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


AXIS Capital Holdings Limited AXS reported fourth-quarter 2017 operating profit of 24 cents per share, missing the Zacks Consensus Estimate by 4.00%. Also, the bottom line declined 79% 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

The quarter suffered due to cat loss, effects of the Ogden rate change in the UK and intense competition.

Operational Update

Operating revenues of about $1.3 billion beat the Zacks Consensus Estimate of $1 billion. The top line rose nearly 29% year over year.

Gross premiums written improved 50% year over year to about $1.1 billion, driven by 65% higher premiums written in the Reinsurance segment and 47% in the Insurance segment.

Net investment income gained 5.2% year over year to $101 million on increase in interest income from fixed maturities.

Total expense in the reported quarter shot up nearly 60% year over year to $1.4 billion due to higher net losses and loss expenses, acquisition costs plus interest expense and financing costs.

AXIS Capital reported underwriting income of $26.1 million, down 61% year over year. Combined ratio deteriorated 400 basis points (bps) to 100.7%.

Full-Year Highlights

Operating loss of $3.15 per share was wider than the Zacks Consensus Estimate of a loss of $3.13. Also, the figure compared unfavorably with $4.48 earned in 2016.

Operating revenues of about $4.5 billion beat the Zacks Consensus Estimate of $4.3 billion. The metric increased 12.1% year over year.

Segment Results

Insurance: Gross premiums written increased 47.1% year over year to $893.4 million owing to better performing property, professional lines and marine lines associated with Novae buyout as well as accident and health, professional lines and liability lines driven by new business.

Net premiums earned increased 45% year over year on strong premium growth in accident and health lines of late along with premium increase in aviation lines associated with the Aviabel acquisition.

Underwriting income was $41.2 million, increasing more than six fold year over year. Combined ratio deteriorated 450 bps to 94.1%.

Reinsurance: Gross premiums written in the quarter jumped 65% year over year to $203 million, largely on the back of a higher level of premiums in credit and surety, catastrophe, property, agriculture and motor lines.

Net premiums earned increased 18% year over year on solid premium growth in agriculture, liability and property lines as well as a decrease in ceded premiums earned in liability lines.

Underwriting loss of $15 million compared unfavorably with the underwriting income of $59.9 million in the year-ago quarter. Combined ratio deteriorated 1530 bps year over year to 102.9%.

Financial Update

AXIS Capital exited the quarter with cash and cash equivalents of $948.6 million, down from $1 billion at 2016-end level.

Notes payable and debt were $1.4 billion, up from $993 million at 2016-end.

Net cash flows from operations of $256 million in 2017 were down 37.1% over 2016.

As of Dec 31, 2017, book value per share was $53.88, down 7.5% year over year.

Capital Deployment

During 2017, the company returned $418 million in the form of dividends and share repurchases, reducing the share count by 4%.

In the fourth quarter, the board of directors approved a 3% hike in quarterly dividend to 39 cents per common 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 that have reported fourth-quarter earnings so far, the bottom line of The Progressive Corporation PGR, The Travelers Companies, Inc. TRV and RLI Corp. RLI surpassed the respective Zacks Consensus Estimate.

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