A.M. Best Revises Outlook to Positive for Arch Capital Group Ltd and Its Subsidiaries

A.M. Best Co. has revised the outlook to positive from stable and affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of “a+” of Arch Reinsurance Ltd. (Arch) (Bermuda) and its strategic affiliates. A.M. Best also has revised the outlook to positive from stable and affirmed the ICRs of “bbb” and “bbb+” of Arch Capital Group (US) Inc. (New York, NY) and the ultimate holding company, Arch Capital Group Ltd (Bermuda) [NASDAQ: ACGL], respectively, as well as all debt ratings of Arch Capital Group Ltd. (See below for a detailed listing of the companies and ratings.)

The revised outlook reflects Arch’s continued superior operating performance, consistently excellent capitalization and demonstrated risk management prowess. Arch maintains a very strong underwriting culture, which centers on active cycle management and being adaptive to varied market conditions.

Overall operating results since Arch’s inception have been strong and in certain instances have exceeded most peers in the sector. Typically, Arch has had a smaller share of major industry losses, which demonstrates the superior risk management of the company. Furthermore, Arch has a prudent investment portfolio and conservative reserving philosophy, which helps maintain a strong balance sheet. Products are offered on a worldwide basis in both primary and reinsurance markets for property/casualty lines of business.

Partially offsetting these positive rating attributes are the current soft market conditions in which Arch, as well as all industry participants, must navigate.

The FSR of A (Excellent) and ICRs of “a+” have been affirmed for Arch Reinsurance Ltd. and its following affiliates:

Arch Reinsurance Company
Arch Insurance Company
Arch Specialty Insurance Company
Arch Excess & Surplus Insurance Company
Arch Insurance Company (Europe) Ltd

The following debt ratings have been affirmed:

Arch Capital Group Ltd—

-- “bbb+” on $300 million 7.35% senior unsecured notes, due 2034

-- “bbb-” on $200 million 8% non-cumulative preferred shares, Series A

-- “bbb-” on $125 million 7.875% non-cumulative preferred shares, Series B

The following indicative ratings have been affirmed for debt securities available under the existing shelf registration:

Arch Capital Group Ltd—

-- “bbb+” on senior debt

-- “bbb” on subordinated debt

-- “bbb-” on preferred stock

Arch Capital Group (U.S.) Inc. (guaranteed by Arch Capital Group Ltd)—

-- “bbb+” on senior debt

-- “bbb” on subordinated debt

-- “bbb-” on preferred stock

The principal methodology used in determining these ratings is Best’s Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Additional key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding BCAR for Property/Casualty Insurers”; “Understanding Universal BCAR”; “Natural Catastrophe Stress Test Methodology”; “Rating Members of Insurance Groups”; and “A.M. Best’s Ratings & the Treatment of Debt.” Methodologies can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Arch Capital (NASDAQ:ACGL)
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