Best Revises Arch Capital and Subs Outlook to Positive; Affirms Ratings

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 Bermuda’s Arch Reinsurance Ltd. and its strategic affiliates. Best also 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), respectively, as well as all debt ratings of Arch Capital Group Ltd.

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,” Best explained.

“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.”

Best also noted that “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.”

As partial offsetting factors, Best cited “the current soft market conditions in which Arch, as well as all industry participants, must navigate.

Best summarized the ratings affected as follows:
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 percent senior unsecured notes, due 2034
— “bbb-” on $200 million 8 percent non-cumulative preferred shares, Series A
— “bbb-” on $125 million 7.875 percent 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

Source: A.M. Best