On Mar 19, 2013, shares of
AXIS Capital Holdings Limited
) hit a 52-week high of $41.84. Previously, the company had
reported solid fourth-quarter results with an earnings surprise
of 64.9%. This property & casualty insurer witnessed positive
earnings surprises in two of four quarters of 2012, with an
average beat of 26.6%.
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On Feb 4, AXIS Capital reported fourth-quarter 2012 operating
loss of 23 cents per share, narrower than the Zacks Consensus
Estimate of a loss of $1.18 per share. Total revenue grossed
$975.5 billion in the quarter, improving 3.1% from the year-ago
quarter. The top line comfortably surpassed the Zacks Consensus
Estimate of $928 million.
AXIS Capital also continues to benefit from rate increases. The
company noted an improved pricing scenario in the insurance
market place extending across classes and geographies, and
expects the momentum to continue. Looking forward, AXIS Capital
expects gross premiums written to increase in 2013, given
favorable pricing momentum sustains in the primary insurance
AXIS Capital has a $750 million share buyback program under its
authorization. Further, the approval of a dividend hike of 4% to
25 cents per share in Dec 2012 marked the 9th consecutive year of
The absence of any major catastrophe events in the first nine
months of 2012 was beneficial to the underwriting results of the
company. However, the occurrence of Hurricane Sandy in the fourth
quarter altered the picture. Though its exposure to cat loss
weighs on the results, prudent underwriting practices managed to
limit the adverse effect. Nevertheless, AXIS Capital enjoyed
underwriting income of $263.1 million for full year 2012,
reversing the year-ago loss. The combined ratio improved 1610
basis points to 112.2% in 2012.
Valuation for AXIS Capital looks attractive. The shares are
trading at a discount to the peer group average, both on a
price-to-book basis (9.3% discount to peer group average) and
forward price-to-earnings basis (27.7% discount to peer group
average), with return on equity remaining 8.2% above the peer
group average. The 1-year return from the stock is 28.5%, much
above S&P's return of 10.3%.
We believe that the conservative underwriting practices will help
the company remain well capitalized. New business generation and
platform expansion will also aid AXIS fuel its top-line growth.
The overall long-term expected sales and earnings growth rate for
this stock is 8.2% and 8.5%, respectively.
AXIS Capital presently carries a Zacks Rank # 2 (Buy). Property
and casualty insurers like
XL Group plc
Cincinnati Financial Corp
Arch Capital Group Ltd.
), among others, carry a favorable Zacks Rank # 1 (Strong Buy)
and appear impressive.