J.P. Morgan Comments On Arch Capital Results

According to J.P. Morgan, Arch Capital ACGL reported 1Q EPS of $0.01, versus per-share loss estimate of $1.58 and consensus per-share loss estimate of $0.91. J.P. Morgan said that the upside in the quarter was a function of four primary factors. “(1) higher favorable development; (2) lower than estimated catastrophe losses (mostly Australia and other); (3) higher mark-to-mark investment performance; and (4) modestly lower underlying loss ratio (primarily in reinsurance), which was partially offset by an FX loss. Meanwhile, recurring net investment income was modestly lower reflecting both yields and assets, despite a one-time dividend on other investments. In terms of share repurchase, the company bought back more than anticipated ($237 million vs. $100E million and $181 million a year ago). Despite higher operating EPS, diluted book value per share growth was lower than estimated (+1.1% vs. +1.9%E) due to lower investment performance and higher share repurchase activity. In terms of the conference call, we expect key topics to focus on 1Q catastrophe losses, premium mix, underlying margins, and pricing.” Arch Capital closed yesterday at $102.33.