Fitch Assigns 'AA' IFS Rating To XL Capital Ltd. Subs

Business Wire, Jan 17, 2002

Business Editors

CHICAGO--(BUSINESS WIRE)--Jan. 17, 2002

Fitch has assigned a 'AA' insurer financial strength rating (IFS) to a number of XL Capital Ltd.'s (XL) insurance subsidiaries.

These subsidiaries include the organization's primary insurance subsidiary, XL Insurance Ltd. (XL Insurance), and its primary reinsurance subsidiaries XL Re Ltd. (XL Re) and XL Reinsurance America, Inc. Fitch also upgraded the IFS rating of XL Re Latin America Ltd. to 'AA' from 'A', reflecting its position as a wholly owned reinsurance subsidiary of XL, and affirmed the 'AA' IFS rating of recently acquired XL Winterthur International Insurance Co. The Rating Outlook is Stable.

XL is a Bermuda-based holding company with subsidiaries providing insurance, reinsurance and specialty financial products and services on a worldwide basis. The company reported consolidated GAAP assets of $25.7 billion and shareholders equity of $4.8 billion at Sept. 30, 2001.

The ratings reflect XL's consolidated position within the global insurance and reinsurance markets, history of favorable underwriting and earnings performance, conservative investment policies, adequate loss reserves, and strong capital position at the insurance subsidiary and parent holding company levels.

While XL has historically produced underwriting results and operating profits that exceed industry norms, results for 2001 have deteriorated significantly due mainly to losses related to the events of September 11. XL reported consolidated GAAP pretax insured losses from the September 11 events of $1.8 billion gross and $750 million net of reinsurance. XL reported a net loss of $492.5 million in the first nine months of 2001, compared with net income of $505.7 million in the first three quarters of 2000.

To offset losses related to the events of September 11, XL completed an issuance of 9.2 million shares of common stock at $89 per share in November 2001 that raised net proceeds of approximately $788 million.

Also, in January 2002, XL issued $600 million of 10 year notes through a fully guaranteed European subsidiary. Approximately $350 million of the proceeds from this offering were used to retire bank debt, with the remainder used for general corporate purposes. Following these capital raising initiatives, XL's pro forma debt-to-total capital ratio is approximately 24.5%, which is above long-term targets. Financial leverage is expected to decline in the near term to around 21%-22% through growth in retained earnings.

Fitch believes that in the aftermath of the events of September 11, the property/casualty insurance market will be characterized by rapidly rising prices, diminished capacity and a flight to quality. Fitch further believes that XL's capital position, underwriting franchise and financial strength, positions the company to significantly benefit from improving insurance market conditions. Operating results are expected to return to previous historical levels in 2002, barring any other unusual large catastrophic events.

Entity/Issue/Type              Action       Rating/Outlook

XL Insurance Ltd.
--Insurer financial strength   Assign       'AA'/Stable.

XL Re Ltd.
--Insurer financial strength   Assign       'AA'/Stable.

XL Winterthur International Insurance Company Limited
--Insurer financial strength   Affirm       'AA'/Stable.

XL Winterthur International Switzerland
--Insurer financial strength   Assign       'AA'/Stable.

XL Re Latin America Ltd.
--Insurer financial strength   Upgrade      'AA'/Stable.

XL Europe Limited
--Insurer financial strength   Assign       'AA'/Stable.

XL America Pool:

XL Reinsurance America Inc.
--Insurer financial strength   Assign       'AA'/Stable.

XL Insurance Co. of NY
--Insurer financial strength   Assign       'AA'/Stable.

XL Specialty Insurance Co.
--Insurer financial strength   Assign       'AA'/Stable.

Indian Harbor Insurance Co.
--Insurer financial strength   Assign       'AA'/Stable.

Greenwich Insurance Co.
--Insurer financial strength   Assign       'AA'/Stable.

XL Winterthur International Insurance Company
--Insurer financial strength   Assign       'AA'/Stable.

XL Winterthur International America Underwriters Insurance Company
--Insurer financial strength   Assign       'AA'/Stable

XL Capital Assurance Inc.
--Insurer financial strength   No Action   'AAA'/Stable.

XL Financial Assurance Ltd.
--Insurer financial strength   No Action   'AAA'/Stable.

XL Capital Ltd.
--Senior Debt                  No Action   'A '/Stable.