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Why Is Arch Capital (ACGL) Up 1.6% Since Last Earnings Report?
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It has been about a month since the last earnings report for Arch Capital Group (ACGL - Free Report) . Shares have added about 1.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Arch Capital due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Arch Capital Q4 Earnings Top on Reinsurance Strength
Arch Capital Group Ltd. 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.
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.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
The consensus estimate has shifted 8.61% due to these changes.
VGM Scores
Currently, Arch Capital has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Arch Capital has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Why Is Arch Capital (ACGL) Up 1.6% Since Last Earnings Report?
It has been about a month since the last earnings report for Arch Capital Group (ACGL - Free Report) . Shares have added about 1.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Arch Capital due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Arch Capital Q4 Earnings Top on Reinsurance Strength
Arch Capital Group Ltd. 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.
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.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
The consensus estimate has shifted 8.61% due to these changes.
VGM Scores
Currently, Arch Capital has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Arch Capital has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.