On Nov 30, 2015, we issued an update research report on AXIS Capital Holdings Limited AXS.
AXIS Capital’s operating earnings per share in the third quarter missed the Zacks Consensus Estimate and suffered a year-over-year decline. The underperformance was blamed on an increase in expenses and catastrophe losses. Though the quarter benefitted from portfolio enhancement, in particular in the insurance property and professional lines, volatility in investment portfolio and high offshore energy losses offset the same.
Nonetheless, management remains focused on strengthening its three businesses — Specialty Insurance, Reinsurance, and Accident and Health — to pave way for long-term growth. The expected long-term earnings growth rate for the stock is currently pegged at 8.5%.
With respect to capital deployment, the company repurchased 4.1 million shares and had $444 million worth shares remaining under authorization.
The property and casualty insurer chalked out plans to capitalize on opportunities by utilizing its resources prudently to enhance efficiencies and better serve clients and brokers across the globe. As such it is shutting down its Australian retail insurance operations.
The insurer is also making organizational changes to support profitable growth in a demanding global marketplace. These measures are estimated to lead to the elimination of about 100 positions. The headcount reduction will be in sync with the company’s effort to lower its expense level.
However, being a property and casualty insurer, AXIS Capital remains exposed to catastrophe events. Underwriting results are always subject to the uncertainty of occurrence as well as the magnitude of impact.
Also, AXIS Capital has been witnessing rising expenses that have eaten into its margins. Moreover, increasing competition in the reinsurance industry can result in slow growth and lower profitability for AXIS Capital.
Soft quarterly results induced a downward movement in the Zacks Consensus Estimate in the last 60 days. It decreased 7% to $3.91 for 2015 and 0.5% to $4.29 for 2016.
Stocks to Consider
Some better-ranked property and casualty insurers are Cincinnati Financial Corp. CINF, RLI Corp. RLI and Hallmark Financial Services Inc. HALL. Each of these stocks sports a Zacks Rank #1 (Strong Buy).
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