XL Capital Ltd., the biggest Bermuda- based insurer by assets, is seeking a buyer after reporting investment losses larger than its market value, four people with knowledge of the matter said.
XL hired Goldman Sachs Group Inc. to gauge interest from potential bidders, said the people, who declined to be identified because the talks are confidential. XL’s market value shrank to less than $2 billion yesterday from more than $20 billion a year ago, making it more affordable for rivals including Everest Re Group Ltd., Zurich Financial Services AG and Ace Ltd. The shares dropped 13 percent.
The property and liability underwriter, whose founding in 1986 helped establish Bermuda as the world’s insurance capital, has been buffeted this year by losses stemming from the global credit crisis and downgrades from three major credit-rating companies. Chief Executive Officer Michael McGavick, who took charge in May, pledged an end to “big mistakes.”
“The company is under a lot of pressure, and a sale to a better capitalized firm would alleviate a lot of their problems,” said Paul Newsome, a Chicago-based analyst at Sandler O’Neill & Partners. “The first companies you would look for would be other Bermuda companies.”
XL dropped 73 cents to $5.06 at 11:33 a.m. in New York Stock Exchange composite trading, after rising as much as 28 percent earlier today.
“It’s not XL’s policy to comment on market rumors and speculation,” XL spokeswoman Carol Parker Trott said.
Melissa Daly, a spokeswoman for New York-based Goldman Sachs, declined to comment, as did Ace’s Stephen Wasdick. Spokespeople at Bermuda-based Everest and Zurich Financial didn’t immediately respond. more