Arch Capital Group Ltd.’s decision to buy American International Group’s mortgage guaranty unit for $3.4 billion drew a mixed response from Standard & Poor’s, Fitch Ratings, Moody’s and A.M. Best.

The deal involves Arch’s acquisition from AIG of United Guaranty Corp. and AIG United Guaranty (Asia) Ltd., a transaction that should close at the end of 2016 or in early 2017.

Standard & Poor’s revised its outlook to negative from stable on all Arch Capital ratings and its subsidiaries (save for Arch Mortgage, which still has a positive outlook).

S&P said the revised outlook stems from risks involved in Arch Capital’s new acquisition.

“The acquisition raises execution concerns related to (Arch Capital’s) ability to manage its business mix, integrate mortgage exposure within its risk management framework, and maintain very strong capitalization,” S&P said.

However, Standard & Poor’s affirmed its “A-” long-term counterparty credit rating for Arch Capital, plus the counterparty credit and financial strength ratings for Arch Capital’s operating subsidiaries. This positive response stems from “the group’s strong business and financial risk profile and strong enterprise risk management,” Standard & Poor’s said.

Fitch Ratings placed several ratings for Arch Capital Group Ltd. on rating watch negative: the “A” issuer default rating, “A-” senior unsecured notes rating and ‘BBB+’ Series C preferred shares rating. Fitch is worried, in part, about the added financial leverage Arch Capital will take on with the acquisition. As of June 30, that figure is at 11.9 percent, but this could jump as high as 25 percent once the deal closes, with an expected $1.125 billion of debt likely needed to help finance the acquisition, Fitch said.

The other issue: Concerns about “an anticipated change for [the holding company ] to a ‘ring-fencing’ environment classification from a ‘group solvency’ approach” once the acquisition goes through—“the acquisition is likely to increase the amount of capital outside of the Bermuda group solvency environment.”

Fitch also acknowledged that the acquisition will help add more mortgage premiums to Arch Capital’s business and also diversify its overall mortgage, insurance and reinsurance portfolios. As well, Fitch affirmed Arch Capital and its subsidiaries’ “A+” insurer financial strength ratings.

Moody’s Investors Service placed Arch Capital’s A3 senior unsecured debt rating, as well as the A1 insurance financial strength ratings for Arch’s insurance and reinsurance subsidiaries on review for downgrade.

Moody’s said it has concerns that the acquisition “would materially increase Arch Group’s credit risk profile by substantially expanding the group’s mortgage insurance operations, and meaningfully raise the group’s financial leverage.

A.M. Best, meanwhile, placed under review with developing implications the “A+ ” (Superior) financial strength and “aa-” issurer credit ratings of Arch Reinsurance and its affiliates, as well as the issurer credit ratings of “a-” and issue ratings of Arch Capital Group’s operations in Bermuda and the U.S.

A.M. Best said it will monitor the acquisition “over its life cycle until the deal closes and afterward when the integration execution becomes complete.”

Sources: Standard & Poor’s, Fitch Ratings, A.M. Best, Moody’s