Best, Fitch Rate XL Notes

May 3, 2007

A.M. Best Co. and Fitch Ratings both announced debt ratings for XL Capital Ltd’s forthcoming $325 million senior unsecured note issuance, due 2027. Best assigned a debt rating of “a-“, while Fitch gave the notes an ‘A’ rating. Both rating agencies also assigned a stable outlook to the notes.

In addition Fitch affirmed the ratings on XL Capital, including the ‘A+’ Issuer Default Rating (IDR), insurer financial strength (IFS) ratings and outstanding preferred stock rating, also with a stable outlook.

The proceeds from the senior note offering, together with available cash, will be used to retire $825 million 2.53 percent senior notes, due 2009, which comprise part of the 6.50 percent equity security units of XL Capital that will settle on May 15, 2007.

Fitch said “XL’s adjusted debt to total capital was 17.3 percent at March 31, 2007,” and it does not “anticipate any material increases in financial leverage for XL in the near term.” Fitch also noted XL’s “record first quarter 2007 net income after preferred dividends of $549.7 million compared to $458.5 million for the same period in 2006.”

Best indicated that as of March 31, 2007, XL’s “unadjusted debt-to-capital leverage ratio (including preferred securities) stood at approximately 33 percent, which includes the recent $1.0 billion preferred security issuance, the proceeds from which are primarily to be used for the purchase of approximately $830 million of XL Capital’s Class A ordinary shares. The company’s financial leverage has trended lower since 2005, in line with A.M. Best’s expectations, driven by strong earnings in 2006 and higher income in first quarter 2007 from both insurance operations and investment affiliates, with debt-to-capital leverage ratios remaining commensurate with its current debt ratings. Despite this improvement, however, leverage has remained above similarly rated peers.”

Best said it “expects XL Capital’s coverage and leverage ratios to further improve moderately barring any extraordinary catastrophes as projected earnings increase shareholders’ equity and the holding company’s liquidity.”

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