AXIS Capital (AXS) Provides Third-Quarter Cat Loss Estimates

AXIS Capital Holdings Ltd. AXS has recently announced its preliminary catastrophe loss estimate of $578 million, net of tax and estimated recoveries from reinsurance and retrocessional covers including the impact of estimated reinstatement premiums for third-quarter 2017. These losses stemmed from Hurricanes Harvey, Irma, Maria and the Mexican tremors.

While the insurer expects its insurance segment to incur cat losses of $315 million, the reinsurance segment is anticipated to incur $302 million in losses.

These estimates are inclusive of the loss expectations from Novae Group plc, acquired by the company on Oct 2, 2017. Axis Capital has announced Novae’s expected catastrophe loss estimates of $60 million, net of estimated recoveries from reinsurance and are inclusive of the impact of estimated reinstatement premiums.

Being a property and casualty insurer, AXIS Capital is highly exposed to losses resulting from natural disasters, man-made catastrophes and other catastrophic events. Underwriting results have thus been affected for years now. For the first half of 2017, AXIS Capital incurred $76 million in catastrophe loss, narrower than the year-ago loss of $63 million. Underwriting income deteriorated 33% with 260 basis points contracting in its combined ratio.

Exposure to catastrophe events has always been a concern for the company because of the uncertainty of their occurrences as well as the magnitude of their impact.  The company maintains comprehensive catastrophe reinsurance coverage for its insurance segment, comprising facultative reinsurance, property per risk treaty reinsurance and property catastrophe treaty reinsurance. However, irrespective of the techniques deployed by the company to ease off catastrophes, exposure to weather-related calamities makes its earnings volatile.

Other insurers too have come up with their loss estimates. The Navigators Group, Inc. NAVG estimates to incur catastrophe loss of $50-$70 million pre-tax ($33-$45 million after-tax) in the third quarter. XL Group Ltd. XL estimates catastrophe losses of $1.48 billion pre-tax or $1.35 billion post-tax. The Travelers Companies, Inc. TRV predicts pre-tax catastrophe loss from Harvey between $375 million and $750 million or $245 million and $490 million after-tax. 

Zacks Rank and Share Price Movement

Axis Capital Holdings carries a Zacks Rank #4 (Sell). Shares of the company have massively underperformed the industry in a year’s time due to natural disasters. While the stock has gained 1.5%, the industry has registered an increase of 25.8%. Diversified product offerings and strategic acquisitions should continue to drive its shares higher. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

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