Best Assigns Debt and IC Ratings to XL Capital Notes

November 12, 2004

A.M. Best Co. announced that it has assigned respective debt ratings of “a-” to XL Capital Ltd.’s $300 million 5.25 percent senior unsecured notes, due 2014 and $350 million 6.375 percent senior unsecured bonds, due 2024.

Best also assigned XL Capital an issuer credit rating of “a-” and affirmed its financial strength rating of “A+” (Superior) on all remaining debt and operating company issuer credit ratings, indicating that they are unaffected by the new issue. All ratings have a negative outlook.

XL announced plans to issue the notes on Tuesday (See IJ Website Nov. 9). Best indicated that the “proceeds from the offering will be used to redeem all of XL Capital’s outstanding Zero Coupon Convertible Debentures (CARZ) due in 2021. At September 30, 2004, the aggregate value of the outstanding CARZ was approximately $655 million. The redemption of the CARZ is expected to be completed within a reasonable timeframe.”

It also said: “Following the issuance of the senior notes and redemption of the CARZ, XL Capital’s debt-to-capital will remain commensurate with its current debt rating level in the mid-20 percent range. The coverage ratio for 2004 is expected to be in the high single digit range.

Through the nine months ended September 30, 2004, XL Capital produced a combined ratio of 96.1 percent on its insurance/reinsurance operations including hurricane losses of $420 million. Shareholders’ equity has grown to $7.4 billion at September 30, 2004, from $6.9 billion at December 31, 2003. XL Capital continues to maintain a well-recognized position as a leading global provider of specialized insurance and reinsurance coverage.”

Explaining the negative outlook, Best said it is based on the rating agency’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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