Doubts About Arch Capital's MI Business Have Created A Meaningful Valuation Gap

It has been a pretty mixed year so far for insurance companies, with particular business mixes/exposures explaining a lot of individual performances. Reinsurers like Everest Re (RE) and specialty insurers like W.R. Berkley (WRB) have been doing alright, while broader P&C players like Chubb (CB) and Hartford (HIG) have been a little weak. And then you have the mortgage insurers like Radian (RDN) and MGIC (MTG) that have been having a tougher time of it.

Combing the traits of specialty P&C and reinsurance as well as mortgage insurance, it is perhaps not so surprising that Arch Capital's (ACGL) performance has reflected that blend - Arch has underperformed its non-MI peers but outperformed its MI peers. While I understand some of the Street's anxiety about the mortgage insurance space, particularly now that it's such a large part of Arch's underwriting income, I continue to believe that the shares look attractive on a long-term basis.

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Doubts About Arch Capital's MI Business Have Created A Meaningful Valuation Gap