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XL Group Upped to Strong Buy

Zacks Equity Research

On May 10, 2013, Zacks Investment Research upgraded XL Group plc (XL) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

XL Group has been witnessing rising earnings estimates on the back of a strong first quarter of 2013 results. Moreover, this property and casualty insurer delivered positive earnings surprises in the past 4 quarters with an average beat of 56.5%. The long-term expected earnings growth rate for this stock is 7.5%    

XL Group reported first-quarter results on May 2. Net operating earnings per share came in at 93 cents, surpassing the Zacks Consensus Estimate by nearly 39% and year-ago earnings by almost 79%.

Better-than-expected results were fueled by improved underwriting results, attributable to lower levels of catastrophe and large risk losses, coupled with higher affiliate earnings. While the underwriting profit increased nearly threefold year over year to $180.6 million, combined ratio improved 760 basis points to 87.7%.

The Insurance segment wrote higher premiums relying on new business initiatives and pricing improvements across most lines.

The Zacks Consensus Estimate for 2013 increased 10.4% to $2.87 per share as 10 of 13 estimates were revised higher over the last 30 days. For 2014, 9 of 13 estimates moved north over the same period, lifting the Zacks Consensus Estimate by 4.6% to $2.95 per share.

Based on the company’s conservative underwriting practices and repositioned P&C portfolio, we expect XL Group to fare well going forward. The company continues to enhance shareholder value through share buybacks and dividend hikes.

Other Stocks to Consider

Apart from XL Group, other stocks that are outperforming in the property and casualty industry include AXIS Capital Holdings Ltd. (AXS), Hilltop Holdings Inc. (HTH) and Montpelier Re Holdings Ltd. (MRH). All these stocks carry a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on XL

Read the Full Research Report on HTH

Read the Full Research Report on AXS

Read the Full Research Report on MRH

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