Axis Capital (AXS) Down 1.7% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Axis Capital (AXS). Shares have lost about 1.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Axis Capital due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

AXIS Capital’s Q4 Earnings & Revenues Beat Estimates

AXIS Capital Holdings Limited reported adjusted fourth-quarter 2021 earnings of $2.13 per share, which beat the Zacks Consensus Estimate by 58%. The bottom line rebounded from the year-ago loss of 20 cents.  

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

Full-Year Highlights

In 2021, AXIS Capital delivered an operating income of $5.12 per share, beating the Zacks Consensus Estimate of $4.34 per share. Moreover, the bottom line improved from the year-ago quarter’s operating loss of $2.08 per share.

Total operating revenues of $5.18 billion beat the consensus mark of 5.12 billion and also increased 10.1% year over year.

Quarterly Operational Update

Total operating revenues of $1.4 billion outpaced the Zacks Consensus Estimate by 11.2%. The top line also rose 15% year over year on higher net premiums earned and net investment income.

Gross premiums written increased 16% year over year to about $1.6 billion, largely driven by a 19% increase in the Insurance segment and a 1% increase in the Reinsurance segment.

Net investment income increased 17% year over year to nearly $128 million, primarily due to positive returns from other investments in 2021.

Total expenses in the quarter under review decreased 8.8% year over year to $1.2 billion, attributable to lower net losses and loss expenses, foreign exchange losses and amortization of value of business acquired. AXIS Capital incurred an underwriting loss of $136 million compared with the prior-year quarter’s loss of $80.8 million. The combined ratio improved 1650 basis points (bps) to 93.1%.

Segment Results

Insurance: Gross premiums written improved 19.1% year over year to $1.3 billion, primarily attributable to increases in professional lines, liability, property, and marine lines driven by new business and favorable rate changes.
Net premiums earned rose 22.5% year over year to $722.4 million.

Underwriting income totaled $81.6 million in contrast to the year-ago quarter’s loss of $66 million. The combined ratio improved 2260 bps to 88.7%.

Reinsurance: Gross premiums written in the fourth quarter increased 1.5% year over year to $247.8 million, primarily attributable to increases in motor and agriculture lines due to new business.

Net premiums earned increased 3.6% year over year to $515.4 million. Underwriting income was $54.3 million against the year-ago quarter’s loss of $14.8 million. The combined ratio improved 1150 bps year over year to 90.8%.

Financial Update

AXIS Capital exited 2021 with cash and cash equivalents of $844.6 million, down 6.4% over the level at 2020 end. Debts were $1.3 billion at 2021 end, up 0.09% from 2020-end level.

Book value per share increased 1.2% year over year to $55.78 as of Dec 31, 2021. The increase was driven by net income generated. It was partially offset by a decrease in net unrealized gains reported in other comprehensive income and common share dividends declared. Operating return on equity totaled 15.1% in the fourth quarter against (1.4%) in the year-ago period.

Dividend Update

The company announced a dividend of 43 cents per share in the reported quarter, which represents an increase of 2.4% and is the 18th consecutive year the insurer has increased dividends since its initial public offering in 2003. Over the past year, total dividends declared amounted to $1.69 per share.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month.

The consensus estimate has shifted -6.04% due to these changes.

VGM Scores

At this time, Axis Capital has a strong Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. 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 #3 (Hold). We expect an in-line return from the stock in the next few months.

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