Company Performance - Arch Capital Group (ACGL) stock decreased by 2.65% to $88.19, underperforming the S&P 500's daily loss of 0.4% [1] - Over the past month, the stock has fallen by 0.6%, lagging behind the Finance sector's gain of 4.41% and the S&P 500's gain of 4.97% [1] Upcoming Earnings - The earnings report for Arch Capital Group is scheduled for July 29, 2025, with projected earnings per share (EPS) of $2.35, reflecting an 8.56% decrease from the same quarter last year [2] - Revenue is estimated to be $4.65 billion, which represents an 18.05% increase from the prior-year quarter [2] Fiscal Year Estimates - For the entire fiscal year, earnings are predicted to be $7.91 per share, indicating a decrease of 14.76%, while revenue is expected to reach $18.92 billion, showing an increase of 13.83% from the previous year [3] - Recent analyst estimate revisions suggest a favorable outlook on the business health and profitability of Arch Capital Group [3] Valuation Metrics - Arch Capital Group has a Forward P/E ratio of 11.46, which is lower than the industry average Forward P/E of 11.81 [6] - The company has a PEG ratio of 6.26, compared to the average PEG ratio of 2.65 for the Insurance - Property and Casualty industry [6] Industry Ranking - The Insurance - Property and Casualty industry is part of the Finance sector and currently holds a Zacks Industry Rank of 139, placing it in the bottom 44% of over 250 industries [7] - The Zacks Industry Rank indicates that the top 50% rated industries outperform the bottom half by a factor of 2 to 1 [7]

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]

Core Viewpoint - Analyst recommendations play a significant role in influencing stock prices, but their reliability is questionable due to potential biases from brokerage firms [1][10]. Group 1: Analyst Recommendations for Arch Capital - Arch Capital Group (ACGL) has an average brokerage recommendation (ABR) of 1.94, indicating a consensus between Strong Buy and Buy, based on 16 brokerage firms [2]. - Out of the 16 recommendations, nine are classified as Strong Buy and one as Buy, representing 56.3% and 6.3% of total recommendations respectively [2]. Group 2: Limitations of Brokerage Recommendations - Studies indicate that brokerage recommendations have limited success in guiding investors towards stocks with the highest price increase potential [5]. - Analysts from brokerage firms often exhibit a strong positive bias in their ratings, with five Strong Buy recommendations for every Strong Sell recommendation [6][10]. - The interests of brokerage firms may not align with those of retail investors, leading to misleading recommendations [7][10]. Group 3: Zacks Rank as an Alternative - The Zacks Rank, which categorizes stocks from Strong Buy to Strong Sell based on earnings estimate revisions, is presented as a more reliable indicator of near-term price performance [8][11]. - Unlike ABR, Zacks Rank is updated more frequently and reflects timely changes in earnings estimates, making it a better tool for predicting future stock prices [12]. Group 4: Current Earnings Estimates for Arch Capital - The Zacks Consensus Estimate for Arch Capital remains unchanged at $7.91 for the current year, suggesting stable analyst views on the company's earnings prospects [13]. - Due to the unchanged consensus estimate and other factors, Arch Capital holds a Zacks Rank of 3 (Hold), indicating a cautious approach despite the Buy-equivalent ABR [14].

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]

Industry Overview - The Zacks Property and Casualty (P&C) Insurance industry is experiencing growth due to solid retention, exposure growth across business lines, and improved pricing, which are driving higher premiums and maintaining profitability [1] - The industry is focusing on personalized offerings to enhance customer experience and is leveraging digitalization [1] - Catastrophic activities, both natural and man-made, may have negatively impacted underwriting profit [1] Company Analysis: Axis Capital Holdings Limited (AXS) - AXS has seen an increase in its top line driven by higher net premiums earned and net investment income [4] - The Insurance segment is performing well, contributing to improved premiums, with favorable market conditions expected to continue across property lines [5] - AXS is focused on growth in Marine Cargo, Cyber, and Renewable Energy, with a return on equity (ROE) of 19%, significantly above the industry average of 7.8% [6] - The company’s net investment income has shown a four-year CAGR of 21.4%, supported by increased fixed maturity assets and yields [7] - AXS has a strong track record of shareholder value enhancement through stock buybacks and consecutive dividend increases, with a ten-year CAGR of 4.2% [8] Company Analysis: Arch Capital Group Ltd. (ACGL) - ACGL focuses on writing specialty lines of insurance and reinsurance, maintaining a strong track record of net premiums written with a four-year CAGR of 20.6% [9][10] - The company expects continued growth in its Insurance and Reinsurance segments due to rate increases and new business opportunities [11] - ACGL has seen a four-year CAGR of 30.2% in net investment income, benefiting from rising investment yields and a growing investment portfolio [12] - The company maintains a robust capital position and has improved its balance sheet, with a return on equity of 15.7%, also above the industry average [13] Financial Estimates - The Zacks Consensus Estimate for AXS' 2025 revenues and EPS indicates a year-over-year increase of 7.8% and 3.4%, respectively [14] - For ACGL, the 2025 revenue estimate suggests a year-over-year increase of 13.5%, while EPS is projected to decline by 14.7% [15] Valuation Metrics - AXS is trading at a price-to-book multiple of 1.49, above its five-year median of 1.06, while ACGL's price-to-book multiple is at 1.69, above its median of 1.64 [16] Conclusion - AXS is well-positioned for growth in its Specialty Insurance and Reinsurance business, particularly in Marine Cargo, Cyber, and Renewable Energy [17] - ACGL is set to benefit from specialty lines of insurance and reinsurance, with growth driven by rate increases and a growing investment portfolio [17] - AXS has a solid dividend yield of 1.7%, significantly higher than the industry average of 0.2%, making it attractive for yield-seeking investors [18] - AXS has outperformed the industry with a year-to-date gain of 14.5%, while ACGL has gained only 0.7% [20]

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]