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Why Should You Retain Axis Capital (AXS) in Your Portfolio?
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AXIS Capital Holdings Limited (AXS - Free Report) is well poised for growth, given its new business and favorable rate change, higher income from fixed maturities and a solid solvency level.
The company has a decent surprise history, beating estimates in three of the last four quarters, with the average surprise being 21.93%.
The Insurance segment of Axis Capital is well poised to gain from solid performance across its professional lines, liability and property lines driven by new business and favorable rate change and an increase in credit and political risk due to some premium adjustments.
In 2020, the company witnessed consolidated insurance business average rate increases of more than double the average rate increase year over year.
Double-digit growth in core insurance lines of business supported by strong rate increases across virtually every line of business is expected to continue through 2021.
Reinsurance pricing gained some momentum during the January renewal season and the insurer looks forward to continued improvement through the remainder of 2021.
Considering higher income from fixed maturities, larger allocation of the portfolio to fixed maturities and higher returns from collateralized loan obligations (CLO) equities, net investment income are likely to improve amid the current low interest rate environment.
Disciplined underwriting has driven consistent improvement in the loss ratio (the ratio of losses to premiums earned). Also, enhanced pricing, improved terms, lower limits coupled with greater stability, portfolio construction and improved loss experienced in accident and health, agriculture and engineering lines as well as the impact of changes in business mix are expected to drive improved loss ratios coupled with greater stability.
Its solvency level is impressive as well. Its cash flow from operations rose over the last few years, which reflects its solid capital position. Cash flow from operating activities in 2020 was $344 million, which surged 72.9% from the year-ago period’s levels. As of Dec 31, 2020, it had cash and cash equivalents worth $1.5 billion, higher than its debt level of $1.3 billion.
The company has increased its dividend for 17 straight years growing at a seven-year (2014-2021) CAGR of 6.5%. Its dividend yield is 3.3%, which is better than the industry average of 0.6%.
Shares of this Zacks Rank #3 (Hold) property and casualty insurer have rallied 45% in the past year compared with the industry’s increase of 49%.
However, being a property and casualty insurer, it is always exposed to cat activities, the occurrence of which imparts volatility to its results.
The Zacks Consensus Estimate for 2021 and 2022 earnings per share is pegged at $4.26 and $4.55, indicating year-over-year increase of nearly 304.8% and 6.8%, respectively.
Alleghany’s bottom line surpassed estimates in two of the last four quarters and missed in the other two, the average beat being 34.08%.
Cincinnati Financial surpassed earnings estimates in two of the last four quarters, with the average surprise being 4.10%.
First American Financial’s bottom line surpassed estimates in three of the last four quarters and missed in one, the average beat being 15.86%.
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Why Should You Retain Axis Capital (AXS) in Your Portfolio?
AXIS Capital Holdings Limited (AXS - Free Report) is well poised for growth, given its new business and favorable rate change, higher income from fixed maturities and a solid solvency level.
The company has a decent surprise history, beating estimates in three of the last four quarters, with the average surprise being 21.93%.
The Insurance segment of Axis Capital is well poised to gain from solid performance across its professional lines, liability and property lines driven by new business and favorable rate change and an increase in credit and political risk due to some premium adjustments.
In 2020, the company witnessed consolidated insurance business average rate increases of more than double the average rate increase year over year.
Double-digit growth in core insurance lines of business supported by strong rate increases across virtually every line of business is expected to continue through 2021.
Reinsurance pricing gained some momentum during the January renewal season and the insurer looks forward to continued improvement through the remainder of 2021.
Considering higher income from fixed maturities, larger allocation of the portfolio to fixed maturities and higher returns from collateralized loan obligations (CLO) equities, net investment income are likely to improve amid the current low interest rate environment.
Disciplined underwriting has driven consistent improvement in the loss ratio (the ratio of losses to premiums earned). Also, enhanced pricing, improved terms, lower limits coupled with greater stability, portfolio construction and improved loss experienced in accident and health, agriculture and engineering lines as well as the impact of changes in business mix are expected to drive improved loss ratios coupled with greater stability.
Its solvency level is impressive as well. Its cash flow from operations rose over the last few years, which reflects its solid capital position. Cash flow from operating activities in 2020 was $344 million, which surged 72.9% from the year-ago period’s levels. As of Dec 31, 2020, it had cash and cash equivalents worth $1.5 billion, higher than its debt level of $1.3 billion.
The company has increased its dividend for 17 straight years growing at a seven-year (2014-2021) CAGR of 6.5%. Its dividend yield is 3.3%, which is better than the industry average of 0.6%.
Shares of this Zacks Rank #3 (Hold) property and casualty insurer have rallied 45% in the past year compared with the industry’s increase of 49%.
However, being a property and casualty insurer, it is always exposed to cat activities, the occurrence of which imparts volatility to its results.
The Zacks Consensus Estimate for 2021 and 2022 earnings per share is pegged at $4.26 and $4.55, indicating year-over-year increase of nearly 304.8% and 6.8%, respectively.
Stocks to Consider
Some better-ranked stocks in the insurance space include Alleghany , Cincinnati Financial (CINF - Free Report) and First American Financial (FAF - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Alleghany’s bottom line surpassed estimates in two of the last four quarters and missed in the other two, the average beat being 34.08%.
Cincinnati Financial surpassed earnings estimates in two of the last four quarters, with the average surprise being 4.10%.
First American Financial’s bottom line surpassed estimates in three of the last four quarters and missed in one, the average beat being 15.86%.
Zacks Top 10 Stocks for 2021
In addition to the stocks discussed above, would you like to know about our 10 best buy-and-hold tickers for the entirety of 2021?
Last year's 2020 Zacks Top 10 Stocks portfolio returned gains as high as +386.8%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2021 today >>