S&P Rates XL Capital’s Notes A-; Affirms Credit, Financial Ratings

May 8, 2007

Standard & Poor’s Ratings Services has assigned its ‘A-‘ senior debt rating to XL Capital Ltd.’s proposed $325 million senior notes due May 15, 2027.

At the same time, Standard & Poor’s affirmed its ‘A-‘ counterparty credit ratings on XL and its core holding company, X.L America Inc. In addition, Standard & Poor’s affirmed its ‘A+’ counterparty credit and financial strength ratings on XL’s core operating companies.

Standard & Poor’s said the outlook on all these companies is stable.

The net proceeds of the issuance will be applied, together with available cash, to the retirement of the $825 million aggregate principal amount of 2.53% senior notes due 2009 that form part of the 6.5% equity security units that settle on May 15, 2007.

“The ratings on XL are based on its very strong global market presence, very strong interest and fixed-charge coverage, and diversified earnings stream,” said Standard & Poor’s credit analyst, Steven Ader.

Somewhat offsetting these strengths are a track record of “inconsistent earnings performance; material, though reduced, exposure to large catastrophic losses; susceptibility to adverse reserve development; and business integration challenges borne from the relatively rapid and successful building of a very strong and diversified global competitive position,” S&P added.

The stable outlook reflects that XL’s continued integration of its “very strongly positioned global insurance, reinsurance, and life and annuity operations; the reduction of property catastrophe exposures from 2005 levels on both gross and net bases; and the materially reduced effect of prior-year reserve additions and other earnings effects borne from acquisitions will enhance overall earnings performance while demonstrating significantly reduced volatility.”

S&P said it expects this improvement will be realized through consistent results in 2007 and beyond as operating performance “improves to the level of its current and higher level peers, with capitalization and financial leverage remaining appropriate for the rating.”

However, if there is a reappearance of significant negative developments that dampen consolidated results, the outlook could be revised to negative. A sustained track record of very strong earnings performance commensurate with higher rated peers in combination with a demonstrated strong enterprise risk management program, which is currently being assessed, could result in the outlook being revised to positive, according to S&P.

Standard & Poor’s

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