major US brokerage houses yesterday.

Alice Schroeder, one of the most well respected insurance industry analysts from the brokerage house Morgan Stanley Dean Witter, yesterday said she wholeheartedly approved with the downsizing changes made by XL.

"We view this as very positive,'' she said, "and as a result have raised our estimate for 2002 and given a price target of $90 per share''.

Ms Schroeder said that her company's prediction prior to yesterday's announcement was $85 per share. "XL was overdue for a re-organisation because of the cobbling of recent mergers,'' she added.

"We are particularly impressed with the size of the cost savings the changes bring. At 45 cents a share by 2002 that is about 10 percent of what XL shares are worth today.'' Ms Schroeder is in Bermuda attending the 14th International Reinsurance Congress at the Fairmont Southampton Princess.

Favourable ratings from Lehman Brothers were released at the end of September and indications from industry experts is that those ratings can only improve with yesterday's news.

Lehman Brothers gave XL Capital a 2 Outperform rating and an $85 price target in that report.

"We believe that the combination of an improving reinsurance market, on the heels of an improving commercial insurance market, a solid balance sheet, and a solid reputation will allow XL to garner a premium multiple to its offshore reinsurance peers and a multiple in line with its large capitalisation property/casualty reinsurance peers,'' the report said.

Lehman Brothers said the price target considered a 180 percent price-to-book multiple compared with its large cap peers of 189 percent. The ratings agency noted that stock is currently trading at 165 percent of book value and 16 times 2000 earnings.

Lehman Brother credited XL with being "one of the better plays in a hardening reinsurance market'' because a large percentage of its business is reinsurance, its reinsurance business is an outstanding performer compared with other reinsurers and because of its "good track record and reputation''.