AM Best Revises Issuer Credit Rating Outlook to Positive for Arch Capital Group Ltd. and Its Subsidiaries
AM Best has revised the outlooks to positive from stable for the Long-Term Issuer Credit Ratings (Long-Term ICRs) and affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term ICRs of "aa-" (Superior) of Arch Reinsurance Ltd. (Arch) (Bermuda) and its strategic affiliates. Concurrently, AM Best has revised the outlook to positive from stable and affirmed the Long-Term ICRs of "a-" (Excellent) 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 the FSR is stable.
The Credit Ratings (ratings) of Arch reflect the group's balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management (ERM).
Arch's ratings, along with its Long-Term ICRs outlooks revision to positive from stable, are based on its historically strong operating performance. Though the reinsurance market has grown more favorable, particularly in the period after the January 1, 2023 renewal season, Arch has a proven track record, even in softer market years, of producing superior underwriting results and investment returns. In the recent market with more favorable underwriting conditions, the group continued to differentiate itself from its peers. A key factor in Arch's success has been its three underwriting segments (reinsurance, primary insurance, mortgage insurance) and its unique agility in managing underwriting cycles.
Additionally, these ratings reflect Arch's balance sheet strength assessment of strongest, as measured by Best's Capital Adequacy Ratio (BCAR), and strong management team. Arch performed favorably in 2023, with the group producing record high earnings. Arch also has maintained its robust risk-adjusted capital position, which contemplates a significant stressed ultimate loss, as calculated by AM Best's "Evaluating Mortgage Insurance" criteria procedure. AM Best utilized a conservative stress scenario for Arch's mortgage insurance book of business when calculating stress-tested risk-adjusted capitalization. AM Best also recognizes that the mortgage insurance business relies heavily on financial models that can vary from actual results.
The positive outlooks on the Long-Term ICRs reflects AM Best's expectation that the group will continue to outperform its peers through profitable underwriting and robust investment returns, as it supports recent strategic acquisitions and continues to enhance its market position.
The FSR of A+ (Superior) and the Long-Term ICRs of "aa-" (Superior) have been affirmed, with the Long-Term ICRs outlooks revised to positive from stable and the FSR outlook maintained at stable, 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 Group Reinsurance Ltd.
- Arch Insurance Canada Ltd.
- Alwyn Insurance Company Limited
- Arch Insurance (UK) Limited
The following Long-Term IRs have been affirmed with the outlooks revised to positive from stable:
Arch Capital Group Ltd.—
-- "a-" (Excellent) on $300 million 7.35% senior unsecured notes, due 2034
-- "bbb" (Good) on $450 million 5.25% non-cumulative preferred shares, Series E
-- "bbb" (Good) on $330 million 5.45% non-cumulative preferred shares, Series F
Arch Capital Group (US) Inc (guaranteed by Arch Capital Group Ltd.)—
-- "a-" (Excellent) on $500 million 5.144% senior unsecured notes, due 2043
Arch Capital Finance LLC (guaranteed by Arch Capital Group Ltd.)—
-- "a-" (Excellent) on $500 million 4.011% senior unsecured notes, due 2026
-- "a-" (Excellent) 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 the outlooks revised to positive from stable:
Arch Capital Group Ltd.—
-- "a-" (Excellent) on senior unsecured debt
-- "bbb+" (Good) on subordinated debt
-- "bbb" (Good) on preferred stock
Arch Capital Group (US) Inc (guaranteed by Arch Capital Group Ltd.)—
-- "a-" (Excellent) on senior unsecured debt
-- "bbb+" (Good) on subordinated debt
-- "bbb" (Good) 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 Guide to Best's Credit Ratings. For information on the proper use of Best's Credit Ratings, Best's Performance Assessments, Best's Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best's Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
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