875159--2/29/2008--XL_CAPITAL

related topics

{regulation, change, law}

{loss, insurance, financial}

{tax, income, asset}

{provision, law, control}

{capital, credit, financial}

{interest, director, officer}

{competitive, industry, competition}

{operation, natural, condition}

{debt, indebtedness, cash}

{product, liability, claim}

{stock, price, share}

{financial, litigation, operation}

{operation, international, foreign}

{condition, economic, financial}

{acquisition, growth, future}

{personnel, key, retain}

{system, service, information}

Risks Related to the Company A downgrade in the Company s credit ratings by one or more rating agencies could materially and negatively impact its business, financial condition, results of operations and/or liquidity. A decline in the Company s ratings may allow many of its clients to terminate their contracts with the Company. The Company s financial condition could be adversely affected by the occurrence of disasters. The failure of any of the underwriting risk management strategies that the Company employs could have a material adverse effect on its financial condition, results of operations and/or liquidity. If actual claims exceed the Company s loss reserves, its financial results could be adversely affected. If the Company s guarantee agreements with SCA are triggered, there may be a material adverse effect on the Company s financial condition, results of operations and/or liquidity. Operational risks, including human or systems failures, are inherent in the Company s business. The effects of emerging claim and coverage issues on the Company s business are uncertain. The Company may require additional capital in the future, which may not be available to it on satisfactory terms, on a timely basis or at all. The Company may be unable to purchase reinsurance and, even if it is able to successfully purchase reinsurance, the Company is subject to the possibility of uncollectability. Since the Company depends on a few brokers for a large portion of its revenues, loss of business provided by any one of them could adversely affect the Company. The Company s reliance on brokers subjects it to credit risk. The Company s investment performance may adversely affect its financial results and ability to conduct business. The Company is exposed to significant capital markets risk related to changes in interest rates, credit spreads, equity prices and foreign exchange rates which may adversely affect its results of operations, financial condition or cash flows. Current legal and regulatory activities relating to insurance brokers and agents, contingent commissions, the municipal guaranteed investment contract market and the financial guarantee market could adversely affect the Company s business, financial condition and results of operations. In addition, lawsuits, including putative class action lawsuits, have been filed against the Company by policyholders and security holders the ultimate outcome of which could have a material adverse effect on the Company s consolidated financial condition, future operating results and/or liquidity. The loss of one or more key executives or the inability to attract and retain qualified personnel could adversely affect the Company s ability to conduct business. Because the Company is a holding company, if its subsidiaries do not make dividend and other payments to it, it may not be able to pay dividends or make payments on its debt securities and other obligations. Risks Related to the Insurance and Reinsurance Industries The insurance and reinsurance industries are historically cyclical and the Company may experience periods with excess underwriting capacity and unfavorable premium rates. Competition in the insurance and reinsurance industries could reduce the Company s operating margins. Unanticipated losses from terrorism and uncertainty surrounding the future of the TRIPRA could have a material adverse effect on the Company s financial condition and results of operations. Potential government intervention in the Company s industry as a result of recent events and instability in the marketplace for insurance products could hinder its flexibility and negatively affect the business opportunities that may be available to it in the market. Consolidation in the insurance industry could adversely impact the Company. The regulatory regimes under which the Company operates, and potential changes thereto, could have a material adverse effect on its business. If the Company s Bermuda operating subsidiaries become subject to insurance statutes and regulations in jurisdictions other than Bermuda or if there is a change in Bermuda law or regulations or the application of Bermuda law or regulations, there could be a significant and negative impact on the Company s business. Changes in current accounting practices and future pronouncements may materially impact the Company s reported financial results. The Company and its Bermuda insurance subsidiaries may become subject to taxes in Bermuda after March 28, 2016, which may have a material adverse effect on its financial condition and results of operations. The Company may become subject to taxes in the Cayman Islands after June 2, 2018, which may have a material adverse effect on its results of operations. The Company and its Bermuda insurance subsidiaries may become subject to U.S. tax, which may have a material adverse effect on its results of operations. The Organisation for Economic Co-operation and Development is considering measures that might change the manner in which the Company is taxed. If an investor acquires ten percent or more of XL Capital Ltd s shares, they may be subject to taxation under the controlled foreign corporation (the CFC) rules. U.S. Persons who hold shares will be subject to adverse tax consequences if the Company is considered to be a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes. There is U.S. income tax risk associated with reinsurance between U.S. insurance companies and their Bermuda affiliates. There are U.S. income tax risks associated with the related person insurance income of the Company s non-U.S. insurance subsidiaries. Changes in U.S. tax law might adversely affect an investment in the Company s shares. Risks Related to the Company s Ordinary Shares The price and trading volume of the Company s ordinary shares may be subject to significant fluctuations. Provisions in the Company s Articles of Association may reduce the voting rights of its ordinary shares. Provisions in the Company s Articles of Association may restrict the ownership and transfer of its ordinary shares. Certain provisions in the Company s charter documents and Rights Agreement could, among other things, impede an attempt to replace its directors or to effect a change of control, which could diminish the value of its ordinary shares. It may be difficult to enforce judgments against XL Capital Ltd or its directors and executive officers. U.S. persons who own the Company s ordinary shares may have more difficulty protecting their interests than U.S. persons who are shareholders of a U.S. corporation.

Full 10-K form ▸

875159--2/29/2008--XL_CAPITAL_LTD