Will Higher Premiums Drive XL Group's (XL) Q1 Earnings?
Zacks Investment Research | Apr 29, 2018 11:31PM ET
XL Group Ltd (NYSE:XL) is slated to report first-quarter 2018 results on May 2 after the market closes. In fourth-quarter 2017, the company delivered a negative earnings surprise of 8.16%.
Let’s see, how things are shaping up for this announcement.
Factors to be Considered This Quarter
The P&C insurer is likely to witness premium growth in the to-be-reported quarter, fueled by higher premiums at both its Insurance and Reinsurance segments. Strong international exposure, expanded capabilities and diversified product offerings will likely fuel premiums. The consensus mark is pegged at $2.7 billion, translating into a 6.5% improvement from the year-ago quarter.
XL Group is projected to report higher net investment income in the quarter to be reported, driven by improved interest rates as well as better-than-expected reinvestment rates and portfolio management activities.
Improved net investment income and premiums are expected to have supported the company’s top line. In fact, the Zacks Consensus Estimate for the metric is pegged at $2.9 billion, representing a rise of 4.8% on a year-over-year basis.
The company is likely to have witnessed an increase in operating expenses this yet-to-be-reported quarter, mainly due to higher net loss and loss expenses incurred as well as claims and policy benefits. This in turn might restrict the operating margin expansion as well.
But the company assumes that a rise in expenses will be a fraction of business growth, thereby continuing to drive the operating expense leverage.
As a property and casualty (P&C) insurer, XL Group is highly exposed to unpredictable weather-related events that result in substantial catastrophe loss. Therefore, the company might report cat loss in the soon-to-be-reported quarter, which is anticipated to impact the insurer’s results.
Nonetheless, the corporate tax cut, which lowered the tax rate to 21% from 35%, is expected to aid the companies’ bottom line and drive margin expansion. The Zacks Consensus Estimate for earnings in the to-be-reported quarter is pegged at 95 cents per share, reflecting an increase of a whopping 90% from the prior-year period.
XL Group Ltd. Price and EPS Surprise
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