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Will Arch Capital's (ACGL) Beat Streak Continue in Q1 Earnings?

Arch Capital Group Ltd. ACGL is slated to report first-quarter 2023 earnings on Apr 26, after market close. The insurer delivered an earnings surprise in three of the last four quarters and missed in one. This led to an average beat of 24.17%.

Factors to Consider

Premiums in the first quarter are expected to have benefited from growth in most lines of business, primarily related to rate increases, new business opportunities and improvement in existing accounts. The Zacks Consensus Estimate for net premiums earned is pegged at $2.7 billion, indicating an increase of 29.8% from the year-ago reported figure. We expect net premiums earned to be $2.6 billion.

Net investment income is likely to have benefited from strong positive cash flow from operations, higher reinvestment rates coupled with the growth in invested assets and higher yields available in the financial markets in the to-be-reported quarter. We expect net investment income to be $81 million.

The Zacks Consensus Estimate for investment income is pegged at $155 million, indicating a 93.7% increase from the year-ago reported figure.

The top line is likely to have benefited from improved earned premiums and higher net investment income. The Zacks Consensus Estimate for revenues is pegged at $2.84 billion, indicating an increase of 29.8% from the year-ago reported figure. We expect total revenues to be $2.51 billion.

Expenses are expected to have increased on higher losses and loss adjustment expenses, acquisition expenses and other operating expenses. We expect total expenses to be $2.1 billion.

Higher-than-expected cat losses are likely to have weighed on underwriting profitability and thus, combined ratio. The Zacks Consensus Estimate for combined ratio is pegged at 80, indicating a deterioration of 100 basis points from the year-ago reported figure.

The Zacks Consensus Estimate for first-quarter 2023 earnings of $1.51 per share indicates an increase of 37.2% from the year-ago quarter’s reported figure. We expect the bottom line to be $1.42 per share for the to-be-reported quarter.

What the Zacks Model Says

Our proven model predicts an earnings beat for Arch Capital this time around. This is because the stock has the right combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).

Earnings ESP: Arch Capital has an Earnings ESP of +3.92%. This is because the Most Accurate Estimate of $1.57 is pegged higher than the Zacks Consensus Estimate of $1.51. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Arch Capital Group Ltd. Price and EPS Surprise

Arch Capital Group Ltd. Price and EPS Surprise
Arch Capital Group Ltd. Price and EPS Surprise

Arch Capital Group Ltd. price-eps-surprise | Arch Capital Group Ltd. Quote

Zacks Rank: Arch Capital currently carries a Zacks Rank #3.

Other Stocks to Consider

Some other finance stocks with the right combination of elements to deliver an earnings beat this time around are:

RenaissanceRe Holdings Ltd. RNR has an Earnings ESP of +3.34% and a Zacks Rank of 3 at present. The Zacks Consensus Estimate for first-quarter 2023 earnings is pegged at $7.34, indicating an increase of 109.7% from the year-ago reported figure. You can see the complete list of today’s Zacks #1 Rank stocks here.

RNR’s earnings beat estimates in two of the last four reported quarters and missed in the other two.

Kinsale Capital Group KNSL has an Earnings ESP of +3.34% and a Zacks Rank of 1 at present. The Zacks Consensus Estimate for first-quarter 2023 earnings is pegged at $2.25, indicating an increase of 38% from the year-ago reported figure.

KNSL’s earnings beat estimates in the last four reported quarters.

Everest Re Group, Ltd. RE has an Earnings ESP of +3.43% and a Zacks Rank of 2. The Zacks Consensus Estimate for first-quarter 2023 earnings is pegged at $12.01, indicating an increase of 16.4% from the year-ago reported figure.

RE’s earnings beat estimates in the last four reported quarters.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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