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Investor optimism on AXIS Capital Holdings Limited AXS has been increasing on the back of strong rate improvements, limited catastrophe losses, enhanced pricing and effective capital deployment.
The Zacks Consensus Estimate for 2021 and 2022 earnings per share is pegged at $4.93 and $4.97, indicating a respective increase of 337% and 0.6% from the corresponding year-ago reported figures.
The Zacks Consensus Estimate for 2021 and 2022 earnings has moved 11.8% and 3.5% north, respectively in the past 30 days. This should instill investors' confidence in the stock.
Earnings Surprise History
AXIS Capital has a decent earnings surprise history. Its bottom line beat estimates in each of the last four quarters, the average being 37.65%.
Zacks Rank & Price Performance
AXIS Capital currently carries a Zacks Rank #2 (Buy). However, in the past year, the stock has rallied 17.6% compared with the industry’s increase of 24%.
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The company has a favorable VGM Score of A. VGM Score helps identify stocks with the most attractive value, best growth and the most promising momentum.
It has an impressive Growth Score of A. This this style score helps analyze the growth prospects of a company.
It has an impressive Value Score of B, which reflects an attractive valuation of the stock.
Back-tested results show that stocks with a Style Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best investment opportunities.
The stock is currently undervalued. It is currently trading at a price to book of 0.94X, lower than the industry average of 1.32X.
Over 85% of AXIS’ insurance portfolio is in the markets that witness strong rate improvements including E&S Property, E&S Casualty, Lloyd’s, Professional Lines as well as a number of Reinsurance lines.
Strong double-digit growth in core insurance lines of business on the back of strong rate increases across virtually every line of business is expected to continue through 2022 at its Insurance segment.
Low interest rates, lower levels of favorable development, social inflation and the pandemic should drive further pricing improvements through 2022.
Reinsurance pricing gained further momentum during the mid-year renewal season, and AXIS Capital expects continued improvement next year.
Lower level of catastrophe and weather-related losses, enhanced pricing, improved terms and conditions, lower limits drive and greater stability improved loss ratios.
Increases in property and catastrophe lines, liability and professional lines driven by favorable market trends are likely to boost premiums of Reinsurance segment. New business and favorable rate changes in the professional lines, property, marine and liability lines should benefit premium income at the Insurance segment.
While strategic distribution management has reduced acquisition costs, strong focus on expenses has led to improved G&A ratios. AXIS Capital continues to target a G&A ratio in the low 14s for 2021.
Positive returns from alternative assets, principally the credit funds, real estate funds, and private equity funds and increase in income from fixed maturities will continue to drive net investment income, which in turn, will contribute to top-line growth of the insurer. In the second quarter, net investment income more than doubled year over year.
The company has increased its dividend for 17 straight years growing at an eight-year (2013-2021) CAGR of 6.7%. Its current dividend yield of 3.1% is higher than the industry average of 0.4%, which makes the stock an attractive pick for yield-seeking investors.
Other Stocks to Consider
Some other top-ranked stocks from the same space include Cincinnati Financial Corporation CINF, Everest Re Group, Ltd. RE and Chubb Limited CB, each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Cincinnati Financial surpassed estimates in three of the last four quarters and missed in the other one, the average earnings surprise being 36.01%.
The bottom line of Everest Re surpassed estimates in two of the last four quarters and missed in the other two, the average being 20.33%.
Chubb’s earnings surpassed estimates in three of the last four quarters, the average being 7.14%.
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Chubb Limited (CB) : Free Stock Analysis Report
Cincinnati Financial Corporation (CINF) : Free Stock Analysis Report
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Everest Re Group, Ltd. (RE) : Free Stock Analysis Report
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