Amendment - Fitch: Comments on Potential XL Capital Spin-off of XLCA & XLFA.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- (This is an amended version of a release issued earlier today. It contains updated information in the fourth paragraph.) XL Capital Ltd (XL) announced today that it plans to spin off 35% of its financial guaranty business via a proposed initial public offering (IPO (Initial Public Offering) The first time a company offers shares of stock to the public. While not a computer term per se, many founders, employees and insiders of computer companies have found this acronym more exciting than any tech term they ever heard. ) of a portion of the common shares of Security Capital Assurance Ltd (SCA (Single Connector Attachment) An 80-pin plug and socket used to connect peripherals. With a SCSI drive, it rolls three cables (power, data channel and ID configuration) into one connector for fast installation and removal. ). It is proposed that SCA will be a newly created holding company that will own XL's primary market financial guarantor XL Capital Assurance Inc. (XLCA XLCA Xl Capital Assurance, Inc. ) and 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. affiliate XL Financial Assurance Ltd. (XLFA). After reviewing the proposed spin-off, Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. believes successful implementation of the IPO will reduce the rating volatility of XLCA and XLFA, which 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. Although the ratings of XLCA and XLFA were not directly affected by the XL downgrade, the financial guaranty ratings became susceptible to downward pressure to the extent XL's ratings would be lowered further in the future. Fitch believes the proposed IPO, upon successful implementation, reduces this susceptibility and achieves further ratings separation of up to three notches between the 'AAA' Insurer Financial Strength (IFS) ratings of XLCA and XLFA and the ratings of XL and its property/casualty subsidiaries. Following the IPO, ratings separation between XLCA and XLFA and XL is limited due to Fitch's concern that XL still maintains a majority economic interest and a majority control of SCA's board of directors. Under the IPO plan, XL plans to retain 65% of SCA's common shares upon implementation of the IPO. XL expects to retain 50.1% voting control in the matter of electing board directors from a group nominated by independent directors and 47.5% of the voting control on all other matters submitted to the board. Fitch gains comfort from the fact that SCA's board of directors will comprise a majority of directors that would be viewed as independent from XL. To provide sufficient capital to support the Fitch rating, inclusive of inclusive of prep. Taking into consideration or account; including. projected growth, the IPO proceeds will be invested in the capital base of XLCA and XLFA. Following the execution of the IPO, SCA will pay only nominal dividends for two years to its common shareholders. During this time, XLFA and XLCA dividends will be restricted to funds needed to support any SCA preferred dividends, nominal common shareholder dividends, debt payments, and holding company operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. . As of Dec. 31, 2005, XLCA and XLFA maintained an aggregate of $81.9 billion of net par in force. 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 GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). assets of $58.4 billion and shareholders equity of approximately $8.5 billion at Dec. 31, 2005. Fitch affirms the following XL financial guaranty related ratings with a Stable Outlook: XL Capital Assurance Inc. -- IFS 'AAA'. XL Financial Assurance Ltd. -- IFS 'AAA'. Twin Reefs-Pass Through Trust -- Long-term 'AA'. Additionally, Fitch affirms the following ratings with a Stable Outlook: XL Capital Ltd -- Issuer Default Rating (IDR IDR In currencies, this is the abbreviation for the Indonesian Rupiah. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. ) at 'A+'; -- $594 million 5.25% senior notes due 2014 at 'A'; -- $825 million 2.53% senior notes due 2009 at 'A'; -- $350 million 6.375% senior notes due 2024 at 'A'; -- 8% series A preference ordinary shares at 'A-'; -- 7.625% series B preference ordinary shares at 'A-'; -- $650 million equity security units 'A'. XL Capital Finance (Europe) PLC -- Issuer Default Rating (IDR) at 'A+'; -- $255 million 6.58% senior notes due 2011 at 'A'; -- $600 million 6.50% guaranteed senior notes due 2012 at 'A'. Fitch also affirms the following XL subsidiaries' insurer financial strength ratings (IFS) at 'AA-' with a Stable Outlook: XL Insurance (Bermuda) Ltd XL Re Ltd XL Insurance Switzerland XL Re Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. Ltd XL Europe Ltd 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 Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, 'www.fitchratings.com'. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
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