Arch Capital (ACGL) Q4 Earnings and Revenues Beat, Rise Y/Y
Arch Capital Group Ltd. ACGL reported fourth-quarter 2023 operating income of $2.49 per share, which beat the Zacks Consensus Estimate by 28.4%. The bottom line increased 16.4% year over year. The results benefited from improved premiums and higher net investment income.
Behind the Headline
Gross premiums written improved 12% year over year to $4.3 billion. Net premiums written climbed 7.4% year over year to $3.3 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 $4.9 billion.
Net investment income increased 73% year over year to $313 million and beat our estimate of $303.2 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 $3.7 billion rose 24.5% year over year, driven by higher net premiums earned, other underwriting income and net investment income. It beat the Zacks Consensus Estimate by 0.2%.
Pre-tax current accident year catastrophic losses, net of reinsurance and reinstatement premiums, were $137 million. Arch Capital’s underwriting income dropped 2.6% year over year to $715 million.
The combined ratio — the percentage of premiums paid out as claims and expenses — improved 310 basis points (bps) to 78.9. Our estimate was 83. The Zacks Consensus Estimate was pegged at 82.
Arch Capital Group Ltd. Price, Consensus and EPS Surprise
Arch Capital Group Ltd. price-consensus-eps-surprise-chart | Arch Capital Group Ltd. Quote
Segment Results
Insurance: Gross premiums written increased 17.6% year over year to $1.9 billion. Our estimate was $1.8 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 an increase in existing accounts and rate changes. Our estimate was $1.3 billion.
Underwriting income of $99 million improved 1% year over year. The combined ratio deteriorated 100 bps to 93. The Zacks Consensus Estimate was pegged at 93.
Reinsurance: Gross premiums written improved 9.7% year over year to $2 billion. Our estimate was $2.8 billion.
Net premiums written rose 0.9% year over year to $1.6 billion on increases in property excluding property catastrophe and other specialty lines, due in part to rate increases, new business opportunities and growth in existing accounts. Our estimate was $2.1 billion.
Underwriting income was $330 million, which increased 25% year over year. The combined ratio deteriorated 160 bps year over year to 80. The Zacks Consensus Estimate was pegged at 83.
Mortgage: Gross premiums written dropped 1.7% year over year to $350 million. Our estimate was $370.8 million.
Net premiums written decreased 7.3% year over year to $255 million due to higher premiums ceded. Our estimate was $340 million.
Underwriting income declined 23.3% year over year to $286 million. Our estimate was $296.7 million. The combined ratio improved 2380 bps to (3.3%). The Zacks Consensus Estimate was pegged at 31.3.
Financial Update
Arch Capital exited 2023 with cash of $917 million, which increased 7.3% from 2022-end. Debt was $2.7 billion as of Dec 31, 2023, flat year over year.
As of Dec 31, 2023, book value per share was $46.94, up 43.9% from 2022-end. Annualized operating return on average common equity expanded 800 basis points to 14.8%. Cash from operations of $5.8 billion improved 50.7% year over year.
Zacks Rank
ACGL currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Insurers
The Travelers Companies TRV reported fourth-quarter 2023 core income of $7.01 per share, which beat the Zacks Consensus Estimate of $5.04. The bottom line more than doubled year over year, driven by higher underlying underwriting gain, lower catastrophe losses and higher net investment income. Travelers’ total revenues increased 13.5% from the year-ago quarter to $10.9 billion, primarily driven by higher premiums. The top-line figure beat the Zacks Consensus Estimate by 0.2%.
Net written premiums increased 13% year over year to about $10 billion, driven by strong growth across all three segments. The figure was higher than our estimate of $9.7 billion. TRV witnessed an underwriting gain of $1.4 billion, up more than three-fold year over year, driven by higher business volumes. The combined ratio improved 870 bps year over year to 85.8, driven by a lower underlying combined ratio and catastrophe losses.
The Progressive Corporation’s PGR fourth-quarter 2023 earnings per share of $2.96 beat the Zacks Consensus Estimate of $2.38. The bottom line improved 97.3% year over year. Operating revenues of $16.6 billion beat the Zacks Consensus Estimate by 3% and increased 23.2% year over year.
Net premiums written were $15.1 billion in the quarter, up 21% from $12.5 billion a year ago. PGR’s premiums beat our estimate of $14 billion. Net premiums earned grew 22% to $15.8 billion and beat our estimate of $14.8 billion.
Progressive’s combined ratio improved 520 bps from the prior-year quarter’s level to 88.7.
W.R. Berkley Corporation’s WRB fourth-quarter 2023 operating income of $1.45 per share beat the Zacks Consensus Estimate of $1.35 by 7.4%. The bottom line improved 25% year over year. Operating revenues came in at $3.2 billion, up 9.3% year over year, on the back of higher net premiums earned as well as improved net investment income. The top line beat the consensus estimate by 1.3%
W.R. Berkley’s net premiums written were $2.7 billion, up 12% year over year. The figure was lower than our estimate of $2.8 billion. Pre-tax underwriting income increased 8.2% to $315.9 million. The consolidated combined ratio remained flat year over year at 88.4.
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