AXIS Capital Hikes Dividend - Analyst Blog

As part of its concerted effort to enhance shareholder value, the board of directors of AXIS Capital Holdings Limited (AXS) approved a 9.5% increase in its quarterly dividend. The increased dividend of 23 cents will be paid on January 18, 2011, to shareholders of record as of December 31, 2010. The board increased the dividend from 21 cents paid in October, 2010.

The dividend hike was primarily supported by the company's strong balance sheet and its ability to generate healthy cash flow. AXIS Capital ended third-quarter 2010 with cash and cash equivalents of $1.1 billion. Cash from operations for the first nine months of 2010 totaled $866.9 million.

Additionally, the board approved a dividend of 45.3 cents per Series A 7.25% Preferred Share payable on January 18, 2011, to shareholders of record on December 31, 2010. A dividend of $1.875 per Series B 7.5% Preferred Share, also approved by the board, is due for payment on March 1, 2011, to shareholders of record as of February 15, 2011.

AXIS Capital has remained focused on increasing its returns to shareholders, be it by dividend payments and/or share repurchases. During the third quarter, AXIS Capital spent $13 million to buy back 0.4 million common shares at an average price of $29.65. The company's board of directors has again authorized a new $750 million common share repurchase program.

In November, ACE Limited (ACE), the closest peer to AXIS Capital, approved a share buyback program. ACE Limited is authorized to repurchase up to $600 million of its common shares through December 31, 2012.

During the third quarter of 2010, AXIS Capital reported operating income of $1.22 per share, beating the Zacks Consensus Estimate by 6 cents and year-ago results by 22 cents. The Zacks Consensus Estimate for fourth-quarter 2010 is $1.20 per share. For full years 2010 and 2011, the Zacks Consensus Estimates are, respectively, $4.40 per share and $4.34 per share.

We believe conservative underwriting practices, a solid capital position, and positive ratings from ratings agencies as well as share buyback programs and dividend hikes position AXIS Capital in a favorable light going forward.

However, the low investment yield environment as well as a challenging property and casualty market keeps us on the sidelines.

We maintain our “Neutral” recommendation on AXIS Capital over the long term. The quantitative Zacks #3 Rank (short term Hold rating) on the stock indicates no clear directional pressure on the stock over the near term.

Headquartered in Pembroke, Bermuda, AXIS Capital is a global provider of specialty lines of insurance and treaty reinsurance.

 
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