XL Estimates $1.65 Billion Loss But Beats Forecast

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XL Capital Ltd, a large Bermuda-based insurer, estimated Tuesday a quarterly net loss of $1.65 billion to $1.67 billion, and said its chairman involuntarily sold about 80 percent of his common shares last week to meet a margin loan call.

However, the company’s estimate of profit excluding one-time items was better than analysts’ average forecast, sending its shares up nearly 70 percent to $12.58 in early afternoon trading.

“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,” Chairman Brian O’Hara said in a statement.

XL shares sank 54 percent last Thursday to their lowest level in a year, after a worldwide equities sell-off triggered by the credit crisis.

“The sale in no way reflects a lack of confidence in XL’s current and future prospects,” O’Hara said.

O’Hara became the latest among top executives across various industries to be forced to sell shares because of margin calls.

The chairman of oil refiner Tesoro Corp., top executives of real estate firm Apartment Investment & Management Co., and the co-founders of medical-equipment maker Boston Scientific Corp., have all had to sell stocks that were pledged as security to cover loans.

In a separate statement, the company said third-quarter results would be hit by charges related to troubled bond insurer Syncora Holdings Ltd, impairments and investment losses.

XL Capital estimated a third-quarter net loss of $6.08 to $6.17 per share, compared with a net income of $1.82 per share in the year-earlier quarter.

But excluding one-time items, the company estimated net income of 40 cents per share, above analysts’ average forecast of 30 cents per share, according to Reuters Estimates.

“Most investors had a more pessimistic view. There were certainly concerns that they (results) could be much worse,” said Paul Newsome, an analyst at Sandler O’Neill.

The insurer said it would register a charge of $1.4 billion after severing its ties with former unit Syncora, which was pushed to the brink of insolvency by the credit crunch.

The company was also hammered by impairment charges of between $250 million and $275 million and net realized losses on investment sales of $40.3 million.

XL also said it would record a gain of $139.5 million related to the strengthening of the U.S. dollar during the quarter.

Standard & Poor’s Equity Research raised XL Capital to “buy” from “hold” saying the insurer was trading at around 70 percent its estimated 2008 book value, a discount compared to peers.

(Reporting by Juan Lagorio, editing by Steve Orlofsky and Tim Dobbyn)