AXIS Capital (AXS)

Global specialty insurer AXIS Capital Holdings Limited (NYSE:AXS) reported revenue ahead of Wall Streets expectations in Q3 CY2025, with sales up 3.9% year on year to $1.67 billion. Its non-GAAP profit of $3.25 per share was 11.5% above analysts’ consensus estimates.

Company Overview

Founded in the aftermath of the 9/11 attacks when insurance capacity was scarce, AXIS Capital Holdings Limited (NYSE:AXS) is a global specialty insurer and reinsurer that provides coverage for complex risks across property, liability, professional lines, cyber, and other specialty markets.

This is a cyclical industry, and the sector benefits when there is 'hard market', characterized by strong premium rate increases that outpace loss and cost inflation, resulting in robust underwriting margins. The opposite is true in a 'soft market'. Interest rates also matter, as they determine the yields earned on fixed-income portfolios. The primary headwind remains the immense and concentrated exposure to large-scale catastrophe losses, as the growing impact of climate change challenges traditional risk models and creates significant earnings volatility. Additionally, they face the risk of adverse prior-year reserve development, where claims prove more costly than anticipated, while the eventual influx of new capital from alternative sources threatens to soften the market and compress future returns.

AXIS Capital's main competitors include other global specialty insurers and reinsurers such as Chubb Limited (NYSE:CB), American International Group (NYSE:AIG), Arch Capital Group (NASDAQ:ACGL), and Everest Group (NYSE:EG), as well as Lloyd's of London syndicates and Munich Re (ETR:MUV2).

Insurers earn revenue three ways. The core insurance business itself, often called underwriting and represented in the income statement as premiums earned, is one way. Investment income from investing the “float” (premiums collected upfront not yet paid out as claims) in assets such as fixed-income assets and equities is the second way. Fees from various sources such as policy administration, annuities, or other value-added services is the third. Regrettably, AXIS Capital’s revenue grew at a tepid 5.1% compounded annual growth rate over the last five years. This was below our standard for the insurance sector and is a rough starting point for our analysis.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. AXIS Capital’s annualized revenue growth of 6% over the last two years aligns with its five-year trend, suggesting its demand was consistently weak. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, AXIS Capital reported modest year-on-year revenue growth of 3.9% but beat Wall Street’s estimates by 1.4%.

Net premiums earned made up 90.7% of the company’s total revenue during the last five years, meaning AXIS Capital lives and dies by its underwriting activities because non-insurance operations barely move the needle.

Markets consistently prioritize net premiums earned growth over investment and fee income, recognizing its superior quality as a core indicator of the company’s underwriting success and market penetration.

When insurers sell policies, they protect themselves from extremely large losses or an outsized accumulation of losses with reinsurance (insurance for insurance companies). Net premiums earned are therefore net of what’s ceded to reinsurers as a risk mitigation and transfer strategy.

AXIS Capital’s net premiums earned has grown at a 5% annualized rate over the last five years, worse than the broader insurance industry and in line with its total revenue.

When analyzing AXIS Capital’s net premiums earned over the last two years, we can see that growth decelerated to 3.8% annually. Since two-year net premiums earned grew slower than total revenue over this period, it’s implied that other line items such as investment income grew at a faster rate. These extra revenue streams are important to the bottom line, yet their performance can be inconsistent. Some firms have been more successful and consistent in managing their float, but sharp fluctuations in the fixed income and equity markets can dramatically affect short-term results.

In Q3, AXIS Capital produced $1.45 billion of net premiums earned, up 6.2% year on year and in line with Wall Street Consensus estimates.

Revenue growth is one major determinant of business quality, and the efficiency of operations is another. For insurance companies, we look at the combined ratio rather than the operating expenses and margins that define sectors such as consumer, tech, and industrials.

The combined ratio is:

• The costs of underwriting (salaries, commissions, overhead) + what an insurer pays out in claims, all divided by net premiums earned

If a company boasts a combined ratio under 100%, it is underwriting profitably. If above 100%, it is losing money on its core operations of selling insurance policies.

Given the calculation, a lower expense ratio is better. Over the last five years, AXIS Capital’s combined ratio has swelled by 20.2 percentage points, going from 99% to 89.5%. It has also improved by 2.2 percentage points on a two-year basis, showing its expenses have consistently grown at a slower rate than revenue. This typically signals prudent management.

In Q3, AXIS Capital’s combined ratio was 89.4%, beating analysts’ expectations by 162.5 basis points (100 basis points = 1 percentage point). This result was 3.7 percentage points better than the same quarter last year.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

AXIS Capital’s full-year EPS flipped from negative to positive over the last five years. This is encouraging and shows it’s at a critical moment in its life.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

AXIS Capital’s EPS grew at an unimpressive 19.7% compounded annual growth rate over the last two years. On the bright side, this performance was higher than its 6% annualized revenue growth and tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into AXIS Capital’s earnings to better understand the drivers of its performance. AXIS Capital’s combined ratio has improved over the last two yearswhile its share count has shrunk 8.7%. Improving profitability and share buybacks are positive signs for shareholders as they juice EPS growth relative to revenue growth.

In Q3, AXIS Capital reported adjusted EPS of $3.25, up from $2.71 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects AXIS Capital’s full-year EPS of $12.68 to shrink by 2.2%.

Insurers are balance sheet businesses, collecting premiums upfront and paying out claims over time. Premiums collected but not yet paid out, often referred to as the float, are invested and create an asset base supported by a liability structure. Book value per share (BVPS) captures this dynamic by measuring these assets (investment portfolio, cash, reinsurance recoverables) less liabilities (claim reserves, debt, future policy benefits). BVPS is essentially the residual value for shareholders.

We therefore consider BVPS very important to track for insurers and a metric that sheds light on business quality. While other (and more commonly known) per-share metrics like EPS can sometimes be lumpy due to reserve releases or one-time items and can be managed or skewed while still following accounting rules, BVPS reflects long-term capital growth and is harder to manipulate.

AXIS Capital’s BVPS grew at a tepid 5.7% annual clip over the last five years. However, BVPS growth has accelerated recently, growing by 18.5% annually over the last two years from $52.60 to $73.82 per share.

Over the next 12 months, Consensus estimates call for AXIS Capital’s BVPS to grow by 14.4% to $73.96, top-notch growth rate.

The debt-to-equity ratio is a widely used measure to assess a company's balance sheet health. A higher ratio means that a business aggressively financed its growth with debt. This can result in higher earnings (if the borrowed funds are invested profitably) but also increases risk.

If debt levels are too high, there could be difficulties in meeting obligations, especially during economic downturns or periods of rising interest rates if the debt has variable-rate payments.

AXIS Capital currently has $1.43 billion of debt and $6.37 billion of shareholder's equity on its balance sheet, and over the past four quarters, has averaged a debt-to-equity ratio of 0.2×. We think this is safe and raises no red flags. In general, we’re comfortable with any ratio below 1.0× for an insurance business. Anything below 0.5× is a bonus.

Return on Equity, or ROE, ties everything together and is a vital metric. It tells us how much profit the insurer generates for each dollar of shareholder equity entrusted to management. Over a long period, insurers with higher ROEs tend to compound shareholder wealth faster through retained earnings, buybacks, and dividends.

Over the last five years, AXIS Capital has averaged an ROE of 11%, uninspiring for a company operating in a sector where the average shakes out around 12.5%.

It was good to see AXIS Capital beat analysts’ EPS expectations this quarter. We were also happy its revenue narrowly outperformed Wall Street’s estimates. Overall, this print had some key positives. The stock remained flat at $89 immediately following the results.

Updated: December 4, 2025 at 11:31 PM EST

When considering an investment in AXIS Capital, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

AXIS Capital doesn’t top our investment wishlist, but we understand that it’s not a bad business. Although its revenue growth was uninspiring over the last five years, its growth over the next 12 months is expected to be higher. And while AXIS Capital’s projected EPS for the next year is lacking, its improving combined ratio shows the business has become more productive.

AXIS Capital’s P/B ratio based on the next 12 months is 1.3x. This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $116.20 on the company (compared to the current share price of $99.48).