Arch Capital Group Ltd. to Enter U.S. Mortgage Insurance Market Through Acquisition of CMG Mortgage Insurance Company and the

  Arch Capital Group Ltd. to Enter U.S. Mortgage Insurance Market Through
  Acquisition of CMG Mortgage Insurance Company and the Operating Platform of
  PMI Mortgage Insurance Co.

Business Wire

HAMILTON, Bermuda -- February 8, 2013

Arch Capital Group Ltd. [Nasdaq: ACGL] today announced that its U.S.-based
subsidiaries (Arch U.S. MI) have entered into a definitive agreement to
acquire CMG Mortgage Insurance Company (CMG MI) from its current owners, PMI
Mortgage Insurance Co. (PMI), which has been in rehabilitation under the
receivership of the Arizona Department of Insurance since 2011, and CMFG Life
Insurance Company (CUNA Mutual). Arch U.S. MI also agreed to acquire PMI’s
mortgage insurance operating platform and related assets from PMI. This
transaction will allow ACGL to enter the rapidly improving U.S. mortgage
insurance marketplace and will broaden its existing mortgage insurance and
reinsurance capabilities. Arch U.S. MI expects to hire the current experienced
senior management team and staff of PMI. ACGL’s global mortgage insurance and
reinsurance operations will report to Marc Grandisson, Chairman and CEO of
Arch Worldwide Reinsurance Group.

The transaction will provide Arch U.S. MI with nationwide mortgage insurance
licenses and a comprehensive mortgage insurance operating platform.
Additionally, Arch U.S. MI expects to enter into distribution and reinsurance
agreements with CUNA Mutual, which will continue to serve credit union
customers on behalf of Arch U.S. MI. With these proposed arrangements, Arch
U.S. MI will gain significant access to the credit union marketplace
immediately upon closing.

It is anticipated that the transaction will close within 12 months, subject to
approvals of the Arizona receivership court, applicable regulators and
government-sponsored enterprises (GSEs), including the Federal National
Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage
Corporation (Freddie Mac), and the satisfaction of customary closing
conditions. Additional transaction highlights are included below.

Constantine (Dinos) Iordanou, Chairman and CEO of ACGL, commented, “We are
extremely pleased to be able to provide a strong source of private capital to
a U.S. mortgage insurance market in great need of capacity, subject to
obtaining all required approvals. We believe that this transaction, which is
consistent with our strategy of moving into new specialty lines of business
where we can hire experienced teams that fit our corporate culture, will allow
us to capitalize on significant opportunities in the U.S. mortgage insurance
marketplace. The new operation will complement our existing European
Union-based mortgage insurance and global reinsurance operations, providing us
with a platform to participate in mortgage insurance and reinsurance business
on a worldwide basis.”

Marc Grandisson commented, “We are very gratified that PMI’s exceptionally
strong management team and staff will be joining Arch. Together with our
senior executives, they will form an industry leading team with broad
capabilities to meet our clients’ needs over the long term. We are also
extremely pleased to partner with CUNA Mutual on an ongoing basis. Their
access to the credit union marketplace and brand reputation should allow us to
secure a strong flow of credit union business.”

“The petition being filed for court approval of this agreement is a
significant milestone and positive step in the PMI receivership,” said
Germaine L. Marks, Director of the Arizona Department of Insurance. “The
successful negotiation of this transaction clearly evidences Arch's commitment
to the private mortgage insurance market, and the PMI receivership team looks
forward to building on that commitment and our relationship with Arch as we
move forward.”

Additional Transaction Highlights

Outlined below are some of the key components of the transaction, all of which
are subject to the terms and conditions included in the related agreements:

  *At closing, it is currently estimated that Arch U.S. MI and its affiliates
    will pay to the sellers aggregate consideration of approximately $300
    million. Additional amounts may be paid based on the actual results of CMG
    MI’s pre-closing portfolio over an agreed upon period.
  *Arch U.S. MI will acquire all of the capital stock of CMG MI and its
    affiliates.
  *Arch U.S. MI will acquire PMI’s mortgage insurance operating platform and
    related assets.
  *An affiliate of Arch U.S. MI will reinsure the run-off of in-force
    insurance on current, non-delinquent loans included in the primary
    mortgage insurance originated by PMI for book years 2009-2011. Other than
    for the risks assumed by Arch U.S. MI’s affiliate under this reinsurance
    agreement, the Arch group will not assume any obligation for risks insured
    under PMI’s existing insurance contracts.
  *Arch U.S. MI will also enter into a services agreement with PMI to provide
    for necessary services to administer the run-off of PMI’s legacy business
    at the direction of PMI.
  *Subject to applicable regulatory and GSE approvals, an affiliate of Arch
    U.S. MI will provide quota share reinsurance to CMG MI through a
    reinsurance agreement that will become effective prior to the closing.

About Arch Capital Group Ltd.

Arch Capital Group Ltd., a Bermuda-based company with approximately $5.75
billion in capital at September 30, 2012, provides insurance and reinsurance
on a worldwide basis through its wholly owned subsidiaries.

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 our 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 our
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 our  ability to maintain and improve our ratings;
investment performance;  the loss of key personnel;  the adequacy of our 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;the impact of acts of terrorism and acts of war; changes
in regulations and/or tax laws in the United States or elsewhere;  our ability
to successfully integrate, establish and maintain operating procedures as well
as integrate the businesses we have 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 us of reinsurance to
manage our gross and net exposures;  the failure of others to meet their
obligations to us; and  other factors identified in our filings with the U.S.
Securities and Exchange Commission.

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 our behalf
are expressly qualified in their entirety by these cautionary statements. We
undertake no obligation to publicly update or revise any forward−looking
statement, whether as a result of new information, future events or otherwise.

Contact:

Arch Capital Group Ltd.
Mark D. Lyons, 441-278-9250
 
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