XL Takes $694 Million Reserve Charge

XL Takes $694 Million Reserve Charge

NU Online News Service, Jan. 13, 8:16 p.m. EST?XL Capital Ltd. in Hamilton, Bermuda said that as the result of an audit it would take a pretax reserve charge of $694 million to cover reinsurance losses mostly from liability business involving directors and officers and medical malpractice business.

The charge of $647 million after taxes will amount to $4.73 per share in the fourth quarter of 2003, the company said.

XL said the majority of the charge, amounting to $663 million pre-tax, resulted from adverse developments from its North American reinsurance operations for casualty business written during the 1997 through 2001 underwriting years.

Brian M. O'Hara, XL president and chief executive officer said the extraordinary audit was undertaken after an acceleration in third quarter claims related to business the company underwrote from 1997 to 2001 years.

Because of the continuing claims spurt through the fourth quarter, Mr. O'Hara said the company has changed the actuarial development patterns it normally would have used.

Mr. O'Hara said that as a result of the charge the company planned to issue convertible securities to raise at least $750 million in the first half of this year "to sustain appropriate levels of capital for our business.