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Arch Capital Q1 Earnings Surpass Estimates, Premiums Increase Y/Y
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Arch Capital Group Ltd. (ACGL - Free Report) reported first-quarter 2025 operating income of $1.54 per share, which beat the Zacks Consensus Estimate by 12.4%. The bottom line, however, declined 37.1% year over year.
The results benefited from higher premiums across its Insurance and Reinsurance segments and improved net investment income. It was offset by poor underwriting income and wider catastrophic losses (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)
Behind the Headline
Gross premiums written improved 8.9% year over year to $6.4 billion. Net premiums written climbed 10.5% year over year to $4.5 billion on higher premiums written across its Insurance and Reinsurance segments.
Net investment income grew 15.6% year over year to $378 million and beat our estimate of $436.2 million. It reflected the impact of a reduction of investable assets related to the special cash dividend to common shareholders of $1.9 billion paid in December 2024, along with higher investment expenses primarily related to incentive compensation in the period. The Zacks Consensus Estimate was pegged at $415 million.
Operating revenues of $4.5 billion rose 21.2% year over year, driven by higher net premiums earned and net investment income. It missed the Zacks Consensus Estimate by 0.9%.
Arch Capital Group Ltd. Price, Consensus and EPS Surprise
Pre-tax current accident year catastrophic losses for the company’s insurance and reinsurance segments, net of reinsurance and reinstatement premiums, were $547 million, wider than the year-ago period’s loss of $58 million. Arch Capital’s underwriting income declined 43.3% year over year to $417 million.
The combined ratio — the percentage of premiums paid out as claims and expenses — deteriorated 1,130 basis points (bps) to 90.1. Our estimate was 94.5. The Zacks Consensus Estimate was pegged at 93.
Segmental Results
Insurance: Gross premiums written increased 24.4% year over year to $2.6 billion. Our estimate was $2.4 billion. Net premiums written climbed 25.4% year over year to $1.9 billion. Growth in net premiums written, excluding the impact of the MCE Acquisition , reflected an increase in commercial automobile and other liability–occurrence due, in part, to new business opportunities and rate changes. These increases were mostly offset by reductions in other liability–claims made where markets remained competitive. Our estimate was $1.7 billion.
The company reported an underwriting loss of $2 million against the year-ago quarter’s income of $86 million. The combined ratio deteriorated 600 bps to 100.1. The Zacks Consensus Estimate was pegged at 102.
Reinsurance: Gross premiums written improved 0.8% year over year to $3.5 billion. Our estimate was $4.3 billion. Net premiums written rose 2.2% year over year to $2.3 billion. The growth primarily reflected increases in casualty, property catastrophe and property, excluding property catastrophe lines, due in part to rate increases, new business opportunities and growth in existing accounts. The upside was offset by reductions in specialty lines due to non-renewals of structured deals and share reductions. Our estimate was $2.8 billion.
Underwriting income was $167 million, which declined 55.9% year over year. The combined ratio deteriorated 1440 bps year over year to 91.8. The Zacks Consensus Estimate was pegged at 94.
Mortgage: Gross premiums written dropped 4.4% year over year to $326 million. Our estimate was $350.3 million. Net premiums written decreased 4% year over year to $266 million. The decrease primarily reflected a lower level of mortgage originations, mostly in international businesses. Our estimate was $275.9 million.
Underwriting income decreased 7% year over year to $252 million. Our estimate was $237.5 million. The combined ratio deteriorated 160 bps to 16.1%. The Zacks Consensus Estimate was pegged at 25.9.
Financial Update
Arch Capital exited the first quarter of 2025 with cash of $1.2 billion, which increased 21.2% from 2024-end. Debt was $2.7 billion as of March 31, 2025, which remained flat from 2024-end.
As of March 31, 2025, book value per share was $55.15, up 3.8% from the end of 2024. Annualized operating return on average common equity contracted 920 basis points year over year to 11.5%. Cash from operations of $1.4 billion declined 6.8% year over year.
Performance of Other Property and Casualty Insurers
Selective Insurance Group, Inc. (SIGI - Free Report) reported first-quarter 2025 operating income of $1.76 per share, which missed the Zacks Consensus Estimate by 6.8%. The bottom line increased 32.3% from the year-ago quarter. Total revenues of $1.3 billion increased 10% from the year-ago quarter’s figure. The top line missed the Zacks Consensus Estimate by 0.9%.
On a year-over-year basis, net premiums written increased 7% to $1.2 billion. Average renewal pure price expanded 220 basis points year over year to 10.3%. The figure matched our estimate. Net investment income increased 12% year over year to $95.6 million. After-tax net underwriting income was $36.1 million, which more than doubled year over year. Net catastrophe losses of $43.4 million were narrower than the year-ago loss of $55.2 million.
RLI Corp. (RLI - Free Report) reported first-quarter 2025 operating earnings of 92 cents per share, which beat the Zacks Consensus Estimate by 4.5%. The bottom line, however, decreased 9.2% from the prior-year quarter. Operating revenues for the reported quarter were $436 million, up 10.7% year over year, driven by higher net premiums earned and net investment income. The top line, however, missed the Zacks Consensus Estimate by 0.9%.
Gross premiums written increased 5% year over year to $491 million. This uptick can be attributed to the solid performance of the Casualty segment (up 13.5%). Our estimate was $577.9 million. Net investment income increased 12% year over year to $36.7 million. The Zacks Consensus Estimate was pegged at $38.6 million, while our estimate for the metric was $38.9 million. The investment portfolio’s total return was 1.3% in the quarter.
Cincinnati Financial Corporation (CINF - Free Report) reported first-quarter 2025 operating loss of 24 cents per share, narrower than the Zacks Consensus Estimate of a loss of 61 cents. CINF had reported an operating income of $1.72 per share in the prior-year quarter. The year-over-year decrease of $309 million was primarily due to a $356 million increase in after-tax catastrophe losses.
Total operating revenues in the quarter under review were $2.6 billion, which missed the Zacks Consensus Estimate by 2.5%. The top line, however, improved 13.3% year over year. Net written premiums climbed 11% year over year to $2.5 billion. Investment income, net of expenses, increased 14% year over year to $280 million, as bond interest grew 24% and stock portfolio dividends declined 7%. The figure was higher than our estimate of $274.8 million.
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Arch Capital Q1 Earnings Surpass Estimates, Premiums Increase Y/Y
Arch Capital Group Ltd. (ACGL - Free Report) reported first-quarter 2025 operating income of $1.54 per share, which beat the Zacks Consensus Estimate by 12.4%. The bottom line, however, declined 37.1% year over year.
The results benefited from higher premiums across its Insurance and Reinsurance segments and improved net investment income. It was offset by poor underwriting income and wider catastrophic losses (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)
Behind the Headline
Gross premiums written improved 8.9% year over year to $6.4 billion. Net premiums written climbed 10.5% year over year to $4.5 billion on higher premiums written across its Insurance and Reinsurance segments.
Net investment income grew 15.6% year over year to $378 million and beat our estimate of $436.2 million. It reflected the impact of a reduction of investable assets related to the special cash dividend to common shareholders of $1.9 billion paid in December 2024, along with higher investment expenses primarily related to incentive compensation in the period. The Zacks Consensus Estimate was pegged at $415 million.
Operating revenues of $4.5 billion rose 21.2% year over year, driven by higher net premiums earned and net investment income. It missed the Zacks Consensus Estimate by 0.9%.
Arch Capital Group Ltd. Price, Consensus and EPS Surprise
Arch Capital Group Ltd. price-consensus-eps-surprise-chart | Arch Capital Group Ltd. Quote
Pre-tax current accident year catastrophic losses for the company’s insurance and reinsurance segments, net of reinsurance and reinstatement premiums, were $547 million, wider than the year-ago period’s loss of $58 million. Arch Capital’s underwriting income declined 43.3% year over year to $417 million.
The combined ratio — the percentage of premiums paid out as claims and expenses — deteriorated 1,130 basis points (bps) to 90.1. Our estimate was 94.5. The Zacks Consensus Estimate was pegged at 93.
Segmental Results
Insurance: Gross premiums written increased 24.4% year over year to $2.6 billion. Our estimate was $2.4 billion. Net premiums written climbed 25.4% year over year to $1.9 billion. Growth in net premiums written, excluding the impact of the MCE Acquisition , reflected an increase in commercial automobile and other liability–occurrence due, in part, to new business opportunities and rate changes. These increases were mostly offset by reductions in other liability–claims made where markets remained competitive. Our estimate was $1.7 billion.
The company reported an underwriting loss of $2 million against the year-ago quarter’s income of $86 million. The combined ratio deteriorated 600 bps to 100.1. The Zacks Consensus Estimate was pegged at 102.
Reinsurance: Gross premiums written improved 0.8% year over year to $3.5 billion. Our estimate was $4.3 billion.
Net premiums written rose 2.2% year over year to $2.3 billion. The growth primarily reflected increases in casualty, property catastrophe and property, excluding property catastrophe lines, due in part to rate increases, new business opportunities and growth in existing accounts. The upside was offset by reductions in specialty lines due to non-renewals of structured deals and share reductions. Our estimate was $2.8 billion.
Underwriting income was $167 million, which declined 55.9% year over year. The combined ratio deteriorated 1440 bps year over year to 91.8. The Zacks Consensus Estimate was pegged at 94.
Mortgage: Gross premiums written dropped 4.4% year over year to $326 million. Our estimate was $350.3 million.
Net premiums written decreased 4% year over year to $266 million. The decrease primarily reflected a lower level of mortgage originations, mostly in international businesses. Our estimate was $275.9 million.
Underwriting income decreased 7% year over year to $252 million. Our estimate was $237.5 million. The combined ratio deteriorated 160 bps to 16.1%. The Zacks Consensus Estimate was pegged at 25.9.
Financial Update
Arch Capital exited the first quarter of 2025 with cash of $1.2 billion, which increased 21.2% from 2024-end. Debt was $2.7 billion as of March 31, 2025, which remained flat from 2024-end.
As of March 31, 2025, book value per share was $55.15, up 3.8% from the end of 2024. Annualized operating return on average common equity contracted 920 basis points year over year to 11.5%. Cash from operations of $1.4 billion declined 6.8% year over year.
Zacks Rank
ACGL 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 Property and Casualty Insurers
Selective Insurance Group, Inc. (SIGI - Free Report) reported first-quarter 2025 operating income of $1.76 per share, which missed the Zacks Consensus Estimate by 6.8%. The bottom line increased 32.3% from the year-ago quarter. Total revenues of $1.3 billion increased 10% from the year-ago quarter’s figure. The top line missed the Zacks Consensus Estimate by 0.9%.
On a year-over-year basis, net premiums written increased 7% to $1.2 billion. Average renewal pure price expanded 220 basis points year over year to 10.3%. The figure matched our estimate. Net investment income increased 12% year over year to $95.6 million. After-tax net underwriting income was $36.1 million, which more than doubled year over year. Net catastrophe losses of $43.4 million were narrower than the year-ago loss of $55.2 million.
RLI Corp. (RLI - Free Report) reported first-quarter 2025 operating earnings of 92 cents per share, which beat the Zacks Consensus Estimate by 4.5%. The bottom line, however, decreased 9.2% from the prior-year quarter. Operating revenues for the reported quarter were $436 million, up 10.7% year over year, driven by higher net premiums earned and net investment income. The top line, however, missed the Zacks Consensus Estimate by 0.9%.
Gross premiums written increased 5% year over year to $491 million. This uptick can be attributed to the solid performance of the Casualty segment (up 13.5%). Our estimate was $577.9 million. Net investment income increased 12% year over year to $36.7 million. The Zacks Consensus Estimate was pegged at $38.6 million, while our estimate for the metric was $38.9 million. The investment portfolio’s total return was 1.3% in the quarter.
Cincinnati Financial Corporation (CINF - Free Report) reported first-quarter 2025 operating loss of 24 cents per share, narrower than the Zacks Consensus Estimate of a loss of 61 cents. CINF had reported an operating income of $1.72 per share in the prior-year quarter. The year-over-year decrease of $309 million was primarily due to a $356 million increase in after-tax catastrophe losses.
Total operating revenues in the quarter under review were $2.6 billion, which missed the Zacks Consensus Estimate by 2.5%. The top line, however, improved 13.3% year over year. Net written premiums climbed 11% year over year to $2.5 billion. Investment income, net of expenses, increased 14% year over year to $280 million, as bond interest grew 24% and stock portfolio dividends declined 7%. The figure was higher than our estimate of $274.8 million.