It has been about a month since the last earnings report for Arch Capital Group (ACGL Quick QuoteACGL - Free Report) . Shares have added about 9.3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Arch Capital due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Arch Capital Q1 Earnings Beat on Solid Underwriting

Arch Capital reported first-quarter 2024 operating income of $2.45 per share, which beat the Zacks Consensus Estimate by 18.9%. The bottom line jumped 41.6% year over year. The results benefited from improved premiums and higher net investment income.

Behind the Headline

Gross premiums written improved 24.1% year over year to $5.9 billion. Net premiums written climbed 19.3% year over year to $4.1 billion on higher premiums written across its Insurance and Reinsurance segments as hard market rates and rising inflation drove clients’ demand for many of its property and casualty products. Our estimate for the metric was $5.2 billion.

Net investment income surged 64.3% year over year to $327 million and beat our estimate of $302.8 million. It was driven by higher interest rates and growth in invested assets, which benefited from strong operating cash flows. The Zacks Consensus Estimate was pegged at $287 million.

Operating revenues of $3.8 billion rose 21.7% year over year, driven by higher net premiums earned and net investment income. It missed the Zacks Consensus Estimate by 0.2%.

Pre-tax current accident year catastrophic losses, net of reinsurance and reinstatement premiums, were $58 million. Arch Capital’s underwriting income climbed 29.1% year over year to $736 million.

The combined ratio — the percentage of premiums paid out as claims and expenses — improved 180 basis points (bps) to 78.8. Our estimate was 82.8. The Zacks Consensus Estimate was pegged at 82.

Segmental Results

Insurance: Gross premiums written increased 7.4% year over year to $2.1 billion. Our estimate was $2.1 billion. Net premiums written climbed 19.1% year over year to $1.4 billion. The uptick was owing to increases in most lines of business, due in part to new business opportunities and a rise in existing accounts and rate changes. Our estimate was $1.6 billion.

Underwriting income of $99 million dropped 24.6% year over year. The combined ratio deteriorated 320 bps to 94.1. The Zacks Consensus Estimate was pegged at 91.

Reinsurance: Gross premiums written improved 40.9% year over year to $3.5 billion. Our estimate was $2.7 billion.

Net premiums written rose 31.3% year over year to $2.3 billion on increases in all lines of business, due in part to rate increases, new business opportunities and growth in existing accounts.  Our estimate was $1.9 billion.

Underwriting income was $379 million, which surged 77.9% year over year. The combined ratio improved 690 bps year over year to 77.4. The Zacks Consensus Estimate was pegged at 82.

Mortgage: Gross premiums written dropped 0.6% year over year to $341 million. Our estimate was $334.9 million.

Net premiums written increased 6.1% year over year to $277 million due to higher premiums ceded. Our estimate was $250.3 million.

Underwriting income increased 11.5% year over year to $271 million. Our estimate was $181.8 million. The combined ratio improved 550 bps to 14.5%. The Zacks Consensus Estimate was pegged at 29.8.

Financial Update

Arch Capital exited the first quarter of 2024 with cash of $993 million, which increased 8.3% from 2023-end. Debt was $2.7 billion as of Mar 31, 2024, which remained flat year over year.

As of Mar 31, 2024, book value per share was $49.36, up 5.2% from the end of 2023. Annualized operating return on average common equity remained flat year over year at 20.7%. Cash from operations of $1.6 billion improved 62.4% year over year.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, Arch Capital has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Arch Capital has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Arch Capital is part of the Zacks Insurance - Property and Casualty industry. Over the past month, Cincinnati Financial (CINF Quick QuoteCINF - Free Report) , a stock from the same industry, has gained 0%. The company reported its results for the quarter ended March 2024 more than a month ago.

Cincinnati Financial reported revenues of $2.32 billion in the last reported quarter, representing a year-over-year change of +8.8%. EPS of $1.72 for the same period compares with $0.89 a year ago.

Cincinnati Financial is expected to post earnings of $1.10 per share for the current quarter, representing a year-over-year change of -9.1%. Over the last 30 days, the Zacks Consensus Estimate has changed +1.7%.

Cincinnati Financial has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.