A.M. Best Co. has reiterated the issuer credit rating (ICR) of “bbb” of XL Group plc (XL) and its wholly owned subsidiary, XL Group Ltd. The credit rating agency also reaffirmed debt ratings for XL Group Ltd.
Concurrently, A.M. Best Co. reaffirmed the financial strength rating (FSR) of A (Excellent) and ICR of “a” of the property/casualty subsidiaries of XL Group.
The outlook for all ratings remains stable.
The rating affirmations came on the back of the company’s superior risk-based capitalization, global market presence and de-risking of its investment portfolio. The ratings also reflect enhanced risk management programs as well as focus on underwriting.
Though the property/casualty operating results were far from impressive through the first half (with a combined ratio of 110.1% deteriorating substantially from the year-ago period), due to huge catastrophe activities, the company’s combined ratio averaged 92.3% for the past five years.
The rating agency also expects XL Group’s debt-to-capital ratio in the band of 15%-25% . At the second quarter-end, the debt-to-capital ratio stood at 20%, a slight decline from 2010-end.
However, substantial exposure to cat losses and lower interest rates partially weigh on the positives.
Select new business growth coupled with an increase in income from operating affiliates and positive prior year loss development, offset by larger natural catastrophe losses and other large individual losses helped XL Group to post a year-over- year growth in earrings as well as surpass the Zacks Consensus Estimate.
The Zacks Consensus Estimate for third-quarter 2011 is 43 cents per share. For full years 2011 and 2012, the Zacks Consensus Estimates are, respectively, $1.34 per share and $2.25 per share.
We retain our Neutral rating on XL Group. The quantitative Zacks #3 Rank (short term Hold rating) for the company indicates no clear directional 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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XL GROUP PLC (XL): Free Stock Analysis Report
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