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Arch Capital (ACGL) Down 1.1% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Arch Capital Group (ACGL - Free Report) . Shares have lost about 1.1% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Arch Capital due for a breakout? 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 drivers.
Arch Capital Q2 Earnings and Revenues Beat, Up Y/Y
Arch Capital reported second-quarter 2019 operating income per share of 17 cents, which outpaced the Zacks Consensus Estimate by 11.6%. Moreover, the bottom line improved 30.5%.
The quarter benefited from improving premiums and net investment income as well as decline in expenses.
Behind the Headlines
Gross premiums written increased 14.2% year over year to $1.9 billion, largely fueled by higher premiums written across its Insurance, Reinsurance and Mortgage segments.
Net investment income increased 40.9% year over year to $155 million, driven by growth in invested assets, reinvestment of fixed income securities at higher available yields and shift from municipal bonds to corporates.
Operating revenues of $1.6 billion increased 9.8% year over year and beat the Zacks Consensus Estimate by 4.8%.
Interest expense was $29.3 million, down nearly 52% year over year, reflecting the paydown of revolving credit agreement borrowings in the second half of 2018.
Total expense of $1.2 billion decreased 43.9% year over year on lower losses and loss adjustment expenses, acquisition expenses, other operating expenses, interest expense and corporate expenses.
Arch Capital’s underwriting income came in at $293.1 million, up 24.5% year over year. Combined ratio improved 230 basis points (bps) to 80.4%.
Segment Results
Insurance: Gross premiums written increased 19.6% year over year to $919.9 million driven by acquisition of a U.K. commercial lines book of business and, growth and rate increase in most lines of business.
Underwriting profit dropped 52.9% year over year to $2.6 million. Combined ratio deteriorated 60 bps to 99.6%.
Reinsurance: Gross premiums written rose 11.3% year over year to $545.5 million on growth in property business, with a significant amount being retroceded.
Underwriting income surged 50.4% year over year to $36.7 million. Combined ratio improved 250 bps year over year to 90.3%.
Mortgage: Gross premiums written increased 10.1% year over year to $364.5 million. Underwriting income increased 25.6% to $2583.4 million. Combined ratio improved 220 bps year over year to 28%. Arch MI U.S. generated $17.2 billion of new insurance written.
Financial Update
Arch Capital exited the quarter with cash of $605.3 million, up 14.9% year over year. Debt was $1.7 billion, up 0.4% year over year.
As of Jun 30, 2019, book value per share was $24.64, up 6.6% year over year.
Operating return on equity was 13.1% in the second quarter, up 150 basis points.
Net cash provided by operating activities was $431.9 million, an increase from $34.2 million in the year-ago period.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
VGM Scores
Currently, Arch Capital has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. 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 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.
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Arch Capital (ACGL) Down 1.1% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Arch Capital Group (ACGL - Free Report) . Shares have lost about 1.1% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Arch Capital due for a breakout? 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 drivers.
Arch Capital Q2 Earnings and Revenues Beat, Up Y/Y
Arch Capital reported second-quarter 2019 operating income per share of 17 cents, which outpaced the Zacks Consensus Estimate by 11.6%. Moreover, the bottom line improved 30.5%.
The quarter benefited from improving premiums and net investment income as well as decline in expenses.
Behind the Headlines
Gross premiums written increased 14.2% year over year to $1.9 billion, largely fueled by higher premiums written across its Insurance, Reinsurance and Mortgage segments.
Net investment income increased 40.9% year over year to $155 million, driven by growth in invested assets, reinvestment of fixed income securities at higher available yields and shift from municipal bonds to corporates.
Operating revenues of $1.6 billion increased 9.8% year over year and beat the Zacks Consensus Estimate by 4.8%.
Interest expense was $29.3 million, down nearly 52% year over year, reflecting the paydown of revolving credit agreement borrowings in the second half of 2018.
Total expense of $1.2 billion decreased 43.9% year over year on lower losses and loss adjustment expenses, acquisition expenses, other operating expenses, interest expense and corporate expenses.
Arch Capital’s underwriting income came in at $293.1 million, up 24.5% year over year. Combined ratio improved 230 basis points (bps) to 80.4%.
Segment Results
Insurance: Gross premiums written increased 19.6% year over year to $919.9 million driven by acquisition of a U.K. commercial lines book of business and, growth and rate increase in most lines of business.
Underwriting profit dropped 52.9% year over year to $2.6 million. Combined ratio deteriorated 60 bps to 99.6%.
Reinsurance: Gross premiums written rose 11.3% year over year to $545.5 million on growth in property business, with a significant amount being retroceded.
Underwriting income surged 50.4% year over year to $36.7 million. Combined ratio improved 250 bps year over year to 90.3%.
Mortgage: Gross premiums written increased 10.1% year over year to $364.5 million. Underwriting income increased 25.6% to $2583.4 million. Combined ratio improved 220 bps year over year to 28%. Arch MI U.S. generated $17.2 billion of new insurance written.
Financial Update
Arch Capital exited the quarter with cash of $605.3 million, up 14.9% year over year. Debt was $1.7 billion, up 0.4% year over year.
As of Jun 30, 2019, book value per share was $24.64, up 6.6% year over year.
Operating return on equity was 13.1% in the second quarter, up 150 basis points.
Net cash provided by operating activities was $431.9 million, an increase from $34.2 million in the year-ago period.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
VGM Scores
Currently, Arch Capital has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. 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 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.