Arch Capital Posts Strong 1Q Earnings - Analyst Blog
01 Mai 2013 - 9:16AM
Zacks
Arch Capital Group
Limited (ACGL) reported first quarter 2013 net operating
earnings of $1.17 per share, surpassing the Zacks Consensus
Estimate of 97 cents per share. Results also outpaced the year-ago
earnings of 82 cents per share.
Including net realized gains of 41 cents, net impairment losses
recognized in earnings of 2 cents, equity in net income of
investment funds accounted for using the equity method of 10 cents
and net foreign exchange gains of 19 cents, Arch Capital reported
net income of $1.85 per share in the first quarter, up 62.3% year
over year.
Quarterly Operational Update
Total revenues of Arch Capital for the reported quarter increased
9.2% year over year to $890.1 million primarily due to higher
premiums earned (up 10.7% year over year) and net realized gains
(up 32.2% year over year). Results also surpassed the Zacks
Consensus Estimate of $852 million.
Net premiums written were $952.8 million, up 10.3% year over
year.
Net investment income declined 11.6% year over year to $65.7
million mainly due to lower income from fixed maturities (down
15.6% year over year) and higher investment expenses (up 29.7% year
over year)
Total expenses of Arch Capital during the quarter were $628.8
million, down 3.1% year over year. Lower interest expense (down
21.6% year over year) and foreign exchange gains of $24.3 million
that rebounded from a year-ago loss of $20.7 million led to the
improvement.
Underwriting income increased 73.2% year over year to $116.4
million during the reported quarter.
Combined ratio was 84.6% showing an improvement of 550 basis points
from 90.1% in the year-ago quarter.
Quarterly Segment Update
Insurance: Net premiums earned increased 0.7% year
over year to $445 million.
Underwriting income during the quarter was $14.95 million,
rebounding from a loss of $8.1 million in the year-ago quarter.
Combined ratio improved 510 basis points year over year to
96.7%.
Reinsurance: Net premiums earned increased 29%
year over year to $307.8 million.
Underwriting income increased 34.7% year over year to $101.4
million during the reported quarter.
Combined ratio improved 130 basis points year over year to
67.1%.
Share Repurchase Update
During the quarter Arch Capital repurchased 0.9 million shares for
approximately $41 million at an average share price of $44.01 per
share. The company is currently left with $728.9 million under its
authorization.
Financial Position
Total investments of Arch Capital increased 2.2% from 2012 end
level to $12.97 billion. As of Mar 31, 2013, total assets of the
company were $18.8 billion, up 5.3% from $17.8 billion from year
end 2012.
Cash flow from operations increased 42.1% year over year to $205.7
million in the first quarter.
As of Mar 31, 2013, shareholders’ equity increased 3.2% from $5.2
billion at year end 2012 to $5.3 billion. The debt-to-capital ratio
of Arch Capital as of Mar 31, 2013 was 5.3% compared to 5.5% as of
Dec 31, 2012.
Book value per share was $37.66 at Mar 31, 2013 representing a 4.1%
increase over $36.19 at Dec 31, 2012.
Return on equity (ROE) for the first quarter of 2013 was 12.9%, up
250 basis points from 10.4% in the year-ago quarter.
Investment Update
Arch Capital’s investment portfolio consists of high quality fixed
income securities with an average credit quality of “AA–/Aa2”.
The average effective duration of Arch Capital’s investment
portfolio as of Mar 31, 2013 was 2.94 years as compared to 3.06
years at year-end 2012.
During the reported quarter, total return on Arch Capital’s
investment portfolio, excluding the effects of foreign exchange was
1.01%, down 59 basis points from 1.60% at year end 2012.
Performance of Other Insurers
Progressive Corp.’s (PGR) earnings per share for
the first quarter of 2013 were 51 cents, surging nearly 21% from 42
cents in the year-ago quarter. Results outpaced the Zacks Consensus
Estimate of 44 cents. Net income shot up 20% from the first quarter
of 2012 to $308.6 million in the quarter.
AXIS Capital Holdings Limited (AXS) reported
first-quarter 2013 net operating income of $1.92 per share, which
breezed past the Zacks Consensus Estimate of $1.19. Earnings surged
79% year over year. Net operating income of $227 million improved
nearly 70% year over year.
Montpelier Re Holdings Ltd. (MRH) reported
first-quarter 2013 operating income of $1.18 per share, better than
the Zacks Consensus Estimate of 89 cents. However, earnings were
4.1% lower than $1.23 per share in the year-ago quarter.
Zacks Rank
Arch Capital currently carries Zacks Rank #2 (Buy).
ARCH CAP GP LTD (ACGL): Free Stock Analysis Report
AXIS CAP HLDGS (AXS): Free Stock Analysis Report
MONTPELIER RE (MRH): Free Stock Analysis Report
PROGRESSIVE COR (PGR): Free Stock Analysis Report
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