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Arch Capital (ACGL) Earnings Beat Estimates in Q4, Soar Y/Y
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Arch Capital Group Ltd. (ACGL - Free Report) reported fourth-quarter 2019 operating income per share of 74 cents, which beat the Zacks Consensus Estimate by 10.5%. Also, the bottom line improved 60.9% year over year.
The upside can be attributed to improved net premiums written as well as a decrease in expenses related to the amortization of intangible assets.
Arch Capital Group Ltd. Price, Consensus and EPS Surprise
Gross premiums written increased 14.6% year over year to $1.9 billion, largely fueled by higher premiums written across its Insurance, Reinsurance and Mortgage segments.
Net investment income was down 1.9% year over year to $154.3 million due to a reduction in interest rates.
Operating revenues of $1.7 billion increased 23.4% year over year on higher premiums earned.
Interest expenses were $31.2 million, up 4.8% year over year.
Total expenses of $1.3 billion increased 5.8% year over year on higher losses and loss adjustment expenses, acquisition expenses, other operating expenses, interest expenses, and corporate expenses.
Arch Capital’s underwriting income was $251.4 million, up 50.6% year over year. Combined ratio improved 400 basis points (bps) to 83.8%.
Segment Results
Insurance: Gross premiums written increased 24.9% year over year to $1 billion. Net premiums written rose 28.7% year over year to $688.7 million, driven by the acquisition of new businesses, growth in existing accounts and rate increase in most lines of business.
Underwriting loss was $13.8 million in the fourth quarter compared with underwriting loss of $15.6 million in the year-ago quarter. Combined ratio improved 70 bps to 102.1%.
Reinsurance: Gross premiums written rose 5.6% year over year to $432.2 million. Net premiums written improved 4.3% year over year to $338.9 million, reflecting new business opportunities in property lines and growth in existing accounts.
The segment reported underwriting income of $26.4 million against underwriting loss of $41.2 million in the year-ago quarter. Combined ratio improved 1710 bps year over year to 93.8%.
Mortgage: Gross premiums written increased 3.5% year over year to $370.7 million. Net premiums written rose 2% year over year to $315.5 million, driven by strong growth in monthly premium business on rise in demand for insurance in force. Underwriting income increased 12.5% to $276.5 million.
Combined ratio improved 100 bps year over year to 21.6%. Arch MI U.S. generated $24.1 billion of new insurance written, which increased 44.3% year over year.
Financial Update
Arch Capital exited the quarter with cash of $726.2 million, up 12.3% year over year. Debt was $1.7 billion, which inched up marginally from the year-ago quarter.
As of Dec 31, 2019, book value per share was $26.42, up 22.8% year over year.
Operating return on equity was 11.7% in the fourth quarter, up 290 basis points.
Net cash provided by operating activities was $505.3 million, up 15.3% year over year.
Full Year Update
Net income for the year ended Dec 31, 2019, surged nearly 150% year over year to $316 million.
Among other players from the insurance industry having reported fourth-quarter earnings so far, the bottom-line results of Brown & Brown, Inc. (BRO - Free Report) and RLI Corp. (RLI - Free Report) beat estimates, while that of Principal Financial (PFG - Free Report) met the same.
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Arch Capital (ACGL) Earnings Beat Estimates in Q4, Soar Y/Y
Arch Capital Group Ltd. (ACGL - Free Report) reported fourth-quarter 2019 operating income per share of 74 cents, which beat the Zacks Consensus Estimate by 10.5%. Also, the bottom line improved 60.9% year over year.
The upside can be attributed to improved net premiums written as well as a decrease in expenses related to the amortization of intangible assets.
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 increased 14.6% year over year to $1.9 billion, largely fueled by higher premiums written across its Insurance, Reinsurance and Mortgage segments.
Net investment income was down 1.9% year over year to $154.3 million due to a reduction in interest rates.
Operating revenues of $1.7 billion increased 23.4% year over year on higher premiums earned.
Interest expenses were $31.2 million, up 4.8% year over year.
Total expenses of $1.3 billion increased 5.8% year over year on higher losses and loss adjustment expenses, acquisition expenses, other operating expenses, interest expenses, and corporate expenses.
Arch Capital’s underwriting income was $251.4 million, up 50.6% year over year. Combined ratio improved 400 basis points (bps) to 83.8%.
Segment Results
Insurance: Gross premiums written increased 24.9% year over year to $1 billion. Net premiums written rose 28.7% year over year to $688.7 million, driven by the acquisition of new businesses, growth in existing accounts and rate increase in most lines of business.
Underwriting loss was $13.8 million in the fourth quarter compared with underwriting loss of $15.6 million in the year-ago quarter. Combined ratio improved 70 bps to 102.1%.
Reinsurance: Gross premiums written rose 5.6% year over year to $432.2 million. Net premiums written improved 4.3% year over year to $338.9 million, reflecting new business opportunities in property lines and growth in existing accounts.
The segment reported underwriting income of $26.4 million against underwriting loss of $41.2 million in the year-ago quarter. Combined ratio improved 1710 bps year over year to 93.8%.
Mortgage: Gross premiums written increased 3.5% year over year to $370.7 million. Net premiums written rose 2% year over year to $315.5 million, driven by strong growth in monthly premium business on rise in demand for insurance in force. Underwriting income increased 12.5% to $276.5 million.
Combined ratio improved 100 bps year over year to 21.6%. Arch MI U.S. generated $24.1 billion of new insurance written, which increased 44.3% year over year.
Financial Update
Arch Capital exited the quarter with cash of $726.2 million, up 12.3% year over year. Debt was $1.7 billion, which inched up marginally from the year-ago quarter.
As of Dec 31, 2019, book value per share was $26.42, up 22.8% year over year.
Operating return on equity was 11.7% in the fourth quarter, up 290 basis points.
Net cash provided by operating activities was $505.3 million, up 15.3% year over year.
Full Year Update
Net income for the year ended Dec 31, 2019, surged nearly 150% year over year to $316 million.
Zacks Rank & Peer Releases
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.
Among other players from the insurance industry having reported fourth-quarter earnings so far, the bottom-line results of Brown & Brown, Inc. (BRO - Free Report) and RLI Corp. (RLI - Free Report) beat estimates, while that of Principal Financial (PFG - Free Report) met the same.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
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