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AXIS Capital Holdings Limited (AXS - Analyst Report) reported second-quarter 2013 net operating income of 43 cents per share, which fell substantially short of the Zacks Consensus Estimate of 59 cents. Earnings dropped 52% year over year. Net operating income of $50 million plunged nearly 56% year over year.

Top-line improvement was more than offset by increase in expenses, inducing a year-over-year decline.

Including net realized investment gains of $14.6 million or 13 cents per share, foreign exchange gain of $10.9 million or 9 cents per share and loss on repurchase of preferred shares of $3.1 million or 3 cents, AXIS Capital reported net income of $72 million or 62 cents per share. This compares unfavorably with a profit of $168 million or $1.35 per share in the prior-year quarter.

Quarterly Operational Performance

Gross premiums written by AXIS Capital in the quarter increased 20.4% year over year to $1.22 billion, aided by a 29.2% improvement in reinsurance segment and 15.7% in the insurance segment.

Net premiums earned in the reported quarter were $945.9 million, up 11.2% year over year.

Net investment income of AXIS Capital increased 11.6% year over year to $83.1 million,

Total revenue of AXIS Capital grossed $1.04 billion in the quarter, improving 9.4% from the year-ago quarter. The top line comfortably surpassed the Zacks Consensus Estimate of $0.98 billion.

Total expenses in the quarter were $966.6 million, escalating 26.5% year over year, largely due to higher net losses and loss expenses and acquisition costs.

Underwriting income of AXIS Capital slumped nearly 92% to $9.9 million in the quarter. The combined ratio deteriorated 940 basis points to 101.7% in the quarter.

Pre-tax net cat losses, net of reinstatement premiums, were $140 million, stemming from tornadoes and hailstorms in the U.S. and flooding in Canada, Europe and Argentina.

Quarterly Segment Update

Insurance Segment: Gross premiums written in the quarter under review improved 15.7% year over year to $781.1 million, driven by better performance at accident & health line of business and property, professional lines and liability lines of business

Net premiums earned augmented 9.3% year over year to $422.3 million on the back of expansion in accident & health, and property businesses.

Underwriting loss incurred was $55.5 million, compared with income of $24.6 million in the year-ago quarter.

Combined ratio for the quarter deteriorated 1950 basis points to 89.9%.

Reinsurance Segment: Gross premiums written in the quarter increased 29.2% year over year to $438.6 million, largely driven by improved performance across all lines of businesses.

Net premiums earned improved 12.8% in the quarter to $523.5 million, driven by an expansion in the agriculture line of business.

Underwriting income declined 31.3% year over year to $65.4 million in the quarter.

Combined ratio deteriorated 800 basis points to 87.5% in the quarter.

Financial Position

AXIS Capital exited 2012 with cash and cash equivalents of $1.1 billion, up 29% from 2012 end level.

Total capitalization as of Jun 30, 2013, was $6.6 billion, including $1.0 billion of long-term debt and $0.6 billion of preferred equity.

Book value per share was $42.67 as of Jun 30, 2013, up 5% year over year.

Return on equity was 3.9% in the reported quarter down from 8.7% in the year-ago quarter.

Alliance Data’s net cash flow from operations was $236 million, down 18.1% year over year.

Share Repurchase and Dividend

In the reported quarter, AXIS Capital spent $228 million to buyback 5.1 million shares. AXIS Capital is left with $409 million under its authorization.

Results at few other Property and Casualty Insurers

ACE Limited (ACE - Analyst Report) reported second-quarter 2013 operating net income of $2.29 per share, up 19.3% from the Zacks Consensus Estimate of $1.92. Results improved 5.5% from $2.17 earned in the year-ago quarter.

Everest Re Group Ltd. (RE - Analyst Report) reported second-quarter 2013 operating earnings of $5.10 per share, substantially beating the Zacks Consensus Estimate of $4.26 per share. Earnings were also up 20% year over year.

Chubb Corporation (CB - Analyst Report) reported second-quarter operating earnings of $1.77 per share, significantly ahead of the Zacks Consensus Estimate of $1.38 per share. Earnings also increased 29% year over year.

Zacks Rank

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

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