AM Best Affirms Credit Ratings of Arch Capital Group Ltd. and Its Subsidiaries
18 October 2019 - 1:18AM
Business Wire
AM Best has affirmed the Financial Strength Rating (FSR)
of A+ (Superior) and the Long-Term Issuer Credit Rating (Long-Term
ICR) of “aa-” of Arch Reinsurance Ltd. (Arch) (Bermuda) and its
strategic affiliates. Concurrently, AM Best has affirmed the
Long-Term ICR of “a-” and the Long-Term Issue Credit Ratings
(Long-Term IRs) of Arch Capital Group Ltd. (Arch Capital) (Bermuda)
[NASDAQ: ACGL], the ultimate holding company; Arch Capital Group
(US) Inc (Delaware); and Arch Capital Finance LLC (Delaware). (See
below for a detailed listing of the companies and ratings.) The
outlook of these Credit Ratings (ratings) is stable.
The ratings of Arch reflect the group’s balance sheet strength,
which AM Best categorizes as strongest, as well as its strong
operating performance, favorable business profile and appropriate
enterprise risk management.
The ratings are based on Arch’s historically strong operating
performance, its balance sheet strength, as measured by Best’s
Capital Adequacy Ratio, and strong management team. Arch continues
to perform favorably on most operating metrics while maintaining a
strong risk-adjusted capital position, despite a significant
Stressed Ultimate Loss, as calculated according to AM Best’s
“Evaluating Mortgage Insurance” criteria procedure, and low
risk-adjusted investment market returns. In years with large market
losses, such as hurricanes Katrina, Rita and Wilma in 2005; the
financial crisis in 2008; the string of global catastrophes in
2011; and the natural catastrophe activity experienced in
2017-2018, Arch has performed well compared with most of its peers.
This robust performance was led by Arch’s extremely profitable
mortgage (re)insurance business. In addition, Arch has demonstrated
that it will actively manage the (re)insurance cycle.
The stable outlooks reflect the successful integration of United
Guaranty Corporation, which Arch finalized the acquisition of in
late 2016, as well as the significant contribution of the United
Guaranty Corporation business to Arch’s net income and retained
earnings during 2018.
AM Best also recognizes that the mortgage insurance business
relies heavily on financial models that can vary from actual
results. AM Best utilized what it believes to be a conservative
stress scenario for Arch’s mortgage insurance book of business when
calculating stress-tested risk-adjusted capitalization. Mortgage
insurance products have a relatively long exposure period when
compared with most of Arch’s current property/casualty insurance
and reinsurance products, which can be characterized as medium tail
on average. AM Best considered long-term sources of liquidity in
the evaluation of these potential tail risk events.
The FSR of A+ (Superior) and the Long-Term ICRs of “aa-” have
been affirmed with stable outlooks for Arch Reinsurance Ltd. and
its following affiliates:
- Arch Reinsurance Company
- Arch Insurance Company
- Arch Specialty Insurance Company
- Arch Property Casualty Insurance Company
- Arch Indemnity Insurance Company
- Arch Insurance Canada Ltd.
- Alwyn Insurance Company Limited
- Arch Insurance (UK) Limited
The following Long-Term IR has been assigned with a stable
outlook:
Arch Capital Group Ltd.—
-- “bbb” on $330 million 5.45% non-cumulative preferred shares,
Series C
The following Long-Term IRs have been affirmed with stable
outlooks:
Arch Capital Group Ltd.—
-- “a-” on $300 million 7.35% senior unsecured notes, due
2034
-- “bbb” on $450 million 5.25% non-cumulative preferred shares,
Series C
Arch Capital Group (US) Inc (guaranteed by Arch Capital Group
Ltd.)—
-- “a-” on $500 million 5.144% senior unsecured notes, due
2043
Arch Capital Finance LLC (guaranteed by Arch Capital Group
Ltd.)—
-- “a-” on $500 million 4.011% senior unsecured notes, due
2026
-- “a-” on $450 million 5.031% senior unsecured notes, due
2046
The following indicative Long-Term IRs under the existing shelf
registration have been affirmed with stable outlooks:
Arch Capital Group Ltd.—
--“a-” on senior unsecured debt
-- “bbb+” on subordinated debt
-- “bbb” on preferred stock
Arch Capital Group (US) Inc (guaranteed by Arch Capital Group
Ltd.)—
--“a-” on senior unsecured debt
-- “bbb+” on subordinated debt
-- “bbb” on preferred stock
This press release relates to Credit Ratings that have been
published on AM Best’s website. For all rating information relating
to the release and pertinent disclosures, including details of the
office responsible for issuing each of the individual ratings
referenced in this release, please see AM Best’s Recent Rating
Activity web page. For additional information regarding the use and
limitations of Credit Rating opinions, please view Understanding
Best’s Credit Ratings. For information on the proper media use of
Best’s Credit Ratings and AM Best press releases, please view Guide
for Media - Proper Use of Best’s Credit Ratings and AM Best Rating
Action Press Releases.
AM Best is a global credit rating agency and information
provider with an exclusive focus on the insurance industry. Visit
www.ambest.com for more information.
Copyright © 2019 by A.M. Best Rating
Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
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version on businesswire.com: https://www.businesswire.com/news/home/20191017005566/en/
Steven M. Chirico, CPA Director +1 908 439 2200, ext.
5087 steven.chirico@ambest.com
Robert B. DeRose Senior Director +1 908 439
2200, ext. 5453 robert.derose@ambest.com
Christopher Sharkey Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com
Jim Peavy Director, Public Relations +1 908 439
2200, ext. 5644 james.peavy@ambest.com
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