XL Group Approves Buyback - Analyst Blog
February 29 2012 - 12:08PM
Zacks
In its concerted effort to boost shareholder value, the board of
directors of XL Group Plc (XL) approved a share
repurchase program wherein the company is authorized to buy back up
to $750 million worth of shares.
The current authorization will also replace $190 million
remaining under the previous authorization.
The repurchase authorization is primarily supported by XL
Group’s strong balance sheet and its ability to generate healthy
cash flow. XL Group exited 2011 with cash and equivalents of $3.83
billion compared with $3.02 billion at 2010 end. The company
expects to repurchase shares from available cash.
The last buyback authorization, worth a $1 billion of shares,
was made in October 2010.
XL Group has always actively bought back shares. In 2011 the
company spent $665.5 million to buy back 31.7 million shares with
4.9 million shares repurchased in the fourth quarter for $99.9
million.
Following the company’s announcement, there was a spurt in the
share movement. The share price of XL Group increased 1.2% to close
at $20.32 on Monday.
There was no earnings momentum over the last 7 days. We believe
the news to enhance shareholder value might encourage analysts to
pull their estimates upward. The Zacks Consensus Estimate for
first-quarter 2012 is 39 cents per share. For full year 2012 and
2013, the Zacks Consensus Estimates are, respectively, $1.85 and
$2.18.
ACE Limited (ACE), which competes with XL
Group, also hopes to propose a 4.25% increase in the quarterly
dividend to return more value to its shareholders.
XL Group suffered hugely in the fourth quarter incurring an
operating loss largely due to higher catastrophe losses, lower
levels of positive prior-year loss development and higher tax
expenses.
However, 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
emerging economies. XL Group has also received final approval to
establish a Brazilian insurance operation.
The quantitative Zacks #5 Rank (short term Strong Sell rating)
for XL Group 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.
ACE LIMITED (ACE): Free Stock Analysis Report
XL GROUP PLC (XL): Free Stock Analysis Report
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