Q3 2025 Arch Capital Group Ltd Earnings Call

Speaker #1: Could they ? Ladies and gentlemen , and welcome to the . Three 2025 Arch Capital Earnings Conference call . At this time , all participants are in a listen only mode .

Operator: Good day, ladies and gentlemen, and welcome to the Q2 2025 Arch Capital Group Ltd. 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.

Speaker #1: 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 .

Speaker #1: Before the company gets started with its update , management wants to refer 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 .

Speaker #1: 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 .

Speaker #1: For more information on the risks and other factors that may affect future performance , investors should review periodic reports that are filed with the company by the company with the SEC from time to time , including our annual report on Form 10-K for the 2024 fiscal year .

Operator: 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, including our annual report on Form 10-K for the 2024 fiscal year. Additionally, certain statements contained in the call that are not based on historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The company intends the forward-looking statements in the call to be subject to the safe harbor created thereby. Management also will make reference to certain non-GAAP measures of financial performance. The reconciliation to GAAP for non-GAAP financial measures can be found in the company's current report on Form 8-K furnished to the SEC yesterday, which contains the company's earnings press release and is available on the company's website at www.archgroup.com and on the SEC website at www.sec.gov.

Speaker #1: Additionally, certain statements contained in the call that are not based on historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Speaker #1: The company intends the forward looking statements in the call to be subject to the safe harbor created thereby . Management also will make reference to certain non-GAAP measures of financial performance .

Speaker #1: The reconciliation to GAAP for non-GAAP financial measures can be found in the company's current report on Form 8-K , furnished to the SEC yesterday , which contains the company's earnings press release and is available on the company's website at .

Speaker #1: And on the SEC website at fcc.gov . And I would like to introduce your host for today's conference , Mr. Nicolas Papadopoulo and Mr. Francois Morin .

Operator: I would like to introduce your host for today's conference, Mr. Nicolas Papadopoulo, and Mr. Francois Morin. Sirs, you may begin.

Speaker #1: You may begin .

Speaker #2: Good morning and welcome to Archie's third quarter earnings call . We delivered record results in the quarter with over $1 billion of after tax operating income and over $1.3 billion of net income , both up 37% year over year after tax .

Nicolas Papadopoulo: Good morning and welcome to Arch Capital Group Ltd.'s third quarter earnings call. We delivered record results in the quarter with over $1 billion of after-tax operating income and over $1.3 billion of net income, both up 37% year over year. After-tax operating earnings per share of $2.77, another record, represented an 18.5% annualized operating return on average common equity. These results reinforce the strength of our diversified platform, which enables our underwriters to pursue opportunities and deploy capital across the enterprise. Meaningful contributions from all three segments, combined with solid investment returns, pushed year-to-date book value per share growth to 17.3%. Our quarterly consolidated combined ratio of 79.8% reflects excellent underwriting and low cat activity in the quarter. Big picture, our nine-month combined ratio of 83.6%, which includes the impact of California wildfires and severe convective storms, highlights the strong underwriting performance across our businesses.

Speaker #2: Operating earnings per share of $2.77 and other record represented an 18.5% annualized operating return on average . Common equity . This results reinforce the strength of our diversified platform , which enables our underwriters to pursue opportunities and deploy capital across the enterprise .

Speaker #2: Meaningful contribution from all three segments , combined with solid investment returns pushed year to date . Book value per share growth to 17.3% .

Speaker #2: Our quarterly consolidated combined ratio of 79.8% reflects excellent underwriting and low cat activity in the quarter . Big picture . Our nine months combined ratio of 83.6% , which includes the impact of California wildfires and severe convective storms , highlights the strong underwriting performance across our businesses .

Speaker #2: Now , some comments about market conditions . As you have heard on other calls , competition is generally increasing as cycle managers , we lean into the strengths of our brand , including underwriting discipline and using risk based pricing tools to generate profitable business .

Nicolas Papadopoulo: Now, some comments about market conditions. As you have heard on other calls, competition is generally increasing. As cycle managers, we lean into the strengths of our brand, including underwriting discipline and using risk-based pricing tools to generate profitable business. We deploy capital into businesses we believe will generate superior risk-adjusted returns. However, given relatively weaker market pricing and an attractive entry point for Arch Capital Group Ltd. stock, we repurchased $732 million of shares in the quarter. Critically, our strong balance sheet and strong capital-generating capabilities permit us to both invest in our business and return capital to investors. Our objective is clear throughout the cycle: to maximize returns for our shareholders over the long term. Importantly, I want to emphasize that we are actively looking to deploy as much capital as possible towards attractive underwriting opportunities.

Speaker #2: We deploy capital into businesses we believe will generate superior risk adjusted returns . However , given relatively weaker market pricing and attractive entry point for our stock repurchase , $732 million of shares in the quarter .

Speaker #2: We deploy capital into businesses we believe will generate superior risk-adjusted returns. However, given relatively weaker market pricing, we will both invest in our business and return capital to investors.

Speaker #2: Our objective is clear throughout the cycle to maximize returns for our shareholders over the long term . Importantly , I want to emphasize that we are actively looking to deploy as much capital as possible towards attractive underwriting opportunities .

Speaker #2: Our playbook remains consistent allocate capital to attractive opportunities that meet our risk adjusted target returns , pursue profitable growth while prioritizing renewals that meet our return thresholds , and take full advantage of our operating flexibility across insurance , reinsurance , and mortgage .

Nicolas Papadopoulo: Our playbook remains consistent: allocate capital to attractive opportunities that meet our risk-adjusted target returns, pursue profitable growth while prioritizing renewals that meet our return thresholds, and take full advantage of our operating flexibility across insurance, reinsurance, and mortgage. Over time, this playbook has been key in enabling us to deliver consistently strong returns without regard to market cycles. I will now provide some color from our reporting segment, starting with our property and casualty insurance group. Underwriting income for the quarter was $129 million, up 8% year over year, on nearly $2 billion of net written premium. Our combined ratio was 93.4%, with a current accident year ex-cat combined ratio of 91.3%, reflecting the strong underlying margins of our insurance portfolio. A distinguishing strength of our insurance segment is its breadth across specialty lines, areas where our team applies deep knowledge and experience to drive better risk selection.

Speaker #2: Over time , this playbook has been key in enabling us to deliver consistently strong returns without regard to market cycles . I will now provide some color from our reporting segment , starting with our property and casualty insurance group .

Speaker #2: Underwriting income for the quarter was $129 million , up 8% year over year , or nearly $2 billion of net premium return . Our combined ratio was 93.4% with a current accident share Xcat combined ratio of 91.3% , reflecting the strong underlying margins of our insurance portfolio .

Speaker #2: A distinguishing strength of our insurance segment is its breadth across specialty lines . Areas where our team applied deep knowledge and experience to drive better risk selection , successfully navigating a transitioning market demand that our underwriter employed the capabilities and experience they have developed to leverage our differentiated offerings and market leadership position as we look to drive profitable returns .

Nicolas Papadopoulo: Successfully navigating a transitioning market demands that our underwriters employ the capabilities and experience they have developed to leverage our differentiated offerings and market leadership position as we look to drive profitable returns. When compared to the third quarter last year, we grew net written premium in North America over liability occurrence by 17%, supported by growth in legal market and double-digit rate increase in E&S casualty. Net written premium in our North America property and short-tail book increased 15%. Growth in legal market and middle property more than offset declines in excess and surplus property. International premium volume was essentially flat. A strategic element of our insurance growth is our middle market business in North America, which was significantly enhanced through the mid-corp and entertainment acquisition last year.

Speaker #2: When compared to the first quarter last year , we grew net written premium in North America . Other liability occurrence by 17% , supported by growth in labour market and double digit rate increase in ONS casualty net written premiums in our North America property and short term book increased 15% growth in middle market and middle property , more than offset declines in excess and surplus property .

Speaker #2: International premium volume was essentially flat . A strategic element of our insurance growth is our middle market business in North America , which was significantly enhanced through the mid and entertainment acquisition last year .

Speaker #2: As discussed previously , the acquired business provided a significant platform from which we in turn to build further scale in the middle market sectors .

Nicolas Papadopoulo: As discussed previously, the acquired business provides a significant platform from which we intend to build further scale in the middle market sectors. Importantly, it is already driving growth and yielding tangible returns. At the outset, we set three integration priorities for the acquired business: rollover of the portfolio, remediate less attractive areas, and separate from legacy systems. We have completed the portfolio rollover. Remediation and separation are on target. Even though there is still work to do, we remain excited about this opportunity, which has been well received by our distribution partners. Next to reinsurance, which delivered another strong quarter with a record of $482 million of underwriting income, a 76.1% combined ratio was a significant improvement over last year's cat-heavy third quarter and illustrates our ability to generate attractive underwriting returns.

Speaker #2: Importantly , it is already driving growth in yielding tangible returns at the outset , we set three integration priorities for the acquired business all over the portfolio .

Speaker #2: Remediate less attractive areas and separate from legacy systems . We have completed the portfolio rollover remediation and separation are on target even though there is still work to do .

Speaker #2: We remain excited about this opportunity , which has been well received by our distribution partners . Next to reinsurance , which delivered an strong quarter with a record of $482 million of underwriting income , a 76.1% combined ratio was a significant improvement over last year's Cat third quarter and illustrates our ability to generate attractive underwriting returns .

Speaker #2: Net premium written were $1.7 billion , down roughly 11% year over year , reflecting current pricing conditions . In short tail and property cat lines and increased retention by students .

Nicolas Papadopoulo: Net written premiums were $1.7 billion, down roughly 11% year over year, reflecting current pricing conditions in short-tail and property cat lines and increased retention by cedents. The diversity of our reinsurance platform means we aren't overly concentrated in any one line. For example, property cat, which has been a hot topic of recent industry conferences, represents only 14% of reinsurance total net premium written for the trailing 12 months ended September 30. Our diversified reinsurance platform, supported by a strong partnership with our broker and cedent company across multiple lines and geographies, further enhances our ability to navigate a competitive environment. We continue to like our prospects in most lines of business, and with improving conditions in casualty lines, our agility and ability to create opportunities is an advantage for us in this market.

Speaker #2: The diversity of our insurance platform means we aren't overly concentrated in any one line . For example , property Cat , which has been a hot topic of recent industry conferences , represent only 14% of reinsurance total net premium return for the 12 months ended September 30th , our diversified reinsurance platform , supported by strong partnership with our broker and sealing company across multiple lines and geographies , further enhances our ability to navigate the competitive environment .

Speaker #2: We continue to like our prospects in most lines of business , and with improving conditions in casualty lines . Our agility and ability to create opportunities is an advantage for us in this market .

Speaker #2: Moving to mortgage , which continues to operate exceptionally well , generating $260 million of underwriting income for the quarter . The segment remains on pace to deliver approximately $1 billion of underwriting income for the year , and is a steady diversifying contributor to arches earnings .

Nicolas Papadopoulo: Moving to mortgage, which continues to operate exceptionally well, generating $260 million of underwriting income for the quarter. The segment remains on pace to deliver approximately $1 billion of underwriting income for the year and is a steady diversifying contributor to Arch Capital Group Ltd.'s earnings. While mortgage originations remain modest due to affordability challenges, our high-quality in-force portfolio continues to outperform expectations. We are well positioned to support first-time home buyers when the U.S. housing market eventually expands. The broader mortgage insurance market remains healthy, with disciplined underwriting and stable pricing. Now turning to investments, where strong earnings and cash flow grew investable assets to $46.7 billion this quarter, with net investment income of $408 million, a quarterly record for Arch Capital Group Ltd.

Speaker #2: While mortgage originations remain modest due to affordability challenge , our high quality In-force portfolio continue to outperform expectations , we are well positioned to support first time homebuyers when the US housing market eventually expands , the broader mortgage insurance market remains healthy , with disciplined underwriting and stable pricing .

Speaker #2: Now turning to investments . We are strong earnings and cash flow grew investable assets to $46.7 billion this quarter , with net investment income of $408 million a quarterly record for arch .

Speaker #2: We continue to position the portfolio to remain conservative in the current environment, with an eye towards generating reliable and sustainable earnings and cash flows for the group.

Nicolas Papadopoulo: We continue to position the portfolio to remain conservative in the current environment, with an eye towards generating reliable and sustainable earnings and cash flows for the group. To conclude my opening remarks, I want to emphasize that we manage Arch Capital Group Ltd. with a long-term lens. That was true in the past, it is true today, and it will be true tomorrow. Market cycles span years, not quarters, and in a transitioning environment, our focus remains on producing superior returns and profitable growth. Our ability to remain successful is rooted in our differentiated customer experience, superior risk-based pricing, and the creativity of our underwriting teams, which are empowered and incentivized to generate profitable business aligned with shareholder value. Today, we are well positioned to outperform in an increasingly competitive market.

Speaker #2: To conclude my opening remarks , I want to emphasize that we manage arch with a long term lens . That was true in the past .

Speaker #2: It is true today , and it will be true tomorrow . Market cycles span years , not quarters , and in a transitioning environment , our focus remains on producing superior returns and profitable growth .

Speaker #2: Our ability to remain successful is rooted in our differentiated customer experience , superior risk based pricing , and the creativity of our underwriting teams , which are empowered and incentivized to generate profitable business aligned with shareholder value .

Speaker #2: Today , we are well positioned to outperform in an increasingly competitive market . Our strong capital position gives us the flexibility to invest in the most attractive , risk adjusted opportunities , whether in the business or by returning capital to shareholders .

Nicolas Papadopoulo: Our strong capital position gives us the flexibility to invest in the most attractive risk-adjusted opportunities, whether in the business or by returning capital to shareholders. This transitioning market is a moment to lean into our strengths with confidence and clarity. I now turn the call over to Francois before returning to answer your questions.

Speaker #2: This transitioning market is a moment to lean into our strengths with confidence and clarity. I now turn the call over to Francois to answer your questions.

Speaker #3: Thank you , Nicholas , and good morning to all . Last night we reported our third quarter results with after tax operating income of $2.77 per share and an annualized net income return on average , common equity of 23.8% .

Francois Morin: Thank you, Nicolas, and good morning to all. Last night, we reported our third quarter results with after-tax operating income of $2.77 per share and an annualized net income return on average common equity of 23.8%. Book value per share grew by 5.3% in the quarter. Similar to last quarter, our three business segments delivered excellent underlying results with an overall ex-cap accident year combined ratio of 80.5%, down 40 basis points from last quarter. Our underwriting income included $103 million of favorable prior year development on a pre-tax basis in the third quarter, or 2.4 points on the overall combined ratio. We recognize favorable development across all three of our segments and in many of our lines of business. The most significant improvements were, once again, seen in our short-tail lines in our P&C segments and in mortgage due to strong cure activity.

Speaker #3: Book value per share grew by 5.3% in the quarter . Similar to last quarter , our three business segments delivered excellent underlying results , with an overall xcat accident year combined ratio of 80.5% , down 40 basis points from last quarter .

Speaker #3: Our underwriting income included $103 million of favorable prior year development on a pre-tax basis . In the third quarter , or 2.4 points on the overall combined ratio .

Speaker #3: We recognize favorable development across all three of our segments and in many of our lines of business , the most significant improvements were once again seen in our short tail lines in our PNC segments and in mortgage .

Speaker #3: Due to strong cure activity . Current year catastrophe losses were low at $72 million , net of reinsurance and reinstatement premiums . In what is typically our most active quarter for catastrophes , the insurance segment's net premiums written grew by 7.3% compared to the same quarter one year ago , mostly due to the contribution of the Mid Corp.

Francois Morin: Current year catastrophe losses were low at $72 million net of reinsurance and reinstatement premiums in what is typically our most active quarter for catastrophes. The insurance segment's net premiums written grew by 7.3% compared to the same quarter one year ago, mostly due to the contribution of the mid-corp and entertainment unit for a full three months this quarter compared to only two months from the same quarter one year ago. The ex-cap accident year loss ratio improved by 10 basis points to 57.5% compared to the same quarter one year ago, and the 220 basis point increase in the acquisition expense ratio is primarily due to the benefit we observed in the third quarter of 2024 from the write-off of deferred acquisition costs for the acquired business at closing under purchase GAAP.

Speaker #3: and entertainment unit . For a full three months this quarter , compared to only two months from the same quarter one year ago .

Speaker #3: The Xcat accident year loss ratio improved by ten basis points to 57.5% , compared to the same quarter one year ago , and the 220 basis point increase in the acquisition expense ratio is primarily due to the benefit we observed in the third quarter of 2024 from the write off of deferred acquisition costs for the acquired business at closing under purchase GAAP profit commissions paid for prior accident years also explained some of the increase from the same quarter one year ago by approximately 40 basis points .

Francois Morin: Profit commissions paid for prior accident years also explain some of the increase from the same quarter one year ago by approximately 40 basis points. The reinsurance segment produced its best quarter ever in terms of pre-tax underwriting income at $482 million, a direct reflection of the strong underlying profitability of the business written over the last few quarters and the absence of significant catastrophe activity in the quarter. Overall, net written premium was down by approximately 10.7% from the same quarter one year ago. Of note, approximately 75% of the overall reduction is the result of two large transactions from the third quarter in 2024 in our specialty line of business that did not renew this quarter. The absence of reinstatement premiums also negatively impacted our top line this quarter.

Speaker #3: The reinsurance segment produced its best quarter ever in terms of pre-tax underwriting income at $482 million, a direct reflection of the strong underlying profitability of the business written over the last few quarters and the absence of significant catastrophe activity in the quarter.

Speaker #3: Overall net written premium was down by approximately 10.7% from the same quarter one year ago . Of note , approximately 75% of the overall reduction is the result of two large transactions from the third quarter in 2024 .

Speaker #3: In our specialty line of business that did not renew this quarter , the absence of reinstatement premiums also negatively impacted our top line this quarter .

Speaker #3: Our Xcat accident year combined ratio remains very strong at 76.8% , reflecting the robust level of underwriting margins in our book of business .

Francois Morin: Our ex-cat accident year combined ratio remains very strong at 76.8%, reflecting the robust level of underwriting margins in our book of business. Once again, our mortgage segment delivered another very strong quarter with underwriting income of $260 million. The improvement from last quarter was primarily due to a lower level of ceded premiums as a result of the tender offers we executed in the second quarter for two Bellemeade Re securities. There was also a slight benefit due to a higher level of cancellations on CRT transactions. The delinquency rate of our USMI business increased to 2.04%, in line with our expectations due to seasonality in the business. On the investment front, we earned a combined $542 million from net investment income and income from funds accounted using the equity method, or $1.44 per share pre-tax.

Speaker #3: Once again , our mortgage segment delivered another very strong quarter with underwriting income of $260 million . The improvement from last quarter was primarily due to a lower level of ceded premiums as a result of the tender offers .

Speaker #3: We executed in the second quarter for too , Bellamy , Bellamy re securities . There was also a slight benefit due to a higher level of cancellations on CRT transactions .

Speaker #3: The delinquency rate of our U.S. mortgage insurance business increased to 2.04%, in line with our expectations due to seasonality in the business. On the investment front, we earned a combined $542 million from net investment income and income from funds accounted for using the equity method, for $1.44 per share pre-tax.

Speaker #3: Net investment income remains an important source of income for us , and with the help of strong positive cash flow from operations , $2.2 billion in the quarter , it should continue to grow in line with the size of our investment portfolio .

Francois Morin: Net investment income remains an important source of income for us, and with the help of strong positive cash flow from operations, $2.2 billion in the quarter, it should continue to grow in line with the size of our investment portfolio. The allocation of our portfolio remains neutral relative to our targeted benchmark. Income from operating affiliates was strong at $62 million, due especially to a very good quarter at Somers Re. Our operating effective tax rate on a year-to-date basis stands at 14.7% and reflects the mix of income by tax jurisdiction. It is slightly below the 16% to 18% previously guided range, mostly due to a 1.7% benefit from discrete items.

Speaker #3: The allocation of our portfolio remained neutral relative to our targeted benchmark income from operating affiliates was strong at $62 million , due especially to a very good quarter at summary , our effective operating effective tax rate on a year to date basis stands at 14.7% and reflects the mix of income by tax jurisdiction .

Speaker #3: It is slightly below the 16 to 18% previously previously guided range , mostly due to a 1.7% benefit from discrete items . As of October 1st , our peak zone Natural cat probable maximum loss for a single event , 1 in 200 year of return level on a net basis remained flat at $1.9 billion and now stands at 8.4% of tangible shareholders equity .

Francois Morin: As of October 1, our peak zone natural cat probable maximum loss for a single event, one in 200 year return level on a net basis remains flat at $1.9 billion and now stands at 8.4% of tangible shareholders' equity. Our PML remains well below our internal limits. On the capital management front, we repurchased $732 million of our shares in the quarter and added $250 million to this number so far in October. On a year-to-date basis, we have repurchased 15.1 million shares, representing 4% of the outstanding number of common shares at the start of the year. As Nicolas mentioned, our balance sheet is stronger than it's ever been, and it remains a significant asset for us as we focus on executing our playbook and leveraging the value of the Arch brand as we move forward in this dynamic market.

Speaker #3: Our PML remains well below our internal limits on the capital management front . We repurchased 732 million of our shares in the quarter and added $250 million to this number so far in October .

Speaker #3: On a year to date basis , we have repurchased 15.1 million shares , representing 4% of the outstanding number of common shares at the start of the year .

Speaker #3: As Nicholas mentioned, our balance sheet is stronger than it's ever been, and it remains a significant asset for us as we focus on executing our playbook and leveraging the value of the Arch brand.

Speaker #3: As we move forward in this dynamic market . With these introductory comments , we are now prepared to take your questions .

Francois Morin: With these introductory comments, we are now prepared to take your questions.

Speaker #1: Thank you . If you would like to ask a question , please signal by pressing star one on your telephone keypad . And if you're using a speakerphone , please make sure you mute function is turned off to allow your signal to reach our equipment again , press star one to ask a question and we'll pause for just a moment to allow everybody an opportunity to signal for questions .

Operator: Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We'll pause for just a moment to allow everybody an opportunity to signal for questions. Your first question will be from Elyse Greenspan at Wells Fargo. Please go ahead.

Speaker #1: And your first question will be from Elise Greenspan at Wells Fargo . Please go ahead .

Speaker #4: Hi . Thanks . Good morning . My first question is just on capital . You know , the level of buyback went up in the quarter .

[Analyst]: Hi. Thanks. Good morning. My first question is just on capital. The level of buyback went up in the quarter. I guess my question is maybe two-pronged. How do we think about the level of buybacks going forward, just given the strong earnings this year? I know last year you guys had gone the route of a pretty substantial special dividend. Is this year the route more of buyback versus a special in terms of capital return?

Speaker #4: I guess my question is maybe two pronged . You know , just how do we think about , you know , the level of buybacks going forward ?

Speaker #4: Just given the strong earnings this year ? And then I know last year you guys had gone the route of a pretty substantial special dividend .

Speaker #4: So is this year the route more of buyback versus a special in terms of capital return .

Speaker #3: You know, the last one, I think it's, you know, for us, we think of those as two options. But most likely, we're not going to do both at the same time.

Francois Morin: Yeah. The last one, I think it's, you know, for us, we think of those as two options, but most likely not going to do both at the same time. In this current environment where, yes, we certainly see our earnings profile being very strong, and we think there's, as we've seen, right, limited opportunities for growth for us to grow aggressively in the business. Capital return to shareholders will remain a focus. Given the stock price, I think, sure, buybacks will be our preferred method going forward, at least for the short term. We'll see how things play out moving forward. That's obviously something we talk with our board on a regular basis. I'd say that's kind of where we're at. Again, balance sheet remains very strong. Is there room for us to do more buybacks as we move forward?

Speaker #3: So in this current environment where yes , we you certainly see our earnings profile being very strong and we think there's , you know , as we've seen , right , limited opportunities for growth for us to grow aggressively in the business .

Speaker #3: So capital return to shareholders will be will remain a focus . And given the stock price I think share buybacks will be our preferred method .

Speaker #3: Going forward , at least for the short term . We'll see how things play out moving forward . But that's obviously something we talk with our board on a regular basis .

Speaker #3: So I'd say that's again , you know , where we're at . And again , you know balance sheet remains very strong . So is there room for us to do more buybacks as we move forward .

Speaker #3: And I think the answer is is definitely yes . And , you know , something ? We'll keep evaluating as we move forward .

Francois Morin: I think the answer is definitely yes, and something we'll keep evaluating as we move forward.

Speaker #4: And then my second question is just on the insurance premium growth , you know , so we've annualized the midcourt deal . But there is going to be some impact from Non-renewals .

[Analyst]: My second question is just on the insurance premium growth. We've annualized the mid-corp and entertainment acquisition, but there is going to be some impact from nonrenewals there. Obviously, the overall market, which is softening in spots. How do we think, as you guys think about pricing, the combination of the nonrenewals on mid-corp, how do you guys see the premium growth outlook for your insurance book from here?

Speaker #4: There . And and obviously just the overall market which is which is softening in spots . So how do we think as you guys think about pricing , the combination of the non-renewals on MediaCorp , how do you guys see , you know , the premium growth outlook , you know , for your insurance book from here ?

Speaker #2: Yes . Good morning Elise . Yes . So on the on the insurance side , I think we we are we're still very much bullish about the business .

Nicolas Papadopoulo: Yes. Good morning. It is, yes, on the insurance side, I think we are still very much bullish about the business. I think we like the market we trade in, and we would like to grow. You know, we talk about profitable growth. That's what we're really focusing on. You have to divide the market in three broad categories. First one being areas where we still see some rate increase, you know, like casualty would be the main one, and the middle market, you know, business where we think we have the rate increase, and I think we have the propensity to grow. You have the second segment, which is the one that I've witnessed headwinds in the past, which is mostly professional lines, whether it's GNO or cyber. The good news there, I think the rate decrease has really moderated on the GNO, pretty flat.

Speaker #2: I think we like we like the market . We we trade in and and we would like to grow . And you know , we talk about profitable growth .

Speaker #2: That's what we really focusing on . And and you have to divide the market in three broad categories . First one being areas where we still see some real increase .

Speaker #2: You know , like casualty will be the main one . And the middle market , you know , business where we think we have the rate increase .

Speaker #2: And I think we we have the propensity to grow . Then then the the second segment , which is the one that have witnessed headwinds in the past , which is mostly professional lines , whether it's or cyber .

Speaker #2: The good news there , I think the , you know , the rate decrease have really moderated on the on the on the know , pretty flat and on cyber .

Nicolas Papadopoulo: On cyber, they're saying that they are moderating. That should be less of a headwind going forward. Third, it's really the property, you know, whether it's the large account property and, you know, the E&S property. The good news for us is that we don't write much of the shared and layered property business. We have a relatively small footprint on the E&S side, which is really under a lot of pressure today. I think overall, if I look at the outlook for us and, you know, our positioning in the London market as well, if I look at the outlook, I would expect, you know, us to have the ability of the insurance to grow better than the market we play in.

Speaker #2: There are signs that they are moderating . So that should be less of a less of a headwind going forward . And third , you know , it's really the property , you know , whether it's the large account and , you know , the INS property .

Speaker #2: The good news for us is that we don't write much of the the share layer property business . And we have a relatively small footprint on , on the , on the inside , which is really under a lot of pressure today .

Speaker #2: So I think overall , if I look at the outlook for , for us and , you know , and our positioning in the London market as well , if I , if I look at the outlook , I would expect , you know , us to have the ability on the insurance to grow better than , the market .

Speaker #2: We , we play in . So .

Speaker #4: That's helpful . And then just one last one , there's a hurricane , you know , out there right now with the potential to impact the Caribbean .

[Analyst]: That's helpful. Just one last one. There's a hurricane out there right now with the potential to impact the Caribbean. I don't think there is a lot of insurance or even reinsurance exposure there. Do you guys just have some high-level thoughts there just on potential exposure?

Speaker #4: I don't think there is a lot of insurance or even reinsurance exposure there . But do you guys just have , you know , high level , some high level thoughts there ?

Speaker #4: Just on potential exposure ?

Speaker #2: I think just too early to tell . I think for sure it will be . It's going to be a it looks like a big event , but actually for , for Jamaica and where as big enough to have repercussions that goes effect in other Caribbean overall .

Nicolas Papadopoulo: I think it's just too early to tell. I think for sure it will be, it's going to be a, it looks like a big event potentially for Jamaica. It's big enough to have repercussions that affect the Caribbean overall. Too early to tell.

Speaker #2: Too early to tell .

Speaker #4: Okay . Thank you .

[Analyst]: Okay, thank you.

Speaker #5: Yeah , it could be just quickly . I mean obviously depending where it hits like some of .

Francois Morin: Yeah. I could be just quickly, I mean, obviously, depending where it hits, like some of the resorts might be the insured values that might be more, you know, that we might participate on, just, you know, not knowing at this point where, again, where things may land. I think that's the, in terms of where the, yeah, where the exposures are and what could be impacted, that would be the focus area, I would say.

Speaker #3: The resorts might be that the , the insured values that might be more you know , that we might participate on just , you know , don't not knowing at this point where again where things may may land .

Speaker #3: But I think that's the in terms of where the yeah where the exposures are and what could be impacted , that would be the focus area .

Speaker #3: I would say .

Speaker #4: Thank you .

[Analyst]: Thank you.

Speaker #3: You're welcome .

Nicolas Papadopoulo: You're welcome.

Speaker #1: Next question will be from Andrew Kligerman at TD Cowen. Please go ahead.

Operator: Next question will be from Andrew Kligerman at TD Cowen. Please go ahead.

Speaker #6: Hey good morning . So maybe maybe starting with you just touched on growth and insurance with Elise . Maybe maybe shifting over to reinsurance .

[Analyst]: Hey, good morning. Maybe starting with, you just touched on growth in insurance with Elyse, maybe shifting over to reinsurance. You kind of kicked off, I remember in the first quarter, you thought that, I think, you did adjusted net written premium growth of 6% or 7%. You kind of repeated that in reinsurance in the second quarter. This quarter, you talked about the two deals and the reinstatement premium is kind of creating, you know, a bit of noise. The part A of it is, what would the normalized growth have been in the absence of those items? The part B is, you know, how are you thinking about growth going forward in that segment?

Speaker #6: You kind of kicked off I remember in the first quarter you thought that I think you did adjusted net written premium growth of 6 or 7% .

Speaker #6: You kind of repeated that in reinsurance in the second quarter . And then this quarter , you talked about the two deals and the reinstatement premium is kind of creating a bit of noise .

Speaker #6: So , so the part a of it is what would the normalized growth have been in the absence of those of those items .

Speaker #6: And the part B is , you know , how are you thinking about growth going forward in that , in that segment .

Speaker #3: Well , I'll take the first part . I mean , maybe Nicholas , in a second . I mean , the normalized growth absent , call it these kind of one offs or again , and they happen .

Francois Morin: I'll take the first part. Maybe Nicolas can share in a second. The normalized growth absent all of these kind of one-offs, or again, they happen, right? We've talked about it in the past. It's, you know, reinsurance can be lumpy. There are deals that happen. They don't happen. The timing of it is not always predictable. The fact that, you know, with a little bit of the headwinds that we're seeing, again, coming from a very high bar on the property, property cat, 7/1 renewals, I'd say our growth in the quarter might have been around, like, call it, you know, a decrease of 3 to 4%, not the 10% that was reported in the quarter.

Speaker #3: Right . We talked about it in the past . It's you know , reinsurance can be lumpy . There's deals that happen . They don't happen .

Speaker #3: The timing of it is is not always predictable . But yeah the you know , the fact that , you know , with a little bit of the headwinds that we're seeing again , coming from a very high bar on the property , property cap 71 renewals , you know , like say our growth in the quarter might have been around like call it , you know , decrease of 3 to 4% .

Speaker #3: Not the 10% that we , you know , that is you know , was reported in the quarter .

Speaker #2: Yeah . Thank you . On the on the outlook for growth on the on the reinsurance side . So I think think of reinsurance .

Nicolas Papadopoulo: Yeah. Thank you, Francois. On the outlook for growth on the reinsurance side, I think think of reinsurance pretty much, you know, the same outlook as insurance. I think you have a rate pressure on the short-tail lines, but, you know, I think you're seeing a rate increase in this location on the casualty lines that could provide opportunity. I would say a similar picture. For, I think, a big headwind is like a lot of our seeding companies, you know, like the business like we do. We like the insurance business. After a few years, you know, there's less fear in the marketplace. People feel better about their balance sheet. What we're seeing is companies retaining more, which creates a significant headwind for the reinsurance group.

Speaker #2: It's pretty much , you know , the same outlook as , as insurance . I think you have a rate pressure on the short end lines .

Speaker #2: And but you know I think you're seeing red increase in this location on the , on the casualty lines that could provide opportunity .

Speaker #2: I think I would say a similar picture , but for I think a big headwind is like a lot of company , you know , like the business , like we do .

Speaker #2: We like we like the insurance business . So , you know , after a few years , you know , there's less fear in the marketplace .

Speaker #2: People feel better about their balance sheet . So what we what we're seeing is companies retaining more , which is creates a significant , significant headwinds for for the for the reinsurance group .

Speaker #2: I mean , by doing so they they either retain the business or move very often . You move more to an excess of loss position that prefers that presents , additional opportunities for for us and , you know , I would say that the margin on the on the excess of loss is usually better than the margin on the quota share .

Nicolas Papadopoulo: I mean, by doing so, they either retain the business or move, very often do move more to an excess of loss position that presents, you know, additional opportunities for us. I would say that the margin on the excess of loss is usually better than the margin on the quota share. I think we may see a different makeup of the margin going forward.

Speaker #2: I think we may see a , a different makeup of the margin going forward .

[Analyst]: I see. Thank you for that. Maybe shifting back to insurance. As a specialty writer, and especially with pressure in E&S property these days, just more from the industry perspective, you touched on your view of how Arch Capital Group Ltd. is going to do, but maybe again a little bit. How do you see E&S premium for the industry playing out over the next few years? I mean, not only have we seen such tremendous growth over the last few years, but is it possible that E&S premium as an industry starts to decline over the next few years? Outlook and then just Arch Capital Group Ltd. in E&S over the near intermediate term as well.

Speaker #2: think the outlook of the industry , So I think is I think it's a tale of two I stories . I think on the on the casualty side , I think , you know , because of what's happening in the market and because of the issues people are having with the prior years .

Nicolas Papadopoulo: I think the outlook of the industry is a tale of two stories. I think on the casualty side, because of what's happening in the market and because of the issues people are having with the prior years, my view is that the trend of more of the business moving to the E&S side, where you have freedom of rate and forms and where you can add exclusions that take a much longer time to be able to do on the admitted side, will continue. On the shorter line, we could see some of the shared and layered business and cat-exposed business going back to the admitted market as they've done historically. It is hard to predict, but I think the fundamental shift, which has been driven by casualty, I expect to continue.

Speaker #2: And I think we my view is that the trend of more of the business , you know , moving to the excess and surplus side , where you have freedom of rate and , and forms and where you can add exclusions .

Speaker #2: That takes take a much longer time to , to be able to do on the admitted side , that will continue on the short term , shorter line , you know , we could see some of the some of the , you know , shared and your business and your cat exposed business .

Speaker #2: You know , going back to the , to the to to the admitted market as they've done historically . So I think how how to predict .

Speaker #2: But I think the fundamental shift , which is , being driven by casualty , that that I expect to continue . So .

Speaker #6: I see and then arch , how do you see yourself ? Do you see gaining share on the short tail and the casualty , respectively ?

[Analyst]: I see. ARCH, how do you see yourself? Do you see gaining share on the short tail and the casualty respectively?

Speaker #2: I mean , the shorter will be a challenge based on what we see in terms of the pricing . I think we are more optimistic on the on the casualty side , where , you know , we we've been underweight , you know , in the , in the difficult in the difficult years .

Nicolas Papadopoulo: Because the short tail would be a challenge based on what we see in terms of the pricing. I think we are more optimistic on the casualty side where we've been underweight in the difficult years. I think our last peak had been holding pretty well. That gives us confidence in how we price the business forward. I think that as rates continue to improve, that gives us an opportunity certainly to do more at a time, maybe when our competitors are still kind of caught up into looking at the right things they did in the earlier years.

Speaker #2: And I think we're , you know , I think our last picks had been holding pretty well . So that gives us confidence in how we price the business forward .

Speaker #2: I think that as rates continues to to improve , I think that give us an opportunity . Certainly to to do more at a time , maybe with our competitors are are still kind of caught up into , you know , looking at their , their , their writings .

Speaker #2: They did , you know , in the earlier years . So .

Speaker #6: Thank you for the insights . You're welcome .

[Analyst]: Thank you for the insights.

Nicolas Papadopoulo: You're welcome.

Speaker #1: Next question will be from Josh Shanker , Bank of America . Please go ahead . Josh .

Operator: Next question will be from Josh Shanker at Bank of America. Please go ahead, Josh.

Speaker #7: Yeah , I don't want to pigeonhole you too much , but obviously did a lot of buybacks in three . Q some companies don't do buybacks in three .

[Analyst]: Yeah. I don't want to pigeonhole you too much, but obviously, there's a lot of buybacks in Q3. Some companies don't do buybacks in Q3 because they're worried about the outcome of the hurricane season. Trying to gauge your appetite for Q4 and maybe Q1, when did you start buying back? How much, you know, were you buying the whole quarter or were you able to do $732 million within about a month ending up a quarter?

Speaker #7: Q because they're worried about the outcome of the hurricane season , but then trying to gauge your appetite for for Q and maybe one Q when did you start buying back and how much , you know , you know , were you buying the whole quarter or really were you able to do 732 million within about a month , ending up ending up a quarter ?

Speaker #3: Yeah , I mean , it's pretty consistent throughout the quarter . I think there was you know , we've gotten a little bit more in September and that kind of as I mentioned , I think we've been active in October as well .

Francois Morin: Yeah. I mean, it was pretty consistent throughout the quarter. I think there was, you know, we've gotten a little bit more in September. That's kind of, as I mentioned, I think we've been active in October as well. I think, again, that it's, you know, I think I touched on it on the last call. No question that, you know, some years ago, we would have said we would not buy during the hurricane season. I think Arch Capital Group Ltd. is different today than it was back then. I think Arch Capital Group Ltd. is much more diversified, much stronger, less exposed on our percentage of equity from a massive or a cap, you know, PML, even at the 1 in 250 or below. For all these reasons, we felt, we do feel and felt a lot more comfortable buying back during the wind season.

Speaker #3: You know , I think again , that's I think I touched on it on the last call . I think no question that , you know , some years ago we would have said we would not buy during the hurricane season .

Speaker #3: But , you know , I think arch is different today than it was back then . I think arch is much more diversified , much stronger , less , you , less exposed on a percentage of equity from a massive or a cap .

Speaker #3: You know , PML , even at the 1 in 250 or below . So for all these reasons , we felt we do feel and felt a lot more comfortable buying back during the the win season .

Speaker #3: And , you know , I think as I said earlier , I think we're going to keep pursuing that , that opportunity as as we move forward .

Francois Morin: I think, as I said earlier, I think we're going to keep pursuing that opportunity as we move forward.

Speaker #7: And you're not worried in the past , you've said part of the reason to do a special dividend was because you just don't think you can return as much capital as you desire to through buyback of its limitations .

[Analyst]: You are not worried. In the past, you've said part of the reason to do a special dividend was because you just don't think you can return as much capital as you desire to through the buyback due to the limitations. As you look out into the end of this quarter and beyond, do you think you can satisfy every bit of capital return you need through repurchases?

Speaker #7: As you look out into the end of this quarter and beyond , do you think you can satisfy every bit of capital return you need through repurchases ?

Speaker #3: It's a daily . I think we look at daily . I certainly think we can do more capital return . We can we I mean , we don't set a target for ourselves , right ?

Francois Morin: It's a daily, as anything we look at daily, I certainly think we can do more capital return. We don't set a target for ourselves, right? I think it's an ongoing process. There's a lot of liquidity in the stock right now, and we're able to buy back stock. We think what we perceive to be a very attractive price, and we'll do as much as we can, how much we think is right. We'll see where we're at.

Speaker #3: So I think it's a it's an ongoing process . But , you know , there's a lot of liquidity in the stock right now .

Speaker #3: And , you know , we're able to buy back stock . We think what we perceive to be a very attractive price and you know , we'll do as much as we can how much we think is right .

Speaker #3: And then we'll see where we're at .

Speaker #7: All right . Thank you very much .

[Analyst]: All right. Thank you very much.

Speaker #3: You're welcome .

Francois Morin: You're welcome.

Speaker #1: Next question will be from Tracy Venditti at Wolfe Research . Please go ahead . Tracy .

Operator: Next question will be from Tracy Benditti at Wolfe Research. Please go ahead, Tracy.

Speaker #8: Thank you . Good morning . This is a bit belated , but it's been a while since I've been on your call . Congrats on your S&P upgrade back in June .

[Analyst]: Thank you. Good morning. This is a bit belated, but it's been a while since I've been on your call. Congrats on your S&P upgrade back in June. Since capital is so topical, my question is, while it's great that you have a AA- rating, it's a new category. You now have to hold AAA capital. Back when you were rated A+, you only had to hold AA capital. I realize a lot of that was just model methodology-driven. My question is, how important is it to you to stay in this new rating category when you're thinking about your ability to deploy capital?

Speaker #8: Since capital is so topical , my question is , well , it's great that you have a double A-minus rating . It's a new category .

Speaker #8: You now have to hold a capital back . When you were rated A+ , you only had to hold AA capital . And I realize a lot of that was just model methodology driven .

Speaker #8: But my question is how important is it to you to stay in this new rating category when you're thinking about your ability to deploy capital ?

Speaker #9: I mean , is .

Francois Morin: I mean, is it critical? I mean, it's not, but it's certainly an advantage. We've seen the benefits of that already in some places, particularly in Europe. No question that the new higher rating, I think, has been well received and we're able to benefit from that. You're right, it comes at, you know, a certain cost. I'd say, though, that the S&P capital model is only one of the things we look at. We have our own internal view of capital. There are other rating agencies that we look at as well. All in, I think our capital position remains very strong. It was always strong. Again, we try to optimize within all those constraints from all the rating agencies and regulators that look at us.

Speaker #3: It critical ? I mean , it's not , but it's certainly an advantage . And we've seen the benefits of that already in some places , particularly in Europe .

Speaker #3: So no question that the new higher rating , I think has been well received and we're able to benefit from that . But you're right .

Speaker #3: I mean , it comes at , you know , a certain cost . I'd say , though , that the , the S&P capital model is only one of the things we look at .

Speaker #3: We have our own internal view of capital . We have our I mean there's other rating agencies that we , you know , that that we look at as well .

Speaker #3: So all in I think our capital position is remains very strong . It was always strong . And again , we , you know , we try to optimize within all those those constraints from all the rating agencies and regulators to look at us .

Speaker #3: But , you know , the Triple-A level of capital that you mentioned was really not , you know , not something that is not really new to us because we were , I'd say , already at that level .

Francois Morin: The AAA level of capital that you mentioned is really not something that is not really new to us because we were, I'd say, already at that level. That's kind of, you know, it wasn't an additional kind of burden or initial step we had to meet.

Speaker #3: So that's kind of , you know , it wasn't an additional kind of burden or initial step . We had to to meet .

Speaker #2: I think , you know , we .

Nicolas Papadopoulo: I think we don't only manage one point. I mean, usually, we look at AA, AAA. For a while, I think we were a little bit in the penalty box because of the MI. I think now it's more, I don't think it changed completely our capital structure. Also, I think it's been helpful on some of the MI, CRT, and SRT where the buyer is extremely sensitive to the rating of those layers. They actually pay a differentiated price for better ratings. As Francois Morin said, I think in Europe, as we lean to, especially on the reinsurance side, but also on the insurance side, our strength is really casualty professional lines. As we lean into those markets, I think having a AA- rating is an advantage.

Speaker #8: Yeah .

Speaker #2: We don't only manage one point . I mean , usually we look at double , Triple-A . So , you know , and for a while I think we were a little bit on the penalty box because of the MI .

Speaker #2: So I think , you know , now I think it's more I think it changed completely . Our capital structure . And I also I think it's been helpful on the some of the mi CRT and where , you know , the buyer are extremely sensitive to the to the to the rating of those layers .

Speaker #2: And they actually pay a differentiated price for , for for a better ratings . And , and as I said , I think in Europe , you know , as we lean to , to especially on the reinsurance side , but also on the insurance side to , you know , our strength is really casualty professional lines .

Speaker #2: And as we as we lean into those markets , I think having a double A minus rating is an advantage .

Speaker #8: Okay . So do you view it just OP to opportunistically or could you see a scenario where you could reduce capital and live with them .

[Analyst]: Okay. I mean, do you view it just opportunistically, or could you see a scenario where you could reduce capital and live with them back to the A+ rating?

Speaker #8: Back to the A plus rating .

Speaker #9: Okay . Well it's it's obviously I .

Francois Morin: It's obviously something, I mean, it's a trade-off we constantly look at, right? I mean, how much capital do we need to hold on the margin to get the incremental rating? Right now, we already have the capital. We're in a very strong capital position. If, down the road, conditions change, the question you ask is something that we've asked ourselves many times in the past. How much capital do we, is it really worth it to us to hold that incremental level of capital? Right now, given our capital position, and again, given the strength of our earnings, the earnings profile where we generate internally the capital on a regular basis, I think we're in a very, very good position.

Speaker #3: Mean it's a trade off . We we constantly look at right I mean how much capital do we need to , you know , hold on the margin to get the incremental rating right now .

Speaker #3: You know , we already have the capital . We're not you know , we're in a very strong capital position . But if you know , down the road , if conditions change , the question you ask is something that we've asked ourselves many times in the past , like how much capital do we , you know , is it really worth it to us to hold that incremental level of capital ?

Speaker #3: But right now , given our capital position again , given the the strength of our earnings , the earnings profile , that where we generate internally , the capital , you on a , on a , on a regular basis , I think we're we're in a very , very good position .

Speaker #8: Okay . My next question is you said you like insurance and you're bullish on the business . And you mentioned casualty rate increases .

[Analyst]: Okay. My next question is, you said you like insurance and you're bullish on business, and you mentioned casualty rate increases. Casualty can mean a lot of things. Once I strip out some of the casualty lines, like you mentioned professional lines, what is really left, what you're left with in terms of attractive pricing is GL, commercial auto, and excess liability, which includes auto. I'm wondering where you're seeing the opportunities. Is it more auto-oriented? If you could just let me know the different casualty lines that are attractive.

Speaker #8: Casualty can mean a lot of things . So once I strip out some of the casualty lines like you mentioned , professional lines , you know , what is really less what you're left with in terms of like attractive pricing is GL commercial auto and excess liability , which includes auto .

Speaker #8: So I'm wondering where you're seeing the opportunities . Is it more auto orientated or if you could just let me know the different casualty lines that are attractive .

Speaker #2: Yeah . So I think the one one of the opportunities on ins casualty side , which would be excess , you know , excess liability .

Nicolas Papadopoulo: I think one of the opportunities on the E&S casualty side, which would be excess liability, would include some auto, but usually, we don't focus on the auto on the E&S side. We have other franchise, like sensitive business, like national accounts or constructions, which are casualty-led lines with heavy components of workers' comp, general liability, and a lesser amount of auto. Those are the places where we think we have the ability to grow.

Speaker #2: So that would include some some auto , but usually , you know , we we , we don't focus on the auto . You know , on on the , on the , on the , side .

Speaker #2: And then we have other , you know , we have other , other franchise like sensitive sensitive business like national accounts or constructions which are casualty led lines with heavy components of a workers comp , you know , general liability and a lesser amount of auto .

Speaker #2: So those are those are the places where , where we think we have the ability to grow .

Speaker #8: Okay . Thank you .

[Analyst]: Thank you.

Speaker #10: You're welcome .

Nicolas Papadopoulo: You're welcome.

Speaker #1: Next question will be from Ryan Tunis at Cantor . Please go ahead . Ryan .

Operator: Next question will be from Ryan Tunis at Keefe. Please go ahead, Ryan.

Speaker #6: Hey , thanks . Good morning .

[Analyst]: Hey, thanks. Good morning. Good afternoon. I just wanted to go back. I thought it was an interesting comment that on the reinsurance side, you're seeing cedents proactively retain more. I guess I'm curious, when I look at the facultative property decline of 17% this quarter, how much of that is, I don't know, you guys proactively walking away or decline in exposure as opposed to rate? I was thinking it was kind of more rate-driven, but that comment made me think it might be more volume-based.

Speaker #11: Good afternoon . I just wanted to go back . I thought it was an interesting comment that on the reinsurance side , you're seeing students proactively retain more and I guess I'm curious when I look at , like , the the facultative property decline of 17% this quarter , how much of that is I don't know , you guys proactively walking away or I , a decline in exposure as opposed to rate because I was thinking it was kind of more rate driven .

Speaker #11: But that comment made me think it might be more volume based .

Speaker #2: No , I don't think we we are we are cutting back . I think at this stage , I think we on the on the other , on the other property , which I think you should clarify , other property line of business .

Nicolas Papadopoulo: No, I don't think we are cutting back. I think at this stage, we are on the other property, which, you know, you should clarify, other property line of business. I think the main factors there are a couple of our clients on the E&S side of the business and retaining more of the business at this stage. That's really, we would like to do more. Also, let's not forget, the rates are also going down. Some of our cedents are also revising some of their ceded premium to the downside. Those are the two components: their ability to want to retain more of the business and also they're reforecasting their growth downwards, which impacts our insurance volume.

Speaker #2: I think , you know , the , the main , the main factors there is the , a couple of our clients on the INS side of the business and on the , you know , we , we , we really more more of the business at this stage .

Speaker #2: So that's really we , we , we would like to do more . And also I think the , you know , the forget the rates are also going down .

Speaker #2: So the , the some of our students are also revising some of their ceded premium to the down . And so those are the two , those are the two components .

Speaker #2: Them their ability to wanting to retain more of the business and also the reforecast their their growth downwards , which impacts our our insurance volume .

Speaker #11: And then .

[Analyst]: I'd like to follow up.

Speaker #6: After that .

Francois Morin: Yeah. Sorry to answer that. I think, Ryan, I think it's just to confirm, I mean, it's no question that the rate environment is down in property. There's also a drop in exposure. Just to be clear, that drop in exposure is typically not our decision, right? It's the cedents' decision. There are some situations where, you know, again, they decide to keep it net or they use a different structure. We still like the product. We still like the line. I mean, most of what we do, we like a lot. Any reduction in exposure that you see that we experience is, you know, generally at this time, more because the cedents choose to do something different, not because we decide to walk away.

Speaker #3: I think it's great . It's just to clarify , just to confirm , I mean , it's no question that the rate environment is down and property .

Speaker #3: There's also a drop in exposure , but the just to be clear , like the that drop in exposure is typically not our decision .

Speaker #3: Right . It's the decision . There are some situations where you know again they decide to keep it net or they they use a different structure .

Speaker #3: But we still like the product . We still like the line . I mean , most of what we do , we like a lot and and any reduction in exposure that you , you see that we experience is generally at this time .

Speaker #3: More because the scenes choose to do something different , not because we decide to walk away .

Speaker #11: Got it . And then just a follow up , you guys talking about the transitioning market . I mean , a lot of times we just kind of focus on pricing .

[Analyst]: Got it. Just to follow up, you guys talking about the transitioning market. I think a lot of times we just kind of focus on pricing. I'm curious if, you know, what type of lines are, and it might be in primary because there's business going back to admitted and just some of the more bad stuff stays E&S or, I get, you know, facultative. I guess it could be a cedent just choosing to, I guess, just continue to cede the stuff where they feel like there's an arbitrage. What other pockets you'd point out that are kind of particularly challenging to underwrite in this type of market where you really got to kind of cross your Ts and dot your Is?

Speaker #11: But I'm curious if , you know what type of lines or it might be in primary because there's business going back to admitted and just some of the more bad stuff stays ins or , you know , facultative , I guess it could be a season just choosing to , I guess , just continue to see this where they feel like there's an arbitrage , but like other pockets , you point out that are kind of particularly challenging to underwrite in this type of market , where you really got to kind of cross your T's and dot your I's .

Speaker #2: I think it's a competitive market . And so I would say a lot of the , a lot of the market today , you , you , you get a lot of selections .

Nicolas Papadopoulo: I think it's a competitive market, Ryan. I would say a lot of the market today, you get a lot of anti-selection. We develop a lot of data analytics tools to really segment our portfolios and provide underwriters some really granular information that shows which price for which risk, which limit for which risk. I think underwriting the market, we are bullish because we have those tools. If you don't have the tools, I would be a lot less bullish about our ability to write profitable business going forward.

Speaker #2: So , you know , we develop a lot of data analytics tools to , to really segment our portfolios . And provide underwriters , you know , the some really granular information that , you know , which which price for which risk , which limit for which risks or I think underwriting the market , we bullish because we have those tools .

Speaker #2: I think if you don't have the tools , that would be a lot less bullish about our ability to to to write profitable , profitable business going forward .

Speaker #2: So .

Speaker #12: Thank you .

Francois Morin: Thank you.

Speaker #1: Did you have further questions ? Ryan .

Operator: Did you have further questions, Ryan?

Speaker #11: I'm good . Thanks , guys . Appreciate it .

Nicolas Papadopoulo: I'm good, thanks. Yes, appreciate it.

Speaker #10: You're welcome .

Speaker #1: Next question will be from Mike Zarembski at BMO . Please go ahead . Mike .

Operator: Next question will be from Michael Zaremski at BMO Capital Markets. Please go ahead, Michael.

Speaker #6: Hey , great . Thanks . Pivoting to the mortgage side of the business , I feel .

[Analyst]: Okay. Great. Thanks. Pivoting to the mortgage side of the business, I feel like if we were to quiz most people and ask them what the historical, I don't know, five, six, seven-year loss ratio was, most people wouldn't guess it was zero. Obviously, there were unique circumstances in the past five-ish years. Just curious, and we know it's a future family business, but curious if your views on a normalized loss ratio is different than what it was in the past if we think about kind of the current cycle and the next cycle coming.

Speaker #13: Like when we if we were to quiz most people and ask them what the historical five , six , seven year loss ratio was , most people wouldn't guess it was zero .

Speaker #13: And obviously there was unique circumstances in the past five ish years . But just curious . And we know it's a feast or famine business , but curious if your views on a normalized loss ratio is is is different than what ?

Speaker #13: Asked if we think about kind of the the the current cycle , in the next cycle coming .

Speaker #3: Well , not knowing what the next cycle will look like , I think would be speculating . I think we have talked about a normalized loss ratio in the 20% range .

Francois Morin: Not knowing what the next cycle will look like, I think we'd be speculating. I think we have talked about a normalized loss ratio in the 20% range across the cycle. I think what we have said, and we believe strongly, is that home prices are the key driver of what the performance will look like for the mortgage book. So far, home prices have remained very strong. There have been, in some pockets, some home price declines in a few areas, but across the nation, across the U.S., you can see that home prices remain very strong. That, I think, explains in large part the outperformance of the mortgage business relative to what we would have thought over an extended period. Does that remain the same going forward? There are a lot of macro factors that will come into play on that.

Speaker #3: You know , across the cycle . You know , I think , you know , we have said and we believe strongly that home prices are the key driver of what how performance , what the performance will look like , you know , for the mortgage book .

Speaker #3: And so far , I mean , home prices have remained very strong . I mean , the , you know , there's been some pockets , there's been some home prices decline , some home price declines in a few areas .

Speaker #3: But across the nation , across the US , you can see that when prices are remaining very strong . So that I think explains in large part I'd say the outperformance of the mortgage business relative to what we would have thought over .

Speaker #3: An extended period . Does that remain the same ? Going forward ? Again , there's a lot of macro factors that will come into play on that , but as long as you know , and we do have , you know , strong beliefs that based on lack of inventory and kind of , you know , there's , you know , there's a there's a lack of housing in the US .

Francois Morin: As long as, and we do have strong beliefs that, based on lack of inventory and kind of a lack of housing in the U.S., I think that will support home prices for the foreseeable future. On that basis, we'd like to think that the performance will remain strong. Now, does it inch up a little bit over time? Maybe a little because it feels like it's been really, really good for a long, long time. For the time being, we've said it, and we still are very, very, very bullish about the mortgage business because it's been truly a terrific business for us.

Speaker #3: I think will support home prices for the foreseeable future . And on that basis , we'd like to think that the performance will remain strong .

Speaker #3: Now , does it again . Does it inch up a little bit over time ? Maybe a little because it feels like it's been really , really good for a long , long time .

Speaker #3: But for the time being , again , we've said it and we you know , we still are very , very , very bullish about the mortgage business because it's been truly , you know , a terrific business for us .

Speaker #13: Got it. Understood. Yep. Go ahead.

[Analyst]: Yeah, I understood. Yep, go ahead.

Speaker #2: And the underwriting remain excellent I think . Yeah . If you look at the Fico distribution I think they're they're getting better . So that will drive you know better outcome .

Nicolas Papadopoulo: The underwriting remains excellent. If you look at the FICO's distribution, I think they're getting better. That will drive better outcome.

Speaker #10: Got it .

[Analyst]: Got it. Moving to capital management, clearly, you've signaled buybacks are high on the list. Maybe you can just give us an update. Has anything changed quarter over quarter on inorganic opportunities? Is U.S. small commercial still something that's on the retail small commercial still high up on the wish list? Thanks.

Speaker #13: Moving to capital management . You know clearly you've signaled buybacks are high on the list . Maybe you can just give us an update .

Speaker #13: Is anything changed quarter over quarter on maybe inorganic opportunities . You know is us small commercial still something that's on the retail small commercial still high up on the wish list .

Speaker #13: Thanks .

Speaker #3: Yeah . The wish list is long . I mean , we , you know , but by the same token , we we have a lot that we , we are working on and can work on .

Francois Morin: Yeah. The wish list is long. I mean, we, you know, by the same token, we have a lot that we are working on and can work on. Middle market is obviously a big focus for us. We've talked about other areas that we'd like to grow in. As you know, these M&A opportunities, they don't happen that often. They take a while to materialize. We're not going to hold a ton of excess capital just on the potential that we might do an M&A transaction. I mean, our leverage ratio is maybe the lowest it's ever been. We've got a lot of flexibility. The balance sheet is strong. We got some excess capital. We got a lot of flexibility, and our ability to execute on that, I think, is really good.

Speaker #3: Middle market is , is obviously a big focus for us . We've talked about other areas , you that we'd like to grow in , but you know , as you know these M&A opportunities , you know , they don't happen that often .

Speaker #3: They take a while to materialize . And so , you know we're we're not going to , you know , hold a ton of excess capital just in the , you know , on the potential that we might do an M&A transaction .

Speaker #3: I mean our our leverage ratio is it's maybe the lowest it's ever been . So we've got a lot of flexibility . The balance sheet is strong .

Speaker #3: We got we got some excess capital . So we got a lot of flexibility in our ability to to execute on that . I think is is really good .

Speaker #3: So you know if there's other things that we can get our hands on that would make us better , we'll be happy to do that .

Francois Morin: If there's other things that we can get our hands on that would make us better, we'll be happy to do that. In the meantime, there's a lot that we already have that is, you know, we can generate good earnings on as well.

Speaker #3: But in the meantime , there's there's a lot that we already have that are that is , you know , we can generate good earnings on as well .

Speaker #13: Got it . And maybe just one last one in since you guys provide excellent market commentary and Nicholas you provided a good view of kind of how to think about the INS marketplace going forward .

[Analyst]: Got it. Maybe just taking one last one in since you guys provide excellent market commentary. Nicolas, you provided a good view of kind of how to think about the E&S marketplace going forward. Do you all have a view on what has also been the kind of exponential growth of the MGA marketplace and kind of how it's been impacting Arch Capital Group Ltd. or maybe the industry? Do you view the MGA marketplace growth to continue to grow much faster than the rest of the market? Thanks.

Speaker #13: Do you all have a view on what it is ? Also been kind of exponential growth of the MGA marketplace and kind of how it's been impacting Arch , or maybe the industry , and do you do you view the the MGA marketplace growth to continue to , to grow much faster than the , the , you know , the rest of the market ?

Nicolas Papadopoulo: Interesting subject. I'm personally bearish on the MGA. I think, historically, strong growth in the MGA, except for a few exceptions, didn't turn out to be good. I think the lack of incentive alignment, the delay in the information to the insurance carrier or the reinsurers, I'm not bullish on that model. I think it's been the flavor of the months in the last few years. I'm still a little bit questioning what the outcome is going to be.

Speaker #2: subject and personally bearish on the you know the MGA I think you know historically you know strong growth in mga . You know except for a few exceptions , you know didn't turn out to be didn't turn out to be good .

Speaker #2: And I'm still I'm still a little bit questioning what the what the outcome is going to be . So but .

[Analyst]: Thank you.

Operator: Next question will be from David Motemaden at Evercore ISI. Please go ahead, David.

[Analyst]: Hey, thanks. Good morning. Just had a question. Obviously, still very good reserve releases. Just focusing in on insurance and reinsurance specifically, could you talk about the movement between long-tail and short-tail lines between those two? Any sort of things to point out on that front?

Francois Morin: I'd say nothing unusual. Very similar to prior quarters. There is a little bit of the adverse on casualty. I mean, nothing that stands out. It's a couple of, you know, it could be, you know, one accident year within one business unit or one line of business. Small adverse on casualty, which I don't think is surprising, at least to us. When we look at the overall picture around kind of where, you know, how the reserves are performing, our quarterly actual versus expected, which is still showing favorable, and meaning, you know, lower than expected, I think gives us a lot of comfort there. We're reacting to the data. In some places, there's no question, there's trends that are showing up that we're addressing. Big picture, the short-tail stuff did extremely well, as it has for quite some time. We'll keep evaluating it every quarter.

[Analyst]: Got it. Thanks. Thanks for that. Just taking a step back, you know, the mix shift to casualty lines in both insurance and reinsurance, you know, at least if I look at it on an earned basis, you know, that definitely is up a bit year over year. It hasn't really increased much, I guess, over the past few quarters. Is that having any bit of an impact at all on the underlying loss ratios in either segment? How should we think about that going forward?

Nicolas Papadopoulo: At some point, it will, because I think the loss peak on the casualty line is a bit higher than the loss peak on the short-tail lines. I think the shift, the mix hasn't really changed fundamentally at this stage. I think down the road, it might.

[Analyst]: Great. Thank you.

Operator: Next question will be from Rob Cox at Goldman Sachs. Please go ahead, Rob.

[Analyst]: Hey, thanks. Yeah, just curious, as you start to renew the MCE book, anything interesting you are seeing either on the delegated or the non-delegated side? You know, how far are we through the non-renewals on the programs book?

Nicolas Papadopoulo: I think what we've seen so far, and I think we've renewed, the entire book has been transferred to Arch. I'm personally very pleased with what we've seen so far. I think the stickiness of the business, the ability to provide additional lines of business to our distribution partners to be more relevant to them, the property expertise in the admitted property business that we really didn't have that we acquired, all those assumptions that we had made at the time of the purchase turned out to be true. I'm actually very pleased with the strategic decision we made to go for the acquisition. On the delegated side, the MGA, I think we knew we didn't do the deal because of the MGA portfolio that was coming with the acquisition. I think we started the remediation. There, I think it's pretty much what we expected.

the property expertise that is expected in the

Hey, pleased with the, you know, the Strategic decision we made to to, to go for the acquisition.

On the dedicated side, the MGA, I think we knew, you know, we didn't do the deal because of the, uh, the MGA portfolio that was coming with the acquisition. So I think we started the remediation, and there I think we.

Nicolas Papadopoulo: I think it takes more time than you think because all these MGAs have not expired yet. I think we'll see the impact really in 2026 of the non-renewal of the not expired yet that we've sent a number of those MGAs this year.

It's pretty much what we expected. So, and I think we, it, it takes more time than you think because all these MGS have not experienced. I think, we, we see the impact really in 2026 of the, of the non-renewal, uh,

of the, um, notice period that we've, we've sent a number of the same GIS this year, so,

[Analyst]: Got it. Thank you. I just wanted to follow up on credit. I mean, just given the mortgage book and the investment in CoFace and I think a relatively larger private credit book that you guys have, any thoughts on the credit environment and anywhere you're leaning into or out of, just given some of the noise in private credit?

Got it. Thank you.

And then just wanted to follow up on on credit. I mean just giving the mortgage book and the investment in co-ace and I think a relatively larger private credit book

that you guys have, um,

Any thoughts on on the the credit environment and anywhere you're leaning into or out of just giving some of the noise and private credit?

Francois Morin: Yeah. I think you got to be careful, I'd say, in what we're looking at. No question that, you know, certainly maybe the headlines around subprime auto loans, you know, not performing well. I think that's a totally different type of customer than what our borrowers would be on the USMI front. I think that, you know, we're not seeing any of the same kind of results. I guess the proof is what we reported, you know, this quarter. Again, very specific around kind of, you know, the type of borrowers in the U.S., the trade credit world. No question that there's been a couple of insolvencies that, you know, have made the headlines that, you know, COFAS, we don't know, but may be exposed. That's, you know, for them to work on.

Yeah, I think you gotta be careful. I'd say, and what we're looking at, no question that you know the certainly maybe the headlines around subprime auto loans, you know, not performing well. I think that's a totally different type of customer than what our.

Francois Morin: There's no question that, you know, when these types of events happen, people will start to think a bit harder about dependencies in the credit and lines of credit they extend, etc. That's not unusual. At this point, we're very, very comfortable with the exposure we have. We understand it well. Obviously, we look and monitor all the external data and the trends that are happening. So far, there's nothing really that stands out that we think we have to adjust our thinking or our strategy.

Borrowers would be on the usmi front. So I think that, you know, and we're we're not seeing any of the same kind of results and and that, that, you know, I guess the proof is what we reported, you know, this quarter. So, uh, so again very specific around can, uh, um, you know, the type of borrowers in the US, uh, the, the Trade Credit World. No question that there's been a couple of, uh, insolvencies that, you know, have made the headlines that, you know, we, um, you know, kofas, we don't know, but maybe exposed and, and uh, that's, you know, for them to to work on. But there's, there's no question that, you know, when the, you know, um, these types of events happen. Uh, people will start to, to think a bit harder about Depend dependencies and and the credit and lines of credit, they extend, Etc, but that's that's not unusual. So, at this point, we're very, very comfortable with the exposure. We have we we understand it. Well. Um, and you know, obviously we

Nicolas Papadopoulo: More specifically on COFAS, I think this is short-term credit. The game here of the underwriting is really, as you're aware of, a weaker credit is really to over time cut your line to that particular credit name so that when the inevitable happens, your exposure is much less. I think they played that game really, really well. I don't know about the latest insolvencies, but historically, they've been very good at that.

We look and and monitor all the the external data and the trends that are happening. But so far, there's nothing really that stands out that we uh, we think we, where we have to adjust our, uh, our thinking or, or strategy, and more specifically on kafas, I think the is a short-term credit. So,

you know, the, the game here of the underwriting is really as you, uh,

As you are aware of uh, weaker credit is really to over over time. Cut your cut, your line, you know, of uh, to to that particular credit name. So that when the individual happened, you know, your exposure is is much less. So I think they they played that game really, really well. And, you know, I I don't know about the, the, the, the, the letters, uh,

Insurgencies, but historically they they've been very good at that.

[Analyst]: Thanks for all the color.

Thanks for all the caller.

Operator: Thank you. Next question will be from Alex Scott at Barclays. Please go ahead, Alex.

Next question will be from Alex Scott at Barkley. Please go ahead, Alex.

[Analyst]: Hey, good morning. First one I had was just circling back on Rob's question on the remediation. Could you frame for us at all how much impact that could have on the insurance segment? Yeah, I just, you know, thinking through trying to dial in premium growth estimates and knowing how much some of us missed our reinsurance growth this quarter from not knowing about the transactions. I just want to make sure I'm layering in enough for this lagged remediation impact.

Hey uh, good morning.

First 1, I had was just circling back on. Rob's question on the remediation. Um, could you frame for us at all? Like, how much impact that could have on the insurance segment? Um, yeah, I just, you know, just thinking through trying to dial in premium growth estimates and knowing how much, you know, some of us missed or or reinsurance growth.

Quarter from not knowing about the transactions. I just want to make sure I'm layering in enough for this lagged, remediation impact.

Francois Morin: Yeah. Specifically on the programs that we acquired, the premium that we've identified and has been, you know, will be non-renewed is roughly $200 million. As Nicolas said, the notices went out, and then there's a notice period, and then the MGA has, you know, three to six months to find another carrier. Some are more successful in getting a replacement sooner. Some of that may actually start happening in the fourth quarter. I don't have the precise projections of when it's going to hit the top line in each of the next few quarters, but just at least give you an idea.

Yeah, so specifically on the the programs that we inquired that the the the premium that we've identified and has been, you know, uh not will be non-renewed as roughly million dollars.

Operator: Call it $200 million, part of a $1.5 billion to $1.6 billion book, which was the overall MCE premium volume. It's kind of the impact that we expect to see. The flip of that, though, is the middle market business that really was attractive to us, was really what we were trying to get, has done very, very well. The rate environment, both on casualty and property in that business, has been very good. We just came back from a couple of industry conferences where our business partners are very supportive, and they are very happy to do business with Arch. We like to think that some of that kind of headwind in terms of giving up or non-renewing some of those programs, we can make up some of that at least in the middle market side.

A a a an idea I call it 200 million dollars, part of a a billion and a half to a billion. 6 books is

Which was the overall MCE premium volume, that's kind of the impact that we, uh, we expect to, uh, you know, to see. Um,

Nicolas Papadopoulo: Got it. That's helpful. The second question I had is on the reinsurance business and casualty specifically. You know, the repricing efforts, I guess, are a lot of it's on the quota share of the actual underlying primary taking rate. Characterize what you're seeing there. I mean, are the underlying primaries taking enough rate where it's in excess of loss cost and it's actually building improving margin in there? Is that why you're speaking more optimistically about it, or is it still pretty, obviously a high, high loss cost environment? I'm just trying to get a feel of whether that's actually improving or not.

The flip of that though is the, the Middle Market business that we, you know, really, uh, was attractive to us, was really what we were trying to get. Has done very, very well. So the rate, you know, the rate environment both on casualty and property in that business has been very good. And and, you know, we just came back from uh, a couple of Industry conferences where the, you know, the the business partners are are very supportive and they are very happy to do business with Arch. So, we like to think that some of that kind of headwind in terms of giving up, or non-renewing some of those programs we can make up some of that, at least in in the Middle Market side.

got it uh, hopeful

Second question I had is on the reinsurance, uh, business and casualties specifically, you know, the, the re-pricing efforts I guess. Are, you know, a lot of it's on the quota share, the actual underlying primary taking rate. Uh, keep keep characterize. What, what you're seeing there I mean, are the are the underlying primaries taking enough rate where it's in excess of loss costs and it's actually building improving margin in there. Um, you know, is that is that why?

Francois Morin: I think you got it right. I think we believe in casualty in general. We're getting more rate than the loss cost, and it's an elevated loss cost. That's what, if you back on the reinsurance side, if you back the right specialty underwriters, people that manage their limits well, avoid some of the heavy auto or other difficult class of business, you would want to do more business with them. I think over time, we expect to be able to write more of that business.

You're speaking more optimistically about it or is it um you know still pretty high high loss cost environment. So I'm just trying to get a feel of whether that's actually improving or not.

So I think you you you you got it right? I think we, we believe in casualty in the general, we're getting more rates and than than the last cut and it's an elevated loss cost. So I think that's what you know, if you back on the insurance side, if you back the the right specialty on the right errors, people that, you know, manage their limits. Well, you know, avoid some of the heavy Auto or you know, other other difficult class of business. I think you

You, you know, you you would want to do more business with with them and I think over time we we we expect to be able to to, to write more than business.

Nicolas Papadopoulo: Okay. Thanks.

Okay, thanks.

[Analyst]: Next question will be from Andrew Kligerman at Jefferies. Please go ahead, Andrew.

Next question will be from Andrew Anderson at Jefferies, please.

[Analyst]: Hey, thanks. Maybe you could just expand a bit on how you're thinking about 1/1 prop cat renewals. Do you still see returns of kind of 20% here on this line? How are you thinking about ILS impacting kind of return levels in industry capital?

Please go ahead, Andrew.

Hey thanks. Um maybe you could just expand a bit on how you're thinking about 1 1 1 prop cat renewals, do you still see returns of kind of 20% here on this line and and how are you thinking about ILS? Impacting kind of return levels and Industry capital?

Francois Morin: Yes. On the cat side, we remain bullish. The outlook is bullish. We like the margin. Maybe a couple of data points. The market really peaked in July 2024, so a little bit over a year ago. I think in 2025, the price went down between 5% and 10%. We are into our second round of rate decrease. Depending on the region, the increase that we witnessed from 2021 to 2024, some of those rates doubled. I think we are in a really, we are in a good place. It depends on the region, but generally, we remain optimistic that the business is attractive. There's more demand. We had more demand last year. We expect more demand to come to the market in the U.S. on an international basis. Overall, we think, despite expected pressure on the rates, we think the margins are still attractive.

Yes, on the, on the, on the, on the cat side, we remain. Bullish Outlook is is is bullish for, we like the margin and maybe a couple of data points the, the the markets really picked, you know, in July, uh, 2024. So a little bit over a year ago and I think in 2025, you know, markets, the the price went down between 5 and 10%.

So we we are in 2 hours, second round.

Of of red. Decrease and

the depending on the region, you know the the the the increase that we Witnesses from you know 2021 to 2024 20, you know,

Some of those, right? Double so I think we, we are in a really, we are in a good place. It depends on the region, but generally, we, we remain, you know.

Optimistic that, you know, the business is attractive. There's more demand; we had more demand last year. We expect more demand to come to the market, on a U.S. and international basis. So,

Overall we think you know, despite pressure expected pressure on the, on the rights. We we we we we remain, we think the margins are still very attractive

[Analyst]: Thanks. I'll leave it there. Thank you.

Thanks, I'll leave it there. Thank you.

[Analyst]: Next question will be from Meyer Shields at Keefe, Bruyette & Woods. Please go ahead.

Next question.

[Analyst]: Great. Thanks so much for fitting me in. I'll try to be quick. I guess in the past, you've talked about ramping up some spending associated with mid-corp and entertainment acquisition. I was hoping we could get an update of timing and maybe amounts of increased spending.

Great. Thanks so much for putting me in. Uh I'll probably quickly just in the past. You've talked about ramping up from spending associated with mid corporate, I was hoping we could get an update of timing and maybe uh

Amounts of increased spending.

[Company Representative]: Increased spending, I think, was more the focus. No question that we got, I don't want to call it a bare-bones organization, but the people that transferred back in August of 2024 was, primarily, underwriters and claims people, right? That was the bulk of the staff that transferred. What we talked about at that time was that, yeah, we would need to hire to reinforce our capabilities in terms of actuarial, data analytics, and a few support functions here and there. We knew it would take some time. It's a competitive job market. We've been able to address some of that too. I think ultimately, it's still, I want to say on the expense ratio on the OpEx side.

[Company Representative]: I mean, we can run the incremental mid-corp business at a more efficient or lower expense ratio than we had pre-acquisition given the synergies and kind of some of the infrastructure costs that we can spread to a bigger base. I think we still have a few openings that we're trying, both on the underwriting side and on the kind of support functions that we're trying to fill. We've done a lot of the work in the last year, and it's showing, right? The business is doing well, and we're able to execute on the strategy and try to grow in some specific areas. We're, again, a little bit of work to do, but we're in a good spot.

Back in August of 2024 was called that, uh, primarily, um, you know, Underwriters and claims people, right? So that was the the the bulk of the, the staff, the transferred. And, and what we talked about at that time, was that, yeah, we would need to hire to, you know, reinforce you know, our capabilities in terms of Actuarial data analytics, uh, and a few support functions here and there. So that, you know, we knew what would take some time, and say, competitive job market, we've been able to, to, uh, address some of that too. But, you know, I think ultimately, you know, that it it's still. Um, I want to say on the expense ratio on the Opex side. I mean, we're, you know, we can run the incremental mid-core business at a more efficient or lower expense ratio than we had the pre pre pre the acquisition, given the, you know, the the synergies and kind of some of the infrastructure costs that we can spread to a bigger base. So I think, you know, we're we're

[Analyst]: Okay. Perfect. Thank you so much.

We still have a few I'd say openings that we're trying, uh, you know, both on the underwriting side and on the kind of support functions that we're trying to to to to to to, to fill. But you know, we we've done a lot of, a lot of the the work has been done in the last year and and it's showing right. The business is doing well and and we're able to, to, to execute on, on the strategy and try to grow in in some specific areas. So, we're, you know, again, a little bit of work to do but we're we're in a good spot.

[Company Representative]: Yep.

Okay. Perfect. Thank you so much.

[Analyst]: Next question will be from Brian Meredith at UBS. Please go ahead.

Yep.

[Analyst]: Yeah, thanks. Thanks for putting me in. Two quick ones here. Just going back to the whole mid-corp and the program business runoff, the underlying loss ratio improvement in insurance, is that a direct result of some of the actions being taken there, or is that something else? Therefore, as we start to see this runoff, should we start to see underlying loss ratios continue to improve in insurance?

First question will be from Brian Meredith at UBS. Please go ahead.

Yes, thanks. Uh, thanks for putting me in 2 quick ones here. Just going back to the whole MC mid Corp in the in the program business run off the underlying loss ratio Improvement insurance. Is that a direct result of some of the actions being taken there? Is that something else? And therefore, as we start to see this runoff, so we start to see underlying loss ratios continue to improve in insurance.

[Company Representative]: It's more the latter. The impact of the non-renewables has not really come into play on an earned basis. The improvement, you know, again, somewhat, you know, not huge at this quarter, but you know, I think hopefully there should be some benefit as this business runs off that we'll see some improvement or at least some stable loss ratios.

Uh, it's more the latter uh, the impact of the non-renewals is is not really come into play into our our on an urn basis. So the Improvement, you know, again.

[Analyst]: Great. Thanks. First of all, I wonder if you could talk a little bit about the substance-based tax credits that Bermuda came out with. I think it was the end of September. What that impact could potentially be for y'all?

Somewhat, you know, not huge at this order. But, you know, I think the, uh, hopefully there's, there should be some benefit as this, you know, business runs off, and we'll see some improvement or at least some stable loss ratios.

Great, thanks. And then, first of all, I wonder if you could talk a little bit about, um, the substance based tax credits of Bermuda came out with, um, I think it was the end of September. Um, what that impact potentially be free all

[Company Representative]: A bit early to tell. No question. Yes, the consultation paper is out. Comments have been submitted. We have had meetings with, you know, obviously, as an insurance community with the government expressing our views. The biggest, kind of I'd say, remaining item that we don't have clarity on is on the transition credits. I mean, at what pace will these kind of credits be allowed to be or reflected, starting in 2025? That is still to be determined. There's work being done on that right now. We expect to have clarity in the first, call it, first half of December. Clarity slash almost finality because it has to be enacted before the end of the year for us to be able to reflect that on our financials. You know, to your question, Brian, I think it will be, you know, substantial, we hope.

Um a bit early to tell uh no question. Yes, the consultation paper is out, it comments have been submitted. Uh, We've have had meetings with, you know, obviously the as a insurance Community with, with the government, expressing our views,

Uh, the biggest can I'd say remaining item that we don't have Clarity on is, um, is on the transition credits. I mean at what pace will these kind of credits be allowed to be or reflected, uh, starting in 2025. So that is still to be determined uh, there's work being done on that right now. We expect to have Clarity in the first call that first half of December uh Clarity almost finality because it has to be enacted before. Uh the end of the year for us to be able to to reflect that in our financials.

[Company Representative]: You know, when we have like the law, I mean, we'll be very, very quick to share that with you all and give you a bit more color on what that might mean for us.

[Analyst]: Great. Thank you.

Uh but you know, to your question Brian. I think it will be um you know substantial uh we hope and uh you know when when we have like the law, I mean, we'll be, you know, very uh uh very quick to share that with you all and give you a bit more color on what that might mean for us.

Thank you.

[Company Representative]: You're welcome.

You're welcome.

[Analyst]: At this time, I'm not showing any further questions. I would like to turn the conference back over to Nicolas Papadopoulo for closing remarks.

At this time, I'm not showing any further questions. I would like to turn the conference back over to Nicolas Papadopoulo for closing remarks.

Francois Morin: Thank you for spending time with us this morning. We're looking forward to talking to you next quarter. Thank you.

Yes, thank you for spending time with us this uh this morning and um we're looking forward to talking to you next quarter. Thank you.

[Analyst]: Thank you, sir. Ladies and gentlemen, again, thank you for participating in today's conference. This concludes the program. You may all disconnect your lines.

Thank you, sir.

Ladies and gentlemen.

Again, thank you for participating in today's conference. This concludes the program. You may all disconnect your lines.