Shares of Arch Capital Group Ltd. ACGL are trading at a premium to the Zacks Property and Casualty Insurance industry. Its price-to-book value of 1.66X is higher than the industry average of 1.63X. It has a Value Score of B.

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Shares of The Travelers Companies, Inc. TRV are also trading at a multiple higher than the industry average, while NMI Holdings Inc NMIH and Cincinnati Financial Corporation CINF shares are trading at a discount.

Arch Capital shares have gained 3.5% in the past year, underperforming its industry, the Finance sector, as well the Zacks S&P 500 composite’s return.

ACGL Price performance

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With a market capitalization of $33.24 billion, the average volume of shares traded in the last three months was 0.2 million.

Closing at $88.33 on Tuesday, the stock stands 24% below its 52-week high of $116.47. The stock is trading below the 50-day and 200-day simple moving averages (SMA) of $92.95 and $100.44, respectively, indicating downward momentum. SMA is a widely used technical analysis tool to predict future price trends by analyzing historical price data.

Return on Capital of ACGL

Arch Capital’s trailing 12-month return on equity is 17.9%, ahead of the industry average of 7.6%. Return on equity, a profitability measure, reflects how effectively a company is utilizing its shareholders. 

Also, the return on invested capital in the trailing 12 months was 6.9%, better than the industry average of 5.8%. This reflects the company’s efficiency in utilizing funds to generate income.

ACGL Growth Projection

The Zacks Consensus Estimate for Arch Capital’s 2025 revenues is pegged at $18.84 billion, implying a year-over-year improvement of 13.3%. 

The consensus estimate for 2026 earnings per share and revenues indicates a year-over-year increase of 13.8% and 8.4%, respectively, from the corresponding 2024 estimates. Earnings have grown 33.5% in the past five years, better than the industry average of 19.3%.

Earnings Surprise History

Arch Capital surpassed earnings estimates in each of the last four quarters, the average being 15.53%. 

Factors Favoring Arch Capital

Widespread operations, coupled with a compelling product portfolio provide meaningful diversification and earnings stability to ACGL. These also enable international expansion, enhance operations and diversify business at attractive risk-adjusted returns through strategic buyouts.

Its Mortgage Insurance complements the specialty insurance and reinsurance businesses. ACGL’s buyout of Allianz’s U.S. MidCorp and Entertainment insurance business has expanded its footprint in the middle-market property and casualty segment.

A growing base of invested assets, driven by improving cash flows, should drive investment income.

Sufficient liquidity, coupled with low leverage, has helped ACGL strengthen its balance. It also shields it from market volatility and supports growth initiatives. 
Notably, its free cash flow conversion has remained more than 85% over the last many quarters, reflecting its solid earnings.

Wrapping Up: Keep On Holding

Arch Capital boasts a strong product portfolio and has a solid track record of premium growth, as well as favorable return on capital. Both the Insurance and Reinsurance segments should continue to witness significant growth from increases in most lines of business. A robust capital position over the years reflects its financial flexibility.

Given the premium valuation, it is better to stay cautious about this Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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The Travelers Companies, Inc. (TRV) : Free Stock Analysis Report

Cincinnati Financial Corporation (CINF) : Free Stock Analysis Report

Arch Capital Group Ltd. (ACGL) : Free Stock Analysis Report

NMI Holdings Inc (NMIH) : Free Stock Analysis Report

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