XL Group plc XL reported second-quarter 2015 operating net income of 84 cents per share comfortably surpassing the Zacks Consensus Estimate by 9.1%. However, earnings declined 17.6% year over year due higher integration costs and catastrophe losses. Also, prior-year quarter gained additional benefit from profit related to commutation of a structured product transaction. Following this news, share price of the company has gained 1.3% in the last trading session to close at $38.67.
Including non-recurring items, net income came at $3.11 per share, reversing the year ago loss of $1.03 per share. These one-time times include Life Retrocession Arrangements, net realized gains on investments sold excluding Life Funds Withheld Assets, net realized and unrealized gains on derivatives, exchange losses, expenses related to Catlin acquisition and net realized and unrealized losses on investments, gain on sale of operating affiliate and derivatives related to the company's insurance company affiliates.
Behind the Headlines
Total revenue of XL Group was $2.35 billion, which surged 28.6% year over year, primarily due to higher premiums earned.
Net premiums earned climbed nearly 39.1% year over year to $2.08 billion.
Net investment income of $223.2 million was down 4.1% year over year.
Pre-tax cat losses, net of reinsurance and reinstatement premiums, came in at $59.9 million, higher than $34.6 million in the year-ago quarter.
Total adjusted expenses of XL Group amounted to $2.07 billion, up 41% year over year owing to higher net losses and loss expenses incurred in P&C operations. Higher acquisition costs and operating expenses also contributed to the increase in expenses.
With respect to P&C operations, gross premiums written in the quarter jumped 42.2% year over year. The upside was attributable to 37.1% and 58.6% growth in gross premiums written in the insurance and reinsurance segments, respectively.
Growth in insurance and reinsurance premiums was primarily driven by combination with Catlin. However, growth in insurance was limited by XL Group’s new businesses like Marine, North American Construction and Political Risk and Trade Credit.
XL Group’s underwriting profit increased 24.3% year over year to $208.8 million. However, combined ratio deteriorated 160 basis points to 89.9%.
Financial Update
XL Group exited the quarter with cash and cash equivalents of $2.98 billion, up 18% from $2.5 billion at the end of 2014.
Notes payable and debt at the end of the quarter were $2.73 billion, up nearly 64% from the 2014-end level of $1.66 billion.
Book value of XL Group as of Jun 30, 2015 was $32.53 per share, down 11.6% from that as of Dec 31, 2014.
Share Repurchase Update
XL Group repurchased 2.9 million of common shares worth of $110 million during the reported quarter.
Zacks Rank and Performance of other P&C Insurers
XL Group currently carries a Zacks Rank #3 (Hold).
The bottom line at each of RLI Corporation RLI, The Travelers Companies Inc. TRV and Progressive Corp. PGR outperformed their respective Zacks Consensus Estimate in the second quarter.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment