Form 8-K - Current report

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

 

Current Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

 

August 1, 2024

Date of Report (Date of earliest event reported) 

Arch Capital Group Ltd.

(Exact name of registrant as specified in its charter)

Bermuda

001-16209

98-0374481

(State or other jurisdiction of incorporation or organization)

(Commission File Number)

(I.R.S. Employer Identification No.)

 

Waterloo House, Ground Floor, 100 Pitts Bay Road, Pembroke HM 08, Bermuda

(Address of principal executive offices) (Zip Code)

 

Registrant’s telephone number, including area code:

[phone]

 

N/A

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

☐    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class

Trading Symbol (s)

Name of each exchange on which registered

Common shares, $0.0011 par value per share

ACGL

NASDAQ

Stock Market

Depositary shares, each representing a 1/1,000th interest in a 5.45% Series F preferred share

ACGLO

NASDAQ

Stock Market

Depositary shares, each representing a 1/1,000th interest in a 4.55% Series G preferred share

ACGLN

NASDAQ

Stock Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

    Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  o

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Introductory Note

This Current Report on Form 8-K is being filed in connection with the completion of the previously announced transaction pursuant to the Master Transaction Agreement, dated April 5, 2024 (as amended, the “Master Transaction Agreement”), by and among Arch Insurance North America, part of Arch Capital Group Ltd. (the “Company”), Allianz Global Risks US Insurance Company, an Illinois insurance company (“Seller”), and Arch Capital Group (U.S.) Inc., a Delaware corporation (“ACGUS”), solely for purposes of Section 5.25 and Article X of the Master Transaction Agreement.

ITEM 1.01    ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.

On August 1, 2024, the Company, Seller and ACGUS entered into Amendment No. 1 to the Master Transaction Agreement to make certain clarifying changes to more accurately reflect the intent of the parties thereto. Except as set forth in such amendment, all other terms of the Master Transaction Agreement remain the same. A copy of Amendment No. 1 to the Master Transaction Agreement is attached hereto as Exhibit 2.2.

The foregoing description of Amendment No. 1 to the Master Transaction Agreement and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by, the full text of Amendment No. 1 to the Master Transaction Agreement (filed as Exhibit 2.2 hereto), which is incorporated into this Item 1.01 by reference.

ITEM 2.01    COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS.

The information set forth in the Introductory Note and Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 2.01.

On August 1, 2024, the Company consummated the previously announced transactions contemplated by the Master Transaction Agreement pursuant to which the Company acquired Seller’s U.S Middle Market Property & Casualty Insurance and U.S. Entertainment Property and Casualty Insurance Business written by Fireman’s Fund Insurance Company, an affiliate of Seller (“FFIC”), and its subsidiaries (together with FFIC, collectively, the “Business Entities”), in each case, relating to relevant policies with accident years 2016 and onwards (collectively, the “Business”), as well as certain assets of Seller and its affiliates related to the Business. In connection with the acquisition of the Business, affiliates of the Company also entered into certain reinsurance agreements relating to the Business and the Business Entities and other agreements providing for administration and other services for the Business Entities by affiliates of the Company for the applicable policies being reinsured following the closing.

As aggregate consideration for the transactions contemplated by the Master Transaction Agreement, the Company assumed certain liabilities and paid to Seller a base purchase price equal to $450 million, on the terms and subject to the conditions set forth in the Master Transaction Agreement.

The material terms of the Master Transaction Agreement were previously reported in Item 1.01 of the Current Report on Form 8-K filed on April 5, 2024 and the material terms of Amendment No. 1 to the Master Transaction Agreement are reported in Item 1.01 of this Current Report on Form 8-K. The foregoing summary does not purport to be complete and is subject to, and is qualified in its entirety by, the full text, terms and conditions of the Master Transaction Agreement, which was filed as Exhibit 10.1 to the Current Report on Form 8-K filed on April 5, 2024 and Amendment No. 1 to the Master Transaction Agreement, filed as Exhibit 2.2 hereto, each of which is incorporated into this Item 2.01 by reference.

ITEM 7.01    REGULATION FD DISCLOSURE.

On August 1, 2024, the Company issued a press release announcing the completion of the transactions contemplated by the Master Transaction Agreement and the related transactions described above in Items 1.01 and 2.01. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

The information in Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities under that section, nor shall it be deemed to be incorporated by reference into the filings of the registrant under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward−looking statements. This Form 8-K or any other written or oral statements made by or on behalf of Arch Capital Group Ltd. and its subsidiaries may include forward−looking statements, which reflect Arch Capital Group Ltd.’s current views with respect to future events and financial performance. Actual events and results may differ materially from those expressed or implied in these statements. A non-exclusive list of the important factors that could cause actual results to differ materially from those in such forward-looking statements includes the factors identified in our other filings with the U.S. Securities and Exchange Commission (“SEC”).

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ITEM 9.01    FINANCIAL STATEMENTS AND EXHIBITS.

(d):     The following exhibits are being filed herewith.

EXHIBIT NO.						DESCRIPTION
2.1						Master Transaction Agreement, dated as of April 5, 2024, by and among Arch Capital Group Ltd., Allianz Global Risks US Insurance Company, and, solely for purposes of Section 5.25 and Article X thereof, Arch Capital Group (U.S.) Inc. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on April 5, 2024)
2.2						Amendment No. 1 to Master Transaction Agreement, dated as of August 1, 2024, by and among Arch Capital Group Ltd., Allianz Global Risks US Insurance Company, and, solely for purposes of Section 5.25 and Article X thereof, Arch Capital Group (U.S.) Inc.
99.1						Press Release issued by Arch Capital Group Ltd. on August 1, 2024
104						Cover Page Interactive Data File (embedded within the Inline XBRL document)

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

			ARCH CAPITAL GROUP LTD.
Date: August 1, 2024			By:			/s/ François Morin
						Name:			François Morin
						Title:			Executive Vice President, Chief Financial Officer and Treasurer

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Exhibit 2.2

AMENDMENT NO. 1

TO

MASTER TRANSACTION AGREEMENT

THIS AMENDMENT NO. 1 TO MASTER TRANSACTION AGREEMENT (this “Amendment”) is made and entered into as of August 1, 2024, by and among Allianz Global Risks US Insurance Company, an Illinois insurance company (“Seller”), Arch Capital Group Ltd., a Bermuda exempted company limited by shares (“Buyer”), and Arch Capital Group (U.S.) Inc., a Delaware corporation (“U.S. Parent”), with respect to that certain Master Transaction Agreement, dated April 5, 2024 (the “Master Transaction Agreement”), by and among Seller, Buyer and, solely for purposes of Section 5.25 and Article X thereof, U.S. Parent. Capitalized terms used but not otherwise defined herein have the meanings ascribed to such terms in the Master Transaction Agreement.

WHEREAS, in accordance with the terms of Section 10.11 of the Master Transaction Agreement, the parties hereto, being all of the parties to the Master Transaction Agreement, desire to amend the Master Transaction Agreement on the terms and conditions set forth herein.

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are acknowledged, the parties hereto hereby agree as follows:

1.Certain Amendments.

(a)The definition of “Administrative Services Agreements” in Section 1.01 of the Master Transaction Agreement is hereby amended and restated in its entirety to read as follows:

“Administrative Services Agreements” means, collectively, the Binding Authority Agreement, the General Agency Agreement, the LPT Administrative Services Agreement, the New Business Administrative Services Agreement and any agreement entered into after the Closing pursuant to Section 4.1 of the New Business Reinsurance Agreement.

(b)Section 1.01 of the Master Transaction Agreement is hereby amended by inserting the following new definition immediately after the definition of “Assumed Reinsurance Agreements”:

“Authorized Control Level RBC” means, with respect to any insurance company or reinsurance company, authorized control level risk based capital as calculated in accordance with the applicable Laws of such insurance company’s or reinsurance company’s domiciliary state.

(c)Section 1.01 of the Master Transaction Agreement is hereby amended by deleting the definition of “Company Action Level RBC” in its entirety.

(d)Clause (f) of the definition of “Division Burdensome Condition” in Section 1.01 of the Master Transaction Agreement is hereby amended and restated in its entirety to read as follows:

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(f)    result in a Resulting Insurer (With License), as of immediately following the closing of the transactions contemplated by the Post-Division Stock Purchase Agreement, being required to have (i) a regulatory required minimum capital and surplus amount that is greater than (1) the amount of the minimum capital and surplus required under applicable Law in the State of domicile of such Resulting Insurer (With License) to be maintained by an insurer authorized in such State to write the classes of insurance which such Resulting Insurer (With License) is authorized to write in such State, plus (2) an amount, when combined with the amounts applicable to the other Resulting Insurers (With License) being acquired in the same transaction as such Resulting Insurer (With License) under this clause (2), equal to $10,000,000 or (ii) a Total Adjusted Capital amount that would result in an RBC Ratio in excess of 325%, whichever of clauses (i) and (ii) is greater;

(e)The definition of “RBC Ratio” in Section 1.01 of the Master Transaction Agreement is hereby amended and restated in its entirety to read as follows:

“RBC Ratio” means, with respect to any U.S. domiciled insurance company or reinsurance company, the percentage equal to (a) the quotient of the Total Adjusted Capital of such insurance or reinsurance company divided by the Authorized Control Level RBC, multiplied by (b) 100.

(f)Section 4.10(b) of the Master Transaction Agreement is hereby amended and restated in its entirety to read as follows:

Immediately following the Closing, and after giving effect to the transactions contemplated by this Agreement and the Ancillary Agreements and the payment of Purchase Price and related fees and expenses required to be paid hereunder or thereunder, LPT Reinsurer’s ECR Ratio (as defined in the LPT Reinsurance Agreement) will be at least 200% and New Business Reinsurer’s RBC Ratio (as defined in the New Business Reinsurance Agreement) will be at least 230%.

(g)Section 5.25(c) of the Master Transaction Agreement is hereby amended and restated in its entirety to read as follows:

Without limiting the foregoing, U.S. Parent shall either (i) cause its applicable Affiliates to perform the services to be performed by such Affiliates under the Administrative Services Agreements and Ancillary Agreements or (ii) otherwise cause such services to be performed (provided, that to the extent that Seller or its applicable Affiliate has a consent right with respect to the identity of the provider of such services and unreasonably withholds its consent to the party selected by U.S. Parent, the failure to cause such services to be provided shall not constitute a breach of this Section 5.25(c)), in each case, in accordance with the terms of the applicable Administrative Services Agreements and Ancillary Agreements.

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(h)The Parties acknowledge and agree that, as of the Closing, the Existing Loss Funds associated with the Shared TPA Agreements (as defined in the Assignment and Assumption Agreement and Bill of Sale) (the “Shared Loss Fund Accounts”) have not been bifurcated in accordance with the terms of Section 5.19(e) of the Master Transaction Agreement such that there is a separate loss fund or settlement account designated solely for use in connection with the Business. Accordingly, notwithstanding anything to the contrary in the Master Transaction Agreement, none of the amounts on deposit in the Shared Loss Fund Accounts shall be included or taken into account in the determination of the Transferred Investment Assets (LPT) or in the Transferred Investment Assets (New Business), and, at the Closing, neither Buyer nor any of its Affiliates shall acquire any interest in the Shared Loss Fund Accounts. Following the Closing, the Business Entities shall continue to use reasonable best efforts to effect such bifurcation, whereupon all amounts on deposit in the Shared Loss Fund Accounts shall be allocated to the accounts to be used in connection with the Excluded Business. With respect to each of the other Existing Loss Funds that has been bifurcated as of the Closing Date such that there is a separate loss fund or settlement account designated solely for use in connection with the Business, the aggregate amount on deposit in each such separate loss fund or settlement account shall be taken into account in the Transferred Investment Assets (LPT) or in the Transferred Investment Assets (New Business), as applicable, and applicable Reinsurer or its Affiliate shall acquire all of Seller’s or the applicable Business Entities’ right, title and interest therein (as applicable) at the Closing pursuant to the Assignment and Assumption Agreement and Bill of Sale.

2.Reaffirmation; References. Except as expressly amended hereby, the Master Transaction Agreement shall continue in full force and effect, and the parties hereto hereby ratify and confirm the Master Transaction Agreement as so amended. From and after the date hereof, all references to the Master Transaction Agreement in the Master Transaction Agreement, the Ancillary Agreements and any other agreements, documents, certificates or instruments executed or delivered by or on behalf any of the parties hereto or their respective Affiliates pursuant to, in connection with or in furtherance of any of the transactions contemplated by the Master Transaction Agreement or the Ancillary Agreements, shall, in each case, be deemed a reference to the Master Transaction Agreement, as amended hereby.

3.General Provisions. Sections 10.2 (Assignment and Binding Effect), 10.3 (Choice of Law), 10.4 (Jurisdiction and Service of Process), 10.5 (Notices), 10.6 (Headings), 10.7 (Fees and Expenses), 10.8 (Entire Agreement), 10.9 (Interpretation), 10.11 (Waiver and Amendment), 10.12 (Third-Party Beneficiaries), 10.13 (Specific Performance), 10.14 (Severability), 10.15 (Negotiation of Agreement), 10.16 (Counterparts; Facsimile Signatures) and 10.17 (Waiver of Jury Trial) of the Master Transaction Agreement are each hereby incorporated by reference and shall apply hereto mutatis mutandis.

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IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1 to Master Transaction Agreement as of the date first written above.

			ALLIANZ GLOBAL RISKS US INSURANCE COMPANY
			By:			/s/ Tracy Ryan
						Name:			Tracy Ryan
						Title:			President & CEO

[Signature Page to Amendment No. 1 to Master Transaction Agreement]

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			ARCH CAPITAL GROUP LTD.
			By:			/s/ François Morin
						Name:			François Morin
						Title:			Chief Financial Officer

[Signature Page to Amendment No. 1 to Master Transaction Agreement]

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			ARCH CAPITAL GROUP U.S. INC.
			By:			/s/ Brian First
						Name:			Brian First
						Title:			President, Arch Insurance North America

[Signature Page to Amendment No. 1 to Master Transaction Agreement]

Exhibit 99.1

Arch Insurance North America

Grace Building, 14th Floor

1114 Avenue of the Americas

New York, NY 10036

www.archinsurance.com

Arch Insurance North America Acquires Allianz’s U.S. MidCorp and Entertainment Insurance Businesses

Acquisition Enhances Middle Market Offerings Within Arch Insurance

NEW YORK — August 1, 2024 — Arch Insurance North America (Arch Insurance), part of Arch Capital Group Ltd. (Nasdaq: ACGL) (Arch), today announced it has closed the acquisition of the U.S. MidCorp and Entertainment insurance businesses from Allianz originally announced on April 5. Nearly 500 former Allianz MidCorp and Entertainment employees have joined Arch and will provide continuity to clients and brokers as Arch Insurance focuses on growing its middle market offerings.

The new Arch MidCorp and Entertainment businesses will report to Mark Lange in the recently created role of Chief Middle Market Executive. Lange previously served as Chief Strategy Officer for Arch Insurance North America.

“We are thrilled to welcome these talented individuals to Arch and look forward to earning the trust of their existing clients and distribution partners,” said Matt Shulman, CEO for Arch Insurance North America. “Under Mark’s leadership, we will continue to drive growth, deliver exceptional value to customers, create opportunities for our new colleagues and Pursue Better Together as a united team.”

Lange added: “I’m looking forward to working with this talented and experienced team to help build out Arch’s middle-market platform. One of our guiding principles throughout this transaction has been to emphasize continuity and to maintain a customer-centric mindset, and I know we’re all ready to hit the ground running.”

Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC acted as financial advisors to Arch, and Willkie Farr & Gallagher LLP served as the Company’s legal advisor.

About Arch Insurance North America 

Arch Insurance North America, part of Arch Capital Group Ltd., includes Arch’s insurance operations in the United States and Canada. Business in the U.S. is written by Arch Insurance Company, Arch Specialty Insurance Company, Arch Property & Casualty Insurance Company and Arch Indemnity Insurance Company. Business in Canada is written by Arch Insurance Canada Ltd.

About Arch Capital Group Ltd.

Arch Capital Group Ltd. (Nasdaq: ACGL) is a publicly listed Bermuda exempted company with approximately $23.4 billion in capital at June 30, 2024. Arch, which is part of the S&P 500 Index, provides insurance, reinsurance and mortgage insurance on a worldwide basis through its wholly owned subsidiaries.

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Cautionary Note Regarding Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward−looking statements. This release or any other written or oral statements made by or on behalf of Arch Capital Group Ltd. and its subsidiaries may include forward−looking statements, which reflect the Company’s current views with respect to future events and financial performance. All statements other than statements of historical fact included in or incorporated by reference in this release are forward−looking statements.

Forward−looking statements can generally be identified by the use of forward−looking terminology such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe" or "continue" or their negative or variations or similar terminology. Forward−looking statements involve the Company’s current assessment of risks and uncertainties. Actual events and results may differ materially from those expressed or implied in these statements. A non-exclusive list of the important factors that could cause actual results to differ materially from those in such forward-looking statements includes the following: adverse general economic and market conditions; increased competition; pricing and policy term trends; fluctuations in the actions of rating agencies and the Company’s ability to maintain and improve its ratings; investment performance; the loss of key personnel; the adequacy of the Company’s loss reserves, severity and/or frequency of losses, greater than expected loss ratios and adverse development on claim and/or claim expense liabilities; greater frequency or severity of unpredictable natural and man-made catastrophic events, including pandemics such as COVID-19; the impact of acts of terrorism and acts of war; changes in regulations and/or tax laws in the United States or elsewhere; ability to successfully integrate, establish and maintain operating procedures as well as integrate the businesses the Company has acquired or may acquire into the existing operations; changes in accounting principles or policies; material differences between actual and expected assessments for guaranty funds and mandatory pooling arrangements; availability and cost to the Company of reinsurance to manage our gross and net exposures; the failure of others to meet their obligations to the Company; an incident, disruption in operations or other cyber event caused by cyber attacks, the use of artificial intelligence technologies or other technology on the Company’s systems or those of the Company’s business partners and service providers, which could negatively impact the Company’s business and/or expose the Company to litigation; and other factors identified in our filings with the U.S. Securities and Exchange Commission (SEC).

The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with other cautionary statements that are included herein or elsewhere. All subsequent written and oral forward−looking statements attributable to us or persons acting on the Company’s behalf are expressly qualified in their entirety by these cautionary statements. The Company undertakes no obligation to publicly update or revise any forward−looking statement, whether as a result of new information, future events or otherwise.

Source — Arch Capital Group Ltd.

Tag — arch-corporate-insurance

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Arch Media Contacts:

Greg Hare

Arch Capital Services LLC

[e-mail]

Stephanie Perez

Arch Capital Services LLC

[e-mail]

Document and Entity Information Cover	Aug. 01, 2024
Document and Entity Information [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Aug. 01, 2024
Entity Registrant Name	Arch Capital Group Ltd.
Entity Central Index Key	0000947484
Entity Incorporation, State or Country Code	D0
Entity File Number	001-16209
Entity Tax Identification Number	98-0374481
Entity Address, Address Line One	Waterloo House, Ground Floor
Entity Address, Address Line Two	100 Pitts Bay Road
Entity Address, City or Town	Pembroke
Entity Address, Postal Zip Code	HM 08
Entity Address, Country	BM
City Area Code	441
Local Phone Number	278-9250
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Entity Emerging Growth Company	false
Common shares
Entity Listings [Line Items]
Title of 12(b) Security	Common shares, $0.0011 par value per share
Trading Symbol	ACGL
Security Exchange Name	NASDAQ
Series F Depositary Share Equivalent
Entity Listings [Line Items]
Title of 12(b) Security	Depositary shares, each representing a 1/1,000th interest in a 5.45% Series F preferred share
Trading Symbol	ACGLO
Security Exchange Name	NASDAQ
Series G Depositary Share Equivalent
Entity Listings [Line Items]
Title of 12(b) Security	Depositary shares, each representing a 1/1,000th interest in a 4.55% Series G preferred share
Trading Symbol	ACGLN
Security Exchange Name	NASDAQ

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