You are buying the XL spin just as they hoped you would. They're practicing for the board meeting that will decide on bonuses. Conservative reserving includes properly estimating reinsurance cessions (among many other things) and XL would have been right/conservative/accurate/good on its reserves only if it had assumed a much lower recoverable, in fact $830 million lower.
You are clearly less than familiar with the facts in this matter, and you should read up before you demonstrate your lack of due-diligence.
In this case, the salient fact is that the purchase of the Winterthur unit came with the seller's guarantee of reserve adequacy. As has been the practice for more than 20 years, this guarantee was effected through a reinsurance contract. That contract, with the seller as reinsurer, provided that all adverse development, 100%, would be be covered by the seller. However, as we have known, there were caveats that required agreement on the amount of development that occurred. If there was no agreement, then there would be arbitration.
Again, if it is still not clear to you, XL Capital "observed" $1.4 billion of adverse development, that it booked to its gross reserves. It then booked an equal $1.4 billion of reinsurance recoverable that it believed was owed by the seller (Credit Suisse) unter the guaranty contract.
Once again, the seller (Credit Suisse) objected to the $1.4 billion and won an arbitration that said it only owed $0.6 billion. And again, while XL Capital now has to write down the recoverable THAT IT HAD ANTICIPATED FROM THE WINTERTHUR SELLER, it cannot RESPONSIBLY draw down the reserves.
Once again, in case it is still not clear to you, XL Capital, for whatever it is worth, can make the case that in this specific case, if in no others, it has reserved ON A GROSS BASIS more conservatively than it might otherwise have had to.
Next time, please try to come to the table more informed before you shoot your mouth off. There are plenty of other points for you to justly criticize this company's management.