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AXIS Capital (AXS) Q3 Earnings Miss Estimates, Increase Y/Y

AXIS Capital Holdings Limited AXS posted third-quarter 2022 operating income of 3 cents per share, which missed the Zacks Consensus Estimate by about 25% but beat our estimate of a loss of 38 cents. The bottom line increased two-fold year over year.

The insurer’s results reflect higher net premiums earned and lower expenses, partially offset by a decrease in net investment income. Combined ratio improved on the back of lower catastrophe and weather-related losses.

Axis Capital Holdings Limited Price, Consensus and EPS Surprise

Axis Capital Holdings Limited Price, Consensus and EPS Surprise
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 increased 3.6% year over year on higher net premiums earned.

Net investment income decreased 17.8% year over year to $88.2 million, primarily attributable to losses from other investments compared to gains from these investments in the prior year. The decrease was partially offset by an increase in income from fixed maturities attributable to increased yields. The figure was lower than our estimate of $103.8 million.

Total expenses in the quarter under review decreased 4.9% year over year to $1.2 billion, attributable to lower amortization of intangible assets and interest expense and financing costs.

Pre-tax catastrophe and weather-related losses, net of reinsurance and reinstatement premiums, decreased 15.2% year over year to $212 million. The losses were due to Hurricane Ian, higher net loss estimate attributable to June European Convective Storms and other events.

AXIS Capital’s underwriting loss of about $29 million was narrower than the year-ago loss of $58.8 million. The combined ratio improved 310 basis points (bps) to 104.3.

Segment Results

Insurance: Gross premiums written improved 12% year over year to $1.3 billion, driven by increases in liability, professional lines and marine lines due to favorable rate changes,  accident and health, and credit and political risk lines due to new business.

Net premiums earned increased 14.8% year over year to $782.1 million.

Underwriting income of $15.7 million increased 51.9% year over year. The combined ratio improved 50 bps to 98%.

Pre-tax catastrophe and weather-related losses, net of reinsurance and reinstatement premiums, increased 7.6% year over year to $113 million. The losses were due to Hurricane Ian and other events.

Reinsurance: Gross premiums written decreased 17% year over year to $389.9 million due to decreases in catastrophe and property lines owing to the exit from these lines of business in June 2022. The decline was partially offset by increases in agriculture lines driven by new business and timing differences.

Net premiums earned decreased 5.2% year over year to $502.7 million.

Underwriting income of $44.8 million narrower than the year ago loss of $69.2 million. The combined ratio improved 530 bps year over year to 109.1.

Pre-tax catastrophe and weather-related losses, net of reinsurance and reinstatement premiums, decreased 31.7% year over year to $99 million. The losses stemmed from Hurricane Ian, an increase of $23 million in the net loss estimate due to June European Convective Storms as well as other weather-related events.

Financial Update

AXIS Capital exited the third quarter with cash and cash equivalents of $1.2 billion, up 43.3% over the level from 2021 end.

Debts were $1.3 billion at quarter-end, up 0.1% from the 2021-end level.

Book value per share decreased 8.7% sequentially to $43.50, as of Sep 30, 2022, due to net unrealized losses reported in other comprehensive income (loss), the net loss generated and common share dividends declared.

Annualized operating return on equity was 0.3% in the third quarter, expanded 20 bps year over year.

Capital Deployment Update

AXIS Capital bought back shares for $35 million. As of Sep 30, 2022, AXIS had $65 million remaining under authorization.

Zacks Rank

AXIS Capital currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Some Other P&C Insurers

Of the insurance industry players that have reported third-quarter results so far, The Travelers Companies TRV and RLI Corp. RLI beat the Zacks Consensus Estimate for earnings, while The Progressive Corporation PGR missed the same.

Travelers’s third-quarter 2022 core income of $2.20 per share beat the Zacks Consensus Estimate by 24.3% but decreased 15.4% year over year. Total revenues increased 6.8% from the year-ago quarter to $9.4 billion and beat the Zacks Consensus Estimate by 2.5%.

Net written premiums increased 110% year over year to $9.2 billion. Underwriting gain of $115 million increased 53.3% year over year in the reported quarter.  The combined ratio improved 40 bps year over year to 98.2.

RLI Corp.’s third-quarter 2022 operating earnings of 50 cents per share beat the Zacks Consensus Estimate by 51.5% but declined 23.1% from the prior-year quarter. Operating revenues increased 15.3% year over year to $312.7 million. The top line, however, missed the Zacks Consensus Estimate by 1.3%.

Gross premiums written increased 13.3% year over year to $403.8 million. This uptick can be attributed to the solid performance of Casualty (up 3.3%), Surety (up 12%) and Property segments (up 39.8%). Net investment income increased 19.2% year over year to $21.3 million.

Progressive’s earnings per share of 49 cents missed the Zacks Consensus Estimate of $1.24 as well as our estimate of $1.38. The bottom line, however, improved more than threefold from 14 cents earned in the year-ago quarter.

Net premiums written were $13 billion in the quarter, up 5% from $11.7 billion a year ago but missed our estimate of $14.2 billion. The combined ratio — the percentage of premiums paid out as claims and expenses — improved 120 bps from the prior-year quarter’s level to 99.2.


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