Why Is Axis Capital (AXS) Up 9.5% Since Last Earnings Report?
It has been about a month since the last earnings report for Axis Capital (AXS). Shares have added about 9.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Axis Capital due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
AXIS Capital Q4 Earnings and Revenues Top Estimates
AXIS Capital Holdings Limited AXS posted fourth-quarter 2023 operating income of $2.94 per share, in contrast to the Zacks Consensus Estimate of a loss of $1.25. The bottom line increased 50.8% year over year.
The insurer’s results reflected higher premiums written, net investment income and increased underwriting income.
Quarterly Operational Update
Total operating revenues of $1.5 billion beat the Zacks Consensus Estimate by 2.7%. The top line however declined 2.1% year over year on lower premiums earned.
Net premiums written decreased 2% to $1.1 billion, attributable to a 51% decline in the Reinsurance segment, partially offset by a 9% increase in the Insurance segment. Our estimate was $1 billion.
Net investment income increased 27.2% year over year to $187 million, primarily driven by an increase in income from the fixed maturities portfolio due to increased yields. Our estimate was $185.2 million.
Total expenses in the quarter under review increased 21.8% year over year to $1.7 billion due to higher net losses and loss expenses. Our estimate for the same was also $1.7 billion.
Catastrophe and weather-related losses and net of reinsurance were $25.9 million, narrower than the year-ago loss of $63.6 million.
AXIS Capital incurred an underwriting loss of $274.1 million against the year-ago income of $132 million.
The combined ratio deteriorated 3050 basis points (bps) to 124.6. The Zacks Consensus Estimate was pegged at 115, while our estimate was 131.
Segment Results
Insurance: Gross premiums written improved 7.7% year over year to $1.6 billion, driven by increases in all lines of business, with the exception of professional lines, which decreased in the quarter, principally due to the unattractive pricing environment for U.S. public D&O business.
Our estimate for gross premiums was $1.5. billion. Net premiums earned increased 9.4% year over year to $969.9 million. Our estimate was $885.6 million.
Underwriting loss was $61.7 million versus year-ago income of $123.7 million. The combined ratio deteriorated 2150 bps to 106.7. The Zacks Consensus Estimate for combined ratio was pegged at 81.
Reinsurance: Gross premiums written decreased 30.2% year over year to $200.9 million, attributable to a lower level of positive premium adjustments in the quarter compared with the prior year and the timing of renewals of significant contracts. Our estimate was $315.3 million.
Net premiums earned decreased 51.2% year over year to $102.4 million. Our estimate was $119.5 million.
Underwriting loss was $212.4 million versus the year-ago income of $8.9 million. The combined ratio deteriorated 6400 bps year over year to 162.8. The Zacks Consensus Estimate for combined ratio was pegged at 135.
Full-Year Highlights
Operating income of $9.85 per share increased 69.5% from 2022. Revenues of $5.7 billion increased 2.2%.
Net premiums written decreased 2% to $5.1 billion.
Underwriting income of $ 160.8 million plunged 55.2% year over year. Combined ratio deteriorated 410 basis points.
Financial Update
AXIS Capital exited 2023 with cash and cash equivalents of $1.4 billion, up 1.4% from the 2022 end level.
Debt was $1.3 billion at quarter-end, up 0.1% from the 2022-end level.
Book value per share increased 15.1% from 2022 end to $54.06 as of Dec 31, 2023, driven by net unrealized investment gains reported in accumulated other comprehensive income (loss), partially offset by net loss for the period, and common share dividends declared.
Annualized operating return on average common equity was 11%, which contracted 10 bps year over year.
Capital Deployment
AXIS Capital is authorized to buy back $100 million shares through Dec 31, 2024.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
VGM Scores
Currently, Axis Capital has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. It comes with little surprise Axis Capital has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Axis Capital belongs to the Zacks Insurance - Property and Casualty industry. Another stock from the same industry, W.R. Berkley (WRB), has gained 4.1% over the past month. More than a month has passed since the company reported results for the quarter ended December 2023.
W.R. Berkley reported revenues of $3.21 billion in the last reported quarter, representing a year-over-year change of +9.4%. EPS of $1.45 for the same period compares with $1.16 a year ago.
For the current quarter, W.R. Berkley is expected to post earnings of $1.49 per share, indicating a change of +49% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.8% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for W.R. Berkley. Also, the stock has a VGM Score of A.
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