Barclays Thinks All The Goodness Of Arch Capital's New Acquisition Already Baked Into Price

Barclays’ Jay Gelb believes the good news associated with the expected accretion from the United Guaranty acquisition is already priced into Arch Capital Group Ltd. (NASDAQ: ACGL)'s share price.

Gelb downgraded the rating on the company from Overweight to Equal Weight, with a price target of $85.

“We still view Arch as among the best managed insurers with among the best track records of sustained book value per share growth,” the analyst mentioned.

Accretion

The recently announced United Guarantee acquisition is expected to drive significant EPS and ROE accretion for Arch Capital Group.

Although Arch Capital Group negotiated an attractive deal, Gelb pointed out that the good news was already baked into the share price.

Related Link: Goldman Sachs Upgrades Arch Capital, Lifts Price Target To $79

Share Price Not Justified

In addition, the analyst pointed out that almost “half of Arch's pro forma earnings are expected to be from mortgage insurance with the remainder from P&C re/insurance. The market now appears to be valuing Arch as a top-tier P&C insurer while still giving it all the credit for EPS accretion.”

Gelb views this as difficult to justify.

At time of writing, Arch Capital was down 0.83 percent at $79.98.

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