Will Higher Cat Losses Hinder AXIS Capital's (AXS) Growth?
On Aug 23, 2016, we issued an updated research report on AXIS Capital Holdings Limited AXS.
AXIS Capital’s second-quarter 2016 earnings beat the Zacks Consensus Estimate by 45%. Earnings, however, deteriorated year over year on higher catastrophe losses.
New business opportunities across AXIS Capital’s lines of business and geography have helped it achieve growth in premium writings. With the aim to enhance its growth profile and boost shareholders’ value, AXIS Capital has already started underwriting operations in China that will concentrate on treaty reinsurance business. Also, its AXIS Healthcare subsidiary launched a new coverage line in Jan 2016 to protect hospitals against losses from pandemics. Additionally, in the second quarter, the company announced the launch of Harrington Re. The entity, which was co-sponsored by AXIS Capital and Blackstone, has total capital of about $600 million. This will enable the company to develop customized solutions for clients and brokers. Moreover, the company’s initiatives in data and analytics, and strategic IT sourcing has started bearing fruits.
AXIS Capital’s strong capital position and focus on increasing international presence are expected to enhance shareholder value and drive long-term growth. The expected long-term earnings growth for the company is pegged at 8.5%.
The company also remains engaged in shareholder friendly moves that make it an attractive pick for yield seeking investors. AXIS intends to pay back at least 100% of annual operating earnings to its shareholders through common dividends and share repurchases, unless it finds other growth avenues to invest in.
However, a competitive reinsurance market and catastrophe losses are headwinds faced by the insurer. While increasing competition in the reinsurance industry can decelerate growth and lower profitability, exposure to cat losses, particularly in the Reinsurance segment, is likely to continue affecting underwriting results.
AXIS capital has also been experiencing escalating expenses. Hence, it intends to lower expense by $50 million to $60 million by the end of 2017. While $30 million out of savings of $40 million are expected in 2016, the remaining $10 million are anticipated in 2017.
AXIS CAP HLDGS Price and Consensus
AXIS CAP HLDGS Price and Consensus | AXIS CAP HLDGS Quote
Zacks Rank and Stocks to Consider
Some better-ranked stocks in the property and casualty sector are Allied World Assurance Company Holdings, AG AWH, Argo Group International Holdings, Ltd. AGII and National Interstate Corporation NATL. Each of these stocks sports a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
AXIS CAP HLDGS (AXS): Free Stock Analysis Report
ARGO GROUP INTL (AGII): Free Stock Analysis Report
NATL INTERST CP (NATL): Free Stock Analysis Report
ALLIED WORLD AS (AWH): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
