Effective April 1, 2011, the new Property & Casualty (non-life) subsidiary of XL Group plc (XL) in Shanghai, China will commence its operations.

Headed by Zheqiang (Al) Xie, XL Insurance (China) Company Limited will offer products and services in Property, Casualty, Specialty and Professional Lines. In December 2010, China Insurance Regulatory Commission granted a license to XL Group to function as a property and casualty company in China.

With commencement of operations in Shanghai, XL Group also widens its presence in the emerging market. XL Group believes that China, with a growing insurance market, offers opportunities to write more premiums.

XL Group reported a solid fourth quarter with operating earnings of 74 cents per share, ahead of last year’s 11 cents, stemming from an increase in property and casualty underwriting income. It was also 7 cents ahead of the Zacks Consensus Estimate.

Recently, XL Group guided preliminary net loss to a range of $70 million to $85 million, pretax and net of reinsurance and reinstatement premium, attributable to the earthquake in New Zealand in February 2011.

The Zacks Consensus Estimate for first-quarter 2011 is 18 cents per share. For full years 2011 and 2012, the Zacks Consensus Estimates are, respectively, $1.95 per share and $2.22 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. Also, the addition of CIMI Professional to XL Insurance will broaden the latter’s exposure to the long-term care industry.

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. It competes with ACE Limited (ACE).

 
XL GROUP PLC (XL): Free Stock Analysis Report
 
Zacks Investment Research