Fitch Rates Stoneheath Re IDR 'A+', Perpetual Preferred Securities 'A-'

Business Wire, Nov 27, 2006

CHICAGO -- Fitch Ratings has assigned an 'A ' Issuer Default Rating (IDR) to Stoneheath Re and an 'A-' underlying rating to Stoneheath Re's issuance of non-cumulative perpetual preferred securities. The Rating Outlook is Stable.

Stoneheath Re is a Cayman Islands exempted company formed solely to issue the non-cumulative perpetual preferred securities, enter into a reinsurance agreement with certain operating subsidiaries of XL Capital Ltd (XL) -- a Bermuda-based holding company organized under the laws of the Cayman Islands, and conduct activities related to the securities' issuance. XL is a worldwide provider of insurance and reinsurance, as well as financial products and services. Fitch rates XL's IDR 'A '.

Proceeds from the non-cumulative perpetual preferred issuance will be deposited in a trust account and will collateralize Stoneheath Re's obligations under the reinsurance agreement. After an initial three-month period, XL has sole discretion to change the scope of the covered perils, attachment points and aggregate retentions of the reinsurance agreement every six months.

XL will enter into a securities issuance agreement providing for the issuance and delivery of non-cumulative series D preference ordinary shares to Stoneheath Re upon payment by Stoneheath Re under the reinsurance agreement or upon the occurrence of certain other events. The series D preference ordinary shares would rank pari passu with XL's outstanding cumulative preferred shares, which are rated 'A-'.

Given XL's unilateral flexibility in modifying the terms of the reinsurance agreement as well as Stoneheath's reliance on XL to provide a significant portion of the preferred dividends via reinsurance payments, Stoneheath Re's non-cumulative perpetual preferred securities are rated equivalent to XL's existing cumulative preferred share at 'A-.'

Fitch assigns the following ratings with a Stable Outlook:

Stoneheath Re

--Issuer Default Rating (IDR) 'A ';

--Non-cumulative perpetual preferred 'A-'.

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.