On Sep 19, 2014, we issued an updated research report on AXIS Capital Holding Limited (AXS).
In the second-quarter, AXIS Capital posted solid results with operating earnings outperforming both Zacks Consensus Estimate as well as year-ago earnings on the strength of improved performance at Insurance as well as Reinsurance segments. Expenses also decreased in the quarter aiding margin expansion. A lower share count due to continued share repurchases boosted the bottom line.
With respect to earnings trend, this Zacks Rank #2 (Buy) property and casualty insurer delivered positive earnings surprises in two of last four quarters, with an average beat of 16.8%.
With respect to estimate revisions, the Zacks Consensus Estimate for 2014 improved as most of the estimates moved north in the last 60 days. It scaled up 9% to $4.85.The expected long-term growth rate for the stock is 8.5%.
New business opportunities across AXIS Capital’s lines of business and geography have helped it to achieve growth in premium writings. This in turn is also aiding top-line improvement. After success at Lloyds franchise for the new AXIS syndicate 1686, it is also weighing the opportunities for AXIS Ventures, the new third-party capital initiative.
Though rate increases have finally leveled off, the company will continue to benefit from solid fundamentals and growth opportunities.
Investment income also improved on strong performance in the equity markets.
With respect to enhancing shareholders’ value, AXIS Capital engages in regular buybacks and dividend hikes. It envisions returning near about 100% of annual operating earnings through dividends and share repurchases going forward.
However, AXIS Capital has been witnessing rising expenses that have also been restricting margin expansion. If the magnitude of increase in revenues fails to exceed the magnitude of increase in expenses, operation margin expansion will be affected going forward.
Also, being a property and casualty insurer, AXIS Capital is also exposed to catastrophe events. Underwriting results improved on a benign cat environment, but will always remain a concern because of the uncertainty of occurrence as well as the magnitude of impact.
Other Stocks to Consider
Investors interested in the property and casualty industry can look for AmTrust Financial Services, Inc. (AFSI), Federated National Holding Company (FNHC) and Mercury General Corporation (MCY). All these sport a Zacks Rank #1 (Strong Buy).
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