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Arch Capital (ACGL) Estimates Losses Due to Coronavirus

Zacks Equity Research

Arch Capital Group Ltd. ACGL provided estimates related to losses incurred and premium volumes due to the impact of COVID-19 on its business.

The pandemic has resulted in increased market volatility and uncertainty, reduced liquidity of capital markets, and led to social disruption as well as intervention by various governments across the world.

The global financial markets experienced extreme volatility in interest rates, credit spreads and equity markets during the first quarter of 2020, thanks to the pandemic.

The property and casualty insurer estimates first quarter pre-tax net losses of $85 million to $95 million across its P&C insurance and reinsurance segments.

The company also expects to incur pre-tax net losses of $40 million to $50 million across its mortgage segment, given the company’s loss reserve selections, set at the higher end of their range of indications across the mortgage segment as of Mar 31, 2020.

These estimated losses across insurance, reinsurance, and mortgage segments take into account claims made as of Mar 31, 2020 and are based on information from modeling techniques. However, the losses actually incurred may differ from estimates as result of uncertainties and the evolving nature of the global pandemic.

The company estimates net investment income in the range of $110 million to $115 million in the first quarter. Further, it estimates total return in the range of -0.65% to -0.95% on its core investment portfolio (excluding Watford). The estimated range will be changed after finalizing the analysis of the investment returns.

Shares of this Zacks Rank #3 (Hold) property and casualty insurance have lost 16.2% in the past year, compared with the industry’s decline of 12.1%. Nevertheless, the company’s policy of ramping up growth and capital position should continue to drive share price higher.

Stocks to Consider

Some better-ranked stocks from the same space are Donegal Group Incorporation DGICA, ProAssurance Corporation PRA, United Fire Group, Inc. UFCS. While Donegal Group sports a Zacks Rank #1 (Strong Buy), ProAssurance and United Fire Group carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Donegal Group surpassed estimates in each of the last four quarters, with the average positive surprise being 271.06%.

ProAssurance surpassed estimates in two of the last four quarters, with the average positive surprise being 16.38%.

United Fire Group surpassed estimates in one of the last four quarters, with the average positive surprise being 9.57%.

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ProAssurance Corporation (PRA) : Free Stock Analysis Report
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Arch Capital Group Ltd. (ACGL) : Free Stock Analysis Report
Donegal Group, Inc. (DGICA) : Free Stock Analysis Report
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