Bermuda-based XL Capital Ltd. posted a third-quarter bottom lineloss of almost $1.05 billion in the wake of Hurricanes Katrina andRita and other natural catastrophes.

The company also announced its involvement--as a cedent, but notas an investor--in a new reinsurance venture without disclosing thename of the new company.

XL's $1,049.2 million net loss figure, announced Monday, equatesto $7.53 per share. By contrast, in third-quarter 2004, XL postednet income of $22.5 million, or 16 cents per share.

The company's earnings include its previously announced pre-taxlosses from the major events of the third quarter--$1.2 billion dueto Hurricane Katrina, $263.6 million from Hurricane Rita, and $89.7million in losses from other natural catastrophes.

XL's combined ratio was 182.2 percent, but if the catastrophesin the third quarter are excluded, it would have been 88.7percent.

"The third quarter's insured market catastrophe losses, which weestimate at $60-to-$72 billion, were greater than our industry hasseen in any previous calendar year," said Brian M. O'Hara,president and chief executive officer of XL Capital. "Our lossestimation process has embraced the extraordinary breadth,magnitude and complexity of these events."

With these catastrophes, however, Mr. O'Hara said XL alsoexpects to see "significant opportunities across the board,"especially in catastrophe-exposed lines, for the 2006 renewalseason.

In an effort to seize those opportunities, XL said it isentering a quota share reinsurance treaty with a new reinsurancecompany, which it did not identify. Although XL noted that it willnot be an equity investor in the newly-formed reinsurer, itacknowledged that the lead investor would likely be investmentfunds managed by an alternative asset manager with whom the company"has had a long standing relationship."

Under the agreement, XL said it would cede specified portions ofits property catastrophe and retrocessional lines of business.

"We believe that this treaty will reinforce XL's leadershipposition in these lines of business, reduce our volatility, provideincremental earnings and therefore maximize our shareholders' riskadjusted return," Mr. O'Hara said.