A.M. Best Co. reiterated the issuer credit ratings ("ICR") of
'bbb' of
XL Group plc
(
XL
). Concurrently, the rating agency reiterated the financial
strength rating ("FSR") of A (Excellent) and ICR of 'a' of the
property/casualty subsidiaries of the company. Additionally, it
reiterated the ICR of 'bbb' of XLIT Ltd.
The rating affirmation came on the back of sturdy risk-based
capitalization, dominant international footprint and completion of
the de-risking of the investment portfolio. The underwriting
results of the subsidiaries have also been strong with combined
ratio of 93% in the first half of 2012. Combined ratio averaged 95%
over the past five years.
A.M. Best noted that management remains focused on managing risk
and also on delivering favorable underwriting numbers. As such, the
company increased the count of senior underwriters. Also,
de-risking of its investment portfolio helped curb the instability
factor in investment results.
The rating agency expects solid earnings to augment capital and
hence debt-to-capital ratio to be in the band of 15%-25%.
Additionally, in the near term, the fixed charge ratio is estimated
to hover close to the current level.
The ratings might be upgraded if the company is able to deliver
sustained robust underwriting and net earnings and is able to
increase its retained earnings.
The ratings could be subject to downgrade is the company fails to
meet market expectations over a number of years or capital level
deteriorates attributable to poor performance or instable
investment results.
Rating affirmations or upgrades from credit rating agencies play an
important part in retaining investor confidence in the stock as
well as maintaining creditworthiness in the market. We believe the
company's strong score with the credit rating agencies will help it
write more business going forward.
XL Group currently carries a Zacks Rank #2, reflecting short term
Buy rating.
ACE Limited
(
ACE
) and
American International Group, Inc.
(
AIG
), which closely compete with XL Group, share the same Zacks
Rank.
ACE LIMITED (ACE): Free Stock Analysis Report
AMER INTL GRP (AIG): Free Stock Analysis Report
XL GROUP PLC (XL): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment
Research