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Why Is Axis Capital (AXS) Down 5.1% Since Last Earnings Report?

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A month has gone by since the last earnings report for Axis Capital (AXS - Free Report) . Shares have lost about 5.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Axis Capital due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

AXIS Capital's Q1 Earnings Beat, Revenues Rise Y/Y

AXIS Capital  posted first-quarter 2021 operating income of 97 cents per share, beating the Zacks Consensus Estimate by 49.2%. The bottom line rebounded from the year-ago loss of $1.94 per share.

The company’s results reflect higher gross premiums written as well as increase in net investment income and lower expenses.

Quarterly Operational Update

Operating revenues of about $1.2 billion increased 4.1% year over year. Gross premiums written improved 4% year over year to about $1.3 billion, largely driven by a 17% increase in the Insurance segment, which was partially offset by 4% decrease in the Reinsurance segment.

Net investment income increased 22.6% year over year to $114 million, primarily driven by higher returns from other investments.

Total expenses in the quarter under review decreased 12.1% year over year to $1.1 billion, attributable to lower net losses and loss expenses, acquisition costs, interest expense and financing costs plus amortization of intangible assets, reorganization expenses and amortization of value of business acquired.

Pre-tax catastrophe and weather-related losses, net of reinsurance and reinstatement premiums, were $110 million primarily attributable to Winter Storms Uri and Viola, principally related to the state of Texas, and other weather-related events. This compares favorably with the year-ago loss of $300 million.

AXIS Capital’s underwriting income of $40.2 million rebounded from prior-year quarter’s loss of $196.8 million. Combined ratio improved 2090 basis points (bps) to 98.9

Segment Results

Insurance: Gross premiums written improved 17.3% year over year to $1.1 billion  primarily attributable to increases in professional lines, property, marine and liability lines driven by new business and favorable rate changes.

Net premiums earned increased 9.6% year over year to $616.3 million.

Underwriting income of $38.8 million rebounded from the year-ago loss of $122.6 million. Combined ratio improved 2810 bps to 93.8.

Reinsurance: Gross premiums written decreased 3.9% year over year to $1.4 billion, primarily attributable to decreases in motor, engineering and catastrophe lines due to non-renewals and decreased line sizes associated with repositioning of the portfolio, partially offset by selective increases in liability lines driven by favorable market conditions.

Net premiums earned declined 7.4% year over year to $487.4 million.

Underwriting income of $1.4 million rebounded from year-ago quarter’s loss of $74.1 million. Combined ratio improved 1210 bps year over year to 100.2

Financial Update

]XIS Capital exited the first quarter with cash and cash equivalents of $1.7 billion, up 3.8% over the level at 2020 end.

Debts were $1.3 billion at quarter end, up 0.02% from 2020-end level.

Book value per share increased 7% year over year to $53.03 as of Mar 31, 2021.

Operating return on equity was 9.9% in the first quarter.

Dividend Update

The company announced a dividend of 42 cents per share in the reported quarter.


 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 23.67% due to these changes.

VGM Scores

At this time, Axis Capital has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second 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 trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Axis Capital has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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