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Analyst Blog

On Mar 15, we upgraded XL Group plc (XL - Analyst Report) to Outperform based on its strong fourth-quarter performance and continued efforts to enhance shareholder value. This property and casualty insurer presently carries a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

XL Group’s fourth-quarter 2012 earnings came in at 13 cents, well above the Zacks Consensus Estimate of a loss of 35 cents per share. Revenues increased 1.9% from the year-ago period to $89.5 million, easily surpassing the Zacks Consensus Estimate of $1.7 billion. Over the past four quarters, XL Group has delivered an average surprise of 54.2%.

XL Group witnessed upward estimate revisions following its earnings release. The Zacks Consensus Estimate for 2013 inched up 4.1% to $2.54 as 4 of 16 estimates were revised higher over the last 30 days.

Why the strong positive bias on the company? With a strong international exposure and a diversified suite of product offering, we believe that the company is well positioned to write higher premiums fueling top-line growth, going forward.

The board of directors approved a $850 million share repurchase program along with a 27% hike in its quarterly dividend, which will further boost the bottom line.

The long-term expected earnings growth rate for this stock is 9.4%.    

Other Stocks to Consider

Apart from XL Group, other stocks in the property and casualty sector that are currently performing well include Arch Capital Group Ltd. (ACGL - Snapshot Report), Cincinnati Financial Corp. (CINF - Analyst Report) and EMC Insurance Group Inc. (EMCI - Snapshot Report). All these companies carry a Zacks Rank #1 (Strong Buy).

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