(Bloomberg) ? XL Capital Ltd., a Bermuda-based insurer, may take a $500 million charge to boost reserves for payments on reinsurance contracts, Prudential Equity Group analyst Jay Gelb estimated in a report.

The charge may be announced on January 13 or 14, said Gelb, who recommended that investors buy shares of the property and casualty insurer before then. XL spokesman Roger Scotton declined to comment on the report.

XL is studying whether it has enough in reserves to pay claims on reinsurance contracts sold by NAC Re Corp., a reinsurance company it bought in 1999. XL raised the unit?s reserves by $160 million in the third quarter, saying it had to investigate whether further increases were needed.

The reserve boost may cost $500 million, though a charge of as much as $750 million may ?ultimately be a positive development,? said Gelb. He also expects the company will reaffirm its profit forecast of between $9.05 and $9.25 a share in 2004, excluding realized investment gains and losses.

XL last month said it would announce the outcome of its study in mid-January.