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Arch Capital Group Ltd (ACGL)
NASDAQ:ACGL
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Arch Capital Group
(NASDAQ:ACGL)81Outperform
Positive Factors
Growth Opportunities
The MidCorp deal with Allianz provides a scaled entry into the middle market business and is seen as a good growth avenue in 3-5 years.
Underwriting Performance
Reinsurance segment showed strong underwriting, with a core combined ratio of 74.8% vs consensus of 76.1%.
Negative Factors
Financial Estimates
The price target for Arch Capital has been lowered, reflecting adjustments in financial estimates.
Arch Capital Group (ACGL) vs. S&P 500 (SPY)
Market Cap
$34.87B
Dividend YieldN/A
Average Volume (3M)1.95M
Price to Earnings (P/E)8.3
Beta (1Y)0.44
Revenue Growth26.24%
EPS Growth-3.87%
CountryUS
Employees6,400
SectorFinancial
Sector Strength93
IndustryInsurance
Share Statistics
EPS (TTM)11.19
Shares Outstanding375,357,240
10 Day Avg. Volume1,812,097
30 Day Avg. Volume1,945,077
Financial Highlights & Ratios
PEG Ratio0.07
Price to Book (P/B)N/A
Price to Sales (P/S)2.07
Price to Cash Flow (P/CF)4.30
P/FCF Ratio4.30
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$115.25Price Target Upside25.45% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering12
Arch Capital Group Business Overview & Revenue Model
Company DescriptionArch Capital Group Ltd. (ACGL) is a leading global provider of insurance, reinsurance, and mortgage insurance solutions. Founded in 1995 and headquartered in Bermuda, the company operates through its subsidiaries, offering a wide range of products to help manage risk. Arch Capital serves clients across various industries, including property, casualty, and specialty insurance, as well as reinsurance and mortgage insurance, catering to both individual and commercial customers.
How the Company Makes MoneyArch Capital Group makes money primarily through its diverse portfolio of insurance and reinsurance products. The company collects premiums from policyholders in exchange for providing coverage against potential losses. In the insurance sector, revenue is generated through underwriting profits, where premiums collected exceed the claims paid out. In the reinsurance sector, Arch Capital earns money by providing risk management solutions to other insurers, receiving premiums in return for taking on some of their risk exposures. The mortgage insurance segment contributes to revenue by offering private mortgage insurance to lenders, protecting them against borrower defaults. Additionally, Arch Capital leverages its investment portfolio, earning income through interest, dividends, and capital gains from its investment operations. Key partnerships with brokers and agents across the globe also play a significant role in expanding their distribution network and enhancing revenue streams.
Arch Capital Group Financial Statement Overview
Summary
Arch Capital Group showcases strong financial health with robust revenue growth, high profit margins, zero debt, and effective cash flow management. Though operational fluctuations exist, the overall financial position remains robust.Income Statement
Arch Capital Group has shown strong revenue growth over the years, with total revenue increasing from $6.78 billion in 2019 to $17.44 billion in 2024. The gross profit margin is high, consistently above 70%, indicating efficient cost management. The net profit margin has also been strong, with the latest figure at 24.73%. However, the EBIT margin has fluctuated, showing some operational challenges. Overall, the income statement reflects a robust growth trajectory and profitability.85
Very Positive
Balance Sheet
The balance sheet of Arch Capital Group is quite strong. The company has zero total debt as of 2024, reflecting excellent leverage management. The equity ratio stands at 29.37%, indicating a solid equity base. Return on Equity (ROE) is also impressive at 20.71%, showcasing effective use of shareholder funds. The absence of debt reduces financial risk, and the growing stockholders' equity strengthens the company's financial stability.90
Very Positive
Cash Flow
Arch Capital Group has demonstrated solid cash flow management with a significant increase in free cash flow from $2.01 billion in 2019 to $6.62 billion in 2024. The operating cash flow to net income ratio is 1.55, indicating strong cash generation relative to net income. However, the free cash flow growth rate has shown some volatility. Overall, the cash flow statement reflects healthy cash generation capabilities.80
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 17.44B | 13.63B | 9.60B | 8.93B | 8.29B | Gross Profit |
| 17.20B | 12.24B | 8.37B | 7.84B | 7.35B | EBIT |
| 200.00M | 13.54B | 1.69B | 2.25B | 1.47B | EBITDA |
| 200.00M | 3.33B | 1.61B | 1.96B | 1.77B | Net Income Common Stockholders |
| 4.31B | 4.44B | 1.48B | 2.16B | 1.41B |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 979.00M | 8.03B | 21.87B | 22.40B | 21.55B | Total Assets |
| 70.91B | 58.91B | 47.99B | 45.10B | 43.28B | Total Debt |
| 2.73B | 2.73B | 2.73B | 2.72B | 3.02B | Net Debt |
| 1.75B | 1.81B | 1.87B | 1.87B | 2.11B | Total Liabilities |
| 50.09B | 40.55B | 35.07B | 31.55B | 29.29B | Stockholders Equity |
| 20.82B | 18.35B | 12.91B | 13.55B | 13.11B |
| Cash Flow | Free Cash Flow | |||
| 6.62B | 5.70B | 3.76B | 3.39B | 2.85B | Operating Cash Flow |
| 6.67B | 5.75B | 3.82B | 3.43B | 2.89B | Investing Cash Flow |
| -4.46B | -5.47B | -3.10B | -2.14B | -3.04B | Financing Cash Flow |
| -1.93B | -69.00M | -706.00M | -1.23B | 521.28M |
Arch Capital Group Technical Analysis
Neutral
91.87
Price Trends
91.88
Negative
95.20
Negative
96.78
Negative
Market Momentum
-0.24
Negative
51.74
Neutral
74.13
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ACGL, the sentiment is Neutral. The current price of 91.87 is above the 20-day moving average (MA) of 90.72, below the 50-day MA of 91.88, and below the 200-day MA of 96.78, indicating a neutral trend. The MACD of -0.24 indicates Negative momentum. The RSI at 51.74 is Neutral, neither overbought nor oversold. The STOCH value of 74.13 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for ACGL.
Arch Capital Group Peers Comparison
Overall Rating
UnderperformOutperform
Sector (64)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
81 Outperform | $34.87B | 8.31 | 20.71% | ― | 26.24% | -3.87% | |
75 Outperform | $13.38B | 18.91 | 6.63% | 1.77% | 19.29% | -19.91% | |
73 Outperform | $24.69B | 9.64 | 15.55% | ― | 5.17% | 35.36% | |
73 Outperform | $11.70B | 6.75 | 17.69% | 0.66% | 28.22% | -31.48% | |
71 Outperform | $47.38B | 15.77 | -3.30% | 1.89% | -28.56% | 1.14% | |
65 Neutral | $5.23B | 26.65 | 6.63% | 1.70% | 15.35% | -44.64% | |
64 Neutral | $14.34B | 10.61 | 9.28% | 4.07% | 18.04% | -9.54% |
* Financial Sector Average
Performance Comparison
ACGL
Arch Capital Group
91.87
7.41
8.77%
AIG
American International Group
79.85
6.57
8.97%
MKL
Markel
1,864.39
358.13
23.78%
RGA
Reinsurance Group
193.05
13.23
7.36%
RNR
Renaissancere Holdings
244.68
17.98
7.93%
SIGI
Selective Insurance Group
85.75
-17.25
-16.75%
Arch Capital Group Earnings Call Summary
Earnings Call Date: Feb 10, 2025 | % Change Since: 0.45% | Next Earnings Date: Apr 23, 2025
Earnings Call Sentiment Neutral
Arch Capital demonstrated strong financial growth and effective capital management in 2024, with significant gains in premiums and investment income. However, the impact of the California wildfires and decreased underwriting income present challenges. Despite competitive pressures, the company has strategically managed its portfolio to maintain profitability.Highlights
Strong Premium Growth
Arch Capital reported $3.8 billion of net premium in Q4, marking a 17% increase over the same quarter last year.
Solid Full-Year Financial Performance
For the full year, Arch reported $3.5 billion of after-tax operating income with an operating return on average common equity of 18.9%.
Book Value Increase
Book value per share ended 2024 at $53.11, representing a 13% increase for the year and nearly 24% increase after adjusting for the special dividend.
Reinsurance Segment Record Income
The reinsurance segment delivered a record $1.2 billion of underwriting income for the year.
Investment Income Growth
The investment group delivered nearly $1.5 billion of annual net investment income from an asset base that increased to over $40 billion.
Lowlights
California Wildfires Impact
The wildfires are expected to result in a net loss between $450 million and $550 million for Arch Capital.
Underwriting Income Decline
Underwriting income in Q4 was down 13% from the previous year, primarily due to losses related to catastrophe activities.
Increased Delinquency Rate
The delinquency rate in the US MI business increased modestly to just over 2% at the end of December.
Competitive Pressures
Competitive pressures have eroded margins in certain lines of business, leading to adjustments in underwriting strategies.
Company Guidance
In the Q4 2024 earnings call, Arch Capital provided substantial guidance and metrics reflecting their financial performance and strategic direction. The company reported a net premium of $3.8 billion, marking a 17% increase from the previous year, despite underwriting income falling by 13% to $625 million largely due to catastrophe-related losses. Arch Capital's full-year after-tax operating income stood at $3.5 billion with an impressive operating return on average common equity of 18.9%. The book value per share rose to $53.11, a 13% increase, or 24% when adjusted for a special dividend of $5 per share paid in December. The company also repurchased $24 million worth of shares, emphasizing their commitment to capital management. Arch Capital navigated a challenging market with a combined ratio of 78.6% for the year and encountered $393 million in catastrophe losses in Q4, mainly from hurricanes Milton and Helene. Looking forward, they expect their catastrophe load to be about 7% to 8% of their full-year group-wide net earned premium for 2025, aiming to sustain attractive margins amidst competitive pressures.Arch Capital Group Corporate Events
Executive/Board Changes
Arch Capital Group Appoints New Board Director
Positive
Feb 6, 2025
On February 4, 2025, Arch Capital Group Ltd. announced the appointment of Alexander Moczarski as a Class III director to its Board of Directors. Mr. Moczarski, with over 45 years of experience in the global insurance industry and previously serving as Chairman of Marsh McLennan Companies, International, brings significant leadership and industry knowledge to the Board. His appointment is expected to enhance Arch’s market leadership and long-term value creation for shareholders.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.