XL Capital Ltd. and American International Group were both downgraded by stock analysts on Friday — but the two insurers received very different responses from the market.

Bermuda-based XL was downgraded from "buy" to "neutral" by Banc of America Securities. The global business insurer slumped 44 cents (4.3 percent) to close New York Stock Exchange trading on Friday at $9.70.

XL's board of directors also announced after the close of the markets that the company would pay out an unchanged quarterly dividend of 19 cents per ordinary share. The third-quarter dividend will be payable on December 30, 2008 to shareholders of record as of December 9.

Meanwhile, Andrew Kligerman of UBS downgraded AIG from "buy" to "neutral" on concerns that turmoil in the credit and equity markets is hampering the company's efforts to sell some of its businesses to pay back a huge bailout loan from the US.

Investors overlooked those concerns as the stock of AIG, which employs around 200 people in Bermuda, soared 28 cents (17.2 percent) to close on $1.91.

Mr. Kligerman said that rival insurers who might have wanted to buy AIG assets have faced their own problems, as falling stock prices and widening credit spreads eat into capital. As the sales process takes longer, the value of the businesses that AIG wants to retain keeps falling, Mr. Kligerman said. That's especially true of the company's commercial property and casualty unit, he added.

Rivals are poaching talent and clients may be leaving as insurance brokers offer business to rival insurers, which may be forcing AIG to cut prices on its policies to try to keep customers, Mr. Kligerman said.

Mr. Kligerman expects AIG to take about $25 billion in write-downs on its credit-default swap exposures when the insurer reports third-quarter results in the coming days.

On a largely positive day on the markets to end a dreadful October for Bermuda's insurance companies, bond insurer Assured Guaranty equalled AIG's 17 percent rise, climbing $1.64 to close on $11.23.

CastlePoint rose 6.5 percent, while IPC Holdings rose five percent, while Endurance and White Mountains both climbed four percent.