A month has gone by since the last earnings report for Axis Capital (AXS Quick QuoteAXS - Free Report) . Shares have added about 4.3% in that time frame, underperforming 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 Top, Underwriting Improves

AXIS Capital Holdings Limited posted third-quarter 2023 operating income of $2.34 per share, beating the Zacks Consensus Estimate by 25.8%. The bottom line increased from 3 cents in the year-ago quarter.

The insurer’s results reflected higher net investment income, increased underwriting income, improved combined ratio and lower expense.

Quarterly Operational Update  

Total operating revenues of $1.5 billion beat the Zacks Consensus Estimate by 3.3%. The top line rose 37.6% year over year on higher net investment income and higher premiums earned.

Net premiums written decreased 6% to $1 billion, attributable to a 65% decline in the Reinsurance segment, partially offset by a 14% increase in the Insurance segment. Our estimate was $1.4 billion. Net investment income increased 75% year over year to $154 million, primarily driven by higher income from the fixed maturities portfolio due to increased yields. Our estimate was $122.3 million.

Total expenses in the quarter under review decreased 0.5% year over year to $1.2 billion due to lower net losses and loss expenses. Our estimate for the same was also $1.2 billion.

Pre-tax catastrophe and weather-related losses and net of reinsurance were $42 million, primarily attributable to Maui wildfires, Hurricane Idalia and other weather-related events. The loss was narrower than the year-ago loss of $212 million. AXIS Capital’s underwriting income of $147 million rebounded from the year-ago loss of $29 million.

The combined ratio improved 1160 basis points (bps) to 92.7. The Zacks Consensus Estimate was pegged at 94. Our estimate was 95.

Segment Results

Insurance: Gross premiums written improved 10.6% year over year to $1.5 billion, driven by increases in property, liability, and marine and aviation lines due to favorable rate changes and new business, and accident and health lines mainly due to new business, partially offset by decreases in cyber lines. Our estimate was $1.6. billion. Net premiums earned increased 13.2% year over year to $885.7 million. Our estimate was $956.9 million. Underwriting income of $104.6 million increased more than six-fold year over year. The combined ratio improved 980 bps to 88.2. The Zacks Consensus Estimate for combined ratio was pegged at 78.

Reinsurance: Gross premiums written increased 15% year over year to $448.3 million, driven by increases in liability, and credit and surety lines due to new business and increased line sizes, and professional lines, largely driven by new business. Our estimate was $492.6 million.

Net premiums earned decreased 13.1% year over year to $436.8 million. Our estimate was $356.7 million. Underwriting income of $42.4 million rebounded from the year-ago loss of $44.8 million. The combined ratio improved 1640 bps year over year to 92.7. The Zacks Consensus Estimate for combined ratio was pegged at 169.

Financial Update

AXIS Capital exited the third quarter with cash and cash equivalents of $1.3 billion, up 7.9% from the 2022 end level. Debt was $1.3 billion at quarter-end, up 0.1% from the 2022-end level.

Book value per share increased 9% from 2022 end to $51.17 as of Sep 30, 2023, driven by net income, partially offset by net unrealized investment losses reported in accumulated other comprehensive income (loss), and common share dividends declared. Annualized operating return on average common equity was 18% in the third quarter, which expanded 1500 bps year over year.

Capital Deployment

As of Sep 30, 2023, AXIS Capital had $100 million remaining authorization under the board-authorized share repurchase program for common share repurchases through Dec 31, 2023.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

The consensus estimate has shifted -25.9% due to these changes.

VGM Scores

At this time, Axis Capital has a nice Growth Score of B, 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 #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Axis Capital is part of the Zacks Insurance - Property and Casualty industry. Over the past month, Travelers (TRV Quick QuoteTRV - Free Report) , a stock from the same industry, has gained 6.9%. The company reported its results for the quarter ended September 2023 more than a month ago.

Travelers reported revenues of $10.7 billion in the last reported quarter, representing a year-over-year change of +13.9%. EPS of $1.95 for the same period compares with $2.20 a year ago.

Travelers is expected to post earnings of $4.97 per share for the current quarter, representing a year-over-year change of +46.2%. Over the last 30 days, the Zacks Consensus Estimate has changed 0%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Travelers. Also, the stock has a VGM Score of B.