Moody's lowers XL Capital ratings

Moody's Investors Service said it has lowered the ratings of XL Capital Ltd., including the senior unsecured debt to A2 from A1, and the ratings of debt-issuing affiliates.

The outlook is stable.

According to Moody's, the downgrades primarily reflect Moody's concerns about the magnitude of XL Capital's fourth-quarter reserve charge, in combination with related charges taken in the third quarter primarily related to XL Reinsurance America Inc, which have exceeded the high end of the expected range considered at the time Moody's confirmed these entities ratings.

The rating agency added that the current ratings and outlook assume the completion of a significant recapitalization of the affected subsidiaries through the issuance of at least $750 million of new securities by XL Capital Ltd over the near term, one that should not result in a significant increase in its overall financial leverage profile.

Despite the downgrade, Moody's said it believes that XL Capital's senior management remains committed to maintaining a high overall credit profile at its principal insurance and reinsurance subsidiary operations, as well as at the holding company, and that subsidiary capital adequacy, operational discipline, risk management and the maintenance of financial leverage and fixed charge coverage levels for the consolidated enterprise will remain at levels commensurate with the group's overall strong financial and business profile.

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