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AXIS Capital Holdings Limited’s (AXS - Analyst Report) first-quarter 2014 earnings per share of $1.24 fell short of the Zacks Consensus Estimate by 5.3% as well as the year-ago earnings by 35%.

The reported quarter suffered lower investment income from alternative investments and higher property losses in the insurance segment.

Operational Update

Net premiums earned by AXIS Capital improved 8.2% on the heels of better results at both Insurance and Reinsurance.

Net investment income of AXIS Capital declined about 24% year over year to $83 million.

On the back of higher net premiums and other insurance related income, total revenue of AXIS Capital inched up 1% year over year to $1.04 billion. It though missed the Zacks Consensus Estimate by 3.7%.

Total expense in the quarter escalated 26% year over year to approximately $889.8 million. The increase was owing to higher net losses and loss expenses, acquisition costs, interest expense and financing costs and general and administrative expenses.

Underwriting income deteriorated 36% to $108.8 million while combined ratio fell 89 basis points (bps) to 91.9%.

Segment Result

Insurance Segment: Gross premiums written in this segment inched up 1% year over year driven by better performances at the liability and credit and political risk lines of business that benefitted from improvements in the U.S. casualty markets and new business written.

Net premiums earned increased 12% year over year due to growth in professional, accident and health and liability lines of business along with favorable impact of the reductions in the ceded reinsurance programs.

Underwriting income in this segment plunged 59% to $17 million, with combined ratio deteriorating 640 bps year over year to 96.3%.

Reinsurance Segment: Gross premiums written in the quarter increased 6% year over year to $219.4 million, largely driven by several treaties written on a multi-year basis, specifically in the property, catastrophe and motor lines.

Net premiums earned increased 5% accounting for growth in business written in prior periods in the professional, motor and agriculture lines.

Meanwhile, underwriting income declined 29% with combined ratio deteriorating 960 bps year over year.

Financial Update

AXIS Capital exited the quarter with cash and cash equivalents of $.21 billion, up 31.1% from the 2013-end level.

Total capitalization at quarter-end was $7.3 billion, including $1.5 billion of long-term debt and $0.6 billion of preferred equity. The figure was up 7.3% over the 2013-end level.

Cash flows from operations of $151 million declined 32%.

Book value per share was $47.13 at the end of the quarter, up 6% year over year.

Share Repurchase Update

During the reported quarter, AXIS Capital repurchased 4 million of its common shares for $179 million. As of Apr 29, the company had remaining authorization of $550 million under its common share repurchase program that will expire on Dec 31, 2015.

Zacks Rank

AXIS Capital presently carries a Zacks Rank #2 (Buy). First-quarter earnings at some other property and casualty insurers like RLI Corporation (RLI - Analyst Report), The Travelers Companies Inc. (TRV - Analyst Report) and W.R. Berkley Corp. (WRB - Analyst Report) also surpassed their respective Zacks Consensus Estimate.




 

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