AM Best Enhances Arch Capital Group’s Credit Rating Outlook
AM Best has elevated the outlook for the Long-Term Issuer Credit Ratings (Long-Term ICRs) of Arch Capital Group Ltd. and its subsidiaries from stable to positive. The credit agency also affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term ICRs of “aa-“ (Superior) for Arch Reinsurance Ltd. (Arch) (Bermuda) and its affiliates.
Additionally, AM Best has revised the outlook to positive from stable and affirmed the Long-Term ICRs of “a-“ (Excellent) along with the Long-Term Issue Credit Ratings (Long-Term IRs) for Arch Capital Group Ltd. (Arch Capital) (Bermuda), the ultimate holding company; Arch Capital Group (US) Inc (Delaware); and Arch Capital Finance LLC (Delaware).
The ratings underscore Arch Capital Group’s exceptionally strong balance sheet, robust operating performance, favorable business profile, and suitable enterprise risk management (ERM), according to AM Best.
The adjustment of the Long-Term ICR outlooks to positive is credited to Arch’s consistently impressive operating performance. Despite variable market conditions, including the recent advantageous reinsurance market after the January 1, 2023, renewal season, Arch has maintained a proven track record of delivering outstanding underwriting results and investment returns, even during less favorable market years.
Key Factors for Arch’s Success
“In the current market with more favorable underwriting conditions, Arch has continued to distinguish itself from its competitors. A critical element of Arch’s success lies in its three underwriting segments (reinsurance, primary insurance, mortgage insurance) and its unique ability to navigate underwriting cycles,” noted AM Best.
AM Best awarded Arch its highest ratings due to its strong balance sheet, as indicated by Best’s Capital Adequacy Ratio (BCAR), and its strong management team.
Arch’s performance in 2023 was noteworthy, marked by record-high earnings and a solid risk-adjusted capital position, which includes a significant stressed ultimate loss as calculated using AM Best’s criteria.
AM Best applied a conservative stress scenario for Arch’s mortgage insurance business and recognizes the reliance of the mortgage insurance business on financial models that might deviate from actual outcomes.
Given the positive Long-Term ICR outlooks, AM Best anticipates the group will continue to outperform its peers. This could be accomplished through profitable underwriting, robust investment returns, support for recent strategic acquisitions, and continued enhancement of its market position.
