AXIS Capital (AXS) Q2 Earnings Beat, Revenues Miss Estimates
AXIS Capital Holdings Limited AXS posted second-quarter 2023 operating income of $2.33 per share, beating the Zacks Consensus Estimate by 26%. The bottom line increased 28.2% year over year.
The insurer’s results reflected higher net investment income, increased underwriting income and improved combined ratio. These were offset by higher expenses.
Axis Capital Holdings Limited Price, Consensus and EPS Surprise
Axis Capital Holdings Limited price-consensus-eps-surprise-chart | Axis Capital Holdings Limited Quote
Quarterly Operational Update
Total operating revenues of $1.4 billion missed the Zacks Consensus Estimate by 0.4%. The top line however rose 2.7% year over year on higher net investment income.
Net premiums written increased 10% to $1.4 billion, driven by a 17% increase in the Insurance segment, partially offset by a 5% decline in the Reinsurance segment. Our estimate was $1.7 billion.
Net investment income increased 48.9% year over year to $137 million, primarily attributable to an increase in income from fixed maturities due to increased yields. The Zacks Consensus Estimate for combined ratio was pegged at $144 million. Our estimate was $140.4 million.
Total expenses in the quarter under review increased 3.3% year over year to $1.2 billion due to higher interest expense and financing costs and general and administrative expenses. Our estimate for the same was also $1.2 billion.
Pre-tax catastrophe and weather-related losses and net of reinsurance were $32 million, primarily attributable to Cyclone Gabrielle and other U.S. weather-related events, narrower than the year-ago loss of $67 million.
AXIS Capital’s underwriting income of $148 million increased 27.3% year over year. Our estimate was $158.1 million.
The combined ratio improved 190 basis points (bps) to 91.5. The Zacks Consensus Estimate was pegged at 96. Our estimate was 97.6.
Segment Results
Insurance: Gross premiums written improved 14.6% year over year to $1.7 billion, attributable to increases in property, marine and aviation, and liability lines due to favorable rate changes and new business, and accident and health lines due to new business. These were partially offset by a decrease in professional lines reflecting the reduction in activity in transactional liability business, together with an unattractive pricing environment for U.S. public D&O business. Net premiums earned increased 9.6% year over year to $842.8 million.
Underwriting income of $114.7 million increased 22.2% year over year. Our estimate was $267.9 million.
The combined ratio improved 90 bps to 83.6. The Zacks Consensus Estimate for combined ratio was pegged at 70.
Reinsurance: Gross premiums written decreased 6.8% year over year to $600.2 million. The decrease was primarily due to exit in catastrophe and property lines.
Net premiums earned decreased 16.8% year over year to $423 million.
Underwriting income of $33.8 million increased 47.9% year over year. The combined ratio deteriorated 430 bps year over year to 92.7. The Zacks Consensus Estimate for combined ratio was pegged at 131.
Financial Update
AXIS Capital exited the second quarter with cash and cash equivalents of $1.5 billion, up 29.3% from the 2022 end level.
Debts were $1.3 billion at quarter-end, up 0.1% from the 2022-end level.
Book value per share increased 8.6% from 2022 end to $50.98 as of Jun 30, 2023, driven by net income and net unrealized gains reported in other comprehensive income (loss). It was partially offset by common share dividends declared.
Annualized return on average common equity was 17.2% in the second quarter, which expanded 350 bps year over year.
Capital Deployment
As of Jun 30, 2023, AXIS Capital had $100 million remaining authorization under the board-authorized share repurchase program for common share repurchases through Dec 31, 2023.
Zacks Rank
AXIS Capital currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Insurers
The Travelers Companies TRV reported second-quarter 2023 core income of 6 cents per share, which missed the Zacks Consensus Estimate of $2.27. The bottom line decreased 97.7% year over year, primarily attributable to higher-than-expected catastrophe loss.
Travelers’ total revenues increased 9.8% from the year-ago quarter to $10.1 billion, primarily driven by higher premiums. The top-line figure was almost in line with the Zacks Consensus Estimate.
Net written premiums increased 14% year over year to a record $10.3 billion, driven by strong growth across all three segments. The figure was higher than our estimate of $9.1 billion.
Travelers witnessed an underwriting gain of $781 million, up 38% year over year, driven by record net earned premiums of $9.2 billion and a consolidated underlying combined ratio, which improved 170 basis points. The combined ratio deteriorated 820 basis points year over year to 106.5 due to higher catastrophe losses and lower net favorable prior-year reserve development, partially offset by a lower underlying combined ratio.
The Progressive Corporation’s PGR second-quarter 2023 earnings per share of 50 cents missed the Zacks Consensus Estimate of 88 cents. The bottom line declined 47.4% year over year.
Net premiums earned grew 19% to $14.5 billion and beat our estimate of $12.9 billion as well as the Zacks Consensus Estimate of $14.3 billion. The combined ratio deteriorated 480 bps from the prior-year quarter’s level to 104.
Policies in force were solid in the Personal Auto segment, increasing 17% from the year-ago month’s figure to 19.7 million. Special Lines improved 7% to 5.8 million.
W.R. Berkley Corporation’s WRB second-quarter 2023 operating income of $1.14 per share beat the Zacks Consensus Estimate by 6.5%. The bottom line increased 1.8% year over year.
Operating revenues came in at $2.9 billion, down 57.4% year over year, on the back of higher net premiums earned as well as higher net investment income. The top line missed the consensus estimate by 1.2%.
W.R. Berkley’s net premiums written were a record $2.8 billion, up 8.7% year over year, as market conditions remained favorable for most lines of business. Our estimate for the same was $2.7 billion.
Catastrophe losses totaled $53.5 million in the quarter. The consolidated combined ratio (a measure of underwriting profitability) deteriorated 100 basis points to 89.6, in line with the Zacks Consensus Estimate. Our estimate for combined ratio was 91.3.
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