We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Why Is Arch Capital (ACGL) Up 15.9% Since Last Earnings Report?
Read MoreHide Full Article
A month has gone by since the last earnings report for Arch Capital Group (ACGL - Free Report) . Shares have added about 15.9% 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 the most recent earnings report in order to get a better handle on the important catalysts.
Arch Capital Q2 Earnings Beat, Premiums Increase Y/Y
Arch Capital Group Ltd. reported second-quarter 2024 operating income of $2.57 per share, beating the Zacks Consensus Estimate by 18.4%. The bottom line increased 33.8% year over year. The quarterly results of ACGL were aided by improved underwriting income across all the segments, new business opportunities, growth in all lines of business and higher invested assets.
Behind the Headlines
Gross premiums written improved 11.1% year over year to $5.3 billion. Net premiums written climbed 10.3% year over year to $3.7 billion on higher premiums written across its Insurance and Reinsurance segments.
Pre-tax net investment income increased 50.4% year over year to $364 million and beat our estimate of $316.8 million. The growth reflected the effects of sustained higher interest rates available in the market, along with growth in invested assets due in part to strong operating cash flows. The Zacks Consensus Estimate was pegged at $347.5 million.
Operating revenues of $3.9 billion rose 22.6% year over year, driven by higher net premiums earned, net investment income and other income. It beat the Zacks Consensus Estimate by 0.6%.
Pre-tax current accident year catastrophic losses, net of reinsurance and reinstatement premiums, were $196 million, wider than the loss of $119 million incurred in the year-ago quarter. Arch Capital’s underwriting income increased 25.7% year over year to $762 million. Our estimate was $638.6 million. The combined ratio — the percentage of premiums paid out as claims and expenses — improved 110 basis points (bps) to 78.7. Our estimate was 82.2. The Zacks Consensus Estimate was pegged at 89.4.
Segmental Results
Insurance: Gross premiums written increased 7.5% year over year to $2.1 billion. Our estimate was $2.2 billion. Net premiums written climbed 7.2% year over year to $1.5 billion, driven by increases in most lines of business, due in part to new business opportunities and rate changes in the reported quarter. Our estimate was $1.7 billion. Underwriting income of $109 million was 0.9% higher than the year-ago number. Our estimate was $123.3 million. The combined ratio deteriorated 70 bps to 92.6. Our estimate was 92.3 while the Zacks Consensus Estimate was pegged at 97.
Reinsurance: Gross premiums written improved 15.6% year over year to $2.9 billion. Our estimate was $2.8 billion. Net premiums written rose 13.9% year over year to $1.9 billion. The growth in net premiums written reflected increases in all lines of business, due in part to rate increases, new business opportunities and growth in existing accounts. The figure matched our estimate. Underwriting income was $366 million, up 49.4% year over year. Our estimate was $304.7 million.
The combined ratio improved 240 bps year over year to 79.5. Our estimate was 82.1. The Zacks Consensus Estimate was pegged at 89.9.
Mortgage: Gross premiums written dropped 2% year over year to $340 million. Our estimate was $340.6 million. Net premiums written increased 4.2% year over year to $276 million on account of a lower level of Bellemeade premiums ceded, due in part to the termination of certain Bellemeade agreements in the fourth quarter of 2023. Our estimate was $340.6 million.
Underwriting income increased 13.4% year over year to $287 million. Our estimate was $210.6 million. The combined ratio improved 760 bps to 7.4. Our estimate was 22.3. The Zacks Consensus Estimate was pegged at 27.8.
Financial Update
Arch Capital exited the quarter with cash of $1.02 billion, which increased 11.2% from 2023-end. Debt was $2.7 billion as of Jun 30, 2024, which remained unchanged from the end of 2023. As of Jun 30, 2024, the book value per share was $52.75, up 12.3% from the 2023-end level.
Annualized operating return on average common equity contracted 100 bps year over year to 20.5%. Cash from operations of $1.5 billion improved 31.8% year over year.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
The consensus estimate has shifted 10.74% due to these changes.
VGM Scores
At this time, Arch Capital has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Following the exact same course, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Arch Capital has a Zacks Rank #2 (Buy). We expect an above average 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, Kinsale Capital Group, Inc. (KNSL - Free Report) , a stock from the same industry, has gained 5.5%. The company reported its results for the quarter ended June 2024 more than a month ago.
Kinsale Capital Group reported revenues of $384.55 million in the last reported quarter, representing a year-over-year change of +30%. EPS of $3.75 for the same period compares with $2.88 a year ago.
Kinsale Capital Group is expected to post earnings of $3.73 per share for the current quarter, representing a year-over-year change of +12.7%. Over the last 30 days, the Zacks Consensus Estimate has changed -1.4%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Kinsale Capital Group. Also, the stock has a VGM Score of C.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Why Is Arch Capital (ACGL) Up 15.9% Since Last Earnings Report?
A month has gone by since the last earnings report for Arch Capital Group (ACGL - Free Report) . Shares have added about 15.9% 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 the most recent earnings report in order to get a better handle on the important catalysts.
Arch Capital Q2 Earnings Beat, Premiums Increase Y/Y
Arch Capital Group Ltd. reported second-quarter 2024 operating income of $2.57 per share, beating the Zacks Consensus Estimate by 18.4%. The bottom line increased 33.8% year over year. The quarterly results of ACGL were aided by improved underwriting income across all the segments, new business opportunities, growth in all lines of business and higher invested assets.
Behind the Headlines
Gross premiums written improved 11.1% year over year to $5.3 billion. Net premiums written climbed 10.3% year over year to $3.7 billion on higher premiums written across its Insurance and Reinsurance segments.
Pre-tax net investment income increased 50.4% year over year to $364 million and beat our estimate of $316.8 million. The growth reflected the effects of sustained higher interest rates available in the market, along with growth in invested assets due in part to strong operating cash flows. The Zacks Consensus Estimate was pegged at $347.5 million.
Operating revenues of $3.9 billion rose 22.6% year over year, driven by higher net premiums earned, net investment income and other income. It beat the Zacks Consensus Estimate by 0.6%.
Pre-tax current accident year catastrophic losses, net of reinsurance and reinstatement premiums, were $196 million, wider than the loss of $119 million incurred in the year-ago quarter. Arch Capital’s underwriting income increased 25.7% year over year to $762 million. Our estimate was $638.6 million. The combined ratio — the percentage of premiums paid out as claims and expenses — improved 110 basis points (bps) to 78.7. Our estimate was 82.2. The Zacks Consensus Estimate was pegged at 89.4.
Segmental Results
Insurance: Gross premiums written increased 7.5% year over year to $2.1 billion. Our estimate was $2.2 billion. Net premiums written climbed 7.2% year over year to $1.5 billion, driven by increases in most lines of business, due in part to new business opportunities and rate changes in the reported quarter. Our estimate was $1.7 billion. Underwriting income of $109 million was 0.9% higher than the year-ago number. Our estimate was $123.3 million. The combined ratio deteriorated 70 bps to 92.6. Our estimate was 92.3 while the Zacks Consensus Estimate was pegged at 97.
Reinsurance: Gross premiums written improved 15.6% year over year to $2.9 billion. Our estimate was $2.8 billion. Net premiums written rose 13.9% year over year to $1.9 billion. The growth in net premiums written reflected increases in all lines of business, due in part to rate increases, new business opportunities and growth in existing accounts. The figure matched our estimate. Underwriting income was $366 million, up 49.4% year over year. Our estimate was $304.7 million.
The combined ratio improved 240 bps year over year to 79.5. Our estimate was 82.1. The Zacks Consensus Estimate was pegged at 89.9.
Mortgage: Gross premiums written dropped 2% year over year to $340 million. Our estimate was $340.6 million. Net premiums written increased 4.2% year over year to $276 million on account of a lower level of Bellemeade premiums ceded, due in part to the termination of certain Bellemeade agreements in the fourth quarter of 2023. Our estimate was $340.6 million.
Underwriting income increased 13.4% year over year to $287 million. Our estimate was $210.6 million. The combined ratio improved 760 bps to 7.4. Our estimate was 22.3. The Zacks Consensus Estimate was pegged at 27.8.
Financial Update
Arch Capital exited the quarter with cash of $1.02 billion, which increased 11.2% from 2023-end. Debt was $2.7 billion as of Jun 30, 2024, which remained unchanged from the end of 2023. As of Jun 30, 2024, the book value per share was $52.75, up 12.3% from the 2023-end level.
Annualized operating return on average common equity contracted 100 bps year over year to 20.5%. Cash from operations of $1.5 billion improved 31.8% year over year.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
The consensus estimate has shifted 10.74% due to these changes.
VGM Scores
At this time, Arch Capital has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Following the exact same course, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Arch Capital has a Zacks Rank #2 (Buy). We expect an above average 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, Kinsale Capital Group, Inc. (KNSL - Free Report) , a stock from the same industry, has gained 5.5%. The company reported its results for the quarter ended June 2024 more than a month ago.
Kinsale Capital Group reported revenues of $384.55 million in the last reported quarter, representing a year-over-year change of +30%. EPS of $3.75 for the same period compares with $2.88 a year ago.
Kinsale Capital Group is expected to post earnings of $3.73 per share for the current quarter, representing a year-over-year change of +12.7%. Over the last 30 days, the Zacks Consensus Estimate has changed -1.4%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Kinsale Capital Group. Also, the stock has a VGM Score of C.