XL Group to Offer APL - Analyst Blog

XL Insurance, the global insurance arm of  XL Group (XL), and Jorgensen & Company, a specialist professional liability managing general underwriter, agreed to offer Accountants' and Consultants' Professional Liability Insurance (APL).

The product from XL Group will offer services that foresee and cater to risks faced by accountants. It will also provide added loss prevention services.

Jorgensen & Company also believes this agreement will augment its product offering as well as service provided to its customers.

XL Group reported a year-over-year decline in premium due to lower insurance as well as reinsurance premiums written. We expect the company's efforts to introduce new products would mitigate falling premiums, going forward.

Of late, XL Group also obtained the license from China Insurance Regulatory Commission to function as a property and casualty company in Shanghai. This license, to operate in Shanghai, widens XL Group's presence in the emerging market. XL Group believes that China with a growing insurance market offers opportunities to write more premiums.

XL Group reported third-quarter 2010 operating income of 52 cents per share, beating the Zacks Consensus Estimate by 8 cents.  However, results were much below the prior-year quarter due to lower income from investment affiliates, lower net investment income and a lower underwriting income from the insurance segment, partially offset by higher underwriting income from the reinsurance segment.

The Zacks Consensus Estimate for fourth-quarter 2010 is 67 cents per share. For fiscal years 2010 and 2011, the Zacks Consensus Estimates are, respectively, $2.35 per share and $2.34 per share.

Based on the company's conservative underwriting practices and repositioned P&C portfolio, we expect XL Group to fare well going forward. The company is also taking initiatives to expand its operations and is aiming to tap the opportunities in the growing economy.

We maintain our long-term Neutral recommendation on XL Group. The quantitative Zacks #4 Rank (short-term Sell rating) for the company indicates downward 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. XL Group competes with ACE Limited (ACE).