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AXIS Capital's (AXS) Q3 Earnings Beat, Revenues Fall Y/Y

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AXIS Capital Holdings Limited AXS reported third-quarter 2020 operating loss of 77 cents per share. The Zacks Consensus Estimate for operating income was pegged at 87 cents per share. In the year-ago quarter, operating loss was 39 cents.

The company’s results reflect lower gross premiums written, rise in expenses, higher catastrophe losses and soft performance of the Reinsurance segment.

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

Operational Update                  

Third-quarter operating revenues amounted to $1.2 billion, down 6.3% year over year. The downside can primarily be attributed to lower premiums earned, other insurance-related income and decline in net investment income.

Gross premiums written decreased 5.3% year over year to $1.3 billion due to 23% decline in the Reinsurance segment, partially offset by 5% increase in the Insurance segment.

Net investment income decreased 11.9% year over year to $101.9 million, primarily due to fall in yields.

Total expenses in the quarter increased 7% year over year to $1.3 billion due to higher net losses and loss expenses and amortization of intangible assets.

Catastrophe and weather-related losses, net of reinstatement premiums increased 50% year over year to $240 million.

Combined ratio deteriorated 510 basis points (bps) to 114.5%.

Segmental Results

Insurance: Gross premiums written grew 4.6% year over year to $935.8 million primarily attributable to increases in professional lines, accident and health, and aviation lines driven by new business and favorable rate changes. This was partially offset by decreases in liability, marine, credit and political risk lines due to a higher level of non-renewals and reduced business opportunities related to the current economic climate.

Net premiums earned increased 5.4% year over year to $544.8 million owing to rise in gross premiums written in the quarter, partially offset by jump in premiums ceded in professional lines and property lines.

Underwriting loss of $81.5 million was wider than year-ago underwriting loss of $17.9 million. Combined ratio deteriorated 1090 bps to 114.4%.

Reinsurance: Gross premiums written decreased 23% year over year to $395.4 million primarily attributable to decreases in accident and health, motor, catastrophe, and credit and surety lines. The decrease in accident and health lines was driven by non-renewals following the decision to exit the Middle East business. The decrease in motor lines was due to premium adjustments. The decrease in catastrophe lines was largely driven by a timing difference associated with a significant contract. The decrease in credit and surety lines was attributable to the current economic climate.

Net premiums earned declined 20% year over year to $271 million due to lower gross premiums written, partially offset by decreases in premiums ceded in catastrophe, accident and health, credit and surety and liability lines.

Underwriting loss of $53.8 million was narrower than year-ago underwriting loss of $60.8 million. Combined ratio deteriorated 60 bps to 110.5%.

Financial Standing

AXIS Capital exited the third quarter with cash and cash equivalents of $1 billion, down 19.4% from 2019-end level.

Book value per share decreased 6% from third quarter end to $54.75 as of Sep 30, 2020.

Annualized operating return on equity was negative 5.5% in the third quarter compared with negative 2.7% in the year-ago quarter.

Dividend Update

The company announced a dividend of 41 cents per share in the reported quarter. Over the past year, total dividend declared was $1.64 per share.

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

Third-quarter earnings of Brown & Brown, Inc. BRO, RLI Corp. RLI and W.R. Berkley Corporation WRB beat the respective Zacks Consensus Estimate.

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