XL Capital Ltd.XL

Morningstar Rating

Stock Research and Analysis

by Bill Bergman

XL had packaged financial strength, international scope, and investment leverage to yield a narrow economic moat. After a series of rocky acquisitions, underwriting results improved significantly in recent years. But the severity of the difficulties Read more

Bulls Say

XL Capital focuses on the risk-management needs of customers with global risks, a rapidly growing market segment.

XL's stream of new product launches will bolster sales. The firm recently started offering directors' and officers' liability insurance in the sizable European market.

XL Re is one of the top five U.S. reinsurance underwriters. This business focuses on long-duration contracts that provide steadier earnings than standard reinsurance contracts.

The firm's innovation has fostered many highly profitable new products, such as XL weather and energy risk, which insures businesses against weather-related damages.

XL earns a decent return on its investment income alone, which reduces the propensity to write underpriced business and take on excessive risk in exchange for a higher investment yield. Read more

Bears Say

XL's main markets are highly competitive and cyclical, so growth rates can vary widely.

Several of the insurers XL acquired during the past five years did not adequately reserve for claim payments. XL has incurred a series of charges to fund the deficiencies.

XL is a large firm, but it competes with insurance behemoths American International Group AIG, Munich Re, Swiss Re SWCEY, and Berkshire Hathaway BRK.B, which have significantly larger capital bases. Read more

Strategy

XL's key strategy is to allocate resources across its broad product range to attract the highest available returns and growth. The company continually develops and refines a range of insurance and risk-management Read more

Management

XL maintains a staggered election cycle for its board of directors, one blemish in a generally shareholder-friendly corporate governance structure. Management compensation includes a long-term incentive plan linked to return on equity. We would like Read more

Profile

With more than $9 billion of equity, XL Capital is a significant force in the global insurance market. XL Insurance offers commercial and specialty insurance for risks, Read more

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