XL Capital comments on actuary report in Winterthur sale

XL Capital says it expects to record a net charge of approximately US$830 million in the fourth quarter of 2005 following finalization of a draft report of an independent actuary (IA) appointed in connection with the company’s acquisition of Winterthur International in 2001.
XL bought Winterthur International from Winterthur Swiss Insurance Co. for US$330 million in 2001. Winterthur Swiss agreed at the time to replenish Winterthur International’s reserves after three years if they proved to be insufficient.
But the companies were at odds over whether the reserves need to be replenished and by how much. An independent actuary (IA) was brought in to assess the situation.
Brian M. O’Hara, XL Capital’s president and CEO, commented recently on the previously announced draft report of the IA.
“While extremely disappointing, the IA’s draft report removes the uncertainty that has existed since the IA review process began,” Mr. O’Hara said. “The IA draft report, which we are still reviewing for manifest errors, requires Winterthur Swiss to pay XL US$575 million (including interest) for the net losses and unearned premium balances relating to the acquired business and is expected to result in XL recording a net charge of approximately US$830 million in the fourth quarter of 2005. I do believe, however, that this draft report reinforces the soundness of XL’s reserving policies and practices on this book.”
“The Winterthur acquisition is both a strategic and a financial success, irrespective of the IA process,” O’Hara said in a news release. “The outcome should be viewed in the context of the final cost of the Winterthur International acquisition.”