8-KOther EventsExhibits & Filings

ARCH CAPITAL GROUP LTD. 8-K Report, Corporate Update (Jul 2, 2021)

Filed July 2, 2021For Securities:ACGLACGLNACGLO

Summary

Arch Capital Group Ltd. (ACGL) announced the completion of its acquisition of Watford Holdings Ltd. (Watford) on July 1, 2021. This transaction was undertaken with investment partners Kelso & Company and Warburg Pincus LLC. While Arch Capital retains significant influence, it has concluded that Watford will no longer be consolidated into Arch's financial statements as a variable interest entity, effective July 1, 2021. This change in accounting treatment means that Watford's results will be deconsolidated from Arch's financial statements going forward. Investors should note that while Arch remains a key stakeholder with significant influence through its 40% ownership in the acquiring entity, the financial reporting will reflect this shift, impacting Arch's reported revenues, expenses, and assets/liabilities. The press release detailing this event is attached as an exhibit to this filing.

Key Highlights

  • 1Arch Capital Group Ltd. completed the acquisition of Watford Holdings Ltd. on July 1, 2021.
  • 2The acquisition was a joint venture with investment partners Kelso & Company and Warburg Pincus LLC.
  • 3Arch Capital Group will no longer consolidate Watford's financial results due to its conclusion that Watford is no longer a variable interest entity for which Arch is the primary beneficiary.
  • 4Effective July 1, 2021, Watford's financial performance will be deconsolidated from Arch's consolidated financial statements.
  • 5Arch retains significant influence over Watford through its 40% ownership in the acquiring entity.
  • 6The press release announcing this event is included as an exhibit to the 8-K filing.

Frequently Asked Questions

The main impact is that Arch Capital will no longer consolidate Watford's financial results. This means Watford's revenues, expenses, assets, and liabilities will be removed from Arch's consolidated balance sheet and income statement. Arch will continue to account for its investment in Watford under the equity method or at fair value, depending on specific accounting rules and its level of influence.

Arch Capital has determined that, despite retaining significant influence, Watford will no longer meet the criteria of a variable interest entity for which Arch is the primary beneficiary under accounting standards. This conclusion, reached as of July 1, 2021, dictates the deconsolidation.

Arch Capital Group owns 40% of the acquiring entity. The remaining ownership is split between investment partners Kelso & Company (30%) and Warburg Pincus LLC (30%).

Yes, the filing explicitly states that Arch Capital retains 'significant influence' over Watford, even though it will no longer consolidate its financial results. This influence stems from its substantial ownership in the acquiring entity.