S&P Affirms XL Capital Senior Debt Rating

May 20, 2003

Standard & Poor’s Ratings Services announced that it has affirmed its ‘A+’ counterparty credit, ‘A+’ senior debt, and ‘A-‘ preferred stock ratings on XL Capital Ltd. (XLC), “based on the strong diversified earnings, conservative business model supported by its profit-oriented underwriting discipline, and very strong capital position of the operating members of the XL Capital Group (XL).”

S&P also indicated that it has raised its counterparty credit and senior debt ratings on XL America Inc., (formerly known as NAC Re Corp.) to ‘A+’ from ‘A’, and has also affirmed its various ratings on XL.
“The outlook on all these companies is stable,” said the bulletin.

“XL has capitalized on its strengths to become a (re)insurer of choice, and members of the group continue to achieve increased market acceptance through new product initiatives and expanded international platforms that are providing strong organizational growth,” stated S&P credit analyst Frederick Loeloff. “Offsetting these positive factors are XL’s active capital-management strategies, susceptibility to adverse development in specific business lines, and the inherent operational risks and potential earnings volatility associated with organizational restructuring/expansion.”

The announcement indicated that S&P expects that “XL’s prospective organic capital growth will be generated primarily from the group’s improved operating performance and earnings potential. Prudent risk selection, conservative line limits, and increased retention should complement pricing initiatives started in 2001, producing a positive impact on XLC’s earnings over the next three years.”

It also expects that “operational inconsistencies and constant growth will put shareholder pressure on management to produce more reliable earnings.”

“Enhanced brand equity, market acceptance, and a focused business model spanning 27 countries have allowed XL to further establish a firm, competitive presence within each market it serves. XL has increased its global reinsurance market position to rank as the 14th largest global reinsurance group based on 2001 net premium writings,” S&P concluded.

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