Axis Capital Reports Mixed Earnings

Axis Capital AXS reported Q3 operating EPS of $1.22, above consensus of $1.14, but below our estimate of $1.35. The downside versus Wells Fargo's estimate reflects foreign exchange losses of $25 million. Wells Fargo is lowering 2010 EPS estimate to $4.45 (from $4.58) to account for the downside. The 2011 EPS estimate and valuation range is unchanged at this time. It does not see AXS shares reacting much to earnings. Gross premiums written declined by 3.2% in the Q3, below our 4.8% growth estimate and down from 2.8% growth in the Q2. Net premiums were up though, with growth of 5.2% as AXS retained more business in the quarter. In looking at the segments growth in insurance offset the decline in reinsurance business. Net investment income came in at $111.8 million above our $101.1 million estimate and $82.6 million in the Q2. Results benefited from income from other investments of $25 million in the quarter versus a $2 million loss in the Q2. AXS closed Monday at $34.16