XL Capital will take a $647 million charge against its fourth-quarter earnings to shore up its reserves and will issue at least $750 million of capital to pay for it.

The Bermuda-based insurer made the announcement last night after reviewing contracts sold between 1997 and 2001 by NAC Re Corp., an American reinsurance company XL bought for $1 billion in 1999. Claims against North American reinsurance contracts written in the late 1990s have mounted recently, forcing reinsurers such as XL to pay out more than they had expected.

The pre-tax charge will total $694 million, of which $663 million is designated for North American reinsurance claims. The insurer also said it would increase the reserves for its other lines of business by a pre-tax amount of $31 million after conducting its usual year-end review of reserves.

As a result of the reinsurance charge, the company said its fourth quarter results would be affected by $4.73 per share. Wall Street analysts, on average, had expected the company to earn $2.15 per share in the fourth quarter, according to Reuters Research. XL's fourth-quarter results are scheduled for release on February 10.

The amount of the charge exceeded some analysts' expectations, in one case by more than half. Jay Gelb of Prudential Equity Group predicted last week that XL would report a $500 million after-tax charge and Jay Cohen, an analyst at Merrill Lynch, said the reserve study could result in a $400 million charge to the fourth quarter.

XL said it would raise the capital in the first half of this year, principally through mandatory convertible securities ? bonds which holders can convert into other instruments, typically the common stock of the issuer.

Problems for XL began in the third quarter of last year, when tort and malpractice claims started to affect XL Re. In October, XL took a $160 million after-tax charge against third-quarter earnings to pay for potential claims in its North American business for medical malpractice and professional liability.

In a conference call with investors at the time, chief executive officer Brian O'Hara pledged an intensive audit designed to quantify the firm's exposure and said this was "among the worst in the industry's history" given "the marked expansion of liability in the US tort system".

Mr. O'Hara and other executives will discuss the charge in a conference call at 10 a.m. today.

Other insurers of US risks have also made significant additions to their reserves. In 2002, ACE added $514 million to its reserves to cover liabilities resulting from its acquisition of Cigna's US business (now ACE INA) and Westchester Specialty.

Scor, the French reinsurer, reported a $415.9 million third quarter loss as a result of bolstering its claims reserves for US exposures it underwrote in the late 1990s.

CNA Financial Corp., an American company, also took huge reserves charges.

Mr. O'Hara said he did not expect the reinsurance claims to affect the results of future quarters.

"We have changed the actuarial development patterns that normally would have applied to the expected loss development of this business," he said in a statement.

XL's stock price fell 0.22 percent to $77.85 yesterday as investors awaited the reserve announcement, which was made after the markets closed.

After XL said it would review its reserves in October, the share price dropped from about $80 to below $70, but has since largely recovered.

During that period, Janus Capital Management ? once XL's sixth-largest shareholder ? sold most of its stake in the insurer, Bloomberg reported. Janus reduced its XL holding to 315,625 shares as of December 31, according to a filing with the Securities and Exchange Commission. Three months earlier, the money manager held 4.77 million shares, according to filings compiled by Bloomberg. Janus owned 6.11 million shares on June 30.

Last week, the investment bank UBS downgraded its rating for XL from "buy" to neutral.