Fitch Affirms XL Capital Ltd Ratings, Outlook Stable

Business Wire, Nov 24, 2005

LONDON -- Fitch Ratings affirms the ratings of XL Capital Ltd (XL) and its property/casualty (re)insurance subsidiaries, including the 'A-(A minus)' Long-term issuer rating for XL, and the 'AA-(AA Minus)' Insurer Financial Strength ("IFS") rating of lead (re)insurance companies XL Insurance (Bermuda) Ltd and XL Re Ltd. The ratings of XL's financial guaranty affiliates are also affirmed at 'AAA'. The Rating Outlook is Stable. All ratings are listed below.

The action follows XL's announcement of an unfavorable indication from a draft report regarding the independent actuarial review of the net reserve seasoning amount relating to XL's 2001 acquisition of certain Winterthur International insurance operations. XL estimates that based on these findings, and barring the finding of any manifest errors in the draft report, the company will report a loss of approximately $830 million in Q405.

The rating action is based on Fitch's expectation that XL will promptly implement capital raising actions to offset the impact of this Q4 loss, as well as a substantial portion of recent catastrophe related losses. Fitch anticipates that the capital will be raised largely with equity or equity like hybrid securities, such that holding company financial leverage does not increase materially.

Fitch downgraded XL's Long-term issuer, debt and preferred securities ratings, as well as the IFS ratings of its property/casualty (re)insurance subsidiaries by one notch on October 26, 2005. This action followed XL's announcement that net losses from Q305 catastrophe events, including Hurricane Katrina, were approximately $1.47 billion, and was based largely on longer term operating returns on capital and earnings volatility that were not consistent with the previous rating category. This volatility was primarily attributable to catastrophe losses and adverse loss reserve development through the last several years. The potential for an unfavorable result in the independent actuarial review process was also considered when the rating action was taken.

Going forward, XL is taking some measures to reduce catastrophe exposures and earnings volatility. To sustain the current ratings, it is important for XL to return to more consistent operating profitability.

XL is a Bermuda headquartered holding company with subsidiaries providing insurance, reinsurance and specialty financial products and services on a worldwide basis. The company reported consolidated GAAP assets of $54.9bn and shareholders equity of approximately $7.0bn at September 30, 2005.

ENTITY

XL Capital Ltd Long-Term Issuer Rating Affirmed at 'A-' rating Outlook Stable

Fitch ratings for the following XL Capital Ltd related securities issues are affirmed at 'A-' (A minus) rating Outlook Stable

XL Capital Ltd

$100 Million 7.15% Senior Notes Due 2005

$594 Million 5.25% Senior Notes Due 2014

$825 Million 2.53% Senior Notes Due 2009

$350 Million 6.375% Senior Notes Due 2024

XL Capital Finance (Europe) PLC

$255 Million 6.58% Senior Notes Due 2011

$600 Million 6.50% Guaranteed Senior Notes Due 2012

Fitch ratings for the following XL Capital Ltd securities issues are affirmed at 'BBB ' rating Outlook Stable

8% Series A Preference Ordinary Shares

7.625% Series B Preference Ordinary Shares

Fitch Insurer Financial Strength Ratings (IFS) of the following XL Capital Ltd insurance subsidiaries are affirmed at 'AA-' rating Outlook Stable

XL Insurance (Bermuda) Ltd

XL Re Ltd

XL Insurance Switzerland

XL Re Latin America Ltd

XL Europe Ltd

XL America Pool

XL Reinsurance America Inc.

XL Insurance Company of New York, Inc.

XL Specialty Insurance Company

Indian Harbor Insurance Company

Greenwich Insurance Company

XL Insurance Company Limited

XL Select Insurance Company

Additionally, Fitch affirms the following XL financial guaranty related ratings with a Stable Outlook:

XL Capital Assurance Inc.

--IFS 'AAA'.

XL Financial Assurance Ltd.

--IFS 'AAA'.

Twin Reefs-Pass Through Trust

-- Long-term 'AA'.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.