XL Group Shares Hits 52-Week High - Analyst Blog
March 26 2013 - 8:20AM
Zacks
On Mar 25, 2013, shares of XL Group plc (XL)
hit a 52-week high of $30.61. Previously, the company had reported
solid fourth-quarter results with an earnings surprise of 138.2%.
This property & casualty insurer witnessed positive earnings
surprises in all four quarters of 2012, with an average beat of
54.3%.
On Feb 7, XL Group reported fourth-quarter 2012 operating income of
13 cents per share, surpassing the Zacks Consensus Estimate of a
loss of 35 cents, and the year-ago loss of 25 cents. Total revenue
increased 11.8% year over year to $1.9 billion, outpacing the Zacks
Consensus Estimate.
XL Group has an $850 million share buyback program under its
authorization, approved by the board of directors in Feb 2013. In
addition, it approved of a dividend hike of 27% to 14 cents per
share.
Moreover, the North America Marine insurance business launched a
marine coverage product named “ShipShape.” The new product will
insure the yacht owners from sudden weather shocks and foul
seas.
The absence of any major catastrophe events in the first nine
months of 2012 was beneficial to the underwriting results of the
company. However, the occurrence of Hurricane Sandy in the fourth
quarter altered the picture. Though its exposure to cat loss weighs
on the results, prudent underwriting practices managed to limit the
adverse effect. The company enjoyed underwriting income of $216.1
million for full year 2012, reversing the year-ago loss. The
combined ratio improved 1120 basis points to 96.3% in 2012.
Valuation for XL Group looks stretched. The shares are trading at a
discount to the peer group average, both on a price-to-book basis
(28.7% discount to peer group average) and forward
price-to-earnings basis (4.9% discount to peer group average), with
return on equity remaining 39.3% below the peer group average. The
1-year return from the stock is 43.4%, much above S&P’s return
of 11.1%.
We believe that the conservative underwriting practices and
repositioned P&C portfolio will help XL Group fare well going
forward. The overall long-term expected earnings growth rate for
this stock is 7.5%.
XL Group presently carries a Zacks Rank # 1 (Strong Buy). Property
and casualty insurers like Aspen Insurance Holding
Ltd. (AHL), Cincinnati Financial Corp.
(CINF) and Arch Capital Group Ltd. (ACGL), among
others, carry a favorable Zacks Rank # 1 and appear impressive.
ARCH CAP GP LTD (ACGL): Free Stock Analysis Report
ASPEN INS HLDGS (AHL): Free Stock Analysis Report
CINCINNATI FINL (CINF): Free Stock Analysis Report
XL GROUP PLC (XL): Free Stock Analysis Report
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