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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - APRIL 30, 2004 12:00 AM (EDT)
A.M. Best Co. has assigned a senior debt rating of "bbb-" to Arch Capital Group Ltd.'s (Arch) (Bermuda) [NASDAQ:ACGL] $300 million 7.35% senior unsecured notes due May 1, 2034. The rating outlook is stable. The financial strength rating of A- (Excellent) of Arch Reinsurance Ltd. (Hamilton, Bermuda) and its affiliated companies is unaffected.
The proceeds from the senior notes will be used to repay an existing $200 million bank revolving credit facility with the remainder used to support the existing business of Arch's insurance and reinsurance operations, as well as for general corporate purposes. Following the transaction, Arch's debt to adjusted capital will be approximately 13%, and fixed charge coverage is expected to remain in excess of 15 times.
The rating reflects the company's excellent capitalization, with $2.0 billion of shareholders' equity at March 31, 2004, and solid operating results since its inception. These positive attributes stem from the strength of Arch's senior management team, which has enabled the group to quickly build the necessary operating infrastructure to service a strong broker distribution network and insure that prudent underwriting and risk management controls are properly adhered to within each of its business units.
In 2003, Arch produced a combined ratio of 90%, benefiting from higher market rates, light catastrophes and an unencumbered balance sheet. Furthermore, the company's investment portfolio has remained conservative, primarily invested in high quality government and corporate fixed income securities.
Partially offsetting these strengths is Arch's aggressive underwriting leverage position relative to other start-up operations, the rapid expansion into primary insurance businesses and the overall casualty orientation of various insurance and reinsurance businesses where pricing and reserve adequacy may not be apparent for several years. A.M. Best will continue to closely monitor Arch's operations and performance.
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A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source.