A.M. Best Assigns Debt Rating to Arch Capital Group Limited's Preferred Share Offering
23 Mai 2006 - 5:25PM
Business Wire
A.M. Best Co. has assigned a debt rating of "bb" to Arch Capital
Group Limited's (Arch) (NASDAQ: ACGL) (Bermuda) $125 million 7.875%
non-cumulative Series B preferred shares. The outlook for this
rating is stable. Arch's remaining debt ratings and the financial
strength rating of A- (Excellent) of Arch Reinsurance Ltd.
(Hamilton, Bermuda) and its affiliated companies are unchanged. The
proceeds from the preferred share offering will be used for general
corporate purposes. A.M. Best anticipates that these proceeds will
be used to support additional opportunities in lines of business
that experience rate increases and meet Arch's return expectations.
Arch may also redeem the Series B preferred shares in whole or in
part at a redemption price of $25 per share on or after May 15,
2011. Following the transaction, Arch's debt-to-adjusted capital
will be approximately 19%, and fixed charge coverage is expected to
be in the high single-digit range. The rating reflects Arch's
excellent capitalization, solid operating performance and its well
regarded operating franchise in both its primary and reinsurance
business. The combination of Arch's solid historical profits,
strong risk management capability and demonstrated financial
flexibility has enabled it to withstand the heightened loss
activity of the 2005 hurricane season. Partially offsetting these
strengths is Arch's higher underwriting leverage position relative
to its peer group, combined with the overall casualty orientation
of its reinsurance and insurance lines of business. Despite Arch's
loss reserve adequacy based on current actuarial studies,
approximately 60% of its book of business is in long-tail casualty
lines. Due to the company's relatively short operating history and
long-tail nature of the casualty business, the pricing and reserve
adequacy of these lines will not be fully apparent for several
years. A.M. Best will continue to monitor Arch's loss reserve
development, capitalization and operating performance. The
following debt rating has been assigned: Arch Capital Group
Limited-- -- "bb" on $125 million 7.875% non-cumulative Series B
preferred shares For Best's Debt Ratings, all other Best's Ratings,
an overview of the rating process and rating methodologies, please
visit www.ambest.com/ratings. For current Best's Ratings,
independent data and analysis on more than 330 reinsurance
companies, please visit www.ambest.com/reinsurance. A.M. Best Co.,
established in 1899, is the world's oldest and most authoritative
insurance rating and information source. For more information,
visit A.M. Best's Web site at www.ambest.com.
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