Arch Capital (ACGL) Provides Q3 Catastrophe Loss Estimates
Zacks Investment Research | Oct 08, 2019 11:53PM ET
Arch Capital Group (NASDAQ:ACGL) estimates third-quarter pre-tax gross catastrophe loss in the range of $65-$75 million, primarily due to Hurricane Dorian and Typhoon Faxai. The estimated losses are net of reinsurance recoveries and reinstatement premiums.
Risk modeling and analytics firm RMS expects insured losses to range between $3.5 billion and $6.5 billion from Hurricane Dorian while catastrophe modeler Karen Clark & Co. estimates insured losses in the United States and Caribbean to be around $5 billion, per media release. RMS estimates insured losses from Typhoon Faxai to be between $5 billion and $9 billion while catastrophe risk modeling firm AIR Worldwide expects loss in the range of $3 billion to $7 billion.
The Zacks Consensus Estimate for the third quarter is currently pegged at 67 cents, indicating increase of 13.6% from the year-ago quarter reported figure on 9.9% higher revenues. However, we expect estimates to move south once analysts start incorporating loss estimates into their numbers.
Being a property and casualty insurer, Arch Capital is vulnerable to natural disasters inducing volatility in underwriting results. Losses from 2019 cat events in the second quarter, net of reinsurance recoverables and reinstatement premiums, were $7.2 million. These losses stemmed from convective storm activity in the United States. Nonetheless, Arch Capital’s underwriting income in the second quarter came in at $293.1 million, up 24.5% year over year while combined ratio improved 230 basis points to 80.4%.
However, given a not-so-active catastrophe environment, underwriting income increased 17% year over year while combined ratio improved 100 basis points in the first half of 2019. Better pricing and reinsurance cover should provide some respite from cat loss incurred by the company in the third quarter.
Shares of Arch Capital, carrying a Zacks Rank #3 (Hold), rallied 13.2% in the third quarter against the Zacks Investment Research
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