Asked about the company's outlook on the level of share buybacks, especially considering the increased activity in Q2 and the ongoing wind season.

Management clarified they do not have specific buyback targets but found the stock price attractive in Q2, leading to higher repurchases. They still view the stock as attractive and have capacity, acknowledging wind season as a consideration. Buybacks will remain a key part of their capital management strategy given the challenging growth environment. “We don't -- certainly don't have targets or plans to buy back a certain number or dollars of shares. We certainly thought that in the second quarter, the price of the stock was very attractive to us.”

Sought elaboration on the early stages of the soft market, specifically whether property rates could materially decrease further and if casualty rates could turn negative.

Nicolas Papadopoulo confirmed that property rates are a significant headwind, having already come down, and the company trades carefully in this area. For casualty, he expressed more optimism, noting that the market remains disciplined on limits despite increased competition. “Specific to property, yes, it's a big headwind, okay. Rates have been coming down. And there, I think we trade quite carefully.”

Questioned if Arch could sustain share repurchases above 100% of operating earnings throughout a soft cycle, given the excess capital built during the hard market.

François Morin affirmed that the company could indeed return all earnings to shareholders if not growing, citing confidence in their ability to generate strong earnings across all phases of the cycle. He noted that M&A or other capital needs could alter this, but Q2 demonstrated their active approach. “You're asking me, are we able to return if we're not growing, can we return all those earnings in back and back to the shareholders? The answer is yes, we could.”

ACGL

Arch Capital Group (ACGL) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Financials· Jul 29, 2026

Source: earnings call transcript

Executive summary

Arch Capital Group Q2 FY26 — Strong Earnings and Capital Returns Amidst Softening Market

Arch Capital reported strong Q2 FY26 earnings, driven by solid underwriting across its diversified segments and significant capital returns through share repurchases. While the underwriting environment is softening with increased competition, particularly in property lines, the company leverages its cycle management and flexible platform to deploy capital in attractive casualty-oriented areas. Management remains confident in its ability to generate strong earnings and return excess capital to shareholders.

Highlights

After-tax operating income reached $893 million or $2.56 of earnings per share.
The company repurchased $1.2 billion in shares during Q2, bringing the total for the first half of the year to $1.95 billion.
Book value per share grew by 2.8% in the quarter and has increased by 4.5% in the first half of the year.
Reinsurance segment delivered excellent underwriting income of $410 million with a current accident year ex-cat combined ratio of 79.9%.
Mortgage segment continued to provide strong, stable results, delivering $220 million of underwriting income.

Concerns

The underwriting environment is increasingly competitive, with the market in the early stages of softening.
Insurance segment underwriting income was negatively affected by $201 million in catastrophe losses related to the Iran conflict and severe U.S. storms.
Net premiums written in the Reinsurance segment were down 10.4% year-over-year due to lower rates and higher retrocession purchases.
Net premiums written in the Insurance segment declined 5.1% year-over-year due to nonrenewal of certain program business and reduced E&S property writings.
The Reinsurance segment's current accident year ex-cat combined ratio increased 270 basis points from last year due to changes in mix and lower pricing in property lines.

Guidance & targets

Category	Target	Timeline	Confidence
Interest expense	$60M to $63M medium materiality	Q3 FY26 and Q4 FY26	High
Operating expense ratio	revert back to historical levels low materiality	H2 FY26	Medium
Catastrophe load (annual)	6% to 8% medium materiality	Annual	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Insurance Underwriting income was negatively affected by catastrophe losses related to the Iran conflict. Net premiums written were negatively impacted by the nonrenewal of certain program business and reduced writings of Excess and Surplus property business. Saw premium growth in casualty-oriented lines in North America and certain specialty London market lines like war and terrorism. Current accident year combined ratio ex cat: 91.6%Ex-cat accident year loss ratio net of reinstatement premiums: 56.4%	—	declined 5.1%	—	$27M underwriting income
Reinsurance Underwriting results were excellent, aided by relatively light catastrophe losses. Net premiums written were down due to reduced writings from lower rates and a higher level of retrocession purchases, primarily in specialty and property catastrophe lines. The ex-cat accident year combined ratio is up 270 basis points from last year due to a shift in line of business mix and a more competitive rate environment for certain subsegments. Casualty reinsurance remains an attractive business but competition is elevated. Current accident year ex-cat combined ratio: 79.9%	—	down 10.4%	—	$410M underwriting income
Mortgage Continued to provide strong, stable results driven by a resilient economy and high-quality risk in force. The U.S. MI portfolio delinquency rate remained flat. Favorable reserve development continued, although slower than prior quarters. Net premiums earned were flat from last quarter, with a reduction in U.S. MI business mostly offset by higher levels of earned premium in Australia. U.S. MI portfolio delinquency rate: 2.1%	flat	—	flat	$220M underwriting income

ACGL operating KPIs by quarter

ACGL operating KPIs stated on its earnings calls, by fiscal quarter
KPI	Sep 2025 Q3 FY25	Dec 2025 Q4 FY25	Change vs prior quarter
Combined ratio	79.8% Our quarterly consolidated combined ratio of 79.8% reflect excellent underwriting and low cat activity in the quarter. Source: earnings call transcript	80.6% Our quarterly consolidated combined ratio of 80.6% reflects excellent underwriting results across the group. Source: earnings call transcript	+0.8 pt

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Deals & partnerships

New client New mortgage insurance client

Signed up a new client in Australia for the mortgage segment, which contributed to growth in new premiums.

Risks & headwinds

Increasingly competitive underwriting environment and softening market Ongoing, early stages

Property rates have been coming down, with mid-teens reductions at mid-year renewals. Reinsurance ex-cat accident year combined ratio increased 270 basis points YoY due to mix changes and lower property pricing.

Mitigation:Leveraging a diversified business model, strong cycle management, and flexibility to deploy capital in areas that generate appropriate risk-adjusted returns, such as casualty-oriented lines.

Catastrophe losses from geopolitical conflicts and severe weather events Q2 FY26, potential for more if war persists

$201 million net of reinsurance from the Iran conflict and severe convective storms in the U.S. The industry estimate for Middle East war losses is around $3 billion.

Mitigation:As a leading writer of political violence, terrorism, and Marine War in the London market, the company selectively deploys capacity and avoids concentration, ensuring pricing supports the risk.

Excess capacity and competition in casualty reinsurance Ongoing

Net premiums written in the Reinsurance segment were down 10.4% YoY. Too much capacity chasing too little business.

Mitigation:Maintaining discipline on terms and conditions, focusing on attractive underlying specialty casualty areas, and partnering with good underwriters to access profitable business.

What to watch in Q3 FY26

Operating expense ratio reversion

H2 FY26

Current Higher in Q2 FY26

Target Revert back to historical levels

Why it matters

Indicates efficiency improvements and cost management post-transition of middle market business to Arch systems.

Our operating expense ratio was higher this quarter due to the transition of our middle market business to Arch systems. As mentioned last quarter, we would expect our operating expense ratio to revert back to historical levels during the second half of the year.

Find out whether ACGL delivers this. Inve re-checks your case every morning.

Q&A highlights

Inquired about the sustainability of the insurance segment's underlying loss ratio, particularly strong international results, and any changes in loss pick assumptions.

Management stated that international short-tail business is performing well, and non-renewal of certain programs helped lower the loss ratio. They are comfortable with current levels and have not systematically changed loss pick assumptions, noting their ability to adjust the mix of business to maintain the loss ratio.

“I mean, at a high level, we think we're comfortable with the levels where we're at and I think there's a good chance or there's a possibility that we stay at levels around this number.”

asked by Elyse Greenspan · answered by François Morin

3 min read 6 chapters

Detailed narrative

Underwriting Performance & Market Cycle

Arch reported strong Q2 underwriting results, with an overall ex-cat accident year combined ratio of 82.5%, representing a 160 basis point increase from the prior year. The market is currently in the early stages of a competitive softening cycle, particularly impacting property and short-tail lines due to an influx of capacity.

However, casualty-oriented lines continue to experience rate increases, and the company's diversified platform enables disciplined capital deployment in areas that meet its risk-adjusted return objectives.

Capital Management & Shareholder Returns

The company actively managed its capital, repurchasing 12.4 million shares at an aggregate cost of $1.2 billion in Q2. This brings total share repurchases for the first half of the year to $1.95 billion, approximately 94% of net income. Management views share buybacks as an accretive use of excess capital, especially at current stock prices (1.5-1.6x book value), and confirmed it has capacity for further repurchases, while noting that special dividends were considered when trading at 2x book value in 2024.

Debt Management and Leverage

In May, Arch accessed the debt market, raising $2 billion through a combination of 10-year and 30-year senior notes. The proceeds were strategically used to redeem $500 million of notes maturing later this year and to purchase $418 million of 2043 and 2046 senior notes via a tender offer.

This action was designed to replace debt that no longer meets updated regulatory capital requirements with fully compliant capital instruments. As of the end of Q2, the company's debt plus preferred to capital leverage ratio stood at a conservative 18.1%.

Investment Portfolio Performance

The company's conservatively managed investment portfolio, which maintains an average credit quality of AA-, contributed $417 million in net investment income during the quarter. Additionally, investments accounted for using the equity method, excluded from operating earnings, performed well, adding an additional $196 million.

Combined, net investment income and income from equity method funds totaled $613 million, or $1.76 per share pretax, with equity method funds contributing 340 basis points to the annualized net income return on average common equity.

Prior Year Development & Catastrophe Losses

The quarter benefited from $165 million of favorable prior year development on a pretax basis, which contributed 4.1 points to the overall combined ratio. This favorable development was recognized across all three segments, primarily in short-tail P&C lines and mortgage due to strong cure activity.

Current year catastrophe losses, net of reinsurance and reinstatement premiums, amounted to $201 million, resulting from a combination of losses from the Iran conflict and severe convective storms in the U.S.

Mid-Corp Business Transition and Growth

Arch has successfully transitioned its middle market business to its own systems, including policy emission. This move, while initially creating some disruption, has been positively received, leveraging the brand's value and client relationships. The company is now focused on providing better tools, analytics, and improved claims processes to drive future growth in this segment, where package rates are seeing positive mid-single-digit increases, a more muted dynamic compared to large property and E&S markets.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.