A month has gone by since the last earnings report for Arch Capital Group (ACGL). Shares have added about 4.2% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Arch Capital due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Arch Capital Q4 Earnings and Revenues Beat, Rise Y/Y

Arch Capital Group reported fourth-quarter 2023 operating income of $2.49 per share, which beat the Zacks Consensus Estimate by 28.4%. The bottom line increased 16.4% year over year. The results benefited from improved premiums and higher net investment income.

Behind the Headline

Gross premiums written improved 12% year over year to $4.3 billion. Net premiums written climbed 7.4% year over year to $3.3 billion on higher premiums written across its Insurance and Reinsurance segments as hard market rates and rising inflation drove clients’ demand for many of its property and casualty products. Our estimate for the metric was $4.9 billion.

Net investment income increased 73% year over year to $313 million and beat our estimate of $303.2 million. It was driven by higher interest rates and growth in invested assets, which benefited from strong operating cash flows. The Zacks Consensus Estimate was pegged at $287 million.

Operating revenues of $3.7 billion rose 24.5% year over year, driven by higher net premiums earned, other underwriting income and net investment income. It beat the Zacks Consensus Estimate by 0.2%.

Pre-tax current accident year catastrophic losses, net of reinsurance and reinstatement premiums, were $137 million. Arch Capital’s underwriting income dropped 2.6% year over year to $715 million.

The combined ratio — the percentage of premiums paid out as claims and expenses — improved 310 basis points (bps) to 78.9. Our estimate was 83. The Zacks Consensus Estimate was pegged at 82.

Segment Results

Insurance: Gross premiums written increased 17.6% year over year to $1.9 billion. Our estimate was $1.8 billion. Net premiums written climbed 19.1% year over year to $1.4 billion. The uptick was owing to increases in most lines of business, due in part to new business opportunities and an increase in existing accounts and rate changes. Our estimate was $1.3 billion.

Underwriting income of $99 million improved 1% year over year. The combined ratio deteriorated 100 bps to 93. The Zacks Consensus Estimate was pegged at 93.

Reinsurance: Gross premiums written improved 9.7% year over year to $2 billion. Our estimate was $2.8 billion.

Net premiums written rose 0.9% year over year to $1.6 billion on increases in property excluding property catastrophe and other specialty lines, due in part to rate increases, new business opportunities and growth in existing accounts. Our estimate was $2.1 billion.

Underwriting income was $330 million, which increased 25% year over year. The combined ratio deteriorated 160 bps year over year to 80. The Zacks Consensus Estimate was pegged at 83.

Mortgage: Gross premiums written dropped 1.7% year over year to $350 million. Our estimate was $370.8 million.

Net premiums written decreased 7.3% year over year to $255 million due to higher premiums ceded. Our estimate was $340 million.

Underwriting income declined 23.3% year over year to $286 million. Our estimate was $296.7 million. The combined ratio improved 2380 bps to (3.3%). The Zacks Consensus Estimate was pegged at 31.3.