsolidation of Somers (3) — — ( 1,461 )

Foreign exchange (gains) losses and other ( 260 ) 157 ( 293 )

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Reserve for losses and loss adjustment expenses at end of year $ 29,369 $ 22,752 $ 20,032

(1) Represents activity related to the Company’s acquisitions in the 2021 period.

See note 2, “Acquisitions.”

(2) See ‘Retroactive Reinsurance Transactions’ section.

(3) See note 12, “Variable Interest Entity and Noncontrolling Interests.”

Development on Prior Year Loss Reserves

Year Ended December 31, 2023

During 2023, the Company recorded estimated net favorable development on prior year loss reserves of $ 538 million, which consisted of net favorable development of $ 42 million from the insurance segment, $ 152 million from the reinsurance segment and $ 344 million from the mortgage segment.

The insurance segment’s net favorable development of $ 42 million, or 0.8 points of net earned premium, consisted of $ 107 million of net favorable development in short and long-tailed lines partially offset by $ 65 million of net adverse development from medium-tailed lines.

Net favorable development in short-tailed lines reflected $ 32 million of favorable development in property (excluding marine), primarily from the 2022 accident year ( i.e.

, the year in which a loss occurred), $ 22 million of favorable development related to warranty and lenders solutions business, primarily

from the 2022 accident year, and $ 15 million of favorable development related to travel and accident business, primarily from the 2020 and 2022 accident years.

Net favorable development in long-tailed lines included $ 28 million of favorable development in executive assurance business, primarily from the 2019 and 2021 accident years, and $ 17 million of favorable development in alternative markets business, primarily from the 2021 and prior accident years.

Such amounts were partially offset by $ 6 million of net adverse development in construction and national accounts, primarily from the 2020 to 2022 accident years.

Net adverse development in medium-tailed lines reflected $ 50 million of adverse development in professional liability business, primarily from the 2017 to 2020 accident years, and $ 21 million of adverse development in contract binding business, primarily from 2020 and prior accident years, partially offset by $ 12 million of favorable development in marine business, primarily from the 2020 and 2021 accident years.

(1) Activity in the 2024 period primarily related to the MCE Acquisition (see note 2 ), along with acquisitions of Watford Insurance Company (see note 16 ) and RMIC Companies, Inc.

and its wholly-owned subsidiaries (“RMIC”) that, together, comprise the run-off mortgage insurance business of Old Republic International Corporation .

Prior year development (“PYD”) arises from changes in loss estimates during the current period related to events occurring in prior calendar years.

Long-tailed lines include lines of business that typically take many years for claims to settle such as third-party liability;

short-tailed lines are those that settle more quickly such as property.

The table below summarizes (favorable) and adverse net PYD by segment and tail length:

(Favorable) Adverse Year Ended December 31,

2024 Short-tailed Long-tailed Total

Insurance $ ( 53 ) $ 16 $ ( 37 )

Reinsurance ( 232 ) 44 ( 188 )

Mortgage ( 282 ) — ( 282 )

Total $ ( 567 ) $ 60 $ ( 507 )

Insurance $ ( 85 ) $ 43 $ ( 42 )

Reinsurance ( 202 ) 50 ( 152 )

Mortgage ( 344 ) — ( 344 )

Total $ ( 631 ) $ 93 $ ( 538 )

Insurance $ ( 65 ) $ 40 $ ( 25 )

Reinsurance ( 195 ) 5 ( 190 )

Mortgage ( 554 ) — ( 554 )

Total $ ( 814 ) $ 45 $ ( 769 )

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The reinsurance segment’s net favorable development of $ 152 million, or 2.6 points of net earned premium, consisted of $ 202 million of net favorable development from short and medium-tailed lines, partially offset by $ 50 million of net adverse development from long-tailed lines.

Net favorable development in short-tailed lines reflected $ 93 million of favorable development from property other than property catastrophe business, primarily from the 2020 to 2022 underwriting years ( i.e.

, all premiums and losses attributable to contracts having an inception or renewal date within the given twelve-month period), $ 51 million of favorable development from property catastrophe business, primarily from the 2019 to 2022 underwriting years, $ 35 million from other specialty business, primarily from the 2021 underwriting year, and $ 13 million of favorable development from other lines of business, primarily from the 2020 underwriting year.

Net favorable development in medium-tailed lines reflected $ 9 million from marine and aviation business, primarily from 2021 and prior underwriting years.

Net adverse development in long-tailed lines primarily reflected $ 46 million from casualty business, primarily from the 2013 to 2020 underwriting years.

The mortgage segment net favorable development was $ 344 million, or 29.7 points, for the 2023 period, with the largest contributor being reserve releases associated with the U.S.

Year Ended December 31, 2024

The insurance segment’s short-tailed lines included $ 32 million of favorable development in travel and accident, primarily from the 2023 accident year, ( i.e ., the year in which a loss occurred), and $ 31 million of favorable development in surety, primarily from the 2007, 2022 and 2023 accident years.

Net adverse development in long-tailed lines included adverse development in programs, mainly from the 2023 accident year.

The reinsurance segment’s short-tailed lines included $ 99 million of favorable development from property other than property catastrophe, primarily from the 2022 and 2023 underwriting years ( i.e.

, all premiums and losses attributable to contracts having an inception or renewal date within the given 12 month period), $ 74 million of favorable development from other specialty lines, primarily from the 2015 to 2022 underwriting years, and $ 64 million of favorable development from property catastrophe, primarily from the 2020 to 2023 underwriting years.

Long-tailed lines included $ 44 million of adverse development in casualty, primarily from the 2016, 2017 and 2020 underwriting years.

The mortgage segment’s favorable development was driven by reserve releases associated with the U.S.

first lien portfolio from the 2022 and 2023 accident years.

The Company’s credit risk transfer and international businesses also contributed to the favorable development.

Year Ended December 31, 2023

The insurance segment’s short-tailed lines included $ 43 million of favorable development in property and marine, primarily from the 2021 and 2022 accident years, $ 22 million of favorable development in warranty and lenders solutions, primarily from the 2022 accident year, and $ 15 million of favorable development related to travel and accident business, primarily from the 2022 accident year.

Long-tailed lines included $ 50 million of adverse development in professional liability, primarily from the 2017 to 2020 accident years.

The reinsurance segment’s short-tailed lines included $ 93 million of favorable development in property other than property catastrophe, primarily from the 2020 to 2022 underwriting years, $ 51 million of favorable development in property catastrophe, primarily from the 2019 to 2022 underwriting years, and $ 35 million from other specialty lines, primarily from the 2021 underwriting year.

Long-tailed lines included $ 45 million of adverse development in casualty business, primarily from the 2013 to 2020 underwriting years.

The mortgage segment’s favorable development was driven by reserve releases associated with the U.S.

first lien portfolio from the 2020 to 2022 accident years.

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Year Ended December 31, 2022

During 2022, the Company recorded estimated net favorable development on prior year loss reserves of $ 769 million, which consisted of net favorable development of $ 25 million from the insurance segment, $ 190 million from the reinsurance segment and $ 554 million from the mortgage segment.

The insurance segment’s net favorable development of $ 25 million, or 0.6 points of net earned premium, consisted of $ 55 million of net favorable development in short-tailed lines partially offset by $ 30 million of net adverse development from medium-tailed and long-tailed lines.

Net favorable development in short-tailed lines reflected $ 37 million of favorable development in warranty and lenders solutions, primarily from the 2021 accident year, and $ 15 million of favorable development related to travel and accident business, primarily from the 2020 and 2021 accident years.

Net adverse development in medium-tailed lines reflected $ 25 million of adverse development in professional liability business, primarily from the 2013 to 2015 and 2018 to 2020 accident years, and $ 6 million of adverse development in contract binding business, across most accident years, partially offset by $ 13 million of favorable development in marine business, across most accident years.

Net adverse development in long-tail lines reflected $ 19 million of adverse development related to casualty business, primarily from the 2020 and 2021 accident years, and $ 7 million of adverse development on construction and national accounts, primarily from the 2017, 2020 and 2021 accident years.

This is partially offset by $ 22 million of favorable development in other business, including alternative markets and excess workers’ compensation, primarily from the 2019 and prior accident years.

The reinsurance segment’s net favorable development of $ 190 million, or 4.8 points of net earned premium, consisted of $ 196 million of net favorable development from short-tailed and medium-tailed lines, partially offset by $ 5 million of net adverse development from long-tailed lines.

Net favorable development in short-tailed lines reflected $ 109 million of favorable development from property other than property catastrophe business, primarily from the 2018 to 2021 underwriting years, $ 24 million of favorable development from property catastrophe business, primarily from the 2018 to 2020 underwriting years, and $ 35 million from other specialty business, primarily from the 2016 and 2021 underwriting years.

Net favorable development in medium-tailed lines reflected $ 28 million in marine and aviation lines, across most underwriting years.

Net adverse development in long-tailed lines primarily reflected $ 5 million in casualty, spread across many prior underwriting years.

The mortgage segment experienced net favorable development of $ 554 million, or 47.8 points of net earned premium, with the majority of reserve releases being on COVID-related delinquencies associated with the U.S.

The insurance segment’s short-tailed lines included $ 37 million of favorable development in warranty and lenders solutions, primarily from the 2021 accident year, and $ 15 million of favorable development related to travel and accident business, primarily from the 2021 accident year.

Long-tailed lines included $ 25 million of adverse development in professional liability, primarily from the 2013 to 2015 and 2018 to 2020 accident years, and $ 18 million related to casualty business, primarily from the 2020 and 2021 accident years.

The reinsurance segment’s short-tailed lines included $ 109 million of favorable development from property other than property catastrophe business, primarily from the 2018 to 2021 underwriting years, $ 35 million from other specialty business, primarily from the 2016 and 2021 underwriting years, $ 28 million in marine and aviation lines, across most underwriting years, and $ 24 million of favorable development from property catastrophe business, primarily from the 2018 to 2020 underwriting years.

Net adverse development in long-tailed lines included $ 5 million in casualty, spread across many prior underwriting years.

The mortgage segment’s favorable development was driven by reserve releases related to COVID-19 delinquencies associated with the U.S.

first lien portfolio from the 2020 and 2021 accident years.

The Company’s credit risk transfer, international, second lien and student loan businesses also contributed to the favorable development.

Year Ended December 31, 2021

During 2021, the Company recorded estimated net favorable development on prior year loss reserves of $ 355 million, which consisted of net favorable development of $ 16 million from the insurance segment, $ 179 million from the reinsurance segment, $ 170 million from the mortgage segment, partially offset by $ 8 million of adverse development from the ‘other’ segment (activity prior to the deconsolidation of Somers).

The insurance segment’s net favorable development of $ 16 million, or 0.4 points of net earned premium, consisted of $ 110 million of net favorable development in short-tailed and long-tailed lines mostly offset by $ 94 million of net adverse development from medium-tailed lines.

Net favorable development of $ 82 million in short-tailed lines reflected $ 39 million of favorable development from property

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(excluding marine), primarily from the 2018 to 2020 accident years, $ 27 million of favorable development in warranty and lenders solutions, primarily from the 2020 accident year, and $ 16 million of favorable development on travel and accident, primarily from the 2016 to 2020 accident years.

Net favorable development of $ 28 million in long-tailed lines reflected favorable development in construction, national accounts and alternative markets, primarily from the 2016 to 2019 accident years, partially offset by adverse development in executive assurance, primarily from the 2015, 2017 and 2018 accident years.

Net adverse development in medium-tailed lines reflected $ 58 million of adverse development in contract binding, primarily from the 2013 to 2019 accident years and $ 31 million of adverse development in professional liability, primarily from the 2018 to 2020 accident years.

The reinsurance segment’s net favorable development of $ 179 million, or 6.3 points of net earned premium, consisted of $ 184 million of net favorable development from short-tailed and medium-tailed lines, partially offset by $ 5 million of net adverse development from long-tailed lines.

Net favorable development of $ 176 million in short-tailed lines reflected $ 123 million from other specialty lines, primarily from the 2014 to 2019 underwriting years, and $ 89 million of favorable development from property other than property catastrophe business, primarily from the 2015 to 2020 underwriting years.

Such amounts were partially offset by adverse development of $ 36 million from property catastrophe, primarily from the 2020 underwriting year.

Adverse development in long-tailed lines reflected an increase in casualty, primarily from the 2018 underwriting year.

The mortgage segment experienced net favorable development of $ 170 million, or 13.2 points of net earned premium.

Approximately a third of this development came from the U.S.

first lien portfolio, which benefited from improving economic conditions and rising home prices, resulting in reduced claim rate assumptions primarily associated with pre-pandemic delinquencies.

Various vintage CRT contracts also experienced similar effects and contributed to the favorable development, including the effect of contracts called by the GSEs.

Subrogation recoveries on second lien and student loan business and international business also contributed to the favorable development.

Retroactive Reinsurance Transactions

In 2021, the Company entered into a retroactive reinsurance transaction with third party reinsurer to reinsure run-off liabilities associated with certain U.S.

insurance exposures.

In 2021, the Company entered into a reinsurance to close with the related party, in connection with the 2018 and prior years of account for certain London syndicate business.

See note 16, “Transactions with Related Parties” .

Short Duration Contracts

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and other (c ontract and commercial surety coverages);

MCE business 1

Reinsurance Casualty Casualty

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primary exposures

The Company determined the following to be insignificant for disclosure purposes:

(1) Includes business underwritten under a new business reinsurance agreement related to the MCE Acquisition.

The Company dete rmined the following to be insignificant for disclosure purposes:

(i) certain mortgage business, including non-U.S.

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Loss Reserves do not reflect contingency reserve allowances to account for future loss occurrences.

Losses arising from future events will be estimated and recognized at the time the losses are incurred and could be substantial.

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Losses arising from

future events will be estimated and recognized at the time the losses are incurred and could be substantial.

Insurance Segment

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If the Company determines that an adjustment is appropriate, the adjustment is recorded in the accounting period in which such determination is made.

Accordingly, should Loss Reserves need to be increased or decreased in the future from amounts currently established, future results of operations would be negatively or positively impacted respectively.

Company authorizes managing general agents, general agents and other producers to write program business on the Company’s behalf within prescribed underwriting authorities.

Accordingly, should Loss

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Reserves need to be increased or decreased in the future from amounts currently established, future results of operations would be negatively or positively impacted respectively.

The Company authorizes managing general agents, general agents and other producers to write program business on the Company’s behalf within prescribed underwriting authorities.

This delegated authority process introduces additional complexity to the actuarial determination of unpaid future losses and loss adjustment expenses.

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The Company places more or less reliance on a particular actuarial method based on the facts and circumstances at the time the estimates of Loss Reserves are made.

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These methods generally fall into one of the following categories or are hybrids of one or more of the following categories:

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However, historical paid loss development methods are more leveraged (meaning that small changes in payments have a larger impact on estimates of ultimate losses) than

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actuarial methods that use incurred losses because cumulative loss payments take much longer to equal the expected ultimate losses than cumulative incurred amounts.

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For catastrophe-exposed business, the reserving process also includes the usage of catastrophe models for known events

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and a heavy reliance on analysis of individual catastrophic events and management judgment.

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Furthermore, ultimate losses for short-tail business are known in a reasonably short period of time.

In the initial reserving process for medium-tail and long-tail insurance lines ( consisting of third party occurrence business, third party claims made business, and other exposures including surety, programs and contract binding exposures), the Company primarily relies on the expected loss method.

The development of the Company’s medium-tail and long-tail business may be unstable, especially if there are high severity major events, as a portion of the Company’s casualty business is in high excess layers.

In the initial reserving process for long-tail insurance lines ( consisting of third party occurrence business, third party claims made business, and other exposures including surety, programs and contract binding exposures), the Company primarily relies on the expected loss method.

The development of the Company’s long-tail business may be unstable, especially if there are high severity major events, as a portion of the Company’s casualty business is in high excess layers.

As time passes, for a given accident year, additional weight is given to the paid and incurred B-F loss development methods and historical paid and incurred loss development methods in the reserving process.

The Company makes a number of key assumptions

in reserving for medium-tail and long-tail lines, including that the pricing loss ratio is the best estimate of the ultimate loss ratio at the time the policy is entered into, that the loss development patterns, which are based on a combination of company and industry loss development patterns and adjusted to reflect differences in the insurance segment’s mix of business, are reasonable and that claims personnel and underwriters analyses of our exposure to major events are assumed to be the best estimate of exposure to the known claims on those events.

The expected loss ratios used in the initial reserving process for medium-tail and long-tail business for recent accident years have varied over time, in some cases significantly, from earlier accident years.

As the credibility of historical experience for earlier accident years increases, the experience from these accident years will be given a greater weighting in the actuarial analysis to determine future accident year expected loss ratios, adjusted for changes in pricing, loss trends, terms and conditions and reinsurance structure.

From time to time, the Company enters into loss portfolio transfer and adverse development cover reinsurance agreements accounted for as retroactive reinsurance.

These agreements transfer Loss Reserves and future favorable or adverse development on certain runoff programs and certain third party occurrence business, within multi-line and other specialty business (the “Covered Lines”).

As incurred losses and allocated loss adjustment expenses for the Covered Lines are ceded to the reinsurer, the Company is not exposed to changes in the amount, timing and uncertainty of cash flows arising from the Covered Lines.

To avoid distortion, the incurred losses and allocated loss adjustment expenses and cumulative paid losses and loss adjustment expenses for the Covered Lines are excluded entirely from the tables below.

Unpaid loss and loss adjustment expenses recoverable at December 31, 2023 included $ 225 million related to such reinsurance agreements.

The Company makes a number of key assumptions in reserving for long-tail lines, including that the pricing loss ratio is the best estimate of the ultimate loss ratio at the time the policy is entered into, that the loss development patterns, which are based on a combination of company and industry loss development patterns and adjusted to reflect differences in the insurance segment’s mix of business, are reasonable and that claims personnel and underwriters analyses of our exposure to major events are assumed to be the best estimate of exposure to the known claims on those events.

The expected loss ratios used in the initial reserving process for long-tail business for recent accident years have varied over time, in some cases significantly, from earlier accident years.

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accident year expected loss ratios, adjusted for changes in pricing, loss trends, terms and conditions and reinsurance structure.

From time to time, the Company enters into loss portfolio transfer and adverse development cover reinsurance agreements accounted for as retroactive reinsurance.

As incurred losses and allocated loss adjustment expenses for the Covered Lines

are ceded to the reinsurer, the Company is not exposed to changes in the amount, timing and uncertainty of cash flows arising from the Covered Lines.

Unpaid loss and loss adjustment expenses recoverable at December 31, 2024 included $ 168 million related to such reinsurance agreements.

The following tables present information on the insurance segment’s short-duration insurance contracts:

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Liabilities for losses and loss adjustment expenses, net of reinsurance $ 1,114

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Third party occurrence business (in millions except claim count)

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Liabilities for losses and loss adjustment expenses, net of reinsurance $ 3,966

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Third party claims-made business (in millions except claim count)

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Liabilities for losses and loss adjustment expenses, net of reinsurance $ 2,533

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Multi-line and other specialty (in millions except claim count)

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Liabilities for losses and loss adjustment expenses, net of reinsurance $ 1,941

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The following table presents the average annual percentage payout of incurred losses and allocated loss adjustment expenses by age, net of reinsurance, as of December 31, 2024:

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In certain instances, the Company establishes ACRs even when the ceding company does not report any liability on a known event.

In addition, specific claim information reported by ceding companies or obtained through claim audits can alert the Company to emerging trends such as changing legal interpretations of coverage and liability, claims from unexpected sources or classes of business, and significant changes in the frequency or severity of individual claims.

business, and significant changes in the frequency or severity of individual claims.

Such information is often used in the process of estimating IBNR reserves.

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The estimation of Loss Reserves for the reinsurance segment is subject to the same risk factors as the estimation of Loss Reserves for the insurance segment.

In addition, the inherent uncertainties of estimating such reserves are even greater for reinsurers, due primarily to the following factors:

patterns among different types of reinsurance contracts, (5) the necessary reliance on the ceding companies for information regarding reported claims and (6) the differing reserving practices among ceding companies.

In addition, the inherent uncertainties of estimating such reserves are even greater for

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reinsurers, due primarily to the following factors:

(1) the claim-tail for reinsurers is generally longer because claims are first reported to the ceding company and then to the reinsurer through one or more intermediaries, (2) the reliance on premium estimates, where reports have not been received from the ceding company, in the reserving process, (3) the potential for writing a number of reinsurance contracts with different ceding companies with the same exposure to a single loss event, (4) the diversity of loss development patterns among different types of reinsurance contracts, (5) the necessary reliance on the ceding companies for information regarding reported claims and (6) the differing reserving practices among ceding companies.

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As of December 31, 2024 there were no significant backlogs related to the processing of assumed reinsurance information at our reinsurance operations.

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The reinsurance segment relies heavily on information reported by ceding companies, as discussed above.

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The development of property losses may be unstable, especially where there is high catastrophic exposure, may be characterized by high severity, low frequency losses for excess and catastrophe-exposed business and may be highly correlated across contracts.

As time passes, for a given underwriting year, additional weight is given to the paid and incurred B-F loss development methods and historical paid and incurred loss development

methods in the reserving process.

The Company makes a number of key assumptions in reserving for short-tail lines, including that historical paid and reported development patterns are stable, catastrophe models provide useful information about our exposure to catastrophic events that have occurred and our underwriters’ judgment and guidance received from ceding companies as to potential loss exposures may be relied on.

The expected loss ratios used in the initial reserving process for property exposures have varied over time due to changes in pricing, reinsurance structure, estimates of catastrophe losses, terms and conditions and geographical distribution.

As losses in property lines are reported relatively quickly, expected loss ratios are selected for the current underwriting year incorporating the experience for earlier underwriting years, adjusted for rate changes, inflation, changes in reinsurance programs, expectations about present and future market conditions and expected attritional losses based on modeling.

Due to the short-tail nature of property business, reported loss experience emerges quickly and ultimate losses are known in a reasonably short period of time.

In the initial reserving process for medium-tail and long-tail reinsurance lines (consisting of casualty, other specialty, marine and aviation and other exposures), the Company primarily relies on the expected loss method.

The development of medium-tail and long-tail business may be unstable, especially if there are high severity major events, with business written on an excess of loss basis typically having a longer tail than business written on a pro rata basis.

As time passes, for a given underwriting year, additional weight is given to the paid and incurred B-F loss development methods and eventually to the historical paid and incurred loss development methods in the reserving process.

Our reinsurance operations make a number of key assumptions in reserving for medium-tail and long-tail lines, including that the pricing loss ratio is the best estimate of the ultimate loss ratio at the time the contract is entered into, historical paid and reported development patterns are stable and claims personnel and underwriters’ analyses of our exposure to major events are our best estimate of our exposure to the known claims on those events.

The expected loss ratios used in our reinsurance operations’ initial reserving process for medium-tail and long-tail contracts have varied over time due to changes in pricing, terms and conditions and reinsurance structure.

As the credibility of historical experience for earlier underwriting years increases, the experience from these underwriting years is used in the actuarial analysis to determine future underwriting year expected loss ratios, adjusted for changes in pricing, loss trends, terms and conditions and reinsurance structure.

As time passes, for a given underwriting year, additional weight is given to the paid and incurred B-F loss development methods and historical paid and incurred loss development methods in the reserving process.

The Company makes a number of key assumptions in reserving for short-tail lines, including that historical paid and reported development

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patterns are stable, catastrophe models provide useful information about our exposure to catastrophic events that have occurred and our underwriters’ judgment and guidance received from ceding companies as to potential loss exposures may be relied on.

Due to the short-tail nature of property business, reported loss experience emerges quickly and ultimate losses are known in a reasonably short period of time.

In the initial reserving process for long-tail reinsurance lines (consisting of casualty, other specialty, marine and aviation and other exposures), the Company primarily relies on the expected loss method.

The development of long-tail business may be unstable, especially if there are high severity major

events, with business written on an excess of loss basis typically having a longer tail than business written on a pro rata basis.

Our reinsurance operations make a number of key assumptions in reserving for long-tail lines, including that the pricing loss ratio is the best estimate of the ultimate loss ratio at the time the contract is entered into, historical paid and reported development patterns are stable and claims personnel and underwriters’ analyses of our exposure to major events are our best estimate of our exposure to the known claims on those events.

The expected loss ratios used in our reinsurance operations’ initial reserving process for long-tail contracts have varied over time due to changes in pricing, terms and conditions and reinsurance structure.

The following tables present information on the reinsurance segment’s short-duration insurance contracts:

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Liabilities for losses and loss adjustment expenses, net of reinsurance $ 3,026

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Property catastrophe (in millions)

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Liabilities for losses and loss adjustment expenses, net of reinsurance $ 812

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Property excluding property catastrophe (in millions)

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Liabilities for losses and loss adjustment expenses, net of reinsurance $ 1,777

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Marine and aviation (in millions)

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2021 8 24 45 52

2022 12 37 62

All outstanding liabilities before 2015, net of reinsurance 18

Liabilities for losses and loss adjustment expenses, net of reinsurance $ 495

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Other specialty (in millions)

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Liabilities for losses and loss adjustment expenses, net of reinsurance $ 2,749

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The following table presents the average annual percentage payout of incurred losses and allocated loss adjustment expenses by age, net of reinsurance, as of December 31, 2024:

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The trigger that creates a case reserve estimate is that an insured loan is reported to us as being two payments in arrears.

The actuarial reviews and

documentation created in the reserving process are completed in accordance with generally accepted actuarial standards.

The actuarial reviews and documentation created in the reserving process are completed in accordance with generally accepted actuarial standards.

The selected assumptions reflect actuarial judgment based on the analysis of historical data and experience combined with information concerning current underwriting, economic, judicial, regulatory and other influences on ultimate claim settlements.

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Additionally, changes in estimates are likely to occur from period to period as economic conditions change, and the ultimate liability may vary significantly from the estimates used.

Major risk factors include (but are not limited to) changes in home prices and borrower equity, which can limit the borrower’s ability to sell

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the property and satisfy the outstanding loan balance, and changes in unemployment, which can affect the borrower’s income and ability to make mortgage payments.

Major risk factors include (but are not limited to) changes in home prices and borrower equity, which can limit the borrower’s ability to sell the property and satisfy the outstanding loan balance, and changes in unemployment, which can affect the borrower’s income and ability to make mortgage payments.

The unique nature of the COVID-19 pandemic, with no historical precedent, adds further uncertainty to current reserve estimates.

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Each month the loan servicers report the delinquency status of each insured loan.

Using the frequency-severity method allows the Company to take advantage of its knowledge of the number of delinquent loans and the coverage provided (“risk size”) on those loans by directly relating the reserves to these amounts.

Using the frequency-

severity method allows the Company to take advantage of its knowledge of the number of delinquent loans and the coverage provided (“risk size”) on those loans by directly relating the reserves to these amounts.

The delinquencies are grouped into homogeneous cohorts for analysis, reflecting the age of delinquency.

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Mortgage insurance is generally not subject to large claim sizes, as with some other lines of insurance.

claim size over $ 250,000 is rare, and this helps reduce the volatility of claim size estimates.

A claim size over $ 250,000 is rare, and this helps reduce the volatility of claim size estimates.

The claim rate and claim size assumptions generate case reserves for the population of reported delinquencies.

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While reserves are initially analyzed by reserve cohort, as described above, they are also rolled up by underwriting year to ensure that reserve assumptions are consistent with the performance of the underwriting year.

The accuracy of prior reserve assumptions is also checked in hindsight to determine if adjustments to the assumptions are needed.

Loss Reserves for the Company’s mortgage reinsurance business and GSE credit risk sharing transactions are comprised of case reserves and IBNR reserves.

The Company’s mortgage reinsurance operations receive reports of delinquent loans and claims notices from ceding companies and record case reserves based upon the amount of reserves recommended by the ceding company.

In addition, specific claim and delinquency information reported by ceding companies is used in the process of estimating IBNR reserves.

The accuracy of prior reserve assumptions

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is also checked in hindsight to determine if adjustments to the assumptions are needed.

Loss Reserves for the Company’s mortgage reinsurance business and GSE credit risk sharing transactions are comprised of case reserves and IBNR reserves.

The Company’s mortgage reinsurance operations receive reports of delinquent loans and claims notices from ceding

companies and record case reserves based upon the amount of reserves recommended by the ceding company.

In addition, specific claim and delinquency information reported by ceding companies is used in the process of estimating IBNR reserves.

The following table presents information on the mortgage segment’s short-duration insurance contracts:

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2023 182 71 — 366

Total $ 1,092

Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance

2024 180 1 40

Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance

2015 16 92 151 171 180 183 184 185 186 186

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Reserve for losses and loss adjustment expenses $ 29,369

(1) Includes amounts associated with the loss portfolio reinsurance agreement related to the MCE Acquisition.

(2) Includes unpaid loss and loss adjustment expenses recoverable of $ 168 million related to the loss portfolio transfer reinsurance agreements.

4 unchanged sentences

Balance at beginning of period $ 4,644 $ 34

Provision on business acquired (1) 16

Change for provision of expected credit losses (2) ( 5 )

4 unchanged sentences

Balance at end of period $ 4,644 $ 34

(1) Reflects provision for current expected credit losses on premiums receivable related to the MCE Acquisition.

(2) Amounts deemed uncollectible are written-off in operating expenses.

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The aggregate excess of loss reinsurance coverage decreases over a ten-year period as the underlying covered mortgages amortize.

See note 12, “Variable Interest Entity and Noncontrolling Interests.”

The following table summarizes the respective coverages and retentions at December 31, 2024:

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(5) 204 204 172

(6) 233 233 185

Total $ 1,720 $ 1,409 $ 818

(1) Issued in March 2019, covering in-force policies primarily issued between 2005 to 2008 under United Guaranty Residential Insurance Company (“UGRIC”);

as well as policies issued through 2015 under both UGRIC and Arch Mortgage Insurance Company.

(2) Issued in July 2019, covering in-force policies issued in 2016.

(1) Issued in September 2021, covering in-force policies issued between April 1, 2021 and June 30, 2021.

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by a separate panel of reinsurers .

(5) Issued in August 2024, covering in-force policies issued between September 1, 2023 and July 31, 2024.

$ 163 million was directly funded by Bellemeade Re 2024-1 Ltd.

via insurance-linked notes, with an additional $ 41 million capacity provided directly to Arch MI U.S.

by a separate panel of reinsurers .

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Equity Securities, at Fair Value

At December 31, 2023, the Company held $ 1.2 billion of equity securities, at fair value, compared to $ 860 million at December 31, 2022.

At December 31, 2024, the Company held $ 1.7 billion of equity securities, at fair value, compared to $ 1.2 billion at December 31, 2023.

Net Investment Income

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Equity securities 40 22 22

Term loans — — 30

Other (1) 136 93 47

2 unchanged sentences

Net investment income $ 1,495 $ 1,023 $ 496

(1) Includes interest income on operating cash, distributions from investment funds and other items.

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

Net Realized Gains (Losses)

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Net realized gains (losses) $ 197 $ ( 165 ) $ ( 663 )

(1) See note 11, “Derivative Instruments” for information on the Company’s derivative instruments.

(2) 2021 period reflected $ 33 million of losses related to the Company’s

deconsolidation of Somers .

(1) See note 11, for information on the Company’s derivative instruments.

(2) Amounts in the 2024 period include benefits from the sale of Castel Underwriting Agencies Limited and the acquisition of RMIC.

Other Investments

The following table summarizes the Company’s other investments and other investable assets:

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

Other investments $ 2,135 $ 1,777

4 unchanged sentences

The following table summarizes the Company’s other investments, as detailed in the previous table, by strategy:

Lending 427 406

Investment grade fixed income 1,055 754

Term loan investments 430 272

Lending 303 427

Private equity 229 182

1 unchanged sentence

$ 2,135 $ 1,777

Limited Partnership Interests

In the normal course of its activities, the Company invests in limited partnerships as part of its overall investment strategy.

Such amounts are included in ‘investments accounted for using the equity method’ and ‘investments accounted for using the fair value option.’ The Company determined that these limited partnership interests represented variable interests in the funds.

The Company’s maximum exposure to loss with respect to these investments is limited to the investment carrying amounts reported in the Company’s consolidated balance sheet and any unfunded commitment.

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

Investments accounted for using the equity method (1) $ 5,980 $ 4,566

Investments accounted for using the fair value option (2) 48 114

Total $ 6,028 $ 4,680

(1) Aggregate unfunded commitments were $ 4.3 billion at December 31, 2024, compared to $ 3.4 billion at December 31, 2023.

(2) Aggregate unfunded commitments were $ 21 million at December 31, 2024, compared to $ 32 million at December 31, 2023.

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Investments Accounted For Using the Equity Method

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

Credit related funds $ 1,258 $ 1,136

Private equity $ 1,915 $ 1,175

Credit related funds 1,487 1,258

Real estate 869 666

3 unchanged sentences

Equities 217 178

Energy 95 111

$ 5,980 $ 4,566

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The Company recorded equity in net income related to investments accounted for using the equity method of $ 580 million for 2024, compared to $ 278 million for 2023 and $ 115 million for 2022.

In applying the equity method,

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investments are initially recorded at cost and are subsequently adjusted based on the Company’s proportionate share of the net income or loss of the funds (which include changes in the market value of the underlying securities in the funds).

A summary of financial information for the Company’s investment funds and operating affiliates accounted for using the equity method is as follows:

In applying the equity method, investments are initially recorded at cost and are subsequently adjusted based on the Company’s proportionate share of the net income or loss of the funds (which include changes in the market value of the underlying securities in the funds).

A summary of aggregated financial information for the Company’s investment funds and operating affiliates accounted for using the equity method is as follows:

Invested assets $ 113,977 $ 91,534

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Net income (loss) $ 11,891 $ 592 $ 6,931

Certain of the Company’s other investments and investments accounted for using the equity method are in investment funds for which the Company has the option to redeem at agreed upon values as described in each investment fund’s subscription agreement.

Certain of the Company’s other investments and investments accounted for using the equity method are in investment funds for which the Company has the option to redeem at

agreed upon values as described in each investment fund’s subscription agreement.

Depending on the terms of the various subscription agreements, investments in investment funds may be redeemed daily, monthly, quarterly or on other terms.

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If the investment funds are eligible to be redeemed, the time to redeem such fund can take weeks or months following the notification.

Limited Partnership Interests

In the normal course of its activities, the Company invests in limited partnerships as part of its overall investment strategy.

The Company’s maximum exposure to

loss with respect to these investments is limited to the investment carrying amounts reported in the Company’s consolidated balance sheet and any unfunded commitment.

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

Investments accounted for using the equity method (1) $ 4,566 $ 3,774

Investments accounted for using the fair value option (2) 114 130

Total $ 4,680 $ 3,904

(1) Aggregate unfunded commitments were $ 3.4 billion at December 31, 2023, consistent with $ 2.6 billion at December 31, 2022.

(2) Aggregate unfunded commitments were $ 32 million at December 31, 2023, compared to $ 17 million at December 31, 2022.

Investments in Operating Affiliates

Investments in which the Company has significant influence over the operating and financial policies are classified as ‘investments in operating affiliates’ on the Company’s balance sheets and are accounted for under the equity method.

Such investments primarily include the Company’s investment in Coface SA (“Coface”), Greysbridge and Premia.

Such investments primarily include the Company’s investment in Coface SA (“Coface”), Greysbridge Holdings Ltd., (“Greysbridge”) and Premia Holdings Ltd.

Investments in Coface and Premia are generally recorded on a three month lag, while the Company’s investment in Greysbridge is not recorded on a lag.

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As of December 31, 2024, the Company owned approximately 29.9 % of the issued shares of Coface, or 30.03 % excluding treasury shares, with a carrying value of $ 592 million, compared to $ 570 million at December 31, 2023.

In July 2021, the Company announced the completion of the previously disclosed acquisition of Somers by Greysbridge for a cash purchase price of $ 35.00 per common share.

Effective July 1, 2021, Somers is wholly owned by Greysbridge, and Greysbridge is owned 40 % by the Company, 30 % by certain investment funds managed by Kelso and 30 % by certain investment funds managed by

In 2021, the Company completed acquisition of Somers Group Holdings Ltd.

and its wholly owned subsidiaries (collectively, “Somers”) by Greysbridge for a cash purchase price of $ 35.00 per common share.

Somers is wholly owned by Greysbridge, and Greysbridge is owned 40 % by the Company, 30 % by certain investment funds managed by

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Kelso & Company (“Kelso”) and 30 % owned by certain investment funds managed by Warburg Pincus LLC (“Warburg”).

At December 31, 2024 the Company’s carrying value in Greysbridge was $ 523 million, compared to $ 430 million at December 31, 2023.

The Company’s carrying value in Greysbridge reflected aggregate purchase price of $ 279 million along with income (loss) from operating affiliates, which included a one-time gain of $ 96 million recognized from the acquisition.

See note 12, “Variable Interest Entity and Noncontrolling Interests.”

The Company recorded income from operating affiliates of $ 200 million for 2024, compared to $ 184 million for 2023 and $ 75 million for 2022.

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Total restricted assets $ 13,048 $ 9,932

(1) 2024 period includes amounts related to the MCE Acquisition.

(2) Primarily includes Funds at Lloyds, deposits with non-U.S.

162 unchanged sentences

Total liabilities measured at fair value $ ( 188 ) $ — $ ( 115 ) $ ( 73 )

(1) See note 11.

(2) In accordance with applicable accounting guidance, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy.

The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets.

(2) See note 11, “Derivative Instruments.”

ARCH CAPITAL 147

38 unchanged sentences

Total liabilities measured at fair value $ ( 141 ) $ — $ ( 119 ) $ ( 22 )

(1) See note 11.

The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets.

(2) See note 11, “Derivative Instruments.”

ARCH CAPITAL 148

6 unchanged sentences

Fair Value Option

Structured Securities (1)

Corporate Bonds

34 unchanged sentences

$ 147 $ 84 $ 106 $ 10 $ 4 $ 5 $ ( 22 )

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

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

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Goodwill and Intangible Assets .

The Company tests goodwill and intangible assets annually for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable.

The Company tests goodwill and intangible assets annually for impairment or whenever events or changes in circumstances indicate the carrying amount may not be recoverable.

When the Company determines goodwill and intangible assets may be impaired, the Company uses techniques including discounted expected future cash flows, to measure fair value.

7 unchanged sentences

In addition, certain of the Company’s investments are managed in portfolios which incorporate the use of foreign currency forward contracts which are intended to provide an economic hedge against foreign currency movements.

In addition, the Company purchases to-be-announced mortgage backed securities (“TBAs”) as part of its investment strategy.

TBAs represent commitments to purchase a future issuance of agency mortgage backed securities.

For the period between purchase of a TBA and issuance of the underlying security, the Company’s position

is accounted for as a derivative.

The Company purchases TBAs in both long and short positions to enhance investment performance and as part of its overall investment strategy.

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

34 unchanged sentences

Total $ 8 $ 59 $ ( 75 )

Variable Interest Entity and Noncontrolling Interests

Somers Holdings Ltd.

In March 2014, the Company invested $ 100 million and acquired 2,500,000 common shares of Somers.

Somers was considered a VIE and the Company concluded that it was the primary beneficiary of Somers.

In the 2020 fourth quarter, Arch Capital, Somers and Greysbridge, a wholly-owned subsidiary of Arch Capital, entered into an Agreement and Plan of Merger (as amended, the “Merger Agreement”).

The merger and the related Greysbridge equity financing closed on July 1, 2021.

Based on the governing documents of Greysbridge, the Company concluded that, while it retains significant influence over Somers, Somers no longer constitutes a variable interest entity.

Accordingly, effective July 1, 2021, the Company no longer consolidates the results of Somers in its consolidated financial statements and footnotes.

The Company classifies its investment as ‘investments in operating affiliates’ on the Company’s balance sheets and is accounted for under the equity method.

The following table summarizes Somers’ cash flow from operating, investing and financing activities.

Year Ended December 31,

2023 2022 2021

Total cash provided by (used for):

Operating activities — — 47

Investing activities — — 96

Financing activities — — ( 2 )

Redeemable noncontrolling interests

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

Balance, beginning of year $ 11 $ 9 $ 58

Impact of deconsolidation of Somers — — ( 49 )

Other ( 9 ) 2 —

Balance, end of year $ 2 $ 11 $ 9

The portion of income or loss attributable to third party investors is recorded in the consolidated statements of income in ‘net (income) loss attributable to noncontrolling interests’ as summarized in the table below:

2023 2022 2021

Amounts attributable to non-redeemable noncontrolling interests $ — $ — $ ( 78 )

Amounts attributable to redeemable noncontrolling interests 1 ( 6 ) ( 4 )

Net (income) loss attributable to noncontrolling interests $ 1 $ ( 6 ) $ ( 82 )

ARCH CAPITAL 151

2023 FORM 10-K

ARCH CAPITAL GROUP LTD.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Includes realized gains or losses on swaps, options and other derivatives contracts.

Variable Interest Entities

Bellemeade Re

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However, given that the ceding insurers do not have the unilateral power to direct those activities that are significant to their economic performance, the Company does not consolidate such entities in its consolidated financial statements.

The reinsurance premium paid in regard to the Bellemeade Agreements is calculated by multiplying the outstanding reinsurance coverage amount at the beginning of the period by the coupon rate, which is the SOFR plus a contractual risk margin, less the actual investment income collected during the preceding month on the assets included in the underlying reinsurance trusts.

The reinsurance premium paid in regard to the Bellemeade Agreements is calculated by multiplying the outstanding

reinsurance coverage amount at the beginning of the period by the coupon rate, which is the SOFR plus a contractual risk margin, less the actual investment income collected during the preceding month on the assets included in the underlying reinsurance trusts.

In the event the assets included in the underlying reinsurance trusts became severely impaired or worthless and the special purpose reinsurance companies were unable to meet their future obligations, the Company’s mortgage insurance subsidiaries would be liable to fulfill claim payments to policyholders.

The Company’s maximum exposure to loss associated with these VIEs is determined as the amount of mortgage insurance claim payments on the insured policies, net of aggregate reinsurance payments previously received, up to the full aggregate excess of loss reinsurance coverage amounts.

The following table summarizes the total assets of the Bellemeade entities:

December 31, 2024 December 31, 2023

3 unchanged sentences

Reinsurers (1) Total VIE Assets

(Oct-17) $ — $ — $ 37

(Apr-18) (2) — — 90

(Oct-18) — — 199

(Mar-19) $ — $ — $ 71

(Apr-19) (2) — — 325

(Jul-19) — — 99

(Oct-19) (2) — — 266

(Sep-21) 363 98 429

(Nov-20) (2) — — 244

(Dec-20) (2) — — 98

(Mar-21) (2) — — 467

(Jun-21) (2) — — 458

(Sep-21) 429 112 490

(Jan-22) 202 16 256

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(Oct-23) 186 47 186

(Aug-24) 163 41 —

Total $ 1,094 $ 315 $ 1,242

(1) Coverage from a separate panel of reinsurers remaining at December 31, 2024 .

(2) Agreements terminated in the 2023 fourth quarter .

ARCH CAPITAL 151

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Preferred dividends ( 40 ) ( 40 ) ( 40 )

Loss on redemption of preferred shares — — ( 15 )

Net income available to Arch common shareholders $ 4,272 $ 4,403 $ 1,436

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For 2024, 2023 and 2022, the number of stock options excluded were 2.2 million, 0.5 million and 0.8 million, respectively.

Arch Capital is incorporated under the laws of Bermuda and, under current Bermuda law, is not obligated to pay any taxes in Bermuda based upon income or capital gains.

The Company has received a written undertaking from the Minister of Finance in Bermuda under the Exempted Undertakings Tax Protection Act 1966 assuring that, in the event that any legislation is enacted in Bermuda imposing any tax computed on profits, income, gain or appreciation on any capital asset, or any tax in the nature of estate duty or inheritance tax, such tax will not be applicable to Arch Capital or any of its operations until March 31, 2035.

However, on December 27, 2023, the Government of Bermuda enacted the Bermuda CIT Act, which will become effective for tax years beginning on or after January 1, 2025.

Given the potential for the new corporate income tax regime in Bermuda to supersede the Minister of Finance’s assurance, the Company is likely to become subject to taxes in Bermuda before March 31, 2035.

The Bermuda CIT Act will apply a 15% corporate income tax to certain Bermuda constituent entities of multi-national

groups in fiscal years beginning on or after January 1, 2025.

The act includes a provision referred to as the economic transition adjustment, which is intended to provide a fair and equitable transition into the tax regime.

Pursuant to this legislation, the Company recorded a $ 1.18 billion net deferred income tax asset in the fourth quarter of 2023, expected to be utilized predominantly over a 10-year period.

Arch Capital is incorporated under the laws of Bermuda and, under Bermuda law in effect as of December 31, 2024, is not obligated to pay taxes on income or capital gains in Bermuda.

Upon its formation in 2000, the Company received a written undertaking from the Minister of Finance in Bermuda under the Exempted Undertakings Tax Protection Act 1966 assuring that, in the event that any legislation is enacted in Bermuda imposing any tax computed on profits, income, gain or appreciation on any capital asset, or any tax in the nature of estate duty or inheritance tax, such tax will not be applicable to Arch Capital or any of its operations until March 31, 2035.

However, on December 27, 2023, the Government of Bermuda enacted the Bermuda CIT Act, which is effective for tax years beginning on or after January 1, 2025.

Once in effect, the new corporate income tax regime in Bermuda is expected to supersede the Minister of Finance’s assurance, and the Company will become subject to taxes in Bermuda before March 31, 2035.

The Bermuda CIT Act will apply a 15% corporate income tax to certain Bermuda constituent entities of multi-national groups in fiscal years beginning on or after January 1, 2025.

The Company expects to incur and pay increased taxes in Bermuda beginning in 2025.

Arch Capital and its non-U.S.

subsidiaries will be subject to U.S.

federal income tax only to the extent that they derive U.S.

source income that is subject to U.S.

withholding tax, or income that is effectively connected with the conduct of a trade or business within the U.S.

and is not exempt from U.S.

tax under an applicable income tax treaty with the U.S., or because a non-U.S.

subsidiary has elected to be treated as a U.S.

Arch Capital and its non-U.S.

subsidiaries will be subject to a withholding tax on dividends from U.S.

investments and interest from certain U.S.

payors (subject to reduction by any applicable income tax treaty).

Arch Capital and its non-U.S.

subsidiaries intend to conduct their operations in a manner that will not cause them to be treated as engaged in a trade or business in the United States and, therefore, will not be required to pay U.S.

federal income

The Bermuda CIT Act, together with the widespread adoption of the OECD Pillar II minimum tax proposal, is expected to result in a minimum effective tax rate of 15% in most jurisdictions in which the Company operates.

Arch Capital has subsidiaries and branches that operate in various jurisdictions around the world that are subject to tax in the jurisdictions in which they operate.

The significant jurisdictions in which Arch Capital’s subsidiaries and branches are subject to tax are the United States, United Kingdom, Ireland, Switzerland, Australia, Canada, and Gibraltar.

ARCH CAPITAL 154

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

taxes (other than U.S.

excise taxes on insurance and reinsurance premium and withholding taxes on dividends and certain other U.S.

source investment income).

However, because there is uncertainty as to the activities which constitute being engaged in a trade or business within the United States, there can be no assurances that the U.S.

Internal Revenue Service will not contend successfully that Arch Capital, or its non-U.S.

subsidiaries that do not elect to become U.S.

taxpayers, are engaged in a trade or business in the United States.

If Arch Capital or any of its non-U.S.

subsidiaries were subject to U.S.

income tax, Arch Capital’s shareholders’ equity and earnings could be materially adversely affected.

Arch Capital has subsidiaries and branches that operate in various jurisdictions around the world that are subject to tax in the jurisdictions in which they operate.

The significant jurisdictions in which Arch Capital’s subsidiaries and branches are subject to tax are the United States, United Kingdom, Ireland, Canada, Switzerland, Australia and Denmark.

The components of income taxes attributable to operations were as follows:

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The 2024 applicable statutory tax rates by jurisdiction were as follows:

Bermuda ( 0.0 %), United States ( 21.0 %), United Kingdom ( 25.0 %), Ireland ( 12.5 %), Denmark ( 22.0 %), Canada ( 26.5 %), Gibraltar ( 12.5 %), Australia ( 30.0 %), Hong Kong ( 16.5 %) and the Netherlands ( 25.8 %).

Bermuda ( 0.0 %), United States ( 21.0 %), United Kingdom ( 25.0 %), Ireland ( 12.5 %), Switzerland ( 19.6 %), Australia ( 30.0 %), Canada ( 26.4 %) and Gibraltar ( 13.8 %).

A reconciliation of the difference between the provision for income taxes and the expected tax provision at the weighted average tax rate follows:

3 unchanged sentences

Addition (reduction) in income tax expense (benefit) resulting from:

Sale of subsidiaries/Bargain purchase option ( 45 ) — —

Investment income ( 39 ) ( 14 ) ( 13 )

Change in tax rate 12 ( 1,179 ) ( 5 )

Share based compensation ( 11 ) ( 13 ) ( 9 )

Tax credits ( 5 ) ( 3 ) ( 10 )

Base eroding tax/Alternative minimum tax 5 9 8

State taxes, net of U.S.

federal tax benefit 4 6 11

Dividend withholding taxes 9 11 12

Change in valuation allowance 3 4 ( 23 )

Base eroding tax 9 8 —

Share based compensation ( 13 ) ( 9 ) ( 5 )

Tax credits ( 3 ) ( 10 ) —

Change in tax rate ( 1,179 ) ( 5 ) —

Uncertain tax position 3 — —

Dividend withholding taxes 3 9 11

Income tax expense (benefit) $ 362 $ ( 873 ) $ 80

18 unchanged sentences

Net unrealized decline of investments 77 89

Lloyds year of account deferral — 1

Fair value adjustment to senior notes 41 41

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Deferred income tax liabilities:

Goodwill and intangibles — ( 39 )

Lloyds year of account deferral ( 19 ) ( 13 )

3 unchanged sentences

Right-of-use asset ( 25 ) ( 24 )

Other ( 6 ) —

Total deferred income tax liabilities ( 263 ) ( 244 )

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operations have recorded $ 70 million of net operating loss (“NOL”) carryforwards that are subject to annual usage limitations under Section 382 of the Internal Revenue Code (“the Code”).

The NOL limitations are related to acquisitions of the CMG entities in January 2014, Ventus Risk Management Inc.

in August 2019, and Verifly Insurance Services, LLC, and Verifly USA Inc.

in April 2023.

In accordance with Section 382 of the Code, utilization of the acquired NOLs is limited to approximately $ 2 million per year through December 31, 2027, approximately $ 1 million through December 31, 2038, and $ 0.3 million thereafter.

The Company’s U.S.

8 unchanged sentences

The Company does not intend to indefinitely reinvest earnings from the Company's Canada subsidiary, however, no income or withholding taxes have been accrued as the Canada subsidiary does not have positive cumulative earnings and profits and therefore a distribution from this particular subsidiary would not be subject to income taxes or withholding taxes.

Potential tax implications of repatriation from the Company’s unremitted earnings that are indefinitely reinvested are driven by facts at

Potential tax implications of repatriation from the Company’s unremitted earnings that are indefinitely reinvested are driven by facts at the time of distribution.

Therefore, it is not practicable to estimate the income tax liabilities that might be incurred if such earnings were remitted.

Distributions from the U.K.

or Ireland would not be subject to withholding tax and no deferred income tax liability would need to be accrued.

ARCH CAPITAL 156

3 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the time of distribution.

Therefore, it is not practicable to estimate the income tax liabilities that might be incurred if such earnings were remitted.

Distributions from the U.K.

or Ireland would not be subject to withholding tax and no deferred income tax liability would need to be accrued.

The Company recognizes interest and penalties relating to unrecognized tax benefits in the provision for income taxes.

14 unchanged sentences

Ireland 2020 - 2024

Canada 2019 - 2023

Switzerland 2020 - 2024

Denmark 2019 - 2023

Australia 2019 - 2024

As of December 31, 2023, the Company’s current income tax recoverable (included in “Other liabilities”) was $ 20 million.

Canada 2020 - 2024

Gibraltar 2019 - 2024

As of December 31, 2024, the Company’s current income tax recoverable (included in “Other assets”) was $ 3 million.

Transactions with Related Parties

In 2017, the Company acquired approximately 25 % of Premia Holdings Ltd.

Premia Holdings Ltd.

is the parent of Premia Reinsurance Ltd., a multi-line Bermuda reinsurance company (together with Premia Holdings Ltd., “Premia”).

In 2017, the Company acquired approximately 25 % of Premia.

Premia is the parent of Premia Reinsurance Ltd., a multi-line Bermuda reinsurance company.

Premia’s strategy is to reinsure or acquire companies or reserve portfolios in the non-life property and casualty insurance and reinsurance run-off market.

1 unchanged sentence

Arch has appointed two directors to serve on the seven person board of directors of Premia.

Arch Re Bermuda is providing a quota share

reinsurance treaty on certain business written by Premia, and subsidiaries of Arch Capital are providing certain administrative and support services to Premia, in each case pursuant to separate multi-year agreements.

During 2023, the Company entered into certain reinsurance transactions with Premia which generated net premiums written and earned of $ 80 million and $ 81 million, respectively, compared to $ 121 million and $ 120 million of net premiums written and earned, respectively in 2022.

Arch Re Bermuda is providing a quota share reinsurance treaty on certain business written by Premia, and subsidiaries of Arch Capital are providing certain administrative and support services to Premia, in each case pursuant to separate multi-year agreements.

During the 2024 period, the Company did not enter into any new reinsurance transactions with Premia, compared to $ 80 million and $ 81 million of net premiums

written and earned, respectively in 2023.

At December 31, 2024, the Company recorded a funds held asset from Premia of $ 137 million, compared to $ 158 million at December 31, 2023.

In the 2021 first quarter, as part of the Company’s acquisition of Barbican, the Company entered into an agreement with Premia Managing Agency Limited for the reinsurance to close of Syndicate 1955’s 2018 underwriting year of account into Premia Syndicate 1884’s 2021 underwriting year of account.

The reinsurance to close covers legacy business underwritten by Syndicate 1955 on the underwriting 2018 and prior years of account and under the agreement, approximately $ 380 million of net liabilities was transferred to Syndicate 1884, with an effective date of January 1, 2021.

The Company had no reinsurance recoverable on unpaid and paid losses or funds held liability at December 31, 2023 and December 31, 2022.

In July 2021, following consummation of the Merger Agreement and the related Greysbridge equity financing, pursuant to which Somers became wholly owned by Greysbridge, and Greysbridge is owned 40 % by the Company, 30 % by certain funds managed by Kelso and 30 % by certain funds managed by Warburg.

During 2023 and 2022 periods, the Company entered into certain reinsurance transactions with Somers which reduced the Company’s net premiums written by $ 574 million and $ 519 million, respectively.

In 2021, the Company completed the acquisition of Somers.

Somers is wholly owned by Greysbridge, and Greysbridge is owned 40 % by the Company and by certain funds managed by Kelso and Warburg.

The Company entered into certain reinsurance transactions with Somers.

During 2024 and 2023 periods, the Company’s net premiums written was reduced by $ 738 million and $ 574 million, respectively.

In addition, Somers paid certain acquisition costs and administrative fees to the Company.

1 unchanged sentence

At December 31, 2023, reinsurance recoverable on unpaid and paid losses from Somers was $ 1.3 billion, with a reinsurance balance payable to Somers of $ 475 million.

See note 12, “Variable Interest Entity and Noncontrolling Interests.”

The Company has a put/call option that was entered into in connection with the Greysbridge equity financing, whereby beginning January 1, 2024 the Company will have a call right (but not the obligation) and Warburg and Kelso will each have a put right (but not the obligation) to buy/sell one third of their initial shares annually at the tangible book value per share of Greysbridge for the most recently ended fiscal quarter.

Under the terms of the Greysbridge equity financing, beginning January 1, 2024, the Company has a call right (but not the obligation) and Warburg and Kelso each have a put right (but not the obligation) to buy/sell a certain amount of their initial shares annually at the current year-end tangible book value per share of Greysbridge.

In 2024, Warburg and Kelso both delivered a put option notice to sell a certain amount of their initial shares.

The transaction, which will involve third-party purchasers of such shares, is expected to close in the 2025 calendar year, subject to any required regulatory approvals and other closing conditions.

In association with the put option notice at December 31, 2024, the Company’s balance sheet reflected $ 261 million in both other assets and other liabilities.

During 2024 period, the Company completed the acquisition of Watford Insurance Company from Somers for a total consideration paid of $ 35 million.

As of December 31, 2024, the Company owns $ 35 million in aggregate principal amount of Somers 6.5 % senior notes, due July 2, 2029 .

ARCH CAPITAL 157

3 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2023, the Company owns $ 35 million in aggregate principal amount of Somers 6.5 % senior notes, due July 2, 2029 .

In the ordinary course of business, the Company renews and enters into new leases for office property and equipment.

102 unchanged sentences

Letter of Credit and Revolving Credit Facilities

In the normal course of its operations, the Company enters into agreements with financial institutions to obtain secured and unsecured credit facilities.

On August 23, 2023, Arch Capital and certain of its subsidiaries amended the existing credit agreement (the “Credit Facility”).

The Credit Facility, as amended, consists of a $ 425 million secured facility for letters of credit (the “Secured Facility”) and a $ 500 million unsecured facility for revolving loans and letters of credit (the “Unsecured Facility”).

In the normal course of its operations, the Company enters into agreements with financial institutions that provide access to secured and unsecured credit facilities.

Group Credit Facility

Arch Capital and certain of its subsidiaries have access to a credit facility with a syndicate of financial institutions (the “Group Credit Facility”) that expires on August 23, 2028.

The Group Credit Facility consists of a $ 425 million secured facility for letters of credit (the “Secured Facility”) and a $ 500 million unsecured facility for revolving loans and letters of credit (the “Unsecured Facility”).

At December 31, 2024, the Secured Facility had $ 275 million of letters of credit outstanding and remaining capacity of $ 150 million, and the Unsecured Facility had no outstanding revolving loans or letters of credit, with remaining capacity of $ 500 million.

The Credit Facility contains certain restrictive and maintenance covenants customary for facilities of this type, including restrictions on indebtedness, minimum consolidated tangible net worth, maximum leverage levels and minimum financial strength ratings.

The Group Credit Facility contains certain restrictive and maintenance covenants customary for facilities of this type, including restrictions on indebtedness, minimum consolidated tangible net worth, maximum leverage levels and minimum financial strength ratings.

Arch Capital and its subsidiaries which are party to the agreement were in compliance with all covenants contained therein at December 31, 2024.

Obligations of each borrower for letters of credit under the Secured Facility are secured by cash and eligible securities of such borrower and held in collateral accounts.

Commitments under the Credit Facility may be increased up to, but not exceeding, an aggregate of $ 1.5 billion.

Arch Capital has a

one-time option to convert any or all outstanding revolving loans of Arch Capital and/or Arch-U.S.

Commitments under the Group Credit Facility may be increased up to, but not exceeding, an aggregate of $ 1.5 billion.

Arch Capital has a one-time option to convert any or all outstanding revolving loans of Arch Capital and/or Arch-U.S.

to term loans with the same terms as the revolving loans except that any prepayments may not be re-borrowed.

5 unchanged sentences

guarantees the obligations of Arch Capital, and Arch Capital Finance LLC guarantees the obligations of Arch Capital and Arch-U.S.

The commitments under the Credit Facility will expire on August 23, 2028, and all loans then outstanding under the Credit Facility must be repaid at such time.

Letters of credit issued under the Credit Facility will not have an expiration date later than August 23, 2029.

On September 27, 2023, Arch Re Bermuda a wholly-owned subsidiary of Arch Capital, entered as the borrower into a Letter of Credit Facility Agreement with Lloyds Bank Corporate Markets plc.

Such agreement provides for a $ 175 million unsecured facility for letters of credit with commitments expiring on September 27, 2025.

At December 31, 2023, this facility had $ 114 million of letters of credit outstanding and remaining capacity of $ 61 million.

On October 25, 2023, Arch Re Bermuda entered into Amendment No.

3 and Joinder to a Letter of Credit Facility Agreement with Lloyds Bank Corporate Markets plc., which amends the agreement dated as of November 3, 2020, as amended on October 29, 2021 and as further amended on October 27, 2022.

Such agreement provides for a $ 530 million facility for letters of credit in respect of Tier 2 Funds at Lloyds.

Other Credit Facilities

Arch Re Bermuda, a wholly-owned subsidiary of Arch Capital, has access to a $ 175 million unsecured letter of credit facility with Lloyds Bank Corporate Markets plc., which expires on September 27, 2025.

At December 31, 2024, this credit facility had $ 106 million of letters of credit outstanding and remaining capacity of $ 69 million.

Arch Re Bermuda also has access to a letter of credit facility with Lloyds Bank Corporate Markets plc., which expires on December 31, 2027.

Such credit facility provides for a $ 700 million facility for letters of credit in respect of Tier 2 Funds at Lloyds.

As of December 31, 2024, $ 700 million face amount of letters of credit had been issued under this facility.

The availability period ends on May 31, 2024.

In addition, certain of Arch Capital’s subsidiaries had outstanding secured letters of credit through other facilities of $ 38 million, which were issued in the normal course of business (“LOC Facilities”).

In addition, Arch Re Bermuda had outstanding secured letters of credit through other facilities in the amount of $ 55 million, which were issued in the normal course of business (“LOC Facilities”).

The principal purpose of the LOC Facilities is to issue, as required, evergreen standby letters of credit in favor of primary insurance or reinsurance counterparties with which certain of Arch Capital’s subsidiaries has entered into reinsurance arrangements.

19 unchanged sentences

Amortization — — ( 95 ) ( 95 )

Impairment ( 2 ) — — ( 2 )

Foreign currency movements and other adjustments 5 1 7 13

3 unchanged sentences

Amortization — — ( 235 ) ( 235 )

Impairment ( 2 ) — — ( 2 )

Foreign currency movements and other adjustments (2) ( 20 ) — ( 17 ) ( 37 )

7 unchanged sentences

31, 2024 $ 571 $ 79 $ 701 $ 1,351

(1) See note 2, “Acquisitions.”

(1) Certain amounts for the Company’s 2024 acquisitions are considered

(2) Amount primarily related to the sale of Castel Underwriting Agencies Limited.

The following table presents the components of goodwill and intangible assets:

21 unchanged sentences

2030 and thereafter 172

The estimated remaining useful lives of these assets range from one to thirteen years at December 31, 2023.

The estimated remaining useful lives of these assets range from one to twelve years at December 31, 2024.

ARCH CAPITAL 161

18 unchanged sentences

(1) Includes shares issued from the exercise of stock options and stock appreciation rights, the vesting of restricted share units and shares issued from the employee share purchase plan.

Special Cash Dividend

In 2024, the Board of Directors of Arch Capital (the “Board”) has declared and paid a special cash dividend of $ 1.9 billion to common shareholders, representing $ 5.00 per outstanding common share.

Share Repurchase Program

The Board of Directors of Arch Capital (the “Board”) has authorized the investment in Arch Capital’s common shares through a share repurchase program.

At December 31, 2023, $ 1.0 billion of share repurchases were available under the program.

Repurchases under the program may be effected from time to time in open market or privately negotiated transactions through December 31, 2024.

The Board has authorized the investment in Arch Capital’s common shares through a share repurchase program.

At December 31, 2024, $ 996.8 million of share repurchases were available under the program.

Repurchases under the program may be effected from time to time in open market.

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

30 unchanged sentences

The Series G Preferred Shares do not have voting rights, except under limited circumstances.

The net proceeds from the Series G Preferred Share offerings were used to redeem the Company’s outstanding 5.25 % Series E Non-Cumulative Preferred Shares.

Series F Preferred Shares

6 unchanged sentences

Except in specified circumstances relating to certain tax or corporate events, the Series F Preferred Shares are not redeemable prior to August 17, 2022 (the fifth anniversary of the issue date).

On and after that date, the Series F Preferred

Shares will be redeemable at the Company’s option, in whole or in part, at a redemption price of $ 25,000 per share of the Series F Preferred Shares (equivalent to $ 25 per depositary share), plus any declared and unpaid dividends, without accumulation of any undeclared dividends to, but excluding, the redemption date.

On and after that date, the Series F Preferred Shares will be redeemable at the Company’s option, in whole or in part, at a redemption price of $ 25,000 per share of the Series F Preferred Shares (equivalent to $ 25 per depositary

share), plus any declared and unpaid dividends, without accumulation of any undeclared dividends to, but excluding, the redemption date.

The Series F Depositary Shares will be redeemed if and to the extent the related Series F Preferred Shares are redeemed by the Company.

2 unchanged sentences

The Series F Preferred Shares will not have voting rights, except under limited circumstances.

The net proceeds from the Series F Preferred Share offerings were used to redeem the Company’s outstanding 6.75 % Series C Non-Cumulative Preferred Shares.

Series E Preferred Shares

In September, 2021, Arch Capital redeemed all outstanding 5.25 % Series E non-cumulative preferred shares.

The preferred shares were redeemed at a redemption price equal to $ 25 per share, plus all declared and unpaid dividends to (but excluding) the redemption date.

In accordance with GAAP, following the redemption, original issuance costs related to such shares have been removed from additional paid-in capital and recorded as a “loss on redemption of preferred shares.” Such adjustment had no impact on total shareholders’ equity or cash flows.

Share-Based Compensation

4 unchanged sentences

The number of common shares reserved for grants under the 2022 Plan, subject to anti-dilution adjustments in the event of certain changes in Arch Capital’s capital structure, is 9.0 million;

provided that no more than 6.0 million common

provided that no more than 6.0 million common shares may be issued as incentive stock options under Section 422 of the Code.

The 2022 Plan will terminate as to future awards on February 25, 2032.

At December 31, 2024, 6.7 million shares are available for future issuance.

The 2018 Long-Term Incentive and Share Award Plan (the “2018 Plan”) became effective as of May 9, 2018 following approval by shareholders of the Company.

The 2018 Plan provides for the issuance of restricted stock units, performance units, restricted shares, performance shares, stock options and stock appreciation rights and other equity-based awards to our eligible employees and directors.

The 2018 Plan authorizes the issuance of 34.5 million common shares;

provided that no more than 6.0 million common shares may be issued as incentive stock options under Section 422 of the Code.

The 2018 Plan will terminate as to future awards on February 28, 2028.

At December 31, 2024, 2.7 million shares are available for future issuance.

ARCH CAPITAL 163

3 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

shares may be issued as incentive stock options under Section 422 of the Code.

The 2022 Plan will terminate as to future awards on February 25, 2032.

At December 31, 2023, 7.8 million shares are available for future issuance.

The 2018 Long-Term Incentive and Share Award Plan (the “2018 Plan”) became effective as of May 9, 2018 following approval by shareholders of the Company.

The 2018 Plan authorizes the issuance of 34.5 million common shares and will terminate as to future awards on February 28, 2028.

At December 31, 2023, 5.8 million shares are available for future issuance.

Upon shareholder approval on May 4, 2023, the Amended and Restated Arch Capital Group Ltd.

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Stock Options and Stock Appreciation Rights

The Company generally issues stock options and SARs to eligible employees, with exercise prices equal to the fair market values of the Company’s Common Shares on the grant dates.

The Company generally issues stock options and SARs to eligible employees, with exercise prices equal to the fair market values of the Company’s Common Shares on the grant dates (adjusted for special dividends).

Such grants generally vest over a three year period with one-third vesting on the first, second and third anniversaries of the grant date.

In connection with the Company’s recent leadership transition in November 2024, the Compensation and Human Capital Committee approved the grant of equity awards, which consist of 1.75 million premium-priced stock options to eligible employees.

The premium-priced stock options have an exercise price equal to 1.685 times the closing price of the Company's common shares on the grant date (or $ 161.24 per share) and will vest in full on the third anniversary of the grant date.

The grant date fair value is determined using the Black-Scholes option valuation model.

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Expected option life (1) 9.0 years 6.0 years 6.0 years

(1) The 2024 period includes an expected volatility, risk free interest rate and expected option life of 26.65 %, 4.39 % and 10 years, respectively, related to the grant of 1.75 million premium-priced stock options.

A summary of stock option and SAR activity under the Company’s Long Term Incentive and Share Award Plans during 2024 is presented below:

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Exercisable, end of year 9,710,426 $ 26.55 3.40 $ 639

(1) Includes 1.75 million premium-priced stock options with a weighted average exercise price of $ 161.24 per share.

The aggregate intrinsic value of stock options and SARs exercised represents the difference between the exercise price of the stock options and SARs and the closing market price of the Company’s common shares on the exercise dates.

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Aggregate fair value of vested restricted share and unit awards (in millions) $ 85 $ 122 $ 51

The aggregate intrinsic value of restricted units outstanding at December 31, 2023 was $ 23 million, and the aggregate intrinsic value of restricted units vested and deferred was $ 0.4 million.

The aggregate intrinsic value of restricted units outstanding at December 31, 2024 was $ 26 million.

Performance Awards

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Weighted average recognition period (years) 2.08 1.21 0.38

(1) Includes awards granted in connection with 1.75 million premium-priced stock options and 0.3 million time-vested restricted shares granted in November 2024.

Retirement Plans

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The Company’s Bermuda insurance and reinsurance subsidiaries are subject to the Bermuda Insurance Act 1978 and related regulations, each as amended (the “Insurance Act”).

Arch Re Bermuda, the Company’s principal reinsurance and insurance subsidiary, is registered as a Class 4 insurer and long-term insurer while Arch Group Reinsurance Ltd.

(“AGRL”) is registered as a Class 3A general business insurer and provides affiliated quota share reinsurance covering certain U.S.

Arch Re Bermuda, the Company’s principal reinsurance and insurance subsidiary, is dual licensed as a Class 4 general business insurer and a Class C long-term insurer while Arch Group Reinsurance Ltd.

(“AGRL”) is registered as a Class 3A general insurer and provides affiliated quota share reinsurance covering certain U.S.

The Insurance Act requires that both entities maintain minimum statutory capital and surplus equal to the greater of a minimum solvency margin and the enhanced capital requirement (“ECR”) as determined by the Bermuda Monetary Authority (“BMA”).

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Under the Insurance Act, Arch Re Bermuda and AGRL are restricted with respect to the payment of dividends.

Each entity is prohibited from declaring or paying in any financial year dividends of more than 25 % of its total statutory capital

and surplus (as shown on its previous financial year’s statutory balance sheet) unless it files, at least seven days before payment of such dividends, with the BMA an affidavit stating that it will continue to meet the required margins following the declaration of those dividends.

Each entity is prohibited from declaring or paying in any financial

year dividends of more than 25 % of its total statutory capital and surplus (as shown on its previous financial year’s statutory balance sheet) unless it files, at least seven days before payment of such dividends, with the BMA an affidavit stating that it will continue to meet the required margins following the declaration of those dividends.

Accordingly, Arch Re Bermuda can pay approximately $ 5.5 billion to Arch Capital during 2025 without providing an affidavit to the BMA.

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Arch Re Europe, an authorized life and non-life reinsurer, Arch Insurance (EU), an authorized non-life insurer and Arch Underwriting Europe, a registered insurance and reinsurance intermediary.

Irish authorized reinsurers and insurers, such as Arch Re Europe, Arch Insurance (EU) and Irish intermediaries, such as Arch Underwriters Europe, are also subject to the general body of Irish laws and regulations including the provisions of the Companies Act 2014.

As part of the Company’s Brexit plan, Arch Insurance (EU) received approval from the Central Bank of Ireland (“CBI”) to expand the nature of its business in 2019 commenced writing insurance lines in the European Economic Area in 2020, and the Part VII Transfer was completed at the end of December 2020.

Irish authorized reinsurers and insurers, such as Arch Re Europe, Arch Insurance (EU) and Irish intermediaries, and Arch Underwriters Europe, are subject to the general body of Irish laws and regulations including the provisions of the Companies Act 2014.

As part of the Company’s Brexit plan, Arch Insurance (EU) received approval from the Central Bank of Ireland (“CBI”) to expand the nature of its business in 2019 and commenced writing insurance lines in the European Economic Area in 2020, and the Part VII Transfer was completed at the end of December 2020.

Arch Re Europe, Arch Insurance (EU) and Arch Underwriters Europe are subject to the supervision of the CBI and must comply with Irish insurance acts and regulations as well as with directions and guidance issued by the CBI.

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The ability of the Company’s regulated insurance subsidiaries to pay dividends or make distributions is dependent on their ability to meet applicable regulatory standards.

These regulations include restrictions that limit the amount of dividends or other distributions, such as loans or cash advances, available to shareholders without prior approval of the insurance regulatory authorities.

These regulations include restrictions that limit the amount of dividends or other distributions, such as loans or cash advances, available to

ARCH CAPITAL 167

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

shareholders without prior approval of the insurance regulatory authorities.

Dividends or distributions, if any, made by Arch Re U.S.

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can declare a maximum of approximately $ 339 million of dividends during 2025 subject to the approval of the Commissioner of the Delaware Department of Insurance.

AMIC and UGRIC are approved as eligible mortgage insurers by Fannie Mae and Freddie Mac, subject to maintaining certain requirements (“eligible mortgage insurers”).

In April 2015, the GSEs published their original comprehensive, requirements, known as the Private Mortgage Insurer Eligibility Requirements or “PMIERs.” Revised and restated in September 2018, and clarified thereafter by the Guidance Letters 2020-1 and 2021-1 issued by the GSEs in 2020 and 2021, respectively, the PMIERs apply to the Company’s eligible mortgage insurers, but do not apply to AMG, which is not GSE-approved.

The amount of assets required to satisfy the revised financial requirements of the PMIERs may be affected by many factors, including macro-economic conditions, the size and composition of our mortgage insurance portfolio, and the amount of risk ceded to reinsurers that may be deducted in our calculation of “minimum required assets.”

AMIC and UGRIC are approved as eligible mortgage insurers by Fannie Mae and Freddie Mac, subject to their comprehensive requirements, known as the Private Mortgage Insurer Eligibility Requirements or “PMIERs.” The GSEs amend the PMIERs from time to time at their discretion and most recently issued PMIERs Guidance 2024-01 on August 21, 2024 (effective March 31, 2025 with a corresponding transition schedule through September 30, 2026), to incorporate new deductions to the definition of “available assets” for investment risk.

Further, the amount of assets required to satisfy the revised financial requirements of the PMIERs may be affected by many factors, including macro-economic conditions, the size and composition of our mortgage insurance portfolio, and the amount of risk ceded to reinsurers that may be deducted in our calculation of “minimum required assets.”

The Company’s U.S.

mortgage insurance subsidiaries are subject to regulation by their domiciliary and primary regulators, the Wisconsin Office of the Commissioner of Insurance (“Wisconsin OCI”) for AMIC and AMG, the North Carolina Department of Insurance (“NC DOI”) for UGRIC, and by state insurance departments in each state in which they are licensed.

mortgage insurance subsidiaries are also subject to regulation by their respective domiciliary and primary regulators, which include the Wisconsin Office of the Commissioner of Insurance (“Wisconsin OCI”) and the North Carolina Department of Insurance (“NC DOI”), as well as the state insurance departments in each state in which they are licensed.

As mandated by state insurance laws, mortgage insurers are generally mono-line companies.

Each company is subject to the statutory requirements of their domiciliary regulator as to payment of dividends and return of capital;

the GSEs may also impart limitations on the Company’s eligible mortgage insurers, such as required minimum assets.

the GSEs may also impart limitations on dividends with respect to the Company’s eligible mortgage insurers, such as if available assets fall below the required minimum assets.

Under respective state law, the Company’s U.S.

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These amounts generally cannot be withdrawn for a period of 10 years and are separate liabilities for statutory accounting purposes, which affects the ability to pay dividends.

However, with prior regulatory approval, a mortgage insurance company may make early withdrawals from the contingency reserve

when incurred losses exceed 35 % of net premiums earned in a calendar year.

However, with prior regulatory approval, a mortgage insurance company

may make early withdrawals from the contingency reserve when incurred losses exceed 35 % of net premiums earned in a calendar year.

Under Wisconsin and North Carolina law, as well as that of 14 other states, a mortgage insurer must maintain a minimum amount of statutory capital relative to its risk in force in order for the mortgage insurer to continue to write new business.

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In May 2004, Arch Insurance (U.K.) was granted the relevant permissions for the classes of insurance business which it underwrites in the U.K.

AMAL currently manages Arch Syndicate 2012 and Arch Syndicate 1955 pursuant to its authorizations by the U.K.

AMAL currently manages our Lloyd’s Syndicates pursuant to its authorizations by the U.K.

regulators and Lloyd’s.

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The capital required to support a Syndicate’s underwriting capacity, or funds at Lloyd’s, is assessed annually and is determined by Lloyd’s in accordance with the capital adequacy rules established by the PRA.

The Company has provided capital to support the underwriting of Arch Syndicate 2012 and Arch Syndicate 1955 in the form of pledged assets and letters of credit provided by Arch Re Bermuda.

The Company has provided capital to support the underwriting of our Lloyd’s Syndicates in the form of pledged assets and letters of credit provided by Arch Re Bermuda.

The amount which the Company provides as funds at Lloyd’s is not available for distribution to the Company for the payment of dividends.

Lloyd’s is supervised by the PRA and required to implement certain rules prescribed by the PRA under the Lloyd’s Act of 1982 regarding the operation of the Lloyd’s market.

Lloyd’s is supervised by the PRA and required to implement certain rules prescribed by the PRA under the Lloyd’s Act of 1982 regarding the operation

ARCH CAPITAL 168

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

respect to managing agents and corporate members, Lloyd’s prescribes certain minimum standards relating to management and control, solvency and other requirements and monitors managing agents’ compliance with such standards.

of the Lloyd’s market.

With respect to managing agents and corporate members, Lloyd’s prescribes certain minimum standards relating to management and control, solvency and other requirements and monitors managing agents’ compliance with such standards.

law, all U.K.

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2024 FORM 10-K

ARCH CAPITAL GROUP LTD.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Subsequent Events

California Wildfires

The Company estimates that its 2025 first quarter results will be negatively impacted by the California wildfires, which occurred in January 2025.

The Company currently estimates that the losses will be in a range of $ 450 million to $ 550 million, net of reinsurance and reinstatement premiums.

This pre-tax preliminary loss estimate is based on industry insured losses ranging from $ 35 billion to $ 45 billion.

The Company’s preliminary estimate is based on currently available information derived from modeling techniques, industry assessments of exposure, preliminary claims information obtained from the Company’s clients and brokers to date and a review of in-force contracts.

The Company’s actual losses from this event may vary materially from the estimates due to the inherent uncertainties in making such determinations.

Share Repurchases

From January 1 to February 27, 2025, the Company repurchased approximately 2.0 million common shares for an aggregate purchase price of $ 180 million.

At February 27, 2025, approximately $ 817 million of repurchases were available under the Company’s share repurchase program.

ARCH CAPITAL 170

2024 FORM 10-K

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data