AXIS Capital Q2 Earnings Beat on Strong Segment Performance - Analyst Blog

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AXIS Capital Holdings Limited 's ( AXS ) second-quarter 2014 earnings per share of $1.63 outperformed the Zacks Consensus Estimate by nearly 33%. Earnings improved nearly four-fold year over year.

The outperformance came on the back of improved results in the two segments of the company. Expenses also decreased in the quarter aiding margin expansion. A lower share count due to continued share repurchases boosted the bottom line.

Including net realized investment gains of 25 cents and foreign exchange loss of 9 cents, the company reported net income of $1.79 per share, up substantially from 62 cents earned in the year-ago quarter.

Operational Update

Net premiums earned by AXIS Capital improved 6% to $1 billion driven by better results at both Insurance and Reinsurance.

Net investment income of AXIS Capital improved 38.5% year over year to $115 million.

On the back of higher net premiums, investment income and other insurance related income, total revenue of AXIS Capital improved 8.6% year over year to $1.1 billion. It surpassed the Zacks Consensus Estimate by 1.2%.

Total expense in the quarter decreased about 5% year over year owing to lower net losses and loss expenses.

Underwriting income substantially improved to $126.6 million from $9.9 million in the year-ago quarter. Combined ratio improved 1,090 basis points (bps) to 90.8%.

Segment Result

Insurance Segment : Gross premiums written in this segment declined 3% year over year driven by weak performances at the property, professional and credit and political risk lines of business. Better performing accident and health business limited the downside.

Net premiums earned increased about 10% year over year owing to growth in professional, accident and health and liability business lines and a positive impact of the reduction in ceded reinsurance programs.

Underwriting income was $29.4 million, reflecting a turnaround from the year-ago loss of $14.5 million. Combined ratio improved 540 bps year over year to 96.8%.

Reinsurance Segment : Gross premiums written in the quarter increased 9% year over year to $477 million, largely driven by growth in the professional lines, continued expansion of the agriculture lines and an increase in the level of multi-year contracts written. However, weak performance at catastrophe and motor business lines were partial offset.

Net premiums earned increased 4% after accounting for improvement in the business written in the professional, agriculture and liability lines.

Meanwhile, underwriting income increased 74% with combined ratio improving 820 bps year over year.

Financial Update

AXIS Capital exited the quarter with cash and cash equivalents of $1 billion, up 13.1% from the 2013-end level.

Total capitalization at quarter end was $7.4 billion, including $1.5 billion of long-term debt and $0.6 billion of preferred equity. The figure was up 8.8% over the 2013-end level.

Cash flows from operations of $241 million increased 2.1% year over year.

Book value per share was $49.69 at the end of the quarter, up 16% year over year.

Share Repurchase Update

During the reported quarter, AXIS Capital repurchased 3.1 million of its common shares for $139 million. As of Jul 29, the company had remaining authorization of $450 million under its common share repurchase program that will expire on Dec 31, 2015.

Zacks Rank

AXIS Capital presently carries a Zacks Rank #3 (Hold).

Performance of other Property and Casualty Insurer

While ACE Limited ( ACE ) outperformed the Zacks Consensus Estimate on solid underwriting performance coupled with improved investment results, RLI Corporation's ( RLI ) earnings were in line with the Zacks Consensus Estimate. However, The Travelers Companies Inc. ( TRV ) missed the Zacks Consensus Estimate on higher-than-expected catastrophe losses.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: RLI , TRV , ACE , AXS

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