XL Capital: $120 Million Investment Loss

NU Online News Service, July 18, 11:15 a.m.EST?XL Capital Ltd., Hamilton, Bermuda, announced today itexpects investment losses of $120 million, mostly fromtelecommunications holdings, and it will increase reserves $200million to cover U.S. terrorist losses.

Brian M. O'Hara, president and chief executive officer of XL,said despite an "intensive reserve analysis immediately followingSept. 11, the unprecedented nature of the attacks has resulted inhigher losses as information has developed."

The company believes increasing reserves at this time shouldfully address its exposure, he said.

The increase in the net loss reserves for Sept. 11 claimsconsists of approximately $135 million of additional reserves inthe company's reinsurance segment, primarily due to higher businessinterruption losses and exposure to Lloyd's Central Fund, and about$65 million in the accident and health book of the Company'sLloyd's operations.

XL explained that the increase in reserves in the accident andhealth book at Lloyd's reflected that the Company's exposureultimately included a higher concentration of victims in the WorldTrade Center than previously indicated.

Net investment losses in the quarter include losses in thecompany's fixed income portfolio for WorldCom, Adelphia and othertelecommunication companies of approximately $92 million and thewritedown of the Company's investment in Mutual Risk Management ofapproximately $20 million. In addition, investment losses includederivative losses and other investment losses net of realizedinvestment gains.

"I am pleased to note that we had minimal underwriting exposurein both our insurance and reinsurance operations to thetelecommunications and related industries during the quarter," Mr.O'Hara added.

Mr. O'Hara said, "Absent the impact of these charges, we believeour second-quarter results should be in line with consensus analystestimates. I am confident that the recovery underway in theinsurance and reinsurance markets is sustainable for theforeseeable future, I and believe that the need for higher pricesis reinforced by the adverse development of recent losses anddeclines in the investment markets."

The company said it intends to announce its full second-quarterresults after the July 30 market close and will host a Webcastinvestor conference call at 10:00 a.m. Eastern Time July 31.

The company said the Webcast will be accessible via thecompany's Web site at www.xlcapital.com.

XL Capital Ltd. provides insurance and reinsurance coverage andfinancial products for industrial, commercial and professionalservice firms, insurance companies, and other enterprises. The firmreported consolidated assets of approximately $30.7 billion andconsolidated shareholders' equity of approximately $5.5 billion asof March 31.