875159--3/1/2007--XL_CAPITAL

related topics

{regulation, change, law}

{loss, insurance, financial}

{tax, income, asset}

{provision, law, control}

{competitive, industry, competition}

{capital, credit, financial}

{interest, director, officer}

{operation, natural, condition}

{product, liability, claim}

{stock, price, share}

{financial, litigation, operation}

{condition, economic, financial}

{operation, international, foreign}

{personnel, key, retain}

{debt, indebtedness, cash}

{acquisition, growth, future}

{system, service, information}

Risks Related to Our Company A downgrade in our credit ratings by one or more rating agencies could materially and negatively impact our business, financial condition, results of operations and/or liquidity. A decline in our ratings may allow many of our clients to terminate their contracts with us. Our financial condition could be adversely affected by the occurrence of disasters. The failure of any of the risk management strategies that we employ could have a material adverse effect on our financial condition, results of operations and/or liquidity. If actual claims exceed our loss reserves, our financial results could be adversely affected. Operational risks, including human or systems failures, are inherent in our business. The effects of emerging claim and coverage issues on our business are uncertain. We may require additional capital in the future, which may not be available to us on satisfactory terms, or at all. We may be unable to purchase reinsurance and, even if we are able to successfully purchase reinsurance, we are subject to the possibility of uncollectability. Since we depend on a few brokers for a large portion of our revenues, loss of business provided by any one of them could adversely affect us. Our reliance on brokers subjects us to credit risk. Our investment performance may adversely affect our financial results and ability to conduct business. We are exposed to significant capital markets risk related to changes in interest rates, credit spreads, equity prices and foreign exchange rates which may adversely affect our results of operations, financial condition or cash flows. Current legal and regulatory activities relating to insurance brokers and agents, contingent commissions, certain finite risk reinsurance products and related products, and the municipal guaranteed investment contract market could adversely affect our business, financial condition and results of operations. In addition lawsuits, including putative class action lawsuits, have been filed against us by policyholders and security holders the ultimate outcome of which could have a material adverse effect on our 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 our ability to conduct business. Because we are a holding company, if our subsidiaries do not make dividend and other payments to us, we may not be able to pay dividends or make payments on our debt securities and other obligations. Risks Related to Our Industry The insurance and reinsurance industries are historically cyclical and we may experience periods with excess underwriting capacity and unfavorable premium rates. Competition in the insurance and reinsurance industries could reduce our operating margins. Unanticipated losses from terrorism and uncertainty surrounding the future of the Terrorism Risk Insurance Act of 2002 could have a material adverse effect on our financial condition and results of operations. Potential government intervention in our industry as a result of recent events and instability in the marketplace for insurance products could hinder our flexibility and negatively affect the business opportunities that may be available to us in the market. Consolidation in the insurance industry could adversely impact us. The regulatory regimes under which we operate, and potential changes thereto, could have a material adverse effect on our business. If our 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 our business. Changes in current accounting practices and future pronouncements may materially impact our reported financial results. We and our Bermuda insurance subsidiaries may become subject to taxes in Bermuda after March 28, 2016, which may have a material adverse effect on our financial condition and results of operations. We may become subject to taxes in the Cayman Islands after June 2, 2018, which may have a material adverse effect on our results of operations. We and our Bermuda insurance subsidiaries may become subject to U.S. tax, which may have a material adverse effect on our results of operations. The Organisation for Economic Co-operation and Development is considering measures that might change the manner in which we are taxed. If you acquire ten percent or more of XL Capital Ltd s shares, you 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 we are 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 our non-U.S. insurance subsidiaries. Changes in U.S. tax law might adversely affect an investment in our shares. Risks Related to Our Ordinary Shares The price and trading volume of our ordinary shares may be subject to significant fluctuations. Provisions in our Articles of Association may reduce the voting rights of our ordinary shares. Provisions in our Articles of Association may restrict the ownership and transfer of our ordinary shares. Certain provisions in our charter documents and Rights Agreement could, among other things, impede an attempt to replace our directors or to effect a change of control, which could diminish the value of our ordinary shares. It may be difficult for you to enforce judgments against XL Capital Ltd or its directors and executive officers. U.S. persons who own our 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--3/1/2007--XL_CAPITAL_LTD