Shares of AXIS Capital Holdings Limited AXS have rallied 15.8% year to date, outperforming the industry’s increase of 0.3%. The Finance sector and the Zacks S&P 500 composite have increased 7% and 6.2%, respectively, in the same time frame. With a market capitalization of $5.3. billion, the average volume of shares traded in the last three months was about 0.5 million.
The repositioning of portfolio and markets offering profitable growth, lower volatility, strong market presence, better pricing, margin expansion and effective capital deployment continue to drive this Zacks Rank #1 (Strong Buy) insurer. AXS has a decent history of delivering positive surprises in three of the last four reported quarters.
Return on equity was 12.7% in the trailing twelve months, better than the industry average of 5.7%. AXIS Capital eyes a low-90s combined ratio to fuel attractive ROE.
Image Source: Zacks Investment Research
Can It Retain the Momentum?
The Zacks Consensus Estimate for AXIS Capital’s 2023 earnings is pegged at $7.53 per share, indicating a 29.6% increase from the year-ago reported figure on 11% higher revenues of $5.9 billion. The consensus estimate for 2024 earnings is pegged at $8.42 per share, indicating an 11.8% increase from the year-ago reported figure on 5.1% higher revenues of $6.2 billion.
The expected long-term earnings growth rate is 5%.
AXIS Capital has been growing its business lines, which are likely to provide a solid double-digit return on equity opportunities. This specialty insurer remains focused on delivering sustained profitable growth and increased shareholder value.
The rate increase, prudent underwriting and PML reductions supported by third-party capital are likely to aid AXS in improving risk-adjusted return. These in turn should drive margin improvement. AXIS Capital expects disciplined pricing to persist in both insurance and reinsurance through 2023.
The insurance industry has been undergoing accelerated digitalization and AXIS Capital is no exception. AXS has made investments in technology that in turn should help the insurer in the effective usage of data, aid higher-value processes and activities, support new lines of business and enable efficient operations.
Axis Capital has an impressive dividend history, boasting one of the highest dividend yields among its peers. It hiked dividends for the last 18 years at an eight-year CAGR (2015 – 2022) of 5.3%, driven by solid earnings. Its dividend yield is currently 2.8%, way above the industry average of 0.4%.
The insurer also has a $100 million share buyback program through 2023 under its authorization.
It has a favorable VGM Score of B. Back-tested results have shown that stocks with a VGM Score of A or B, combined with a Zacks Rank #1 or #2 (Buy), are best investment opportunities.
Other Stocks to Consider
Some other top-ranked stocks from the insurance industry are Selective Insurance Group SIGI, RenaissanceRe RNR, Arch Capital Group ACGL. While Selective Insurance Group and RenaissanceRe sport a Zacks Rank #1, Arch Capital Group carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Selective Insurance Group 2023 earnings indicates 30.6% year-over-year growth. In the past year, Selective Insurance’s stock has gained 30.5%.
The Zacks Consensus Estimate for SIGI’s 2023 earnings has moved 9.1% north in the past 30 days.
The Zacks Consensus Estimate for RenaissanceRe 2023 earnings indicates 219% year-over-year growth. In the past year, RenaissanceRe’s stock has gained 42%.
The Zacks Consensus Estimate for RNR’s 2023 earnings has moved 7.7% north in the past 30 days.
Arch Capital Group’s earnings surpassed the Zacks Consensus Estimate in the last three quarters of 2022, the average earnings surprise being 24.17%. In the past year, the insurer has gained 45%.
The Zacks Consensus Estimate for ACGL’s 2023 earnings has moved 7.7% north in the past 30 days.
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