It has been about a month since the last earnings report for Axis Capital (AXS). Shares have added about 19.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Axis Capital due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
AXIS Capital Q3 Earnings and Revenues Beat, Premiums Rise Y/Y
AXIS Capital Holdings Limited posted third-quarter 2024 operating income of $2.71 per share, beating the Zacks Consensus Estimate by 8.4%. The bottom line increased 16% year over year. The insurer’s results reflected improved net investment income and higher premiums, offset by poor underwriting income and higher expenses.
Quarterly Operational Update
Total operating revenues of $1.5 billion beat the Zacks Consensus Estimate by 0.4%. The top line rose 6.2% year over year on higher net investment income and higher premiums earned. Net premiums written increased 27% to $1.2 billion, attributable to a 10% increase in the insurance segment and 189% in the reinsurance segment.
Net investment income increased 33% year over year to $205 million, primarily attributable to income from fixed maturities portfolio due to increased yields and an increase in fixed maturity assets. The Zacks Consensus Estimate was pegged at $179 million. Our estimate was $175 million.
Total expenses in the quarter under review increased 13% year over year to $1.4 billion due to higher net losses and loss expenses, acquisition costs, interest expense and financing costs. Our estimate was pegged at $1.3 billion.
Pre-tax catastrophe and weather-related losses and net of reinsurance were $78 million, including $43 million attributable to Hurricane Helene and Hurricane Beryl. The remaining losses were primarily attributable to other weather-related events. The loss was wider than the year-ago loss of $42 million. AXIS Capital’s underwriting income of $135.1 million decreased 8% year over year. The combined ratio deteriorated 40 basis points (bps) to 93.1. The Zacks Consensus Estimate was pegged at 94. Our estimate was 93.4.
Segment Results
Insurance: Gross premiums written improved 4.7% year over year to $1.5 billion, driven by increases in property, accident and health, and credit and political risk lines driven by new business. It was partially offset by a decrease in cyber lines principally due to a lower level of premiums associated with program business. Our estimate was $1.6. billion. Net premiums earned increased 15.6% year over year to $1 billion. Our estimate was $974.8 million.
Underwriting income of $98.7 million decreased 5.6% year over year. The combined ratio deteriorated 220 bps to 90.4. The Zacks Consensus Estimate for combined ratio was pegged at 89.
Reinsurance: Gross premiums written decreased 8.7% year over year to $409 million. The decrease was primarily attributable to liability lines due to the restructuring of significant contracts, together with non-renewals and decreased line sizes in accident and health lines. Our estimate was $522.8 million. Net premiums earned decreased 21.5% year over year to $342.8 million. Our estimate was $415.4 million. Underwriting income of $36.4 million decreased 14.2% year over year. The combined ratio improved 130 bps year over year to 91.4. The Zacks Consensus Estimate for combined ratio was pegged at 107.
Financial Update
AXIS Capital exited the third quarter with cash and cash equivalents of $981 million, up 2.9% from the 2023-end level. Debt was $1.3 billion at quarter-end, up 0.08% from the 2023-end level. Book value per share increased 19.6% from 2023-end to $64.65 as of Sept. 30, 2024. Annualized operating return on average common equity was 17.3% in the third quarter, which contracted 70 bps year over year.
Capital Deployment
As of Sept. 30, 2024, AXIS Capital had $260 million of remaining authorization under the open-ended board-authorized share buback program for share repurchases.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -9.21% due to these changes.
VGM Scores
At this time, Axis Capital has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Axis Capital has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Axis Capital belongs to the Zacks Insurance - Property and Casualty industry. Another stock from the same industry, Selective Insurance (SIGI), has gained 12.3% over the past month. More than a month has passed since the company reported results for the quarter ended September 2024.
Selective Insurance reported revenues of $1.24 billion in the last reported quarter, representing a year-over-year change of +13.9%. EPS of $1.40 for the same period compares with $1.51 a year ago.
Selective Insurance is expected to post earnings of $1.95 per share for the current quarter, representing a year-over-year change of +0.5%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.2%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Selective Insurance. Also, the stock has a VGM Score of B.
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Axis Capital Holdings Limited (AXS) : Free Stock Analysis Report
Selective Insurance Group, Inc. (SIGI) : Free Stock Analysis Report
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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 Nasdaq, Inc.
