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Arch Capital (ACGL) Up 2.2% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Arch Capital Group (ACGL - Free Report) . Shares have added about 2.2% in that time frame, underperforming 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 catalysts.
Arch Capital Q3 Earnings, Revenues Top on Higher Premiums
Arch Capital Group Ltd. reported third-quarter 2024 operating income of $1.99 per share, which beat the Zacks Consensus Estimate by 2.6%. The bottom line decreased 13.6% year over year. The quarterly results of ACGL were adversely impacted by lower underwriting income across all the segments attributable to higher cat losses stemming from Hurricane Helene. The downside was limited by positive contributions from new business opportunities, growth in all lines of business and higher invested assets.
Behind ACGL's Headlines
Gross premiums written improved 20.2% year over year to $5.4 billion. Net premiums written climbed 20.6% year over year to $4 billion on higher premiums written across its Insurance and Reinsurance segments. Our estimate was $5 billion.
Pre-tax net investment income increased 48.3% year over year to $399 million and beat our estimate of $354.9 million. The growth reflected the effects of sustained higher interest rates available in the market, along with growth in invested assets due in part to strong operating cash flows and inflows related to the MCE Acquisition. The Zacks Consensus Estimate was pegged at $373 million.
Operating revenues of $4.4 billion rose 24.6% year over year, driven by higher net premiums earned, net investment income and other income. It beat the Zacks Consensus Estimate by 8.1%.
Pre-tax current accident year catastrophic losses, net of reinsurance and reinstatement premiums, were $450 million, wider than a loss of $180 million incurred in the year-ago quarter.
Arch Capital’s underwriting income decreased 25.4% year over year to $538 million. Our estimate was $463.3 million. The combined ratio — the percentage of premiums paid out as claims and expenses — deteriorated 870 basis points (bps) to 86.6. Our estimate and the Zacks Consensus Estimate were both pegged at 87.
Arch Capital’s Segmental Results
Insurance: Gross premiums written increased 14.6% year over year to $2.3 billion. Our estimate was $2.2 billion. Net premiums written climbed 19.6% year over year to $1.8 billion, driven by the impact of the MCE acquisition and an increase in other liability—occurrences due, in part, to new business opportunities and rate changes. Our estimate was $1.6 billion. Underwriting income of $120 million was 7% lower than the year-ago number. Our estimate was $84 million. The combined ratio deteriorated 220 bps to 93.1. Our estimate was 94.5 while the Zacks Consensus Estimate was pegged at 96.
Reinsurance: Gross premiums written improved 29.2% year over year to $2.8 billion. Our estimate was $2.4 billion. Net premiums written rose 24.5% year over year to $1.9 billion. The growth in net premiums written reflected increases in most lines of business due in part to rate increases, new business opportunities and growth in existing accounts. Our estimate was $1.7 billion. Underwriting income was $149 million, down 51.9% year over year. Our estimate was $176.9 million. The combined ratio deteriorated 1230 bps year over year to 92.3. Our estimate and the Zacks Consensus Estimate were both pegged at 90.
Mortgage: Gross premiums written dropped 2.3% year over year to $339 million. Our estimate was $336.9 million. Net premiums written increased 4.1% year over year to $282 million on account of a lower level of Bellemeade premiums ceded due in part to the termination of certain Bellemeade agreements in the fourth quarter of 2023. Our estimate was $255 million. Underwriting income decreased 4.6% year over year to $269 million. Our estimate was $202.7 million. The combined ratio deteriorated 1010 bps to 14.8. Our estimate was 24.3. The Zacks Consensus Estimate was pegged at 25.4.
ACGL’s Financial Update
Arch Capital exited the quarter with cash of $1.03 billion, which increased 11.8% from 2023-end. Debt was $2.7 billion as of Sept. 30, 2024, which remained unchanged from the end of 2023. As of Sept. 30, 2024, the book value per share was $57, up 21.4% from the 2023-end level. Annualized operating return on average common equity contracted 1000 bps year over year to 14.8%. Cash from operations of $2 billion improved 2.4% year over year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -11.62% due to these changes.
VGM Scores
At this time, Arch Capital has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Arch Capital has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Arch Capital belongs to the Zacks Insurance - Property and Casualty industry. Another stock from the same industry, Travelers (TRV - Free Report) , has gained 8.4% over the past month. More than a month has passed since the company reported results for the quarter ended September 2024.
Travelers reported revenues of $11.85 billion in the last reported quarter, representing a year-over-year change of +10.7%. EPS of $5.24 for the same period compares with $1.95 a year ago.
Travelers is expected to post earnings of $6.38 per share for the current quarter, representing a year-over-year change of -9%. Over the last 30 days, the Zacks Consensus Estimate has changed +1.6%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for Travelers. Also, the stock has a VGM Score of A.
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Arch Capital (ACGL) Up 2.2% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Arch Capital Group (ACGL - Free Report) . Shares have added about 2.2% in that time frame, underperforming 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 catalysts.
Arch Capital Q3 Earnings, Revenues Top on Higher Premiums
Arch Capital Group Ltd. reported third-quarter 2024 operating income of $1.99 per share, which beat the Zacks Consensus Estimate by 2.6%. The bottom line decreased 13.6% year over year. The quarterly results of ACGL were adversely impacted by lower underwriting income across all the segments attributable to higher cat losses stemming from Hurricane Helene. The downside was limited by positive contributions from new business opportunities, growth in all lines of business and higher invested assets.
Behind ACGL's Headlines
Gross premiums written improved 20.2% year over year to $5.4 billion. Net premiums written climbed 20.6% year over year to $4 billion on higher premiums written across its Insurance and Reinsurance segments. Our estimate was $5 billion.
Pre-tax net investment income increased 48.3% year over year to $399 million and beat our estimate of $354.9 million. The growth reflected the effects of sustained higher interest rates available in the market, along with growth in invested assets due in part to strong operating cash flows and inflows related to the MCE Acquisition. The Zacks Consensus Estimate was pegged at $373 million.
Operating revenues of $4.4 billion rose 24.6% year over year, driven by higher net premiums earned, net investment income and other income. It beat the Zacks Consensus Estimate by 8.1%.
Pre-tax current accident year catastrophic losses, net of reinsurance and reinstatement premiums, were $450 million, wider than a loss of $180 million incurred in the year-ago quarter.
Arch Capital’s underwriting income decreased 25.4% year over year to $538 million. Our estimate was $463.3 million. The combined ratio — the percentage of premiums paid out as claims and expenses — deteriorated 870 basis points (bps) to 86.6. Our estimate and the Zacks Consensus Estimate were both pegged at 87.
Arch Capital’s Segmental Results
Insurance: Gross premiums written increased 14.6% year over year to $2.3 billion. Our estimate was $2.2 billion. Net premiums written climbed 19.6% year over year to $1.8 billion, driven by the impact of the MCE acquisition and an increase in other liability—occurrences due, in part, to new business opportunities and rate changes. Our estimate was $1.6 billion. Underwriting income of $120 million was 7% lower than the year-ago number. Our estimate was $84 million. The combined ratio deteriorated 220 bps to 93.1. Our estimate was 94.5 while the Zacks Consensus Estimate was pegged at 96.
Reinsurance: Gross premiums written improved 29.2% year over year to $2.8 billion. Our estimate was $2.4 billion. Net premiums written rose 24.5% year over year to $1.9 billion. The growth in net premiums written reflected increases in most lines of business due in part to rate increases, new business opportunities and growth in existing accounts. Our estimate was $1.7 billion. Underwriting income was $149 million, down 51.9% year over year. Our estimate was $176.9 million. The combined ratio deteriorated 1230 bps year over year to 92.3. Our estimate and the Zacks Consensus Estimate were both pegged at 90.
Mortgage: Gross premiums written dropped 2.3% year over year to $339 million. Our estimate was $336.9 million. Net premiums written increased 4.1% year over year to $282 million on account of a lower level of Bellemeade premiums ceded due in part to the termination of certain Bellemeade agreements in the fourth quarter of 2023. Our estimate was $255 million. Underwriting income decreased 4.6% year over year to $269 million. Our estimate was $202.7 million. The combined ratio deteriorated 1010 bps to 14.8. Our estimate was 24.3. The Zacks Consensus Estimate was pegged at 25.4.
ACGL’s Financial Update
Arch Capital exited the quarter with cash of $1.03 billion, which increased 11.8% from 2023-end. Debt was $2.7 billion as of Sept. 30, 2024, which remained unchanged from the end of 2023. As of Sept. 30, 2024, the book value per share was $57, up 21.4% from the 2023-end level. Annualized operating return on average common equity contracted 1000 bps year over year to 14.8%. Cash from operations of $2 billion improved 2.4% year over year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -11.62% due to these changes.
VGM Scores
At this time, Arch Capital has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Arch Capital has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Arch Capital belongs to the Zacks Insurance - Property and Casualty industry. Another stock from the same industry, Travelers (TRV - Free Report) , has gained 8.4% over the past month. More than a month has passed since the company reported results for the quarter ended September 2024.
Travelers reported revenues of $11.85 billion in the last reported quarter, representing a year-over-year change of +10.7%. EPS of $5.24 for the same period compares with $1.95 a year ago.
Travelers is expected to post earnings of $6.38 per share for the current quarter, representing a year-over-year change of -9%. Over the last 30 days, the Zacks Consensus Estimate has changed +1.6%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for Travelers. Also, the stock has a VGM Score of A.