The end of an earnings season can be a great time to discover new stocks and assess how companies are handling the current business environment. Let’s take a look at how Arch Capital Group (NASDAQ: ACGL) and the rest of the reinsurance stocks fared in Q1.
This is a cyclical industry, and the sector benefits when there is 'hard market', characterized by strong premium rate increases that outpace loss and cost inflation, resulting in robust underwriting margins. The opposite is true in a 'soft market'. Interest rates also matter, as they determine the yields earned on fixed-income portfolios. The primary headwind remains the immense and concentrated exposure to large-scale catastrophe losses, as the growing impact of climate change challenges traditional risk models and creates significant earnings volatility. Additionally, they face the risk of adverse prior-year reserve development, where claims prove more costly than anticipated, while the eventual influx of new capital from alternative sources threatens to soften the market and compress future returns.
The 7 reinsurance stocks we track reported a mixed Q1. As a group, revenues beat analysts’ consensus estimates by 4.9%.
While some reinsurance stocks have fared somewhat better than others, they have collectively declined. On average, share prices are down 3.8% since the latest earnings results.
Arch Capital Group (NASDAQ: ACGL)
With roots dating back to 1995 and now operating across insurance markets on six continents, Arch Capital Group (NASDAQ: ACGL) provides specialty insurance, reinsurance, and mortgage insurance services worldwide through its three main business segments.
Arch Capital Group reported revenues of $4.67 billion, up 18.6% year on year. This print exceeded analysts’ expectations by 1%. Overall, it was a strong quarter for the company with a solid beat of analysts’ net premiums earned estimates and an impressive beat of analysts’ EPS estimates.
Nicolas Papadopoulo, Arch CEO, commented, “We delivered solid results this quarter despite the losses arising from the California wildfires, resulting in an annualized operating return on equity of 11.5%. Although the market has generally become more competitive, we remain optimistic about our prospects to deliver long-term shareholder value. For a company with a strong underwriting culture like Arch, this is a market where we can stand out.”
Unsurprisingly, the stock is down 6.8% since reporting and currently trades at $88.31.
Best Q1: Hamilton Insurance Group (NYSE: HG)
Founded in 2013 and operating through three distinct underwriting platforms across four countries, Hamilton Insurance Group (NYSE: HG) operates global specialty insurance and reinsurance platforms across Lloyd's, Ireland, Bermuda, and the United States.
Hamilton Insurance Group reported revenues of $768.8 million, up 16.7% year on year, outperforming analysts’ expectations by 28.3%. The business had an exceptional quarter with an impressive beat of analysts’ EPS and net premiums earned estimates.
Hamilton Insurance Group pulled off the biggest analyst estimates beat among its peers. The market seems happy with the results as the stock is up 8.1% since reporting. It currently trades at $20.74.
Is now the time to buy Hamilton Insurance Group? Access our full analysis of the earnings results here, it’s free.
Weakest Q1: Everest Group (NYSE: EG)
Rebranded from Everest Re in 2023 to reflect its evolution beyond just reinsurance, Everest Group (NYSE: EG) underwrites property and casualty reinsurance and insurance worldwide, serving insurance companies, corporations, and other clients across six continents.
Everest Group reported revenues of $4.26 billion, up 3.1% year on year, falling short of analysts’ expectations by 4.2%. It was a disappointing quarter as it posted a significant miss of analysts’ net premiums earned estimates and a significant miss of analysts’ EPS estimates.
As expected, the stock is down 4.2% since the results and currently trades at $330.27.
Read our full analysis of Everest Group’s results here.
AXIS Capital (NYSE: AXS)
Founded in the aftermath of the 9/11 attacks when insurance capacity was scarce, AXIS Capital Holdings Limited (NYSE: AXS) is a global specialty insurer and reinsurer that provides coverage for complex risks across property, liability, professional lines, cyber, and other specialty markets.
AXIS Capital reported revenues of $1.52 billion, up 6.2% year on year. This number missed analysts’ expectations by 7.6%. Overall, it was a slower quarter as it also recorded a significant miss of analysts’ net premiums earned estimates and a significant miss of analysts’ book value per share estimates.
AXIS Capital had the weakest performance against analyst estimates among its peers. The stock is down 8.1% since reporting and currently trades at $95.91.
Read our full, actionable report on AXIS Capital here, it’s free.
RenaissanceRe (NYSE: RNR)
Born in Bermuda after the devastating Hurricane Andrew created a crisis in the catastrophe insurance market, RenaissanceRe (NYSE: RNR) provides property, casualty, and specialty reinsurance and insurance solutions to customers worldwide, primarily through intermediaries.
RenaissanceRe reported revenues of $3.47 billion, up 33.5% year on year. This result topped analysts’ expectations by 14.4%. Zooming out, it was a mixed quarter as it also logged a solid beat of analysts’ net premiums earned estimates but a significant miss of analysts’ EPS estimates.
RenaissanceRe pulled off the fastest revenue growth among its peers. The stock is down 4.5% since reporting and currently trades at $236.
Read our full, actionable report on RenaissanceRe here, it’s free.
Market Update
The Fed’s interest rate hikes throughout 2022 and 2023 have successfully cooled post-pandemic inflation, bringing it closer to the 2% target. Inflationary pressures have eased without tipping the economy into a recession, suggesting a soft landing. This stability, paired with recent rate cuts (0.5% in September 2024 and 0.25% in November 2024), fueled a strong year for the stock market in 2024. The markets surged further after Donald Trump’s presidential victory in November, with major indices reaching record highs in the days following the election. Still, questions remain about the direction of economic policy, as potential tariffs and corporate tax changes add uncertainty for 2025.
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