XL Takes Q4 Charges on Enron, Air Crash, Other Losses

January 29, 2002

XL Capital Ltd announced that its fourth quarter results will include charges for increased prior period casualty reinsurance loss reserves and several large loss events, mainly its exposure to Enron’s bankruptcy, the fatal crash of American Airlines Flight 587 and several property losses in Europe.

Brian M. O’Hara, XL’s President and CEO, explained the move as follows: “Following our regular year-end reserve review, we are increasing the reserves of our North American casualty reinsurance book due to adverse development from underwriting years predating our acquisition of NAC Re Corporation. In addition, a number of other loss events in the fourth quarter, including the bankruptcy of Enron, the loss of American Airlines flight 587 and several large European property losses, negatively impacted our results. As a result, we expect to report fourth quarter 2001 operating results at or near breakeven. Including realized investment losses and interim mark-to-market losses on credit enhancement transactions, the Company expects to report a net loss of approximately $60 million for the quarter.”

“These results, while very disappointing, stem from the poor pricing and terms that pervaded our industry over the past several years,” O’Hara continued. He went on to note that, “Underwriting fundamentals are improving substantially in 2002, and we are poised to take advantage of dramatically increased opportunities.

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