Best Rates XL’s Senior Notes ‘a-‘

August 20, 2004

A.M. Best Co. announced that it has assigned a debt rating of “a-” to XL Capital Ltd.’s $300 million 5.25 percent senior unsecured notes, due September 2014. Standard & Poor’s and Fitch Ratings have assigned an “A” rating to the notes (See IJ Website Aug. 19).

Proceeds from the offering will be used to redeem all of XL Capital’s outstanding Liquid Yield Option Notes (LYONs) due in 2021. At June 30, 2004, the aggregate value of the outstanding LYONs was approximately $315 million. They are expected to be redeemed within a reasonable timeframe.

Best confirmed that XL’s and its subsidiaries financial strength rating of “A+” (Superior) as well as the remaining debt ratings remain unaffected. The outlook for all the ratings is negative.

“Following the issuance of the senior notes and redemption of the LYONs, XL Capital’s debt plus preferred securities to capital will remain commensurate with its current debt rating level in the mid 20 percent range,” said Best. The coverage ratio for 2004 is expected to be in the high single digit range.”

Best also noted that “through the first six months of 2004, XL Capital has produced a combined ratio of 88 percent, and shareholders’ equity has grown to $7.1 billion at June 30, 2004. XL Capital continues to maintain a well-recognized position as a leading global provider of specialized insurance and reinsurance coverage.

“The negative outlook is based on A.M. Best’s concern with the sufficiency of XL Capital’s consolidated capital base for the current rating given the recent premium growth and market expansion into insurance lines of business.”

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