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AXIS Capital's (AXS) Q1 Earnings Beat, Revenues Rise Y/Y

AXIS Capital Holdings Limited AXS posted first-quarter 2023 operating income of $2.33 per share, beating the Zacks Consensus Estimate by 23.2%. The bottom line increased 11.5% year over year.

The insurer’s results reflected higher net investment income as well as increased underwriting income and improved combined ratio. It was offset by higher expenses.

Axis Capital Holdings Limited Price, Consensus and EPS Surprise

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

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

Quarterly Operational Update

Total operating revenues of $1.3 billion missed the Zacks Consensus Estimate by 6.7%. The top line however rose 0.6% year over year on higher net investment income.

Net investment income increased 47.2% year over year to $134 million, primarily attributable to an increase in income from fixed maturities due to increased yields.

Total expenses in the quarter under review increased 1.9% year over year to $1.14 billion, attributable to higher interest expense and financing costs.

Pre-tax catastrophe and weather-related losses, and net of reinsurance were $38 million, primarily attributable to New Zealand floods, Cyclone Gabrielle and other weather-related events. This compares favorably with the year-ago loss of $60 million.

AXIS Capital’s underwriting income of $139.4 million increased 0.4% year over year. The combined ratio improved 50 basis points (bps) to 90.9.

Segment Results

Insurance: Gross premiums written improved 6.7% year over year to $1.5 billion, primarily attributable to increases in property, liability and cyber lines due to favorable rate changes and new business and accident and health lines. It was partially offset by a decrease in professional lines due to changing market dynamics. Net premiums earned increased 8.5% year over year to $816.4 million.

Underwriting income of $103.3 million increased 9.5% year over year. The combined ratio improved 20 bps to 87.3.

Reinsurance: Gross premiums written decreased 26.1% year over year to $966.3 million. The decrease was primarily due to exit from catastrophe and property lines of business in June 2022, non-renewals of marine business and the exit from the aviation business effective Jan 1, 2023, non-renewals of U.S. regional multi-line business and decrease in accident and health lines. It was partially offset by an increase in credit and surety lines driven by new business.

Net premiums earned decreased 18.1% year over year to $413.7 million.
Underwriting income of $36 million decreased 18.9% year over year. The combined ratio improved 110 bps year over year to 91.4.

Financial Update

AXIS Capital exited the first quarter with cash and cash equivalents of $816.9 million, up 8.7% over the level from 2022 end.

Debts were $1.3 billion at quarter-end, up 0.02% from the 2022-end level.

Book value per share increased 7.2% from 2022 end to $50.31 as of Mar 31, 2023, driven by net income and net unrealized gains reported in other comprehensive income (loss). It was partially offset by common share dividends declared.

Annualized return on average common equity was 16.2% in the first quarter, which expanded 420 bps year over year.

Capital Deployment

As of Mar 31, 2023, AXIS Capital had $100 million of remaining authorization under board-authorized share repurchase program for common share repurchases through Dec 31, 2023.

Zacks Rank

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

Performance of Some Other P&C Insurers

The Travelers Companies TRV reported first-quarter 2023 core income of $4.11 per share, which beat the Zacks Consensus Estimate of $3.64 and our estimate of $3.41. However, the bottom line decreased 2.6% year over year. Travelers’ total revenues increased 10% from the year-ago quarter to $9.7 billion, primarily driven by higher premiums. The top-line figure missed the Zacks Consensus Estimate of $9.8 billion.

Net written premiums increased 12% year over year to $9.4 billion, driven by strong growth across all three segments. The figure was higher than our estimate of $8.9 billion.

Catastrophe losses totaled $422 million, wider than $36 million pre-tax in the prior-year quarter. Catastrophe losses primarily resulted from severe wind and hail storms in multiple states. Travelers witnessed an underwriting gain of $501 million, down 12.9% year over year.  The combined ratio deteriorated 410 bps year over year to 95.4.

The Progressive Corporation’s PGR first-quarter 2023 earnings per share of 65 cents missed the Zacks Consensus Estimate of $1.44 as well as our estimate of $1.50. The bottom line declined 20.7% year over year.

Operating revenues were about $14.2 billion, up 15.8% year over year. This improvement was driven by a 15% increase in premiums, 18.5% higher fees and other revenues, a 7.1% increase in service revenues and 73.2% higher investment income. The top line exceeded the Zacks Consensus Estimate of $14.1 billion and our estimate of $13.1 billion.

Net premiums earned grew 15% to $13.5 billion and beat our estimate of $12.6 billion. The combined ratio — the percentage of premiums paid out as claims and expenses — deteriorated 450 bps from the prior-year quarter’s level to 99.

Chubb Limited CB reported first-quarter 2023 core operating income of $4.41 per share, which outpaced the Zacks Consensus Estimate by 0.9%. This outperformance was driven by higher premium revenues and improved net investment income. The bottom line improved 15.1% from the year-ago quarter. Net premiums written improved 16.6% year over year to $10.7 billion in the quarter. The figure was higher than our estimate of $10.1 billion. Net premiums earned rose 16.1% to $10.1 billion. The figure was higher than our estimate of $9.4 billion. Net investment income was $1.11 billion, up 34.7%. The figure was higher than our estimate of $957.3 million.

Property and casualty (P&C) underwriting income was $1.21 billion, down 5.5% from the year-ago quarter. Global P&C underwriting income, excluding Agriculture, was $1.2 billion, down 1.6%. Chubb incurred an after-tax catastrophe loss of $382 million, wider than the year-ago catastrophe loss of $290 million. The combined ratio deteriorated 200 bps on a year-over-year basis to 86.3% in the quarter under review.

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