Arch Capital Group Faces Market Challenges Despite Strong Earnings

Arch Capital Group Ltd. (ACGL), a Bermuda-based insurer with a market cap of $33.2 billion, focuses on property, casualty, and mortgage insurance. This global company excels in risk management across various industries thanks to its disciplined underwriting and solid capital management practices. Over the years, Arch has gained a reputation for stable profitability, bolstered by diversification and strategic acquisitions.

Market Performance Lagging Behind Peers

Recently, Arch’s stock has struggled compared to the broader market. Over the past 52 weeks, the shares rose just 3.9%, while the S&P 500 Index ($SPX) surged by 22.3%. Year-to-date in 2025, ACGL’s shares dipped 4.5%, while the SPX saw a 4% increase.

Moreover, ACGL underperformed when compared to the Financial Select Sector SPDR Fund (XLF), which returned 32.5% over the last year and 7.2% year-to-date.

Earnings Report Sparks Stock Decline

On February 10, Arch Capital reported its fiscal fourth-quarter earnings, which led to a more than 6% drop in shares during the following three trading sessions. The company achieved adjusted earnings of $2.26 per share, exceeding market forecasts. Additionally, Arch’s revenue hit $4.55 billion, also surpassing Street expectations.

Net premiums written increased by 17.1% to $3.8 billion. However, underwriting income fell 12.6% to $625 million due to losses from catastrophic events. Book value per share grew by 13% to $53.11, demonstrating solid growth. Looking ahead, Arch anticipates a catastrophe load of 7% to 8% for 2025 while aiming to sustain competitive margins.

Analysts Retain Optimism for ACGL

For the current fiscal year, ending in December, analysts forecast a 6.9% decline in ACGL’s earnings per share (EPS) to $8.64. Encouragingly, the company has a strong earnings surprise history, having exceeded consensus estimates in the last four quarters.

Currently, among the 17 analysts who provide coverage for ACGL, the consensus rating stands at “Moderate Buy.” This rating breaks down into 10 “Strong Buy” ratings, two “Moderate Buys,” four “Holds,” and one “Strong Sell.”

This outlook has remained stable over the past few months.

Target Price Adjustments from Analysts

On February 14, Morgan Stanley (MS) analyst Michael Phillips rated Arch Capital Group as “Overweight,” while lowering the price target from $115 to $110.

Currently, ACGL’s mean price target is $114.81, suggesting a potential upside of 30.2% from its current price. The highest target of $141 indicates a possible 59.9% increase from present levels.

On the date of publication, Kritika Sarmah did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.

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