XL Group plc
) is witnessing solid bottom-line growth fueled by its robust
operational strategies. Moreover, the company is also engaged in
enhancing its shareholders' value through consistent share
repurchase and dividend payments.
XL Group remains focused on those lines of businesses within its
insurance and reinsurance operations that provide the best return
on capital over the pricing cycle. To refine its business mix, XL
Group is deploying capital in businesses with lower loss ratios,
which is resulting in margin expansion.
In addition, XL Group's inorganic growth story also remains
impressive. Its subsidiary - XL Reinsurance America Inc. acquired
crop insurance provider Global Ag Insurance Services to
capitalize on the expertise of Global Ag in western U.S.
Moreover, the company is committed to rewarding it shareholders
with more dividend and buying back of shares, that in turn lower
the share count leading to greater earnings per share. In
February this year, the board of directors approved a 14.3% hike
in its quarterly dividend to 16 cents per share The board also
approved a buyback program, authorizing XL Group to repurchase
shares worth $1 billion. The current program includes about $200
million worth of shares remaining from the previous
On the flip side, net investment income at XL Group has been on a
declining trend for the past few years. With performance closely
linked to credit markets that remain volatile, the exposure to
these assets can further cause volatility in investment earnings.
Moreover, XL Group's operating expenses have been on a rising
trend over the last few years. Higher net losses and loss expense
as well as higher operating expenses induced the increase. If
operating expenses continue to escalate, it might take a toll on
operating margin expansion.
In addition, exposure to catastrophe events remains a headwind
for property and casualty insurers and XL Group is no exception
in this regard.
With respect to earnings performance, XL Group has delivered
positive earnings surprises in three of the last four quarters,
with an average beat of 18.3%. A benign cat environment and
higher net income from investment funds and investment manager
operating affiliates continue to aid the upside.
Meanwhile, XL Group continues to witness estimate revisions. Over
the last 30 days, the Zacks Consensus Estimate for 2014 increased
by a penny to $3.00. The expected long-term earnings growth for
the stock is 5.7%.
XL Group currently carries a Zacks Rank #3 (Hold). Some
better-ranked property and casualty insurers worth considering
AmTrust Financial Services, Inc
Atlas Financial Holdings, Inc
). All these stocks sport a Zacks Rank #1 (Strong Buy).
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