On Mar 22, 2016, we issued an updated research report on AXIS Capital Holdings Limited AXS.
The company’s fourth-quarter 2015 earnings per share beat the Zacks Consensus Estimate and improved year over year. Among the positives, estimated catastrophe and weather-related pre-tax net losses declined year over year and the company witnessed higher net favorable prior year reserve development. However, net premiums earned decreased.
For 2016 and 2017, the company’s earnings are projected to grow 4.4% to $4.20 and 8.8% to $4.57, respectively.
AXIS Capital continues to strengthen its Specialty Insurance, Reinsurance as well as Accident and Health businesses. Moreover, in order to boost shareholders’ value and ramp up its growth profile, the property and casualty (P&C) insurer has devised plans to capitalize on opportunities by utilizing its resources prudently. As part of its initiatives, AXIS Capital made a decision to shut down its Australian retail insurance operations.
The insurer is also making organizational changes to support profitable growth in a demanding global marketplace. These measures could lead to elimination of about 100 positions. The headcount reduction will be in sync with the company’s effort to lower its expense level.
AXIS Capital actively engages in investor-friendly moves like share buybacks and dividend hikes to retain investor confidence. With respect to dividend hikes, the company declared a 21% hike in its quarterly dividend in the last reported quarter.
In the fourth quarter of 2015, the company increased its share repurchase authorization to $750 million, effective through Dec 31, 2016. As of Feb 2, 2016, the insurer has $734 million left under its authorization. AXIS Capital’s strong cash position, retained earnings and solid operational performance should continue to support its buyback activities and dividend payouts.
However, stiff competition in the reinsurance industry may account for slow growth and lower profitability for the company. Also, escalating expenses and dependence on limited number of brokers for revenues remain headwinds.
Stocks to Consider
Currently, AXIS Capital carries a Zacks Rank #3 (Hold). Some better-ranked P&C insurers are Hallmark Financial Services Inc. HALL, Markel Corp. MKL and Cincinnati Financial Corp. CINF. Each of these stocks sports a Zacks Rank #1 (Strong Buy).
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