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UBS reiterated its Buy rating and $124.00 price target on Arch Capital (NASDAQ:ACGL) following recent meetings with the company’s senior management. Currently trading at $89.52, with a P/E ratio of 9x and impressive revenue growth of 26% over the last twelve months, the company has demonstrated strong financial performance. The firm expressed increased confidence in Arch Capital’s ability to deliver solid premium growth, attractive underwriting margins, and increased capital return over the next twelve to 24 months.
UBS estimates Arch Capital could generate more than $3 billion of capital over the next twelve months, with more than $2 billion available for share buyback, special dividends, or bolt-on acquisitions. The firm noted that Arch Capital does not hold excess capital specifically for acquisitions and targets share buybacks when it can recoup the premium to book value paid within three years.
At its current valuation of approximately 1.6 times book value and mid-teens return on equity, UBS views Arch Capital’s shares as attractively priced for share buybacks. The firm modestly increased its 2026 and 2027 earnings per share estimates to $9.01 and $9.98, respectively, from previous estimates of $8.91 and $9.79.
UBS cited better-than-expected insurance margins from MidCorp, strong capital management, and an attractive valuation as reasons for its positive outlook on Arch Capital shares over the next twelve months. The firm noted that Arch Capital’s price-to-book ratio is in line with its 10-year average, while its price-to-earnings ratio is near the low end of its 10-year range.
While premium growth is expected to slow, UBS believes Arch Capital is accumulating significant excess capital that could be deployed to benefit shareholders through various capital return initiatives. InvestingPro analysis shows the company maintains a GREAT financial health score, with particularly strong profitability metrics. For deeper insights into Arch Capital’s financial health and growth potential, including additional ProTips and comprehensive valuation metrics, check out the detailed Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, Arch Capital Group Ltd. reported first-quarter earnings for 2025 that exceeded expectations, prompting analysts to adjust their projections. Keefe, Bruyette & Woods raised their price target for Arch Capital to $113, up from $104, while maintaining an Outperform rating. They cited the company’s robust performance and strategic "Cycle Management" as reasons for the adjustment. Meanwhile, JMP Securities reiterated a Market Outperform rating with a $125 price target, highlighting Arch Capital’s strong operational performance and strategic positioning in the current market. They praised the company’s management for navigating market cycles effectively, which they believe positions Arch Capital for growth. However, Jefferies downgraded the stock from Buy to Hold, with a revised price target of $100, due to anticipated challenges in the property catastrophe insurance segment. Despite these challenges, Jefferies noted that the primary Casualty segment could support revenue. Analysts from Keefe, Bruyette & Woods also noted potential reserve releases for 2025 and 2026, reflecting a continued positive outlook on Arch Capital’s financial health.
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