AXIS Capital (AXS) To Incur $104 Million Q2 Catastrophe Loss

AXIS Capital Holdings Limited (NYSE:AXS) estimates catastrophe loss of $104 million, net of estimated recoveries from reinsurance and including the impact of estimated reinstatement premiums, for the second quarter of 2016. The company expects its Reinsurance segment to incur the majority of the loss.

The loss stemmed from 20 different events across the globe. Wildfires at Fort McMurray in Canada, earthquakes in Japan and Ecuador, and floods in Europe were responsible for loss worth $71 million. Hailstorms in Texas as well as other weather-related U.S. events led to $33 million in loss.

While the Reinsurance segment will bear 60.6% of the catastrophe loss, the Insurance segment will incur the remaining 39.4% loss stemming from weather-related events in the U.S. The catastrophe loss is expected to weigh on the underwriting result in the second quarter with both underwriting income and combined ratio deteriorating.

The Zacks Consensus Estimate for the second quarter is currently pegged at 87 cents, which translates to a year-over-year decline of 6.7%. We expect the estimates to move down as analysts incorporate the impact of the catastrophe loss.

In the last quarter, AXIS Capital’s combined ratio improved 180 basis points year over year. This was due to a decrease in loss expense ratio and general and administrative expense ratio, partially offset by an increase in acquisition cost ratio.

AXIS Capital is scheduled to announce its second-quarter results on Jul 26. However, our proven model does not conclusively show that the company will beat on earnings. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. Although AXIS Capital carries a favorable Zacks Rank #3, its Earnings ESP of -5.75% makes prediction difficult.

According to AXIS Capital, the insurance industry had to incur catastrophe loss of $19 billion in the second quarter. While the Fort McMurray wildfires, the Japanese and Ecuadorian earthquakes and the European floods resulted in loss of $11 billion, the multiple weather-related events in the U.S. were responsible for loss of $8 billion.

Other insurers too reported their catastrophe loss estimates for the second quarter. The Navigators Group, Inc. (NASDAQ:NAVG) estimates catastrophe loss to be around $12 million, Aspen Insurance Holdings Ltd. (NYSE:AHL) anticipates catastrophe loss of approximately $65 million and Blue Capital Reinsurance Holdings Ltd. (NYSE:BCRH) loss estimates stand at around $5.1 million.