Here's Why Hold Strategy is Apt for Arch Capital (ACGL)

Arch Capital Group Ltd. ACGL is well-poised for growth, driven by new business opportunities, rate increases, solid growth within professional liability and travel business units and a solid capital position.

Growth Projections

The Zacks Consensus Estimate for ACGL 2023 and 2024 earnings per share is pegged at $6.16 and $6.92, indicating a year-over-year increase of 26.4% and 12.3%, respectively.

Northbound Estimate Revision

Estimates for 2023 have moved up nearly 0.4% in the past seven days, reflecting investor optimism.

Earnings Surprise History

Arch Capital surpassed earnings estimates in each of the last four quarters, the average being 28.47%.

Zacks Rank & Price Performance

Arch Capital currently carries a Zacks Rank #3 (Hold). In the past year, the stock has rallied 67.5%, outperforming the industry’s increase of 5%.

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Style Score

Arch Capital has a VGM Score of A. VGM Score helps identify stocks with the most attractive value, best growth and the most promising momentum.

Business Tailwinds

New business opportunities, rate increases, growth in existing accounts and the Australian single-premium mortgage insurance should drive Arch Capital generate increasing premiums. ACGL’s compelling product portfolio provides meaningful diversification and earnings stability, with operations spread across geographies.

ACGL has an impressive inorganic growth strategy that outlines international expansion, enhances operations and diversifies the business at attractive risk-adjusted returns. This insurer stays focused on diversifying its Mortgage Insurance business via strategic acquisitions that complement the strength of the specialty insurance and reinsurance businesses.

A rising interest rate environment should help drive net investment income through 2023. In the first quarter of 2023, the metric increased 9.9% year over year. Going forward, with new money rates in fixed income portfolio in the range of 4.5% to 5% and a growing base of invested assets, the company expects to deliver an increasing level of investment income to help boost the bottom line.

Arch Capital’s solid balance sheet with high liquidity and low leverage shields it from market volatility. This insurer’s solid capital position supports financial flexibility and growth initiatives.

Stocks to Consider

Some better-ranked stocks from the property and casualty insurance industry are Kinsale Capital Group, Inc. KNSL, RLI Corp. RLI and Axis Capital Holdings Limited AXS. While Kinsale Capital sports a Zacks Rank #1 (Strong Buy), RLI Corp. and Axis Capital carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Kinsale Capital has a solid track record of beating earnings estimates in each of the last four quarters, the average being 14.77%. In the past year, KNSL has gained 66.1%.

The Zacks Consensus Estimate for KNSL’s 2023 and 2024 earnings per share is pegged at $10.32 and $12.41, indicating a year-over-year increase of 32.3% and 20.2%, respectively.

RLI Corp.’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 45.50%. In the past year, RLI Corp. has gained 18.3%.

The Zacks Consensus Estimate for RLI’s 2023 earnings has moved 2.9% north in the past seven days.

Axis Capital beat estimates in three of the last four quarters and missed in one, the average being 6.50%. The Zacks Consensus Estimate for 2023 has moved 2.7% north in the past 30 days.

The Zacks Consensus Estimate for AXS’ 2023 and 2024 earnings per share is pegged at $7.70 and $8.60, indicating a year-over-year increase of 32.5% and 11.7%, respectively. In the past year, AXS has lost 0.04%.

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RLI Corp. (RLI) : 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.

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