AXS vs. ACGL: Which P&C Insurance Stock Should You Hold Now?

The Zacks Property and Casualty (P&C) Insurance industry has been benefiting from Solid retention, exposure growth across business lines and improved pricing, driving higher premiums and helping insurers maintain profitability. The industry remains focused on personalized offerings to enhance customer experience, leveraging digitalization. However, catastrophic activities, both natural and man-made, might have weighed on underwriting profit.

Here we focus on two property and casualty insurers, namely Axis Capital Holdings Limited AXS and Arch Capital Group Ltd. ACGL.

According to CoreLogic, the estimate for insurance market losses across residential and commercial exposures for the Eaton and Palisades Fires in Los Angeles is between $35 billion and $45 billion. Per Moody’s RMS Event Response, the insured losses for the January 2025 Los Angeles firestorm events are projected between $20 billion and $30 billion.

Let’s delve deeper into the fundamentals of these stocks to ascertain which P&C insurer is better positioned at the moment.            

Factors to Consider for AXS

AXIS Capital is a global specialty underwriter and has been witnessing an increase in its top line over a considerable period of time on the back of higher net premiums earned and higher net investment income. 

Its well-performing Insurance segment largely contributes to improving premiums. Expansion of its underwriting and product capabilities and repositioning of the portfolio, carried out over the past three years, will continue to drive its performance. In the Insurance segment, with respect to property, AXIS continues to witness favorable market conditions in each of the platforms. The company expects positive conditions to be sustained across all of the property lines. Rates increased in excess of trends in both its Insurance and Reinsurance segments.

AXIS Capital boasts a leading specialty insurer and global reinsurer aiming for leadership in specialty risks. The insurer remains focused on growth in Marine Cargo, Cyber and Renewable Energy, which is likely to provide strong double-digit return on equity (ROE) opportunities. Its return on equity of 19% is better than the industry average of 7.8%.

AXIS Capital’s net investment income continues to deliver strong results, driven by an increase in fixed maturity assets and yields, higher returns from private equity funds, other privately held investments and real estate funds. The metric witnessed a four-year CAGR of 21.4%.

AXIS Capital continues to boost shareholder value through stock buybacks and dividend hikes. The insurer has been able to approve 18 consecutive dividend raises at a ten-year CAGR (2015 – 2024) of 4.2%, driven by solid earnings. It boasts one of the highest dividend yields among its peers.

Factors to Consider for ACGL

Arch Capital remains focused on writing specialty lines of insurance and reinsurance and is well-positioned to provide a full range of property, casualty and mortgage insurance and reinsurance lines.

Arch Capital has been displaying a brilliant track record of net premiums written. The metric witnessed a four-year CAGR of 20.6%. Consistent premium growth across its Insurance and Reinsurance segments has been boosting better results, enabling the company to maintain sustained revenue growth over the past few years. 

The Insurance and Reinsurance segments should continue to witness significant growth from increases in most lines of business, due in part to rate increases, new business opportunities and growth in existing accounts. Arch Capital expects further growth going forward. 

Arch Capital has been witnessing substantial improvement in net investment income over the last few years. The metric witnessed a four-year CAGR of 30.2%. The company believes that its growing investment portfolio keeps providing meaningful tailwinds to its bottom line.
Rising investment yields and the growth of investable assets from strong operating cash flows also contributed to the growth. Net cash flow from operations has helped grow the invested asset base and contributed to the increase in net investment income. 

The P&C insurer boasts a robust capital position over the years, reflecting its financial flexibility. It has also been strengthening its balance sheet, with debt remaining flat and the cash balance improving from the 2024 end level. A solid liquidity position should continue to support Arch Capital in meeting any short-term obligations as well as aid in capital deployment, including the distribution of wealth to shareholders. Its return on equity of 15.7% is better than the industry average.

Estimates for AXS and ACGL

The Zacks Consensus Estimate for AXS’ 2025 revenues and EPS implies a year-over-year increase of 7.8% and 3.4%, respectively. EPS estimates have moved 2.5% northward over the past 30 days. 

On the other hand, the Zacks Consensus Estimate for ACGL’s 2025 revenues implies a year-over-year increase of 13.5%, while the same for EPS indicates a decline of 14.7% year over year. EPS estimates have moved 0.8% northward over the past 30 days.

Are AXS and ACGL Shares Expensive?

AXIS Capital is trading at a price-to-book multiple of 1.49, above its median of 1.06 over the last five years. Arch Capital’s price-to-book multiple sits at 1.69, above its median of 1.64 over the last five years.

Conclusion

AXS remains poised to gain from its Specialty Insurance and Reinsurance business, growth in Marine Cargo, Cyber and Renewable Energy, as well as higher returns from private equity funds and financial flexibility. ACGL is set to gain specialty lines of insurance and reinsurance, growth from increases in most lines of business, due in part to rate increases, new business opportunities and a growing investment portfolio.

Though both these P&C insurers engage in share buybacks, Arch Capital does not pay dividends. On the other hand, AXIS Capital has a solid track record of increasing dividends and its dividend yield is currently 1.7%, which is way above the industry average of 0.2%. This makes the stock an attractive pick for yield-seeking investors.

On the basis of return on equity, which reflects a company’s efficiency in generating profit from shareholders' equity, as well as gives a clear picture of the company's financial health, AXS scores higher than ACGL.

AXIS Capital has a VGM Score of A, while Arch Capital carries a VGM Score of B. Also, AXIS Capital has a Value Score of A, while Arch Capital carries a Value Score of B.

AXS shares have gained 14.5% year to date and outperformed the industry, while ACGL has gained 0.7% and underperformed the industry. Though both these stocks carry a Zacks Rank #3 (Hold), AXIS Capital has an edge over Arch Capital. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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