Is a Beat in the Cards for Arch Capital This Earnings Season?

Arch Capital Group Ltd. ACGL is expected to register an improvement in its top line but a decline in its bottom line when it reports first-quarter 2025 results on April 29, after the closing bell.

The Zacks Consensus Estimate for BRO’s first-quarter revenues is pegged at $4.55 billion, indicating 20.7% growth from the year-ago reported figure.

The consensus estimate for earnings is pegged at $1.37 per share. The Zacks Consensus Estimate for ACGL’s first-quarter earnings has moved down 6.2% in the past 30 days. The estimate suggests a year-over-year decline of 44%. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

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) that increases the chances of an earnings beat.

Earnings ESP: Arch Capital has an Earnings ESP of +2.28% at present. This is because the Most Accurate Estimate of $1.40 is pegged higher than the Zacks Consensus Estimate of $1.37. 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 Q1 Results of ACGL

An increase in property and short-tail specialty and other liability, increases in casualty, rate increases, new business opportunities and growth in existing accounts in the Insurance and Reinsurance segments are likely to have favored net premiums earned.

The Zacks Consensus Estimate for net premiums earned is pegged at $4 billion, indicating an increase of 19.5% from the year-ago reported figure. We expect net premiums earned to increase 19.2% to $4 billion.

Net investment income is likely to have benefited from higher yields available in the financial markets and net cash flow from operating activities, which is expected to increase the invested asset base. We expect net investment income to increase 33.4% to $436.2 million. The Zacks Consensus Estimate for investment income is pegged at $415 million, indicating a 27% increase from the year-ago reported figure.

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 39.7% to $3.8 billion.

Better pricing and increased exposure, coupled with prudent underwriting, are expected to have improved underwriting profitability, leading to an improvement in the combined ratio. However, catastrophe losses relating to the recent California wildfires are likely to have weighed on the improvement. The Zacks Consensus Estimate for the combined ratio is pegged at 93. Our estimate is pegged at 94.5.

Other Stocks to Consider

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

Root, Inc. ROOT has an Earnings ESP of +25.84% and a Zacks Rank of 1 at present. The Zacks Consensus Estimate for first-quarter 2025 earnings is pegged at 45 cents, indicating an increase of 207.1% from the year-ago reported figure. You can see the complete list of today’s Zacks #1 Rank stocks here.

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

Palomar Holdings, Inc. PLMR has an Earnings ESP of +1.57% and a Zacks Rank of 2 at present. The Zacks Consensus Estimate for first-quarter 2025 earnings is pegged at $1.59, indicating an increase of 45.8% from the year-ago reported figure.

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

Arthur J. Gallagher & Co. AJG has an Earnings ESP of +0.53% and a Zacks Rank #3 at present. The Zacks Consensus Estimate for first-quarter 2025 earnings is pegged at $3.57, indicating a year-over-year increase of 2.2%.

AJG’s earnings beat estimates in three of the last four reported quarters and matched in one.

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

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