XL Capital?s leadership came under attack last night from a Citigroup analyst who suggested recent costly acquisitions may be the final straw for a management change.

The CBS Marketwatch story emerged last night just hours after XL Capital Ltd. announced plans to sell $2.15 billion of shares and $650 million in equity security units. The company plans to use the proceeds for ?the replenishment of the capital base? to offset losses from the 2005 Atlantic hurricane season and an expected $830 million loss for disputed claims against its Winterthur insurance businesses.

According to CBS Marketwatch, Citigroup analyst Ron Frank said in a note to clients last night that big acquisitions ? including the purchase of several Winterthur insurance businesses and NAC Re ? which built XL into a leading reinsurer turned out to be much more expensive than expected.

A spokesperson for XL Capital last night said: ?Brian O?Hara has the full support of the company and is totally committed to the stewardship of XL Capital, which is why he is out raising capital for it at the moment.?

In late November, S&P downgraded XL?s main financial strength ratings to A-plus from AA-minus and yesterday, Mr. Frank wrote: ?Mr. (president and CEO Brian) O?Hara?s credibility is in poor shape, not only with investors but also, judging from its public comments, with [rating agency] Standard & Poor?s.?

He continued: ?XL has, in hindsight, paid far more for two of its largest acquisitions than was contemplated at the time these deals were struck, with both on Mr. O?Hara?s watch.?

?This may be the last straw that causes a top management change, which would begin restoring credibility and therefore be positive for the stock,? Frank said.

XL, which suffered $1.05 billion net loss in the third-quarter after big hits from Hurricanes Katrina and Rita, estimated its loss from Hurricane Wilma which hit Florida in October at $210 million.

Management now intends to recommend a cut in its quarterly dividend to 38 cents per share from 50 cents. Mr. O?Hara said in a a statement that the action was taken as part of the company?s previously announced capital planning initiatives to ?maintain XL?s financial footing and take advantage of the property and casualty marketing conditions.?

The company also announced yesterday that John M. DiBiasi has been appointed president of a new Excess & Surplus unit dedicated to providing primary casualty coverages to mid-size and large businesses. It will also have the capacity to provide property and umbrella business.

Clive Tobin, chief executive responsible for XL Capital Ltd.?s insurance operations said: ?This is a natural evolution for XL Insurance operations. Our Bermuda and Dublin origins very much reflect an E&S culture.?

A.M. Best and Fitch were quick to react to XL?s capital raising plans yesterday with A.M. Best Co. assigning indicative debt ratings of a- to senior unsecured debt, bbb+ to subordinated debt and ?bbb? to preferred stock.

A.M. Best said that XL Capital?s financial strength rating of A+ and its existing issuer credit and debt ratings would remain unchanged despite an expectation that XL Capital will record an $830 million charge in the fourth quarter of 2005 on the Winterthur decision. The company?s ratings were previously placed under review with negative implications in September 2005 and as part of the under review process, A.M. Best said it will assess these various charges and XL Capital?s total recapitalisation plan and consider XL Capital?s ongoing earnings capability in light of the anticipated improvement in the property insurance and reinsurance segments, the ratings agency said.

Fitch Ratings assigned a rating of A- to the proposed offering of $650 million of equity security units. The rating is equivalent to XL?s long term issuer rating and the rating on XL?s existing senior debt obligations. Fitch downgraded XL?s long-term issuer, debt, and preferred securities ratings by one notch on October 26, 2005 on volatility from third quarter 2005 losses.

Fitch said that at the time of the downgrade, Fitch expected XL to execute capital raising and it also expected that XL?s capital market activity would not materially increase holding company financial leverage, issuing largely common equity and equity-like hybrid securities. These expectations will be met with the completion of this securities offering, Fitch said.

Shares of XL gained $2.32 to close at $68.70 in New York Stock Exchange composite trading.