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
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
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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