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Arch Capital (ACGL) Rises 35% YTD: Can It Retain the Upside?
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Arch Capital Group Ltd. (ACGL - Free Report) , banking on the strength of new business opportunities, rate improvement, growth in existing accounts and a solid capital position, has performed well so far this year and has the potential to retain the momentum ahead.
Shares have rallied 35.4% year to date, outperforming the industry’s growth of 15.9%, the Finance sector’s rise of 4% and the Zacks S&P 500 composite’s increase of 12.4%. With a market capitalization of $37.5 billion, the average volume of shares traded in the last three months was 1.8 million.
The company has a VGM Score of B. The Style Score rates stocks on their combined weighted styles, helping to identify those with the most attractive value, best growth and most promising momentum.
The Zacks Consensus Estimate for 2024 and 2025 earnings has moved 1.4% and 1.6% north, respectively, in the past 30 days, reflecting analyst optimism.
Image Source: Zacks Investment Research
Earnings History
This Zacks Rank #3 (Hold) insurer has a solid history of delivering earnings surprises in the last eight reported quarters. Earnings of this leading specialty P&C and mortgage insurer increased 32.3% in the last five years, better than the industry average of 10.5%.
Return on Capital
Return on equity in the trailing 12 months was 21.9%, better than the industry average of 7.8%. This highlights the company’s efficiency in utilizing shareholders’ funds.
Also, the return on invested capital (ROIC) has been increasing over the last few quarters as the company raised its capital investment over the same time frame, reflecting ACGL’s efficiency in utilizing funds to generate income. ROIC in the trailing 12 months was 16.6%, better than the industry average of 5.9%.
Can ACGL Retain the Momentum?
Arch Capital continues to gain from business opportunities, rate increases, a rise in existing accounts and growth in Australian single-premium mortgage insurance. Widespread operations coupled with a compelling product portfolio provide meaningful diversification and earnings stability to ACGL. We estimate 2026 earnings to witness a three-year CAGR of 1.1%.
Arch Capital has an impressive inorganic growth story. The insurer, through acquisitions, continues to make international expansion, enhance operations and diversify business at attractive risk-adjusted returns. The diversification of its Mortgage Insurance business via strategic acquisitions complements the strength of the specialty insurance and reinsurance businesses. Agreeing to buy Allianz’s U.S. MidCorp and Entertainment insurance business testifies Arch's commitment to expanding its footprint in the middle-market property and casualty segment.
Investment income should benefit from a growing base of invested assets driven by improving cash flows.
Arch Capital has been strengthening its balance sheet with high liquidity and low leverage. This also shields it from market volatility and supports growth initiatives.
Notably, its free cash flow conversion has remained more than 85% over the last many quarters, reflecting its solid earnings.
The Zacks Consensus Estimate for 2024 earnings stands at $8.55, suggesting an increase of 1.2% on 18.6% higher revenues of $16 billion. The consensus estimate for 2025 earnings stands at $9.10, suggesting an increase of 6.5% on 13.8% higher revenues of $18.2 billion.
The long-term earnings growth is expected to be 6.3%. We expect the 2026 bottom line to witness a three-year CAGR of 6.5%. It has a Growth Score of B.
HCI Group earnings surpassed estimates in each of the last four quarters, the average beat being 139.15%. In the past year, HCI has rallied 10.5%.
The Zacks Consensus Estimate for HCI’s 2024 and 2025 earnings implies 57.6% and 4.3% year-over-year growth, respectively.
Palomar’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 15.10%. In the past year, PLMR’s stock has surged 54.8%.
The Zacks Consensus Estimate for PLMR’s 2024 and 2025 earnings indicates 25.8% and 16.1% year-over-year growth, respectively.
ProAssurance earnings surpassed estimates in two of the last four quarters and missed in the other two. In the past year, PRA’s stock has lost 2.5%.
The Zacks Consensus Estimate for PRA’s 2024 and 2025 earnings suggests 371.4% and 71.6% year-over-year growth, respectively.
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Arch Capital (ACGL) Rises 35% YTD: Can It Retain the Upside?
Arch Capital Group Ltd. (ACGL - Free Report) , banking on the strength of new business opportunities, rate improvement, growth in existing accounts and a solid capital position, has performed well so far this year and has the potential to retain the momentum ahead.
Shares have rallied 35.4% year to date, outperforming the industry’s growth of 15.9%, the Finance sector’s rise of 4% and the Zacks S&P 500 composite’s increase of 12.4%. With a market capitalization of $37.5 billion, the average volume of shares traded in the last three months was 1.8 million.
The company has a VGM Score of B. The Style Score rates stocks on their combined weighted styles, helping to identify those with the most attractive value, best growth and most promising momentum.
The Zacks Consensus Estimate for 2024 and 2025 earnings has moved 1.4% and 1.6% north, respectively, in the past 30 days, reflecting analyst optimism.
Image Source: Zacks Investment Research
Earnings History
This Zacks Rank #3 (Hold) insurer has a solid history of delivering earnings surprises in the last eight reported quarters. Earnings of this leading specialty P&C and mortgage insurer increased 32.3% in the last five years, better than the industry average of 10.5%.
Return on Capital
Return on equity in the trailing 12 months was 21.9%, better than the industry average of 7.8%. This highlights the company’s efficiency in utilizing shareholders’ funds.
Also, the return on invested capital (ROIC) has been increasing over the last few quarters as the company raised its capital investment over the same time frame, reflecting ACGL’s efficiency in utilizing funds to generate income. ROIC in the trailing 12 months was 16.6%, better than the industry average of 5.9%.
Can ACGL Retain the Momentum?
Arch Capital continues to gain from business opportunities, rate increases, a rise in existing accounts and growth in Australian single-premium mortgage insurance. Widespread operations coupled with a compelling product portfolio provide meaningful diversification and earnings stability to ACGL. We estimate 2026 earnings to witness a three-year CAGR of 1.1%.
Arch Capital has an impressive inorganic growth story. The insurer, through acquisitions, continues to make international expansion, enhance operations and diversify business at attractive risk-adjusted returns. The diversification of its Mortgage Insurance business via strategic acquisitions complements the strength of the specialty insurance and reinsurance businesses. Agreeing to buy Allianz’s U.S. MidCorp and Entertainment insurance business testifies Arch's commitment to expanding its footprint in the middle-market property and casualty segment.
Investment income should benefit from a growing base of invested assets driven by improving cash flows.
Arch Capital has been strengthening its balance sheet with high liquidity and low leverage. This also shields it from market volatility and supports growth initiatives.
Notably, its free cash flow conversion has remained more than 85% over the last many quarters, reflecting its solid earnings.
The Zacks Consensus Estimate for 2024 earnings stands at $8.55, suggesting an increase of 1.2% on 18.6% higher revenues of $16 billion. The consensus estimate for 2025 earnings stands at $9.10, suggesting an increase of 6.5% on 13.8% higher revenues of $18.2 billion.
The long-term earnings growth is expected to be 6.3%. We expect the 2026 bottom line to witness a three-year CAGR of 6.5%. It has a Growth Score of B.
Stocks to Consider
Some top-ranked stocks from the insurance industry are HCI Group, Inc. (HCI - Free Report) , Palomar Holdings (PLMR - Free Report) and ProAssurance (PRA - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
HCI Group earnings surpassed estimates in each of the last four quarters, the average beat being 139.15%. In the past year, HCI has rallied 10.5%.
The Zacks Consensus Estimate for HCI’s 2024 and 2025 earnings implies 57.6% and 4.3% year-over-year growth, respectively.
Palomar’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 15.10%. In the past year, PLMR’s stock has surged 54.8%.
The Zacks Consensus Estimate for PLMR’s 2024 and 2025 earnings indicates 25.8% and 16.1% year-over-year growth, respectively.
ProAssurance earnings surpassed estimates in two of the last four quarters and missed in the other two. In the past year, PRA’s stock has lost 2.5%.
The Zacks Consensus Estimate for PRA’s 2024 and 2025 earnings suggests 371.4% and 71.6% year-over-year growth, respectively.