Joshua Shanker, an analyst from Bank of America Securities, reiterated the Buy rating on Arch Capital Group (ACGL – Research Report). The associated price target is $100.00.
Joshua Shanker has given his Buy rating due to a combination of factors related to Arch Capital Group’s strong performance and positive financial outlook. In the fourth quarter of 2023, the company’s operating earnings per share (EPS) of $2.49 exceeded both the forecast and the consensus estimates. The increase was further bolstered by an unexpected deferred tax benefit, which led to a significant 22% quarterly and 44% yearly increase in book value per share. Moreover, Arch Capital outperformed in areas such as investments in Coface and Somers Re, which contributed to the better-than-expected results. Additionally, the company demonstrated a more favorable loss ratio and witnessed higher investment income, along with a lower tax rate, rounding out the factors contributing to the earnings beat.
Continuing with the positive assessment, the Property and Casualty (P&C) underwriting results were healthy, with net premium written growth surpassing expectations. Despite predicting a modest deterioration in underwriting margins over the next three years, Shanker notes that Arch Capital’s investment income has risen beyond expectations, leading to an upward revision of EPS forecasts for the coming years. Furthermore, the expectation of special common stock dividends doubling indicates robust cash flow, which is likely to be reinvested into the business. These factors, combined with an increased price objective and the potential for EPS to outperform consensus estimates, support the continued recommendation to buy Arch Capital Group’s stock.
In another report released today, JMP Securities also reiterated a Buy rating on the stock with a $100.00 price target.
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Arch Capital Group (ACGL) Company Description:
Arch Capital Group Ltd. provides property and casualty insurance and reinsurance lines. It operates through the following segments: Insurance, Reinsurance, Mortgage, Corporate (Non-Underwriting), and Other. The Insurance segment consists of insurance underwriting units which offer specialty product lines like construction and national accounts, excess and surplus casualty, lenders products, professional lines, and programs. The Reinsurance segment is comprised of reinsurance underwriting which offer specialty product lines such as casualty, marine and aviation, other specialty, property catastrophe, property excluding property catastrophe, and other. The Mortgage segment is the operations that includes U.S. and international mortgage insurance and reinsurance operations as well as GSE credit risk sharing transactions. The Corporate (Non-Underwriting) segment includes net investment income, other income, corporate expense, interest expense, net realized gains and losses, net impairment losses. The Other segment refers to Watford Re. which is a variable interest entity. The company was founded by Clements Robert in 1995 and is headquartered in Hamilton, Bermuda.
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