Fitch Affirms XL Capital Ltd Ratings; Outlook Stable

Business Wire, August 11, 2006

CHICAGO -- Fitch affirms the ratings of XL Capital Ltd (XL) and its property/casualty (re)insurance subsidiaries, including the 'A ' Issuer Default Rating (IDR) for XL, and the 'AA-' Insurer Financial Strength (IFS) rating of lead (re)insurance companies XL Insurance (Bermuda) Ltd and XL Re Ltd. The Rating Outlook is Stable. All ratings are listed below. E[acute accent]XL's ratings reflect its strong competitive position with worldwide capability in commercial insurance and reinsurance, reasonable financial leverage, solid capitalization of its insurance subsidiaries, and conservative investment portfolio. E[acute accent]Offsetting these positives are XL's earnings volatility, and weak operating performance in recent years which is primarily attributable to catastrophe losses and adverse prior-year loss reserve development. XL reported a significant net loss (after preferred dividends) of $1.3 billion in 2005 due to catastrophe losses which totaled $1.9 billion, as well as $834 million of charges relating to the unfavorable outcome from the independent actuarial review of the net reserve seasoning amount relating to XL's 2001 acquisition of certain Winterthur International insurance operations. E[acute accent]XL began a number of risk management initiatives to reduce its catastrophe exposure and earnings volatility while still taking advantage of opportunities presented by hard market conditions in certain lines. To sustain the current ratings, it is important for XL to return to more consistent operating profitability in the future. Fitch believes that property/casualty insurance market conditions are favorable in many segments. In this environment, XL's capital position, underwriting franchise, and financial flexibility should enable the company to produce favorable earnings in 2006. E[acute accent]The company reported greatly improved profitability through the first six months of 2006. XL's GAAP combined ratio for its general insurance and reinsurance operations decreased to 89.8% from 93.7% in the prior year period. Net income also improved to $835.6 million compared with $578.8 million in the first six months of 2005. E[acute accent]XL is a Bermuda headquartered holding company with subsidiaries providing insurance, reinsurance, and financial products and services on a worldwide basis. The company reported consolidated GAAP assets of $58.5 billion and shareholders equity of approximately $8.5 billion at June 30, 2006.

E[acute accent]Fitch affirms the following, with a Stable Outlook:

E[acute accent]XL Capital Ltd.

E[acute accent]-- IDR at 'A '

E[acute accent]-- $594 million 5.25% senior notes due 2014 at 'A';

E[acute accent]-- $825 million 2.53% senior notes due 2009 at 'A';

E[acute accent]-- $350 million 6.375% senior notes due 2024 at 'A';

E[acute accent]-- $745 Million 5.25% senior notes due 2011 at 'A';

E[acute accent]-- 8% series A preference ordinary shares at 'A-';

E[acute accent]-- 7.625% series B preference ordinary shares at 'A-'.

E[acute accent]XL Capital Finance (Europe) PLC

E[acute accent]-- IDR at 'A ';

E[acute accent]-- $255 million 6.58% senior notes due 2011 at 'A';

E[acute accent]-- $600 million 6.50% guaranteed senior notes due 2012 at 'A'.

E[acute accent]Fitch also affirms the IFS ratings of the following XL Capital Ltd insurance subsidiaries at 'AA-', with a Stable Outlook:

E[acute accent]XL Insurance (Bermuda) Ltd

E[acute accent]XL Re Ltd

E[acute accent]XL Insurance Switzerland

E[acute accent]XL Re Latin America Ltd

E[acute accent]XL Europe Ltd

E[acute accent]XL Insurance Company Limited

E[acute accent]XL Insurance America, Inc.

E[acute accent]XL Reinsurance America Inc.

E[acute accent]XL Insurance Company of New York, Inc.

E[acute accent]XL Specialty Insurance Company

E[acute accent]Indian Harbor Insurance Company

E[acute accent]Greenwich Insurance Company

E[acute accent]XL Select Insurance Company

E[acute accent]Fitch also affirms the following IFS ratings at 'AAA', with a Stable Outlook:

E[acute accent]XL Capital Assurance Inc.

E[acute accent]XL Capital Assurance (U.K.) Limited

E[acute accent]XL Financial Assurance Ltd. (XLFA)

E[acute accent]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.