It has been about a month since the last earnings report for XL Group Ltd. . Shares have added about 4.3% in that time frame, underperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
XL Group Q4 Earnings and Revenues Beat Estimates
XL Group's fourth-quarter 2016 operating net income of $0.47 per share surpassed the Zacks Consensus Estimate by 38.2%. However, earnings deteriorated approximately 27.7% year over year due to higher expenses and lower underwriting profit.
Including non-recurring items, net income surged 47.4% year over year to $1.12 per share.
Full-Year 2016 Highlights
XL Group’s full-year operating earnings came in at $1.63 per share, down about 33% year over year.
In 2016, total revenue increased 16.5% year over year to $10.6 billion.
Behind the Headlines
Total revenue of XL Group inched up 1.9% year over year to $2.66 billion due to higher net premiums earned. Also, the top line beat the Zacks Consensus Estimate of $2.59 billion.
Net premiums earned grew 3.3% year over year to $2.5 billion.
Net investment income was $196.1 million, down 9% year over year.
Pre-tax cat losses, net of reinsurance and reinstatement premiums, were $246.1 million. The reported figure was significantly wider than a loss of $107.8 million in the year-ago quarter.
Total expenses of XL Group rose 5.8% year over year to $2.6 billion owing to higher net losses and loss expenses incurred, interest expenses, and exchange losses.
With respect to Property and Casualty operations, gross premiums written in the quarter climbed 19.3% year over year to $3 billion.
The insurance segment witnessed an improvement in premiums, primarily owing to new business in Political Risk and Trade Credit, Property International Open Market, Professional, US, Construction North America and North America programs along with stronger renewals in International Financial Lines and Casualty Global Risk Management.
Also, the reinsurance segment displayed premium growth in the reported quarter. Significant new proportional business in the Property Treaty line of business in Bermuda led to the improvement. However, cancellations in Bermuda and London in the Casualty line of business partially offset the upside.
XL Group’s underwriting profit plunged 31.1% year over year to $126.4 million. Combined ratio deteriorated 250 basis points to 94.8% in the reported quarter.
Financial Update
XL Group exited the quarter with cash and cash equivalents of $3.42 billion, up 5.2% from $3.26 billion at the end of 2015.
Notes payable and debt at the end of the quarter inched up 0.1% to $2.65 billion from the 2015-end level of $2.64 billion.
As of Dec 31, 2016, diluted book value of XL Group was $40.33 per share, up 3.8% from Dec 31, 2015.
Share Repurchase Update
In the year ended Dec 31, 2016, XL Group bought back approximately 30.2 million shares worth $1.1 billion. As of Dec 31, 2016, XL Group had shares worth $449.3 million remaining under its authorization.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one upward revision for the current quarter compared to three downward. In the past month, the consensus estimate has shifted downward by 10.83% due to these changes.
VGM Scores
At this time, the XL Group's stock has a subpar Growth Score of 'D'. It is also lagging a lot on the momentum front with an 'F'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.
The stock is suitable solely for value based on our styles scores.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of these revisions also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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Why Is XL Group (XL) Up 4.3% Since the Last Earnings Report?
It has been about a month since the last earnings report for XL Group Ltd. . Shares have added about 4.3% in that time frame, underperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
XL Group Q4 Earnings and Revenues Beat Estimates
XL Group's fourth-quarter 2016 operating net income of $0.47 per share surpassed the Zacks Consensus Estimate by 38.2%. However, earnings deteriorated approximately 27.7% year over year due to higher expenses and lower underwriting profit.
Including non-recurring items, net income surged 47.4% year over year to $1.12 per share.
Full-Year 2016 Highlights
XL Group’s full-year operating earnings came in at $1.63 per share, down about 33% year over year.
In 2016, total revenue increased 16.5% year over year to $10.6 billion.
Behind the Headlines
Total revenue of XL Group inched up 1.9% year over year to $2.66 billion due to higher net premiums earned. Also, the top line beat the Zacks Consensus Estimate of $2.59 billion.
Net premiums earned grew 3.3% year over year to $2.5 billion.
Net investment income was $196.1 million, down 9% year over year.
Pre-tax cat losses, net of reinsurance and reinstatement premiums, were $246.1 million. The reported figure was significantly wider than a loss of $107.8 million in the year-ago quarter.
Total expenses of XL Group rose 5.8% year over year to $2.6 billion owing to higher net losses and loss expenses incurred, interest expenses, and exchange losses.
With respect to Property and Casualty operations, gross premiums written in the quarter climbed 19.3% year over year to $3 billion.
The insurance segment witnessed an improvement in premiums, primarily owing to new business in Political Risk and Trade Credit, Property International Open Market, Professional, US, Construction North America and North America programs along with stronger renewals in International Financial Lines and Casualty Global Risk Management.
Also, the reinsurance segment displayed premium growth in the reported quarter. Significant new proportional business in the Property Treaty line of business in Bermuda led to the improvement. However, cancellations in Bermuda and London in the Casualty line of business partially offset the upside.
XL Group’s underwriting profit plunged 31.1% year over year to $126.4 million. Combined ratio deteriorated 250 basis points to 94.8% in the reported quarter.
Financial Update
XL Group exited the quarter with cash and cash equivalents of $3.42 billion, up 5.2% from $3.26 billion at the end of 2015.
Notes payable and debt at the end of the quarter inched up 0.1% to $2.65 billion from the 2015-end level of $2.64 billion.
As of Dec 31, 2016, diluted book value of XL Group was $40.33 per share, up 3.8% from Dec 31, 2015.
Share Repurchase Update
In the year ended Dec 31, 2016, XL Group bought back approximately 30.2 million shares worth $1.1 billion. As of Dec 31, 2016, XL Group had shares worth $449.3 million remaining under its authorization.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one upward revision for the current quarter compared to three downward. In the past month, the consensus estimate has shifted downward by 10.83% due to these changes.
XL Group Ltd. Price and Consensus
XL Group Ltd. Price and Consensus | XL Group Ltd. Quote
VGM Scores
At this time, the XL Group's stock has a subpar Growth Score of 'D'. It is also lagging a lot on the momentum front with an 'F'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.
The stock is suitable solely for value based on our styles scores.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of these revisions also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.