We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Arch Capital (ACGL) Q4 Earnings Top on Reinsurance Strength
Read MoreHide Full Article
Arch Capital Group Ltd. (ACGL - Free Report) reported fourth-quarter 2022 operating income of $2.14 per share, beating the Zacks Consensus Estimate by 59.7%. The bottom line increased 68.5% year over year.
The results benefited from improved premiums and higher net investment income on the back of improved Insurance and Reinsurance segment performance.
Arch Capital Group Ltd. Price, Consensus and EPS Surprise
Gross premiums written improved 32.6% year over year to $3,795 million. Net premiums written climbed 49.2% year over year to $3,034 million on higher premiums written across its Insurance and Reinsurance segments.
Net investment income skyrocketed 100.2% year over year to $181 million and beat our estimate of $121 million by 49.6%. Higher net investment income reflects higher interest rates.
Operating revenues of $2,950 million rose 35.1% year over year, beating the Zacks Consensus Estimate by about 10.3% and our estimate of $2,617 million. This increase was supported by higher net premiums earned and net investment income.
Total expenses of $2,184 million increased 28.8% year over year due to higher losses and loss adjustment expenses, acquisition expenses, other operating expenses, as well as higher net foreign exchange gains. Our estimate was $2,191 million.
Pre-tax current accident year catastrophic losses, net of reinsurance and reinstatement premiums, were $34.6 million, stemming from a series of global events that occurred in 2022.
Arch Capital’s underwriting income increased 55.7% year over year to $734.2 million. The combined ratio improved 410 basis points (bps) to 73.5.
Segment Results
Insurance: Gross premiums written increased 10.6% year over year to $1,644 million. Net premiums written climbed 17.4% year over year to $1,216 million. This growth can primarily be attributed to improving lines of business, owing to increasing rates, fresh business opportunities and growth trajectory in existing accounts.
The underwriting income of $97 million was 38.5% higher than the year-ago number. The combined ratio improved 80 bps to 92.1.
Reinsurance: Gross premiums written improved 77.4% year over year to $1,797 million. Net premiums written rose 117.6% year over year to $1,543 million. The fourth-quarter results were impacted by a few non-recurring items, in the absence of which gross and net premiums written would be higher by 47.9% and 61%, respectively. The growth was driven by increases in other specialties, property catastrophe and property, excluding property catastrophe lines, primarily related to rate increases, new business opportunities and growth in existing accounts.
Underwriting income was $263 million, up 98.5% year over year. The combined ratio improved 470 bps year over year to 78.4.
Mortgage: Gross premiums written dropped 2.3% year over year to $355.8 million. Net premiums written decreased 5.1% year over year to $274.5 million. The reduction in net premiums earned reflected a decline in earnings from single premium policy terminations and higher ceded premiums earned, which were partially offset by the growing credit risk transfer business.
Underwriting income increased 39.1% year over year to $373.5 million. The combined ratio was (27.1) versus 11.7 in the year-ago quarter.
Financial Update
Arch Capital exited 2022 with cash of $855 million, which decreased 0.41% from 2021-end. Debt was $2,725 million as of Dec 31, 2022, up 0.04% from 2021-end.
As of Dec 31, 2022, the book value per share was $32.62, down 2.8% from 2021-end.
Annualized operating return on average common equity expanded 330 basis points to 14.8% in 2022.
Cash from operations of $3.8 billion in 2022 improved 11.3% year over year.
Of the insurance industry players that have reported fourth-quarter results so far, RLICorporation (RLI - Free Report) and The Progressive Corporation (PGR - Free Report) beat the respective Zacks Consensus Estimate for earnings, while The Travelers Companies (TRV - Free Report) earnings were in line with Zacks Consensus Estimate.
RLI Corporationreported fourth-quarter 2022 operating earnings of $1.53 per share, beating the Zacks Consensus Estimate by 41.7%. The bottom line improved 26.4% from the prior-year quarter. Operating revenues for the reported quarter of RLI were $329.5 million, up 19.4% year over year, driven by 16.7% higher net premiums earned and 59% higher net investment income. The top line beat the Zacks Consensus Estimate by 0.4%.
Progressive Corporationfourth-quarter 2022 earnings per share of $1.50 beat the Zacks Consensus Estimate of $1.49. The bottom line improved 42.9% year over year. Net premiums written of PGR were $12.5 billion in the quarter, up 16% from $10.7 billion a year ago. The combined ratio — the percentage of premiums paid out as claims and expenses — improved 80 bps from the prior-year quarter’s level to 93.9.
Travelers Companiesreported fourth-quarter 2022 core income of $3.40 per share, which matched the Zacks Consensus Estimate. The bottom line decreased 35% year over year. Total revenues increased 7.5% from the year-ago quarter to about $9.6 billion, primarily driven by higher premiums and fee income. The top-line figure beat the Zacks Consensus Estimate by 0.2%.
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Arch Capital (ACGL) Q4 Earnings Top on Reinsurance Strength
Arch Capital Group Ltd. (ACGL - Free Report) reported fourth-quarter 2022 operating income of $2.14 per share, beating the Zacks Consensus Estimate by 59.7%. The bottom line increased 68.5% year over year.
The results benefited from improved premiums and higher net investment income on the back of improved Insurance and Reinsurance segment performance.
Arch Capital Group Ltd. Price, Consensus and EPS Surprise
Arch Capital Group Ltd. price-consensus-eps-surprise-chart | Arch Capital Group Ltd. Quote
Behind the Headlines
Gross premiums written improved 32.6% year over year to $3,795 million. Net premiums written climbed 49.2% year over year to $3,034 million on higher premiums written across its Insurance and Reinsurance segments.
Net investment income skyrocketed 100.2% year over year to $181 million and beat our estimate of $121 million by 49.6%. Higher net investment income reflects higher interest rates.
Operating revenues of $2,950 million rose 35.1% year over year, beating the Zacks Consensus Estimate by about 10.3% and our estimate of $2,617 million. This increase was supported by higher net premiums earned and net investment income.
Total expenses of $2,184 million increased 28.8% year over year due to higher losses and loss adjustment expenses, acquisition expenses, other operating expenses, as well as higher net foreign exchange gains. Our estimate was $2,191 million.
Pre-tax current accident year catastrophic losses, net of reinsurance and reinstatement premiums, were $34.6 million, stemming from a series of global events that occurred in 2022.
Arch Capital’s underwriting income increased 55.7% year over year to $734.2 million. The combined ratio improved 410 basis points (bps) to 73.5.
Segment Results
Insurance: Gross premiums written increased 10.6% year over year to $1,644 million. Net premiums written climbed 17.4% year over year to $1,216 million. This growth can primarily be attributed to improving lines of business, owing to increasing rates, fresh business opportunities and growth trajectory in existing accounts.
The underwriting income of $97 million was 38.5% higher than the year-ago number. The combined ratio improved 80 bps to 92.1.
Reinsurance: Gross premiums written improved 77.4% year over year to $1,797 million. Net premiums written rose 117.6% year over year to $1,543 million. The fourth-quarter results were impacted by a few non-recurring items, in the absence of which gross and net premiums written would be higher by 47.9% and 61%, respectively. The growth was driven by increases in other specialties, property catastrophe and property, excluding property catastrophe lines, primarily related to rate increases, new business opportunities and growth in existing accounts.
Underwriting income was $263 million, up 98.5% year over year. The combined ratio improved 470 bps year over year to 78.4.
Mortgage: Gross premiums written dropped 2.3% year over year to $355.8 million. Net premiums written decreased 5.1% year over year to $274.5 million. The reduction in net premiums earned reflected a decline in earnings from single premium policy terminations and higher ceded premiums earned, which were partially offset by the growing credit risk transfer business.
Underwriting income increased 39.1% year over year to $373.5 million. The combined ratio was (27.1) versus 11.7 in the year-ago quarter.
Financial Update
Arch Capital exited 2022 with cash of $855 million, which decreased 0.41% from 2021-end. Debt was $2,725 million as of Dec 31, 2022, up 0.04% from 2021-end.
As of Dec 31, 2022, the book value per share was $32.62, down 2.8% from 2021-end.
Annualized operating return on average common equity expanded 330 basis points to 14.8% in 2022.
Cash from operations of $3.8 billion in 2022 improved 11.3% year over year.
Zacks Rank
Arch Capital currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Insurers
Of the insurance industry players that have reported fourth-quarter results so far, RLI Corporation (RLI - Free Report) and The Progressive Corporation (PGR - Free Report) beat the respective Zacks Consensus Estimate for earnings, while The Travelers Companies (TRV - Free Report) earnings were in line with Zacks Consensus Estimate.
RLI Corporationreported fourth-quarter 2022 operating earnings of $1.53 per share, beating the Zacks Consensus Estimate by 41.7%. The bottom line improved 26.4% from the prior-year quarter. Operating revenues for the reported quarter of RLI were $329.5 million, up 19.4% year over year, driven by 16.7% higher net premiums earned and 59% higher net investment income. The top line beat the Zacks Consensus Estimate by 0.4%.
Progressive Corporationfourth-quarter 2022 earnings per share of $1.50 beat the Zacks Consensus Estimate of $1.49. The bottom line improved 42.9% year over year. Net premiums written of PGR were $12.5 billion in the quarter, up 16% from $10.7 billion a year ago. The combined ratio — the percentage of premiums paid out as claims and expenses — improved 80 bps from the prior-year quarter’s level to 93.9.
Travelers Companiesreported fourth-quarter 2022 core income of $3.40 per share, which matched the Zacks Consensus Estimate. The bottom line decreased 35% year over year. Total revenues increased 7.5% from the year-ago quarter to about $9.6 billion, primarily driven by higher premiums and fee income. The top-line figure beat the Zacks Consensus Estimate by 0.2%.