Arch Affirmed, Outlook Positive

S&P revised its outlook on Arch Capital Group Ltd. to positive from stable, and affirmed its “BBB-” counterparty credit rating on Arch.

The outlook was revised to reflect Arch and its subsidiaries’ substantially improved capital adequacy position relative to prior years, the group’s moderating premium growth, and the expectation that Arch’s strategy will remain prudent in a market that has already begun to soften. The ratings are based on the group’s growing business franchise, very strong operating performance, very strong capital adequacy, and strong financial flexibility. These factors are offset by the companies’ relatively short operating history and significant proportion of casualty writings that have not yet fully matured.

The group is expected to post modest growth in the low-single-digit range in 2005, reflecting management’s continued underwriting discipline. Operating results are expected to remain strong. Assuming normal catastrophe losses, operating performance is expected to improve further in 2005, and capital adequacy is expected to remain very strong.