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What's in Store for XL Group (XL) this Earnings Season?

XL Group Ltd.XL is slated to report fourth-quarter 2016 results on Feb 1, after the market closes . Last quarter, the company had posted a positive earnings surprise of 4.76%. Let's see how things are shaping up for this announcement.

Factors to be Considered this Quarter

XL Group is likely to report top-line growth in the fourth quarter on the back of increased premiums at the Reinsurance segment as well as higher gross premiums written and diversified product offerings.

Moreover, continued share buybacks should aid the company's bottom line.

Further, the property and casualty (P&C) insurer is likely to have experienced a decline in operating expenses as the ongoing integration and synergy benefits have been gaining traction.

In addition, the company is expected to have witnessed improved underwriting results, which in turn, should mitigate the impact of catastrophe losses incurred in the fourth quarter.

Coming to this matter, XL Group estimates pre-tax catastrophe loss of $245 million, net of reinsurance and including reinstatement premiums, in the fourth quarter, stemming from Hurricane Matthew and the earthquake in New Zealand.

Also, the company has projected an additional $10 million in one-time integration costs in the fourth quarter associated with the change in its insurance operating model.

With respect to the surprise trend, the company delivered positive surprises in three of the last four quarters, with an average beat of 11.77%.

XL Group Ltd. Price and EPS Surprise

XL Group Ltd. Price and EPS Surprise | XL Group Ltd. Quote

Earnings Whispers

Our proven model does not conclusively show that XL Group is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP : XL Group has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 34 cents. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter .

Zacks Rank : XL Group carries a Zacks Rank #3. Though a favorable Zacks Rank increases the predictive power of ESP, we need a positive ESP to be confident about an earnings beat.

We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies from the insurance industry that you may want to consider as these have the right combination of elements to post an earnings beat this quarter:

Validus Holdings, Ltd. VR , which is set to report fourth-quarter earnings on Feb 2, has an Earnings ESP of +5.13% and a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here .

Cigna Corporation CI has an Earnings ESP of +2.30% and a Zacks Rank #3. The company is set to report fourth-quarter earnings on Feb 2.

CNA Financial Corporation CNA has an Earnings ESP of +13.42% and a Zacks Rank #1. The company is slated to report fourth-quarter earnings on Feb 6.

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Validus Holdings, Ltd. (VR): Free Stock Analysis Report

Cigna Corporation (CI): Free Stock Analysis Report

XL Group Ltd. (XL): Free Stock Analysis Report

CNA Financial Corporation (CNA): Free Stock Analysis Report

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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 Nasdaq, Inc.


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

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