Arch Capital (ACGL) To Report Q2 Earnings: What's In Store?

Arch Capital Group Limited (NASDAQ:ACGL) is slated to report second-quarter 2019 results on Jul 29 after market close. The company has a solid record of delivering positive earing surprise in the last six quarters.

Let’s see how things are shaping up for this announcement.

The company’s improved property and select casualty lines pricing and prudent underwriting are expected to boost premiums.

The mortgage insurance business is likely to benefit from better credit conditions and conservative lending standards. Insurance in force is expected to improve in the to-be-reported quarter.

Strategic buyouts are expected to aid results. The Zacks Consensus Estimate for net premiums written is pegged at $1.4 billion, indicating an increase of 19.7% from the year-ago reported figure.

A benign catastrophe environment is likely to aid underwriting profitability. The Zacks Consensus Estimate for combined ratio is pegged at 80%, implying an improvement of 300 basis points.

Improved interest rate environment, reinvestment of fixed income securities at higher available yields and shift from municipal bonds to corporates are likely to aid net investment income. The Zacks Consensus Estimate for investment income is pegged at $159 million, indicating an upside of 47.2% from the year-ago reported figure.

Operating expenses are likely to weigh on margin expansion.

However, sustained buyback should boost the bottom line.

The Zacks Consensus Estimate for earnings stands at 69 cents, implying an increase of 16.9% from the year-ago quarter reported figure.

What Our Quantitative Model States

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP.

Earnings ESP: Arch Capital has an Earnings ESP 0.00%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at 69 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Arch Capital Group Ltd. Price and EPS Surprise

Zacks Rank: Arch Capital carries a Zacks Rank #2, which increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.

We caution against the Sell-rated stocks (#4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Some stocks from the insurance industry with the apt combination of elements to surpass estimates this reporting cycle are as follows:

Everest Re Group, Ltd. (NYSE:RE) is set to report second-quarter earnings on Jul 29. It has an Earnings ESP of +0.53% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Markel Corporation (NYSE:MKL) has an Earnings ESP of +1.60% and is a Zacks #3 Ranked player. The company is slated to announce second-quarter earnings on Jul 30.

Alleghany Corporation (NYSE:Y) has an Earnings ESP of +1.74% and a Zacks Rank of 3. The company is set to release second-quarter earnings on Aug 6.

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