A.M. Best Downgrades Debt Ratings of XL Capital Group; All Ratings Placed Under Review with Negative Implications.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--Jan. 14, 2004 A.M. Best Co. has downgraded all debt ratings of XL Capital Ltd. (Cayman Islands Cayman Islands (kā`mən), British dependency (2005 est. pop. 44,300), 100 sq mi (259 sq km), comprising three islands in the West Indies. ), affecting approximately $2.4 billion of securities issued or guaranteed by XL Capital Ltd and its affiliates. Concurrently, A.M. Best has placed the financial strength ratings of A+ (Superior) of XL Capital Group (Hamilton, Bermuda) (NYSE NYSE See: New York Stock Exchange :XL) and its affiliated companies Affiliated Companies A situation that occurs when one company owns a minority interest (less than 50%) in another company. Also refers to companies that are related to each other in some way. Notes: An affiliated company is sometimes referred to as a subsidiary. under review with negative implications. These rating actions follow the announcement that XL Capital has recorded a fourth-quarter pre-tax charge of $694 million related to prior year adverse reserve development emanating from its North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. casualty lines of reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. business, which it acquired in 1999 through the NAC See network access control. Re Corporation merger. This charge follows a third-quarter pre-tax charge of $184 million relative to the company's North American reserve position. Cumulatively, these reserve charges have exceeded A.M. Best's expectation and have caused the company's risk- adjusted capital to fall below levels required for its current financial strength ratings. However, XL Capital plans to raise additional capital during the first half of 2004 to replenish re·plen·ish v. re·plen·ished, re·plen·ish·ing, re·plen·ish·es v.tr. 1. To fill or make complete again; add a new stock or supply to: replenish the larder. 2. its capital base. XL Capital's fourth-quarter charge is based upon the conclusion of an extensive claims review conducted in conjunction with outside actuaries, auditors and claims specialists covering cedants of former NAC Re Corporation's casualty business for accident years 1997 to 2001. Furthermore, separate loss reserve reviews undertaken by XL Capital management have resulted in reserve charges to the international and insurance business segments. These amounts are included in the fourth-quarter charge. The downgrade Downgrade A negative change in the rating of a security. Notes: For example, an analyst may downgrade a stock from strong buy to buy, or a bond rating agency may downgrade a bond from AAA to AA. of the debt securities reflect the declining trend in XL Capital's fixed charge coverage ratios over the last three years and the anticipation of elevated debt to capital leverage ratios following the completion of the 2004 capital injection plan. Notwithstanding, A.M. Best expects XL Capital's leverage and coverages to improve as projected earnings increase shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. and holding company liquidity. XL Capital's ratings will remain under review with negative implications until additional capital has been successfully raised in sufficient amounts to place risk-adjusted capitalization well within the Superior level, supportive of its current financial strength ratings. Should this not be accomplished within a reasonable timeframe, it is likely that the current financial strength ratings will be downgraded to the Excellent level. For a complete listing of the financial strength and debt ratings of XL Capital Group, please visit www.ambest.com/press/011402xlcapital.pdf. For a list of A.M. Best's debt ratings, please visit http://www.ambest.com/ratings/debtrating/companies.html. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. |
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