What's In The Cards For XL Group (XL) This Earnings Season?

XL Group Ltd (NYSE:XL) is slated to report third-quarter 2017 results on Oct 24, after the market closes. Last quarter, the company delivered a positive earnings surprise of 7.87%. Let’s see how things are shaping up for this announcement.

Factors to be Considered This Quarter

With the occurrence of Hurricanes Harvey, Irma and Maria during the third quarter as well as the Mexico earthquakes, XL Group’s underwriting profitability will be largely hampered in the soon-to-be- reported quarter. Notably, the company has estimated catastrophe losses for the third quarter to be about $1.35 billion. This in turn might lead to a noticeable deterioration in the combined ratio as well.

Also, the company is expecting a fall in net investment income, owing to the still low-interest rate environment. In addition, improvement in investment income is closely associated with the credit markets and volatility in such markets can render instability in investment earnings.

Further, the company might experience a decline in gross written premiums in the yet-to-be-reported quarter. This is mainly due to a large international casualty quota share treaty in the previous year, which did not get renewed, as well as a cancelled business that did not meet the company’s expectations.

Nonetheless, lower operating expenses and continued share buybacks have likely cushioned the company’s bottom line. In fact, the company expects to complete not less than $700 million in buyback in 2017.

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