It has been about a month since the last earnings report for Axis Capital (AXS). Shares have lost about 9.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Axis Capital due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
AXIS Capital Q4 Earnings Beat Estimates
AXIS Capital Holdings fourth-quarter 2019 operating income of 5 cents per share, beat the Zacks Consensus Estimate by 150%. In the year-ago quarter, the company had incurred operating loss of $1.77 per share.
Full-Year Highlights
In 2019, AXIS Capital delivered operating income of $2.52 per share, which beat the Zacks Consensus Estimate by 0.8%. Also, the bottom line improved 31.9% year over year.
Total operating revenues of $5.1 billion matched the Zacks Consensus Estimate but declined 3.1% year over year.
Operational Update
Fourth-quarter operating revenues amounted to nearly $1.29 billion, down 1.8% year over year.
Gross premiums written improved 7.6% year over year to $1.3 billion, largely driven by 4.4% and 19% increase in Insurance and Reinsurance segments, respectively.
Net investment income increased nearly 4% year over year to nearly $117.6 million.
Total expenses declined 7.8% year over year to $1.3 billion, attributable to lower net losses and loss expenses, amortization of value of business acquired, amortization of intangible assets and reorganization expenses.
AXIS Capital incurred underwriting loss of $49.3 million, narrower than the prior-year quarter’s loss of $194.7 million. Combined ratio improved 1000 basis points (bps) to 107.9%.
Segment Results
Insurance: Gross premiums written improved 4.4% year over year to $961.6 million owing to strong performance in liability and professional lines, driven by new business and favorable rate changes, partially offset by a decrease in credit and political risk lines due to reduced business opportunities.
Net premiums earned decreased 5.2% year over year to $559.6 million.
Underwriting income was $29.7 million against year-ago quarter’s loss of $36.9 million. Combined ratio improved 1140 bps to 94.9%.
Reinsurance: Gross premiums written in the fourth quarter rose 19% year over year to $299.7 million, primarily attributable to increase in liability, property, and professional lines. These increases were partially offset by decreases in catastrophe lines due to lower reinstatement premiums and accident and health lines due to timing differences.
Net premiums earned dropped 1.9% year over year to $612 million.
Underwriting loss of $78.9 million was significantly narrower than the year-ago quarter’s loss of $157.7 million. Combined ratio improved 1050 bps year over year to 113.5%.
Financial Update
AXIS Capital exited the fourth quarter with cash and cash equivalents of $1.2 billion, up 0.7% over the level at 2018 end.
Book value per share increased 11.7% year over year to $55.79 as of Dec 31, 2019.
Operating return on equity totaled 0.4% at the end of the fourth quarter compared with (13.2%) in the year-ago period.
Dividend Update
The company announced a dividend of 41 cents per share in the fourth quarter of 2019.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision flatlined during the past month.
VGM Scores
At this time, Axis Capital has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 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
Axis Capital has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Axis Capital Holdings Limited (AXS): Free Stock Analysis Report
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