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XL Group (XL) Q4 Earnings Miss Estimates, Revenues Beat

Zacks Equity Research
Updated

XL Group Ltd XL reported fourth-quarter 2017 operating net income of 45 cents per share, which missed the Zacks Consensus by 8.2%. Moreover, the bottom line deteriorated 4.3% from the prior-year quarter. The catastrophe loss incurred in the reported quarter, stemming from the California wildfires, was 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

 

Including non-recurring items, the company reported net income of 11 cents per share, which plummeted 90.2% from the year-ago quarter.

Full-Year Highlights

For 2017, XL Group reported operating net loss per share of $2.01 against an operating net income of $1.63 a year ago.

Total revenues of $11.2 billion grew 5.4% year over year.

Behind the Headlines

Total revenues of XL Group improved 9.2% year over year to $2.9 billion owing to higher net premiums earned, net investment income as well as fee income and other. Also, the top line outperformed the Zacks Consensus Estimate by 6.6%.

Net premiums earned rose 8.9% year over year to $2.6 billion.

Net investment income improved 11% year over year to $217.7 million.

Pretax cat loss, net of reinsurance and reinstatement premiums were $315.2 million. The reported figure was noticeably wider than a loss of $246.1 million in the year-ago quarter. The loss incurred in the reported quarter is primarily attributable to the California wildfires.

Total expenses of XL Group increased 7.1% year over year to $2.8 billion due to substantially higher net losses and loss expenses incurred, claims and policy benefits plus acquisition costs.

With respect to Property and Casualty operations, gross premiums written in the quarter improved 18% year over year to $3.6 billion.

The insurance segment witnessed improvement in premiums, primarily owing to growth in North America Property, International Casualty and International Financial lines. However, decreases in Political Risk, Credit and Bond as well as North America programs, offset this upside.

The reinsurance segment experienced improvement in its premiums in the reported quarter on the back of an increased share on a large multiline treaty with one of the company’s core clients.

XL Group reported underwriting profit of $26.3 million, plunging 79.2% from the year-ago quarter. Combined ratio deteriorated 420 basis points to 99.0% in the quarter under review.

Financial Update

XL Group exited the fourth quarter with cash and cash equivalents of $3.44 billion, up 0.3% from $3.43 billion at the end of 2016.

Notes payable and debt at the end of the quarter were $3.2 billion, up 21.6% from the year-end 2016.

As of Dec 31, 2017, diluted book value of XL Group was $38.04 per share, down 5.7% from Dec 31, 2016.

Share Repurchase Update    

In the fourth quarter, the company did not participate in any share buyback under its current share repurchase authorization.

For 2017, XL Group bought back approximately 13.8 million shares worth $571.6 million. As of Dec 31, 2017, XL Group had shares worth $529.1 million remaining under its authorization.

Zacks Rank

XL Group carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Performance of Other P&C Insurers

Among other players from the same space that have reported fourth-quarter earnings so far, the bottom line of The Progressive Corporation PGR, The Travelers Companies, Inc. TRV and RLI Corp. RLI outpaced the respective Zacks Consensus Estimate.

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