Item 1. CONSOLIDATED FINANCIAL STATEMENTS

						Page No.
Report of Independent Registered Public Accounting Firm						5
Consolidated Balance Sheets
March 31, 2023 and December 31, 2022 (unaudited)						6
Consolidated Statements of Income
For the three month periods ended March 31, 2023 and 2022 (unaudited)						7
Consolidated Statements of Comprehensive Income
For the three month periods ended March 31, 2023 and 2022 (unaudited)						8
Consolidated Statements of Changes in Shareholders’ Equity
For the three month periods ended March 31, 2023 and 2022 (unaudited)						9
Consolidated Statements of Cash Flows
For the three month periods ended March 31, 2023 and 2022 (unaudited)						10
Notes to Consolidated Financial Statements (unaudited)
Note 1 - Basis of Presentation and Recent Accounting Pronouncements						11
Note 2 - Share Transactions						11
Note 3 - Earnings Per Common Share						12
Note 4 - Segment Information						13
Note 5 - Reserve for Losses and Loss Adjustment Expenses						16
Note 6 - Allowance for Expected Credit Losses						18
Note 7 - Investment Information						19
Note 8 - Fair Value						24
Note 9 - Derivative Instruments						29
Note 10 - Commitments and Contingencies						30
Note 11 - Variable Interest Entities						31
Note 12 - Other Comprehensive Income (Loss)						32
Note 13 - Income Taxes						33
Note 14 - Legal Proceedings						33
Note 15 - Transactions with Related Parties						33

ARCH CAPITAL			4			2023 FIRST QUARTER FORM 10-Q

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Arch Capital Group Ltd.

Results of Review of Interim Financial Statements

We have reviewed the accompanying consolidated balance sheet of Arch Capital Group Ltd. and its subsidiaries (the “Company”) as of March 31, 2023, and the related consolidated statements of income, comprehensive income, and changes in shareholders’ equity and the consolidated statements of cash flows for the three-month periods ended March 31, 2023 and 2022, including the related notes (collectively referred to as the “interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2022, and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for the year then ended (not presented herein), and in our report dated February 24, 2023, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2022, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

These interim financial statements are the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

/s/ PricewaterhouseCoopers LLP

New York, New York

May 4, 2023

ARCH CAPITAL			5			2023 FIRST QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(U.S. dollars and shares in millions)

			(Unaudited)
			March 31, 2023						December 31, 2022
Assets
Investments:
Fixed maturities available for sale, at fair value (amortized cost: $21,922 and $21,282; net of allowance for credit losses: $56 and $41)			$	20,692					$	19,683
Short-term investments available for sale, at fair value (amortized cost: $1,553 and $1,333; net of allowance for credit losses: $0 and $0)			1,553						1,332
Equity securities, at fair value			859						860
Other investments, at fair value			1,776						1,644
Investments accounted for using the equity method			3,896						3,774
Total investments			28,776						27,293
Cash			803						855
Accrued investment income			163						159
Investment in operating affiliates			1,015						965
Premiums receivable (net of allowance for credit losses: $36 and $35)			4,513						3,625
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses (net of allowance for credit losses: $21 and $22)			6,612						6,564
Contractholder receivables (net of allowance for credit losses: $2 and $3)			1,750						1,731
Ceded unearned premiums			2,116						1,799
Deferred acquisition costs			1,355						1,264
Receivable for securities sold			84						12
Goodwill and intangible assets			785						804
Other assets			3,131						2,919
Total assets			$	51,103					$	47,990
Liabilities
Reserve for losses and loss adjustment expenses			$	20,758					$	20,032
Unearned premiums			8,218						7,337
Reinsurance balances payable			1,819						1,530
Contractholder payables			1,752						1,734
Collateral held for insured obligations			252						249
Senior notes			2,726						2,725
Payable for securities purchased			262						95
Other liabilities			1,317						1,367
Total liabilities			37,104						35,069
Commitments and contingencies (refer to Note 10****)
Redeemable noncontrolling interests			11						11
Shareholders' Equity
Non-cumulative preferred shares			830						830
Common shares ($0.0011 par, shares issued: 590.5 and 588.3)			1						1
Additional paid-in capital			2,260						2,211
Retained earnings			16,597						15,892
Accumulated other comprehensive income (loss), net of deferred income tax			(1,297)						(1,646)
Common shares held in treasury, at cost (shares: 218.3 and 217.9)			(4,403)						(4,378)
Total shareholders' equity available to Arch			13,988						12,910
Total liabilities, noncontrolling interests and shareholders' equity			$	51,103					$	47,990

See Notes to Consolidated Financial Statements

ARCH CAPITAL			6			2023 FIRST QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(U.S. dollars and shares in millions, except per share data)

			(Unaudited)
			Three Months Ended
			March 31,
			2023						2022
Revenues
Net premiums earned			$	2,883					$	2,121
Net investment income			199						80
Net realized gains (losses)			17						(292)
Other underwriting income			10						6
Equity in net income (loss) of investment funds accounted for using the equity method			48						36
Other income (loss)			11						(9)
Total revenues			3,168						1,942
Expenses
Losses and loss adjustment expenses			1,471						1,001
Acquisition expenses			533						378
Other operating expenses			319						290
Corporate expenses			30						32
Amortization of intangible assets			23						27
Interest expense			32						33
Net foreign exchange (gains) losses			18						(4)
Total expenses			2,426						1,757
Income (loss) before income taxes and income (loss) from operating affiliates			742						185
Income tax (expense) benefit			(64)						(12)
Income (loss) from operating affiliates			39						25
Net income (loss)			$	717					$	198
Net (income) loss attributable to noncontrolling interests			(2)						(2)
Net income (loss) available to Arch			715						196
Preferred dividends			(10)						(10)
Net income (loss) available to Arch common shareholders			$	705					$	186
Net income per common share and common share equivalent
Basic			$	1.92					$	0.50
Diluted			$	1.87					$	0.48
Weighted average common shares and common share equivalents outstanding
Basic			367.3						374.2
Diluted			377.6						384.2

See Notes to Consolidated Financial Statements

ARCH CAPITAL			7			2023 FIRST QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(U.S. dollars in millions)

			(Unaudited)
			Three Months Ended
			March 31,
			2023						2022
Comprehensive Income
Net income (loss)			$	717					$	198
Other comprehensive income (loss), net of deferred income tax
Unrealized appreciation (decline) in value of available-for-sale investments:
Unrealized holding gains (losses) arising during period			245						(684)
Reclassification of net realized (gains) losses, included in net income (loss)			99						102
Foreign currency translation adjustments			5						(3)
Comprehensive income (loss)			1,066						(387)
Net (income) loss attributable to noncontrolling interests			(2)						(2)
Comprehensive income (loss) available to Arch			$	1,064					$	(389)

See Notes to Consolidated Financial Statements

ARCH CAPITAL			8			2023 FIRST QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(U.S. dollars in millions)

			(Unaudited)
			Three Months Ended
			March 31,
			2023						2022
Non-cumulative preferred shares
Balance at beginning and end of period			$	830					$	830
Common shares
Balance at beginning and end of period			1						1
Additional paid-in capital
Balance at beginning of period			2,211						2,085
Amortization of share-based compensation			41						45
Other changes			8						4
Balance at end of period			2,260						2,134
Retained earnings
Balance at beginning of period			15,892						14,456
Net income (loss)			717						198
Net (income) loss attributable to noncontrolling interests			(2)						(2)
Preferred share dividends			(10)						(10)
Balance at end of period			16,597						14,642
Accumulated other comprehensive income (loss), net of deferred income tax
Balance at beginning of period			(1,646)						(65)
Unrealized appreciation (decline) in value of available-for-sale investments, net of deferred income tax:
Balance at beginning of period			(1,512)						13
Unrealized holding gains (losses) during period, net of reclassification adjustment			344						(582)
Balance at end of period			(1,168)						(569)
Foreign currency translation adjustments, net of deferred income tax:
Balance at beginning of period			(134)						(78)
Foreign currency translation adjustments			5						(3)
Balance at end of period			(129)						(81)
Balance at end of period			(1,297)						(650)
Common shares held in treasury, at cost
Balance at beginning of period			(4,378)						(3,761)
Shares repurchased for treasury			(25)						(276)
Balance at end of period			(4,403)						(4,037)
Total shareholders’ equity			$	13,988					$	12,920

See Notes to Consolidated Financial Statements

ARCH CAPITAL			9			2023 FIRST QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(U.S. dollars in millions)

			(Unaudited)
			Three Months Ended
			March 31,
			2023						2022
Operating Activities
Net income (loss)			$	717					$	198
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Net realized (gains) losses			(17)						289
Equity in net (income) or loss of investment funds accounted for using the equity method and other income or loss			(66)						(11)
Amortization of intangible assets			23						27
Share-based compensation			41						45
Changes in:
Reserve for losses and loss adjustment expenses, net of unpaid losses and loss adjustment expenses recoverable			603						276
Unearned premiums, net of ceded unearned premiums			541						513
Premiums receivable			(871)						(601)
Deferred acquisition costs			(75)						(97)
Reinsurance balances payable			279						(74)
Other items, net			(212)						(13)
Net cash provided by operating activities			963						552
Investing Activities
Purchases of fixed maturity investments			(3,901)						(6,728)
Purchases of equity securities			(8)						(409)
Purchases of other investments			(266)						(616)
Proceeds from sales of fixed maturity investments			3,034						6,053
Proceeds from sales of equity securities			75						1,100
Proceeds from sales, redemptions and maturities of other investments			96						570
Proceeds from redemptions and maturities of fixed maturity investments			180						241
Net settlements of derivative instruments			14						(2)
Net (purchases) sales of short-term investments			(208)						(511)
Purchases of fixed assets			(11)						(11)
Other			(1)						—
Net cash used for investing activities			(996)						(313)
Financing Activities
Purchases of common shares under share repurchase program			—						(255)
Proceeds from common shares issued, net			(18)						(17)
Other			(2)						49
Preferred dividends paid			(10)						(10)
Net cash used for financing activities			(30)						(233)
Effects of exchange rate changes on foreign currency cash and restricted cash			5						(4)
Increase (decrease) in cash and restricted cash			(58)						2
Cash and restricted cash, beginning of year			1,273						1,314
Cash and restricted cash, end of period			$	1,215					$	1,316

See Notes to Consolidated Financial Statements

ARCH CAPITAL			10			2023 FIRST QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Basis of Presentation and Recent Accounting Pronouncements

General

Arch Capital Group Ltd. (“Arch Capital”) is a publicly listed Bermuda exempted company which provides insurance, reinsurance and mortgage insurance on a worldwide basis through its wholly-owned subsidiaries. As used herein, the “Company” means Arch Capital and its subsidiaries.

Basis of Presentation

The interim consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). All significant intercompany transactions and balances have been eliminated in consolidation. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates and assumptions. In the opinion of management, the accompanying unaudited interim consolidated financial statements reflect all adjustments (consisting of normally recurring accruals) necessary for a fair statement of results on an interim basis. The results of any interim period are not necessarily indicative of the results for a full year or any future periods. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted; however, management believes that the disclosures are adequate to make the information presented not misleading. This report should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (“2022 Form 10-K”), including the Company’s audited consolidated financial statements and related notes.

The Company has reclassified the presentation of certain prior year information to conform to the current presentation. Such reclassifications had no effect on the Company’s net income, comprehensive income, shareholders’ equity or cash flows. All amounts are in millions, except per share amounts, unless otherwise noted.

Recent Accounting Pronouncements

Recently Issued Accounting Standards Adopted

For information regarding additional accounting standards that the Company has not yet adopted, see note 3(t), “Significant Accounting Policies—Recent Accounting Pronouncements,” of the notes to consolidated financial statements in the Company’s 2022 Form 10-K.

2. Share Transactions

Share-Based Compensation

During the 2023 first quarter, the Company granted 0.5 million stock options, 0.6 million performance share awards and performance share units (“PSAs/PSUs”) and 0.8 million restricted shares and units to certain employees. The stock options were valued at the grant date using the Black-Scholes option pricing model. The weighted average grant-date fair value of the stock options, PSAs/PSUs and restricted shares and units granted during the 2023 first quarter were approximately $23.49, $74.06 and $69.25 per share, respectively. Such values are being amortized over the respective substantive vesting period.

During the 2022 first quarter, the Company granted 0.7 million stock options, 0.7 million PSAs/PSUs and 1.0 million restricted shares and units to certain employees. The stock options were valued at the grant date using the Black-Scholes option pricing model. The weighted average grant-date fair value of the stock options, PSAs/PSUs and restricted shares and units granted during the 2022 first quarter were approximately $13.13, $49.91 and $47.54 per share, respectively. Such values are being amortized over the respective substantive vesting period.

ARCH CAPITAL			11			2023 FIRST QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

3. Earnings Per Common Share

The following table sets forth the computation of basic and diluted earnings per common share:

			Three Months Ended
			March 31,
			2023						2022
Numerator:
Net income (loss)			$	717					$	198
Amounts attributable to noncontrolling interests			(2)						(2)
Net income (loss) available to Arch			715						196
Preferred dividends			(10)						(10)
Net income (loss) available to Arch common shareholders			$	705					$	186
Denominator:
Weighted average common shares and common share equivalents outstanding — basic			367.3						374.2
Effect of dilutive common share equivalents:
Nonvested restricted shares			2.8						2.7
Stock options (1)			7.5						7.3
Weighted average common shares and common share equivalents outstanding — diluted			377.6						384.2
Earnings per common share:
Basic			$	1.92					$	0.50
Diluted			$	1.87					$	0.48

(1) Certain stock options were not included in the computation of diluted earnings per share where the exercise price of the stock options exceeded the average market price and would have been anti-dilutive or where, when applying the treasury stock method to in-the-money options, the sum of the proceeds, including unrecognized compensation, exceeded the average market price and would have been anti-dilutive. For the 2023 first quarter and 2022 first quarter, the number of stock options excluded were 0.5 million and 0.8 million, respectively.

ARCH CAPITAL			12			2023 FIRST QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4. Segment Information

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 Chief Executive Officer, the Chief Financial Officer and Treasurer and the President and Chief Underwriting Officer are the Company’s chief operating decision makers. They 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 underwriting segments based on underwriting income or loss. The Company does not manage its assets by underwriting segment, with the exception of goodwill and intangible assets, and accordingly, investment income is not allocated to each underwriting segment.

The Company determined its reportable 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.

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; excess and surplus casualty; professional lines; programs; property, energy, marine and aviation; travel, accident and health; warranty and lenders solutions; and other (consisting of alternative markets, excess workers' compensation and surety business).

The reinsurance segment consists of the Company’s reinsurance underwriting units which offer specialty product lines on a worldwide basis. Product lines include: casualty; marine and aviation; other specialty; property catastrophe; property excluding property catastrophe (losses on a single risk, both excess of loss and pro rata); and other (consisting of life reinsurance, casualty clash and other).

The mortgage segment includes the Company’s U.S. primary mortgage insurance business, investment and services related to U.S. credit-risk transfer (“CRT”) which are predominately with government sponsored enterprises (“GSEs”) and international mortgage insurance and reinsurance operations. Arch Mortgage Insurance Company and United Guaranty Residential Insurance Company (combined “Arch MI U.S.”) are approved as eligible mortgage insurers by Federal National Mortgage Association (“Fannie Mae”) and Federal Home Loan Mortgage Corporation (“Freddie Mac”), each a GSE. Arch MI U.S. also includes Arch Mortgage Guaranty Company, which is not a GSE-approved entity.

The corporate segment results include net investment income, net realized gains or losses (which includes changes in the allowance for credit losses on financial assets and net impairment losses recognized in earnings), equity in net income or loss of investments accounted for using the equity method, other income (loss), corporate expenses, transaction costs and other, amortization of intangible assets, interest expense, net foreign exchange gains or losses, income taxes, income or loss from operating affiliates and items related to the Company’s non-cumulative preferred shares.

ARCH CAPITAL			13			2023 FIRST QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following tables summarize the Company’s underwriting income or loss by segment, together with a reconciliation of underwriting income or loss to net income available to Arch common shareholders:

			Three Months Ended
			March 31, 2023
			Insurance						Reinsurance						Mortgage																		Total
Gross premiums written (1)			$	1,979					$	2,460					$	343																	$	4,780
Premiums ceded			(542)						(734)						(82)																		(1,356)
Net premiums written			1,437						1,726						261																		3,424
Change in unearned premiums			(180)						(396)						35																		(541)
Net premiums earned			1,257						1,330						296																		2,883
Other underwriting income (loss)			—						4						6																		10
Losses and loss adjustment expenses			(703)						(766)						(2)																		(1,471)
Acquisition expenses			(245)						(281)						(7)																		(533)
Other operating expenses			(195)						(74)						(50)																		(319)
Underwriting income (loss)			$	114					$	213					$	243																	570
Net investment income																																	199
Net realized gains (losses)																																	17
Equity in net income (loss) of investment funds accounted for using the equity method																																	48
Other income (loss)																																	11
Corporate expenses (2)																																	(29)
Transaction costs and other (2)																																	(1)
Amortization of intangible assets																																	(23)
Interest expense																																	(32)
Net foreign exchange gains (losses)																																	(18)
Income (loss) before income taxes and income (loss) from operating affiliates																																	742
Income tax (expense) benefit																																	(64)
Income (loss) from operating affiliates																																	39
Net income (loss)																																	717
Amounts attributable to redeemable noncontrolling interests																																	(2)
Net income (loss) available to Arch																																	715
Preferred dividends																																	(10)
Net income (loss) available to Arch common shareholders																																	$	705
Underwriting Ratios
Loss ratio			55.9		%				57.6		%				0.6		%																51.0		%
Acquisition expense ratio			19.5		%				21.1		%				2.5		%																18.5		%
Other operating expense ratio			15.5		%				5.6		%				16.9		%																11.1		%
Combined ratio			90.9		%				84.3		%				20.0		%																80.6		%
Goodwill and intangible assets			$	228					$	142					$	415																	$	785

(1) Certain amounts included in the gross premiums written of each segment are related to intersegment transactions. 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.

(2) Certain expenses have been excluded from ‘corporate expenses’ and reflected in ‘transaction costs and other.’

ARCH CAPITAL			14			2023 FIRST QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

			Three Months Ended
			March 31, 2022
			Insurance						Reinsurance						Mortgage																		Total
Gross premiums written (1)			$	1,720					$	1,719					$	365																	$	3,801
Premiums ceded			(513)						(580)						(77)																		(1,167)
Net premiums written			1,207						1,139						288																		2,634
Change in unearned premiums			(180)						(335)						2																		(513)
Net premiums earned			1,027						804						290																		2,121
Other underwriting income (loss)			—						1						5																		6
Losses and loss adjustment expenses			(601)						(454)						54																		(1,001)
Acquisition expenses			(196)						(172)						(10)																		(378)
Other operating expenses			(167)						(70)						(53)																		(290)
Underwriting income (loss)			$	63					$	109					$	286																	458
Net investment income																																	80
Net realized gains (losses)																																	(292)
Equity in net income (loss) of investment funds accounted for using the equity method																																	36
Other income (loss)																																	(9)
Corporate expenses (2)																																	(32)
Transaction costs and other (2)																																	—
Amortization of intangible assets																																	(27)
Interest expense																																	(33)
Net foreign exchange gains (losses)																																	4
Income (loss) before income taxes and income (loss) from operating affiliates																																	185
Income tax (expense) benefit																																	(12)
Income (loss) from operating affiliates																																	25
Net income (loss)																																	198
Amounts attributable to redeemable noncontrolling interests																																	(2)
Net income (loss) available to Arch																																	196
Preferred dividends																																	(10)
Net income (loss) available to Arch common shareholders																																	$	186
Underwriting Ratios
Loss ratio			58.5		%				56.5		%				(18.9)		%																47.2		%
Acquisition expense ratio			19.1		%				21.4		%				3.6		%																17.8		%
Other operating expense ratio			16.2		%				8.7		%				18.4		%																13.7		%
Combined ratio			93.8		%				86.6		%				3.1		%																78.7		%
Goodwill and intangible assets			$	249					$	184					$	493																	$	926

(1) Certain amounts included in the gross premiums written of each segment are related to intersegment transactions. 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.

(2) Certain expenses have been excluded from ‘corporate expenses’ and reflected in ‘transaction costs and other.’

ARCH CAPITAL			15			2023 FIRST QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

5. Reserve for Losses and Loss Adjustment Expenses

The following table represents an analysis of losses and loss adjustment expenses and a reconciliation of the beginning and ending reserve for losses and loss adjustment expenses:

			Three Months Ended
			March 31,
			2023						2022
Reserve for losses and loss adjustment expenses at beginning of period			$	20,032					$	17,757
Unpaid losses and loss adjustment expenses recoverable			6,280						5,599
Net reserve for losses and loss adjustment expenses at beginning of period			13,752						12,158
Net incurred losses and loss adjustment expenses relating to losses occurring in:
Current year			1,607						1,142
Prior years			(136)						(141)
Total net incurred losses and loss adjustment expenses			1,471						1,001
Net foreign exchange (gains) losses and other			55						(33)
Net paid losses and loss adjustment expenses relating to losses occurring in:
Current year			(140)						(71)
Prior years			(727)						(656)
Total net paid losses and loss adjustment expenses			(867)						(727)
Net reserve for losses and loss adjustment expenses at end of period			14,411						12,399
Unpaid losses and loss adjustment expenses recoverable			6,347						5,710
Reserve for losses and loss adjustment expenses at end of period			$	20,758					$	18,109

Development on Prior Year Loss Reserves

2023 First Quarter

During the 2023 first quarter, the Company recorded net favorable development on prior year loss reserves of $136 million, which consisted of $12 million from the insurance segment, $53 million from the reinsurance segment and $71 million from the mortgage segment.

The insurance segment’s net favorable development of $12 million, or 0.9 loss ratio points, for the 2023 first quarter consisted of $25 million of net favorable development in short-tailed and long-tailed lines and $13 million of net adverse development in medium-tailed lines. Net favorable development in short-tailed lines reflected $9 million of favorable development in property (excluding marine), primarily from 2020 and 2022 accident years (i.e., the year in which a loss occurred), $8 million of favorable development related to travel and accident business, primarily from the 2020 to 2022 accident years, and $7 million of favorable development in warranty and lenders solutions, primarily from the 2022 accident year. Net favorable development in long-tailed lines of $1 million included favorable development in executive assurance business, partially offset by adverse development in casualty and healthcare. Net adverse development in medium-tailed lines included $18 million of adverse development in professional liability

business, primarily from the 2017 to 2019 accident years, partially offset by favorable development in marine business of $7 million, primarily from the 2021 and 2022 accident years.

The reinsurance segment’s net favorable development of $53 million, or 4.0 loss ratio points, for the 2023 first quarter consisted of $49 million of net favorable development in short-tailed lines and $3 million of net favorable development in medium-tailed and long-tailed lines. Net favorable development in short-tailed lines reflected $23 million of favorable development related to property other than property catastrophe business, across most underwriting years (i.e., all premiums and losses attributable to contracts having an inception or renewal date within the given twelve-month period), $18 million of favorable development related to other specialty and other short-tailed lines, primarily from the 2020 and 2021 underwriting years, and $8 million of favorable development related to property catastrophe business, primarily from the 2018, 2019 and 2022 underwriting years. Net favorable development in medium-tailed lines included $2 million in marine and aviation lines, while net favorable development in long-tailed lines included $3 million in casualty business.

ARCH CAPITAL			16			2023 FIRST QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The mortgage segment’s net favorable development was $71 million, or 23.9 loss ratio points, for the 2023 first quarter. Such amounts were primarily related to reductions on reserves for loans becoming delinquent after the onset of the COVID-19 pandemic.The Company’s credit risk transfer and international businesses also contributed to the favorable development.

2022 First Quarter

During the 2022 first quarter, the Company recorded net favorable development on prior year loss reserves of $141 million, which consisted of $7 million from the insurance segment, $32 million from the reinsurance segment and $102 million from the mortgage segment.

The insurance segment’s net favorable development of $7 million, or 0.7 loss ratio points, for the 2022 first quarter consisted of $19 million of net favorable development in short-tailed lines and $12 million of net adverse development in medium-tailed and long-tailed lines. Net favorable development in short-tailed lines reflected $19 million of favorable development in warranty and lenders solutions, primarily from the 2021 accident year. Net adverse development in medium-tailed lines included $7 million of adverse development in professional liability business, primarily from the 2010 to 2013, 2015 and 2019 accident years, and $6 million of adverse development in contract binding business, across most accident years, partially offset by favorable development in program business of $5 million, primarily from the 2020 accident year. Net adverse development in long-tailed lines primarily reflected $6 million of unfavorable development related to casualty lines, primarily from 2019 to 2021 accident years.

The reinsurance segment’s net favorable development of $32 million, or 4.0 loss ratio points, for the 2022 first quarter consisted $35 million of net favorable development in short-tailed and medium-tailed lines and $3 million of net adverse development in long-tailed lines. Net favorable development in short-tailed lines reflected $19 million of favorable development related to property catastrophe and property other than property catastrophe business, primarily from the 2018, 2019 and 2021 underwriting years. Net favorable development in medium-tailed lines included $11 million of favorable development in marine and aviation lines, across most underwriting years. Adverse development in long-tailed lines reflected an increase in casualty reserves, primarily from the 2021 underwriting year, which was partially offset by favorable development in earlier underwriting years.

The mortgage segment’s net favorable development was $102 million, or 35.3 loss ratio points, for the 2022 first quarter, primarily reflecting the impact of lower new delinquencies and favorable cure activity related to the U.S. first lien portfolio primarily from the 2020 accident year. The Company’s credit risk transfer, international, second lien and student loan business also contributed to the favorable development.

ARCH CAPITAL			17			2023 FIRST QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

6. Allowance for Expected Credit Losses

Premiums Receivable

The following table provides a roll forward of the allowance for expected credit losses of the Company’s premium receivables:

			Premium Receivables, Net of Allowance			Allowance for Expected Credit Losses
Three Months Ended March 31, 2023
Balance at beginning of period			$	3,625		$	35
Change for provision of expected credit losses (1)						$	1
Balance at end of period			$	4,513		$	36
Three Months Ended March 31, 2022
Balance at beginning of period			$	2,633		$	40
Change for provision of expected credit losses (1)						$	(1)
Balance at end of period			$	3,224		$	39

(1)Amounts deemed uncollectible are written-off in operating expenses. For the 2023 first quarter and 2022 first quarter, amounts written off were $1 million and $2 million, respectively.

Reinsurance Recoverables

The following table provides a roll forward of the allowance for expected credit losses of the Company’s reinsurance recoverables:

			Reinsurance Recoverables, Net of Allowance						Allowance for Expected Credit Losses
Three Months Ended March 31, 2023
Balance at beginning of period			$	6,564					$	22
Change for provision of expected credit losses									(1)
Balance at end of period			$	6,612					$	21
Three Months Ended March 31, 2022
Balance at beginning of period			$	5,881					$	13
Change for provision of expected credit losses									5
Balance at end of period			$	5,941					$	18

The following table summarizes the Company’s reinsurance recoverables on paid and unpaid losses (not including ceded unearned premiums):

			March 31,						December 31
			2023						2022
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses			$	6,612					$	6,564
% due from carriers with A.M. Best rating of “A-” or better			68.3		%				68.8		%
% due from all other rated carriers			0.2		%				0.1		%
% due from all other carriers with no A.M. Best rating (1)			31.5		%				31.1		%
Largest balance due from any one carrier as % of total shareholders’ equity			8.7		%				9.0		%

(1) At March 31, 2023 and December 31, 2022 over 94% and 95% of such amount were collateralized through reinsurance trusts, funds withheld arrangements, letters of credit or other, respectively.

Contractholder Receivables

The following table provides a roll forward of the allowance for expected credit losses of the Company’s contractholder receivables:

			Contract-holder Receivables, Net of Allowance						Allowance for Expected Credit Losses
Three Months Ended March 31, 2023
Balance at beginning of period			$	1,731					$	3
Change for provision of expected credit losses									(1)
Balance at end of period			$	1,750					$	2
Three Months Ended March 31, 2022
Balance at beginning of period			$	1,829					$	3
Change for provision of expected credit losses									1
Balance at end of period			1,810						$	4

ARCH CAPITAL			18			2023 FIRST QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

7. Investment Information

Available For Sale Investments

The following table summarizes the fair value and cost or amortized cost of the Company’s securities classified as available for sale:

			Estimated Fair Value						Gross Unrealized Gains						Gross Unrealized Losses						Allowance for Expected Credit Losses						Cost or Amortized Cost
March 31, 2023
Fixed maturities:
Corporate bonds			$	9,409					$	84					$	(636)					$	(45)					$	10,006
Residential mortgage backed securities			823						6						(74)						—						891
Municipal bonds			314						2						(24)						—						336
Commercial mortgage backed securities			1,035						1						(54)						(2)						1,090
U.S. government and government agencies			4,563						14						(234)						—						4,783
Non-U.S. government securities			2,187						13						(178)						(3)						2,355
Asset backed securities			2,361						3						(97)						(6)						2,461
Total			20,692						123						(1,297)						(56)						21,922
Short-term investments			1,553						1						(1)						—						1,553
Total			$	22,245					$	124					$	(1,298)					$	(56)					$	23,475
December 31, 2022
Fixed maturities:
Corporate bonds			$	8,020					$	55					$	(781)					$	(30)					$	8,776
Residential mortgage backed securities			795						5						(87)						—						877
Municipal bonds			419						3						(33)						—						449
Commercial mortgage backed securities			1,047						1						(58)						(3)						1,107
U.S. government and government agencies			5,162						15						(343)						—						5,490
Non-U.S. government securities			2,313						9						(238)						(2)						2,544
Asset backed securities			1,927						1						(107)						(6)						2,039
Total			19,683						89						(1,647)						(41)						21,282
Short-term investments			1,332						1						(2)						—						1,333
Total			$	21,015					$	90					$	(1,649)					$	(41)					$	22,615

ARCH CAPITAL			19			2023 FIRST QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table summarizes, for all available for sale securities in an unrealized loss position, the fair value and gross unrealized loss by length of time the security has been in a continual unrealized loss position:

			Less than 12 Months												12 Months or More												Total
			Estimated Fair Value						Gross Unrealized Losses						Estimated Fair Value						Gross Unrealized Losses						Estimated Fair Value						Gross Unrealized Losses
March 31, 2023
Fixed maturities:
Corporate bonds			$	2,723					$	(101)					$	4,702					$	(535)					$	7,425					$	(636)
Residential mortgage backed securities			412						(18)						279						(56)						691						(74)
Municipal bonds			131						(6)						164						(18)						295						(24)
Commercial mortgage backed securities			167						(8)						855						(46)						1,022						(54)
U.S. government and government agencies			1,209						(40)						2,137						(194)						3,346						(234)
Non-U.S. government securities			1,109						(61)						863						(117)						1,972						(178)
Asset backed securities			909						(31)						1,006						(66)						1,915						(97)
Total			6,660						(265)						10,006						(1,032)						16,666						(1,297)
Short-term investments			274						(1)						—						—						274						(1)
Total			$	6,934					$	(266)					$	10,006					$	(1,032)					$	16,940					$	(1,298)
December 31, 2022
Fixed maturities:
Corporate bonds			$	4,823					$	(393)					$	2,559					$	(388)					$	7,382					$	(781)
Residential mortgage backed securities			546						(52)						154						(35)						700						(87)
Municipal bonds			364						(30)						16						(3)						380						(33)
Commercial mortgage backed securities			598						(35)						445						(23)						1,043						(58)
U.S. government and government agencies			3,557						(197)						1,443						(146)						5,000						(343)
Non-U.S. government securities			1,703						(154)						542						(84)						2,245						(238)
Asset backed securities			1,148						(66)						512						(41)						1,660						(107)
Total			12,739						(927)						5,671						(720)						18,410						(1,647)
Short-term investments			237						(2)						—						—						237						(2)
Total			$	12,976					$	(929)					$	5,671					$	(720)					$	18,647					$	(1,649)

At March 31, 2023, on a lot level basis, approximately 9,380 security lots out of a total of approximately 12,970 security lots were in an unrealized loss position and the largest single unrealized loss from a single lot in the Company’s fixed maturity portfolio was $7 million. At December 31, 2022, on a lot level basis, approximately 9,810 security lots out of a total of approximately 12,590 security lots were in an unrealized loss position and the largest single unrealized loss from a single lot in the Company’s fixed maturity portfolio was $7 million.

The contractual maturities of the Company’s fixed maturities are shown in the following table. Expected maturities, which are management’s best estimates, will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

						March 31, 2023												December 31, 2022
Maturity						Estimated Fair Value						Amortized Cost						Estimated Fair Value						Amortized Cost
Due in one year or less						$	483					$	507					$	511					$	537
Due after one year through five years						11,405						11,938						11,016						11,715
Due after five years through 10 years						4,430						4,840						3,984						4,527
Due after 10 years						155						195						403						480
						16,473						17,480						15,914						17,259
Residential mortgage backed securities						823						891						795						877
Commercial mortgage backed securities						1,035						1,090						1,047						1,107
Asset backed securities						2,361						2,461						1,927						2,039
Total						$	20,692					$	21,922					$	19,683					$	21,282

ARCH CAPITAL			20			2023 FIRST QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Equity Securities, at Fair Value

At March 31, 2023, the Company held $859 million of equity securities, at fair value, compared to $860 million at December 31, 2022. Such holdings include publicly traded common stocks primarily in the consumer cyclical and non-cyclical, technology, communication and financial sectors and exchange-traded funds in fixed income, equity and other sectors.

Other Investments, at Fair Value

The following table summarizes the Company’s other investments and other investable assets:

			March 31, 2023						December 31, 2022
Fixed maturities			$	631					$	554
Other investments			1,121						1,043
Short-term investments			17						33
Equity securities			7						14
Total			$	1,776					$	1,644

The following table summarizes the Company’s other investments, as detailed in the previous table, by strategy:

			March 31, 2023						December 31, 2022
Lending			$	420					$	406
Investment grade fixed income			280						271
Term loan investments			209						164
Private equity			131						123
Credit related funds			62						56
Energy			19						23
Total			$	1,121					$	1,043

Investments Accounted For Using the Equity Method

The following table summarizes the Company’s investments accounted for using the equity method, by strategy:

			March 31, 2023						December 31, 2022
Credit related funds			$	1,156					$	1,136
Private equity			944						917
Real estate			574						535
Lending			533						531
Infrastructure			271						245
Equities			173						169
Fixed income			135						130
Energy			110						111
Total			$	3,896					$	3,774

Certain of the Company’s other investments are in investment funds for which the Company has the option to redeem at agreed upon values as described in each investment fund’s subscription agreement. Depending on the terms of the various subscription agreements, investments in investment funds may be redeemed daily, monthly, quarterly or on other terms. Two common redemption restrictions which may impact the Company’s ability to redeem these investment funds are gates and lockups. A gate is a suspension of redemptions which may be implemented by the general partner or investment manager of the fund in order to defer, in whole or in part, the redemption request in the event the aggregate amount of redemption requests exceeds a predetermined percentage of the investment fund’s net assets which may otherwise hinder the general partner or investment manager’s ability to liquidate holdings in an orderly fashion in order to generate the cash necessary to fund extraordinarily large redemption payouts. A lockup period is the initial amount of time an investor is contractually required to hold the security before having the ability to redeem. If the investment funds are eligible to be redeemed, the time to redeem such fund can take weeks or months following the notification.

Limited Partnership Interests

In the normal course of its activities, the Company invests in limited partnerships as part of its overall investment strategy. Such amounts are included in ‘investments accounted for using the equity method’ and ‘investments accounted for using the fair value option.’ The Company has determined that it is not required to consolidate these investments because it is not the primary beneficiary of the funds. The Company’s maximum exposure to loss with respect to these investments is limited to the investment carrying amounts reported in the Company’s consolidated balance sheet and any unfunded commitment.

The following table summarizes investments in limited partnership interests where the Company has a variable interest by balance sheet line item:

			March 31, 2023						December 31, 2022
Investments accounted for using the equity method (1)			$	3,896					$	3,774
Investments accounted for using the fair value option (2)			130						131
Total			$	4,026					$	3,905

(1) Aggregate unfunded commitments were $2.6 billion at March 31, 2023, compared with $2.6 billion at December 31, 2022.

(2) Aggregate unfunded commitments were $61 million at March 31, 2023, compared to $17 million at December 31, 2022.

ARCH CAPITAL			21			2023 FIRST QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Net Investment Income

The components of net investment income were derived from the following sources:

			March 31,
			2023						2022
Three Months Ended
Fixed maturities			$	188					$	82
Term loans			0						2
Equity securities			4						6
Short-term investments			14						3
Other (1)			13						10
Gross investment income			219						103
Investment expenses			(20)						(23)
Net investment income			$	199					$	80

(1) Includes income distributions from investment funds and other items.

Net Realized Gains (Losses)

Net realized gains (losses), which include changes in the allowance for credit losses on financial assets and net impairment losses recognized in earnings were as follows:

			March 31,
			2023						2022
Three Months Ended
Available for sale securities:
Gross gains on investment sales			$	17					$	20
Gross losses on investment sales			(111)						(108)
Change in fair value of assets and liabilities accounted for using the fair value option:
Fixed maturities			6						(31)
Other investments			9						4
Equity securities			1						(3)
Equity securities, at fair value:
Net realized gains (losses) on sales during the period			19						65
Net unrealized gains (losses) on equity securities still held at reporting date			38						(176)
Allowance for credit losses:
Investments related			(16)						(32)
Underwriting related			0						(4)
Derivative instruments (1)			56						(24)
Other			(2)						(3)
Net realized gains (losses)			$	17					$	(292)

(1) See note 9 for information on the Company’s derivative instruments.

Equity in Net Income (Loss) of Investment Funds Accounted for Using the Equity Method

The Company recorded an income of $48 million related to investment funds accounted for using the equity method in the 2023 first quarter, compared to $36 million for the 2022 first quarter. In applying the equity method, 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). Such investments are generally recorded on a one to three month lag based on the availability of reports from the investment funds.

Investments in Operating Affiliates

Investments in which the Company has significant influence over the operating and financial policies are classified as ‘investments in operating affiliates’ on the Company’s balance sheets and are accounted for under the equity method. Such investments primarily include the Company’s investment in Coface SA (“Coface”), Greysbridge Holdings Ltd., (“Greysbridge”) and Premia Holdings Ltd. Investments in Coface and Premia Holdings Ltd. are generally recorded on a three month lag, while the Company’s investment in Greysbridge is not recorded on a lag.

As of March 31, 2023, the Company owned approximately 29.86% of the issued shares of Coface, or 30.09% excluding treasury shares, with a carrying value of $576 million, compared to $563 million at December 31, 2022.

As of March 31, 2023, the Company owned 40% of Greysbridge with a carrying value of $330 million, compared to $306 million at December 31, 2022.

Income from operating affiliates for the 2023 first quarter was $39 million, compared to $25 million, for the 2022 first quarter.

See note 15 for information on Company’s transactions with related parties.

ARCH CAPITAL			22			2023 FIRST QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Allowance for Expected Credit Losses

The following table provides a roll forward of the allowance for expected credit losses of the Company’s securities classified as available for sale:

						Structured Securities (1)												Corporate Bonds												Non-U.S. Government Securities						Total
Three Months Ended March 31, 2023
Balance at beginning of period						$	9											$	30											$	2					$	41
Additions for current-period provision for expected credit losses						—												1												—						1
Additions (reductions) for previously recognized expected credit losses						(1)												15												1						15
Reductions due to disposals						—												(1)												—						(1)
Balance at end of period						$	8											$	45											$	3					$	56
Three Months Ended March 31, 2022
Balance at beginning of period						$	1											$	2											$	—					$	3
Additions for current-period provision for expected credit losses						6												25												—						31
Additions (reductions) for previously recognized expected credit losses						—												—												—						—
Reductions due to disposals						—												—												—						—
Balance at end of period						$	7											$	27											$	—					$	34

(1) Includes asset backed securities, residential mortgage backed securities and commercial mortgage backed securities.

Restricted Assets

The Company is required to maintain assets on deposit, which primarily consist of fixed maturities, with various regulatory authorities to support its underwriting operations. The Company’s subsidiaries maintain assets in trust accounts as collateral for transactions with affiliated companies and also have investments in segregated portfolios primarily to provide collateral or guarantees for letters of credit to third parties. See note 18, “Commitments and Contingencies,” of the notes to consolidated financial statements in the Company’s 2022 Form 10-K.

The following table details the value of the Company’s restricted assets:

			March 31, 2023						December 31, 2022
Assets used for collateral or guarantees:
Affiliated transactions			$	4,353					$	4,254
Third party agreements			2,764						2,633
Deposits with U.S. regulatory authorities			805						776
Other (1)			1,089						1,038
Total restricted assets			$	9,011					$	8,701

(1) Primarily includes Funds at Lloyds, deposits with non-U.S. regulatory authorities and other restricted assets.

Reconciliation of Cash and Restricted Cash

The following table details reconciliation of cash and restricted cash within the Consolidated Balance Sheets:

			March 31, 2023						December 31, 2022
Cash			$	803					$	855
Restricted cash (included in ‘other assets’)			412						418
Cash and restricted cash			$	1,215					$	1,273

ARCH CAPITAL			23			2023 FIRST QUARTER FORM 10-Q

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

8. Fair Value

Accounting guidance regarding fair value measurements addresses how companies should measure fair value when they are required to use a fair value measure for recognition or disclosure purposes under GAAP and provides a common definition of fair value to be used throughout GAAP. It defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly fashion between market participants at the measurement date. In addition, it establishes a three-level valuation hierarchy for the disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The level in the hierarchy within which a given fair value measurement falls is determined based on the lowest level input that is significant to the measurement (Level 1 being the highest priority and Level 3 being the lowest priority).

The levels in the hierarchy are defined as follows:

Level 1:						Inputs to the valuation methodology are observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets
Level 2:						Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument
Level 3:						Inputs to the valuation methodology are unobservable and significant to the fair value measurement

Following is a description of the valuation methodologies used for securities measured at fair value, as well as the general classification of such securities pursuant to the valuation hierarchy. The Company reviews its securities measured at fair value and discusses the proper classification of such investments with investment advisers and others.

The Company determines the existence of an active market based on its judgment as to whether transactions for the financial instrument occur in such market with sufficient frequency and volume to provide reliable pricing information. The independent pricing sources obtain market quotations and actual transaction prices for securities that have quoted prices in active markets. The Company uses quoted values and other data provided by nationally recognized independent pricing sources as inputs into its process for determining fair values of its fixed maturity investments. To validate the techniques or models used by pricing sources, the Company's review process includes, but

is not limited to: (i) quantitative analysis (e.g., comparing the quarterly return for each managed portfolio to its target benchmark, with significant differences identified and investigated); (ii) a review of the average number of prices obtained in the pricing process and the range of resulting fair values; (iii) initial and ongoing evaluation of methodologies used by outside parties to calculate fair value; (iv) a comparison of the fair value estimates to the Company’s knowledge of the current market; (v) a comparison of the pricing services' fair values to other pricing services' fair values for the same investments; and (vi) periodic back-testing, which includes randomly selecting purchased or sold securities and comparing the executed prices to the fair value estimates from the pricing service. A price source hierarchy was maintained in order to determine which price source would be used (i.e., a price obtained from a pricing service with more seniority in the hierarchy will be used over a less senior one in all cases). The hierarchy prioritizes pricing services based on availability and reliability and assigns the highest priority to index providers. Based on the above review, the Company will challenge any prices for a security or portfolio which are considered not to be representative of fair value. The Company did not adjust any of the prices obtained from the independent pricing sources at March 31, 2023.

In certain circumstances, when fair values are unavailable from these independent pricing sources, quotes are obtained directly from broker-dealers who are active in the corresponding markets. Such quotes are subject to the validation procedures noted above. Where quotes are unavailable, fair value is determined by the Investment Manager using quantitative and qualitative assessments such as internally modeled values. Of the $25.2 billion of financial assets and liabilities measured at fair value at March 31, 2023, approximately $13 million, or 0.1%, were priced using non-binding broker-dealer quotes or modeled valuations. Of the $23.8 billion of financial assets and liabilities measured at fair value at December 31, 2022, approximately $13 million, or 0.1%, were priced using non-binding broker-dealer quotes or modeled valuations.

Fixed maturities

The Company uses the market approach valuation technique to estimate the fair value of its fixed maturity securities, when possible. The market approach includes obtaining prices from independent pricing services, such as index providers and pricing vendors, as well as to a lesser extent quotes from broker-dealers. The independent pricing sources obtain market quotations and actual transaction prices for securities that have quoted prices in active markets. Each source has its own proprietary method for determining the fair value of securities that are not actively traded. In general, these methods involve the use of “matrix pricing” in which the independent pricing source uses observable market inputs

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

including, but not limited to, investment yields, credit risks and spreads, benchmarking of like securities, broker-dealer quotes, reported trades and sector groupings to determine a reasonable fair value.

The following describes the significant inputs generally used to determine the fair value of the Company’s fixed maturity securities by asset class:

U.S. government and government agencies – valuations provided by independent pricing services, with all prices provided through index providers and pricing vendors. The Company determined that all U.S. Treasuries would be classified as Level 1 securities due to observed levels of trading activity, the high number of strongly correlated pricing quotes received on U.S. Treasuries and other factors. The fair values of U.S. government agency securities are generally determined using the spread above the risk-free yield curve. As the yields for the risk-free yield curve and the spreads for these securities are observable market inputs, the fair values of U.S. government agency securities are classified within Level 2.

Corporate bonds – valuations provided by independent pricing services, substantially all through index providers and pricing vendors with a small amount through broker-dealers. The fair values of these securities are generally determined using the spread above the risk-free yield curve. These spreads are generally obtained from the new issue market, secondary trading and from broker-dealers who trade in the relevant security market. As the significant inputs used in the pricing process for corporate bonds are observable market inputs, the fair value of these securities are classified within Level 2. A small number of securities are included in Level 3 due to a low level of transparency on the inputs used in the pricing process.

Municipal bonds – valuations provided by independent pricing services, with all prices provided through index providers and pricing vendors. The fair values of these securities are generally determined using spreads obtained from broker-dealers who trade in the relevant security market, trade prices and the new issue market. As the significant inputs used in the pricing process for municipal bonds are observable market inputs, the fair value of these securities are classified within Level 2.

Residential mortgage-backed securities – valuations provided by independent pricing services, substantially all through pricing vendors and index providers with a small amount through broker-dealers. The fair values of these securities are generally determined through the use of pricing models (including Option Adjusted Spread) which use spreads to determine the expected average life of the securities. These spreads are generally obtained from the new issue market, secondary trading and from broker-dealers who trade in the relevant security market. The pricing services also review

prepayment speeds and other indicators, when applicable. As the significant inputs used in the pricing process for mortgage-backed securities are observable market inputs, the fair value of these securities are classified within Level 2. A small number of securities are included in Level 3 due to a low level of transparency on the inputs used in the pricing process.

Commercial mortgage-backed securities – valuations provided by independent pricing services, substantially all through index providers and pricing vendors with a small amount through broker-dealers. The fair values of these securities are generally determined through the use of pricing models which use spreads to determine the appropriate average life of the securities. These spreads are generally obtained from the new issue market, secondary trading and from broker-dealers who trade in the relevant security market. The pricing services also review prepayment speeds and other indicators, when applicable. As the significant inputs used in the pricing process for commercial mortgage-backed securities are observable market inputs, the fair value of these securities are classified within Level 2.

Non-U.S. government securities – valuations provided by independent pricing services, with all prices provided through index providers and pricing vendors. The fair values of these securities are generally based on international indices or valuation models which include daily observed yield curves, cross-currency basis index spreads and country credit spreads. As the significant inputs used in the pricing process for non-U.S. government securities are observable market inputs, the fair value of these securities are classified within Level 2.

Asset-backed securities – valuations provided by independent pricing services, substantially all through index providers and pricing vendors with a small amount through broker-dealers. The fair values of these securities are generally determined through the use of pricing models (including Option Adjusted Spread) which use spreads to determine the appropriate average life of the securities. These spreads are generally obtained from the new issue market, secondary trading and from broker-dealers who trade in the relevant security market. The pricing services also review prepayment speeds and other indicators, when applicable. As the significant inputs used in the pricing process for asset-backed securities are observable market inputs, the fair value of these securities are classified within Level 2. A small number of securities are included in Level 3 due to a low level of transparency on the inputs used in the pricing process.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Equity securities

The Company determined that exchange-traded equity securities would be included in Level 1 as their fair values are based on quoted market prices in active markets. Certain equity securities are included in Level 2 of the valuation hierarchy as the significant inputs used in the pricing process for such securities are observable market inputs. Other equity securities are included in Level 3 due to the lack of an available independent price source for such securities. As the significant inputs used to price these securities are unobservable, the fair value of such securities are classified as Level 3.

Other investments

The Company’s other investments include term loan investments for which fair values are estimated by using quoted prices of term loan investments with similar characteristics, pricing models or matrix pricing. Such investments are generally classified within Level 2. The fair values for certain of the Company’s other investments are determined using net asset values as advised by external fund managers. The net asset value is based on the fund manager’s valuation of the underlying holdings in accordance with the fund’s governing documents. In accordance with applicable accounting guidance, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. A small number of securities are included in Level 3 due to the lack of an available independent price source for such securities.

Derivative instruments

The Company’s futures contracts, foreign currency forward contracts, interest rate swaps and other derivatives trade in the over-the-counter derivative market. The Company uses the market approach valuation technique to estimate the fair value for these derivatives based on significant observable market inputs from third party pricing vendors, non-binding broker-dealer quotes and/or recent trading activity. As the significant inputs used in the pricing process for these

derivative instruments are observable market inputs, the fair value of these securities are classified within Level 2.

Short-term investments

The Company determined that certain of its short-term investments held in highly liquid money market-type funds, Treasury bills and commercial paper would be included in Level 1 as their fair values are based on quoted market prices in active markets. The fair values of other short-term investments are generally determined using the spread above the risk-free yield curve and are classified within Level 2.

Residential mortgage loans

The Company’s residential mortgage loans (included in ‘other assets’ in the consolidated balance sheets) include amounts related to the Company’s whole mortgage loan purchase and sell program. Fair values of residential mortgage loans are generally determined based on market prices. As significant inputs used in pricing process for these residential mortgage loans are observable market inputs, the fair value of these securities are classified within Level 2.

Other liabilities

The Company’s other liabilities include contingent and deferred consideration liabilities related to the Company’s acquisitions. Contingent consideration liabilities are remeasured at fair value at each balance sheet date with changes in fair value recognized in ‘net realized gains (losses).’ To determine the fair value of contingent consideration liabilities, the Company estimates the future payments using an income approach based on modeled inputs which include a weighted average cost of capital. Deferred consideration liabilities are measured at fair value on the transaction date. The Company determined that contingent and deferred consideration liabilities would be included within Level 3.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table presents the Company’s financial assets and liabilities measured at fair value by level at March 31, 2023:

									Estimated Fair Value Measurements Using:
			Estimated Fair Value						Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
Assets measured at fair value:
Available for sale securities:
Fixed maturities:
Corporate bonds			$	9,409					$	—					$	9,340					$	69
Residential mortgage backed securities			823						—						823						—
Municipal bonds			314						—						314						—
Commercial mortgage backed securities			1,035						—						1,035						—
U.S. government and government agencies			4,563						4,546						17						—
Non-U.S. government securities			2,187						—						2,187						—
Asset backed securities			2,361						—						2,361						—
Total			20,692						4,546						16,077						69
Short-term investments			1,553						1,406						147						—
Equity securities, at fair value			859						825						29						5
Derivative instruments (2)			211						—						211						—
Residential mortgage loans			2						—						2						—
Fair value option:
Corporate bonds			613						—						613						—
Non-U.S. government bonds			7						—						7						—
Asset backed securities			2						—						2						—
U.S. government and government agencies			9						9						—						—
Short-term investments			17						1						16						—
Equity securities			7						3						—						4
Other investments			249						—						203						46
Other investments measured at net asset value (1)			872
Total			1,776						13						841						50
Total assets measured at fair value			$	25,093					$	6,790					$	17,307					$	124
Liabilities measured at fair value:
Other liabilities			$	(14)					$	—					$	—					$	(14)
Derivative instruments (2)			(101)						—						(101)						—
Total liabilities measured at fair value			$	(115)					$	—					$	(101)					$	(14)

(1) In accordance with applicable accounting guidance, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets.

(2) See note 9.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table presents the Company’s financial assets and liabilities measured at fair value by level at December 31, 2022:

									Estimated Fair Value Measurements Using:
			Estimated Fair Value						Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
Assets measured at fair value:
Available for sale securities:
Fixed maturities:
Corporate bonds			$	8,020					$	—					$	7,899					$	121
Residential mortgage backed securities			795						—						795						—
Municipal bonds			419						—						419						—
Commercial mortgage backed securities			1,047						—						1,047						—
U.S. government and government agencies			5,162						5,145						17						—
Non-U.S. government securities			2,313						—						2,313						—
Asset backed securities			1,927						—						1,927						—
Total			19,683						5,145						14,417						121
Short-term investments			1,332						1,198						134						—
Equity securities, at fair value			860						829						28						3
Derivative instruments (2)			149						—						149						—
Residential mortgage loans			2						—						2						—
Fair value option:
Corporate bonds			543						—						543						—
Non-U.S. government bonds			4						—						4						—
Asset backed securities			2						—						2						—
U.S. government and government agencies			5						5						—						—
Short-term investments			33						1						32						—
Equity securities			14						10						—						4
Other investments			196						—						163						33
Other investments measured at net asset value (1)			847
Total			1,644						16						744						37
Total assets measured at fair value			$	23,670					$	7,188					$	15,474					$	161
Liabilities measured at fair value:
Other liabilities			$	(14)					$	—					$	—					$	(14)
Derivative instruments (2)			(76)						—						(76)						—
Total liabilities measured at fair value			$	(90)					$	—					$	(76)					$	(14)

(1) In accordance with applicable accounting guidance, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets.

(2) See note 9.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table presents a reconciliation of the beginning and ending balances for all financial assets and liabilities measured at fair value on a recurring basis using Level 3 inputs:

			Assets																														Liabilities
s			Available For Sale																		Fair Value Option												Fair Value
			Structured Securities (1)						Corporate Bonds												Other Investments						Equity Securities						Equity Securities						Other Liabilities
Three Months Ended March 31, 2023
Balance at beginning of period			$	—					$	121											$	33					$	4					$	4					$	(14)
Total gains or (losses) (realized/unrealized)
Included in earnings (2)			—						1												(1)						—						—						—
Included in other comprehensive income			—						—												—						—						—						—
Purchases, issuances, sales and settlements
Purchases			—						—												18						—						1						—
Issuances			—						—												—						—						—						—
Sales			—						—												(4)						—						—						—
Settlements			—						(53)												—						—						—						—
Transfers in and/or out of Level 3			—						—												—						—						—						—
Balance at end of period			$	—					$	69											$	46					$	4					$	5					$	(14)
Three Months Ended March 31, 2022
Balance at beginning of period			$	3					$	—											$	28					$	5					$	3					$	(17)
Total gains or (losses) (realized/unrealized)
Included in earnings (2)			—						—												—						—						—						—
Included in other comprehensive income			—						—												—						—						—						(1)
Purchases, issuances, sales and settlements
Purchases			—						—												—						—						—						—
Issuances			—						—												—						—						—						—
Sales			—						—												(2)						—						—						—
Settlements			—						—												(3)						—						—						—
Transfers in and/or out of Level 3			—						4												—						—						—						—
Balance at end of period			$	3					$	4											$	23					$	5					$	3					$	(18)

(1) Includes asset backed securities, residential mortgage backed securities and commercial mortgage backed securities.

(2) Gains or losses were included in net realized gains (losses).

Financial Instruments Disclosed, But Not Carried, At Fair Value

The Company uses various financial instruments in the normal course of its business. The carrying values of cash, accrued investment income, receivable for securities sold, certain other assets, payable for securities purchased and certain other liabilities approximated their fair values at March 31, 2023, due to their respective short maturities. As these financial instruments are not actively traded, their respective fair values are classified within Level 2.

At March 31, 2023, the Company’s senior notes were carried at their cost, net of debt issuance costs, of $2.7 billion and had a fair value of $2.5 billion. At December 31, 2022, the Company’s senior notes were carried at their cost, net of debt issuance costs, of $2.7 billion and had a fair value of $2.4 billion. The fair values of the senior notes were obtained from a third party pricing service and are based on observable market inputs. As such, the fair values of the senior notes are classified within Level 2.

9. Derivative Instruments

The Company’s investment strategy allows for the use of derivative instruments. The Company’s derivative instruments are recorded on its consolidated balance sheets at fair value. The Company utilizes exchange traded U.S. Treasury note, Eurodollar and other futures contracts and commodity futures to manage portfolio duration or replicate investment positions in its portfolios and the Company routinely utilizes foreign currency forward contracts, currency options, index futures contracts and other derivatives as part of its total return objective. In addition, certain of the Company’s investments are managed in portfolios which incorporate the use of foreign currency forward contracts which are intended to provide an economic hedge against foreign currency movements.

From time to time, the Company purchases to-be-announced mortgage backed securities (“TBAs”) as part of its investment strategy. TBAs represent commitments to purchase a future issuance of agency mortgage backed securities. For the period between purchase of a TBA and

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

issuance of the underlying security, the Company’s position is accounted for as a derivative. The Company purchases TBAs in both long and short positions to enhance investment performance and as part of its overall investment strategy.

The following table summarizes information on the fair values and notional values of the Company’s derivative instruments:

			Estimated Fair Value
			Asset Derivatives (1)						Liability Derivatives (1)						Notional Value (2)
March 31, 2023
Futures contracts			$	105					$	(47)					$	2,516
Foreign currency forward contracts			21						(26)						1,062
Other			85						(28)						1,006
Total			$	211					$	(101)
December 31, 2022
Futures contracts			$	51					$	(17)					$	3,138
Foreign currency forward contracts			39						(35)						1,136
Other			59						(24)						3,592
Total			$	149					$	(76)

(1) The fair value of asset derivatives are included in ‘other assets’ and the fair value of liability derivatives are included in ‘other liabilities.’

(2) Represents the absolute notional value of all outstanding contracts, consisting of long and short positions.

The Company did not hold any derivatives which were designated as hedging instruments at March 31, 2023 or December 31, 2022.

The Company’s derivative instruments can be traded under master netting agreements, which establish terms that apply to all derivative transactions with a counterparty. In the event of a bankruptcy or other stipulated event of default, such agreements provide that the non-defaulting party may elect to terminate all outstanding derivative transactions, in which case all individual derivative positions (loss or gain) with a counterparty are closed out and netted and replaced with a single amount, usually referred to as the termination amount, which is expressed in a single currency. The resulting single net amount, where positive, is payable to the party “in-the-money” regardless of whether or not it is the defaulting party,

unless the parties have agreed that only the non-defaulting party is entitled to receive a termination payment where the net amount is positive and is in its favor. Contractual close-out netting reduces derivatives credit exposure from gross to net exposure.

At March 31, 2023, asset derivatives and liability derivatives of $210 million and $95 million, respectively, were subject to a master netting agreement, compared to $147 million and $73 million, respectively, at December 31, 2022. The remaining derivatives included in the preceding table were not subject to a master netting agreement.

Realized and unrealized contract gains and losses on the Company’s derivative instruments are reflected in ‘net realized gains (losses)’ in the consolidated statements of income, as summarized in the following table:

Derivatives not designated as						March 31,
hedging instruments:						2023						2022
Three Months Ended
Net realized gains (losses):
Futures contracts						$	39					$	(47)
Foreign currency forward contracts						9						(2)
Other (1)						8						25
Total						$	56					$	(24)

(1) Includes realized gains and losses on swaps, options and other derivatives contracts.

10. Commitments and Contingencies

Investment Commitments

The Company’s investment commitments, which are primarily related to agreements entered into by the Company to invest in funds and separately managed accounts when called upon, were approximately $2.9 billion at March 31, 2023, consistent with $2.9 billion at December 31, 2022.

Interest Paid

Interest paid on the Company’s senior notes and other borrowings was nominal for the three months ended March 31, 2023, compared to $1 million for the 2022 period.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

11. Variable Interest Entities

Bellemeade Re

The Company has entered into aggregate excess of loss mortgage reinsurance agreements with various special purpose reinsurance companies domiciled in Bermuda (the “Bellemeade Agreements”). At the time the Bellemeade Agreements were entered into, the applicability of the accounting guidance that addresses VIEs was evaluated. As a result of the evaluation of the Bellemeade Agreements, the Company concluded that these entities are VIEs. However, given that the ceding insurers do not have the unilateral power to direct those activities that are significant to their economic performance, the Company does not consolidate such entities in its consolidated financial statements. The Company’s on-balance sheet liability was $5 million at March 31, 2023, compared to $2 million at December 31, 2022, while the maximum off-balance sheet exposure to loss was $24 million at March 31, 2023, compared to $27 million at December 31, 2022. The Company’s maximum exposure to loss associated with these VIEs is calculated as the maximum historical observable spread between the benchmark index for each respective transaction and short term invested trust asset yields. The benchmark index for agreements effective prior to 2021 is based on one-month LIBOR, while the benchmark index for 2021 and later agreements is based on the Secured Overnight Financing Rate (“SOFR”). SOFR is a measure of the cost of borrowing cash overnight, collateralized by U.S. Treasury securities, and is based on directly observable U.S. Treasury-backed repurchase transactions. The following table summarizes the total assets of the Bellemeade entities:

						March 31, 2023												December 31, 2022
Bellemeade Entities (Issue Date)						Total VIE Assets																								Coverage Remaining from Reinsurers (1)						Total VIE Assets
2017-1 Ltd. (Oct-17)						$	—																							$	—					$	37
2018-1 Ltd. (Apr-18)						78																								—						90
2018-3 Ltd. (Oct-18)						183																								—						199
2019-1 Ltd. (Mar-19)						99																								—						108
2019-2 Ltd. (Apr-19)						307																								—						325
2019-3 Ltd. (Jul-19)						182																								—						223
2019-4 Ltd. (Oct-19)						252																								—						266
2020-2 Ltd. (Sep-20)						89																								—						105
2020-3 Ltd. (Nov-20)						224																								6						244
2020-4 Ltd. (Dec-20)						87																								3						98
2021-1 Ltd. (Mar-21)						438																								29						467
2021-2 Ltd. (Jun-21)						434																								71						458
2021-3 Ltd. (Sep-21)						481																								125						490
2022-1 Ltd. (Jan-22)						284																								33						284
2022-2 Ltd. (Sep-22)						201																								126						201
Total						$	3,339																							$	393					$	3,595

(1) Coverage from a separate panel of reinsurers remaining at March 31, 2023.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

12. Other Comprehensive Income (Loss)

The following tables present details about amounts reclassified from accumulated other comprehensive income and the tax effects allocated to each component of other comprehensive income (loss):

												Amounts Reclassified from AOCI
						Consolidated Statement of Income						Three Months Ended
Details About						Line Item That Includes						March 31,
AOCI Components						Reclassification						2023						2022
Unrealized appreciation (decline) on available-for-sale investments
						Net realized gains (losses)						$	(94)					$	(88)
						Provision for credit losses						(16)						(32)
						Total before tax						(110)						(120)
						Income tax (expense) benefit						11						18
						Net of tax						$	(99)					$	(102)

			Before Tax Amount						Tax Expense (Benefit)						Net of Tax Amount
Three Months Ended March 31, 2023
Unrealized appreciation (decline) in value of investments:
Unrealized holding gains (losses) arising during period			$	281					$	36					$	245
Less reclassification of net realized gains (losses) included in net income			(110)						(11)						(99)
Foreign currency translation adjustments			5						—						5
Other comprehensive income (loss)			$	396					$	47					$	349
Three Months Ended March 31, 2022
Unrealized appreciation (decline) in value of investments:
Unrealized holding gains (losses) arising during period			$	(784)					$	(100)					$	(684)
Less reclassification of net realized gains (losses) included in net income			(120)						(18)						(102)
Foreign currency translation adjustments			(3)						—						(3)
Other comprehensive income (loss)			$	(667)					$	(82)					$	(585)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

13. Income Taxes

The Company’s income tax provision on income before income taxes, including income (loss) from operating affiliates, resulted in an effective tax rate of 8.2% for the three months ended March 31, 2023, compared to 5.6% for the three months ended March 31, 2022. The Company’s effective tax rate, which is based upon the expected annual effective tax rate, may fluctuate from period to period based on the relative mix of income or loss reported by jurisdiction and the varying tax rates in each jurisdiction.

The Company had a net deferred tax asset of $450 million at March 31, 2023, compared to a net deferred tax asset of $531 million at December 31, 2022. The change is primarily a result of market value fluctuations in the investment portfolio. In addition, the Company paid $4 million and $9 million of income taxes for the three months ended March 31, 2023 and 2022, respectively.

14. Legal Proceedings

The Company, in common with the insurance industry in general, is subject to litigation and arbitration in the normal course of its business. As of March 31, 2023, the Company was not a party to any litigation or arbitration which is expected by management to have a material adverse effect on the Company’s results of operations and financial condition and liquidity.

15. Transactions with Related Parties

Premia Reinsurance Ltd. is a multi-line Bermuda reinsurance company (and its affiliates together with Premia Holdings Ltd., “Premia”). The Company has entered into certain reinsurance transactions with Premia. For the three months ended March 31, 2023, the Company recorded net premiums written and earned of $75 million, compared to $1 million for the three months ended March 31, 2022. At March 31, 2023, the Company recorded a funds held asset from Premia of $199 million, compared to $119 million at December 31, 2022.

Somers Group Holdings Ltd. and its wholly owned subsidiaries (collectively, “Somers”) are wholly owned by Greysbridge. The Company has entered into certain reinsurance transactions with Somers. For the three months ended March 31, 2023, the Company recorded ceded premiums written related to such transactions of $219 million, compared to $221 million for the three months ended March 31, 2022. In addition, Somers paid certain acquisition costs and administrative fees to the Company. At March 31, 2023, the Company recorded a reinsurance recoverable on unpaid and paid losses from Somers of $1.2 billion and a reinsurance balance payable to Somers of $435 million, compared to $1.2 billion and $414 million, respectively, at December 31, 2022.

ARCH CAPITAL			33			2023 FIRST QUARTER FORM 10-Q