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XL Group (XL) Q2 Earnings Miss Estimates, Revenues Beat

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XL Group (XL) Q2 Earnings Miss Estimates, Revenues Beat

XL Group (XL) benefits from bottom-line growth and higher premiums in Q2. But, increase in expenses is a woe.

XL Group Ltd XL reported second-quarter 2018 operating net income of 84 cents per share, which missed the Zacks Consensus Estimate by 6.7%. Moreover, the bottom line declined 12.5% from the prior-year quarter. Higher level of non-catastrophe loss, increase in expenses along with prior-year development from short tail lines in Insurance, were mainly responsible for the downside.

XL Group Ltd. Price, Consensus and EPS Surprise


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

Nonetheless, the quarter witnessed top-line growth, favorable underwriting performance and better investment results.

Including non-recurring items, the company delivered net income of $1.21 per share, which grew 6.1% from the year-ago period.

Behind Second-Quarter Headlines

Total revenues of XL Group improved 7.3% year over year to $2.9 billion owing to higher net premiums earned as well as net investment income. Also, the top line beat the Zacks Consensus Estimate by 1.2%.

Net premiums earned rose 7.1% year over year to $2.7 billion.

Net investment income improved 11.1% year over year to $231.8 million.

Pretax cat loss, net of reinsurance and reinstatement premiums were $76.8 million. The reported figure was noticeably narrower than $92.1 million incurred in the prior-year period.

Total expenses of XL Group increased 8.8% year over year to $2.7 billion due to substantially higher net loss and loss expenses incurred, claims and policy benefits as well as acquisition costs.

With respect to Property and Casualty operations, gross premiums written in the second quarter improved 10.6% year over year to $3.9 billion.

The insurance segment witnessed improvement in premiums, attributable to increase in rates and new business in Global Lines, Property and Financial Lines in International and Property and Construction in North America.

The reinsurance segment experienced growth in premiums in the quarter under consideration on the back of improved rates as well as new business.

XL Group reported underwriting profit of $114.2 million, which plunged nearly 41.3% from the year-earlier quarter. Combined ratio deteriorated 350 basis points to 95.8% in the quarter under review.

Financial Update

XL Group exited the second quarter with cash and cash equivalents of $2.9 billion, down 15.5% from $3.4 billion at the end of 2017.

Notes payable and debt at the end of the quarter were $3.2 billion, down 0.1% from the year-end 2017.

As of Jun 30, 2018, book value of XL Group was $36.56 per share, down 3.9% from the level as of Dec 31, 2017.

Share Repurchase Update    

In the second quarter, the company did not participate in any share buyback program under its current share repurchase authorization. As of Jun 30, 2018, XL Group had shares worth $529.1 million left under its authorized program.

Zacks Rank

XL Group carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other P&C Insurers

Among other players from the insurance industry, which have already reported second-quarter earnings, the bottom line of The Progressive Corporation PGR and RLI Corp. RLI outpaced the respective Zacks Consensus Estimate while The Travelers Companies, Inc.’s TRV earnings missed the same.

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