A.M. Best has reiterated the issuer credit ratings (ICR) of ‘bbb+’ and all the existing debt ratings of AXIS Capital Holdings Limited (AXS). The outlook was however upgraded to positive from stable. The rating agency also reiterated the financial strength rating (FSR) of A (Excellent) and ICR of ‘a+’ of AXIS Specialty Limited (subsidiary of AXIS Capital Holdings) and its operating affiliates. The outlook was upgraded to positive from stable.
The rating affirmations came on the back of solid operating performance, superior risk based capitalization, effective risk management and strong management team. The solid operating performance was attributable to continued underwriting profitability as well as a balanced risk profile.
Further, the company’s book of business primarily comprises of short to medium-tail lines with emphasis on specialty risks including property, marine and political risk, and property catastrophe coverages. AXIS Capital is thus strongly positioned based on its diversified offerings.
However, the company’s significant exposure to catastrophe losses and the weak casualty market conditions, to some extent dwarfs the positives. AXIS Capital in the third quarter suffered catastrophe losses, which totaled $91 million, net of reinstatement premiums.
Moreover, the rating agency notched down the FSR to B++ (Good) from A (Excellent) and ICR to ‘bbb+’ from ‘a+’ of AXIS Specialty Insurance Company, an insurance subsidiary with outlook for both ratings at stable. However, prompted by management’s intentions to stop writing new business, A.M. Best withdrew its rating.
AXIS Capital Holdings missed the third quarter Zacks Consensus Estimate by 2 cents and year ago earnings by a substantial 16 cents. Higher premiums were more than offset by lower investment income and elevated expenses inducing lower earnings in the quarter.
There was no earnings momentum on the stock over the last 7 days. The rating affirmation with an upward revision in outlook might encourage analysts to pull their estimates upward.
We retain our long term Neutral recommendation on AXIS Capital Holdings Limited. The quantitative Zacks #3 Rank (short-term Hold rating) on the stock indicates no clear directional pressure on the shares over the near term.
Headquartered in Pembroke, Bermuda, AXIS Capital is a global provider of specialty lines of insurance and treaty reinsurance. It competes with ACE Limited (ACE).
