Arch Capital (ACGL) Down 1.7% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Arch Capital Group (ACGL). Shares have lost about 1.7% in that time frame, outperforming the S&P 500.

But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is Arch Capital due for a breakout? Well, first let's take a quick look at the most recent earnings report in order to get a better handle on the recent drivers for Arch Capital Group Ltd. before we dive into how investors and analysts have reacted as of late.

Arch Capital Tops Q4 Earnings Estimates on Solid Underwriting

Arch Capital Group Ltd. reported fourth-quarter 2025 operating income of $2.98 per share, which beat the Zacks Consensus Estimate by 19.7%. The bottom line increased 31.9% year over year. ACGL’s quarterly results benefited from higher premiums in its Insurance segment, improved net investment income, stronger underwriting performance and investment gains. These positives were partially offset by higher taxes.

Behind the Headlines

Gross premiums written increased 1.1% year over year to $4.8 billion. Net premiums earned rose 2.7% year over year to $4.3 billion on higher premiums earned in its Insurance segment. The figure marginally missed the Zacks Consensus Estimate. Pre-tax net investment income increased 7.2% year over year to $434 million, exceeding the Zacks Consensus Estimate of $416.6 million and our estimate of $398.5 million. The increase primarily reflected growth in average invested assets, partially driven by strong operating cash flows.

Operating revenues of $4.7 billion increased 4.4% year over year, driven by higher net premiums earned and net investment income. Revenues surpassed the Zacks Consensus Estimate by 2%. Pre-tax current accident year catastrophic losses for the company’s insurance and reinsurance segments, net of reinsurance and reinstatement premiums, were $164 million.

Arch Capital’s underwriting income increased 32.3% year over year to $827 million. The combined ratio, representing the percentage of premiums paid out as claims and expenses, improved 440 basis points to 80.6, beating the Zacks Consensus Estimate of 83.0 and our model estimate of 84.5.

Segmental Results

Insurance: Gross premiums written increased 2.3% year over year to $2.5 billion. Net premiums written declined 4% year over year to $1.9 billion, primarily due to the timing of ceded written premium accruals related to the MCE acquisition in the prior-year quarter and changes in business mix reflecting different net-to-gross retention levels. Net premiums written also came in below our estimate of $2.2 billion. Underwriting income of $119 million was nearly four times higher than the year-ago level, though it fell short of our estimate of $168.2 million. The combined ratio improved 450 basis points year over year to 94.0, marginally above the Zacks Consensus Estimate of 93.9.

Reinsurance: Gross premiums written increased marginally by 0.2% year over year to $1.9 billion. Net premiums written declined 5.2% year over year to $1.5 billion, primarily reflecting the non-renewal of a large transaction. The figure was below our estimate of $1.6 billion. Underwriting income totaled $458 million, up 39.6% year over year. The combined ratio improved 600 basis points year over year to 77.0, significantly better than the Zacks Consensus Estimate of 80.4.

Mortgage: Gross premiums written declined 1.5% year over year to $326 million. Net premiums written decreased 3.6% year over year to $267 million, primarily reflecting lower U.S. monthly and single premium volume. Net premiums written exceeded our estimate of $261.7 million. Underwriting income declined 6.4% year over year to $250 million. The combined ratio deteriorated 30 basis points year over year to 13.7, though it remained well below the Zacks Consensus Estimate of 21.2.

Financial Update

Arch Capital exited the quarter with cash and cash equivalents of $993 million, up 1.4% year over year. Total debt was $2.7 billion as of Dec. 31, 2025, slightly higher than the 2024-end level. Book value per share was $65.11 as of Dec. 31, 2025, reflecting an increase of 22.6% from the year-ago figure. Annualized operating return on average common equity expanded 220 basis points year over year to 18.9%.

Net cash provided by operating activities was $1.4 billion in 2025, down 10.7% year over year. During the fourth quarter of 2025, ACGL repurchased $798 million worth of its common shares.

Full-Year Highlights

For 2025, Arch Capital reported an operating income of $9.84 per share, which beat the Zacks Consensus Estimate by 5%. The figure improved 6% year over year. Total revenues of $18.8 billion beat the consensus mark by 0.5% and increased 12.9% year over year. The combined ratio deteriorated 30 basis points to 82.8, though it was better than our model estimate of 84.8.

How Have Estimates Been Moving Since Then?

Since the earnings release, investors have witnessed a flat trend in estimates revision.

VGM Scores

Currently, Arch Capital has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a score of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Arch Capital has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Arch Capital belongs to the Zacks Insurance - Property and Casualty industry. Another stock from the same industry, Allstate (ALL), has gained 3.2% over the past month. More than a month has passed since the company reported results for the quarter ended December 2025.

Allstate reported revenues of $17.27 billion in the last reported quarter, representing a year-over-year change of +3.4%. EPS of $14.31 for the same period compares with $7.67 a year ago.

For the current quarter, Allstate is expected to post earnings of $7.16 per share, indicating a change of +102.8% from the year-ago quarter. The Zacks Consensus Estimate has changed +3.8% over the last 30 days.

Allstate has a Zacks Rank #1 (Strong Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.

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