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02/25/2005 Arch Capital Group (ACGL)
Insurance and reinsurance underwriter Arch Capital Group turned up in our Value Screen. It looks like a long-term value play. Although some slowdown is inevitable in the insurance business as reported by numerous sources (possibly contributing to Arch's current low valuation), it is unlikely to be drastic.
Arch, with its sound management and nimbleness for an insurer,
plus its ability to grow earnings (4th Quarter 2004 earnings were $1.45
per share, versus $1.22 a year ago), creates a lot of book value for
itself and is currently trading at a huge discount to book. Book
value is over $60 per share. Operational cash flow is extremely
healthy. There is some concern over a subpoena by the Attorney General
of New York regarding some of its malpractice insurance coverage,
but its management strenuously denies the allegations.
On a technical note, Arch has broken out of a consolidation range of $35-$40 and looks set to resume the uptrend.
On a technical note, Arch has broken out of a consolidation range of $35-$40 and looks set to resume the uptrend.