Arch Capital Hits 52-Week High on Rating Affirmation, Q3 Beat

Zacks

On Dec 23, 2014, shares of Arch Capital Group Ltd. (ACGL) scaled a 52-week high of $59.95 on the back of rating affirmation by Moody’s as well as a solid third quarter performance. With about 0.3 million shares exchanging hands in the last trading session, the scrip closed at $59.75 per share, gaining 1.43% for the day.

Arch Capital has been scoring strongly with the rating agencies, which are essential in retaining investor confidence in the stock and maintaining its creditworthiness in the market. Recently, Moody's Investors Service conferred a financial strength rating of A1 to Arch Capital’s principal operating subsidiaries with a stable outlook. This rating reflected the company’s solid operating platform with a good spread of risk in specialty insurance and reinsurance. It also depicted the company’s strong equity capitalization, balance sheet and profitability along with its moderate financial leverage and strong liquiditywhich was evidently reflected in the third quarter results.

With respect to earnings performance, this property and casualty insurer has been delivering positive surprise over the last trailing four quarters with an average beat of 14%. Arch Capital reported third quarter 2014 operating earnings per share of $1.05, 9.4% higher than the Zacks Consensus Estimate of 96 cents. However, EPS came in slightly lower than the year-ago figure of $1.10.

Higher top-line improvement aided the bottom line. Increase in the premiums earned, net investment income, net realized gains and underwriting income supported the top-line growth.

Earlier this year, the company acquired CMG Mortgage Insurance Company and the mortgage insurance operating platform of PMI Mortgage Insurance Co. (PMI). Per the transaction, CMG Mortgage Insurance along with the operating platform will form Arch Mortgage Insurance Company (Arch MI) to offer mortgage insurance across the United States. This deal will enable Arch U.S. MI to enter the U.S. mortgage insurance marketplace immediately and will also allow the Company to serve all lenders nationwide.

Notably, Arch Capital’s liquidity cushions its growth initiatives.

Arch Capital currently holds a Zacks Rank #2 (Buy). The stock has been witnessing upward estimate revisions in the Zacks Consensus Estimate over the last 30 days. For 2014, the Zacks Consensus Estimate for the stock moved north by 0.5% to $4.37 per share and for 2015 it rose by 1.4% to $3.71 per share. The long-term growth of Arch Capital is targeted at 11.3%.

Other Stocks to Consider

Investors may take interest in better-ranked stocks like AmTrust Financial Services, Inc. (AFSI), Navigators Group Inc. (NAVG) and Selective Insurance Group Inc. (SIGI). All these stocks sport a Zacks Rank #1 (Strong Buy).

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