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On Mar 19, 2013, shares of AXIS Capital Holdings Limited (AXS - Analyst Report) hit a 52-week high of $41.84. Previously, the company had reported solid fourth-quarter results with an earnings surprise of 64.9%. This property & casualty insurer witnessed positive earnings surprises in two of four quarters of 2012, with an average beat of 26.6%.

On Feb 4, AXIS Capital reported fourth-quarter 2012 operating loss of 23 cents per share, narrower than the Zacks Consensus Estimate of a loss of $1.18 per share. Total revenue grossed $975.5 billion in the quarter, improving 3.1% from the year-ago quarter. The top line comfortably surpassed the Zacks Consensus Estimate of $928 million.

AXIS Capital also continues to benefit from rate increases. The company noted an improved pricing scenario in the insurance market place extending across classes and geographies, and expects the momentum to continue. Looking forward, AXIS Capital expects gross premiums written to increase in 2013, given favorable pricing momentum sustains in the primary insurance market.

AXIS Capital has a $750 million share buyback program under its authorization. Further, the approval of a dividend hike of 4% to 25 cents per share in Dec 2012 marked the 9th consecutive year of dividend increase.

The absence of any major catastrophe events in the first nine months of 2012 was beneficial to the underwriting results of the company. However, the occurrence of Hurricane Sandy in the fourth quarter altered the picture. Though its exposure to cat loss weighs on the results, prudent underwriting practices managed to limit the adverse effect. Nevertheless, AXIS Capital enjoyed underwriting income of $263.1 million for full year 2012, reversing the year-ago loss. The combined ratio improved 1610 basis points to 112.2% in 2012.

Valuation for AXIS Capital looks attractive. The shares are trading at a discount to the peer group average, both on a price-to-book basis (9.3% discount to peer group average) and forward price-to-earnings basis (27.7% discount to peer group average), with return on equity remaining 8.2% above the peer group average. The 1-year return from the stock is 28.5%, much above S&P’s return of 10.3%.   

We believe that the conservative underwriting practices will help the company remain well capitalized. New business generation and platform expansion will also aid AXIS fuel its top-line growth. The overall long-term expected sales and earnings growth rate for this stock is 8.2% and 8.5%, respectively.

AXIS Capital presently carries a Zacks Rank # 2 (Buy). Property and casualty insurers like XL Group plc (XL - Analyst Report), Cincinnati Financial Corp. (CINF - Analyst Report) and Arch Capital Group Ltd. (ACGL - Snapshot Report), among others, carry a favorable Zacks Rank # 1 (Strong Buy) and appear impressive.
 

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