管理層發言
Good day, ladies and gentlemen. And welcome to the second quarter 2026 Arch Capital Group Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this conference call is being recorded. Before the company gets started with its update, management wants to first remind everyone that certain statements in yesterday's press release and discussed on this call may constitute forward-looking statements under the federal securities laws. These statements are based upon management's current assessments and assumptions and are subject to a number of risks and uncertainties. Consequently, actual results may differ materially from those expressed or implied. For more information on the risks and other factors that may affect future performance, investors should review periodic reports that are filed by the company with the SEC from time to time, including our annual report on Form 10-K for the 2025 fiscal year. Additionally, certain statements contained in the call that are not based on historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The company intends the forward-looking statements in the call to be subject to the safe harbor created thereby. Management will also make reference to certain non-GAAP measures of financial performance. The reconciliations to GAAP for each non-GAAP financial measure can be found in the company's current report on Form 8-K furnished to the SEC yesterday, which contains the company's earnings press release and is available on the company's website at www.archgroup.com and on the SEC's website at www.sec.gov. I would now like to introduce your hosts for today's conference, Mr. Nicolas Papadopoulo and Mr. François Morin. Sirs, you may begin.
Good morning, and welcome to Arch's second quarter earnings call. We reported strong earnings this quarter with solid underwriting performance from each of our three segments. After-tax operating income in the quarter was $893 million, or $2.56 of earnings per share. Slowing top-line growth and strong earnings freed up capital for additional share repurchases in the quarter, bringing the total for the first half of the year to $1.95 billion. Book value per share grew by 2.8% in the quarter, and has increased by 4.5% in the first half of the year. While the underwriting environment is increasingly competitive, it is important to note that we are still in the early stages of this softening market. Overall, fundamentals are attractive with some lines experiencing increased competition while others continue to see rate increases. Arch's diversified business model ensures that we can find opportunities to deploy capital that generate appropriate risk-adjusted returns. Our position as an industry leader in specialty insurance, reinsurance, and mortgage insurance provides us a meaningful competitive advantage. Clients come to us not only for capacity but also for our underwriting expertise, claims capabilities, and valuable perspectives that help them better manage risk. Our commitment to cycle management is embedded in our culture and guides our underwriting approach. This is reinforced by a compensation structure that incentivizes quality underwriting by aligning performance with long-term profitability and shareholder returns. Let us now turn to our segment performance. Starting with insurance, where results were negatively affected by catastrophe losses related to the Iran conflict. Arch is a leading writer of political violence, terrorism, and marine war in the London market. So while losses affected this quarter's results, we are seeing ongoing opportunities to support clients with assets in the region. Underwriting income of $27 million does not reflect the good underlying performance of the segment which delivered a current accident year combined ratio ex-cat of 91.6%. As reported by others, and consistent with our comments last quarter, competition is increasing, particularly in property and short-tail lines. That said, the middle market commercial business and casualty-oriented lines continue to experience rate increases. Additionally, pricing in directors and officers is rebounding slowly while rate declines in cyber insurance have moderated. Our gross and net premiums written were negatively impacted by the nonrenewal of certain program business as discussed in prior calls, and we are also impacted by reduced writing of our excess and surplus lines property business. We continue to see premium growth in casualty-oriented lines in North America including excess and surplus casualty, construction, and national accounts. We also saw positive trends in certain specialty London market lines, including war and terrorism. Looking ahead, our diversified platform provides us with the flexibility to grow in those areas where pricing supports our return objectives. Reinsurance underwriting results were excellent, aided by relatively light catastrophe losses, resulting in $410 million of underwriting income in the quarter. The current quarter accident year ex-cat combined ratio was 79.9%, a 270 basis point increase from last year due to changes in mix and lower pricing in property lines. Net premiums written were down 10% from the same quarter last year, as some of our clients opted to retain more risk and increasing competition lowered rates particularly in property. We increased our cession to traditional reinsurance and third-party capital which impacted our net-to-gross ratio. Our ability to leverage these capabilities enables us to provide solutions to our brokers and cedents while maintaining flexibility to manage our net risk portfolio. Similar to insurance, casualty reinsurance is an area where we see attractive business opportunities, though competition is elevated due to abundant reinsurance capacity. Within our Reinsurance business, our focus is on maintaining our position as a leading reinsurance partner through disciplined underwriting and by consistently delivering business expertise across market cycles. The mortgage segment continued to provide strong, stable results, delivering $220 million of underwriting income in the quarter. The mortgage portfolio performed well, driven by a resilient economy and high-quality risk in force. Our U.S. MI portfolio delinquency rate remained flat at 2.1%. Favorable reserve development continued, although slower than in prior quarters. While affordability and housing supply constraints limit new mortgage origination, mortgage insurance remains a consistent contributor to earnings as the strengths of the in-force portfolio and favorable credit characteristics continue to support steady profitability. Investment contributed $417 million, or $1.20 of net investment income per share in the quarter. This is supported by our conservatively managed portfolio which maintains an average credit quality of AA-. We continue to benefit from an asset base that has grown to $49.5 billion supported by strong cash flows. Investments accounted for using the equity method, which are excluded from operating earnings, performed well, adding an additional $196 million, or $0.56 per share to net income, reflecting strong returns across the portfolio. Over the last five years, we have enjoyed favorable market conditions in property and short-tail lines and consequently, we now face early stages of a competitive market driven by an influx of capacity. This part of the cycle is to be expected. Importantly, a more competitive environment does not mean a lack of opportunity. It simply requires greater discipline in where and how capital is deployed. Our playbook is built upon our enduring strengths: a diversified platform, best-in-class cycle management, a strong brand that enhances our relationship with clients and distribution partners, as well as disciplined capital management. In sum, we remain well positioned to consistently deliver superior results for our shareholders. As Arch approaches its 25th anniversary, one thing is clear: while the company has evolved, the principles and playbook we rely upon create long-term shareholder value. With that, I will turn the call over to François.
Thank you, Nicolas, and good morning to all. Before I provide some additional color on our results, I wanted to walk you through our capital allocation and management actions this quarter. Capital management is an essential tool to help us manage our business through the insurance cycle. The latest hard market provided Arch the opportunity to generate significant excess capital that, as the market transitions, cannot be fully deployed into our business. Our preferred option has first been to return excess capital to our shareholders through share repurchases and secondly, through special dividends. After considering the opportunities available to us to deploy capital in the business, both existing and new, we determined that share buybacks remain an accretive use of excess capital in enhancing shareholder returns at current prices. As a result, we repurchased 12.4 million shares at an aggregate cost of $1.2 billion in the quarter. Through the first half of the year, we have repurchased approximately 94% of our net income in our own shares. As you know, we also accessed the debt market in May, raising $2 billion in a combination of 10-year and 30-year senior notes. The proceeds from this issuance will be used to 1) redeem the $500 million of 10-year senior notes maturing later this year, 2) purchase $418 million of our 2043 and 2046 senior notes through a recently completed tender offer, with the remainder for general corporate purposes. The tender offer was designed to replace debt that no longer meets updated regulatory capital requirements with fully compliant capital instruments. As a result of the debt raise, we expect our interest expense to be approximately $60 million to $63 million for each of the next two quarters. As of the end of the second quarter, our debt plus preferred to capital leverage ratio stands at a conservative 18.1%. Turning back to our operating performance for the quarter, our three business segments delivered excellent underlying results, with an overall ex-cat accident year combined ratio of 82.5%, up 160 basis points from the same quarter last year. Our underwriting income included $165 million of favorable prior year development on a pre-tax basis in the quarter, or 4.1 points on the overall combined ratio. We recognized favorable development in all three of our segments, and in many of our lines of business, but mainly in short-tail lines in our P&C segments and in mortgage due to strong cure activity. Current year catastrophe losses were $201 million net of reinsurance and reinstatement premiums, and were a combination of losses from the Iran conflict and severe convective storms in the U.S. The Insurance segment's net premiums written declined 5.1% year-over-year due in part to the nonrenewal of certain program business. The ex-cat accident year loss ratio net of reinstatement premiums improved by 90 basis points to 56.4% compared to the same quarter one year ago, due primarily to strong performance in our international operations. The acquisition expense ratio for the current accident year increased by 30 basis points, as the benefit we observed from the write-off of deferred acquisition costs for the MCE-acquired business rolled off. Our operating expense ratio was higher this quarter due to the transition of our middle market business to Arch Systems. As mentioned last quarter, we would expect our operating expense ratio to revert to historical levels during the second half of the year. Turning to the reinsurance segment, net premiums written were down 10.4% from the same quarter one year ago, reflecting reduced writings from lower rates and a higher level of retrocession purchases primarily in the specialty and property catastrophe lines. Overall, our ex-catastrophe accident year combined ratio of 79.9% is up from last year due to the shift in line of business mix and a more competitive rate environment for certain subsegments. Our mortgage segment produced another very strong quarter with underwriting income of $220 million. Net premiums earned were flat from last quarter with a reduction in our U.S. MI business mostly offset by higher levels of earned premium in Australia. On the investment front, we earned a combined $613 million of net investment income and income from funds accounted for using the equity method, or $1.76 per share pre-tax, up from the $1.57 per share we earned last quarter. We note that the returns of equity method funds contributed 340 basis points to our annualized net income return on average common equity in the quarter. Cash flow from operations remained very strong at $1.3 billion for the quarter. Income from operating affiliates was $46 million for the quarter, slightly higher than the $40 million from the same quarter one year ago. Our effective tax rate on pre-tax operating income was 15.1% reflecting the mix of income by tax jurisdiction. As of July 1, our peak zone natural cat probable maximum loss for a single event at a 1-in-250-year return level on a net basis is down slightly to $1.8 billion and now stands at 8% of tangible shareholders' equity. With these introductory comments, we are now prepared to take your questions.
分析師問答
Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We will pause for just a moment to allow everyone an opportunity to signal for questions. Our first question comes from the line of Elyse Greenspan with Wells Fargo. Elyse, your line is open. Please go ahead.
Hi. Thanks. Good morning. My first question is on the insurance segment. I was hoping to get a sense of the sustainability of the underlying loss ratio you saw in the quarter. François, I think you pointed out strong international results for the second quarter in a row, so just trying to get a sense of the sustainability there. And then was there any change in your loss pick assumptions within your insurance book in the quarter?
A few points on that, Elyse. First, international is more of a short-tail book, so it has been running very well. There is always potential volatility that we have to think about, so it is hard for us to know exactly how that will play out, but the business is doing extremely well and we are happy with that. On the North American side, what also helped a little bit is the nonrenewal of some of the programs that started out earlier this year. That has reduced premium and brought down the loss ratio a bit. Where it goes from here, at a high level we are comfortable with the levels where we are at, and there is a good chance we stay around this number. Regarding movement in loss trends, there was no systematic change in specific loss picks within the insurance book this quarter, absent the normal adjustments for rate over trend that we go through in each of our lines of business. So nothing new there.
And remember, in insurance you can adjust the mix of the book. Most of our books today are split in what we call quartile or quintile, where some parts are running at a lower ex-loss ratio and other parts at a higher loss ratio. The work of the underwriter is to get pricing or manage higher loss ratio out. So we have more propensity to keep the loss ratio where it is through active underwriting and mix management.
Thanks. And then my follow-up was just on capital. Obviously, buybacks picked up in the quarter. Slower growth, strong earnings, and capital position. How are you thinking about the level of buybacks from here, recognizing wind season? Would you expect to slow down this quarter and then pick back up? How are you thinking about the level of capital return going forward?
We do not have targets or plans to buy back a certain number or dollars of shares. We certainly thought that in the second quarter the stock price was very attractive to us, which is why we were able to buy back more than before. Does that stay at this level? I do not know. At current prices, we still like the stock and think it is very attractive. We have capacity to buy back more, so we will see how that plays out. Wind season is always something in the back of our minds that we have to consider. Going forward, we are in a position where growth will be harder to come by, so share buybacks will remain part of the arsenal we have to manage returns.
Your next question comes from the line of Pablo Singzon with J.P. Morgan. Your line is open. Please go ahead.
Hi. Good morning. Retention in the insurance business has ticked up over the past couple of years. Is your approach here to keep retention the same, or could you potentially increase that and internalize more of the underwriting income? I'm just not sure if ceding is economically more attractive like it is in reinsurance today.
Can you repeat the question? Are you asking about retention of the insurance segment? Your retention has been moving, and you have been ceding less while not overgrowing. In the soft market, it is a function of the market we are in. In reinsurance we have seen a little more ceding because, as rates were going down and we increased limits, we bought more protection. There are many factors that influence the net-to-gross, and the market is certainly one of them. We are here to solve the problem for insureds and brokers, and reinsurance is a good tool to stay in front of clients. Ultimately, we decide what we want to keep after that.
And in the insurance segment, what is your stance on net-to-gross there?
On insurance, it depends on the market and the lines. I addressed some of that earlier. On reinsurance, we have been more active buying protection, especially because the property cat business is stressed. We manage the net portfolio using available capacity with a lower cost of capital to help solve the problem for clients and distribution partners.
Your next question comes from the line of Andrew Kligerman with TD Cowen. Your line is open. Please go ahead.
Good morning. Nicolas, I was intrigued by your prepared remarks where you talked about an influx of capacity and that we are in the early stages of a soft market. I hope you can elaborate a little bit separately on property and casualty. Do you think property rates could come down materially more and to what potential degree? And you mentioned that casualty was decelerating. Do you think we could start to see that turn negative?
I truly believe the market we are trading in is a favorable market. There are businesses our teams can write on the insurance side and to a large extent on the reinsurance side. We are made to trade in this type of environment. Specific to property, it is a big headwind — rates have been coming down, and we trade quite carefully, which you saw reflected in net premiums going down. We are much more optimistic on casualty. There is more competition there, but the market remains disciplined, especially on the insurance side. We have not seen significant loosening; our competition stays disciplined. We are monitoring management of limits, which is a critical aspect of what we track.
Property catastrophe activity will have an impact, yes. It is still early in the season; so far it has been quiet, but things could change depending on weather as we look into 2027.
Got it. So in terms of casualty, when you say you are disciplined, are you keeping up with loss costs on your rate? And the prior year development was 1.4 favorable in insurance and 5.3 favorable in reinsurance — mainly short-tail stuff. Could you give a little color on the amount and geography by accident year in casualty, or was it insignificant? I'm curious how casualty played out in prior year development.
Casualty at a high level is kind of neutral. By subline and by year there is some up, some down; in total it is about neutral. Most of the favorable development is in short-tail lines in the last two to three accident/underwriting years.
Your next question comes from the line of Cave Montazeri with Deutsche Bank. Your line is open. Please go ahead.
Thank you. I just want to follow up on the $1.2 billion of share repurchases you did this quarter. I think it is the first time in a while since you went over 100% of operating income, and part of that is dictated by the stock price. There is still a meaningful gap between where you are trading and intrinsic value based on 3 or 4 times book. At current levels, how long can you sustain share repurchases above 100% of operating earnings? You mentioned built-up excess capital during the hard market and possibly issuing more debt. Can you give a sense of whether you could sustain above 100% payout throughout the soft cycle — potentially a multiyear path?
You are asking if we have a crystal ball, which we do not, but we are very confident in our ability to generate strong earnings through all phases of the cycle. We have three pillars to our operations and they are all performing well. We believe we can generate earnings for the foreseeable future at a minimum. If we are not growing, we could return those earnings to shareholders. Could we do something else? Yes — M&A or other uses. We deployed capital differently in the past. The second quarter demonstrates we are active and like the stock; it is a natural and attractive way to return capital to shareholders and we will keep doing that unless things change materially.
Linked to this, your PML went down a bit this quarter, though not as much as your premium on a net basis. Can you give color on what kind of business you are sending to the retrocession market? Should we expect your PML to go down over time as the cycle softens? That could be an additional source of capital that you could use for buybacks or other uses.
The PML you look at is Florida Tri-County, one of the 50 zones we monitor. Florida business is our peak zone and historically has had the highest margin, which is why it shows up as a peak. Rate reductions are across the board in property catastrophe, so we would expect PMAs could reduce. Think of Florida as a highest-margin area within our property cat books.
As a percentage of shareholders' equity, we were at 8%. In the last soft market we were at 4%. We are a different animal now and a much more relevant partner to many clients and brokers. Could our PML come down? Absolutely. Does it go back to previous levels? We do not know.
Your next question comes from the line of Robert Cox with Goldman Sachs. Your line is open. Please go ahead.
Hey, thanks. First question on casualty reinsurance. I think you took a somewhat differentiated view versus peers in 2025 by leaning in with selective cedents. As we think about deceleration in casualty reinsurance growth year to date, is that reflective of those outperforming cedents choosing to retain more risk, or has Arch changed its view on casualty reinsurance returns?
No, we have not changed our view. We still find casualty reinsurance attractive in many specialty areas. The issue is too much capacity chasing too little business. It is hit or miss on terms and conditions — some work and others do not. Often quota shares have ceding commissions that are too high for our taste. We are still looking for the right opportunities to add casualty reinsurance with the right ceding companies and the right terms.
Thanks. I just want to follow up on the Middle East losses this quarter. There also seems to be incremental opportunities to write new business. Could you give a sense of strategy to write new business there and how you determine what is a good risk?
Following the losses in the Iran region, prices adjusted and at some points were multiples of pre-conflict levels. We decided to deploy capacity and stay with our insureds. Some insureds want coverage for war exposures that were previously excluded, and selectively we have deployed more capacity in the region while making sure to avoid concentrations. We have a careful approach to service distribution partners and clients in the region.
Your next question comes from the line of David Motemaden with Evercore. Your line is open. Please go ahead.
Hey, thanks. Good morning. Wondering if you could quantify the Iran losses this quarter that impacted the insurance segment, and elaborate on how you are thinking about them and the cat load within insurance going forward. I'm also interested in any IBNR versus case reserve detail you could share.
The majority of the insurance catastrophe losses come from Iran. On catastrophe load going forward, we previously quoted 6-8% on an annual basis for the group, and that has not changed. The losses from the Iran conflict are actual claims — case reserves have been set up. These are not hypothetical IBNR entries; they are real claims with damage to refineries and tangible losses. There are always questions around business interruption and the full magnitude of those outcomes, but the claims are real and tangible.
We operate out of London at Lloyd's and are leaders in political violence and terrorism markets. When losses happen in that space, we expect them and pricing supports participation. That's why we've been meaningful in that area over the last few years, and we are continuing to operate there.
Got it. Thanks. On the reinsurance segment, the accident year loss ratio ex-cat deteriorated 370 basis points year-on-year. That seems within expectations given mix shift away from property and pricing pressure. Should we expect the same sort of deterioration through the rest of the year? How are you thinking about that?
We look at trailing 12 months as the lens for reinsurance because there is more volatility. The shift in mix to less short-tail is reflected in the higher loss ratio, and the more competitive market and lower rates in certain segments have not fully earned in, so some of that may earn in over time. The recent quarter's loss ratio is a bit higher than the run rate we would expect, but it is within our expectations given the moving parts. We will see how it plays out going forward.
Your next question comes from the line of Tracy Benguigui with Wolfe Research. Your line is open. Please go ahead.
You quantified the property catastrophe rate decreases at mid-year renewals and asked to share your view of rate adequacy. Looking at one broker survey, pricing is back to 2021 levels, but a competitor said it looked more like 2023. Where in that spectrum is your view?
I concur with what others have said: mid-year rate reductions were in the mid-teens that we saw. In terms of rate index, we are not back to pre-hurricane levels. Are we back to 2022? We think the market trades above that. Are we in 2023? Maybe. It depends on region — we have 50 zones. Some zones are still green and provide adequate returns, some are red, some are orange. We actively manage a portfolio. In terms of index, we think we are still above certain prior hurricane rate indices.
Great. Can you touch on your appetite to reinsure MGAs? I realize you are the lead reinsurer for at least one of the fronting companies. What structural safeguards do you have in place?
Our involvement with MGAs has been mostly on the property short-tail side. We have been a significant player, supported by pricing on the primary side. It was one way our insurance team could access business otherwise inaccessible. Shorter lines limit some of the risk of working with MGAs. The bigger issue is for the primary insurer over the longer term: if an MGA is no longer there in five or six years, who pays claims and will reinsurance capacity still be available? That concern is more acute for long-tail lines than for short-tail reinsurance.
Your next question comes from the line of Yaron Kinar with Mizuho. Your line is open. Please go ahead.
Thank you. Two questions on the reinsurance segment and opportunities there. First, you said you're still seeing an attractive environment for casualty reinsurance, which sounds a little different than what we have heard from other executives this season. I understand you look for the right underlying risks. Could you provide additional color on what makes this a more attractive opportunity for you in this market? Second, on the property side and Florida: one broker said Southern Florida is back to 2017 property cat levels, and a competitor said they are lightening the load in Florida. What are you seeing in Florida — Southern versus Northern, West versus East?
What makes casualty attractive to us is the underlying insurance casualty business, which we think is profitable in certain specialty areas. Through our insurance relationships, we can access companies that are good underwriters in specialty casualty areas. On property and Florida, at June 1 rate reductions were across the board. Historically, there were higher reductions at the top end of programs and lower reductions in frequency layers; this time appetite has been more across the board. Tri-County is a big zone and typically attracts higher pricing. In other areas like Galveston or Orlando the pricing is less because they are not as peak. The market is efficient: pricing reflects abundance of capacity and new entrants, but differentiation between zones remains meaningful. People use models and we do not see a huge red flag.
Your next question comes from the line of Rowland Mayer with RBC Capital Markets. Your line is open. Please go ahead.
Do you expect continued benefits from higher investment yields to add pressure to casualty competition over time? And do you embed views on investment yields in your rate adequacy decisions on long-tail lines?
We do not embed investment yield assumptions in a way that would allow underwriting to rely on them. We ask our casualty underwriters to write for an underwriting profit and we credit them with a risk-free rate. We require an underwriting profit and do not rely on higher investment income to make underwriting economics work.
Thank you. As my follow-up, are you at all close to the point where special dividends make more sense than buybacks? In 2024 you did a special dividend above 1.8x book. How are you thinking about that decision now?
Back in 2024 we were at 2x book so buybacks didn't make sense and a special dividend was the right answer. Right now we are trading in the roughly 1.45x to 1.6x range, so buybacks make more sense. Our preference would be one or the other; currently buybacks are the right tool. We will continue to evaluate and the decision depends on our visibility into forward earnings and strategic opportunities.
Your next question comes from the line of Brian Meredith with UBS. Your line is open. Please go ahead.
Thanks. Nicolas, focusing on mid-corp: ex the program business you are intentionally running off, how has growth been? How has retention been? Has it been more challenging to keep the business given the competitive market? How should we think about it going forward?
We have been positively surprised. Our first goal was to move the business to Arch and to transition policy administration systems from the previous owner to us. That created some disruptions for underwriters, but the value of the brand and relationship strength worked for us. We are in a good place. Now that the underwriting team and policy administration systems are on Arch, we can provide better tools, analytics, triage, and improve claims. There are a lot of initiatives that will lead to growth in the future.
Do you see better market dynamics in mid-corp compared to other areas?
Mid-corp dynamics are muted compared to large property and E&S. We still see package rate increases in the mid-single digits. Property itself is flattish — it used to be up 5% — but we do not see the double-digit decreases evident elsewhere in excess and surplus property or large account property.
Your next question comes from the line of Chris Hartwell with Autonomous Research. Your line is open. Please go ahead.
Good morning. Quick question on the mid-year renewal conversations over the last few months. What are brokers and cedents really pushing for in terms of rate versus risk transfer? Are they focused primarily on price or also on structural changes to transfer of risk?
The primary message we've gotten from brokers and cedents is price. There has been some slippage in terms and conditions as clients look to save money and see if they can add margin via underlying layers. We're starting to see that, but for now it is mostly a pricing discussion.
Thanks. On the mortgage business, growth popped quarter-over-quarter. Can you provide color on what's driving that? Also, profitability has been strong for years but growth hasn't been apparent. As the back book matures, how should we think about the trade-off between margin and growth going forward?
This quarter we signed a new client in Australia which contributed to the premium influx, and we reduced some quota share insurance purchases which improved net growth. Looking ahead, mortgage profitability remains steady. Mortgage markets react differently than property cat — rate adjustments are smaller. We expect international growth to contribute more as new client business earns in through the year.
Your next question comes from the line of Meyer Shields with KBW. Your line is open. Please go ahead.
Thanks. I want to talk about casualty loss trends. Given social inflation, are Arch and the companies you reinsure on the facultative side getting better at pushing back so that net loss trends are not as bad? Are you seeing better defense results that offset plaintiff-side trends?
We would love to see more pushback and better defense results. There has been some pushback, but we do not yet see the impact of tort reform or materially different defense outcomes in our numbers. It is not reflected in our loss trends yet.
Understood. One more: a few years ago there was more caution on mid-year renewals because hurricane forecasts were negative. If forecasts are benign this season, does that increase your appetite for property cat exposures given the available rates?
Seasonal forecasts are a factor; we have meteorologists on staff and they provide outlooks. We look at correlations and historical data, so it is a factor we consider, but it is not the main driver of our underwriting decisions.
Your next question comes from the line of Mike Zaremski with BMO. Your line is open. Please go ahead.
Thanks. On the mortgage segment where growth popped, you called out nonrenewing some of the Bellemeade arrangements and less reinsurance. Can you quantify that impact and whether we should assume that effect persists for the next three quarters?
The current quarter is a good starting point. Some of these agreements, such as the Bellemeade arrangements, were effectively canceled and those benefits come through monthly. The reduction in quota shares also benefited net written premium. I would expect relatively flat premium on the U.S. MI side, while Australia will contribute more as the new client ramps. For year-over-year growth, expect more international growth to show up over the rest of the year.
Got it, that's helpful. On the war in the Middle East: you didn't quantify the exact cat loss earlier. If the war endures or ebbs and flows, should we think about industry loss estimates or is it very idiosyncratic to specific properties? Any color on how to think about potential further losses would be helpful.
There could be more. The Q2 losses were direct reflections of risks we insure that were hit. If similar events occur in Q3 or Q4, we could see more losses. This is case-by-case and more property-specific rather than an aggregate systemic loss like a pandemic. We'll react to material new information or damage as it emerges.
Our estimate for industry loss since the last earnings call hasn't changed; the industry estimate remains around $3 billion for the Middle East war losses.
Your next question comes from the line of Brian Meredith with UBS. Your line is open. Please go ahead.
Thanks for letting me get one more question. You talk a lot about share buybacks, but what about M&A? How are you thinking about M&A in this environment? Historically, M&A picks up in soft markets. Are you seeing opportunities in the marketplace?
We don't think of M&A as an alternative to organic growth or capital return. M&A is strategic — it can be a way to buy scale in a line we want to be in faster, as with the Allianz transaction where we paid for a franchise to operate in middle market property-led business. We evaluate M&A for what it adds to our platform. Right now, M&A prices are expensive, and timing is tricky. Successful M&A is difficult and has historically created issues for some companies, so we are careful in our approach.
Thank you. I am not showing any further questions. I would now like to turn the conference over to Mr. Nicolas Papadopoulo for closing remarks.
Yes. Thank you for your time today, and another good quarter for Arch. We are looking forward to talking to you next quarter.
Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may all disconnect.