Will Arch Capital's Beat Streak Continue This Earnings Season?

Arch Capital Group Ltd. ACGL is expected to register an improvement in both top and bottom lines when it reports fourth-quarter 2025 results on Feb. 9, after the closing bell.

The Zacks Consensus Estimate for ACGL’s fourth-quarter revenues is pegged at $4.66 billion, indicating 2.3% growth from the year-ago reported figure.

The consensus estimate for earnings is pegged at $2.49 per share. The Zacks Consensus Estimate for ACGL’s fourth-quarter earnings has moved north 6.4% in the past 30 days. The estimate suggests a year-over-year rise of 10.1%.

What the Zacks Model Unveils for ACGL

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), which increases the chances of an earnings beat.

Earnings ESP: Arch Capital has an Earnings ESP of +4.54% at present. This is because the Most Accurate Estimate of $2.61 is pegged higher than the Zacks Consensus Estimate of $2.49. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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.

Factors Likely to Shape Q4 Results of ACGL

Rate increases, new business opportunities and growth in existing accounts, product innovation, market expansion and strong underwriting performance, combined with strategic investments, are likely to have favored net premiums earned.

The Zacks Consensus Estimate for net premiums earned is pegged at $4.2 billion. We expect net premiums earned to increase 2.2% to $4.2 billion.

The Mortgage segment is likely to have benefited from the in-force portfolio and high persistency.

Net investment income is likely to have benefited from solid net cash flow from operating activities, which is expected to have increased the invested asset base. We expect net investment income to be $398.5 million. The Zacks Consensus Estimate for investment income is pegged at $417 million.

The top line is likely to have gained from improved earned premiums and higher net investment income. 

Expenses are expected to have increased in the to-be-reported quarter due to higher losses and loss adjustment expenses, acquisition costs, other operating expenses, amortization of intangible assets, corporate expenses and interest expenses. We expect total expenses to increase 2.9% to $3.7 billion.

Prudent underwriting combined with better pricing and increased exposure is likely to have improved underwriting profitability. A not-so-active catastrophe environment is expected to have added to the upside, leading to an improvement in the combined ratio. The Zacks Consensus Estimate for the combined ratio is pegged at 83, and our estimate is pinned at 84.5.

Share buybacks are likely to have added upside to the bottom line.

Other Stocks to Consider

Here are three other P&C insurance stocks that you may want to consider, as our model shows that these, too, have the right combination of elements to post an earnings beat:

First American Financial Corporation FAF has an Earnings ESP of +2.12% and a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for fourth-quarter 2025 earnings is pegged at $1.49 per share, indicating a year-over-year increase of 10.3%. 

FAF’s earnings beat estimates in each of the last four quarters.

Kinsale Capital Group, Inc. KNSL has an Earnings ESP of +0.59% and a Zacks Rank #3 at present. The Zacks Consensus Estimate for fourth-quarter 2025 earnings is pegged at $5.30, indicating a year-over-year increase of 14.7%.

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

CNA Financial Corporation CNA has an Earnings ESP of +11.67% and a Zacks Rank #3 at present. The Zacks Consensus Estimate for fourth-quarter 2025 earnings is pegged at $1.20, indicating a year-over-year decrease of 4%.

CNA’s earnings beat estimates in three of the last four quarters while missing in one.

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

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