Recently, Fitch Ratings affirmed the issuer default rating
Arch Capital Group Ltd.
) at "A". The rating agency also affirmed the ratings on the
company's senior unsecured notes at "A-" and preferred shares at
Further, Fitch affirmed the insurer financial strength (IFS)
rating of Arch capital's subsidiaries - Arch Reinsurance Ltd.,
Arch Reinsurance Company, Arch Reinsurance Europe Underwriting
Limited, Arch Insurance Company, Arch Excess and Surplus
Insurance Company, Arch Specialty Insurance Company, Arch
Indemnity Insurance Company and Arch Insurance Company (Europe)
Limited - at "A+." All the above-mentioned ratings carry a stable
The rating affirmation was based on the company's strong
fundamentals including run rate profitability, financial
leverage, interest coverage, preferred dividend coverage and risk
reserve. However, the ratings also take into account negatives
such as catastrophe risks, possibility of an unfavorable impact
due to high concentration of longer duration casualty insurance
in the business mix and a challenging market-rate environment in
the property and casualty business.
While the stable outlook indicates low possibility of a
revision in the ratings, steady increase in the size and market
position of Arch Capital's equity along with continued strong run
rate profits, stability in earnings, and moderate operating and
financial leverage can lead to a rating upgrade.
Alternatively, a significant unfavorable movement in the
prior-year reserve development that raises concerns about the
company's underwriting profitability and volatility could lead to
a downgrade. Additionally, a surge in the underwriting leverage
above 1.0x or net written premiums-to-equity ratio and
equity-credit adjusted financial leverage beyond 25% can lead to
a downward revision in ratings.
Arch Capital carries a Zacks Rank #2 (Buy). Other property and
casualty insurers worth considering are
Cincinnati Financial Corp.
Navigators Group Inc.
Maiden Holdings, Ltd.
). All these companies carry a Zacks Rank #1 (Strong Buy).
ARCH CAP GP LTD (ACGL): Free Stock Analysis
CINCINNATI FINL (CINF): Free Stock Analysis
MAIDEN HOLDINGS (MHLD): Free Stock Analysis
NAVIGATORS GRP (NAVG): Free Stock Analysis
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