Recently, A.M. Best Co. affirmed the issuer credit rating
Arch Capital Group Ltd.
) at "a-" as well as its debt ratings with a stable outlook. The
rating agency also affirmed the financial strength rating (FSR)
at "A+" and ICR at "aa-" of the company's subsidiary - Arch
Reinsurance Ltd. and its strategic affiliates - Arch Reinsurance
Company, Arch Insurance Company, Arch Specialty Insurance
Company, Arch Excess & Surplus Insurance Company and Arch
Insurance Company (Europe) Ltd.
Further, A. M. Best conferred an FSR of "A+" and an ICR of
"aa-" on Arch Capital's operating subsidiary, Arch Insurance
Canada Ltd., which was earlier a branch company. The rating
agency also affirmed the ICR of Arch Capital Group (US) Inc. at
"bbb+". All the above-mentioned ratings carry a stable
The rating affirmations were based on Arch Capital's strong
operating performance despite the difficult operating
environment, along with continued strong capitalization levels
and a well established enterprise risk management system. The
company also follows impressive underwriting practices and easily
adapts itself to various market conditions through active
management of the underwriting cycle. This is important
considering the historically low underwriting yields being
witnessed in the industry at present.
Further, Arch Capital has a track record of generating strong
operating results since inception and it usually outperforms
peers in certain operating metrics. The company usually incurs
only a small portion of the total industry loss in case of
catastrophic events such as Hurricane Sandy. This helps the
company maintain stability in financial results.
Arch Capital also has a sensible investment portfolio and a
conservative approach toward reserve creation, leading to a
sturdy balance sheet. However, the adverse market conditions
partially offset these positives.
A. M. Best can change the outlook to negative in case the
operating performance starts deteriorating consistently, the
company suffers high catastrophe or investment losses compared
with its peers or its risk-adjusted capital declines
significantly. On the other hand, if Arch Capital continues to
outperform its peers in terms of operating profits and maintains
impressive risk-adjusted capital levels, then a revision of the
outlook to positive and a rating upgrade are possible.
Arch Capital carries a Zacks Rank #3 (Hold). Other property
and casualty insurers such as
Cincinnati Financial Corp.
Fidelity National Financial, Inc.
) are worth considering. All these stocks carry a Zacks Rank #1
ARCH CAP GP LTD (ACGL): Free Stock Analysis
CINCINNATI FINL (CINF): Free Stock Analysis
FIDELITY NAT FI (FNF): Free Stock Analysis
RLI CORP (RLI): Free Stock Analysis Report
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