Citizens has reiterated its Market Outperform rating on Arch Capital Group (NASDAQ:ACGL), keeping a price objective of $125 after the company reported fourth-quarter 2025 results that came in ahead of analyst forecasts. The research firm points to Arch’s robust underwriting results, reduced catastrophe losses and resilient franchise metrics as the basis for its assessment.
Valuation view
Citizens notes that the $125 target equates to approximately 1.7 times forward book value and about 12 times Arch’s estimated 2027 earnings per share. By comparison, Arch is currently trading with a Price/Book ratio of 1.51 and a P/E ratio of 9.06, which Citizens interprets as implying the shares may be modestly undervalued relative to its target. The firm describes Arch as a "best-in-class company" that merits a premium multiple given its consistent operating results and active management of the insurance cycle. Over the last twelve months the company delivered an 18% return on equity, a metric Citizens highlights in support of its stance.
Franchise strength and market positioning
The research note emphasizes that Arch’s core property and casualty insurance and reinsurance operations remain well positioned amid what it characterizes as attractive market conditions. While Citizens acknowledges some moderation in specific property lines, it says many areas - notably casualty - remain firm. With a market capitalization of $34.7 billion, Arch has also produced solid top-line growth, with revenue expanding 15.9% over the most recent twelve-month period.
Citizens sees Arch as one of the larger beneficiaries of the hard P&C market because of the company’s deep global distribution and underwriting expertise. The firm further notes management’s tendency to identify market improvements early and to "lean in hard," a strategy it says has enabled Arch to outpace peers in growth and market share over several renewal cycles.
Loss reserving and cycle management
In an environment where loss reserves face heightened investor scrutiny, Citizens considers Arch to be "amongst the best positioned" on the basis of conservative loss picks and disciplined cycle management. The firm emphasizes that Arch adjusts casualty business volumes according to prevailing market conditions, a practice it views as supportive of longer-term underwriting performance.
Quarterly results
Arch’s fourth-quarter adjusted earnings were $2.98 per share, outstripping the analyst consensus of $2.56. The company reported net income available to common shareholders of $1.2 billion, or $3.35 per share, reflecting a 21.2% annualized return on average common equity. Citizens attributes the outperformance to strong underwriting outcomes and a reduction in catastrophe-related losses.
Following the earnings release, shares of Arch experienced a modest uptick. Citizens and market participants will continue to monitor the company’s execution and results in coming quarters.
Analyst activity
InvestingPro data cited by Citizens shows that 14 analysts have recently raised their earnings expectations for the upcoming period, a backdrop the firm appears to view as supportive of its constructive rating.
Investors should continue to track Arch’s quarterly results, reserve development and the trajectory of the P&C market to gauge whether the company sustains the performance that underpins Citizens’ Market Outperform rating.