Axis Capital Holdings: Strong Third Quarter

| About: Axis Capital (AXS)

Earnings momentum for Axis Capital Holdings Limited (NYSE:AXS) has advanced in the past week following strong third quarter results, including 61.4% positive earnings surprise. Moreover, with a price-to-book (P/B) ratio of just 0.87, this Zacks #2 Rank (Buy) insurance and reinsurance provider is a true value pick.

Strong Third Quarter

On October 31, Axis Capital reported third quarter 2012 operating earnings of $1.63 per share, which was 61.4% above the Zacks Consensus Estimate of $1.01 and 120.3% better than the year-ago result of 74 cents.

The quarter experienced a low level of catastrophe and large loss activity. Also, strong equity markets and the subsequent return from investments had a positive impact. Share buybacks boosted the bottom line.

Total revenue grossed $1.02 billion in the quarter, improving 7.4% from the year-ago quarter. The top line comfortably surpassed the Zacks Consensus Estimate by 4%.

Net premiums earned in the reported quarter were $862 million, up 3.7% year over year. Net investment income more than doubled to $103.6 million, largely driven by alternative investments.

Underwriting profit of $337 million in the quarter rebounded from a loss of $342 million in the year-ago quarter. The combined ratio improved 2550 basis points to 90.8%.

During the third quarter, AXIS Capital spent $179 million to buy back 5.2 million shares.

Return on equity was 15.2% in the quarter, compared with 7.8% in the year-ago quarter.

Positive Earnings Estimate Revisions

Following the solid quarter, the Zacks Consensus Estimate for 2012 increased 2.5% to $4.15 in the past 7 days, representing a year-over-year increase of approximately 429.7%. For 2013, the Zacks Consensus Estimate has moved higher by 2.7% to $3.80 over the same time frame.

Attractive Valuation

Along with a very attractive P/B multiple, Axis Capital has a price-to-earnings (P/E) ratio as low as 8.91 (a P/B ratio under 3.0 and P/E ratio below 15.0 indicate value).

Moreover, the company has a 1-year return on equity (ROE) of 8.6%, higher than its peer group average of 7.6%.

Headquartered in Pembroke, Bermuda, and founded in 2001, AXIS Capital Holdings Limited is a global provider of specialty lines insurance and treaty reinsurance. With a market capitalization of $4.3 billion and 1,100 full time employees, the company operates in Bermuda, the U.S., Singapore, Europe, Canada, Australia and Latin America. It competes with ACE Limited (NYSE:ACE) and Swiss Re Ltd among others.

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