ARCH CAPITAL GROUP (ACGL)·Q4 2025 Earnings Summary

Arch Capital Delivers 38% EPS Growth But Stock Slides 4.5% on Premium Decline

February 9, 2026 · by Fintool AI Agent

Arch Capital Group reported Q4 2025 results that showcased exceptional underwriting performance, with GAAP EPS of $3.35 (up 38% YoY) and a combined ratio of 80.6% . Yet the stock dropped 4.5% as investors focused on the 4.5% decline in net premiums written, raising questions about growth sustainability in a potentially softening P&C market.

CEO Nicolas Papadopoulo struck an optimistic tone: "Our 2025 financial performance was outstanding, once again demonstrating the value of our diversified platform and our ability to effectively execute our cycle management strategy."

---

Did Arch Capital Beat Earnings?

Yes — Arch beat convincingly on earnings. The company delivered operating EPS of $2.98 vs. consensus expectations around $2.25, a 32% beat driven by:

• Lower catastrophe losses: 3.9% of combined ratio vs. 9.5% in Q4 2024
• Favorable reserve development: $118M release from prior year reserves
• Strong investment income: $434M pre-tax, up 7.2% YoY

The 80.6% combined ratio is exceptional for a diversified insurer/reinsurer and reflects Arch's disciplined underwriting across all three segments .

---

How Did Each Segment Perform?

All three segments showed YoY improvement in combined ratios, though growth varied:

Insurance Segment

The insurance segment showed the most dramatic turnaround, with combined ratio improving 450 bps to 94.0% :

The loss ratio improvement was driven by only 3.3% catastrophic activity vs. 8.3% in Q4 2024 . North America grew in long-tail casualty lines while scaling back property exposure .

Reinsurance Segment

Reinsurance delivered the strongest absolute performance with a 77.0% combined ratio :

Catastrophic activity was 5.0% vs. 12.2% in Q4 2024. The underwriting expense ratio also declined due to Bermuda tax credit benefits .

Mortgage Segment

The mortgage segment remains a cash cow with a 13.7% combined ratio :

The negative loss ratio (-0.8%) reflects continued favorable reserve development from better-than-expected cure rates . U.S. primary mortgage NIW was $14.3B with 79% FICO scores above 740 .

---

Why Did the Stock Drop Despite the Beat?

Net premiums written declined 4.5% YoY to $3.65B, the first decline in several quarters . This signals Arch is prioritizing profitability over growth in a competitive market:

The divergence between gross (up 1.1%) and net (down 4.5%) reflects increased ceded premiums, suggesting Arch is buying more reinsurance protection . This conservatism may be prudent given potential market softening but concerns growth-focused investors.

---

What Did Management Say About the Outlook?

CEO Papadopoulo expressed confidence entering 2026: "We enter 2026 with optimism in our ability to continue delivering superior results for our shareholders."

Key themes from the release:

1. Cycle management: Arch is emphasizing disciplined underwriting over premium growth, consistent with their historical playbook

2. Capital deployment: $798M in share repurchases during Q4, with $1.9B total for 2025 — management sees value in buying back stock

3. Bermuda tax impact: New corporate income tax increased effective tax rate to 14.5% from 6.6% in Q4 2024

4. Investment portfolio: Total investable assets reached $47.4B with average duration of 3.34 years and AA-/Aa3 average credit rating

---

What Changed From Last Quarter?

Operating EPS actually improved sequentially as catastrophe losses remained low (3.9% vs. 1.7% in Q3) . The slight increase in combined ratio reflects normal seasonal patterns and business mix changes.

---

Full Year 2025 Summary

For the full year, Arch delivered record profitability:

The 22.6% book value growth is particularly notable, driven by strong earnings, share repurchases, and a recovery in the fixed income portfolio's unrealized gains .

---

Capital Position and Shareholder Returns

Arch's capital position remains robust:

• Total capital: $26.9B at December 31, 2025
• Debt/capital ratio: 10.1%, down from 11.6% a year ago
• Share repurchases: $1.92B in 2025 ($7.78B cumulative)
• Remaining authorization: $1.1B

Management has been aggressive with buybacks, repurchasing 8.9M shares in Q4 alone at an average price of $90.04 .

---

Key Risks to Watch

1. Premium growth deceleration: Net premiums written down 4.5% YoY raises sustainability concerns

2. Bermuda tax changes: Higher effective tax rate (14.5% vs. 6.6%) will pressure future earnings

3. Catastrophe exposure: While Q4 was benign, Arch remains exposed to hurricane and earthquake risk

4. Mortgage segment normalization: The exceptional combined ratios may not persist as housing market conditions evolve

5. Investment portfolio duration: At 3.34 years, the portfolio is positioned for rate cuts but vulnerable to rate increases

---

The Bottom Line

Arch Capital delivered exceptional Q4 underwriting results with a 80.6% combined ratio and 38% EPS growth. The stock's 4.5% decline reflects investor concern about the 4.5% drop in net premiums written and the shift from growth to capital return. For long-term shareholders, the 22.6% book value growth and consistent beat track record suggest the business remains on solid footing — the question is whether premium growth can reaccelerate in 2026.

---

Conference Call: February 10, 2026 at 10:00 AM ET. Webcast available at archgroup.com/investors .

---

Data sources: Arch Capital Group Q4 2025 8-K filing (February 9, 2026), S&P Global Market Intelligence. Values retrieved from S&P Global where citations not provided.