On Mar 25, 2013, shares of
XL Group plc
) hit a 52-week high of $30.61. Previously, the company had
reported solid fourth-quarter results with an earnings surprise
of 138.2%. This property & casualty insurer witnessed
positive earnings surprises in all four quarters of 2012, with an
average beat of 54.3%.
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XL GROUP PLC (XL): Free Stock Analysis Report
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On Feb 7, XL Group reported fourth-quarter 2012 operating income
of 13 cents per share, surpassing the Zacks Consensus Estimate of
a loss of 35 cents, and the year-ago loss of 25 cents. Total
revenue increased 11.8% year over year to $1.9 billion, outpacing
the Zacks Consensus Estimate.
XL Group has an $850 million share buyback program under its
authorization, approved by the board of directors in Feb 2013. In
addition, it approved of a dividend hike of 27% to 14 cents per
Moreover, the North America Marine insurance business launched a
marine coverage product named "ShipShape." The new product will
insure the yacht owners from sudden weather shocks and foul seas.
The absence of any major catastrophe events in the first nine
months of 2012 was beneficial to the underwriting results of the
company. However, the occurrence of Hurricane Sandy in the fourth
quarter altered the picture. Though its exposure to cat loss
weighs on the results, prudent underwriting practices managed to
limit the adverse effect. The company enjoyed underwriting income
of $216.1 million for full year 2012, reversing the year-ago
loss. The combined ratio improved 1120 basis points to 96.3% in
Valuation for XL Group looks stretched. The shares are trading at
a discount to the peer group average, both on a price-to-book
basis (28.7% discount to peer group average) and forward
price-to-earnings basis (4.9% discount to peer group average),
with return on equity remaining 39.3% below the peer group
average. The 1-year return from the stock is 43.4%, much above
S&P's return of 11.1%.
We believe that the conservative underwriting practices and
repositioned P&C portfolio will help XL Group fare well going
forward. The overall long-term expected earnings growth rate for
this stock is 7.5%.
XL Group presently carries a Zacks Rank # 1 (Strong Buy).
Property and casualty insurers like
Aspen Insurance Holding Ltd.
Cincinnati Financial Corp
Arch Capital Group Ltd
), among others, carry a favorable Zacks Rank # 1 and appear