XL Capital Reports Fourth-Quarter Profit

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NU Online News Service, Feb. 12, 4:13 p.m.EST?Reversing a loss, XL Capital Ltd.reported a 2002 fourth-quarter net increase of $297.7 million, or$2.20 on a per-share basis, over the period in the prior year.

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XL Capital reported a fourth-quarter profit of $214.1 million,or $1.56 a share, compared with a loss of $83.6 million, or 64cents a share, one year ago.

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Bermuda-based XL also stated that gross premiums written in thefourth quarter totaled $2. billion, down from $2.08 billion lastyear.

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"We had a very good quarter with strong underwriting results,delivering an operating return on common equity of 17 percent andincreasing our book value per ordinary share to $44.48," said BrianM. O'Hara, president and chief executive officer at XL.

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XL's results were generally in line with Wall Streetexpectations, while falling short for some. The company's operatingearnings-per-share of $1.82 was a penny below what New York-basedbrokerage Morgan Stanley said it expected.

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In underwriting, XL's overall combined ratio was 96.4 percent,higher than Morgan Stanley's expectation of 91 percent.

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The company's fourth-quarter results were achieved whilestrengthening reserves during the quarter for prior years, Mr.O'Hara said.

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"The reserve strengthening primarily occurred in our U.S.casualty reinsurance business, reflecting deterioration in theunderwriting results for the 1997 to 2000 accident years," hesaid.

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Mr. O'Hara said the reserve increase of $215 million pre-tax,including $30 million for pre-1986 asbestos exposures, was largelyoffset by overall favorable 1995 and prior years' loss developmentin other lines of business.

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"The increase in the provision for asbestos exposures nearlydoubles our reserves in this area, but this remains a minorexposure for XL," Mr. O'Hara said.

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He also noted that the markets in which XL operates are robustand that prices are still rising in most lines, "and we arecontinuing to improve terms and conditions."

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The company also announced that to demonstrate its commitment totransparency in financial reporting, it will expense all XLemployee stock options granted in 2003 and beyond. But thecompany's projections for 2003, including stock option expenses,remain in line with prior earnings guidance, Mr. O'Hara said.

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