Arch Capital (ACGL) 8-K Arch Capital Group LTD. Reports 2016 Second Quarter Results

Exhibit 99.2

	Waterloo House, Ground Floor
	100 Pitts Bay Road
	Pembroke HM 08 Bermuda
	441-278-9250
	441-278-9255 fax
	Contact:
	Mark D. Lyons
	Executive Vice President and Chief Financial Officer

Financial Supplement

Financial Information

as of June 30, 2016

The following financial supplement is provided to assist in your understanding of Arch Capital Group Ltd.

This report is for informational purposes only.  It should be read in conjunction with documents filed by Arch Capital Group Ltd. with the U.S. Securities and Exchange Commission, including the most recent Annual Report on Form 10-K and the Quarterly Reports on Form 10-Q.  Please refer to the Company’s website at www.archcapgroup.com for further information describing Arch Capital Group Ltd. 

Arch Capital Group Ltd. and Subsidiaries

Table of Contents

			Page
I.	Financial Highlights		3
II.	Consolidated Financial Statements
	a.	Consolidated Statements of Income	4
	b.	Consolidated Balance Sheets	5
	c.	Consolidated Statements of Changes in Shareholders’ Equity	6
	d.	Consolidated Statements of Cash Flows	7
III.	Segment Information
	a.	Overview	8
	b.	Consolidated Results	10
	c.	Insurance Segment Results	14
	d.	Reinsurance Segment Results	16
	e.	Mortgage Segment Results	18
	f.	Selected Information on Losses and Loss Adjustment Expenses	21
IV.	Investment Information
	a.	Investable Asset Summary and Investment Portfolio Metrics	22
	b.	Composition of Net Investment Income, Yield and Total Return	23
	c.	Composition of Fixed Maturities	24
	d.	Credit Quality Distribution and Maturity Profile	25
	e.	Analysis of Corporate Exposures	26
	f.	Structured Securities	27
	g.	Bank Loan Investments	28
	h.	Eurozone Investments	29
V.	Other
	a.	Comments on Regulation G	30
	b.	Operating Income Reconciliation and Annualized Operating Return on Average Common Equity	31
	c.	Operating Income and Effective Tax Rate Calculations	32
	d.	Capital Structure and Share Repurchase Activity	33

1

Arch Capital Group Ltd. and Subsidiaries

Basis of Presentation

Basis of Presentation

All financial information contained herein is unaudited, however, certain information relating to the consolidated balance sheet at December 31, 2015 is derived from or agrees to audited financial information. Unless otherwise noted, all data is in thousands, except for share and per share amounts and ratio information.

In March 2014, the Company invested $100.0 million to acquire approximately 11% of Watford Holdings Ltd.’s common equity and a warrant to purchase additional common equity. Watford Holdings Ltd. is the parent of Watford Re Ltd., a multi-line Bermuda reinsurance company (together with Watford Holdings Ltd., “Watford Re”). In accordance with GAAP, Watford is considered a variable interest entity and the Company concluded that it is the primary beneficiary of Watford Re. As such, 100% of the results of Watford Re are included in the Company’s consolidated financial statements. The portion of Watford Re’s earnings owned by third parties is recorded in the consolidated statements of income as ‘amounts attributable to noncontrolling interests.’ In addition, the Company reflects Watford Re’s redeemable preference shares in the mezzanine section of the Company’s consolidated balance sheets as ‘redeemable noncontrolling interests’ because they have redemption features that are not solely within the control of Watford Re.

Cautionary Note Regarding Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. This release or any other written or oral statements made by or on behalf of Arch Capital Group Ltd. and its subsidiaries may include forward-looking statements, which reflect the Company’s current views with respect to future events and financial performance. All statements other than statements of historical fact included in or incorporated by reference in this release are forward-looking statements.

Forward-looking statements can generally be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe” or “continue” or their negative or variations or similar terminology. Forward-looking statements involve the Company’s current assessment of risks and uncertainties. Actual events and results may differ materially from those expressed or implied in these statements. A non-exclusive list of the important factors that could cause actual results to differ materially from those in such forward-looking statements includes the following: adverse general economic and market conditions; increased competition; pricing and policy term trends; fluctuations in the actions of rating agencies and the Company’s ability to maintain and improve the Company’s ratings; investment performance; the loss of key personnel; the adequacy of the Company’s loss reserves, severity and/or frequency of losses, greater than expected loss ratios and adverse development on claim and/or claim expense liabilities; greater frequency or severity of unpredictable natural and man-made catastrophic events; the impact of acts of terrorism and acts of war; changes in regulations and/or tax laws in the United States or elsewhere; the Company’s ability to successfully integrate, establish and maintain operating procedures as well as integrate the businesses we have acquired or may acquire into the existing operations; changes in accounting principles or policies; material differences between actual and expected assessments for guaranty funds and mandatory pooling arrangements; availability and cost to the Company of reinsurance to manage gross and net exposures; the failure of others to meet their obligations to the Company; and other factors identified in the Company’s filings with the U.S. Securities and Exchange Commission.

The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with other cautionary statements that are included herein or elsewhere. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on the Company’s behalf are expressly qualified in their entirety by these cautionary statements. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

2

Arch Capital Group Ltd. and Subsidiaries

Financial Highlights

The following table presents financial highlights (1):

(U.S. Dollars in thousands, except share data)	Three Months Ended								Six Months Ended
	June 30,								June 30,
	2016			2015			Change		2016			2015			Change
Underwriting results:
Gross premiums written	$	1,292,199		$	1,155,253		11.9	%	$	2,683,260		$	2,466,931		8.8	%
Net premiums written	918,735			823,392			11.6	%	1,895,836			1,765,809			7.4	%
Net premiums earned	885,418			836,249			5.9	%	1,721,480			1,674,247			2.8	%
Underwriting income (2)	113,470			108,343			4.7	%	225,357			223,046			1.0	%
Loss ratio	56.6		%	52.8		%	3.8		54.9		%	52.9		%	2.0
Acquisition expense ratio	16.0		%	17.4		%	(1.4	)	16.2		%	17.2		%	(1.0	)
Other operating expense ratio	17.3		%	17.7		%	(0.4	)	17.5		%	17.6		%	(0.1	)
Combined ratio	89.9		%	87.9		%	2.0		88.6		%	87.7		%	0.9
Net investment income	$	70,397		$	67,171		4.8	%	$	140,806		$	137,459		2.4	%
Per diluted share	$	0.57		$	0.53		7.5	%	$	1.13		$	1.08		4.6	%
Net income available to Arch common shareholders	$	205,570		$	110,305		86.4	%	$	354,884		$	388,157		(8.6	)%
Per diluted share	$	1.65		$	0.88		87.5	%	$	2.85		$	3.05		(6.6	)%
After-tax operating income available to Arch common shareholders (2)	$	140,574		$	145,956		(3.7	)%	$	286,316		$	295,802		(3.2	)%
Per diluted share	$	1.13		$	1.16		(2.6	)%	$	2.30		$	2.33		(1.3	)%
Comprehensive income available to Arch	$	273,258		$	24,208		1,028.8	%	$	546,187		$	336,711		62.2	%
Cash flow from operations	$	152,934		$	231,762		(34.0	)%	$	410,213		$	247,361		65.8	%
Diluted weighted average common shares and common share equivalents outstanding	124,365,596			125,885,420			(1.2	)%	124,425,126			127,156,713			(2.1	)%
Financial measures:
Change in book value per common share during period	4.4		%	(0.6		)%	5.0		8.5		%	4.2		%	4.3
Annualized return on average common equity	13.2		%	7.5		%	5.7		11.6		%	13.4		%	(1.8	)
Annualized operating return on average common equity (2)	9.0		%	9.9		%	(0.9	)	9.3		%	10.2		%	(0.9	)
Total return on investments (3)
Including effects of foreign exchange	1.27		%	(0.04		)%	131 bps		3.11		%	1.07		%	204 bps
Excluding effects of foreign exchange	1.63		%	(0.38		)%	201 bps		3.14		%	1.68		%	146 bps

(1) Presented on a ‘core’ basis which excludes amounts related to the ‘other’ segment (i.e., results of Watford Re). See ‘Comments on Regulation G’ for a further discussion of the presentation of ‘core’ results.

(2) See ‘Comments on Regulation G’ for a further discussion of consolidated underwriting income, after-tax operating income or loss available to Arch common shareholders and annualized operating return on average common equity.

(3) Total return on investments includes net investment income, equity in net income (loss) of investment funds accounted for using the equity method, net realized gains and losses and the change in unrealized gains and losses generated by the Company’s investment portfolio. Total return is calculated on a pre-tax basis and before investment expenses.

3

Arch Capital Group Ltd. and Subsidiaries

Consolidated Statements of Income

(U.S. Dollars in thousands, except share data)	Three Months Ended															Six Months Ended
	June 30,			March 31,			December 31,			September 30,			June 30,			June 30,			June 30,
	2016			2016			2015			2015			2015			2016			2015
Revenues
Net premiums written	$	1,023,563		$	1,121,235		$	834,984		$	971,972		$	943,580		$	2,144,798		$	2,010,575
Change in unearned premiums	(17,578		)	(169,656		)	108,536			(35,289		)	(142		)	(187,234		)	(156,873		)
Net premiums earned	1,005,985			951,579			943,520			936,683			943,438			1,957,564			1,853,702
Net investment income	88,338			93,735			95,900			86,233			86,963			182,073			165,957
Net realized gains (losses)	68,218			37,324			(143,767		)	(89,698		)	(35,725		)	105,542			47,623
Net impairment losses recognized in earnings	(5,343		)	(7,639		)	(7,336		)	(5,868		)	(1,113		)	(12,982		)	(6,912		)
Other underwriting income	25,224			5,047			8,621			7,623			7,717			30,271			19,253
Equity in net income of investment funds accounted for using the equity method	8,737			6,655			5,517			(2,118		)	16,167			15,392			22,056
Other income (loss)	(7		)	(25		)	(451		)	(265		)	2,205			(32		)	317
Total revenues	1,191,152			1,086,676			902,004			932,590			1,019,652			2,277,828			2,101,996
Expenses
Losses and loss adjustment expenses	(584,592		)	(522,949		)	(506,020		)	(531,741		)	(519,426		)	(1,107,541		)	(1,013,142		)
Acquisition expenses	(175,281		)	(170,465		)	(171,409		)	(171,566		)	(175,425		)	(345,746		)	(338,501		)
Other operating expenses	(159,590		)	(152,269		)	(161,569		)	(146,220		)	(151,190		)	(311,859		)	(299,727		)
Corporate expenses	(17,200		)	(9,383		)	(12,243		)	(10,739		)	(17,418		)	(26,583		)	(26,763		)
Interest expense	(15,663		)	(16,107		)	(15,827		)	(13,300		)	(4,011		)	(31,770		)	(16,747		)
Net foreign exchange gains (losses)	24,662			(23,566		)	4,520			14,680			(19,583		)	1,096			46,918
Total expenses	(927,664		)	(894,739		)	(862,548		)	(858,886		)	(887,053		)	(1,822,403		)	(1,647,962		)
Income before income taxes	263,488			191,937			39,456			73,704			132,599			455,425			454,034
Income tax expense	(14,131		)	(16,310		)	(11,450		)	(9,704		)	(6,780		)	(30,441		)	(19,458		)
Net income	249,357			175,627			28,006			64,000			125,819			424,984			434,576
Amounts attributable to noncontrolling interests	(38,302		)	(20,829		)	30,573			16,033			(10,029		)	(59,131		)	(35,450		)
Net income attributable to Arch	211,055			154,798			58,579			80,033			115,790			365,853			399,126
Preferred dividends	(5,485		)	(5,484		)	(5,485		)	(5,484		)	(5,485		)	(10,969		)	(10,969		)
Net income available to Arch common shareholders	$	205,570		$	149,314		$	53,094		$	74,549		$	110,305		$	354,884		$	388,157
Comprehensive income available to Arch	$	273,258		$	272,929		$	32,268		$	23,400		$	24,208		$	546,187		$	336,711
Net income per common share
Basic	$	1.70		$	1.24		$	0.44		$	0.62		$	0.91		$	2.94		$	3.16
Diluted	$	1.65		$	1.20		$	0.42		$	0.60		$	0.88		$	2.85		$	3.05
Weighted average common shares and common share equivalents outstanding
Basic	120,599,060			120,428,179			120,700,524			120,567,410			121,719,214			120,513,620			122,957,384
Diluted	124,365,596			124,496,496			125,311,942			125,011,773			125,885,420			124,425,126			127,156,713

4

Arch Capital Group Ltd. and Subsidiaries

Consolidated Balance Sheets

(U.S. Dollars in thousands, except share data)	June 30,				March 31,			December 31,			September 30,			June 30,
	2016				2016			2015			2015			2015
Assets
Investments:
Fixed maturities available for sale, at fair value	$	11,050,464			$	10,645,257		$	10,459,353		$	10,560,635		$	9,927,603
Short-term investments available for sale, at fair value	853,531				623,844			587,904			708,428			875,727
Investment of funds received under securities lending, at fair value	338,326				594,929			389,336			286,659			377,897
Equity securities available for sale, at fair value	490,815				506,915			618,405			606,259			701,623
Other investments available for sale, at fair value	182,957				195,079			300,476			281,014			377,677
Investments accounted for using the fair value option	3,066,029				3,139,332			2,894,494			2,783,165			2,613,487
Investments accounted for using the equity method	685,766				628,832			592,973			589,277			472,926
Total investments	16,667,888			��	16,334,188			15,842,941			15,815,437			15,346,940
Cash	516,591				557,961			553,326			649,779			525,074
Accrued investment income	85,317				81,628			87,206			76,142			80,129
Fixed maturities and short-term investments pledged under securities lending, at fair value	330,773				580,766			384,081			285,632			373,969
Premiums receivable	1,260,607				1,209,548			983,443			1,074,884			1,181,636
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses	2,034,970				1,962,863			1,867,373			1,832,386			1,831,227
Contractholder receivables	1,600,426				1,529,105			1,486,296			1,436,154			1,393,138
Prepaid reinsurance premiums	540,954				500,412			427,609			442,346			442,141
Deferred acquisition costs, net	462,906				464,288			433,477			448,893			448,647
Receivable for securities sold	142,315				329,262			45,505			705,821			454,057
Goodwill and intangible assets	88,327				92,670			97,531			103,620			102,518
Other assets	680,843				898,678			968,482			899,498			905,449
Total assets	$	24,411,917			$	24,541,369		$	23,177,270		$	23,770,592		$	23,084,925
Liabilities
Reserve for losses and loss adjustment expenses	$	9,471,647			$	9,378,987		$	9,125,250		$	9,084,855		$	9,082,281
Unearned premiums	2,618,359				2,579,148			2,333,932			2,467,691			2,442,923
Reinsurance balances payable	295,987				276,426			224,120			235,562			252,462
Contractholder payables	1,600,426				1,529,105			1,486,296			1,436,154			1,393,138
Collateral held for insured obligations	261,228				249,440			248,982			242,928			219,798
Deposit accounting liabilities	22,325				266,140			260,364			270,876			277,523
Senior notes	791,392				791,349			791,306			791,264			791,222
Revolving credit agreement borrowings	397,830				457,431			530,434			339,077			100,000
Securities lending payable	338,318				594,922			393,844			292,838			383,965
Payable for securities purchased	382,834				494,813			64,996			817,371			468,015
Other liabilities	533,694				549,832			568,852			649,910			536,207
Total liabilities	16,714,040				17,167,593			16,028,376			16,628,526			15,947,534
Redeemable noncontrolling interests	205,366				205,274			205,182			205,089			204,996
Shareholders’ equity
Non-cumulative preferred shares	325,000				325,000			325,000			325,000			325,000
Common shares	581				579			577			576			576
Additional paid-in capital	517,942				485,943			467,339			450,948			437,533
Retained earnings	7,725,255				7,519,685			7,370,371			7,317,277			7,242,728
Accumulated other comprehensive income, net of deferred income tax	163,834				101,629			(16,502		)	9,809			66,441
Common shares held in treasury, at cost	(2,028,690		)		(2,019,249		)	(1,941,904		)	(1,940,795		)	(1,934,763		)
Total shareholders’ equity available to Arch	6,703,922				6,413,587			6,204,881			6,162,815			6,137,515
Non-redeemable noncontrolling interests	788,589				754,915			738,831			774,162			794,880
Total shareholders’ equity	7,492,511				7,168,502			6,943,712			6,936,977			6,932,395
Total liabilities, noncontrolling interests and shareholders’ equity	$	24,411,917			$	24,541,369		$	23,177,270		$	23,770,592		$	23,084,925
Common shares outstanding, net of treasury shares	122,572,260				122,093,596			122,627,783			122,438,554			122,403,909
Book value per common share (1)	$	52.04			$	49.87		$	47.95		$	47.68		$	47.49

(1)    Excludes the effects of stock options and restricted stock units outstanding.

5

Arch Capital Group Ltd. and Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity

(U.S. Dollars in thousands)	Three Months Ended															Six Months Ended
	June 30,			March 31,			December 31,			September 30,			June 30,			June 30,			June 30,
	2016			2016			2015			2015			2015			2016			2015
Non-Cumulative Preferred Shares
Balance at beginning and end of period	$	325,000		$	325,000		$	325,000		$	325,000		$	325,000		$	325,000		$	325,000
Common Shares
Balance at beginning of period	579			577			576			576			573			577			572
Common shares issued, net	2			2			1			—			3			4			4
Balance at end of period	581			579			577			576			576			581			576
Additional Paid-in Capital
Balance at beginning of period	485,943			467,339			450,948			437,533			399,757			467,339			383,073
Common shares issued, net	8,265			—			3,136			62			7,378			8,265			7,378
Exercise of stock options	921			4,222			3,563			2,739			6,256			5,143			9,624
Amortization of share-based compensation	21,504			14,265			9,521			10,531			22,806			35,769			36,044
Other	1,309			117			171			83			1,336			1,426			1,414
Balance at end of period	517,942			485,943			467,339			450,948			437,533			517,942			437,533
Retained Earnings
Balance at beginning of period	7,519,685			7,370,371			7,317,277			7,242,728			7,132,423			7,370,371			6,854,571
Net income	249,357			175,627			28,006			64,000			125,819			424,984			434,576
Amounts attributable to noncontrolling interests	(38,302		)	(20,829		)	30,573			16,033			(10,029		)	(59,131		)	(35,450		)
Preferred share dividends	(5,485		)	(5,484		)	(5,485		)	(5,484		)	(5,485		)	(10,969		)	(10,969		)
Balance at end of period	7,725,255			7,519,685			7,370,371			7,317,277			7,242,728			7,725,255			7,242,728
Accumulated Other Comprehensive Income
Balance at beginning of period	101,629			(16,502		)	9,809			66,441			158,023			(16,502		)	128,856
Unrealized appreciation (decline) in value of available-for-sale investments, net of deferred income tax:
Balance at beginning of period	150,745			50,085			65,714			110,360			213,522			50,085			161,598
Unrealized holding gains (losses) arising during period, net of reclassification adjustment	80,366			100,758			(14,087		)	(41,613		)	(103,149		)	181,124			(49,777		)
Portion of other-than-temporary impairment losses recognized in other comprehensive income, net of deferred income tax	(52		)	(98		)	(1,542		)	(3,033		)	(13		)	(150		)	(1,461		)
Balance at end of period	231,059			150,745			50,085			65,714			110,360			231,059			110,360
Foreign currency translation adjustments:
Balance at beginning of period	(49,116		)	(66,587		)	(55,905		)	(43,919		)	(55,499		)	(66,587		)	(32,742		)
Foreign currency translation adjustments	(18,151		)	17,313			(10,851		)	(12,083		)	11,580			(838		)	(11,177		)
Foreign currency translation adjustments attributable to noncontrolling interests	42			158			169			97			—			200			—
Balance at end of period	(67,225		)	(49,116		)	(66,587		)	(55,905		)	(43,919		)	(67,225		)	(43,919		)
Balance at end of period	163,834			101,629			(16,502		)	9,809			66,441			163,834			66,441
Common Shares Held in Treasury, at Cost
Balance at beginning of period	(2,019,249		)	(1,941,904		)	(1,940,795		)	(1,934,763		)	(1,727,074		)	(1,941,904		)	(1,562,019		)
Shares repurchased for treasury	(9,441		)	(77,345		)	(1,109		)	(6,032		)	(207,689		)	(86,786		)	(372,744		)
Balance at end of period	(2,028,690		)	(2,019,249		)	(1,941,904		)	(1,940,795		)	(1,934,763		)	(2,028,690		)	(1,934,763		)
Total Shareholders’ Equity Available to Arch	6,703,922			6,413,587			6,204,881			6,162,815			6,137,515			6,703,922			6,137,515
Non-redeemable noncontrolling interests	788,589			754,915			738,831			774,162			794,880			788,589			794,880
Total shareholders’ equity	$	7,492,511		$	7,168,502		$	6,943,712		$	6,936,977		$	6,932,395		$	7,492,511		$	6,932,395

6

Arch Capital Group Ltd. and Subsidiaries

Consolidated Statements of Cash Flows

(U.S. Dollars in thousands)	Three Months Ended															Six Months Ended
	June 30,			March 31,			December 31,			September 30,			June 30,			June 30,			June 30,
	2016			2016			2015			2015			2015			2016			2015
Operating Activities
Net income	$	249,357		$	175,627		$	28,006		$	64,000		$	125,819		$	424,984		$	434,576
Adjustments to reconcile net income to net cash provided by operating activities:
Net realized (gains) losses	(83,303		)	(43,034		)	127,981			82,798			27,089			(126,337		)	(60,818		)
Net impairment losses included in earnings	5,343			7,639			7,336			5,868			1,113			12,982			6,912
Equity in net income or loss of investment funds accounted for using the equity method and other income or loss	7,918			3,243			(126		)	14,332			(8,379		)	11,161			(10,349		)
Share-based compensation	21,504			14,265			9,521			10,531			22,806			35,769			36,044
Changes in:
Reserve for losses and loss adjustment expenses, net of unpaid losses and loss adjustment expenses recoverable	74,944			111,255			42,081			47,961			37,289			186,199			91,616
Unearned premiums, net of prepaid reinsurance premiums	17,578			169,656			(108,536		)	35,289			142			187,234			156,873
Premiums receivable	(61,466		)	(217,348		)	81,958			97,901			(14,395		)	(278,814		)	(206,642		)
Deferred acquisition costs, net	(3,400		)	(30,050		)	12,714			(2,713		)	(2,705		)	(33,450		)	(39,009		)
Reinsurance balances payable	21,783			51,929			(10,127		)	(15,415		)	35,679			73,712			19,657
Other liabilities	23,617			32,697			38,585			101,479			(45,985		)	56,314			(94,841		)
Other items, net	(55,194		)	46,664			(39,066		)	(19,651		)	121,265			(8,530		)	51,180
Net cash provided by operating activities	218,681			322,543			190,327			422,380			299,738			541,224			385,199
Investing Activities
Purchases of fixed maturity investments	(9,408,194		)	(8,133,537		)	(7,069,769		)	(7,740,713		)	(7,610,660		)	(17,541,731		)	(14,641,391		)
Purchases of equity securities	(84,415		)	(128,263		)	(29,887		)	(196,991		)	(162,672		)	(212,678		)	(288,535		)
Purchases of other investments	(345,415		)	(305,198		)	(429,275		)	(540,572		)	(404,276		)	(650,613		)	(779,678		)
Proceeds from sales of fixed maturity investments	9,151,013			7,827,536			6,682,493			7,078,118			7,476,321			16,978,549			14,333,436
Proceeds from sales of equity securities	121,607			216,012			55,003			236,665			146,437			337,619			272,343
Proceeds from sales, redemptions and maturities of other investments	425,410			211,125			392,515			270,718			318,201			636,535			587,650
Proceeds from redemptions and maturities of fixed maturities	207,086			163,894			118,132			155,413			202,327			370,980			474,984
Net settlements of derivative instruments	24,083			21,091			(86,170		)	62,108			(7,057		)	45,174			19,006
Proceeds from investment in joint venture	—			—			—			—			40,000			—			40,000
Net (purchases) sales of short-term investments	(238,866		)	(65,594		)	(12,646		)	178,034			(62,576		)	(304,460		)	3,707
Change in cash collateral related to securities lending	24,403			(43,118		)	(35,347		)	47,014			(12,800		)	(18,715		)	(18,329		)
Purchase of business, net of cash acquired	(1,460		)	—			—			—			3,250			(1,460		)	818
Purchases of fixed assets	(4,332		)	(3,952		)	(4,835		)	(4,505		)	(3,124		)	(8,284		)	(6,396		)
Change in other assets	6,679			6,737			6,661			(6,885		)	(7,144		)	13,416			(36,769		)
Net cash provided by (used for) investing activities	(122,401		)	(233,267		)	(413,125		)	(461,596		)	(83,773		)	(355,668		)	(39,154		)
Financing Activities
Purchases of common shares under share repurchase program	—			(75,256		)	—			(3,506		)	(198,979		)	(75,256		)	(361,877		)
Proceeds from common shares issued, net	(1,689		)	202			4,164			(1,481		)	2,590			(1,487		)	2,178
Proceeds from borrowings	46,000			—			192,285			239,077			—			46,000			—
Repayments of borrowings	(105,000		)	(74,171		)	—			—			—			(179,171		)	—
Change in cash collateral related to securities lending	(24,403		)	43,118			35,347			(47,014		)	12,800			18,715			18,329
Dividends paid to redeemable noncontrolling interests	(4,497		)	(4,497		)	(4,497		)	(4,497		)	(4,497		)	(8,994		)	(9,313		)
Other	(31,338		)	29,115			(92,376		)	(4,555		)	25,239			(2,223		)	55,018
Preferred dividends paid	(5,485		)	(5,484		)	(5,485		)	(5,484		)	(5,485		)	(10,969		)	(10,969		)
Net cash provided by (used for) financing activities	(126,412		)	(86,973		)	129,438			172,540			(168,332		)	(213,385		)	(306,634		)
Effects of exchange rate changes on foreign currency cash	(11,238		)	2,332			(3,093		)	(8,619		)	6,429			(8,906		)	(39		)
Increase (decrease) in cash	(41,370		)	4,635			(96,453		)	124,705			54,062			(36,735		)	39,372
Cash beginning of period	557,961			553,326			649,779			525,074			471,012			553,326			485,702
Cash end of period	$	516,591		$	557,961		$	553,326		$	649,779		$	525,074		$	516,591		$	525,074
Income taxes paid, net	$	24,115		$	2,504		$	4,813		$	9,468		$	22,423		$	26,619		$	25,992
Interest paid	$	27,711		$	3,813		$	27,533		$	119		$	24,565		$	31,524		$	25,076
Net cash provided by operating activities, excluding the ‘other’ segment	$	152,934		$	257,279		$	98,521		$	359,246		$	231,762		$	410,213		$	247,361

7

Arch Capital Group Ltd. and Subsidiaries

Segment Information — Overview

The Company classifies its businesses into three underwriting segments — insurance, reinsurance and mortgage — and two other operating segments — ‘other’ and corporate (non-underwriting). The Company’s Insurance, Reinsurance and Mortgage segments each have managers who are responsible for the overall profitability of their respective segments and who are directly accountable to the Company’s chief operating decision makers, the Chairman and Chief Executive Officer of ACGL, the President and Chief Operating Officer of ACGL and the Chief Financial Officer of ACGL. The chief operating decision makers do not assess performance, measure return on equity or make resource allocation decisions on a line of business basis. Management measures segment performance for its three core underwriting segments based on underwriting income or loss. The Company does not manage its assets by underwriting segment and, accordingly, investment income is not allocated to each underwriting segment.

The Company determined its reportable operating segments using the management approach described in accounting guidance regarding disclosures about segments of an enterprise and related information. The accounting policies of the segments are the same as those used for the preparation of the Company’s consolidated financial statements. Intersegment business is allocated to the segment accountable for the underwriting results.

Insurance Segment

The insurance segment consists of the Company’s insurance underwriting units which offer specialty product lines on a worldwide basis. Product lines include:

• Construction and national accounts: primary and excess casualty coverages to middle and large accounts in the construction industry and a wide range of products for middle and large national accounts, specializing in loss sensitive primary casualty insurance programs (including large deductible, self-insured retention and retrospectively rated programs).

• Excess and surplus casualty: primary and excess casualty insurance coverages, including middle market energy business, and contract binding, which primarily provides casualty coverage through a network of appointed agents to small and medium risks.

• Lenders products: collateral protection, debt cancellation and service contract reimbursement products to banks, credit unions, automotive dealerships and original equipment manufacturers and other specialty programs that pertain to automotive lending and leasing.

• Professional lines: directors’ and officers’ liability, errors and omissions liability, employment practices liability, fiduciary liability, crime, professional indemnity and other financial related coverages for corporate, private equity, venture capital, real estate investment trust, limited partnership, financial institution and not-for-profit clients of all sizes and medical professional and general liability insurance coverages for the healthcare industry. The business is predominately written on a claims-made basis.

• Programs: primarily package policies, underwriting workers’ compensation and umbrella liability business in support of desirable package programs, targeting program managers with unique expertise and niche products offering general liability, commercial automobile, inland marine and property business with minimal catastrophe exposure.

• Property, energy, marine and aviation: primary and excess general property insurance coverages, including catastrophe-exposed property coverage, for commercial clients. Coverages for marine include hull, war, specie and liability. Aviation and stand alone terrorism are also offered.

• Travel, accident and health: specialty travel and accident and related insurance products for individual, group travelers, travel agents and suppliers, as well as accident and health, which provides accident, disability and medical plan insurance coverages for employer groups, medical plan members, students and other participant groups.

• Other: includes alternative market risks (including captive insurance programs), excess workers’ compensation and employer’s liability insurance coverages for qualified self-insured groups, associations and trusts, and contract and commercial surety coverages, including contract bonds (payment and performance bonds) primarily for medium and large contractors and commercial surety bonds for Fortune 1,000 companies and smaller transaction business programs.

8

Arch Capital Group Ltd. and Subsidiaries

Segment Information — Overview

Reinsurance Segment

The reinsurance segment consists of the Company’s reinsurance underwriting units which offer specialty product lines on a worldwide basis. Product lines include:

• Casualty: provides coverage to ceding company clients on third party liability and workers’ compensation exposures from ceding company clients, primarily on a treaty basis. Exposures include, among others, executive assurance, professional liability, workers’ compensation, excess and umbrella liability, excess motor and healthcare business.

• Marine and aviation: provides coverage for energy, hull, cargo, specie, liability and transit, and aviation business, including airline and general aviation risks. Business written may also include space business, which includes coverages for satellite assembly, launch and operation for commercial space programs.

• Other specialty: provides coverage to ceding company clients for proportional motor and other lines including surety, accident and health, workers’ compensation catastrophe, agriculture, trade credit and political risk.

• Property catastrophe: provides protection for most catastrophic losses that are covered in the underlying policies written by reinsureds, including hurricane, earthquake, flood, tornado, hail and fire, and coverage for other perils on a case-by-case basis. Property catastrophe reinsurance provides coverage on an excess of loss basis when aggregate losses and loss adjustment expense from a single occurrence of a covered peril exceed the retention specified in the contract.

• Property excluding property catastrophe: provides coverage for both personal lines and commercial property exposures and principally covers buildings, structures, equipment and contents. The primary perils in this business include fire, explosion, collapse, riot, vandalism, wind, tornado, flood and earthquake. Business is assumed on both a proportional and excess of loss basis. In addition, facultative business is written which focuses on commercial property risks on an excess of loss basis.

• Other. includes life reinsurance business on both a proportional and non-proportional basis, casualty clash business and, in limited instances, non-traditional business which is intended to provide insurers with risk management solutions that complement traditional reinsurance.

Mortgage Segment

The mortgage segment includes the Company’s U.S. and international mortgage insurance and reinsurance operations as well as government sponsored enterprise (“GSE”) credit-risk sharing transactions. Arch Mortgage Insurance Company (“Arch MI U.S.”) is approved as an eligible mortgage insurer by Fannie Mae and Freddie Mac.

Corporate (Non-Underwriting) Segment

The corporate (non-underwriting) segment results include net investment income, other income (loss), corporate expenses, interest expense, net realized gains or losses, net impairment losses included in earnings, equity in net income (loss) of investment funds accounted for using the equity method, net foreign exchange gains or losses, income taxes and items related to the Company’s non-cumulative preferred shares. Such amounts exclude the results of the ‘other’ segment.

Other Segment

The ‘other’ segment includes the results of Watford Holdings Ltd. and its subsidiary Watford Re Ltd., a multi-line Bermuda reinsurance company, which was launched in March 2014. The Company acts as Watford Re’s reinsurance manager, and Highbridge Principal Strategies, LLC, a subsidiary of JPMorgan Chase & Co., manages Watford Re’s investment assets, each under a long term services agreement. Pursuant to generally accepted accounting principles, Watford Re is considered a variable interest entity and the Company concluded that it is the primary beneficiary of Watford Re. As such, the Company consolidates the results of Watford Re in its consolidated financial statements, although it only owns approximately 11% of Watford Re’s common equity. Watford Re has its own management and board of directors that is responsible for its overall profitability. The portion of Watford’s earnings attributable to third party investors is recorded in the consolidated statements of income as ‘amounts attributable to noncontrolling interests.’ Management measures segment performance for the ‘other’ segment based on net income or loss.

9

Arch Capital Group Ltd. and Subsidiaries

Segment Information

(U.S. Dollars in thousands)	Three Months Ended
	June 30, 2016
	Insurance			Reinsurance			Mortgage			Sub-total (Core)			Other			Total
Gross premiums written (1)	$	762,043		$	412,053		$	118,434		$	1,292,199		$	109,285		$	1,329,936
Premiums ceded	(246,875		)	(119,951		)	(6,969		)	(373,464		)	(4,457		)	(306,373		)
Net premiums written	515,168			292,102			111,465			918,735			104,828			1,023,563
Change in unearned premiums	12,482			(846		)	(44,953		)	(33,317		)	15,739			(17,578		)
Net premiums earned	527,650			291,256			66,512			885,418			120,567			1,005,985
Other underwriting income	—			20,118			4,137			24,255			969			25,224
Losses and loss adjustment expenses	(354,633		)	(146,091		)	(366		)	(501,090		)	(83,502		)	(584,592		)
Acquisition expenses, net	(77,317		)	(55,796		)	(8,523		)	(141,636		)	(33,645		)	(175,281		)
Other operating expenses	(92,371		)	(37,115		)	(23,991		)	(153,477		)	(6,113		)	(159,590		)
Underwriting income (loss)	$	3,329		$	72,372		$	37,769		113,470			(1,724		)	111,746
Net investment income										70,397			17,941			88,338
Net realized gains (losses)										40,927			27,291			68,218
Net impairment losses recognized in earnings										(5,343		)	—			(5,343		)
Equity in net income (loss) of investment funds accounted for using the equity method										8,737			—			8,737
Other income (loss)										(7		)	—			(7		)
Corporate expenses										(17,200		)	—			(17,200		)
Interest expense										(12,432		)	(3,231		)	(15,663		)
Net foreign exchange gains (losses)										22,461			2,201			24,662
Income before income taxes										221,010			42,478			263,488
Income tax expense										(14,131		)	—			(14,131		)
Net income										206,879			42,478			249,357
Dividends attributable to redeemable noncontrolling interests										—			(4,586		)	(4,586		)
Amounts attributable to nonredeemable noncontrolling interests										—			(33,716		)	(33,716		)
Net income available to Arch										206,879			4,176			211,055
Preferred dividends										(5,485		)	—			(5,485		)
Net income available to Arch common shareholders										$	201,394		$	4,176		$	205,570
Underwriting Ratios
Loss ratio	67.2		%	50.2		%	0.6		%	56.6		%	69.3		%	58.1		%
Acquisition expense ratio	14.7		%	19.2		%	12.8		%	16.0		%	27.9		%	17.4		%
Other operating expense ratio	17.5		%	12.7		%	36.1		%	17.3		%	5.1		%	15.9		%
Combined ratio	99.4		%	82.1		%	49.5		%	89.9		%	102.3		%	91.4		%
Net premiums written to gross premiums written	67.6		%	70.9		%	94.1		%	71.1		%	95.9		%	77.0		%
Total investable assets										$	15,178,308		$	1,703,431		$	16,881,739
Total assets										22,205,182			2,206,735			24,411,917
Total liabilities										15,613,641			1,100,399			16,714,040

(1) Certain amounts included in the gross premiums written of each segment are related to intersegment transactions and are included in the gross premiums written of each segment. Accordingly, the sum of gross premiums written for each segment does not agree to the total gross premiums written as shown in the table above due to the elimination of intersegment transactions in the total.

10

Arch Capital Group Ltd. and Subsidiaries

Segment Information

(U.S. Dollars in thousands)	Three Months Ended
	June 30, 2015
	Insurance			Reinsurance			Mortgage			Sub-total (Core)			Other			Total
Gross premiums written (1)	$	744,810		$	342,101		$	68,572		$	1,155,253		$	127,954		$	1,199,209
Premiums ceded	(235,743		)	(89,446		)	(6,902		)	(331,861		)	(7,766		)	(255,629		)
Net premiums written	509,067			252,655			61,670			823,392			120,188			943,580
Change in unearned premiums	758			21,310			(9,211		)	12,857			(12,999		)	(142		)
Net premiums earned	509,825			273,965			52,459			836,249			107,189			943,438
Other underwriting income	521			2,658			3,686			6,865			852			7,717
Losses and loss adjustment expenses	(320,926		)	(111,183		)	(9,639		)	(441,748		)	(77,678		)	(519,426		)
Acquisition expenses, net	(76,723		)	(58,360		)	(10,200		)	(145,283		)	(30,142		)	(175,425		)
Other operating expenses	(89,054		)	(39,007		)	(19,679		)	(147,740		)	(3,450		)	(151,190		)
Underwriting income (loss)	$	23,643		$	68,073		$	16,627		108,343			(3,229		)	105,114
Net investment income										67,171			19,792			86,963
Net realized gains (losses)										(26,860		)	(8,865		)	(35,725		)
Net impairment losses recognized in earnings										(1,113		)	—			(1,113		)
Equity in net income (loss) of investment funds accounted for using the equity method										16,167			—			16,167
Other income (loss)										2,205			—			2,205
Corporate expenses										(17,418		)	—			(17,418		)
Interest expense										(4,011		)	—			(4,011		)
Net foreign exchange gains (losses)										(22,571		)	2,988			(19,583		)
Income before income taxes										121,913			10,686			132,599
Income tax expense										(6,780		)	—			(6,780		)
Net income										115,133			10,686			125,819
Dividends attributable to redeemable noncontrolling interests										—			(4,743		)	(4,743		)
Amounts attributable to nonredeemable noncontrolling interests										—			(5,286		)	(5,286		)
Net income available to Arch										115,133			657			115,790
Preferred dividends										(5,485		)	—			(5,485		)
Net income available to Arch common shareholders										$	109,648		$	657		$	110,305
Underwriting Ratios
Loss ratio	62.9		%	40.6		%	18.4		%	52.8		%	72.5		%	55.1		%
Acquisition expense ratio	15.0		%	21.3		%	19.4		%	17.4		%	28.1		%	18.6		%
Other operating expense ratio	17.5		%	14.2		%	37.5		%	17.7		%	3.2		%	16.0		%
Combined ratio	95.4		%	76.1		%	75.3		%	87.9		%	103.8		%	89.7		%
Net premiums written to gross premiums written	68.3		%	73.9		%	89.9		%	71.3		%	93.9		%	78.7		%
Total investable assets										$	14,513,554		$	1,340,574		$	15,854,128
Total assets										21,323,611			1,761,314			23,084,925
Total liabilities										15,299,256			648,278			15,947,534

(1) Certain amounts included in the gross premiums written of each segment are related to intersegment transactions and are included in the gross premiums written of each segment. Accordingly, the sum of gross premiums written for each segment does not agree to the total gross premiums written as shown in the table above due to the elimination of intersegment transactions in the total.

11

Arch Capital Group Ltd. and Subsidiaries

Segment Information

(U.S. Dollars in thousands)	Six Months Ended
	June 30, 2016
	Insurance			Reinsurance			Mortgage			Sub-total (Core)			Other			Total
Gross premiums written (1)	$	1,560,596		$	893,443		$	229,714		$	2,683,260		$	257,891		$	2,767,902
Premiums ceded	(495,664		)	(280,517		)	(11,736		)	(787,424		)	(8,929		)	(623,104		)
Net premiums written	1,064,932			612,926			217,978			1,895,836			248,962			2,144,798
Change in unearned premiums	(24,193		)	(60,462		)	(89,701		)	(174,356		)	(12,878		)	(187,234		)
Net premiums earned	1,040,739			552,464			128,277			1,721,480			236,084			1,957,564
Other underwriting income	—			20,443			7,930			28,373			1,898			30,271
Losses and loss adjustment expenses	(678,242		)	(257,689		)	(8,995		)	(944,926		)	(162,615		)	(1,107,541		)
Acquisition expenses, net	(151,671		)	(110,583		)	(16,908		)	(279,162		)	(66,584		)	(345,746		)
Other operating expenses	(178,232		)	(73,570		)	(48,606		)	(300,408		)	(11,451		)	(311,859		)
Underwriting income (loss)	$	32,594		$	131,065		$	61,698		225,357			(2,668		)	222,689
Net investment income										140,806			41,267			182,073
Net realized gains (losses)										72,789			32,753			105,542
Net impairment losses recognized in earnings										(12,982		)	—			(12,982		)
Equity in net income (loss) of investment funds accounted for using the equity method										15,392			—			15,392
Other income (loss)										(32		)	—			(32		)
Corporate expenses										(26,583		)	—			(26,583		)
Interest expense										(25,059		)	(6,711		)	(31,770		)
Net foreign exchange gains (losses)										420			676			1,096
Income before income taxes										390,108			65,317			455,425
Income tax expense										(30,441		)	—			(30,441		)
Net income										359,667			65,317			424,984
Dividends attributable to redeemable noncontrolling interests										—			(9,173		)	(9,173		)
Amounts attributable to nonredeemable noncontrolling interests										—			(49,958		)	(49,958		)
Net income available to Arch										359,667			6,186			365,853
Preferred dividends										(10,969		)	—			(10,969		)
Net income available to Arch common shareholders										$	348,698		$	6,186		$	354,884
Underwriting Ratios
Loss ratio	65.2		%	46.6		%	7.0		%	54.9		%	68.9		%	56.6		%
Acquisition expense ratio	14.6		%	20.0		%	13.2		%	16.2		%	28.2		%	17.7		%
Other operating expense ratio	17.1		%	13.3		%	37.9		%	17.5		%	4.9		%	15.9		%
Combined ratio	96.9		%	79.9		%	58.1		%	88.6		%	102.0		%	90.2		%
Net premiums written to gross premiums written	68.2		%	68.6		%	94.9		%	70.7		%	96.5		%	77.5		%

(1) Certain amounts included in the gross premiums written of each segment are related to intersegment transactions and are included in the gross premiums written of each segment. Accordingly, the sum of gross premiums written for each segment does not agree to the total gross premiums written as shown in the table above due to the elimination of intersegment transactions in the total.

12

Arch Capital Group Ltd. and Subsidiaries

Segment Information

(U.S. Dollars in thousands)	Six Months Ended
	June 30, 2015
	Insurance			Reinsurance			Mortgage			Sub-total (Core)			Other			Total
Gross premiums written (1)	$	1,510,963		$	827,213		$	129,113		$	2,466,931		$	256,587		$	2,541,231
Premiums ceded	(459,893		)	(226,015		)	(15,572		)	(701,122		)	(11,821		)	(530,656		)
Net premiums written	1,051,070			601,198			113,541			1,765,809			244,766			2,010,575
Change in unearned premiums	(33,331		)	(47,516		)	(10,715		)	(91,562		)	(65,311		)	(156,873		)
Net premiums earned	1,017,739			553,682			102,826			1,674,247			179,455			1,853,702
Other underwriting income	948			4,087			11,404			16,439			2,814			19,253
Losses and loss adjustment expenses	(638,822		)	(223,715		)	(23,448		)	(885,985		)	(127,157		)	(1,013,142		)
Acquisition expenses, net	(151,801		)	(114,964		)	(20,618		)	(287,383		)	(51,118		)	(338,501		)
Other operating expenses	(177,173		)	(77,051		)	(40,048		)	(294,272		)	(5,455		)	(299,727		)
Underwriting income (loss)	$	50,891		$	142,039		$	30,116		223,046			(1,461		)	221,585
Net investment income										137,459			28,498			165,957
Net realized gains (losses)										38,649			8,974			47,623
Net impairment losses recognized in earnings										(6,912		)	—			(6,912		)
Equity in net income (loss) of investment funds accounted for using the equity method										22,056			—			22,056
Other income (loss)										317			—			317
Corporate expenses										(26,763		)	—			(26,763		)
Interest expense										(16,747		)	—			(16,747		)
Net foreign exchange gains (losses)										44,282			2,636			46,918
Income before income taxes										415,387			38,647			454,034
Income tax expense										(19,458		)	—			(19,458		)
Net income										395,929			38,647			434,576
Dividends attributable to redeemable noncontrolling interests										—			(9,651		)	(9,651		)
Amounts attributable to nonredeemable noncontrolling interests										—			(25,799		)	(25,799		)
Net income available to Arch										395,929			3,197			399,126
Preferred dividends										(10,969		)	—			(10,969		)
Net income available to Arch common shareholders										$	384,960		$	3,197		$	388,157
Underwriting Ratios
Loss ratio	62.8		%	40.4		%	22.8		%	52.9		%	70.9		%	54.7		%
Acquisition expense ratio	14.9		%	20.8		%	20.1		%	17.2		%	28.5		%	18.3		%
Other operating expense ratio	17.4		%	13.9		%	38.9		%	17.6		%	3.0		%	16.2		%
Combined ratio	95.1		%	75.1		%	81.8		%	87.7		%	102.4		%	89.2		%
Net premiums written to gross premiums written	69.6		%	72.7		%	87.9		%	71.6		%	95.4		%	79.1		%

(1) Certain amounts included in the gross premiums written of each segment are related to intersegment transactions and are included in the gross premiums written of each segment. Accordingly, the sum of gross premiums written for each segment does not agree to the total gross premiums written as shown in the table above due to the elimination of intersegment transactions in the total.

13

Arch Capital Group Ltd. and Subsidiaries

Segment Information — Insurance Segment

(U.S. Dollars in thousands)	Three Months Ended															Six Months Ended
	June 30,			March 31,			December 31,			September 30,			June 30,			June 30,			June 30,
	2016			2016			2015			2015			2015			2016			2015
Gross premiums written	$	762,043		$	798,553		$	680,617		$	752,438		$	744,810		$	1,560,596		$	1,510,963
Premiums ceded	(246,875		)	(248,789		)	(229,011		)	(209,443		)	(235,743		)	(495,664		)	(459,893		)
Net premiums written	515,168			549,764			451,606			542,995			509,067			1,064,932			1,051,070
Change in unearned premiums	12,482			(36,675		)	52,919			(20,451		)	758			(24,193		)	(33,331		)
Net premiums earned	527,650			513,089			504,525			522,544			509,825			1,040,739			1,017,739
Other underwriting income	—			—			526			519			521			—			948
Losses and loss adjustment expenses	(354,633		)	(323,609		)	(313,966		)	(339,859		)	(320,926		)	(678,242		)	(638,822		)
Acquisition expenses, net	(77,317		)	(74,354		)	(70,440		)	(77,076		)	(76,723		)	(151,671		)	(151,801		)
Other operating expenses	(92,371		)	(85,861		)	(92,623		)	(84,620		)	(89,054		)	(178,232		)	(177,173		)
Underwriting income	$	3,329		$	29,265		$	28,022		$	21,508		$	23,643		$	32,594		$	50,891
Underwriting Ratios
Loss ratio	67.2		%	63.1		%	62.2		%	65.0		%	62.9		%	65.2		%	62.8		%
Acquisition expense ratio	14.7		%	14.5		%	14.0		%	14.8		%	15.0		%	14.6		%	14.9		%
Other operating expense ratio	17.5		%	16.7		%	18.4		%	16.2		%	17.5		%	17.1		%	17.4		%
Combined ratio	99.4		%	94.3		%	94.6		%	96.0		%	95.4		%	96.9		%	95.1		%
Catastrophic activity and prior year development:
Current accident year catastrophic events, net of
reinsurance and reinstatement premiums	3.9		%	0.1		%	0.4		%	1.6		%	1.2		%	2.0		%	0.9		%
Net (favorable) adverse development in prior year loss
reserves, net of related adjustments	(0.8		)%	(0.8		)%	(2.1		)%	(1.4		)%	(3.4		)%	(0.8		)%	(2.2		)%
Combined ratio excluding catastrophic activity and prior year development (1)	96.3		%	95.0		%	96.3		%	95.8		%	97.6		%	95.7		%	96.4		%
Net premiums written to gross premiums written	67.6		%	68.8		%	66.4		%	72.2		%	68.3		%	68.2		%	69.6		%

(1) See ‘Comments on Regulation G’ for further discussion.

14

Arch Capital Group Ltd. and Subsidiaries

Segment Information — Insurance Segment

(U.S. Dollars in thousands)	Three Months Ended																				Six Months Ended
	June 30,				March 31,				December 31,				September 30,				June 30,				June 30,				June 30,
	2016				2016				2015				2015				2015				2016				2015
Net premiums written
Professional lines (1)	$	107,519	20.9	%	$	109,467	19.9	%	$	104,183	23.1	%	$	118,563	21.8	%	$	100,100	19.7	%	$	216,986	20.4	%	$	211,278	20.1	%
Construction and national accounts	85,260		16.5	%	104,474		19.0	%	65,544		14.5	%	60,320		11.1	%	77,096		15.1	%	189,734		17.8	%	173,599		16.5	%
Programs	75,420		14.6	%	89,784		16.3	%	78,753		17.4	%	120,028		22.1	%	106,179		20.9	%	165,204		15.5	%	224,376		21.3	%
Excess and surplus casualty (2)	60,412		11.7	%	53,657		9.8	%	50,345		11.1	%	51,170		9.4	%	53,971		10.6	%	114,069		10.7	%	103,341		9.8	%
Travel, accident and health	54,456		10.6	%	57,263		10.4	%	36,418		8.1	%	49,386		9.1	%	35,416		7.0	%	111,719		10.5	%	74,328		7.1	%
Property, energy, marine and aviation	50,194		9.7	%	49,975		9.1	%	30,668		6.8	%	51,802		9.5	%	62,049		12.2	%	100,169		9.4	%	120,716		11.5	%
Lenders products	25,254		4.9	%	24,784		4.5	%	30,877		6.8	%	29,212		5.4	%	24,011		4.7	%	50,038		4.7	%	46,827		4.5	%
Other (3)	56,653		11.0	%	60,360		11.0	%	54,818		12.1	%	62,514		11.5	%	50,245		9.9	%	117,013		11.0	%	96,605		9.2	%
Total	$	515,168	100.0	%	$	549,764	100.0	%	$	451,606	100.0	%	$	542,995	100.0	%	$	509,067	100.0	%	$	1,064,932	100.0	%	$	1,051,070	100.0	%
Client location
United States	$	436,958	84.8	%	$	450,028	81.9	%	$	381,498	84.5	%	$	447,456	82.4	%	$	436,106	85.7	%	$	886,986	83.3	%	$	881,964	83.9	%
Europe	34,318		6.7	%	65,085		11.8	%	41,337		9.2	%	47,640		8.8	%	30,761		6.0	%	99,403		9.3	%	98,043		9.3	%
Asia and Pacific	22,855		4.4	%	16,337		3.0	%	14,391		3.2	%	24,264		4.5	%	14,000		2.8	%	39,192		3.7	%	25,983		2.5	%
Other	21,037		4.1	%	18,314		3.3	%	14,380		3.2	%	23,635		4.4	%	28,200		5.5	%	39,351		3.7	%	45,080		4.3	%
Total	$	515,168	100.0	%	$	549,764	100.0	%	$	451,606	100.0	%	$	542,995	100.0	%	$	509,067	100.0	%	$	1,064,932	100.0	%	$	1,051,070	100.0	%
Underwriting location
United States	$	423,465	82.2	%	$	446,200	81.2	%	$	369,805	81.9	%	$	443,367	81.7	%	$	421,830	82.9	%	$	869,665	81.7	%	$	860,695	81.9	%
Europe	74,373		14.4	%	94,095		17.1	%	67,636		15.0	%	87,043		16.0	%	70,901		13.9	%	168,468		15.8	%	163,319		15.5	%
Other	17,330		3.4	%	9,469		1.7	%	14,165		3.1	%	12,585		2.3	%	16,336		3.2	%	26,799		2.5	%	27,056		2.6	%
Total	$	515,168	100.0	%	$	549,764	100.0	%	$	451,606	100.0	%	$	542,995	100.0	%	$	509,067	100.0	%	$	1,064,932	100.0	%	$	1,051,070	100.0	%
Net premiums earned
Professional lines (1)	$	108,556	20.6	%	$	104,944	20.5	%	$	103,393	20.5	%	$	106,283	20.3	%	$	107,420	21.1	%	$	213,500	20.5	%	$	215,292	21.2	%
Construction and national accounts	84,414		16.0	%	77,043		15.0	%	77,762		15.4	%	75,256		14.4	%	71,580		14.0	%	161,457		15.5	%	143,810		14.1	%
Programs	90,595		17.2	%	98,501		19.2	%	102,104		20.2	%	115,502		22.1	%	112,942		22.2	%	189,096		18.2	%	228,906		22.5	%
Excess and surplus casualty (2)	57,155		10.8	%	54,965		10.7	%	50,669		10.0	%	53,366		10.2	%	51,709		10.1	%	112,120		10.8	%	104,056		10.2	%
Travel, accident and health	59,821		11.3	%	47,545		9.3	%	39,949		7.9	%	39,918		7.6	%	39,979		7.8	%	107,366		10.3	%	73,711		7.2	%
Property, energy, marine and aviation	47,076		8.9	%	49,037		9.6	%	52,115		10.3	%	55,106		10.5	%	53,825		10.6	%	96,113		9.2	%	108,906		10.7	%
Lenders products	23,007		4.4	%	24,402		4.8	%	22,832		4.5	%	23,956		4.6	%	21,259		4.2	%	47,409		4.6	%	44,118		4.3	%
Other (3)	57,026		10.8	%	56,652		11.0	%	55,701		11.0	%	53,157		10.2	%	51,111		10.0	%	113,678		10.9	%	98,940		9.7	%
Total	$	527,650	100.0	%	$	513,089	100.0	%	$	504,525	100.0	%	$	522,544	100.0	%	$	509,825	100.0	%	$	1,040,739	100.0	%	$	1,017,739	100.0	%

(1)    Includes professional liability, executive assurance and healthcare business.

(2)    Includes casualty and contract binding business.

(3)    Includes alternative markets, excess workers’ compensation and surety business.

15

Arch Capital Group Ltd. and Subsidiaries

Segment Information — Reinsurance Segment

(U.S. Dollars in thousands)	Three Months Ended															Six Months Ended
	June 30,			March 31,			December 31,			September 30,			June 30,			June 30,			June 30,
	2016			2016			2015			2015			2015			2016			2015
Gross premiums written	$	412,053		$	481,390		$	262,482		$	329,327		$	342,101		$	893,443		$	827,213
Premiums ceded	(119,951		)	(160,566		)	(62,417		)	(92,182		)	(89,446		)	(280,517		)	(226,015		)
Net premiums written	292,102			320,824			200,065			237,145			252,655			612,926			601,198
Change in unearned premiums	(846		)	(59,616		)	62,957			23,286			21,310			(60,462		)	(47,516		)
Net premiums earned	291,256			261,208			263,022			260,431			273,965			552,464			553,682
Other underwriting income	20,118			325			3,736			2,783			2,658			20,443			4,087
Losses and loss adjustment expenses	(146,091		)	(111,598		)	(100,855		)	(115,780		)	(111,183		)	(257,689		)	(223,715		)
Acquisition expenses, net	(55,796		)	(54,787		)	(53,252		)	(55,416		)	(58,360		)	(110,583		)	(114,964		)
Other operating expenses	(37,115		)	(36,455		)	(41,629		)	(37,131		)	(39,007		)	(73,570		)	(77,051		)
Underwriting income	$	72,372		$	58,693		$	71,022		$	54,887		$	68,073		$	131,065		$	142,039
Underwriting Ratios
Loss ratio	50.2		%	42.7		%	38.3		%	44.5		%	40.6		%	46.6		%	40.4		%
Acquisition expense ratio	19.2		%	21.0		%	20.2		%	21.3		%	21.3		%	20.0		%	20.8		%
Other operating expense ratio	12.7		%	14.0		%	15.8		%	14.3		%	14.2		%	13.3		%	13.9		%
Combined ratio	82.1		%	77.7		%	74.3		%	80.1		%	76.1		%	79.9		%	75.1		%
Catastrophic activity and prior year development:
Current accident year catastrophic events, net of
reinsurance and reinstatement premiums	5.4		%	1.4		%	5.3		%	4.0		%	3.6		%	3.5		%	2.0		%
Net (favorable) adverse development in prior year loss
reserves, net of related adjustments	(21.7		)%	(18.0		)%	(21.1		)%	(18.5		)%	(21.5		)%	(19.9		)%	(21.0		)%
Combined ratio excluding catastrophic activity and prior year development (1)	98.4		%	94.3		%	90.1		%	94.6		%	94.0		%	96.3		%	94.1		%
Net premiums written to gross premiums written	70.9		%	66.6		%	76.2		%	72.0		%	73.9		%	68.6		%	72.7		%

(1) See ‘Comments on Regulation G’ for further discussion.

16

Arch Capital Group Ltd. and Subsidiaries

Segment Information — Reinsurance Segment

(U.S. Dollars in thousands)	Three Months Ended																						Six Months Ended
	June 30,				March 31,					December 31,				September 30,				June 30,					June 30,				June 30,
	2016				2016					2015				2015				2015					2016				2015
Net premiums written
Other specialty (1)	$	113,943	39.0	%	$	100,820		31.4	%	$	62,219	31.1	%	$	63,293	26.7	%	$	72,134		28.6	%	$	214,763	35.0	%	$	173,282	28.8	%
Property excluding property catastrophe (2)	69,831		23.9	%	73,723			23.0	%	61,126		30.6	%	72,456		30.6	%	57,005			22.6	%	143,554		23.4	%	146,929		24.4	%
Casualty (3)	61,555		21.1	%	126,483			39.4	%	57,062		28.5	%	63,395		26.7	%	64,778			25.6	%	188,038		30.7	%	182,636		30.4	%
Property catastrophe	41,771		14.3	%	(2,295		)	(0.7	)%	8,765		4.4	%	21,366		9.0	%	46,046			18.2	%	39,476		6.4	%	61,489		10.2	%
Marine and aviation	1,463		0.5	%	17,540			5.5	%	8,308		4.2	%	12,221		5.2	%	9,461			3.7	%	19,003		3.1	%	30,305		5.0	%
Other (4)	3,539		1.2	%	4,553			1.4	%	2,585		1.3	%	4,414		1.9	%	3,231			1.3	%	8,092		1.3	%	6,557		1.1	%
Total	$	292,102	100.0	%	$	320,824		100.0	%	$	200,065	100.0	%	$	237,145	100.0	%	$	252,655		100.0	%	$	612,926	100.0	%	$	601,198	100.0	%
Pro rata	$	146,231	50.1	%	$	112,209		35.0	%	$	139,978	70.0	%	$	138,367	58.3	%	$	128,976		51.0	%	$	258,440	42.2	%	$	259,211	43.1	%
Excess of loss	145,871		49.9	%	208,615			65.0	%	60,087		30.0	%	98,778		41.7	%	123,679			49.0	%	354,486		57.8	%	341,987		56.9	%
Total	$	292,102	100.0	%	$	320,824		100.0	%	$	200,065	100.0	%	$	237,145	100.0	%	$	252,655		100.0	%	$	612,926	100.0	%	$	601,198	100.0	%
Client location
United States	$	126,449	43.3	%	$	134,506		41.9	%	$	70,187	35.1	%	$	128,830	54.3	%	$	130,780		51.8	%	$	260,955	42.6	%	$	271,467	45.2	%
Europe	90,688		31.0	%	131,828			41.1	%	60,301		30.1	%	48,359		20.4	%	55,566			22.0	%	222,516		36.3	%	198,505		33.0	%
Bermuda	14,685		5.0	%	20,765			6.5	%	18,592		9.3	%	15,544		6.6	%	22,503			8.9	%	35,450		5.8	%	46,752		7.8	%
Asia and Pacific	40,090		13.7	%	16,710			5.2	%	24,254		12.1	%	31,492		13.3	%	24,729			9.8	%	56,800		9.3	%	38,863		6.5	%
Other	20,190		6.9	%	17,015			5.3	%	26,731		13.4	%	12,920		5.4	%	19,077			7.6	%	37,205		6.1	%	45,611		7.6	%
Total	$	292,102	100.0	%	$	320,824		100.0	%	$	200,065	100.0	%	$	237,145	100.0	%	$	252,655		100.0	%	$	612,926	100.0	%	$	601,198	100.0	%
Underwriting location
Bermuda	$	108,638	37.2	%	$	48,415		15.1	%	$	50,684	25.3	%	$	56,718	23.9	%	$	89,363		35.4	%	$	157,053	25.6	%	$	174,583	29.0	%
United States	100,436		34.4	%	140,250			43.7	%	81,450		40.7	%	117,216		49.4	%	102,057			40.4	%	240,686		39.3	%	240,524		40.0	%
Europe	71,804		24.6	%	122,738			38.3	%	59,503		29.7	%	53,717		22.7	%	63,587			25.2	%	194,542		31.7	%	185,570		30.9	%
Other	11,224		3.8	%	9,421			2.9	%	8,428		4.2	%	9,494		4.0	%	(2,352		)	(0.9	)%	20,645		3.4	%	521		0.1	%
Total	$	292,102	100.0	%	$	320,824		100.0	%	$	200,065	100.0	%	$	237,145	100.0	%	$	252,655		100.0	%	$	612,926	100.0	%	$	601,198	100.0	%
Net premiums earned
Other specialty (1)	$	109,493	37.6	%	$	74,249		28.4	%	$	74,916	28.5	%	$	72,337	27.8	%	$	80,256		29.3	%	$	183,742	33.3	%	$	164,054	29.6	%
Property excluding property catastrophe (2)	65,487		22.5	%	71,953			27.5	%	73,856		28.1	%	72,267		27.7	%	69,600			25.4	%	137,440		24.9	%	149,364		27.0	%
Casualty (3)	80,157		27.5	%	76,053			29.1	%	78,621		29.9	%	75,061		28.8	%	83,186			30.4	%	156,210		28.3	%	156,567		28.3	%
Property catastrophe	19,823		6.8	%	17,953			6.9	%	21,945		8.3	%	23,325		9.0	%	24,325			8.9	%	37,776		6.8	%	51,595		9.3	%
Marine and aviation	12,559		4.3	%	17,878			6.8	%	11,064		4.2	%	13,708		5.3	%	13,423			4.9	%	30,437		5.5	%	26,036		4.7	%
Other (4)	3,737		1.3	%	3,122			1.2	%	2,620		1.0	%	3,733		1.4	%	3,175			1.2	%	6,859		1.2	%	6,066		1.1	%
Total	$	291,256	100.0	%	$	261,208		100.0	%	$	263,022	100.0	%	$	260,431	100.0	%	$	273,965		100.0	%	$	552,464	100.0	%	$	553,682	100.0	%
Pro rata	$	153,933	52.9	%	$	139,693		53.5	%	$	134,145	51.0	%	$	132,090	50.7	%	$	143,835		52.5	%	$	293,626	53.1	%	$	297,350	53.7	%
Excess of loss	137,323		47.1	%	121,515			46.5	%	128,877		49.0	%	128,341		49.3	%	130,130			47.5	%	258,838		46.9	%	256,332		46.3	%
Total	$	291,256	100.0	%	$	261,208		100.0	%	$	263,022	100.0	%	$	260,431	100.0	%	$	273,965		100.0	%	$	552,464	100.0	%	$	553,682	100.0	%

(1)    Includes proportional motor, surety, accident and health, workers’ compensation catastrophe, agriculture, trade credit and other.        (2)  Includes facultative business.    

(3)      Includes executive assurance, professional liability, workers’ compensation, excess motor, healthcare and other.                (4) Includes life, casualty clash and other.

17

Arch Capital Group Ltd. and Subsidiaries

Segment Information — Mortgage Segment

(U.S. Dollars in thousands)	Three Months Ended															Six Months Ended
	June 30,			March 31,			December 31,			September 30,			June 30,			June 30,			June 30,
	2016			2016			2015			2015			2015			2016			2015
Gross premiums written	$	118,434		$	111,280		$	91,787		$	74,657		$	68,572		$	229,714		$	129,113
Premiums ceded	(6,969		)	(4,767		)	(4,660		)	(7,832		)	(6,902		)	(11,736		)	(15,572		)
Net premiums written	111,465			106,513			87,127			66,825			61,670			217,978			113,541
Change in unearned premiums	(44,953		)	(44,748		)	(30,391		)	(12,277		)	(9,211		)	(89,701		)	(10,715		)
Net premiums earned	66,512			61,765			56,736			54,548			52,459			128,277			102,826
Other underwriting income (1)	4,137			3,793			3,461			3,565			3,686			7,930			11,404
Losses and loss adjustment expenses	(366		)	(8,629		)	(7,237		)	(9,562		)	(9,639		)	(8,995		)	(23,448		)
Acquisition expenses, net	(8,523		)	(8,385		)	(14,030		)	(10,428		)	(10,200		)	(16,908		)	(20,618		)
Other operating expenses	(23,991		)	(24,615		)	(21,274		)	(21,048		)	(19,679		)	(48,606		)	(40,048		)
Underwriting income	$	37,769		$	23,929		$	17,656		$	17,075		$	16,627		$	61,698		$	30,116
Underwriting Ratios
Loss ratio	0.6		%	14.0		%	12.8		%	17.5		%	18.4		%	7.0		%	22.8		%
Acquisition expense ratio	12.8		%	13.6		%	24.7		%	19.1		%	19.4		%	13.2		%	20.1		%
Other operating expense ratio	36.1		%	39.9		%	37.5		%	38.6		%	37.5		%	37.9		%	38.9		%
Combined ratio	49.5		%	67.5		%	75.0		%	75.2		%	75.3		%	58.1		%	81.8		%
Net (favorable) adverse development in prior year loss
reserves, net of related adjustments	(16.6		)%	(4.4		)%	(8.1		)%	(7.3		)%	(2.1		)%	(10.8		)%	(3.8		)%
Combined ratio excluding prior year development (2)	66.1		%	71.9		%	83.1		%	82.5		%	77.4		%	68.9		%	85.6		%
Net premiums written to gross premiums written	94.1		%	95.7		%	94.9		%	89.5		%	89.9		%	94.9		%	87.9		%
Net premiums written by client location
United States	$	66,261		$	55,803		$	51,724		$	48,611		$	47,460		$	122,064		$	93,282
Other	45,204			50,710			35,403			18,214			14,210			95,914			20,259
Total	$	111,465		$	106,513		$	87,127		$	66,825		$	61,670		$	217,978		$	113,541
United States %	59.4		%	52.4		%	59.4		%	72.7		%	77.0		%	56.0		%	82.2		%
Other %	40.6		%	47.6		%	40.6		%	27.3		%	23.0		%	44.0		%	17.8		%
Net premiums written by underwriting location
United States	$	42,442		$	35,330		$	33,474		$	33,298		$	30,589		$	77,772		$	58,545
Other	69,023			71,183			53,653			33,527			31,081			140,206			54,996
Total	$	111,465		$	106,513		$	87,127		$	66,825		$	61,670		$	217,978		$	113,541
United States %	38.1		%	33.2		%	38.4		%	49.8		%	49.6		%	35.7		%	51.6		%
Other %	61.9		%	66.8		%	61.6		%	50.2		%	50.4		%	64.3		%	48.4		%

(1)     Represents income earned on various risk-sharing products offered to government sponsored enterprises and mortgage lenders.

(2)    See ‘Comments on Regulation G’ for further discussion.

18

Arch Capital Group Ltd. and Subsidiaries

Segment Information — Mortgage Segment

(U.S. Dollars in millions)	June 30, 2016					March 31, 2016					December 31, 2015					September 30, 2015
Insurance In Force (IIF) (1)
U.S. mortgage insurance	$	33,367		30.7	%	$	28,433		30.9	%	$	27,101		35.5	%	$	25,697		39.8	%
Mortgage reinsurance	22,242			20.5	%	22,393			24.3	%	20,876			27.3	%	19,550			30.3	%
Other (2)	52,926			48.8	%	41,172			44.8	%	28,415			37.2	%	19,357			30.0	%
Total	$	108,535		100.0	%	$	91,998		100.0	%	$	76,392		100.0	%	$	64,604		100.0	%
Risk In Force (RIF) (3)
U.S. mortgage insurance	$	8,396		64.8	%	$	7,165		62.5	%	$	6,826		63.9	%	$	6,467		65.1	%
Mortgage reinsurance	2,567			19.8	%	2,661			23.2	%	2,653			24.8	%	2,676			26.9	%
Other (2)	1,993			15.4	%	1,636			14.3	%	1,206			11.3	%	796			8.0	%
Total	$	12,956		100.0	%	$	11,462		100.0	%	$	10,685		100.0	%	$	9,939		100.0	%
Supplemental disclosures for U.S. mortgage insurance:
Total RIF by credit quality (FICO score):
>=740	$	4,766		56.8	%	$	3,995		55.8	%	$	3,763		55.1	%	$	3,532		54.6	%
680-739	2,779			33.1	%	2,354			32.9	%	2,237			32.8	%	2,114			32.7	%
620-679	753			9.0	%	712			9.9	%	717			10.5	%	705			10.9	%
<620	98			1.2	%	104			1.5	%	109			1.6	%	116			1.8	%
Total	$	8,396		100.0	%	$	7,165		100.0	%	$	6,826		100.0	%	$	6,467		100.0	%
Weighted average FICO score	741					739					738					737
Total RIF by Loan-To-Value (LTV):
95.01% and above	$	1,135		13.5	%	$	1,052		14.7	%	$	1,050		15.4	%	$	1,045		16.2	%
90.01% to 95.00%	4,379			52.2	%	3,677			51.3	%	3,472			50.9	%	3,252			50.3	%
85.01% to 90.00%	2,438			29.0	%	2,056			28.7	%	1,942			28.5	%	1,831			28.3	%
85.00% and below	444			5.3	%	380			5.3	%	362			5.3	%	339			5.2	%
Total	$	8,396		100.0	%	$	7,165		100.0	%	$	6,826		100.0	%	$	6,467		100.0	%
Weighted average LTV	92.9		%			93.0		%			93.0		%			93.2		%
Total RIF by State:
California	$	727		8.7	%	$	622		8.7	%	$	599		8.8	%	$	570		8.8	%
Wisconsin	620			7.4	%	585			8.2	%	581			8.5	%	574			8.9	%
Texas	469			5.6	%	401			5.6	%	380			5.6	%	355			5.5	%
Florida	422			5.0	%	345			4.8	%	327			4.8	%	310			4.8	%
Minnesota	351			4.2	%	319			4.5	%	315			4.6	%	306			4.7	%
Massachusetts	330			3.9	%	262			3.7	%	249			3.6	%	235			3.6	%
Virginia	300			3.6	%	237			3.3	%	218			3.2	%	213			3.3	%
Washington	279			3.3	%	261			3.6	%	259			3.8	%	247			3.8	%
Illinois	279			3.3	%	218			3.0	%	202			3.0	%	187			2.9	%
Ohio	260			3.1	%	212			3.0	%	203			3.0	%	191			3.0	%
Others	4,359			51.9	%	3,703			51.7	%	3,493			51.2	%	3,279			50.7	%
Total	$	8,396		100.0	%	$	7,165		100.0	%	$	6,826		100.0	%	$	6,467		100.0	%
Weighted average coverage (end of period RIF divided by IIF)	25.2		%			25.2		%			25.2		%			25.2		%
Analysts’ persistency (4)	75.6		%			74.2		%			75.6		%			76.0		%
Risk-to-capital ratio (5)	12.4:1					11.1:1					10.5:1					10.1:1

(1)    The aggregate dollar amount of each insured mortgage loan’s current principal balance.     (2)    Includes GSE credit risk-sharing transactions and international insurance business.    

(3) The aggregate dollar amount of each insured mortgage loan’s current principal balance     (4)    Represents the % of IIF at the beginning of a 12-month period that remained in force at the end of the period.

multiplied by the insurance coverage percentage specified in the policy for insurance policies (5)    Represents total current (non-delinquent) RIF, net of reinsurance, divided by total statutory capital. Ratio

issued and after contract limits and/or loss ratio caps for risk-sharing or reinsurance transactions. calculated for Arch MI U.S. only (estimate for June 30, 2016).

19

Arch Capital Group Ltd. and Subsidiaries

Segment Information — Mortgage Segment

(U.S. Dollars in millions, except policy/loan/claim count)	Three Months Ended																				Six Months Ended
	June 30, 2016					March 31, 2016					December 31, 2015					September 30, 2015					June 30, 2016
Supplemental disclosures for U.S. mortgage insurance:
Total new insurance written (NIW) (1)	$	6,420				$	2,906				$	2,575				$	3,179				$	9,326
Total NIW by credit quality (FICO score):
>=740	$	3,950		61.5	%	$	1,808		62.2	%	$	1,543		59.9	%	$	1,973		62.1	%	$	5,758		61.7	%
680-739	2,162			33.7	%	959			33.0	%	842			32.7	%	976			30.7	%	3,121			33.5	%
620-679	307			4.8	%	139			4.8	%	190			7.4	%	230			7.2	%	446			4.8	%
<620	1			—	%	—			—	%	—			—	%	—			—	%	1			—	%
Total	$	6,420		100.0	%	$	2,906		100.0	%	$	2,575		100.0	%	$	3,179		100.0	%	$	9,326		100.0	%
Total NIW by LTV:
95.01% and above	$	551		8.6	%	$	175		6.0	%	$	164		6.4	%	$	219		6.9	%	$	726		7.8	%
90.01% to 95.00%	2,983			46.5	%	1,233			42.4	%	1,164			45.2	%	1,458			45.9	%	4,216			45.2	%
85.01% to 90.00%	2,078			32.4	%	1,021			35.1	%	856			33.2	%	1,054			33.2	%	3,099			33.2	%
85.01% and below	808			12.6	%	477			16.4	%	391			15.2	%	448			14.1	%	1,285			13.8	%
Total	$	6,420		100.0	%	$	2,906		100.0	%	$	2,575		100.0	%	$	3,179		100.0	%	$	9,326		100.0	%
Total NIW purchase vs. refinance:
Purchase	$	5,309		82.7	%	$	2,055		70.7	%	$	1,923		74.7	%	$	2,483		78.1	%	$	7,364		79.0	%
Refinance	1,111			17.3	%	851			29.3	%	652			25.3	%	696			21.9	%	1,962			21.0	%
Total	$	6,420		100.0	%	$	2,906		100.0	%	$	2,575		100.0	%	$	3,179		100.0	%	$	9,326		100.0	%
Ending number of policies in force (PIF)	172,666					153,984					148,943					143,335
Rollforward of insured loans in default:
Beginning delinquent number of loans	2,325					2,702					2,757					2,850					2,702
Plus: new notices	1,033					1,048					1,134					1,196					2,081
Less: cures	(919		)			(1,206		)			(987		)			(1,057		)			(2,125		)
Less: paid claims	(193		)			(222		)			(205		)			(233		)			(415		)
Less: delinquent rescissions and denials	(1		)			3					3					1					2
Ending delinquent number of loans	2,245					2,325					2,702					2,757					2,245
Ending percentage of loans in default	1.3		%			1.5		%			1.8		%			1.9		%
Losses:
Number of claims paid	193					222					205					233					415
Total paid claims (in thousands)	$	7,744				$	9,168				$	8,093				$	9,036				$	16,912
Average per claim (in thousands)	$	40.1				$	41.3				$	39.5				$	38.8				$	40.8
Severity (2)	94.8		%			93.9		%			96.2		%			91.7		%			94.8		%
Average reserve per default (in thousands)	$	27.8				$	32.1				$	29.1				$	30.6

(1)    The original principal balance of all loans that received coverage during the period.        

(2)    Represents total paid claims divided by RIF of loans for which claims were paid.

20

Arch Capital Group Ltd. and Subsidiaries

Segment Information — Selected Information on Losses and Loss Adjustment Expenses

(U.S. Dollars in thousands)	Three Months Ended															Six Months Ended
	June 30,			March 31,			December 31,			September 30,			June 30,			June 30,			June 30,
	2016			2016			2015			2015			2015			2016			2015
Components of losses and loss adjustment expenses incurred (1)
Paid losses and loss adjustment expenses	$	484,033		$	391,543		$	445,914		$	467,855		$	465,053		$	875,576		$	897,687
Change in unpaid losses and loss adjustment expenses	17,057			52,293			(23,856		)	(2,654		)	(23,305		)	69,350			(11,702		)
Total losses and loss adjustment expenses	$	501,090		$	443,836		$	422,058		$	465,201		$	441,748		$	944,926		$	885,985
Estimated net (favorable) adverse development in prior year loss reserves, net of related adjustments (1)
Net impact on underwriting results:
Insurance	$	(4,133	)	$	(4,177	)	$	(10,561	)	$	(7,572	)	$	(17,167	)	$	(8,310	)	$	(22,122	)
Reinsurance	(63,187		)	(46,943		)	(55,411		)	(48,075		)	(58,802		)	(110,130		)	(116,081		)
Mortgage	(11,066		)	(2,735		)	(4,579		)	(3,965		)	(1,108		)	(13,801		)	(3,920		)
Total	$	(78,386	)	$	(53,855	)	$	(70,551	)	$	(59,612	)	$	(77,077	)	$	(132,241	)	$	(142,123	)
Impact on losses and loss adjustment expenses:
Insurance	$	(4,905	)	$	(6,150	)	$	(10,030	)	$	(9,867	)	$	(18,595	)	$	(11,055	)	$	(27,349	)
Reinsurance	(69,836		)	(47,364		)	(59,091		)	(49,941		)	(57,798		)	(117,200		)	(115,809		)
Mortgage	(11,066		)	(2,735		)	(4,579		)	(3,975		)	(1,125		)	(13,801		)	(3,740		)
Total	$	(85,807	)	$	(56,249	)	$	(73,700	)	$	(63,783	)	$	(77,518	)	$	(142,056	)	$	(146,898	)
Impact on acquisition expenses:
Insurance	$	772		$	1,973		$	(531	)	$	2,295		$	1,428		$	2,745		$	5,227
Reinsurance	6,649			421			3,680			1,866			(1,004		)	7,070			(272		)
Mortgage	—			—			—			10			17			—			(180		)
Total	$	7,421		$	2,394		$	3,149		$	4,171		$	441		$	9,815		$	4,775
Impact on combined ratio:
Insurance	(0.8		)%	(0.8		)%	(2.1		)%	(1.4		)%	(3.4		)%	(0.8		)%	(2.2		)%
Reinsurance	(21.7		)%	(18.0		)%	(21.1		)%	(18.5		)%	(21.5		)%	(19.9		)%	(21.0		)%
Mortgage	(16.6		)%	(4.4		)%	(8.1		)%	(7.3		)%	(2.1		)%	(10.8		)%	(3.8		)%
Total	(8.9		)%	(6.4		)%	(8.6		)%	(7.1		)%	(9.2		)%	(7.7		)%	(8.5		)%
Impact on loss ratio:
Insurance	(0.9		)%	(1.2		)%	(2.0		)%	(1.9		)%	(3.6		)%	(1.1		)%	(2.7		)%
Reinsurance	(24.0		)%	(18.1		)%	(22.5		)%	(19.2		)%	(21.1		)%	(21.2		)%	(20.9		)%
Mortgage	(16.6		)%	(4.4		)%	(8.1		)%	(7.3		)%	(2.1		)%	(10.8		)%	(3.6		)%
Total	(9.7		)%	(6.7		)%	(8.9		)%	(7.6		)%	(9.3		)%	(8.3		)%	(8.8		)%
Impact on acquisition expense ratio:
Insurance	0.1		%	0.4		%	(0.1		)%	0.5		%	0.2		%	0.3		%	0.5		%
Reinsurance	2.3		%	0.1		%	1.4		%	0.7		%	(0.4		)%	1.3		%	(0.1		)%
Mortgage	—		%	—		%	—		%	—		%	—		%	—		%	(0.2		)%
Total	0.8		%	0.3		%	0.3		%	0.5		%	0.1		%	0.6		%	0.3		%
Estimated net losses incurred from current accident year catastrophic events (2)
Insurance	$	20,592		$	428		$	1,888		$	8,545		$	6,019		$	21,020		$	9,200
Reinsurance	15,705			3,774			13,972			10,302			9,842			19,479			11,272
Total	$	36,297		$	4,202		$	15,860		$	18,847		$	15,861		$	40,499		$	20,472
Impact on combined ratio:
Insurance	3.9		%	0.1		%	0.4		%	1.6		%	1.2		%	2.0		%	0.9		%
Reinsurance	5.4		%	1.4		%	5.3		%	4.0		%	3.6		%	3.5		%	2.0		%
Total	4.1		%	0.5		%	1.9		%	2.3		%	1.9		%	2.4		%	1.2		%

(1) Presented on a ‘core’ basis which excludes amounts related to the ‘other’ segment (i.e., results of Watford Re). See ‘Comments on Regulation G’ for a further discussion of the presentation of ‘core’ results.

(2) Equals estimated losses from catastrophic events occurring in the current accident year, net of reinsurance and reinstatement premiums. Amounts shown for the insurance segment are for named catastrophic events only. Amounts shown for the reinsurance segment include (i) named events with over $5 million of losses incurred by its Bermuda and Europe operations and (ii) all catastrophe losses incurred by its U.S. operations. Amounts not applicable for the mortgage segment.

21

Arch Capital Group Ltd. and Subsidiaries

Investment Information — Investable Asset Summary and Investment Portfolio Metrics

The following table summarizes the Company’s investable assets and portfolio metrics (1):

(U.S. Dollars in thousands)	June 30,					March 31,					December 31,					September 30,					June 30,
	2016					2016					2015					2015					2015
Investable assets (1) (2):
Fixed maturities available for sale, at fair value	$	11,050,464		72.8	%	$	10,645,257		71.2	%	$	10,459,353		71.4	%	$	10,560,635		71.7	%	$	9,927,603		68.4	%
Fixed maturities, at fair value (3)	377,482			2.5	%	371,298			2.5	%	367,780			2.5	%	341,131			2.3	%	387,941			2.7	%
Fixed maturities pledged under securities lending agreements, at fair value	319,672			2.1	%	558,603			3.7	%	373,304			2.5	%	285,632			1.9	%	373,969			2.6	%
Total fixed maturities	11,747,618			77.4	%	11,575,158			77.4	%	11,200,437			76.5	%	11,187,398			75.9	%	10,689,513			73.7	%
Short-term investments available for sale, at fair value	853,531			5.6	%	623,844			4.2	%	587,904			4.0	%	708,428			4.8	%	875,727			6.0	%
Short-term investments pledged under securities lending agreements, at fair value	—			—	%	6,000			—	%	—			—	%	—			—	%	—			—	%
Cash	442,066			2.9	%	479,545			3.2	%	444,776			3.0	%	521,137			3.5	%	470,011			3.2	%
Equity securities available for sale, at fair value	490,815			3.2	%	506,915			3.4	%	618,405			4.2	%	606,259			4.1	%	701,623			4.8	%
Equity securities, at fair value (3)	7,090			—	%	437			—	%	798			—	%	78			—	%	248			—	%
Equity securities pledged under securities lending agreements, at fair value	11,101			0.1	%	16,163			0.1	%	10,777			0.1	%	—			—	%	—			—	%
Other investments available for sale, at fair value	182,957			1.2	%	195,079			1.3	%	300,476			2.1	%	281,014			1.9	%	377,677			2.6	%
Other investments, at fair value (3)	1,003,621			6.6	%	1,010,450			6.8	%	908,809			6.2	%	891,484			6.1	%	899,763			6.2	%
Investments accounted for using the equity method (4)	685,766			4.5	%	628,832			4.2	%	592,973			4.0	%	589,277			4.0	%	472,926			3.3	%
Securities transactions entered into but not settled at the balance sheet date	(246,257		)	(1.6	)%	(88,129		)	(0.6	)%	(20,524		)	(0.1	)%	(51,343		)	(0.3	)%	26,066			0.2	%
Total investable assets managed by the Company	$	15,178,308		100.0	%	$	14,954,294		100.0	%	$	14,644,831		100.0	%	$	14,733,732		100.0	%	$	14,513,554		100.0	%
Average effective duration (in years)	3.85					3.56					3.43					3.42					3.05
Average S&P/Moody’s credit ratings (5)	AA/Aa2					AA/Aa2					AA/Aa2					AA/Aa2					AA/Aa2
Embedded book yield (before investment expenses)	1.92		%			2.07		%			2.16		%			2.10		%			2.07		%

(1) Presented on a ‘core’ basis which excludes amounts related to the ‘other’ segment (i.e., results of Watford Re). See ‘Comments on Regulation G’ for a further discussion of the presentation of ‘core’ results. Such amounts are summarized as follows:

(U.S. Dollars in thousands)	June 30,			March 31,			December 31,			September 30,			June 30,
	2016			2016			2015			2015			2015
Investable assets in ‘other’ segment:
Cash	$	74,525		$	78,416		$	108,550		$	128,642		$	55,063
Investments accounted for using the fair value option	1,677,836			1,757,147			1,617,107			1,550,472			1,325,535
Securities sold but not yet purchased	(54,668		)	(48,279		)	(30,583		)	(25,384		)	—
Securities transactions entered into but not settled at the balance sheet date	5,738			(77,422		)	1,033			(60,207		)	(40,024		)
Total investable assets included in ‘other’ segment	$	1,703,431		$	1,709,862		$	1,696,107		$	1,593,523		$	1,340,574

(2)    This table excludes the collateral received and reinvested and includes the securities pledged under securities lending agreements, at fair value.

(3)    Represents investments which are carried at fair value under the fair value option and reflected as “investments accounted for using the fair value option” on the balance sheet.

(4) Changes in the carrying value of investment funds accounted for using the equity method are recorded as “equity in net income (loss) of investment funds accounted for using the equity method” rather than as an unrealized gain or loss component of accumulated other comprehensive income.

(5)    Average credit ratings on the Company’s investment portfolio on securities with ratings assigned by Standard & Poor’s (“S&P”) and Moody’s Investors Service (“Moody’s”).

22

Arch Capital Group Ltd. and Subsidiaries

Investment Information — Composition of Net Investment Income, Yield and Total Return

The following table summarizes the Company’s net investment income, yield and total return:

(U.S. Dollars in thousands, except share data)	Three Months Ended															Six Months Ended
	June 30,			March 31,			December 31,			September 30,			June 30,			June 30,			June 30,
	2016			2016			2015			2015			2015			2016			2015
Composition of net investment income (1):
Fixed maturities	$	64,365		$	59,001		$	58,942		$	58,888		$	61,191		$	123,366		$	123,559
Term loan investments (2)	5,669			4,858			5,639			4,810			4,566			10,527			8,841
Equity securities (dividends)	3,984			3,756			5,111			3,807			2,742			7,740			5,421
Short-term investments	618			458			121			75			183			1,076			378
Other (3)	8,152			13,672			8,259			10,253			10,472			21,824			23,209
Gross investment income	82,788			81,745			78,072			77,833			79,154			164,533			161,408
Investment expenses	(12,391		)	(11,336		)	(11,102		)	(10,582		)	(11,983		)	(23,727		)	(23,949		)
Net investment income	$	70,397		$	70,409		$	66,970		$	67,251		$	67,171		$	140,806		$	137,459
Per share	$	0.57		$	0.57		$	0.53		$	0.54		$	0.53		$	1.13		$	1.08
Investment income yield, at amortized cost (1) (4):
Pre-tax	2.08		%	2.13		%	2.02		%	2.04		%	2.05		%	2.06		%	2.07		%
After-tax	1.91		%	1.91		%	1.82		%	1.86		%	1.90		%	1.88		%	1.92		%
Total return (1) (5):
Including effects of foreign exchange	1.27		%	1.82		%	(0.33		)%	(0.31		)%	(0.04		)%	3.11		%	1.07		%
Excluding effects of foreign exchange	1.63		%	1.48		%	(0.10		)%	0.04		%	(0.38		)%	3.14		%	1.68		%

(1) Presented on a ‘core’ basis which excludes amounts related to the ‘other’ segment (i.e., results of Watford Re). See ‘Comments on Regulation G’ for a further discussion of the presentation of ‘core’ results.

(2) Included in “investments accounted for using the fair value option” on the Company’s balance sheet.

(3) Includes income on other investments, funds held balances, cash balances and other.

(4) Presented on an annualized basis and excluding the impact of investments for which returns are not included within investment income, such as investments accounted for using the equity method and certain equities.

(5) Includes net investment income, equity in net income or loss of investment funds accounted for using the equity method, net realized gains and losses and the change in unrealized gains or losses generated by the Company’s investment portfolio. Total return is calculated on a pre-tax basis and before investment expenses.

23

Arch Capital Group Ltd. and Subsidiaries

Investment Information — Composition of Fixed Maturities

The following table summarizes the Company’s fixed maturities and fixed maturities pledged under securities lending agreements (1):

(U.S. Dollars in thousands)	Fair Value		Gross Unrealized Gains		Gross Unrealized Losses			Net Unrealized Gains (Losses)			Amortized Cost		Fair Value / Amortized Cost		% of Total
At June 30, 2016
Corporates	$	3,117,847	$	67,087	$	(16,531	)	$	50,556		$	3,067,291	101.6	%	26.5	%
Non-U.S. government-backed corporates	92,756		1,350		(1,104		)	246			92,510		100.3	%	0.8	%
U.S. government and government agencies	2,701,042		33,940		(749		)	33,191			2,667,851		101.2	%	23.0	%
Agency mortgage-backed securities	584,429		7,339		(219		)	7,120			577,309		101.2	%	5.0	%
Non-agency mortgage-backed securities	90,022		5,634		(958		)	4,676			85,346		105.5	%	0.8	%
Agency commercial mortgage-backed securities	79,238		1,866		(251		)	1,615			77,623		102.1	%	0.7	%
Non-agency commercial mortgage-backed securities	545,153		11,988		(753		)	11,235			533,918		102.1	%	4.6	%
Municipal bonds	1,897,128		47,135		(678		)	46,457			1,850,671		102.5	%	16.1	%
Non-U.S. government securities	1,274,237		46,672		(37,074		)	9,598			1,264,639		100.8	%	10.8	%
Asset-backed securities	1,365,766		13,492		(5,413		)	8,079			1,357,687		100.6	%	11.6	%
Total	$	11,747,618	$	236,503	$	(63,730	)	$	172,773		$	11,574,845	101.5	%	100.0	%
At December 31, 2015
Corporates	$	2,881,952	$	15,033	$	(57,050	)	$	(42,017	)	$	2,923,969	98.6	%	25.7	%
Non-U.S. government-backed corporates	78,742		945		(3,458		)	(2,513		)	81,255		96.9	%	0.7	%
U.S. government and government agencies	2,423,455		6,228		(9,978		)	(3,750		)	2,427,205		99.8	%	21.6	%
Agency mortgage-backed securities	562,162		1,925		(3,612		)	(1,687		)	563,849		99.7	%	5.0	%
Non-agency mortgage-backed securities	250,395		7,947		(1,722		)	6,225			244,170		102.5	%	2.2	%
Agency commercial mortgage-backed securities	75,252		239		(278		)	(39		)	75,291		99.9	%	0.7	%
Non-agency commercial mortgage-backed securities	688,900		3,030		(6,700		)	(3,670		)	692,570		99.5	%	6.2	%
Municipal bonds	1,626,281		27,014		(1,534		)	25,480			1,600,801		101.6	%	14.5	%
Non-U.S. government securities	992,792		10,414		(39,122		)	(28,708		)	1,021,500		97.2	%	8.9	%
Asset-backed securities	1,620,506		3,307		(12,951		)	(9,644		)	1,630,150		99.4	%	14.5	%
Total	$	11,200,437	$	76,082	$	(136,405	)	$	(60,323	)	$	11,260,760	99.5	%	100.0	%

(1) Presented on a ‘core’ basis which excludes amounts related to the ‘other’ segment (i.e., results of Watford Re). See ‘Comments on Regulation G’ for a further discussion of the presentation of ‘core’ results.

24

Arch Capital Group Ltd. and Subsidiaries

Investment Information — Credit Quality Distribution and Maturity Profile

The following table summarizes the credit quality distribution and maturity profile of the Company’s fixed maturities and fixed maturities pledged under securities lending agreements (1):

(U.S. Dollars in thousands)	June 30,				March 31,				December 31,				September 30,				June 30,
	2016				2016				2015				2015				2015
Credit quality distribution of total fixed maturities (2) (3):
U.S. government and government agencies (4)	$	3,364,709	28.6	%	$	3,611,793	31.2	%	$	3,060,869	27.3	%	$	2,997,450	26.8	%	$	2,593,318	24.3	%
AAA	3,421,385		29.1	%	3,797,393		32.8	%	4,000,750		35.7	%	3,815,981		34.1	%	3,639,910		34.1	%
AA	2,255,666		19.2	%	1,524,692		13.2	%	1,651,760		14.7	%	1,978,961		17.7	%	1,967,666		18.4	%
A	1,541,075		13.1	%	1,512,085		13.1	%	1,431,138		12.8	%	1,474,976		13.2	%	1,474,583		13.8	%
BBB	525,084		4.5	%	484,968		4.2	%	457,251		4.1	%	335,514		3.0	%	337,517		3.2	%
BB	232,859		2.0	%	233,348		2.0	%	203,426		1.8	%	195,888		1.8	%	212,561		2.0	%
B	151,549		1.3	%	164,744		1.4	%	138,770		1.2	%	137,324		1.2	%	170,859		1.6	%
Lower than B	96,726		0.8	%	100,441		0.9	%	130,545		1.2	%	132,107		1.2	%	136,784		1.3	%
Not rated	158,565		1.3	%	145,694		1.3	%	125,928		1.1	%	119,197		1.1	%	156,315		1.5	%
Total fixed maturities, at fair value	$	11,747,618	100.0	%	$	11,575,158	100.0	%	$	11,200,437	100.0	%	$	11,187,398	100.0	%	$	10,689,513	100.0	%
Maturity profile of total fixed maturities (2):
Due in one year or less	$	272,242	2.3	%	$	295,627	2.6	%	$	357,343	3.2	%	$	349,574	3.1	%	$	387,896	3.6	%
Due after one year through five years	5,225,233		44.5	%	5,391,177		46.6	%	4,790,737		42.8	%	4,639,733		41.5	%	4,288,771		40.1	%
Due after five years through ten years	2,907,672		24.8	%	2,561,411		22.1	%	2,318,165		20.7	%	2,677,172		23.9	%	2,556,513		23.9	%
Due after 10 years	677,863		5.8	%	642,505		5.6	%	536,977		4.8	%	468,086		4.2	%	376,573		3.5	%
	9,083,010		77.3	%	8,890,720		76.8	%	8,003,222		71.5	%	8,134,565		72.7	%	7,609,753		71.2	%
Mortgage-backed securities	674,451		5.7	%	714,001		6.2	%	812,557		7.3	%	869,311		7.8	%	896,245		8.4	%
Commercial mortgage-backed securities	624,391		5.3	%	577,853		5.0	%	764,152		6.8	%	810,973		7.2	%	832,159		7.8	%
Asset-backed securities	1,365,766		11.6	%	1,392,584		12.0	%	1,620,506		14.5	%	1,372,549		12.3	%	1,351,356		12.6	%
Total fixed maturities, at fair value	$	11,747,618	100.0	%	$	11,575,158	100.0	%	$	11,200,437	100.0	%	$	11,187,398	100.0	%	$	10,689,513	100.0	%

(1) Presented on a ‘core’ basis which excludes amounts related to the ‘other’ segment (i.e., results of Watford Re). See ‘Comments on Regulation G’ for a further discussion of the presentation of ‘core’ results.

(2) This table excludes the collateral received and reinvested and includes the fixed maturities pledged under securities lending agreements, at fair value.

(3)     For individual fixed maturities, S&P ratings are used. In the absence of an S&P rating, ratings from Moody’s are used, followed by ratings from Fitch Ratings.

(4)     Includes U.S. government-sponsored agency mortgage backed securities and agency commercial mortgage backed securities.

25

Arch Capital Group Ltd. and Subsidiaries

Investment Information — Analysis of Corporate Exposures

The following table summarizes the Company’s corporate bonds by sector, excluding government-backed securities (1):

(U.S. Dollars in thousands)	June 30,				March 31,				December 31,				September 30,				June 30,
	2016				2016				2015				2015				2015
Sector:
Industrials	$	1,634,205	52.4	%	$	1,594,202	52.4	%	$	1,508,734	52.4	%	$	1,601,879	55.3	%	$	1,705,524	57.3	%
Financials	1,025,714		32.9	%	966,692		31.8	%	997,189		34.6	%	933,181		32.2	%	896,655		30.1	%
Utilities	225,403		7.2	%	207,371		6.8	%	180,405		6.3	%	147,777		5.1	%	147,563		5.0	%
Covered bonds	154,194		4.9	%	171,101		5.6	%	163,739		5.7	%	162,139		5.6	%	171,368		5.8	%
All other (2)	78,331		2.5	%	104,026		3.4	%	31,885		1.1	%	52,113		1.8	%	54,936		1.8	%
Total fixed maturities, at fair value	$	3,117,847	100.0	%	$	3,043,392	100.0	%	$	2,881,952	100.0	%	$	2,897,089	100.0	%	$	2,976,046	100.0	%
Credit quality distribution (3):
AAA	$	291,686	9.4	%	$	393,737	12.9	%	$	358,305	12.4	%	$	416,453	14.4	%	$	429,889	14.4	%
AA	832,197		26.7	%	702,772		23.1	%	735,432		25.5	%	778,614		26.9	%	778,677		26.2	%
A	1,134,859		36.4	%	1,138,261		37.4	%	1,064,965		37.0	%	1,109,506		38.3	%	1,101,592		37.0	%
BBB	420,279		13.5	%	377,529		12.4	%	359,903		12.5	%	243,870		8.4	%	243,514		8.2	%
BB	184,652		5.9	%	174,657		5.7	%	154,050		5.3	%	150,066		5.2	%	161,134		5.4	%
B	134,024		4.3	%	147,395		4.8	%	123,534		4.3	%	120,056		4.1	%	152,712		5.1	%
Lower than B	20,416		0.7	%	17,657		0.6	%	11,844		0.4	%	9,234		0.3	%	10,332		0.3	%
Not rated	99,734		3.2	%	91,384		3.0	%	73,919		2.6	%	69,290		2.4	%	98,196		3.3	%
Total fixed maturities, at fair value	$	3,117,847	100.0	%	$	3,043,392	100.0	%	$	2,881,952	100.0	%	$	2,897,089	100.0	%	$	2,976,046	100.0	%

(1) Presented on a ‘core’ basis which excludes amounts related to the ‘other’ segment (i.e., results of Watford Re). See ‘Comments on Regulation G’ for a further discussion of the presentation of ‘core’ results.

(2)    Includes sovereign securities, supranational securities and other.

(3)    For individual fixed maturities, S&P ratings are used. In the absence of an S&P rating, ratings from Moody’s are used, followed by ratings from Fitch Ratings.

The following table summarizes the Company’s top ten exposures to fixed income corporate issuers by fair value at June 30, 2016, excluding government-backed securities and covered bonds (1):

(U.S. Dollars in thousands)	Fair Value		% of Asset Class		% of Investable Assets		Credit Quality (2)
Issuer:
Apple Inc.	$	71,396	2.3	%	0.5	%	AA+/Aa1
Wells Fargo & Company	70,956		2.3	%	0.5	%	A+/Aa3
Coca-Cola Co	70,063		2.2	%	0.5	%	AA-/Aa3
Microsoft Corporation	61,400		2.0	%	0.4	%	AAA/Aaa
Oracle Corporation	59,000		1.9	%	0.4	%	AA-/A1
MassMutual Global Funding II	54,483		1.7	%	0.4	%	AA+/Aa2
Royal Dutch Shell PLC	53,894		1.7	%	0.4	%	A+/Aa2
Anheuser Busch Inbev SA	45,574		1.5	%	0.3	%	A-/A3
JPMorgan Chase & Co	42,737		1.4	%	0.3	%	A-/A3
Toyota Motor Corporation	42,733		1.4	%	0.3	%	AA-/Aa3
Total	$	572,236	18.4	%	3.8	%

(1) Presented on a ‘core’ basis which excludes amounts related to the ‘other’ segment (i.e., results of Watford Re). See ‘Comments on Regulation G’ for a further discussion of the presentation of ‘core’ results.

(2)    Average credit ratings assigned by S&P and Moody’s, respectively.

26

Arch Capital Group Ltd. and Subsidiaries

Investment Information — Structured Securities

The following table provides information on the Company’s mortgage-backed securities (MBS) and commercial mortgage-backed securities (CMBS) at June 30, 2016, excluding amounts guaranteed by U.S. government agencies (1):

(U.S. Dollars in thousands)				Average	Estimated Fair Value
	Issuance	Amortized		Credit			% of Amortized		% of Investable			Non-Agency		Non-Agency
	Year	Cost		Quality	Total		Cost		Assets		Additional Statistics:	MBS		CMBS (2)
Non-agency MBS:	2003-2008	$	64,394	CC-	$	68,802	106.8	%	0.5	%	Wtd. average loan age (months)	114		32
	2009	453		AA	453		100.0	%	—	%	Wtd. average life (months) (3)	47		81
	2010	1,067		NR	1,142		107.0	%	—	%	Wtd. average loan-to-value % (4)	62.5	%	56.8	%
	2014	2,240		NR	2,205		98.4	%	—	%	Total delinquencies (5)	15.6	%	0.7	%
	2015	16,215		A	16,434		101.4	%	0.1	%	Current credit support % (6)	8.0	%	37.1	%
	2016	977		C-	986		100.9	%	—	%
Total non-agency MBS		$	85,346	CC+	$	90,022	105.5	%	0.6	%
Non-agency CMBS:	2002-2008	$	27,672	A	$	27,909	100.9	%	0.2	%
	2009	534		BBB	535		100.2	%	—	%
	2010	8,675		AAA	8,914		102.8	%	0.1	%
	2011	576		AAA	579		100.5	%	—	%
	2012	34,940		AAA	35,575		101.8	%	0.2	%
	2013	84,173		AA	86,924		103.3	%	0.6	%
	2014	123,512		AA+	125,630		101.7	%	0.8	%
	2015	157,786		AAA	161,574		102.4	%	1.1	%
	2016	96,050		AA+	97,513		101.5	%	0.6	%
Total non-agency CMBS		$	533,918	AA+	$	545,153	102.1	%	3.6	%

(1) Presented on a ‘core’ basis which excludes amounts related to the ‘other’ segment (i.e., results of Watford Re). See ‘Comments on Regulation G’ for a further discussion of the presentation of ‘core’ results.

(2) Loans defeased with government/agency obligations represented were not material to the collateral underlying the Company’s CMBS holdings.

(3) The weighted average life for MBS is based on the interest rates in effect at June 30, 2016. The weighted average life for CMBS reflects the average life of the collateral underlying the Company’s CMBS holdings.

(4) The range of loan-to-values on MBS is 13% to 96%, while the range of loan-to-values on CMBS is 3% to 200%.

(5) Total delinquencies includes 60 days and over.

(6) Current credit support % represents the % for a collateralized mortgage obligation (CMO) or CMBS class/tranche from other subordinate classes in the same CMO or CMBS deal.

The following table provides information on the Company’s asset-backed securities (ABS) at June 30, 2016 (1):

(U.S. Dollars in thousands)			Average	Weighted		Estimated Fair Value
	Amortized		Credit	Average Credit				% of Amortized		% of Investable
Sector:	Cost		Quality	Support		Total		Cost		Assets
Credit cards	$	706,330	AAA	16	%	$	715,273	101.3	%	4.7	%
Autos	264,955		AAA	26	%	266,468		100.6	%	1.8	%
Loans	189,013		A+	12	%	186,179		98.5	%	1.2	%
Equipment	119,367		AA-	2	%	118,574		99.3	%	0.8	%
Other (2)	78,022		A	20	%	79,272		101.6	%	0.5	%
Total ABS (3)	$	1,357,687	AA+			$	1,365,766	100.6	%	9.0	%

(1) Presented on a ‘core’ basis which excludes amounts related to the ‘other’ segment (i.e., results of Watford Re). See ‘Comments on Regulation G’ for a further discussion of the presentation of ‘core’ results.

(2) Including rate reduction bonds, commodities, home equity, U.K. securitized and other.

(3) The effective duration of the total ABS was 1.9 years at June 30, 2016. The Company’s investment portfolio included sub-prime securities with a par value of $51.1 million and estimated fair value of $41.8 million and an average credit quality of “CCC/Caa3” from S&P/Moody’s at June 30, 2016. Such amounts were primarily in the home equity sector of ABS with the balance in other ABS, MBS and CMBS sectors.

27

Arch Capital Group Ltd. and Subsidiaries

Investment Information — Bank Loan Investments

The Company’s investments in bank loans are included in the following categories at June 30, 2016 (1):

(U.S. Dollars in thousands)	Fair Value		% of Asset Class		% of Investable Assets
Composition:
Investment funds accounted for using the equity method	$	2,985	0.8	%	—	%
Term loan investments (2)	362,857		99.2	%	2.4	%
Total	$	365,842	100.0	%	2.4	%
Currency:
U.S.-denominated	$	237,037	64.8	%	1.6	%
Euro-denominated	128,805		35.2	%	0.8	%
Total	$	365,842	100.0	%	2.4	%
Sector:
Consumer non-cyclical	$	103,991	28.4	%	0.7	%
Consumer cyclical	88,484		24.2	%	0.6	%
Industrials	65,574		17.9	%	0.4	%
Basic materials	45,567		12.5	%	0.3	%
Media	27,717		7.6	%	0.2	%
Utilities	13,095		3.6	%	0.1	%
All other	21,416		5.9	%	0.1	%
Total	$	365,844	100.0	%	2.4	%
Weighted average rating factor (Moody's)	B2

(1) Presented on a ‘core’ basis which excludes amounts related to the ‘other’ segment (i.e., results of Watford Re). See ‘Comments on Regulation G’ for a further discussion of the presentation of ‘core’ results.

(2)    Included in “investments accounted for using the fair value option” on the Company’s balance sheet.

28

Arch Capital Group Ltd. and Subsidiaries

Investment Information — Eurozone Investments

The fair value of the Company’s Eurozone investments are as follows at June 30, 2016 (1):

(U.S. Dollars in thousands)			Financial		Other		Bank		Equities
	Sovereign (3)		Corporates		Corporates		Loans (4)		and Other		Total
Country (2):
Netherlands	$	115,660	$	20,410	$	66,934	$	6,289	$	5,385	$	214,678
Germany	84,677		—		26,803		26,309		682		138,471
France	14,971		—		38,133		3,744		4,677		61,525
Luxembourg	—		—		23,086		5,565		—		28,651
Supranational (5)	17,131		—		—		—		—		17,131
Belgium	5,187		—		8,555		—		—		13,742
Ireland	—		—		1,044		6,016		182		7,242
Spain	—		—		—		2,175		993		3,168
Italy	—		—		—		1,147		—		1,147
Austria	—		—		900		—		—		900
Greece	890		—		—		—		—		890
Total	$	238,516	$	20,410	$	165,455	$	51,245	$	11,919	$	487,545

(1) Presented on a ‘core’ basis which excludes amounts related to the ‘other’ segment (i.e., results of Watford Re). See ‘Comments on Regulation G’ for a further discussion of the presentation of ‘core’ results.

(2) The country allocations set forth in the table are based on various assumptions made by the Company in assessing the country in which the underlying credit risk resides, including a review of the jurisdiction of organization, business operations and other factors. Based on such analysis, the Company does not believe that it has any other Eurozone investments at June 30, 2016.

(3) Sovereign includes securities issued and/or guaranteed by Eurozone governments.

(4) Included in “term loan investments” in the Bank Loan Investments table.

(5) Includes World Bank, European Investment Bank, International Finance Corp. and European Bank for Reconstruction and Development.

29

Arch Capital Group Ltd. and Subsidiaries

Comments on Regulation G

Throughout this financial supplement, the Company presents its operations in the way it believes will be the most meaningful and useful to investors, analysts, rating agencies and others who use the Company’s financial information in evaluating the performance of the Company. This presentation includes the use of after-tax operating income available to Arch common shareholders, which is defined as net income available to Arch common shareholders, excluding net realized gains or losses, net impairment losses recognized in earnings, equity in net income or loss of investment funds accounted for using the equity method and net foreign exchange gains or losses, net of income taxes, and the use of annualized operating return on average common equity. The presentation of after-tax operating income available to Arch common shareholders and annualized operating return on average common equity are non-GAAP financial measures as defined in Regulation G. The reconciliation of such measures to net income available to Arch common shareholders and annualized return on average common equity (the most directly comparable GAAP financial measures) in accordance with Regulation G is included on the following page.

The Company believes that net realized gains or losses, net impairment losses recognized in earnings, equity in net income or loss of investment funds accounted for using the equity method and net foreign exchange gains or losses in any particular period are not indicative of the performance of, or trends in, the Company’s business performance. Although net realized gains or losses, net impairment losses recognized in earnings, equity in net income or loss of investment funds accounted for using the equity method and net foreign exchange gains or losses are an integral part of the Company’s operations, the decision to realize investment gains or losses, the recognition of the change in the carrying value of investments accounted for using the fair value option in net realized gains or losses, the recognition of net impairment losses recognized in earnings, the recognition of equity in net income or loss of investment funds accounted for using the equity method and the recognition of foreign exchange gains or losses are independent of the insurance underwriting process and result, in large part, from general economic and financial market conditions. Furthermore, certain users of the Company’s financial information believe that, for many companies, the timing of the realization of investment gains or losses is largely opportunistic. In addition, net impairment losses recognized in earnings represent other-than-temporary declines in expected recovery values on securities without actual realization. The use of the equity method on certain of the Company’s investments in certain funds that invest in fixed maturity securities is driven by the ownership structure of such funds (either limited partnerships or limited liability companies). In applying the equity method, these investments are initially recorded at cost and are subsequently adjusted based on the Company’s proportionate share of the net income or loss of the funds (which include changes in the market value of the underlying securities in the funds). This method of accounting is different from the way the Company accounts for its other fixed maturity securities and the timing of the recognition of equity in net income or loss of investment funds accounted for using the equity method may differ from gains or losses in the future upon sale or maturity of such investments. Due to these reasons, the Company excludes net realized gains or losses, net impairment losses recognized in earnings, equity in net income or loss of investment funds accounted for using the equity method and net foreign exchange gains or losses from the calculation of after-tax operating income available to Arch common shareholders.

The Company believes that showing net income available to Arch common shareholders exclusive of the items referred to above reflects the underlying fundamentals of the Company’s business since the Company evaluates the performance of and manages its business to produce an underwriting profit. In addition to presenting net income available to Arch common shareholders, the Company believes that this presentation enables investors and other users of the Company’s financial information to analyze the Company’s performance in a manner similar to how the Company’s management analyzes performance. The Company also believes that this measure follows industry practice and, therefore, allows the users of the Company’s financial information to compare the Company’s performance with its industry peer group. The Company believes that the equity analysts and certain rating agencies which follow the Company and the insurance industry as a whole generally exclude these items from their analyses for the same reasons.

In addition, the Company’s presentation includes the use of information prepared on a ‘core’ basis, which excludes amounts related to the ‘other’ segment (i.e., results of Watford Re). Information provided on a ‘core’ basis are non-GAAP financial measures as defined in Regulation G. Pursuant to generally accepted accounting principles, Watford Re is considered a variable interest entity and the Company concluded that it is the primary beneficiary of Watford Re. As such, the Company consolidates the results of Watford Re in its consolidated financial statements, although it only owns approximately 11% of Watford Re’s common equity. Watford Re has its own management and board of directors that is responsible for its overall profitability. In addition, the Company does not guarantee or provide credit support for Watford Re. Because Watford Re is an independent company, the assets of Watford Re can be used only to settled obligations of Watford Re and Watford Re is solely responsible for its own liabilities and commitments. The Company’s financial exposure to Watford Re is limited to its investment in Watford Re’s common and preferred shares and counterparty credit risk (mitigated by collateral) arising from the reinsurance transactions. The Company believes that presenting information on a ‘core’ basis enables investors and other users of the Company’s financial information to analyze the Company’s performance in a manner similar to how the Company’s management analyzes performance. See ‘Segment Information’ for a further discussion of segment results and a reconciliation of core and consolidated results.

The Company’s segment information includes the presentation of consolidated underwriting income or loss and a subtotal of underwriting income or loss on a ‘core’ basis. Such measures represent the pre-tax profitability of our underwriting operations and include net premiums earned plus other underwriting income, less losses and loss adjustment expenses, acquisition expenses and other operating expenses. Other operating expenses include those operating expenses that are incremental and/or directly attributable to our individual underwriting operations. Underwriting income or loss does not incorporate items included in the Company’s corporate (non-underwriting) segment. While these measures are presented in the Segment Information footnote to the Company’s Consolidated Financial Statements, they are considered non-GAAP financial measures when presented elsewhere on a consolidated basis. The reconciliations of underwriting income or loss to income before income taxes (the most directly comparable GAAP financial measure) on a consolidated basis and a ‘core’ basis, in accordance with Regulation G, is shown on pages 10 to 13.

The Company’s segment information includes the use of a combined ratio excluding catastrophic activity and prior year development for the insurance segment and reinsurance segment and a combined ratio excluding prior year development for the mortgage segment. These ratios are non-GAAP financial measures as defined in Regulation G. The reconciliation of such measures to the combined ratio (the most directly comparable GAAP financial measure) in accordance with Regulation G are shown on the individual segment pages. The Company’s management utilizes the adjusted combined ratio excluding current accident year catastrophic events and favorable or adverse development in prior year loss reserves in its analysis of the core underwriting performance of each of its underwriting segments.

30

Arch Capital Group Ltd. and Subsidiaries

Operating Income Reconciliation and Annualized Operating Return on Average Common Equity

The following table summarizes the Company’s consolidated financial data, including a reconciliation of net income available to Arch common shareholders to after-tax operating income available to Arch common shareholders and related diluted per share results. Each line item reflects the impact of the Company’s approximate 11% ownership of Watford Re’s common equity:

(U.S. Dollars in thousands, except share data)	Three Months Ended																Six Months Ended
	June 30,			March 31,			December 31,			September 30,				June 30,			June 30,			June 30,
	2016			2016			2015			2015				2015			2016			2015
Net income available to Arch common shareholders	$	205,570		$	149,314		$	53,094		$	74,549			$	110,305		$	354,884		$	388,157
Net realized (gains) losses	(43,935		)	(32,464		)	90,856			57,472				27,837			(76,399		)	(39,638		)
Net impairment losses recognized in earnings	5,343			7,639			7,336			5,868				1,113			12,982			6,912
Equity in net (income) loss of investment funds accounted for using the equity method	(8,737		)	(6,655		)	(5,517		)	2,118				(16,168		)	(15,392		)	(22,057		)
Net foreign exchange (gains) losses	(22,703		)	22,209			(2,533		)	(15,904		)		22,241			(494		)	(44,574		)
Income tax expense	5,036			5,699			363			1,695				628			10,735			7,002
After-tax operating income available to Arch common shareholders	$	140,574		$	145,742		$	143,599		$	125,798		��	$	145,956		$	286,316		$	295,802
Diluted per common share results:
Net income available to Arch common shareholders	$	1.65		$	1.20		$	0.42		$	0.60			$	0.88		$	2.85		$	3.05
Net realized (gains) losses	(0.35		)	(0.26		)	0.73			0.46				0.22			(0.62		)	(0.31		)
Net impairment losses recognized in earnings	0.04			0.06			0.06			0.05				0.01			0.10			0.05
Equity in net (income) loss of investment funds accounted for using the equity method	(0.07		)	(0.05		)	(0.04		)	0.02				(0.13		)	(0.12		)	(0.17		)
Net foreign exchange (gains) losses	(0.18		)	0.18			(0.02		)	(0.13		)		0.18			—			(0.35		)
Income tax expense	0.04			0.04			—			0.01				—			0.09			0.06
After-tax operating available to Arch common shareholders	$	1.13		$	1.17		$	1.15		$	1.01			$	1.16		$	2.30		$	2.33
Weighted average common shares and common share equivalents outstanding — diluted	124,365,596			124,496,496			125,311,942			125,011,773				125,885,420			124,425,126			127,156,713
Beginning common shareholders’ equity	$	6,088,587		$	5,879,881		$	5,837,815		$	5,812,515			$	5,963,702		$	5,879,881		$	5,805,053
Ending common shareholders’ equity	6,378,922			6,088,587			5,879,881			5,837,815				5,812,515			6,378,922			5,812,515
Average common shareholders’ equity	$	6,233,755		$	5,984,234		$	5,858,848		$	5,825,165			$	5,888,109		$	6,129,402		$	5,808,784
Annualized return on average common equity	13.2		%	10.0		%	3.6		%	5.1		%		7.5		%	11.6		%	13.4		%
Annualized operating return on average common equity	9.0		%	9.7		%	9.8		%	8.6		%		9.9		%	9.3		%	10.2		%

31

Arch Capital Group Ltd. and Subsidiaries

Operating Income and Effective Tax Rate Calculations

The following table provides a reconciliation of income before income taxes to after-tax operating income available to Arch common shareholders and an analysis of the effective tax rate on pre-tax operating income available to Arch common shareholders:

(U.S. Dollars in thousands)	Three Months Ended															Six Months Ended
	June 30,			March 31,			December 31,			September 30,			June 30,			June 30,			June 30,
	2016			2016			2015			2015			2015			2016			2015
Arch Operating Income Components (1):
Income before income taxes	$	221,010		$	169,098		$	74,384		$	92,293		$	121,913		$	390,108		$	415,387
Net realized (gains) losses	(40,927		)	(31,862		)	84,302			53,480			26,860			(72,789		)	(38,649		)
Net impairment losses recognized in earnings	5,343			7,639			7,336			5,868			1,113			12,982			6,912
Equity in net (income) loss of investment funds accounted for using the equity method	(8,737		)	(6,655		)	(5,517		)	2,118			(16,167		)	(15,392		)	(22,056		)
Net foreign exchange (gains) losses	(22,461		)	22,041			(2,286		)	(16,056		)	22,571			(420		)	(44,282		)
Pre-tax operating income	154,228			160,261			158,219			137,703			156,290			314,489			317,312
Arch share of ‘other’ segment operating income (2)	927			1,576			1,953			1,588			1,305			2,503			1,917
Pre-tax operating income available to Arch (b)	155,155			161,837			160,172			139,291			157,595			316,992			319,229
Income tax expense (a)	(9,096		)	(10,611		)	(11,088		)	(8,009		)	(6,154		)	(19,707		)	(12,458		)
After-tax operating income available to Arch	146,059			151,226			149,084			131,282			151,441			297,285			306,771
Preferred dividends	(5,485		)	(5,484		)	(5,485		)	(5,484		)	(5,485		)	(10,969		)	(10,969		)
After-tax operating income available to Arch common shareholders	$	140,574		$	145,742		$	143,599		$	125,798		$	145,956		$	286,316		$	295,802
Effective tax rate on pre-tax operating income available to Arch (a)/(b)	5.9		%	6.6		%	6.9		%	5.7		%	3.9		%	6.2		%	3.9		%

(1) Line items are presented on a ‘core’ basis, excluding amounts related to the ‘other’ segment (i.e., results of Watford Re). See ‘Comments on Regulation G’ for a further discussion of the presentation of ‘core’ results.

(2) Balances in the ‘other’ segment and a calculation of Arch’s share of the ‘other’ segment operating income is as follows:

(U.S. Dollars in thousands)	Three Months Ended															Six Months Ended
	June 30,			March 31,			December 31,			September 30,			June 30,			June 30,			June 30,
	2016			2016			2015			2015			2015			2016			2015
Balances in ‘other’ segment:
Underwriting income (loss)	$	(1,724	)	$	(944	)	$	(3,557	)	$	1,309		$	(3,229	)	$	(2,668	)	$	(1,461	)
Net investment income	17,941			23,326			28,930			18,982			19,792			41,267			28,498
Other expenses	—			—			—			—			—			—			—
Interest expense	(3,231		)	(3,480		)	(3,070		)	(1,286		)	—			(6,711		)	—
Preferred dividends	(4,586		)	(4,587		)	(4,589		)	(4,588		)	(4,743		)	(9,173		)	(9,651		)
Pre-tax operating income (loss) available to common shareholders	8,400			14,315			17,714			14,417			11,820			22,715			17,386
Arch ownership	11		%	11		%	11		%	11		%	11		%	11		%	11		%
Arch share of ‘Other’ segment operating income (loss) (3)	$	927		$	1,576		$	1,953		$	1,588		$	1,305		$	2,503		$	1,917

(3) Excludes amounts attributable to net realized gains or losses and net foreign exchange gains or losses in the ‘other’ segment (see ‘Segment Information’).

32

Arch Capital Group Ltd. and Subsidiaries

Capital Structure and Share Repurchase Activity

The following table provides an analysis of the Company’s capital structure (1):

(U.S. Dollars in thousands, except share data)	June 30,			March 31,			December 31,			September 30,			June 30,
	2016			2016			2015			2015			2015
Debt:
ACGL Senior notes, due May 1, 2034 ($300,000 principal, 7.35%)	$	296,915		$	296,895		$	296,874		$	296,854		$	296,834
Arch-U.S. Senior notes, due Nov. 1, 2043 ($500,000 principal, 5.144%) (2)	494,477			494,454			494,432			494,410			494,388
Revolving credit agreement borrowings, due June 30, 2019 (variable)	100,000			100,000			100,000			100,000			100,000
Total debt	$	891,392		$	891,349		$	891,306		$	891,264		$	891,222
Shareholders’ equity available to Arch:
Non-cumulative preferred shares (6.75%)	$	325,000		$	325,000		$	325,000		$	325,000		$	325,000
Common shareholders’ equity (a)	6,378,922			6,088,587			5,879,881			5,837,815			5,812,515
Total shareholders’ equity available to Arch	$	6,703,922		$	6,413,587		$	6,204,881		$	6,162,815		$	6,137,515
Total capital available to Arch	$	7,595,314		$	7,304,936		$	7,096,187		$	7,054,079		$	7,028,737
Common shares outstanding, net of treasury shares (b)	122,572,260			122,093,596			122,627,783			122,438,554			122,403,909
Book value per common share (3) (a)/(b)	$	52.04		$	49.87		$	47.95		$	47.68		$	47.49
Leverage ratios:
Senior notes/total capital available to Arch	10.4		%	10.8		%	11.2		%	11.2		%	11.3		%
Revolving credit agreement borrowings/total capital available to Arch	1.3		%	1.4		%	1.4		%	1.4		%	1.4		%
Debt/total capital available to Arch	11.7		%	12.2		%	12.6		%	12.6		%	12.7		%
Preferred/total capital available to Arch	4.3		%	4.4		%	4.6		%	4.6		%	4.6		%
Debt and preferred/total capital available to Arch	16.0		%	16.7		%	17.1		%	17.2		%	17.3		%

(1) Presented on a ‘core’ basis which excludes amounts related to the ‘other’ segment (i.e., results of Watford Re). See ‘Comments on Regulation G’ for a further discussion of the presentation of ‘core’ results.

(2) Issued by Arch Capital Group (U.S.) Inc. (“Arch-U.S.), a wholly owned subsidiary of Arch Capital Group Ltd. (“ACGL”), and fully and unconditionally guaranteed by ACGL.

(3) Excludes the effects of stock options and restricted stock units outstanding.

The following table provides an analysis of the Company’s share repurchase program:

(U.S. Dollars in thousands except share data)	Three Months Ended													Cumulative
	June 30,		March 31,			December 31,		September 30,			June 30,			June 30,
	2016		2016			2015		2015			2015			2016
Effect of share repurchases:
Aggregate cost of shares repurchased	$	—	$	75,256		$	—	$	3,506		$	198,979		$	3,682,661
Shares repurchased	—		1,140,137			—		52,402			3,165,975			125,223,844
Average price per share repurchased	$	—	$	66.01		$	—	$	66.91		$	62.85		$	29.41
Average book value per common share (1)	$	50.96	$	48.91		$	47.82	$	47.59		$	47.65
Average repurchase price-to-book multiple	—		1.35		x	—		1.41		x	1.32		x
Remaining share repurchase authorization (2)	$	446,501

(1)    Equals average of beginning and ending book value per common share for each period presented.

(2) Repurchases under the share repurchase authorization may be effected from time to time in open market or privately negotiated transactions through December 2016.

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