Arch Capital Group Ltd. posted net income of $1.2 billion for the second quarter of 2025, equivalent to $3.23 per diluted share, yielding a 22.9% annualized return on average common equity.
This compares to $1.3 billion, or $3.30 per share, for the same period in 2024.
After-tax operating income available to common shareholders was $979 million, or $2.58 per share, nearly flat compared to $981 million, or $2.57 per share, in the prior-year quarter. The company reported a combined ratio excluding catastrophic events and prior year development of 80.9%, higher than 76.7% last year.
Gross premiums written in the insurance segment rose 27.5% year over year, 3.6% when excluding the MCE acquisition completed on August 1, 2024. Net premiums written climbed 30.7% compared to Q2 2024, or 1.7% excluding the acquisition. The underwriting expense ratio declined to 33.6%, compared to 35.3% last year, supported by scale efficiencies and fair value adjustments from the acquired assets.
The loss ratio included 2.9 points from current-year catastrophic activity and 0.4 points in reserve releases from prior years, compared to 2.0 and 0.3 points, respectively, in 2024.
The reinsurance segment recorded an 8.7% increase in gross premiums written and a 5.8% rise in net premiums written. Net premiums earned grew 17.2%, driven by rate changes and new or expanded business. The loss ratio contribution from catastrophic events declined to 5.5 points from 10.0 points in the prior year. Reserve releases lowered the loss ratio by 3.9 points, up from 1.9 points. The underwriting expense ratio increased to 24.4% from 23.0%, largely due to changes in ceded commission structures.
The mortgage segment saw a 5.0% decline in gross premiums written and an 8.3% decrease in net premiums written. The drop was attributed to a one-time expense related to the Bellemeade Re tender offer and reduced international originations. Reserve releases lowered the loss ratio by 22.8 points, compared to 26.9 points a year earlier.
Net investment income rose due to higher average invested assets, while net realized gains increased to $229 million from $122 million. Foreign exchange losses reached $88 million, reversing a $1 million gain last year. Arch repurchased $163 million in shares during the quarter. Book value per share rose 7.3% to $59.17. The effective tax rate rose to 14.7%, up from 7.1%, primarily due to Bermuda’s new corporate tax.
What’s your take on Arch’s segment results and capital strategy this quarter? Let us know in the comments.
