The rating actions are based primarily on longer term operating returns on capital and earnings volatility that was not consistent with the previous rating category. This volatility was primarily attributable to catastrophe losses and adverse loss reserve development through the past several years.
XL reported recently that the company would report net losses from third-quarter catastrophe events, particularly Hurricane Katrina, of approximately $1.47 billion. Following these losses, the company expects to report an operating loss for the full-year 2005.
There remains some uncertainty regarding the timing and execution of future capital-raising plans to offset the impact of recent catastrophe-related losses and the resolution of an independent valuation process regarding the settlement of a reserve seasoning agreement related to XL's July 2001 acquisition of Winterthur International.
XL's ratings were originally placed on Rating Watch in February 2005 following the announcement that it was entering into an independent actuarial process with Winterthur Swiss Insurance Co. (Winterthur) regarding settlement of a reserve seasoning agreement related to XL's July 2001 purchase of Winterthur International.
If XL is unsuccessful in the independent actuary review process, the company could face a net pretax reserve increase of approximately $900 million. The independent actuarial process is expected to be completed by year-end 2005.
XL is a Bermuda headquartered holding company with subsidiaries providing insurance, reinsurance, and specialty financial products and services on a worldwide basis. The company reported consolidated GAAP assets of $53.3 billion and shareholders equity of approximately $8.4 billion at June 30, 2005.
XL Capital Ltd.
-- Long-term issuer rating downgraded to 'A-' from 'A', Outlook Stable
Fitch's ratings for the following XL Capital Ltd related securities issues are downgraded to 'A-' from 'A', Outlook Stable
XL Capital Ltd
-- $100 million 7.15% senior notes due 2005;
-- $594 million 5.25% senior notes due 2014;
-- $825 million 2.53% senior notes due 2009;
-- $350 million 6.375% senior notes due 2024.
XL Capital Finance (Europe) PLC
-- $255 million 6.58% senior notes due 2011;
-- $600 million 6.50% guaranteed senior notes due 2012.
Fitch's ratings for the following XL Capital Ltd securities issues are downgraded from 'A-' to 'BBB+', Outlook Stable
-- 8% series A preference ordinary shares;
-- 7.625% series B preference ordinary shares.
Fitch insurer financial strength ratings (IFS) of the following XL Capital Ltd insurance subsidiaries are downgraded from 'AA' to 'AA-', Outlook Stable
XL Insurance (Bermuda) Ltd
XL Re Ltd
XL Insurance Switzerland
XL Re Latin America Ltd
XL Europe Ltd
XL America Pool:
XL Reinsurance America Inc.
XL Insurance Company of New York, Inc.
XL Specialty Insurance Company
Indian Harbor Insurance Company
Greenwich Insurance Company
XL Insurance Company Limited
XL Select Insurance Company
Additionally, Fitch affirms the following XL financial guaranty related ratings with a Stable Outlook:
XL Capital Assurance Inc.
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