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Reasons Why You Should Retain Arch Capital (ACGL) Stock

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Arch Capital Group Ltd. (ACGL - Free Report) has been gaining momentum over the past many quarters on the back of new business opportunities, rate increases, higher premium earned and strong balance sheet.

Growth Projections

The Zacks Consensus Estimate for 2021 and 2022 earnings per share is pegged at $3.14 and $4.09, indicating year-over-year increase of 130.8% and 30.2%, respectively.

Earnings Surprise History

Arch Capital has a decent earnings surprise history. It beat estimates in each of the last four quarters, with the average being 40.35%.

Zacks Rank & Price Performance

Arch Capital currently carries a Zacks Rank #3 (Hold). In the past year, the stock has rallied 35.3% compared with the industry’s increase of 40.3%.

Zacks Investment ResearchImage Source: Zacks Investment Research

Style Score

The company has a favorable VGM Score of B. VGM Score helps to identify stocks with the most attractive value, best growth and the most promising momentum.

It has an impressive Growth Score of B. This style score helps analyze the growth prospects of a company.

Business Tailwinds

Arch Capital is witnessing a positive trend in net premiums earned, driven by premium growth at both its Insurance and Reinsurance segments.

Increase in most lines of business due to new business opportunities, rate increases and growth in existing accounts will continue to boost the performance of the Insurance segment of Arch Capital.

The company’s reinsurance operations continue to gain from higher premiums across most of its business lines fueled by combination of new business and strong rate increases.

Rate increases coupled with better underwriting actions are likely to improve the loss ratios, while growth in the premium base should better the expense ratio. Over the last four quarters, Arch Capital witnessed lower claims activity as well.

Moreover, rate increase on a global basis strengthens the momentum for improving margins in P&C insurance. The insurer expects improved underwriting margins for the next several quarters.

Furthermore, higher premium earned, lower loss ratios and expense ratio continue to improve the underlying combined ratio.

Arch Capital boasts a solid balance sheet with debt plus preferred leverage remaining well within the reasonable range. Also, higher level of premiums boosts the cash flows from operation.

Banking on solid financial strength, the insurer engages in capital deployment to enhance its shareholders value. Currently, it has $737.3 million remaining under its share repurchase authorization.

Stocks to Consider

Some better-ranked stocks from the insurance sector are HCI Group, Inc. (HCI - Free Report) , Cincinnati Financial Corporation (CINF - Free Report) and Alleghany Corporation (Y - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The bottom line of HCI Group surpassed estimates in three of the last four quarters and missed the mark in the remaining one, the average beat being 42.91%.

Cincinnati Financial’s earnings surpassed estimates in three of the last four quarters, missing the mark on a single occasion, the average surprise being 17.63%.

Alleghany’s earnings surpassed estimates in each of the last four quarters, the average being 128.63%.

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