Arch Capital Group Ltd. ( ACGL Quick Quote ACGL - Free Report) reported second-quarter 2022 operating income per share of $1.34 per share, which beat the Zacks Consensus Estimate by 22.9%. The bottom line increased 34% year over year. The results benefited from improved premiums, lower expenses, as well as lower catastrophic losses and improved combined ratio, offset by lower net investment income. Arch Capital Group Ltd. Price, Consensus and EPS Surprise
Behind the Headlines
Gross premiums written improved 17.8% year over year to $3.9 billion. Net premiums written climbed 11.9% year over year to $2.7 billion on higher premiums written across its Insurance and Reinsurance segments.
Net investment income declined 4.7% year over year to $106.4 million. Operating revenues of $2.4 billion rose 8% year over year and beat the Zacks Consensus Estimate by 2%. Total expenses of $1.8 billion decreased 1.7% year over year due to lower losses and loss adjustment expenses, acquisition expenses, and interest expense as well as higher net foreign exchange gains. Pre-tax current accident year catastrophic losses, net of reinsurance and reinstatement premiums were $82.4 million, which increased 77.2% from the prior-year quarter. Arch Capital’s underwriting income increased 38.5% year over year to $535.4 million. The combined ratio improved 490 basis points (bps) to 77.1. Segment Results Insurance: Gross premiums written advanced 24.6% year over year to $1.7 billion. Net premiums written climbed 27.5% year over year to $1.2 billion. This growth can primarily be attributed to increases in most lines of business, due in part to rate increases, new business opportunities and growth in existing accounts. Underwriting income increased 97.8% to $97.6 million. The combined ratio improved 320 bps to 91.1. Reinsurance: Gross premiums written improved 32.1% year over year to $1.8 billion. Net premiums written rose 25.7% year over year to $1.5 billion. The growth was driven by increases in other specialty, property catastrophe and property excluding property catastrophe lines, primarily related to rate increases, new business opportunities and growth in existing accounts. Underwriting income was $139.4 million, up 45.2% from the year-ago quarter. The combined ratio improved 170 bps year over year to 85.4. Mortgage: Gross premiums written decreased 5% year over year to $371.9 million. Net premiums written decreased 12.5% year over year to $293.7 million. The reduction in gross premiums written primarily reflected lower U.S. primary mortgage insurance single premium volume and a decrease in monthly premiums. Underwriting income increased 19.3% year over year to $298.4 million. The combined ratio was (1.5) versus 26.5 in the year-ago quarter. Financial Update
Arch Capital exited the second quarter of 2022 with cash of $813.5 million, which decreased 5.3% from 2021 end. Debt was $2.7 billion as of Jun 30, 2022, down 0.02% from 2021 end. As of Jun 30, 2022, the book value per share was $31.37, down 6.5% from 2021 end.
Annualized operating return on average common equity was 13.3% in the second quarter, down 790 bps. ACGL bought back shares worth $320.7 million in the second quarter of 2022. Zacks Rank
Arch Capital currently carries a Zacks Rank #2 (Buy). You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Performance of Some Other P&C Insurers
Of the insurance industry players that have reported second-quarter results so far,
The Travelers Companies ( TRV Quick Quote TRV - Free Report) and RLI Corporation ( RLI Quick Quote RLI - Free Report) beat the respective Zacks Consensus Estimate for earnings, while The Progressive Corporation ( PGR Quick Quote PGR - Free Report) met the mark. Travelers’ core income of $2.57 per share beat the Zacks Consensus Estimate by 28.5% but decreased 26% year over year. Total revenues increased 7% year over year, primarily due to higher premiums, and beat the consensus estimate by 1.8%. Net written premiums increased 11%, driven by strong retention rates and positive renewal premium changes across all the segments. Underwriting gain of $113 million decreased 65% year over year in the reported quarter. Travelers’ combined ratio deteriorated 300 bps year over year to 98.3 due to higher catastrophe losses and a higher underlying combined ratio. RLI’s operating earnings of $1.49 per share beat the Zacks Consensus Estimate by 6.1% and improved 36.7% from the prior-year quarter. Operating revenues were $301.3 million, up 16.9% year over year, driven by 17.3% higher net premiums earned and 10.5% higher net investment income. The top line beat the Zacks Consensus Estimate of $276 million by 0.9%. RLI’s underwriting income of $56 million increased 53%, primarily due to the strong performance of the Property and Surety segments. The combined ratio improved 460 bps year over year to 80.2. Progressive’s earnings per share of 95 cents came in line with the Zacks Consensus Estimate. The bottom line declined 37.1% year over year. Net premiums written were $12.4 billion in the quarter, up 8% from $11.7 billion a year ago.