AXS -Axis Capital

[CLM5]

Didn't see a thread on Axis Capital, so figured I'd start one. Has anybody looked at this? Conservatively managed insurer/reinsurer with a historically good CR, history of reserve releases, has compounded book at double digit rates over the past decade, and is trading at around .9x tangible book. Trades at a big discount to all of its comparables, and historical averages, even though it seems to be a high quality insurer.

 

Seems to me that most of the hit has been due to the cat losses. It's never made sense to me as to why TBV valuations like this come down after cat losses, considering the most likely outcome is a hardening of the market.

 

Thoughts anyone? Does anyone know the management well?

[lemsinge]

I've looked at the name. While this might not be anything big, it probably has strong potential if they can get a more attractive ROE and begin to grow their book value at a higher pace. It seems that there is a path to a lower expense ratio in the coming quarters, and, with a loss ratio similar to previous quarters, Axis could probably see low to mid-teens ROE instead of the typical ~8% in the past.

 

3Q17 expense ratio was at 31% versus 35% in prior quarters. If this holds, and loss ratio reverts back to 60% there is a lot of bottom-line growth that the street is completely ignoring.

 

I think the best way to get a grasp on management is by digging into the recent novae acquisition (which I have yet to do), as it seems that they have some issues of their own (Ogden rate change and generally mild to poor performance).

 

Happy to keep discussing this as I plan on digging deeper

[walkie518]

I have followed this company for a long time. 

 

They are a solid group, but when Charman was fired, the company was never quite the same. 

 

That said, the recent acquisition of a firm with Lloyd's access appears to be similar to what Charman did after leaving at Endurance Specialty. 

 

Endurance Specialty was a specialty insurer, over time they acquired and acquired then eventually merged with Montpelier.  (https://finance.yahoo.com/news/endurance-announces-completion-acquisition-montpelier-202901824.html)

 

After the Montpelier merger, Endurance had its foot in the door at Lloyd's and after that the value of the firm became more apparent and a Japanese firm bought the company. 

 

I think AXS might be on a similar path.  Maybe they are aiming to be acquired or to merge with another firm, maybe they are looking to hardening markets for the next score.

 

The reinsurance market has certainly been rattled from this past hurricane season as well as CA fires. 

 

I would read through the filings and think a little about RNR vis-a-vis if reinsurance is of interest.