Bermuda-based insurance giant XL Capital's share price yesterday lost more than half its value as US blue-chip stocks hit their lowest level in five years.

After an analyst raised concerns about XL's investment portfolio, the company's share price nosedived to $4.01 — XL's lowest closing price in the 17 years since the company floated on the New York Stock Exchange. A year ago XL was trading at $81.

On Wall Street, the Dow Jones Industrial Average plunged more than seven percent, as a massive late-afternoon sell-off saw the index of 30 leading companies shed 679 points to close on 8,579. The huge loss came on top of the 15 percent the Dow had already lost during its previous six losing sessions.

As the credit squeeze showed no signs of loosening its choking grip on the global economy, a White House spokesman confirmed that the US Treasury was considering injecting cash directly into American banks.

Finance ministers and central bankers from the Group of Seven major industrial nations will meet in Washington today to discuss the deepening crisis.

European stocks finished down about two percent after trading higher for much of the day, while most Asian stocks finished up.

What may have sparked the XL sell-off — at one point yesterday the company hit an all-time low point of $3.45 — was the insurer's removal from the Goldman Sachs' "conviction buy" list yesterday on "concern regarding the quality of XL's investment portfolio".

Sandler O'Neill & Partners analyst Paul Newsome cut his XL stock-price estimate to $18 from $22 on declines in the value of bond and equity holdings.

"People are concerned, particularly for XL," Mr. Newsome, based in Chicago, told Bloomberg. XL's investment management "has been poor. It's a combination of being a little more risky than their peers. And they seem to get themselves into issues," including greater-than-average losses on holdings in financial institutions earlier this year, he said.

However, Mr. Newsome still held a "buy" recommendation on the stock, and said the leadership of chief executive officer Michael McGavick, who succeeded Brian O'Hara in May, "bodes well for XL's future".

There was heavy trading in XL, as some 41 million shares changed hands — around five times the normal volume.

XL announced in August it would be trimming its local workforce by 47 staff in order to streamline its operations and focus on its core insurance and reinsurance business. The company did not respond to a request for comment yesterday.

XL was not the only Bermuda company to suffer a huge fall — financial guarantor Primus Guaranty fell 57 percent after it said it had exposure to $68 million worth of debt insurance policies, known as credit default swaps, with a collapsed Icelandic bank.

And reinsurer Validus lost 19 percent of its market value after it estimated it would incur losses of some $185 million related to hurricanes Ike and Gustav.

Another insurer, Max Capital, plunged 30 percent, while embattled American International Group, which employs more than 200 people in Bermuda, lost a quarter of its value to close on $2.39. AIG, the beneficiary of an $85 billion bailout by the US Government last month, announced on Wednesday evening that the US Federal Reserve would provide another $38 billion in liquidity to the company.

Many more Bermuda international companies saw double-digit declines as investors deserted the insurance sector in droves. Aspen and IPC fell 13 percent, Allied World 14 percent, and Endurance and Ace both fell 15 percent.

Shares of US automobile giant General Motors fell 33 percent to $4.65 — their lowest point since 1929.

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