Good day, ladies and gentlemen, and welcome to the 3Q2026 Arch Capital Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. As a reminder, this conference call is being recorded. Before the company gets started with its update, management wants to first remind everyone that certain statements in yesterday's press release and discussed on this call may constitute forward-looking statements under the federal securities laws. These statements are based upon management's current assessments and assumptions and are subject to a number of risks and uncertainties. Consequently, actual results may differ materially from those expressed or implied. for more information on the risks and other factors that may affect future performance investors should review periodic reports that are filed by the company with the SEC from time to time Thank you for listening. Management will also make reference to certain non-GAAP measures of financial performance. I would now like to introduce your hosts for today's conference, Mr. Nicolas Papadopoulo and Mr. Francois Morin. Sirs, you may begin.

Good morning and welcome to ARCH's third quarter earnings call. ARCH delivered a very strong result this quarter, reflecting excellent underwriting performance across each of our businesses and a relatively low level of catastrophe activity. After-tax operating income was $910 million, or $2.67 per share. resulting in an annualized operating return on average common equity of 16%. Strong returns from our equity method investments contributed to an annualized net income return on average common equity of 18.1%. Despite increasingly competitive market conditions, we continue to generate strong returns reflecting our ability to proactively shift capital to optimize long-term returns. This is the essence of cycle management, and given this dynamic, we were able to return approximately $1.4 billion to our common shareholders through buybacks in the quarter. Book value per share was essentially flat in the quarter. However, it's worth noting that tangible book value per share, excluding AOCI, increased approximately 15% from a year ago. Archer's brand underwriting expertise and relationships combined with our diversified platform give us broad access to business across insurance and reinsurance. In addition, continuing investments in data and analytics enhance our risk selection and provide deeper insight into our portfolios. Each of these elements allows us to be highly selective about where and how we deploy capital. Importantly, We are led by returns, therefore premium growth is not the ultimate objective. We continue to act on what we see, growing where returns remain attractive and exercising restraint where they do not. Let me now turn to our segment performance, starting with insurance. Insurance generated $108 million of underwriting income in the quarter with a combined ratio of 94.4% and a current accident year combined ratio excluding catastrophes of 89.2%. Gross premiums return increased 7.8% and net premiums return increased 2.7% compared to the same quarter last year. The premium growth in the quarter benefited from a new captive program in alternative markets and increased ridings of marine warbridge coverage related to the Iran conflict. The premium growth we saw this quarter was stronger than the underlying trend for the year. Year-to-date, adjusting for the planned reduction in middle-market commercial program business, gross premiums return increased 4.2% and net premiums return increased 1.6% compared to the first nine months of last year. This low single-digit underlying growth is consistent with our expectation given current market condition. In North America, we continue to see opportunities across excess and surplus casualty, construction and national account casualty, where rate and market conditions remain attractive. Internationally, we continue to benefit from our position as a lead market across many classes at Lloyds. At the same time, property and short-tail markets remain more competitive, while rate increases have moderated in some of our casualty lines. We continue to believe that adverse development emerging across the industry from more recent accident years reinforces the need for casualty pricing to remain at or above the lost cost trend. Moving to reinsurance, which delivered $393 million of underwriting income in the quarter with a combined ratio of 78.3%, aided by light catastrophe activity. Gross premiums returns declined approximately 8% compared with the same quarter last year, reflecting abundant reinsurance capacity, particularly in property and short-term lines. Consistent with our cycle management approach, we are reducing participation where returns no longer meet our objectives. and increasingly leveraging third-party capital to manage net exposure and optimize returns on our own capital. While casualty generally remains attractive, additional capacity continues to enter the market. We will not chase growth for the sake of growth. We will remain patient and deploy capital where pricing and terms and conditions appropriately reflect the underlying risk. Our objective is not to become an index of the overall market. Our global reach, underwriting expertise and third-party capital platform allow us to take advantage of opportunities as they emerge and to construct a portfolio that delivers our required risk-adjusted returns. Our mortgage segment generated $201 million of underwriting income in the quarter and continues to be a valuable contributor to our results. New origination volume remains constrained, primarily Due to mortgage interest rates currently above 7%, limiting near-term growth opportunities. Importantly, the underlying quality of our enforced portfolio remains strong. In USMI, favorable reserve development has moderated from prior years, while positive homeowner credit conditions continue to support a low delinquency rate of 2.2% at September 30th. Higher mortgage rates also support persistency by reducing voluntary refinancing activity. Our business, outside of primary US mortgage insurance, brought $66 million of net premium in the quarter. And we continue to see opportunities in these businesses, providing diversification from our USMI business. As always, the mortgage team remains focused on disciplined execution, optimizing the platform, and managing expenses in line with the market environment. Finally, investment contributed $451 million of pre-tax net investment income in the quarter. Our equity method investment also performed very well, contributing $224 million to pre-tax net income. With $49.2 billion of investable assets, investment income is expected to remain an important contributor to Arch's overall earnings. Last Friday, Arch celebrated its 25th anniversary. I want to recognize this milestone and thank our employees for what we have built together, a global franchise, a strong brand, and perhaps most importantly, a unique culture anchored in our values. I also want to thank our investors for the confidence they have placed in ARCH over the past 25 years. As I reflect on my 25 years at ARCH, one thing has remained consistent. Our ability to adapt and generate attractive returns across very different market environments. That has been our legacy for our first 25 years and it remains our focus for the next 25. Today, we are operating in a transitioning market where conditions are becoming increasingly uneven. And as this quarter's results demonstrate, we are prepared for that environment and we welcome the challenge. The market will continue to evolve, but our core principles will not. We will remain disciplined underriders and thoughtful stewards of capital, always focused on producing superior risk-adjusted returns over the long term. That gives me confidence in Archer's position today and the opportunities ahead over the next 25 years. With that, I will turn the call over to Francois.

Thank you, Nicolas, and good morning to all. As you saw last night, our third quarter results were highlighted by strong underwriting performance and solid investment results. Capital management and capital returns also remain very much at the forefront of our initiatives this quarter, as we took advantage of an attractive share price to repurchase 14.8 million of our common shares at an aggregate cost of $1.4 billion in the quarter. Through nine months of 2026, we have repurchased approximately 109% of our net income in our own shares. While our first choice will always be to invest our capital in the business, a transitioning business environment presents an avenue to return excess capital to our shareholders. Turning to our operating performance for the quarter, our three business segments delivered excellent underlying results. with an overall ex-cap accident year combined ratio of 81.2%, up 70 basis points from the same quarter last year. Our underwriting income included $179 million of favorable prior development on a pre-tax basis in the third quarter or 4.5 points on the overall combined ratio. We recognized favorable development in all three of our segments, and in many of our lines of business, but mainly in short tail lines in our P&C segments and in mortgage due to ongoing strong cure activity. Current year catastrophe losses worth $234 million in the quarter, net of reinsurance and reinstatement premiums. These catastrophe losses originated from a variety of events across the globe and include losses associated with the Iran conflict. The insurance segment's net premiums written increased 2.7% year-over-year as we were able to grow in select areas where expected returns met our underwriting criteria, primarily in our international operations. These opportunities more than offset the headwinds from the non-renewal of certain program business discussed on prior calls. The ex-cat accident-year loss ratio Net of reinstatement premiums improved by 170 basis points to 55.8% compared to the same quarter one year ago. Most of the improvement was due to the benefit of incremental Marine War breach earned premium. Our insurance expense ratio was lower this quarter compared to the same quarter one year ago, reflecting the introduction of the Bermuda QRTCs. Turning to our reinsurance segment, Net premiums written were down 9.3% from the same quarter one year ago, reflecting reduced writings from lower rates and reduced participations across many lines of business, with the notable exception of casualty where we were able to find growth opportunities. Overall, our XCAT accident year law combined ratio of 78.4% increased 160 basis points from last year, Due to the shift in line of business mix towards longer tail lines and a more competitive rate environment. As I mentioned earlier, favorable prior reserve development in the quarter was primarily from short tail lines with nominal movements in casualty and longer tail lines of business. Our mortgage segment produced another very strong quarter with underwriting income of $201 million. The decrease in underwriting income reflects lower net premiums earned from last quarter, with the reduction occurring in our USMI business due to lower monthly premiums and higher seeded premiums, and in our international operations, where last quarter was favorably impacted by single premium terminations. Overall, the credit quality of our in-force portfolio remains very strong, as reflected by a low delinquency rate and favorable cure activity. Persistency of our in-force portfolio remains at around 80% and is an important factor in the sustainability of future premium flows. On the investment front, we earned a combined $675 million from net investment income and income from funds accounted for using the equity method, or $1.98 per share pre-tax, up from the $1.76 per share we earned last quarter. We note that the returns from equity method funds contributed 340 basis points to our annualized net income return on average common equity on a year-to-date basis and represents an important part, though variable, of our book value growth over time. Cash flow from operations remained very strong at $1.8 billion for the quarter, given the strong underwriting results of our operations. The recent increase in interest rates is also expected to provide a tailwind to net investment income given the short duration of our fixed income portfolio and new money yields outpacing our book yield by approximately 65 to 70 basis points. Income from operating affiliates was $33 million for the quarter, down from $62 million from the same quarter one year ago. Our effective tax rate on pre-tax operating income was 15.8%. reflecting the mix of income by tax jurisdiction. As of October 1, our peak zone natural cap PML for a single event, one in 250-year return period on a net basis is up slightly to $1.9 billion and now stands at 8.6% of tangible shareholders' equity. With these introductory comments, we are now prepared to take your questions.

Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star 1 to ask a question, and we'll pause for just a moment to allow everyone an opportunity to signal for questions. Our first question comes from the line of Elise Greenspan with Wells Fargo. Your line is open. Please go ahead.

Hi, thanks. Good morning. I guess my first question is just on capital. You guys have been leaning into buyback of late. So I was just hoping to get an update on how you're kind of balancing buyback and how you guys see some inorganic opportunities that are out there today and then Can you let us know, you know, provide an update on buybacks in the fourth quarter to date in October?

Yeah, sure. Good morning. On the, yeah, through last night, we bought back just about another $100 million of buybacks in October. And again, our strategy has not changed over time. We look carefully at capital. We're best to deploy it. Last quarter was really, and I mentioned it earlier, is really, you know, we thought the stock price was particularly attractive and, you know, we had the opportunity to buy back a meaningful amount of shares in that period. So we're, you know, we seized the opportunity. How do we think about the rest of the year in 2027? I mean, we're in a good position. Obviously, our capital base is very strong. We're generating very strong earnings. and the challenge for us right now is growing. So in an environment where growth is a bit more difficult and we still generate very strong earnings, we'll be in a position to probably most likely return back even more capital as we move forward.

To answer your question, good morning. We don't think of inorganic growth as a capital management. I think for us we think more and many others.

Okay. And then my second question, you know, you guys said, right, the underlying insurance growth is kind of in the low single digits right now. Just as you guys think about the market evolving, not only like for the fourth quarter, I'm really more interested in 27. You know, how do you see, you know, that underlying growth trending? You know, within the insurance business, you know, over, you know, the next, you know, 15 months, you know, or so.

So our view hasn't changed.

I think we believe that we're trading in a pretty good market overall. And we, you know, we see attractive opportunities in insurance, you know, especially in the casualty lines of business and and some of the specialty we write in London to be able to grow. I mean, there is the headwinds, continued headwinds on the property side that we are aware of, but overall we feel good about the market we trade in.

Yes, if you compare 26 to what could happen in 27, and compare really to 25. The decrease, we had some headwinds in 26. We talked about the non-renewals of MC programs, the property, cyber, DNO. There's some lines that we shrunk because the market wasn't attractive to us. So now if you compare like 27 versus 26, like the reset, we think there's a good opportunity for us to grow at some level in 26, our middle market business in the U.S. we think has an opportunity to grow. So there's a number of areas where if you compare on a relative like 27 versus 26, we think we'll be in an environment that is attractive in some places and we'll find a way to go get some of that business.

Thank you. You're welcome.

Your next question comes from the line of Pablo Singzon with J.P. Morgan. Your line is open. Please go ahead.

Hi, good morning. First question is on the expense ratio, operating expense ratio. I was hoping you could frame that as we go into next year. Seems like there's going to be some pressure on your premium base, but at the same time, you're getting a step up in Bermuda tax credits and then, of course, a normal course expense management initiative that you'll be implementing anyway. So just any perspective on how that might turn from here?

Yeah, if we focus on, I mean, I'm assuming the question is more for insurance, you know, the way that we think about it, and, you know, we always go back to trailing 12 months, like what's the run rate, you know, certainly, as you know, there's seasonality and some of our expenses and, and all that, but no question that the Bermuda, Bermuda, Coyote Seas is not a one time event, right? So it's sustainable. So yes, In Q3 specific, we didn't have a Q3 25. We had a Q3 26. So that's what we're trying to certainly communicate in the earnings release. And, you know, that'll be there going forward. And as you know, and you mentioned it, you know, the credits are expected to go up in 27 on a percentage basis based on what the Bermuda government is committed to. And then we had a couple of things that we had to absorb this year, right? We had a little bit of duplication of expenses around the integration of our middle market business. That is, for the most part, if not completely behind us in terms of the double accounting or double expense, so that will be a benefit. And normal, call it inflationary costs on expenses we think should kind of track You know, generally, you know, closely to the premium growth. So, you know, premium, you know, expense ratio, you put it all together, we think has a chance to kind of be, you know, come down a little bit from the current levels. But, you know, and you mentioned that we'll be working aggressively to manage our expense base. There's potential improvements and efficiencies, etc. that we'll realize over time. But, you know, that's kind of how we think about it.

Thanks, Chantal. And then the second question on the MI business, and not specifically about the quarter, but I just wanted to get your thoughts on changes on the regulatory side there, where there's a recent pilot announced, basically, I think it's meant to streamline MI cancellation upon reaching some threshold LTVs, right, based on the whole market values. So how do you see that affecting your business? Thanks.

Yeah, so the way we think about it is, you know, We don't see any near-term impact. I think the pilot is really for new mortgages, and it's going to take some time to implement. So as far as we're concerned, I think mortgage remains a terrific business for us.

Right, and I think the pilot, what's been identified, right, is to... I think that there's the vision or this acknowledgement that there's some inertia in terms of because it's not a change per se. The current rules have always been in place. People have the ability to cancel their MI if they reach certain LTV levels, etc. So that's nothing new there. I think they're trying to have people realize that there's this optionality. They want to encourage it. They want to encourage home affordability and and we were fully supportive of that. But, you know, and I'd say where we, where the MI product has been truly a massive benefit to promoting home ownership and home affordability is, you know, when we had the stats, we ran the stats recently last year, we, you know, through MI, we were able to support 75,000 first-time home buyers in the U.S. So we think that's a very positive thing, you know, to promote home ownership and to Thank you. Okay.

Your next question comes from the line of Alex Scott with Barclays. Your line is open. Please go ahead.

Hey, good morning. I wanted to see if you could dig a little bit more into the international growth for us, specifically the kind of risks you're taking, the kind of loss experience you've seen on that business in particular, if it's Middle Eastern related.

Yes, so I think we, you know, we are a leader in the London market and whether it's war on land or, you know, marine war breach, those are coverage where we've, with others, we provide and we've been providing for a while. When we look at what's happening today in the Middle East, I think we look at the market share of those losses and the premium we get paid. We see it more as an opportunity than anything else. I think we trade carefully in that region, but we also want to support the insured. We've been insuring for a while in that region. So we take it very seriously and I think we trade carefully, but we see this as doing our job in helping those insured at the time where they really need the insurance.

Got it. That's so helpful. Thank you. Could you talk also about just what you've seen in terms of private capital emergence in the reinsurance landscape and, you know, property as well and just, you know, how ARCH can take advantage of that, but also maybe, you know, some of the risks associated with the pricing environment that come along with it and maybe your high-level perspective on some of that capital?

Yes, so third-party capital, that's It's a helpful tool for us, I think, for the industry in general. I think it's, you know, and as pricing goes down, I think it's a capacity that has a lower cost of capital and the industry has been using it to provide solutions to brokers and sit-ups. And Arch is doing that. So on the property side, I think it's... It's been there for a while. I think the supply comes and goes. So I think as a carrier, we have to be able to manage that. But I think it's an interesting and valuable tool to have. On the casualty side, I think on the reinsurance side, it's a little newer and untested. It doesn't look that the product provides as much tail risk. So the question is, who has the tail risk in the infrastructure? And that's still a question.

Thank you.

Your next question comes from the line of KV Montessori with Deutsche Bank. Your line is open. Please go ahead.

Thank you. The first question is on this marine bridge premiums. As we think about your run rate underlying loss ratio, could you maybe help us quantify the impact that that had on during the quarter? How much did that kind of boost your X and D or X cap loss ratio this quarter?

Yeah, I mean, I touched on my comments. I think it was most of the improvement. So you compare year over year, that was, you know, pretty much, you know, there's always updates, gives and takes here and there. But, you know, try to, you know, make it, you know, clear or easy for you guys to think about it. There was most of the improvement. So, you know, you can see the premium flows through our international short tail and property specialty line of business and the supplement. And, you know, so it was definitely noticeable. So that's why we highlighted it.

Got it. And thanks for the call on the insurance OPEX. I guess I'll maybe ask about that on the reinsurance side. Obviously, earned premium is coming down. But year-to-date, your OPEX ratio also improved, went down. So can you unpack what's driving that improvement? And is there anything we should keep in mind as we try to run that improvement going forward?

I mean, the nuance or maybe the difference for reinsurance is, you know, there's certainly some profit commissions on third party capital that come into play here. And, you know, it's been a relatively benign cat environment the last couple of years. So, you know, are we earning or is that a run rate? I mean, that's for you guys to decide whether, you know, on a more normalized cat year, we would probably have Slightly less in terms of profit commissions, but the rest, I mean, it's, again, our teams are working hard to manage the expense base and kind of have that, you know, line up with, you know, the growth and the premium, but that's, again, just back on the profit commissions, that may be the one thing on reinsurance that is something to think about. Thanks.

Your next question comes from the line of Andrew Kligerman with TD Cohen. Your line is open. Please go ahead.

Good morning. I'll skip my follow up and ask this question that has a couple of pieces to it. So I heard Nicolas say that casualty is attracting much more capital now. And at the same time, I think, Nicolas, you also said that you're seeing a lot of growth opportunities in insurance casualty. And then later, I think Francois was saying he sees opportunities in casualty and reinsurance for growth. So it seems like that's the growth area. So what I'm hoping to hear is, you know, A, where in both segments do you see the growth opportunities? And B, and maybe I should reverse the order, and the second part of it is, in both segments. What are rates, terms, and conditions doing? I hear in reinsurance it's getting a little softer in terms of seating commissions and maybe terms. So that's it.

Yes, I think you're right in the sense that the opportunity and the casualty is is probably more clear on the insurance than it is on the reinsurance side. And the insurance you mentioned, you know, we mentioned in my comments the lines of business that we've been growing. I think we have a decent value proposition, lots of data and historical data on the segments we're riding in. So we're not riding the entire market in casualty on the insurance side. We're riding, you know, we're not targeting the large-account excess towers, which we think is still challenging. But the rest, I mean, the ENS casualty and some of the other specialty we write, like construction, we feel very good about our brand and our expertise and the solution we're solving for clients in the current market environment. On the reinsurance side, it's a little different. I think the underlying business that our guys target is very similar to what we do on the insurance side, but the terms and conditions are probably not where we would want them to be. So I think for them to be able to like a piece of business, you need both the underlying to be attractive and the term condition to be attractive. And despite the fact that some of the major players have withdrawn, There's still an abundance of smaller players that are providing enough capacity to keep those terms and conditions, in our view, too high. We find opportunities, but they are not as likely as in the insurance group. And the role of third-party capital It adds another dimension to the supply on the reinsurance side. So I think it contributes to more supply, which makes it more difficult to find growth.

Thanks. That was helpful. Maybe anything you could say on rates and casualty just in general?

So primary casualty rates have been decelerating, but they're still about lost trend. I think we still think that it's adequate overall.

Thank you.

Your next question comes from the line of Josh Shanker with Bank of America. Your line is open. Please go ahead.

Yeah, thank you. Good morning, everybody. So over the past year, you've returned 100% of your earnings to shareholders. And if you look at comprehensive income, you've returned more than 100%. So to get to the question, you might be pushing into excess capital here. How big is that excess capital cushion that you could be returning 100% of your capital or more for a while? And where does the Bermuda tax credit sit in that sort of capital

Well, I know you're hoping I'm going to give you the number, and I'm not, so that's like a good try on that one. But yeah, no question. I mean, right? I mean, excess capital, we talk about it a lot. We certainly don't look to carry excess capital, too much of it. and we were in a position, you know, a few years ago when we are, you know, and our results have been very strong the last few years and, you know, we didn't buy back a whole lot in 24. We started buying back a little bit in, you know, last year and more so in the second half of the year and a lot this year. So no question that the stock price, you know, is a factor in how much we return, how quickly. But, yeah, we have accumulated a lot of excess capital over the years and there's still some on the balance sheet. It's not, you know, as we've said before, it's not burning in our pockets. We're not going to go waste it and we're very careful with it and we want to be, you know, again, if there's a good opportunity where we can put it to work in the business, we'll absolutely, that's always our top priority. But, you know, let's, you know, you look at our numbers, we do still have some excess capital that, you know, at the right time will be certainly, you know, absent some opportunity to deploy in the business, we'll return to shareholders. So, That's part of that. And part B, your question in terms of the Bermuda tax, there's no new development. So we have talked about this potential kind of DTA going away. Is it going to be in the fourth quarter? Is it going to be next year? Is it not going to happen? There's a lot of discussions with both Bermuda government and OECD and lots of interested parties. So we're We're waiting. We'll hear more probably over the coming months, but right now, no new news to communicate.

It's probably about $900 billion. Do you internally give yourself any capital credit for it to the rating agencies? How do you think about it when you're assessing your capital cushion?

It's capital, but Internally, we look at it with and without. So we take the view and we always run analyses with and without it because it's a possibility that we lose it. It's not a certainty. So for us, it's important to run scenarios or run models both ways.

All right. Thank you for the details. Yep.

Your next question comes from the line of Roland Mayer with RBC Capital Markets. Your line is open. Please go ahead.

Hi, good morning. I wanted to go off Pablo's MI question. Could you maybe walk through the amount of capital to back the pre-2023 loans that have significant HTA? I assume there would be a significant unlock there if there was a regulatory change or the friction was reduced via AI.

Sorry, Roland. We couldn't quite. Can you repeat the question? You didn't come through clear to us. Sorry. Did we lose him?

Going off Pablo's MI question, could you maybe walk through the amount of capital that backs pre-2023 loans that have significant HPA in case there is a regulatory change or AI reduces friction in terms of detaching those loans?

Well, again, you know, it's in the supplement that you can look at the risk and force that is for pre-23. We have the risk and force by year, so it's call it pre-23, you know, it's somewhere around 25% of our risk and force is in, again, we got a category for 2016 and prior, which is, you know, goes back, you know, longer, but big picture, call it 25% of the risk and force. Again, the executive order is very specific that it's going to be prospective. It's a fair question you ask, but for us right now, it's not a concern. We're supportive of the initiative, but at this point, more to come in how the pilot program is going to work and what it's going to achieve.

Thank you. That's helpful. And then my second question, the buyback quarter to date you said was a meaningful slowdown. Is that because the stock moved when you were in a blackout period? Or should we think about 3Q as a pull forward? Sorry, in the fourth quarter? Yeah, I believe you said $100 million through last night, and that would be a sharp

Yeah, I mean, again, there's a variety of considerations. I mean, we were in a blackout period, so we put like a 10b-5-1 plan in place, and there's limits on it, etc. So now that we'll be back in the open window starting tomorrow, we'll see what we do. But that's, again, I don't want to kind of I want you guys to read too much into what happened on a daily basis because there's a lot of considerations that go into it.

Thank you. That's great. Congrats on 25 years. Thank you.

Your next question comes from the line of David Motomaden with Evercore ICI. Your line is open. Please go ahead. A gentle reminder to unmute locally.

Hi, thanks. Sorry about that. You guys have spoken a bit about how you expect low single digit insurance growth going forward. I'm wondering if you could just share your view on the reinsurance side, and maybe just touch on how you're thinking about the 1-1 property cat renewals.

Yes. We really don't give guidance, so keep that in mind. Clearly, we expect some continued pressure on the short tail book, catastrophe, excessive loss, and, you know, and other properties, which is a big part of the portfolio in reinsurance, much bigger part than the insurance. So that will put pressure on the top line. But we like the market we are in. So I think we are trading well. We have a big book. We have great brands. So we're still finding opportunities. And we also take underwriting actions. As you know, pricings are going down. So I think you have to put all of this together and figure out, you know, where we're going to end up at 1.1. The market on the property side, you know, due to the fact that there hasn't been any, it's been a light catastrophe year, you can expect, you know, continued pressure, I think, on the rates.

Got it. No, thanks. That makes sense. Thought it was worth a try to ask about. Just maybe just following up, you know, interesting to hear you talk about casualty pricing still being attractive, but it sounds like moderating within North America E&S casualty and large account casualty. But at the same time, you know, the Lloyds pricing is moderating. It sounds like you said pricing is still above loss trend on casualty just broadly in insurance. How narrow is that now? Has that been narrowing enough where that could potentially get to a point where you guys are thinking about pulling back? Or do you still think there's still a pretty good runway to continue to grow in casualty?

So first correction is, I think I said the pricing in casualty has decelerated and now it's about, you know, last run to below. So I think that margin now is zero or turning negative. So that's one. The business we write, we think, has still very good margin in it. So I think there is a decent run rate in front of us for us to continue to find that business attractive.

So I think just to clarify, we still like the absolute return. It's just that on a relative basis, it's not improving, but it's holding up. So we are still chasing or hoping to get more of that business because on an absolute level, returns meet our threshold and it's good business.

Great. Appreciate that. Thank you. You're welcome.

Your next question comes from the line of Tracy Benjiji with Wolf Research. Your line is open. Please go ahead.

Morning. I hate to be the dead horse on capital, but it was great to hear that you're in a position to return even more capital as you move forward and your buybacks this quarter are quite remarkable on a payout ratio basis. But I'm curious, If any way, if that level was debt funded, I'll just point out that out of your $2 billion debt raise, about $1.1 billion was incremental debt and the balance was pre-funding. I'm also curious how you factor in negative marks in your capital return capabilities. I know at least S&P Capital cares about that.

Well, I mean, part one, no question that, yeah, we talked about it last quarter. The debt raise in June, you know, you're right, had about $1.1 billion of incrementally, you know, new capital, effectively, that we earmarked for general corporate purposes. And sure, buybacks being one of those, you know, the buybacks in the third quarter, you know, where does it come from exactly? It's all the same pot of money, right? But you're right, that certainly helped. and many more. Thank you. We want to maintain that capacity. It's just that we ended up effectively being at a level that was probably a little bit too conservative pre this debt issuance. So we're still in a very good spot. And discussions with rating agencies, they are, I'd say, very supportive of our approach and our philosophy around capital management. So right now, no concerns. And the mark to mark, I mean, our mark to market, if the question part be on more on the I think the impact for us was noticeable, obviously, in the third quarter, but not in a material way that we have issues that we have to think about.

Great.

Yeah, understood.

I have a big picture question. You know, ARCH is known for cycle management, but in the last soft cycle, you were much smaller and perhaps more nimble. So how should we expect you navigate this soft cycle? Is it fair to assume maybe a less intense push on non-renewals?

So on the reinsurance side, I would say yes. But again, we have different tools today that we had back then. I think if you look at our gross number and seeded number and net number on the reinsurance side, the last portion of our premium is already seeded to sidecars of third-party capitals. I think for us the philosophy is to really manage the net portfolio and ultimately stay in front of our clients. We have a leadership position and really figuring out and working with third-party capital, which I mentioned have lower cost of capital to be able to find solutions for sedent and brokers. So that's how we see it.

And on the insurance side?

Insurance side, I think it's a little different because our brand is a lot, our relationship with distribution partners is a lot and more relevant than he was probably five or six years ago, I think. And there is a flight to quality in terms of the company our distribution partner wants to trade with. So we're benefiting from that. And the solution we provide, I think, is a lot more analytical work that we've done to manage our portfolio. It's a lot more granular. So I think we can... I think we can maintain margin by just attacking a small portion of the business that is the worst part of any one portfolio. So I think we are much more granular in terms of our approach. I don't expect that managing the cycle in the next three or four years will mean cutting large portions of our business on the insurance side. I think it will be more being very laser focused on Your next question comes from the line of Brian Meredith with UBS. Your line is open. Please go ahead.

Yeah, thanks. Yeah, just quickly here, Francois, on the Iran conflict premiums that you had in the quarter, the Marine stuff, I'm assuming that as long as the war is going on, you're still running that business. So should we expect you'll see similar benefits in the fourth quarter from that, or is the business just not as profitable as you maybe think it is and maybe you're battling it back?

No, you should absolutely expect similar levels in the fourth quarter. Beyond that, I mean, it'll be a function of, you know, just have to watch the news and you'll get a sense, but no question that, you know, the business is still priced very, you know, we think at a, A very attractive level. I mean, there's I mean, there's inherent risk in that business. We get it. We understand it. Nicholas touched on it. I mean, we're we're doing it carefully. But in terms of the amount of premium that we expect to write in the fourth quarter, I would I would expect a similar amount.

Makes sense. Thank you. And then second question, just bigger picture, you know, we're hearing a lot about business moving from the not admitted market to the markets. I'm just curious, are you seeing that happening yourself? You know, obviously you got non-admitted and admitted. And then when that happens, you know, is that good or bad for you all? If I think about, you know, going from non-admitted to admitted.

So anecdotally, we hear that. We hear, you know, some of our wholesale brokers, when they lose an account and we lose the account, You know, complaining that it stayed with the retailer. So they found an admitted market. And it's true on property and real estate, and it's true on casualty, but we don't have a good line of sight into specific numbers, but certainly we're hearing more of it. So for us, I think we We have very different channels. Certain products we write on ENS basis, certain products we write on the retail basis. So I think when the wholesaler loses the business to the retail market, I think it hurts our ENS franchise. For those particular risks, I don't think we pick them up on the retail side because we don't want child conflicts.

Your next question comes from the line of Bob Huan with Morgan Stanley. Your line is open. Please go ahead.

Hey, this is Sid on for Bob. One more question on the Iran conflict. I know you guys mentioned it impacted the cap losses and insurance too. I was wondering if you could give us a sense of what was the premium and the cap loss dollar amounts in that?

Well, I mean, it's a lot less on the loss side. The $230 million or so of CAT losses, it's a lot less than half of that number in the quarter. We don't disclose individual numbers by event. So, I mean, that's how we think about it. And in terms of premium, again, I pointed you that there is some premium on the reinsurance side that we're getting also given our reinsurance structures of some syndicates at Lloyd's. So we're picking that up, but that's smaller, but more, you know, the bigger impact is on insurance. And I pointed you to the, you know, the volume or the premium numbers and the supplement in the international kind of line of business for short tail property. So that's, that's kind of how you can get a sense of the amount of business we wrote there.

Okay, thanks. And then follow up just on capital management. Do you have any thoughts on continuing or accelerating share repurchases for the quarter versus potentially doing another special dividend?

I mean, at this point, given the stock price, I think we're certainly more in favor or I think share buybacks make more sense to how we think about returning capital. So that would be the preferred approach at this point. And the pace, again, we touched on it earlier. I think there's no set kind of number that we try to get to. It's a reaction a little bit to stock price and what we see in the market. So could it go up? Could it go down? I mean, we don't know. I mean, ultimately, it'll be something that happens over time.

Okay. Thank you so much. Appreciate it.

Your next question comes from the line of Mike Zaremski with BMO. Your line is open. Please go ahead.

Hey, thanks. Maybe first kind of a macro question, given you guys have a bird's eye view into a lot of markets. In terms of kind of data center related premiums, a couple industry executives have talked about kind of 10 billion net new insurance premiums in the marketplace. Thank you very much.

It's an opportunity, but it's not a big opportunity. I think we ride it out of our London office. And so we have a construction team there that participates and leads some of the panels. But premium-wise, I don't think it's a game changer for us.

Got it. Follow-up on some of your playing offense. I know you've been playing a bit of offense in ENS casualty for a while. Is that more like small account or middle? I think you said it's not large. Just kind of curious what sandbox that is.

Yeah, so it's not the national account, like the big chains or the big retailers or the... We are more in the, I would say, middle market. I think the accounts are, our average account premium is in the hundreds of thousands. So I think it's not small, you know, we're not competing with the binding authority or the small DNS. I think we are more in the middle market and I think our insured are the construction companies, the energy companies, but not the contractors, but not Not the really national retail accounts.

Got it. And maybe just sneaking one last one in, probably an easy one, but reinsurance margins continue to be excellent, especially on an underlying loss ratio basis. If the consensus is right that You know, reinsurance pricing continues to decelerate or decline. You know, should we just continue to expect the underlying loss ratio to kind of glide path up from low 60s to mid 60s? You know, I know there's lots of moving parts there, but directionally.

Yeah, I mean, certainly it should go up. I think just the reality of like rates coming down a little, I don't think it's going to It's going to be a glide path. It's not going to be a stair step. It's going to happen gradually and maybe it plateaus if rates kind of stabilize. But yeah, I mean, it probably could go up a couple hundred basis points maybe over the next little while. I mean, depending again on how, you know, I mean, one-one renewals will have an impact, et cetera. And then the mix obviously is always part of the answer. Yeah. Thank you. Yep.

Your next question comes from the line of Mayor Shields with KBW. Your line is open. Please go ahead.

Great. Thanks so much for fitting me in. I just had a couple of quick questions. One, corporate expenses are only $22 million and a quarter. Is anything unusual there?

Well, again, the QRTCs being... Do a quarter year over year. That's part of the answer, right? No question that we didn't have QRTC credits in Q3 of 25. We had them this quarter. So that's most of it. There's also a variety of expenses that we had last year, consulting, et cetera. So, I mean, it's too many to list, but the big item this quarter was definitely QRTCs. And again, that's sustainable. So as you look forward, something to think about.

Okay, perfect. And second, does the rising interest rate environment have any implications for loss trends for short tail lines?

I would say it's neutral because the, you know, the rate is applied to the values on the short tail lines. So, you know, if the underwriter does a good job or the broker does a good job, you know, The total sum insured should be adjusted to reflect the inflation. It's never perfect. So as inflation step up, there may be momentarily an adjustment that we make to estimate the catch up that needs to happen for the replacement cost. But I think it's not a big factor, I think, except in transition time.

Okay, perfect. Thank you so much.

Your next question comes from the line of Chris Hartwell with Autonomous Research. Your line is open. Please go ahead.

Good morning, and thank you for taking my questions. A couple of hopefully quick ones. First of all, just on reinsurance. I think into and post-Monte Carlo, the brokers have been increasingly talking about the need for reinsurance to take more frequency. I think given what we've seen on pricing over the course of this year, I was wondering your views on how much scope there is for the reinsurance industry collectively and also your attitude to accepting that increased frequency.

So we don't have an issue with frequency. The thing we have to recognize is it's harder to price and severity. for us we are agnostic as long as we get paid for the risk we take so we do a lot of sub layers we used to do it and we still do some so yes I think what the brokers have been talking about is selling more sub layers with pricing going up attachment point have raised up and so there is an opportunity you know to bring the attachment point of the four arms down and I think we will support that as long as we get paid for the risk.

Okay, thank you. And secondly, just on some of the news flow that's been around one of your equity investments, ECOFAS, in recent weeks, I wondered if you could Just remind me of your thoughts and views around that specific investment and how important that relationship is to you.

It's very important. We actually love the investment. It's been good to us. There's nothing to complain. And we like the business. We like the management team there, the CEO. We have a lot of confidence in their ability, and they've done a great job. They were really the number three players, and I think now they're probably competing to be the number one player in the space. I think we like it a lot.

I think the structure, people, yes, it's an investment, but we think of it as a quarter share on a top-notch credit insurer, so it's It's a slightly different structure, but the results have been terrific, and we're very happy with it.

Your next question comes from the line of Yaron Kinnar with Mizuho. Your line is open. Please go ahead.

Thanks for taking my questions here. First one, hopefully a quick one, just with the riots that we've seen in France and across Europe, just want to confirm that that should not really drive any significant losses for the industry and certainly for forage.

Yeah, I mean, for us, yeah, and the industry as well, I think our understanding is it's, I mean, it's de minimis. I mean, I've seen numbers about, you know, call it a billion dollars, maybe, I mean, it could be ongoing. It seems like every Saturday the French get together to protest a bit more, but it's not something we do in a big way. So it's, for us, I wouldn't expect anything material in the fourth quarter on that.

Okay. And then my second question may be a little unfair to ask or difficult to answer, but I'll try anyway. With the appetite that you guys still have in casualty, particularly in reinsurance, it does stand out a bit relative to what we're hearing from other executives in the industry. I'm just trying to figure out why that would be. My assumption is that the terms and conditions and the pricing doesn't really fluctuate a whole lot from one reinsurance to the other. So what is it that allows you to see this as a more attractive liability or risk than others? Is it that you have a lower cost of capital or are there other parameters that I'm missing here?

I think it's a better loss experience than our competitors. I think we didn't write a lot of casualty back in the 50s, 60s, 70s. We started to write a bit more in You know, in 2021, but ultimately our loss pick haven't really moved. And so that gives us confidence that, you know, we've got the right terms and conditions on the reinsurance, supporting the book of business that, you know, closer to what we do on the insurance side, I think is good business. So that's

Your next question comes from the line of David Modumayden with Evercore ICI. Your line is open. Please go ahead.

Hey, guys. Thanks for taking my follow-up. Just a quick one on the insurance underlying loss ratio. If I just sort of assume that I guess all of the improvement year-on-year is coming from the Iran incremental premiums, It was basically flat year-on-year at 57.5, which is up quite a bit versus the first couple quarters, which I know there's seasonality, but you would also improve the loss ratio year-on-year in the first half versus roughly flat in 3Q. So I'm wondering if there's anything else underneath that or if it's just purely a mixed dynamic.

We would steer you to look at trailing 12 months. That's certainly how we look at it. There's always going to be some noise, one quarter, good or bad, and that influences the latest. This quarter might be a little bit elevated. There's a couple of claims here and there, but our view is what we've done the last 12 months. Even if you adjust for the Iran conflict is, you know, call it, you know, it's been flattish in terms of like compared to a year ago and given that we'll have some of the underwriting actions we've taken with programs as we look forward, we'd like to think that, you know, that range that we're talking about in terms of ex-cat, ex-year loss ratio is kind of generally in the right direction for 2017.

Thank you.

You're welcome.

I'm not showing any further questions. I would now like to turn the conference over to Mr. Nicolas Papadopoulo for closing remarks.

Thank you for your time today. And I want to remind you that you're all invited to our 25th anniversary. We are ringing the bell at the NASDAQ in a few weeks. So we hope to see you there. Thank you.

Thank you for participating in today's conference. This concludes the program. You may all disconnect.