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

XL Group LtdXL is slated to report third-quarter 2017 results on Oct 24, after the market closes . Last quarter, the company delivered a positive earnings surprise of 7.87%. Let's see how things are shaping up for this announcement.

Factors to be Considered This Quarter

With the occurrence of Hurricanes Harvey, Irma and Maria during the third quarter as well as the Mexico earthquakes, XL Group's underwriting profitability will be largely hampered in the soon-to-be- reported quarter. Notably, the company has estimated catastrophe losses for the third quarter to be about $1.35 billion. This in turn might lead to a noticeable deterioration in the combined ratio as well.

Also, the company is expecting a fall in net investment income, owing to the still low-interest rate environment. In addition, improvement in investment income is closely associated with the credit markets and volatility in such markets can render instability in investment earnings.

Further, the company might experience a decline in gross written premiums in the yet-to-be-reported quarter. This is mainly due to a large international casualty quota share treaty in the previous year, which did not get renewed, as well as a cancelled business that did not meet the company's expectations.

Nonetheless, lower operating expenses and continued share buybacks have likely cushioned the company's bottom line. In fact, the company expects to complete not less than $700 million in buyback in 2017.

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 bullish Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But 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 a loss of $3.74. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter .

XL Group Ltd. Price and EPS Surprise

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

Zacks Rank : XL Group carries a Zacks Rank #4 (Sell), which fails to increase the predictive power of ESP. Hence, we caution against all Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Some stocks worth considering from the insurance industry with the right combination of elements to surpass estimates this quarter are as follows:

CNO Financial Group, Inc. CNO is set to report third-quarter earnings on Oct 25 with an Earnings ESP of +1.70% and a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank stocks here .

Prudential Financial, Inc. PRU has an Earnings ESP of +0.07% and holds a Zacks Rank #2. The company is slated to report third-quarter earnings on Nov 1.

Lincoln National Corporation LNC has an Earnings ESP of +0.05% and also holds a Zacks Rank of 2. The company is slated to report third-quarter earnings on Nov 1.

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Lincoln National Corporation (LNC): Free Stock Analysis Report

CNO Financial Group, Inc. (CNO): Free Stock Analysis Report

Prudential Financial, Inc. (PRU): Free Stock Analysis Report

XL Group Ltd. (XL): 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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