Deutsche Bank Downgrades XL Group plc (XL) to Sell

December 2, 2013 8:57 AM EST Send to a Friend
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Price: $32.75 +0.83%

Rating Summary:
    6 Buy, 6 Hold, 2 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 24 | Down: 28 | New: 14
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Deutsche Bank downgraded XL Group plc (NYSE: XL) from Hold to Sell with a price target of $26.00 (from $33.00). The firm revised EPS estimates for 2014 to $2.60 from 2.75. The firm's 2015 EPS estimate remains unchanged at $2.75

Analyst Joshua Shanker explains, "The essential differences between this outlook and our previous view is modeling $160 million of net favorable prior year development in both 2014 and 2015 in contrast with our former expectations of $130 million and $65 million, respectively, which is more than offset by increases in our expectation of accident-year loss ratio in 2014. XL's initial loss picks for the trailing twelve months are 800-900bps better than there were in 2008, which seems implausible given market conditions and competitive pressures. Business mix can explain some improvement (albeit this is usually accompanied with an increase in earnings volatility. Comparatively aggressive initial loss picking is also a plausible explanation, and we believe this is partially responsible for XL's much greater-than-peer margin improvements. We have some concern that XL's habitual tendency to over-reserve for losses with a trend equating to 7.5% of reserves may have been compromised if loss-picking has indeed become aggressive."

For an analyst ratings summary and ratings history on XL Group plc click here. For more ratings news on XL Group plc click here.

Shares of XL Group plc closed at $31.99 yesterday.


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