Carriers Issue Early Bird Reports For Third Quarter To Calm Jittery Investors

Net income, excluding net realized gains and losses, is estimated to be approximately $107.8 million, or 40 cents a share, according to the company. This compares with $562.8 million, or $3.13 per ordinary share, in the prior year's third quarter.

For its insurance operations, XL said its combined ratio was 107.9, a major deterioration from 87.5 in 2007.

Explaining the reasoning behind the early release of third-quarter information, Mr. McGavick, in a conference call, said it had to do with rumors that had affected XL's business partners and share price.

"Last week, we saw some significant and very wrong rumors with respect to our situation," he said–citing, for example, "rumors that were many multiples of what we took in OTTI [other than temporary impairment charges]."

"Given the jitteriness in the market last week, it was a bad time to have a set of rumors like that out there," added Mr. McGavick, who said XL was releasing figures early to set the record straight and correct "a very significant disconnect…."

"We hope that…putting true data out in the market, including the very broad disclosures [about XL's] investment portfolio, will go a very long way to curing that disconnect," he said.

Speaking to the expected third-quarter results, Mr. McGavick said in a statement that "the third quarter has seen real progress in relation to the strategic objectives set out earlier in the year. We eliminated the vast majority of our exposures to Syncora."

He added that "we have also made demonstrable progress in de-risking the firm, both in our investment portfolios and by demonstrating our attention to managing our traditional property and casualty exposures well, as we believe our third-quarter hurricane losses show."

He said that "while it was a tough quarter by any measure, we are very pleased with the resilience of the XL franchise. Especially noteworthy was the fact that our clients, brokers and people pulled with us through the uncertainty of the Syncora situation, enabling us to have positive sales momentum in the quarter, and positioning us well for the critical Jan. 1 renewal period."

The company also reported that its chairman, Brian M. O'Hara, had involuntarily sold approximately 80 percent of his XL common shares on Oct. 9 "in order to meet a margin loan call."

Mr. O'Hara said the sale "in no way reflects a lack of confidence in XL's current and future prospects."

Explaining the sale, he said: "I regret that last Thursday I was forced to sell approximately 80 percent of my XL shares. I had pledged those shares as collateral to secure a personal loan used to fund purchases of XL shares in order to avoid the expiration of certain options. The forced sale was due to the precipitous drop in XL's share price last week."

Meanwhile, ACE Ltd. said it expects third-quarter net realized and unrealized investment losses of approximately $1.5 billion, and a decrease in book value per share of 7.5 percent year-to-date.

The company said it was announcing estimates ahead of its scheduled Oct. 28 third-quarter earnings release because of "the extraordinary market conditions and questions of investor confidence" for financial institutions in general.

Of the estimated $1.5 billion in realized and unrealized investment losses, ACE said approximately $1.3 billion relates to the company's fixed income and equity portfolios, "largely due to the widening of credit spreads in our high-quality corporate bond portfolio."

Approximately $220 million of the estimated net realized investment losses relates to the guaranteed minimum income benefit liabilities of the company's variable annuity reinsurance book, ACE said.

"These losses resulted from an increase in the fair market value of the liabilities related to these annuities," the company said in a statement. "This does not present any liquidity exposures. Cash flow in this business is positive and is within our original expectations."

The company said it expects operating cash flow to be in the range of $800 million to $1 billion for the third quarter.

ACE noted that as of Sept. 30, it has entered into securities lending agreements totaling about $2 billion. The proceeds, ACE said, are invested in prime short-term money market funds.

ACE also re-emphasized that it did not and does not invest in collateralized debt obligations, collateralized loan obligations or complex credit structures, and does not employ leverage, and therefore has no transactions that require the posting of collateral.

ACE Ltd. Chairman and Chief Executive Officer Evan G. Greenberg said the company's financial performance and balance sheet "remain strong."

"ACE has a strong capital position, and our financial results for the third quarter were quite good," he said. "ACE is well positioned to take advantage of weaknesses and opportunities within our industry as they emerge."

The Travelers Companies Inc. reported that its estimate of third-quarter catastrophe losses–primarily from Hurricanes Ike, Gustav and Dolly–amounts to approximately $690 million after-tax and $1.05 billion pre-tax, net of reinsurance.

Travelers said Ike prompted catastrophe claims in eight states, and includes its estimated share of assessments from the Texas Windstorm Insurance Association.

On the investment side, the company said investment losses would amount to $115 million after-tax, and $170 million pre-tax in the third quarter. This includes $44 million after-tax and $67 million pre-tax with respect to securities issued by Lehman Brothers Holdings Inc. and its subsidiaries.

Travelers said that as of Sept. 30, it is not a party to any credit default swaps, and it has approximately $15 million of loans outstanding under its securities lending program, for which it believes it has no exposure to loss.

On reserves, Travelers said in the third quarter it expects to report net favorable prior-year reserve development of approximately $210 million after-tax and $330 million pre-tax.

The net favorable prior-year reserve development is driven by better-than-expected loss experience–primarily in the commercial multiperil and general liability product lines, Travelers said.

The reserve development also includes a $46 million after-tax and $70 million pre-tax increase to asbestos reserves. Travelers said it completed its annual in-depth asbestos claim review in the third quarter.

Taking all of the news together, Travelers said operating income per share would be reduced by 80 cents, while net income per share would drop $1. The company said operating income differs from net income in that operating income excludes the after-tax impact of net realized investment losses.

"Our disciplined attention to risk management, both operationally and in our investment activities, has served us well in this active storm season and in a difficult economic environment," Travelers Chairman and CEO Jay S. Fishman said in a statement.

"Our catastrophe losses were consistent with our risk and pricing models, net realized investment losses were modest relative to our overall investment portfolio, and better-than-expected loss experience resulted in net favorable prior-year reserve development," he continued.