Question-and-Answer Session
Question
Have you had any success in your reinsurance discussions? Why has there not been a more significant outgoing reinsurance session? Are terms too onerous?
Paul S. Giordano
We continue to consider reinsurance of certain components of our book of business, however, current market pricing is not attractive and the options available to us, given the state of the current market, remain very limited. Nevertheless, we intend to continue to consider reinsurance as part of our overall restructuring plan.
Question
What conversations are you having with the rating agencies? How long is the path to an upgrade, even to a AA?
Paul S. Giordano
We do not expect to restore our AAA ratings in the near-to-medium term, but we do feel that AA ratings are reasonably achievable if we can execute a significant part of our restructuring plan. The capital requirements are significantly less onerous at the AA threshold as compared to the AAA. That said, restoring our ratings to AA would also involve a broader quantitative assessment than simply capital, as well as qualitative considerations on the part of the agencies. At this point in time we can’t get any assurance that we will be able to restore our ratings to AA or higher.
Question
Any chance that XL can buy out the guarantee clause that it still has in regards to its SCA policies and how would the rating agencies react if XLCA allowed XLLI to buy out it’s agreement to guarantee XLFA’s obligations to CA on all the [inaudible] business?
Paul S. Giordano
We feel it is possible to structure an arrangement with XL that would terminate or commute XL’s exposure under its guarantee to XLCA in exchange for fair value. We have, and continue to actively pursue discussions with XL towards this end. The rating agencies’ reaction to this would likely depend on the amount and form of consideration received. We currently receive no value for the XL guarantee and rating agency capital models. However, this could change depending on future events and the outcome of our restructuring efforts if successful.
Question
Can you outline your plans to remain listed on the New York Stock Exchange?
David P. Shea
On April 14 the company met with representatives from the New York Stock Exchange and we presented the key elements of our plan, which Paul reviewed in his opening remarks. I would say that we very highly value the relationship with the New York Stock Exchange. We’ve been proactively communicating with them. We value our listing on the New York Stock Exchange and we remain committed to maintaining our listing in good standing.
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