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Arch Capital (ACGL) Q4 Earnings Beat, Premiums Increase Y/Y

Arch Capital Group LimitedACGL reported fourth-quarter 2016 earnings per share of $1.13 that beat the Zacks Consensus Estimate of $1.01 by about 12%. Earnings dipped 1.7% from the year-ago quarter.

Arch Capital's net income declined 19% year over year to 50 cents per share.

Operating earnings for 2016 came in at $4.63 per share, up 3.3% year over year.

Behind the Headlines

Gross premiums written increased 8.3% year over year to $1.2 billion on higher premiums written across its Insurance, Reinsurance and Mortgage segments.

Net investment income grew nearly 4.5% to $70 million. The increase was fueled by higher income distributions on term loan investments.

Arch Capital's underwriting income decreased 3.4% year over year to $109.2 million. Combined ratio deteriorated 180 basis points (bps) to 90.7%.

Segment Result

Insurance Segment : Gross premiums written increased 4% year over year to $707.5 million owing to growth in the travel line from a mix of new business as well as construction and national accounts.

Underwriting income of $2.6 million plummeted 90.8% from the year-ago quarter. Combined ratio deteriorated 480 bps to 99.4%.

Reinsurance Segment : Gross premiums written in the quarter rose 5.4% year over year to $277 million.

Underwriting income decreased 4.8% year over year to $67.6 million. Combined ratio deteriorated 430 bps year over year to 78.6%.

Mortgage Segment : Gross premiums written in the quarter jumped 50.7% year over year to $138.3 million, largely driven by growth in U.S. primary business, Australian mortgage reinsurance and GSE credit risk-sharing transactions receiving insurance accounting treatment.

Underwriting income skyrocketed 139.7% year over year to $42.3 million. Combined ratio deteriorated 2150 bps year over year to 53.5%.

Financial Update

Arch Capital exited 2016 with total capital of $10.49 billion, up from $7.06 at year-end 2015.

As of Dec 31, 2016, diluted book value per share was $55.19, up 15.8% year over year.

Operating return on equity was 9.4% in 2016 compared with 9.7% in 2015.

Acquisition Update

Exiting 2016, Arch Capital closed the acquisition of United Guaranty Corporation for $3.3 billion. The buyout will enable the acquirer to expand its private mortgage insurance business.

Zacks Rank

Arch Capital presently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank stocks here .

Arch Capital Group Ltd. Price, Consensus and EPS Surprise

Arch Capital Group Ltd. Price, Consensus and EPS Surprise | Arch Capital Group Ltd. Quote

Performance of Other P&C Insurers

Among the other players from the same space that have reported their fourth-quarter earnings so far, the bottom line at Progressive Corp. PGR and The Travelers Companies Inc. TRV and RLI Corp. RLI beat their respective Zacks Consensus Estimate.

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Arch Capital Group Ltd. (ACGL): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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