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AXIS Capital (AXS) Q4 Earnings Miss Estimates, Revenues Beat

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AXIS Capital Holdings Limited (AXS - Free Report) incurred fourth-quarter 2018 operating loss of $1.77 per share, wider than the Zacks Consensus Estimate of operating loss of $1.34. Moreover, the bottom line came in against the year-ago quarter’s operating income of 24 cents per share.

Nonetheless, the reported quarter witnessed a solid premium performance across Insurance and Reinsurance segments. Better investment results and higher revenues were tailwinds in the period.

Full-Year Highlights

For 2018, AXIS Capital delivered operating income of $1.92 per share, missing the Zacks Consensus Estimate by 18.3%. However, the bottom line came in against the year-ago quarter’s operating loss of $3.15 per share.

Moreover, total operating revenues of $13 billion beat the consensus mark by 1.2% and also grew 15.2% year over year.

Axis Capital Holdings Limited Price, Consensus and EPS Surprise


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

Operational Update

Operating revenues of about $1.3 billion surpassed the Zacks Consensus Estimate by 3.5%. Also, the top line inched up 0.3% year over year.

Gross premiums written improved 6.9% year over year to about $1.2 billion, largely driven by a 7.8% and 4.1% increase in the Insurance and Reinsurance segments, respectively.

Net investment income increased 12.1% year over year to nearly $113.1 million.

Total expenses in the quarter under review rose 7.5% year over year to $1.5 billion, attributable to higher net losses and loss expenses, acquisition costs, interest expense and financing costs plus amortization of intangible assets.

AXIS Capital incurred underwriting loss of $194.7 million against the prior-year quarter’s income of $26.1 million. Combined ratio deteriorated 1660 basis points (bps) to 117.3%.

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. The company has incurred cumulative pre-tax reorganization expenses of $94 million since the third quarter of 2017.

Segment Results

Insurance: Gross premiums written improved 7.8% year over year to $920.7 million owing to a strong performance across credit and political risk as well as liability and professional lines, driven by new business.

Net premiums earned inched up 0.7% year over year to $590.5 million.

Underwriting loss of $36.9 million came in against the year-ago quarter’s income of $37.8 million. Combined ratio deteriorated 1240 bps to 106.3%.

Reinsurance: Gross premiums written in the fourth quarter rose 4.1% year over year to $252 million, attributable to catastrophe plus accident and health lines. However, a decrease in professional and property lines partially offset this upside.

Net premiums earned dipped 0.2% year over year to $623.9 million.

Underwriting loss of $157.8 million was significantly wider than the year-ago quarter’s loss of $11.7 million. Combined ratio deteriorated 2200 bps year over year to 124%.

Financial Update

AXIS Capital exited the fourth quarter with cash and cash equivalents of $1.2 billion, up 29.9% over the level at 2017 end.  

Senior notes and notes payable were $1.3 billion, slipped 2.5% from 2017-end level.

Book value per share declined 5.3% year over year to $49.93 as of Dec 31, 2018.

Operating return on equity totaled (13.6%) at the end of the fourth quarter compared with 1.7% in the year-ago period.

Dividend Update

The company announced a dividend of 40 cents per share in the reported quarter. Over the past year, total dividends declared amounted to $1.57 per share.

Zacks Rank

AXIS Capital carries a Zacks Rank #5 (Strong 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 fourth-quarter earnings so far, the bottom line of MGIC Investment Corporation (MTG - Free Report) and The Travelers Companies, Inc. (TRV - Free Report) beat the respective Zacks Consensus Estimate while that of The Progressive Corporation (PGR - Free Report) missed the same.

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