XL shares continue slide, hit new all-time low

Associated Press
October 9, 2008 1:10 pm ET

NEW YORK (AP) -- The yearlong slide in shares of XL Capital Ltd. continued Thursday as worries about the health of the insurance sector ratcheted up.

XL shares dropped as low as $3.45, their lowest point since their 1991 debut on the New York Stock Exchange. They recently traded down $4.77, or 55 percent, at $3.91.

The Bermuda-based insurance and reinsurance company had its price target cut by Sandler O'Neill & Partners before the market open, as analyst Paul Newsome expressed concern about the company's fixed income and equity investments for the third quarter. He noted XL Capital's investment portfolio holds more mortgage- and asset-backed bonds than other insurers, representing about 32 percent of the company's fixed-income portfolio at the end of the second quarter.

He reduced his share price target to $18 from $22, in part to reflect dilution due to the company's move to raise $2.88 billion through new stock offerings during the summer.

Newsome noted he was not yet making adjustments for the sharp market declines in the five trading days since the quarter ended. During that time, the Standard and Poor's 500 Index, which includes XL Capital, fell 15.7 percent.

On the positive side, Newsome said the stock is now inexpensive, and he said the track record of Chief Executive Michael McGavick, who took the helm in May after successfully turning around Safeco Insurance, "bodes well for XL Capital."

He maintained a "Buy" rating on the stock.

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