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XL Group Q4 Earnings Beat, Plunge Y/Y on High Expenses

XL Group plcXL reported fourth-quarter 2015 operating net income of 65 cents per share that beat the Zacks Consensus Estimate by 12.1%. Earnings, however, plummeted 42% year over year due to escalating expenses and higher catastrophe losses.

Nonetheless, upon including non-recurring items, net income surged 43.4% year over year to 76 cents per share.

Full-year 2015 Highlights

XL Group's full-year operating earnings came in at $2.43 per share, down 34% year over year.

Total revenues for 2015 surged 30.3% year over year to $9.1 billion.

Behind the Headlines

Total revenue of XL Group soared 55.3% year over year to $2.6 billion. Higher premiums earned drove the upside. Revenues also surpassed the Zacks Consensus Estimate of $2.4 billion.

Net premiums earned surged nearly 66.2% year over year to $2.4 billion.

Net investment income of $171.9 million dipped 0.2% year over year.

Pretax cat losses, net of reinsurance and reinstatement premiums, came in at $107.8 million, significantly higher than $31.7 million in the year-ago quarter.

Total adjusted expenses of XL Group increased 90.6% year over year to $2.5 billion owing to higher net losses and loss expenses incurred in property and casualty (P&C) operations. Higher acquisition costs, interest expenses, claims and policy benefits, and operating expenses also contributed to the increase in total expense.

With respect to P&C operations, gross premiums written in the quarter soared 56% year over year. The upside was attributable to growth in gross premiums written in the insurance and reinsurance segments.

Growth in insurance and reinsurance premiums was primarily driven by the combination with Catlin. Increase in renewed premiums in the Global Risk Management, Cyber and Marine business lines also contributed to the insurance segment's improvement. However, the reinsurance segment witnessed lesser-than-expected growth owing to the timing of renewals, especially a large quota share which was extended and renewed at Jan 1, 2016.

XL Group's underwriting profit decreased 16.2% year over year to $183 million. Combined ratio deteriorated 780 basis points to 92.3% in the reported quarter.

Financial Update

XL Group exited the quarter with cash and cash equivalents of $3.3 billion, up 29.1% from $2.5 billion at the end of 2014.

Notes payable and debt at the end of the quarter were $2.6 billion, up nearly 59.1% from the 2014-end level of $1.7 billion.

Book value of XL Group as of Dec 31, 2015 was $38.87 per share, up 0.9% from Dec 31, 2014.

Share Repurchase Update

XL Group repurchased 4.7 million shares for $176.7 million during the reported quarter, taking full year tally to 12.4 million shares bought back for $466.7 million. As of Dec 31, 2015 ordinary shares worth $703.3 million were available for purchase under the share buyback program.

Zacks Rank and Performance of Other P&C Insurers

XL Group currently carries a Zacks Rank #3 (Hold).

Other P&C insurers too recently released their fourth-quarter earnings results. While the bottom line at The Travelers Companies, Inc. TRV and Progressive Corp. PGR beat their respective Zacks Consensus Estimate, RLI Corp. RLI missed the same in the fourth quarter.

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RLI CORP (RLI): Free Stock Analysis Report

XL GROUP PLC (XL): Free Stock Analysis Report

TRAVELERS COS (TRV): Free Stock Analysis Report

PROGRESSIVE COR (PGR): 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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