On Friday, Roth/MKM set a new price target for Arch Capital Group Ltd (NASDAQ:ACGL) shares, raising it to $125 from the previous $110 while maintaining a Buy rating. The firm's optimism is rooted in Arch Capital's consistent performance and recent strategic moves in the property and casualty (P&C) insurance sector.
Arch Capital has been highlighted for its long-term success, with a notable 15.6% compound annual growth rate in book value per share since 2001, a key indicator of performance in the P&C industry. The company's recent acquisition of Allianz (ETR:ALVG)'s U.S. middle market business is expected to provide additional growth opportunities.
The firm's analysis suggests that Arch Capital's sustained top-line growth in net premiums written positions it to outperform industry profits in the coming years.
The company's entry into the excess and surplus (E&S) market, which is currently experiencing rapid growth and favorable pricing dynamics, is also seen as a strategic advantage.
Looking ahead, analysts anticipate that the competitive nature of the E&S market will increase from late 2025 to 2026. However, with its newly acquired middle market business, Arch Capital is expected to retain business and continue growing faster than the industry, supported by its strong balance sheet.
The price target increase to $125 is based on a 1.8x multiple of the firm's expected 2025 book value, excluding Accumulated Other Comprehensive Income (AOCI). This valuation reflects confidence in Arch Capital's ability to leverage its market position and recent acquisition to drive future growth.
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