Axis Capital Holdings Limited : Wells Fargo Raises Target Price To $97 From $85

AXIS Capital Holdings Limited AXS posted fourth-quarter 2024 operating income of $2.97 per share, which beat the Zacks Consensus Estimate by 10.8%. The bottom line increased 1% year over year. The insurer’s results reflected improved net investment income and higher premiums, offset by higher expenses.

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Quarterly Operational Update of AXS

Total operating revenues of $1.6 billion missed the Zacks Consensus Estimate by 2.8%. The top line rose 6.7% year over year on higher net investment income and higher premiums earned.

Axis Capital Holdings Limited Price, Consensus and EPS Surprise

Axis Capital Holdings Limited price-consensus-eps-surprise-chart | Axis Capital Holdings Limited Quote

Net premiums written increased 14% to $1.2 billion, attributable to a 9% increase in the Insurance segment and a 64% surge in the Reinsurance segment.

Net investment income increased 5% year over year to $195.8 million, driven by income from fixed maturities portfolio due to increased yields, partially offset by lower returns on alternative investments. The Zacks Consensus Estimate was pegged at $190 million. Our estimate was $188.7 million.

Total expenses in the quarter under review increased 38.4% year over year to $1.2 billion due to higher general and administrative expenses, acquisition costs and foreign exchange gains. Our estimate was pegged at $1.3 billion.

Catastrophe and weather-related losses and net of reinsurance were $64 million, attributable to Hurricane Helene and other weather-related events.

AXIS Capital’s underwriting income was $129.5 million against a loss of $274 million in the year-ago quarter. The combined ratio improved 3040 basis points (bps) to 94.2%. The Zacks Consensus Estimate was pegged at 92%. Our estimate was 93.4%.

Segment Results

Insurance: Gross premiums written improved 7.4% year over year to $1.7 billion, driven by increases in property, accident and health, and credit and political risk lines on new business, partially offset by a decrease in cyber lines. Our estimate and the Zacks Consensus Estimate were both pegged at $1.1. billion.

Net premiums earned increased 11.9% year over year to $1 billion. Our estimate was $1 billion.

Underwriting income was $0.1 million versus a loss of $0.6 million incurred in the year ago quarter. The combined ratio deteriorated 220 bps to 90.4%. The Zacks Consensus Estimate for combined ratio was pegged at 87%.

Reinsurance: Gross premiums written increased 36.9% year over year to $275 million, driven by accident and health lines on new business, motor, accident and health, and professional lines. Our estimate was $179.5 million. Net premiums earned increased 0.7% year over year to $351 million. Our estimate was $413.7 million and the Zacks Consensus Estimate was $372 million.

Underwriting income was $0.4 million versus a loss of $212.4 million in the year-ago quarter. The combined ratio improved 7190 bps year over year to 90.9%. The Zacks Consensus Estimate for combined ratio was pegged at 118%.

Full-Year Highlights

Total operating revenues of $6.1 billion missed the Zacks Consensus Estimate by 2.8%. However, the top line rose 6.6% year over year on higher net investment income and higher premiums earned.

Net premiums written increased 13% to $5.8 billion, driven by 13% in the Insurance segment and an increase of 12% in the Reinsurance segment.

AXIS Capital’s underwriting income of $571.5 million increased more than three-fold year over year. Combined ratio of 92.3% improved 760 bps.

Financial Update

AXIS Capital exited 2024 with cash and cash equivalents of $2.1 billion, doubled from the 2023-end level. Debt was $1.3 billion at quarter-end, up 0.1% from the 2023-end level.

Book value per share increased 20.4% from 2023-end to $65.27 as of Dec. 30, 2024.

Annualized operating return on average common equity was 18% in 2024, which expanded 760 bps year over year.

Capital Deployment

AXS returned $350 million to shareholders in 2024, including share repurchases of $200 million and dividends of $150 million. The insurer had $200 million of remaining authorization as on Dec. 30, 2024.

Zacks Rank

AXS currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Insurers

The Travelers Companies TRV reported fourth-quarter 2024 core income of $9.15 per share, which beat the Zacks Consensus Estimate by 39.3% and improved 30.5% year over year. Travelers’ total revenues increased 10.4% from the year-ago quarter to $11.9 billion. The top-line figure beat the Zacks Consensus Estimate by 1%.

Net written premiums increased 7% year over year to a record $10.7 billion, driven by strong growth across all three segments. Our estimate was $10.8 billion. The Zacks Consensus Estimate was pegged at $926 million. TRV witnessed an underwriting gain of $1.4 billion, up 30.5% year over year. The consolidated underlying combined ratio of 84% improved 190 bps year over year.

RLI Corp. RLI reported fourth-quarter 2024 operating earnings of 41 cents per share, which missed the Zacks Consensus Estimate by 14.5%. The bottom line decreased 46.8% from the prior-year quarter. Operating revenues for the reported quarter were $436 million, up 15.3% year over year, driven by higher net premiums earned and net investment income. The top line matched the Zacks Consensus Estimate.

Gross premiums written increased 9% year over year to $473.2 million. This uptick can be attributed to the solid performance of the Casualty segment (up 18.3%). Our estimate was $550 million. Underwriting income of $22.2 million decreased 62.8% year over year. The combined ratio deteriorated 1,170 bps year over year to 94.4%. The Zacks Consensus Estimate for the metric was pegged at 96%, while our estimate was 102%.

W.R. Berkley Corporation’s WRB fourth-quarter 2024 operating income of $1.13 per share beat the Zacks Consensus Estimate by 20.2%. The bottom line improved 17.7% year over year. Operating revenues were $3.5 billion, up 9.2% year over year. The top line beat the consensus estimate by 4.2%.

W.R. Berkley’s net premiums written were $2.9 billion, up 8% year over year. The figure was lower than our estimate of $3 billion. The consolidated combined ratio (a measure of underwriting profitability) deteriorated 180 bps year over year to 90.2%. The Zacks Consensus Estimate was 91%.

Zacks Investment Research

Axis Capital (AXS) reported $1.58 billion in revenue for the quarter ended December 2024, representing a year-over-year increase of 8.3%. EPS of $2.97 for the same period compares to $2.94 a year ago.

The reported revenue represents a surprise of -2.83% over the Zacks Consensus Estimate of $1.63 billion. With the consensus EPS estimate being $2.68, the EPS surprise was +10.82%.

While investors scrutinize revenue and earnings changes year-over-year and how they compare with Wall Street expectations to determine their next move, some key metrics always offer a more accurate picture of a company's financial health.

Since these metrics play a crucial role in driving the top- and bottom-line numbers, comparing them with the year-ago numbers and what analysts estimated about them helps investors better project a stock's price performance.

Here is how Axis Capital performed in the just reported quarter in terms of the metrics most widely monitored and projected by Wall Street analysts:

• Combined Ratio - Total: 94.2% compared to the 92.2% average estimate based on three analysts.
• Net loss and loss expense ratio - Total: 60.4% versus 59.9% estimated by three analysts on average.
• General and Administrative Expense Ratio - Insurance: 12.9% compared to the 12.1% average estimate based on two analysts.
• Combined Ratio - Reinsurance: 90.9% versus the two-analyst average estimate of 117.5%.
• General and Administrative Expense Ratio - Reinsurance: 4% compared to the 4.9% average estimate based on two analysts.
• Acquisition Cost Ratio - Total: 20.1% versus 19.5% estimated by two analysts on average.
• Net loss and loss expense ratio - Insurance: 58.8% compared to the 57% average estimate based on two analysts.
• Net premiums earned: $1.38 billion compared to the $1.40 billion average estimate based on three analysts. The reported number represents a change of +8.8% year over year.
• Net investment income: $195.77 million versus $189.77 million estimated by three analysts on average. Compared to the year-ago quarter, this number represents a +4.7% change.
• Net premiums earned- Insurance Segment: $1.03 billion compared to the $1.02 billion average estimate based on two analysts. The reported number represents a change of +11.9% year over year.
• Net premiums earned- Reinsurance Segment: $350.99 million versus the two-analyst average estimate of $372.38 million. The reported number represents a year-over-year change of +0.7%.
• Other insurance related income (loss): $7.02 million versus the two-analyst average estimate of $7.95 million. The reported number represents a year-over-year change of +16%.

View all Key Company Metrics for Axis Capital here>>>

Shares of Axis Capital have returned +2.1% over the past month versus the Zacks S&P 500 composite's +1.7% change. The stock currently has a Zacks Rank #3 (Hold), indicating that it could perform in line with the broader market in the near term.

Zacks Investment Research

Axis Capital (AXS) came out with quarterly earnings of $2.97 per share, beating the Zacks Consensus Estimate of $2.68 per share. This compares to earnings of $2.94 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of 10.82%. A quarter ago, it was expected that this insurance company would post earnings of $2.50 per share when it actually produced earnings of $2.71, delivering a surprise of 8.40%.

Over the last four quarters, the company has surpassed consensus EPS estimates four times.

Axis Capital, which belongs to the Zacks Insurance - Property and Casualty industry, posted revenues of $1.58 billion for the quarter ended December 2024, missing the Zacks Consensus Estimate by 2.83%. This compares to year-ago revenues of $1.46 billion. The company has topped consensus revenue estimates two times over the last four quarters.

The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.

Axis Capital shares have added about 2.1% since the beginning of the year versus the S&P 500's gain of 3.2%.

What's Next for Axis Capital?

While Axis Capital has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of this earnings release, the estimate revisions trend for Axis Capital: mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is $2.92 on $1.67 billion in revenues for the coming quarter and $11.45 on $6.79 billion in revenues for the current fiscal year.

Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Insurance - Property and Casualty is currently in the bottom 44% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

CNA Financial (CNA), another stock in the same industry, has yet to report results for the quarter ended December 2024. The results are expected to be released on February 10.

This insurance holding company is expected to post quarterly earnings of $1.11 per share in its upcoming report, which represents a year-over-year change of -16.5%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days.

CNA Financial's revenues are expected to be $3.19 billion, up 2.8% from the year-ago quarter.

Zacks Investment Research

Axis Capital reported Q4 adjusted earnings late Wednesday of $2.97 per diluted share, compared with a loss of $1.25 a year earlier.

Analysts polled by FactSet expected earnings of $2.57.

Revenue in the three months ended Dec. 31 fell to $1.47 billion from $1.48 billion a year earlier.

Four analysts polled by FactSet expected $1.5 billion.