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XL Maintained at Outperform

Zacks Equity Research

We have retained our Outperform recommendation on XL Group plc (XL). The conservative underwriting practices of the company and repositioned P&C portfolio is expected to push up XL Group’s financials in the upcoming period.  The global insurance and reinsurance provider currently carries a Zacks Rank #1 (Strong Buy).

Why the Reiteration?

Over the last 30 days, one out of 13 estimates moved north pushing the Zacks Consensus Estimate for 2013 by 1.7% to $2.92 per share. This also translates into a year-over-year improvement of 47.4%. Over the last 60 days 10 out of 13 estimates moved up pushing the Zacks Consensus Estimate by 11.9%.

With a strong international exposure and a diversified product offering suite, XL Group positions itself to write higher premiums. It focuses on those lines of businesses within its insurance and reinsurance operations that generate higher returns. Moreover to reach out to more number of clients the company has been undertaking a number of initiatives which include strategic alliances and expansion of its geographic territory.

Additionally, the formation of a new unit within its reinsurance business is expected to consolidate its operations, thereby enhancing customer service. The company also launched the Motor Truck Cargo Coverage Solutions recently, which targets the mid-to-large sized trucking business in North America. This is expected to strengthen its inland marine business under the Property and Casualty segment thereby bolstering top line growth.

XL Group consistently rewards its shareholders through share buybacks and dividend payouts. The Board in Feb 2013 authorized an $850 million worth of share buyback replacing the $250 million worth of shares remaining under the previous authorization. As of Mar 31, 2013, the company is left with $725 million under its authorization. XL Group also increased its quarterly dividend by 27% to 14 cents per share in Feb 2013. The company also scores strongly with the rating agencies.

However, fluctuating cash position of the company and exposure to losses resulting from natural and man-made disasters and other catastrophic events remain a matter of concern for XL Group.

Other Stocks to Consider

Among others from the industry, American Safety Insurance Holdings Limited (ASI), Montpelier Re Holdings Limited (MRH) and Platinum Underwriters Holdings Limited (PTP) carry Zacks Rank #1 (Strong Buy) and are worth considering.

Read the Full Research Report on XL

Read the Full Research Report on MRH

Read the Full Research Report on ASI

Read the Full Research Report on PTP

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