Executive Summary

Strong quarter with broad-based growth and clean underwriting: total revenues rose to $5.213B, GAAP diluted EPS was $3.23, and operating EPS was $2.58; BVPS increased 7.3% QoQ to $59.17, driven by investment gains and underwriting profits .
Clear beats vs S&P Global consensus: operating EPS $2.58 vs $2.30* and revenue $5.213B vs $4.268B*; operating ROE at 18.2% underscored resilient profitability despite higher taxes from Bermuda’s new corporate tax , estimates*.
Reinsurance delivered record pre-tax underwriting income ($451M) on lower cat load and favorable prior-year development; mortgage remained a steady diversifier with $238M underwriting income despite lower NIW; insurance grew NPW 31% aided by MidCorp/Entertainment acquisition, with integration on track .
Stock drivers: magnitude of revenue/EPS beat, 7.3% QoQ BVPS lift, continued capital return (repurchases in July too), and commentary pointing to NII growth and selective Florida cat growth; watch higher effective tax rate and reinsurance attritional losses noted on the call .

What Went Well and What Went Wrong

What Went Well
- Reinsurance outperformance: underwriting income rose 23% YoY to $451M, with loss ratio improvement to 54.1% and lower cat points (5.5 vs 10.0 prior-year) plus stronger favorable PYD (3.9 points) .
- Book value and investments: BVPS grew 7.3% QoQ to $59.17; pre-tax NII rose to $405M and total investment return was 3.09% in Q2 .
- Management discipline and cycle management: “disciplined underwriting…paired with dynamic capital management” and data/analytics capabilities highlighted; CEO: “This…positions us to consistently generate superior returns across market cycles” .
- Operational scaling: announced two new global capabilities centers in India (Trivandrum, Pune; Hyderabad coming), supporting analytics/technology/operations across businesses .
What Went Wrong
- Reinsurance attritional losses: CFO cited items like the Air India crash and refinery explosions as drivers of higher attritional in the quarter vs unusually benign prior-year comp .
- Higher taxes: effective tax rate on pre-tax operating income rose to 15.2% (vs 9.5% prior-year) due to Bermuda’s new corporate income tax .
- Insurance segment loss ratio rose (59.8% vs 57.3% YoY) with 2.9 pts of cat and mix/MidCorp effects; combined ratio 93.4% (up 0.8 pts YoY) .

Financial Results

Headline results vs prior periods and estimates

Metric	Q4 2024	Q1 2025	Q2 2024	Q2 2025 (Actual)	Q2 2025 (Consensus)
Total Revenues ($B)	$4.548	$4.673	$4.229	$5.213	$4.268*
GAAP Diluted EPS ($)	$2.42	$1.48	$3.30	$3.23	—
Operating EPS ($)	$2.26	$1.54	$2.57	$2.58	$2.30*
Combined Ratio (%)	85.0	90.1	78.7	81.2	—
Operating ROE (Annualized, %)	16.7	11.5	20.5	18.2	—

Notes: Consensus figures marked with * are from S&P Global (Values retrieved from S&P Global).

Key deltas:

Revenues: +18.5% QoQ and +23.3% YoY; beat by ~$0.945B vs consensus* .
Operating EPS: +$1.04 QoQ and +$0.01 YoY; beat by ~$0.28 vs consensus* .

Segment performance (YoY)

Segment (Q2)	Net Premiums Earned ($M)	Underwriting Income ($M)	Loss Ratio (%)	Combined Ratio (%)
Insurance 2024	1,478	109	57.3	92.6
Insurance 2025	1,969	129	59.8	93.4
Reinsurance 2024	1,780	366	56.5	79.5
Reinsurance 2025	2,087	451	54.1	78.5
Mortgage 2024	307	287	(8.6)	7.4
Mortgage 2025	281	238	(1.2)	15.2

Drivers:

Insurance: growth aided by MidCorp/Entertainment acquisition; loss ratio up (cat + mix); expense ratio improved .
Reinsurance: higher earned premium, lower cat points, stronger PYD benefited the loss ratio; expense ratio up on lower contingent commissions .
Mortgage: earnings remained strong with sizable favorable PYD; lower NIW and Bellemeade tender expense increased adjusted ratios .

KPIs and capital

KPI	Q4 2024	Q1 2025	Q2 2024	Q2 2025
Pre-tax Net Investment Income ($M)	405	378	364	405
Equity Method Income ($M)	143	53	167	162
Book Value/Share ($)	53.11	55.15	52.75	59.17
Annualized Operating ROE (%)	16.7	11.5	20.5	18.2
Cat Losses (current AY, pre-tax, $M)	393	547	196	154
Favorable PYD (pre-tax, $M)	146	167	124	139
Operating Cash Flow ($M)	1,573	1,458	1,518	1,124
Share Repurchases ($M)	23.5	196.4	2.0	163.2
Effective Tax Rate on Operating Income (%)	6.7	11.7	9.5	15.2

Guidance Changes

Metric/Topic	Period	Previous	Current	Change
Pre-tax Net Investment Income trend	“Next few quarters”	NA	“Should grow in line with the size of our investment portfolio”	Qualitative raise
Reinsurance NPW timing (retro property cat)	Q3 2025	NA	~$94M timing-related NPW tailwind expected (offset to Q2 timing)	New timing color
Capital return	2H 2025	NA	“Capital return…we think we’ll be there” (repurchases; dividends considered)	Reiterated focus
Bermuda “jobs credit” tax offset	Late Q3–Q4 2025 update expected	NA	Potential operating expense offsets across segments if enacted	Potential tailwind
MidCorp program remediation impact	2H 2025–2026	NA	Effects begin on written in 2H25; more on earned over 12–18 months	Execution timeline

No formal quantitative revenue/EPS guidance was issued in the press release or call; management provided directional commentary as above .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4’24, Q1’25)	Current Period (Q2’25)	Trend
MidCorp (Allianz) integration and margins	Q1’25: Insurance combined ratio 100.1% with 9.5 pts cat; MCE lowered expense ratio; 1.9-pt expense benefit at close	Full quarter included; 0.6-pt expense benefit; +1.0 pt to accident-year ex-cat loss ratio from acquired business; program actions to show on earned 12–18 months	Integration on track; margin lift ramps 2026
Florida/property cat reinsurance	Q1’25: property cat growth; pricing still strong	Selective expansion in FL; pricing slightly down but T&C stable; attractive ROEs; more demand around FHCF layers	Discipline; still attractive
Reinsurance attritional losses	Q1’25: high CATs (wildfires) drove 66.9% loss ratio	Attritional uptick from Air India/refineries; characterized as normal volatility	Monitor, but not structural
Mortgage credit quality/NIW	Q1’25: low delinquency (1.96%), strong cures; NIW lower	Delinquency 1.93%; strong cures; Bellemeade tender $15M one-time	Stable, diversified earner
Capital return	Q1’25: $196M buybacks	$163M in Q2 and ~$161M in July; willing to continue; potential dividends considered	Active
Tax rate and Bermuda tax	Q1’25 ETR on operating 11.7%	15.2% in Q2 from Bermuda corporate tax	Higher baseline

Management Commentary

Strategy and cycle management: “We achieved these results by staying true to our core principle of cycle management…positions us to consistently generate superior returns across market cycles.” — CEO Nicolas Papadopoulo .
Investment outlook: “Pre-tax net investment income in the next few quarters should grow in line with the size of our investment portfolio.” — CFO François Morin .
Reinsurance property cat: “ROEs are still very attractive…pricing slightly down but terms and conditions were stable…overall catastrophe excess of loss margin remained attractive.” — CEO .
Capital return: “Certainly at current price levels we find stock to be attractive and be more than happy to buy back as we move forward.” — CFO .
MidCorp remediation: “We’ve taken underwriting actions on the program side that should lead to performance improvements over the next 12–18 months.” — CEO .

Q&A Highlights

Insurance growth excluding MCE: modest organic growth with pressure in E&S property, D&O, cyber; casualty and international selective growth; pricing in excess D&O/cyber stabilizing .
Florida reinsurance and returns: attractive ROEs; demand around FHCF attachment shifts enabled growth; pricing flat to slightly lower depending on layer .
Attritional losses: cited large but normal items (Air India, refineries); not indicative of a trend .
Capital return cadence: willing to continue repurchases in 2H; potential for dividends; less seasonal slowdown around wind season than historically .
Bermuda “jobs credit”: would reduce operating expenses across segments if enacted; updates expected late Q3/Q4 .
MidCorp integration: program business ~1/3 of portfolio; actions taken with earned impact in 12–18 months .

Estimates Context

Q2 2025 results vs S&P Global consensus: operating EPS $2.58 vs $2.30*, revenue $5.213B vs $4.268B*. Estimate counts: EPS (11), revenue (2). The magnitude of the revenue beat (~$945M) suggests stronger-than-modeled earned premium and investment income contributions. Estimates for forward quarters show EPS stepping up through FY26, reflecting embedded earned premium growth and NII tailwind.
Notes: Values marked with * are from S&P Global (Values retrieved from S&P Global).

Key Takeaways for Investors

Broad beat with quality: strong revenue/EPS beat, BVPS +7.3% QoQ, and 18.2% operating ROE despite a higher tax rate .
Reinsurance momentum: record underwriting income driven by lower cat incidence and favorable prior-year development; selective Florida growth supports forward earnings .
Mortgage as ballast: low delinquencies and favorable cures sustain high profitability even with lower NIW; one-time Bellemeade tender costs should be recouped via lower ceded premiums through 2027 .
Insurance integration arc: MidCorp/Entertainment scaling lowers expense ratio; program remediation benefits should accumulate into 2026; watch for normalization of loss ratio as mix shifts .
NII tailwind: with portfolio growth and yields, management expects pre-tax NII to rise in coming quarters, further supporting EPS and BVPS compounding .
Capital deployment: continued buybacks (including July) and potential dividends create a floor under the equity story; monitor authorization updates and pace .
Risk watch: higher effective tax rate, episodic attritional losses in reinsurance, and competitive pressures in E&S property and certain financial lines; however, pricing discipline and mix management remain strong mitigants .

Appendix: Additional Press Releases (Q2 timeframe)

Arch opened two global capabilities centers in India (Trivandrum, Pune; Hyderabad upcoming) to scale analytics/technology/operations across Insurance, Reinsurance, and Mortgage .

ARCH CAPITAL GROUP LTD. (ACGL)·Q2 2025 Earnings Summary