XL Capital, a Bermuda-based global insurer, late on Wednesday said it expects to post a fourth-quarter loss of $830 million after being put on notice that an actuarial decision related to its reserving for a 2001 acquisition is likely to go against it.

The development comes on the heels of XL posting a $1.05 billion loss in the third quarter, after heavy storm losses from an unusually active Atlantic hurricane season.

XL's anticipated fourth quarter loss relates to a drawn-out dispute over how much money it is due from Credit Suisse, which sold it the property and casualty parts of insurer Winterthur three years ago.

XL wanted more money from the financial services giant to meet claims from prior-year policies it acquired under the 2001 acquisition. In total, XL sought $1.45 billion to boost a reserve fund related to its purchase of the property-casualty business of the Swiss insurer. Credit Suisse argued its estimates indicated $550 million would be an adequate payment.

Each side was so certain their estimate was right that they moved to resolve the issue through a process called 'baseball arbitration'.

Under this process, an independent actuary is given the task of assessing how much should be held in reserve for claims from policies previously sold by Winterthur.

The stakes were high: Both sides agreed that if the actuary's estimate was closer to XL's demand, Winterthur would have to pay. And conversely, Winterthur would have to pay a total of $541 million ? $550 million less $9 million due from XL ? if the estimate was closer to its figure. This week's announcement relates to a draft report being issued. The official ruling is due to be made on December 5, with the actuary reserving the right to adjust the reserve calculation if any "manifest errors" are found, Press statements issued by both parties indicated.

Interest is due on Winterthur's payment, accrued between June 30 2004 and September 2005, plus $6 million more to XL, after a recent increase agreement.

In all, Winterthur is due to pay XL in the region of $575 million within days of the final ruling.

The actual actuary's estimate of where how much the reserve fund should hold was not revealed by either XL or Credit Suisse.

XL said previously it could have to boost its reserves by $900 million if it the arbitration decision went against it.

The negative ruling could raise questions over chief executive Brian O'Hara's future prospects with the company. Investors already disgruntled with management, which had assured it its Winterthur estimate was sound, could push for Mr. O'Hara's ouster.

A source said Mr. O'Hara has "very recently" been "depressed", likely because of concerns his days with the company could be numbered. XL posted a $1.05 billion loss on November 1 after being hit by some $1.47 billion in third-quarter claims, both because of record catastrophes like August 29's Hurricane Katrina, and continued adverse loss reserve development.

Mr. O'Hara also came under fire in the second quarter after having to boost reserves related to claims for professional liability and corporate board insurance policies sold in years past.

XL's move to raise its reserves reduced second-quarter profit by more than $180 million.

Michael Paisan, an investment analyst with Legg Mason Wood Walker, said in July that he'd "lost all confidence in management".

While numerous insurers have been forced in recent years to boost reserves for mounting claims related to casualty policies sold in years past, XL's second-quarter reserve boost was especially unwelcome because management had earlier told investors the reserve deficiencies were fixed.

In July Mr. O'Hara said he was "disappointed" at having to boost reserves again and acknowledged investors had "zero tolerance for any further adjustments".

XL has seen adverse loss reserve development, largely related policies sold by its US operations, of $267.6 million in 2004, $937.3 million in 2003 and $400 million in 2002.

No one at the company could yesterday be reached for further details on what the negative outcome of the settlement with Winterthur could mean for the company, or management. Attempts to reach someone for comment were made by telephone and e-mail.

The company's Bermudiana Road headquarters were officially closed yesterday for the American Thanksgiving holiday.

US markets were also closed, meaning investors could not react to the news by buying or selling XL shares on the New York Stock Exchange.

There was however speculation yesterday that XL's string of losses could put it at risk of a takeover bid.

The company's losses have weakened its capital position, forcing it to look at raising more capital.

William Wilt, a Morgan Stanley investment analyst that follows XL, said the Winterthur development was a "calamity" equal to about about 13 percent of XL's common shareholders' equity, on top of a 17 percent book value loss in the third quarter.

And ratings agency Standard & Poor's warned the possibility of the Winterthur reserve valuation decision going against XL could result in it taking a negative rating action on the company's various ratings.

However, another ratings firm, Fitch & Co., said it did not expect to make any additional ratings actions after downgrading various XL ratings on October 26.

While Fitch affirmed its XL ratings, it said this was contingent on capital being raised. Expectations are that XL will boost capital through the sale, in the near-term, of equity or equity-like hybrid securities.