Artisan Partners, a high value-added investment management firm, published its ‘Artisan International Value Fund’ fourth quarter 2021 investor letter – a copy of which can be downloaded here. A return of 4.38% was recorded by its Investor Class: ARTKX, 4.44% by its Advisor Class: APDKX, and 4.45% by its Institutional Class: APHKX for the fourth quarter of 2021, all outperforming the MSCI EAFE Index that delivered a 2.69% return and the MSCI All Country World ex USA Index that gained 1.82% for the same period. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.
Artisan International Value Fund, in its Q4 2021 investor letter, mentioned Arch Capital Group Ltd. (NASDAQ: ACGL) and discussed its stance on the firm. Arch Capital Group Ltd. is a Hamilton, Bermuda-based insurance company with an $18.0 billion market capitalization. ACGL delivered a 7.20% return since the beginning of the year, while its 12-month returns are up by 34.79%. The stock closed at $47.65 per share on February 16, 2022.
Here is what Artisan International Value Fund has to say about Arch Capital Group Ltd. in its Q4 2021 investor letter:
“We initially purchased shares of Arch Capital in 2003, when the group’s tangible shareholder’s equity was close to $1.7 billion. A holding company operating a multiline property casualty insurance business, Arch has three divisions that underwrite insurance, reinsurance and mortgage insurance. Today, after years of high-return compounding and smart capital allocation, tangible book value is about $11.6 billion. Over that same period, the number of shares outstanding has declined almost 40%—from over 650 million to today’s approximately 400 million. That means book value per share has increased from about $3.85 per share to $29.00, or 653%. Arch Capital is financially disciplined and effectively cycle manages its three lines of business—that is, the company underwrites aggressively when pricing is strong and returns are good, and it reduces exposure when pricing is weak and returns are low. The pandemic’s 2020 onset was a difficult time for the group’s mortgage insurance business. The increased risk of mortgage defaults demanded a build-up of risk provisions, hurting profits and hampering book value growth. 2021 proved much better in two ways. First, mortgage default notices turned out to be modest and, combined with significant increases in home prices, considerably diminished the embedded risk in the group’s mortgage insurance policies. Second, due to years of poor returns in the property casualty insurance and re-insurance industry, pricing has finally started to turn. Arch has increased premiums written by over 30% in the last two years. Profits from those increased premiums are expected to positively impact profits and book value during 2022 (barring any major natural disasters). In the meantime, the company continues repurchasing shares below intrinsic value. In the fourth quarter, the share price increased 16% in local currency.”
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Our calculations show that Arch Capital Group Ltd. (NASDAQ: ACGL) failed to obtain a mark on our list of the 30 Most Popular Stocks Among Hedge Funds. ACGL was in 31 hedge fund portfolios at the end of the third quarter of 2021, compared to 22 funds in the previous quarter. Arch Capital Group Ltd. (NASDAQ: ACGL) delivered a 13.05% return in the past 3 months.
In May 2021, we also shared another hedge fund’s views on ACGL in another article. You can find other letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q4 page.
Disclosure: None. This article is originally published at Insider Monkey.
