Moody's affirms XL Capital

Moody's Investors Service said it affirmed the Baa2 senior unsecured debt rating and Ba1 preferred stock rating of XL Capital Ltd. and maintained a negative outlook.

XL Capital reported a net loss of $1.4 billion for the fourth quarter of 2008 and a net loss of $2.63 billion for the full year. The agency said the affirmation reflects earnings results that generally remain in line with its medium-term expectations for the company and financial metrics that are expected to remain within the tolerances of Moody's revised rating drivers for the company.

XL's ratings reflect the group's overall good market positions in its principal operating segments, its diversified earnings streams by geography and line of business, the company's sound liquidity and capitalization at its flagship Bermuda operating subsidiaries and its solid core underwriting performance, Moody's said.

These fundamental strengths are tempered by the intrinsic volatility of XL's reinsurance businesses and some insurance lines, by the company's exposure to natural catastrophes, by its significant financial leverage and by its past volatile profitability, Moody's said.

The negative outlook reflects the agency's concerns regarding XL's exposures to further investment losses, its heightened financial leverage profile, the company's earnings and internal capital generation capacity and its ability to comfortably cover its high fixed charges.

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