Group 1 - Arch Capital's shares have underperformed over the past year, losing 9% of their value [1] - The company has faced challenges due to increased Bermuda income taxes and losses from California wildfires [1] - Arch Capital's small mortgage insurance segment may also be a contributing factor to its poor performance [1]

When deciding whether to buy, sell, or hold a stock, investors often rely on analyst recommendations. Media reports about rating changes by these brokerage-firm-employed (or sell-side) analysts often influence a stock's price, but are they really important? Let's take a look at what these Wall Street heavyweights have to say about Arch Capital Group (ACGL) before we discuss the reliability of brokerage recommendations and how to use them to your advantage. Arch Capital currently has an average brokerage rec ...

Core Viewpoint - Arch Capital Group (ACGL) shares have increased by approximately 2.5% since the last earnings report, underperforming the S&P 500 index [1] Group 1: Earnings and Estimates - Fresh estimates for Arch Capital have trended downward over the past month [2] - The stock has a Zacks Rank of 3 (Hold), indicating expectations for an in-line return in the coming months [4] Group 2: VGM Scores - Arch Capital has an average Growth Score of C and a Momentum Score of C, while it received a B grade for Value, placing it in the top 40% for this investment strategy [3] - The overall aggregate VGM Score for Arch Capital is B, which is relevant for investors not focused on a single strategy [3] Group 3: Industry Performance - Arch Capital is part of the Zacks Insurance - Property and Casualty industry, where The Hartford Insurance Group (HIG) has gained 5.3% over the past month [5] - The Hartford reported revenues of $4.75 billion for the last quarter, reflecting a year-over-year increase of 9.6% [5] - The Hartford's expected earnings for the current quarter are $2.78 per share, indicating an 11.2% change from the previous year [6]

The Zacks Property and Casualty (P&C) Insurance industry has been benefiting from Solid retention, exposure growth across business lines and improved pricing, driving higher premiums and helping insurers maintain profitability. The industry remains focused on personalized offerings to enhance customer experience, leveraging digitalization. However, catastrophic activities, both natural and man-made, might have weighed on underwriting profit.Here we focus on two property and casualty insurers, namely Axis Ca ...

Core Viewpoint - Arch Capital Group Ltd. (ACGL) is currently experiencing a short-term bullish trend, trading above its 50-day simple moving average, despite a significant decline from its 52-week high [1]. Price Performance - ACGL's share price is $94.59, down 18.7% from its 52-week high of $116.47 [1]. - Over the past year, ACGL shares have gained 2.4%, underperforming the industry growth of 12.8% and the Finance sector's growth of 6.3%, but outperforming the Zacks S&P 500 composite return of 0.6% [4][5]. Valuation Metrics - ACGL is trading at a forward 12-month price-to-book ratio of 1.72X, above the industry average of 1.58X, indicating an expensive valuation [6]. - The company has a Value Score of B, suggesting a relatively attractive valuation compared to peers [6]. Profitability - Arch Capital's trailing 12-month return on equity is 15.7%, significantly higher than the industry average of 7.8%, reflecting effective utilization of shareholders' equity [9]. Growth Projections - The Zacks Consensus Estimate for Arch Capital's 2025 revenues is $18.88 billion, representing a year-over-year improvement of 13.5% [10]. - For 2026, the consensus estimates indicate a year-over-year increase of 20.3% in earnings per share and 5.8% in revenues from the 2025 estimates [10]. - Earnings have grown by 33.5% over the past five years, outperforming the industry average of 18.9% [10]. Earnings Performance - Arch Capital has consistently surpassed earnings estimates in the last four quarters, with an average surprise of 13.93% [11]. Business Strengths - The company benefits from widespread operations and a compelling product portfolio, providing diversification and earnings stability [12]. - Significant efforts in inorganic growth through acquisitions have aided international expansion and enhanced operations [12]. - Solid performances in both the Insurance and Reinsurance segments, complemented by Mortgage Insurance, are expected to drive premium growth [13]. Financial Health - ACGL has maintained a free cash flow conversion rate of over 85% in recent quarters, indicating strong earnings [14]. - The company enjoys sufficient liquidity and low leverage, which strengthens its balance sheet and supports growth initiatives [13]. Final Assessment - Arch Capital has a robust product portfolio and a solid track record of premium growth, with expectations for continued growth across its business lines [15]. - The company has a VGM Score of B, indicating attractive value, growth, and momentum [17].

INVESTOR PRESENTATION 2025 First Quarter ©2025 Arch Capital Group Ltd. All rights reserved. ©2025 Arch Capital Group Ltd. All rights reserved. 1 Informational Statements The Private Securities Litigation Reform Act of 1995 ("PSLRA") provides a "safe harbor" for forward-looking statements. This release or any other written or oral statements made by or on behalf of Arch Capital Group Ltd. and its subsidiaries may include forward-looking statements, which reflect our current views with respect to future event ...

Core Viewpoint - Arch Capital Group (ACGL) has been a highly searched stock recently, indicating potential investor interest and market activity [1] Earnings Estimates - Arch Capital is expected to report earnings of $2.34 per share for the current quarter, reflecting a year-over-year decline of 9% [5] - The consensus earnings estimate for the current fiscal year is $7.89, indicating a year-over-year decrease of 15% [5] - For the next fiscal year, the consensus earnings estimate is $9.57, showing a year-over-year increase of 21.2% [6] - Over the last 30 days, the earnings estimates have seen slight changes of -1.8% for the current quarter and -0.1% for the current fiscal year [5][6] Revenue Growth Forecast - The consensus sales estimate for the current quarter is $4.68 billion, representing a year-over-year increase of 18.8% [11] - For the current fiscal year, the revenue estimate is $18.91 billion, indicating a growth of 13.8%, while the next fiscal year is projected at $20.32 billion, reflecting a growth of 7.5% [11] Last Reported Results and Surprise History - In the last reported quarter, Arch Capital achieved revenues of $4.56 billion, a year-over-year increase of 21.3% [12] - The EPS for the same period was $1.54, down from $2.45 a year ago, with a surprise of +12.41% compared to the consensus estimate [12][13] - The company has consistently beaten consensus EPS estimates in the last four quarters and topped revenue estimates three times [13] Valuation - Arch Capital has a Zacks Rank of 3 (Hold), suggesting it may perform in line with the broader market in the near term [7][18] - The Zacks Value Style Score for Arch Capital is graded B, indicating it is trading at a discount compared to its peers [17]

Financial Performance - Total revenues for Q1 2025 increased to $4,673 million, up 18.6% from $3,941 million in Q1 2024[19] - Net premiums earned rose to $4,188 million, a 22.4% increase compared to $3,422 million in the same period last year[19] - Net income available to Arch common shareholders decreased to $564 million, down 49.2% from $1,110 million in Q1 2024[19] - Comprehensive income for Q1 2025 was $886 million, compared to $975 million in Q1 2024, reflecting a decrease of 9.1%[22] - Basic net income per common share was $1.51, down from $2.99 in Q1 2024, representing a decline of 49.7%[19] - Net income for Q1 2025 was $574 million, a decrease of 48.8% compared to $1,120 million in Q1 2024[29] - After-tax operating income available to Arch common shareholders was $587 million for Q1 2025, down from $933 million in Q1 2024[192] - The annualized net income return on average common equity for Q1 2025 was 11.1%, compared to 24.6% in Q1 2024[192] Assets and Liabilities - Total assets increased to $75,176 million, up 5.8% from $70,906 million at the end of 2024[15] - The reserve for losses and loss adjustment expenses rose to $30,946 million, an increase of 5.4% from $29,369 million at the end of 2024[15] - Shareholders' equity available to Arch increased to $21,545 million, up 3.5% from $20,820 million at the end of 2024[15] - Cash and restricted cash at the end of Q1 2025 was $1,985 million, up from $1,600 million at the end of Q1 2024[29] - Total restricted assets increased to $13.769 billion as of March 31, 2025, from $13.048 billion at December 31, 2024[106] Investment Income - The company reported net investment income of $378 million, an increase of 15.6% from $327 million in Q1 2024[19] - Income from investments accounted for using the equity method for Q1 2025 was $53 million, down from $99 million in Q1 2024[98] - The total fair value of available-for-sale investments as of March 31, 2025, was $31,275 million, compared to $29,819 million at the end of 2024, indicating a 4.9% increase[81] - The company reported gross gains on investment sales of $51 million and gross losses of $113 million for the first quarter of 2025[91] Underwriting Performance - Underwriting income for the total company was $417 million, with the insurance segment reporting a loss of $2 million, the reinsurance segment generating $167 million, and the mortgage segment contributing $252 million[60] - The combined ratio for the insurance segment was 100.1%, while the reinsurance segment had a combined ratio of 91.8%, and the mortgage segment reported a combined ratio of 16.1%[60] - The insurance segment experienced a $2 million underwriting loss, primarily due to California wildfires, but net premiums written grew by $373 million from the MCE Acquisition, reflecting a 24.2% increase compared to the first quarter of 2024[174] - The mortgage segment generated $252 million of underwriting income, with a persistency rate of 81.9% and a low delinquency rate, indicating stable market conditions[175] Acquisition and Growth - The company completed the acquisition of the U.S MidCorp and Entertainment insurance business from Allianz for $450 million on August 1, 2024[35][36] - Total assets acquired in the Allianz transaction amounted to $3,292 million, with total liabilities acquired at $3,088 million, resulting in identifiable net assets of $204 million[39] - Goodwill recognized from the acquisition was $246 million, primarily due to expanded market presence and growth opportunities[40] Shareholder Actions - The company repurchased 2.2 million shares for $196.4 million in Q1 2025, with a total of $800.4 million remaining under the share repurchase program[49] - The company repurchased approximately 1.2 million common shares for an aggregate purchase price of $108 million from April 1 to May 2, 2025[166] Tax and Regulatory - The effective tax rate for the first quarter of 2025 was 17.4%, up from 8.3% in the same period of 2024, primarily due to the enactment of a 15% corporate income tax in Bermuda[160] - The company paid $18 million in income taxes for the first quarter of 2025, compared to a tax recovery of $6 million in the same quarter of 2024[161] Losses and Reserves - The total net incurred losses and loss adjustment expenses for Q1 2025 were $2,587 million, compared to $1,728 million in Q1 2024, representing a 50% increase[66] - The net reserve for losses and loss adjustment expenses at the end of Q1 2025 was $22,567 million, an increase from $16,636 million at the end of Q1 2024, marking a 36% rise[66] - Catastrophe losses for the current year amounted to $547 million, net of reinstatement premiums, impacting overall profitability[170] Market Conditions - The average credit quality of the benchmark return index was rated "A1" by Moody's as of March 31, 2025[180] - The estimated fixed income duration of the benchmark return index was 3.33 years as of March 31, 2025[180]

Core Insights - Baron is an asset management firm that specializes in growth equity investment solutions [1] - Founded in 1982, Baron has established a reputation for its long-term, fundamental, and active approach to growth investing [1] - Research remains a central component of Baron's business model, as it was originally founded as an equity research firm [1]

Core Viewpoint - Arch Capital Group Ltd. (ACGL) reported a first-quarter 2025 operating income of $1.54 per share, exceeding the Zacks Consensus Estimate by 12.4%, although it represented a 37.1% decline year over year. The results were supported by higher premiums in the Insurance and Reinsurance segments and improved net investment income, but were negatively impacted by poor underwriting income and increased catastrophic losses [1]. Premiums and Income - Gross premiums written increased by 8.9% year over year to $6.4 billion, while net premiums written rose by 10.5% year over year to $4.5 billion, driven by higher premiums in both Insurance and Reinsurance segments [2]. - Net investment income grew by 15.6% year over year to $378 million, although it fell short of the estimate of $436.2 million, influenced by a reduction in investable assets due to a $1.9 billion special cash dividend paid in December 2024 and higher investment expenses [3]. Revenue and Losses - Operating revenues reached $4.5 billion, marking a 21.2% increase year over year, but missed the Zacks Consensus Estimate by 0.9%. Pre-tax current accident year catastrophic losses amounted to $547 million, significantly higher than the previous year's loss of $58 million. Underwriting income declined by 43.3% year over year to $417 million [4]. - The combined ratio, indicating the percentage of premiums paid out as claims and expenses, worsened by 1,130 basis points to 90.1, compared to the estimate of 94.5 [5]. Segment Performance - In the Insurance segment, gross premiums written rose by 24.4% year over year to $2.6 billion, with net premiums written climbing 25.4% to $1.9 billion, driven by new business opportunities and rate changes, despite competitive market pressures [6]. - The Reinsurance segment saw gross premiums written increase by 0.8% year over year to $3.5 billion, while net premiums written rose by 2.2% to $2.3 billion, primarily due to rate increases and growth in existing accounts, although offset by reductions in specialty lines [7][8]. - The Mortgage segment experienced a decline, with gross premiums written dropping by 4.4% year over year to $326 million and net premiums written decreasing by 4% to $266 million, attributed to lower mortgage originations [9]. Financial Position - As of March 31, 2025, the company had cash of $1.2 billion, a 21.2% increase from the end of 2024. Debt remained flat at $2.7 billion. Book value per share was $55.15, up 3.8% from the end of 2024, while annualized operating return on average common equity contracted by 920 basis points year over year to 11.5% [11].