APOLOGIES FOR THE INCORRECT HEADING ! It should read,
XL will be buried by its counterparty exposure to SCA
The two principal risks which will bury XL relate to its relationship with SCA.
XL cannot wash its hands of SCA by the IPO. SCA is ‘managed’ by XL and is inextricably linked via various agreements. As a result XK is the major creditor to SCA and has the greatest counterparty risk on SCA.
XL has already written off its investment in SCA and it must be only a matter of time until SCA seeks Chapter 11 protection. However, the key impediment to this is that XL is conflicted as it is a major creditor of SCA and hence XL would be adversely impacted by bankruptcy protection – more on this later.
XL’s major exposure to SCA is via guarantees and reinsurance provided to SCA. XL provides guarantees to SCA in relation to activities prior to IPO which were around $70bn of which circa $19bn are BBB or lower (31 Mar 08).
XL also provides certain reinsurance protections to SCA. As at 31 Mar 08, XL’s total net exposure under its facultative agreements with SCA subsidiaries was approximately $6.9 billion. XL has considerable exposure if the mark-to-market movements on SCA’s credit derivatives reinsured by XL were to widen.
Given SCA’s own position it should be seeking chapter 11 but it is run by XL and is hence massively conflicted. Whatever happens to SCA, XL will be looking after its own counterparty exposure as a creditor to SCA beyond that of its position as a shareholder. This is good for XL shareholders (and SCA debt holders) but not for SCA shareholders. The challenge for XL is navigate this conflict of interest.
XL was the most aggressive and creative insurer of sub-prime and CDO products, so recent IPO of SCA is unlikely to shield XL beyond the next 12 months.
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International standards is the shoe that the foot a few millimeters long.
Chinese standards adopt a few millimeters or centimeters. Such as: 245 millimeters,24 1/2 centimeters,that the same size.
Conversion formula:
Cm system of few × 2-10 = Europe (EU system +10) ÷ 2 = centimeters
Centimeters -18 +0.5 = US-made American +18-0.5 = centimeters
Centimeters -18-0.5 = +18 + 0.5 inch Inch = centimeters
Shoe table:
Shoes
Foot length cm 22.5 23 23.5 24 24.5 25 25.5 26
Europe EUR 35 36 37 38 39 39 40 40
U.S. US 5 5.5 6 6.5 7 7.5 8 8.5
UK UK 4 4.5 5 5.5 6 6.5 7 7.5
Men
Foot length cm 24.5 25 25.5 26 26.5 27 27.5 28
Europe EUR 39 40 41 42 43 44 45 46
U.S. US 7 7.5 8 8.5 9 9.5 10 10.5
UK UK 6 6.5 7 7.5 8 8.5 9 9.5 TREWQWTRYUTRE
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