We recently compiled a list of the 7 Hot Insurance Stocks To Buy Right Now. In this article, we are going to take a look at where Arch Capital Group Ltd. (NASDAQ:ACGL) stands against the other hot insurance stocks to buy.
Insurance Market Insights: Key Trends Shaping the Future
The insurance market plays a crucial role in our economy by providing financial protection to individuals, businesses, and communities against unexpected risks. The market is currently experiencing significant changes driven by evolving consumer expectations, technological advancements, and global economic conditions.
Analysts note that the market is currently favorable in general, with insurers reporting healthy profits and a growth-oriented environment. According to Deloitte’s 2025 global insurance outlook, insurance premiums are projected to grow by 3.3% in 2024, largely fueled by advanced markets, which are expected to contribute 75% of this growth.
Advancements in artificial intelligence (AI) continue to revolutionize how insurers assess risk and manage claims. AI technologies enable better data analysis and faster decision-making processes, which can enhance customer service and operational efficiency.
On October 22, CNBC reported that Near Space Labs, a Brooklyn, New York-based startup, has developed innovative technology to enhance the insurance claims process following natural disasters like hurricanes Helene and Milton. Their invention, called “Swifts,” consists of AI-enabled cameras mounted on weather balloons that fly at altitudes higher than airplanes. This allows them to capture high-resolution images over vast areas quickly, significantly speeding up damage assessments from weeks to just days. CEO Rema Matevosyan highlighted that their technology can gather data equivalent to what 800,000 drones would capture in one flight. The company has already conducted over 1,000 missions and is scaling operations to respond immediately to climate-related disasters, aiming to provide insurance companies with timely information for risk analysis and claims processing.
Another key trend shaping the industry is the rising demand for new and innovative products like cyber insurance. As cyber threats become more prevalent, companies are increasingly seeking coverage against data breaches and ransomware attacks. According to IBM, the average cost of a data breach was approximately $4.88 million in 2024, highlighting the urgent need for robust cyber protection. As a result of these trends, insurers are looking to innovate and develop new products that can address these emerging risks effectively.
Overall, experts believe that the insurance market is positioned for growth as it adapts to changing consumer needs and leverages technology to improve services. According to The Business Research Company, the insurance market was valued at $7.26 trillion in 2023. Looking forward, the market is expected to grow at a compound annual growth rate (CAGR) of 7.2% during 2024-2028 to reach $10.28 trillion by the end of the forecast period.
With advancements in technology and a focus on customer-centric solutions, companies in this sector can enhance their profitability while providing better services to clients.
Our Methodology
To compile our list of the 7 hot insurance stocks to buy right now, we began by using the Finviz stock screener to identify insurance stocks that had a year-to-date performance of over 30%. From the remaining pool of more than 15 hot insurance stocks to buy, we focused on the top 7 stocks that are most favored by institutional investors. Data for the hedge fund sentiment surrounding each stock was taken from Insider Monkey’s database of 912 elite hedge funds. The 7 hot insurance stocks to buy right now are ranked in ascending order based on the number of hedge funds holding stakes in them as of Q2 2024.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A business executive reviewing insurance policy documents with a customer.
Arch Capital Group Ltd. (NASDAQ:ACGL)
Year-to-Date Performance: 41.63%
Number of Hedge Fund Holders: 37
Arch Capital Group Ltd. (NASDAQ:ACGL) is a Bermuda-based insurance company that specializes in providing insurance, reinsurance, and mortgage insurance globally. The company has established itself as a leader in specialty insurance solutions.
Arch operates through its wholly-owned subsidiaries and has recently shown strong financial performance across all its segments. In the second quarter of 2024, Arch Capital Group Ltd. (NASDAQ:ACGL) reported impressive results, driven by contributions from its Property and Casualty (P&C) segments.
The combined underwriting income from the Reinsurance and Insurance segments reached $475 million in Q2 2024, supported by over $5 billion in gross premiums. The Reinsurance segment alone generated $366 million in underwriting income, despite facing increased catastrophic events. This resilience highlights the company’s effective risk management strategies and strong market positioning.
The Insurance segment also performed well, contributing $109 million in underwriting income with a 7% increase in net written premiums compared to the same quarter last year. The Mortgage segment showed significant growth as well, generating $287 million in underwriting income while also increasing new insurance written by 12% year-over-year in the US.
During the second quarter, Arch Capital Group Ltd. (NASDAQ:ACGL) announced that it has completed the acquisition of RMIC Companies and its subsidiaries, which include the run-off mortgage insurance business of Old Republic International Corporation. This acquisition reflects the company’s strategy of pursuing opportunities to deploy capital effectively.
Additionally, on August 1, 2024, Arch Capital Group Ltd. (NASDAQ:ACGL) reported that Arch Insurance North America finalized the acquisition of the US MidCorp and Entertainment insurance businesses from Allianz. This move is expected to strengthen the company’s middle-market offerings and expand its workforce with nearly 500 former Allianz employees.
Arch Capital Group’s (NASDAQ:ACGL) investment portfolio grew to $37.8 billion, generating $364 million in net investment income during the quarter. This growth is attributed to strong cash flows from underwriting operations and higher yields across its investments.
With robust financial results, strategic acquisitions, and a solid market presence, Arch Capital Group (NASDAQ:ACGL) stands out as an attractive investment option.
Over the past 5 years, Arch Capital Group Ltd. (NASDAQ:ACGL) has grown its net income at a compound annual growth rate (CAGR) of 33%, while its levered free cash flow has increased at a CAGR of 24% during the same period.
According to Insider Monkey’s Q2 database of over 900 hedge funds, 37 hedge funds held stakes in ACGL. Baron Funds stated the following regarding Arch Capital Group Ltd. (NASDAQ:ACGL) in its Q2 2024 investor letter:
“Specialty insurer Arch Capital Group Ltd. (NASDAQ:ACGL) contributed to performance after reporting positive financial results that exceeded Street expectations. Operating ROE was 21% in the first quarter, and book value per share rose 40% due to strong underwriting profitability and the establishment of a deferred tax asset at the end of 2023. Favorable conditions persist in the P&C insurance market with strong growth and attractive returns despite signs of increasing competition. We continue to own the stock due to Arch’s capable management team and our expectation of significant growth in earnings and book value.”
Overall ACGL ranks 6th on our list of the hot insurance stocks to buy. While we acknowledge the potential of ACGL as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ACGL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.