XL Capital Ltd. in Bermuda announced today that it plans a U.S. initial public offering for a new entity encompassing company segments providing financial guaranty insurance and reinsurance.
The company said a registration statement with the U.S. Securities and Exchange Commission has been filed for a portion of Security Capital Assurance Ltd (SCA) shares.
SCA is a newly-created holding company for XL's financial guaranty insurance and reinsurance businesses conducted through XL Capital Assurance Inc. (XLCA) and XL Financial Assurance Ltd. (XLFA).
XL said that SCA, through its operating units of XLCA and XLFA, will provide credit enhancement products to public finance and structured finance markets throughout the United States and internationally.
Under the registration statement, a portion of SCA's shares will be issued and sold by SCA and a portion will be sold by SCA's parent, XL Insurance (Bermuda) Ltd, as selling shareholder.
After the consummation of the offering, XL said it will own approximately 65 percent of SCA's outstanding common shares. This amount would be reduced if the underwriters' over-allotment option to purchase additional common shares is exercised, the company said.
XL expects to retain 50.1 percent voting control for electing directors from a group nominated by independent directors and 47.5 percent of the voting control on all other matters submitted to the board.
Reacting positively to the IPO announcement, Fitch Ratings said the move would reduce the rating volatility of XLCA and XLFA, which it said became a concern after the October 2005 one-notch downgrade of XL and its property-casualty reinsurance subsidiaries XL Reinsurance America Inc. and XL Insurance (Bermuda) Ltd.
SCA said XL expects to use the stock sale proceeds primarily for capital contributions to its financial guaranty subsidiaries to support future business growth. SCA intends to apply to have its shares listed on the New York Stock Exchange under the ticker symbol SCA.
Paul S. Giordano, executive vice president and chief executive of XL's Financial Products & Services segment, has been appointed president and chief executive offficer of SCA and CEO of XLCA.
Brian M. O'Hara, XL president and CEO, said the IPO and management designations should "enable XL to build on its strengths in insurance and reinsurance while enabling SCA to continue to capitalize on growth opportunities in the triple-A credit enhancement markets."
XL Capital Ltd as of Dec. 31, 2005, had consolidated assets of approximately $58.4 billion and consolidated shareholders' equity of approximately $8.5 billion
The IPO the registration statement is available on the U.S. Securities and Exchange Commission Web Site at www.sec.gov under Filings & Forms (EDGAR).
This article updated 3:01 p.m.
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