Arch Capital (ACGL) Stock Forecast & Price Target

Arch Capital Group Ltd has demonstrated robust growth in its Insurance segment, particularly following the acquisition of Allianz's US MidCorp and Entertainment businesses, contributing to a strong top-line performance year-to-date. The Reinsurance unit has emerged as the largest segment by net written premiums, growing significantly from $1.9 billion in gross written premiums in 2018 to over $11 billion in 2024, aided by favorable market conditions. Additionally, Arch has benefited from a rise in net investment income due to increased global yields, positioning the company for continued growth in book value per share, anticipated to reach approximately $75 by year-end 2027, driven by strong operational earnings and significant capital generation.

Arch Capital Group is facing significant challenges as evidenced by a 13.5% year-over-year decline in property premiums during the second quarter of 2025 and projected underwriting income declines of nearly 25% by 2027, leading to an overall estimated 18% deterioration in underwriting income contribution by fiscal year 2027. The expectations of modest deterioration in the combined ratio, in conjunction with a slowing growth outlook and heightened pricing competition, are anticipated to push the loss ratio into the low 60s over time. Additionally, key risks such as accelerating social inflation and potential large catastrophe losses pose further threats to the company's ability to maintain adequate reserves and protect its book value.