Arch Capital Group Ltd. (ACGL) Q1 2025 Earnings Call Transcript
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Apr 30 2025
0mins
Should l Buy ACGL?
Source: SeekingAlpha
After-tax operating income $587 million, an increase from the previous year, despite $547 million of catastrophe losses.
Operating earnings per share $1.54, reflecting strong performance despite competitive market conditions.
Annualized operating return on equity 11.5%, indicating solid profitability.
Net premium written (Insurance segment) $1.9 billion, a 25% increase from Q1 2024, driven by the integration of the MidCorp and Entertainment Insurance Businesses.
Underwriting income (Mortgage segment) $252 million, consistent performance despite challenges in mortgage origination.
Delinquency rate (U.S. MI business) 1.96%, indicating strong portfolio performance.
Invested assets $43.1 billion, a 4% increase from year-end.
Net investment income and income from funds accounting $431 million pre-tax, a decrease attributed to a special dividend payment and portfolio repositioning.
Cash flow from operations Approximately $1.5 billion for the quarter, indicating strong operational performance.
Common shareholders' equity $20.7 billion, reflecting a strong balance sheet.
Debt plus preferred to capital ratio 14.7%, indicating a low leverage position.
Book value per share 3.8% growth for the quarter, reflecting overall strong performance.
Combined ratio (ex-catastrophe) 81%, showing improvement across all segments compared to the same quarter last year.
Favorable prior year development $167 million pre-tax, contributing 4 points to the overall combined ratio.
Reinsurance segment net premiums written growth 2.2%, impacted by reinstatement premiums and non-renewals.
Share repurchase $196 million in Q1 and an additional $100 million in April, demonstrating disciplined capital management.
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Analyst Views on ACGL
Wall Street analysts forecast ACGL stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for ACGL is 107.62 USD with a low forecast of 93.00 USD and a high forecast of 131.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
13 Analyst Rating
6 Buy
6 Hold
1 Sell
Moderate Buy
Current: 100.950
Low
93.00
Averages
107.62
High
131.00
Current: 100.950
Low
93.00
Averages
107.62
High
131.00
About ACGL
Arch Capital Group Ltd. is a Bermuda-based company, which provides insurance, reinsurance, and mortgage insurance through its subsidiaries. The insurance segment consists of the Company’s insurance underwriting units, which offer specialty product lines, including construction and national accounts; excess and surplus casualty; professional lines; programs; property, energy, marine and aviation; travel, accident and health; warranty and lender solutions, and others (consisting of alternative markets, excess workers' compensation and surety business). The reinsurance segment consists of its reinsurance underwriting units, which offer specialty product lines, including casualty; marine and aviation; other specialty; property catastrophe; property excluding property catastrophe, and others (consisting of life reinsurance and other). The mortgage segment includes its United States primary mortgage insurance business, investment and services related to United States credit-risk transfer.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Arch Capital Reports Q4 Earnings Growth
- Earnings Growth: Arch Capital Group Ltd reported a net income of $1.228 billion for Q4, translating to an EPS of $3.35, which marks a significant increase from last year's $925 million and $2.42 per share, indicating improved profitability.
- Revenue Decline: Despite the earnings increase, the company's quarterly revenue fell by 4.5%, dropping from $3.819 billion last year to $3.649 billion, suggesting challenges in revenue growth.
- Performance Comparison: The EPS growth of 38.5% compared to the previous year reflects improvements in cost control and operational efficiency, even as overall revenue declined, highlighting a mixed performance.
- Market Reaction: Investors may feel optimistic about the earnings growth; however, the revenue decline could raise concerns about future growth potential, potentially impacting the company's market performance.
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Arch Capital Q4 Earnings Exceed Expectations
- Earnings Beat: Arch Capital reported a Q4 non-GAAP EPS of $2.98, exceeding expectations by $0.41, indicating robust performance in its insurance and reinsurance segments, although shares only rose by 0.04%.
- Catastrophic Losses: The company faced pre-tax current accident year catastrophic losses of $164 million in its insurance and reinsurance segments, net of reinsurance and reinstatement premiums, highlighting ongoing market risks.
- Reserve Development: Arch Capital experienced favorable development in prior year loss reserves amounting to $118 million, net of related adjustments, showcasing effective risk management and loss control, which enhances financial stability.
- Share Buybacks: The company executed $798 million in share repurchases during Q4, reflecting confidence in its intrinsic value, while the book value per common share reached $65.11 as of December 31, 2025, marking a 4.5% increase from September 30, 2025.
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Arch Capital Set to Announce Q4 Earnings on February 9th
- Earnings Announcement Date: Arch Capital is set to release its Q4 earnings on February 9th after market close, with consensus EPS estimates at $2.57, reflecting a 13.7% year-over-year growth, indicating sustained profitability potential.
- Historical Performance: Over the past two years, Arch Capital has consistently beaten EPS estimates 100% of the time, showcasing its strong earnings capability and market adaptability, while achieving a 38% beat rate on revenue estimates, indicating revenue growth volatility.
- Estimate Revision Dynamics: In the last three months, EPS estimates have seen 13 upward revisions and 1 downward revision, reflecting analysts' optimism regarding the company's earnings outlook, whereas revenue estimates have seen no upward revisions and 2 downward revisions, suggesting market caution regarding revenue growth.
- Focus on Buybacks: Despite a reduced emphasis on growth, Seeking Alpha's quantitative rating indicates that Arch Capital remains favored by investors, particularly regarding its buyback plans, highlighting the company's proactive strategy in capital management.
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- New Position Disclosure: Madison Asset Management disclosed a new position in MSA Safety, acquiring 568,244 shares valued at approximately $91 million, representing 1% of its $8.7 billion AUM, indicating confidence in the company's potential.
- Holding Rankings: Following this acquisition, MSA Safety remains outside Madison's top five holdings, which include ACGL, ROST, PCAR, GOOGL, and APH, reflecting the firm's ongoing commitment to a diversified investment strategy.
- Financial Performance: MSA Safety reported a trailing twelve-month revenue of $1.86 billion and a net income of $279.92 million, with a dividend yield of 1.13%, although its stock has underperformed the S&P 500 index over the past year, suggesting market caution regarding its growth prospects.
- Future Outlook: MSA Safety is scheduled to report its fourth-quarter results on February 11, where management is expected to provide guidance for 2026, and investors should pay attention to anticipated low-single-digit sales growth for the year ahead.
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Arch Capital Reports Q4 Earnings Growth
- Earnings Growth: Arch Capital Group Ltd reported a net income of $1.228 billion for Q4, translating to an EPS of $3.35, which marks a significant increase from last year's $925 million and $2.42 per share, indicating improved profitability.
- Revenue Decline: Despite the earnings increase, the company's quarterly revenue fell by 4.5%, dropping from $3.819 billion last year to $3.649 billion, suggesting challenges in revenue growth.
- Performance Comparison: The EPS growth of 38.5% compared to the previous year reflects improvements in cost control and operational efficiency, even as overall revenue declined, highlighting a mixed performance.
- Market Reaction: Investors may feel optimistic about the earnings growth; however, the revenue decline could raise concerns about future growth potential, potentially impacting the company's market performance.
See More
Arch Capital Q4 Earnings Exceed Expectations
- Earnings Beat: Arch Capital reported a Q4 non-GAAP EPS of $2.98, exceeding expectations by $0.41, indicating robust performance in its insurance and reinsurance segments, although shares only rose by 0.04%.
- Catastrophic Losses: The company faced pre-tax current accident year catastrophic losses of $164 million in its insurance and reinsurance segments, net of reinsurance and reinstatement premiums, highlighting ongoing market risks.
- Reserve Development: Arch Capital experienced favorable development in prior year loss reserves amounting to $118 million, net of related adjustments, showcasing effective risk management and loss control, which enhances financial stability.
- Share Buybacks: The company executed $798 million in share repurchases during Q4, reflecting confidence in its intrinsic value, while the book value per common share reached $65.11 as of December 31, 2025, marking a 4.5% increase from September 30, 2025.
See More
Key Focus Areas This Week: Jobs, Consumer Prices, Coca-Cola, CVS, Ford, McDonald's, and More
- Market Performance: The Dow Jones Industrial Average rose by 2.5% and closed above 50,000 for the first time.
- Nasdaq Struggles: In contrast, the Nasdaq Composite ended the week down 1.8%, despite a strong rally on Friday.
See More
Madison Asset Management Liquidates Trex Position Worth $98 Million
- Position Liquidation: Madison Asset Management sold all 1,893,081 shares of Trex in Q4 2025 for an estimated $97.82 million, indicating a significant decline in the fund's Trex position and reflecting a pessimistic outlook on the company's future performance.
- Poor Market Performance: As of February 5, 2026, Trex shares were priced at $43.02, down 38.6% year-over-year, significantly underperforming the S&P 500 by 52 percentage points, suggesting serious challenges to its competitive position in the market.
- Sales Growth Potential: Despite market volatility, Trex achieved a 25% sales increase in its latest quarter, with new products accounting for 25% of sales, indicating strong innovation capabilities and demand that could lay the groundwork for future recovery.
- Attractive Valuation: Trex's EV-to-EBITDA ratio stands at 15, below its decade-long average of 23, suggesting that the current stock price remains attractive in light of its long-term growth potential, which may draw interest from long-term investors.
See More
Arch Capital Set to Announce Q4 Earnings on February 9th
- Earnings Announcement Date: Arch Capital is set to release its Q4 earnings on February 9th after market close, with consensus EPS estimates at $2.57, reflecting a 13.7% year-over-year growth, indicating sustained profitability potential.
- Historical Performance: Over the past two years, Arch Capital has consistently beaten EPS estimates 100% of the time, showcasing its strong earnings capability and market adaptability, while achieving a 38% beat rate on revenue estimates, indicating revenue growth volatility.
- Estimate Revision Dynamics: In the last three months, EPS estimates have seen 13 upward revisions and 1 downward revision, reflecting analysts' optimism regarding the company's earnings outlook, whereas revenue estimates have seen no upward revisions and 2 downward revisions, suggesting market caution regarding revenue growth.
- Focus on Buybacks: Despite a reduced emphasis on growth, Seeking Alpha's quantitative rating indicates that Arch Capital remains favored by investors, particularly regarding its buyback plans, highlighting the company's proactive strategy in capital management.
See More
Madison Asset Management Acquires MSA Safety Shares
- New Position Disclosure: Madison Asset Management disclosed a new position in MSA Safety, acquiring 568,244 shares valued at approximately $91 million, representing 1% of its $8.7 billion AUM, indicating confidence in the company's potential.
- Holding Rankings: Following this acquisition, MSA Safety remains outside Madison's top five holdings, which include ACGL, ROST, PCAR, GOOGL, and APH, reflecting the firm's ongoing commitment to a diversified investment strategy.
- Financial Performance: MSA Safety reported a trailing twelve-month revenue of $1.86 billion and a net income of $279.92 million, with a dividend yield of 1.13%, although its stock has underperformed the S&P 500 index over the past year, suggesting market caution regarding its growth prospects.
- Future Outlook: MSA Safety is scheduled to report its fourth-quarter results on February 11, where management is expected to provide guidance for 2026, and investors should pay attention to anticipated low-single-digit sales growth for the year ahead.
See More
