AXIS Capital Ramping Up Global Business: Time To Hold?

On Jun 20, 2016, we issued an updated research report on AXIS Capital Holdings Limited (NYSE:AXS) .

New business opportunities across AXIS Capital’s lines of business and geography have been helping it to write more business and in turn expedite growth. Underwriting operations in China that concentrate on the treaty reinsurance business on Lloyd's China, the establishment of a representative office in Dubai and AXIS Healthcare’s foray into the nursing home professional liability market are among other endeavors that the company undertook to ramp up its growth profile and boost shareholder value.

AXIS Capital has chalked out plans to capitalize on opportunities by utilizing its resources prudently to enhance efficiencies and better serve clients and brokers across the globe. To that end, the company shut down its Australian retail insurance operations and incurred reorganization and related expenses of $46 million and additional corporate expenses of $5 million. Nonetheless, this would result in annual run-rate pre-tax cost savings of about $30 million to be greatly realized in 2016.

Riding on its operational strength, AXIS Capital has been rewarding its investors with dividend hikes and share buybacks. The company raised dividend by 21% in the fourth quarter of 2015. Moreover, as of Apr 26, 2016, the company had $625 million under its authorization. AXIS intends to pay back at least 100% of annual operating earnings to its shareholders in the form of common dividend and share repurchase unless the company finds other growth avenues to invest the same.

However, being a property and casualty insurer, the company is exposed to catastrophe events that weigh on its underwriting results. Escalating expenses weighing on margin expansion is also a concern. Also, dependence on a limited number of brokers for revenues keeps us cautious.

With respect to the earnings trend, this Zacks Rank #3 (Hold) insurer delivered positive surprises in two of the last four quarters. Yet it has an average earnings miss of 8.4%.

The Zacks Consensus Estimate went south by 2% to $4.05 for 2016 while the same increased 0.4% to $4.54 for 2017 over the last eight weeks.

Nonetheless, AXIS Capital continues to build on its Specialty Insurance, Reinsurance, and Accident and Health to pave way for long-term growth. The expected long-term earnings growth is currently pegged at 8.5%.

Stocks to Consider

Some better-ranked property and casualty insurers are Markel Corp (NYSE:MKL) , National General Holdings Corp. (NASDAQ:NGHC) and Alleghany Corporation (NYSE:Y) . Each of these stocks carries a Zacks Rank #1 (Strong Buy).

AXIS CAP HLDGS (AXS): Free Stock Analysis Report

MARKEL CORP (MKL): Free Stock Analysis Report

ALLEGHANY CORP (Y): Free Stock Analysis Report

NATIONAL GNL HL (NGHC): Free Stock Analysis Report

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