Summary
Keefe, Bruyette & Woods (KBW) adjusted its valuation work for Arch Capital, raising the price target to $104.00 from $102.00 while maintaining a Market Perform recommendation. The firm made the change after reviewing Arch Capital’s fourth-quarter 2025 financial report and the company’s subsequent conference call.
Analyst revisions and rationale
KBW lowered its earnings-per-share projections for Arch Capital to $9.85 for 2026 and $11.00 for 2027, down from prior estimates of $10.00 and $11.35, respectively. The research note indicates these cuts reflect expectations for slower premium growth and higher core and catastrophe loss and expense ratios. Those headwinds are quantified in the analyst revisions as partially offset by a set of favorable items: higher investment income, larger reserve releases and a lower outstanding share count.
The firm specifically pointed to persistent softness in property catastrophe reinsurance pricing, decelerating premium growth in the primary insurance lines, and weakening profitability in the mortgage segment as factors constraining Arch Capital’s near-term upside potential.
Quarterly results
Arch Capital reported fourth-quarter 2025 results that showed a mixed performance versus expectations. The company delivered adjusted earnings per share of $2.98, beating a $2.56 projection and representing a 16.41% upside to the consensus EPS estimate. Revenue for the quarter was $3.65 billion, however, below the $4.19 billion forecast and missing by 12.89%.
Business development
Separately, Arch RoamRight, an Arch Capital division focused on travel insurance, announced a partnership with Tern. Under the agreement, Arch RoamRight becomes the first travel insurance provider to integrate directly with Tern’s travel business platform, enabling travel advisors and clients to purchase travel protection concurrently with bookings. The move is described by Arch as a way to streamline the purchase flow and expand distribution for its travel protection products.
Context and implications
KBW’s report balances modest positive adjustments to valuation with downward revisions to earnings forecasts. The firm’s maintained Market Perform rating suggests that, despite a slightly higher price target, analysts see limited near-term catalysts that would move Arch Capital decisively out of its current trading range. The combination of an EPS beat and a revenue shortfall in the quarter, together with the cited market headwinds in reinsurance and mortgage profitability, frame the firm’s cautious stance.
Key takeaways
- KBW raised Arch Capital’s price target to $104 while keeping a Market Perform rating.
- EPS estimates were reduced to $9.85 for 2026 and $11.00 for 2027 due to softer premiums and higher loss/expense ratios, partly mitigated by investment income, reserve releases and fewer shares.
- Arch Capital posted an EPS beat of $2.98 for Q4 2025 but missed revenue expectations; Arch RoamRight launched a direct integration with Tern to streamline travel protection sales.