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. And 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 remain, 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. 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. 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 I'm 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?
Yeah. Two things on that, Elyse. First, international is more of a short-tail book, so it has been running very well. There is always potential volatility to consider, so it is hard for us to know 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. Those premiums earn in over time, so that has brought down the loss ratio somewhat. Where does it go from here? At a high level, we think we are comfortable with the levels where we are. There is a good chance we stay around this number. Regarding movement in loss trends, there was no systematic change in our loss pick assumptions for any particular line in the quarter—just the normal adjustment of rate over trend that we go through in our lines of business.
And remember, in insurance you can adjust the mix of the book. Most of our books today are split into quartiles or quintiles where some portions run at a lower ex-loss ratio and others run at a higher loss ratio. The work of the underwriter is to get pricing or manage higher loss ratio business out. So we have the propensity to keep the loss ratio where it is.
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 obviously, in the midst of wind season, would you expect to slow down this quarter and then pick back up? Or 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 dollar amount of shares. We thought that in the second quarter the stock price was very attractive to us, which is why we bought back more. Does that stay at this level? I do not know. At current prices we still like the stock and think it is attractive. We have capacity to buy back more, so we will see how that plays out. Wind season is always something that is on the back of our minds. Going forward, we think growth will be harder to come by and share buybacks will remain part of the arsenal we use to manage our 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 not sure if ceding is economically more attractive like it is in reinsurance today.
Can you repeat the question? Are you asking about retention in the insurance segment? Your retention has been going down, right? You've been ceding less or not overgrowing. The answer is it is a function of the market we are in. In reinsurance we've seen more ceding because as rates were going down and we increased limits, we bought more retrocession. There are many factors that influence net-to-gross, including client behavior and market conditions. 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 to keep.
And in the insurance segment, what is your stance on net-to-gross there?
On the insurance side, we manage retention actively through underwriters who adjust mix and terms. On reinsurance, we've been more active buying protection, especially because the property catastrophe business is quite stressed. We manage the net portfolio using available capacity that may have a lower cost of capital to solve client problems.
Your next question comes from the line of Andrew Kligerman with TD Cowen. Your line is open. Please go ahead.
Good morning. Nicholas, I was intrigued by your early comments where you talked about an influx of capacity and that we are in the early stages of a soft market. I was hoping you could 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 casualty was decelerating. Do you think we could start to see that turn negative?
First, I believe the market we are trading in is favorable. There are businesses our teams can write on the insurance side and to a large extent on the reinsurance side. We are well suited to trade in this type of environment. Specific to property, yes, it's a big headwind. Rates have been coming down and we are trading carefully, which you saw in net premiums going down. We are much more optimistic on casualty. There is competition, but the market remains disciplined, especially on the insurance side. We have not seen significant mismanagement of limits, which is a critical aspect we track. Competition remains disciplined.
I would add that property catastrophe activity will have an impact. It is still early in the season; so far it has been quiet, but things could change 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. Could you give a little color on the amount and geography by accident year in casualty, or was it insignificant?
Casualty at a high level is kind of neutral. By subline and by year there is some up and some down, but in total it's 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. Part of that is dictated by the stock price, but there is still a pretty meaningful gap between where you are trading and intrinsic value based on 3 or 4 times book value. At current levels, how long can you sustain share repurchases above 100% of the operating earnings you generate? You mentioned you've built up a decent amount of excess capital during the hard market and you could issue more debt if you wanted to. Could you sustain above 100% payout throughout the soft cycle? Is that a multiyear clear path?
You are asking if we have a crystal ball—we do not—but we are confident in our ability to generate strong earnings through all phases of the cycle. We have three pillars to our operations and we believe we can generate earnings for the foreseeable future. If we are not growing, we can return those earnings to shareholders. The answer is yes, we could. Could we do something else with capital? Potentially, but we will not speculate. The second quarter was a demonstration that we are active, like the stock, and buybacks are a natural and attractive way to return capital. We will keep doing the same 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 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, historically the highest margin for our property catastrophe books. Rate reductions are across the board in property cat, so we would expect PMAs to reduce. Think of Florida as a highest margin area in 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 bigger, different partner to many clients and brokers now. Yes, our PML could come down. Whether it goes back to the same lower level is unknown.
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. You took a somewhat differentiated view in 2025 by leaning in with some selective cedents. As we think about deceleration in casualty reinsurance growth year to date, is that reflective of 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, especially in specialty areas. The issue is too much capacity chasing too little business. It becomes hit-or-miss on terms and conditions. Some ceding commissions are too high on quota-share structures. We are still looking for the right opportunities with the right ceding companies to add casualty business.
Okay. Thanks. One more: on the Middle East, you had some losses this quarter but also incremental opportunities to write new business. Could you give a sense of the strategy to write new business 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 what they were before the conflict. We decided to deploy a bit of capacity and stay with our insureds. Some insureds are seeking coverage for war exposures that were previously excluded from standard property policies. Selectively we have deployed more capacity in the region while making sure to avoid concentrations. We have a careful approach to continuing 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 sort of IBNR versus actual loss detail you could share.
The majority of the insurance catastrophe losses come from Iran. The cat load going forward—our guidance of roughly 6-8% on an annual basis for the group has not changed. The Iran conflict losses are actual claims; case reserves have been set up. These are not hypothetical IBNR. They are tangible claims on refineries and other assets. There are questions around business interruption and the full magnitude of 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, we expect them and pricing supports our participation. That is why we've been in this space more meaningfully in recent years.
Got it. Thanks. On the reinsurance segment, the accident year loss ratio ex-cat deteriorated 370 basis points year on year. Is that the same sort of deterioration we should expect through the rest of the year, given mix shift away from property and pricing pressure?
We look at trailing 12 months as a lens for reinsurance because there will be more volatility. The mix has shifted to less short-tail, which increases the loss ratio. Market competition and lower rates have not fully earned in, so that may earn in over time. The quarter probably reflects several moving parts and is within our expectations. We are not surprised by it, but 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 cat rate decreases you saw at mid-year renewals and shared your view of rate adequacy. Looking at one broker survey, pricing looks like 2021 levels, but a competitor said it looked more like 2023. Where in the spectrum is your view?
I concur with other comments: mid-year reductions were in the mid-teens. We do not think we are back to pre-hurricane levels. Are we back to 2022? No, we think market trades above that. Are we in 2023? Maybe. It depends on the region. We actively manage a portfolio across 50 zones—some zones are green, some red, some orange. In terms of rate index, our view is we're still above certain prior hurricane 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 and supported by pricing on the primary side. It is one way for our insurance team to access business they otherwise could not. Shorter tail limits some risk with MGAs. The bigger issue is who pays the claims down the road if the MGA or fronting insurer is not there—especially for long-tail lines. As a reinsurer, that is less of an issue than it is for the insurer or cedent regarding long-term visibility.
Your next question comes from the line of Yaron Kinar with Mizuho. Your line is open. Please go ahead.
Thank you. Good morning. Two questions on reinsurance opportunities. First, you are still seeing an attractive environment for casualty, which sounds a little different than other executives this season. You mentioned partnering with the right underlying risk—can you offer additional color on what makes casualty more attractive for you?
What makes the opportunity interesting is the underlying insurance casualty, which in certain specialty areas is profitable. We try to access those companies through our insurance operations that we believe are good underwriters in specialty casualty areas.
On the property side, following up: we heard Southern Florida back to 2017 levels from another broker, and a competitor said they lightened up their load in Florida. What are you seeing in Florida? Southern versus Northern, west versus east—with so many zones, any color?
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 usually attracts higher pricing. Other areas, like Galveston or Orlando, have lower pricing because they are not the peak zone for everyone. The market is efficient; pricing reflects abundant capacity. Differentiation between zones is efficient and model-driven, 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.
Hi. Good morning. Do you expect continued benefits from higher investment yields to add pressure to casualty competition over time? Do you embed views of investment yields in your rate adequacy decision on long tail lines?
We do not embed higher investment yields into underwriting decisions for casualty. 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 regardless of investment yield environment.
Thank you. As a follow-up: buybacks are part of the arsenal. Are you close to a point where special dividends make more sense than buybacks? In 2024 you were above 1.8x book and paid a special dividend, but ROE expectations were higher then.
Back in 2024 we were at 2x book, so special dividends made sense. Right now we are trading in the 1.45x to 1.6x range, so buybacks still make sense. Our preference is one or the other based on valuation and the outlook. Our visibility in forward earnings is positive and supports value creation and strong returns over the next few years, which is an important part of our buyback economics.
Your next question comes from the line of Brian Meredith with UBS. Your line is open. Please go ahead.
Yes. Thanks. Nicolas, first question on mid-corp: excluding the program business that you are 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 over to Arch and transition policy administration systems from Allianz to our platform. That created some disruptions for underwriters, but the value of the brand and relationship strength worked in our favor. We are in a good place. Now that underwriting and policy administration are on Arch systems, we can provide better tools, analytics, triage, and improved claims handling. There are many initiatives that should lead to more growth in the future.
Do you see better market dynamics in mid-corp than some other areas?
Mid-corp is more muted compared to large property and E&S. We still see package rate increases in the mid single digits. Property is flattish—no double-digit decreases like we see elsewhere in excess and surplus 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 mid-year renewal conversations with ceding clients over the last few months. I'm trying to understand what clients are pushing for in terms of rate versus risk transfer. Are they pushing for price or structural risk transfer?
The primary message from brokers and cedents is price. There is some slippage in terms and conditions as clients look to save money and see if they can layer savings into underlying layers. We are starting to see more of that, but mostly it is driven by price at the margin right now.
Okay. And on mortgage: growth popped this quarter. Can you provide color on what's driving that? And as the back book matures, how should we see the trade-off between margin and growth?
This quarter we signed a new client in Australia, which benefited our new premium influx. We also reduced some quota-share reinsurance, which helped net premium growth. Those are the two elements. Profitability remains steady; mortgage dynamics are different from property cat where rate decreases have been larger. Mortgage pricing movements are much smaller and markets react quickly to maintain market share.
Your next question comes from the line of Meyer Shields with KBW. Your line is open. Please go ahead.
Great. Thanks. I want to talk about casualty loss trends from a different perspective. We are well into social inflation as an external issue. Are Arch and the companies you reinsure on a facultative basis getting better at pushing back, such that net loss trends may not be as bad? Are you seeing improved defense or tort reform impacts on your book?
We would love to see more pushback and better outcomes on defense, but in the numbers we do not yet see the impact of tort reform or different behavior by defense attorneys. It is not reflected in our loss trends yet.
Understood. And a follow-up: in past mid-year renewals, there was caution when hurricane forecasts were very negative. If forecasts are benign, does that increase your appetite for property cat given available rates?
Forecasts are a factor. We have meteorologists on staff and consider seasonal outlooks, but it's only one factor among many. Correlations exist historically, but it is not the main factor driving our decisions.
Your next question comes from the line of Mike Zaremski with BMO. Your line is open. Please go ahead.
Hey. Thanks. Good morning. On the mortgage segment where the growth popped and you called out nonrenewing some of the Bellemeade and less reinsurance—can you quantify that impact and should we run-rate that over the next three quarters as well?
The current quarter is a good starting point. Some agreements, like on the Bellemeade side, are canceled and premiums are monthly, so the benefit is ongoing. We would expect relatively flat premium on the U.S. MI side, with international growth driven by the new Australian client started in Q1. As the year progresses, we should see more of that international business coming in.
Got it. That is helpful. Switching to the Middle East war—if the conflict endures or ebbs, should we think about potential additional losses industry-wide? Any industry loss estimate you are using or is this idiosyncratic to Arch?
There could be more. Q2 reflected specific risks we insure that were hit. If similar events happen in Q3 or Q4, we could have more. This is more case-by-case and property-specific, not an aggregate event like COVID. We will react if news indicates additional damage.
Our estimate for industry loss since the last earnings call has not changed. We believe the industry loss for the Middle East war losses remains around $3 billion.
Your next question comes from the line of Brian Meredith with UBS. Your line is open. Please go ahead.
Hey. Thanks for letting me get one more question. You talk a lot about share buybacks, but how are you thinking about M&A in this environment? Historically, M&A picks up as the market softens—are you seeing that in the marketplace?
We don't view M&A purely as an alternative to returning capital. M&A is strategic—it's build versus buy. If we want to enter a line without scale, M&A can accelerate that. The Allianz transaction is an example: we wanted to be in middle market property-led business and paid to acquire a franchise to operate in that space. We evaluate M&A for strategic fit more than for market share. Right now M&A is expensive; timing is tricky and successful M&A is difficult, so we approach opportunities very carefully.
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.