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AXIS Capital (AXS) Q4 Earnings Miss Estimates, Revenues Beat

Zacks Equity Research

AXIS Capital Holdings Limited AXS incurred fourth-quarter 2018 operating loss of $1.77 per share, wider than the Zacks Consensus Estimate of operating loss of $1.34. Moreover, the bottom line came in against the year-ago quarter’s operating income of 24 cents per share.

Nonetheless, the reported quarter witnessed a solid premium performance across Insurance and Reinsurance segments. Better investment results and higher revenues were tailwinds in the period.

Full-Year Highlights

For 2018, AXIS Capital delivered operating income of $1.92 per share, missing the Zacks Consensus Estimate by 18.3%. However, the bottom line came in against the year-ago quarter’s operating loss of $3.15 per share.

Moreover, total operating revenues of $13 billion beat the consensus mark by 1.2% and also grew 15.2% year over year.

Axis Capital Holdings Limited Price, Consensus and EPS Surprise

Axis Capital Holdings Limited Price, Consensus and EPS Surprise | Axis Capital Holdings Limited Quote

Operational Update

Operating revenues of about $1.3 billion surpassed the Zacks Consensus Estimate by 3.5%. Also, the top line inched up 0.3% year over year.

Gross premiums written improved 6.9% year over year to about $1.2 billion, largely driven by a 7.8% and 4.1% increase in the Insurance and Reinsurance segments, respectively.

Net investment income increased 12.1% year over year to nearly $113.1 million.

Total expenses in the quarter under review rose 7.5% year over year to $1.5 billion, attributable to higher net losses and loss expenses, acquisition costs, interest expense and financing costs plus amortization of intangible assets.

AXIS Capital incurred underwriting loss of $194.7 million against the prior-year quarter’s income of $26.1 million. Combined ratio deteriorated 1660 basis points (bps) to 117.3%.

In the quarter under consideration, pre-tax cost savings of $17 million — $68 million on an annualized basis — related to the company’s transformation initiative and the integration of Novae have been recognized. The company has incurred cumulative pre-tax reorganization expenses of $94 million since the third quarter of 2017.

Segment Results

Insurance : Gross premiums written improved 7.8% year over year to $920.7 million owing to a strong performance across credit and political risk as well as liability and professional lines, driven by new business.

Net premiums earned inched up 0.7% year over year to $590.5 million.

Underwriting loss of $36.9 million came in against the year-ago quarter’s income of $37.8 million. Combined ratio deteriorated 1240 bps to 106.3%.

Reinsurance : Gross premiums written in the fourth quarter rose 4.1% year over year to $252 million, attributable to catastrophe plus accident and health lines. However, a decrease in professional and property lines partially offset this upside.

Net premiums earned dipped 0.2% year over year to $623.9 million.

Underwriting loss of $157.8 million was significantly wider than the year-ago quarter’s loss of $11.7 million. Combined ratio deteriorated 2200 bps year over year to 124%.

Financial Update

AXIS Capital exited the fourth quarter with cash and cash equivalents of $1.2 billion, up 29.9% over the level at 2017 end.

Senior notes and notes payable were $1.3 billion, slipped 2.5% from 2017-end level.

Book value per share declined 5.3% year over year to $49.93 as of Dec 31, 2018.

Operating return on equity totaled (13.6%) at the end of the fourth quarter compared with 1.7% in the year-ago period.

Dividend Update

The company announced a dividend of 40 cents per share in the reported quarter. Over the past year, total dividends declared amounted to $1.57 per share.

Zacks Rank

AXIS Capital carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here .

Performance of Other Insurers

Among other players from the insurance industry having reported fourth-quarter earnings so far, the bottom line of MGIC Investment Corporation MTG and The Travelers Companies, Inc. TRV beat the respective Zacks Consensus Estimate while that of The Progressive Corporation PGR missed the same.

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MGIC Investment Corporation (MTG) : Free Stock Analysis Report

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