XL Capital Ltd Reports Operating Results (10-Q)
LX Capital Limited through its subsidiaries provides excess liability insurance coverage to industrial commercial and other enterprises directors and officers of such enterprises professional firms high excess property coverage and the assumption of reinsurance contracts on a worldwide basis. The company's strategy is to be the premier provider of strategic financial risk solutions to specific global markets by applying intellectual and financial capital to assure its customers' economic vitality and enhance their competitive positions. Xl Capital Ltd has a market cap of $5.53 billion; its shares were traded at around $16.17 with a P/E ratio of 6.3 and P/S ratio of 0.8. The dividend yield of Xl Capital Ltd stocks is 2.4%. Highlight of Business Operations: The principal currencies creating foreign exchange risk for us are the British pound sterling, the Euro, the Swiss Franc, and the Canadian dollar. The Companys net notional foreign currency denominated exposure on foreign exchange contracts was $423.6 million and $186.2 million as at September 30, 2009 and December 31, 2008 respectively, with a net unrealized loss of $0.6 million and $3.2 million as at September 30, 2009 and December 31, 2008, respectively.
As at September 30, 2009, the Companys equity portfolio was approximately $49 million as compared to $330 million as at December 31, 2008. This excludes fixed income fund investments that generally do not have the risk characteristics of equity investments. As at September 30, 2009, the Companys allocation to equity securities was approximately 0.1% of the total investment portfolio (including cash and cash equivalents, accrued investment income and net payable for investments purchased) as compared to approximately 1.1% as at December 31, 2008.
As of September 30, 2009, the remaining credit derivative exposure outside of the Companys investment portfolio consisted of two contracts written by the Company that provide credit protection on senior tranches of structured finance transactions with total insured contractual payments outstanding of $279.2 million, a weighted average contractual term to maturity of 6.3 years and a total liability recorded of $12.2 million.
The Companys alternative investment portfolio, which is exposed to equity and credit risk as well as certain other market risks, had a total exposure of $868.5 million making up approximately 2.6% of the total investment portfolio (including cash and cash equivalents, accrued investment income and net payable for investments purchased) at September 30, 2009, as compared to December 31, 2008, where the Company had a total exposure of $1.1 billion representing approximately 3.2% of the total investment portfolio. The VaR associated with the alternative investment portfolio at September 30, 2009 based on a 95% confidence level with a one month holding period, excluding foreign exchange risk, was approximately $31.2 million.
At September 30, 2009, bond and stock index futures outstanding had a net long position of $92.9 million as compared to a net long position of $101.7 million at December 31, 2008. A 10% appreciation or depreciation of the underlying exposure to these derivative instruments would have resulted in realized gains or realized losses of $9.3 million as at September 30, 2009 and $10.2 million as at December 31, 2008, respectively. The Company may reduce its exposure to these futures through offsetting transactions, including options and forwards.
The VaR of the investment portfolio at September 30, 2009, based on a 95% confidence level with a one month holding period, excluding foreign exchange risk, was approximately $422.6 million as compared to $892.4 million at December 31, 2008. The VaR of all investment related derivatives excluding investments in affiliates and other investments was approximately $22.2 million as at September 30, 2009 as compared to $42.9 million at December 31, 2008. The Companys investment portfolio VaR as at September 30, 2009 is not necessarily indicative of future VaR levels.
Read the The complete ReportXL is in the portfolios of Richard Snow of Snow Capital Management, L.P., Richard Snow of Snow Capital Management, L.P., HOTCHKIS & WILEY of HOTCHKIS & WILEY Capital Management LLC, David Tepper of APPALOOSA MANAGEMENT LP, Charles Brandes of Brandes Investment.