On Apr 10, Zacks Investment Research upgraded AXIS Capital Holdings Limited AXS to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
AXIS Capital has witnessed increasing earnings estimates following a slew of positives in the quarter.
AXIS Accident & Health, a unit of AXIS Capital acquired Ternian Insurance Group. The buyout enhanced the accident & health coverage portfolio. It also fortified the insurer’s capabilities in the voluntary group limited benefits market.
Moreover, the company received an early termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 for the merger with PartnerRe Ltd. PRE. The decision stemmed from an intense competition in the reinsurance industry amid declining premiums. Therefore, to guard against future losses and reserve shortfalls, the companies decided to merge.
Moreover, PartnerRe-AXIS fusion will be ranked as one of the top-five global reinsurers in terms of premiums. This would give it a huge competitive advantage. Additionally, PartnerRe and AXIS expect pre-tax cost synergies worth $200 million from the merger within the first 1.5 years only. The merger is also expected to be accretive to earnings and return on equity.
The company delivered positive surprises in 2 of last 4 quarters, with an average beat of 7.3%. Additionally, our proven model shows that AXIS Capital is likely to beat earnings in the first quarter as it has the right combination of the top Zacks Rank and +16.95% Earnings ESP. AXIS Capital is scheduled to report first-quarter earnings on Apr 29.
These positives resulted in an upward revision in the Zacks Consensus Estimate for 2015 over the last 30 days. The estimate moved up 0.7% to $4.55 as 2 of 9 estimates moved north. The expected long-term earnings growth rate for the stock is 8.5%.
Other Stocks to Consider
Investors interested in the insurance industry can also consider Berkshire Hathaway Inc. BRK.B and Cincinnati Financial Corp. CINF. Both these sport the same Zacks Rank as AXIS Capital.
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