Arch Capital Group Ltd. (ACGL - Free Report) announced pre-tax gross catastrophe loss estimates of $110-$130 million, stemming from Hurricane Michael and the California wildfire. The insurer’s fourth-quarter results will reflect these losses.
Being a property and casualty insurer, Arch Capital is vulnerable to natural disasters inducing volatility in underwriting results. In the last reported quarter, the company incurred net catastrophe losses of $58.2 million from Hurricane Florence and Typhoon Jebi in Japan. However, combined ratio, a measure of underwriting profitability, improved 2950 basis points, given the company’s underwriting excellence. In fact, operating earnings per share in the third quarter rebounded from the year-ago loss owing to favorable underwriting results and higher net investment income.
According to a report published in Insurance Journal on Dec 12, 2018, insured losses from the California wildfire came in at $9.05 billion, while catastrophe modeler CoreLogic estimated total losses resulting from the wildfires in Northern and Southern California between $15 billion and $19 billion. Per reports from Florida Office of Insurance Regulation, Hurricane Michael is estimated to cause about $4.3 billion in insured losses.
Insurer Mercury General Corporation (MCY - Free Report) estimates pre-tax gross catastrophe loss of $253 million, stemming from Camp Fire and Woolsey Fire. RLI Corp. (RLI - Free Report) projects cat loss between $22 million and $27 million, net of reinsurance. AXIS Capital Holdings Limited (AXS - Free Report) expects preliminary cat loss between $100 million and $120 million, net of estimated recoveries, owing to reinsurance and retrocessional covers, and including the impact of estimated reinstatement premiums for fourth-quarter 2018.
The Zacks Consensus Estimate for the fourth quarter is currently pegged at 45 cents, flat year over year on 1% higher revenues. However, we expect the estimates to move south, once analysts start incorporating loss estimates into their numbers.
Concurrently, Arch Capital projects effective tax rate on pre-tax operating income for the fourth quarter of 2018 between 12% and 15%.
The company is set to report fourth-quarter 2018 results on Feb 12. Our proven model does not conclusively show that the company is likely to deliver a positive surprise in the to-be-reported quarter. This is because, though its favorable Zacks Rank #3 (Hold) increases the predictive power of ESP, the company's Earnings ESP of -42.22% makes surprise prediction difficult. It came up with positive earnings surprises in the trailing three quarters.
Shares of Arch Capital have lost 8.5% year to date, wider than the industry’s decline of 6.5%. Nonetheless, diverse product and service portfolio that drives the growth of premiums, the expansion of U.S. Mortgage Insurance business, along with a robust capital position should help the stock rebound.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
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Arch Capital Group Ltd. (ACGL - Free Report) announced pre-tax gross catastrophe loss estimates of $110-$130 million, stemming from Hurricane Michael and the California wildfire. The insurer’s fourth-quarter results will reflect these losses.
Being a property and casualty insurer, Arch Capital is vulnerable to natural disasters inducing volatility in underwriting results. In the last reported quarter, the company incurred net catastrophe losses of $58.2 million from Hurricane Florence and Typhoon Jebi in Japan. However, combined ratio, a measure of underwriting profitability, improved 2950 basis points, given the company’s underwriting excellence. In fact, operating earnings per share in the third quarter rebounded from the year-ago loss owing to favorable underwriting results and higher net investment income.
According to a report published in Insurance Journal on Dec 12, 2018, insured losses from the California wildfire came in at $9.05 billion, while catastrophe modeler CoreLogic estimated total losses resulting from the wildfires in Northern and Southern California between $15 billion and $19 billion. Per reports from Florida Office of Insurance Regulation, Hurricane Michael is estimated to cause about $4.3 billion in insured losses.
Insurer Mercury General Corporation (MCY - Free Report) estimates pre-tax gross catastrophe loss of $253 million, stemming from Camp Fire and Woolsey Fire. RLI Corp. (RLI - Free Report) projects cat loss between $22 million and $27 million, net of reinsurance. AXIS Capital Holdings Limited (AXS - Free Report) expects preliminary cat loss between $100 million and $120 million, net of estimated recoveries, owing to reinsurance and retrocessional covers, and including the impact of estimated reinstatement premiums for fourth-quarter 2018.
The Zacks Consensus Estimate for the fourth quarter is currently pegged at 45 cents, flat year over year on 1% higher revenues. However, we expect the estimates to move south, once analysts start incorporating loss estimates into their numbers.
Concurrently, Arch Capital projects effective tax rate on pre-tax operating income for the fourth quarter of 2018 between 12% and 15%.
The company is set to report fourth-quarter 2018 results on Feb 12. Our proven model does not conclusively show that the company is likely to deliver a positive surprise in the to-be-reported quarter. This is because, though its favorable Zacks Rank #3 (Hold) increases the predictive power of ESP, the company's Earnings ESP of -42.22% makes surprise prediction difficult. It came up with positive earnings surprises in the trailing three quarters.
Shares of Arch Capital have lost 8.5% year to date, wider than the industry’s decline of 6.5%. Nonetheless, diverse product and service portfolio that drives the growth of premiums, the expansion of U.S. Mortgage Insurance business, along with a robust capital position should help the stock rebound.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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