NEW YORK (Bloomberg) — XL Capital Ltd., the Bermuda-based business insurer whose stock has lost more than half its value in the past year, advanced in New York trading after Goldman Sachs Group Inc. placed the company on its "conviction buy list."

The current value of the shares assumes a "worst case scenario" in which bond insurer Security Capital Assurance Ltd., partly owned by XL, goes out of business, Goldman analysts including Thomas Cholnoky said today in a research note.

Michael McGavick, who becomes chief executive officer May 1, is trying to reassure investors that risks from subprime mortgages are in the past after a $1.2 billion loss in the fourth quarter when XL wrote down the value of investments including a stake of more than 40 percent in Security Capital. McGavick will focus on selling more property and casualty coverage outside the U.S.

XL rose $1.45, or 4.3 percent, to $34.88 on Tuesday in New York Stock Exchange composite trading.

The insurer last week posted a first-quarter profit of $244.4 million. Security Capital said in March it will stop writing new business and scrap its dividend after claims on collateralized debt obligations surged.

"Given the low probability of Security Capital ceasing to exist near-term, there exists a tremendous risk/reward profile" for XL investors said Cholnoky, who estimates the company may rise about 20 percent from Wednesday's close to $40 in 12 months.