01—Abstract
Summary
Summary of the 10-Q filed May 5, 2026. Cited figures are marked; the original filing is the authoritative source.
Arch Capital Group (ACGL) reported a strong first quarter of 2026, with net income available to common shareholders of $1,037 milliona, or $2.88 per diluted share, up from $564 million ($1.48) a year earlier.
Results were driven by a sharp improvement in underwriting profitability: consolidated underwriting income rose to $728 millionb from $417 million, and the consolidated loss ratio fell to 52.4% from 61.8%. Strong underwriting was supplemented by a $160 million equity-method contribution (versus $53 million), partly offset by $87 million of net realized losses. The annualized net income return on average common equity was 17.8% (operating ROAE 15.4%), and book value per share rose 1.7% sequentially to $66.19.
Total revenues declined modestly to $4.52 billionc from $4.67 billion as net premiums earned fell 4.8% to $3.99 billion, reflecting softer reinsurance volumes. Segment performance was mixed. Reinsurance was the standout, with underwriting income of $441 million, a combined ratio of 75.9%, and $152 million of favorable reserve development, though net premiums written fell 6.0% amid pricing pressure and higher cedant retentions.
Insurance underwriting income was roughly breakeven a year ago but improved to $66 milliond, with a combined ratio of 96.5%, while topline growth was essentially flat and expenses were elevated by MCE Acquisition transition costs. Mortgage generated $221 million of underwriting income, though this was down 12% and new originations remained subdued. Capital return accelerated: the company repurchased $783 million of common shares in the quarter, and after quarter end the board increased the buyback authorization by $3.0 billion, leaving about $3.0 billion available as of May 1, 2026.
Key risk considerations include the competitive environment in property and reinsurance, a reduced effective tax rate of 8.6% that reflects Bermuda and UK tax law changes, and catastrophe exposure, with the modeled Florida windstorm net probable maximum pre-tax loss at $1.9 billion (8.2% of tangible shareholders' equity). Balance sheet metrics remained solid, with debt-to-total-capital at 10.1% and the Arch MI U.S. PMIERs sufficiency ratio at 175%, though the PMIERs ratio declined from 179% at year-end.
02—Key points
Key Highlights
- Net income available to Arch common shareholders rose to $1,037M ($2.88 diluted EPS) from $564M ($1.48) in Q1 2025, and annualized net income ROAE reached 17.8% versus 11.1%.
- Consolidated underwriting income increased to $728M from $417M, with the consolidated loss ratio improving to 52.4% from 61.8% and the combined ratio to 81.7% from 90.1%.
- Reinsurance delivered $441M of underwriting income (75.9% combined ratio) including $152M of favorable prior-year reserve development, but net premiums written fell 6.0%.
- Insurance underwriting income improved to $66M (96.5% combined ratio) from a $2M loss, though topline growth was flat and MCE transition expenses continued into mid-2026.
- Book value per share rose 1.7% sequentially to $66.19 (up from $55.15 a year earlier), while the company repurchased $783M of shares in Q1 and increased its buyback authorization by $3.0B after quarter end.
- Net realized losses of $87M and an $87M swing from prior-year gains weighed on reported revenues, partly offset by a $160M equity-method income contribution.
- The effective tax rate fell to 8.6% from 17.4%, driven by Bermuda and UK tax law changes, supporting net income growth.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2026filed May 5, 2026Financial Statements
Q1 FY2026 against Q1 FY2025
| Line item | Q1 FY2026Q1 FY2025 | Change |
|---|---|---|
| Revenue | $4.52B$4.67B | −3.3% |
| Interest Expense | $37.00M$35.00M | +5.7% |
| Net Income | $1.05B$574.00M | +82.4% |
| EPS (Basic) | $2.94$1.51 | +94.7% |
| EPS (Diluted) | $2.88$1.48 | +94.6% |
| Shares Outstanding (Basic) | 353.20M372.90M | −5.3% |
| Shares Outstanding (Diluted) | 359.70M381.90M | −5.8% |
05—Questions
Frequently Asked Questions
Why did net income more than double year over year?
The main driver was a large improvement in underwriting results, with consolidated underwriting income rising to $728M from $417M as the loss ratio fell by about 9 points. Other contributors were higher equity-method income ($160M vs. $53M) and a lower effective tax rate (8.6% vs. 17.4%). These gains were partly offset by $87M of net realized losses, compared with $3M of gains a year earlier.
How is the reinsurance segment performing, and what is the pricing outlook?
Reinsurance underwriting income reached $441M with a 75.9% combined ratio, supported by $152M of favorable reserve development. However, net premiums written fell 6.0% to $2.2B due to pricing pressure, higher cedant retentions, and lower property catastrophe volume at January 1. Management says increased capacity is creating competitive conditions and that it will reduce participation where pricing falls below its minimum return thresholds.
What is the status of the MCE Acquisition integration in the insurance segment?
The company says it has substantially completed the data and system migration of the business acquired from Allianz in 2024. Expenses remained elevated in Q1 due to transition costs, and some expenses are expected to continue into mid-2026. The company also chose not to renew certain middle-market commercial program business from the acquisition, which reduced net premiums written by roughly 2.5 percentage points in the quarter.
How much capital does Arch have available for buybacks, and how much is it returning?
Arch repurchased about $783M of common shares in Q1 2026, compared with $196M in Q1 2025. On April 19, 2026, the board increased the program by $3.0B, and about $3.0B was available as of May 1, 2026, after roughly $346M of repurchases from April 1 through May 1. Total capital available to Arch was $26.9B, with debt-to-total-capital at 10.1%, which the company characterizes as a balance sheet in excellent health.
What are the main catastrophe and risk exposures investors should watch?
Based on April 1, 2026 exposures, the modeled peak zone catastrophe loss is a Florida Tri-County windstorm with a net probable maximum pre-tax loss of $1.9B, or 8.2% of tangible shareholders' equity, within the company's 25% limit. The modeled RDS mortgage loss from a severe economic event is $924M, or 4.0% of tangible equity. Q1 current-year catastrophe losses were 4.2 points in insurance and 5.4 points in reinsurance, compared with 9.5 and 21.7 points in Q1 2025, which were heavily affected by the California wildfires.
06—Continue