XL Group plc (XL): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report


XL Group's fourth-quarter operating net income was higher than the Zacks Consensus Estimate and year-ago quarter figure. The outperformance came largely on the back of solid underwriting results in both segments Insurance and Reinsurance owing to a quite catastrophic environment. The underwriting results were one of the best with underwriting profit improving more than 50% for consecutive years and combined ratio being the strongest in more than 15 years. Net investment income continues to decline. However, XL Group aims a premier position in global specialty insurance and reinsurance markets hence inked a deal to buy Catlin Group. While it estimates earnings per share and return on equity accretion in 2016 and double-digit earnings per share accretion in 2017, it will also realize cost synergies though will incur one time integration costs. Earlier XL Insurance (Bermuda) divested its wholly owned subsidiary, XL Life Reinsurance. XL Group believes that the divestiture will improve the risk profile and cushion it with additional flexibility to pursue capital management initiatives .We retain our Neutral recommendation.


Upon its redomestication to Ireland from the Cayman Islands, on Jul 1, 2010, the company changed its name to XL Group Plc. (XL) from XL Capital Ltd. Founded in 1986, the company has grown through several mergers and acquisitions to become a leading global provider of insurance, reinsurance and financial risk solutions for enterprises and insurance companies. The Bermuda-based company's insurance products provide customized coverage for corporate risks and are divided into two categories: risk management products (global property and casualty programs for large multinational corporations) and specialty lines products (a wide variety of liability products, including professional, workers comp, environmental, and property coverage for marine, aviation and satellite equipment). Much of the company's casualty business is written on an umbrella or high-layer excess-of-loss basis. The excess nature of many of the company's insurance products, coupled with historically large policy, limits creates a sizeable book of business that can be classified as low frequency and high severity.

The company is organized into three operating segments: Insurance, Reinsurance and Life Operations:

The Insurance segment (accounted for 71% of gross premium written in 2013) provides commercial property, casualty and specialty insurance products on a global basis.

The Reinsurance segment (25%) provides casualty, property risk (including energy and engineering), property catastrophe, marine, aviation and other specialty reinsurance on a global basis.

The Life Operations segment (4%) provides life reinsurance on business written by life insurance companies, principally to help them manage mortality, morbidity, survivorship, investment and lapse risks.

Source: Compnay

As of Sep 30, 2014, XL Group's shareholders' equity was $11.2 billion (down 1.1% from 2013 end level). Total assets were $45.9 billion (up 0.6% year over year).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Stocks

Referenced Stocks: XL



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