Outperform - Price 16.85 on Sept. 8
by FBR Capital Markets

[XL's four main segments are insurance, reinsurance, life operations and other financial lines...supported by investments and global-business and corporate services.] We are raising our target to 21 from 18 and reiterating our Outperform rating following our analysis of potential write-ups in XL's investment portfolio....The first two months of 3Q09 have been quite favorable for insurers with large investment holdings....Government and muni bonds are up quarter-to-date, while structured credit and corporate securities have performed especially well....XL's investment leverage of 5.2 times is one of the highest among insurers we cover. [Its] investment portfolio has large holdings of corporates and structured credit, the two major asset classes that have appreciated most in the quarter...we estimate that XL's investment portfolio has appreciated by about $776 million, giving book value a 12% boost in the first two months of the third quarter....After taking into account earnings and dividends, we estimate that XL's book value will increase about 15% (17% for tangible book value) if the markets remain flat for the rest of the quarter. We calculate that book value and tangible book value are currently around $21.70 and $19.23, respectively. Market cap: $5.8 billion.

Hold - Price 5.69 on April 8
by Sandler O'Neill

We're raising our price target to $6 from $5.50. Our new target contemplates a price-to-book value multiple of about 40% applied to a projected book value (excluding goodwill) of $14.67 one year from now...Other small-cap property-casualty insurers are trading at about book value. We believe XL deserves a discount to the group, given its historical troubles and earnings volatility. Consistent with most property-casualty insurers, we expect XL's book value will have risen in the first quarter as operating earnings more than offset losses in the financial markets. 2008 EPS was minus $2.41. 2009-E EPS is [plus] $1.75. Market cap: $1.9 billion.

Buy - Price: 10.70 on Oct. 14
by Sandler O'Neill

We are maintaining our Buy rating following XL's pre-announcement of third-quarter earnings. We are revising our 2008 operating EPS estimate to a loss of $2.15 from a loss of $3.01 to account for the third-quarter earnings and to reflect [an error in our previous estimate]. Our 2009 EPS estimate is unchanged at $2.77. The most important development from XL's pre-announcement is that there does not appear to be any immediate need for XL to raise capital.... We were slightly disappointed with XL's earnings: it reported a $1.65 to $1.67 billion loss. Our estimate was $1.57 billion. This net income loss equates to $6.08 to $6.17 per share. We estimate operating EPS (which excludes net realized investment losses) at a loss of $4.83. We were looking for a loss of $4.67 per share.... Target share price: $18. Market cap: $1.58 billion.

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So you can wreck XL Capital (XL) and Prudential (PRU) and Morgan Stanley (MS) and MetLife (MET) and KeyCorp (KEY) and Fifth Third (FITB) and Nat City (NCC) -- takeover, who are you kidding? -- in a matter of weeks.

XL's valuation looks like a misprint, at three times estimated '09 profits and half of book value. The stock is down 56% this year, to 20, on fear the company may have to pump billions of dollars into Security Capital Assurance (SCA), a troubled, MBIA-like financial-guaranty company whose stock has plunged 84%, to 63 cents, this year. SCA was spun off by XL in 2006.

Goldman Sachs said it is upgrading XL Capital (XL) to Buy from Neutral based on valuation. See shares trading close to book value and note that probability of SCA worst case scenario remains low. Price target raised to $40 from $33.

Rating on XL Capital (XL) was cut from Overweight to Neutral, JP Morgan said. Credit will likely continue to be a factor, and the fundamental outlook is weaker than expected.