Yahoo Finance Arch Capital (ACGL) Q1 Earnings and Revenues Top, Rise Y/Y
Arch Capital Group Ltd. ACGL reported first-quarter 2023 operating income of $1.73 per share, beating the Zacks Consensus Estimate by 14.6%. Earnings also came ahead of our estimate of $1.42. The bottom line increased 57.3% year over year.
The results benefited from improved premiums and higher net investment income on the back of improved Insurance and Reinsurance segment performance.
Arch Capital Group Ltd. Price, Consensus and EPS Surprise
Arch Capital Group Ltd. price-consensus-eps-surprise-chart | Arch Capital Group Ltd. Quote
Behind the Headlines
Gross premiums written improved 28.5% year over year to $4.8 billion. Net premiums written climbed 30% year over year to $3.4 billion on higher premiums written across its Insurance and Reinsurance segments and beat our estimate of $2.6 billion.
Net investment income increased 9.9% year over year to $199 million and beat our estimate of $81 million. Higher net investment income reflects higher interest rates growth in invested assets.
Operating revenues of $3.1 billion rose 41.1% year over year, driven by higher net premiums earned and net investment income. It beat the Zacks Consensus Estimate by 8.7% and came ahead of our estimate of $2.9 billion.
Pre-tax current accident year catastrophic losses, net of reinsurance and reinstatement premiums, were $79 million.
Arch Capital’s underwriting income increased 24.5% year over year to $570 million.
The combined ratio — the percentage of premiums paid out as claims and expenses — deteriorated 190 basis points (bps) to 80.6.
Segment Results
Insurance: Gross premiums written increased 15.1% year over year to about $2 billion. Net premiums written climbed 19.1% year over year to $1.4 billion, in line with our estimate, driven by increases in most lines of business, due in part to new business opportunities, increases in existing accounts and rate changes and more business retention. Underwriting income of $114 million was 81% higher than the year-ago number. The combined ratio improved 290 bps to 90.9.
Reinsurance: Gross premiums written improved 43.1% year over year to $2.5 billion. Net premiums written rose 51.5% year over year to $1.7 billion, driven by increases in most lines of business, due in part to rate increases, new business opportunities and growth in existing accounts as well as more business retention. Our estimate was $1.6 billion.
Underwriting income was $213 million, up 95.4% year over year. The combined ratio improved 230 bps year over year to 84.3.
Mortgage: Gross premiums written dropped 6% year over year to $343 million. Net premiums written decreased 9.4% year over year to $261 million due to a higher level of ceded premiums through quota share reinsurance agreements than in the year-ago quarter. Our estimate was $306.1 billion.
Underwriting income dropped 15% year over year to $243 million. The combined ratio deteriorated 1690 bps to 20%.
Financial Update
Arch Capital exited the quarter with cash of $803 million, which decreased 6.1% from 2021-end. Debt was $2.7 billion as of Mar 31, 2023, up 0.04% from 2022-end.
As of Mar 31, 2023, the book value per share was $35.35, up 8.4% from 2021-end. Annualized operating return on average common equity expanded 710 basis points to 20.7%. Cash from operations of $963 million improved 74.5% 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 first-quarter 2022 core income of $4.11 per share, which beat the Zacks Consensus Estimate of $3.64 and our estimate of $3.41. However, the bottom line decreased 2.6% year over year. Travelers’ total revenues increased 10% from the year-ago quarter to $9.7 billion, primarily driven by higher premiums. The top-line figure however missed the Zacks Consensus Estimate of $9.8 billion.
Net written premiums increased 12% year over year to a record $9.4 billion, driven by strong growth across all three segments. The figure was higher than our estimate of $8.9 billion.
Catastrophe losses totaled $422 million, wider than $36 million pre-tax in the prior-year quarter. Catastrophe losses primarily resulted from severe wind and hail storms in multiple states. Travelers witnessed an underwriting gain of $501 million, down 12.9% year over year. The combined ratio deteriorated 410 bps year over year to 95.4
The Progressive Corporation’s PGR first-quarter 2023 earnings per share of 65 cents missed the Zacks Consensus Estimate of $1.44 as well as our estimate of $1.50. The bottom line declined 20.7% year over year.
Operating revenues were about $14.2 billion, up 15.8% year over year. This improvement was driven by a 15% increase in premiums, 18.5% higher fees and other revenues, a 7.1% increase in service revenues and a 73.2% higher investment income. The top line exceeded the Zacks Consensus Estimate of $14.1 billion and our estimate of $13.1 billion.
Net premiums earned grew 15% to $13.5 billion and beat our estimate of $12.6 billion. The combined ratio deteriorated 450 bps from the prior-year quarter’s level to 99.
RLI Corp. RLI reported first-quarter 2023 operating earnings of $1.63 per share, beating the Zacks Consensus Estimate by 34.7%. The bottom line improved 14% from the prior-year quarter. Operating revenues for the reported quarter were $335 million, up 19.4% year over year, driven by 14.3% higher net premiums earned and 51.5% higher net investment income. The top line however missed the Zacks Consensus Estimate by 2.2%.
Gross premiums written increased 15.6% year over year to $415 million. This uptick can be attributed to the solid performance of the Casualty (up 1%), Property (up 45%) and Surety segments (up 13.6%). Underwriting income of $67.9 million increased 14.1%, primarily due to higher profitability in its Property and Casualty segment. Combined ratio remained flat year over year at 77.9.
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