xl8k_022908.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
————————————
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported): February 29, 2008
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XL
CAPITAL LTD
(Exact
name of registrant as specified in its charter)
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Cayman
Islands
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1-10804
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98-0191089
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(State
or other jurisdiction
of
incorporation)
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(Commission
File Number)
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(I.R.S.
Employer Identification No.)
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XL
House, One Bermudiana Road, Hamilton, Bermuda HM 11
(Address
of principal executive offices)
Registrant’s
telephone number, including area code: (441) 292 8515
Not
Applicable
(Former
name or former address, if changed since last report)
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Check
the appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
[ ]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b))
[ ]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR 240.13e-4(c))
Item
7.01.
Regulation FD Disclosure.
The
following information is being furnished under Item 7.01, “Regulation FD
Disclosure.” This information shall not be deemed “filed” for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), or otherwise subject to the liabilities of that Section, or incorporated
by reference into any filing under the Securities Act of 1933, as amended, or
the Exchange Act, except as shall be expressly set forth by specific reference
in such a filing.
On
February 5, 2008, XL Capital Ltd (“XL” or the “Company”) issued a press release
(the “Release”) announcing the Company’s full year 2007 financial
results. The Release was furnished to the Securities and Exchange
Commission (the “SEC”) as Exhibit 99.1 to the Company’s Current Report on Form
8-K dated February 5, 2008. In the Release, the Company indicated
that the financial information contained therein was subject to revision
pending the completion of the audits of XL, Security Capital Assurance Ltd
(“SCA”) and XL’s other affiliates. While the 2007 audited financial
statements of SCA (the “SCA Financials”) remain unavailable, since the date of
the Release the Company has received additional unaudited financial information
from SCA in respect of the facultative and excess of loss reinsurance agreements
between the Company’s subsidiaries and SCA’s subsidiaries (the “Facultative
Agreements” and the “Excess of Loss Agreement,” respectively). This
information has allowed the Company to update the information provided in the
Release and include such updated information in the Company’s Annual Report on
Form 10-K for the year ended December 31, 2007 (the “2007 10-K”) that is being
filed with the SEC simultaneously herewith.
More
specifically, based on information received to date and as reflected in the 2007
10-K, the Company has:
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done
an extensive analysis of recent market developments with respect to the
monoline industry in general and SCA specifically (including the ratings
downgrades relating to SCA since year end) and considered industry analyst
reports which indicated that the fair value of any investment in the
financial guarantor sector in general and SCA specifically has very
uncertain value at this point in time. As a result, management believes
that the fair value of the Company’s investment in SCA is substantially
less than the traded market value at December 31, 2007 of $3.89 per share
and accordingly, the Company has reduced the reported value of its
investment in SCA from $117 million to zero. Management believes this
decline in value is other than temporary;
and
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received
preliminary unaudited information from SCA that the aggregate amount that
it expects to be recording as a recoverable from XL under the Facultative
Agreements and the Excess of Loss Agreement is $328.3 million as set out
below:
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US
dollars in millions
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Excess
of Loss Agreement
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$259.4 |
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Losses
under the Facultative Agreements
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51.0 |
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Mark
to market charge for Facultative Agreements
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17.9 |
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Total
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$328.3 |
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Accordingly,
the Company has recorded the following in the 2007 10-K:
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As
a result of the advised losses under the Facultative Agreements being
$21.0 million higher than those originally estimated by the Company at the
time of the Release, the Company has recorded an additional charge of
$21.0 million and a related tax credit of $1.9
million;
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The
Company has booked an additional mark to market charge of $17.9 million in
respect of the Facultative Agreements;
and
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In
the Release, XL had recorded an estimated charge of $300 million for the
Excess of Loss Agreement and, notwithstanding the information received
from SCA relating to this contract, XL has not amended its estimate in
respect of this agreement.
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The
additional charges described above total approximately $154 million (net of tax)
which result in total fourth quarter 2007 charges for the Company of
approximately $1.66 billion (net of tax) which is within the previously
disclosed range of $1.5 to $1.7 billion as set forth in the Company’s press
release dated January 23, 2008.
Set forth
below is a reconciliation of the Company’s net income for the twelve months
ended December 31, 2007 as set forth in the Release to that which is reported in
the 2007 10-K:
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U.S.
dollars in millions
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Net
Income
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As
reported in the Release
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$360.4 |
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Write
down of investment in SCA
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(117.0 |
) |
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Increased
losses under the Facultative Agreements
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(21.0 |
) |
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Mark
to market charge for Facultative Agreements
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(17.9 |
) |
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Tax
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1.9 |
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As
reported in 2007 10-K
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$206.4 |
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As
reflected in the 2007 10-K, the Company’s book value per ordinary share at
December 31, 2007 was $50.30 per ordinary share.
Finally,
as disclosed in the 2007 10-K, under Rule 3-09 of Regulation S-X, the Company is
required to file the SCA Financials as an Exhibit to the 2007
10-K. The SCA Financials were not available at the time the Company
filed the 2007 10-K. The Company intends to file the SCA Financials
as an Exhibit to an amendment to the 2007 10-K as soon as they are
available.
SIGNATURES
Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned hereunto duly
authorized.
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XL
CAPITAL LTD
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(Registrant)
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By: /s/ Kirstin Romann
Gould
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Name: Kirstin Romann Gould
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Title: General Counsel and
Secretary
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