AXIS Capital Holdings Limited AXS lost all hopes of merging with PartnerRe Ltd PRE when the latter announced that has chosen EXOR S.p.A. as its partner.
Pursuant to the termination of the amalgamation agreement, PartnerRe will pay a break-up fee of $315 million to AXIS Capital. Both companies had entered into a stock swap merger agreement on Jan 25.
Concurrently, AXIS Capital reinstated its share repurchase program, which it had suspended due to the merger. The authorization had $749 million remaining through Dec 31, 2016. AXIS Capital also intends to undertake a $300 million accelerated share repurchase program to be exhausted by this year. AXIS Capital has already bought back about 92.8 million shares for $3.3 billion since it went public.
Subsequently, A.M. Best removed the ratings of AXIS Capital and AXIS Specialty Limited and its operating affiliates from under review with negative implications. The rating agency affirmed the issuer credit ratings (ICR) of “a-”for AXIS Capital and the financial strength rating (FSR) of A+ (Superior) and ICR of “aa-” for AXIS Specialty Limited and its operating affiliates. The ratings have a stable outlook.
Given the intensely competitive environment that the reinsurance industry is in amid declining premiums, AXIS Capital and PartnerRe chose to merge to guard against future losses and reserve shortfall. The fusion would have placed the combined entity among one of the top-five global reinsurers in terms of premiums.
Though the merger did not materialize, management remains focused on strengthening its three businesses — Specialty Insurance, Reinsurance, and Accident and Health — to pave way for long-term growth.
AXIS Capital reported in-line earnings last month. While revenues declined, expenses increased. However, the quarter experienced net investment income improvement from changes in the fair value of alternative investments.
Zacks Rank and Other Stocks
AXIS Capital carries a Zacks Rank #3 (Hold). Some better-ranked property and casualty insurers are First American Financial Corporation FAF and Selective Insurance Group Inc. SIGI. Each of these sports a Zacks Rank #1 (Strong Buy).
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