10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the period ended September 30, 2014
Or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number:  001-26456

ARCH CAPITAL GROUP LTD.

(Exact name of registrant as specified in its charter)

Bermuda

(State or other jurisdiction of incorporation or organization)

Not Applicable

(I.R.S. Employer Identification No.)

Waterloo House, Ground Floor

100 Pitts Bay Road

Pembroke HM 08, Bermuda

(Address of principal executive offices)

(441) 278-9250

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x     No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x     No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x	Accelerated filer o
Non-accelerated filer o	Smaller reporting company o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o   No x

The number of the registrant’s common shares (par value, $0.0033 per share) outstanding as of October 31, 2014 was 129,110,352.

ARCH CAPITAL GROUP LTD.

INDEX

	Page No.
PART I. Financial Information
Item 1 — Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm	2
Consolidated Balance Sheets
September 30, 2014 (unaudited) and December 31, 2013	3
Consolidated Statements of Income
For the three and nine month periods ended September 30, 2014 and 2013 (unaudited)	4
Consolidated Statements of Comprehensive Income
For the three and nine month periods ended September 30, 2014 and 2013 (unaudited)	5
Consolidated Statements of Changes in Shareholders’ Equity
For the nine month periods ended September 30, 2014 and 2013 (unaudited)	6
Consolidated Statements of Cash Flows
For the nine month periods ended September 30, 2014 and 2013 (unaudited)	7
Notes to Consolidated Financial Statements (unaudited)	8
Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations	46
Item 3 — Quantitative and Qualitative Disclosures About Market Risk	84
Item 4 — Controls and Procedures	84
PART II. Other Information
Item 1 — Legal Proceedings	84
Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds	85
Item 5 — Other Information	85
Item 6 — Exhibits	85

1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of

Arch Capital Group Ltd.:

We have reviewed the accompanying condensed consolidated balance sheet of Arch Capital Group Ltd. and its subsidiaries (the “Company”) as of September 30, 2014, and the related condensed consolidated statements of income and comprehensive income for the three-month and nine-month periods ended September 30, 2014 and September 30,2013, and the condensed consolidated statements of changes in shareholders’ equity and cash flows for the nine-month periods ended September 30, 2014 and September 30,2013. These interim financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States).  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 Public Company Accounting Oversight Board (United States), 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.

Based on our review, we are not aware of any material modifications that should be made to the accompanying condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, 2013, 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 March 3, 2014, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet information as of December 31, 2013, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived.

/s/ PricewaterhouseCoopers LLP

New York, New York

November 7, 2014

2

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (U.S. dollars in thousands, except share data)
	(Unaudited)
	September 30, 2014			December 31, 2013
Assets
Investments:
Fixed maturities available for sale, at fair value (amortized cost: $10,699,615 and $9,564,634)	$	10,733,382		$	9,571,776
Short-term investments available for sale, at fair value (amortized cost: $754,641 and $1,477,584)	748,659			1,478,367
Investment of funds received under securities lending, at fair value (amortized cost: $100,680 and $97,943)	104,252			100,584
Equity securities available for sale, at fair value (cost: $513,196 and $433,275)	582,075			496,824
Other investments available for sale, at fair value (cost: $398,719 and $488,687)	431,833			498,310
Investments accounted for using the fair value option	2,202,995			1,221,534
Investments accounted for using the equity method	307,252			244,339
Total investments	15,110,448			13,611,734
Cash	663,726			434,057
Accrued investment income	65,042			66,848
Investment in joint venture (cost: $100,000)	97,313			104,856
Fixed maturities and short-term investments pledged under securities lending, at fair value	107,547			105,081
Premiums receivable	1,027,204			753,924
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses	1,814,190			1,804,330
Contractholder receivables	1,286,799			1,064,246
Prepaid reinsurance premiums	404,661			328,343
Deferred acquisition costs, net	409,174			342,314
Receivable for securities sold	672,259			50,555
Goodwill and intangible assets	111,528			27,319
Other assets	840,794			872,487
Total assets	$	22,610,685		$	19,566,094
Liabilities
Reserve for losses and loss adjustment expenses	$	8,958,734		$	8,824,696
Unearned premiums	2,303,247			1,896,365
Reinsurance balances payable	244,379			196,167
Contractholder payables	1,286,799			1,064,246
Deposit accounting liabilities	349,850			421,297
Senior notes	800,000			800,000
Revolving credit agreement borrowings	100,000			100,000
Securities lending payable	110,736			107,999
Payable for securities purchased	740,953			51,318
Other liabilities	633,502			456,510
Total liabilities	15,528,200			13,918,598
Commitments and Contingencies
Redeemable noncontrolling interests (1)	219,419			—
Shareholders' Equity
Non-cumulative preferred shares	325,000			325,000
Common shares ($0.0033 par, shares issued: 171,380,760 and 169,560,591)	571			565
Additional paid-in capital	366,408			299,517
Retained earnings	6,644,892			6,042,154
Accumulated other comprehensive income, net of deferred income tax	102,186			74,964
Common shares held in treasury, at cost (shares: 40,680,141 and 35,885,707)	(1,358,011		)	(1,094,704		)
Total shareholders' equity available to Arch	6,081,046			5,647,496
Non-redeemable noncontrolling interests (1)	782,020			—
Total shareholders' equity	6,863,066			5,647,496
Total liabilities, noncontrolling interests and shareholders' equity	$	22,610,685		$	19,566,094

(1)     See Note 4.

See Notes to Consolidated Financial Statements

3

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (U.S. dollars in thousands, except share data)
	(Unaudited)						(Unaudited)
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2014			2013			2014			2013
Revenues
Net premiums written	$	959,539		$	839,135		$	2,996,457		$	2,602,446
Change in unearned premiums	(55,888		)	(44,135		)	(325,874		)	(295,860		)
Net premiums earned	903,651			795,000			2,670,583			2,306,586
Net investment income	80,105			66,083			220,089			200,124
Net realized gains (losses)	18,515			(6,022		)	92,356			64,970
Other-than-temporary impairment losses	(8,593		)	(901		)	(26,313		)	(3,873		)
Less investment impairments recognized in other comprehensive income, before taxes	—			173			—			175
Net impairment losses recognized in earnings	(8,593		)	(728		)	(26,313		)	(3,698		)
Other underwriting income	1,702			526			5,317			1,966
Equity in net income of investment funds accounted for using the equity method	4,966			5,665			17,459			30,429
Other income (loss)	(7,815		)	624			(5,069		)	2,702
Total revenues	992,531			861,148			2,974,422			2,603,079
Expenses
Losses and loss adjustment expenses	501,673			427,045			1,423,431			1,245,101
Acquisition expenses	163,547			147,313			482,047			406,582
Other operating expenses	149,480			118,070			451,629			365,661
Interest expense	4,152			5,937			32,890			17,687
Net foreign exchange (gains) losses	(56,031		)	40,562			(47,174		)	2,487
Total expenses	762,821			738,927			2,342,823			2,037,518
Income before income taxes	229,710			122,221			631,599			565,561
Income tax expense	(6,446		)	(7,396		)	(17,473		)	(17,320		)
Net income	$	223,264		$	114,825		$	614,126		$	548,241
Amounts attributable to noncontrolling interests (1)	5,411			—			5,065			—
Net income available to Arch	228,675			114,825			619,191			548,241
Preferred dividends	(5,484		)	(5,484		)	(16,453		)	(16,453		)
Net income available to Arch common shareholders	$	223,191		$	109,341		$	602,738		$	531,788
Net income per common share
Basic	$	1.69		$	0.83		$	4.56		$	4.05
Diluted	$	1.64		$	0.80		$	4.42		$	3.92
Weighted average common shares and common share equivalents outstanding
Basic	131,945,962			131,495,296			132,151,824			131,262,309
Diluted	135,876,605			136,034,413			136,354,172			135,680,829

(1)     See Note 4.

See Notes to Consolidated Financial Statements

4

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (U.S. dollars in thousands)
	(Unaudited)						(Unaudited)
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2014			2013			2014			2013
Comprehensive Income
Net income	$	223,264		$	114,825		$	614,126		$	548,241
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	(90,619		)	41,226			89,162			(208,865		)
Portion of other-than-temporary impairment losses recognized in other comprehensive income, net of deferred income tax	—			(173		)	—			(175		)
Reclassification of net realized (gains) losses, net of income taxes, included in net income	(17,483		)	20,701			(47,017		)	(31,916		)
Foreign currency translation adjustments	(23,595		)	29,523			(14,923		)	(4,106		)
Comprehensive income	91,567			206,102			641,348			303,179
Amounts attributable to noncontrolling interests (1)	5,411			—			5,065			—
Comprehensive income available to Arch	$	96,978		$	206,102		$	646,413		$	303,179

(1)     See Note 4.

See Notes to Consolidated Financial Statements

5

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (U.S. dollars in thousands)
	(Unaudited)
	Nine Months Ended
	September 30,
	2014			2013
Non-cumulative preferred shares
Balance at beginning and end of period	$	325,000		$	325,000
Common shares
Balance at beginning of year	565			561
Common shares issued, net	6			4
Balance at end of period	571			565
Additional paid-in capital
Balance at beginning of year	299,517			227,778
Common shares issued, net	6,401			5,583
Exercise of stock options	14,891			7,438
Amortization of share-based compensation	45,118			40,305
Other	481			2,345
Balance at end of period	366,408			283,449
Retained earnings
Balance at beginning of year	6,042,154			5,354,361
Net income	614,126			548,241
Amounts attributable to noncontrolling interests (1)	5,065			—
Preferred share dividends	(16,453		)	(16,453		)
Balance at end of period	6,644,892			5,886,149
Accumulated other comprehensive income
Balance at beginning of year	74,964			287,017
Unrealized appreciation in value of available-for-sale investments, net of deferred income tax:
Balance at beginning of year	80,692			289,956
Unrealized holding gains (losses) arising during period, net of reclassification adjustment	42,145			(240,781		)
Portion of other-than-temporary impairment losses recognized in other comprehensive income, net of deferred income tax	—			(175		)
Balance at end of period	122,837			49,000
Foreign currency translation adjustments:
Balance at beginning of year	(5,728		)	(2,939		)
Foreign currency translation adjustments	(14,923		)	(4,106		)
Balance at end of period	(20,651		)	(7,045		)
Balance at end of period	102,186			41,955
Common shares held in treasury, at cost
Balance at beginning of year	(1,094,704		)	(1,025,839		)
Shares repurchased for treasury	(263,307		)	(67,994		)
Balance at end of period	(1,358,011		)	(1,093,833		)
Total shareholders’ equity available to Arch	6,081,046			5,443,285
Non-redeemable noncontrolling interests (1)	782,020			—
Total shareholders’ equity	$	6,863,066		$	5,443,285

(1)     See Note 4.

See Notes to Consolidated Financial Statements

6

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (U.S. dollars in thousands)
	(Unaudited)
	Nine Months Ended
	September 30,
	2014			2013
Operating Activities
Net income	$	614,126		$	548,241
Adjustments to reconcile net income to net cash provided by operating activities:
Net realized gains	(113,033		)	(66,957		)
Net impairment losses recognized in earnings	26,313			3,698
Equity in net income or loss of investment funds accounted for using the equity method and other income or loss	3,784			35,634
Share-based compensation	45,118			40,305
Changes in:
Reserve for losses and loss adjustment expenses, net of unpaid losses and loss adjustment expenses recoverable	94,255			(24,305		)
Unearned premiums, net of prepaid reinsurance premiums	325,874			295,860
Premiums receivable	(279,766		)	(160,091		)
Deferred acquisition costs, net	(72,120		)	(73,793		)
Reinsurance balances payable	49,621			2,573
Other liabilities	117,889			(15,893		)
Other items	(12,402		)	41,776
Net Cash Provided By Operating Activities	799,659			627,048
Investing Activities
Purchases of:
Fixed maturity investments	(22,030,862		)	(12,436,587		)
Equity securities	(366,578		)	(438,255		)
Other investments	(1,596,691		)	(992,935		)
Proceeds from the sales of:
Fixed maturity investments	20,284,869			11,877,419
Equity securities	305,034			373,000
Other investments	1,030,901			813,596
Proceeds from redemptions and maturities of fixed maturity investments	636,729			595,503
Net sales (purchases) of short-term investments	678,388			(268,968		)
Change in investment of securities lending collateral	(2,737		)	2,508
Purchase of business, net of cash acquired (1)	(235,578		)	—
Purchases of furniture, equipment and other assets	(14,575		)	(10,953		)
Net Cash Used For Investing Activities	(1,311,100		)	(485,672		)
Financing Activities
Purchases of common shares under share repurchase program	(251,919		)	(57,796		)
Proceeds from common shares issued, net	3,248			(425		)
Change in securities lending collateral	2,737			(2,508		)
Third party investment in non-redeemable noncontrolling interests (2)	796,903			—
Third party investment in redeemable noncontrolling interests (2)	219,233			—
Dividends paid to redeemable noncontrolling interests (2)	(9,632		)	—
Other	6,559			5,679
Preferred dividends paid	(16,453		)	(16,453		)
Net Cash Provided By (Used For) Financing Activities	750,676			(71,503		)
Effects of exchange rate changes on foreign currency cash	(9,566		)	(4,773		)
Increase in cash	229,669			65,100
Cash beginning of year	434,057			371,041
Cash end of period	$	663,726		$	436,141

(1)     See Note 2.

(2)     See Note 4.

See Notes to Consolidated Financial Statements

7

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.General

Arch Capital Group Ltd. (“ACGL”) is a Bermuda public limited liability company which provides insurance and reinsurance on a worldwide basis through its subsidiaries (together with ACGL, the “Company”).

On January 30, 2014, the Company acquired CMG Mortgage Insurance Company and its affiliated mortgage insurance companies (together, “CMG Entities”) and the mortgage insurance platform and related assets from PMI Mortgage Insurance Co. (“PMI”) (see Note 2).

On March 20, 2014, the Company acquired approximately 11% of Watford Holdings Ltd.’s common equity and a warrant to purchase additional common equity for $100 million. Watford Holdings Ltd. is the parent of Watford Re Ltd., a newly-formed multi-line Bermuda reinsurance company (together with Watford Holdings Ltd., “Watford”). Watford is considered a variable interest entity (“VIE”) and the Company concluded that it is the primary beneficiary of Watford. As such, the results of Watford are included in the Company’s consolidated financial statements (see Note 4).

The interim consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and Watford. 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 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, 2013 (“2013 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. Tabular amounts are in U.S. Dollars in thousands, except share amounts, unless otherwise noted.

2.    Business Acquired

On January 30, 2014, the Company’s U.S.-based subsidiaries completed the acquisition of the CMG Entities through a stock purchase agreement (“SPA”) from its previous owners, PMI, which has been in rehabilitation under the receivership of the Arizona Department of Insurance since 2011, and CMFG Life Insurance Company (“CUNA Mutual”). In addition, the Company entered into a distribution agreement with CUNA Mutual and a reinsurance agreement with an affiliate of CUNA Mutual. CMG Mortgage Insurance Company has been renamed “Arch Mortgage Insurance Company” (“Arch MI U.S.”). As part of the transaction, Arch MI U.S. obtained approval as an eligible mortgage insurer from Federal National Mortgage Association and Federal Home Loan Mortgage Corporation (each a government sponsored enterprise or “GSE”), subject to maintaining certain ongoing requirements.

In addition, through an asset purchase agreement (“APA”) with PMI, the Company acquired the mortgage insurance operating platform of PMI, 100% of the capital stock of PMI Mortgage Assurance Co., a mortgage insurance company licensed in all 50 states (renamed Arch Mortgage Guaranty Company), and entered into a quota share reinsurance agreement pursuant to which Arch Reinsurance Ltd. agreed to provide 100% quota share indemnity reinsurance to PMI for all certificates of insurance that were issued by PMI between and including January 1, 2009 and December 31, 2011 that were not in default as of an agreed upon effective date. Other than this quota share, no PMI legacy exposures were assumed in the transaction. As part of the transaction, the Company entered into a services agreement with PMI to provide certain necessary operational services to administer the run-off of PMI’s legacy business at the direction of PMI. Arch MI U.S. also entered into a quota share

8

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

reinsurance agreement whereby it will cede 20% of all new primary flow mortgage insurance business post-closing (both credit union and non-credit union business) on the first $25 billion in original loan amounts to PMI, on a funds-withheld basis.

The completion of the SPA and APA transactions enabled the Company to enter the U.S. mortgage insurance marketplace and serve all lenders nationwide. The arrangements with CUNA Mutual also provided a seamless transition and enabled the Company to provide uninterrupted access and services to the credit union marketplace.

At closing, the Company paid aggregate consideration of $160.6 million (80% of the actual closing date book value of the CMG Entities) under the SPA and $84.6 million under the APA. Additionally, the SPA contains provisions for contingent consideration payments, subject to an overall maximum payment of 150% of closing book value of the pre-closing portfolio of the CMG Entities as re-calculated over an earn-out period and payable at the third, fifth and sixth anniversaries after closing (subject to a one time extension period of one to three years at the sellers’ discretion). The maximum amount of contingent consideration payments is $136.9 million. To the extent that the adjusted book value of the CMG Entities drops below the cumulative amount paid by the Company, no additional payments would be due. To determine the fair value of the contingent consideration liability, the Company estimated future payments using a weighted average cost of capital approach at a rate of return of 15% which reflects the industry-weighted average rate of return on debt and equity as required by market participants. The fair value of the contingent consideration liability was $41.8 million at closing. The contingent consideration liability, which is included in ‘other liabilities’ in the consolidated balance sheets, is remeasured at fair value at each balance sheet date ($58.7 million at September 30, 2014) until the contingency is resolved with changes in fair value recognized in ‘net realized gains (losses).’

The following table summarizes the fair value of net assets acquired and allocation of purchase price, measured as of the acquisition date:

	Total		Useful Life
Purchase price
Cash paid	$	245,157
Contingent consideration liability	41,762
Total purchase price (a)	$	286,919
Assets acquired
Cash	$	9,579
Investments, at fair value	312,093
Intangible asset -- acquired insurance contracts	46,473		5 years
Intangible asset -- operating platform	29,900		5 years
Intangible asset -- favorable lease contract	1,056		5 years
Intangible asset -- insurance licenses	16,858		Indefinite
Other assets acquired	21,691
Total assets acquired	437,650
Liabilities acquired
Reserves for losses and loss adjustment expenses	$	121,572
Unearned premiums	26,261
Intangible liability -- unfavorable service contract	9,533		9 years
Other liabilities acquired	7,217
Total liabilities acquired	164,583
Net assets acquired (b)	$	273,067
Goodwill (a)-(b)	$	13,852

From the acquisition date to September 30, 2014, the Company recorded amortization expense of $15.0 million related to net intangible assets acquired. The Company recognized goodwill of $13.9 million that is primarily attributed to PMI’s assembled workforce, access to the mortgage insurance market and additional synergies to be realized in the future. Under U.S. tax principles, which differentiate between taxable and non-taxable business combinations, the Company estimates that $48.0 million of goodwill is expected to be deductible for tax purposes.

The Company includes the operations of Arch MI U.S. in its mortgage segment (see Note 6).

9

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

3.    Significant Accounting Policies

As discussed in Note 2, the Company completed its acquisition of the CMG Entities on January 30, 2014. As such, the Company has added relevant sections pertaining to mortgage insurance to its significant accounting policies as described in Note 2, “Significant Accounting Policies,” of its audited consolidated financial statements and related notes of the 2013 Form 10-K.

(b) Premium Revenues and Related Expenses

Insurance.Insurance premiums written are generally recorded at the policy inception and are primarily earned on a pro rata basis over the terms of the policies for all products, usually 12 months. Premiums written include estimates in the Company’s programs, specialty lines, lenders products business and for participation in involuntary pools. Such premium estimates are derived from multiple sources which include the historical experience of the underlying business, similar business and available industry information. Unearned premium reserves represent the portion of premiums written that relates to the unexpired terms of in-force insurance policies.

Reinsurance. Reinsurance premiums written include amounts reported by brokers and ceding companies, supplemented by the Company’s own estimates of premiums where reports have not been received. The determination of premium estimates requires a review of the Company’s experience with the ceding companies, familiarity with each market, the timing of the reported information, an analysis and understanding of the characteristics of each line of business, and management’s judgment of the impact of various factors, including premium or loss trends, on the volume of business written and ceded to the Company. On an ongoing basis, the Company’s underwriters review the amounts reported by these third parties for reasonableness based on their experience and knowledge of the subject class of business, taking into account the Company’s historical experience with the brokers or ceding companies. In addition, reinsurance contracts under which the Company assumes business generally contain specific provisions which allow the Company to perform audits of the ceding company to ensure compliance with the terms and conditions of the contract, including accurate and timely reporting of information. Based on a review of all available information, management establishes premium estimates where reports have not been received. Premium estimates are updated when new information is received and differences between such estimates and actual amounts are recorded in the period in which estimates are changed or the actual amounts are determined.

Reinsurance premiums written are recorded based on the type of contracts the Company writes. Premiums on the Company’s excess of loss and pro rata reinsurance contracts are estimated when the business is underwritten. For excess of loss contracts, premiums are recorded as written based on the terms of the contract. Estimates of premiums written under pro rata contracts are recorded in the period in which the underlying risks are expected to incept and are based on information provided by the brokers and the ceding companies. For multi-year reinsurance treaties which are payable in annual installments, generally, only the initial annual installment is included as premiums written at policy inception due to the ability of the reinsured to commute or cancel coverage during the term of the policy. The remaining annual installments are included as premiums written at each successive anniversary date within the multi-year term.

Reinstatement premiums for the Company’s insurance and reinsurance operations are recognized at the time a loss event occurs, where coverage limits for the remaining life of the contract are reinstated under pre-defined contract terms. Reinstatement premiums, if obligatory, are fully earned when recognized. The accrual of reinstatement premiums is based on an estimate of losses and loss adjustment expenses, which reflects management’s judgment. Premium estimates are reviewed by management at least quarterly. Such review includes a comparison of actual reported premiums to expected ultimate premiums along with a review of the aging and collection of premium estimates. Based on management’s review, the appropriateness of the premium estimates is evaluated, and any adjustment to these estimates is recorded in the period in which it becomes known. Adjustments to premium estimates could be material and such adjustments could directly and significantly impact earnings favorably or unfavorably in the period they are determined because the estimated premium may be fully or substantially earned. A significant portion of amounts included as premiums receivable, which represent estimated premiums written, net of commissions, are not currently due based on the terms of the underlying contracts.

Reinsurance premiums written, irrespective of the class of business, are generally earned on a pro rata basis over the terms of the underlying policies or reinsurance contracts. Contracts and policies written on a “losses occurring” basis cover claims that may occur during the term of the contract or policy, which is typically 12 months. Accordingly, the premium is earned evenly over the term. Contracts which are written on a “risks attaching” basis cover claims which attach to the underlying insurance policies written during the terms of such contracts. Premiums earned on such contracts usually extend beyond the original term of the reinsurance contract, typically resulting in recognition of premiums earned over a 24-month period. Certain

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of the Company’s reinsurance contracts include provisions that adjust premiums or acquisition expenses based upon the experience under the contracts. Premiums written and earned, as well as related acquisition expenses, are recorded based upon the projected experience under such contracts.

The Company also writes certain reinsurance business that is intended to provide insurers with risk management solutions that complement traditional reinsurance. Under these contracts, the Company assumes a measured amount of insurance risk in exchange for an anticipated margin, which is typically lower than on traditional reinsurance contracts. The terms and conditions of these contracts may include additional or return premiums based on loss experience, loss corridors, sublimits and caps. Examples of such business include aggregate stop-loss coverages, financial quota share coverages and multi- year retrospectively rated excess of loss coverages. If these contracts are deemed to transfer risk, they are accounted for as reinsurance.

Mortgage. Mortgage guaranty insurance policies are contracts that are generally non-cancelable by the insurer, are renewable at a fixed price, and provide for payment of premiums on a monthly, annual or single basis. Upon renewal, the Company is not able to re-underwrite or re-price its policies. Consistent with industry accounting practices, premiums written on a monthly basis are earned as coverage is provided. Premiums written on an annual basis are amortized on a monthly pro rata basis over the year of coverage. Primary mortgage insurance premiums written on policies covering more than one year are referred to as single premiums. A portion of the revenue from single premiums is recognized in premiums earned in the current period, and the remaining portion is deferred as unearned premiums and earned over the estimated expiration of risk of the policy. If single premium policies related to insured loans are canceled due to repayment by the borrower and the policy is a non-refundable product, the remaining unearned premium related to each canceled policy is recognized as earned premium upon notification of the cancellation.

Unearned premiums represent the portion of premiums written that is applicable to the estimated unexpired risk of insured loans. A portion of premium payments may be refundable if the insured cancels coverage, which generally occurs when the loan is repaid, the loan amortizes to a sufficiently low amount to trigger a lender permitted or legally required cancellation, or the value of the property has increased sufficiently in accordance with the terms of the contract. Premium refunds reduce premiums earned in the consolidated statements of operations.

Acquisition Costs.Acquisition expenses and other expenses related to the Company’s underwriting operations that vary with, and are directly related to, the successful acquisition or renewal of business are deferred and amortized based on the type of contract. For property and casualty insurance and reinsurance contracts, deferred acquisition costs are amortized over the period in which the related premiums are earned. Consistent with mortgage insurance industry accounting practice, amortization of acquisition costs related to the mortgage insurance contracts for each underwriting year’s book of business is charged against revenue in proportion to estimated gross profits. Estimated gross profits are comprised of earned premiums and losses and loss adjustment expenses. For each underwriting year, the Company estimates the rate of amortization to reflect actual experience and any changes to persistency or loss development.

Acquisition expenses, net of ceding commissions received from reinsurers, consist principally of commissions and premium taxes paid to obtain the Company’s business. Other operating expenses also include expenses that vary with, and are directly related to, the acquisition of business. Deferred acquisition costs are carried at their estimated realizable value and take into account anticipated losses and loss adjustment expenses, based on historical and current experience, and anticipated investment income. A premium deficiency occurs if the sum of anticipated losses and loss adjustment expenses, unamortized acquisition costs and maintenance costs exceed unearned premiums (including expected future premiums) and anticipated investment income. A premium deficiency is recorded by charging any unamortized acquisition costs to expense to the extent required in order to eliminate the deficiency. If the premium deficiency exceeds unamortized acquisition costs then a liability is accrued for the excess deficiency.

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(i) Reserves for Losses and Loss Adjustment Expenses

Insurance and Reinsurance. The reserve for losses and loss adjustment expenses consists of estimates of unpaid reported losses and loss adjustment expenses and estimates for losses incurred but not reported. The reserve for unpaid reported losses and loss adjustment expenses, established by management based on reports from ceding companies and claims from insureds, excludes estimates of amounts due from insureds related to losses under high deductible policies, and represents the estimated ultimate cost of events or conditions that have been reported to or specifically identified by the Company. Such reserves are supplemented by management’s estimates of reserves for losses incurred for which reports or claims have not been received. The Company’s reserves are based on a combination of reserving methods, incorporating both Company and industry loss development patterns. The Company selects the initial expected loss and loss adjustment expense ratios based on information derived by its underwriters and actuaries during the initial pricing of the business, supplemented by industry data where appropriate. Such ratios consider, among other things, rate changes and changes in terms and conditions that have been observed in the market. These estimates are reviewed regularly and, as experience develops and new information becomes known, the reserves are adjusted as necessary. Such adjustments, if any, are reflected in income in the period in which they are determined. As actual loss information has been reported, the Company has developed its own loss experience and its reserving methods include other actuarial techniques. Over time, such techniques have been given further weight in its reserving process based on the continuing maturation of the Company’s reserves. Inherent in the estimates of ultimate losses and loss adjustment expenses are expected trends in claims severity and frequency and other factors which may vary significantly as claims are settled. Accordingly, ultimate losses and loss adjustment expenses may differ materially from the amounts recorded in the accompanying consolidated financial statements. Losses and loss adjustment expenses are recorded on an undiscounted basis, except for excess workers’ compensation and employers’ liability business written by the Company’s insurance operations.

Mortgage. The reserves for mortgage guaranty insurance losses and loss adjustment expenses are the estimated claim settlement costs on notices of default that have been received by the Company, as well as loan defaults that have been incurred but have not been reported by the lenders. Consistent with industry accounting practice, the Company does not establish loss reserves for future claims on insured loans that are not currently in default (defined as two consecutive missed payments). The Company establishes loss reserves on a case-by-case basis when insured loans are identified as currently in default using estimated claim rates and average claim sizes for each report year, net of any salvage recoverable. The Company also reserves for defaults that have occurred but have not yet been reported to the Company prior to the close of an accounting period. To determine this reserve, the Company estimates the number of defaults not yet reported using historical information regarding late reported delinquencies and applies estimated claim rates and claim sizes for the estimated defaults not yet reported.

The establishment of reserves across the Company’s segments is an inherently uncertain process, are necessarily based on estimates, and the ultimate net cost may vary from such estimates. The methods for making such estimates and for establishing the resulting liability are reviewed and updated using the most current information available. Any resulting adjustments, which may be material, are reflected in current operations

(p) Recent Accounting Pronouncements

A new accounting standard issued in the 2014 second quarter will change the manner in which most companies recognize revenue. The standard requires that revenue reflect the transfer of goods or services to customers based on the consideration or payment the company expects to be entitled to in exchange for those goods or services; however, the standard does not change the accounting for insurance contracts or financial instruments. The new standard also requires enhanced disclosures about revenue. This accounting guidance is effective in the 2017 first quarter and may be applied on a full retrospective or modified retrospective approach. The Company is currently assessing the impact the implementation of this standard will have on its consolidated financial statements.

(q) Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price of an acquisition over the fair value of the net assets acquired and is assigned to the applicable reporting unit at acquisition. Goodwill is not amortized and is evaluated for impairment on an annual basis. Impairment tests may be performed more frequently if the facts and circumstances indicate a possible impairment. In performing impairment tests, the Company may first assess qualitative factors to determine whether it is more likely than not (that is, more than a 50% probability) that the fair value of a reporting unit exceeds its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in the accounting guidance.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Indefinite-lived intangible assets, such as insurance licenses, are not amortized and are evaluated for impairment similar to goodwill. Finite-lived intangible assets and liabilities include the value of insurance and reinsurance contracts, which are estimated based on the present value of future expected cash flows and amortized in ‘acquisition expenses’ in proportion to the estimated profits expected to be realized. Other finite-lived intangible assets or liabilities, including favorable or unfavorable contracts, are amortized in ‘other operating expenses’ over their useful lives. Finite-lived intangible assets and liabilities are periodically reviewed for indicators of impairment. An impairment is recognized when the carrying amount is not recoverable from its undiscounted cash flows and is measured as the difference between the carrying amount and fair value.

If goodwill or intangible assets are impaired, such assets are written down to their realizable values with the related expense recorded in the Company’s results of operations.

4.Variable Interest Entity and Noncontrolling Interests

Variable interest entity

A VIE refers to an entity that has characteristics such as (i) insufficient equity at risk to allow the entity to finance its activities without additional financial support or (ii) instances where the equity investors, as a group, do not have characteristics of a controlling financial interest. The primary beneficiary of a VIE is defined as the variable interest holder that is determined to have the controlling financial interest as a result of having both (i) the power to direct the activities of a VIE that most significantly impact the economic performance of the VIE and (ii) the obligation to absorb losses or right to receive benefits from the VIE that could potentially be significant to the VIE. If a company is determined to be the primary beneficiary, it is required to consolidate the VIE in its financial statements.

In March 2014, Watford raised approximately $1.1 billion of capital consisting of $907.3 million in common equity ($895.6 million net of issuance costs) and $226.6 million in preference equity ($219.2 million net of issuance costs and discount). The Company invested $100.0 million and acquired approximately 11% of Watford Holdings Ltd.’s common equity and a warrant to purchase additional common equity. Arch Underwriters Ltd. (“AUL”), a subsidiary of the Company, acts as Watford’s reinsurance manager, and Highbridge Principal Strategies, LLC (“Highbridge”), a subsidiary of JPMorgan Chase & Co., manages Watford’s investment assets, each under separate long term services agreements. John Rathgeber, previously Vice Chairman of Arch Worldwide Reinsurance Group, was named CEO of Watford. In addition, Marc Grandisson, Chairman and CEO of Arch Worldwide Reinsurance and Mortgage Groups, and Nicolas Papadopoulo, CEO Reinsurance Group, were appointed to the board of directors of Watford.

The Company concluded that Watford is a VIE due to both the reinsurance management services agreement with AUL and the investment management agreement with Highbridge. Both of these agreements provide for services for an extended period of time with limited termination rights by Watford. In addition, these agreements allow for both AUL and Highbridge to participate in the favorable results of Watford in the form of performance fees. To determine if the Company is the primary beneficiary of Watford, the Company concluded that the most significant activity of Watford pertains to the insurance activities arising from the reinsurance management services agreement, as these activities will ultimately generate the investable assets required by Highbridge to execute the investment strategy. In addition, the Company factored into its analysis qualitative aspects of the relationship with Watford that are indicative of power to direct the insurance activities. These aspects coupled with the Company’s board seats and a former executive of the Company serving as Watford’s CEO resulted in the Company concluding that it is the primary beneficiary of Watford. As such, the results of Watford are included in the Company’s consolidated financial statements.

The Company concluded that Watford represents a separate operating segment and provides the income statement and total investable assets, total assets and total liabilities of Watford within Note 6. Because Watford is an independent company, the assets of Watford can be used only to settle obligations of Watford and Watford is solely responsible for its own liabilities and commitments. The Company’s financial exposure to Watford is limited to its investment in Watford’s common shares and counterparty credit risk (mitigated by collateral) arising from the reinsurance transactions.

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Non-redeemable noncontrolling interests

The Company accounts for the portion of Watford’s common equity attributable to third party investors in the shareholders’ equity section of its consolidated balance sheets. The noncontrolling ownership in Watford’s common shares was approximately 89% at September 30, 2014. The portion of Watford’s income or loss attributable to third party investors is recorded in the consolidated statements of income in ‘amounts attributable to noncontrolling interests.’ The following table sets forth activity in the non-redeemable noncontrolling interests:

	Three Months Ended September 30, 2014			Nine Months Ended September 30, 2014
Balance, beginning of period	$	792,340		$	—
Sale of shares to noncontrolling interests	—			796,903
Amounts attributable to noncontrolling interests	(10,320		)	(14,883		)
Balance, end of period	$	782,020		$	782,020

Redeemable noncontrolling interests

The Company accounts for redeemable noncontrolling interests in the mezzanine section of its consolidated balance sheets in accordance with applicable accounting guidance. Such redeemable noncontrolling interests represent the 9,065,200 cumulative redeemable preference shares (“Watford Preference Shares”) issued in late March 2014 with a par value of $0.01 per share and a liquidation preference of $25.00 per share. The Watford Preference Shares were issued at a discounted amount of $24.50 per share. Holders of the Watford Preference Shares will be entitled to receive, if declared by Watford’s board, quarterly cash dividends on the last day of March, June, September, and December. Dividends will accrue from the closing date to June 30, 2019 at a fixed rate of 8.5% per annum. From June 30, 2019 and subsequent, dividends will accrue based on a floating rate equal to the 3 month U.S. dollar LIBOR (with a 1% floor) plus a margin based on the difference between the fixed rate and the 5 year mid swap rate to the floating rate as set out on the IRSB18. The Watford Preference Shares may be redeemed by Watford on or after June 30, 2019 or at the option of the preferred shareholders at any time on or after June 30, 2034. Because the redemption features are not solely within the control of Watford, the Company accounts for the redeemable noncontrolling interests in the Watford Preference Shares in the mezzanine section of its consolidated balance sheets. Third party investors own 100% of the Watford Preference Shares at September 30, 2014. Preferred dividends, including the accretion of the discount and issuance costs, are included in ‘amounts attributable to noncontrolling interests’ in the Company’s consolidated statements of income.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

5.    Earnings Per Common Share

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

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2014			2013			2014			2013
Numerator:
Net income	$	223,264		$	114,825		$	614,126		$	548,241
Amounts attributable to noncontrolling interests	5,411			—			5,065			—
Net income available to Arch	228,675			114,825			619,191			548,241
Preferred dividends	(5,484		)	(5,484		)	(16,453		)	(16,453		)
Net income available to Arch common shareholders	$	223,191		$	109,341		$	602,738		$	531,788
Denominator:
Weighted average common shares outstanding — basic	131,945,962			131,495,296			132,151,824			131,262,309
Effect of dilutive common share equivalents:
Nonvested restricted shares	1,156,790			1,124,644			1,134,481			1,094,327
Stock options (1)	2,773,853			3,414,473			3,067,867			3,324,193
Weighted average common shares and common share equivalents outstanding — diluted	135,876,605			136,034,413			136,354,172			135,680,829
Earnings per common share:
Basic	$	1.69		$	0.83		$	4.56		$	4.05
Diluted	$	1.64		$	0.80		$	4.42		$	3.92

_________________________________________________

(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 2014 third quarter and 2013 third quarter, the number of stock options excluded were 1,355,087 and 387,249, respectively. For the nine months ended September 30, 2014 and 2013, the number of stock options excluded were 1,378,249 and 1,735,995, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

6.    Segment Information

During the 2014 first quarter, to reflect activity during the period as described below, the Company changed its segment structure and added two new segments (mortgage and ‘other’). The Company now classifies its businesses into three underwriting segments — insurance, reinsurance and mortgage — and two other operating segments — ‘other’ and corporate (non-underwriting). 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 Company’s insurance, reinsurance and mortgage segments each have managers who are responsible for the overall profitability of their respective segments and who are directly accountable to the Company’s chief operating decision makers, the Chairman, President and Chief Executive Officer of ACGL and the Chief Financial Officer of ACGL. The chief operating decision makers do not assess performance, measure return on equity or make resource allocation decisions on a line of business basis. Management measures segment performance for its three 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 corporate (non-underwriting) segment results include net investment income, other income (loss), other expenses incurred by the Company, interest expense, net realized gains or losses, net impairment losses included in earnings, equity in net income (loss) of investment funds accounted for using the equity method, net foreign exchange gains or losses, income taxes and items related to the Company’s non-cumulative preferred shares. Such amounts exclude the results of the ‘other’ segment.

The ‘other’ segment includes the results of Watford (see Note 4). Watford has its own management and board of directors that is responsible for the overall profitability of the ‘other’ segment. For the ‘other’ segment, performance is measured based on net income or loss.

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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 common shareholders:

	Three Months Ended
	September 30, 2014
	Insurance			Reinsurance			Mortgage			Sub-Total			Other			Total
Gross premiums written (1)	$	726,683		$	345,747		$	66,389		$	1,138,392		$	103,483		$	1,159,907
Premiums ceded	(187,689		)	(83,502		)	(7,904		)	(278,668		)	(3,668		)	(200,368		)
Net premiums written	538,994			262,245			58,485			859,724			99,815			959,539
Change in unearned premiums	(19,607		)	34,303			(5,539		)	9,157			(65,045		)	(55,888		)
Net premiums earned	519,387			296,548			52,946			868,881			34,770			903,651
Other underwriting income	499			215			988			1,702			—			1,702
Losses and loss adjustment expenses	(338,319		)	(123,784		)	(15,987		)	(478,090		)	(23,583		)	(501,673		)
Acquisition expenses, net	(81,775		)	(60,205		)	(11,958		)	(153,938		)	(9,609		)	(163,547		)
Other operating expenses	(83,138		)	(36,337		)	(17,913		)	(137,388		)	(1,658		)	(139,046		)
Underwriting income (loss)	$	16,654		$	76,437		$	8,076		101,167			(80		)	101,087
Net investment income										72,239			7,866			80,105
Net realized gains (losses)										31,411			(12,896		)	18,515
Net impairment losses recognized in earnings										(8,593		)	—			(8,593		)
Equity in net income of investment funds accounted for using the equity method										4,966			—			4,966
Other income (loss)										(7,815		)	—			(7,815		)
Other expenses										(10,434		)	—			(10,434		)
Interest expense										(4,152		)	—			(4,152		)
Net foreign exchange gains (losses)										57,611			(1,580		)	56,031
Income before income taxes										236,400			(6,690		)	229,710
Income tax expense										(6,446		)	—			(6,446		)
Net income										229,954			(6,690		)	223,264
Dividends attributable to redeemable noncontrolling interests										—			(4,909		)	(4,909		)
Amounts attributable to noncontrolling interests										—			10,320			10,320
Net income available to Arch										229,954			(1,279		)	228,675
Preferred dividends										(5,484		)	—			(5,484		)
Net income available to Arch common shareholders										$	224,470		$	(1,279	)	$	223,191
Underwriting Ratios
Loss ratio	65.1		%	41.7		%	30.2		%	55.0		%	67.8		%	55.5		%
Acquisition expense ratio	15.7		%	20.3		%	22.6		%	17.7		%	27.6		%	18.1		%
Other operating expense ratio	16.0		%	12.3		%	33.8		%	15.8		%	4.8		%	15.4		%
Combined ratio	96.8		%	74.3		%	86.6		%	88.5		%	100.2		%	89.0		%
Goodwill and intangible assets	$	24,024		$	3,939		$	83,565		$	111,528		$	—		$	111,528
Total investable assets										$	14,584,727		$	1,124,048		$	15,708,775
Total assets										21,207,667			1,403,018			22,610,685
Total liabilities										15,223,488			304,712			15,528,200

_________________________________________________

(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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

	Three Months Ended
	September 30, 2013
	Insurance			Reinsurance			Mortgage			Sub-Total			Other			Total
Gross premiums written (1)	$	682,839		$	330,458		$	24,633		$	1,036,987		$	—		$	1,036,987
Premiums ceded	(180,868		)	(17,927		)	—			(197,852		)	—			(197,852		)
Net premiums written	501,971			312,531			24,633			839,135			—			839,135
Change in unearned premiums	(22,842		)	(9,433		)	(11,860		)	(44,135		)	—			(44,135		)
Net premiums earned	479,129			303,098			12,773			795,000			—			795,000
Other underwriting income	545			(19		)	—			526			—			526
Losses and loss adjustment expenses	(305,921		)	(119,107		)	(2,017		)	(427,045		)	—			(427,045		)
Acquisition expenses, net	(82,799		)	(61,063		)	(3,451		)	(147,313		)	—			(147,313		)
Other operating expenses	(75,734		)	(32,108		)	(2,334		)	(110,176		)	—			(110,176		)
Underwriting income	$	15,220		$	90,801		$	4,971		110,992			—			110,992
Net investment income										66,083			—			66,083
Net realized losses										(6,022		)	—			(6,022		)
Net impairment losses recognized in earnings										(728		)	—			(728		)
Equity in net income of investment funds accounted for using the equity method										5,665			—			5,665
Other income (loss)										624			—			624
Other expenses										(7,894		)	—			(7,894		)
Interest expense										(5,937		)	—			(5,937		)
Net foreign exchange losses										(40,562		)	—			(40,562		)
Income before income taxes										122,221			—			122,221
Income tax expense										(7,396		)	—			(7,396		)
Net income										114,825			—			114,825
Dividends attributable to redeemable noncontrolling interests										—			—			—
Amounts attributable to noncontrolling interests										—			—			—
Net income available to Arch										114,825			—			114,825
Preferred dividends										(5,484		)	—			(5,484		)
Net income available to Arch common shareholders										$	109,341		$	—		$	109,341
Underwriting Ratios
Loss ratio	63.8		%	39.3		%	15.8		%	53.7		%	—		%	53.7		%
Acquisition expense ratio	17.3		%	20.1		%	27.0		%	18.5		%	—		%	18.5		%
Other operating expense ratio	15.8		%	10.6		%	18.3		%	13.9		%	—		%	13.9		%
Combined ratio	96.9		%	70.0		%	61.1		%	86.1		%	—		%	86.1		%
Goodwill and intangible assets	$	20,653		$	8,307		$	—		$	28,960		$	—		$	28,960
Total investable assets										$	13,282,560		$	—		$	13,282,560
Total assets										18,930,823			—			18,930,823
Total liabilities										13,487,538			—			13,487,538

_________________________________________________

(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.

18

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

	Nine Months Ended
	September 30, 2014
	Insurance			Reinsurance			Mortgage			Sub-Total			Other			Total
Gross premiums written (1)	$	2,309,560		$	1,212,641		$	169,772		$	3,690,462		$	190,239		$	3,726,804
Premiums ceded	(646,082		)	(215,623		)	(17,622		)	(877,816		)	(6,428		)	(730,347		)
Net premiums written	1,663,478			997,018			152,150			2,812,646			183,811			2,996,457
Change in unearned premiums	(158,878		)	(23,495		)	(9,606		)	(191,979		)	(133,895		)	(325,874		)
Net premiums earned	1,504,600			973,523			142,544			2,620,667			49,916			2,670,583
Other underwriting income	1,513			834			2,970			5,317			—			5,317
Losses and loss adjustment expenses	(936,615		)	(413,745		)	(39,938		)	(1,390,298		)	(33,133		)	(1,423,431		)
Acquisition expenses, net	(235,156		)	(199,673		)	(32,593		)	(467,422		)	(14,625		)	(482,047		)
Other operating expenses	(250,111		)	(110,198		)	(48,077		)	(408,386		)	(4,402		)	(412,788		)
Underwriting income (loss)	$	84,231		$	250,741		$	24,906		359,878			(2,244		)	357,634
Net investment income										211,690			8,399			220,089
Net realized gains (losses)										102,074			(9,718		)	92,356
Net impairment losses recognized in earnings										(26,313		)	—			(26,313		)
Equity in net income of investment funds accounted for using the equity method										17,459			—			17,459
Other income (loss)										(5,069		)	—			(5,069		)
Other expenses										(36,512		)	(2,329		)	(38,841		)
Interest expense										(32,890		)	—			(32,890		)
Net foreign exchange gains (losses)										48,191			(1,017		)	47,174
Income before income taxes										638,508			(6,909		)	631,599
Income tax expense										(17,473		)	—			(17,473		)
Net income (loss)										621,035			(6,909		)	614,126
Dividends attributable to redeemable noncontrolling interests										—			(9,818		)	(9,818		)
Amounts attributable to noncontrolling interests										—			14,883			14,883
Net income available to Arch										621,035			(1,844		)	619,191
Preferred dividends										(16,453		)	—			(16,453		)
Net income available to Arch common shareholders										$	604,582		$	(1,844	)	$	602,738
Underwriting Ratios
Loss ratio	62.3		%	42.5		%	28.0		%	53.1		%	66.4		%	53.3		%
Acquisition expense ratio	15.6		%	20.5		%	22.9		%	17.8		%	29.3		%	18.1		%
Other operating expense ratio	16.6		%	11.3		%	33.7		%	15.6		%	8.8		%	15.5		%
Combined ratio	94.5		%	74.3		%	84.6		%	86.5		%	104.5		%	86.9		%

_________________________________________________

(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.

19

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

	Nine Months Ended
	September 30, 2013
	Insurance			Reinsurance			Mortgage			Sub-Total			Other			Total
Gross premiums written (1)	$	2,075,560		$	1,099,803		$	69,135		$	3,241,424		$	—		$	3,241,424
Premiums ceded	(567,471		)	(74,581		)	—			(638,978		)	—			(638,978		)
Net premiums written	1,508,089			1,025,222			69,135			2,602,446			—			2,602,446
Change in unearned premiums	(125,339		)	(138,479		)	(32,042		)	(295,860		)	—			(295,860		)
Net premiums earned	1,382,750			886,743			37,093			2,306,586			—			2,306,586
Other underwriting income	1,599			367			—			1,966			—			1,966
Losses and loss adjustment expenses	(880,580		)	(358,247		)	(6,274		)	(1,245,101		)	—			(1,245,101		)
Acquisition expenses, net	(227,806		)	(167,497		)	(11,279		)	(406,582		)	—			(406,582		)
Other operating expenses	(232,216		)	(96,207		)	(5,027		)	(333,450		)	—			(333,450		)
Underwriting income	$	43,747		$	265,159		$	14,513		323,419			—			323,419
Net investment income										200,124			—			200,124
Net realized gains										64,970			—			64,970
Net impairment losses recognized in earnings										(3,698		)	—			(3,698		)
Equity in net income of investment funds accounted for using the equity method										30,429			—			30,429
Other income (loss)										2,702			—			2,702
Other expenses										(32,211		)	—			(32,211		)
Interest expense										(17,687		)	—			(17,687		)
Net foreign exchange losses										(2,487		)	—			(2,487		)
Income before income taxes										565,561			—			565,561
Income tax expense										(17,320		)	—			(17,320		)
Net income										548,241			—			548,241
Dividends attributable to redeemable noncontrolling interests										—			—			—
Amounts attributable to noncontrolling interests										—			—			—
Net income available to Arch										548,241			—			548,241
Preferred dividends										(16,453		)	—			(16,453		)
Net income available to Arch common shareholders										$	531,788		$	—		$	531,788
Underwriting Ratios
Loss ratio	63.7		%	40.4		%	16.9		%	54.0		%	—		%	54.0		%
Acquisition expense ratio	16.5		%	18.9		%	30.4		%	17.6		%	—		%	17.6		%
Other operating expense ratio	16.8		%	10.8		%	13.6		%	14.5		%	—		%	14.5		%
Combined ratio	97.0		%	70.1		%	60.9		%	86.1		%	—		%	86.1		%

_________________________________________________

(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.

20

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

7.    Investment Information

At September 30, 2014, total investable assets of $15.71 billion included $14.58 billion managed by the Company and $1.12 billion attributable to Watford.

Available For Sale Investments

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

	Fair Value		Gross Unrealized Gains		Gross Unrealized Losses			Cost or Amortized Cost		OTTI Unrealized Losses (2)
September 30, 2014
Fixed maturities and fixed maturities pledged under securities lending agreements (1):
Corporate bonds	$	3,070,353	$	29,747	$	(30,089	)	$	3,070,695	$	—
Mortgage backed securities	966,848		18,567		(8,349		)	956,630		(3,600		)
Municipal bonds	1,293,455		31,860		(971		)	1,262,566		—
Commercial mortgage backed securities	1,232,092		9,355		(5,976		)	1,228,713		—
U.S. government and government agencies	1,551,583		6,433		(2,533		)	1,547,683		—
Non-U.S. government securities	1,001,947		11,808		(27,117		)	1,017,256		—
Asset backed securities	1,724,651		6,707		(7,175		)	1,725,119		(22		)
Total	10,840,929		114,477		(82,210		)	10,808,662		(3,622		)
Equity securities	582,075		78,988		(10,109		)	513,196		—
Other investments	431,833		33,114		—			398,719		—
Short-term investments	748,659		407		(6,387		)	754,639		—
Total	$	12,603,496	$	226,986	$	(98,706	)	$	12,475,216	$	(3,622	)
December 31, 2013
Fixed maturities and fixed maturities pledged under securities lending agreements (1):
Corporate bonds	$	2,267,263	$	35,289	$	(35,537	)	$	2,267,511	$	(16	)
Mortgage backed securities	1,133,095		16,270		(22,209		)	1,139,034		(9,269		)
Municipal bonds	1,481,738		29,378		(9,730		)	1,462,090		(17		)
Commercial mortgage backed securities	1,074,497		13,972		(15,224		)	1,075,749		(199		)
U.S. government and government agencies	1,301,809		3,779		(11,242		)	1,309,272		(19		)
Non-U.S. government securities	1,085,861		14,729		(19,363		)	1,090,495		—
Asset backed securities	1,332,594		20,033		(13,795		)	1,326,356		(3,422		)
Total	9,676,857		133,450		(127,100		)	9,670,507		(12,942		)
Equity securities	496,824		69,487		(5,938		)	433,275		—
Other investments	498,310		28,082		(18,459		)	488,687		—
Short-term investments	1,478,367		1,654		(871		)	1,477,584		—
Total	$	12,150,358	$	232,673	$	(152,368	)	$	12,070,053	$	(12,942	)

_________________________________________________

(1) In securities lending transactions, the Company receives collateral in excess of the fair value of the fixed maturities and short-term investments pledged. For purposes of this table, the Company has excluded the collateral received and reinvested and included the fixed maturities and short-term investments pledged. See “—Securities Lending Agreements.”

(2) Represents the total other-than-temporary impairments (“OTTI”) recognized in accumulated other comprehensive income (“AOCI”). It does not include the change in fair value subsequent to the impairment measurement date. At September 30, 2014, the net unrealized gain related to securities for which a non-credit OTTI was recognized in AOCI was $2.1 million, compared to a net unrealized gain of $6.0 million at December 31, 2013.

21

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
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
September 30, 2014
Fixed maturities and fixed maturities pledged under securities lending agreements (1):
Corporate bonds	$	1,549,643	$	(22,058	)	$	193,803	$	(8,031	)	$	1,743,446	$	(30,089	)
Mortgage backed securities	360,510		(2,809		)	124,796		(5,540		)	485,306		(8,349		)
Municipal bonds	108,444		(470		)	21,390		(501		)	129,834		(971		)
Commercial mortgage backed securities	508,131		(2,769		)	94,948		(3,207		)	603,079		(5,976		)
U.S. government and government agencies	576,459		(2,385		)	3,430		(148		)	579,889		(2,533		)
Non-U.S. government securities	538,957		(22,925		)	49,200		(4,192		)	588,157		(27,117		)
Asset backed securities	802,765		(3,253		)	222,099		(3,922		)	1,024,864		(7,175		)
Total	4,444,909		(56,669		)	709,666		(25,541		)	5,154,575		(82,210		)
Equity securities	187,003		(10,087		)	269		(22		)	187,272		(10,109		)
Other investments	—		—			—		—			—		—
Short-term investments	141,056		(6,387		)	—		—			141,056		(6,387		)
Total	$	4,772,968	$	(73,143	)	$	709,935	$	(25,563	)	$	5,482,903	$	(98,706	)
December 31, 2013
Fixed maturities and fixed maturities pledged under securities lending agreements (1):
Corporate bonds	$	1,183,625	$	(32,837	)	$	46,673	$	(2,700	)	$	1,230,298	$	(35,537	)
Mortgage backed securities	778,693		(20,253		)	43,634		(1,956		)	822,327		(22,209		)
Municipal bonds	589,009		(9,422		)	6,092		(308		)	595,101		(9,730		)
Commercial mortgage backed securities	677,617		(15,110		)	1,612		(114		)	679,229		(15,224		)
U.S. government and government agencies	1,144,809		(11,242		)	—		—			1,144,809		(11,242		)
Non-U.S. government securities	821,506		(15,776		)	24,334		(3,587		)	845,840		(19,363		)
Asset backed securities	692,362		(10,431		)	88,629		(3,364		)	780,991		(13,795		)
Total	5,887,621		(115,071		)	210,974		(12,029		)	6,098,595		(127,100		)
Equity securities	76,563		(5,938		)	—		—			76,563		(5,938		)
Other investments	165,891		(15,775		)	47,316		(2,684		)	213,207		(18,459		)
Short-term investments	28,170		(871		)	—		—			28,170		(871		)
Total	$	6,158,245	$	(137,655	)	$	258,290	$	(14,713	)	$	6,416,535	$	(152,368	)

_________________________________________________

(1) In securities lending transactions, the Company receives collateral in excess of the fair value of the fixed maturities and short-term investments pledged. For purposes of this table, the Company has excluded the collateral received and reinvested and included the fixed maturities and short-term investments pledged. See “—Securities Lending Agreements.”

At September 30, 2014, on a lot level basis, approximately 2,090 security lots out of a total of approximately 4,920 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 $2.9 million. At December 31, 2013, on a lot level basis, approximately 2,080 security lots out of a total of approximately 4,400 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 $3.5 million.

22

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The contractual maturities of the Company’s fixed maturities and fixed maturities pledged under securities lending agreements 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.

	September 30, 2014				December 31, 2013
Maturity	Fair Value		Amortized Cost		Fair Value		Amortized Cost
Due in one year or less	$	253,946	$	250,917	$	235,330	$	232,652
Due after one year through five years	4,184,904		4,178,652		3,738,500		3,718,920
Due after five years through 10 years	2,213,584		2,207,108		1,966,536		1,979,510
Due after 10 years	264,904		261,523		196,305		198,286
	6,917,338		6,898,200		6,136,671		6,129,368
Mortgage backed securities	966,848		956,630		1,133,095		1,139,034
Commercial mortgage backed securities	1,232,092		1,228,713		1,074,497		1,075,749
Asset backed securities	1,724,651		1,725,119		1,332,594		1,326,356
Total	$	10,840,929	$	10,808,662	$	9,676,857	$	9,670,507

Securities Lending Agreements

The Company operates a securities lending program under which certain of its fixed income portfolio securities are loaned to third parties, primarily major brokerage firms, for short periods of time through a lending agent. The fair value and amortized cost of fixed maturities and short-term investments pledged under securities lending agreements were $107.5 million and $109.0 million, respectively, at September 30, 2014, compared to $105.1 million and $105.9 million, respectively, at December 31, 2013. The fair value of the portfolio of collateral backing the Company’s securities lending program was $104.3 million at September 30, 2014, compared to $100.6 million at December 31, 2013. Such amounts included approximately $5.7 million of sub-prime securities at September 30, 2014, compared to $6.3 million at December 31, 2013. The Company maintains legal control over the securities it lends, retains the earnings and cash flows associated with the loaned securities and receives a fee from the borrower for the temporary use of the securities. An indemnification agreement with the lending agent protects the Company in the event a borrower becomes insolvent or fails to return any of the securities on loan to the Company. 

Other Investments

The following table summarizes the Company’s other investments, including available for sale and fair value option components:

	September 30, 2014		December 31, 2013
Available for sale:
Asian and emerging markets	$	275,191	$	331,984
Investment grade fixed income	156,642		159,115
Other	—		7,211
Total available for sale	431,833		498,310
Fair value option:
Term loan investments (par value: $1,013,196 and $494,502)	1,001,771		512,076
Asian and emerging markets	25,249		14,054
Investment grade fixed income	76,606		75,062
Other (1)	327,899		172,088
Total fair value option	1,431,525		773,280
Total	$	1,863,358	$	1,271,590

_________________________________________________

(1) Includes fund investments with strategies in mortgage servicing rights, transportation and infrastructure assets and other.

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

23

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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.

Fair Value Option

The following table summarizes the Company’s assets and liabilities which are accounted for using the fair value option:

	September 30, 2014		December 31, 2013
Fixed maturities	$	565,754	$	448,254
Other investments	1,431,525		773,280
Short-term investments	205,716		—
Investments accounted for using the fair value option	$	2,202,995	$	1,221,534

Net Investment Income

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

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2014			2013			2014			2013
Fixed maturities	$	66,052		$	62,447		$	194,370		$	186,457
Term loan investments	14,065			5,296			26,642			15,539
Equity securities (dividends)	2,779			2,241			8,971			6,828
Short-term investments	905			417			1,417			1,173
Other (1)	7,914			3,753			21,733			14,786
Gross investment income	91,715			74,154			253,133			224,783
Investment expenses	(11,610		)	(8,071		)	(33,044		)	(24,659		)
Net investment income	$	80,105		$	66,083		$	220,089		$	200,124

_________________________________________________

(1) Includes dividends on investment funds and other items.

24

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Net Realized Gains (Losses)

Net realized gains (losses) were as follows, excluding other-than-temporary impairment provisions:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2014			2013			2014			2013
Available for sale securities:
Gross gains on investment sales	$	62,727		$	47,433		$	185,541		$	183,306
Gross losses on investment sales	(35,012		)	(69,256		)	(108,053		)	(149,095		)
Change in fair value of assets and liabilities accounted for using the fair value option:
Fixed maturities	(9,023		)	5,599			318			3,955
Other investments	(1,085		)	8,221			27,676			8,670
Equity securities	—			—			—			704
Short-term investments	638			—			638			—
Derivative instruments (1)	7,449			1,574			7,083			16,842
Other (2)	(7,179		)	407			(20,847		)	588
Net realized gains (losses)	$	18,515		$	(6,022	)	$	92,356		$	64,970

_________________________________________________

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

(2) Includes accretion of contingent consideration liability amounts related to the acquisition of the CMG Entities (see Note 2 for further details).

Other-Than-Temporary Impairments

The Company performs quarterly reviews of its available for sale investments in order to determine whether declines in fair value below the amortized cost basis were considered other-than-temporary in accordance with applicable guidance. The following table details the net impairment losses recognized in earnings by asset class:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2014			2013			2014			2013
Fixed maturities:
Mortgage backed securities	$	(2	)	$	(280	)	$	(2	)	$	(295	)
Corporate bonds	(147		)	(88		)	(811		)	(88		)
Asset backed securities	(29		)	(20		)	(40		)	(40		)
Total	(185		)	(388		)	(860		)	(423		)
Equity securities	(95		)	(340		)	(373		)	(3,275		)
Other investments	(8,313		)	—			(25,080		)	—
Net impairment losses recognized in earnings	$	(8,593	)	$	(728	)	$	(26,313	)	$	(3,698	)

A description of the methodology and significant inputs used to measure the amount of net impairment losses recognized in earnings in the 2014 periods is as follows:

• Other investments — the Company utilized information received from fund managers and positive and negative evidence on the fund investment, including the business prospects, recent events, industry and market data and other factors. Net impairment losses for the 2014 third quarter primarily related to a reduction in the carrying value of a fund investment as the Company decided to redeem its holding in early October 2014. Net impairment losses for the nine months ended September 30, 2014 primarily related to the same fund investment which was in an unrealized loss position and where the Company determined that it did not intend to hold such investment for a reasonable period of time by which the fair value of the fund would increase and the Company would recover its cost. The cost basis of such fund was adjusted down accordingly to its then current fair value based on an analysis performed each quarter;

25

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

• Corporate bonds — the Company reviewed the business prospects, credit ratings, estimated loss given default factors and information received from asset managers and rating agencies for certain corporate bonds. The amortized cost basis of the corporate bonds were adjusted down, if required, to the expected recovery value calculated in the OTTI review process;

• Equity securities — the Company utilized information received from asset managers on common stocks, including the business prospects, recent events, industry and market data and other factors. For certain equities which were in an unrealized loss position and where the Company determined that it did not have the intent or ability to hold such securities for a reasonable period of time by which the fair value of the securities would increase and the Company would recover its cost, the cost basis of such securities was adjusted down accordingly.

The Company believes that the $3.6 million of OTTI included in accumulated other comprehensive income at September 30, 2014 on the securities which were considered by the Company to be impaired was due to market and sector-related factors (i.e., not credit losses). At September 30, 2014, the Company did not intend to sell these securities, or any other securities which were in an unrealized loss position, and determined that it is more likely than not that the Company will not be required to sell such securities before recovery of their cost basis.

The following table provides a roll forward of the amount related to credit losses recognized in earnings for which a portion of an OTTI was recognized in accumulated other comprehensive income:

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2014			2013		2014			2013
Balance at start of period	$	21,441		$	61,449	$	60,062		$	62,001
Credit loss impairments recognized on securities not previously impaired	—			369		—			402
Credit loss impairments recognized on securities previously impaired	151			19		162			21
Reductions for increases in cash flows expected to be collected that are recognized over the remaining life of the security	—			—		—			—
Reductions for securities sold during the period	(217		)	—		(38,849		)	(587		)
Balance at end of period	$	21,375		$	61,837	$	21,375		$	61,837

Restricted Assets

The Company is required to maintain assets on deposit, which primarily consist of fixed maturities, with various regulatory authorities to support its insurance and reinsurance operations. The Company’s insurance and reinsurance subsidiaries maintain assets in trust accounts as collateral for insurance and reinsurance 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 10 for further details. The following table details the value of the Company’s restricted assets:

	September 30, 2014		December 31, 2013
Assets used for collateral or guarantees:
Affiliated transactions	$	4,159,480	$	4,060,533
Third party agreements	941,372		856,890
Deposits with U.S. regulatory authorities	353,091		302,809
Deposits with non-U.S. regulatory authorities	—		6,546
Trust funds	76,110		75,264
Total restricted assets	$	5,530,053	$	5,302,042

26

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 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 including a review of deep dive reports on selected securities which indicate the use of observable inputs in the pricing process; (iv) comparing the fair value estimates to its 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) back-testing, which includes randomly selecting purchased or sold securities and comparing the executed prices to the fair value estimates from the pricing service. For a majority of investments, the Company obtained multiple quotes. 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 pricing services at September 30, 2014.

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 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. In addition, pricing vendors use model processes, such as an Option Adjusted Spread model, to develop prepayment and interest rate scenarios. The Option Adjusted Spread model is commonly used to estimate fair value for securities such as mortgage backed and asset backed securities. 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. Of the $14.87 billion of financial assets and liabilities measured at fair value at September 30, 2014, approximately $420.4 million, or 2.8%, were priced using non-binding broker-dealer quotes. Of the $13.37 billion of financial

27

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

assets and liabilities measured at fair value at December 31, 2013, approximately $601.9 million, or 4.5%, were priced using non-binding broker-dealer quotes.

The Company reviews its securities measured at fair value and discusses the proper classification of such investments with investment advisers and others. No transfers were made in the periods presented. A discussion of the general classification of the Company’s financial instruments follows:

Fixed maturities. 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. Where the Company believes that quoted market prices are not available or that the market is not active, fair values are estimated by using quoted prices of securities with similar characteristics, pricing models or matrix pricing and are generally classified as Level 2 securities. The Company determined that Level 2 securities included corporate bonds, mortgage backed securities, municipal bonds, asset backed securities and non-U.S. government securities.

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. Other equity securities are included in Level 2 of the valuation hierarchy.

Other investments. The fair values for certain of the Company’s other investments are determined using net asset values (“NAV”) as advised by external fund managers. The NAV is based on the fund manager’s valuation of the underlying holdings in accordance with the fund’s governing documents. Periodically, the Company performs a number of monitoring procedures in order to assess the quality of the NAVs, including regular review and discussion of each fund’s performance, regular evaluation of fund performance against applicable benchmarks and the backtesting of the NAVs against audited and interim financial statements. Other investments with liquidity terms allowing the Company to substantially redeem its holdings in a short time frame at the applicable NAV are reflected in Level 2. Other investments with redemption restrictions that prevent the Company from redeeming in the near term are classified in Level 3 of the valuation hierarchy. Other investments also 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 as Level 2 securities.

Short-term investments. The Company determined that certain of its short-term investments held in highly liquid money market-type funds would be included in Level 1 as their fair values are based on quoted market prices in active markets. Other short-term investments are classified in Level 2 of the valuation hierarchy.

In securities lending transactions, the Company receives collateral in excess of the fair value of the fixed maturities and short-term investments pledged under securities lending agreements. For purposes of the following tables, the Company has excluded the collateral received and reinvested and included the fixed maturities and short-term investments pledged under securities lending agreements, at fair value.

Contingent consideration liability. The contingent consideration liability (included in ‘other liabilities’ in the consolidated balance sheets) resulted from the acquisition of the CMG Entities and is remeasured at fair value at each balance sheet date. Changes in fair value are recognized in ‘net realized gains (losses).’ To determine the fair value of the contingent consideration liability, the Company estimates future payments using an income approach based on modeled inputs which include a weighted average cost of capital. The Company determined that the contingent consideration liability would be included in Level 3 of the valuation hierarchy.

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ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table presents the Company’s financial assets and liabilities measured at fair value by level at September 30, 2014:

			Fair Value Measurement Using:
	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 and fixed maturities pledged under securities lending agreements (1):
Corporate bonds	$	3,070,353	$	—	$	3,070,353	$	—
Mortgage backed securities	966,848		—		966,848		—
Municipal bonds	1,293,455		—		1,293,455		—
Commercial mortgage backed securities	1,232,092		—		1,232,092		—
U.S. government and government agencies	1,551,583		1,551,583		—		—
Non-U.S. government securities	1,001,947		—		1,001,947		—
Asset backed securities	1,724,651		—		1,724,651		—
Total	10,840,929		1,551,583		9,289,346		—
Equity securities	582,075		582,075		—		—
Other investments	431,833		—		328,750		103,083
Short-term investments	748,659		723,698		24,961		—
Fair value option:
Corporate bonds	452,275		—		452,275		—
Non-U.S. government bonds	70,494		—		70,494		—
Mortgage backed securities	17,919		—		17,919		—
Asset backed securities	25,066		—		25,066		—
Other investments	1,431,525		—		1,008,531		422,994
Short-term investments	205,716		198,077		7,639		—
Total	2,202,995		198,077		1,581,924		422,994
Total assets measured at fair value	$	14,806,491	$	3,055,433	$	11,224,981	$	526,077
Liabilities measured at fair value:
Contingent consideration liability	$	58,661	$	—	$	—	$	58,661
Total liabilities measured at fair value	$	58,661	$	—	$	—	$	58,661

_________________________________________________

(1) In securities lending transactions, the Company receives collateral in excess of the fair value of the fixed maturities and short-term investments pledged. For purposes of this table, the Company has excluded the collateral received and reinvested and included the fixed maturities and short-term investments pledged.

29

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

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, 2013:

			Fair Value Measurement Using:
	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 and fixed maturities pledged under securities lending agreements (1):
Corporate bonds	$	2,267,263	$	—	$	2,265,218	$	2,045
Mortgage backed securities	1,133,095		—		1,133,095		—
Municipal bonds	1,481,738		—		1,481,738		—
Commercial mortgage backed securities	1,074,497		—		1,074,497		—
U.S. government and government agencies	1,301,809		1,301,809		—		—
Non-U.S. government securities	1,085,861		—		1,085,861		—
Asset backed securities	1,332,594		—		1,332,594		—
Total	9,676,857		1,301,809		8,373,003		2,045
Equity securities	496,824		496,738		86		—
Other investments	498,310		—		327,890		170,420
Short-term investments	1,478,367		1,427,744		50,623		—
Fair value option:
Corporate bonds	334,065		—		334,065		—
Non-U.S. government bonds	73,156		—		73,156		—
Mortgage backed securities	41,033		—		41,033		—
Other investments	773,280		—		395,755		377,525
Total	1,221,534		—		844,009		377,525
Total assets measured at fair value	$	13,371,892	$	3,226,291	$	9,595,611	$	549,990

_________________________________________________

(1) In securities lending transactions, the Company receives collateral in excess of the fair value of the fixed maturities and short-term investments pledged. For purposes of this table, the Company has excluded the collateral received and reinvested and included the fixed maturities and short-term investments pledged.

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ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following tables present 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:

	Fair Value Measurements Using: Significant Unobservable Inputs (Level 3)
	Assets												Liabilities
s	Available-For-Sale						Fair Value Option
	Corporate Bonds			Other Investments			Other Investments			Total			Contingent Consideration Liability
Three Months Ended September 30, 2014
Balance at beginning of period	$	—		$	103,213		$	451,036		$	554,249		$	53,099
Total gains or (losses) (realized/unrealized)
Included in earnings (1)	—			(262		)	(3,224		)	(3,486		)	5,562
Included in other comprehensive income	—			132			—			132			—
Purchases, issuances, sales and settlements
Purchases	—			—			18,058			18,058			—
Issuances	—			—			—			—			—
Sales	—			—			—			—			—
Settlements	—			—			(42,876		)	(42,876		)	—
Transfers in and/or out of Level 3	—			—			—			—			—
Balance at end of period	$	—		$	103,083		$	422,994		$	526,077		$	58,661
Three Months Ended September 30, 2013
Balance at beginning of period	$	2,360		$	189,893		$	290,189		$	482,442		$	—
Total gains or (losses) (realized/unrealized)
Included in earnings (1)	—			—			8,731			8,731			—
Included in other comprehensive income	—			(5,239		)	—			(5,239		)	—
Purchases, issuances, sales and settlements
Purchases	—			20,000			63,348			83,348			—
Issuances	—			—			—			—			—
Sales	—			—			—			—			—
Settlements	(271		)	—			(3,424		)	(3,695		)	—
Transfers in and/or out of Level 3	—			—			—			—			—
Balance at end of period	$	2,089		$	204,654		$	358,844		$	565,587		$	—

_________________________________________________

(1) Gains or losses on corporate bonds were included in net realized gains (losses) while gains or losses on other investments were included in net realized gains (losses) or net investment income. Gains or losses on the contingent consideration liability were included in net realized gains (losses).

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ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

	Fair Value Measurements Using: Significant Unobservable Inputs (Level 3)
	Assets												Liabilities
s	Available-For-Sale						Fair Value Option
	Corporate Bonds			Other Investments			Other Investments			Total			Contingent Consideration Liability
Nine Months Ended September 30, 2014
Balance at beginning of period	$	2,045		$	170,420		$	377,525		$	549,990		$	—
Total gains or (losses) (realized/unrealized)
Included in earnings (1)	—			291			19,222			19,513			16,899
Included in other comprehensive income	—			(1,464		)	932			(532		)	—
Purchases, issuances, sales and settlements
Purchases	—			—			124,783			124,783			—
Issuances	—			—			—			—			41,762
Sales	(2,045		)	(66,164		)	—			(68,209		)	—
Settlements	—			—			(99,468		)	(99,468		)	—
Transfers in and/or out of Level 3	—			—			—			—			—
Balance at end of period	$	—		$	103,083		$	422,994		$	526,077		$	58,661
Nine Months Ended September 30, 2013
Balance at beginning of period	$	98,404		$	184,202		$	195,350		$	477,956		$	—
Total gains or (losses) (realized/unrealized)
Included in earnings (1)	4,679			4,762			7,029			16,470			—
Included in other comprehensive income	(3,051		)	632			—			(2,419		)	—
Purchases, issuances, sales and settlements
Purchases	—			25,000			223,918			248,918			—
Issuances	—			—			—			—			—
Sales	(96,655		)	—			—			(96,655		)	—
Settlements	(1,288		)	(9,942		)	(67,453		)	(78,683		)	—
Transfers in and/or out of Level 3	—			—			—			—			—
Balance at end of period	$	2,089		$	204,654		$	358,844		$	565,587		$	—

_________________________________________________

(1) Gains or losses on corporate bonds were included in net realized gains (losses) while gains or losses on other investments were included in net realized gains (losses) or net investment income. Gains or losses on the contingent consideration liability were included in net realized gains (losses).

The amount of total losses for the 2014 third quarter included in earnings attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2014 was $3.5 million, while the amount of total gains for the nine months ended September 30, 2014 included in earnings attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2014 was $14.3 million. The amount of total gains for the 2013 third quarter included in earnings attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2013 was $8.7 million, while the amount of total gains for the nine months ended September 30, 2013 included in earnings attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2013 was $13.2 million.

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 September 30, 2014, due to their respective short maturities. As these financial instruments are not actively traded, their respective fair values are classified within Level 2.

At September 30, 2014, the senior notes of ACGL were carried at their cost of $300.0 million and had a fair value of $414.8 million while the senior notes of Arch-U.S. were carried at their cost of $500.0 million and had a fair value of $543.1 million. 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 value of the senior notes is classified within Level 2.

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ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

9.Derivative Instruments

The Company’s investment strategy allows for the use of derivative securities. The Company’s derivative instruments are recorded on its consolidated balance sheets at fair value. The fair values of those derivatives are based on quoted market prices. All realized and unrealized contract gains and losses are reflected in the Company’s results of operations. 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. Certain of the Company’s corporate bonds are managed in a global bond portfolio which incorporates the use of foreign currency forward contracts which are intended to provide an economic hedge against foreign currency movements on the portfolio’s non-U.S. Dollar denominated holdings. The Company routinely utilizes other foreign currency forward contracts, currency options, index futures contracts and other derivatives as part of its total return objective.

In addition, 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 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 Company did not hold any derivatives which were designated as hedging instruments at September 30, 2014 or December 31, 2013.

The following table summarizes information on the fair values and notional values of the Company’s derivative instruments. The fair value of TBAs is included in ‘fixed maturities available for sale, at fair value.’

	Asset Derivatives		Liability Derivatives			Net Derivatives
	Fair Value		Fair Value			Fair Value			Notional Value (1)
September 30, 2014
Futures contracts	$	437	$	(1,797	)	$	(1,360	)	$	1,333,987
Foreign currency forward contracts	6,297		(1,783		)	4,514			350,938
TBAs	397,193		(407,954		)	(10,761		)	776,558
Other	3,763		(2,719		)	1,044			758,581
Total	$	407,690	$	(414,253	)	$	(6,563	)
December 31, 2013
Futures contracts	$	461	$	(110	)	$	351		$	475,967
Foreign currency forward contracts	5,023		(3,090		)	1,933			330,746
TBAs	33,455		(21,731		)	11,724			56,160
Other	920		(1,541		)	(621		)	347,916
Total	$	39,859	$	(26,472	)	$	13,387

_________________________________________________

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

The Company’s derivative instruments are generally 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. Effectively, contractual close-out netting reduces derivatives credit exposure from gross to net exposure. At September 30, 2014, asset derivatives and liability derivatives of $203.9 million and $343.7 million, respectively, were subject to a master netting agreement, compared to $28.0 million and $14.6 million, respectively, at December 31, 2013. The remaining derivatives included in the table above were not subject to a master netting agreement.

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ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table summarizes net realized gains (losses) recorded on the Company’s derivative instruments in the consolidated statements of income:

	Three Months Ended						Nine Months Ended
Derivatives not designated as	September 30,						September 30,
hedging instruments	2014			2013			2014			2013
Futures contracts	$	(354	)	$	(2,804	)	$	4,969		$	6,990
Foreign currency forward contracts	6,558			1,344			2,490			8,224
TBAs	660			2,511			353			(699		)
Other	585			523			(729		)	2,327
Total	$	7,449		$	1,574		$	7,083		$	16,842

10.Commitments and Contingencies

Letter of Credit and Revolving Credit Facilities

As of September 30, 2014, the Company had a $300 million unsecured revolving loan and letter of credit facility and a $500 million secured letter of credit facility (the “Credit Agreement”). The Credit Agreement expires on June 30, 2019. In addition, the Company had access to secured letter of credit facilities of approximately $192.5 million as of September 30, 2014, which are available on a limited basis and for limited purposes (together with the secured portion of the Credit Agreement and these letter of credit facilities, the “LOC Facilities”). At September 30, 2014, the Company had $421.4 million in outstanding letters of credit under the LOC Facilities, which were secured by investments with a fair value of $480.9 million, and had $100.0 million of borrowings outstanding under the Credit Agreement which are due on June 30, 2019. The Company was in compliance with all covenants contained in the LOC Facilities at September 30, 2014. As of September 30, 2014, Watford had a $200 million line of credit facility that expires on May 19, 2015. At September 30, 2014, Watford had $3.4 million in outstanding letters of credit under that credit facility. Watford was in compliance with all covenants contained in its credit facility at September 30, 2014.

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 $941.9 million at September 30, 2014.

11.Share Transactions

Share Repurchases

The board of directors of ACGL has authorized the investment in ACGL’s common shares through a share repurchase program. Since the inception of the share repurchase program, ACGL has repurchased approximately 114.5 million common shares for an aggregate purchase price of $3.04 billion. For the 2014 third quarter and nine months ended September 30, 2014, ACGL repurchased 4,593,726 common shares for an aggregate purchase price of $251.9 million. During the 2013 third quarter and nine months ended September 30, 2013, ACGL repurchased 26,300 and 1,264,718 common shares, respectively, for an aggregate purchase price of $1.3 million and $57.8 million, respectively. At September 30, 2014, $460.2 million of share repurchases were available under the program. The timing and amount of the repurchase transactions under this program will depend on a variety of factors, including market conditions and corporate and regulatory considerations. See Note 16.

12.Income Taxes

ACGL is incorporated under the laws of Bermuda and, under current Bermuda law, is not obligated to pay any taxes in Bermuda based upon income or capital gains. The Company has received a written undertaking from the Minister of Finance in Bermuda under the Exempted Undertakings Tax Protection Act 1966 that, in the event that any legislation is enacted in Bermuda imposing any tax computed on profits, income, gain or appreciation on any capital asset, or any tax in the nature of estate duty or inheritance tax, such tax will not be applicable to ACGL or any of its operations until March 31, 2035. This undertaking does not, however, prevent the imposition of taxes on any person ordinarily resident in Bermuda or any company in respect of its ownership of real property or leasehold interests in Bermuda.

34

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

ACGL and its non-U.S. subsidiaries will be subject to U.S. federal income tax only to the extent that they derive U.S. source income that is subject to U.S. withholding tax or income that is effectively connected with the conduct of a trade or business within the U.S. and is not exempt from U.S. tax under an applicable income tax treaty with the U.S. ACGL and its non-U.S. subsidiaries will be subject to a withholding tax on dividends from U.S. investments and interest from certain U.S. payors (subject to reduction by any applicable income tax treaty). ACGL and its non-U.S. subsidiaries intend to conduct their operations in a manner that will not cause them to be treated as engaged in a trade or business in the United States and, therefore, will not be required to pay U.S. federal income taxes (other than U.S. excise taxes on insurance and reinsurance premium and withholding taxes on dividends and certain other U.S. source investment income). However, because there is uncertainty as to the activities which constitute being engaged in a trade or business within the United States, there can be no assurances that the U.S. Internal Revenue Service will not contend successfully that ACGL or its non-U.S. subsidiaries are engaged in a trade or business in the United States. If ACGL or any of its non-U.S. subsidiaries were subject to U.S. income tax, ACGL’s shareholders’ equity and earnings could be materially adversely affected. ACGL has subsidiaries and branches that operate in various jurisdictions around the world that are subject to tax in the jurisdictions in which they operate. The significant jurisdictions in which ACGL’s subsidiaries and branches are subject to tax are the United States, United Kingdom, Ireland, Canada, Switzerland and Denmark.

The Company’s income tax provision on income before income taxes resulted in an expense of 2.8% for the nine months ended September 30, 2014, compared to an expense of 3.1% for the 2013 period. These rates include the tax effect of unusual or infrequent items representing 0.1% and 0.2% of the Company’s effective tax rate for the nine months ended September 30, 2014 and the 2013 period, respectively. 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 $155.8 million at September 30, 2014, compared to $128.6 million at December 31, 2013. In addition, the Company paid$13.3 million in income taxes for the nine months ended September 30, 2014, while the Company paid$7.6 million for the 2013 period.

13.Other Comprehensive Income (Loss)

The following table presents details about amounts reclassified from accumulated other comprehensive income:

		Amounts Reclassed from AOCI
	Consolidated Statement of Income	Three Months Ended						Nine Months Ended
Details About	Line Item That Includes	September 30,						September 30,
AOCI Components	Reclassification	2014			2013			2014			2013
Unrealized appreciation on available-for-sale investments
	Net realized gains (losses)	$	27,715		$	(21,825	)	$	77,488		$	37,176
	Other-than-temporary impairment losses	(8,593		)	(901		)	(26,313		)	(3,873		)
	Total before tax	19,122			(22,726		)	51,175			33,303
	Income tax (expense) benefit	(1,639		)	2,025			(4,158		)	(1,387		)
	Net of tax	$	17,483		$	(20,701	)	$	47,017		$	31,916

35

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table presents the tax effects allocated to each component of other comprehensive income (loss):

	Before Tax Amount			Tax Expense (Benefit)			Net of Tax Amount
Three Months Ended September 30, 2014
Unrealized appreciation (decline) in value of investments:
Unrealized holding gains (losses) arising during period	$	(90,276	)	$	343		$	(90,619	)
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)	—			—			—
Less reclassification of net realized gains included in net income	19,122			1,639			17,483
Foreign currency translation adjustments	(23,595		)	—			(23,595		)
Other comprehensive income (loss)	$	(132,993	)	$	(1,296	)	$	(131,697	)
Three Months Ended September 30, 2013
Unrealized appreciation (decline) in value of investments:
Unrealized holding gains (losses) arising during period	$	41,122		$	(104	)	$	41,226
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)	(173		)	—			(173		)
Less reclassification of net realized gains (losses) included in net income	(22,726		)	(2,025		)	(20,701		)
Foreign currency translation adjustments	29,523			—			29,523
Other comprehensive income (loss)	$	93,198		$	1,921		$	91,277
Nine Months Ended September 30, 2014
Unrealized appreciation (decline) in value of investments:
Unrealized holding gains (losses) arising during period	$	100,274		$	11,112		$	89,162
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)	—			—			—
Less reclassification of net realized gains included in net income	51,175			4,158			47,017
Foreign currency translation adjustments	(14,923		)	—			(14,923		)
Other comprehensive income (loss)	$	34,176		$	6,954		$	27,222
Nine Months Ended September 30, 2013
Unrealized appreciation (decline) in value of investments:
Unrealized holding gains (losses) arising during period	$	(229,919	)	$	(21,054	)	$	(208,865	)
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)	(175		)	—			(175		)
Less reclassification of net realized gains included in net income	33,303			1,387			31,916
Foreign currency translation adjustments	(4,106		)	—			(4,106		)
Other comprehensive income (loss)	$	(267,503	)	$	(22,441	)	$	(245,062	)

36

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

14.Guarantor Financial Information

The following tables present condensed financial information for ACGL, Arch Capital Group (U.S.) Inc. (“Arch-U.S.”), a 100% owned subsidiary of ACGL, and ACGL’s other subsidiaries.

		September 30, 2014
Condensed Consolidating Balance Sheet		ACGL (Parent Guarantor)		Arch-U.S. (Subsidiary Issuer)		Other ACGL Subsidiaries		Consolidating Adjustments and Eliminations			ACGL Consolidated
Assets
Total investments		$	134	$	78,741	$	15,031,573	$	—		$	15,110,448
Cash		5,969		15,710		642,047		—			663,726
Investments in subsidiaries		6,487,180		1,641,236		—		(8,128,416		)	—
Due from subsidiaries and affiliates		34		—		405,714		(405,748		)	—
Premiums receivable		—		—		1,410,961		(383,757		)	1,027,204
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses		—		—		5,572,303		(3,758,113		)	1,814,190
Contractholder receivables		—		—		1,286,799		—			1,286,799
Prepaid reinsurance premiums		—		—		1,430,149		(1,025,488		)	404,661
Deferred acquisition costs, net		—		—		409,174		—			409,174
Other assets		7,412		63,507		2,264,246		(440,682		)	1,894,483
	Total assets	$	6,500,729	$	1,799,194	$	28,452,966	$	(14,142,204	)	$	22,610,685
Liabilities
Reserve for losses and loss adjustment expenses		$	—	$	—	$	12,701,382	$	(3,742,648	)	$	8,958,734
Unearned premiums		—		—		3,328,735		(1,025,488		)	2,303,247
Reinsurance balances payable		—		—		615,237		(370,858		)	244,379
Contractholder payables		—		—		1,286,799		—			1,286,799
Deposit accounting liabilities		—		—		628,383		(278,533		)	349,850
Senior notes		300,000		500,000		—		—			800,000
Revolving credit agreement borrowings		100,000		—		—		—			100,000
Due to subsidiaries and affiliates		5		—		405,743		(405,748		)	—
Other liabilities		19,678		58,139		1,597,887		(190,513		)	1,485,191
	Total liabilities	419,683		558,139		20,564,166		(6,013,788		)	15,528,200
Redeemable noncontrolling interests (1)		—		—		219,419		—			219,419
Shareholders’ Equity
Total shareholders’ equity available to Arch		6,081,046		1,241,055		6,887,361		(8,128,416		)	6,081,046
Non-redeemable noncontrolling interests (1)		—		—		782,020		—			782,020
	Total shareholders’ equity	6,081,046		1,241,055		7,669,381		(8,128,416		)	6,863,066
	Total liabilities, noncontrolling interests and shareholders’ equity	$	6,500,729	$	1,799,194	$	28,452,966	$	(14,142,204	)	$	22,610,685

(1)     See Note 4.

37

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

		December 31, 2013
Condensed Consolidating Balance Sheet		ACGL (Parent Guarantor)		Arch-U.S. (Subsidiary Issuer)		Other ACGL Subsidiaries		Consolidating Adjustments and Eliminations			ACGL Consolidated
Assets
Total investments		$	2,530	$	408,957	$	13,200,247	$	—		$	13,611,734
Cash		3,223		509		430,325		—			434,057
Investments in subsidiaries		6,046,060		1,258,889		—		(7,304,949		)	—
Due from subsidiaries and affiliates		2,251		—		405,110		(407,361		)	—
Premiums receivable		—		—		1,085,369		(331,445		)	753,924
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses		—		—		5,645,156		(3,840,826		)	1,804,330
Contractholder receivables		—		—		1,064,246		—			1,064,246
Prepaid reinsurance premiums		—		—		1,109,312		(780,969		)	328,343
Deferred acquisition costs, net		—		—		342,314		—			342,314
Other assets		6,598		60,342		1,714,651		(554,445		)	1,227,146
	Total assets	$	6,060,662	$	1,728,697	$	24,996,730	$	(13,219,995	)	$	19,566,094
Liabilities
Reserve for losses and loss adjustment expenses		$	—	$	—	$	12,625,766	$	(3,801,070	)	$	8,824,696
Unearned premiums		—		—		2,677,334		(780,969		)	1,896,365
Reinsurance balances payable		—		—		662,394		(466,227		)	196,167
Contractholder payables		—		—		1,064,246		—			1,064,246
Deposit accounting liabilities		—		—		758,490		(337,193		)	421,297
Senior notes		300,000		500,000		—		—			800,000
Revolving credit agreement borrowings		100,000		—		—		—			100,000
Due to subsidiaries and affiliates		18		10,250		397,093		(407,361		)	—
Other liabilities		13,148		33,206		691,699		(122,226		)	615,827
	Total liabilities	413,166		543,456		18,877,022		(5,915,046		)	13,918,598
Redeemable noncontrolling interests		—		—		—		—			—
Shareholders’ Equity
Total shareholders’ equity available to Arch		5,647,496		1,185,241		6,119,708		(7,304,949		)	5,647,496
Non-redeemable noncontrolling interests		—		—		—		—			—
	Total shareholders’ equity	5,647,496		1,185,241		6,119,708		(7,304,949		)	5,647,496
	Total liabilities, noncontrolling interests and shareholders’ equity	$	6,060,662	$	1,728,697	$	24,996,730	$	(13,219,995	)	$	19,566,094

38

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

		Three Months Ended September 30, 2014
Condensed Consolidating Statement of Income and Comprehensive Income		ACGL (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other ACGL Subsidiaries			Consolidating Adjustments and Eliminations			ACGL Consolidated
Revenues
Net premiums earned		$	—		$	—		$	903,651		$	—		$	903,651
Net investment income		—			—			79,936			169			80,105
Net realized gains		—			—			18,515			—			18,515
Net impairment losses recognized in earnings		—			—			(8,593		)	—			(8,593		)
Other underwriting income		—			—			1,702			—			1,702
Equity in net income of investment funds accounted for using the equity method		—			—			4,966			—			4,966
Other income (loss)		—			—			(7,815		)	—			(7,815		)
	Total revenues	—			—			992,362			169			992,531
Expenses
Losses and loss adjustment expenses		—			—			501,673			—			501,673
Acquisition expenses		—			—			163,547			—			163,547
Other operating expenses		10,056			810			138,614			—			149,480
Interest expense		5,858			6,433			(8,308		)	169			4,152
Net foreign exchange gains		—			—			(35,244		)	(20,787		)	(56,031		)
	Total expenses	15,914			7,243			760,282			(20,618		)	762,821
Income (loss) before income taxes		(15,914		)	(7,243		)	232,080			20,787			229,710
Income tax benefit (expense)		—			2,097			(8,543		)	—			(6,446		)
Income (loss) before equity in net income of subsidiaries		(15,914		)	(5,146		)	223,537			20,787			223,264
Equity in net income of subsidiaries		244,589			10,459			—			(255,048		)	—
Net income		228,675			5,313			223,537			(234,261		)	223,264
Amounts attributable to noncontrolling interests (1)		—			—			5,411			—			5,411
Net income available to Arch		228,675			5,313			228,948			(234,261		)	228,675
Preferred dividends		(5,484		)	—			—			—			(5,484		)
Net income available to Arch common shareholders		$	223,191		$	5,313		$	228,948		$	(234,261	)	$	223,191
Comprehensive income available to Arch		$	96,978		$	(10,614	)	$	104,501		$	(93,887	)	$	96,978

(1)     See Note 4.

39

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

		Three Months Ended September 30, 2013
Condensed Consolidating Statement of Income and Comprehensive Income		ACGL (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other ACGL Subsidiaries			Consolidating Adjustments and Eliminations			ACGL Consolidated
Revenues
Net premiums earned		$	—		$	—		$	795,000		$	—		$	795,000
Net investment income		—			—			72,772			(6,689		)	66,083
Net realized losses		—			—			(6,022		)	—			(6,022		)
Net impairment losses recognized in earnings		—			—			(728		)	—			(728		)
Other underwriting income		—			—			526			—			526
Equity in net income of investment funds accounted for using the equity method		—			—			5,665			—			5,665
Other income (loss)		—			—			624			—			624
	Total revenues	—			—			867,837			(6,689		)	861,148
Expenses
Losses and loss adjustment expenses		—			—			427,045			—			427,045
Acquisition expenses		—			—			147,313			—			147,313
Other operating expenses		6,975			397			110,698			—			118,070
Interest expense		5,793			7			6,826			(6,689		)	5,937
Net foreign exchange losses		—			—			26,815			13,747			40,562
	Total expenses	12,768			404			718,697			7,058			738,927
Income (loss) before income taxes		(12,768		)	(404		)	149,140			(13,747		)	122,221
Income tax expense		—			(1,356		)	(6,040		)	—			(7,396		)
Income (loss) before equity in net income of subsidiaries		(12,768		)	(1,760		)	143,100			(13,747		)	114,825
Equity in net income of subsidiaries		127,593			6,839			—			(134,432		)	—
Net income		114,825			5,079			143,100			(148,179		)	114,825
Amounts attributable to noncontrolling interests		—			—			—			—			—
Net income available to Arch		114,825			5,079			143,100			(148,179		)	114,825
Preferred dividends		(5,484		)	—			—			—			(5,484		)
Net income available to Arch common shareholders		$	109,341		$	5,079		$	143,100		$	(148,179	)	$	109,341
Comprehensive income available to Arch		$	206,102		$	18,444		$	220,630		$	(239,074	)	$	206,102

40

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

		Nine Months Ended September 30, 2014
Condensed Consolidating Statement of Income and Comprehensive Income		ACGL (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other ACGL Subsidiaries			Consolidating Adjustments and Eliminations			ACGL Consolidated
Revenues
Net premiums earned		$	—		$	—		$	2,670,583		$	—		$	2,670,583
Net investment income		—			—			237,317			(17,228		)	220,089
Net realized gains		—			—			92,356			—			92,356
Net impairment losses recognized in earnings		—			—			(26,313		)	—			(26,313		)
Other underwriting income		—			—			5,317			—			5,317
Equity in net income of investment funds accounted for using the equity method		—			—			17,459			—			17,459
Other income (loss)		—			—			(5,069		)	—			(5,069		)
	Total revenues	—			—			2,991,650			(17,228		)	2,974,422
Expenses
Losses and loss adjustment expenses		—			—			1,423,431			—			1,423,431
Acquisition expenses		—			—			482,047			—			482,047
Other operating expenses		35,613			2,281			413,735			—			451,629
Interest expense		17,565			19,395			13,158			(17,228		)	32,890
Net foreign exchange gains		—			—			(28,449		)	(18,725		)	(47,174		)
	Total expenses	53,178			21,676			2,303,922			(35,953		)	2,342,823
Income (loss) before income taxes		(53,178		)	(21,676		)	687,728			18,725			631,599
Income tax benefit (expense)		—			8,179			(25,652		)	—			(17,473		)
Income (loss) before equity in net income of subsidiaries		(53,178		)	(13,497		)	662,076			18,725			614,126
Equity in net income of subsidiaries		672,369			41,945			—			(714,314		)	—
Net income		619,191			28,448			662,076			(695,589		)	614,126
Amounts attributable to noncontrolling interests (1)		—			—			5,065			—			5,065
Net income available to Arch		619,191			28,448			667,141			(695,589		)	619,191
Preferred dividends		(16,453		)	—			—			—			(16,453		)
Net income available to Arch common shareholders		$	602,738		$	28,448		$	667,141		$	(695,589	)	$	602,738
Comprehensive income available to Arch		$	646,413		$	29,792		$	691,968		$	(721,760	)	$	646,413

(1)     See Note 4.

41

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

		Nine Months Ended September 30, 2013
Condensed Consolidating Statement of Income and Comprehensive Income		ACGL (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other ACGL Subsidiaries			Consolidating Adjustments and Eliminations			ACGL Consolidated
Revenues
Net premiums earned		$	—		$	—		$	2,306,586		$	—		$	2,306,586
Net investment income		—			—			220,074			(19,950		)	200,124
Net realized gains		—			—			64,970			—			64,970
Net impairment losses recognized in earnings		—			—			(3,698		)	—			(3,698		)
Other underwriting income		—			—			1,966			—			1,966
Equity in net income of investment funds accounted for using the equity method		—			—			30,429			—			30,429
Other income (loss)		—			—			2,702			—			2,702
	Total revenues	—			—			2,623,029			(19,950		)	2,603,079
Expenses
Losses and loss adjustment expenses		—			—			1,245,101			—			1,245,101
Acquisition expenses		—			—			406,582			—			406,582
Other operating expenses		30,608			1,947			333,106			—			365,661
Interest expense		17,456			15			20,166			(19,950		)	17,687
Net foreign exchange (gains) losses		—			—			(1,839		)	4,326			2,487
	Total expenses	48,064			1,962			2,003,116			(15,624		)	2,037,518
Income (loss) before income taxes		(48,064		)	(1,962		)	619,913			(4,326		)	565,561
Income tax benefit (expense)		—			1,629			(18,949		)	—			(17,320		)
Income (loss) before equity in net income of subsidiaries		(48,064		)	(333		)	600,964			(4,326		)	548,241
Equity in net income of subsidiaries		596,305			36,024			—			(632,329		)	—
Net income		548,241			35,691			600,964			(636,655		)	548,241
Amounts attributable to noncontrolling interests		—			—			—			—			—
Net income available to Arch		548,241			35,691			600,964			(636,655		)	548,241
Preferred dividends		(16,453		)	—			—			—			(16,453		)
Net income available to Arch common shareholders		$	531,788		$	35,691		$	600,964		$	(636,655	)	$	531,788
Comprehensive income available to Arch		$	303,179		$	(4,385	)	$	351,576		$	(347,191	)	$	303,179

42

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

		Nine Months Ended September 30, 2014
Condensed Consolidating Statement of Cash Flows		ACGL (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other ACGL Subsidiaries			Consolidating Adjustments and Eliminations			ACGL Consolidated
Operating Activities
	Net Cash Provided By Operating Activities	$	265,694		$	8,407		$	822,558		$	(297,000	)	$	799,659
Investing Activities
Purchases of fixed maturity investments		—			(78,509		)	(21,952,353		)	—			(22,030,862		)
Purchases of equity securities		—			—			(366,578		)	—			(366,578		)
Purchases of other investments		—			—			(1,596,691		)	—			(1,596,691		)
Proceeds from the sales of fixed maturity investments		—			—			20,284,869			—			20,284,869
Proceeds from the sales of equity securities		—			—			305,034			—			305,034
Proceeds from the sales of other investments		—			—			1,030,901			—			1,030,901
Proceeds from redemptions and maturities of fixed maturity investments		—			—			636,729			—			636,729
Net sales of short-term investments		2,396			408,760			267,232			—			678,388
Change in investment of securities lending collateral		—			—			(2,737		)	—			(2,737		)
Contributions to subsidiaries		—			(313,207		)	(100,000		)	413,207			—
Intercompany loans issued		—			—			10,250			(10,250		)	—
Purchase of business, net of cash acquired		—			—			(235,578		)	—			(235,578		)
Purchases of furniture, equipment and other assets		(220		)	—			(14,355		)	—			(14,575		)
	Net Cash Provided By (Used For) Investing Activities	2,176			17,044			(1,733,277		)	402,957			(1,311,100		)
Financing Activities
Purchases of common shares under share repurchase program		(251,919		)	—			—			—			(251,919		)
Proceeds from common shares issued, net		3,248			—			413,207			(413,207		)	3,248
Repayments of intercompany borrowings		—			(10,250		)	—			10,250			—
Change in securities lending collateral		—			—			2,737			—			2,737
Third party investment in non-redeemable noncontrolling interests (1)		—			—			796,903			—			796,903
Third party investment in redeemable noncontrolling interests (1)		—			—			219,233			—			219,233
Dividends paid to redeemable noncontrolling interests (1)		—			—			(9,632		)	—			(9,632		)
Dividends paid to parent		—			—			(297,000		)	297,000			—
Other		—			—			6,559			—			6,559
Preferred dividends paid		(16,453		)	—			—			—			(16,453		)
	Net Cash Provided By (Used For) Financing Activities	(265,124		)	(10,250		)	1,132,007			(105,957		)	750,676
Effects of exchange rates changes on foreign currency cash		—			—			(9,566		)	—			(9,566		)
Increase in cash		2,746			15,201			211,722			—			229,669
Cash beginning of year		3,223			509			430,325			—			434,057
Cash end of period		$	5,969		$	15,710		$	642,047		$	—		$	663,726

(1)     See Note 4.

43

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

		Nine Months Ended September 30, 2013
Condensed Consolidating Statement of Cash Flows		ACGL (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other ACGL Subsidiaries			Consolidating Adjustments and Eliminations			ACGL Consolidated
Operating Activities
	Net Cash Provided By (Used For) Operating Activities	$	62,400		$	(653	)	$	659,301		$	(94,000	)	$	627,048
Investing Activities
Purchases of fixed maturity investments		—			—			(12,436,587		)	—			(12,436,587		)
Purchases of equity securities		—			—			(438,255		)	—			(438,255		)
Purchases of other investments		—			—			(992,935		)	—			(992,935		)
Proceeds from the sales of fixed maturity investments		—			—			11,877,419			—			11,877,419
Proceeds from the sales of equity securities		—			—			373,000			—			373,000
Proceeds from the sales of other investments		—			—			813,596			—			813,596
Proceeds from redemptions and maturities of fixed maturity investments		—			—			595,503			—			595,503
Net (purchases) sales of short-term investments		7,789			2,996			(279,753		)	—			(268,968		)
Change in investment of securities lending collateral		—			—			2,508			—			2,508
Contributions to subsidiaries		(160		)	(11,850		)	(250		)	12,260			—
Intercompany loans issued		—			—			(10,250		)	10,250			—
Purchases of furniture, equipment and other assets		(402		)	—			(10,551		)	—			(10,953		)
	Net Cash Provided By (Used For) Investing Activities	7,227			(8,854		)	(506,555		)	22,510			(485,672		)
Financing Activities
Purchases of common shares under share repurchase program		(57,796		)	—			—			—			(57,796		)
Proceeds from common shares issued, net		(425		)	—			12,260			(12,260		)	(425		)
Proceeds from intercompany borrowings		—			10,250			—			(10,250		)	—
Change in securities lending collateral		—			—			(2,508		)	—			(2,508		)
Dividends paid to parent		—			—			(94,000		)	94,000			—
Other		—			—			5,679			—			5,679
Preferred dividends paid		(16,453		)	—			—			—			(16,453		)
	Net Cash Provided By (Used For) Financing Activities	(74,674		)	10,250			(78,569		)	71,490			(71,503		)
Effects of exchange rates changes on foreign currency cash		—			—			(4,773		)	—			(4,773		)
Increase (decrease) in cash		(5,047		)	743			69,404			—			65,100
Cash beginning of year		6,417			612			364,012			—			371,041
Cash end of period		$	1,370		$	1,355		$	433,416		$	—		$	436,141

15.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 September 30, 2014, 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.

44

ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

16.Subsequent Events

At September 30, 2014, $460.2 million of share repurchases were available under ACGL’s share repurchase program. From October 1 through October 29, 2014, the Company repurchased 1.6 million common shares for an aggregate purchase price of $89.2 million. On November 6, 2014, the board of directors of ACGL increased the aggregate purchase amount authorized under the share repurchase program to $1.0 billion. Repurchases under this authorization may be effected from time to time in open market or privately negotiated transactions through December 31, 2016. The timing and amount of the repurchase transactions under this authorization will depend on a variety of factors, including market conditions and corporate and regulatory considerations.

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ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a discussion and analysis of our financial condition and results of operations. This should be read in conjunction with our consolidated financial statements included in Item 1 of this report and also our Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2013 (“2013 Form 10-K”). In addition, readers should review “Risk Factors” set forth in Item 1A of Part I of our 2013 Form 10-K. Tabular amounts are in U.S. Dollars in thousands, except share amounts, unless otherwise noted.

Arch Capital Group Ltd. (“ACGL” and, together with its subsidiaries, “we” or “us”) is a Bermuda public limited liability company with approximately $6.98 billion in capital at September 30, 2014 and, through operations in Bermuda, the United States, Europe and Canada, writes specialty lines of property and casualty insurance and reinsurance, as well as mortgage insurance and reinsurance, on a worldwide basis.

Current Outlook

Our insurance group continued to obtain rate increases above loss cost trends in the primary insurance markets during the 2014 third quarter, slightly below the levels observed in the 2014 second quarter. Our insurance group continues to see its best opportunities in some sectors of the excess and surplus market and in its binding authority and program business. Competitive conditions have negatively affected primary property rates resulting in lower premium volume. In our reinsurance business, we see a continued softening of terms and conditions with property catastrophe business remaining under pressure due to the alternative capacity in the market. Also, cedents continue to request additional ceding commissions on quota share contracts and reinsurance buyers continue to shift business to excess of loss treaties. Our underwriting teams continue to execute a disciplined strategy by emphasizing small and medium-sized accounts over large accounts.

On January 30, 2014, the Company acquired CMG Mortgage Insurance Company and its affiliated mortgage insurance companies (together, “CMG Entities”) and the mortgage insurance platform and related assets from PMI Mortgage Insurance Co. (“PMI”). CMG Mortgage Insurance Company (subsequently renamed Arch Mortgage Insurance Company), is the leading provider of mortgage insurance products and services to credit unions in the U.S. Prior to the acquisition, CMG Mortgage Insurance Company had been approved as an eligible mortgage insurer by Federal National Mortgage Association and Federal Home Loan Mortgage Corporation (each a government sponsored enterprise or “GSE”) solely for credit union customers. As part of the transaction, Arch Mortgage Insurance Company (“Arch MI U.S.”) has been approved as an eligible mortgage insurer by the GSEs. Arch MI U.S. will continue to serve its existing credit union customers and, at the same time, has made substantial progress in building out its sales force to serve banks and other mortgage originators.

In late March 2014, Watford Re Ltd., a newly-formed multi-line Bermuda reinsurance company, was launched with over $1.1 billion of initial capital. We invested $100.0 million in Watford Holdings Ltd., Watford Re Ltd.’s parent (combined with Watford Re Ltd., “Watford”) to acquire approximately 11% of Watford Holdings Ltd.’s common equity and a warrant to purchase additional common equity. Arch Underwriters Ltd., our subsidiary, acts as Watford’s reinsurance manager, and Highbridge Principal Strategies, LLC, a subsidiary of JPMorgan Chase & Co., manages Watford’s investment assets, each under a long term services agreement. John Rathgeber, previously Vice Chairman of Arch Worldwide Reinsurance Group, was named CEO of Watford. In addition, Marc Grandisson, Chairman and CEO of Arch Worldwide Reinsurance and Mortgage Groups, and Nicolas Papadopoulo, CEO Reinsurance Group, were appointed to the board of directors of Watford.

Our objective is to achieve an average operating return on average equity of 15% or greater over the insurance cycle, which we believe to be an attractive return to our common shareholders given the risks we assume. We continue to look for opportunities to find acceptable books of business to underwrite without sacrificing underwriting discipline and continue to write a significant portion of our overall book in catastrophe-exposed business which has the potential to increase the volatility of our operating results.

Deterioration in economic conditions could have a material impact on the frequency and severity of claims and, therefore, could negatively impact our underwriting returns. In addition, volatility in the financial markets could significantly affect our investment returns, reported results and shareholders’ equity. We consider the potential impact of economic trends in the estimation process for establishing unpaid losses and loss adjustment expenses and in determining our investment strategies.

In addition, the impact of weakness of the U.S., European countries and other key economies, projected budget deficits for the U.S., European countries and other governments and the consequences associated with possible additional downgrades of securities of the U.S., European countries and other governments by credit rating agencies is inherently unpredictable and could have a material adverse effect on financial markets and economic conditions in the U.S. and throughout the world. In

46

turn, this could have a material adverse effect on our business, financial condition and results of operations and, in particular, this could have a material adverse effect on the value of securities in our investment portfolio.

Natural Catastrophe Risk

We monitor our natural catastrophe risk globally for all perils and regions, in each case, where we believe there is significant exposure. Our models employ both proprietary and vendor-based systems and include cross-line correlations for property, marine, offshore energy, aviation, workers compensation and personal accident. Currently, we seek to limit our 1-in-250 year return period net probable maximum pre-tax loss from a severe catastrophic event in any geographic zone to approximately 25% of total shareholders’ equity available to Arch. We reserve the right to change this threshold at any time. Based on in-force exposure estimated as of October 1, 2014, our modeled peak zone catastrophe exposure was a windstorm affecting the Northeastern U.S., with a net probable maximum pre-tax loss of $658 million, followed by windstorms affecting the Gulf of Mexico and Florida Tri-County with net probable maximum pre-tax losses of $608 million and $451 million, respectively. Based on in-force exposure estimated as of July 1, 2014, our modeled peak zone exposure was a windstorm affecting the Northeastern U.S., with a net probable maximum pre-tax loss of $674 million, followed by windstorms affecting the Gulf of Mexico and Florida Tri-County with net probable maximum pre-tax losses of $623 million and $426 million, respectively. Our exposures to other perils, such as U.S. earthquake and international events, was less than the exposures arising from U.S. windstorms and hurricanes in both periods. As of October 1, 2014, our modeled peak zone earthquake exposure (Los Angeles earthquake) represented approximately 51% of our peak zone catastrophe exposure, and our modeled peak zone international exposure (Japan earthquake) was substantially less than both our peak zone windstorm and earthquake exposures. Net probable maximum pre-tax loss estimates are net of expected reinsurance recoveries, before income tax and before excess reinsurance reinstatement premiums. Loss estimates are reflective of the zone indicated and not the entire portfolio. Since hurricanes and windstorms can affect more than one zone and make multiple landfalls, our loss estimates include clash estimates from other zones.

The loss estimates shown above do not represent our maximum exposures and it is highly likely that our actual incurred losses would vary materially from the modeled estimates. There can be no assurances that we will not suffer a net loss greater than 25% of total shareholders’ equity available to Arch from one or more catastrophic events due to several factors, including the inherent uncertainties in estimating the frequency and severity of such events and the margin of error in making such determinations resulting from potential inaccuracies and inadequacies in the data provided by clients and brokers, the modeling techniques and the application of such techniques or as a result of a decision to change the percentage of shareholders’ equity exposed to a single catastrophic event. Actual losses may also increase if our reinsurers fail to meet their obligations to us or the reinsurance protections purchased by us are exhausted or are otherwise unavailable. See “Risk Factors—Risk Relating to Our Industry” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Natural and Man-Made Catastrophic Events” in our 2013 Form 10-K.

Financial Measures

Management uses the following three key financial indicators in evaluating our performance and measuring the overall growth in value generated for ACGL’s common shareholders:

Book Value per Common Share

Book value per common share represents total common shareholders’ equity available to Arch divided by the number of common shares outstanding. Management uses growth in book value per common share as a key measure of the value generated for our common shareholders each period and believes that book value per common share is the key driver of ACGL’s share price over time. Book value per common share is impacted by, among other factors, our underwriting results, investment returns and share repurchase activity, which has an accretive or dilutive impact on book value per common share depending on the purchase price. Book value per common share was $44.04 at September 30, 2014, compared to $43.73 at June 30, 2014 and $38.34 at September 30, 2013. The 0.7%increase in the 2014 third quarter was driven by underwriting returns, offset by the impact of foreign exchange and investment returns, while the 14.9%increase for the trailing twelve months was driven by underwriting and investment returns.

47

Operating Return on Average Common Equity

Operating return on average common equity (“Operating ROAE”) represents annualized after-tax operating income available to Arch common shareholders divided by the average of beginning and ending common shareholders’ equity available to Arch during the period. After-tax operating income available to Arch common shareholders, a “non-GAAP measure” as defined in the SEC rules, represents net income available to Arch common shareholders, excluding net realized gains or losses, net impairment losses recognized in earnings, equity in net income or loss of investment funds accounted for using the equity method and net foreign exchange gains or losses, net of income taxes. Management uses Operating ROAE as a key measure of the return generated to common shareholders and has set an objective to achieve an average Operating ROAE of 15% or greater over the insurance cycle, which it believes to be an attractive return to common shareholders given the risks we assume. See “Comment on Non-GAAP Financial Measures.” Our Operating ROAE was 9.7% for the 2014 third quarter, compared to 11.9% for the 2013 third quarter, and 11.2% for the nine months ended September 30, 2014, compared to 11.9% for the 2013 period. The lower level of Operating ROAE for the 2014 third quarter primarily resulted from a lower level of underwriting income, reflecting an increase in attritional large losses and changes in mix of business, partially offset by a lower level of catastrophic activity. Operating ROAE for the 2014 periods also reflected a higher level of average common shareholders’ equity compared to the 2013 periods. Our Operating ROAE also reflects the impact of new initiatives, such as our U.S. mortgage business, which required an upfront capital commitment but will take time to contribute significantly to our returns.

Total Return on Investments

Total return on investments includes investment income, equity in net income or loss of investment funds accounted for using the equity method, net realized gains and losses and the change in unrealized gains and losses generated by Arch’s investment portfolio. Total return is calculated on a pre-tax basis and before investment expenses, excluding amounts reflected in the ‘other’ segment, and reflects the effect of financial market conditions along with foreign currency fluctuations. Management uses total return on investments as a key measure of the return generated to Arch common shareholders on the capital held in the business, and compares the return generated by our investment portfolio against benchmark returns which we measured our portfolio against during the periods.

The benchmark return index is a customized combination of indices intended to approximate a target portfolio by asset mix and average credit quality while also matching the approximate estimated duration and currency mix of our insurance and reinsurance liabilities. Although the estimated duration and average credit quality of this index will move as the duration and rating of its constituent securities change, generally we do not adjust the composition of the benchmark return index except to incorporate the currency mix as noted above. The benchmark return index should not be interpreted as expressing a preference for or aversion to any particular sector or sector weight. The index is intended solely to provide, unlike many master indices that change based on the size of their constituent indices, a relatively stable basket of investable indices.

At September 30, 2014, the benchmark return index had an average credit quality of “Aa2” by Moody’s Investors Service (“Moody’s”), an estimated duration of 3.49 years and included weightings to the following indices:

	Weighting
The Bank of America Merrill Lynch 1-10 Year AA U.S. Corporate & Yankees Index	21.250	%
The Bank of America Merrill Lynch 1-5 Year U.S. Treasury Index	13.000
The Bank of America Merrill Lynch U.S. Mortgage Backed Securities Index	11.875
Barclays Capital CMBS, AAA Index	10.000
The Bank of America Merrill Lynch 1-10 Year U.S. Municipal Securities Index	7.125
The Bank of America Merrill Lynch 1-10 Year Euro Government Bond Index	5.500
The Bank of America Merrill Lynch US Bullet Agency Securities 1-10 Years Index	5.000
The Bank of America Merrill Lynch 0-3 Month U.S. Treasury Bill Index	5.000
MSCI World Free Index	5.000
The Bank of America Merrill Lynch 5-10 Year U.S. Treasury Index	3.250
The Bank of America Merrill Lynch 1-10 Year U.K. Gilt Index	3.000
The Bank of America Merrill Lynch U.S. High Yield Constrained Index	2.750
Barclays Capital U.S. High-Yield Corporate Loan Index	2.750
The Bank of America Merrill Lynch 1-10 Year Australia Government Bond Index	2.500
The Bank of America Merrill Lynch 1-5 Year Canada Government Bond Index	2.000
Total	100.000	%

48

The following table summarizes the pre-tax total return (before investment expenses) of investments managed by Arch compared to the benchmark return against which we measured our portfolio during the periods:

	Arch Portfolio		Benchmark Return
Pre-tax total return (before investment expenses):
2014 third quarter	(0.51	)%	(0.89	)%
2013 third quarter	1.43	%	1.36	%
Nine Months Ended September 30, 2014	2.32	%	2.17	%
Nine Months Ended September 30, 2013	0.31	%	0.38	%

Total return for the 2014 third quarter reflected the impact of the U.S. Dollar strengthening against the Euro, British Pound Sterling and other major currencies on non-U.S. Dollar denominated investments. Excluding foreign exchange, total return was 0.21% for the 2014 third quarter, compared to 0.84% for the 2013 third quarter, and 2.89% for the nine months ended September 30, 2014, compared to 0.27% for the 2013 period.

Comment on Non-GAAP Financial Measures

Throughout this filing, we present our operations in the way we believe will be the most meaningful and useful to investors, analysts, rating agencies and others who use our financial information in evaluating the performance of our company. This presentation includes the use of after-tax operating income available to Arch common shareholders, which is defined as net income available to Arch common shareholders, excluding net realized gains or losses, net impairment losses recognized in earnings, equity in net income or loss of investment funds accounted for using the equity method and net foreign exchange gains or losses, net of income taxes. The presentation of after-tax operating income available to Arch common shareholders is a “non-GAAP financial measure” as defined in Regulation G. The reconciliation of such measure to net income available to Arch common shareholders (the most directly comparable GAAP financial measure) in accordance with Regulation G is included under “Results of Operations” below.

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

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

49

RESULTS OF OPERATIONS

The following table summarizes, on an after-tax basis, our consolidated financial data, including a reconciliation of after-tax operating income available to Arch common shareholders to net income available to Arch common shareholders:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2014			2013			2014			2013
After-tax operating income available to Arch common shareholders	$	142,055		$	149,205		$	467,128		$	442,974
Net realized gains (losses), net of tax	27,476			(3,442		)	96,016			65,260
Net impairment losses recognized in earnings, net of tax	(8,593		)	(728		)	(26,313		)	(3,698		)
Equity in net income of investment funds accounted for using the equity method, net of tax	4,765			5,665			16,983			30,429
Net foreign exchange gains (losses), net of tax	57,488			(41,359		)	48,924			(3,177		)
Net income available to Arch common shareholders	$	223,191		$	109,341		$	602,738		$	531,788

Segment Information

During the 2014 first quarter, to reflect activity during the period as described below, we changed our segment structure and added two new segments (mortgage and ‘other’). We now classify our businesses into three underwriting segments — insurance, reinsurance and mortgage — and two other operating segments — ‘other’ and corporate (non-underwriting). Our 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 our chief operating decision makers, the Chairman, President and Chief Executive Officer of ACGL and the Chief Financial Officer of ACGL. The chief operating decision makers do not assess performance, measure return on equity or make resource allocation decisions on a line of business basis. Management measures segment performance for our three underwriting segments based on underwriting income or loss. We do not manage our assets by underwriting segment, with the exception of goodwill and intangible assets, and, accordingly, investment income is not allocated to each underwriting segment.

We determined our 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 our consolidated financial statements. Intersegment business is allocated to the segment accountable for the underwriting results. The corporate (non-underwriting) segment results include net investment income, other income (loss), other expenses incurred by us, interest expense, net realized gains or losses, net impairment losses included in earnings, equity in net income (loss) of investment funds accounted for using the equity method, net foreign exchange gains or losses, income taxes and items related to our non-cumulative preferred shares. Such amounts exclude the results of the ‘other’ segment.

The mortgage segment was formed in the 2014 first quarter and consists of our mortgage insurance and reinsurance business, including Arch MI U.S. The mortgage segment also provides reinsurance on both a proportional and non-proportional basis globally, direct mortgage insurance in Europe and various risk-sharing products to government sponsored entities and mortgage lenders.

The ‘other’ segment includes the results of Watford, which is a multi-line Bermuda reinsurance company launched in late March 2014. Watford has its own management and board of directors that is responsible for the overall profitability of its results. We are required to consolidate the results of Watford in our financial statements. The portion of Watford’s earnings attributable to third party investors is recorded in the consolidated statements of income as ‘amounts attributable to noncontrolling interests.’ For the ‘other’ segment, performance is measured based on net income or loss.

50

Insurance Segment

The following table sets forth our insurance segment’s underwriting results:

	Three Months Ended September 30,								Nine Months Ended September 30,
	2014			2013			% Change		2014			2013			% Change
Gross premiums written	$	726,683		$	682,839		6.4		$	2,309,560		$	2,075,560		11.3
Premiums ceded	(187,689		)	(180,868		)			(646,082		)	(567,471		)
Net premiums written	538,994			501,971			7.4		1,663,478			1,508,089			10.3
Change in unearned premiums	(19,607		)	(22,842		)			(158,878		)	(125,339		)
Net premiums earned	519,387			479,129			8.4		1,504,600			1,382,750			8.8
Other underwriting income	499			545					1,513			1,599
Losses and loss adjustment expenses	(338,319		)	(305,921		)			(936,615		)	(880,580		)
Acquisition expenses, net	(81,775		)	(82,799		)			(235,156		)	(227,806		)
Other operating expenses	(83,138		)	(75,734		)			(250,111		)	(232,216		)
Underwriting income	$	16,654		$	15,220		9.4		$	84,231		$	43,747		92.5
Underwriting Ratios							% Point Change								% Point Change
Loss ratio	65.1		%	63.8		%	1.3		62.3		%	63.7		%	(1.4	)
Acquisition expense ratio	15.7		%	17.3		%	(1.6	)	15.6		%	16.5		%	(0.9	)
Other operating expense ratio	16.0		%	15.8		%	0.2		16.6		%	16.8		%	(0.2	)
Combined ratio	96.8		%	96.9		%	(0.1	)	94.5		%	97.0		%	(2.5	)

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

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

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

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

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

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

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

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

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

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Premiums Written.

The following table sets forth our insurance segment’s net premiums written by major line of business:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
	Amount		%	Amount		%	Amount		%	Amount		%
Programs	$	129,227	24	$	110,637	22	$	378,189	23	$	322,892	21
Professional lines	119,798		22	124,004		25	357,117		22	370,019		25
Construction and national accounts	55,342		10	48,545		10	230,010		14	204,933		14
Property, energy, marine and aviation	53,485		10	77,201		15	200,771		12	242,487		16
Excess and surplus casualty	50,552		10	44,794		9	153,281		9	101,056		7
Travel, accident and health	44,500		8	32,158		6	119,731		7	82,068		5
Lenders products	27,799		5	22,610		5	74,714		4	78,364		5
Other	58,291		11	42,022		8	149,665		9	106,270		7
Total	$	538,994	100	$	501,971	100	$	1,663,478	100	$	1,508,089	100

2014 Third Quarter versus 2013 Third Quarter. Gross premiums written by the insurance segment in the 2014 third quarter were 6.4%higher than in the 2013 third quarter, while net premiums written were 7.4%higher than in the 2013 third quarter. The growth in net premiums written primarily resulted from increases in: programs; travel, accident and health; alternative markets; construction and national accounts; and excess and surplus casualty. Such amounts were partially offset by reductions in property, energy, marine and aviation business and professional lines. The increase in programs reflects underlying exposure growth and rate increases in existing programs and new business while the growth in travel, accident and health primarily resulted from expansion in existing and new distribution channels. The higher level of alternative markets reflected new accounts resulting from a renewal rights agreement entered into in the 2014 second quarter, growth in construction and national accounts primarily reflected new national accounts business written while growth in excess and surplus casualty primarily resulted from contract binding business. The decrease in property, energy, marine and aviation reflected reductions in property and marine business in response to current market conditions while the lower level of professional lines business was primarily due to a continued strategic reduction in exposure to international business.

Nine Months Ended September 30, 2014 versus 2013. Gross premiums written by the insurance segment for the nine months ended September 30, 2014 were 11.3%higher than in the 2013 period, while net premiums written were 10.3%higher than in the 2013 period. The differential in gross versus net premiums written primarily resulted from growth in alternative markets business which is subject to a high level of cessions, primarily to captives, and reflects increases in lines such as programs and contract binding (which was launched in early 2013), both of which are retained at a high level. The growth in net premiums written primarily resulted from increases in: programs; excess and surplus casualty; alternative markets; travel, accident and health; and construction and national accounts. Such amounts were partially offset by reductions in professional lines and property, energy, marine and aviation lines. The increase in program business resulted from new business, underlying exposure growth and rate strengthening within existing programs. The growth in excess and surplus casualty primarily resulted from contract binding business along with rate increases while the increase in alternative markets reflected new accounts written resulting from a renewal rights agreement entered into in the 2014 second quarter. Growth in travel, accident and health primarily resulted from expansion in existing and new distribution channels while the increase in construction and national accounts primarily resulted from growth in existing accounts and rate increases. The decrease in professional lines was primarily due to a continued strategic reduction in exposure to international business while the reduction in property lines reflected reductions in property and marine business in response to current market conditions.

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Net Premiums Earned.

The following table sets forth our insurance segment’s net premiums earned by major line of business:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
	Amount		%	Amount		%	Amount		%	Amount		%
Programs	$	118,087	23	$	99,250	21	$	341,311	23	$	280,802	20
Professional lines	118,204		23	124,021		26	346,979		23	374,218		27
Construction and national accounts	68,229		13	65,335		14	209,282		14	183,410		13
Property, energy, marine and aviation	59,432		11	77,437		16	187,242		12	227,420		17
Excess and surplus casualty	48,716		9	31,458		6	131,423		9	82,866		6
Travel, accident and health	34,991		7	23,086		5	93,701		6	69,171		5
Lenders products	23,591		5	24,573		5	70,186		5	74,477		5
Other	48,137		9	33,969		7	124,476		8	90,386		7
Total	$	519,387	100	$	479,129	100	$	1,504,600	100	$	1,382,750	100

Net premiums written are primarily earned on a pro rata basis over the terms of the policies for all products, usually 12 months. Net premiums earned in the 2014 third quarter were 8.4%higher than in the 2013 third quarter and 8.8%higher for the nine months ended September 30, 2014 than in the 2013 period. Net premiums earned reflect changes in net premiums written over the previous five quarters.

Losses and Loss Adjustment Expenses.

The table below shows the components of the insurance segment’s loss ratio:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2014		2013		2014		2013
Current year	67.3	%	67.5	%	65.4	%	66.5	%
Prior period reserve development	(2.2	)%	(3.7	)%	(3.1	)%	(2.8	)%
Loss ratio	65.1	%	63.8	%	62.3	%	63.7	%

Current Year Loss Ratio.

The insurance segment’s current year loss ratio in the 2014 third quarter was 0.2 points lower than in the 2013 third quarter and 1.1 points lower for the nine months ended September 30, 2014 than in the 2013 period. The 2014 third quarter loss ratio reflected 0.4 points of current year catastrophic activity, compared to 2.6 points in the 2013 third quarter, and reflected a higher level of non-catastrophic large loss activity, primarily in aviation war business. The loss ratio for the nine months ended September 30, 2014 reflected 0.6 points of current year catastrophic activity, compared to 1.4 points for the 2013 period. The loss ratios for the 2014 periods also reflected the impact of rate improvement on net premiums earned over the previous five quarters and changes in the mix of business.

Prior Period Reserve Development.

2014 Third Quarter: The insurance segment’s net favorable development of $11.4 million, or 2.2 points, consisted of $15.3 million of net favorable development in short-tailed lines and $3.9 million of net adverse development in medium-tailed and long-tailed lines. Favorable development in short-tailed lines primarily consisted of reductions in property (including special risk other than marine) reserves from the 2011 to 2013 accident years (i.e., the year in which a loss occurred), primarily due to varying levels of reported claims activity. Development on the 2005 to 2013 named catastrophic events was favorable by $2.1 million in the quarter. Net adverse development in medium-tailed and long-tailed lines reflected increases in construction reserves of $8.4 million, primarily resulting from higher reported losses in the 2009 to 2011 accident years, and increases in program reserves of $7.5 million, reflecting higher reported losses in the 2011 and 2012 accident years. In addition, the insurance segment results reflected favorable development in professional lines of $6.9 million and in marine and other of $5.1 million.

2013 Third Quarter: The insurance segment’s net favorable development of $17.5 million, or 3.7 points, consisted of $24.9 million of net favorable development in short-tailed lines and $7.4 million of net adverse development in medium-tailed and long-tailed lines. Favorable development in short-tailed lines primarily consisted of reductions in property (including

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special risk other than marine) reserves from the 2007 to 2012 accident years, primarily due to varying levels of reported claims activity. Development on the 2005 to 2012 named catastrophic events was favorable by $6.9 million in the quarter. Net adverse development in medium-tailed and long-tailed lines reflected increases of $16.3 million in program reserves, primarily due to a small number of programs, $4.5 million in casualty reserves, primarily from the 2006 and 2008 accident years, and $5.2 million in construction reserves, spread between the 2007 to 2010 accident years. Such amounts were partially offset by reductions of $7.4 million in healthcare reserves, $4.7 million in executive assurance reserves and $4.6 million in excess workers' compensation reserves, all spread across various accident years.

Nine Months Ended September 30, 2014: The insurance segment’s net favorable development of $46.4 million, or 3.1 points, consisted of $56.0 million of net favorable development in short-tailed lines and $9.6 million of net adverse development in medium-tailed and long-tailed lines. Favorable development in short-tailed lines primarily consisted of reductions in property (including special risk other than marine) reserves from the 2008 to 2013 accident years, primarily due to varying levels of reported claims activity. Development on the 2005 to 2013 named catastrophic events was favorable by $8.3 million for the 2014 period. Net adverse development in medium-tailed and long-tailed lines reflected increases in construction reserves of $22.4 million, reflecting higher reported losses in the 2009 to 2012 accident years, and in program reserves of $21.3 million, reflecting higher reported losses in the 2011 to 2013 accident years. In addition, the insurance segment results reflected favorable development in professional lines of $18.8 million and in marine and other of $15.3 million.

Nine Months Ended September 30, 2013: The insurance segment’s net favorable development of $38.5 million, or 2.8 points, consisted of $52.7 million of net favorable development in short-tailed lines, partially offset by $14.2 million of net adverse development in medium-tailed and long-tailed lines. Favorable development in short-tailed lines primarily consisted of reductions in property (including special risk other than marine) reserves from the 2008 to 2011 accident years, primarily due to varying levels of reported claims activity. Development on the 2005 to 2012 named catastrophic events was favorable by $15.5 million in the period. Net adverse development in medium-tailed and long-tailed lines included increases of $19.1 million in program reserves, primarily due to a small number of programs, $14.9 million in casualty reserves, primarily related to claims from the two most recent accident years on certain Canadian accounts which were non-renewed, and $10.5 million in construction reserves, spread between the 2007 to 2010 accident years, partially offset by reductions of $14.9 million in healthcare reserves, $4.6 million in national accounts, $4.5 million in marine, and $4.2 million in excess workers' compensation, all spread across various accident years.

Underwriting Expenses.

2014 Third Quarter versus 2013 Third Quarter: The insurance segment’s underwriting expense ratio was 31.7% in the 2014 third quarter, compared to 33.1% in the 2013 third quarter. The acquisition expense ratio was 15.7% in the 2014 third quarter, compared to 17.3% in the 2013 third quarter. The comparison of the 2014 third quarter and 2013 third quarter acquisition expense ratios is influenced by, among other things, the mix and type of business written and earned and the level of ceding commissions. In addition, the acquisition expense ratio was impacted by changes in development of prior year loss reserves which increased the 2014 third quarter ratio by 0.6 points, compared to 0.9 points in the 2013 third quarter. The other operating expense ratio was 16.0% for the 2014 third quarter, compared to 15.8% for the 2013 third quarter, as a higher level of aggregate expenses was substantially offset by growth in net premiums earned.

Nine Months Ended September 30, 2014 versus 2013: The insurance segment’s underwriting expense ratio was 32.2% for the nine months ended September 30, 2014, compared to 33.3% in the 2013 period. The acquisition expense ratio was 15.6% for the nine months ended September 30, 2014, compared to 16.5% in the 2013 period. The acquisition expense ratio was impacted by changes in development of prior year loss reserves which increased the ratio by 0.8 points for the nine months ended September 30, 2014, compared to 0.4 points in the 2013 period. The other operating expense ratio was 16.6% for the nine months ended September 30, 2014, compared to 16.8% for the 2013 period, reflecting the higher level of net premiums earned.

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Reinsurance Segment

The following table sets forth our reinsurance segment’s underwriting results:

	Three Months Ended September 30,								Nine Months Ended September 30,
	2014			2013			% Change		2014			2013			% Change
Gross premiums written	$	345,747		$	330,458		4.6		$	1,212,641		$	1,099,803		10.3
Premiums ceded	(83,502		)	(17,927		)			(215,623		)	(74,581		)
Net premiums written	262,245			312,531			(16.1	)	997,018			1,025,222			(2.8	)
Change in unearned premiums	34,303			(9,433		)			(23,495		)	(138,479		)
Net premiums earned	296,548			303,098			(2.2	)	973,523			886,743			9.8
Other underwriting income	215			(19		)			834			367
Losses and loss adjustment expenses	(123,784		)	(119,107		)			(413,745		)	(358,247		)
Acquisition expenses, net	(60,205		)	(61,063		)			(199,673		)	(167,497		)
Other operating expenses	(36,337		)	(32,108		)			(110,198		)	(96,207		)
Underwriting income	$	76,437		$	90,801		(15.8	)	$	250,741		$	265,159		(5.4	)
Underwriting Ratios							% Point Change								% Point Change
Loss ratio	41.7		%	39.3		%	2.4		42.5		%	40.4		%	2.1
Acquisition expense ratio	20.3		%	20.1		%	0.2		20.5		%	18.9		%	1.6
Other operating expense ratio	12.3		%	10.6		%	1.7		11.3		%	10.8		%	0.5
Combined ratio	74.3		%	70.0		%	4.3		74.3		%	70.1		%	4.2

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

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

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

• Other specialty: provides coverage to ceding company clients for non-excess motor, including U.K. business primarily emanating from one client, and other lines including surety, accident and health, workers’ compensation catastrophe, agriculture, trade credit and political risk.

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

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

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

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Premiums Written.

The following table sets forth our reinsurance segment’s net premiums written by major line of business:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
	Amount		%	Amount		%	Amount		%	Amount		%
Other specialty	$	84,702	32	$	125,666	40	$	338,032	34	$	318,483	31
Casualty	64,048		24	58,893		19	258,584		26	207,640		20
Property excluding property catastrophe	77,186		30	78,085		25	227,200		23	230,083		22
Property catastrophe	24,056		9	33,810		11	130,554		13	210,826		21
Marine and aviation	9,767		4	13,283		4	33,558		3	50,744		5
Other	2,486		1	2,794		1	9,090		1	7,446		1
Total	$	262,245	100	$	312,531	100	$	997,018	100	$	1,025,222	100
Pro rata	$	160,472	61	$	208,701	67	$	458,332	46	$	467,155	46
Excess of loss	101,773		39	103,830		33	538,686		54	558,067		54
Total	$	262,245	100	$	312,531	100	$	997,018	100	$	1,025,222	100

2014 Third Quarter versus 2013 Third Quarter. Gross premiums written by the reinsurance segment in the 2014 third quarter were 4.6%higher than in the 2013 third quarter, while net premiums written were 16.1%lower than in the 2013 third quarter. The differential in gross versus net premiums written primarily reflects retrocessions of premiums to Watford Re (included in the ‘other’ segment) in the 2014 third quarter. The lower level of net premiums written reflected decreases in other specialty, property catastrophe and marine and aviation lines, partially offset by growth in casualty business. Other specialty premiums in the 2013 third quarter included $55.2 million from a multi-line quota share reinsurance agreement which was not expected to, and did not, recur in 2014, partially offset by increases in accident and health and motor business. The reduction in property catastrophe and marine and aviation business reflected non-renewals and share decreases in response to current market conditions and a higher usage of retrocessional coverage. The increase in casualty premiums reflected new international excess motor business as well as quota shares of U.S. professional liability business which were written after June 30, 2013, partially offset by cessions to Watford Re.

Nine Months Ended September 30, 2014 versus 2013. Gross premiums written by the reinsurance segment for the nine months ended September 30, 2014 were 10.3%higher than in the 2013 period, while net premiums written were 2.8%lower than in the 2013 period. The differential in gross versus net premiums written primarily reflects retrocessions of premiums to Watford Re (included in the ‘other’ segment) for the nine months ended September 30, 2014.. The growth in net premiums written reflected increases in casualty and other specialty lines, partially offset by reductions in property catastrophe and marine lines. Growth in casualty premiums reflected new international excess motor business as well as quota shares of U.S. professional liability business which were written after June 30, 2013, partially offset by cessions to Watford Re, while the increase in other specialty premiums primarily reflected a higher level of accident and health business. In addition, other specialty premiums in the 2013 period included $55.2 million from a multi-line quota share reinsurance agreement which was not expected to, and did not, recur in 2014. The reduction in property lines reflected market conditions, selected non-renewals and a higher usage of retrocessional coverage.

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Net Premiums Earned.

The following table sets forth our reinsurance segment’s net premiums earned by major line of business:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
	Amount		%	Amount		%	Amount		%	Amount		%
Other specialty	$	97,337	33	$	103,565	34	$	330,779	34	$	272,666	31
Casualty	79,477		27	59,324		20	248,399		25	169,251		19
Property excluding property catastrophe	71,663		24	69,975		23	216,209		22	201,857		23
Property catastrophe	32,423		11	48,595		16	122,087		13	176,160		20
Marine and aviation	13,110		4	18,566		6	47,264		5	59,062		6
Other	2,538		1	3,073		1	8,785		1	7,747		1
Total	$	296,548	100	$	303,098	100	$	973,523	100	$	886,743	100
Pro rata	$	156,830	53	$	159,930	53	$	522,611	54	$	431,416	49
Excess of loss	139,718		47	143,168		47	450,912		46	455,327		51
Total	$	296,548	100	$	303,098	100	$	973,523	100	$	886,743	100

Net premiums written, irrespective of the class of business, are generally earned on a pro rata basis over the terms of the underlying policies or reinsurance contracts. Net premiums earned for the 2014 third quarter were 2.2%lower than in the 2013 third quarter and 9.8%higher for the nine months ended September 30, 2014 than in the 2013 period. Net premiums earned reflect changes in net premiums written over the previous five quarters.

Losses and Loss Adjustment Expenses.

The table below shows the components of the reinsurance segment’s loss ratio:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2014		2013		2014		2013
Current year	62.3	%	56.3	%	63.1	%	57.8	%
Prior period reserve development	(20.6	)%	(17.0	)%	(20.6	)%	(17.4	)%
Loss ratio	41.7	%	39.3	%	42.5	%	40.4	%

Current Year Loss Ratio.

The reinsurance segment’s current year loss ratio in the 2014 third quarter was 6.0 points higher than in the 2013 third quarter and 5.3 points higher for the nine months ended September 30, 2014 than in the 2013 period. The 2014 third quarter loss ratio reflected 4.6 points of current year catastrophic activity, compared to 2.0 points in the 2013 third quarter. The loss ratio for the nine months ended September 30, 2014 reflected 3.2 points of current year catastrophic activity, compared to 5.7 points for the 2013 period. The current year loss ratio for the 2014 third quarter and nine months ended September 30, 2014 also reflects changes in the mix of business earned due, in part, to a lower contribution from property catastrophe business.

Prior Period Reserve Development.

2014 Third Quarter: The reinsurance segment’s net favorable development of $61.0 million, or 20.6 points, consisted of $26.1 million from short-tailed lines and $34.9 million from long-tailed and medium-tailed lines. Favorable development in short-tailed lines included $18.5 million from property catastrophe and property other than property catastrophe reserves, primarily from the 2011 to 2013 underwriting years (i.e., all premiums and losses attributable to contracts having an inception or renewal date within the given twelve-month period). Contained within this release was favorable development from the 2005 to 2013 named catastrophic events of $3.5 million. The net reduction of loss estimates for the reinsurance segment’s short-tailed lines primarily resulted from varying levels of reported and paid claims activity than previously anticipated which led to decreases in certain loss ratio selections during the period. Favorable development in long-tailed lines reflected reductions in casualty reserves of $29.8 million, primarily from the 2005 to 2010 underwriting years based on varying levels of reported and paid claims activity, and a reduction of $4.8 million in marine and aviation reserves, across all underwriting years.

2013 Third Quarter: The reinsurance segment’s net favorable development of $51.4 million, or 17.0 points, consisted of $29.0 million from short-tailed lines and $22.4 million from long-tailed and medium-tailed lines. Favorable development in short-tailed lines included $23.5 million from property catastrophe and property other than property catastrophe reserves,

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primarily from the 2010 to 2012 underwriting years. Contained within this amount was favorable development from the 2005 to 2012 named catastrophic events of $8.4 million. The net reduction of loss estimates for the reinsurance segment's short-tailed lines primarily resulted from varying levels of reported and paid claims activity than previously anticipated which led to decreases in certain loss ratio selections during the period. Favorable development in long-tailed lines reflected reductions in casualty reserves, primarily from the 2002 to 2008 underwriting years based on varying levels of reported and paid claims activity.

Nine Months Ended September 30, 2014: The reinsurance segment’s net favorable development of $200.5 million, or 20.6 points, consisted of $114.5 million from short-tailed lines and $86.0 million from long-tailed and medium-tailed lines. Favorable development in short-tailed lines included $86.5 million from property catastrophe and property other than property catastrophe reserves, primarily from the 2011 to 2013 underwriting years. Contained within this release was favorable development from the 2005 to 2013 named catastrophic events of $12.2 million. The net reduction of loss estimates for the reinsurance segment’s short-tailed lines primarily resulted from varying levels of reported and paid claims activity than previously anticipated which led to decreases in certain loss ratio selections during the period. Favorable development in long-tailed lines reflected reductions in casualty reserves of $69.9 million, primarily from the 2003 to 2010 underwriting years based on varying levels of reported and paid claims activity, and a reduction of $13.4 million in marine and aviation reserves, across all underwriting years.

Nine Months Ended September 30, 2013: The reinsurance segment’s net favorable development of $154.3 million, or 17.4 points, consisted of $87.0 million of net favorable development in short-tailed lines and $67.3 million from long-tailed and medium-tailed lines. Favorable development in short-tailed lines included $92.5 million from property catastrophe and property other than property catastrophe reserves, primarily from the 2008 to 2012 underwriting years. Contained within this amount was favorable development from the 2005 to 2012 named catastrophic events of $27.6 million. The net reduction of loss estimates for the reinsurance segment's short-tailed lines primarily resulted from varying levels of reported and paid claims activity than previously anticipated which led to decreases in certain loss ratio selections during the period. Such amounts were partially offset by an increase in estimates for U.S. crop hail losses of $8.6 million. Favorable development in long-tailed lines reflected reductions in casualty reserves, primarily from the 2002 to 2008 underwriting years based on varying levels of reported and paid claims activity, while favorable development in medium-tailed lines was across most underwriting years.

Underwriting Expenses.

2014 Third Quarter versus 2013 Third Quarter: The underwriting expense ratio for the reinsurance segment was 32.6% in the 2014 third quarter, compared to 30.7% in the 2013 third quarter. The acquisition expense ratio for the 2014 third quarter was 20.3%, compared to 20.1% for the 2013 third quarter. The acquisition expense ratio was impacted by changes in development of prior year loss reserves which increased the 2014 third quarter acquisition expense ratio by 0.2 points. In addition, the comparison of the acquisition expense ratios is influenced by, among other things, the mix and type of business written and earned and the level of ceding commissions. The operating expense ratio for the 2014 third quarter was 12.3%, compared to 10.6% in the 2013 third quarter, reflecting a higher level of aggregate expenses due, in part, to selected expansion of the reinsurance segment's operating platform.

Nine Months Ended September 30, 2014 versus 2013: The underwriting expense ratio for the reinsurance segment was 31.8% for the nine months ended September 30, 2014, compared to 29.7% in the 2013 period. The acquisition expense ratio was 20.5% for the nine months ended September 30, 2014, compared to 18.9% in the 2013 period. The 2014 ratio reflected a higher level of premiums earned on a pro rata basis, including two large contracts entered into in the second half of 2013, which resulted in a higher level of ceding commissions. The acquisition expense ratio was impacted by changes in development of prior year loss reserves which increased the acquisition expense ratio by 0.2 points, compared to a 0.1 point reduction in the 2013 period. The operating expense ratio for the nine months ended September 30, 2014 was 11.3%, compared to 10.8% in the 2013 period.

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Mortgage Segment

The following table sets forth our mortgage segment’s underwriting results:

	Three Months Ended September 30,								Nine Months Ended September 30,
	2014			2013			% Change		2014			2013			% Change
Gross premiums written	$	66,389		$	24,633		169.5		$	169,772		$	69,135		145.6
Premiums ceded	(7,904		)	—					(17,622		)	—
Net premiums written	58,485			24,633			137.4		152,150			69,135			120.1
Change in unearned premiums	(5,539		)	(11,860		)			(9,606		)	(32,042		)
Net premiums earned	52,946			12,773			314.5		142,544			37,093			284.3
Other underwriting income	988			—					2,970			—
Losses and loss adjustment expenses	(15,987		)	(2,017		)			(39,938		)	(6,274		)
Acquisition expenses, net	(11,958		)	(3,451		)			(32,593		)	(11,279		)
Other operating expenses	(17,913		)	(2,334		)			(48,077		)	(5,027		)
Underwriting income	$	8,076		$	4,971		62.5		$	24,906		$	14,513		71.6
Underwriting Ratios							% Point Change								% Point Change
Loss ratio	30.2		%	15.8		%	14.4		28.0		%	16.9		%	11.1
Acquisition expense ratio	22.6		%	27.0		%	(4.4	)	22.9		%	30.4		%	(7.5	)
Other operating expense ratio	33.8		%	18.3		%	15.5		33.7		%	13.6		%	20.1
Combined ratio	86.6		%	61.1		%	25.5		84.6		%	60.9		%	23.7

The mortgage segment includes the results of Arch MI U.S., a leading provider of mortgage insurance products and services to credit unions in the U.S. marketplace, which was acquired in January 2014, along with the Company’s other global mortgage insurance, reinsurance and risk-sharing products. Since the acquisition, Arch MI U.S. has made substantial progress in building out its sales force to serve banks and other mortgage originators.

Premiums Written.

The following table sets forth our mortgage segment’s net premiums written by client location and underwriting location (i.e., where the business is underwritten):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
	Amount		%	Amount		%	Amount		%	Amount		%
Net premiums written by client location:
United States	$	54,639	93	$	14,824	60	137,306		90	50,382		73
Other	3,846		7	9,809		40	14,844		10	18,753		27
Total	$	58,485	100	$	24,633	100	$	152,150	100	$	69,135	100
Net premiums written by underwriting location:
United States	$	32,229	55	$	—	—	$	73,554	48	$	—	—
Other	26,256		45	24,633		100	78,596		52	69,135		100
Total	$	58,485	100	$	24,633	100	$	152,150	100	$	69,135	100

2014 Third Quarter versus 2013 Third Quarter. Net premiums written in the 2014 third quarter included $32.2 million of business underwritten by Arch MI U.S., including $24.6 million from credit union clients and $7.6 million from other lenders. Amounts written from other lenders primarily resulted from lender paid mortgage insurance single premium transactions in the 2014 third quarter. In addition, net premiums written included $8.8 million from the 100% quota share indemnity reinsurance agreement with PMI for performing certificates of insurance that were issued by PMI from 2009 to 2011, while premiums on reinsurance treaties covering U.S. and international mortgages were substantially unchanged. The persistency rate represents the percentage of mortgage insurance in force at the beginning of a 12-month period that remains in force at the end of such period. The persistency rate of the Arch MI U.S. portfolio of mortgage loans was 81.2% at September 30, 2014, compared to 80.5% at June 30, 2014.

Nine Months Ended September 30, 2014 versus 2013. Net premiums written for the nine months ended September 30, 2014 included $73.6 million of business underwritten by Arch MI U.S. (representing activity from February to June 2014), including $65.7 million from credit union clients and $7.9 million from other lenders. In addition, net premiums written

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included $24.8 million from the PMI quota share agreement noted above. The mortgage segment’s net premiums written also included other reinsurance treaties covering U.S. and international mortgages.

Arch MI U.S. generated $1.98 billion of new insurance written (“NIW”) during the 2014 third quarter and $3.56 billion of NIW for the nine months ended September 30, 2014 (including activity for January 2014 for comparability purposes), primarily for credit union clients. NIW represents the original principal balance of all loans that received coverage during the period.

The following table provides details on the NIW generated by Arch MI U.S. for the 2014 periods:

(U.S. Dollars in millions)	Three Months Ended												Nine Months Ended
	September 30, 2014				June 30, 2014				March 31, 2014 (1)				September 30, 2014 (1)
Total new insurance written (NIW)	$	1,982			$	941			$	639			$	3,562
Total NIW by credit quality (FICO score):
>=740	$	1,279	64.6	%	$	534	56.8	%	$	375	58.7	%	$	2,188	61.4	%
680-739	629		31.7	%	339		36.0	%	225		35.2	%	$	1,193	33.5	%
620-679	74		3.7	%	68		7.2	%	39		6.1	%	$	181	5.1	%
Total	$	1,982	100.0	%	$	941	100.0	%	$	639	100.0	%	$	3,562	100.0	%
Total NIW by LTV:
95.01% and above	$	81	4.1	%	$	70	7.4	%	$	45	7.0	%	$	196	5.5	%
90.01% to 95.00%	904		45.6	%	500		53.1	%	330		51.6	%	$	1,734	48.7	%
85.01% to 90.00%	646		32.6	%	265		28.2	%	186		29.1	%	$	1,097	30.8	%
85.01% and below	351		17.7	%	106		11.3	%	78		12.3	%	$	535	15.0	%
Total	$	1,982	100.0	%	$	941	100.0	%	$	639	100.0	%	$	3,562	100.0	%
Total NIW purchase vs. refinance:
Purchase	$	1,234	62.3	%	$	786	83.5	%	$	487	76.2	%	$	2,507	70.4	%
Refinance	748		37.7	%	155		16.5	%	152		23.8	%	$	1,055	29.6	%
Total	$	1,982	100.0	%	$	941	100.0	%	$	639	100.0	%	$	3,562	100.0	%

_________________________________________________

(1) Includes activity for January 2014 for comparability purposes (pre-acquisition date).

Net Premiums Earned.

Net premiums earned for the 2014 periods were substantially higher than in the 2013 periods, primarily due to the acquisition of Arch MI U.S. along with a higher earned contribution from the mortgage segment’s quota share reinsurance business.

Losses and Loss Adjustment Expenses.

The table below shows the components of the mortgage segment’s loss ratio:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2014		2013		2014		2013
Current year	31.6	%	15.8	%	29.2	%	16.9	%
Prior period reserve development	(1.4	)%	—	%	(1.2	)%	—	%
Loss ratio	30.2	%	15.8	%	28.0	%	16.9	%

Unlike property and casualty business for which we estimate ultimate losses on premiums earned, losses on mortgage insurance business are only recorded at the time a borrower is delinquent on their mortgage, in accordance with mortgage insurance industry practice. Because our mortgage insurance reserving process does not take into account the impact of future losses from loans that are not in default, mortgage insurance loss reserves are not an estimate of ultimate losses. In addition to establishing loss reserves for loans in default, under GAAP, we are required to establish a premium deficiency reserve for our mortgage insurance products if the amount of expected future losses for a particular product and maintenance costs for such product exceeds expected future premiums, existing reserves and the anticipated investment income for such product. We evaluate whether a premium deficiency exists quarterly. No such reserve was established for the nine months ended September 30, 2014.

The mortgage segment’s current year loss ratio was 15.8 points higher in the 2014 third quarter compared to the 2013 third quarter and 12.3 points higher for the nine months ended September 30, 2014 than in the 2013 period. The current year

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loss ratio for the 2014 periods reflect changes in the mix of business earned, resulting in part from our acquisition of Arch MI U.S., when compared to the 2013 periods. The mortgage segment’s net favorable development for the 2014 third quarter of $0.7 million, or 1.4 points, and $1.8 million, or 1.2 points, for the nine months ended September 30, 2014 was spread across a number of underwriting years.

Underwriting Expenses.

2014 Third Quarter versus 2013 Third Quarter. The underwriting expense ratio for the mortgage segment was 56.4% in the 2014 third quarter, compared to 45.3% in the 2013 third quarter. The acquisition expense ratio was 22.6% for the 2014 third quarter, compared to 27.0% for the 2013 third quarter. The operating expense ratio was 33.8% for the 2014 third quarter, compared to 18.3% in the 2013 third quarter. As the mortgage segment’s mix is expected to shift more towards U.S. mortgage insurance business, the underwriting expense ratio is expected to stay at an elevated rate until Arch MI U.S. reaches scale with respect to non-credit union clientele.

Nine Months Ended September 30, 2014 versus 2013. The underwriting expense ratio for the mortgage segment was 56.6% for the nine months ended September 30, 2014, compared to 44.0% for the 2013 period. The acquisition expense ratio was 22.9% for the nine months ended September 30, 2014, compared to 30.4% for the 2013 period. The operating expense ratio was 33.7% for the nine months ended September 30, 2014, compared to 13.6% in the 2013 period. As the mortgage segment’s mix is expected to shift more towards U.S. mortgage insurance business, the underwriting expense ratio is expected to stay at an elevated rate until Arch MI U.S. reaches scale with respect to non-credit union clientele.

Other Segment

The following table sets forth our ‘other’ segment’s results:

	Three Months Ended September 30, 2014			Nine Months Ended September 30, 2014
Gross premiums written	$	103,483		$	190,239
Premiums ceded	(3,668		)	(6,428		)
Net premiums written	99,815			183,811
Change in unearned premiums	(65,045		)	(133,895		)
Net premiums earned	34,770			49,916
Losses and loss adjustment expenses	(23,583		)	(33,133		)
Acquisition expenses, net	(9,609		)	(14,625		)
Other operating expenses	(1,658		)	(4,402		)
Underwriting income (loss)	(80		)	(2,244		)
Net investment income	$	7,866		$	8,399
Other expenses	—			(2,329		)
Net realized gains	(12,896		)	(9,718		)
Net foreign exchange gains	(1,580		)	(1,017		)
Net income (loss)	(6,690		)	(6,909		)
Dividends attributable to redeemable noncontrolling interests (1)	(4,909		)	(9,818		)
Net income (loss) attributable to common interests	(11,599		)	(16,727		)
Amounts attributable to nonredeemable noncontrolling interests (1)	10,320			14,883
Net income (loss) available to Arch	$	(1,279	)	$	(1,844	)
Underwriting Ratios
Loss ratio	67.8		%	66.4		%
Acquisition expense ratio	27.6		%	29.3		%
Other operating expense ratio	4.8		%	8.8		%
Combined ratio	100.2		%	104.5		%
Total investable assets	$	1,124,048
Total assets	1,403,018
Total liabilities	304,712

_________________________________________________

(1)     Recorded as ‘amounts attributable to noncontrolling interests’ in the consolidated statements of income.

As noted earlier, the ‘other’ segment includes the results of Watford. Watford has its own management and board of directors and is responsible for the overall profitability of its results. We act as Watford’s reinsurance manager and Highbridge Principal Strategies, a subsidiary of JPMorgan Chase & Co., manages Watford’s investment assets, each under a long term

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services agreement. We invested $100.0 million to acquire approximately 11% of Watford’s common equity and a warrant to purchase additional common equity. We performed an analysis of Watford and concluded that Watford is a variable interest entity (“VIE”) and concluded that we are the primary beneficiary of Watford. As such, 100% of the results of Watford are included in our consolidated financial statements. Management measures segment performance for the ‘other’ segment based on net income or loss. See note 4, “Variable Interest Entity and Noncontrolling Interests” of the notes accompanying our consolidated financial statements for additional information. Watford’s premiums written are primarily in longer-tail lines, including casualty and other specialty treaties. In addition, Watford’s operating expenses for the nine months ended September 30, 2014 included $2.3 million of non-recurring initial costs (shown in the table above as ‘other expenses’).

Other Income or Expense Items (excluding amounts related to the ‘other’ segment)

Net Investment Income. The components of net investment income were derived from the following sources:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2014			2013			2014			2013
Fixed maturities	$	64,461		$	62,447		$	191,409		$	186,457
Term loan investments	5,717			5,296			16,619			15,539
Equity securities (dividends)	2,779			2,241			8,971			6,828
Short-term investments	152			417			660			1,173
Other (1)	7,896			3,753			21,681			14,786
Gross investment income	81,005			74,154			239,340			224,783
Investment expenses (2)	(8,766		)	(8,071		)	(27,650		)	(24,659		)
Net investment income	$	72,239		$	66,083		$	211,690		200,124

_________________________________________________

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

(2) Investment expenses were approximately 0.26% of average invested assets for the 2014 third quarter, compared to 0.25% for the 2013 third quarter, and 0.28% for the nine months ended September 30, 2014, compared to 0.27% for the 2013 period.

Investment income for the 2014 third quarter included $3.1 million of distributions received on a fund investment, compared to $4.1 million in the 2014 second quarter. The pre-tax investment income yield, calculated based on amortized cost and on an annualized basis, was 2.05% for the 2014 third quarter, compared to 2.05% for the 2014 second quarter and 2.08% for the 2013 third quarter, and 2.07% for the nine months ended September 30, 2014, compared to 2.16% for the 2013 period. Such yields reflect the effects of low prevailing interest rates available in the market and our investment strategy which puts an emphasis on total return. Yields on future investment income may vary based on financial market conditions, investment allocation decisions and other factors.

Other Income (Loss). We record income or loss from our investments in Gulf Reinsurance Limited (“Gulf Re”) and certain other investments using the equity method on a three month lag basis based on the availability of their financial statements. In addition, other income (loss) from time to time includes certain non-recurring items. We recorded a loss of $7.8 million in the 2014 third quarter (based upon Gulf Re’s 2014 second quarter results), compared to income of $0.6 million in the 2013 third quarter, and a loss of $5.1 million for the nine months ended September 30, 2014 (which included a non-recurring income item), compared to income of $2.7 million for the 2013 period. We expect to incur a loss related to our investment in Gulf Re in the 2014 fourth quarter of between $4.0 million and $6.0 million based on Gulf Re’s 2014 third quarter results.

Equity in Net Income of Investment Funds Accounted for Using the Equity Method. We recorded $5.0 million of equity in net income related to investment funds accounted for using the equity method in the 2014 third quarter, compared to $5.7 million for the 2013 third quarter, and $17.5 million for the nine months ended September 30, 2014, compared to $30.4 million for the 2013 period. We use the equity method on certain investments (which primarily invest in fixed maturity securities) due to the ownership structure of these investment funds, where we do not have a controlling interest and are not the primary beneficiary. In applying the equity method, these investments are initially recorded at cost and are subsequently adjusted based on our 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, which are typically structured as limited partnerships, are generally recorded on a one to three month lag based on the availability of reports from the investment funds. Certain of these funds employ leverage to achieve a higher rate of return on their assets under management. While leverage presents opportunities for increasing the total return of such investments, it may increase losses as well. Fluctuations in the carrying value of the investment funds accounted for using the equity method may increase the volatility of our reported results of operations. Investment funds accounted for using the equity method totaled $307.3 million at September 30, 2014, compared to $244.3 million at December 31, 2013.  

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Net Realized Gains or Losses. We recorded net realized gains of $31.4 million for the 2014 third quarter, compared to net realized losses of $6.0 million for the 2013 third quarter, and net realized gains of $102.1 million for the nine months ended September 30, 2014, compared to net realized gains of $65.0 million for the 2013 period. Currently, our portfolio is actively managed to maximize total return within certain guidelines. In assessing returns under this approach, we include net investment income, net realized gains and losses and the change in unrealized gains and losses generated by our investment portfolio. The effect of financial market movements on the investment portfolio will directly impact net realized gains and losses as the portfolio is adjusted and rebalanced. Net realized gains or losses from the sale of fixed maturities primarily resulted from our decisions to reduce credit exposure, to change duration targets, to rebalance our portfolios or due to relative value determinations. Net realized gains or losses also included changes in the fair value of assets and liabilities accounted for using the fair value option along with remeasurement of the contingent consideration liability related to our purchase of the CMG Entities. See note 2, “Business Acquired,” and note 7, “Investment Information—Net Realized Gains (Losses),” of the notes accompanying our consolidated financial statements for additional information.

Net Impairment Losses Recognized in Earnings. On a quarterly basis, we perform reviews of our available for sale investments to determine whether declines in fair value below the cost basis are considered other-than-temporary in accordance with applicable accounting guidance regarding the recognition and presentation of other-than-temporary impairments. The process of determining whether a security is other-than-temporarily impaired requires judgment and involves analyzing many factors. These factors include (i) an analysis of the liquidity, business prospects and overall financial condition of the issuer, (ii) the time period in which there was a significant decline in value, (iii) the significance of the decline, and (iv) the analysis of specific credit events. We evaluate the unrealized losses of our equity securities by issuer and determine if we can forecast a reasonable period of time by which the fair value of the securities would increase and we would recover our cost. If we are unable to forecast a reasonable period of time in which to recover the cost of our equity securities, we record a net impairment loss in earnings equivalent to the entire unrealized loss. We recorded $8.6 million of credit related impairments in earnings for the 2014 third quarter, compared to $0.7 million for the 2013 third quarter, and $26.3 million for the nine months ended September 30, 2014, compared to $3.7 million for the 2013 period. The OTTI recorded for the 2014 third quarter was primarily on one investment fund as the Company decided to redeem its holding in early October 2014. See note 7, “Investment Information—Other-Than-Temporary Impairments,” of the notes accompanying our consolidated financial statements for additional information.

Other Expenses. Other expenses, which are included in our other operating expenses and part of corporate and other (non-underwriting), were $10.4 million for the 2014 third quarter, compared to $7.9 million for the 2013 third quarter, and $36.5 million for the nine months ended September 30, 2014, compared to $32.2 million for the 2013 period. Such amounts primarily represent certain holding company costs necessary to support our worldwide insurance and reinsurance operations, share based compensation expense and costs associated with operating as a publicly traded company. Other expenses for the 2014 periods reflected a higher level of compensation costs than in the 2013 periods.

Interest expense. Interest expense was $4.2 million for the 2014 third quarter, compared to $5.9 million for the 2013 third quarter, and $32.9 million for the nine months ended September 30, 2014, compared to $17.7 million for the 2013 period. Interest expense for the 2014 third quarter included $12.4 million related to the Company’s senior notes and other borrowings, partially offset by an $8.2 million reduction in interest expense on a deposit accounting liability (i.e., a contract that does not pass risk transfer) in accordance with GAAP. The reduction in the 2014 third quarter resulted from a reassessment of the estimated ultimate liability due to a determination that paid losses are expected to be lower than initially anticipated. Because the contract does not pass risk transfer under GAAP, it is accounted for similar to a borrowing with accretion and changes in expectations surrounding the estimated ultimate liability impacting interest expense. The reduction of the estimated ultimate liability at September 30, 2014 will also reduce the rate of accretion recorded in interest expense for future periods. The higher level of interest expense for the nine months ended September 30, 2014 primarily resulted from interest related to the $500.0 million of 5.144% senior notes issued by Arch Capital Group (U.S.) Inc. (“Arch-U.S.”) in December 2013.

Net Foreign Exchange Gains or Losses. Net foreign exchange gains for the 2014 third quarter were $57.6 million (primarily net unrealized gains), compared to net foreign exchange losses for the 2013 third quarter of $40.6 million (net unrealized losses of $39.4 million and net realized losses of $1.1 million). Net foreign exchange gains for the nine months ended September 30, 2014 were $48.2 million (net unrealized gains of $48.9 million and net realized losses of $0.7 million), compared to net foreign exchange losses for the 2013 period of $2.5 million (net unrealized gains of $8.1 million and net realized losses of $10.6 million). Net unrealized foreign exchange gains or losses result from the effects of revaluing our net insurance liabilities required to be settled in foreign currencies at each balance sheet date. Changes in the value of investments held in foreign currencies due to foreign currency rate movements are reflected as a direct increase or decrease to shareholders’ equity and are not included in the consolidated statements of income. We have not matched a portion of our projected liabilities in foreign currencies with investments in the same currencies and may not match such amounts in future periods, which could increase our exposure to foreign currency fluctuations and increase the volatility of our shareholders’ equity.

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Income tax expense. Our income tax provision on income before income taxes resulted in an expense of 2.8% for the 2014 third quarter, compared to 6.1% for the 2013 third quarter, and 2.8% for the nine months ended September 30, 2014, compared to 3.1% for the 2013 period. Our 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.

CRITICAL ACCOUNTING POLICIES, ESTIMATES AND RECENT ACCOUNTING PRONOUNCEMENTS

Critical accounting policies, estimates and recent accounting pronouncements are discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our 2013 Form 10-K, updated where applicable in the notes accompanying our consolidated financial statements.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Financial Condition

Investable Assets Managed by Arch

The finance and investment committee of our board of directors establishes our investment policies and sets the parameters for creating guidelines for our investment managers. The finance and investment committee reviews the implementation of the investment strategy on a regular basis. Our current approach stresses preservation of capital, market liquidity and diversification of risk. While maintaining our emphasis on preservation of capital and liquidity, we expect our portfolio to become more diversified and, as a result, we may expand into areas which are not currently part of our investment strategy. Our Chief Investment Officer administers the investment portfolio, oversees our investment managers, formulates investment strategy in conjunction with our finance and investment committee and directly manages certain portions of our fixed income and equity portfolios.

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At September 30, 2014, total investable assets of $15.71 billion included $14.58 billion managed by Arch and $1.12 billion included in the ‘other’ segment (i.e., attributable to Watford). The following table summarizes total investable assets managed by Arch:

	September 30, 2014					December 31, 2013
	Amount			% of Total		Amount			% of Total
Investable assets (1) (2):
Fixed maturities available for sale, at fair value	$	10,733,382		73.6		$	9,571,776		68.1
Fixed maturities, at fair value (3)	359,409			2.5		448,254			3.2
Fixed maturities pledged under securities lending agreements, at fair value	107,547			0.7		105,081			0.8
Total fixed maturities	11,200,338			76.8		10,125,111			72.1
Short-term investments available for sale, at fair value	748,659			5.1		1,478,367			10.5
Short-term investments pledged under securities lending agreements, at fair value	—			—		—			—
Cash	486,351			3.3		434,057			3.1
Equity securities available for sale, at fair value	582,075			4.0		496,824			3.5
Other investments available for sale, at fair value	431,833			3.0		498,310			3.6
Other investments, at fair value (3)	838,054			5.8		773,280			5.5
Investments accounted for using the equity method (4)	307,252			2.1		244,339			1.7
Securities transactions entered into but not settled at the balance sheet date	(9,835		)	(0.1	)	(763		)	—
Total investable assets managed by Arch	$	14,584,727		100.0		$	14,049,525		100.0

_________________________________________________

(1) The table above excludes investable assets attributable to the ‘other’ segment. Such amounts are summarized as follows:

(U.S. dollars in thousands)	September 30, 2014
Investable assets in ‘other’ segment:
Cash	$	177,375
Investments accounted for using the fair value option (3)	1,005,532
Securities transactions entered into but not settled at the balance sheet date	(58,859		)
Total investable assets included in ‘other’ segment	$	1,124,048

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

(3) Represents investments which are carried at fair value under the fair value option and reflected as “investments accounted for using the fair value option” on the Company’s balance sheet. Changes in the carrying value of such investments are recorded in net realized gains or losses.

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

At September 30, 2014, our fixed income portfolio, which includes fixed maturity securities and short-term investments, had average credit quality ratings from Standard & Poor’s Rating Services (“S&P”)/Moody’s of “AA/Aa2” and an average yield to maturity (embedded book yield), before investment expenses, of 2.21%. At December 31, 2013, our fixed income portfolio had average credit quality ratings from S&P/Moody’s of “AA-/Aa2” and an average yield to maturity of 2.38%. Our investment portfolio had an average effective duration of 3.28 years at September 30, 2014, compared to 2.62 years at December 31, 2013. At September 30, 2014, approximately $9.74 billion, or 67%, of total investable assets managed by Arch were internally managed, compared to $9.07 billion, or 65%, at December 31, 2013.

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The following table summarizes our fixed maturities and fixed maturities pledged under securities lending agreements (“Fixed Maturities”) by type:

	Fair Value		Gross Unrealized Gains		Gross Unrealized Losses			Cost or Amortized Cost
September 30, 2014
Corporate bonds	$	3,346,118	$	29,747	$	(30,089	)	$	3,346,460
Mortgage backed securities	984,767		18,567		(8,349		)	974,549
Municipal bonds	1,293,455		31,860		(971		)	1,262,566
Commercial mortgage backed securities	1,232,092		9,355		(5,976		)	1,228,713
U.S. government and government agencies	1,551,583		6,433		(2,533		)	1,547,683
Non-U.S. government securities	1,067,672		11,808		(27,117		)	1,082,981
Asset backed securities	1,724,651		6,707		(7,175		)	1,725,119
Total	$	11,200,338	$	114,477	$	(82,210	)	$	11,168,071
December 31, 2013
Corporate bonds	$	2,601,328	$	35,289	$	(35,537	)	$	2,601,576
Mortgage backed securities	1,174,128		16,270		(22,209		)	1,180,067
Municipal bonds	1,481,738		29,378		(9,730		)	1,462,090
Commercial mortgage backed securities	1,074,497		13,972		(15,224		)	1,075,749
U.S. government and government agencies	1,301,809		3,779		(11,242		)	1,309,272
Non-U.S. government securities	1,159,017		14,729		(19,363		)	1,163,651
Asset backed securities	1,332,594		20,033		(13,795		)	1,326,356
Total	$	10,125,111	$	133,450	$	(127,100	)	$	10,118,761

The following table provides the credit quality distribution of our Fixed Maturities:

	September 30, 2014			December 31, 2013
Rating (1)	Fair Value		% of Total	Fair Value		% of Total
U.S. government and government agencies (2)	$	2,328,587	20.8	$	2,284,053	22.6
AAA	4,282,341		38.2	3,709,872		36.6
AA	1,964,325		17.5	1,720,605		17.0
A	1,623,894		14.5	1,359,193		13.4
BBB	322,067		2.9	304,543		3.0
BB	166,799		1.5	180,125		1.8
B	203,395		1.8	188,119		1.9
Lower than B	157,499		1.4	241,463		2.4
Not rated	151,431		1.4	137,138		1.3
Total	$	11,200,338	100.0	$	10,125,111	100.0

_________________________________________________

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

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

At September 30, 2014, below-investment grade securities comprised approximately 6% of our Fixed Maturities, compared to 7% at December 31, 2013. In accordance with our investment strategy, we invest in high yield fixed income securities which are included in “Corporate bonds.” Upon issuance, these securities are typically rated below investment grade (i.e., rating assigned by the major rating agencies of “BB+” or less). At September 30, 2014, corporate bonds represented 79% of the total below investment grade securities at fair value, mortgage backed securities represented 15% of the total and 6% were in other classes. At December 31, 2013, corporate bonds represented 46% of the total below investment grade securities at fair value, mortgage backed securities represented 46% of the total and 8% were in other classes. Unrealized losses include the impact of foreign exchange movements on certain securities denominated in foreign currencies and, as such, the amount of securities in an unrealized loss position fluctuates due to foreign currency movements.

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The following table provides information on the severity of the unrealized loss position as a percentage of amortized cost for all Fixed Maturities which were in an unrealized loss position:

	September 30, 2014						December 31, 2013
Severity of Unrealized Loss	Fair Value		Gross Unrealized Losses			% of Total Gross Unrealized Losses	Fair Value		Gross Unrealized Losses			% of Total Gross Unrealized Losses
0-10%	$	5,063,972	$	(76,791	)	93.4	$	6,006,316	$	(110,954	)	87.3
10-20%	85,296		(4,950		)	6.0	78,250		(11,465		)	9.0
20-30%	5,284		(467		)	0.6	13,955		(4,621		)	3.6
30-40%	23		(2		)	—	74		(60		)	0.1
Total	$	5,154,575	$	(82,210	)	100.0	$	6,098,595	$	(127,100	)	100.0

The following table provides information on the severity of the unrealized loss position as a percentage of amortized cost for non-investment grade Fixed Maturities which were in an unrealized loss position:

	September 30, 2014						December 31, 2013
Severity of Unrealized Loss	Fair Value		Gross Unrealized Losses			% of Total Gross Unrealized Losses	Fair Value		Gross Unrealized Losses			% of Total Gross Unrealized Losses
0-10%	$	171,916	$	(6,481	)	7.9	$	133,354	$	(3,882	)	3.1
10-20%	6,654		(612		)	0.7	444		(64		)	0.1
20-30%	413		(3		)	—	1,292		(350		)	0.3
30-80%	—		—			—	28		(35		)	—
Total	$	178,983	$	(7,096	)	8.6	$	135,118	$	(4,331	)	3.5

We determine estimated recovery values for our Fixed Maturities following a review of the business prospects, credit ratings, estimated loss given default factors and information received from asset managers and rating agencies for each security. For structured securities, we utilize underlying data, where available, for each security provided by asset managers and additional information from credit agencies in order to determine an expected recovery value for each security. The analysis provided by the asset managers includes expected cash flow projections under base case and stress case scenarios which modify expected default expectations and loss severities and slow down prepayment assumptions.

The following table summarizes our top ten exposures to fixed income corporate issuers by fair value at September 30, 2014, excluding guaranteed amounts and covered bonds:

	Fair Value		Credit Rating (1)
General Electric Co.	$	101,155	AA+/A1
Toyota Motor Corporation	65,420		AA-/Aa3
Apple Inc.	59,742		AA+/Aa1
Wells Fargo & Company	57,475		A+/A1
Exxon Mobil Corp.	55,648		AAA/Aaa
Bank of Montreal	51,288		A+/Aa3
Daimler AG	50,507		A-/A3
Federation des caisses Desjardins du Quebec	50,245		A+/Aa2
HSBC Holdings PLC	49,971		AA-/A2
Royal Bank of Canada	47,432		AA-/Aa3
Total	$	588,883

_________________________________________________

(1)  Ratings as assigned by S&P/Moody’s.

Our portfolio includes investments, such as mortgage-backed securities, which are subject to prepayment risk. At September 30, 2014, our investments in residential mortgage-backed securities (“MBS”) amounted to approximately $984.8 million, or 6.8% of total investable assets managed by Arch, compared to $1.17 billion, or 8.4%, at December 31, 2013.  As with other fixed income investments, the fair value of these securities fluctuates depending on market and other general economic conditions and the interest rate environment. Changes in interest rates can expose us to changes in the prepayment rate on these investments. In periods of declining interest rates, mortgage prepayments generally increase and MBS are prepaid more quickly, requiring us to reinvest the proceeds at the then current market rates. Conversely, in periods of rising rates, mortgage prepayments generally fall, preventing us from taking full advantage of the higher level of rates. However, economic conditions may curtail prepayment activity if refinancing becomes more difficult, thus limiting prepayments on MBS. Our portfolio also includes commercial mortgage backed securities (“CMBS”). At September 30, 2014, CMBS constituted

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approximately $1.23 billion, or 8.4% of total investable assets managed by Arch, compared to $1.07 billion, or 7.6%, at December 31, 2013. The commercial real estate market has experienced price deterioration, which could lead to increased delinquencies and defaults on commercial real estate mortgages. We do not have a significant exposure to insurance enhanced asset-backed or mortgage-backed securities. We do not have any significant investments in companies which guarantee securities at September 30, 2014.

Delinquencies and losses with respect to residential mortgage loans from certain vintage years have increased since 2007 and may continue to increase, particularly in the sub-prime sector. In addition, during this period, residential property values in many states have declined or remained stable, after extended periods during which those values appreciated. A continued decline or an extended flattening in those values may result in additional increases in delinquencies and losses on residential mortgage loans generally, especially with respect to second homes and investment properties, and with respect to any residential mortgage loans where the aggregate loan amounts (including any subordinated loans) are close to or greater than the related property values. These developments may have a significant adverse effect on the prices of loans and securities, including those in our investment portfolio. The situation continues to have wide ranging consequences, including downward pressure on economic growth and the potential for increased insurance and reinsurance exposures, which could have an adverse impact on our results of operations, financial condition, business and operations.

The following table provides information on our MBS and CMBS at September 30, 2014, excluding amounts guaranteed by the U.S. government:

					Fair Value
	Issuance Year	Amortized Cost		Average Credit Quality	Total		% of Amortized Cost		% of Investable Assets Managed by Arch
Non-agency MBS:	2003-2008	$	130,741	CC+	$	141,636	108.3	%	1.0	%
	2009	31,107		AAA	30,995		99.6	%	0.2	%
	2010	26,885		AA+	26,521		98.6	%	0.2	%
	2012	28,729		AAA	28,601		99.6	%	0.2	%
	2013	96,334		AAA	97,042		100.7	%	0.7	%
	2014	20,290		AA+	20,233		99.7	%	0.1	%
Total non-agency MBS		$	334,086	BBB	$	345,028	103.3	%	2.4	%
Non-agency CMBS:	2002-2008	92,418		AA-	93,531		101.2	%	0.6	%
	2009	370		BBB-	371		100.3	%	0.0	%
	2010	62,364		AAA	64,051		102.7	%	0.4	%
	2011	63,542		AAA	64,785		102.0	%	0.4	%
	2012	100,637		AAA	101,247		100.6	%	0.7	%
	2013	310,219		AAA	313,166		100.9	%	2.1	%
	2014	458,693		AAA	457,676		99.8	%	3.1	%
Total non-agency CMBS		$	1,088,243	AAA	$	1,094,827	100.6	%	7.5	%

	Non-Agency		Non-Agency
Additional Statistics:	MBS		CMBS (1)
Weighted average loan age (months)	81		24
Weighted average life (months) (2)	47		57
Weighted average loan-to-value % (3)	64.6	%	58.6	%
Total delinquencies (4)	10.5	%	0.5	%
Current credit support % (5)	17.2	%	35.9	%

_________________________________________________

(1) Loans defeased with government/agency obligations were not material to the collateral underlying our CMBS holdings.

(2) The weighted average life for MBS is based on the interest rates in effect at September 30, 2014. The weighted average life for CMBS reflects the average life of the collateral underlying our CMBS holdings.

(3) The range of loan-to-values is 21% to 76% on MBS and 8% to 116% on CMBS.

(4) Total delinquencies includes 60 days and over.

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

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The following table provides information on our asset backed securities (“ABS”) at September 30, 2014:

						Fair Value
	Amortized Cost		Average Credit Quality	Weighted Average Credit Support		Total		% of Amortized Cost		% of Investable Assets Managed by Arch
Sector:
Credit cards	$	674,488	AAA	17	%	$	675,873	100.2	%	4.6	%
Loans	301,472		AA	32	%	300,203		99.6	%	2.1	%
Autos	321,670		AAA	27	%	321,417		99.9	%	2.2	%
Equipment	204,311		AA-	11	%	202,427		99.1	%	1.4	%
Other	223,178		AA	15	%	224,731		100.7	%	1.5	%
Total ABS (1)	$	1,725,119	AA+			$	1,724,651	100.0	%	11.8	%

_________________________________________________

(1) The effective duration of the total ABS was 2.1 years at September 30, 2014.

At September 30, 2014, our fixed income portfolio included $12.7 million par value in sub-prime securities with a fair value of $4.8 million and average credit quality ratings from S&P/Moody’s of “CCC/Caa2.” At December 31, 2013, our fixed income portfolio included $48.5 million par value in sub-prime securities with a fair value of $27.9 million and average credit quality ratings from S&P/Moody’s of “B/Caa1.” Such amounts were primarily in the home equity sector of our asset backed securities, with the balance in other ABS, MBS and CMBS sectors. We define sub-prime mortgage-backed securities as investments in which the underlying loans primarily exhibit one or more of the following characteristics: low FICO scores, above-prime interest rates, high loan-to-value ratios or high debt-to-income ratios. In addition, the portfolio of collateral backing our securities lending program contained $5.7 million fair value of sub-prime securities with average credit quality ratings from S&P/Moody’s of “CCC-/Ca” at September 30, 2014, compared to $6.3 million and “CCC/Caa3” at December 31, 2013.

The following table provides information on the fair value of our Eurozone investments at September 30, 2014:

	Sovereign (2)		Financial Corporates		Other Corporates		Covered Bonds (3)		Bank Loans (4)		Equities and Other		Total
Country (1)
Netherlands	$	123,831	$	2,319	$	59,327	$	—	$	20,870	$	113	$	206,460
Germany	171,654		—		3,324		—		11,656		—		186,634
Belgium	62,757		—		—		—		—		—		62,757
Supranational (5)	64,260		—		—		—		—		—		64,260
Luxembourg	—		3,288		31,741		—		7,701		1,945		44,675
France	2,128		2,457		8,353		—		4,138		2,883		19,959
Finland	—		—		—		6,705		—		—		6,705
Ireland	—		—		2,612		—		1,577		409		4,598
Italy	—		—		1,779		—		509		—		2,288
Spain	—		—		—		—		1,539		—		1,539
Slovenia	581		—		—		—		—		—		581
Total	$	425,211	$	8,064	$	107,136	$	6,705	$	47,990	$	5,350	$	600,456

_________________________________________________

(1) The country allocations set forth in the table are based on various assumptions made by us in assessing the country in which the underlying credit risk resides, including a review of the jurisdiction of organization, business operations and other factors. Based on such analysis, we do not believe that we have any Eurozone investments from Austria, Estonia, Greece, Malta, Portugal or Slovakia at September 30, 2014.

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

(3) Securities issued by Eurozone banks where the security is backed by a separate group of loans.

(4) Included in “investments accounted for using the fair value option.”

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

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At September 30, 2014, our equity portfolio included $582.1 million of equity securities, compared to $496.8 million at December 31, 2013. Our equity portfolio primarily consists of publicly traded common stocks in the consumer staples, real estate and natural resources sectors. The following table provides information on the severity of the unrealized loss position as a percentage of cost for all equity securities classified as available for sale which were in an unrealized loss position:

	September 30, 2014						December 31, 2013
Severity of Unrealized Loss	Fair Value		Gross Unrealized Losses			% of Total Gross Unrealized Losses	Fair Value		Gross Unrealized Losses			% of Total Gross Unrealized Losses
0-10%	$	167,438	$	(6,054	)	59.9	$	52,964	$	(1,924	)	32.4
10-20%	15,942		(2,484		)	24.6	20,312		(2,792		)	47.0
20-30%	2,590		(811		)	8.0	3,103		(1,140		)	19.2
30-40%	1,153		(647		)	6.4	184		(82		)	1.4
40-50%	149		(113		)	1.1	—		—			—
Total	$	187,272	$	(10,109	)	100.0	$	76,563	$	(5,938	)	100.0

On a quarterly basis, we evaluate the unrealized losses of our equity securities by issuer and forecast a reasonable period of time by which the fair value of the securities would increase and we would recover the cost basis. Substantially all of the unrealized losses on equity securities were on holdings which have been in a continual unrealized loss position for less than 12 months at September 30, 2014. We believe that a reasonable period of time exists to allow for recovery of the cost basis of our equity securities that are in an unrealized loss position at September 30, 2014.

The following table summarizes our other investments:

	September 30, 2014		December 31, 2013
Available for sale:
Asian and emerging markets	$	275,191	$	331,984
Investment grade fixed income	156,642		159,115
Other	—		7,211
Total available for sale	431,833		498,310
Fair value option:
Term loan investments (par value: $415,028 and $494,502)	408,300		512,076
Asian and emerging markets	25,249		14,054
Investment grade fixed income	76,606		75,062
Other (1)	327,899		172,088
Total fair value option	838,054		773,280
Total	$	1,269,887	$	1,271,590

________________________________________________

(1) Includes fund investments with strategies in mortgage servicing rights, transportation and infrastructure assets and other.

Certain of our other investments are in investment funds for which we have 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 our 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 our investment is eligible to be redeemed, the time to redeem such investment can take weeks or months following the notification.

Certain of our investment managers may use leverage to achieve a higher rate of return on their assets under management, primarily those included in “other investments available for sale, at fair value,” “investments accounted for using the fair value option” and “investments accounted for using the equity method” on our balance sheet. While leverage presents opportunities for increasing the total return of such investments, it may increase losses as well. Accordingly, any event that adversely affects the value of the underlying holdings would be magnified to the extent leverage is used and our potential losses would be magnified. In addition, the structures used to generate leverage may lead to such investments being required to meet covenants based on market valuations and asset coverage. Market valuation declines could force the sale of investments into a depressed

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market, which may result in significant additional losses. Alternatively, the levered investments may attempt to delever by raising additional equity or potentially changing the terms of the established financing arrangements. We may choose to participate in the additional funding of such investments.

Our investment strategy allows for the use of derivative instruments. We utilize various derivative instruments such as futures contracts to enhance investment performance, replicate investment positions or manage market exposures and duration risk that would be allowed under our investment guidelines if implemented in other ways. See note 9, “Derivative Instruments,” of the notes accompanying our consolidated financial statements for additional disclosures concerning derivatives.

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. See note 8, “Fair Value,” of the notes accompanying our consolidated financial statements for a summary of our financial assets and liabilities measured at fair value at September 30, 2014 and December 31, 2013 segregated by level in the fair value hierarchy.

Investable Assets in the ‘Other’ Segment

Investable assets in the ‘other’ segment are managed by Watford. The board of directors of Watford establishes their investment policies and guidelines. Watford’s investments are accounted for using the fair value option with changes in the carrying value of such investments recorded in net realized gains or losses. At September 30, 2014, Watford’s investable assets consisted of the following:

	September 30, 2014
Cash	$	177,375
Investments accounted for using the fair value option:
Term loan investments (par value: $598,168)	593,471
Fixed maturities	206,345
Short-term investments	205,716
Total investments accounted for using the fair value option	1,005,532
Securities transactions entered into but not settled at the balance sheet date	(58,859		)
Total investable assets included in ‘other’ segment	$	1,124,048

Premiums Receivable and Reinsurance Recoverables

At September 30, 2014, 83.1% of premiums receivable of $1.03 billion represented amounts not yet due, while amounts in excess of 90 days overdue were 4.7% of the total. At December 31, 2013, 80.0% of premiums receivable of $753.9 million represented amounts not yet due, while amounts in excess of 90 days overdue were 3.3% of the total. Approximately 48.4% of the $57.6 million of paid losses and loss adjustment expenses recoverable at September 30, 2014 were more than 90 days overdue, while 27.6% of the $56.1 million of paid losses and loss adjustment expenses recoverable at December 31, 2013 were more than 90 days overdue. Our reserves for doubtful accounts were approximately $13.5 million at September 30, 2014, compared to $12.3 million at December 31, 2013.

At September 30, 2014, approximately 83.2% of reinsurance recoverables on paid and unpaid losses (not including prepaid reinsurance premiums) of $1.81 billion were due from carriers which had an A.M. Best rating of “A-” or better and the largest reinsurance recoverables from any one carrier was approximately 3.6% of our total shareholders’ equity. At December 31, 2013, approximately 86.5% of reinsurance recoverables on paid and unpaid losses (not including prepaid reinsurance premiums) of $1.80 billion were due from carriers which had an A.M. Best rating of “A-” or better and the largest reinsurance recoverables from any one carrier was approximately 4.2% of our total shareholders’ equity.

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The effects of reinsurance on written and earned premiums and losses and loss adjustment expenses with unaffiliated reinsurers were as follows:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2014			2013			2014			2013
Premiums Written
Direct	$	757,636		$	681,773		$	2,378,759		$	2,113,549
Assumed	402,271			355,214			1,348,045			1,127,875
Ceded	(200,368		)	(197,852		)	(730,347		)	(638,978		)
Net	$	959,539		$	839,135		$	2,996,457		$	2,602,446
Premiums Earned
Direct	$	750,323		$	673,199		$	2,166,233		$	1,977,421
Assumed	381,736			328,720			1,160,192			935,059
Ceded	(228,408		)	(206,919		)	(655,842		)	(605,894		)
Net	$	903,651		$	795,000		$	2,670,583		$	2,306,586
Losses and Loss Adjustment Expenses
Direct	$	487,543		$	409,623		$	1,309,121		$	1,177,156
Assumed	145,428			106,620			455,063			330,151
Ceded	(131,298		)	(89,198		)	(340,753		)	(262,206		)
Net	$	501,673		$	427,045		$	1,423,431		$	1,245,101

Reserves for Losses and Loss Adjustment Expenses

We establish reserves for losses and loss adjustment expenses (“Loss Reserves”) which represent estimates involving actuarial and statistical projections, at a given point in time, of our expectations of the ultimate settlement and administration costs of losses incurred. Estimating Loss Reserves is inherently difficult, which is exacerbated by the fact that we have relatively limited historical experience upon which to base such estimates. We utilize actuarial models as well as available historical insurance industry loss ratio experience and loss development patterns to assist in the establishment of Loss Reserves. Actual losses and loss adjustment expenses paid will deviate, perhaps substantially, from the reserve estimates reflected in our financial statements.

At September 30, 2014 and December 31, 2013, our Loss Reserves, net of unpaid losses and loss adjustment expenses recoverable, by type and by operating segment were as follows:

	September 30, 2014		December 31, 2013
Insurance:
Case reserves	$	1,441,100	$	1,446,029
IBNR reserves	3,054,642		3,037,755
Total net reserves	4,495,742		4,483,784
Reinsurance:
Case reserves	712,894		749,830
Additional case reserves	109,813		113,331
IBNR reserves	1,732,048		1,722,214
Total net reserves	2,554,755		2,585,375
Mortgage:
Case reserves	98,928		1,419
IBNR reserves	20,562		5,868
Total net reserves	119,490		7,287
Other:
Case reserves	3,980		—
IBNR reserves	28,187		—
Total net reserves	32,167		—
Total:
Case reserves	2,256,902		2,197,278
Additional case reserves	109,813		113,331
IBNR reserves	4,835,439		4,765,837
Total net reserves	$	7,202,154	$	7,076,446

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At September 30, 2014 and December 31, 2013, the insurance segment’s Loss Reserves by major line of business, net of unpaid losses and loss adjustment expenses recoverable, were as follows:

	September 30, 2014		December 31, 2013
Professional lines (1)	$	1,499,759	$	1,525,360
Construction and national accounts	763,619		694,721
Excess and surplus casualty (2)	674,577		678,893
Programs	657,810		644,689
Property, energy, marine and aviation	413,359		503,208
Travel, accident and health	59,687		49,934
Lenders products	37,028		31,076
Other (3)	389,903		355,903
Total net reserves	$	4,495,742	$	4,483,784

_________________________________________________

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

(2) Includes casualty and contract binding business.

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

At September 30, 2014 and December 31, 2013, the reinsurance segment’s Loss Reserves by major line of business, net of unpaid losses and loss adjustment expenses recoverable, were as follows:

	September 30, 2014		December 31, 2013
Casualty (1)	$	1,470,867	$	1,513,205
Other specialty (2)	456,194		397,776
Property excluding property catastrophe (3)	276,943		260,968
Property catastrophe	152,725		190,027
Marine and aviation	141,193		163,293
Other (4)	56,833		60,106
Total net reserves	$	2,554,755	$	2,585,375

 _________________________________________________

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

(2) Includes non-excess motor, surety, accident and health, workers’ compensation catastrophe, agriculture, trade credit and other.

(3) Includes facultative business.

(4) Includes life, casualty clash and other.

Mortgage Segment Supplemental Information

For the 2014 periods, the mortgage segment’s insurance in force (“IIF”), which represents the aggregate dollar amount of each insured mortgage loan’s original principal balance, and risk in force (“RIF”), which represents the aggregate dollar amount of each insured mortgage loan’s current principal balance multiplied by the insurance coverage percentage specified in the policy for insurance policies issued, were as follows:

(U.S. Dollars in millions)	September 30, 2014				June 30, 2014				March 31, 2014
Insurance In Force (IIF)
U.S. mortgage insurance	$	22,055	46.3	%	$	21,168	44.9	%	$	21,240	46.9	%
Mortgage reinsurance	21,097		44.3	%	21,405		45.4	%	21,161		46.7	%
Other (1)	4,464		9.4	%	4,586		9.7	%	2,869		6.4	%
Total	$	47,616	100.0	%	$	47,159	100.0	%	$	45,270	100.0	%
Risk In Force (RIF) (2)
U.S. mortgage insurance	$	5,506	54.4	%	$	5,273	52.7	%	$	5,275	52.6	%
Mortgage reinsurance	4,483		44.3	%	4,601		46.0	%	4,664		46.6	%
Other (1)	136		1.3	%	139		1.3	%	80		0.8	%
Total	$	10,125	100.0	%	$	10,013	100.0	%	$	10,019	100.0	%
Ending number of policies in force	129,665				126,347				127,019

_________________________________________________

(1)    Includes risk-sharing products offered to government sponsored enterprises and mortgage lenders and international insurance business.        

(2) For international business and risk-sharing products, the RIF calculation is based on the maximum claim amount which we are exposed to on each insured mortgage loan. For certain of our mortgage reinsurance treaties, such amount incorporates loss ratio caps.

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The following table provides supplemental disclosures for our mortgage segment’s U.S. mortgage insurance operations related to RIF:

(U.S. Dollars in millions)	September 30, 2014					June 30, 2014					March 31, 2014
Total RIF by credit quality (FICO score):
>=740	$	2,864		52.0	%	$	2,687		51.0	%	$	2,671		50.6	%
680-739	1,803			32.7	%	1,724			32.7	%	1,713			32.5	%
620-679	694			12.6	%	709			13.4	%	731			13.9	%
<620	145			2.7	%	153			2.9	%	160			3.0	%
Total	$	5,506		100.0	%	$	5,273		100.0	%	$	5,275		100.0	%
Weighted average FICO score	733					731					730
Total RIF by Loan-To-Value (LTV):
95.01% and above	$	1,139		20.7	%	$	1,161		22.0	%	$	1,183		22.4	%
90.01% to 95.00%	2,558			46.5	%	2,389			45.3	%	2,337			44.3	%
85.01% to 90.00%	1,544			28.0	%	1,474			28.0	%	1,494			28.3	%
85.00% and below	265			4.8	%	249			4.7	%	261			5.0	%
Total	$	5,506		100.0	%	$	5,273		100.0	%	$	5,275		100.0	%
Weighted average LTV	93.4		%			93.4		%			93.4		%
Total RIF by State:
Wisconsin	$	532		9.7	%	$	517		9.8	%	$	510		9.7	%
California	474			8.6	%	454			8.6	%	460			8.7	%
Texas	293			5.3	%	283			5.4	%	285			5.4	%
Florida	271			4.9	%	264			5.0	%	268			5.1	%
Minnesota	271			4.9	%	258			4.9	%	255			4.8	%
Washington	231			4.2	%	228			4.3	%	230			4.4	%
Massachusetts	209			3.8	%	204			3.9	%	203			3.8	%
Alaska	207			3.8	%	202			3.8	%	201			3.8	%
Virginia	196			3.6	%	186			3.5	%	185			3.5	%
New York	188			3.4	%	184			3.5	%	186			3.5	%
Others	2,634			47.8	%	2,493			47.3	%	2,492			47.3	%
Total	$	5,506		100.0	%	$	5,273		100.0	%	$	5,275		100.0	%
Weighted average coverage (1)	25.0		%			24.9		%			24.8		%
Analysts’ persistency (2)	81.2		%			80.5		%			79.1		%
Risk-to-capital ratio (3)	9.3:1					8.9:1					9.0:1

_________________________________________________

(1) Represents the end of period RIF divided by end of period IIF.

(2) Represents the percentage of IIF at the beginning of a 12-month period that remained in force at the end of the period.        

(3) Represents total current (non-delinquent) RIF, net of reinsurance, divided by total statutory capital. Ratio calculated for Arch Mortgage Insurance Company only (estimate for September 30, 2014).

The following table provides supplemental disclosures for our mortgage segment’s U.S. mortgage insurance operations related to insured loans and loss metrics:

(U.S. Dollars in thousands, except loan count)	Three Months Ended									Nine Months Ended
	September 30, 2014			June 30, 2014			March 31, 2014 (1)			September 30, 2014 (1)
Rollforward of insured loans in default:
Beginning delinquent number of loans	3,641			3,858			4,469			4,469
Plus: new notices	1,553			1,377			1,458			4,388
Less: cures	(1,168		)	(1,202		)	(1,635		)	(4,005		)
Less: paid claims	(397		)	(383		)	(429		)	(1,209		)
Less: delinquent rescissions and denials	(4		)	(9		)	(5		)	(18		)
Ending delinquent number of loans	3,625			3,641			3,858			3,625
Losses:
Number of claims paid	397			383			429			1,209
Total paid claims	$	17,093		$	16,190		$	18,117		$	51,400
Average per claim	$	43.1		$	42.3		$	42.2		$	42.5
Severity (2)	93.7		%	93.0		%	97.4		%	95.3		%
Average reserve per default	$	27.1		$	28.1		$	27.5

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(1)     Includes activity for January 2014 for comparability purposes (pre-acquisition date).

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

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Shareholders’ Equity and Book Value per Common Share

Total shareholders’ equity available to Arch was $6.08 billion at September 30, 2014, compared to $5.65 billion at December 31, 2013. The increase in 2014 was primarily attributable to net income, reflecting contributions from both underwriting and investing activities, partially offset by share purchase activity.

The following table presents the calculation of book value per common share:

(U.S. dollars in thousands, except share data)	September 30, 2014		December 31, 2013
Calculation of book value per common share:
Total shareholders’ equity available to Arch	$	6,081,046	$	5,647,496
Less preferred shareholders’ equity	325,000		325,000
Common shareholders’ equity available to Arch	$	5,756,046	$	5,322,496
Common shares outstanding, net of treasury shares (1)	130,700,619		133,674,884
Book value per common share	$	44.04	$	39.82

_________________________________________________

(1) Excludes the effects of 7,980,587 and 8,338,480 stock options and 460,860 and 443,710 restricted stock units outstanding at September 30, 2014 and December 31, 2013, respectively.

Liquidity and Capital Resources

ACGL is a holding company whose assets primarily consist of the shares in its subsidiaries. Generally, ACGL depends on its available cash resources, liquid investments and dividends or other distributions from its subsidiaries to make payments, including the payment of debt service obligations and operating expenses it may incur and any dividends or liquidation amounts with respect to the non-cumulative preferred shares and common shares. ACGL’s readily available cash, short-term investments and marketable securities, excluding amounts held by our regulated insurance and reinsurance subsidiaries, totaled $6.1 million at September 30, 2014, compared to $5.8 million at December 31, 2013. During 2014, ACGL received dividends of $297.0 million from Arch Reinsurance Ltd. (“Arch Re Bermuda”), our Bermuda-based reinsurer and insurer.

The ability of our regulated insurance and reinsurance subsidiaries to pay dividends or make distributions or other payments to us is dependent on their ability to meet applicable regulatory standards. Under Bermuda law, Arch Re Bermuda is required to maintain an enhanced capital requirement which must equal or exceed its minimum solvency margin (i.e., the amount by which the value of its general business assets must exceed its general business liabilities) equal to the greatest of (1) $100.0 million, (2) 50% of net premiums written (being gross premiums written less any premiums ceded by Arch Re Bermuda, but Arch Re Bermuda may not deduct more than 25% of gross premiums when computing net premiums written) and (3) 15% of net aggregated losses and loss expense provisions and other insurance reserves. Arch Re Bermuda is prohibited from declaring or paying any dividends during any financial year if it is not in compliance with its enhanced capital requirement, minimum solvency margin or minimum liquidity ratio. In addition, Arch Re Bermuda is prohibited from declaring or paying in any financial year dividends of more than 25% of its total statutory capital and surplus (as shown on its previous financial year’s statutory balance sheet) unless it files, at least seven days before payment of such dividends, with the Bermuda Monetary Authority (“BMA”) an affidavit stating that it will continue to meet the required margins. In addition, Arch Re Bermuda is prohibited, without prior approval of the BMA, from reducing by 15% or more its total statutory capital, as set out in its previous year’s statutory financial statements. As a Class 4 insurer, Arch Re Bermuda is required to maintain available statutory capital and surplus pertaining to its general business at a level equal to or in excess of its enhanced capital requirement (“ECR”) which is established by reference to either the BSCR model (“BSCR”) or an approved internal capital model. At December 31, 2013, as determined under Bermuda law, Arch Re Bermuda had statutory capital of $2.36 billion ($2.32 billion at December 31, 2012) and statutory capital and surplus of $5.42 billion ($5.01 billion at December 31, 2012), which amounts were in compliance with Arch Re Bermuda’s ECR at such date. Such amounts include ownership interests in U.S. insurance and reinsurance subsidiaries. Accordingly, Arch Re Bermuda can pay approximately $1.06 billion to ACGL during the remainder of 2014 without providing an affidavit to the BMA, as discussed above. Under BMA guidelines, the value of the assets of our insurance group (i.e., the group of companies that conducts exclusively, or mainly, insurance business) must exceed the amount of the group’s liabilities by the aggregate minimum margin of solvency of each qualifying member of the group (the “Group MSM”). A member is a qualifying member of the insurance group if it is subject to solvency requirements in the jurisdiction in which it is registered. We were in compliance with the Group MSM at December 31, 2013.

Our U.S. insurance and reinsurance subsidiaries are subject to insurance laws and regulations in the jurisdictions in which they operate. The ability of our regulated insurance subsidiaries to pay dividends or make distributions is dependent on their ability to meet applicable regulatory standards. These regulations include restrictions that limit the amount of dividends or other

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distributions, such as loans or cash advances, available to shareholders without prior approval of the insurance regulatory authorities. Dividends or distributions, if any, made by Arch Re U.S. would result in an increase in available capital at Arch Capital Group (U.S.) Inc. (“Arch-U.S.”), a wholly-owned subsidiary of ACGL. Arch Re U.S. can declare a maximum of approximately $101.3 million of dividends during the remainder of 2014 subject to the approval of the Commissioner of the Delaware Department of Insurance (“Commissioner”). In addition, with respect to dividends in excess of $101.3 million (extraordinary dividend), no payment can be made until (1) 30 days after the Commissioner has received notice of the declaration thereof and has not within such period disapproved such payment; or (2) the Commissioner shall have approved the payment within the 30-day period. Delaware insurance laws also require that the statutory surplus of Arch Re U.S. following any dividend or distribution be reasonable in relation to its outstanding liabilities and adequate to its financial needs.

In addition to meeting applicable regulatory standards, the ability of our insurance and reinsurance subsidiaries to pay dividends to intermediate parent companies owned by Arch Re Bermuda is also constrained by our dependence on the financial strength ratings of our insurance and reinsurance subsidiaries from independent rating agencies. The ratings from these agencies depend to a large extent on the capitalization levels of our insurance and reinsurance subsidiaries. We believe that ACGL has sufficient cash resources and available dividend capacity to service its indebtedness and other current outstanding obligations.

Our insurance and reinsurance subsidiaries are required to maintain assets on deposit, which primarily consist of fixed maturities, with various regulatory authorities to support their operations. The assets on deposit are available to settle insurance and reinsurance liabilities to third parties. Our insurance and reinsurance subsidiaries maintain assets in trust accounts as collateral for insurance and reinsurance transactions with affiliated companies and also have investments in segregated portfolios primarily to provide collateral or guarantees for letters of credit to third parties. At September 30, 2014 and December 31, 2013, such amounts approximated $5.53 billion and $5.30 billion, respectively.

Our non-U.S. operations account for a significant percentage of our net premiums written. In general, the business written by our non-U.S. operations, which is heavily weighted towards reinsurance business, has been more profitable than the business written in our U.S. operations, which is weighted more towards insurance business. In general, our reinsurance segment has operated at a higher margin than our insurance segment, which is due to prevailing market conditions and the mix and type of business written. Historically, the most profitable line of business has been catastrophe-exposed property reinsurance, which is written primarily in our non-U.S. operations. Additionally, a significant component of our pre-tax income is generated through our investment performance. We hold a substantial amount of our investable assets in our non-U.S. operations and, accordingly, a large portion of our investment income is produced in our non-U.S. operations. In addition, ACGL, through its subsidiaries, provides financial support to certain of its insurance subsidiaries and affiliates, through certain reinsurance arrangements beneficial to the ratings of such subsidiaries. Our U.S.-based insurance and reinsurance groups enter into separate reinsurance arrangements with Arch Re Bermuda covering individual lines of business. For the 2013 calendar year, the U.S. groups ceded business to Arch Re Bermuda at an aggregate net cession rate (i.e., net of third party reinsurance) of approximately 55% (compared to 46% for 2012). All of the above factors have resulted in the non-U.S. group providing a higher contribution to our overall pre-tax income in the current period than the percentage of net premiums written would indicate.

Except as described in the above paragraph, or where express reinsurance, guarantee or other financial support contractual arrangements are in place, each of ACGL’s subsidiaries or affiliates is solely responsible for its own liabilities and commitments (and no other ACGL subsidiary or affiliate is so responsible). Any reinsurance arrangements, guarantees or other financial support contractual arrangements that are in place are solely for the benefit of the ACGL subsidiary or affiliate involved and third parties (creditors or insureds of such entity) are not express beneficiaries of such arrangements.

The following table summarizes our consolidated cash flows from operating, investing and financing activities:

	Nine Months Ended
	September 30,
	2014			2013
Total cash provided by (used for):
Operating activities	$	799,659		$	627,048
Investing activities	(1,311,100		)	(485,672		)
Financing activities	750,676			(71,503		)
Effects of exchange rate changes on foreign currency cash	(9,566		)	(4,773		)
Increase in cash	$	229,669		$	65,100

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• Cash provided by operating activities for the nine months ended September 30, 2014 was higher than in the 2013 period. The increase in operating cash flows reflected a higher level of premiums collected, partially offset by a lower level of distributions on certain fund investments and a higher level of operating expenses paid.

• Cash used for investing activities for the nine months ended September 30, 2014 was higher than in the 2013 period. Activity for the nine months ended September 30, 2014 reflected the investment by Watford of some of its available cash into investments and our acquisition of Arch MI U.S. in the 2014 first quarter. In addition, gross purchases and sales of fixed maturity investments were higher than in the 2013 period.

• Cash provided by financing activities for the nine months ended September 30, 2014 was higher than in the 2013 period, primarily due to the consolidation of Watford in our results, and its capital raising in the 2014 first quarter. There were $251.9 million of repurchases under our share repurchase program for the nine months ended September 30, 2014, compared to $57.8 million in the 2013 period.

Our insurance and reinsurance operations provide liquidity in that premiums are received in advance, sometimes substantially in advance, of the time losses are paid. The period of time from the occurrence of a claim through the settlement of the liability may extend many years into the future. Sources of liquidity include cash flows from operations, financing arrangements or routine sales of investments.

As part of Arch’s investment strategy, we seek to establish a level of cash and highly liquid short-term and intermediate-term securities which, combined with expected cash flow, is believed by us to be adequate to meet our foreseeable payment obligations. However, due to the nature of our operations, cash flows are affected by claim payments that may comprise large payments on a limited number of claims and which can fluctuate from year to year. We believe that our liquid investments and cash flow will provide us with sufficient liquidity in order to meet our claim payment obligations. However, the timing and amounts of actual claim payments related to recorded Loss Reserves vary based on many factors, including large individual losses, changes in the legal environment, as well as general market conditions. The ultimate amount of the claim payments could differ materially from our estimated amounts. Certain lines of business written by us, such as excess casualty, have loss experience characterized as low frequency and high severity. The foregoing may result in significant variability in loss payment patterns. The impact of this variability can be exacerbated by the fact that the timing of the receipt of reinsurance recoverables owed to us may be slower than anticipated by us. Therefore, the irregular timing of claim payments can create significant variations in cash flows from operations between periods and may require us to utilize other sources of liquidity to make these payments, which may include the sale of investments or utilization of existing or new credit facilities or capital market transactions. If the source of liquidity is the sale of investments, we may be forced to sell such investments at a loss, which may be material.

Our investments in certain securities, including certain fixed income and structured securities, investments in funds accounted for using the equity method, other investments and our investments in Gulf Reinsurance Limited (joint venture) and Watford may be illiquid due to contractual provisions or investment market conditions. If we require significant amounts of cash on short notice in excess of anticipated cash requirements, then we may have difficulty selling these investments in a timely manner or may be forced to sell or terminate them at unfavorable values.

Total investable assets managed by Arch were $14.58 billion at September 30, 2014, compared to $14.05 billion at December 31, 2013. The primary goals of our asset liability management process are to satisfy the insurance liabilities, manage the interest rate risk embedded in those insurance liabilities and maintain sufficient liquidity to cover fluctuations in projected liability cash flows, including debt service obligations. Generally, the expected principal and interest payments produced by our fixed income portfolio adequately fund the estimated runoff of our insurance reserves. Although this is not an exact cash flow match in each period, the substantial degree by which the fair value of the fixed income portfolio exceeds the expected present value of the net insurance liabilities, as well as the positive cash flow from newly sold policies and the large amount of high quality liquid bonds, provide assurance of our ability to fund the payment of claims and to service our outstanding debt without having to sell securities at distressed prices or access credit facilities. Our unfunded investment commitments totaled approximately $941.9 million at September 30, 2014.

Various rating agencies have announced the possibility of future downgrades of the United States’ credit rating, depending on spending levels, interest rates, fiscal pressures that result in a higher general government debt trajectory and other factors. In addition, the impact of the continuing weakness of the U.S., European countries and other key economies, projected budget deficits for the U.S., European countries and other governments and the consequences associated with possible additional downgrades of securities of the U.S., European countries and other governments by credit rating agencies is inherently unpredictable and could have a material adverse effect on financial markets and economic conditions in the U.S. and throughout the world. In turn, this could have a material adverse effect on our business, financial condition and results of

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operations and, in particular, this could have a material adverse effect on the value and liquidity of securities in our investment portfolio. Our investment portfolio as of September 30, 2014 included $1.55 billion of obligations of the U.S. government and government agencies at fair value and $1.29 billion of municipal bonds at fair value. Please refer to Item 1A “Risk Factors” of our 2013 Form 10-K for a discussion of other risks relating to our business and investment portfolio.

We expect that our liquidity needs, including our anticipated insurance obligations and operating and capital expenditure needs, for the next twelve months, at a minimum, will be met by funds generated from underwriting activities and investment income, as well as by our balance of cash, short-term investments, proceeds on the sale or maturity of our investments, and our credit facilities.

We monitor our capital adequacy on a regular basis and will seek to adjust our capital base (up or down) according to the needs of our business. The future capital requirements of our business will depend on many factors, including our ability to write new business successfully and to establish premium rates and reserves at levels sufficient to cover losses. Our ability to underwrite is largely dependent upon the quality of our claims paying and financial strength ratings as evaluated by independent rating agencies. In particular, we require (1) sufficient capital to maintain our financial strength ratings, as issued by several ratings agencies, at a level considered necessary by management to enable our key operating subsidiaries to compete; (2) sufficient capital to enable our underwriting subsidiaries to meet the capital adequacy tests performed by statutory agencies in the U.S. and other key markets; and (3) letters of credit and other forms of collateral that are necessary for our non-U.S. operating companies because they are “non-admitted” under U.S. state insurance regulations.

New financial requirements for private mortgage insurers were released for public comment by the Federal Housing Finance Agency (“FHFA”) in July 2014, and Arch MI U.S. will be subject to these requirements once enacted. The draft Private Mortgage Insurer Eligibility Requirements (“PMIERs”) establish new standards that mortgage insurers must meet in order to insure loans sold to or guaranteed by Federal National Mortgage Association and Federal Home Loan Mortgage Corporation (the GSEs). The PMIERs were subject to a sixty-day public comment period which ended on September 8, 2014. The PMIERs’ financial requirements are based in part on a risk-based, required assets model and employ a grid approach based upon a number of factors, including vintage (origination year), original loan-to-value and original credit score of performing loans and the delinquency status of non-performing loans. The draft PMIERs propose up to a two year phase-in, beginning after publication of final PMIERs, for approved mortgage insurers to fully comply with the PMIER financial requirements. The available assets required to satisfy such final requirements at any point in time will be affected by many factors, including the content and timing of any final PMIERs, macro-economic conditions, and the size and composition of Arch MI U.S.’s mortgage insurance portfolio at the applicable point in time.  Based upon its mortgage insurance portfolio as of September 30, 2014 (including credit for reinsurance ceded to affiliates), we believe that Arch MI U.S. currently satisfies the proposed financial requirements, although no assurance can be given as to what changes, if any, will be made to the final PMIERs.

In December 2013, Arch-U.S., a wholly-owned subsidiary of ACGL, completed a public offering of $500.0 million principal amount of 5.144% senior notes issued at par and due November 1, 2043 (“Arch-U.S. Senior Notes”), fully and unconditionally guaranteed by ACGL (the “Guarantee”). The Arch-U.S. Senior Notes and the Guarantee are unsecured and unsubordinated obligations of Arch-U.S. and ACGL, respectively, and rank equally and ratably with the other unsecured and unsubordinated indebtedness of Arch-U.S. and ACGL, respectively.

On January 30, 2014, we completed our acquisition of the CMG Entities. The Stock Purchase Agreement contains provisions for contingent consideration payments, subject to an overall maximum payment of 150% of closing book value of the pre-closing portfolio of the CMG Entities as re-calculated over an earn-out period and payable at the third, fifth and sixth anniversaries after closing (subject to a one time extension period of one to three years at the sellers’ discretion). The maximum amount of contingent consideration payments is $136.9 million over the earn-out period. To the extent that the adjusted book value of the CMG Entities drops below the cumulative amount paid by us, no additional payments would be due.

As part of our capital management program, we may seek to raise additional capital or may seek to return capital to our shareholders through share repurchases, cash dividends or other methods (or a combination of such methods). Any such determination will be at the discretion of our board of directors and will be dependent upon our profits, financial requirements and other factors, including legal restrictions, rating agency requirements and such other factors as our board of directors deems relevant.

The board of directors of ACGL has authorized the investment in ACGL’s common shares through a share repurchase program. Authorizations have consisted of a $1.0 billion authorization in February 2007, a $500.0 million authorization in May 2008, a $1.0 billion authorization in November 2009 and a $1.0 billion authorization in February 2011. Since the inception of the share repurchase program through October 29, 2014, ACGL has repurchased 116.2 million common shares for an aggregate purchase price of $3.13 billion. At October 29, 2014, $371.0 million of share repurchases were available under the

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program. On November 6, 2014, the board of directors of ACGL increased the aggregate purchase amount authorized under the share repurchase program to $1.0 billion. Repurchases under this authorization may be effected from time to time in open market or privately negotiated transactions through December 31, 2016. The timing and amount of the repurchase transactions under this program will depend on a variety of factors, including market conditions and corporate and regulatory considerations. We will continue to monitor our share price and, depending upon results of operations, market conditions and the development of the economy, as well as other factors, we will consider share repurchases on an opportunistic basis.

To the extent that our existing capital is insufficient to fund our future operating requirements or maintain such ratings, we may need to raise additional funds through financings or limit our growth. We can provide no assurance that, if needed, we would be able to obtain additional funds through financing on satisfactory terms or at all. Adverse developments in the financial markets, such as disruptions, uncertainty or volatility in the capital and credit markets, may result in realized and unrealized capital losses that could have a material adverse effect on our results of operations, financial position and our businesses, and may also limit our access to capital required to operate our business.

If we are not able to obtain adequate capital, our business, results of operations and financial condition could be adversely affected, which could include, among other things, the following possible outcomes: (1) potential downgrades in the financial strength ratings assigned by ratings agencies to our operating subsidiaries, which could place those operating subsidiaries at a competitive disadvantage compared to higher-rated competitors; (2) reductions in the amount of business that our operating subsidiaries are able to write in order to meet capital adequacy-based tests enforced by statutory agencies; and (3) any resultant ratings downgrades could, among other things, affect our ability to write business and increase the cost of bank credit and letters of credit. In addition, under certain of the reinsurance agreements assumed by our reinsurance operations, upon the occurrence of a ratings downgrade or other specified triggering event with respect to our reinsurance operations, such as a reduction in surplus by specified amounts during specified periods, our ceding company clients may be provided with certain rights, including, among other things, the right to terminate the subject reinsurance agreement and/or to require that our reinsurance operations post additional collateral.

In addition to common share capital, we depend on external sources of finance to support our underwriting activities, which can be in the form (or any combination) of debt securities, preference shares, common equity and bank credit facilities providing loans and/or letters of credit. As noted above, equity or debt financing, if available at all, may be on terms that are unfavorable to us. In the case of equity financings, dilution to our shareholders could result, and, in any case, such securities may have rights, preferences and privileges that are senior to those of our outstanding securities.

In June 2014, we entered into a five-year agreement for a $300 million unsecured revolving loan and letter of credit facility and a $500 million secured letter of credit facility. Under the terms of the agreement, Arch Reinsurance Company, our U.S.-based reinsurer, and Arch Re Bermuda are limited to issuing $100 million of unsecured letters of credit as part of the unsecured revolving loan. In addition, we have access to secured letter of credit facilities of approximately $192.5 million, which are available on a limited basis and for limited purposes. Refer to note 10, “Commitments and Contingencies—Letter of Credit and Revolving Credit Facilities,” of the notes accompanying our consolidated financial statements for a discussion of our available facilities, applicable covenants on such facilities and available capacity.

In March 2012, ACGL and Arch Capital Group (U.S.) Inc. filed a universal shelf registration statement with the SEC. This registration statement allows for the possible future offer and sale by us of various types of securities, including unsecured debt securities, preference shares, common shares, warrants, share purchase contracts and units and depositary shares. The shelf registration statement enables us to efficiently access the public debt and/or equity capital markets in order to meet our future capital needs. The shelf registration statement also allows selling shareholders to resell common shares that they own in one or more offerings from time to time. We will not receive any proceeds from any shares offered by the selling shareholders. This report is not an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state.

At September 30, 2014, total capital available to Arch of $6.98 billion consisted of $800.0 million of senior notes, representing 11.5% of the total, $100.0 million of revolving credit agreement borrowings due in June 2019, representing 1.4% of the total, $325.0 million of preferred shares, representing 4.7% of the total, and common shareholders’ equity of $5.76 billion, representing 82.4% of the total. At December 31, 2013, total capital available to Arch of $6.55 billion consisted of $800.0 million of senior notes, representing 12.2% of the total, $100.0 million of revolving credit agreement borrowings due in August 2014, representing 1.5% of the total, $325.0 million of preferred shares, representing 5.0% of the total, and common shareholders’ equity of $5.32 billion, representing 81.3% of the total. The increase in capital during 2014 was primarily attributable to net income, reflecting contributions from both underwriting and investing activities, partially offset by share repurchase activity.

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Off-Balance Sheet Arrangements

Off-balance sheet arrangements are discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our 2013 Form 10-K.

Market Sensitive Instruments and Risk Management

In accordance with the SEC’s Financial Reporting Release No. 48, we performed a sensitivity analysis to determine the effects that market risk exposures could have on the future earnings, fair values or cash flows of our financial instruments as of September 30, 2014. Market risk represents the risk of changes in the fair value of a financial instrument and is comprised of several components, including liquidity, basis and price risks. An analysis of material changes in market risk exposures at September 30, 2014 that affect the quantitative and qualitative disclosures presented in our 2013 Form 10-K (see section captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Market Sensitive Instruments and Risk Management”) were as follows:

Investment Market Risk

Fixed Income Securities. We invest in interest rate sensitive securities, primarily debt securities. We consider the effect of interest rate movements on the fair value of our fixed maturities, fixed maturities pledged under securities lending agreements, short-term investments and certain of our other investments which invest in fixed income securities and the corresponding change in unrealized appreciation. As interest rates rise, the fair value of our interest rate sensitive securities falls, and the converse is also true. Based on historical observations, there is a low probability that all interest rate yield curves would shift in the same direction at the same time. Accordingly, the actual effect of interest rate movements may differ materially from the amounts set forth in the following tables.

The following table summarizes the effect that an immediate, parallel shift in the interest rate yield curve would have had on our fixed income securities (including amounts attributable to the ‘other’ segment):

	Interest Rate Shift in Basis Points
(U.S. dollars in millions)	-100			-50			—		+50			+100
September 30, 2014
Total fair value	$	14,823.5		$	14,590.4		$	14,358.4	$	14,131.4		$	13,911.6
Change from base	3.24		%	1.62		%			(1.58		)%	(3.11		)%
Change in unrealized value	$	465.1		$	232.0				$	(227.0	)	$	(446.8	)
December 31, 2013
Total fair value	$	13,338.9		$	13,178.2		$	13,009.5	$	12,839.6		$	12,671.3
Change from base	2.53		%	1.30		%			(1.31		)%	(2.60		)%
Change in unrealized value	$	329.4		$	168.7				$	(169.9	)	$	(338.2	)

In addition, we consider the effect of credit spread movements on the fair value of our fixed maturities, fixed maturities pledged under securities lending agreements, short-term investments and certain of our other investments and investment funds accounted for using the equity method which invest in fixed income securities and the corresponding change in unrealized appreciation. As credit spreads widen, the fair value of our fixed income securities falls, and the converse is also true.

The following table summarizes the effect that an immediate, parallel shift in credit spreads in a static interest rate environment would have had on our fixed income securities (including amounts attributable to the ‘other’ segment):

	Credit Spread Shift in Basis Points
(U.S. dollars in millions)	-100			-50			—		+50			+100
September 30, 2014
Total fair value	$	14,627.9		$	14,509.6		$	14,358.4	$	14,222.8		$	14,088.4
Change from base	1.88		%	1.05		%			(0.94		)%	(1.88		)%
Change in unrealized value	$	269.5		$	151.2				$	(135.6	)	$	(270.0	)
December 31, 2013
Total fair value	$	13,228.3		$	13,137.9		$	13,009.5	$	12,896.3		$	12,783.0
Change from base	1.68		%	0.99		%			(0.87		)%	(1.74		)%
Change in unrealized value	$	218.8		$	128.4				$	(113.2	)	$	(226.5	)

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Another method that attempts to measure portfolio risk is Value-at-Risk (“VaR”). VaR attempts to take into account a broad cross-section of risks facing a portfolio by utilizing relevant securities volatility data skewed towards the most recent months and quarters. VaR measures the amount of a portfolio at risk for outcomes 1.65 standard deviations from the mean based on normal market conditions over a one year time horizon and is expressed as a percentage of the portfolio’s initial value. In other words, 95% of the time, should the risks taken into account in the VaR model perform per their historical tendencies, the portfolio’s loss in any one year period is expected to be less than or equal to the calculated VaR, stated as a percentage of the measured portfolio’s initial value. As of September 30, 2014, our portfolio’s VaR was estimated to be 2.97%, compared to an estimated 3.43% at December 31, 2013.

Certain Other Investments and Equity Securities. Our investment portfolio includes certain other investments which do not invest in fixed income securities along with equity holdings. At September 30, 2014 and December 31, 2013, the fair value of such investments totaled $686.6 million and $606.4 million, respectively. These investments are exposed to price risk, which is the potential loss arising from decreases in fair value. An immediate hypothetical 10% decline in the value of each position would reduce the fair value of such investments by approximately $68.7 million and $60.6 million at September 30, 2014 and December 31, 2013, respectively, and would have decreased book value per common share by approximately $0.53 and $0.45, respectively. An immediate hypothetical 10% increase in the value of each position would increase the fair value of such investments by approximately $68.7 million and $60.6 million at September 30, 2014 and December 31, 2013, respectively, and would have increased book value per common share by approximately $0.53 and $0.45, respectively.

Investment-Related Derivatives. Derivative instruments may be used to enhance investment performance, replicate investment positions or manage market exposures and duration risk that would be allowed under our investment guidelines if implemented in other ways. The fair values of those derivatives are based on quoted market prices. See note 9, “Derivative Instruments,” of the notes accompanying our consolidated financial statements for additional disclosures concerning derivatives. At September 30, 2014, the notional value of all derivative instruments (excluding to-be-announced mortgage backed securities which are included in the fixed income securities analysis above and foreign currency forward contracts which are included in the foreign currency exchange risk analysis below) was $2.09 billion, compared to $812.1 million at December 31, 2013. A 100 basis point depreciation of the underlying exposure to these derivative instruments at September 30, 2014 and December 31, 2013 would have resulted in a reduction in net income of approximately $20.9 million and $8.1 million, respectively, and would have decreased book value per common share by $0.16 and $0.06, respectively. A 100 basis point appreciation of the underlying exposure to these derivative instruments at September 30, 2014 and December 31, 2013 would have resulted in an increase in net income of approximately $20.9 million and $8.1 million, respectively, and would have increased book value per common share by $0.16 and $0.06, respectively.

For further discussion on investment activity, please refer to “—Financial Condition, Liquidity and Capital Resources—Financial Condition—Investable Assets.”

Foreign Currency Exchange Risk

Foreign currency rate risk is the potential change in value, income and cash flow arising from adverse changes in foreign currency exchange rates. Through our subsidiaries and branches located in various foreign countries, we conduct our insurance and reinsurance operations in a variety of local currencies other than the U.S. Dollar. We generally hold investments in foreign currencies which are intended to mitigate our exposure to foreign currency fluctuations in our net insurance liabilities. We may also utilize foreign currency forward contracts and currency options as part of our investment strategy. See Note 9, “Derivative Instruments,” of the notes accompanying our consolidated financial statements for additional information.

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The following table provides a summary of our net foreign currency exchange exposures, as well as foreign currency derivatives in place to manage these exposures:

(U.S. dollars in thousands, except per share data)	September 30, 2014			December 31, 2013
Net assets (liabilities), denominated in foreign currencies, excluding shareholders’ equity and derivatives	$	93,473		$	168,352
Shareholders’ equity denominated in foreign currencies (1)	384,032			396,106
Net foreign currency forward contracts outstanding (2)	(214,505		)	(87,399		)
Net exposures denominated in foreign currencies	$	263,000		$	477,059
Pre-tax impact of a hypothetical 10% appreciation of the U.S. Dollar against foreign currencies:
Shareholders’ equity	$	(26,300	)	$	(47,706	)
Book value per common share	$	(0.20	)	$	(0.36	)
Pre-tax impact of a hypothetical 10% decline of the U.S. Dollar against foreign currencies:
Shareholders’ equity	$	26,300		$	47,706
Book value per common share	$	0.20		$	0.36

_________________________________________________

(1) Represents capital contributions held in the foreign currencies of our operating units.

(2) Notional value of the outstanding foreign currency forward contracts in U.S. Dollars.

As a result of the current financial and economic environment as well as the potential for additional investment returns, we may not match a portion of our projected liabilities in foreign currencies with investments in the same currencies, which would increase our exposure to foreign currency fluctuations and increase the volatility in our results of operations. Historical observations indicate a low probability that all foreign currency exchange rates would shift against the U.S. Dollar in the same direction and at the same time and, accordingly, the actual effect of foreign currency rate movements may differ materially from the amounts set forth above. For further discussion on foreign exchange activity, please refer to “—Results of Operations.”

Cautionary Note Regarding Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 (“PSLRA”) provides a “safe harbor” for forward-looking statements. This release or any other written or oral statements made by or on behalf of us may include forward-looking statements, which reflect our current views with respect to future events and financial performance. All statements other than statements of historical fact included in or incorporated by reference in this release are forward-looking statements. Forward-looking statements, for purposes of the PSLRA or otherwise, can generally be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe” or “continue” and similar statements of a future or forward-looking nature or their negative or variations or similar terminology.

Forward-looking statements involve our current assessment of risks and uncertainties. Actual events and results may differ materially from those expressed or implied in these statements. Important factors that could cause actual events or results to differ materially from those indicated in such statements are discussed below and elsewhere in this release and in our periodic reports filed with the Securities and Exchange Commission (the “SEC”), and include:

• our ability to successfully implement its business strategy during “soft” as well as “hard” markets;

• acceptance of our business strategy, security and financial condition by rating agencies and regulators, as well as by brokers and our insureds and reinsureds; 

• our ability to maintain or improve our ratings, which may be affected by our ability to raise additional equity or debt financings, by ratings agencies’ existing or new policies and practices, as well as other factors described herein;

• general economic and market conditions (including inflation, interest rates, foreign currency exchange rates, prevailing credit terms and the depth and duration of a recession) and conditions specific to the reinsurance and insurance markets (including the length and magnitude of the current “soft” market) in which we operate;

• competition, including increased competition, on the basis of pricing, capacity, coverage terms or other factors;

• developments in the world’s financial and capital markets and our access to such markets;

• our ability to successfully enhance, integrate and maintain operating procedures (including information technology) to effectively support our current and new business;

• the loss of key personnel;

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• the integration of businesses we have acquired or may acquire into our existing operations;

• accuracy of those estimates and judgments utilized in the preparation of our financial statements, including those related to revenue recognition, insurance and other reserves, reinsurance recoverables, investment valuations, intangible assets, bad debts, income taxes, contingencies and litigation, and any determination to use the deposit method of accounting, which for a relatively new insurance and reinsurance company, like our company, are even more difficult to make than those made in a mature company since relatively limited historical information has been reported to us through September 30, 2014;

• greater than expected loss ratios on business written by us and adverse development on claim and/or claim expense liabilities related to business written by our insurance and reinsurance subsidiaries;

• severity and/or frequency of losses;

• claims for natural or man-made catastrophic events in our insurance or reinsurance business could cause large losses and substantial volatility in our results of operations;

• acts of terrorism, political unrest and other hostilities or other unforecasted and unpredictable events;

• availability to us of reinsurance to manage our gross and net exposures and the cost of such reinsurance;

• the failure of reinsurers, managing general agents, third party administrators or others to meet their obligations to us;

• the timing of loss payments being faster or the receipt of reinsurance recoverables being slower than anticipated by us;

• our investment performance, including legislative or regulatory developments that may adversely affect the fair value of our investments;

• the impact of the continued weakness of the U.S., European countries or other key economies, projected budget deficits for the U.S., European countries and other governments and the consequences associated with possible additional downgrades of securities of the U.S., European countries and other governments by credit rating agencies, and the resulting effect on the value of securities in our investment portfolio as well as the uncertainty in the market generally;

• losses relating to aviation business and business produced by a certain managing underwriting agency for which we may be liable to the purchaser of its prior reinsurance business or to others in connection with the May 5, 2000 asset sale described in our periodic reports filed with the SEC;

• changes in accounting principles or policies or in our application of such accounting principles or policies;

• changes in the political environment of certain countries in which we operates, underwrites business or invests;

• statutory or regulatory developments, including as to tax policy matters and insurance and other regulatory matters such as the adoption of proposed legislation that would affect Bermuda-headquartered companies and/or Bermuda-based insurers or reinsurers and/or changes in regulations or tax laws applicable to us, our subsidiaries, brokers or customers; and

• the other matters set forth under Item 1A “Risk Factors”, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other sections of our Annual Report on Form 10-K, as well as the other factors set forth in our other documents on file with the SEC, and management’s response to any of the aforementioned factors.

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

Other Financial Information

The consolidated financial statements as of September 30, 2014 and for the three month and nine month periods ended September 30, 2014 and 2013 have been reviewed by PricewaterhouseCoopers LLP, an independent registered public accounting firm. Their report (dated November 7, 2014) is included on page 2. The report of PricewaterhouseCoopers LLP states that they did not audit and they do not express an opinion on that unaudited financial information. Accordingly, the degree of reliance on their report on such information should be restricted in light of the limited nature of the review procedures applied. PricewaterhouseCoopers LLP is not subject to the liability provisions of Section 11 of the Securities Act of 1933 for

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their report on the unaudited financial information because that report is not a “report” or a “part” of the registration statement prepared or certified by PricewaterhouseCoopers LLP within the meaning of Sections 7 and 11 of the Securities Act of 1933.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Reference is made to the information appearing above under the subheading “Market Sensitive Instruments and Risk Management” under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which information is hereby incorporated by reference.

ITEM 4.  CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

In connection with the filing of this Form 10-Q, our management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of disclosure controls and procedures pursuant to applicable Exchange Act Rules as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of the end of and during the period covered by this report with respect to information being recorded, processed, summarized and reported within time periods specified in the SEC’s rules and forms and with respect to timely communication to them and other members of management responsible for preparing periodic reports of all material information required to be disclosed in this report as it relates to ACGL and its consolidated subsidiaries.

We continue to enhance our operating procedures and internal controls to effectively support our business and our regulatory and reporting requirements. Our management does not expect that our disclosure controls or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. As a result of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons or by collusion of two or more people. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. As a result of the inherent limitations in a cost-effective control system, misstatement due to error or fraud may occur and not be detected. Accordingly, our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the disclosure controls and procedures are met.

Changes in Internal Controls Over Financial Reporting

There have been no changes in internal control over financial reporting that occurred during the fiscal quarter ended September 30, 2014 that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting.

PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings

We, in common with the insurance industry in general, are subject to litigation and arbitration in the normal course of our business. As of September 30, 2014, we were not a party to any litigation or arbitration which is expected by management to have a material adverse effect on our results of operations and financial condition and liquidity.

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Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

The following table summarizes our purchases of our common shares for the 2014 third quarter:

	Issuer Purchases of Equity Securities
Period	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that  May Yet be Purchased Under the Plan or Programs (2)
7/1/2014 - 7/31/2014	2,809	$	56.87	—	$	712,115
8/1/2014 - 8/31/2014	1,631,595	54.97		1,622,627	$	622,914
9/1/2014 - 9/30/2014	2,979,852	54.77		2,971,099	$	460,196
Total	4,614,256	$	54.84	4,593,726	$	460,196

_________________________________________________

(1) Includes repurchases by ACGL of shares, from time to time, from employees in order to facilitate the payment of withholding taxes on restricted shares granted and the exercise of stock appreciation rights. We purchased these shares at their fair value, as determined by reference to the closing price of our common shares on the day the restricted shares vested or the stock appreciation rights were exercised.

(2) Remaining amount available at September 30, 2014 under ACGL’s share repurchase authorization, under which repurchases may be effected from time to time in open market or privately negotiated transactions. On November 6, 2014, the board of directors of ACGL increased the aggregate purchase amount authorized under the share repurchase program to $1.0 billion. Repurchases under this authorization may be effected from time to time in open market or privately negotiated transactions through December 31, 2016.

Item 5.  Other Information

In accordance with Section 10a(i)(2) of the Securities Exchange Act of 1934, as amended, we are responsible for disclosing non-audit services to be provided by our independent auditor, PricewaterhouseCoopers LLP, which are approved by the Audit Committee of our board of directors. During the 2014 third quarter, the Audit Committee approved engagements of PricewaterhouseCoopers LLP for permitted non-audit services, which consisted of tax consulting services, tax compliance services and other accounting consulting services.

Item 6.  Exhibits

Exhibit No.	Description
10.1	Restricted Share Agreement with Arch Capital Group Ltd. substantially in the form signed by each of Louis J. Paglia and Eugene S. Sunshine for July 14, 2014 grants
10.2	Amended and Restated Employment Agreement, dated October 1, 2014, between Arch Capital Group Ltd. and Constantine Iordanou *
15	Accountants’ Awareness Letter (regarding unaudited interim financial information)
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	The following financial information from Arch Capital Group Ltd.’s Quarterly Report for the quarter ended September 30, 2014 formatted in XBRL: (i) Consolidated Balance Sheets at September 30, 2014 and December 31, 2013; (ii) Consolidated Statements of Income for the three and nine month periods ended September 30, 2014 and 2013; (iii) Consolidated Statements of Comprehensive Income for the three and nine month periods ended September 30, 2014 and 2013; (iv) Consolidated Statements of Changes in Shareholders’ Equity for the nine month periods ended September 30, 2014 and 2013; (v) Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2014 and 2013; and (vi) Notes to Consolidated Financial Statements.

* Filed as an exhibit to our Report on Form 8-K, as filed with the SEC on October 6, 2014, and incorporated by reference.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ARCH CAPITAL GROUP LTD.
	(REGISTRANT)
	/s/ Constantine Iordanou
Date: November 7, 2014	Constantine Iordanou
	President and Chief Executive Officer (Principal Executive Officer) and Chairman of the Board of Directors
	/s/ Mark D. Lyons
Date: November 7, 2014	Mark D. Lyons
	Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)

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EXHIBIT INDEX

Exhibit No.	Description
10.1	Restricted Share Agreement with Arch Capital Group Ltd. substantially in the form signed by each of Louis J. Paglia and Eugene S. Sunshine for July 14, 2014 grants
10.2	Amended and Restated Employment Agreement, dated October 1, 2014, between Arch Capital Group Ltd. and Constantine Iordanou *
15	Accountants’ Awareness Letter (regarding unaudited interim financial information)
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	The following financial information from Arch Capital Group Ltd.’s Quarterly Report for the quarter ended September 30, 2014 formatted in XBRL: (i) Consolidated Balance Sheets at September 30, 2014 and December 31, 2013; (ii) Consolidated Statements of Income for the three and nine month periods ended September 30, 2014 and 2013; (iii) Consolidated Statements of Comprehensive Income for the three and nine month periods ended September 30, 2014 and 2013; (iv) Consolidated Statements of Changes in Shareholders’ Equity for the nine month periods ended September 30, 2014 and 2013; (v) Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2014 and 2013; and (vi) Notes to Consolidated Financial Statements.

* Filed as an exhibit to our Report on Form 8-K, as filed with the SEC on October 6, 2014, and incorporated by reference.

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EX-10.1

Exhibit 10.1

ARCH CAPITAL GROUP LTD.
Restricted Share Agreement

THIS AGREEMENT, dated as of July 14, 2014, between Arch Capital Group Ltd. (the “Company”), a Bermuda company, and ____ (the “Director”).

WHEREAS, the following terms reflect the Company’s 2012 Long Term Incentive and Share Award Plan (the “Plan”);

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the parties hereto agree as follows.

1.Award of Shares.  Pursuant to the provisions of the Plan, the terms of which are incorporated herein by reference, the Director is hereby awarded 1,090 Restricted Shares (the “Award”), subject to the terms and conditions herein set forth. Capitalized terms used herein and not defined shall have the meanings set forth in the Plan. In the event of any conflict between this Agreement and the Plan, the Plan shall control.

2.Terms and Conditions.  It is understood and agreed that the Award of Restricted Shares evidenced hereby is subject to the following terms and conditions:

(a)    Vesting of Award. Subject to Section 2(b) below and the other terms and conditions of this Agreement, this Award shall become vested on May 8, 2015. Unless otherwise provided by the Company, all dividends and other amounts receivable in connection with any adjustments to the Shares under Section 4(c) of the Plan shall be subject to the vesting schedule in this Section 2(a). Notwithstanding the foregoing, if a Change in Control occurs and the Director ceases to be a director of the Company for any reason, then the Restricted Shares shall become immediately vested in full upon such termination of service.

“Change in Control” shall mean:

(A) any person (within the meaning of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), other than a Permitted Person, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of Voting Securities representing 50% or more of the total voting power or value of all the then outstanding Voting Securities; or

(B) the individuals who, as of the date hereof, constitute the Board of Directors of the Company (the “Board”) together with those who become directors subsequent to such date and whose recommendation, election or nomination for election to the Board was approved by a vote of at least a majority of the directors then still in office who either were

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directors as of such date or whose recommendation, election or nomination for election was previously so approved, cease for any reason to constitute a majority of the members of the Board; or

(C) the consummation of a merger, consolidation, recapitalization, liquidation, sale or disposition by the Company of all or substantially all of the Company's assets, or reorganization of the Company, other than any such transaction which would (x) result in more than 50% of the total voting power and value represented by the voting securities of the surviving entity outstanding immediately after such transaction being beneficially owned by the former shareholders of the Company and (y) not otherwise be deemed a Change in Control under subparagraphs (A) or (B) of this paragraph.

“Permitted Persons” means (A) the Company; (B) any Related Party; or (C) any group (as defined in Rule 13b-3 under the Exchange Act) comprised of any or all of the foregoing.

“Related Party” means (A) a majority-owned subsidiary of the Company; (B) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any majority-owned subsidiary of the Company; or (C) any entity, 50% or more of the voting power of which is owned directly or indirectly by the shareholders of the Company in substantially the same proportion as their ownership of Voting Securities immediately prior to the transaction.

“Voting Security” means any security of the Company which carries the right to vote generally in the election of directors.

(b)    Termination of Service; Forfeiture of Unvested Shares. Except as otherwise set forth in Section 2(a) above, in the event the Director ceases to be a director of the Company prior to the date the Restricted Shares otherwise become vested due to his or her death or Permanent Disability (as defined in the Company’s Incentive Compensation Plan), the Restricted Shares shall become immediately vested in full upon such termination of service. If the Director ceases to be a director of the Company for any other reason prior to the date the Restricted Shares become vested, the Award shall be forfeited by the Director and become the property of the Company.

(c)    Certificates.  Each certificate issued in respect of Restricted Shares awarded hereunder shall be issued in book entry format with the Company’s transfer agent and shall bear a legend disclosing the restrictions on transferability imposed on

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such Restricted Shares by this Agreement (the “Restrictive Legend”). Upon the vesting of Restricted Shares pursuant to Section 2(a) hereof and the satisfaction of any withholding tax liability pursuant to Section 5 hereof, such vested Shares, not bearing the Restrictive Legend, shall be delivered to the Director.

(d)    Rights of a Stockholder.  Prior to the time a Restricted Share is fully vested hereunder, the Director shall have no right to transfer, pledge, hypothecate or otherwise encumber such Restricted Shares. During such period, the Director shall have all other rights of a stockholder, including, but not limited to, the right to vote and to receive dividends (subject to Section 2(a) hereof) at the time paid on such Restricted Shares.

(e)    No Right to Continued Services. This Award shall not confer upon the Director any right with respect to continuance of services with the Company nor shall this Award interfere with the right of the Company to terminate the Director’s services at any time.

3.    Transfer of Shares. The Shares delivered hereunder, or any interest therein, may be sold, assigned, pledged, hypothecated, encumbered, or transferred or disposed of in any other manner, in whole or in part, only in compliance with the terms, conditions and restrictions as set forth in the governing instruments of the Company, applicable United States federal and state securities laws or any other applicable laws or regulations and the terms and conditions hereof.

4.    Expenses of Issuance of Shares. The issuance of stock certificates hereunder shall be without charge to the Director. The Company shall pay, and indemnify the Director from and against any issuance, stamp or documentary taxes (other than transfer taxes) or charges imposed by any governmental body, agency or official (other than income taxes) or by reason of the issuance of Shares.

5.    Withholding. No later than the date of vesting of (or the date of an election by the Director under Section 83(b) of the Code with respect to) the Award granted hereunder, the Director shall make arrangements satisfactory to the Committee regarding payment of any federal, state or local taxes of any kind required by law to be withheld at such time with respect to such Award and the Company shall, to the extent permitted or required by law, have the right to deduct from any payment of any kind otherwise due to the Director, federal, state and local taxes of any kind required by law to be withheld at such time.

6.    References.  References herein to rights and obligations of the Director shall apply, where appropriate, to the Director’s legal representative or estate without regard to whether specific reference to such legal representative or estate is contained in a particular provision of this Agreement.

7.    Notices.  Any notice required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given when delivered personally or by courier, or sent by certified or registered mail, postage prepaid, return receipt requested, duly addressed to the party concerned at the address indicated below or

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to such changed address as such party may subsequently by similar process give notice of:

If to the Company:

Arch Capital Group Ltd.Waterloo House

100 Pitts Bay RoadPembroke HM 08, Bermuda Attn.: Secretary

If to the Director:

To the last address delivered to the Company by the Director in the manner set forth herein.

8.    Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to principles of conflict of laws.

9.    Entire Agreement. This Agreement and the Plan constitute the entire agreement among the parties relating to the subject matter hereof, and any previous agreement or understanding among the parties with respect thereto is superseded by this Agreement and the Plan.

10.    Counterparts.  This Agreement may be executed in two counterparts, each of which shall constitute one and the same instrument.

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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.

ARCH CAPITAL GROUP LTD.

By: /s/ Dawna Ferguson    

Dawna Ferguson

Secretary

[/s/ Director signature]    

EX-15

Exhibit 15

Securities and Exchange Commission

100 F Street, N.E.

Washington, DC 20549

Commissioners:

We are aware that our report dated November 7, 2014 on our review of interim financial information of Arch Capital Group Ltd. and its subsidiaries (the “Company”) for the three-month and nine-month periods ended September 30, 2014 and September 30, 2013 and included in the Company's quarterly report on Form 10-Q for the quarter ended September 30, 2014 is incorporated by reference in the Registration Statement on Form S-3 (Registration No. 333-180329) and in the Registration Statements on Forms S-8 (Registration No. 333- 99974, Registration No. 333-86145, Registration No. 333-82772, Registration No. 333-72182, Registration No. 333-98971, Registration No. 333-124422, Registration No. 333-142835 and Registration No. 333-181308).

Very truly yours,

/s/ PricewaterhouseCoopers LLP

New York, New York

November 7, 2014

EX-31.1

Exhibit 31.1

Certification

of Chief Executive Officer

Pursuant to Section 302 of the

Sarbanes-Oxley Act of 2002

I, Constantine Iordanou, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Arch Capital Group Ltd.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in the report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and to the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	November 7, 2014
By:	/s/ Constantine Iordanou
Name:	Constantine Iordanou
Title:	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification

of Chief Financial Officer

Pursuant to Section 302 of the

Sarbanes-Oxley Act of 2002

I, Mark D. Lyons, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Arch Capital Group Ltd.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in the report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and to the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	November 7, 2014
By:	/s/ Mark D. Lyons
Name:	Mark D. Lyons
Title:	Executive Vice President, Chief Financial Officer and Treasurer

EX-32.1

Exhibit 32.1

Certification Pursuant to Chapter 63, Title 18 United States Code §1350

As Adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Arch Capital Group Ltd. (the “Company”) on Form 10-Q for the period ending September 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Constantine Iordanou, as President and Chief Executive Officer of the Company, certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934; and

(2) the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 7, 2014

 /s/ Constantine Iordanou

Constantine Iordanou

President and Chief Executive Officer

A signed original of this written statement required by Section 906 or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Arch Capital Group Ltd. and will be retained by Arch Capital Group Ltd. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

Certification Pursuant to Chapter 63, Title 18 United States Code §1350

As Adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Arch Capital Group Ltd. (the “Company”) on Form 10-Q for the period ending September 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Mark D. Lyons, as Executive Vice President, Chief Financial Officer and Treasurer of the Company, certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934; and

(2) the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 7, 2014

 /s/ Mark D. Lyons

Mark D. Lyons

Executive Vice President,

Chief Financial Officer and Treasurer

A signed original of this written statement required by Section 906 or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Arch Capital Group Ltd. and will be retained by Arch Capital Group Ltd. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Variable Interest Entities and Noncontrolling Interests - Non-redeemable noncontrolling interests (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended				9 Months Ended
	Sep. 30, 2014		Sep. 30, 2013		Sep. 30, 2014		Sep. 30, 2013
Noncontrolling Interest [Line Items]
Non-redeemable noncontrolling interests, beginning of year					$ 0
Net (loss) income attributable to noncontrolling interests	10,320		0		14,883		0
Non-redeemable noncontrolling interests, end of period	782,020	[1]	0	[1]	782,020	[1]	0	[1]
Watford Holdings Ltd | Noncontrolling Interest
Noncontrolling Interest [Line Items]
Non-redeemable noncontrolling interests, beginning of year	792,340				0
Sale of shares to noncontrolling interests	0				796,903
Net (loss) income attributable to noncontrolling interests	$ (10,320)				$ (14,883)
Common shares | Watford Holdings Ltd | Noncontrolling Interest
Noncontrolling Interest [Line Items]
Noncontrolling interest, ownership percentage by noncontrolling owners	89.00%				89.00%

[1] See Note 4.

XML

Investment Information - Narrative (Details) (USD $)	9 Months Ended		12 Months Ended
	Sep. 30, 2014 lots		Dec. 31, 2013 lots		Sep. 30, 2013
Narrative items:
Investable assets	$ 15,708,775,000				$ 13,282,560,000
OTTI unrealized losses at current fair value	2,100,000		6,000,000
Continuous unrealized loss, qualitative disclosures:
Number of positions in an unrealized loss position (lots)	2,090		2,080
Total number of positions (lots)	4,920		4,400
Largest single loss	2,900,000		3,500,000
Securities lending, qualitative disclosures:
Fair value of fixed maturities and short-term investments pledged under securities lending agreements	107,500,000		105,100,000
Amortized cost of fixed maturities and short-term investments pledged under securities lending agreements	109,000,000		105,900,000
Fair value of securities backing securities lending program	104,252,000		100,584,000
Approximate fair value of sub-prime securities backing the securities lending program	5,700,000		6,300,000
OTTI Unrealized Losses	3,622,000	[1]	12,942,000	[1]
Underwriting segments
Narrative items:
Investable assets	14,584,727,000				13,282,560,000
Other
Narrative items:
Investable assets	$ 1,124,048,000				$ 0

[1] Represents the total other-than-temporary impairments (“OTTI”) recognized in accumulated other comprehensive income (“AOCI”). It does not include the change in fair value subsequent to the impairment measurement date. At September 30, 2014, the net unrealized gain related to securities for which a non-credit OTTI was recognized in AOCI was $2.1 million, compared to a net unrealized gain of $6.0 million at December 31, 2013.

XML

Investment Information - Fair value option (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Fair Value, Option, Quantitative Disclosures [Line Items]
Investments accounted for using the fair value option	$ 2,202,995	$ 1,221,534
Fixed Maturities
Fair Value, Option, Quantitative Disclosures [Line Items]
Investments accounted for using the fair value option	565,754	448,254
Other investments
Fair Value, Option, Quantitative Disclosures [Line Items]
Investments accounted for using the fair value option	1,431,525	773,280
Short-term investments
Fair Value, Option, Quantitative Disclosures [Line Items]
Investments accounted for using the fair value option	$ 205,716	$ 0

XML

Fair Value - Fair Value Hierarchy (Details) (Recurring, USD $) In Thousands, unless otherwise specified	Sep. 30, 2014		Dec. 31, 2013
Estimated Fair Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	$ 14,806,491		$ 13,371,892
Liabilities measured at fair value	58,661
Estimated Fair Value | Fixed maturities and fixed maturities pledged under securities lending agreements
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	10,840,929		9,676,857
Estimated Fair Value | Fixed maturities and fixed maturities pledged under securities lending agreements | Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	3,070,353		2,267,263
Estimated Fair Value | Fixed maturities and fixed maturities pledged under securities lending agreements | Mortgage backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	966,848		1,133,095
Estimated Fair Value | Fixed maturities and fixed maturities pledged under securities lending agreements | Municipal bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	1,293,455		1,481,738
Estimated Fair Value | Fixed maturities and fixed maturities pledged under securities lending agreements | Commercial mortgage backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	1,232,092		1,074,497
Estimated Fair Value | Fixed maturities and fixed maturities pledged under securities lending agreements | US government and government agencies
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	1,551,583		1,301,809
Estimated Fair Value | Fixed maturities and fixed maturities pledged under securities lending agreements | Non-US government securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	1,001,947		1,085,861
Estimated Fair Value | Fixed maturities and fixed maturities pledged under securities lending agreements | Asset backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	1,724,651		1,332,594
Estimated Fair Value | Equity securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	582,075		496,824
Estimated Fair Value | Other investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	431,833		498,310
Estimated Fair Value | Short-term investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	748,659		1,478,367
Estimated Fair Value | Fair value option
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	2,202,995		1,221,534
Estimated Fair Value | Fair value option | Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	452,275		334,065
Estimated Fair Value | Fair value option | Mortgage backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	17,919		41,033
Estimated Fair Value | Fair value option | Non-US government securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	70,494		73,156
Estimated Fair Value | Fair value option | Asset backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	25,066
Estimated Fair Value | Fair value option | Other investments fair value option
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	1,431,525		773,280
Estimated Fair Value | Fair value option | Short-term investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	205,716
Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	3,055,433		3,226,291
Liabilities measured at fair value	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Contingent consideration liability
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities measured at fair value	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fixed maturities and fixed maturities pledged under securities lending agreements
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	1,551,583	[1]	1,301,809	[1]
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fixed maturities and fixed maturities pledged under securities lending agreements | Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	0	[1]	0	[1]
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fixed maturities and fixed maturities pledged under securities lending agreements | Mortgage backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	0	[1]	0	[1]
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fixed maturities and fixed maturities pledged under securities lending agreements | Municipal bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	0	[1]	0	[1]
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fixed maturities and fixed maturities pledged under securities lending agreements | Commercial mortgage backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	0	[1]	0	[1]
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fixed maturities and fixed maturities pledged under securities lending agreements | US government and government agencies
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	1,551,583	[1]	1,301,809	[1]
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fixed maturities and fixed maturities pledged under securities lending agreements | Non-US government securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	0	[1]	0	[1]
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fixed maturities and fixed maturities pledged under securities lending agreements | Asset backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	0	[1]	0	[1]
Quoted Prices in Active Markets for Identical Assets (Level 1) | Equity securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	582,075		496,738
Quoted Prices in Active Markets for Identical Assets (Level 1) | Other investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	0		0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Short-term investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	723,698		1,427,744
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair value option
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	198,077		0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair value option | Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	0		0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair value option | Mortgage backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	0		0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair value option | Non-US government securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	0		0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair value option | Asset backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair value option | Other investments fair value option
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	0		0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair value option | Short-term investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	198,077
Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	11,224,981		9,595,611
Liabilities measured at fair value	0
Significant Other Observable Inputs (Level 2) | Contingent consideration liability
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities measured at fair value	0
Significant Other Observable Inputs (Level 2) | Fixed maturities and fixed maturities pledged under securities lending agreements
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	9,289,346	[1]	8,373,003	[1]
Significant Other Observable Inputs (Level 2) | Fixed maturities and fixed maturities pledged under securities lending agreements | Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	3,070,353	[1]	2,265,218	[1]
Significant Other Observable Inputs (Level 2) | Fixed maturities and fixed maturities pledged under securities lending agreements | Mortgage backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	966,848	[1]	1,133,095	[1]
Significant Other Observable Inputs (Level 2) | Fixed maturities and fixed maturities pledged under securities lending agreements | Municipal bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	1,293,455	[1]	1,481,738	[1]
Significant Other Observable Inputs (Level 2) | Fixed maturities and fixed maturities pledged under securities lending agreements | Commercial mortgage backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	1,232,092	[1]	1,074,497	[1]
Significant Other Observable Inputs (Level 2) | Fixed maturities and fixed maturities pledged under securities lending agreements | US government and government agencies
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	0	[1]	0	[1]
Significant Other Observable Inputs (Level 2) | Fixed maturities and fixed maturities pledged under securities lending agreements | Non-US government securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	1,001,947	[1]	1,085,861	[1]
Significant Other Observable Inputs (Level 2) | Fixed maturities and fixed maturities pledged under securities lending agreements | Asset backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	1,724,651	[1]	1,332,594	[1]
Significant Other Observable Inputs (Level 2) | Equity securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	0		86
Significant Other Observable Inputs (Level 2) | Other investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	328,750		327,890
Significant Other Observable Inputs (Level 2) | Short-term investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	24,961		50,623
Significant Other Observable Inputs (Level 2) | Fair value option
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	1,581,924		844,009
Significant Other Observable Inputs (Level 2) | Fair value option | Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	452,275		334,065
Significant Other Observable Inputs (Level 2) | Fair value option | Mortgage backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	17,919		41,033
Significant Other Observable Inputs (Level 2) | Fair value option | Non-US government securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	70,494		73,156
Significant Other Observable Inputs (Level 2) | Fair value option | Asset backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	25,066
Significant Other Observable Inputs (Level 2) | Fair value option | Other investments fair value option
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	1,008,531		395,755
Significant Other Observable Inputs (Level 2) | Fair value option | Short-term investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	7,639
Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	526,077		549,990
Liabilities measured at fair value	58,661
Significant Unobservable Inputs (Level 3) | Contingent consideration liability
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities measured at fair value	58,661
Significant Unobservable Inputs (Level 3) | Fixed maturities and fixed maturities pledged under securities lending agreements
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	0	[1]	2,045	[1]
Significant Unobservable Inputs (Level 3) | Fixed maturities and fixed maturities pledged under securities lending agreements | Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	0	[1]	2,045	[1]
Significant Unobservable Inputs (Level 3) | Fixed maturities and fixed maturities pledged under securities lending agreements | Mortgage backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	0	[1]	0	[1]
Significant Unobservable Inputs (Level 3) | Fixed maturities and fixed maturities pledged under securities lending agreements | Municipal bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	0	[1]	0	[1]
Significant Unobservable Inputs (Level 3) | Fixed maturities and fixed maturities pledged under securities lending agreements | Commercial mortgage backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	0	[1]	0	[1]
Significant Unobservable Inputs (Level 3) | Fixed maturities and fixed maturities pledged under securities lending agreements | US government and government agencies
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	0	[1]	0	[1]
Significant Unobservable Inputs (Level 3) | Fixed maturities and fixed maturities pledged under securities lending agreements | Non-US government securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	0	[1]	0	[1]
Significant Unobservable Inputs (Level 3) | Fixed maturities and fixed maturities pledged under securities lending agreements | Asset backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	0	[1]	0	[1]
Significant Unobservable Inputs (Level 3) | Equity securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	0		0
Significant Unobservable Inputs (Level 3) | Other investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	103,083		170,420
Significant Unobservable Inputs (Level 3) | Short-term investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	0		0
Significant Unobservable Inputs (Level 3) | Fair value option
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	422,994		377,525
Significant Unobservable Inputs (Level 3) | Fair value option | Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	0		0
Significant Unobservable Inputs (Level 3) | Fair value option | Mortgage backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	0		0
Significant Unobservable Inputs (Level 3) | Fair value option | Non-US government securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	0		0
Significant Unobservable Inputs (Level 3) | Fair value option | Asset backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	0
Significant Unobservable Inputs (Level 3) | Fair value option | Other investments fair value option
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	422,994		377,525
Significant Unobservable Inputs (Level 3) | Fair value option | Short-term investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	$ 0

[1] In securities lending transactions, the Company receives collateral in excess of the fair value of the fixed maturities and short-term investments pledged. For purposes of this table, the Company has excluded the collateral received and reinvested and included the fixed maturities and short-term investments pledged.

XML

Investment Information - Maturity profile of available for sale securities) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Estimated Fair Value:
Estimated fair value	$ 10,733,382	$ 9,571,776
Amortized Cost:
Amortized cost	10,699,615	9,564,634
Fixed maturities and fixed maturities pledged under securities lending agreements
Estimated Fair Value:
Due in one year or less	253,946	235,330
Due after one year through five years	4,184,904	3,738,500
Due after five years through 10 years	2,213,584	1,966,536
Due after 10 years	264,904	196,305
Single maturity date	6,917,338	6,136,671
Estimated fair value	10,840,929	9,676,857
Amortized Cost:
Due in one year or less	250,917	232,652
Due after one year through five years	4,178,652	3,718,920
Due after five years through 10 years	2,207,108	1,979,510
Due after 10 years	261,523	198,286
Single maturity date	6,898,200	6,129,368
Amortized cost	10,808,662	9,670,507
Fixed maturities and fixed maturities pledged under securities lending agreements | Mortgage backed securities
Estimated Fair Value:
Securities without single maturity date	966,848	1,133,095
Amortized Cost:
Securities without single maturity date	956,630	1,139,034
Fixed maturities and fixed maturities pledged under securities lending agreements | Commercial mortgage backed securities
Estimated Fair Value:
Securities without single maturity date	1,232,092	1,074,497
Amortized Cost:
Securities without single maturity date	1,228,713	1,075,749
Fixed maturities and fixed maturities pledged under securities lending agreements | Asset backed securities
Estimated Fair Value:
Securities without single maturity date	1,724,651	1,332,594
Amortized Cost:
Securities without single maturity date	$ 1,725,119	$ 1,326,356

XML

Guarantor Financial Information (Tables)

9 Months Ended

Sep. 30, 2014

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Condensed consolidating balance sheet

		September 30, 2014
Condensed Consolidating Balance Sheet		ACGL (Parent Guarantor)		Arch-U.S. (Subsidiary Issuer)		Other ACGL Subsidiaries		Consolidating Adjustments and Eliminations			ACGL Consolidated
Assets
Total investments		$	134	$	78,741	$	15,031,573	$	—		$	15,110,448
Cash		5,969		15,710		642,047		—			663,726
Investments in subsidiaries		6,487,180		1,641,236		—		(8,128,416		)	—
Due from subsidiaries and affiliates		34		—		405,714		(405,748		)	—
Premiums receivable		—		—		1,410,961		(383,757		)	1,027,204
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses		—		—		5,572,303		(3,758,113		)	1,814,190
Contractholder receivables		—		—		1,286,799		—			1,286,799
Prepaid reinsurance premiums		—		—		1,430,149		(1,025,488		)	404,661
Deferred acquisition costs, net		—		—		409,174		—			409,174
Other assets		7,412		63,507		2,264,246		(440,682		)	1,894,483
	Total assets	$	6,500,729	$	1,799,194	$	28,452,966	$	(14,142,204	)	$	22,610,685
Liabilities
Reserve for losses and loss adjustment expenses		$	—	$	—	$	12,701,382	$	(3,742,648	)	$	8,958,734
Unearned premiums		—		—		3,328,735		(1,025,488		)	2,303,247
Reinsurance balances payable		—		—		615,237		(370,858		)	244,379
Contractholder payables		—		—		1,286,799		—			1,286,799
Deposit accounting liabilities		—		—		628,383		(278,533		)	349,850
Senior notes		300,000		500,000		—		—			800,000
Revolving credit agreement borrowings		100,000		—		—		—			100,000
Due to subsidiaries and affiliates		5		—		405,743		(405,748		)	—
Other liabilities		19,678		58,139		1,597,887		(190,513		)	1,485,191
	Total liabilities	419,683		558,139		20,564,166		(6,013,788		)	15,528,200
Redeemable noncontrolling interests (1)		—		—		219,419		—			219,419
Shareholders’ Equity
Total shareholders’ equity available to Arch		6,081,046		1,241,055		6,887,361		(8,128,416		)	6,081,046
Non-redeemable noncontrolling interests (1)		—		—		782,020		—			782,020
	Total shareholders’ equity	6,081,046		1,241,055		7,669,381		(8,128,416		)	6,863,066
	Total liabilities, noncontrolling interests and shareholders’ equity	$	6,500,729	$	1,799,194	$	28,452,966	$	(14,142,204	)	$	22,610,685

(1)     See Note 4.

		December 31, 2013
Condensed Consolidating Balance Sheet		ACGL (Parent Guarantor)		Arch-U.S. (Subsidiary Issuer)		Other ACGL Subsidiaries		Consolidating Adjustments and Eliminations			ACGL Consolidated
Assets
Total investments		$	2,530	$	408,957	$	13,200,247	$	—		$	13,611,734
Cash		3,223		509		430,325		—			434,057
Investments in subsidiaries		6,046,060		1,258,889		—		(7,304,949		)	—
Due from subsidiaries and affiliates		2,251		—		405,110		(407,361		)	—
Premiums receivable		—		—		1,085,369		(331,445		)	753,924
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses		—		—		5,645,156		(3,840,826		)	1,804,330
Contractholder receivables		—		—		1,064,246		—			1,064,246
Prepaid reinsurance premiums		—		—		1,109,312		(780,969		)	328,343
Deferred acquisition costs, net		—		—		342,314		—			342,314
Other assets		6,598		60,342		1,714,651		(554,445		)	1,227,146
	Total assets	$	6,060,662	$	1,728,697	$	24,996,730	$	(13,219,995	)	$	19,566,094
Liabilities
Reserve for losses and loss adjustment expenses		$	—	$	—	$	12,625,766	$	(3,801,070	)	$	8,824,696
Unearned premiums		—		—		2,677,334		(780,969		)	1,896,365
Reinsurance balances payable		—		—		662,394		(466,227		)	196,167
Contractholder payables		—		—		1,064,246		—			1,064,246
Deposit accounting liabilities		—		—		758,490		(337,193		)	421,297
Senior notes		300,000		500,000		—		—			800,000
Revolving credit agreement borrowings		100,000		—		—		—			100,000
Due to subsidiaries and affiliates		18		10,250		397,093		(407,361		)	—
Other liabilities		13,148		33,206		691,699		(122,226		)	615,827
	Total liabilities	413,166		543,456		18,877,022		(5,915,046		)	13,918,598
Redeemable noncontrolling interests		—		—		—		—			—
Shareholders’ Equity
Total shareholders’ equity available to Arch		5,647,496		1,185,241		6,119,708		(7,304,949		)	5,647,496
Non-redeemable noncontrolling interests		—		—		—		—			—
	Total shareholders’ equity	5,647,496		1,185,241		6,119,708		(7,304,949		)	5,647,496
	Total liabilities, noncontrolling interests and shareholders’ equity	$	6,060,662	$	1,728,697	$	24,996,730	$	(13,219,995	)	$	19,566,094

Condensed consolidating statement of income and comprehensive income

		Three Months Ended September 30, 2014
Condensed Consolidating Statement of Income and Comprehensive Income		ACGL (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other ACGL Subsidiaries			Consolidating Adjustments and Eliminations			ACGL Consolidated
Revenues
Net premiums earned		$	—		$	—		$	903,651		$	—		$	903,651
Net investment income		—			—			79,936			169			80,105
Net realized gains		—			—			18,515			—			18,515
Net impairment losses recognized in earnings		—			—			(8,593		)	—			(8,593		)
Other underwriting income		—			—			1,702			—			1,702
Equity in net income of investment funds accounted for using the equity method		—			—			4,966			—			4,966
Other income (loss)		—			—			(7,815		)	—			(7,815		)
	Total revenues	—			—			992,362			169			992,531
Expenses
Losses and loss adjustment expenses		—			—			501,673			—			501,673
Acquisition expenses		—			—			163,547			—			163,547
Other operating expenses		10,056			810			138,614			—			149,480
Interest expense		5,858			6,433			(8,308		)	169			4,152
Net foreign exchange gains		—			—			(35,244		)	(20,787		)	(56,031		)
	Total expenses	15,914			7,243			760,282			(20,618		)	762,821
Income (loss) before income taxes		(15,914		)	(7,243		)	232,080			20,787			229,710
Income tax benefit (expense)		—			2,097			(8,543		)	—			(6,446		)
Income (loss) before equity in net income of subsidiaries		(15,914		)	(5,146		)	223,537			20,787			223,264
Equity in net income of subsidiaries		244,589			10,459			—			(255,048		)	—
Net income		228,675			5,313			223,537			(234,261		)	223,264
Amounts attributable to noncontrolling interests (1)		—			—			5,411			—			5,411
Net income available to Arch		228,675			5,313			228,948			(234,261		)	228,675
Preferred dividends		(5,484		)	—			—			—			(5,484		)
Net income available to Arch common shareholders		$	223,191		$	5,313		$	228,948		$	(234,261	)	$	223,191
Comprehensive income available to Arch		$	96,978		$	(10,614	)	$	104,501		$	(93,887	)	$	96,978

(1)     See Note 4.

		Three Months Ended September 30, 2013
Condensed Consolidating Statement of Income and Comprehensive Income		ACGL (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other ACGL Subsidiaries			Consolidating Adjustments and Eliminations			ACGL Consolidated
Revenues
Net premiums earned		$	—		$	—		$	795,000		$	—		$	795,000
Net investment income		—			—			72,772			(6,689		)	66,083
Net realized losses		—			—			(6,022		)	—			(6,022		)
Net impairment losses recognized in earnings		—			—			(728		)	—			(728		)
Other underwriting income		—			—			526			—			526
Equity in net income of investment funds accounted for using the equity method		—			—			5,665			—			5,665
Other income (loss)		—			—			624			—			624
	Total revenues	—			—			867,837			(6,689		)	861,148
Expenses
Losses and loss adjustment expenses		—			—			427,045			—			427,045
Acquisition expenses		—			—			147,313			—			147,313
Other operating expenses		6,975			397			110,698			—			118,070
Interest expense		5,793			7			6,826			(6,689		)	5,937
Net foreign exchange losses		—			—			26,815			13,747			40,562
	Total expenses	12,768			404			718,697			7,058			738,927
Income (loss) before income taxes		(12,768		)	(404		)	149,140			(13,747		)	122,221
Income tax expense		—			(1,356		)	(6,040		)	—			(7,396		)
Income (loss) before equity in net income of subsidiaries		(12,768		)	(1,760		)	143,100			(13,747		)	114,825
Equity in net income of subsidiaries		127,593			6,839			—			(134,432		)	—
Net income		114,825			5,079			143,100			(148,179		)	114,825
Amounts attributable to noncontrolling interests		—			—			—			—			—
Net income available to Arch		114,825			5,079			143,100			(148,179		)	114,825
Preferred dividends		(5,484		)	—			—			—			(5,484		)
Net income available to Arch common shareholders		$	109,341		$	5,079		$	143,100		$	(148,179	)	$	109,341
Comprehensive income available to Arch		$	206,102		$	18,444		$	220,630		$	(239,074	)	$	206,102

		Nine Months Ended September 30, 2014
Condensed Consolidating Statement of Income and Comprehensive Income		ACGL (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other ACGL Subsidiaries			Consolidating Adjustments and Eliminations			ACGL Consolidated
Revenues
Net premiums earned		$	—		$	—		$	2,670,583		$	—		$	2,670,583
Net investment income		—			—			237,317			(17,228		)	220,089
Net realized gains		—			—			92,356			—			92,356
Net impairment losses recognized in earnings		—			—			(26,313		)	—			(26,313		)
Other underwriting income		—			—			5,317			—			5,317
Equity in net income of investment funds accounted for using the equity method		—			—			17,459			—			17,459
Other income (loss)		—			—			(5,069		)	—			(5,069		)
	Total revenues	—			—			2,991,650			(17,228		)	2,974,422
Expenses
Losses and loss adjustment expenses		—			—			1,423,431			—			1,423,431
Acquisition expenses		—			—			482,047			—			482,047
Other operating expenses		35,613			2,281			413,735			—			451,629
Interest expense		17,565			19,395			13,158			(17,228		)	32,890
Net foreign exchange gains		—			—			(28,449		)	(18,725		)	(47,174		)
	Total expenses	53,178			21,676			2,303,922			(35,953		)	2,342,823
Income (loss) before income taxes		(53,178		)	(21,676		)	687,728			18,725			631,599
Income tax benefit (expense)		—			8,179			(25,652		)	—			(17,473		)
Income (loss) before equity in net income of subsidiaries		(53,178		)	(13,497		)	662,076			18,725			614,126
Equity in net income of subsidiaries		672,369			41,945			—			(714,314		)	—
Net income		619,191			28,448			662,076			(695,589		)	614,126
Amounts attributable to noncontrolling interests (1)		—			—			5,065			—			5,065
Net income available to Arch		619,191			28,448			667,141			(695,589		)	619,191
Preferred dividends		(16,453		)	—			—			—			(16,453		)
Net income available to Arch common shareholders		$	602,738		$	28,448		$	667,141		$	(695,589	)	$	602,738
Comprehensive income available to Arch		$	646,413		$	29,792		$	691,968		$	(721,760	)	$	646,413

(1)     See Note 4.

		Nine Months Ended September 30, 2013
Condensed Consolidating Statement of Income and Comprehensive Income		ACGL (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other ACGL Subsidiaries			Consolidating Adjustments and Eliminations			ACGL Consolidated
Revenues
Net premiums earned		$	—		$	—		$	2,306,586		$	—		$	2,306,586
Net investment income		—			—			220,074			(19,950		)	200,124
Net realized gains		—			—			64,970			—			64,970
Net impairment losses recognized in earnings		—			—			(3,698		)	—			(3,698		)
Other underwriting income		—			—			1,966			—			1,966
Equity in net income of investment funds accounted for using the equity method		—			—			30,429			—			30,429
Other income (loss)		—			—			2,702			—			2,702
	Total revenues	—			—			2,623,029			(19,950		)	2,603,079
Expenses
Losses and loss adjustment expenses		—			—			1,245,101			—			1,245,101
Acquisition expenses		—			—			406,582			—			406,582
Other operating expenses		30,608			1,947			333,106			—			365,661
Interest expense		17,456			15			20,166			(19,950		)	17,687
Net foreign exchange (gains) losses		—			—			(1,839		)	4,326			2,487
	Total expenses	48,064			1,962			2,003,116			(15,624		)	2,037,518
Income (loss) before income taxes		(48,064		)	(1,962		)	619,913			(4,326		)	565,561
Income tax benefit (expense)		—			1,629			(18,949		)	—			(17,320		)
Income (loss) before equity in net income of subsidiaries		(48,064		)	(333		)	600,964			(4,326		)	548,241
Equity in net income of subsidiaries		596,305			36,024			—			(632,329		)	—
Net income		548,241			35,691			600,964			(636,655		)	548,241
Amounts attributable to noncontrolling interests		—			—			—			—			—
Net income available to Arch		548,241			35,691			600,964			(636,655		)	548,241
Preferred dividends		(16,453		)	—			—			—			(16,453		)
Net income available to Arch common shareholders		$	531,788		$	35,691		$	600,964		$	(636,655	)	$	531,788
Comprehensive income available to Arch		$	303,179		$	(4,385	)	$	351,576		$	(347,191	)	$	303,179

Condensed consolidating statement of cash flows

		Nine Months Ended September 30, 2014
Condensed Consolidating Statement of Cash Flows		ACGL (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other ACGL Subsidiaries			Consolidating Adjustments and Eliminations			ACGL Consolidated
Operating Activities
	Net Cash Provided By Operating Activities	$	265,694		$	8,407		$	822,558		$	(297,000	)	$	799,659
Investing Activities
Purchases of fixed maturity investments		—			(78,509		)	(21,952,353		)	—			(22,030,862		)
Purchases of equity securities		—			—			(366,578		)	—			(366,578		)
Purchases of other investments		—			—			(1,596,691		)	—			(1,596,691		)
Proceeds from the sales of fixed maturity investments		—			—			20,284,869			—			20,284,869
Proceeds from the sales of equity securities		—			—			305,034			—			305,034
Proceeds from the sales of other investments		—			—			1,030,901			—			1,030,901
Proceeds from redemptions and maturities of fixed maturity investments		—			—			636,729			—			636,729
Net sales of short-term investments		2,396			408,760			267,232			—			678,388
Change in investment of securities lending collateral		—			—			(2,737		)	—			(2,737		)
Contributions to subsidiaries		—			(313,207		)	(100,000		)	413,207			—
Intercompany loans issued		—			—			10,250			(10,250		)	—
Purchase of business, net of cash acquired		—			—			(235,578		)	—			(235,578		)
Purchases of furniture, equipment and other assets		(220		)	—			(14,355		)	—			(14,575		)
	Net Cash Provided By (Used For) Investing Activities	2,176			17,044			(1,733,277		)	402,957			(1,311,100		)
Financing Activities
Purchases of common shares under share repurchase program		(251,919		)	—			—			—			(251,919		)
Proceeds from common shares issued, net		3,248			—			413,207			(413,207		)	3,248
Repayments of intercompany borrowings		—			(10,250		)	—			10,250			—
Change in securities lending collateral		—			—			2,737			—			2,737
Third party investment in non-redeemable noncontrolling interests (1)		—			—			796,903			—			796,903
Third party investment in redeemable noncontrolling interests (1)		—			—			219,233			—			219,233
Dividends paid to redeemable noncontrolling interests (1)		—			—			(9,632		)	—			(9,632		)
Dividends paid to parent		—			—			(297,000		)	297,000			—
Other		—			—			6,559			—			6,559
Preferred dividends paid		(16,453		)	—			—			—			(16,453		)
	Net Cash Provided By (Used For) Financing Activities	(265,124		)	(10,250		)	1,132,007			(105,957		)	750,676
Effects of exchange rates changes on foreign currency cash		—			—			(9,566		)	—			(9,566		)
Increase in cash		2,746			15,201			211,722			—			229,669
Cash beginning of year		3,223			509			430,325			—			434,057
Cash end of period		$	5,969		$	15,710		$	642,047		$	—		$	663,726

(1)     See Note 4.

		Nine Months Ended September 30, 2013
Condensed Consolidating Statement of Cash Flows		ACGL (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other ACGL Subsidiaries			Consolidating Adjustments and Eliminations			ACGL Consolidated
Operating Activities
	Net Cash Provided By (Used For) Operating Activities	$	62,400		$	(653	)	$	659,301		$	(94,000	)	$	627,048
Investing Activities
Purchases of fixed maturity investments		—			—			(12,436,587		)	—			(12,436,587		)
Purchases of equity securities		—			—			(438,255		)	—			(438,255		)
Purchases of other investments		—			—			(992,935		)	—			(992,935		)
Proceeds from the sales of fixed maturity investments		—			—			11,877,419			—			11,877,419
Proceeds from the sales of equity securities		—			—			373,000			—			373,000
Proceeds from the sales of other investments		—			—			813,596			—			813,596
Proceeds from redemptions and maturities of fixed maturity investments		—			—			595,503			—			595,503
Net (purchases) sales of short-term investments		7,789			2,996			(279,753		)	—			(268,968		)
Change in investment of securities lending collateral		—			—			2,508			—			2,508
Contributions to subsidiaries		(160		)	(11,850		)	(250		)	12,260			—
Intercompany loans issued		—			—			(10,250		)	10,250			—
Purchases of furniture, equipment and other assets		(402		)	—			(10,551		)	—			(10,953		)
	Net Cash Provided By (Used For) Investing Activities	7,227			(8,854		)	(506,555		)	22,510			(485,672		)
Financing Activities
Purchases of common shares under share repurchase program		(57,796		)	—			—			—			(57,796		)
Proceeds from common shares issued, net		(425		)	—			12,260			(12,260		)	(425		)
Proceeds from intercompany borrowings		—			10,250			—			(10,250		)	—
Change in securities lending collateral		—			—			(2,508		)	—			(2,508		)
Dividends paid to parent		—			—			(94,000		)	94,000			—
Other		—			—			5,679			—			5,679
Preferred dividends paid		(16,453		)	—			—			—			(16,453		)
	Net Cash Provided By (Used For) Financing Activities	(74,674		)	10,250			(78,569		)	71,490			(71,503		)
Effects of exchange rates changes on foreign currency cash		—			—			(4,773		)	—			(4,773		)
Increase (decrease) in cash		(5,047		)	743			69,404			—			65,100
Cash beginning of year		6,417			612			364,012			—			371,041
Cash end of period		$	1,370		$	1,355		$	433,416		$	—		$	436,141

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Fair Value - Narrative (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013
Fair Value Disclosures [Abstract]
Total assets and liabilities measured at fair value	$ 14,870,000,000		$ 14,870,000,000		$ 13,370,000,000
Total assets and liabilities measured at fair value priced using non-binding broker quotes	420,400,000		420,400,000		601,900,000
Total assets and liabilities measured at fair value priced using non-binding broker quotes (percentage)	2.80%		2.80%		4.50%
Gains (losses) including in earnings attributable to the change in unrealized gains or losses related to assets still held at balance sheet date	(3,500,000)	8,700,000	14,300,000	13,200,000
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Senior notes	800,000,000		800,000,000		800,000,000
Reportable Legal Entities | ACGL (Parent Guarantor)
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Senior notes	300,000,000		300,000,000		300,000,000
Estimated fair value of senior notes	414,800,000		414,800,000
Reportable Legal Entities | Arch-U.S. (Subsidiary Issuer)
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Senior notes	500,000,000		500,000,000		500,000,000
Estimated fair value of senior notes	$ 543,100,000		$ 543,100,000

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Business Acquired (Tables)

9 Months Ended

Sep. 30, 2014

Business Combinations [Abstract]

Summary of fair value of net assets acquired and allocation of purchase price

The following table summarizes the fair value of net assets acquired and allocation of purchase price, measured as of the acquisition date:

	Total		Useful Life
Purchase price
Cash paid	$	245,157
Contingent consideration liability	41,762
Total purchase price (a)	$	286,919
Assets acquired
Cash	$	9,579
Investments, at fair value	312,093
Intangible asset -- acquired insurance contracts	46,473		5 years
Intangible asset -- operating platform	29,900		5 years
Intangible asset -- favorable lease contract	1,056		5 years
Intangible asset -- insurance licenses	16,858		Indefinite
Other assets acquired	21,691
Total assets acquired	437,650
Liabilities acquired
Reserves for losses and loss adjustment expenses	$	121,572
Unearned premiums	26,261
Intangible liability -- unfavorable service contract	9,533		9 years
Other liabilities acquired	7,217
Total liabilities acquired	164,583
Net assets acquired (b)	$	273,067
Goodwill (a)-(b)	$	13,852

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Investment Information - Net realized gains and losses (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended				9 Months Ended
	Sep. 30, 2014		Sep. 30, 2013		Sep. 30, 2014		Sep. 30, 2013
Net realized gains and losses:
Available for sale securities, gross gains on investment sales	$ 62,727		$ 47,433		$ 185,541		$ 183,306
Available for sale securities, gross losses on investment sales	(35,012)		(69,256)		(108,053)		(149,095)
Derivative instruments	7,449	[1]	1,574	[1]	7,083	[1]	16,842	[1]
Other	(7,179)	[2]	407	[2]	(20,847)	[2]	588	[2]
Net realized gains (losses)	18,515		(6,022)		92,356		64,970
Fixed Maturities
Net realized gains and losses:
Change in fair value of assets and liabilities accounted for using the fair value option	(9,023)		5,599		318		3,955
Other investments
Net realized gains and losses:
Change in fair value of assets and liabilities accounted for using the fair value option	(1,085)		8,221		27,676		8,670
Equity securities
Net realized gains and losses:
Change in fair value of assets and liabilities accounted for using the fair value option	0		0		0		704
Short-term investments
Net realized gains and losses:
Change in fair value of assets and liabilities accounted for using the fair value option	$ 638		$ 0		$ 638		$ 0

[1] See Note 9 for information on the Company’s derivative instruments.

[2] Includes accretion of contingent consideration liability amounts related to the acquisition of the CMG Entities (see Note 2 for further details).

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Segment Information - Summary of underwriting income or loss by segment (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended				9 Months Ended
	Sep. 30, 2014		Sep. 30, 2013		Sep. 30, 2014		Sep. 30, 2013		Dec. 31, 2013
Segment Reporting Information [Line Items]
Gross premiums written	$ 1,159,907		$ 1,036,987		$ 3,726,804		$ 3,241,424
Premiums ceded	(200,368)		(197,852)		(730,347)		(638,978)
Net premiums written	959,539		839,135		2,996,457		2,602,446
Change in unearned premiums	(55,888)		(44,135)		(325,874)		(295,860)
Net premiums earned	903,651		795,000		2,670,583		2,306,586
Other underwriting income	1,702		526		5,317		1,966
Losses and loss adjustment expenses	(501,673)		(427,045)		(1,423,431)		(1,245,101)
Acquisition expenses, net	(163,547)		(147,313)		(482,047)		(406,582)
Other operating expenses	(139,046)		(110,176)		(412,788)		(333,450)
Underwriting income (loss)	101,087		110,992		357,634		323,419
Net investment income	80,105		66,083		220,089		200,124
Net realized gains (losses)	18,515		(6,022)		92,356		64,970
Net impairment losses recognized in earnings	(8,593)		(728)		(26,313)		(3,698)
Equity in net income (loss) of investment funds accounted for using the equity method	4,966		5,665		17,459		30,429
Other income (loss)	(7,815)		624		(5,069)		2,702
Other expenses	(10,434)		(7,894)		(38,841)		(32,211)
Interest expense	(4,152)		(5,937)		(32,890)		(17,687)
Net foreign exchange gains (losses)	56,031		(40,562)		47,174		(2,487)
Income before income taxes	229,710		122,221		631,599		565,561
Income tax expense	(6,446)		(7,396)		(17,473)		(17,320)
Net income	223,264		114,825		614,126		548,241
Dividends attributable to redeemable noncontrolling interests	(4,909)		0		(9,818)		0
Amounts attributable to noncontrolling interests	10,320		0		14,883		0
Net income available to Arch	228,675		114,825		619,191		548,241
Preferred dividends	(5,484)		(5,484)		(16,453)		(16,453)
Net income available to Arch common shareholders	223,191		109,341		602,738		531,788
Underwriting Ratios
Loss ratio	55.50%		53.70%		53.30%		54.00%
Acquisition expense ratio	18.10%	[1]	18.50%	[1]	18.10%	[1]	17.60%	[1]
Other operating expense ratio	15.40%		13.90%		15.50%		14.50%
Combined ratio	89.00%		86.10%		86.90%		86.10%
Goodwill and intangible assets	111,528		28,960		111,528		28,960		27,319
Total investable assets	15,708,775		13,282,560		15,708,775		13,282,560
Total assets	22,610,685		18,930,823		22,610,685		18,930,823		19,566,094
Total liabilities	15,528,200		13,487,538		15,528,200		13,487,538		13,918,598
Sub-Total
Segment Reporting Information [Line Items]
Gross premiums written	1,138,392	[2]	1,036,987	[2]	3,690,462	[2]	3,241,424	[2]
Premiums ceded	(278,668)		(197,852)		(877,816)		(638,978)
Net premiums written	859,724		839,135		2,812,646		2,602,446
Change in unearned premiums	9,157		(44,135)		(191,979)		(295,860)
Net premiums earned	868,881		795,000		2,620,667		2,306,586
Other underwriting income	1,702		526		5,317		1,966
Losses and loss adjustment expenses	(478,090)		(427,045)		(1,390,298)		(1,245,101)
Acquisition expenses, net	(153,938)		(147,313)		(467,422)		(406,582)
Other operating expenses	(137,388)		(110,176)		(408,386)		(333,450)
Underwriting income (loss)	101,167		110,992		359,878		323,419
Net investment income	72,239		66,083		211,690		200,124
Net realized gains (losses)	31,411		(6,022)		102,074		64,970
Net impairment losses recognized in earnings	(8,593)		(728)		(26,313)		(3,698)
Equity in net income (loss) of investment funds accounted for using the equity method	4,966		5,665		17,459		30,429
Other income (loss)	(7,815)		624		(5,069)		2,702
Other expenses	(10,434)		(7,894)		(36,512)		(32,211)
Interest expense	(4,152)		(5,937)		(32,890)		(17,687)
Net foreign exchange gains (losses)	57,611		(40,562)		48,191		(2,487)
Income before income taxes	236,400		122,221		638,508		565,561
Income tax expense	(6,446)		(7,396)		(17,473)		(17,320)
Net income	229,954		114,825		621,035		548,241
Dividends attributable to redeemable noncontrolling interests	0		0		0		0
Amounts attributable to noncontrolling interests	0		0		0		0
Net income available to Arch	229,954		114,825		621,035		548,241
Preferred dividends	(5,484)		(5,484)		(16,453)		(16,453)
Net income available to Arch common shareholders	224,470		109,341		604,582		531,788
Underwriting Ratios
Loss ratio	55.00%		53.70%		53.10%		54.00%
Acquisition expense ratio	17.70%	[1]	18.50%	[1]	17.80%	[1]	17.60%	[1]
Other operating expense ratio	15.80%		13.90%		15.60%		14.50%
Combined ratio	88.50%		86.10%		86.50%		86.10%
Goodwill and intangible assets	111,528		28,960		111,528		28,960
Total investable assets	14,584,727		13,282,560		14,584,727		13,282,560
Total assets	21,207,667		18,930,823		21,207,667		18,930,823
Total liabilities	15,223,488		13,487,538		15,223,488		13,487,538
Sub-Total | Insurance
Segment Reporting Information [Line Items]
Gross premiums written	726,683	[2]	682,839	[2]	2,309,560	[2]	2,075,560	[2]
Premiums ceded	(187,689)		(180,868)		(646,082)		(567,471)
Net premiums written	538,994		501,971		1,663,478		1,508,089
Change in unearned premiums	(19,607)		(22,842)		(158,878)		(125,339)
Net premiums earned	519,387		479,129		1,504,600		1,382,750
Other underwriting income	499		545		1,513		1,599
Losses and loss adjustment expenses	(338,319)		(305,921)		(936,615)		(880,580)
Acquisition expenses, net	(81,775)		(82,799)		(235,156)		(227,806)
Other operating expenses	(83,138)		(75,734)		(250,111)		(232,216)
Underwriting income (loss)	16,654		15,220		84,231		43,747
Underwriting Ratios
Loss ratio	65.10%		63.80%		62.30%		63.70%
Acquisition expense ratio	15.70%	[1]	17.30%	[1]	15.60%	[1]	16.50%	[1]
Other operating expense ratio	16.00%		15.80%		16.60%		16.80%
Combined ratio	96.80%		96.90%		94.50%		97.00%
Goodwill and intangible assets	24,024		20,653		24,024		20,653
Sub-Total | Reinsurance
Segment Reporting Information [Line Items]
Gross premiums written	345,747	[2]	330,458	[2]	1,212,641	[2]	1,099,803	[2]
Premiums ceded	(83,502)		(17,927)		(215,623)		(74,581)
Net premiums written	262,245		312,531		997,018		1,025,222
Change in unearned premiums	34,303		(9,433)		(23,495)		(138,479)
Net premiums earned	296,548		303,098		973,523		886,743
Other underwriting income	215		(19)		834		367
Losses and loss adjustment expenses	(123,784)		(119,107)		(413,745)		(358,247)
Acquisition expenses, net	(60,205)		(61,063)		(199,673)		(167,497)
Other operating expenses	(36,337)		(32,108)		(110,198)		(96,207)
Underwriting income (loss)	76,437		90,801		250,741		265,159
Underwriting Ratios
Loss ratio	41.70%		39.30%		42.50%		40.40%
Acquisition expense ratio	20.30%	[1]	20.10%	[1]	20.50%	[1]	18.90%	[1]
Other operating expense ratio	12.30%		10.60%		11.30%		10.80%
Combined ratio	74.30%		70.00%		74.30%		70.10%
Goodwill and intangible assets	3,939		8,307		3,939		8,307
Sub-Total | Mortgage
Segment Reporting Information [Line Items]
Gross premiums written	66,389	[2]	24,633	[2]	169,772	[2]	69,135	[2]
Premiums ceded	(7,904)		0		(17,622)		0
Net premiums written	58,485		24,633		152,150		69,135
Change in unearned premiums	(5,539)		(11,860)		(9,606)		(32,042)
Net premiums earned	52,946		12,773		142,544		37,093
Other underwriting income	988		0		2,970		0
Losses and loss adjustment expenses	(15,987)		(2,017)		(39,938)		(6,274)
Acquisition expenses, net	(11,958)		(3,451)		(32,593)		(11,279)
Other operating expenses	(17,913)		(2,334)		(48,077)		(5,027)
Underwriting income (loss)	8,076		4,971		24,906		14,513
Underwriting Ratios
Loss ratio	30.20%		15.80%		28.00%		16.90%
Acquisition expense ratio	22.60%	[1]	27.00%	[1]	22.90%	[1]	30.40%	[1]
Other operating expense ratio	33.80%		18.30%		33.70%		13.60%
Combined ratio	86.60%		61.10%		84.60%		60.90%
Goodwill and intangible assets	83,565		0		83,565		0
Other
Segment Reporting Information [Line Items]
Gross premiums written	103,483	[2]	0	[2]	190,239	[2]	0	[2]
Premiums ceded	(3,668)		0		(6,428)		0
Net premiums written	99,815		0		183,811		0
Change in unearned premiums	(65,045)		0		(133,895)		0
Net premiums earned	34,770		0		49,916		0
Other underwriting income	0		0		0		0
Losses and loss adjustment expenses	(23,583)		0		(33,133)		0
Acquisition expenses, net	(9,609)		0		(14,625)		0
Other operating expenses	(1,658)		0		(4,402)		0
Underwriting income (loss)	(80)		0		(2,244)		0
Net investment income	7,866		0		8,399		0
Net realized gains (losses)	(12,896)		0		(9,718)		0
Net impairment losses recognized in earnings	0		0		0		0
Equity in net income (loss) of investment funds accounted for using the equity method	0		0		0		0
Other income (loss)	0		0		0		0
Other expenses	0		0		(2,329)		0
Interest expense	0		0		0		0
Net foreign exchange gains (losses)	(1,580)		0		(1,017)		0
Income before income taxes	(6,690)		0		(6,909)		0
Income tax expense	0		0		0		0
Net income	(6,690)		0		(6,909)		0
Dividends attributable to redeemable noncontrolling interests	(4,909)		0		(9,818)		0
Amounts attributable to noncontrolling interests	10,320		0		14,883		0
Net income available to Arch	(1,279)		0		(1,844)		0
Preferred dividends	0		0		0		0
Net income available to Arch common shareholders	(1,279)		0		(1,844)		0
Underwriting Ratios
Loss ratio	67.80%		0.00%		66.40%		0.00%
Acquisition expense ratio	27.60%	[1]	0.00%	[1]	29.30%	[1]	0.00%	[1]
Other operating expense ratio	4.80%		0.00%		8.80%		0.00%
Combined ratio	100.20%		0.00%		104.50%		0.00%
Goodwill and intangible assets	0		0		0		0
Total investable assets	1,124,048		0		1,124,048		0
Total assets	1,403,018		0		1,403,018		0
Total liabilities	$ 304,712		$ 0		$ 304,712		$ 0

[1] {F|ahBzfndlYmZpbGluZ3MtaHJkcmoLEgZYTUxEb2MiXlhCUkxEb2NHZW5JbmZvOjg0NzkyMTQ4MWY4YTQ5Yzg4ZDc1YjI5ZmVlMWQ2MjFifFRleHRTZWxlY3Rpb246ODJCQkJDN0VGMjE1NDhFMjM5MkY0NURFNDZCMjQxNjkM}

[2] 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.

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Significant Accounting Policies (Details)	9 Months Ended
	Sep. 30, 2014
Significant Accounting Policies [Line Items]
Premium revenue recognition period	12 months
Losses occurring
Significant Accounting Policies [Line Items]
Premium revenue recognition period	12 months
Risks attaching
Significant Accounting Policies [Line Items]
Premium revenue recognition period	24

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Investment Information - Other than temporary impairments rollforward (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Rollforward:
Balance at start of period	$ 21,441	$ 61,449	$ 60,062	$ 62,001
Credit loss impairments recognized on securities not previously impaired	0	369	0	402
Credit loss impairments recognized on securities previously impaired	151	19	162	21
Reductions for increases in cash flows expected to be collected that are recognized over the remaining life of the security	0	0	0	0
Reductions for securities sold during the period	(217)	0	(38,849)	(587)
Balance at end of period	$ 21,375	$ 61,837	$ 21,375	$ 61,837

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Subsequent Events (Details) (USD $)	0 Months Ended	3 Months Ended		9 Months Ended		1 Months Ended
	Nov. 06, 2014 Subsequent Event	Sep. 30, 2014 Common shares	Sep. 30, 2013 Common shares	Sep. 30, 2014 Common shares	Sep. 30, 2013 Common shares	Oct. 29, 2014 Common shares Subsequent Event
Subsequent Event [Line Items]
Remaining authorized repurchase amount				$ 460,200,000
Stock Repurchase Program, Authorized Amount	1,000,000,000
Treasury stock, shares acquired (shares)		4,593,726	26,300	4,593,726	1,264,718	1,600,000.0
Treasury stock, value of shares acquired		$ 251,900,000	$ 1,300,000	$ 251,900,000	$ 57,800,000	$ 89,200,000

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Income Taxes (Details) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013
Income Tax Disclosure [Abstract]
Effective tax rate on income before income taxes (percentage)	2.80%	3.10%
Tax effect of unusual or infrequent items (percentage)	0.10%	0.20%
Net deferred tax assets	$ 155.8		$ 128.6
Income taxes paid	$ 13.3	$ 7.6

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Investment Information - Other investments (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014		Dec. 31, 2013
Schedule Of Other Investments [Line Items]
Other investments and fair value option investments	$ 1,863,358		$ 1,271,590
Available for sale
Schedule Of Other Investments [Line Items]
Other investments and fair value option investments	431,833		498,310
Available for sale | Asian and emerging markets
Schedule Of Other Investments [Line Items]
Other investments and fair value option investments	275,191		331,984
Available for sale | Investment grade fixed income
Schedule Of Other Investments [Line Items]
Other investments and fair value option investments	156,642		159,115
Available for sale | Other
Schedule Of Other Investments [Line Items]
Other investments and fair value option investments	0		7,211
Fair value option
Schedule Of Other Investments [Line Items]
Other investments and fair value option investments	1,431,525		773,280
Fair value option | Term loan investments
Schedule Of Other Investments [Line Items]
Other investments and fair value option investments	1,001,771		512,076
Other investments par	1,013,196		494,502
Fair value option | Asian and emerging markets
Schedule Of Other Investments [Line Items]
Other investments and fair value option investments	25,249		14,054
Fair value option | Investment grade fixed income
Schedule Of Other Investments [Line Items]
Other investments and fair value option investments	76,606		75,062
Fair value option | Other
Schedule Of Other Investments [Line Items]
Other investments and fair value option investments	$ 327,899	[1]	$ 172,088	[1]

[1] Includes fund investments with strategies in mortgage servicing rights, transportation and infrastructure assets and other.

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Business Acquired

9 Months Ended

Sep. 30, 2014

Business Combinations [Abstract]

Business Acquired

Business Acquired

On January 30, 2014, the Company’s U.S.-based subsidiaries completed the acquisition of the CMG Entities through a stock purchase agreement (“SPA”) from its previous owners, PMI, which has been in rehabilitation under the receivership of the Arizona Department of Insurance since 2011, and CMFG Life Insurance Company (“CUNA Mutual”). In addition, the Company entered into a distribution agreement with CUNA Mutual and a reinsurance agreement with an affiliate of CUNA Mutual. CMG Mortgage Insurance Company has been renamed “Arch Mortgage Insurance Company” (“Arch MI U.S.”). As part of the transaction, Arch MI U.S. obtained approval as an eligible mortgage insurer from Federal National Mortgage Association and Federal Home Loan Mortgage Corporation (each a government sponsored enterprise or “GSE”), subject to maintaining certain ongoing requirements.

In addition, through an asset purchase agreement (“APA”) with PMI, the Company acquired the mortgage insurance operating platform of PMI, 100% of the capital stock of PMI Mortgage Assurance Co., a mortgage insurance company licensed in all 50 states (renamed Arch Mortgage Guaranty Company), and entered into a quota share reinsurance agreement pursuant to which Arch Reinsurance Ltd. agreed to provide 100% quota share indemnity reinsurance to PMI for all certificates of insurance that were issued by PMI between and including January 1, 2009 and December 31, 2011 that were not in default as of an agreed upon effective date. Other than this quota share, no PMI legacy exposures were assumed in the transaction. As part of the transaction, the Company entered into a services agreement with PMI to provide certain necessary operational services to administer the run-off of PMI’s legacy business at the direction of PMI. Arch MI U.S. also entered into a quota share reinsurance agreement whereby it will cede 20% of all new primary flow mortgage insurance business post-closing (both credit union and non-credit union business) on the first $25 billion in original loan amounts to PMI, on a funds-withheld basis.

The completion of the SPA and APA transactions enabled the Company to enter the U.S. mortgage insurance marketplace and serve all lenders nationwide. The arrangements with CUNA Mutual also provided a seamless transition and enabled the Company to provide uninterrupted access and services to the credit union marketplace.

At closing, the Company paid aggregate consideration of $160.6 million (80% of the actual closing date book value of the CMG Entities) under the SPA and $84.6 million under the APA. Additionally, the SPA contains provisions for contingent consideration payments, subject to an overall maximum payment of 150% of closing book value of the pre-closing portfolio of the CMG Entities as re-calculated over an earn-out period and payable at the third, fifth and sixth anniversaries after closing (subject to a one time extension period of one to three years at the sellers’ discretion). The maximum amount of contingent consideration payments is $136.9 million. To the extent that the adjusted book value of the CMG Entities drops below the cumulative amount paid by the Company, no additional payments would be due. To determine the fair value of the contingent consideration liability, the Company estimated future payments using a weighted average cost of capital approach at a rate of return of 15% which reflects the industry-weighted average rate of return on debt and equity as required by market participants. The fair value of the contingent consideration liability was $41.8 million at closing. The contingent consideration liability, which is included in ‘other liabilities’ in the consolidated balance sheets, is remeasured at fair value at each balance sheet date ($58.7 million at September 30, 2014) until the contingency is resolved with changes in fair value recognized in ‘net realized gains (losses).’

The following table summarizes the fair value of net assets acquired and allocation of purchase price, measured as of the acquisition date:

	Total		Useful Life
Purchase price
Cash paid	$	245,157
Contingent consideration liability	41,762
Total purchase price (a)	$	286,919
Assets acquired
Cash	$	9,579
Investments, at fair value	312,093
Intangible asset -- acquired insurance contracts	46,473		5 years
Intangible asset -- operating platform	29,900		5 years
Intangible asset -- favorable lease contract	1,056		5 years
Intangible asset -- insurance licenses	16,858		Indefinite
Other assets acquired	21,691
Total assets acquired	437,650
Liabilities acquired
Reserves for losses and loss adjustment expenses	$	121,572
Unearned premiums	26,261
Intangible liability -- unfavorable service contract	9,533		9 years
Other liabilities acquired	7,217
Total liabilities acquired	164,583
Net assets acquired (b)	$	273,067
Goodwill (a)-(b)	$	13,852

From the acquisition date to September 30, 2014, the Company recorded amortization expense of $15.0 million related to net intangible assets acquired. The Company recognized goodwill of $13.9 million that is primarily attributed to PMI’s assembled workforce, access to the mortgage insurance market and additional synergies to be realized in the future. Under U.S. tax principles, which differentiate between taxable and non-taxable business combinations, the Company estimates that $48.0 million of goodwill is expected to be deductible for tax purposes.

The Company includes the operations of Arch MI U.S. in its mortgage segment (see Note 6).

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Other Comprehensive Income (Loss) - Amounts reclassified from accumulated other comprehensive income (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Other-than-temporary impairment losses	$ (8,593)	$ (728)	$ (26,313)	$ (3,698)
Income before income taxes	229,710	122,221	631,599	565,561
Income tax expense	(6,446)	(7,396)	(17,473)	(17,320)
Net of tax	228,675	114,825	619,191	548,241
Reclassification out of accumulated other comprehensive income | Unrealized appreciation on available-for-sale investments
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net realized gains	27,715	(21,825)	77,488	37,176
Other-than-temporary impairment losses	(8,593)	(901)	(26,313)	(3,873)
Income before income taxes	19,122	(22,726)	51,175	33,303
Income tax expense	(1,639)	2,025	(4,158)	(1,387)
Net of tax	$ 17,483	$ (20,701)	$ 47,017	$ 31,916

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Segment Information - Narrative (Details)	9 Months Ended
	Sep. 30, 2014 segment
Underwriting segments
Segment Reporting Information [Line Items]
Number of underwriting segments	3
Other
Segment Reporting Information [Line Items]
Number of underwriting segments	2

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Investment Information (Tables)

9 Months Ended

Sep. 30, 2014

Disclosure Investment Information [Abstract]

Summary of fair value and cost or amortized cost of available for sale securities

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

	Fair Value		Gross Unrealized Gains		Gross Unrealized Losses			Cost or Amortized Cost		OTTI Unrealized Losses (2)
September 30, 2014
Fixed maturities and fixed maturities pledged under securities lending agreements (1):
Corporate bonds	$	3,070,353	$	29,747	$	(30,089	)	$	3,070,695	$	—
Mortgage backed securities	966,848		18,567		(8,349		)	956,630		(3,600		)
Municipal bonds	1,293,455		31,860		(971		)	1,262,566		—
Commercial mortgage backed securities	1,232,092		9,355		(5,976		)	1,228,713		—
U.S. government and government agencies	1,551,583		6,433		(2,533		)	1,547,683		—
Non-U.S. government securities	1,001,947		11,808		(27,117		)	1,017,256		—
Asset backed securities	1,724,651		6,707		(7,175		)	1,725,119		(22		)
Total	10,840,929		114,477		(82,210		)	10,808,662		(3,622		)
Equity securities	582,075		78,988		(10,109		)	513,196		—
Other investments	431,833		33,114		—			398,719		—
Short-term investments	748,659		407		(6,387		)	754,639		—
Total	$	12,603,496	$	226,986	$	(98,706	)	$	12,475,216	$	(3,622	)
December 31, 2013
Fixed maturities and fixed maturities pledged under securities lending agreements (1):
Corporate bonds	$	2,267,263	$	35,289	$	(35,537	)	$	2,267,511	$	(16	)
Mortgage backed securities	1,133,095		16,270		(22,209		)	1,139,034		(9,269		)
Municipal bonds	1,481,738		29,378		(9,730		)	1,462,090		(17		)
Commercial mortgage backed securities	1,074,497		13,972		(15,224		)	1,075,749		(199		)
U.S. government and government agencies	1,301,809		3,779		(11,242		)	1,309,272		(19		)
Non-U.S. government securities	1,085,861		14,729		(19,363		)	1,090,495		—
Asset backed securities	1,332,594		20,033		(13,795		)	1,326,356		(3,422		)
Total	9,676,857		133,450		(127,100		)	9,670,507		(12,942		)
Equity securities	496,824		69,487		(5,938		)	433,275		—
Other investments	498,310		28,082		(18,459		)	488,687		—
Short-term investments	1,478,367		1,654		(871		)	1,477,584		—
Total	$	12,150,358	$	232,673	$	(152,368	)	$	12,070,053	$	(12,942	)

_________________________________________________

(1) In securities lending transactions, the Company receives collateral in excess of the fair value of the fixed maturities and short-term investments pledged. For purposes of this table, the Company has excluded the collateral received and reinvested and included the fixed maturities and short-term investments pledged. See “—Securities Lending Agreements.”

(2) Represents the total other-than-temporary impairments (“OTTI”) recognized in accumulated other comprehensive income (“AOCI”). It does not include the change in fair value subsequent to the impairment measurement date. At September 30, 2014, the net unrealized gain related to securities for which a non-credit OTTI was recognized in AOCI was $2.1 million, compared to a net unrealized gain of $6.0 million at December 31, 2013.

Summary of available for sale securities in a continual unrealized loss position

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
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
September 30, 2014
Fixed maturities and fixed maturities pledged under securities lending agreements (1):
Corporate bonds	$	1,549,643	$	(22,058	)	$	193,803	$	(8,031	)	$	1,743,446	$	(30,089	)
Mortgage backed securities	360,510		(2,809		)	124,796		(5,540		)	485,306		(8,349		)
Municipal bonds	108,444		(470		)	21,390		(501		)	129,834		(971		)
Commercial mortgage backed securities	508,131		(2,769		)	94,948		(3,207		)	603,079		(5,976		)
U.S. government and government agencies	576,459		(2,385		)	3,430		(148		)	579,889		(2,533		)
Non-U.S. government securities	538,957		(22,925		)	49,200		(4,192		)	588,157		(27,117		)
Asset backed securities	802,765		(3,253		)	222,099		(3,922		)	1,024,864		(7,175		)
Total	4,444,909		(56,669		)	709,666		(25,541		)	5,154,575		(82,210		)
Equity securities	187,003		(10,087		)	269		(22		)	187,272		(10,109		)
Other investments	—		—			—		—			—		—
Short-term investments	141,056		(6,387		)	—		—			141,056		(6,387		)
Total	$	4,772,968	$	(73,143	)	$	709,935	$	(25,563	)	$	5,482,903	$	(98,706	)
December 31, 2013
Fixed maturities and fixed maturities pledged under securities lending agreements (1):
Corporate bonds	$	1,183,625	$	(32,837	)	$	46,673	$	(2,700	)	$	1,230,298	$	(35,537	)
Mortgage backed securities	778,693		(20,253		)	43,634		(1,956		)	822,327		(22,209		)
Municipal bonds	589,009		(9,422		)	6,092		(308		)	595,101		(9,730		)
Commercial mortgage backed securities	677,617		(15,110		)	1,612		(114		)	679,229		(15,224		)
U.S. government and government agencies	1,144,809		(11,242		)	—		—			1,144,809		(11,242		)
Non-U.S. government securities	821,506		(15,776		)	24,334		(3,587		)	845,840		(19,363		)
Asset backed securities	692,362		(10,431		)	88,629		(3,364		)	780,991		(13,795		)
Total	5,887,621		(115,071		)	210,974		(12,029		)	6,098,595		(127,100		)
Equity securities	76,563		(5,938		)	—		—			76,563		(5,938		)
Other investments	165,891		(15,775		)	47,316		(2,684		)	213,207		(18,459		)
Short-term investments	28,170		(871		)	—		—			28,170		(871		)
Total	$	6,158,245	$	(137,655	)	$	258,290	$	(14,713	)	$	6,416,535	$	(152,368	)

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(1) In securities lending transactions, the Company receives collateral in excess of the fair value of the fixed maturities and short-term investments pledged. For purposes of this table, the Company has excluded the collateral received and reinvested and included the fixed maturities and short-term investments pledged. See “—Securities Lending Agreements.”

Contractual maturities of the Company's fixed maturities and fixed maturities pledged under securities lending arrangements

The contractual maturities of the Company’s fixed maturities and fixed maturities pledged under securities lending agreements 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.

	September 30, 2014				December 31, 2013
Maturity	Fair Value		Amortized Cost		Fair Value		Amortized Cost
Due in one year or less	$	253,946	$	250,917	$	235,330	$	232,652
Due after one year through five years	4,184,904		4,178,652		3,738,500		3,718,920
Due after five years through 10 years	2,213,584		2,207,108		1,966,536		1,979,510
Due after 10 years	264,904		261,523		196,305		198,286
	6,917,338		6,898,200		6,136,671		6,129,368
Mortgage backed securities	966,848		956,630		1,133,095		1,139,034
Commercial mortgage backed securities	1,232,092		1,228,713		1,074,497		1,075,749
Asset backed securities	1,724,651		1,725,119		1,332,594		1,326,356
Total	$	10,840,929	$	10,808,662	$	9,676,857	$	9,670,507

Summary of other investments, including available for sale and fair value option components

The following table summarizes the Company’s other investments, including available for sale and fair value option components:

	September 30, 2014		December 31, 2013
Available for sale:
Asian and emerging markets	$	275,191	$	331,984
Investment grade fixed income	156,642		159,115
Other	—		7,211
Total available for sale	431,833		498,310
Fair value option:
Term loan investments (par value: $1,013,196 and $494,502)	1,001,771		512,076
Asian and emerging markets	25,249		14,054
Investment grade fixed income	76,606		75,062
Other (1)	327,899		172,088
Total fair value option	1,431,525		773,280
Total	$	1,863,358	$	1,271,590

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(1) Includes fund investments with strategies in mortgage servicing rights, transportation and infrastructure assets and other.

Summary of assets and liabilities accounted for using the fair value option

The following table summarizes the Company’s assets and liabilities which are accounted for using the fair value option:

	September 30, 2014		December 31, 2013
Fixed maturities	$	565,754	$	448,254
Other investments	1,431,525		773,280
Short-term investments	205,716		—
Investments accounted for using the fair value option	$	2,202,995	$	1,221,534

Components of net investment income

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

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2014			2013			2014			2013
Fixed maturities	$	66,052		$	62,447		$	194,370		$	186,457
Term loan investments	14,065			5,296			26,642			15,539
Equity securities (dividends)	2,779			2,241			8,971			6,828
Short-term investments	905			417			1,417			1,173
Other (1)	7,914			3,753			21,733			14,786
Gross investment income	91,715			74,154			253,133			224,783
Investment expenses	(11,610		)	(8,071		)	(33,044		)	(24,659		)
Net investment income	$	80,105		$	66,083		$	220,089		$	200,124

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(1) Includes dividends on investment funds and other items.

Summary of net realized gains (losses)

Net realized gains (losses) were as follows, excluding other-than-temporary impairment provisions:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2014			2013			2014			2013
Available for sale securities:
Gross gains on investment sales	$	62,727		$	47,433		$	185,541		$	183,306
Gross losses on investment sales	(35,012		)	(69,256		)	(108,053		)	(149,095		)
Change in fair value of assets and liabilities accounted for using the fair value option:
Fixed maturities	(9,023		)	5,599			318			3,955
Other investments	(1,085		)	8,221			27,676			8,670
Equity securities	—			—			—			704
Short-term investments	638			—			638			—
Derivative instruments (1)	7,449			1,574			7,083			16,842
Other (2)	(7,179		)	407			(20,847		)	588
Net realized gains (losses)	$	18,515		$	(6,022	)	$	92,356		$	64,970

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

(2) Includes accretion of contingent consideration liability amounts related to the acquisition of the CMG Entities (see Note 2 for further details).

Summary of OTTI recognized in earnings by asset class

The following table details the net impairment losses recognized in earnings by asset class:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2014			2013			2014			2013
Fixed maturities:
Mortgage backed securities	$	(2	)	$	(280	)	$	(2	)	$	(295	)
Corporate bonds	(147		)	(88		)	(811		)	(88		)
Asset backed securities	(29		)	(20		)	(40		)	(40		)
Total	(185		)	(388		)	(860		)	(423		)
Equity securities	(95		)	(340		)	(373		)	(3,275		)
Other investments	(8,313		)	—			(25,080		)	—
Net impairment losses recognized in earnings	$	(8,593	)	$	(728	)	$	(26,313	)	$	(3,698	)

Rollforward of the amount related to credit losses recognized in earnings for which a portion was recognized in AOCI

The following table provides a roll forward of the amount related to credit losses recognized in earnings for which a portion of an OTTI was recognized in accumulated other comprehensive income:

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2014			2013		2014			2013
Balance at start of period	$	21,441		$	61,449	$	60,062		$	62,001
Credit loss impairments recognized on securities not previously impaired	—			369		—			402
Credit loss impairments recognized on securities previously impaired	151			19		162			21
Reductions for increases in cash flows expected to be collected that are recognized over the remaining life of the security	—			—		—			—
Reductions for securities sold during the period	(217		)	—		(38,849		)	(587		)
Balance at end of period	$	21,375		$	61,837	$	21,375		$	61,837

Summary of restricted assets

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

	September 30, 2014		December 31, 2013
Assets used for collateral or guarantees:
Affiliated transactions	$	4,159,480	$	4,060,533
Third party agreements	941,372		856,890
Deposits with U.S. regulatory authorities	353,091		302,809
Deposits with non-U.S. regulatory authorities	—		6,546
Trust funds	76,110		75,264
Total restricted assets	$	5,530,053	$	5,302,042

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Segment Information (Tables)

9 Months Ended

Sep. 30, 2014

Segment Reporting [Abstract]

Analysis of underwriting income by segment and reconciliation to net income available to common shareholders

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 common shareholders:

	Three Months Ended
	September 30, 2014
	Insurance			Reinsurance			Mortgage			Sub-Total			Other			Total
Gross premiums written (1)	$	726,683		$	345,747		$	66,389		$	1,138,392		$	103,483		$	1,159,907
Premiums ceded	(187,689		)	(83,502		)	(7,904		)	(278,668		)	(3,668		)	(200,368		)
Net premiums written	538,994			262,245			58,485			859,724			99,815			959,539
Change in unearned premiums	(19,607		)	34,303			(5,539		)	9,157			(65,045		)	(55,888		)
Net premiums earned	519,387			296,548			52,946			868,881			34,770			903,651
Other underwriting income	499			215			988			1,702			—			1,702
Losses and loss adjustment expenses	(338,319		)	(123,784		)	(15,987		)	(478,090		)	(23,583		)	(501,673		)
Acquisition expenses, net	(81,775		)	(60,205		)	(11,958		)	(153,938		)	(9,609		)	(163,547		)
Other operating expenses	(83,138		)	(36,337		)	(17,913		)	(137,388		)	(1,658		)	(139,046		)
Underwriting income (loss)	$	16,654		$	76,437		$	8,076		101,167			(80		)	101,087
Net investment income										72,239			7,866			80,105
Net realized gains (losses)										31,411			(12,896		)	18,515
Net impairment losses recognized in earnings										(8,593		)	—			(8,593		)
Equity in net income of investment funds accounted for using the equity method										4,966			—			4,966
Other income (loss)										(7,815		)	—			(7,815		)
Other expenses										(10,434		)	—			(10,434		)
Interest expense										(4,152		)	—			(4,152		)
Net foreign exchange gains (losses)										57,611			(1,580		)	56,031
Income before income taxes										236,400			(6,690		)	229,710
Income tax expense										(6,446		)	—			(6,446		)
Net income										229,954			(6,690		)	223,264
Dividends attributable to redeemable noncontrolling interests										—			(4,909		)	(4,909		)
Amounts attributable to noncontrolling interests										—			10,320			10,320
Net income available to Arch										229,954			(1,279		)	228,675
Preferred dividends										(5,484		)	—			(5,484		)
Net income available to Arch common shareholders										$	224,470		$	(1,279	)	$	223,191
Underwriting Ratios
Loss ratio	65.1		%	41.7		%	30.2		%	55.0		%	67.8		%	55.5		%
Acquisition expense ratio	15.7		%	20.3		%	22.6		%	17.7		%	27.6		%	18.1		%
Other operating expense ratio	16.0		%	12.3		%	33.8		%	15.8		%	4.8		%	15.4		%
Combined ratio	96.8		%	74.3		%	86.6		%	88.5		%	100.2		%	89.0		%
Goodwill and intangible assets	$	24,024		$	3,939		$	83,565		$	111,528		$	—		$	111,528
Total investable assets										$	14,584,727		$	1,124,048		$	15,708,775
Total assets										21,207,667			1,403,018			22,610,685
Total liabilities										15,223,488			304,712			15,528,200

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(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.

	Three Months Ended
	September 30, 2013
	Insurance			Reinsurance			Mortgage			Sub-Total			Other			Total
Gross premiums written (1)	$	682,839		$	330,458		$	24,633		$	1,036,987		$	—		$	1,036,987
Premiums ceded	(180,868		)	(17,927		)	—			(197,852		)	—			(197,852		)
Net premiums written	501,971			312,531			24,633			839,135			—			839,135
Change in unearned premiums	(22,842		)	(9,433		)	(11,860		)	(44,135		)	—			(44,135		)
Net premiums earned	479,129			303,098			12,773			795,000			—			795,000
Other underwriting income	545			(19		)	—			526			—			526
Losses and loss adjustment expenses	(305,921		)	(119,107		)	(2,017		)	(427,045		)	—			(427,045		)
Acquisition expenses, net	(82,799		)	(61,063		)	(3,451		)	(147,313		)	—			(147,313		)
Other operating expenses	(75,734		)	(32,108		)	(2,334		)	(110,176		)	—			(110,176		)
Underwriting income	$	15,220		$	90,801		$	4,971		110,992			—			110,992
Net investment income										66,083			—			66,083
Net realized losses										(6,022		)	—			(6,022		)
Net impairment losses recognized in earnings										(728		)	—			(728		)
Equity in net income of investment funds accounted for using the equity method										5,665			—			5,665
Other income (loss)										624			—			624
Other expenses										(7,894		)	—			(7,894		)
Interest expense										(5,937		)	—			(5,937		)
Net foreign exchange losses										(40,562		)	—			(40,562		)
Income before income taxes										122,221			—			122,221
Income tax expense										(7,396		)	—			(7,396		)
Net income										114,825			—			114,825
Dividends attributable to redeemable noncontrolling interests										—			—			—
Amounts attributable to noncontrolling interests										—			—			—
Net income available to Arch										114,825			—			114,825
Preferred dividends										(5,484		)	—			(5,484		)
Net income available to Arch common shareholders										$	109,341		$	—		$	109,341
Underwriting Ratios
Loss ratio	63.8		%	39.3		%	15.8		%	53.7		%	—		%	53.7		%
Acquisition expense ratio	17.3		%	20.1		%	27.0		%	18.5		%	—		%	18.5		%
Other operating expense ratio	15.8		%	10.6		%	18.3		%	13.9		%	—		%	13.9		%
Combined ratio	96.9		%	70.0		%	61.1		%	86.1		%	—		%	86.1		%
Goodwill and intangible assets	$	20,653		$	8,307		$	—		$	28,960		$	—		$	28,960
Total investable assets										$	13,282,560		$	—		$	13,282,560
Total assets										18,930,823			—			18,930,823
Total liabilities										13,487,538			—			13,487,538

_________________________________________________

(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.

	Nine Months Ended
	September 30, 2014
	Insurance			Reinsurance			Mortgage			Sub-Total			Other			Total
Gross premiums written (1)	$	2,309,560		$	1,212,641		$	169,772		$	3,690,462		$	190,239		$	3,726,804
Premiums ceded	(646,082		)	(215,623		)	(17,622		)	(877,816		)	(6,428		)	(730,347		)
Net premiums written	1,663,478			997,018			152,150			2,812,646			183,811			2,996,457
Change in unearned premiums	(158,878		)	(23,495		)	(9,606		)	(191,979		)	(133,895		)	(325,874		)
Net premiums earned	1,504,600			973,523			142,544			2,620,667			49,916			2,670,583
Other underwriting income	1,513			834			2,970			5,317			—			5,317
Losses and loss adjustment expenses	(936,615		)	(413,745		)	(39,938		)	(1,390,298		)	(33,133		)	(1,423,431		)
Acquisition expenses, net	(235,156		)	(199,673		)	(32,593		)	(467,422		)	(14,625		)	(482,047		)
Other operating expenses	(250,111		)	(110,198		)	(48,077		)	(408,386		)	(4,402		)	(412,788		)
Underwriting income (loss)	$	84,231		$	250,741		$	24,906		359,878			(2,244		)	357,634
Net investment income										211,690			8,399			220,089
Net realized gains (losses)										102,074			(9,718		)	92,356
Net impairment losses recognized in earnings										(26,313		)	—			(26,313		)
Equity in net income of investment funds accounted for using the equity method										17,459			—			17,459
Other income (loss)										(5,069		)	—			(5,069		)
Other expenses										(36,512		)	(2,329		)	(38,841		)
Interest expense										(32,890		)	—			(32,890		)
Net foreign exchange gains (losses)										48,191			(1,017		)	47,174
Income before income taxes										638,508			(6,909		)	631,599
Income tax expense										(17,473		)	—			(17,473		)
Net income (loss)										621,035			(6,909		)	614,126
Dividends attributable to redeemable noncontrolling interests										—			(9,818		)	(9,818		)
Amounts attributable to noncontrolling interests										—			14,883			14,883
Net income available to Arch										621,035			(1,844		)	619,191
Preferred dividends										(16,453		)	—			(16,453		)
Net income available to Arch common shareholders										$	604,582		$	(1,844	)	$	602,738
Underwriting Ratios
Loss ratio	62.3		%	42.5		%	28.0		%	53.1		%	66.4		%	53.3		%
Acquisition expense ratio	15.6		%	20.5		%	22.9		%	17.8		%	29.3		%	18.1		%
Other operating expense ratio	16.6		%	11.3		%	33.7		%	15.6		%	8.8		%	15.5		%
Combined ratio	94.5		%	74.3		%	84.6		%	86.5		%	104.5		%	86.9		%

_________________________________________________

(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.

	Nine Months Ended
	September 30, 2013
	Insurance			Reinsurance			Mortgage			Sub-Total			Other			Total
Gross premiums written (1)	$	2,075,560		$	1,099,803		$	69,135		$	3,241,424		$	—		$	3,241,424
Premiums ceded	(567,471		)	(74,581		)	—			(638,978		)	—			(638,978		)
Net premiums written	1,508,089			1,025,222			69,135			2,602,446			—			2,602,446
Change in unearned premiums	(125,339		)	(138,479		)	(32,042		)	(295,860		)	—			(295,860		)
Net premiums earned	1,382,750			886,743			37,093			2,306,586			—			2,306,586
Other underwriting income	1,599			367			—			1,966			—			1,966
Losses and loss adjustment expenses	(880,580		)	(358,247		)	(6,274		)	(1,245,101		)	—			(1,245,101		)
Acquisition expenses, net	(227,806		)	(167,497		)	(11,279		)	(406,582		)	—			(406,582		)
Other operating expenses	(232,216		)	(96,207		)	(5,027		)	(333,450		)	—			(333,450		)
Underwriting income	$	43,747		$	265,159		$	14,513		323,419			—			323,419
Net investment income										200,124			—			200,124
Net realized gains										64,970			—			64,970
Net impairment losses recognized in earnings										(3,698		)	—			(3,698		)
Equity in net income of investment funds accounted for using the equity method										30,429			—			30,429
Other income (loss)										2,702			—			2,702
Other expenses										(32,211		)	—			(32,211		)
Interest expense										(17,687		)	—			(17,687		)
Net foreign exchange losses										(2,487		)	—			(2,487		)
Income before income taxes										565,561			—			565,561
Income tax expense										(17,320		)	—			(17,320		)
Net income										548,241			—			548,241
Dividends attributable to redeemable noncontrolling interests										—			—			—
Amounts attributable to noncontrolling interests										—			—			—
Net income available to Arch										548,241			—			548,241
Preferred dividends										(16,453		)	—			(16,453		)
Net income available to Arch common shareholders										$	531,788		$	—		$	531,788
Underwriting Ratios
Loss ratio	63.7		%	40.4		%	16.9		%	54.0		%	—		%	54.0		%
Acquisition expense ratio	16.5		%	18.9		%	30.4		%	17.6		%	—		%	17.6		%
Other operating expense ratio	16.8		%	10.8		%	13.6		%	14.5		%	—		%	14.5		%
Combined ratio	97.0		%	70.1		%	60.9		%	86.1		%	—		%	86.1		%

_________________________________________________

(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.

XML

Fair Value - Rollforward of Level 3 assets and liabilities (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended				9 Months Ended
	Sep. 30, 2014		Sep. 30, 2013		Sep. 30, 2014	Sep. 30, 2013
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance at beginning of period	$ 554,249		$ 482,442		$ 549,990	$ 477,956
Total gains or (losses) (realized/unrealized) - included in earnings	(3,486)	[1]	8,731	[1]	19,513	16,470
Total gains or (losses) (realized/unrealized) - included in other comprehensive income	132		(5,239)		(532)	(2,419)
Purchases, issuances, sales and settlements
Purchases	18,058		83,348		124,783	248,918
Issuances	0		0		0	0
Sales	0		0		(68,209)	(96,655)
Settlements	(42,876)		(3,695)		(99,468)	(78,683)
Transfers in and/or out of Level 3	0		0		0	0
Balance at end of period	526,077		565,587		526,077	565,587
Contingent consideration liability
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance at beginning of period	53,099		0		0	0
Total gains or (losses) (realized/unrealized) - included in earnings	5,562	[1]	0	[1]	16,899	0
Total gains or (losses) (realized/unrealized) - included in other comprehensive income	0		0		0	0
Purchases, issuances, sales and settlements
Purchases	0		0		0	0
Issuances	0		0		41,762	0
Sales	0		0		0	0
Settlements	0		0		0	0
Transfers in and/or out of Level 3	0		0		0	0
Balance at end of period	58,661		0		58,661	0
Available for sale | Corporate bonds
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance at beginning of period	0		2,360		2,045	98,404
Total gains or (losses) (realized/unrealized) - included in earnings	0	[1]	0	[1]	0	4,679
Total gains or (losses) (realized/unrealized) - included in other comprehensive income	0		0		0	(3,051)
Purchases, issuances, sales and settlements
Purchases	0		0		0	0
Issuances	0		0		0	0
Sales	0		0		(2,045)	(96,655)
Settlements	0		(271)		0	(1,288)
Transfers in and/or out of Level 3	0		0		0	0
Balance at end of period	0		2,089		0	2,089
Available for sale | Other investments
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance at beginning of period	103,213		189,893		170,420	184,202
Total gains or (losses) (realized/unrealized) - included in earnings	(262)	[1]	0	[1]	291	4,762
Total gains or (losses) (realized/unrealized) - included in other comprehensive income	132		(5,239)		(1,464)	632
Purchases, issuances, sales and settlements
Purchases	0		20,000		0	25,000
Issuances	0		0		0	0
Sales	0		0		(66,164)	0
Settlements	0		0		0	(9,942)
Transfers in and/or out of Level 3	0		0		0	0
Balance at end of period	103,083		204,654		103,083	204,654
Fair value option | Other investments
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance at beginning of period	451,036		290,189		377,525	195,350
Total gains or (losses) (realized/unrealized) - included in earnings	(3,224)	[1]	8,731	[1]	19,222	7,029
Total gains or (losses) (realized/unrealized) - included in other comprehensive income	0		0		932	0
Purchases, issuances, sales and settlements
Purchases	18,058		63,348		124,783	223,918
Issuances	0		0		0	0
Sales	0		0		0	0
Settlements	(42,876)		(3,424)		(99,468)	(67,453)
Transfers in and/or out of Level 3	0		0		0	0
Balance at end of period	$ 422,994		$ 358,844		$ 422,994	$ 358,844

[1] Gains or losses on corporate bonds were included in net realized gains (losses) while gains or losses on other investments were included in net realized gains (losses) or net investment income.

XML

Investment Information - Summary of available for sale securities (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended		12 Months Ended
	Sep. 30, 2014		Dec. 31, 2013
Available for sale securities:
Estimated Fair Value	$ 12,603,496		$ 12,150,358
Gross Unrealized Gains	226,986		232,673
Gross Unrealized Losses	(98,706)		(152,368)
Cost or Amortized Cost	12,475,216		12,070,053
OTTI Unrealized Losses	(3,622)	[1]	(12,942)	[1]
Fixed maturities and fixed maturities pledged under securities lending agreements
Available for sale securities:
Estimated Fair Value	10,840,929		9,676,857
Gross Unrealized Gains	114,477	[2]	133,450	[2]
Gross Unrealized Losses	(82,210)	[2]	(127,100)	[2]
Cost or Amortized Cost	10,808,662	[2]	9,670,507	[2]
OTTI Unrealized Losses	(3,622)	[1],[2]	(12,942)	[1],[2]
Fixed maturities and fixed maturities pledged under securities lending agreements | Corporate bonds
Available for sale securities:
Estimated Fair Value	3,070,353		2,267,263
Gross Unrealized Gains	29,747	[2]	35,289	[2]
Gross Unrealized Losses	(30,089)	[2]	(35,537)	[2]
Cost or Amortized Cost	3,070,695	[2]	2,267,511	[2]
OTTI Unrealized Losses	0	[1],[2]	(16)	[1],[2]
Fixed maturities and fixed maturities pledged under securities lending agreements | Mortgage backed securities
Available for sale securities:
Estimated Fair Value	966,848		1,133,095
Gross Unrealized Gains	18,567	[2]	16,270	[2]
Gross Unrealized Losses	(8,349)	[2]	(22,209)	[2]
Cost or Amortized Cost	956,630	[2]	1,139,034	[2]
OTTI Unrealized Losses	(3,600)	[1],[2]	(9,269)	[1],[2]
Fixed maturities and fixed maturities pledged under securities lending agreements | Municipal bonds
Available for sale securities:
Estimated Fair Value	1,293,455		1,481,738
Gross Unrealized Gains	31,860	[2]	29,378	[2]
Gross Unrealized Losses	(971)	[2]	(9,730)	[2]
Cost or Amortized Cost	1,262,566	[2]	1,462,090	[2]
OTTI Unrealized Losses	0	[1],[2]	(17)	[1],[2]
Fixed maturities and fixed maturities pledged under securities lending agreements | Commercial mortgage backed securities
Available for sale securities:
Estimated Fair Value	1,232,092		1,074,497
Gross Unrealized Gains	9,355	[2]	13,972	[2]
Gross Unrealized Losses	(5,976)	[2]	(15,224)	[2]
Cost or Amortized Cost	1,228,713	[2]	1,075,749	[2]
OTTI Unrealized Losses	0	[1],[2]	(199)	[1],[2]
Fixed maturities and fixed maturities pledged under securities lending agreements | US government and government agencies
Available for sale securities:
Estimated Fair Value	1,551,583		1,301,809
Gross Unrealized Gains	6,433	[2]	3,779	[2]
Gross Unrealized Losses	(2,533)	[2]	(11,242)	[2]
Cost or Amortized Cost	1,547,683	[2]	1,309,272	[2]
OTTI Unrealized Losses	0	[1],[2]	(19)	[1],[2]
Fixed maturities and fixed maturities pledged under securities lending agreements | Non-US government securities
Available for sale securities:
Estimated Fair Value	1,001,947		1,085,861
Gross Unrealized Gains	11,808	[2]	14,729	[2]
Gross Unrealized Losses	(27,117)	[2]	(19,363)	[2]
Cost or Amortized Cost	1,017,256	[2]	1,090,495	[2]
OTTI Unrealized Losses	0	[1],[2]	0	[1],[2]
Fixed maturities and fixed maturities pledged under securities lending agreements | Asset backed securities
Available for sale securities:
Estimated Fair Value	1,724,651		1,332,594
Gross Unrealized Gains	6,707	[2]	20,033	[2]
Gross Unrealized Losses	(7,175)	[2]	(13,795)	[2]
Cost or Amortized Cost	1,725,119	[2]	1,326,356	[2]
OTTI Unrealized Losses	(22)	[1],[2]	(3,422)	[1],[2]
Equity securities
Available for sale securities:
Estimated Fair Value	582,075		496,824
Gross Unrealized Gains	78,988		69,487
Gross Unrealized Losses	(10,109)		(5,938)
Cost or Amortized Cost	513,196		433,275
OTTI Unrealized Losses	0	[1]	0	[1]
Other investments
Available for sale securities:
Estimated Fair Value	431,833		498,310
Gross Unrealized Gains	33,114		28,082
Gross Unrealized Losses	0		(18,459)
Cost or Amortized Cost	398,719		488,687
OTTI Unrealized Losses	0	[1]	0	[1]
Short-term investments
Available for sale securities:
Estimated Fair Value	748,659		1,478,367
Gross Unrealized Gains	407		1,654
Gross Unrealized Losses	(6,387)		(871)
Cost or Amortized Cost	754,639		1,477,584
OTTI Unrealized Losses	$ 0	[1]	$ 0	[1]

[1] Represents the total other-than-temporary impairments (“OTTI”) recognized in accumulated other comprehensive income (“AOCI”). It does not include the change in fair value subsequent to the impairment measurement date. At September 30, 2014, the net unrealized gain related to securities for which a non-credit OTTI was recognized in AOCI was $2.1 million, compared to a net unrealized gain of $6.0 million at December 31, 2013.

[2] In securities lending transactions, the Company receives collateral in excess of the fair value of the fixed maturities and short-term investments pledged. For purposes of this table, the Company has excluded the collateral received and reinvested and included the fixed maturities and short-term investments pledged. See “—Securities Lending Agreements.”

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Fair Value (Tables)

9 Months Ended

Sep. 30, 2014

Fair Value Disclosures [Abstract]

Fair value hierarchy

The following table presents the Company’s financial assets and liabilities measured at fair value by level at September 30, 2014:

			Fair Value Measurement Using:
	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 and fixed maturities pledged under securities lending agreements (1):
Corporate bonds	$	3,070,353	$	—	$	3,070,353	$	—
Mortgage backed securities	966,848		—		966,848		—
Municipal bonds	1,293,455		—		1,293,455		—
Commercial mortgage backed securities	1,232,092		—		1,232,092		—
U.S. government and government agencies	1,551,583		1,551,583		—		—
Non-U.S. government securities	1,001,947		—		1,001,947		—
Asset backed securities	1,724,651		—		1,724,651		—
Total	10,840,929		1,551,583		9,289,346		—
Equity securities	582,075		582,075		—		—
Other investments	431,833		—		328,750		103,083
Short-term investments	748,659		723,698		24,961		—
Fair value option:
Corporate bonds	452,275		—		452,275		—
Non-U.S. government bonds	70,494		—		70,494		—
Mortgage backed securities	17,919		—		17,919		—
Asset backed securities	25,066		—		25,066		—
Other investments	1,431,525		—		1,008,531		422,994
Short-term investments	205,716		198,077		7,639		—
Total	2,202,995		198,077		1,581,924		422,994
Total assets measured at fair value	$	14,806,491	$	3,055,433	$	11,224,981	$	526,077
Liabilities measured at fair value:
Contingent consideration liability	$	58,661	$	—	$	—	$	58,661
Total liabilities measured at fair value	$	58,661	$	—	$	—	$	58,661

_________________________________________________

(1) In securities lending transactions, the Company receives collateral in excess of the fair value of the fixed maturities and short-term investments pledged. For purposes of this table, the Company has excluded the collateral received and reinvested and included the fixed maturities and short-term investments pledged.

The following table presents the Company’s financial assets and liabilities measured at fair value by level at December 31, 2013:

			Fair Value Measurement Using:
	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 and fixed maturities pledged under securities lending agreements (1):
Corporate bonds	$	2,267,263	$	—	$	2,265,218	$	2,045
Mortgage backed securities	1,133,095		—		1,133,095		—
Municipal bonds	1,481,738		—		1,481,738		—
Commercial mortgage backed securities	1,074,497		—		1,074,497		—
U.S. government and government agencies	1,301,809		1,301,809		—		—
Non-U.S. government securities	1,085,861		—		1,085,861		—
Asset backed securities	1,332,594		—		1,332,594		—
Total	9,676,857		1,301,809		8,373,003		2,045
Equity securities	496,824		496,738		86		—
Other investments	498,310		—		327,890		170,420
Short-term investments	1,478,367		1,427,744		50,623		—
Fair value option:
Corporate bonds	334,065		—		334,065		—
Non-U.S. government bonds	73,156		—		73,156		—
Mortgage backed securities	41,033		—		41,033		—
Other investments	773,280		—		395,755		377,525
Total	1,221,534		—		844,009		377,525
Total assets measured at fair value	$	13,371,892	$	3,226,291	$	9,595,611	$	549,990

_________________________________________________

(1) In securities lending transactions, the Company receives collateral in excess of the fair value of the fixed maturities and short-term investments pledged. For purposes of this table, the Company has excluded the collateral received and reinvested and included the fixed maturities and short-term investments pledged.

Rollforward of Level 3 investments

The following tables present 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:

	Fair Value Measurements Using: Significant Unobservable Inputs (Level 3)
	Assets												Liabilities
s	Available-For-Sale						Fair Value Option
	Corporate Bonds			Other Investments			Other Investments			Total			Contingent Consideration Liability
Three Months Ended September 30, 2014
Balance at beginning of period	$	—		$	103,213		$	451,036		$	554,249		$	53,099
Total gains or (losses) (realized/unrealized)
Included in earnings (1)	—			(262		)	(3,224		)	(3,486		)	5,562
Included in other comprehensive income	—			132			—			132			—
Purchases, issuances, sales and settlements
Purchases	—			—			18,058			18,058			—
Issuances	—			—			—			—			—
Sales	—			—			—			—			—
Settlements	—			—			(42,876		)	(42,876		)	—
Transfers in and/or out of Level 3	—			—			—			—			—
Balance at end of period	$	—		$	103,083		$	422,994		$	526,077		$	58,661
Three Months Ended September 30, 2013
Balance at beginning of period	$	2,360		$	189,893		$	290,189		$	482,442		$	—
Total gains or (losses) (realized/unrealized)
Included in earnings (1)	—			—			8,731			8,731			—
Included in other comprehensive income	—			(5,239		)	—			(5,239		)	—
Purchases, issuances, sales and settlements
Purchases	—			20,000			63,348			83,348			—
Issuances	—			—			—			—			—
Sales	—			—			—			—			—
Settlements	(271		)	—			(3,424		)	(3,695		)	—
Transfers in and/or out of Level 3	—			—			—			—			—
Balance at end of period	$	2,089		$	204,654		$	358,844		$	565,587		$	—

_________________________________________________

(1) Gains or losses on corporate bonds were included in net realized gains (losses) while gains or losses on other investments were included in net realized gains (losses) or net investment income. Gains or losses on the contingent consideration liability were included in net realized gains (losses).

	Fair Value Measurements Using: Significant Unobservable Inputs (Level 3)
	Assets												Liabilities
s	Available-For-Sale						Fair Value Option
	Corporate Bonds			Other Investments			Other Investments			Total			Contingent Consideration Liability
Nine Months Ended September 30, 2014
Balance at beginning of period	$	2,045		$	170,420		$	377,525		$	549,990		$	—
Total gains or (losses) (realized/unrealized)
Included in earnings (1)	—			291			19,222			19,513			16,899
Included in other comprehensive income	—			(1,464		)	932			(532		)	—
Purchases, issuances, sales and settlements
Purchases	—			—			124,783			124,783			—
Issuances	—			—			—			—			41,762
Sales	(2,045		)	(66,164		)	—			(68,209		)	—
Settlements	—			—			(99,468		)	(99,468		)	—
Transfers in and/or out of Level 3	—			—			—			—			—
Balance at end of period	$	—		$	103,083		$	422,994		$	526,077		$	58,661
Nine Months Ended September 30, 2013
Balance at beginning of period	$	98,404		$	184,202		$	195,350		$	477,956		$	—
Total gains or (losses) (realized/unrealized)
Included in earnings (1)	4,679			4,762			7,029			16,470			—
Included in other comprehensive income	(3,051		)	632			—			(2,419		)	—
Purchases, issuances, sales and settlements
Purchases	—			25,000			223,918			248,918			—
Issuances	—			—			—			—			—
Sales	(96,655		)	—			—			(96,655		)	—
Settlements	(1,288		)	(9,942		)	(67,453		)	(78,683		)	—
Transfers in and/or out of Level 3	—			—			—			—			—
Balance at end of period	$	2,089		$	204,654		$	358,844		$	565,587		$	—

_________________________________________________

(1) Gains or losses on corporate bonds were included in net realized gains (losses) while gains or losses on other investments were included in net realized gains (losses) or net investment income. Gains or losses on the contingent consideration liability were included in net realized gains (losses).

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Derivative Instruments (Tables)

9 Months Ended

Sep. 30, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Fair value and notional amount of derivatives

The following table summarizes information on the fair values and notional values of the Company’s derivative instruments. The fair value of TBAs is included in ‘fixed maturities available for sale, at fair value.’

	Asset Derivatives		Liability Derivatives			Net Derivatives
	Fair Value		Fair Value			Fair Value			Notional Value (1)
September 30, 2014
Futures contracts	$	437	$	(1,797	)	$	(1,360	)	$	1,333,987
Foreign currency forward contracts	6,297		(1,783		)	4,514			350,938
TBAs	397,193		(407,954		)	(10,761		)	776,558
Other	3,763		(2,719		)	1,044			758,581
Total	$	407,690	$	(414,253	)	$	(6,563	)
December 31, 2013
Futures contracts	$	461	$	(110	)	$	351		$	475,967
Foreign currency forward contracts	5,023		(3,090		)	1,933			330,746
TBAs	33,455		(21,731		)	11,724			56,160
Other	920		(1,541		)	(621		)	347,916
Total	$	39,859	$	(26,472	)	$	13,387

Summary of net realized gains (losses) recorded in the consolidated statements of income

The following table summarizes net realized gains (losses) recorded on the Company’s derivative instruments in the consolidated statements of income:

	Three Months Ended						Nine Months Ended
Derivatives not designated as	September 30,						September 30,
hedging instruments	2014			2013			2014			2013
Futures contracts	$	(354	)	$	(2,804	)	$	4,969		$	6,990
Foreign currency forward contracts	6,558			1,344			2,490			8,224
TBAs	660			2,511			353			(699		)
Other	585			523			(729		)	2,327
Total	$	7,449		$	1,574		$	7,083		$	16,842

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General

9 Months Ended

Sep. 30, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

General

General

Arch Capital Group Ltd. (“ACGL”) is a Bermuda public limited liability company which provides insurance and reinsurance on a worldwide basis through its subsidiaries (together with ACGL, the “Company”).

On January 30, 2014, the Company acquired CMG Mortgage Insurance Company and its affiliated mortgage insurance companies (together, “CMG Entities”) and the mortgage insurance platform and related assets from PMI Mortgage Insurance Co. (“PMI”) (see Note 2).

On March 20, 2014, the Company acquired approximately 11% of Watford Holdings Ltd.’s common equity and a warrant to purchase additional common equity for $100 million. Watford Holdings Ltd. is the parent of Watford Re Ltd., a newly-formed multi-line Bermuda reinsurance company (together with Watford Holdings Ltd., “Watford”). Watford is considered a variable interest entity (“VIE”) and the Company concluded that it is the primary beneficiary of Watford. As such, the results of Watford are included in the Company’s consolidated financial statements (see Note 4).

The interim consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and Watford. 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 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, 2013 (“2013 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. Tabular amounts are in U.S. Dollars in thousands, except share amounts, unless otherwise noted.

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Other Comprehensive Income (Loss) (Tables)

9 Months Ended

Sep. 30, 2014

Comprehensive Income Note Disclosure [Abstract]

Details about amounts reclassified from AOCI

The following table presents details about amounts reclassified from accumulated other comprehensive income:

		Amounts Reclassed from AOCI
	Consolidated Statement of Income	Three Months Ended						Nine Months Ended
Details About	Line Item That Includes	September 30,						September 30,
AOCI Components	Reclassification	2014			2013			2014			2013
Unrealized appreciation on available-for-sale investments
	Net realized gains (losses)	$	27,715		$	(21,825	)	$	77,488		$	37,176
	Other-than-temporary impairment losses	(8,593		)	(901		)	(26,313		)	(3,873		)
	Total before tax	19,122			(22,726		)	51,175			33,303
	Income tax (expense) benefit	(1,639		)	2,025			(4,158		)	(1,387		)
	Net of tax	$	17,483		$	(20,701	)	$	47,017		$	31,916

Schedule of comprehensive income (loss)

The following table presents the tax effects allocated to each component of other comprehensive income (loss):

	Before Tax Amount			Tax Expense (Benefit)			Net of Tax Amount
Three Months Ended September 30, 2014
Unrealized appreciation (decline) in value of investments:
Unrealized holding gains (losses) arising during period	$	(90,276	)	$	343		$	(90,619	)
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)	—			—			—
Less reclassification of net realized gains included in net income	19,122			1,639			17,483
Foreign currency translation adjustments	(23,595		)	—			(23,595		)
Other comprehensive income (loss)	$	(132,993	)	$	(1,296	)	$	(131,697	)
Three Months Ended September 30, 2013
Unrealized appreciation (decline) in value of investments:
Unrealized holding gains (losses) arising during period	$	41,122		$	(104	)	$	41,226
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)	(173		)	—			(173		)
Less reclassification of net realized gains (losses) included in net income	(22,726		)	(2,025		)	(20,701		)
Foreign currency translation adjustments	29,523			—			29,523
Other comprehensive income (loss)	$	93,198		$	1,921		$	91,277
Nine Months Ended September 30, 2014
Unrealized appreciation (decline) in value of investments:
Unrealized holding gains (losses) arising during period	$	100,274		$	11,112		$	89,162
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)	—			—			—
Less reclassification of net realized gains included in net income	51,175			4,158			47,017
Foreign currency translation adjustments	(14,923		)	—			(14,923		)
Other comprehensive income (loss)	$	34,176		$	6,954		$	27,222
Nine Months Ended September 30, 2013
Unrealized appreciation (decline) in value of investments:
Unrealized holding gains (losses) arising during period	$	(229,919	)	$	(21,054	)	$	(208,865	)
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)	(175		)	—			(175		)
Less reclassification of net realized gains included in net income	33,303			1,387			31,916
Foreign currency translation adjustments	(4,106		)	—			(4,106		)
Other comprehensive income (loss)	$	(267,503	)	$	(22,441	)	$	(245,062	)

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Variable Interest Entities and Noncontrolling Interests - Redeemable noncontrolling interests (Details) (Watford Holdings Ltd, USD $)	9 Months Ended
	Sep. 30, 2014
Redeemable Noncontrolling Interest [Line Items]
Par value per share	$ 0.01
Liquidation preference per share	$ 25.00
Issue price per share	$ 24.50
Preference shares, number of shares issued	9,065,200
Preference shares, dividend rate (percentage)	8.50%
3 month US dollar LIBOR
Redeemable Noncontrolling Interest [Line Items]
Preference shares, dividend rate (percentage)	1.00%
Cumulative redeemable preference shares
Redeemable Noncontrolling Interest [Line Items]
Noncontrolling interest, ownership percentage by noncontrolling owners	100.00%

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Investment Information - Restricted assets (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Restricted Assets [Line Items]
Restricted assets	$ 5,530,053	$ 5,302,042
Collateral or guarantees - affiliated transactions
Restricted Assets [Line Items]
Restricted assets	4,159,480	4,060,533
Collateral or guarantees - third party agreements
Restricted Assets [Line Items]
Restricted assets	941,372	856,890
Deposits with US regulatory authorities
Restricted Assets [Line Items]
Restricted assets	353,091	302,809
Deposits with non-US regulatory authorities
Restricted Assets [Line Items]
Restricted assets	0	6,546
Trust funds
Restricted Assets [Line Items]
Restricted assets	$ 76,110	$ 75,264

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Unaudited Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014		Dec. 31, 2013
Investments:
Fixed maturities available for sale, at fair value (amortized cost: $10,699,615 and $9,564,634)	$ 10,733,382		$ 9,571,776
Short-term investments available for sale, at fair value (amortized cost: $754,641 and $1,477,584)	748,659		1,478,367
Investment of funds received under securities lending, at fair value (amortized cost: $100,680 and $97,943)	104,252		100,584
Equity securities available for sale, at fair value (cost: $513,196 and $433,275)	582,075		496,824
Other investments available for sale, at fair value (cost: $398,719 and $488,687)	431,833		498,310
Investments accounted for using the fair value option	2,202,995		1,221,534
Investments accounted for using the equity method	307,252		244,339
Total investments	15,110,448		13,611,734
Cash	663,726		434,057
Accrued investment income	65,042		66,848
Investment in joint venture (cost: $100,000)	97,313		104,856
Fixed maturities and short-term investments pledged under securities lending, at fair value	107,547		105,081
Premiums receivable	1,027,204		753,924
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses	1,814,190		1,804,330
Contractholder receivables	1,286,799		1,064,246
Prepaid reinsurance premiums	404,661		328,343
Deferred acquisition costs, net	409,174		342,314
Receivable for securities sold	672,259		50,555
Goodwill and intangible assets	111,528		27,319
Other assets	840,794		872,487
Total assets	22,610,685		19,566,094
Liabilities
Reserve for losses and loss adjustment expenses	8,958,734		8,824,696
Unearned premiums	2,303,247		1,896,365
Reinsurance balances payable	244,379		196,167
Contractholder payables	1,286,799		1,064,246
Deposit accounting liabilities	349,850		421,297
Senior notes	800,000		800,000
Revolving credit agreement borrowings	100,000		100,000
Securities lending payable	110,736		107,999
Payable for securities purchased	740,953		51,318
Other liabilities	633,502		456,510
Total liabilities	15,528,200		13,918,598
Commitments and Contingencies
Redeemable noncontrolling interests	219,419		0
Shareholders' Equity
Non-cumulative preferred shares	325,000		325,000
Common shares ($0.0033 par, shares issued: 171,380,760 and 169,560,591)	571		565
Additional paid-in capital	366,408		299,517
Retained earnings	6,644,892		6,042,154
Accumulated other comprehensive income, net of deferred income tax	102,186		74,964
Common shares held in treasury, at cost (shares: 40,680,141 and 35,885,707)	(1,358,011)		(1,094,704)
Total shareholders' equity available to Arch	6,081,046		5,647,496
Non-redeemable noncontrolling interests	782,020	[1]	0
Total shareholders' equity	6,863,066		5,647,496
Total liabilities, noncontrolling interests and shareholders' equity	$ 22,610,685		$ 19,566,094

[1] See Note 4.

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Investment Information - Aging of available for sale securities in an unrealized loss position (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014		Dec. 31, 2013
Available for sale securities:
Estimated Fair Value - Less than 12 Months	$ 4,772,968		$ 6,158,245
Gross Unrealized Losses - Less than 12 Months	(73,143)		(137,655)
Estimated Fair Value - 12 Months or More	709,935		258,290
Gross Unrealized Losses - 12 Months or More	(25,563)		(14,713)
Estimated Fair Value - Total	5,482,903		6,416,535
Gross Unrealized Losses - Total	(98,706)		(152,368)
Fixed maturities and fixed maturities pledged under securities lending agreements
Available for sale securities:
Estimated Fair Value - Less than 12 Months	4,444,909	[1]	5,887,621	[1]
Gross Unrealized Losses - Less than 12 Months	(56,669)	[1]	(115,071)	[1]
Estimated Fair Value - 12 Months or More	709,666	[1]	210,974	[1]
Gross Unrealized Losses - 12 Months or More	(25,541)	[1]	(12,029)	[1]
Estimated Fair Value - Total	5,154,575	[1]	6,098,595	[1]
Gross Unrealized Losses - Total	(82,210)	[1]	(127,100)	[1]
Fixed maturities and fixed maturities pledged under securities lending agreements | Corporate bonds
Available for sale securities:
Estimated Fair Value - Less than 12 Months	1,549,643	[1]	1,183,625	[1]
Gross Unrealized Losses - Less than 12 Months	(22,058)	[1]	(32,837)	[1]
Estimated Fair Value - 12 Months or More	193,803	[1]	46,673	[1]
Gross Unrealized Losses - 12 Months or More	(8,031)	[1]	(2,700)	[1]
Estimated Fair Value - Total	1,743,446	[1]	1,230,298	[1]
Gross Unrealized Losses - Total	(30,089)	[1]	(35,537)	[1]
Fixed maturities and fixed maturities pledged under securities lending agreements | Mortgage backed securities
Available for sale securities:
Estimated Fair Value - Less than 12 Months	360,510	[1]	778,693	[1]
Gross Unrealized Losses - Less than 12 Months	(2,809)	[1]	(20,253)	[1]
Estimated Fair Value - 12 Months or More	124,796	[1]	43,634	[1]
Gross Unrealized Losses - 12 Months or More	(5,540)	[1]	(1,956)	[1]
Estimated Fair Value - Total	485,306	[1]	822,327	[1]
Gross Unrealized Losses - Total	(8,349)	[1]	(22,209)	[1]
Fixed maturities and fixed maturities pledged under securities lending agreements | Municipal bonds
Available for sale securities:
Estimated Fair Value - Less than 12 Months	108,444	[1]	589,009	[1]
Gross Unrealized Losses - Less than 12 Months	(470)	[1]	(9,422)	[1]
Estimated Fair Value - 12 Months or More	21,390	[1]	6,092	[1]
Gross Unrealized Losses - 12 Months or More	(501)	[1]	(308)	[1]
Estimated Fair Value - Total	129,834	[1]	595,101	[1]
Gross Unrealized Losses - Total	(971)	[1]	(9,730)	[1]
Fixed maturities and fixed maturities pledged under securities lending agreements | Commercial mortgage backed securities
Available for sale securities:
Estimated Fair Value - Less than 12 Months	508,131	[1]	677,617	[1]
Gross Unrealized Losses - Less than 12 Months	(2,769)	[1]	(15,110)	[1]
Estimated Fair Value - 12 Months or More	94,948	[1]	1,612	[1]
Gross Unrealized Losses - 12 Months or More	(3,207)	[1]	(114)	[1]
Estimated Fair Value - Total	603,079	[1]	679,229	[1]
Gross Unrealized Losses - Total	(5,976)	[1]	(15,224)	[1]
Fixed maturities and fixed maturities pledged under securities lending agreements | US government and government agencies
Available for sale securities:
Estimated Fair Value - Less than 12 Months	576,459	[1]	1,144,809	[1]
Gross Unrealized Losses - Less than 12 Months	(2,385)	[1]	(11,242)	[1]
Estimated Fair Value - 12 Months or More	3,430	[1]	0	[1]
Gross Unrealized Losses - 12 Months or More	(148)	[1]	0	[1]
Estimated Fair Value - Total	579,889	[1]	1,144,809	[1]
Gross Unrealized Losses - Total	(2,533)	[1]	(11,242)	[1]
Fixed maturities and fixed maturities pledged under securities lending agreements | Non-US government securities
Available for sale securities:
Estimated Fair Value - Less than 12 Months	538,957	[1]	821,506	[1]
Gross Unrealized Losses - Less than 12 Months	(22,925)	[1]	(15,776)	[1]
Estimated Fair Value - 12 Months or More	49,200	[1]	24,334	[1]
Gross Unrealized Losses - 12 Months or More	(4,192)	[1]	(3,587)	[1]
Estimated Fair Value - Total	588,157	[1]	845,840	[1]
Gross Unrealized Losses - Total	(27,117)	[1]	(19,363)	[1]
Fixed maturities and fixed maturities pledged under securities lending agreements | Asset backed securities
Available for sale securities:
Estimated Fair Value - Less than 12 Months	802,765	[1]	692,362	[1]
Gross Unrealized Losses - Less than 12 Months	(3,253)	[1]	(10,431)	[1]
Estimated Fair Value - 12 Months or More	222,099	[1]	88,629	[1]
Gross Unrealized Losses - 12 Months or More	(3,922)	[1]	(3,364)	[1]
Estimated Fair Value - Total	1,024,864	[1]	780,991	[1]
Gross Unrealized Losses - Total	(7,175)	[1]	(13,795)	[1]
Equity securities
Available for sale securities:
Estimated Fair Value - Less than 12 Months	187,003		76,563
Gross Unrealized Losses - Less than 12 Months	(10,087)		(5,938)
Estimated Fair Value - 12 Months or More	269		0
Gross Unrealized Losses - 12 Months or More	(22)		0
Estimated Fair Value - Total	187,272		76,563
Gross Unrealized Losses - Total	(10,109)		(5,938)
Other investments
Available for sale securities:
Estimated Fair Value - Less than 12 Months	0		165,891
Gross Unrealized Losses - Less than 12 Months	0		(15,775)
Estimated Fair Value - 12 Months or More	0		47,316
Gross Unrealized Losses - 12 Months or More	0		(2,684)
Estimated Fair Value - Total	0		213,207
Gross Unrealized Losses - Total	0		(18,459)
Short-term investments
Available for sale securities:
Estimated Fair Value - Less than 12 Months	141,056		28,170
Gross Unrealized Losses - Less than 12 Months	(6,387)		(871)
Estimated Fair Value - 12 Months or More	0		0
Gross Unrealized Losses - 12 Months or More	0		0
Estimated Fair Value - Total	141,056		28,170
Gross Unrealized Losses - Total	$ (6,387)		$ (871)

[1] In securities lending transactions, the Company receives collateral in excess of the fair value of the fixed maturities and short-term investments pledged. For purposes of this table, the Company has excluded the collateral received and reinvested and included the fixed maturities and short-term investments pledged. See “—Securities Lending Agreements.”

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Unaudited Consolidated Statements of Changes in Shareholders' Equity (USD $) In Thousands		Total	Non-Cumulative Preferred Shares	Common Shares	Additional Paid-in Capital	Retained Earnings	Accumulated other comprehensive income	Unrealized gains on available-for-sale securities	Foreign currency translation adjustments	Common Shares Held in Treasury, at Cost
Balance at beginning of year at Dec. 31, 2012			$ 325,000	$ 561	$ 227,778	$ 5,354,361	$ 287,017	$ 289,956	$ (2,939)	$ (1,025,839)
Common shares issued, net				4	5,583
Exercise of stock options					7,438
Amortization of share-based compensation					40,305
Other					2,345
Net income		548,241				548,241
Amounts attributable to noncontrolling interests	[1]	0				0
Preferred share dividends		(16,453)				(16,453)
Unrealized holding gains (losses) arising during period, net of reclassification adjustment								(240,781)
Portion of other-than-temporary impairment losses recognized in other comprehensive income, net of deferred income tax		(175)						(175)
Foreign currency translation adjustments		(4,106)							(4,106)
Shares repurchased for treasury										(67,994)
Noncontrolling interest	[1]	0
Total shareholders' equity at Sep. 30, 2013		5,443,285
Balance at end of period at Sep. 30, 2013		5,443,285	325,000	565	283,449	5,886,149	41,955	49,000	(7,045)	(1,093,833)
Balance at beginning of year at Dec. 31, 2013		5,647,496	325,000	565	299,517	6,042,154	74,964	80,692	(5,728)	(1,094,704)
Common shares issued, net				6	6,401
Exercise of stock options					14,891
Amortization of share-based compensation					45,118
Other					481
Net income		614,126				614,126
Amounts attributable to noncontrolling interests	[1]	5,065				5,065
Preferred share dividends		(16,453)				(16,453)
Unrealized holding gains (losses) arising during period, net of reclassification adjustment								42,145
Portion of other-than-temporary impairment losses recognized in other comprehensive income, net of deferred income tax		0						0
Foreign currency translation adjustments		(14,923)							(14,923)
Shares repurchased for treasury										(263,307)
Noncontrolling interest	[1]	782,020
Total shareholders' equity at Sep. 30, 2014		6,863,066
Balance at end of period at Sep. 30, 2014		$ 6,081,046	$ 325,000	$ 571	$ 366,408	$ 6,644,892	$ 102,186	$ 122,837	$ (20,651)	$ (1,358,011)

[1] See Note 4.

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Commitments and Contingencies (Details) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2014
Unfunded Investment Commitments [Abstract]
Investment commitments	$ 941.9
LOC Facilities [Member]
Line of Credit Facility [Abstract]
Letters of credit outstanding, amount	421.4
Investments pledged as collateral	480.9
Other secured letter of credit facilities
Line of Credit Facility [Abstract]
Maximum borrowing capacity	192.5
Credit Agreement
Line of Credit Facility [Abstract]
Credit facility expiration date	Jun. 30, 2019
Line of credit facility, amount outstanding	100.0
Unsecured revolving loan and letter of credit facility
Line of Credit Facility [Abstract]
Maximum borrowing capacity	300.0
Secured letter of credit facility
Line of Credit Facility [Abstract]
Maximum borrowing capacity	500.0
Watford Holdings Ltd | Line of credit
Line of Credit Facility [Abstract]
Maximum borrowing capacity	200.0
Credit facility expiration date	May 19, 2015
Letters of credit outstanding, amount	$ 3.4

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Business Acquired - Summary of fair value of net assets acquired and allocation of purchase price(Details) (CMG Mortgage Insurance Company, USD $) In Thousands, unless otherwise specified	0 Months Ended
	Jan. 30, 2014
Business Acquisition [Line Items]
Cash paid	$ 245,157
Contingent consideration liability	41,762
Total purchase price (a)	286,919
Cash	9,579
Investments, at fair value	312,093
Other assets acquired	21,691
Total assets acquired	437,650
Reserves for losses and loss adjustment expenses	121,572
Unearned premiums	26,261
Intangible liability -- unfavorable service contract	9,533
Other liabilities acquired	7,217
Total liabilities acquired	164,583
Net assets acquired	273,067
Goodwill	13,852
Useful life of finite lived intangible liabilities acquired	9 years
Insurance licenses
Business Acquisition [Line Items]
Intangible asset -- insurance licenses	16,858
Acquired insurance contracts
Business Acquisition [Line Items]
Intangible asset	46,473
Useful life of finite lived intangible assets acquired	5 years
Operating platform
Business Acquisition [Line Items]
Intangible asset	29,900
Useful life of finite lived intangible assets acquired	5 years
Favorable lease contract
Business Acquisition [Line Items]
Intangible asset	$ 1,056
Useful life of finite lived intangible assets acquired	5 years

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Guarantor Financial Information - Condensed consolidating statement of income and comprehensive income (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended				9 Months Ended
	Sep. 30, 2014		Sep. 30, 2013		Sep. 30, 2014		Sep. 30, 2013
Revenues
Premiums Earned, Net	$ 903,651		$ 795,000		$ 2,670,583		$ 2,306,586
Net investment income	80,105		66,083		220,089		200,124
Net realized gains (losses)	18,515		(6,022)		92,356		64,970
Net impairment losses recognized in earnings	(8,593)		(728)		(26,313)		(3,698)
Other underwriting income	1,702		526		5,317		1,966
Equity in net income of investment funds accounted for using the equity method	4,966		5,665		17,459		30,429
Other income (loss)	(7,815)		624		(5,069)		2,702
Total revenues	992,531		861,148		2,974,422		2,603,079
Expenses
Losses and loss adjustment expenses	501,673		427,045		1,423,431		1,245,101
Acquisition expenses	163,547		147,313		482,047		406,582
Other operating expenses	149,480		118,070		451,629		365,661
Interest expense	4,152		5,937		32,890		17,687
Net foreign exchange (gains) losses	(56,031)		40,562		(47,174)		2,487
Total expenses	762,821		738,927		2,342,823		2,037,518
Income (loss) before income taxes	229,710		122,221		631,599		565,561
Income tax expense (benefit)	(6,446)		(7,396)		(17,473)		(17,320)
Income Loss Net Of Income Taxes And Before Equity In Net Income Of Subsidiaries	223,264		114,825		614,126		548,241
Income (Loss) from Subsidiaries, Net of Tax	0		0		0		0
Net income	223,264		114,825		614,126		548,241
Amounts attributable to noncontrolling interests	5,411	[1]	0	[1]	5,065	[1]	0	[1]
Net income available to Arch	228,675		114,825		619,191		548,241
Preferred dividends	(5,484)		(5,484)		(16,453)		(16,453)
Net income available to Arch common shareholders	223,191		109,341		602,738		531,788
Comprehensive Income (Loss), Net of Tax, Attributable to Parent	96,978		206,102		646,413		303,179
Reportable Legal Entities | ACGL (Parent Guarantor)
Revenues
Premiums Earned, Net	0		0		0		0
Net investment income	0		0		0		0
Net realized gains (losses)	0		0		0		0
Net impairment losses recognized in earnings	0		0		0		0
Other underwriting income	0		0		0		0
Equity in net income of investment funds accounted for using the equity method	0		0		0		0
Other income (loss)	0		0		0		0
Total revenues	0		0		0		0
Expenses
Losses and loss adjustment expenses	0		0		0		0
Acquisition expenses	0		0		0		0
Other operating expenses	10,056		6,975		35,613		30,608
Interest expense	5,858		5,793		17,565		17,456
Net foreign exchange (gains) losses	0		0		0		0
Total expenses	15,914		12,768		53,178		48,064
Income (loss) before income taxes	(15,914)		(12,768)		(53,178)		(48,064)
Income tax expense (benefit)	0		0		0		0
Income Loss Net Of Income Taxes And Before Equity In Net Income Of Subsidiaries	(15,914)		(12,768)		(53,178)		(48,064)
Income (Loss) from Subsidiaries, Net of Tax	244,589		127,593		672,369		596,305
Net income	228,675		114,825		619,191		548,241
Amounts attributable to noncontrolling interests	0	[1]	0		0	[1]	0
Net income available to Arch	228,675		114,825		619,191		548,241
Preferred dividends	(5,484)		(5,484)		(16,453)		(16,453)
Net income available to Arch common shareholders	223,191		109,341		602,738		531,788
Comprehensive Income (Loss), Net of Tax, Attributable to Parent	96,978		206,102		646,413		303,179
Reportable Legal Entities | Arch-U.S. (Subsidiary Issuer)
Revenues
Premiums Earned, Net	0		0		0		0
Net investment income	0		0		0		0
Net realized gains (losses)	0		0		0		0
Net impairment losses recognized in earnings	0		0		0		0
Other underwriting income	0		0		0		0
Equity in net income of investment funds accounted for using the equity method	0		0		0		0
Other income (loss)	0		0		0		0
Total revenues	0		0		0		0
Expenses
Losses and loss adjustment expenses	0		0		0		0
Acquisition expenses	0		0		0		0
Other operating expenses	810		397		2,281		1,947
Interest expense	6,433		7		19,395		15
Net foreign exchange (gains) losses	0		0		0		0
Total expenses	7,243		404		21,676		1,962
Income (loss) before income taxes	(7,243)		(404)		(21,676)		(1,962)
Income tax expense (benefit)	2,097		(1,356)		8,179		1,629
Income Loss Net Of Income Taxes And Before Equity In Net Income Of Subsidiaries	(5,146)		(1,760)		(13,497)		(333)
Income (Loss) from Subsidiaries, Net of Tax	10,459		6,839		41,945		36,024
Net income	5,313		5,079		28,448		35,691
Amounts attributable to noncontrolling interests	0	[1]	0		0	[1]	0
Net income available to Arch	5,313		5,079		28,448		35,691
Preferred dividends	0		0		0		0
Net income available to Arch common shareholders	5,313		5,079		28,448		35,691
Comprehensive Income (Loss), Net of Tax, Attributable to Parent	(10,614)		18,444		29,792		(4,385)
Reportable Legal Entities | Other ACGL Subsidiaries
Revenues
Premiums Earned, Net	903,651		795,000		2,670,583		2,306,586
Net investment income	79,936		72,772		237,317		220,074
Net realized gains (losses)	18,515		(6,022)		92,356		64,970
Net impairment losses recognized in earnings	(8,593)		(728)		(26,313)		(3,698)
Other underwriting income	1,702		526		5,317		1,966
Equity in net income of investment funds accounted for using the equity method	4,966		5,665		17,459		30,429
Other income (loss)	(7,815)		624		(5,069)		2,702
Total revenues	992,362		867,837		2,991,650		2,623,029
Expenses
Losses and loss adjustment expenses	501,673		427,045		1,423,431		1,245,101
Acquisition expenses	163,547		147,313		482,047		406,582
Other operating expenses	138,614		110,698		413,735		333,106
Interest expense	(8,308)		6,826		13,158		20,166
Net foreign exchange (gains) losses	(35,244)		26,815		(28,449)		(1,839)
Total expenses	760,282		718,697		2,303,922		2,003,116
Income (loss) before income taxes	232,080		149,140		687,728		619,913
Income tax expense (benefit)	(8,543)		(6,040)		(25,652)		(18,949)
Income Loss Net Of Income Taxes And Before Equity In Net Income Of Subsidiaries	223,537		143,100		662,076		600,964
Income (Loss) from Subsidiaries, Net of Tax	0		0		0		0
Net income	223,537		143,100		662,076		600,964
Amounts attributable to noncontrolling interests	5,411	[1]	0		5,065	[1]	0
Net income available to Arch	228,948		143,100		667,141		600,964
Preferred dividends	0		0		0		0
Net income available to Arch common shareholders	228,948		143,100		667,141		600,964
Comprehensive Income (Loss), Net of Tax, Attributable to Parent	104,501		220,630		691,968		351,576
Consolidating Adjustments and Eliminations
Revenues
Premiums Earned, Net	0		0		0		0
Net investment income	169		(6,689)		(17,228)		(19,950)
Net realized gains (losses)	0		0		0		0
Net impairment losses recognized in earnings	0		0		0		0
Other underwriting income	0		0		0		0
Equity in net income of investment funds accounted for using the equity method	0		0		0		0
Other income (loss)	0		0		0		0
Total revenues	169		(6,689)		(17,228)		(19,950)
Expenses
Losses and loss adjustment expenses	0		0		0		0
Acquisition expenses	0		0		0		0
Other operating expenses	0		0		0		0
Interest expense	169		(6,689)		(17,228)		(19,950)
Net foreign exchange (gains) losses	(20,787)		13,747		(18,725)		4,326
Total expenses	(20,618)		7,058		(35,953)		(15,624)
Income (loss) before income taxes	20,787		(13,747)		18,725		(4,326)
Income tax expense (benefit)	0		0		0		0
Income Loss Net Of Income Taxes And Before Equity In Net Income Of Subsidiaries	20,787		(13,747)		18,725		(4,326)
Income (Loss) from Subsidiaries, Net of Tax	(255,048)		(134,432)		(714,314)		(632,329)
Net income	(234,261)		(148,179)		(695,589)		(636,655)
Amounts attributable to noncontrolling interests	0	[1]	0		0	[1]	0
Net income available to Arch	(234,261)		(148,179)		(695,589)		(636,655)
Preferred dividends	0		0		0		0
Net income available to Arch common shareholders	(234,261)		(148,179)		(695,589)		(636,655)
Comprehensive Income (Loss), Net of Tax, Attributable to Parent	$ (93,887)		$ (239,074)		$ (721,760)		$ (347,191)

[1] See Note 4.

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Legal Proceedings

9 Months Ended

Sep. 30, 2014

Disclosure Legal Proceedings [Abstract]

Legal Proceedings

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 September 30, 2014, 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.

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Business Acquired - Narrative (Details) (USD $)	0 Months Ended	9 Months Ended	0 Months Ended			9 Months Ended				8 Months Ended
	Jan. 30, 2014 CMG Mortgage Insurance Company	Sep. 30, 2014 CMG Mortgage Insurance Company	Jan. 30, 2014 Stock Purchase Agreement (SPA) CMG Mortgage Insurance Company	Jan. 30, 2014 Asset Purchase Agreement (APA) CMG Mortgage Insurance Company	Jan. 30, 2014 Maximum CMG Mortgage Insurance Company	Sep. 30, 2014 Maximum CMG Mortgage Insurance Company	Sep. 30, 2014 Minimum CMG Mortgage Insurance Company	Sep. 30, 2014 New mortgage insurance business (post closing) CMG Mortgage Insurance Company	Sep. 30, 2014 Contingent consideration liability CMG Mortgage Insurance Company	Sep. 30, 2014 Net intangible assets acquired
Business Acquisition [Line Items]
Amortization of Intangible Assets										$ 15,000,000
Percentage of voting interests acquired	100.00%
Quota share agreement percentage		100.00%						20.00%
Quota share reinsurance agreement limit								25,000,000,000
Cash paid	245,157,000		160,600,000	84,600,000
Percentage of book value			80.00%		150.00%
Contingent consideration, upper bound		136,900,000
Discount rate, percentage	15.00%
Extension period						3 years	1 year
Contingent consideration liability	41,762,000								58,661,000
Goodwill	13,852,000
Goodwill, deferred tax asset		$ 48,000,000

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Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2014

Accounting Policies [Abstract]

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”) and include the accounts of the Company and Watford. All significant intercompany transactions and balances have been eliminated in consolidation.

Use of estimates

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 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.

Premium revenues

Insurance.Insurance premiums written are generally recorded at the policy inception and are primarily earned on a pro rata basis over the terms of the policies for all products, usually 12 months. Premiums written include estimates in the Company’s programs, specialty lines, lenders products business and for participation in involuntary pools. Such premium estimates are derived from multiple sources which include the historical experience of the underlying business, similar business and available industry information. Unearned premium reserves represent the portion of premiums written that relates to the unexpired terms of in-force insurance policies.

Reinsurance. Reinsurance premiums written include amounts reported by brokers and ceding companies, supplemented by the Company’s own estimates of premiums where reports have not been received. The determination of premium estimates requires a review of the Company’s experience with the ceding companies, familiarity with each market, the timing of the reported information, an analysis and understanding of the characteristics of each line of business, and management’s judgment of the impact of various factors, including premium or loss trends, on the volume of business written and ceded to the Company. On an ongoing basis, the Company’s underwriters review the amounts reported by these third parties for reasonableness based on their experience and knowledge of the subject class of business, taking into account the Company’s historical experience with the brokers or ceding companies. In addition, reinsurance contracts under which the Company assumes business generally contain specific provisions which allow the Company to perform audits of the ceding company to ensure compliance with the terms and conditions of the contract, including accurate and timely reporting of information. Based on a review of all available information, management establishes premium estimates where reports have not been received. Premium estimates are updated when new information is received and differences between such estimates and actual amounts are recorded in the period in which estimates are changed or the actual amounts are determined.

Reinsurance premiums written are recorded based on the type of contracts the Company writes. Premiums on the Company’s excess of loss and pro rata reinsurance contracts are estimated when the business is underwritten. For excess of loss contracts, premiums are recorded as written based on the terms of the contract. Estimates of premiums written under pro rata contracts are recorded in the period in which the underlying risks are expected to incept and are based on information provided by the brokers and the ceding companies. For multi-year reinsurance treaties which are payable in annual installments, generally, only the initial annual installment is included as premiums written at policy inception due to the ability of the reinsured to commute or cancel coverage during the term of the policy. The remaining annual installments are included as premiums written at each successive anniversary date within the multi-year term.

Reinstatement premiums for the Company’s insurance and reinsurance operations are recognized at the time a loss event occurs, where coverage limits for the remaining life of the contract are reinstated under pre-defined contract terms. Reinstatement premiums, if obligatory, are fully earned when recognized. The accrual of reinstatement premiums is based on an estimate of losses and loss adjustment expenses, which reflects management’s judgment. Premium estimates are reviewed by management at least quarterly. Such review includes a comparison of actual reported premiums to expected ultimate premiums along with a review of the aging and collection of premium estimates. Based on management’s review, the appropriateness of the premium estimates is evaluated, and any adjustment to these estimates is recorded in the period in which it becomes known. Adjustments to premium estimates could be material and such adjustments could directly and significantly impact earnings favorably or unfavorably in the period they are determined because the estimated premium may be fully or substantially earned. A significant portion of amounts included as premiums receivable, which represent estimated premiums written, net of commissions, are not currently due based on the terms of the underlying contracts.

Reinsurance premiums written, irrespective of the class of business, are generally earned on a pro rata basis over the terms of the underlying policies or reinsurance contracts. Contracts and policies written on a “losses occurring” basis cover claims that may occur during the term of the contract or policy, which is typically 12 months. Accordingly, the premium is earned evenly over the term. Contracts which are written on a “risks attaching” basis cover claims which attach to the underlying insurance policies written during the terms of such contracts. Premiums earned on such contracts usually extend beyond the original term of the reinsurance contract, typically resulting in recognition of premiums earned over a 24-month period. Certain of the Company’s reinsurance contracts include provisions that adjust premiums or acquisition expenses based upon the experience under the contracts. Premiums written and earned, as well as related acquisition expenses, are recorded based upon the projected experience under such contracts.

The Company also writes certain reinsurance business that is intended to provide insurers with risk management solutions that complement traditional reinsurance. Under these contracts, the Company assumes a measured amount of insurance risk in exchange for an anticipated margin, which is typically lower than on traditional reinsurance contracts. The terms and conditions of these contracts may include additional or return premiums based on loss experience, loss corridors, sublimits and caps. Examples of such business include aggregate stop-loss coverages, financial quota share coverages and multi- year retrospectively rated excess of loss coverages. If these contracts are deemed to transfer risk, they are accounted for as reinsurance.

Mortgage. Mortgage guaranty insurance policies are contracts that are generally non-cancelable by the insurer, are renewable at a fixed price, and provide for payment of premiums on a monthly, annual or single basis. Upon renewal, the Company is not able to re-underwrite or re-price its policies. Consistent with industry accounting practices, premiums written on a monthly basis are earned as coverage is provided. Premiums written on an annual basis are amortized on a monthly pro rata basis over the year of coverage. Primary mortgage insurance premiums written on policies covering more than one year are referred to as single premiums. A portion of the revenue from single premiums is recognized in premiums earned in the current period, and the remaining portion is deferred as unearned premiums and earned over the estimated expiration of risk of the policy. If single premium policies related to insured loans are canceled due to repayment by the borrower and the policy is a non-refundable product, the remaining unearned premium related to each canceled policy is recognized as earned premium upon notification of the cancellation.

Unearned premiums represent the portion of premiums written that is applicable to the estimated unexpired risk of insured loans. A portion of premium payments may be refundable if the insured cancels coverage, which generally occurs when the loan is repaid, the loan amortizes to a sufficiently low amount to trigger a lender permitted or legally required cancellation, or the value of the property has increased sufficiently in accordance with the terms of the contract. Premium refunds reduce premiums earned in the consolidated statements of operations.

Deferred acquisition costs

Acquisition Costs.Acquisition expenses and other expenses related to the Company’s underwriting operations that vary with, and are directly related to, the successful acquisition or renewal of business are deferred and amortized based on the type of contract. For property and casualty insurance and reinsurance contracts, deferred acquisition costs are amortized over the period in which the related premiums are earned. Consistent with mortgage insurance industry accounting practice, amortization of acquisition costs related to the mortgage insurance contracts for each underwriting year’s book of business is charged against revenue in proportion to estimated gross profits. Estimated gross profits are comprised of earned premiums and losses and loss adjustment expenses. For each underwriting year, the Company estimates the rate of amortization to reflect actual experience and any changes to persistency or loss development.

Acquisition expenses, net of ceding commissions received from reinsurers, consist principally of commissions and premium taxes paid to obtain the Company’s business. Other operating expenses also include expenses that vary with, and are directly related to, the acquisition of business. Deferred acquisition costs are carried at their estimated realizable value and take into account anticipated losses and loss adjustment expenses, based on historical and current experience, and anticipated investment income. A premium deficiency occurs if the sum of anticipated losses and loss adjustment expenses, unamortized acquisition costs and maintenance costs exceed unearned premiums (including expected future premiums) and anticipated investment income. A premium deficiency is recorded by charging any unamortized acquisition costs to expense to the extent required in order to eliminate the deficiency. If the premium deficiency exceeds unamortized acquisition costs then a liability is accrued for the excess deficiency.

Reserve for losses and loss adjustment expenses

Insurance and Reinsurance. The reserve for losses and loss adjustment expenses consists of estimates of unpaid reported losses and loss adjustment expenses and estimates for losses incurred but not reported. The reserve for unpaid reported losses and loss adjustment expenses, established by management based on reports from ceding companies and claims from insureds, excludes estimates of amounts due from insureds related to losses under high deductible policies, and represents the estimated ultimate cost of events or conditions that have been reported to or specifically identified by the Company. Such reserves are supplemented by management’s estimates of reserves for losses incurred for which reports or claims have not been received. The Company’s reserves are based on a combination of reserving methods, incorporating both Company and industry loss development patterns. The Company selects the initial expected loss and loss adjustment expense ratios based on information derived by its underwriters and actuaries during the initial pricing of the business, supplemented by industry data where appropriate. Such ratios consider, among other things, rate changes and changes in terms and conditions that have been observed in the market. These estimates are reviewed regularly and, as experience develops and new information becomes known, the reserves are adjusted as necessary. Such adjustments, if any, are reflected in income in the period in which they are determined. As actual loss information has been reported, the Company has developed its own loss experience and its reserving methods include other actuarial techniques. Over time, such techniques have been given further weight in its reserving process based on the continuing maturation of the Company’s reserves. Inherent in the estimates of ultimate losses and loss adjustment expenses are expected trends in claims severity and frequency and other factors which may vary significantly as claims are settled. Accordingly, ultimate losses and loss adjustment expenses may differ materially from the amounts recorded in the accompanying consolidated financial statements. Losses and loss adjustment expenses are recorded on an undiscounted basis, except for excess workers’ compensation and employers’ liability business written by the Company’s insurance operations.

Mortgage. The reserves for mortgage guaranty insurance losses and loss adjustment expenses are the estimated claim settlement costs on notices of default that have been received by the Company, as well as loan defaults that have been incurred but have not been reported by the lenders. Consistent with industry accounting practice, the Company does not establish loss reserves for future claims on insured loans that are not currently in default (defined as two consecutive missed payments). The Company establishes loss reserves on a case-by-case basis when insured loans are identified as currently in default using estimated claim rates and average claim sizes for each report year, net of any salvage recoverable. The Company also reserves for defaults that have occurred but have not yet been reported to the Company prior to the close of an accounting period. To determine this reserve, the Company estimates the number of defaults not yet reported using historical information regarding late reported delinquencies and applies estimated claim rates and claim sizes for the estimated defaults not yet reported.

The establishment of reserves across the Company’s segments is an inherently uncertain process, are necessarily based on estimates, and the ultimate net cost may vary from such estimates. The methods for making such estimates and for establishing the resulting liability are reviewed and updated using the most current information available. Any resulting adjustments, which may be material, are reflected in current operations

Goodwill and intangible assets

Goodwill represents the excess of the purchase price of an acquisition over the fair value of the net assets acquired and is assigned to the applicable reporting unit at acquisition. Goodwill is not amortized and is evaluated for impairment on an annual basis. Impairment tests may be performed more frequently if the facts and circumstances indicate a possible impairment. In performing impairment tests, the Company may first assess qualitative factors to determine whether it is more likely than not (that is, more than a 50% probability) that the fair value of a reporting unit exceeds its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in the accounting guidance.

Indefinite-lived intangible assets, such as insurance licenses, are not amortized and are evaluated for impairment similar to goodwill. Finite-lived intangible assets and liabilities include the value of insurance and reinsurance contracts, which are estimated based on the present value of future expected cash flows and amortized in ‘acquisition expenses’ in proportion to the estimated profits expected to be realized. Other finite-lived intangible assets or liabilities, including favorable or unfavorable contracts, are amortized in ‘other operating expenses’ over their useful lives. Finite-lived intangible assets and liabilities are periodically reviewed for indicators of impairment. An impairment is recognized when the carrying amount is not recoverable from its undiscounted cash flows and is measured as the difference between the carrying amount and fair value.

If goodwill or intangible assets are impaired, such assets are written down to their realizable values with the related expense recorded in the Company’s results of operations.

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Unaudited Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2014		Sep. 30, 2013
Operating Activities
Net income	$ 614,126		$ 548,241
Adjustments to reconcile net income to net cash provided by operating activities:
Net realized gains	(113,033)		(66,957)
Net impairment losses recognized in earnings	26,313		3,698
Equity in net income or loss of investment funds accounted for using the equity method and other income or loss	3,784		35,634
Share-based compensation	45,118		40,305
Changes in:
Reserve for losses and loss adjustment expenses, net of unpaid losses and loss adjustment expenses recoverable	94,255		(24,305)
Unearned premiums, net of prepaid reinsurance premiums	325,874		295,860
Premiums receivable	(279,766)		(160,091)
Deferred acquisition costs, net	(72,120)		(73,793)
Reinsurance balances payable	49,621		2,573
Other liabilities	117,889		(15,893)
Other items	(12,402)		41,776
Net Cash Provided By Operating Activities	799,659		627,048
Investing Activities
Purchases of fixed maturity investments	(22,030,862)		(12,436,587)
Purchases of equity securities	(366,578)		(438,255)
Purchases of other investments	(1,596,691)		(992,935)
Proceeds from the sale of fixed maturity investments	20,284,869		11,877,419
Proceeds from the sale of equity securities	305,034		373,000
Proceeds from the sale of other investments	1,030,901		813,596
Proceeds from redemptions and maturities of fixed maturity investments	636,729		595,503
Net sales (purchases) of short-term investments	678,388		(268,968)
Change in investment of securities lending collateral	(2,737)		2,508
Purchase of business, net of cash acquired	(235,578)	[1]	0	[1]
Purchases of furniture, equipment and other assets	(14,575)		(10,953)
Net Cash Used For Investing Activities	(1,311,100)		(485,672)
Financing Activities
Purchases of common shares under share repurchase program	(251,919)		(57,796)
Proceeds from common shares issued, net	3,248		(425)
Change in securities lending collateral	2,737		(2,508)
Third party investment in non-redeemable noncontrolling interests	796,903	[2]	0	[2]
Third party investment in redeemable noncontrolling interests	219,233	[2]	0	[2]
Dividends paid to redeemable noncontrolling interests	(9,632)	[2]	0	[2]
Other	6,559		5,679
Preferred dividends paid	(16,453)		(16,453)
Net Cash Provided By (Used For) Financing Activities	750,676		(71,503)
Effects of exchange rate changes on foreign currency cash	(9,566)		(4,773)
Increase in cash	229,669		65,100
Cash beginning of year	434,057		371,041
Cash end of period	$ 663,726		$ 436,141

[1] See Note 2.

[2] See Note 4.

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Unaudited Consolidated Balance Sheets (Parentheticals) (USD $) In Thousands, except Share data, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Fixed maturities available for sale, at amortized cost	$ 10,699,615	$ 9,564,634
Short-term investments available for sale, at amortized cost	754,641	1,477,584
Investment of funds received under securities lending agreements, at cost	100,680	97,943
Equity securities, at cost	513,196	433,275
Other investments, at cost	398,719	488,687
Investment in joint venture, at cost	$ 100,000	$ 100,000
Common shares, par value per share	$ 0.0033	$ 0.0033
Common shares issued (shares)	171,380,760	169,560,591
Common shares held in treasury (shares)	40,680,141	35,885,707

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2014

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Letter of Credit and Revolving Credit Facilities

As of September 30, 2014, the Company had a $300 million unsecured revolving loan and letter of credit facility and a $500 million secured letter of credit facility (the “Credit Agreement”). The Credit Agreement expires on June 30, 2019. In addition, the Company had access to secured letter of credit facilities of approximately $192.5 million as of September 30, 2014, which are available on a limited basis and for limited purposes (together with the secured portion of the Credit Agreement and these letter of credit facilities, the “LOC Facilities”). At September 30, 2014, the Company had $421.4 million in outstanding letters of credit under the LOC Facilities, which were secured by investments with a fair value of $480.9 million, and had $100.0 million of borrowings outstanding under the Credit Agreement which are due on June 30, 2019. The Company was in compliance with all covenants contained in the LOC Facilities at September 30, 2014. As of September 30, 2014, Watford had a $200 million line of credit facility that expires on May 19, 2015. At September 30, 2014, Watford had $3.4 million in outstanding letters of credit under that credit facility. Watford was in compliance with all covenants contained in its credit facility at September 30, 2014.

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 $941.9 million at September 30, 2014.

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Document and Entity Information	9 Months Ended
	Sep. 30, 2014	Oct. 31, 2014
Document and Entity Information [Abstract]
Entity Registrant Name	ARCH CAPITAL GROUP LTD.
Entity Central Index Key	0000947484
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Document Type	10-Q
Document Period End Date	Sep. 30, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q3
Amendment Flag	false
Entity Common Stock, Shares Outstanding		129,110,352

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Share Transactions

9 Months Ended

Sep. 30, 2014

Stockholders' Equity Note [Abstract]

Share Transactions

Share Transactions

Share Repurchases

The board of directors of ACGL has authorized the investment in ACGL’s common shares through a share repurchase program. Since the inception of the share repurchase program, ACGL has repurchased approximately 114.5 million common shares for an aggregate purchase price of $3.04 billion. For the 2014 third quarter and nine months ended September 30, 2014, ACGL repurchased 4,593,726 common shares for an aggregate purchase price of $251.9 million. During the 2013 third quarter and nine months ended September 30, 2013, ACGL repurchased 26,300 and 1,264,718 common shares, respectively, for an aggregate purchase price of $1.3 million and $57.8 million, respectively. At September 30, 2014, $460.2 million of share repurchases were available under the program. The timing and amount of the repurchase transactions under this program will depend on a variety of factors, including market conditions and corporate and regulatory considerations. See Note 16.

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Unaudited Consolidated Statements of Income (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended				9 Months Ended
	Sep. 30, 2014		Sep. 30, 2013		Sep. 30, 2014		Sep. 30, 2013
Revenues
Net premiums written	$ 959,539		$ 839,135		$ 2,996,457		$ 2,602,446
Change in unearned premiums	(55,888)		(44,135)		(325,874)		(295,860)
Net premiums earned	903,651		795,000		2,670,583		2,306,586
Net investment income	80,105		66,083		220,089		200,124
Net realized gains (losses)	18,515		(6,022)		92,356		64,970
Other-than-temporary impairment losses	(8,593)		(901)		(26,313)		(3,873)
Less investment impairments recognized in other comprehensive income, before taxes	0		173		0		175
Net impairment losses recognized in earnings	(8,593)		(728)		(26,313)		(3,698)
Other underwriting income	1,702		526		5,317		1,966
Equity in net income of investment funds accounted for using the equity method	4,966		5,665		17,459		30,429
Other income (loss)	(7,815)		624		(5,069)		2,702
Total revenues	992,531		861,148		2,974,422		2,603,079
Expenses
Losses and loss adjustment expenses	501,673		427,045		1,423,431		1,245,101
Acquisition expenses	163,547		147,313		482,047		406,582
Other operating expenses	149,480		118,070		451,629		365,661
Interest expense	4,152		5,937		32,890		17,687
Net foreign exchange (gains) losses	(56,031)		40,562		(47,174)		2,487
Total expenses	762,821		738,927		2,342,823		2,037,518
Income before income taxes	229,710		122,221		631,599		565,561
Income tax expense	(6,446)		(7,396)		(17,473)		(17,320)
Net income	223,264		114,825		614,126		548,241
Amounts attributable to noncontrolling interests	5,411	[1]	0	[1]	5,065	[1]	0	[1]
Net income available to Arch	228,675		114,825		619,191		548,241
Preferred dividends	(5,484)		(5,484)		(16,453)		(16,453)
Net income available to Arch common shareholders	$ 223,191		$ 109,341		$ 602,738		$ 531,788
Net income per common share
Basic (per share)	$ 1.69		$ 0.83		$ 4.56		$ 4.05
Diluted (per share)	$ 1.64		$ 0.80		$ 4.42		$ 3.92
Weighted average common shares and common share equivalents outstanding
Basic (shares)	131,945,962		131,495,296		132,151,824		131,262,309
Diluted (shares)	135,876,605		136,034,413		136,354,172		135,680,829

[1] See Note 4.

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Earnings Per Common Share

9 Months Ended

Sep. 30, 2014

Earnings Per Share [Abstract]

Earnings Per Common Share

Earnings Per Common Share

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

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2014			2013			2014			2013
Numerator:
Net income	$	223,264		$	114,825		$	614,126		$	548,241
Amounts attributable to noncontrolling interests	5,411			—			5,065			—
Net income available to Arch	228,675			114,825			619,191			548,241
Preferred dividends	(5,484		)	(5,484		)	(16,453		)	(16,453		)
Net income available to Arch common shareholders	$	223,191		$	109,341		$	602,738		$	531,788
Denominator:
Weighted average common shares outstanding — basic	131,945,962			131,495,296			132,151,824			131,262,309
Effect of dilutive common share equivalents:
Nonvested restricted shares	1,156,790			1,124,644			1,134,481			1,094,327
Stock options (1)	2,773,853			3,414,473			3,067,867			3,324,193
Weighted average common shares and common share equivalents outstanding — diluted	135,876,605			136,034,413			136,354,172			135,680,829
Earnings per common share:
Basic	$	1.69		$	0.83		$	4.56		$	4.05
Diluted	$	1.64		$	0.80		$	4.42		$	3.92

_________________________________________________

(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 2014 third quarter and 2013 third quarter, the number of stock options excluded were 1,355,087 and 387,249, respectively. For the nine months ended September 30, 2014 and 2013, the number of stock options excluded were 1,378,249 and 1,735,995, respectively.

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Variable Interest Entities and Noncontrolling Interests

9 Months Ended

Sep. 30, 2014

Noncontrolling Interest [Abstract]

Variable Interest Entity and Noncontrolling Interests

Variable Interest Entity and Noncontrolling Interests

Variable interest entity

A VIE refers to an entity that has characteristics such as (i) insufficient equity at risk to allow the entity to finance its activities without additional financial support or (ii) instances where the equity investors, as a group, do not have characteristics of a controlling financial interest. The primary beneficiary of a VIE is defined as the variable interest holder that is determined to have the controlling financial interest as a result of having both (i) the power to direct the activities of a VIE that most significantly impact the economic performance of the VIE and (ii) the obligation to absorb losses or right to receive benefits from the VIE that could potentially be significant to the VIE. If a company is determined to be the primary beneficiary, it is required to consolidate the VIE in its financial statements.

In March 2014, Watford raised approximately $1.1 billion of capital consisting of $907.3 million in common equity ($895.6 million net of issuance costs) and $226.6 million in preference equity ($219.2 million net of issuance costs and discount). The Company invested $100.0 million and acquired approximately 11% of Watford Holdings Ltd.’s common equity and a warrant to purchase additional common equity. Arch Underwriters Ltd. (“AUL”), a subsidiary of the Company, acts as Watford’s reinsurance manager, and Highbridge Principal Strategies, LLC (“Highbridge”), a subsidiary of JPMorgan Chase & Co., manages Watford’s investment assets, each under separate long term services agreements. John Rathgeber, previously Vice Chairman of Arch Worldwide Reinsurance Group, was named CEO of Watford. In addition, Marc Grandisson, Chairman and CEO of Arch Worldwide Reinsurance and Mortgage Groups, and Nicolas Papadopoulo, CEO Reinsurance Group, were appointed to the board of directors of Watford.

The Company concluded that Watford is a VIE due to both the reinsurance management services agreement with AUL and the investment management agreement with Highbridge. Both of these agreements provide for services for an extended period of time with limited termination rights by Watford. In addition, these agreements allow for both AUL and Highbridge to participate in the favorable results of Watford in the form of performance fees. To determine if the Company is the primary beneficiary of Watford, the Company concluded that the most significant activity of Watford pertains to the insurance activities arising from the reinsurance management services agreement, as these activities will ultimately generate the investable assets required by Highbridge to execute the investment strategy. In addition, the Company factored into its analysis qualitative aspects of the relationship with Watford that are indicative of power to direct the insurance activities. These aspects coupled with the Company’s board seats and a former executive of the Company serving as Watford’s CEO resulted in the Company concluding that it is the primary beneficiary of Watford. As such, the results of Watford are included in the Company’s consolidated financial statements.

The Company concluded that Watford represents a separate operating segment and provides the income statement and total investable assets, total assets and total liabilities of Watford within Note 6. Because Watford is an independent company, the assets of Watford can be used only to settle obligations of Watford and Watford is solely responsible for its own liabilities and commitments. The Company’s financial exposure to Watford is limited to its investment in Watford’s common shares and counterparty credit risk (mitigated by collateral) arising from the reinsurance transactions.

Non-redeemable noncontrolling interests

The Company accounts for the portion of Watford’s common equity attributable to third party investors in the shareholders’ equity section of its consolidated balance sheets. The noncontrolling ownership in Watford’s common shares was approximately 89% at September 30, 2014. The portion of Watford’s income or loss attributable to third party investors is recorded in the consolidated statements of income in ‘amounts attributable to noncontrolling interests.’ The following table sets forth activity in the non-redeemable noncontrolling interests:

	Three Months Ended September 30, 2014			Nine Months Ended September 30, 2014
Balance, beginning of period	$	792,340		$	—
Sale of shares to noncontrolling interests	—			796,903
Amounts attributable to noncontrolling interests	(10,320		)	(14,883		)
Balance, end of period	$	782,020		$	782,020

Redeemable noncontrolling interests

The Company accounts for redeemable noncontrolling interests in the mezzanine section of its consolidated balance sheets in accordance with applicable accounting guidance. Such redeemable noncontrolling interests represent the 9,065,200 cumulative redeemable preference shares (“Watford Preference Shares”) issued in late March 2014 with a par value of $0.01 per share and a liquidation preference of $25.00 per share. The Watford Preference Shares were issued at a discounted amount of $24.50 per share. Holders of the Watford Preference Shares will be entitled to receive, if declared by Watford’s board, quarterly cash dividends on the last day of March, June, September, and December. Dividends will accrue from the closing date to June 30, 2019 at a fixed rate of 8.5% per annum. From June 30, 2019 and subsequent, dividends will accrue based on a floating rate equal to the 3 month U.S. dollar LIBOR (with a 1% floor) plus a margin based on the difference between the fixed rate and the 5 year mid swap rate to the floating rate as set out on the IRSB18. The Watford Preference Shares may be redeemed by Watford on or after June 30, 2019 or at the option of the preferred shareholders at any time on or after June 30, 2034. Because the redemption features are not solely within the control of Watford, the Company accounts for the redeemable noncontrolling interests in the Watford Preference Shares in the mezzanine section of its consolidated balance sheets. Third party investors own 100% of the Watford Preference Shares at September 30, 2014. Preferred dividends, including the accretion of the discount and issuance costs, are included in ‘amounts attributable to noncontrolling interests’ in the Company’s consolidated statements of income.

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Subsequent Events (Notes)

9 Months Ended

Sep. 30, 2014

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

At September 30, 2014, $460.2 million of share repurchases were available under ACGL’s share repurchase program. From October 1 through October 29, 2014, the Company repurchased 1.6 million common shares for an aggregate purchase price of $89.2 million. On November 6, 2014, the board of directors of ACGL increased the aggregate purchase amount authorized under the share repurchase program to $1.0 billion. Repurchases under this authorization may be effected from time to time in open market or privately negotiated transactions through December 31, 2016. The timing and amount of the repurchase transactions under this authorization will depend on a variety of factors, including market conditions and corporate and regulatory considerations.

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Income Taxes

9 Months Ended

Sep. 30, 2014

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

ACGL is incorporated under the laws of Bermuda and, under current Bermuda law, is not obligated to pay any taxes in Bermuda based upon income or capital gains. The Company has received a written undertaking from the Minister of Finance in Bermuda under the Exempted Undertakings Tax Protection Act 1966 that, in the event that any legislation is enacted in Bermuda imposing any tax computed on profits, income, gain or appreciation on any capital asset, or any tax in the nature of estate duty or inheritance tax, such tax will not be applicable to ACGL or any of its operations until March 31, 2035. This undertaking does not, however, prevent the imposition of taxes on any person ordinarily resident in Bermuda or any company in respect of its ownership of real property or leasehold interests in Bermuda.

ACGL and its non-U.S. subsidiaries will be subject to U.S. federal income tax only to the extent that they derive U.S. source income that is subject to U.S. withholding tax or income that is effectively connected with the conduct of a trade or business within the U.S. and is not exempt from U.S. tax under an applicable income tax treaty with the U.S. ACGL and its non-U.S. subsidiaries will be subject to a withholding tax on dividends from U.S. investments and interest from certain U.S. payors (subject to reduction by any applicable income tax treaty). ACGL and its non-U.S. subsidiaries intend to conduct their operations in a manner that will not cause them to be treated as engaged in a trade or business in the United States and, therefore, will not be required to pay U.S. federal income taxes (other than U.S. excise taxes on insurance and reinsurance premium and withholding taxes on dividends and certain other U.S. source investment income). However, because there is uncertainty as to the activities which constitute being engaged in a trade or business within the United States, there can be no assurances that the U.S. Internal Revenue Service will not contend successfully that ACGL or its non-U.S. subsidiaries are engaged in a trade or business in the United States. If ACGL or any of its non-U.S. subsidiaries were subject to U.S. income tax, ACGL’s shareholders’ equity and earnings could be materially adversely affected. ACGL has subsidiaries and branches that operate in various jurisdictions around the world that are subject to tax in the jurisdictions in which they operate. The significant jurisdictions in which ACGL’s subsidiaries and branches are subject to tax are the United States, United Kingdom, Ireland, Canada, Switzerland and Denmark.

The Company’s income tax provision on income before income taxes resulted in an expense of 2.8% for the nine months ended September 30, 2014, compared to an expense of 3.1% for the 2013 period. These rates include the tax effect of unusual or infrequent items representing 0.1% and 0.2% of the Company’s effective tax rate for the nine months ended September 30, 2014 and the 2013 period, respectively. 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 $155.8 million at September 30, 2014, compared to $128.6 million at December 31, 2013. In addition, the Company paid$13.3 million in income taxes for the nine months ended September 30, 2014, while the Company paid$7.6 million for the 2013 period.

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Fair Value

9 Months Ended

Sep. 30, 2014

Fair Value Disclosures [Abstract]

Fair Value

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 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 including a review of deep dive reports on selected securities which indicate the use of observable inputs in the pricing process; (iv) comparing the fair value estimates to its 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) back-testing, which includes randomly selecting purchased or sold securities and comparing the executed prices to the fair value estimates from the pricing service. For a majority of investments, the Company obtained multiple quotes. 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 pricing services at September 30, 2014.

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 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. In addition, pricing vendors use model processes, such as an Option Adjusted Spread model, to develop prepayment and interest rate scenarios. The Option Adjusted Spread model is commonly used to estimate fair value for securities such as mortgage backed and asset backed securities. 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. Of the $14.87 billion of financial assets and liabilities measured at fair value at September 30, 2014, approximately $420.4 million, or 2.8%, were priced using non-binding broker-dealer quotes. Of the $13.37 billion of financial assets and liabilities measured at fair value at December 31, 2013, approximately $601.9 million, or 4.5%, were priced using non-binding broker-dealer quotes.

The Company reviews its securities measured at fair value and discusses the proper classification of such investments with investment advisers and others. No transfers were made in the periods presented. A discussion of the general classification of the Company’s financial instruments follows:

Fixed maturities. 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. Where the Company believes that quoted market prices are not available or that the market is not active, fair values are estimated by using quoted prices of securities with similar characteristics, pricing models or matrix pricing and are generally classified as Level 2 securities. The Company determined that Level 2 securities included corporate bonds, mortgage backed securities, municipal bonds, asset backed securities and non-U.S. government securities.

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. Other equity securities are included in Level 2 of the valuation hierarchy.

Other investments. The fair values for certain of the Company’s other investments are determined using net asset values (“NAV”) as advised by external fund managers. The NAV is based on the fund manager’s valuation of the underlying holdings in accordance with the fund’s governing documents. Periodically, the Company performs a number of monitoring procedures in order to assess the quality of the NAVs, including regular review and discussion of each fund’s performance, regular evaluation of fund performance against applicable benchmarks and the backtesting of the NAVs against audited and interim financial statements. Other investments with liquidity terms allowing the Company to substantially redeem its holdings in a short time frame at the applicable NAV are reflected in Level 2. Other investments with redemption restrictions that prevent the Company from redeeming in the near term are classified in Level 3 of the valuation hierarchy. Other investments also 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 as Level 2 securities.

Short-term investments. The Company determined that certain of its short-term investments held in highly liquid money market-type funds would be included in Level 1 as their fair values are based on quoted market prices in active markets. Other short-term investments are classified in Level 2 of the valuation hierarchy.

In securities lending transactions, the Company receives collateral in excess of the fair value of the fixed maturities and short-term investments pledged under securities lending agreements. For purposes of the following tables, the Company has excluded the collateral received and reinvested and included the fixed maturities and short-term investments pledged under securities lending agreements, at fair value.

Contingent consideration liability. The contingent consideration liability (included in ‘other liabilities’ in the consolidated balance sheets) resulted from the acquisition of the CMG Entities and is remeasured at fair value at each balance sheet date. Changes in fair value are recognized in ‘net realized gains (losses).’ To determine the fair value of the contingent consideration liability, the Company estimates future payments using an income approach based on modeled inputs which include a weighted average cost of capital. The Company determined that the contingent consideration liability would be included in Level 3 of the valuation hierarchy.

The following table presents the Company’s financial assets and liabilities measured at fair value by level at September 30, 2014:

			Fair Value Measurement Using:
	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 and fixed maturities pledged under securities lending agreements (1):
Corporate bonds	$	3,070,353	$	—	$	3,070,353	$	—
Mortgage backed securities	966,848		—		966,848		—
Municipal bonds	1,293,455		—		1,293,455		—
Commercial mortgage backed securities	1,232,092		—		1,232,092		—
U.S. government and government agencies	1,551,583		1,551,583		—		—
Non-U.S. government securities	1,001,947		—		1,001,947		—
Asset backed securities	1,724,651		—		1,724,651		—
Total	10,840,929		1,551,583		9,289,346		—
Equity securities	582,075		582,075		—		—
Other investments	431,833		—		328,750		103,083
Short-term investments	748,659		723,698		24,961		—
Fair value option:
Corporate bonds	452,275		—		452,275		—
Non-U.S. government bonds	70,494		—		70,494		—
Mortgage backed securities	17,919		—		17,919		—
Asset backed securities	25,066		—		25,066		—
Other investments	1,431,525		—		1,008,531		422,994
Short-term investments	205,716		198,077		7,639		—
Total	2,202,995		198,077		1,581,924		422,994
Total assets measured at fair value	$	14,806,491	$	3,055,433	$	11,224,981	$	526,077
Liabilities measured at fair value:
Contingent consideration liability	$	58,661	$	—	$	—	$	58,661
Total liabilities measured at fair value	$	58,661	$	—	$	—	$	58,661

_________________________________________________

(1) In securities lending transactions, the Company receives collateral in excess of the fair value of the fixed maturities and short-term investments pledged. For purposes of this table, the Company has excluded the collateral received and reinvested and included the fixed maturities and short-term investments pledged.

The following table presents the Company’s financial assets and liabilities measured at fair value by level at December 31, 2013:

			Fair Value Measurement Using:
	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 and fixed maturities pledged under securities lending agreements (1):
Corporate bonds	$	2,267,263	$	—	$	2,265,218	$	2,045
Mortgage backed securities	1,133,095		—		1,133,095		—
Municipal bonds	1,481,738		—		1,481,738		—
Commercial mortgage backed securities	1,074,497		—		1,074,497		—
U.S. government and government agencies	1,301,809		1,301,809		—		—
Non-U.S. government securities	1,085,861		—		1,085,861		—
Asset backed securities	1,332,594		—		1,332,594		—
Total	9,676,857		1,301,809		8,373,003		2,045
Equity securities	496,824		496,738		86		—
Other investments	498,310		—		327,890		170,420
Short-term investments	1,478,367		1,427,744		50,623		—
Fair value option:
Corporate bonds	334,065		—		334,065		—
Non-U.S. government bonds	73,156		—		73,156		—
Mortgage backed securities	41,033		—		41,033		—
Other investments	773,280		—		395,755		377,525
Total	1,221,534		—		844,009		377,525
Total assets measured at fair value	$	13,371,892	$	3,226,291	$	9,595,611	$	549,990

_________________________________________________

(1) In securities lending transactions, the Company receives collateral in excess of the fair value of the fixed maturities and short-term investments pledged. For purposes of this table, the Company has excluded the collateral received and reinvested and included the fixed maturities and short-term investments pledged.

The following tables present 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:

	Fair Value Measurements Using: Significant Unobservable Inputs (Level 3)
	Assets												Liabilities
s	Available-For-Sale						Fair Value Option
	Corporate Bonds			Other Investments			Other Investments			Total			Contingent Consideration Liability
Three Months Ended September 30, 2014
Balance at beginning of period	$	—		$	103,213		$	451,036		$	554,249		$	53,099
Total gains or (losses) (realized/unrealized)
Included in earnings (1)	—			(262		)	(3,224		)	(3,486		)	5,562
Included in other comprehensive income	—			132			—			132			—
Purchases, issuances, sales and settlements
Purchases	—			—			18,058			18,058			—
Issuances	—			—			—			—			—
Sales	—			—			—			—			—
Settlements	—			—			(42,876		)	(42,876		)	—
Transfers in and/or out of Level 3	—			—			—			—			—
Balance at end of period	$	—		$	103,083		$	422,994		$	526,077		$	58,661
Three Months Ended September 30, 2013
Balance at beginning of period	$	2,360		$	189,893		$	290,189		$	482,442		$	—
Total gains or (losses) (realized/unrealized)
Included in earnings (1)	—			—			8,731			8,731			—
Included in other comprehensive income	—			(5,239		)	—			(5,239		)	—
Purchases, issuances, sales and settlements
Purchases	—			20,000			63,348			83,348			—
Issuances	—			—			—			—			—
Sales	—			—			—			—			—
Settlements	(271		)	—			(3,424		)	(3,695		)	—
Transfers in and/or out of Level 3	—			—			—			—			—
Balance at end of period	$	2,089		$	204,654		$	358,844		$	565,587		$	—

_________________________________________________

(1) Gains or losses on corporate bonds were included in net realized gains (losses) while gains or losses on other investments were included in net realized gains (losses) or net investment income. Gains or losses on the contingent consideration liability were included in net realized gains (losses).

	Fair Value Measurements Using: Significant Unobservable Inputs (Level 3)
	Assets												Liabilities
s	Available-For-Sale						Fair Value Option
	Corporate Bonds			Other Investments			Other Investments			Total			Contingent Consideration Liability
Nine Months Ended September 30, 2014
Balance at beginning of period	$	2,045		$	170,420		$	377,525		$	549,990		$	—
Total gains or (losses) (realized/unrealized)
Included in earnings (1)	—			291			19,222			19,513			16,899
Included in other comprehensive income	—			(1,464		)	932			(532		)	—
Purchases, issuances, sales and settlements
Purchases	—			—			124,783			124,783			—
Issuances	—			—			—			—			41,762
Sales	(2,045		)	(66,164		)	—			(68,209		)	—
Settlements	—			—			(99,468		)	(99,468		)	—
Transfers in and/or out of Level 3	—			—			—			—			—
Balance at end of period	$	—		$	103,083		$	422,994		$	526,077		$	58,661
Nine Months Ended September 30, 2013
Balance at beginning of period	$	98,404		$	184,202		$	195,350		$	477,956		$	—
Total gains or (losses) (realized/unrealized)
Included in earnings (1)	4,679			4,762			7,029			16,470			—
Included in other comprehensive income	(3,051		)	632			—			(2,419		)	—
Purchases, issuances, sales and settlements
Purchases	—			25,000			223,918			248,918			—
Issuances	—			—			—			—			—
Sales	(96,655		)	—			—			(96,655		)	—
Settlements	(1,288		)	(9,942		)	(67,453		)	(78,683		)	—
Transfers in and/or out of Level 3	—			—			—			—			—
Balance at end of period	$	2,089		$	204,654		$	358,844		$	565,587		$	—

_________________________________________________

(1) Gains or losses on corporate bonds were included in net realized gains (losses) while gains or losses on other investments were included in net realized gains (losses) or net investment income. Gains or losses on the contingent consideration liability were included in net realized gains (losses).

The amount of total losses for the 2014 third quarter included in earnings attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2014 was $3.5 million, while the amount of total gains for the nine months ended September 30, 2014 included in earnings attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2014 was $14.3 million. The amount of total gains for the 2013 third quarter included in earnings attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2013 was $8.7 million, while the amount of total gains for the nine months ended September 30, 2013 included in earnings attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2013 was $13.2 million.

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 September 30, 2014, due to their respective short maturities. As these financial instruments are not actively traded, their respective fair values are classified within Level 2.

At September 30, 2014, the senior notes of ACGL were carried at their cost of $300.0 million and had a fair value of $414.8 million while the senior notes of Arch-U.S. were carried at their cost of $500.0 million and had a fair value of $543.1 million. 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 value of the senior notes is classified within Level 2.

XML

Share Transactions - Share repurchases (Details) (Common shares, USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Common shares
Class of Stock [Line Items]
Cumulative number of shares acquired since inception of share repurchase program			114,500,000
Aggregate purchase price of shares acquired since inception of share repurchase program			$ 3,040,000,000
Treasury stock, shares acquired (shares)	4,593,726	26,300	4,593,726	1,264,718
Treasury stock, value of shares acquired	251,900,000	1,300,000	251,900,000	57,800,000
Remaining authorized repurchase amount			$ 460,200,000

XML

Segment Information

9 Months Ended

Sep. 30, 2014

Segment Reporting [Abstract]

Segment Information

Segment Information

During the 2014 first quarter, to reflect activity during the period as described below, the Company changed its segment structure and added two new segments (mortgage and ‘other’). The Company now classifies its businesses into three underwriting segments — insurance, reinsurance and mortgage — and two other operating segments — ‘other’ and corporate (non-underwriting). 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 Company’s insurance, reinsurance and mortgage segments each have managers who are responsible for the overall profitability of their respective segments and who are directly accountable to the Company’s chief operating decision makers, the Chairman, President and Chief Executive Officer of ACGL and the Chief Financial Officer of ACGL. The chief operating decision makers do not assess performance, measure return on equity or make resource allocation decisions on a line of business basis. Management measures segment performance for its three 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 corporate (non-underwriting) segment results include net investment income, other income (loss), other expenses incurred by the Company, interest expense, net realized gains or losses, net impairment losses included in earnings, equity in net income (loss) of investment funds accounted for using the equity method, net foreign exchange gains or losses, income taxes and items related to the Company’s non-cumulative preferred shares. Such amounts exclude the results of the ‘other’ segment.

The ‘other’ segment includes the results of Watford (see Note 4). Watford has its own management and board of directors that is responsible for the overall profitability of the ‘other’ segment. For the ‘other’ segment, performance is measured based on net income or loss.

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 common shareholders:

	Three Months Ended
	September 30, 2014
	Insurance			Reinsurance			Mortgage			Sub-Total			Other			Total
Gross premiums written (1)	$	726,683		$	345,747		$	66,389		$	1,138,392		$	103,483		$	1,159,907
Premiums ceded	(187,689		)	(83,502		)	(7,904		)	(278,668		)	(3,668		)	(200,368		)
Net premiums written	538,994			262,245			58,485			859,724			99,815			959,539
Change in unearned premiums	(19,607		)	34,303			(5,539		)	9,157			(65,045		)	(55,888		)
Net premiums earned	519,387			296,548			52,946			868,881			34,770			903,651
Other underwriting income	499			215			988			1,702			—			1,702
Losses and loss adjustment expenses	(338,319		)	(123,784		)	(15,987		)	(478,090		)	(23,583		)	(501,673		)
Acquisition expenses, net	(81,775		)	(60,205		)	(11,958		)	(153,938		)	(9,609		)	(163,547		)
Other operating expenses	(83,138		)	(36,337		)	(17,913		)	(137,388		)	(1,658		)	(139,046		)
Underwriting income (loss)	$	16,654		$	76,437		$	8,076		101,167			(80		)	101,087
Net investment income										72,239			7,866			80,105
Net realized gains (losses)										31,411			(12,896		)	18,515
Net impairment losses recognized in earnings										(8,593		)	—			(8,593		)
Equity in net income of investment funds accounted for using the equity method										4,966			—			4,966
Other income (loss)										(7,815		)	—			(7,815		)
Other expenses										(10,434		)	—			(10,434		)
Interest expense										(4,152		)	—			(4,152		)
Net foreign exchange gains (losses)										57,611			(1,580		)	56,031
Income before income taxes										236,400			(6,690		)	229,710
Income tax expense										(6,446		)	—			(6,446		)
Net income										229,954			(6,690		)	223,264
Dividends attributable to redeemable noncontrolling interests										—			(4,909		)	(4,909		)
Amounts attributable to noncontrolling interests										—			10,320			10,320
Net income available to Arch										229,954			(1,279		)	228,675
Preferred dividends										(5,484		)	—			(5,484		)
Net income available to Arch common shareholders										$	224,470		$	(1,279	)	$	223,191
Underwriting Ratios
Loss ratio	65.1		%	41.7		%	30.2		%	55.0		%	67.8		%	55.5		%
Acquisition expense ratio	15.7		%	20.3		%	22.6		%	17.7		%	27.6		%	18.1		%
Other operating expense ratio	16.0		%	12.3		%	33.8		%	15.8		%	4.8		%	15.4		%
Combined ratio	96.8		%	74.3		%	86.6		%	88.5		%	100.2		%	89.0		%
Goodwill and intangible assets	$	24,024		$	3,939		$	83,565		$	111,528		$	—		$	111,528
Total investable assets										$	14,584,727		$	1,124,048		$	15,708,775
Total assets										21,207,667			1,403,018			22,610,685
Total liabilities										15,223,488			304,712			15,528,200

_________________________________________________

(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.

	Three Months Ended
	September 30, 2013
	Insurance			Reinsurance			Mortgage			Sub-Total			Other			Total
Gross premiums written (1)	$	682,839		$	330,458		$	24,633		$	1,036,987		$	—		$	1,036,987
Premiums ceded	(180,868		)	(17,927		)	—			(197,852		)	—			(197,852		)
Net premiums written	501,971			312,531			24,633			839,135			—			839,135
Change in unearned premiums	(22,842		)	(9,433		)	(11,860		)	(44,135		)	—			(44,135		)
Net premiums earned	479,129			303,098			12,773			795,000			—			795,000
Other underwriting income	545			(19		)	—			526			—			526
Losses and loss adjustment expenses	(305,921		)	(119,107		)	(2,017		)	(427,045		)	—			(427,045		)
Acquisition expenses, net	(82,799		)	(61,063		)	(3,451		)	(147,313		)	—			(147,313		)
Other operating expenses	(75,734		)	(32,108		)	(2,334		)	(110,176		)	—			(110,176		)
Underwriting income	$	15,220		$	90,801		$	4,971		110,992			—			110,992
Net investment income										66,083			—			66,083
Net realized losses										(6,022		)	—			(6,022		)
Net impairment losses recognized in earnings										(728		)	—			(728		)
Equity in net income of investment funds accounted for using the equity method										5,665			—			5,665
Other income (loss)										624			—			624
Other expenses										(7,894		)	—			(7,894		)
Interest expense										(5,937		)	—			(5,937		)
Net foreign exchange losses										(40,562		)	—			(40,562		)
Income before income taxes										122,221			—			122,221
Income tax expense										(7,396		)	—			(7,396		)
Net income										114,825			—			114,825
Dividends attributable to redeemable noncontrolling interests										—			—			—
Amounts attributable to noncontrolling interests										—			—			—
Net income available to Arch										114,825			—			114,825
Preferred dividends										(5,484		)	—			(5,484		)
Net income available to Arch common shareholders										$	109,341		$	—		$	109,341
Underwriting Ratios
Loss ratio	63.8		%	39.3		%	15.8		%	53.7		%	—		%	53.7		%
Acquisition expense ratio	17.3		%	20.1		%	27.0		%	18.5		%	—		%	18.5		%
Other operating expense ratio	15.8		%	10.6		%	18.3		%	13.9		%	—		%	13.9		%
Combined ratio	96.9		%	70.0		%	61.1		%	86.1		%	—		%	86.1		%
Goodwill and intangible assets	$	20,653		$	8,307		$	—		$	28,960		$	—		$	28,960
Total investable assets										$	13,282,560		$	—		$	13,282,560
Total assets										18,930,823			—			18,930,823
Total liabilities										13,487,538			—			13,487,538

_________________________________________________

(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.

	Nine Months Ended
	September 30, 2014
	Insurance			Reinsurance			Mortgage			Sub-Total			Other			Total
Gross premiums written (1)	$	2,309,560		$	1,212,641		$	169,772		$	3,690,462		$	190,239		$	3,726,804
Premiums ceded	(646,082		)	(215,623		)	(17,622		)	(877,816		)	(6,428		)	(730,347		)
Net premiums written	1,663,478			997,018			152,150			2,812,646			183,811			2,996,457
Change in unearned premiums	(158,878		)	(23,495		)	(9,606		)	(191,979		)	(133,895		)	(325,874		)
Net premiums earned	1,504,600			973,523			142,544			2,620,667			49,916			2,670,583
Other underwriting income	1,513			834			2,970			5,317			—			5,317
Losses and loss adjustment expenses	(936,615		)	(413,745		)	(39,938		)	(1,390,298		)	(33,133		)	(1,423,431		)
Acquisition expenses, net	(235,156		)	(199,673		)	(32,593		)	(467,422		)	(14,625		)	(482,047		)
Other operating expenses	(250,111		)	(110,198		)	(48,077		)	(408,386		)	(4,402		)	(412,788		)
Underwriting income (loss)	$	84,231		$	250,741		$	24,906		359,878			(2,244		)	357,634
Net investment income										211,690			8,399			220,089
Net realized gains (losses)										102,074			(9,718		)	92,356
Net impairment losses recognized in earnings										(26,313		)	—			(26,313		)
Equity in net income of investment funds accounted for using the equity method										17,459			—			17,459
Other income (loss)										(5,069		)	—			(5,069		)
Other expenses										(36,512		)	(2,329		)	(38,841		)
Interest expense										(32,890		)	—			(32,890		)
Net foreign exchange gains (losses)										48,191			(1,017		)	47,174
Income before income taxes										638,508			(6,909		)	631,599
Income tax expense										(17,473		)	—			(17,473		)
Net income (loss)										621,035			(6,909		)	614,126
Dividends attributable to redeemable noncontrolling interests										—			(9,818		)	(9,818		)
Amounts attributable to noncontrolling interests										—			14,883			14,883
Net income available to Arch										621,035			(1,844		)	619,191
Preferred dividends										(16,453		)	—			(16,453		)
Net income available to Arch common shareholders										$	604,582		$	(1,844	)	$	602,738
Underwriting Ratios
Loss ratio	62.3		%	42.5		%	28.0		%	53.1		%	66.4		%	53.3		%
Acquisition expense ratio	15.6		%	20.5		%	22.9		%	17.8		%	29.3		%	18.1		%
Other operating expense ratio	16.6		%	11.3		%	33.7		%	15.6		%	8.8		%	15.5		%
Combined ratio	94.5		%	74.3		%	84.6		%	86.5		%	104.5		%	86.9		%

_________________________________________________

(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.

	Nine Months Ended
	September 30, 2013
	Insurance			Reinsurance			Mortgage			Sub-Total			Other			Total
Gross premiums written (1)	$	2,075,560		$	1,099,803		$	69,135		$	3,241,424		$	—		$	3,241,424
Premiums ceded	(567,471		)	(74,581		)	—			(638,978		)	—			(638,978		)
Net premiums written	1,508,089			1,025,222			69,135			2,602,446			—			2,602,446
Change in unearned premiums	(125,339		)	(138,479		)	(32,042		)	(295,860		)	—			(295,860		)
Net premiums earned	1,382,750			886,743			37,093			2,306,586			—			2,306,586
Other underwriting income	1,599			367			—			1,966			—			1,966
Losses and loss adjustment expenses	(880,580		)	(358,247		)	(6,274		)	(1,245,101		)	—			(1,245,101		)
Acquisition expenses, net	(227,806		)	(167,497		)	(11,279		)	(406,582		)	—			(406,582		)
Other operating expenses	(232,216		)	(96,207		)	(5,027		)	(333,450		)	—			(333,450		)
Underwriting income	$	43,747		$	265,159		$	14,513		323,419			—			323,419
Net investment income										200,124			—			200,124
Net realized gains										64,970			—			64,970
Net impairment losses recognized in earnings										(3,698		)	—			(3,698		)
Equity in net income of investment funds accounted for using the equity method										30,429			—			30,429
Other income (loss)										2,702			—			2,702
Other expenses										(32,211		)	—			(32,211		)
Interest expense										(17,687		)	—			(17,687		)
Net foreign exchange losses										(2,487		)	—			(2,487		)
Income before income taxes										565,561			—			565,561
Income tax expense										(17,320		)	—			(17,320		)
Net income										548,241			—			548,241
Dividends attributable to redeemable noncontrolling interests										—			—			—
Amounts attributable to noncontrolling interests										—			—			—
Net income available to Arch										548,241			—			548,241
Preferred dividends										(16,453		)	—			(16,453		)
Net income available to Arch common shareholders										$	531,788		$	—		$	531,788
Underwriting Ratios
Loss ratio	63.7		%	40.4		%	16.9		%	54.0		%	—		%	54.0		%
Acquisition expense ratio	16.5		%	18.9		%	30.4		%	17.6		%	—		%	17.6		%
Other operating expense ratio	16.8		%	10.8		%	13.6		%	14.5		%	—		%	14.5		%
Combined ratio	97.0		%	70.1		%	60.9		%	86.1		%	—		%	86.1		%

_________________________________________________

(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.

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Investment Information

9 Months Ended

Sep. 30, 2014

Disclosure Investment Information [Abstract]

Investment Information

Investment Information

At September 30, 2014, total investable assets of $15.71 billion included $14.58 billion managed by the Company and $1.12 billion attributable to Watford.

Available For Sale Investments

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

	Fair Value		Gross Unrealized Gains		Gross Unrealized Losses			Cost or Amortized Cost		OTTI Unrealized Losses (2)
September 30, 2014
Fixed maturities and fixed maturities pledged under securities lending agreements (1):
Corporate bonds	$	3,070,353	$	29,747	$	(30,089	)	$	3,070,695	$	—
Mortgage backed securities	966,848		18,567		(8,349		)	956,630		(3,600		)
Municipal bonds	1,293,455		31,860		(971		)	1,262,566		—
Commercial mortgage backed securities	1,232,092		9,355		(5,976		)	1,228,713		—
U.S. government and government agencies	1,551,583		6,433		(2,533		)	1,547,683		—
Non-U.S. government securities	1,001,947		11,808		(27,117		)	1,017,256		—
Asset backed securities	1,724,651		6,707		(7,175		)	1,725,119		(22		)
Total	10,840,929		114,477		(82,210		)	10,808,662		(3,622		)
Equity securities	582,075		78,988		(10,109		)	513,196		—
Other investments	431,833		33,114		—			398,719		—
Short-term investments	748,659		407		(6,387		)	754,639		—
Total	$	12,603,496	$	226,986	$	(98,706	)	$	12,475,216	$	(3,622	)
December 31, 2013
Fixed maturities and fixed maturities pledged under securities lending agreements (1):
Corporate bonds	$	2,267,263	$	35,289	$	(35,537	)	$	2,267,511	$	(16	)
Mortgage backed securities	1,133,095		16,270		(22,209		)	1,139,034		(9,269		)
Municipal bonds	1,481,738		29,378		(9,730		)	1,462,090		(17		)
Commercial mortgage backed securities	1,074,497		13,972		(15,224		)	1,075,749		(199		)
U.S. government and government agencies	1,301,809		3,779		(11,242		)	1,309,272		(19		)
Non-U.S. government securities	1,085,861		14,729		(19,363		)	1,090,495		—
Asset backed securities	1,332,594		20,033		(13,795		)	1,326,356		(3,422		)
Total	9,676,857		133,450		(127,100		)	9,670,507		(12,942		)
Equity securities	496,824		69,487		(5,938		)	433,275		—
Other investments	498,310		28,082		(18,459		)	488,687		—
Short-term investments	1,478,367		1,654		(871		)	1,477,584		—
Total	$	12,150,358	$	232,673	$	(152,368	)	$	12,070,053	$	(12,942	)

_________________________________________________

(1) In securities lending transactions, the Company receives collateral in excess of the fair value of the fixed maturities and short-term investments pledged. For purposes of this table, the Company has excluded the collateral received and reinvested and included the fixed maturities and short-term investments pledged. See “—Securities Lending Agreements.”

(2) Represents the total other-than-temporary impairments (“OTTI”) recognized in accumulated other comprehensive income (“AOCI”). It does not include the change in fair value subsequent to the impairment measurement date. At September 30, 2014, the net unrealized gain related to securities for which a non-credit OTTI was recognized in AOCI was $2.1 million, compared to a net unrealized gain of $6.0 million at December 31, 2013.

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
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
September 30, 2014
Fixed maturities and fixed maturities pledged under securities lending agreements (1):
Corporate bonds	$	1,549,643	$	(22,058	)	$	193,803	$	(8,031	)	$	1,743,446	$	(30,089	)
Mortgage backed securities	360,510		(2,809		)	124,796		(5,540		)	485,306		(8,349		)
Municipal bonds	108,444		(470		)	21,390		(501		)	129,834		(971		)
Commercial mortgage backed securities	508,131		(2,769		)	94,948		(3,207		)	603,079		(5,976		)
U.S. government and government agencies	576,459		(2,385		)	3,430		(148		)	579,889		(2,533		)
Non-U.S. government securities	538,957		(22,925		)	49,200		(4,192		)	588,157		(27,117		)
Asset backed securities	802,765		(3,253		)	222,099		(3,922		)	1,024,864		(7,175		)
Total	4,444,909		(56,669		)	709,666		(25,541		)	5,154,575		(82,210		)
Equity securities	187,003		(10,087		)	269		(22		)	187,272		(10,109		)
Other investments	—		—			—		—			—		—
Short-term investments	141,056		(6,387		)	—		—			141,056		(6,387		)
Total	$	4,772,968	$	(73,143	)	$	709,935	$	(25,563	)	$	5,482,903	$	(98,706	)
December 31, 2013
Fixed maturities and fixed maturities pledged under securities lending agreements (1):
Corporate bonds	$	1,183,625	$	(32,837	)	$	46,673	$	(2,700	)	$	1,230,298	$	(35,537	)
Mortgage backed securities	778,693		(20,253		)	43,634		(1,956		)	822,327		(22,209		)
Municipal bonds	589,009		(9,422		)	6,092		(308		)	595,101		(9,730		)
Commercial mortgage backed securities	677,617		(15,110		)	1,612		(114		)	679,229		(15,224		)
U.S. government and government agencies	1,144,809		(11,242		)	—		—			1,144,809		(11,242		)
Non-U.S. government securities	821,506		(15,776		)	24,334		(3,587		)	845,840		(19,363		)
Asset backed securities	692,362		(10,431		)	88,629		(3,364		)	780,991		(13,795		)
Total	5,887,621		(115,071		)	210,974		(12,029		)	6,098,595		(127,100		)
Equity securities	76,563		(5,938		)	—		—			76,563		(5,938		)
Other investments	165,891		(15,775		)	47,316		(2,684		)	213,207		(18,459		)
Short-term investments	28,170		(871		)	—		—			28,170		(871		)
Total	$	6,158,245	$	(137,655	)	$	258,290	$	(14,713	)	$	6,416,535	$	(152,368	)

_________________________________________________

(1) In securities lending transactions, the Company receives collateral in excess of the fair value of the fixed maturities and short-term investments pledged. For purposes of this table, the Company has excluded the collateral received and reinvested and included the fixed maturities and short-term investments pledged. See “—Securities Lending Agreements.”

At September 30, 2014, on a lot level basis, approximately 2,090 security lots out of a total of approximately 4,920 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 $2.9 million. At December 31, 2013, on a lot level basis, approximately 2,080 security lots out of a total of approximately 4,400 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 $3.5 million.

The contractual maturities of the Company’s fixed maturities and fixed maturities pledged under securities lending agreements 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.

	September 30, 2014				December 31, 2013
Maturity	Fair Value		Amortized Cost		Fair Value		Amortized Cost
Due in one year or less	$	253,946	$	250,917	$	235,330	$	232,652
Due after one year through five years	4,184,904		4,178,652		3,738,500		3,718,920
Due after five years through 10 years	2,213,584		2,207,108		1,966,536		1,979,510
Due after 10 years	264,904		261,523		196,305		198,286
	6,917,338		6,898,200		6,136,671		6,129,368
Mortgage backed securities	966,848		956,630		1,133,095		1,139,034
Commercial mortgage backed securities	1,232,092		1,228,713		1,074,497		1,075,749
Asset backed securities	1,724,651		1,725,119		1,332,594		1,326,356
Total	$	10,840,929	$	10,808,662	$	9,676,857	$	9,670,507

Securities Lending Agreements

The Company operates a securities lending program under which certain of its fixed income portfolio securities are loaned to third parties, primarily major brokerage firms, for short periods of time through a lending agent. The fair value and amortized cost of fixed maturities and short-term investments pledged under securities lending agreements were $107.5 million and $109.0 million, respectively, at September 30, 2014, compared to $105.1 million and $105.9 million, respectively, at December 31, 2013. The fair value of the portfolio of collateral backing the Company’s securities lending program was $104.3 million at September 30, 2014, compared to $100.6 million at December 31, 2013. Such amounts included approximately $5.7 million of sub-prime securities at September 30, 2014, compared to $6.3 million at December 31, 2013. The Company maintains legal control over the securities it lends, retains the earnings and cash flows associated with the loaned securities and receives a fee from the borrower for the temporary use of the securities. An indemnification agreement with the lending agent protects the Company in the event a borrower becomes insolvent or fails to return any of the securities on loan to the Company. 

Other Investments

The following table summarizes the Company’s other investments, including available for sale and fair value option components:

	September 30, 2014		December 31, 2013
Available for sale:
Asian and emerging markets	$	275,191	$	331,984
Investment grade fixed income	156,642		159,115
Other	—		7,211
Total available for sale	431,833		498,310
Fair value option:
Term loan investments (par value: $1,013,196 and $494,502)	1,001,771		512,076
Asian and emerging markets	25,249		14,054
Investment grade fixed income	76,606		75,062
Other (1)	327,899		172,088
Total fair value option	1,431,525		773,280
Total	$	1,863,358	$	1,271,590

_________________________________________________

(1) Includes fund investments with strategies in mortgage servicing rights, transportation and infrastructure assets and other.

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.

Fair Value Option

The following table summarizes the Company’s assets and liabilities which are accounted for using the fair value option:

	September 30, 2014		December 31, 2013
Fixed maturities	$	565,754	$	448,254
Other investments	1,431,525		773,280
Short-term investments	205,716		—
Investments accounted for using the fair value option	$	2,202,995	$	1,221,534

Net Investment Income

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

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2014			2013			2014			2013
Fixed maturities	$	66,052		$	62,447		$	194,370		$	186,457
Term loan investments	14,065			5,296			26,642			15,539
Equity securities (dividends)	2,779			2,241			8,971			6,828
Short-term investments	905			417			1,417			1,173
Other (1)	7,914			3,753			21,733			14,786
Gross investment income	91,715			74,154			253,133			224,783
Investment expenses	(11,610		)	(8,071		)	(33,044		)	(24,659		)
Net investment income	$	80,105		$	66,083		$	220,089		$	200,124

_________________________________________________

(1) Includes dividends on investment funds and other items.

Net Realized Gains (Losses)

Net realized gains (losses) were as follows, excluding other-than-temporary impairment provisions:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2014			2013			2014			2013
Available for sale securities:
Gross gains on investment sales	$	62,727		$	47,433		$	185,541		$	183,306
Gross losses on investment sales	(35,012		)	(69,256		)	(108,053		)	(149,095		)
Change in fair value of assets and liabilities accounted for using the fair value option:
Fixed maturities	(9,023		)	5,599			318			3,955
Other investments	(1,085		)	8,221			27,676			8,670
Equity securities	—			—			—			704
Short-term investments	638			—			638			—
Derivative instruments (1)	7,449			1,574			7,083			16,842
Other (2)	(7,179		)	407			(20,847		)	588
Net realized gains (losses)	$	18,515		$	(6,022	)	$	92,356		$	64,970

_________________________________________________

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

(2) Includes accretion of contingent consideration liability amounts related to the acquisition of the CMG Entities (see Note 2 for further details).

Other-Than-Temporary Impairments

The Company performs quarterly reviews of its available for sale investments in order to determine whether declines in fair value below the amortized cost basis were considered other-than-temporary in accordance with applicable guidance. The following table details the net impairment losses recognized in earnings by asset class:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2014			2013			2014			2013
Fixed maturities:
Mortgage backed securities	$	(2	)	$	(280	)	$	(2	)	$	(295	)
Corporate bonds	(147		)	(88		)	(811		)	(88		)
Asset backed securities	(29		)	(20		)	(40		)	(40		)
Total	(185		)	(388		)	(860		)	(423		)
Equity securities	(95		)	(340		)	(373		)	(3,275		)
Other investments	(8,313		)	—			(25,080		)	—
Net impairment losses recognized in earnings	$	(8,593	)	$	(728	)	$	(26,313	)	$	(3,698	)

A description of the methodology and significant inputs used to measure the amount of net impairment losses recognized in earnings in the 2014 periods is as follows:

• Other investments — the Company utilized information received from fund managers and positive and negative evidence on the fund investment, including the business prospects, recent events, industry and market data and other factors. Net impairment losses for the 2014 third quarter primarily related to a reduction in the carrying value of a fund investment as the Company decided to redeem its holding in early October 2014. Net impairment losses for the nine months ended September 30, 2014 primarily related to the same fund investment which was in an unrealized loss position and where the Company determined that it did not intend to hold such investment for a reasonable period of time by which the fair value of the fund would increase and the Company would recover its cost. The cost basis of such fund was adjusted down accordingly to its then current fair value based on an analysis performed each quarter;

• Corporate bonds — the Company reviewed the business prospects, credit ratings, estimated loss given default factors and information received from asset managers and rating agencies for certain corporate bonds. The amortized cost basis of the corporate bonds were adjusted down, if required, to the expected recovery value calculated in the OTTI review process;

• Equity securities — the Company utilized information received from asset managers on common stocks, including the business prospects, recent events, industry and market data and other factors. For certain equities which were in an unrealized loss position and where the Company determined that it did not have the intent or ability to hold such securities for a reasonable period of time by which the fair value of the securities would increase and the Company would recover its cost, the cost basis of such securities was adjusted down accordingly.

The Company believes that the $3.6 million of OTTI included in accumulated other comprehensive income at September 30, 2014 on the securities which were considered by the Company to be impaired was due to market and sector-related factors (i.e., not credit losses). At September 30, 2014, the Company did not intend to sell these securities, or any other securities which were in an unrealized loss position, and determined that it is more likely than not that the Company will not be required to sell such securities before recovery of their cost basis.

The following table provides a roll forward of the amount related to credit losses recognized in earnings for which a portion of an OTTI was recognized in accumulated other comprehensive income:

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2014			2013		2014			2013
Balance at start of period	$	21,441		$	61,449	$	60,062		$	62,001
Credit loss impairments recognized on securities not previously impaired	—			369		—			402
Credit loss impairments recognized on securities previously impaired	151			19		162			21
Reductions for increases in cash flows expected to be collected that are recognized over the remaining life of the security	—			—		—			—
Reductions for securities sold during the period	(217		)	—		(38,849		)	(587		)
Balance at end of period	$	21,375		$	61,837	$	21,375		$	61,837

Restricted Assets

The Company is required to maintain assets on deposit, which primarily consist of fixed maturities, with various regulatory authorities to support its insurance and reinsurance operations. The Company’s insurance and reinsurance subsidiaries maintain assets in trust accounts as collateral for insurance and reinsurance 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 10 for further details. The following table details the value of the Company’s restricted assets:

	September 30, 2014		December 31, 2013
Assets used for collateral or guarantees:
Affiliated transactions	$	4,159,480	$	4,060,533
Third party agreements	941,372		856,890
Deposits with U.S. regulatory authorities	353,091		302,809
Deposits with non-U.S. regulatory authorities	—		6,546
Trust funds	76,110		75,264
Total restricted assets	$	5,530,053	$	5,302,042

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Derivative Instruments

9 Months Ended

Sep. 30, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

Derivative Instruments

The Company’s investment strategy allows for the use of derivative securities. The Company’s derivative instruments are recorded on its consolidated balance sheets at fair value. The fair values of those derivatives are based on quoted market prices. All realized and unrealized contract gains and losses are reflected in the Company’s results of operations. 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. Certain of the Company’s corporate bonds are managed in a global bond portfolio which incorporates the use of foreign currency forward contracts which are intended to provide an economic hedge against foreign currency movements on the portfolio’s non-U.S. Dollar denominated holdings. The Company routinely utilizes other foreign currency forward contracts, currency options, index futures contracts and other derivatives as part of its total return objective.

In addition, 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 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 Company did not hold any derivatives which were designated as hedging instruments at September 30, 2014 or December 31, 2013.

The following table summarizes information on the fair values and notional values of the Company’s derivative instruments. The fair value of TBAs is included in ‘fixed maturities available for sale, at fair value.’

	Asset Derivatives		Liability Derivatives			Net Derivatives
	Fair Value		Fair Value			Fair Value			Notional Value (1)
September 30, 2014
Futures contracts	$	437	$	(1,797	)	$	(1,360	)	$	1,333,987
Foreign currency forward contracts	6,297		(1,783		)	4,514			350,938
TBAs	397,193		(407,954		)	(10,761		)	776,558
Other	3,763		(2,719		)	1,044			758,581
Total	$	407,690	$	(414,253	)	$	(6,563	)
December 31, 2013
Futures contracts	$	461	$	(110	)	$	351		$	475,967
Foreign currency forward contracts	5,023		(3,090		)	1,933			330,746
TBAs	33,455		(21,731		)	11,724			56,160
Other	920		(1,541		)	(621		)	347,916
Total	$	39,859	$	(26,472	)	$	13,387

_________________________________________________

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

The Company’s derivative instruments are generally 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. Effectively, contractual close-out netting reduces derivatives credit exposure from gross to net exposure. At September 30, 2014, asset derivatives and liability derivatives of $203.9 million and $343.7 million, respectively, were subject to a master netting agreement, compared to $28.0 million and $14.6 million, respectively, at December 31, 2013. The remaining derivatives included in the table above were not subject to a master netting agreement.

The following table summarizes net realized gains (losses) recorded on the Company’s derivative instruments in the consolidated statements of income:

	Three Months Ended						Nine Months Ended
Derivatives not designated as	September 30,						September 30,
hedging instruments	2014			2013			2014			2013
Futures contracts	$	(354	)	$	(2,804	)	$	4,969		$	6,990
Foreign currency forward contracts	6,558			1,344			2,490			8,224
TBAs	660			2,511			353			(699		)
Other	585			523			(729		)	2,327
Total	$	7,449		$	1,574		$	7,083		$	16,842

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Guarantor Financial Information - Condensed consolidating balance sheet (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014		Dec. 31, 2013	Sep. 30, 2013		Dec. 31, 2012
Assets
Total investments	$ 15,110,448		$ 13,611,734
Cash	663,726		434,057	436,141		371,041
Investments in subsidiaries	0		0
Due from subsidiaries and affiliates	0		0
Premiums receivable	1,027,204		753,924
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses	1,814,190		1,804,330
Contractholder receivables	1,286,799		1,064,246
Prepaid reinsurance premiums	404,661		328,343
Deferred acquisition costs, net	409,174		342,314
Other assets	1,894,483		1,227,146
Total assets	22,610,685		19,566,094	18,930,823
Liabilities
Reserve for losses and loss adjustment expenses	8,958,734		8,824,696
Unearned premiums	2,303,247		1,896,365
Reinsurance balances payable	244,379		196,167
Contractholder payables	1,286,799		1,064,246
Deposit accounting liabilities	349,850		421,297
Senior notes	800,000		800,000
Revolving credit agreement borrowings	100,000		100,000
Due to subsidiaries and affiliates	0		0
Other liabilities	1,485,191		615,827
Total liabilities	15,528,200		13,918,598	13,487,538
Redeemable noncontrolling interests	219,419		0
Shareholders' Equity
Total shareholders’ equity available to Arch	6,081,046		5,647,496	5,443,285
Non-redeemable noncontrolling interests	782,020	[1]	0	0	[1]
Total shareholders’ equity	6,863,066		5,647,496	5,443,285
Total liabilities, noncontrolling interests and shareholders’ equity	22,610,685		19,566,094
Reportable Legal Entities | ACGL (Parent Guarantor)
Assets
Total investments	134		2,530
Cash	5,969		3,223	1,370		6,417
Investments in subsidiaries	6,487,180		6,046,060
Due from subsidiaries and affiliates	34		2,251
Premiums receivable	0		0
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses	0		0
Contractholder receivables	0		0
Prepaid reinsurance premiums	0		0
Deferred acquisition costs, net	0		0
Other assets	7,412		6,598
Total assets	6,500,729		6,060,662
Liabilities
Reserve for losses and loss adjustment expenses	0		0
Unearned premiums	0		0
Reinsurance balances payable	0		0
Contractholder payables	0		0
Deposit accounting liabilities	0		0
Senior notes	300,000		300,000
Revolving credit agreement borrowings	100,000		100,000
Due to subsidiaries and affiliates	5		18
Other liabilities	19,678		13,148
Total liabilities	419,683		413,166
Redeemable noncontrolling interests	0		0
Shareholders' Equity
Total shareholders’ equity available to Arch	6,081,046		5,647,496
Non-redeemable noncontrolling interests	0		0
Total shareholders’ equity	6,081,046		5,647,496
Total liabilities, noncontrolling interests and shareholders’ equity	6,500,729		6,060,662
Reportable Legal Entities | Arch-U.S. (Subsidiary Issuer)
Assets
Total investments	78,741		408,957
Cash	15,710		509	1,355		612
Investments in subsidiaries	1,641,236		1,258,889
Due from subsidiaries and affiliates	0		0
Premiums receivable	0		0
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses	0		0
Contractholder receivables	0		0
Prepaid reinsurance premiums	0		0
Deferred acquisition costs, net	0		0
Other assets	63,507		60,342
Total assets	1,799,194		1,728,697
Liabilities
Reserve for losses and loss adjustment expenses	0		0
Unearned premiums	0		0
Reinsurance balances payable	0		0
Contractholder payables	0		0
Deposit accounting liabilities	0		0
Senior notes	500,000		500,000
Revolving credit agreement borrowings	0		0
Due to subsidiaries and affiliates	0		10,250
Other liabilities	58,139		33,206
Total liabilities	558,139		543,456
Redeemable noncontrolling interests	0		0
Shareholders' Equity
Total shareholders’ equity available to Arch	1,241,055		1,185,241
Non-redeemable noncontrolling interests	0		0
Total shareholders’ equity	1,241,055		1,185,241
Total liabilities, noncontrolling interests and shareholders’ equity	1,799,194		1,728,697
Reportable Legal Entities | Other ACGL Subsidiaries
Assets
Total investments	15,031,573		13,200,247
Cash	642,047		430,325	433,416		364,012
Investments in subsidiaries	0		0
Due from subsidiaries and affiliates	405,714		405,110
Premiums receivable	1,410,961		1,085,369
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses	5,572,303		5,645,156
Contractholder receivables	1,286,799		1,064,246
Prepaid reinsurance premiums	1,430,149		1,109,312
Deferred acquisition costs, net	409,174		342,314
Other assets	2,264,246		1,714,651
Total assets	28,452,966		24,996,730
Liabilities
Reserve for losses and loss adjustment expenses	12,701,382		12,625,766
Unearned premiums	3,328,735		2,677,334
Reinsurance balances payable	615,237		662,394
Contractholder payables	1,286,799		1,064,246
Deposit accounting liabilities	628,383		758,490
Senior notes	0		0
Revolving credit agreement borrowings	0		0
Due to subsidiaries and affiliates	405,743		397,093
Other liabilities	1,597,887		691,699
Total liabilities	20,564,166		18,877,022
Redeemable noncontrolling interests	219,419		0
Shareholders' Equity
Total shareholders’ equity available to Arch	6,887,361		6,119,708
Non-redeemable noncontrolling interests	782,020		0
Total shareholders’ equity	7,669,381		6,119,708
Total liabilities, noncontrolling interests and shareholders’ equity	28,452,966		24,996,730
Consolidating Adjustments and Eliminations
Assets
Total investments	0		0
Cash	0		0	0		0
Investments in subsidiaries	(8,128,416)		(7,304,949)
Due from subsidiaries and affiliates	(405,748)		(407,361)
Premiums receivable	(383,757)		(331,445)
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses	(3,758,113)		(3,840,826)
Contractholder receivables	0		0
Prepaid reinsurance premiums	(1,025,488)		(780,969)
Deferred acquisition costs, net	0		0
Other assets	(440,682)		(554,445)
Total assets	(14,142,204)		(13,219,995)
Liabilities
Reserve for losses and loss adjustment expenses	(3,742,648)		(3,801,070)
Unearned premiums	(1,025,488)		(780,969)
Reinsurance balances payable	(370,858)		(466,227)
Contractholder payables	0		0
Deposit accounting liabilities	(278,533)		(337,193)
Senior notes	0		0
Revolving credit agreement borrowings	0		0
Due to subsidiaries and affiliates	(405,748)		(407,361)
Other liabilities	(190,513)		(122,226)
Total liabilities	(6,013,788)		(5,915,046)
Redeemable noncontrolling interests	0		0
Shareholders' Equity
Total shareholders’ equity available to Arch	(8,128,416)		(7,304,949)
Non-redeemable noncontrolling interests	0		0
Total shareholders’ equity	(8,128,416)		(7,304,949)
Total liabilities, noncontrolling interests and shareholders’ equity	$ (14,142,204)		$ (13,219,995)

[1] See Note 4.

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Guarantor Financial Information - Condensed consolidating statement of cash flows (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2014		Sep. 30, 2013
Condensed Cash Flow Statements, Captions [Line Items]
Net Cash Provided by (Used in) Operating Activities	$ 799,659		$ 627,048
Purchases of fixed maturity investments	(22,030,862)		(12,436,587)
Purchases of equity securities	(366,578)		(438,255)
Purchases of other investments	(1,596,691)		(992,935)
Proceeds from the sale of fixed maturity investments	20,284,869		11,877,419
Proceeds from the sale of equity securities	305,034		373,000
Proceeds from the sale of other investments	1,030,901		813,596
Proceeds from redemptions and maturities of fixed maturity investments	636,729		595,503
Net sales (purchases) of short-term investments	678,388		(268,968)
Change in investment of securities lending collateral	(2,737)		2,508
Contributions to subsidiaries	0		0
Intercompany loans issued	0		0
Purchase of business, net of cash acquired	(235,578)	[1]	0	[1]
Purchases of furniture, equipment and other assets	(14,575)		(10,953)
Net Cash Used For Investing Activities	(1,311,100)		(485,672)
Purchases of common shares under share repurchase program	(251,919)		(57,796)
Proceeds from common shares issued, net	3,248		(425)
Proceeds from intercompany borrowings			0
Repayments of intercompany borrowings	0
Change in securities lending collateral	2,737		(2,508)
Third party investment in non-redeemable noncontrolling interests	796,903	[2]	0	[2]
Third party investment in redeemable noncontrolling interests	219,233	[2]	0	[2]
Dividends paid to redeemable noncontrolling interests	(9,632)	[2]	0	[2]
Dividends paid to parent	0		0
Other	6,559		5,679
Preferred dividends paid	(16,453)		(16,453)
Net Cash Provided By (Used For) Financing Activities	750,676		(71,503)
Effects of exchange rate changes on foreign currency cash	(9,566)		(4,773)
Increase (decrease) in cash	229,669		65,100
Cash beginning of year	434,057		371,041
Cash end of period	663,726		436,141
Reportable Legal Entities | ACGL (Parent Guarantor)
Condensed Cash Flow Statements, Captions [Line Items]
Net Cash Provided by (Used in) Operating Activities	265,694		62,400
Purchases of fixed maturity investments	0		0
Purchases of equity securities	0		0
Purchases of other investments	0		0
Proceeds from the sale of fixed maturity investments	0		0
Proceeds from the sale of equity securities	0		0
Proceeds from the sale of other investments	0		0
Proceeds from redemptions and maturities of fixed maturity investments	0		0
Net sales (purchases) of short-term investments	2,396		7,789
Change in investment of securities lending collateral	0		0
Contributions to subsidiaries	0		(160)
Intercompany loans issued	0		0
Purchase of business, net of cash acquired	0
Purchases of furniture, equipment and other assets	(220)		(402)
Net Cash Used For Investing Activities	2,176		7,227
Purchases of common shares under share repurchase program	(251,919)		(57,796)
Proceeds from common shares issued, net	3,248		(425)
Proceeds from intercompany borrowings			0
Repayments of intercompany borrowings	0
Change in securities lending collateral	0		0
Third party investment in non-redeemable noncontrolling interests	0	[2]
Third party investment in redeemable noncontrolling interests	0	[2]
Dividends paid to redeemable noncontrolling interests	0	[2]
Dividends paid to parent	0		0
Other	0		0
Preferred dividends paid	(16,453)		(16,453)
Net Cash Provided By (Used For) Financing Activities	(265,124)		(74,674)
Effects of exchange rate changes on foreign currency cash	0		0
Increase (decrease) in cash	2,746		(5,047)
Cash beginning of year	3,223		6,417
Cash end of period	5,969		1,370
Reportable Legal Entities | Arch-U.S. (Subsidiary Issuer)
Condensed Cash Flow Statements, Captions [Line Items]
Net Cash Provided by (Used in) Operating Activities	8,407		(653)
Purchases of fixed maturity investments	(78,509)		0
Purchases of equity securities	0		0
Purchases of other investments	0		0
Proceeds from the sale of fixed maturity investments	0		0
Proceeds from the sale of equity securities	0		0
Proceeds from the sale of other investments	0		0
Proceeds from redemptions and maturities of fixed maturity investments	0		0
Net sales (purchases) of short-term investments	408,760		2,996
Change in investment of securities lending collateral	0		0
Contributions to subsidiaries	(313,207)		(11,850)
Intercompany loans issued	0		0
Purchase of business, net of cash acquired	0
Purchases of furniture, equipment and other assets	0		0
Net Cash Used For Investing Activities	17,044		(8,854)
Purchases of common shares under share repurchase program	0		0
Proceeds from common shares issued, net	0		0
Proceeds from intercompany borrowings			10,250
Repayments of intercompany borrowings	(10,250)
Change in securities lending collateral	0		0
Third party investment in non-redeemable noncontrolling interests	0	[2]
Third party investment in redeemable noncontrolling interests	0	[2]
Dividends paid to redeemable noncontrolling interests	0	[2]
Dividends paid to parent	0		0
Other	0		0
Preferred dividends paid	0		0
Net Cash Provided By (Used For) Financing Activities	(10,250)		10,250
Effects of exchange rate changes on foreign currency cash	0		0
Increase (decrease) in cash	15,201		743
Cash beginning of year	509		612
Cash end of period	15,710		1,355
Reportable Legal Entities | Other ACGL Subsidiaries
Condensed Cash Flow Statements, Captions [Line Items]
Net Cash Provided by (Used in) Operating Activities	822,558		659,301
Purchases of fixed maturity investments	(21,952,353)		(12,436,587)
Purchases of equity securities	(366,578)		(438,255)
Purchases of other investments	(1,596,691)		(992,935)
Proceeds from the sale of fixed maturity investments	20,284,869		11,877,419
Proceeds from the sale of equity securities	305,034		373,000
Proceeds from the sale of other investments	1,030,901		813,596
Proceeds from redemptions and maturities of fixed maturity investments	636,729		595,503
Net sales (purchases) of short-term investments	267,232		(279,753)
Change in investment of securities lending collateral	(2,737)		2,508
Contributions to subsidiaries	(100,000)		(250)
Intercompany loans issued	10,250		(10,250)
Purchase of business, net of cash acquired	(235,578)
Purchases of furniture, equipment and other assets	(14,355)		(10,551)
Net Cash Used For Investing Activities	(1,733,277)		(506,555)
Purchases of common shares under share repurchase program	0		0
Proceeds from common shares issued, net	413,207		12,260
Proceeds from intercompany borrowings			0
Repayments of intercompany borrowings	0
Change in securities lending collateral	2,737		(2,508)
Third party investment in non-redeemable noncontrolling interests	796,903	[2]
Third party investment in redeemable noncontrolling interests	219,233	[2]
Dividends paid to redeemable noncontrolling interests	(9,632)	[2]
Dividends paid to parent	(297,000)		(94,000)
Other	6,559		5,679
Preferred dividends paid	0		0
Net Cash Provided By (Used For) Financing Activities	1,132,007		(78,569)
Effects of exchange rate changes on foreign currency cash	(9,566)		(4,773)
Increase (decrease) in cash	211,722		69,404
Cash beginning of year	430,325		364,012
Cash end of period	642,047		433,416
Consolidating Adjustments and Eliminations
Condensed Cash Flow Statements, Captions [Line Items]
Net Cash Provided by (Used in) Operating Activities	(297,000)		(94,000)
Purchases of fixed maturity investments	0		0
Purchases of equity securities	0		0
Purchases of other investments	0		0
Proceeds from the sale of fixed maturity investments	0		0
Proceeds from the sale of equity securities	0		0
Proceeds from the sale of other investments	0		0
Proceeds from redemptions and maturities of fixed maturity investments	0		0
Net sales (purchases) of short-term investments	0		0
Change in investment of securities lending collateral	0		0
Contributions to subsidiaries	413,207		12,260
Intercompany loans issued	(10,250)		10,250
Purchase of business, net of cash acquired	0
Purchases of furniture, equipment and other assets	0		0
Net Cash Used For Investing Activities	402,957		22,510
Purchases of common shares under share repurchase program	0		0
Proceeds from common shares issued, net	(413,207)		(12,260)
Proceeds from intercompany borrowings			(10,250)
Repayments of intercompany borrowings	10,250
Change in securities lending collateral	0		0
Third party investment in non-redeemable noncontrolling interests	0	[2]
Third party investment in redeemable noncontrolling interests	0	[2]
Dividends paid to redeemable noncontrolling interests	0	[2]
Dividends paid to parent	297,000		94,000
Other	0		0
Preferred dividends paid	0		0
Net Cash Provided By (Used For) Financing Activities	(105,957)		71,490
Effects of exchange rate changes on foreign currency cash	0		0
Increase (decrease) in cash	0		0
Cash beginning of year	0		0
Cash end of period	$ 0		$ 0

[1] See Note 2.

[2] See Note 4.

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Other Comprehensive Income (Loss) - Components of other comprehensive income (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Before tax amount:
Unrealized holding gains arising during period, before tax	$ (90,276)	$ 41,122	$ 100,274	$ (229,919)
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss), before tax	0	(173)	0	(175)
Less reclassification of net realized gains included in net income, before tax	19,122	(22,726)	51,175	33,303
Foreign currency translation adjustments, before tax	(23,595)	29,523	(14,923)	(4,106)
Other comprehensive income (loss), before tax	(132,993)	93,198	34,176	(267,503)
Tax expense (benefit):
Unrealized holding gains arising during period, tax	343	(104)	11,112	(21,054)
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss), tax	0	0	0	0
Less reclassification of net realized gains included in net income, tax	1,639	(2,025)	4,158	1,387
Foreign currency translation adjustments, tax	0	0	0	0
Other comprehensive income (loss), tax	(1,296)	1,921	6,954	(22,441)
Net of tax amount:
Unrealized holding gains arising during period, net of tax	(90,619)	41,226	89,162	(208,865)
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss), net of tax	0	(173)	0	(175)
Less reclassification of net realized gains included in net income, net of tax	17,483	(20,701)	47,017	31,916
Foreign currency translation adjustments, net of tax	(23,595)	29,523	(14,923)	(4,106)
Net current period other comprehensive income (loss)	$ (131,697)	$ 91,277	$ 27,222	$ (245,062)

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General (Details) (Watford Holdings Ltd, Variable Interest Entity, Primary Beneficiary, USD $) In Millions, unless otherwise specified	0 Months Ended	1 Months Ended
	Mar. 20, 2014	Mar. 31, 2014
Watford Holdings Ltd | Variable Interest Entity, Primary Beneficiary
Variable Interest Entity [Line Items]
Percentage ownership	11.00%
Initial investment contribution amount	$ 100.0	$ 100.0

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Investment Information - Other than temporary impairments recognized in earnings (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Net impairment losses recognized in earnings	$ (8,593)	$ (728)	$ (26,313)	$ (3,698)
Fixed Maturities
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Net impairment losses recognized in earnings	(185)	(388)	(860)	(423)
Fixed Maturities | Mortgage backed securities
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Net impairment losses recognized in earnings	(2)	(280)	(2)	(295)
Fixed Maturities | Asset backed securities
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Net impairment losses recognized in earnings	(29)	(20)	(40)	(40)
Fixed Maturities | Corporate bonds
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Net impairment losses recognized in earnings	(147)	(88)	(811)	(88)
Equity securities
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Net impairment losses recognized in earnings	(95)	(340)	(373)	(3,275)
Other investments
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Net impairment losses recognized in earnings	$ (8,313)	$ 0	$ (25,080)	$ 0

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Guarantor Financial Information

9 Months Ended

Sep. 30, 2014

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Guarantor Financial Information

Guarantor Financial Information

The following tables present condensed financial information for ACGL, Arch Capital Group (U.S.) Inc. (“Arch-U.S.”), a 100% owned subsidiary of ACGL, and ACGL’s other subsidiaries.

		September 30, 2014
Condensed Consolidating Balance Sheet		ACGL (Parent Guarantor)		Arch-U.S. (Subsidiary Issuer)		Other ACGL Subsidiaries		Consolidating Adjustments and Eliminations			ACGL Consolidated
Assets
Total investments		$	134	$	78,741	$	15,031,573	$	—		$	15,110,448
Cash		5,969		15,710		642,047		—			663,726
Investments in subsidiaries		6,487,180		1,641,236		—		(8,128,416		)	—
Due from subsidiaries and affiliates		34		—		405,714		(405,748		)	—
Premiums receivable		—		—		1,410,961		(383,757		)	1,027,204
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses		—		—		5,572,303		(3,758,113		)	1,814,190
Contractholder receivables		—		—		1,286,799		—			1,286,799
Prepaid reinsurance premiums		—		—		1,430,149		(1,025,488		)	404,661
Deferred acquisition costs, net		—		—		409,174		—			409,174
Other assets		7,412		63,507		2,264,246		(440,682		)	1,894,483
	Total assets	$	6,500,729	$	1,799,194	$	28,452,966	$	(14,142,204	)	$	22,610,685
Liabilities
Reserve for losses and loss adjustment expenses		$	—	$	—	$	12,701,382	$	(3,742,648	)	$	8,958,734
Unearned premiums		—		—		3,328,735		(1,025,488		)	2,303,247
Reinsurance balances payable		—		—		615,237		(370,858		)	244,379
Contractholder payables		—		—		1,286,799		—			1,286,799
Deposit accounting liabilities		—		—		628,383		(278,533		)	349,850
Senior notes		300,000		500,000		—		—			800,000
Revolving credit agreement borrowings		100,000		—		—		—			100,000
Due to subsidiaries and affiliates		5		—		405,743		(405,748		)	—
Other liabilities		19,678		58,139		1,597,887		(190,513		)	1,485,191
	Total liabilities	419,683		558,139		20,564,166		(6,013,788		)	15,528,200
Redeemable noncontrolling interests (1)		—		—		219,419		—			219,419
Shareholders’ Equity
Total shareholders’ equity available to Arch		6,081,046		1,241,055		6,887,361		(8,128,416		)	6,081,046
Non-redeemable noncontrolling interests (1)		—		—		782,020		—			782,020
	Total shareholders’ equity	6,081,046		1,241,055		7,669,381		(8,128,416		)	6,863,066
	Total liabilities, noncontrolling interests and shareholders’ equity	$	6,500,729	$	1,799,194	$	28,452,966	$	(14,142,204	)	$	22,610,685

(1)     See Note 4.

		December 31, 2013
Condensed Consolidating Balance Sheet		ACGL (Parent Guarantor)		Arch-U.S. (Subsidiary Issuer)		Other ACGL Subsidiaries		Consolidating Adjustments and Eliminations			ACGL Consolidated
Assets
Total investments		$	2,530	$	408,957	$	13,200,247	$	—		$	13,611,734
Cash		3,223		509		430,325		—			434,057
Investments in subsidiaries		6,046,060		1,258,889		—		(7,304,949		)	—
Due from subsidiaries and affiliates		2,251		—		405,110		(407,361		)	—
Premiums receivable		—		—		1,085,369		(331,445		)	753,924
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses		—		—		5,645,156		(3,840,826		)	1,804,330
Contractholder receivables		—		—		1,064,246		—			1,064,246
Prepaid reinsurance premiums		—		—		1,109,312		(780,969		)	328,343
Deferred acquisition costs, net		—		—		342,314		—			342,314
Other assets		6,598		60,342		1,714,651		(554,445		)	1,227,146
	Total assets	$	6,060,662	$	1,728,697	$	24,996,730	$	(13,219,995	)	$	19,566,094
Liabilities
Reserve for losses and loss adjustment expenses		$	—	$	—	$	12,625,766	$	(3,801,070	)	$	8,824,696
Unearned premiums		—		—		2,677,334		(780,969		)	1,896,365
Reinsurance balances payable		—		—		662,394		(466,227		)	196,167
Contractholder payables		—		—		1,064,246		—			1,064,246
Deposit accounting liabilities		—		—		758,490		(337,193		)	421,297
Senior notes		300,000		500,000		—		—			800,000
Revolving credit agreement borrowings		100,000		—		—		—			100,000
Due to subsidiaries and affiliates		18		10,250		397,093		(407,361		)	—
Other liabilities		13,148		33,206		691,699		(122,226		)	615,827
	Total liabilities	413,166		543,456		18,877,022		(5,915,046		)	13,918,598
Redeemable noncontrolling interests		—		—		—		—			—
Shareholders’ Equity
Total shareholders’ equity available to Arch		5,647,496		1,185,241		6,119,708		(7,304,949		)	5,647,496
Non-redeemable noncontrolling interests		—		—		—		—			—
	Total shareholders’ equity	5,647,496		1,185,241		6,119,708		(7,304,949		)	5,647,496
	Total liabilities, noncontrolling interests and shareholders’ equity	$	6,060,662	$	1,728,697	$	24,996,730	$	(13,219,995	)	$	19,566,094

		Three Months Ended September 30, 2014
Condensed Consolidating Statement of Income and Comprehensive Income		ACGL (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other ACGL Subsidiaries			Consolidating Adjustments and Eliminations			ACGL Consolidated
Revenues
Net premiums earned		$	—		$	—		$	903,651		$	—		$	903,651
Net investment income		—			—			79,936			169			80,105
Net realized gains		—			—			18,515			—			18,515
Net impairment losses recognized in earnings		—			—			(8,593		)	—			(8,593		)
Other underwriting income		—			—			1,702			—			1,702
Equity in net income of investment funds accounted for using the equity method		—			—			4,966			—			4,966
Other income (loss)		—			—			(7,815		)	—			(7,815		)
	Total revenues	—			—			992,362			169			992,531
Expenses
Losses and loss adjustment expenses		—			—			501,673			—			501,673
Acquisition expenses		—			—			163,547			—			163,547
Other operating expenses		10,056			810			138,614			—			149,480
Interest expense		5,858			6,433			(8,308		)	169			4,152
Net foreign exchange gains		—			—			(35,244		)	(20,787		)	(56,031		)
	Total expenses	15,914			7,243			760,282			(20,618		)	762,821
Income (loss) before income taxes		(15,914		)	(7,243		)	232,080			20,787			229,710
Income tax benefit (expense)		—			2,097			(8,543		)	—			(6,446		)
Income (loss) before equity in net income of subsidiaries		(15,914		)	(5,146		)	223,537			20,787			223,264
Equity in net income of subsidiaries		244,589			10,459			—			(255,048		)	—
Net income		228,675			5,313			223,537			(234,261		)	223,264
Amounts attributable to noncontrolling interests (1)		—			—			5,411			—			5,411
Net income available to Arch		228,675			5,313			228,948			(234,261		)	228,675
Preferred dividends		(5,484		)	—			—			—			(5,484		)
Net income available to Arch common shareholders		$	223,191		$	5,313		$	228,948		$	(234,261	)	$	223,191
Comprehensive income available to Arch		$	96,978		$	(10,614	)	$	104,501		$	(93,887	)	$	96,978

(1)     See Note 4.

		Three Months Ended September 30, 2013
Condensed Consolidating Statement of Income and Comprehensive Income		ACGL (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other ACGL Subsidiaries			Consolidating Adjustments and Eliminations			ACGL Consolidated
Revenues
Net premiums earned		$	—		$	—		$	795,000		$	—		$	795,000
Net investment income		—			—			72,772			(6,689		)	66,083
Net realized losses		—			—			(6,022		)	—			(6,022		)
Net impairment losses recognized in earnings		—			—			(728		)	—			(728		)
Other underwriting income		—			—			526			—			526
Equity in net income of investment funds accounted for using the equity method		—			—			5,665			—			5,665
Other income (loss)		—			—			624			—			624
	Total revenues	—			—			867,837			(6,689		)	861,148
Expenses
Losses and loss adjustment expenses		—			—			427,045			—			427,045
Acquisition expenses		—			—			147,313			—			147,313
Other operating expenses		6,975			397			110,698			—			118,070
Interest expense		5,793			7			6,826			(6,689		)	5,937
Net foreign exchange losses		—			—			26,815			13,747			40,562
	Total expenses	12,768			404			718,697			7,058			738,927
Income (loss) before income taxes		(12,768		)	(404		)	149,140			(13,747		)	122,221
Income tax expense		—			(1,356		)	(6,040		)	—			(7,396		)
Income (loss) before equity in net income of subsidiaries		(12,768		)	(1,760		)	143,100			(13,747		)	114,825
Equity in net income of subsidiaries		127,593			6,839			—			(134,432		)	—
Net income		114,825			5,079			143,100			(148,179		)	114,825
Amounts attributable to noncontrolling interests		—			—			—			—			—
Net income available to Arch		114,825			5,079			143,100			(148,179		)	114,825
Preferred dividends		(5,484		)	—			—			—			(5,484		)
Net income available to Arch common shareholders		$	109,341		$	5,079		$	143,100		$	(148,179	)	$	109,341
Comprehensive income available to Arch		$	206,102		$	18,444		$	220,630		$	(239,074	)	$	206,102

		Nine Months Ended September 30, 2014
Condensed Consolidating Statement of Income and Comprehensive Income		ACGL (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other ACGL Subsidiaries			Consolidating Adjustments and Eliminations			ACGL Consolidated
Revenues
Net premiums earned		$	—		$	—		$	2,670,583		$	—		$	2,670,583
Net investment income		—			—			237,317			(17,228		)	220,089
Net realized gains		—			—			92,356			—			92,356
Net impairment losses recognized in earnings		—			—			(26,313		)	—			(26,313		)
Other underwriting income		—			—			5,317			—			5,317
Equity in net income of investment funds accounted for using the equity method		—			—			17,459			—			17,459
Other income (loss)		—			—			(5,069		)	—			(5,069		)
	Total revenues	—			—			2,991,650			(17,228		)	2,974,422
Expenses
Losses and loss adjustment expenses		—			—			1,423,431			—			1,423,431
Acquisition expenses		—			—			482,047			—			482,047
Other operating expenses		35,613			2,281			413,735			—			451,629
Interest expense		17,565			19,395			13,158			(17,228		)	32,890
Net foreign exchange gains		—			—			(28,449		)	(18,725		)	(47,174		)
	Total expenses	53,178			21,676			2,303,922			(35,953		)	2,342,823
Income (loss) before income taxes		(53,178		)	(21,676		)	687,728			18,725			631,599
Income tax benefit (expense)		—			8,179			(25,652		)	—			(17,473		)
Income (loss) before equity in net income of subsidiaries		(53,178		)	(13,497		)	662,076			18,725			614,126
Equity in net income of subsidiaries		672,369			41,945			—			(714,314		)	—
Net income		619,191			28,448			662,076			(695,589		)	614,126
Amounts attributable to noncontrolling interests (1)		—			—			5,065			—			5,065
Net income available to Arch		619,191			28,448			667,141			(695,589		)	619,191
Preferred dividends		(16,453		)	—			—			—			(16,453		)
Net income available to Arch common shareholders		$	602,738		$	28,448		$	667,141		$	(695,589	)	$	602,738
Comprehensive income available to Arch		$	646,413		$	29,792		$	691,968		$	(721,760	)	$	646,413

(1)     See Note 4.

		Nine Months Ended September 30, 2013
Condensed Consolidating Statement of Income and Comprehensive Income		ACGL (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other ACGL Subsidiaries			Consolidating Adjustments and Eliminations			ACGL Consolidated
Revenues
Net premiums earned		$	—		$	—		$	2,306,586		$	—		$	2,306,586
Net investment income		—			—			220,074			(19,950		)	200,124
Net realized gains		—			—			64,970			—			64,970
Net impairment losses recognized in earnings		—			—			(3,698		)	—			(3,698		)
Other underwriting income		—			—			1,966			—			1,966
Equity in net income of investment funds accounted for using the equity method		—			—			30,429			—			30,429
Other income (loss)		—			—			2,702			—			2,702
	Total revenues	—			—			2,623,029			(19,950		)	2,603,079
Expenses
Losses and loss adjustment expenses		—			—			1,245,101			—			1,245,101
Acquisition expenses		—			—			406,582			—			406,582
Other operating expenses		30,608			1,947			333,106			—			365,661
Interest expense		17,456			15			20,166			(19,950		)	17,687
Net foreign exchange (gains) losses		—			—			(1,839		)	4,326			2,487
	Total expenses	48,064			1,962			2,003,116			(15,624		)	2,037,518
Income (loss) before income taxes		(48,064		)	(1,962		)	619,913			(4,326		)	565,561
Income tax benefit (expense)		—			1,629			(18,949		)	—			(17,320		)
Income (loss) before equity in net income of subsidiaries		(48,064		)	(333		)	600,964			(4,326		)	548,241
Equity in net income of subsidiaries		596,305			36,024			—			(632,329		)	—
Net income		548,241			35,691			600,964			(636,655		)	548,241
Amounts attributable to noncontrolling interests		—			—			—			—			—
Net income available to Arch		548,241			35,691			600,964			(636,655		)	548,241
Preferred dividends		(16,453		)	—			—			—			(16,453		)
Net income available to Arch common shareholders		$	531,788		$	35,691		$	600,964		$	(636,655	)	$	531,788
Comprehensive income available to Arch		$	303,179		$	(4,385	)	$	351,576		$	(347,191	)	$	303,179

		Nine Months Ended September 30, 2014
Condensed Consolidating Statement of Cash Flows		ACGL (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other ACGL Subsidiaries			Consolidating Adjustments and Eliminations			ACGL Consolidated
Operating Activities
	Net Cash Provided By Operating Activities	$	265,694		$	8,407		$	822,558		$	(297,000	)	$	799,659
Investing Activities
Purchases of fixed maturity investments		—			(78,509		)	(21,952,353		)	—			(22,030,862		)
Purchases of equity securities		—			—			(366,578		)	—			(366,578		)
Purchases of other investments		—			—			(1,596,691		)	—			(1,596,691		)
Proceeds from the sales of fixed maturity investments		—			—			20,284,869			—			20,284,869
Proceeds from the sales of equity securities		—			—			305,034			—			305,034
Proceeds from the sales of other investments		—			—			1,030,901			—			1,030,901
Proceeds from redemptions and maturities of fixed maturity investments		—			—			636,729			—			636,729
Net sales of short-term investments		2,396			408,760			267,232			—			678,388
Change in investment of securities lending collateral		—			—			(2,737		)	—			(2,737		)
Contributions to subsidiaries		—			(313,207		)	(100,000		)	413,207			—
Intercompany loans issued		—			—			10,250			(10,250		)	—
Purchase of business, net of cash acquired		—			—			(235,578		)	—			(235,578		)
Purchases of furniture, equipment and other assets		(220		)	—			(14,355		)	—			(14,575		)
	Net Cash Provided By (Used For) Investing Activities	2,176			17,044			(1,733,277		)	402,957			(1,311,100		)
Financing Activities
Purchases of common shares under share repurchase program		(251,919		)	—			—			—			(251,919		)
Proceeds from common shares issued, net		3,248			—			413,207			(413,207		)	3,248
Repayments of intercompany borrowings		—			(10,250		)	—			10,250			—
Change in securities lending collateral		—			—			2,737			—			2,737
Third party investment in non-redeemable noncontrolling interests (1)		—			—			796,903			—			796,903
Third party investment in redeemable noncontrolling interests (1)		—			—			219,233			—			219,233
Dividends paid to redeemable noncontrolling interests (1)		—			—			(9,632		)	—			(9,632		)
Dividends paid to parent		—			—			(297,000		)	297,000			—
Other		—			—			6,559			—			6,559
Preferred dividends paid		(16,453		)	—			—			—			(16,453		)
	Net Cash Provided By (Used For) Financing Activities	(265,124		)	(10,250		)	1,132,007			(105,957		)	750,676
Effects of exchange rates changes on foreign currency cash		—			—			(9,566		)	—			(9,566		)
Increase in cash		2,746			15,201			211,722			—			229,669
Cash beginning of year		3,223			509			430,325			—			434,057
Cash end of period		$	5,969		$	15,710		$	642,047		$	—		$	663,726

(1)     See Note 4.

		Nine Months Ended September 30, 2013
Condensed Consolidating Statement of Cash Flows		ACGL (Parent Guarantor)			Arch-U.S. (Subsidiary Issuer)			Other ACGL Subsidiaries			Consolidating Adjustments and Eliminations			ACGL Consolidated
Operating Activities
	Net Cash Provided By (Used For) Operating Activities	$	62,400		$	(653	)	$	659,301		$	(94,000	)	$	627,048
Investing Activities
Purchases of fixed maturity investments		—			—			(12,436,587		)	—			(12,436,587		)
Purchases of equity securities		—			—			(438,255		)	—			(438,255		)
Purchases of other investments		—			—			(992,935		)	—			(992,935		)
Proceeds from the sales of fixed maturity investments		—			—			11,877,419			—			11,877,419
Proceeds from the sales of equity securities		—			—			373,000			—			373,000
Proceeds from the sales of other investments		—			—			813,596			—			813,596
Proceeds from redemptions and maturities of fixed maturity investments		—			—			595,503			—			595,503
Net (purchases) sales of short-term investments		7,789			2,996			(279,753		)	—			(268,968		)
Change in investment of securities lending collateral		—			—			2,508			—			2,508
Contributions to subsidiaries		(160		)	(11,850		)	(250		)	12,260			—
Intercompany loans issued		—			—			(10,250		)	10,250			—
Purchases of furniture, equipment and other assets		(402		)	—			(10,551		)	—			(10,953		)
	Net Cash Provided By (Used For) Investing Activities	7,227			(8,854		)	(506,555		)	22,510			(485,672		)
Financing Activities
Purchases of common shares under share repurchase program		(57,796		)	—			—			—			(57,796		)
Proceeds from common shares issued, net		(425		)	—			12,260			(12,260		)	(425		)
Proceeds from intercompany borrowings		—			10,250			—			(10,250		)	—
Change in securities lending collateral		—			—			(2,508		)	—			(2,508		)
Dividends paid to parent		—			—			(94,000		)	94,000			—
Other		—			—			5,679			—			5,679
Preferred dividends paid		(16,453		)	—			—			—			(16,453		)
	Net Cash Provided By (Used For) Financing Activities	(74,674		)	10,250			(78,569		)	71,490			(71,503		)
Effects of exchange rates changes on foreign currency cash		—			—			(4,773		)	—			(4,773		)
Increase (decrease) in cash		(5,047		)	743			69,404			—			65,100
Cash beginning of year		6,417			612			364,012			—			371,041
Cash end of period		$	1,370		$	1,355		$	433,416		$	—		$	436,141

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Variable Interest Entities and Noncontrolling Interests (Tables)

9 Months Ended

Sep. 30, 2014

Noncontrolling Interest [Abstract]

Activity in non-redeemable noncontrolling interests

The following table sets forth activity in the non-redeemable noncontrolling interests:

	Three Months Ended September 30, 2014			Nine Months Ended September 30, 2014
Balance, beginning of period	$	792,340		$	—
Sale of shares to noncontrolling interests	—			796,903
Amounts attributable to noncontrolling interests	(10,320		)	(14,883		)
Balance, end of period	$	782,020		$	782,020

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Investment Information - Net investment income (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended				9 Months Ended
	Sep. 30, 2014		Sep. 30, 2013		Sep. 30, 2014		Sep. 30, 2013
Net investment income:
Gross investment income	$ 91,715		$ 74,154		$ 253,133		$ 224,783
Investment expenses	(11,610)		(8,071)		(33,044)		(24,659)
Net investment income	80,105		66,083		220,089		200,124
Fixed Maturities
Net investment income:
Gross investment income	66,052		62,447		194,370		186,457
Term loan investments
Net investment income:
Gross investment income	14,065		5,296		26,642		15,539
Equity securities (dividends)
Net investment income:
Gross investment income	2,779		2,241		8,971		6,828
Short-term investments
Net investment income:
Gross investment income	905		417		1,417		1,173
Other
Net investment income:
Gross investment income	$ 7,914	[1]	$ 3,753	[1]	$ 21,733	[1]	$ 14,786	[1]

[1] Includes dividends on investment funds and other items.

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Earnings Per Common Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended				9 Months Ended
	Sep. 30, 2014		Sep. 30, 2013		Sep. 30, 2014		Sep. 30, 2013
Numerator:
Net income	$ 223,264		$ 114,825		$ 614,126		$ 548,241
Amounts attributable to noncontrolling interests	5,411	[1]	0	[1]	5,065	[1]	0	[1]
Net income available to Arch	228,675		114,825		619,191		548,241
Preferred dividends	(5,484)		(5,484)		(16,453)		(16,453)
Net income available to Arch common shareholders	$ 223,191		$ 109,341		$ 602,738		$ 531,788
Denominator:
Weighted average common shares outstanding — basic	131,945,962		131,495,296		132,151,824		131,262,309
Effect of dilutive common share equivalents:
Nonvested restricted shares	1,156,790		1,124,644		1,134,481		1,094,327
Stock options	2,773,853		3,414,473		3,067,867		3,324,193
Weighted average common shares and common share equivalents outstanding — diluted	135,876,605		136,034,413		136,354,172		135,680,829
Earnings per common share:
Basic (per share)	$ 1.69		$ 0.83		$ 4.56		$ 4.05
Diluted (per share)	$ 1.64		$ 0.80		$ 4.42		$ 3.92
Stock Options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per common share (shares)	1,355,087		387,249		1,378,249		1,735,995

[1] See Note 4.

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Unaudited Consolidated Statements of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended				9 Months Ended
	Sep. 30, 2014		Sep. 30, 2013		Sep. 30, 2014		Sep. 30, 2013
Comprehensive Income
Net income	$ 223,264		$ 114,825		$ 614,126		$ 548,241
Unrealized appreciation (decline) in value of available-for-sale investments:
Unrealized holding gains (losses) arising during period	(90,619)		41,226		89,162		(208,865)
Portion of other-than-temporary impairment losses recognized in other comprehensive income, net of deferred income tax	0		(173)		0		(175)
Reclassification of net realized (gains) losses, net of income taxes, included in net income	(17,483)		20,701		(47,017)		(31,916)
Foreign currency translation adjustments	(23,595)		29,523		(14,923)		(4,106)
Comprehensive income	91,567		206,102		641,348		303,179
Amounts attributable to noncontrolling interests	5,411	[1]	0	[1]	5,065	[1]	0	[1]
Comprehensive income available to Arch	$ 96,978		$ 206,102		$ 646,413		$ 303,179

[1] See Note 4.

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Significant Accounting Policies

9 Months Ended

Sep. 30, 2014

Accounting Policies [Abstract]

Significant Accounting Policies

Significant Accounting Policies

As discussed in Note 2, the Company completed its acquisition of the CMG Entities on January 30, 2014. As such, the Company has added relevant sections pertaining to mortgage insurance to its significant accounting policies as described in Note 2, “Significant Accounting Policies,” of its audited consolidated financial statements and related notes of the 2013 Form 10-K.

(b) Premium Revenues and Related Expenses

Insurance.Insurance premiums written are generally recorded at the policy inception and are primarily earned on a pro rata basis over the terms of the policies for all products, usually 12 months. Premiums written include estimates in the Company’s programs, specialty lines, lenders products business and for participation in involuntary pools. Such premium estimates are derived from multiple sources which include the historical experience of the underlying business, similar business and available industry information. Unearned premium reserves represent the portion of premiums written that relates to the unexpired terms of in-force insurance policies.

Reinsurance. Reinsurance premiums written include amounts reported by brokers and ceding companies, supplemented by the Company’s own estimates of premiums where reports have not been received. The determination of premium estimates requires a review of the Company’s experience with the ceding companies, familiarity with each market, the timing of the reported information, an analysis and understanding of the characteristics of each line of business, and management’s judgment of the impact of various factors, including premium or loss trends, on the volume of business written and ceded to the Company. On an ongoing basis, the Company’s underwriters review the amounts reported by these third parties for reasonableness based on their experience and knowledge of the subject class of business, taking into account the Company’s historical experience with the brokers or ceding companies. In addition, reinsurance contracts under which the Company assumes business generally contain specific provisions which allow the Company to perform audits of the ceding company to ensure compliance with the terms and conditions of the contract, including accurate and timely reporting of information. Based on a review of all available information, management establishes premium estimates where reports have not been received. Premium estimates are updated when new information is received and differences between such estimates and actual amounts are recorded in the period in which estimates are changed or the actual amounts are determined.

Reinsurance premiums written are recorded based on the type of contracts the Company writes. Premiums on the Company’s excess of loss and pro rata reinsurance contracts are estimated when the business is underwritten. For excess of loss contracts, premiums are recorded as written based on the terms of the contract. Estimates of premiums written under pro rata contracts are recorded in the period in which the underlying risks are expected to incept and are based on information provided by the brokers and the ceding companies. For multi-year reinsurance treaties which are payable in annual installments, generally, only the initial annual installment is included as premiums written at policy inception due to the ability of the reinsured to commute or cancel coverage during the term of the policy. The remaining annual installments are included as premiums written at each successive anniversary date within the multi-year term.

Reinstatement premiums for the Company’s insurance and reinsurance operations are recognized at the time a loss event occurs, where coverage limits for the remaining life of the contract are reinstated under pre-defined contract terms. Reinstatement premiums, if obligatory, are fully earned when recognized. The accrual of reinstatement premiums is based on an estimate of losses and loss adjustment expenses, which reflects management’s judgment. Premium estimates are reviewed by management at least quarterly. Such review includes a comparison of actual reported premiums to expected ultimate premiums along with a review of the aging and collection of premium estimates. Based on management’s review, the appropriateness of the premium estimates is evaluated, and any adjustment to these estimates is recorded in the period in which it becomes known. Adjustments to premium estimates could be material and such adjustments could directly and significantly impact earnings favorably or unfavorably in the period they are determined because the estimated premium may be fully or substantially earned. A significant portion of amounts included as premiums receivable, which represent estimated premiums written, net of commissions, are not currently due based on the terms of the underlying contracts.

Reinsurance premiums written, irrespective of the class of business, are generally earned on a pro rata basis over the terms of the underlying policies or reinsurance contracts. Contracts and policies written on a “losses occurring” basis cover claims that may occur during the term of the contract or policy, which is typically 12 months. Accordingly, the premium is earned evenly over the term. Contracts which are written on a “risks attaching” basis cover claims which attach to the underlying insurance policies written during the terms of such contracts. Premiums earned on such contracts usually extend beyond the original term of the reinsurance contract, typically resulting in recognition of premiums earned over a 24-month period. Certain of the Company’s reinsurance contracts include provisions that adjust premiums or acquisition expenses based upon the experience under the contracts. Premiums written and earned, as well as related acquisition expenses, are recorded based upon the projected experience under such contracts.

The Company also writes certain reinsurance business that is intended to provide insurers with risk management solutions that complement traditional reinsurance. Under these contracts, the Company assumes a measured amount of insurance risk in exchange for an anticipated margin, which is typically lower than on traditional reinsurance contracts. The terms and conditions of these contracts may include additional or return premiums based on loss experience, loss corridors, sublimits and caps. Examples of such business include aggregate stop-loss coverages, financial quota share coverages and multi- year retrospectively rated excess of loss coverages. If these contracts are deemed to transfer risk, they are accounted for as reinsurance.

Mortgage. Mortgage guaranty insurance policies are contracts that are generally non-cancelable by the insurer, are renewable at a fixed price, and provide for payment of premiums on a monthly, annual or single basis. Upon renewal, the Company is not able to re-underwrite or re-price its policies. Consistent with industry accounting practices, premiums written on a monthly basis are earned as coverage is provided. Premiums written on an annual basis are amortized on a monthly pro rata basis over the year of coverage. Primary mortgage insurance premiums written on policies covering more than one year are referred to as single premiums. A portion of the revenue from single premiums is recognized in premiums earned in the current period, and the remaining portion is deferred as unearned premiums and earned over the estimated expiration of risk of the policy. If single premium policies related to insured loans are canceled due to repayment by the borrower and the policy is a non-refundable product, the remaining unearned premium related to each canceled policy is recognized as earned premium upon notification of the cancellation.

Unearned premiums represent the portion of premiums written that is applicable to the estimated unexpired risk of insured loans. A portion of premium payments may be refundable if the insured cancels coverage, which generally occurs when the loan is repaid, the loan amortizes to a sufficiently low amount to trigger a lender permitted or legally required cancellation, or the value of the property has increased sufficiently in accordance with the terms of the contract. Premium refunds reduce premiums earned in the consolidated statements of operations.

Acquisition Costs.Acquisition expenses and other expenses related to the Company’s underwriting operations that vary with, and are directly related to, the successful acquisition or renewal of business are deferred and amortized based on the type of contract. For property and casualty insurance and reinsurance contracts, deferred acquisition costs are amortized over the period in which the related premiums are earned. Consistent with mortgage insurance industry accounting practice, amortization of acquisition costs related to the mortgage insurance contracts for each underwriting year’s book of business is charged against revenue in proportion to estimated gross profits. Estimated gross profits are comprised of earned premiums and losses and loss adjustment expenses. For each underwriting year, the Company estimates the rate of amortization to reflect actual experience and any changes to persistency or loss development.

Acquisition expenses, net of ceding commissions received from reinsurers, consist principally of commissions and premium taxes paid to obtain the Company’s business. Other operating expenses also include expenses that vary with, and are directly related to, the acquisition of business. Deferred acquisition costs are carried at their estimated realizable value and take into account anticipated losses and loss adjustment expenses, based on historical and current experience, and anticipated investment income. A premium deficiency occurs if the sum of anticipated losses and loss adjustment expenses, unamortized acquisition costs and maintenance costs exceed unearned premiums (including expected future premiums) and anticipated investment income. A premium deficiency is recorded by charging any unamortized acquisition costs to expense to the extent required in order to eliminate the deficiency. If the premium deficiency exceeds unamortized acquisition costs then a liability is accrued for the excess deficiency.

(i) Reserves for Losses and Loss Adjustment Expenses

Insurance and Reinsurance. The reserve for losses and loss adjustment expenses consists of estimates of unpaid reported losses and loss adjustment expenses and estimates for losses incurred but not reported. The reserve for unpaid reported losses and loss adjustment expenses, established by management based on reports from ceding companies and claims from insureds, excludes estimates of amounts due from insureds related to losses under high deductible policies, and represents the estimated ultimate cost of events or conditions that have been reported to or specifically identified by the Company. Such reserves are supplemented by management’s estimates of reserves for losses incurred for which reports or claims have not been received. The Company’s reserves are based on a combination of reserving methods, incorporating both Company and industry loss development patterns. The Company selects the initial expected loss and loss adjustment expense ratios based on information derived by its underwriters and actuaries during the initial pricing of the business, supplemented by industry data where appropriate. Such ratios consider, among other things, rate changes and changes in terms and conditions that have been observed in the market. These estimates are reviewed regularly and, as experience develops and new information becomes known, the reserves are adjusted as necessary. Such adjustments, if any, are reflected in income in the period in which they are determined. As actual loss information has been reported, the Company has developed its own loss experience and its reserving methods include other actuarial techniques. Over time, such techniques have been given further weight in its reserving process based on the continuing maturation of the Company’s reserves. Inherent in the estimates of ultimate losses and loss adjustment expenses are expected trends in claims severity and frequency and other factors which may vary significantly as claims are settled. Accordingly, ultimate losses and loss adjustment expenses may differ materially from the amounts recorded in the accompanying consolidated financial statements. Losses and loss adjustment expenses are recorded on an undiscounted basis, except for excess workers’ compensation and employers’ liability business written by the Company’s insurance operations.

Mortgage. The reserves for mortgage guaranty insurance losses and loss adjustment expenses are the estimated claim settlement costs on notices of default that have been received by the Company, as well as loan defaults that have been incurred but have not been reported by the lenders. Consistent with industry accounting practice, the Company does not establish loss reserves for future claims on insured loans that are not currently in default (defined as two consecutive missed payments). The Company establishes loss reserves on a case-by-case basis when insured loans are identified as currently in default using estimated claim rates and average claim sizes for each report year, net of any salvage recoverable. The Company also reserves for defaults that have occurred but have not yet been reported to the Company prior to the close of an accounting period. To determine this reserve, the Company estimates the number of defaults not yet reported using historical information regarding late reported delinquencies and applies estimated claim rates and claim sizes for the estimated defaults not yet reported.

The establishment of reserves across the Company’s segments is an inherently uncertain process, are necessarily based on estimates, and the ultimate net cost may vary from such estimates. The methods for making such estimates and for establishing the resulting liability are reviewed and updated using the most current information available. Any resulting adjustments, which may be material, are reflected in current operations

(p) Recent Accounting Pronouncements

A new accounting standard issued in the 2014 second quarter will change the manner in which most companies recognize revenue. The standard requires that revenue reflect the transfer of goods or services to customers based on the consideration or payment the company expects to be entitled to in exchange for those goods or services; however, the standard does not change the accounting for insurance contracts or financial instruments. The new standard also requires enhanced disclosures about revenue. This accounting guidance is effective in the 2017 first quarter and may be applied on a full retrospective or modified retrospective approach. The Company is currently assessing the impact the implementation of this standard will have on its consolidated financial statements.

(q) Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price of an acquisition over the fair value of the net assets acquired and is assigned to the applicable reporting unit at acquisition. Goodwill is not amortized and is evaluated for impairment on an annual basis. Impairment tests may be performed more frequently if the facts and circumstances indicate a possible impairment. In performing impairment tests, the Company may first assess qualitative factors to determine whether it is more likely than not (that is, more than a 50% probability) that the fair value of a reporting unit exceeds its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in the accounting guidance.

Indefinite-lived intangible assets, such as insurance licenses, are not amortized and are evaluated for impairment similar to goodwill. Finite-lived intangible assets and liabilities include the value of insurance and reinsurance contracts, which are estimated based on the present value of future expected cash flows and amortized in ‘acquisition expenses’ in proportion to the estimated profits expected to be realized. Other finite-lived intangible assets or liabilities, including favorable or unfavorable contracts, are amortized in ‘other operating expenses’ over their useful lives. Finite-lived intangible assets and liabilities are periodically reviewed for indicators of impairment. An impairment is recognized when the carrying amount is not recoverable from its undiscounted cash flows and is measured as the difference between the carrying amount and fair value.

If goodwill or intangible assets are impaired, such assets are written down to their realizable values with the related expense recorded in the Company’s results of operations.

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Derivative Instruments (Details) (USD $)	3 Months Ended				9 Months Ended
	Sep. 30, 2014		Sep. 30, 2013		Sep. 30, 2014		Sep. 30, 2013		Dec. 31, 2013
Derivative offsetting [Abstract]
Derivative assets subject to master netting agreements	$ 203,900,000				$ 203,900,000				$ 28,000,000
Derivative liabilities subject to master netting agreements	343,700,000				343,700,000				14,600,000
Net realized gains (losses) on derivative instruments
Net realized gains (losses) on derivative instruments	7,449,000	[1]	1,574,000	[1]	7,083,000	[1]	16,842,000	[1]
Not Designated as Hedging Instrument [Member]
Derivative [Line Items]
Asset derivatives - fair value	407,690,000				407,690,000				39,859,000
Liability derivatives - fair value	(414,253,000)				(414,253,000)				(26,472,000)
Net derivatives - fair value	(6,563,000)				(6,563,000)				13,387,000
Net realized gains (losses) on derivative instruments
Net realized gains (losses) on derivative instruments	7,449,000		1,574,000		7,083,000		16,842,000
Not Designated as Hedging Instrument [Member] | Futures contracts
Net realized gains (losses) on derivative instruments
Net realized gains (losses) on derivative instruments	(354,000)		(2,804,000)		4,969,000		6,990,000
Not Designated as Hedging Instrument [Member] | Futures contracts | Other investments available for sale, at fair value
Derivative [Line Items]
Asset derivatives - fair value	437,000				437,000				461,000
Liability derivatives - fair value	(1,797,000)				(1,797,000)				(110,000)
Net derivatives - fair value	(1,360,000)				(1,360,000)				351,000
Net derivatives - notional value	1,333,987,000	[2]			1,333,987,000	[2]			475,967,000	[2]
Not Designated as Hedging Instrument [Member] | Foreign currency forward contracts
Net realized gains (losses) on derivative instruments
Net realized gains (losses) on derivative instruments	6,558,000		1,344,000		2,490,000		8,224,000
Not Designated as Hedging Instrument [Member] | Foreign currency forward contracts | Other investments available for sale, at fair value
Derivative [Line Items]
Asset derivatives - fair value	6,297,000				6,297,000				5,023,000
Liability derivatives - fair value	(1,783,000)				(1,783,000)				(3,090,000)
Net derivatives - fair value	4,514,000				4,514,000				1,933,000
Net derivatives - notional value	350,938,000	[2]			350,938,000	[2]			330,746,000	[2]
Not Designated as Hedging Instrument [Member] | TBAs
Net realized gains (losses) on derivative instruments
Net realized gains (losses) on derivative instruments	660,000		2,511,000		353,000		(699,000)
Not Designated as Hedging Instrument [Member] | TBAs | Fixed maturities available for sale, at fair value
Derivative [Line Items]
Asset derivatives - fair value	397,193,000				397,193,000				33,455,000
Liability derivatives - fair value	(407,954,000)				(407,954,000)				(21,731,000)
Net derivatives - fair value	(10,761,000)				(10,761,000)				11,724,000
Net derivatives - notional value	776,558,000	[2]			776,558,000	[2]			56,160,000	[2]
Not Designated as Hedging Instrument [Member] | Other
Net realized gains (losses) on derivative instruments
Net realized gains (losses) on derivative instruments	585,000		523,000		(729,000)		2,327,000
Not Designated as Hedging Instrument [Member] | Other | Other investments available for sale, at fair value
Derivative [Line Items]
Asset derivatives - fair value	3,763,000				3,763,000				920,000
Liability derivatives - fair value	(2,719,000)				(2,719,000)				(1,541,000)
Net derivatives - fair value	1,044,000				1,044,000				(621,000)
Net derivatives - notional value	$ 758,581,000	[2]			$ 758,581,000	[2]			$ 347,916,000	[2]

[1] See Note 9 for information on the Company’s derivative instruments.

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

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Earnings Per Common Share (Tables)

9 Months Ended

Sep. 30, 2014

Earnings Per Share [Abstract]

Schedule of computation of basic and diluted earnings per common share

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

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2014			2013			2014			2013
Numerator:
Net income	$	223,264		$	114,825		$	614,126		$	548,241
Amounts attributable to noncontrolling interests	5,411			—			5,065			—
Net income available to Arch	228,675			114,825			619,191			548,241
Preferred dividends	(5,484		)	(5,484		)	(16,453		)	(16,453		)
Net income available to Arch common shareholders	$	223,191		$	109,341		$	602,738		$	531,788
Denominator:
Weighted average common shares outstanding — basic	131,945,962			131,495,296			132,151,824			131,262,309
Effect of dilutive common share equivalents:
Nonvested restricted shares	1,156,790			1,124,644			1,134,481			1,094,327
Stock options (1)	2,773,853			3,414,473			3,067,867			3,324,193
Weighted average common shares and common share equivalents outstanding — diluted	135,876,605			136,034,413			136,354,172			135,680,829
Earnings per common share:
Basic	$	1.69		$	0.83		$	4.56		$	4.05
Diluted	$	1.64		$	0.80		$	4.42		$	3.92

_________________________________________________

(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 2014 third quarter and 2013 third quarter, the number of stock options excluded were 1,355,087 and 387,249, respectively. For the nine months ended September 30, 2014 and 2013, the number of stock options excluded were 1,378,249 and 1,735,995, respectively.

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Variable Interest Entities and Noncontrolling Interests - Variable interest entity (Details) (Variable Interest Entity, Primary Beneficiary, Watford Holdings Ltd, USD $)	0 Months Ended	1 Months Ended
	Mar. 20, 2014	Mar. 31, 2014
Variable Interest Entity, Primary Beneficiary | Watford Holdings Ltd
Variable Interest Entity [Line Items]
Initial capitalization amount		$ 1,100,000,000
Proceeds from issuance of common shares		907,300,000
Net proceeds from issuance of common shares		895,600,000
Proceeds on issuance of preference shares		226,600,000
Net proceeds on issuance of preference shares		219,200,000
Initial investment contribution amount	$ 100,000,000	$ 100,000,000
Ownership percentage		11.00%

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Other Comprehensive Income (Loss)

9 Months Ended

Sep. 30, 2014

Comprehensive Income Note Disclosure [Abstract]

Other Comprehensive Income (Loss)

Other Comprehensive Income (Loss)

The following table presents details about amounts reclassified from accumulated other comprehensive income:

		Amounts Reclassed from AOCI
	Consolidated Statement of Income	Three Months Ended						Nine Months Ended
Details About	Line Item That Includes	September 30,						September 30,
AOCI Components	Reclassification	2014			2013			2014			2013
Unrealized appreciation on available-for-sale investments
	Net realized gains (losses)	$	27,715		$	(21,825	)	$	77,488		$	37,176
	Other-than-temporary impairment losses	(8,593		)	(901		)	(26,313		)	(3,873		)
	Total before tax	19,122			(22,726		)	51,175			33,303
	Income tax (expense) benefit	(1,639		)	2,025			(4,158		)	(1,387		)
	Net of tax	$	17,483		$	(20,701	)	$	47,017		$	31,916

The following table presents the tax effects allocated to each component of other comprehensive income (loss):

	Before Tax Amount			Tax Expense (Benefit)			Net of Tax Amount
Three Months Ended September 30, 2014
Unrealized appreciation (decline) in value of investments:
Unrealized holding gains (losses) arising during period	$	(90,276	)	$	343		$	(90,619	)
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)	—			—			—
Less reclassification of net realized gains included in net income	19,122			1,639			17,483
Foreign currency translation adjustments	(23,595		)	—			(23,595		)
Other comprehensive income (loss)	$	(132,993	)	$	(1,296	)	$	(131,697	)
Three Months Ended September 30, 2013
Unrealized appreciation (decline) in value of investments:
Unrealized holding gains (losses) arising during period	$	41,122		$	(104	)	$	41,226
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)	(173		)	—			(173		)
Less reclassification of net realized gains (losses) included in net income	(22,726		)	(2,025		)	(20,701		)
Foreign currency translation adjustments	29,523			—			29,523
Other comprehensive income (loss)	$	93,198		$	1,921		$	91,277
Nine Months Ended September 30, 2014
Unrealized appreciation (decline) in value of investments:
Unrealized holding gains (losses) arising during period	$	100,274		$	11,112		$	89,162
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)	—			—			—
Less reclassification of net realized gains included in net income	51,175			4,158			47,017
Foreign currency translation adjustments	(14,923		)	—			(14,923		)
Other comprehensive income (loss)	$	34,176		$	6,954		$	27,222
Nine Months Ended September 30, 2013
Unrealized appreciation (decline) in value of investments:
Unrealized holding gains (losses) arising during period	$	(229,919	)	$	(21,054	)	$	(208,865	)
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)	(175		)	—			(175		)
Less reclassification of net realized gains included in net income	33,303			1,387			31,916
Foreign currency translation adjustments	(4,106		)	—			(4,106		)
Other comprehensive income (loss)	$	(267,503	)	$	(22,441	)	$	(245,062	)