Moody's Wants XL Unit To Grow Slowly

By Allison Bell

January 16, 2004 at 07:00 PM

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NU Online News Service, Jan. 16, 2004, 3:56 p.m. EST – Moody's Investors Service, New York, wants XL Capital Ltd., Hamilton, Bermuda, to take a patient approach to expanding its new funding agreement unit.[@@]

Moody's has given the unit, XL Life Insurance and Annuity Company, an Aa3 insurance financial strength rating. The rating is 1 notch lower than Moody's rating for XL Capital.

XL Life Insurance appears to have a good capital position and a conservative investment philosophy, but it will be relatively small compared with other players in the funding agreement market, and it will be ceding about 90% of the funding agreements it writes to XL Capital affiliates, Moody's says.

The new rating reflects Moody's expectation that the XL Life Insurance unit "will grow its block of business in a controlled manner" and "maintain strong capital levels," Moody's says.

A funding agreement is a contract that guarantees payments of principal and accumulated interest for an institutional client.

The XL Life Insurance unit previously was Lyndon Life Insurance Company, an Illinois-based stock company.

The old Lyndon Life was a reinsurer and credit life insurer controlled by ITT Corp., New York. Mercury Finance Company, Chicago, bought Lyndon Life in 1995, then sold it to Frontier Insurance Group Inc., Rock Hill, N.Y., in 1997. Frontier agreed to sell Lyndon Life to Protective Life Insurance Company, a unit of Protective Life Corp., Birmingham, Ala., in 1999.

XL Life and Annuity Holding Company, a unit of XL Capital, bought Lyndon Life in March 2002 and gave the company its current name in September 2002.

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