Yahoo Finance Arch Capital (ACGL) Q1 Earnings Beat on Solid Underwriting
Arch Capital Group ACGL reported first-quarter 2024 operating income of $2.45 per share, which beat the Zacks Consensus Estimate by 18.9%. The bottom line jumped 41.6% year over year. The results benefited from improved premiums and higher net investment income.
Behind the Headline
Gross premiums written improved 24.1% year over year to $5.9 billion. Net premiums written climbed 19.3% year over year to $4.1 billion on higher premiums written across its Insurance and Reinsurance segments as hard market rates and rising inflation drove clients’ demand for many of its property and casualty products. Our estimate for the metric was $5.2 billion.
Net investment income surged 64.3% year over year to $327 million and beat our estimate of $302.8 million. It was driven by higher interest rates and growth in invested assets, which benefited from strong operating cash flows. The Zacks Consensus Estimate was pegged at $287 million.
Operating revenues of $3.8 billion rose 21.7% year over year, driven by higher net premiums earned and net investment income. It missed the Zacks Consensus Estimate by 0.2%.
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, net of reinsurance and reinstatement premiums, were $58 million. Arch Capital’s underwriting income climbed 29.1% year over year to $736 million.
The combined ratio — the percentage of premiums paid out as claims and expenses — improved 180 basis points (bps) to 78.8. Our estimate was 82.8. The Zacks Consensus Estimate was pegged at 82.
Segmental Results
Insurance: Gross premiums written increased 7.4% year over year to $2.1 billion. Our estimate was $2.1 billion. Net premiums written climbed 19.1% year over year to $1.4 billion. The uptick was owing to increases in most lines of business, due in part to new business opportunities and a rise in existing accounts and rate changes. Our estimate was $1.6 billion.
Underwriting income of $99 million dropped 24.6% year over year. The combined ratio deteriorated 320 bps to 94.1. The Zacks Consensus Estimate was pegged at 91.
Reinsurance: Gross premiums written improved 40.9% year over year to $3.5 billion. Our estimate was $2.7 billion.
Net premiums written rose 31.3% year over year to $2.3 billion on increases in all lines of business, due in part to rate increases, new business opportunities and growth in existing accounts. Our estimate was $1.9 billion.
Underwriting income was $379 million, which surged 77.9% year over year. The combined ratio improved 690 bps year over year to 77.4. The Zacks Consensus Estimate was pegged at 82.
Mortgage: Gross premiums written dropped 0.6% year over year to $341 million. Our estimate was $334.9 million.
Net premiums written increased 6.1% year over year to $277 million due to higher premiums ceded. Our estimate was $250.3 million.
Underwriting income increased 11.5% year over year to $271 million. Our estimate was $181.8 million. The combined ratio improved 550 bps to 14.5%. The Zacks Consensus Estimate was pegged at 29.8.
Financial Update
Arch Capital exited the first quarter of 2024 with cash of $993 million, which increased 8.3% from 2023-end. Debt was $2.7 billion as of Mar 31, 2024, which remained flat year over year.
As of Mar 31, 2024, book value per share was $49.36, up 5.2% from the end of 2023. Annualized operating return on average common equity remained flat year over year at 20.7%. Cash from operations of $1.6 billion improved 62.4% year over year.
Zacks Rank
ACGL currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performances of Other Insurers
The Travelers Companies TRV reported first-quarter 2024 core income of $4.69 per share, which missed the Zacks Consensus Estimate of $4.75 on higher-than-expected catastrophe loss. The bottom line increased 14.1% year over year, driven by higher underlying underwriting gain and higher net investment income, partially offset by higher catastrophe losses. Travelers’ total revenues increased 15.3% from the year-ago quarter to $11.2 billion, primarily driven by higher premiums. The top-line figure beat the Zacks Consensus Estimate by 0.1%.
Net written premiums increased 8% year over year to about $10.2 billion, driven by strong growth across all three segments. The figure was higher than our estimate of $9.9 billion. Travelers witnessed an underwriting gain of $1.4 billion, up 57.3% year over year, driven by higher business volumes.
Consolidated underlying combined ratio of 87.7 improved 290 bps year over year. The combined ratio improved 150 bps year over year to 93.9 due to an improvement in the underlying combined ratio, partially offset by higher catastrophe losses and lower net favorable prior-year reserve development. The Zacks Consensus Estimate was pegged at 94.
Progressive Corporation’s PGR first-quarter 2024 earnings per share of $3.83 beat the Zacks Consensus Estimate of $3.20. The bottom line improved nearly eight times year over year. Operating revenues of $17.1 billion beat the Zacks Consensus Estimate by 2.4% and increased 20.1% year over year.
Net premiums earned grew 19% to $16 billion and beat our estimate of $14.4 billion. Combined ratio — the percentage of premiums paid out as claims and expenses — improved 1,290 bps from the prior-year quarter’s level to 86.1.
RLI Corp. RLI reported first-quarter 2024 operating earnings of $1.89 per share, beating the Zacks Consensus Estimate as well as the year-ago number by 16%. The quarterly results reflected continued premium growth across all product segments. Operating revenues for the reported quarter were $394 million, up 17.6% year over year, driven by 17% higher net premiums earned and 21.3% higher net investment income. The top line, however, missed the Zacks Consensus Estimate by 0.1%.
Gross premiums written increased 13% year over year to $468 million. This uptick can be attributed to the solid performance of the Casualty (up 12.6%), Property (up 13.5%) and Surety (up 12.1%) segments. Our estimate was $511 million. Underwriting income of $77.7 million increased 16%. Combined ratio deteriorated 60 bps year over year to 78.5. The Zacks Consensus Estimate for the metric was pegged at 85, while our estimate was 77.7.
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