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Here's Why You Should Hold Arch Capital (ACGL) Stock Now

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Arch Capital Group Ltd. (ACGL - Free Report) has been gaining momentum on the back of growth within professional liability lines, rate improvements, strong housing demand and solid capital position

Growth Projections

The Zacks Consensus Estimate for 2022 and 2023 earnings per share is pegged at $4.32 and $5.14, indicating year-over-year increases of 20.7% and 18.9%, respectively. The expected long-term earnings growth rate is pegged at 10%.

Earnings Surprise History

Arch Capital has a solid track record of beating earnings estimates in six of the last seven quarters.

Zacks Rank & Price Performance

Arch Capital currently carries a Zacks Rank #3 (Hold). In the past year, the stock has rallied 13.8% against the industry’s decline of 1.6%.

Zacks Investment Research
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Return on Equity (ROE)

Arch Capital’s ROE for the trailing 12 months is 13.2%, up 820 basis points year over year and better than the industry average of 5.7%, reflecting its efficiency in utilizing shareholders’ funds. 

Style Score

Arch Capital has a VGM Score of B. VGM Score helps identify stocks with the most attractive value, best growth and the most promising momentum.

Business Tailwinds

Premiums in the Insurance segment stand to gain from solid growth within professional liability and travel business units in both North America and internationally. New business opportunities as well as growth in existing accounts are expected to boost the Insurance segment. Underwriting performance was excellent with a 250-basis point improvement in accident quarter combined ratio, excluding catastrophe losses in the first quarter.

Rate improvements should continue to expand writings in the property casualty segment. Rate increases remain well above the long-term loss cost trends and have spread to more lines.

Growth in the Reinsurance segment is primarily driven by casualty and other specialty lines. Rate increases, new business opportunities and growth in existing accounts should benefit the top line.

The mortgage segment stands to benefit from strong housing demand and excellent credit conditions as well as growth in Australian single premium mortgage insurance.

This leading specialty property, and casualty and mortgage insurer actively pursues acquisitions to expand internationally, enhance capabilities, boost operations and diversify the business. The acquisitions are likely to boost its insurance solutions and strengthen its position as the only globally diversified insurer of mortgage credit risk.

Arch Capital boasts an impressive solvency level. A higher level of premiums is likely to boost cash flow from operations.

Stocks to Consider

Some better-ranked stocks from the property and casualty insurance sector are RLI Corp. (RLI - Free Report) , W.R. Berkley Corporation (WRB - Free Report) and American Financial Group, Inc. (AFG - Free Report) . While RLI Corp. currently sports a Zacks Rank #1(Strong Buy), American Financial and W.R. Berkley carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

RLI has a solid track record of beating earnings estimates in each of the last seven quarters. In the past year, RLI stock has increased 10.7%.

The Zacks Consensus Estimate for RLI’s 2022 and 2023 earnings per share is pegged at $4.35 and $4.45, indicating year-over-year increases of 12.4% and 2.3%, respectively.

W.R. Berkley’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 27.08%. In the past year, W.R. Berkley's stock has increased 29.7%.

The Zacks Consensus Estimate for WRB’s 2022 and 2023 earnings has moved 6.3% and 6.2% north, respectively, in the past 30 days.

American Financial’s earnings surpassed estimates in each of the last four quarters, the average beat being 41.72%. In the past year, American Financial has rallied 8.2%.

The Zacks Consensus Estimate for AFG’s 2022 and 2023 earnings has moved 9.8% and 6.9% north, respectively, in the past seven days.