BRK.B vs. ACGL: Which Insurance Powerhouse Deserves the Spotlight?

Better pricing, growing climate-related risks and rapid digitalization have been influencing the insurance industry's course through 2025. While insurers continue to face catastrophe losses, improved pricing is supporting profitability. 

The Federal Reserve cut the interest rate by 25 basis points in its recent FOMC meeting and hinted at two more cuts this year.

Against this backdrop, Berkshire Hathaway Inc. (BRK.B) and Arch Capital Group Limited ACGL — two leading insurers — are expected to maintain their strength.

With digital innovation accelerating across the industry, merger and acquisition (M&A) activity is likely to pick up, especially in technology-driven transactions, according to Willis Towers Watson’s Quarterly Deal Performance Monitor. 

But for long-term insurance-focused investors, which stock offers the more compelling opportunity? Let’s take a closer look at both companies' fundamentals.

Factors to Consider for BRK.B

Berkshire Hathaway is a highly diversified conglomerate with ownership in more than 90 subsidiaries spanning insurance, energy, transportation, manufacturing and consumer products. This broad industry exposure helps minimize concentration risk and ensures stability across market cycles. Insurance remains the company’s most significant segment, contributing roughly one-fourth of total revenues.

Beyond insurance, Berkshire’s diverse portfolio generates steady cash flows and supports resilience against sector-specific volatility. Under the leadership of Warren Buffett, the company adheres to a disciplined, value-oriented investment philosophy focused on acquiring undervalued assets with durable long-term potential. 

It has been rebalancing its investment portfolio to have income-generating and geographically diverse holdings. This conglomerate sold its stake in Chinese electric vehicle maker BYD and lowered its stakes in Apple and Bank of America. On the other hand, Berkshire has been steadily increasing its stake in Japanese firms. 

Its key financial strength lies in expanding insurance float—the funds retained between premium collection and claim payments—which rose from about $114 billion in 2017 to $174 billion as of the second quarter of 2025. This float acts as a source of low-cost capital that Berkshire strategically deploys into high-quality investments, including over $100 billion in short-term U.S. Treasury bills and other government-backed instruments, accounting for nearly 90% of its capital allocation.

With more than $100 billion in cash reserves, minimal debt and a superior credit profile, Berkshire Hathaway’s balance sheet reflects exceptional financial fortitude. Its disciplined share repurchase strategy further underscores prudent capital management and a steadfast commitment to enhancing long-term shareholder value.

Berkshire’s return on equity of 7% lags the industry average of 7.7% but the company has improved its returns over time. BRK.B shares have gained 9.4% year to date, outperforming the industry’s increase of 7.7%.

Factors to Consider for ACGL

ACGL is a leading global specialty insurer delivering solid results, banking on the strength of its diversified platform. Arch Capital is well-positioned in the P&C insurance market, benefiting from a hard market environment that is characterized by rising premiums and increased demand for insurance coverage. 

Hard market rates and rising inflation drive client demand for many property and casualty products, raising premiums over time. Arch Capital has been displaying a brilliant track record of net premiums written, as evident from its six-year (2018-2024) CAGR of 12.9%. Rate increases, new business opportunities, growth in existing accounts, product innovation, market expansion, and strong underwriting performance, combined with strategic investments, should continue to favor premium growth. 

The Mortgage segment provides profitable diversification by producing a steady stream of reliable earnings. 

Apart from organic growth, Arch Capital continues to strengthen its competitive position through strategic acquisitions and investments. It actively pursues inorganic growth to expand its market share and capabilities within the insurance and reinsurance sectors. 

Its investment income has been increasing, primarily driven by strong and reliable returns from its growing fixed income portfolio and higher returns from its non-fixed income portfolio. It prefers fixed-income investments, such as bonds, because they offer predictable returns that can be used in claims payment. ACGL had 67% of its investments invested in fixed maturities as of 2024 end, with short-term investments, equity securities and other investments accounting for the remaining.  The company believes that its growing investment portfolio keeps providing meaningful tailwinds to its bottom line.

This insurer has maintained a robust capital position over the years, reflecting its financial flexibility. Last year, for the first time, Arch’s board approved a special dividend of $5 per share. The board also approved a $2 billion increase to its buyback authorization and thus has $2.3 billion remaining under its current approval as of Sept 4, 2025

Its return on equity of 15.4% is better than the industry average. ACGL shares have lost 0.2% year to date.

Estimates for BRK.B and ACGL

The Zacks Consensus Estimate for BRK.B’s 2025 revenues implies a year-over-year increase of 4.8% while that for EPS implies a year-over-year decrease of 7.6%.  However, EPS estimates have moved 2.6% north in the past seven days. 

The Zacks Consensus Estimate for ACGL’s  2025 revenues implies a year-over-year increase of 13.5% while that for EPS implies a year-over-year decrease of 8.4%.  EPS estimates have moved 3.8% north in the past seven days.

Are BRK.B and ACGL Shares Expensive?

Berkshire is trading at a price-to-book multiple of 1.60, above its median of 1.42 over the last five years. ACGL’s price-to-book multiple sits at 1.55, below its median of 1.65 over the last five years.

Conclusion

Holding shares of Berkshire Hathaway adds dynamism to shareholders’ portfolios. It is led by Warren Buffett, who has been creating tremendous value for shareholders over nearly six decades with his unique skills. However, all eyes are now on how the behemoth fares when Greg Abel succeeds Warren Buffett as CEO of Berkshire, starting Jan. 1, 2026. Warren Buffett will continue to be the company's executive chairman.

Arch Capital is set to grow, driven by premium growth, strategic buyouts, and a robust capital and liquidity position, shielding it from market volatility and enabling it to retain its financial flexibility.

On the basis of return on equity, which reflects a company’s efficiency in generating profit from shareholders' equity as well as gives a clear picture of the company's financial health, ACGL scores higher than BRK.B. 
 
Though these stocks carry a Zacks Rank #3 (Hold) each, in terms of price appreciation, BRK.B has an edge over ACGL. 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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