Axis Estimates Sandy Cat Loss at $300M


Axis Capital Holdings Limited (AXS) has provided its pre-tax loss estimate from Sandy of approximately $300 million, net of tax and estimated recoveries from reinsurance and including estimated reinstatement premiums in the fourth quarter of 2012.

The loss is expected to be split among its insurance and reinsurance segments equally. Axis Capital expects to bear 100% of the first $150 million losses and thereafter 50% of the losses of every $100 million slab.

The company posted better numbers in each of the first three quarters of 2012 owing to lower catastrophe activities. Underwriting results and combined ratio exhibited huge improvement. The first quarter reported underwriting profit which rebounded from the year-ago loss, while the second and third quarters experienced solid improvement.

However, the picture is expected to be altered in the fourth quarter owing to the huge losses from Superstorm Sandy.

The Zacks Consensus Estimate for the fourth quarter of 2012 is a loss of 9 cents representing a year-over-year decline of 116%. However, for full year 2012, it is currently pegged at $3.50, reflecting year-over-year growth of 377.8%. We expect the solid performance in each of the three quarters to more than offset the headwinds in the fourth quarter, thereby aiding the company to post better numbers.

Other property and casualty insurers like Montpelier Re Holdings (MRH), ACE Limited (ACE) and XL Group Plc (XL), which closely compete with the company, have also provided their loss estimates from Hurricane Sandy for the fourth quarter of 2012. ACE Limited’s loss estimate stands at $380 million after tax, net of reinsurance and including reinstatement premiums.

Montpelier estimates pretax net loss of approximately $95 million net of reinsurance recoveries and reinstatement premiums, while XL Group expects pretax loss of approximate $350 million, net of reinsurance and reinstatement premiums .

However, amid such headwinds, the news of a 4% dividend hike and a new $750 million share buyback program approval will help retain investor confidence.

Axis Capital currently holds a Zacks #3 Rank, which translates into a short-term hold rating. Montpelier, ACE Limited and XL Group also share the same Zacks Rank.

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