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AXIS Capital (AXS) Q3 Earnings Beat Estimates, Revenues Miss

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AXIS Capital Holdings Limited (AXS - Free Report) reported third-quarter 2018 operating income of $96 cents per share, surpassing the Zacks Consensus Estimate by 31.5%. Moreover, the bottom line compared favorably with the year-ago quarter’s operating loss of $5.35 per share.

Axis Capital Holdings Limited Price, Consensus and EPS Surprise


Axis Capital Holdings Limited Price, Consensus and EPS Surprise | Axis Capital Holdings Limited Quote

Premiums improved substantially during the reported period. Such an encouraging quarterly performance reflects benefits of the portfolio optimization initiatives as well as earnings potential. Also, the acquisition of Novae Group contributed to this upside. Insurance segment also delivered a stellar performance.  However, Reinsurance segment was soft in the quarter under discussion.

Operational Update

Operating revenues of about $1.3 billion missed the Zacks Consensus Estimate by 0.9%. However, the top line rose nearly 21.4% year over year.

Gross premiums written improved 20.1% year over year to about $1.4 billion, largely driven by a 48.9% increase in the Insurance segment, owing to the Novae buyout. However, a 15% decrease in the Reinsurance segment partially offset this upside.

Net investment income increased 20.2% year over year to nearly $114.4 million.

Total expenses in the quarter under review declined 20.3% year over year to $1.3 billion, attributable to lower net loss and loss expenses as well as foreign exchange losses.

AXIS Capital delivered underwriting income of $59 million, having rebounded from the prior-year quarter’s loss of $512.9 million. Combined ratio improved 5500 basis points (bps) to 97.9%.

AXIS Capital is on track to deliver savings of $100 million by year-end 2020. The company has incurred cumulative pre-tax reorganization expenses of $75 million since the third quarter of 2017.

In the quarter under consideration, pre-tax cost savings of $17 million, $68 million on an annualized basis, related to the company’s transformation initiative and the integration of Novae have been recognized.

Segment Results

Insurance: Gross premiums written surged 48.9% year over year to $969.4 million owing to better performing property, professional, marine lines as well as credit and political risk lines associated with the Novae transaction.

Net premiums earned soared 46.1% year over year.

Underwriting loss of $11.7 million was noticeably narrower than the year-ago loss of $288.2 million. Combined ratio improved 6640 bps to 102.2%.

Reinsurance: Gross premiums written in the third quarter declined 15% year over year to $454.3 million, due to catastrophe, marine and aviation lines associated with the Novae acquisition.

Net premiums earned grew 2.2% year over year to $609.3 million.

Underwriting income of $70.4 million, compared favorably with the year-ago quarter’s loss of $224.7 million. Combined ratio deteriorated 4760 bps year over year to 89.5%.

Financial Update

AXIS Capital exited the quarter with cash and cash equivalents of $1.1 billion, up 11.1% over the level at 2017 end.  

Senior notes and notes payable were $1.4 billion, inching up 0.1% from 2017-end level.

Book value per share decreased 4.4% year over year to $53.82 as of Sep 30, 2018.

Operating return on equity remained flat year over year at 7.2%.

Dividend Update

The company announced a dividend of 39 cents per share in the reported quarter. Over the past year, total dividends declared amounted to $1.56 per share.

Zacks Rank

AXIS Capital carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Insurers

Among other players from the insurance industry having reported third-quarter earnings so far, the bottom line of The Progressive Corporation (PGR - Free Report) and MGIC Investment Corporation (MTG - Free Report) outpaced the respective Zacks Consensus Estimate, while RLI Corp.’s (RLI - Free Report) metric missed the same.

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