XL Gustav, Ike Losses $195 to $270 Million; Minimal Investment Loss

Bermuda’s XL Capital Ltd. has announced preliminary net loss estimates for Hurricanes Gustav and Ike, as well as the effect on its investment portfolio from Lehman Brothers, Washington Mutual, Fannie Mae and Freddie Mac.

XL said its “preliminary loss estimates, pretax and net of reinsurance and reinstatement premium, related to Hurricane Gustav range from approximately $30 million to $35 million, which are attributable in roughly equal proportions to our insurance and reinsurance operations.”

Its preliminary loss estimates, pretax and net of reinsurance and reinstatement premium, related to Hurricane Ike range from approximately $165 million to $235 million, of which $65 million to $85 million is attributable to insurance and $100 million to $150 million to reinsurance.

The Company’s preliminary loss estimates “are based on its review of individual treaties and policies expected to be impacted and client data received to date and has taken into account current industry loss estimates, both from published sources and the Company’s internal analysis,” said the bulletin.

XL also pointed out that its exposure to the Lehman Brothers bankruptcy is “less than one-quarter of a percent of its investment portfolio,” as of June 30, 2008. “As of that date, the cost and market value of XL’s current holdings of equity of Lehman Brothers was $2 million and $1 million, respectively.”

In addition XL pointed out that as of that date, its “current holdings of subordinated debt of Lehman Brothers had an amortized cost and market value of approximately $34 million and $29 million, respectively, and XL’s holdings of senior debt of Lehman Brothers had an amortized cost and market value of $66 million and $63 million, respectively. XL has made no purchases of Lehman Brothers securities since June 30, 2008. XL has no derivative counterparty exposure to Lehman Brothers.

“As of September 25, 2008, the amortized cost of XL’s fixed income holdings of Washington Mutual, Inc. was $4 million.

“As of September 25, 2008, the cost of XL’s common and preferred equity of Fannie Mae and Freddie Mac was $9 million.”

CEO, Michael S. McGavick, commented, “Total industry losses for Gustav and Ike are still being calculated, but we believe that Ike alone could be in excess of $15 billion. We are pleased that even at the high end of our current estimates, losses from these two hurricanes represent less than three percent of pro forma total shareholders’ equity as of June 30, 2008. We believe that today’s announcements demonstrate disciplined underwriting as well as our care in managing exposures to individual credits.”

Source: XL Capital – www.xlcapital.com