Arch Capital Group Ltd reported sharply higher fourth-quarter profits driven by strong underwriting performance, lower catastrophe losses and solid investment returns.

The Bermuda-based insurer and reinsurer said net income available to common shareholders rose to $1.2 billion, or $3.35 per share, in the three months ended December 31, up from $925 million, or $2.42 per share, a year earlier.

The result translated into an annualised return on average common equity of 21.2 per cent, well above the 2024 fourth-quarter level of 17.9 per cent.

After-tax operating income climbed to $1.1 billion, reflecting an 18.9 per cent operating return on equity. Arch also increased book value per share to $65.11, a 4.5 per cent rise from the end of the third quarter, while returning significant capital to shareholders through $798 million in share repurchases during the quarter.

Chief executive Nicolas Papadopoulo said the results highlighted the benefits of Arch’s diversified business model and disciplined underwriting approach.

“Our 2025 financial performance was outstanding, once again demonstrating the value of our diversified platform and our ability to effectively execute our cycle management strategy,” Mr Papadopoulo said. “We enter 2026 with optimism in our ability to continue delivering superior results for our shareholders.”

Group underwriting income jumped 32 per cent to $827 million, supported by a consolidated combined ratio of 80.6 per cent, a marked improvement from 85.0 per cent a year earlier. Excluding catastrophe losses and prior-year reserve development, the combined ratio stood at 79.5 per cent, broadly in line with the prior year.

Catastrophe losses were notably lower, with pre-tax current accident year catastrophe losses of $164 million, while favourable prior-year reserve development contributed $118 million to results.

The reinsurance segment was a standout performer, generating underwriting income of $458 million, up nearly 40 per cent year-on-year, and a combined ratio of 77.0 per cent. Lower catastrophe activity and favourable reserve development helped to drive the improvement, while expense ratios benefited from Bermuda’s newly enacted tax credit regime.

The insurance segment also showed significant progress, with underwriting income rising to $119 million from $30 million a year earlier, as catastrophe losses eased and pricing discipline held in key casualty lines.

Arch’s mortgage insurance business remained highly profitable, reporting underwriting income of $250 million, although this was slightly lower than the prior year owing to reduced premium volumes. Results continued to benefit from favourable prior-year reserve development linked to better-than-expected cure rates.

Net investment income increased to $434 million, reflecting growth in invested assets and stable yields. The quarter also benefited from $22 million in net realised investment gains, compared with a sizeable loss in the same period of 2024.

Corporate results were positively influenced by the full-year impact of qualified refundable tax credits under Bermuda’s Tax Credit Act 2025, which contributed to lower expense ratios and a corporate benefit in the quarter. At the same time, Arch reported a higher effective tax rate, reflecting the implementation of Bermuda’s corporate income tax regime.

Arch, which is part of the S&P 500 and has approximately $26.9 billion in capital, said it remains well positioned heading into 2026, despite continuing macroeconomic and catastrophe-related risks facing the global insurance market.

• For more on the fourth quarter results for the Arch Capital Group, see Related Media

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