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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 on the back of strong rate increases, new business opportunities, lower expense ratio and a higher level of income on fund investments.

Long-Term Growth

The expected long-term earnings growth rate is 10%, higher than the industry average of 9.4%.

Growth Projections

The Zacks Consensus Estimate for 2021 and 2022 earnings per share is pegged at $3.24 and $4.12, indicating a year-over-year increase of 138.2% and 27.2%, 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 14.28%.

Zacks Rank & Price Performance

Arch Capital currently carries a Zacks Rank #3 (Hold). In the past year, the stock has rallied 26.5% compared with the industry’s increase of 23.3%.

Zacks Investment ResearchImage Source: Zacks Investment Research

Style Score

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

Business Tailwinds

The property and casualty insurer remains well poised for growth on the back of solid performance across its segments.

The Insurance and the Reinsurance segments are well poised for growth on the back of rate increases, new business opportunities and growth in existing accounts across most of the business lines and strong growth across most lines of business.

Arch Capital expects the ongoing rate improvements to be reflected in underwriting results over the coming quarters.

The underlying combined ratio is likely to improve on the back of a higher level of premium earned, lower loss ratios attributable to rate increases as well as improved underwriting performance and lower expense ratio.

Net investment income is expected to grow in the long run on the back of growth in invested assets, higher level of income on fund investments, reinvestment of fixed income securities at higher available yields and the shift from municipal bonds to corporates.

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

Banking on solid financial strength, the insurer engages in capital deployment to enhance its shareholder value. Currently, it has $431.2 million remaining under its share repurchase authorization.

Stocks to Consider

Some better-ranked stocks from the same space include American Financial Group, Inc. (AFG - Free Report) , Berkshire Hathaway Inc. (BRK.B - Free Report) and ProAssurance Corporation (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.

American Financial surpassed estimates in each of the last four quarters, the average earnings surprise being 52.82%.

The bottom line of Berkshire Hathaway surpassed estimates in three of the last four quarters and missed in the other one, the average being 6.80%.

ProAssurance’s earnings surpassed estimates in three of the last four quarters and missed in the other one, the average being 200.6%.