Moazami in a note wrote that there are a multitude of potential buyers. In a takeout scenario, we believe that XL could fetch more than $30 per share."
XL suffered huge losses from the financial crisis, sparking concern among some investors that the company didn't have enough capital to take on lots of new risks and pay claims. After slumping in 2008, XL shares surged last year. But the stock is still very cheap, according to Moazami.
XL's economic book value, which is basically the value of the company if it was liquidated, is about $34 a share, the analyst estimated. That's more than 90% above the current stock price, he noted.
"The capital markets generally do not give much credit to any of the value embedded in an insurer's balance sheet, but we believe that an acquirer recognizes and can monetize this embedded value," Moazami wrote.
XL Chief Executive Mike McGavick may be motivated to sell the company, the analyst added. The last insurer McGavick ran, Safeco, was sold at a big premium to Liberty Mutual in 2008.
"No other CEO in our coverage universe has a greater propensity to sell than Michael McGavick," Moazami wrote.
The executive has political aspirations, having run for the Senate in 2006, and he could gain at least $16.6 million personally if XL is acquired, the analyst estimated.