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ACGL Q2 Earnings Beat on Reserve Gains, Investment Income
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Key Takeaways
ACGL beat Q2 earnings estimates as higher investment income helped offset catastrophe-related pressure.
ACGL reported lower premiums, while its Reinsurance segment remained highly profitable.
Arch Capital repurchased $1.2 billion of shares and grew book value despite lower year-over-year earnings.
Arch Capital Group Ltd. (ACGL - Free Report) reported second-quarter 2026 operating income of $2.56 per share, which beat the Zacks Consensus Estimate by 2.8%. The bottom line decreased 0.8% year over year.
Revenues of $4.43 billion declined 6.9% year over year and missed the consensus mark by 3.1%. Results reflected lower earned premiums and catastrophe pressure, partly offset by higher net investment income.
Brown & Brown, Inc. Price, Consensus and EPS Surprise
Gross premiums written declined 1.1% year over year to $6.13 billion. Net premiums written decreased 6.9% to $4.05 billion, reflecting lower volumes in the Insurance and Reinsurance segments. Net premiums earned fell 8.1% to $3.99 billion.
Underwriting income fell 19.7% to $657 million. The combined ratio, which measures claims and expenses as a percentage of premiums, deteriorated 230 basis points to 83.5%. Catastrophe losses totaled $201 million, while favorable prior-year reserve development was $165 million.
Arch Capital's Insurance Segment Faces Cat Losses
Insurance gross premiums written declined 2.9% year over year to $2.60 billion. The figure was lower than our estimate of $2.7 billion. Net premiums written fell 5.1% to $1.93 billion. The figure was lower than our estimate of $1.95 billion.
Underwriting income plunged 79.1% to $27 million. The figure was lower than our estimate of $70.2 million. The combined ratio worsened by 510 basis points to 98.5%. The combined ratio excluding catastrophe activity and prior-year development was 91.6%, up 100 basis points.
ACGL's Reinsurance Profitability Remains Strong
Reinsurance gross premiums written inched up 0.2% to $3.20 billion. The figure was lower than our estimate of $3.06 billion. Net premiums written dropped 10.4% to $1.84 billion, partly due to non-renewals, reduced participations and targeted increases in retrocessions. The figure was lower than our estimate of $2 billion.
Underwriting income decreased 9.1% to $410 million. The figure was higher than our estimate of $384.2 million. However, the combined ratio improved 100 basis points to 77.5%. The underlying combined ratio increased 270 basis points to 79.9%.
Arch Capital's Mortgage Results Moderate
Mortgage gross premiums written rose 0.3% year over year to $324 million, while net premiums written increased 7.5% to $272 million. Growth in international business offset lower U.S. monthly premium volume. The figure for gross premiums written was higher than our estimate of $314.9 million, while that for net premiums written was higher than our estimate of $247.6 million.
Underwriting income declined 7.6% to $220 million. The figure was lower than our estimate of $226.7 million. The combined ratio deteriorated 760 basis points to 22.8%. Excluding prior year development, the combined ratio was 39.8% compared with 39.3% a year earlier.
ACGL's Investment Portfolio Adds Support
Pre-tax net investment income increased 3% year over year to $417 million, supported by growth in average invested assets and strong operating cash flows. The figure was higher than our estimate of $420.9 million. Equity in net income from investments accounted for under the equity method rose to $196 million from $162 million.
Arch Capital ended the quarter with $1.11 billion in cash and $4.29 billion in senior notes. Book value per share rose 2.8% sequentially to $68.04. Net cash provided by operating activities increased 17.6% year over year to $1.32 billion.
Arch Capital's Returns and Capital Actions
Net income available to common shareholders was $1.05 billion, or $3 per share, compared with $1.23 billion, or $3.23 per share, in the year-ago quarter. Annualized net income return on average common equity was 18%, which contracted 490 basis points year over year, while annualized operating return was 15.3%, which contracted 290 basis points year over year.
The company completed a $2 billion senior notes offering in June and used part of the proceeds for debt refinancing and tender offers. Interest expense increased to $44 million from $38 million. Arch Capital also repurchased $1.2 billion of shares during the quarter, contributing to an 8.2% year-over-year decline in diluted weighted-average shares.
Performance of Other Property and Casualty Insurers
Selective Insurance Group, Inc. (SIGI - Free Report) reported second-quarter 2026 operating earnings of $1.95 per share, which beat the Zacks Consensus Estimate by 13.4%. The bottom line increased 48.9% year over year. Revenues of $1.37 billion rose 4.5% from the year-ago quarter and topped the consensus estimate by 0.7%.
Net premiums written declined 5% year over year to $1.22 billion due to a 6% decrease in Standard Commercial Lines, an 8% fall in Standard Personal Lines, and a 2% decline in Excess and Surplus Lines. Our estimate was $1.33 billion. Net premiums earned increased 2.3%. Direct new business fell to $206.1 million from $248.1 million. Renewal pure price increases averaged 6.5%, down from 9.9% in the prior-year quarter.
Chubb Limited (CB - Free Report) reported second-quarter 2026 core operating earnings of $7.26 per share, which beat the Zacks Consensus Estimate of $6.63 by 9.5%. The bottom line increased 18.2% year over year. Revenues rose 2.7% year over year to $15.77 billion but missed the consensus mark of $15.90 billion by 0.8%.
Net premiums earned increased 5.8% to $13.89 billion. P&C underwriting income increased 18.8% year over year to $1.94 billion. The combined ratio improved 180 basis points to 83.8%, reflecting a lower share of premiums consumed by claims and expenses. Our estimate was $1.15 billion.
Cincinnati Financial Corporation (CINF - Free Report) reported second-quarter 2026 operating income of $1.43 per share, which missed the Zacks Consensus Estimate by 21.4%. The bottom line declined 27.4% from the year-ago quarter. Total operating revenues for the second quarter were $3 billion, reflecting a 6.8% year-over-year increase. The figure, however, missed the Zacks Consensus Estimate by 1.4%. Earned premiums climbed 6.3% year over year to $2.6 billion. The figure marginally missed the Zacks Consensus Estimate by 1.5%.
Net investment income, net of expenses, increased 12% year over year to $319 million, primarily due to a 14% rise in interest income from fixed-maturity securities and a 3% jump in equity portfolio dividends. The figure marginally beat the Zacks Consensus Estimate by 1.8%. Total benefits and expenses increased 12.8% year over year to $2.7 billion.
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ACGL Q2 Earnings Beat on Reserve Gains, Investment Income
Key Takeaways
Arch Capital Group Ltd. (ACGL - Free Report) reported second-quarter 2026 operating income of $2.56 per share, which beat the Zacks Consensus Estimate by 2.8%. The bottom line decreased 0.8% year over year.
Revenues of $4.43 billion declined 6.9% year over year and missed the consensus mark by 3.1%. Results reflected lower earned premiums and catastrophe pressure, partly offset by higher net investment income.
Brown & Brown, Inc. Price, Consensus and EPS Surprise
Brown & Brown, Inc. price-consensus-eps-surprise-chart | Brown & Brown, Inc. Quote
ACGL's Underwriting Results Weaken
Gross premiums written declined 1.1% year over year to $6.13 billion. Net premiums written decreased 6.9% to $4.05 billion, reflecting lower volumes in the Insurance and Reinsurance segments. Net premiums earned fell 8.1% to $3.99 billion.
Underwriting income fell 19.7% to $657 million. The combined ratio, which measures claims and expenses as a percentage of premiums, deteriorated 230 basis points to 83.5%. Catastrophe losses totaled $201 million, while favorable prior-year reserve development was $165 million.
Arch Capital's Insurance Segment Faces Cat Losses
Insurance gross premiums written declined 2.9% year over year to $2.60 billion. The figure was lower than our estimate of $2.7 billion. Net premiums written fell 5.1% to $1.93 billion. The figure was lower than our estimate of $1.95 billion.
Underwriting income plunged 79.1% to $27 million. The figure was lower than our estimate of $70.2 million. The combined ratio worsened by 510 basis points to 98.5%. The combined ratio excluding catastrophe activity and prior-year development was 91.6%, up 100 basis points.
ACGL's Reinsurance Profitability Remains Strong
Reinsurance gross premiums written inched up 0.2% to $3.20 billion. The figure was lower than our estimate of $3.06 billion. Net premiums written dropped 10.4% to $1.84 billion, partly due to non-renewals, reduced participations and targeted increases in retrocessions. The figure was lower than our estimate of $2 billion.
Underwriting income decreased 9.1% to $410 million. The figure was higher than our estimate of $384.2 million. However, the combined ratio improved 100 basis points to 77.5%. The underlying combined ratio increased 270 basis points to 79.9%.
Arch Capital's Mortgage Results Moderate
Mortgage gross premiums written rose 0.3% year over year to $324 million, while net premiums written increased 7.5% to $272 million. Growth in international business offset lower U.S. monthly premium volume. The figure for gross premiums written was higher than our estimate of $314.9 million, while that for net premiums written was higher than our estimate of $247.6 million.
Underwriting income declined 7.6% to $220 million. The figure was lower than our estimate of $226.7 million. The combined ratio deteriorated 760 basis points to 22.8%. Excluding prior year development, the combined ratio was 39.8% compared with 39.3% a year earlier.
ACGL's Investment Portfolio Adds Support
Pre-tax net investment income increased 3% year over year to $417 million, supported by growth in average invested assets and strong operating cash flows. The figure was higher than our estimate of $420.9 million. Equity in net income from investments accounted for under the equity method rose to $196 million from $162 million.
Arch Capital ended the quarter with $1.11 billion in cash and $4.29 billion in senior notes. Book value per share rose 2.8% sequentially to $68.04. Net cash provided by operating activities increased 17.6% year over year to $1.32 billion.
Arch Capital's Returns and Capital Actions
Net income available to common shareholders was $1.05 billion, or $3 per share, compared with $1.23 billion, or $3.23 per share, in the year-ago quarter. Annualized net income return on average common equity was 18%, which contracted 490 basis points year over year, while annualized operating return was 15.3%, which contracted 290 basis points year over year.
The company completed a $2 billion senior notes offering in June and used part of the proceeds for debt refinancing and tender offers. Interest expense increased to $44 million from $38 million. Arch Capital also repurchased $1.2 billion of shares during the quarter, contributing to an 8.2% year-over-year decline in diluted weighted-average shares.
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 Property and Casualty Insurers
Selective Insurance Group, Inc. (SIGI - Free Report) reported second-quarter 2026 operating earnings of $1.95 per share, which beat the Zacks Consensus Estimate by 13.4%. The bottom line increased 48.9% year over year. Revenues of $1.37 billion rose 4.5% from the year-ago quarter and topped the consensus estimate by 0.7%.
Net premiums written declined 5% year over year to $1.22 billion due to a 6% decrease in Standard Commercial Lines, an 8% fall in Standard Personal Lines, and a 2% decline in Excess and Surplus Lines. Our estimate was $1.33 billion. Net premiums earned increased 2.3%. Direct new business fell to $206.1 million from $248.1 million. Renewal pure price increases averaged 6.5%, down from 9.9% in the prior-year quarter.
Chubb Limited (CB - Free Report) reported second-quarter 2026 core operating earnings of $7.26 per share, which beat the Zacks Consensus Estimate of $6.63 by 9.5%. The bottom line increased 18.2% year over year. Revenues rose 2.7% year over year to $15.77 billion but missed the consensus mark of $15.90 billion by 0.8%.
Net premiums earned increased 5.8% to $13.89 billion. P&C underwriting income increased 18.8% year over year to $1.94 billion. The combined ratio improved 180 basis points to 83.8%, reflecting a lower share of premiums consumed by claims and expenses. Our estimate was $1.15 billion.
Cincinnati Financial Corporation (CINF - Free Report) reported second-quarter 2026 operating income of $1.43 per share, which missed the Zacks Consensus Estimate by 21.4%. The bottom line declined 27.4% from the year-ago quarter. Total operating revenues for the second quarter were $3 billion, reflecting a 6.8% year-over-year increase. The figure, however, missed the Zacks Consensus Estimate by 1.4%. Earned premiums climbed 6.3% year over year to $2.6 billion. The figure marginally missed the Zacks Consensus Estimate by 1.5%.
Net investment income, net of expenses, increased 12% year over year to $319 million, primarily due to a 14% rise in interest income from fixed-maturity securities and a 3% jump in equity portfolio dividends. The figure marginally beat the Zacks Consensus Estimate by 1.8%. Total benefits and expenses increased 12.8% year over year to $2.7 billion.