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Axis Capital (AXS) Up 8.3% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Axis Capital (AXS). Shares have added about 8.3% in that time frame, outperforming 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 catalysts.

AXIS Capital's Q2 Earnings Top, Revenues Increase Y/Y

AXIS Capital Holdings Limited posted record second-quarter 2021 operating income of $2.00 per share, beating the Zacks Consensus Estimate by 39.9%. The bottom line more than doubled year over year.

The company’s results reflected higher gross premiums written as well as increase in net investment income.

Quarterly Operational Update

Operating revenues of about $1.3 billion increased 10.1% year over year. Gross premiums written improved 13% year over year to about $1.9 billion, largely driven by a 22% increase in the Insurance segment, which was partially offset by a 1% decrease in the Reinsurance segment.

Net investment income more than doubled year over year to $105 million, primarily driven by higher returns from other investments.

Total expenses in the quarter under review increased 0.6% year over year to $1.1 billion, attributable to higher general and administrative expenses, foreign exchange losses and amortization of intangible assets.

Pre-tax catastrophe and weather-related losses, net of reinsurance and reinstatement premiums, were $29 million, narrower than the year-ago loss of $35 million. AXIS Capital’s underwriting income of $148.3 million surged 69.6% year over year. Combined ratio improved 410 basis points (bps) to 90.6.

Segment Results

Insurance: Gross premiums written improved 22.3% year over year to $1.3 billion driven by increases in professional lines, property and liability lines driven by new business and favorable rate changes. Net premiums earned increased 9.5% year over year to $631.7 million. Underwriting income of $93.5 million increased nearly three-fold year over year. Combined ratio improved 890 bps to 84.5.

Reinsurance: Gross premiums written decreased 0.9% year over year to $672.7 billion, attributable to decreases in catastrophe and property lines due to non-renewals and decreased line sizes associated with repositioning the portfolio, partially offset by increases in professional lines and liability lines driven by favorable market conditions. Net premiums earned increased 8.3% year over year to $1.4 million. Underwriting income of $54.7 million increased 3.2% year over year. Combined ratio improved 1210 bps year over year to 100.2

Financial Update

AXIS Capital exited the second quarter with cash and cash equivalents of nearly $1 billion, up 10.8% over the level at 2020 end. Debts were $1.3 billion at quarter end, up 0.05% from 2020-end level.

Book value per share increased 0.7% year over year to $55.50 as of Jun 30, 2021. Operating return on equity was 14.4% in the second quarter, up 810 bps year over year.

Dividend Update

The company announced a dividend of 42 cents per share in the reported quarter.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted -10% due to these changes.

VGM Scores

Currently, Axis Capital has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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

Axis Capital has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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