ACGL Arch Capital Group Ltd

A.M. Best Co. has affirmed the financial strength rating (FSR) of A (Excellent) and the issuer credit ratings (ICR) of �a� of Arch Reinsurance Ltd. (Arch) (Bermuda) and its reinsured affiliates. A.M. Best also has affirmed the ICR of �bbb-� of Arch Capital Group (US) Inc. (Greenwich, CT), and the ICR of �bbb� and all debt ratings of Arch Capital Group Limited (Bermuda) (NASDAQ: ACGL). The outlook for all ratings is stable. (See below for a detailed list of the companies and ratings.) These ratings reflect Arch�s excellent capitalization, strong operating performance since its inception and robust risk management system. Arch�s proven risk management capabilities have created a recent and historical operating performance, enabling the company to be among the leaders in the Bermuda market. Arch, along with its affiliated companies, offers primary and reinsurance coverage for both property/casualty lines on a worldwide basis. The combination of Arch�s risk management characteristics, operational controls and diversified business profile have created an organization capable of effectively responding to changes in the market cycle. Furthermore, the company�s solid financial flexibility provides strong access to both debt and equity markets. Arch�s financial leverage measures remain low as compared to the industry. A.M. Best expects the company to maintain financial leverage as measured by debt and preferred-to-total capital below 20%, while fixed charge coverage is expected to remain in the upper single digit range. Arch�s reinsurance and insurance casualty loss reserves for earlier accident years have been maturing and proven to be within conservative ranges. The absence of adverse development in these reserves has provided A.M. Best with comfort concerning Arch�s initial loss ratio assumptions. Partially offsetting these strengths will be Arch�s ability to maintain its underwriting discipline and competitive position within its chosen markets given the additional capital that has entered the industry through new company formations, sidecars and strong 2006 earnings. The FSR of A (Excellent) and ICRs of �a� have been affirmed for Arch Reinsurance Ltd. and its following reinsured affiliates: Arch Reinsurance Company Arch Insurance Company Arch Specialty Insurance Company Arch Excess & Surplus Insurance Company Arch Insurance Company (Europe) Ltd The ICR of �bbb� has been affirmed for Arch Capital Group Limited. The ICR of �bbb-� has been affirmed for Arch Capital Group (US) Inc. The following debt ratings have been affirmed: Arch Capital Group Limited� -- �bbb� on $300 million 7.35% senior unsecured notes, due 2034 -- �bb+� on $200 million 8% non-cumulative preferred shares, Series A, due 2011 -- �bb+� on $125 million 7.875% non-cumulative preferred shares, Series B The following indicative shelf ratings have been affirmed for debt securities available under the existing shelf registrations: Arch Capital Group Limited� -- �bbb� on senior debt -- �bbb-� on subordinated debt -- �bb+� on preferred stock Arch Capital Group (U.S.) Inc. (guaranteed by Arch Capital Group Limited)� -- �bbb� on senior debt Founded in 1899, A.M. Best Company is a full-service credit rating organization dedicated to serving the financial services industries, including the banking and insurance sectors. For more information, visit www.ambest.com.