XL Group (XL) expects preliminary net loss related to the storms that affected the Midwest and Southeast United States in April and May, to range between $50 million and $75 million, net of reinsurance and reinstatement premiums. The company expects majority of the loss to be attributable to XL's reinsurance segment.
In the first quarter, XL Group incurred catastrophe losses of $387.4 million, more than a two-fold increase from $181.1 million in the first quarter of 2010. Major catastrophes in the quarter were Australian Flood, New Zealand Earthquake and Japanese earthquake.
Underwriting loss widened substantially to $328.1 million in the quarter from a loss of $6.6 million in the year-ago quarter. Combined ratio deteriorated to 125.8% from 100.5% in the first quarter of 2010.
The results at Reinsurance segment remained affected in the first quarter of 2011. Underwriting loss at the Reinsurance segment in the first quarter was $143.7 million compared with $8.1 million in the year-ago period.
In the first quarter, huge catastrophe losses weighed on the results of the company. The company reported an operating loss of 52 cents per share, wider than the Zacks Consensus Estimate of a loss of 38 cents. Results compare unfavorably with an operating profit of 44 cents earned in the year-ago quarter.
The Zacks Consensus Estimate for second quarter 2011 is 62 cents per share. For full years 2011 and 2012, the Zacks Consensus Estimates are $1.20 and $2.14 per share, respectively.
We maintain our long-term Neutral recommendation on XL Group. The quantitative Zacks #4 Rank (short-term Sell rating) for the company indicates a downward pressure on the stock over the near term.
Based in Dublin, Ireland, XL Group is a leading global provider of insurance, reinsurance and financial risk solutions to enterprises and insurance companies. It competes with ACE Limited (ACE).
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