News that Bermuda-based insurance giant XL Capital Ltd. will axe jobs in a bid to trim its operating costs sparked concern last night.

How many jobs will go and where in the global organisation is not clear, but the company intends to trim more than $100 million from its operating expenses.

"This expense reduction will involve all parts of the organisation geographically but the primary emphasis will be on streamlining corporate functions," XL's chief executive officer Mike McGavick said.

"This will be achieved through job eliminations, increased outsourcing and the cessation of certain projects and activities."

Although there was no word from the company on how Bermuda might be affected, Shadow Minister of Finance Bob Richards said he expects job cuts here.

"It's a matter of some concern. I think they have a pretty sizeable complement of staff here so it would be very surprising if the job cuts were in other parts of the operation and not in Bermuda," he speculated.

However, Mr. Richards, who is chairman of Bermuda Asset Management, added: "We will just have to see how this unfolds. There's no sense jumping the gun."

Finance Minister Paula Cox said: "There is no information available at this stage as to what impact, if any, organisational change will have on the company's operations in Bermuda.

"Undoubtedly, if there is to be any significant impact on jobs for Bermudians and the company's Bermuda operations, the relevant discussions will be held with the Bermuda authorities. However it is premature to speculate at this stage in the absence of such discussions and hard data."

The news came as XL announced it will pay $1.78 billion to try to put its Security Capital Assurance (SCA) problems behind it.

XL's agreement with SCA is expected to take effect next month and the massive payment to the bond insurer will eliminate 98 percent of potential costs tied to SCA.

XL expects to take a charge of around $1.5 billion relating to the agreement in the third quarter.

In its second-quarter earnings statement last night, XL said it would sell $2.5 billion in securities to pay for the agreement.

The sub-prime mortgage crisis has hit SCA, as the value of the mortgage-backed bonds it insures have plummeted.

"We have delivered on the commitment to put the Security Capital overhang firmly behind us," Mr. McGavick said.

Chief operating officer Henry Keeling is to retire from XL, effective this Friday, the company added.

Mr. Keeling had openly expressed his interest in replacing Brian O'Hara as CEO in May, but the board opted to bring in Mr. McGavick from outside the company.

XL announced that it made a profit of $237.9 million in the April through June period, compared to $554.6 million in the same period a year earlier.

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