Bermuda-based XL Capital Ltd. yesterday confirmed the company was in talks on a possible "business combination'' with NAC Re Corp., the ninth-largest US reinsurer.

Through a merger with NAC, XL would expand its reinsurance sales and gain a larger US presence. The Wall Street Journal interactive edition cited sources familiar with the discussions and stated that XL might pay $1 billion in stock for Connecticut-based NAC Re.

The purchase would give XL Capital a company with 1998 net premiums of $553.7 million and consolidated stockholder equity of $750.7 million. The purchase will also give XL a unit licensed to write policies in every US state.

The merger would create a company with about $13.3 billion in assets.

Trading in XL's shares was delayed on the New York Stock Exchange yesterday and resumed after the two companies released a statement.

NAC was cited as a possible XL takeover target four months ago. XL and Bermuda-based ACE Ltd. have been on buying sprees as the two companies attempt to keep market share in a highly competitive arena.

In a joint press release yesterday the companies said discussions are on going and declined to reveal any further details. XL president and chief executive officer Brian O'Hara said he could give no assurance that the discussions, if continued, will result in any transaction being concluded.

"XL Capital continuously looks for opportunities to increase shareholder value through economically accretive strategic transactions,'' he said. "Our discussions with NAC Re stem from our strong belief that a combination of our two companies would generate unique strategic advantages and be economically beneficial to both companies' shareholders.'' NAC writes insurance and reinsurance worldwide.

The Wall Street Journal said XL would exchange .92 shares for every NAC RE share in the deal. XL would end up paying a 27 percent premium on NAC's share price based on Friday's stock market close.

The newspaper said NAC Re had a reputation for conservative investments and reserve polices which fit XL's strategy.

XL Capital is the new name of Exel Ltd.

Exel Ltd. 1998 shopping list and new formations -- (dates reflect when announced, and not necessarily when acquired or formed) merger with Mid Ocean Ltd. ($2.1 billion) -- March 1998 purchase of Bermuda-based Reeve Court Insurance ($100 million) -- July 1998 purchase of 25 percent of US-based Tri City Brokerage, Inc. -- July 1998 Airline Risk Consortium --formed with ACE Ltd. and Overseas Partners Re Ltd.

-- September 1998 Formation of X.L. Financial Assurance Ltd. and equity interest in Financial Security Assurance International Ltd. through joint venture with Financial Security Assurance Holdings Ltd. -- November 1998 Intercargo Corp. ($88 million) -- December 1998 NAC Re, talks confirmed -- February 1999 Brian O'Hara