XL Capital Ltd. said last night it expected to report more than $200 million in losses from its alternative investment portfolio for the fourth quarter. And the company added that its fourth-quarter losses so far would be "largely in line with" third quarter losses.

The figures were released as the Bermuda-based insurer put out a statement shortly before 9.30 p.m. in response to a Bloomberg story that claimed XL was "seeking a buyer after reporting investment losses larger that its market value" (see page one).

The story cited four people with knowledge of the situation suggesting that XL had hired Goldman Sachs to gauge potential buyers.

The company's share price at first rocketed on the news, but moments later plunged to $2.83, the lowest level in the company's 17 years as a public company. It recovered to reach $3.90, down by 33 percent, by the close of trading in New York.

"While it is generally not XL Capital Ltd.'s policy to comment on market rumours, the company believes in the current circumstances it is appropriate to do so," XL's statement read.

"The company remains focused on operating its business and meeting the needs of its customers and is committed to taking actions as necessary to maximise value for its shareholders.

"In that regard, as can be expected in the current environment, the company is continuing to explore value-enhancing opportunities available to it and is being assisted in that effort by one of its long-standing financial advisors, Goldman, Sachs & Co."

XL also issued guidance on investment portfolio developments since the end of the third quarter.

"Based upon the most recently available information, the company anticipates that the estimated mark-to-market decline on its investment portfolio (comprised of changes in unrealised losses, other than temporary impairments and realised losses on securities sales) due to changes in credit spreads and interest rates since the end of the third quarter of 2008 to date would be largely in line with that reported for the third quarter of 2008," XL stated.

In the third quarter, XL reported $292.9 million in investment losses, while unrealised losses were $2.59 billion.

"The company notes that future market movements will occur between now and the end of the fourth quarter of 2008, and such movements will affect the mark-to-market on the investment portfolio that the company will report for the fourth quarter of 2008.

"In addition the company estimates that it will report approximately $200 to $220 million in net investment fund affiliate losses from its alternative investment portfolio for the fourth quarter of 2008 (covering September, October and November)."