XL Group plc
) provided its estimates for loss from catastrophes for the third
quarter. According to the company, pretax loss from catastrophes
in the third quarter of 2013, net of reinsurance and
reinstatement premiums, will likely be approximately $60 million.
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The Reinsurance segment of XL Group will incur majority of the
estimated loss. Losses stemmed from the hailstorms in Germany and
France in late July. The loss will thus be a drag on the
underwriting results of the segment. The last quarter also
experienced 28% decline in underwriting income.
According to media reports, reinsurance firm Swiss Re estimated
industry loss from the cat event to range between $2 billion and
$2.7 billion, while French reinsurer SCOR estimated the loss to
be about EUR 3 million. Yet another catastrophe modeling firm,
AIR Worldwide projected the industry to suffer as much as $2
billion in losses.
In the last reported quarter, XL Group's underwriting profit
declined 28.8% year over year with combined ratio deteriorating
300 basis points year over year. The downside resulted from
catastrophe losses, which included flooding in Europe, Argentina
and Canada, and tornadoes and hailstorms in the United States. We
expect the third quarter also to face the brunt of catastrophes,
which would weigh on its underwriting results.
Nevertheless, XL Group continues to deliver positive earnings
surprises. The last reported quarter marked the sixth consecutive
quarter of positive surprises. We expect the trend to continue
riding on the strength of new business initiatives, pricing
improvements across most lines, and conservative underwriting
practices, among others. The Zacks Consensus Estimate for the
current quarter is pegged at 45 cents, reflecting a
year-over-year decline of 25%.
Currently, XL Group carries a Zacks Rank #3 (Hold). Better-placed
property and casualty insurers
Cincinnati Financial Corp.
CNA Financial Corporation
), carrying a Zacks Rank #1 (Strong Buy), are worth